[Federal Register Volume 69, Number 110 (Tuesday, June 8, 2004)]
[Notices]
[Pages 32084-32087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12904]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49779; File No. SR-NYSE-2004-16]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to Proposed Rule Change and Amendment No. 
1 thereto by the New York Stock Exchange, Inc. Relating to Revised 
Uniform Application for Securities Industry Registration or Transfer 
(Form U4) and Revised Uniform Termination Notice for Securities 
Industry Registration (Form U5)

May 27, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 17, 2004, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the NYSE. The NYSE amended 
the proposed rule change on April 30, 2004.\3\ The Commission is

[[Page 32085]]

publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons and to grant accelerated approval 
of the proposed rule change, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Katherine England, Assistant Director, Division of Market 
Regulation, Commission, dated April 29, 2004 (``Amendment No. 1''). 
In Amendment No. 1, the NYSE amended the proposed rule change to 
file it pursuant to Section 19(b)(2) of the Act and to request that 
the Commission grant accelerated approval of the proposed rule 
change.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes for its use revised Forms U4 and U5 \4\ 
(collectively, the ``Forms'').
---------------------------------------------------------------------------

    \4\ Form U4 is the form for ``Uniform Application for Securities 
Industry Registration or Transfer'' and Form U5 is the form for 
``Uniform Termination Notice for Securities Industry Registration.''
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NYSE included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The NYSE has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange hereby proposes to use the revised Forms. The revised 
Forms were filed by the National Association of Securities Dealers, 
Inc. (``NASD'') with the Commission on April 8, 2003, and approved by 
the Commission on July 10, 2003.\5\ The Exchange uses these Forms as 
part of its registration and oversight of persons associated with 
members and member organizations. In addition, these Forms are used in 
connection with the Central Registration Depository (``CRD'') system in 
which the Exchange participates. The CRD is an industry-wide automated 
system, which allows for the efficient review and tracking of 
registered persons in the securities industry, as well as changes in 
their work and disciplinary histories.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 48161 (July 10, 
2003), 68 FR 42444 (July 17, 2003) (SR-NASD-2003-57).
---------------------------------------------------------------------------

    The effective date for the Forms is July 14, 2003. The Exchange 
believes that the NASD's filing was based on its efforts to enhance the 
CRD and the registration and termination process of individuals in the 
securities industry. The Exchange also believes that the Forms were 
amended to provide additional enhancements and information for more 
meaningful and detailed disclosure. The Forms are to be submitted 
electronically through the Internet.
    The revisions to the Forms include, among other things: (1) 
Additional disclosure questions to the ``Regulatory Disciplinary 
Actions'' subsection of Section 14 (Disclosure Questions) of the Form 
U4 to elicit information regarding events that might cause a person to 
be subject to a statutory disqualification as a result of additional 
categories of disqualification enumerated in certain sections of the 
Act \6\ created by the enactment of the Sarbanes-Oxley Act of 2002 
(``Sarbanes-Oxley Act'');\7\ (2) adding a Disclosure Reporting Page 
(``DRP'') and a question to the Form U5 that parallels the DRP and the 
Form U4 question relating to terminations for cause; and (3) certain 
technical, clarifying, and conforming changes to the Forms to 
facilitate accurate reporting.\8\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78a et seq.
    \7\ 15 U.S.C. 78o-6.
    \8\ On April 6, 2003, the North American Securities 
Administrators Association, Inc., voted to approve the revised Forms 
at its membership meeting.
---------------------------------------------------------------------------

New Disclosure Questions Required by Enactment of the Sarbanes-Oxley 
Act

    Specific revisions that affect NYSE members and member 
organizations include new disclosure questions required by the 
enactment of the Sarbanes-Oxley Act. Section 604 of the Sarbanes-Oxley 
Act created new categories of ``statutory disqualification,'' 
enumerated in Section 15(b)(4)(H) of the Act.\9\ Under the expanded 
definition, members, member organizations, and their associated persons 
may be subject to a disqualification (i.e., may be required to obtain 
regulatory approval before becoming a member of the NYSE or becoming 
associated with an NYSE member or member organization) if they are 
subject to certain orders issued by a state securities commission or 
state insurance commissioner (or any agency or officer performing like 
functions), state authorities that supervise or examine banks, savings 
associations, or credit unions, an appropriate federal banking 
authority, or the National Credit Union Administration. Specifically, 
persons (including members and member organizations) may be subject to 
a statutory disqualification based on orders issued by the above 
agencies that: (1) Bar a person from association or from engaging in 
the business of securities, insurance, banking, savings association 
activities, or credit union activities; or (2) are based on violations 
of any laws or regulations that prohibit fraudulent, manipulative, or 
deceptive conduct.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o(b)(4)(H).
    \10\ See Section 15(b)(4)(H) of the Act, 15 U.S.C. 78o(b)(4)(H).
---------------------------------------------------------------------------

    The Form U4 has historically been the vehicle for the reporting of 
events that may cause a person to become subject to a statutory 
disqualification. With the concurrence of a working group of 
regulators, including state regulators, representatives of other self-
regulatory organizations (``SROs''), and Commission observers, Section 
14 (Disclosure Questions) of the Form U4 was amended to elicit 
reporting of regulatory actions that may now make individuals subject 
to a statutory disqualification under the expanded definition of 
``statutory disqualification'' in the Act created by the passage of the 
Sarbanes-Oxley Act.
    The changes include renumbering current Regulatory Action 
Disclosure Question 14D on the Form U4 as Question 14D(1), adding 
Question 14D(2) to mirror the language in Section 15(b)(4)(H) of the 
Act,\11\ and modifying the ``Regulatory Action DRP'' on the Forms. To 
aid in reporting events under Question 14D(2), the ``Specific 
Instructions'' section of the Form U4 has been amended with respect to 
Section 14 (Disclosure Questions). In addition, two new defined terms, 
``final order'' and ``federal banking agency,'' have been added to the 
``Explanation of Terms'' section of the Form U4. The ``Regulatory 
Action'' DRP on the Form U4 has also been amended to aid in reporting 
events required to be reported pursuant to the Sarbanes-Oxley Act.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o(b)(4)(H).
---------------------------------------------------------------------------

Modifications to the Form U4 Relating to Fingerprinting Requirements

    The language associated with questions under Section 2 (Fingerprint 
Information) and Section 6 (Registration Requests with Affiliated 
Firms) on the Form U4 has been amended to clarify fingerprinting 
requirements, including electronic filing representations and 
exceptions to the fingerprint requirement.\12\
---------------------------------------------------------------------------

    \12\ In conjunction with these changes relating to the 
fingerprint questions, the ``Specific Instructions'' section of the 
Form U4 with respect to Section 2 (Fingerprint Information) and 
Section 6 (Registration Requests with Affiliated Firms) was amended.
---------------------------------------------------------------------------

    Under Section 2 of the Form U4, the ``Electronic Filing 
Representation'' subsection was modified to address two situations that 
were not adequately covered by the previous language. The first 
situation involves a member or member organization submitting

[[Page 32086]]

fingerprint results on behalf of an individual whose fingerprints were 
processed through another SRO, in lieu of submitting fingerprint cards. 
The second situation is when a member or member organization is seeking 
registration for an individual who: (1) Is currently employed by the 
member or member organization (usually in an unregistered capacity), 
and (2) previously has been fingerprinted (through the NYSE or another 
SRO).
    The current electronic filing representation states that the member 
or member organization is submitting or will promptly submit 
fingerprint cards as required by applicable SRO rules. In the two 
situations described above, members or member organizations will not be 
submitting fingerprint cards contemporaneously with, or within 30 days 
of, filing a Form U4. The amended language will allow members or member 
organizations and individuals to represent that the filing member or 
member organization has continuously employed the individual since the 
last submission of a fingerprint card to the NYSE (and therefore is not 
required to resubmit a card at this time) or has continuously employed 
the individual since the individual has had his or her fingerprints 
processed through another SRO, and the individual will submit (or has 
submitted) the processed results to the CRD system.
    Furthermore, under Section 2, the ``Exceptions to the Fingerprint 
Requirement'' subsection has been modified. Currently, members or 
member organizations can claim an exception to the fingerprint 
requirement by affirming that the individual has been continuously 
employed by the filing member or member organization in an unregistered 
capacity (and had previously submitted a fingerprint card in connection 
with that employment) or meets one or more exemptions under Rule 17f-2 
of the Act.\13\ The modifications to the ``Exceptions to the 
Fingerprint Requirement'' questions will allow a member or member 
organization to select the specific permissive exemption under Rule 
17f-2(a)(1)(iii).\14\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.17f-2. Rule 17f-2 of the Act governs the 
fingerprinting requirements of securities personnel. Rule 17f-
2(a)(1)(i) permits an exemption for persons who are not engaged in 
the sale of securities; do not regularly have access to the keeping, 
handling, or processing of securities, monies, or books and records; 
and do not have supervisory responsibility over persons engaged in 
such activities. Rule 17f-2(a)(1)(iii) generally exempts the 
partners, directors, officers, and employees of a broker-dealer that 
are engaged exclusively in the sales of certain securities, such as 
variable contracts, limited partnership interests, and unit 
investment trusts.
    \14\ 17 CFR 240.17f-2(a)(1)(iii).
---------------------------------------------------------------------------

    Section 6 (Registration Requests With Affiliated Firms) of the Form 
U4 has been amended to add a fingerprint question to create appropriate 
options for individuals requesting new registrations with a member or 
member organization affiliated with the filing member or member 
organization.\15\ The proposed ``Electronic or Other Filing 
Representation'' subsection will provide three additional radio 
buttons.\16\ Filers can select the current standard representation 
(i.e., ``I am submitting, have submitted, or promptly will submit to 
the appropriate SRO a fingerprint card''). In the alternative, the 
proposed representations will enable the individual to indicate that: 
(1) He or she has been employed continuously by the filing member or 
member organization since the last submission of a fingerprint card, 
and he or she is not required to resubmit a fingerprint card; or (2) 
the individual has been employed continuously by the filing member or 
member organization, his or her fingerprints have been processed by an 
SRO other than the NYSE, and the individual is submitting, has 
submitted, or promptly will submit the processed results for posting to 
the CRD. Section 6 will also contain a radio button that allows the 
applicant to select an exemption to the fingerprint requirement 
pursuant to Rule 17f-2 of the Act.\17\
---------------------------------------------------------------------------

    \15\ ``Affiliated firm'' has been added to the ``Explanation of 
Terms'' to clarify the use and meaning of the term on the Form U4.
    \16\ A ``radio button'' is a navigation and selection device 
that allows a filer to select a particular option in an electronic 
filing environment.
    \17\ 17 CFR 240.17f-2.
---------------------------------------------------------------------------

Conforming Changes

    (1) A new disclosure question was added to Form U5 (Question 7F) 
and corresponding DRP to mirror Question 14J on the Form U4. This 
question will allow firms to report that an individual was terminated 
after allegations of certain violations, fraud, wrongful taking of 
property, or failure to supervise, and will further clarify the 
individual's obligation to report the termination on the Form U4. 
Currently, the NYSE staff must rely on the reason for termination or an 
internal review initiated by the member or member organization as 
reported (by the former employing firm) on an individual's Form U5 to 
determine whether that individual is required to answer Question 14J 
affirmatively. The new Question 7F on the Form U5 should clarify for 
NYSE staff and terminated individuals the basis for and circumstances 
surrounding the termination (and whether it requires an affirmative 
answer on the corresponding Form U4 question) and will enable members 
and member organizations to appropriately identify and provide 
supporting details regarding terminations for cause. The term ``resign 
or resigned'' was also added as an explained term on the Form U5 to 
parallel the same term on the Form U4 for purposes of the new Question 
7F.
    (2) The Customer Complaint DRP was modified on both Forms to 
distinguish the fields that are required for reporting a customer 
complaint, arbitration, and/or litigation. The amended changes also 
added instructions and rearranged the questions in a more logical 
order. However, the content of the customer complaint disclosure 
question and DRP fields were not changed.
    (3) The language in Question 14F was revised to clarify the intent 
of the reporting obligation.\18\
---------------------------------------------------------------------------

    \18\ Formerly, Question 14F asked, ``Has your authorization to 
act as an attorney, accountant or federal contractor ever been 
revoked or suspended?'' As amended, Question 14F asks, ``Have you 
ever had an authorization to act as an attorney, accountant or 
federal contractor that was revoked or suspended?''
---------------------------------------------------------------------------

    (4) Current hair and eye color codes were changed to match the 
codes used by the Federal Bureau of Investigation's fingerprint system.
    (5) Other consistency changes were also made that relate to bolding 
or highlighting certain instructions in the DRPs to facilitate 
appropriate reporting on the Forms.
    (6) Grammatical and other modifications have been made to the Forms 
to make them more consistent and to better clarify the disclosure 
information required to be reported on the Forms. For example, the 
summary field of the DRPs on the Forms was reworded to emphasize that 
those fields are optional for comments by registered representatives, 
members, and member organizations, respectively.
    The revised technical and formatting amendments do not alter the 
reporting or disclosure requirements applicable to broker-dealers or 
their registered persons. Therefore, members and member organizations 
are not required to ``re-file'' disclosure or administrative 
information for their associated persons.
    The Exchange believes that the amendments will enhance the utility 
of the Forms as part of the Exchange's registration and oversight 
function by providing more detailed reporting concerning persons 
associated with members and member organizations as well as 
enhancements to electronic filing through the Internet.

[[Page 32087]]

2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with the requirements under Section 6(b)(5) of the Act \19\ 
in that the proposal is designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Additionally, the Exchange 
believes that the information reported on the Forms will assist the 
Exchange in its responsibilities under Section 6(c)(3)(B) of the Act 
\20\ in denying membership to those subject to a statutory 
disqualification or who cannot meet such standards of training, 
experience and competence as are prescribed by the rules of the 
Exchange or those who have engaged in acts or practices inconsistent 
with just and equitable principles of trade.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78f(c)(3)(B).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change, as amended, 
will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change, as amended.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2004-16 on the subject line.
    Paper comments:
    Send paper comments in triplicate to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609.
    All submissions should refer to File Number SR-NYSE-2004-16. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the NYSE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSE-2004-16 and should be submitted on or before June 
29, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The NYSE has requested that the Commission grant accelerated 
approval to the proposed rule change, as amended, based on the fact 
that the revised Forms were filed by the NASD and have been approved by 
the Commission,\21\ and that the Exchange's proposal is substantively 
similar to the NASD's proposal, except for certain nomenclature/terms 
utilized that are specific to the NYSE.
---------------------------------------------------------------------------

    \21\ See supra note .
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder, applicable to a national securities 
exchange.\22\ In particular, the Commission finds that the proposed 
rule change, as amended, is consistent with Section 6(b)(5) of the Act 
\23\ and will promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, and, in general, protect investors and the 
public interest. In addition, the Commission finds good cause, pursuant 
to Section 19(b)(2) of the Act,\24\ for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of notice in the Federal Register. The Commission does not 
believe that the proposed rule change raises novel regulatory issues. 
Consequently, the Commission believes that it is appropriate to permit 
the NYSE to use the Forms as soon as possible. Accordingly, the 
Commission finds that there is good cause, consistent with Section 
6(b)(5) of the Act,\25\ to approve to approve the proposal on an 
accelerated basis.
---------------------------------------------------------------------------

    \22\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78s(b)(2).
    \25\ 15 U.S.C. 78s(b)(5).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NYSE-2004-16), as amended, 
is hereby approved on an accelerated basis.
---------------------------------------------------------------------------

    \26\ Id.
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-12904 Filed 6-7-04; 8:45 am]
BILLING CODE 8010-01-P