[Federal Register Volume 69, Number 148 (Tuesday, August 3, 2004)]
[Notices]
[Pages 46607-46609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17651]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50099; File No. SR-NASD-2004-100]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the National Association of Securities Dealers, Inc. To Amend the Rule 
9600 Series

July 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 June 28, 2004, the National Association of Securities Dealers, Inc. 
(``NASD''), filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by NASD. On July 23, 
2004, NASD filed Amendment No. 1 to the proposed rule change.\3\ 
Pursuant to section 19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ NASD has designated this proposal as non-
controversial, which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Shirley H. Weiss, Associate General Counsel, 
NASD, to Katherine A. England, Assistant Director, Division of 
Market Regulation, Commission, dated July 22, 2004 (``Amendment No 
1''). In Amendment No. 1, NASD made several non-substantive changes 
to clarify the proposed rule text and the discussion of the proposed 
rule in the Purpose section.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend its Rule 9600 Series to permit a Waiver 
Subcommittee of the National Adjudicatory Council (``NAC'') to affirm, 
modify, or reverse a decision of NASD's Department of Member Regulation 
(``Department'') denying a request for a waiver from a required 
qualifications examination pursuant to NASD Rule 1070. The text of the 
proposed rule change is set forth below. Proposed new language is in 
italics; proposed deletions are in brackets.
* * * * *
9600. PROCEDURES FOR EXEMPTIONS
9610. Application
    (a) Where to File.
    A member seeking exemptive relief as permitted under Rules 1021, 
1070, 2210, 2315, 2320, 2340, 2520, 2710, 2720, 2810, 2850, 2851, 2860, 
Interpretive Material 2860-1, 3010(b)(2), 3020, 3150, 3210, 3230, 3350, 
8211, 8212, 8213, 11870, or 11900, or Municipal Securities Rulemaking 
Board Rule G-37, shall file a written application with the appropriate 
department or staff of [the Association] NASD and provide a copy of the 
application to the Office of General Counsel of NASD Regulation.
    (b) and (c) No change.
9620. Decision
    After considering an application, NASD [Regulation] staff shall 
issue a written decision setting forth its findings and conclusions. 
The decision shall be served on the Applicant pursuant to Rules 9132 
and 9134. After the decision is served on the Applicant, the 
application and decision shall be publicly available unless NASD 
[Regulation] staff determines that the Applicant has shown good cause 
for treating the application or decision as confidential in whole or in 
part.
9630. Appeal
    (a) Notice.
    An Applicant may file a written notice of appeal within 15 calendar 
days after service of a decision issued under Rule 9620. The notice of 
appeal shall be filed with the Office of General Counsel of NASD 
Regulation, with a copy of the notice also provided to the appropriate 
department or staff of [the Association] NASD. The notice of appeal 
shall contain a brief statement of the findings and conclusions as to 
which exception is taken. Appeals of decisions issued by NASD staff 
pursuant to Rule 9620 shall be decided by the National Adjudicatory 
Council, except with respect to exemptive relief under Rule 1070 
(Qualification Examinations and Waiver of Requirements), which shall be 
decided by the Waiver Subcommittee of the National Adjudicatory 
Council. [The National Adjudicatory Council may order oral argument.] 
If the Applicant does not want the [National Adjudicatory Council's] 
decision on the appeal to be publicly available in whole or in part, 
the Applicant also shall include in its notice of appeal a detailed 
statement, including supporting facts, showing good cause for treating 
the decision as confidential in whole or in part. The notice of appeal 
shall be signed by the Applicant.

[[Page 46608]]

    (b) Expedited Review.
    Where the failure to promptly review a decision to deny a request 
for exemption would unduly or unfairly harm the applicant, the National 
Adjudicatory Council or the Waiver Subcommittee of the National 
Adjudicatory Council, as the case may be, shall provide expedited 
review.
    (c) No change.
    (d) [Appointment of Subcommittee] Oral Argument.
    (1) Subject to paragraph (2) below, [F]following the filing of a 
notice of appeal, the National Adjudicatory Council or Review 
Subcommittee may order oral argument and may designate a Subcommittee 
to hear [an] such oral argument[, if ordered]. The Subcommittee may 
consider any new evidence [that] if the Applicant can show good cause 
for not including it in its application, and the Subcommittee will 
recommend to the National Adjudicatory Council a disposition of all 
matters on appeal.
    (2) With respect to exemptive relief requested under Rule 1070, the 
Waiver Subcommittee of the National Adjudicatory Council may order oral 
argument and consider any new evidence if the Applicant can show good 
cause for not including it in its application.
    (e) Decision.
    (1) Subject to paragraph (2) below, [A]after considering all 
matters on appeal, and, as applicable, the Subcommittee's 
recommendation, the National Adjudicatory Council shall affirm, modify, 
or reverse the decision issued under Rule 9620. The National 
Adjudicatory Council shall issue a written decision setting forth its 
findings and conclusions and serve the decision on the Applicant. The 
decision shall be served pursuant to Rules 9132 and 9134. The decision 
shall be effective upon service and shall constitute final action of 
[the Association] NASD.
    (2) With respect to exemptive relief requested under Rule 1070, 
after considering all matters on appeal, the Waiver Subcommittee of the 
National Adjudicatory Council shall affirm, modify, or reverse the 
decision issued under Rule 9620. The Waiver Subcommittee shall issue a 
written decision setting forth its findings and conclusions and serve 
the decision on the Applicant. The decision shall be served pursuant to 
Rules 9132 and 9134. The decision shall be effective upon service and 
shall constitute final action of NASD. The Waiver Subcommittee shall 
retain the discretion to refer the appeal to the National Adjudicatory 
Council, in which case the National Adjudicatory Council shall act on 
such appeal pursuant to its authority under this 9600 Series.
* * * * *

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

    In its filing with the Commission, NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASD 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
    NASD's Rule 9600 Series sets forth the procedures pursuant to which 
NASD members and their associated persons may seek exemptive relief 
from those NASD rules that allow NASD staff to grant exemptions. The 
purpose of this proposed rule change is to permit a subcommittee of the 
NAC, consisting of one industry and one non-industry NAC member, to 
affirm, modify, or reverse a decision of NASD's Department of Member 
Regulation denying a request for a waiver from an applicable 
qualification examination requirement and issue decisions in such 
matters that will constitute final NASD action. The subcommittee will 
be appointed by the NAC annually.
    Under NASD's Rule 9600 Series, an initial application for relief 
under any NASD rule for which exemptive relief may be granted is filed 
with the appropriate NASD department or staff. NASD staff examines the 
merits of the application, determines whether to grant or deny the 
application for relief, and communicates its decision to the applicant. 
If NASD staff denies the application, the applicant may appeal the 
adverse decision to the NAC, which may affirm, modify, or reverse the 
decision.
    Currently, persons seeking a waiver of a required qualification 
examination under NASD Rule 1070 must file a written application with 
the Department, including a detailed statement of the grounds for the 
waiver. The Department examines the merits of the waiver request based 
on the NASD Qualification Examination Waiver Guidelines 
(``Guidelines'') and communicates its decision to the applicant in a 
letter that grants or denies the waiver.\6\ The applicant may then 
appeal any adverse Department decision to the NAC, which considers the 
decision, determines whether to affirm, modify, or reverse the 
decision, and issues a decision that constitutes final NASD action.
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    \6\ The Guidelines, last updated on May 6, 2004, are available 
on NASD's Web site at http://www.nasdr.com/5200_waiver.asp.
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    After reviewing the qualifications examination waiver process, the 
NAC determined that a subcommittee of the NAC, rather than the full 
NAC, should have authority to consider appeals of adverse Department 
decisions with respect to NASD Rule 1070 and to issue final NASD 
decisions in such matters. In reaching this determination, the NAC 
recognized that a subcommittee would have the flexibility to review 
adverse Department decisions on a timelier basis than the full NAC, 
which generally meets only five times each year. NASD believes that any 
delay arising from the NAC's schedule may harm the associated person on 
whose behalf the NASD member is appealing, as well as the member, 
because the associated person is unable to function in the requested 
registered capacity while his or her firm's appeal is pending. The NAC 
also considered that its specialized expertise in reviewing 
disciplinary matters and policy issues is not required in the 
examination waiver process because appellate review of examination 
waivers is based on application of the Guidelines to the specific facts 
of the case. The subcommittee would retain discretion to refer an 
appeal to the full NAC when, for example, there is a split vote or the 
subcommittee believes that the issues in the appeal warrant 
consideration by the full NAC.
    NASD is therefore proposing this rule change to permit a 
subcommittee of the NAC to review appeals of Department denials of 
requests to waive an applicable qualification examination requirement 
and to issue decisions that affirm, modify, or reverse such Department 
decisions. The subcommittee of the NAC would also be given the 
authority, where appropriate, to provide expedited review, order oral 
argument, and consider new evidence.
    Finally, NASD no longer refers to itself or its subsidiary, NASD 
Regulation, Inc., using its full corporate name, ``the Association,'' 
``the NASD'' or ``NASD Regulation, Inc.'' Instead, NASD uses ``NASD'' 
unless otherwise appropriate for corporate or regulatory reasons. 
Accordingly, the proposed rule change replaces several references to

[[Page 46609]]

``Association'' and ``NASD Regulation'' in the text of the proposed 
rule change with ``NASD.'' NASD Rule 9630(a) appropriately designates 
``the Office of General Counsel of NASD Regulation.''
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\7\ which requires, among 
other things, that NASD's rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. NASD believes that the proposed rule change is 
consistent with the provisions of the Act noted above because it will 
enable individuals who are appealing denials of examination waivers to 
get a decision and become registered in their desired capacity more 
expeditiously, whether as a result of a waiver or of being required to 
take the necessary examination.
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    \7\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change will result in 
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

    Written comments were neither solicited nor received with respect 
to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change is effective upon filing 
pursuant to section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) 
thereunder \9\ because the proposed rule change (1) does not 
significantly affect the protection of investors or the public 
interest, (2) does not impose any significant burden on competition, 
and (3) by its terms, does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
NASD has satisfied the five-day pre-filing requirement. NASD intends to 
make the proposed rule change operative on September 1, 2004.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    At any time with 60 days of the filing of the proposed rule change, 
the Commission may summarily abrogate this proposal if it appears to 
the Commission that such action is necessary or appropriate in the 
public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act.\10\
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    \10\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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IV. 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-NASD-2004-100 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-NASD-2004-100. 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 such 
filing also will be available for inspection and copying at the 
principal office of NASD. 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-NASD-2004-100 and should be submitted on or before August 24, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-17651 Filed 8-2-04; 8:45 am]
BILLING CODE 8010-01-P