[Federal Register Volume 69, Number 157 (Monday, August 16, 2004)]
[Notices]
[Pages 50406-50407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18604]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50162; File No. SR-NASD-2004-078]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the National Association of Securities Dealers, Inc. To 
Establish Certain Qualification Requirements for Supervisors of 
Research Analysts

August 6, 2004.
    On May 10, 2004, the National Association of Securities Dealers, 
Inc. (``NASD''), filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), a proposed rule change

[[Page 50407]]

to establish certain qualification requirements for supervisors of 
research analysts pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on June 23, 2004.\3\ The Commission received no 
comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 49857 (June 15, 2004), 
69 FR 35106 (June 23, 2004).
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    The proposed rule change amends NASD Rule 1022 to require 
supervisors of research analysts to pass the regulatory part (Series 
87) of the Research Analyst Qualification Examination or the Series 16 
Supervisory Analyst Examination administered by the New York Stock 
Exchange (``NYSE'').
    NASD Rule 1050, which became effective on March 30, 2004, requires 
all persons associated with a member who are to function as research 
analysts to be registered as such with NASD and pass a qualification 
examination.\4\ Those individuals required to be registered as research 
analysts must pass the Research Analyst Qualification Examination 
(Series 86/87) or qualify for an exemption. The Series 86/87 consists 
of two parts: an analysis part (Series 86) that tests fundamental 
analysis and valuation of equity securities, and a regulatory part 
(Series 87) that tests knowledge of applicable rules.
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    \4\ See Securities Exchange Act Release No. 48252 (July 29, 
2003), 68 FR 4575 (August 4, 2003).
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    In light of these new research analyst registration requirements 
and the scope and importance of the comprehensive analyst conflict 
rules that have been implemented recently, the proposal requires 
supervisors of research analysts to pass the regulatory part (Series 
87) of the Research Analyst Qualification Examination or, for dual 
NASD-NYSE members, the NYSE Supervisory Analyst Examination (Series 
16).
    Under the proposed rule change, dual members would be required to 
have a principal who has passed either the Series 24 and the Series 87 
or the Series 16 to supervise the content of research. If the member 
elects to have a Series 16 be responsible for supervising the content 
of research, then a Series 24 principal who has also passed either the 
Series 87 or the Series 16 would be responsible for supervising the 
conduct of both the Series 16 supervisory analyst and the research 
analyst.
    The Commission believes that the proposed rule change should 
provide NASD members that are also members of the NYSE some flexibility 
in their supervisory structure for research analysts by allowing dual 
members to permit a principal who has passed either the Series 24 and 
the Series 87 or the Series 16 to supervise the content of research.
    The Commission also believes that the proposal should promote 
investor protection by ensuring that persons responsible for reviewing 
and approving research reports and for providing general supervision of 
the conduct of research analysts have demonstrable knowledge of NASD 
Rule 2711 and other analyst conflict of interest laws, rules, and 
regulations.
    For the above reasons, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities association 
\5\ and, in particular, the requirements of Section 15A of the Act \6\ 
and the rules and regulations thereunder. The Commission finds 
specifically that the proposed rule change is consistent with Sections 
15A(b)(6) and 15A(b)(9) of the Exchange Act.\7\
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(6) and (9).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-NASD-2004-078) be, 
and hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-18604 Filed 8-13-04; 8:45 am]
 BILLING CODE 8010-01-P