[Federal Register Volume 69, Number 161 (Friday, August 20, 2004)]
[Notices]
[Pages 51739-51740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19062]



[[Page 51739]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50198; File No. SR-NSX-2004-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 by National Stock Exchange To Adopt an Anti-
Money Laundering Compliance Program

    August 13, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 5, 2004, National Stock Exchange\SM\ (``NSX\SM\'' or 
``Exchange'') \3\ filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change, as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. On 
August 9, 2004, the Exchange filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission is publishing this notice to solicit comment 
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\ The Exchange recently changed its name and was formerly 
known as The Cincinnati Stock Exchange or ``CSE.'' See Securities 
Exchange Act Release No. 48774 (November 12, 2003), 68 FR 65332 
(November 19, 2003) (SR-CSE-2003-12).
    \4\ See letter from James C. Yong, Senior Vice President of 
Regulation and General Counsel, NSX, to Nancy Sanow, Assistant 
Director, Division of Market Regulation, Commission, dated August 9, 
2004 (``Amendment No. 1''). In Amendment No. 1, NSX deleted the 
phrase ``While the Exchange views the regulatory oversight of 
members' compliance with the requirements of the PATRIOT Act to be a 
designated examining authority function under section 17(d) of the 
Securities Exchange Act of 1934 (the ``Act'')'' and added language 
to the text of the proposed rule to clarify that, in the event any 
of the provisions of the rule conflicted with any of the provisions 
of another applicable self-regulatory organization's rule requiring, 
the development and implementation of an anti-money laundering 
compliance program, the provisions of the member's Designated 
Examining Authority would apply.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new Rule 5.6, entitled ``Anti-Money 
Laundering Compliance Program.'' Proposed new language is in italics.
* * * * *

Rule 5.6 Anti-Money Laundering Compliance Program

    (a) Each member shall develop and implement an anti-money 
laundering program reasonably designed to achieve and monitor 
compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 
5311, et seq.), and the implementing regulations promulgated thereunder 
by the Department of the Treasury. Each member's anti-money laundering 
program must be approved, in writing, by a member of its senior 
management.
    (b) The anti-money laundering programs required by the Rule shall, 
at a minimum:
    (1) Establish and implement policies and procedures that can be 
reasonably expected to detect and cause the reporting of transactions 
required under 31 U.S.C. 5318(g) and the implementing regulations 
thereunder;
    (2) Establish and implement policies and internal controls 
reasonably designed to achieve compliance with the Bank Secrecy Act and 
the implementing regulations thereunder;
    (3) Provide for independent testing for compliance to be conducted 
by the member's personnel or by a qualified outside party;
    (4) Designate, and identify to the Exchange (by name, title, 
mailing address, e-mail address, telephone number, and facsimile 
number), a person or persons responsible for implementing and 
monitoring the day-to-day operations and internal controls of the 
program and provide prompt notification to the Exchange regarding any 
change in such designation(s); and
    (5) Provide ongoing training for appropriate persons.
    In the event that any of the provisions of this Rule 5.6 conflict 
with any of the provisions of another applicable self-regulatory 
organization's rule requiring the development and implementation of an 
anti-money laundering compliance program, the provisions of the rule of 
the member's Designated Examining Authority shall apply.

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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change as 
amended 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. The Exchange has prepared summaries, set 
forth in sections A, B, and C below, of the most significant parts of 
such statements.

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

1. Purpose
    In response to the events of September 11, 2001, President Bush 
signed into law on October 26, 2001, the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism Act of 2001 (the ``PATRIOT Act'') \5\ to address 
terrorist threats through enhanced domestic security measures, expanded 
surveillance powers, increased information sharing and broadened anti-
money laundering requirements. The PATRIOT Act amends, among other 
laws, the Bank Secrecy Act, as set forth in Title 31 of the United 
States Code.\6\ Certain provisions of Title III of the PATRIOT Act, 
also known as the International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001 (``MLAA''), impose affirmative 
obligations on a broad range of financial institutions, including 
broker-dealers, specifically requiring the establishment of anti-money 
laundering monitoring and supervisory programs.
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    \5\ Uniting and Strengthening America by Providing Appropriate 
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. 
L. 107-56, 115 Stat. 272 (2001).
    \6\ 31 U.S.C. 5311, et seq.
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    MLAA Section 352 requires all financial institutions (including 
broker-dealers) to establish anti-money laundering programs that 
include, at a minimum: (i) Internal policies, procedures and controls; 
(ii) the specific designation of an anti-money laundering compliance 
officer; (iii) an ongoing employee training program; and (iv) an audit 
function to test the anti-money laundering program.
    The Commission had previously approved several other self-
regulatory organizations' (``SROs'') proposals (including those of the 
NYSE and the NASD) to adopt rules requiring their members to establish 
anti-money laundering compliance programs with the minimum standards 
described above.\7\ Proposed NSX Rule 5.6 involves similar 
requirements. Adoption of the proposed rule would establish a 
regulatory framework for members to comply with the requirements of the 
PATRIOT Act consistent with that imposed by other SROs.
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    \7\ See, e.g., Securities Exchange Act Release No. 45798 (April 
22, 2002), 67 FR 20854 (April 26, 2002)(order approving SR-NASD-
2002-10 and SR-NASD-2002-24).
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    All members, regardless of whether the Exchange is the DEA, will be

[[Page 51740]]

required to designate and identify to the Exchange (by name, title, 
mailing address, e-mail address, telephone number, and facsimile 
number), a person or persons responsible for implementing and 
monitoring the day-to-day operations and internal controls of the 
program and provide prompt notification to the Exchange regarding any 
change in that designation.
    The exchange is not currently a DEA for any of its members. If the 
Exchange becomes a DEA for any of its members, its members would be 
subject to examination by the Exchange for compliance with the PATRIOT 
Act requirements.
    In Amendment No. 1 the Exchange added language to the text of the 
proposed rule to clarify that, in the event any of the provisions of 
the rule conflicted with any of the provisions of another applicable 
self-regulatory organization's rule requiring, the development and 
implementation of an anti-money laundering compliance program, the 
provisions of the member's Designated Examining Authority would apply.
2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change is section 6(b)(5) of the Act,\8\ in that it is designed to 
promote just and equitable principles of trade, to foster cooperating 
and coordination with persons engaged in regulating securities 
transactions, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest, and is not designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
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    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

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

    No written comments were solicited or received in connection with 
the proposed rule change.

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

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organizations consents, the Commission will:
    A. by order approve the proposed rule change, as amended, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-NSX-2004-02 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-NSX-2004-02. This 
file number should be included in the subject line if e-mail is used. 
To help the Commission process and review 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 Section, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filings will also be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from the 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-NSX-
2004-02 and should be submitted on or before September 10, 2004.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-19062 Filed 8-19-04; 8:45 am]
BILLING CODE 8010-01-P