[Federal Register Volume 70, Number 12 (Wednesday, January 19, 2005)]
[Notices]
[Pages 3083-3085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-177]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51023; File No. SR-NASD-2004-174]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment No. 1 Thereto Relating to 
Frequency of Updates From the National Do-Not-Call Registry

January 11, 2005.
    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 November 24, 2004 the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by NASD. On 
January 6, 2005, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and is 
approving the proposed rule change, as amended, on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, NASD filed a partial amendment to 
request that the Commission approve the proposed rule change on an 
accelerated basis pursuant to Section 19(b)(2) of the Securities 
Exchange Act of 1934 (``Act''). The partial amendment also changes 
the effective date of the proposed rule change from January 1, 2005 
to March 1, 2005.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend NASD Rule 2212, to require a member that 
seeks to qualify for the safe harbor set forth in NASD Rule 2212 to, 
among other things, use a process to prevent telephone solicitations to 
any telephone number in a version of the national do-not-call registry 
obtained from the administrator of the registry no more than thirty-one 
(31) days prior to the date any call is made. This proposed amendment 
is consistent with recent amendments to the comparable do-not-call 
rules of the Federal Trade Commission (``FTC'') and the Federal 
Communications Commission (``FCC''). Below is the text of the proposed 
rule change. Proposed new language is in italics. Proposed deletions 
are in [brackets].

2200. Communications With Customers and the Public

2210. Communications with the Public
* * * * *
2212. Telemarketing
    (a) No Change.
    (b) No Change.
    (c) Safe Harbor Provision.
    (1)-(3) No Change.
    (4) Accessing the national do-not-call database. The member uses a 
process to prevent telephone solicitations to any telephone number on 
any list established pursuant to the do-not-call rules, employing a 
version of the national do-not-call registry obtained from the 
administrator of the registry no more than [three months] thirty-one 
(31) days prior to the date any call is made, and maintains records 
documenting this process.
    (d)-(g) No Change.

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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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
    In 2003, the FTC, via its Telemarketing Sales Rule, and the FCC, 
via its Miscellaneous Rules Relating to Common Carriers, established 
requirements for sellers and telemarketers to participate in a national 
do-not-call registry.\4\ Since June 2003, consumers have been able to 
enter their home telephone numbers into the national do-not-call 
registry, which is maintained by the FTC. Under rules of the FTC and 
FCC, sellers and telemarketers generally are prohibited from making 
telephone solicitations to consumers whose numbers are listed in the 
national do-not-call registry. The FCC's do-not-call rules apply to 
broker-dealers while the FTC's rules do not.\5\
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    \4\ The do-not-call rules of the FCC and FTC are very similar in 
terms of substance, in part, because Congress directed the FCC to 
consult with the FTC to maximize consistency between their 
respective do-not-call rules. See The Do-Not-Call Implementation 
Act, 108 Public Law 10, 117 Stat. 557 (March 11, 2003).
    \5\ See 15 U.S.C. 6102(d)(2)(A), which provides that ``The rules 
promulgated by the Federal Trade Commission under subsection (a) 
shall not apply to * * * [among other persons, brokers or dealers] * 
* *. .'' The FTC's do-not-call rules were promulgated under 15 
U.S.C. 6102. The FCC's rules are not subject to this limitation and 
apply to all sellers and telemarketers. See NASD Notice to Members 
04-15 for a more extensive discussion of the concurrent application 
of FCC and NASD rules in this area.
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    In July 2003, the SEC requested that NASD amend its telemarketing 
rules to require NASD members to participate in the national do-not-
call registry.\6\ Because broker-dealers are subject to the FCC's do-
not-call rules, NASD modeled its rules in this area after those of the 
FCC and codified these do-not-call requirements in NASD Rule 2212, with 
minor modifications tailoring the rules to broker-dealer activities and 
the securities industry. The SEC approved these rules in January 
2004.\7\
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    \6\ The Telemarketing and Consumer Fraud and Abuse Prevention 
Act of 1994 (codified at 15 U.S.C. 6102) requires the SEC to 
promulgate telemarketing rules substantially similar to those of the 
FTC or to direct self-regulatory organizations to promulgate such 
rules unless the SEC determines that such rules are not in the 
interest of investor protection.
    \7\ See Securities Exchange Act Release No. 49055 (January 12, 
2004); 69 FR 2801 (January 20, 2004) (SR-NASD-2003-131).

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[[Page 3084]]

Safe Harbor Provision for the National Do-Not-Call Registry 
Requirements

    The FCC and FTC each provided persons subject to their respective 
do-not-call rules a ``safe harbor'' providing that a seller or 
telemarketer is not liable for a violation of the do-not-call rules 
that is the result of an error if the seller or telemarketer's routine 
business practice meets certain specified standards. NASD has provided 
a parallel safe harbor in paragraph (c) of NASD Rule 2212; this safe 
harbor is limited to a violation of subparagraph (a)(3) of NASD Rule 
2212, which prohibits initiating any telephone solicitation to any 
person who has registered his or her phone number with the national do-
not-call registry.
    Today, to be eligible for this NASD Rule 2212 safe harbor, a member 
or person associated with a member must demonstrate that the member's 
routine business practice meets four standards. First, the member must 
have established and implemented written procedures to comply with the 
national do-not-call rules. Second, the member must have trained its 
personnel, and any entity assisting it in its compliance, in procedures 
established pursuant to the national do-not-call rules. Third, the 
member must have maintained and recorded a list of telephone numbers 
that the member may not contact. Fourth, the member must use a process 
to prevent telephone solicitations to any telephone number on any list 
established pursuant to the do-not-call rules, employing a version of 
the national do-not-call registry obtained from the FTC no more than 
three months prior to the date any call is made, and must maintain 
records documenting this process.
    Shortly after NASD's rules were approved, Congress instructed the 
FTC to amend its telemarketing rules to require use of a national do-
not-call registry no more than thirty-one days old.\8\ Accordingly, in 
March 2004, the FTC amended its Telemarketing Sales Rule to require 
sellers and telemarketers seeking to qualify for the FTC's do-not-call 
safe harbor to use a version of the national do-not-call registry 
obtained from the FTC no more than thirty-one days prior to the date 
any call is made. In August 2004, the FCC adopted a conforming 
amendment to its Miscellaneous Rules Relating to Common Carriers, 
requiring that persons who seek to qualify for a similar safe harbor 
provided in the rule use a version of the national do-not-call registry 
obtained from the administrator of the national do-not-call registry 
(i.e., the FTC) no more than thirty-one days prior to the date any call 
is made.\9\ The FTC and FCC rule amendments take effect on January 1, 
2005.
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    \8\ The FTC indicated that it was directed to amend its rules by 
Congress in the Consolidated Appropriations Act of 2004, Public Law 
108-199, 188 Stat 3 (requirement in Division B, Title V). See The 
Telemarketing Sales Rule--Part III, 69 FR 16368 (March 29, 2004).
    \9\ See 69 FR 60311 (October 8, 2004); CG Docket No. 02-278, FCC 
04-204 (adopted August 25, 2004; released September 21, 2004). The 
FCC indicated that while Congress did not direct the FCC to amend 
its do-not-call rule, it determined to do so, in part, because it is 
required to consult and coordinate with the FTC with respect to, and 
maximize the consistency of, their respective do-not-call rules. See 
69 FR 60313.
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    NASD is proposing to amend NASD Rule 2212 to conform to this change 
in the rules of the FTC and FCC. NASD believes that this change is 
necessary to maintain the consistency between the telemarketing rules 
of NASD and the FTC and FCC (particularly given that the FCC's rules 
already directly apply to broker-dealers), and that investors generally 
expect NASD's telemarketing standards to be comparable to those of the 
FTC and FCC. Additionally, under The Telemarketing and Consumer Fraud 
and Abuse Prevention Act of 1994 the SEC has requested that NASD amend 
its do-not-call rules to conform to the recent amendments to the FTC's 
do-not-call rules.
    NASD's proposed rule change would take effect on March 1, 2005. 
Accordingly, under the proposed rule change, effective March 1, 2005, 
an NASD member seeking to qualify for the safe harbor in NASD Rule 2212 
would be required to use a process to prevent telephone solicitations 
to any telephone number in a version of the national do-not-call 
registry obtained from the administrator of the registry (i.e., the 
FTC) no more than thirty-one days prior to the date any call is made.
    NASD will announce the effective date of the proposed rule change 
in a Notice to Members to be published no later than 30 days following 
Commission approval.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\10\ in general, and with Section 
15A(b)(6) of the Act,\11\ in particular, which requires, among other 
things, that NASD 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 will 
increase the protection of investors by enabling investors who do not 
want to receive telephone solicitations to receive the benefits and 
protections of the national do-not-call registry sooner.
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    \10\ 15 U.S.C. 78o-3.
    \11\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD believes that the proposed rule change does 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

    Written comments were neither solicited nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2004-174 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-2004-174. 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

[[Page 3085]]

available for inspection and copying at the principal offices 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-2004-174 
and should be submitted on or before February 9, 2005.

IV. Commission's Finding and Order Granting Accelerated Approval of 
Proposed Rule Changes

    NASD has requested that the Commission find good cause pursuant to 
Section 19(b)(2) of the Act for approving the proposed rule change 
prior to the 30th day after publication in the Federal Register. The 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to NASD and, in particular, the requirements of Section 15A 
and the rules and regulations thereunder. After careful review the 
Commission finds that the proposed rule change is consistent with the 
requirements of Section 15A(b)(6) of the Act \12\ because it is 
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.\13\ Specifically, the 
proposed rule change will make the NASD rules consistent with the 
telemarketing rules of the FTC and FCC, and lessens the possibility of 
any confusion about a broker-dealer's responsibility to use the 
national do-not-call registry.
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    \12\ 15 U.S.C. 78o-3(b)(6).
    \13\ 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).
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    Based on the above, the Commission believes that there is good 
cause, consistent with Section 15A(b)(6) \14\ and Section 19(b)(2) of 
the Act \15\ to approve the proposal, as amended, on an accelerated 
basis.
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    \14\ 15 U.S.C. 78o-3(b)(6).
    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NASD-2004-174) is hereby 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-177 Filed 1-18-05; 8:45 am]
BILLING CODE 8010-01-P