[Federal Register Volume 70, Number 75 (Wednesday, April 20, 2005)]
[Notices]
[Pages 20611-20613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1859]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51545; File No. SR-NYSE-2005-24]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Relating to the Definition of Research Analyst in Rule 344 
(Research Analysts and Supervisory Analysts) and Rule 472 
(Communications With the Public)

April 14, 2005.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Exchange Act'' or the ``Act''),\2\ and Rule 19b-4 
thereunder,\3\ notice is hereby given that on April 1, 2005, the New 
York Stock Exchange, Inc. (``NYSE'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or the ``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The NYSE filed the proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange hereby proposes an amendment to Rule 344 (Research 
Analysts and Supervisory Analysts) and Rule 472 (Communications with 
the Public) to amend the definition of ``research analyst'' in the 
respective Rules to include ``associated persons.''
    Below is the text of the proposed rule change. Proposed new 
language is italicized.

Rule 344. Research Analysts and Supervisory Analysts

    Research analysts and supervisory analysts must be registered with, 
qualified by, and approved by the Exchange.
    Adopted: June 18, 1964.

Supplementary Material:
    .10 For purposes of this Rule, the term ``research analyst'' 
includes a member, allied member, associated person or employee who is 
primarily responsible for the preparation of the substance of a 
research report and/or whose name appears on such report. Such research 
analysts must pass a qualification examination acceptable to the 
Exchange.
    .11--No Change.
    .12 For purposes of this Rule, the term ``associated person'' is 
defined as a natural person engaged in investment banking, or a 
securities or kindred business, who is directly or indirectly 
controlling or controlled by a member or member organization, whether 
or not any such person is registered, applying for registration or 
exempt from registration with the NYSE.

Rule 472. Communications With the Public

    Approval of Communications and Research Reports
    (a)--.30--No Change.
    .40 For purposes of this Rule, the term ``research analyst'' 
includes a member, allied member, associated person or employee of a 
member or member organization primarily responsible for, and any person 
who reports directly or indirectly to such research analyst in 
connection with, the preparation of the substance of a research report 
whether or not any such person has the job title of ``research 
analyst.''
    For purposes of this Rule, the term ``household member'' means any 
individual whose principal residence is the same as the research 
analyst's principal residence. Paragraphs (e)(1), (2), (3), (4)(i), 
(ii), (iii), (iv) and (v), (k)(1)(iii)b., c., and (k)(2)(i)b. and e. 
apply to any account in which a research analyst has a financial 
interest, or over which the research analyst exercises discretion or 
control, other than an investment company registered under the 
Investment Company Act of 1940. The trading restrictions applicable to 
research analysts and household members (i.e., paragraphs (e)(1), (2), 
(3), (4)(i), (ii), (iii), (iv) and (v); do not apply to a ``blind 
trust'' account that is controlled by a person other than the research 
analyst or research analyst's household member where neither the 
research analyst nor household member knows of the account's 
investments or investment transactions.
    .50--.120--No Change.
    .130 For purposes of this Rule, the term ``associated person'' is 
defined as a natural person engaged in investment banking, or a 
securities or kindred business, who is directly or indirectly 
controlling or controlled by a member or member organization, whether 
or not any such person is registered, applying for registration or 
exempt from registration with the NYSE.

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 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 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 is proposing to amend its definition of ``research 
analyst'' to include ``associated persons'' in order to cover natural 
persons who control or are under the control of members and member 
organizations.
    Background. On May 10, 2002 and July 29, 2003, the Commission

[[Page 20612]]

approved, among other things, amendments to Exchange Rules 344 and 472. 
The amendments were promulgated to address the issue of research 
analysts' conflicts of interest.\6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 48252 (July 29, 
2003), 68 FR 45875 (August 4, 2003) (SR-NYSE-2002-49) and Securities 
Exchange Act Release No. 45908 (May 10, 2002), 67 FR 34969 (May 16, 
2002) (SR-NYSE-2002-09).
---------------------------------------------------------------------------

    Proposed Amendments. Proposed Rules 344.10 and 472.40 would be 
amended to include ``associated persons'' to the group of persons 
included under the definition of ``research analyst.'' In addition, 
proposed Rule 344.12 and 472.130 would include a definition of the term 
``associated person.''
    As proposed, an ``associated person'' is defined as a natural 
person engaged in investment banking, or a securities or kindred 
business, who is directly or indirectly controlling or controlled by a 
member or member organization, whether or not any such person is 
registered, applying for registration or exempt from registration with 
the NYSE (see proposed Rules 344.12 and 472.130).
(2) Statutory Basis
    The statutory basis for this proposed rule change is section 
6(b)(5) \7\ of the Exchange Act. Under section 6(b)(5), the rules of 
the Exchange must be designed, among other things, to foster 
cooperation and coordination with persons engaged in regulating 
transactions in securities. Adopting this amended definition will 
provide for greater uniformity between the Exchange and NASD rules and 
facilitate member firm compliance with these rules.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
    \8\ NASD Rule 2711 (Research Analysts and Research Reports) 
defines ``research analyst'' to mean the associated person who is 
primarily responsible for, and any associated person who reports 
directly or indirectly to such a research analyst in connection 
with, preparation of the substance of a research report, whether or 
not any such person has the job title of ``research analyst.''
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange 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.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
does not become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 5-day pre-
filing notice. The Commission believes that waiving the five-day pre-
filing requirement for this proposed rule change is consistent with the 
protection of investors and the public interest. In addition, in light 
of the Commission's approval of NASD Rules 1050 and 2711, which include 
``associated persons'' within the purview of the definition of 
``research analyst,'' the April 4, 2005 deadline for satisfaction of 
the Research Analyst Qualification Examination Requirement,\11\ and the 
fact that the Exchange does not expect this proposed amendment to be 
controversial, as it is a conforming change, the Exchange has requested 
that the Commission waive the 30-day operative period requirement. The 
Commission believes that it is consistent with the protection of 
investors and the public interest to waive the 30-day operative delay 
and make this proposed rule change immediately effective upon filing on 
April 1, 2005.\12\ Waiving the 30-day operative period would allow the 
Exchange to work in concert with NASD to provide an exemption from the 
Research Analyst Qualification Examination (Series 86 and 87) for 
certain research analysts employed by foreign affiliates of a member or 
member organization who contribute to the preparation of a member's 
research reports.\13\
---------------------------------------------------------------------------

    \11\ Research analysts, as defined in Exchange Rule 344.10, must 
be registered with, qualified and approved by the Exchange, by 
taking the Research Analyst Qualification Examination (Series 86/87 
Examination). The registration and qualification requirement became 
effective March 30, 2004. Candidates who have been functioning as 
research analysts as of the effective date of March 30, 2004, and 
submitted a registration application to NASD, on behalf of the CRD, 
by June 1, 2004, have been given until April 4, 2005, to meet the 
qualification requirements.
    \12\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \13\ See SR-NYSE-2005-25 and SR-NASD-2005-043.
---------------------------------------------------------------------------

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 e-mail to [email protected]. Please include File 
Number SR-NYSE-2005-24 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-2005-24. 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, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such 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

[[Page 20613]]

available publicly. All submission should refer to File Number SR-NYSE-
2005-24 and should be submitted on or before May 11, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1859 Filed 4-19-05; 8:45 am]
BILLING CODE 8010-01-P