[Federal Register Volume 70, Number 126 (Friday, July 1, 2005)]
[Notices]
[Pages 38229-38232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3458]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51923; File No. SR-NYSE-2005-13]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Proposed Uniform 
Branch Office Form (``Form BR'')

 June 24, 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 April 13, 2005, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') 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. 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.
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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 proposed new Uniform Branch Office 
Form (``Form BR''). The text of the proposed Form BR is available on 
the NYSE's Web site (http://www.nyse.com/), at the Exchange's Office of 
the Secretary, and at the Commission's Public Reference Room.

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 purpose of this filing is to establish a new Form BR that would 
enable Exchange members and member organizations (``NYSE Membership'') 
to electronically submit branch office application information to the 
Exchange, the National Association of Securities Dealers, Inc. 
(``NASD''), and states through the Central Registration Depository 
(``CRD[reg]'' or ``CRD system'').\3\ The NYSE Membership would be able 
to use the proposed Form BR to submit information that is currently 
furnished through the NYSE Branch Office Application form, Schedule E 
of the Uniform Application for Broker-Dealer Registration (``Form 
BD''), and certain state branch office forms.
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    \3\ CRD is a computerized database that contains information 
about most brokers, some investment advisers, their representatives, 
and the firms for whom they work. Examples of information in CRD 
include brokers' licenses, regulatory violations, educational 
backgrounds, employment histories, and records of serious investor 
complaints.
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Background
    A working group (``Working Group''), composed of Exchange and NASD 
staff, representatives of the North American Securities Administrators 
Association (``NASAA''), and states, developed the proposed new Form BR 
to register and seek approval of branch offices. Form BR is one 
component of a broader project to provide uniform branch office 
definitions and registration procedures.\4\ The Exchange believes that 
the integration of branch registration into CRD through Form BR would 
create efficiencies for the NYSE Membership by, among other things, 
making it easier for them to register branch offices with the Exchange, 
NASD, and states, and to manage their ongoing registration 
responsibilities regarding those branch offices (e.g., changes and 
withdrawals). The NYSE Membership would also benefit from centralized 
on-line work queues, electronic notifications, and the ability to 
designate and identify the branch office where a particular registered 
representative works. Additional CRD enhancements would provide what 
amounts to a relational ``link'' between the Form BR and the Uniform 
Application for Securities Industry Registration or Transfer (``Form 
U4'').\5\
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    \4\ Although adoption of the proposed Form BR would not be 
dependent on the adoption of a uniform definition of branch office, 
both the Exchange and NASD have submitted rule filings to the 
Commission proposing to adopt definitions of branch office that 
would be substantially similar in all material respects. See SR-
NYSE-2002-34 and SR-NASD-2003-104 and amendments thereto.
    \5\ For example, while firms would continue to report changes to 
an individual registered person's branch office assignment by filing 
an amended Form U4, firms would also be able to report a new office 
of employment address for multiple registered persons assigned to a 
particular branch office that has moved to a new location by filing 
an amended Form BR (rather than filing multiple Form U4 amendments 
for the registered persons affected). The Exchange and NASD expect 
to make the appropriate technical changes to Form U4 to support this 
functionality and to facilitate the overall implementation of the 
branch office registration project.
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    The proposed Form BR would be a ``uniform'' form, similar to the 
Form U4 and the Uniform Termination Notice for Securities Industry 
Registration (``Form U5''). As with Forms U4 and U5, by electronically 
filing a single Form BR through CRD, the NYSE Membership would be able 
to update branch application information and seek approval for branch 
offices from the Exchange, NASD, and states that require branch 
registration.\6\ Form BR would reconcile inconsistencies among existing 
branch office forms, eliminate duplicative questions, and elicit 
information to facilitate the branch office registration/approval 
process. Form BR is intended to combine the current Exchange Branch 
Office Application form, the existing state branch office forms, and 
Schedule E of Form BD.\7\
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    \6\ Currently, Connecticut, Florida, Nevada, and Vermont have 
separate forms that firms must submit to register a branch office in 
each of those states.
    \7\ States that currently require branch office registration or 
reporting have indicated that they would use the proposed Form BR 
for those purposes.
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    Previously, branch application information was submitted through 
the Exchange's Electronic Filing Platform

[[Page 38230]]

(``EFP'').\8\ Once the proposed new Form BR becomes effective, branch 
office applications and amendments would no longer be accepted or 
processed through EFP. Form BR information submitted through CRD would 
be automatically transmitted to the NYSE branch office system, from 
which the Exchange would review branch applications per its current 
protocol. The NYSE branch office system would then transmit approval/
rejection determinations directly back to CRD, where the NYSE 
Membership could view them.
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    \8\ The EFP is an extranet built by the NYSE to support 
authenticated, encrypted, two-way communications between the NYSE 
and its membership. It is currently being used for applications such 
as branch office approvals and short interest reporting.
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Features of Proposed Form BR
    The following are significant features of proposed Form BR:
    Filing Types: Form BR would permit firms to make: (1) An 
``initial'' filing (to apply for approval of or to report a branch 
office); (2) an ``amendment'' filing (to amend information previously 
filed); and (3) a ``closing/withdrawal'' filing (to terminate a branch 
office registration and/or withdraw an initial filing prior to approval 
by a state or self-regulatory organization (``SRO'')).
    NYSE Component: Form BR would include a section that solicits 
information exclusively from the NYSE Membership, including certain 
branch office and office space-sharing information.
    Explanation of Terms: Form BR would adopt, to the extent possible, 
the ``Explained Terms'' used on the existing uniform forms. It would 
also include definitions of additional terms used in the context of 
branch office registration and reporting, including ``closing,'' 
``person-in-charge,'' ``regular branch,'' ``small branch,'' 
``supervisor,'' and ``withdrawal.'' \9\
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    \9\ Some of these terms are used on the current NYSE Branch 
Office Application form.
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    Type of Entity: Consistent with the uniform form concept, Form BR 
would provide entities with the opportunity to designate whether the 
branch office filing is being made on behalf of a broker-dealer 
(``BD'') or an investment adviser (``IA''). This feature would enable 
firms to register or report IA branches in states that require such 
registration and reporting.
    Other Business (``DBA'') Names/Types of Activities/Web Sites: This 
section of Form BR would elicit the financial industry activities 
conducted at the branch office, names under which the branch office is 
conducting business, and Web site addresses used by the branch office.
    Office Sharing Arrangements: Form BR would allow for the submission 
of all information elicited on both the Exchange's current Branch 
Office Application and Office Space-Sharing forms.\10\ As noted above, 
some of this information would be exclusive to the NYSE Membership. The 
protocol for submission of information regarding office-sharing 
arrangements pursuant to NYSE Rule 343 would not change.
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    \10\ This information would be consistent with information 
currently elicited on Schedule E of the Form BD.
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2. Statutory Basis
    The Exchange believes that, insofar as Form BR and the CRD system 
are used by the Exchange and other various SROs, their use is 
consistent with Section 6(b)(5) \11\ of the Act in that it is designed 
to foster cooperation and coordination with persons engaged in 
regulating transactions in securities. Additionally, the Exchange 
believes that the information reported on the Forms would assist the 
Exchange in its responsibilities under Section 6(c)(3)(B) \12\ of the 
Act in denying membership to those subject to a statutory 
disqualification or who cannot meet such standards of training, 
experience, and competence as are prescribed by the rules of the 
Exchange, or those who have engaged in acts or practices inconsistent 
with just and equitable principles of trade.
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(c)(3)(B).
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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 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

    The Exchange's Information Memo No. 04-43, issued on August 9, 
2004, solicited comments on a preliminary version of Form BR. The only 
comments the Exchange received were contained in a September 7, 2004 
letter from the Association of Registration Management (``ARM''). A 
copy of the Information Memo and the ARM letter are available at the 
NYSE and the Commission. The NASD issued a similar notice to its 
members \13\ that elicited comments from other parties, as well as a 
similar letter from the ARM. The Exchange, NASD, ARM, and other parties 
discussed all of the comments, and a consensus was reached to make the 
changes below to the preliminary Form BR.
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    \13\ See NASD Notice to Members 04-55 (August 2004).
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Pre-Populating the Proposed Form BR
    In response to five commenters who suggested that Form BR be pre-
populated wherever possible, a number of questions in Section 1 
(General Information) would be pre-populated from information already 
reported in Web CRD. Furthermore, applicants would be required to 
complete Section 5 (Associated Individual) only for initial branch 
office filings. To associate a registered individual with a branch 
office after the initial branch office filing, applicants would only 
need to update the ``office of employment'' address on that 
individual's Form U4, and the Form BR would automatically be populated 
with that information.
    During the transition period (in which information would be moved 
from the EFP to Form BR on the CRD system), the following Form BR data 
elements would be pre-populated based on existing NYSE, NASD, and 
jurisdiction branch office data: Branch Address, NYSE Branch Code 
Number, NASD Branch Number, NYSE/NASD Supervisor/Person-In-Charge Name 
and CRD Number, Operational Status, and NYSE/Jurisdiction Registration 
Status. To facilitate the transition process, firms would have the 
option of providing a data feed of the name and CRD number of the 
individuals associated with each branch. Once branches have been 
established in the CRD system, it would be possible to electronically 
transfer entire branches between firms, or relocate an entire branch 
within the same firm, via the Form BR.
Section 1--General Information
    As noted above, seven fields would be pre-populated.
Section 2--Registration/Notice Filing/Type of Office
    Six commenters offered remarks about Section 2. One commenter 
recommended that the Form ask for information only about one 
supervisor. The Working Group decided not to limit the question to one 
supervisor, since there could be more than one supervisor in a branch 
office. However, in response to a comment that it was duplicative to 
ask whether a supervisor was currently associated with the firm, the 
Working Group eliminated that question. The Working Group left intact 
the requirement to check a box requiring the applicant to attest that 
it is not required to register the branch with the NYSE. In

[[Page 38231]]

response to a comment that the information in Section 2 was already 
being reported on the Form U4, the Working Group eliminated the 
``Disclosure,'' statutory disqualification (``SD'') status, and 
``Independent Contractor'' fields. Applicants would only need to supply 
the name and/or CRD number of the supervisor/person-in-charge. The 
other information would be populated based on information already in 
the CRD system.
Section 3--Types of Activities/Other Business Names/Websites
    Section 3, among other things, would include a question about the 
outside activities of associated persons. Six commenters had concerns 
about the scope of information being elicited and the difficulty of 
updating the information when persons join or leave a firm. After 
considering the comments, the Working Group determined that there is a 
regulatory need for information regarding the ``investment-related'' 
activities of associated persons conducted at the branch. Therefore, 
the Working Group eliminated the checklist of financial industry 
activities, business, or services conducted by any associated person of 
the applicant at the branch and replaced it with a question limited to 
a description of any outside ``investment-related'' activities, a term 
that is defined in the Form U4.
    The Working Group also considered a commenter's suggestion that 
disclosure should be limited to information about firms. The commenter 
had concerns about the costs of gathering information about associated 
persons' activities, and the potential for firm responsibility for 
associated persons' outside business activities. The Working Group, 
nonetheless, concluded that the questions being asked in Section 3, as 
revised, have significant regulatory value, and should be retained.\14\
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    \14\ The Exchange believes that the Commission had suggested 
that the policies and procedures for closely monitoring outside 
business activities and selling away could form part of an effective 
supervisory system. See Commission's Staff Legal Bulletin No. 17, 
March 19, 2004.
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Section 4--Branch Office Arrangements
    Section 4 elicits information about branch office arrangements and 
payment of expenses. There were eight comments about this section, 
which generally asked for clarification of the questions. Initially, a 
question in Section 4 (taken essentially verbatim from the Schedule E) 
asked whether the branch had a written agreement with the main office 
and whether five percent or more of its registered representatives were 
deemed to be ``independent contractors.'' The Working Group eliminated 
this question in its entirety because: (1) Another question in Section 
4 would ask whether the business location operates under a written 
agreement; and (2) as previously discussed, information about 
independent contractors would be elicited on the Form U4. The Working 
Group added a question that permits applicants to explain any expense 
payment or financial interest arrangement in their own words.
Section 5--Associated Individuals
    In the preliminary Form BR, Section 5 requested the CRD number, 
disclosure information, and SD status of each associated person at a 
branch, and whether the person is an independent contractor. In 
response to seven comments that such requests were duplicative and 
unnecessary, the Working Group eliminated the ``Disclosure,'' ``SD,'' 
and ``Independent Contractor'' fields from this section. As modified, 
firms would be required to enter only each individual's CRD number or, 
in the alternative, each individual's name. The other information would 
be populated, as appropriate, based on information already in the CRD 
system.\15\
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    \15\ The individual's firm and regulators would be able to 
access the individual's entire CRD record by ``clicking'' on the 
individual's CRD number when viewing Section 5 of the Form BR in Web 
CRD.
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Section 6--NYSE Branch Information
    In response to ARM's comment that the NYSE primarily seeks ``a 
sense of the size of the branch office's business,'' and that exact 
figures would be difficult to estimate, the NYSE changed the question 
``What is the estimated cost of opening and equipping the new office?'' 
to ``Is the estimated cost of opening and equipping this branch office 
greater than 10% of the applicant's most recent excess net capital?'' 
and ``If yes, enter the cost of opening and equipping the office.''
    ARM also commented that the issues sought to be addressed by four 
questions for branches conducting research and investment banking would 
be more effectively addressed by one question, ``Does the applicant 
have information barriers in place?'' The NYSE agreed, and replaced the 
four questions with the suggested one.
    ARM believed that the question ``Is the officer or partner 
responsible for the inspection of this office at least annually a 
registered representative?'' served no regulatory purpose. The NYSE 
agreed, and removed it.
    Furthermore, agreeing with ARM's observation that ``Name and 
address where branch office certificates will be sent'' might not 
require a response if it were worded ``Name and address where branch 
office certificates will be sent, if different from this branch office 
address,'' the NYSE added the suggested, conditional wording.
Section 7--Branch Closing
    This section elicits information about the date operations would 
cease at the branch office, the location of the branch's books and 
records, and the name and telephone number of a contact person. One 
commenter stated the view that Section 7 made branch closing or 
withdrawal more complicated. Another commenter suggested pre-populating 
Section 7. A third commenter noted that the information being asked was 
already available on the Form U5. The NYSE eliminated the question ``Is 
this office closing to be listed in the NYSE Bulletin?'' However, the 
Working Group did not change any other questions due to the regulatory 
value of the requested information.
Section 8--Branch Withdrawal
    Despite one comment questioning the need for this information, the 
Working Group decided to keep this section's request for date and 
reason for withdrawal, and name and telephone number of contact person, 
because the Working Group felt the information would be of value to 
regulators.
Section 9--Signature
    As initially proposed, Section 9 required the signatory to certify 
``under penalty of perjury'' that he or she had signed the form on 
behalf of, and with the authority of, the applicant. The attestation 
also required the signatory and the applicant to represent that the 
applicant would promptly file any required amendments to the Form BR. 
One commenter contended that the signer should not be required to 
attest on behalf of himself and the firm as to the truth of information 
supplied by associated individuals or as to future amendments. Another 
commenter noted that neither the current NYSE Branch Office Application 
nor Schedule E amendments require a signature, and suggested that Form 
BR limit the attestation to ``the best of the member's knowledge the 
application is accurate and complete in all material respects.'' The 
Working Group carefully considered these comments and removed ``under 
penalty of perjury,'' as well as the statement regarding future 
amendments on behalf of the signatory and firm, from the attestation. 
However, the Working Group concluded that the

[[Page 38232]]

integrity of the data being reported requires an attestation that the 
statements are ``current, true and complete.''
Other Comments
    Four commenters favored the proposed Form BR only if all states 
were to accept the Form in place of state registration requirements. 
The Exchange notes that, as of this date, Connecticut, Florida, 
Vermont, and Nevada have indicated that they plan to retire their 
respective branch registration forms and adopt the Form BR. Several of 
the states that require a ``notice'' filing also have agreed to use the 
proposed Form BR in place of their forms. The Exchange notes that 
NASAA, which, as part of the Working Group, was involved in the 
creation of the Form BR, has indicated that it expects to formally 
endorse the Form BR.
    The Exchange has also considered comments concerning the costs to 
firms of filing the proposed Form BR for each of their branches. Two 
commenters indicated that their firms have more than 1,000 branch 
offices. The Working Group carefully weighed the regulatory value of 
branch office registration against the additional costs that would be 
incurred by members that heretofore were not required to register 
certain offices (e.g., home offices), and determined that the 
regulatory value of registering each office that could in the future 
qualify as a branch office outweighed the increased financial costs to 
certain members. In reaching this decision, the Working Group 
considered the fact that large multi-service firms with branch offices 
throughout the United States have long been required to register a 
significant number of branch offices.

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

    Within 35 days of the date of 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 Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, 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, 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-NYSE-2005-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NYSE-2005-13. 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 the Exchange. 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-NYSE-2005-13 and should be submitted on or before July 
22, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3458 Filed 6-30-05; 8:45 am]
BILLING CODE 8010-01-P