[Federal Register Volume 70, Number 247 (Tuesday, December 27, 2005)]
[Notices]
[Pages 76483-76485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-7864]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52979; File No. SR-NASD-2005-135]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change Relating to the 
Status of Former Registered Persons Serving in the Armed Forces of the 
United States

December 19, 2005.
    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 November 15, 2005, the National Association of Securities 
Dealers, Inc. (``NASD'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the NASD. 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

    NASD is proposing to amend NASD IM-1000-2 to toll the two-year 
expiration provisions for qualification examination requirements set 
forth in NASD Rules 1021(c), 1031(c), and 1041(c) for certain former 
registered persons serving in the Armed Forces of the United States, 
including persons who commence their active military duty within two 
years after they have ceased to be registered with a member and persons 
who terminate their registration with a member while on active military 
duty.
    Below is the text of the proposed rule change. Proposed new 
language is in italics.
* * * * *
IM-1000-2. Status of Persons Serving in the Armed Forces of the United 
States
    (a)-(b) No Change.
    (c) Status of Formerly Registered Persons
    (1) If a person who is currently not registered with a member 
volunteers for or is called into active duty in the Armed Forces of the 
United States at any time within two years after the date the person 
ceases to be registered with a member, NASD will defer the lapse of 
registration requirements set forth in Rules 1021(c), 1031(c), and 
1041(c) (i.e., toll the two-year expiration provisions for 
qualification examination requirements). NASD will defer the lapse of 
registration requirements commencing on the date the person begins 
actively serving in the Armed Forces of the United States, provided 
that NASD is properly notified of the person's period of active 
military service within 90 days following his or her completion of 
active service or upon his or her re-registration with a member, 
whichever occurs first. The deferral will terminate 90 days following 
the person's completion of active service in the Armed Forces of the 
United States. Accordingly, if such person does not re-register with a 
member within 90 days following his or her completion of active service 
in the Armed Forces of the United States, the amount of time in which 
the person must become re-registered with a member without being 
subject to the qualification examination requirements shall consist of 
the standard two-year period provided in Rules 1021(c), 1031(c), and 
1041(c)

[[Page 76484]]

reduced by the period of time between the person's termination of 
registration and beginning of active service in the Armed Forces of the 
United States.
    (2) If a person placed upon inactive status while serving in the 
Armed Forces of the United States ceases to be registered with a 
member, NASD will defer the lapse of registration requirements set 
forth in Rules 1021(c), 1031(c), and 1041(c) (i.e., toll the two-year 
expiration provisions for qualification examination requirements) 
during the pendency of his or her active service in the Armed Forces of 
the United States. NASD will defer the lapse of registration 
requirements based on existing information in the Central Registration 
Depository, provided that NASD is properly notified of the person's 
period of active military service within two years following his or her 
completion of active service or upon his or her re-registration with a 
member, whichever occurs first. The deferral will terminate 90 days 
following the person's completion of active service in the Armed Forces 
of the United States. Accordingly, if such person does not re-register 
with a member within 90 days following his or her completion of active 
service in the Armed Forces of the United States, the amount of time in 
which the person must become re-registered with a member without being 
subject to the qualification examination requirements shall consist of 
the standard two-year period provided in Rules 1021(c), 1031(c), and 
1041(c).
* * * * *

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 received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV 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
    Since the September 11, 2001 attacks, NASD has provided tailored 
regulatory relief to securities industry professionals who volunteer 
for or are called into active military duty. In January 2002, NASD 
filed with the SEC for immediate effectiveness a rule change that 
amended NASD IM-1000-2 to codify the staff's position regarding the 
relief from NASD Rule 1120 (Continuing Education Requirements) for 
securities industry professionals who volunteer for or are called into 
active military duty.\3\ In addition, in conjunction with the current 
filing, NASD has filed with the SEC for immediate effectiveness a rule 
change \4\ that amends NASD IM-1000-2 to clarify its scope with respect 
to registered persons and sole proprietors and to codify NASD's 
existing guidance relating to the receipt of transaction-related 
compensation by registered persons actively serving in the Armed Forces 
of the United States.
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    \3\ See Securities Exchange Act Release No. 45259 (January 9, 
2002), 67 FR 2256 (January 16, 2002) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change to Relieve Registered 
Representatives Serving in the Armed Forces From Continuing 
Education Requirements) (SR-NASD-2002-03).
    \4\ See SR-NASD-2005-134.
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    Recently, members have requested that NASD toll the two-year 
expiration period for securities licenses (``two-year licensing 
expiration provisions'') \5\ in certain cases, such as where a person 
commences active military duty within two years of his or her having 
been registered with a member or where a person on active military duty 
ceases to be registered with a member, but seeks employment in the 
industry following completion of active service.
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    \5\ NASD Rules 1021(c), 1031(c), and 1041(c) provide that if a 
person does not register with a member within two years of his or 
her last registration, his or her qualification as a principal, 
representative, or assistant representative will lapse and the 
person must then retest to function as a principal, representative, 
or assistant representative.
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    In response, NASD is proposing to amend NASD IM-1000-2 to toll the 
``two-year licensing expiration provisions'' for a person previously 
registered with a member who commences his or her active military duty 
within two years after he or she has ceased to be registered with the 
member. Under the proposal, the tolling would start on the date such 
person enters active military service and would terminate 90 days 
following the person's completion of active service in the Armed Forces 
of the United States. The proposal requires that NASD be properly 
notified of the person's period of active military service within 90 
days following his or her completion of active service or upon his or 
her re-registration with a member, whichever occurs first. The proposal 
also provides that if such person does not re-register with a member 
within 90 days following his or her completion of active service in the 
Armed Forces of the United States, the amount of time in which the 
person must become re-registered with a member without being subject to 
the ``two-year licensing expiration provisions'' will consist of the 
standard two-year period reduced by the period of time between the 
person's termination of registration and beginning of active service in 
the Armed Forces of the United States.\6\
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    \6\ For instance, under the proposal, if a person terminates his 
registration with a firm on August 1, 2005, is called into active 
military duty on November 1, 2005, and returns from active military 
duty on May 1, 2006, NASD would toll the ``two-year licensing 
expiration provisions'' beginning on November 1, 2005, until July 
30, 2006 (which is 90 days following completion of his active 
military duty). In this example, NASD would have to be notified of 
his period of active military service by no later than July 30, 
2006. Further, if he does not re-register with a member by July 30, 
2006, he would then have 21 months remaining (24 months less the 
three months that ran prior to his entering active service) to re-
register with a firm without having to re-take a qualification exam 
or seek a waiver.
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    In addition, NASD is proposing to amend NASD IM-1000-2 to toll the 
``two-year licensing expiration provisions'' for a person placed upon 
``inactive'' status pursuant to NASD IM-1000-2 who while serving in the 
Armed Forces of the United States ceases to be registered with a 
member.\7\ Under the proposal, the tolling would start on the date such 
person ceases to be registered with the member and would terminate 90 
days following the person's completion of active service in the Armed 
Forces of the United States. The proposal requires that NASD be 
properly notified of the person's period of active military service 
within two years following his or her completion of active service or 
upon his or her re-registration with a member, whichever occurs first. 
NASD is proposing to toll the ``two-year licensing expiration 
provisions'' for such persons based on available information in the 
Central Registration Depository (CRD) regarding their active military 
status. The proposal further provides that if such person does not re-
register with a member within 90 days following his or her completion 
of active service in the Armed Forces of the United States, the person 
would have 90 days plus two years following the end of the person's 
active service in the Armed Forces of the United States to become re-
registered with a member.\8\
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    \7\ Persons on ``inactive'' status due to active military duty 
who do not cease their registration with a member while serving in 
the Armed Forces of the United States are not subject to the ``two-
year licensing expiration provisions'' because they are considered 
registered for purposes of NASD Rules. See NASD IM-1000-2.
    \8\ For example, under the proposal, assume a person registered 
with Firm A, enters active military duty on January 1, 2006, and is 
placed on ``inactive'' status for purposes of NASD registration. He 
then terminates his registration with Firm A on July 1, 2006 while 
still on active military duty. He returns from active military duty 
on December 1, 2006. In this example, NASD would remove his 
``inactive'' status designation on July 1, 2006 because he has 
ceased to be registered with a member. However, NASD would toll the 
``two-year licensing expiration provisions'' beginning on July 1, 
2006, until March 1, 2007 (which is 90 days following completion of 
his active military duty). NASD would have to be notified of his 
period of active military service by no later than December 1, 2008 
(which is two years following completion of his active military 
duty).

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[[Page 76485]]

    NASD will announce the effective date of the proposed rule change 
in a Notice to Members (``NTM'') to be published no later than 60 days 
following Commission approval. The effective date will be 30 days 
following publication of the NTM announcing Commission approval.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among 
other things, that NASD's 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 provides 
appropriate tailored relief to persons actively serving in the Armed 
Forces of the United States in a manner consistent with NASD's goals of 
investor protection and market integrity.
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    \9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change will result in 
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. 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 self-regulatory organization 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 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 No. SR-NASD-2005-135 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-NASD-2005-135. 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 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-2005-135 and should be submitted on or before 
January 17, 2006.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-7864 Filed 12-23-05; 8:45 am]
BILLING CODE 8010-01-P