Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Amendments to New York Stock Exchange Rules 35 (“Floor Employees to be Registered”) and 301 (“Proposed Transfer or Lease of Membership”), 77230-77232 [E5-8067]
Download as PDF
<![CDATA[
77230
Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices
inconvenience and interruption to the
public.
The Commission believes that waiver
of the 30 day operative delay is
consistent with the protection of
investors and the public interest,23
because it will allow the Exchange to
continue, without interruption, the
existing operation of the Pilot for an
additional year, while the Commission
considers the Hybrid Market.
Accordingly, the Commission
designates that the proposal shall
become operative as of the date of this
notice.
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:
wwhite on PROD1PC65 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2005–89 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–2005–89. 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 (https://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
23 For 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).
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18:56 Dec 28, 2005
Jkt 208001
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–2005–89 and should
be submitted on or before January 19,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.24
Jonathan G. Katz,
Secretary.
[FR Doc. E5–8066 Filed 12–28–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53018; File No. SR–NYSE–
2005–78]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Notice of
Filing of Proposed Rule Change
Relating to Amendments to New York
Stock Exchange Rules 35 (‘‘Floor
Employees to be Registered’’) and 301
(‘‘Proposed Transfer or Lease of
Membership’’)
December 23, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 2 thereunder,
notice is hereby given that on December
13, 2005, the New York Stock Exchange,
Inc. (‘‘NYSE’’ or ‘‘Exchange’’) 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 Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed change consists of
amendments to NYSE Rules 35 (‘‘Floor
Employees to be Registered’’) and 301
(‘‘Proposed Transfer or Lease of
Membership’’) which would limit
access to the Exchange Floor until
fingerprint reports have been properly
processed and approved and would
require an alternative background check
for persons whose fingerprints are
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Frm 00113
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deemed illegible. The text of the
proposed rule change is available on
NYSE’s Web site (https://www.nyse.com),
at NYSE’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,
NYSE 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. NYSE 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
NYSE Rule 35 governs the issuance of
Floor tickets (e.g., Regular Tickets and
Special Tickets) to Floor employees,
which enables them to enter upon the
trading Floor. NYSE Rule 35.70 requires
the fingerprinting of prospective
employees of members and member
organizations. Similarly, NYSE Rule
301.23 requires that prospective
members be fingerprinted.
Security concerns have suggested a
tightening of these rules in two respects:
(1) That access to the Floor be denied
for persons fingerprinted for the first
time until the fingerprinting results
have properly been processed and
accepted; and (2) that those persons
whose fingerprints cannot be read (i.e.,
are illegible) be subject to an alternative
background check acceptable to the
Exchange to cover the same criminal
convictions included by fingerprint
type. In order for a background check to
be acceptable to the Exchange, it would,
at a minimum, have to disclose the same
arrest records which the fingerprint
check would for all fifty states and,
where the applicant is foreign, through
the records of Interpol. Amendments are
also proposed to reflect the fact that the
Exchange no longer accepts fingerprint
cards, but rather processes them through
agents.3
3 See NYSE Information Memo 04–53, dated
October 8, 2004 (announcing that as of October 29,
2004, the Exchange would stop accepting new
fingerprints from its members and member
organizations and other persons and entities subject
to a fingerprinting requirement under Section 17 of
the Exchange Act, but noting that certain members
unable to submit fingerprints through another SRO
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Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices
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Background
Rule 17f–2 4 under the Exchange Act
sets out the requirements for the
fingerprinting of persons employed in
the securities industry. The Exchange
has adopted procedures to comply with
the regulations in order to assure that
appropriate persons are fingerprinted
and the results of the fingerprinting are
reviewed.5
Prior to providing member firm
employees with Floor ticket access to
the Trading Floor and Exchange
facilities, and pursuant to NYSE Rules
35 and 345.11 (‘‘Employees—
Registration, Approval, Records’’),6 a
member firm must electronically submit
a Form U4 7 via the Central Registration
Depository system (‘‘CRD’’).8 The hiring
member firm and the employee are
responsible for confirming the accuracy
of the information included on the Form
U4.9
Members and member organizations
currently have up to 30 days from the
date of the electronic filing of the Form
U4 application in Web CRD for the
fingerprints to be submitted. Applicants
and member organizations sometimes
wait until the end of the 30-day period
to submit fingerprints, whereas results
from the FBI can be reported within 24–
48 hours. It is proposed that prospective
new Floor employees not be admitted to
the Floor until the results of the
fingerprinting have been posted to the
CRD, reviewed and approved. While the
physical security of the Floor is the
primary factor in the proposed changes,
it is hoped that with this proposed
would still be able to receive Exchange fingerprint
services). Upon the completion of the
reorganization of the Exchange proposed for
January of 2006, NYSE believes that there should
no longer be members unable to utilize another
SRO.
4 17 CFR 240.17f–2.
5 See NYSE Information Memos 76–30 dated June
25, 1976 and 76–53, dated December 31, 1976,
announcing, respectively, the adoption of Exchange
Act Rule 17f–2 and SEC approval of the Exchange’s
plan for the processing of fingerprints. See also
Securities Exchange Act Release No. 13105
(December 23, 1976), 42 FR 753 (January 4, 1977).
6 NYSE Rule 345.11 requires, among other things,
member firms to thoroughly investigate the
previous record of persons whom they contemplate
employing.
7 Form U4 includes information such as an
individual’s ten-year employment history, five-year
residential history, education, disciplinary actions,
disclosure information, and the self-regulatory
organization of registration.
8 The CRD is a registration and licensing system
for the U.S. securities industry, state and Federal
regulators, and SROs. The NASD operates the CRD
pursuant to policies developed jointly with the
North American Securities Administrators
Association, Inc.
9 Through CRD the accuracy of the disclosure
portion (e.g., criminal disclosures, regulatory action
disclosures) of Form U4 pursuant to prior submitted
filings and fingerprinting is confirmed.
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18:56 Dec 28, 2005
Jkt 208001
requirement, member organizations will
be encouraged to act more promptly.
An applicant who has been
fingerprinted previously with a member
or registered broker-dealer would be
granted a conditional approval, pending
review of the fingerprint results
submitted by the current employer,
assuming the prior employment was
within ninety days of the application.
Any such applicant would have been
under a duty to disclose any reportable
events during such employment to a
supervising broker-dealer who was
charged with a duty to report statutory
disqualifications. In addition, the
applicant would, of course, have a duty
to disclose any reportable events during
the intervening period in his or her
application.
A separate issue is raised where
applicants submit fingerprints, which
cannot be read (i.e., illegible
fingerprints). Under Exchange Act Rule
17f–2(a)(l)(iv),10 when fingerprints are
rejected three times as ‘‘illegible’’ by the
FBI, the individual is exempt from
further fingerprinting.11 Exchange Act
Rule 17f–2 does not require an alternate
means of conducting a background
check. To address this background
check lapse, the NYSE’s proposed
amendment goes beyond the
requirements of the foregoing rule and
requires that members and member
organizations conduct an alternative
background check acceptable to the
Exchange. Any such background check,
in order to be acceptable to the
Exchange, would have to cover the same
criminal convictions included by
fingerprint type on a fifty state basis
and, if the applicant is foreign, an
Interpol or other multi-national database
check. These checks are generally
conducted by non-governmental
agencies. Member organizations would
be expected to use appropriate due
diligence in the selection of
investigative agencies for such
background checks, assuring their
ability to satisfactorily research all
pertinent databases. As above,
conditional approval would be available
to persons previously the subject of a
background check, provided
employment with a member or
registered broker-dealer terminated
within ninety days of the applications.
The proposed revisions to NYSE
Rules 35.70 and 301.23 will also reflect
the fact that the Exchange no longer
receives fingerprint cards directly, but
does so through agents of the
10 17
CFR 240.17f–2(a)(1)(iv).
this instance, CRD also conducts a ‘‘name
check.’’
11 In
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77231
Exchange.12 However, the Exchange’s
Membership Services Department will
process the fingerprints of member
applicants not associated with brokerdealers (not required to be registered on
CRD).
2. Statutory Basis
NYSE believes that the proposed rule
change is consistent with the
requirements of the Exchange Act and
the rules and regulations thereunder
applicable to a national securities
exchange, and in particular, with the
requirements of Sections 6(b)(5) 13
which requires, among other things, that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and national market
system, and in general, to protect
investors and the public interest. NYSE
believes that the proposed rule change,
by strengthening the security of the
Exchange Floor, will help assure the
uninterrupted trading and maintenance
of the market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposal does not 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
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.
12 NYSE Rule 345.18 provides that any filing or
submission to be made with the Exchange under
this rule, where appropriate, may be made with a
properly authorized agent acting on behalf of the
Exchange and shall be deemed to be a filing with
the Exchange.
13 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices
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 Exchange
Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2005–78 on the
subject line.
Paper Comments
wwhite on PROD1PC65 with NOTICES
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Jonathan G. Katz,
Secretary.
[FR Doc. E5–8067 Filed 12–28–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52995; File No. SR–PCX–
2005–140]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change and
Amendment No. 1 Thereto by the
Pacific Exchange, Inc. Relating to the
NASD PCX Agreement
December 21, 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 December
All submissions should refer to File
21, 2005, the Pacific Exchange, Inc.
Number SR–NYSE–2005–78. This file
(‘‘PCX’’ or ‘‘Exchange’’) filed with the
number should be included on the
Securities and Exchange Commission
subject line if e-mail is used. To help the
(‘‘Commission’’ or ‘‘SEC’’) the proposed
Commission process and review your
rule change as described in Items I and
comments more efficiently, please use
II below, which Items have been
only one method. The Commission will prepared by PCX. On December 21,
post all comments on the Commission’s 2005, PCX filed Amendment No. 1 to
Internet Web site (https://www.sec.gov/
the proposed rule change. PCX filed the
rules/sro.shtml). Copies of the
proposed rule change pursuant to
submission, all subsequent
Section 19(b)(3)(A) of the Act 3 and Rule
amendments, all written statements
19b–4(f)(6) thereunder,4 which renders
with respect to the proposed rule
it effective upon filing with the
change that are filed with the
Commission. The Commission is
Commission, and all written
publishing this notice to solicit
comments on the proposed rule change,
communications relating to the
as amended, from interested persons.
proposed rule change between the
Commission and any person, other than I. Self-Regulatory Organization’s
those that may be withheld from the
Statement of the Terms of Substance of
public in accordance with the
the Proposed Rule Change
provisions of 5 U.S.C. 552, will be
PCX is proposing to amend its
available for inspection and copying in
undertaking to extend for 90 days from
the Commission’s Public Reference
the date of this filing the time period by
Room. Copies of the filing also will be
which PCX will amend the agreement
available for inspection and copying at
between the National Association of
the principal office of NYSE. All
Securities Dealers (‘‘NASD’’) and PCX
comments received will be posted
currently in place pursuant to Rule 17d–
without change; the Commission does
2 under the Act 5 (the ‘‘NASD PCX
not edit personal identifying
Agreement’’). As described in more
information from submissions. You
detail below, the amendment to the
should submit only information that
you wish to make available publicly. All NASD PCX Agreement will expand the
scope of the NASD’s regulatory
submissions should refer to File
responsibility.
Number SR–NYSE–2005–78 and should
be submitted on or before January 19,
14 14 17 CFR 200.30–3(a)(12).
2006.
1 15 U.S.C. 78s(b)(1).
2 17
CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 17 CFR 240.17d–2.
3 15
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18:56 Dec 28, 2005
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Frm 00115
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
PCX 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. PCX 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 Commission recently approved a
proposed rule change in relation to the
acquisition of PCX Holdings, Inc. by
Archipelago Holdings, Inc.
(‘‘Archipelago Holdings’’).6 In its filing
with the Commission, PCX committed
to amend the NASD PCX Agreement
within 90 days of the Commission’s
approval of SR–PCX–2005–90 to expand
the scope of the NASD’s regulatory
functions under the NASD PCX
Agreement so as to encompass all of the
regulatory oversight and enforcement
responsibilities with respect to the
broker-dealer affiliate of Archipelago
Holdings, Archipelago Securities, L.L.C.
(‘‘Archipelago Securities’’).7 The 90-day
period expires on December 21, 2005,
and while the PCX and NASD have
executed an amended NASD PCX
Agreement, the PCX and NASD have not
yet filed the amended NASD PCX
Agreement with the Commission.
The PCX believes that an extension of
time for an additional 90 days from the
date of this filing to amend the PCX
NASD Agreement will give the
Commission staff sufficient time to
publish and take action on the proposal.
There is currently a plan in place (i.e.,
the NASD PCX Agreement) allocating to
the NASD the responsibility to receive
regulatory reports from Archipelago
Securities, to examine Archipelago
Securities for compliance and to enforce
compliance by Archipelago Securities
with the Act, the rules and regulations
thereunder and the rules of the NASD,
and to carry out other specified
regulatory functions with respect to
6 Securities Exchange Act Release No. 52497
(September 22, 2005); 70 FR 56949 (September 29,
2005) (approving SR–PCX–2005–90 as amended).
7 Archipelago Securities acts as the outbound
order router for the Archipelago Exchange and, as
such, is regulated as an exchange ‘‘facility’’ of the
PCX and PCXE.
E:\FR\FM\29DEN1.SGM
29DEN1
]]>Agencies
[Federal Register Volume 70, Number 249 (Thursday, December 29, 2005)]
[Notices]
[Pages 77230-77232]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-8067]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53018; File No. SR-NYSE-2005-78]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Relating to Amendments to New
York Stock Exchange Rules 35 (``Floor Employees to be Registered'') and
301 (``Proposed Transfer or Lease of Membership'')
December 23, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on December 13, 2005, the New York Stock Exchange, Inc. (``NYSE''
or ``Exchange'') 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
Exchange. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed change consists of amendments to NYSE Rules 35
(``Floor Employees to be Registered'') and 301 (``Proposed Transfer or
Lease of Membership'') which would limit access to the Exchange Floor
until fingerprint reports have been properly processed and approved and
would require an alternative background check for persons whose
fingerprints are deemed illegible. The text of the proposed rule change
is available on NYSE's Web site (https://www.nyse.com), at NYSE'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, NYSE 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. NYSE 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
NYSE Rule 35 governs the issuance of Floor tickets (e.g., Regular
Tickets and Special Tickets) to Floor employees, which enables them to
enter upon the trading Floor. NYSE Rule 35.70 requires the
fingerprinting of prospective employees of members and member
organizations. Similarly, NYSE Rule 301.23 requires that prospective
members be fingerprinted.
Security concerns have suggested a tightening of these rules in two
respects: (1) That access to the Floor be denied for persons
fingerprinted for the first time until the fingerprinting results have
properly been processed and accepted; and (2) that those persons whose
fingerprints cannot be read (i.e., are illegible) be subject to an
alternative background check acceptable to the Exchange to cover the
same criminal convictions included by fingerprint type. In order for a
background check to be acceptable to the Exchange, it would, at a
minimum, have to disclose the same arrest records which the fingerprint
check would for all fifty states and, where the applicant is foreign,
through the records of Interpol. Amendments are also proposed to
reflect the fact that the Exchange no longer accepts fingerprint cards,
but rather processes them through agents.\3\
---------------------------------------------------------------------------
\3\ See NYSE Information Memo 04-53, dated October 8, 2004
(announcing that as of October 29, 2004, the Exchange would stop
accepting new fingerprints from its members and member organizations
and other persons and entities subject to a fingerprinting
requirement under Section 17 of the Exchange Act, but noting that
certain members unable to submit fingerprints through another SRO
would still be able to receive Exchange fingerprint services). Upon
the completion of the reorganization of the Exchange proposed for
January of 2006, NYSE believes that there should no longer be
members unable to utilize another SRO.
---------------------------------------------------------------------------
[[Page 77231]]
Background
Rule 17f-2 \4\ under the Exchange Act sets out the requirements for
the fingerprinting of persons employed in the securities industry. The
Exchange has adopted procedures to comply with the regulations in order
to assure that appropriate persons are fingerprinted and the results of
the fingerprinting are reviewed.\5\
---------------------------------------------------------------------------
\4\ 17 CFR 240.17f-2.
\5\ See NYSE Information Memos 76-30 dated June 25, 1976 and 76-
53, dated December 31, 1976, announcing, respectively, the adoption
of Exchange Act Rule 17f-2 and SEC approval of the Exchange's plan
for the processing of fingerprints. See also Securities Exchange Act
Release No. 13105 (December 23, 1976), 42 FR 753 (January 4, 1977).
---------------------------------------------------------------------------
Prior to providing member firm employees with Floor ticket access
to the Trading Floor and Exchange facilities, and pursuant to NYSE
Rules 35 and 345.11 (``Employees--Registration, Approval,
Records''),\6\ a member firm must electronically submit a Form U4 \7\
via the Central Registration Depository system (``CRD'').\8\ The hiring
member firm and the employee are responsible for confirming the
accuracy of the information included on the Form U4.\9\
---------------------------------------------------------------------------
\6\ NYSE Rule 345.11 requires, among other things, member firms
to thoroughly investigate the previous record of persons whom they
contemplate employing.
\7\ Form U4 includes information such as an individual's ten-
year employment history, five-year residential history, education,
disciplinary actions, disclosure information, and the self-
regulatory organization of registration.
\8\ The CRD is a registration and licensing system for the U.S.
securities industry, state and Federal regulators, and SROs. The
NASD operates the CRD pursuant to policies developed jointly with
the North American Securities Administrators Association, Inc.
\9\ Through CRD the accuracy of the disclosure portion (e.g.,
criminal disclosures, regulatory action disclosures) of Form U4
pursuant to prior submitted filings and fingerprinting is confirmed.
---------------------------------------------------------------------------
Members and member organizations currently have up to 30 days from
the date of the electronic filing of the Form U4 application in Web CRD
for the fingerprints to be submitted. Applicants and member
organizations sometimes wait until the end of the 30-day period to
submit fingerprints, whereas results from the FBI can be reported
within 24-48 hours. It is proposed that prospective new Floor employees
not be admitted to the Floor until the results of the fingerprinting
have been posted to the CRD, reviewed and approved. While the physical
security of the Floor is the primary factor in the proposed changes, it
is hoped that with this proposed requirement, member organizations will
be encouraged to act more promptly.
An applicant who has been fingerprinted previously with a member or
registered broker-dealer would be granted a conditional approval,
pending review of the fingerprint results submitted by the current
employer, assuming the prior employment was within ninety days of the
application. Any such applicant would have been under a duty to
disclose any reportable events during such employment to a supervising
broker-dealer who was charged with a duty to report statutory
disqualifications. In addition, the applicant would, of course, have a
duty to disclose any reportable events during the intervening period in
his or her application.
A separate issue is raised where applicants submit fingerprints,
which cannot be read (i.e., illegible fingerprints). Under Exchange Act
Rule 17f-2(a)(l)(iv),\10\ when fingerprints are rejected three times as
``illegible'' by the FBI, the individual is exempt from further
fingerprinting.\11\ Exchange Act Rule 17f-2 does not require an
alternate means of conducting a background check. To address this
background check lapse, the NYSE's proposed amendment goes beyond the
requirements of the foregoing rule and requires that members and member
organizations conduct an alternative background check acceptable to the
Exchange. Any such background check, in order to be acceptable to the
Exchange, would have to cover the same criminal convictions included by
fingerprint type on a fifty state basis and, if the applicant is
foreign, an Interpol or other multi-national database check. These
checks are generally conducted by non-governmental agencies. Member
organizations would be expected to use appropriate due diligence in the
selection of investigative agencies for such background checks,
assuring their ability to satisfactorily research all pertinent
databases. As above, conditional approval would be available to persons
previously the subject of a background check, provided employment with
a member or registered broker-dealer terminated within ninety days of
the applications.
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\10\ 17 CFR 240.17f-2(a)(1)(iv).
\11\ In this instance, CRD also conducts a ``name check.''
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The proposed revisions to NYSE Rules 35.70 and 301.23 will also
reflect the fact that the Exchange no longer receives fingerprint cards
directly, but does so through agents of the Exchange.\12\ However, the
Exchange's Membership Services Department will process the fingerprints
of member applicants not associated with broker-dealers (not required
to be registered on CRD).
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\12\ NYSE Rule 345.18 provides that any filing or submission to
be made with the Exchange under this rule, where appropriate, may be
made with a properly authorized agent acting on behalf of the
Exchange and shall be deemed to be a filing with the Exchange.
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2. Statutory Basis
NYSE believes that the proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange, and in
particular, with the requirements of Sections 6(b)(5) \13\ which
requires, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
national market system, and in general, to protect investors and the
public interest. NYSE believes that the proposed rule change, by
strengthening the security of the Exchange Floor, will help assure the
uninterrupted trading and maintenance of the market.
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\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal does not 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
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.
[[Page 77232]]
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 Exchange Act. Comments may be submitted
by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2005-78 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-2005-78. 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 (https://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 available for inspection and copying at the principal
office of 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
available publicly. All submissions should refer to File Number SR-
NYSE-2005-78 and should be submitted on or before January 19, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 14 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-8067 Filed 12-28-05; 8:45 am]
BILLING CODE 8010-01-P
