Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Amendments to Rule 2340 (Customer Account Statements), 7990-7991 [E5-649]
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Federal Register / Vol. 70, No. 31 / Wednesday, February 16, 2005 / Notices
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.15
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2005–002 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–NASD–2005–002. 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
Section, 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 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
15 See 15 U.S.C. 78s(b)(3)(C). For purposes of
calculation the 60-day abrogation period, the
Commission considers the period to commence on
January 28, 2005, the date Nasdaq filed Amendment
No. 1.
VerDate jul<14>2003
12:44 Feb 15, 2005
Jkt 205001
should refer to File Number SR–NASD–
2005–002 and should be submitted on
or before March 9, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–636 Filed 2–15–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51181; File No. SR–NASD–
2004–171]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
the National Association of Securities
Dealers, Inc. Relating to Amendments
to Rule 2340 (Customer Account
Statements)
February 10, 2005.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on November
2, 2004, 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 NASD. On
February 2, 2005 NASD filed
Amendment No. 1 to the proposed rule
change.4 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
NASD is proposing to amend Rule
2340 to require that account statements
include a statement that advises each
customer to promptly report any
inaccuracy or discrepancy in that
person’s account to his or her
introducing firm and clearing firm
(where these are different firms) and to
re-confirm any oral communications in
writing to further protect the customer’s
rights, including rights under the
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a et seq.
3 17 CFR 240.19b–4.
4 In Amendment No. 1, NASD filed a partial
amendment to change the proposed effective date
from 30 days following Commission approval to
180 days following Commission approval. NASD
also changed the reference to ‘‘each customer’’ to
‘‘the customer’’ in the sentence proposed to be
added as the second sentence to paragraph (a) of
Rule 2340.
PO 00000
16 17
1 15
Frm 00069
Fmt 4703
Sfmt 4703
Securities Investor Protection Act
(‘‘SIPA’’). Below is the text of the
proposed rule change. Proposed new
language is in italics.
*
*
*
*
*
2340. Customer Account Statements
(a) General
Each general securities member shall,
with a frequency of not less than once
every calendar quarter, send a statement
of account (‘‘account statement’’)
containing a description of any
securities positions, money balances, or
account activity to each customer whose
account had a security position, money
balance, or account activity during the
period since the last such statement was
sent to the customer. In addition, each
general securities member shall include
in the account statement a statement
that advises the customer to report
promptly any inaccuracy or discrepancy
in that person’s account to his or her
brokerage firm. (In cases where the
customer’s account is serviced by both
an introducing and clearing firm, each
general securities member must include
in the advisory a reference that such
reports be made to both firms.) Such
statement also shall advise the customer
that any oral communications should be
re-confirmed in writing to further
protect the customer’s rights, including
rights under the Securities Investor
Protection Act (SIPA).
(b) through (d) No change
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it 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
(a) Purpose
On May 25, 2001, the U.S. General
Accounting Office (‘‘GAO’’) issued
Securities Investor Protection: Steps
Needed to Better Disclose SIPC Policies
to Investors (GAO–01–653). In that
report, the GAO made recommendations
to SEC and the Securities Investor
E:\FR\FM\16FEN1.SGM
16FEN1
Federal Register / Vol. 70, No. 31 / Wednesday, February 16, 2005 / Notices
Protection Corporation (‘‘SIPC’’) about
ways to improve the information
available to the public about SIPC and
the Securities Investor Protection Act.5
Among other things, the GAO
recommended that self-regulatory
organizations (‘‘SROs’’) explore actions
to include information on periodic
statements or trade confirmations to
inform investors that they should
document any unauthorized trading in
writing. This is important because, in
the event a firm goes into SIPC
liquidation, SIPC and the trustee
generally will assume that the firm’s
records are accurate unless the customer
is able to prove otherwise.6 Currently,
clearing firms may include language in
customer account statements advising
customers to immediately report to the
firm any discrepancies in balances or
positions, but these advisories may not
necessarily direct customers to do so in
writing, nor are they required to be
included on the statements.
Therefore, NASD is proposing to
amend Rule 2340, which specifies
disclosures required to be made on
customer account statements. The
proposed amendment to Rule 2340
would require general securities firms to
include in monthly account statements
a statement advising customers to report
promptly any inaccuracy or discrepancy
in their account to their clearing firm
and the introducing firm (where these
are different firms). Such statement also
would need to advise customers that
any oral communications should be reconfirmed in writing to further protect
customers’ rights, including rights
under SIPA. The proposed disclosure
requirement would not impose any
limitation whatsoever on a customer’s
right to raise concerns regarding
inaccuracies or discrepancies in his or
her account at any time, either in
writing or orally. Further, a customer’s
failure to promptly raise such concerns,
either in writing or orally, does not act
to estop a customer from reporting an
inaccuracy or discrepancy in his or her
account during any SIPC liquidation of
his or her brokerage or clearing firm.
5 In July 2003, the GAO issued Securities Investor
Protection: Update on Matters Related to the
Securities Investor Protection Corporation, in which
the GAO noted that the Commission was working
with self-regulatory organizations to explore ways
in which the GAO’s recommendations could be
implemented.
6 The SIPC Brochure advises customers that if
they ever discover an error in a confirmation or
statement, they should immediately bring the error
to the attention of the brokerage firm in writing and
keep a copy of this writing. SIPC advises that if
there is something wrong with the brokerage firm’s
records, the customer will have to prove that the
records are inaccurate, or SIPC and the trustee will
assume that the firm’s records are correct.
VerDate jul<14>2003
12:44 Feb 15, 2005
Jkt 205001
7991
NASD will announce the effective
date of the proposed rule change in a
Notice to Members to be published no
later than 30 days following
Commission approval. NASD is
proposing an effective date of 180 days
following Commission approval. This
will give members time to make
necessary changes to their customer
documentation and systems.
IV. Solicitation of Comments
(b) Statutory Basis
• 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–NASD–2004–171 on the
subject line.
NASD believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act, which
requires, among other things, that NASD
rules must be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest.
NASD believes that the proposed rule
change is consistent with the provisions
of the Act noted above because each
customer will be advised to promptly
report any discrepancies or inaccuracies
in his or her account to his or her
brokerage firm (both the clearing firm
and introducing firm, where the
customer’s account is serviced by both)
and to re-confirm any oral
communications in writing, thereby
further protecting the customer’s rights,
including rights under SIPA.
(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, as amended.
(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.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
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
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
No. SR–NASD–2004–171. 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. 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
Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such
filing will also be available for
inspection and copying at the principal
office of NASD. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to file number SR–NASD–
2004–171 and should be submitted on
or before March 9, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–649 Filed 2–15–05; 8:45 am]
BILLING CODE 8010–01–P
8 17
E:\FR\FM\16FEN1.SGM
CFR 200.30–3(a)(12).
16FEN1
]]>Agencies
[Federal Register Volume 70, Number 31 (Wednesday, February 16, 2005)]
[Notices]
[Pages 7990-7991]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-649]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51181; File No. SR-NASD-2004-171]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. Relating
to Amendments to Rule 2340 (Customer Account Statements)
February 10, 2005.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on November 2, 2004, 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 NASD. On February 2, 2005 NASD filed Amendment No. 1 to the proposed
rule change.\4\ 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\ In Amendment No. 1, NASD filed a partial amendment to change
the proposed effective date from 30 days following Commission
approval to 180 days following Commission approval. NASD also
changed the reference to ``each customer'' to ``the customer'' in
the sentence proposed to be added as the second sentence to
paragraph (a) of Rule 2340.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to amend Rule 2340 to require that account
statements include a statement that advises each customer to promptly
report any inaccuracy or discrepancy in that person's account to his or
her introducing firm and clearing firm (where these are different
firms) and to re-confirm any oral communications in writing to further
protect the customer's rights, including rights under the Securities
Investor Protection Act (``SIPA''). Below is the text of the proposed
rule change. Proposed new language is in italics.
* * * * *
2340. Customer Account Statements
(a) General
Each general securities member shall, with a frequency of not less
than once every calendar quarter, send a statement of account
(``account statement'') containing a description of any securities
positions, money balances, or account activity to each customer whose
account had a security position, money balance, or account activity
during the period since the last such statement was sent to the
customer. In addition, each general securities member shall include in
the account statement a statement that advises the customer to report
promptly any inaccuracy or discrepancy in that person's account to his
or her brokerage firm. (In cases where the customer's account is
serviced by both an introducing and clearing firm, each general
securities member must include in the advisory a reference that such
reports be made to both firms.) Such statement also shall advise the
customer that any oral communications should be re-confirmed in writing
to further protect the customer's rights, including rights under the
Securities Investor Protection Act (SIPA).
(b) through (d) No change
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it 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
(a) Purpose
On May 25, 2001, the U.S. General Accounting Office (``GAO'')
issued Securities Investor Protection: Steps Needed to Better Disclose
SIPC Policies to Investors (GAO-01-653). In that report, the GAO made
recommendations to SEC and the Securities Investor
[[Page 7991]]
Protection Corporation (``SIPC'') about ways to improve the information
available to the public about SIPC and the Securities Investor
Protection Act.\5\ Among other things, the GAO recommended that self-
regulatory organizations (``SROs'') explore actions to include
information on periodic statements or trade confirmations to inform
investors that they should document any unauthorized trading in
writing. This is important because, in the event a firm goes into SIPC
liquidation, SIPC and the trustee generally will assume that the firm's
records are accurate unless the customer is able to prove otherwise.\6\
Currently, clearing firms may include language in customer account
statements advising customers to immediately report to the firm any
discrepancies in balances or positions, but these advisories may not
necessarily direct customers to do so in writing, nor are they required
to be included on the statements.
---------------------------------------------------------------------------
\5\ In July 2003, the GAO issued Securities Investor Protection:
Update on Matters Related to the Securities Investor Protection
Corporation, in which the GAO noted that the Commission was working
with self-regulatory organizations to explore ways in which the
GAO's recommendations could be implemented.
\6\ The SIPC Brochure advises customers that if they ever
discover an error in a confirmation or statement, they should
immediately bring the error to the attention of the brokerage firm
in writing and keep a copy of this writing. SIPC advises that if
there is something wrong with the brokerage firm's records, the
customer will have to prove that the records are inaccurate, or SIPC
and the trustee will assume that the firm's records are correct.
---------------------------------------------------------------------------
Therefore, NASD is proposing to amend Rule 2340, which specifies
disclosures required to be made on customer account statements. The
proposed amendment to Rule 2340 would require general securities firms
to include in monthly account statements a statement advising customers
to report promptly any inaccuracy or discrepancy in their account to
their clearing firm and the introducing firm (where these are different
firms). Such statement also would need to advise customers that any
oral communications should be re-confirmed in writing to further
protect customers' rights, including rights under SIPA. The proposed
disclosure requirement would not impose any limitation whatsoever on a
customer's right to raise concerns regarding inaccuracies or
discrepancies in his or her account at any time, either in writing or
orally. Further, a customer's failure to promptly raise such concerns,
either in writing or orally, does not act to estop a customer from
reporting an inaccuracy or discrepancy in his or her account during any
SIPC liquidation of his or her brokerage or clearing firm.
NASD will announce the effective date of the proposed rule change
in a Notice to Members to be published no later than 30 days following
Commission approval. NASD is proposing an effective date of 180 days
following Commission approval. This will give members time to make
necessary changes to their customer documentation and systems.
(b) Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act, which requires, among other
things, that NASD rules must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that the proposed rule change is
consistent with the provisions of the Act noted above because each
customer will be advised to promptly report any discrepancies or
inaccuracies in his or her account to his or her brokerage firm (both
the clearing firm and introducing firm, where the customer's account is
serviced by both) and to re-confirm any oral communications in writing,
thereby further protecting the customer's rights, including rights
under SIPA.
(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, as amended.
(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, 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2004-171 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 No. SR-NASD-2004-171. 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. 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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies
of such filing will also be available for inspection and copying at the
principal office of NASD. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to file number
SR-NASD-2004-171 and should be submitted on or before March 9, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-649 Filed 2-15-05; 8:45 am]
BILLING CODE 8010-01-P
