Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to Rule 3012, Rule 3013, and IM-3013, 68122-68124 [05-22335]
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68122
Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices
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 offices 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–2005–124 and
should be submitted on or before
November 30, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Jonathan G. Katz,
Secretary.
[FR Doc. 05–22333 Filed 11–8–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52727; File No. SR–NASD–
2005–121]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
to Rule 3012, Rule 3013, and IM–3013
November 3, 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 October
14, 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, and II below, which Items
have been prepared by NASD. NASD
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder,4 which renders the
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4.
1 15
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proposal effective upon receipt of this
filing by the Commission. 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 NASD
Rule 3012 (Supervisory Control
System), Rule 3013 (Annual
Certification of Compliance and
Supervisory Processes), and IM–3013
(Annual Compliance and Supervision
Certification) to allow members, by no
later than April 1, 2006, to submit the
initial annual report required by Rule
3012 and to execute the initial annual
certification required by Rule 3013 and
IM–3013. Below is the text of the
proposed rule change. Proposed new
language is in italics.
*
*
*
*
*
3012. Supervisory Control System
(a) General Requirements
(1) Each member shall designate and
specifically identify to NASD one or
more principals who shall establish,
maintain, and enforce a system of
supervisory control policies and
procedures that (A) test and verify that
the member’s supervisory procedures
are reasonably designed with respect to
the activities of the member and its
registered representatives and
associated persons, to achieve
compliance with applicable securities
laws and regulations, and with
applicable NASD rules and (B) create
additional or amend supervisory
procedures where the need is identified
by such testing and verification. The
designated principal or principals must
submit to the member’s senior
management no less than annually, a
report 5 detailing each member’s system
of supervisory controls, the summary of
the test results and significant identified
exceptions, and any additional or
amended supervisory procedures
created in response to the test results.
(2) No change.
5 Rule 3012 became effective on January 31, 2005,
which would require a member’s first Rule 3012
report to be submitted by no later than January 31,
2006 and at least annually thereafter; however, a
member may elect to submit its first Rule 3012
report by no later than April 1, 2006. Importantly,
a member’s first Rule 3012 report must encompass
the period from January 31, 2005 (the effective date
of Rule 3012) up to the submission date (or a
reasonable period of time immediately preceding
the submission date). Each ensuing Rule 3012
report may not be for a period greater than 12
months from the date of the preceding Rule 3012
report (but may be for a shorter time period if a
member elects to prepare a report more frequently
than annually).
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*
(b) Dual Member No change.
*
*
*
*
Rule 3013. Annual Certification of
Compliance and Supervisory Processes
(a) Designation of Chief Compliance
Officer No change.
(b) Annual Certification.
Each member shall have its chief
executive officer (or equivalent officer)
certify annually,6 as set forth in IM–
3013, that the member has in place
processes to establish, maintain, review,
test and modify written compliance
policies and written supervisory
procedures reasonably designed to
achieve compliance with applicable
NASD rules, MSRB rules and federal
securities laws and regulations, and that
the chief executive officer has
conducted one or more meetings with
the chief compliance officer in the
preceding 12 months to discuss such
processes.
*
*
*
*
*
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
Rule 3013 requires that each
member’s chief executive officer
(‘‘CEO’’), or other equivalent officer,
certify annually according to the terms
set forth in IM–3013 that the member
has in place processes to establish,
maintain, review, test and modify its
written supervisory procedures. The
first annual certification is currently due
by December 1, 2005.7 Before a CEO can
complete the annual certification
requirement, IM–3013 requires, among
other things, that the CEO, chief
6 Rule 3013 and IM–3013 became effective on
December 1, 2004, which would require a member’s
first certification to be executed by December 1,
2005 and annually thereafter; however, a member
may elect to execute its first certification by no later
than April 1, 2006 and annually thereafter.
7 Each ensuing annual certification must be
effected no later than on the anniversary date of the
previous year’s certification. See IM–3013, n.1.
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Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices
compliance officer (‘‘CCO’’), and any
other necessary officers review a report
that evidences the member’s processes.
Rule 3012(a)(1) requires, among other
things, that each member submit to its
senior management no less than
annually a report detailing its
supervisory controls system that will
test and verify the adequacy of its
supervisory procedures, the summary of
the test results, and any additional or
amended supervisory procedures
created in response to the test results.
Currently, members must complete and
submit the report by January 31, 2006
and at least annually thereafter.8
Since the adoption of these rules,
NASD has received a number of
inquiries from members regarding
whether the reports required by Rule
3012 and IM–3013 could be combined.
Although NASD has advised members
that they may combine the Rule 3012
report with the report required by IM–
3013 as long as all of the required
elements of the respective reports are
addressed and clearly identified,
members have indicated that it would
be difficult to combine the reports since
the first annual certification required by
Rule 3013 must be executed by
December 1, 2005 (and thus the related
report must be prepared in advance of,
but reasonably close in time to, such
execution), while the Rule 3012 report
is not required to be submitted until
January 31, 2006.
In addition, dual members have
inquired whether they can combine the
reports required by Rule 3012 and IM–
3013 with the Annual Report required
by NYSE Rule 342.30, which is due by
April 1st of each year. As support for
their request, dual members have noted
that the NYSE Rule 342.30 Annual
Report mandates similar, though not
identical, requirements as the Rule 3012
report. Dual members have also noted
that IM–3013 specifically provides that
the IM–3013 report may be combined
with any other compliance or other
similar report required by another selfregulatory organization. Dual members
assert that being able to complete one
report instead of being required to
complete three reports that could cover
overlapping topics and issues would
prevent the duplication of significant
resources. However, because of the
disparate dates by which the three
reports must be completed, the dual
8 See Notice to Members 04–71 (October 2004)
(announcing, among other things, the effective date
of January 31, 2005); see also Transcript of
December 16, 2004 Call-in Workshop (‘‘Transcript’’)
reminding members that Rule 3012 Report is due
within one year of the January 31, 2005 effective
date and at least annually thereafter. The Transcript
is available at www.nasd.com/SupervisoryControl.
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members have indicated that it would
be nearly impossible to combine the
reports.9
Accordingly, NASD is filing this
proposed rule change to address those
issues. Specifically, the proposed rule
change will amend Rule 3012 to provide
that a member may submit its initial
Rule 3012 report by no later than April
1, 2006. The proposed rule change
explains that due to Rule 3012’s January
31, 2005 effective date, a member
choosing to rely on any date after
January 31, 2005 through April 1, 2006
as the submission deadline for its initial
Rule 3012 report will have to
encompass the period from January 31,
2004 up to that submission date (or a
reasonable period of time immediately
preceding the submission date). Each
ensuing Rule 3012 report must
encompass the 12 months following the
previous Rule 3012 report (or such
shorter time period if a member elects
to prepare a report more frequently than
annually).
Additionally, the proposed rule
change will amend Rule 3013 and IM–
3013 to provide that a member may
execute its first annual certification by
no later than April 1, 2006 and annually
thereafter. A member should keep in
mind that the report required by IM–
3013 that evidences the member’s
processes must be prepared in advance
of, but reasonably close in time to, April
1, 2006.
As a result of these proposed changes
members will be able, if they so choose,
to combine the respective reports,
provided the single report clearly
identifies and addresses all of the
requirements set forth in Rule 3012,
Rule 3013 and IM–3013. The proposed
rule change will also allow dual
members to comply with the respective
reporting requirements of Rule 3012,
Rule 3013, IM–3013, and NYSE Rule
342.30 without undue duplication of
effort.
NASD has filed the proposed rule
change for immediate effectiveness and
has requested that the Commission
waive the 5-day pre-filing requirement
and the 30-day period for the proposed
rule change to become operative, in
9 It should be noted that Rule 3012(b) provides
that any dual member electing to comply with the
substantially similar requirements of the NYSE
shall be deemed in compliance with the provisions
of Rule 3012. A dual member must comply with all
of the NYSE’s substantially similar requirements to
be considered in compliance with Rule 3012.
Accordingly, any dual member electing to comply
with the substantially similar requirements of the
NYSE would comply with Rule 3012’s reporting
requirement by completing the NYSE Rule 342.30
Annual Report. The member, however, would still
be required to complete the report required by IM–
3013 prior to the initial certification date required
by Rule 3013 and IM–3013.
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68123
order to allow NASD members to have
as much time as possible to adjust their
procedures to the new submission dates
for the initial Rule 3012 report and the
initial certification required by Rule
3013 and IM–3013. The effective date
and the implementation date will be the
date of filing, October 14, 2005.
2. 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 synchronizing the
date of the report required by Rule 3012
and the date of execution of the
certification required by Rule 3013 and
IM–3013 will reasonably serve to
minimize duplication of effort on the
part of members, while still ensuring the
protection of investors.
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
The foregoing proposed rule change is
subject to Section 19(b)(3)(A)(iii) of the
Act 10 and Rule 19b–4(f)(6) thereunder 11
because the proposal (i) Does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) does not become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest;
provided that the self-regulatory
organization has given the Commission
notice of its intent to file the proposed
rule change, along with a brief
description of the text of the proposed
rule change, at least five business days
prior to the date of filing of the
10 15
11 17
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U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
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Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices
proposed rule change, or such shorter
time as designated by the Commission.
NASD has requested that the
Commission waive the five-day prefiling requirement and the 30-day
operative delay so that the proposed
rule change will become immediately
effective upon filing. The Commission
believes that waiving the five-day prefiling provision and the 30-day
operative delay is consistent with the
protection of investors and the public
interest.12 Waiving the pre-filing
requirement and accelerating the
operative date will merely permit the
immediate implementation of changes
that will allow firms to more efficiently
discharge their reporting obligations.
For these reasons, the Commission
designates the proposed rule change as
effective and operative immediately.
At any time within 60 days of the
filing of such proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2005–121 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–NASD–2005–121. 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/
12 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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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, 100 F Street, NE, Washington, DC
20549. Copies of such filing also will 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 the File
Number SR–NASD–2005–121 and
should be submitted on or before
November 30, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Jonathan G. Katz,
Secretary.
[FR Doc. 05–22335 Filed 11–8–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52713; File No. SR–NSX–
2005–08]
Self-Regulatory Organizations;
National Stock Exchange; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change and
Amendments No. 1 and 2 Thereto
Relating to Manual Processing Fee
November 1, 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
September 28, 2005, National Stock
ExchangeSM (‘‘Exchange’’ or ‘‘NSXSM’’)
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.
On October 21, 2005, the Exchange filed
Amendment No. 1 to the proposed rule
PO 00000
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00139
Fmt 4703
Sfmt 4703
change.3 On October 31, 2005, the
Exchange filed Amendment No. 2 to the
proposed rule change.4 The Exchange
filed the proposed rule change pursuant
Section 19(b)(3)(A)(ii) of the Act 5 and
Rule 19b–4(f)(2) 6 thereunder, which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NSX proposes to amend its manual
processing fee for crosses and meets
phoned into the NSX Control Room and
the book fees charged to its Designated
Dealers.
The text of the proposed rule change
is reproduced below. Additions are
indicated by italics. Deletions are
contained within the brackets.
RULES OF NATIONAL STOCK
EXCHANGE
*
*
*
*
*
*
*
CHAPTER XI
Trading Rules
*
*
*
Rule 11.10 National Securities Trading
System Fees
A. Trading Fees
(a)–(d) No change.
(e) Crosses and Meets
(1)–(3) No change.
(4) Users executing crosses and meets
in Tape A, B or C securities through the
Exchange’s System Supervisory Center
shall be charged [$15 per contra-party]
$.0025 per share, up to a maximum of
$75 per side of transaction. This
transaction fee shall be in lieu of any
transaction fee otherwise applicable
under Paragraphs (A)(e)(1) through
(A)(e)(3) above.
(f)–(l) No change.
(m) DD Issue/Book Fees. Designated
Dealers will be charged a monthly book
fee based on the following incremental
schedule:
Number of issues
0 to 150 ........................................
151 to 300 ....................................
301 to 500 ....................................
Fee per
issue
$30.00
20.00
15.00
3 In Amendment No. 1, the Exchanged (1)
clarified who may phone orders into the NSX
Control Room, (2) defined ‘‘cross’’ and ‘‘meet,’’ and
(3) made other technical changes.
4 In Amendment No. 2, the Exchange made a
correction to the rule text.
515 U.S.C. 78s(b)(3)(A)(ii).
617 CFR 240.19b–4(f)(2).
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]]>Agencies
[Federal Register Volume 70, Number 216 (Wednesday, November 9, 2005)]
[Notices]
[Pages 68122-68124]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22335]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52727; File No. SR-NASD-2005-121]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Amendments to Rule 3012, Rule 3013, and IM-3013
November 3, 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 October 14, 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, and II below, which Items have been prepared by NASD. NASD has
designated the proposed rule change as constituting a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal
effective upon receipt of this filing by the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 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 Rule 3012 (Supervisory Control
System), Rule 3013 (Annual Certification of Compliance and Supervisory
Processes), and IM-3013 (Annual Compliance and Supervision
Certification) to allow members, by no later than April 1, 2006, to
submit the initial annual report required by Rule 3012 and to execute
the initial annual certification required by Rule 3013 and IM-3013.
Below is the text of the proposed rule change. Proposed new language is
in italics.
* * * * *
3012. Supervisory Control System
(a) General Requirements
(1) Each member shall designate and specifically identify to NASD
one or more principals who shall establish, maintain, and enforce a
system of supervisory control policies and procedures that (A) test and
verify that the member's supervisory procedures are reasonably designed
with respect to the activities of the member and its registered
representatives and associated persons, to achieve compliance with
applicable securities laws and regulations, and with applicable NASD
rules and (B) create additional or amend supervisory procedures where
the need is identified by such testing and verification. The designated
principal or principals must submit to the member's senior management
no less than annually, a report \5\ detailing each member's system of
supervisory controls, the summary of the test results and significant
identified exceptions, and any additional or amended supervisory
procedures created in response to the test results.
---------------------------------------------------------------------------
\5\ Rule 3012 became effective on January 31, 2005, which would
require a member's first Rule 3012 report to be submitted by no
later than January 31, 2006 and at least annually thereafter;
however, a member may elect to submit its first Rule 3012 report by
no later than April 1, 2006. Importantly, a member's first Rule 3012
report must encompass the period from January 31, 2005 (the
effective date of Rule 3012) up to the submission date (or a
reasonable period of time immediately preceding the submission
date). Each ensuing Rule 3012 report may not be for a period greater
than 12 months from the date of the preceding Rule 3012 report (but
may be for a shorter time period if a member elects to prepare a
report more frequently than annually).
---------------------------------------------------------------------------
(2) No change.
(b) Dual Member No change.
* * * * *
Rule 3013. Annual Certification of Compliance and Supervisory Processes
(a) Designation of Chief Compliance Officer No change.
(b) Annual Certification.
Each member shall have its chief executive officer (or equivalent
officer) certify annually,\6\ as set forth in IM-3013, that the member
has in place processes to establish, maintain, review, test and modify
written compliance policies and written supervisory procedures
reasonably designed to achieve compliance with applicable NASD rules,
MSRB rules and federal securities laws and regulations, and that the
chief executive officer has conducted one or more meetings with the
chief compliance officer in the preceding 12 months to discuss such
processes.
---------------------------------------------------------------------------
\6\ Rule 3013 and IM-3013 became effective on December 1, 2004,
which would require a member's first certification to be executed by
December 1, 2005 and annually thereafter; however, a member may
elect to execute its first certification by no later than April 1,
2006 and annually thereafter.
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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, 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
Rule 3013 requires that each member's chief executive officer
(``CEO''), or other equivalent officer, certify annually according to
the terms set forth in IM-3013 that the member has in place processes
to establish, maintain, review, test and modify its written supervisory
procedures. The first annual certification is currently due by December
1, 2005.\7\ Before a CEO can complete the annual certification
requirement, IM-3013 requires, among other things, that the CEO, chief
[[Page 68123]]
compliance officer (``CCO''), and any other necessary officers review a
report that evidences the member's processes.
---------------------------------------------------------------------------
\7\ Each ensuing annual certification must be effected no later
than on the anniversary date of the previous year's certification.
See IM-3013, n.1.
---------------------------------------------------------------------------
Rule 3012(a)(1) requires, among other things, that each member
submit to its senior management no less than annually a report
detailing its supervisory controls system that will test and verify the
adequacy of its supervisory procedures, the summary of the test
results, and any additional or amended supervisory procedures created
in response to the test results. Currently, members must complete and
submit the report by January 31, 2006 and at least annually
thereafter.\8\
---------------------------------------------------------------------------
\8\ See Notice to Members 04-71 (October 2004) (announcing,
among other things, the effective date of January 31, 2005); see
also Transcript of December 16, 2004 Call-in Workshop
(``Transcript'') reminding members that Rule 3012 Report is due
within one year of the January 31, 2005 effective date and at least
annually thereafter. The Transcript is available at www.nasd.com/
SupervisoryControl.
---------------------------------------------------------------------------
Since the adoption of these rules, NASD has received a number of
inquiries from members regarding whether the reports required by Rule
3012 and IM-3013 could be combined. Although NASD has advised members
that they may combine the Rule 3012 report with the report required by
IM-3013 as long as all of the required elements of the respective
reports are addressed and clearly identified, members have indicated
that it would be difficult to combine the reports since the first
annual certification required by Rule 3013 must be executed by December
1, 2005 (and thus the related report must be prepared in advance of,
but reasonably close in time to, such execution), while the Rule 3012
report is not required to be submitted until January 31, 2006.
In addition, dual members have inquired whether they can combine
the reports required by Rule 3012 and IM-3013 with the Annual Report
required by NYSE Rule 342.30, which is due by April 1st of each year.
As support for their request, dual members have noted that the NYSE
Rule 342.30 Annual Report mandates similar, though not identical,
requirements as the Rule 3012 report. Dual members have also noted that
IM-3013 specifically provides that the IM-3013 report may be combined
with any other compliance or other similar report required by another
self-regulatory organization. Dual members assert that being able to
complete one report instead of being required to complete three reports
that could cover overlapping topics and issues would prevent the
duplication of significant resources. However, because of the disparate
dates by which the three reports must be completed, the dual members
have indicated that it would be nearly impossible to combine the
reports.\9\
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\9\ It should be noted that Rule 3012(b) provides that any dual
member electing to comply with the substantially similar
requirements of the NYSE shall be deemed in compliance with the
provisions of Rule 3012. A dual member must comply with all of the
NYSE's substantially similar requirements to be considered in
compliance with Rule 3012. Accordingly, any dual member electing to
comply with the substantially similar requirements of the NYSE would
comply with Rule 3012's reporting requirement by completing the NYSE
Rule 342.30 Annual Report. The member, however, would still be
required to complete the report required by IM-3013 prior to the
initial certification date required by Rule 3013 and IM-3013.
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Accordingly, NASD is filing this proposed rule change to address
those issues. Specifically, the proposed rule change will amend Rule
3012 to provide that a member may submit its initial Rule 3012 report
by no later than April 1, 2006. The proposed rule change explains that
due to Rule 3012's January 31, 2005 effective date, a member choosing
to rely on any date after January 31, 2005 through April 1, 2006 as the
submission deadline for its initial Rule 3012 report will have to
encompass the period from January 31, 2004 up to that submission date
(or a reasonable period of time immediately preceding the submission
date). Each ensuing Rule 3012 report must encompass the 12 months
following the previous Rule 3012 report (or such shorter time period if
a member elects to prepare a report more frequently than annually).
Additionally, the proposed rule change will amend Rule 3013 and IM-
3013 to provide that a member may execute its first annual
certification by no later than April 1, 2006 and annually thereafter. A
member should keep in mind that the report required by IM-3013 that
evidences the member's processes must be prepared in advance of, but
reasonably close in time to, April 1, 2006.
As a result of these proposed changes members will be able, if they
so choose, to combine the respective reports, provided the single
report clearly identifies and addresses all of the requirements set
forth in Rule 3012, Rule 3013 and IM-3013. The proposed rule change
will also allow dual members to comply with the respective reporting
requirements of Rule 3012, Rule 3013, IM-3013, and NYSE Rule 342.30
without undue duplication of effort.
NASD has filed the proposed rule change for immediate effectiveness
and has requested that the Commission waive the 5-day pre-filing
requirement and the 30-day period for the proposed rule change to
become operative, in order to allow NASD members to have as much time
as possible to adjust their procedures to the new submission dates for
the initial Rule 3012 report and the initial certification required by
Rule 3013 and IM-3013. The effective date and the implementation date
will be the date of filing, October 14, 2005.
2. 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 synchronizing the date of the
report required by Rule 3012 and the date of execution of the
certification required by Rule 3013 and IM-3013 will reasonably serve
to minimize duplication of effort on the part of members, while still
ensuring the protection of investors.
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
The foregoing proposed rule change is subject to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder \11\
because the proposal (i) Does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; and (iii) does not become operative
for 30 days from the date on which it was filed, or such shorter time
as the Commission may designate if consistent with the protection of
investors and the public interest; provided that the self-regulatory
organization has given the Commission notice of its intent to file the
proposed rule change, along with a brief description of the text of the
proposed rule change, at least five business days prior to the date of
filing of the
[[Page 68124]]
proposed rule change, or such shorter time as designated by the
Commission.
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
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NASD has requested that the Commission waive the five-day pre-
filing requirement and the 30-day operative delay so that the proposed
rule change will become immediately effective upon filing. The
Commission believes that waiving the five-day pre-filing provision and
the 30-day operative delay is consistent with the protection of
investors and the public interest.\12\ Waiving the pre-filing
requirement and accelerating the operative date will merely permit the
immediate implementation of changes that will allow firms to more
efficiently discharge their reporting obligations. For these reasons,
the Commission designates the proposed rule change as effective and
operative immediately.
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\12\ 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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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2005-121 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-NASD-2005-121. 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, 100 F Street,
NE, Washington, DC 20549. Copies of such filing also will 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 the File Number SR-NASD-2005-121 and should
be submitted on or before November 30, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-22335 Filed 11-8-05; 8:45 am]
BILLING CODE 8010-01-P
