Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the International Securities Exchange, LLC and the National Association of Securities Dealers, Inc., 2040-2044 [E7-539]
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Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices
RECORD ACCESS PROCEDURES:
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on the procedures for gaining access to
or contesting the contents of this record
may contact the Privacy Act Officer,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–5100.
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EXEMPTIONS CLAIMED FOR THE SYSTEM:
None.
Dated: January 11, 2007.
By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7–547 Filed 1–16–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55057; File No. 4–529]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing of Proposed Plan for
the Allocation of Regulatory
Responsibilities Between the
International Securities Exchange, LLC
and the National Association of
Securities Dealers, Inc.
January 8, 2007.
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Pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 17d–2 thereunder,2
notice is hereby given that on December
20, 2006, the International Securities
Exchange, LLC (‘‘ISE’’) and the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (together with the ISE, the
‘‘Parties’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
an amended and restated plan for the
allocation of regulatory responsibilities.
The Commission is publishing this
notice to solicit comments on the
amended and restated 17d–2 plan from
interested persons.
I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
2 17
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registered as either a national securities
exchange or registered national
securities association to examine for,
and enforce compliance by, its members
and persons associated with its
members with the Act, the rules and
regulations thereunder, and the SRO’s
own rules, unless the SRO is relieved of
this responsibility pursuant to Section
17(d) 4 or Section 19(g)(2) 5 of the Act.
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). Such
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.8
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.9 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
member compliance with financial
responsibility requirements. Rule 17d–1
does not relieve an SRO from its
obligation to examine a common
member for compliance with its own
rules and provisions of the federal
securities laws governing matters other
than financial responsibility, including
4 15
U.S.C. 78q(d).
5 15 U.S.C. 78s(g)(2).
6 15 U.S.C. 78q(d)(1).
7 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
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sales practices and trading activities and
practices.
To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17d–2 under the Act.10
Rule 17d–2 permits SROs to propose
joint plans for the allocation of
regulatory responsibilities with respect
to their common members. Under
paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
effective if, after providing for notice
and comment, it determines that the
plan is necessary or appropriate in the
public interest and for the protection of
investors, to foster cooperation and
coordination among the SROs, to
remove impediments to, and foster the
development of, a national market
system and a national clearance and
settlement system, and is in conformity
with the factors set forth in Section
17(d) of the Act. Commission approval
of a plan filed pursuant to Rule 17d–2
relieves an SRO of those regulatory
responsibilities allocated by the plan to
another SRO.
II. Proposed Plan
The Parties currently operate
pursuant to a 17d–2 plan in which
NASD has assumed certain inspection,
examination, and enforcement
responsibility for common members
with respect to certain applicable laws,
rules, and regulations (the ‘‘current
NASD–ISE 17d–2 Plan’’).11 On
September 28, 2006, the Commission
approved a proposed rule change
submitted by ISE relating to the
adoption of rules to govern its electronic
trading system for equities.12 In that
filing, ISE represented that it would
enter into a 17d–2 agreement with
NASD to delegate to NASD all
regulatory oversight and enforcement
responsibilities with respect to the ISE’s
outbound routing facility pursuant to
applicable laws.13
On December 20, 2006, the Parties
submitted an amended and restated
17d–2 plan for review by the
Commission. The amended and restated
17d–2 plan, which would replace and
supersede the current NASD–ISE 17d–2
Plan and all prior amendments thereto
in their entirety, is intended to reduce
regulatory duplication for firms that are
10 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
11 See Securities Exchange Act Release Nos.
42668 (April 11, 2000), 65 FR 21048 (April 19, 2000
(File No. 4–431) (notice of filing); and 42815 (May
23, 2000), 65 FR 34762 (May 31, 2000) (File No. 4–
431) (order).
12 See Securities Exchange Act Release No. 54528
(September 28, 2006), 71 FR 58650 (October 4,
2006) (SR–ISE–2006–48).
13 See id. at 71 FR 58654.
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Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices
common members of both ISE and
NASD and to address regulation of the
ISE’s outbound routing facility for its
new electronic trading system for
equities. The text of the plan delineates
regulatory responsibilities with respect
to the Parties, including responsibility
for ISE rules. Included in the amended
and restated plan is an exhibit (the ‘‘ISE
Certification of Common Rules,’’
referred to herein as the ‘‘Certification’’)
that lists every ISE rule and the federal
securities laws, rules, and regulations
thereunder for which, under the plan,
NASD would bear responsibility for
overseeing and enforcing with respect to
common members. In particular, under
the amended and restated 17d–2 plan,
NASD would assume examination and
enforcement responsibility relating to
compliance by dual members and
persons associated therewith with the
rules of ISE that are substantially similar
to the applicable rules of NASD
(‘‘Common Rules’’),14 as well as any
provisions of the federal securities laws
and the rules and regulations
thereunder delineated in the
Certification.15 Under the plan, ISE
would retain full responsibility for
surveillance and enforcement with
respect to trading activities or practices
involving ISE’s own marketplace,
including, without limitation, ISE’s
rules relating to the rights and
obligations of market makers;
registration pursuant to its unique rules
(i.e., non-Common Rules); its duties as
a DEA pursuant to Rule 17d–1 under the
Act; and any rules that are not Common
Rules, except for ISE rules for any ISE
member that operates as a facility,16 acts
as an outbound router for the ISE, and
is a member of NASD (the ‘‘Router
Member’’).17
The text of the amended and restated
17d–2 plan is as follows:
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Agreement Between NASD and
International Securities Exchange LLC
Pursuant to Rule 17d–2 Under the
Securities Exchange Act of 1934
This Agreement, by and between the
National Association of Securities
Dealers, Inc. (‘‘NASD’’) and the
14 See paragraph 1(b) of the amended and restated
17d–2 plan (defining Common Rules).
15 See paragraph 1(f) of the amended and restated
17d–2 plan. The Commission notes that there are
currently no federal securities law rules listed on
the Certification.
16 See Section 3(a)(2) of the Act (defining
‘‘facility’’). 15 U.S.C. 78c(a)(2).
17 Apparent violations of such rules by any such
entity will be processed by, and enforcement
proceedings will be conducted by, the NASD. See
paragraph 2(d) of the amended and restated
17d–2 plan. As of the date of the amended and
restated 17d–2 plan, ISE Route LLC is the only
Router Member.
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International Securities Exchange LLC
(‘‘ISE’’), is made this 20th day of
December, 2006 (the ‘‘Agreement’’),
pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’) and Rule 17d–2
thereunder which permits agreements
between self-regulatory organizations to
allocate regulatory responsibility to
eliminate regulatory duplication. NASD
and ISE may be referred to individually
as a ‘‘party’’ and together as the
‘‘parties.’’
This Agreement amends and restates
the agreement entered into between the
parties on April 3, 2000 and amended
on April 27, 2000, entitled ‘‘Agreement
Between the National Association of
Securities Dealers, Inc., NASD
Regulation, Inc. and the International
Securities Exchange LLC Pursuant to
Section 17(d) and Rule 17d–2,’’ and any
subsequent amendments thereafter.
Whereas, NASD and ISE desire to
reduce duplication in the examination
of their Dual Members (as defined
herein) and in the filing and processing
of certain registration and membership
records; and
Whereas, NASD and ISE desire to
execute an agreement covering such
subjects pursuant to the provisions of
Rule 17d–2 under the Exchange Act and
to file such agreement with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’) for its
approval.
Now, therefore, in consideration of
the mutual covenants contained
hereinafter, NASD and ISE hereby agree
as follows:
1. Definitions.
Unless otherwise defined in this
Agreement or the context otherwise
requires, the terms used in this
Agreement shall have the same meaning
as they have under the Exchange Act
and the rules and regulations
thereunder. As used in this Agreement,
the following terms shall have the
following meanings:
(a) ‘‘ISE Rules’’ or ‘‘NASD Rules’’
shall mean the rules of the ISE or NASD,
respectively, as the rules of an exchange
or association are defined in Exchange
Act Section 3(a)(27).
(b) ‘‘Common Rules’’ shall mean the
ISE Rules that are substantially similar
to the applicable NASD Rules in that
examination for compliance with such
rules would not require NASD to
develop one or more new examination
standards, modules, procedures, or
criteria in order to analyze the
application of the rule, or a Dual
Member’s activity, conduct, or output in
relation to such rule.
(c) ‘‘Dual Members’’ shall mean those
ISE members that are also members of
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NASD and the associated persons
therewith.
(d) ‘‘Effective Date’’ shall have the
meaning set forth in paragraph 14.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with the
NASD Code of Procedure (the Rule 9000
Series) and other applicable NASD
procedural rules, to determine whether
violations of pertinent laws, rules or
regulations have occurred, and if such
violations are deemed to have occurred,
the imposition of appropriate sanctions
as specified under the NASD’s Code of
Procedure and sanctions guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities
and Enforcement Responsibilities
relating to compliance by the Dual
Members with the Common Rules and
the provisions of the Exchange Act and
the rules and regulations thereunder,
and other applicable laws, rules and
regulations, each as set forth on Exhibit
1 attached hereto.
2. Regulatory and Enforcement
Responsibilities.
NASD shall assume Regulatory
Responsibilities and Enforcement
Responsibilities for Dual Members.
Attached as Exhibit 1 to this Agreement
and made part hereof, ISE furnished
NASD with a current list of Common
Rules and certified to NASD that such
rules are substantially similar to the
corresponding NASD rule (the
‘‘Certification’’). NASD hereby agrees
that the rules listed in the Certification
are Common Rules as defined in this
Agreement. Each year following the
Effective Date of this Agreement, or
more frequently if required by changes
in either the rules of ISE or NASD, ISE
shall submit an updated list of Common
Rules to NASD for review which shall
add ISE rules not included in the
current list of Common Rules that
qualify as Common Rules as defined in
this Agreement; delete ISE rules
included in the current list of Common
Rules that no longer qualify as Common
Rules as defined in this Agreement; and
confirm that the remaining rules on the
current list of Common Rules continue
to be ISE rules that qualify as Common
Rules as defined in this Agreement.
Within 30 days of receipt of such
updated list, NASD shall confirm in
writing whether the rules listed in any
updated list are Common Rules as
defined in this Agreement.
Notwithstanding anything herein to the
contrary, it is explicitly understood that
the term ‘‘Regulatory Responsibilities’’
does not include, and ISE shall retain
full responsibility for (unless otherwise
addressed by separate agreement or
rule) the following:
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(a) Surveillance and enforcement with
respect to trading activities or practices
involving ISE’s own marketplace,
including without limitation ISE’s rules
relating to the rights and obligations of
market makers;
(b) registration pursuant to its
applicable rules of associated persons
(i.e., registration rules that are not
Common Rules);
(c) discharge of its duties and
obligations as a Designated Examining
Authority pursuant to Rule 17d–1 under
the Exchange Act; and
(d) any ISE Rules that are not
Common Rules, except for ISE Rules for
any ISE member that operates as a
facility (as defined in Section 3(a)(2) of
the Exchange Act), acts as an outbound
router for the ISE and is a member of
NASD (‘‘Router Member’’) as provided
in paragraph 6. As of the date of this
Agreement, ISE Route LLC is the only
Router Member.
3. Dual Members.
Prior to the Effective Date, ISE shall
furnish NASD with a current list of Dual
Members, which shall be updated no
less frequently than once each quarter.
4. No Charge.
There shall be no charge to ISE by
NASD for performing the Regulatory
Responsibilities and Enforcement
Responsibilities under this Agreement
except as hereinafter provided. NASD
shall provide ISE with ninety (90) days
advance written notice in the event
NASD decides to impose any charges to
ISE for performing the Regulatory
Responsibilities under this Agreement.
If NASD determines to impose a charge,
ISE shall have the right at the time of
the imposition of such charge to
terminate this Agreement; provided,
however, that NASD’s Regulatory
Responsibilities under this Agreement
shall continue until the Commission
approves the termination of this
Agreement.
5. Reassignment of Regulatory
Responsibilities.
Notwithstanding any provision
hereof, this Agreement shall be subject
to any statute, or any rule or order of the
Commission, or industry agreement,
restructuring the regulatory framework
of the securities industry or reassigning
Regulatory Responsibilities between
self-regulatory organizations. To the
extent such action is inconsistent with
this Agreement, such action shall
supersede the provisions hereof to the
extent necessary for them to be properly
effectuated and the provisions hereof in
that respect shall be null and void.
6. Notification of Violations.
In the event that NASD becomes
aware of apparent violations of any ISE
Rules, which are not listed as Common
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Rules, discovered pursuant to the
performance of the Regulatory
Responsibilities assumed hereunder,
NASD shall notify ISE of those apparent
violations for such response as ISE
deems appropriate. Apparent violations
of all other applicable rules, including
violations of the Common Rules, various
securities acts, and rules and regulations
thereunder, shall be processed by, and
enforcement proceedings in respect
thereto shall be conducted by NASD as
provided hereinbefore; provided,
however, that in the event a Dual
Member is the subject of an
investigation relating to a transaction on
the ISE, ISE may in its discretion
assume concurrent jurisdiction and
responsibility. With respect to apparent
violations of any ISE Rules by any
Router Member, NASD shall not make
referrals to ISE pursuant to this
paragraph 6. Such apparent violations
shall be processed by, and enforcement
proceedings in respect thereto will be
conducted by, NASD as provided in this
Agreement. Each party agrees to make
available promptly all files, records and
witnesses necessary to assist the other
in its investigation or proceedings.
7. Continued Assistance.
NASD shall make available to ISE all
information obtained by NASD in the
performance by it of the Regulatory
Responsibilities hereunder in respect to
the Dual Members subject to this
Agreement. In particular, and not in
limitation of the foregoing, NASD shall
furnish ISE any information it obtains
about Dual Members which reflects
adversely on their financial condition. It
is understood that such information is
of an extremely sensitive nature and,
accordingly, ISE acknowledges and
agrees to take all reasonable steps to
maintain its confidentiality. ISE shall
make available to NASD any
information coming to its attention that
reflects adversely on the financial
condition of Dual Members or indicates
possible violations of applicable laws,
rules or regulations by such firms.
8. Dual Member Applications.
a. Dual Members subject to this
Agreement shall be required to submit,
and NASD shall be responsible for
processing and acting upon all
applications submitted on behalf of
allied persons, partners, officers,
registered personnel and any other
person required to be approved by the
rules of both ISE and NASD or
associated with Dual Members thereof.
Upon request, NASD shall advise ISE of
any changes of allied members,
partners, officers, registered personnel
and other persons required to be
approved by the rules of both ISE and
NASD.
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b. Dual Members shall be required to
send to NASD all letters, termination
notices or other material respecting the
individuals listed in paragraph 8(a).
c. When as a result of processing such
submissions NASD becomes aware of a
statutory disqualification as defined in
the Exchange Act with respect to a Dual
Member, NASD shall determine
pursuant to Sections 15A(g) and/or
Section 6(c) of the Exchange Act the
acceptability or continued applicability
of the person to whom such
disqualification applies and keep ISE
advised of its actions in this regard for
such subsequent proceedings as ISE
may initiate.
d. Notwithstanding the foregoing,
NASD shall not review the membership
application, reports, filings, fingerprint
cards, notices, or other writings filed to
determine if such documentation
submitted by a broker or dealer, or a
person associated therewith or other
persons required to register or qualify by
examination: (i) Meets the ISE
requirements for general membership or
for specified categories of membership
or participation in the ISE, such as (A)
Primary Market Maker Membership
(‘‘PMM’’); (B) Competitive Market
Maker Membership (‘‘CMM’’); (C)
Electronic Access Membership (‘‘EAM’’)
(or any similar type of ISE membership
or participation that is created after this
Agreement is executed); or (ii) meets the
ISE requirements to be associated with,
or employed by, an ISE member or
participant in any capacity, such a
Designated Trading Representative
(‘‘DTR’’) (or any similar type of
participation, employment category or
title, or associate-person category or
class that is created after this Agreement
is executed). NASD shall not review
applications or other documentation
filed to request a change in the rights or
status described in this paragraph 8(d),
including termination or limitation on
activities, of a member or a participant
of the ISE, or a person associated with,
or requesting association with, a
member or participant of the ISE.
9. Branch Office Information.
NASD shall also be responsible for
processing and, if required, acting upon
all requests for the opening, address
changes, and terminations of branch
offices by Dual Members and any other
applications required of Dual Members
with respect to the Common Rules as
they may be amended from time to time.
NASD shall advise ISE monthly of the
opening, address change and
termination of branch and main offices
of Dual Members and the names of such
branch office managers.
10. Customer Complaints.
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ISE shall forward to NASD copies of
all customer complaints involving Dual
Members received by ISE relating to
NASD’s Regulatory Responsibilities
under this Agreement. It shall be
NASD’s responsibility to review and
take appropriate action in respect to
such complaints.
11. Advertising.
NASD shall assume responsibility to
review the advertising of Dual Members
subject to the Agreement, provided that
such material is filed with NASD in
accordance with NASD’s filing
procedures and is accompanied with
any applicable filing fees set forth in
NASD Rules. Such review shall be made
in accordance with then applicable
NASD rules and interpretations. The
advertising of Dual Members shall be
subject only to compliance with
appropriate NASD rules and
interpretations.
12. No Restrictions on Regulatory
Action.
Nothing contained in this Agreement
shall restrict or in any way encumber
the right of either party to conduct its
own independent or concurrent
investigation, examination or
enforcement proceeding of or against
Dual Members, as either party, in its
sole discretion, shall deem appropriate
or necessary.
13. Termination.
This Agreement may be terminated by
ISE or NASD at any time upon the
approval of the Commission after one
(1) year’s written notice to the other
party, except as provided in paragraph
4.
14. Effective Date.
This Agreement shall be effective
upon approval of the Commission.
15. Arbitration.
In the event of a dispute between the
parties as to the operation of this
Agreement, ISE and NASD hereby agree
that any such dispute shall be settled by
arbitration in Washington, DC in
accordance with the rules of the
American Arbitration Association then
in effect, or such other procedures as the
parties may mutually agree upon.
Judgment on the award rendered by the
arbitrator(s) may be entered in any court
having jurisdiction.
16. Separate Agreement.
This Agreement is wholly separate
from the multiparty Agreement made
pursuant to Rule 17d–2 of the Exchange
Act between the American Stock
Exchange LLC, the Boston Stock
Exchange, Inc., the Chicago Board
Options Exchange, Inc., the
International Securities Exchange LLC,
the National Association of Securities
Dealers, Inc., the New York Stock
Exchange, Inc., the Pacific Exchange,
Inc., and the Philadelphia Stock
Exchange, Inc. involving the allocation
of regulatory responsibilities with
respect to common members for
compliance with common rules relating
to the conduct by broker-dealers of
accounts for listed options or index
warrants entered into on January 14,
2004, and as may be amended from time
to time.
17. Notification of Members.
ISE and NASD shall notify Dual
Members of this Agreement after the
Effective Date by means of a uniform
joint notice.
18. Amendment.
This Agreement may be amended in
writing duly approved by each party.
All such amendments must be filed
ISE Rule(s)
with and approved by the Commission
before they become effective.
19. Limitation of Liability.
Neither NASD nor ISE nor any of their
respective directors, governors, officers
or employees shall be liable to the other
party to this Agreement for any liability,
loss or damage resulting from or
claimed to have resulted from any
delays, inaccuracies, errors or omissions
with respect to the provision of
Regulatory Responsibilities as provided
hereby or for the failure to provide any
such responsibility, except with respect
to such liability, loss or damages as
shall have been suffered by one or the
other of NASD or ISE and caused by the
willful misconduct of the other party or
their respective directors, governors,
officers or employees. No warranties,
express or implied, are made by NASD
or ISE with respect to any of the
responsibilities to be performed by each
of them hereunder.
20. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, NASD and ISE join in
requesting the Commission, upon its
approval of this Agreement or any part
thereof, to relieve ISE of any and all
responsibilities with respect to matters
allocated to NASD pursuant to this
Agreement; provided, however, that this
Agreement shall not be effective until
the Effective Date.
Exhibit 1—ISE Certification of Common
Rules
ISE hereby certifies that the
requirements contained in the rules
listed below for ISE are identical to, or
substantially similar to, the comparable
NASD rules identified.
NASD Rule(s)
408. Prevention of the Misuse of Material, Nonpublic Information ..........
409. Disciplinary Action ............................................................................
604. Continuing Education for Registered Persons* ................................
622. Transfer of Accounts ........................................................................
624. Brokers’ Blanket Bonds* ...................................................................
626. Telephone Solicitation* .....................................................................
1400. Maintenance, Retention, and Furnishing of Books, Records and
Other Information.
1407. Market Maker Hedge Exemption from Nasdaq Short Sale Rule* ..
2114. Doing Business with the Public 1 ...................................................
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3010(a)(2) Supervision.
3070(a)(1) and (a)(10) Reporting Requirements.
1120 Continuing Education Requirements.
11870 Customer Account Transfer Contracts.
3020 Fidelity Bonds.
2212 Telemarketing.
3110(a) Books and Records—Requirements.
5100 Short Sale Rule; IM–6130 Trade Reporting of Short Sales.
2310 Recommendations to Customers (Suitability); 2320 Best Execution and Interpositioning; 2330 Customers’ Securities or Funds; 2340
Customer Account Statements; 2341 Margin Disclosure Statement;
2350 Broker/Dealer Conduct on the Premises of Financial Institutions; 2360 Approval Procedures for Day-Trading Accounts; 2361
Day-Trading Risk Disclosure Statement; 2370 Borrowing From or
Lending to Customers.
1 In connection with the approval of ISE Rule 2114, the Commission noted that since the ISE is requiring Equity EAMs that do business with
the public to become members of NASD, those ISE members are required to comply with NASD rules that govern the practice of members when
doing business with the public. The Commission noted that, among other things, these members would be obligated to comply with these listed
NASD Rules. See Securities Exchange Act Release No. 54401 (September 1, 2006), 71 FR 53483 (September 11, 2006) (SR–ISE–2006–53).
* ISE will be responsible for any significant differences between its rules and the comparable NASD rule identified, until such time amendments
to such rule(s) may be approved.
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*
*
Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices
*
*
*
III. Date of Effectiveness of the
Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the
Act 18 and Rule 17d–2 thereunder,19
after February 7, 2007, the Commission
may, by written notice, declare the plan
submitted by ISE and NASD, File No. 4–
529, to be effective if the Commission
finds that the plan is necessary or
appropriate in the public interest and
for the protection of investors, to foster
cooperation and coordination among
self-regulatory organizations, or to
remove impediments to and foster the
development of the national market
system and a national system for the
clearance and settlement of securities
transactions and in conformity with the
factors set forth in Section 17(d) of the
Act.
IV. Solicitation of Comments
In order to assist the Commission in
determining whether to approve the
amended and restated 17d–2 plan and
to relieve ISE of the responsibilities
which would be assigned to NASD,
interested persons are invited to submit
written data, views, and arguments
concerning the foregoing. Comments
may be submitted by any of the
following methods:
mstockstill on PROD1PC61 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number 4–529 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number 4–529. 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/
other.shtml). Copies of the submission,
all subsequent amendments, all written
statements with respect to the proposed
plan that are filed with the Commission,
and all written communications relating
to the proposed plan between the
Commission and any person, other than
18 15
19 17
U.S.C. 78q(d)(1).
CFR 240.17d–2.
VerDate Aug<31>2005
13:58 Jan 16, 2007
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 plan also will be
available for inspection and copying at
the principal offices of ISE and 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 4–529 and should be submitted
on or before February 7, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–539 Filed 1–16–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
Pathways Group, Inc. (n/k/a Bicoastal
Communications, Inc.); Order of
Suspension of Trading
January 12, 2007.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Pathways
Group, Inc. (n/k/a Bicoastal
Communications, Inc.) because it has
not filed any periodic reports since the
period ended September 30, 2000.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in securities of
the above-listed company is suspended
for the period from 9:30 a.m. EST on
January 12, 2007, through 11:59 p.m.
EST on January 26, 2007.
By the Commission.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 07–159 Filed 1–12–07; 11:25 am]
BILLING CODE 8011–01–P
20 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55068; File No. SR–Amex–
2006–17]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing of Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto
Relating to Procedures for At-Risk
Cross Transactions
January 9, 2007.
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 February
17, 2006, the American Stock Exchange
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Amex. On November 9, 2006, the
Exchange filed Amendment No. 1 to the
proposed rule change.3 On December 1,
2006, the Exchange filed Amendment
No. 2 to the proposed rule change.4 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
The Amex proposes to revise the
procedures applicable to cross
transactions in equity options to provide
procedures for at-risk cross transactions.
The text of the proposed rule change is
available at the Amex, on the Amex’s
Web site at https://amex.com, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Amex included statements concerning
the purpose of, and basis for, the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 renamed the proposed
procedure for equity options as ‘‘at-risk’’ cross
transactions; provided that the eligible order size
would be at least 50 contracts; clarified certain
descriptions of the proposal in Section II.A.1 below;
and made minor revisions to the text of the
proposed rule change. Amendment No. 1 replaced
and superseded the original filing in its entirety.
4 Amendment No. 2 revised the proposed rule
text to clarify that, under Commentary .02(c) of
Amex Rule 950—ANTE(d), the member, on behalf
of the public customer whose order is subject to
facilitation, must establish priority consistent with
the Exchange’s customer priority rules. Amendment
No. 2 also made a technical correction to the
Purpose section of the proposed rule change.
2 17
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]]>Agencies
[Federal Register Volume 72, Number 10 (Wednesday, January 17, 2007)]
[Notices]
[Pages 2040-2044]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-539]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55057; File No. 4-529]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the International Securities
Exchange, LLC and the National Association of Securities Dealers, Inc.
January 8, 2007.
Pursuant to Section 17(d) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that
on December 20, 2006, the International Securities Exchange, LLC
(``ISE'') and the National Association of Securities Dealers, Inc.
(``NASD'') (together with the ISE, the ``Parties'') filed with the
Securities and Exchange Commission (``Commission'') an amended and
restated plan for the allocation of regulatory responsibilities. The
Commission is publishing this notice to solicit comments on the amended
and restated 17d-2 plan from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or registered national securities association to
examine for, and enforce compliance by, its members and persons
associated with its members with the Act, the rules and regulations
thereunder, and the SRO's own rules, unless the SRO is relieved of this
responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of
the Act. Without this relief, the statutory obligation of each
individual SRO could result in a pattern of multiple examinations of
broker-dealers that maintain memberships in more than one SRO (``common
members''). Such regulatory duplication would add unnecessary expenses
for common members and their SROs.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------
To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for notice and comment, it determines that the plan is
necessary or appropriate in the public interest and for the protection
of investors, to foster cooperation and coordination among the SROs, to
remove impediments to, and foster the development of, a national market
system and a national clearance and settlement system, and is in
conformity with the factors set forth in Section 17(d) of the Act.
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an
SRO of those regulatory responsibilities allocated by the plan to
another SRO.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. Proposed Plan
The Parties currently operate pursuant to a 17d-2 plan in which
NASD has assumed certain inspection, examination, and enforcement
responsibility for common members with respect to certain applicable
laws, rules, and regulations (the ``current NASD-ISE 17d-2 Plan'').\11\
On September 28, 2006, the Commission approved a proposed rule change
submitted by ISE relating to the adoption of rules to govern its
electronic trading system for equities.\12\ In that filing, ISE
represented that it would enter into a 17d-2 agreement with NASD to
delegate to NASD all regulatory oversight and enforcement
responsibilities with respect to the ISE's outbound routing facility
pursuant to applicable laws.\13\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release Nos. 42668 (April 11,
2000), 65 FR 21048 (April 19, 2000 (File No. 4-431) (notice of
filing); and 42815 (May 23, 2000), 65 FR 34762 (May 31, 2000) (File
No. 4-431) (order).
\12\ See Securities Exchange Act Release No. 54528 (September
28, 2006), 71 FR 58650 (October 4, 2006) (SR-ISE-2006-48).
\13\ See id. at 71 FR 58654.
---------------------------------------------------------------------------
On December 20, 2006, the Parties submitted an amended and restated
17d-2 plan for review by the Commission. The amended and restated 17d-2
plan, which would replace and supersede the current NASD-ISE 17d-2 Plan
and all prior amendments thereto in their entirety, is intended to
reduce regulatory duplication for firms that are
[[Page 2041]]
common members of both ISE and NASD and to address regulation of the
ISE's outbound routing facility for its new electronic trading system
for equities. The text of the plan delineates regulatory
responsibilities with respect to the Parties, including responsibility
for ISE rules. Included in the amended and restated plan is an exhibit
(the ``ISE Certification of Common Rules,'' referred to herein as the
``Certification'') that lists every ISE rule and the federal securities
laws, rules, and regulations thereunder for which, under the plan, NASD
would bear responsibility for overseeing and enforcing with respect to
common members. In particular, under the amended and restated 17d-2
plan, NASD would assume examination and enforcement responsibility
relating to compliance by dual members and persons associated therewith
with the rules of ISE that are substantially similar to the applicable
rules of NASD (``Common Rules''),\14\ as well as any provisions of the
federal securities laws and the rules and regulations thereunder
delineated in the Certification.\15\ Under the plan, ISE would retain
full responsibility for surveillance and enforcement with respect to
trading activities or practices involving ISE's own marketplace,
including, without limitation, ISE's rules relating to the rights and
obligations of market makers; registration pursuant to its unique rules
(i.e., non-Common Rules); its duties as a DEA pursuant to Rule 17d-1
under the Act; and any rules that are not Common Rules, except for ISE
rules for any ISE member that operates as a facility,\16\ acts as an
outbound router for the ISE, and is a member of NASD (the ``Router
Member'').\17\
---------------------------------------------------------------------------
\14\ See paragraph 1(b) of the amended and restated 17d-2 plan
(defining Common Rules).
\15\ See paragraph 1(f) of the amended and restated 17d-2 plan.
The Commission notes that there are currently no federal securities
law rules listed on the Certification.
\16\ See Section 3(a)(2) of the Act (defining ``facility''). 15
U.S.C. 78c(a)(2).
\17\ Apparent violations of such rules by any such entity will
be processed by, and enforcement proceedings will be conducted by,
the NASD. See paragraph 2(d) of the amended and restated 17d-2 plan.
As of the date of the amended and restated 17d-2 plan, ISE Route LLC
is the only Router Member.
---------------------------------------------------------------------------
The text of the amended and restated 17d-2 plan is as follows:
Agreement Between NASD and International Securities Exchange LLC
Pursuant to Rule 17d-2 Under the Securities Exchange Act of 1934
This Agreement, by and between the National Association of
Securities Dealers, Inc. (``NASD'') and the International Securities
Exchange LLC (``ISE''), is made this 20th day of December, 2006 (the
``Agreement''), pursuant to Section 17(d) of the Securities Exchange
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. NASD and
ISE may be referred to individually as a ``party'' and together as the
``parties.''
This Agreement amends and restates the agreement entered into
between the parties on April 3, 2000 and amended on April 27, 2000,
entitled ``Agreement Between the National Association of Securities
Dealers, Inc., NASD Regulation, Inc. and the International Securities
Exchange LLC Pursuant to Section 17(d) and Rule 17d-2,'' and any
subsequent amendments thereafter.
Whereas, NASD and ISE desire to reduce duplication in the
examination of their Dual Members (as defined herein) and in the filing
and processing of certain registration and membership records; and
Whereas, NASD and ISE desire to execute an agreement covering such
subjects pursuant to the provisions of Rule 17d-2 under the Exchange
Act and to file such agreement with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, NASD and ISE hereby agree as follows:
1. Definitions.
Unless otherwise defined in this Agreement or the context otherwise
requires, the terms used in this Agreement shall have the same meaning
as they have under the Exchange Act and the rules and regulations
thereunder. As used in this Agreement, the following terms shall have
the following meanings:
(a) ``ISE Rules'' or ``NASD Rules'' shall mean the rules of the ISE
or NASD, respectively, as the rules of an exchange or association are
defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean the ISE Rules that are
substantially similar to the applicable NASD Rules in that examination
for compliance with such rules would not require NASD to develop one or
more new examination standards, modules, procedures, or criteria in
order to analyze the application of the rule, or a Dual Member's
activity, conduct, or output in relation to such rule.
(c) ``Dual Members'' shall mean those ISE members that are also
members of NASD and the associated persons therewith.
(d) ``Effective Date'' shall have the meaning set forth in
paragraph 14.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with the NASD Code of Procedure
(the Rule 9000 Series) and other applicable NASD procedural rules, to
determine whether violations of pertinent laws, rules or regulations
have occurred, and if such violations are deemed to have occurred, the
imposition of appropriate sanctions as specified under the NASD's Code
of Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the Dual Members with the Common Rules and the provisions
of the Exchange Act and the rules and regulations thereunder, and other
applicable laws, rules and regulations, each as set forth on Exhibit 1
attached hereto.
2. Regulatory and Enforcement Responsibilities.
NASD shall assume Regulatory Responsibilities and Enforcement
Responsibilities for Dual Members. Attached as Exhibit 1 to this
Agreement and made part hereof, ISE furnished NASD with a current list
of Common Rules and certified to NASD that such rules are substantially
similar to the corresponding NASD rule (the ``Certification''). NASD
hereby agrees that the rules listed in the Certification are Common
Rules as defined in this Agreement. Each year following the Effective
Date of this Agreement, or more frequently if required by changes in
either the rules of ISE or NASD, ISE shall submit an updated list of
Common Rules to NASD for review which shall add ISE rules not included
in the current list of Common Rules that qualify as Common Rules as
defined in this Agreement; delete ISE rules included in the current
list of Common Rules that no longer qualify as Common Rules as defined
in this Agreement; and confirm that the remaining rules on the current
list of Common Rules continue to be ISE rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of such
updated list, NASD shall confirm in writing whether the rules listed in
any updated list are Common Rules as defined in this Agreement.
Notwithstanding anything herein to the contrary, it is explicitly
understood that the term ``Regulatory Responsibilities'' does not
include, and ISE shall retain full responsibility for (unless otherwise
addressed by separate agreement or rule) the following:
[[Page 2042]]
(a) Surveillance and enforcement with respect to trading activities
or practices involving ISE's own marketplace, including without
limitation ISE's rules relating to the rights and obligations of market
makers;
(b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any ISE Rules that are not Common Rules, except for ISE Rules
for any ISE member that operates as a facility (as defined in Section
3(a)(2) of the Exchange Act), acts as an outbound router for the ISE
and is a member of NASD (``Router Member'') as provided in paragraph 6.
As of the date of this Agreement, ISE Route LLC is the only Router
Member.
3. Dual Members.
Prior to the Effective Date, ISE shall furnish NASD with a current
list of Dual Members, which shall be updated no less frequently than
once each quarter.
4. No Charge.
There shall be no charge to ISE by NASD for performing the
Regulatory Responsibilities and Enforcement Responsibilities under this
Agreement except as hereinafter provided. NASD shall provide ISE with
ninety (90) days advance written notice in the event NASD decides to
impose any charges to ISE for performing the Regulatory
Responsibilities under this Agreement. If NASD determines to impose a
charge, ISE shall have the right at the time of the imposition of such
charge to terminate this Agreement; provided, however, that NASD's
Regulatory Responsibilities under this Agreement shall continue until
the Commission approves the termination of this Agreement.
5. Reassignment of Regulatory Responsibilities.
Notwithstanding any provision hereof, this Agreement shall be
subject to any statute, or any rule or order of the Commission, or
industry agreement, restructuring the regulatory framework of the
securities industry or reassigning Regulatory Responsibilities between
self-regulatory organizations. To the extent such action is
inconsistent with this Agreement, such action shall supersede the
provisions hereof to the extent necessary for them to be properly
effectuated and the provisions hereof in that respect shall be null and
void.
6. Notification of Violations.
In the event that NASD becomes aware of apparent violations of any
ISE Rules, which are not listed as Common Rules, discovered pursuant to
the performance of the Regulatory Responsibilities assumed hereunder,
NASD shall notify ISE of those apparent violations for such response as
ISE deems appropriate. Apparent violations of all other applicable
rules, including violations of the Common Rules, various securities
acts, and rules and regulations thereunder, shall be processed by, and
enforcement proceedings in respect thereto shall be conducted by NASD
as provided hereinbefore; provided, however, that in the event a Dual
Member is the subject of an investigation relating to a transaction on
the ISE, ISE may in its discretion assume concurrent jurisdiction and
responsibility. With respect to apparent violations of any ISE Rules by
any Router Member, NASD shall not make referrals to ISE pursuant to
this paragraph 6. Such apparent violations shall be processed by, and
enforcement proceedings in respect thereto will be conducted by, NASD
as provided in this Agreement. Each party agrees to make available
promptly all files, records and witnesses necessary to assist the other
in its investigation or proceedings.
7. Continued Assistance.
NASD shall make available to ISE all information obtained by NASD
in the performance by it of the Regulatory Responsibilities hereunder
in respect to the Dual Members subject to this Agreement. In
particular, and not in limitation of the foregoing, NASD shall furnish
ISE any information it obtains about Dual Members which reflects
adversely on their financial condition. It is understood that such
information is of an extremely sensitive nature and, accordingly, ISE
acknowledges and agrees to take all reasonable steps to maintain its
confidentiality. ISE shall make available to NASD any information
coming to its attention that reflects adversely on the financial
condition of Dual Members or indicates possible violations of
applicable laws, rules or regulations by such firms.
8. Dual Member Applications.
a. Dual Members subject to this Agreement shall be required to
submit, and NASD shall be responsible for processing and acting upon
all applications submitted on behalf of allied persons, partners,
officers, registered personnel and any other person required to be
approved by the rules of both ISE and NASD or associated with Dual
Members thereof. Upon request, NASD shall advise ISE of any changes of
allied members, partners, officers, registered personnel and other
persons required to be approved by the rules of both ISE and NASD.
b. Dual Members shall be required to send to NASD all letters,
termination notices or other material respecting the individuals listed
in paragraph 8(a).
c. When as a result of processing such submissions NASD becomes
aware of a statutory disqualification as defined in the Exchange Act
with respect to a Dual Member, NASD shall determine pursuant to
Sections 15A(g) and/or Section 6(c) of the Exchange Act the
acceptability or continued applicability of the person to whom such
disqualification applies and keep ISE advised of its actions in this
regard for such subsequent proceedings as ISE may initiate.
d. Notwithstanding the foregoing, NASD shall not review the
membership application, reports, filings, fingerprint cards, notices,
or other writings filed to determine if such documentation submitted by
a broker or dealer, or a person associated therewith or other persons
required to register or qualify by examination: (i) Meets the ISE
requirements for general membership or for specified categories of
membership or participation in the ISE, such as (A) Primary Market
Maker Membership (``PMM''); (B) Competitive Market Maker Membership
(``CMM''); (C) Electronic Access Membership (``EAM'') (or any similar
type of ISE membership or participation that is created after this
Agreement is executed); or (ii) meets the ISE requirements to be
associated with, or employed by, an ISE member or participant in any
capacity, such a Designated Trading Representative (``DTR'') (or any
similar type of participation, employment category or title, or
associate-person category or class that is created after this Agreement
is executed). NASD shall not review applications or other documentation
filed to request a change in the rights or status described in this
paragraph 8(d), including termination or limitation on activities, of a
member or a participant of the ISE, or a person associated with, or
requesting association with, a member or participant of the ISE.
9. Branch Office Information.
NASD shall also be responsible for processing and, if required,
acting upon all requests for the opening, address changes, and
terminations of branch offices by Dual Members and any other
applications required of Dual Members with respect to the Common Rules
as they may be amended from time to time. NASD shall advise ISE monthly
of the opening, address change and termination of branch and main
offices of Dual Members and the names of such branch office managers.
10. Customer Complaints.
[[Page 2043]]
ISE shall forward to NASD copies of all customer complaints
involving Dual Members received by ISE relating to NASD's Regulatory
Responsibilities under this Agreement. It shall be NASD's
responsibility to review and take appropriate action in respect to such
complaints.
11. Advertising.
NASD shall assume responsibility to review the advertising of Dual
Members subject to the Agreement, provided that such material is filed
with NASD in accordance with NASD's filing procedures and is
accompanied with any applicable filing fees set forth in NASD Rules.
Such review shall be made in accordance with then applicable NASD rules
and interpretations. The advertising of Dual Members shall be subject
only to compliance with appropriate NASD rules and interpretations.
12. No Restrictions on Regulatory Action.
Nothing contained in this Agreement shall restrict or in any way
encumber the right of either party to conduct its own independent or
concurrent investigation, examination or enforcement proceeding of or
against Dual Members, as either party, in its sole discretion, shall
deem appropriate or necessary.
13. Termination.
This Agreement may be terminated by ISE or NASD at any time upon
the approval of the Commission after one (1) year's written notice to
the other party, except as provided in paragraph 4.
14. Effective Date.
This Agreement shall be effective upon approval of the Commission.
15. Arbitration.
In the event of a dispute between the parties as to the operation
of this Agreement, ISE and NASD hereby agree that any such dispute
shall be settled by arbitration in Washington, DC in accordance with
the rules of the American Arbitration Association then in effect, or
such other procedures as the parties may mutually agree upon. Judgment
on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction.
16. Separate Agreement.
This Agreement is wholly separate from the multiparty Agreement
made pursuant to Rule 17d-2 of the Exchange Act between the American
Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board
Options Exchange, Inc., the International Securities Exchange LLC, the
National Association of Securities Dealers, Inc., the New York Stock
Exchange, Inc., the Pacific Exchange, Inc., and the Philadelphia Stock
Exchange, Inc. involving the allocation of regulatory responsibilities
with respect to common members for compliance with common rules
relating to the conduct by broker-dealers of accounts for listed
options or index warrants entered into on January 14, 2004, and as may
be amended from time to time.
17. Notification of Members.
ISE and NASD shall notify Dual Members of this Agreement after the
Effective Date by means of a uniform joint notice.
18. Amendment.
This Agreement may be amended in writing duly approved by each
party. All such amendments must be filed with and approved by the
Commission before they become effective.
19. Limitation of Liability.
Neither NASD nor ISE nor any of their respective directors,
governors, officers or employees shall be liable to the other party to
this Agreement for any liability, loss or damage resulting from or
claimed to have resulted from any delays, inaccuracies, errors or
omissions with respect to the provision of Regulatory Responsibilities
as provided hereby or for the failure to provide any such
responsibility, except with respect to such liability, loss or damages
as shall have been suffered by one or the other of NASD or ISE and
caused by the willful misconduct of the other party or their respective
directors, governors, officers or employees. No warranties, express or
implied, are made by NASD or ISE with respect to any of the
responsibilities to be performed by each of them hereunder.
20. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and
Rule 17d-2 thereunder, NASD and ISE join in requesting the Commission,
upon its approval of this Agreement or any part thereof, to relieve ISE
of any and all responsibilities with respect to matters allocated to
NASD pursuant to this Agreement; provided, however, that this Agreement
shall not be effective until the Effective Date.
Exhibit 1--ISE Certification of Common Rules
ISE hereby certifies that the requirements contained in the rules
listed below for ISE are identical to, or substantially similar to, the
comparable NASD rules identified.
------------------------------------------------------------------------
ISE Rule(s) NASD Rule(s)
------------------------------------------------------------------------
408. Prevention of the Misuse of 3010(a)(2) Supervision.
Material, Nonpublic Information.
409. Disciplinary Action............... 3070(a)(1) and (a)(10)
Reporting Requirements.
604. Continuing Education for 1120 Continuing Education
Registered Persons\*\. Requirements.
622. Transfer of Accounts.............. 11870 Customer Account Transfer
Contracts.
624. Brokers' Blanket Bonds\*\......... 3020 Fidelity Bonds.
626. Telephone Solicitation\*\......... 2212 Telemarketing.
1400. Maintenance, Retention, and 3110(a) Books and Records--
Furnishing of Books, Records and Other Requirements.
Information.
1407. Market Maker Hedge Exemption from 5100 Short Sale Rule; IM-6130
Nasdaq Short Sale Rule\*\. Trade Reporting of Short
Sales.
2114. Doing Business with the Public 2310 Recommendations to
\1\. Customers (Suitability); 2320
Best Execution and
Interpositioning; 2330
Customers' Securities or
Funds; 2340 Customer Account
Statements; 2341 Margin
Disclosure Statement; 2350
Broker/Dealer Conduct on the
Premises of Financial
Institutions; 2360 Approval
Procedures for Day-Trading
Accounts; 2361 Day-Trading
Risk Disclosure Statement;
2370 Borrowing From or Lending
to Customers.
------------------------------------------------------------------------
\1\ In connection with the approval of ISE Rule 2114, the Commission
noted that since the ISE is requiring Equity EAMs that do business
with the public to become members of NASD, those ISE members are
required to comply with NASD rules that govern the practice of members
when doing business with the public. The Commission noted that, among
other things, these members would be obligated to comply with these
listed NASD Rules. See Securities Exchange Act Release No. 54401
(September 1, 2006), 71 FR 53483 (September 11, 2006) (SR-ISE-2006-
53).
* ISE will be responsible for any significant differences between its
rules and the comparable NASD rule identified, until such time
amendments to such rule(s) may be approved.
[[Page 2044]]
* * * * *
III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \18\ and Rule 17d-2
thereunder,\19\ after February 7, 2007, the Commission may, by written
notice, declare the plan submitted by ISE and NASD, File No. 4-529, to
be effective if the Commission finds that the plan is necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development
of the national market system and a national system for the clearance
and settlement of securities transactions and in conformity with the
factors set forth in Section 17(d) of the Act.
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\18\ 15 U.S.C. 78q(d)(1).
\19\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the amended and restated 17d-2 plan and to relieve ISE of the
responsibilities which would be assigned to NASD, interested persons
are invited to submit written data, views, and arguments concerning the
foregoing. Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/other.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number 4-529 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number 4-529. 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/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan 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 plan also will be
available for inspection and copying at the principal offices of ISE
and 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 4-529
and should be submitted on or before February 7, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(34).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-539 Filed 1-16-07; 8:45 am]
BILLING CODE 8011-01-P
