Self-Regulatory Organizations; National Association of Securities Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); Notice of Filing of Proposed Rule Change Relating to Interpretative Material 9216, Violations Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-1(c)(2), 44201-44203 [E7-15290]

Download as PDF Federal Register / Vol. 72, No. 151 / Tuesday, August 7, 2007 / Notices formation.59 The Commission has considered the merits of the issues raised by each of the commenters and has concluded that the PORTAL rules, as proposed, are consistent with the Act. The Commission notes that in its response to comments, Nasdaq provided SIFMA with additional information regarding the operation of the PORTAL Market and believes Nasdaq sufficiently responded to SIFMA’s comments. The Commission agrees with Nasdaq, in particular, that the prompt and complete dissemination of PORTAL Market Information to PORTAL Participants should allow PORTAL Participants to better evaluate their decisions regarding trading in the PORTAL Market and should result in increased investor confidence and liquidity in the PORTAL Market. The Commission also notes that if a PORTAL Participant does not want its trade information disseminated to other PORTAL Participants, there is no requirement that the Participant utilize Nasdaq’s system for effecting its trade; use of the PORTAL Market is voluntary. Furthermore, the Commission agrees that Nasdaq need not make the subscriber and related agreements part of this proposal, nor does Nasdaq need to make its exemption requests public. The Commission does not believe that Nasdaq’s proposal is anti-competitive because of the eligibility standard in DTC’s rules. Nasdaq does not have any authority with respect to DTC’s rules. DTC’s rules provide that DTC is authorized to make 144A securities eligible for deposit, book-entry delivery, and other depository services, provided that any such Rule 144A securities are designated for inclusion in a system of an SRO approved by the Commission for the reporting of quotation and trade information of Rule 144A transactions.60 In approving the proposed rule change establishing the DTC eligibility requirement that Rule 144A securities must be included in an SRO Rule 144A System, such as the PORTAL Market, the Commission noted a crucial feature of any such system would be a requirement that the SRO’s members report trades involving securities using the system on a routine basis to the SRO, along with information that will facilitate detection of securities law violations.61 jlentini on PROD1PC65 with NOTICES 59 15 U.S.C. 78c(f). Securities Exchange Act Release No. 33327 (December 13, 1993); 58 FR 57878 (December 22, 1993) (SR–DTC–90–06). 61 Given the evolution in the market for these securities since DTC’s rule was adopted, the Commission believes it would be reasonable for DTC to review this requirement. 60 See VerDate Aug<31>2005 15:56 Aug 06, 2007 Jkt 211001 The Commission believes that reestablishing the PORTAL Market as a quoting and trading system is a reasonable effort by Nasdaq to enhance the quality of the Rule 144A market by providing a centralized market and information to QIBs, promoting greater efficiency in executions, and increasing overall market transparency. While the PORTAL Market will provide a system for quoting and trading Rule 144A securities, it does not represent an exclusive means for selling or purchasing Rule 144A securities, nor does it prevent broker-dealers from seeking alternative trading venues for such transactions. V. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,62 that the proposed rule change (SR–NASDAQ– 2006–065), as amended, be, and hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.63 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–15288 Filed 8–6–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56175; File No. SR–NASD– 2007–055] Self-Regulatory Organizations; National Association of Securities Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); Notice of Filing of Proposed Rule Change Relating to Interpretative Material 9216, Violations Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d– 1(c)(2) July 31, 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 July 24, 2007, the National Association of Securities Dealers, Inc. (‘‘NASD’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by NASD.3 The Commission is publishing 62 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 On July 26, 2007, the Commission approved a proposed rule change filed by NASD to amend NASD’s Certificate of Incorporation to reflect its 63 17 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 44201 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 Interpretative Material 9216 (Violations Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d–1(c)(2)) (‘‘IM– 9216’’) to expand the list of violations eligible for disposition under NASD’s Minor Rule Violation Plan (‘‘MRVP’’). The proposed rule change also would delete from IM–9216 references to NASD rules that have been rescinded. The text of the proposed rule change is available at NASD, the Commission’s Public Reference Room, and http:// www.finra.org. 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 On November 28, 2006, NASD and the NYSE Group, Inc. (‘‘NYSE Group’’) announced a plan to consolidate their member regulation operations into a combined organization (the ‘‘Transaction’’) that will be the sole U.S. private-sector provider of member firm regulation for securities firms that do business with the public.4 This consolidation will streamline the broker-dealer regulatory system, combine technologies, permit the establishment of a single set of rules and group examiners with complementary name change to the Financial Industry Regulatory Authority, Inc., or FINRA, in connection with the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146 (July 26, 2007). 4 On July 26, 2007, the Commission approved amendments to NASD’s By-Laws to implement governance and related changes to accommodate the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. See Securities Exchange Act Release No. 56145 (July 26, 2007). E:\FR\FM\07AUN1.SGM 07AUN1 44202 Federal Register / Vol. 72, No. 151 / Tuesday, August 7, 2007 / Notices areas of expertise in a single organization—all of which will serve to enhance oversight of U.S. securities firms and help ensure investor protection. The combined organization, FINRA,5 will work expeditiously to consolidate the rules that apply to its member firms, reducing to one the two sets of rules currently applicable to members of both the NASD and NYSE (‘‘Dual Members’’). During an interim period, however, until the adoption of a consolidated rulebook, NASD has proposed to incorporate into FINRA’s rulebook certain NYSE Rules that pertain to the regulation of member firm conduct (the ‘‘Incorporated NYSE Rules’’).6 The Incorporated NYSE Rules will apply solely to Dual Members until such time as FINRA adopts, subject to Commission approval, consolidated rules applicable to all of its members. As discussed in SR–NASD–2007–054, NASD is not proposing to incorporate, among other rules, the NYSE Disciplinary Rules or related interpretations, including NYSE’s MRVP as set forth in NYSE Rule 476A (Imposition of Fines for Minor Violation(s) of Rules).7 However, the instant proposed rule change would amend NASD’s MRVP to include those Incorporated NYSE Rules currently enumerated in NYSE’s MRVP. This would permit FINRA, during the interim period until the adoption of a consolidated rulebook, to impose a fine for minor rule violations by a Dual Member of the Incorporated NYSE Rules in lieu of commencing disciplinary proceedings. The proposed amendments to IM– 9216 also would specify the applicability of the rules listed therein to various members of FINRA. Specifically, any Dual Member (including any persons affiliated with such member) may be subject to a fine under Rule 9216(b) with respect to any rule listed in IM–9216 that applies to such member or person; provided, however, that any Dual Member that jlentini on PROD1PC65 with NOTICES 5 See supra note 3. The Commission notes that the Transaction closed on July 30, 2007. See telephone conference between Nancy BurkeSanow, Assistant Director, Commission, and Patrice Gliniecki, Senior Vice President and Deputy General Counsel, FINRA, on July 31, 2007. 6 See Securities Exchange Act Release No. 56147 (July 26, 2007) (SR–NASD–2007–054, Exhibit 5) (incorporating certain NYSE Rules relating to member firm conduct into FINRA’s rulebook). 7 NASD is not proposing to incorporate NYSE’s MRVP (NYSE Rule 476A), because NYSE Rule 476A contains procedures that would conflict with the finding of a minor rule violation by FINRA. For example, NYSE Rule 476A permits a person against whom a fine is imposed to contest the NYSE’s fine determination by, among other things, appealing to the NYSE board of directors. VerDate Aug<31>2005 15:56 Aug 06, 2007 Jkt 211001 was not also a member of NASD as of the date of closing of the Transaction and that does not engage in any activities that would have required it to be an NASD member (and its affiliated persons that are not otherwise subject to NASD rules) would only be subject to a fine under Rule 9216(b) with respect to the following rules listed in IM–9216: Any NYSE rule, SEC Exchange Act rule, NASD By-Law or Schedule to By-Laws, or the NASD Rule 8000 Series. In addition, any member of FINRA that is not also a member of the NYSE (and its associated persons that are not otherwise subject to NYSE rules) may be subject to a fine under Rule 9216(b) with respect to any rule listed in IM– 9216, with the exception of the NYSE rules. NASD is not proposing to adopt the provision in NYSE’s MRVP that establishes a $5,000 maximum fine that may be imposed under NYSE’s MRVP for minor violations of NYSE rules. Rather, FINRA would continue to apply the $2,500 maximum fine level under NASD’s MRVP in determining fine levels for minor violations of either an NASD or NYSE rule included in NASD’s MRVP. Among other things, such an approach helps to ensure greater consistency in the administration of the disciplinary process for FINRA and its members, as well as in the related reporting obligations for minor violations of rules.8 Finally, the proposed rule change would delete from IM–9216 references to NASD rules that have been rescinded. 8 Rule 19d–1(c)(2) under the Act provides that any disciplinary action taken by a self-regulatory organization (‘‘SRO’’) against any person of a rule of the SRO that has been designated as a minor rule violation pursuant to a plan is not considered ‘‘final’’ for purposes of Rule 19d–1(c)(1) if the sanction imposed consists of a fine not exceeding $2,500 and the sanctioned person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies at the SRO with respect to the matter. SROs are permitted to report such minor rule violations (where the fine does not exceed $2,500) to the SEC on a periodic, rather than immediate, basis. In addition, members are not required to report ‘‘minor rule violations’’ on the Forms BD, U4 or U5 (as such term is defined on the forms). These forms provide that a rule violation may be designated as ‘‘minor’’ under a plan approved by the SEC if, among other things, the sanction imposed consists of a fine of $2,500 or less. See also Securities Exchange Act Release No. 40193 (July 10, 1998), 63 FR 39338 (July 22, 1998) (Order Granting Approval to Proposed Rule Change Relating to Fines for Disruptive Action on the Options Floor) (SR–PCX–98–21) (stating in the context of amendments to the Pacific Exchange’s (now NYSE Arca) MRVP that, as noted in PCX’s MRVP, pursuant to Securities Exchange Act Release No. 30958, any person or organization found in violation of a minor rule under the MRVP is not required to report such violation on Form BD, provided that, among other things, the sanction imposed consists of a fine not exceeding $2,500). PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 On June 30, 2006, the Commission approved SR–NASD–2005–087, which, among other things, deleted NASD Rules 4619, 4642, 4652, 5430, 6720, and 8212 from the NASD Manual.9 On September 28, 2006, the Commission approved SR–NASD–2006–091, which, among other things, deleted NASD Rule 6420.10 The proposed rule change will become effective upon the later of the closing of the Transaction or the Commission’s approval of the proposed rule change. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of section 15A of the Act,11 including section 15A(b)(2) of the Act,12 in that it will permit FINRA to carry out the purposes of the Act, to comply with the Act and to enforce compliance by FINRA members and persons associated with members with the Act, the rules and regulations thereunder and FINRA rules. The proposed rule change also is consistent with section 15A(b)(7) of the Act,13 in that it will provide that FINRA members and their associated persons are appropriately disciplined for violations of FINRA rules. The proposed rule change also is consistent with section 15A(b)(8) of the Act 14 in that it furthers the statutory goals of providing a fair procedure for disciplining members and their associated persons. The addition of these violations to NASD’s MRVP will provide FINRA staff with the ability to impose minor rule violations for the Incorporated NYSE Rules that are currently enumerated in NYSE’s MRVP. B. Self-Regulatory Organization’s Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 9 Securities Exchange Act Release No. 54084 (June 30, 2006), 71 FR 38935 (July 10, 2006) (Order Approving SR–NASD–2005–087). 10 Securities Exchange Act Release No. 54537 (September 28, 2006), 71 FR 59173 (October 6, 2006) (Order Approving SR–NASD–2006–091). 11 15 U.S.C. 78o–3. 12 15 U.S.C. 78o–3(b)(2). 13 15 U.S.C. 78o–3(b)(7). 14 15 U.S.C. 78o–3(b)(8). E:\FR\FM\07AUN1.SGM 07AUN1 Federal Register / Vol. 72, No. 151 / Tuesday, August 7, 2007 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the NASD consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASD–2007–055 on the subject line. jlentini on PROD1PC65 with NOTICES Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASD–2007–055. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. VerDate Aug<31>2005 15:56 Aug 06, 2007 Jkt 211001 44203 Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–2007–055 and should be submitted on or before August 28, 2007. quarter, the contact information required by these rules. The proposed rule change was published for comment in the Federal Register on May 31, 2007.3 The Commission received two comment letters on the proposal.4 On July 27, 2007, NASD filed Amendment No. 1 to the proposed rule change.5 This order approves the proposed rule change, as amended. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Nancy M. Morris, Secretary. [FR Doc. E7–15290 Filed 8–6–07; 8:45 am] Currently, there are several NASD rules requiring firms to identify and report to NASD certain designated contact persons: Rule 1120 (Continuing Education Requirements); Rule 1150 (Executive Representative); IM–3011–2 (Review of Anti-Money Laundering Compliance Person Information); and Rule 3520 (Emergency Contact Information). These rules further require firms to review the contact information at the end of each calendar quarter, and if necessary, update such information within 17 business days after the end of each quarter. Members review this information and provide any updates online via the NASD Contact System (‘‘NCS’’).6 Based on recommendations made by its Small Firm Rules Impact Task Force,7 NASD has proposed to eliminate these quarterly review requirements in favor of a more comprehensive approach for verifying and updating all contact information required to be reported. Specifically, proposed new Rule 1160 would require members to provide the required contact information via NCS or such other means as NASD may specify. New Rule 1160 also would require members to update the contact information promptly, but in any event not later BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56179; File No. SR–NASD– 2007–034] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change as Modified by Amendment No. 1 Creating NASD Rule 1160 (Firm Contact Information) Regarding the Reporting and Annual Review of Designated Contact Information to NASD August 1, 2007. I. Introduction On May 11, 2007, the National Association of Securities Dealers, Inc. (‘‘NASD’’) filed with the Securities and Exchange Commission (‘‘Commission’’) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change seeking to adopt new NASD Rule 1160 (Firm Contact Information) regarding the reporting of designated contact information to NASD and the annual review of such information. The proposed rule change also proposed amendments to Rule 1120 (Continuing Education Requirements), Rule 1150 (Executive Representative), Interpretive Material (IM)–3011–2 (Review of Anti-Money Laundering Compliance Person Information), and Rule 3520 (Emergency Contact Information) to eliminate the requirement that members review and update, at the end of each calendar 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 II. Description of the Proposal 3 See Securities Exchange Act Release No. 55810 (May 24, 2007), 72 FR 30404. 4 See letter to Nancy Morris, Secretary, Commission, from Lisa Roth, Members Advocacy Chairman, National Association of Independent Broker-Dealers (‘‘NAIBD’’), dated June 13, 2007; letter from Kenneth M. Cherrier, JD, Chief Compliance Officer, Fintegra Financial Solutions (‘‘Fintegra’’), dated June 21, 2007. 5 In Amendment No. 1, NASD responded to comments and made a technical correction to the proposed rule text. This is a technical amendment and is not subject to notice and comment. 6 NASD also currently requires each firm to report, via NCS, contact information for its Executive Officer and the Head of Compliance. NCS also includes several optional fields for other contact persons. 7 NASD established the Small Firm Rules Impact Task Force in September 2006 to examine how existing NASD rules affect smaller firms. In particular, the Task Force focuses on possible opportunities to amend or modernize certain conduct rules that may be particularly burdensome for small firms, where such changes are consistent with investor protection and market integrity. E:\FR\FM\07AUN1.SGM 07AUN1

Agencies

[Federal Register Volume 72, Number 151 (Tuesday, August 7, 2007)]
[Notices]
[Pages 44201-44203]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-15290]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56175; File No. SR-NASD-2007-055]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); 
Notice of Filing of Proposed Rule Change Relating to Interpretative 
Material 9216, Violations Appropriate for Disposition Under Plan 
Pursuant to SEC Rule 19d-1(c)(2)

July 31, 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 July 24, 2007, the National Association of Securities Dealers, Inc. 
(``NASD'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been substantially prepared by 
NASD.\3\ 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\ On July 26, 2007, the Commission approved a proposed rule 
change filed by NASD to amend NASD's Certificate of Incorporation to 
reflect its name change to the Financial Industry Regulatory 
Authority, Inc., or FINRA, in connection with the consolidation of 
the member firm regulatory functions of NASD and NYSE Regulation, 
Inc. See Securities Exchange Act Release No. 56146 (July 26, 2007).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Interpretative Material 9216 (Violations 
Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-
1(c)(2)) (``IM-9216'') to expand the list of violations eligible for 
disposition under NASD's Minor Rule Violation Plan (``MRVP''). The 
proposed rule change also would delete from IM-9216 references to NASD 
rules that have been rescinded. The text of the proposed rule change is 
available at NASD, the Commission's Public Reference Room, and http://
www.finra.org.

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
    On November 28, 2006, NASD and the NYSE Group, Inc. (``NYSE 
Group'') announced a plan to consolidate their member regulation 
operations into a combined organization (the ``Transaction'') that will 
be the sole U.S. private-sector provider of member firm regulation for 
securities firms that do business with the public.\4\ This 
consolidation will streamline the broker-dealer regulatory system, 
combine technologies, permit the establishment of a single set of rules 
and group examiners with complementary

[[Page 44202]]

areas of expertise in a single organization--all of which will serve to 
enhance oversight of U.S. securities firms and help ensure investor 
protection.
---------------------------------------------------------------------------

    \4\ On July 26, 2007, the Commission approved amendments to 
NASD's By-Laws to implement governance and related changes to 
accommodate the consolidation of the member firm regulatory 
functions of NASD and NYSE Regulation, Inc. See Securities Exchange 
Act Release No. 56145 (July 26, 2007).
---------------------------------------------------------------------------

    The combined organization, FINRA,\5\ will work expeditiously to 
consolidate the rules that apply to its member firms, reducing to one 
the two sets of rules currently applicable to members of both the NASD 
and NYSE (``Dual Members''). During an interim period, however, until 
the adoption of a consolidated rulebook, NASD has proposed to 
incorporate into FINRA's rulebook certain NYSE Rules that pertain to 
the regulation of member firm conduct (the ``Incorporated NYSE 
Rules'').\6\ The Incorporated NYSE Rules will apply solely to Dual 
Members until such time as FINRA adopts, subject to Commission 
approval, consolidated rules applicable to all of its members.
---------------------------------------------------------------------------

    \5\ See supra note 3. The Commission notes that the Transaction 
closed on July 30, 2007.
    See telephone conference between Nancy Burke-Sanow, Assistant 
Director, Commission, and Patrice Gliniecki, Senior Vice President 
and Deputy General Counsel, FINRA, on July 31, 2007.
    \6\ See Securities Exchange Act Release No. 56147 (July 26, 
2007) (SR-NASD-2007-054, Exhibit 5) (incorporating certain NYSE 
Rules relating to member firm conduct into FINRA's rulebook).
---------------------------------------------------------------------------

    As discussed in SR-NASD-2007-054, NASD is not proposing to 
incorporate, among other rules, the NYSE Disciplinary Rules or related 
interpretations, including NYSE's MRVP as set forth in NYSE Rule 476A 
(Imposition of Fines for Minor Violation(s) of Rules).\7\ However, the 
instant proposed rule change would amend NASD's MRVP to include those 
Incorporated NYSE Rules currently enumerated in NYSE's MRVP. This would 
permit FINRA, during the interim period until the adoption of a 
consolidated rulebook, to impose a fine for minor rule violations by a 
Dual Member of the Incorporated NYSE Rules in lieu of commencing 
disciplinary proceedings.
---------------------------------------------------------------------------

    \7\ NASD is not proposing to incorporate NYSE's MRVP (NYSE Rule 
476A), because NYSE Rule 476A contains procedures that would 
conflict with the finding of a minor rule violation by FINRA. For 
example, NYSE Rule 476A permits a person against whom a fine is 
imposed to contest the NYSE's fine determination by, among other 
things, appealing to the NYSE board of directors.
---------------------------------------------------------------------------

    The proposed amendments to IM-9216 also would specify the 
applicability of the rules listed therein to various members of FINRA. 
Specifically, any Dual Member (including any persons affiliated with 
such member) may be subject to a fine under Rule 9216(b) with respect 
to any rule listed in IM-9216 that applies to such member or person; 
provided, however, that any Dual Member that was not also a member of 
NASD as of the date of closing of the Transaction and that does not 
engage in any activities that would have required it to be an NASD 
member (and its affiliated persons that are not otherwise subject to 
NASD rules) would only be subject to a fine under Rule 9216(b) with 
respect to the following rules listed in IM-9216: Any NYSE rule, SEC 
Exchange Act rule, NASD By-Law or Schedule to By-Laws, or the NASD Rule 
8000 Series. In addition, any member of FINRA that is not also a member 
of the NYSE (and its associated persons that are not otherwise subject 
to NYSE rules) may be subject to a fine under Rule 9216(b) with respect 
to any rule listed in IM-9216, with the exception of the NYSE rules.
    NASD is not proposing to adopt the provision in NYSE's MRVP that 
establishes a $5,000 maximum fine that may be imposed under NYSE's MRVP 
for minor violations of NYSE rules. Rather, FINRA would continue to 
apply the $2,500 maximum fine level under NASD's MRVP in determining 
fine levels for minor violations of either an NASD or NYSE rule 
included in NASD's MRVP. Among other things, such an approach helps to 
ensure greater consistency in the administration of the disciplinary 
process for FINRA and its members, as well as in the related reporting 
obligations for minor violations of rules.\8\
---------------------------------------------------------------------------

    \8\ Rule 19d-1(c)(2) under the Act provides that any 
disciplinary action taken by a self-regulatory organization 
(``SRO'') against any person of a rule of the SRO that has been 
designated as a minor rule violation pursuant to a plan is not 
considered ``final'' for purposes of Rule 19d-1(c)(1) if the 
sanction imposed consists of a fine not exceeding $2,500 and the 
sanctioned person has not sought an adjudication, including a 
hearing, or otherwise exhausted his administrative remedies at the 
SRO with respect to the matter. SROs are permitted to report such 
minor rule violations (where the fine does not exceed $2,500) to the 
SEC on a periodic, rather than immediate, basis. In addition, 
members are not required to report ``minor rule violations'' on the 
Forms BD, U4 or U5 (as such term is defined on the forms). These 
forms provide that a rule violation may be designated as ``minor'' 
under a plan approved by the SEC if, among other things, the 
sanction imposed consists of a fine of $2,500 or less. See also 
Securities Exchange Act Release No. 40193 (July 10, 1998), 63 FR 
39338 (July 22, 1998) (Order Granting Approval to Proposed Rule 
Change Relating to Fines for Disruptive Action on the Options Floor) 
(SR-PCX-98-21) (stating in the context of amendments to the Pacific 
Exchange's (now NYSE Arca) MRVP that, as noted in PCX's MRVP, 
pursuant to Securities Exchange Act Release No. 30958, any person or 
organization found in violation of a minor rule under the MRVP is 
not required to report such violation on Form BD, provided that, 
among other things, the sanction imposed consists of a fine not 
exceeding $2,500).
---------------------------------------------------------------------------

    Finally, the proposed rule change would delete from IM-9216 
references to NASD rules that have been rescinded. On June 30, 2006, 
the Commission approved SR-NASD-2005-087, which, among other things, 
deleted NASD Rules 4619, 4642, 4652, 5430, 6720, and 8212 from the NASD 
Manual.\9\ On September 28, 2006, the Commission approved SR-NASD-2006-
091, which, among other things, deleted NASD Rule 6420.\10\
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 54084 (June 30, 2006), 
71 FR 38935 (July 10, 2006) (Order Approving SR-NASD-2005-087).
    \10\ Securities Exchange Act Release No. 54537 (September 28, 
2006), 71 FR 59173 (October 6, 2006) (Order Approving SR-NASD-2006-
091).
---------------------------------------------------------------------------

    The proposed rule change will become effective upon the later of 
the closing of the Transaction or the Commission's approval of the 
proposed rule change.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A of the Act,\11\ including section 15A(b)(2) 
of the Act,\12\ in that it will permit FINRA to carry out the purposes 
of the Act, to comply with the Act and to enforce compliance by FINRA 
members and persons associated with members with the Act, the rules and 
regulations thereunder and FINRA rules. The proposed rule change also 
is consistent with section 15A(b)(7) of the Act,\13\ in that it will 
provide that FINRA members and their associated persons are 
appropriately disciplined for violations of FINRA rules. The proposed 
rule change also is consistent with section 15A(b)(8) of the Act \14\ 
in that it furthers the statutory goals of providing a fair procedure 
for disciplining members and their associated persons. The addition of 
these violations to NASD's MRVP will provide FINRA staff with the 
ability to impose minor rule violations for the Incorporated NYSE Rules 
that are currently enumerated in NYSE's MRVP.
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    \11\ 15 U.S.C. 78o-3.
    \12\ 15 U.S.C. 78o-3(b)(2).
    \13\ 15 U.S.C. 78o-3(b)(7).
    \14\ 15 U.S.C. 78o-3(b)(8).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

[[Page 44203]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the NASD consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASD-2007-055 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2007-055. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. 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-2007-055 and should be 
submitted on or before August 28, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-15290 Filed 8-6-07; 8:45 am]
BILLING CODE 8010-01-P