Self-Regulatory Organizations; National Association of Securities Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); Notice of Filing of Proposed Rule Change Related to Mandated Use of an Automated Liability Notification System, 58918-58920 [E7-20385]
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58918
Federal Register / Vol. 72, No. 200 / Wednesday, October 17, 2007 / Notices
Sector SPDR (XLE) and the Financial
Select Sector SPDR (XLF).6 CBOE
proposes to amend Footnote 6 of its Fee
Schedule to note that XLE and XLF are
not among the Penny Pilot classes in
which it assesses a $.10 per contract
marketing fee, similar to QQQQ options
and IWM options. All other option
classes being added to the Penny Pilot
Program, including DIA options and
SPY options, will be assessed the
marketing fee at a rate of $.10 per
contract.
CBOE also proposes to make a nonsubstantive change to the text of
Footnote 6 of its Fee Schedule to delete
references to ‘‘LMM’’ because LMMs are
not appointed in any option classes in
which the marketing fee is assessed.
CBOE is not amending its marketing
fee program in any other respects.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 7 in general, and
Section 6(b)(4) of the Act 8 in particular,
in that it is designed to provide for the
equitable allocation of reasonable dues,
fees, and other charges among CBOE
members and other persons using its
facilities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
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
No written comments were solicited
or received with respect to the proposed
rule change.
sroberts on PROD1PC70 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has been designated as a fee change
pursuant to Section 19(b)(3)(A)(ii) of the
Act 9 and Rule 19b–4(f)(2) 10 thereunder,
because it establishes or changes a due,
fee, or other charge imposed by the
Exchange. Accordingly, the proposal
will take effect upon filing with the
Commission. At any time within 60
6 See Securities Exchange Release No. 56565
(September 27, 2007), 72 FR 56403 (October 3,
2007) (SR–CBOE–2007–117) (approving expansion
of Penny Pilot Program).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4).
9 15 U.S.C. 78s(b)(3)(A)(ii).
10 17 CFR 240.19b–4(f)(2).
VerDate Aug<31>2005
19:05 Oct 16, 2007
Jkt 214001
days of the filing of such proposed rule
change the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
2007–117 and should be submitted on
or before November 7, 2007.
IV. Solicitation of Comments
BILLING CODE 8011–01–P
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2007–117 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–CBOE–2007–117. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room 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 CBOE. 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–CBOE–
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–20459 Filed 10–16–07; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56639; File No. SR–NASD–
2007–035]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.); Notice of
Filing of Proposed Rule Change
Related to Mandated Use of an
Automated Liability Notification
System
October 11, 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 May 25,
2007, the National Association of
Securities Dealers (‘‘NASD’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change described in Items
I, II, and III below, which items have
been prepared primarily by the NASD.3
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to amend Rule
11810(i) to mandate the use of the
automated liability notification system
of a registered clearing agency when
issuing liability notices in connection
with certain securities transactions
provided both parties to the contract are
participants in a registered clearing
agency that has such an automated
system.4
11 17
CFR 200.30–3(a)(12).
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 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
Exchange Act Release No. 56146 (July 26, 2007); 72
FR 42190 (Aug. 1, 2007).
4 Proposed new rule text is attached to NASD’s
filing as Exhibit 1 and can be found at https://
1 15
E:\FR\FM\17OCN1.SGM
17OCN1
Federal Register / Vol. 72, No. 200 / Wednesday, October 17, 2007 / Notices
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
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 these statements.5
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
sroberts on PROD1PC70 with NOTICES
(1) Purpose
NASD Rule 11810(i) sets forth the
procedures that must be followed when
a party is owed securities that have
become the subject of a voluntary
corporate action, such as a tender or
exchange offer. Under Rule 11810(i), the
owed party delivers a liability notice to
the owing or failing party. The liability
notice sets a cut off date for the delivery
of the securities by the owing party and
provides notice to the owing party that
the counterparty will be held liable for
any damages caused by its failure to
deliver the securities in time for the
owed party to participate in the
voluntary corporate action.
If the owing party delivers the
securities in response to the liability
notice, it has met its delivery obligation.
If the owing party fails to deliver the
securities in sufficient time for the owed
party to participate in the voluntary
corporate action, it will be liable for any
damages that may accrue thereby (i.e.,
in lieu of delivering the securities the
owing party must deliver proceeds
equivalent to the proceeds that the owed
party would have received if it had been
able to participate in the offer). The
owed party has the responsibility to
communicate its intentions to the owing
party and to prove, if necessary, that the
owing party received the liability notice.
Rule 11810(i) currently requires
broker-dealers to send liability notices
using ‘‘electronic media having
immediate receipt capabilities.’’
Although there is currently no one
acceptable means for sending and
tracking liability notices, NASD
members have advised that it is industry
practice to send liability notices by fax
www.finra.org/RulesRegulation/RuleFilings/
index.htm.
5 The Commission has modified portions of the
text of the summaries prepared by the NASD.
VerDate Aug<31>2005
19:05 Oct 16, 2007
Jkt 214001
to the failing counterparty. Sending
liability notices by fax is a manual,
paper-intensive process that is subject to
error. For example, the fax may be
directed to the wrong department and
not timely received by the correct
department, or sent to the correct
department but overlooked by the
responsible person(s). In other cases, the
receiver may not notify the sender that
the fax has been received, and the
sender must follow up with another fax
or telephone call or both. The financial
risk to an owing firm that misses or
incorrectly processes a liability notice
relating to a voluntary corporate action
can be considerable, since the corporate
action may involve hundreds of
shareholders.
In response to industry need for a
reliable and uniform method of
transmitting liability notices, The
Depository Trust Company (‘‘DTC’’)
developed SMART/Track for Corporate
Action Liability Notification Service
(‘‘SMART/Track’’). SMART/Track is a
web-based system for the
communication of corporate action
liability notices that allows DTC
participants and the clearing members
of the National Securities Clearing
Corporation to create, send, process and
tract such notices.6 Transmitting
liability notices through SMART/Track
eliminates paper liability notices and
provides firms with an electronic,
centralized system for the distribution,
management and control of liability
notices and helps reduce the risks,
costs, and delays resulting from missing
or inaccurate information associated
with paper corporate action liability
notices. Specifically, SMART/Track
provides participants with (1) more
timely receipt and distribution of
corporation action liability notifications;
(2) a centralized system to manage and
control all liability notifications on all
issues; (3) immediate identification of
the security affected by a corporate
action liability notification; (4) detailed
disclosure and clearer explanation of
the terms and conditions of the
corporate action; and (5) an audit trail
with a complete record of actions taken
regarding a liability notice.
As proposed, NASD Rule 11810(i)
will mandate the use of the automated
liability notification system of a
registered clearing agency when the
parties to a contract are both
participants in a registered clearing
agency that has an automated service for
corporate action liability notices. When
either or both parties to a contract are
6 Currently DTC is the only registered clearing
agency operating an automated corporate liability
notification service.
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
58919
not participants in a registered clearing
agency that has an automated service for
corporate action liability notices, Rule
11810(i) will continue to require the
liability notice to be issued using
written or comparable electronic media
having immediate receipt capabilities.
NASD proposes to announce the
effective date of the proposed rule
change in a ‘‘Notice to Members’’ that
will be published no later than sixty
days following the date of approval of
the proposed rule change by the
Commission. The NASD anticipates that
the effective date of the proposed rule
change will be thirty days following
publication of the Notice to Members
announcing the Commission’s approval
of the proposed rule change.
(2) Statutory Basis
The statutory basis under the Act for
this proposed rule change is the
requirement under Section 15A of the
Act, which requires, among other
things, that the rules of a national
securities association are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
perfect the mechanism of a free and
open market and a national market
system, and in general to protect
investors and the public interest.7
NASD believes that the proposed rule
change is consistent with the provisions
of the Act in that SMART/Track will
eliminate the use of paper corporate
action liability notices and will provide
firms with an electronic, centralized
system to distribute, manage, and
control liability notices. In addition to
reducing the risks, costs, and delays
resulting from missing or inaccurate
information associated with paper
corporate action liability notices,
SMART/Track gives firms detailed
disclosure of the terms and conditions
of the corporate action, enables firms to
more timely receive and distribute
corporate action liability notices, and
provides an audit trail with a complete
record of actions taken regarding a
liability notice.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
NASD does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
7 15
E:\FR\FM\17OCN1.SGM
U.S.C. 78f(b)(5).
17OCN1
58920
Federal Register / Vol. 72, No. 200 / Wednesday, October 17, 2007 / Notices
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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
ninety days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2007–035 in the
subject line.
sroberts on PROD1PC70 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–2007–035. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
VerDate Aug<31>2005
19:05 Oct 16, 2007
Jkt 214001
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Section, 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 filings also will be
available for inspection and copying at
the principal office of the NASD and on
NASD’s Web site, https://www.finra.org/
RulesRegulation/RuleFilings/index.htm.
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–2007–035 and
should be submitted on or before
November 7, 2007.
upon filing with the Commission.5 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–20385 Filed 10–16–07; 8:45 am]
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA 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. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56644; File No. SR–FINRA–
2007–016]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Reflect the Closing of
the NASD/BSE Trade Reporting Facility
October 11, 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 October
9, 2007, the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
(f/k/a the National Association of
Securities Dealers, Inc. (‘‘NASD’’)) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared substantially by FINRA.
FINRA has submitted the proposed rule
change under Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6) thereunder,4
which renders the proposal effective
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
1 15
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA proposes to delete in their
entirety the NASD Rule 4000D, 6000D,
and 7000D Series and the Limited
Liability Company Agreement of The
NASD/BSE Trade Reporting Facility
LLC (the ‘‘NASD/BSE TRF LLC
Agreement’’), in light of the recent
closing of the NASD/BSE Trade
Reporting Facility (the ‘‘NASD/BSE
TRF’’).6
The text of the proposed rule change
is available at https://www.finra.org, at
the principal offices of FINRA, and at
the Commission’s Public Reference
Room.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The NASD/BSE TRF was approved by
the Commission 7 and commenced
operation in February 2007 to provide
members with a mechanism for
reporting locked-in trades in NMS
stocks, as defined in Rule 600(b)(47) of
Regulation NMS under the Act,8
effected otherwise than on an exchange.
The Boston Stock Exchange, Inc.
(‘‘BSE’’), the ‘‘Business Member’’ under
the NASD/BSE TRF LLC Agreement,
5 FINRA has asked the Commission to waive the
30-day operative delay provided in Rule 19b–
4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii).
6 Effective July 30, 2007, FINRA was formed
through the consolidation of NASD and the member
regulatory functions of NYSE Regulation, Inc.
Accordingly, from that date until the date it closed
on September 21, 2007, the NASD/BSE TRF was
doing business as the FINRA/BSE TRF.
7 See Securities Exchange Act Release No. 54931
(December 13, 2006), 71 FR 76409 (December 20,
2006) (order approving File No. SR–NASD–2006–
115).
8 17 CFR 242.600(b)(47).
E:\FR\FM\17OCN1.SGM
17OCN1
]]>Agencies
[Federal Register Volume 72, Number 200 (Wednesday, October 17, 2007)]
[Notices]
[Pages 58918-58920]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-20385]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56639; File No. SR-NASD-2007-035]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.);
Notice of Filing of Proposed Rule Change Related to Mandated Use of an
Automated Liability Notification System
October 11, 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 May 25, 2007, the National Association of Securities Dealers
(``NASD'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change described in Items I, II, and
III below, which items have been prepared primarily by the NASD.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
---------------------------------------------------------------------------
\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 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
Exchange Act Release No. 56146 (July 26, 2007); 72 FR 42190 (Aug. 1,
2007).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to amend Rule 11810(i) to mandate the use of the
automated liability notification system of a registered clearing agency
when issuing liability notices in connection with certain securities
transactions provided both parties to the contract are participants in
a registered clearing agency that has such an automated system.\4\
---------------------------------------------------------------------------
\4\ Proposed new rule text is attached to NASD's filing as
Exhibit 1 and can be found at https://www.finra.org/RulesRegulation/
RuleFilings/index.htm.
---------------------------------------------------------------------------
[[Page 58919]]
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 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 these
statements.\5\
---------------------------------------------------------------------------
\5\ The Commission has modified portions of the text of the
summaries prepared by the NASD.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(1) Purpose
NASD Rule 11810(i) sets forth the procedures that must be followed
when a party is owed securities that have become the subject of a
voluntary corporate action, such as a tender or exchange offer. Under
Rule 11810(i), the owed party delivers a liability notice to the owing
or failing party. The liability notice sets a cut off date for the
delivery of the securities by the owing party and provides notice to
the owing party that the counterparty will be held liable for any
damages caused by its failure to deliver the securities in time for the
owed party to participate in the voluntary corporate action.
If the owing party delivers the securities in response to the
liability notice, it has met its delivery obligation. If the owing
party fails to deliver the securities in sufficient time for the owed
party to participate in the voluntary corporate action, it will be
liable for any damages that may accrue thereby (i.e., in lieu of
delivering the securities the owing party must deliver proceeds
equivalent to the proceeds that the owed party would have received if
it had been able to participate in the offer). The owed party has the
responsibility to communicate its intentions to the owing party and to
prove, if necessary, that the owing party received the liability
notice.
Rule 11810(i) currently requires broker-dealers to send liability
notices using ``electronic media having immediate receipt
capabilities.'' Although there is currently no one acceptable means for
sending and tracking liability notices, NASD members have advised that
it is industry practice to send liability notices by fax to the failing
counterparty. Sending liability notices by fax is a manual, paper-
intensive process that is subject to error. For example, the fax may be
directed to the wrong department and not timely received by the correct
department, or sent to the correct department but overlooked by the
responsible person(s). In other cases, the receiver may not notify the
sender that the fax has been received, and the sender must follow up
with another fax or telephone call or both. The financial risk to an
owing firm that misses or incorrectly processes a liability notice
relating to a voluntary corporate action can be considerable, since the
corporate action may involve hundreds of shareholders.
In response to industry need for a reliable and uniform method of
transmitting liability notices, The Depository Trust Company (``DTC'')
developed SMART/Track for Corporate Action Liability Notification
Service (``SMART/Track''). SMART/Track is a web-based system for the
communication of corporate action liability notices that allows DTC
participants and the clearing members of the National Securities
Clearing Corporation to create, send, process and tract such
notices.\6\ Transmitting liability notices through SMART/Track
eliminates paper liability notices and provides firms with an
electronic, centralized system for the distribution, management and
control of liability notices and helps reduce the risks, costs, and
delays resulting from missing or inaccurate information associated with
paper corporate action liability notices. Specifically, SMART/Track
provides participants with (1) more timely receipt and distribution of
corporation action liability notifications; (2) a centralized system to
manage and control all liability notifications on all issues; (3)
immediate identification of the security affected by a corporate action
liability notification; (4) detailed disclosure and clearer explanation
of the terms and conditions of the corporate action; and (5) an audit
trail with a complete record of actions taken regarding a liability
notice.
---------------------------------------------------------------------------
\6\ Currently DTC is the only registered clearing agency
operating an automated corporate liability notification service.
---------------------------------------------------------------------------
As proposed, NASD Rule 11810(i) will mandate the use of the
automated liability notification system of a registered clearing agency
when the parties to a contract are both participants in a registered
clearing agency that has an automated service for corporate action
liability notices. When either or both parties to a contract are not
participants in a registered clearing agency that has an automated
service for corporate action liability notices, Rule 11810(i) will
continue to require the liability notice to be issued using written or
comparable electronic media having immediate receipt capabilities.
NASD proposes to announce the effective date of the proposed rule
change in a ``Notice to Members'' that will be published no later than
sixty days following the date of approval of the proposed rule change
by the Commission. The NASD anticipates that the effective date of the
proposed rule change will be thirty days following publication of the
Notice to Members announcing the Commission's approval of the proposed
rule change.
(2) Statutory Basis
The statutory basis under the Act for this proposed rule change is
the requirement under Section 15A of the Act, which requires, among
other things, that the rules of a national securities association are
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to perfect the
mechanism of a free and open market and a national market system, and
in general to protect investors and the public interest.\7\ NASD
believes that the proposed rule change is consistent with the
provisions of the Act in that SMART/Track will eliminate the use of
paper corporate action liability notices and will provide firms with an
electronic, centralized system to distribute, manage, and control
liability notices. In addition to reducing the risks, costs, and delays
resulting from missing or inaccurate information associated with paper
corporate action liability notices, SMART/Track gives firms detailed
disclosure of the terms and conditions of the corporate action, enables
firms to more timely receive and distribute corporate action liability
notices, and provides an audit trail with a complete record of actions
taken regarding a liability notice.
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\7\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
[[Page 58920]]
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(A) By order approve such proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2007-035 in 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-2007-035. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Section, 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 filings also will be available for
inspection and copying at the principal office of the NASD and on
NASD's Web site, https://www.finra.org/RulesRegulation/RuleFilings/
index.htm. 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-2007-035 and should be submitted on or before November 7, 2007.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-20385 Filed 10-16-07; 8:45 am]
BILLING CODE 8011-01-P
