Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14149 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See NASD’s comment letter dated March 15, 

2005 in response to the SEC’s Concept Release 

Concerning Self-Regulation, Securities Exchange 

Act Release No. 50700 (November 18, 2004), 69 FR 

71256 (December 8, 2004) (File No. S7–40–04). 

4At the closing of the Transaction, NASD will 

adopt a new corporate name. The proposed rule 

change refers to the newly named entity as the 

‘‘New SRO.’’

proposed rule change (SR–CBOE–2006–

95), as modified by Amendment Nos. 1 

and 2, be, and it hereby is approved on 

an accelerated basis for a six-month 

pilot period ending on September 19, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5423 Filed 3–23–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55495; File No. SR–NASD–

2007–023] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

By-Laws of NASD To Implement 

Governance and Related Changes To 

Accommodate the Consolidation of the 

Member Firm Regulatory Functions of 

NASD and NYSE Regulation, Inc. 

March 20, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on March 19, 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 

prepared by NASD. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASD is proposing to amend the ByLaws of NASD (‘‘NASD By-Laws’’) to 

implement governance and related 

changes to accommodate the 

consolidation of the member firm 

regulatory functions of NASD and NYSE 

Regulation, Inc. (‘‘NYSE Regulation’’). 

The proposed rule change also would 

make limited conforming changes to the 

By-Laws of NASD Regulation, Inc. 

(‘‘NASD Regulation By-Laws’’). 

The text of the proposed rule change 

is available on the NASD’s Web site 

(http://www.nasd.com), at the principal 

office of NASD, and at the 

Commission’s Public Reference Room. 

The text of Exhibit 5 of the proposed 

rule change is also available on the 

Commission’s Web site (http:// 

www.sec.gov). 

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 

Background and Reasons for the 

Transaction 

The securities industry—both 

domestically and internationally—is in 

the midst of dramatic change. As the 

industry changes, it has become clear 

that the self-regulatory organization 

(‘‘SRO’’) model must be adapted to 

ensure efficient and effective regulation. 

At the moment, both NASD and NYSE 

Regulation oversee the activities of U.S.- 

based broker-dealers doing business 

with the public, approximately 170 of 

which are regulated by both 

organizations. The result is a 

duplicative, sometimes conflicting 

system that makes inefficient use of 

resources and, as such, can be 

detrimental to the ultimate goal of 

investor protection. 

NASD has long supported the idea of 

one SRO having responsibility for all 

member firm regulation.3 At the same 

time, the SEC, Congress, securities 

firms, and independent observers have 

long encouraged greater efficiencies, 

clarity and cost savings in the regulation 

of America’s financial markets. For 

these reasons, NASD and NYSE 

Regulation joined together proactively 

to design a system that would better 

meet the needs of today’s investors and 

securities firms. 

With the support and encouragement 

of the SEC, NASD and NYSE Group, Inc. 

(‘‘NYSE Group’’) representatives began 

meeting in June 2006 to discuss options 

for changes to the self-regulatory 

system. A determination was made that 

the scope of the discussions should be 

limited to eliminating redundant 

member regulation and not to combine 

the market regulatory responsibilities of 

NASD and NYSE Regulation. 

On November 28, 2006, NASD and 

the NYSE Group announced the plan to 

consolidate their member regulation 

operations into a combined organization 

that will be the sole U.S. private-sector 

provider of member firm regulation for 

securities firms that do business with 

the public (the ‘‘Transaction’’).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 

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. Moreover, the new 

organization will be committed to 

reducing regulatory costs and burdens 

for firms of all sizes through greater 

regulatory efficiency. 

The goals of the consolidation plan 

are to: 

• Establish a new organization that 

will be the single SRO for all securities 

firms doing business with the public in 

the U.S.; 

• Build and sustain the confidence 

critical to the operation of vibrant 

capital markets; 

• Increase efficient, effective, and 

consistent regulation of securities firms; 

• Provide cost savings to securities 

firms of all sizes; and 

• Strengthen investor protection and 

market integrity. 

None of NASD’s current functions and 

activities will be eliminated as a result 

of the Transaction. The new 

organization will be responsible for: 

• Regulatory oversight of all 

securities firms that do business with 

the public; 

• Professional training, testing and 

licensing of registered persons; 

• Arbitration and mediation; 

• Market regulation by contract for 

The Nasdaq Stock Market, Inc. 

(‘‘Nasdaq’’), the American Stock 

Exchange LLC, and the International 

Securities Exchange, LLC; and 

• Industry utilities, such as Trade 

Reporting Facilities and other over-thecounter operations. 

The consolidation plan addresses key 

issues raised in the SEC’s 2004 Concept 


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5See supra note 3. 

6On March 7, 2007, NASD and NYSE Group filed 

notification reports with the Department of Justice 

and the Federal Trade Commission under the HartScott-Rodino Antitrust Improvements Act of 1976. 

The waiting period for such a filing will terminate 

30 calendar days after the filing, unless the waiting 

period is extended. NASD believes that the 

completion of the Transaction will not violate the 

antitrust laws. NASD also has received a favorable 

ruling by the Internal Revenue Service that the 

Transaction will not affect the tax-exempt status of 

NASD or NASD Regulation. NASD and NYSE 

Group will seek to satisfy all regulatory filing 

obligations and observe any required waiting 

periods prior to the completion of the Transaction. 

Release Concerning Self-Regulation: (1) 

The inherent conflicts of interest 

between SRO regulatory operations and 

members, market operations, issuers 

and stockholders; (2) the costs and 

inefficiencies of multiple SROs, arising 

from multiple SRO rulebooks, 

inspection regimes and staff; and (3) the 

funding SROs have available for 

regulatory operations and the manner in 

which SROs allocate revenue to 

regulatory operations.5

The closing of the Transaction and the 

consolidation of the member firm 

regulatory functions of the two 

organizations is subject to the SEC’s 

approval of this proposed rule change, 

the execution of definitive agreements 

between NASD and NYSE Group and 

obtaining certain additional regulatory 

approvals.6

Composition of the New SRO Board of 

Governors During the Transitional 

Period 

The proposed rule change will 

implement the governance changes at 

the combined organization, including a 

Board structure that balances public and 

industry representation, and designates 

certain governor seats to represent 

member firms of various sizes. As 

further described below, the new 

governance structure guarantees 

industry participation that provides for 

fair and balanced member 

representation on the Board. 

For a transitional period commencing 

on the date of closing of the Transaction 

and ending on the third anniversary of 

the date of closing (the ‘‘Transitional 

Period’’), the New SRO Board of 

Governors (‘‘New SRO Board’’) will 

consist of 23 governors as follows: (1) 

Eleven of the governors will be ‘‘Public 

Governors’’; (2) ten of the governors will 

be ‘‘Industry Governors’’; and (3) two of 

the governors will initially be Richard 

G. Ketchum, Chief Executive Officer 

(‘‘CEO’’) of NYSE Regulation and Mary 

L. Schapiro, CEO of NASD. Mr. 

Ketchum will serve as Non-Executive 

Chairman of the New SRO for a term of 

three years. Ms. Schapiro will serve as 

CEO of the New SRO. 

The eleven Public Governors will 

have no material business relationship 

with a broker or dealer or an SRO 

registered under the Exchange Act. 

Of the ten Industry Governors, (1) 

Three will be registered with a member 

that employs 500 or more registered 

persons (the ‘‘Large Firm Governors’’); 

(2) one will be registered with a member 

that employs at least 151 and no more 

than 499 registered persons (the ‘‘MidSize Firm Governor’’); (3) three will be 

registered with a member that employs 

at least one and no more than 150 

registered persons (the ‘‘Small Firm 

Governors’’); (4) one will be associated 

with a floor member of the New York 

Stock Exchange (the ‘‘Floor Member 

Governor’’); (5) one will be associated 

with an independent dealer or 

insurance affiliate (the ‘‘Independent 

Dealer/Insurance Affiliate Governor’’); 

and (6) one will be associated with an 

investment company affiliate (the 

‘‘Investment Company Affiliate 

Governor’’). 

The Industry Governors and Public 

Governors will be appointed or 

nominated during the Transitional 

Period as follows: 

• The three Small Firm Governors 

will be nominated by the NASD Board 

and elected by members that have at 

least one and no more than 150 

registered persons; provided that 

members of that size also can nominate 

such candidates. 

• The one Mid-Size Firm Governor 

will be nominated jointly by the Board 

of Directors of NYSE Group (‘‘NYSE 

Group Board’’) and the NASD Board and 

elected by members that have at least 

151 and no more than 499 registered 

persons; provided that members of that 

size also can nominate such candidates. 

• The three Large Firm Governors 

will be nominated by the NYSE Group 

Board and elected by members that have 

500 or more registered persons; 

provided that members of that size also 

can nominate such candidates. 

• Five Public Governors will be 

appointed by the NYSE Group Board. 

• Five Public Governors will be 

appointed by the NASD Board. 

• One Public Governor will be 

appointed jointly by the NYSE Group 

Board and the NASD Board. 

• The one Floor Member Governor 

will be appointed by the NYSE Group 

Board. 

• The one Independent Dealer/ 

Insurance Affiliate Governor will be 

appointed by the NASD Board. 

• The one Investment Company 

Affiliate Governor will be appointed 

jointly by the NYSE Group Board and 

the NASD Board. 

Effective as of closing of the 

Transaction, the NYSE Group Board and 

the NASD Board in office prior to the 

closing will appoint the Public 

Governors and Industry Governors they, 

either individually or jointly, have the 

power to appoint. The Public Governors 

will hold office for the Transitional 

Period. The three Large Firm Governors, 

three Small Firm Governors and one 

Mid-Size Governor will be elected as 

Governors at the first annual meeting of 

members following the closing, which is 

expected to be held within ninety days 

after closing of the Transaction and will 

hold office until the first annual meeting 

of members following the Transitional 

Period. During the interim period from 

closing of the Transaction until the 

annual meeting, these seven seats will 

be filled by three interim Industry 

Governors appointed by the NASD 

Board prior to the closing of the 

Transaction from industry governors 

currently on the NASD Board, three 

interim Industry Governors appointed 

by the NYSE Group Board and one 

interim Industry Governor jointly 

appointed by the NYSE Group Board 

and the NASD Board prior to the closing 

of the Transaction. 

As a result of the NASD By-Law 

amendments, members will no longer 

have the ability to vote for all New SRO 

Board candidates in elections, but will 

have an opportunity to vote on 

designated seats on the New SRO Board. 

Specifically, firms will vote for industry 

nominees that are similar in size to their 

own firm. This means that small firms 

and large firms will vote for candidates 

running for the seats reserved for their 

firm size and the mid-sized firms will 

likewise vote for the mid-sized firm 

seat. All other New SRO Board seats 

will be appointed as described above. 

All members will continue to have the 

ability to vote on any future 

amendments to the New SRO By-Laws, 

as well as in district elections. 

The New SRO Board will have a 

Governor who will preside over 

executive sessions of the New SRO 

Board in the event the Non-Executive 

Chairman is recused (‘‘Lead Governor’’). 

The Lead Governor will be selected by 

the New SRO Board, after consultation 

with the CEO. The Board, the CEO, the 

Non-Executive Chairman and the Lead 

Governor will have the authority to call 

meetings of the New SRO Board. Both 

the CEO and Non-Executive Chairman, 

and for matters from which the CEO and 

Non-Executive Chairman are recused 

from considering, the Lead Governor, 

will have the authority to place items on 

the New SRO Board agendas. 


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7Under Article VII, Section 4 of the New SRO ByLaws (Composition and Qualification of the Board), 

the total number of Governors is determined by the 

Board of Governors, with such number being no 

fewer than 16 nor more than 25 Governors. The 

number of Public Governors must exceed the 

number of Industry Governors. 

Governor Vacancies During the 

Transitional Period 

In the event of a vacancy in the 

governor position held by the CEO of 

NYSE Regulation during the 

Transitional Period, the then CEO of 

NYSE Regulation will serve as a 

governor for the remainder of the 

Transitional Period. If the CEO of NYSE 

Regulation as of closing of the 

Transaction ceases to occupy the office 

of Non-Executive Chairman for any 

reason during the Transitional Period, 

then his successor as Non-Executive 

Chairman shall be selected by and from 

a committee comprised of the Governors 

that were appointed or nominated by 

the NYSE Group Board, with the 

exception that those Governors that also 

serve as NYSE Group directors may not 

become Non-Executive Chairman nor 

may his successor as CEO of NYSE 

Regulation become Non-Executive 

Chairman. 

In the event of any vacancy among the 

Large Firm Governors, the Mid-Size 

Firm Governor, or the Small Firm 

Governors during the Transitional 

Period, such vacancy shall only be filled 

by, and nominations for persons to fill 

such vacancy shall be made by, a 

committee of the New SRO Board 

composed of the other Governors 

appointed or nominated by the NYSE 

Group Board in the case of a Large Firm 

Governor vacancy; such vacancy shall 

only be filled by the Board, and 

nominations for persons to fill such 

vacancy shall be made by the 

Nominating Committee in the case of a 

Mid-Size Firm Governor vacancy; or 

such vacancy shall only be filled by, 

and nominations for persons to fill such 

vacancy shall be made by, a committee 

of the New SRO Board composed of the 

other Governors appointed or 

nominated by the NASD Board in the 

case of a Small Firm Governor vacancy. 

In the event the remaining term of office 

of any such governor is more than 

twelve months, nominations shall be 

made as set forth above, but such 

vacancy will be filled by the New SRO 

members entitled to vote on such 

governor position at a meeting of such 

members called to fill the vacancy. 

In the event of any vacancy among the 

Floor Member Governor, the Investment 

Company Affiliate Governor or the 

Independent Dealer/Insurance Affiliate 

Governor during the Transitional 

Period, such vacancy shall only be filled 

by, and nominations for persons to fill 

such vacancy shall be made by, a 

committee of the New SRO Board 

composed of the other Governors 

appointed or nominated by the NYSE 

Group Board in the case of a Floor 

Member Governor vacancy; such 

vacancy shall only be filled by the New 

SRO Board, and nominations for 

persons to fill such vacancy shall be 

made by the Nominating Committee in 

the case of an Investment Company 

Affiliate Governor vacancy; or such 

vacancy shall only be filled by, and 

nominations for persons to fill such 

vacancy shall be made by, a committee 

of the New SRO Board composed of 

other Governors appointed or 

nominated by the NASD Board in the 

case of an Independent Dealer/ 

Insurance Affiliate Governor vacancy. 

In the event of any vacancy among 

those Public Governors appointed by 

the NYSE Group Board, such vacancy 

shall only be filled by, and nominations 

for persons to fill such vacancy shall be 

made by, a committee of the New SRO 

Board composed of the other Governors 

appointed or nominated by the NYSE 

Group Board. In the event of any 

vacancy among those Public Governors 

appointed by the NASD Board, such 

vacancy shall only be filled by, and 

nominations for persons to fill such 

vacancy shall be made by, a committee 

of the New SRO Board comprised of the 

other Governors appointed or 

nominated by the NASD Board. In the 

event of any vacancy of the Public 

Governor position jointly appointed by 

the NYSE Group Board and the NASD 

Board, such vacancy shall only be filled 

by the New SRO Board, and 

nominations for persons to fill such 

vacancy shall be made by the 

Nominating Committee. 

Composition of the New SRO Board 

After the Transitional Period 

Upon the expiration of the 

Transitional Period, the term of office of 

the CEO of NYSE Regulation as a 

member of the New SRO Board will 

automatically terminate and the 

authorized number of members of the 

New SRO Board will be reduced by 

one.7

As of the first annual meeting of 

members following the Transitional 

Period, the Large Firm Governors, the 

Mid-Size Firm Governor and the Small 

Firm Governors will be elected into 

three classes. The composition of the 

classes will be arranged as follows: 

• The first class, being comprised of 

one Large Firm Governor and one Small 

Firm Governor, will be elected for a 

term of office expiring at the first 

succeeding annual meeting of members; 

• The second class, being comprised 

of one Large Firm Governor, one MidSize Firm Governor and one Small Firm 

Governor, will be elected for a term of 

office expiring at the second succeeding 

annual meeting of members; and 

• The third class, being comprised of 

one Large Firm Governor and one Small 

Firm Governor, will be elected for a 

term of office expiring at the third 

succeeding annual meeting of members. 

While these classes are designed to 

ensure staggered board seats, at no time 

will there be less than ten Industry 

Governor positions on the New SRO 

Board. At each annual election 

following the first annual meeting of 

members after the Transitional Period, 

Large Firm Governors, Small Firm 

Governors, and Mid-Size Firm 

Governors will be elected for a term of 

three years to replace those whose terms 

expire. 

As of the first annual meeting of 

members following the Transitional 

Period, the Public Governors, the Floor 

Member Governor, the Independent 

Dealer/Insurance Affiliate Governor, 

and the Investment Company Affiliate 

Governor (the ‘‘Appointed Governors’’) 

will be divided by the New SRO Board 

into three classes, as equal in number as 

possible, with the first class holding 

office until the first succeeding annual 

meeting of members, the second class 

holding office until the second 

succeeding annual meeting of members, 

and the third class holding office until 

the third succeeding annual meeting of 

members. Each class will initially 

contain as equivalent a number as 

possible of Appointed Governors who 

were members of the New SRO Board 

appointed or nominated by the NYSE 

Group Board or are successors to such 

governor positions, on the one hand, 

and Appointed Governors who were 

members of the New SRO Board 

appointed or nominated by the NASD 

Board or are successors to such governor 

positions, on the other hand, to the 

extent the New SRO Board determines 

such persons are to remain Governors 

after the Transitional Period. At each 

annual election following the first 

annual meeting of members following 

the Transitional Period, Appointed 

Governors will be appointed by the New 

SRO Board for a term of three years to 

replace those whose terms expire. 

Role and Composition of the 

Nominating Committee 

The Nominating Committee will be a 

committee of the New SRO Board and 

will replace the current National 

Nominating Committee. For the first 


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14152 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

annual meeting following the closing of 

the Transaction, nominations for the 

seven elected industry seats will not be 

made by the Nominating Committee, but 

instead by the NASD Board and the 

NYSE Group Board as constituted prior 

to the closing of the Transaction. In 

addition, prior to the closing, the NASD 

Board and the NYSE Group Board will 

identify and appoint persons for the 

eleven public seats and three remaining 

industry seats. 

During the Transitional Period, the 

Nominating Committee will be 

responsible solely for nominating 

persons to fill vacancies in governor 

seats for which the full New SRO Board 

has the authority to fill. Following the 

Transitional Period, the Nominating 

Committee will be responsible for 

nominating persons for appointment or 

election to the New SRO Board, as well 

as nominating persons to fill vacancies 

in appointed or elected governor seats. 

During the Transitional Period, 

members of the Nominating Committee 

will be appointed jointly by the New 

SRO CEO and the CEO of NYSE 

Regulation as of closing of the 

Transaction (or his duly appointed 

successor as Chair of the New SRO 

Board), subject to ratification of the 

appointees by the New SRO Board. 

Following the Transitional Period, the 

composition of the Nominating 

Committee will be determined by the 

New SRO Board. At all times, the 

number of Public Governors on the 

Nominating Committee must equal or 

exceed the number of Industry 

Governors on the Nominating 

Committee. In addition, the Nominating 

Committee must at all times be 

comprised of a number of governors that 

is a minority of the entire New SRO 

Board. The New SRO CEO may not be 

a member of the Nominating Committee. 

Proposed Changes and Comparison to 

Current NASD By-Laws 

The following chart summarizes the 

material proposed changes as compared 

to the current NASD By-Laws and the 

timing of their effectiveness. The 

following is only a summary; the text of 

the proposed rule change is available on 

the NASD’s Web site (http:// 

www.nasd.com), at the principal office 

of NASD, and at the Commission’s 

Public Reference Room. The text of 

Exhibit 5 of the proposed rule change is 

also available on the Commission’s Web 

site (http://www.sec.gov). 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Composition and Qualification of the 

Board. 

The Board consists of no fewer than 15 

nor more than 25 Governors, comprising (i) The Chief Executive Officer of the NASD, (ii) if the Board of 

Governors determines, from time to 

time, in its sole discretion, that the 

appointment of a second officer of 

the NASD to the Board of Governors 

is advisable, a second officer of the 

NASD, (iii) the President of NASD 

Regulation, (iv) the Chair of the National Adjudicatory Council and (v) 

no fewer than 12 and no more than 

22 Governors elected by the members of the NASD. The Governors 

elected by the members of the 

NASD include a representative of an 

issuer of investment company shares 

or an affiliate of such an issuer, a 

representative of an insurance company, a representative of a national 

retail firm, a representative of a regional retail or independent financial 

planning member firm, a representative of a firm that provides clearing 

services to other NASD members, 

and a representative of an NASD 

member having not more than 150 

registered persons. The number of 

Non-Industry Governors must exceed 

the number of Industry Governors. If 

the number of Industry and Non-Industry Governors is 13–15, the 

Board must include at least four Public Governors. If the number of Industry and Non-Industry Governors 

is 16–17, the Board must include at 

least five Public Governors. If the 

number of Industry and Non-Industry 

Governors is 18–23, the Board must 

include at least six Public Governors.

As of Closing, and for the Transitional 

Period, the Board consists of 23 authorized members, consisting of (i) 

The Chief Executive Officer of the 

NASD, (ii) the Chief Executive Officer of NYSE Regulation, Inc., (iii) 

eleven Public Governors, (iv) a Floor 

Member Governor, an Independent 

Dealer/Insurance Affiliate Governor 

and an Investment Company Affiliate 

Governor and (v) three Small Firm 

Governors, one Mid-Size Firm Governor and three Large Firm Governors; provided, however that the 

Board will not include such Small 

Firm Governors, Mid-Size Firm Governor or Large Firm Governors, but 

rather will include three persons, who 

immediately prior to the Closing are 

Industry Governors, selected by the 

Board in office prior to the Closing, 

three persons, who immediately prior 

to the Closing qualified as Industry 

Governors pursuant to the By-Laws 

in existence prior to the Closing, selected by the Board of Directors of 

NYSE Group, Inc., and one person, 

who immediately prior to the Closing 

qualified as an Industry Governor 

pursuant to the By-Laws in existence 

prior to the Closing, selected by the 

Board of Directors of NYSE Group, 

Inc. and the Board of Governors in 

office prior to the Closing jointly, until 

the election of such Small Firm Governors, Mid-Size Firm Governor and 

Large Firm Governors at the first annual meeting of members following 

the Closing. [NOTE: To allow for the 

possibility of a contested election, 

the nominees for the Small Firm 

Governor, Mid-Size Firm Governor or 

Large Firm Governor will be voted 

upon at an annual meeting of members which shall be held as soon as 

practicable after the closing of the 

Transaction and is expected to be 

held within ninety days of the closing 

of the Transaction.].

Same as By-Laws for the Transitional 

Period, except that: (i) The Chief Executive Officer of NYSE Regulation, 

Inc. is no longer a Governor; (ii) the 

total number of Governors is determined by the Board of Governors, 

with such number being no fewer 

than 16, nor more than 25 and (iii) 

the number of Public Governors is 

determined by the Board of Governors, provided such number must 

exceed the number of Industry Governors. 


cprice-sewell on PROD1PC66 with NOTICES
Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14153 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Term of Office of Governors .................. The Chief Executive Officer and, if appointed, the second officer of the 

NASD, and the President of NASD 

Regulation serve as Governors until 

a successor is elected, or until death, 

resignation or removal.

The Chair of the National Adjudicatory 

Council serves as a Governor for a 

term of one year, or until a successor is duly elected and qualified, 

or until death, resignation, disqualification or removal.

The Governors elected by the members of the NASD are divided into 

three classes and hold office for a 

term of no more than three years, 

such term being fixed by the Board 

at the time of the nomination or certification of each such Governor, or 

until a successor is duly elected and 

qualified, or until death, resignation, 

disqualification or removal.

The Chief Executive Officer serves as 

a Governor until a successor is elected, or until death, resignation or removal.

The Chief Executive Officer of NYSE 

Regulation, Inc. as of Closing serves 

as a Governor during the Transitional 

Period, until death, resignation or removal.

Effective as of Closing, the Board of 

Directors of NYSE Group, Inc. appoints the NYSE Public Governors, 

the Board in office prior to the Closing appoints the NASD Public Governors and the Board of Directors of 

NYSE Group, Inc. and the Board in 

office prior to the Closing jointly appoint the Joint Public Governor.

Effective as of Closing, the Board of 

Directors of NYSE Group, Inc. appoints the Floor Member Governor, 

the Board of Governors in office prior 

to the Closing appoints the Independent Dealer/Insurance Affiliate 

Governor and the Board of Directors 

of NYSE Group, Inc. and the Board 

of Governors in office prior to the 

Closing jointly appoint the Investment 

Company Affiliate Governor.

The Public Governors and the Floor 

Member Governor, the Investment 

Company Affiliate Governor and the 

Independent Dealer/Insurance Affiliate Governor appointed in accordance with the preceding paragraphs 

hold office for the Transitional Period, or until death, resignation, disqualification or removal.

Three Large Firm Governors, three 

Small Firm Governors and one MidSize Governor are elected as Governors at the first annual meeting of 

members following the Closing (the 

‘‘Initial Member Elected Governors’’). 

The Initial Member Elected Governors hold office until the first annual meeting of members following 

the Transitional Period, or until a 

successor is duly elected and qualified, or until death, resignation, disqualification or removal.

Upon the expiration of the Transitional 

Period, the term of office of the Chief 

Executive Officer of NYSE Regulation, Inc. as a member of the Board 

automatically, and without any further 

action, terminates, such person no 

longer is a member of the Board and 

the authorized number of members 

of the Board automatically is reduced 

by one.

The Chief Executive Officer serves as 

a Governor until a successor is elected, or until death, resignation or removal. 

Public Governors and the Floor Member Governor, the Independent Dealer/Insurance Affiliate Governor and 

the Investment Company Affiliate 

Governor (the ‘‘Appointed Governors’’) are appointed by the Board. 

As of the first annual meeting of members following the Transitional Period, the Appointed Governors are divided by the Board into three classes, as equal in number as possible, 

with the first class holding office until 

the first succeeding annual meeting 

of members, the second class holding office until the second succeeding meeting of members and the 

third class holding office until the 

third succeeding annual meeting of 

members, or until a successor is duly 

appointed and qualified, or until 

death, resignation, disqualification or 

removal. Each class initially contains 

as equivalent a number as possible 

of Appointed Governors who were 

members of the NYSE Group Committee during the Transitional Period 

or are successors to such Governor 

positions, on the one hand, and Appointed Governors who were members of the NASD Group Committee 

during the Transitional Period or are 

successors to such Governor positions, on the other hand, to the extent the Board determines such persons are to remain Governors after 

the Transitional Period. At each annual election following the first annual meeting of members following 

the Transitional Period, Appointed 

Governors are appointed by the 

Board for a term of three years to replace those whose terms expire. 

As of the first annual meeting of members following the Transitional Period, the Large Firm Governors, the 

Mid-Size Firm Governor and the 

Small Firm Governors are divided 

into three classes, as equal in number as possible, with the first class, 

being comprised of one Large Firm 

Governor and one Small Firm Governor, holding office until the first 

succeeding annual meeting of members, the second class, being comprised of one Large Firm Governor, 

one Mid-Size Firm Governor and one 

Small Firm Governor, holding office 

until the second succeeding annual 

meeting of members and the third 

class, being comprised of one Large 

Firm Governor and one Small Firm 

Governor, holding office until the 

third succeeding annual meeting of 

members, or until a successor is duly 

elected and qualified, or until death, 

resignation, disqualification or removal. At each annual election following the first annual meeting of 

members following the Transitional 

Period, Large Firm Governors, Small 

Firm Governors and the Mid-Size 

Firm Governor are elected for a term 

of three years to replace those 

whose terms expire. 


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14154 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Filling of Vacancies ................................ If an elected Governor position becomes vacant, whether because of 

death, disability, disqualification, removal or resignation, the National 

Nominating Committee nominates, 

and the Board elects by majority vote 

of the remaining Governors then in 

office, a person satisfying the classification (Industry, Non-Industry or 

Public Governor) for the governorship to fill such vacancy, except that 

if the remaining term of office for the 

vacant Governor position is not more 

than six months, no replacement is 

required. If the remaining term of office for the vacant Governor position 

is more than one year, the Governor 

elected by the Board to fill such position stands for election in the next 

annual election.

In the event the Chief Executive Officer 

of NYSE Regulation, Inc. as of Closing no longer serves as a Governor 

during the Transitional Period, the 

then Chief Executive Officer of NYSE 

Regulation, Inc. serves as a Governor for the remainder of the Transitional Period, until death, resignation 

or removal.

In the event of any vacancy among the 

NYSE Public Governors, the Joint 

Public Governor or NASD Public 

Governors during the Transitional 

Period, such vacancy is only filled 

by, and nominations for persons to 

fill such vacancy are made by, the 

NYSE Group Committee in the case 

of a vacant NYSE Public Governor 

position, such vacancy is only filled 

by the Board, and nominations for 

persons to fill such vacancy are 

made by the Nominating Committee, 

in the case of a vacant Joint Public 

Governor position or such vacancy is 

only filled by, and nominations for 

persons to fill such vacancy are 

made by, the NASD Group Committee in the case of a vacant NASD 

Public Governor position.

In the event of any vacancy among the 

Large Firm Governors, the Mid-Size 

Firm Governor or the Small Firm 

Governors, such vacancy is only 

filled by the Large Firm Governor 

Committee in the case of a Large 

Firm Governor vacancy, the Board in 

the case of a Mid-Size Firm Governor vacancy or the Small Firm 

Governor Committee in the case of a 

Small Firm Governor vacancy; provided, however, that in the event the 

remaining term of office of any Large 

Firm, Mid-Size Firm or Small Firm 

Governor position that becomes vacant is for more than 12 months, 

such vacancy is filled by the members of the New SRO entitled to vote 

thereon at a meeting thereof convened to vote thereon. 

All other vacancies are filled by the 

Board. 

In the event of any vacancy among the 

Floor Member Governor, the Investment Company Affiliate Governor or 

the Independent Dealer/Insurance 

Affiliate Governor during the Transitional Period, such vacancy is only 

filled by, and nominations for persons to fill such vacancy are made 

by, the NYSE Group Committee in 

the case of a Floor Member Governor vacancy, such vacancy is only 

filled by the Board, and nominations 

for persons to fill such vacancy are 

made by the Nominating Committee, 

in the case of an Investment Company Affiliate Governor vacancy or 

such vacancy is only filled by, and 

nominations for persons to fill such 

vacancy are made by, the NASD 

Group Committee in the case of an 

Independent Dealer/Insurance Affiliate Governor vacancy. 

In the event of any vacancy among the 

Large Firm Governors, the Mid-Size 

Firm Governor or the Small Firm 

Governors during the Transitional 

Period, such vacancy is only filled 

by, and nominations for persons to 

fill such vacancy are made by, the 

NYSE Group Governor Committee in 

the case of a Large Firm Governor 

vacancy, such vacancy is only filled 

by the Board, and nominations for 

persons to fill such vacancy are 

made by the Nominating Committee, 

in the case of the Mid-Size Firm 

Governor vacancy or such vacancy 

is only filled by, and nominations for 

persons to fill such vacancy are 

made by, the NASD Governor Committee in the case of a Small Firm 

Governor vacancy: provided, however, that in the event the remaining 

term of office of any Large Firm, MidSize Firm or Small Firm Governor 

position that becomes vacant is for 

more than 12 months, nominations 

shall be made as set forth above in 

this paragraph, but such vacancy is 

filled by the members of the New 

SRO entitled to vote thereon at a 

meeting thereof convened to vote 

thereon. 


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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14155 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Nominations ........................................... The National Nominating Committee, 

which is not a committee of the 

Board, nominates and, in the event 

of a contested election, may support: 

Industry, Non-Industry and Public 

Governors for each vacant or new 

Governor position on the NASD 

Board for election by the membership; Industry, Non-Industry and Public Directors for each vacant or new 

position on the NASD Regulation 

Board and the NASD Dispute Resolution Board for election by the stockholder; and Industry, Non-Industry, 

and Public members for each vacant 

or new position on the National Adjudicatory Council for appointment by 

the NASD Regulation Board.

In the case of the first annual meeting 

of members following the Closing, 

nominations are by the Board of Directors of NYSE Group, Inc. with respect to Large Firm Governors, jointly by the Board of Directors of NYSE 

Group, Inc. and the Board in office 

prior to the Closing with respect to 

the Mid-Size Firm Governor and by 

the Board in office prior to the Closing with respect to Small Firm Governors.

The Nominating Committee, which is a 

committee of the Board, nominates 

and, in the event of a contested election, may support: Large Firm, MidSize Firm, Small Firm, Public, Floor 

Member, Independent Dealer/Insurance Affiliate and Investment Company Affiliate Governors for each vacant or new Governor position on the 

New SRO Board; Industry and Public 

Directors for each vacant or new position on the NASD Regulation Board 

and the NASD Dispute Resolution 

Board for election by the stockholder; 

and Industry and Public members for 

each vacant or new position on the 

National Adjudicatory Council for appointment by the NASD Regulation 

Board. 

Composition and Qualifications of the 

Nominating Committee.

The National Nominating Committee 

consists of no fewer than six and no 

more than nine members. The number of Non-Industry committee members equals or exceeds the number 

of Industry committee members. If 

the National Nominating Committee 

consists of six members, at least two 

must be Public committee members. 

If the National Nominating Committee consists of seven or more 

members, at least three must be 

Public committee members. No officer or employee of the NASD serves 

as a member of the National Nominating Committee in any voting or 

non-voting capacity. No more than 

three of the National Nominating 

Committee members and no more 

than two of the Industry committee 

members are current members of the 

NASD Board.

The Nominating Committee is jointly 

populated by the Chief Executive Officer and the Chief Executive Officer 

of NYSE Regulation, Inc. as of Closing (or his duly appointed or elected 

successor as Chair of the Board), 

subject to ratification of the appointees by the Board. The number 

of Public Governors on the Nominating Committee equals or exceeds 

the number of Industry Governors on 

the Nominating Committee. The 

Nominating Committee is at all times 

comprised of a number of members 

which is a minority of the entire 

Board and the Chief Executive Officer may not be a member of the 

Nominating Committee.

The Nominating Committee consists of 

such number of members of the 

Board as the Board determines from 

time to time. The number of Public 

Governors on the Nominating Committee equals or exceeds the number 

of Industry Governors on the Nominating Committee. The Nominating 

Committee is at all times comprised 

of a number of members which is a 

minority of the entire Board and the 

Chief Executive Officer may not be a 

member of the Nominating Committee. 

A National Nominating Committee 

member may not simultaneously 

serve on the National Nominating 

Committee and the Board, unless 

such member is in his or her final 

year of service on the Board, and following that year, that member may 

not stand for election to the Board 

until such time as he or she is no 

longer a member of the National 

Nominating Committee. 

Required Board Committees ................. NASD is required to have an Audit 

Committee and a National Nominating Committee.

New SRO is required to have the following committees of the Board: the 

NASD Group Committee; The NYSE 

Group Committee; the Small Firm 

Governor Committee and the Large 

Firm Governor Committee, which 

have the authority described above 

in ‘‘Filling of Vacancies’’ and below in 

‘‘Chair.’’ New SRO also is required to 

have Audit, Finance and Nominating 

Committees and, during the first year 

of the Transitional Period or as may 

be extended thereafter by the Board, 

an Integration Committee.

New SRO is required to have the following committees of the Board: The 

Small Firm Governor Committee and 

the Large Firm Governor Committee, 

which have the authority described 

above in ‘‘Filling of Vacancies.’’ New 

SRO also is required to have Audit, 

Finance and Nominating Committees. 


cprice-sewell on PROD1PC66 with NOTICES
14156 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Composition of Board Committees ........ Unless otherwise provided in the ByLaws, any committee having the authority to exercise the powers and 

authority of the Board has a percentage of Non-Industry committee members at least as great as the percentage of Non-Industry Governors on 

the Board and a percentage of Public committee members at least as 

great as the percentage of Public 

Governors on the Board.

The NASD Group Committee, the 

NYSE Group Committee, the Small 

Firm Governor Committee and the 

Large Firm Governor Committee are 

composed as described below in the 

description of such defined terms. 

Unless otherwise provided in the ByLaws, any other committee having 

the authority to exercise the powers 

and authority of the Board has a 

number of Public Governors as 

members thereof in excess of the 

number of Industry Governors which 

are members thereof. In addition, 

any committee of the Board having 

the authority to exercise the powers 

and authority of the Board (with the 

exception of the Large Firm Governor Committee, the Small Firm 

Governor Committee, the NASD 

Group Committee and the NYSE 

Group Committee) also has (i) a percentage of members (to the nearest 

whole number of committee members) that are members of the NASD 

Group Committee at least as great 

as the percentage of Governors on 

the Board that are members of the 

NASD Group Committee; and (ii) a 

percentage of members (to the nearest whole number of committee 

members) that are members of the 

NYSE Group Committee at least as 

great as the percentage of Governors on the Board that are members of the NYSE Group Committee.

The Small Firm Governor Committee 

and the Large Firm Governor Committee are composed as described 

below in the description of such defined terms. Unless otherwise provided in the By-Laws, any other committee having the authority to exercise the powers and authority of the 

Board has a number of Public Governors as members thereof in excess 

of the number of Industry Governors 

which are members thereof. 

Executive Committee Composition ........ The Executive Committee consists of 

no fewer than five and no more than 

eight Governors. The Executive 

Committee includes the Chief Executive Officer of the NASD, and at least 

one Director of NASD Regulation. 

The Executive Committee has a percentage of Non-Industry committee 

members at least as great as the 

percentage of Non-Industry Governors on the whole Board and a 

percentage of Public committee 

members at least as great as the 

percentage of Public Governors on 

the whole Board.

The Executive Committee consists of 

no fewer than five and no more than 

eight Governors. The Executive 

Committee includes the Chief Executive Officer of the New SRO and the 

Chair of the Board.

Same as Transitional Period. 

Integration Committee ............................ No such committee ............................... The Board shall appoint an Integration 

Committee with a term of one year 

unless continued for a longer period 

by resolution of the Board. The Chair 

of the Board shall be the Chair of the 

Integration Committee.

Not applicable. 

Annual Meetings of Members ................ An annual meeting of members of the 

NASD is held on such date and at 

such place as the Board designates. 

The business of the annual meeting 

includes the election of the members 

of the Board, Industry, Non-Industry 

and Public, by all of the members of 

the NASD.

Except for the first annual meeting following the Closing at which Large 

Firm Governors, the Mid-Size Firm 

Governor and Small Firm Governors 

are elected, there are no annual 

meetings of members during the 

Transitional Period. At such first annual meeting, Small Firm members 

are only entitled to vote for the election of Small Firm Governors, MidSize Firm members are only entitled 

to vote for the election of the MidSize Firm Governor and Large Firm 

members are only entitled to vote for 

the election of Large Firm Governors.

An annual meeting of members of the 

New SRO is held on such date and 

at such place as the Board designates. The business of the annual 

meeting includes the election of the 

Small, Mid-Size and Large Firm 

members of the Board. Small Firm 

members are only entitled to vote for 

the election of Small Firm Governors, 

Mid-Size Firm members are only entitled to vote for the election of the 

Mid-Size Firm Governor and Large 

Firm members are only entitled to 

vote for the election of Large Firm 

Governors. 

Authority to Call Special Meetings of the 

Board.

Not specified ......................................... Special meetings of the Board of the 

New SRO may be called by the 

Board, the Chief Executive Officer of 

the New SRO, the Chair or the Lead 

Governor.

Same as the Transitional Period. 


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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14157 

8NASD will be filing a subsequent rule change to 

address the applicable eligibility proceedings for 

persons subject to disqualification as a result of the 

proposed change in definition. 

Topic Current By-Laws By-Laws effective at closing and for the 

transitional period 

By-Laws effective at the expiration of 

the transitional period 

Authority to Include Items on the Agenda for Meetings of the Board.Not specified ......................................... Each of the Chief Executive Officer of 

the New SRO and the Chair, and 

with respect to matters from which 

the Chief Executive Officer of the 

New SRO and the Chair recuse 

themselves, the Lead Governor, has 

the authority to include matters on 

the agenda of a meeting of the 

Board.

Same as the Transitional Period. 

Chair ....................................................... Elected by the Board from among its 

members.

The Chair is the Chief Executive Officer of NYSE Regulation, Inc. as of 

Closing so long as he remains a 

Governor. In the event the Chief Executive Officer of NYSE Regulation, 

Inc. as of the Closing ceases to be a 

Chair during the Transitional Period, 

subject to the Restated Certificate of 

Incorporation and the By-Laws, the 

Chair is selected by the NYSE Group 

Committee from among its members; 

provided that the Chair so selected 

may not be a member of the Board 

of Directors of NYSE Group, Inc. nor 

may the successor Chief Executive 

Officer of NYSE Regulation, Inc. 

serve as Chair.

Elected by the Board from among its 

members. 

The proposed amendments to the 

NASD By-Laws also include changes or 

additions to certain defined terms. In 

addition to changes to accommodate the 

new governance structure, the proposed 

rule change would amend the definition 

of ‘‘disqualification’’ in the NASD ByLaws to conform to the federal securities 

laws, such that any person subject to a 

statutory disqualification under the 

Exchange Act also would be subject to 

disqualification under NASD rules.8

These changes or additions to the 

defined terms in the NASD By-Laws 

include the following: 

Term Current By-Laws By-Laws effective at closing and through and 

after the transitional period 

Closing ................................................................. Not applicable .................................................. Means the closing of the consolidation of certain member firm regulatory functions of 

NYSE Regulation, Inc. and NASD. 

Disqualification .................................................... As currently written, the definition lists some, 

but not all, of the grounds for statutory disqualification contained in Section 3(a)(39) 

of the Exchange Act.

Means the definition that is contained in Section 3(a)(39) of the Exchange Act. The purpose of the amendment is to conform the 

By-Laws directly to the statutory provision 

that NASD is obligated to enforce, as well 

as to conform the By-Laws to any subsequent amendments to the statute. 

Floor Member Governor ...................................... Not applicable .................................................. Means a member of the Board appointed as 

such who is a person associated with a 

member (or a firm in the process of becoming a member) which is a specialist or floor 

broker on the New York Stock Exchange 

trading floor. 

Independent Dealer/Insurance Affiliate Governor Not applicable .................................................. Means a member of the Board appointed as 

such who is a person associated with a 

member which is an independent contractor 

financial planning member firm or an insurance company, or an affiliate of such a 

member. 


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14158 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

Term Current By-Laws By-Laws effective at closing and through and 

after the transitional period 

Industry Governor or Industry committee member.Means a Governor (excluding the Chief Executive Officer of the NASD and the President 

of NASD Regulation) or committee member 

who: (1) Is or has served in the prior three 

years as an officer, director or employee of 

a broker or dealer, excluding an outside director or a director not engaged in the dayto-day management of a broker or dealer; 

(2) is an officer, director (excluding an outside director) or employee of an entity that 

owns more than ten percent of the equity of 

a broker or dealer, and the broker or dealer 

accounts for more than five percent of the 

gross revenues received by the consolidated entity; (3) owns more than five percent of the equity securities of any broker 

or dealer, whose investments in brokers or 

dealers exceed ten percent of his or her 

net worth, or whose ownership interest otherwise permits him or her to be engaged in 

the day-to-day management of a broker or 

dealer; (4) provides professional services to 

brokers or dealers, and such services constitute 20 percent or more of the professional revenues received by the Governor 

or committee member or 20 percent or 

more of the gross revenues received by the 

Governor’s or committee member’s firm or 

partnership; (5) provides professional services to a director, officer or employee of a 

broker, dealer or corporation that owns 50 

percent or more of the voting stock of a 

broker or dealer, and such services relate 

to the director’s, officer’s or employee’s 

professional capacity and constitute 20 percent or more of the professional revenues 

received by the Governor or committee 

member or 20 percent or more of the gross 

revenues received by the Governor’s or 

committee member’s firm or partnership; or 

(6) has a consulting or employment relationship with or provides professional services to the NASD, NASD Regulation, NASD 

Dispute Resolution, or a market for which 

NASD provides regulation, or has had any 

such relationship or provided any such 

services at any time within the prior three 

years.

Means the Floor Member Governor, the Independent Dealer/Insurance Affiliate Governor 

and the Investment Company Affiliate Governor and any other Governor (excluding 

the Chief Executive Officer of the New 

SRO and, during the Transitional Period, 

the Chief Executive Officer of NYSE Regulation, Inc.) or committee member who: (1) 

Is or has served in the prior year as an officer, director (other than as an independent 

director), employee or controlling person of 

a broker or dealer, or (2) has a consulting 

or employment relationship with or provides 

professional services to a self-regulatory organization registered under the Exchange 

Act, or has had any such relationship or 

provided any such services at any time 

within the prior year. 

Investment Company Affiliate Governor ............. Not applicable .................................................. Means a member of the Board appointed as 

such who is a person associated with a 

member which is an investment company 

(as defined in The Investment Company 

Act of 1940, as amended) or an affiliate of 

such a member. 

Joint Public Governor .......................................... Not applicable .................................................. Means the one Public Governor to be appointed as such by the Board of Directors 

of NYSE Group, Inc. and the Board in office prior to the Closing jointly. 

Large, Mid-Size and Small Firms ........................ Not applicable .................................................. Mean any broker or dealer admitted to membership in the New SRO which, at the time 

of determination, has 1–150, 151–499 or 

500 or more registered persons, respectively. 

Large Firm, Mid-Size Firm and Small Firm Governors.Not applicable .................................................. Mean members of the Board to be elected by 

Large, Mid-Size, and Small Firm members, 

respectively, provided, however, that in 

order to be eligible to serve, a Large Firm, 

Mid-Size Firm, and Small Firm Governor 

must be an Industry Governor and must be 

registered with a member which is a Large 

Firm, Mid-Size Firm, or Small Firm member, as the case may be. 


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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14159 

Term Current By-Laws By-Laws effective at closing and through and 

after the transitional period 

Large Firm Governor and Small Firm Governor 

Committees.

Not applicable .................................................. Means a committee of the Board comprised 

of all of the Large Firm Governors or Small 

Firm Governors, as the case may be. 

Lead Governor .................................................... Not applicable .................................................. Means a member of the Board elected as 

such by the Board, provided, however, that 

any member of the Board who is concurrently serving as a member of the Board of 

Directors of NYSE Group, Inc. is not eligible to serve as the Lead Governor. 

NASD Public Governors and NYSE Public Governors.Not applicable .................................................. Mean the five Public Governors to be appointed as such by the Board in office prior 

to the Closing and the five Public Governors to be appointed as such by the 

Board of Directors of NYSE Group, Inc., respectively, effective as of Closing. 

NASD Group Committee ..................................... Not applicable .................................................. Means a committee of the Board comprised 

of the five Public Governors and the Independent Dealer/Insurance Affiliate Governor 

appointed as such by the Board in office 

prior to Closing, and the Small Firm Governors which were nominated for election 

as such by the Board in office prior to Closing, and in each case their successors. 

NYSE Group Committee ..................................... Not applicable. ................................................. Means a committee of the Board comprised 

of the five Public Governors and the Floor 

Member Governor appointed as such by 

the Board of Directors of NYSE Group, 

Inc., and the Large Firm Governors which 

were nominated for election as such by the 

Board of Directors of NYSE Group, Inc., 

and in each case their successors. 

Non-Industry Governor or Non-Industry committee member.Means a Governor (excluding the Chief Executive Officer and any other officer of the 

NASD, the President of NASD Regulation) 

or committee member who is: (1) A Public 

Governor or committee member; (2) an officer or employee of an issuer of securities 

listed on a market for which NASD provides 

regulation; (3) an officer or employee of an 

issuer of unlisted securities that are traded 

in the over-the-counter market; or (4) any 

other individual who would not be an Industry Governor or committee member.

Not applicable. 

Public Governor or Public committee member ... Means a Governor or committee member 

who has no material business relationship 

with a broker or dealer or the NASD, NASD 

Regulation, NASD Dispute Resolution, or a 

market for which NASD provides regulation.

Means any Governor or committee member 

who is not the Chief Executive Officer of 

the New SRO or, during the Transitional 

Period, the Chief Executive Officer of 

NYSE Regulation, Inc., who is not an Industry Governor and who otherwise has no 

material business relationship with a broker 

or dealer or a self-regulatory organization 

registered under the Exchange Act, other 

than as a public director of such a self-regulatory organization. 

Transitional Period .............................................. Not applicable .................................................. Means the period commencing on the date of 

the Closing and ending on the third anniversary of the date of the Closing. 

There also are certain other nonsubstantive changes reflected in the rule 

text. For example, each reference to ‘‘the 

NASD’’ or ‘‘NASD’’ in the NASD ByLaws will be replaced with ‘‘the 

Corporation’’ in contemplation of the 

change in the name of the corporation. 

In addition, each reference to the ‘‘Rules 

of the Association’’ in the NASD ByLaws will be replaced with the ‘‘Rules 

of the Corporation.’’ The effective date 

of the proposed rule change will be the 

closing of the Transaction. Assuming 

SEC approval of the proposed rule 

change, corresponding changes will be 

made to NASD’s Certificate of 

Incorporation. The effective date of the 

corresponding changes to NASD’s 

Certificate of Incorporation also will be 

the closing of the Transaction. 

Proposed Changes to NASD Regulation 

By-Laws 

In 1996, based on recommendations 

of a committee appointed by the NASD 

Board, NASD formed its subsidiary 

NASD Regulation (in addition to the 

already existing Nasdaq) and adopted 

the Plan of Allocation and Delegation of 

Functions by NASD to Subsidiaries 

(‘‘Delegation Plan’’) to reflect its change 


cprice-sewell on PROD1PC66 with NOTICES
14160 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

9On December 20, 2006, NASD eliminated its 

delegation of authority to Nasdaq under the 

Delegation Plan and effectuated complete 

separation with Nasdaq, including dissolution of 

NASD’s controlling share in Nasdaq. 

10 15 U.S.C. 78o–3(b)(2). 11 15 U.S.C. 78o–3(b)(4). 

in corporate structure.9 In 2000, NASD 

created another subsidiary for its 

mediation and arbitration functions, 

NASD Dispute Resolution. Following 

the closing of the Transaction, the New 

SRO will evaluate the role and 

governance structure of the subsidiaries 

and the ongoing need for the Delegation 

Plan. At this time, the proposed rule 

change would make limited conforming 

changes to the NASD Regulation ByLaws solely to reflect the proposed 

governance structure of the New SRO 

Board. 

First, in light of the new proposed 

composition of the New SRO Board, the 

proposed rule change would amend 

Section 5.2 of the NASD Regulation ByLaws (Number of Members and 

Qualifications of the National 

Adjudicatory Council (‘‘NAC’’)) to 

eliminate the reference that the 

Chairman of the NAC shall serve as a 

Governor of the NASD Board for a oneyear term. Second, because the 

Chairman of the NAC may continue to 

serve as a Director of the NASD 

Regulation Board, the proposed rule 

change would eliminate the requirement 

in Section 4.3 (Qualifications) that only 

Governors of the NASD Board shall be 

eligible for election to the NASD 

Regulation Board. Finally, NASD 

proposes to amend the statement in 

Section 4.3 that provides that the CEO 

of NASD shall be an ex-officio nonvoting member of the NASD Regulation 

Board, to reflect that Ms. Schapiro will 

occupy both the position of CEO of the 

New SRO and the President of NASD 

Regulation. In particular, the proposed 

rule change would clarify that where the 

CEO of the New SRO also serves as 

President of NASD Regulation, then the 

person shall have all powers, including 

voting powers, granted to all other 

Directors pursuant to applicable law, 

the Restated Certificate of Incorporation, 

the Delegation Plan and the NASD 

Regulation By-Laws. 

The effective date of the proposed 

rule change will be the closing of the 

Transaction. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A of the Act, including 

Section 15A(b)(2) of the Act,10 in that it 

provides for the organization of the New 

SRO in a manner that will permit the 

New SRO to carry out the purposes of 

the Act, to comply with the Act, and to 

enforce compliance by New SRO 

members and persons associated with 

members with the Act, the rules and 

regulations thereunder, New SRO rules 

and the federal securities laws. NASD 

further believes that the proposed rule 

change is consistent with Section 

15A(b)(4) of the Act 11 in that the 

amendments are designed to assure a 

fair representation of the New SRO’s 

members in the selection of its 

Governors and administration of its 

affairs, as well as to comply with the 

public participant requirements of the 

Act. Moreover, firms that today are 

regulated by both NASD and NYSE 

Regulation will benefit from the 

elimination of the current duplication of 

regulatory review of these firms. The 

Transaction, as reflected in the 

proposed rule change, will further 

benefit members as it will streamline 

the broker-dealer regulatory system, 

combine technologies and permit the 

establishment of a single set of rules and 

group examiners with complementary 

areas of expertise in a single 

organization—all of which will serve to 

enhance oversight of U.S. securities 

firms and help to ensure investor 

protection. 

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. 

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 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–2007–023 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–2007–023. 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. Copies of such filing also will be 

available for inspection and copying at 

the principal office of NASD. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASD–2007–023 and 

should be submitted on or before April 

16, 2007. 


cprice-sewell on PROD1PC66 with NOTICES
Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14161 

12 17 CFR 200.30–3(a)(12). 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5422 Filed 3–23–07; 8:45 am] 

BILLING CODE 8010–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #10829] 

Iowa Disaster #IA–00006 

AGENCY: Small Business Administration. 

ACTION: Notice. 

SUMMARY: This is a Notice of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the State of Iowa ( FEMA—1688—DR), 

dated 03/14/2007. 

Incident: Severe Winter Storms. 

Incident Period: 02/23/2007 through 

03/02/2007. 

Effective Date: 03/14/2007. 

Physical Loan Application Deadline 

Date: 05/14/2007. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street, SW., Suite 6050, 

Washington, DC 20416. 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given that as a result of the 

President’s major disaster declaration on 

03/14/2007, Private Non-Profit 

organizations that provide essential 

services of a governmental nature may 

file disaster loan applications at the 

address listed above or other locally 

announced locations. 

The following areas have been 

determined to be adversely affected by 

the disaster: 

Primary Counties: 

Benton, Black Hawk, Boone, Bremer, 

Buchanan, Butler, Calhoun, Cedar, 

Chickasaw, Clinton, Des Moines, 

Fayette, Floyd, Franklin, Greene, 

Grundy, Hamilton, Hardin, Henry, 

Howard, Humboldt, Iowa, Jackson, 

Jasper, Jefferson, Johnson, Jones, 

Keokuk, Lee, Linn, Louisa, Marion, 

Marshall, Mitchell, Muscatine, 

Pocahontas, Poweshiek, Story, 

Tama, Van Buren, Wapello, 

Washington, Winnebago, 

Winneshiek, Worth, Wright. 

The Interest Rates are: 

Percent 

Other (Including Non-Profit Organizations) With Credit Available 

Elsewhere ................................. 5.250 

Businesses and Non-Profit Organizations Without Credit Available Elsewhere ......................... 4.000 

The number assigned to this disaster for physical damage is ..... 10829 

(Catalog of Federal Domestic Assistance 

Number: 59008) 

Herbert L. Mitchell, 

Associate Administrator for Disaster 

Assistance. 

[FR Doc. E7–5428 Filed 3–23–07; 8:45 am] 

BILLING CODE 8025–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #10817] 

Oregon Disaster Number OR–00017 

AGENCY: Small Business Administration. 

ACTION: Amendment 1. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the State of Oregon (FEMA–1683–DR), 

dated 02/22/2007. 

Incident: Severe Winter Storm and 

Flooding. 

Incident Period: 12/14/2006 through 

12/15/2006. 

Effective Date: 03/16/2007. 

Physical Loan Application Deadline 

Date: 04/23/2007. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street, SW., Suite 6050, 

Washington, DC 20416. 

SUPPLEMENTARY INFORMATION: The notice 

of the President’s major disaster 

declaration for Private Non-Profit 

organizations in the State of Oregon, 

dated 02/22/2007, is hereby amended to 

include the following areas as adversely 

affected by the disaster. 

Primary Counties: 

Wasco. 

All other information in the original 

declaration remains unchanged. 

(Catalog of Federal Domestic Assistance 

Number: 59008) 

Herbert L. Mitchell, 

Associate Administrator for Disaster 

Assistance. 

[FR Doc. E7–5427 Filed 3–23–07; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF STATE 

[Public Notice 5729] 

Culturally Significant Objects Imported 

for Exhibition Determinations: 

‘‘Edward Hopper’’

Summary: Notice is hereby given of 

the following determinations: Pursuant 

to the authority vested in me by the Act 

of October 19, 1965 (79 Stat. 985; 22 

U.S.C. 2459), Executive Order 12047 of 

March 27, 1978, the Foreign Affairs 

Reform and Restructuring Act of 1998 

(112 Stat. 2681, et seq.; 22 U.S.C. 6501 

note, et seq.), Delegation of Authority 

No. 234 of October 1, 1999, Delegation 

of Authority No. 236 of October 19, 

1999, as amended, and Delegation of 

Authority No. 257 of April 15, 2003 [68 

FR 19875], I hereby determine that the 

objects to be included in the exhibition 

‘‘Edward Hopper’’, imported from 

abroad for temporary exhibition within 

the United States, are of cultural 

significance. The objects are imported 

pursuant to loan agreements with the 

foreign owners or custodians. I also 

determine that the exhibition or display 

of the exhibit objects at the Museum of 

Fine Arts, Boston, Massachusetts, 

beginning on or about May 6, 2007, 

until on or about August 19, 2007, the 

National Gallery of Art, Washington, 

DC, beginning on or about September 

16, 2007, until on or about January 21, 

2008, and the Art Institute of Chicago, 

Chicago, Illinois, beginning on or about 

February 16, 2008, until on or about 

May 11, 2008, and at possible additional 

venues yet to be determined, is in the 

national interest. Public Notice of these 

Determinations is ordered to be 

published in the Federal Register. 

For Further Information Contact: For 

further information, including a list of 

the exhibit objects, contact Julianne 

Simpson, Attorney-Adviser, Office of 

the Legal Adviser, U.S. Department of 

State (telephone: (202) 453–8050). The 

address is U.S. Department of State, 

SA–44, 301 4th Street, SW., Room 700, 

Washington, DC 20547–0001. 

Dated: March 20, 2007. 

C. Miller Crouch, 

Principal Deputy Assistant Secretary for 

Educational and Cultural Affairs Department 

of State. 

[FR Doc. E7–5485 Filed 3–23–07; 8:45 am] 

BILLING CODE 4710–05–P 


cprice-sewell on PROD1PC66 with NOTICES