Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices 62391

53 15 U.S.C. 78s(b)(2).

54 15 U.S.C. 78s(b)(2).

55 17 CFR 200.300–3(a)(12).

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

2 17 CFR 240.19b–4.

3On November 6, 1997, the NASD Regulation,

Inc. filed an amendment, which among other

things, clarifies the reference to ‘‘associated person’’

and explains the absence of the term ‘‘issuer’’ in the

definition of ‘‘investment-related.’’ See letter from

Alden S. Adkins, General Counsel, NASD

Regulations, Inc. to Katherine A. England, Assistant

Director, Division of Market Regulation, SEC, dated

November 6, 1997 (‘‘Amendment No. 1’’). On

November 12, 1997, the NASD Regulation, Inc.

amended its proposal to clarify the definition of

‘‘appropriate signatory’’ and to clarify the

implementation dates of the interim Forms and the

disclosure of additional information. See letter from

Alden S. Adkins, General Counsel, NASD

Regulation, Inc., to Katherine A. England, Assistant

Director, Division of Market Regulation, SEC, dated

November 12, 1997 (‘‘Amendment No. 2’’).

4The Association submitted a similar proposal on

November 25, 1996. See Securities Exchange Act

Release No. 37994 (November 27, 1996) 61 FR

64549 (December 5, 1996) (SR–NASD–96–38). After

several negotiations among the Commission, the

NASD, and the North American Securities

Administrators Association, Inc. (‘‘NASAA’’), SR–

NASD–96–38 has been withdrawn and replaced in

its entirety by the current filing. See letter from Joan

C. Conley, Corporate Secretary, NASD Regulation,

Inc., to Katherine A. England, Assistant Director,

Division of Market Regulation, SEC, dated October

17, 1997.

5Copies of Forms U–4 and U–5, containing the

interim pages, were submitted as Attachment A to

the NASD’s rule proposal. A complete set of these

revised forms is available for inspection and

copying in the Commission’s Public Reference

Room and is also available from the NASD.

6Upon approval of this proposal, the NASD plans

to begin responding to electronic inquiries via the

Internet on or about January 1, 1998. See

Amendment No. 2, p. 1.

well as other regulatory activities.

Finally, the acceleration of the

effectiveness of Amendment No. 2 will

enable the Commission to approve its

changes at the same time as the other

major modifications to the NASD

corporate governance procedures

proposed in the Notice. Therefore, the

Commission believes that granting

accelerated approval to Amendment No.

2 is appropriate and consistent with

Section 19(b)(2) of the Act.53

VI. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2 to the proposed rule change. Persons

making written submissions should file

six copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, N.W., Washington, D.C.

20549. Copies of the submission, all

subsequent amendments, all written

statements with respect to Amendment

No. 2 that are filed with the

Commission, and all written

communications relating to Amendment

No. 2 between the Commission and any

persons, 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 will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–97–71 and should be

submitted by December 12, 1997.

VII. Conclusion

For all of the aforementioned reasons,

the Commission finds that the proposed

rule changes are consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

a national securities association.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,54 that (a) the

proposed rule change (SR–NASD–97–

71) is approved, including approval of

Amendment No. 2 on an accelerated

basis (with the effective date of the

nomination and election procedures to

be immediate and the effective date of

the remaining provisions to occur at the

time of the January 1998 meeting of the

NASD Board), and (b) temporary

approval of the proposed rule changes

(SR–NASD–96–20 and SR–NASD–96–

29), to the extent not superseded by the

immediately effective amendments to

SR–NASD–97–71, is extended until the

January 1998 meeting of the NASD

Board.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.55

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–30622 Filed 11–20–97; 8:45 am]

BILLING CODE 8010–01–U

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39322; File No. SR–NASD–

97–78]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc., Relating to the Amended

Interpretation of IM–8310–2, Release of

Disciplinary Information, and the

Implementation of Interim Pages in

Forms U–4 and U–5

November 13, 1997.

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

17, 1997,3 the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) 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 Regulation, Inc.

(‘‘NASDR’’).4 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

NASDR is proposing to amend the

Interpretation on the Release of

Disciplinary Information, IM–8310–2 of

Rule 8310 of the Procedural Rules of the

NASD, to include additional

information required to be reported

pursuant to the amended Forms U–4,

U–5, and BD. Interim pages for Forms

U–4 and U–5 also have been filed to

facilitate the immediate release of this

additional information.5 Below is the

text of the proposed rule change.

Proposed new language is an italics.

IM–8310–2. Release of Disciplinary

Information

(a) The Association shall, in response

to a written inquiry, electronic inquiry,6

or telephonic inquiry via a toll-free

telephone listing, release certain

information contained in its files

regarding the employment and

disciplinary history of members and

their associated persons, including

information regarding past and present

employment history with Association

members; all final disciplinary actions

taken by federal, state, or foreign

securities agencies or self-regulatory

organizations that relate to securities or

commodities transactions; all pending

disciplinary actions that have been

taken by federal or state securities

agencies or self-regulatory organizations

that relate to securities and commodities

transactions and are required to be

reported on Form BD for Form U–4 and

all foreign government or self-regulatory

organization disciplinary actions that

relate to securities or commodities

transactions and are required to be

reported on Form BD or Form U–4; and

all criminal indictments, informations

or convictions that are required to be

reported on Form BD or Form U–4. The

Association will also release

information required to be reported on

Form BD or Form U–4 concerning civil

judgments and arbitration decisions in

securities and commodities disputes

involving public customers, pending

and settled customer complaints,

arbitrations and civil litigation, current

investigations involving criminal or
62392 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices

7The NASD proposes that the disclosure of this

additional information will become effective on

February 17, 1998. Information released from

January 1 to February 17, 1998, would include only

that information that currently is required to be

reported on Forms U–4 and U–5. See Amendment

No. 2, pp. 1–2.

8See Securities Exchange Act Rel. No 30629

(April 23, 1992) 57 FR 18535 (April 30, 1992); and

Securities Exchange Act Rel. No. 32568 (July 1,

1993) 58 FR 36723 (July 8, 1993).

9See Securities Exchange Act Rel. No. 37407

(July 5, 1996) 61 FR 36595 (July 11, 1996); and

Securities Exchange Act Rel. No. 37431 (July 12,

1996) 61 FR 37357 (July 18, 1996). See also

Securities Exchange Act Rel. No. 37632 (September

4, 1996) 61 FR 47412 (September 9, 1996).

10See supra note 5. 11See supra note 9.

regulatory matters, terminations of

employment after allegations involving

violations of investment related statutes

or rules, theft or wrongful taking of

property, bankruptcies less than ten

years old, outstanding judgments or

liens, any bonding company denial, pay

out or revocation, and any suspension

or revocation to act as an attorney,

accountant or federal contractor.7

* * * * *

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

NASDR 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. The 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

Under the NASD’s Public Disclosure

Program,8 the NASD, in response to a

written inquiry or telephonic inquiry

via a toll-free telephone listing, releases

certain information contained in the

Central Registration Depository (‘‘CRD’’)

regarding the employment and

disciplinary history of members and

their associated persons, including

information regarding past and present

employment history with Association

members; all final disciplinary actions

taken by federal, state, or foreign

securities agencies or self-regulatory

organizations that relate to securities or

commodities transactions; all pending

disciplinary actions that have been

taken by federal or state securities

agencies or self-regulatory organizations

that relate to securities and commodities

transactions and are required to be

reported on Form BD or Form U–4; all

foreign government or self-regulatory

organization disciplinary actions that

relate to securities or commodities

transactions and are required to be

reported on Form BD or Form U–4; and

all criminal indictments, informations

or convictions that are required to be

reported on Form BD or Form U–4. The

Association also releases information

concerning civil judgments and

arbitration decisions in securities and

commodities disputes involving public

customers.

In 1992, the NASD began developing

a replacement for the CRD system. In

conjunction with that effort, the NASD

worked with the NASAA, the

Commission, and the New York Stock

Exchange to amend Forms U–4, U–5,

and BD to accommodate electronic

filing of information with the new CRD

when it became operational. The

Commission approved the amended

forms in July 1996.9

On November 25, 1996, the NASD

filed a proposed rule change designed to

permit the NASD to release additional

information regarding the disciplinary

history of its members and persons

associated with a member as part of the

Public Disclosure Program.10 The

proposed rule change would have

allowed the NASD to release all

information on any question on page 3

(Question 22) of the amended Form U–

4 and Question 11 of the amended Form

BD, as approved by the Commission in

July 1996. At the time of this filing, the

NASD anticipated that the new CRD

system would become operational in the

Spring of 1997. The additional

information that the NASD proposes to

disclose includes:

1. All pending arbitrations and civil

proceedings that relate to securities or

commodities transactions;

2. Pending written customer

complaints alleging sales practice

violations and compensatory damages of

$5,000 or more;

3. Settlements of $10,000 or more of

arbitrations, civil suits, and customer

complaints involving securities or

commodities transactions;

4. Current investigations involving

criminal or regulatory matters;

5. Terminations of employment after

allegations involving violations of

investment-related statutes or rules,

fraud, theft, or failure to supervise

investment-related activities;

6. Bankruptcies less than 10 years old

and outstanding liens or judgments;

7. Bonding company denials, pay

outs, or revocations; and

8. Any suspension or revocation to act

as an attorney, accountant, or federal

contractor.

In January 1997, NASD Regulation

senior management determined that the

CRD redesign should be reassessed in

light of changing business needs and

rapidly advancing technology. The CRD

reassessment reviewed each of the

components of the CRD redesign,

developed a revised Internet-based

technology architecture and strategy for

going forward with CRD modernization,

and mapped that architecture into a

series of incremental projects that will

provide an overall modernization of

CRD before the turn of the century.

As a result of the CRD reassessment

and revised technology, the NASD is

withdrawing the previously proposed

rule change (SR–NASD–96–38) to the

Public Disclosure Program because it

was premised on the implementation of

the redesigned CRD and the use of the

amended Form U–4, Form U–5, and

Form BD.

This filing, which replaces SR–

NASD–96–38, proposes the same

substantive disclosure, However, to

accomplish the release of the additional

information, the NASD has reformatted

the questions set forth on the page 3 of

amended Form U–4; questions 13

through 16 on amended Form U–5; and

the Disclosure Reporting Pages for both

Forms in a manner that is compatible

with its current CRD technology

architecture. The reformatted, interim

forms contain no substantive changes to

any of the questions on those pages.

The Association has clarified the

definitions of ‘‘investigation’’ and ‘‘sales

practice violation’’ for purposes of the

Forms. For purposes of Forms U–4 and

U–5 reporting, the instructions clarify

that an ‘‘investigation’’ includes an

NASD investigation after a ‘‘Wells’’

notice has been given or after a person

associated with a member, as defined in

the NASD By-Laws, has been advised by

the staff that it intends to recommend

formal disciplinary action. The

instructions further clarify that a ‘‘sales

practice violation’’ includes any

conduct directed at or involving a

customer that would constitute a

violation of rules for which a person

could be disciplined by any selfregulatory organization.

The Association also proposes a

technical correction to the interim Form

U–5. On the amended Form U–4,11 the

Association defined the term

‘‘investment-related’’ as pertaining to

‘‘securities, commodities, banking,

insurance, or real estate investment

company, investment adviser, futures
Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices 62393

12See supra note 6.

13See supra notes 7 and 8.

14Section 15A(b)(6) requires that the Association

amend its rules to prevent fraudulent and

manipulative acts and practices, to remove

impediments to and perfect the mechanism of a free

and open market, and in general, to protect

investors and the public interest.

15Section 15A(i) requires the Association to: (1)

Establish and maintain a toll-free telephone listing

to receive inquiries regarding disciplinary actions

involving its members and their associated persons,

and (2) promptly respond to such inquiries in

writing. 16 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

sponsor, bank, or savings association.’’

The Association intended that the same

definition apply for the Form U–5, but

the word ‘‘issuer’’ was inadvertently

omitted. Thus, on the interim Form U–

5, this omission is corrected so that both

the interim Form U–4 and Form U–5 set

forth the same definition. Similarly, the

definition of the term ‘‘appropriate

signatory’’ on the interim Form U–5 is

corrected to refer to ‘‘issuer’’ rather than

‘‘issuer of securities’’ because the former

term was intended to be used

consistently on the amended Forms U–

4 and U–5. Thus, the interim Forms U–

4 and U–5 have been corrected to reflect

the intended reference and its consistent

application.

The instructions to and reformatted

pages of the proposed interim Forms U–

4 and U–5 were submitted with the

proposal as Attachment A.12 The NASD

proposes to make the interim Forms and

the disclosure of the additional

information set forth in this rule filing

effective on February 17, 1998. This

effective date will permit members and

the NASD to complete annual

registration renewals and permit the

NASD to train members on the use of

the interim Forms before the interim

Forms are implemented. The NASD

proposes to begin responding to

electronic inquiries for Public

Disclosure Program information via the

Internet after this rule filing is

approved, on or about January 1, 1998.

The information that would be released

from January 1 to February 17, 1998,

would include only that information

that currently is required to be reported

on the Forms U–4 and U–5 and is

currently released under IM–8310–2.13

2. Statutory Basis

The NASD believes the proposed rule

change is consistent with Sections

15A(b)(6) 14 and 15A(i) 15 of the Act. The

NASD believes the proposed rule

change will further the goals of these

sections of the Act inasmuch as the

increased disclosure will enhance the

access of members of the public to

information that will help them to

determine whether to conduct or

continue to conduct business with an

NASD member or any of the member’s

associated persons.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe 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 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 at

the principal office of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by December 12, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–30623 Filed 11–20–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39328; File No. SR–PCX–

97–44]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Incorporated

Relating to Applicant Specialists on

the Exchange

November 14, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1, notice is hereby given that on

November 10, 1997, the Pacific

Exchange, Incorporated (‘‘PCX’’ or

‘‘Exchange’’) filed with the Securities

Exchange Commission (‘‘Commission’’

or ‘‘SEC’’) the proposed rule change as

described in Items I, II, and III below,

which Items have been prepared by the

PCX. The Commission is publishing this

notice to solicit comment on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PCX is proposing to make

technical changes to its rules on the

procedures relating the approval process

for applicant specialists on the

Exchange. The text of the proposed rule

changes is available at the Office of the

Secretary, PCX, and in the Public

Reference Room at the Commission.

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

PCX 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. The PCX has prepared

summaries, set forth in section A, B, and

C below, of the most significant aspects

of such statements.