Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices 66703

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

2On August 5, 1997, DTC filed its proposed rule

change with the Commission (File No. SR–DTC–97–

16). On August 6, 1997, NSCC filed with the

Commission and on August 28, 1997, amended its

proposed rule change (File No. SR–NSCC–97–08).

On September 25, 1997, Philadep filed its proposed

rule change with the Commission (File No. SR–

Philadep–97–04). On September 30, 1997, SCCP

filed its proposed rule change with the Commission

(File No. SR–Philadep–97–04).

PHLX submitted a rule filing on November 14,

1997 (File No. SR-PHLX–97–59) in connection with

its withdrawal from the clearance and settlement

and securities depository businesses. PHLX’s rule

filing is being addressed in a separate notice and

order.

3Securities Exchange Act Release Nos. 39222

(October 8, 1997), 62 FR 53847 (DTC); 39220

(October 8, 1997), 62 FR 53848 (NSCC); 39223

(October 8, 1997), 62 FR 53681 (SCCP); 39221

(October 8, 1997), 62 FR 53681 (Philadep).

4Letter from P. Howard Edelstein, President,

Electronic Settlements Group, Thomson Financial

Services, Inc., (November 4, 1997).

5Letter from Richard B. Nesson, Executive Vice

President and General Counsel, DTC (November 14,

1997).

names, social security numbers, home

addresses, dates of birth, dates of hire,

and information identifying us as the

employer. We may also disclose to the

FPLS names, social security numbers,

and quarterly earnings of each RRB

employee within one month of the end

of the quarterly reporting period.

Information submitted by the RRB to

the FPLS will be disclosed by the Office

of Child Support Enforcement to the

Social Security Administration for

verification to ensure that the social

security number provided is correct.

The datea disclosed by the RRB to the

FPLS will also be disclosed by the

Office of Child Support Enforcement to

the Secretary of the Treasury for use in

verifying claims for the advance

payment of the earned income tax credit

or to verify a claim of employment on

a tax return.

II. Compatibility of Proposed Routine

Use

We are proposing this routine use in

accordance with the Privacy Act (5

U.S.C. 552a(b)(3)). The Privacy Act

permits the disclosure of information

about individuals without their consent

for a routine use where the information

will be used for a purpose which is

compatible with the purpose for which

the information was originally collected.

The Office of Management and Budget

has indicated that a ‘‘compatible’’ use is

a use which is necessary and proper.

Since the proposed uses of the data are

required by Public Law 104–193, they

are clearly necessary and proper uses,

and therefore ‘‘compatible’’ uses which

meet the requirement of the Privacy Act.

III. Altered System Report

On December 11, 1997, the Railroad

Retirement Board filed an altered

system report for this system with the

chairman of the designated Senate and

House committees and with the Office

of Management and Budget. This was

done to comply with Section 3 of the

Privacy Act of 1974 and OMB Circular

No. A–130, Appendix I.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

RRB–19

SYSTEM NAME: PAYROLL RECORD SYSTEM—RRB

* * * * *

ROUTINE USES OF RECORDS MAINTAINED IN THE

SYSTEM, INCLUDING CATEGORIES OF USERS AND

THE PURPOSES OF SUCH USES:

* * * * *

Paragraph ‘‘j’’ is added to read as

follows:

j. The names, social security numbers,

home addresses, dates of birth, dates of

hire, quarterly earnings, employer

identifying information, and State of

hire of employees may be disclosed to

the Office of Child Support

Enforcement, Administration for

Children and Families, Department of

Health and Human Services for the

purpose of locating individuals to

establish paternity, establishing and

modifying orders of child support,

identifying sources of income, and for

other child support enforcement actions

as required by the Personal

Responsibility and Work Opportunity

Reconciliation Act (Welfare Reform Act,

Pub. L. 104–193).

[FR Doc. 97–33202 Filed 12–18–97; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39444; File Nos. SR–DTC–

97–16, SR–NSCC–97–08, SR–Philadep–97–

04, SR-SCCP–97–04]

Self-Regulatory Organizations; The

Depository Trust Company; National

Securities Clearing Corporation;

Philadelphia Depository Trust

Company; Stock Clearing Corporation

of Philadelphia; Order Granting Partial

Permanent Approval and Partial

Temporary Approval of Proposed Rule

Changes Relating to a Decision by the

Philadelphia Stock Exchange,

Incorporated to Withdraw From The

Securities Depository Business and to

Restructure and Limit its Clearance

and Settlement Business

December 11, 1997.

In August and September, 1997, The

Depository Trust Company (‘‘DTC’’),

National Securities Clearing Corporation

(‘‘NSCC’’), Philadelphia Depository

Trust Company (‘‘Philadep’’), and Stock

Clearing Corporation of Philadelphia

(‘‘SCCP’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

proposed rule changes pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’),1

concerning the decision by the

Philadelphia Stock Exchange,

Incorporated (‘‘PHLX’’) to withdraw

from the securities depository business

and to restructure its clearance and

settlement business.2 Notices of the

proposals were published in the Federal

Register on October 15 and 16, 1997.3

The Commission received one comment

letter, which pertained to DTC and

which expressed concern that PHLX’s

decision to withdraw from the clearance

and settlement and securities depository

businesses reduced competition in the

market.4 The Commission also received

DTC’s letter responding to the comment

letter.5 For the reasons discussed below,

the Commission is approving the

proposed rule changes.

I. Description

PHLX is withdrawing from the

securities depository business currently

offered through its wholly owned

subsidiary, Philadep, and is

restructuring and limiting its clearance

and settlement business currently

offered through its wholly owned

subsidiary, SCCP. DTC, NSCC, PHLX,

Philadep, and SCCP have entered into

an agreement dated as of June 18, 1997,

governing arrangements relating to

PHLX’s decision (‘‘Agreement’’).

Pursuant to the Agreement, as discussed

below, most of the current day-to-day

depository and clearance services of

Philadep and SCCP will now be

provided by DTC and NSCC.

A. Agreement

Under the Agreement, the parties are

working to assure an orderly transition

with respect to the cessation of

Philadep’s operations and the

restructuring of SCCP’s operations.

Philadep and DTC have agreed to assist

sole Philadep participants in becoming

DTC participants to the extent that they

meet DTC qualifications and desire to

become DTC participants. Philadep and

DTC also have agreed to cooperate in

the transfer of securities from the

custody of Philadep to the custody of

DTC.

After the closing date of the

Agreement, SCCP no longer will

maintain its continuous net settlement

(‘‘CNS’’) system for conducting
66704 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices

6Under the Agreement, SCCP may add other

PHLX members to this schedule subject to NSCC’s

approval. The Commission understands that at this

time SCCP will be offering margin services only to

PHLX members that are PHLX equity specialists.

7SCCP included the text of its revised rules as an

exhibit which is available for inspection and

copying at the Commission’s public reference room

and through SCCP.

8Under the rule change, the term ‘‘margin

member’’ is defined to include participants that are

PHLX specialists, alternate specialists, and other

PHLX floor members specifically approved by

NSCC to effect trading in a margin account.

9 12 CFR 220.

10Under the rule change, SCCP Rule 1 defines the

term ‘‘account equity’’ as the total net current

market value of security positions held in the

margin account plus or minus cash balances in such

account.

settlements between SCCP and its

participants. As a result, SCCP will

cease providing the cash settlement

services attendant to Philadep’s sameday funds settlement system and the

Philadep settlement process. However,

pursuant to the Agreement, SCCP may

continue to offer limited clearing and

settlement services to PHLX members.

SCCP intends to provide trade

confirmation and recording services for

PHLX members that carry out

transactions through regional interface

operations (‘‘RIO’’) accounts and exclearing accounts. Under the amended

versions of SCCP Rules 10 and 11, SCCP

will not provide clearing guarantees on

such transactions.

SCCP will continue to offer margin

services for certain participants in a

special account established by SCCP at

NSCC. Pursuant to the Agreement, SCCP

will establish an omnibus account at

NSCC and will abide by NSCC’s rules

and procedures as a participant of

NSCC. Under the Agreement, SCCP may

offer margin services only to: (i) PHLX

equity specialists for their specialists

and alternate specialists transactions, as

well as for their proprietary transactions

in securities for which they are not

appointed as specialists or alternate

specialists and (ii) PHLX members listed

on a schedule that are not PHLX equity

specialists for their proprietary

transactions.6

Under the Agreement, PHLX,

Philadep, and SCCP will not directly or

indirectly engage in or compete in the

business of providing securities

depository services or clearance and

settlement services for a period of five

years. This prohibition does not apply

to PHLX’s equity ownership interest in

The Options Clearing Corporation and

does not apply to SCCP’s providing of

margin services.

B. SCCP Rule Changes 7

A new definition of ‘‘margin member’’

is established in SCCP Rule 1 to reflect

those PHLX floor firms entitled to clear

through a SCCP margin account.8

Pursuant to the amended version of

SCCP Rule 9, SCCP may provide margin

accounts for margin members that clear

and settle their transactions through

SCCP’s omnibus clearance and

settlement account. SCCP will margin

such accounts based on its procedures

and on Regulation T of the Board of

Governors of the Federal Reserve

System.9

At any time, SCCP may demand a

margin member to provide additional

margin based upon its review of the

margin member’s security positions

held by SCCP. SCCP will retain its

margin thresholds as currently specified

in its procedures and may require

adequate assurances or additional

margin in addition to the minimum

margin thresholds in order to protect

SCCP in issues deemed by SCCP to

warrant additional protection. SCCP

may demand any such margin payments

in federal funds in accordance with its

procedures.

SCCP may issue margin calls to any

margin member whose margin

requirement exceeds the account equity

of the margin member’s margin

account.10 SCCP may waive any amount

that would trigger a margin call not

exceeding $500. A margin member that

fails to meet a margin call will be

subject to SCCP Rule 22 (formerly SCCP

Rule 23) which governs disciplinary

proceedings and penalties. SCCP may

cease to act for delinquent margin

members and will retain a lien on all

delinquent margin members’ accounts

and securities therein.

SCCP will segregate and maintain

records on each individual margin

account and will maintain the omnibus

account so as to reflect all positions in

SCCP’s margin accounts. SCCP also will

guarantee the settlement obligations of

the omnibus account to NSCC. Pursuant

to the Agreement, PHLX will guarantee

SCCP’s obligations to NSCC.

SCCP’s books and records for the

omnibus clearance and settlement

account will reflect all activity that

occurs in the account at NSCC and DTC.

At any time prior to midnight (Eastern

Time) on the next business day after

SCCP receives a margin member’s trade,

SCCP will be entitled to reverse such a

trade from such margin member’s

account. SCCP will settle the omnibus

clearance and settlement account with

NSCC each business day in accordance

with NSCC’s rules and procedures.

Accordingly, SCCP will be subject to

NSCC’s rules including, but not limited

to, the following: (i) Daily mark-tomarket requirements, (ii) allocations of

long and short securities positions, (iii)

dividend and reorganization settlement

activities, and (iv) pledging of collateral

and stock loans. Dividends,

reorganizations, adjustments, and buyins will be passed through to margin

members in accordance with SCCP’s

procedures. SCCP will continue to

provide margin members with purchase

and sales reports, bookkeeping reports,

dividend and reorganization reports,

and preliminary equity reports in

accordance with SCCP’s procedures.

SCCP will have one composite

settlement per day with NSCC through

the omnibus clearance and settlement

account. SCCP will maintain line of

credit (‘‘LOC’’) arrangements with one

or more commercial banks sufficient to

support anticipated funding needs of

the underlying margin accounts. In

order to cover all such margin debits,

SCCP anticipates obtaining an aggregate

of $5 million in committed and $5

million in uncommitted LOCs from each

of two separate lending institutions,

totaling $20 million.

SCCP is amending its Rule 14

(formerly SCCP Rule 15) to provide that

mark-to-market funds may not be used

to finance margin members’ account

activity. SCCP also is amending Rule 14

to provide that any mark-to-market

funds collected by SCCP will be

segregated and invested in accordance

with analogous procedures set forth in

SCCP Rule 4. Under the amended

version of SCCP Rule 13, SCCP will pass

through any buy-ins submitted by NSCC

to SCCP or by a SCCP participant to

NSCC in accordance with NSCC’s buyin rules and procedures.

To ensure that margin members have

an efficient way to obtain securities

depository services after the closure of

Philadep’s depository service, NSCC

will sponsor SCCP in opening a

depository account at DTC to benefit

margin members. If margin members

carry out trades in securities that are not

eligible for custodial services in DTC’s

book-entry system, SCCP will use

NSCC’s direct clearing service to settle

the transactions. SCCP will continue to

perform bookkeeping and reconciliation

services for the omnibus clearance and

settlement account and its related DTC

custody account pursuant to SCCP

procedures.

In accordance with NSCC’s

participants fund formulae, SCCP, as a

NSCC participant and as a sponsored

participant of DTC, will be required to

provide NSCC and DTC with

participants fund contributions. SCCP is

deleting its participants fund formulae

applicable to inactive accounts, full

service CNS accounts, and layoff

accounts. SCCP will establish a fixed
Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices 66705

11As previously stated, SCCP is establishing

separate sources of funding, including bank LOCs,

to serve the operation of its margin members’

margin accounts.

12Supra Notes 4 and 5.

13 15 U.S.C. 78q–1(b)(3)(F).

14 15 U.S.C. 78s(b).

15See Exchange Act Section 17A(b)(3)(I), 15

U.S.C. 78q–1(b)(I).

16 15 U.S.C. 78c(f). Bradford National Clearing

Corp. v. SEC, 590 F.2d 1085, 1105 (D.C. Cir. 1978).

17 Id. at 1106.

$35,000 contribution for each of the

following account categories: specialist

margin and non-specialist margin. No

changes will be made to the RIO

account formula. Accordingly, RIO

account participants will continue to be

subject to a contribution of $10,000 to

$75,000 depending upon monthly

trading activity. SCCP will continue to

use its current procedure under which

a participant engaging in more than one

account type activity will be subject

only to the formula that would generate

the highest participants fund

contribution.

SCCP may allocate any portion of its

participants fund to satisfy NSCC’s and

DTC’s participants fund requirements

with respect to the omnibus account.

Any excess SCCP participants fund cash

not used to fund SCCP’s NSCC and DTC

participants fund requirements will be

segregated and invested by SCCP in

accordance with SCCP Rule 4. If SCCP’s

participants fund formulae do not

provide for contributions that equal

those which would be required

pursuant to the NSCC and DTC

participants fund formulae, SCCP

reserves the right to collect from each

participant an additional pro rata charge

to meet any such deficit.

SCCP is amending SCCP Rule 4 to

specify that no participants fund

contributions may be used in financing

margin members’ margin account

activity.11 In addition SCCP is amending

Rule 4 to provide for the establishment

by SCCP and Philadep of a reserve fund

that will be used to provide a liquid

fund to draw on as necessary to meet

certain specified expenses. The reserve

fund will be funded with deposits of

$1,000,000 by August 11, 1998;

$1,000,000 by August 11, 1999; and

$1,000,000 by August 11, 2000. The

reserve fund will be held and invested

in accordance with the procedures set

forth in SCCP Rule 4 for the holding and

investment of the participants fund.

Amounts drawn from the reserve fund

must be replenished within sixty days

following the date of each such

withdrawal. SCCP Rule 4 also is being

amended to provide that no portion of

the reserve fund may be used in

financing margin members’ margin

account activity.

SCCP is amending its schedule of fees

to delete those fees associated with

services no longer to be offered. SCCP

will now charge RIO Accounts fees of

$0.05 per $1,000 of contract value.

II. Comment Letters

The Commission received two

comment letters in response to the

notice of DTC’s proposed rule change:

one was a comment letter from

Thomson Financial Services

(‘‘Thomson’’) pertaining to DTC and one

was a response from DTC to Thomson’s

letter.12 Thomson stated that it did not

object to DTC’s proposal to offer

depository services to former sole

Philadep participants; however,

Thomson also stated its belief that the

cessation of Philadep’s services might

adversely affect competition.

DTC stated in response that it is

strongly committed to competition. DTC

noted that the regional stock exchanges

have decided independently that

maintaining their own securities

depositories was no longer in their

members’ best interests. In addition,

DTC stated that when the regional stock

exchanges have decided to close their

securities depositories, DTC always has

responded promptly by expending

resources to ensure the safe transfer of

funds and securities.

III. Discussion

Section 17A(b)(3)(F) of the Act 13

requires that the rules of a clearing

agency be designed to promote prompt

and accurate clearance and settlement of

securities transactions and to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible. The Commission believes

that the proposed rule changes by DTC,

NSCC, Philadep, and SCCP are

consistent with the requirements of

Section 17A(b)(3)(F) because they

should facilitate prompt and accurate

clearance and settlement of securities

transactions by providing More efficient

and less expensive clearing and

depository services. Moreover, because

the proposals provide for the orderly

transfer of open positions and securities

from SCCP to NSCC and from Philadep

to DTC, the Commission believes the

proposals are consistent with the

obligations of DTC, NSCC, Philadep,

and SCCP to safeguard securities and

funds in their custody and control and

to provide for the prompt and accurate

clearance and settlement of securities

transactions.

Section 19(b) of the Act 14 provides

that the Commission shall approve

proposed exchange and clearing agency

rule changes if it finds that the

proposals are consistent with the

requirements of the Act and the rules

and regulations thereunder that govern

those organizations. Competition among

clearing agencies is a factor that the

Commission must consider in its

examination of any proposal.15

However, the Commission is not

required to achieve its regulatory

objectives in the least anticompetitive

manner and is at most required to

decide that any anticompetitive effects

of its actions are necessary or

appropriate to the achievement of its

objectives.16 Therefore, in assessing the

anticompetitive effect, the Commission

is required to balance the maintenance

of fair competition along with a number

of other equally important express

purposes of the Act such as the

protection of investors and the

safeguarding of securities and funds.17

Despite the dominant market position

of DTC and NSCC, the Commission

believes the current regulatory scheme

and the particular structure and nature

of the clearing and depository industries

provide ample means of avoiding the

potential negative effects of a monopoly.

Sections 17A and 19 of the Act and the

rules thereunder provide the

Commission appropriate and effective

regulatory authority over DTC and

NSCC. The Commission believes that

after the consummation of the proposed

arrangements, securities industry

members will continue to have access to

high quality, low cost depository and

clearing services provided under the

mandate of the Act. Accordingly, the

Commission believes that the proposed

transaction advances the objectives of

the national clearance and settlement

and system without an inappropriate or

unnecessary burden upon competition.

Thus, the light of the above, the

Commission finds that approval of the

proposals is warranted. However,

because a part of SCCP’s proposed rule

change concerns the restructuring of

SCCP’s operations to enable SCCP to

offer limited clearing and settlement

services to certain PHLX members, the

Commission finds that it is appropriate

to grant only temporary approval to the

portion of SCCP’s proposed rule change

that amends SCCP’s By-laws, Rules, or

Procedures. This will allow the

Commission and SCCP to see how well

SCCP’s restructured operations are

functioning under actual working

conditions and to determine whether

any adjustments are necessary. Thus,

the Commission is approving the

portion of SCCP’s proposal that amends
66706 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices

18 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Rel. No. 39322 (Nov.

13, 1997), 62 FR 62391.

4Telephone conversation with Alden S. Adkins,

General Counsel and Mary M. Dunbar, Assistant

General Counsel, NASDR, and Belinda Blaine,

Associate Director, Katherine A. England, Assistant

Director, and Mignon McLemore, Staff Attorney,

Division of Market Regulation, November 26, 1997.

5See 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).

6See supra note 3. The notice contains a

complete list of disclosable disciplinary

information.

7 If the request is written and there is no

disclosable history, a record indicating same is sent

to the inquirer.

8See supra note 3.

9 15 U.S.C. 78s(b)(2).

10See supra note 4.

11 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. The

ability to use electric media will most likely

enhance efficiency by decreasing the time between

when the request is made and when the response

is received. Additionally, the ready accessibility of

CRD information should positively affect

competition in the marketplace; disciplinary

histories will be more accessible to the public. 15

U.S.C. 78c(f).

its By-laws, Rules, or Procedures

through December 31, 1998.

IV. Conclusion

On the basis of the foregoing, the

Commission finds that the proposals are

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore Ordered, pursuant to

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

proposed rule changes of Philadep (File

No. SR–Philadep–97–04), of DTC (File

No. SR–DTC–97–16), and of NSCC (File

No. SR–NSCC–97–08) and the portion of

SCCP’s proposed rule change dealing

with its entering into the Agreement

(File No. SR–SCCP–97–04) be and

hereby are approved.

It is further Ordered, pursuant to

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

portion of SCCP’s proposed rule change

that amends its By-laws, Rule, or

Procedures (File No. SR–SCCP–97–04)

be and hereby is approved through

December 31, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–33194 Filed 12–18–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39442; File No. SR–NASD–

97–78]

Self-Regulatory Organizations; Order

Granting Partial Approval on an

Accelerated Basis of Proposed Rule

Change by National Association of

Securities Dealers, Inc. Relating to the

Amended Interpretation of IM–8310–2,

Release of Disciplinary Information

December 11, 1997.

I. Introduction

On October 17, 1997, National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) submitted

to the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’),

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

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a

proposed rule change which amends the

Interpretation on the Release of

Disciplinary Information, IM–8310–2 of

Rule 8310 of the Procedural Rules of the

NASD (‘‘Interpretation’’ or ‘‘IM–8310–

2’’). A notice of the proposed rule

change was published in the Federal

Register on November 21, 1997.3 The

Commission, to date, has received no

comment letters on the proposed rule

change. For the reasons discussed

below, the Commission is granting

partial accelerated approval of the

proposed rule change.

In its notice, filed on October 17,

1997, the NASD Regulation, Inc.

(‘‘NASDR’’) proposed to amend IM–

8310–2 to include the phrase

‘‘electronic inquiry’’ in the rule

language so that it could respond to

electronic inquiries, as well as written

or telephonic inquiries. In the notice,

the NASDR also proposed to amend the

rule language to include the additional

information required to be reported on

the amended Forms U–4, U–5, and BD.

The NASDR has requested that the

Commission approve, on an accelerated

basis, only that portion of the amended

rule language that allows it to respond

to electronic inquiries.4 Hence, the

Commission is partially approving, on

an accelerated basis, that portion of the

NASDR’s request which will give the

NASD the option of responding to the

electronic inquiries of persons or

entities requesting employment and

disciplinary history of its members and

their associated persons.

II. Description of Proposal

Under the NASD’s Public Disclosure

Program (‘‘PDP’’),5 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 its members and

their associated persons. When an

inquiry is made, if the broker-dealer or

associated person has a disciplinary

history, the NASD responds by sending

the inquirer a copy of the disclosable

information (e.g., information regarding

past and present employment history

with Association members).6 If there is

no history, the NASD responds by

informing the caller of this and

following up with a written record of

same, if so requested.7

In past months, the NASD has

undertaken a reassessment of the CRD to

take advantage of developing technology

and to improve its performance meeting

the NASD’s changing business needs.

As a result of this reassessment, the

NASD determined that the Internet

should be a component of its PDP. In an

effort to expand its PDP and make it

more accessible and convenient for

investors, the NASD’s proposal amends

the Interpretation to enable the NASD to

receive electronic inquiries as well as

written and telephonic inquiries.8

III. Discussion

NASDR has requested that the

Commission find good cause pursuant

to Section 19(b)(2) of the Act,9 for

approving, prior to the 30 day after

publication in the Federal Register, that

part of the proposed rule change that

permits the NASD to respond to

electronic inquiries.10 The Commission

has reviewed the NASDR’s proposed

rule change and believes, for reasons set

forth below, that the proposal is

consistent with the requirements of the

Act 11 and the rules and regulations

thereunder applicable to the NASD.

Specifically, the Commission believes

the proposal is consistent with Sections

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

15A(b)(6) provides in relevant part that

the rules of the association be designed

to foster cooperation and coordination

with persons engaged in regulating and

processing information with respect to

securities and not to permit unfair

discrimination among customers,

issuers, brokers or dealers. Section

15A(i) of the Act requires the

Association to promptly respond in

writing to inquiries regarding

disciplinary actions involving its

members or associated persons.

The Commission finds good cause,

pursuant to Section 19(b)(2) of the Act,

for approving the proposed rule change

prior to the 30th day after publication in

the Federal Register. By amending IM–