[Federal Register Volume 65, Number 190 (Friday, September 29, 2000)]
[Notices]
[Pages 58585-58589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25022]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43330; File No. SR-NASD-00-39]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 by the National Association of 
Securities Dealers, Inc. Relating to an Amendment to Schedule A of the 
NASD By-Laws for the Timely Filing of Reports, and Amendments to IM-
9216, Minor Rule Violation Plan

September 22, 2000.
    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 June 20, 2000, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), through its wholly owned subsidiary, 
NASD Regulation, Inc. (``NASD Regulation''), filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by NASD Regulation. NASD Regulation amended the proposal on September 
5, 2000.\3\ On September 21, 2000, NASD Regulation again amended the 
proposal.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See September 1, 2000 letter from Alden S. Adkins, Senior 
Vice President and General Counsel, NASD Regulation to Joseph P. 
Morra, Special Counsel, Division of Market Regulation, SEC 
(``Amendment No. 1''). In Amendment No. 1, NASD Regulation made 
technical, non-substantive changes to the original proposal. In 
addition, NASD Regulation provided clarifying language to assist in 
describing the requirements under Rule 1120.
    \4\ See September 19, 2000 letter from Gregory J. Dean, Jr., 
Assistant General Counsel, NASD Regulation to Joseph P. Morra, 
Special Counsel, Division of Market Regulation, SEC (``Amendment No. 
2''). In Amendment No. 2, NASD Regulation corrected the reference to 
SEC Rule 19d-1(c)(2) in the title to IM-9216.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation proposes to amend Schedule A of the NASD By-Laws 
for the Timely Filing of Reports, and to amend IM-9216, Minor Rule 
Violation Plan of the Association, to permit the Association to set 
late fees to encourage the timely filing of reports and to expand the 
Association's Minor Rule Violation Plan pursuant to SEC Rule 19d-1.\5\ 
Below is the text of the proposed rule change. Proposed new language is 
in italics.
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    \5\ 17 CFR 240.19d-1.
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* * * * *

Schedule A to the NASD By-Laws

    Assessments and fees pursuant to the provisions of Article VI of 
the By-Laws of the NASD shall be determined on the following basis:
* * * * *

Section 2--Fees

    (a) through (k) No Change.
    (l)(1) Unless a specific temporary extension of time has been 
granted, there shall be imposed upon each member required to file 
reports, as designated by this paragraph, a fee of $100 for each day 
that such report is not timely filed. The fee will be assessed for a 
period not to exceed 10 business days. Requests for such extension of 
time must be submitted to the Association at least three business days 
prior to the due date; and
    (2) Any report filed pursuant to this Rule containing material 
inaccuracies or filed incompletely shall be deemed not to have been 
filed until a corrected copy of the report has been resubmitted.
    (3) List of Designated Reports:
    (A) SEC Rule 17a-5--Monthly and quarterly FOCUS reports and annual 
audit reports.
* * * * *

IM-9216. Violations Appropriate for Disposition Under Plan Pursuant to 
SEC Rule 19d-1(c)(2)

    <bullet> Rule 2210(b) and (c) and Rule 2220(b) and (c)--Failure 
to have advertisement and sales literature approved by a principal 
prior to use; failure to maintain separate files of advertisements 
and sales literature containing required information; and failure to 
file advertisements with the Association within the required time 
limits.
    <bullet> Rule 3360--Failure to timely file reports of short 
positions on Form NS-1.
    <bullet> Rule 3110--Failure to keep and preserve books, 
accounts, records, memoranda, and correspondence in conformance with 
applicable laws, rules, regulations and statements of policy 
promulgated thereunder, and with the Rules of the Association.
    <bullet> Rule 8211, Rule 8212, and Rule 8213--Failure to submit 
trading data as requested.
    <bullet> Article IV of the NASD By-Laws--Failure to timely 
submit amendments to Form BD.
    <bullet> Article V of the NASD By-Laws--Failure to timely submit 
amendments to Form U-4.
    <bullet> Rule 1120--Failure to comply with continuing education 
requirements.
    <bullet> Rule 3010(b)--Failure to timely file reports pursuant 
to the Taping Rule.
    <bullet> Rule 3070--Failure to timely file reports.
    <bullet> Rule 4619(d)--Failure to timely file notifications 
pursuant to SEC Regulation M.
    <bullet> Rules 4632, 4642, 4652, 6240, 6420, 6550, 6620, And 
6720--Transaction reporting in equity, convertible debt, and high 
yield securities.
    <bullet> Rules 6130 and 6170--Transaction reporting to the 
Automated Confirmation Transaction Service (``ACT'').
    <bullet> Rule 6953--Synchronization of member business clocks.
    <bullet> Rules 6954 and 6955--Failure to submit data in 
accordance with the Order Audit Trail System (``OATS'').
    <bullet> Rule 11870--Failure to abide by Customer Account 
Transfer Contracts.
    <bullet> SEC Exchange Act Rule 11Ac1-4--Failure to properly 
display limit orders.
    <bullet> SEC Exchange Act Rule 11Ac1-1(c)(5)--Failure to 
properly update published quotations in certain Electronic 
Communication Networks (``ECN's'').
    <bullet> SEC Exchange Act Rule 17a-5--Failure to timely file 
FOCUS reports.
    <bullet> SEC Exchange Act Rule 17a-11--Failure to timely file 
net capital reports.
    <bullet> MSRB Rule A-14--Failure to pay annual fee.
    <bullet> MSRB Rule G-12--Failure to abide by uniform practice 
rules.
    <bullet> MSRB Rule G-14--Failure to submit reports.
    <bullet> MSRB Rule G-36--Failure to timely submit reports.
    <bullet> MSRB Rule G-37--Failure to timely submit reports for 
political contributions.
    <bullet> MSRB Rule G-38--Failure to timely submit reports 
detailing consultant activities.
* * * * *

[[Page 58586]]

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 Regulation 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 Regulation 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
    In 1999, the Association considered and implemented a number of 
significant sanction-related policies with respect to formal 
disciplinary actions.\6\ These policies were implemented in response to 
a request from members for alternative mechanisms to achieve regulatory 
compliance in an effective and efficient manner. Citing the time and 
cost of defending disciplinary actions and the consequences of 
reporting such violations, member firms have asked whether certain 
situations, such as technical or minor violations, might be better 
addressed through alternative approaches. In response, the NASD 
proposes to amend Schedule A of the NASD By-Laws to establish late fees 
for designated filings and reports, and to amend the list of violations 
for the Association's Minor Rule Violation Plan set forth in IM-9216. 
These changes will allow the Association greater flexibility in 
obtaining compliance with violations considered to be technical in 
nature, without having to file complaints and hold hearings under the 
disciplinary procedures.
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    \6\ See Notice to Members 99-50 (July 1999) (NASD Will No Longer 
Impose Censures for Some Violations); Notice of Members 99-86 
(October 1999) (NASD Regulation Adopts Policy Regarding Imposition 
And Collection of Monetary Sanctions).
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    Late Fees. Proposed amendments to Schedule A of the NASD By-Laws 
would adopt a late fee for certain filings and reports designated by 
the Association. The late fees would be assessed on a per-day basis for 
a period of no more than 10 business days. The fees would be 
administrative rather than disciplinary in nature, and will help assist 
Association staff in achieving members' compliance. Where the late 
filing is serious, the institution of a suspension or disciplinary 
proceedings will be more appropriate.
    Because the late fees would be assessed on a per-day basis, the 
total dollar amount of a late filing fee would increase for each day 
the filing is filed past the deadline. In those instances where the 
member knows it is unable to meet a filing deadline (e.g., technical 
difficulties, third party contractor delays, auditor delays, and other 
types of delays outside the control of the member), the member may 
apply before the deadline for an extension. In addition, inaccurate or 
incomplete filings will not be deemed filed until they are correctly 
submitted. Once the Association determines a late fee is due, the 
Association will send notice of the late fee to the member after the 
document has been correctly filed, or after 10 business days have past. 
When the notice has been sent, the late fee will be automatically 
deducted from the member's Central Registration Depository Account.
    The Association belives that the implementation of late fees would 
be an additional incentive for members to comply with filing 
requirements. Because the Association would not commence disciplinary 
proceedings except in serious cases, members benefit by not having to 
expend the time and expense of defending those actions. The 
administrative cost to the Association to compel compliance by those 
who miss the filing deadlines will be borne by the members who file 
reports late.
    Minor Rule Violation Plan. In 1984, the SEC adopted amendments to 
Rule 19d-1(c) under the Act \7\ to allow self-regulatory organizations 
to adopt, with SEC approval, Minor Rule Violation Plans.\8\ In 1993, 
pursuant to Exchange Act Rule 19d-1(c)(2),\9\ the NASD established a 
Minor Rule Violation Plan (``Plan'').\10\ NASD Rule 9216(b) provides 
that the Association may impose a fine and/or a censure, not to exceed 
$2,500, on any member or associated person for a minor violation of 
certain specified Association rules contained in IM-9216.\11\ The 
purpose of NASD Rule 9216(b) is to provide for a meaningful sanction 
for a rule violation when the initiation of disciplinary proceeding 
through the formal complaint process would be more costly and time-
consuming than would be warranted, given the minor or technical nature 
of the violation. In addition, the Rule provides an efficient, 
alternative means by which to deter violations of rules while 
maintaining procedural rights for disciplined persons. Inclusion of a 
rule in the Association's Plan should not be interpreted to mean it is 
an unimportant rule; rather, the technical violation of the rule may be 
appropriate for disposition under the Plan. The Association retains 
this discretion to bring full disciplinary proceedings for any 
violation included in the Plan, including situations where the 
violation is egregious or where there is a history or pattern of repeat 
violations.
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    \7\ 17 CFR 240.19d-1(c)(2).
    \8\ See Securities and Exchange Act Release No. 21013 (June 1, 
1984), 49 FR 23833 (June 8, 1984).
    \9\ 17 CFR 240.19d-1(c)(2).
    \10\ See Securities Exchange Act Release No. 32076 (March 31, 
1993), 58 FR 18291 (April 8, 1993) (SR-NASD-93-06). See also Notice 
to Members 93-42 (July 1993) (SEC Approves NASD's Minor Rule 
Violation Plan).
    \11\ Recently, the NASD has decided not to impose censures for 
certain violations when monetary sanctions of $5,000 or less are 
imposed. See Notice to Members 99-59 (July 1999) (NASD Will No 
Longer Impose Censures for Some Violations).
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    In SR-NASD-93-06, which initially set forth the provisions and 
procedures of NASD Rule 9216(b), the Association indicated that it 
would amend the list of rules from time to time, as it considered 
appropriate, to phase in the implementation of NASD Rule 9216(b). At 
this time the Association proposes to amend IM-9216 to expand the list 
of minor rule violations in the Plan that would be appropriate for 
disposition under NASD Rule 9216(b). The Association proposes to assess 
fines not to exceed $2,500 for violations by individuals, and not to 
exceed $5,000 for violations by member firms. The number and 
seriousness of the violations, and the previous disciplinary history of 
the respondent will be reviewed to determine the amount of the fine for 
a minor rule violation. Once the Association has brought a minor rule 
violation against an individual or member firm, the Association may, at 
its discretion, issue progressively higher fines for all subsequent 
minor rule violations within the next 24-month period.
    Description of Proposed Additions to the Minor Rule Violation Plan. 
A discussion of the NASD's rationale for including each of the 
violations, and the limitations on the eligibility of such violations 
for disposition under the Plan, follows:
    Article IV of NASD By-Laws-Failure to timely submit amendments to 
Form BD. Members are required pursuant to Article IV, Section (c) of 
the NASD By-Laws to ensure that their membership applications are kept 
current at all times through amendments to Form BD. All such amendments 
must be filed with the NASD no later than 30 days after learning of 
facts or circumstances giving rise to an amendment. The Association 
believes that the failure to amend Form BD in a timely manner by a 
member

[[Page 58587]]

firm may be appropriate for disposition as a minor rule violation.
    Article V of NASD By-Laws-Failure to timely submit amendments to 
Form U-4. All registered representatives and associated persons are 
required pursuant to Article V, Section 2(c) of the NASD By-Laws to 
ensure that their applications are kept current at all times through 
amendments to Form U-4. All such amendments must be filed with the NASD 
no later than 30 days after learning of facts or circumstances giving 
rise to an amendment. In addition, registered representatives and 
associated persons are required to file amendments to Form U-4 if they 
become statutorily disqualified as defined in Section 3(a)(39) \12\ and 
Section 15 (b)(4) \13\ of the Act. All amendments pursuant to statutory 
disqualification must be filed no later than ten days after such 
disqualification occurs. The Association believes that the failure to 
amend Form U-4 in a timely manner by a registered representative or an 
associated person may be appropriate for disposition as a minor rule 
violation.
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    \12\ 15 U.S.C. 78c(a)(39).
    \13\ 15 U.S.C. 78o(b)(4).
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    Rule 1120--Failure to maintain continuing education requirements, 
regulatory and firm elements. Regulatory Element. NASD Rule 1120(a) 
requires members to oversee the continuing education requirements of 
the ``registered persons'' \14\ and to ensure that such persons do not 
continue acting in a registered capacity if they do not complete the 
requirements<ls-thn-eq> The Regulatory Element of the continuing 
education requirements requires that each registered person, who is not 
considered exempt from the rule, shall complete the Regulatory Element, 
as established by the member, on three occasions after the occurrence 
of their second registration anniversary and every three years 
thereafter. On each occasion, the training must be completed within 120 
days after the registered person's anniversary date. A registered 
person will be in violation of Rule 1120(a) if the person has not 
completed the Regulatory Element within the prescribed time periods, 
and will be deemed to be inactive until the Regulatory has been 
fulfilled.
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    \14\ ``Registered person'' means any person registered with the 
Association as a representative, principal or assistant 
representative pursuant to Rules 1020, 1030, 1040, and the Rule 1110 
Series.
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    The member firm will be considered to be in violation of the 
Regulatory Element if a registered person of the member firm does not 
complete the Regulatory Element requirements, and the member firm 
permits a registered person to continue to perform duties, despite the 
fact that the registered person has not completed the Regulatory 
Element requirements. Firm Element. NASD Rule 1120(b) requires members 
to establish, maintain, evaluate and update continuing education 
programs for members and their ``covered registered persons.'' \15\ 
Specifically, the Firm Element of the continuing education requirement 
requires that each member firm develop continuing and current education 
programs for covered persons to enhance their securities knowledge, 
skill, and professionalism. The programs must be held annually, and 
must take into consideration each member's size, organizational 
structure, and scope of business activities, as well as regulatory 
developments and the performance of covered persons in the Regulatory 
Element. At a minimum, the programs must include: general investment 
features and associated risk factors; suitability and sales practice 
considerations; and applicable regulatory requirements. A covered 
registered person would be in violation of the Firm Element if the 
person fails to participate in the firm's educational programs.
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    \15\ ``Covered registered person'' means any person registered 
with a member who has direct contact with customers in the conduct 
of the member's securities sales, trading and investment banking 
activities, and to the immediate supervisors of such persons.
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    A member firm would violate the Firm Element of Rule 1120 if the 
firm fails to take all appropriate and reasonable steps to ensure that 
its covered registered persons participate in a continuing education 
program of the member; the firm fails to adequately ensure that covered 
registered persons participate in educational programs; the firm fails 
to evaluate and prioritize its training needs annually, an to update 
its written training plan when necessary; and the firm fails to 
maintain appropriate record for a written training plan.
    Rule 3010(b)--Failure to timely file reports pursuant to the Taping 
Rule. NASD Rule 3010(b)(2)(vii) requires members subject to the taping 
requirements of the Rule to file quarterly reports that detail the 
member's supervision of the telemarketing activities of its registered 
persons. Members who fail to file reports in a timely manner may be 
subject to a minor rule violation.
    Rule 3070--Failure to timely file reports. NASD Rule 3070 requires 
member firms to file a report with the Association when any of 10 
specified events occur. These events may vary significantly, ranging 
from situations where a court, government agency, or self-regulatory 
organization has determined there has been a violation of the 
securities laws, to circumstances where a firm has received a written 
customer complaint alleging theft, misappropriation of funds or 
securities, or forgery. Member firms are required to report such events 
within 10 business days after the member knows, or should have known, 
of the existence of the event. In addition, member firms are required 
to collect and report statistical and summary information regarding 
customer complaints by the 15th of the month following the calendar 
quarter in which the customer complaints are received by the member. 
Members who fail to file reports in a timely manner may be subject to a 
minor rule violation.
    Rule 4619(d)--Failure to timely file reports pursuant to SEC 
Regulation M. NASD Rule 4619(d) requires member firms to file certain 
notifications with the NASD to comply with SEC Regulation M,\16\ and 
SEC Rules 101,\17\ 103,\18\ and 104 \19\ (i.e., notification of 
withdrawal of quotations and identification of quotations as those of a 
passive market maker). The failure to timely file such notices may be 
considered a minor rule violation by the Association.
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    \16\ 17 CFR 242.
    \17\ 17 CFR 242.101.
    \18\ 17 CFR 242.103
    \19\ 17 CFR 242.104.
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    Rules 4632, 4642, 4652, 6240, 6420, 6550, 6620, and 6720--
Transaction reporting in equity, convertible debt, and high yield 
securities. The Association's trade reporting rules require member 
firms to submit reports of transactions in equity, convertible debt, 
and high yield securities.\20\ The rules concern trade reporting in 
certain Nasdaq securities, listed securities (commonly known as the 
``third market''), OTC equity securities, non-Nasdaq securities, and 
high yield securities. The Association believes that the failure, in 
certain circumstances, to report such transaction data pursuant to the 
requirements of these rules may be appropriate for disposition as a 
minor rule violation.
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    \20\ NASD Rules 4632, 4642, 4652, 6240, 6420, 6550, 6620 and 
6720.
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    Rules 6130 and 6170--Transaction reporting to the Automated 
Confirmation Transaction Service (``ACT''). NASD Rules 6130 and 6170 
require member firms to submit transaction reports of transactions in 
``ACT Eligible Securities'' \21\ to the Automated Confirmation 
Transaction

[[Page 58588]]

Service (``ACT''). The Association believes that the failure, in 
certain circumstances, to submit required transaction reports to ACT 
pursuant to the requirements of these rules may be appropriate for 
disposition as a minor rule violation.
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    \21\ NASD Rule 6110(a).
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    Rules 6953--Synchronization of member business clocks. NASD Rule 
6953 requires member firms to synchronize all computer and mechanical 
time-stamping devices to be within three seconds of the National 
Institute of Standards and Technology standard. The Association 
believes that the failure by a member firm to synchronize its time-
stamping devices may be appropriate for disposition as a minor rule 
violation.
    Rules 6954 and 6955--Failure to submit data in accordance with the 
Order Audit Trail System (``OATS''). The OATS rules impose obligations 
on member firms to record in electronic form and to report to NASD 
Regulation certain items of information with respect to orders they 
receive to effect transactions in equity securities traded in The 
Nasdaq Stock Market. The OATS rules require that each member receiving 
an order relating to equity securities traded in the Nasdaq Stock 
Market must capture specific information and electronically transmit 
this information to OATS. The Association believes that violations 
under the OATS rules may be appropriate for disposition as a minor rule 
violation.
    Rule 11870--Failure to abide by Customer Account Transfer 
Contracts. NASD Rule 11870 requires members to follow procedures for 
the transfer or closing-out of customer accounts with the Automated 
Customer Account Transfer System (``ACATS''). The Rule requires members 
to validate or object to a customer account transfer within three days 
of receipt of the transfer notice. Members must complete the transfer 
within four days of validation. Failure to transfer the customer 
account with the stated time or failure to properly transfer a customer 
account may be appropriate for disposition as a minor rule violation.
    SEC Rule 11Ac1-4--Failure to properly display limit orders. SEC 
Rule 11Ac1-4 \22\ requires, subject to certain exceptions, a registered 
broker or dealer that acts as an OTC market maker to ``immediately'' 
display qualifying customer limit orders in its published quotes. 
Failure to immediately display qualifying limit orders pursuant to SEC 
Rule 11Ac1-4 may be appropriate for disposition as a minor rule 
violation.
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    \22\ 17 CFR 240.11Ac1-4.
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    SEC Rule 11Ac1-1(c)(5)--Failure to properly update published 
quotations in certain Electronic Communication Networks (``ECN's''). 
SEC Rule 11Ac1-1(c)(5) \23\ requires an OTC market maker to update its 
published quotation to reflect qualifying priced orders that it enters 
into a specific type of Electronic Communication Network (``ECN''). The 
failure to display such priced orders pursuant to SEC Rule 11Ac1-
1(c)(5) may be considered a minor rule violation by the Association.
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    \23\ 17 CFR 240.11Ac1-1(c)(5).
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    SEC Rule 17a-5--Failure to timely file FOCUS reports. The 
Association proposes to institute minor rule violations for failure of 
a member to timely file monthly, quarterly and annual reports required 
by SEC Rule 17a-5,\24\ also known as FOCUS reports. Reports not filed 
in a timely manner may be appropriate for disposition as a minor rule 
violation.
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    \24\ 17 CFR 240.17a-5.
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    SEC Rule 17a-11--Failure to timely file net capital reports. SEC 
Rule 17a-11\25\ requires members to file reports if their net capital 
falls below a certain level as defined in SEC Rule 15c3-1,\26\ or in 
other instances that indicate the existence of financial or operational 
difficulties. The Association believes that the failure to timely file 
the reports may be appropriate for disposition as a minor rule 
violation.
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    \25\ 17 CFR 240.17a-11.
    \26\ 17 CFR 240.15c3-1.
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    MSRB Rule A-14--Failure to pay annual fee. MSRB Rule A-14 requires 
each broker, dealer and municipal securities dealer to pay an annual 
fee to the MSRB Board in each fiscal year in which the broker, dealer 
and municipal securities dealer conducts municipal securities 
activities. The fee must be received by the Board no later than October 
31 of the fiscal year in which the fee is due. Failure to pay the 
annual fee may be considered by the Association to be a minor rule 
violation.
    MSRB Rules G-12 and G-14--Failure to Report Transactions or 
Inaccurate Reporting of Transactions. MSRB Rule G-14, in part, requires 
the accurate and timely reporting of each transaction in municipal 
securities. The Association believes that failure to report 
transactions may be appropriate for disposition as a minor rule 
violation. In addition, inaccurate and/or untimely transaction 
reporting is measured and assessed based on the following benchmarks, 
which are derived from industry compliance statistics:
    <bullet> National Securities Clearing Corporation ``T-Input 
Percentage.'' An industry goal is a T-Input Percentage of 95 percent.
    <bullet> Effecting Broker Symbol (``EBS'') percentage. For the past 
six months, the industry EBS compliance percentage has been over 99 
percent.
    <bullet> Customer Trade Ineligibility (``CTI'') percentage. For the 
past year, the industry CTI percentage has been about ten percent.
    The Association believes that inaccurate or untimely transaction 
reporting under these rules may be appropriate for disposition as a 
minor rule violation. More significant non-compliance with MSRB Rule G-
14 is generally evident in instances when the T-Input Percentage is 
below 90 percent for a 6-month period, or for EBS and CTI, when firm 
non-compliance statistics are 5 percent or more below the industry 
average for a 6-month period. In these instances, formal complaint 
proceedings may be brought by the Association. Subsequent non-
compliance using these criteria would warrant a formal complaint.
    MSRB Rule G-36--Failure to timely submit reports. MSRB Rule G-36 
concerns the delivery of Official Statements, Advance Refunding 
Documents and Forms G-36(OS) and G-36(ARD) to the MSRB. MSRB Rule G-36, 
in part, requires the sending--within certain specified time frames--of 
two copies of certain issuer documents to the MSRB. Failure to file 
Form G-36(OS) or G-36(ARD) within the published time frames may be 
appropriate for disposition as a minor rule violation.
    MSRB Rule G-37--Failure to timely submit reports for political 
contributions and MSRB Rule G-38--Failure to timely submit reports 
detailing consultant activities. MSRB Rules G-37 and G-38 require, in 
part, the disclosure on MSRB Form G-37/38 of certain political 
contributions, solicitation of municipal securities business, and the 
use of consultants by municipal securities dealers. Due dates for these 
required disclosures are January 31, April 30, July 31, and October 31. 
The late filing of reports pursuant to MSRB Rules G-37 and G-38 may be 
appropriate for disposition as a minor rule violation.
    In addition, form filings that are incomplete or inaccurate, or 
inaccurate record keeping as required under MSRB Rules G-37 and G-38, 
may also be appropriate for disposition by the Association as minor 
rule violations.

[[Page 58589]]

2. Statutory Basis
    NASD Regulation believes that the proposal is consistent with the 
provisions of Section 15A(b)(6) of the Act,\27\ which requires, among 
other things, that the Association's rules must be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest. NASD Regulation believes that the proposed 
rule change is consistent with Section 15A(b)(7) of the Act,\28\ in 
that it is intended to safeguard the interests of investors while 
establishing fair and reasonable rules for its members and persons 
associated with its members. NASD Regulation also believes that the 
proposed rule change is consistent with Section 15A(b)(8) of the 
Act,\29\ in that it furthers the statutory goals of providing a fair 
procedure for disciplining members and associated persons.
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    \27\ 15 U.S.C. 78o-3(b)(6).
    \28\ 15 U.S.C. 78o-3(b)(7).
    \29\ 15 U.S.C. 78o-3(b)(8).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation 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, as amended.

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 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to file number SR-NASD-00-39 and 
should be submitted by October 20, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\30\
Margaret H. McFarland,
Deputy Secretary.
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    \30\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 00-25022 Filed 9-28-00; 8:45 am]
BILLING CODE 8010-01-M