29198 Federal Register / Vol. 66, No. 103 / Tuesday, May 29, 2001 / Notices

17See NASD Regulation Letter, supra, note 11.

18 15 U.S.C. 78s(b)(2).

19 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 44032

(March 3, 2001), 66 FR 14237. 3 15 U.S.C. 78q–1(b)(3)(F).

proposes to eliminate the ability of

members subject to Exchange Act Rule

15c3–1 to request an exemption from

the requirements, and to strike NASD

Rule 1022 from the list of rules in NASD

Rule 9610(a) from which a member may

seek exemptive relief. NASD members

that are exempt from or otherwise not

subject to Exchange Act Rule 15c3–1

would not be subject to the

requirements of either NASD Rule

1022(b) or 1022(c) and thus no longer

required to seek exemptive relief from

them.

The Commission believes that the

proposed changes are consistent with

the Act and the rules and regulations

thereunder. Specifically, the

Commission believes that the proposal

to identify the classes of brokers or

dealers that are required to designate a

FINOP or an Introducing FINOP will

protect investors and the public interest

by helping to ensure that the financial

and operations personnel of brokerdealers subject to Exchange Act Rule

15c3–1 have the training and

competence needed to ensure the

member’s compliance with applicable

net capital, recordkeeping and other

financial and operational rules.

With regard to the Ad Hoc

Committee’s contention that the

proposal should not apply to certain

limited function broker-dealers, the

Commission agrees with NASD

Regulation’s assertion that compliance

with the Commission’s net capital and

other financial and operational rules

does not depend on the size of a brokerdealer’s business.17 As noted above, the

Commission believes the proposal will

help to ensure NASD members’

compliance with applicable net capital,

recordkeeping, and other financial and

operational rules. In addition, the

Commission does not believe that the

proposal will create a significant

competitive disadvantage for new

limited function broker-dealers who

will be required to register a FINOP or

an Introducing FINOP. In this regard,

the Commission notes that a limited

function broker-dealer will be able to

employ a FINOP or an introducing

FINOP on a part-time basis.

The Commission finds that the

proposed changes to NASD Rule 9610(a)

are consistent with the Act because they

clarify NASD Rule 9610(a). Specifically,

the amendments to NASD Rule 9610(a)

clarify that the Rule 9600 Series merely

sets forth procedures for seeking

exemptive relief, and that the type of

relief that may be requested, and the

authority to grant it, is found in the

rules listed in NASD Rule 9610(a). In

addition, the amendments to NASD

Rule 9610(a) make NASD Rule 9610(a)

consistent with NASD Rule 1022, as

amended, by deleting NASD Rule 1022

from the list of rules from which a

member may seek exemptive relief.

Finally, the Commission finds that the

proposal to amend NASD Rule

1022(c)(3) by adding a reference to

paragraph (b)(2) of NASD Rule 1022 is

consistent with the Act because it will

help to clarify the application of NASD

Rule 1022(c)(3).

V. Conclusion

For the foregoing reasons, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,18 that the

proposed rule change (SR–NASD–00–

77) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.19

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13329 Filed 5–25–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44322; File No. SR–NSCC–

00–09]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Order Approving a

Proposed Rule Change Relating to

Processing Certain Securities

Undergoing Reorganization

May 18, 2001.

On July 12, 2000, the National

Securities Clearing Corporation

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

Exchange Commission (‘‘Commission’’)

a proposed rule change (File No. SR–

NSCC–00–09) pursuant to section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’).1 Notice of the proposal

was published in the Federal Register

on March 9, 2001.2 No comment letters

were received. For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Description

NSCC’s rules permit NSCC to

continue to process certain securities

undergoing reorganization or issuing

dividends and specify how NSCC shall

handle those issues. However, not all

types of reorganizations or dividends fit

the procedures specifically set forth in

the rules. Ordinarily, this would require

that the affected security be exited from

the applicable system. Exiting the

affected security from the applicable

system poses a burden on the financial

investment community when the issue

is widely traded.

The proposed rule change modifies

NSCC’s Rules and Procedures to give

NSCC the flexibility to process in the

continuous net settlement (‘‘CNS’’),

balance order, or other related system,

on an exception basis, securities that

would not otherwise have been eligible

for processing to the extent NSCC has

the capability to do so. The proposed

rule change provides that in such

circumstance, NSCC would issue a

notice to its members setting forth how

NSCC would process the security.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder and

particularly with the requirements of

Section 17A(b)(3)(F).3 Section

17A(b)(3)(F) requires that the rules of a

clearing agency be designed to promote

the prompt and accurate clearance and

settlement of securities transactions.

The Commission believes that NSCC’s

rule change meets this standard because

the proposed rule change allows NSCC

to process otherwise ineligible securities

in NSCC’s CNS system, balance order,

or other related system, on an exception

basis. By providing a means whereby

these securities, which previously

would not have been eligible for

processing through NSCC, can be

processed through and receive the

benefits of NSCC’s highly automated

systems, the proposed rule change

facilitates the prompt and accurate

clearance and settlement of such

securities transactions.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A(b)(3)(F) 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 change (File No. SR–

NSCC–00–09) be an hereby is approved.

Federal Register / Vol. 66, No. 103 / Tuesday, May 29, 2001 / Notices 29199

4 17 CFR 200.30–3(a)(12).

1A copy of the text of SCCP’s proposed rule

change and the attached exhibits are available at the

Commission’s Public Reference Section or through

SCCP.

2The term ‘‘margin member’’ means participants

who are Philadelphia Stock Exchange specialists,

alternate specialists, and other Phlx floor members

specifically approved by the National Securities

Clearing Corporation to effect trading in a margin

account in accordance with SCCP Rule 9.

3The term ‘‘participants’’ means persons or

organizations which have qualified for membership

in SCCP pursuant to SCCP Rules 2 and 3.

Participants are also referred to in SCCP Rules as

‘‘members.’’

4See SCCP Rule 23 section 1(c).

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13327 Filed 5–25–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44334; File No. SR–SCCP–

2001–04]

Self-Regulatory Organizations; The

Stock Clearing Corporation of

Philadelphia; Notice of Filing of

Proposed Rule Change Relating to the

Establishment of Fines for Late Margin

Call Payments and an Appeal Process

for Such Fines

May 22, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’), as amended, notice is hereby

given that on, February 27, 2001, The

Stock Clearing Corporation of

Philadelphia (‘‘SCCP’’) 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 primarily by SCCP. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested parties.1

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to amend SCCP Rule 9,

Margin Accounts, to include a fine

schedule for late payments of margin

calls. The proposed rule change will

also allow SCCP to amend Rule 23,

Right of Appeal, to provide for a right

of appeal for margin members 2 who

wish to appeal imposition of the fine for

late payments of margin calls.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

SCCP 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. SCCP has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of these statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to implement late fines on

SCCP margin members who are late

meeting a margin call payment. The

proposed rule change is intended to

encourage the timely payments of

margin calls. Rule 9 provides, in part,

that SCCP will provide margin accounts

for margin members that clear and settle

their transactions through SCCP’s

omnibus clearance and settlement

account. SCCP provides margin for such

accounts based on its procedures and

Regulation T of the Board of Governors

of the Federal Reserve System. Margin

members who are designated as

specialists or alternate specialists in a

security receive margin credit of 15%

with respect to positions in that security

held in their specialist accounts.

Members holding positions for which

they are not designated as a specialist or

alternate specialist receive nonspecialist margin credit of 50%. SCCP

may issue margin calls to any margin

member when the margin requirement

exceeds the account equity. Pursuant to

SCCP procedures, margin call payments

are due by 12:00 p.m. EST the business

day of the call. Late margin payments

are not currently subject to a specific

late fine although members may be

subject to possible disciplinary action

pursuant to SCCP Rule 22.

SCCP believes that implementation of

the proposed fine schedule will reduce

the number of incidents of late margin

call payments by members.

Notwithstanding the late margin call

payment fine, members would continue

to be subject to possible disciplinary

action pursuant to SCCP Rule 22.

Currently, Rule 23 provides, in

relevant part, a SCCP participant 3 with

the right to appeal from any decision or

decisions of SCCP resulting in sanctions

or penalties imposed under Rule 20 or

22.4 SCCP proposes to include fines

imposed under Rule 9 to the list of

applicable actions specified in Rule 23.

The proposed inclusion in Rule 23 of a

margin member’s right to appeal a fine

for late margin call payments will

provide members a process by which to

dispute implementation of such fines.

SCCP believes that the proposed rule

change will facilitate ensuring

compliance with SCCP’s rules regarding

margin and Regulation T and is

therefore consistent with section

17A(b)(3)(A) of the Act and specifically

with section 17A(b)(3)(F) of the Act in

that it is designated to promote the

prompt and accurate settlement of

securities transactions and to remove

impediments to and perfect the

mechanism of a national system in that

the proposed fine for late margin calls

will encourage margin members to

submit margin payments in a timely

manner therefore reducing the

frequency of late margin call payments.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

SCCP does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which SCCP 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