55436 Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 

6 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b-4(f)(6). 

5Nasdaq asked the Commission to waive the 30- 

day operative delay. See Rule 19b–4(f)(6)(iii). 17 

CFR 240.19b–4(f)(6)(iii). 

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.6

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18763 Filed 9–20–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52431; File No. SR–NASD–

2005–103] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Technical 

Changes to NASD Rule 3110 and IM–

3110 

September 14, 2005. 

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 

September 6, 2005, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’), through its subsidiary, The 

Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), 

filed with the Securities and Exchange 

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

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared by Nasdaq. Nasdaq 

has filed the proposal as a ‘‘noncontroversial’’ rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b-4(f)(6)4 thereunder, which renders 

the proposed rule change effective upon 

filing with the Commission.5 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 

Nasdaq is proposing to amend NASD 

Rule 3110 to re-label paragraph (d) 

(Changes in Account Name or 

Designation) as paragraph (j), and 

relocate the Interpretive Material 3110 

(‘‘IM–3110’’) to the end of NASD Rule 

3110. The text of the proposed rule 

change is below. Proposed new 

language is in italics; proposed 

deletions are in [brackets]. 

* * * * * 

3100. BOOKS AND RECORDS, AND 

FINANCIAL CONDITION 

3110. Books and Records 

(a) through (c) No change. 

[(d) Changes in Account Name or 

Designation] 

[Before any customer order is 

executed, there must be placed upon the 

memorandum for each transaction, the 

name or designation of the account (or 

accounts) for which such order is to be 

executed. No change in such account 

name(s) (including related accounts) or 

designation(s) (including error accounts) 

shall be made unless the change has 

been authorized by a member or a 

person(s) designated under the 

provisions of NASD rules. Such person 

must, prior to giving his or her approval 

of the account designation change, be 

personally informed of the essential 

facts relative thereto and indicate his or 

her approval of such change in writing 

on the order or other similar record of 

the member. The essential facts relied 

upon by the person approving the 

change must be documented in writing 

and preserved for a period of not less 

than three years, the first two years in 

an easily accessible place, as the term 

‘‘easily accessible place’’ is used in SEC 

Rule 17a–4.] 

[For purposes of this paragraph (d), a 

person(s) designated under the 

provisions of NASD rules to approve 

account name or designation changes 

must pass a qualifying principal 

examination appropriate to the business 

of the firm.] 

[* * *] 

[IM–3110. Customer Account 

Information] 

[(a) Members should be aware that, 

effective January 1, 1990, any 

transaction which involves a nonNasdaq, non-exchange equity security 

trading for less than five dollars per 

share may be subject to the provisions 

of SEC Rules 15g–1 through 15g–9, and 

those rules should be reviewed to 

determine if an executed customer 

suitability agreement is required.] 

[(b) Additional information is 

required to be obtained prior to making 

recommendations to customers (see 

Rule 2310) and in connection with 

discretionary accounts (see Rule 2510).] 

[(c) Accounts opened, and 

recommendations made prior to January 

1, 1991 remain subject to former Article 

III, Sections 2 and 21(c) as previously in 

effect as set forth in Notice to Members 

90–52 (August 1990).] 

[* * *] 

(d) through (i) No change. 

(j) Changes in Account Name or 

Designation 

Before any customer order is 

executed, there must be placed upon the 

memorandum for each transaction, the 

name or designation of the account (or 

accounts) for which such order is to be 

executed. No change in such account 

name(s) (including related accounts) or 

designation(s) (including error accounts) 

shall be made unless the change has 

been authorized by a member or a 

person(s) designated under the 

provisions of NASD rules. Such person 

must, prior to giving his or her approval 

of the account designation change, be 

personally informed of the essential 

facts relative thereto and indicate his or 

her approval of such change in writing 

on the order or other similar record of 

the member. The essential facts relied 

upon by the person approving the 

change must be documented in writing 

and preserved for a period of not less 

than three years, the first two years in 

an easily accessible place, as the term 

‘‘easily accessible place’’ is used in SEC 

Rule 17a–4. 

For purposes of this paragraph (j), a 

person(s) designated under the 

provisions of NASD rules to approve 

account name or designation changes 

must pass a qualifying principal 

examination appropriate to the business 

of the firm. 

IM–3110. Customer Account 

Information 

(a) Members should be aware that, 

effective January 1, 1990, any 

transaction which involves a nonNasdaq, non-exchange equity security 

trading for less than five dollars per 

share may be subject to the provisions 

of SEC Rules 15g–1 through 15g–9, and 

those rules should be reviewed to 

determine if an executed customer 

suitability agreement is required. 

(b) Additional information is required 

to be obtained prior to making 

recommendations to customers (see 

Rule 2310) and in connection with 

discretionary accounts (see Rule 2510). 

(c) Accounts opened, and 

recommendations made prior to January 

1, 1991 remain subject to former Article 

III, Sections 2 and 21(c) as previously in 

effect as set forth in Notice to Members 

90–52 (August 1990). 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of and basis for the 

Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 55437 

6See Securities Exchange Act Release No. 49883 

(June 17, 2004), 69 FR 35092 (June 23, 2004) (SR–

NASD–2002–162). 

7 15 U.S.C. 78o–3(b)(6). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)(iii) 

under the Act requires the self-regulatory 

organization to provide the Commission written 

notice of its intent to file the proposed rule change 

at least five business days (or such shorter time as 

designated by the Commission) before doing so. 

Nasdaq has requested that the Commission waive 

the five-day pre-filing notice requirement. The 

Commission granted Nasdaq’s request. 

10For purposes of waiving the 30-day operative 

delay, the Commission has considered the proposed 

rule’s impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

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. Nasdaq 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 

The Commission previously approved 

amendments to NASD Rule 3110 (Books 

and Records) to create new paragraphs 

(d) and (i) concerning Changes in 

Account Name or Designation, and 

Holding of Customer Mail, 

respectively.6

In reviewing NASD Rule 3110, 

Nasdaq staff noticed that certain 

provisions in NASD Rule 3110 were 

inadvertently labeled as being part of 

the Interpretive Material, IM–3110 

(Customer Account Information). In 

seeking to re-label these provisions as 

part of NASD Rule 3110, Nasdaq staff 

noticed that two paragraphs of NASD 

Rule 3110 are now labeled as paragraph 

(d). To avoid confusion, Nasdaq 

proposes to re-label paragraph (d) 

(Changes in Account Name or 

Designation) as paragraph (j). In 

addition, Nasdaq proposes to move the 

Interpretive Material, IM–3110, which 

consists only of paragraphs (a)–(c), and 

is currently contained in the middle of 

NASD Rule 3110, to the end of the rule. 

This change conforms IM–3110 to 

Nasdaq’s general practice of placing 

Interpretive Material after the rule to 

which it relates. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 15A(b)(6) of the 

Act,7 which requires, among other 

things, that Nasdaq 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. 

Nasdaq believes that this technical 

change is consistent with the protection 

of investors and the public interest in 

that it will avoid any confusion when 

reading the provisions of NASD Rule 

3110. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq 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 

Because the foregoing proposed rule 

change: (1) Does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms does not become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) 8 of the Act and Rule 

19b-4(f)(6) thereunder.9

Nasdaq has requested that the 

Commission waive the 30-day preoperative period, which would make the 

proposed rule operative immediately. 

The Commission believes waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because the proposed 

rule change is solely technical in nature 

and is intended to alleviate confusion 

when reading the provisions of NASD 

Rule 3110. For these reasons, the 

Commission designates the proposal to 

be effective and operative upon filing 

with the Commission.10

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASD–2005–103 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–9303. 

All submissions should refer to File 

Number SR–NASD–2005–103. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the NASD. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASD–2005–103 and 

should be submitted on or before 

October 12, 2005. 

55438 Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 

11 17 CFR 200.30–3(a)(12). 

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

2The Commission has modified the text of the 

summaries prepared by NSCC. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18767 Filed 9–20–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52445; File No. SR–NSCC–

2005–08] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Codify, Consolidate, 

and Clarify Financial Responsibility 

and Operational Capability Rules 

September 15, 2005. 

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

Securities Exchange Act of 1934 

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

August 2, 2005, the National Securities 

Clearing Corporation (‘‘NSCC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change described in Items 

I, II, and III below, which items have 

been prepared primarily by NSCC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested parties. 

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 codify, consolidate, and 

clarify NSCC’s financial responsibility 

and operational capability rules into 

NSCC Rule 15 (‘‘Financial 

Responsibility and Operational 

Capability’’). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NSCC 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. NSCC has prepared 

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

and (C) below, of the most significant 

aspects of these statements.2

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Clarification of ‘‘Participants’’

Section 1 of Rule 15 sets forth NSCC’s 

general authority to establish standards 

of membership and guidelines for the 

application of such standards. Section 1 

is amended to make clear that it applies 

to a Member, Non-Clearing Member, 

Municipal Comparison Only Member, 

Fund Member, Insurance Carrier 

Member, TPA Member, or Data Services 

Only Member and that each such 

member is referred to as a ‘‘participant’’

in NSCC’s rules. 

2. Regular Reporting Required of 

Participants 

Section 2 of Rule 15 is amended to 

clearly set forth the list of reports and 

information, such as financial 

statements and copies of certain 

regulatory filings, which certain 

participants are routinely required to 

submit on a regular basis for NSCC’s 

risk management purposes. The explicit 

list of reports and information includes 

all such reports and information 

currently required by NSCC under its 

general authority to monitor compliance 

with membership standards. The 

submission requirements applicable to 

certain categories of NSCC participants 

previously had been set forth on NSCC’s 

Web site and were communicated to 

participants quarterly by NSCC 

Important Notice. Codifying the 

requirements in Section 2 of Rule 15 

will further facilitate compliance with 

these reporting requirements. 

The codification of the list of reports 

and information which are required on 

a routine basis does not restrict NSCC’s 

current general authority to require 

additional information in particular 

instances should NSCC’s risk 

management procedures so require 

pursuant to new Section 2 of Rule 15. 

The timeframes by which participants 

are required to submit particular 

information is deleted from Section 2 of 

Rule 15 because these timeframes may 

vary according to external parameters 

such as, for example, regulatory 

requirements applicable to a certain 

class of participants. Section 2 now 

makes reference to the submission of 

reports and information within the time 

periods prescribed by NSCC from time 

to time. Section 2 also directs 

participants to provide the information 

in the form and to the person or 

department specified by NSCC from 

time to time. NSCC communicates these 

submission deadlines and requirements 

to participants by Important Notices 

which are reissued quarterly. In 

addition, the current submission 

schedule is posted on NSCC’s Web site, 

and new participants are advised of the 

submission schedule in the NSCC 

acceptance letter. The reference to the 

timeframe by which reports are due is 

also deleted from Addendum B 

(including the version of Addendum B 

contained in Appendix 1) since it is 

now set forth clearly in Section 2 of 

Rule 15. 

Section 2 of Rule 15 is further revised 

to make specific reference to a 

participant’s obligation to provide 

amendments and addenda to all reports 

and to inform NSCC of any extensions 

granted by its regulator regarding 

submission of a regulatory report for 

which NSCC also requires submission. 

To the extent NSCC’s review includes 

copies of reports submitted by the 

participant to its regulator, this will 

facilitate NSCC’s review process by 

making each participant responsible for 

notifying NSCC of an extension rather 

than requiring NSCC to make inquiries 

of the participant after NSCC fails to 

receive a report by the date on which it 

is otherwise required to be provided to 

NSCC. 

In addition, Section 2 is amended to 

make specific reference to a 

participant’s obligation to provide 

annual financial statements of its 

guarantor consistent with NSCC’s 

current risk management review 

procedures. Currently, these procedures 

are communicated to participants on 

NSCC’s Web site, in Important Notices, 

and in correspondence. Codification of 

the requirement in Rule 15 will 

facilitate compliance. 

3. Participant Reporting on Certain 

Changes 

Rule 15 is further amended by new 

Section 3 which codifies a participant’s 

reporting obligations with respect to 

certain changes which could have a 

substantial impact on its business or 

financial condition, such as: (1) Material 

organizational changes including 

mergers, acquisitions, changes in 

corporate form, name changes, changes 

in the ownership of a participant or its 

affiliates, and material changes in 

management; (2) material changes in 

business lines, including new business 

lines undertaken; and (3) defendant 

status in litigation which could 

reasonably impact the participant’s 

financial condition or ability to conduct 

business. Timely notification of such 

changes and events enables NSCC to 

analyze the implications of the event 

and determine an appropriate course of 

action for risk management purposes.