68122 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

16 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.

5Rule 3012 became effective on January 31, 2005, 

which would require a member’s first Rule 3012 

report to be submitted by no later than January 31, 

2006 and at least annually thereafter; however, a 

member may elect to submit its first Rule 3012 

report by no later than April 1, 2006. Importantly, 

a member’s first Rule 3012 report must encompass 

the period from January 31, 2005 (the effective date 

of Rule 3012) up to the submission date (or a 

reasonable period of time immediately preceding 

the submission date). Each ensuing Rule 3012 

report may not be for a period greater than 12 

months from the date of the preceding Rule 3012 

report (but may be for a shorter time period if a 

member elects to prepare a report more frequently 

than annually).

6Rule 3013 and IM–3013 became effective on 

December 1, 2004, which would require a member’s 

first certification to be executed by December 1, 

2005 and annually thereafter; however, a member 

may elect to execute its first certification by no later 

than April 1, 2006 and annually thereafter.

7Each ensuing annual certification must be 

effected no later than on the anniversary date of the 

previous year’s certification. See IM–3013, n.1.

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 the filing also will be 

available for inspection and copying at 

the principal offices of 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–2005–124 and 

should be submitted on or before 

November 30, 2005.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.16

Jonathan G. Katz, 

Secretary.

[FR Doc. 05–22333 Filed 11–8–05; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52727; File No. SR–NASD–

2005–121] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Amendments 

to Rule 3012, Rule 3013, and IM–3013 

November 3, 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 October 

14, 2005, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) 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 NASD. NASD 

has designated the proposed rule change 

as constituting a ‘‘non-controversial’’

rule change pursuant to Section 

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

4(f)(6) thereunder,4 which renders the 

proposal effective upon receipt of this 

filing by the Commission. 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 

NASD is proposing to amend NASD 

Rule 3012 (Supervisory Control 

System), Rule 3013 (Annual 

Certification of Compliance and 

Supervisory Processes), and IM–3013 

(Annual Compliance and Supervision 

Certification) to allow members, by no 

later than April 1, 2006, to submit the 

initial annual report required by Rule 

3012 and to execute the initial annual 

certification required by Rule 3013 and 

IM–3013. Below is the text of the 

proposed rule change. Proposed new 

language is in italics.

* * * * *

3012. Supervisory Control System 

(a) General Requirements 

(1) Each member shall designate and 

specifically identify to NASD one or 

more principals who shall establish, 

maintain, and enforce a system of 

supervisory control policies and 

procedures that (A) test and verify that 

the member’s supervisory procedures 

are reasonably designed with respect to 

the activities of the member and its 

registered representatives and 

associated persons, to achieve 

compliance with applicable securities 

laws and regulations, and with 

applicable NASD rules and (B) create 

additional or amend supervisory 

procedures where the need is identified 

by such testing and verification. The 

designated principal or principals must 

submit to the member’s senior 

management no less than annually, a 

report 5 detailing each member’s system 

of supervisory controls, the summary of 

the test results and significant identified 

exceptions, and any additional or 

amended supervisory procedures 

created in response to the test results.

(2) No change. 

(b) Dual Member No change.

* * * * *

Rule 3013. Annual Certification of 

Compliance and Supervisory Processes 

(a) Designation of Chief Compliance 

Officer No change. 

(b) Annual Certification. 

Each member shall have its chief 

executive officer (or equivalent officer) 

certify annually,6 as set forth in IM–

3013, that the member has in place 

processes to establish, maintain, review, 

test and modify written compliance 

policies and written supervisory 

procedures reasonably designed to 

achieve compliance with applicable 

NASD rules, MSRB rules and federal 

securities laws and regulations, and that 

the chief executive officer has 

conducted one or more meetings with 

the chief compliance officer in the 

preceding 12 months to discuss such 

processes.

* * * * *

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 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 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 

Rule 3013 requires that each 

member’s chief executive officer 

(‘‘CEO’’), or other equivalent officer, 

certify annually according to the terms 

set forth in IM–3013 that the member 

has in place processes to establish, 

maintain, review, test and modify its 

written supervisory procedures. The 

first annual certification is currently due 

by December 1, 2005.7 Before a CEO can 

complete the annual certification 

requirement, IM–3013 requires, among 

other things, that the CEO, chief 

Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68123

8See Notice to Members 04–71 (October 2004) 

(announcing, among other things, the effective date 

of January 31, 2005); see also Transcript of 

December 16, 2004 Call-in Workshop (‘‘Transcript’’) 

reminding members that Rule 3012 Report is due 

within one year of the January 31, 2005 effective 

date and at least annually thereafter. The Transcript 

is available at www.nasd.com/SupervisoryControl.

9 It should be noted that Rule 3012(b) provides 

that any dual member electing to comply with the 

substantially similar requirements of the NYSE 

shall be deemed in compliance with the provisions 

of Rule 3012. A dual member must comply with all 

of the NYSE’s substantially similar requirements to 

be considered in compliance with Rule 3012. 

Accordingly, any dual member electing to comply 

with the substantially similar requirements of the 

NYSE would comply with Rule 3012’s reporting 

requirement by completing the NYSE Rule 342.30 

Annual Report. The member, however, would still 

be required to complete the report required by IM–

3013 prior to the initial certification date required 

by Rule 3013 and IM–3013.

10 15 U.S.C. 78s(b)(3)(A)(iii).

11 17 CFR 240.19b–4(f)(6).

compliance officer (‘‘CCO’’), and any 

other necessary officers review a report 

that evidences the member’s processes.

Rule 3012(a)(1) requires, among other 

things, that each member submit to its 

senior management no less than 

annually a report detailing its 

supervisory controls system that will 

test and verify the adequacy of its 

supervisory procedures, the summary of 

the test results, and any additional or 

amended supervisory procedures 

created in response to the test results. 

Currently, members must complete and 

submit the report by January 31, 2006 

and at least annually thereafter.8

Since the adoption of these rules, 

NASD has received a number of 

inquiries from members regarding 

whether the reports required by Rule 

3012 and IM–3013 could be combined. 

Although NASD has advised members 

that they may combine the Rule 3012 

report with the report required by IM–

3013 as long as all of the required 

elements of the respective reports are 

addressed and clearly identified, 

members have indicated that it would 

be difficult to combine the reports since 

the first annual certification required by 

Rule 3013 must be executed by 

December 1, 2005 (and thus the related 

report must be prepared in advance of, 

but reasonably close in time to, such 

execution), while the Rule 3012 report 

is not required to be submitted until 

January 31, 2006. 

In addition, dual members have 

inquired whether they can combine the 

reports required by Rule 3012 and IM–

3013 with the Annual Report required 

by NYSE Rule 342.30, which is due by 

April 1st of each year. As support for 

their request, dual members have noted 

that the NYSE Rule 342.30 Annual 

Report mandates similar, though not 

identical, requirements as the Rule 3012 

report. Dual members have also noted 

that IM–3013 specifically provides that 

the IM–3013 report may be combined 

with any other compliance or other 

similar report required by another selfregulatory organization. Dual members 

assert that being able to complete one 

report instead of being required to 

complete three reports that could cover 

overlapping topics and issues would 

prevent the duplication of significant 

resources. However, because of the 

disparate dates by which the three 

reports must be completed, the dual 

members have indicated that it would 

be nearly impossible to combine the 

reports.9

Accordingly, NASD is filing this 

proposed rule change to address those 

issues. Specifically, the proposed rule 

change will amend Rule 3012 to provide 

that a member may submit its initial 

Rule 3012 report by no later than April 

1, 2006. The proposed rule change 

explains that due to Rule 3012’s January 

31, 2005 effective date, a member 

choosing to rely on any date after 

January 31, 2005 through April 1, 2006 

as the submission deadline for its initial 

Rule 3012 report will have to 

encompass the period from January 31, 

2004 up to that submission date (or a 

reasonable period of time immediately 

preceding the submission date). Each 

ensuing Rule 3012 report must 

encompass the 12 months following the 

previous Rule 3012 report (or such 

shorter time period if a member elects 

to prepare a report more frequently than 

annually). 

Additionally, the proposed rule 

change will amend Rule 3013 and IM–

3013 to provide that a member may 

execute its first annual certification by 

no later than April 1, 2006 and annually 

thereafter. A member should keep in 

mind that the report required by IM–

3013 that evidences the member’s 

processes must be prepared in advance 

of, but reasonably close in time to, April 

1, 2006. 

As a result of these proposed changes 

members will be able, if they so choose, 

to combine the respective reports, 

provided the single report clearly 

identifies and addresses all of the 

requirements set forth in Rule 3012, 

Rule 3013 and IM–3013. The proposed 

rule change will also allow dual 

members to comply with the respective 

reporting requirements of Rule 3012, 

Rule 3013, IM–3013, and NYSE Rule 

342.30 without undue duplication of 

effort. 

NASD has filed the proposed rule 

change for immediate effectiveness and 

has requested that the Commission 

waive the 5-day pre-filing requirement 

and the 30-day period for the proposed 

rule change to become operative, in 

order to allow NASD members to have 

as much time as possible to adjust their 

procedures to the new submission dates 

for the initial Rule 3012 report and the 

initial certification required by Rule 

3013 and IM–3013. The effective date 

and the implementation date will be the 

date of filing, October 14, 2005. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act, which 

requires, among other things, that NASD 

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 believes that synchronizing the 

date of the report required by Rule 3012 

and the date of execution of the 

certification required by Rule 3013 and 

IM–3013 will reasonably serve to 

minimize duplication of effort on the 

part of members, while still ensuring the 

protection of investors. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD 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 

The foregoing proposed rule change is 

subject to Section 19(b)(3)(A)(iii) of the 

Act 10 and Rule 19b–4(f)(6) thereunder 11

because the proposal (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest; 

provided that the self-regulatory 

organization has given the Commission 

notice of its intent to file the proposed 

rule change, along with a brief 

description of the text of the proposed 

rule change, at least five business days 

prior to the date of filing of the 

68124 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

12For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

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

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchanged (1) 

clarified who may phone orders into the NSX 

Control Room, (2) defined ‘‘cross’’ and ‘‘meet,’’ and 

(3) made other technical changes.

4 In Amendment No. 2, the Exchange made a 

correction to the rule text.

515 U.S.C. 78s(b)(3)(A)(ii).

617 CFR 240.19b–4(f)(2).

proposed rule change, or such shorter 

time as designated by the Commission.

NASD has requested that the 

Commission waive the five-day prefiling requirement and the 30-day 

operative delay so that the proposed 

rule change will become immediately 

effective upon filing. The Commission 

believes that waiving the five-day prefiling provision and the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest.12 Waiving the pre-filing 

requirement and accelerating the 

operative date will merely permit the 

immediate implementation of changes 

that will allow firms to more efficiently 

discharge their reporting obligations. 

For these reasons, the Commission 

designates the proposed rule change as 

effective and operative immediately.

At any time within 60 days of the 

filing of such 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–2005–121 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–9303.

All submissions should refer to File 

Number SR–NASD–2005–121. 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, 100 F Street, NE, Washington, DC 

20549. Copies of such filing also will be 

available for inspection and copying at 

the principal office of 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 the File 

Number SR–NASD–2005–121 and 

should be submitted on or before 

November 30, 2005.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.13

Jonathan G. Katz, 

Secretary.

[FR Doc. 05–22335 Filed 11–8–05; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52713; File No. SR–NSX–

2005–08] 

Self-Regulatory Organizations; 

National Stock Exchange; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change and 

Amendments No. 1 and 2 Thereto 

Relating to Manual Processing Fee 

November 1, 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 28, 2005, National Stock 

ExchangeSM (‘‘Exchange’’ or ‘‘NSXSM’’) 

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 the Exchange. 

On October 21, 2005, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 On October 31, 2005, the 

Exchange filed Amendment No. 2 to the 

proposed rule change.4 The Exchange 

filed the proposed rule change pursuant 

Section 19(b)(3)(A)(ii) of the Act 5 and 

Rule 19b–4(f)(2) 6 thereunder, which 

renders the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NSX proposes to amend its manual 

processing fee for crosses and meets 

phoned into the NSX Control Room and 

the book fees charged to its Designated 

Dealers. 

The text of the proposed rule change 

is reproduced below. Additions are 

indicated by italics. Deletions are 

contained within the brackets. 

RULES OF NATIONAL STOCK 

EXCHANGE

* * * * *

CHAPTER XI 

Trading Rules

* * * * *

Rule 11.10 National Securities Trading 

System Fees 

A. Trading Fees 

(a)–(d) No change. 

(e) Crosses and Meets 

(1)–(3) No change. 

(4) Users executing crosses and meets 

in Tape A, B or C securities through the 

Exchange’s System Supervisory Center 

shall be charged [$15 per contra-party] 

$.0025 per share, up to a maximum of 

$75 per side of transaction. This 

transaction fee shall be in lieu of any 

transaction fee otherwise applicable 

under Paragraphs (A)(e)(1) through 

(A)(e)(3) above. 

(f)–(l) No change. 

(m) DD Issue/Book Fees. Designated 

Dealers will be charged a monthly book 

fee based on the following incremental 

schedule:

Number of issues Fee per 

issue 

0 to 150 ........................................ $30.00 

151 to 300 .................................... 20.00 

301 to 500 .................................... 15.00