30272 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

1On June 5, 1996, the NASD filed Amendment

No. 1 to the proposed rule change to clarify that

rather than submitting entirely new forms for the

Commission’s approval, the filing seeks to amend

currently existing Forms U–4 and U–5. Amendment

No. 1 was submitted along with a redlined version

of the signature page (page 4) for Form U–4 to

highlight the revisions to that part of the Form.

Letter from Craig 1. Landauer, Associate General

Counsel, NASD to Mark P. Barracca, Special

Counsel, SEC, dated June 5, 1996.

The NASD has established a rollout

schedule which began in May 1996 with

approximately eleven member firms and

one service bureau being involved in a

pilot test. It is anticipated that the pilot

firms will file all forms electronically in

the new CRD system on approximately

July 29, 1996.

The NASD Board in assessing the

impact of mandatory electronic filing on

smaller members decided to divide the

membership into two groups. This was

done by analyzing the average number

of filings a firm makes in conjunction

with the number of registered persons

employed at the firm. The analysis

revealed that firm which employ 50 or

more registered persons are responsible

for an overwhelming majority of the

filings. Therefore, the Board used this

criteria as the dividing point for the two

groups. The NASD used April 26, 1996

as the date to divide the members. On

that date, there were 813 members who

employed 50 or more registered persons

(‘‘Group I’’) and approximately 4,600

members with less than 50 registered

persons (‘‘Group II’’).

The rollout schedule for all NASD

members is as follows. These firms have

been divided among the five NASD

Service and Quality teams. Team 1 goes

into production on approximately

September 9, 1996, Teams 2 and 3 on

approximately October 7, 1996, and

Teams 4 and 5 on approximately

November 4, 1996.

Firms in Group II may comply with

the electronic filing requirement

through any of three methods: (1) they

may file electronically on their own; (2)

they may utilize a third-party vendor to

file on their behalf; or (3) for a period

of one year commencing on September

9, 1996 and ending on September 9,

1997, for a prescribed fee, these firms

may file paper forms with the NASD

which through its own internal

processing unit will file the forms with

the new CRD system.

The NASD is also amending its

Membership and Registration Rules to

establish electronic filing protocols.

Under these protocols the member will:

(1) Designate a Registered Principal(s)

or corporate officer(s) to be responsible

for supervising the electronic filing of

appropriate filings with such

responsibility to acknowledge,

electronically, that the filing is on behalf

of the firm and the member firm’s

associated persons.

(2) Retain and provide upon

regulatory request original, signed Form

U–4s which were electronically

processed as initial or transfer

applications as part of the

recordkeeping requirements.

(3) File amendments to administration

data without the signature of the subject

individual. Such information includes

the addition of state or SRO registration,

exam scheduling and updates to

residential, business and personal

history.

(4) File amendments to disclosure

data electronically provided that the

subject person has acknowledged that

the information has been received and

reviewed. This acknowledgement must

be retained and provided upon

regulatory request.

(5) File initial and amended Form U–

5 Notice of Terminations electronically.

The filing firm must make the filings

available upon regulatory request.

The NASD believes that the proposed

rule changes are consistent with the

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

Act in that mandatory electronic filing

with the new CRD system will provide

efficient processing of registrationrelated filings and will allow for easy

access to information in these filings by

all industry and regulatory participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The 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

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 self-regulatory

organization 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 the file

number in the caption above and should

be submitted by July 5, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–15181 Filed 6–13–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37289; File No. SR–NASD–

96–19]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating of Proposed

Amendments to Forms U–4 and U–5

June 7, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on May 16, 1996, the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the NASD.1 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

The NASD is proposing to amend the

Uniform Application for Securities
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30273

2Copies of the revised Forms U–4 and U–5 were

attached as Exhibit 2 to the NASD’s rule proposal

and are available for inspection and copying in the

Commission’s Public Reference Room and are

available from the NASD.

3The Commission is simultaneously publishing

notice of NASD’s proposed rule changes to its ByLaws and Membership and Registration Rules that

will require member firms to submit information on

Forms U–4, U–5, and BD via electronic means and

to establish electronic filing protocols. File No. SR–

NASD–96–21; Securities Exchange Act Release No.

37291 (June 7, 1996).

4Registered representatives will not be required

to refile Form U–4 with the NASD as a result of the

changes to the form. Registered representatives,

however, will continue to be subject to the

requirement to update their forms when any

information becomes inaccurate or incomplete.

When updating a particular item, all information

relating to that item must be completed, including

DRP pages, if applicable.

Industry Registration or Transfer, Form

U–4, and the Uniform Termination

Notice for Securities Industry

Registration, Form U–5.2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

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. The 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

The NASD is proposing to amend the

Uniform Application for Securities

Industry Registration or Transfer, Form

U–4 and the Uniform Termination

Notice for Securities Industry

Registration, Form U–5.

Since November 1993, in support of

efforts to redesign the Central

Registration Depository (CRD), a task

force comprising the North American

Securities Administrators Association

(NASAA), industry representatives, the

SEC, NASD and other SROs has worked

to revise the uniform registration forms

(Form U–4 and Form U–5). The NASD

has undertaken an extensive redesign

effort to improve the CRD which will

require electronic filing of registrationrelated forms.3 Currently scheduled for

pilot phase during the second quarter of

1996, the redesigned CRD will offer

efficient processing of registrationrelated filings and user friendly access

to information contained in those filings

for all industry and regulatory

participants.

The revised forms define how the

information will be collected and stored

in the revised CRD. Implementation of

the amended forms will coincide with

implementation of the redesigned CRD.

The forms revision effort has dealt with

bringing better clarify and fairness into

the reporting of disclosable information.

The most significant changes relate to

the disclosure questions on Forms U–4

and U–5. The revisions will provide for

more detailed reporting to support new

functionality created by CRD’s redesign.

The forms have been revised to include:

• Expansion of Page 1 of Form U–4

and the parallel items on Form U–5 to

handle the registration of non-members

and to accommodate multiple types of

registration or notices of termination for

Investment Adviser Representative and

Agent of Issuer registrations. (In the long

term, the new CRD will ultimately

contain licensing data bases for nonmembers.)

• Addition of a statement on Page 4

of Form U–4 that will be executed by

the applicant and retained by the

member firm, that authorizes the

member firm to make electronic filings

on behalf of the applicant.

• An option for the applicant and

member firm to request on the Form U–

4 processing under a Relicensing

Program. This program is intended to

replace the existing Temporary Agent

Transfer (TAT) Program. The new

program will result in expedited

handling for eligible persons including

most individuals who previously have

reported an affirmative answer to

disclosure questions on their Forms U–

4, but who have no new disclosure upon

transfer. Even if there is new disclosure,

the applicant may have an opportunity

to gain a Temporary Registration while

that disclosure is reviewed.

• An opportunity for an individual to

provide a summary of the circumstances

relating to an internal review disclosure

submitted by the individual’s former

employer on the Form U–5. Individuals

already have the opportunity to provide

responses to other Form U–5 disclosures

on their next U–4 filing upon transfer to

a new employer.

• Item 22, the disclosure question on

the Form U–4 and the parallel

disclosure items on the Form U–5 have

been made consistent with each other to

the extent possible.

• The questions relating to disclosure

have been categorized to provide a

uniform format to collect, display and

sort disclosure detail.

• Each category of disclosure has its

own custom Disclosure Reporting Page

(DRP) soliciting detail unique to that

category.

• Each custom DRP solicits detail to

provide the information that regulators

have indicated they need in order to

make informed registration decisions.

The revised DRPs require more detail

than the current DRPs, which will

reduce the number of requests for

additional disclosures that prolong the

review and registration process.

The forms also contain a new

customer complaint question. The

question was developed after much

discussion between representatives from

the NASD, NASAA and the securities

industry. The NASD believes the new

question will greatly simplify and

clarify what types of complaints have to

be reported on the Forms U–4 and U–

5. The question will require the

reporting of all written customer

complaints which allege sales practice

rule violations and compensatory

damages of $5,000 or more. The

definition of sales practice violations

will be included in the explanation of

terms section of the forms. The NASD

intends to issue a Notice to Members

which will include a list of examples of

sales practice violations under this

section and the instructional software in

the new CRD system will have this list

as well. The NASD will periodically

revise this list as warranted. Written

complaints, which do not evolve into

arbitration, civil litigation or a

settlement over the jurisdictional

amount, would be deleted from the CRD

system two years from the date of the

complaint. All arbitration and civil

litigation proceedings involving

securities transaction matters will be

reported regardless of the dollar amount

of compensatory damages. All

settlements of $10,000 or more will be

reported as well.

The NASD began a test pilot phase of

the new CRD system on approximately

May 20, 1996 with eleven firms and one

service bureau who agreed to

participate. The pilot participants will

go into actual production on the new

system on approximately July 29, 1996

using the revised Forms U–4 and U–5.

The NASD intends to phase-in the use

of the amended Forms with the

remaining NASD members commencing

on approximately September 9, 1996

and concluding on approximately

November 7, 1996.4

The NASD believes that the amended

Forms U–4 and U–5 are consistent with

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

the Act in that the NASD is required to

adopt appropriate qualification and

registration requirements for persons

associated with NASD members or
30274 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

1 15 U.S.C. 78s(b)(1) (1988).

2The Commission has modified the text of the

summaries prepared by NSCC.

3The exact changes to NSCC’s fee schedule are

attached as Exhibit A.

4 15 U.S.C. 78q–1(b)(3)(D) (1988).

5 15 U.S.C. 78s(b)(3)(A)(ii) (1988).

6 17 CFR 240.19b–4(e)(2) (1995).

applicants for NASD membership.

Article IV, Section 2 of the NASD ByLaws authorizes the Board to prescribe

the form used by any person who

wishes to make application for

registration with the NASD. The NASD

believes the amended forms will make

the filing of disclosable information

easier and more efficient and will

provide more complete information for

use by securities regulators.

(B) Self-Regulatory Organization’s

Statement on Burden on competition

The 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

Within 35 days of the 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 self-regulatory organization

consents, the Commission will:

(A) By order approve the 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 the file

number in the caption above and should

be submitted by July 5, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–15183 Filed 6–13–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37293; File No. SR–NSCC–

96–12]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing and

Immediate Effectiveness of a Proposed

Rule Change Revising Service Fees

June 10, 1996.

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

Securities Exchange Act of 1934

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

April 23, 1996, the National Securities

Clearing Corporation (‘‘NSCC’’) 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 NSCC.

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

The purpose of the proposed rule

change is to revise NSCC’s fee schedule.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In it 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. Set forth in sections

(A), (B), and (C) below, are the most

significant aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of this rule change is to

reduce five existing service fees. The

revisions to the fee schedule are being

made as a result of increased trading

volumes and the related reduction in

costs with respect to these services. Fees

relating to equity trade recording,

certain clearance services, Automated

Customer Account Transfer Service/

Transfer Initiation Form submissions,

Networking accounts, and Fund/Serv

transactions are being reduced.3 The

new fees will be effective as of May 1,

1996.

NSCC believes the proposed rule

change is consistent with the

requirements of Section 17A(b)(3)(D) of

the Act,4 and the rules and regulations

thereunder because it provides for the

equitable allocation of dues, fees, and

other charges among NSCC’s

participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will impact or

impose a 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 have been

solicited or received. NSCC will notify

the Commission of any written

comments received by NSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

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

to Rule 19b–4(e)(2) 6 promulgated

thereunder because the proposal

changes a due, fee, or other charge

imposed by NSCC. At any time within

sixty days of the filing of such 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent