Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30269

2Letters from Anthony H. Davidson, MBSCC, to

Christine Sibille, Division of Market Regulation

(‘‘Division’’), Commission (March 18, 1996) and to

Mark Steffensen, Division, Commission (May 30,

1996).

3The Commission has modified the text of the

summaries prepared by MBSCC.

4The purpose of the daily margin requirement

(‘‘MMD’’) is to ensure that a participant’s open

obligations to MBSCC will be satisfied in the event

the participant is unable to meet such obligations.

MMD is derived from a formula which assesses

various factors including the type of position held

and marked-to-market value fluctuations. The

purpose of the minimum market margin deposit

(‘‘3MD’’) is to provide additional assurances that

each participant’s fund contributions will be

adequate to satisfy all open commitments recorded

with MBSCC. Currently, the deposit required to

satisfy this component of the participant fund is

$250,000 per participant. The proposed rule change

will not affect the requirements of MBSCC

participants with regard to the MMD and 3MD

components of the participant’s fund.

5Notwithstanding the purposes of the basic

deposit, MMD, and 3MD components of the

participants fund, MBSCC is not limited in its

application of participant fund proceeds. Rather,

MBSCC can utilize the total participants fund to

satisfy a participant’s obligations irrespective of the

type of default.

6MBSCC determined that its participants on

average maintain two accounts at MBSCC.

Presently, the monthly maintenance fee per account

is $350 or $700 for two accounts. MBSCC based the

minimum deposit amount of $1,000 upon these

averages and other participant usage data.

7 15 U.S.C. § 78q–1 (1988). 8 17 CFR 200.30–3(a)(12) (1995)

Corporation (‘‘MBSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–MBSCC–96–01)

and amended such filing on March 25,

and May 30, 1996,2 as described in

Items I, II, and III below, which items

have been prepared primarily by

MBSCC. 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 proposed rule change will revise

MBSCC’s rules to modify MBSCC

participants’ deposit requirements to the

participants fund.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In Its filing with the Commission,

MBSCC included statements concerning

the purpose of and basic 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. MBSCC has prepared

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

and (C) below, of the most significant

aspects of such statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The MBSCC participant fund is

composed of a basic deposit, a

minimum market margin deposit, and a

daily margin requirement.4 The basic

deposit component is intended to

ensure that a participant’s obligations to

MBSCC for services will be satisfied if

the participant is unable to meet such

obligations.5 Currently, the basic

deposit component is $10,000, which

must be in cash for each account

maintained by a participant. The

proposed rule change will require a

minimum deposit of $1,000 for each

participant regardless of the number of

accounts maintained.6 If a participant’s

average monthly services bill, as

determined by MBSCC on a semiannual

basis, exceeds $1,000, the participant’s

minimum deposit amount will be the

amount of such average monthly

services bill up to a maximum amount

of $10,000 per account maintained by

such participant. MBSCC believes that

as a result of the proposed rule change,

participants fund deposits will reflect

more accurately each participant’s

actual services billing.

MBSCC believes that the proposed

rule change is consistent with the

requirements of Section 17A of the Act 7

and the rules and regulations

thereunder because it provides for the

equitable allocation of dues, fees, and

other charges among MBSCC’s

participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

MBSCC does not believe that the

proposed rule change will have an

impact on 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 relating to the

proposed rule change have solicited or

received. MBSCC will notify the

Commission of any written comments

received by MBSCC.

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 MBSCC 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 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, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of MBSCC. All submissions

should refer to the file number SR–

MBSCC–96–01 and should be submitted

by July 5, 1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–15180 Filed 6–13–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37291; File No. SR–NASD–

96–21]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to Mandatory

Electronic Filing of Forms U–4, U–5

and BD

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 June 7, 1996, the

National Association of Securities

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

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)
30270 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

the proposed rule change as described

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

have been prepared by the NASD. 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 herewith filing a

proposed rule change to the NASD ByLaws and Membership and Registration

Rules. Below is the text of the proposed

rule change. Proposed new language is

italicized; proposed deletions are in

brackets.

By-Laws

Ineligibility of Certain Persons for

Membership or Association

Article II Sec. 3(a)

No registered broker, dealer,

municipal securities broker or

dealer, or government securities

broker or dealer shall be admitted to

membership, and no member shall

be continued in membership, if

such broker, dealer, municipal

securities broker or dealer, or

government securities broker or

dealer, or member * * * or if such

member fails to comply with the

requirement that all forms filed

pursuant to these By-Laws be filed

via electronic process or such other

process the Corporation may

prescribe.

Application for Membership

Article III Sec. 1(a)

Application for membership in the

Corporation, properly signed by the

applicant, shall be made to the

Corporation via electronic process

or such other process the

Corporation may prescribe, on the

form to be prescribed by the

corporation, and shall contain:

* * *

Article III Sec.1 (d)

Each member shall ensure that its

membership application with the

Corporation is kept current at all

times by supplementary

amendments via electronic process

or such other process the

Corporation may prescribe to the

original application. Such

amendments to the application

shall be filed with the Corporation

not later than thirty (30) calendar

days after learning of the facts or

circumstances giving rise to the

amendment.

Executive Representative

Article III Sec. 3

Each member shall appoint and

certify to the Secretary of the

Corporation one ‘‘executive

representative’’ who shall represent,

vote and act for the member in all

the affairs of the Corporation,

except that other executives of a

member may also hold office in the

Corporation, serve on the Board of

Governors or committees of the

Corporation, or otherwise take part

in the affairs of the Corporation. A

member may change its executive

representative upon giving [written]

notice thereof via electronic process

or such other process the

Corporation may prescribe to the

Secretary, or may, when necessary,

appoint, by [written] notice via

electronic process to the Secretary,

a substitute for its executive

representative. An executive

representative of a member or a

substitute shall be a member of

senior management and registered

principal of the member.

Resignation of Members

Article III Sec. 5

Membership in the Association may

be voluntarily terminated only by

formal resignation. Resignations of

members must be filed via

electronic process or such other

process the Corporation may

prescribe [in writing] and addressed

to the Corporation which shall

immediately notify the appropriate

District Committee. Any member

may resign from the Corporation at

any time. Such resignation shall not

take effect until thirty (30) calendar

days after the receipt thereof by the

Corporation and until all

indebtedness due the Corporation

from such member shall have been

paid in full and so long as any

complaint or action is pending

against the member under the Code

of Procedure. The Corporation,

however, may in its discretion

declare a resignation effective at

any time.

Registration of Branch Offices

Article III Sec.8(b)

Each member of the Corporation shall

promptly advise the Corporation via

electronic process or such other

process the Corporation may

prescribe of the opening, [or]

closing, relocation, change in

designated supervisor or change in

designated activities of any branch

office of such member not later

than thirty (30) calendar days after

the effective date of such change.

Application for Registration

Article IV Sec.2(a)

Application by any person for

registration with the Corporation,

properly signed by the applicant,

shall be made to the Corporation via

electronic process or such other

process the Corporation may

prescribe, on the form to be

prescribed by the Corporation

[Board of Governors] and shall

contain: * * *.

Article IV Sec.2(c)

Every application for registration filed

with the Corporation shall be kept

current at all times by

supplementary amendments via

electronic process or such other

process the Corporation may

prescribe to the original

application. Such amendments to

the application shall be filed with

the Corporation not later than thirty

(30) calendar days within learning

of the facts or circumstances giving

rise to the amendment. If such

amendment involves a statutory

disqualification as defined in

Section 3(a)(39) and Section

15(b)(4) of the Act, such

amendment shall be filed not later

than ten (10) calendar days after

such disqualification occurs.

Notification by Member to Corporation

and Associated Person of Termination;

Amendments to Notification

Article IV Sec.3(a)

Following the termination of the

association with a member of a

person who is registered with it,

such member shall [promptly, but]

not [in no event] later than thirty

(30) calendar days after such

termination, give [written] notice of

the termination of such association

to the Corporation [Association] via

electronic process or such other

process the Corporation may

prescribe on a form designated by

the Corporation [Board of

Governors], and concurrently shall

provide to the person whose

association has been terminated a

copy of said notice as filed with the

Corporation [Association]. A

member which does not submit

such notification [in writing], and

provide a copy to the person whose

association has been terminated,

within the time period prescribed

shall be assessed a late filing fee as

specified by the Corporation [Board

of Governors]. Termination of

registration of such person

associated with a member shall not

take effect so long as any complaint

or action under the Code of

Procedure is pending against a

member and to which complaint or

action such person associated with
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30271

1The Commission is simultaneously publishing

notice of NASD’s proposed rule changes amending

Forms U–4 and U–5. File No. SR–NASD–96–19;

Securities Exchange Act Release No. 37289 (June 7,

1996).

a member is also a respondent, or

so long as any complaint or action

is pending against such person

individually under the Code of

Procedure. The Corporation,

however, may in its discretion

declare the termination effective at

any time.

Article IV Sec.3(b)

The member shall notify the

Corporation [Association] via

electronic process or such other

process the Corporation may

prescribe [in writing] by means of

an amendment to the notice filed

pursuant to paragraph (a) above in

the event that the member learns of

facts or circumstances causing any

information set forth in said notice

to become inaccurate or incomplete.

Such amendment shall be filed with

the Corporation [Association] and a

copy provided to the person whose

association with the member has

been terminated not later than

thirty (30) calendar days after the

member learns of facts or

circumstances giving rise to the

amendment.

Membership and Registration Rules

Electronic Filing Rules

Registration—Electronic Filing

This Part has been prepared pursuant

to the provisions of Article II Section 2,

Article III Section 1, and Article IV

Sections 2 and 3 of the NASD By-Laws

and contains the requirements of filing

the appropriate forms for members and

persons associated with members.

(1) Filing Requirement:

All forms required to be filed by these

By-Laws shall be filed through an

electronic process or such other

process the Corporation may

prescribe to the Central Registration

Depository.

(2) Supervisory Requirements:

(a) In order to comply with the

supervisory procedures requirement

in Rule 3010 of the Conduct Rules,

each member must identify a

Registered Principal(s) or corporate

officer(s) who has a position of

authority over registration

functions, to be responsible for

supervising the electronic filing of

appropriate forms pursuant to this

Part.

(b) The Registered Principal(s) or

corporate officer(s) who has or have

the responsibility to review and

approve the forms filed pursuant to

this Part will be required to

acknowledge, electronically, that he

is filing this information on behalf

of the firm and the member firm’s

associated persons.

(3) Form U–4 Filing Requirements:

(a) Initial and transfer electronic

application filings will be based on

a signed Form U–4 provided to the

firm by the applicant. As part of the

member firm’s recordkeeping

requirements, it must retain the

applicant’s signed Form U–4 and

make it available upon regulatory

request.

(b) Amendments to the disclosure

information in Item 22 can be filed

electronically without obtaining the

associated person’s signature on

Form U–4. The member will be

required to provide the associated

person with a copy of the amended

disclosure information that was

filed. In providing this material to

the associated person, the firm must

obtain the written

acknowledgement that the

information has been received and

reviewed. The member must

maintain this acknowledgement in

its books and records and must

make it available upon regulatory

request.

(4) Form U–5 Filing Requirements:

(a) Initial filings and amendments of

Form U–5 will be done

electronically. As part of the

member firm’s recordkeeping

requirements, it must make them

available upon regulatory request.

(5) A Member may employ a third party

to file the required forms

electronically on its behalf, if the

member and the third party have

executed NASD’s Broker-Dealer

Agent—Filing Addendum To CRD

Subscribe Agreement.

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

Since 1992, the NASD has undertaken

an extensive redesign effort to improve

the Central Registration Depository

(‘‘CRD’’) with the goal of requiring total

electronic filing of registration-related

forms. The central focus of the redesign

effort is to provide efficient, reliable,

effective, state-of-the-art systems and

procedures at reasonable cost to support

licensing and regulation of the securities

industry. Implementation of mandatory

electronic filing will eliminate delays in

processing information in hard copy.

The redesigned CRD will offer efficient

processing of registration-related filings

and user friendly access to information

contained in those filings for all

industry and regulatory participants. A

detailed discussion of the CRD

implementation plan appeared in the

December 1995 issue of Membership On

Your Side.

The revisions to the By-Laws include

amendments that require filers to

submit information on Forms U–4, U–5,

and BD via electronic means.1 The

impact of this requirement on small

member firms with limited access and

form filing needs was considered by the

Board of Governors. The Board

addressed this concern, by providing all

firms with the option to contract with

third party vendors to handle the filings

with the CRD. The Board also

determined to give firms who have less

than fifty registered persons the option

to file electronically, utilize a thirdparty service bureau or file with the

NASD’s internal processing unit.

Member firms can choose for

themselves based upon their needs

whether to access the system directly by

acquiring the necessary hardware and

software and training their registration

staff or to access the system indirectly

via a third party agent or service bureau.

NASD Membership staff are working

with the vendors and service bureaus to

make sure they are prepared to provide

this service to members.

Specific By-Law provisions which

currently require filers to use ‘‘forms’’ or

provide ‘‘written notification’’ are

changed to require filing by electronic

process or such other process as the

NASD may prescribe. The provisions

which refer to the filer obligations to

keep applications ‘‘current’’ have been

revised to set out more specific

requirements including specific time

frames (usually 30 days) for the filing of

information. In addition, the NASD’s

membership eligibility criteria are

amended to require firms to file via the

electronic process. Firms who fail to

comply with the electronic filing

requirement may be subject to

suspension or cancellation of

membership.
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