Document ID: SEC-2006-0441-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-04-04T04:00Z

[Federal Register: April 4, 2006 (Volume 71, Number 64)]
[Notices]               
[Page 16847-16849]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ap06-78]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53564; File No. SR-NASD-2006-038]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Proposed Amendments to NASD Rule 1013 To Adopt 
a Standardized New Member Application Form (Form NMA)

March 29, 2006.

    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 March 3, 2006, the National Association of Securities Dealers, Inc. 
(``NASD'') 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 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 filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \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 240.19-b4(f)(6). NASD gave the Commission written 
notice of its intent to file this proposed rule change on February 
8, 2006.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Rule 1013 (New Member Application and 
Interview) to adopt a standardized new member application form, Form 
NMA, to be used by all new applicants applying for membership to NASD. 
The proposed rule change also makes several technical changes to NASD 
Rules 1013 and 1014. The proposed new form is available at NASD, the 
Commission, and at http://www.nasd.com. Below is the text of the 

proposed rule change. Proposed new language is in italics; proposed 
deletions are in [brackets].
* * * * *

1013. New Member Application and Interview

(a) Filing of Application
    (1)--No Change.
(2) Contents
    An Applicant shall submit an application using NASD Form NMA. The 
application shall include:
    (A) Through (Q) No Change.
    (R) [a Web CRD entitlement request form] an NASD Entitlement 
Program Agreement and Terms of Use and an NASD Member Firm Account 
Administrator Entitlement Form [a Member Contact Questionnaire user 
access request form].
(3) Electronic Filings
    Upon approval of the Applicant's [Web CRD entitlement request form] 
NASD Member Firm Account Administrator Entitlement Form, the Applicant 
shall submit its Forms U4 for each Associated Person who is required to 
be registered under NASD Rules, any amendments to its Forms BD or U4 
and any Form U5 electronically via Web CRD. [Upon approval of the 
Applicant's membership, the Applicant shall submit any amendments to 
its Member Contact Questionnaire electronically.]
    (4) through (5) No Change.
(b) Membership Interview
    (1) through (7) No Change.
* * * * *

1014. Department Decision

(a). Standards for Admission
    (1) through (5) No Change.
    (6) The communications and operational systems that the Applicant 
intends to employ for the purpose of conducting business with customers 
and other members are adequate and provide reasonably for business 
continuity in each area set forth in Rule 1013(a)(2)([F]E)(xii);
    (7) through (14) No change.
* * * * *

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
    NASD staff has been working to make its membership application 
process more efficient and less burdensome for both new applicants and 
the staff. Applying for NASD membership is an intensive process 
requiring considerable attention to detail as well as a substantial 
time commitment. NASD Rule 1013 (New Member Application and Interview) 
identifies the requirements for submitting a new member application for 
NASD membership, including a listing of the necessary documents and a 
requirement that the applicant submit a ``substantially complete'' 
application.\5\ Pursuant to NASD Rule 1013(a)(4), NASD can reject an 
application that is not substantially complete.
---------------------------------------------------------------------------

    \5\ See NASD Rule 1013(a)(4).
---------------------------------------------------------------------------

    Although NASD Rule 1013 contains a listing of the requirements for 
a new member application submission, NASD continues to receive 
incomplete or inadequate membership applications. Such applications 
often require NASD staff to serve requests for significant additional 
information or documentation to the applicant and require a great deal 
of NASD staff time and resources to process appropriately. Applications 
initially submitted with inadequate or incomplete information result in 
increased processing times, which can have the effect of significantly 
delaying when an applicant can begin conducting business as a member of 
NASD.
    To address these issues, NASD is proposing to amend NASD Rule 1013 
to

[[Page 16848]]

include a requirement to use New Member Application Form (``Form NMA'') 
to submit any applications for NASD membership. Form NMA will not 
establish new or additional content requirements, which are already set 
forth in NASD Rule 1013, but rather, will be a means to assist new 
member applicants in the preparation of a complete application package. 
Form NMA will be organized according to the 14 individual standards for 
membership enumerated in NASD Rule 1014, and will list all required 
exhibits, forms and supporting documentation required in an application 
submission.
    Additionally, Form NMA will identify certain information as 
mandatory or required submissions in the initial application. If such 
``mandatory'' information is not provided in the initial application 
submission, the application will be deemed not ``substantially 
complete'' pursuant to NASD Rule 1013(a)(4) and will be rejected.\6\
---------------------------------------------------------------------------

    \6\ NASD can deem an application to be not ``substantially 
complete'' for other reasons. Such a determination is made based on 
the facts and circumstances of the application, the information and 
documentation requirements of NASD Rule 1013, the nature and 
complexity of the application, and the nature and extent of the 
missing or incomplete documentation.
---------------------------------------------------------------------------

    By requiring member applicants to use the prescribed Form NMA, NASD 
expects to streamline the application process by creating one unified 
application process and clearly outlining the information that must be 
submitted to process the application. Additionally, using the 
prescribed form will expedite the application review and approval 
process and will also lessen the burden on NASD staff reviewing the 
membership application by making the process of reviewing applications 
for completeness more efficient.
    Once the proposed rule change becomes effective and operative, NASD 
will make Form NMA available to applicants as part of NASD's New Member 
Application Package and through NASD's Web site. Applicants will be 
required to submit Form NMA, along with required exhibits, as an 
original, signed paper form. Additionally, NASD staff intends to 
develop systems that will allow applicants to submit Form NMA 
electronically via Web CRD[reg].
    Finally, NASD is making several technical changes. Specifically, 
NASD is deleting NASD Rule 1013's references to the Web CRD entitlement 
request form and Member Contact Questionnaire user access request form 
and, where appropriate, replacing those references with the forms' 
respective new titles--NASD Entitlement Program Agreement and Terms of 
Use and NASD Member Firm Account Administrator Entitlement Form. NASD 
is also changing an incorrect cite in NASD Rule 1014(a)(6) from NASD 
Rule 1013(a)(2)(F)(xii) to NASD Rule 1013(a)(2)(E)(xii).
    This proposed rule change is effective upon filing. NASD will 
announce the implementation date of the proposed rule change in a 
Notice to Members to be published no later than 60 days following 
Commission notice of the filing of the rule change for immediate 
effectiveness. The implementation date will be 30 days from the 
publication of the Notice to Members.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with 
Section 15A of the Act,\7\ in general, and furthers the objectives of 
Section 15A(b)(6) of the Act,\8\ in particular, 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. The proposed rule change amends NASD Rule 1013 to 
require new member applications to be submitted using Form NMA. The 
proposed rule change does not propose any new or additional content 
requirements for member applications.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 rule-comments@sec.gov. Please include 

File Number SR-NASD-2006-038 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASD-2006-038. 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 the 
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

[[Page 16849]]

should submit only information that you wish to make available 
publicly. All submissions should refer to the File Number SR-NASD-2006-
038 and should be submitted on or before April 25, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-4821 Filed 4-3-06; 8:45 am]

BILLING CODE 8010-01-P