Document ID: SEC-2006-0222-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-02-21T05:00Z

[Federal Register: February 21, 2006 (Volume 71, Number 34)]
[Notices]               
[Page 8875-8877]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21fe06-83]                         

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53276; File No. SR-NASD-2005-098]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto Relating to the Submission of SEC Rule 15c2-11 
Information on Non-Nasdaq Securities

February 13, 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 August 18, 2005, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') proposed rule change SR-NASD-2005-098 as 
described in Items I, II, and III below, which Items have been prepared 
by NASD. On January 10, 2006, NASD filed Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made certain technical and clarifying 
changes to the original rule filing of August 18, 2005. Amendment 
No. 1 supersedes and replaces the original rule filing in its 
entirety.
---------------------------------------------------------------------------

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

    NASD is proposing to amend NASD Rule 6740 to (1) relieve members of 
the obligation to file with NASD copies of certain information that is 
electronically accessible through the SEC's Electronic Data Gathering, 
Analysis, and Retrieval (``EDGAR'') system; and (2) exclude from NASD 
Rule 6740 quotation activity for which the SEC has granted an exemption 
under SEC Rule 15c2-11(h). Below is the text of the proposed rule 
change. Proposed new language is italicized; proposed deletions are in 
[brackets].
* * * * *

[[Page 8876]]

6740. Submission of Rule 15c2-11 Information on Non-Nasdaq Securities

    (a) Except as provided in SEC Rule 15c2-11(f)(1), (2), (3), and (5) 
and 15c2-11(h) under the Act, no member shall initiate or resume the 
quotation of a non-Nasdaq security in any quotation medium unless the 
member has demonstrated compliance with this rule and the applicable 
requirements for information maintenance under Rule 15c2-11. A member 
shall demonstrate compliance by making a filing with, and in the form 
required by, [the Association] NASD, which filing must be received at 
least three business days before the member's quotation is published or 
displayed in the quotation medium.
    (b) The information to be filed shall contain one copy of all 
information required to be maintained under SEC Rule 15c2-11(a)(1), 
(2), (3)(iii), (4)(ii), or (5), including any information that may be 
required by future amendments thereto. Members are not required to file 
with NASD copies of any information that is available through the SEC's 
Electronic Data Gathering, Analysis, and Retrieval (``EDGAR'') system; 
provided, however, that the filing with NASD shall contain identifying 
information for each issuer report or statement available through EDGAR 
that was relied upon in satisfying the member's obligations under this 
Rule and SEC Rule 15c2-11(a), including the type of report, report date 
and any other information as may be requested by NASD. In addition, 
this filing shall identify the issuer, the issuer's predecessor in the 
event of a merger or reorganization within the previous 12 months, the 
type of non-Nasdaq security to be quoted (e.g., ADR, warrant, unit, or 
common stock), the quotation medium to be used, the member's initial or 
resumed quotation, and the particular subsection of Rule 15c2-11 with 
which the member is demonstrating compliance. Additionally, if a member 
is initiating or resuming quotation of a non-Nasdaq security with a 
priced entry, the member's filing must specify the basis upon which 
that priced entry was determined and the factors considered in making 
that determination.
    (c) If a member's initial or resumed quotation does not include a 
priced entry, a member shall supplement its prior filing under this 
Rule, in the form required by [the Association] NASD, before inserting 
a priced entry for the affected non-Nasdaq security in a quotation 
medium. The supplemental filing shall specify the basis upon which the 
proposed priced entry was determined and the factors considered in 
making that determination. The supplemental filing must be received by 
[the Association] NASD at least three business days before the member's 
priced entry first appears in a quotation medium.
    (d) All filings made with [the Association] NASD under this Rule 
must be reviewed and signed by a principal of the member firm.
* * * * *

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 Rule 6740 prohibits a member from initiating or resuming the 
quotation of a non-Nasdaq security \4\ in a quotation medium unless the 
member has demonstrated compliance with the requirements of SEC Rule 
15c2-11 pertaining to the review and maintenance of specified 
information about the security and issuer. To demonstrate compliance 
with both NASD Rule 6740 and SEC Rule 15c2-11, a member must file with 
NASD a Form 211, together with the information required under SEC Rule 
15c2-11(a), at least three business days before the quotation is 
published or displayed.
---------------------------------------------------------------------------

    \4\ For purposes of this rule, ``non-Nasdaq security'' is 
defined in NASD Rule 6710(c) as ``any equity security that is 
neither included in The Nasdaq Stock Market nor traded on any 
national securities exchange.''
---------------------------------------------------------------------------

    Much of the information that is required under SEC Rule 15c2-11(a) 
for reporting issuers, such as prospectuses, offering circulars and 
annual reports, is publicly available through the SEC's EDGAR system. 
NASD believes that there is no policy purpose served in requiring 
members to file with NASD copies of such information. Accordingly, NASD 
is proposing to relieve members of the obligation to file with NASD 
copies of information that is electronically accessible through the 
SEC's EDGAR system. NASD believes the proposed rule change, as amended, 
will eliminate the administrative burden and cost imposed on members in 
furnishing such information to NASD. Although members will not be 
required to file the information with NASD, they will nonetheless 
remain obligated under NASD Rule 6740 to review and maintain 
information as required by SEC Rule 15c2-11.
    In addition, members currently are required to identify on the Form 
211 the type and date of each report or statement that is submitted to 
NASD. Under the proposed rule change, as amended, where copies of 
documents are not submitted to NASD because they are available through 
EDGAR, members will continue to be required to provide on the Form 211 
the type and date of each report or statement, as well as other 
information as may be requested by NASD relating to each report or 
statement for the reporting issuer that the member relied upon in 
satisfying its information review obligations under NASD Rule 6740 and 
SEC Rule 15c2-11(a).\5\
---------------------------------------------------------------------------

    \5\ If information other than the type and date of the statement 
or report is required to be submitted by members under this proposed 
provision, NASD will provide notice of these additional requirements 
in a Notice to Members.
---------------------------------------------------------------------------

    In addition, paragraphs (f) and (h) of SEC Rule 15c2-11 set forth 
the exclusions to the rule's information review and maintenance 
requirements. NASD Rule 6740(a) tracks the SEC Rule 15c2-11(f) 
exceptions,\6\ but does not contain an exclusion for those quotations 
pursuant to which the Commission has granted an exemption, upon request 
or its own motion, under SEC Rule 15c2-11(h). NASD believes that the 
terms for filing a Form 211 under NASD Rule 6740 should conform to SEC 
Rule 15c2-11; members should not be required to review, maintain and 
file information under the NASD rule if there is no similar obligation 
under the SEC rule. Accordingly, NASD is proposing to amend NASD Rule 
6740 to relieve members of their obligations under the rule in the 
event that the Commission has granted an exemption to any quotation 
under SEC Rule 15c2-11(h). To the extent that the Commission's 
exemptive relief applies any terms and conditions to such relief, those 
same terms and conditions would apply to the exclusion under NASD Rule 
6740.
---------------------------------------------------------------------------

    \6\ Because the definition of ``non-Nasdaq security'' under NASD 
Rule 6710(c) excludes debt instruments, NASD Rule 6740 does not 
refer to subsection (f)(4) of SEC Rule 15c2-11, which relates to 
municipal securities.
---------------------------------------------------------------------------

    Finally, NASD no longer refers to itself using its full corporate 
name, ``the

[[Page 8877]]

Association,'' or ``the NASD.'' Instead, NASD uses the name ``NASD'' 
unless otherwise appropriate for corporate or regulatory reasons. 
Accordingly, the proposed rule change, as amended, replaces, as a 
technical change, several references in NASD Rule 6740 to ``the 
Association'' with the name ``NASD.''
    NASD will announce the effective date of the proposed rule change, 
as amended, in a Notice to Members to be published no later than 60 
days following Commission approval. The effective date will be 30 days 
following publication of the Notice to Members announcing Commission 
approval.
2. Statutory Basis
    NASD believes that the proposed rule change, as amended, 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 harmonizing NASD 
Rule 6740 and SEC Rule 15c2-11, so that members are not required to 
review, maintain and file information under the NASD rule when they are 
not required to review and maintain such information under the SEC 
rule, is consistent with the Act. Moreover, SEC Rule 15c2-11 is, by its 
terms, ``a means reasonably designed to prevent fraudulent, deceptive 
or manipulative acts or practices,'' and thus, NASD believes that 
harmonizing NASD Rule 6740 and SEC Rule 15c2-11 is consistent with the 
protection of investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change, as amended, 
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, as amended, or
    (B) Institute proceedings to determine whether the proposed rule 
change, as amended, should be disapproved.

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-2005-098 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-2005-098. 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-
098 and should be submitted on or before March 10, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-2368 Filed 2-17-06; 8:45 am]

BILLING CODE 8010-01-P