Document ID: SEC-2005-0005-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2005-09-21T04:00Z

[Federal Register: September 21, 2005 (Volume 70, Number 182)]
[Notices]               
[Page 55436-55438]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se05-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52431; File No. SR-NASD-2005-103]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Technical Changes to NASD Rule 3110 and IM-3110

September 14, 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 6, 2005, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 Nasdaq. Nasdaq 
has filed the proposal as a ``non-controversial'' rule change pursuant 
to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)\4\ 
thereunder, which renders the proposed rule change effective upon 
filing with the Commission.\5\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \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(f)(6).
    \5\ Nasdaq asked the Commission to waive the 30-day operative 
delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is proposing to amend NASD Rule 3110 to re-label paragraph 
(d) (Changes in Account Name or Designation) as paragraph (j), and 
relocate the Interpretive Material 3110 (``IM-3110'') to the end of 
NASD Rule 3110. The text of the proposed rule change is below. Proposed 
new language is in italics; proposed deletions are in [brackets].
* * * * *

3100. BOOKS AND RECORDS, AND FINANCIAL CONDITION

3110. Books and Records

    (a) through (c) No change.
    [(d) Changes in Account Name or Designation]
    [Before any customer order is executed, there must be placed upon 
the memorandum for each transaction, the name or designation of the 
account (or accounts) for which such order is to be executed. No change 
in such account name(s) (including related accounts) or designation(s) 
(including error accounts) shall be made unless the change has been 
authorized by a member or a person(s) designated under the provisions 
of NASD rules. Such person must, prior to giving his or her approval of 
the account designation change, be personally informed of the essential 
facts relative thereto and indicate his or her approval of such change 
in writing on the order or other similar record of the member. The 
essential facts relied upon by the person approving the change must be 
documented in writing and preserved for a period of not less than three 
years, the first two years in an easily accessible place, as the term 
``easily accessible place'' is used in SEC Rule 17a-4.]
    [For purposes of this paragraph (d), a person(s) designated under 
the provisions of NASD rules to approve account name or designation 
changes must pass a qualifying principal examination appropriate to the 
business of the firm.]
    [* * *]

[IM-3110. Customer Account Information]

    [(a) Members should be aware that, effective January 1, 1990, any 
transaction which involves a non-Nasdaq, non-exchange equity security 
trading for less than five dollars per share may be subject to the 
provisions of SEC Rules 15g-1 through 15g-9, and those rules should be 
reviewed to determine if an executed customer suitability agreement is 
required.]
    [(b) Additional information is required to be obtained prior to 
making recommendations to customers (see Rule 2310) and in connection 
with discretionary accounts (see Rule 2510).]
    [(c) Accounts opened, and recommendations made prior to January 1, 
1991 remain subject to former Article III, Sections 2 and 21(c) as 
previously in effect as set forth in Notice to Members 90-52 (August 
1990).]
    [* * *]
    (d) through (i) No change.

(j) Changes in Account Name or Designation

    Before any customer order is executed, there must be placed upon 
the memorandum for each transaction, the name or designation of the 
account (or accounts) for which such order is to be executed. No change 
in such account name(s) (including related accounts) or designation(s) 
(including error accounts) shall be made unless the change has been 
authorized by a member or a person(s) designated under the provisions 
of NASD rules. Such person must, prior to giving his or her approval of 
the account designation change, be personally informed of the essential 
facts relative thereto and indicate his or her approval of such change 
in writing on the order or other similar record of the member. The 
essential facts relied upon by the person approving the change must be 
documented in writing and preserved for a period of not less than three 
years, the first two years in an easily accessible place, as the term 
``easily accessible place'' is used in SEC Rule 17a-4.
    For purposes of this paragraph (j), a person(s) designated under 
the provisions of NASD rules to approve account name or designation 
changes must pass a qualifying principal examination appropriate to the 
business of the firm.

IM-3110. Customer Account Information

    (a) Members should be aware that, effective January 1, 1990, any 
transaction which involves a non-Nasdaq, non-exchange equity security 
trading for less than five dollars per share may be subject to the 
provisions of SEC Rules 15g-1 through 15g-9, and those rules should be 
reviewed to determine if an executed customer suitability agreement is 
required.
    (b) Additional information is required to be obtained prior to 
making recommendations to customers (see Rule 2310) and in connection 
with discretionary accounts (see Rule 2510).
    (c) Accounts opened, and recommendations made prior to January 1, 
1991 remain subject to former Article III, Sections 2 and 21(c) as 
previously in effect as set forth in Notice to Members 90-52 (August 
1990).
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the

[[Page 55437]]

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. Nasdaq 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
    The Commission previously approved amendments to NASD Rule 3110 
(Books and Records) to create new paragraphs (d) and (i) concerning 
Changes in Account Name or Designation, and Holding of Customer Mail, 
respectively.\6\
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    \6\ See Securities Exchange Act Release No. 49883 (June 17, 
2004), 69 FR 35092 (June 23, 2004) (SR-NASD-2002-162).
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    In reviewing NASD Rule 3110, Nasdaq staff noticed that certain 
provisions in NASD Rule 3110 were inadvertently labeled as being part 
of the Interpretive Material, IM-3110 (Customer Account Information). 
In seeking to re-label these provisions as part of NASD Rule 3110, 
Nasdaq staff noticed that two paragraphs of NASD Rule 3110 are now 
labeled as paragraph (d). To avoid confusion, Nasdaq proposes to re-
label paragraph (d) (Changes in Account Name or Designation) as 
paragraph (j). In addition, Nasdaq proposes to move the Interpretive 
Material, IM-3110, which consists only of paragraphs (a)-(c), and is 
currently contained in the middle of NASD Rule 3110, to the end of the 
rule. This change conforms IM-3110 to Nasdaq's general practice of 
placing Interpretive Material after the rule to which it relates.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act,\7\ which requires, 
among other things, that Nasdaq 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. Nasdaq believes that this technical change is 
consistent with the protection of investors and the public interest in 
that it will avoid any confusion when reading the provisions of NASD 
Rule 3110.
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    \7\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) under the Act 
requires the self-regulatory organization to provide the Commission 
written notice of its intent to file the proposed rule change at 
least five business days (or such shorter time as designated by the 
Commission) before doing so. Nasdaq has requested that the 
Commission waive the five-day pre-filing notice requirement. The 
Commission granted Nasdaq's request.
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    Nasdaq has requested that the Commission waive the 30-day pre-
operative period, which would make the proposed rule operative 
immediately. The Commission believes waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because the proposed rule change is solely technical in nature and is 
intended to alleviate confusion when reading the provisions of NASD 
Rule 3110. For these reasons, the Commission designates the proposal to 
be effective and operative upon filing with the Commission.\10\
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    \10\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    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-2005-103 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NASD-2005-103. 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 such 
filing also will be available for inspection and copying at the 
principal office of the 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-2005-103 
and should be submitted on or before October 12, 2005.

[[Page 55438]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18767 Filed 9-20-05; 8:45 am]

BILLING CODE 8010-01-P