Document ID: SEC-2007-0069-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Posted Date: 2007-01-17T05:00Z

[Federal Register: January 17, 2007 (Volume 72, Number 10)]
[Notices]               
[Page 2055-2056]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ja07-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55078; File No. SR-NASD-2006-136]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Make Technical and Grammatical Corrections to Rule 10308

January 10, 2007.
    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 December 28, 2006, the National Association of Securities Dealers, 
Inc. (``NASD'') 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 NASD. NASD has 
filed this proposal 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.\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\ 3 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ NASD informed the Commission staff that a clerical error was 
made in its filing and the word ``individual's'' in paragraph 
(a)(5)(B)(iii) of Rule 10308 should be lowercase. Telephone 
conversation between Jean Feeney, Vice President, NASD; and Michael 
Hershaft, Special Counsel, Commission (Jan. 9, 2006). Because this 
is a non-substantive change, this amendment to the proposed rule 
change will not toll the 60-day abrogation period.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend paragraph (a)(5)(B) of Rule 10308 of the 
NASD Code of Arbitration Procedure to delete unnecessary cross 
references in the definition of ``immediate family member,'' and to 
correct a grammatical error.\6\ The text of the proposed rule change is 
below. Proposed new language is in italics; proposed deletions are in 
brackets.
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    \6\ The Commission recently approved amendments to Rule 10308, 
effective Jan. 15, 2007. Securities Exchange Act Release No. 54607 
(Oct. 16, 2006), 71 FR 62026 (Oct. 20, 2006) (file No. SR-NASD-2005-
094).
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10308. Selection of Arbitrators

    (a) Definitions
    (1) through (4) No change.
    (5) ``public arbitrator''
    (A) No change.
    (B) For [the] purposes of this Rule, the term ``immediate family 
member'' means:
    (i) [The] a person's parent, stepparent, child, or stepchild[, of a 
person engaged in the conduct or activities described in paragraphs 
(a)(4)(A) through (D)];
    (ii) A member of [the] a person's household [of a person engaged in 
the conduct or activities described in paragraphs (a)(4)(A) through 
(D)];
    (iii) An individual to whom a person [who receives] provides 
financial support of more than 50 percent of the individual's annual 
income [from a person engaged in the conduct or activities described in 
paragraphs (a)(4)(A) through (D)]; or
    (iv) A person who is claimed as a dependent for federal income tax 
purposes [by a person engaged in the conduct or activities described in 
paragraphs (a)(4)(A) through (D)].
    (6) through (7) No change.
    (b) through (f) 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 believes that the cross-references to ``a person engaged in 
the conduct or activities described in paragraph (a)(4)(A) through 
(D)'' in the definition of immediate family member in paragraphs 
(a)(5)(B)(i)-(iv) of Rule 10308 are redundant when read in conjunction 
with other provisions of the rule. For example, Rule 
10308(a)(5)(A)(vii) provides that a person may be a public arbitrator 
if he or she ``is not the spouse or immediate family member of a person 
who is engaged in the conduct or activities described in paragraphs 
(a)(4)(A) through (D).'' The definition of ``immediate family member'' 
in Rule 10308(a)(5)(B) states, in part, ``For the purpose of this Rule, 
the term ``immediate family member'' means * * * (i) the parent, 
stepparent, child, or stepchild, of a person engaged in the conduct or 
activities described in paragraphs (a)(4)(A) through (D).'' Thus, both 
the rule and the definition refer redundantly to ``a person [who is] 
engaged in the conduct or activities described in paragraphs (a)(4)(A) 
through (D).''
    Moreover, new paragraphs (a)(5)(A)(v) and (vi) of Rule 10308 were 
recently added to provide that persons who are otherwise qualified may 
not serve as public arbitrators if they have certain family members who 
are employed by, or serve as officers or directors of, entities in a 
control relationship with a broker-dealer.\7\ In these instances, there 
is no need to refer to paragraphs (a)(4)(A) through (D) as those 
paragraphs are not at issue. Rather, what is important is the family 
relationship itself.
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    \7\ Id.
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    For these reasons, NASD proposes to amend the examples of family 
relationships in the definition of ``immediate family member'' in 
paragraphs (a)(5)(B)(i)-(iv) of Rule 10308 in a non-substantive way to 
retain the relationships themselves but omit the references to 
paragraphs (a)(4)(A) through (D) of the rule. As noted above, because 
this reference is in Rule 10308(a)(5)(A)(vii), arbitrators who have an 
immediate family member engaged in the conduct or activities described 
in paragraphs (a)(4)(A) through (D) of the rule will continue to be 
ineligible to serve as public arbitrators. Arbitrators, who do not have 
immediate family members engaged in the conduct or activities described 
in paragraphs (a)(4)(A) through (D) of the rule, still may be subject 
to new paragraphs (a)(5)(A)(v) and (vi) of Rule 10308, which governs 
public arbitrators.
    In deleting the references to paragraphs (a)(4)(A) through (D), 
discussed above, NASD has rearranged phrases to provide additional 
clarity. In so doing, NASD does not intend to make any change in the 
substance of the definitions or in how they are construed.
    Finally, NASD proposes to correct a grammatical error in Rule 
10308(a)(5)(B) by replacing the term ``for the purpose of'' with the 
more common phrase ``for

[[Page 2056]]

purposes of,'' which is used in the remainder of the rule.\8\
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    \8\ See, e.g., Rule 10308(a)(1), (2), (6), and (7).
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    NASD has filed this proposed rule change for immediate 
effectiveness so that these proposed non-substantive changes to the 
definition of ``immediate family member'' can become operational on 
January 15, 2007, the same time as the most recent changes to the 
definition of public arbitrator.\9\ NASD believes this proposal will 
help clarify Rule 10308, and make it easier to determine the proper 
classification of an arbitrator.
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    \9\ See infra note 7.
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among 
other things, that NASD's rules 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 the proposed rule change is 
consistent with the provision of the Act noted above because it will 
assist in the administration of arbitrations by making Rule 10308 
easier to understand and apply.
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    \10\ 15 U.S.C. 78o-3(b)(6).
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(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.

(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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act\11\ and Rule 19b-4(f)(6) 
thereunder\12\ because the 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 if consistent with 
the protection of investors and the public interest. As required under 
Rule 19b-4(f)(6)(iii),\13\ NASD provided the Commission with written 
notice of NASD's intent to file the proposed rule change along with a 
brief description and text of the proposed rule change, at least five 
business days prior to the filing date of the proposed rule change.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    NASD has requested that the Commission waive the 30-day operative 
delay so that the proposed rule change will become immediately 
effective upon filing. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest,\14\ as such waiver is necessary so that the proposed 
rule changes will become effective with other amendments to Rule 10308 
on January 15, 2007. For these reasons, the Commission designates that 
the proposed rule change has become effective and operative 
immediately.
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    \14\ For purposes only 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 such 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-2006-136 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-2006-136. 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 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-2006-136 and should be 
submitted on or before February 7, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-525 Filed 1-16-07; 8:45 am]

BILLING CODE 8011-01-P