Document ID: SEC-2006-1413-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-11-01T05:00Z

[Federal Register: November 1, 2006 (Volume 71, Number 211)]
[Notices]               
[Page 64326-64327]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no06-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54654; File No. SR-NASD-2006-060]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change To Require Members 
To File Regulatory Notices With NASD Electronically

October 26, 2006.
    On May 16, 2006, the National Association of Securities Dealers, 
Inc. (``NASD'') filed a proposed rule change with the Securities and 
Exchange Commission (``Commission''), pursuant to section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ 
and Rule 19b-4 under the Act.\2\ The proposed rule change adopts NASD 
Rule 3170 to provide the NASD with the authority to require member 
firms to file or submit electronically with the NASD any regulatory 
notice or other document that member firms are required to file with 
(or otherwise submit to) the NASD. The NASD may specify the electronic 
format to be used. The proposed rule change does not specify the 
particular regulatory notices or documents that the NASD will require 
members to file electronically. Instead, the NASD's proposed rule 
change would give the NASD the authority to require members to file or 
submit electronically with the NASD any specified regulatory notice or 
document.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The NASD plans to require members to file certain specified notices 
with the NASD via an electronic, Internet-based receiving and 
processing system (``System''), using templates developed by the NASD 
for each notice. The System will be available to members on the NASD's 
Internet Web site. Initially, the NASD plans to require members to file 
notices that must be filed with the NASD under the following Exchange 
Act Rules electronically: \3\
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    \3\ The NASD has requested relief on behalf of its members from 
the Commission with respect to these Exchange Act rules. See Letter 
from Patrice Gliniecki, Senior Vice President and General Counsel, 
NASD, to Michael A. Macchiaroli, Associate Director, Division of 
Market Regulation, Commission, dated May 16, 2006. The staff of the 
Division of Market Regulation is issuing a no-action letter 
providing such relief. See letter from Michael A. Macchiaroli, 
Associate Director, Division of Market Regulation, Commission, to 
Patrice Gliniecki, Senior Vice President and General Counsel, NASD, 
dated October 26, 2006. Electronic filing of notices with the NASD 
does not affect requirements in these rules to file notices with the 
Commission or other securities regulatory agencies.

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[[Page 64327]]

     Rule 15c3-1(e)--Withdrawals of equity capital.
     Rule 15c3-3(i)--Special Reserve Bank Account.
     Rule 17a-4(f)(2)(i); Rule 17a-4(f)(3)(vii)--Electronic 
storage media.
     Rule 17a-5(f)(4)--Replacement of accountant.
     Rule 17a-11(b)--Net capital deficiency.
     Rule 17a-11(c)(1)--Aggregate indebtedness is in excess of 
1200 percent of net capital.
     Rule 17a-11(c)(2)--Net capital is less than 5 percent of 
aggregate debit items.
     Rule 17a-11(c)(3)--Net capital is less than 120 percent of 
required minimum dollar amount.
     Rule 17a-11(d)--Failure to make and keep current books and 
records.
     Rule 17a-11(e)--Material inadequacy in accounting systems, 
internal controls, or practices and procedures.
    The proposed rule change was published for comment in the Federal 
Register on August 22, 2006.\4\ A correction was published on September 
22, 2006.\5\ This order approves the proposed rule change.
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    \4\ See Securities Exchange Act Release No. 54319 (August 15, 
2006), 71 FR 48958 (SR-NASD-2006-060).
    \5\ See Securities Exchange Act Release No. 54319A (September 
18, 2006), 71 FR 55537 (SR-NASD-2006-060).
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    The Commission received two comment letters in response to the 
proposed rule change.\6\ Mr. Akridge supported the proposal. Wulff, 
Hansen supported the general purpose of the rule change, but stated 
that converting documents that exist only in paper form to electronic 
format could be burdensome for firms that do not have the necessary 
technology. On October 5, 2006, the NASD filed a response to the 
comment letters.\7\ In its response, the NASD stated that it intends to 
accommodate firms that do not have the ability to convert documents to 
electronic format. Further, the NASD stated that when technologies 
change, the NASD will consider the economic effect of the new 
technologies and consult with its members regarding requiring filings 
that use the new technologies.
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    \6\ See e-mail dated August 31, 2006 from Frank Akridge Jr. 
(``Mr. Akridge'') and letter dated September 7, 2006 from Chris 
Charles, President, Wulff, Hansen & Co. (``Wulff, Hansen'').
    \7\ See letter from Shirley H. Weiss, Office of General Counsel, 
NASD, to Katherine A. England, Division of Market Regulation, 
Commission.
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    The Commission finds that the NASD's proposal to adopt NASD Rule 
3170 is consistent with the requirements of the Act and the rules and 
regulations under the Act applicable to a national securities 
exchange.\8\ In particular, the Commission believes that the proposal 
is consistent with section 15A(b)(6) of the Act,\9\ 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 in that the proposed rule change will establish 
a cost-saving and efficient method of filing these notices that will 
enhance the speed and efficiency of processing the notices and reduce 
administrative costs.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    The NASD will issue a Notice to Members and other member 
communications, as appropriate, to advise its members which regulatory 
notices or documents members will be required to file or submit 
electronically to the NASD and the date on which electronic filing or 
submission of these notices or documents will be required. These 
communications will also advise members that as of the specified date, 
electronic filing or submission of the specified regulatory notices or 
documents will be mandatory, and that the NASD will no longer accept 
facsimile or other non-electronic transmissions of these notices or 
documents.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NASD-2006-060) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Nancy M. Morris,
Secretary.
[FR Doc. E6-18348 Filed 10-31-06; 8:45 am]

BILLING CODE 8011-01-P