Document ID: SEC-2006-1249-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-09-26T04:00Z

[Federal Register: September 26, 2006 (Volume 71, Number 186)]
[Notices]               
[Page 56203-56204]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26se06-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54456; File No. SR-NASD-2006-064]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving a Proposed Rule Change and Amendment 
Nos. 1 and 2 Thereto Relating to Extension of Time Requests

September 15, 2006.

I. Introduction

    On May 15, 2006, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and 
Rule 19b-4 \2\ thereunder, a proposed rule change seeking to adopt new 
Rule 3160 (``Extensions of Time under Regulation T and SEC Rule 15c3-
3''). NASD filed Amendment Nos. 1 and 2 to the proposed rule change on 
May 25, 2006 and July 25, 2006, respectively.\3\ The proposed rule 
change, as amended, was published in the Federal Register on August 10, 
2006.\4\ The Commission received one comment letter in response to the 
proposal.\5\ On September 13, 2006, the NASD filed a response to the 
comment letter.\6\ This order approves the proposed rule change, as 
amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1 and Amendment No. 2. Amendment No. 2 
replaced and superceded the original rule filing and Amendment No. 1 
in their entirety.
    \4\ Exchange Act Release No. 54265 (August 2, 2006), 71 FR 45879 
(August 10, 2006).
    \5\ See letter from Dennis A. Young, Vice President, Treasurer, 
Cosse International Securities, Inc., to Nancy Morris, Secretary, 
Commission, dated August 31, 2006.
    \6\ See letter from Kathryn M. Moore, Assistant General Counsel, 
Regulatory Policy and Oversight, to Nancy M. Morris, Secretary, 
Commission, dated September 13, 2006.
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II. Description

    NASD is proposing to adopt new Rule 3160 to require (1) All 
clearing firm members for which NASD is the designated examining 
authority (``DEA'') pursuant to Rule 17d-1 under the Act to submit to 
NASD requests for extensions of time under Regulation T \7\ promulgated 
by the Federal Reserve Board, or pursuant to Rule 15c3-3(n) under the 
Act; and (2) each clearing firm member for which NASD is the DEA to 
file a monthly report with NASD indicating all broker-dealers for which 
it clears that have overall ratios of requested extensions of time to 
total transactions for the month that exceed a percentage specified by 
NASD.
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    \7\ See 12 CFR 220.1, et. seq.
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Extension of Time Requests

    As stated above, proposed NASD Rule 3160(a) would require all 
clearing firm members for which NASD is DEA to submit to NASD requests 
for extensions of time under Regulation T and Exchange Act Rule 15c3-
3(n). The Commission previously approved NYSE Rule 434 requiring each 
carrying firm for which the NYSE is the DEA to submit extensions 
requests to the NYSE.\8\ The SRO designated as a member's DEA has 
responsibility for examining its members that are also members of 
another SRO for compliance with applicable financial responsibility 
rules such as Regulation T and Exchange Act Rule 15c3-3. NASD believes 
that requiring a member to submit extension requests to its DEA helps 
to ensure that the DEA receives complete extension information to 
assist it in performing this function and would ensure uniform 
application of standards to all customers of firms for which NASD is 
the DEA.
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    \8\ See Exchange Act Release No. 34073 (May 17, 1994), 59 FR 
26826 (May 24, 1994) (SR-NYSE-88-35); see also NYSE Information Memo 
94-22 (June 10, 1994).
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Monthly Reporting Requirement

    Proposed NASD Rule 3160(b) would require each clearing firm member 
for which NASD is the DEA to file a monthly report with NASD, in such 
format as NASD may require, indicating all broker-dealers for which it 
clears that have overall ratios of requests for extensions of time 
under Regulation T and Rule 15c3-3(m) to total transactions for the 
month that exceed a percentage specified by NASD. The monthly report 
would require clearing firms subject to proposed NASD Rule 3160(b) to 
identify, among other things: (1) The broker-dealer's name; (2) the 
number of transactions by the broker-dealer for the month; (3) the 
number of extension requests for the month; and (4) the ratio of the 
number of extensions requested to total transactions. The rule proposal 
would require that the reports be submitted no later than five business 
days following the end of each reporting month. The requirements of the

[[Page 56204]]

proposed NASD monthly reporting requirement are consistent with the 
NYSE's current program.\9\
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    \9\ See Exchange Act Release No. 28726 (December 28, 1990), 56 
FR 540 (January 7, 1991) (SR-NYSE-89-24); and NYSE Information 
Memoranda 98-09 (March 5, 1998) and 94-22 (June 10, 1994); see also 
NYSE Information Memorandum 05-78 (October 12, 2005).
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III. Summary of Comment Received and NASD Response

    The Commission received one comment letter to the proposed rule 
change.\10\ The commenter stated that the proposed monthly reporting 
requirement would place an undue burden on self-clearing firms and 
requested that NASD amend the proposed rule to clarify that the monthly 
reporting requirement applies solely to clearing firms which clear for 
other broker-dealers. In its response, NASD stated that it did not 
intend for the proposed monthly reporting requirement to apply to self-
clearing firms that do not clear for other broker-dealers, and that the 
proposed rule would not require these self-clearing firms to file the 
monthly report. \11\ Finally, NASD stated that it will reiterate this 
position in the Notice to Members announcing Commission approval of the 
proposed rule.
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    \10\ See supra note 5.
    \11\ See supra note 6.
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IV. Discussion and Commission Findings

    The Commission has reviewed the proposed rule filing, as amended, 
and finds that the proposed rule change, as amended, is consistent with 
the requirements of the Exchange Act, and, in particular, Section 
15A(b)(6) of the Act,\12\ which requires, among other things, that 
NASD's 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 
Commission believes that the proposed rule change will further assist 
NASD in ensuring that firms are complying with financial responsibility 
rules and preventing the excessive use of credit for the purchase or 
carrying of securities.
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    \12\ 15 U.S.C. 78o-3(b)(6). In approving this proposed rule 
change, 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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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-NASD-2006-064), as 
amended, be, and it hereby is approved.
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
[FR Doc. 06-8239 Filed 9-25-06; 8:45 am]

BILLING CODE 8010-01-P