Document ID: SEC-2006-0435-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-04-03T04:00Z

[Federal Register: April 3, 2006 (Volume 71, Number 63)]
[Notices]               
[Page 16603-16604]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ap06-84]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53556; File No. SR-NASD-2005-098]

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

March 27, 2006.
    On August 18, 2005, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), a proposed rule change to NASD Rule 6740 
relating to the submission of SEC Rule 15c2-11 information on non-
Nasdaq securities pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') ;\1\ and Rule 19b-4 
thereunder.\2\ On January 10, 2006, NASD submitted Amendment No. 1 to 
the proposed rule change.\3\ The Commission published the proposed rule 
change, as amended, for comment in the Federal Register on February 21, 
2006.\4\ The Commission received no comments on the proposal.
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    \1\ 5 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 and 
superseded and replaced the original rule filing in its entirety.
    \4\ See Securities Exchange Act Release No. 53276 (February 13, 
2006), 71 FR 8875 (February 21, 2006).
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    NASD Rule 6740 prohibits a member from initiating or resuming the 
quotation of a non-Nasdaq security \5\ 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.
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    \5\ 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.''
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    The proposed rule change, as amended, relieves members of the 
obligation to file with NASD copies of information that is 
electronically accessible through the SEC's EDGAR system. 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. Further, 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).\6\
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    \6\ 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.
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    In addition, the proposed rule change, as amended, would except 
members from the requirements of NASD Rule 6740 where the Commission 
has granted an exemption to publish or submit any quotation under SEC 
Rule 15c2-11(h). To the extent that the Commission's exemption is 
subject to any terms and conditions, those same terms and conditions 
would apply to the exclusion under NASD Rule 6740.
    Finally, 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 has stated that the effective date of the proposed rule change 
will be 30 days following publication of NASD's Notice to Members 
announcing Commission approval, and the Commission believes that this 
is reasonable.\7\
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    \7\ NASD will announce the effective date of the proposed rule 
change in a Notice to Members to be published no later than 60 days 
following Commission approval.

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[[Page 16604]]

    The Commission believes that the proposed rule change, as amended, 
should harmonize 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. NASD Rule 6740 seeks to ensure that 
members are in compliance with SEC Rule 15c2-11. Therefore, where the 
Commission has granted an exemption under Rule 15c2-11(h), it is 
appropriate that the same treatment apply under NASD Rule 6740. The 
Commission also believes that relieving members of the obligation to 
file with NASD copies of information that is electronically accessible 
through the EDGAR system will eliminate the administrative burden and 
cost imposed on members in furnishing such information to NASD while 
preserving the requirement that the members maintain and review 
information as required by SEC Rule 15c2-11.
    For the above reasons, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities association \8\ and, in particular, the requirements of 
Section 15A of the Act \9\ and the rules and regulations thereunder. 
The Commission finds specifically that the proposed rule change is 
consistent with Sections 15A(b)(6) and 15A(b)(9) of the Exchange 
Act.\10\
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    \8\ In approving the proposed rule change, the Commission notes 
that it 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.
    \10\ 15 U.S.C. 78o-3(b)(6) and (b)(9).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\11\ that the proposed rule change (SR-NASD 2005-098), as 
amended, be, and hereby is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).
    \12\ 12 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Nancy M. Morris,
Secretary.
[FR Doc. E6-4757 Filed 3-31-06; 8:45 am]

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