Document ID: SEC-2007-1031-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-08-01T04:00Z

[Federal Register: August 1, 2007 (Volume 72, Number 147)]
[Notices]               
[Page 42190-42192]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au07-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56146; File No. SR-NASD-2007-053]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change Relating to the Restated Certificate of 
Incorporation of National Association of Securities Dealers, Inc.

July 26, 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 July 24, 2007, the National Association of Securities Dealers, Inc. 
(``NASD'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change to amend the Restated 
Certificate of Incorporation of NASD (``Certificate'') as described in 
Items I and II below, which Items have been substantially prepared by 
NASD. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons and is simultaneously 
approving the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend its Certificate to reflect the governance 
and related changes proposed by NASD to accommodate the consolidation 
of the member firm regulatory functions of NASD and NYSE Regulation, 
Inc. and to conform the Certificate to the amended NASD By-Laws. The 
proposed amendments to the Certificate also reflect NASD's change in 
corporate name to Financial Industry Regulatory Authority, Inc. 
(``FINRA'') as of the closing of the Transaction (defined below). The 
text of the proposed rule change, including the Certificate, is 
available at NASD, the Commission's Public Reference Room, and http://nasd.complinet.com
.

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 III 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
    On November 28, 2006, NASD and the NYSE Group, Inc. (``NYSE 
Group'') announced a plan to consolidate their member regulation 
operations into a combined organization (``Transaction'') that will be 
the sole U.S. private-sector provider of member firm regulation for 
securities firms that conduct business with the public. This 
consolidation will streamline the broker-dealer regulatory system, 
combine technologies, permit the establishment of a single set of rules

[[Page 42191]]

and group examiners with complementary areas of expertise in a single 
organization--all of which will serve to enhance oversight of U.S. 
securities firms and help ensure investor protection. Moreover, NASD 
notes that the new organization will be committed to reducing 
regulatory costs and burdens for firms of all sizes through greater 
regulatory efficiency.
    On January 19, 2007, NASD held a special meeting of the members of 
NASD eligible to vote on amendments to the NASD By-Laws. A quorum of 
members entitled to vote on the matter was present, in person or by 
proxy, at such meeting, and a majority of the quorum approved the 
amendments to the NASD's By-Laws. On March 19, 2007, NASD filed with 
the Commission a proposed rule change to amend the NASD By-Laws to 
implement the governance and related changes to accommodate the 
consolidation of the member regulatory functions of NASD and NYSE 
Regulation, Inc.\3\
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    \3\ See Securities Exchange Act Release No. 55495 (March 20, 
2007), 72 FR 14149 (March 26, 2007) (SR-NASD-2007-023). Today, the 
Commission approved the amendments to NASD's By-Laws proposed in 
connection with the Transaction. See Securities Exchange Act Release 
No. 56145 (July 26, 2007) (``Release No. 34-56145'').
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    The purpose of this proposed rule change is to make the necessary 
amendments to the Certificate to reflect the governance and related 
changes in connection with the Transaction, the related changes to the 
NASD By-Laws, and NASD's change in corporate name to FINRA as of the 
date of closing of the Transaction.\4\
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    \4\ Article XXII, Section 3 of the NASD By-Laws, as amended in 
Release 34 -56145, supra note 3, addresses the term of office of 
Governors for a transitional period commencing on the date of 
closing of the Transaction and ending on the third anniversary of 
the date of closing. Among other things, Article XXII, Section 3 
provides that ``* * * in the event the remaining term of office of 
any Large Firm, Mid Size Firm or Small Firm Governor position that 
becomes vacant is for more than 12 months, nominations shall be made 
as set forth above in this paragraph, but such vacancy shall be 
filled by the members entitled to vote thereon at a meeting thereof 
convened to vote thereon (emphasis added).'' Article Eleventh of the 
Certificate does not reiterate the applicable nomination process in 
such instances, insofar as the text solely restates those persons 
entitled to make nominations as reflected elsewhere in Article 
Eleventh. In short, in filling any such vacancies, NASD represents 
that the nominations will be made in accordance with the provisions 
of Article XXII, Section 3 of the amended NASD By-Laws.
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    The effective date of the proposed rule change will be the closing 
of the Transaction. The proposed rule change will not become effective 
if the Transaction does not close.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A of the Act,\5\ including section 15A(b)(2) of 
the Act,\6\ in that it will permit FINRA to carry out the purposes of 
the Act, to comply with the Act, and to enforce compliance by FINRA 
members, and persons associated with FINRA members, with the Act, the 
rules and regulations thereunder, and FINRA rules.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78o-3(b)(2).
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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. 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-2007-053 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-2007-053. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also 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 File Number SR-NASD-2007-053 and should be 
submitted on or before August 22, 2007.

IV. Commission Findings

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities association.\7\ 
Specifically, the Commission believes that the proposal is consistent 
with section 15A(b)(2) of the Act \8\ in that it will permit FINRA to 
be so organized to carry out the purposes of the Act, to comply with 
the Act and to enforce compliance by FINRA members and persons 
associated with members with the Act, the rules and regulations 
thereunder, and FINRA rules. Further, the Commission finds that the 
proposed rule change is consistent with section 15A(b)(6) of the Act 
\9\ in that it is 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.
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    \7\ 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).
    \8\ 15 U.S.C. 78o-3(b)(2).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    The proposed rule change amends the Certificate to conform to the 
changes in the NASD By-Laws that the Commission is approving today, and 
to reflect the NASD's new name, FINRA.\10\ Specifically, the amended 
Certificate incorporates the governance structure in FINRA's By-Laws, 
as approved today, including with respect to the three-year 
transitional period and thereafter. The proposed revisions to the 
Certificate do not make changes to the governance of FINRA not already 
contemplated by the proposed changes to FINRA's By-Laws, which were 
published for comment and

[[Page 42192]]

approved by the Commission.\11\ The Commission believes that the 
proposed changes to the Certificate are consistent with the Act.
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    \10\ See Release No. 34-56145, supra note 3.
    \11\ Id.
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    The Commission finds good cause to approve the proposal prior to 
the thirtieth day after the proposal was published for comment in the 
Federal Register. This approval allows the proposed rule change to take 
effect without delay. The proposed revisions to the Certificate do not 
make changes to the governance of FINRA not already contemplated by the 
proposed changes to FINRA's By-Laws, which were published for comment 
and approved by the Commission.\12\ Therefore, interested persons were 
provided the opportunity to submit comments on essentially identical 
changes. For this reason, the Commission finds good cause, consistent 
with section 19(b)(2) of the Act, to grant accelerated approval to the 
proposed changes to the Certificate.
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    \12\ Id.
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    The Commission finds good cause, consistent with section 19(b)(2) 
of the Act, to grant accelerated approval to the proposed change of the 
NASD's name to FINRA because it is technical and does not impact 
members or other market participants.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-NASD-2007-053) is hereby approved on 
an accelerated basis.\13\
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    \13\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E7-14856 Filed 7-31-07; 8:45 am]

BILLING CODE 8010-01-P