Document ID: SEC-2007-0949-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc
Posted Date: 2007-07-13T04:00Z

[Federal Register: July 13, 2007 (Volume 72, Number 134)]
[Notices]               
[Page 38641-38643]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy07-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56029; File No. SR-NASD-2007-038]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Amend the Customer and the Industry Codes of Arbitration 
Procedure To Clarify NASD's Jurisdiction Concerning Members of Other 
Self-Regulatory Organizations

July 9, 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 June 13, 2007 the National Association of Securities Dealers, Inc. 
(``NASD''), through its wholly owned subsidiary, NASD Dispute 
Resolution, Inc. (``NASD Dispute Resolution'') filed with the 
Securities and Exchange Commission (``Commission''), the proposed rule 
change as described in Items I, II, and III below, which Items have 
been substantially prepared by NASD Dispute Resolution. NASD has 
designated the proposed rule change as constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization under Section 19(b)(3)(A)(i) of the Act \3\ and 
Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal effective 
upon receipt of this filing by the Commission. 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\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Dispute Resolution is proposing to amend NASD Rules 12100 and 
13100 of the NASD Codes of Arbitration Procedure for Customer Disputes 
(``Customer Code'') and for Industry Disputes (``Industry Code'') 
(together, the ``Codes'') to clarify that, for purposes of the Codes, 
the term ``member'' includes any broker or dealer admitted to 
membership in a self-regulatory organization that, with NASD consent, 
has required its members to arbitrate pursuant to the Codes and/or to 
be treated as members of NASD for purposes of the Codes. Below is the 
text

[[Page 38642]]

of the proposed rule change. Proposed new language is in italics.
* * * * *
Customer Code
12100. Definitions
    Unless otherwise defined in the Code, terms used in the Code and 
interpretive material, if defined in the NASD By-Laws, shall have the 
meaning as defined in the NASD By-Laws.
    Paragraphs (a) through (n) unchanged.
    (o) Member
    For purposes of the Code, the term ``member'' means any broker or 
dealer admitted to membership in NASD, whether or not the membership 
has been terminated or cancelled; and any broker or dealer admitted to 
membership in a self-regulatory organization that, with NASD consent, 
has required its members to arbitrate pursuant to the Code and/or to be 
treated as members of NASD for purposes of the Code, whether or not the 
membership has been terminated or cancelled.
    Remainder unchanged.
* * * * *
Industry Code
13100. Definitions
    Unless otherwise defined in the Code, terms used in the Code and 
interpretive material, if defined in the NASD By-Laws, shall have the 
meaning as defined in the NASD By-Laws.
    Paragraphs (a) through (n) unchanged.
    (o) Member
    For purposes of the Code, the term ``member'' means any broker or 
dealer admitted to membership in NASD, whether or not the membership 
has been terminated or cancelled; and any broker or dealer admitted to 
membership in a self-regulatory organization that, with NASD consent, 
has required its members to arbitrate pursuant to the Code and/or to be 
treated as members of NASD for purposes of the Code, whether or not the 
membership has been terminated or cancelled.
    Remainder unchanged.
* * * * *

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 is amending Rule 12100(o) of its Customer Code and Rule 
13100(o) of its Industry Code to clarify that, for purposes of the 
Codes, the term ``member'' includes any broker or dealer admitted to 
membership in a self-regulatory organization that, with NASD consent, 
has required its members to arbitrate pursuant to the Codes and/or to 
be treated as members of NASD for purposes of the Codes. Such members 
would, like NASD members, be treated as members whether or not their 
membership has been terminated or cancelled.
    The proposed rule change will codify current practice under which 
NASD has assumed, by agreement, the arbitration and mediation functions 
of several self-regulatory organizations that closed their dispute 
resolution forums.\5\
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    \5\ The Codes apply not only to NASD members and their 
associated persons, but also to members and associated persons of 
the Municipal Securities Rulemaking Board (``MSRB''), the 
Philadelphia Stock Exchange (``Phlx''), the American Stock Exchange 
(``Amex''), International Securities Exchange (``ISE''), and The 
Nasdaq Stock Market LLC (``Nasdaq''), pursuant to agreements under 
which members of those self-regulatory organizations for which the 
NASD administers the arbitration process will be treated as 
``members'' of the NASD for purposes of the Codes. See Securities 
Exchange Act Release No. 39378 (Dec. 1, 1997), 62 FR 64417 (Dec. 5, 
1997) (SR-MSRB-97-4) (MSRB approval order); Securities Exchange Act 
Release No. 40517 (Oct. 1, 1998), 63 FR 54177 (Oct. 8, 1998) (SR-
Phlx-98-28) (Phlx approval order); Securities Exchange Act Release 
No. 40622 (Oct. 30, 1998), 63 FR 59819 (Nov. 5, 1998) (SR-Amex-98-
32) (Amex approval order); Securities Exchange Act Release 45094 
(Nov. 21, 2001), 66 FR 60230 (Dec. 3, 2001) (File No. SR-ISE-00-17) 
(ISE approval order); and Securities Exchange Act Release No. 53128 
(Jan. 13, 2006), 71 FR 3550 (Jan. 23, 2006) (File No. 10-131) 
(Nasdaq approval order). See also Securities Exchange Act Release 
No. 55818 (May 25, 2007), 72 FR 30898 (June 4, 2007) (SR-NYSE-2007-
048) (the New York Stock Exchange LLC's proposed rule change to 
provide guidance regarding new and pending arbitrations in light of 
the consolidation of NYSE Regulation's arbitration department with 
that of NASD DisputeResolution.).
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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,\6\ which requires, among 
other things, that NASD's rules must be designed to prevent fraudulent 
and manipulative acts and practices, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, 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 provisions of the 
Act noted above because it will make explicit NASD's jurisdiction with 
respect to members of other self-regulatory organizations that, with 
NASD consent, have required their members to arbitrate pursuant to the 
Codes and/or to be treated as members of NASD for purposes of the 
Codes. The proposed rule change also will clarify that one set of 
arbitration rules and administration procedures will apply to these 
other self-regulatory organizations.
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    \6\ 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 by NASD.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act and subparagraph (f)(1) of Rule 19b-4 
thereunder, because it constitutes a stated policy, practice or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule.\7\ At any time within 60 days of the 
filing of the 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.
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    \7\ 17 CFR 240.19b-4(f)(1).
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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:

[[Page 38643]]

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-2007-038 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-2007-038. 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-2007-038 and should be 
submitted on or before August 3, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-13599 Filed 7-12-07; 8:45 am]

BILLING CODE 8010-01-P