Document ID: SEC-2006-0791-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-06-21T04:00Z

[Federal Register: June 21, 2006 (Volume 71, Number 119)]
[Notices]               
[Page 35720-35721]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jn06-156]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53982; File No. SR-NASD-2006-063]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Fee for Extension 
of Time Requests

June 14, 2006.
    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 May 15, 2006, the National Association of Securities Dealers, Inc. 
(``NASD'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by NASD. On May 25, 
2006, NASD filed Amendment No. 1 to the proposed rule change.\3\ NASD 
has designated this proposal as one establishing or changing a due, 
fee, or other charge under section 19(b)(3)(A)(ii) of the Act \4\ and 
Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal effective 
upon filing with Commission. The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, NASD made non-substantive changes to the 
discussion of the purpose of the proposed rule filing.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Section 8 of Schedule A to NASD's By-
Laws to increase the service charge for processing extension requests 
to $4.00 per request. Below is the text of the proposed rule change. 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *
SCHEDULE A TO NASD BY-LAWS
* * * * *
Section 8--Service Charge for Processing Extension of Time Requests
    (a) No Change.
    (b) The service charge for processing each initial extension of 
time request and for all subsequent extension of time requests (1) 
involving the same transaction under Regulation T and/or (2) involving 
an extension of time previously granted pursuant to SEC Rule 15c3-3(n) 
shall be [$2.00; provided, however, that the service charge shall be 
$1.00 for extension of time requests filed electronically by members 
using NASD's Automated Regulatory Reporting System]$4.00 per request.
* * * * *

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
    Regulation T, issued by the Board of Governors of the Federal 
Reserve System (``FRB'') pursuant to the Act, among other things, 
governs the extension of credit to customers by broker-dealers for 
purchasing securities.\6\ Rule 15c3-3 under the Act governs, among 
other things, the time period in which broker-dealers must complete 
sell orders on behalf of customers.\7\ Under SEC Rule 15c3-3(n), a 
self-regulatory organization (``SRO'') may grant a broker-dealer an 
extension of time for delivery on sales of securities

[[Page 35721]]

if: (1) It is satisfied that the broker-dealer is acting in good faith 
in making the application; and (2) exceptional circumstances warrant 
such action. Regulation T has a similar standard to allow an extension 
of time for payment for purchases of securities.\8\
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    \6\ 12 CFR 220.4(c) and 220.8(d). Regulation T generally 
requires that customers with a cash account pay for securities 
within five business days of purchase; for customers with a margin 
account, there must be sufficient minimum margin (typically 50%) to 
support the purchase.
    \7\ 17 CFR 240.15c3-3. In particular, Rule 15c3-3(m) requires a 
broker-dealer that executes a customer sell order to obtain 
possession of the securities within ten business days of the 
settlement date or to close the transaction by purchasing the 
securities.
    \8\ Under Regulation T, a firm's examining authority may grant 
an extension unless the examining authority believes that the 
broker-dealer is not acting in good faith or that the broker-dealer 
has not sufficiently determined that exceptional circumstances 
warrant such action. See supra note 6.
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    NASD proposes to amend Section 8 of Schedule A to NASD's By-Laws to 
increase the service charge for processing each extension of time 
request pursuant to the provisions of Regulation T and Rule 15c3-3 from 
$2 (or $1 in the case of electronically filed extension of time 
requests) to $4 for all manually or electronically filed extension of 
time requests. NASD believes that the proposed fees align with the 
actual costs associated with reviewing, processing, recording and 
responding to such requests. The NYSE similarly increased the fee it 
charges for extension requests to $4.00 per extension.\9\
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    \9\ See Exchange Act Release No. 53235 (February 6, 2006), 71 FR 
7820 (February 14, 2006) (SR-NYSE-2005-92) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change and Amendment No. 
1 Thereto Relating to Increasing Certain Fees Charged by the NYSE to 
Its Members and Member Organizations).
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    NASD has filed the proposed rule change for immediate 
effectiveness. The new fee shall be implemented on July 1, 2006.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(5) of the Act,\10\ which requires, among 
other things, that NASD's rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls. NASD believes that the rule change reflects NASD's increased 
costs in reviewing, processing and administering the extensions of time 
requests.
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    \10\ 15 U.S.C. 78o-3(b)(5).
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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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing with the 
Commission pursuant to section 19(b)(3)(A) of the Act \11\ and Rule 
19b-4(f)(2) thereunder,\12\ because it establishes or changes a due, 
fee, or other charge imposed by NASD. 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ The effective date of the original proposed rule change is 
May 15, 2006, and the effective date for Amendment No. 1 is May 25, 
2006. For purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change, as 
amended, under section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on May 25, 2006, the date on which 
NASD submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(A).
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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:

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-2006-063 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-2006-063. 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. 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-2006-063 
and should be submitted on or before July 12, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-9691 Filed 6-20-06; 8:45 am]

BILLING CODE 8010-01-P