Document ID: SEC-2007-0750-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-05-31T04:00Z

[Federal Register: May 31, 2007 (Volume 72, Number 104)]
[Notices]               
[Page 30404-30406]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31my07-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55810; File No. SR-NASD-2007-034]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change Creating NASD 
Rule 1160 (Firm Contact Information) Regarding the Reporting and Annual 
Review of Designated Contact Information to NASD

May 24, 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 May 11, 2007, the National Association of Securities Dealers, Inc. 
(``NASD'') filed

[[Page 30405]]

with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by NASD. 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.
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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 adopt new NASD Rule 1160 (Firm Contact 
Information) regarding the reporting of designated contact information 
to NASD and the annual review of such information. The proposed rule 
change also would amend Rule 1120 (Continuing Education Requirements), 
Rule 1150 (Executive Representative), Interpretive Material (IM)-3011-2 
(Review of Anti-Money Laundering Compliance Person Information), and 
Rule 3520 (Emergency Contact Information) to eliminate the requirement 
that members review and update, at the end of each calendar quarter, 
the contact information required by these rules. The text of the 
proposed rule change is available at http://www.nasd.com, at the NASD, and at 

the Commission's Public Reference Room.

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
    Currently, there are several rules requiring firms to identify and 
report to NASD certain designated contact persons: Rule 1120 
(Continuing Education Requirements); Rule 1150 (Executive 
Representative); IM-3011-2 (Review of Anti-Money Laundering Compliance 
Person Information); and Rule 3520 (Emergency Contact Information). 
These rules further require firms to review the contact information at 
the end of each calendar quarter, and if necessary, update such 
information within 17 business days after the end of each quarter. 
Members review this information and provide any updates online via the 
NASD Contact System (``NCS'').\3\
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    \3\ NASD also currently requires each firm to report, via NCS, 
contact information for its Executive Officer and the Head of 
Compliance. NCS also includes several optional fields for other 
contact persons.
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    Based on recommendations made by its Small Firm Rules Impact Task 
Force,\4\ NASD is proposing to eliminate these quarterly review 
requirements in favor of a more comprehensive approach for verifying 
and updating all contact information required to be reported. 
Specifically, proposed new Rule 1160 would require members to provide 
the required contact information via NCS or such other means as NASD 
may specify. New Rule 1160 also would require members to update the 
contact information promptly, but in any event not later than 30 days 
following any change in such information, as well as to review and, if 
necessary, update the information within 17 business days after the end 
of each calendar year. In addition, the rule would require members to 
comply with any NASD request for such information promptly, but in any 
event not later than 15 days following the request, or such longer 
period that may be agreed to by NASD staff. The proposed rule change 
would not relieve members from any separate requirements to update such 
information.\5\
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    \4\ NASD established the Small Firm Rules Impact Task Force in 
September 2006 to examine how existing NASD rules impact smaller 
firms. In particular, the Task Force focuses on possible 
opportunities to amend or modernize certain conduct rules that may 
be particularly burdensome for small firms, where such changes are 
consistent with investor protection and market integrity.
    \5\ For example, a firm must identify, among others, its Chief 
Executive Officer and Chief Compliance Officer on Form BD, and 
promptly update such information by submitting an amendment whenever 
the information becomes inaccurate or incomplete for any reason. See 
also Article IV, Section 1(c) of the NASD By-Laws, requiring each 
member to ensure that its membership application is kept current at 
all times by supplementary amendments, and to file any such 
amendment no later than 30 days after learning of the facts or 
circumstances giving rise to the amendment.
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    The proposed rule change also would amend Rule 3520 to eliminate 
the requirement that only a firm's Executive Representative, or his or 
her written designee, be permitted to review and update the firm's 
emergency contact information. NASD believes that eliminating this 
restriction will assist members in complying with their obligation to 
keep current their emergency contact information by giving members the 
flexibility to have others perform this duty as necessary or 
appropriate.
    The proposed rule change has several advantages over current NASD 
requirements applicable to firm contact information. NASD understands 
that for many firms, the persons who occupy the designated positions 
seldom change, and thus the proposed rule change would eliminate any 
unnecessary burden that firms may incur in conducting quarterly reviews 
of the contact information. At the same time, the proposed rule change 
would help to ensure that the contact information required by NASD is 
kept current and provided to NASD promptly upon request. This would 
assure NASD's ability to contact its members in the event of an 
emergency, as well as support members' compliance with certain NASD 
rules, such as continuing education requirements and anti-money 
laundering obligations, and facilitate member voting through the 
Executive Representatives.
    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. The effective date will be 30 days following 
publication of the Notice to Members announcing Commission approval.
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 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 proposed rule change sets forth a comprehensive 
approach for member firms to provide and keep current required contact 
information, while also reducing unnecessary burdens on firms by 
eliminating the requirement that firms review and update the contact 
information on a quarterly basis; instead, firms would be required to 
conduct such reviews on an annual basis as well as to promptly update 
the information following any change.
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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.

[[Page 30406]]

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2007-034 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-2007-034. 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 the 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-2007-034 and should be submitted on or before June 21, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-10403 Filed 5-30-07; 8:45 am]

BILLING CODE 8010-01-P