Document ID: SEC-2006-1050-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2006-08-15T04:00Z

[Federal Register: August 15, 2006 (Volume 71, Number 157)]
[Notices]               
[Page 46954-46955]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15au06-73]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54284; File No. SR-NASDAQ-2006-016]

 
 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Eliminate Registration of 
Foreign Associates Under Nasdaq Membership Rules

August 8, 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 July 21, 2006, The NASDAQ Stock Market LLC (``Nasdaq'') 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 prepared by Nasdaq. 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

    Nasdaq proposes to eliminate the requirement for ``foreign 
associates'' to register with Nasdaq. Nasdaq will implement the 
proposed rule change immediately upon approval by the Commission. The 
text of the proposed rule change is below. Proposed new language is in 
italics; proposed deletions are in [brackets].
1060. Persons Exempt from Registration.
    (a) The following persons associated with a member are not required 
to be registered with Nasdaq:
    (1)-(4) No change.
    (5) Persons associated with a member that are not citizens, 
nationals, or residents of the United States or any of its territories 
or possessions and that will conduct all of their securities activities 
in areas outside the jurisdiction of the United States and will not 
engage in any securities activities with or for any citizen, national 
or resident of the United States.
    For purposes of Rule 1060(a)(4), the terms ``option'' and ``direct 
participation program'' shall have the meanings assigned to such terms 
by NASD Rules 2860 and 1022(e)(1)(A), respectively, and the definitions 
contained in such NASD rules shall apply to Nasdaq members as if such 
Rules were part of Nasdaq's Rules.
    (b) No change.
1100. [Foreign Associates] Reserved
    [(a) All persons associated with a member who are designated as 
Foreign Associates shall be required to be registered but shall be 
exempt from the requirement to pass a Qualification Examination. 
Persons associated with a member shall be designated as Foreign 
Associates if they meet the following criteria:]
    [(1) They are not citizens, nationals, or residents of the United 
States or any of its territories or possessions;]
    [(2) They will conduct all of their securities activities in areas 
outside the jurisdiction of the United States and they will not engage 
in any securities activities with or for any citizen, national or 
resident of the United States.]
    [(b) Prior to the time the exemption provided for in paragraph (a) 
hereof may become effective, the member desiring to employ any such 
person must file with Nasdaq a ``Uniform Application for Securities 
Industry Registration or Transfer'' for each such person and must 
certify that such person meets the criteria of paragraph (a), as well 
as that:]
    [(1) Such person is not subject to any of the prohibitions to 
registration with Nasdaq;]
    [(2) Service of process for any proceeding instituted by Nasdaq in 
respect to such person may be sent to an address designated by the 
member.]
    [(c) In the event of the termination of the employment of a Foreign 
Associate, the member must notify Nasdaq immediately by filing a notice 
of termination.]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq 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.
    Nasdaq proposes to eliminate the ``foreign associate'' registration 
category under Nasdaq Rule 1100 and add an exemption to Nasdaq Rule 
1060 for persons formerly covered by this registration category. 
Nasdaq's rule is based on NASD Rule 1100, which provides that an 
associated person of a member may be designated as a ``foreign 
associate'' if the person (i) is not a citizen, national, or resident 
of the United States, and (ii) will conduct all of his or her 
securities activities outside the jurisdiction of the United States and 
will not engage in any securities activities with or for any citizen, 
national or resident of the United States. The NASD rule provides that 
a foreign associate is not required to pass any qualification 
examinations but must register with NASD.
    In its current form, Nasdaq Rule 1100 duplicates the NASD 
requirement. Nasdaq believes, however, that it does not have a 
compelling policy reason for duplicating the NASD's registration 
requirement or extending it to non-NASD members. Nasdaq members that 
are NASD members will already be required to register their foreign 
associates with the NASD. The NASD's role as the primary regulator with 
respect to firms with public customers may be indicative of a need to 
pursue broad registration of broker-dealer employees even if such 
employees have no nexus with U.S. securities markets, but a duplicative 
requirement by Nasdaq would serve no regulatory purpose. With respect 
to the small number of non-NASD members that become Nasdaq members, 
Nasdaq has no reason to expect that any would have associated persons 
categorized as foreign associates and believes that there would be no 
regulatory benefit

[[Page 46955]]

associated with the registration of those that might fit within this 
category. Accordingly, Nasdaq proposes to amend its rule to exempt 
foreign associates from registration with Nasdaq.
2. Statutory Basis.
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with Section 
6(b)(5) of the Act,\4\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Nasdaq believes that the 
proposed rule change will mitigate unnecessary burdens on its members 
and their associated persons without diminishing the regulatory 
protections associated with its membership rules.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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, as amended.

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 Nasdaq 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-NASDAQ-2006-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2006-016. 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 Nasdaq. 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 publicly available. All submissions should refer to 
File Number SR-NASDAQ-2006-016 and should be submitted on or before 
September 5, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 20.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-13317 Filed 8-14-06; 8:45 am]

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