Document ID: SEC-2006-1260-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-09-29T04:00Z

[Federal Register: September 29, 2006 (Volume 71, Number 189)]
[Notices]               
[Page 57587-57588]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29se06-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54496; File No. SR-NASD-2006-105]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Communications Concerning Investment Analysis 
Tools

September 25, 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 September 7, 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 and II, which Items have been prepared by NASD. NASD has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) 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).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 NASD Rule 2210 and Interpretive Material 
2210-6 to clarify the filing requirements for communications concerning 
investment analysis tools. The text of the proposed rule change is 
available on NASD's Web site (http://www.nasd.com), at the NASD's Office of 

the Secretary, 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. 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
    On September 28, 2004, the Commission approved IM-2210-6, regarding 
``investment analysis tools.'' IM-2210-6(b) defines the term 
``investment analysis tool'' as ``an interactive technological tool 
that produces simulations and statistical analyses that present the 
likelihood of various investment outcomes if certain investments are 
made or certain investment strategies or styles are undertaken, thereby 
serving as an additional resource to investors in the evaluation of the 
potential risks and returns of investment choices.'' IM-2210-6 allows a 
member to use and provide customers access to investment analysis tools 
if the member complies with certain disclosure and other requirements. 
IM-2210-6 became effective on February 14, 2005.
    IM-2210-6(a) requires a member that offers or intends to offer an 
investment analysis tool, within 10 days of first use, to (1) provide 
the NASD Advertising Regulation Department (Department) access to the 
investment analysis tool, and (2) file with the Department any template 
for written reports produced by, or sales material concerning, the 
tool. Recently, questions have arisen regarding why the filing 
requirement was not included with other communications filing 
requirements under Rule 2210(c). Members have noted that persons 
reading Rule 2210(c) might not understand that there is an additional 
filing requirement for investment analysis tool report templates and 
sales material under IM-2210-6. Members have also asked NASD staff what 
the term ``sales material'' as used in IM-2210-6, is intended to 
include, since ``sales material'' is not defined in either Rule 2210 or 
IM-2210-6.
    In response to these inquiries, NASD is including a provision in 
Rule 2210(c) that refers to the existing requirement set forth in IM-
2210-6 to file templates for written reports produced by, or 
advertisements and sales literature concerning, investment analysis 
tools. This new provision does not make any substantive changes to the 
current filing requirements for communications concerning investment 
analysis tools. NASD also is deleting the term ``sales material'' 
throughout IM-2210-6 and replacing it with the terms ``advertisement'' 
and ``sales literature'' to clarify the rule's application. This 
clarification is consistent with how the staff has applied the rule to 
date, and thus also does not make any substantive changes to the scope 
of IM-2210-6.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\5\ which requires, among 
other things, NASD rules to 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. NASD believes that clarifying the filing requirements 
for communications concerning investment analysis tools will eliminate 
confusion regarding certain provisions of Rule 2210 and IM-2210-6.
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    \5\ 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, as amended.

[[Page 57588]]

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \6\ and 
Rule 19b-4(f)(6) thereunder.\7\ As required under Rule 19b-
4(f)(6)(iii),\8\ NASD provided the Commission with written notice of 
NASD's intent to file the proposed rule change along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the filing date of the proposed rule change.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative for 30 days after the date of its filing.\9\ 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. NASD has requested that the 
Commission waive the 30-day operative delay contained in Rule 19b-
4(f)(6)(iii) \11\ under the Act based upon a representation that the 
proposed rule change does not make any substantive changes to the 
current filing requirements for communications concerning investment 
analysis tools, and will provide clarification to member firms. In 
light of the foregoing, the Commission believes such waiver is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission designates the proposal to be effective and 
operative upon filing with the Commission.\12\
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    \9\ Id.
    \10\ Id.
    \11\ Id.
    \12\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    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.

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-2006-105 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-2006-105. 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 NASD-2006-105 and 
should be submitted on or before October 20, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-16028 Filed 9-28-06; 8:45 am]

BILLING CODE 8010-01-P