Document ID: SEC-2006-0353-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Nasdaq Stock Market LLC
Posted Date: 2006-03-16T05:00Z

[Federal Register: March 16, 2006 (Volume 71, Number 51)]
[Notices]               
[Page 13645-13646]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr06-90]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53428; File No. 4-514]

 
Self-Regulatory Organizations; Notice of Filing of Proposed Minor 
Rule Violation Plan by The Nasdaq Stock Market LLC

March 7, 2006.
    Pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19d-1(c)(2) thereunder,\2\ notice is hereby 
given that on February 22, 2006, The Nasdaq Stock Market LLC 
(``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') copies of a proposed minor rule violation 
plan (``MRVP'') specifying those uncontested minor rule violations with 
sanctions not exceeding $2,500 which would not be subject to the 
provisions of Rule 19d-1(c)(1) under the Act\3\ requiring that a self-
regulatory organization promptly file notice with the Commission of any 
final disciplinary action taken with respect to any person or 
organization.\4\ In accordance with paragraph (c)(2) of Rule 19d-1 of 
the Act, Nasdaq proposes to designate certain specified rule violations 
as minor rule violations, and requests that it be relieved of the 
reporting requirements regarding such violations, provided it gives 
notice of such violations to the Commission on a quarterly basis. 
Nasdaq proposes to include in its proposed MRVP the policies and 
procedures currently included in Nasdaq Rule 9216(b) (``Procedure for 
Violations Under Plan Pursuant to SEC Rule 19d-1(c)(2)'') and the rule 
violations currently included in Nasdaq Rule IM-9216 (``Violations 
Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-
1(c)(2)'').\5\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(d)(1).
    \2\ 17 CFR 240.19d-1(c)(2).
    \3\ 17 CFR 240.19d-1(c)(1).
    \4\ The Commission adopted amendments to paragraph (c) of Rule 
19d-1 to allow self-regulatory organizations (``SROs'') to submit 
for Commission approval plans for the abbreviated reporting of minor 
disciplinary infractions. See Exchange Act Release No. 21013 (June 
1, 1984), 49 FR 23828 (June 8, 1984). Any disciplinary action taken 
by an SRO against any person for violation of a rule of the SRO 
which has been designated as a minor rule violation pursuant to such 
a plan filed with the Commission shall not be considered ``final'' 
for purposes of Section 19(d)(1) of the Act if the sanction imposed 
consists of a fine not exceeding $2,500 and the sanctioned person 
has not sought an adjudication, including a hearing, or otherwise 
exhausted his administrative remedies.
    \5\ On January 13, 2006, the Commission approved Nasdaq's 
application for registration as a national securities exchange, 
including the rules governing the Nasdaq exchange. Exchange Act 
Release No. 53128, 71 FR 3550 (January 23, 2006). In the approval 
order, the Commission noted that Nasdaq Rule 9216(b) and IM-9216 
provided for the imposition of fines for minor rule violations 
pursuant to a minor rule violation plan. Accordingly, the Commission 
noted that as a condition to the operation of the Nasdaq Exchange, 
Nasdaq must file a minor rule violation plan with the Commission.
---------------------------------------------------------------------------

    According to Nasdaq's proposed MRVP, under Rule 9216(b) and IM-
9216, Nasdaq or the Nasdaq Review Counsel may impose a fine (not to 
exceed $2,500) and/or a censure on a member or an associated person 
with respect to any rule listed in IM-9216. If the person against whom 
the fine or censure is imposed does not dispute the violation, the 
Department of Enforcement or the Department of Market Regulation may 
prepare and request that such person execute a minor rule violation 
plan letter.\6\ In such a letter, the member or associated person 
accepts a finding of violation, consents to the imposition of 
sanctions, and agrees to waive the right to a hearing before a Hearing 
Panel (or, if applicable, an Extended Hearing Panel), any right of 
appeal to the Nasdaq Review Council, the Commission, or the courts, and 
any other challenge to the validity of the letter. The letter will 
describe the act or practice engaged in or omitted, the rule, 
regulation, or statutory provision violated, and the sanction or 
sanctions to be imposed.\7\
---------------------------------------------------------------------------

    \6\ Consistent with Nasdaq's rules, Nasdaq noted in its 
submission to the Commission that the Department of Enforcement, the 
Department of Market Regulation, and the Office of Disciplinary 
Affairs will be comprised of NASD Regulation, Inc. (``NASDR'') staff 
acting on behalf of Nasdaq pursuant to Nasdaq's contractual 
arrangement with NASDR. See Nasdaq Rule 9001 and Nasdaq Rule 
9120(f), (g) and (x).
    \7\ Nasdaq attached a sample form of a minor rule violation 
letter with its submission to the Commission.
---------------------------------------------------------------------------

    If a member or associated person executes a minor rule violation 
plan letter, the letter shall be submitted to the Nasdaq Review 
Council. The Office of Disciplinary Affairs may accept such letter or 
refer it to the Nasdaq Review Council for acceptance or rejection. 
Similarly, the Review Subcommittee of the Nasdaq Review Council may 
accept or reject such letter or refer it to the Nasdaq Review Council 
for acceptance or rejection. If the letter is rejected, Nasdaq may take 
any other appropriate disciplinary action with respect to the alleged 
violation or violations.
    Nasdaq proposed that the quarterly report of actions taken on minor 
rule violations under Rule 9216(b) and IM-9216 would list for each 
violation: Nasdaq's internal file number for the case, the name of the 
individual and/or organization, the nature of the violation, the 
specific rule provision violated, the sanction imposed, the number of 
times the rule violation has occurred and the date of disposition.\8\
---------------------------------------------------------------------------

    \8\ Nasdaq attached a sample form of the quarterly report with 
its submission to the Commission.
---------------------------------------------------------------------------

    The following Nasdaq rule violations currently are included in Rule 
9216(b) and IM-9216: Rules 2210, 2211, IM-2210-1 and 2210-4 
(Communications with the public); Rule 3360 (Failure to timely file 
reports of short positions on Form NS-1); Rule 3110 (Failure to keep 
and preserve books, accounts, records, memoranda, and correspondence in 
conformance with all applicable laws, rules, regulations and statements 
of policy promulgated thereunder, and with the Rules of Nasdaq); Rule 
8211 (Failure to submit trading data as requested); Rule 1013 (Failure 
to timely submit amendments to Form BD); Rule 1031 (Failure to timely 
submit amendments to Form U4); Rule 1031 (Failure to timely submit 
amendments to Form U5); Rule 1120 (Failure to comply with the Firm 
Element of the continuing education requirements);

[[Page 13646]]

Rule 3010(b) (Failure to timely file reports pursuant to the Taping 
Rule); Rule 3070 (Failure to timely file reports); Rule 4619(e) 
(Failure to timely file notifications pursuant to SEC Regulation M); 
Rules 6954 and 6955 (Failure to submit data in accordance with the 
Order Audit Trail System); Rule 11870 (Failure to abide by Customer 
Account Transfer Contracts); SEC Exchange Act Rule 604 (Failure to 
properly display limit orders); SEC Exchange Act Rule 602(b)(5) 
(Failure to properly update published quotations in certain Electronic 
Communication Networks); SEC Exchange Act Rule 17a-5 (Failure to timely 
file FOCUS reports and annual reports); and SEC Exchange Act Rule 17a-
10 (Failure to timely file Schedule I). Nasdaq represented that 
modifications may be made to IM-9216. Nasdaq proposes that when 
amendments to IM-9216 are made pursuant to a rule filing submitted 
under Rule 19b-4 of the Act,\9\ such a filing would automatically be 
deemed a request by Nasdaq for Commission approval of a modification to 
its MRVP.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Nasdaq's proposed Minor Rule Violation Plan, 
including whether the proposed plan 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/other.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number 4-514 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 4-514. 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/other.shtml
). Copies of the submission, all 

subsequent amendments, all written statements with respect to the 
proposed plan that are filed with the Commission, and all written 
communications relating to the proposed plan 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. 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 4-514 and should be submitted 
on or before April 6, 2006.

II. Date of Effectiveness of the Proposed Minor Rule Violation Plan and 
Timing for Commission Action

    Pursuant to Section 19d-1 of the Act and Rule 19d-1(c)(2) 
thereunder,\10\ after April 6, 2006, the Commission may, by order, 
declare Nasdaq's proposed Minor Rule Violation Plan effective if the 
plan is consistent with the public interest, the protection of 
investors, or otherwise in furtherance of the purposes of the Act. The 
Commission in its order may restrict the categories of violations to be 
designated as minor rule violations and may impose any other terms or 
conditions to the proposed Minor Rule Violation Plan, File No. 4-514, 
and to the period of its effectiveness which the Commission deems 
necessary or appropriate in the public interest, for the protection of 
investors or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(d)(1) and 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-3809 Filed 3-15-06; 8:45 am]

BILLING CODE 8010-01-P