Source: http://www.thefederalregister.com/d.p/2004-04-05-04-7600
Timestamp: 2013-06-18 07:37:35
Document Index: 645890827

Matched Legal Cases: ['art 7114', 'art 3944', 'art 6726', 'art 140', 'art 5250', 'art 1739', 'art 30206', 'art 514', 'art 9740', 'art 180']

14 CFR Part 7114 CFR Part 3944 CFR Part 6726 CFR Part 140 CFR Part 5250 CFR Part 1739 CFR Part 30206 CFR Part 514 CFR Part 9740 CFR Part 180	Federal Register: April 5, 2004 (Volume 69, Number 65)
DOCID: FR Doc 04-7600
DOCUMENT ID: [Release No. 34-49497; File No. SR-NASD-2003-184]
SUBJECT CATEGORY: Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc., To Require Members To Review and Update Executive Representative Contact Information on a Quarterly Basis DOCUMENT SUMMARY: March 29, 2004.
On December 8, 2003, the National Association of Securities Dealers, Inc. (``NASD'') filed with the Securities and Exchange Commission (``Commission'' or ``SEC''), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4 thereunder,\2\ a proposed rule change to require members to conduct a review, and, if necessary, update their executive representative contact information on a quarterly basis, specifically within 17 business days after the end of each calendar quarter. The proposed rule change was published for notice and comment in the Federal Register on January 27, 2004.\3\ The Commission received two comment letters on the proposal.\4\ On March 17, 2004, the NASD filed a response to comments.\5\ This order approves the proposed rule change. \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b4.
\3\ See Securities Exchange Act Release No. 49110 (January 21, 2004), 69 FR 3973.
\4\ See February 4, 2004 letter from Bradley C. McCurtain, Maine Securities Corporation (``MSC letter'') (via email), and February 16, 2004 letter from John J. Dardis, President, Jack Dardis & Associates, LTD (``Dardis letter'') (via email).
\5\ See March 17, 2004 letter from Grace Yeh, Assistant General Counsel, NASD, to Katherine A. England, Assistant Director, Division of Market Regulation, Commission (``NASD letter'').
The Commission received two comment letters on the NASD's proposal.\6\ One commenter expressed full support for the proposal, but suggested the information become a line item on the quarterly FOCUS report, because ``small firms seldom have executive management changes.'' \7\ The other commenter found it ``difficult to not agree'' with the NASD's proposal, but noted a lack of instructions on how the NASD will implement the proposed rule change, and a concern that the costs of the proposed rule change might outweigh the benefits of the new requirement.\8\ The commenter raised a number of specific questions, including: \6\ See footnote 4, supra. \7\ MSC letter. \8\ Dardis letter.
Is the lack of current information a quarterly problem? Do contact persons change that often?
Is this a significant problem with small broker dealers?
If there is no response from the designated person, can the local district follow up to see if there has been a change?\9\
NASD, in response to the comments, stated the proposal ``is essential to its ability to regulate the marketplace.'' \10\ NASD believes that requiring members to review and update such information will ``help ensure the accuracy of the information.'' \11\ \10\ NASD letter at 1.
\11\ NASD has proposed similar quarterly contact information review requirements. See Securities Exchange Act Release Nos. 49246 (February 13, 2004), 69 FR 8255 (February 23, 2004) (SRNASD2003
183) (order approving continuing education contact person(s) quarterly update requirement), and 46444 (August 30, 2002), 67 FR 57257 (September 9, 2002) (SRNASD2002108) (proposing quarterly update of emergency contact information). NASD stated it will collect the information through NASD's Contact System (``NCS''), with all quarterly reviews and updates being performed on a central location in NCS. Additionally, NASD will require members ``to perform all quarterly reviews and updates on the same schedule (i.e., within 17 business days after the end of each quarter).'' \12\
\12\ NASD letter at 2.
In response to a commenter's suggestion that NASD add the executive representative contact information directly to the FOCUS report, NASD ``notes that the FOCUS report is an SEC document, requiring SEC action to be amended, and that any amendments to such form tend to be related to financial reporting requirements.'' \13\ Instead, to help members comply with this new requirement, NASD is considering different methods of notifying members of the need to update their executive representative designation and contact information, including (1) reminders that are contemporaneous with the act of filing a quarterly FOCUS report; (2) periodic email broadcasts distributed to members' executive representatives; and (3) individual emails to executive representatives.\14\ \13\ Id.
The NASD explained that failure to provide the requisite information during the 17 business days following each calendar quarter can result in disciplinary action by NASD.\15\ NASD noted that, in SR
NASD2004025,\16\ NASD seeks to amend its minor rule violation plan to address violations of the requirement that members provide or update contact information.
\15\ NASD letter at 3 (``NASD may use informal or formal means to enforce violations of its rules'').
\16\ The Commission has not yet published notice of SRNASD
2004025. Copies of the proposed rule change are available at the Commission and at the NASD.
The Commission has reviewed carefully the proposed rule change, the [[Page 17724]]
comment letters, and the NASD's response to the comments, and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association \17\ and, in particular, the requirements of section 15A(b)(6) of the Act,\18\ which requires, among other things, that NASD's rules 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.
\17\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78o3(b)(6).
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\19\ that the proposed rule change (SRNASD2003184) be, and it hereby is, approved.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\20\ \20\ 17 CFR 200.303(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. 047600 Filed 4204; 8:45 am]
SUMMARY: National Association of Securities Dealers, Inc., DOCUMENT BODY 2: March 29, 2004.