On June 20, 2000, the National Association of Securities Dealers, Inc. (“NASD” or “Association”), through it wholly owned subsidiary, NASD Regulation, Inc. (“NASD Regulation”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  and rule 19b-4 thereunder, filed with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change to amend Schedule A of the NASD By-Laws for the timely filing of reports, and amendments to IM-9216, the Minor Rule Violation Plan (“MRVP”). NASD Regulation amended the proposal on September 5, 2000. NASD Regulation again amended the proposal on September 21, 2000. The proposed rule change, including Amendment Nos. 1 and 2, was published for notice and comment in the Federal Register on September 29, 2000. No comments were received on the proposal. On June 28, 2001, NASD Regulation amended the proposal. This order approves the proposed rule change. Also, Amendment No. 3 is approved on an accelerated basis.
The Commission has reviewed carefully the proposed rule change, and Amendment Nos. 1, 2 and 3, and finds the proposed rule change is consistent with the Act and the rules and regulations promulgated thereunder. Specifically, the Commission finds that approval of the proposed rule change is consistent with section 15A(b)(6) of the Start Printed Page 36813Act, which requires, among other things, that the Association'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. The Commission also finds that the proposal, as amended, is consistent with section 15A(b)(7) of the Act, in that it will allow for reasonable safeguarding of investors' interests while establishing fair and reasonable rules for the Association's members and persons associated with its members. The Commission also finds the proposal is consistent with section 15A(b)(8) of the Act, in that it furthers the statutory goal of providing a fair procedure for disciplining the Association's members and associated persons. Finally, the Commission finds the proposal is consistent with Securities Exchange Act Rule 19d-1(c)(2)  that governs minor rule violation plans.
In approving this proposal, the Commission in no way minimizes the importance of compliance with these rules, and all other rules subject to the imposition of fines under the Association's MRVP. The Commission believes that the violation of any self-regulatory organizations' rules, as well as Commission rules, is a serious matter. However, in an effort to provide the Association with greater flexibility in addressing certain violations, the MRVP provides a reasonable means to address rule violations that do not rise to the level of requiring formal disciplinary proceedings. The Commission expects that the Association will continue to conduct surveillance with due diligence, and make a determination based on its findings whether fines of more or less than the recommended amount are appropriate for violations of rules under its MRVP, on a case by case basis, or if a violation requires formal disciplinary action.
The Commission finds good cause for approving proposed Amendment No. 3 before the 30th day after the date of publication of notice of filing of Amendment No. 3 in the Federal Register. The Association filed Amendment No. 3 largely in response to concerns raised by the Commission regarding language in the original proposal, and ambiguity regarding how the Association intended to monitor violations of certain rules if those rules were administered under the Association's MRVP. Amendment No. 3 clarifies the ambiguities noted by the Commission and eliminates some rules that did not lend themselves to enforcement through an MRVP to address the Commission's concerns. The substantive changes implemented in Amendment No. 3 warrant accelerated approval. For these reasons, the Commission finds good cause for accelerating approval of Amendment No. 3.
Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3, including whether proposed Amendment No. 3 is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to file number SR-NASD-00-39 and should be submitted by August 3, 2001.
It Therefore Is Ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (SR-NASD-00-39), including Amendment Nos. 1, 2 and 3, is approved.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. See September 1, 2000 letter from Alden S. Adkins, Senior Vice President and General Counsel, NASD Regulation to Joseph P. Morra, Special Counsel, Division of Market Regulation (“Division”), SEC (“Amendment No. 1”). In Amendment No. 1, NASD Regulation made technical, non-substantive changes to the original proposal. In addition, NASD Regulation provided clarifying language to assist in describing the requirements under Rule 1120.Back to Citation
4. See September 19, 2000 letter from Gregory J. Dean, Jr., Assistant General Counsel, NASD Regulation to Joseph P. Morra, Special Counsel, Division, SEC (“Amendment No. 2”). In Amendment No. 2, NASD Regulation corrected the reference to SEC Rule 19d-1(c)(2) in the title to IM-9216.Back to Citation
6. See June 28, 2001 letter from Patrice M. Gliniecki, Vice President and Deputy General Counsel, NASD Regulation to Katherine A. England, Assistant Director, Division, SEC (“Amendment No. 3, NASD Regulation made the following changes to the proposal regarding the MRVP: (1) Member firm violations of the Regulatory Element of NASD Rule 1120, Continuing Education, will not be eligible for consideration under the MRVP; (2) untimely notifications filed pursuant to NASD Rule 4619(d) may be appropriate for disposition as a minor violation, where, for example, a member inadvertently misses the filing deadline but files the notification the following day before the commencement of trading and no customer harm has occurred; intentionally late filings are inappropriate for disposition as a minor violation of the rule; (3) synchronization of business clocks pursuant to NASD Rule 6953 is deleted from the proposal; (4) Securities Exchange Act Rule 17a-11, Notification Provisions for Brokers and Dealers, is deleted from the proposal; (5) payment of annual fees pursuant to MSRB Rule A-14 is clarified to reflect that, in the event NASD Regulation staff were to issue a minor violation to a firm for failure to pay the annual fee in a timely manner, the firm would remain obligated to pay the annual fee to the MSRB; firms would not be permitted to pay the minor violation fine in lieu of paying the annual fee to the MSRB; and (6) changes in language to the “Purpose” section of the proposal as originally filed (the new language is delineated in Amendment No. 3).Back to Citation
7. In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f).Back to Citation
[FR Doc. 01-17518 Filed 7-12-01; 8:45 am]
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