[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Notices]
[Pages 2709-2711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1110]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39539; File No. SR-NASD-97-92]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating to
By-Law Amendment to Require Members To Update Firm Contact Information
Electronically, To Maintain Electronic Mail Account, and for Other
Purposes
January 12, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 19, 1997, the
National Association of Securities Dealers, Inc. (``NASD'' or
``Association'') 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 the NASD. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Association is proposing the following changes to its by-laws,
to require its members to update firm contact information
electronically, to maintain an electronic mail (e-mail) address, and to
make certain other technical changes:
By-Laws of the National Association of Securities Dealers, Inc.\2\
Article IV--Executive Representative
Sec. 3. Each member shall appoint and certify to the Secretary of
the NASD one ``executive representative'' who shall represent, vote,
and act for the member in all the affairs of the NASD, except that
other executives of a member may also hold office in the NASD, serve on
the Board or committees appointed under Article IX, Section 1 or
otherwise take part in the affairs of the NASD. A member may change its
executive representative upon giving notice thereof via electronic
process or such other process the NASD may prescribe to the Secretary,
or may, when necessary, appoint, by notice via electronic process to
the Secretary, a substitute for its executive representative. An
executive representative of a member or a substitute shall be a member
of senior management and registered principal of the member. Not later
than January 1, 1999, each executive representative shall maintain an
Internet electronic mail account for communication with the NASD and
shall update firm contact information via the NASD Regulation Web Site
or such other means as prescribed by the NASD.
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\2\ This version of the NASD By-Laws was approved by the
Commission in Securities Exchange Act Release No. 39326 (Nov. 14,
1997), 62 FR 62385 (Nov. 21, 1997). Additions are italicized,
deletions are bracketed.
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* * * * *
Article VII--Board of Governors
* * * * *
Sec. 9. (b) The National Nominating Committee shall consist of no
fewer than six and no more than nine members. The number of [Industry]
Non-Industry committee members shall equal or exceed the number of
[Non-Industry] Industry committee members. If the National Nominating
Committee consists of six members, at least two shall be Public
committee members. If the National Nominating Committee consists of
seven or more members, at least three shall be Public committee
members. No officer or employee of the Association shall serve as a
member of
[[Page 2710]]
the National Nominating Committee in any voting or non-voting capacity.
No more than three of the National Nominating Committee members and no
more than two of the Industry committee members shall be current
members of the NASD Board.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The 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
(a) Amendment to Article IV, Section 3. On August 5, 1997, the
Membership Committee of the NASD Regulation, Inc. (``NASD Regulation'')
Board of Directors recommended the adoption of an amendment to the NASD
By-Laws to require each executive representative, beginning not later
than January 1, 1999, to maintain an Internet electronic mail account
for communication with the NASD and to update firm contact information
via the NASD Regulation Web Site. The NASD Regulation Board approved
the recommendation at its September 23, 1997 meeting. The NASD Board of
Governors approved the amendment at its December 11, 1997 meeting.
The NASD has long wrestled with how to collect and administer in an
effective manner the names of members, executive representatives and
other individuals who hold positions of significant responsibility
within member firms. This information is used by the NASD Corporate
Secretary for member balloting. Member Regulation for compliance
purposes, and Corporate Communications in identifying Key individuals
for use in target mailings. The current method for acquiring this
information is through the filing of an NASD form entitled ``NASD
Member Firm Contact Questionnaire'' (NMFCQ).
The data requested on the NMFCQ is not required on any other form
filing (e.q., Form BD or U-4). The data is available in the Central
Registration Depository (``CRD''), but in a text form that renders it
nearly impossible to interface to another system. Thus, members are
required to file the NMFCQ with the CRD, where the information is data
captured into the Member Profile System, an adjunct to the existing CRD
system. The data is then viewable throughout the organization via the
Member Profile System and is interfaced to regulatory and finance
systems as well as the existing corporate mailing system for use in
distributing publications, reports, voting ballots, and mail.
A new procedure for collecting NMFCQ information in the future is
necessary for two reasons. First, the CRD modernization effort does not
include rebuilding this function, so another alternative is required.
Second, members are rarely updating these filings. Because the
information solicited via the form is very important to support the
NASD's business, the NASD must have a more efficient means for firms to
update this information, thereby encouraging them to do so more
regularly.
The proposed By-Law change will improve the data collection process
by requiring a firm to access its NMFCQ via the NASD Regulation Web
Site and update it on a periodic basis. (A firm would be able to access
only its own NMFCQ; the information would be password-protected to
prevent any public access.) The information then would be interfaced to
the internal NASD Regulation systems requiring this set of data.
Further, the By-Law also would require each member to maintain an
Internet electronic mail address on behalf of its executive
representative. This electronic mail address would be used proactively
to send messages reminding the member to review and update its contact
information.
There are other reasons the staff is interested in member Internet
access and electronic mail. Once established, it opens up many options
for timely communications with members and associated cost savings. It
also can assist members with timely internal distribution of NASD
information, notices, and publications. Other potential initiatives
include eliminating or reducing printed publications, sending more
timely announcements and notices, and providing value-added services to
members.
The NASD is proposing a one-year transition period to accommodate
small firms that may not currently have Internet access or electronic
mail accounts.
(b) Technical Amendment to Article VII, Section 9(b). The NASD also
proposes a technical amendment to Article VII, Section 9(b) of the NASD
By-Laws. In Special Notice to Members 97-75, the NASD proposed a
comprehensive revision to its By-Laws to provide for a more streamlined
corporate structure. The membership approved these changes on November
13, 1997, and the Securities and Exchange Commission (``Commission'')
approved them on November 14, 1997.\3\ Article VII, Section 9(b)
contained a typographical error that provided that the number of
Industry committee members on the National Nominating Committee should
equal or exceed the number of Non-Industry committee members. The terms
``Industry'' and ``Non-Industry'' were transported. Section 9(b) should
provide that the number of Non-Industry committee members should equal
or exceed the number of Industry committee members. The National
Nominating Committee is required to be composed in such a manner by the
Undertakings agreed to by the NASD on August 8, 1996.\4\
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\3\ See Securities Exchange Act Release No. 39326 (Nov. 14,
1997), 62 FR 62385 (Nov. 21, 1997).
\4\ Securities Exchange Act Release No. 37538 (Aug. 8, 1996)
(SEC Order Instituting Public Proceedings Pursuant to Section
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and
Imposing Remedial Sanctions, In the Matter of National Association
of Securities Dealers, Inc., Administrative Proceeding File No. 3-
9056).
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2. Statutory Basis
The NASD believes the proposed rule change is consistent with
Section 15A(b)(2) in that the proposed rule change will assist the NASD
in carrying out the purposes of the Act and to enforce compliance with
the Act, the rules and regulations thereunder, and the Rules of the
Association.
B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD does not believe 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
[[Page 2711]]
longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will by order approve such proposed rule change, or
institute proceedings to determine whether the proposed rule change
should be disapproved.
The NASD proposes to make the rule change effective upon Commission
approval.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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. Sec. 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-97-92 and
should be submitted by February 6, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-1110 Filed 1-15-98; 8:45 am]
BILLING CODE 8010-01-M
