02-30043. Self Regulatory Organizations; Order Granting Approval to Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to the Security Futures Risk Disclosure Statement

November 20, 2002.

On September 25, 2002, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and rule 19b-4 thereunder,^[2] a proposed rule change relating to the Security Futures Risk Disclosure Statement. The proposed rule change was published for comment in the Federal Register on October 17, 2002.^[3] The Commission received no comments on the proposal.

In addition, on September 25, 2002, NASD submitted a separate proposed rule change relating to the Security Futures Risk Disclosure Statement (File No. SR-NASD-2001-28). At NASD's request, the Commission put that proposed rule change into effect summarily pursuant to section 19(b)(3) of the Act,^[4] so that the Security Futures Risk Disclosure Statement would be in effect prior to the start of trading in security futures.^[5] Section 19(b)(3) of the Act ^[6] requires that any proposed rule change put into effect summarily shall be filed promptly thereafter in accordance with the provisions of section 19(b)(1) of the Act.^[7] Accordingly, NASD filed this proposed rule change to gain final approval of the Security Futures Risk Disclosure Statement.

The Commission 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.^[8] In particular, the Commission finds that the proposal is consistent with the requirements of section 15A(b)(6) of the Act,^[9] which requires, among other things, that NASD's rules be designed to prevent fraudulent and manipulative acts and practices, and, in general, to protect investors and the public interest. Under NASD's rules, the Security Futures Risk Disclosure Statement must be provided to customers at or prior to the time the customer's account is approved for trading security futures. Among other things, the statement describes the risks of security futures, how they trade, margin, effects of leverage, settlement procedures, customer account protections, and the tax consequences of trading security futures. Accordingly, the Commission believes that the Security Futures Risk Disclosure Statement should inform customers that trade security futures of the characteristics of security futures and the risks associated with trading them.

It is therefore ordered, pursuant to section 19(b)(2) of the Act ^[10] , that the proposed rule change (File No. SR-NASD-2002-129) be, and it hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[11]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See Securities Exchange Act Release No. 46614 (October 7, 2002), 67 FR 64162.

4.  15 U.S.C. 78s(b)(3).

5.  See Securities Exchange Act Release No. 46612 (October 7, 2002), 67 FR 64151.

6.  15 U.S.C. 78s(b)(3).

7.  15 U.S.C. 78(s)(b)(1).

8.  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).

9.  15 U.S.C. 78o-3(b)(6).

10.  15 U.S.C. 78s(b)(2).

11.  17 CFR 200.30-3(a)(12).