[Federal Register Volume 64, Number 29 (Friday, February 12, 1999)]
[Notices]
[Pages 7223-7224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3512]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41026; File No. SR-NASD-99-10]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the National
Association of Securities Dealers, Inc. Relating to an Amendment to the
Composition of Boards of NASD Regulation, Inc. and the Nasdaq Stock
Market, Inc.
February 8, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 3, 1999, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in Items I and II 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
and to grant accelerated approval to the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The NASD is proposing to amend the By-Laws of the NASD Regulation,
Inc. (``NASD Regulation'') and The Nasdaq Stock Market, Inc.
(``Nasdaq'') to increase the possible size of the Board of Directors of
those corporations. Below is the text of the proposed rule change.
Proposed new language is italicized; proposed deletion are in brackets.
Proposed Revisions to the NASD Regulation, Inc. By-Laws
ARTICLE IV
Number of Directors
Sec. 4.2 The Board shall consist of no fewer than five and no more
than [eight] ten Directors, the exact number to be determined by
resolution adopted by the Stockholder of NASD Regulation from time to
time. Notwithstanding the preceding sentence, the number of Directors
shall equal the number of Directors on the Nasdaq Board. Any new
Director position created as a result of an increase in the size of the
Board shall be filled pursuant to [as part of the annual election
conducted under] Section 4.4.
Qualifications
Sec. 4.3 (a) Directors need not be stockholders of NASD
Regulation. Only Governors of the NASD Board shall be eligible for
election to the Board. The number of Non-Industry Directors shall equal
or exceed the number of Industry Directors plus the President. The
Board shall include the President and the National Adjudicatory Council
Chair, representatives of an issuer of investment company shares or an
affiliate of such an issuer, and an insurance company or an affiliated
NASD member. If t[T]he Board consist of five to seven Directors, it
shall include at least one Public Director.[, unless the Board consists
of eight Directors. In such case] If the Board consists of eight
Directors, at least two Directors shall be Public Directors and if the
Board consists of ten Directors at least three shall be Public
Directors. The Chief Executive Officer of the NASD shall be an ex-
officio non-voting member of the Board.
(b) No change.
Proposed Revisions to The Nasdaq Stock Market, Inc. By-Laws
ARTICLE IV
Definitions
Number of Directors
Sec. 4.2 The Board shall consist of no fewer than five and no more
than [eight] ten Directors, the exact number to be determined by
resolution adopted by the stockholder of Nasdaq from time to time.
Notwithstanding the preceding sentence, the number of Directors shall
equal the number of Directors on the NASD Regulation Board. Any new
Director position created as a result of an increase in the size of the
Board shall be filled pursuant to [as part of the annual election
conducted under] Section 4.4.
Qualifications
Sec. 4.3 Directors need not be stockholders of Nasdaq. Only
Governors of the NASD Board shall be eligible for election to the
Board. The President of Nasdaq shall be a Director. The number of Non-
Industry Directors, including at least one Public Director and at least
one issuer representative, shall equal or exceed the number of Industry
Directors plus the President[.]. unless the Board consists of ten
Directors. In such case at least two Directors shall be issuer
representatives. The Chief Executive Officer of NASD shall be an ex-
officio non-voting member of the 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 III 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
The purpose of the proposed rule change is to provide the NASD with
more flexibility in determining the size of the boards of directors of
its subsidiaries, NASD Regulation and Nasdaq, while maintaining the
balance between non-industry and industry members contained in the
current By-Laws of those subsidiaries. The proposed rule change will
allow the NASD and its subsidiaries to accommodate additional
constituencies and the larger number of NASD Board members that
resulted from the recent reconfiguration of the NASD Board to
accommodate the structure resulting from the NASD's recent merger with
the American Stock Exchange. In addition to increasing the permissible
size of the subsidiary boards, the proposed rule change will provide
for additional public representation on the NASD Regulation Board and
additional issuer representation on the Nasdaq Board should the size of
the boards be increased to ten.
2. Statutory Basis
The NASD believes that the proposed rule change is consistent with
the
[[Page 7224]]
provisions of Section 15A(b)(4) \3\ of the Act, which requires, among
other things, that the Association's rules be designed to assure a fair
representation of its members in the administration of its affairs. The
NASD believes that the proposed rule change enhances the Association's
ability to assure fair representation in that it provides the NASD with
the discretion to increase the size of its subsidiary boards to allow
representation of additional constituencies while preserving the
fundamental compositional requirements of those boards.
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\3\ 15 U.S.C. 78o(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD represents that the proposed rule change will not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The NASD has neither solicited nor received comments on the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change 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. 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 at
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 No. SR-NASD-99-10 and should
be submitted by March 5, 1999.
IV. Commission's Findings and Order Granting Accelerated Approval
of the Proposed Rule Change
The Commission finds that the proposed rule change relating to
amending the composition of the NASD Regulation and Nasdaq boards is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities association.
Specifically, the Commission believes the proposal is consistent with
the Section 15A(b)(4) \4\ requirements that the Association's rules be
designed to assure a fair representation of its members in the
administration of its affairs.\5\ In particular, the Commission notes
that the NASD has not altered the balanced composition of each
subsidiary board.
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\4\ 15 U.S.C. 78o(b)(4).
\5\ In approving this rule change, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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The Commission finds good cause for approving the rule change prior
to the thirtieth day after the date of publication of notice thereof in
the Federal Register. The Commission believes that accelerated approval
will facilitate the formation of the NASD subsidiary boards in a manner
that will better represent the constituencies' presence on the NASD
parent board.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (File No. SR-NASD-99-10) is
hereby approved on an accelerated basis.
\6\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 15 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-3512 Filed 2-11-99; 8:45 am]
BILLING CODE 8010-01-M
