[Federal Register Volume 61, Number 116 (Friday, June 14, 1996)]
[Notices]
[Pages 30272-30274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15183]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37289; File No. SR-NASD-96-19]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating of
Proposed Amendments to Forms U-4 and U-5
June 7, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on May 16,
1996, 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, II, and III below, which Items have been prepared by the
NASD.\1\ The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ On June 5, 1996, the NASD filed Amendment No. 1 to the
proposed rule change to clarify that rather than submitting entirely
new forms for the Commission's approval, the filing seeks to amend
currently existing Forms U-4 and U-5. Amendment No. 1 was submitted
along with a redlined version of the signature page (page 4) for
Form U-4 to highlight the revisions to that part of the Form. Letter
from Craig 1. Landauer, Associate General Counsel, NASD to Mark P.
Barracca, Special Counsel, SEC, dated June 5, 1996.
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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 Uniform Application for
Securities
[[Page 30273]]
Industry Registration or Transfer, Form U-4, and the Uniform
Termination Notice for Securities Industry Registration, Form U-5.\2\
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\2\ Copies of the revised Forms U-4 and U-5 were attached as
Exhibit 2 to the NASD's rule proposal and are available for
inspection and copying in the Commission's Public Reference Room and
are available from the NASD.
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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
The NASD is proposing to amend the Uniform Application for
Securities Industry Registration or Transfer, Form U-4 and the Uniform
Termination Notice for Securities Industry Registration, Form U-5.
Since November 1993, in support of efforts to redesign the Central
Registration Depository (CRD), a task force comprising the North
American Securities Administrators Association (NASAA), industry
representatives, the SEC, NASD and other SROs has worked to revise the
uniform registration forms (Form U-4 and Form U-5). The NASD has
undertaken an extensive redesign effort to improve the CRD which will
require electronic filing of registration-related forms.\3\ Currently
scheduled for pilot phase during the second quarter of 1996, the
redesigned CRD will offer efficient processing of registration-related
filings and user friendly access to information contained in those
filings for all industry and regulatory participants.
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\3\ The Commission is simultaneously publishing notice of NASD's
proposed rule changes to its By-Laws and Membership and Registration
Rules that will require member firms to submit information on Forms
U-4, U-5, and BD via electronic means and to establish electronic
filing protocols. File No. SR-NASD-96-21; Securities Exchange Act
Release No. 37291 (June 7, 1996).
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The revised forms define how the information will be collected and
stored in the revised CRD. Implementation of the amended forms will
coincide with implementation of the redesigned CRD. The forms revision
effort has dealt with bringing better clarify and fairness into the
reporting of disclosable information. The most significant changes
relate to the disclosure questions on Forms U-4 and U-5. The revisions
will provide for more detailed reporting to support new functionality
created by CRD's redesign. The forms have been revised to include:
Expansion of Page 1 of Form U-4 and the parallel items on
Form U-5 to handle the registration of non-members and to accommodate
multiple types of registration or notices of termination for Investment
Adviser Representative and Agent of Issuer registrations. (In the long
term, the new CRD will ultimately contain licensing data bases for non-
members.)
Addition of a statement on Page 4 of Form U-4 that will be
executed by the applicant and retained by the member firm, that
authorizes the member firm to make electronic filings on behalf of the
applicant.
An option for the applicant and member firm to request on
the Form U-4 processing under a Relicensing Program. This program is
intended to replace the existing Temporary Agent Transfer (TAT)
Program. The new program will result in expedited handling for eligible
persons including most individuals who previously have reported an
affirmative answer to disclosure questions on their Forms U-4, but who
have no new disclosure upon transfer. Even if there is new disclosure,
the applicant may have an opportunity to gain a Temporary Registration
while that disclosure is reviewed.
An opportunity for an individual to provide a summary of
the circumstances relating to an internal review disclosure submitted
by the individual's former employer on the Form U-5. Individuals
already have the opportunity to provide responses to other Form U-5
disclosures on their next U-4 filing upon transfer to a new employer.
Item 22, the disclosure question on the Form U-4 and the
parallel disclosure items on the Form U-5 have been made consistent
with each other to the extent possible.
The questions relating to disclosure have been categorized
to provide a uniform format to collect, display and sort disclosure
detail.
Each category of disclosure has its own custom Disclosure
Reporting Page (DRP) soliciting detail unique to that category.
Each custom DRP solicits detail to provide the information
that regulators have indicated they need in order to make informed
registration decisions. The revised DRPs require more detail than the
current DRPs, which will reduce the number of requests for additional
disclosures that prolong the review and registration process.
The forms also contain a new customer complaint question. The
question was developed after much discussion between representatives
from the NASD, NASAA and the securities industry. The NASD believes the
new question will greatly simplify and clarify what types of complaints
have to be reported on the Forms U-4 and U-5. The question will require
the reporting of all written customer complaints which allege sales
practice rule violations and compensatory damages of $5,000 or more.
The definition of sales practice violations will be included in the
explanation of terms section of the forms. The NASD intends to issue a
Notice to Members which will include a list of examples of sales
practice violations under this section and the instructional software
in the new CRD system will have this list as well. The NASD will
periodically revise this list as warranted. Written complaints, which
do not evolve into arbitration, civil litigation or a settlement over
the jurisdictional amount, would be deleted from the CRD system two
years from the date of the complaint. All arbitration and civil
litigation proceedings involving securities transaction matters will be
reported regardless of the dollar amount of compensatory damages. All
settlements of $10,000 or more will be reported as well.
The NASD began a test pilot phase of the new CRD system on
approximately May 20, 1996 with eleven firms and one service bureau who
agreed to participate. The pilot participants will go into actual
production on the new system on approximately July 29, 1996 using the
revised Forms U-4 and U-5. The NASD intends to phase-in the use of the
amended Forms with the remaining NASD members commencing on
approximately September 9, 1996 and concluding on approximately
November 7, 1996.\4\
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\4\ Registered representatives will not be required to refile
Form U-4 with the NASD as a result of the changes to the form.
Registered representatives, however, will continue to be subject to
the requirement to update their forms when any information becomes
inaccurate or incomplete. When updating a particular item, all
information relating to that item must be completed, including DRP
pages, if applicable.
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The NASD believes that the amended Forms U-4 and U-5 are consistent
with the provisions of Section 15A(b)(6) of the Act in that the NASD is
required to adopt appropriate qualification and registration
requirements for persons associated with NASD members or
[[Page 30274]]
applicants for NASD membership. Article IV, Section 2 of the NASD By-
Laws authorizes the Board to prescribe the form used by any person who
wishes to make application for registration with the NASD. The NASD
believes the amended forms will make the filing of disclosable
information easier and more efficient and will provide more complete
information for use by securities regulators.
(B) Self-Regulatory Organization's Statement on Burden on competition
The NASD does not believe that 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 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 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:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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. 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 the file number in the caption
above and should be submitted by July 5, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-15183 Filed 6-13-96; 8:45 am]
BILLING CODE 8010-01-M
