[Federal Register Volume 61, Number 134 (Thursday, July 11, 1996)]
[Notices]
[Pages 36595-36596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17630]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37407; File No. SR-NASD-96-19]
Self-Regulatory Organizations; Order Granting Accelerated
Approval of Proposed Rule Change by National Association of Securities
Dealers, Inc., Relating to Amendments to Forms U-4 and U-5
July 5, 1996.
On May 16, 1996, the National Association of Securities Dealers,
Inc. (NASD or Association) filed with the Securities and Exchange
Commission (SEC or 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 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.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 37289 (June 7, 1996), 61 FR 30272 (June 14,
1996). No comments were received by the Commission. This order grants
accelerated approval to the proposed amendments.
1. Background and Description of the Proposal
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\ The
redesigned CRD is intended to offer more 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 currently reviewing a proposal by the NASD
to amend its By-Laws and Membership and Registration Rules to
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), 61 FR 30269 (June 14, 1996).
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The revised Forms U-4 and U-5 define how information regarding
securities industry representatives and securities firms 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 is intended to provide more useful and accurate
information for entry into the CRD. 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.)
[[Page 36596]]
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.
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.
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 discussion between representatives from
the NASD, NASAA and the securities industry. The NASD believes the new
question will clarify the types of complaints that have to be reported
on the Forms U-4 and U-5. The question will require the reporting of
all written customer complaints that allege sales practice rule
violations and compensatory damages of $5,000 or more. The definition
of the term of ``sales practice violations'' will be included in the
explanation of terms section of the forms. The NASD intends to issue a
Notice of 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, will be
deleted from the CRD system two years from the date the complaint was
reported to the CRD. 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 recently began a test pilot phase of the new CRD system
with eleven firms and one service bureau that 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.
II. Commission Findings
The Commission finds that the proposed amendments to Forms U-4 and
U-5 are consistent with the provisions of Section 15A(b)(6) of the
Act.\4\ The amended forms will make the filing of disclosable
information easier and more efficient for the securities industry. In
addition, the amended forms will provide more detailed information for
use by securities regulators, thus fostering the protection of
investors and the public interest.
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\4\ 15 U.S.C. 78o-3(b)(6) (1988).
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The Commission finds good cause to approve the proposed rule change
prior to the 30th day after the date of publication of notice of filing
in the Federal Register. The forms were published for comment by NASAA
in August 1995 and the revised customer complaint question also was
published by NASAA in March 1996. Comments that were received have been
addressed by amendments to the forms. As stated earlier, the Commission
has received no comment letters on the instant proposal. In addition,
the Commission believes that accelerated approval is warranted so the
NASD can print and distribute the new forms in time for NASD members to
become familiar with the forms prior to their use in July and September
1996.
III. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\5\ that the proposed rule change (SR-NASD-96-19) is approved.
\5\ 15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Jonathan G. Katz,
Secretary.
[FR Doc. 96-17630 Filed 7-10-96; 8:45 am]
BILLING CODE 8010-01-M
