regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.,

[Federal Register: July 2, 2002 (Volume 67, Number 127)]

[Notices]

[Page 44492-44494]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr02jy02-127]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46103; File No. SR-NYSE-2002-21]

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the New York Stock Exchange, Inc. To Allow the Use of Revised Forms U-4 and U-5

June 21, 2002.

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 June 5, 2002, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filedwith 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 Exchange. The Exchange filedthe proposal pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

\3\ 15 U.S.C. 78s(b)(3)(A).

\4\ 17 CFR 240.19b-4(f)(6). The NYSE provided the Commission with written notice of its intention to file this proposed rule change on May 28, 2002. The Exchange has asked the Commission to waive the 30-day operative delay.

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

   The Exchange hereby submits revised Uniform Application for Securities Industry Registration or Transfer (``Form U-4'') and the revised Uniform Termination Notice for Securities Industry Registration (``U-5'') for Commission review.

2. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

   In its filing with the Commission, the NYSE included statements concerning the purpose of and basis for its proposal and discussed any comments it received regarding the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.

   1. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

      1. Purpose

      The purpose of this proposed rule change is to allow the NYSE to use revised Uniform Application for Securities Industry Registration or Transfer (``Form U-4'') and Uniform Termination Notice for Securities Industry Registration (``Form U-5'') (together, the ``Forms''). The NYSE uses these Forms as part of its registration and oversight of persons associated with members and member organizations. In addition, these Forms are used in connection with the National Association of Securities Dealers, Inc.'s (``NASD'') Central Registration Depository (``CRD'') system, in which the Exchange participates. The CRD is an industry-wide automated system, which allows for the efficient review and tracking of registered persons in the securities industry, as well as changes in their work and disciplinary histories.

      The Forms were filedby NASD Regulation, Inc. (``NASDR'') with the Commission, and approved by the Commission on March 11, 2002.\5\ The NYSE included in its filing copies of the Forms (marked as Exhibits A and B). SR-NASD-2002-05 was based on NASDR's efforts to enhance the CRD and the registration and termination process of individuals in the securities industry. The Forms were amended to provide additional enhancements and information for more meaningful and detailed disclosure. The Forms are to be submitted electronically through the Internet.

      \5\ See Securities Exchange Act Release No. 45531 (March 11, 2002 ), 67 FR 11735 (March 15, 2002) (SR-NASD-2002-05).

      The technical changes to the Forms will (1) update the Form U-4 to add examination and registration categories that were not previously included; (2) make certain formatting and technical changes to the Forms that would complete the transition from a paper-based filing model to an electronic-filing model; (3) clarify certain items that have been a source of confusion for Web CRD users; (4) provide separate paper filing instructions for those filers that do not use the CRD or Investment Adviser Registration Depository (``IARD'') systems; (5) accommodate the electronic submission of investment adviser filings in the IARD system; and (6) establish procedures that will enable broker/ dealer firms and investment adviser firms employing dually registered persons to concur with information contained in the Forms.

      Specific revisions that affect NYSE members and member organizations include the addition of new registration categories. The revised Forms add new registration categories for the NYSE Trading Assistant (``TA'') and Specialist Clerk (``SC'') positions.\6\

      \6\ See Securities Exchange Act Release Nos. 40943 (January 13, 1999), 64 FR 3330 (January 21, 1999) (SR-NYSE-98-36) and 41701 (August 3, 1999), 64 FR 43804 (August 11, 1999) (SR-NYSE-99-20) in which the Commission approved the TA and SC positions, respectively.

      The revised Forms also add: (1) a Series 7A examination that corresponds with the Floor Member Conducting Public Business (``PM'') and Floor Clerk Conducting Business (``PC'') registration category;\7\ (2) a NYSE Branch Manager Series 12 examination that corresponds with the Securities Manager (``SM'') registration category;\8\ (3) a Series 21 examination that corresponds with the

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      NYSE SC registration category; and (4) a Series 25 examination that corresponds with the NYSE TA registration category.

      \7\ See Securities Exchange Act Release No. 32698 (July 29, 1993), 58 FR 41539 (August 4, 1993)(SR-NYSE-93-10) in which the Commission approved the NYSE proposed rule change to adopt the Series 7A examination as a module of the Series 7 examination for floor members who only accept orders from professional customers, and to establish a new registration category. See also Securities Exchange Act Release No. 42092 (November 2, 1999), 64 FR 61375 (November 10, 1999) (SR-NYSE-99-36) in which the Commission approved the NYSE proposal to eliminate the Series 7B examination and adopt a new interpretation of Rule 345 to establish the Series 7A examination as the qualifying examination for floor clerks who only accept orders from professional customers.

      \8\ See Securities Exchange Act Release No. 39712 (March 3, 1998), 63 FR 11939 (March 11, 1998)(SR-NYSE-97-33), in which the Commission approved a Continuing Education Program for supervisors that included Series 12 examination-qualified securities managers.

      Another change affecting NYSE members and member organizations is the Signature and Acknowledgment sections on Form U-4. To accommodate electronic filing, revised Section 15, the ``Signatures'' section, defines a ``signature'' as either ``a manual signature or an electronically transmitted equivalent.'' This section permits individuals and appropriate signatories to go directly to designated signature fields to execute the electronic signatures required by the Form U-4. Revised Sections 15A and 15B address the individual/ applicant's acknowledgment and consent and the firm/appropriate signatory's representations, both of which must be completed on all initial or temporary registration Form U-4 filings. Section 15C addresses the Temporary Registration Acknowledgment, which must be completed for all initial or temporary registrations. Section 15D has been added to address an individual/applicant's acknowledgment and consent to amendments to the disclosure questions or the Disclosure Reporting Pages (``DRPs''). Firms and appropriate signatories must complete Section 15E for all amended Form U-4 filings. In addition, the signature section includes the Firm/Appropriate Signatory Concurrence (15F), which is a new signature section that enables one firm to concur with a filing made by another firm with which an individual is also registered (i.e., the individual is registered with more than one broker/dealer and/or investment adviser firm).

      The changes to Form U-5 combine the signatures into Section 8, which includes the firm acknowledgment in Section 8A and the individual acknowledgment and consent in Section 8B. Only appropriate signatories of firms are required to sign the Form U-5; however, if the terminating firm reports on the Form U-5 that an individual is under internal review, that individual may file a Part II to the Internal Review DRP to provide a response.

      In addition, unregistered individuals are obligated to report to CRD any address changes for two years following the termination of registration. The individual acknowledgment and consent is included in the proposed changes to the Form U-5 to require individuals submitting an address change or an Internal Review DRP-Part II to attest that the information is accurate and complete. With the exception of Part II of the Form U-5 Internal Review DRP, there is currently no mechanism for a former associated person or member to submit information to amend or update a disclosure record through the use of the Forms. Part II of the Form U-5 Internal Review DRP provides a current or former registered representative an opportunity to provide a summary of the circumstances relating to an internal review reported on a Form U-5 by a former employer.

      The revised technical and formatting amendments do not alter the reporting or disclosure requirements applicable to broker/dealers or their registered persons. Therefore, members and member organizations are not required to ``re-file'' disclosure or administrative information for their associated persons.

      The amendments will enhance the utility of Forms U-4 and U-5 as part of the Exchange's registration and oversight function by providing more detailed reporting concerning persons associated with members and member organizations as well as enhancements to electronic filing through the Internet. 2. Statutory Basis

      The NYSE believes the proposed rule change is consistent with Section 6(b)(5) of the Act,\9\ in that use of the Forms should foster cooperation and coordination with persons engaged in regulating transactions in securities. Additionally, the NYSE believes the information reported on the Forms assists the Exchange in its responsibilities under Section 6(c) of the Act \10\ in denying membership to those subject to a statutory disqualification or who cannot meet such standards of training, experience and competence as are prescribed by the rules of the Exchange or those who have engaged in acts or practices inconsistent with just and equitable principles of trade.

      \9\ 15 U.S.C. 78f(b)(5).

      \10\ 15 U.S.C. 78f(c).

   2. Self-Regulatory Organization's Statement on Burden on Competition

      The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

   3. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

      The Exchange has neither solicited nor received written comments on the proposed rule change.

3. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

   The proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 19b-4 \12\ thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

   \11\ 15 U.S.C. 78s(b)(3)(A).

   \12\ 17 CFR 240.19b-4(f)(6).

   The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Acceleration of the operative date will allow immediate use of the Forms. For these reasons, the Commission designates the proposal to be effective and operative upon filing with the Commission.\13\

   \13\ For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

4. Solicitation of Comments

   Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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 NYSE. All submissions should refer to file number SR-NYSE-2002-21 and should be submitted by July 23, 2002.

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   For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\14\

   \14\ 17 CFR 200.30-3(a)(12).

   Margaret H. McFarland, Deputy Secretary.

   [FR Doc. 02-16544Filed7-1-02; 8:45 am]

   BILLING CODE 8010-01-P