68 FR 126 pgs. 39168-39169 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Order Granting Approval of Plan and Amendment No. 1 Thereto for Allocation of Regulatory Responsibilities Between the National Association of Securities Dealers, Inc. and the International Securities Exchange, Inc.
Type: NOTICEVolume: 68Number: 126Pages: 39168 - 39169
Docket number: [Release No. 34-48064; File No. S7-966]
FR document: [FR Doc. 03-16522 Filed 6-30-03; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48064; File No. S7-966]
Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Order Granting Approval of Plan and Amendment No. 1 Thereto for Allocation of Regulatory Responsibilities Between the National Association of Securities Dealers, Inc. and the International Securities Exchange, Inc.
June 19, 2003.
On January 7, 2003, the National Association of Securities Dealers, Inc. ("NASD'or "Association") and the International Securities Exchange, Inc. ("ISE") filed with the Securities and Exchange Commission ("SEC" or "Commission") a plan, pursuant to Section 17(d) of the Securities Exchange of 1934 ("Act")1and Rule 17d-2 thereunder,2for allocation of regulatory responsibilities relating to options-related sales practices.3On May 1, 2003, NASD and ISE filed Amendment No. 1 to the plan.4The regulatory responsibilities transferred to the NASD under this plan, as amended, for common members of the ISE and NASD are all the regulatory responsibilities initially allocated to the ISE under a 17d-2 plan for allocating regulatory responsibilities with respect to options-related sale practices executed by several SROs that was approved by the Commission.5
Footnotes:
1 15 U.S.C. 78q(d).
2 17 CFR 240.17d-2.
3 See letter from Michael Simon, Senior Vice President and General Counsel, ISE, to Nancy Sanow, Assistant Director, Division of Market Regulation ("Division"), SEC, dated January 6, 2003.
4 See letter from Michael Simon, Senior Vice President and General Counsel, ISE, to Nancy Sanow, Assistant Director, Division, SEC, dated April 30, 2003. Amendment No. 1 deleted paragraphs 5.1 and 5.2 of the plan filed on January 7, 2003.
5 See Securities Exchange Act Release No. 46800 (November 8, 2002), 67 FR 69774 (November 19, 2002).
The plan, including Amendment No. 1, was published for comment on May 21, 2003.6The Commission received no comments on the plan. This order approves the plan, as amended. Accordingly, the NASD shall assume, in addition to the regulatory responsibilities it already has under the Act, the regulatory responsibilities allocated to it under the plan, as amended. At the same time, the ISE is relieved of those regulatory responsibilities allocated to the NASD.
Footnotes:
6 See Securities Exchange Act Release No. 47871 (May 14, 2003), 68 FR 27869 (May 21, 2003).
I. Introduction
Section 19(g)(1) of the Act,7among other things, requires every national securities exchange and registered securities association ("SRO") to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to section 17(d) or 19(g)(2) of the Act.8Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO ("common members"). This regulatory duplication would add unnecessary expenses for common members and their SROs.
Footnotes:
7 15 U.S.C. 78s(g)(1).
8 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2).
Section 17(d)(1) of the Act was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.9With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules and regulations, or to perform other specified regulatory functions.
Footnotes:
9 15 U.S.C. 78q(d). See also Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session. 32 (1975).
To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.10Rule 17d-1, adopted on April 20, 1976,11authorizes the Commission to name a single SRO as the designated examining authority ("DEA") to examine common members for compliance with financial responsibility requirements imposed by the Act, or by Commission or SRO rules. When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with applicable financial responsibility rules.
Footnotes:
10 17 CFR 240.17d-1 and 17 CFR 240.17d-2.
11 See Securities Exchange Act Release No. 12352, 41 FR 18809 (May 3, 1976).
On its face, Rule 17d-1 deals only with an SRO's obligations to enforce broker-dealers' compliance with the financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices, and trading activities and practices.
To address regulatory duplication in these other areas, on October 28, 1976, the Commission adopted Rule 17d-2 under the Act.12This rule permits SROs to propose joint plans allocating regulatory responsibilities with respect to common members. Under paragraph (c) of Rule 17d-2, the Commission may declare such a plan effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to and foster the development of a national market system and a national clearance and settlement system, and in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO.
Footnotes:
12 See Securities Exchange Act Release No. 12935, 41 FR 49093 (November 8, 1976).
II. Discussion
The Commission finds that the proposed plan is consistent with the factors set forth in Section 17(d) of the Act13and Rule 17d-2(c)14in that the proposed plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among self-regulatory organizations, or to remove impediments to and foster the development of the national market system. In particular, the Commission believes that the proposed plan is an achievement of cooperation between the ISE and NASD which will reduce unnecessary regulatory duplication by allocating to NASD certain responsibilities related to options-related sale practice regulation for members that belong to both the ISE and NASD. Furthermore, because the ISE and NASD will coordinate their regulatory functions in accordance with the plan, the plan will promote investor protection.
Footnotes:
13 15 U.S.C. 78q(d).
14 17 CFR 240.17d-2(c).
III. Conclusion
This order gives effect to the plan, as amended, filed with the Commission that is contained in File S7-966. The parties shall notify all members affected by the plan, as amended, of their rights and obligations under the amended plan.
It Is Therefore ordered, pursuant to Sections 17(d)15and 11A(a)(3)(B)16of the Act, that the plan of the ISE and NASD, as amended, filed pursuant to Rule 17d-2,17is approved.
Footnotes:
15 15 U.S.C. 78q(d).
16 15 U.S.C. 78k-1(a)(3)(B).
17 17 CFR 240.17d-2.
It Is Therefore ordered that the ISE is relieved of those responsibilitiesallocated to NASD under the plan, as amended.
Footnotes:
18 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.18
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-16522 Filed 6-30-03; 8:45 am]
BILLING CODE 8010-01-P