NASD Rulemaking:
Notice of Filing of Proposed Rule Change re: Amendment to Composition of NASD Board to Include Members of New Amex LLC and for Other Purposes
See also Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the American Stock Exchange, Inc. Relating to Changes to the Combination of the American Stock Exchange, Inc. and the NASD, Inc.
See also Notice of Filing of Proposed Rule Change by NASD, Inc. Relating to Amendment to Composition of NASD Board to Include Members of New Amex LLC and for Other Purposes
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-40443; File No. SR-NASD-98-67)
September 16, 1998
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the National Association of Securities Dealers, Inc. Relating to Policies Regarding Authority Over American Stock Exchange LLC and Composition of Board of Governors of American Stock Exchange LLC
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Exchange Act" or "Act"),1
notice is hereby given that on September 14, 1998, 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 self-regulatory organization. The NASD filed an amendment to the filing on September 16, 1998.2 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The NASD has filed a proposed rule change to state two policies regarding NASD's oversight of American Stock Exchange LLC ("Amex LLC") and the composition of the Board of Governors of Amex LLC. Below is the text of the proposed rule change:
Policy With Respect to Authority Over American Stock Exchange LLC
Under the Transaction Agreement dated as of May 8, 1998, by and among the NASD, American Stock Exchange, Inc., and certain other related parties (the "Transaction Agreement" and, together with the agreements and other documents attached thereto, the "Transactional Documents"), Amex LLC will be and remain a self-regulatory organization registered under Section 6 of the Act, and as such will have statutory authority and responsibility over, among other things, the disciplining of its members, the amendment, repeal or addition of provisions to its Constitution and Rules (subject only to the power of the NASD to withhold consent to any such action affecting the Constitution of Amex LLC), the listing and delisting of securities, the grant or denial of membership in Amex LLC and approval of status as an approved person or allied member, and the grant or denial of access to facilities of and services offered by Amex LLC, all subject to the powers of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Act").
Subject to the terms and conditions of the Transactional Documents, the NASD will enjoy a controlling interest in Amex LLC, including in the selection of a majority of the Amex LLC Board of Governors and, through its influence over the Board of Governors, in the allocation of the resources of Amex LLC.
As the parent company of Amex LLC, the NASD will be responsible to ensure that Amex meets its obligations as a self-regulatory organization. It will be the policy of the NASD that in discharging that responsibility the NASD will be governed by the following principles:
1. The NASD will exercise its powers and its managerial influence to ensure that the Amex LLC fulfills its self-regulatory obligations by:
Directing Amex LLC to take action necessary to effectuate its purposes and functions as a national securities exchange operating pursuant to the Act; and
Ensuring that Amex LLC has and appropriately allocates such financial, technological, technical, and personnel resources as may be necessary or appropriate to meet its obligations under the Act.
2. The NASD will refrain from taking any action with respect to Amex LLC that, to the best of its knowledge, would impede, delay, obstruct, or conflict with efforts by Amex LLC to carry out its self-regulatory obligations under the Act and the rules and regulations thereunder.
Policy with Respect to Composition of Board of Governors of American Stock Exchange LLC
Section 9.12(d) of the Transaction Agreement dated as of May 8, 1998, by and among the NASD, American Stock Exchange, Inc., and certain other related parties (the "Transaction Agreement") and Article II, Sec. 04(a)(4) of the Constitution of American Stock Exchange LLC ("Amex LLC") provide that the Board of Governors of Amex LLC will include two representatives of NASD staff appointed by the NASD.
To assure substantial and meaningful input by the public in the governance of Amex LLC, the NASD will use its appointment power to fill one of those two positions with a representative of the staff who is not an employee of and has no material business relationship with a broker or dealer or with the NASD, NASD Regulation, The Nasdaq Stock Market, or Amex LLC, but who may be an officer or employee of an issuer of securities listed on Nasdaq or Amex LLC or traded in the over-the-counter market.
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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 self-regulatory organization 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 self-regulatory organization 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
1. Purpose
The proposed rule change has two purposes. First, with regard to NASD's authority over Amex LLC (the successor operating organization to the American Stock Exchange), the proposed rule change is intended to clarify the NASD's intent that, upon closing of the Transaction Agreement dated as of May 8, 1998, by and among the NASD, the American Stock Exchange, Inc., and certain other related parties, the NASD will be responsible to ensure that Amex LLC will fulfill its self-regulatory obligations and will have the resources necessary for it to do so.
Second, with regard to the composition of the Board of Governors of Amex LLC, the proposed rule change is intended to ensure sufficient non-Industry representation on that Board.
Summary of Proposed Rule Change
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Policy With Respect to Authority Over American Stock Exchange LLC
This part of the proposed rule change sets forth certain principles that will guide the NASD in its fulfillment of its responsibilities as parent company of Amex LLC with ultimate responsibility for Amex LLC's compliance with its statutory responsibilities as a self-regulatory organization.
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Policy with Respect to Composition of Board of Governors of American Stock Exchange LLC
This part of the proposed rule change states the NASD's policy that, in order to assure substantial and meaningful input by persons outside the securities industry in the governance of Amex LLC, the NASD will appoint as one of the two representatives of NASD staff on the Amex LLC Board of Governors, a person who is not an employee of and has no material business relationship with a broker or dealer or with the NASD, NASD Regulation, The Nasdaq Stock Market, or Amex LLC, but who may be an officer or employee of an issuer of securities listed on Nasdaq or Amex LLC or traded in the over-the-counter market.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the provisions of Sections 15A(b)(2) and 15A(b)(4) of the Act, which require, among other things, that the NASD's rules must be designed to carry out the purposes of the Act, and to assure a fair representation of its members in the administration of its affairs.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Association does not believe that the proposed rule change will impose any inappropriate burden on competition.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others
No written comments were either solicited or 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, 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, 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 at the Commission's Public Reference Room, located at the above address. 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-98-67 and should be submitted by [insert date 21 days from date of publication].
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.3
Jonathan G. Katz
Secretary
Footnotes
115 U.S.C. 78s(b)(1).
2See Letter to Katherine England, Commission, from T. Grant Callery, NASD, dated September 16, 1998 ("Amendment No. 1"). Amendment No. 1 replaces entirely the Exhibit No. 1 originally submitted with the rule filing.
317 CFR 200.30-3(a)(12).
http://www.sec.gov/rules/sro/nd9867n.htm
