Commission Requirements for Registration Under Section 15 of the Exchange Act

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 249
[Release No. 34–39677]
Commission Requirements for Registration Under Section 15 of the Exchange Act AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission is adopting Interim Form BD for the registration of brokers and dealers under the Securities Exchange Act of 1934. The Interim Form is intended to enhance the ability of the public to obtain information regarding securities professionals until the redesigned CRD system is operational. EFFECTIVE DATE: March 16, 1998. FOR FURTHER INFORMATION CONTACT:
Catherine McGuire, Chief Counsel, or Paul Andrews, Special Counsel at (202) 942–0073, Office of Chief Counsel,

9414 Federal Register / Vol. 63, No. 37 /Wednesday, February 25, 1998 /Rules and Regulations 1Securities Exchange Act Rel. No. 37431 (July 12, 1996), 61 FR 37357 (July 18, 1996); see also 17 CFR 249.501. 2The CRD is a customized electronic database that allows ‘‘one-stop’’ filing for broker-dealer registration among the various state and federal regulators. In 1992, the Commission began participating in the CRD system as part of its ongoing effort to reduce the costs associated with broker-dealer registration. 3Securities Exchange Act Rel. No. 37632 (September 4, 1996), 61 FR 47412 (September 9, 1996). 4At this time, that is expected to occur shortly before the year 2000. 5The Commission has the authority to require the filing of Form BD pursuant to Sections 15 and 17 of the Exchange Act. 15 U.S.C. 78o and 78q. 6Sections 15(b)(1), 15(b)(4) and 15(b)(6) of the Exchange Act authorize the Commission to deny registration to a broker-dealer if the broker-dealer or an associated person of the broker-dealer has engaged in the activities listed in those sections, 15 U.S.C. 78o(b)(1), (b)(4), and (b)(6). See also 15 U.S.C. 78o–3(g)(2). 7Alternatively, Section 553(b)(3)(B) of the APA provides that an agency may dispense with prior notice and comment when it finds, for good cause, that such notice and public comment are ‘‘impracticable, unnecessary, or contrary to the public interest.’’ 5 U.S.C. 533(b)(3)(B). Because Interim Form BD makes no substantive or material change to the 1996 Amendments, and the Commission has already solicited comment on those amendments, the Commission finds that good cause exists such that notice and comment are unnecessary for the adoption of Interim Form BD. Division of Market Regulation, Mail Stop 7–11, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. SUPPLEMENTARY INFORMATION:
I. Background
On July 12, 1996, the Commission adopted amendments to Form BD (‘‘1996 Amendments’’), the uniform application form for broker￾dealer registration under the Securities Exchange Act of 1934 (‘‘Exchange Act’’).1 In general, the amendments were adopted to provide the Commission, self-regulatory organizations (‘‘SROs’’), and state securities regulators with better information about a registrant’s disciplinary history; to elicit more precise information about the business activities of broker-dealer applicants; and to facilitate the electronic retrieval of information. At the time it adopted these amendments, the Commission stated that use of Form BD, as amended, was to coincide with the implementation of the redesigned Central Registration Depository (‘‘CRD’’), a computer system operated by the National Association of Securities Dealers, Inc. (‘‘NASD’’) that maintains registration information regarding broker-dealers and their registered personnel. Among other things, the redesigned CRD system will allow broker-dealers to file Form BD electronically.2 Although the NASD expected to implement the redesigned CRD system in September 1996, a test of the system that began in May 1996 revealed that additional changes were needed in the software that will be used by broker￾dealers to make electronic filings. Furthermore, the NASD determined that broker-dealers needed additional time to prepare their internal operations and infrastructure to support electronic filings. As a result, the NASD delayed the implementation of the redesigned CRD system. Because of this delay, on September 4, 1996, the Commission suspended the compliance date for the Form BD amendments.3 Thus, until the redesigned CRD system is fully functional, applicants continue to file old Form BD. One of the primary goals of the enhanced CRD, as well as the Form BD as amended, is to make certain information concerning broker-dealers and their associated persons more readily available to the public until the CRD redesign is complete. The NASD has determined to make the information available through a web-based technology. To do so, however, it is necessary to reformat a segment of Form BD. To enhance the ability of the public to obtain information regarding securities professionals, the Commission is adopting Interim Form BD for use by registrants until the redesigned CRD system is operational.4 Interim Form BD is based on old Form BD; it requires registrants to file information called for by the 1996 Amendments. The information would be in a computer format that will allow the CRD to make the information available to the public over the WorldWide Web. The Interim Form would not change the substance of the 1996 Amendments, but only their appearance on a temporary basis.
II. Description of the Interim Form BD
Interim Form BD will consist of Form BD currently in use with one exception. Old Question 7 on Form BD will be reformatted to resemble Question 11 on the amendments to Form BD approved by the Commission in July 1996.5 The NASD, through the CRD system, will then publish the contents of Question 7 in the interim form for public access. Question 7 requests information about the disciplinary history of the applicant and its control affiliates, including information relating to statutory disqualifications,6 other relevant history, and the applicant’s financial soundness. In order to make the disclosure more organized and complete, Question 7 is broken into broad categories: criminal, civil, regulatory, and financial. Disclosure of such offenses as military court convictions, perjury, and conspiracy to commit certain offenses is also required.
III. Effective Date
In general, the Administrative Procedure Act (‘‘APA’’), 5 U.S.C. 551, et seq., requires that agency rulemaking, such as changing Form BD, must be subject to a public notice and comment period. 5 U.S.C. 553. That requirement has already been satisfied. In Securities Exchange Act Rel. No. 35224, 60 FR 4040 (Jan. 12, 1995), the Commission solicited comment on what became the 1996 Amendments to Form BD. The substance of these amendments (namely, new Question 11) will be used in Interim Form BD. Thus, Interim Form BD is not subject to a notice and comment period.7 In addition to being unnecessary, the Commission is of the view that soliciting comment would be impractical. The proposed Interim Form BD would only be used on a temporary basis and to delay its implementation until after a notice and comment period would significantly reduce its efficacy. Moreover, although the APA generally requires publication of such amendments at least thirty days before their effective date, this requirement does not apply if the Commission determines, for good cause, not to provide a thirty-day period. See 5 U.S.C. 533(d). In light of the previous notice and comment period in connection with the Form BD amendments, as well as the fact that Interim Form BD will provide investors with immediate and inexpensive access to the relevant information concerning broker-dealers and their associated persons, the Commission here finds that good cause exists such that Interim Form BD is effective as of 16, 1998. The use of Interim Form BD is prospective only. Registrants already registered with the Commission need not refile on Interim Form BD.
IV. Statutory Basis
15 U.S.C. 78o, 78q, 78w.
List of Subjects in 17 CFR Part 249 Broker-Dealers, Reporting and recordkeeping requirements, Securities. For the reasons set forth above, the Commission hereby amends Title 17,
Chapter II, part 249 of the Code of
Federal Regulations as follows:

Federal Register / Vol. 63, No. 37 /Wednesday, February 25, 1998 /Rules and Regulations 9415
PART 249—FORMS, SECURITIES
EXCHANGE ACT OF 1934

1. The authority citation for Part 249
   continues to read in part as follows:
   Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;

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Note: Form BD does not, and the Interim Form will not, appear in the Code of Federal Regulations.
2. By amending Form BD (referenced
in Section 249.501) to revise Question 7 to read as follows:
BILLING CODE 8010–01–P

9416 Federal Register / Vol. 63, No. 37 /Wednesday, February 25, 1998 /Rules and Regulations

Federal Register / Vol. 63, No. 37 /Wednesday, February 25, 1998 /Rules and Regulations 9417

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By the Commission.
Dated: February 18, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98–4711 Filed 2–24–98; 8:45 am] BILLING CODE 8010–01–C