Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to the Definition of Branch Office in Rule 3010

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38781; File No. SR-NASD-97-41]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by National Association of Securities Dealers, Inc. Relating to

the Definition of Branch Office in Rule 3010

June 26, 1997.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on June 17, 1997, the

National Association of Securities Dealers, Inc. (``NASD'') 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

[[Page 35871]]

have been prepared by NASD Regulation, Inc. (``NASDR'').\2\ The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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\1\ 15 U.S.C. 78s(b)(1) (1988).

\2\ The proposed rule change has not yet been approved by the

NASD Board of Governors. Accordingly, the NASD has consented to an

extension of the period of time specified in Section 19(b)(2) of the

Act until at least thirty-five days after it has filed an amendment

advising the Commission of the action taken by the NASD Board of

Governors. See letter from Craig L. Landauer, Associate General

Counsel, NASD Regulation, to Mignon McLemore, Division of Market

Regulation, SEC, dated June 24, 1997.

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

NASDR is proposing to amend Conduct Rule 3010 of the NASD, to

create another exception to the definition of branch office. Below is

the text of the proposed rule change. Proposed new language is in

italics.

3010. Supervision

(g) Definitions

* * * * * * *

(2) ``Branch Office'' means any location identified by any means to

the public or customers as a location at which the member conducts an

investment banking or securities business, excluding:

* * * * * * *

(D) any location where a person conducts business on behalf of the

member occasionally and exclusively by appointment for the convenience

of customers, so long as each customer is provided with the address and

telephone number of the branch office or OSJ of the firm from which the

person conducting business at the non-branch location is directly

supervised.

* * * * * * *

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 NASD 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 NASD 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

The definition of a branch office, found in NASD Rule 3010,

includes any location identified by any means to the public or

customers as a location at which the member conducts an investment

banking or securities business, subject to several exceptions. If a

business location of a member meets the definition of a branch office,

such office must be identified to the NASD through the filing of a

Schedule E to Form BD and such location is subject to an annual NASD

fee of $75.00. Several members have asked for guidance from NASDR staff

as to the application of the branch office registration requirements

where a business location is used exclusively for appointments from

time to time between registered representatives and customers.

This issue may arise under networking arrangements between NASD

members and banks. In this context, registered persons of the member

may periodically schedule appointments with bank customers at a bank

location where the NASD member conducts no securities activities. Under

the Interagency Statement on Retail Sales of Non-deposit Investment

Products, banks are required to use signage at the place of the

appointment to identify the NASD member that employs the registered

person.\3\ This use of signage at the appointment may imply the need

for the location to register as a branch office. The NASD is proposing

to create another exception to the definition of branch office to

address this type of situation.

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\3\ Board of Governors of the Federal Reserve System et al.,

Interagency Statement on Retail Sales of Non-deposit Investment

Products, at 10 (February 15, 1994).

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The proposed amendment would add language to paragraph (g) of Rule

3010 to exempt from the branch office definition certain locations

where a person conducts business for the member firm occasionally and

by appointment only for the convenience of customers, and where the

member maintains no other tangible presence. To be consistent with

other provisions of Rule 3010, the person conducting business at such

locations would be required to provide each customer with the address

and telephone number of the branch office or office of supervisory

jurisdiction (``OSJ'') of the firm from which the person who is

conducting the meeting is supervised.

The NASD believes that the proposed rule change is consistent with

the provisions of Section 15A(b)(6) \4\ of the Act. The NASD believes

the proposed rule change will provide clarification regarding branch

registration requirements and will ease the filing burden of many

members without compromising the ability to monitor compliance.

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\4\ Section 15A(b)(6) requires that the rules of the Association

be designed to prevent fraudulent and manipulative acts and

practices, to remove impediments to and perfect the mechanism of a

free and open market, and in general, to protect investors and the

public interest.

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

The NASD does not believe that the proposed rule change will result

in any burden on competition that is not necessary or appropriate in

furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of 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 such 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. 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

[[Page 35872]]

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 NASD. All

submissions should refer to the file number in the caption above and

should be submitted by July 23, 1997.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\5\

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\5\ 17 CFR 200.30-3(a)(12) (1996).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-17319 Filed 7-1-97; 8:45 am]

BILLING CODE 8010-01-M