

[Federal Register: October 10, 2007 (Volume 72, Number 195)]
[Notices]               
[Page 57617-57619]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc07-126]                         


[[Page 57617]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56594; File No. SR-BSE-2007-25]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval to Proposed 
Rule Change, as Modified by Amendments No. 1, 2, and 3 Thereto, 
Relating to Registration Filing Requirements and Reporting Requirements

October 1, 2007.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 19, 2007, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
On August 7, 2007, BSE filed Amendment No. 1 to the proposed rule 
change.\3\ On September 7, 2007, BSE filed Amendment No. 2 to the 
proposed rule change.\4 \On September 26, 2007, BSE filed Amendment No. 
3 to the proposed rule change.\5\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendments No. 1, 2, and 3 thereto, from interested persons and approve 
the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 superseded and replaced the original rule 
filing in its entirety.
    \4\ Amendment No. 2 superseded and replaced Amendment No. 1 in 
its entirety.
    \5\ Amendment No. 3 superseded and replaced Amendment No. 2 in 
its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to: (1) Amend BSE Rules Chapter I-B Sections 4, 5, 
and 6 and Chapter XVIII Section 4 and Boston Options Exchange (``BOX'') 
Rules Chapter II Sections 1(b)(i) and Section 4(b), Chapter XI Sections 
2(b), 3(a), and 4(c) and Chapter X Section 2(e), to require all 
members, and member and participant organizations, that do not already 
participate in Web Central Registration Depository (``Web CRD'') as a 
member of a participating exchange or the Financial Industry Regulatory 
Authority, Inc. (``FINRA'') to submit Forms U4, U5, BD and amendments 
thereto as well as fingerprints, to the Web CRD; \6\ (2) amend Exchange 
Rules Chapter I-B Sections 4, 5, and 6 and Chapter XVIII Section 4 to 
add language specifying a timeframe in which to amend Form U4, Form U5, 
and Form BD; and (3) amend its Minor Rule Violation Plan (``MRVP'') by 
adopting new provisions for failures to submit amendments to Form U4, 
Form U5, and Form BD.\7\
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    \6\ Web CRD is a Web-based system that provides broker-dealers 
and their associated persons ``one-stop filing'' with the 
Commission, FINRA, and other self-regulatory organizations and 
regulators. Web CRD is operated by FINRA and is utilized by 
participating securities regulators in connection with registering 
and licensing broker-dealers and their associated persons.
    \7\ Rule 19d-1(c)(1) under the Act, 17 CFR 240.19d-1(c)(1), 
requires any self-regulatory organization, for which the Commission 
is the appropriate regulatory agency, that takes any final 
disciplinary action with respect to any person to promptly file a 
notice thereof with the Commission. However, rule violations 
resulting in a fine not exceeding $2,500 are not deemed final and 
therefore not subject to the same reporting requirements.
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    The text of the proposed rule change is available at the principal 
office of the BSE, the Commission's Public Reference Room, and http://www.bostonstock.com
.


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 Exchange 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 III below. The Exchange 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 purpose of the proposed rule change is to create a more 
efficient, centralized registration process by migrating from a manual 
paper-based Exchange procedure to Web CRD for registration and 
fingerprinting, with more defined deadlines and a more streamlined 
disciplinary process.

Web CRD

    The Web CRD process would assist in maintaining all historical 
information related to associated persons of member, and participant 
organizations in one central repository, as well as creating efficient 
disclosure utilizing an online database, which can be accessed by other 
exchanges and regulators. Additionally, the Web CRD process would track 
and capture information related to registration and continuing 
education. Finally, the Web CRD system would capture information 
related to fingerprinting and statutory disqualification.
    Members, and member and/or participant organizations, would be 
required to submit Forms U4 and U5 (and amendments thereto) through the 
Web CRD system rather than in paper form to the Exchange. Currently, 
members, and member and/or participant organizations, submit Forms U4 
and U5 in paper form to the Exchange. Although Form BD is required to 
be submitted to Web CRD, the proposed rule change codifies this 
requirement into BSE Rules Chapter I-B Sections 4, 5, and 6 and Chapter 
XVIII Section 4 and BOX Rules Chapter II Sections 1(b)(i) and Section 
4(b), Chapter XI Sections 2(b), 3(a), and 4(c) and Chapter X Section 
2(e), and applies to amendments as well.\8\
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    \8\ 17 CFR 240.15b-1.
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    Members, and member and/or participant organizations, also 
currently file manual rolled fingerprint cards \9\ with the Exchange, 
which the Exchange then forwards to the FBI, the fingerprint processing 
arm of the Office of the Attorney General of the United States. The FBI 
identifies submitted fingerprints, retrieves relevant criminal history 
information, and returns fingerprint reports (including the original 
fingerprint cards) to the Exchange. Upon receipt of the approved 
fingerprint cards, the Exchange sends this information to the member 
organization and keeps a copy for its records. This proposed rule 
change would require the members, and member and/or participant 
organizations, to send the fingerprint cards to FINRA for processing. 
All trading personnel and other associated persons of members, and 
member or participant organizations, who are not registered and only 
submit fingerprint cards to FINRA, will be classified as Non-Registered 
Fingerprint (``NRF'') filers.
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    \9\ FINRA will accept Federal Bureau of Investigation (``FBI'') 
fingerprint results in lieu of fingerprint cards.
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    The Exchange anticipates that the proposed migration to Web CRD 
will take place on October 1, 2007. The Exchange will provide 
notification in writing to the membership of the effective date of the 
rule change.
    Additionally, the Exchange is amending the language in BOX Chapter

[[Page 57618]]

XI Doing Business With The Public, Section 2(b) to clarify the 
registration obligations of Options Principals.

Minor Rule Violation Plan

    The Exchange is adding language to BSE's and BOX's MRVPs to clarify 
the timeframe within which members, and member and/or participant 
organizations, must amend Forms U4, U5, and BD to allow for prompt 
disclosure. The Exchange proposes a timeframe of thirty days from the 
time the filer knew of or should have known of the facts which gave 
rise to the need for an amendment, to submit amended Forms U4, U5, and 
BD. By including this language in the Exchange Rules, Boston Stock 
Exchange Regulation (``BSER'') would retain the discretion to initiate 
formal disciplinary proceedings.\10\ The Exchange believes that the 
proposed change should encourage member organizations and participant 
organizations to timely file Forms U4, U5, and BD and thereby timely 
disclose the information contained in those forms. The disclosure of 
this information should enable the Exchange and the public to receive 
current information on registered persons and entities.
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    \10\ Section 6(b)(6) requires an exchange to have rules that 
provide for members and associated persons to be appropriately 
disciplined for violations of the Act, the rules thereunder, and the 
Exchange's rules. 15 U.S.C. 78f(b)(6). Inclusion of a rule in an 
MRVP permits an exchange to impose a fine, under appropriate 
circumstances under the MRVP. However, including a rule in an MRVP 
does not limit an exchange's ability to bring a formal disciplinary 
action against a member or an associated person.
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    Specifically, the proposed changes to the MRVP would authorize the 
Exchange to impose a fine on any member or participant organization 
without formal disciplinary action. As proposed, BSER would review the 
number and seriousness of the violation(s), as well as the previous 
disciplinary history of the violator, to determine if a matter is 
appropriate for disposition under the MRVP. Once a member or 
participant organization is fined under the MRVP, BSER may issue 
progressively higher fines for all subsequent violations within a 
rolling twelve-month period, or it may choose to initiate formal 
disciplinary proceedings. The addition of these changes to the 
Exchange's MRVP should allow BSER to impose more meaningful sanctions 
for violations that would otherwise receive a cautionary letter, for 
example, but do not necessarily rise to the level of a formal 
disciplinary proceeding.
    Additionally, the proposed changes would allow for disposition of 
minor or technical violations of Exchange rules by means of a less 
costly and less time consuming process as compared to a formal 
disciplinary process. Expediting resolutions for technical violations, 
while retaining the discretion to bring formal disciplinary action, 
should allow for efficient dispositions of rule violations.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, by providing information to 
a central repository.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Importantly, the Exchange believes, moving to Web CRD provides a 
central location where information is available. This enables easier 
access to all members and member and/or participant organizations. 
Further, most other exchanges participate in Web CRD registration.

B. 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.

C. 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 comments on the 
proposed rule change.

III. 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-BSE-2007-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2007-25. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the BSE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BSE-2007-25 and should be 
submitted on or before October 31, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\13\ In 
particular, the Commission finds that the proposed

[[Page 57619]]

rule change is consistent with Section 6(b)(5) of the Act,\14\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
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    \13\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the changes proposed by BSE should 
result in a more efficient process for members to register and to keep 
information current and should make regulatory information with respect 
to members and their associated persons more readily available to 
regulators as well as the public. Furthermore, it will align the rules 
of the Exchange regarding electronic registration more closely with 
those at other exchanges.
    In addition, the Commission believes the proposed rule change is 
consistent with the Act because it is designed to allow BSE to 
discipline or sanction members under its MRVP for violation of the 
provisions of the rules of the Exchange for these rules. In approving 
the proposed rule change, the Commission in no way minimizes the 
importance of compliance with Exchange rules and all other rules 
subject to the imposition of fines under the MRVP. The Commission 
believes that the violation of a self-regulatory organization's rules, 
as well as Commission rules, is a serious matter. However, in an effort 
to provide the Exchange with greater flexibility in addressing certain 
violations of its rules, the MRVP provides a reasonable means to 
address violations that do not rise to the level of requiring formal 
BSE disciplinary proceedings. The Commission expects that BSE will 
continue to conduct surveillance with due diligence, and make a 
determination based on its findings whether fines of more or less than 
the recommended amount are appropriate for violations of Exchange rules 
under the MRVP, on a case by case basis, or if a violation requires 
formal disciplinary action.
    BSE has requested that the Commission find good cause for approving 
the proposed rule change before the thirtieth day after publication of 
the notice in the Federal Register. The Commission believes that 
granting accelerated approval of the proposal will allow the Exchange 
to migrate to Web CRD on its intended date, October 1, 2007. The 
Commission notes that it has approved similar proposals to implement 
electronic registration for Chicago Board Options Exchange, 
Incorporated \15\ and the Philadelphia Stock Exchange.\16\ The 
Commission believes that BSE's proposal raises no new regulatory 
issues, and it should make regulatory information with respect to its 
members and their associated persons more readily available without 
further delay.
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    \15\ See Securities Exchange Act Release No. 46308 (August 2, 
2002), 67 FR 51905 (August 9, 2002) (SR-CBOE-2001-66).
    \16\ See Securities Exchange Act Release No. 54960 (December 12, 
2006), 71 FR 77851 (December 27, 2006) (SR-Phlx-2006-83).
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    Accordingly, the Commission finds good cause, consistent with 
Section 19(b)(2) of the Act,\17\ to grant accelerated approval to the 
proposed rule change before the thirtieth day after the publication of 
notice thereof in the Federal Register.
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    \17\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-BSE-2007-25), as modified by 
Amendments No. 1, 2, and 3, be, and it hereby is, approved on an 
accelerated basis.
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    \18\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-19906 Filed 10-9-07; 8:45 am]

BILLING CODE 8011-01-P
