SEC Extends Its Temporary No-Action Relief from SEC Rules 17a-3 and 17a-25 in Connection with NASDAQ's Commencement of Operation as an Exchange
January 3, 2007
NASD is notifying its members that the Division of Market Regulation (Division) of the Securities and Exchange Commission (Commission) has extended its no-action relief originally scheduled to expire on December 31, 2006, with respect to SEC Rules 17a-3 and 17a-25 in connection with NASDAQ's commencement of operation as an exchange (No-Action Letter). In light of the staged commencement by NASDAQ as an exchange (NASDAQ began operating as an exchange for NASDAQ-listed securities on August 1, 2006, but has not yet begun operation as an exchange for non-NASDAQ exchange-listed securities), the Division is granting an extension to its no-action relief until the sixtieth day following the date NASDAQ begins operating as an exchange for non-NASDAQ exchange-listed securities.
As further detailed in its letter, the Division will not recommend to the Commission enforcement action during the time periods specified in the letter with respect to SEC Rule 17a-3 and 17a-25 if a broker-dealer trades in NASDAQ-listed securities and non-NASDAQ exchange-listed securities and incorrectly identifies (1) NASDAQ as an exchange or an over-the-counter (OTC) market, (2) NASDAQ securities as exchange-listed securities or OTC securities (and for non-NASDAQ exchange-listed securities, the transactions as having occurred on an exchange market or an OTC market), and/or (3) with respect to SEC Rule 17a-3 only, a broker-dealer as a member of NASDAQ or NASD.
In addition, the Division will not recommend to the Commission enforcement action under SEC Rule 17a-5 until the sixtieth day following the date NASDAQ begins operating as an exchange for non-NASDAQ exchange-listed securities if a broker-dealer incorrectly classifies securities commission revenues generated by transactions in NASDAQ-listed and non-NASDAQ exchange-listed securities on FOCUS reports submitted to the broker-dealer's designated examining authority.
Please see the Division's No-Action Letter for details regarding the no-action relief granted.
NASD will interpret NASD Rule 3110 (Books and Records), which incorporates SEC Rule 17a-3 by reference, consistent with the temporary no-action relief granted by the Division. Further, with respect to Electronic Blue Sheet (EBS) submissions, NASD will interpret NASD Rule 8211 (Automated Submission of Trading Data Requested by NASD) in a manner consistent with the intent of the Division's No-Action Letter. Members should note, however, that, except as discussed herein, the EBS remediation deadline, as extended by the Intermarket Surveillance Group (ISG) in NASD Notice to Members 06-33/ISG Regulatory Memorandum 2006-02, continues to be December 31, 2006.