Notice To Members 88-8

Request for Comments on Proposed New Section 3 to Article VII and an Amendment to Article XI, Section 4 of the NASD By-Laws

Published Date:

TO: All NASD Members and Other Interested Persons

LAST DATE FOR COMMENT: FEBRUARY 20, 1988.

BACKGROUND AND EXPLANATION OF AMENDMENTS

Under current NASD procedure, the Executive Committee of the NASD Board of Governors has been delegated the authority, pursuant to Article XI, Section 4 of the NASD By-Laws, to exercise the powers of the Board of Governors between meetings of the Board. Typically, the Executive Committee acts via telephone conference calls or by mail. Recent experience has shown, however, that it is sometimes necessary to take action immediately to respond to highly volatile market conditions.

Consequently, the Board approved for comment proposed amendments to Article VII of the By-Laws that, in the event of extraordinary market conditions, would grant the Board, or between Board meetings, the Chairman of the Board (or the Vice Chairman in his absence) when the President determines that it is not practical or appropriate to convene the Executive Committee or Board, and the NASD President, acting jointly, with the specific authority to take various actions. These actions pertain to the following:

  • operation of NASD quotation, execution, and other systems, and the participation therein of any person or the trading therein of any security;
  • operation of, or trading in, the over-the-counter markets;
  • operation of firms' offices or systems.

The President would be required, however, to report promptly any action taken under this authority to the Executive Committee and to the Board at its next meeting.

In addition, the NASD is also proposing a technical amendment to Article XI, Section 4 of the NASD By-Laws to clarify the procedure by which the Board delegates authority to the Executive Committee to act between meetings of the Board.

The texts of the proposed amendments are attached.

* * * *

The NASD encourages all members and other interested persons to comment on these proposed amendments. Comments should be addressed to:

Mr. Lynn Nellius
Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006-1506

Comments must be received no later than February 20, 1988. Comments received by this date will be considered by the NASD Board of Governors. If the proposed amendments are approved by the Board, they must be filed with and approved by the Securities and Exchange Commission before becoming effective.

Questions concerning this notice can be directed to either the undersigned or to Dennis C. Hensley, NASD Vice President and Deputy General Counsel, at (202) 728-8295.

Sincerely,

Frank J.Wilson
Executive Vice President
and General Counsel

Attachment

PROPOSED AMENDMENTS TO NASD BY-LAWS

(Amend Article VII of the By-Laws by redesignating Sections 3 through 9 as Sections 4 through 10 and adding new Section 3 as follows:)*

Authority for Actions Affecting Over-the-Counter Market, Corporation Systems, and Member Offices

See. 3. (a) The Board of Governors, or between meetings of the Board, a Committee consisting of the Chairman of the Board (or in his absence, a Vice Chairman of the Board) and the President of the Corporation, in the event of an emergency or extraordinary market conditions, shall have the authority to take any action regarding (i) the trading in or operation of the over-the-counter securities market, the operation of any automated system owned or operated by the Corporation or any subsidiary thereof, and the participation in any such system of any or all persons or the trading therein of any or all securities and (ii) the operation of any or all member firms' offices or systems, if, in the opinion of the Board or the Committee hereby constituted, such action is necessary or appropriate for the protection of investors or the public interest or for the orderly operation of the marketplace or the System.

(b) The authority provided in Subsection (a) shall be exercised by the Committee only if the President, in his discretion, concludes that it is not practical or appropriate to convene a meeting of the Board of Governors or Executive Committee to consider the contemplated action.
(c) The President shall promptly report any action taken by the Committee pursuant to this Section to the Executive Committee and to the Board of Governors at its next meeting.

(Amend Article XI, Section 4 as follows:)*

Executive Committee

Sec. 4. By resolution passed not less than annually by a majority of the entire Board of Governors, there may be created an Executive Committee, consisting of five or more members of the Board. [which] The Executive Committee shall exercise such of the powers of the Board in the management of the Corporation between meetings of the Board of Governors as may be delegated to it from time to time by the Board. The Executive Committee created hereunder shall keep minutes of its meetings and shall report its proceedings to the Board of Governors at the next meeting thereof.

*New language is underlined; deleted language is in brackets.