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67432 Federal Register / Vol. 67, No.

214 / Tuesday, November 5, 2002 / Notices

The Commission staff estimates, exemption since adoption of the rule, Securities and Exchange Commission,
however, based on past conversations and approximately 2.7 % (100) of the 450 Fifth Street, NW, Washington, DC
with representatives of the fund funds that have not already done so 20549. Comments must be submitted to
industry, that funds could spend as choose to rely on the rule each year. For OMB within 30 days of this notice.
much as half of this amount ($122.4 each of those funds choosing for the first Dated: October 29, 2002.
million) to preserve the books and time to rely on the rule, we estimate that
Margaret H. McFarland,
records that are necessary to prepare the adoption of the audit committee
Deputy Secretary.
financial statements, meet various state charter requires, on average, 1 hour of
reporting requirements, and prepare directors’ time, 2.5 hours of professional [FR Doc. 02–28098 Filed 11–4–02; 8:45 am]
their annual federal and state income time and 1 hour of support staff time, BILLING CODE 8010–01–P

tax returns. for a total one-time burden of 4.5 hours,

Rule 32a–4 [17 CFR 270.32a–4] is and an estimated total one-time cost of
entitled ‘‘Independent Audit $555.40, resulting in an annual SECURITIES AND EXCHANGE
Committees.’’ The rule exempts a fund aggregate time burden of 450 hours and COMMISSION
from the requirements of section an annual aggregate cost of $55,540.14 [Release No. 34–46739; File No. SR–NASD–
32(a)(2) of the Investment Company Act In addition to the hour burden 2002–146]
that shareholders ratify or reject the described above, rule 32a-4 imposes
selection of the independent public certain costs on those funds that choose Self-Regulatory Organizations; Notice
accountant of a registered management to rely on the exemption. These costs of Filing and Immediate Effectiveness
company or registered face-amount are minimal and are justified by the of Proposed Rule Change by the
certificate company if the fund has an relief provided by the exemption. We National Association of Securities
audit committee composed wholly of estimate that each of the approximately Dealers, Inc. Amending NASD Rule
independent directors. 360 funds currently relying on the rule 3011 To Require Members To Identify
Instead of relying on rule 32a–4, a is required to spend approximately .5 and Provide Contact Information for
fund could seek ratification or rejection hours annually to comply with the Their Anti-Money Laundering
by shareholders of the selection of its requirement that it preserve Compliance Persons
independent public accountant at each permanently its audit committee
charters, for an additional annual hour October 29, 2002.
annual meeting. Under the rule, a fund
is exempt from having to seek burden of 180 hours, and an additional Pursuant to section 19(b)(1) of the
shareholder approval of its independent annual cost for all funds of $12,439.20. Securities Exchange Act of 1934
public accountant, if (i) the fund’s board 15 (‘‘Act’’),1 and rule 19b–4 2 thereunder,
of directors establishes an audit These estimates of average costs are notice is hereby given that on October
committee composed solely of made solely for the purposes of the 22, 2002, the National Association of
independent directors with Paperwork Reduction Act. The estimate Securities Dealers, Inc. (‘‘NASD’’ or
responsibility for overseeing the fund’s is not derived from a comprehensive or ‘‘Association’’), submitted to the
accounting and auditing processes,11 (ii) even a representative survey or study of Securities and Exchange Commission
the fund’s board of directors adopts an the costs of Commission rules. An (‘‘Commission’’) the proposed rule
audit committee charter setting forth the agency may not conduct or sponsor, and change as described in items I, II, and
committee’s structure, duties, powers a person is not required to respond to, III below, which items have been
and methods of operation, or sets out a collection of information unless it prepared by the NASD. NASD filed the
similar provisions in the fund’s charter displays a currently valid OMB control proposal pursuant to section 19(b)(3)(A)
or bylaws,12 and (iii) the fund maintains number. of the Act,3 and rule 19b–4(f)(6)
a copy of such an audit committee General comments regarding the thereunder,4 which renders the proposal
charter permanently in an easily above information should be directed to effective upon filing with the
accessible place.13 the following persons: (i) Desk Officer Commission. The Commission is
As conditions of relying on rule 32a– for the Securities and Exchange publishing this notice to solicit
4, a fund’s board of directors must adopt Commission, Office of Information and comments on the proposed rule change
an audit committee charter and must Regulatory Affairs, Office of from interested persons.
preserve that charter, and any Management and Budget, New I. Self-Regulatory Organization’s
modifications to the charter, Executive Office Building, Washington, Statement of the Terms of Substance of
permanently in an easily accessible DC 20503; and (ii) Kenneth A. Fogash, the Proposed Rule Change
place. The information collection Acting Associate Executive Director/
requirement in rule 32a–4 enables the CIO, Office of Information Technology, NASD proposes to amend NASD rule
Commission to monitor the duties and 3011 to require each member to provide
responsibilities of an independent audit 14 To calculate this cost, the Commission staff to NASD contact information for the
committee formed by a fund relying on
used an average hourly wage rate of $300 per hour individual or individuals responsible
for directors, an average hourly wage rate of $96.16 for implementing and monitoring the
the rule. Commission staff estimates that per hour for professionals, and an average hourly
there are approximately 3,700 wage rate of $15 per hour for support staff ((100 x day-to-day operations and internal
management investment companies and 1 x $300/hour) + (100 x 2.5 x $96.16/hour) + (100 controls of the member’s anti-money
face-amount certificate companies that
x 1 x $15/hour) = $55,540). See Securities Industry laundering (‘‘AML’’) compliance
Association, Report on Management & Professional program (‘‘AML Program’’). Below is the
could rely on the rule. We believe that Earnings in the Securities Industry 2001 (Oct.
approximately 9.7 percent (360) of those 2001). text of the proposed rule change. New
funds have taken advantage of the 15 In calculating this annual cost, the Commission text is in italics.
staff estimated that one-third of the annual hour * * * * *
burden (60 hours) would be incurred by support
to the net assets of all funds ($7 trillion x .000035 staff with an average hourly wage rate of $15 per
= $244.7 million). hour, and two-thirds of the annual burden (120
1 15 U.S.C. 78s(b)(1).
11 Rule 32a–4(a). 2 17 CFR 240.19b–4.
hours) would be incurred by professionals with an
12 Rule 32a–4(b). 3 15 U.S.C. 78s(b)(3)(A).
average hourly wage rate of $96.16 per hour ((60 x
13 Rule 32a–4(c). $15/hour) + (120 × $96.16/hour) = $12,439.20). 4 17 CFR 240.19b–4(f)(6).

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Federal Register / Vol. 67, No. 214 / Tuesday, November 5, 2002 / Notices 67433

3011. Anti-Money Laundering A. Self-Regulatory Organization’s implementing and monitoring the daily
Compliance Program Statement of the Purpose of, and operations of the firm’s AML Program.
Statutory Basis for, the Proposed Rule To facilitate Treasury’s efforts in
On or before April 24, 2002, each Change collecting the AML contact information
member shall develop and implement a set forth in Treasury’s final rule, NASD
written anti-money laundering program 1. Purpose proposes to amend NASD rule 3011 to
reasonably designed to achieve and The USA PATRIOT Act of 2001 require that members provide to NASD
monitor the member’s compliance with (‘‘PATRIOT Act’’),5 which was signed contact information concerning the
the requirements of the Bank Secrecy into law on October 26, 2001, recognizes members’ designated AML compliance
Act (31 U.S.C. 5311, et seq.), and the that effective identification of money person(s). The information would be
implementing regulations promulgated laundering and terrorist activities used by Treasury in connection with its
thereunder by the Department of the requires the expedited sharing and regulatory obligations set forth in
Treasury. Each member organization’s reporting of information among section 314(a) of the PATRIOT Act and
anti-money laundering program must be governmental and law enforcement the implementing regulations
approved, in writing, by a member of authorities and financial institutions. In promulgated thereunder. Consistent
senior management. The anti-money furtherance of this goal, section 314(a) with Treasury’s final rule, members
laundering programs required by this of the PATRIOT Act requires the United would be required to provide to NASD
States Department of the Treasury the name, title, mailing address, e-mail
rule shall, at a minimum;
(‘‘Treasury’’) to adopt regulations to address, telephone number, and
(a) Establish and implement policies encourage cooperation and information facsimile number of the contact person.
and procedures that can be reasonably sharing among financial institutions, Members would also be required to
expected to detect and cause the their regulatory authorities, and law promptly notify NASD of any changes to
reporting of transactions required under enforcement authorities. In particular, the information.6
31 U.S.C. 5318(g) and the implementing the regulations should be designed to NASD intends to initially collect the
regulations thereunder; facilitate law enforcement authorities’ contact information through the
ability to share information with Member Firm Contact Questionnaire on
(b) Establish and implement policies,
financial institutions and to request the NASD Website. NASD anticipates
procedures, and internal controls
information from financial institutions that form and system changes necessary
reasonably designed to achieve to collect the contact information will
compliance with the Bank Secrecy Act about persons suspected of engaging in
money laundering or terrorist activities. be completed by November 15, 2002.
and the implementing regulations Members will have until December 31,
Section 314(a) of the PATRIOT Act
thereunder; 2002, to provide NASD with the
further provides that the regulations
(c) Provide for independent testing for adopted by Treasury may require that necessary contact information.7
compliance to be conducted by member each financial institution designate one 2. Statutory Basis
personnel or by a qualified outside or more contact persons to receive
party; information concerning, and to monitor NASD believes that the proposed rule
accounts of, identified individuals or change is consistent with the provisions
(d) Designate, and identify to NASD of Section 15A(b)(6) of the Act,8 which
(by name, title, mailing address, e-mail entities.
On September 18, 2002, Treasury requires, among other things, that
address, telephone number, and NASD’s rules be designed to prevent
facsimile number) an individual or issued a final rule implementing section
314 of the PATRIOT Act. Consistent fraudulent and manipulative acts and
individuals responsible for practices, to promote just and equitable
implementing and monitoring the day- with section 314(a) of the PATRIOT Act,
the rule creates a system for the efficient principles of trade, and, in general, to
to-day operations and internal controls protect investors and the public interest.
communication of potential money
of the program and provide prompt NASD believes that the proposed rule
laundering and terrorist information.
notification to NASD regarding any change is designed to accomplish these
Upon receiving a request for
change in such designation(s); and information by the Financial Crimes ends by expediting the information
(e) Provide ongoing training for Enforcement Network (‘‘FinCEN’’), a sharing process necessary to help
appropriate personnel. bureau of Treasury, the rule requires combat money laundering and
financial institutions to identify a terrorism.
* * * * *
contact person to handle the request and B. Self-Regulatory Organization’s
II. Self-Regulatory Organization’s to receive future information requests. Statement on Burden on Competition
Statement of the Purpose of, and When requested by FinCEN, the NASD does not believe that the
Statutory Basis for, the Proposed Rule financial institution is required to proposed rule change will result in any
Change provide the name, title, mailing address, burden on competition that is not
e-mail address, telephone number, and necessary or appropriate in furtherance
In its filing with the Commission, facsimile number of the designated
NASD included statements concerning of the purposes of the Act, as amended.
contact person. The financial institution
the purpose of and basis for the must also promptly notify FinCEN of 6 NASD believes that its proposed amendments to
proposed rule change and discussed any any changes to the contact information. NASD rule 3011 are consistent with New York
comments it received on the proposed NASD rule 3011, NASD’s AML Stock Exchange, Inc. (‘‘NYSE’’) rule 445 (AML
rule change. The text of these statements Compliance Program Rule, requires each Compliance Program), which requires that NYSE
member organizations provide to the NYSE contact
may be examined at the places specified member to designate an individual or information identifying the member organization’s
in Item IV below. NASD has prepared individuals responsible for designated AML compliance person and promptly
summaries, set forth in sections A, B, notify the NYSE of any changes to the information.
7 New member applicants will be required to
and C below, of the most significant 5 Uniting and Strengthening America by

Providing Appropriate Tools Required to Intercept provide the contact information during the
aspects of such statements. and Obstruct Terrorism Act of 2001, Pub. L. No. application process.
107–56, 115 Stat. 272 (2001). 8 15 U.S.C. 78o–3(b)(6).

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67434 Federal Register / Vol. 67, No. 214 / Tuesday, November 5, 2002 / Notices

C. Self-Regulatory Organization’s For the Commission, by the Division of exercise notices. These procedures are
Statement on Comments on the Market Regulation, pursuant to delegated not described in OCC’s rules but are
Proposed Rule Change Received From authority.11 treated as a stated policy, practice, or
Members, Participants, or Others Margaret H. McFarland, interpretation with respect to Rule 803,
Deputy Secretary. which addresses assignments to clearing
Written comments were neither
[FR Doc. 02–28100 Filed 11–4–02; 8:45 am] members.
solicited nor received.
Current Method
III. Date of Effectiveness of the
Proposed Rule Change and Timing for Under OCC’s current random
Commission Action SECURITIES AND EXCHANGE assignment process, an assignment
COMMISSION ‘‘wheel’’ is created for each option series
The foregoing rule change has become for which there is an exercise and all
effective pursuant to section 19(b)(3)(A) [Release No. 34–46735; File No. SR–OCC–
short positions of that series are placed
of the Act 9 and subparagraph (f)(6) of 2002–19]
on the wheel, starting with positions in
rule 19b–410 thereunder because it does the customers’ account of the clearing
not: (i) Significantly affect the Self-Regulatory Organizations; The
Options Clearing Corporation; Notice member with the lowest identification
protection of investors or the public number, followed by positions in other
interest; (ii) impose any significant of Filing and Order Granting
Accelerated Approval of a Proposed accounts of that clearing member, then
burden on competition; (iii) become by positions in the customers’ account
operative for 30 days from the date on Rule Change Relating to Random
Assignment Processing of the clearing member with the next
which it was filed, or such shorter time lowest identification number, and so
as the Commission may designate and October 28, 2002. forth. The number of contracts exercised
NASD has given the Commission Pursuant to Section 19(b)(1) of the for that series is totaled. If the number
written notice of its intention to file the Securities Exchange Act of 1934 of exercised contracts is less than the
proposed rule change at least five (‘‘Act’’),1 notice is hereby given that on number of contracts held in open short
business days prior to filing. At any August 15, 2002, The Options Clearing positions, exercises are assigned in
time within 60 days of the filing of the Corporation (‘‘OCC’’) filed with the standard assignment increments of 25
proposed rule change, the Commission Securities and Exchange Commission contracts.3 The system calculates a
may summarily abrogate such rule (‘‘Commission’’) the proposed rule random starting point on the wheel for
change if it appears to the Commission change as described in Items I, and II the first assignment increment. The first
that such action is necessary or below, which items have been prepared 25 contracts are assigned starting at the
appropriate in the public interest, for primarily by OCC. The Commission is first position randomly chosen. Based
the protection of investors, or otherwise publishing this notice and order to on the number of contracts in the open
in furtherance of the purposes of the solicit comments on the proposed rule interest for the series and the number of
Act. change from interested persons. exercise increments to be assigned, a
IV. Solicitation of Comments I. Self-Regulatory Organization’s uniform skip interval is calculated as
Statement of the Terms of Substance of follows:
Interested persons are invited to S = the total number of contracts being
submit written data, views and the Proposed Rule Change
exercised for a particular series
arguments concerning the foregoing, The proposed rule change alters T = the total number of contracts on the
including whether the proposed rule OCC’s procedures for random wheel
change is consistent with the Act. assignment processing. I = the assignment increment
Persons making written submissions II. Self-Regulatory Organization’s 1. T1 = S + I ¥1;
should file six copies thereof with the 2. T2 = T1/I, where T2 is an integer;
Statement of the Purpose of, and 3. T3 = T/T2, where T3 is an integer;
Secretary, Securities and Exchange Statutory Basis for, the Proposed Rule
Commission, 450 Fifth Street, NW., 4. Skip Interval = T3 ‘‘ 1, if I > than T3,
Change skip interval = 0.
Washington, DC 20549–0609. Copies of
the submission, all subsequent In its filing with the Commission, After the first assignment, the system
amendments, all written statements OCC included statements concerning skips the calculated skip interval,
with respect to the proposed rule the purpose of and basis for the assigns the next 25 contracts, and skips
change that are filed with the proposed rule change and discussed any again to the next assignment increment
Commission, and all written comments it received on the proposed until all exercises are assigned.
communications relating to the rule change. The text of these statements
may be examined at the places specified Proposed Change
proposed rule change between the
Commission and any person, other than in Item IV below. OCC has prepared OCC is proposing minor
those that may be withheld from the summaries, set forth in sections (A), (B), modifications to its random assignment
public in accordance with the and (C) below, of the most significant process. First, positions will be placed
provisions of 5 U.S.C. 552, will be aspects of such statements.2 on the wheel in sequential order based
available for inspection and copying in on a unique data base identification
(A)Self-Regulatory Organization’s code given to a position account (i.e., an
the Commission’s Public Reference Statement of the Purpose of, and
Room. Copies of the filing will also be account or subaccount 4 that can hold
Statutory Basis for, the Proposed Rule
available for inspection and copying at Change 3 If the number of contracts being exercised is
the principal office of the Association. equal to the number of open short positions, the
OCC proposes to refine its random
All submissions should refer to File No. entire open interest for that series will be assigned
assignment procedures for processing
SR–NASD–2002–146 and should be automatically.
4 In a combined market-makers’ account,
submitted by November 26, 2002. 11 17CFR 200.30–3(a)(12). positions of individual market-makers are assigned
1 15U.S.C. 78s(b)(1). unique acronyms and are not netted against each
9 15 U.S.C. 78s(b)(3)(A). 2 The Commission has modified parts of these other for reporting purposes. Each market-maker
10 17 CFR 240.19b–4(f)(6). statements. acronym is treated as a separate ‘‘position account.’’

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