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  • ARTICLE VII BOARD OF GOVERNORS

    • Powers and Authority of Board

      Sec. 1.  (a) The Board shall be the governing body of the Corporation and, except as otherwise provided by applicable law, the Restated Certificate of Incorporation, or these By-Laws, shall be vested with all powers necessary for the management and administration of the affairs of the Corporation and the promotion of the Corporation's welfare, objects, and purposes. In the exercise of such powers, the Board shall have the authority to:
      (i) adopt for submission to the membership, as hereinafter provided, such By-Laws and changes or additions thereto as it deems necessary or appropriate;
      (ii) adopt such other Rules of the Corporation and changes or additions thereto as it deems necessary or appropriate, provided, however, that the Board may at its option submit to the membership any such adoption, change, or addition to such Rules;
      (iii) make such regulations, issue such orders, resolutions, exemptions, interpretations, including interpretations of these By-Laws and the Rules of the Corporation, and directions, and make such decisions as it deems necessary or appropriate;
      (iv) prescribe rules for the required or voluntary arbitration of controversies between members and between members and customers or others as it shall deem necessary or appropriate;
      (v) establish rules and procedures to be followed by members in connection with the distribution of securities issued by members and affiliates thereof;
      (vi) require all over-the-counter transactions in securities between members, other than transactions in exempted securities as defined in Section 3(a)(12) of the Act, to be cleared and settled through the facilities of a clearing agency registered with the Commission pursuant to the Act, which clears and settles such over-the-counter transactions in securities;
      (vii) organize and operate automated systems to provide qualified subscribers with securities information and automated services. The systems may be organized and operated by a division or subsidiary company of the Corporation or by one or more independent firms under contract with the Corporation as the Board may deem necessary or appropriate. The Board may adopt rules for such automated systems, establish reasonable qualifications and classifications for members and other subscribers, provide qualification standards for securities included in such systems, require members to report promptly information in connection with securities included in such systems, and establish charges to be collected from subscribers and others;
      (viii) require the prompt reporting by members of such original and supplementary trade data as the Board deems appropriate. Such reporting requirements may be administered by the Corporation, a division or subsidiary thereof, or a clearing agency registered under the Act; and
      (ix) engage in any activities or conduct necessary or appropriate to carry out the Corporation's purposes under its Restated Certificate of Incorporation and the federal securities laws.
      (b) In the event of the refusal, failure, neglect, or inability of any Governor to discharge such Governor's duties, or for any cause affecting the best interests of the Corporation the sufficiency of which the Board shall be the sole judge, the Board shall have the power, by the affirmative vote of two-thirds of the Governors then in office, to remove such Governor and declare such Governor's position vacant and that, subject to the Restated Certificate of Incorporation, such position shall be filled in accordance with these By-Laws; provided, that during the Transitional Period, (i) a Governor that is a member of the NYSE Group Committee may only be removed by the affirmative vote of a majority of the Governors who are members of the NYSE Group Committee and (ii) a Governor that is a member of the NASD Group Committee may only be removed by the affirmative vote of a majority of the Governors who are members of the NASD Group Committee.
      (c) To the fullest extent permitted by applicable law, the Restated Certificate of Incorporation, and these By-Laws, the Corporation may delegate any power of the Corporation or the Board to a committee appointed pursuant to Article IX, Section 1, the NASD Regulation Board, the NASD Dispute Resolution Board, or the Corporation's staff in a manner not inconsistent with the Delegation Plan; provided, that during the Transitional Period, no such delegation shall occur without the prior affirmative vote of two-thirds of the Governors then in office.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2006-104 eff. Dec. 20, 2006.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-93-48 eff. Mar. 8, 1994.
      Amended eff. Oct. 25, 1988.

      Selected Notice: 93-15.

    • Authority to Cancel or Suspend for Failure to Submit Required Information

      Sec. 2.  (a) The Board shall have authority, upon notice and opportunity for a hearing, to cancel or suspend the membership of any member or suspend the association of any person associated with a member for failure to file, or to submit on request, any report, document, or other information required to be filed with or requested by the Corporation pursuant to these By-Laws or the Rules of the Corporation.
      (b) Any membership or association suspended or canceled pursuant to this Section may be reinstated by the Corporation pursuant to the Rules of the Corporation.
      (c) The Board is authorized to delegate its authority under this Section in a manner not inconsistent with the Delegation Plan and otherwise in accordance with the Rules of the Corporation.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Authority to Take Action Under Emergency or Extraordinary Market Conditions

      Sec. 3.  The Board, or such person or persons as may be designated by the Board, in the event of an emergency or extraordinary market conditions, shall have the authority to take any action regarding:
      (a) 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 NASD Regulation, and the participation in any such system of any or all persons or the trading therein of any or all securities; and
      (b) the operation of any or all member firms' offices or systems, if, in the opinion of the Board or the person or persons hereby designated, 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.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2006-104 eff. Dec. 20, 2006.
      Amended by SR-NASD-2006-135 eff. Dec. 20, 2006.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff,. July 11, 1996.
      Amended by SR-NASD-94-64 eff. Feb. 9, 1995.
      Adopted Sept. 12, 1988.

    • Composition and Qualifications of the Board

      Sec. 4.  (a) The Board shall consist of no fewer than 16 nor more than 25 Governors. The number of Public Governors shall exceed the number of Industry Governors.

      From and after the Transitional Period, the Board of Governors shall consist of (i) the Chief Executive Officer of the Corporation, (ii) a number of Public Governors determined by the Board, (iii) a Floor Member Governor, an Independent Dealer/Insurance Affiliate Governor and an Investment Company Affiliate Governor and (iv) three Small Firm Governors, one Mid-Size Firm Governor and three Large Firm Governors.
      (b) As soon as practicable following the annual election of Governors, the Board shall elect from among its members a Chair and such other persons having such titles as it shall deem necessary or advisable, to serve until the next annual election or until their successors are chosen and qualify. The Chair of the Board shall preside over all meetings of the Board, and shall not have any other power or authority except as otherwise expressly provided for herein. The Lead Governor shall preside at all meetings of the Board at which the Chair is not present, and shall have the authority to call, and will lead if the Chair of the Board is recused, executive sessions of the Board. Any other persons elected under this subsection shall have such powers and duties as may be determined from time to time by the Board. Except as otherwise provided herein, the Board, by resolution adopted by a majority of the Governors then in office, (i) after the completion of the Transitional Period, may remove the Chair and any person elected under this subsection from such position at any time and (ii) during the Transitional Period, may remove any person, other than the Chair, elected under this subsection from such position at any time.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2004-110 eff. Dec. 31, 2004.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Amended by SR-NASD-98-56 eff. Oct. 30, 1998.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-96-02 eff. Apr. 11, 1996.
      Amended by SR-NASD-94-64 eff. Feb. 9, 1995.
      Amended eff. Sept. 4, 1990.

      Selected Notices: 88-8, 88-29.

    • Term of Office of Governors

      Sec. 5.  From and after the Transitional Period:

      The Chief Executive Officer shall serve as a Governor until a successor is elected, or until death, resignation, or removal.
      Public Governors and the Floor Member Governor, the Independent Dealer/Insurance Affiliate Governor and the Investment Company Affiliate Governor (the "Appointed Governors") shall be appointed by the Board from candidates recommended to the Board by the Nominating Committee.
      As of the first annual meeting of members following the Transitional Period, the Appointed Governors shall be divided by the Board into three classes, as equal in number as possible, with the first class holding office until the first succeeding annual meeting of members, the second class holding office until the second succeeding annual meeting of members and the third class holding office until the third succeeding annual meeting of members, or until a successor is duly appointed and qualified, or until death, resignation, disqualification, or removal. Each class shall initially contain as equivalent a number as possible of Appointed Governors who were members of the NYSE Group Committee during the Transitional Period or are successors to such Governor positions, on the one hand, and Appointed Governors who were members of the NASD Group Committee during the Transitional Period or are successors to such Governor positions, on the other hand, to the extent the Board determines such persons are to remain Governors after the Transitional Period. No Appointed Governor may serve more than two consecutive terms. If a Governor is appointed to fill a vacancy of such a Governor position for a term of less than one year, the Governor may serve up to two consecutive terms following the expiration of the Governor's initial term. At each annual election following the first annual meeting of members following the Transitional Period, Appointed Governors shall be appointed by the Board for a term of three years to replace those whose terms expire.
      As of the first annual meeting of members following the Transitional Period, the Large Firm Governors, the Mid-Size Firm Governor and the Small Firm Governors shall be divided into three classes, as equal in number as possible, with the first class, being comprised of one Large Firm Governor and one Small Firm Governor, holding office until the first succeeding annual meeting of members, the second class, being comprised of one Large Firm Governor, one Mid-Size Firm Governor and one Small Firm Governor, holding office until the second succeeding annual meeting of members and the third class, being comprised of one Large Firm Governor and one Small Firm Governor, holding office until the third succeeding annual meeting of members, or until a successor is duly elected and qualified, or until death, resignation, disqualification, or removal. A Governor elected by the members may not serve more than two consecutive terms. If a Governor is elected to fill a vacancy of such a Governor position for a term of less than one year, the Governor may serve up to two consecutive terms following the expiration of the Governor's initial term. At each annual election following the first annual meeting of members following the Transitional Period, Large Firm Governors, Small Firm Governors and the Mid-Size Firm Governor shall be elected for a term of three years to replace those whose terms expire.
      In the event of any vacancy among the Large Firm Governors, the Mid-Size Firm Governor or the Small Firm Governors, such vacancy shall only be filled by the Large Firm Governor Committee in the case of a Large Firm Governor vacancy, the Board in the case of a Mid-Size Firm Governor vacancy or the Small Firm Governor Committee in the case of a Small Firm Governor vacancy; provided, however, that in the event the remaining term of office of any Large Firm, Mid-Size Firm or Small Firm Governor position that becomes vacant is for more than 12 months, such vacancy shall be filled by the members entitled to vote thereon at a meeting thereof convened to vote thereon.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2004-110 eff. Dec. 31, 2004.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Amended by SR-NASD-98-56 eff. Oct. 30, 1998.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended eff. Sept. 4, 1990.

    • Disqualification

      Sec. 6.  Notwithstanding Section 5 or Article XXII, the term of office of a Governor shall terminate immediately upon a determination by the Board, by a majority vote of the remaining Governors, that: (a) the Governor no longer satisfies the classification for which the Governor was elected; and (b) the Governor's continued service as such would violate the compositional requirements of the Board set forth in Section 4 (or, in the case of the Transitional Period, Article XXII). If the term of office of a Governor terminates under this Section, and the remaining term of office of such Governor at the time of termination is not more than six months, during the period of vacancy the Board shall not be deemed to be in violation of Section 4 (or, in the case of the Transitional Period, Article XXII) by virtue of such vacancy.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-98-56 eff. Oct. 30, 1998.
      Adopted by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Filling of Vacancies

      Intentionally Deleted
      Sec. 7. Intentionally Deleted
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-96-02 eff. Apr. 11, 1996.
      Amended eff. Sept. 4, 1990.

    • Meetings of Board; Quorum; Required Vote

      Sec. 8.  Meetings of the Board shall be held at such times and places, upon such notice, and in accordance with such procedure as the Board in its discretion may determine. Special meetings of the Board of the Corporation may be called by the Board, the Chief Executive Officer of the Corporation, the Chair or the Lead Governor. Each of the Chief Executive Officer of the Corporation and the Chair, and with respect to matters from which the Chief Executive Officer of the Corporation and the Chair recuse themselves, the Lead Governor, shall have the authority to include matters on the agenda of a meeting of the Board. At all meetings of the Board, unless otherwise set forth in these By-Laws or required by law, a quorum for the transaction of business shall consist of a majority of the Board, including not less than 50 percent of the Public Governors. Any action taken by a majority vote at any meeting at which a quorum is present, except as otherwise provided in the Restated Certificate of Incorporation or these By-Laws, shall constitute the action of the Board. Governors or members of any committee appointed by the Board under Article IX, Section 1 may participate in a meeting of the Board or a committee by means of communications facilities that ensure all persons participating in the meeting can hear and speak to one another, and participation in a meeting pursuant to this By-Law shall constitute presence in person at such meeting. No Governor shall vote by proxy at any meeting of the Board.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended eff. Dec. 15, 1986.

      Selected Notices: 88-96, 93-15, 94-24, 94-52.

    • The Nominating Committee

      Sec. 9.  (a) Except as otherwise provided in these By-Laws, the Nominating Committee shall nominate and, in the event of a contested election, may, as described in Section 11(b), support: Large Firm, Mid-Size Firm, Small Firm, Public, Floor Member, Independent Dealer/Insurance Affiliate and Investment Company Affiliate Governors for each such vacant or new Governor position on the Board; Industry and Public Directors for each vacant or new position on the NASD Regulation Board and the NASD Dispute Resolution Board for election by the stockholder; and Industry and Public members for each vacant or new position on the National Adjudicatory Council for appointment by the NASD Regulation Board.
      (b) Except as otherwise provided in these By-laws, after the completion of the Transitional Period the Nominating Committee shall consist of such number of members of the Board as the Board shall determine from time to time; provided, however, that the Nominating Committee shall at all times be comprised of a number of members which is a minority of the entire Board and the Chief Executive Officer shall not be a member of the Nominating Committee. The number of Public Governors on the Nominating Committee shall equal or exceed the number of Industry Governors on the Nominating Committee.
      (c) After the completion of the Transitional Period, and except as otherwise provided in these By-Laws, members of the Nominating Committee shall be appointed annually by the Board and may be removed only by majority vote of the whole Board, after appropriate notice, for refusal, failure, neglect, or inability to discharge such member's duties.
      (d) The Secretary of the Corporation shall collect from each nominee for Governor such information as is reasonably necessary to serve as the basis for a determination of the nominee's classification a Large Firm, Mid-Size Firm, Small Firm, Public, Floor Member, Independent Dealer/Insurance Affiliate and/or Investment Company Affiliate Governor, and the Secretary shall certify to the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) each nominee's classification.
      (e) At all meetings of the Nominating Committee, a quorum for the transaction of business shall consist of a majority of the Nominating Committee. In the absence of a quorum, a majority of the committee members present may adjourn the meeting until a quorum is present.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May 8, 2001.
      Amended by SR-NASD-97-92 eff. May 5, 1998.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998 (Sec. 9(a), 9(e) eff. Nov. 14, 1997).
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-94-64 eff. Feb. 9, 1995.
      Amended eff. July 19, 1990 and Sept. 4, 1990.

    • Procedure for Nomination of Governors

      Sec. 10.  Prior to a meeting of members pursuant to Article XXI for the election of Governors, the Corporation shall notify the members of the names of each nominee selected by the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) for each governorship up for election by the members, the classification of governorship (Large Firm, Mid-Size Firm or Small Firm) for which the nominee is nominated, the qualifications of each nominee, and such other information regarding each nominee as the Board or the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) deems pertinent. A person who has not been so nominated may be included on the ballot for the election of Governors if: (a) within 45 days after the date of such notice, such person presents to the Secretary of the Corporation (i) in the case of petitions solely in support of such person, petitions in support of his or her nomination duly executed by three percent of the members entitled to vote for such nominees' election, and no such member shall endorse more than one such nominee, or (ii) in the case of petitions in support of more than one person, petitions in support of the nominations of such persons duly executed by ten percent of the members entitled to vote for such nominees' election; and (b) the Secretary certifies that (i) the petitions are duly executed by the Executive Representatives of the requisite number of members entitled to vote for such nominee's/nominees' election, and (ii) the person(s) satisfies/satisfy the classification (Large Firm, Mid-Size Firm or Small Firm) of the governorship(s) to be filled, based on such information provided by the person(s) as is reasonably necessary to make the certification. The Secretary shall not unreasonably withhold or delay the certification. Upon certification, the election shall be deemed a contested election with respect to the category of Governor to which the nomination relates. After the certification of a contested election or the expiration of time for contesting an election under this Section, the Secretary shall deliver notice of a meeting of members pursuant to Article XXI, Section 3(a).
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-94-64 eff. Feb. 9, 1995.
      Amended eff. July 19, 1990 and Sept. 4, 1990.

    • Communication of Views

      Sec. 11.  (a) The Corporation, the Board, a committee appointed pursuant to Article IX, Section 1, and the Corporation's staff shall not take any position publicly or with a member or person associated with or employed by a member with respect to any candidate in a contested election or nomination held pursuant to these By-Laws or the NASD Regulation By-Laws. A Governor or a member of any committee (other than the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein)) may communicate his or her views with respect to any candidate if such Governor or committee member acts solely in his or her individual capacity and disclaims any intention to communicate in any official capacity on behalf of the Corporation, the Board, or any committee (other than the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein)). Except as provided herein, any candidate and his or her representatives may communicate support for the candidate to a member or person associated with or employed by a member.
      (b) In a contested election, the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) may support its nominees under this Article by sending to members eligible to vote up to two mailings of materials in support of its nominees in lieu of mailings sent by its candidates under Article VII, Section 12. In addition to such mailings, in the event of mailings and or other communications to members by or on behalf of a candidate by petition in a contested election, the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) may respond in-kind, but shall not take a position unresponsive, to the contesting candidate's communications.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May. 8, 2001.
      Adopted by SR-NASD-97-71 eff. Nov. 14, 1997.

    • Administrative Support

      Sec. 12.  The Secretary of the Corporation shall provide administrative support to the candidates in a contested election under this Article by sending to members eligible to vote for such category of Governors up to two mailings of materials prepared by the candidates. The Corporation shall pay the postage for the mailings. If a candidate wants such mailings sent, the candidate shall prepare such material on the candidate's personal stationery. The material shall state that it represents the opinions of the candidate. The candidate shall provide a copy of such material for each member eligible to vote for such category of Governors. A candidate nominated by the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) may identify himself or herself as such in his or her materials. Any candidate may send additional materials to members at the candidate's own expense. Except as provided in this Article, the Corporation, the Board, any committee, and the Corporation's staff shall not provide any other administrative support to a candidate in a contested election conducted under this Article or a contested election or nomination conducted under the NASD Regulation By-Laws.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Adopted by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Election of Governors

      Sec. 13.  Governors that are to be elected by the members shall be elected by a plurality of the votes of the members of the Corporation present in person or represented by proxy at the annual meeting of the Corporation and entitled to vote for such category of Governors. The annual meeting of the Corporation shall be on such date and at such place as the Board shall designate pursuant to Article XXI. Except as otherwise provided in these By-Laws or the Restated Certificate of Incorporation, any Governor so elected must be nominated by the Nominating Committee or certified by the Secretary pursuant to Section 10.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May 8, 2001.
      Amended by SR-NASD-97-71 eff. Nov. 14, 1997.
      Amended by SR-NASD-96-20 eff. July 11, 1996.
      Amended by SR-NASD-94-64 eff. Feb. 9, 1995.
      Amended eff. July 19, 1990 and Sept. 4, 1990.

    • Maintenance of Compositional Requirements of the Board

      Sec. 14.  Each elected or appointed Governor shall update the information submitted under Section 9(d) regarding his or her classification as a Large Firm, Mid-Size Firm, Small Firm, Public, Floor Member, Independent Dealer/Insurance Affiliate and/or Investment Company Affiliate Governor at least annually and upon request of the Secretary of the Corporation, and shall report immediately to the Secretary any change in such classification.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-2001-06 eff. May 8, 2001.
      Adopted by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Resignation

      Sec. 15.  Any Governor may resign at any time either upon written notice of resignation to the Chief Executive Officer or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time is not specified, upon receipt thereof, and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make such resignation effective.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Adopted by SR-NASD-97-71 eff. Jan. 15, 1998.