[Federal Register Volume 59, Number 37 (Thursday, February 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4143]


[[Page Unknown]]

[Federal Register: February 24, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33627; File No. SR-NASD-93-76]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. to Article 
II, Sections 10 and 11 of the Code of Procedures Relating to the 
Procedures of the National Business Conduct Committee

February 15, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February 
14, 1994,\1\ the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the NASD. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\The NASD submitted the filing on December 16, 1993. However, 
on February 14, 1994, it filed an amendment to replace and supersede 
the original filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Below is the text of the proposed rule change. Proposed new 
language is italicized; proposed deletions are in brackets.
Code of Procedure
* * * * *
Article II
* * * * *
Sec. 10
* * * * *
Acceptance, Waiver and Consent of the Respondent
    (a) If the Committee has reason to believe a violation has occurred 
and the member or associated person does not dispute the violation, the 
Committee may suggest that the member or associated person submit a 
letter containing an acceptance of a finding of violations, a waiver of 
all rights of appeal to the National Business Conduct Committee (and 
any review thereof by the Board of Governors), the Securities and 
Exchange Commission and the courts or to otherwise challenge or contest 
the validity of the Order issued if the letter is accepted, and a 
consent to the imposition of sanctions. The letter shall describe the 
act or practice engaged in or omitted; the rule, regulation or 
statutory provision violated; and the sanction to be imposed therefore. 
If the Committee then concludes that the Letter of Acceptance, Waiver 
and Consent is appropriate and should be accepted, it shall be 
submitted to the National Business Conduct Committee. If the letter is 
accepted by the National Business Conduct Committee or a Subcommittee 
designated by the National Business Conduct Committee, it shall become 
final and shall constitute the complaint, answer and decision in the 
matter. If the letter is rejected by the Committee, [or] the National 
Business Conduct Committee, or a Subcommittee designated by the 
National Business Conduct Committee, any acceptances, waivers and 
consents contained therein shall not be considered in any further 
complaint action which may be taken against the member or associated 
person.
Minor Rule Violations Procedure
(b)(1)
* * * * *
    (3) The Letter shall be submitted to the Committee and, if 
accepted, the Letter shall then be submitted to the National Business 
Conduct Committee. If the National Business Conduct Committee or a 
Subcommittee designated by the National Business Conduct Committee 
accepts the Letter, the Corporation will report the violation to the 
Securities and Exchange Commission as required by the Commission 
pursuant to a plan approved under Rule 19d-1(c)(2) adopted under the 
Securities Exchange Act of 1934, as amended. If the Committee, [or] the 
National Business Conduct Committee, or a Subcommittee designated by 
the National Business Conduct Committee rejects the Letter, the 
Committee or National Business Conduct Committee may take any other 
appropriate disciplinary action with respect to the violation or 
violations.
* * * * *
Settlement Procedure
Sec. 11
* * * * *
    (e) Before any such Order of Acceptance of Offer of Settlement 
shall become effective it must be submitted to and approved by the 
National Business Conduct Committee or a Subcommittee designated by the 
National Business Conduct Committee, which is hereby delegated 
authority to accept or reject an Offer of Settlement. If the National 
Business Conduct Committee [by a majority vote] or a Subcommittee 
designated by the National Business Conduct Committee approves the 
Committee's Order, it shall communicate its conclusion to the Committee 
which shall thereafter issue such Order.

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 NASD 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 IV below. The NASD 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

    The National Business Conduct Committee of the NASD (``NBCC'') is 
composed of participating members of the first year class of the NASD 
Board of Governors (``Board'') plus an elected Chair and Vice-Chair 
from the Board's second year class. The members of the NBCC are sent a 
weekly package (``weekly mailings'') for review on proposed Acceptance, 
Waiver, and Consents (``AWCs''), Minor Rule Violations Letters, and 
Offers of Settlement. The NBCC also reviews, on a weekly basis, all 
disciplinary decisions of the District Business Conduct Committees and 
the Market Surveillance Committee. All matters are first reviewed by 
the Chair and Vice-Chair of the NBCC and then reviewed by the other 
members of the NBCC along with the recommendations of the Chair and 
Vice-Chair.
    The NASD has determined that the weekly mailings to the NBCC 
require a substantial commitment of time of NBCC members and that the 
review by NBCC members of all the foregoing matters is unnecessary and 
unduly burdensome. In order to reduce the amount of materials which 
must be read by NBCC members, the NASD proposes to amend Article II, 
Sections 10(a), 10(b), and 11(e)\2\ of the Code of Procedure (``Code'') 
to allow the NBCC to designate a Subcommittee composed of members of 
the NBCC to review AWCs, Minor Rule Violations Letters, and Offers of 
Settlement in all instances other than matters that are outside the 
NASD Sanction Guidelines\3\ or where the designated Subcommittee, in 
its discretion, otherwise believes full NBCC review is appropriate. The 
NASD intends that, initially, the Subcommittee designated by the 
Committee will consist of the Committee Chair and Vice-Chair, but may 
modify the composition of the Subcommittee in the future.,

    \2\NASD Manual, Code of Procedure, Article II, Sections 10(a), 
10(b), and 11(e), (CCH)  3030, 3031.
    \3\The NASD Sanction Guidelines were published in May 1993 and 
sent to all NASD members, See NASD Regulatory & Compliance ALERT, 
Volume 7, No. 2 (June 1993).
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    The NASD is, therefore, proposing to amend Article II, Sections 
10(a) and 10(b) of the Code, to allow acceptance and rejections of AWCs 
and Minor Rule Violations Letters to be made by a Subcommittee 
designated by the NBCC as an alternative to full NBCC review.
    The NASD is also proposing to amend Article II, section 11(e) of 
the Code to allow acceptances and rejections of Offers of Settlement to 
be made by a Subcommittee designated by the NBCC as an alternative to 
full NBCC review. The NASD is also proposing to delete the phrase ``by 
a majority vote'' from Article II, section 11(e) of the Code. The NASD 
considers the phrase ``by a majority vote'' to be confusing since a 
majority vote is always required by an NASD review body acting pursuant 
to the Code.
    The NASD believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(8) of the Act in that the proposed 
rule change provides for fair procedures for the disciplining of 
members and persons associated with members. The proposal enhances the 
NASD's disciplinary procedures with respect to AWCs, Minor Rule 
Violations Letters, and Offers of Settlement by facilitating the review 
of such matters by the NBCC.

(B) Self-Regulatory Organization's Statement on Burden on Competition.

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule, or
    B. Institute proceeding to determine whether the proposed rule 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by March 17, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-4143 Filed 2-23-94; 8:45 am]
BILLING CODE 8010-01-M