[Federal Register Volume 59, Number 220 (Wednesday, November 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28264]


[[Page Unknown]]

[Federal Register: November 16, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34954; File No. SR-NASD-94-59]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
Publication of Final NASD Disciplinary Decisions

November 9, 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 October 
26, 1994, 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.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The NASD is proposing to amend its Resolution of the Board of 
Governors--Notice to Membership and Press Suspensions, Expulsions, 
Revocations, and Monetary Sanctions and Release of Certain Information 
Regarding Disciplinary History of Members and Their Associated Persons 
(``Resolution'') under Article V, Section 1 of the Association's Rules 
of Fair Practice.\1\ Below is the text of the proposed rule change. 
Proposed new language is italicized; proposed deletions are in 
brackets.
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    \1\NASD Manual, Rules of Fair Practice, Art. V, Sec. 1 (CCH) 
2301.
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Rules of Fair Practice

Article V Sanctions for Violation of the Rules
Section 1
* * * * *
Resolution of the Board of Governors
Notice to Membership and Press of Suspensions, Expulsions, Revocations, 
and Monetary Sanctions and Release of Certain Information Regarding 
Disciplinary History of Members and Their Associated Persons
    The Association shall, in response to a written inquiry or 
telephonic inquiry via a toll-free telephone listing, release certain 
information as contained in its files regarding the employment and 
disciplinary history of members and their associated persons, including 
information regarding past and present employment history with NASD 
members, all final disciplinary actions taken by federal or state or 
foreign securities agencies or self-regulatory organizations that 
relate to securities or commodities transactions; all pending 
disciplinary actions that have been taken by federal or state 
securities agencies or self-regulatory organizations that relate to 
securities and commodities transactions and have been reported on Form 
BD or U-4 and all foreign government or self-regulatory organizations 
disciplinary actions that are securities or commodities related and 
reported on Form BD or U-4; and all criminal indictments, informations 
or convictions reported on Form BD or Form U-4. The Association will 
also release information concerning civil judgments and arbitration 
decisions in securities and commodities disputes involving public 
customers.
    The Association shall report to the membership and to the press 
pursuant to the procedures and at the times outlined herein any order 
of suspension, cancellation or expulsion of a member; or suspension or 
revocation of the registration of a person associated with a member; or 
suspension or barring of a member or person associated with a member 
from association with all members; or imposition of monetary sanctions 
of $10,000 or more upon a member or person associated with a member. 
The Board of Governors may, in its discretion, determine to waive the 
notice provisions set forth herein as to an order of imposition of 
monetary sanctions of $10,000 or more upon a member or person 
associated with a member, under those extraordinary circumstances where 
notice would violate fundamental notions of fairness or work an 
injustice.
    If a decision of a District Business Conduct Committee is not 
appealed to or called for review by the NBCC, the order of the District 
Business Conduct Committee shall become effective on a date set by the 
Association but not before the expiration of 45 days after the date of 
decision. Notices of decisions imposing monetary sanctions of $10,000 
or more or penalties of expulsion, revocation, suspension and/or the 
barring of a person from being associated with all members shall 
promptly be transmitted to the membership and to the press, 
concurrently; provided, however, no such notice shall be sent prior to 
the expiration of 45 days from the date of the said decision.
    Notwithstanding the preceding paragraph, expulsions and bars 
imposed pursuant to the provisions of Article II, Sections 10 and 11 of 
the Code of Procedure shall become effective upon approval or 
acceptance by the National Business Conduct Committee, and publicity 
regarding any sanctions imposed pursuant to Article II, Sections 10 and 
11 of the Code may be issued immediately upon such approval or 
acceptance.
    If a decision of a District Business Conduct Committee is appealed 
to or called for review by the Board of Governors, the order of the 
District Business Conduct Committee is stayed pending a final 
determination and decision by the Board and notice of the action of the 
District Business Conduct Committee shall not be sent to the membership 
or the press during the pendency of proceedings before the Board of 
Governors.
    If a final decision of the Association is not appealed to the 
Securities and Exchange Commission, the sanctions specified in the 
decision (other than bars and expulsions) shall become effective on a 
date established by the Association but not before the expiration of 30 
days after the date of the decision, unless the decision specifies 
otherwise. Notices of decisions imposing monetary sanctions of $10,000 
or more on penalties of expulsion, revocation, suspension and/or the 
barring of a person from being associated with all members shall 
promptly be transmitted to the membership and to the press, 
concurrently; provided, however, no such notice shall be sent prior to 
the expiration of 30 days from the date of a [said] decision imposing 
sanctions other than expulsion, revocation, and/or the barring of a 
person from being associated with all members.
    If a decision of the Board of Governors imposing monetary sanctions 
of $10,000 or more or a penalty of expulsion, revocation, suspension 
and/or barring of a member from being associated with all members is 
appealed to the Securities and Exchange Commission, notice thereof 
shall be given to the membership and to the press as soon as possible 
after receipt by the Association of notice from the Securities and 
Exchange Commission of such appeal and the Association's notice shall 
whether the effectiveness of the Board's decision has or has not been 
stayed pending the outcome of proceedings before the Securities and 
Exchange Commission.
    In the event an appeal to the courts is filed from a decision by 
the Securities and Exchange Commission in a case previously appealed to 
it from a decision of the Board of Governors, involving the imposition 
of monetary sanctions of $10,000 or more or a penalty of expulsion, 
revocation, suspension and/or barring of a member from being associated 
with all members, notice thereof shall be given to the membership as 
soon as possible after receipt by the Association of a formal notice of 
appeal. Such notice shall include a statement that the order of the 
Commission has or has not been stayed.
    Any order issued by the Securities and Exchange Commission of 
revocation or suspension of a member's broker/dealer registration with 
the Commission; or the suspension or expulsion of a member from the 
Association; or the suspension or barring of a member or person 
associated with a member from association with all broker/dealers or 
membership; or the imposition of monetary sanctions of $10,000 or more 
shall be made known to the membership of the Association through a 
notice containing the effective date thereof sent as soon as possible 
after receipt by the Association of the order of the Securities and 
Exchange Commission.
    Cancellations of membership or registration pursuant to the 
Association's By-Laws, Rules or Regulations shall be sent to the 
membership and, when appropriate, to the press as soon after the 
effective date of the cancellation as possible.
    Notices to the membership and releases to the press referred to 
above shall identify the section of the Association's Rules and By-Laws 
or the Securities and Exchange Commission Rules violated, and shall 
describe the conduct constituting such violation. Notices may also 
identify the member with which an individual was associated at the time 
the violations occurred if such identification is determined by the 
Association to be in the public interest.

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 Resolution requires that a final NASD decision of the National 
Business Conduct Committee (``NBCC'') or the Board of Governors of the 
NASD (``Board'') imposing monetary sanctions of $10,000 or more or 
penalties of expulsion, revocation, suspension and/or the barring of a 
person from being associated with all members be promptly transmitted 
to the membership and to the press, concurrently; provided, however, no 
such notice shall be sent prior to the expiration of 30 days from the 
date of the said decision. Upon review, the Association has determined 
that the elimination of the 30 day notification delay regarding NASD 
final decisions ordering the most serious sanctions (i.e., expulsion, 
revocation, and/or the barring of a person from being associated with 
all members) would further investor protection and the public interest 
and that notification to the membership and to the press should be made 
promptly upon issuance of such final decisions. The NASD, therefore, 
proposes to amend the Resolution to provide that no such notice shall 
be sent prior to the expiration of 30 days from the date of a decision 
imposing sanctions other than expulsion, revocation, and/or the barring 
of a person from being associated with all members. Such sanctions 
generally are imposed immediately.
    The proposed rule change would not amend the Resolution's current 
30 day notification delay on final decisions of the NBCC or the Board 
regarding the lesser sanctions, nor amend the procedures with respect 
to decisions of the District Business Conduct Committees.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act which provides that the 
rules of the association are designed to prevent fraudulent and 
manipulative acts and practices, and, in general, to protect investors 
and the public interest, in that the proposed rule change would amend 
the Resolution to provide that notice of the issuance of a final 
decision of the NBCC or the Board ordering an expulsion, revocation, 
and/or the barring of a person from being associated with all members 
would not be subject to the current 30 day notification delay to the 
membership and to the press. The NASD believes that prompt notification 
to the membership and the press of final decisions regarding such 
sanctions against members or persons associated with members will 
provide important information to investors and further the public 
interest.

(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 change, or
    B. Institute proceedings to determine whether the proposed rule 
change 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, N.W., Washington, D.C. 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 December 7, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-28264 Filed 11-15-94; 8:45 am]
BILLING CODE 8010-01-M