[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