[Federal Register Volume 60, Number 121 (Friday, June 23, 1995)]
[Rules and Regulations]
[Pages 32738-32834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14750]



      

[[Page 32737]]

_______________________________________________________________________

Part II





Securities and Exchange Commission





_______________________________________________________________________



17 CFR Part 200, et al.



Rules of Practice; Final Rule

  Federal Register / Vol. 60, No. 121 / Friday, June 23, 1995 / Rules 
and Regulations   
[[Page 32738]] 

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 201, 202, 203, 209, 228, 229, 230, 232, 240, 250, 
260, 270 and 275

[Release No. 34-35833; File No. S7-40-92]
RIN 3235-AF91


Rules of Practice

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission today announces the 
adoption of comprehensive revisions to its Rules of Practice 
(``Rules''), the procedural rules that govern Commission administrative 
proceedings. Enforcement proceedings initiated by the Commission and 
review of disciplinary proceedings brought by self-regulatory 
organizations are among the most frequently occurring and significant 
proceedings governed by the Rules. Adoption of the Rules and the other 
actions taken today implement recommendations made by the Commission's 
Task Force on Administrative Proceedings in its final Report, entitled 
Fair and Efficient Administrative Proceedings.
    The Rules contain procedures implementing authority granted to the 
Commission by the Securities Enforcement Remedies and Penny Stock 
Reform Act of 1990 to issue administrative temporary cease-and-desist 
and disgorgement orders. The Rules also implement revised procedures 
for the conduct of hearings, including simplified service of orders 
instituting proceeding, expanded use of prehearing conferences, 
codification of policies on the availability of certain investigation 
files to respondents in enforcement and disciplinary proceedings, 
issuance of subpoenas returnable prior to hearing and the consideration 
by administrative law judges of dispositive motions prior to hearing. 
In addition, the Rules contain revised procedures governing appeals to 
the Commission including various procedural requirements governing 
Commission review of self-regulatory determinations that were 
previously contained in part in Rules 19d-2 and 19d-3 under the 
Securities Exchange Act of 1934.
    The revised Rules better facilitate full, fair and efficient 
proceedings by setting forth applicable procedural requirements more 
completely and in an easier to use format; by streamlining procedures 
that had become burdened with archaic requirements; and by the addition 
of provisions that address changes in statutory requirements, judicial 
and administrative case law developments, Commission policies, and 
litigation practices since the Rules were last revised.
    The Commission also announces the issuance of a statement of 
Informal Procedures and Supplementary Information Concerning 
Adjudicatory Proceedings. This statement establishes guidelines for the 
completion of key phases of contested adjudications; requires periodic 
case status reports that will formally apprise the Commission if an 
adjudicatory matter is pending for longer than specified periods of 
time, so that the Commission can determine whether additional steps are 
necessary to reach a fair and timely resolution of the matter; and 
provides for increased and more timely disclosure concerning the 
Commission's adjudicatory docket through the periodic publication in 
the SEC Docket of summary statistical information concerning changes in 
the Commission's case load.

EFFECTIVE DATE: These rules are effective July 24, 1995.

TRANSITION PROVISION: Any administrative proceeding that has been 
docketed by the Commission--i.e., in which an administrative 
proceedings file number has been assigned by the Secretary--prior to 
the date of this Federal Register publication, June 23, 1995, shall be 
completed pursuant to the former Rules of Practice. Any proceeding 
docketed by the Commission after the date of this Federal Register 
publication but prior to the effective date shall be conducted under 
the former Rules of Practice unless, within 30 days of the effective 
date, each respondent in the proceeding submits a request in writing to 
the Secretary that the proceedings be conducted under the Rules of 
Practice adopted today.

ADDRESSES: Printed copies of the revised Rules of Practice including 
the comments will be available from the Commission's Publications 
Branch, U.S. Securities and Exchange Commission, 450 Fifth Street, NW.; 
Stop C-11; Washington, D.C. 20549.

FOR FURTHER INFORMATION CONTACT: Andrew Z. Glickman or Daniel O. 
Hirsch, Office of the General Counsel at (202) 942-0870; U.S. 
Securities and Exchange Commission; 450 Fifth Street, N.W.; Stop 6-6; 
Washington, D.C. 20549.
      
SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Discussion of the Revised Rules
    A. New Organizational Structure of the Rules
    B. Comments Accompanying the Rules
    C. Summary of Major Changes to the Rules from the Former Rules
    D. Technical Changes and Appendices
III. Discussion of the Statement of Informal Procedures and 
Supplemental Information Concerning Adjudicatory Proceedings
    A. Guidelines for the Timely Completion of Proceedings
    B. Reports to the Commission on Pending Cases
    C. Increased Public Disclosure Concerning the Pending Case 
Docket
IV. Rules of Practice: Table of Contents
    100 Series--General Rules
    200 Series--Initiation of Proceedings and Prehearing Rules
    300 Series--Rules Regarding Hearings
    400 Series--Appeal to the Commission and Commission Review
    500 Series--Rules Relating to Temporary Orders and Suspensions
    600 Series--Rules Regarding Disgorgement and Penalty Payments
    Form D-A Disclosure of Assets and Financial Information
V. Regulatory Flexibility Analysis
VI. Statutory Basis for Rules
TEXT OF ADOPTED RULES

I. Background

    Today's adoption of comprehensive revisions to the Rules of 
Practice (``Rules'') of the Securities and Exchange Commission 
(``Commission'') and issuance of a statement of informal procedures 
with respect to Commission adjudications culminate an extensive review 
of the Commission's adjudication procedures and process. In July 1990, 
then-Commissioner Mary L. Schapiro was appointed chairman of the Task 
Force on Administrative Proceedings (``Task Force'' or ``Schapiro Task 
Force''). The mission of the Task Force was to review the rules and 
procedures relating to Commission administrative proceedings, to 
identify sources of delay in those proceedings and to recommend steps 
to make the adjudicatory process more efficient and effective.1 
Following passage of the Securities Enforcement Remedies and Penny 
Stock Reform Act (``Remedies Act''),2 the Task Force greatly 
expanded its work to include preparing procedures to implement the 
authority granted to the Commission by the Remedies Act. The Task Force 
ultimately determined that it would be [[Page 32739]] necessary and 
appropriate to revise completely the entire Rules of Practice.

    \1\  SEC Creates Task Force on Administrative Proceedings, News 
Release 90-39 (July 19, 1990).
    \2\ Pub. L. 101-429, 104 Stat. 931 (1990).
---------------------------------------------------------------------------

    In January 1991 and December 1991, the Schapiro Task Force 
presented to the Chairman interim findings and recommendations 
concerning the need to reduce the pending case backlog. Implementation 
of these recommendations included, among other things, a reorganization 
of the Adjudications Group within the Office of the General Counsel, 
significant increases in staff resources assigned to adjudicatory 
proceedings, and more frequent Commission meetings to consider proposed 
adjudicatory opinions.
    In August 1992, the Secretary published approximately 400 orders 
issued by the Commission and administrative law judges between 1964 and 
1992.3 The previously unpublished orders, which were assembled and 
organized by the Task Force, concerned interpretations of the Rules of 
Practice or other procedural issues. The orders provide litigants with 
additional information about applicable procedure and thereby reduce 
the likelihood that previously decided issues will need to be 
relitigated. Also, as recommended by the Task Force, the Commission 
began regular publication in the SEC Docket of initial decisions of the 
administrative law judges as well as significant procedural orders.

    \3\ 52 SEC Docket 3, 3-792 (Aug. 18, 1992).
---------------------------------------------------------------------------

    In March 1993, the Schapiro Task Force issued its final report, 
Fair and Efficient Administrative Proceedings (``the Task Force 
Report'').4 The Task Force concluded that the fundamental 
structure of the Commission's administrative process is sound. The Task 
Force found, however, that there was unnecessary delay in deciding 
litigated adjudicatory proceedings.5 The Task Force recommended a 
comprehensive revision of the Rules of Practice and included proposed 
new Rules in its Report. In addition, the Task Force made various other 
recommendations designed to improve the efficiency and fairness of the 
Commission's administrative proceedings.6 These included steps 
that were intended to make structural changes that would reduce the 
likelihood of a recurrence of the conditions that led to unnecessary 
delay and a backlog of pending cases.

    \4\  Task Force on Administrative Proceedings, Securities and 
Exchange Commission, Fair and Efficient Administrative Proceedings: 
Report of the Task Force (Feb. 1993) [hereinafter Task Force 
Report].
    \5\ Id. at 13. See also id. at 19-22 (summary of statistical 
data concerning proceedings adjudicated from 1982 through 1992).
    \6\ Id. 12-19.
    In November 1993, the Commission published in the Federal Register 
a release proposing to adopt the Task Force's proposals pertaining to 
the Rules and asking interested persons for comment.7

    \7\ Proposed Rules of Practice, Exchange Act Release No. 33163, 
58 FR 61732 (Nov. 22, 1993). Most of the rules in the Rules of 
Practice deal with agency procedure and practice and are exempt from 
the Administrative Procedure Act's notice and comment requirement 
for rulemaking, 5 U.S.C. 553(b)(3). Consistent with the 
recommendation of the Task Force, though, all the Rules were 
published for comment. See Task Force Report, supra note 4, at 12.
---------------------------------------------------------------------------

II. Discussion of the Revised Rules

    The Commission received seven comment letters from various 
interested persons.8 Although not numerous, the comment letters as 
a group contained very extensive commentary on the proposed Rules. 
Commenters generally greeted the Commission's proposals favorably. All 
commenters praised the Commission's initiating a review of its Rules 
with the goal of further promoting fair and efficient administrative 
proceedings. All commenters submitted proposals to make various 
modifications to the Rules including many suggestions in response to 
the specific requests for comment contained in the proposing release. A 
number of comments also addressed matters not directly within the scope 
of the Rules. These included internal Commission management issues, 
such as the organizational structure of the Commission's divisions and 
offices, or enforcement policy issues, such as the frequency with which 
the Commission will initiate administrative proceedings. Significant 
changes to the Rules are discussed below.

    \8\ The comment letters may be inspected and copied at the 
Commission's Public Reference Room, 450 Fifth Street, N.W., 
Washington, D.C. 20549, File No. S7-40-92.
---------------------------------------------------------------------------

A. New Organizational Structure of the Rules

    The former Rules, which had not been comprehensively revised since 
1960, contained requirements which were out-of-date or inconsistent 
with current practices and, in a few cases, inconsistent with other 
rules. In revising the Rules, emphasis was placed on maintaining 
consistency with applicable statutory language while improving 
intelligibility, ensuring that the Rules accurately reflected current 
Commission practice, and providing internal consistency in the use of 
terms between individual rules.
    The Commission has adopted a new organizational structure and 
numbering system for the Rules of Practice based on model 
administrative rules prepared by the Administrative Conference of the 
United States (``ACUS''). As originally proposed, the Commission's 
Rules had been arranged in roughly the order in which an administrative 
proceeding progresses and numbered consecutively. The new format groups 
rules together in six broad categories based on which phase or type of 
proceeding they govern. The first four groups--general rules; 
institution of proceedings and prehearing rules; hearing rules; and 
rules regarding appeals to the Commission and Commission review--are 
predicated upon the four classifications suggested by ACUS. The two 
additional groups are related to specific Commission proceedings and 
administrative remedies and sanctions--rules regarding temporary 
orders, suspension of a registration and summary suspensions of 
trading; and rules governing disgorgement and penalty payments.
    Within each group, related rules are placed together. Rules which, 
as proposed, covered multiple topics have been divided into shorter 
rules each limited to fewer topics. The new structure increases the use 
of rule headings and subheadings to guide a user to the appropriate 
rule. To the extent possible, related provisions cross-reference each 
other. Each of the six major groups of rules is numbered in a separate 
series, from 100 through 600. In addition to improving the ease of use 
of the rules, the new numbering system will provide the Commission with 
greater flexibility when future amendments and additions to the Rules 
occur.

B. Comments Accompanying the Rules

    The Commission has prepared explanatory comments for the Rules of 
Practice; these comments appear with the Rules in this ``Supplementary 
Information'' section. The complete text of the Rules without comments 
appears below in Section VII. Each explanatory remark is identified as 
either a ``comment'' or a ``revision comment.'' ``Comments'' are 
statements explaining the basis for a rule, describing the rule's 
rationale, referencing related rules, or providing information 
concerning pertinent Commission practice. Comments are not a part of 
the rules, and are not included in the Code of Federal Regulations. The 
Commission believes, however, that information in the comment section 
will assist persons consulting the Rules in a more thorough 
understanding of the Rules. Printed copies of the revised Rules of 
Practice including the comments will be [[Page 32740]] available from 
the Commission's Publications Branch, U.S. Securities and Exchange 
Commission; 450 Fifth Street, N.W.; Stop C-11; Washington, D.C. 20549. 
A copy of this publication will be provided to each respondent by the 
Secretary at the commencement of proceedings.
    ``Revision comments'' are statements explaining changes from the 
proposed Rules to the adopted Rules. In addition, revision comments 
include, where appropriate, a brief discussion of responses to the 
requests for comment in the proposing release.
C. Summary of Major Changes to the Rules From the Former Rules

    This section contains a capsule summary of major changes from the 
former Rules.
    1. Temporary cease-and-desist orders. The Rules include procedures 
for the issuance of a temporary cease-and-desist order 
(``TCDO'').9-10 Rules 510, 511 and 512 contain the application 
procedures, notice requirements, hearing procedures and issuance 
requirements for TCDO's. Rule 513 contains additional requirements for 
ex parte issuance of a TCDO. Rule 514 sets forth the availability of 
judicial review and the duration of a TCDO. Rule 530 governs special 
procedures relating to issuance of an initial decision whether to enter 
a permanent order if a temporary order is pending. Rules 531 and 540 
govern Commission review of that initial decision, and duration of the 
temporary order pending that review.

    \9-10\ Rules 510-514, 530, 531 and 540.
---------------------------------------------------------------------------

    The Division of Enforcement may file an application for a TCDO 
simultaneously with or after the commencement of proceedings seeking a 
permanent cease-and-desist order with respect to a registered entity or 
associated person.11 The application must be accompanied by a 
declaration of facts signed by a person with knowledge of the facts 
contained therein; a memorandum of points and authorities; a proposed 
order imposing the temporary relief sought; and, unless relief is 
sought ex parte, a proposed notice of hearing and order to show cause 
whether the temporary relief should be imposed. If a proceeding for a 
permanent cease-and-desist order has not already been commenced, the 
Division must also file a proposed order instituting proceedings to 
determine whether a permanent cease-and-desist order should be imposed.

    \11\ Prior to filing an application for temporary relief, the 
staff would, in all cases, have to obtain authority to seek a 
temporary order from the Commission. As with any other decision to 
initiate enforcement action prior to the institution of proceedings, 
Commission deliberations and discussions with the staff concerning 
the decision whether to authorize an application for temporary 
relief would be nonpublic, privileged, and not ordinarily reviewable 
by a court.
---------------------------------------------------------------------------

    Unless the conditions warranting issuance of an ex parte order are 
met, a respondent shall be served with the application and additional 
papers and a hearing on the application shall be scheduled.
    If a respondent has been served with a temporary cease-and-desist 
order entered without a prior Commission hearing, the respondent may 
apply to the Commission to have the order set aside, limited, or 
suspended, and if the application is made within 10 days after the date 
on which the order was served, may request a hearing on such 
application. The Commission shall hold a hearing and render a decision 
on such an application at the earliest possible time. The hearing shall 
begin within two days of the filing of the application unless the 
applicant consents to a longer period or the Commission, by order, for 
good cause shown, sets a later date. If the Commission does not render 
its decision within 10 days of the application or such longer time as 
consented to by the applicant, the temporary order shall be suspended 
until a decision is rendered.
    A temporary cease-and-desist order may be appealed to a federal 
district court within 10 days of service of an order entered with prior 
notice, or within 10 days after the Commission's issuance of its 
decision upon a respondent's application to set aside, limit or suspend 
an ex parte order.
    After issuance of a temporary cease-and-desist order, the 
proceeding to determine whether to enter a permanent order shall go 
forward with a hearing before a hearing officer and the issuance of an 
initial decision. The Rules establish procedures with respect to 
expedited consideration of any appeal of the initial decision. The 
Rules also set forth limitations on the duration and scope of the 
temporary cease-and-desist order pending issuance of the Commission's 
opinion on review of the initial decision.
    2. Suspension of Registered Entity. Rules 520, 521, 522 and 524 
include extensive revisions to the provisions of former Rule 19 
relating to the suspension of a registered broker or dealer pending a 
final determination whether the registration shall be revoked. 
Consistent with amendments to the Securities Exchange Act, the new 
rules apply to a municipal securities dealer, government securities 
broker, government securities dealer, or transfer agent as well as a 
broker or dealer. Where possible, the new procedures for suspensions 
pending a final determination whether to revoke a registration parallel 
the procedures relating to temporary cease-and-desist orders.
    3. Disgorgement. The 600 series of the revised Rules contains new 
provisions governing payment of disgorgement, interest and penalties. 
Rule 600 requires prejudgment interest to be assessed on any sum 
required to be paid pursuant to an order of disgorgement. The rate of 
interest is set at the IRS underpayment rate and compounded quarterly 
unless the Commission specifies a lower rate with respect to funds 
placed in an approved escrow. Under Rule 601 unless otherwise provided, 
funds due pursuant to an order by the Commission requiring the payment 
of disgorgement, interest or penalties must be paid no later than 21 
days after service of the order. After disgorgement has been paid, a 
proposed plan of disgorgement will be submitted pursuant to Rule 610.
    Rule 611 lists the required elements of such disgorgement plan. A 
plan may provide for distribution of funds to investors or to a court 
registry or court-appointed receiver for injured investors. Where 
return of disgorged funds to investors is not justified, funds may be 
paid to the U.S. Treasury. Rule 612 requires that notice of a proposed 
plan be published in the SEC News Digest and the SEC Docket and other 
publications as required. A plan may be approved, approved with 
modifications, republished for additional comments or disapproved 
pursuant to Rule 613. Rule 614 contains provisions governing the 
administration of an approved plan.
    Rule 620 addresses conditions under which a non-party will be 
granted leave to intervene or to participate in a proceeding for the 
purpose of challenging a disgorgement order or plan of disgorgement. 
The Rule provides that no person shall be granted leave to intervene or 
to participate for such a purpose based solely upon that person's 
eligibility or potential eligibility to participate in a disgorgement 
fund or based upon any private right of action such person may have 
against any person who is also a respondent in an enforcement 
proceeding.
    Persons claiming an inability to pay disgorgement, interest or a 
penalty must do so in accordance with Rule 630. A respondent who 
asserts inability to pay may be required to file a sworn financial 
statement and to keep the statement current. Failure to file a required 
statement may be deemed a waiver of the claim of inability to pay.
    4. Expanded Role for Prehearing Conferences. The Rules 
significantly expand the role of prehearing [[Page 32741]] conferences 
and encourage more active prehearing case management by administrative 
law judges. Under the proposed rule, no initial prehearing conference 
was required. In accordance with suggestions by commenters, revised 
Rule 221 requires that except where the emergency nature of a 
proceeding would make a prehearing conference clearly inappropriate, 
both an initial and a final prehearing conference shall be held. The 
initial conference is to be held within 14 days of service of an 
answer, or if no answer is required, within 14 days of the issuance of 
an order instituting proceedings. The final conference is to be held as 
close to the beginning of the hearing as is reasonable.
    The Rules make an initial prehearing conference mandatory in most 
cases because such a conference can eliminate unnecessary delay and 
improve the quality of adjudicative decisionmaking by sharpening the 
preparation of cases and presentation of issues. The increased role for 
prehearing conferences will facilitate the new procedures that provide 
for access to certain categories of investigation file documents in 
enforcement and disciplinary proceedings and for the prehearing 
production of documents pursuant to subpoena.
    5. Prehearing Access to Certain Investigative Documents. Pursuant 
to new Rule 230, in an enforcement or disciplinary proceeding, the 
Division of Enforcement will provide any party with an opportunity for 
inspection and copying of certain categories of documents obtained by 
the Division in connection with the investigation leading to the 
Division's recommendation to institute proceedings. The rule codifies 
the prevailing practice of the Division of Enforcement staff in the 
Headquarters Office and various regional offices. A respondent's right 
to inspect and copy documents under this Rule is automatic; the 
respondent does not need to make a formal request for access through 
the hearing officer.
    Documents to which access must be provided include: (1) Each 
subpoena issued; (2) every other written request to persons not 
employed by the Commission to provide documents or to be interviewed; 
(3) the documents turned over in response to any such subpoenas or 
other written requests; (4) all transcripts and transcript exhibits; 
(5) any other documents obtained from persons not employed by the 
Commission; and (6) any final examination or inspection reports 
prepared by the Division of Market Regulation or the Division of 
Investment Management. The Division of Enforcement's obligation under 
this rule relates only to documents obtained by the Division of 
Enforcement. Documents located only in the files of other divisions or 
offices are beyond the scope of the rule.
    The Division of Enforcement may withhold a document if: (1) The 
document is privileged; (2) the document is an internal memorandum, 
note or writing prepared by a Commission employee, other than certain 
examination or inspection reports prepared by the Divisions of Market 
Regulation or Investment Management, or is otherwise attorney work-
product and will not be offered in evidence; (3) the document would 
disclose the identity of a confidential source; or (4) the hearing 
officer grants leave to withhold a document or category of documents as 
not relevant to the subject matter of the proceeding or otherwise, for 
good cause shown.
    Rule 230 is not the exclusive means by which a respondent may 
obtain access to documents. Production of documents prepared by the 
staff may be required under the doctrine of Brady v. Maryland, 373 U.S. 
83 (1963), or pursuant to Jencks Act requirements made applicable to 
the Commission pursuant to rule, or may be sought by subpoena or 
through other procedures. See, e.g., the Freedom of Information Act, 5 
U.S.C. 552.
    The document access policy in Rule 230 has been revised 
significantly from the proposed rule. Under the proposed rule, the 
staff was required to make a relevancy determination before a document 
would be produced. The Commission decided to change this rule, based in 
part upon comments received that contended that a relevancy 
determination by the staff was problematic.12

    \12\ Specifically, it was suggested that the proposed standard 
might deny respondents access to documents that ``while possibly not 
directly relevant to any of the Commission's allegations, may bear 
directly on the lines of defense the respondent is developing.'' ABA 
comment letter dated Feb. 28, 1994, at 59. It was also suggested 
that asking the staff to make such a determination was inappropriate 
because of the staff's ``outlook and allegiance.'' Id.
---------------------------------------------------------------------------

    6. Prehearing Document Production Pursuant to Subpoena. Rule 232(a) 
allows for production of documents pursuant to subpoena prior to the 
start of a hearing. The Rule states that a party may request 
``subpoenas requiring the production of documentary or other tangible 
evidence returnable at any designated time or place.'' Under former 
Rule 14(b)(1), such documents were only to be turned over at the 
hearing. As adopted, the rule will reduce delay and eliminate the need 
for postponements by allowing for documents to be reviewed and copied, 
and for proposed exhibits to be selected, all prior to a final 
prehearing conference.
    7. Summary Disposition. Under former Rule 11(e), a motion that 
would dispose of a proceeding in whole or in part could not be made, or 
considered by a hearing officer, prior to the completion of the 
interested division's case or the conclusion of the hearing. See 17 CFR 
201.11(e) (1994). Rule 250 makes substantial changes to these 
procedures. The Rule provides for a motion for summary disposition by 
any party after each party required to file an answer has done so and, 
in an enforcement or disciplinary proceeding, after documents have been 
made available to the respondent for inspection and copying. If the 
interested division has not completed presentation of its case in chief 
at the hearing, a summary decision motion may be made only with leave 
of the hearing officer. The facts of the pleadings of the party against 
whom the motion is made shall be taken as true, except as modified by 
stipulations or admissions made by that party, by uncontested 
affidavits, or by facts officially noted. In accordance with 
suggestions of a commenter, the Rule now provides that if a party 
cannot, for good cause, present facts essential to justify opposition 
to the motion by affidavit prior to hearing, the hearing officer shall 
deny the motion.
    A motion for summary disposition is subject to a 35-page limit.
    8. Protective Orders. The revised Rules contain provisions allowing 
certain persons involved in an evidentiary hearing to obtain a 
protective order for confidential information. Documents and testimony 
introduced in a public hearing are presumed to be public. Rule 322 
allows any party intending to introduce material as evidence during a 
hearing, any person who is the subject or creator of such material, or 
any witness who testifies at a hearing to file a motion requesting a 
protective order for such material or testimony. A protective order 
shall be granted only upon a finding that the harm resulting from 
disclosure would outweigh the benefits of disclosure.
    The former Rules of Practice contained a confidential treatment 
provision that related solely to applications for materials filed in 
connection with registration statements and other statutorily required 
filings; it required that confidential treatment be sought at the time 
of filing. See 17 CFR 201.25 (1994). Proposed Rule 33 would have 
responded to this situation by [[Page 32742]] allowing a party to seek 
confidential treatment under any ``applicable statute or rule,'' 
without limiting the scope of materials sought to be protected or the 
timing of the application.
    The Commission has decided that a separate rule for protective 
orders would be more efficient and easier for adjudicatory litigants to 
use than a rule that encompassed not only protective orders, but also 
requests for confidential treatment under the federal securities laws 
13 or the Freedom of Information Act.14

    \13\ See Clause 30 of Schedule A of the Securities Act of 1933, 
15 U.S.C. 77aa(30), and Rule 406 thereunder, 17 CFR 230.406; Section 
24(b)(2) of the Securities Exchange Act of 1934, 15 U.S.C. 
78x(b)(2), and Rule 24b-2 thereunder, 17 CFR 240.24b-2; Section 
22(b) of the Public Utility Holding Company Act of 1935, 15 U.S.C. 
79v(b), and Rule 104 thereunder, 17 CFR 250.104; Section 45(a) of 
the Investment Company Act of 1940, 15 U.S.C. 80a-44(a), and Rule 
45a-1 thereunder, 17 CFR 270.45a-1; and Section 210(a) of the 
Investment Advisers Act of 1940, 15 U.S.C. 80b-10(a). See also Rule 
of Practice 190, 17 CFR 201.190 (specifying procedures by which 
registrants may request confidential treatment of certain 
information contained in regulatory filings).
    \14\ See 17 CFR 200.83 (providing for procedures by which 
persons submitting information to the Commission can request that 
the information not be disclosed pursuant to a request under the 
Freedom of Information Act, 5 U.S.C. Sec. 552).
---------------------------------------------------------------------------

    9. Service. The rule for service of orders by the Commission, Rule 
141, and the rule for service of papers by parties, Rule 150, contain a 
number of revisions. Rule 141 contains new provisions specifically 
addressing service upon persons in a foreign country and upon persons 
currently registered with the Commission. Rule 141 also contains a new 
provision allowing a waiver of formal service to permit a party to 
accept service by facsimile transmission. For parties wishing to use 
facsimile transmission to serve one another, Rule 150 allows delivery 
of papers by fax when two conditions are met: (i) there must be a 
written agreement between the persons intending to serve each other by 
fax specifying such terms as they deem necessary with respect to 
telephone numbers, hours of facsimile operation, provision of paper 
original or other matters; and (ii) receipt of each document served by 
fax must be confirmed by a manually signed receipt delivered by fax or 
other means agreed to by the parties. These conditions are intended to 
ensure that service by fax will be both an efficient and an effective 
means of service.

D. Technical Changes and Appendices

    A number of technical changes have been made and appendices created 
in order to implement the Rules. First, former Rule 24 concerning 
incorporation by reference, which related to the making of disclosure 
or regulatory filings has been moved from the Rules of Practice to 
Regulation S-K section 10, paragraph (d) (17 CFR 229.10(d); a 
comparable provision has been added to Regulation S-B section 10, 
paragraph (f) (17 CFR 228.10(f)). Second, Commission procedures for 
summary suspensions pursuant to Section 12(k) of the Exchange Act, 15 
U.S.C. 78l(k), have been moved from Part 202 of 17 CFR into new Rule 
550. Third, new cross-reference tables showing the location of the 
former rules in the revised rules and vice versa have been included in 
an appendix to appear in the Code of Federal Regulations. Finally, all 
references to the Rules of Practice in the Commission's other rules and 
forms have been updated.
III. Discussion of the Statement of Informal Procedures and 
Supplemental Information Concerning Adjudicatory Proceedings

    In 1990, at the time the Schapiro Task Force was created, there was 
significant delay in the disposition of administrative proceedings. For 
example, in fiscal years 1991 and 1992, the Commission issued a total 
of 10 opinions in Commission-initiated administrative proceedings. 
These 10 cases took an average of four years from institution of 
proceedings to conclusion.15

    \15\ See Task Force Report, supra note 4, at 20-22.
---------------------------------------------------------------------------

    Interim recommendations made by the Task Force to eliminate 
unnecessary delay and reduce the backlog were implemented in 1991 and 
1992. The Commission reorganized the Adjudications Group within the 
Office of the General Counsel and appointed new senior staff to 
supervise the adjudicatory work assigned to the Office of the General 
Counsel. On a Commission-wide basis, the total number of staff assigned 
to adjudicatory matters was increased over three fold. For 
approximately one year attorneys throughout the General Counsel's 
Office assisted the Adjudications Group in preparing opinions for the 
Commission. Further, the Commission gave greater priority to 
adjudicatory matters, held oral arguments on a more timely basis, and 
met to consider proposed opinions more frequently.16

    \16\ Also pursuant to a recommendation of the Task Force, the 
Office of the General Counsel organized a conference with self-
regulatory organizations, held in June 1994, to address problems of 
mutual concern. Changes in adjudicatory procedures or practices by 
the self-regulatory organizations resulting from the conference may 
eliminate or simplify certain issues that would otherwise be 
appealed to the Commission.
---------------------------------------------------------------------------

    In fiscal year 1994, the number of new appeals to the Commission 
declined and the number of cases resolved increased compared with the 
prior year. As a result, in fiscal year 1994 the pending appellate 
caseload declined for the first time in over a decade. In addition, the 
number of cases pending on appeal for more than one year has declined 
significantly from the level of four years ago.
    Despite these strides, the Commission's past experience strongly 
suggests that additional steps should be taken, especially given the 
increase in proceedings assigned to the administrative law judges 
17 and the likelihood that the number and complexity of new 
appeals may increase again in coming years. Backlogs in the 
Commission's disposition of adjudicatory proceedings have recurred 
periodically over at least the past 30 years.18 The Task Force 
examined prior efforts to address delay in the administrative 
proceedings process, and considered why earlier ``solutions'' gave way 
to new backlogs.

    \17\  There were 56 cases pending before the administrative law 
judges as of October 1, 1994, up from 32 cases on October 1, 1993 
and 25 cases on October 1, 1992.
    \18\ See Task Force Report, supra note 4, at 33 n.46.
---------------------------------------------------------------------------

    The Task Force considered various alternatives aimed at eliminating 
systemic causes of the recurring backlog problems. In its Report, the 
Task Force recommended: (1) That the Commission establish guidelines 
for the timely completion of adjudicatory proceedings; (2) that the 
Commission be specifically apprised of matters not completed within 
designated periods, so that the Commission has a specific opportunity 
to determine what, if any, steps to take to advance the fair and timely 
resolution of those particular matters; and (3) that the Commission 
make increased public disclosure of the status of the pending case 
docket and changes in its case load.
    The Statement of Informal Procedures and Supplementary Information 
Concerning Adjudicatory Proceedings (``Statement of Informal 
Procedures'') adopts, with modifications, these three recommendations. 
Implementation of these recommendations will increase accountability 
for the timely and efficient completion of adjudicatory proceedings and 
consolidate on a more permanent basis the improvements in the 
adjudications process made since the creation of the Task Force.

A. Guidelines for the Timely Completion of Proceedings

    The Guidelines For the Timely Completion of Proceedings provide 
that an administrative law judge's initial [[Page 32743]] decision 
should be filed within 10 months of issuance of the order for 
proceedings and that a decision by the Commission on appeal of an 
initial decision, review of a self-regulatory organization 
determination or remand of a prior decision by a court of appeals 
should be issued within 11 months of the filing of a petition for 
review or application for review or the issuance of a mandate of the 
court.19

    \19\ The guidelines also set 45 days for a Commission decision 
on interlocutory matters, and up to 45 days to decide a motion for 
stay, depending upon whether the action to be stayed has already 
taken effect.
---------------------------------------------------------------------------

    The primary purposes of the guidelines are to provide a basis to 
gauge the Commission's and administrative law judges' productivity in 
issuing opinions, and to permit the allocation of appropriate 
Commission, management and staff resources for the timely completion of 
proceedings. Establishment of guidelines by the Commission indicates 
the priority of adjudicatory matters for the Commission, as well as for 
persons delegated authority or assigned responsibility for adjudicatory 
matters. Among other benefits, the guidelines can lend important 
authority to the deadlines set by the administrative law judges for 
hearing dates and pre- and post-hearing submissions, and by the General 
Counsel and the Secretary for oral argument dates and the filing of 
briefs.
    The Schapiro Task Force had recommended that ``normative 
guidelines'' for the completion of adjudicatory proceedings be included 
in the Rules of Practice themselves. The existing Rules of Practice use 
this approach in some instances,20 and other federal agencies and 
departments also have used similar approaches.21 The Commission 
believes, however, that since the guidelines are not themselves rules, 
it is preferable to publish them in a supplemental statement, and 
thereby eliminate a potential source of confusion or collateral 
litigation concerning their status as non-binding criteria for 
monitoring the age of pending cases rather than a legal standard. This 
approach is consistent with the publication in the Code of Federal 
Regulation of other non-binding, informal procedures.22

    \20\ See, e.g., former Rule 16(e), 17 CFR 201.16(e) (1994) 
(period prescribed for filing of proposed findings and conclusions 
``normally should be no more than 30 days after the close of the 
hearing, and if the hearing officer directs that the first filing be 
made at a date later than 30 days after the close of the hearing, 
the reasons for so doing shall be stated in his order'').
    \21\ See, e.g., 37 CFR 10.139(c) (ALJ in Patent and Trademark 
Office, Dept. of Commerce, shall normally issue initial decisions in 
disciplinary cases within six months of the date a complaint is 
filed).
    \22\ See, e.g., 17 CFR 202.
---------------------------------------------------------------------------

    The guidelines do not create a requirement that each portion of a 
proceeding or the entire proceeding be completed within the periods 
described. Proceedings at either the hearing stage or on review by the 
Commission may require additional time because they are unusually 
complex or because the record is exceptionally long or for other 
reasons. In addition, fairness to all parties requires that the 
Commission's deliberative process not be constrained by an inflexible 
schedule. In some proceedings, deliberation may be delayed by the need 
to consider more urgent matters, to permit the preparation of 
dissenting opinions or for other good cause. The guidelines will be 
used by the Commission as one of several criteria in monitoring and 
evaluating its adjudicatory program.
    As noted in the supplemental statement, the guidelines adopted 
today will need to be examined periodically and may need to be 
readjusted in light of changes in the Commission's case load and the 
availability of Commission resources.
    One alternative approach, considered by the Task Force, was to set 
fixed deadlines for the issuance of initial decisions and Commission 
opinions, and to provide for a remedy, such as dismissal, if cases were 
not completed within the deadline. Applying this approach to 
adjudicatory proceedings, including enforcement actions and review of 
self-regulatory organization determinations, places too great a premium 
on the benefits of achieving resolution of a proceeding, without due 
consideration to the resolution reached. In light of its broad 
responsibilities, the Commission should retain the flexibility to delay 
the resolution of proceedings in order to address higher priority 
matters, without abandoning the opportunity to adjudicate issues 
properly before it, particularly those relating to whether the 
protection of the public or investors requires that a securities law 
violator be subject to remedial sanctions.
B. Reports to the Commission on Pending Cases

    Prior reviews of the administrative process concluded that 
delegation of certain functions to the staff is desirable, as it frees 
the Commission from having to deal with routine matters and can 
expedite Commission action.23 Unmonitored delegation, however, can 
also create a source of delay. The Schapiro Task Force observed that, 
once a case is assigned to an administrative law judge or to the staff, 
``there is no procedure to return cases to the Commission for a status 
conference if significant milestones are not reached or no opinion is 
prepared within specified periods.'' 24 The Task Force recommended 
that if a case does not proceed through each major phase on a timely 
basis, it should automatically be returned to the Commission to 
determine whether any additional steps should be taken to advance the 
resolution of the case. The Task Force stated that ``[b]y establishing 
this procedure, the Commission will require the staff to identify non-
routine matters, shortages in staff or other impediments that are 
preventing the timely completion of delegated decisionmaking.'' 25

    \23\ Task Force Report, supra note , at 32-33.
    \24\ Id. at 33.
    \25\ Id. at 42.
---------------------------------------------------------------------------

    In response to this recommendation, one commenter advocated that 
the Commission should ``encourage more ALJ autonomy and thereby avoid 
SEC involvement between the times when cases are authorized and 
appealed.'' 26 Accordingly, this commenter suggested, unless 
absolutely necessary, interim Commission review of cases assigned to an 
administrative law judge should not occur, even on a case management 
basis such as for status conferences. The commenter suggested, as an 
alternative to status conferences, that the administrative law judges 
have a periodic requirement to report any case backlog to the 
Commission and the public. The Commission has modified the 
recommendation of the Schapiro Task Force to address the concerns 
raised by this commenter.

    \26\ ABA comment letter to Commissioner Mary Schapiro on the 
Report of the Task Force on Administrative Proceedings dated Nov. 
10, 1993, at 8.
---------------------------------------------------------------------------

    Under the informal procedures adopted today, a requirement formally 
to apprise the Commission of proceedings beyond a specified age is 
being integrated into a case status reporting system overseen by the 
Secretary. Use of written status reports as a tool to improve docket 
control is a widely accepted practice. For example, federal court 
judges are required to report periodically to the Office of United 
States Courts on the status of certain matters pending beyond specified 
periods. Face-to-face status conferences between the Commission and an 
administrative law judge, or discussion of the merits of a proceeding, 
will not be a part of the more formal case status reporting system.
    Periodically, confidential status reports with respect to all filed 
[[Page 32744]] adjudicatory proceedings shall be made to the 
Commission. The Chief Administrative Law Judge shall report on 
proceedings assigned to an administrative law judge. The General 
Counsel shall report on proceedings assigned to the Office of the 
General Counsel, as well as any other pending proceedings. These status 
reports shall be made through the Secretary, with a minimum frequency 
established by the Commission. In connection with these reports, the 
Chief Administrative Law Judge and the General Counsel shall 
specifically apprise the Commission of any proceeding that exceeds the 
guidelines established for the timely completion of proceedings by more 
than 30 days. The report shall describe the procedural posture of any 
such proceeding, estimate a date for conclusion of the proceeding, and 
provide such other information as is necessary to enable the Commission 
to determine whether additional steps are necessary to reach a fair and 
timely resolution of the matter.
    In some cases, additional resources may be necessary to free an 
administrative law judge or staff to address a matter of unusually 
large size or exceptional complexity.27 In some instances, 
consultation with the Commission by the General Counsel may speed the 
completion of a particular case. In others, the length of the hearing, 
the number or respondents, the complexity of a case or the urgency of 
other matters may justify delay in reaching a decision at a delegated 
level, in which case no action in response to the status report would 
be needed. Coupled with the guidelines for the timely completion of 
proceedings, however, the use of a comprehensive and formalized case 
status reporting system will provide greater assurance that the 
resolution of a proceeding that has been delayed will be treated as a 
priority matter.

    \27\ For example, additional administrative law judges might be 
necessary on a temporary basis, see, e.g., 5 U.S.C. 3344, to allow 
the judge assigned responsibility for a proceeding to complete that 
proceeding without the burden of new cases, or additional law 
clerks, paralegals or other staff might be needed on temporary 
assignment.
---------------------------------------------------------------------------

    As noted by the Schapiro Task Force, an increasing number of status 
reports concerning cases that are not completed within the guidelines 
may provide an ``early warning signal'' that additional resources are 
necessary. Had a more detailed and more formal case status reporting 
requirement been in effect in the mid-1980's, the Commission might have 
been in a better position to address the developing case backlog before 
it gained the magnitude it had reached by 1990 when the Task Force was 
created.
    The Commission believes that the case status reporting requirements 
announced today will fulfill the purpose of the Schapiro Task Force 
recommendation discussed above by establishing a mechanism that will 
automatically address cases that are not timely resolved and by 
increasing accountability by and to the Commission for management of 
the docket.
    The Task Force recommended that the requirement to formally apprise 
the Commission if a proceeding is not completed within specified 
periods should be implemented through changes in the Commission's 
formal delegations to the administrative law judges, the Secretary, and 
the General Counsel. See 17 CFR 200.30-1 et. seq. The Commission 
believes that publication of these case status reporting procedures in 
the Statement of Informal Procedures will be equally effective in 
implementing this recommendation.

C. Increased Public Disclosure Concerning the Pending Case Docket

    The Task Force recommended publishing more information concerning 
the status of the Commission's adjudicatory docket.28 Ongoing 
disclosure of information about the adjudication program caseload 
increases awareness of the importance of the program, facilitates 
oversight of the program, and promotes public confidence in the 
efficiency and fairness of the program. Under the procedures adopted 
today, the Secretary will publish each October and April in the SEC 
Docket summary statistical information about the status of the pending 
adjudicatory docket and changes in the Commission's caseload over the 
prior six months.29

    \28\ See Recommendation 4, Task Force Report, supra note , at 
43-44.
    \29\ The report shall include the number of cases pending before 
the administrative law judges and the Commission at the beginning 
and end of the six-month period. The report shall also show 
increases in the caseload arising from new cases being instituted, 
appealed or remanded to the Commission, and decreases in the 
caseload arising from the disposition of proceedings by issuance of 
initial decisions, issuance of final decisions issued on appeal of 
initial decisions, other dispositions of appeals of initial 
decisions, final decisions on review of self-regulatory organization 
determinations, other dispositions on review of self-regulatory 
organization determinations, and decisions with respect to stays or 
interlocutory motions. For each category of decision, the report 
shall also show the median age of the cases at the time of the 
decision and the number of cases decided within the guidelines for 
the timely completion of adjudicatory proceedings.
---------------------------------------------------------------------------

    The Commission will also continue to follow the Task Force 
recommendation that it adopt the practice of several federal courts of 
appeals by publishing with each opinion the date the appeal or review 
was commenced and the date of oral argument, if any.
    The Task Force suggested publication of information about the 
Commission's caseload in the Annual Report. Although a useful adjunct 
to publication in the SEC Docket, publication in the Annual Report 
alone is not sufficient. The Docket is more widely available (both on 
commercial database services and in other places such as libraries) 
than the Annual Report. In addition, publication in the Docket allows 
more frequent and more timely disclosure.
IV. Rules of Practice: Table of Contents

General Rules

Rule 100. Scope of the Rules of Practice.
Rule 101. Definitions.
Rule 102. Appearance and Practice Before the Commission.
Rule 103. Construction of Rules.
Rule 104. Business Hours.
Rule 110. Presiding Officer.
Rule 111. Hearing Officer: Authority.
Rule 112. Hearing Officer: Disqualification and Withdrawal.
Rule 120. Ex Parte Communications.
Rule 121. Separation of Functions.
Rule 140. Commission Orders and Decisions: Signature and 
Availability.
Rule 141. Orders and Decisions: Service of Orders Instituting 
Proceeding and Other Orders and Decisions.
Rule 150. Service of Papers by Parties.
Rule 151. Filing of Papers With the Commission: Procedure.
Rule 152. Filing of Papers: Form.
Rule 153. Filing of Papers: Signature Requirement and Effect.
Rule 154. Motions.
Rule 155. Default; Motion to Set Aside Default.
Rule 160. Time Computation.
Rule 161. Extensions of Time, Postponements and Adjournments.
Rule 180. Sanctions.
Rule 190. Confidential Treatment of Information in Certain Filings.
Rule 191. Adjudications Not Required to Be Determined on the Record 
After Notice and Opportunity for Hearing.
Rule 192. Rulemaking: Issuance, Amendment and Repeal of Rules of 
General Application.
Rule 193. Applications by Barred Individuals for Consent to 
Associate.

Initiation of Proceedings and Prehearing Rules

Rule 200. Initiation of Proceedings.
Rule 201. Consolidation of Proceedings.
Rule 202. Specification of Procedures by Parties in Certain 
Proceedings.
Rule 210. Parties, Limited Participants and Amici Curiae.
Rule 220. Answer to Allegations.
Rule 221. Prehearing Conferences.
Rule 222. Prehearing Submissions. [[Page 32745]] 
Rule 230. Enforcement and Disciplinary Proceedings: Availability of 
Documents for Inspection and Copying
Rule 231. Enforcement and Disciplinary Proceedings: Production of 
Witness Statements.
Rule 232. Subpoenas.
Rule 233. Depositions Upon Oral Examination.
Rule 234. Depositions Upon Written Questions.
Rule 235. Introducing Prior Sworn Statements of Witnesses into the 
Record.
Rule 240. Settlement.
Rule 250. Motion for Summary Disposition.

Rules Regarding Hearings

Rule 300. Hearings.
Rule 301. Hearings to Be Public.
Rule 302. Record of Hearings.
Rule 310. Failure to Appear at Hearings: Default
Rule 320. Evidence: Admissibility.
Rule 321. Evidence: Objections and Offers of Proof.
Rule 322. Evidence: Confidential Information, Protective Orders.
Rule 323. Evidence: Official Notice.
Rule 324. Evidence: Stipulations.
Rule 325. Evidence: Presentation Under Oath or Affirmation.
Rule 326. Evidence: Presentation, Rebuttal and Cross-examination.
Rule 340. Proposed Findings, Conclusions and Supporting Briefs.
Rule 350. Record in Proceedings Before Hearing Officer; Retention of 
Documents; Copies.
Rule 351. Transmittal of Documents to Secretary; Record Index; 
Certification.
Rule 360. Initial Decision of Hearing Officer.

Appeal to the Commission and Commission Review

Rule 400. Interlocutory Review.
Rule 401. Issuance of Stays.
Rule 410. Appeal of Initial Decisions by Hearing Officers.
Rule 411. Commission Consideration of Initial Decisions by Hearing 
Officers.
Rule 420. Appeal of Determinations by Self-Regulatory Organizations.
Rule 421. Commission Consideration of Determinations by Self-
Regulatory Organizations.
Rule 430. Appeal of Actions Made Pursuant to Delegated Authority.
Rule 431. Commission Consideration of Actions Made Pursuant to 
Delegated Authority.
Rule 450. Briefs Filed with the Commission.
Rule 451. Oral Argument Before the Commission.
Rule 452. Additional Evidence.
Rule 460. Record Before the Commission.
Rule 470. Reconsideration.
Rule 490. Receipt of Petitions for Judicial Review Pursuant to 28 
U.S.C. 2112(a)(1).

Rules Relating to Temporary Orders and Suspensions

Rule 500. Expedited Consideration of Proceedings.
Rule 510. Temporary Cease-and-Desist Orders: Application Process.
Rule 511. Temporary Cease-and-Desist Orders: Notice; Procedures for 
Hearing.
Rule 512. Temporary Cease-and-Desist Orders: Issuance After Notice 
and Opportunity for Hearing.
Rule 513. Temporary Cease-and-Desist Orders: Issuance Without Prior 
Notice and Opportunity For Hearing.
Rule 514. Temporary Cease-and-Desist Orders: Judicial Review; 
Duration.
Rule 520. Suspension of Registration of Brokers, Dealers, or other 
Exchange Act-Registered Entities: Application.
Rule 521. Suspension of Registration of Brokers, Dealers, or other 
Exchange Act-Registered Entities: Notice and Opportunity for Hearing 
on Application.
Rule 522. Suspension of Registration of Brokers, Dealers, or other 
Exchange Act-Registered Entities: Issuance and Review of Order.
Rule 523. [Reserved].
Rule 524. Suspension of Registrations: Duration.
Rule 530. Initial Decision on Permanent Order: Timing for Submitting 
Proposed Findings and Preparation of Decision.
Rule 531. Initial Decision on Permanent Order: Effect on Temporary 
Order.
Rule 540. Appeal and Commission Review of Initial Decision Making a 
Temporary Order Permanent.
Rule 550. Summary Suspensions Pursuant to Exchange Act Section 
12(k)(1)(A).

Rules Regarding Disgorgement and Penalty Payments

Rule 600. Interest on Sums Disgorged.
Rule 601. Prompt Payment of Disgorgement, Interest and Penalties.
Rule 610. Submission of Proposed Plan of Disgorgement.
Rule 611. Contents of Plan of Disgorgement; Provisions for Payment.
Rule 612. Notice of Proposed Plan of Disgorgement and Opportunity 
for Comment by Non-Parties.
Rule 613. Order Approving, Modifying or Disapproving Proposed Plan 
of Disgorgement.
Rule 614. Administration of Plan of Disgorgement.
Rule 620. Right to Challenge Order of Disgorgement.
Rule 630. Inability to Pay Disgorgement, Interest or Penalties.

Form

209.1. Form D-A: Disclosure of Assets and Financial Information.
General Rules

Rule 100. Scope of the Rules of Practice
    (a)Unless provided otherwise, these Rules of Practice govern 
proceedings before the Commission under the statutes that it 
administers.
    (b) These rules do not apply to:
    (1) investigations, except where made specifically applicable by 
the Rules Relating to Investigations, part 203 of this chapter; or
    (2) actions taken by the duty officer pursuant to delegated 
authority under 17 CFR 200.43.
    Comment: The Rules of Practice govern a wide range of Commission 
processes, including Commission-initiated enforcement and disciplinary 
proceedings, proceedings to review disciplinary actions initiated by 
self-regulatory organizations and certain other self-regulatory 
decisions, proceedings to review Commission staff decisions made 
pursuant to delegated authority, and proceedings in which an exemptive 
application is contested and a hearing ordered. Certain agency 
processes are specifically excluded from the scope of the Rules. First, 
Commission investigations are not governed by the Rules unless a rule 
explicitly provides otherwise. See, e.g., Rule 240 (concerning offers 
of settlement); see also 17 CFR 203.8 (service of subpoenas in formal 
investigations is governed by Rule 232). Second, these Rules do not 
cover an appeal from a decision of the duty officer. Rules governing 
appeals of such decisions are contained in 17 CFR 200.43(c).
    Each rule indicates whether that rule applies generally to all 
proceedings, or only to a particular category of proceedings, such as 
ones in which an order instituting proceedings has been entered. A 
majority of the Rules address procedures in those matters where the 
Commission has ordered an evidentiary hearing pursuant to an order 
instituting proceedings. When an order instituting proceedings has been 
entered, it may specify particular procedures to be used in the 
proceeding to which it applies.
    The Administrative Procedure Act (``APA''), 5 U.S.C. 551 et seq., 
is the source of various provisions of the Rules. In addition, in any 
particular proceeding the APA may govern the Rules or the specific 
procedures that the Commission is required to employ. Which 
requirements of the Administrative Procedure Act are applicable to a 
particular Commission proceeding depends on the language of the statute 
authorizing the proceeding. An adjudication is subject to the 
requirements of 5 U.S.C. 554, 556 and 557 if the Commission is 
authorized by statute to make its determination ``on the record, after 
notice and opportunity for an agency hearing.'' Such adjudications are 
often referred to as ``on the record'' or formal adjudications. Other 
adjudications, including those where the Commission is authorized by 
statute to make its determination ``after opportunity for hearing,'' 
are often referred to as informal adjudications. See Rules 191 and 326 
and associated comments. [[Page 32746]] 
Rule 101. Definitions
    (a) For purposes of these Rules of Practice, unless explicitly 
stated to the contrary:
    (1) Commission means the United States Securities and Exchange 
Commission, or a panel of Commissioners constituting a quorum of the 
Commission, or a single Commissioner acting as duty officer pursuant to 
17 CFR 200.43;
    (2) counsel means any attorney representing a party or any other 
person representing a party pursuant to Rule 102(b);
    (3) disciplinary proceeding means an action pursuant to Rule 
102(e);
    (4) enforcement proceeding means an action, initiated by an order 
instituting proceedings, held for the purpose of determining whether or 
not a person is about to violate, has violated, has caused a violation 
of, or has aided or abetted a violation of any statute or rule 
administered by the Commission, or whether to impose a sanction as 
defined in section 551(10) of the Administrative Procedure Act, 5 
U.S.C. 551(10);
    (5) hearing officer means an administrative law judge, a panel of 
Commissioners constituting less than a quorum of the Commission, an 
individual Commissioner, or any other person duly authorized to preside 
at a hearing;
    (6) interested division means a division or an office assigned 
primary responsibility by the Commission to participate in a particular 
proceeding;
    (7) order instituting proceedings means an order issued by the 
Commission commencing a proceeding or an order issued by the Commission 
to hold a hearing;
    (8) party means the interested division, any person named as a 
respondent in an order instituting proceedings, any applicant named in 
the caption of any order, persons entitled to notice in a stop order 
proceeding as set forth in Rule 200(a)(2) or any person seeking 
Commission review of a decision;
    (9) proceeding means any agency process initiated by an order 
instituting proceedings; or by the filing, pursuant to Rule 410, of a 
petition for review of an initial decision by a hearing officer; or by 
the filing, pursuant to Rule 420, of an application for review of a 
self-regulatory organization determination; or by the filing, pursuant 
to Rule 430, of a notice of intention to file a petition for review of 
a determination made pursuant to delegated authority;
    (10) Secretary means the Secretary of the Commission; and
    (11) temporary sanction means a temporary cease-and-desist order or 
a temporary suspension of the registration of a broker, dealer, 
municipal securities dealer, government securities broker, government 
securities dealer, or transfer agent pending final determination 
whether the registration shall be revoked.
    (b) [Reserved]
Rule 102. Appearance and Practice Before the Commission
    A person shall not be represented before the Commission or a 
hearing officer except as stated in paragraphs (a) and (b) of this rule 
or as otherwise permitted by the Commission or a hearing officer.
    (a) Representing Oneself. In any proceeding, an individual may 
appear on his or her own behalf.
    (b) Representing Others. In any proceeding, a person may be 
represented by an attorney at law admitted to practice before the 
Supreme Court of the United States or the highest court of any State 
(as defined in Section 3(a)(16) of the Exchange Act, 15 U.S.C. 
78c(a)(16)); a member of a partnership may represent the partnership; a 
bona fide officer of a corporation, trust or association may represent 
the corporation, trust or association; and an officer or employee of a 
state commission or of a department or political subdivision of a state 
may represent the state commission or the department or political 
subdivision of the state.
    (c) Former Commission Employees. Former employees of the Commission 
must comply with the restrictions on practice contained in the 
Commission's Conduct Regulation, Subpart M, 17 CFR 200.735.
    (d) Designation of Address for Service; Notice of Appearance; Power 
of Attorney; Withdrawal.
    (1) Representing Oneself. When an individual first makes any filing 
or otherwise appears on his or her own behalf before the Commission or 
a hearing officer in a proceeding as defined in Rule 101(a), he or she 
shall file with the Commission, or otherwise state on the record, and 
keep current, an address at which any notice or other written 
communication required to be served upon him or her or furnished to him 
or her may be sent and a telephone number where he or she may be 
reached during business hours.
    (2) Representing Others. When a person first makes any filing or 
otherwise appears in a representative capacity before the Commission or 
a hearing officer in a proceeding as defined in Rule 101(a), that 
person shall file with the Commission, and keep current, a written 
notice stating the name of the proceeding; the representative's name, 
business address and telephone number; and the name and address of the 
person or persons represented.
    (3) Power of Attorney. Any individual appearing or practicing 
before the Commission in a representative capacity may be required to 
file a power of attorney with the Commission showing his or her 
authority to act in such capacity.
     (4) Withdrawal. Withdrawal by any individual appearing in a 
representative capacity shall be permitted only by order of the 
Commission or the hearing officer. A motion seeking leave to withdraw 
shall state with specificity the reasons for such withdrawal.
    (e) Suspension and Disbarment.
     (1) Generally. The Commission may censure a person or deny, 
temporarily or permanently, the privilege of appearing or practicing 
before it in any way to any person who is found by the Commission after 
notice and opportunity for hearing in the matter:
    (i) not to possess the requisite qualifications to represent 
others; or
    (ii) to be lacking in character or integrity or to have engaged in 
unethical or improper professional conduct; or
    (iii) to have willfully violated, or willfully aided and abetted 
the violation of any provision of the Federal securities laws or the 
rules and regulations thereunder.
    (2) Certain Professionals and Convicted Persons. Any attorney who 
has been suspended or disbarred by a court of the United States or of 
any State; or any person whose license to practice as an accountant, 
engineer, or other professional or expert has been revoked or suspended 
in any State; or any person who has been convicted of a felony or a 
misdemeanor involving moral turpitude shall be forthwith suspended from 
appearing or practicing before the Commission. A disbarment, 
suspension, revocation or conviction within the meaning of this rule 
shall be deemed to have occurred when the disbarring, suspending, 
revoking or convicting agency or tribunal enters its judgment or order, 
including a judgment or order on a plea of nolo contendere, regardless 
of whether an appeal of such judgment or order is pending or could be 
taken.
    (3) Temporary Suspensions. An order of temporary suspension shall 
become effective upon service on the respondent. No order of temporary 
suspension shall be entered by the Commission pursuant to paragraph 
(e)(3)(i) of this rule more than 90 days after the date on which the 
final judgment or order entered in a judicial [[Page 32747]] or 
administrative proceeding described in paragraph (e)(3)(i)(A) or 
(e)(3)(i)(B) has become effective, whether upon completion of review or 
appeal procedures or because further review or appeal procedures are no 
longer available.
    (i) The Commission, with due regard to the public interest and 
without preliminary hearing, may, by order, temporarily suspend from 
appearing or practicing before it any attorney, accountant, engineer, 
or other professional or expert who has been by name:
    (A) permanently enjoined by any court of competent jurisdiction, by 
reason of his or her misconduct in an action brought by the Commission, 
from violating or aiding and abetting the violation of any provision of 
the Federal securities laws or of the rules and regulations thereunder; 
or
    (B) found by any court of competent jurisdiction in an action 
brought by the Commission to which he or she is a party or found by the 
Commission in any administrative proceeding to which he or she is a 
party to have violated (unless the violation was found not to have been 
willful) or aided and abetted the violation of any provision of the 
Federal securities laws or of the rules and regulations thereunder.
    (ii) Any person temporarily suspended from appearing and practicing 
before the Commission in accordance with paragraph (e)(3)(i) of this 
rule may, within 30 days after service upon him or her of the order of 
temporary suspension, petition the Commission to lift the temporary 
suspension. If no petition has been received by the Commission within 
30 days after service of the order, the suspension shall become 
permanent.
    (iii) Within 30 days after the filing of a petition in accordance 
with paragraph (e)(3)(ii) of this rule, the Commission shall either 
lift the temporary suspension, or set the matter down for hearing at a 
time and place designated by the Commission, or both, and, after 
opportunity for hearing, may censure the petitioner or disqualify the 
petitioner from appearing or practicing before the Commission for a 
period of time or permanently. In every case in which the temporary 
suspension has not been lifted, every hearing held and other action 
taken pursuant to this paragraph (e)(3) shall be expedited in 
accordance with Rule 500. If the hearing is held before a hearing 
officer, the time limits set forth in Rule 531 will govern review of 
the hearing officer's initial decision.
    (iv) In any hearing held on a petition filed in accordance with 
paragraph (e)(3)(ii) of this rule, the staff of the Commission shall 
show either that the petitioner has been enjoined as described in 
paragraph (e)(3)(i)(A) of this rule or that the petitioner has been 
found to have committed or aided and abetted violations as described in 
paragraph (e)(3)(i)(B) of this rule and that showing, without more, may 
be the basis for censure or disqualification. Once that showing has 
been made, the burden shall be upon the petitioner to show cause why he 
or she should not be censured or temporarily or permanently 
disqualified from appearing and practicing before the Commission. In 
any such hearing, the petitioner may not contest any finding made 
against him or her or fact admitted by him or her in the judicial or 
administrative proceeding upon which the proceeding under this 
paragraph (e)(3) is predicated. A person who has consented to the entry 
of a permanent injunction as described in paragraph (e)(3)(i)(A) of 
this rule without admitting the facts set forth in the complaint shall 
be presumed for all purposes under this paragraph (e)(3) to have been 
enjoined by reason of the misconduct alleged in the complaint.
    (4) Filing of Prior Orders. Any person appearing or practicing 
before the Commission who has been the subject of an order, judgment, 
decree, or finding as set forth in paragraph (e)(3) of this rule shall 
promptly file with the Secretary a copy thereof (together with any 
related opinion or statement of the agency or tribunal involved). 
Failure to file any such paper, order, judgment, decree or finding 
shall not impair the operation of any other provision of this rule.
    (5) Reinstatement. (i) An application for reinstatement of a person 
permanently suspended or disqualified under paragraph (e)(1) or (e)(3) 
of this rule may be made at any time, and the applicant may, in the 
Commission's discretion, be afforded a hearing; however, the suspension 
or disqualification shall continue unless and until the applicant has 
been reinstated by the Commission for good cause shown.
    (ii) Any person suspended under paragraph (e)(2) of this rule shall 
be reinstated by the Commission, upon appropriate application, if all 
the grounds for application of the provisions of that paragraph are 
subsequently removed by a reversal of the conviction or termination of 
the suspension, disbarment, or revocation. An application for 
reinstatement on any other grounds by any person suspended under 
paragraph (e)(2) of this rule may be filed at any time and the 
applicant shall be accorded an opportunity for a hearing in the matter; 
however, such suspension shall continue unless and until the applicant 
has been reinstated by order of the Commission for good cause shown.
    (6) Other Proceedings Not Precluded. A proceeding brought under 
paragraph (e)(1), (e)(2) or (e)(3) of this rule shall not preclude 
another proceeding brought under these same paragraphs.
    (7) Public Hearings. All hearings held under this paragraph (e) 
shall be public unless otherwise ordered by the Commission on its own 
motion or after considering the motion of a party.
    (f) Practice Defined. For the purposes of these Rules of Practice, 
practicing before the Commission shall include, but shall not be 
limited to:
    (1) transacting any business with the Commission; and
    (2) the preparation of any statement, opinion or other paper by any 
attorney, accountant, engineer or other professional or expert, filed 
with the Commission in any registration statement, notification, 
application, report or other document with the consent of such 
attorney, accountant, engineer or other professional or expert.
    Revision Comment: Rule 102, which governs appearance and practice 
before the Commission, contains two changes from former Rule 2. First, 
as suggested by one commenter, the rule now explicitly requires that 
individuals and other persons filing a notice of appearance keep the 
information contained in the notice, such as address and telephone 
number, up-to-date. Current information is necessary to permit the 
expeditious service of orders as well as other efforts to contact a 
party.
    The same commenter suggested that the Commission consider adopting 
a provision that would require an attorney to file a written notice of 
withdrawal when the attorney seeks to withdraw from a matter before the 
Commission. New paragraph (d)(4) accomplishes this by requiring that, a 
person appearing in a representative capacity who wishes to withdraw 
from a proceeding, must file a motion seeking leave to withdraw and 
obtain such leave from the Commission or the hearing officer.
    In addition, language has been added to paragraph (d) (1) and (2) 
to clarify the longstanding policy of the Commission that a person who 
makes a filing with the Commission thereby makes an appearance before 
the Commission.

Rule 103. Construction of Rules

    (a) The Rules of Practice shall be construed and administered to 
secure the just, speedy, and inexpensive determination of every 
proceeding. [[Page 32748]] 
    (b) In any particular proceeding, to the extent that there is a 
conflict between these rules and a procedural requirement contained in 
any statute, or any rule or form adopted thereunder, the latter shall 
control.
    (c) For purposes of these rules:
    (1) any term in the singular includes the plural, and any term in 
the plural includes the singular, if such use would be appropriate;
    (2) any use of a masculine, feminine, or neuter gender encompasses 
such other genders as would be appropriate; and
    (3) unless the context requires otherwise, counsel for a party may 
take any action required or permitted to be taken by such party.
    Comment (a): Paragraph (a) is based on Rule 1 of the Federal Rules 
of Civil Procedure. See Fed. R. Civ. P. 1.
Rule 104. Business Hours
    The Headquarters office of the Commission, at 450 Fifth Street, 
NW., Washington, DC 20549, is open each day, except Saturdays, Sundays, 
and Federal legal holidays, from 9 a.m. to 5:30 p.m., Eastern Standard 
Time or Eastern Daylight Saving Time, whichever is currently in effect 
in Washington, DC Federal legal holidays consist of New Year's Day; 
Birthday of Martin Luther King, Jr.; Presidents Day; Memorial Day; 
Independence Day; Labor Day; Columbus Day; Veterans Day; Thanksgiving 
Day; Christmas Day; and any other day appointed as a holiday in 
Washington, D.C. by the President or the Congress of the United States.
Rule 110. Presiding Officer
    All proceedings shall be presided over by the Commission or, if the 
Commission so orders, by a hearing officer. When the Commission 
designates that the hearing officer shall be an administrative law 
judge, the Chief Administrative Law Judge shall select, pursuant to 17 
CFR 200.30-10, the administrative law judge to preside.
    Comment: Ordinarily the assignment to a hearing officer is part of 
the order instituting proceedings. The Rules use the term ``hearing 
officer,'' defined in Rule 101(a), to refer to a person who presides at 
a hearing. While an administrative law judge presides at most hearings 
at which the Commission itself does not preside, other persons may 
preside. See Securities Exchange Act Sec. 4A, 15 U.S.C. 78d-1; 
Administrative Procedure Act Sec. 556(b), 5 U.S.C. 556(b).
    Revision Comment: Rule 110 has been revised to specify the process 
by which administrative law judges are assigned by referencing the 
authority the Commission has previously delegated to the Chief 
Administrative Law Judge to assign matters to any of the administrative 
law judges.
Rule 111. Hearing Officer: Authority
    The hearing officer shall have the authority to do all things 
necessary and appropriate to discharge his or her duties. No provision 
of these Rules of Practice shall be construed to limit the powers of 
the hearing officer provided by the Administrative Procedure Act, 5 
U.S.C. 556, 557. The powers of the hearing officer include, but are not 
limited to, the following:
    (a) administering oaths and affirmations;
    (b) issuing subpoenas authorized by law and revoking, quashing, or 
modifying any such subpoena;
    (c) receiving relevant evidence and ruling upon the admission of 
evidence and offers of proof;
    (d) regulating the course of a proceeding and the conduct of the 
parties and their counsel;
    (e) holding prehearing and other conferences as set forth in Rule 
221 and requiring the attendance at any such conference of at least one 
representative of each party who has authority to negotiate concerning 
the resolution of issues in controversy;
    (f) recusing himself or herself upon motion made by a party or upon 
his or her own motion;
    (g) ordering, in his or her discretion, in a proceeding involving 
more than one respondent, that the interested division indicate, on the 
record, at least one day prior to the presentation of any evidence, 
each respondent against whom that evidence will be offered;
    (h) subject to any limitations set forth elsewhere in these rules, 
considering and ruling upon all procedural and other motions;
    (i) preparing an initial decision as provided in Rule 360;
    (j) upon notice to all parties, reopening any hearing prior to the 
filing of an initial decision therein, or, if no initial decision is to 
be filed, prior to the time fixed for the filing of final briefs with 
the Commission; and
    (k) informing the parties as to the availability of one or more 
alternative means of dispute resolution, and encouraging the use of 
such methods.
    Comment: This rule is based upon Section 556(c) of the 
Administrative Procedure Act, 5 U.S.C. 556(c). By its terms, the list 
of powers is illustrative, not exhaustive. The hearing officer is 
permitted to take any action necessary and appropriate to discharge his 
or her duties.
    Revision Comment: One commenter suggested that the Commission 
include in Rule 111 two powers recently added to Section 556(c) of the 
Administrative Procedure Act by the Administrative Dispute Resolution 
Act: the power to require attendance at a prehearing conference by a 
representative of each party who has the authority to negotiate 
concerning the resolution of issues in controversy and the power to 
inform parties as to the availability of alternate means of dispute 
resolution (ADR) and to encourage the use of such methods.
    The Commission has decided to modify this rule to address these 
concerns.
Rule 112. Hearing Officer: Disqualification and Withdrawal
    (a) Notice of Disqualification. At any time a hearing officer 
believes himself or herself to be disqualified from considering a 
matter, the hearing officer shall issue a notice stating that he or she 
is withdrawing from the matter and setting forth the reasons therefor.
    (b) Motion for Withdrawal. Any party who has a reasonable, good 
faith basis to believe that a hearing officer has a personal bias, or 
is otherwise disqualified from hearing a case, may make a motion to the 
hearing officer that the hearing officer withdraw. The motion shall be 
accompanied by an affidavit setting forth in detail the facts alleged 
to constitute grounds for disqualification. If the hearing officer 
finds himself or herself not disqualified, he or she shall so rule and 
shall continue to preside over the proceeding.
    Comment: Section 556(b) of the Administrative Procedure Act, 5 
U.S.C. 556(b), provides that a hearing officer may disqualify himself 
or herself at any time. The standard for making a motion to disqualify 
requires that the movant have a reasonable good-faith basis. This 
standard is intended to emphasize that there must be objective reasons 
to seek a disqualification, not just a subjective, though sincerely 
held, belief. A party seeking disqualification must do so promptly upon 
learning of the relevant information. A party may not await the outcome 
of the hearing officer's decision to determine if the alleged grounds 
for disqualification affected the decision.
Rule 120. Ex Parte Communications
    (a) Except to the extent required for the disposition of ex parte 
matters as authorized by law, the person presiding over an evidentiary 
hearing may not:
    (1) consult a person or party on a fact in issue, unless on notice 
and opportunity for all parties to participate; or [[Page 32749]] 
    (2) be responsible to or subject to the supervision or direction of 
an employee or agent engaged in the performance of investigative or 
prosecuting functions for the Commission.
    (b) The Commission's code of behavior regarding ex parte 
communications between persons outside the Commission and decisional 
employees, 17 CFR 200.110-200.114, governs other prohibited 
communications during a proceeding conducted under the Rules of 
Practice.
    Comment: Paragraph (a) is based on Section 554(d)(1) of the 
Administrative Procedure Act (APA), 5 U.S.C. 554(d)(1). Paragraph (b) 
references the Commission's rules applying to communications between 
Commission members or decisional employees and persons outside the 
agency, which incorporate the requirements of Section 557(d)(1) of the 
APA, 5 U.S.C. 557(d)(1). See also 17 CFR 200.62 (ethical canon for 
Commission members regarding ex parte communications); Securities Act 
Release No. 5815 (Mar. 10, 1977), 11 SEC Docket 1933 (Mar. 22, 1977) 
(amending Commission's code of behavior governing ex parte 
communications between persons outside the Commission and decisional 
employees to conform to requirements of Section 4 of the Government in 
the Sunshine Act, 5 U.S.C. Sec. 552b).
    Revision Comment: Although the Commission's administrative 
proceedings were previously subject to the requirements of the 
Administrative Procedure Act governing ex parte communications, 5 
U.S.C. 554(d)(1) and 557(d)(1), the prior rules did not mention them. 
Rule 120 makes no substantive changes to these requirements--it simply 
restates the APA's directive with regard to ex parte contacts. The Rule 
was added so that these requirements were more readily available to 
persons subject to proceedings under the Rules of Practice. See, Model 
Adjudication Rule 120(A), Administrative Conference of the United 
States (Dec. 1993).
Rule 121. Separation of Functions
    Any Commission officer, employee or agent engaged in the 
performance of investigative or prosecutorial functions for the 
Commission in a proceeding as defined in Rule 101(a) may not, in that 
proceeding or one that is factually related, participate or advise in 
the decision, or in Commission review of the decision pursuant to 
Section 557 of the Administrative Procedure Act, 5 U.S.C. 557, except 
as a witness or counsel in the proceeding.
    Comment: Rule 121 is based on Section 554(d) of the Administrative 
Procedure Act (APA), 5 U.S.C. 554(d), which governs the separation of 
personnel involved in prosecutorial and investigative functions in 
certain cases from decisionmaking in those cases.
    Revision Comment: Although the Commission's administrative 
proceedings were previously subject to the requirements of Section 
554(d) of the APA governing separation of functions, 5 U.S.C. 554(d), 
the prior rules did not mention them. Rule 121 makes no substantive 
changes to these requirements--it simply restates the APA's position on 
separation of functions. The Rule was added so that these requirements 
were more readily available to persons subject to proceedings under the 
Rules of Practice. See Model Adjudication Rule 121, Administrative 
Conference of the United States (Dec. 1993).
Rule 140. Commission Orders and Decisions: Signature and Availability
    (a) Signature Required. All orders and decisions of the Commission 
shall be signed by the Secretary or any other person duly authorized by 
the Commission.
    (b) Availability for Inspection. Each order and decision shall be 
available for inspection by the public from the date of entry, unless 
the order or decision is nonpublic. A nonpublic order or decision shall 
be available for inspection by any person entitled to inspect it from 
the date of entry.
    (c) Date of Entry of Orders. The date of entry of a Commission 
order shall be the date the order is signed. Such date shall be 
reflected in the caption of the order, or if there is no caption, in 
the order itself.
    Revision Comment (b): Changes to the text of the Commission's rule 
regarding availability of orders are technical. The Office of the 
Secretary has for many years maintained a practice of holding 
Commission orders for five days before release to the public. Under 
Rule 140(b), unless an order or decision is nonpublic, it will be 
available to the public from the date of entry.
    Revision comment (c): This paragraph has been simplified. No 
substantive change is intended.
Rule 141. Orders and Decisions: Service of Orders Instituting 
Proceeding and Other Orders and Decisions
    (a) Service of an Order Instituting Proceedings.
    (1) By Whom Made. The Secretary, or another duly authorized officer 
of the Commission, shall serve a copy of an order instituting 
proceedings on each person named in the order as a party. The Secretary 
may direct an interested division to assist in making service.
    (2) How made.
    (i) To Individuals. Notice of a proceeding shall be made to an 
individual by delivering a copy of the order instituting proceedings to 
the individual or to an agent authorized by appointment or by law to 
receive such notice. Delivery means--handing a copy of the order to the 
individual; or leaving a copy at the individual's office with a clerk 
or other person in charge thereof; or leaving a copy at the 
individual's dwelling house or usual place of abode with some person of 
suitable age and discretion then residing therein; or sending a copy of 
the order addressed to the individual by U.S. Postal Service certified, 
registered or Express Mail and obtaining a confirmation of receipt; or 
giving confirmed telegraphic notice.
    (ii) To Corporations or Entities. Notice of a proceeding shall be 
made to a person other than a natural person by delivering a copy of 
the order instituting proceedings to an officer, managing or general 
agent, or any other agent authorized by appointment or by law to 
receive such notice, by any method specified in paragraph (a)(2)(i) of 
this rule.
    (iii) Upon Persons Registered with the Commission. In addition to 
any other method of service specified in paragraph (a)(2) of this rule, 
notice may be made to a person currently registered with the Commission 
as a broker, dealer, municipal securities dealer, government securities 
broker, government securities dealer, investment adviser, investment 
company or transfer agent by sending a copy of the order addressed to 
the most recent business address shown on the person's registration 
form by U.S. Postal Service certified, registered or Express Mail and 
obtaining a confirmation of attempted delivery.
    (iv) Upon Persons in a Foreign Country. Notice of a proceeding to a 
person in a foreign country may be made by any method specified in 
paragraph (a)(2) of this rule, or by any other method reasonably 
calculated to give notice, provided that the method of service used is 
not prohibited by the law of the foreign country.
    (v) In Stop Order Proceedings. Notwithstanding any other provision 
of paragraph (a)(2) of this rule, in proceedings pursuant to Sections 8 
or 10 of the Securities Act of 1933, 15 U.S.C. 77h or 77j, or Sections 
305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 77eee or 
77ggg, notice of the institution of proceedings shall be made by 
personal service or confirmed [[Page 32750]] telegraphic notice, or a 
waiver obtain pursuant to paragraph (a)(4) of this rule.
    (3) Certificate of Service. The Secretary shall place in the record 
of the proceeding a certificate of service identifying the party given 
notice, the method of service, the date of service, the address to 
which service was made and the person who made service. If service is 
made in person, the certificate shall state, if available, the name of 
the individual to whom the order was given. If service is made by U.S. 
Postal Service certified, registered or Express Mail, the certificate 
shall be accompanied by a confirmation of receipt or of attempted 
delivery, as required. If service is made to an agent authorized by 
appointment to receive service, the certificate shall be accompanied by 
evidence of the appointment.
    (4) Waiver of Service. In lieu of service as set forth in paragraph 
(a)(2) of this rule, the party may be provided a copy of the order 
instituting proceedings by first-class mail or other reliable means if 
a waiver of service is obtained from the party and placed in the 
record.
    (b) Service of Orders or Decisions Other Than an Order Instituting 
Proceedings. Written orders or decisions issued by the Commission or by 
a hearing officer shall be served promptly on each party pursuant to 
any method of service authorized under paragraph (a) of this rule or 
Rule 150(c). Service of orders or decisions by the Commission, 
including those entered pursuant to delegated authority, shall be made 
by the Secretary or, as authorized by the Secretary, by a member of an 
interested division. Service of orders or decisions issued by a hearing 
officer shall be made by the Secretary or the hearing officer.
    Comment (a): The Rule is derived, in part, from Rules 4 and 5(b) of 
the Federal Rules of Civil Procedure. The Rule is also based, in part, 
on Section 40(a) of the Investment Company Act, 15 U.S.C. 80a-39(a), 
and Section 211(c) of the Investment Advisers Act, 15 U.S.C. 80b-11(c), 
which set forth acceptable methods for service of orders instituting 
proceedings under those Acts, and on Sections 8 and 10 of the 
Securities Act of 1933, 15 U.S.C. 77h and 77j, and Sections 305 and 307 
of the Trust Indenture Act of 1939, 15 U.S.C. 77eee and 77ggg, which 
set forth acceptable methods of service for orders instituting stop 
order proceedings pursuant to those statutory sections.
    The Commission commences proceedings to enforce the Federal 
securities laws by issuing an ``order instituting proceedings.'' The 
Commission is required to give each party appropriate notice of an 
order instituting proceedings. See Rule 200 (setting forth requirements 
in connection with the issuance of such orders). While service of the 
order instituting proceedings satisfies notice requirements, it is not 
the exclusive means of providing notice sufficient to meet the 
requirements of due process. In some circumstances--for example, where 
emergency or expedited relief is sought--actual notice of the 
institution of a proceeding may be made by telephone. See, e.g., Rule 
511. Although formal service of the order is still required in such 
circumstances, action on an application for emergency or expedited 
relief may precede service of the order.
    Rule 141(a)(2) allows service by those means specifically mentioned 
by statute. Rule 141 also allows service to be made by U.S. Postal 
Service Express Mail which, like certified or registered mail, both 
traditionally relied upon under the former rule, is a U.S. Post Office 
service that provides each letter a unique identification number, is 
traceable, and allows for a receipt upon delivery. Under Rule 141, 
alternative methods of service to persons located in the United States, 
such as service by publication, are not permitted. A party may, 
however, waive service and receive notice by accepting a copy of an 
order instituting proceedings by facsimile transmission, U.S. Mail, 
private overnight courier, or other means. Whatever method of service 
is used, Rule 141 requires a certificate of service establishing how 
notice was given, or a written waiver of service.
    The Rule establishes specific criteria for service of orders upon 
persons registered with the Commission and upon persons in a foreign 
country. A person who is currently registered with the Commission to 
engage in the securities business with the public may reasonably be 
expected to receive mail sent to the address shown on their 
registration form or to make appropriate arrangements for such mail to 
be forwarded or delivered. Rule 141 provides that a person currently 
registered with the Commission as a broker, dealer, municipal 
securities dealer, government securities broker, government securities 
dealer, investment adviser, investment company or transfer agent may be 
served by sending a copy of the order to the last business address 
shown on their registration form by U.S. Postal Service certified, 
registered or Express Mail and that confirmation of attempted delivery 
to that address is sufficient for valid service if no confirmation of 
receipt can be obtained.
    A person in a foreign country may be served by any method of 
service, reasonably calculated to give notice, that is not prohibited 
by the law of the foreign country.
    Comment (b): Service of an order instituting proceedings places a 
party on notice that there will be subsequent filings or other papers. 
Unless a party defaults, a party's response to receipt of an order 
instituting proceedings must include the filing of a notice of 
appearance. Cf. Rule 155 (governing defaults). The notice will provide 
an address of record where the party can be served with subsequent 
orders. Therefore, a return receipt or other confirmation of delivery 
is not required for subsequent orders.
    Subject to statutory limitations governing particular types of 
orders, orders other than an order instituting proceedings may be 
served pursuant to any method provided for in Rule 141(a) or in Rule 
150(c), which governs service of papers filed by parties. The 
Commission may serve an order on a party, as well as on the party's 
counsel. It is the Commission's practice to send orders instituting 
proceedings and final orders to each party in addition to serving 
counsel, if any. Cf. Rule 150(b) (if a party is represented by counsel, 
counsel shall be served with papers filed by other parties with the 
Commission).
    Revision Comment (a): The Rule has been revised to permit a waiver 
of formal service and thereby allow the use of methods of service, such 
as private courier service or facsimile transmission, in circumstances 
where such methods might otherwise be inconsistent with statutory 
requirements.
    The Rule has been revised to include a provision specifically 
addressing service by the Commission on a person in a foreign country. 
The Hague Convention on the Service Abroad of Judicial and 
Extrajudicial Documents does not apply to the service of Commission 
orders.
    The rule has also been revised to include a specific provision for 
service on persons registered with the Commission as a broker, dealer, 
municipal securities dealer, government securities broker, government 
securities dealer, investment adviser, investment company or transfer 
agent.
Rule 150. Service of Papers by Parties
    (a) When Required. In every proceeding as defined in Rule 101(a), 
each paper, including each notice of appearance, written motion, brief, 
or other written communication, shall be served upon each party in the 
[[Page 32751]] proceeding in accordance with the provisions of this 
rule; provided, however, that absent an order to the contrary, no 
service shall be required for motions which may be heard ex parte.
    (b) Upon a Person Represented by Counsel. Whenever service is 
required to be made upon a person represented by counsel who has filed 
a notice of appearance pursuant to Rule 102, service shall be made 
pursuant to paragraph (c) of this rule upon counsel, unless service 
upon the person represented is ordered by the Commission or the hearing 
officer.
    (c) How Made. Service shall be made by delivering a copy of the 
filing. Delivery means:
    (1) personal service--handing a copy to the person required to be 
served; or leaving a copy at the person's office with a clerk or other 
person in charge thereof; or leaving a copy at the person's dwelling 
house or usual place of abode with some person of suitable age and 
discretion then residing therein;
    (2) mailing the papers through the U.S. Postal Service by first 
class, certified, registered, or Express Mail delivery addressed to the 
person;
    (3) sending the papers through a commercial courier service or 
express delivery service addressed to the person; or
    (4) transmitting the papers by facsimile machine where the 
following conditions are met:
    (i) the persons serving each other by facsimile transmission have 
agreed to do so in a writing, signed by each party, which specifies 
such terms as they deem necessary with respect to facsimile machine 
telephone numbers to be used, hours of facsimile machine operation, the 
provision of non-facsimile original or copy, and any other such 
matters; and
    (ii) receipt of each document served by facsimile is confirmed by a 
manually signed receipt delivered by facsimile machine or other means 
agreed to by the parties.
    (d) When Service Is Complete. Personal service, service by U.S. 
Postal Service Express Mail or service by a commercial courier or 
express delivery service is complete upon delivery. Service by mail is 
complete upon mailing. Service by facsimile is complete upon 
confirmation of transmission by delivery of a manually signed receipt.
    Comment (a): Each document a party files in connection with a 
proceeding, as defined in Rule 101(a), must be served on all other 
parties admitted to the proceeding. In general, the party serving a 
paper should use the same method of service on all other parties and 
for filing with the Commission. Where a party uses different methods of 
service, the reason for doing so must be stated. Where a party is 
represented by counsel who has filed a notice of appearance, service 
ordinarily shall be made on counsel.
    Revision Comment: The rule now contains a provision, paragraph 
(c)(4), allowing the use of facsimile transmission (``fax'') for the 
delivery of papers. The Commission received a large number of comments 
on this subject. Commenters had a number of suggestions for how to 
implement service by fax, including: that service should not be deemed 
complete unless a manually signed receipt acknowledges that the 
transmission was readable and was received in full within the time 
permitted for filing; that the hearing officer be given discretion to 
determine whether, and under what circumstances, fax service should be 
allowed; that an initial agreement to allow service by fax should 
include an undertaking to serve documents leaving sufficient time 
before the filing deadline and to notify the sender promptly of any fax 
transmission errors; that simultaneous service of an original copy 
should also be made through other means; and that a written agreement 
of terms should be required when the parties agree to the use of fax 
service. Commenters disagreed whether the Commission should limit the 
use of facsimile transmission to cases in which all parties agree on 
the terms for service.
    In federal court, filing by fax is permitted where authorized by 
local rule subject to standards approved by the Judicial Conference. 
See Fed. R. Civ. P. 5(e); Fed. R. App. P. 25(a). The Commission has 
decided to allow service by facsimile transmission where two conditions 
have been met. First, persons serving each other by fax must agree to 
do so in writing. The written agreement shall contain such terms as are 
necessary with respect to telephone numbers, hours of operation, and 
provision of paper original and any other matters. Second, receipt of a 
document served by fax must be confirmed by a manually signed receipt. 
These conditions are intended to ensure that service by fax will be 
both an efficient and an effective means of service.
    One commenter objected to the provision in the proposed rule that 
would have allowed service directly upon a party where the party was 
represented by counsel. In response, Rule 150(b) has been amended to 
clarify that service upon counsel by another party is required unless 
service upon the person represented is specifically ordered by the 
Commission or the hearing officer.
Rule 151. Filing of Papers With the Commission: Procedure
    (a) When to File. All papers required to be served by a party upon 
any person shall be filed with the Commission at the time of service or 
promptly thereafter. Papers required to be filed with the Commission 
must be received within the time limit, if any, for such filing.
    (b) Where to File. Filing of papers with the Commission shall be 
made by filing them with the Secretary. When a proceeding is assigned 
to a hearing officer, a person making a filing with the Secretary shall 
promptly provide to the hearing officer a copy of any such filing; 
provided, however, that the hearing officer may direct or permit 
filings to be made with him or her, in which event the hearing officer 
shall note thereon the filing date and promptly provide the Secretary 
with either the original or a copy of any such filings.
    (c) To Whom to Direct the Filing. Unless otherwise provided, where 
the Commission has assigned a case to a hearing officer, all motions, 
objections, applications or other filings made during a proceeding 
prior to the filing of an initial decision therein, or, if no initial 
decision is to be filed, prior to the time fixed for the filing of 
briefs with the Commission, shall be directed to and decided by the 
hearing officer.
    (d) Certificate of Service. Papers filed with the Commission or a 
hearing officer shall be accompanied by a certificate stating the name 
of the person or persons served, the date of service, the method of 
service and the mailing address or facsimile telephone number to which 
service was made, if not made in person. If the method of service to 
any party is different from the method of service to any other party or 
the method for filing with the Commission, the certificate shall state 
why a different means of service was used.
    Comment: Since hearing officers frequently preside at locations 
away from the Commission's Headquarters in Washington, D.C., persons 
are permitted to make filings with the hearing officer, who then can 
forward the filings to the Secretary. Rule 351 contains additional 
procedures for the transmittal of the record of a proceeding before a 
hearing officer (and the index of the record) from the hearing officer 
to the Secretary.
    Rule 151 requires that where the Commission has assigned a hearing 
officer to preside at a proceeding, the person making a motion direct 
his or her requests and arguments to the hearing officer, not the 
Commission. If [[Page 32752]] a motion is directed to the Commission in 
a case in which a hearing officer is assigned, the Secretary must refer 
the motion to the hearing officer unless a motion directly to the 
Commission is authorized. In those unusual circumstances where a motion 
is properly directed to the Commission, the proceeding before the 
hearing officer should continue, unless otherwise ordered.
    Revision Comment (d): The requirements for the certificate of 
service have been modified to require that the certificate list the 
name of the person served and the method of service used if other than 
personal service is made. Additionally, if the method of service to any 
party is different from the method of service to any other party or the 
method for filing with the Commission, the certificate must state why a 
different method was used.
Rule 152. Filing of Papers: Form
    (a) Specifications. Papers filed in connection with any proceeding 
as defined in Rule 101(a) shall:
    (1) be on one grade of unglazed white paper measuring 8\1/2\ x 11 
inches, except that, to the extent that the reduction of larger 
documents would render them illegible, such documents may be filed on 
larger paper;
    (2) be typewritten or printed in either 10- or 12-point typeface or 
otherwise reproduced by a process that produces permanent and plainly 
legible copies;
    (3) include at the head of the paper, or on a title page, the name 
of the Commission, the title of the proceeding, the names of the 
parties, the subject of the particular paper or pleading, and the file 
number assigned to the proceeding;
    (4) be paginated with left hand margins at least 1 inch wide, and 
other margins of at least 1 inch;
    (5) be double-spaced, with single-spaced footnotes and single-
spaced indented quotations; and
    (6) be stapled, clipped or otherwise fastened in the upper left 
corner.
    (b) Signature Required. All papers must be dated and signed as 
provided in Rule 153.
    (c) Suitability for Recordkeeping. Documents which, in the opinion 
of the Commission, are not suitable for computer scanning or 
microfilming may be rejected.
    (d) Number of Copies. An original and three copies of all papers 
shall be filed.
    (e) Form of Briefs. All briefs containing more than 10 pages shall 
include a table of contents, an alphabetized table of cases, a table of 
statutes, and a table of other authorities cited, with references to 
the pages of the brief wherein they are cited.
    (f) Scandalous or Impertinent Matter. Any scandalous or impertinent 
matter contained in any brief or pleading or in connection with any 
oral presentation in a proceeding may be stricken on order of the 
Commission or the hearing officer.
Rule 153. Filing of Papers: Signature Requirement and Effect
    (a) General Requirements. Following the issuance of an order 
instituting proceedings, every filing of a party represented by counsel 
shall be signed by at least one counsel of record in his or her name 
and shall state that counsel's business address and telephone number. A 
party who acts as his or her own counsel shall sign his or her 
individual name and state his or her address and telephone number on 
every filing.
    (b) Effect of Signature.
    (1) The signature of a counsel or party shall constitute a 
certification that:
    (i) the person signing the filing has read the filing;
    (ii) to the best of his or her knowledge, information, and belief, 
formed after reasonable inquiry, the filing is well grounded in fact 
and is warranted by existing law or a good faith argument for the 
extension, modification, or reversal of existing law; and
    (iii) the filing is not made for any improper purpose, such as to 
harass or to cause unnecessary delay or needless increase in the cost 
of adjudication.
    (2) If a filing is not signed, the hearing officer or the 
Commission shall strike the filing, unless it is signed promptly after 
the omission is called to the attention of the person making the 
filing.
    Comment: Rule 153(b) is based upon Rule 11 of the Federal Rules of 
Civil Procedure. Persons signing a filing bear personal responsibility 
for the contents of the filing. If a filing is contrary to the 
provisions of this rule, the person or persons signing the filing may 
be subject to sanctions under Rule 180.
Rule 154. Motions
    (a) Generally. Unless made during a hearing or conference, a motion 
shall be in writing, shall state with particularity the grounds 
therefor, shall set forth the relief or order sought, and shall be 
accompanied by a written brief of the points and authorities relied 
upon. All written motions shall be served in accordance with Rule 150, 
be filed in accordance with Rule 151, meet the requirements of Rule 
152, and be signed in accordance with Rule 153. The Commission or the 
hearing officer may order that an oral motion be submitted in writing. 
Unless otherwise ordered by the Commission or the hearing officer, if a 
motion is properly made to the Commission concerning a proceeding to 
which a hearing officer is assigned, the proceeding before the hearing 
officer shall continue pending the determination of the motion by the 
Commission. No oral argument shall be heard on any motion unless the 
Commission or the hearing officer otherwise directs.
    (b) Opposing and Reply Briefs. Except as provided in Rule 401, 
briefs in opposition to a motion shall be filed within five days after 
service of the motion. Reply briefs shall be filed within three days 
after service of the opposition.
    (c) Length Limitation. A brief in support of or opposition to a 
motion shall not exceed 10 pages, exclusive of pages containing any 
table of contents, table of authorities, and/or addendum. Requests for 
leave to file briefs in excess of 10 pages are disfavored.
Rule 155. Default; Motion to Set Aside Default
    (a) A party to a proceeding may be deemed to be in default and the 
Commission or the hearing officer may determine the proceeding against 
that party upon consideration of the record, including the order 
instituting proceedings, the allegations of which may be deemed to be 
true, if that party fails:
    (1) to appear, in person or through a representative, at a hearing 
or conference of which that party has been notified;
    (2) to answer, to respond to a dispositive motion within the time 
provided, or otherwise to defend the proceeding; or
    (3) to cure a deficient filing within the time specified by the 
Commission or the hearing officer pursuant to Rule 180(b).
    (b) A motion to set aside a default shall be made within a 
reasonable time, state the reasons for the failure to appear or defend, 
and specify the nature of the proposed defense in the proceeding. In 
order to prevent injustice and on such conditions as may be 
appropriate, the hearing officer, at any time prior to the filing of 
the initial decision, or the Commission, at any time, may for good 
cause shown set aside a default.
    Comment: Pursuant to Rule 155 the Commission or the hearing officer 
may enter a default against any party who fails to appear in person or, 
if appropriate, through a representative, at a hearing or conference of 
which the party has notice. Thus, for example, failure to appear at a 
prehearing conference may be a grounds for default. [[Page 32753]] In 
addition, for example, this rule permits the entry of default against 
any party who fails to answer, to respond to a dispositive motion, or 
otherwise to defend the proceeding, or to file a required brief either 
before the hearing officer or on appeal before the Commission. This 
provision retains the existing standards for setting aside a default 
contained in former Rule of Practice 12(d), 17 CFR 201.12(d) (1994).
    Revision Comment: Failure to file a notice of appearance has been 
eliminated as a basis for a default. Failure to file a notice of 
appearance, like the failure to make any other required filing, is 
subject to sanctions under Rule 180(c).
Rule 160. Time Computation
    (a) Computation. In computing any period of time prescribed in or 
allowed by these Rules of Practice or by order of the Commission, the 
day of the act, event, or default from which the designated period of 
time begins to run shall not be included. The last day of the period so 
computed shall be included unless it is a Saturday, Sunday, or Federal 
legal holiday (as defined in Rule 104), in which event the period runs 
until the end of the next day that is not a Saturday, Sunday, or 
Federal legal holiday. Intermediate Saturdays, Sundays, and Federal 
legal holidays shall be excluded from the computation when the period 
of time prescribed or allowed is seven days or less, not including any 
additional time allowed for service by mail in paragraph (b) of this 
rule. If on the day a filing is to be made, weather or other conditions 
have caused the Secretary's office or other designated filing location 
to close, the filing deadline shall be extended to the end of the next 
day that is neither a Saturday, a Sunday, nor a Federal legal holiday.
    (b) Additional Time For Service by Mail. If service is made by 
mail, three days shall be added to the prescribed period for response.
    Revision Comment (b): This paragraph has been simplified. No 
substantive change is intended. One commenter requested that the amount 
of time for service by mail be increased. Rule 6(e) of the Federal 
Rules of Civil Procedure, which allows only three days to be added to a 
prescribed period when service is by mail, establishes a widely used 
and familiar standard for the computation of additional time when 
service is by mail. No change in the additional time period for service 
by mail was deemed warranted.
Rule 161. Extensions of Time, Postponements and Adjournments
    (a) Availability. Except as otherwise provided by law, the 
Commission, at any time, or the hearing officer, at any time prior to 
the filing of his or her initial decision or, if no initial decision is 
to be filed, at any time prior to the closing of the record, may, for 
good cause shown, extend or shorten any time limits prescribed by these 
Rules of Practice for the filing of any papers and may, consistent with 
paragraph (b) of this rule, postpone or adjourn any hearing.
    (b) Limitations on Postponements, Adjournments and Extensions. A 
hearing shall begin at the time and place ordered, provided that, 
within the limits provided by statute, the Commission or the hearing 
officer may for good cause shown postpone the commencement of the 
hearing or adjourn a convened hearing for a reasonable period of time 
or change the place of hearing.
    (1) Additional Considerations. In considering a motion for 
postponement of the start of a hearing, adjournment once a hearing has 
begun, or extensions of time for filing papers, the hearing officer or 
the Commission shall consider, in addition to any other factors:
    (i) the length of the proceeding to date;
    (ii) the number of postponements, adjournments or extensions 
already granted;
    (iii) the stage of the proceedings at the time of the request; and
    (iv) any other such matters as justice may require.
    (2) Time Limit. Postponements, adjournments or extensions of time 
for filing papers shall not exceed 21 days unless the Commission or the 
hearing officer states on the record or sets forth in a written order 
the reasons why a longer period of time is necessary.
    Comment: The rule requires the hearing officer to consider 
explicitly the efficient and timely administration of justice when 
determining whether to grant a postponement, adjournment or extension 
of time for filing of papers. The need for delay must be balanced 
against the need to bring each case to a timely conclusion, consistent 
with the public interest. The factors listed in the rule build on 
existing standards applied by the administrative law judges.
Rule 180. Sanctions
    (a) Contemptuous Conduct. 
    (1) Subject to Exclusion or Suspension. Contemptuous conduct by any 
person before the Commission or a hearing officer during any 
proceeding, including any conference, shall be grounds for the 
Commission or the hearing officer to:
    (i) exclude that person from such hearing or conference, or any 
portion thereof; and/or
    (ii) summarily suspend that person from representing others in the 
proceeding in which such conduct occurred for the duration, or any 
portion, of the proceeding.
    (2) Review Procedure. A person excluded from a hearing or 
conference, or a counsel summarily suspended from practice for the 
duration or any portion of a proceeding, may seek review of the 
exclusion or suspension by filing with the Commission, within three 
days of the exclusion or suspension order, a motion to vacate the 
order. The Commission shall consider such motion on an expedited basis 
as provided in Rule 500.
    (3) Adjournment. Upon motion by a party represented by counsel 
subject to an order of exclusion or suspension, an adjournment shall be 
granted to allow the retention of new counsel. In determining the 
length of an adjournment, the Commission or hearing officer shall 
consider, in addition to the factors set forth in Rule 161, the 
availability of co-counsel for the party or of other members of a 
suspended counsel's firm.
    (b) Deficient Filings; Leave to Cure Deficiencies. The Commission 
or the hearing officer may reject, in whole or in part, any filing that 
fails to comply with any requirements of these Rules of Practice or of 
any order issued in the proceeding in which the filing was made. Any 
such filings shall not be part of the record. The Commission or the 
hearing officer may direct a party to cure any deficiencies and to 
resubmit the filing within a fixed time period.
    (c) Failure to Make Required Filing or to Cure Deficient Filing. 
The Commission or the hearing officer may enter a default pursuant to 
Rule 155, dismiss the case, decide the particular matter at issue 
against that person, or prohibit the introduction of evidence or 
exclude testimony concerning that matter if a person fails:
    (1) to make a filing required under these Rules of Practice; or
    (2) to cure a deficient filing within the time specified by the 
Commission or the hearing officer pursuant to paragraph (b) of this 
rule.
    Comment (a): Paragraph (a) is based on former Rule 2(f), which 
provided that contemptuous conduct was grounds for exclusion and 
summary suspension for the duration of a hearing. Contemptuous conduct 
during the course of a proceeding that would warrant 
[[Page 32754]] sanctions has been rare. Under Rule 180(a), any person 
found to have engaged in contemptuous conduct can be excluded from all 
or a portion of a particular hearing or conference.
    In the event that a hearing officer or the Commission excludes or 
suspends a party's counsel, the party may make a motion for an 
adjournment to obtain new counsel. See 5 U.S.C. 555(b) (right in 
administrative proceedings to be accompanied by retained counsel); cf. 
Feeney v. SEC, 564 F.2d 260, 262 (8th Cir. 1977), cert. denied, 435 
U.S. 969 (1978) (no right to appointed counsel in administrative 
proceedings where respondent assumed to be indigent (citing Boruski v. 
SEC, 340 F.2d 991, 992 (2d Cir.), cert. denied, 381 U.S. 943 (1965)). 
Whether or not an exclusion or summary suspension order is issued, 
conduct during a hearing may be the basis for further disciplinary 
action, e.g., pursuant to Rule 102(e), or, as to a staff member, under 
the Commission's personnel regulations.
    Comment (b): A filing may be rejected if it fails to meet the 
requirements of any rule or order. See In the Matter of Fischbach, 
Admin. Proc. File No. 3-7384 (June 18, 1991). For example, filings that 
are not served as required by Rule 150, that fail to cite to the record 
as required by Rule 450, that are longer than permitted by Rule 450, or 
that fail to comply with a prehearing order pursuant to Rule 221, could 
be found to be deficient.
    The rule permits the hearing officer or the Commission to fix a 
period of time during which a deficiency must be cured and a new filing 
made. The authority to reject a filing or to permit an opportunity to 
cure a deficiency is discretionary. Whether a particular filing should 
be rejected or whether leave to cure a deficient filing should be 
granted requires a case-by-case determination. Parties, including those 
appearing pro se, are obligated to familiarize themselves with the 
Rules of Practice. The fact that a person may represent himself or 
herself or be represented by counsel who has not previously practiced 
before the Commission may be a factor in considering how to address a 
deficient filing, but should not, standing alone, be determinative. 
Deficiencies that are technical, de minimis, or non-prejudicial, 
however, may not warrant any action pursuant to this rule.
    Comment (c): This provision permits the entry of sanctions for the 
failure to file a document required under the Commission's Rules of 
Practice or for failure to cure a deficient filing within the time 
ordered. In response to such failures, the Commission or the hearing 
officer may determine the particular matter at issue against the person 
who has failed to perform or may preclude that person from introducing 
evidence or testimony on that matter. It is intended that the provision 
will be invoked for failures that do not warrant the entry of a default 
under Rule 155.
    Revision Comment (b): The rule now states explicitly that a 
rejected filing is not part of the record. If a filing is rejected, the 
entry of that filing on the docket may be stricken.
    Revision Comment (c): The revised rule allows for a sanction less 
severe than a default for a deficient filing.
Rule 190. Confidential Treatment of Information in Certain Filings
    (a) Application. An application for confidential treatment pursuant 
to the provisions of Clause 30 of Schedule A of the Securities Act of 
1933, 15 U.S.C. 77aa(30), and Rule 406 thereunder, 17 CFR 230.406; 
Section 24(b)(2) of the Securities Exchange Act of 1934, 15 U.S.C. 
78x(b)(2), and Rule 24b-2 thereunder, 17 CFR 240.24b-2; Section 22(b) 
of the Public Utility Holding Company Act of 1935, 15 U.S.C. 79v(b), 
and Rule 104 thereunder, 17 CFR 250.104; Section 45(a) of the 
Investment Company Act of 1940, 15 U.S.C. 80a-44(a), and Rule 45a-1 
thereunder, 17 CFR 270.45a-1; or Section 210(a) of the Investment 
Advisers Act of 1940, 15 U.S.C. 80b-10(a), shall be filed with the 
Secretary. The application shall be accompanied by a sealed copy of the 
materials as to which confidential treatment is sought.
    (b) Procedure For Supplying Additional Information. The applicant 
may be required to furnish in writing additional information with 
respect to the grounds for objection to public disclosure. Failure to 
supply the information so requested within 14 days from the date of 
receipt by the applicant of a notice of the information required shall 
be deemed a waiver of the objection to public disclosure of that 
portion of the information to which the additional information relates, 
unless the Commission or the hearing officer shall otherwise order for 
good cause shown at or before the expiration of such 14-day period.
    (c) Confidentiality of Materials Pending Final Decision. Pending 
the determination of the application for confidential treatment, 
transcripts, non-final orders including an initial decision, if any, 
and other materials in connection with the application shall be placed 
under seal; shall be for the confidential use only of the hearing 
officer, the Commission, the applicant, and any other parties and 
counsel; and shall be made available to the public only in accordance 
with orders of the Commission.
    (d) Public Availability of Orders. Any final order of the 
Commission denying or sustaining an application for confidential 
treatment shall be made public. Any prior findings or opinions relating 
to an application for confidential treatment under this rule shall be 
made public at such time as the material as to which confidentiality 
was requested is made public.
    Comment: Pursuant to the statutory provisions and rules set forth 
in paragraph (a), persons who file a registration statement, report, 
application or other such materials may file an application for 
confidential treatment of required information included in such 
filings. Securities Act Rule 406, 17 CFR 230.406, Exchange Act Rule 
24b-2, 17 CFR 240.24b-2, and Pubic Utility Holding Company Act Rule 
104, 15 CFR 250.104, set forth certain procedures governing application 
for confidential treatment for materials filed under the Securities 
Act, Exchange Act and Public Utility Holding Company Act respectively. 
There are no corresponding rules governing applications for 
confidential treatment under the Investment Company Act or Investment 
Advisers Act, although Investment Company Act Rule 45a-1, 17 CFR 
270.45a-1, sets forth certain procedures governing applications for 
confidential treatment of the names and addresses of dealers of 
registered investment companies.
    Rule 190 is based in part on former Rule 25. The Rule governs 
applications for confidential treatment with respect to information 
required to be filed with the Commission in connection with a 
registration statement, report, application or other such materials. 
Rule 322 applies to requests for a protective order for materials 
introduced at hearings conducted pursuant to these Rules of Practice. 
Thus, both rules address material that would ordinarily be placed in a 
public file but is treated as confidential pending the determination of 
the request for confidentiality. The Commission's Freedom of 
Information Act regulations, 17 CFR 200.83, apply to requests for 
confidential treatment of information, such as testimony in an 
enforcement investigation, that is not ordinarily placed in a public 
file at the time received by the Commission but which may be made 
public pursuant to a request under the Freedom of Information Act 
(``FOIA''). Requests to keep materials confidential under FOIA are not 
evaluated until the Commission [[Page 32755]] receives a request for 
access to the information.
    An application for confidential treatment may be heard by the 
Commission or referred to a hearing officer. Authority to act on 
applications for confidential treatment has been delegated to the 
staff, see, e.g., Delegation to the Director of the Division of 
Corporation Finance, 17 CFR 200.30-1(a)(3). In practice, applications 
are determined by delegated authority. Review of delegated 
decisionmaking may be sought pursuant to Rule 430.
Rule 191. Adjudications Not Required To Be Determined on the Record 
After Notice and Opportunity for Hearing
    (a) Scope of the Rule. This rule applies to every case of 
adjudication, as defined in 5 U.S.C. 551, pursuant to any statute which 
the Commission administers, where adjudication is not required to be 
determined on the record after notice and opportunity for hearing and 
which the Commission has not chosen to determine on the record after 
notice and opportunity for hearing.
    (b) Procedure. In every case of adjudication under paragraph (a) of 
this rule, the Commission shall (1) give prompt notice of any adverse 
action or final disposition to any person who has requested the 
Commission to make (or not to make) any such adjudication, and (2) 
furnish to any such person a written statement of reasons therefor. 
Additional procedures may be specified in rules relating to specific 
types of such adjudications. Where any such rule provides for the 
publication of a Commission order, notice of the action or disposition 
shall be deemed to be given by such publication.
    (c) Contents of the Record. If the Commission provides notice and 
opportunity for the submission of written comments by parties to the 
adjudication or, as the case may be, by other interested persons, 
written comments received on or before the closing date for comments, 
unless accorded confidential treatment pursuant to statute or rule of 
the Commission, become a part of the record of the adjudication. The 
Commission, in its discretion, may accept and include in the record 
written comments filed with the Commission after the closing date.
    Comment: Section 23(c) of the Exchange Act, 15 U.S.C. 78w(c) 
requires the Commission to prescribe the procedures applicable to 
Exchange Act adjudications ``not required to be determined on the 
record after notice and opportunity for hearing.'' Rule 191 contains 
these required procedures and also applies them to adjudications 
arising under all statutes administered by the Commission.
    The Administrative Procedure Act recognizes a distinction between 
an ``adjudication required by statute to be determined on the record 
after opportunity for an agency hearing,'' See 5 U.S.C. 554(a), and 
other types of adjudications. The former are often referred to as 
``formal'' or ``on the record'' adjudications. The latter, such as 
proceedings in which a hearing is required to be conducted after 
``notice and opportunity for hearing,'' but not specifically ``on the 
record,'' are often referred to as ``informal'' adjudications. Various 
Administrative Procedure Act requirements, particularly with respect to 
hearing procedures, apply only to an ``adjudication required by statute 
to be determined on the record after opportunity for an agency hearing 
***'' See, e.g., 5 U.S.C. 556(a), 557(a) (requirements of those 
sections apply only to an adjudication ``on the record'' as set forth 
in Section 554(a)); cf. 5 U.S.C. 555 (requirements not limited to 
proceedings ``on the record'' as set forth in Section 554(a)).
    Where an ``on the record'' hearing is not mandated by statute, this 
rule establishes certain basic requirements for the proceedings. The 
Commission, as a matter of discretion, can order a ``formal'' hearing 
or provide other alternative procedures in addition to the minimum 
requirements of Rule 191.
Rule 192. Rulemaking: Issuance, Amendment and Repeal of Rules of 
General Application
    (a) By Petition. Any person desiring the issuance, amendment or 
repeal of a rule of general application may file a petition therefor 
with the Secretary. Such petition shall include a statement setting 
forth the text or the substance of any proposed rule or amendment 
desired or specifying the rule the repeal of which is desired, and 
stating the nature of his or her interest and his or her reasons for 
seeking the issuance, amendment or repeal of the rule. The Secretary 
shall acknowledge, in writing, receipt of the petition and refer it to 
the appropriate division or office for consideration and 
recommendation. Such recommendations shall be transmitted with the 
petition to the Commission for such action as the Commission deems 
appropriate. The Secretary shall notify the petitioner of the action 
taken by the Commission.
    (b) Notice of Proposed Issuance, Amendment or Repeal of Rules. 
Except where the Commission finds that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest, 
whenever the Commission proposes to issue, amend, or repeal any rule or 
regulation of general application other than an interpretive rule; 
general statement of policy; or rule of agency organization, procedure, 
or practice; or any matter relating to agency management or personnel 
or to public property, loans, grants, benefits, or contracts, there 
shall first be published in the Federal Register a notice of the 
proposed action. Such notice shall include:
    (1) a statement of the time, place, and nature of the rulemaking 
proceeding, with particular reference to the manner in which interested 
persons shall be afforded the opportunity to participate in such 
proceeding;
    (2) reference to the authority under which the rule is proposed; 
and
    (3) the terms or substance of the proposed rule or a description of 
the subjects and issues involved.
Rule 193. Applications by Barred Individuals for Consent to Associate
Preliminary Note
    This rule governs applications to the Commission by certain 
persons, barred by Commission order from association with brokers, 
dealers, municipal securities dealers, government securities brokers, 
government securities dealers, investment advisers, investment 
companies or transfer agents, for consent to become so associated. 
Applications made pursuant to this rule must show that the proposed 
association would be consistent with the public interest. In addition 
to the information specifically required by the rule, applications 
should be supplemented, where appropriate, by written statements of 
individuals (other than the applicant) who are competent to attest to 
the applicant's character, employment performance, and other relevant 
information. Intentional misstatements or omissions of fact may 
constitute criminal violations of 18 U.S.C. 1001 et seq. and other 
provisions of law.
    The nature of the supervision that an applicant will receive or 
exercise as an associated person with a registered entity is an 
important matter bearing upon the public interest. In meeting the 
burden of showing that the proposed association is consistent with the 
public interest, the application and supporting documentation must 
demonstrate that the proposed supervision, procedures, or terms and 
conditions of employment are reasonably designed to prevent a 
recurrence of the conduct that led to imposition of the bar. As an 
associated person, the applicant will be limited to association in a 
specified capacity with [[Page 32756]] a particular registered entity 
and may also be subject to specific terms and conditions.
    Normally, the applicant's burden of demonstrating that the proposed 
association is consistent with the public interest will be difficult to 
meet where the applicant is to be supervised by, or is to supervise, 
another barred individual. In addition, where an applicant wishes to 
become the sole proprietor of a registered entity and thus is seeking 
Commission consent notwithstanding an absence of supervision, the 
applicant's burden will be difficult to meet.
    In addition to the factors set forth in paragraph (d) of this rule, 
the Commission will consider the nature of the findings that resulted 
in the bar when making its determination as to whether the proposed 
association is consistent with the public interest. In this regard, 
attention is directed to Rule 5(e) of the Commission's Rules on 
Informal and Other Procedures, 17 CFR 202.5(e). Among other things, 
Rule 5(e) sets forth the Commission's policy ``not to permit a *** 
respondent [in an administrative proceeding] to consent to *** [an] 
order that imposes a sanction while denying the allegations in the *** 
order for proceedings.'' Consistent with the rationale underlying that 
policy, and in order to avoid the appearance that an application made 
pursuant to this rule was granted on the basis of such denial, the 
Commission will not consider any application that attempts to reargue 
or collaterally attack the findings that resulted in the Commission's 
bar order.
    (a) Scope of Rule. Applications for Commission consent to 
associate, or to change the terms and conditions of association, with a 
registered broker, dealer, municipal securities dealer, government 
securities broker, government securities dealer, investment adviser, 
investment company or transfer agent may be made pursuant to this rule 
where a Commission order bars the individual from association with a 
registered entity and:
    (1) such barred individual seeks to become associated with an 
entity that is not a member of a self-regulatory organization; or
    (2) the order contains a proviso that application may be made to 
the Commission after a specified period of time.
    (b) Form of Application. Each application shall be supported by an 
affidavit, manually signed by the applicant, that addresses the factors 
set forth in paragraph (d) of this rule. One original and three copies 
of the application shall be filed pursuant to Rules 151, 152 and 153. 
Each application shall include as exhibits:
    (1) a copy of the Commission order imposing the bar;
    (2) an undertaking by the applicant to notify immediately the 
Commission in writing if any information submitted in support of the 
application becomes materially false or misleading while the 
application is pending;
    (3) the following forms, as appropriate:
    (i) a copy of a completed Form U-4, where the applicant's proposed 
association is with a broker-dealer or municipal securities dealer;
    (ii) a  copy  of  a  completed  Form MSD-4, where the applicant's 
proposed association is with a bank municipal securities dealer;
    (iii) the information required by Form ADV, 17 CFR 279.1, with 
respect to the applicant, where the applicant's proposed association is 
with an investment adviser;
    (iv) the information required by Form TA-1, 17 CFR 249b.100, with 
respect to the applicant, where the applicant's proposed association is 
with a transfer agent; and
    (4) a written statement by the proposed employer that describes:
    (i) the terms and conditions of employment and supervision to be 
exercised over such applicant and, where applicable, by such applicant;
    (ii) the qualifications, experience, and disciplinary records of 
the proposed supervisor(s) of the applicant;
    (iii) the compliance and disciplinary history, during the two years 
preceding the filing of the application, of the office in which the 
applicant will be employed; and
    (iv) the names of any other associated persons in the same office 
who have previously been barred by the Commission, and whether they are 
to be supervised by the applicant.
    (c) Required Showing. The applicant shall make a showing 
satisfactory to the Commission that the proposed association would be 
consistent with the public interest.
    (d) Factors to be Addressed. The affidavit required by paragraph 
(b) of this rule shall address each of the following:
    (1) the time period since the imposition of the bar;
    (2) any restitution or similar action taken by the applicant to 
recompense any person injured by the misconduct that resulted in the 
bar;
    (3) the applicant's compliance with the order imposing the bar;
    (4) the applicant's employment during the period subsequent to 
imposition of the bar;
    (5) the capacity or position in which the applicant proposes to be 
associated;
    (6) the manner and extent of supervision to be exercised over such 
applicant and, where applicable, by such applicant;
    (7) any relevant courses, seminars, examinations or other actions 
completed by the applicant subsequent to imposition of the bar to 
prepare for his or her return to the securities business; and
    (8) any other information material to the application.
    (e) Notification to Applicant and Written Statement. In the event 
an adverse recommendation is proposed by the staff with respect to an 
application made pursuant to this rule, the applicant shall be so 
advised and provided with a written statement of the reasons for such 
recommendation. The applicant shall then have 30 days to submit a 
written statement in response.
    (f) Concurrent Applications. The Commission will not consider any 
application submitted pursuant to this rule if any other application 
for consent to associate concerning the same applicant is pending 
before any self-regulatory organization.

Initiation of Proceedings and Prehearing Rules

Rule 200. Initiation of Proceedings.
    (a) Order Instituting Proceedings: Notice and Opportunity For 
Hearing.
    (1) Generally. Whenever an order instituting proceedings is issued 
by the Commission, appropriate notice thereof shall be given to each 
party to the proceeding by the Secretary or another duly designated 
officer of the Commission. Each party shall be given notice of any 
hearing within a time reasonable in light of the circumstances, in 
advance of the hearing; provided, however, no prior notice need be 
given to a respondent if the Commission has authorized the Division of 
Enforcement to seek a temporary sanction ex parte.
    (2) Stop Order Proceedings: Additional Persons Entitled to Notice. 
Any notice of a proceeding relating to the issuance of a stop order 
suspending the effectiveness of a registration statement pursuant to 
Section 8(d) of the Securities Act of 1933, 15 U.S.C. 77h(d), shall be 
sent to or served on the issuer; or, in the case of a foreign 
government or political subdivision thereof, sent to or served on the 
underwriter; or, in the case of a foreign or territorial person, sent 
to or served on its duly authorized representative in the United States 
named in the registration statement, properly directed in the case of 
telegraphic notice to the address [[Page 32757]] given in such 
statement. In addition, if such proceeding is commenced within 90 days 
after the registration statement has become effective, notice of the 
proceeding shall be given to the agent for service named on the facing 
sheet of the registration statement and to each other person designated 
on the facing sheet of the registration statement as a person to whom 
copies of communications to such agent are to be sent.
    (b) Content of Order. The order instituting proceedings shall:
    (1) state the nature of any hearing;
    (2) state the legal authority and jurisdiction under which the 
hearing is to be held;
    (3) contain a short and plain statement of the matters of fact and 
law to be considered and determined, unless the order directs an answer 
pursuant to Rule 220 in which case the order shall set forth the 
factual and legal basis alleged therefor in such detail as will permit 
a specific response thereto; and
    (4) state the nature of any relief or action sought or taken.
    (c) Time and Place of Hearing. The time and place for any hearing 
shall be fixed with due regard for the public interest and the 
convenience and necessity of the parties, other participants, or their 
representatives.
    (d) Amendment to Order Instituting Proceedings.
    (1) By the Commission. Upon motion by a party, the Commission may, 
at any time, amend an order instituting proceedings to include new 
matters of fact or law.
    (2) By the Hearing Officer. Upon motion by a party, the hearing 
officer may, at any time prior to the filing of an initial decision or, 
if no initial decision is to be filed, prior to the time fixed for the 
filing of final briefs with the Commission, amend an order instituting 
proceedings to include new matters of fact or law that are within the 
scope of the original order instituting proceedings.
    (e) Publication of Notice of Public Hearings. Unless otherwise 
ordered by the Commission, notice of any public hearing shall be given 
general circulation by release to the public, by publication in the SEC 
News Digest and, where directed, by publication in the Federal 
Register.
    Comment (a): Paragraph (a) requires that appropriate notice of an 
order instituting proceedings be given. Ordinarily, notice is 
accomplished through service of the order pursuant to the procedures 
set forth in Rule 141. Where emergency or expedited action is sought, 
however, notice of a hearing may be given prior to formal service of 
the order instituting proceedings. See Rules 511(a) and 521(a). Notice 
may be delayed if the Commission determines to hear a matter ex parte. 
See Rule 513.
    Comment (c): The provisions of this paragraph are based on Section 
554(b) of the Administrative Procedure Act, 5 U.S.C. Sec. 554(b). It is 
the policy of the Commission that in a proceeding under the Public 
Utility Holding Company Act, the Investment Company Act (except Section 
9(b)), Section 206A of the Investment Advisers Act, Section 8 of the 
Securities Act, or Sections 305 and 307 of the Trust Indenture Act or 
any proceeding in which a temporary sanction is sought, the hearing 
should normally be held at the Commission's Headquarters.
    Comment (d): The Commission has stated that amendment of orders 
instituting proceeding should be freely granted, subject only to the 
consideration that other parties should not be surprised, nor their 
rights prejudiced. Carl L. Shipley, 45 S.E.C. 589, 595 (1974). Where 
amendments to an order instituting proceedings are intended to correct 
an error, to conform the order to the evidence or to take into account 
subsequent developments which should be considered in disposing of the 
proceeding, and the amendments are within the scope of the original 
order, either a hearing officer or the Commission has authority to 
amend the order. See, e.g., Don A. Long, Admin. Proc. Rulings Release 
No. 233 (Mar. 31, 1980), 52 SEC Docket 497 (Aug. 18, 1992) (hearing 
officer's grant of motion to conform pleading to evidence adduced at 
hearing). Since, however, the Commission has not delegated its 
authority to authorize orders instituting proceedings, hearing officers 
do not have authority to initiate new charges or to expand the scope of 
matters set down for hearing beyond the framework of the original order 
instituting proceedings. See Securities Act Release No. 5309 (Sept. 27, 
1972).
    Revision Comment (c): Comment was requested as to the Commission's 
practice with respect to holding hearings in multiple cities, in 
locations outside Washington, or in locations other than those where 
the Commission maintains Regional Offices. Commenters supported the 
current practice. The Commission has determined not to change the 
substance of the rule. The statement of policy in former Rule 6(b) that 
certain specified hearings would normally be held in Washington, D.C. 
has been moved into a comment to Rule 200. The policy statement 
contained in the comment has been modified to reflect that the hearing 
location should normally be at the Commission's Headquarters, and that 
hearings as to whether a temporary sanction will be imposed are covered 
by the policy.
Rule 201. Consolidation of Proceedings
    By order of the Commission or a hearing officer, proceedings 
involving a common question of law or fact may be consolidated for 
hearing of any or all the matters at issue in such proceedings. The 
Commission or the hearing officer may make such orders concerning the 
conduct of such proceedings as it deems appropriate to avoid 
unnecessary cost or delay. Consolidation shall not prejudice any rights 
under these Rules of Practice and shall not affect the right of any 
party to raise issues that could have been raised if consolidation had 
not occurred. For purposes of this rule, no distinction is made between 
joinder and consolidation of proceedings.
    Comment: Rule 201 is modeled after Model Adjudication Rule 201, 
Administrative Conference of the United States (Dec. 1993).
    Revision Comment: Former Rule 10 provided that proceedings could be 
``joined'' and ``consolidated.'' Rule 201 does not draw a distinction 
between joinder and consolidation.
    One commenter suggested that the Commission should refrain from 
making decisions on whether to consolidate proceedings in order to 
avoid the appearance that in deciding the consolidation issue the 
Commission had reached an opinion as to the merits of a case. Just as 
judges make preliminary decisions regarding joinder, consolidation, 
evidentiary motions and other matters without losing either their 
objectivity or the appearance of objectivity, so the Commission or a 
hearing officer must decide matters preliminary to a final decision. 
There is neither a loss of objectivity nor an appearance of less 
objectivity from doing so. Although the Commission does not agree with 
the rationale provided by the commenter, the rule as adopted permits 
the decision on consolidation to be made by a hearing officer because 
it may be more efficient to have a hearing officer issue a decision on 
consolidation.
    The commenter also suggested that consolidation should be permitted 
only if consolidation tends to avoid unnecessary cost or delay as under 
former Rule 10. Rule 201 as revised includes a standard substantially 
similar to that of former Rule 10.
Rule 202. Specification of Procedures by Parties in Certain Proceedings
    (a) Motion to Specify Procedures. In any proceeding other than an 
enforcement or disciplinary proceeding [[Page 32758]] or a proceeding 
to review a determination by a self-regulatory organization pursuant to 
Rules 420 and 421, a party may, at any time up to 20 days prior to the 
start of a hearing, make a motion to specify the procedures necessary 
or appropriate for the proceeding, with particular reference to:
    (1) whether there should be an initial decision by a hearing 
officer;
    (2) whether any interested division of the Commission may assist in 
the preparation of the Commission's decision; and
    (3) whether there should be a 30-day waiting period between the 
issuance of the Commission's order and the date it is to become 
effective.
    (b) Objections; Effect of Failure to Object. Any other party may 
object to the procedures so specified, and such party may specify such 
additional procedures as it considers necessary or appropriate. In the 
absence of such objection or such specification of additional 
procedures, such other party may be deemed to have waived objection to 
the specified procedures.
    (c) Approval Required. Any proposal pursuant to paragraph (a) of 
this rule, even if not objected to by any party, shall be subject to 
the written approval of the hearing officer.
    (d) Procedure Upon Agreement to Waive an Initial Decision. If an 
initial decision is waived pursuant to paragraph (a) of this rule, the 
hearing officer shall notify the Secretary and, unless the Commission 
directs otherwise within 14 days, no initial decision shall be issued.
    Comment: Allowing for the specification of procedures by the 
parties under the supervision of a hearing officer has been effective 
in promoting efficiency in certain proceedings involving regulatory 
matters. By contrast, in an enforcement or disciplinary proceeding in 
which the government is seeking to impose sanctions on particular 
persons, or on review of a determination by a self-regulatory 
organization, it is not in the public interest to subject basic 
procedures to negotiation by the parties. Accordingly, Rule 202 
excludes enforcement, disciplinary, and self-regulatory organization 
review proceedings from its scope.
    Consistent with the operation of Rule 221, the Rule requires 
motions to specify procedures to be made at least 20 days prior to a 
hearing. As a result, any such motions may be timely answered and 
resolved prior to the final prehearing conference.
Rule 210. Parties, Limited Participants and Amici Curiae
    (a) Parties in an Enforcement or Disciplinary Proceeding or a 
Proceeding to Review a Self-Regulatory Organization Determination.
    (1) Generally. No person shall be granted leave to become a party 
or a non-party participant on a limited basis in an enforcement or 
disciplinary proceeding or a proceeding to review a determination by a 
self-regulatory organization pursuant to Rules 420 and 421.
    (2) Disgorgement Proceedings. In an enforcement proceeding, a 
person may state his or her views with respect to a proposed plan of 
disgorgement or file a proof of claim pursuant to Rule 612.
    (b) Intervention as a Party.
    (1) Generally. In any proceeding, other than an enforcement 
proceeding, a disciplinary proceeding or a proceeding to review a self-
regulatory organization determination, any person may seek leave to 
intervene as a party by filing a motion setting forth the person's 
interest in the proceeding. No person, however, shall be admitted as a 
party to a proceeding by intervention unless it is determined that 
leave to participate pursuant to paragraph (c) of this rule would be 
inadequate for the protection of his or her interests.
    (i) In a proceeding under the Public Utility Holding Company Act of 
1935, any representative of interested consumers or security holders, 
or any other person whose participation in the proceeding may be in the 
public interest or for the protection of investors or consumers, may be 
admitted as a party upon the filing of a written motion setting forth 
the person's interest in the proceeding.
    (ii) In a proceeding under the Investment Company Act of 1940, any 
representative of interested security holders, or any other person 
whose participation in the proceeding may be in the public interest or 
for the protection of investors, may be admitted as a party upon the 
filing of a written motion setting forth the person's interest in the 
proceeding.
    (2) Intervention as of Right.
    (i) In proceedings under the Public Utility Holding Company Act of 
1935, any interested representative, agency, authority or 
instrumentality of the United States or any interested State, State 
commission, municipality or other political subdivision of a state 
shall be admitted as a party to any proceeding upon the filing of a 
written motion requesting leave to be admitted.
    (ii) In proceedings under the Investment Company Act of 1940, any 
interested State or State agency shall be admitted as a party to any 
proceeding upon the filing of a written motion requesting leave to be 
admitted.
    (c) Leave to Participate On a Limited Basis. In any proceeding, 
other than an enforcement proceeding, a disciplinary proceeding or a 
proceeding to review a self-regulatory organization determination, any 
person may seek leave to participate on a limited basis as a non-party 
participant as to any matter affecting the person's interests.
    (1) Procedure. Motions for leave to participate shall be in 
writing, shall set forth the nature and extent of the movant's interest 
in the proceeding, and, except where good cause for late filing is 
shown, shall be filed not later than 20 days prior to the date fixed 
for the commencement of the hearing. Leave to participate pursuant to 
this paragraph (c) may include such rights of a party as the hearing 
officer may deem appropriate. Persons granted leave to participate 
shall be served in accordance with Rule 150; provided, however, that a 
party to the proceeding may move that the extent of notice of filings 
or other papers to be provided to persons granted leave to participate 
be limited, or may move that the persons granted leave to participate 
bear the cost of being provided copies of any or all filings or other 
papers. Persons granted leave to participate shall be bound, except as 
may be otherwise determined by the hearing officer, by any stipulation 
between the parties to the proceeding with respect to procedure, 
including submission of evidence, substitution of exhibits, corrections 
of the record, the time within which briefs or exceptions may be filed 
or proposed findings and conclusions may be submitted, the filing of 
initial decisions, the procedure to be followed in the preparation of 
decisions and the effective date of the Commission's order in the case. 
Where the filing of briefs or exceptions or the submission of proposed 
findings and conclusions are waived by the parties to the proceedings, 
a person granted leave to participate pursuant to this paragraph (c) 
shall not be permitted to file a brief or exceptions or submit proposed 
findings and conclusions except by leave of the Commission or of the 
hearing officer.
    (2) Certain Persons Entitled to Leave to Participate. The hearing 
officer is directed to grant leave to participate under this paragraph 
(c) to any person to whom it is proposed to issue any security in 
exchange for one or more bona fide outstanding securities, claims or 
property interests, or partly in such exchange and partly for cash, 
where the Commission is authorized to approve [[Page 32759]] the terms 
and conditions of such issuance and exchange after a hearing upon the 
fairness of such terms and conditions.
    (d) Amicus Participation.
    (1) Availability. An amicus brief may be filed only if:
    (i) a motion for leave to file the brief has been granted;
    (ii) the brief is accompanied by written consent of all parties;
    (iii) the brief is filed at the request of the Commission or the 
hearing officer; or
    (iv) the brief is presented by the United States or an officer or 
agency thereof, or by a State, Territory or Commonwealth.
    (2) Procedure. An amicus brief may be filed conditionally with the 
motion for leave. The motion for leave shall identify the interest of 
the movant and shall state the reasons why a brief of an amicus curiae 
is desirable. Except as all parties otherwise consent, any amicus 
curiae shall file its brief within the time allowed the party whose 
position the amicus will support, unless the Commission or hearing 
officer, for cause shown, grants leave for a later filing. In the event 
that a later filing is allowed, the order granting leave to file shall 
specify when an opposing party may reply to the brief. A motion of an 
amicus curiae to participate in oral argument will be granted only for 
extraordinary reasons.
    (e) Permission to State Views. Any person may make a motion seeking 
leave to file a memorandum or make an oral statement of his or her 
views. Any such communication may be included in the record; provided, 
however, that unless offered and admitted as evidence of the truth of 
the statements therein made, any assertions of fact submitted pursuant 
to the provisions of this paragraph (e) will be considered only to the 
extent that the statements therein made are otherwise supported by the 
record.
    (f) Modification of Participation Provisions. The Commission or the 
hearing officer may, by order, modify the provisions of this rule which 
would otherwise be applicable, and may impose such terms and conditions 
on the participation of any person in any proceeding as it may deem 
necessary or appropriate in the public interest.
    Comment (b): Paragraph (b) reflects requirements of Section 19 of 
the Public Utility Holding Company Act of 1935, 15 U.S.C. Sec. 79s, and 
Section 40(c) of the Investment Company Act of 1940, 15 U.S.C. 
Sec. 80a-39(c).
    Comment (c): Through leave to participate on a limited basis, this 
rule provides an interested person the opportunity to express concerns 
relating to any matter affecting the person's interests. Unlike the 
consent to submission by an amicus, written consent of all parties is 
not sufficient to obtain status as a limited participant. Approval from 
the hearing officer is required.
    By their terms, certain rules within the Rules of Practice apply to 
the rights and responsibilities of ``parties.'' When non-party 
participants are admitted, the order granting leave to participate may 
specify the extent to which they are to have the obligations or rights 
of a party under the Rules. Depending on the extent of the 
participant's interest and the facts of each case, the degree of 
participation will vary. See, e.g., In the Matter of College Retirement 
Equities Fund, Admin. Proc. Rulings Release No. 288 (Feb. 11, 1988), 52 
SEC Docket 448 (Aug. 18, 1992) (order scheduling prehearing conference 
to discuss inter alia procedures to limit duplicative cross-examination 
of witnesses without diminishing the opportunity for full cross-
examination by participants).
    In an enforcement or disciplinary proceeding, or a proceeding to 
review a self-regulatory organization determination, the only persons 
who may be parties are those specified by the Commission in the order 
instituting proceedings. Status as a limited, non-party participant 
pursuant to paragraph (c) is not allowed. A person may seek to 
participate in such proceedings as an amicus, pursuant to paragraph 
(d), or, if that person has knowledge of specific facts relevant to the 
proceeding, as a witness. In addition, pursuant to Rule 612, persons 
desiring to comment on a proposed plan of disgorgement will have an 
opportunity to submit their written views to the Commission and, as 
appropriate under the plan, to file a claim against the disgorgement 
pool.
    Paragraph (c)(2) reflects the requirements of Section 3(a)(10) of 
the Securities Act of 1933, 15 U.S.C. Sec. 77c(a)(10).
    Comment (d): The provisions for amicus participation are based on 
Rule 29 of the Federal Rules of Appellate Procedure. Amicus 
participation contemplates the limited action of filing a brief setting 
forth the filer's views on particular legal or policy issues in the 
proceeding.
    Comment (e): This paragraph allows for the submission of a 
statement of views with less formality than that required for an amicus 
brief or for participation on an ongoing basis as a non-party. From 
time to time persons, particularly individual security holders or 
members of the public, who do not otherwise wish to participate in a 
proceeding on any extended basis will seek to make written statements 
of their views in a letter or by appearing at a hearing. The factual 
assertions in such letters or statements will be considered only to the 
extent that the statements therein made are otherwise supported by the 
record.
    Revision Comment (d): One commenter suggested that the consent of 
the Division of Enforcement should not be required for the filing of an 
amicus brief on behalf of a respondent in an enforcement proceeding. 
The Commission or a hearing officer can more fairly and more adequately 
assess the benefits of a proposed amicus filing if the Division of 
Enforcement or any other party with views on the proposal may set forth 
its objections on the record. Accordingly, the Commission decided not 
to make the suggested rule change.
Rule 220. Answer to Allegations
    (a) When Required. In its order instituting proceedings, the 
Commission may require any party to file an answer to each of the 
allegations contained therein. Even if not so ordered, any party in any 
proceeding may elect to file an answer. Any other person granted leave 
by the Commission or the hearing officer to participate on a limited 
basis in such proceedings pursuant to Rule 210(c) may be required to 
file an answer.
    (b) When to File. Except where a different period is provided by 
rule or by order, a party required to file an answer as provided in 
paragraph (a) of this rule shall do so within 20 days after service 
upon the party of the order instituting proceedings. Persons granted 
leave to participate on a limited basis in the proceeding pursuant to 
Rule 210(c) may file an answer within a reasonable time, as determined 
by the Commission or the hearing officer. If the order instituting 
proceedings is amended, the Commission or the hearing officer may 
require that an amended answer be filed and, if such an answer is 
required, shall specify a date for the filing thereof.
    (c) Contents; Effect of Failure to Deny. Unless otherwise directed 
by the hearing officer or the Commission, an answer shall specifically 
admit, deny, or state that the party does not have, and is unable to 
obtain, sufficient information to admit or deny each allegation in the 
order instituting proceedings. When a party intends in good faith to 
deny only a part of an allegation, the party shall specify so much of 
it as is true and shall deny only the remainder. A statement of a lack 
of information shall have the effect of a denial. A defense of res 
judicata, statute [[Page 32760]] of limitations or any other matter 
constituting an affirmative defense shall be asserted in the answer. 
Any allegation not denied shall be deemed admitted.
    (d) Motion for More Definite Statement. A party may file with an 
answer a motion for a more definite statement of specified matters of 
fact or law to be considered or determined. Such motion shall state the 
respects in which, and the reasons why, each such matter of fact or law 
should be required to be made more definite. If the motion is granted, 
the order granting such motion shall set the periods for filing such a 
statement and any answer thereto.
    (e) Amendments. A party may amend its answer at any time by written 
consent of each adverse party or with leave of the Commission or the 
hearing officer. Leave shall be freely granted when justice so 
requires.
    (f) Failure to File Answer: Default. If a party respondent fails to 
file an answer required by this rule within the time provided, such 
person may be deemed in default pursuant to Rule 155(a). A party may 
make a motion to set aside a default pursuant to Rule 155(b).
    Comment (b): The time allowed to file an answer, 20 days, conforms 
to the time for answers under Rule 12 of the Federal Rules of Civil 
Procedure.
    Revision Comment (c): The provision relating to the filing of 
affirmative defenses is based on Rule 8(c) of the Federal Rules of 
Civil Procedure. The change is intended to improve efficiency and 
fairness by clarifying issues at an early stage of the proceeding that 
may affect the timing, duration or necessity for a hearing.
    Revision Comment (e): Proposed Rule 9(b) provided for amendment of 
an answer only when ordered by the Commission or a hearing officer. As 
adopted, Rule 220(e) allows amendment of an answer by consent of all 
parties or by leave of the Commission or hearing officer. Amendment of 
an answer may increase efficiency and fairness by sharpening the issues 
in dispute. Moreover, the provisions for a summary disposition prior to 
hearing pursuant to Rule 250 increase the importance of the answer. The 
modification to the rule is in accordance with Rule 15 of the Federal 
Rules of Civil Procedure. No provision is made, however, for allowing a 
period for an amendment as of right, because a meaningful period for 
exercise of such a right, such as the 20-day period provided under the 
Federal Rules of Civil Procedure, is inconsistent with the prompt start 
of the hearing. See, e.g., Exchange Act Sec. 21C(b), 15 U.S.C. 78u-3(b) 
(cease-and-desist proceedings to begin no later than 60 days after 
institution, other than with consent of respondent).
Rule 221. Prehearing Conferences
    (a) Purposes of Conferences. The purposes of prehearing conferences 
include, but are not limited to:
    (1) expediting the disposition of the proceeding;
    (2) establishing early and continuing control of the proceeding by 
the hearing officer; and
    (3) improving the quality of the hearing through more thorough 
preparation.
    (b) Procedure. On his or her own motion or at the request of a 
party, the hearing officer may, in his or her discretion, direct 
counsel or any party to meet for an initial, final or other prehearing 
conference. Such conferences may be held with or without the hearing 
officer present as the hearing officer deems appropriate. Where such a 
conference is held outside the presence of the hearing officer, the 
hearing officer shall be advised promptly by the parties of any 
agreements reached. Such conferences also may be held with one or more 
persons participating by telephone or other remote means.
    (c) Subjects to be Discussed. At a prehearing conference 
consideration may be given and action taken with respect to any and all 
of the following:
    (1) simplification and clarification of the issues;
    (2) exchange of witness and exhibit lists and copies of exhibits;
    (3) stipulations, admissions of fact, and stipulations concerning 
the contents, authenticity, or admissibility into evidence of 
documents;
    (4) matters of which official notice may be taken;
    (5) the schedule for exchanging prehearing motions or briefs, if 
any;
    (6) the method of service for papers other than Commission orders;
    (7) summary disposition of any or all issues;
    (8) settlement of any or all issues;
    (9) determination of hearing dates;
    (10) amendments to the order instituting proceedings or answers 
thereto;
    (11) production of documents as set forth in Rule 230, and 
prehearing production of documents in response to subpoenas duces tecum 
as set forth in Rule 232;
    (12) specification of procedures as set forth in Rule 202; and
    (13) such other matters as may aid in the orderly and expeditious 
disposition of the proceeding.
    (d) Required Prehearing Conferences. Except where the emergency 
nature of a proceeding would make a prehearing conference clearly 
inappropriate, both an initial and a final prehearing conference should 
be held. Unless ordered otherwise, an initial prehearing conference 
shall be held within 14 days of the service of an answer, or if no 
answer is required, within 14 days of service of the order instituting 
proceedings. A final conference shall be held as close to the start of 
the hearing as reasonable under the circumstances.
    (e) Prehearing Orders. At or following the conclusion of any 
conference held pursuant to this rule, the hearing officer shall enter 
a ruling or order which recites the agreements reached and any 
procedural determinations made by the hearing officer.
    (f) Failure to Appear: Default. Any person who is named in an order 
instituting proceedings as a person against whom findings may be made 
or sanctions imposed and who fails to appear, in person or through a 
representative, at a prehearing conference of which he or she has been 
duly notified may be deemed in default pursuant to Rule 155(a). A party 
may make a motion to set aside a default pursuant to Rule 155(b).
    Comment (a): Rule 221 is modeled on Rule 16 of the Federal Rules of 
Civil Procedure. When properly managed, prehearing conferences can 
eliminate unnecessary delay and improve the quality of justice by 
sharpening the preparation of cases, facilitating the prehearing 
exchange of documents, and promoting settlements in appropriate cases.
    Comment (d): Unless ordered otherwise, the initial prehearing 
conference will be held within 14 days after a respondent files an 
answer. Pursuant to Rule 230(d), the Division of Enforcement is 
required to commence making documents available to a respondent for 
inspection and copying in an enforcement or disciplinary proceeding no 
later than 14 days after the respondent files an answer. Consequently, 
the initial prehearing conference can be used to address any pending 
issues related to the availability of documents for inspection and 
copying, and thereafter the respondent should ordinarily have access to 
such documents.
    Revision Comment (c): Paragraph (c)(6) was added to bring to the 
attention of the participants that they may agree among themselves to 
procedures for the service of papers by facsimile. See Rule 150(c)(4).
    Revision Comment (d): Under the proposed rule, no initial 
prehearing [[Page 32761]] conference was required. In accordance with 
comments received, the revised rule requires both an initial and a 
final prehearing conference, except where the emergency nature of a 
proceeding would make a prehearing conference clearly inappropriate.
Rule 222. Prehearing Submissions
    (a) Submissions Generally. The hearing officer, on his or her own 
motion, or at the request of a party or other participant, may order 
any party, including the interested division, to furnish such 
information as deemed appropriate, including any or all of the 
following:
    (1) an outline or narrative summary of its case or defense;
    (2) the legal theories upon which it will rely;
    (3) copies and a list of documents that it intends to introduce at 
the hearing; and
    (4) a list of witnesses who will testify on its behalf, including 
the witnesses' names, occupations, addresses and a brief summary of 
their expected testimony.
    (b) Expert Witnesses. Each party who intends to call an expert 
witness shall submit, in addition to the information required by 
paragraph (a)(4) of this rule, a statement of the expert's 
qualifications, a listing of other proceedings in which the expert has 
given expert testimony, and a list of publications authored or co-
authored by the expert.
Rule 230. Enforcement and Disciplinary Proceedings: Availability of 
Documents for Inspection and Copying
    For purposes of this rule, the term documents shall include 
writings, drawings, graphs, charts, photographs, recordings and other 
data compilations, including data stored by computer, from which 
information can be obtained.
    (a) Documents to be Available for Inspection and Copying.
    (1) Unless otherwise provided by this rule, or by order of the 
Commission or the hearing officer, the Division of Enforcement shall 
make available for inspection and copying by any party documents 
obtained by the Division prior to the institution of proceedings, in 
connection with the investigation leading to the Division's 
recommendation to institute proceedings. Such documents shall include:
    (i) each subpoena issued;
    (ii) every other written request to persons not employed by the 
Commission to provide documents or to be interviewed;
    (iii) the documents turned over in response to any such subpoenas 
or other written requests;
    (iv) all transcripts and transcript exhibits;
    (v) any other documents obtained from persons not employed by the 
Commission; and
    (vi) any final examination or inspection reports prepared by the 
Division of Market Regulation or the Division of Investment Management.
    (2) Nothing in this paragraph (a) shall limit the right of the 
Division to make available any other document, or shall limit the right 
of a respondent to seek access to or production pursuant to subpoena of 
any other document, or shall limit the authority of the hearing officer 
to order the production of any document pursuant to subpoena.
    (b) Documents That May Be Withheld.
    (1) The Division of Enforcement may withhold a document if:
    (i) the document is privileged;
    (ii) the document is an internal memorandum, note or writing 
prepared by a Commission employee, other than an examination or 
inspection report as specified in paragraph (a)(1)(vi) of this rule, or 
is otherwise attorney work product and will not be offered in evidence;
    (iii) the document would disclose the identity of a confidential 
source; or
    (iv) the hearing officer grants leave to withhold a document or 
category of documents as not relevant to the subject matter of the 
proceeding or otherwise, for good cause shown.
    (2) Nothing in this paragraph (b) authorizes the Division of 
Enforcement in connection with an enforcement or disciplinary 
proceeding to withhold, contrary to the doctrine of Brady v. Maryland, 
373 U.S. 83, 87 (1963), documents that contain material exculpatory 
evidence.
    (c) Withheld Document List. The hearing officer may require the 
Division of Enforcement to submit for review a list of documents 
withheld pursuant to paragraphs (b)(1)-(b)(4) of this rule or to submit 
any document withheld, and may determine whether any such document 
should be made available for inspection and copying.
    (d) Timing of Inspection and Copying. Unless otherwise ordered by 
the Commission or the hearing officer, the Division of Enforcement 
shall commence making documents available to a respondent for 
inspection and copying pursuant to this rule no later than 14 days 
after the respondent files an answer. In a proceeding in which a 
temporary cease-and-desist order is sought pursuant to Rule 510 or a 
temporary suspension of registration is sought pursuant to Rule 520, 
documents shall be made available no later than the day after service 
of the decision as to whether to issue a temporary cease-and-desist 
order or temporary suspension order.
    (e) Place of Inspection and Copying. Documents subject to 
inspection and copying pursuant to this rule shall be made available to 
the respondent for inspection and copying at the Commission office 
where they are ordinarily maintained, or at such other place as the 
parties, in writing, may agree. A respondent shall not be given custody 
of the documents or leave to remove the documents from the Commission's 
offices pursuant to the requirements of this rule other than by written 
agreement of the Division of Enforcement. Such agreement shall specify 
the documents subject to the agreement, the date they shall be returned 
and such other terms or conditions as are appropriate to provide for 
the safekeeping of the documents.
    (f) Copying Costs and Procedures. The respondent may obtain a 
photocopy of any documents made available for inspection. The 
respondent shall be responsible for the cost of photocopying. Unless 
otherwise ordered, charges for copies made by the Division of 
Enforcement at the request of the respondent will be at the rate 
charged pursuant to the fee schedule at 17 CFR 200.80e for copies. The 
respondent shall be given access to the documents at the Commission's 
offices or such other place as the parties may agree during normal 
business hours for copying of documents at the respondent's expense.
    (g) Issuance of Investigatory Subpoenas After Institution of 
Proceedings. The Division of Enforcement shall promptly inform the 
hearing officer and each party if investigatory subpoenas are issued 
under the same investigation file number or pursuant to the same order 
directing private investigation (``formal order'') under which the 
investigation leading to the institution of proceedings was conducted. 
The hearing officer shall order such steps as necessary and appropriate 
to assure that the issuance of investigatory subpoenas after the 
institution of proceedings is not for the purpose of obtaining evidence 
relevant to the proceedings and that any relevant documents that may be 
obtained through the use of investigatory subpoenas in a continuing 
investigation are made available to each respondent for inspection and 
copying on a timely basis.
    (h) Failure to Make Documents Available--Harmless Error. In the 
event [[Page 32762]] that a document required to be made available to a 
respondent pursuant to this rule is not made available by the Division 
of Enforcement, no rehearing or redecision of a proceeding already 
heard or decided shall be required, unless the respondent shall 
establish that the failure to make the document available was not a 
harmless error.
    Comment (a): A respondent's right to inspect and copy documents 
under this rule is automatic; the respondent does not need to make a 
formal request for access through the hearing officer. Generally, the 
rule requires that the Division of Enforcement make available for 
inspection and copying documents obtained by the Division from persons 
not employed by the Commission during the course of its investigation 
prior to the institution of proceedings. Except for final inspection or 
examination reports prepared by the Division of Market Regulation or 
the Division of Investment Management, documents prepared by Commission 
staff are treated as attorney work product, and do not have to be made 
available pursuant to this rule.
    Rule 230 is not the exclusive means by which a respondent may 
obtain access to or production of documents. Production of documents 
prepared by the staff may be required under the doctrine of Brady v. 
Maryland, 373 U.S. 83 (1963), or pursuant to Jencks Act requirements 
made applicable to the Commission pursuant to Rule 231, or may be 
sought by subpoena pursuant to Rule 232 or through other procedures. 
See, e.g., Freedom of Information Act, 5 U.S.C. 552.
    The Rule states that the Division of Enforcement shall (1) make 
available for inspection and copying (2) documents (3) obtained by the 
Division (4) in connection with the investigation leading to the 
institution of proceedings.
    (1) The Division of Enforcement is required to make documents 
available for inspection and copying. It is not required to produce a 
copy of the documents to each respondent. The definition of documents 
is based in part on Federal Rule of Civil Procedure 34.
    (2) The definition of the term ``documents'' in paragraph (a) is 
modeled on the definition of documents in Rule 34 of the Federal Rules 
of Civil Procedure.
    (3) The Division of Enforcement's obligation under this rule 
relates to documents obtained by the Division of Enforcement. Documents 
located only in the files of other divisions or offices are beyond the 
scope of the rule.
    (4) The ``investigation leading to the Division's recommendation to 
institute proceedings'' ordinarily is delineated by the investigation 
number or numbers under which requests for documents, testimony or 
other information were made. When an investigation is initiated by the 
Division of Enforcement it is assigned a number, often referred to as 
the ``case'' or ``investigation'' number. Each request for documents, 
testimony or other information from persons not employed by the 
Commission specifies the investigation or preliminary investigation 
number to which it relates. In turn, each written recommendation by the 
Division of Enforcement to institute proceedings identifies on its 
cover page, by investigation number, the source investigation or 
investigations to which it relates. Accordingly, the identity and 
content of the appropriate investigation file or files from which 
documents must be made available can be based on objective criteria.
    Comment (b): Under paragraph (b), the Division can withhold 
documents under four exceptions. Exception (1) shields information 
subject to a claim of privilege. Exception (2) protects as attorney 
work product internal documents prepared by Commission employees, which 
will not be offered in evidence. Work product includes any notes, 
working papers, memoranda or other similar materials, prepared by an 
attorney in anticipation of litigation. See Hickman v. Taylor, 329 U.S. 
495 (1947); see also Fed. R. Civ. P. 26(b)(3) and (b)(5). Accountants, 
paralegals and investigators who work on an investigation do so at the 
direction of the director, an associate director, an associate regional 
administrator or another supervisory attorney, and their work product 
is therefore shielded by the rule. An examination or inspection report 
prepared by the Division of Market Regulation or the Division of 
Investment Management is not prepared in anticipation of litigation, 
and is therefore explicitly excluded from the materials that may be 
withheld. A respondent's claim that work product should be turned over 
will necessarily be evaluated on a case-by-case basis.
    Exception (3) protects the identity of a confidential source. See 5 
U.S.C. 552(b)(7)(C) and (D). Exception (4) protects any other document 
or category of documents that the hearing officer determines may be 
withheld as not relevant to the subject matter of the proceeding, or 
otherwise for good cause shown. This exception provides a mechanism to 
address a situation where a single investigation involves a discrete 
segment or segments that are related only indirectly, or not at all, to 
the recommendations ultimately made to the Commission with respect to 
the particular respondents in a specific proceeding. To require that 
documents not relevant to the subject matter of the proceeding be made 
available, simply because they were obtained as part of a broad 
investigation, burdens the respondent as well as the Division of 
Enforcement with unnecessary costs and delay.
    For example, a single investigation may encompass inquiry into an 
issuer's allegedly false accounting disclosure and an unrelated 
manipulation of the issuer's securities by a third party. If the 
recommendation to the Commission and resulting administrative 
proceeding involve only the accounting disclosures, the Division could 
seek leave to withhold trading records, transcripts and other documents 
related to the manipulation investigation.
    Comment (c): The hearing officer may, in his or her discretion, 
override any exception claimed by the Division and order the Division 
to produce withheld items.
    Comment (g): In some circumstances, for example, where a temporary 
cease-and-desist order is sought, or where a single formal order is 
being used to investigate several distinct areas of potential 
violations, proceedings may be instituted prior to the end of all 
investigative activities. To allow the hearing officer to take 
appropriate steps to assure that investigative subpoenas are not used 
for the purpose of gathering information for use in the proceeding, 
paragraph (g) requires the Division of Enforcement to notify the 
hearing officer and each party if the Division is continuing to issue 
investigative subpoenas under the same investigation file number or 
order directing private investigation (``formal order'') used in the 
investigation leading to the institution of proceedings.
    Revision Comment: As stated in the proposing release, the intent of 
the Rule is to codify existing staff practice with respect to 
voluntarily making available documents for inspection or copying. See 
Comments to proposed Rules 20 and 21, 58 FR 61750-51 (Nov. 22, 1993). 
The staff practice reflected an informal policy of the Division of 
Enforcement staff in the Headquarters Office and certain Regional 
Offices to make available to respondents major portions of the 
Division's investigation file. The policy evolved over many years and 
was implemented differently by different offices. Rule 230 seeks to 
respond to the criticism of commenters without establishing document 
production requirements, suggested by several commenters, that are not 
a part of existing practice.
    Proposed Rule 20 would have required the production of ``all 
[[Page 32763]] documents, including transcripts of testimony, relevant 
to any allegation in the order instituting proceedings'' and excepted 
from production various documents including those ``obtained during the 
course of a pending nonpublic investigation, unless the documents will 
be relied upon by the interested division during the course of the 
hearing.'' One commenter suggested that the scope of required 
production was too narrow and ill defined, thereby providing too much 
discretion to the Division of Enforcement staff to determine whether a 
document was relevant. For example, it was suggested that a respondent 
should be entitled to information relevant to the scope of requested 
relief as well as allegations of liability. Moreover, the commenter 
explained, the exception for documents from pending investigations 
could negate the requirement to produce if the investigation that led 
to an enforcement proceeding is still continuing with respect to other 
persons or activities.
    With exceptions for documents that are privileged, work product, or 
would reveal a confidential source, the revised rule requires that 
documents obtained from persons outside the Commission as part of the 
investigation leading to institution of proceedings be made available 
for inspection and copying. In addition, the Division of Enforcement 
may seek leave of the hearing officer to withhold other documents. The 
rule no longer calls upon the Division of Enforcement staff to make 
relevancy determinations.
    As proposed, Rule 20 would have allowed the Division to withhold 
documents ``obtained during the course of a pending nonpublic 
investigation, unless the documents will be relied upon by the 
interested division during the course of the hearing.'' This provision 
was intended to address the possibility, particularly where a temporary 
cease-and-desist order was sought, that the investigation that led to 
proceedings was continuing as to other persons or events after the 
institution of proceedings. As revised, Rule 230 provides that the 
Division of Enforcement shall promptly inform the hearing officer and 
each party if investigatory subpoenas are issued under the same 
investigation file number or pursuant to the same formal order under 
which the investigation leading to the recommendation to institute 
proceedings was conducted. The hearing officer will then order such 
steps as are necessary and appropriate with regard to documents 
obtained in the ongoing investigation.
    In order to provide for the safekeeping of documents subject to 
inspection, and to control costs associated with implementation of the 
rule, the revised rule provides that documents shall be made available 
for inspection and copying at the Commission office where they are 
ordinarily maintained, or at such other place as the parties may agree. 
The Commission considered alternatives raised by commenters. None 
appear more likely to result in prompt access to documents obtained by 
the Division of Enforcement that are the basis of the Division's 
allegations.
Rule 231. Enforcement and Disciplinary Proceedings: Production of 
Witness Statements
    (a) Availability. Any respondent in an enforcement or disciplinary 
proceeding may move that the Division of Enforcement produce for 
inspection and copying any statement of any person called or to be 
called as a witness by the division that pertains, or is expected to 
pertain, to his or her direct testimony and that would be required to 
be produced pursuant to the Jencks Act, 18 U.S.C. 3500. Such production 
shall be made at a time and place fixed by the hearing officer and 
shall be made available to any party, provided, however, that the 
production shall be made under conditions intended to preserve the 
items to be inspected or copied.
    (b) Failure to Produce--Harmless Error. In the event that a 
statement required to be made available for inspection and copying by a 
respondent is not turned over by the Division of Enforcement, no 
rehearing or redecision of a proceeding already heard or decided shall 
be required unless the respondent establishes that the failure to turn 
over the statement was not harmless error.
    Comment: Prior statements by witnesses memorialized in transcripts 
during the investigation that led to a proceeding fall within the scope 
of Rule 230 as well as Rule 231. Where the staff believes a witness 
statement falls outside the purview of the rule, the hearing officer 
may require that the documents in question be turned over for in camera 
inspection. See, e.g., In the Matter of Thomas J. Fittin, Jr., Exchange 
Act Release No. 29173, 48 SEC Docket 1474, 1483 (May 21, 1991); In the 
Matter of Robert E. Iles, Sr., Admin. Proc. Rulings Release No. 367 
(Apr. 19, 1990), 52 SEC Docket 750 (Aug. 18, 1992) (order relating to 
Brady v. Maryland and Jencks Act issues).
    The Jencks Act does not require production of a witness's prior 
statement until the witness takes the stand. In Commission proceedings 
administrative law judges often required production prior to the start 
of the hearing, and the Division of Enforcement now provides such 
prehearing production voluntarily in most circumstances. Submission of 
a witness's prior statement, however, may provide a motive for 
intimidation of that witness or improper contact by a respondent with 
the witness. The rule provides, therefore, that the time for delivery 
of witness statements is to be determined by the hearing officer, so 
that a case-specific determination of such risks can be made if 
necessary. Upon a showing that there is substantial risk of improper 
use of a witness's prior statement, the hearing officer may take 
appropriate steps, for example, delaying production of a prior 
statement, or prohibiting parties from communicating with particular 
witnesses.
Rule 232. Subpoenas
    (a) Availability; Procedure. In connection with any hearing ordered 
by the Commission, a party may request the issuance of subpoenas 
requiring the attendance and testimony of witnesses at the designated 
time and place of hearing, and subpoenas requiring the production of 
documentary or other tangible evidence returnable at any designated 
time or place. Unless made on the record at a hearing, requests for 
issuance of a subpoena shall be made in writing and served on each 
party pursuant to Rule 150. A person whose request for a subpoena has 
been denied or modified may not request that any other person issue the 
subpoena.
    (1) Unavailability of Hearing Officer. In the event that the 
hearing officer assigned to a proceeding is unavailable, the party 
seeking issuance of the subpoena may seek its issuance from the first 
available of the following persons: the Chief Administrative Law Judge, 
the law judge most senior in service as a law judge, the duty officer, 
any other member of the Commission, or any other person designated by 
the Commission to issue subpoenas. Requests for issuance of a subpoena 
made to the Commission, or any member thereof, must be submitted to the 
Secretary, not to an individual Commissioner.
    (2) Signing May be Delegated. A hearing officer may authorize 
issuance of a subpoena, and may delegate the manual signing of the 
subpoena to any other person authorized to issue subpoenas.
    (b) Standards for Issuance. Where it appears to the person asked to 
issue the subpoena that the subpoena sought may be unreasonable, 
oppressive, excessive in scope, or unduly burdensome, he or she may, in 
his or her discretion, as a [[Page 32764]] condition precedent to the 
issuance of the subpoena, require the person seeking the subpoena to 
show the general relevance and reasonable scope of the testimony or 
other evidence sought. If after consideration of all the circumstances, 
the person requested to issue the subpoena determines that the subpoena 
or any of its terms is unreasonable, oppressive, excessive in scope, or 
unduly burdensome, he or she may refuse to issue the subpoena, or issue 
it only upon such conditions as fairness requires. In making the 
foregoing determination, the person issuing the subpoena may inquire of 
the other participants whether they will stipulate to the facts sought 
to be proved.
    (c) Service. Service shall be made pursuant to the provisions of 
Rule 150(b)-(d). The provisions of this paragraph (c) shall apply to 
the issuance of subpoenas for purposes of investigations, as required 
by 17 CFR 203.8, as well as hearings.
    (d) Tender of fees required. When a subpoena compelling the 
attendance of a person at a hearing or deposition is issued at the 
instance of anyone other than an officer or agency of the United 
States, service is valid only if the subpoena is accompanied by a 
tender to the subpoenaed person of the fees for one day's attendance 
and mileage specified by paragraph (f) of this rule.
    (e) Application to Quash or Modify. (1) Procedure. Any person to 
whom a subpoena is directed or who is an owner, creator or the subject 
of the documents that are to be produced pursuant to a subpoena may, 
prior to the time specified therein for compliance, but in no event 
more than 15 days after the date of service of such subpoena, request 
that the subpoena be quashed or modified. Such request shall be made by 
application filed with the Secretary and served on all parties pursuant 
to Rule 150. The party on whose behalf the subpoena was issued may, 
within five days of service of the application, file an opposition to 
the application. If a hearing officer has been assigned to the 
proceeding, the application to quash shall be directed to that hearing 
officer for consideration, even if the subpoena was issued by another 
person.
    (2) Standards Governing Application to Quash or Modify. If 
compliance with the subpoena would be unreasonable, oppressive or 
unduly burdensome, the hearing officer or the Commission shall quash or 
modify the subpoena, or may order return of the subpoena only upon 
specified conditions. These conditions may include but are not limited 
to a requirement that the party on whose behalf the subpoena was issued 
shall make reasonable compensation to the person to whom the subpoena 
was addressed for the cost of copying or transporting evidence to the 
place for return of the subpoena.
    (f) Witness Fees and Mileage. Witnesses summoned before the 
Commission shall be paid the same fees and mileage that are paid to 
witnesses in the courts of the United States, and witnesses whose 
depositions are taken and the persons taking the same shall severally 
be entitled to the same fees as are paid for like services in the 
courts of the United States. Witness fees and mileage shall be paid by 
the party at whose instance the witnesses appear.
    Comment (a): Rule 232 requires that, unless made on the record at a 
hearing, subpoena requests must be in writing. Ex parte, oral 
communication with the hearing officer concerning the need for issuance 
of a subpoena creates the opportunity for unintended and potentially 
improper discussion of the merits of a case.
    Comment (b): Rule 232(b) is based upon Section 555(d) of the 
Administrative Procedure Act, 5 U.S.C. 555(d).
    Revision Comment: Under the former Rule 14 of the Rules of Practice 
and the proposed rules, neither the fact that a subpoena was sought nor 
the identity of the person subpoenaed was disclosed. Comment was 
requested as to whether the identity of the persons subpoenaed should 
be disclosed to other parties, and if so, when such disclosure should 
take place. One commenter suggested that the identity of persons 
subpoenaed should be disclosed to all other parties and an application 
to quash should be served on all parties. The Commission believes that 
these suggestions are consistent with other changes made to increase 
the prehearing exchange of information. Accordingly, Rule 232 has been 
revised to incorporate these suggestions.
    Commenters also suggested that respondents be allowed to issue 
subpoenas for the purpose of compelling prehearing discovery 
depositions as is allowed in actions under the Federal Rules of Civil 
Procedure. See Fed. R. Civ. P. 30(a)(1). Discovery under the Federal 
Rules of Civil Procedure, including deposition practice, is often a 
source of delay, extensive collateral disputes and high litigation 
costs. See Fair and Efficient Administrative Proceedings: Report of the 
Task Force on Administrative Proceedings (1993) at 47-48. One commenter 
suggested that the disadvantages of oral deposition practice under the 
Federal Rules of Civil Procedure could be avoided by permitting 
depositions only by order of the hearing officer; by limiting each 
respondent to five depositions, unless additional depositions were 
approved by the hearing officer; and by requiring all depositions to be 
completed within 90 days of the close of document discovery.
    The Commission has weighed the arguments advanced in favor of 
expanding the scope of prehearing discovery to permit oral depositions 
as suggested and has concluded that a rule authorizing discovery 
depositions is not warranted.
    First, the Commission's experience in federal court litigation 
strongly suggests that notwithstanding the proposed restriction for the 
use of discovery depositions, there remains a significant potential for 
extensive collateral litigation over their use. Under the commenter's 
proposal, for example, each respondent could seek leave to take more 
than five depositions, and might contest, through motions for 
interlocutory review and arguments on appeal, any denial of additional 
depositions by the hearing officer.
    Second, the suggestion to limit depositions to the 90-day period 
after the close of ``document discovery'' conflicts with the statutory 
timetable for cease-and-desist proceedings, the fastest growing 
category of enforcement proceedings. When a cease-and-desist order is 
sought, the Commission is required to set a hearing date not earlier 
than 30 days nor later than 60 days after service of the order 
instituting proceedings, unless an earlier or a later date is set by 
the Commission with the consent of a respondent. See, e.g., Exchange 
Act 21C(b), 15 U.S.C. Sec. 78u-3(b). In a proceeding with multiple 
respondents, one respondent's decision not to consent to a later 
hearing date, or to consent to an extension less than that sought by 
other respondents, would give rise to difficult and time-consuming 
collateral issues over scheduling, and could necessitate multiple 
hearings. Even without such complications, a 90-day period for 
depositions, in addition to a period for inspection and copying of 
documents, would represent a significant departure from the statute.
    Third, the rationale for permitting oral depositions in litigation 
under the Federal Rules of Civil Procedure does not apply equally to a 
Commission administrative proceeding. In the typical civil action, 
where neither party can compel testimony prior to the filing of the 
complaint, oral depositions play a critical role in permitting evidence 
to be gathered prior to trial. Also, a plaintiff in the typical civil 
action is not required before filing to vet a proposed 
[[Page 32765]] lawsuit either with the defendant or anyone else. In 
this context, discovery, including depositions, is a crucial adjunct to 
motions to dismiss, summary judgment, and other procedural mechanisms 
designed to allow an assessment by the judge whether the allegations of 
the complaint are sufficient to warrant trial.
    By contrast, in administrative proceedings brought by the 
Commission, there is ordinarily a detailed pre-institution fact finding 
investigation and a rigorous pre-institution review process. At the 
close of the investigation, a respondent is usually told the general 
conclusions reached by the Division of Enforcement and is afforded an 
opportunity to submit a written ``Wells'' statement presenting 
arguments against commencement of an action. See Commission's decisions 
on advisory committee recommendations regarding commencement of 
enforcement proceedings and termination of staff investigations, 
Securities Act Release No. 5310, 38 FR 5457 (Mar. 1, 1973). No 
proceedings are instituted unless a majority of the Commission votes to 
authorize proceedings after reviewing both a report on the 
investigation's findings from the Division of Enforcement and any Wells 
statement that is submitted. If proceedings are authorized, the 
documents and transcripts obtained from persons not employed by the 
Commission in the investigation are shared with the respondent. The 
benefits from and need for oral depositions are therefore different and 
less important in the context of Commission administrative proceedings 
than they may be in litigation between private parties under the 
Federal Rules of Civil Procedure.
    Finally, the revised Rules of Practice include two new provisions 
that address in significant part a respondent's interest in obtaining 
discovery prior to the start of the hearing. Rule 232 authorizes the 
issuance of subpoenas duces tecum for the production of documents 
returnable at any designated time or place. Rule 230 mandates that the 
Division of Enforcement generally make available documents and 
transcripts of testimony obtained from persons other than employees of 
the Commission in the investigation leading to the proceeding.
    One commenter suggested that the opportunity to review transcripts 
of investigative depositions was not sufficient. The commenter noted 
that knowledge gained during an investigation is cumulative. Division 
of Enforcement staff are unable to question each witness as thoroughly 
during the course of an investigation, particularly in the early 
stages, as can be done in a post-investigation deposition. Further, an 
investigator on the Division of Enforcement staff will not necessarily 
ask the same questions as would a respondent. Moreover, even where 
investigative testimony is complete, the transcript provided to 
respondents is not a full substitute for the opportunity during live 
testimony to observe a witness's demeanor as well as to hear the 
content of a witness's answers.
    These reasons establish support for an opportunity after the 
investigation for both the respondent and the Division of Enforcement 
to subpoena witnesses and question them under oath--an opportunity 
available at the hearing. They do not establish the need for prehearing 
depositions as well. Permitting post-investigation, prehearing 
depositions would afford a respondent information that may be useful in 
advance of hearing. However, given the newly established right to 
subpoena documents prior to hearing, the marginal benefits of 
prehearing depositions are not justified by their likely cost in time, 
expense, collateral disputes and scheduling complexities.
Rule 233. Depositions Upon Oral Examination
    (a) Procedure. Any party desiring to take the testimony of a 
witness by deposition shall make a written motion setting forth the 
reasons why such deposition should be taken including the specific 
reasons why the party believes the witness will be unable to attend or 
testify at the hearing; the name and address of the prospective 
witness; the matters concerning which the prospective witness is 
expected to be questioned; and the proposed time and place for the 
taking of the deposition.
    (b) Required Finding When Ordering a Deposition. In the discretion 
of the Commission or the hearing officer, an order for deposition may 
be issued upon a finding that the prospective witness will likely give 
testimony material to the proceeding, that it is likely the prospective 
witness will be unable to attend or testify at the hearing because of 
age, sickness, infirmity, imprisonment or other disability, and that 
the taking of a deposition will serve the interests of justice.
    (c) Contents of Order. An order for deposition shall designate by 
name a deposition officer. The designated officer may be the hearing 
officer or any other person authorized to administer oaths by the laws 
of the United States or of the place where the deposition is to be 
held. An order for deposition also shall state:
    (1) the name of the witness whose deposition is to be taken;
    (2) the scope of the testimony to be taken;
    (3) the time and place of the deposition;
    (4) the manner of recording, preserving and filing the deposition; 
and
    (5) the number of copies, if any, of the deposition and exhibits to 
be filed upon completion of the deposition.
    (d) Procedure at Depositions. A witness whose testimony is taken by 
deposition shall be sworn or shall affirm before any questions are put 
to him or her. Examination and cross-examination of deponents may 
proceed as permitted at a hearing. The witness being deposed may have 
counsel present during the deposition.
    (e) Objections to Questions or Evidence. Objections to questions or 
evidence shall be in short form, stating the grounds of objection 
relied upon. Objections to questions or evidence shall be noted by the 
deposition officer upon the deposition, but a deposition officer other 
than the hearing officer shall not have the power to decide on the 
competency, materiality or relevance of evidence. Failure to object to 
questions or evidence before the deposition officer shall not be deemed 
a waiver unless the ground of the objection is one that might have been 
obviated or removed if presented at that time.
    (f) Filing of Depositions. The questions propounded and all answers 
or objections shall be recorded or transcribed verbatim, and a 
transcript prepared by the deposition officer, or under his or her 
direction. The transcript shall be subscribed by the witness and 
certified by the deposition officer. The original deposition and 
exhibits shall be filed with the Secretary. A copy of the deposition 
shall be available to the deponent and each party for purchase at 
prescribed rates.
    (g) Payment. The cost of the transcript shall be paid by the party 
requesting the deposition.
    Comment: Depositions under the Rules of Practice are used only to 
preserve testimony of a witness who would be unlikely to be able to 
attend the hearing. They are not allowed for purposes of discovery. See 
In the Matter of Central and South West Corp., Admin. Proc. Rulings 
Release No. 184 (July 14, 1976), 52 SEC Docket 375 (Aug. 18, 1992) 
(citing L.M. Rosenthal & Co., Inc., Admin. Proc. File No. 3-4330 (Jan. 
30, 1974)); see also In the Matter of Gail G. Griseuk, Admin. Proc. 
Rulings Release 440 (Aug. 31, 1994), 57 SEC Docket 1488 (Sept. 27, 
1994) (formal [[Page 32766]] discovery procedures are not available in 
Commission administrative proceedings).
    Comment (c): The criteria for serving as a deposition officer are 
based on the criteria in Rule 28 of the Federal Rules of Civil 
Procedure.
    Revision Comment (b): Under Proposed Rule 22, the criteria for 
whether to allow a deposition to be taken were not consistent with the 
criteria for allowing the deposition to be introduced. As revised, the 
criteria for permitting a deposition are consistent with the criteria 
of Rule 235 for introducing a prior sworn statement of a witness.
    Depositions are no longer required to be filed under seal, although 
a confidentiality order may be sought. See Rule 322.
Rule 234. Depositions Upon Written Questions
    (a) Availability. Depositions may be taken and submitted on written 
questions upon motion of any party. The motion shall include the 
information specified in Rule 233(a). A decision on the motion shall be 
governed by the provisions of Rule 233(b).
    (b) Procedure. Written questions shall be filed with the motion. 
Within 10 days after service of the motion and written questions, any 
party may file objections to such written questions and any party may 
file cross-questions. When a deposition is taken pursuant to this rule 
no persons other than the witness, counsel to the witness, the 
deposition officer, and, if the deposition officer does not act as 
reporter, a reporter, shall be present at the examination of the 
witness. No party shall be present or represented unless otherwise 
permitted by order. The deposition officer shall propound the questions 
and cross-questions to the witness in the order submitted.
    (c) Additional Requirements. The order for deposition, filing of 
the deposition, form of the deposition and use of the deposition in the 
record shall be governed by paragraphs (c) through (g) of Rule 233, 
except that no cross-examination shall be made.
    Comment: The procedures for depositions upon written questions are 
based in part on Rule 31 of the Federal Rules of Civil Procedure.
Rule 235. Introducing Prior Sworn Statements of Witnesses into the 
Record
    (a) At a hearing, any person wishing to introduce a prior, sworn 
statement of a witness, not a party, otherwise admissible in the 
proceeding, may make a motion setting forth the reasons therefor. If 
only part of a statement is offered in evidence, the hearing officer 
may require that all relevant portions of the statement be introduced. 
If all of a statement is offered in evidence, the hearing officer may 
require that portions not relevant to the proceeding be excluded. A 
motion to introduce a prior sworn statement may be granted if:
    (1) the witness is dead;
    (2) the witness is out of the United States, unless it appears that 
the absence of the witness was procured by the party offering the prior 
sworn statement;
    (3) the witness is unable to attend or testify because of age, 
sickness, infirmity, imprisonment or other disability;
    (4) the party offering the prior sworn statement has been unable to 
procure the attendance of the witness by subpoena; or,
    (5) in the discretion of the Commission or the hearing officer, it 
would be desirable, in the interests of justice, to allow the prior 
sworn statement to be used. In making this determination, due regard 
shall be given to the presumption that witnesses will testify orally in 
an open hearing. If the parties have stipulated to accept a prior sworn 
statement in lieu of live testimony, consideration shall also be given 
to the convenience of the parties in avoiding unnecessary expense.
    Revision Comment: Proposed Rule 22, which addressed the 
introduction of a deposition as part of the record, did not state 
whether it applied to any deposition, or only a deposition taken 
pursuant to the Rules of Practice. Rule 235 specifies the circumstances 
under which prior sworn statements by a witness are admissible. One 
commenter suggested making the stipulation of the parties to accept a 
deposition in lieu of live testimony a factor in determining whether a 
deposition already taken should be admitted in evidence. The rule was 
revised accordingly.
Rule 240. Settlement
    (a) Availability. Any person who is notified that a proceeding may 
or will be instituted against him or her, or any party to a proceeding 
already instituted, may, at any time, propose in writing an offer of 
settlement.
    (b) Procedure. An offer of settlement shall state that it is made 
pursuant to this rule; shall recite or incorporate as a part of the 
offer the provisions of paragraphs (c)(4) and (5) of this rule; shall 
be signed by the person making the offer, not by counsel; and shall be 
submitted to the interested division.
    (c) Consideration of Offers of Settlement. (1) Offers of settlement 
shall be considered by the interested division when time, the nature of 
the proceedings, and the public interest permit.
    (2) Where a hearing officer is assigned to a proceeding, the 
interested division and the party submitting the offer may request that 
the hearing officer express his or her views regarding the 
appropriateness of the offer of settlement. A request for the hearing 
officer to express his or her views on an offer of settlement or 
otherwise to participate in a settlement conference constitutes a 
waiver by the persons making the request of any right to claim bias or 
prejudgment by the hearing officer based on the views expressed.
    (3) The interested division shall present the offer of settlement 
to the Commission with its recommendation, except that, if the 
division's recommendation is unfavorable, the offer shall not be 
presented to the Commission unless the person making the offer so 
requests.
    (4) By submitting an offer of settlement, the person making the 
offer waives, subject to acceptance of the offer:
    (i) all hearings pursuant to the statutory provisions under which 
the proceeding is to be or has been instituted;
    (ii) the filing of proposed findings of fact and conclusions of 
law;
    (iii) proceedings before, and an initial decision by, a hearing 
officer;
    (iv) all post-hearing procedures; and
    (v) judicial review by any court.
    (5) By submitting an offer of settlement the person further waives:
    (i) such provisions of the Rules of Practice or other requirements 
of law as may be construed to prevent any member of the Commission's 
staff from participating in the preparation of, or advising the 
Commission as to, any order, opinion, finding of fact, or conclusion of 
law to be entered pursuant to the offer; and
    (ii) any right to claim bias or prejudgment by the Commission based 
on the consideration of or discussions concerning settlement of all or 
any part of the proceeding.
    (6) If the Commission rejects the offer of settlement, the person 
making the offer shall be notified of the Commission's action and the 
offer of settlement shall be deemed withdrawn. The rejected offer shall 
not constitute a part of the record in any proceeding against the 
person making the offer, provided, however, that rejection of an offer 
of settlement does not affect the continued validity of waivers 
pursuant to paragraph (c)(5) of this rule with respect to any 
discussions concerning the rejected offer of settlement. 
[[Page 32767]] 
    (7) Final acceptance of any offer of settlement will occur only 
upon the issuance of findings and an order by the Commission.
    Comment: In proceedings required to be conducted ``on the record,'' 
Section 554(c) of the Administrative Procedure Act, 5 U.S.C. 
Sec. 554(c), requires that administrative agencies give interested 
parties the opportunity for the submission and consideration of offers 
of settlement ``when time, the nature of the proceeding, and the public 
interest permit.'' Cf. Table I, Subpart D, 17 CFR 201 (listing 
Commission proceedings required to be conducted ``on the record''). It 
is the Commission's practice to provide such an opportunity in all 
proceedings, whether or not the proceeding is required to be conducted 
``on the record.''
    Although the staff is authorized to participate in settlement 
negotiations under various circumstances, the Commission must approve 
every settlement.
    Rule 240 addresses offers of settlement made both prior to and 
after the institution of proceedings. The Rule requires each offer of 
settlement to recite or incorporate as part of the offer the provisions 
of paragraphs (c)(4) and (5). Certain facts necessary for the 
Commission to make a reasoned judgment as to whether settlement offer 
is in the public interest are often available only to the staff that 
negotiated the proposed settlement. Paragraph (c)(5)(i) requires waiver 
of any provisions that may be construed to prohibit ex parte 
communications regarding the settlement offer between the Commission 
and staff involved in litigating the proceeding. Paragraph (c)(5)(ii) 
requires waiver of any right to claim bias or prejudgment by the 
Commission arising from the Commission's consideration or discussion 
concerning settlement of all or any part of the proceeding.
    Revision Comment: The Commission considered but declined to accept 
one commenter's suggestion that the rule regarding settlements should 
retain a provision of former Rule 8(a)(3) that, where the Commission 
deemed it appropriate, the Commission also may give the party making an 
offer an opportunity to make an oral presentation. The Commission 
considers hundreds of settlement offers each year. Given the volume of 
settlements, it would require significant resources to rule on oral 
presentation requests, to address collateral disputes if a request was 
denied, and to hear presentations if requests were granted. While the 
Commission has authority to permit oral presentations at any time, see 
Rule 451, based on its experience, the Commission does not believe that 
oral presentations by a respondent in support of a written offer of 
settlement would aid the Commission's decisional process.
Rule 250. Motion for Summary Disposition
    (a) After a respondent's answer has been filed and, in an 
enforcement or a disciplinary proceeding, documents have been made 
available to that respondent for inspection and copying pursuant to 
Rule 230, the respondent, or the interested division may make a motion 
for summary disposition of any or all allegations of the order 
instituting proceedings with respect to that respondent. If the 
interested division has not completed presentation of its case in 
chief, a motion for summary disposition shall be made only with leave 
of the hearing officer. The facts of the pleadings of the party against 
whom the motion is made shall be taken as true, except as modified by 
stipulations or admissions made by that party, by uncontested 
affidavits, or by facts officially noted pursuant to Rule 323.
    (b) The hearing officer shall promptly grant or deny the motion for 
summary disposition or shall defer decision on the motion. The hearing 
officer may grant the motion for summary disposition if there is no 
genuine issue with regard to any material fact and the party making the 
motion is entitled to a summary disposition as a matter of law. If it 
appears that a party, for good cause shown, cannot present by affidavit 
prior to hearing facts essential to justify opposition to the motion, 
the hearing officer shall deny or defer the motion. A hearing officer's 
decision to deny leave to file a motion for summary disposition is not 
subject to interlocutory appeal.
    (c) The motion for summary disposition, supporting memorandum of 
points and authorities, and any declarations, affidavits or attachments 
shall not exceed 35 pages in length.
    Comment: The rule applies to enforcement proceedings and 
disciplinary proceedings as well as any other proceeding in which a 
hearing is scheduled. Motions for disposition prior to hearing may 
provide particular benefits in regulatory proceedings. Enforcement or 
disciplinary proceedings in which a motion for disposition prior to 
hearing would be appropriate are likely to be less common. Typically, 
enforcement and disciplinary proceedings that reach litigation involve 
genuine disagreement between the parties as to material facts. Where a 
genuine issue as to material facts clearly exists as to an issue, it 
would be inappropriate for a party to seek leave to file a motion for 
summary disposition or for a hearing officer to grant the motion. While 
partial disposition may be appropriate in some cases, a hearing will 
still often be necessary in order to determine a respondent's state of 
mind and the need for remedial sanctions if liability is found.
    Summary disposition is a procedure that can resolve issues prior to 
hearing, thereby reducing the costs of hearing and expediting 
resolution of the proceeding. The possibility that such motions may 
simplify the proceeding should not be allowed to delay the planned 
start of the hearing, however. The hearing officer is authorized to set 
schedules for the submission of summary disposition motions in order to 
prevent the use of such motions as a tactic for delay or as a means for 
needlessly increasing the costs of prehearing preparation. The hearing 
officer may deny or defer a ruling on such a motion if it is not filed 
timely in light of the prehearing schedule. Nothing in Rule 250 should 
be construed to create a right to prehearing depositions or other 
discovery not otherwise provided for by these rules in order to support 
or oppose such a motion.
    Revision Comment: Most major agencies in the federal system have 
made available some form of summary disposition procedure. See Puerto 
Rico Aqueduct & Sewer Authority v. EPA, 35 F.3d 600, 606 (1st Cir. 
1994), cert. denied, 115 S. Ct. 1096 (1995) (listing agencies that 
provide for summary disposition). Rule 250 expressly permits a 
dispositive motion prior to hearing to be made to and decided by the 
hearing officer, a reversal of practice under former Rule 11(e) which 
required such decisions to be made by the Commission.
    One commenter recommended that the proposed rule allowing for 
dispositive motions be modified to permit a procedure similar or 
identical to a motion for summary judgment under Rule 56 of the Federal 
Rules of Civil Procedure. That commenter also recommended that a 
summary judgment remedy be available to respondents only, unless a 
staff motion for summary judgment triggered a respondent's right to 
take discovery depositions to secure evidence necessary to show the 
existence of a genuine factual dispute.
    The Commission gave detailed consideration to both proposals. Rule 
250 balances the potential efficiency gained by allowing the hearing 
officer to eliminate unnecessary hearings in some [[Page 32768]] cases 
against the costs of allowing additional motions, prehearing procedures 
and the attendant delay in cases where a hearing in which all evidence 
can be presented and witness demeanor can be observed is warranted.
    As noted in the Revision Comment to Rule 232, pretrial procedures 
developed under the Federal Rules of Civil Procedure, including summary 
judgment under Rule 56, must be viewed in context. The Federal Rules of 
Civil Procedure govern a judicial system that deals most frequently 
with disputes between private parties. Unlike in Commission 
proceedings, in the typical private party civil action there is no 
opportunity to conduct a pre-filing investigation with the use of 
subpoenas; no formal opportunity such as a Wells submission, see 17 CFR 
202.5(c), for the opposing party to present reasons against the 
initiation of an action; and no panel of public officials, such as the 
Commission, that must authorize the filing of a complaint. In addition, 
because of the priority of criminal caseloads, there is a high premium 
on providing trial dates for civil matters. Thus, the rationales that 
justify prehearing summary disposition procedures under the Federal 
Rules of Civil Procedure do not apply equally to Commission 
administrative proceedings.
    Also as noted in the Revision Comment to Rule 232, the statutory 
schedule for cease-and-desist proceedings provides no realistic 
opportunity for summary judgment procedures comparable to those allowed 
under the Federal Rules of Civil Procedure. It is the Commission's 
view, therefore, that procedures to allow for the disposition of a case 
prior to hearing have a potentially useful role in the administrative 
process, but one that is more limited than summary judgment under the 
Federal Rules of Civil Procedure.
    It was also suggested that the Commission should permit the use of 
affidavits in support of a motion for summary disposition. The text of 
the proposed rule did not set forth any limitation on the filing of 
affidavits in connection with a dispositive motion. The comment to the 
proposed rule, however, stated that affidavits were not contemplated. 
After further consideration, the Commission has decided that affidavits 
or declarations should be allowed, subject to limitations on their 
length.
    Typically, Commission proceedings that reach litigation involve 
basic disagreement as to material facts. Based on past experience, the 
circumstances when summary disposition prior to hearing could be 
appropriately sought or granted will be comparatively rare. Consistent 
with the goal of various other rules to facilitate the hearing 
officer's control over the prehearing scheduling, the revised rule 
requires leave of the hearing officer prior to filing a motion for 
summary disposition at any time prior to completion of the interested 
division's case in chief. See Rules 221 and 222. Such leave shall be 
granted only for good cause shown, and if consideration of the motion 
will not delay the scheduled start of the hearing.
    The Commission will monitor closely the use of the procedures for 
disposition prior to hearing to determine whether they operate as 
intended to create more streamlined proceedings and an elimination of 
needless hearings, or whether the availability of such procedures 
operates as a source of delay, expense or harassment.

Rules Regarding Hearings

Rule 300. Hearings
    Hearings for the purpose of taking evidence shall be held only upon 
order of the Commission. All hearings shall be conducted in a fair, 
impartial, expeditious and orderly manner.
Rule 301. Hearings to Be Public
    All hearings, except hearings on applications for confidential 
treatment filed pursuant to Rule 190, hearings held to consider a 
motion for a protective order pursuant to Rule 322, and hearings on ex 
parte application for a temporary cease-and-desist order, shall be 
public unless otherwise ordered by the Commission on its own motion or 
the motion of a party. No hearing shall be nonpublic where all 
respondents request that the hearing be made public.
Rule 302. Record of Hearings
    (a) Recordation. Unless ordered otherwise by the hearing officer or 
the Commission, all hearings shall be recorded and a written transcript 
thereof shall be prepared.
    (b) Availability of a Transcript. Transcripts of public hearings 
shall be available for purchase at prescribed rates. Transcripts of 
nonpublic proceedings, and transcripts subject to a protective order 
pursuant to Rule 322, shall be available for purchase only by parties, 
provided, however, that any person compelled to submit data or evidence 
in a hearing may purchase a copy of his or her own testimony.
    (c) Transcript Correction. Prior to the filing of post-hearing 
briefs or proposed findings and conclusions, or within such earlier 
time as directed by the Commission or the hearing officer, a party or 
witness may make a motion to correct the transcript. Proposed 
corrections of the transcript may be submitted to the hearing officer 
by stipulation pursuant to Rule 324, or by motion. Upon notice to all 
parties to the proceeding, the hearing officer may, by order, specify 
corrections to the transcript.
    Comment (b): The Administrative Procedure Act (APA) provides that 
any person compelled to submit data or evidence in a non-investigatory 
proceeding may purchase a copy of his or her own testimony. See 5 
U.S.C. 555(c). In addition, Section 11 of the Federal Advisory 
Committee Act (FACA) requires that an agency make available copies of 
transcripts of agency proceedings as defined in Section 551(12) of the 
APA, 5 U.S.C. Sec. 555(c). See FACA, 5 U.S.C. App. (1988), 86 Stat. 
770.
Rule 310. Failure to Appear at Hearings: Default
    Any person named in an order instituting proceedings as a person 
against whom findings may be made or sanctions imposed who fails to 
appear at a hearing of which he or she has been duly notified may be 
deemed to be in default pursuant to Rule 155(a). A party may make a 
motion to set aside a default pursuant to Rule 155(b).
Rule 320. Evidence: Admissibility
    The Commission or the hearing officer may receive relevant evidence 
and shall exclude all evidence that is irrelevant, immaterial or unduly 
repetitious.
    Comment: Rule 320 restates the Administrative Procedure Act (APA) 
standard for the reception of evidence. 5 U.S.C. 556(c)(3) and (d). 
While Section 556 of the APA applies only to proceedings which are ``on 
the record'' pursuant to 5 U.S.C. 554(a), Rule 320 applies to all 
proceedings, as defined in Rule 101(a), before the Commission or a 
hearing officer.
Rule 321. Evidence: Objections and Offers of Proof
    (a) Objections. Objections to the admission or exclusion of 
evidence must be made on the record and shall be in short form, stating 
the grounds relied upon. Exceptions to any ruling thereon by the 
hearing officer need not be noted at the time of the ruling. Such 
exceptions will be deemed waived on appeal to the Commission, however, 
unless raised:
    (1) pursuant to interlocutory review in accordance with Rule 400; 
[[Page 32769]] 
    (2) in a proposed finding or conclusion filed pursuant to Rule 340; 
or
    (3) in a petition for Commission review of an initial decision 
filed in accordance with Rule 410.
    (b) Offers of Proof. Whenever evidence is excluded from the record, 
the party offering such evidence may make an offer of proof, which 
shall be included in the record. Excluded material shall be retained 
pursuant to Rule 350(b).
Rule 322. Evidence: Confidential Information, Protective Orders
    (a) Procedure. In any proceeding as defined in Rule 101(a), a 
party; any person who is the owner, subject or creator of a document 
subject to subpoena or which may be introduced as evidence; or any 
witness who testifies at a hearing may file a motion requesting a 
protective order to limit from disclosure to other parties or to the 
public documents or testimony that contain confidential information. 
The motion should include a general summary or extract of the documents 
without revealing confidential details. If the movant seeks a 
protective order against disclosure to other parties as well as the 
public, copies of the documents shall not be served on other parties. 
Unless the documents are unavailable, the movant shall file for in 
camera inspection a sealed copy of the documents as to which the order 
is sought.
    (b) Basis for Issuance. Documents and testimony introduced in a 
public hearing are presumed to be public. A motion for a protective 
order shall be granted only upon a finding that the harm resulting from 
disclosure would outweigh the benefits of disclosure.
    (c) Requests for Additional Information Supporting Confidentiality. 
A movant under paragraph (a) of this rule may be required to furnish in 
writing additional information with respect to the grounds for 
confidentiality. Failure to supply the information so requested within 
five days from the date of receipt by the movant of a notice of the 
information required shall be deemed a waiver of the objection to 
public disclosure of that portion of the documents to which the 
additional information relates, unless the Commission or the hearing 
officer shall otherwise order for good cause shown at or before the 
expiration of such five-day period.
    (d) Confidentiality of Documents Pending Decision. Pending a 
determination of a motion under this rule, the documents as to which 
confidential treatment is sought and any other documents that would 
reveal the confidential information in those documents shall be 
maintained under seal and shall be disclosed only in accordance with 
orders of the Commission or the hearing officer. Any order issued in 
connection with a motion under this rule shall be public unless the 
order would disclose information as to which a protective order has 
been granted, in which case that portion of the order that would reveal 
the protected information shall be nonpublic.
    Comment: A protective order under Rule 322 is available only in 
proceedings as defined in Rule 101(a). Rule 322 is distinct from other 
Commission rules relating to the treatment of requests for preserving 
the confidentiality of information. See 17 CFR 200.83 (providing for 
procedures by which persons submitting information generally to the 
Commission can request that the information not be disclosed pursuant 
to a request under the Freedom of Information Act, 5 U.S.C. Sec. 552). 
See also Rule 190 (specifying procedures by which registrants may 
request confidential treatment of certain information contained in 
regulatory filings).
    Revision Comment: The former Rules of Practice did not have a 
provision that specifically allowed the entry of protective orders for 
documents submitted as evidence in connection with a hearing. Former 
Rule 25 related solely to applications for confidential treatment of 
materials filed in connection with registration statements and other 
such filings and required that confidential treatment be sought at the 
time of filing. Proposed Rule 33 allowed a party to seek confidential 
treatment under any ``applicable statute or rule,'' without limiting 
the scope of materials sought to be protected or the timing of the 
application. The proposed rule was intended to allow for issuance of a 
protective order in connection with a hearing. Rule 322 has been added 
to clarify the availability of protective orders for documents filed or 
testimony given in an adjudicative proceeding.
    Comment was requested as to whether the filing of an application 
for confidential treatment of evidentiary information should be 
permitted ex parte. The Commission has decided that allowing such 
filings will not be necessary because Rule 322 allows a party to file a 
motion containing a general summary or extract of the materials without 
revealing confidential details.
Rule 323. Evidence: Official Notice
    Official notice may be taken of any material fact which might be 
judicially noticed by a district court of the United States, any matter 
in the public official records of the Commission, or any matter which 
is peculiarly within the knowledge of the Commission as an expert body. 
If official notice is requested or taken of a material fact not 
appearing in the evidence in the record, the parties, upon timely 
request, shall be afforded an opportunity to establish the contrary.
    Comment: This provision is based on Section 556(e) of the 
Administrative Procedure Act, 5 U.S.C. Sec. 556(e).
Rule 324. Evidence: Stipulations
    The parties may, by stipulation, at any stage of the proceeding 
agree upon any pertinent facts in the proceeding. A stipulation may be 
received in evidence and, when received, shall be binding on the 
parties to the stipulation.
    Revision Comment: Stipulation as to facts not in dispute can aid in 
the efficient conduct of a hearing and reduce costs for all parties. 
Rule 324 has been added to clarify that stipulations may be entered 
into at any stage of the proceeding, including prior to the start of 
the hearing. Rule 324 is based, in part, on Rule 324 of the Model 
Adjudication Rules, Administrative Conference of the United States 
(Dec. 1993).
Rule 325. Evidence: Presentation Under Oath or Affirmation
    A witness at a hearing for the purpose of taking evidence shall 
testify under oath or affirmation.
Rule 326. Evidence: Presentation, Rebuttal and Cross-examination
    In any proceeding in which a hearing is required to be conducted on 
the record after opportunity for hearing in accord with 5 U.S.C. 
556(a), a party is entitled to present its case or defense by oral or 
documentary evidence, to submit rebuttal evidence, and to conduct such 
cross-examination as, in the discretion of the Commission or the 
hearing officer, may be required for a full and true disclosure of the 
facts. The scope and form of evidence, rebuttal evidence, if any, and 
cross-examination, if any, in any other proceeding shall be determined 
by the Commission or the hearing officer in each proceeding.
    Comment: The requirements of Section 556 of the Administrative 
Procedure Act, including those regarding the right to present evidence, 
submit rebuttal evidence and conduct cross-examination, apply only to 
``formal'' adjudications: those hearings [[Page 32770]] required by 
statute to be conducted ``on the record'' after opportunity for 
hearing. See 5 U.S.C. Secs. 554(a), 556(a). In contrast, ``informal'' 
adjudications are proceedings where the statutory requirement for an 
``opportunity for hearing'' does not specifically require the hearing 
to be held ``on the record.'' The Commission may, but is not required 
to, follow procedures mandated for ``formal'' adjudications under 
Section 556 in ``informal'' adjudications. Thus, in cases of 
``informal'' adjudication, such as a proceeding as to whether a 
temporary cease-and-desist order should be entered, the respondent's 
opportunity to put on live witnesses at the hearing may be limited. See 
also Rule 191 (regarding adjudications not required to be determined on 
the record after notice and opportunity for hearing); Rules 510-513 
(regarding temporary cease-and-desist orders).
Rule 340. Proposed Findings, Conclusions and Supporting Briefs
    (a) Opportunity to File. Before an initial decision is issued, each 
party shall have an opportunity, reasonable in light of all the 
circumstances, to file in writing proposed findings and conclusions 
together with, or as a part of, its brief.
    (b) Procedure. Proposed findings of fact must be supported by 
citations to specific portions of the record. If successive filings are 
directed, the proposed findings and conclusions of the party assigned 
to file first shall be set forth in serially numbered paragraphs, and 
any counter statement of proposed findings and conclusions must, in 
addition to any other matter, indicate those paragraphs of the 
proposals already filed as to which there is no dispute. A reply brief 
may be filed by the party assigned to file first, or, where 
simultaneous filings are directed, reply briefs may be filed by each 
party, within the period prescribed therefor by the hearing officer. No 
further briefs may be filed except with leave of the hearing officer.
    (c) Time for Filing. In any proceeding in which an initial decision 
is to be issued:
    (1) At the end of each hearing, the hearing officer shall, by 
order, after consultation with the parties, prescribe the period within 
which proposed findings and conclusions and supporting briefs are to be 
filed. The party or parties directed to file first shall make its or 
their initial filing within 30 days of the end of the hearing unless 
the hearing officer, for good cause shown, permits a different period 
and sets forth in the order the reasons why the different period is 
necessary.
    (2) The total period within which all such proposed findings and 
conclusions and supporting briefs and any counter statements of 
proposed findings and conclusions and reply briefs are to be filed 
shall be no longer than 90 days after the close of the hearing unless 
the hearing officer, for good cause shown, permits a different period 
and sets forth in an order the reasons why the different period is 
necessary.
    Comment (a): Rule 340 is based on Section 557(c) of the 
Administrative Procedure Act, 5 U.S.C. Sec. 557(c). By its terms, 
Section 557(c) applies only to proceedings ``on the record'' after 
opportunity to be heard. See Comment to Rule 326. Consistent with 
longstanding Commission practice, however, Rule 340 mandates an 
opportunity for submission of findings and conclusions in any case in 
which an initial decision is to be prepared, whether or not the 
proceeding is ``on the record.'' The limitation in Rule 340 that the 
opportunity to submit proposed findings and conclusions be ``reasonable 
in light of all the circumstances'' grants the hearing officer or the 
Commission discretion to restrict the time allowed for filing findings 
and conclusions. For example, in emergency proceedings, an abbreviated 
period might be appropriate. Rule 340 does not apply to proceedings in 
which the Commission itself presides at the taking of evidence since no 
initial decision is issued in such circumstances. In such a case--for 
example, where a temporary cease-and-desist order is sought--the 
Commission has complete discretion whether to allow for post-hearing 
submissions.
    The rule requires that each proposed finding must be supported by 
appropriate citations to the record. Filings that fail to meet this 
requirement may be subject to sanctions pursuant to Rule 180.
Rule 350. Record in Proceedings Before Hearing Officer; Retention of 
Documents; Copies
    (a) Contents of the Record. The record shall consist of:
    (1) the order instituting proceedings, each notice of hearing and 
any amendments;
    (2) each application, motion, submission or other paper, and any 
amendments, motions, objections, and exceptions to or regarding them;
    (3) each stipulation, transcript of testimony and document or other 
item admitted into evidence;
    (4) each written communication accepted by the hearing officer 
pursuant to Rule 210;
    (5) with respect to a request to disqualify a hearing officer or to 
allow the hearing officer's withdrawal under Rule 112, each affidavit 
or transcript of testimony taken and the decision made in connection 
with the request;
    (6) all motions, briefs and other papers filed on interlocutory 
appeal;
    (7) all proposed findings and conclusions;
    (8) each written order issued by the hearing officer or Commission; 
and
    (9) any other document or item accepted into the record by the 
hearing officer.
    (b) Retention of Documents Not Admitted. Any document offered in 
evidence but excluded, and any document marked for identification but 
not offered as an exhibit, shall not be considered a part of the 
record. The Secretary shall retain any such documents until the later 
of the date upon which a Commission order ending the proceeding becomes 
final, or the conclusion of any judicial review of the Commission's 
order.
    (c) Substitution of Copies. A true copy of a document may be 
substituted for any document in the record or any document retained 
pursuant to paragraph (b) of this rule.
Rule 351. Transmittal of Documents to Secretary; Record Index; 
Certification
    (a) Transmittal From Hearing Officer to Secretary of Partial Record 
Index. The hearing officer may, at any time, transmit to the Secretary 
motions, exhibits or any other original documents filed with or 
accepted into evidence by the hearing officer, together with an index 
of such documents. The hearing officer, may, by order, require the 
interested division or other persons to assist in promptly transporting 
such documents from the hearing location to the Office of the 
Secretary.
    (b) Preparation, Certification of Record Index. Promptly after the 
close of the hearing, the hearing officer shall transmit to the 
Secretary an index of the originals of any motions, exhibits or any 
other documents filed with or accepted into evidence by the hearing 
officer that have not been previously transmitted to the Secretary, and 
the Secretary shall prepare a record index. Prior to issuance of an 
initial decision, or if no initial decision is to be prepared, within 
30 days of the close of the hearing, the Secretary shall transmit the 
record index to the hearing officer and serve a copy of the record 
index on each party. Any person may file proposed corrections to the 
record index with the hearing officer within 15 days of service of the 
record index. The hearing officer shall, by order, direct whether any 
[[Page 32771]] corrections to the record index shall be made. The 
Secretary shall make such corrections, if any, and issue a revised 
record index. If an initial decision is to be issued, the initial 
decision shall include a certification that the record consists of the 
items set forth in the record index or revised record index issued by 
the Secretary.
    (c) Final Transmittal of Record Items to the Secretary. After the 
close of the hearing, the hearing officer shall transmit to the 
Secretary originals of any motions, exhibits or any other documents 
filed with, or accepted into evidence by, the hearing officer, or any 
other portions of the record that have not already been transmitted to 
the Secretary. Prior to service of the initial decision by the 
Secretary, or if no initial decision is to be issued, within 60 days of 
the close of the hearing, the Secretary shall inform the hearing 
officer if any portions of the record are not in the Secretary's 
custody.
    Comment: The Office of the Secretary is responsible for custody and 
safekeeping of administrative proceedings records. Hearings, however, 
are often held away from the Commission's Headquarters in Washington. 
Exhibits introduced at such hearings or filings made directly with the 
hearing officer (see Rule 151) may be voluminous. Rule 350 establishes 
procedures to facilitate and safeguard the transfer to the Secretary of 
motions, exhibits or other record items filed with the hearing officer. 
Parties and other persons are afforded a specific opportunity to object 
if they believe that the certified record is incomplete.
Rule 360. Initial Decision of Hearing Officer
    (a) When Required. Unless the Commission directs otherwise, the 
hearing officer shall prepare an initial decision in any proceeding in 
which the Commission directs a hearing officer to preside at a hearing, 
provided, however, that an initial decision may be waived by the 
parties with the consent of the hearing officer pursuant to Rule 202.
    (b) Content. An initial decision shall include: findings and 
conclusions, and the reasons or basis therefor, as to all the material 
issues of fact, law or discretion presented on the record and the 
appropriate order, sanction, relief, or denial thereof. The initial 
decision shall also state the time period, not to exceed 21 days after 
service of the decision, except for good cause shown, within which a 
petition for review of the initial decision may be filed. The reasons 
for any extension of time shall be stated in the initial decision. The 
initial decision shall also include a statement that, as provided in 
paragraph (d) of this rule:
    (1) the initial decision shall become the final decision of the 
Commission as to each party unless a party files a petition for review 
of the initial decision or the Commission determines on its own 
initiative to review the initial decision as to a party; and
    (2) if a party timely files a petition for review or the Commission 
takes action to review as to a party, the initial decision shall not 
become final with respect to that party.
    (c) Filing, Service and Publication. The hearing officer shall file 
the initial decision with the Secretary. The Secretary shall promptly 
serve the initial decision upon the parties and shall promptly publish 
notice of the filing thereof in the SEC News Digest. Thereafter, the 
Secretary shall publish the initial decision in the SEC Docket; 
provided, however, that in nonpublic proceedings no notice shall be 
published unless the Commission otherwise directs.
    (d) When Final. (1) Unless a party or an aggrieved person entitled 
to review files a petition for review in accordance with the time limit 
specified in the initial decision, or unless the Commission on its own 
initiative orders review pursuant to Rule 411, an initial decision 
shall become the final decision of the Commission.
    (2) If a petition for review is timely filed by a party or an 
aggrieved person entitled to review, or if the Commission upon its own 
initiative has ordered review of a decision with respect to a party or 
a person aggrieved who would be entitled to review, the initial 
decision shall not become final as to that party or person.
    (e) Order of Finality. In the event that the initial decision 
becomes the final decision of the Commission with respect to a party, 
the Commission shall issue an order that the decision has become final 
as to that party. The order of finality shall state the date on which 
sanctions, if any, take effect. Notice of the order shall be published 
in the SEC News Digest and the SEC Docket.
    Comment (a): Paragraph (a) is based on Section 557(b) of the 
Administrative Procedure Act (APA), 5 U.S.C. Sec. 557(b).
    Comment (b): The first sentence of paragraph (b), is based on 
Section 557(c)(3) of the APA, 5 U.S.C. Sec. 557(c)(3).
    Comment (d): Paragraph (d) is based on Sections 557(b) and 704 of 
the APA, 5 U.S.C. Secs. 557(b) and 704. In certain limited 
circumstances, a non-party may be aggrieved by a decision and entitled 
to seek review. See, e.g., Exchange Act Sec. 25(a)(1), 15 U.S.C. 
Sec. 78y(a)(1).
    Comment (e): The order of finality provides formal notice that the 
initial decision will not be reviewed. An initial decision 
automatically becomes final, however, with the passage of time even if 
the order of finality is not issued. Formal notice to a respondent that 
an initial decision has become final is not required for the decision 
to take effect. A respondent is able to ascertain when the period for 
filing a petition for review pursuant to Rule 410, or for initiation of 
review on the Commission's initiative pursuant to Rule 411, has 
expired. When an initial decision becomes final, any collateral 
consequences from entry of a final order take effect immediately. 
Sanctions pursuant to the decision may not be immediately effective, 
however. Rule 601 specifies when amounts owing pursuant to a 
disgorgement or penalty order become due. In addition, some period of 
time may be necessary or appropriate after an initial decision becomes 
final before sanctions should take effect, for example, to allow a 
respondent to provide for an orderly termination of a business upon 
effectiveness of a suspension or bar. Ordinarily, the initial decision 
will specify when sanctions will take effect if the initial decision 
becomes final. If the initial decision or applicable rule does not 
specify when sanctions are to become final, the Commission will enter 
an appropriate order. The Secretary has delegated authority to fix the 
date when sanctions become effective. See 17 CFR 200.30-7.

Appeal to the Commission and Commission Review

Rule 400. Interlocutory Review
    (a) Availability. The Commission will not review a hearing 
officer's ruling prior to its consideration of the entire proceeding in 
the absence of extraordinary circumstances. The Commission may decline 
to consider a ruling certified by a hearing officer pursuant to 
paragraph (c) of this rule if it determines that interlocutory review 
is not warranted or appropriate under the circumstances. The Commission 
may, at any time, on its own motion, direct that any matter be 
submitted to it for review.
    (b) Expedited Consideration. Interlocutory review of a hearing 
officer's ruling shall be expedited in every way, consistent with the 
Commission's other responsibilities.
    (c) Certification Process. A ruling submitted to the Commission for 
interlocutory review must be certified in writing by the hearing 
officer and shall specify the material relevant to the 
[[Page 32772]] ruling involved. The hearing officer shall not certify a 
ruling unless:
    (1) his or her ruling would compel testimony of Commission members, 
officers or employees or the production of documentary evidence in 
their custody; or
    (2) upon application by a party, within five days of the hearing 
officer's ruling, the hearing officer is of the opinion that:
    (i) the ruling involves a controlling question of law as to which 
there is substantial ground for difference of opinion; and
    (ii) an immediate review of the order may materially advance the 
completion of the proceeding.
    (d) Proceedings Not Stayed. The filing of an application for review 
or the grant of review shall not stay proceedings before the hearing 
officer unless he or she, or the Commission, shall so order. The 
Commission will not consider the motion for a stay unless the motion 
shall have first been made to the hearing officer.
    Comment: Rule 400 is based in part on rules governing interlocutory 
review of the decisions of a United States district court by a court of 
appeals. See 28 U.S.C. Sec. 1292(b). In contrast to the practice in the 
federal judicial system, however, the Commission may take up a matter 
on its own motion at any time, even if a hearing officer does not 
certify it for interlocutory review.
    The requirement in paragraph (b) that interlocutory review be 
``expedited in every way, consistent with the Commission's other 
responsibilities,'' conforms to the standard for review in Rules 
102(e)(3) and 500. Interlocutory matters should be promptly resolved in 
order to allow for the timely completion of the entire proceeding.
    Revision Comment: The structure of this rule has been significantly 
modified to break out each of the rule's substantive provisions and 
thereby improve its readability. Other changes in the rule are 
technical and are intended only to clarify its operation.
    One commenter recommended that a hearing officer's decision with 
respect to a motion that he or she be disqualified be subject to 
interlocutory review and that the rule contain an express provision 
making immediately appealable any decision not to quash a subpoena as 
requested by a third-party recipient. The Commission has decided not to 
incorporate these recommendations. Either is subject to interlocutory 
review if the hearing officer determines that the decision meets the 
standards of paragraph (c). Moreover, the decision whether to subpoena 
a witness is best made by the hearing officer who is most familiar with 
the details of the proceeding.
Rule 401. Issuance of Stays
    (a) Procedure. A request for a stay shall be made by written 
motion, filed pursuant to Rule 154, and served on all parties pursuant 
to Rule 150. The motion shall state the reasons for the relief 
requested and the facts relied upon, and, if the facts are subject to 
dispute, the motion shall be supported by affidavits or other sworn 
statements or copies thereof. Portions of the record relevant to the 
relief sought, if available to the movant, shall be filed with the 
motion. The Commission may issue a stay based on such motion or on its 
own motion.
    (b) Scope of Relief. The Commission may grant a stay in whole or in 
part, and may condition relief under this rule upon such terms, or upon 
the implementation of such procedures, as it deems appropriate.
    (c) Stay of a Commission Order. A motion for a stay of a Commission 
order may be made by any person aggrieved thereby who would be entitled 
to review in a federal court of appeals. A motion seeking to stay the 
effectiveness of a Commission order pending judicial review may be made 
to the Commission at any time during which the Commission retains 
jurisdiction over the proceeding.
    (d) Stay of an Action by a Self-Regulatory Organization.
    (1) Availability. A motion for a stay of an action by a self-
regulatory organization for which the Commission is the appropriate 
regulatory agency, for which action review may be sought pursuant to 
Rule 420, may be made by any person aggrieved thereby.
    (2) Summary Entry. A stay may be entered summarily, without notice 
and opportunity for hearing.
    (3) Expedited Consideration. Where the action complained of has 
already taken effect and the motion for stay is filed within 10 days of 
the effectiveness of the action, or where the action complained of, 
will, by its terms, take effect within five days of the filing of the 
motion for stay, the consideration of and decision on the motion for a 
stay shall be expedited in every way, consistent with the Commission's 
other responsibilities. Where consideration will be expedited, persons 
opposing the motion for a stay may file a statement in opposition 
within two days of service of the motion unless the Commission, by 
written order, shall specify a different period.
    Comment: The Commission has stated that it ``generally considers 
four factors'' when evaluating the appropriateness of a stay of its own 
orders:
    (1) whether there is a strong likelihood that a party will succeed 
on the merits in a proceeding challenging the particular Commission 
action (or, if the other factors strongly favor a stay, that there is a 
substantial case on the merits); (2) whether, without a stay, a party 
will suffer irreparable injury; (3) whether there will be substantial 
harm to any person if the stay were granted; and (4) whether the 
issuance of a stay would likely serve the public interest.
    Order Preliminarily Considering Whether to Issue Stay Sua Sponte 
and Establishing Guidelines for Seeking Stay Applications, Exchange Act 
Release No. 33870 (Apr. 7, 1994), 56 SEC Docket 1189, 1190-91 (Apr. 26, 
1994). The evaluation of the factors enumerated by the Commission, 
according to the release, will vary with the ``equities and 
circumstances'' of the case before the Commission. Id. See also In re 
Hibbard, Brown & Co. et al., Admin. Proc. File No. 3-8418, SEC Press 
Release No. 94-72 (Aug. 2, 1994) at 4.
    The General Counsel has been delegated the authority to decide 
whether a stay should be granted. 17 CFR 200.30-14(g)(5), (6). Such 
decisions by the General Counsel are subject to review pursuant to Rule 
430.
    The Commission may condition the grant of a stay on such terms or 
upon the implementation of such procedures as it deems appropriate. For 
example, where a respondent seeks a stay of a disgorgement order, the 
Commission may require safeguards, such as establishment of an escrow, 
that would assure that funds will be available for payment at a later 
date if the disgorgement order is upheld.
    Comment (c): Rule 401(c) requires that a motion for a stay of a 
Commission order pending review by a court be made to the Commission 
while the Commission retains jurisdiction over the proceeding. Other 
than a temporary cease-and-desist order, which is subject to judicial 
review in the first instance in a United States District Court, 
Commission orders are reviewable by a court of appeals. See, e.g., 
Exchange Act Sec. 25, 15 U.S.C. 78y (governing judicial review of final 
orders of the Commission generally), Exchange Act Sec. 21C(d)(2), 15 
U.S.C. Sec. 78u-3(d)(2) (governing judicial review of temporary cease-
and-desist orders). The Commission loses jurisdiction to grant a stay 
of an order subject to review in a court of appeals only after the 
record is filed in a court of appeals. See, e.g., Exchange Act 
Secs. 25(a)(3), (c)(2), 15 U.S.C. 78y(a)(3), (c)(2), and Fed. R. App. 
P. 18. [[Page 32773]] 
    Comment (d): This paragraph is based on Section 19(d) of the 
Exchange Act, 15 U.S.C. Sec. 78s(d), and former Exchange Act Rule 19d-
2, 17 CFR 240.19d-2 (1994).
    The provision for expedited consideration in paragraph (d)(3) is 
based on the requirement of Section 19(d)(2) that the Commission 
establish an expedited procedure for consideration and determination of 
the question of a stay for ``appropriate cases.'' The Commission has 
established a guideline for the timely determination of such requests. 
See 17 CFR 201.900 (Informal Procedures and Supplementary Information 
Concerning Adjudicatory Proceedings). A self-regulatory organization 
controls the effective date of the sanctions it imposes. If it desires 
additional time to address the issue of whether a stay should issue, it 
may consider delaying the effective date of its order. If the 
determination complained of has not taken effect, the time limits for 
the filing of opposing and reply briefs would be those set forth in 
Rule 154.
    Revision Comment: A commenter suggested that the Commission amend 
the rule to include substantive standards under which a stay shall be 
granted or to identify the criteria the Commission applies in 
considering a request for a stay. As noted in the comment to Rule 401, 
earlier this year the Commission reiterated in a release the factors 
generally considered when evaluating the appropriateness of a stay 
under Section 25(c)(2) of the Exchange Act. Order Preliminarily 
Considering Whether to Issue Stay Sua Sponte and Establishing 
Guidelines for Seeking Stay Applications, Exchange Act Release No. 
33870 (Apr. 7, 1994). The Commission believes that the long-standing 
enunciation of its policy with respect to such stays provides 
sufficient guidance.
    A commenter suggested that the Commission reconsider its rule 
allowing motions for stays of a self-regulatory organization (SRO) 
determination, including a final SRO disciplinary action, to be made 
``at any time.'' The commenter proposed that a person seek a stay 
within 10 days of the filing of an SRO disciplinary decision pursuant 
to Section 19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1). The 
Commission does not agree that respondents should be required to 
request a stay within such a limited period. Requiring a stay to be 
sought within a fixed time would place respondents who may have no 
reason to seek a stay immediately at a disadvantage, as they may be 
entitled to a stay or other relief as the result of changed 
circumstances at a later time. Cf. Rule 512(e).
    Exchange Act Section 19(d)(2) requires that in ``appropriate 
cases'' the Commission establish an expedited procedure for 
consideration and determination of the question of a stay. Expedited 
consideration is appropriate when a sanction or other action complained 
of has already taken effect or will take effect prior to the time a 
decision could be made without expedited consideration.
Rule 410. Appeal of Initial Decisions by Hearing Officers
    (a) Petition for Review; When Available. In any proceeding in which 
an initial decision is made by a hearing officer, any party, and any 
other person who would have been entitled to judicial review of the 
decision entered therein if the Commission itself had made the 
decision, may file a petition for review of the decision with the 
Commission.
    (b) Procedure. The petition for review of an initial decision shall 
be filed with the Commission within such time after service of the 
initial decision as prescribed by the hearing officer pursuant to Rule 
360(b). The petition shall set forth the specific findings and 
conclusions of the initial decision as to which exception is taken, 
together with supporting reasons for each exception. Supporting reasons 
may be stated in summary form. Any exception to an initial decision not 
stated in the petition for review, or in a previously filed proposed 
finding made pursuant to Rule 340, may, at the discretion of the 
Commission, be deemed to have been waived by the petitioner.
    (c) Financial Disclosure Statement Requirement. Any person who 
files a petition for review of an initial decision that asserts that 
person's inability to pay either disgorgement, interest or a penalty 
shall file with the opening brief a sworn financial disclosure 
statement containing the information specified in Rule 630(b).
    (d) Opposition to Review. A party may seek leave to file a brief in 
opposition to a petition for review within five days of the filing of 
the petition. The Commission will grant leave, or order the filing of 
an opposition on its own motion, only if it determines that briefing 
will significantly aid the decisional process. A brief in opposition 
shall identify those issues which do not warrant consideration by the 
Commission and shall state succinctly the reasons therefore.
    (e) Prerequisite to Judicial Review. Pursuant to Section 704 of the 
Administrative Procedure Act, 5 U.S.C. 704, a petition to the 
Commission for review of an initial decision is a prerequisite to the 
seeking of judicial review of a final order entered pursuant to such 
decision.
    Comment (a)-(b): Pursuant to Section 557(c) of the Administrative 
Procedure Act, 5 U.S.C Sec. 557(c), in adjudications required to be 
conducted ``on the record after opportunity for agency hearing,'' a 
party is entitled to a reasonable opportunity to file exceptions to the 
initial decision and supporting reasons for the exceptions or proposed 
findings or conclusions. The Commission's practice, reflected in 
paragraph (a), is to provide an opportunity to file exceptions in all 
proceedings where an initial decision is to be made, not only those in 
``on-the-record'' or ``formal'' adjudication. See Comments to Rules 100 
and 191.
    Except in limited cases as specified in Rule 411(b)(1) when the 
right of appeal is mandatory, the Commission, after considering a 
petition for review, may determine not to hear an appeal or to limit 
the issues on appeal. Administrative Procedure Act Sec. 557(b), 5 U.S.C 
Sec. 557(b) (``[o]n appeal from or review of the initial decision, the 
agency has all the powers which it would have in making the initial 
decision except as it may limit the issues on notice or by rule''). Cf. 
Section 4A(b) of the Exchange Act, 15 U.S.C. Sec. 78d-1(b) (providing a 
right to appeal certain decisions to the Commission).
    The standards for granting a petition for review are set forth in 
Rule 411. Under these standards, the Commission grants a petition for 
review in virtually all cases. The product of a consensus over many 
years, this result represents a Commission determination that there is 
a benefit to joint deliberation by the Commission when exception is 
taken to an initial decision.
    Comment (c): In order to make a determination with respect to 
whether disgorgement, interest or a penalty is appropriate for a 
respondent who raises inability to pay as an issue, the Commission must 
have access to complete and current financial information. Although 
financial disclosure may have occurred during the course of a hearing, 
by the time an initial decision and petition for review are filed that 
information is not likely to be current. Accordingly, a current 
financial disclosure statement is required if a petition for review 
raises exceptions concerning inability to pay.
    Comment (d): The Commission has rarely found grounds for denial of 
a petition for review under its long-standing standards for determining 
whether to grant review, now set forth in Rule 411(b). Therefore, 
routine opposition to a petition for review [[Page 32774]] serves 
little purpose. Accordingly, leave from the Commission must be sought 
prior to filing an opposition to a petition for review. Where the 
Commission believes briefing would significantly assist its decisional 
process, it may grant leave to file an opposition or order such a 
filing. The Commission has delegated authority to the General Counsel 
to determine whether to grant requests for leave to file an opposition. 
See 17 CFR 200.30-14.
    Revision Comments: Comment was requested as to (1) whether, 
notwithstanding the potential benefits of preparing a petition for 
review, the requirement for a petition should be eliminated where an 
appeal is provided as of right by Section 4A(b) of the Exchange Act; 
and (2) whether, in light of the Commission's longstanding practice of 
granting virtually all petitions for review, the requirement of filing 
a petition for review should be eliminated.
    One commenter supported retaining the petition for review and 
suggested that the petition for review is a more appropriate mechanism 
for noticing an appeal because it helps clarify issues and provides 
more information than the notice of appeal used under the Federal Rules 
of Appellate Procedure.
    The Commission grants virtually all petitions for review. Although 
Commission review in a particular case can be time consuming, it 
establishes authoritative precedent applicable to other cases and 
promotes accountability for, and confidence in, the Commission's 
adjudicatory process. Commission review of those cases in which review 
is sought has tended to encourage acceptance of hearing officers' 
decisions and to promote the settlement of cases even prior to hearing 
in similar cases, thereby reducing the overall adjudicatory workload.
    The Commission has decided to retain the petition for review 
process for all cases including those where a right to appeal is 
statutorily required. The petition for review is a summary document and 
requires limited resources to prepare. Requiring the petition, however, 
enhances the efficiency of the appeals process for both the Commission 
and parties by focusing attention from an early point on those issues 
considered most significant by the petitioner. Thus, the petition for 
review offers substantial benefits both to the Commission and to 
petitioners.
    As proposed, the rule would have allowed the filing of an 
opposition to review by any person opposing review. As noted by one 
commenter, given the Commission's practices with respect to the grant 
of petitions for review, an opposition to review serves little benefit 
to either the Commission or the parties, except in those rare cases 
where there is a genuine issue as to the necessity or appropriateness 
of review. As revised, the rule allows a party to seek leave to file a 
brief in opposition to a petition for review. The Commission believes 
this mechanism will limit the unnecessary expenditure of time or 
resources in routine oppositions to petitions for review while 
allowing, in appropriate cases, for other parties to be heard in 
opposition. The Commission retains discretion to direct the filing of 
an opposition on its motion in any case.
    Comment was requested as to whether, after the filing of a petition 
for review, a 10- or 15-day period would be more realistic for filing a 
brief in opposition to a petition for review or a petition for summary 
affirmance. As revised, the Rule provides a 10-day period for a person 
to seek leave to file an opposition. If leave is granted, the 
Commission will specify the time allowed for filing a brief. Provisions 
related specifically to the filing of a motion for summary affirmance 
have been deleted.
Rule 411. Commission Consideration of Initial Decisions by Hearing 
Officers
    (a) Scope of Review. The Commission may affirm, reverse, modify, 
set aside or remand for further proceedings, in whole or in part, an 
initial decision by a hearing officer and may make any findings or 
conclusions that in its judgment are proper and on the basis of the 
record.
    (b) Standards for Granting Review Pursuant to a Petition for 
Review.
    (1) Mandatory Review. After a petition for review has been filed, 
the Commission shall review any initial decision that:
    (i) denies any request for action pursuant to Section 8(a) or 
Section 8(c) of the Securities Act of 1933, 15 U.S.C. 77h (a), (c), or 
the first sentence of Section 12(d) of the Exchange Act, 15 U.S.C. 
78l(d);
    (ii) suspends trading in a security pursuant to Section 12(k) of 
the Exchange Act, 15 U.S.C. 78l(k); or
    (iii) is in a case of adjudication (as defined in 5 U.S.C. 551) not 
required to be determined on the record after notice and opportunity 
for hearing (except to the extent there is involved a matter described 
in 5 U.S.C. 554(a) (1) through (6)).
    (2) Discretionary Review. The Commission may decline to review any 
other decision. In determining whether to grant review, the Commission 
shall consider whether the petition for review makes a reasonable 
showing that:
    (i) a prejudicial error was committed in the conduct of the 
proceeding; or
    (ii) the decision embodies:
    (A) a finding or conclusion of material fact that is clearly 
erroneous; or
    (B) a conclusion of law that is erroneous; or
    (C) an exercise of discretion or decision of law or policy that is 
important and that the Commission should review.
    (c) Commission Review Other Than Pursuant to a Petition for Review. 
The Commission may, on its own initiative, order review of any initial 
decision, or a portion of any initial decision, within 21 days after 
the end of the period established for filing a petition for review 
pursuant to Rule 410(b) or any brief in opposition to a petition for 
review permitted pursuant to Rule 410(d). A party who does not intend 
to file a petition for review, and who desires the Commission's 
determination whether to order review on its own initiative to be made 
in a shorter time, may make a motion for an expedited decision, 
accompanied by a written statement that the party waives its right to 
file a petition for review. The vote of one member of the Commission, 
conveyed to the Secretary, shall be sufficient to bring a matter before 
the Commission for review.
    (d) Limitations on Matters Reviewed. Review by the Commission of an 
initial decision shall be limited to the issues specified in the 
petition for review or the issues, if any, specified in the briefing 
schedule order issued pursuant to Rule 450(a). On notice to all 
parties, however, the Commission may, at any time prior to issuance of 
its decision, raise and determine any other matters that it deems 
material, with opportunity for oral or written argument thereon by the 
parties.
    (e) Summary Affirmance. The Commission may summarily affirm an 
initial decision based upon the petition for review and any response 
thereto, without further briefing, if it finds that no issue raised in 
the petition for review warrants further consideration by the 
Commission.
    (f) Failure to Obtain a Majority. In the event a majority of 
participating Commissioners do not agree to a disposition on the 
merits, the initial decision shall be of no effect, and an order will 
be issued in accordance with this result.
    Comment (a): Section 557(b) of the Administrative Procedure Act, 5 
U.S.C Sec. 557(b), provides that ``[o]n appeal from or review of the 
initial decision, the agency has all the powers which it 
[[Page 32775]] would have in making the initial decision except as it 
may limit the issues on notice or by rule.''
    Comment (b): Paragraph (b) is based, in part, on the requirements 
of Exchange Act Section 4A, 15 U.S.C. Sec. 78d-1.
    Comment (c): Paragraph (c) is based, in part, on the requirements 
of Exchange Act Section 4A.
    Before the Commission determines whether to order review of an 
issue on its own motion, petitions for review and cross-petitions, if 
any, should be filed in accordance with Rule 410(b) and opposition 
briefs, if any, should be filed in accordance with Rule 410(d). Under 
Rule 411(c), there is a 21-day period after the end of the period for 
the filing of a petition for review during which the Commission may 
determine whether to grant review. If time is allowed for filing an 
opposition, there would be a corresponding increase in the time allowed 
for the Commission to order review on its own motion.
    Comment (e): A provision for summary affirmance was added to the 
Rules of Practice in 1964 based upon Recommendation Number 9 of the 
Administrative Conference of the United States (ACUS). See also ACUS 
Recommendation No. 68-6 (suggesting that an agency may accord 
administrative finality to an initial decision by summarily affirming 
the initial decision or denying a petition for review). Summary 
affirmance may be appropriate when exception is taken to conclusions of 
law, but there is no genuine dispute as to any material facts, or when 
the Commission believes that deliberation by the Commission would not 
be useful or appropriate. Summary affirmance has very rarely been 
granted. But see In the Matter of Joseph A. Lugo, Exchange Act Release 
No. 25982 (Aug. 8, 1988), 41 SEC Docket 946 (Aug 23, 1988) (petitioners 
failed to file required briefs).
    Revision Comment (c): The period during which the Commission can 
determine whether to grant review on its own initiative has been 
extended from 15 days to 21 days to conform to the 21-day period 
allowed in Rule 450(a)(2) for the issuance of a briefing schedule 
order.
    Revision Comment (e): Comment was requested as to whether, in light 
of the Commission's summarily affirming an initial decision only 
rarely, the possibility of a summary affirmance should be eliminated. 
One commenter objected to summary affirmance based solely upon the 
petition for review and suggested that to the extent that review of an 
initial decision can be denied at the Commission's discretion, summary 
affirmance is unnecessary and counteracts the benefits of joint 
deliberation. The commenter suggested that if summary affirmance is 
retained it should be considered only after briefs have been filed, and 
should not be available at all where the Commission has granted review 
based upon a reasonable showing of error.
    While summary affirmance has rarely been used in the past, the 
Commission's adjudication workload changes over time. Summary 
affirmance provides a potentially useful mechanism to resolve quickly 
certain cases. The Commission has decided to retain summary affirmance 
as a mechanism for disposition of appropriate cases. See In the Matter 
of Joseph Lugo, Admin. Proc. File No. 3-6740 (Aug. 8, 1988), Exchange 
Act Release No. 25982, 41 SEC Docket 946 (1988) (petitioners failed to 
file required briefs).
Rule 420. Appeal of Determinations by Self-Regulatory Organizations
    (a) Application for Review; When Available. An application for 
review by the Commission may be filed by any person who is aggrieved by 
a determination of a self-regulatory organization with respect to any
    (i) final disciplinary sanction;
    (ii) denial or conditioning of membership or participation;
    (iii) prohibition or limitation in respect to access to services 
offered by that self-regulatory organization or a member thereof; or
    (iv) bar from association as to which a notice is required to be 
filed with the Commission pursuant to Section 19(d)(1) of the Exchange 
Act, 15 U.S.C. 78s(d)(1).
    (b) Procedure. An application for review may be filed with the 
Commission pursuant to Rule 151 within 30 days after notice of the 
determination was filed with the Commission pursuant to Section 
19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1), and received by the 
aggrieved person applying for review. The application shall be served 
by the applicant on the self-regulatory organization. The application 
shall identify the determination complained of, set forth in summary 
form a brief statement of alleged errors in the determination and 
supporting reasons therefor and state an address where the applicant 
can be served with the record index. The application shall be 
accompanied by the notice of appearance required by Rule 102(d).
    (c) Determination Not Stayed. Filing an application for review with 
the Commission pursuant to paragraph (b) of this rule shall not operate 
as a stay of the complained of determination made by the self-
regulatory organization unless the Commission otherwise orders either 
pursuant to a motion filed in accordance with Rule 401 or on its own 
motion.
    (d) Certification of the Record; Service of the Index. Fourteen 
days after receipt of an application for review or a Commission order 
for review, the self-regulatory organization shall certify and file 
with the Commission one copy of the record upon which the action 
complained of was taken, and shall file with the Commission three 
copies of an index to such record, and shall serve upon each party one 
copy of the index.
    Comment: Rule 420 (a) and (b) are based in part on Exchange Act 
Section 19(d)(2), 15 U.S.C Sec. 78s(d)(2).
    Comment (b): It is the responsibility of the person seeking review 
to assure that the application for review is actually received by the 
Commission within the time limit provided. See Rule 151. While a method 
of service that provides proof of delivery is not mandatory, in the 
event there is a question as to whether an application was timely 
filed, it is the applicant's burden to establish when the filing was 
made.
    Commission review of self-regulatory organization determinations 
for which an application may be filed pursuant to paragraph (a) is 
required by statute. The purpose of the statement of alleged errors and 
supporting reasons is to provide general notice of the basis for the 
application, not to justify the need for review. Citations to the 
record are not required because at the time the application is filed 
the record index has not been served on the applicant.
    Revision Comment (a)-(d): Rules 420 and 421 are the only rules 
within the Rules of Practice limited expressly to self-regulatory 
organization (SRO) determinations. The substantive provisions of former 
Exchange Act Rules 19d-2 (concerning applications for stays of SRO 
determinations) and 19d-3 (concerning applications for review of SRO 
determinations generally) have been incorporated into Rules 420, 421 
and other rules in the Rules of Practice. Rules 19d-2 and 19d-3 have 
been revised to cross-reference the Rules of Practice. Their 
substantive provisions have been deleted. These two rules were not 
deleted entirely at this time in order to provide a transition period 
for the updating of reference works, materials published by SROs and 
other guides relied upon by associated persons of SROs or others who 
seek information about the Commission's review of SRO determinations.
    Comment was requested whether, in light of the potential benefits 
of a [[Page 32776]] summary statement of the contested issues early in 
the review process, respondents appealing the determination of an SRO 
should be required to file a petition for review that includes a 
statement of the issues on review and the alleged errors by the SRO. 
The National Association of Securities Dealers (NASD) suggested that 
the application for review process should require parallel levels of 
specificity with the petition for review process governing appeals from 
an initial decision of a hearing officer. The NASD commented that it 
believes that the Commission's obligation to conduct a de novo review 
of an SRO disciplinary proceeding requires that the Commission apply a 
non-deferential standard of review, but does not mandate that the 
Commission raise issues that the party seeking review overlooked.
    The NASD suggested, therefore, that the Rules should provide that 
issues not raised by the party seeking review are deemed waived. The 
NASD asserted that briefs filed by the NASD with the Commission 
typically address not only those issues raised by the parties seeking 
review, but all issues that the NASD believes that the Commission may 
wish to address. The NASD stated that in its view, ``[i]t is not 
uncommon for briefs to devote more discussion to issues that are not in 
dispute than those that have been raised by the parties.'' Letter from 
T. Grant Callery, V.P. and General Counsel, NASD, to Jonathan G. Katz, 
Secretary, SEC 25 n.63 (Jan. 31, 1994).
    The Commission believes that the de novo standard requires 
consideration of the entire record of a proceeding including material 
issues on that record, even if the parties have themselves failed to 
raise those issues. Over the 10-year period from 1983 through 1992, 
review of NASD disciplinary sanctions has been sought in less than five 
percent of all cases. Commission opinions on review play a critical 
role in setting standards for the securities industry. While it is not 
inconsistent with a de novo standard for the Commission to expect the 
parties to raise material issues and to bring forward relevant portions 
of the record, the Commission should not, as a matter of policy, ignore 
material issues or allow errors unaddressed by the parties to stand. 
Moreover, since the person seeking review would not have a record index 
at the time an application for review is filed, failure to note an 
exception at this preliminary stage would not constitute a waiver of 
any matters.
    In response to the suggestions of the NASD, Rule 420 requires the 
person seeking review to make a summary statement of alleged errors in 
the determination complained of, so as to give the Commission and other 
parties notice of issues on review. This procedure allows the 
Commission to make a more informed briefing schedule order, pursuant to 
Rule 450, and to provide earlier opportunities for all parties to 
consider the content of their briefs.
    The NASD also suggested that the Rules of Practice should provide 
that the Commission give parties notice and an opportunity to address 
any additional issues that the Commission raises in an administrative 
appeal. The NASD urged that adoption of a policy advising litigants 
when the Commission is raising an issue sua sponte could make SRO 
briefs ``more focused, more succinct, and presumably more helpful.''
    Revised Rule 421(b) states that the Commission will provide an 
opportunity for supplemental briefing with respect to issues not raised 
by the parties when the Commission believes such briefing would 
significantly aid the decisional process. Supplemental briefing is not 
appropriate, however, in each case where the parties overlook an issue 
deemed material by the Commission. For example, where the law on an 
issue overlooked by the parties is clear, requiring briefs can inject 
unnecessary delay and expense with no corresponding benefit to the 
Commission or the parties.
    Comment was also requested whether the requirement to include a 
financial disclosure statement if a respondent makes a claim of 
inability to pay should be extended to SRO proceedings. One commentator 
agreed that the requirement should be added, for purposes of 
consistency, to the rules governing appeals from SRO decisions. The 
Commission has decided not to add a financial disclosure requirement 
for appeals of SRO sanctions. The Commission, however, may require 
additional evidence as to a respondent's claim of inability to pay, 
including submission of a financial disclosure form, in particular 
cases. See Rule 452 (regarding additional evidence). A self-regulatory 
organization may choose to impose a financial disclosure requirement 
when a person intends to argue an inability to pay on appeal to the 
self-regulatory organization. Such a financial statement would provide 
a standardized baseline for consideration of claims of inability to 
pay.
Rule 421. Commission Consideration of Determinations by Self-Regulatory 
Organizations
    (a) Commission Review Other than Pursuant to a Petition for Review. 
The Commission may, on its own initiative, order review of any 
determination by a self-regulatory organization that could be subject 
to an application for review pursuant to Rule 420(a) within 40 days 
after notice thereof was filed with the Commission pursuant to Section 
19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1).
    (b) Supplemental Briefing. The Commission may at any time prior to 
issuance of its decision raise or consider any matter that it deems 
material, whether or not raised by the parties. Notice to the parties 
and an opportunity for supplemental briefing with respect to issues not 
briefed by the parties shall be given where the Commission believes 
that such briefing would significantly aid the decisional process.
    Comment: Exchange Act Section 19(e) sets forth standards regarding 
the scope of the Commission's review of a self-regulatory 
organizations' imposition of a final disciplinary sanction. Exchange 
Act Section 19(f) sets forth standards with respect to the Commission's 
review of a self-regulatory organization's denial of membership or 
participation to an applicant, the barring of a person from becoming 
associated with a member of a self-regulatory organization, and a self-
regulatory organization's prohibition or limitation of a person with 
respect to access to services offered by the self-regulatory 
organization or any member thereof. Among the many opinions in which 
the Commission and the courts of appeal have explained the scope of the 
Commission's review under Sections 19(e) and 19(f) are the following: 
Schellenbach v. SEC, 989 F.2d 907, 909 (7th Cir. 1993) (in considering 
an appeal under Section 19(e), Commission undertakes an independent 
review of facts and law); Todd & Co. v. SEC, 557 F.2d 1008, 1013 (7th 
Cir. 1977) (self-regulatory organization rules and actions are subject 
to full review by Commission, which must base its decision on its own 
findings); R.H. Johnson & Co. v. SEC, 198 F.2d 690, 695 (2d Cir.), 
cert. denied, 344 U.S. 855 (1952) (noting that provisions of former 15 
U.S.C. Sec. 78o-3 called for de novo findings by Commission); Paul 
Edward Van Dusen, 47 S.E.C. 668, 690 (1981) (on appeal taken under 
Section 19(f), in order to sustain self-regulatory organization's 
action, Commission must find that grounds on which self-regulatory 
organization based that action exist, that action was in 
[[Page 32777]] accordance with organization's rules, and that those 
rules are, and were applied in a manner, consistent with purposes of 
Exchange Act); Sumner B. Cotzin, 45 S.E.C. 575, 580 (1974) (``[W]e must 
make our own findings as to the conduct of applicants seeking review of 
[self-regulatory organization disciplinary action], determine whether 
such conduct violated the organization's rules, and, if so, determine 
whether the sanctions imposed are excessive or oppressive having due 
regard to the public interest.'').
    Comment (a): Rule 421(a) allows the Commission 40 days to determine 
whether to order review on its own initiative. The time limit for 
Commission review is tied to the Commission's receipt of the notice 
required by Exchange Act Section 19(d)(1), not receipt of the notice by 
the respondent, since the Commission would have no practical way of 
knowing when such receipt occurred.
Rule 430. Appeal of Actions Made Pursuant to Delegated Authority
    (a) Scope of Rule. Any person aggrieved by an action made by 
authority delegated in Secs. 200.30-1 through 200.30-17 of this chapter 
may seek review of the action pursuant to paragraph (b) of this rule.
    (b) Procedure. (1) Notice of Intention to Petition for Review. A 
party or any person aggrieved by an action made pursuant to delegated 
authority may seek Commission review of the action by filing a written 
notice of intention to petition for review within five days after 
actual notice to the party of the action or service of notice of the 
action pursuant to Rule 141(b), whichever is earlier. The notice shall 
identify the petitioner and the action complained of, and shall be 
accompanied by a notice of appearance pursuant to Rule 102(d).
    (2) Petition for Review. Within five days after the filing of a 
notice of intention to petition for review pursuant to paragraph (b)(1) 
of this rule, the person seeking review shall file a petition for 
review containing a clear and concise statement of the issues to be 
reviewed and the reasons why review is appropriate. The petition shall 
include exceptions to any findings of fact or conclusions of law made, 
together with supporting reasons for such exceptions based on 
appropriate citations to such record as may exist. These reasons may be 
stated in summary form.
    (c) Prerequisite to Judicial Review. Pursuant to Section 704 of the 
Administrative Procedure Act, 5 U.S.C. 704, a petition to the 
Commission for review of an action made by authority delegated in 
Secs. 200.30-1 through 200.30-17 of this chapter is a prerequisite to 
the seeking of judicial review of a final order entered pursuant to 
such an action.
    Comment (a): Congress granted the Commission explicit authority to 
delegate certain functions to an individual commissioner, division 
directors and others in 1962. Pub. L. No. 87-592, 76 Stat. 394. This 
authority appears in Sections 4A and 4B of the Exchange Act, 15 U.S.C. 
78d-1 and 78d-2, and was amended most recently in 1987. See Pub. L. No. 
100-181, Title III, Sec. 308(a), 101 Stat. 1254. The predecessor rule 
to Rules 430 and 431, former Rule 26, was adopted in 1963. See 
Securities Act Release No. 4588 (Mar. 8, 1963) (adopting release).
    Due to the different nature of matters delegated to hearing 
officers, senior staff or the duty officer, the Commission's rules 
provide different mechanisms for review of such actions. See Rules 410 
and 411 (procedures relating to initial decisions by a hearing 
officer); 17 CFR 200.43 (procedures relating to duty officer). Rule 430 
relates to certain delegations made to staff. It applies only to review 
of actions taken pursuant to authority delegated in 17 CFR 200.30-1 
through 200.30-17. Authority delegated by other provisions--for 
example, the delegation of authority to issue subpoenas pursuant to a 
private order directing investigation (``formal order'')--is not 
subject to the Rule.
    Comment (b): Decisions made by division directors or other senior 
staff pursuant to delegated authority often relate to registration 
statements, proxy statements, applications, periodic filings or other 
matters which are highly time sensitive. Generally, the record in 
actions made pursuant to delegated authority is not extensive. The rule 
therefore requires a prompt decision by a party as to whether review 
will be sought. Under Rule 430, a party or other aggrieved person must 
file a notice of intent to petition for review within five days after 
actual notice of the decision, or within five days after service of a 
written decision pursuant to Rule 141(b), whichever is earlier. Actual 
notice of a decision pursuant to delegated authority may be conveyed by 
any means, including a telephone call. The required information in a 
petition for review is essentially the same as that required for a 
petition for review of a hearing officer's initial decision. See Rule 
410(b).
Rule 431. Commission Consideration of Actions Made Pursuant to 
Delegated Authority
    (a) Scope of Review. The Commission may affirm, reverse, modify, 
set aside or remand for further proceedings, in whole or in part, any 
action made pursuant to authority delegated in Secs. 200.30-1 through 
200.30-17 of this chapter.
    (b) Standards for Granting Review Pursuant to a Petition for 
Review.
    (1) Mandatory Review. After a petition for review has been filed, 
the Commission shall review any action that it would be required to 
review pursuant to Rule 411(b)(1) if the action was made as the initial 
decision of a hearing officer.
    (2) Discretionary Review. The Commission may decline to review any 
other action. In determining whether to grant review, the Commission 
shall consider the factors set forth in Rule 411(b)(2).
    (c) Commission Review Other Than Pursuant to a Petition for Review. 
The Commission may, on its own initiative, order review of any action 
made pursuant to delegated authority at any time, provided, however, 
that where there are one or more parties to the matter, such review 
shall not be ordered more than ten days after the action. The vote of 
one member of the Commission, conveyed to the Secretary, shall be 
sufficient to bring a matter before the Commission for review.
    (d) Required Items in an Order for Review. In an order granting a 
petition for review or directing review on the Commission's own 
initiative, the Commission shall set forth the time within which any 
party or other person may file a statement in support of or in 
opposition to the action made by delegated authority and shall state 
whether a stay shall be granted, if none is in effect, or shall be 
continued, if in effect pursuant to paragraph (e) of this rule.
    (e) Automatic Stay of Delegated Action. An action made pursuant to 
delegated authority shall have immediate effect and be deemed the 
action of the Commission. Upon filing with the Commission of a notice 
of intention to petition for review, or upon notice to the Secretary of 
the vote of a Commissioner that a matter be reviewed, an action made 
pursuant to delegated authority shall be stayed until the Commission 
orders otherwise, provided, however, there shall be no automatic stay 
of an action:
    (1) to grant a stay of action by the Commission or a self-
regulatory organization as authorized by 17 CFR 200.30-14(g)(5)-(6); or
    (2) to commence a subpoena enforcement proceeding as authorized by 
17 CFR 200.30-4(a)(10).
    (f) Effectiveness of Stay or of Commission Decision to Modify or 
[[Page 32778]] Reverse a Delegated Action. As against any person who 
shall have acted in reliance upon any action at a delegated level, any 
stay or any modification or reversal by the Commission of such action 
shall be effective only from the time such person receives actual 
notice of such stay, modification or reversal.
    Comment: See Comment (a) to Rule 430.
    Comment (b): Paragraph (b) is based, in part, on requirements of 
Exchange Act Section 4A, 15 U.S.C. Sec. 78d-1.
    Comment (c): Paragraph (c) is based, in part, on requirements of 
Exchange Act Section 4A, 15 U.S.C. Sec. 78d-1. In practice, the 
authority to review decisions on the Commission's own initiative is 
used very rarely.
    Revision Comment (c): Comment was requested as to whether the 
period in which the Commission could order review on its own initiative 
should be retained at five days or extended to 15 days. One commenter 
supported the extension of the period to 10 days. The Commission has 
adopted a 10-day standard.
    Revision Comment (e): After publication of the proposed rules, the 
delegation to the Director of the Division of Enforcement was amended 
to permit the Director to authorize a subpoena enforcement proceeding 
in Federal Court. See 17 CFR 200.30-4(a)(10). Under Rule 431, the 
Director's decision to commence a proceeding is not automatically 
stayed when notice of intention to file a petition for review is given 
since a stay would unnecessarily disrupt judicial proceedings commenced 
on the basis of the Director's decision. The presence of a Federal 
judge overseeing the subpoena enforcement proceeding makes an automatic 
stay unnecessary for the limited period before the Commission reviews 
the Director's decision.
Rule 450. Briefs Filed with the Commission
    (a) Briefing Schedule Order. Other than review ordered pursuant to 
Rule 431, if review of a determination is mandated by statute, rule, or 
judicial order or the Commission determines to grant review as a matter 
of discretion, the Commission shall issue a briefing schedule order 
directing the party or parties to file opening briefs and specifying 
particular issues, if any, as to which briefing should be limited or 
directed. Unless otherwise provided, opening briefs shall be filed 
within 40 days of the date of the briefing schedule order. Opposition 
briefs shall be filed within 30 days after the date opening briefs are 
due. Reply briefs shall be filed within 14 days after the date 
opposition briefs are due. No briefs in addition to those specified in 
the briefing schedule order may be filed except with leave of the 
Commission. The briefing schedule order shall be issued:
    (1) at the time the Commission orders review on its own initiative 
pursuant to Rules 411 or 421, or orders interlocutory review on its own 
motion pursuant to Rule 400(a); or
    (2) within 21 days, or such longer time as provided by the 
Commission, after:
    (i) the last day permitted for filing a petition for review 
pursuant to Rule 410(b) or a brief in opposition to a petition for 
review pursuant to Rule 410(d);
    (ii) receipt by the Commission of an index to the record of a 
determination of a self-regulatory organization filed pursuant to Rule 
420(d);
    (iii) receipt by the Commission of the mandate of a court of 
appeals with respect to a judicial remand; or
    (iv) certification of a ruling for interlocutory review pursuant to 
Rule 400(c).
    (b) Contents of Briefs. Briefs shall be confined to the particular 
matters at issue. Each exception to the findings or conclusions being 
reviewed shall be stated succinctly. Exceptions shall be supported by 
citation to the relevant portions of the record, including references 
to the specific pages relied upon, and by concise argument including 
citation of such statutes, decisions and other authorities as may be 
relevant. If the exception relates to the admission or exclusion of 
evidence, the substance of the evidence admitted or excluded shall be 
set forth in the brief, in an appendix thereto, or by citation to the 
record. Reply briefs shall be confined to matters in opposition briefs 
of other parties.
    (c) Length Limitation. Opening and opposition briefs shall not 
exceed 50 pages and reply briefs shall not exceed 25 pages, exclusive 
of pages containing the table of contents, table of authorities, and 
any addendum, except with leave of the Commission.
    Comment (a): When the Commission reviews an action made by 
delegated authority pursuant to Rules 430 and 431, briefs are generally 
not submitted and no briefing schedule order is required.
    Under Rule 450, the first brief on the merits would usually be due 
40 days from the date of the scheduling order. The rules allot 
substantial time prior to issuance of the scheduling order for filing 
of a petition for review or, in the case of an appeal from a self-
regulatory organization decision, for filing of a notice pursuant to 
Exchange Act Rule 19d-1, 17 CFR 240.19d-1, an application for review 
and the record index. See Rule 360 (21-day maximum for filing petition 
for review of initial decision); Rule 420(b) (30 days for filing 
application for review of determination by self-regulatory 
organization); Rule 420(d) (14 days to file record index). The time 
taken by the Commission to issue the briefing schedule order--up to 21 
days in the ordinary case--affords additional time for parties to 
review the record and begin preparation of a merits brief. Accordingly, 
requests for extensions of time to file briefs will be disfavored. 
Failure to file a required brief may be grounds for dismissal. See Rule 
180(c).
    Comment (b): Failure to cite to the record in briefs can result in 
unnecessary delay, particularly where the record is long. Under Rule 
450, the obligation to support claims made in a brief lies with the 
person submitting the brief. Briefs that fail to include appropriate 
citations to the record, or to conform to other requirements of the 
Rules of Practice relating to the form and content of briefs, may be 
rejected or subject to other sanction. See Rule 180(b).
    Revision Comment (a): Paragraph (a) requires that if review is 
granted or ordered, the Commission shall issue a briefing schedule 
order in all cases except pursuant to Rule 431 for review of an action 
made pursuant to certain delegated authority. Prior to the submission 
of merits briefs the Commission will make a formal determination 
whether to grant petitions for review where review is not mandatory, 
and in any case may choose to specify particular issues as to which 
briefing should be limited or directed. Also, where there are cross-
petitions for review, there may be particular reasons to designate the 
side that will file opening briefs. In proceedings arising on review of 
self-regulatory organization proceedings a scheduling order is useful 
in assuring that the respondent is on notice of applicable filing 
deadlines. The briefing schedule order therefore provides an efficient, 
uniform mechanism for the Commission to address issues raised by a 
petition for review, to order review on its own initiative if it 
chooses to do so, and to establish a schedule for the filing of briefs.
    As revised, Rule 450 includes a requirement for issuance of a 
briefing schedule order when the Commission is ordered to conduct 
further proceedings on remand from a court.
    Comment was requested as to whether the time ordinarily allowed for 
filing of briefs under Rule 450 should be [[Page 32779]] increased to 
45 days for the opening brief, 35 days for a brief in opposition and 21 
days for a reply brief. One commenter supported such an increase. The 
Commission has decided, however, that the presumptive filing deadlines 
set forth in paragraph (a), which are identical to those under the 
Federal Rules of Appellate Procedure, are reasonable and do not need to 
be extended in the typical appeal. See Fed. R. App. P. 31.
    Unless the Commission provides for a longer time, the Commission 
will have 21 days to issue the briefing schedule order after the filing 
of the last petition for review or other filing that triggers the 
issuance of a briefing schedule order. In the revised rule, this period 
was increased from 15 days to correspond to the 21-day period allowed 
the Commission pursuant to Rule 411 to decide whether to order review 
of an initial decision on its own initiative if no petition for review 
is received.
    Ordinarily, issuance of a briefing schedule order will be a 
ministerial act, undertaken by staff in the Office of the General 
Counsel, pursuant to delegated authority. See 17 CFR 200.30-14. Timely 
issuance of the briefing schedule order is a crucial step in assuring 
that matters on appeal to the Commission are completed promptly. 
Consistent with the recommendation of the Task Force on Administrative 
Proceedings that the Commission itself be involved in resolving 
problems if proceedings are delayed, the delegation to issue a briefing 
schedule order is limited. See, Fair and Efficient Administrative 
Proceedings: Report of the Task Force on Administrative Proceedings 
(1993) at 45. If an order is not issued within the 21-day time-frame 
established by Rule 450, the Secretary shall submit a proposed order 
for consideration by the Commission.
Rule 451. Oral Argument Before the Commission
    (a) Availability. The Commission, on its own motion or the motion 
of a party or any other aggrieved person entitled to Commission review, 
may order oral argument with respect to any matter. Motions for oral 
argument with respect to whether to affirm all or part of an initial 
decision by a hearing officer shall be granted unless exceptional 
circumstances make oral argument impractical or inadvisable. The 
Commission will consider appeals, motions and other matters properly 
before it on the basis of the papers filed by the parties without oral 
argument unless the Commission determines that the presentation of 
facts and legal arguments in the briefs and record and the decisional 
process would be significantly aided by oral argument.
    (b) Procedure. Requests for oral argument shall be made by separate 
motion accompanying the initial brief on the merits. The Commission 
shall issue an order as to whether oral argument is to be heard, and if 
so, the time and place therefor. The grant or denial of a motion for 
oral argument shall be made promptly after the filing of the last brief 
called for by the briefing schedule. If oral argument is granted, the 
time fixed for oral argument shall be changed only by written order of 
the Commission, for good cause shown. The order shall state at whose 
request the change is made and the reasons for any such change.
    (c) Time Allowed. Unless the Commission orders otherwise, not more 
than one half-hour per side will be allowed for oral argument. The 
Commission may, in its discretion, determine that several persons have 
a common interest, and that the interests represented will be 
considered a single side for purposes of allotting time for oral 
argument. Time will be divided equally among persons on a single side, 
provided, however, that by mutual agreement they may reallocate their 
time among themselves. A request for additional time must be made by 
motion filed reasonably in advance of the date fixed for argument.
    (d) Participation of Commissioners. A member of the Commission who 
was not present at the oral argument may participate in the decision of 
the proceeding, provided that the member has reviewed the transcript of 
such argument prior to such participation. The decision shall state 
whether the required review was made.
    Comment: Rule 451 is based on former Rule of Practice 21(a) and 
former Exchange Act Rule 19d-3(f).
    Comment (c): The term ``side'' is used in this rule to indicate 
that the time allowed is afforded to opposing interests rather than to 
individual parties. See Fed. R. App. P. 34(b). If multiple appellants 
or appellees have a common interest, they may constitute only a single 
side.
    Revision Comment (a): Comment was requested as to (1) whether the 
Commission's practice with respect to granting requests for oral 
argument should be changed to limit the opportunity for oral argument 
on appeals from decisions of administrative law judges to the most 
significant cases; and (2) whether the Commission should change its 
standards for granting oral argument in self-regulatory organization 
appeals to allow argument only in the most significant cases--such as 
cases in which fines exceed certain dollar limits, in which a member or 
associated person with no prior disciplinary record is permanently 
barred from membership, or in which the decisional process as to an 
important matter of law would be significantly aided by oral argument.
    The Commission received a number of comments on the proposed 
changes to its oral argument rule. The commenters were divided as to 
whether the Commission should change its standards for granting oral 
argument in self-regulatory organization appeals. Some commenters 
objected to the Commission's current practice of denying oral argument 
in such proceedings. The comments were also divided as to whether to 
support the proposed criteria for identifying self-regulatory 
organization cases that warrant oral argument. One commenter 
recommended that the Commission provide for oral argument in cases 
where self-regulatory organization sanctions (either by fine or 
permanent membership bar) are significant, or where an important issue 
of law is in question. Another suggested that certain of the proposed 
criteria (specifically a large fine or bar against a person without a 
disciplinary record) would not assist the Commission in identifying 
those self-regulatory organization cases that warrant oral argument. 
According to this commenter, the total circumstances of the case should 
be considered. One commenter suggested that as an alternative to 
increasing oral argument in self-regulatory organization cases, the 
Commission consider adopting a policy of requesting additional briefing 
on issues that are of particular interest and not raised by the parties 
in their briefs. In response to this comment, the Commission has 
adopted Rule 421(b) relating to supplemental briefing on review of 
self-regulatory organization determinations.
    One commenter supported the proposal to require that requests for 
oral argument be set forth in a separate motion accompanying the 
initial brief on the merits. The Commission believes that this 
requirement will make oral argument requests more readily identifiable 
than at present.
    Where the Commission itself has instituted proceedings, a 
respondent has a substantial claim for the opportunity to argue 
directly to the Commission. In the context of issues presented in 
appeals from self-regulatory organizations, the Commission has 
determined that, in general, its decisionmaking process would not be 
significantly aided by oral argument. Accordingly, after careful 
consideration of the other comments and given the 
[[Page 32780]] Commission's decision to adopt Rule 421(b) on 
supplemental briefing, the Commission has decided to modify its oral 
argument rule. The Rule continues the Commission policy of ordinarily 
granting requests for oral arguments on appeals from an initial 
decision of an administrative law judge, but not holding oral argument 
on review of a determination by a self-regulatory organization. The 
Rule makes clear, however, that oral argument will be allowed where the 
Commission believes the presentation of facts and legal arguments in 
the briefs and record and the decisional process would be significantly 
aided by oral argument.
Rule 452. Additional Evidence
    Upon its own motion or the motion of a party, the Commission may 
allow the submission of additional evidence. A party may file a motion 
for leave to adduce additional evidence at any time prior to issuance 
of a decision by the Commission. Such motion shall show with 
particularity that such additional evidence is material and that there 
were reasonable grounds for failure to adduce such evidence previously. 
The Commission may accept or hear additional evidence, may remand the 
proceeding to a self-regulatory organization, or may remand or refer 
the proceeding to a hearing officer for the taking of additional 
evidence, as appropriate.
    Comment: Rule 452 is based on former Rule 21(d) and former Exchange 
Act Rule 19d-3(e). See In the Matter of Jonathan Scott Saluk, Exchange 
Act Release No. 35371 (Feb. 14, 1995), 58 SEC Docket 2273 (Mar. 14, 
1995) (Order Remanding Proceedings) (remand to a self-regulatory 
organization to consider new evidence not available when decision was 
reached); In the Matter of Klaus Langheinrich, Exchange Act Release No. 
32603 (July 8, 1993), 54 SEC Docket 1376 (July 27, 1993) (Order 
Remanding Proceedings) (remand on motion of Commission to a self-
regulatory organization to supplement record with additional evidence).
Rule 460. Record Before the Commission
    The Commission shall determine each matter on the basis of the 
record.
    (a) Contents of the Record.
    (1) In proceedings for final decision before the Commission other 
than those reviewing a determination by a self-regulatory organization, 
the record shall consist of:
    (i) all items part of the record below in accordance with Rule 350;
    (ii) any petitions for review, cross-petitions or oppositions; and
    (iii) all briefs, motions, submissions and other papers filed on 
appeal or review.
    (2) In a proceeding for final decision before the Commission 
reviewing a determination by a self-regulatory organization, the record 
shall consist of:
    (i) the record certified pursuant to Rule 420(d) by the self-
regulatory organization;
    (ii) any application for review; and
    (iii) any submissions, moving papers, and briefs filed on appeal or 
review.
    (b) Transmittal of Record to Commission. Within 14 days after the 
last date set for filing briefs or such later date as the Commission 
directs, the Secretary shall transmit the record to the Commission.
    (c) Review of Documents Not Admitted. Any document offered in 
evidence but excluded by the hearing officer or the Commission and any 
document marked for identification but not offered as an exhibit shall 
not be considered a part of the record before the Commission on appeal 
but shall be transmitted to the Commission by the Secretary if so 
requested by the Commission. In the event that the Commission does not 
request the document, the Secretary shall retain the document not 
admitted into the record until the later of
    (1) the date upon which the Commission's order becomes final, or
    (2) the conclusion of any judicial review of that order.
Rule 470. Reconsideration
    (a) Scope of Rule. A party or any person aggrieved by a 
determination in a proceeding may file a motion for reconsideration of 
a final order issued by the Commission.
    (b) Procedure. A motion for reconsideration shall be filed within 
10 days after service of the order complained of on each party, or 
within such time as the Commission may prescribe upon motion of the 
person seeking reconsideration, if made within the foregoing 10-day 
period. The motion for reconsideration shall briefly and specifically 
state the matters of record alleged to have been erroneously decided, 
the grounds relied upon, and the relief sought. Except with permission 
of the Commission, a motion for reconsideration shall not exceed 15 
pages. No responses to a motion for reconsideration shall be filed 
unless requested by the Commission.
    Comment: This rule is based in part on former Rules of Practice 
21(e), Rules 35 and 40 of the Federal Rules of Appellate Procedure with 
respect to petitions for rehearing, and Rule 450 of the Model 
Adjudication Rules, Administrative Conference of the United States 
(Dec. 1993). The page limit for motions for reconsideration is based on 
the page limit for petitions for reconsideration before federal courts 
of appeals. A motion for reconsideration is intended to be an 
exceptional remedy. As a result, Rule 470 provides that no responses to 
motions for reconsideration shall be filed unless requested by the 
Commission.
Rule 490. Receipt of Petitions for Judicial Review Pursuant to 28 
U.S.C. 2112(a)(1)
    The Commission officer and office designated pursuant to 28 U.S.C. 
2112(a)(1) to receive copies of petitions for review of Commission 
orders from the persons instituting review in a court of appeals, are 
the Secretary and the Office of the Secretary at the Commission's 
Headquarters. Ten copies of each petition shall be submitted. Each copy 
shall state on its face that it is being submitted to the Commission 
pursuant to 28 U.S.C. 2112 by the person or persons who filed the 
petition in the court of appeals.
    Comment: Unless directed otherwise by statute, appeals of 
Commission orders and decisions to a court of appeals are instituted by 
the filing of a petition for review in accordance with the Federal 
Rules of Appellate Procedure. See Fed. R. App. P. 15(a). Section 
2112(a)(2) of Title 28 of the U.S. Code requires the Commission to 
designate the officer and office who must receive copies of any 
petitions for review of Commission orders filed in the federal courts 
of appeals.
    Persons seeking judicial review of Commission orders should be 
aware that if the Commission receives, within ten days after approval 
of its order, petitions for judicial review properly filed in more than 
one court of appeals, the Judicial Panel on Multidistrict Litigation 
will randomly select one of those courts to have jurisdiction over all 
cases challenging the order. See 28 U.S.C. 2112(a). If no petition for 
review is received during the 10-day period and petitions are 
subsequently filed in two or more courts of appeals, the appeal will be 
heard in the court of appeals where the first petition for review was 
filed. Id.

Rules Relating to Temporary Orders and Suspensions

Rule 500. Expedited Consideration of Proceedings
    Consistent with the Commission's or the hearing officer's other 
responsibilities, every hearing shall be held and every decision shall 
be [[Page 32781]] rendered at the earliest possible time in connection 
with:
    (a) an application for a temporary sanction, as defined in Rule 
101(a), or a proceeding to determine whether a temporary sanction 
should be made permanent;
    (b) a motion or application to review an order suspending 
temporarily the effectiveness of an exemption from registration 
pursuant to Regulations A, B, E or F under the Securities Act, 
Secs. 230.258, 230.336, 230.610 or 230.656 of this chapter; or,
    (c) a motion to or petition to review an order suspending 
temporarily the privilege of appearing before the Commission under Rule 
102(e)(3), or a sanction under Rule 180(a)(1).
    Comment: Rule 500's requirement that ``Consistent with the 
Commission's or the hearing officer's other responsibilities, every 
hearing shall be held and every decision shall be rendered at the 
earliest possible time'' is derived from two sources. First, when a 
temporary cease-and-desist order is entered ex parte and the respondent 
timely seeks Commission review of the decision, the Commission is 
required by statute to hold a hearing and render its decision ``at the 
earliest possible time.'' See, e.g., Exchange Act Sec. 21C(d)(1), 15 
U.S.C. Sec. 78u-3(d)(1). Second, former Rule 2(e)(3)(iii) contained the 
requirement that proceedings in connection with Commission review of 
temporary suspensions of persons appearing or practicing before the 
Commission ``be expedited in every way consistent with the Commission's 
other responsibilities.''
    The rule requires expedited consideration when temporary sanctions 
are sought or ordered against a respondent. Temporary sanction orders 
generally arise from exigent circumstances. Expedited consideration of 
the decision whether to enter or continue such an order is necessary 
both to protect the public from harm, by promptly restraining improper 
ongoing or threatened activities, and to protect the rights of 
respondents, who may be adversely affected by an application for a 
temporary sanction even if the sanction is ultimately denied. After a 
temporary sanction is entered, fairness to the public--especially 
persons harmed by violative conduct--and to the respondent further 
dictates expediting proceedings to determine whether a permanent 
sanction or other appropriate relief is warranted.
    The rule also requires expedited consideration of a motion, 
application or petition to review a temporary suspension of an 
exemption from registration, a temporary suspension from practice 
before the Commission pursuant to Rule 102(e)(3), or a sanction for 
misconduct during the course of the hearing pursuant to Rule 180(a)(1).
Rule 510. Temporary Cease-and-Desist Orders: Application Process
    (a) Procedure. A request for entry of a temporary cease-and-desist 
order shall be made by application filed by the Division of 
Enforcement. The application shall set forth the statutory provision or 
rule that each respondent is alleged to have violated; the temporary 
relief sought against each respondent, including whether the respondent 
would be required to take action to prevent the dissipation or 
conversion of assets; and whether the relief is sought ex parte.
    (b) Accompanying Documents. The application shall be accompanied by 
a declaration of facts signed by a person with knowledge of the facts 
contained therein, a memorandum of points and authorities, a proposed 
order imposing the temporary relief sought, and, unless relief is 
sought ex parte, a proposed notice of hearing and order to show cause 
whether the temporary relief should be imposed. If a proceeding for a 
permanent cease-and-desist order has not already been commenced, a 
proposed order instituting proceedings to determine whether a permanent 
cease-and-desist order should be imposed shall also be filed with the 
application.
    (c) With Whom Filed. The application shall be filed with the 
Secretary or, if the Secretary is unavailable, with the duty officer. 
In no event shall an application be filed with an administrative law 
judge.
    (d) Record of Proceedings. Hearings, including ex parte 
presentations made by the Division of Enforcement pursuant to Rule 513, 
shall be recorded or transcribed pursuant to Rule 302.
    Comment (a)-(c): Rule 510 requires requests for a temporary cease-
and-desist order be made by application, not motion, to make clear that 
the time limitations governing the filing of an opposition to a motion 
do not apply. The information required in the application and 
accompanying documents is similar to the type of information required 
in a request for a temporary restraining order under Rule 65(b) of the 
Federal Rules of Civil Procedure.
    The rule requires the Division of Enforcement to file a declaration 
of facts and a memorandum of points and authorities in order to provide 
the Commission with a clearly articulated record on which to base the 
temporary cease-and-desist order. A declaration may be made by a staff 
member or any other person.
    If notice of the application is to be given to the respondent, the 
rule requires the Division to file a proposed notice of hearing and 
order to show cause why a temporary cease-and-desist order should not 
be issued. A proposed temporary order is also required. If warranted, 
and with such modifications as may be appropriate, these orders can be 
entered by the Commission without the delay otherwise required while an 
order is drafted and then submitted to the Commission.
    A temporary cease-and-desist order may only be issued pending a 
proceeding to determine whether to issue a permanent cease-and-desist 
order. See, e.g., Exchange Act Sec. 21C(c)(1), 15 U.S.C. Sec. 78u-
3(c)(1). If an order instituting proceedings has not already been 
issued, a proposed order is required so that proceedings can be 
instituted before action is taken on the application for a temporary 
cease-and-desist order.
    The rule also specifies that the application and accompanying 
documents are to be filed with the Secretary. The Secretary will 
promptly forward such documents to each Commissioner. If the Secretary 
is unavailable, the application may be filed with the duty officer. 
Rule 151(b), which provides generally that a hearing officer may allow 
filings to be made with the hearing officer, does not authorize the 
filing of an application for a temporary cease-and-desist order with an 
administrative law judge, even if the request for a temporary order 
arises from an ongoing proceeding where an administrative law judge has 
been assigned.
    Comment (d): Rule 302 requires that except as otherwise ordered, 
all hearings are to be recorded or transcribed. Paragraph (d) clarifies 
that the appearance of the Division of Enforcement, ex parte, to seek 
entry of a temporary cease-and-desist order after institution of 
proceedings constitutes a hearing subject to Rule 302. A Commission 
meeting prior to the institution of proceedings at which the Commission 
considers a recommendation by the Division of Enforcement that the 
Commission authorize the filing of an application for a temporary 
cease-and-desist order is not a hearing, however, and a transcript of 
the meeting would not be a part of the record or otherwise available to 
a respondent.
    Revision Comment: As proposed, Rule 510 included a provision 
allowing the Commission to waive the filing of any or all of the 
supporting documents that [[Page 32782]] would ordinarily accompany the 
application for a temporary cease-and-desist order. The proposed rule 
also provided that proceedings should be recorded or transcribed ``or 
otherwise memorialized to the extent that circumstances permit.'' As 
the comments to the proposed rules stated, the possible waiver of 
requirements with respect to accompanying documents or the creation of 
a transcript was included in the proposed rule to address limited 
circumstances such as the need to hold a hearing in emergency 
circumstances at night, over a weekend, or when no Commissioners were 
present in Washington, and certain hearing formalities could not be 
observed. However, as noted by one commenter, the proposed rule was 
subject to interpretations which could have allowed the use of waivers 
more frequently than intended. In addition, consideration of a request 
for a waiver could raise collateral issues that would delay prompt, 
effective remedial action.
    The Commission has authority under these rules, see, e.g., Rule 161 
(extension of time to file documents) and Rule 302 (hearings to be 
recorded and transcribed except as otherwise ordered), and in its 
inherent powers as an adjudicative body to respond to truly exigent or 
emergency conditions. The Commission concluded that the extraordinary 
circumstances justifying the proposed waivers have been so rare that 
having separate provisions to account for them is unnecessary at this 
time.
Rule 511. Temporary Cease-and-Desist Orders: Notice; Procedures for 
Hearing
    (a) Notice: How Given. Notice of an application for a temporary 
cease-and-desist order shall be made by serving a notice of hearing and 
order to show cause pursuant to Rule 141(b) or, where timely service of 
a notice of hearing pursuant to Rule 141(b) is not practicable, by any 
other means reasonably calculated to give actual notice that a hearing 
will be held, including telephonic notification of the general subject 
matter, time, and place of the hearing. If an application is made ex 
parte, pursuant to Rule 513, no notice to a respondent need be given 
prior to the Commission's consideration of the application.
    (b) Hearing Before the Commission. Except as provided in paragraph 
(d) of this rule, hearings on an application for a temporary cease-and-
desist order shall be held before the Commission.
    (c) Presiding Officer: Designation. The Chairman shall preside or 
designate a Commissioner to preside at the hearing. If the Chairman is 
absent or unavailable at the time of hearing and no other Commissioner 
has been designated to preside, the duty officer on the day the hearing 
begins shall preside or designate another Commissioner to preside.
    (d) Procedure at Hearing.
    (1) The presiding officer shall have all those powers of a hearing 
officer set forth in Rule 111 and shall rule on the admissibility of 
evidence and other procedural matters, including, but not limited to: 
whether oral testimony will be heard; the time allowed each party for 
the submission of evidence or argument; and whether post-hearing 
submission of briefs, proposed findings of fact and conclusions of law 
will be permitted and if so, the procedures for submission; provided, 
however, that the person presiding may consult with other Commissioners 
participating in the hearing on these or any other question of 
procedure.
    (2) Each Commissioner present at the hearing shall be afforded a 
reasonable opportunity to ask questions of witnesses, if any, or of 
counsel.
    (3) A party or witness may participate by telephone. Alternative 
means of remote access, including a video link, shall be permitted in 
the Commission's discretion. Factors the Commission may consider in 
determining whether to permit alternative means of remote access 
include, but are not limited to, whether allowing an alternative means 
of access will delay the hearing, whether the alternative means is 
reliable, and whether the party proposing its use has made arrangements 
to pay for its cost.
    (4) After a hearing has begun, the Commission may, on its own 
motion, or the motion of a party, assign a hearing officer to preside 
at the taking of oral testimony or other evidence and to certify the 
record of such testimony or other evidence to the Commission within a 
fixed period of time. No recommended or initial decision shall be made 
by such a hearing officer.
    Comment (a): If an order instituting proceedings has not been 
issued prior to the filing of an application for a temporary cease-and-
desist order, an order instituting proceedings must be entered in 
conjunction with entry of a notice of hearing and order to show cause. 
See, e.g., Exchange Act Sec. 21C(c)(1), 15 U.S.C. Sec. 78u-3(c)(1). 
Provided that the respondent receives actual notice of the hearing, 
which may be made by telephone, formal service of the order instituting 
proceedings pursuant to Rule 141 is not required prior to the 
commencement of the hearing. Absent a waiver, as provided for in Rule 
141(a)(4), furnishing a copy of the order by facsimile transmission 
would not meet the service requirements of Rule 141. At or promptly 
after the hearing, however, the Secretary must serve a copy of the 
order instituting proceedings and the notice of hearing in accord with 
Rule 141 and the Division of Enforcement must serve its application and 
accompanying documents pursuant to Rule 150.
    Comment (b): Rule 101(a) defines the term ``Commission'' to include 
the duty officer as provided for by 17 CFR 200.43. Pursuant to that 
section, the duty officer may preside at the taking of evidence.
    Comment (d): Hearings held pursuant to the Commission's authority 
to impose a temporary cease-and-desist order are not required to be 
formal, ``on the record'' adjudications within the meaning of Sections 
554, 556-557 of the Administrative Procedure Act, 5 U.S.C. Secs. 554, 
556-57. See Chemical Waste Management, Inc. v. EPA, 873 F.2d 1477, 
1481-82 (D.C. Cir. 1989) (no presumption that a statutory ``hearing'' 
requirement compels the agency to undertake a formal ``hearing on the 
record''). A full, trial-type evidentiary hearing will not ordinarily 
be held because of the exigent nature of the proceedings, the temporary 
nature of any sanction, and the opportunity for immediate post-sanction 
review by a federal district court. See Boddie v. Connecticut, 401 U.S. 
371, 378 (1971) (``The formality and procedural requisites for the 
hearing can vary, depending upon the importance of the interests 
involved and the nature of the subsequent proceedings.'').
    Rule 511(d) incorporates the statutory provision that the hearing 
does not have to be a formal, trial-type proceeding. The amount of 
process due will vary based on the facts and circumstances of each 
case. See Boddie, 401 U.S. at 378. The Commission may determine the 
form of evidence (for example, whether live or by affidavit), the 
duration of the hearing (for example, by restricting the time for 
argument) or the extent of post-hearing procedures (for example, 
whether to allow submissions of post-hearing briefs). Relevant factors 
in making these determinations may include, among others, the risk of 
harm to investors or the public, the nature of the alleged or 
threatened violations, the nature of the proposed sanction, the 
potential effect of a sanction on the respondent, and the likely 
duration of the sanction before opportunity for further hearings.
    Ordinarily, the Commission expects that the hearing on an 
application for a temporary cease-and-desist order will proceed on the 
basis of affidavits and oral argument in similar fashion to a 
[[Page 32783]] hearing on a Commission request under Rule 65 of the 
Federal Rules of Civil Procedure for a temporary restraining order in 
federal court.
    Due to the exigent circumstances in cases in which a temporary 
cease-and-desist order would be sought, respondents, their counsel and 
the participating Commission staff may not be able to be present in 
Washington, D.C., where the Commission ordinarily meets. The rule 
provides that parties and witnesses may participate by telephone. 
Alternative technologies that would allow remote access to the hearing 
may be used in the Commission's discretion.
    Revision Comment (b): The comment to proposed Rule 41 noted the 
recommendation of the Task Force on Administrative Proceedings that 
applications for temporary cease-and-desist orders be heard by the 
Commission. The proposed rules provided, in addition, that a hearing 
could be held before a hearing officer, which was defined as an 
administrative law judge or duty officer. While the comment noted that 
``the Commission could make such an assignment when an application for 
a temporary sanction has arisen during the course of a proceeding 
already assigned to a hearing officer,'' the proposed rule did not, by 
its terms, limit the proceedings that would be assigned to a hearing 
officer to such rare circumstances.
    Referral of a temporary cease-and-desist order application to a 
hearing officer for hearing and preparation of an initial decision 
would likely require approximately three days at a minimum, and up to a 
week or more, depending upon the time allowed for submission of 
proposed findings of fact and conclusions of law and for the 
preparation of the initial decision. It would be inconsistent for the 
Commission to authorize a proceeding in which the Division of 
Enforcement alleged that there were exigent circumstances warranting a 
temporary order and to then assign the matter to a hearing officer for 
preparation of a non-binding initial decision, which would be subject 
to briefing and argument to the Commission before a binding order could 
be entered.
    After careful consideration, the Commission has decided to require 
that hearings on an application for a temporary cease-and-desist order 
be held before the Commission, not a hearing officer. In judicial 
proceedings on an application for a temporary restraining order, 
evidence is often submitted solely by affidavit. Proceedings for a 
temporary cease-and-desist order also may not involve live testimony. 
The Rules recognize, however, that testimony may be offered and 
allowed. See Rule 510. Due to considerations of efficiency, expertise 
and the demands of other Commission business, the Commission itself 
does not ordinarily preside at the taking of testimony in an 
enforcement or disciplinary proceeding. In recognition of this fact, 
the rule permits the Commission to assign a hearing officer to preside 
solely at the taking of testimony and to certify the resulting record 
to the Commission, without a recommended or initial decision. There 
would be no argument, briefing or submissions to the hearing officer.
Rule 512. Temporary Cease-and-Desist Orders: Issuance After Notice and 
Opportunity for Hearing
    (a) Basis for Issuance. A temporary cease-and-desist order shall be 
issued only if the Commission determines that the alleged violation or 
threatened violation specified in an order instituting proceedings 
whether to enter a permanent cease-and-desist order pursuant to 
Securities Act Section 8A(a), 15 U.S.C. 77h-1(a), Exchange Act Section 
21C(a), 15 U.S.C. 78u-3(a), Investment Company Act Section 9(f)(1), 15 
U.S.C. 80a-9(f)(1), or Investment Advisers Act Section 203(k)(1), 15 
U.S.C. 80b-3(k)(1), or the continuation thereof, is likely to result in 
significant dissipation or conversion of assets, significant harm to 
investors, or substantial harm to the public interest, including, but 
not limited to, losses to the Securities Investor Protection 
Corporation, prior to the completion of proceedings on the permanent 
cease-and-desist order.
    (b) Content, Scope and Form of Order. Every temporary cease-and-
desist order granted shall:
    (1) describe the basis for its issuance, including the alleged or 
threatened violations and the harm that is likely to result without the 
issuance of an order;
    (2) describe in reasonable detail, and not by reference to the 
order instituting proceedings or any other document, the act or acts 
the respondent is to take or refrain from taking; and
    (3) be indorsed with the date and hour of issuance.
    (c) Effective Upon Service. A temporary cease-and-desist order is 
effective upon service upon the respondent.
    (d) Service: How Made. Service of a temporary cease-and-desist 
order shall be made pursuant to Rule 141(a). The person who serves the 
order shall promptly file a declaration of service identifying the 
person served, the method of service, the date of service, the address 
to which service was made and the person who made service; provided, 
however, failure to file such a declaration shall have no effect on the 
validity of the service.
    (e) Commission Review. At any time after the respondent has been 
served with a temporary cease-and-desist order, the respondent may 
apply to the Commission to have the order set aside, limited or 
suspended. The application shall set forth with specificity the facts 
that support the request.
    Comment (a): Rule 512(a) sets forth the statutory criteria for 
issuance of a temporary cease-and-desist order when the order is 
preceded by notice and an opportunity to be heard. See, e.g., Exchange 
Act Sec. 21C(c), 15 U.S.C. Sec. 78u-3(c).
    Comment (b): Rule 512(b) requires that a temporary cease-and-desist 
order describe the basis for the order and the acts that the respondent 
is to take or refrain from taking to comply with the order. These 
requirements, which are modeled on Rule 65(d) of the Federal Rules of 
Civil Procedure, are meant to ensure that a respondent will have 
adequate notice of the constraints placed upon him or her by the order 
and to provide the predicate notice for enforcement of the order if the 
respondent fails to comply with it.
    Rule 512(b) also requires that a temporary cease-and-desist order 
be indorsed with the date and hour of issuance. Although a temporary 
cease-and-desist order is not effective until served, requiring this 
indorsement minimizes the potential for disputes over when an order was 
entered. A similar provision is included in Rule 65(b) of the Federal 
Rules of Civil Procedure.
    Comment (c): A temporary cease-and-desist order becomes effective 
upon service upon the respondent. See, e.g., Exchange Act 
Sec. 21C(c)(1), 15 U.S.C. Sec. 78u-3(c)(1).
    Comment (e): Paragraph (e) is based on statutory provisions 
permitting respondents to seek to set aside, limit or suspend a 
temporary order at any time. See, e.g., Exchange Act Sec. 21C(d)(1), 15 
U.S.C. Sec. 78u-3(d)(1).
Rule 513. Temporary Cease-and-Desist Orders: Issuance Without Prior 
Notice and Opportunity For Hearing
    In addition to the requirements for issuance of a temporary cease-
and-desist order set forth in Rule 512, the following requirements 
shall apply if a temporary cease-and-desist order is to be entered 
without prior notice and opportunity for hearing:
    (a) Basis for Issuance Without Prior Notice and Opportunity for 
Hearing. A [[Page 32784]] temporary cease-and-desist order may be 
issued without notice and opportunity for hearing only if the 
Commission determines, from specific facts in the record of the 
proceeding, that notice and hearing prior to entry of an order would be 
impracticable or contrary to the public interest.
    (b) Content of the Order. An ex parte temporary cease-and-desist 
order shall state specifically why notice and hearing would have been 
impracticable or contrary to the public interest.
    (c) Hearing Before the Commission. If a respondent has been served 
with a temporary cease-and-desist order entered without a prior 
Commission hearing, the respondent may apply to the Commission to have 
the order set aside, limited, or suspended, and if the application is 
made within 10 days after the date on which the order was served, may 
request a hearing on such application. The Commission shall hold a 
hearing and render a decision on such an application at the earliest 
possible time. The hearing shall begin within two days of the filing of 
the application unless the applicant consents to a longer period or the 
Commission, by order, for good cause shown, sets a later date. The 
Commission shall render a decision on the application within five 
calendar days of its filing, provided, however, that the Commission, by 
order, for good cause shown, may extend the time within which a 
decision may be rendered for a single period of five calendar days, or 
such longer time as consented to by the applicant. If the Commission 
does not render its decision within 10 days of the respondent's 
application or such longer time as consented to by the applicant, the 
temporary order shall be suspended until a decision is rendered.
    (d) Presiding Officer, Procedure at Hearing. Procedures with 
respect to the selection of a presiding officer and the conduct of the 
hearing shall be in accordance with Rule 511.
    Comment (a): The rule sets forth the statutory requirement for 
entry of a temporary cease-and-desist order without prior notice. See, 
e.g., Exchange Act Sec. 21C(c)(1), 15 U.S.C. Sec. 78u-3(c)(1). The 
requirement that the Commission's determination be based on ``specific 
facts'' is modeled on Rule 65(b) of the Federal Rules of Civil 
Procedure.
    Comment (b): The requirement that an ex parte order state why it 
was issued without notice and hearing is modeled on Rule 65(b) of the 
Federal Rules of Civil Procedure which requires a similar statement of 
reasons if a temporary restraining order is issued without notice. A 
statement of the reasons why an order was entered ex parte aids the 
Commission's decisional process by ensuring that the statutory criteria 
for ex parte action have been met and facilitates review of the order. 
See Rule 514 (ex parte order must be appealed to the Commission before 
seeking judicial review).
    Comment (c): Rule 513(c) restates the statutory standards with 
respect to opportunity for a hearing after service of a temporary 
cease-and-desist order entered ex parte. See, e.g., Exchange Act 
Sec. 21C(d)(1), 15 U.S.C. Sec. 78u-3(d)(1). The requirement that a 
hearing be held and a decision rendered ``at the earliest possible 
time'' is not elaborated upon in the legislative history.
    The Due Process Clause of the Fifth Amendment requires that if a 
person is subject to an ex parte deprivation of property, he or she 
shall be provided a ``prompt'' opportunity for hearing thereafter. FDIC 
v. Mallen, 486 U.S. 230, 241-42 (1988); Barry v. Barchi, 443 U.S. 55, 
65-66 (1979) (hearing must be provided ``at a meaningful time'') 
(citation omitted). While the hearing must be held and a decision 
rendered promptly, judicial decisions should be made in a ``considered 
and deliberate manner,'' and without excessive or undue haste. Mallen, 
486 U.S. at 244. The Commission must allow an appropriate amount of 
time for each party to prepare its case prior to hearing and must allow 
time for each Commissioner to review all evidence or other submissions 
and, as necessary, to engage in joint deliberation. See id. at 243-244. 
What would be ``possible'' in terms of the earliest time for hearing or 
resolution of a case would depend, therefore, on the specific facts of 
each case and the Commission's other responsibilities.
    When a temporary cease-and-desist order is entered ex parte, the 
respondent must, as a prerequisite to judicial review of the order, 
first apply to the Commission to have the order set aside, limited or 
suspended, and the Commission must then hold a hearing, if requested, 
and render a decision on the application. See, e.g., Exchange Act 
Sec. 21C(d)(2), 15 U.S.C. Sec. 78u-3(d)(2). While recognizing that some 
cases may demand more time than others, Rule 513(c) establishes a 
maximum time limit on the continuing effectiveness of an ex parte order 
pending its review by the Commission.
    Under the rule, a hearing on the application to set aside a 
temporary cease-and-desist order will begin within two days of the 
filing of the application, unless the respondent requests a longer 
period or the Commission determines, by order, for good cause shown, 
that a longer time is necessary. A temporary cease-and-desist order 
entered ex parte will be suspended, however, if the Commission does not 
hold the hearing and render a decision on an application to set aside, 
limit or suspend the order within 10 calendar days of the date of 
application, or such longer time as consented to by the respondent. 
While the Commission may take as long as needed to decide the 
application, after the 10-day period or such longer time as consented 
to by the respondent, the respondent does not remain bound by the 
temporary order pending the Commission's decision. If the Commission 
then upholds the temporary cease-and-desist order, the order will once 
again become binding and the respondent can seek judicial review.
    The time limits set forth in Rule 513 are consistent with the 
statutory time limits established with respect to orders entered after 
notice and hearing. If an order is entered after notice and hearing, 
the respondent is allowed to seek judicial review within 10 days of 
service of the order. Under Rule 513, a respondent will not be subject 
to an ex parte order for any longer than 10 days prior to having the 
opportunity to seek judicial review.
    The provisions of Rule 513(c) are similar to the provisions of Rule 
65(b) of the Federal Rules of Civil Procedure, that a party subject to 
a temporary restraining order obtained without notice may, on two days 
notice to the adverse party, or such shorter time as permitted by the 
court, appear and move for dissolution of the temporary restraining 
order. Rule 65(b) does not require that a hearing be held or a decision 
on the motion be issued within the two-day period allowed for the 
making of a motion to dissolve the temporary restraining order. Rather, 
the rule requires the court to hear and determine the motion ``as 
expeditiously as the ends of justice require.'' Such motions are 
ordinarily resolved within the initial 10-day duration of a temporary 
restraining order. Extension of an ex parte temporary restraining order 
for an additional ten days, though permitted by rule, is uncommon.
    Revision Comment (c): By statute, a respondent given notice and 
opportunity to be heard prior to entry of a temporary cease-and-desist 
order may seek judicial review of the order within 10 days of service 
of the order. In contrast, under the proposed rules a respondent could 
be subject to a temporary order entered ex parte for an indefinite 
period of time without access to judicial review. Judicial review of an 
ex parte order is unavailable until the Commission acts on the 
respondent's [[Page 32785]] application to set aside, limit or suspend 
the order. The proposed rules established no time limit for the 
Commission to act or, in the alternative, for the effectiveness of the 
order. As adopted, the rule includes standards for the start of the 
hearing on a respondent's application for review of an ex parte order 
and limits the effectiveness of an ex parte order to 10 days after the 
respondent files an application for review of the order.
Rule 514. Temporary Cease-and-Desist Orders: Judicial Review; Duration
    (a) Availability of Judicial Review. Judicial review of a temporary 
cease-and-desist order shall be available as provided in Section 
8A(d)(2) of the Securities Act, 15 U.S.C. 77h-1(d)(2), Section 
21C(d)(2) of the Exchange Act, 15 U.S.C. 78u-3(d)(2), Section 
9(f)(4)(B) of the Investment Company Act, 15 U.S.C. 80a-9(f)(4)(B), or 
Section 203(k)(4)(B) of the Investment Advisers Act, 15 U.S.C. 80b-
3(k)(4)(B).
    (b) Duration. Unless set aside, limited, or suspended, either by 
order of the Commission, a court of competent jurisdiction, or a 
hearing officer acting pursuant to Rule 531, or by operation of Rule 
513, a temporary cease-and-desist order shall remain effective and 
enforceable until the earlier of:
    (1) the completion of proceedings to determine whether a permanent 
order shall be entered; or
    (2) 180 days, or such longer time as consented to by the 
respondent, after issuance of a briefing schedule order pursuant to 
Rule 540(b), if an initial decision whether a permanent order should be 
entered is appealed.
    Comment: Rule 514(b) sets forth provisions governing the duration 
of a temporary cease-and-desist order. After entry of a temporary 
cease-and-desist order, proceedings to determine whether a permanent 
order is warranted will be assigned to an administrative law judge. The 
case will follow the same procedural steps as any other proceeding 
assigned to an administrative law judge for hearing. Depending upon the 
pace of judicial review of the temporary order, the filing of the 
respondent's answer, prehearing preparation or the hearing on issuance 
of the permanent order may take place prior to the completion of 
judicial review of the temporary order.
    Unless set aside, limited, or suspended, either by order of the 
Commission, a court of competent jurisdiction, or a hearing officer 
acting pursuant to Rule 531, or pursuant to the operation of Rule 
513(c), a temporary cease-and-desist order remains effective and 
enforceable pending issuance of the administrative law judge's initial 
decision as to whether a permanent order will be issued. See, e.g., 
Exchange Act Sec. 21C(c)(1), 15 U.S.C. Sec. 78u-3(c)(1).
    Rule 500 requires that during the pendency of the temporary order 
every hearing be held and every decision be rendered at the earliest 
possible time, consistent with the Commission's or the hearing 
officer's other responsibilities. The number of respondents, the 
complexity of the allegations, the number and location of witnesses and 
other such factors, however, will affect, to a substantial degree, the 
length of the hearing before the administrative law judge. Rule 530 
provides for expedited preparation of an initial decision once the 
hearing is concluded. When the initial decision is issued, Rule 531 
requires that if the original terms of a temporary order are not to be 
made permanent, the administrative law judge shall set aside, limit or 
suspend the terms of the order in accordance with their initial 
decision. See 17 CFR 200.30-9 (authority delegated to the 
administrative law judges to set aside, limit or suspend temporary 
orders in accord with an initial decision). Hence, if the initial 
decision denies a permanent cease-and-desist order, the temporary order 
may be suspended pending any appeal of the initial decision.
    If an initial decision would make a pending temporary order 
permanent the temporary order will not be suspended. If the initial 
decision is appealed, the Commission may take as long as needed to 
reach a decision on the need for a permanent order. Rule 514(b) 
provides, however, that the temporary order shall be suspended after 
180 days from issuance of the briefing schedule order pursuant to Rule 
540 in connection with the appeal, or such longer time as consented to 
by the respondent, if the Commission has not issued its decision by 
that time.
Rule 520. Suspension of Registration of Brokers, Dealers, or other 
Exchange Act-Registered Entities: Application
    (a) Procedure. A request for suspension of a registered broker, 
dealer, municipal securities dealer, government securities broker, 
government securities dealer, or transfer agent pending a final 
determination whether the registration shall be revoked shall be made 
by application filed by the Division of Enforcement. The application 
shall set forth the statutory provision or rule that each respondent is 
alleged to have violated and the temporary suspension sought as to each 
respondent.
    (b) Accompanying Documents. The application shall be accompanied by 
a declaration of facts signed by a person with knowledge of the facts 
contained therein, a memorandum of points and authorities, a proposed 
order imposing the temporary suspension of registration sought, and a 
proposed notice of hearing and order to show cause whether the 
temporary suspension of registration should be imposed. If a proceeding 
to determine whether to revoke the registration permanently has not 
already been commenced, a proposed order instituting proceedings to 
determine whether a permanent sanction should be imposed shall also be 
filed with the application.
    (c) With Whom Filed. The application shall be filed with the 
Secretary or, if the Secretary is unavailable, with the duty officer. 
In no event shall an application be filed with an administrative law 
judge.
    (d) Record of Hearings. All hearings shall be recorded or 
transcribed pursuant to Rule 302.
    Comment: The Exchange Act provides for the Commission's authority 
to suspend certain entities registered under the Act. See Exchange Act 
Secs. 15(b)(5), 15B(c)(3), 15C(c)(1)(B), 17A(c)(4)(A), 15 U.S.C. 
Secs. 78o(b)(5), 78o-4(c)(3), 78o-5(c)(1)(B), 78q-1(c)(4)(A). The 
procedures for the suspension of Exchange Act-registered entities are 
based upon the applicable statutory standards and modeled upon 
provisions applicable to temporary cease-and-desist order proceedings. 
From 1936 through 1981, the Commission brought over 30 proceedings to 
suspend temporarily the registration of a broker or dealer pending 
final determination whether the registration would be permanently 
revoked. In contrast to practice before 1981, the Rules provide that 
the Commission, without prior assignment to a hearing officer for 
initial decision, will decide applications to suspend a registration 
pending final determination whether the registration should be 
permanently revoked.
Rule 521. Suspension of Registration of Brokers, Dealers, or Other 
Exchange Act-Registered Entities: Notice and Opportunity for Hearing on 
Application
    (a) How Given. Notice of an application to suspend a registration 
pursuant to Rule 520 shall be made by serving a notice of hearing and 
order to show cause pursuant to Rule 141(b) or, where timely service of 
a notice of hearing pursuant to Rule 141(b) is not practicable, by any 
other means reasonably calculated to give actual notice that a hearing 
will be held, [[Page 32786]] including telephonic notification of the 
general subject matter, time, and place of the hearing.
    (b) Hearing: Before Whom Held. Except as provided in paragraph (d) 
of this rule, hearings on an application to suspend a registration 
pursuant to Rule 520 shall be held before the Commission.
    (c) Presiding Officer: Designation. The Chairman shall preside or 
designate a Commissioner to preside at the hearing. If the Chairman is 
absent or unavailable at the time of hearing and no other Commissioner 
has been designated to preside, the duty officer on the day the hearing 
begins shall preside or designate another Commissioner to preside.
    (d) Procedure at Hearing. (1) The presiding officer shall have all 
those powers of a hearing officer set forth in Rule 111 and shall rule 
on the admissibility of evidence and other procedural matters, 
including, but not limited to: whether oral testimony will be heard; 
the time allowed each party for the submission of evidence or argument; 
and whether post-hearing submission of briefs, proposed findings of 
fact and conclusions of law will be permitted and if so, the procedures 
for submission; provided, however, that the person presiding may 
consult with other Commissioners participating in the hearing on these 
or any other question of procedure.
    (2) Each Commissioner present at the hearing shall be afforded a 
reasonable opportunity to ask questions of witnesses, if any, or 
counsel.
    (3) A party or witness may participate by telephone. Alternative 
means of remote access, including a video link, shall be permitted in 
the Commission's discretion. Factors the Commission may consider in 
determining whether to permit alternative means of remote access 
include, but are not limited to, whether allowing an alternative means 
of access will delay the hearing, whether the alternative means is 
reliable, and whether the party proposing its use has made arrangements 
to pay for its cost.
    (4) After a hearing has begun, the Commission may, on its own 
motion or the motion of a party, assign a hearing officer to preside at 
the taking of oral testimony or other evidence and to certify the 
record of such testimony or other evidence to the Commission within a 
fixed period of time. No recommended or initial decision shall be made.
Rule 522. Suspension of Registration of Brokers, Dealers, or other 
Exchange Act-Registered Entities: Issuance and Review of Order
    (a) Basis for Issuance. An order suspending a registration, pending 
final determination as to whether the registration shall be revoked 
shall be issued only if the Commission finds that the suspension is 
necessary or appropriate in the public interest or for the protection 
of investors.
    (b) Content, Scope and Form of Order. Each order suspending a 
registration shall:
    (1) describe the basis for its issuance, including the alleged or 
threatened violations and the harm that is likely to result without the 
issuance of an order;
    (2) describe in reasonable detail, and not by reference to the 
order instituting proceedings or any other document, the act or acts 
the respondent is to take or refrain from taking; and
    (3) be indorsed with the date and hour of issuance.
    (c) Effective Upon Service. An order suspending a registration is 
effective upon service upon the respondent.
    (d) Service: How Made. Service of an order suspending a 
registration shall be made pursuant to Rule 141(a). The person who 
serves the order shall promptly file a declaration of service 
identifying the person served, the method of service, the date of 
service, the address to which service was made and the person who made 
service; provided, however, failure to file such a declaration shall 
have no effect on the validity of the service.
    (e) Commission Review. At any time after the respondent has been 
served with an order suspending a registration, the respondent may 
apply to the Commission or the hearing officer to have the order set 
aside, limited, or suspended. The application shall set forth with 
specificity the facts that support the request.
    Comment (b): When an order suspending a registration is issued, 
there may be trades in process or other commitments which the 
respondent is obligated to meet as well as other ongoing activities 
which would have to be addressed to permit an orderly cessation of 
business. The Rule, therefore, requires a description, in reasonable 
detail of the act or acts the respondent is to take or refrain from 
taking. To protect investors or the public, the order may provide that 
a suspension will be effective in stages, or only after a period of 
time.
Rule 523. [Reserved]
Rule 524. Suspension of Registrations: Duration
    Unless set aside, limited or suspended by order of the Commission, 
a court of competent jurisdiction, or a hearing officer acting pursuant 
to Rule 531, an order suspending a registration shall remain effective 
and enforceable until the earlier of:
    (a) the completion of proceedings to determine whether the 
registration shall be permanently revoked; or
    (b) 180 days, or such longer time as consented to by the 
respondent, after issuance of a briefing schedule order pursuant to 
Rule 540(b), if an initial decision whether the registration shall be 
permanently revoked is appealed.
Rule 530. Initial Decision on Permanent Order: Timing for Submitting 
Proposed Findings and Preparation of Decision
    Unless otherwise ordered by the Commission or hearing officer, if a 
temporary cease-and-desist order or suspension of registration order is 
in effect, the following time limits shall apply to preparation of an 
initial decision as to whether such order should be made permanent:
    (a) proposed findings and conclusions and briefs in support thereof 
shall be filed 30 days after the close of the hearing;
    (b) the record in the proceedings shall be served by the Secretary 
upon the hearing officer three days after the date for the filing of 
the last brief called for by the hearing officer; and
    (c) the initial decision shall be filed with the Secretary at the 
earliest possible time, but in no event more than 30 days after service 
of the record, unless the hearing officer, by order, shall extend the 
time for good cause shown for a period not to exceed 30 days.
Rule 531. Initial Decision on Permanent Order: Effect on Temporary 
Order
    (a) Specification of Permanent Sanction. If, at the time an initial 
decision is issued, a temporary sanction is in effect as to any 
respondent, the initial decision shall specify:
    (1) which terms or conditions of a temporary cease-and-desist 
order, if any, shall become permanent; and
    (2) whether a temporary suspension of a respondent's registration, 
if any, shall be made a permanent revocation of registration.
    (b) Modification of Temporary Order. If any temporary sanction 
shall not become permanent under the terms of the initial decision, the 
hearing officer shall issue a separate order setting aside, 
[[Page 32787]] limiting or suspending the temporary sanction then in 
effect in accordance with the terms of the initial decision. The 
hearing officer shall decline to suspend a term or condition of a 
temporary cease-and-desist order if it is found that the continued 
effectiveness of such term or condition is necessary to effectuate any 
term of the relief ordered in the initial decision, including the 
payment of disgorgement, interest or penalties. An order modifying 
temporary sanctions shall be effective 14 days after service. Within 
one week of service of the order modifying temporary sanctions any 
party may seek a stay or modification of the order from the Commission 
pursuant to Rule 401.
    Comment: If, after hearing all the evidence as to whether a 
permanent cease-and-desist order or permanent suspension of 
registration should be issued, a hearing officer issues an initial 
decision denying a permanent order, consideration must be given to the 
necessity for continuation of the temporary order.
    Rule 531 requires that the hearing officer modify the temporary 
sanction order in accordance with the initial decision. See 17 CFR 
200.30-9 (authority delegated to the administrative law judges to set 
aside, limit or suspend temporary orders in accord with an initial 
decision). In order to allow time for each party to seek Commission 
review of any modification to the temporary sanction, the hearing 
officer's order will not become effective for 14 days.
    The initial decision of the hearing officer to deny a permanent 
order in whole or in part is reached after all evidence has been heard 
and briefs have been submitted. By contrast, the decision to enter a 
temporary sanction, and in the case of a temporary cease-and-desist 
order, any judicial review, is more limited in scope. Nonetheless, the 
hearing officer's judgment that continuation of a temporary order is 
not necessary must be balanced against the fact that the initial 
decision may be reversed. The Commission's decision whether to stay or 
modify the hearing officer's order is an interim procedural ruling that 
is not be subject to judicial review.
Rule 540. Appeal and Commission Review of Initial Decision Making a 
Temporary Order Permanent
    (a) Petition for Review. Any person who seeks Commission review of 
an initial decision as to whether a temporary sanction shall be made 
permanent shall file a petition for review pursuant to Rule 410, 
provided, however, that the petition must be filed within 10 days after 
service of the initial decision.
    (b) Review Procedure. If the Commission determines to grant or 
order review, it shall issue a briefing schedule order pursuant to Rule 
450. Unless otherwise ordered by the Commission, opening briefs shall 
be filed within 21 days of the order granting or ordering review, and 
opposition briefs shall be filed within 14 days after opening briefs 
are filed. Reply briefs shall be filed within seven days after 
opposition briefs are filed. Oral argument, if granted by the 
Commission, shall be held within 90 days of the issuance of the 
briefing schedule order.
Rule 550. Summary Suspensions Pursuant to Exchange Act Section 
12(k)(1)(A)
    (a) Petition for Termination of Suspension. Any person adversely 
affected by a suspension pursuant to Section 12(k)(1)(A) of the 
Exchange Act, 15 U.S.C. 78l(k)(1)(A), who desires to show that such 
suspension is not necessary in the public interest or for the 
protection of investors may file a sworn petition with the Secretary, 
requesting that the suspension be terminated. The petition shall set 
forth the reasons why the petitioner believes that the suspension of 
trading should not continue and state with particularity the facts upon 
which the petitioner relies.
    (b) Commission Consideration of a Petition. The Commission, in its 
discretion, may schedule a hearing on the matter, request additional 
written submissions, or decide the matter on the facts presented in the 
petition and any other relevant facts known to the Commission. If the 
petitioner fails to cooperate with, obstructs, or refuses to permit the 
making of an examination by the Commission, such conduct shall be 
grounds to deny the petition.
    Comment: Exchange Act Section 12(k) authorizes the Commission 
summarily to suspend trading in securities for 10-day periods, if in 
its opinion the public interest or the protection of investors so 
requires. See 15 U.S.C. 78l(k). Orders suspending trading in particular 
securities pursuant to Section 12(k)(1)(A) are directed towards a 
security; they do not name a person or entity as a respondent. 
Accordingly, Rule 550 establishes a special mechanism to allow persons 
adversely affected by a suspension to petition for relief.
    The usual purpose of a suspension is to alert the investing public 
that there is insufficient public information about the issuer upon 
which an informed investment judgment can be made or that the market 
for the securities may be reacting to manipulative forces or deceptive 
practices. Consequently, the primary issues normally to be considered 
by the Commission in determining whether or not a 10-day suspension 
should be instituted are whether or not there is sufficient public 
information upon which to base an informed investment decision or 
whether the market for the security appears to reflect manipulative or 
deceptive activities.

Rules Regarding Disgorgement and Penalty Payments

Rule 600. Interest on Sums Disgorged
    (a) Interest Required. Prejudgment interest shall be due on any sum 
required to be paid pursuant to an order of disgorgement. The 
disgorgement order shall specify each violation that forms the basis 
for the disgorgement ordered; the date which, for purposes of 
calculating disgorgement, each such violation was deemed to have 
occurred; the amount to be disgorged for each such violation; and the 
total sum to be disgorged. Prejudgment interest shall be due from the 
first day of the month following each such violation through the last 
day of the month preceding the month in which payment of disgorgement 
is made. The order shall state the amount of prejudgment interest owed 
as of the date of the disgorgement order and that interest shall 
continue to accrue on all funds owed until they are paid.
    (b) Rate of Interest. Interest on the sum to be disgorged shall be 
computed at the underpayment rate of interest established under Section 
6621(a)(2) of the Internal Revenue Code, 26 U.S.C. 6621(a)(2), and 
shall be compounded quarterly. The Commission or the hearing officer 
may, by order, specify a lower rate of prejudgment interest as to any 
funds which the respondent has placed in an escrow or otherwise 
guaranteed for payment of disgorgement upon a final determination of 
the respondent's liability. Escrow and other guarantee arrangements 
must be approved by the Commission or the hearing officer prior to 
entry of the disgorgement order.
    Comment: The Commission is authorized to order disgorgement, 
``including reasonable interest,'' in any administrative proceeding in 
which a cease-and-desist order is sought or a civil monetary penalty 
could be imposed. See, e.g., Exchange Act Sec. 21B(e), 15 U.S.C. 78u-
2(e) (monetary penalty proceedings); Exchange Act 
[[Page 32788]] Sec. 21C(e), 15 U.S.C. 78u-3(e) (cease-and-desist 
proceedings). The purpose of disgorgement in Commission administrative 
proceedings is to deny a wrongdoer his ill-gotten gains. See The 
Securities Law Enforcement Remedies and Penny Stock Reform Act of 1990, 
S. Rep. No. 337, 101st Cong., 2d Sess. 16 (1990) (``[D]isgorgement 
forces a defendant to give up the amount by which he was unjustly 
enriched.''). Unless prejudgment interest is assessed on funds to be 
disgorged, the wrongdoer benefits unjustly by having had the equivalent 
of an interest free loan from the victims of his wrongdoing. In order 
to effectuate fully the remedial purposes of disgorgement, Rule 600 
therefore requires that prejudgment interest be assessed on all funds 
to be disgorged.
    Rule 600 prescribes the payment of prejudgment interest at the 
underpayment rate of interest established under Section 6621(a)(2) of 
the Internal Revenue Code, 26 U.S.C. 6621(a)(2). The Commission or 
hearing officer, by order, may specify a lower rate of prejudgment 
interest, however, as to funds which the respondent, with the approval 
of the Commission or hearing officer, and prior to entry of the 
disgorgement order, placed in an approved escrow or otherwise 
guaranteed for payment of disgorgement upon a finding of liability. In 
calculating the rate of prejudgment interest as to such funds, the 
Commission or hearing officer may take into account the actual interest 
obtained on the funds while in escrow, with appropriate adjustments for 
expenses of the escrow or guarantee.
    An adjustment to the rate of prejudgment interest may be 
appropriate if a respondent makes arrangements to escrow or guarantee 
payment of disputed funds prior to a formal adjudication of liability 
because the respondent's continuing benefit from those funds is 
significantly limited. Providing such an adjustment to the prejudgment 
interest facilitates the prompt and cost-efficient return of investor 
funds upon a finding of liability, and permits a respondent to limit 
its liability for prejudgment interest pending resolution of a 
proceeding. A person who concludes prior to the institution of 
proceedings that he or she may be liable for disgorgement claims may, 
in anticipation of proceedings, seek to limit potential prejudgment 
interest by establishing an escrow or equivalent arrangement on terms 
in accord with this rule. Such terms would include approval of the 
escrow by the Commission or by the staff, pursuant to delegated 
authority.
    Revision Comment: A number of comments addressed criteria for 
whether prejudgment interest should be assessed and what an appropriate 
rate of prejudgment interest would be. A respondent who wrongfully 
takes for his own use monies that belong to investors or other persons 
has received the equivalent of an interest free loan from the victims 
of his wrongdoing. The proper measurement of the benefit of this loan 
to the respondent is the cost the respondent would otherwise have paid 
for a comparable, unsecured loan. The actual use to which the 
respondent put the funds, or the rate of return the respondent earned 
is irrelevant. Similarly, it is irrelevant to the calculation of the 
respondent's economic benefit whether he obtained use of the funds by 
fraud or negligence. In order to fulfill the remedial purposes of 
disgorgement, a respondent should never be allowed free use of funds 
wrongfully obtained from others. Therefore, the Commission concluded 
that prejudgment interest should be assessed on all funds to be 
disgorged.
    Seeking to determine the specific interest rate for borrowed funds 
a particular respondent might have obtained in an arms length 
transaction would involve an inquiry into a wide variety of factors, 
including unique characteristics of the respondent's credit history and 
general economic conditions at the time of the violation. Typically, 
however, the interest rate charged to small entities or individuals for 
unsecured credit by a lender with no prior relationship to the borrower 
will be at the prime rate plus two to five points. The Internal Revenue 
Code underpayment rate of interest established under Section 6621(a)(2) 
of the Internal Revenue Code, 26 U.S.C. Sec. 6621(a)(2), a widely 
published, floating rate based on a fixed margin above the rate for 
treasury bills, is a reasonable proxy for an unsecured loan rate. 
Accordingly, Rule 600 prescribes the payment of prejudgment interest at 
the Internal Revenue Code underpayment rate.
    Commenters suggested that a lower rate, such as the treasury bill 
rate, was a more appropriate measure of prejudgment interest. The 
treasury bill rate, which reflects the rate paid by the U.S. Government 
to borrow money, is lower than the cost of funds rate that ordinarily 
could be obtained by an unsecured, private borrower. That rate, or any 
other below-market rate for the cost of funds is therefore not an 
appropriate measure of prejudgment interest to charge in remedial 
proceedings, where the purpose of the prejudgment interest is to deny a 
wrongdoer any economic benefit from his violations. One commenter 
advocated that in assessing prejudgment interest the Commission should 
be guided by factors which a court would consider in awarding 
prejudgment interest in a dispute between private parties. The criteria 
courts use in seeking to balance competing private economic interests, 
particularly in commercial settings voluntarily entered into by the 
parties, should not govern assessment of prejudgment interest 
authorized by statute in a remedial law enforcement action.
    The Commission considered whether any other prejudgment interest 
rate, or a case by case determination of a rate, would be more 
appropriate than the Internal Revenue Code underpayment rate. No other 
widely published, floating rate appears to offer a proxy for borrowing 
costs which would better approximate a typical respondent's cost of 
funds. A case-by-case approach to assessing prejudgment interest would 
be unduly complicated, particularly in light of the speculative nature 
of a post-hoc determination of the costs a particular respondent would 
have been able to obtain in connection with activities that violated 
the federal securities laws. Finally, restitution payments or other 
factors that might be appropriately considered to have diminished the 
duration of a respondent's use of ill-gotten gains would affect the 
calculation of disgorgement principal owed at various times, and 
thereby reduce prejudgment interest by a corresponding amount, but 
should not alter the rate of interest. Based on all these 
considerations, the Commission concluded that ordinarily, the IRS 
underpayment rate is a reasonable and appropriate rate to use in 
assessing prejudgment interest on disgorgement ordered as the result of 
remedial administrative proceedings.
    If, however, a respondent, with the approval of the Commission or 
the hearing officer, sets aside allegedly ill-gotten gains in an 
escrow, or makes other approved arrangements guaranteeing payment upon 
a finding of liability, the rationale for assessing prejudgment 
interest at a cost of funds rate is less compelling. Since the rate of 
return a respondent can earn by placing potential disgorgement funds in 
a conservative, risk-free investment will ordinarily be less than the 
rate established under 26 U.S.C. Sec. 6621(a)(2), an adjustment to the 
rate of prejudgment interest may be appropriate when an approved escrow 
is established. Cases in which respondents have sought to return or 
escrow funds prior to a finding of liability have been rare. Rule 600 
has [[Page 32789]] been revised, however, to adopt Commission practice 
which permits an adjustment to the prejudgment interest rate when an 
approved escrow or equivalent arrangement is established prior to a 
finding of liability.
    Rule 601. Prompt Payment of Disgorgement, Interest and Penalties
    (a) Timing of Payments. Unless otherwise provided, funds due 
pursuant to an order by the Commission requiring the payment of 
disgorgement, interest or penalties shall be paid no later than 21 days 
after service of the order, and funds due pursuant to an order by a 
hearing officer shall be paid on the first day after the order becomes 
final pursuant to Rule 360.
    (b) Stays. A stay of any order requiring the payment of 
disgorgement, interest or penalties may be sought at any time pursuant 
to Rule 401.
    Comment (a): Prompt collection of disgorgement, interest and 
penalties is essential to prevent a dissipation of assets that would 
thwart the disgorgement order. Since collection of disgorgement, 
interest and penalties becomes increasingly more difficult the longer 
it is delayed, timely determination of whether a respondent will pay 
disgorgement, interest and penalties as ordered is necessary so that 
appropriate collection efforts can be initiated. Procedures for 
execution of a money judgment are not available in an administrative 
proceeding. If a respondent does not pay disgorgement, interest and 
penalties as ordered, the Commission must determine whether to seek 
enforcement of its order by bringing a judicial action or by referring 
the matter to the Department of Justice for collection. Both processes 
often require significant periods of time.
    Rule 601 provides, therefore, that funds due pursuant to an order 
by a hearing officer are to be paid on the first day after the order 
becomes final. Since Rule 360 provides at least a 21-day period before 
a hearing officer's order becomes final, even if no review of the order 
is sought, a respondent will have at least 22 days notice before 
payment is due. If a respondent seeks review of the hearing officer's 
order, the Commission, by order, must deny the petition for review or 
affirm the initial decision before payment would be required. Rule 601 
provides that disgorgement, interest and penalties owed pursuant to an 
order by the Commission are to be paid no later than 21 days after 
service of the order. The one-day and 21-day time periods specified in 
Rule 601(a) may be modified by order in a particular case.
Rule 610. Submission of Proposed Plan of Disgorgement
    The Commission or the hearing officer may, at any time, order any 
party to submit a plan for the administration and distribution of 
disgorgement funds. Unless ordered otherwise, the Division of 
Enforcement shall submit a proposed plan no later than 60 days after 
funds or other assets have been turned over by the respondent pursuant 
to a Commission disgorgement order and any appeals of the disgorgement 
order have been waived or completed, or appeal is no longer available.
    Comment: The rules relating to disgorgement are based on the 
Commission's experience in judicial actions involving disgorgement. In 
most civil actions the court orders the Commission to submit a proposed 
plan for administration and distribution of disgorgement funds which, 
after notice and a hearing, the court later approves, modifies or 
disapproves. At the hearing, parties and other persons may present 
their objections to the court. Ordinarily, the Division of Enforcement 
seeks to avoid disputes over the plan and attempts, when preparing the 
plan, to consult with other parties and any other persons who have 
notified the staff or the court of an interest in the disposition of 
disgorgement funds. Since the development of a disgorgement plan may be 
a significant undertaking, it is not required in most proceedings until 
the funds to be disgorged have been transferred from the control of the 
respondent and, if the disgorgement order is subject to appeal, until 
after the appeal is decided.
    Similar procedures are established under Rules 610 through 614. 
Rule 610 requires that unless ordered otherwise, the Division of 
Enforcement shall submit a plan of disgorgement no later than 60 days 
after funds are turned over by the respondent pursuant to a 
disgorgement order and appeals of the order, if any, are concluded. In 
some cases a respondent may be in a better position than the Division 
of Enforcement to propose a disgorgement plan. Any party, therefore, 
may be required to submit a plan of disgorgement in addition to or in 
lieu of the plan of the Division of Enforcement. Also, the presumptive 
60-day period set forth in the Rule may be modified by order. For 
example, in a case with multiple respondents, where some respondents 
settle and others choose to litigate, it may be appropriate to await 
the resolution of the case against all respondents before making a 
determination as to the disposition of disgorgement funds received from 
those who settled.
Rule 611. Contents of Plan of Disgorgement; Provisions for Payment
    (a) Required Plan Elements. Unless otherwise ordered, a plan for 
the administration of a disgorgement fund shall include the following 
elements:
    (1) procedures for the receipt of additional funds, including the 
specification of an account where funds will be held and the 
instruments in which the funds may be invested;
    (2) specification of categories of persons potentially eligible to 
receive proceeds from the fund;
    (3) procedures for providing notice to such persons of the 
existence of the fund and their potential eligibility to receive 
proceeds of the fund;
    (4) procedures for making and approving claims, procedures for 
handling disputed claims and a cut-off date for the making of claims;
    (5) a proposed date for the termination of the fund, including 
provision for the disposition of any funds not otherwise distributed;
    (6) procedures for the administration of the fund, including 
selection, compensation and, as necessary, indemnification of a fund 
administrator to oversee the fund, process claims, prepare accountings, 
file tax returns and, subject to the approval of the Commission, make 
distributions from the fund to investors; and
    (7) such other provisions as the Commission or the hearing officer 
may require.
    (b) Payment to Registry of the Court or Court-Appointed Receiver. 
Subject to such conditions as the Commission or the hearing officer 
shall deem appropriate, a plan of disgorgement may provide for payment 
of disgorgement funds into a court registry or to a court-appointed 
receiver in any case pending in federal or state court against a 
respondent or any other person based upon a complaint alleging 
violations arising from the same or substantially similar facts as 
those alleged in the Commission's order instituting proceedings.
    (c) Payment to the United States Treasury Under Certain 
Circumstances. When, in the opinion of the Commission or the hearing 
officer, the cost of administering a plan of disgorgement relative to 
the value of the available disgorgement funds and the number of 
potential claimants would not justify distribution of the disgorgement 
funds to injured investors, the plan may provide that the funds shall 
be paid directly to the general fund of the United States Treasury. 
[[Page 32790]] 
    Comment (b): To minimize the costs of administering a plan of 
disgorgement, the Commission has in certain civil injunctive 
proceedings consented to the payment of disgorgement funds obtained as 
the result of a Commission initiated proceeding into a fund established 
for the benefit of persons in a related private civil action. See, 
e.g., SEC v. Levin, No. 3-92CV-399D (N.D. Tex. Mar. 2, 1992) 
(settlement directed payment into court registry); SEC v. Boesky, No. 
86-CIV-2299, slip op. (S.D.N.Y. Nov. 14, 1986) (settlement directed 
payment to escrow agent). Rule 611 provides for a similar disposition 
of disgorgement funds obtained in an administrative proceeding. 
Transfer of disgorgement funds into a fund established in a judicial 
proceeding may be subject to conditions on the use of the funds. For 
example, the Commission has routinely prohibited the use of any funds 
obtained in a Commission initiated action to pay attorneys' fees in a 
private lawsuit.
    Comment (c): The Commission has the authority to provide for the 
return of ill-gotten gains to investors, but there is no requirement 
that it do so. See, e.g., Exchange Act Secs. 21B(e) and 21C(e), 15 
U.S.C. Secs. 78u-2(e) and 78u-3(e) (``[t]he Commission is authorized to 
adopt rules, regulations, and orders * * * concerning payments to 
investors''). Returning funds to the United States Treasury when the 
expense of locating or making distributions to injured investors is 
prohibitive is consistent with treatment by the courts in similar 
situations. SEC v. Marcus Schloss & Co., 714 F. Supp. 100 (S.D.N.Y. 
1989); SEC v. Courtois, [1984-85 Transfer Binder] Fed. Sec. L. Rep. 
(CCH) para. 92,000 (S.D.N.Y. 1985); SEC v. Lund, 570 F. Supp. 1397, 
1404-1405 (C.D. Cal. 1983).
    Revision Comment (b): The respondent named in a Commission action 
may have settled a related civil action brought by private parties or 
may not have been named in a related private party litigation. The rule 
has been revised to permit the payment of disgorged funds to a fund 
established in connection with a judicial proceeding against the 
respondent or against any other person based upon a complaint alleging 
violations arising from the same or substantially similar facts as 
those alleged in the Commission's order instituting proceedings.
Rule 612. Notice of Proposed Plan of Disgorgement and Opportunity for 
Comment by Non-Parties
    Notice of a proposed plan of disgorgement shall be published in the 
SEC News Digest, in the SEC Docket, and in such other publications as 
the Commission or the hearing officer may require. The notice shall 
specify how copies of the proposed plan may be obtained and shall state 
that persons desiring to comment on the proposed plan may submit their 
views, in writing, to the Commission.
    Comment: Publication of notice that a proposed plan has been 
submitted is required in order to provide potential claimants or other 
persons with an opportunity to make known their views prior to adoption 
of the plan.
Rule 613. Order Approving, Modifying or Disapproving Proposed Plan of 
Disgorgement
    At any time more than 30 days after publication of notice of a 
proposed plan of disgorgement, the hearing officer or the Commission 
shall, by order, approve, approve with modifications, or disapprove the 
proposed plan. In the discretion of the Commission or the hearing 
officer, a proposed plan of disgorgement that is substantially modified 
prior to adoption may be republished for an additional comment period 
pursuant to Rule 612. The order approving or disapproving the plan 
should be entered within 30 days after the end of the final period 
allowed for comments on the proposed plan unless the Commission or the 
hearing officer, by written order, allows a longer period for good 
cause shown.
    Comment: After submission of comments, if any, the plan should be 
promptly approved, approved as modified or disapproved. The Commission 
or the hearing officer may hold a hearing on the proposed plan or may 
rule on the plan based only on written submissions, if any.
Rule 614. Administration of Plan of Disgorgement
    (a) Appointment and Removal of Administrator. The Commission or the 
hearing officer shall have discretion to appoint any person, including 
a Commission employee, as administrator of a plan of disgorgement and 
to delegate to that person responsibility for administering the plan. A 
respondent may be required or permitted to administer or assist in 
administering a plan of disgorgement, subject to such terms and 
conditions as the Commission or the hearing officer deem appropriate to 
ensure the proper distribution of funds. An administrator may be 
removed at any time by order of the Commission or hearing officer.
    (b) Administrator to Post Bond. If the administrator is not a 
Commission employee, the administrator shall be required to obtain a 
bond in the manner prescribed by 11 U.S.C. 322, in an amount to be 
approved by the Commission. The cost of the bond may be paid for as a 
cost of administration. The Commission may waive posting of a bond for 
good cause shown.
    (c) Administrator's Fees. If the administrator is a Commission 
employee, no fee shall be paid to the administrator for his or her 
services. If the administrator is not a Commission employee, he or she 
may file an application for fees for completed services, and upon 
approval by the Commission or a hearing officer, may be paid a 
reasonable fee for those services. Any objections thereto shall be 
filed within 21 days of service of the application on the parties.
    (d) Source of Funds. Unless otherwise ordered, fees and other 
expenses of administering the plan of disgorgement shall be paid first 
from the interest earned on disgorged funds, and if the interest is not 
sufficient, then from the corpus.
    (e) Accountings. During the first 10 days of each calendar quarter, 
or as otherwise directed by the Commission or the hearing officer, the 
administrator shall file an accounting of all monies earned or received 
and all monies spent in connection with the administration of the plan 
of disgorgement. A final accounting shall be submitted for approval of 
the Commission or hearing officer prior to discharge of the 
administrator and cancellation of the administrator's bond, if any.
    (f) Amendment. A plan may be amended upon motion by any party or 
the plan administrator or upon the Commission's or hearing officer's 
own motion.
    Comment (a): In some circumstances, for example, where the number 
of potential claimants to a fund is small and the identity of the 
claimants is known in advance, the plan of disgorgement may be 
relatively uncomplicated and may not require extensive resources to 
administer. In such a case, an administrative law judge or a staff 
member may administer the plan of disgorgement most effectively.
    As in court actions, however, if the amount of disgorgement is 
large or there are many potential claimants, administration of a 
disgorgement plan may involve extensive time and resources and may be 
accomplished most effectively by selecting an administrator with 
expertise in handling disgorgement-type proceedings. Such a person 
would, as necessary, be able to retain an accounting firm, a law firm, 
or any other entity necessary to assist in the administration of the 
disgorgement plan. [[Page 32791]] 
    Rule 614 does not specify a method for selecting an administrator. 
In court proceedings, the Commission may have an advisory role in 
recommending individuals to the court as possible administrators, but 
the court itself must select and appoint the administrator. In 
administrative proceedings, however, the Commission itself is 
responsible for appointing the administrator. Selection of an 
administrator by the Commission may be subject to various statutory 
provisions or regulations regarding personnel matters, procurement and 
contract requirements, or other matters. In addition, the selection 
process should promote public confidence that the selection was made on 
an impartial basis.
    In some proceedings, particularly those in which a settlement has 
been reached, the respondent may be required or allowed to assist in 
administering a disgorgement plan. See, e.g., In the Matter of 
Donaldson, Lufkin & Jenrette Sec. Corp., Exchange Act Release No. 27889 
(Apr. 11, 1990), 45 SEC Docket 1826, 1834 (Apr. 24, 1990). Especially 
in such self-administered disgorgement plans, the Commission may 
require affidavits, an accountant's certification, or other safeguards 
to assure that funds have been distributed only in accordance with the 
plan.
    Comment (b): Funds or other assets paid as disgorgement will be 
placed into an escrow, custodial or similar account established by the 
Commission or with the Commission's approval for the purpose of holding 
such funds or assets until they are disbursed. No funds will be 
transferred to the Commission itself. See 31 U.S.C. Sec. 3302(b) 
(requiring agencies receiving funds for the government to deposit the 
money into the Treasury without deduction for any charge or claim).
    Funds paid pursuant to a disgorgement order do not become the 
property of the Commission and internal control and audit procedures 
mandated by statute for the Commission's own funds are not applicable 
to disgorgement funds. Rule 614(b) requires, therefore, that if the 
administrator is not a Commission employee, the administrator must 
obtain a surety bond comparable to that when a trustee is appointed in 
a SIPC liquidation or bankruptcy proceeding.  See 15 U.S.C. 
Sec. 78eee(b)(3); 11 U.S.C. Sec. 322. See also Rule 614(e) (quarterly 
accountings required).
    Comment (c): If the administrator is not a Commission employee, 
reasonable fees may be paid to the administrator. Payment of the 
administrator's fees may be made only upon a public application filed 
by the administrator and subject to the approval of the Commission or a 
hearing officer. Filings by the administrator, including fee 
applications, should conform to the filing requirements of Rule 151 and 
be served on all parties pursuant to Rule 150.
    Comment (d): The Commission has broad authority to adopt rules, 
regulations and orders it deems appropriate to implement its authority 
to order disgorgement. See, e.g., Exchange Act Sec. 21B(e), 15 U.S.C. 
Sec. 78u-2(e). Paragraph (d) provides that fees and expenses be paid 
first out of interest earned on disgorged funds, and if the interest is 
insufficient, then out of the corpus of the funds. Subject to any 
applicable requirements established by Congress with respect to the use 
of appropriated funds, and except to the extent a Commission employee 
is appointed administrator, or an administrative law judge administers 
a disgorgement fund without the assistance of an administrator, 
appropriated funds ordinarily will not be used to defray the direct 
costs of administering a disgorgement plan. Where the value of the 
available disgorgement funds relative to the expense of administrating 
a plan of disgorgement from the corpus or the interest earned would not 
justify distribution of funds, the disgorged funds may be turned over 
to the general fund of the United States Treasury. See Rule 611(c).
    Comment (f): After a plan is approved, changed circumstances may 
require amendment of the plan. A plan may be amended upon motion by any 
party or the plan administrator or upon the Commission's or hearing 
officer's own motion. Procedures for publication of notice or hearing 
on the motion will be subject to case by case determination.
Rule 620. Right to Challenge Order of Disgorgement
    Other than in connection with the opportunity to submit comments as 
provided in Rule 612, no person shall be granted leave to intervene or 
to participate in a proceeding or otherwise to appear to challenge an 
order of disgorgement; or an order approving, approving with 
modifications, or disapproving a plan of disgorgement; or any 
determination relating to a plan of disgorgement based solely upon that 
person's eligibility or potential eligibility to participate in a 
disgorgement fund or based upon any private right of action such person 
may have against any person who is also a respondent in an enforcement 
proceeding.
    Comment: The opportunity to submit comments on a plan of 
disgorgement does not give a person any right to become a party to or 
intervene in an enforcement proceeding. See Rule 210 (no one may become 
a party or receive leave to intervene in an enforcement proceeding).
    Although return of ill-gotten gains to injured investors is often 
an appropriate disposition of disgorged funds, the purpose of the 
Commission's administrative disgorgement remedy is to deprive violators 
of ill-gotten gains and thus serve as a deterrent to violations, rather 
than to compensate injured investors. See The Securities Law 
Enforcement Remedies and Penny Stock Reform Act of 1990, S. Rep. No. 
337, 101st Cong., 2d Sess. 16 (1990) (``In contrast to an award of 
damages in a private action, which is designed to compensate an injured 
plaintiff, disgorgement forces a defendant to give up the amount by 
which he was unjustly enriched.''). The statutory remedy is consistent 
in this regard with the equitable remedy available in civil injunctive 
actions brought by the Commission. See, e.g., SEC v. First City 
Financial Corp., 890 F.2d 1215, 1230, 1232 n.24 (D.C. Cir. 1989) (the 
primary purpose of disgorgement is not to compensate investors); SEC v. 
Tome, 833 F.2d 1086, 1096 (2d Cir. 1987), cert. denied, 486 U.S. 1014 
(1988); SEC v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1307 (2d Cir.), 
cert. denied, 404 U.S. 1005 (1971); Securities Law Enforcement Remedies 
and Penny Stock Reform Act of 1990, H.R. Rep. No. 616, 101st Cong., 2d 
Sess. at 22 (1990).
    Where it is not practical to locate persons who have been harmed, 
disgorgement in injunctive actions has been ordered paid into the 
general fund of the U.S. Treasury. See SEC v. Marcus Schloss & Co., 714 
F. Supp. 100, 103 (S.D.N.Y. 1989); SEC v. Courtois, [1984-85 Transfer 
Binder] Fed. Sec. L. Rep. (CCH) para. 92,000, at 90,959 (S.D.N.Y. 
1985); SEC v. Lund, 570 F. Supp. 1397, 1404-1405 (C.D. Cal. 1983). In 
insider trading cases, courts have required that disgorgement be made 
available to persons other than investors. See SEC v. Materia, [1983-84 
Transfer Binder] Fed. Sec. L. Rep. (CCH) para. 99,583, at 97,284-85 
(S.D.N.Y. 1983), aff'd on other grounds, 745 F.2d 197 (2d Cir. 1984), 
cert. denied, 471 U.S. 1053 (1985). See generally Louis Loss, 
Fundamentals of Securities Regulation 1007 (2d ed. 1988) (discussing 
discretion exercised by courts in designating recipients of disgorged 
funds).
    Since there is not a requirement that funds obtained in an 
administrative enforcement proceeding be paid to 
[[Page 32792]] investors, persons who may have a private right of 
action in federal court against a respondent do not thereby have 
standing in the Commission's enforcement proceeding against that 
respondent to challenge a plan of disgorgement solely because of 
dissatisfaction with their potential eligibility to receive funds from 
the Commission's disgorgement pool. See Marino v. Ortiz, 484 U.S. 301, 
304 (1988) (per curiam) (explicitly disapproving of the suggestion in 
SEC v. Certain Unknown Purchasers, 817 F.2d 1018, 1021 & n.1 (2d Cir. 
1987), cert. denied, 484 U.S. 1060 (1988), that a person has standing 
to appeal whenever he ``has an interest that is affected by the trial 
court's judgment.'').
    The limitations in Rule 620 on participation in the proceedings 
before a hearing by a person with potential claims against the 
disgorgement pool does not preclude a person who is aggrieved by a 
decision concerning the disposition of disgorgement assets and entitled 
to review of the decision from petition the Commission for such review. 
A person aggrieved by a final decision of the Commission who is 
entitled to review may also seek a stay of the Commission order or 
judicial review of the order. See Rules 360, 401 and 410; Section 702 
of the Administrative Procedure Act, 5 U.S.C. Sec. 702. See also SEC v. 
Wozniak, 33 F.3d 13 (7th Cir. 1994) (persons not parties to the 
litigation who objected to a disgorgement plan could have sought a stay 
of district court's judgment and distribution of the plan in order to 
have standing to appeal).
Rule 630. Inability to Pay Disgorgement, Interest or Penalties
    (a) Generally. In any proceeding in which an order requiring 
payment of disgorgement, interest or penalties may be entered, a 
respondent may present evidence of an inability to pay disgorgement, 
interest or a penalty. The Commission may, in its discretion, or the 
hearing officer may, in his or her discretion, consider evidence 
concerning ability to pay in determining whether disgorgement, interest 
or a penalty is in the public interest.
    (b) Financial Disclosure Statement. Any respondent who asserts an 
inability to pay disgorgement, interest or penalties may be required to 
file a sworn financial disclosure statement and to keep the statement 
current. The financial statement shall show the respondent's assets, 
liabilities, income or other funds received and expenses or other 
payments, from the date of the first violation alleged against that 
respondent in the order instituting proceedings, or such later date as 
specified by the Commission or a hearing officer, to the date of the 
order requiring the disclosure statement to be filed. By order, the 
Commission or the hearing officer may prescribe the use of the 
Disclosure of Assets and Financial Information Form (see Form D-A at 
Sec. 209.1 of this chapter) or any other form, may specify other time 
periods for which disclosure is required, and may require such other 
information as deemed necessary to evaluate a claim of inability to 
pay.
    (c) Confidentiality. Any respondent submitting financial 
information pursuant to this rule or Rule 410(c) may make a motion, 
pursuant to Rule 322, for the issuance of a protective order against 
disclosure of the information submitted to the public or to any parties 
other than the Division of Enforcement. Prior to a ruling on the 
motion, no party receiving information as to which a motion for a 
protective order has been made may transfer or convey the information 
to any other person without the prior permission of the Commission or 
the hearing officer.
    (d) Service Required. Notwithstanding any provision of Rule 322, a 
copy of the financial disclosure statement shall be served on the 
Division of Enforcement.
    (e) Failure to File Required Financial Information: Sanction. Any 
respondent who, after making a claim of inability to pay either 
disgorgement, interest or a penalty, fails to file a financial 
disclosure statement when such a filing has been ordered or is required 
by rule may, in the discretion of the Commission or the hearing 
officer, be deemed to have waived the claim of inability to pay. No 
sanction pursuant to Rules 155 or 180 shall be imposed for a failure to 
file such a statement.
    Comment (a): A respondent may present evidence of ability to pay a 
penalty, and the Commission may, in its discretion, consider such 
evidence. See, e.g., Exchange Act Sec. 21B(d), 15 U.S.C. Sec. 78u-2(d). 
A respondent's ability to pay becomes a significant issue not only in 
proceedings in which a penalty is ordered, but also when disgorgement 
and interest is ordered. Although no statutory requirement addresses 
inability to pay disgorgement or interest, the Commission considers 
evidence of ability to pay as a factor in determining whether a 
respondent should be required to pay disgorgement and interest as well 
as penalties. Rule 630 codifies this practice.
    Comment (b): A respondent may not be entirely candid about his or 
her financial position when asserting an inability to pay disgorgement, 
interest or penalties. The Commission or a hearing officer may require 
persons who assert an inability to pay disgorgement, interest or 
penalties to file sworn, verifiable financial disclosure statements 
before consideration of inability to pay as a basis for waiving 
disgorgement, interest or penalties.
    Rule 630 provides that the Commission or the hearing officer may 
require ``such other information as deemed necessary to evaluate a 
claim of inability to pay.'' Accordingly, the Division of Enforcement 
may seek an order to question the respondent under oath or may seek the 
issuance of subpoenas to obtain documents or testimony concerning an 
asserted inability to pay. In addition, the rule provides that, by 
order, the Commission or the hearing officer may prescribe a particular 
financial disclosure form to be used and may specify time periods for 
which disclosure is required. Form D-A, the Disclosure of Assets and 
Financial Information Form, includes a waiver by the respondent that 
authorizes ``The Securities and Exchange Commission and any of its 
staff * * * to obtain any such information from credit bureaus, 
financial institutions or any other source as may be needed to verify 
the statements made on this form.'' If such a waiver is obtained, the 
Division of Enforcement may rely on it as a basis to seek confirmation 
of information in the financial disclosure form without further 
approval from the hearing officer or Commission.
    Comment (c): The public's right to review financial disclosure 
statements submitted in connection with a respondent's claim of 
inability to pay should be balanced against the respondent's legitimate 
interest in protecting confidential or personal information from 
premature or unnecessary disclosure. Each request for confidentiality 
must be decided based on the procedural status of the case, the extent 
to which financial information has already been disclosed, and the 
individual facts and circumstances underlying the request.
    While financial circumstances may change during the course of a 
proceeding, a respondent who intends to assert a claim of inability to 
pay may be required by the hearing officer to specify in connection 
with prehearing submissions or conferences whether the issue will be 
raised. Early submission of a financial disclosure form to support a 
planned claim of inability to pay will allow the hearing officer and 
parties to better prepare for hearing and to assess the time needed for 
the hearing. Part I of Form D-A requires only summary information as to 
which confidentiality [[Page 32793]] interests are limited. Part II 
requires detailed back-up information that is more likely to call for 
personal, confidential data, such as bank account numbers and 
information about regular medical payments. The earlier in a proceeding 
the respondent is required to submit financial information, however, 
the more compelling the case for the confidentiality of personal 
financial information such as that called for in Part II of Form D-A. 
Providing for confidential treatment of personal financial information 
at the early stages of a proceeding or prior to the respondent's own 
introduction of evidence of inability to pay protects a respondent's 
privacy interests to the maximum extent in the event that the Division 
fails in its case in chief or that the case settles prior to completion 
of the hearing.
    Comment (d): A copy of the financial disclosure statement must be 
served on the Division of Enforcement notwithstanding any motion for a 
protective order. The Division of Enforcement must have the 
respondent's financial information in order to determine whether to 
challenge a claim of inability to pay. Notice that a disclosure 
statement has been filed must also be provided to other respondents, 
who may seek all or part of the information submitted unless a 
protective order has been sought or granted pursuant to Rule 322.

Form

209.1. Form D-A: Disclosure of Assets and Financial Information
    (a) Rules 410 and 630 of the Rules of Practice (17 CFR 201.410 and 
630 of this chapter) provide that under certain circumstances a 
respondent who asserts or intends to assert an inability to pay 
disgorgement, interest or penalties may be required to disclose certain 
financial information. Unless otherwise ordered, this form may be used 
by individuals required to supply such information.
    (b) The respondent filing Form D-A is required promptly to notify 
the Commission of any material change in the answer to any question on 
this form.
    (c) Form D-A may not be withheld from the Division of Enforcement. 
A respondent making financial information disclosures on this form 
after the institution of proceedings may make a motion, pursuant to 
Rule 322 of the Commission's Rules of Practice (17 CFR 201.322 of this 
chapter), for the issuance of a protective order to limit disclosure of 
the information submitted on Form D-A to the public or parties other 
than the Division of Enforcement. A request for a protective order 
allows the requester an opportunity to justify the need for 
confidentiality. The making of a motion for a protective order does 
not, however, guarantee that disclosure will be limited.
    (d) No party receiving information for which a motion for a 
protective order has been made may transfer or convey the information 
to any other person prior to a ruling on the motion without the prior 
permission of the Commission or a hearing officer.
    (e) A person making financial information disclosures on Form D-A 
prior to the institution of proceedings, in connection with an offer of 
settlement or otherwise, may request confidential treatment of the 
information pursuant to the Freedom of Information Act. See the 
Commission's Freedom of Information Act (``FOIA'') regulations, 17 CFR 
200.83. A request for confidential treatment allows the requester an 
opportunity to substantiate the need for confidentiality. No 
determination as to the validity of any request for confidential 
treatment will be made until a request for disclosure of the 
information under FOIA is received.

    Note: Form D-A appears in the appendix to this document.
V. Regulatory Flexibility Analysis

    The initial Regulatory Flexibility Analysis was prepared in 
accordance with 5 U.S.C. 603 and published in the Proposing Release. No 
comments were received on this analysis. The Commission has prepared a 
Final Regulatory Flexibility Analysis, a copy of which may be obtained 
by writing to Andrew Glickman, Esq., Office of the General Counsel, 
Mail Stop 6-6, Securities and Exchange Commission, 450 5th Street, 
N.W., Washington, D.C. 20549.

VI. Statutory Basis For Rules

    These amendments to the Rules of Practice and related rules are 
being adopted pursuant to: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 
77u, 78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 
78u-3, 78v, 78w, 79c, 79s, 79t, 79z-5a, 77sss, 77ttt, 80a-8, 80a-9, 
80a-37, 80a-38, 80a-39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 
and 80b-12.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies), Organization and functions (Government 
agencies), Securities.

17 CFR Part 201

    Accountants, Administrative practice and procedure, Brokers, 
Claims, Confidential business information, Equal access to justice, 
Fraud, Lawyers, Penalties, Securities.

17 CFR Part 202

    Administrative practice and procedure.

17 CFR Part 203

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Securities.

17 CFR Part 209

    Administrative practice and procedure--financial disclosure form.

17 CFR Part 228

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 229

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 230

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 232

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

    Accountants, Administrative practice and procedure, Brokers, 
Lawyers, Penalties, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 250

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 260

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 270

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 275

    Reporting and recordkeeping requirements, Securities.
Text of Adopted Rules

    For the reasons set out in the preamble, Title 17, Chapter II of 
the Code of Federal Regulations is amended as follows: [[Page 32794]] 

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

Subpart A--Organization and Program Management

    1. The authority citation for part 200, subpart A, continues to 
read in part as follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t, 
79sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    2. Section 200.1(j) is revised to read as follows:


Sec. 200.1 General statement and statutory authority.

* * * * *
    (j) Administrative sanctions, injunctive remedies, civil money 
penalties and criminal prosecution. There are also private rights of 
action for investors injured by violations of the Acts.


Sec. 200.16  [Amended]

    3. In Sec. 200.16, remove the words ``Rule 2(e) of the Commission's 
Rules of Practice (Sec. 201.2(e) of this chapter)'', and, in their 
place, add the words ``Rule 102(e) of the Commission's Rules of 
Practice (Sec. 201.102(e) of this chapter)''.


Sec. 200.30-4  [Amended]

    4. In Sec. 200.30-4(a)(5), remove the words ``Rule 29 of the 
Commission's Rules of Practice (17 CFR 201.1-201.29)'', and, in their 
place, add the words ``Rule 193 of the Commission's Rules of Practice, 
Sec. 201.193 of this chapter''.


Sec. 200.30-7  [Amended]

    5. In Sec. 200.30-7(a)(1), remove the words ``Rule 21(a) of the 
Commission's rules of practice, Sec. 201.21(a)'', and, in their place, 
add the words ``Rule 451 of the Commission's Rules of Practice, 
Sec. 201.451''.
    6. In Sec. 200.30-7(a)(2), remove the words ``Rule 21(b) of the 
Commission's rules of practice, Sec. 201.21(b)'', and, in their place, 
add the words ``Rule 451(c) of the Commissions Rules of Practice, 
Sec. 201.451(c)''.
    7. In Sec. 200.30-7 (a)(3) and (a)(4), remove the words ``Rule 13 
of the Commission's rules of practice, Sec. 201.13'', and, in their 
place, add the words ``Rule 161 of the Commission's Rules of Practice, 
Sec. 201.161'' .
    8. In Sec. 200.30-7(a)(5), remove the words ``Rule 22(d) of the 
Commission's rules of practice, Sec. 201.22(d)'', and, in their place, 
add the words ``Rule 450(c) of the Commission's Rules of Practice, 
Sec. 201.450(c)''.
    9. In Sec. 200.30-7(a)(9), remove the words ``rules 6 and 23 of the 
Commission's rules of practice'', and, in their place, add the words 
``Rules 141 and 150 of the Commission's Rules of Practice, 
Secs. 201.141 and 201.150 of this chapter''.
    10. In Sec. 200.30-7 paragraph (a)(10) is added to read as follows: 
Sec. 200.30-7 Delegation of Authority to Secretary of the Commission.
    (a) * * *
    (10) To set the date for sanctions to take effect if an initial 
decision is not appealed and becomes final pursuant to Rule 360(d) or 
if an initial decision is affirmed pursuant to Rule 411.
* * * * *
    11. Section 200.30-9 is revised to read as follows:


Sec. 200.30-9  Delegation of authority to hearing officers.

    Pursuant to the provisions of Section 4A of the Securities Exchange 
Act of 1934 (15 U.S.C. 78d-1), the Securities and Exchange Commission 
hereby delegates, until the Commission orders otherwise, to each 
Administrative Law Judge (``Judge'') the authority:
    (a) To make an initial decision in any proceeding at which the 
Judge presides in which a hearing is required to be conducted in 
conformity with the Administrative Procedure Act (5 U.S.C. 557) unless 
such initial decision is waived by all parties who appear at the 
hearing and the Commission does not subsequently order that an initial 
decision nevertheless be made by the Judge, and in any other proceeding 
in which the Commission directs the Judge to make such a decision; and
    (b) To issue, upon entry pursuant to Rule 531 of the Commission's 
Rules of Practice, Sec. 201.531 of this chapter, of an initial decision 
on a permanent order, a separate order setting aside, limiting or 
suspending any temporary sanction, as that term is defined in Rule 
101(a)(11) of the Commission's Rules of Practice, Sec. 201.101(a) of 
this chapter, then in effect in accordance with the terms of the 
initial decision.


Sec. 200.30-10  [Amended]

    12. In Sec. 200.30-10(a)(1), remove the words ``Rule 6(b) of the 
Commission's rules of practice, Sec. 201.6(b) of this chapter, and Rule 
11(a) of the Commission's rules of practice (Sec. 201.11(a) of this 
chapter)'', and, in their place, add the words ``Rule 200 of the 
Commission's Rules of Practice, Sec. 201.200 of this chapter''.
    13. In Sec. 200.30-10(a)(2), remove the words ``Rule 11(b) of the 
Commission's rules of practice (Sec. 201.11(b) of this chapter)'', and, 
in their place, add the words ``Rule 110 of the Commission's Rules of 
Practice, Sec. 201.110 of this chapter''.
    14. In Sec. 200.30-10(a)(3), remove the words ``Rule 13 of the 
Commission's rules of practice, Sec. 201.13'', and, in their place, add 
the words ``Rule 161 of the Commission's Rules of Practice, 
Sec. 201.161''.
    15. In Sec. 200.30-10(a)(4), remove the words ``Rule 13 of the 
Commission's rules of practice (Sec. 201.13 of this chapter)'', and, in 
their place, add the words ``Rule 161 of the Commission's Rules of 
Practice, Sec. 201.161 of this chapter''.
    16. In Sec. 200.30-10(a)(5), remove the words ``Rule 22(d) of the 
Commission's rules of practice (Sec. 201.22(d) of this chapter)'', and, 
in their place, add the words ``Rule 450(c) of the Commission's Rules 
of Practice, Sec. 201.450(c) of this chapter''.
    17. In Sec. 200.30-10 paragraph (a)(6) is removed and paragraphs 
(a)(7) and (a)(8) are redesignated as paragraphs (a)(6) and (a)(7).
    18. In newly redesignated Sec. 200.30-10(a)(6), remove the words 
``Rule 14(b) of the Commission's rules of practice (201.14(b) of this 
chapter)'', and, in their place, add the words ``Rule 232 of the 
Commission's Rules of Practice, Sec. 201.232 of this chapter''.
    19. Section 200.30-14 is amended by revising the introductory text 
of paragraph (g)(1), adding paragraphs (g)(1)(x) through (g)(1)(xiv), 
and revising paragraphs (g)(2), and (g)(4) through (g)(7) to read as 
follows:


Sec. 200.30-14  Delegation of authority to the General Counsel.

* * * * *
    (g)(1) With respect to proceedings conducted pursuant to the 
Securities Act of 1933 (15 U.S.C. 77a, et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a, et seq.), the Public Utility 
Holding Company Act of 1935 (15 U.S.C. 79a, et seq.), the Trust 
Indenture Act of 1939 (15 U.S.C. 77aaa, et seq.), the Investment 
Company Act of 1940 (15 U.S.C. 80a-1, et seq.), the Investment Advisers 
Act of 1940 (15 U.S.C. 80b-1, et seq.),the Securities Investor 
Protection Act of 1970 (15 U.S.C. 78aaa, et seq.) and the provisions of 
Rule 102(e) of the Commission's Rules of Practice (Sec. 201.102(e) of 
this chapter);
* * * * *
    (x) To determine motions to consolidate proceedings pending before 
the Commission.
    (xi) To determine whether to permit or require that a record of 
proceedings be supplemented with additional evidence. [[Page 32795]] 
    (xii) To determine requests for leave to file an opposition to a 
petition for review filed pursuant to the provisions of Rule 411 of the 
Commission's Rules of Practice, Sec. 201.411 of this chapter.
    (xiii) To issue a briefing schedule order pursuant to Rule 450 of 
the Commission's Rules of Practice, Sec. 201.450 of this chapter.
    (xiv) To determine motions for expedited briefing schedules.
    (2) With respect to proceedings conducted pursuant to the 
Securities Act of 1933 (15 U.S.C. 77a, et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a, et seq.), the Investment Company 
Act of 1940 (15 U.S.C. 80a-1, et seq.), the Investment Advisers Act of 
1940 ( 15 U.S.C. 80b-1, et seq.), the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78aaa, et seq.) and the provisions of Rule 
102(e) of the Commission's Rules of Practice (Sec. 201.102(e) of this 
chapter), to issue findings and orders taking the remedial action 
described in the order for proceedings where the respondents expressly 
consent to such action, fail to appear or default in the filing of 
answers required to be filed; or to grant a request, based upon a 
showing of good cause, to vacate an order of default, so as to permit 
presentation of a defense.
* * * * *
    (4) With respect to proceedings under Sections 19 (d), (e) and (f) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78s (d), (e) and 
(f)), to determine that an application for review under those sections 
has been abandoned, under the provisions of Rule 420, Sec. 201.420 of 
this chapter, or otherwise, and to issue an order dismissing the 
application in such event.
    (5) With respect to proceedings conducted or reviewed pursuant to 
the Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.), the 
Investment Company Act of 1940 (15 U.S.C. 80a-1, et seq.), the 
Investment Advisers Act of 1940 ( 15 U.S.C. 80b-1, et seq.) and the 
provisions of Rule 102(e) of the Commission's Rules of Practice, 
Sec. 201.102(e) of this chapter, to determine applications to stay 
Commission orders pending appeal of those orders to the federal courts 
and to determine applications to vacate such stays.
    (6) With respect to review proceedings pursuant to Sections 19 (d), 
(e), and (f) of the Securities Exchange Act of 1934 (15 U.S.C. 78s (d), 
(e), and (f)), to determine applications for a stay of action taken by 
a self-regulatory organization pending Commission review of that action 
and to determine applications to vacate such stays.
    (7) In connection with Commission review of actions taken by self-
regulatory organizations, pursuant to Sections 19 (d), (e) and (f) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78s (d), (e) and (f)), 
to grant or deny requests for oral argument in accordance with the 
provisions of Rule 451, Sec. 201.451 of this chapter.
* * * * *

Subpart B--Disposition of Commission Business

    20. The authority citation for part 200, subpart B continues to 
read as follows:

    Authority: 5 U.S.C. 522b.

    21. Section 200.43 is amended by adding ``, except that the duty 
officer may preside at the taking of evidence with respect to the 
issuance of a temporary cease-and-desist order as provided by Rule 
511(c) of the Commission's Rules of Practice, Sec. 201.511(c) of this 
chapter.'' before the period.

Subpart F--Code of Behavior Governing Ex Parte Communications 
Between Persons Outside the Commission and Decisional Employees

    22. The authority citation for part 200, subpart F is revised to 
read as follows:

    Authority: 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11; 5 
U.S.C. 557.


Sec. 200.111  [Amended]

    23. In Sec. 200.111(d)(1)(i), remove the words ``Rule 23 of the 
Commission's Rules of Practice, Sec. 201.23'', and, in their place, add 
the words ``Rule 150 of the Commission's Rules of Practice, 
Sec. 201.150''.
    24. In Sec. 200.111(d)(2), remove the words ``Rule 9(c) of the 
Commission's Rules of Practice, Sec. 201.9(c)'', and, in their place, 
add the words `` Rule 210(c) of the Commission's Rules of Practice, 
Sec. 201.210(c)''.

Subpart H--Regulations Pertaining to the Privacy of Individuals and 
Systems of Records Maintained by the Commission

    25. The general authority citation for part 200, subpart H is 
revised to read as follows:

    Authority: 5 U.S.C. 552a(f), unless otherwise noted.
* * * * *


Sec. 200.312  [Amended]

    26. In Sec. 200.312(a)(8), remove the words ``Rule 2(e)'', and, in 
their place, add the words ``Rule 102(e)''.

Subpart K--Regulations Pertaining to the Protection of the 
Environment

    27. The authority citation for part 200, subpart K is revised to 
read as follows:

    Authority: 15 U.S.C. 78w(a)(2).


Sec. 200.554  [Amended]

    28. In Sec. 200.554(a), remove the words ``Sec. 201.20'', and, in 
their place, add the words ``Rule 460 of the Commission's Rules of 
Practice, Sec. 201.460''.

Subpart M--Regulation Concerning Conduct of Members and Employees 
and Former Members and Employees of the Commission

    29. The authority citation for part 200, subpart M continues to 
read as follows:

    Authority: 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11; E. O. 
11222; 3 CFR, 1964-1965 Comp.; 5 CFR 735.104 unless otherwise noted.


Sec. 200.735-13  [Amended]

    30. In Sec. 200.735-13(c), remove the words ``Rule 2(e) of the 
Commission's Rules of Practice, 17 CFR 201.2(e)'', and ``17 CFR 201.1'' 
and, in their place, add the words ``Rule 102(e) of the Commission's 
Rules of Practice, Sec. 201.102(e) of this chapter'' and ``17 CFR 
201.100''.

PART 201--RULES OF PRACTICE

    31. The authority citation for Part 201 is removed.

Subpart A--[Removed and Reserved]

    32. Subpart A is removed and reserved.

Subpart B--Regulations Pertaining to the Equal Access to Justice Act

    33. The authority citation for Subpart B of Part 201 is revised to 
read as follows:

    Authority: 15 U.S.C. 77s, 78w, 78x, 79t, 77sss, 80a-37 and 80b-
11; 5 U.S.C. 504(c)(1).

    34. In Sec. 201.42: the reference to ``201.25'' in paragraph (b) is 
corrected to read ``201.190''.
    35. In Sec. 201.54: the reference to ``201.8'' is corrected to read 
``201.240''.
    36. In Sec. 201.57: the reference to ``201.17'' is corrected to 
read ``201.410 and 201.411''.
    37. Section 201.60 is removed and reserved.

Subpart C--Procedures Pertaining to the Payment of Bounties 
Pursuant to Subsection 21A(e) of the Securities Exchange Act of 
1934

    38. The authority citation for Subpart C of Part 201 is revised to 
read as follows:

    Authority: 15 U.S.C. 78u-1 and 78w.

     [[Page 32796]] 39. Subpart D is added to read as follows:

Subpart D--Rules of Practice

General Rules

Sec.
201.100  Scope of the rules of practice.
201.101  Definitions.
201.102  Appearance and practice before the Commission.
201.103  Construction of rules.
201.104  Business hours.
201.110  Presiding officer.
201.111  Hearing officer: authority.
201.112  Hearing officer: disqualification and withdrawal.
201.120  Ex parte communications.
201.121  Separation of functions.
201.140  Commission orders and decisions: signature and 
availability.
201.141  Orders and decisions: service of orders instituting 
proceeding and other orders and decisions.
201.150  Service of papers by parties.
201.151  Filing of papers with the Commission: procedure.
201.152  Filing of papers: form.
201.153  Filing of papers: signature requirement and effect.
201.154  Motions.
201.155  Default; motion to set aside default.
201.160  Time computation.
201.161  Extensions of time, postponements and adjournments.
201.180  Sanctions.
201.190  Confidential treatment of information in certain filings.
201.191  Adjudications not required to be determined on the record 
after notice and opportunity for hearing.
201.192  Rulemaking: issuance, amendment and repeal of rules of 
general application.
201.193  Applications by barred individuals for consent to 
associate.

Initiation Of Proceedings And Prehearing Rules

201.200  Initiation of proceedings.
201.201  Consolidation of proceedings.
201.202  Specification of procedures by parties in certain 
proceedings.
201.210  Parties, limited participants and amici curiae.
201.220  Answer to allegations.
201.221  Prehearing conferences.
201.222  Prehearing submissions.
201.230  Enforcement and disciplinary proceedings: availability of 
documents for inspection and copying.
201.231  Enforcement and disciplinary proceedings: production of 
witness statements.
201.232  Subpoenas.
201.233  Depositions upon oral examination.
201.234  Depositions upon written questions.
201.235  Introducing prior sworn statements of witnesses into the 
record.
201.240  Settlement.
201.250  Motion for summary disposition.

Rules Regarding Hearings

201.300  Hearings.
201.301  Hearings to be public.
201.302  Record of hearings.
201.310  Failure to appear at hearings: default.
201.320  Evidence: admissibility.
201.321  Evidence: objections and offers of proof.
201.322  Evidence: confidential information, protective orders.
201.323  Evidence: official notice.
201.324  Evidence: stipulations.
201.325  Evidence: presentation under oath or affirmation.
201.326  Evidence: presentation, rebuttal and cross-examination.
201.340  Proposed findings, conclusions and supporting briefs.
201.350  Record in proceedings before hearing officer; retention of 
documents; copies.
201.351  Transmittal of documents to Secretary; record index; 
certification.
201.360  Initial decision of hearing officer.

Appeal To The Commission And Commission Review

201.400  Interlocutory review.
201.401  Issuance of stays.
201.410  Appeal of initial decisions by hearing officers.
201.411  Commission consideration of initial decisions by hearing 
officers.
201.420  Appeal of determinations by self-regulatory organizations.
201.421  Commission consideration of determinations by self-
regulatory organizations.
201.430  Appeal of actions made pursuant to delegated authority.
201.431  Commission consideration of actions made pursuant to 
delegated authority.
201.450  Briefs filed with the Commission.
201.451  Oral argument before the Commission.
201.452  Additional evidence.
201.460  Record before the Commission.
201.470  Reconsideration.
201.490  Receipt of petitions for judicial review pursuant to 28 
U.S.C. 2112(a)(1).

Rules Relating To Temporary Orders And Suspensions

201.500  Expedited consideration of proceedings.
201.510  Temporary cease-and-desist orders: application process.
201.511  Temporary cease-and-desist orders: notice; procedures for 
hearing.
201.512  Temporary cease-and-desist orders: issuance after notice 
and opportunity for hearing.
201.513  Temporary cease-and-desist orders: issuance without prior 
notice and opportunity for hearing.
201.514  Temporary cease-and-desist orders: judicial review; 
duration.
201.520  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: application.
201.521  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: notice and opportunity for hearing 
on application.
201.522  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: issuance and review of order.
201.523  [Reserved].
201.524  Suspension of registrations: duration.
201.530  Initial decision on permanent order: timing for submitting 
proposed findings and preparation of decision.
201.531  Initial decision on permanent order: effect on temporary 
order.
201.540  Appeal and Commission review of initial decision making a 
temporary order permanent.
201.550  Summary suspensions pursuant to Exchange Act Section 
12(k)(1)(A).

Rules Regarding Disgorgement And Penalty Payments

201.600  Interest on sums disgorged.
201.601  Prompt payment of disgorgement, interest and penalties.
201.610  Submission of proposed plan of disgorgement.
201.611  Contents of plan of disgorgement; provisions for payment.
201.612  Notice of proposed plan of disgorgement and opportunity for 
comment by non-parties.
201.613  Order approving, modifying or disapproving proposed plan of 
disgorgement.
201.614  Administration of plan of disgorgement.
201.620  Right to challenge order of disgorgement.
201.630  Inability to pay disgorgement, interest or penalties.

Informal Procedures And Supplementary Information Concerning 
Adjudicatory Proceedings

201.900  Informal Procedures and Supplementary Information 
Concerning Adjudicatory Proceedings.
Table I to Subpart D--Adversary Adjudications Conducted by the 
Commission under 5 U.S.C. 554
Table II to Subpart D--Cross-reference table showing location of 
Rules of Practice adopted in 1995 with former Rules of Practice, 
related rules and statutory provisions.
Table III to Subpart D--Cross-reference table showing location of 
former Rules of Practice and related rules with Rules of Practice 
adopted in 1995

Subpart D--Rules of Practice

    Authority: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u, 
78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 78u-
3, 78v, 78w, 79c, 79s, 79t, 79z-5a, 77sss, 77ttt, 80a-8, 80a-9, 80a-
37, 80a-38, 80a-39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 
and 80b-12 unless otherwise noted.

General Rules


Sec. 201.100  Scope of the rules of practice.

    (a) Unless provided otherwise, these Rules of Practice govern 
proceedings before the Commission under the statutes that it 
administers. [[Page 32797]] 
    (b) These rules do not apply to:
    (1) Investigations, except where made specifically applicable by 
the Rules Relating to Investigations, part 203 of this chapter; or
    (2) Actions taken by the duty officer pursuant to delegated 
authority under 17 CFR 200.42.


Sec. 201.101  Definitions.

    (a) For purposes of these Rules of Practice, unless explicitly 
stated to the contrary:
    (1) Commission means the United States Securities and Exchange 
Commission, or a panel of Commissioners constituting a quorum of the 
Commission, or a single Commissioner acting as duty officer pursuant to 
17 CFR 200.43;
    (2) Counsel means any attorney representing a party or any other 
person representing a party pursuant to Sec. 201.102(b);
    (3) Disciplinary proceeding means an action pursuant to 
Sec. 201.102(e);
    (4) Enforcement proceeding means an action, initiated by an order 
instituting proceedings, held for the purpose of determining whether or 
not a person is about to violate, has violated, has caused a violation 
of, or has aided or abetted a violation of any statute or rule 
administered by the Commission, or whether to impose a sanction as 
defined in Section 551(10) of the Administrative Procedure Act, 5 
U.S.C. 551(10);
    (5) Hearing officer means an administrative law judge, a panel of 
Commissioners constituting less than a quorum of the Commission, an 
individual Commissioner, or any other person duly authorized to preside 
at a hearing;
    (6) Interested division means a division or an office assigned 
primary responsibility by the Commission to participate in a particular 
proceeding;
    (7) Order instituting proceedings means an order issued by the 
Commission commencing a proceeding or an order issued by the Commission 
to hold a hearing;
    (8) Party means the interested division, any person named as a 
respondent in an order instituting proceedings, any applicant named in 
the caption of any order, persons entitled to notice in a stop order 
proceeding as set forth in Sec. 201.200(a)(2) or any person seeking 
Commission review of a decision;
    (9) Proceeding means any agency process initiated by an order 
instituting proceedings; or by the filing, pursuant to Sec. 201.410, of 
a petition for review of an initial decision by a hearing officer; or 
by the filing, pursuant to Sec. 201.420, of an application for review 
of a self-regulatory organization determination; or by the filing, 
pursuant to Sec. 201.430, of a notice of intention to file a petition 
for review of a determination made pursuant to delegated authority;
    (10) Secretary means the Secretary of the Commission; and
    (11) Temporary sanction means a temporary cease-and-desist order or 
a temporary suspension of the registration of a broker, dealer, 
municipal securities dealer, government securities broker, government 
securities dealer, or transfer agent pending final determination 
whether the registration shall be revoked.
    (b) [Reserved]
Sec. 201.102  Appearance and practice before the Commission.

    A person shall not be represented before the Commission or a 
hearing officer except as stated in paragraphs (a) and (b) of this 
section or as otherwise permitted by the Commission or a hearing 
officer.
    (a) Representing oneself. In any proceeding, an individual may 
appear on his or her own behalf.
    (b) Representing others. In any proceeding, a person may be 
represented by an attorney at law admitted to practice before the 
Supreme Court of the United States or the highest court of any State 
(as defined in Section 3(a)(16) of the Exchange Act, 15 U.S.C. 
78c(a)(16)); a member of a partnership may represent the partnership; a 
bona fide officer of a corporation, trust or association may represent 
the corporation, trust or association; and an officer or employee of a 
state commission or of a department or political subdivision of a state 
may represent the state commission or the department or political 
subdivision of the state.
    (c) Former Commission employees. Former employees of the Commission 
must comply with the restrictions on practice contained in the 
Commission's Conduct Regulation, Subpart M, 17 CFR 200.735.
    (d) Designation of address for service; notice of appearance; power 
of attorney; withdrawal. (1) Representing oneself. When an individual 
first makes any filing or otherwise appears on his or her own behalf 
before the Commission or a hearing officer in a proceeding as defined 
in Sec. 201.101(a), he or she shall file with the Commission, or 
otherwise state on the record, and keep current, an address at which 
any notice or other written communication required to be served upon 
him or her or furnished to him or her may be sent and a telephone 
number where he or she may be reached during business hours.
    (2) Representing others. When a person first makes any filing or 
otherwise appears in a representative capacity before the Commission or 
a hearing officer in a proceeding as defined in Sec. 201.101(a), that 
person shall file with the Commission, and keep current, a written 
notice stating the name of the proceeding; the representative's name, 
business address and telephone number; and the name and address of the 
person or persons represented.
    (3) Power of attorney. Any individual appearing or practicing 
before the Commission in a representative capacity may be required to 
file a power of attorney with the Commission showing his or her 
authority to act in such capacity.
    (4) Withdrawal. Withdrawal by any individual appearing in a 
representative capacity shall be permitted only by order of the 
Commission or the hearing officer. A motion seeking leave to withdraw 
shall state with specificity the reasons for such withdrawal.
    (e) Suspension and disbarment. (1) Generally. The Commission may 
censure a person or deny, temporarily or permanently, the privilege of 
appearing or practicing before it in any way to any person who is found 
by the Commission after notice and opportunity for hearing in the 
matter:
    (i) Not to possess the requisite qualifications to represent 
others; or
    (ii) To be lacking in character or integrity or to have engaged in 
unethical or improper professional conduct; or
    (iii) To have willfully violated, or willfully aided and abetted 
the violation of any provision of the Federal securities laws or the 
rules and regulations thereunder.
    (2) Certain professionals and convicted persons. Any attorney who 
has been suspended or disbarred by a court of the United States or of 
any State; or any person whose license to practice as an accountant, 
engineer, or other professional or expert has been revoked or suspended 
in any State; or any person who has been convicted of a felony or a 
misdemeanor involving moral turpitude shall be forthwith suspended from 
appearing or practicing before the Commission. A disbarment, 
suspension, revocation or conviction within the meaning of this section 
shall be deemed to have occurred when the disbarring, suspending, 
revoking or convicting agency or tribunal enters its judgment or order, 
including a judgment or order on a plea of nolo contendere, regardless 
of whether an appeal of such judgment or order is pending or could be 
taken. [[Page 32798]] 
    (3) Temporary suspensions. An order of temporary suspension shall 
become effective upon service on the respondent. No order of temporary 
suspension shall be entered by the Commission pursuant to paragraph 
(e)(3)(i) of this section more than 90 days after the date on which the 
final judgment or order entered in a judicial or administrative 
proceeding described in paragraph (e)(3)(i)(A) or (e)(3)(i)(B) of this 
section has become effective, whether upon completion of review or 
appeal procedures or because further review or appeal procedures are no 
longer available.
    (i) The Commission, with due regard to the public interest and 
without preliminary hearing, may, by order, temporarily suspend from 
appearing or practicing before it any attorney, accountant, engineer, 
or other professional or expert who has been by name:
    (A) Permanently enjoined by any court of competent jurisdiction, by 
reason of his or her misconduct in an action brought by the Commission, 
from violating or aiding and abetting the violation of any provision of 
the Federal securities laws or of the rules and regulations thereunder; 
or
    (B) Found by any court of competent jurisdiction in an action 
brought by the Commission to which he or she is a party or found by the 
Commission in any administrative proceeding to which he or she is a 
party to have violated (unless the violation was found not to have been 
willful) or aided and abetted the violation of any provision of the 
Federal securities laws or of the rules and regulations thereunder.
    (ii) Any person temporarily suspended from appearing and practicing 
before the Commission in accordance with paragraph (e)(3)(i) of this 
section may, within 30 days after service upon him or her of the order 
of temporary suspension, petition the Commission to lift the temporary 
suspension. If no petition has been received by the Commission within 
30 days after service of the order, the suspension shall become 
permanent.
    (iii) Within 30 days after the filing of a petition in accordance 
with paragraph (e)(3)(ii) of this section, the Commission shall either 
lift the temporary suspension, or set the matter down for hearing at a 
time and place designated by the Commission, or both, and, after 
opportunity for hearing, may censure the petitioner or disqualify the 
petitioner from appearing or practicing before the Commission for a 
period of time or permanently. In every case in which the temporary 
suspension has not been lifted, every hearing held and other action 
taken pursuant to this paragraph (e)(3) shall be expedited in 
accordance with Sec. 201.500. If the hearing is held before a hearing 
officer, the time limits set forth in Sec. 201.531 will govern review 
of the hearing officer's initial decision.
    (iv) In any hearing held on a petition filed in accordance with 
paragraph (e)(3)(ii) of this section, the staff of the Commission shall 
show either that the petitioner has been enjoined as described in 
paragraph (e)(3)(i)(A) of this section or that the petitioner has been 
found to have committed or aided and abetted violations as described in 
paragraph (e)(3)(i)(B) of this section and that showing, without more, 
may be the basis for censure or disqualification. Once that showing has 
been made, the burden shall be upon the petitioner to show cause why he 
or she should not be censured or temporarily or permanently 
disqualified from appearing and practicing before the Commission. In 
any such hearing, the petitioner may not contest any finding made 
against him or her or fact admitted by him or her in the judicial or 
administrative proceeding upon which the proceeding under this 
paragraph (e)(3) is predicated. A person who has consented to the entry 
of a permanent injunction as described in paragraph (e)(3)(i)(A) of 
this section without admitting the facts set forth in the complaint 
shall be presumed for all purposes under this paragraph (e)(3) to have 
been enjoined by reason of the misconduct alleged in the complaint.
    (4) Filing of prior orders. Any person appearing or practicing 
before the Commission who has been the subject of an order, judgment, 
decree, or finding as set forth in paragraph (e)(3) of this section 
shall promptly file with the Secretary a copy thereof (together with 
any related opinion or statement of the agency or tribunal involved). 
Failure to file any such paper, order, judgment, decree or finding 
shall not impair the operation of any other provision of this section.
    (5) Reinstatement. (i) An application for reinstatement of a person 
permanently suspended or disqualified under paragraph (e)(1) or (e)(3) 
of this section may be made at any time, and the applicant may, in the 
Commission's discretion, be afforded a hearing; however, the suspension 
or disqualification shall continue unless and until the applicant has 
been reinstated by the Commission for good cause shown.
    (ii) Any person suspended under paragraph (e)(2) of this section 
shall be reinstated by the Commission, upon appropriate application, if 
all the grounds for application of the provisions of that paragraph are 
subsequently removed by a reversal of the conviction or termination of 
the suspension, disbarment, or revocation. An application for 
reinstatement on any other grounds by any person suspended under 
paragraph (e)(2) of this section may be filed at any time and the 
applicant shall be accorded an opportunity for a hearing in the matter; 
however, such suspension shall continue unless and until the applicant 
has been reinstated by order of the Commission for good cause shown.
    (6) Other proceedings not precluded. A proceeding brought under 
paragraph (e)(1), (e)(2) or (e)(3) of this section shall not preclude 
another proceeding brought under these same paragraphs.
    (7) Public hearings. All hearings held under this paragraph (e) 
shall be public unless otherwise ordered by the Commission on its own 
motion or after considering the motion of a party.
    (f) Practice defined. For the purposes of these Rules of Practice, 
practicing before the Commission shall include, but shall not be 
limited to:
    (1) Transacting any business with the Commission; and
    (2) The preparation of any statement, opinion or other paper by any 
attorney, accountant, engineer or other professional or expert, filed 
with the Commission in any registration statement, notification, 
application, report or other document with the consent of such 
attorney, accountant, engineer or other professional or expert.


Sec. 201.103  Construction of rules.

    (a) The Rules of Practice shall be construed and administered to 
secure the just, speedy, and inexpensive determination of every 
proceeding.
    (b) In any particular proceeding, to the extent that there is a 
conflict between these rules and a procedural requirement contained in 
any statute, or any rule or form adopted thereunder, the latter shall 
control.
    (c) For purposes of these rules:
    (1) Any term in the singular includes the plural, and any term in 
the plural includes the singular, if such use would be appropriate;
    (2) Any use of a masculine, feminine, or neuter gender encompasses 
such other genders as would be appropriate; and
    (3) Unless the context requires otherwise, counsel for a party may 
take any action required or permitted to be taken by such party.


Sec. 201.104  Business hours.

    The Headquarters office of the Commission, at 450 Fifth Street, 
N.W., Washington, D.C. 20549, is open each [[Page 32799]] day, except 
Saturdays, Sundays, and Federal legal holidays, from 9 a.m. to 5:30 
p.m., Eastern Standard Time or Eastern Daylight Saving Time, whichever 
is currently in effect in Washington, D.C. Federal legal holidays 
consist of New Year's Day; Birthday of Martin Luther King, Jr.; 
Presidents Day; Memorial Day; Independence Day; Labor Day; Columbus 
Day; Veterans Day; Thanksgiving Day; Christmas Day; and any other day 
appointed as a holiday in Washington, D.C. by the President or the 
Congress of the United States.


Sec. 201.110  Presiding officer.

    All proceedings shall be presided over by the Commission or, if the 
Commission so orders, by a hearing officer. When the Commission 
designates that the hearing officer shall be an administrative law 
judge, the Chief Administrative Law Judge shall select, pursuant to 17 
CFR 200.30-10, the administrative law judge to preside.


Sec. 201.111  Hearing officer: authority.

    The hearing officer shall have the authority to do all things 
necessary and appropriate to discharge his or her duties. No provision 
of these Rules of Practice shall be construed to limit the powers of 
the hearing officer provided by the Administrative Procedure Act, 5 
U.S.C. 556, 557. The powers of the hearing officer include, but are not 
limited to, the following:
    (a) Administering oaths and affirmations;
    (b) Issuing subpoenas authorized by law and revoking, quashing, or 
modifying any such subpoena;
    (c) Receiving relevant evidence and ruling upon the admission of 
evidence and offers of proof;
    (d) Regulating the course of a proceeding and the conduct of the 
parties and their counsel;
    (e) Holding prehearing and other conferences as set forth in 
Sec. 201.221 and requiring the attendance at any such conference of at 
least one representative of each party who has authority to negotiate 
concerning the resolution of issues in controversy;
    (f) Recusing himself or herself upon motion made by a party or upon 
his or her own motion;
    (g) Ordering, in his or her discretion, in a proceeding involving 
more than one respondent, that the interested division indicate, on the 
record, at least one day prior to the presentation of any evidence, 
each respondent against whom that evidence will be offered;
    (h) Subject to any limitations set forth elsewhere in these rules, 
considering and ruling upon all procedural and other motions;
    (i) Preparing an initial decision as provided in Sec. 201.360;
    (j) Upon notice to all parties, reopening any hearing prior to the 
filing of an initial decision therein, or, if no initial decision is to 
be filed, prior to the time fixed for the filing of final briefs with 
the Commission; and
    (k) Informing the parties as to the availability of one or more 
alternative means of dispute resolution, and encouraging the use of 
such methods.


Sec. 201.112  Hearing officer: disqualification and withdrawal.

    (a) Notice of disqualification. At any time a hearing officer 
believes himself or herself to be disqualified from considering a 
matter, the hearing officer shall issue a notice stating that he or she 
is withdrawing from the matter and setting forth the reasons therefor.
    (b) Motion for withdrawal. Any party who has a reasonable, good 
faith basis to believe that a hearing officer has a personal bias, or 
is otherwise disqualified from hearing a case, may make a motion to the 
hearing officer that the hearing officer withdraw. The motion shall be 
accompanied by an affidavit setting forth in detail the facts alleged 
to constitute grounds for disqualification. If the hearing officer 
finds himself or herself not disqualified, he or she shall so rule and 
shall continue to preside over the proceeding.


Sec. 201.120  Ex parte communications.

    (a) Except to the extent required for the disposition of ex parte 
matters as authorized by law, the person presiding over an evidentiary 
hearing may not:
    (1) Consult a person or party on a fact in issue, unless on notice 
and opportunity for all parties to participate; or
    (2) Be responsible to or subject to the supervision or direction of 
an employee or agent engaged in the performance of investigative or 
prosecuting functions for the Commission.
    (b) The Commission's code of behavior regarding ex parte 
communications between persons outside the Commission and decisional 
employees, 17 CFR 200.110 through 200.114, governs other prohibited 
communications during a proceeding conducted under the Rules of 
Practice.


Sec. 201.121  Separation of functions.

    Any Commission officer, employee or agent engaged in the 
performance of investigative or prosecutorial functions for the 
Commission in a proceeding as defined in Sec. 201.101(a) may not, in 
that proceeding or one that is factually related, participate or advise 
in the decision, or in Commission review of the decision pursuant to 
Section 557 of the Administrative Procedure Act, 5 U.S.C. 557, except 
as a witness or counsel in the proceeding.


Sec. 201.140  Commission orders and decisions: signature and 
availability.

    (a) Signature required. All orders and decisions of the Commission 
shall be signed by the Secretary or any other person duly authorized by 
the Commission.
    (b) Availability for inspection. Each order and decision shall be 
available for inspection by the public from the date of entry, unless 
the order or decision is nonpublic. A nonpublic order or decision shall 
be available for inspection by any person entitled to inspect it from 
the date of entry.
     (c) Date of entry of orders. The date of entry of a Commission 
order shall be the date the order is signed. Such date shall be 
reflected in the caption of the order, or if there is no caption, in 
the order itself.


Sec. 201.141  Orders and decisions: service of orders instituting 
proceeding and other orders and decisions.

    (a) Service of an order instituting proceedings. (1) By whom made. 
The Secretary, or another duly authorized officer of the Commission, 
shall serve a copy of an order instituting proceedings on each person 
named in the order as a party. The Secretary may direct an interested 
division to assist in making service.
    (2) How made. (i) To individuals. Notice of a proceeding shall be 
made to an individual by delivering a copy of the order instituting 
proceedings to the individual or to an agent authorized by appointment 
or by law to receive such notice. Delivery means--handing a copy of the 
order to the individual; or leaving a copy at the individual's office 
with a clerk or other person in charge thereof; or leaving a copy at 
the individual's dwelling house or usual place of abode with some 
person of suitable age and discretion then residing therein; or sending 
a copy of the order addressed to the individual by U.S. Postal Service 
certified, registered or Express Mail and obtaining a confirmation of 
receipt; or giving confirmed telegraphic notice.
    (ii) To corporations or entities. Notice of a proceeding shall be 
made to a person other than a natural person by delivering a copy of 
the order instituting proceedings to an officer, managing or general 
agent, or any other agent authorized by appointment or by law to 
receive such notice, by any method specified in paragraph (a)(2)(i) of 
this section. [[Page 32800]] 
    (iii) Upon persons registered with the Commission. In addition to 
any other method of service specified in paragraph (a)(2) of this 
section, notice may be made to a person currently registered with the 
Commission as a broker, dealer, municipal securities dealer, government 
securities broker, government securities dealer, investment adviser, 
investment company or transfer agent by sending a copy of the order 
addressed to the most recent business address shown on the person's 
registration form by U.S. Postal Service certified, registered or 
Express Mail and obtaining a confirmation of attempted delivery.
    (iv) Upon persons in a foreign country. Notice of a proceeding to a 
person in a foreign country may be made by any method specified in 
paragraph (a)(2) of this section, or by any other method reasonably 
calculated to give notice, provided that the method of service used is 
not prohibited by the law of the foreign country.
    (v) In stop order proceedings. Notwithstanding any other provision 
of paragraph (a)(2) of this section, in proceedings pursuant to 
Sections 8 or 10 of the Securities Act of 1933, 15 U.S.C. 77h or 77j, 
or Sections 305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 
77eee or 77ggg, notice of the institution of proceedings shall be made 
by personal service or confirmed telegraphic notice, or a waiver obtain 
pursuant to paragraph (a)(4) of this section.
    (3) Certificate of service. The Secretary shall place in the record 
of the proceeding a certificate of service identifying the party given 
notice, the method of service, the date of service, the address to 
which service was made and the person who made service. If service is 
made in person, the certificate shall state, if available, the name of 
the individual to whom the order was given. If service is made by U.S. 
Postal Service certified, registered or Express Mail, the certificate 
shall be accompanied by a confirmation of receipt or of attempted 
delivery, as required. If service is made to an agent authorized by 
appointment to receive service, the certificate shall be accompanied by 
evidence of the appointment.
    (4) Waiver of service. In lieu of service as set forth in paragraph 
(a)(2) of this section, the party may be provided a copy of the order 
instituting proceedings by first class mail or other reliable means if 
a waiver of service is obtained from the party and placed in the 
record.
    (b) Service of orders or decisions other than an order instituting 
proceedings. Written orders or decisions issued by the Commission or by 
a hearing officer shall be served promptly on each party pursuant to 
any method of service authorized under paragraph (a) of this section or 
Sec. 201.150(c). Service of orders or decisions by the Commission, 
including those entered pursuant to delegated authority, shall be made 
by the Secretary or, as authorized by the Secretary, by a member of an 
interested division. Service of orders or decisions issued by a hearing 
officer shall be made by the Secretary or the hearing officer.


Sec. 201.150  Service of papers by parties.

    (a) When required. In every proceeding as defined in 
Sec. 201.101(a), each paper, including each notice of appearance, 
written motion, brief, or other written communication, shall be served 
upon each party in the proceeding in accordance with the provisions of 
this section; provided, however, that absent an order to the contrary, 
no service shall be required for motions which may be heard ex parte.
    (b) Upon a person represented by counsel. Whenever service is 
required to be made upon a person represented by counsel who has filed 
a notice of appearance pursuant to Sec. 201.102, service shall be made 
pursuant to paragraph (c) of this section upon counsel, unless service 
upon the person represented is ordered by the Commission or the hearing 
officer.
    (c) How made. Service shall be made by delivering a copy of the 
filing. Delivery means:
    (1) Personal service--handing a copy to the person required to be 
served; or leaving a copy at the person's office with a clerk or other 
person in charge thereof, or, if there is no one in charge, leaving it 
in a conspicuous place therein; or, if the office is closed or the 
person to be served has no office, leaving it at the person's dwelling 
house or usual place of abode with some person of suitable age and 
discretion then residing therein;
    (2) Mailing the papers through the U.S. Postal Service by first 
class, registered, or certified mail or Express Mail delivery addressed 
to the person;
    (3) Sending the papers through a commercial courier service or 
express delivery service; or
    (4) Transmitting the papers by facsimile machine where the 
following conditions are met:
    (i) The persons serving each other by facsimile transmission have 
agreed to do so in a writing, signed by each party, which specifies 
such terms as they deem necessary with respect to facsimile machine 
telephone numbers to be used, hours of facsimile machine operation, the 
provision of non-facsimile original or copy, and any other such 
matters; and
    (ii) Receipt of each document served by facsimile is confirmed by a 
manually signed receipt delivered by facsimile machine or other means 
agreed to by the parties.
    (d) When service is complete. Personal service, service by U.S. 
Postal Service Express Mail or service by a commercial courier or 
express delivery service is complete upon delivery. Service by mail is 
complete upon mailing. Service by facsimile is complete upon 
confirmation of transmission by delivery of a manually signed receipt.


Sec. 201.151  Filing of papers with the Commission: procedure.
    (a) When to file. All papers required to be served by a party upon 
any person shall be filed with the Commission at the time of service or 
promptly thereafter. Papers required to be filed with the Commission 
must be received within the time limit, if any, for such filing.
    (b) Where to file. Filing of papers with the Commission shall be 
made by filing them with the Secretary. When a proceeding is assigned 
to a hearing officer, a person making a filing with the Secretary shall 
promptly provide to the hearing officer a copy of any such filing, 
provided, however, that the hearing officer may direct or permit 
filings to be made with him or her, in which event the hearing officer 
shall note thereon the filing date and promptly provide the Secretary 
with either the original or a copy of any such filings.
    (c) To whom to direct the filing. Unless otherwise provided, where 
the Commission has assigned a case to a hearing officer, all motions, 
objections, applications or other filings made during a proceeding 
prior to the filing of an initial decision therein, or, if no initial 
decision is to be filed, prior to the time fixed for the filing of 
briefs with the Commission, shall be directed to and decided by the 
hearing officer.
    (d) Certificate of service. Papers filed with the Commission or a 
hearing officer shall be accompanied by a certificate stating the name 
of the person or persons served, the date of service, the method of 
service and the mailing address or facsimile telephone number to which 
service was made, if not made in person. If the method of service to 
any party is different from the method of service to any other party or 
the method for filing with the Commission, the certificate shall state 
why a different means of service was used. [[Page 32801]] 


Sec. 201.152  Filing of papers: form.

    (a) Specifications. Papers filed in connection with any proceeding 
as defined in Sec. 201.101(a) shall:
    (1) Be on one grade of unglazed white paper measuring 8\1/2\ x 11 
inches, except that, to the extent that the reduction of larger 
documents would render them illegible, such documents may be filed on 
larger paper;
    (2) Be typewritten or printed in either 10- or 12-point typeface or 
otherwise reproduced by a process that produces permanent and plainly 
legible copies;
    (3) Include at the head of the paper, or on a title page, the name 
of the Commission, the title of the proceeding, the names of the 
parties, the subject of the particular paper or pleading, and the file 
number assigned to the proceeding;
    (4) Be paginated with left hand margins at least 1 inch wide, and 
other margins of at least 1 inch;
    (5) Be double-spaced, with single-spaced footnotes and single-
spaced indented quotations; and
    (6) Be stapled, clipped or otherwise fastened in the upper left 
corner.
    (b) Signature required. All papers must be dated and signed as 
provided in Sec. 201.153.
    (c) Suitability for recordkeeping. Documents which, in the opinion 
of the Commission, are not suitable for computer scanning or 
microfilming may be rejected.
    (d) Number of copies. An original and three copies of all papers 
shall be filed.
    (e) Form of briefs. All briefs containing more than 10 pages shall 
include a table of contents, an alphabetized table of cases, a table of 
statutes, and a table of other authorities cited, with references to 
the pages of the brief wherein they are cited.
    (f) Scandalous or impertinent matter. Any scandalous or impertinent 
matter contained in any brief or pleading or in connection with any 
oral presentation in a proceeding may be stricken on order of the 
Commission or the hearing officer.


Sec. 201.153  Filing of papers: signature requirement and effect.

    (a) General requirements. Following the issuance of an order 
instituting proceedings, every filing of a party represented by counsel 
shall be signed by at least one counsel of record in his or her name 
and shall state that counsel's business address and telephone number. A 
party who acts as his or her own counsel shall sign his or her 
individual name and state his or her address and telephone number on 
every filing.
    (b) Effect of signature. (1) The signature of a counsel or party 
shall constitute a certification that:
    (i) the person signing the filing has read the filing;
    (ii) to the best of his or her knowledge, information, and belief, 
formed after reasonable inquiry, the filing is well grounded in fact 
and is warranted by existing law or a good faith argument for the 
extension, modification, or reversal of existing law; and
    (iii) the filing is not made for any improper purpose, such as to 
harass or to cause unnecessary delay or needless increase in the cost 
of adjudication.
    (2) If a filing is not signed, the hearing officer or the 
Commission shall strike the filing, unless it is signed promptly after 
the omission is called to the attention of the person making the 
filing.


Sec. 201.154  Motions.

    (a) Generally. Unless made during a hearing or conference, a motion 
shall be in writing, shall state with particularity the grounds 
therefor, shall set forth the relief or order sought, and shall be 
accompanied by a written brief of the points and authorities relied 
upon. All written motions shall be served in accordance with 
Sec. 201.150, be filed in accordance with Sec. 201.151, meet the 
requirements of Sec. 201.152, and be signed in accordance with 
Sec. 201.153. The Commission or the hearing officer may order that an 
oral motion be submitted in writing. Unless otherwise ordered by the 
Commission or the hearing officer, if a motion is properly made to the 
Commission concerning a proceeding to which a hearing officer is 
assigned, the proceeding before the hearing officer shall continue 
pending the determination of the motion by the Commission. No oral 
argument shall be heard on any motion unless the Commission or the 
hearing officer otherwise directs.
    (b) Opposing and reply briefs. Except as provided in Sec. 201.401, 
briefs in opposition to a motion shall be filed within five days after 
service of the motion. Reply briefs shall be filed within three days 
after service of the opposition.
    (c) Length limitation. A brief in support of or opposition to a 
motion shall not exceed 10 pages, exclusive of pages containing any 
table of contents, table of authorities, and/or addendum. Requests for 
leave to file briefs in excess of 10 pages are disfavored.


Sec. 201.155  Default; motion to set aside default.

    (a) A party to a proceeding may be deemed to be in default and the 
Commission or the hearing officer may determine the proceeding against 
that party upon consideration of the record, including the order 
instituting proceedings, the allegations of which may be deemed to be 
true, if that party fails:
    (1) To appear, in person or through a representative, at a hearing 
or conference of which that party has been notified;
    (2) To answer, to respond to a dispositive motion within the time 
provided, or otherwise to defend the proceeding; or
    (3) To cure a deficient filing within the time specified by the 
commission or the hearing officer pursuant to Sec. 201.180(b).
    (b) A motion to set aside a default shall be made within a 
reasonable time, state the reasons for the failure to appear or defend, 
and specify the nature of the proposed defense in the proceeding. In 
order to prevent injustice and on such conditions as may be 
appropriate, the hearing officer, at any time prior to the filing of 
the initial decision, or the Commission, at any time, may for good 
cause shown set aside a default.


Sec. 201.160  Time computation.

    (a) Computation. In computing any period of time prescribed in or 
allowed by these Rules of Practice or by order of the Commission, the 
day of the act, event, or default from which the designated period of 
time begins to run shall not be included. The last day of the period so 
computed shall be included unless it is a Saturday, Sunday, or Federal 
legal holiday (as defined in Sec. 201.104), in which event the period 
runs until the end of the next day that is not a Saturday, Sunday, or 
Federal legal holiday. Intermediate Saturdays, Sundays, and Federal 
legal holidays shall be excluded from the computation when the period 
of time prescribed or allowed is seven days or less, not including any 
additional time allowed for service by mail in paragraph (b) of this 
section. If on the day a filing is to be made, weather or other 
conditions have caused the Secretary's office or other designated 
filing location to close, the filing deadline shall be extended to the 
end of the next day that is neither a Saturday, a Sunday, nor a Federal 
legal holiday.
    (b) Additional time for service by mail. If service is made by 
mail, three days shall be added to the prescribed period for response.


Sec. 201.161  Extensions of time, postponements and adjournments.

    (a) Availability. Except as otherwise provided by law, the 
Commission, at any time, or the hearing officer, at any time prior to 
the filing of his or her [[Page 32802]] initial decision or, if no 
initial decision is to be filed, at any time prior to the closing of 
the record, may, for good cause shown, extend or shorten any time 
limits prescribed by these Rules of Practice for the filing of any 
papers and may, consistent with paragraph (b) of this section, postpone 
or adjourn any hearing.
    (b) Limitations on postponements, adjournments and extensions. A 
hearing shall begin at the time and place ordered, provided that, 
within the limits provided by statute, the Commission or the hearing 
officer may for good cause shown postpone the commencement of the 
hearing or adjourn a convened hearing for a reasonable period of time 
or change the place of hearing.
    (1) Additional considerations. In considering a motion for 
postponement of the start of a hearing, adjournment once a hearing has 
begun, or extensions of time for filing papers, the hearing officer or 
the Commission shall consider, in addition to any other factors:
    (i) The length of the proceeding to date;
    (ii) The number of postponements, adjournments or extensions 
already granted;
    (iii) The stage of the proceedings at the time of the request; and
    (iv) Any other such matters as justice may require.
    (2) Time limit. Postponements, adjournments or extensions of time 
for filing papers shall not exceed 21 days unless the Commission or the 
hearing officer states on the record or sets forth in a written order 
the reasons why a longer period of time is necessary.


Sec. 201.180  Sanctions.

    (a) Contemptuous conduct.
    (1) Subject to exclusion or suspension. Contemptuous conduct by any 
person before the Commission or a hearing officer during any 
proceeding, including any conference, shall be grounds for the 
Commission or the hearing officer to:
    (i) Exclude that person from such hearing or conference, or any 
portion thereof; and/or
    (ii) Summarily suspend that person from representing others in the 
proceeding in which such conduct occurred for the duration, or any 
portion, of the proceeding.
    (2) Review procedure. A person excluded from a hearing or 
conference, or a counsel summarily suspended from practice for the 
duration or any portion of a proceeding, may seek review of the 
exclusion or suspension by filing with the Commission, within three 
days of the exclusion or suspension order, a motion to vacate the 
order. The Commission shall consider such motion on an expedited basis 
as provided in Sec. 201.500.
    (3) Adjournment. Upon motion by a party represented by counsel 
subject to an order of exclusion or suspension, an adjournment shall be 
granted to allow the retention of new counsel. In determining the 
length of an adjournment, the Commission or hearing officer shall 
consider, in addition to the factors set forth in Sec. 201.161, the 
availability of co-counsel for the party or of other members of a 
suspended counsel's firm.
    (b) Deficient filings; leave to cure deficiencies. The Commission 
or the hearing officer may reject, in whole or in part, any filing that 
fails to comply with any requirements of these Rules of Practice or of 
any order issued in the proceeding in which the filing was made. Any 
such filings shall not be part of the record. The Commission or the 
hearing officer may direct a party to cure any deficiencies and to 
resubmit the filing within a fixed time period.
    (c) Failure to make required filing or to cure deficient filing. 
The Commission or the hearing officer may enter a default pursuant to 
Sec. 201.155, dismiss the case, decide the particular matter at issue 
against that person, or prohibit the introduction of evidence or 
exclude testimony concerning that matter if a person fails:
    (1) To make a filing required under these Rules of Practice; or
    (2) To cure a deficient filing within the time specified by the 
Commission or the hearing officer pursuant to paragraph (b) of this 
section.


Sec. 201.190  Confidential treatment of information in certain filings.

    (a) Application. An application for confidential treatment pursuant 
to the provisions of Clause 30 of Schedule A of the Securities Act of 
1933, 15 U.S.C. 77aa(30), and Rule 406 thereunder, 17 CFR 230.406; 
Section 24(b)(2) of the Securities Exchange Act of 1934, 15 U.S.C. 
78x(b)(2), and Rule 24b-2 thereunder, 17 CFR 240.24b-2; Section 22(b) 
of the Public Utility Holding Company Act of 1935, 15 U.S.C. 79v(b), 
and Rule 104 thereunder, 17 CFR 250.104; Section 45(a) of the 
Investment Company Act of 1940, 15 U.S.C. 80a-44(a), and Rule 45a-1 
thereunder, 17 CFR 270.45a-1; or Section 210(a) of the Investment 
Advisers Act of 1940, 15 U.S.C. 80b-10(a), shall be filed with the 
Secretary. The application shall be accompanied by a sealed copy of the 
materials as to which confidential treatment is sought.
    (b) Procedure for supplying additional information. The applicant 
may be required to furnish in writing additional information with 
respect to the grounds for objection to public disclosure. Failure to 
supply the information so requested within 14 days from the date of 
receipt by the applicant of a notice of the information required shall 
be deemed a waiver of the objection to public disclosure of that 
portion of the information to which the additional information relates, 
unless the Commission or the hearing officer shall otherwise order for 
good cause shown at or before the expiration of such 14-day period.
    (c) Confidentiality of materials pending final decision. Pending 
the determination of the application for confidential treatment, 
transcripts, non-final orders including an initial decision, if any, 
and other materials in connection with the application shall be placed 
under seal; shall be for the confidential use only of the hearing 
officer, the Commission, the applicant, and any other parties and 
counsel; and shall be made available to the public only in accordance 
with orders of the Commission.
    (d) Public availability of orders. Any final order of the 
Commission denying or sustaining an application for confidential 
treatment shall be made public. Any prior findings or opinions relating 
to an application for confidential treatment under this section shall 
be made public at such time as the material as to which confidentiality 
was requested is made public.


Sec. 201.191  Adjudications not required to be determined on the record 
after notice and opportunity for hearing.

    (a) Scope of the rule. This rule applies to every case of 
adjudication, as defined in 5 U.S.C. 551, pursuant to any statute which 
the Commission administers, where adjudication is not required to be 
determined on the record after notice and opportunity for hearing and 
which the Commission has not chosen to determine on the record after 
notice and opportunity for hearing.
    (b) Procedure. In every case of adjudication under paragraph (a) of 
this section, the Commission shall give prompt notice of any adverse 
action or final disposition to any person who has requested the 
Commission to make (or not to make) any such adjudication, and furnish 
to any such person a written statement of reasons therefor. Additional 
procedures may be specified in rules relating to specific types of such 
adjudications. Where any such rule provides for the publication of a 
Commission order, notice of the action [[Page 32803]] or disposition 
shall be deemed to be given by such publication.
    (c) Contents of the record. If the Commission provides notice and 
opportunity for the submission of written comments by parties to the 
adjudication or, as the case may be, by other interested persons, 
written comments received on or before the closing date for comments, 
unless accorded confidential treatment pursuant to statute or rule of 
the Commission, become a part of the record of the adjudication. The 
Commission, in its discretion, may accept and include in the record 
written comments filed with the Commission after the closing date.


Sec. 201.192  Rulemaking: issuance, amendment and repeal of rules of 
general application.

    (a) By petition. Any person desiring the issuance, amendment or 
repeal of a rule of general application may file a petition therefor 
with the Secretary. Such petition shall include a statement setting 
forth the text or the substance of any proposed rule or amendment 
desired or specifying the rule the repeal of which is desired, and 
stating the nature of his or her interest and his or her reasons for 
seeking the issuance, amendment or repeal of the rule. The Secretary 
shall acknowledge, in writing, receipt of the petition and refer it to 
the appropriate division or office for consideration and 
recommendation. Such recommendations shall be transmitted with the 
petition to the Commission for such action as the Commission deems 
appropriate. The Secretary shall notify the petitioner of the action 
taken by the Commission.
    (b) Notice of proposed issuance, amendment or repeal of rules. 
Except where the Commission finds that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest, 
whenever the Commission proposes to issue, amend, or repeal any rule or 
regulation of general application other than an interpretive rule; 
general statement of policy; or rule of agency organization, procedure, 
or practice; or any matter relating to agency management or personnel 
or to public property, loans, grants, benefits, or contracts, there 
shall first be published in the Federal Register a notice of the 
proposed action. Such notice shall include:
    (1) A statement of the time, place, and nature of the rulemaking 
proceeding, with particular reference to the manner in which interested 
persons shall be afforded the opportunity to participate in such 
proceeding;
    (2) Reference to the authority under which the rule is proposed; 
and
    (3) The terms or substance of the proposed rule or a description of 
the subjects and issues involved.


Sec. 201.193  Applications by barred individuals for consent to 
associate.

Preliminary note
    This rule governs applications to the Commission by certain 
persons, barred by Commission order from association with brokers, 
dealers, municipal securities dealers, government securities 
brokers, government securities dealers, investment advisers, 
investment companies or transfer agents, for consent to become so 
associated. Applications made pursuant to this section must show 
that the proposed association would be consistent with the public 
interest. In addition to the information specifically required by 
the rule, applications should be supplemented, where appropriate, by 
written statements of individuals (other than the applicant) who are 
competent to attest to the applicant's character, employment 
performance, and other relevant information. Intentional 
misstatements or omissions of fact may constitute criminal 
violations of 18 U.S.C. 1001 et seq. and other provisions of law.
    The nature of the supervision that an applicant will receive or 
exercise as an associated person with a registered entity is an 
important matter bearing upon the public interest. In meeting the 
burden of showing that the proposed association is consistent with 
the public interest, the application and supporting documentation 
must demonstrate that the proposed supervision, procedures, or terms 
and conditions of employment are reasonably designed to prevent a 
recurrence of the conduct that led to imposition of the bar. As an 
associated person, the applicant will be limited to association in a 
specified capacity with a particular registered entity and may also 
be subject to specific terms and conditions.
    Normally, the applicant's burden of demonstrating that the 
proposed association is consistent with the public interest will be 
difficult to meet where the applicant is to be supervised by, or is 
to supervise, another barred individual. In addition, where an 
applicant wishes to become the sole proprietor of a registered 
entity and thus is seeking Commission consent notwithstanding an 
absence of supervision, the applicant's burden will be difficult to 
meet.
    In addition to the factors set forth in paragraph (d) of this 
section, the Commission will consider the nature of the findings 
that resulted in the bar when making its determination as to whether 
the proposed association is consistent with the public interest. In 
this regard, attention is directed to Rule 5(e) of the Commission's 
Rules on Informal and Other Procedures, 17 CFR 202.5(e). Among other 
things, Rule 5(e) sets forth the Commission's policy ``not to permit 
a * * * respondent [in an administrative proceeding] to consent to * 
* * [an] order that imposes a sanction while denying the allegations 
in the * * * order for proceedings.'' Consistent with the rationale 
underlying that policy, and in order to avoid the appearance that an 
application made pursuant to this section was granted on the basis 
of such denial, the Commission will not consider any application 
that attempts to reargue or collaterally attack the findings that 
resulted in the Commission's bar order.

    (a) Scope of rule. Applications for Commission consent to 
associate, or to change the terms and conditions of association, with a 
registered broker, dealer, municipal securities dealer, government 
securities broker, government securities dealer, investment adviser, 
investment company or transfer agent may be made pursuant to this 
section where a Commission order bars the individual from association 
with a registered entity and:
    (1) Such barred individual seeks to become associated with an 
entity that is not a member of a self-regulatory organization; or
    (2) The order contains a proviso that application may be made to 
the Commission after a specified period of time.
    (b) Form of application. Each application shall be supported by an 
affidavit, manually signed by the applicant, that addresses the factors 
set forth in paragraph (d) of this section. One original and three 
copies of the application shall be filed pursuant to Secs. 201.151, 
201.152 and 201.153. Each application shall include as exhibits:
    (1) A copy of the Commission order imposing the bar;
    (2) An undertaking by the applicant to notify immediately the 
Commission in writing if any information submitted in support of the 
application becomes materially false or misleading while the 
application is pending;
    (3) The following forms, as appropriate:
    (i) A copy of a completed Form U-4, where the applicant's proposed 
association is with a broker-dealer or municipal securities dealer;
    (ii) A copy of a completed Form MSD-4, where the applicant's 
proposed association is with a bank municipal securities dealer;
    (iii) The information required by Form ADV, 17 CFR 279.1, with 
respect to the applicant, where the applicant's proposed association is 
with an investment adviser;
    (iv) The information required by Form TA-1, 17 CFR 249b.100, with 
respect to the applicant, where the applicant's proposed association is 
with a transfer agent; and
    (4) A written statement by the proposed employer that describes:
    (i) The terms and conditions of employment and supervision to be 
[[Page 32804]] exercised over such applicant and, where applicable, by 
such applicant;
    (ii) The qualifications, experience, and disciplinary records of 
the proposed supervisor(s) of the applicant;
    (iii) The compliance and disciplinary history, during the two years 
preceding the filing of the application, of the office in which the 
applicant will be employed; and
    (iv) The names of any other associated persons in the same office 
who have previously been barred by the Commission, and whether they are 
to be supervised by the applicant.
    (c) Required showing. The applicant shall make a showing 
satisfactory to the Commission that the proposed association would be 
consistent with the public interest.
    (d) Factors to be addressed. The affidavit required by paragraph 
(b) of this section shall address each of the following:
    (1) The time period since the imposition of the bar;
    (2) Any restitution or similar action taken by the applicant to 
recompense any person injured by the misconduct that resulted in the 
bar;
    (3) The applicant's compliance with the order imposing the bar;
    (4) The applicant's employment during the period subsequent to 
imposition of the bar;
    (5) The capacity or position in which the applicant proposes to be 
associated;
    (6) The manner and extent of supervision to be exercised over such 
applicant and, where applicable, by such applicant;
    (7) Any relevant courses, seminars, examinations or other actions 
completed by the applicant subsequent to imposition of the bar to 
prepare for his or her return to the securities business; and
    (8) Any other information material to the application.
    (e) Notification to applicant and written statement. In the event 
an adverse recommendation is proposed by the staff with respect to an 
application made pursuant to this section, the applicant shall be so 
advised and provided with a written statement of the reasons for such 
recommendation. The applicant shall then have 30 days to submit a 
written statement in response.
    (f) Concurrent applications. The Commission will not consider any 
application submitted pursuant to this section if any other application 
for consent to associate concerning the same applicant is pending 
before any self-regulatory organization.

Initiation of Proceedings and Prehearing Rules


Sec. 201.200  Initiation of proceedings.

    (a) Order instituting proceedings: notice and opportunity for 
hearing.(1) Generally. Whenever an order instituting proceedings is 
issued by the Commission, appropriate notice thereof shall be given to 
each party to the proceeding by the Secretary or another duly 
designated officer of the Commission. Each party shall be given notice 
of any hearing within a time reasonable in light of the circumstances, 
in advance of the hearing; provided, however, no prior notice need be 
given to a respondent if the Commission has authorized the Division of 
Enforcement to seek a temporary sanction ex parte.
    (2) Stop order proceedings: additional persons entitled to notice. 
Any notice of a proceeding relating to the issuance of a stop order 
suspending the effectiveness of a registration statement pursuant to 
Section 8(d) of the Securities Act of 1933, 15 U.S.C. 77h(d), shall be 
sent to or served on the issuer; or, in the case of a foreign 
government or political subdivision thereof, sent to or served on the 
underwriter; or, in the case of a foreign or territorial person, sent 
to or served on its duly authorized representative in the United States 
named in the registration statement, properly directed in the case of 
telegraphic notice to the address given in such statement. In addition, 
if such proceeding is commenced within 90 days after the registration 
statement has become effective, notice of the proceeding shall be given 
to the agent for service named on the facing sheet of the registration 
statement and to each other person designated on the facing sheet of 
the registration statement as a person to whom copies of communications 
to such agent are to be sent.
    (b) Content of order. The order instituting proceedings shall:
    (1) State the nature of any hearing;
    (2) State the legal authority and jurisdiction under which the 
hearing is to be held;
    (3) Contain a short and plain statement of the matters of fact and 
law to be considered and determined, unless the order directs an answer 
pursuant to Sec. 201.220 in which case the order shall set forth the 
factual and legal basis alleged therefor in such detail as will permit 
a specific response thereto; and
    (4) State the nature of any relief or action sought or taken.
    (c) Time and place of hearing. The time and place for any hearing 
shall be fixed with due regard for the public interest and the 
convenience and necessity of the parties, other participants, or their 
representatives.
    (d) Amendment to order instituting proceedings.(1) By the 
Commission. Upon motion by a party, the Commission may, at any time, 
amend an order instituting proceedings to include new matters of fact 
or law.
    (2) By the hearing officer. Upon motion by a party, the hearing 
officer may, at any time prior to the filing of an initial decision or, 
if no initial decision is to be filed, prior to the time fixed for the 
filing of final briefs with the Commission, amend an order instituting 
proceedings to include new matters of fact or law that are within the 
scope of the original order instituting proceedings.
    (e) Publication of notice of public hearings. Unless otherwise 
ordered by the Commission, notice of any public hearing shall be given 
general circulation by release to the public, by publication in the SEC 
News Digest and, where directed, by publication in the Federal 
Register.


Sec. 201.201  Consolidation of proceedings.

    By order of the Commission or a hearing officer, proceedings 
involving a common question of law or fact may be consolidated for 
hearing of any or all the matters at issue in such proceedings. The 
Commission or the hearing officer may make such orders concerning the 
conduct of such proceedings as it deems appropriate to avoid 
unnecessary cost or delay. Consolidation shall not prejudice any rights 
under these Rules of Practice and shall not affect the right of any 
party to raise issues that could have been raised if consolidation had 
not occurred. For purposes of this section, no distinction is made 
between joinder and consolidation of proceedings.


Sec. 201.202  Specification of procedures by parties in certain 
proceedings.

    (a) Motion to specify procedures. In any proceeding other than an 
enforcement or disciplinary proceeding or a proceeding to review a 
determination by a self-regulatory organization pursuant to 
Secs. 201.420 and 201.421, a party may, at any time up to 20 days prior 
to the start of a hearing, make a motion to specify the procedures 
necessary or appropriate for the proceeding, with particular reference 
to:
    (1) Whether there should be an initial decision by a hearing 
officer;
    (2) Whether any interested division of the Commission may assist in 
the preparation of the Commission's decision; and
    (3) Whether there should be a 30-day waiting period between the 
issuance of [[Page 32805]] the Commission's order and the date it is to 
become effective.
    (b) Objections; effect of failure to object. Any other party may 
object to the procedures so specified, and such party may specify such 
additional procedures as it considers necessary or appropriate. In the 
absence of such objection or such specification of additional 
procedures, such other party may be deemed to have waived objection to 
the specified procedures.
    (c) Approval required. Any proposal pursuant to paragraph (a) of 
this section, even if not objected to by any party, shall be subject to 
the written approval of the hearing officer.
    (d) Procedure upon agreement to waive an initial decision. If an 
initial decision is waived pursuant to paragraph (a) of this section, 
the hearing officer shall notify the Secretary and, unless the 
Commission directs otherwise within 14 days, no initial decision shall 
be issued.


Sec. 201.210  Parties, limited participants and amici curiae.

    (a) Parties in an enforcement or disciplinary proceeding or a 
proceeding to review a self-regulatory organization determination. (1) 
Generally. No person shall be granted leave to become a party or a non-
party participant on a limited basis in an enforcement or disciplinary 
proceeding or a proceeding to review a determination by a self-
regulatory organization pursuant to Secs. 201.420 and 201.421.
    (2) Disgorgement proceedings. In an enforcement proceeding, a 
person may state his or her views with respect to a proposed plan of 
disgorgement or file a proof of claim pursuant to Sec. 201.612.
    (b) Intervention as a party. (1) Generally. In any proceeding, 
other than an enforcement proceeding, a disciplinary proceeding or a 
proceeding to review a self-regulatory organization determination, any 
person may seek leave to intervene as a party by filing a motion 
setting forth the person's interest in the proceeding. No person, 
however, shall be admitted as a party to a proceeding by intervention 
unless it is determined that leave to participate pursuant to paragraph 
(c) of this section would be inadequate for the protection of his or 
her interests.
    (i) In a proceeding under the Public Utility Holding Company Act of 
1935, any representative of interested consumers or security holders, 
or any other person whose participation in the proceeding may be in the 
public interest or for the protection of investors or consumers, may be 
admitted as a party upon the filing of a written motion setting forth 
the person's interest in the proceeding.
    (ii) In a proceeding under the Investment Company Act of 1940, any 
representative of interested security holders, or any other person 
whose participation in the proceeding may be in the public interest or 
for the protection of investors, may be admitted as a party upon the 
filing of a written motion setting forth the person's interest in the 
proceeding.
    (2) Intervention as of right. (i) In proceedings under the Public 
Utility Holding Company Act of 1935, any interested representative, 
agency, authority or instrumentality of the United States or any 
interested State, State commission, municipality or other political 
subdivision of a state shall be admitted as a party to any proceeding 
upon the filing of a written motion requesting leave to be admitted.
    (ii) In proceedings under the Investment Company Act of 1940, any 
interested State or State agency shall be admitted as a party to any 
proceeding upon the filing of a written motion requesting leave to be 
admitted.
    (c) Leave to participate on a limited basis. In any proceeding, 
other than an enforcement proceeding, a disciplinary proceeding or a 
proceeding to review a self-regulatory organization determination, any 
person may seek leave to participate on a limited basis as a non-party 
participant as to any matter affecting the person's interests.
    (1) Procedure. Motions for leave to participate shall be in 
writing, shall set forth the nature and extent of the movant's interest 
in the proceeding, and, except where good cause for late filing is 
shown, shall be filed not later than 20 days prior to the date fixed 
for the commencement of the hearing. Leave to participate pursuant to 
this paragraph (c) may include such rights of a party as the hearing 
officer may deem appropriate. Persons granted leave to participate 
shall be served in accordance with Sec. 201.150; provided, however, 
that a party to the proceeding may move that the extent of notice of 
filings or other papers to be provided to persons granted leave to 
participate be limited, or may move that the persons granted leave to 
participate bear the cost of being provided copies of any or all 
filings or other papers. Persons granted leave to participate shall be 
bound, except as may be otherwise determined by the hearing officer, by 
any stipulation between the parties to the proceeding with respect to 
procedure, including submission of evidence, substitution of exhibits, 
corrections of the record, the time within which briefs or exceptions 
may be filed or proposed findings and conclusions may be submitted, the 
filing of initial decisions, the procedure to be followed in the 
preparation of decisions and the effective date of the Commission's 
order in the case. Where the filing of briefs or exceptions or the 
submission of proposed findings and conclusions are waived by the 
parties to the proceedings, a person granted leave to participate 
pursuant to this paragraph (c) shall not be permitted to file a brief 
or exceptions or submit proposed findings and conclusions except by 
leave of the Commission or of the hearing officer.
    (2) Certain persons entitled to leave to participate. The hearing 
officer is directed to grant leave to participate under this paragraph 
(c) to any person to whom it is proposed to issue any security in 
exchange for one or more bona fide outstanding securities, claims or 
property interests, or partly in such exchange and partly for cash, 
where the Commission is authorized to approve the terms and conditions 
of such issuance and exchange after a hearing upon the fairness of such 
terms and conditions.
    (d) Amicus participation.
    (1) Availability. An amicus brief may be filed only if:
    (i) A motion for leave to file the brief has been granted;
    (ii) The brief is accompanied by written consent of all parties;
    (iii) The brief is filed at the request of the Commission or the 
hearing officer; or
    (iv) The brief is presented by the United States or an officer or 
agency thereof, or by a State, Territory or Commonwealth.
    (2) Procedure. An amicus brief may be filed conditionally with the 
motion for leave. The motion for leave shall identify the interest of 
the movant and shall state the reasons why a brief of an amicus curiae 
is desirable. Except as all parties otherwise consent, any amicus 
curiae shall file its brief within the time allowed the party whose 
position the amicus will support, unless the Commission or hearing 
officer, for cause shown, grants leave for a later filing. In the event 
that a later filing is allowed, the order granting leave to file shall 
specify when an opposing party may reply to the brief. A motion of an 
amicus curiae to participate in oral argument will be granted only for 
extraordinary reasons.
    (e) Permission to state views. Any person may make a motion seeking 
leave to file a memorandum or make an oral statement of his or her 
views. Any such communication may be included in the record; provided, 
however, that unless offered and admitted as evidence [[Page 32806]] of 
the truth of the statements therein made, any assertions of fact 
submitted pursuant to the provisions of this paragraph (e) will be 
considered only to the extent that the statements therein made are 
otherwise supported by the record.
    (f) Modification of participation provisions. The Commission or the 
hearing officer may, by order, modify the provisions of this section 
which would otherwise be applicable, and may impose such terms and 
conditions on the participation of any person in any proceeding as it 
may deem necessary or appropriate in the public interest.


 201.220  Answer to allegations.

    (a) When required. In its order instituting proceedings, the 
Commission may require any party to file an answer to each of the 
allegations contained therein. Even if not so ordered, any party in any 
proceeding may elect to file an answer. Any other person granted leave 
by the Commission or the hearing officer to participate on a limited 
basis in such proceedings pursuant to Sec. 201.210(c) may be required 
to file an answer.
    (b) When to file. Except where a different period is provided by 
rule or by order, a party required to file an answer as provided in 
paragraph (a) of this section shall do so within 20 days after service 
upon the party of the order instituting proceedings. Persons granted 
leave to participate on a limited basis in the proceeding pursuant to 
Sec. 201.210(c) may file an answer within a reasonable time, as 
determined by the Commission or the hearing officer. If the order 
instituting proceedings is amended, the Commission or the hearing 
officer may require that an amended answer be filed and, if such an 
answer is required, shall specify a date for the filing thereof.
    (c) Contents; effect of failure to deny. Unless otherwise directed 
by the hearing officer or the Commission, an answer shall specifically 
admit, deny, or state that the party does not have, and is unable to 
obtain, sufficient information to admit or deny each allegation in the 
order instituting proceedings. When a party intends in good faith to 
deny only a part of an allegation, the party shall specify so much of 
it as is true and shall deny only the remainder. A statement of a lack 
of information shall have the effect of a denial. A defense of res 
judicata, statute of limitations or any other matter constituting an 
affirmative defense shall be asserted in the answer. Any allegation not 
denied shall be deemed admitted.
    (d) Motion for more definite statement. A party may file with an 
answer a motion for a more definite statement of specified matters of 
fact or law to be considered or determined. Such motion shall state the 
respects in which, and the reasons why, each such matter of fact or law 
should be required to be made more definite. If the motion is granted, 
the order granting such motion shall set the periods for filing such a 
statement and any answer thereto.
    (e) Amendments. A party may amend its answer at any time by written 
consent of each adverse party or with leave of the Commission or the 
hearing officer. Leave shall be freely granted when justice so 
requires.
    (f) Failure to file answer: default. If a party respondent fails to 
file an answer required by this section within the time provided, such 
person may be deemed in default pursuant to Sec. 201.155(a). A party 
may make a motion to set aside a default pursuant to Sec. 201.155(b).


 201.221  Prehearing conferences.

    (a) Purposes of conferences. The purposes of prehearing conferences 
include, but are not limited to:
    (1) Expediting the disposition of the proceeding;
    (2) Establishing early and continuing control of the proceeding by 
the hearing officer; and
    (3) Improving the quality of the hearing through more thorough 
preparation.
    (b) Procedure. On his or her own motion or at the request of a 
party, the hearing officer may, in his or her discretion, direct 
counsel or any party to meet for an initial, final or other prehearing 
conference. Such conferences may be held with or without the hearing 
officer present as the hearing officer deems appropriate. Where such a 
conference is held outside the presence of the hearing officer, the 
hearing officer shall be advised promptly by the parties of any 
agreements reached. Such conferences also may be held with one or more 
persons participating by telephone or other remote means.
    (c) Subjects to be discussed. At a prehearing conference 
consideration may be given and action taken with respect to any and all 
of the following:
    (1) Simplification and clarification of the issues;
    (2) Exchange of witness and exhibit lists and copies of exhibits;
    (3) Stipulations, admissions of fact, and stipulations concerning 
the contents, authenticity, or admissibility into evidence of 
documents;
    (4) Matters of which official notice may be taken;
    (5) The schedule for exchanging prehearing motions or briefs, if 
any;
    (6) The method of service for papers other than Commission orders;
    (7) Summary disposition of any or all issues;
    (8) Settlement of any or all issues;
    (9) Determination of hearing dates;
    (10) Amendments to the order instituting proceedings or answers 
thereto;
    (11) Production of documents as set forth in Sec. 201.230, and 
prehearing production of documents in response to subpoenas duces tecum 
as set forth in Sec. 201.232;
    (12) Specification of procedures as set forth in Sec. 201.202; and
    (13) Such other matters as may aid in the orderly and expeditious 
disposition of the proceeding.
    (d) Required prehearing conferences. Except where the emergency 
nature of a proceeding would make a prehearing conference clearly 
inappropriate, both an initial and a final prehearing conference should 
be held. Unless ordered otherwise, an initial prehearing conference 
shall be held within 14 days of the service of an answer, or if no 
answer is required, within 14 days of service of the order instituting 
proceedings. A final conference shall be held as close to the start of 
the hearing as reasonable under the circumstances.
    (e) Prehearing orders. At or following the conclusion of any 
conference held pursuant to this section, the hearing officer shall 
enter a ruling or order which recites the agreements reached and any 
procedural determinations made by the hearing officer.
    (f) Failure to appear: default. Any person who is named in an order 
instituting proceedings as a person against whom findings may be made 
or sanctions imposed and who fails to appear, in person or through a 
representative, at a prehearing conference of which he or she has been 
duly notified may be deemed in default pursuant to Sec. 201.155(a). A 
party may make a motion to set aside a default pursuant to 
Sec. 201.155(b).


Sec. 201.222  Prehearing submissions.

    (a) Submissions generally. The hearing officer, on his or her own 
motion, or at the request of a party or other participant, may order 
any party, including the interested division, to furnish such 
information as deemed appropriate, including any or all of the 
following:
    (1) An outline or narrative summary of its case or defense;
    (2) The legal theories upon which it will rely;
    (3) Copies and a list of documents that it intends to introduce at 
the hearing; and [[Page 32807]] 
    (4) A list of witnesses who will testify on its behalf, including 
the witnesses' names, occupations, addresses and a brief summary of 
their expected testimony.
    (b) Expert witnesses. Each party who intends to call an expert 
witness shall submit, in addition to the information required by 
paragraph (a)(4) of this section, a statement of the expert's 
qualifications, a listing of other proceedings in which the expert has 
given expert testimony, and a list of publications authored or co-
authored by the expert.


Sec. 201.230  Enforcement and disciplinary proceedings: availability of 
documents for inspection and copying.

    For purposes of this section, the term documents shall include 
writings, drawings, graphs, charts, photographs, recordings and other 
data compilations, including data stored by computer, from which 
information can be obtained.
    (a) Documents to be available for inspection and copying. (1) 
Unless otherwise provided by this section, or by order of the 
Commission or the hearing officer, the Division of Enforcement shall 
make available for inspection and copying by any party documents 
obtained by the Division prior to the institution of proceedings, in 
connection with the investigation leading to the Division's 
recommendation to institute proceedings. Such documents shall include:
    (i) Each subpoena issued;
    (ii) Every other written request to persons not employed by the 
Commission to provide documents or to be interviewed;
    (iii) The documents turned over in response to any such subpoenas 
or other written requests;
    (iv) All transcripts and transcript exhibits;
    (v) Any other documents obtained from persons not employed by the 
Commission; and
    (vi) Any final examination or inspection reports prepared by the 
Division of Market Regulation or the Division of Investment Management.
    (2) Nothing in this paragraph (a) shall limit the right of the 
Division to make available any other document, or shall limit the right 
of a respondent to seek access to or production pursuant to subpoena of 
any other document, or shall limit the authority of the hearing officer 
to order the production of any document pursuant to subpoena.
    (b) Documents that may be withheld. (1) The Division of Enforcement 
may withhold a document if:
    (i) The document is privileged;
    (ii) The document is an internal memorandum, note or writing 
prepared by a Commission employee, other than an examination or 
inspection report as specified in paragraph (a)(1)(vi) of this section, 
or is otherwise attorney work product and will not be offered in 
evidence;
    (iii) The document would disclose the identity of a confidential 
source; or
    (iv) The hearing officer grants leave to withhold a document or 
category of documents as not relevant to the subject matter of the 
proceeding or otherwise, for good cause shown.
    (2) Nothing in this paragraph (b) authorizes the Division of 
Enforcement in connection with an enforcement or disciplinary 
proceeding to withhold, contrary to the doctrine of Brady v. Maryland, 
373 U.S. 83, 87 (1963), documents that contain material exculpatory 
evidence.
    (c) Withheld document list. The hearing officer may require the 
Division of Enforcement to submit for review a list of documents 
withheld pursuant to paragraphs (b)(1) through (b)(4) of this section 
or to submit any document withheld, and may determine whether any such 
document should be made available for inspection and copying.
    (d) Timing of inspection and copying. Unless otherwise ordered by 
the Commission or the hearing officer, the Division of Enforcement 
shall commence making documents available to a respondent for 
inspection and copying pursuant to this section no later than 14 days 
after the respondent files an answer. In a proceeding in which a 
temporary cease-and-desist order is sought pursuant to Sec. 201.510 or 
a temporary suspension of registration is sought pursuant to 
Sec. 201.520, documents shall be made available no later than the day 
after service of the decision as to whether to issue a temporary cease-
and-desist order or temporary suspension order.
    (e) Place of inspection and copying. Documents subject to 
inspection and copying pursuant to this section shall be made available 
to the respondent for inspection and copying at the Commission office 
where they are ordinarily maintained, or at such other place as the 
parties, in writing, may agree. A respondent shall not be given custody 
of the documents or leave to remove the documents from the Commission's 
offices pursuant to the requirements of this section other than by 
written agreement of the Division of Enforcement. Such agreement shall 
specify the documents subject to the agreement, the date they shall be 
returned and such other terms or conditions as are appropriate to 
provide for the safekeeping of the documents.
    (f) Copying costs and procedures. The respondent may obtain a 
photocopy of any documents made available for inspection. The 
respondent shall be responsible for the cost of photocopying. Unless 
otherwise ordered, charges for copies made by the Division of 
Enforcement at the request of the respondent will be at the rate 
charged pursuant to the fee schedule at 17 CFR 200.80e for copies. The 
respondent shall be given access to the documents at the Commission's 
offices or such other place as the parties may agree during normal 
business hours for copying of documents at the respondent's expense.
    (g) Issuance of investigatory subpoenas after institution of 
proceedings. The Division of Enforcement shall promptly inform the 
hearing officer and each party if investigatory subpoenas are issued 
under the same investigation file number or pursuant to the same order 
directing private investigation (``formal order'') under which the 
investigation leading to the institution of proceedings was conducted. 
The hearing officer shall order such steps as necessary and appropriate 
to assure that the issuance of investigatory subpoenas after the 
institution of proceedings is not for the purpose of obtaining evidence 
relevant to the proceedings and that any relevant documents that may be 
obtained through the use of investigatory subpoenas in a continuing 
investigation are made available to each respondent for inspection and 
copying on a timely basis.
    (h) Failure to make documents available--harmless error. In the 
event that a document required to be made available to a respondent 
pursuant to this section is not made available by the Division of 
Enforcement, no rehearing or redecision of a proceeding already heard 
or decided shall be required, unless the respondent shall establish 
that the failure to make the document available was not harmless error.


Sec. 201.231  Enforcement and disciplinary proceedings: production of 
witness statements.

    (a) Availability. Any respondent in an enforcement or disciplinary 
proceeding may move that the Division of Enforcement produce for 
inspection and copying any statement of any person called or to be 
called as a witness by the division that pertains, or is expected to 
pertain, to his or her direct testimony and that would be required to 
be produced pursuant to the Jencks Act, 18 U.S.C. 3500. Such production 
shall be [[Page 32808]] made at a time and place fixed by the hearing 
officer and shall be made available to any party, provided, however, 
that the production shall be made under conditions intended to preserve 
the items to be inspected or copied.
    (b) Failure to produce--harmless error. In the event that a 
statement required to be made available for inspection and copying by a 
respondent is not turned over by the Division of Enforcement, no 
rehearing or redecision of a proceeding already heard or decided shall 
be required unless the respondent establishes that the failure to turn 
over the statement was not harmless error.


Sec. 201.232  Subpoenas.

    (a) Availability; procedure. In connection with any hearing ordered 
by the Commission, a party may request the issuance of subpoenas 
requiring the attendance and testimony of witnesses at the designated 
time and place of hearing, and subpoenas requiring the production of 
documentary or other tangible evidence returnable at any designated 
time or place. Unless made on the record at a hearing, requests for 
issuance of a subpoena shall be made in writing and served on each 
party pursuant to Sec. 201.150. A person whose request for a subpoena 
has been denied or modified may not request that any other person issue 
the subpoena.
    (1) Unavailability of hearing officer. In the event that the 
hearing officer assigned to a proceeding is unavailable, the party 
seeking issuance of the subpoena may seek its issuance from the first 
available of the following persons: the Chief Administrative Law Judge, 
the law judge most senior in service as a law judge, the duty officer, 
any other member of the Commission, or any other person designated by 
the Commission to issue subpoenas. Requests for issuance of a subpoena 
made to the Commission, or any member thereof, must be submitted to the 
Secretary, not to an individual Commissioner.
    (2) Signing may be delegated. A hearing officer may authorize 
issuance of a subpoena, and may delegate the manual signing of the 
subpoena to any other person authorized to issue subpoenas.
    (b) Standards for issuance. Where it appears to the person asked to 
issue the subpoena that the subpoena sought may be unreasonable, 
oppressive, excessive in scope, or unduly burdensome, he or she may, in 
his or her discretion, as a condition precedent to the issuance of the 
subpoena, require the person seeking the subpoena to show the general 
relevance and reasonable scope of the testimony or other evidence 
sought. If after consideration of all the circumstances, the person 
requested to issue the subpoena determines that the subpoena or any of 
its terms is unreasonable, oppressive, excessive in scope, or unduly 
burdensome, he or she may refuse to issue the subpoena, or issue it 
only upon such conditions as fairness requires. In making the foregoing 
determination, the person issuing the subpoena may inquire of the other 
participants whether they will stipulate to the facts sought to be 
proved.
    (c) Service. Service shall be made pursuant to the provisions of 
Sec. 201.150 (b) through (d). The provisions of this paragraph (c) 
shall apply to the issuance of subpoenas for purposes of 
investigations, as required by 17 CFR 203.8, as well as hearings.
    (d) Tender of fees required. When a subpoena compelling the 
attendance of a person at a hearing or deposition is issued at the 
instance of anyone other than an officer or agency of the United 
States, service is valid only if the subpoena is accompanied by a 
tender to the subpoenaed person of the fees for one day's attendance 
and mileage specified by paragraph (f) of this section.
     (e) Application to quash or modify. (1) Procedure. Any person to 
whom a subpoena is directed or who is an owner, creator or the subject 
of the documents that are to be produced pursuant to a subpoena may, 
prior to the time specified therein for compliance, but in no event 
more than 15 days after the date of service of such subpoena, request 
that the subpoena be quashed or modified. Such request shall be made by 
application filed with the Secretary and served on all parties pursuant 
to Sec. 201.150. The party on whose behalf the subpoena was issued may, 
within five days of service of the application, file an opposition to 
the application. If a hearing officer has been assigned to the 
proceeding, the application to quash shall be directed to that hearing 
officer for consideration, even if the subpoena was issued by another 
person.
    (2) Standards governing application to quash or modify. If 
compliance with the subpoena would be unreasonable, oppressive or 
unduly burdensome, the hearing officer or the Commission shall quash or 
modify the subpoena, or may order return of the subpoena only upon 
specified conditions. These conditions may include but are not limited 
to a requirement that the party on whose behalf the subpoena was issued 
shall make reasonable compensation to the person to whom the subpoena 
was addressed for the cost of copying or transporting evidence to the 
place for return of the subpoena.
    (f) Witness fees and mileage. Witnesses summoned before the 
Commission shall be paid the same fees and mileage that are paid to 
witnesses in the courts of the United States, and witnesses whose 
depositions are taken and the persons taking the same shall severally 
be entitled to the same fees as are paid for like services in the 
courts of the United States. Witness fees and mileage shall be paid by 
the party at whose instance the witnesses appear.


Sec. 201.233  Depositions upon oral examination.

    (a) Procedure. Any party desiring to take the testimony of a 
witness by deposition shall make a written motion setting forth the 
reasons why such deposition should be taken including the specific 
reasons why the party believes the witness will be unable to attend or 
testify at the hearing; the name and address of the prospective 
witness; the matters concerning which the prospective witness is 
expected to be questioned; and the proposed time and place for the 
taking of the deposition.
    (b) Required finding when ordering a deposition. In the discretion 
of the Commission or the hearing officer, an order for deposition may 
be issued upon a finding that the prospective witness will likely give 
testimony material to the proceeding, that it is likely the prospective 
witness will be unable to attend or testify at the hearing because of 
age, sickness, infirmity, imprisonment or other disability, and that 
the taking of a deposition will serve the interests of justice.
    (c) Contents of order. An order for deposition shall designate by 
name a deposition officer. The designated officer may be the hearing 
officer or any other person authorized to administer oaths by the laws 
of the United States or of the place where the deposition is to be 
held. An order for deposition also shall state:
    (1) The name of the witness whose deposition is to be taken;
    (2) The scope of the testimony to be taken;
    (3) The time and place of the deposition;
    (4) The manner of recording, preserving and filing the deposition; 
and
    (5) The number of copies, if any, of the deposition and exhibits to 
be filed upon completion of the deposition.
    (d) Procedure at depositions. A witness whose testimony is taken by 
deposition shall be sworn or shall affirm before any questions are put 
to him or [[Page 32809]] her. Examination and cross-examination of 
deponents may proceed as permitted at a hearing. The witness being 
deposed may have counsel present during the deposition.
    (e) Objections to questions or evidence. Objections to questions or 
evidence shall be in short form, stating the grounds of objection 
relied upon. Objections to questions or evidence shall be noted by the 
deposition officer upon the deposition, but a deposition officer other 
than the hearing officer shall not have the power to decide on the 
competency, materiality or relevance of evidence. Failure to object to 
questions or evidence before the deposition officer shall not be deemed 
a waiver unless the ground of the objection is one that might have been 
obviated or removed if presented at that time.
    (f) Filing of depositions. The questions propounded and all answers 
or objections shall be recorded or transcribed verbatim, and a 
transcript prepared by the deposition officer, or under his or her 
direction. The transcript shall be subscribed by the witness and 
certified by the deposition officer. The original deposition and 
exhibits shall be filed with the Secretary. A copy of the deposition 
shall be available to the deponent and each party for purchase at 
prescribed rates.
    (g) Payment. The cost of the transcript shall be paid by the party 
requesting the deposition.


Sec. 201.234  Depositions upon written questions.

    (a) Availability. Depositions may be taken and submitted on written 
questions upon motion of any party. The motion shall include the 
information specified in Sec. 201.233(a). A decision on the motion 
shall be governed by the provisions of Sec. 201.233(b).
    (b) Procedure. Written questions shall be filed with the motion. 
Within 10 days after service of the motion and written questions, any 
party may file objections to such written questions and any party may 
file cross-questions. When a deposition is taken pursuant to this 
section no persons other than the witness, counsel to the witness, the 
deposition officer, and, if the deposition officer does not act as 
reporter, a reporter, shall be present at the examination of the 
witness. No party shall be present or represented unless otherwise 
permitted by order. The deposition officer shall propound the questions 
and cross-questions to the witness in the order submitted.
    (c) Additional requirements. The order for deposition, filing of 
the deposition, form of the deposition and use of the deposition in the 
record shall be governed by paragraphs (c) through (g) of Sec. 201.233, 
except that no cross-examination shall be made.


Sec. 201.235  Introducing prior sworn statements of witnesses into the 
record.

    (a) At a hearing, any person wishing to introduce a prior, sworn 
statement of a witness, not a party, otherwise admissible in the 
proceeding, may make a motion setting forth the reasons therefor. If 
only part of a statement is offered in evidence, the hearing officer 
may require that all relevant portions of the statement be introduced. 
If all of a statement is offered in evidence, the hearing officer may 
require that portions not relevant to the proceeding be excluded. A 
motion to introduce a prior sworn statement may be granted if:
    (1) The witness is dead;
    (2) The witness is out of the United States, unless it appears that 
the absence of the witness was procured by the party offering the prior 
sworn statement;
    (3) The witness is unable to attend or testify because of age, 
sickness, infirmity, imprisonment or other disability;
    (4) The party offering the prior sworn statement has been unable to 
procure the attendance of the witness by subpoena; or,
    (5) In the discretion of the Commission or the hearing officer, it 
would be desirable, in the interests of justice, to allow the prior 
sworn statement to be used. In making this determination, due regard 
shall be given to the presumption that witnesses will testify orally in 
an open hearing. If the parties have stipulated to accept a prior sworn 
statement in lieu of live testimony, consideration shall also be given 
to the convenience of the parties in avoiding unnecessary expense.


Sec. 201.240  Settlement.

    (a) Availability. Any person who is notified that a proceeding may 
or will be instituted against him or her, or any party to a proceeding 
already instituted, may, at any time, propose in writing an offer of 
settlement.
    (b) Procedure. An offer of settlement shall state that it is made 
pursuant to this section; shall recite or incorporate as a part of the 
offer the provisions of paragraphs (c) (4) and (5) of this section; 
shall be signed by the person making the offer, not by counsel; and 
shall be submitted to the interested division.
    (c) Consideration of offers of settlement. (1) Offers of settlement 
shall be considered by the interested division when time, the nature of 
the proceedings, and the public interest permit.
    (2) Where a hearing officer is assigned to a proceeding, the 
interested division and the party submitting the offer may request that 
the hearing officer express his or her views regarding the 
appropriateness of the offer of settlement. A request for the hearing 
officer to express his or her views on an offer of settlement or 
otherwise to participate in a settlement conference constitutes a 
waiver by the persons making the request of any right to claim bias or 
prejudgment by the hearing officer based on the views expressed.
    (3) The interested division shall present the offer of settlement 
to the Commission with its recommendation, except that, if the 
division's recommendation is unfavorable, the offer shall not be 
presented to the Commission unless the person making the offer so 
requests.
    (4) By submitting an offer of settlement, the person making the 
offer waives, subject to acceptance of the offer:
    (i) All hearings pursuant to the statutory provisions under which 
the proceeding is to be or has been instituted;
    (ii) The filing of proposed findings of fact and conclusions of 
law;
    (iii) Proceedings before, and an initial decision by, a hearing 
officer;
    (iv) All post-hearing procedures; and
    (v) Judicial review by any court.
    (5) By submitting an offer of settlement the person further waives:
    (i) Such provisions of the Rules of Practice or other requirements 
of law as may be construed to prevent any member of the Commission's 
staff from participating in the preparation of, or advising the 
Commission as to, any order, opinion, finding of fact, or conclusion of 
law to be entered pursuant to the offer; and
    (ii) Any right to claim bias or prejudgment by the Commission based 
on the consideration of or discussions concerning settlement of all or 
any part of the proceeding.
    (6) If the Commission rejects the offer of settlement, the person 
making the offer shall be notified of the Commission's action and the 
offer of settlement shall be deemed withdrawn. The rejected offer shall 
not constitute a part of the record in any proceeding against the 
person making the offer, provided, however, that rejection of an offer 
of settlement does not affect the continued validity of waivers 
pursuant to paragraph (c)(5) of this section with respect to any 
discussions concerning the rejected offer of settlement.
    (7) Final acceptance of any offer of settlement will occur only 
upon the [[Page 32810]] issuance of findings and an order by the 
Commission.


Sec. 201.250  Motion for summary disposition.

    (a) After a respondent's answer has been filed and, in an 
enforcement or a disciplinary proceeding, documents have been made 
available to that respondent for inspection and copying pursuant to 
Sec. 201.230, the respondent, or the interested division may make a 
motion for summary disposition of any or all allegations of the order 
instituting proceedings with respect to that respondent. If the 
interested division has not completed presentation of its case in 
chief, a motion for summary disposition shall be made only with leave 
of the hearing officer. The facts of the pleadings of the party against 
whom the motion is made shall be taken as true, except as modified by 
stipulations or admissions made by that party, by uncontested 
affidavits, or by facts officially noted pursuant to Sec. 201.323.
    (b) The hearing officer shall promptly grant or deny the motion for 
summary disposition or shall defer decision on the motion. The hearing 
officer may grant the motion for summary disposition if there is no 
genuine issue with regard to any material fact and the party making the 
motion is entitled to a summary disposition as a matter of law. If it 
appears that a party, for good cause shown, cannot present by affidavit 
prior to hearing facts essential to justify opposition to the motion, 
the hearing officer shall deny or defer the motion. A hearing officer's 
decision to deny leave to file a motion for summary disposition is not 
subject to interlocutory appeal.
    (c) The motion for summary disposition, supporting memorandum of 
points and authorities, and any declarations, affidavits or attachments 
shall not exceed 35 pages in length.

Rules Regarding Hearings


Sec. 201.300  Hearings.

    Hearings for the purpose of taking evidence shall be held only upon 
order of the Commission. All hearings shall be conducted in a fair, 
impartial, expeditious and orderly manner.
Sec. 201.301  Hearings to be public.

    All hearings, except hearings on applications for confidential 
treatment filed pursuant to Sec. 201.190, hearings held to consider a 
motion for a protective order pursuant to Sec. 201.322, and hearings on 
ex parte application for a temporary cease-and-desist order, shall be 
public unless otherwise ordered by the Commission on its own motion or 
the motion of a party. No hearing shall be nonpublic where all 
respondents request that the hearing be made public.


Sec. 201.302  Record of hearings.

    (a) Recordation. Unless ordered otherwise by the hearing officer or 
the Commission, all hearings shall be recorded and a written transcript 
thereof shall be prepared.
    (b) Availability of a transcript. Transcripts of public hearings 
shall be available for purchase at prescribed rates. Transcripts of 
nonpublic proceedings, and transcripts subject to a protective order 
pursuant to Sec. 201.322, shall be available for purchase only by 
parties; provided, however, that any person compelled to submit data or 
evidence in a hearing may purchase a copy of his or her own testimony.
    (c) Transcript correction. Prior to the filing of post-hearing 
briefs or proposed findings and conclusions, or within such earlier 
time as directed by the Commission or the hearing officer, a party or 
witness may make a motion to correct the transcript. Proposed 
corrections of the transcript may be submitted to the hearing officer 
by stipulation pursuant to Sec. 201.324, or by motion. Upon notice to 
all parties to the proceeding, the hearing officer may, by order, 
specify corrections to the transcript.


Sec. 201.310  Failure to appear at hearings: default.

    Any person named in an order instituting proceedings as a person 
against whom findings may be made or sanctions imposed who fails to 
appear at a hearing of which he or she has been duly notified may be 
deemed to be in default pursuant to Sec. 201.155(a). A party may make a 
motion to set aside a default pursuant to Sec. 201.155(b).


Sec. 201.320  Evidence: admissibility.

    The Commission or the hearing officer may receive relevant evidence 
and shall exclude all evidence that is irrelevant, immaterial or unduly 
repetitious.


Sec. 201.321  Evidence: objections and offers of proof.

    (a) Objections. Objections to the admission or exclusion of 
evidence must be made on the record and shall be in short form, stating 
the grounds relied upon. Exceptions to any ruling thereon by the 
hearing officer need not be noted at the time of the ruling. Such 
exceptions will be deemed waived on appeal to the Commission, however, 
unless raised:
    (1) Pursuant to interlocutory review in accordance with 
Sec. 201.400;
    (2) In a proposed finding or conclusion filed pursuant to 
Sec. 201.340; or
    (3) In a petition for Commission review of an initial decision 
filed in accordance with Sec. 201.410.
    (b) Offers of proof. Whenever evidence is excluded from the record, 
the party offering such evidence may make an offer of proof, which 
shall be included in the record. Excluded material shall be retained 
pursuant to Sec. 201.350(b).


Sec. 201.322  Evidence: confidential information, protective orders.

    (a) Procedure. In any proceeding as defined in Sec. 201.101(a), a 
party, any person who is the owner, subject or creator of a document 
subject to subpoena or which may be introduced as evidence, or any 
witness who testifies at a hearing may file a motion requesting a 
protective order to limit from disclosure to other parties or to the 
public documents or testimony that contain confidential information. 
The motion should include a general summary or extract of the documents 
without revealing confidential details. If the movant seeks a 
protective order against disclosure to other parties as well as the 
public, copies of the documents shall not be served on other parties. 
Unless the documents are unavailable, the movant shall file for in 
camera inspection a sealed copy of the documents as to which the order 
is sought.
    (b) Basis for issuance. Documents and testimony introduced in a 
public hearing are presumed to be public. A motion for a protective 
order shall be granted only upon a finding that the harm resulting from 
disclosure would outweigh the benefits of disclosure.
    (c) Requests for additional information supporting confidentiality. 
A movant under paragraph (a) of this section may be required to furnish 
in writing additional information with respect to the grounds for 
confidentiality. Failure to supply the information so requested within 
five days from the date of receipt by the movant of a notice of the 
information required shall be deemed a waiver of the objection to 
public disclosure of that portion of the documents to which the 
additional information relates, unless the Commission or the hearing 
officer shall otherwise order for good cause shown at or before the 
expiration of such five-day period.
    (d) Confidentiality of documents pending decision. Pending a 
determination of a motion under this section, the documents as to which 
confidential treatment is sought and any other documents that would 
reveal the confidential information in those documents shall be 
maintained under [[Page 32811]] seal and shall be disclosed only in 
accordance with orders of the Commission or the hearing officer. Any 
order issued in connection with a motion under this section shall be 
public unless the order would disclose information as to which a 
protective order has been granted, in which case that portion of the 
order that would reveal the protected information shall be nonpublic.


Sec. 201.323  Evidence: official notice.

    Official notice may be taken of any material fact which might be 
judicially noticed by a district court of the United States, any matter 
in the public official records of the Commission, or any matter which 
is peculiarly within the knowledge of the Commission as an expert body. 
If official notice is requested or taken of a material fact not 
appearing in the evidence in the record, the parties, upon timely 
request, shall be afforded an opportunity to establish the contrary.


Sec. 201.324  Evidence: stipulations.

    The parties may, by stipulation, at any stage of the proceeding 
agree upon any pertinent facts in the proceeding. A stipulation may be 
received in evidence and, when received, shall be binding on the 
parties to the stipulation.


Sec. 201.325  Evidence: presentation under oath or affirmation.

    A witness at a hearing for the purpose of taking evidence shall 
testify under oath or affirmation.


Sec. 201.326  Evidence: presentation, rebuttal and cross-examination.

    In any proceeding in which a hearing is required to be conducted on 
the record after opportunity for hearing in accord with 5 U.S.C. 
556(a), a party is entitled to present its case or defense by oral or 
documentary evidence, to submit rebuttal evidence, and to conduct such 
cross-examination as, in the discretion of the Commission or the 
hearing officer, may be required for a full and true disclosure of the 
facts. The scope and form of evidence, rebuttal evidence, if any, and 
cross-examination, if any, in any other proceeding shall be determined 
by the Commission or the hearing officer in each proceeding.


Sec. 201.340  Proposed findings, conclusions and supporting briefs.
    (a) Opportunity to file. Before an initial decision is issued, each 
party shall have an opportunity, reasonable in light of all the 
circumstances, to file in writing proposed findings and conclusions 
together with, or as a part of, its brief.
    (b) Procedure. Proposed findings of fact must be supported by 
citations to specific portions of the record. If successive filings are 
directed, the proposed findings and conclusions of the party assigned 
to file first shall be set forth in serially numbered paragraphs, and 
any counter statement of proposed findings and conclusions must, in 
addition to any other matter, indicate those paragraphs of the 
proposals already filed as to which there is no dispute. A reply brief 
may be filed by the party assigned to file first, or, where 
simultaneous filings are directed, reply briefs may be filed by each 
party, within the period prescribed therefor by the hearing officer. No 
further briefs may be filed except with leave of the hearing officer.
    (c) Time for filing. In any proceeding in which an initial decision 
is to be issued:
    (1) At the end of each hearing, the hearing officer shall, by 
order, after consultation with the parties, prescribe the period within 
which proposed findings and conclusions and supporting briefs are to be 
filed. The party or parties directed to file first shall make its or 
their initial filing within 30 days of the end of the hearing unless 
the hearing officer, for good cause shown, permits a different period 
and sets forth in the order the reasons why the different period is 
necessary.
    (2) The total period within which all such proposed findings and 
conclusions and supporting briefs and any counter statements of 
proposed findings and conclusions and reply briefs are to be filed 
shall be no longer than 90 days after the close of the hearing unless 
the hearing officer, for good cause shown, permits a different period 
and sets forth in an order the reasons why the different period is 
necessary.


Sec. 201.350  Record in proceedings before hearing officer; retention 
of documents; copies.

    (a) Contents of the record. The record shall consist of:
    (1) The order instituting proceedings, each notice of hearing and 
any amendments;
    (2) Each application, motion, submission or other paper, and any 
amendments, motions, objections, and exceptions to or regarding them;
    (3) Each stipulation, transcript of testimony and document or other 
item admitted into evidence;
    (4) Each written communication accepted by the hearing officer 
pursuant to Sec. 201.210;
    (5) With respect to a request to disqualify a hearing officer or to 
allow the hearing officer's withdrawal under Sec. 201.112, each 
affidavit or transcript of testimony taken and the decision made in 
connection with the request;
    (6) All motions, briefs and other papers filed on interlocutory 
appeal;
    (7) All proposed findings and conclusions;
    (8) Each written order issued by the hearing officer or Commission; 
and
    (9) Any other document or item accepted into the record by the 
hearing officer.
    (b) Retention of documents not admitted. Any document offered in 
evidence but excluded, and any document marked for identification but 
not offered as an exhibit, shall not be considered a part of the 
record. The Secretary shall retain any such documents until the later 
of the date upon which a Commission order ending the proceeding becomes 
final, or the conclusion of any judicial review of the Commission's 
order.
    (c) Substitution of copies. A true copy of a document may be 
substituted for any document in the record or any document retained 
pursuant to paragraph (b) of this section.


Sec. 201.351  Transmittal of documents to Secretary; record index; 
certification.

    (a) Transmittal from hearing officer to Secretary of partial record 
index. The hearing officer may, at any time, transmit to the Secretary 
motions, exhibits or any other original documents filed with or 
accepted into evidence by the hearing officer, together with an index 
of such documents. The hearing officer, may, by order, require the 
interested division or other persons to assist in promptly transporting 
such documents from the hearing location to the Office of the 
Secretary.
    (b) Preparation, certification of record index. Promptly after the 
close of the hearing, the hearing officer shall transmit to the 
Secretary an index of the originals of any motions, exhibits or any 
other documents filed with or accepted into evidence by the hearing 
officer that have not been previously transmitted to the Secretary, and 
the Secretary shall prepare a record index. Prior to issuance of an 
initial decision, or if no initial decision is to be prepared, within 
30 days of the close of the hearing, the Secretary shall transmit the 
record index to the hearing officer and serve a copy of the record 
index on each party. Any person may file proposed corrections to the 
record index with the hearing officer within 15 days of service of the 
record index. The hearing officer shall, by order, direct whether any 
corrections to the record index shall be made. The Secretary shall make 
such corrections, if any, and issue a revised [[Page 32812]] record 
index. If an initial decision is to be issued, the initial decision 
shall include a certification that the record consists of the items set 
forth in the record index or revised record index issued by the 
Secretary.
    (c) Final transmittal of record items to the Secretary. After the 
close of the hearing, the hearing officer shall transmit to the 
Secretary originals of any motions, exhibits or any other documents 
filed with, or accepted into evidence by, the hearing officer, or any 
other portions of the record that have not already been transmitted to 
the Secretary. Prior to service of the initial decision by the 
Secretary, or if no initial decision is to be issued, within 60 days of 
the close of the hearing, the Secretary shall inform the hearing 
officer if any portions of the record are not in the Secretary's 
custody.
Sec. 201.360  Initial decision of hearing officer.

    (a) When required. Unless the Commission directs otherwise, the 
hearing officer shall prepare an initial decision in any proceeding in 
which the Commission directs a hearing officer to preside at a hearing, 
provided, however, that an initial decision may be waived by the 
parties with the consent of the hearing officer pursuant to 
Sec. 201.202.
    (b) Content. An initial decision shall include: findings and 
conclusions, and the reasons or basis therefor, as to all the material 
issues of fact, law or discretion presented on the record and the 
appropriate order, sanction, relief, or denial thereof. The initial 
decision shall also state the time period, not to exceed 21 days after 
service of the decision, except for good cause shown, within which a 
petition for review of the initial decision may be filed. The reasons 
for any extension of time shall be stated in the initial decision. The 
initial decision shall also include a statement that, as provided in 
paragraph (d) of this section:
    (1) The initial decision shall become the final decision of the 
Commission as to each party unless a party files a petition for review 
of the initial decision or the Commission determines on its own 
initiative to review the initial decision as to a party; and
    (2) If a party timely files a petition for review or the Commission 
takes action to review as to a party, the initial decision shall not 
become final with respect to that party.
    (c) Filing, service and publication. The hearing officer shall file 
the initial decision with the Secretary. The Secretary shall promptly 
serve the initial decision upon the parties and shall promptly publish 
notice of the filing thereof in the SEC News Digest. Thereafter, the 
Secretary shall publish the initial decision in the SEC Docket; 
provided, however, that in nonpublic proceedings no notice shall be 
published unless the Commission otherwise directs.
    (d) When final.
    (1) Unless a party or an aggrieved person entitled to review files 
a petition for review in accordance with the time limit specified in 
the initial decision, or unless the Commission on its own initiative 
orders review pursuant to Sec. 201.411, an initial decision shall 
become the final decision of the Commission.
    (2) If a petition for review is timely filed by a party or an 
aggrieved person entitled to review, or if the Commission upon its own 
initiative has ordered review of a decision with respect to a party or 
a person aggrieved who would be entitled to review, the initial 
decision shall not become final as to that party or person.
    (e) Order of finality. In the event that the initial decision 
becomes the final decision of the Commission with respect to a party, 
the Commission shall issue an order that the decision has become final 
as to that party. The order of finality shall state the date on which 
sanctions, if any, take effect. Notice of the order shall be published 
in the SEC News Digest and the SEC Docket.

Appeal to the Commission and Commission Review


Sec. 201.400  Interlocutory review.

    (a) Availability. The Commission will not review a hearing 
officer's ruling prior to its consideration of the entire proceeding in 
the absence of extraordinary circumstances. The Commission may decline 
to consider a ruling certified by a hearing officer pursuant to 
paragraph (c) of this section if it determines that interlocutory 
review is not warranted or appropriate under the circumstances. The 
Commission may, at any time, on its own motion, direct that any matter 
be submitted to it for review.
    (b) Expedited consideration. Interlocutory review of a hearing 
officer's ruling shall be expedited in every way, consistent with the 
Commission's other responsibilities.
    (c) Certification process. A ruling submitted to the Commission for 
interlocutory review must be certified in writing by the hearing 
officer and shall specify the material relevant to the ruling involved. 
The hearing officer shall not certify a ruling unless:
    (1) His or her ruling would compel testimony of Commission members, 
officers or employees or the production of documentary evidence in 
their custody; or
    (2) Upon application by a party, within five days of the hearing 
officer's ruling, the hearing officer is of the opinion that:
    (i) The ruling involves a controlling question of law as to which 
there is substantial ground for difference of opinion; and
    (ii) An immediate review of the order may materially advance the 
completion of the proceeding.
    (d) Proceedings not stayed. The filing of an application for review 
or the grant of review shall not stay proceedings before the hearing 
officer unless he or she, or the Commission, shall so order. The 
Commission will not consider the motion for a stay unless the motion 
shall have first been made to the hearing officer.


Sec. 201.401  Issuance of stays.

    (a) Procedure. A request for a stay shall be made by written 
motion, filed pursuant to Sec. 201.154, and served on all parties 
pursuant to Sec. 201.150. The motion shall state the reasons for the 
relief requested and the facts relied upon, and, if the facts are 
subject to dispute, the motion shall be supported by affidavits or 
other sworn statements or copies thereof. Portions of the record 
relevant to the relief sought, if available to the movant, shall be 
filed with the motion. The Commission may issue a stay based on such 
motion or on its own motion.
    (b) Scope of relief. The Commission may grant a stay in whole or in 
part, and may condition relief under this section upon such terms, or 
upon the implementation of such procedures, as it deems appropriate.
    (c) Stay of a Commission order. A motion for a stay of a Commission 
order may be made by any person aggrieved thereby who would be entitled 
to review in a federal court of appeals. A motion seeking to stay the 
effectiveness of a Commission order pending judicial review may be made 
to the Commission at any time during which the Commission retains 
jurisdiction over the proceeding.
    (d) Stay of an action by a self-regulatory organization.
    (1) Availability. A motion for a stay of an action by a self-
regulatory organization for which the Commission is the appropriate 
regulatory agency, for which action review may be sought pursuant to 
Sec. 201.420, may be made by any person aggrieved thereby.
    (2) Summary entry. A stay may be entered summarily, without notice 
and opportunity for hearing. [[Page 32813]] 
    (3) Expedited consideration. Where the action complained of has 
already taken effect and the motion for stay is filed within 10 days of 
the effectiveness of the action, or where the action complained of, 
will, by its terms, take effect within five days of the filing of the 
motion for stay, the consideration of and decision on the motion for a 
stay shall be expedited in every way, consistent with the Commission's 
other responsibilities. Where consideration will be expedited, persons 
opposing the motion for a stay may file a statement in opposition 
within two days of service of the motion unless the Commission, by 
written order, shall specify a different period.


Sec. 201.410  Appeal of initial decisions by hearing officers.

    (a) Petition for review; when available. In any proceeding in which 
an initial decision is made by a hearing officer, any party, and any 
other person who would have been entitled to judicial review of the 
decision entered therein if the Commission itself had made the 
decision, may file a petition for review of the decision with the 
Commission.
    (b) Procedure. The petition for review of an initial decision shall 
be filed with the Commission within such time after service of the 
initial decision as prescribed by the hearing officer pursuant to 
Sec. 201.360(b). The petition shall set forth the specific findings and 
conclusions of the initial decision as to which exception is taken, 
together with supporting reasons for each exception. Supporting reasons 
may be stated in summary form. Any exception to an initial decision not 
stated in the petition for review, or in a previously filed proposed 
finding made pursuant to Sec. 201.340, may, at the discretion of the 
Commission, be deemed to have been waived by the petitioner.
    (c) Financial disclosure statement requirement. Any person who 
files a petition for review of an initial decision that asserts that 
person's inability to pay either disgorgement, interest or a penalty 
shall file with the opening brief a sworn financial disclosure 
statement containing the information specified in Sec. 201.630(b).
    (d) Opposition to review. A party may seek leave to file a brief in 
opposition to a petition for review within five days of the filing of 
the petition. The Commission will grant leave, or order the filing of 
an opposition on its own motion, only if it determines that briefing 
will significantly aid the decisional process. A brief in opposition 
shall identify those issues which do not warrant consideration by the 
Commission and shall state succinctly the reasons therefore.
    (e) Prerequisite to judicial review. Pursuant to Section 704 of the 
Administrative Procedure Act, 5 U.S.C. 704, a petition to the 
Commission for review of an initial decision is a prerequisite to the 
seeking of judicial review of a final order entered pursuant to such 
decision.


Sec. 201.411  Commission consideration of initial decisions by hearing 
officers.

    (a) Scope of review. The Commission may affirm, reverse, modify, 
set aside or remand for further proceedings, in whole or in part, an 
initial decision by a hearing officer and may make any findings or 
conclusions that in its judgment are proper and on the basis of the 
record.
    (b) Standards for granting review pursuant to a petition for 
review.
    (1) Mandatory review. After a petition for review has been filed, 
the Commission shall review any initial decision that:
    (i) Denies any request for action pursuant to Section 8(a) or 
Section 8(c) of the Securities Act of 1933, 15 U.S.C. 77h(a), (c), or 
the first sentence of Section 12(d) of the Exchange Act, 15 U.S.C. 
78l(d);
    (ii) Suspends trading in a security pursuant to Section 12(k) of 
the Exchange Act, 15 U.S.C. 78l(k); or
    (iii) Is in a case of adjudication (as defined in 5 U.S.C. 551) not 
required to be determined on the record after notice and opportunity 
for hearing (except to the extent there is involved a matter described 
in 5 U.S.C. 554(a) (1) through (6)).
    (2) Discretionary review. The Commission may decline to review any 
other decision. In determining whether to grant review, the Commission 
shall consider whether the petition for review makes a reasonable 
showing that:
    (i) A prejudicial error was committed in the conduct of the 
proceeding; or
    (ii) The decision embodies:
    (A) A finding or conclusion of material fact that is clearly 
erroneous; or
    (B) A conclusion of law that is erroneous; or
    (C) An exercise of discretion or decision of law or policy that is 
important and that the Commission should review.
    (c) Commission review other than pursuant to a petition for review. 
The Commission may, on its own initiative, order review of any initial 
decision, or a portion of any initial decision, within 21 days after 
the end of the period established for filing a petition for review 
pursuant to Sec. 201.410(b) or any brief in opposition to a petition 
for review permitted pursuant to Sec. 201.410(d). A party who does not 
intend to file a petition for review, and who desires the Commission's 
determination whether to order review on its own initiative to be made 
in a shorter time, may make a motion for an expedited decision, 
accompanied by a written statement that the party waives its right to 
file a petition for review. The vote of one member of the Commission, 
conveyed to the Secretary, shall be sufficient to bring a matter before 
the Commission for review.
    (d) Limitations on matters reviewed. Review by the Commission of an 
initial decision shall be limited to the issues specified in the 
petition for review or the issues, if any, specified in the briefing 
schedule order issued pursuant to Sec. 201.450(a). On notice to all 
parties, however, the Commission may, at any time prior to issuance of 
its decision, raise and determine any other matters that it deems 
material, with opportunity for oral or written argument thereon by the 
parties.
    (e) Summary affirmance. The Commission may summarily affirm an 
initial decision based upon the petition for review and any response 
thereto, without further briefing, if it finds that no issue raised in 
the petition for review warrants further consideration by the 
Commission.
    (f) Failure to obtain a majority. In the event a majority of 
participating Commissioners do not agree to a disposition on the 
merits, the initial decision shall be of no effect, and an order will 
be issued in accordance with this result.


Sec. 201.420  Appeal of determinations by self-regulatory 
organizations.

    (a) Application for review; when available. An application for 
review by the Commission may be filed by any person who is aggrieved by 
a self-regulatory organization determination as to which a notice is 
required to be filed with the Commission pursuant to Section 19(d)(1) 
of the Exchange Act, 15 U.S.C. 78s(d)(1). Such determinations include 
any:
    (1) Final disciplinary sanction;
    (2) Denial or conditioning of membership or participation;
    (3) Prohibition or limitation in respect to access to services 
offered by that self-regulatory organization or a member thereof; or
    (4) Bar from association.
    (b) Procedure. An application for review may be filed with the 
Commission pursuant to Sec. 201.151 within 30 days after notice of the 
determination was filed with the Commission pursuant to Section 
[[Page 32814]] 19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1), and 
received by the aggrieved person applying for review. The application 
shall be served by the applicant on the self-regulatory organization. 
The application shall identify the determination complained of, set 
forth in summary form a brief statement of alleged errors in the 
determination and supporting reasons therefor and state an address 
where the applicant can be served with the record index. The 
application shall be accompanied by the notice of appearance required 
by Sec. 201.102(d).
    (c) Determination not stayed. Filing an application for review with 
the Commission pursuant to paragraph (b) of this section shall not 
operate as a stay of the complained of determination made by the self-
regulatory organization unless the Commission otherwise orders either 
pursuant to a motion filed in accordance with Sec. 201.401 or on its 
own motion.
    (d) Certification of the record; service of the index. Fourteen 
days after receipt of an application for review or a Commission order 
for review, the self-regulatory organization shall certify and file 
with the Commission one copy of the record upon which the action 
complained of was taken, and shall file with the Commission three 
copies of an index to such record, and shall serve upon each party one 
copy of the index.


Sec. 201.421  Commission consideration of determinations by self-
regulatory organizations.

    (a) Commission review other than pursuant to a petition for review. 
The Commission may, on its own initiative, order review of any 
determination by a self-regulatory organization that could be subject 
to an application for review pursuant to Sec. 201.420(a) within 40 days 
after notice thereof was filed with the Commission pursuant to Section 
19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1).
    (b) Supplemental briefing. The Commission may at any time prior to 
issuance of its decision raise or consider any matter that it deems 
material, whether or not raised by the parties. Notice to the parties 
and an opportunity for supplemental briefing with respect to issues not 
briefed by the parties shall be given where the Commission believes 
that such briefing would significantly aid the decisional process.


Sec. 201.430  Appeal of actions made pursuant to delegated authority.

    (a) Scope of rule. Any person aggrieved by an action made by 
authority delegated in Secs. 200.30-1 through 200.30-17 of this chapter 
may seek review of the action pursuant to paragraph (b) of this 
section.
    (b) Procedure.
    (1) Notice of intention to petition for review. A party or any 
person aggrieved by an action made pursuant to delegated authority may 
seek Commission review of the action by filing a written notice of 
intention to petition for review within five days after actual notice 
to the party of the action or service of notice of the action pursuant 
to Sec. 201.141(b), whichever is earlier. The notice shall identify the 
petitioner and the action complained of, and shall be accompanied by a 
notice of appearance pursuant to Sec. 201.102(d).
    (2) Petition for review. Within five days after the filing of a 
notice of intention to petition for review pursuant to paragraph (b)(1) 
of this section, the person seeking review shall file a petition for 
review containing a clear and concise statement of the issues to be 
reviewed and the reasons why review is appropriate. The petition shall 
include exceptions to any findings of fact or conclusions of law made, 
together with supporting reasons for such exceptions based on 
appropriate citations to such record as may exist. These reasons may be 
stated in summary form.
    (c) Prerequisite to judicial review. Pursuant to Section 704 of the 
Administrative Procedure Act, 5 U.S.C. 704, a petition to the 
Commission for review of an action made by authority delegated in 
Secs. 200.30-1 through 200.30-17 of this chapter is a prerequisite to 
the seeking of judicial review of a final order entered pursuant to 
such an action.


Sec. 201.431  Commission consideration of actions made pursuant to 
delegated authority.

    (a) Scope of review. The Commission may affirm, reverse, modify, 
set aside or remand for further proceedings, in whole or in part, any 
action made pursuant to authority delegated in Secs. 200.30-1 through 
200.30-17 of this chapter.
    (b) Standards for granting review pursuant to a petition for 
review.
    (1) Mandatory review. After a petition for review has been filed, 
the Commission shall review any action that it would be required to 
review pursuant to Sec. 201.411(b)(1) if the action was made as the 
initial decision of a hearing officer.
    (2) Discretionary review. The Commission may decline to review any 
other action. In determining whether to grant review, the Commission 
shall consider the factors set forth in Sec. 201.411(b)(2).
    (c) Commission review other than pursuant to a petition for review. 
The Commission may, on its own initiative, order review of any action 
made pursuant to delegated authority at any time, provided, however, 
that where there are one or more parties to the matter, such review 
shall not be ordered more than ten days after the action. The vote of 
one member of the Commission, conveyed to the Secretary, shall be 
sufficient to bring a matter before the Commission for review.
    (d) Required items in an order for review. In an order granting a 
petition for review or directing review on the Commission's own 
initiative, the Commission shall set forth the time within which any 
party or other person may file a statement in support of or in 
opposition to the action made by delegated authority and shall state 
whether a stay shall be granted, if none is in effect, or shall be 
continued, if in effect pursuant to paragraph (e) of this section.
    (e) Automatic stay of delegated action. An action made pursuant to 
delegated authority shall have immediate effect and be deemed the 
action of the Commission. Upon filing with the Commission of a notice 
of intention to petition for review, or upon notice to the Secretary of 
the vote of a Commissioner that a matter be reviewed, an action made 
pursuant to delegated authority shall be stayed until the Commission 
orders otherwise, provided, however, there shall be no automatic stay 
of an action:
    (1) To grant a stay of action by the Commission or a self-
regulatory organization as authorized by 17 CFR 200.30-14(g) (5)-(6); 
or
    (2) To commence a subpoena enforcement proceeding as authorized by 
17 CFR 200.30-4(a)(10).
    (f) Effectiveness of stay or of Commission decision to modify or 
reverse a delegated action. As against any person who shall have acted 
in reliance upon any action at a delegated level, any stay or any 
modification or reversal by the Commission of such action shall be 
effective only from the time such person receives actual notice of such 
stay, modification or reversal.


Sec. 201.450  Briefs filed with the Commission.

    (a) Briefing schedule order. Other than review ordered pursuant to 
Sec. 201.431, if review of a determination is mandated by statute, 
rule, or judicial order or the Commission determines to grant review as 
a matter of discretion, the Commission shall issue a briefing schedule 
order directing the party or parties to file opening briefs and 
[[Page 32815]] specifying particular issues, if any, as to which 
briefing should be limited or directed. Unless otherwise provided, 
opening briefs shall be filed within 40 days of the date of the 
briefing schedule order. Opposition briefs shall be filed within 30 
days after the date opening briefs are due. Reply briefs shall be filed 
within 14 days after the date opposition briefs are due. No briefs in 
addition to those specified in the briefing schedule order may be filed 
except with leave of the Commission. The briefing schedule order shall 
be issued:
    (1) At the time the Commission orders review on its own initiative 
pursuant to Secs. 201.411 or 201.421, or orders interlocutory review on 
its own motion pursuant to Sec. 201.400(a); or
    (2) Within 21 days, or such longer time as provided by the 
Commission, after:
    (i) The last day permitted for filing a petition for review 
pursuant to Sec. 201.410(b) or a brief in opposition to a petition for 
review pursuant to Sec. 201.410(d);
    (ii) Receipt by the Commission of an index to the record of a 
determination of a self-regulatory organization filed pursuant to 
Sec. 201.420(d);
    (iii) Receipt by the Commission of the mandate of a court of 
appeals with respect to a judicial remand; or
    (iv) Certification of a ruling for interlocutory review pursuant to 
Sec. 201.400(c).
    (b) Contents of briefs. Briefs shall be confined to the particular 
matters at issue. Each exception to the findings or conclusions being 
reviewed shall be stated succinctly. Exceptions shall be supported by 
citation to the relevant portions of the record, including references 
to the specific pages relied upon, and by concise argument including 
citation of such statutes, decisions and other authorities as may be 
relevant. If the exception relates to the admission or exclusion of 
evidence, the substance of the evidence admitted or excluded shall be 
set forth in the brief, in an appendix thereto, or by citation to the 
record. Reply briefs shall be confined to matters in opposition briefs 
of other parties.
    (c) Length limitation. Opening and opposition briefs shall not 
exceed 50 pages and reply briefs shall not exceed 25 pages, exclusive 
of pages containing the table of contents, table of authorities, and 
any addendum, except with leave of the Commission.


Sec. 201.451  Oral argument before the Commission.

    (a) Availability. The Commission, on its own motion or the motion 
of a party or any other aggrieved person entitled to Commission review, 
may order oral argument with respect to any matter. Motions for oral 
argument with respect to whether to affirm all or part of an initial 
decision by a hearing officer shall be granted unless exceptional 
circumstances make oral argument impractical or inadvisable. The 
Commission will consider appeals, motions and other matters properly 
before it on the basis of the papers filed by the parties without oral 
argument unless the Commission determines that the presentation of 
facts and legal arguments in the briefs and record and the decisional 
process would be significantly aided by oral argument.
    (b) Procedure. Requests for oral argument shall be made by separate 
motion accompanying the initial brief on the merits. The Commission 
shall issue an order as to whether oral argument is to be heard, and if 
so, the time and place therefor. The grant or denial of a motion for 
oral argument shall be made promptly after the filing of the last brief 
called for by the briefing schedule. If oral argument is granted, the 
time fixed for oral argument shall be changed only by written order of 
the Commission, for good cause shown. The order shall state at whose 
request the change is made and the reasons for any such change.
    (c) Time allowed. Unless the Commission orders otherwise, not more 
than one half-hour per side will be allowed for oral argument. The 
Commission may, in its discretion, determine that several persons have 
a common interest, and that the interests represented will be 
considered a single side for purposes of allotting time for oral 
argument. Time will be divided equally among persons on a single side, 
provided, however, that by mutual agreement they may reallocate their 
time among themselves. A request for additional time must be made by 
motion filed reasonably in advance of the date fixed for argument.
    (d) Participation of Commissioners. A member of the Commission who 
was not present at the oral argument may participate in the decision of 
the proceeding, provided that the member has reviewed the transcript of 
such argument prior to such participation. The decision shall state 
whether the required review was made.


Sec. 201.452  Additional evidence.
    Upon its own motion or the motion of a party, the Commission may 
allow the submission of additional evidence. A party may file a motion 
for leave to adduce additional evidence at any time prior to issuance 
of a decision by the Commission. Such motion shall show with 
particularity that such additional evidence is material and that there 
were reasonable grounds for failure to adduce such evidence previously. 
The Commission may accept or hear additional evidence, may remand the 
proceeding to a self-regulatory organization, or may remand or refer 
the proceeding to a hearing officer for the taking of additional 
evidence, as appropriate.


Sec. 201.460  Record before the Commission.

    The Commission shall determine each matter on the basis of the 
record.
    (a) Contents of the record.
    (1) In proceedings for final decision before the Commission other 
than those reviewing a determination by a self-regulatory organization, 
the record shall consist of:
    (i) All items part of the record below in accordance with 
Sec. 201.350;
    (ii) Any petitions for review, cross-petitions or oppositions; and
    (iii) All briefs, motions, submissions and other papers filed on 
appeal or review.
    (2) In a proceeding for final decision before the Commission 
reviewing a determination by a self-regulatory organization, the record 
shall consist of:
    (i) The record certified pursuant to Sec. 201.420(d) by the self-
regulatory organization;
    (ii) Any application for review; and
    (iii) Any submissions, moving papers, and briefs filed on appeal or 
review.
    (b) Transmittal of record to Commission. Within 14 days after the 
last date set for filing briefs or such later date as the Commission 
directs, the Secretary shall transmit the record to the Commission.
    (c) Review of documents not admitted. Any document offered in 
evidence but excluded by the hearing officer or the Commission and any 
document marked for identification but not offered as an exhibit shall 
not be considered a part of the record before the Commission on appeal 
but shall be transmitted to the Commission by the Secretary if so 
requested by the Commission. In the event that the Commission does not 
request the document, the Secretary shall retain the document not 
admitted into the record until the later of:
    (1) The date upon which the Commission's order becomes final, or
    (2) The conclusion of any judicial review of that order.


Sec. 201.470  Reconsideration.

    (a) Scope of rule. A party or any person aggrieved by a 
determination in a proceeding may file a motion for reconsideration of 
a final order issued by the Commission. [[Page 32816]] 
     (b) Procedure. A motion for reconsideration shall be filed within 
10 days after service of the order complained of on each party, or 
within such time as the Commission may prescribe upon motion of the 
person seeking reconsideration, if made within the foregoing 10-day 
period. The motion for reconsideration shall briefly and specifically 
state the matters of record alleged to have been erroneously decided, 
the grounds relied upon, and the relief sought. Except with permission 
of the Commission, a motion for reconsideration shall not exceed 15 
pages. No responses to a motion for reconsideration shall be filed 
unless requested by the Commission.


Sec. 201.490  Receipt of petitions for judicial review pursuant to 28 
U.S.C. 2112(a)(1).

    The Commission officer and office designated pursuant to 28 U.S.C. 
2112(a)(1) to receive copies of petitions for review of Commission 
orders from the persons instituting review in a court of appeals, are 
the Secretary and the Office of the Secretary at the Commission's 
Headquarters. Ten copies of each petition shall be submitted. Each copy 
shall state on its face that it is being submitted to the Commission 
pursuant to 28 U.S.C. 2112 by the person or persons who filed the 
petition in the court of appeals.

Rules Relating to Temporary Orders and Suspensions


Sec. 201.500  Expedited consideration of proceedings.

    Consistent with the Commission's or the hearing officer's other 
responsibilities, every hearing shall be held and every decision shall 
be rendered at the earliest possible time in connection with:
    (a) An application for a temporary sanction, as defined in 
Sec. 201.101(a), or a proceeding to determine whether a temporary 
sanction should be made permanent;
    (b) A motion or application to review an order suspending 
temporarily the effectiveness of an exemption from registration 
pursuant to Regulations A, B, E or F under the Securities Act, 
Secs. 230.258, 230.336, 230.610 or 230.656 of this chapter; or,
    (c) A motion to or petition to review an order suspending 
temporarily the privilege of appearing before the Commission under 
Sec. 201.102(e)(3), or a sanction under Sec. 201.180(a)(1).


Sec. 201.510  Temporary cease-and-desist orders: application process.

    (a) Procedure. A request for entry of a temporary cease-and-desist 
order shall be made by application filed by the Division of 
Enforcement. The application shall set forth the statutory provision or 
rule that each respondent is alleged to have violated; the temporary 
relief sought against each respondent, including whether the respondent 
would be required to take action to prevent the dissipation or 
conversion of assets; and whether the relief is sought ex parte.
    (b) Accompanying documents. The application shall be accompanied by 
a declaration of facts signed by a person with knowledge of the facts 
contained therein, a memorandum of points and authorities, a proposed 
order imposing the temporary relief sought, and, unless relief is 
sought ex parte, a proposed notice of hearing and order to show cause 
whether the temporary relief should be imposed. If a proceeding for a 
permanent cease-and-desist order has not already been commenced, a 
proposed order instituting proceedings to determine whether a permanent 
cease-and-desist order should be imposed shall also be filed with the 
application.
    (c) With whom filed. The application shall be filed with the 
Secretary or, if the Secretary is unavailable, with the duty officer. 
In no event shall an application be filed with an administrative law 
judge.
    (d) Record of proceedings. Hearings, including ex parte 
presentations made by the Division of Enforcement pursuant to 
Sec. 201.513, shall be recorded or transcribed pursuant to 
Sec. 201.302.


Sec. 201.511  Temporary cease-and-desist orders: notice; procedures for 
hearing.

    (a) Notice: how given. Notice of an application for a temporary 
cease-and-desist order shall be made by serving a notice of hearing and 
order to show cause pursuant to Sec. 201.141(b) or, where timely 
service of a notice of hearing pursuant to Sec. 201.141(b) is not 
practicable, by any other means reasonably calculated to give actual 
notice that a hearing will be held, including telephonic notification 
of the general subject matter, time, and place of the hearing. If an 
application is made ex parte, pursuant to Sec. 201.513, no notice to a 
respondent need be given prior to the Commission's consideration of the 
application.
    (b) Hearing before the Commission. Except as provided in paragraph 
(d) of this section, hearings on an application for a temporary cease-
and-desist order shall be held before the Commission.
    (c) Presiding officer: designation. The Chairman shall preside or 
designate a Commissioner to preside at the hearing. If the Chairman is 
absent or unavailable at the time of hearing and no other Commissioner 
has been designated to preside, the duty officer on the day the hearing 
begins shall preside or designate another Commissioner to preside.
    (d) Procedure at hearing. (1) The presiding officer shall have all 
those powers of a hearing officer set forth in Sec. 201.111 and shall 
rule on the admissibility of evidence and other procedural matters, 
including, but not limited to whether oral testimony will be heard; the 
time allowed each party for the submission of evidence or argument; and 
whether post-hearing submission of briefs, proposed findings of fact 
and conclusions of law will be permitted and if so, the procedures for 
submission; provided, however, that the person presiding may consult 
with other Commissioners participating in the hearing on these or any 
other question of procedure.
    (2) Each Commissioner present at the hearing shall be afforded a 
reasonable opportunity to ask questions of witnesses, if any, or of 
counsel.
    (3) A party or witness may participate by telephone. Alternative 
means of remote access, including a video link, shall be permitted in 
the Commission's discretion. Factors the Commission may consider in 
determining whether to permit alternative means of remote access 
include, but are not limited to, whether allowing an alternative means 
of access will delay the hearing, whether the alternative means is 
reliable, and whether the party proposing its use has made arrangements 
to pay for its cost.
    (4) After a hearing has begun, the Commission may, on its own 
motion, or the motion of a party, assign a hearing officer to preside 
at the taking of oral testimony or other evidence and to certify the 
record of such testimony or other evidence to the Commission within a 
fixed period of time. No recommended or initial decision shall be made 
by such a hearing officer.


Sec. 201.512  Temporary cease-and-desist orders: issuance after notice 
and opportunity for hearing.

    (a) Basis for issuance. A temporary cease-and-desist order shall be 
issued only if the Commission determines that the alleged violation or 
threatened violation specified in an order instituting proceedings 
whether to enter a permanent cease-and-desist order pursuant to 
Securities Act Section 8A(a), 15 U.S.C. 77h-1(a), Exchange Act Section 
21C(a), 15 U.S.C. 78u-3(a), Investment Company Act Section 9(f)(1), 15 
U.S.C. 80a-9(f)(1), or Investment Advisers Act Section 203(k)(1), 15 
U.S.C. 80b-3(k)(1), or the continuation thereof, is likely to result 
[[Page 32817]] in significant dissipation or conversion of assets, 
significant harm to investors, or substantial harm to the public 
interest, including, but not limited to, losses to the Securities 
Investor Protection Corporation, prior to the completion of proceedings 
on the permanent cease-and-desist order.
    (b) Content, scope and form of order. Every temporary cease-and-
desist order granted shall:
    (1) Describe the basis for its issuance, including the alleged or 
threatened violations and the harm that is likely to result without the 
issuance of an order;
    (2) Describe in reasonable detail, and not by reference to the 
order instituting proceedings or any other document, the act or acts 
the respondent is to take or refrain from taking; and
    (3) Be indorsed with the date and hour of issuance.
    (c) Effective upon service. A temporary cease-and-desist order is 
effective upon service upon the respondent.
    (d) Service: how made. Service of a temporary cease-and-desist 
order shall be made pursuant to Sec. 201.141(a). The person who serves 
the order shall promptly file a declaration of service identifying the 
person served, the method of service, the date of service, the address 
to which service was made and the person who made service; provided, 
however, failure to file such a declaration shall have no effect on the 
validity of the service.
    (e) Commission review. At any time after the respondent has been 
served with a temporary cease-and-desist order, the respondent may 
apply to the Commission to have the order set aside, limited or 
suspended. The application shall set forth with specificity the facts 
that support the request.


Sec. 201.513  Temporary cease-and-desist orders: issuance without prior 
notice and opportunity for hearing.

    In addition to the requirements for issuance of a temporary cease-
and-desist order set forth in Sec. 201.512, the following requirements 
shall apply if a temporary cease-and-desist order is to be entered 
without prior notice and opportunity for hearing:
    (a) Basis for issuance without prior notice and opportunity for 
hearing. A temporary cease-and-desist order may be issued without 
notice and opportunity for hearing only if the Commission determines, 
from specific facts in the record of the proceeding, that notice and 
hearing prior to entry of an order would be impracticable or contrary 
to the public interest.
    (b) Content of the order. An ex parte temporary cease-and-desist 
order shall state specifically why notice and hearing would have been 
impracticable or contrary to the public interest.
    (c) Hearing before the Commission. If a respondent has been served 
with a temporary cease-and-desist order entered without a prior 
Commission hearing, the respondent may apply to the Commission to have 
the order set aside, limited, or suspended, and if the application is 
made within 10 days after the date on which the order was served, may 
request a hearing on such application. The Commission shall hold a 
hearing and render a decision on the respondent's application at the 
earliest possible time. The hearing shall begin within two days of the 
filing of the application unless the applicant consents to a longer 
period or the Commission, by order, for good cause shown, sets a later 
date. The Commission shall render a decision on the application within 
five calendar days of its filing, provided, however, that the 
Commission, by order, for good cause shown, may extend the time within 
which a decision may be rendered for a single period of five calendar 
days, or such longer time as consented to by the applicant. If the 
Commission does not render its decision within 10 days of the 
respondent's application or such longer time as consented to by the 
applicant, the temporary order shall be suspended until a decision is 
rendered.
    (d) Presiding officer, procedure at hearing. Procedures with 
respect to the selection of a presiding officer and the conduct of the 
hearing shall be in accordance with Sec. 201.511.
Sec. 201.514  Temporary cease-and-desist orders: judicial review; 
duration.

    (a) Availability of judicial review. Judicial review of a temporary 
cease-and-desist order shall be available as provided in Section 
8A(d)(2) of the Securities Act, 15 U.S.C. 77h-1(d)(2), Section 
21C(d)(2) of the Exchange Act, 15 U.S.C. 78u-3(d)(2), Section 
9(f)(4)(B) of the Investment Company Act, 15 U.S.C. 80a-9(f)(4)(B), or 
Section 203(k)(4)(B) of the Investment Advisers Act, 15 U.S.C. 80b-
3(k)(4)(B).
    (b) Duration. Unless set aside, limited, or suspended, either by 
order of the Commission, a court of competent jurisdiction, or a 
hearing officer acting pursuant to Sec. 201.531, or by operation of 
Sec. 201.513, a temporary cease-and-desist order shall remain effective 
and enforceable until the earlier of:
    (1) The completion of the proceedings whether a permanent order 
shall be entered; or
    (2) 180 days, or such longer time as consented to by the 
respondent, after issuance of a briefing schedule order pursuant to 
Sec. 201.540(b), if an initial decision whether a permanent order 
should be entered is appealed.


Sec. 201.520  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: application.

    (a) Procedure. A request for suspension of a registered broker, 
dealer, municipal securities dealer, government securities broker, 
government securities dealer, or transfer agent pending a final 
determination whether the registration shall be revoked shall be made 
by application filed by the Division of Enforcement. The application 
shall set forth the statutory provision or rule that each respondent is 
alleged to have violated and the temporary suspension sought as to each 
respondent.
    (b) Accompanying documents. The application shall be accompanied by 
a declaration of facts signed by a person with knowledge of the facts 
contained therein, a memorandum of points and authorities, a proposed 
order imposing the temporary suspension of registration sought, and a 
proposed notice of hearing and order to show cause whether the 
temporary suspension of registration should be imposed. If a proceeding 
to determine whether to revoke the registration permanently has not 
already been commenced, a proposed order instituting proceedings to 
determine whether a permanent sanction should be imposed shall also be 
filed with the application.
    (c) With whom filed. The application shall be filed with the 
Secretary or, if the Secretary is unavailable, with the duty officer. 
In no event shall an application be filed with an administrative law 
judge.
    (d) Record of hearings. All hearings shall be recorded or 
transcribed pursuant to Sec. 201.302.


Sec. 201.521  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: notice and opportunity for hearing on 
application.

    (a) How given. Notice of an application to suspend a registration 
pursuant to Sec. 201.520 shall be made by serving a notice of hearing 
and order to show cause pursuant to Sec. 201.141(b) or, where timely 
service of a notice of hearing pursuant to Sec. 201.141(b) is not 
practicable, by any other means reasonably calculated to give actual 
notice that a hearing will be held, including telephonic notification 
of the general subject matter, time, and place of the hearing.
    (b) Hearing: before whom held. Except as provided in paragraph (d) 
of this section, hearings on an application to [[Page 32818]] suspend a 
registration pursuant to Sec. 201.520 shall be held before the 
Commission.
    (c) Presiding officer: designation. The Chairman shall preside or 
designate a Commissioner to preside at the hearing. If the Chairman is 
absent or unavailable at the time of hearing and no other Commissioner 
has been designated to preside, the duty officer on the day the hearing 
begins shall preside or designate another Commissioner to preside.
    (d) Procedure at hearing. (1) The presiding officer shall have all 
those powers of a hearing officer set forth in Sec. 201.111 and shall 
rule on the admissibility of evidence and other procedural matters, 
including, but not limited to whether oral testimony will be heard; the 
time allowed each party for the submission of evidence or argument; and 
whether post-hearing submission of briefs, proposed findings of fact 
and conclusions of law will be permitted and if so, the procedures for 
submission; provided, however, that the person presiding may consult 
with other Commissioners participating in the hearing on these or any 
other question of procedure.
    (2) Each Commissioner present at the hearing shall be afforded a 
reasonable opportunity to ask questions of witnesses, if any, or 
counsel.
    (3) A party or witness may participate by telephone. Alternative 
means of remote access, including a video link, shall be permitted in 
the Commission's discretion. Factors the Commission may consider in 
determining whether to permit alternative means of remote access 
include, but are not limited to, whether allowing an alternative means 
of access will delay the hearing, whether the alternative means is 
reliable, and whether the party proposing its use has made arrangements 
to pay for its cost.
    (4) After a hearing has begun, the Commission may, on its own 
motion or the motion of a party, assign a hearing officer to preside at 
the taking of oral testimony or other evidence and to certify the 
record of such testimony or other evidence to the Commission within a 
fixed period of time. No recommended or initial decision shall be made.


Sec. 201.522  Suspension of registration of brokers, dealers, or other 
Exchange Act-registered entities: issuance and review of order.

    (a) Basis for issuance. An order suspending a registration, pending 
final determination as to whether the registration shall be revoked 
shall be issued only if the Commission finds that the suspension is 
necessary or appropriate in the public interest or for the protection 
of investors.
    (b) Content, scope and form of order. Each order suspending a 
registration shall:
    (1) Describe the basis for its issuance, including the alleged or 
threatened violations and the harm that is likely to result without the 
issuance of an order;
    (2) Describe in reasonable detail, and not by reference to the 
order instituting proceedings or any other document, the act or acts 
the respondent is to take or refrain from taking; and
    (3) Be indorsed with the date and hour of issuance.
    (c) Effective upon service. An order suspending a registration is 
effective upon service upon the respondent.
    (d) Service: how made. Service of an order suspending a 
registration shall be made pursuant to Sec. 201.141(a). The person who 
serves the order shall promptly file a declaration of service 
identifying the person served, the method of service, the date of 
service, the address to which service was made and the person who made 
service; provided, however, failure to file such a declaration shall 
have no effect on the validity of the service.
    (e) Commission review. At any time after the respondent has been 
served with an order suspending a registration, the respondent may 
apply to the Commission or the hearing officer to have the order set 
aside, limited, or suspended. The application shall set forth with 
specificity the facts that support the request.


Sec. 201.523  [Reserved].


Sec. 201.524  Suspension of registrations: duration.

    Unless set aside, limited or suspended by order of the Commission, 
a court of competent jurisdiction, or a hearing officer acting pursuant 
to Sec. 201.531, an order suspending a registration shall remain 
effective and enforceable until the earlier of:
    (a) The completion of the proceedings whether the registration 
shall be permanently revoked; or
    (b) 180 days, or such longer time as consented to by the 
respondent, after issuance of a briefing schedule order pursuant to 
Sec. 201.540(b), if an initial decision whether the registration shall 
be permanently revoked is appealed.


Sec. 201.530  Initial decision on permanent order: timing for 
submitting proposed findings and preparation of decision.

    Unless otherwise ordered by the Commission or hearing officer, if a 
temporary cease-and-desist order or suspension of registration order is 
in effect, the following time limits shall apply to preparation of an 
initial decision as to whether such order should be made permanent:
    (a) Proposed findings and conclusions and briefs in support thereof 
shall be filed 30 days after the close of the hearing;
    (b) The record in the proceedings shall be served by the Secretary 
upon the hearing officer three days after the date for the filing of 
the last brief called for by the hearing officer; and
    (c) The initial decision shall be filed with the Secretary at the 
earliest possible time, but in no event more than 30 days after service 
of the record, unless the hearing officer, by order, shall extend the 
time for good cause shown for a period not to exceed 30 days.


Sec. 201.531 Initial decision on permanent order:  effect on temporary 
order.

    (a) Specification of permanent sanction. If, at the time an initial 
decision is issued, a temporary sanction is in effect as to any 
respondent, the initial decision shall specify:
    (1) Which terms or conditions of a temporary cease-and-desist 
order, if any, shall become permanent; and
    (2) Whether a temporary suspension of a respondent's registration, 
if any, shall be made a permanent revocation of registration.
    (b) Modification of temporary order. If any temporary sanction 
shall not become permanent under the terms of the initial decision, the 
hearing officer shall issue a separate order setting aside, limiting or 
suspending the temporary sanction then in effect in accordance with the 
terms of the initial decision. The hearing officer shall decline to 
suspend a term or condition of a temporary cease-and-desist order if it 
is found that the continued effectiveness of such term or condition is 
necessary to effectuate any term of the relief ordered in the initial 
decision, including the payment of disgorgement, interest or penalties. 
An order modifying temporary sanctions shall be effective 14 days after 
service. Within one week of service of the order modifying temporary 
sanctions any party may seek a stay or modification of the order from 
the Commission pursuant to Sec. 201.401.


Sec. 201.540  Appeal and Commission review of initial decision making a 
temporary order permanent.

    (a) Petition for review. Any person who seeks Commission review of 
an initial decision as to whether a temporary sanction shall be made 
permanent shall file a petition for review pursuant to Sec. 201.410, 
provided, [[Page 32819]] however, that the petition must be filed 
within 10 days after service of the initial decision.
    (b) Review procedure. If the Commission determines to grant or 
order review, it shall issue a briefing schedule order pursuant to 
Sec. 201.450. Unless otherwise ordered by the Commission, opening 
briefs shall be filed within 21 days of the order granting or ordering 
review, and opposition briefs shall be filed within 14 days after 
opening briefs are filed. Reply briefs shall be filed within seven days 
after opposition briefs are filed. Oral argument, if granted by the 
Commission, shall be held within 90 days of the issuance of the 
briefing schedule order.
Sec. 201.550  Summary suspensions pursuant to Exchange Act Section 
12(k)(1)(A).

    (a) Petition for termination of suspension. Any person adversely 
affected by a suspension pursuant to Section 12(k)(1)(A) of the 
Exchange Act, 15 U.S.C. 78l(k)(1)(A), who desires to show that such 
suspension is not necessary in the public interest or for the 
protection of investors may file a sworn petition with the Secretary, 
requesting that the suspension be terminated. The petition shall set 
forth the reasons why the petitioner believes that the suspension of 
trading should not continue and state with particularity the facts upon 
which the petitioner relies.
    (b) Commission consideration of a petition. The Commission, in its 
discretion, may schedule a hearing on the matter, request additional 
written submissions, or decide the matter on the facts presented in the 
petition and any other relevant facts known to the Commission. If the 
petitioner fails to cooperate with, obstructs, or refuses to permit the 
making of an examination by the Commission, such conduct shall be 
grounds to deny the petition.

Rules Regarding Disgorgement and Penalty Payments


Sec. 201.600  Interest on sums disgorged.

    (a) Interest required. Prejudgment interest shall be due on any sum 
required to be paid pursuant to an order of disgorgement. The 
disgorgement order shall specify each violation that forms the basis 
for the disgorgement ordered; the date which, for purposes of 
calculating disgorgement, each such violation was deemed to have 
occurred; the amount to be disgorged for each such violation; and the 
total sum to be disgorged. Prejudgment interest shall be due from the 
first day of the month following each such violation through the last 
day of the month preceding the month in which payment of disgorgement 
is made. The order shall state the amount of prejudgment interest owed 
as of the date of the disgorgement order and that interest shall 
continue to accrue on all funds owed until they are paid.
    (b) Rate of interest. Interest on the sum to be disgorged shall be 
computed at the underpayment rate of interest established under Section 
6621(a)(2) of the Internal Revenue Code, 26 U.S.C. 6621(a)(2), and 
shall be compounded quarterly. The Commission or the hearing officer 
may, by order, specify a lower rate of prejudgment interest as to any 
funds which the respondent has placed in an escrow or otherwise 
guaranteed for payment of disgorgement upon a final determination of 
the respondent's liability. Escrow and other guarantee arrangements 
must be approved by the Commission or the hearing officer prior to 
entry of the disgorgement order.


Sec. 201.601  Prompt payment of disgorgement, interest and penalties.

    (a) Timing of payments. Unless otherwise provided, funds due 
pursuant to an order by the Commission requiring the payment of 
disgorgement, interest or penalties shall be paid no later than 21 days 
after service of the order, and funds due pursuant to an order by a 
hearing officer shall be paid on the first day after the order becomes 
final pursuant to Sec. 201.360.
    (b) Stays. A stay of any order requiring the payment of 
disgorgement, interest or penalties may be sought at any time pursuant 
to Sec. 201.401.


Sec. 201.610  Submission of proposed plan of disgorgement.

    The Commission or the hearing officer may, at any time, order any 
party to submit a plan for the administration and distribution of 
disgorgement funds. Unless ordered otherwise, the Division of 
Enforcement shall submit a proposed plan no later than 60 days after 
funds or other assets have been turned over by the respondent pursuant 
to a Commission disgorgement order and any appeals of the disgorgement 
order have been waived or completed, or appeal is no longer available.


Sec. 201.611  Contents of plan of disgorgement; provisions for payment.

    (a) Required plan elements. Unless otherwise ordered, a plan for 
the administration of a disgorgement fund shall include the following 
elements:
    (1) Procedures for the receipt of additional funds, including the 
specification of an account where funds will be held and the 
instruments in which the funds may be invested;
    (2) Specification of categories of persons potentially eligible to 
receive proceeds from the fund;
    (3) Procedure for providing notice to such persons of the existence 
of the fund and their potential eligibility to receive proceeds of the 
fund;
    (4) Procedures for making and approving claims, procedures for 
handling disputed claims and a cut-off date for the making of claims;
    (5) A proposed date for the termination of the fund, including 
provision for the disposition of any funds not otherwise distributed;
    (6) Procedures for the administration of the fund, including 
selection, compensation and, as necessary, indemnification of a fund 
administrator to oversee the fund, process claims, prepare accountings, 
file tax returns and, subject to the approval of the Commission, make 
distributions from the fund to investors; and
    (7) Such other provisions as the Commission or the hearing officer 
may require.
    (b) Payment to registry of the court or court-appointed receiver. 
Subject to such conditions as the Commission or the hearing officer 
shall deem appropriate, a plan of disgorgement may provide for payment 
of disgorgement funds into a court registry or to a court-appointed 
receiver in any case pending in federal or state court against a 
respondent or any other person based upon a complaint alleging 
violations arising from the same or substantially similar facts as 
those alleged in the Commission's order instituting proceedings.
    (c) Payment to the United States Treasury under certain 
circumstances. When, in the opinion of the Commission or the hearing 
officer, the cost of administering a plan of disgorgement relative to 
the value of the available disgorgement funds and the number of 
potential claimants would not justify distribution of the disgorgement 
funds to injured investors, the plan may provide that the funds shall 
be paid directly to the general fund of the United States Treasury.


Sec. 201.612  Notice of proposed plan of disgorgement and opportunity 
for comment by non-parties.

    Notice of a proposed plan of disgorgement shall be published in the 
SEC News Digest, in the SEC Docket, and in such other publications as 
the Commission or the hearing officer may require. The notice shall 
specify how copies of the proposed plan may be obtained and shall state 
that persons desiring to comment on the proposed [[Page 32820]] plan 
may submit their views, in writing, to the Commission.


Sec. 201.613  Order approving, modifying or disapproving proposed plan 
of disgorgement.

    At any time more than 30 days after publication of notice of a 
proposed plan of disgorgement, the hearing officer or the Commission 
shall, by order, approve, approve with modifications, or disapprove the 
proposed plan. In the discretion of the Commission or the hearing 
officer, a proposed plan of disgorgement that is substantially modified 
prior to adoption may be republished for an additional comment period 
pursuant to Sec. 201.612. The order approving or disapproving the plan 
should be entered within 30 days after the end of the final period 
allowed for comments on the proposed plan unless the Commission or the 
hearing officer, by written order, allows a longer period for good 
cause shown.


Sec. 201.614  Administration of plan of disgorgement.

    (a) Appointment and removal of administrator. The Commission or the 
hearing officer shall have discretion to appoint any person, including 
a Commission employee, as administrator of a plan of disgorgement and 
to delegate to that person responsibility for administering the plan. A 
respondent may be required or permitted to administer or assist in 
administering a plan of disgorgement, subject to such terms and 
conditions as the Commission or the hearing officer deem appropriate to 
ensure the proper distribution of funds. An administrator may be 
removed at any time by order of the Commission or hearing officer.
    (b) Administrator to post bond. If the administrator is not a 
Commission employee, the administrator shall be required to obtain a 
bond in the manner prescribed by 11 U.S.C. 322, in an amount to be 
approved by the Commission. The cost of the bond may be paid for as a 
cost of administration. The Commission may waive posting of a bond for 
good cause shown.
    (c) Administrator's fees. If the administrator is a Commission 
employee, no fee shall be paid to the administrator for his or her 
services. If the administrator is not a Commission employee, he or she 
may file an application for fees for completed services, and upon 
approval by the Commission or a hearing officer, may be paid a 
reasonable fee for those services. Any objections thereto shall be 
filed within 21 days of service of the application on the parties.
    (d) Source of funds. Unless otherwise ordered, fees and other 
expenses of administering the plan of disgorgement shall be paid first 
from the interest earned on disgorged funds, and if the interest is not 
sufficient, then from the corpus.
    (e) Accountings. During the first 10 days of each calendar quarter, 
or as otherwise directed by the Commission or the hearing officer, the 
administrator shall file an accounting of all monies earned or received 
and all monies spent in connection with the administration of the plan 
of disgorgement. A final accounting shall be submitted for approval of 
the Commission or hearing officer prior to discharge of the 
administrator and cancellation of the administrator's bond, if any.
    (f) Amendment. A plan may be amended upon motion by any party or 
the plan administrator or upon the Commission's or hearing officer's 
own motion.


Sec. 201.620  Right to challenge order of disgorgement.

    Other than in connection with the opportunity to submit comments as 
provided in Sec. 201.612, no person shall be granted leave to intervene 
or to participate in a proceeding or otherwise to appear to challenge 
an order of disgorgement; or an order approving, approving with 
modifications, or disapproving a plan of disgorgement; or any 
determination relating to a plan of disgorgement based solely upon that 
person's eligibility or potential eligibility to participate in a 
disgorgement fund or based upon any private right of action such person 
may have against any person who is also a respondent in an enforcement 
proceeding.


Sec. 201.630  Inability to pay disgorgement, interest or penalties.

    (a) Generally. In any proceeding in which an order requiring 
payment of disgorgement, interest or penalties may be entered, a 
respondent may present evidence of an inability to pay disgorgement, 
interest or a penalty. The Commission may, in its discretion, or the 
hearing officer may, in his or her discretion, consider evidence 
concerning ability to pay in determining whether disgorgement, interest 
or a penalty is in the public interest.
    (b) Financial disclosure statement. Any respondent who asserts an 
inability to pay disgorgement, interest or penalties may be required to 
file a sworn financial disclosure statement and to keep the statement 
current. The financial statement shall show the respondent's assets, 
liabilities, income or other funds received and expenses or other 
payments, from the date of the first violation alleged against that 
respondent in the order instituting proceedings, or such later date as 
specified by the Commission or a hearing officer, to the date of the 
order requiring the disclosure statement to be filed. By order, the 
Commission or the hearing officer may prescribe the use of the 
Disclosure of Assets and Financial Information Form (see Form D-A at 
Sec. 209.1 of this chapter) or any other form, may specify other time 
periods for which disclosure is required, and may require such other 
information as deemed necessary to evaluate a claim of inability to 
pay.
    (c) Confidentiality. Any respondent submitting financial 
information pursuant to this section or Sec. 201.410(c) may make a 
motion, pursuant to Sec. 201.322, for the issuance of a protective 
order against disclosure of the information submitted to the public or 
to any parties other than the Division of Enforcement. Prior to a 
ruling on the motion, no party receiving information as to which a 
motion for a protective order has been made may transfer or convey the 
information to any other person without the prior permission of the 
Commission or the hearing officer.
    (d) Service required. Notwithstanding any provision of 
Sec. 201.322, a copy of the financial disclosure statement shall be 
served on the Division of Enforcement.
    (e) Failure to file required financial information: sanction. Any 
respondent who, after making a claim of inability to pay either 
disgorgement, interest or a penalty, fails to file a financial 
disclosure statement when such a filing has been ordered or is required 
by rule may, in the discretion of the Commission or the hearing 
officer, be deemed to have waived the claim of inability to pay. No 
sanction pursuant to Secs. 201.155 or 201.180 shall be imposed for a 
failure to file such a statement.

Informal Procedures and Supplementary Information Concerning 
Adjudicatory Proceedings


Sec. 201.900  Informal Procedures and Supplementary Information 
Concerning Adjudicatory Proceedings.

    (a) Guidelines for the timely completion of proceedings.
    (1) Timely resolution of adjudicatory proceedings is one factor in 
assessing the effectiveness of the adjudicatory program in protecting 
investors, promoting public confidence in the securities markets and 
assuring respondents a fair hearing. Establishment of guidelines for 
the timely completion of key phases of contested administrative 
proceedings [[Page 32821]] provides a standard for both the Commission 
and the public to gauge the Commission's adjudicatory program on this 
criterion. The Commission has directed that, to the extent possible:
    (i) An administrative law judge's initial decision should be filed 
with the Secretary within 10 months of issuance of the order 
instituting proceedings.
    (ii) A decision by the Commission on review of an interlocutory 
matter should be completed within 45 days of the date set for filing 
the final brief on the matter submitted for review.
    (iii) A decision by the Commission on a motion to stay a decision 
that has already taken effect or that will take effect within five days 
of the filing of the motion, should be issued within five days of the 
date set for filing of the opposition to the motion for a stay. If the 
decision complained of has not taken effect, the Commission's decision 
should be issued within 45 days of the date set for filing of the 
opposition to the motion for a stay.
    (iv) A decision by the Commission with respect to an appeal from 
the initial decision of a hearing officer, a review of a determination 
by a self-regulatory organization, or a remand of a prior Commission 
decision by a court of appeals should be issued within 11 months from 
the date the petition for review, application for review, or mandate of 
the court is filed.
    (2) The guidelines in this paragraph (a) do not create a 
requirement that each portion of a proceeding or the entire proceeding 
be completed within the periods described. Among other reasons, a 
proceeding at either the hearing stage or on review by the Commission 
may require additional time because it is unusually complex or because 
the record is exceptionally long. In addition, fairness is enhanced if 
the Commission's deliberative process is not constrained by an 
inflexible schedule. In some proceedings, deliberation may be delayed 
by the need to consider more urgent matters, to permit the preparation 
of dissenting opinions, or for other good cause. The guidelines will be 
used by the Commission as one of several criteria in monitoring and 
evaluating its adjudicatory program. The guidelines will be examined 
periodically, and, if necessary, readjusted in light of changes in the 
pending caseload and the available level of staff resources.
    (b) Reports to the Commission on pending cases. The administrative 
law judges, the Secretary and the General Counsel have each been 
delegated authority to issue certain orders or adjudicate certain 
proceedings. See 17 CFR 200.30-1, et seq. Proceedings are also assigned 
to the General Counsel for the preparation of a proposed order or 
opinion which will then be recommended to the Commission for 
consideration. In order to improve accountability by and to the 
Commission for management of the docket, the Commission has directed 
that confidential status reports with respect to all filed adjudicatory 
proceedings shall be made periodically to the Commission. These reports 
will be made through the Secretary, with a minimum frequency 
established by the Commission. In connection with these periodic 
reports, if a proceeding assigned to an administrative law judge or 
pending before the Commission has not been concluded within 30 days of 
the guidelines established in paragraph (a) of this section, the Chief 
Administrative Law Judge or the General Counsel, respectively, shall 
specifically apprise the Commission of that fact, and shall describe 
the procedural posture of the case, project an estimated date for 
conclusion of the proceeding, and provide such other information as is 
necessary to enable the Commission to determine whether additional 
steps are necessary to reach a fair and timely resolution of the 
matter.
    (c) Publication of information concerning the pending case docket. 
Ongoing disclosure of information about the adjudication program 
caseload increases awareness of the importance of the program, 
facilitates oversight of the program and promotes confidence in the 
efficiency and fairness of the program by investors, securities 
industry participants, self-regulatory organizations and other members 
of the public. The Commission has directed the Secretary to publish in 
the SEC Docket in the first and seventh months of each fiscal year 
summary statistical information about the status of pending 
adjudicatory proceedings and changes in the Commission's caseload over 
the prior six months. The report will include the number of cases 
pending before the administrative law judges and the Commission at the 
beginning and end of the six-month period. The report will also show 
increases in the caseload arising from new cases being instituted, 
appealed or remanded to the Commission and decreases in the caseload 
arising from the disposition of proceedings by issuance of initial 
decisions, issuance of final decisions issued on appeal of initial 
decisions, other dispositions of appeals of initial decisions, final 
decisions on review of self-regulatory organization determinations, 
other dispositions on review of self-regulatory organization 
determinations, and decisions with respect to stays or interlocutory 
motions. For each category of decision, the report shall also show the 
median age of the cases at the time of the decision and the number of 
cases decided within the guidelines for the timely completion of 
adjudicatory proceedings.
Table I to Subpart D--Adversary Adjudications Conducted by the 
Commission under 5 U.S.C. 554

Securities Exchange Act of 1934

    Section 11A(b)(6), 15 U.S.C. 78k-1(b)(6) (suspension or revocation 
of registration, or censure of a securities information processor).
    Section 11A(c)(3)(A), 15 U.S.C. 78k-1(c)(3)(A) (prohibition of 
transactions by brokers and dealers in registered securities other than 
on a national securities exchange).
    Section 12(j), 15 U.S.C. 78l(j) (suspensions of effective date or 
revocation of registration of a security).
    Section 15(b)(4), 15 U.S.C. 78o(b)(4) (suspension or revocation of 
registration, or censure of a broker or dealer).
    Section 15(b)(6)(A), 15 U.S.C. 78o(b)(6)(A) (censure, suspension or 
bar an associate of a broker or a dealer).
    Section 15B(c)(2), 15 U.S.C. 78o-4(c)(2) (suspension or revocation 
of registration, or censure of a municipal securities dealer).
    Section 15B(c)(4), 15 U.S.C. 78o-4(c)(4) (censure, suspension or 
bar of an associate of a municipal securities broker or dealer).
    Section 15B(c)(8), 15 U.S.C. 78o-4(c)(8) (removal or censure of 
member of the Municipal Securities Rulemaking Board).
    Section 15C(c)(1)(A), 15 U.S.C. 78o-5(c)(1)(A) (suspension or 
revocation of registration, or censure of a government securities 
broker or dealer).
    Section 15C(c)(1)(C), 15 U.S.C. 78o-5(c)(1)(C) (censure, suspension 
or bar of an associate of a government securities broker or dealer).
    Section 17A(c)(3), 15 U.S.C. 78q-1(c)(3) (deny registration, 
censure, place limitation on, suspend, or revoke registration of a 
transfer agent).
    Section 17A(c)(4)(C), 15 U.S.C. 78q-1(c)(4)(C) (censure, place 
limitations on, suspend or bar certain persons associated or seeking to 
associate with a transfer agent).
    Section 19(h)(1), 15 U.S.C. 78s(h)(1) (suspension or revocation of 
registration, or censure of a self-regulatory organization). 
[[Page 32822]] 
    Section 19(h)(2), 15 U.S.C. 78s(h)(2) (suspension or expulsion of a 
member of a self-regulatory organization).
    Section 19(h)(3), 15 U.S.C. 78s(h)(3) (suspension or bar of a 
person from being associated with a national securities exchange or 
registered securities association).
    Section 19(h)(4), 15 U.S.C. 78s(h)(4) (removal or censure of a 
director or officer of a self-regulatory organization).
    Section 21B(a), 15 U.S.C. 78u-2(a) (imposition of civil penalties 
against any person for violation of the federal securities laws).

Ivestment Company Act of 1940

    Section 9(d)(1), 15 U.S.C. 80a-9(d)(1) (imposition of civil 
penalties against any person for violation of the federal securities 
laws).

Investment Advisers Act of 1940

    Section 203(e), 15 U.S.C. 80b-3(e) (suspension or revocation of 
registration, or censure of an investment adviser).
    Section 203(f), 15 U.S.C. 80b-3(f) (censure, suspension, or bar of 
an associate of an investment adviser).
    Section 203(i)(1), 15 U.S.C. 80b-3(i)(1) (imposition of civil 
penalties against any person for violation of the federal securities 
laws).

 Table II to Subpart D--Cross-reference Table Showing Location of Rules 
   of Practice Adopted in 1995 with Former Rules of Practice, Related   
                     Rules, and Statutory Provisions                    
------------------------------------------------------------------------
       New rules (17 CFR 201)              Former rules/Act Sec.        
------------------------------------------------------------------------
100................................  1.                                 
101................................  none.                              
102................................  2.                                 
102(d)(4)..........................  none.                              
103(a)-(c).........................  none.                              
104................................  5.                                 
110................................  11(b).                             
111................................  11(d)-(e), 16(g).                  
112................................  11(c).                             
120................................  5 U.S.C. 554(d).                   
121................................  5 U.S.C. 554(d).                   
140(a).............................  22(h).                             
140(b)-(c).........................  22(k).                             
141(a).............................  6(a), (b), (f).                    
141(b).............................  23(d).                             
150(a).............................  23(a).                             
150(b).............................  2(d), (h).                         
150(c).............................  23(b).                             
150(d).............................  23(c).                             
151................................  12(b), 22(a).                      
152(a)-(e).........................  22(a)-(h).                         
152(f).............................  20(d).                             
153................................  7(f).                              
154................................  11(e).                             
155................................  12(d).                             
160................................  22(j), 23(b).                      
161................................  13.                                
180(a).............................  2(f).                              
180(b)-(c).........................  none.                              
190................................  25.                                
191................................  27, 28.                            
192................................  4.                                 
193................................  29.                                
200(a)(1)..........................  6(a), (b).                         
200(a)(2)..........................  6(f).                              
200(b), (c)........................  6(a), (b).                         
200(d).............................  6(d).                              
200(e).............................  6(c).                              
201................................  10.                                
202................................  8(b), (c).                         
210................................  9.                                 
220................................  7(a)-(e).                          
221(a)-(c), (e)....................  8(d)                               
221(d).............................  none.                              
221(f).............................  6(e).                              
222(a).............................  8(d).                              
222(b).............................  none.                              
230................................  none.                              
231(a).............................  11-1.                              
231(b).............................  none.                              
232(a)-(d).........................  14(b).                             
232(e)-(f).........................  14(b)(2), (c).                     
233................................  15(a)-(e).                         
234................................  15(g).                             
235................................  15(f).                             
240................................  8(a).                              
250................................  11(e).                             
300................................  11(a)-(b).                         
301................................  11(b).                             
302(a).............................  11(f).                             
302(b).............................  25(d).                             
302(c).............................  20(c).                             
310................................  6(e).                              
320................................  14(a).                             
321(a).............................  11(e).                             
321(b).............................  none.                              
322................................  none.                              
323................................  14(d).                             
324................................  none.                              
325................................  14(a).                             
326................................  14(a).                             
340................................  16(d)-(e).                         
350................................  20(a)-(b).                         
351................................  20(a)(4).                          
360(a).............................  16(b).                             
360(b).............................  16(a).                             
360(c).............................  16(f).                             
360(d), (e)........................  17(f).                             
400................................  12(a).                             
401................................  12(c).                             
401(d)(2)..........................  15 U.S.C. 78s(d)(2).               
410(a).............................  17(a).                             
410(b).............................  17(b).                             
410(c).............................  none.                              
410(d).............................  none.                              
410(e).............................  17(h).                             
411(a).............................  17(g)(2).                          
411(b).............................  17(d).                             
411(c).............................  17(c).                             
411(d).............................  17(g)(1).                          
411(e).............................  17(d).                             
411(f).............................  17(g)(3).                          
420(a), (b), (d)...................  17 CFR 240.19d-3(b).               
420(c).............................  15 U.S.C. 78s(d)(2).               
420(d).............................  58.                                
421(a).............................  15 U.S.C. 78s(e)-(f).              
421(b)-(c).........................  none.                              
430................................  26(a), (c).                        
431(a).............................  none.                              
431(b).............................  26(b).                             
431(c).............................  26(d).                             
431(d)-(f).........................  26(e).                             
450(a).............................  17(e).                             
450(b).............................  18, 17 CFR 240.19d-3(c)-(g).       
450(c).............................  22(d).                             
451................................  21.                                
452................................  21(d).                             
460................................  20, 21(c).                         
470................................  21(e).                             
490................................  23(e).                             
500................................  none.                              
510................................  none.                              
511................................  none.                              
512................................  none.                              
513................................  none.                              
514................................  none.                              
520................................  none.                              
521................................  none.                              
522................................  none.                              
524................................  none.                              
530................................  19.                                
531................................  none.                              
540................................  none.                              
550................................  17 CFR 202.8.                      
600................................  none.                              
601................................  none.                              
610................................  none.                              
611................................  none.                              
612................................  none.                              
613................................  none.                              
614................................  none.                              
620................................  none.                              
630................................  none.                              
900................................  none.                              
------------------------------------------------------------------------


Table III to Subpart D--Cross-reference Table Showing Location of Former
  Rules of Practice and Related Rules With Rules of Practice Adopted in 
                                  1995                                  
------------------------------------------------------------------------
            Former rules                    New rules (17 CFR 201)      
------------------------------------------------------------------------
1..................................  100.                               
2..................................  102.                               
2(d), (h)..........................  150(b).                            
2(f)...............................  180(a).                            
3 [reserved].......................  n/a.                               
[[Page 32823]]
                                                                        
4..................................  192.                               
5..................................  104.                               
6(a)...............................  200(b).                            
6(a),(b),(f).......................  141(a).                            
6(a), (b)..........................  200(a)(1).                         
6(b)...............................  200(c).                            
6(c), (d)..........................  200(d), (e).                       
6(e)...............................  221(f), 310.                       
6(f)...............................  200(a)(2).                         
7(a)-(e)...........................  220.                               
7(f)...............................  153.                               
8(a)...............................  240.                               
8(b)-(c)...........................  202.                               
8(d)...............................  221, 222(a).                       
9..................................  210.                               
10.................................  201.                               
11(a)-(b)..........................  300.                               
11(b)..............................  110, 301.                          
11(c)..............................  112.                               
11(d), (e).........................  111.                               
11(e)..............................  154, 250, 321(a).                  
11(f)..............................  302(a).                            
11-1...............................  231(a).                            
12(a)..............................  400.                               
12(b)..............................  151(c).                            
12(c)..............................  401.                               
12(d)..............................  155.                               
13.................................  161.                               
14(a)..............................  320, 325, 326.                     
14(b)..............................  232(a)-(d).                        
14(b)(2), (c)......................  232(e)-(f).                        
14(d)..............................  323.                               
15(a)-(e)..........................  233.                               
15(f)..............................  235.                               
15(g)..............................  234.                               
16(a)..............................  360(b).                            
16(b)..............................  360(a).                            
16(c) [reserved]...................  n/a.                               
16(d)-(e)..........................  340.                               
16(f)..............................  351, 360(c).                       
16(g)..............................  111.                               
17(a)..............................  410(a).                            
17(b)..............................  410(b).                            
17(c)..............................  411(c).                            
17(d)..............................  411(b), (e).                       
17(e)..............................  450(a), (d).                       
17(f)..............................  360(d), (e).                       
17(g)..............................  411(d), (a), (f).                  
17(h)..............................  410(e).                            
18.................................  450(b).                            
19.................................  530.                               
20(a)-(b)..........................  350, 351, 460.                     
20(c)..............................  302(c).                            
20(d)..............................  152(f).                            
21.................................  451.                               
21(c)..............................  460.                               
21(d)..............................  452.                               
21(e)..............................  470.                               
22(a)..............................  151(a)-(c), 152.                   
22(b) [reserved]...................  n/a.                               
22(c)..............................  152(d).                            
22(d)..............................  152(e), 450(c).                    
22(e)-(g)..........................  152(a)-(c).                        
22(h)..............................  140(a).                            
22(i)..............................  none.                              
22(j), (k).........................  160, 140(c).                       
22(k)..............................  140(b).                            
23(a)..............................  150(a).                            
23(b)..............................  150(c), 160.                       
23(c)..............................  150(d).                            
23(d)..............................  141(b).                            
23(e)..............................  490.                               
24.................................  17 CFR 228.10(f), 17 CFR 229.10(d).
25.................................  190.                               
25(d)..............................  302(b).                            
26(a), (c).........................  430.                               
26(b)..............................  431(b).                            
26(d)..............................  431(c).                            
26(e)..............................  431(d)-(f).                        
27.................................  191.                               
28.................................  191.                               
29.................................  193.                               
17 CFR 202.8.......................  550.                               
17 CFR 240.19d-2...................  401(a)-(b), (d).                   
17 CFR 240.19d-3(a)................  420,421.                           
17 CFR 240.19d-3(b)................  420(a), (b), (d).                  
17 CFR 240.19d-3(c)-(d)............  450, 180(c).                       
17 CFR 240.19d-3(e)................  452.                               
17 CFR 240.19d-3(f)................  451.                               
17 CFR 240.19d-3(g)................  100.                               
------------------------------------------------------------------------

PART 202--INFORMAL AND OTHER PROCEDURES
    40. The authority citation for Part 202 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77s, 77t, 78d-1, 78u, 78w, 78ll(d), 79r, 
79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, and 80b-11, unless 
otherwise noted.
* * * * *
Sec. 202.8  [Removed and reserved]

    41. Section 202.8 is removed and reserved:
PART 203--RULES RELATING TO INVESTIGATIONS

    42. The authority citation for Part 203 continues to read as 
follows:

    Authority: 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11, 
unless otherwise noted.
Sec. 203.3  [Amended]

    43. In Sec. 203.3, remove the words ``Sec. 201.2(e) of this chapter 
(Rule 2(e)'', and, in their place, add the words ``Sec. 201.102(e) of 
this chapter (Rule 102(e)''.
Sec. 203.7  [Amended]

    44. In Sec. 203.7(b), remove the words ``Sec. 201.2(b) of this 
chapter (Rule 2(b)'', and, in their place, add the words 
``Sec. 201.101(a) of this chapter (Rule 101(a)''.


Sec. 203.8  [Amended]

    45. In Sec. 203.8, remove the words ``Sec. 201.14(b) of this 
chapter (Rule 14(b) of the Commission's rules of practice)'', and, in 
their place, add the words ``Rule 232(c) of the Commission's Rules of 
Practice, Sec. 201.232(c) of this chapter''.
    46. Part 209 is added to read as follows:

PART 209--FORMS PRESCRIBED UNDER THE COMMISSION'S RULES OF PRACTICE

Sec.
209.0-1  Availability of forms.
209.1  Form D-A: Disclosure of assets and financial information.

    Authority: 15 U.S.C. 77h-1, 77u, 78u-2, 78u-3, 78v, 78w, 80a-9, 
80a-37, 80a-38, 80a39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 
and 80b-12, unless otherwise noted.


Sec. 209.0-1  Availability of forms.

    (a) This part identifies and describes the forms for use under the 
Securities and Exchange Commission's Rules of Practice, part 201 of 
this chapter.
    (b) Any person may obtain a copy of any form prescribed for use in 
this part by written request to the Securities and Exchange Commission, 
450 Fifth Street, N.W., Washington, D.C. 20549. Any person may inspect 
the forms at this address and at the Commission's regional and district 
offices. (See Sec. 200.11 of this chapter for the addresses of the SEC 
regional and district offices.)


Sec. 209.1  Form D-A: Disclosure of assets and financial information.

    (a) Rules 410 and 630 of the Rules of Practice (17 CFR 201.410 and 
201.630) provide that under certain circumstances a respondent who 
asserts or intends to assert an inability to pay disgorgement, interest 
or penalties may be required to disclose certain financial information. 
Unless otherwise ordered, this form may be used by individuals required 
to supply such information.
    (b) The respondent filing Form D-A is required promptly to notify 
the Commission of any material change in the answer to any question on 
this form.
    (c) Form D-A may not be withheld from the interested division. A 
respondent making financial information disclosures on this form after 
the institution of proceedings may make a motion, pursuant to Rule 322 
of the Commission's Rules of Practice (17 CFR 201.322), for the 
issuance of a protective order to limit disclosure to the public or 
parties other than the interested division of the information submitted 
on Form D-A. A request for a protective order allows the requester an 
opportunity to justify the need for [[Page 32824]] confidentiality. The 
making of a motion for a protective order, however, does not guarantee 
that disclosure will be limited.
    (d) No party receiving information for which a motion for a 
protective order has been made may transfer or convey the information 
to any other person prior to a ruling on the motion without the prior 
permission of the Commission or a hearing officer.
    (e) A person making financial information disclosures on Form D-A 
prior to the institution of proceedings, in connection with an offer of 
settlement or otherwise, may request confidential treatment of the 
information pursuant to the Freedom of Information Act. See the 
Commission's Freedom of Information Act (``FOIA'') regulations, 17 CFR 
200.83. A request for confidential treatment allows the requester an 
opportunity to substantiate the need for confidentiality. No 
determination as to the validity of any request for confidential 
treatment will be made until a request for disclosure of the 
information under FOIA is received.

    Editorial Note: The text of Form D-A appears in the appendix to 
this document and will not appear in the Code of Federal 
Regulations.
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    47. The authority citation for Part 228 continues to read as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.

    48. By amending Sec. 228.10 by adding paragraph (f) to read as 
follows:


Sec. 228.10  (Item 10) General.

* * * * *
    (f) Incorporation by Reference. Where rules, regulations, or 
instructions to forms of the Commission permit incorporation by 
reference, a document may be so incorporated by reference to the 
specific document and to the prior filing or submission in which such 
document was physically filed or submitted. Except where a registrant 
or issuer is expressly required to incorporate a document or documents 
by reference, reference may not be made to any document which 
incorporates another document by reference if the pertinent portion of 
the document containing the information or financial statements to be 
incorporated by reference includes an incorporation by reference to 
another document. No document on file with the Commission for more than 
five years may be incorporated by reference except:
    (1) Documents contained in registration statements, which may be 
incorporated by reference as long as the registrant has a reporting 
requirement with the Commission; or
    (2) Documents that the registrant specifically identifies by 
physical location by SEC file number reference, provided such materials 
have not been disposed of by the Commission pursuant to its Records 
Control Schedule (17 CFR 200.80f).

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

    49. The authority citation for Part 229 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n, 
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    50. By amending Sec. 229.10 by adding paragraph (d) to read as 
follows:


Sec. 229.10  General.

* * * * *
    (d) Incorporation by Reference. Where rules, regulations, or 
instructions to forms of the Commission permit incorporation by 
reference, a document may be so incorporated by reference to the 
specific document and to the prior filing or submission in which such 
document was physically filed or submitted. Except where a registrant 
or issuer is expressly required to incorporate a document or documents 
by reference, reference may not be made to any document which 
incorporates another document by reference if the pertinent portion of 
the document containing the information or financial statements to be 
incorporated by reference includes an incorporation by reference to 
another document. No document on file with the Commission for more than 
five years may be incorporated by reference except:
    (1) Documents contained in registration statements, which may be 
incorporated by reference as long as the registrant has a reporting 
requirement with the Commission; or
    (2) Documents that the registrant specifically identifies by 
physical location by SEC file number reference, provided such materials 
have not been disposed of by the Commission pursuant to its Records 
Control Schedule (17 CFR 200.80f).

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    51. The authority citation for Part 230 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *


Sec. 230.406  [Amended]

    52. In Sec. 230.406 paragraphs (e), (g), (h)(1) and (h)(2), remove 
the words ``Sec. 201.26'', and, in their place, add the words 
``Sec. 201.431''.


Sec. 230.411  [Amended]

    53. In Secs. 230.411(b)(4), remove the words ``Rule 24 of the 
Commission's Rules of Practice (Sec. 201.24 of this chapter)'' and in 
paragraph (c) remove the words ``Rule 24 of the Commission's Rules of 
Practice'' and add, in their place, the words ``Sec. 228.10(f) and 
Sec. 229.10(d) of this chapter''.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

    54. The authority citation for part 232 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30 and 80a-37.


Sec. 232.101  [Amended]
    55. In Sec. 232.101(c)(13), remove the words ``Rules of Practice 
(Secs. 201.1-201.29 of this chapter)'', and add, in their place, the 
words ``Subpart D of Part 201 of this chapter''.


Sec. 232.102  [Amended]

    56. In Sec. 232.102(a), remove the words ``Rule 24 of the 
Commission's Rules of Practice (Sec. 201.24 of this chapter)'', and 
add, in their place, the words ``Sec. 228.10(f) and Sec. 229.10(d) of 
this chapter''.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    57. The authority citation for Part 240 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * * [[Page 32825]] 


Sec. 240.12b-23  [Amended]

    58. In Sec. 240.12b-23(b), remove the words ``Rule 24 of the 
Commission's Rules of Practice (Sec. 201.24 of this chapter)'' and add, 
in their place, the words ``Sec. 228.10(f) and Sec. 229.10(d) of this 
chapter''.


Sec. 240.12b-32  [Amended]

    59. In Sec. 240.12b-32(a), remove the words ``Sec. 201.24 of this 
chapter'' and add, in their place, ``Sec. 228.10(f) and Sec. 229.10(d) 
of this chapter''.


Sec. 240.14a-101  [Amended]

    60. In Sec. 240.14a-101 NOTE D 1, remove the words ``Rule 24 of the 
Commission's Rules of Practice (Sec. 201.24 of this chapter)'' and add, 
in their place, the words ``Sec. 228.10(f) and Sec. 229.10(d) of this 
chapter''.
    61. Sections 240.19d-2 and 19d-3 are revised to read as follows:


Sec. 240.19d-2  Applications for stays of disciplinary sanctions or 
summary suspensions by a self-regulatory organization.

    If any self-regulatory organization imposes any final disciplinary 
sanction as to which a notice is required to be filed with the 
Commission pursuant to Section 19(d)(1) of the Exchange Act, 15 U.S.C. 
78s(d)(1), pursuant to Section 6(b)(6), 15A(b)(7) or 17A(b)(3)(G) of 
the Act (15 U.S.C. 78f(b)(6), 78o-3(b)(7) or 78q-1(b)(3)(G)), or 
summarily suspends or limits or prohibits access pursuant to Section 
6(d)(3), 15A(h)(3) or 17A(b)(5)(C) of the Act (15 U.S.C. 78f(d)(3), 
78o-3(h)(3) or 78q-1(b)(5)(C)), any person aggrieved thereby for which 
the Commission is the appropriate regulatory agency may file with the 
Commission a written motion for a stay of imposition of such action 
pursuant to Rule 401 of the Commission's Rules of Practice, 
Sec. 201.401 of this chapter.


Sec. 240.19d-3  Applications for review of final disciplinary 
sanctions, denials of membership, participation or association, or 
prohibitions or limitations of access to services imposed by self-
regulatory organizations.

    Applications to the Commission for review of any final disciplinary 
sanction, denial or conditioning of membership, participation, bar from 
association, or prohibition or limitation with respect to access to 
services offered by a self-regulatory organization or a member thereof 
by any such organization shall be made pursuant to Rule 420 of the 
Commission's Rules of Practice, Sec. 201.420 of this chapter.


Sec. 240.24b-2  [Amended]

    62. In Sec. 240.24b-2 paragraphs (d)(2), (e)(1), and (e)(2), remove 
the words ``17 CFR 201.26'', and, in their place, add the words 
``Sec. 201.431 of this chapter''.

PART 250--GENERAL RULES AND REGULATIONS, PUBLIC UTILITY HOLDING 
COMPANY ACT OF 1935

    63. The authority citation for part 250 continues to read as 
follows:

    Authority: 15 U.S.C. 79c, 79f(b), 79i(c)(3), 79t, unless 
otherwise noted.


Sec. 250.22  [Amended]

    64. In Sec. 250.22(b)(1), remove the words ``Sec. 201.24 of this 
chapter'' and add, in their place, ``Sec. 228.10(f) and Sec. 229.10(d) 
of this chapter''.

PART 260--GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF 
1939

    65. The authority citation for part 260 continues to read as 
follows:

    Authority: 15 U.S.C. 77eee, 77ggg, 77nnn, 77sss, 78ll(d); 80b-3, 
80b-4, and 80b-11.


Sec. 260.7a-29  [Amended]

    66. In Sec. 260.7a-29(a), remove the words ``Sec. 201.24 of this 
chapter'' and add, in their place, ``Sec. 228.10(f) and Sec. 229.10(d) 
of this chapter''.

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

    67. The authority citation for part 270 continues to read in part 
as follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39 unless 
otherwise noted.
* * * * *


Sec. 270.0-4  [Amended]

    68. In Sec. 270.0-4(a), remove the words ``Sec. 201.24 of this 
chapter'' and add, in their place, ``Sec. 228.10(f) and Sec. 229.10(d) 
of this chapter''.


Sec. 270.8b-32  [Amended]

    69. In Sec. 270.8b-32(a), remove the words ``Sec. 201.24 of this 
chapter'' and add, in their place, ``Sec. 228.10(f) and Sec. 229.10(d) 
of this chapter''.
PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

    70. The authority citation for part 275 continues to read in part 
as follows:

    Authority: 15 U.S.C. 80b-3, 80b-4, 80b-6A, 80b-11, unless 
otherwise noted.
* * * * *


Sec. 275.0-6  [Amended]

    71. In Sec. 275.0-6 paragraph (a) and the NOTE at the end of the 
section, remove the words ``Sec. 201.24 of this chapter'' and add, in 
their place, ``Sec. 228.10(f) and Sec. 229.10(d) of this chapter''.

    By the Commission.

    Dated: June 9, 1995.

Margaret H. McFarland,
Deputy Secretary.
    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix--Form D-A

BILLING CODE 8010-01-P

[[Page 32826]]

[GRAPHIC][TIFF OMITTED]TR23JN95.000



[[Page 32827]]

[GRAPHIC][TIFF OMITTED]TR23JN95.001



[[Page 32828]]

[GRAPHIC][TIFF OMITTED]TR23JN95.002



[[Page 32829]]

[GRAPHIC][TIFF OMITTED]TR23JN95.003



[[Page 32830]]

[GRAPHIC][TIFF OMITTED]TR23JN95.004



[[Page 32831]]

[GRAPHIC][TIFF OMITTED]TR23JN95.005



[[Page 32832]]

[GRAPHIC][TIFF OMITTED]TR23JN95.006



[[Page 32833]]

[GRAPHIC][TIFF OMITTED]TR23JN95.007



[[Page 32834]]

[GRAPHIC][TIFF OMITTED]TR23JN95.008


[FR Doc. 95-14750 Filed 6-22-95; 8:45 am]
BILLING CODE 8010-01-C