[Federal Register Volume 61, Number 251 (Monday, December 30, 1996)]
[Notices]
[Pages 68806-68807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33058]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38069; File No. SR-NASD-96-44]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by National 
Association of Securities Dealers, Inc. Extending the Pilot Injunctive 
Relief for an Additional Year

December 20, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 9, 1996, NASD 
Regulation, Inc., (``NASD Regulation'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I, II and III, below, which Items have 
been prepared by NASD Regulation. On December 17, 1996, NASD Regulation 
submitted an amendment (``Amendment No. 1'') to the proposed rule 
change.\2\ On December 18, 1996, NASD Regulation submitted a second 
amendment (``Amendment No. 2'') to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ Letter from Alden S. Adkins, Vice President and General 
Counsel, NASD Regulation, Inc., to Katherine A. England, Assistant 
Director, Division of Market Regulation, SEC, dated December 13, 
1996 (indicating final action on the proposed rule change by the 
NASD Board of Governors).
    \3\ Letter from Alden S. Adkins, Vice President and General 
Counsel, NASD Regulation, Inc., to Katherine A. England, Assistant 
Director, Division of Market Regulation, SEC, dated December 17, 
1996 (amending filing to: (1) set forth the language of Rule 10335; 
(2) amend paragraph (i) of the Rule to show the effective date of 
the Rule; (3) request accelerated approval of the proposed rule 
change).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Regulation is herewith filing a proposed rule change to extend 
for one year the pilot injunctive relief rule, Rule 10335 (formerly 
Section 47) of the Code of Arbitration Procedure (``Code'').

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD Regulation included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item III below. NASD Regulation has prepared summaries, 
set forth in Sections A, B, and C below, of the most significant 
aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    NASD Regulation's injunctive relief rule, Rule 10335 of the Code, 
provides a procedure for obtaining injunctive relief in arbitration and 
for expediting proceedings for injunctive relief in intra-industry 
disputes. Rule 10335 took effect on January 3, 1996, for a one-year 
pilot period. In its filing with the Commission, the NASD stated that 
at the end of the one-year pilot program it would evaluate the efficacy 
of the Rule to determine if the Rule should be made permanent, the 
pilot should be extended, or the Rule should be permitted to terminate 
by its terms.
    Between January 3 and December 5, 1996, 237 cases were filed with 
the NASD seeking injunctive relief under Rule 10335. All of the cases 
under Rule 10335 involved disputes between member firms and their 
former registered representative employees (often referred to as 
``raiding'' cases). Of those, 147 settled, 21 were withdrawn, and 56 
are pending. The remaining cases were either not eligible for 
resolution in the NASD's forum (2), closed after a hearing (6) , 
inactive (4), or could not be processed because of deficiencies in the 
claim that were not corrected (1). The details concerning cases filed 
up to September 19, 1996, and the comments solicited by NASD Regulation 
from some users of the procedures, are set forth in a report from NASD 
Regulation to the Commission submitted on October 11, 1996. Additional 
comments were received after October 11, 1996. The report and 
additional comments may be examined at the places specified in Item III 
below.
     On the basis of NASD Regulation's experience and the comments of 
the participants, NASD Regulation believes that the procedures set 
forth in Rule 10335 represent a significant improvement to the 
procedures for resolving intra-industry disputes; however, NASD 
Regulation also believes that additional experience with the Rule is 
necessary to evaluate adequately how the Rule could be improved to meet 
the needs of the participants more effectively.
    Accordingly, NASD Regulation is proposing to extend the injunctive 
relief Rule as a pilot program for another year. During the next year 
NASD Regulation will review the comments solicited, will solicit 
additional comments in a Notice to Members, and will develop 
modifications or interpretations of the Rule in response thereto.
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act \4\ in 
that extending the effectiveness of the injunctive relief procedures 
will serve the public interest by enhancing the satisfaction with the 
arbitration process afforded by expeditious resolution of certain 
disputes.
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    \4\ 15 U.S.C. Sec. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    NASD Regulation did not solicit comments with respect to extending 
the pilot program. Instead, comments have been solicited in order to 
aid NASD Regulation in developing changes to the Rule in anticipation 
of seeking permanent adoption. Those comments are contained in Exhibits 
2 and 3 to the filing. Accordingly, NASD Regulation will address these 
comments, and any additional comments that may be received, in 
connection with any rule filing seeking to make the Rule a permanent 
addition to the Code.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room Copies of such filing will also be

[[Page 68807]]

available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-N-NASD-96-44, and 
should be submitted by January 21, 1997.

IV. The Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission has reviewed carefully the proposed rule change of 
NASD Regulation, and concludes that the proposed rule change is 
consistent with the requirements of the Act and rules and regulations 
thereunder applicable to a national securities association, and 
particularly with Section 15A(b)(6) of the Act.
    Rule 10335 is intended to provide a pilot system within the NASD 
arbitration forum to process requests for temporary injunctive relief. 
The Rule is intended principally to facilitate the disposition of 
employment disputes and related disputes concerning whether registered 
representatives who move to other firms may transfer their accounts to 
their new firms. The Commission finds that it is appropriate to extend 
the pilot for one year. During that time, the Commission and NASD 
Regulation will be able to evaluate the success of the Rule, to solicit 
additional comments, to develop modifications or interpretations of the 
Rule in response to these comments, and to determine whether to extend 
the pilot further or to make the Rule permanent.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. The Commission believes that it 
is appropriate to approve the proposed rule change on an accelerated 
basis so that members can continue to have the benefit of injunctive 
relief in arbitration without interruption. The Rule was previously 
available through the pilot, and the Commission is extending the pilot 
only for one year. The Commission believes, therefore, that granting 
accelerated approval of the proposed rule change is appropriate and 
consistent with Section 15A of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that File No. SR-NASD-93-44, as amended, be, and hereby is, approved on 
a one-year pilot basis, effective January 3, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-33058 Filed 12-27-96; 8:45 am]
BILLING CODE 8010-01-M