[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