[Federal Register Volume 62, Number 68 (Wednesday, April 9, 1997)]
[Notices]
[Pages 17273-17274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38466; File No. SR-NASD-97-22]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. To Amend
the Damage Ceilings for Claims Under the Standard Arbitration and
Simplified Arbitration Procedures
April 2, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on March
27, 1997, the National Association of Securities Dealers, Inc.
(``NASD'' or ``Association'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items has been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD Regulation, Inc. (``NASDR'') is proposing to amend the Code of
Arbitration Procedure (``Code'') of the NASD to: (1) Raise the ceiling
for disputes to be eligible for resolution by a single arbitrator under
simplified arbitration procedures from $10,000 to $25,000; and (2)
raise the ceiling for disputes eligible for resolution by a single
arbitrator under standard arbitration procedures from $30,000 to
$50,000.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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
1. Purpose
In its January 1996 Report on Securities Arbitration Reform, the
NASD's Arbitration Policy Task Force (``Task Force'') recommended that
the ceiling for cases eligible for resolution by a single arbitrator
under simplified arbitration procedures should be raised from $10,000
to $30,000. The Task Force also recommended that the ceiling for cases
eligible for resolution by a single arbitrator under standard
arbitration procedures should be raised from $30,000 to $50,000. The
Task Force recommended that these changes apply to all NASD
arbitrations--public customer and intra-industry. The Task Force
stated, and NASDR concurs, that raising the threshold, which will cause
a larger percentage of cases to be resolved under the simplified
arbitration procedures, will ``strike an appropriate balance between
the desire for faster and less expensive arbitration on the one hand
and more expansive procedures on the other.'' \1\
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\1\ See Report of the Arbitration Policy Task Force on
Securities Arbitration Reform, at 73.
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NASDR has consulted with the Securities Industry Conference on
Arbitration (``SICA'') and the New York Stock Exchange (``NYSE'') on
the appropriate threshold for simplified and single-arbitrator
proceedings. While SICA and the NYSE agree with the Task Force's
rationale, they are concerned that setting the threshold for simplified
arbitrations too high could disadvantage customer claimants by limiting
their procedural rights \2\ under the Code in cases that have
significant economic value to the customer. In view of these concerns,
NASD is instead proposing to set the threshold for simplified
arbitration at $25,000, instead of $30,000. SICA approved of the
adjusted thresholds at its October 17, 1996 meeting.
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\2\ Under the simplified arbitration procedures for matters
between a public customer and an associated person or member, cases
are resolved without a hearing (so-called ``paper cases'') by a
single public arbitrator. A public customer may, however, demand a
hearing, or the arbitrator may call a hearing, in which case the
arbitrator will hold a hearing and the parties will have the benefit
of all of the available forms of discovery. See Rule 10302. Under
the standard arbitration procedures for all matters involving public
customers, cases in which the claims are more than $10,000 but less
than $30,000 may be heard by a single public arbitrator. These cases
are not decided on the papers; rather, the arbitrator holds a
hearing. However, any party may demand a three person panel. See
Rule 10308.
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Accordingly, NASD is proposing to amend Rules 10202, Composition of
Panels (former Section 9) and 10308, Designation of Number of
Arbitrators (formerly Section 19) \3\ of the Code to establish the
threshold for single arbitrator cases at $50,000. NASDR is also
proposing to amend Rules 10203, Simplified Industry Arbitration
(formerly Section 10) and 10302, Simplified Arbitration (formerly
Section 13) of the Code to establish the threshold for simplified
arbitrations at $25,000. In addition, NASD is proposing to amend each
of those rules to state that the threshold amount is ``exclusive of
attendant costs and interest.''
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\3\ NASDR will shortly be filing a proposed rule change to amend
Rule 10308 to implement the list selection process for the selection
of arbitrators recommended by the Task Force. The list selection
rule filing will further substantially amend Rule 10308, but will
not be implemented until NASD has developed the technology and
procedures to administer the process and developed a pool of
arbitrators sufficient to provide lists of arbitrators in accordance
with the requirements of the rule. Accordingly, NASD is amending
Rule 10308 in the interim until the list selection rule is filed,
approved and implemented.
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Under the proposed rule change to Rules 10302(d) and 10308(b),
claims involving public customers and exceeding $25,000, exclusive of
attendant costs and interest, will be heard by a three member
arbitration panel, rather than a panel of no less than three and no
more than five arbitrators. Under the proposed rule change to Rule
10302 (f) and (h)(3), the Director of Arbitration will ``appoint,''
rather than ``select,'' the public arbitrator for simplified
arbitration. The proposed rule change amends Rule 10308(a) to state
that a majority of the arbitrators on a three member arbitration panel
(for claims that are less than or equal to $50,000 but where a party or
arbitrator requested a panel of three arbitrators) shall be public
arbitrators, rather than stating that a majority of the three
arbitrator panel ``shall not be from the securities industry.'' The
proposed rule change also includes several technical changes designed
to correct inconsistencies in the rule language and which were also
adopted by SICA.
2. Statutory Basis
The NASD believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(6) of the
[[Page 17274]]
Act \4\ in that raising the thresholds for simplified arbitration and
for standard arbitrations using a single arbitrator will permit such
cases to be resolved more quickly and at lower cost to the parties and
is consistent with the NASD's longstanding goal of providing the
investing public with a fair, efficient and cost-effective forum for
the resolution of 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 impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No. SR-NASD-97-22 and should
be submitted by April 30, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-9065 Filed 4-8-97; 8:45 am]
BILLING CODE 8010-01-M