[Federal Register Volume 63, Number 171 (Thursday, September 3, 1998)]
[Notices]
[Pages 47058-47059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23762]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40379; File No. SR-NASD-98-58]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating to
the Elimination of the Requirement for Personal Service of Decisions in
Cases Involving Bars and Expulsions
August 27, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 7, 1998, the National Association of Securities Dealers, Inc.
(``NASD''), through its regulatory subsidiary, 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. The filing was subsequently amended on August 18,
1998 and August 20, 1998.\3\ The Commission is publishing this notice
to solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Joan C. Conley, Secretary, NASD Regulation,
to Katherine A. England, Assistant Director, Division of Market
Regulation, Commission, dated August 18, 1998 and E-mail from Eric
Moss, Office of General Counsel, NASD Regulation, to Mandy Cohen,
Division of Market Regulation, Commission, dated August 20, 1998.
All amendments are included in this Notice.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
NASD Regulation is proposing to amend Rules 9269 and 9360 of the
Code of Procedure of the NASD, to eliminate the requirement for
personal service of decisions in cases involving bars and
expulsions.\4\ The text of the proposed rule change is set forth below.
Proposed new language is in italics; proposed deletions are in
brackets.
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\4\ NASD Regulation has also filed a related rule change with
the Commission in Exchange Act Release No. 40378 (August 7, 1998)
(File No. SR-NASD-98-57). The text of the proposed rule change
contained herein treats SR-NASD-98-57 as already having been
approved.
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* * * * *
9000. Code of Procedure
9200. Disciplinary Proceedings
9269. Default Decisions
(a) through (c).
No change.
(d) Final Disciplinary Action of the Association; Effectiveness of
Sanctions.
If a default decision is not appealed pursuant to Rule 9311 or
called for review pursuant to Rule 9312 within 25 days after the date
the Office of Hearing Officers serves it on the Parties, the default
decision shall become the final disciplinary action of the Association
for purposes of SEC Rule 19d-1(c)(1). Unless otherwise provided in the
default decision, the sanctions shall become effective 30 days after
the default decision becomes the final disciplinary action of the
Association, except that a bar or expulsion shall become effective
immediately upon the default decision becoming the final disciplinary
action of the Association. The Association shall serve the decision on
a Respondent by overnight courier, facsimile or other means likely to
obtain prompt service when the sanction is a bar or an expulsion.
* * * * *
9360. Effectiveness of Sanctions
Unless otherwise provided in the decision issued under Rule 9349 or
Rule 9351, a sanction (other than a bar or an expulsion) specified in a
decision constituting final disciplinary action of the Association for
purposes of SEC Rule 19d-1(c)(1) shall become effective [on a date
established by the Chief Hearing Officer, which shall not be earlier
than] 30 days after the date of service of the decision constituting
final disciplinary action. A bar or an expulsion shall become effective
upon service of the decision constituting final disciplinary action of
the Association for purposes of SEC Rule 19d-1(c)(1), unless otherwise
specified therein. The Association shall [take reasonable steps to
obtain personal service of] serve the decision on a Respondent by
overnight courier, facsimile or other means reasonably likely to obtain
prompt service when the sanction is a bar or an expulsion.
* * * * *
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 IV below. NASD Regulation has prepared summaries, set
forth in Sections A, B,
[[Page 47059]]
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
The proposed change to Rules 9269 and 9360 would establish that in
cases involving bars or expulsions, service of decisions should be done
by overnight courier, facsimile or other means likely to obtain prompt
service. Rule 9269 does not presently contain language addressing the
means by which service of default decisions in cases involving bars and
expulsions should be accomplished. Rule 9360 currently requires that
the Chief Hearing Officer serve all final disciplinary decisions, and
that reasonable efforts be made to personally serve (hand delivery) all
final decisions imposing a bar or expulsion. Rule 9360's personal
service provision for final decisions imposing bars or expulsions was
created because these decisions become effective immediately.
The Association believes that with respect to final default
decisions imposing bars or expulsions, reasonable efforts at personal
service (hand delivery) generally would not be successful. Default
decisions are often entered because respondents cannot be located. If
and when such respondents become aware that a default has been entered
against them, Rule 9269(c) provides an expeditious means for such
respondents to move to set aside the default decision.
2. Statutory Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Act, which
requires, among other things, that the Association's rules be designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and, in general, to protect
investors and the public interest. The NASD believes that the proposed
rule change is consistent with Section 15A(b)(7) in that it provides
for reasonable means to notify parties of default decisions. The rule
change is consistent with Section 15A(b)(8) in that it furthers the
statutory goals of providing a fair procedure for disciplining members
and persons associated with members.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(A) by order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to the file number SR-NASD-97-58 and
should be submitted by September 24, 1998.
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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Jonathan G. Katz,
Secretary.
[FR Doc. 98-23762 Filed 9-2-98; 8:45 am]
BILLING CODE 8010-01-M