[Federal Register Volume 63, Number 239 (Monday, December 14, 1998)]
[Notices]
[Pages 68814-68815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33071]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40755; File No. SR-NASD-98-90]


Self-Regulatory Organizations, Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Proposed Amendments to the Code of Procedure to Provide for the 
Office of Disciplinary Affairs of NASD Regulation, Inc. to Authorize 
all Enforcement Actions

December 7, 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 December 4, 1998, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through it wholly-owned subsidiary 
NASD Regulation (``NASDR''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by NASDR.\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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Several non-substantive changes were provided by the NASDR 
in a telephone conversation between Eric Moss, Office of General 
Counsel, NASDR, and Joseph Corcoran, Division of Market Regulation, 
Commission, on December 7, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASDR proposes to amend Rules 9120 and 9211 of the NASD's Code of 
Procedure to enable the Office of Disciplinary Affairs of NASDR to 
authorize all disciplinary actions. Below is the text of the proposed 
rule change. Proposed new language is italicized, proposed deletions 
are in brackets.
* * * * *
9120.  Definitions.
    (a) through (d).
    No change.
    (e) ``Department of Enforcement''
    The term ``Department of Enforcement'' means the Department of 
Enforcement or its delegatee, the Department of Market Regulation[, 
except that the term excludes the Department of Market Regulation with 
respect to the action of:
    (1) authorizing a complaint under Rule 9211;
    (2) determining the terms of a letter of acceptance, waiver, and 
consent or the terms of a minor rule violation plan letter under Rule 
9216;
    (3) determining whether to contest an offer of settlement under 
Rule 9270; and
    (4) authorizing the filing of an appeal under Rule 9311]. (f) 
through (u).
    No change.
    (v) ``Office of Disciplinary Affairs''
    The term ``Office of Disciplinary Affairs'' means the Office of 
Disciplinary Affairs for NASD Regulation.
    (w) [v] ``Panelist''
    No change.
    (x) [w] ``Party''
    No change.
    (v)[x] ``Primary District Committee''
    No change.
    (z)[y] ``Respondent''
    No change.
    (aa)[z] ``Review Subcommittee''
    No change.
    (bb)[aa] ``Statutory Disqualification Committee''
    No change.
    (cc)[bb] ``Subcommittee''
    No change.
* * * * *
9200. DISCIPLINARY PROCEEDINGS
    9210. Complaint and Answer

[[Page 68815]]

    9211. Issuance of Complaint
    (a) Complaint
    (1) If the Department of Enforcement believes that any NASD member 
or associated person is violating or has violated any rule, regulation, 
or statutory provision, including the federal securities laws and the 
regulations thereunder, which the Association has jurisdiction to 
enforce, the Department of Enforcement may request authorization from 
the Office of Disciplinary Affairs to issue a complaint.
    (2) the NASD Regulation Board and the NASD Board each shall have 
the authority to direct the Office of Disciplinary Affairs [Department 
of Enforcement] to authorize and the Department of Enforcement to issue 
a complaint when, on the basis of information and belief, either of 
such boards is of the opinion that any NASD member or associated person 
is violating or has violated any rule, regulation, or statutory 
provision, including the federal securities laws and the regulations 
thereunder, which the Association has jurisdiction to enforce.
    (b) No change.
* * * * *

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

    In its filing with the Commission, NASDR included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it receive on the proposed rule change. The text 
of these statements may be examined at the place specified in Item IV 
below. NASDR 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
    Currently, the Case Authorization Unit (``CAU''), located in the 
Department of Enforcement (``Enforcement'') of NASDR, authorized all 
disciplinary actions. The Office of Disciplinary Policy (``ODP''), 
which reports to the Office of the President of NASDR, is the primary 
reviewer of cases developed in the Washington, D.C. office and those 
involving ``quality-of-market'' issues. ODP also review and comments on 
all cases involving policy issues. The NASD is proposing amendment so 
that the Code of Procedure (``Code'') that would provide for ODP to 
authorize all disciplinary actions. ODP would be renamed Office of 
Disciplinary Affairs (``ODA'') to reflect its additional role as a case 
authorizer.
    Under the existing structure, CAU and ODP have coordinated efforts, 
minimized areas of potential duplication, and worked well together 
during the first year of staff authorization of cases. There is, 
however, an overlap of functions between these two offices. To increase 
overall operating efficiency and to maintain the consistency and 
independence of the case authorization function, NASDR proposes to 
place the functions performed by ODP and CAU in one office. Under the 
proposed rule changes, all cases would be authorized by ODA, which 
would review the legal, policy and consistency issues presented by each 
case.
2. Statutory Basis
    NASDR believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\4\ 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 Sections 15A(b) (7) and (8) of the Act,\5\ 
which mandate that the Association maintain a fair disciplinary 
process. The proposed rule change would provide for the same review of 
all Enforcement cases--whether developed in the districts or the 
Washington office.
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    \4\ U.S.C. 78o-3(b)(6).
    \5\ U.S.C. 78o-3 (b)(7), (b)(8).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDR 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 35 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 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 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 
is consistent with the Act. 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 available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to File No. SR-NASD-98-90 and should be 
submitted by December 29, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33071 Filed 12-11-98; 8:45 am]
BILLING CODE 8010-01-M