[Federal Register Volume 64, Number 2 (Tuesday, January 5, 1999)]
[Notices]
[Pages 548-549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-74]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40846; File No. SR-NASD-98-97]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by National
Association of Securities Dealers, Inc, Relating to Extension of
Effectiveness of Pilot Injunctive Relief Rule
December 28, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice of hereby given that
on December 22, 1998, 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 and II below, which Items have been prepared by
the NASD Regulation, Inc. (``NASD Regulation''). The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons. For the reasons discussed below, the
Commission is granting accelerated approval of the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The NASD Regulation is proposing to amend Rule 10335 of the Code of
Arbitration (``Code'') of the NASD to extend the pilot injunctive
relief rule for six months. Below is the text of the proposed rule
change. Proposed new language is in italics; proposed deletions are in
brackets.
10335. Injunctions
* * *
(i) Effective Date
This Rule shall apply to arbitration claims filed on after January
3, 1996. Except as otherwise proved in this Rule, the remaining
provisions of the Code shall apply to proceedings instituted under this
Rule This Rule shall expire on [January 3, 1999] July 3, 1999, unless
extended by the Association's Board of Governors.
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 NASD Regulation included
statement 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. The 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
(a) Purpose
The NASD'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. NASD Rule 10335 took effect on January 3, 1996, for a one-
year pilot period.\3\ The initial pilot period was subsequently
extended twice by the Commission to permit the Regulation's Office of
Dispute Resolution to gain additional experience with the rule before
determining whether the rule should be made permanent, the pilot period
should be extended, or the rule should be permitted to terminate by its
terms.\4\ In July 1998, the NASD filed a proposed rule change that
would amend Rule 10335 and make it a permanent part of the Code.\5\ The
NASD also sought, and the Commission approved, a six-month extension of
the pilot rule to provide time for the Commission to take action with
respect to the proposed rule change.\6\ The rule is currently due to
expire on January 3, 1999.
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\3\ Securities Exchange Act Release No. 36145 (August 23, 1995),
60 FR 45200 (August 30, 1995).
\4\ Securities Exchange Act Release Nos. 38069 (December 20,
1996), 61 FR 68806 (December 30, 1996), and 39458 (December 17,
1997), 62 FR 67423 (December 24, 1997).
\5\ Securities Exchange Act Release No. 40441 (September 15,
1998), 63 FR 50611 (September 22, 1998).
\6\ Securities Exchange Act Release No. 40124 (June 24, 1998),
63 FR 36282 (July 2, 1998).
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The proposed amendments to Rule 10335 were published for comment,
and the NASD filed an amendment to the proposed rule change in response
to those comments in December 1998. The Commission has received
additional comments regarding the proposed rule change since that
amendment was filed. The purpose of the requested six-month extension
of the pilot rule is to provide the NASD with time to consider and
respond to the additional comments.
(b) Statutory Basis
The 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 must 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
current pilot rule serves the public interest by enhancing the
satisfaction with the arbitration process afforded by expeditious
resolution of certain disputes, and that it is in the interest of
members that the effectiveness of the rule remains uninterrupted
pending Commission action on the permanent rule filing.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The 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.
[[Page 549]]
III. 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, 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 provision
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 number SR-NASD-98-97 and
should be submitted by January 26, 1999.
IV. Commission Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The NASD Regulation has requested that the Commission find good
cause pursuant to Section 19(b)(2) of the Act \7\ for approving the
proposed rule change prior to the 30th day after publication in the
Federal Register. The Commission finds that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities association
and, in particular, the requirements of Section 15A(b)(6) of the
Act.\8\ Rule 10335 is intended to provide a pilot system within the
NASD arbitration forum to process requests for temporary injunctive
relief. Rule 10335 is intended principally to facilitate the
disposition of employment disputes, and related disputes, concerning
members who file for injunctive relief to prevent registered
representatives from transferring their client accounts to their new
firms. The Commission expects that during the pilot's extension the
NASD Regulation will consider and respond to the comment letters
regarding the proposed rule change to permanently add Rule 10335 to the
Code.\9\
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\7\ 15 U.S.C. 78s(b)(2).
\8\ 15 U.S.C. 78o(b)(6).
\9\ See supra, note 6.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Commission
believes that accelerated approval of the proposal is appropriate
because members will continue to have the benefit of injunctive relief
in arbitration without interruption. The Commission is extending the
pilot for six months. During that time NASD Regulation will review and
respond to comments regarding the proposed rule change to amend and
make Rule 10335 a permanent part of the Code. The Commission believes,
therefore, that granting accelerated approval of the proposed rule
change is consistent with Section 15A of the Act.\10\
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\10\ 15 U.S.C. 78o-3.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change be, and hereby is, approved on
an accelerated basis for a six month pilot basis through July 3, 1999.
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\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-74 Filed 1-4-99; 8:45 am]
BILLING CODE 8010-01-M