[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