[Federal Register Volume 64, Number 12 (Wednesday, January 20, 1999)]
[Notices]
[Pages 3142-3144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1205]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40933; File No. SR-NASD-98-93]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. Relating to Timing of Payment of Prehearing 
Process Fee In Arbitration

January 11, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on December 11, 1998 the National Association of Securities 
Dealers, Inc. (``NASD''), through its wholly owned 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. NASD Regulation has designated the 
proposed rule change as constituting a change in a fee under Section 
19(b)(3)(A)(ii) of the Exchange Act \3\ and paragraph (e)(2) of Rule 
19b-4 under the Exchange Act,\4\

[[Page 3143]]

which renders the proposal effective upon receipt of this filing by the 
Commission. 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\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(e)(2).
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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 Rule 10333(d) of the Rules of 
the Association to change the time when the prehearing process fee in 
an arbitration must be paid. The fee is charged to members. Below is 
the text of the proposed rule change. Proposed new language is in 
italics; proposed deletions are in brackets.
* * * * *
Rule 10333. Member Surcharge
    (a)-(c) No change.
    (d) Each member that is a party to an arbitration proceeding will 
pay a non-refundable process fee as set forth in the schedule below for 
each stage of a proceeding. The process fee shall not be chargeable to 
any other party under Rules 10332(c) and 10205(c) of the Code. If an 
associated person of a member is a party, the member that employed the 
associated person at the time of the events which gave rise to the 
dispute, claim or controversy will be charged the process fees. The 
prehearing process fee will accrue according to the schedule set forth 
below, but will not become [be] due [and payable] until (1) the parties 
are notified of the prehearing conference, or (2) if no prehearing 
conference is scheduled, the parties are notified of the date and 
location of the first hearing session [when the prehearing conference 
is held, or, if no prehearing conference is held, when the parties are 
notified of the date and location of the first hearing session]. The 
hearing fee will accrue and be due and payable when the parties are 
notified of the date and location of the first hearing session. All 
accrued but unpaid fees will be due and payable at the conclusion of 
the member's or associated person's involvement in the proceeding. No 
member will pay more than one prehearing and hearing process fee for 
any case. The process fees will stop accruing when either the member 
enters into a settlement of the dispute or the member is dismissed from 
the proceeding or, if the member is paying a process fee as a result of 
an associated person being named as a party, when the associated person 
enters into a settlement or is dismissed from the proceeding, whichever 
is later.
* * * * *

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), 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 purpose of the prehearing process fee is to cover the cost of 
the arbitration activities to which the fee relates. The purpose of the 
proposed amendment is to match the Association's receipt of the fees 
more closely in time with the dates that the Association incurs the 
costs of such activities. The fee is charged to members.
    Under the current rule, since the prehearing process fee is not due 
and payable until the earlier of the prehearing conference or, if such 
conference is not held, the date when the parties are notified of the 
location of the first hearing session, significant staff activity 
occurs and the related costs are incurred before the prehearing process 
fee is payable. Before the fee is payable, Association staff execute a 
number of arbitration pre-hearing tasks. For example, prior to the date 
of the prehearing conference or scheduling of the first hearing 
session, staff is involved in serving the claim, processing motions, 
and administering the process by which arbitrators are selected. The 
purpose of the rule change is to match more closely in time the 
revenues to be received with the costs incurred by NASD Regulation for 
these activities. Making the prehearing process fee payable when the 
parties are notified of the prehearing conference, or, if no prehearing 
conference is scheduled, when the parties are notified of the date and 
location of the first hearing session, will accomplish this goal.
(b) Statutory Bias
    NASD Regulation believes that the proposed rule change is 
consistent with Section 15A(b)(6) of the Exchange 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. NASD Regulation believes that the 
proposed rule change is consistent with Section 15A(b)(5) of the 
Exchange Act in that the proposed rule change provides for the 
equitable allocation of reasonable charges among members and other 
persons using the Association's arbitration facility and requires 
member firms to absorb a reasonable share of the costs of operating the 
arbitration program.

(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 Exchange 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

    The proposed rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A) of the Exchange Act \5\ and paragraph (e)(2) of 
Rule 19b-4 thereunder \6\ in that the proposed rule change constitutes 
an amendment to the timing of the payment of a fee that the NASD 
currently imposes on its members. At any time within 60 days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Exchange Act.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 C.F.R. 240.19b-4(e)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Exchange Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549. 
Copies of the submission, all subsequent amendments, all written 
statements

[[Page 3144]]

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 number SR-NASD-98-93 and 
should be submitted by February 10, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 C.F.R. 200.30-3(a)(12). In approving the proposal, the 
Commission has considered the rule's impact on efficiency, and 
capital formation. 15 U.S.C. 78c(f).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-1205 Filed 1-19-99; 8:45 am]
BILLING CODE 8010-01-M