[Federal Register Volume 64, Number 16 (Tuesday, January 26, 1999)]
[Notices]
[Pages 3993-3994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1699]



[[Page 3993]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40954; File No. SR-NASD-98-91]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to the Time Period for Filing 
Information Requests in Arbitration

January 19, 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 8, 1998, the National Association of Securities 
Dealers, Inc., 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 ``non-controversial'' rule change under 
paragraph (e)(6) of Rule 19b-4 under the Exchange Act,\3\ 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\ 17 CFR 240.19b-4(e)(6).
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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 10321 of the National 
Association of Securities Dealers, Inc. (``NASD'' or ``Association''), 
to modify the earliest date to file document and information requests 
in arbitration proceedings from 20 business days to 45 calendar days 
after service of the Statement of Claim or upon filing of the Answer, 
whichever is earlier. Below is the text of the proposed rule change. 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *

RULES OF THE ASSOCIATION

* * * * *

10000. CODE OF ARBITRATION PROCEDURE

* * * * *

10321. General Provisions Governing Pre-Hearing Proceedings

    (a) (No change)
    (b) Document Production and Information Exchange
    (1) Any party may serve a written request for information or 
documents (``information request'') upon another party [twenty (20) 
business] 45 calendar days or more after service of the Statement of 
Claim by the Director of Arbitration or upon filing of the Answer, 
whichever is earlier. The requesting party shall serve the information 
request on all parties and file a copy with the Director of 
Arbitration. The parties shall endeavor to resolve disputes regarding 
an information request prior to serving any objection to the request. 
Such efforts shall be set forth in the objection.
    (2)-(4) (No change)
    (c)-(e) (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, 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

    The proposed rule change is intended to modify the earliest date to 
file document and information requests in arbitration proceedings from 
20 business days to 45 calendar days after service of the Statement of 
Claim or upon filing of the Answer, whichever is earlier, to coincide 
with the recently amended time period to file an Answer to the 
Statement of Claim.
    In a previous filing approved by the Commission \4\ and effective 
on March 16, 1998, NASD Regulation enlarged the time to answer an 
arbitration claim from 20 business days to 45 calendar days, and 
eliminated extensions of time to answer except in extraordinary 
circumstances. That change was proposed because requests for extensions 
of time were common, generally because respondents needed additional 
time to develop a complete answer to the claim. The extension of time 
to 45 days was designed to ease the administrative burden on NASD 
Regulation staff by eliminating the burden of processing and granting 
routine extensions of time.
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    \4\ Exchange Act Rel. No. 39664 (February 13, 1998) (File No. 
SR-NASD-98-07) 63 FR 8727 (February 20, 1998).
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    NASD Regulation has determined that a related change is necessary 
to the rule on discovery in arbitration, Rule 10321, which currently 
permits requests for documents and information to be made 20 business 
days or more after service of the Statement of Claim by the Director of 
Arbitration or upon filing of the Answer, whichever is earlier. The 20-
day period was originally intended to coincide with the time to answer 
claims, in order to prevent the respondent from having to respond to a 
discovery request before it had prepared its answer. Since the time to 
answer has been extended to 45 days, however, Rule 10321 could require 
a party to respond to a document request in 20 business days 
(approximately a month), which would be over two weeks before the 
party's answer was due. Therefore, to maintain the original purpose of 
the discovery time period, NASD Regulation proposes that the time 
period in Rule 10321 be extended to 45 calendar days as well.
(b) Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of 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. The NASD 
believes that the proposed rule change will protect investors and the 
public interest by facilitating a more orderly discovery procedure for 
all parties.

(B) Self-Regulatory Organization's Statement of 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.

[[Page 3994]]

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The proposed rule change has been filed by the Association as a 
``non-controversial'' rule change under Rule 19b-4(e)(6) under the 
Exchange Act.\5\ Consequently, because the foregoing proposed rule 
change: (1) does not significantly affect the protection of investors 
or the public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative until January 11, 1999, 
more than 30 days from December 8, 1998, the date on which it was 
filed, and the NASD provided the Commission with written notice of its 
intent to file the proposed rule change at least five days prior to the 
filing date, it has become effective pursuant to Section 19(b)(3)(A) of 
the Exchange Act and Rule 19b-4(e)(6) thereunder.
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    \5\ 17 CFR 240.19b-4(e)(6).
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    At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal 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.

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, NW, 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 number SR-NASD-98-91 and 
should be submitted by February 16, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-1699 Filed 1-25-99; 8:45 am]
BILLING CODE 8010-01-M