[Federal Register Volume 64, Number 191 (Monday, October 4, 1999)]
[Notices]
[Pages 53761-53762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25667]



[[Page 53761]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41920; File No. SR-NASD-99-36]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the National 
Association of Securities Dealers, Inc. Relating to the Selection of 
Chairs and Vice Chairs of the National Adjudicatory Council

September 27, 1999.
    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 August 4, 1999, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), 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 and II below, which Items have been 
prepared by 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation is proposing to amend its by-laws to clarify that 
the outgoing members of the National Adjudicatory Council (``NAC'') 
will select a Chair and Vice Chair from among the members who will be 
serving on the NAC the following year. Currently, the new Board selects 
the Chair and Vice Chair. Below is the text of the proposed rule 
change. Proposed new language is in italics; proposed deletions are in 
brackets.

By-Laws of NASD Regulation, Inc.

Article V

National Adjudicatory Council

Appointment and Authority

    Sec. 5.1 No change.

Number of Members and Qualifications

    Sec. 5.2(a) No change.
    (b) [As soon as practicable following the appointment of members, 
the] The incumbent National Adjudicatory Council shall elect a Chair 
and a Vice Chair from among [its] the members serving during the 
following term. The Chair and Vice Chair shall have such powers and 
duties as may be determined from time to time by the National 
Adjudicatory Council. The Chair also shall serve as a Director of the 
NASD Regulation Board and a Governor of the NASD Board for a one-year 
term as provided in the by-laws and Restated Certificate of 
Incorporation of the NASD and these by-laws. The Board, by resolution 
adopted by a majority of Directors then in office and after notice to 
the NASD Board, may remove the Chair or Vice Chair from such position 
at any time for refusal, failure, neglect, or inability to discharge 
his or her duties.

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 III 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

(1) Purpose
    On January 15, 1998, the adjudicatory functions of the National 
Business Conduct Committee (``NBCC'') were transferred to the NAC. 
Presently, the Association believes that the NASD Regulation By-Laws 
are unclear as to whether the outgoing or newly appointed NAC select 
the Chair and Vice Chair. Since the formation of the NAC, there has 
been only one selection and the Chair and Vice Chair were selected from 
the newly appointed NAC. The NASD proposes to direct the outgoing NAC 
to select either a returning or a new member of the NAC to serve in 
these positions for the following year. The NASD believes that the 
outgoing NAC members are particularly well suited to select the Chair 
and Vice Chair for the following year, and will prevent delay in the 
selection of the Chair, who is also a member of the NASD Board of 
Governors, and Vice Chair. The Association represents that this 
proposal is also consistent with the practice that was used by the 
NBCC, the predecessor of the NAC, in selecting its Chair and Vice 
Chair.
(2) Statutory Basis
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act,\3\ 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 permitting 
the outgoing NAC to select the Chair and Vice Chair for the following 
year will prevent delay and result in the selection of the most highly 
qualified candidates, who will serve important roles in reviewing 
disciplinary, membership and other matters for the Association.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD 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. 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, NW., Washington, DC 20549-0609. 
Copies of the submissions, 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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Room. Copies of such filing will also 
be available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No.

[[Page 53762]]

SR-NASD-99-36 and should be submitted by October 25, 1999.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    Upon review, 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.\4\ In particular, the Commission believes the proposal is 
consistent with Section 15A(b)(6) of the Act which requires, amongst 
other things, that the rules of an association be designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, and, in general, to protect investors and the 
public.\5\ The Association believes that the NASD Regulation By-Laws 
are unclear on how the Chair and Vice-Chair for the incoming NAC are 
chosen. While neither agreeing or disagreeing with this interpretation 
of the current NASD Regulation By-Laws, the Commission believes that 
the proposed rule change, which permits the incumbent NAC to select the 
Chair and Vice Chair of the incoming NAC, will facilitate selection of 
these important positions and prevent delays ion the exercise of the 
NAC's delegated self-regulatory responsibilities.\6\ Additionally, the 
Commission notes that the proposal is consistent with the practice 
utilized by the NBCC, the NAC's predecessor.
---------------------------------------------------------------------------

    \4\ In approving this rule change, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78o-3(b)(6).
    \6\ The NASD will generally attempt to provide the incumbent NAC 
with a two week period during which the names of the newly appointed 
NAC members can be reviewed. Telephone conversation between Eric 
Moss, Assistant General Counsel, Office of General Counsel, NASD 
Regulation and Marc McKayle, Attorney, Division of Market 
Regulation, Commission, dated August 24, 1999.
---------------------------------------------------------------------------

    Finally, the Commission finds good cause pursuant to Section 
19(b)(2) \7\ for approving the proposed rule change prior to the 30th 
day after its publication in the Federal Register. Accelerated approval 
of the proposed rule change should insure that the proposed selection 
procedures for the NAC Chair and Vice Chair can be used for the 
scheduled November 1999, appointment of the new NAC.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASD-99-36) be, and hereby 
is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \8\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-25667 Filed 10-1-99; 8:45 am]
BILLING CODE 8010-01-M