[Federal Register Volume 65, Number 68 (Friday, April 7, 2000)]
[Notices]
[Pages 18407-18412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8649]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42606; File No. SR-NASD-00-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Amending 
NASD Code of Arbitration Rules 10335 and 10205(h) Regarding Injunctive 
Relief

April 3, 2000.
    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 January 13, 2000, \3\ 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'') a 
proposed rule change as described in Items I, II, and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On March 9, 2000 and March 15, 2000 the NASD submitted 
Amendments No. 1 and 2 to the proposed rule change, respectively, 
the substance of which is incorporated into the notice. See letters 
to Katherine A. England, Assistant Director, Division of Market 
Regulation, Commission, from Patrice Gliniecki, Vice President and 
Deputy General Counsel, NASD Regulation, dated March 7, 2000 
(``Amendment No. 1'') and March 24, 2000 (Amendment No. ``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 Rules 10335 and 10205(h) of 
the

[[Page 18408]]

Code of Arbitration Procedure of the NASD, to simplify and clarify the 
procedures for obtaining injunctive relief in certain disputes subject 
to arbitration. 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
* * * * *
10300. UNIFORM CODE OF ARBITRATION
Rule 10335. [Injunctions] Temporary Injunctive Orders; Requests for 
Permanent Injunctive Relief
    [The current text of Rule 10335 is deleted in its entirety.]
    (a) Temporary Injunctive Orders
    (1) In industry or clearing disputes required to be submitted to 
arbitration pursuant to Rule 10201, parties may seek a temporary 
injunctive order, as defined in subparagraph (a)(2) of this Rule, from 
a court of competent jurisdiction. Parties to a pending arbitration may 
seek a temporary injunctive order from a court of competent 
jurisdiction even if another party has already filed a claim arising 
from the same dispute in arbitration pursuant to this paragraph, 
provided that an arbitration hearing on a request for permanent 
injunctive relief has not yet commenced.
    (2) For purposes of this Rule, temporary injunctive order means a 
temporary restraining order, preliminary injunction or other form of 
initial, temporary injunctive relief.
    (3) A party seeking a temporary injunctive order from a court with 
respect to an industry or clearing dispute required to be submitted to 
arbitration pursuant to Rule 10201 shall simultaneously file with the 
Director a Statement of Claim requesting permanent relief with respect 
to the same dispute in the manner specified under this Code, and shall 
simultaneously serve the Statement of Claim requesting permanent relief 
on all parties. Filings and service under this Rule may be made by 
facsimile, overnight delivery service or messenger. A party obtaining a 
court-issued temporary injunctive order shall notify the Director and 
the other parties of the issuance of the order within one business day.
    (4) Unless otherwise stated, for purposes of computation of time 
under any paragraph of this Rule, any reference to days means calendar 
days, including Saturdays, Sundays or any NASD holiday. However, if a 
party must provide notice or a response to the Director and the day on 
which that notice or response to the Director must be given falls on a 
Saturday, Sunday or any NASD holiday, then the time period is extended 
until the next business day.
    (b) Hearing on Request for Permanent Injunctive Relief
    (1) Scheduling of Hearing
    If a court issues a temporary injunctive order, an arbitration 
hearing on the request for permanent injunctive relief shall commence 
within 15 days of the date the court issues the temporary injunctive 
order. If the 15th day falls on a Saturday, Sunday, or NASD holiday, 
the 15-day period shall expire on the next business day. The Director 
shall provide to all parties notice of the date, time and place of the 
hearing at least three days prior to the commencement of the hearing.
    (2) Composition of Arbitration Panel
    The hearing on the request for permanent injunctive relief shall be 
heard by a panel of three arbitrators, who shall either be all non-
public arbitrators as defined in Rule 10308(a)(4), or, if the 
underlying dispute would be heard by a public arbitrator or panel 
consisting of a majority of public arbitrators under rule 10202, a 
majority of public arbitrators as defined in Rule 10308(a)(5).
    (3) Selection of Arbitrators and Chairperson
    (A) In cases in which all of the members of the arbitration panel 
are non-public under paragraph (b)(2) of this Rule, the Director shall 
generate and provide to the parties a list of seven arbitrators from a 
national roster of arbitrators. At least a majority of the arbitrators 
listed shall be lawyers specializing in injunctive relief. Each party 
may exercise one strike to the arbitrators on the list. Within three 
days of receiving the list, each party shall inform the Director which 
arbitrator, if any, it wishes to strike, and shall rank the remaining 
arbitrators in order of preference.
    (B) In cases in which the panel of arbitrators consists of a 
majority of public arbitrators under paragraph (b)(2) of this Rule, the 
Director shall generate and provide to the parties a list of nine 
arbitrators from a national roster of arbitrators. At least a majority 
of the arbitrators listed shall be (1) public arbitrators and (2) 
lawyers specializing in injunctive relief. Each party may exercise two 
strikes to the arbitrators on the list. Within three days of receiving 
the list, each party shall inform the Director which arbitrators, if 
any, it wishes to strike, and shall rank the remaining arbitrators in 
order of preference.
    (C) Each party shall inform the Director of its preference of 
chairperson of the arbitration panel by the close of business on the 
next business day after receiving notice of the panel members. If the 
parties do not agree on a chairperson within that time, the Director, 
shall select the chairperson. In cases in which the panel consists of a 
majority of public arbitrators, the chairperson shall be one of the 
public arbitrators who is a lawyer specializing in injunctive relief. 
In cases in which the panel consists of non-public arbitrators, the 
chairperson shall be a lawyer specializing in injunctive relief. 
Whenever possible, the Director shall select as chairperson the lawyer 
specializing in injunctive relief whom the parties have ranked the 
highest.
    (D) The Director may exercise discretionary authority and make any 
decision that is consistent with the purposes of this Rule and Rule 
10308 to facilitate the appointment of arbitration panels and the 
selection of chairperson.
    (4) Applicable Legal Standard
    The legal standard for granting or denying a request for permanent 
injunctive relief is that of the state where the events upon which the 
request is based occurred, or as specified in an enforceable choice of 
law agreement between the parties.
    (5) Effect of Pending Temporary Injunctive Order
    Upon a full and air presentation of the evidence from all relevant 
parties on the request for permanent injunctive relief, the panel may 
prohibit the parties from seeking an extension of any court-issued 
temporary injunctive order remaining in effect, or, if appropriate, 
order the parties jointly to move to modify or dissolve any such order. 
In the event that a panel's order conflicts with a pending court order, 
the panel's order will become effective upon expiration of the pending 
court order.
    (6) Fees, Costs and Expenses, and Arbitrator Honorarium
    (A) The parties shall jointly bear the travel-related costs and 
expenses of the arbitrators appointed to hear the request for permanent 
injunctive relief. The arbitrators shall not reallocate such costs and 
expenses among the parties.
    (B) The party seeking injunctive relief shall pay the expedited 
hearing fees pursuant to Rule 10205(h), or, where both sides seek such 
relief, both parties shall pay such fees. In either event, however, the 
arbitrator(s) shall have the authority to allocate such fees among the 
parties.

[[Page 18409]]

    (C) Notwithstanding any other provision in the Code, the 
chairperson of the panel hearing a request for permanent injunctive 
relief pursuant to this Rule shall receive an honorarium of $375 for 
each single session, and $700 for each double session, of the hearing. 
Each other member of the panel shall receive an honorarium $300 for 
each single session, and $600 for each double session, of the hearing. 
The parties shall equally pay the difference between these amounts and 
the amounts panel members and the chairperson receive under the Code 
pursuant to IM-10104. the arbitrators shall not reallocate such amount 
among the parties.
    (c) Hearing on Damages or other Relief
    (1) Upon completion of the hearing on the request for permanent 
relief, the panel, may, if necessary, set a date for any subsequent 
hearing on damages or other relief, which shall be held before the same 
panel of arbitrators and which shall include, but not be limited to, 
the same record.
    (2) The parties shall jointly bear the travel-related costs and 
expenses of the arbitrators resulting from any subsequent hearings on 
damages or other relief. The arbitrators shall not reallocate such 
costs and expenses among the parties.
    (d) Effective Date
    This Rule shall apply to arbitration claims filed on or after [60 
days from effective date.] Except as otherwise provided in this Rule, 
the remaining provisions of the Code shall apply to proceeding 
instituted under this Rule.
* * * * *
10200. INDUSTRY AND CLEARING CONTROVERSIES
10205. Schedule of Fees for Industry and Clearing Controversies
    (h) [In each industry dispute of clearing controversy which is 
required to be submitted to arbitration before the Association as set 
forth in Rule 10201, above, where interim injunctive relief is 
requested or where a court has issued a temporary injunction and a 
party requests expedited proceedings, a total non-refundable surcharge 
of $2,500 shall be paid by the party or parties requesting the 
expedited proceedings as provided by Rule 10335. For purposes of this 
Rule, where expedited proceedings are mandated by Rule 10335(g), the 
party that sought and was granted injunctive relief by a court shall be 
deemed a party requesting expedited proceedings. These surcharges shall 
be in addition to all other non-refundable filing fees, hearing 
deposits, or costs which may be required. The arbitrator may determine 
that a party shall reimburse another party for any non-refundable 
surcharge it has paid.] A party seeking a temporary injunctive order in 
court pursuant to Rule 10335 shall pay a total non-refundable surcharge 
of $2,500 at the time the party files its Statement of Claim and 
Request for Permanent Relief as required by Rule 10335. Where more than 
one party seeks such relief, all such parties shall pay the surcharge. 
The arbitrator may determine that a party shall reimburse another party 
for part or all of any non-refundable surcharge it has paid. These 
surcharge fees shall be in addition to all other non-refundable filing 
fees, hearing deposits, or costs which may be required.
* * * * *

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

1. Purpose
    Rule 10335, the NASD's pilot injunctive relief rule, allows interim 
injunctive relief to be obtained in controversies involving member 
firms and associated persons in arbitration. The rule has primarily 
been used in ``raiding cases,'' or cases involving the transfer of an 
employee to another firm. Rule 10335 took effect on January 3, 1996 for 
a one-year pilot period. The Commission has periodically extended the 
initial pilot period in order to permit NASD Regulation's Office of 
Dispute Resolution to assess the effectiveness of the rule. The pilot 
rule is currently due to expire on January 5, 2001.\4\
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    \4\ See Securities Exchange Act Release No. 42280 (December 28, 
1999), 65 FR 1211 (January 7, 2000).
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    In November 1997, the NASD published Notice to Members 97-59, which 
sought comment on how the injunctive relief and expedited proceedings 
work and how they could be improved, and identified more than twenty 
specific questions based on previous comments received from users of 
the rule. Based on comments received in response to Notice to Members 
97-59, the NASD filed a rule to amend Rule 10335 and to make it a 
permanent part of the Code (SR-NASD-98-49) in July 1998. The NASD filed 
amendments and responses to comments received by the Commission 
regarding the rule filing in December 1998.
    In response to additional formal and informal comments received 
after the amendments and responses to comments were filed, the 
Injunctive Relief Rule Subcommittee of NASD Regulation's Inc's National 
Arbitration and Mediation Committee (``NAMC'') undertook to reconsider 
every aspect of the proposed rule change. In addition to its NAMC 
members, the Subcommittee included representatives from member firms 
that has expressed an interest in the rule, including all of the retail 
firms that commented negatively on the prior rule filing.
    After lengthy deliberation and careful compromise, the Subcommittee 
recommended withdrawing the previous rule filing and replacing it with 
the proposed amendments summarized below. The NAMC approved the 
proposed amendments at its September 1999 meeting. The proposed 
amendments were then approved by the Small Firm Advisory Board and the 
Board of Directors of NASD Regulations in December 1999.

Summary of the Current Rule

    Rule 10335 currently provides, among other things, that:
     Parties may seek temporary injunctive relief either in 
court or in arbitration.
     Parties who seek temporary injunctive relief in court must 
simultaneously submit the claim to arbitration for permanent relief.
     Parties may obtain interim injunctive relief in 
arbitration rather than in court in the form of either an Immediate 
Injunctive Order or a Regular Injunctive Order.
     Permanent injunctive relief may be obtained in arbitration 
as part of the final relief sought by a party in connection with a 
claim.
     Applications for interim injunctive relief are expedited.
     Where a court grants interim injunctive relief to one of 
the parties, arbitration proceedings on the dispute must be expedited.

Summary of Proposed Rule Change

    The NASD continues to believe that it is important that parties be 
able to obtain immediate temporary injunctive

[[Page 18410]]

relief in cases that warrant such relief. However, users of the rule 
have complained that the bifurcated procedures and multiple layers of 
review provided by the current pilot rule are unnecessarily complex and 
confusing. The principal objectives of the proposed amendments are to 
simplify and expedite the procedures for seeking immediate injunctive 
relief in intra-industry disputes and to fairly and effectively 
integrate court-ordered initial injunctive relief with the arbitration 
of the underlying claims in the same disputes.

Availability of Injunctive Relief in Arbitration

    The most significant aspect of the proposed rule change is that it 
would eliminate the option of seeking temporary injunctive relief in 
arbitration. Under the current rule, parties may seek either an 
Immediate Injunctive Order or a Regular Injunctive Order in 
arbitration, which are roughly parallel to temporary restraining orders 
and preliminary injunctions available in court. The rule does not 
currently impose any time limits on the orders issued, and does not 
specify what standard should be applied in deciding applications for 
injunctive relief. Users of the pilot rule have complained that the 
terminology is confusing, that the lack of standards has created 
uncertainty, and that the lack of time limits permits parties who 
obtain relief to pressure the enjoined party to settle by delaying the 
hearing on the merits. In addition, experience with the rule has shown 
that, although temporary injunctive relief is available in arbitration 
on an expedited basis, it is still not possible to obtain such 
injunctive relief in arbitration as quickly as in court, due largely to 
the need to appoint and convene arbitrators specifically for each case.
    Under the proposed amendments, parties would still be able to seek 
temporary injunctive relief in a court of competitive jurisdiction. The 
rule would continue to require parties seeking such relief to 
simultaneously file a Statement of Claim in arbitration requesting 
permanent relief regarding the same dispute. This requirement reflects 
the intent of the rule to provide parties with an ability to seek 
immediate relief, but to ensure that the underlying disputes remain 
subject to arbitration.
    One question that has arisen in the application of the pilot rule 
is whether parties can seek temporary injunctive relief in court even 
if a Statement of Claim has already been filed in arbitration regarding 
the underlying dispute. Under the proposed amendments, parties to a 
pending arbitration would be able to seek a temporary injunctive order 
in court even if another party has already filed a claim arising from 
the same dispute in arbitration, provided that an arbitration hearing 
on a request for permanent injunctive relief had not yet commenced.

Hearing on Request for Permanent Relief; Selection of Arbitrators; 
Appointment of Chairperson

    Under the proposed amendments, if a court issues a temporary 
injunctive order, the hearing on the request for permanent relief must 
commence within 15 days of the date the court issued its order. The 
hearing on the request for permanent injunctive relief would be heard 
by a panel of three arbitrators. In cases in which the underlying 
dispute would be heard by a panel of non-public arbitrators as defined 
in Rule 10308(a)(4), the three arbitrators would be non-public. In 
cases in which the underlying dispute would be heard by a public 
arbitrator or panel consisting of a majority of public arbitrators 
under Rule 10202, the panel hearing the request for permanent relief 
would consist of a majority of public arbitrators as defined in Rule 
10308(a)(5).
    In cases in which all of the members of the arbitration panel are 
non-public, the Director of Arbitration would generate and provide to 
the parties a list of seven arbitrators from a national roster of 
arbitrators, at least a majority of whom would be lawyers specializing 
in injunctive relief. Each party would be able to exercise one strike 
to the arbitrators on the list.
    In cases in which the panel of arbitrators consists of a majority 
of public arbitrators, the Director of Arbitration would generate and 
provide to the parties a list of nine arbitrators from a national 
roster of arbitrators. At least a majority of the arbitrators in those 
cases would be (1) public arbitrators and (2) lawyers specializing in 
injunctive relief. In those cases, the parties would be able to 
exercise two strikes to the arbitrators on the list. Regardless of the 
number of strikes given to the parties, the rule would incorporate by 
reference other Code of Arbitration rules providing unlimited strikes 
for cause, so that parties would always be able to strike arbitrators 
who were unqualified due to conflicts of interest or for other reasons.
    Under the proposed amendments, the parties would be required to 
inform the Director of their preference of chairperson of the 
arbitration panel by the close of business on the next business day 
after receiving notice of the panel members. If the parties did not 
agree on a chairperson within that time, the Director would select the 
chairperson. In cases in which the panel consists of a majority of 
public arbitrators, the chairperson would be one of the public 
arbitrators who is a lawyer specializing in injunctive relief. In cases 
in which the panel consists of non-public arbitrators, the chairperson 
would be a lawyer specializing in injunctive relief. Whenever possible, 
the Director would select as chairperson the lawyer specializing in 
injunctive relief whom the parties have ranked the highest. The rule 
would also provide that the Director of Arbitration may exercise 
discretionary authority and make any decision that is consistent with 
the purposes of the rule and the arbitrator selection rule (Rule 10308) 
to facilitate the appointment of arbitration panels and the selection 
of the chairperson.
    The timing of the hearing, the composition of the panel and the 
selection of the chairperson are the result of a carefully crafted 
compromise that is intended to balance the need to ensure fairness for 
all parties with the need to commence the arbitration process as 
quickly as possible.

Applicable Legal Standard

    The proposed rule would provide that the decision to grant or deny 
a request for permanent injunctive relief would be governed by an 
enforceable choice of law agreement between the parties, or, if there 
were no such agreement, then by the law of the state where the events 
upon which the request is based occurred.

Temporary Injunctive Order in Effect During Hearing

    One of the most difficult aspects of integrating court-ordered 
injunctive relief with arbitration of the underlying claims in the same 
dispute is the treatment of a pending court order in effect at the 
commencement of the hearing on the request for permanent relief. This 
becomes a potentially important issue in the event that the pending 
court order conflicts with the decision of the panel, because 
conflicting orders from a court and the arbitration panel could place 
parties in the position of either having to be in contempt of a pending 
court order or violation of an arbitration order.
    NASD Regulation does not believe that arbitration panels have the 
authority to dissolve, modify or supersede a court order. However, 
arbitrators do have the authority to

[[Page 18411]]

order parties not to seek extensions of pending orders, or to jointly 
ask the court to modify or dissolve a pending order, if necessary. To 
address this issue, the proposed rule change would provide that, in the 
event that a court-issued temporary injunctive order is still in 
effect, after a full and fair presentation of evidence from all 
relevant parties, an arbitration panel may prohibit the parties from 
seeking an extension of the pending court order, and, if appropriate, 
may order the parties to jointly move the court to modify or dissolve 
the pending court order. In the event that a panel's order conflicts 
with a pending court order, the panel's order will become effective 
upon expiration of the pending court order.

Fees

    Expediting the hearing on the request for permanent relief and 
providing arbitrators who meet the special requirements of Rule 10335 
may involve additional costs and expenses. For example, in order to 
appoint the required number of qualified arbitrators in the short time 
frame provided by the rule, it may be necessary to use arbitrators from 
cities other than the site of the hearing. Because expedition of the 
hearing on the request for permanent relief is in the interest of all 
parties, particularly the party against whom a court-ordered temporary 
restraining order has been entered, the proposed amendments provide 
that the parties would jointly bear the travel-related costs and 
expenses of the arbitrators appointed to hear the request for permanent 
injunctive relief. To ensure that these additional expenses are borne 
equally by the parties, the rule would prohibit the arbitrators from 
reallocating arbitrator travel costs and expenses among the parties.
    Similarly, the rule provides that, notwithstanding any other 
provision in the Code, the chairperson of the panel hearing a request 
for permanent injunctive relief pursuant to this rule shall receive an 
honorarium of $375 for each single session, and $700 for each double 
session, of the hearing. Each other member of the panel shall receive 
an honorarium of $300 for each single session, and $600 for each double 
session, of the hearing. The NASD believes that these additional 
amounts are necessary to ensure that a sufficient number of qualified 
arbitrators are available to participate in such hearings in the short 
time frame provided by the rule. Again, because both parties benefit 
from the expedition of the hearing on the request for permanent relief, 
the NASD believes that it is equitable that the parties share the 
difference between these amounts and the amounts panel members and the 
chairperson would otherwise receive under the Code. As in the case of 
additional travel costs and expenses, the rule ensure this balance by 
prohibiting arbitrators from reallocating these amounts among the 
parties.\5\
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    \5\ The payment of ordinary honoraria, as provided in IM-10104 
of the Code, shall not be affected by this provision.
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    Finally, the rule also provides that the party seeking injunctive 
relief shall pay the expedited hearing fees pursuant to Rule 10205(h), 
or, where both sides seek such relief, both parties shall pay such 
fees. In either event, the rule specifically provides that the 
arbitrators shall have the authority to allocate such fees among the 
parties. The rule has no effect on the obligations of parties to pay, 
or on the authority of arbitrators to allocate, any other hearing fees 
required under the Code.

Subsequent Hearings on Damages or Other Relief

    The hearing on the request for permanent relief is intended to 
address only the question of injunctive relief. It is not intended to 
address other forms of relief, such as damages, which do not need to be 
heard on an expedited basis. The rule provides that if, upon completion 
of the hearing on the request for permanent relief, a subsequent 
hearing on other forms of relief is necessary, the panel shall set the 
date for the subsequent hearing. This would provide parties the 
opportunity to develop a more complete record than might be possible 
within the constraints of the expedited injunctive relief hearing. Any 
subsequent hearing would be before the same panel that heard the 
request for permanent injunctive relief, and would include, but would 
not be limited to, the record developed at the earlier hearing. The 
rule would also provides that the parties would jointly bear the 
travel-related costs and expenses of the arbitrators resulting from any 
subsequent hearings on damages or other relief, and prohibits the 
arbitrators from reallocating those costs and expenses among the 
parties.

Rule 10205(n)

    Rule 10205(h), Schedule of Fees in Industry and Clearing 
Controversies, currently provides that when temporary injunctive relief 
is sought in arbitrators or in court, a non-refundable surcharge of 
$2,500 shall be paid by the party or parties requesting the expedited 
proceedings as provided in Rule 10335. To harmonize Rule 10205(h) with 
the proposed amendments to Rule 10335, the proposed rule change would 
also amend Rule 10205(h) to eliminate reference to the availability of 
temporary injunctive relief in arbitration, and to clarify the 
application of the provision of temporary injunctive orders sought in 
court.
2. Statutory Basis
    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 it is 
in the best interest of investors and the parties involved in intra-
industry disputes to provide for fast and efficient resolution of 
requests for temporary injunctive relief, and to provide clear and 
simple rules governing the integration of court-ordered relief with the 
arbitrator of the underlying disputes.

B. Self-Regulation 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 Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designated up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 18412]]

arguments concerning the foregoing. The Commission notes in particular 
that, under the proposal, the parties shall jointly bear the travel-
related costs and expenses of the arbitrators appointed to hear the 
request for permanent injunctive relief. Further, the parties shall 
jointly bear the travel-related costs and expenses resulting from any 
subsequent hearings on damages or other relief. In addition, the 
parties shall equally pay the difference between the honorarium under 
proposed paragraph (b)(6)(C) of Rule 10335 and the amounts the 
arbitrators are otherwise entitled to receive under the Code. The 
arbitrators may not reallocate these costs and expenses among the 
parties. The Commission seeks comments on this fee structure, including 
whether the proposal is consistent with the Act which, among other 
things, prohibits the imposition of inappropriate and unnecessary 
burdens on competition \6\ and requires that fees and charges be 
reasoanble and equitably allocated.\7\ In previous orders, the 
Commission has relied substantially on arbitrators' discretion in 
finding that fees and charges met this standard.\8\
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    \6\ See 15 U.S.C. 78o-3(b)(9)
    \7\ See 15 U.S.C. 78o-3(b)(5).
    \8\ See, e.g., Securities Exchange Act Release No. 41056 
(February 16, 1999), 64 FR 10041 (March 1, 1999).
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    Persons making written submissions should file six copies thereof 
with the Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, D.C. 20549-0609. 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 No. SR-NASD-00-02 and should be 
submitted April 28, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-8649 Filed 4-6-00; 8:45 am]
BILLING CODE 8010-01-M