[Federal Register Volume 65, Number 70 (Tuesday, April 11, 2000)]
[Notices]
[Pages 19421-19423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8878]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42607; File No. SR-NASD-00-05]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to the Release of Disciplinary Information

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 February 16, 2000, 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 (``Commission'' or ``SEC'') the 
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 of the proposed rule change to solicit comments 
on the proposal from interested persons.
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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

    NASD Regulation is proposing to amend IM-8310-2 of the Association, 
to provide for the publication of all final, litigated decisions issued 
by the Office of Hearing Officers (``OHO''),\3\ the National 
Adjudicatory Council (``NAC''), and the NASD Board, regardless of 
sanctions imposed. Below is the text of the proposed rule change. 
Proposed new language is in italics.
* * * * *
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    \3\ The OHO issues decisions rendered by Hearing Officers 
(default decisions) and Hearing Panels.
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IM-8310-2. Release of Disciplinary Information
    (a) through (c) No change.
    (d)(1) The Association shall release to the public information with 
respect to

[[Page 19422]]

any disciplinary decision issued pursuant to the Rule 9000 Series 
imposing a suspension, cancellation or expulsion of a member; or 
suspension or revocation of the regulation of a person associated with 
a member; or suspension or barring of a member or person associated 
with a member from association with all members; or imposition of 
monetary sanctions of $10,000 or more upon a member or person 
associated with a member; or containing an allegation of a violation of 
a Designated Rule; and may also release such information with respect 
to any disciplinary decision or group of decisions that involve a 
significant policy or enforcement determination where the release of 
information is deemed by the President of NASD Regulation, Inc. to be 
in the public interest. The Association also may release to the public 
information with respect to any disciplinary decision issued pursuant 
to the Rule 8220 Series imposing a suspension or cancellation of the 
member or a suspension of the association of a person with a member, 
unless the National Adjudicatory Council determines otherwise. The 
National Adjudicatory Council may, in its discretion, determine to 
waive the requirement to release information with respect to a 
disciplinary decision under those extraordinary circumstances where the 
release of such information would violate fundamental notions of 
fairness or work an injustice.
    The Association may release to the public information on any other 
final, litigated, disciplinary decision issued pursuant to the Rule 
8220 Series or Rule 9000 Series, not specifically enumerated in this 
paragraph, regardless of sanctions imposed, so long as the names of the 
parties and other identifying information is redacted.
    (2) No changes.
    (e) through (m) 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

1. Purpose
    Some, but not all, NASD disciplinary decisions are currently 
available in electronic legal research databases, such as Westlaw, 
Lexis-Nexis, and Books on Screen. Interpretive Material 8310-2 (the 
``Interpretation'') permits the NASD to release any disciplinary 
decision: (1) Imposing a suspension, cancellation or expulsion of a 
member; (2) imposing a suspension or revocation of the registration of 
any associated person; (3) imposing a suspension or barring a member or 
associated person from association with all members; (4) imposing 
monetary sanctions of $10,000 or more on a member or associated person; 
(5) containing an alleged violation of a Designated Rule; or (6) deemed 
by the President of NASD Regulation to involve a significant policy or 
enforcement determination where the release of information would be in 
the public interest.
    Disciplinary decisions provide guidance in how NASD rules are to be 
interpreted and enforced. The Association believes that providing 
vendors of legal research databases with all final, litigated decision 
issued by the OHO, the NAC, and the NASD Board, edited to prevent the 
disclosure of the identities of respondents upon whom minimal or no 
sanctions are imposed, is in the public interest.
    Accordingly, the Association is proposing to amend the 
Interpretation to provide for the publication of all final, litigated 
decisions issued by the OHO, the NAC, and the NASD Board, regardless of 
sanctions imposed. However, the names of the parties and other 
identifying information mentioned in the decisions that do not meet the 
current enumerated publication criteria, as outlined in the 
Interpretation (and listed above), will be redacted from these 
decisions. Settlements, Letters of Acceptance, Waivers and Consents 
(``AWCs''), and Minor Rule Violation Plan letters are excluded from the 
proposal. This proposal will not have any impact on the information 
contained in or disclosed by the Central Registration Depository 
system.
    The Association will make all decisions covered under this proposal 
available that were issued after August 7, 1997, the effective date of 
the most recent significant changes to the NASD Code of Procedure.\4\ 
The Association believes that the disciplinary decisions issued after 
August 7, 1997, are of special value in providing a clearer picture of 
the Association's current application and interpretation of its 
substantive and procedural rules. The Association does not believe that 
the benefits that would arise from publishing decisions that pre-date 
August 7, 1997, justify the administrative burdens that would result 
from having to redact the names of parties and other identifying 
information from these decisions.
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    \4\ See Special NASD Notice to Members 97-55 (August 1997).
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2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\5\ 
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 is consistent with Section 15A(b)(7) of the Act 
\6\ in that it works to adequately safeguard the interests of investors 
while establishing fair and reasonable rules for its members and 
persons associated with its members. The NASD also believes that the 
proposed changes are consistent with Section 15A(b)(8) of the Act \7\ 
in that they further the statutory goals of providing a fair procedure 
for disciplining members and associated persons.
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    \5\ 15 U.S.C. 78o-3(b)(6).
    \6\ 15 U.S.C. 78o-3(b)(7).
    \7\ 15 U.S.C. 78o-3(b)(8).
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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 Act.

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

    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 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and

[[Page 19423]]

publishes its reasons for so finding or (ii) as to which the sale-
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 
arguments concerning the foregoing, including whether the proposed rule 
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 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-00-05 and should be 
submitted by May 2, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-8878 Filed 4-10-00; 8:45 am]
BILLING CODE 8010-01-M