[Federal Register Volume 67, Number 149 (Friday, August 2, 2002)]
[Notices]
[Page 50499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19534]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46256; File No. SR-NASD-2002-62]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval to Proposed Rule Change Relating 
to Amending Code of Arbitration Procedure to Conform Rule 10314(b) to 
the Current Minimum Standard Applicable to Claims

July 25, 2002.

I. Introduction

    On May 9, 2002, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly-owned 
subsidiary, NASD Dispute Resolution, Inc. (``NASD Dispute Resolution'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend the NASD Code of Arbitration Procedure to conform Rule 10314(b) 
to the current minimum standard applicable to claims.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on June 20, 2002.\3\ The Commission received two comments on 
the proposal.\4\ This order approves the proposed rule change.
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    \3\ See Securities Exchange Act Release No. 46077 (June 14, 
2002), 67 FR 42088 (June 20, 2002).
    \4\ See letters to Jonathan G. Katz, Secretary, Commission, from 
Franklin Geerdes, Attorney, dated May 24, 2002 (``Geerdes Letter''); 
Martin L. Feinberg, Attorney, dated July 7, 2002 (``Feinberg 
Letter'').
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II. Description of the Proposal

    In its proposal, NASD Dispute Resolution proposed to amend the Code 
to conform Rule 10314(b) to the current minimum standard applicable to 
claims, so that Answers need only specify relevant facts and available 
defenses to the Statement of Claim that was submitted by the claimant, 
rather than specifying all such facts and defenses that may be relied 
upon at the hearing.
    In the proposal, NASD Dispute Resolution explained that it recently 
streamlined its procedures for review of arbitration claims. NASD 
Dispute Resolution does not consider a Statement of Claim to be 
deficient if it meets the minimum requirements of a properly signed 
Uniform Submission Agreement that names the same respondents as shown 
on the Statement of Claim, proper fees, and sufficient copies of the 
Statement of Claim. The proposed rule change would make the minimum 
requirements contents of an Answer consistent with those of a Statement 
of Claim.

III. Summary of Comments

    The Commission received two comments on the proposal.\5\ Commenters 
noted a perceived ambiguity in the proposed text of NASD Rule 
10314(b)(1). In the proposed rule change, NASD Dispute Resolution had 
proposed the following text: ``The Answer shall specify all relevant 
facts and available defenses to the Statement of Claim submitted. . . 
.'' One commenter suggested that the modifier ``all'' should be placed 
before ``available defenses,'' \6\ while another suggested that ``the'' 
should precede ``relevant facts.'' \7\ NASD Dispute Resolution 
maintains, and the Commission agrees, that the proposed rule text does 
not require the revisions proposed by the commenters.\8\
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    \5\ See note 4, supra.
    \6\ See Feinberg Letter.
    \7\ See Geerdes Letter.
    \8\ Telephone conference between Jean I. Feeney, Associate Vice 
President and Chief Counsel, NASD Dispute Resolution and Geoffrey 
Pemble, Attorney, Division of Market Regulation, Commission (July 
25, 2002).
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IV. Discussion

    After careful 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 
\9\ and, in particular, the requirements of section 15A of the Act \10\ 
and the rules and regulations thereunder. The Commission finds 
specifically that the proposed rule change is consistent with section 
15A(b)(6) of the Act,\11\ which requires, among other things, that the 
rules of an association 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.\12\ The Commission believes that the proposed rule 
harmonizes the pleading requirements for claimants and respondents in 
arbitration proceedings administered by NASD Dispute Resolution in a 
manner consistent with the Act. Further, the Commission has carefully 
considered the suggestions submitted by commenters and has concluded 
that the proposed rule text does not require the revisions proposed by 
the commenters.
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    \9\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78o-3.
    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ Id.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-NASD-2002-62) be, 
and it hereby is, approved.
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-19534 Filed 8-1-02; 8:45 am]
BILLING CODE 8010-01-P