[Federal Register Volume 68, Number 69 (Thursday, April 10, 2003)]
[Notices]
[Pages 17713-17714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8733]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47631; File No. SR-NASD-2003-64]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Extend for an Additional Six-Month Period a 
Pilot Rule To Require Industry Parties in Arbitration To Waive 
Application of Contested California Arbitrator Disclosure Standards, 
Upon the Request of Customers and Associated Persons With Claims of 
Statutory Employment Discrimination

April 3, 2003.
    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 March 31, 2003, the National Association of Securities Dealers, Inc. 
(``NASD'') 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. NASD has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change pursuant to Rule 19b-4(f)(6) under the 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(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to extend the pilot rule in IM-10100, paragraphs 
(f) and (g), to require industry parties in arbitration to waive 
application of contested California arbitrator disclosure standards, 
upon the request of customers (and, in industry cases, upon the request 
of associated persons with claims of statutory employment 
discrimination), for a six-month pilot period.

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 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. The NASD 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
    The proposed rule change extends for an additional six months a 
pilot rule that was approved by the Commission for a six-month period 
ending March 30, 2003.\4\ NASD's statement of purpose is contained in 
the Commission's Approval Order. In that Approval Order, at footnote 9, 
the Commission stated:
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    \4\ Exchange Act Release No. 46562 (September 26, 2002), 67 FR 
62085 (October 3, 2002).

    If the outcome of the lawsuit is that the California Standards 
do not apply to NASD arbitration, waivers would no longer be 
necessary. Cases in which arbitrators were appointed pursuant to 
waivers would continue to their conclusion. If the lawsuit has not 
concluded at the expiration of the six-month pilot period, NASD may 
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request an extension.

    The litigation discussed in the Approval Order has not concluded, 
and NASD now is a party to additional litigation relating to 
application of the California Standards. Accordingly, NASD is now 
requesting an extension of the pilot for an additional six months (or 
until the pending litigation has resolved the question of whether or 
not the California Standards apply to NASD arbitration). NASD requests 
that the pilot be extended for six months beginning on March 31, 2003.
    In addition, NASD has made one change to its model waiver 
agreement. In light of questions raised by practitioners, the first 
sentence of the waiver agreement has been amended to delete reference 
to federal or state laws other than the California Standards. NASD 
proposes to begin using the amended waiver agreement upon the operative 
date of the pilot extension for all cases in which none of the parties 
has yet signed the prior NASD waiver agreement. This change will not 
affect any parties that already have signed the prior NASD waiver 
agreement, or any cases in which some of the parties have signed the 
prior NASD waiver agreement. If any party in an ongoing case has signed 
the prior NASD waiver agreement, then all other parties will use the 
same agreement.

[[Page 17714]]

2. Statutory Basis
    NASD 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 NASD'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. NASD believes that expediting the appointment of 
arbitrators under the waiver, at the request of customers (and, in 
industry cases, associated persons with claims of statutory employment 
discrimination), will allow those parties to exercise their contractual 
rights to proceed in arbitration in California, notwithstanding the 
confusion caused by the disputed California Standards.
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    \5\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

    NASD has designated the proposed rule change as one that: (i) Does 
not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 days from the date on which 
it was filed, or such shorter time as the Commission may designate. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
At any time within 60 days of the filing of the proposed rule change, 
the Commission may summarily abrogate the rule change if it appears to 
the Commission that the action is necessary or appropriate in the 
public interest, for the protection of investors, or would otherwise 
further the purposes of the Act.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\8\ the proposal 
may not become operative for 30 days after the date of its filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, and the self-
regulatory organization must file notice of its intent to file the 
proposed rule change at least five business days beforehand. NASD has 
requested that the Commission waive the five-day pre-filing requirement 
and the 30-day operative delay so that the proposed rule change will 
become immediately effective upon filing.
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the five-day pre-filing 
provision and the 30-day operative delay is consistent with the 
protection of investors and the public interest.\9\ Waiving the pre-
filing requirement and accelerating the operative date will merely 
extend a pilot program that is designed to provide investors with a 
mechanism to resolve disputes with broker--dealers. During the period 
of this extension, the Commission and NASD will continue to monitor the 
status of the previously discussed litigation. For these reasons, the 
Commission designates that the proposed rule change as effective and 
operative immediately.
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    \9\ For purposes of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. 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 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-2003-64 and 
should be submitted by May 1, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8733 Filed 4-9-03; 8:45 am]
BILLING CODE 8010-01-P