[Federal Register Volume 69, Number 54 (Friday, March 19, 2004)]
[Rules and Regulations]
[Pages 13166-13182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6069]



[[Page 13165]]

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Part III





Securities and Exchange Commission





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17 CFR Parts 200, 201, and 240



Adoption of Amendments to the Rules of Practice and Delegations of 
Authority of the Commission; Final Rule

  Federal Register / Vol. 69, No. 54 / Friday, March 19, 2004 / Rules 
and Regulations  

[[Page 13166]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 201, and 240

[Release No. 34-49412; File No. S7-25-03]
RIN 3235-AI98


Adoption of Amendments to the Rules of Practice and Delegations 
of Authority of the Commission

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
amending its Rules of Practice and certain of its delegations of 
authority to the staff in light of the Sarbanes-Oxley Act of 2002. The 
Sarbanes-Oxley Act, among other things, authorizes the Commission to 
review disciplinary actions of the Public Company Accounting Oversight 
Board and to create ``Fair Funds'' in Commission administrative 
proceedings. The Commission also is amending other provisions of the 
Rules of Practice and its delegations as a result of its experience 
with those rules and to correct certain citations. The amendments will 
enhance the transparency and facilitate parties' understanding of the 
applicability of the review process to Board proceedings. The 
amendments also will make practice under the rules easier and more 
efficient.

EFFECTIVE DATE: April 19, 2004.

FOR FURTHER INFORMATION CONTACT: Bari S. Podell, Office of the General 
Counsel, (202) 942-0950, Securities and Exchange Commission, 450 5th 
Street, NW., Washington, DC 20549-0208.

SUPPLEMENTARY INFORMATION: On November 25, 2003, the Commission 
proposed amendments to the Rules of Practice (``Rules'').\1\ The 
Commission proposed new rules to effectuate the provisions of the 
Sarbanes-Oxley Act of 2002.\2\ The Commission also proposed additional 
amendments to its existing Rules as a result of experience with those 
rules. Additional amendments were proposed to correct typographical 
errors and change certain citations to conform to the amended rules.
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    \1\ Proposed Amendments to the Rules of Practice and Related 
Provisions, Exchange Act Release No. 48832, 68 FR 68185 (Dec. 5, 
2003). It is noted that the release incorrectly was dated November 
23, 2003. The correct date of the release is November 25, 2003.
    \2\ 15 U.S.C. 7201 et seq.
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I. Discussion

    The Commission requested comment from interested persons. The 
Commission received two comment letters in response to the Proposing 
Release.\3\ One comment letter expressed concern that the Commission 
preserve funds for future disgorgement funds. The other comment letter 
recommended certain bookkeeping measures. The Commission will consider 
the two commenters' observations and suggestions in connection with 
these issues. There were no comment letters addressing the text or 
operation of the proposed Rules. After careful consideration, the 
Commission is adopting the amendments to the Rules of Practice and 
related provisions, as well as certain delegations of authority to the 
staff, essentially as proposed.
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    \3\ Letters from Donna L. Greer, Vice-President of Business 
Development, Greer Information Services, Ltd. (December 31, 2003), 
and from Joseph E. Dryer, Houston, Texas (December 4, 2003).
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A. Amendments as a Result of the Sarbanes-Oxley Act

    Section 107(c) of the Sarbanes-Oxley Act \4\ provides for 
Commission review of disciplinary actions imposed by the Public Company 
Accounting Oversight Board (``Board'') and actions that result in the 
disapproval of registration of a public accounting firm.\5\ Sections 
105(d) and 107(c) of the Sarbanes-Oxley Act require the Board to give 
the Commission notice if the Board disapproves the registration of a 
public accounting firm or if the Board disciplines a registered public 
accounting firm or a person associated with a registered public 
accounting firm.
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    \4\ 15 U.S.C. 7217(c).
    \5\ Under section 102(c) of the Sarbanes-Oxley Act, 15 U.S.C. 
7212(c), the Board's written notice of disapproval of a complete 
application for registration as a registered public accounting firm 
is treated as a ``disciplinary sanction'' for purposes of sections 
105(d) and 107(c) of that Act, 15 U.S.C. 7215(d), 7217(c).
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    In creating its framework for Commission review of Board actions, 
section 107(c) of the Sarbanes-Oxley Act specifies that sections 
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934,\6\ which 
govern Commission review of self-regulatory organization disciplinary 
proceedings, shall govern Commission review of final disciplinary 
sanctions imposed by the Board ``as fully as if the Board were a self-
regulatory organization and the Commission were the appropriate 
regulatory agency for such organization for purposes of those sections 
19(d)(2) and 19(e)(1). * * *'' As described in the proposing release, 
the effect of section 107(c) of the Sarbanes-Oxley Act is to make Board 
actions subject to Commission review under those Exchange Act 
provisions on the same basis as actions by existing self-regulatory 
organizations, and to make relevant rules under those provisions 
applicable to that review.
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    \6\ 15 U.S.C. 78s(d)(2) and 78s(e)(1).
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    The Commission nonetheless proposed to enact new rules and to amend 
others for purposes of clarity. The Commission has now determined to 
adopt the new proposed rules and those changes as proposed. The changes 
include specific references to Commission review of Board actions and, 
for example, identify the process by which the Board will provide 
notice to the Commission of its actions.
1. Disapproval of Registration
    Rule 19d-4(a) adds definitions. As proposed and adopted, rule 19d-
4(b) will require the Board to file with the Commission and to serve on 
the public accounting firm a notice of disapproval of registration 
within 30 days of the Board's action.\7\ The notice must include the 
firm's name and last known address (as reflected in the Board's 
records), the basis for the Board's disapproval, a copy of the Board's 
written notice of disapproval, and such other information as the Board 
deems relevant.
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    \7\ The 30-day period for filing is consistent with the thirty 
days provided in section 19(d)(2) of the Exchange Act for the filing 
of an application for review by a person aggrieved by certain 
actions taken by a self-regulatory organization.
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2. Review of Disciplinary Sanctions
    The Commission has determined to adopt proposed Rule 19d-4(c). That 
rule requires the Board to file and serve a notice of any disciplinary 
sanction, other than a disapproval of registration, within 30 days of 
the Board's action. The notice must provide the name and last address 
(as reflected in the Board's records) of the associated person or 
registered public accounting firm disciplined and a description of the 
acts or omissions on which the sanction is based. The notice must also 
specify the sanction imposed, give the effective date of the sanction, 
and include a statement of the reasons for the sanction or a copy of 
the Board's statement justifying the sanction, as well as such other 
information as the Board deems relevant.
    The Commission is also adopting proposed Rule 440(a) with respect 
to applications for review from actions of the Board. Rule 440(a) 
permits any person aggrieved by a final disciplinary sanction 
(including disapproval of a completed application for registration of a 
public accounting firm) imposed by the Board to file an application for 
review with the Commission. Rule

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440(b) requires any application to be filed within 30 days after the 
Board's notice under Rule 19d-4 is received by the aggrieved person. 
The application must identify the determination complained of and 
contain a brief statement of the alleged errors in the determination. 
If the applicant is represented by counsel, the application must be 
accompanied by a notice of counsel's appearance, filed in accordance 
with new Rule 102(d). Under Rule 440(d), the Board has fourteen days 
after receipt of the application to certify the record to the 
Commission and serve one copy of the record index on each party.
3. Stay of Board Action
    In accordance with section 105(e)(1) of the Sarbanes-Oxley Act,\8\ 
proposed Rule 440(c) provided that filing an application for review 
would act as a stay of the Board's action unless the Commission 
otherwise orders. Proposed Rule 401(e)(1) would permit any person 
aggrieved by the automatic stay to ask the Commission to lift the stay. 
The Commission may, in any event, lift the stay on its own motion.
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    \8\ 15 U.S.C. 7215(e)(1).
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    As permitted under section 105(e)(1) of the Sarbanes-Oxley Act, 
proposed Rule 401(e)(2) provided that the Commission may act to lift a 
stay of Board action summarily, without notice and opportunity for a 
hearing. The Commission could also expedite consideration of a motion 
to lift a stay of Board action to the extent expedition is consistent 
with the Commission's other responsibilities. If the consideration of a 
motion to lift is expedited, proposed Rule 401(e)(3) permitted persons 
opposing the lifting of the stay to file an opposition within two days 
of service of the motion to lift unless the Commission orders a 
different period.\9\ The Commission is adopting all these provisions.
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    \9\ The two-day period is modeled after Rule 401(d)(3), which 
permits persons opposing a motion to the Commission for a stay to 
file a statement in opposition within two days of service of the 
motion.
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4. Review on Motion of the Commission
    The Commission is also adopting proposed Rule 441(a), which permits 
the Commission to review a Board disciplinary sanction on its own 
motion. The Commission must determine whether to take review of a Board 
disciplinary sanction within 40 days after the Board files its notice 
of the action.\10\ Rule 441(b) permits the Commission to raise any 
material matter, whether or not the parties previously raised that 
matter. The Commission can raise material matters in cases it takes up 
on its own motion and in cases that are appealed to it. The Commission 
may provide notice and an opportunity for supplemental briefing if the 
Commission believes that such briefing would significantly aid its 
decisional process.
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    \10\ Rule 421(a) permits the Commission to order review of 
certain determinations by a self-regulatory organization within 40 
days after notice thereof is filed with the Commission.
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5. Amendments to Existing Rules
    The Commission also adopts as proposed certain amendments to the 
following Rules with respect to the review proceedings created by the 
Sarbanes-Oxley Act:
     The definition of ``proceeding'' in Rule 
101(a)(9) (Definitions) is amended to include review of Board 
disciplinary sanctions under Rule 440.\11\
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    \11\ Rule 101(a)(12) defines the term ``Board'' to mean the 
Public Company Accounting Oversight Board.
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     Rule 202(a) (Specification of procedures by 
parties in certain proceedings) and Rule 210 (Parties, limited 
participants and amici curiae), which permit intervention and leave to 
participate on a limited basis, are amended to exclude review of Board 
disciplinary sanctions under Rule 440. These Rules currently do not 
apply to Commission enforcement or disciplinary proceedings or to 
review of determinations by self-regulatory organizations.
     Rule 450(a)(2) (Briefs filed with the 
Commission) is amended to include a provision for briefs to be filed in 
the Commission's review of final disciplinary sanctions imposed by the 
Board. Under the Rule, the Commission would issue a briefing schedule 
order within 21 days (or such longer time as provided by the 
Commission) following its receipt of the Board's index of the record of 
the Board's determination.
     Rule 460(a)(3) (Record before the Commission) 
defines the contents of the record before the Commission to include the 
record certified to the Commission by the Board, any application for 
review, and any submissions made to the Commission.
    The Commission is revising its ex parte rule, 17 CFR 200.111 
(Prohibitions; application, definitions), to provide that, in 
proceedings to review Board action, the prohibitions against ex parte 
communications commence when a copy of the application for review of 
the Board's action has been filed with the Commission and served on the 
Board.\12\
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    \12\ At the same time, the Commission is correcting 17 CFR 
200.111(c)(1)(ii) to provide that, in proceedings under section 
19(d) of the Securities Exchange Act of 1934, the prohibitions 
against ex parte communications commence when a copy of the 
application for review of the self-regulatory organization's action 
is filed with the Commission. The rule currently provides that the 
prohibition commences when the Secretary serves the application on 
the self-regulatory organization. This no longer is the Commission's 
practice. The change conforms the language of the provision to 
reflect current practice.
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6. Delegations of Authority
    To implement these rule amendments, the Commission adds certain 
delegations to the staff. Title 17 CFR 200.30-7 (Delegation of 
authority to the Secretary of the Commission) currently delegates to 
the Commission's Secretary the authority, among other things, to 
postpone or adjourn hearings, set and reallocate time for oral 
argument, extend the time to make filings, issue orders pursuant to 
offers of settlement, and certify records to the appropriate United 
States Court of Appeals. The Commission is amending this delegation to 
make clear that the delegations extend, where appropriate, to 
proceedings under the Sarbanes-Oxley Act.
    The Commission also is amending 17 CFR 200.30-7(a)(5) and 200.30-
10(a)(5), which currently permit the Secretary or the Chief 
Administrative Law Judge, respectively, to authorize a party to file 
briefs exceeding 60 pages ``in accordance with Rule 450(c).'' However, 
existing Rule 450(c) provides that briefs cannot exceed 50 pages, 
absent leave of the Commission.\13\ The Commission therefore is 
correcting these delegations to provide that the Secretary or the Chief 
Administrative Law Judge may authorize a party to file briefs exceeding 
50 pages. The Commission also is making clear that its delegation of 
authority to the Secretary and its delegation of authority to the Chief 
Administrative Law Judge include proceedings under the Securities 
Investor Protection Act of 1970 and under Rule 102(e).
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    \13\ 17 CFR 201.450(c).
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    The Commission further amends 17 CFR 200.30-14(g)(1) to delegate to 
the General Counsel the authority, among other things, to grant 
requests for the submission of late briefs, issue an order dismissing a 
proceeding as to a party if the party requests to withdraw its appeal, 
permit a party to supplement the record, and issue briefing schedule 
orders in proceedings under the Sarbanes-Oxley Act. The General Counsel 
also is delegated the authority, in proceedings under the Sarbanes-
Oxley Act, to determine that an application for review has been 
abandoned, to determine whether to stay a Commission order or vacate a

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preexisting stay pending appeal of the order to the Federal courts, to 
grant or deny requests for oral argument, and to determine whether to 
lift the automatic stay of a disciplinary sanction. The General Counsel 
is further delegated the authority to request additional briefs from 
the parties. See 17 CFR 200.30-14(g)(1)(vii), (g)(4), (g)(5), (g)(7), 
and (g)(8).

B. Fair Funds and Disgorgement

    Section 308(a) of the Sarbanes-Oxley Act \14\ provides that, in a 
Commission administrative proceeding where the Commission or a hearing 
officer enters an order requiring disgorgement from a respondent for a 
violation of the securities laws, or where the respondent agrees in 
settlement to payment of such disgorgement, any civil penalty also 
ordered against that respondent may be added to the disgorgement funds 
to create a ``Fair Fund'' to be disbursed by the Commission for the 
benefit of the victims of such violation. Section 308(b) of the 
Sarbanes-Oxley Act \15\ authorizes the Commission to accept gifts or 
bequests to the United States of real and personal property for deposit 
in a Fair Fund.
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    \14\ 15 U.S.C. 7246(a).
    \15\ 15 U.S.C. 7246(b).
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    Administration of, and distribution to investors under, Fair Funds 
and disgorgement plans occur after the conclusion of the principal 
action against a respondent. The functions involved are administrative 
in nature and not subject to provisions such as Rule 120 of the Rules 
of Practice and the ex parte communication rule. Recognizing this, the 
Commission has determined to adopt its proposal to remove, from subpart 
D of the Rules of Practice, Rules 610 through 620, which relate to the 
development, submission, approval, and administration of orders of 
disgorgement, and to the right to challenge orders of disgorgement, and 
to include them in a new subpart F.
    The Commission is adopting Rules 1100, 1101, and 1102 as proposed. 
New Rule 1100 authorizes the Commission to create a Fair Fund in any 
administrative proceeding in which a final order is entered against a 
respondent requiring disgorgement and payment of a civil money penalty. 
The Commission may also create a Fair Fund if it approves a settlement 
of an administrative proceeding that provides for a respondent's 
payment of disgorgement and a civil money penalty. The Commission may 
add to the Fair Fund any property received in accordance with section 
308(b) of the Sarbanes-Oxley Act.\16\
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    \16\ Section 308(b) of the Sarbanes-Oxley Act provides that the 
Commission may accept, hold, and utilize gifts of property for a 
Fair Fund.
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    The Commission has the power to require disgorgement of a wrong-
doer's ill-gotten gains obtained by virtue of his or her securities law 
violation, regardless of whether particular investors suffered any 
damages.\17\ The Commission notes that Fair Funds must be disbursed to 
the investors harmed by the securities law violation at issue. Where 
there are no identifiable victims of a violation, the Commission will 
continue to require that any disgorgement and civil money penalty 
amounts be paid to the United States Treasury.
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    \17\ See, e.g., SEC v. First City Financial Corp., 890 F.2d 
1215, 1230 (D.C. Cir. 1989) (defendant who violated Exchange Act 
section 13 required to disgorge although harm was to the market as a 
whole, not to particular persons).
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    In some cases, the Commission may conclude that it is in the public 
interest to impose a civil money penalty and order disgorgement even 
though the relative value of the ill-gotten gains and the number of 
potential claimants would result in high administrative costs and de 
minimis distributions to individual investors. Under such 
circumstances, the Commission will not create a Fair Fund and will 
continue its practice of ordering that the disgorgement and civil 
penalty amount be paid directly to the United States Treasury.
    The Rules permit the Commission or the hearing officer, as 
appropriate, to oversee the administration of both disgorgement funds 
and Fair Funds. As adopted, Rule 1101(a) allows the Commission or the 
hearing officer at any time to order any party to submit a plan for the 
administration of either a Fair Fund or a disgorgement fund. Unless 
ordered otherwise, the Division of Enforcement must submit such a plan 
within 60 days after the respondent has tendered the funds or other 
assets pursuant to the Commission's order to pay disgorgement and, if 
applicable, a civil money penalty.
    Rule 1101(b) requires that a Fair Fund plan or disgorgement fund 
plan shall provide for: Receiving and holding additional funds, 
including any funds received under section 308(b) of the Sarbanes-Oxley 
Act; identifying categories of persons potentially eligible to receive 
funds; providing notice to those persons of the fund's existence and 
their potential eligibility; processing claims; termination of the fund 
and disposition of any remaining assets not otherwise distributed; 
administration of the fund; and such other provisions as the Commission 
or the hearing officer deems appropriate.
    Rule 1102(a) provides that the Commission may authorize payment of 
disgorgement funds into any court registry or to a court-appointed 
receiver in any case that alleges the same or similar facts against the 
respondent.
    Rule 1102(b) permits the Commission or the hearing officer to order 
that funds be paid directly to the United States Treasury if the cost 
of administering the fund relative to the value of the disgorgement 
fund, together with any civil money penalty, and the number of 
potential claimants do not justify distribution of the funds.
    As adopted, Rule 1103 requires that notice of a proposed 
disgorgement plan or a proposed Fair Fund plan be published in the SEC 
Docket or such other publications as the Commission or the hearing 
officer directs. The notice must specify how to obtain copies of the 
proposed plan and inform those desiring to comment to submit their 
written views to the Commission. The Commission also would post notice 
of a proposed plan on its Web site. The reference in the proposed rule 
to publication in the SEC News Digest has been deleted since the News 
Digest now is available through the Commission's Web site.
    The Commission is also adopting Rules 1104, 1105, and 1106 as 
proposed. Rule 1104 provides that, at any time after 30 days following 
publication of the notice of a proposed disgorgement plan or a proposed 
Fair Fund plan, the Commission or the hearing officer may approve, 
modify, or disapprove the proposed plan. If a plan is substantially 
modified, the Commission or the hearing officer may order publication 
of the modified plan before its adoption.
    Rule 1105 provides for the administration of Fair Funds and 
disgorgement funds. It permits the Commission or the hearing officer to 
appoint any person, including a Commission employee, as a fund 
administrator. Either the Commission or the hearing officer would be 
able to remove an administrator.
    An administrator who is not a Commission employee must post a bond 
in an amount designated by the Commission, unless the bond is waived by 
the Commission. An administrator who is not a Commission employee may 
receive a fee for reasonable services, subject to approval by the 
Commission or the hearing officer. Commission employees may not receive 
such fees. Fees and expenses from fund administration would be paid 
first from interest and then, if the interest were

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insufficient, from corpus. The administrator must give periodic 
accountings, as ordered, and submit a final accounting prior to his or 
her discharge and cancellation of any bond. On motion of a party or the 
administrator or upon notice of the hearing officer or the Commission, 
the plan may be amended.
    Rule 1105(b) provides that a respondent may be required or 
permitted to administer a plan of disgorgement, subject to terms the 
Commission or the hearing officer deems appropriate. At this time, the 
Commission does not propose to extend this provision to Fair Funds. A 
Fair Fund would include a civil penalty and might include funds 
conveyed to the United States pursuant to section 308(b) of the 
Sarbanes-Oxley Act.
    Rule 1106 states that no person will be granted the right to 
intervene or appear in a proceeding to challenge an order of 
disgorgement, an order creating a Fair Fund, an order approving, 
modifying, or disapproving a disgorgement plan or a Fair Fund plan, or 
any determination relating to a plan based solely on the person's 
eligibility or potential eligibility to participate in a fund or based 
on a private right of action. As was the case under the Commission's 
disgorgement rules before these amendments, such person's participation 
is limited to submitting comments in accordance with Rule 1103.

C. Other Proposed Amendments

    In 1995, the Commission substantially amended its Rules of 
Practice. After several years of experience with these Rules, the 
Commission has determined to make certain changes to the Rules to make 
practice under them easier and more efficient.
    1. The existing Rules do not make explicit the Commission's 
authority to order a variation from the rules governing proceedings 
before it. The Commission is adopting proposed Rule 100(c), which 
specifies that the Commission may, by order, direct in a particular 
proceeding that an alternative procedure shall apply or that compliance 
with an otherwise applicable rule is unnecessary. Such an order would 
be based on the Commission's determination that to do so would serve 
the interests of justice and not result in prejudice to any party to 
the proceeding.
    2. Section 11A of the Exchange Act and the rules thereunder 
authorize the Commission to adjudicate certain disputes involving 
registered securities information processors, national market system 
plans, or transaction reporting plans.\18\ In addition to the inclusion 
of review of Board disciplinary sanctions discussed above, as proposed, 
Rule 101(a)(9) is amended to expand the definition of ``proceeding'' to 
make clear that the Rules of Practice are applicable to such 
adjudications.\19\
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    \18\ See Exchange Act section 11A(b)(5) (requiring Commission to 
review prohibitions or limitations of access to services offered by 
registered securities information processors); Exchange Act Rule 
11Aa3-2(e) (giving Commission discretion to entertain appeals from 
actions under national market system plans); Exchange Act Rule 
11Aa3-1(f) (giving Commission discretion to entertain appeals in 
connection with implementation or operation of transaction reporting 
plans).
    \19\ Because the current Rules of Practice do not specify a 
particular procedure for proceedings under Exchange Act section 11A, 
the Commission has been required to specify by order the procedural 
rules that are to be employed in section 11A review proceedings. 
See, e.g., The Cincinnati Stock Exchange, Exchange Act Release No. 
43316 (Sept. 21, 2000), 73 SEC Docket 1006 (Order Accepting 
Jurisdiction, Establishing Procedures, and Ordering Briefs).
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    3. The Commission previously required counsel to file a motion to 
withdraw as counsel. The Commission is adopting proposed Rule 
102(d)(4), which will now require only that a person who seeks to 
withdraw his or her appearance in a representative capacity file a 
notice of withdrawal with the Commission or the hearing officer. The 
notice should state the withdrawing representative's name, address, and 
telephone number; the name, address, and telephone number of the person 
for whom the appearance was made; and the withdrawal's effective date. 
If the person who seeks to withdraw knows the new representative's 
name, address, and telephone number, or knows that the person for whom 
the appearance was made intends to represent him- or herself, that 
information would also be required to be included in the notice. The 
notice must be served on the parties in accordance with Rule 150. In 
addition, the notice must be filed at least five days before the 
proposed effective date of the withdrawal.
    4. The Commission has found that some appeals could be streamlined 
if certain issues were addressed first to the hearing officer. The 
Commission is therefore adopting the proposed amendment to Rule 111. 
The amendment authorizes hearing officers to consider and rule on a 
motion to correct a manifest error of fact, provided that the motion is 
filed within ten days of the initial decision.
    5. Former Rule 141(a)(3) required the Secretary to ``maintain a 
record of service on parties.'' The rule is amended to authorize the 
Secretary to maintain records of service in computerized records, 
rather than hard copy records.
    6. Former Rule 141(a)(3) required the Secretary to place in the 
record of the proceeding confirmations of delivery of service. The 
Commission has concluded that it is easier to maintain confirmations of 
service by certified mail in a single file. The Commission believes 
this form of recordkeeping will permit easier retrieval of these 
documents. The Commission amends Rule 141(a)(3) accordingly.
    7. Former Rule 141(b) provided that service of written orders or 
decisions by the Commission or by a hearing officer, other than an 
order instituting proceedings, must be made by any method of service 
authorized under Rule 141(a) or Rule 150(c)(1)-(3). As discussed below, 
the Commission now is amending Rule 150 to abolish the requirement that 
the parties agree in writing to accept service by facsimile 
transmission.
    However, the Commission has determined that it is important to be 
able to demonstrate that a party has agreed to accept service of an 
order or decision by facsimile transmission. Therefore, as amended, 
Rule 141(b) provides that orders and decisions may be served by 
facsimile only if the party to be served has agreed to accept such 
service in a writing, signed by the party, and has provided the 
Commission with facsimile machine telephone number and hours of 
facsimile machine operation. Rule 141(b) replaces the reference to Rule 
150(c) with a reference to Rules 150(c)(1)-(3).
    8. As noted above, the Commission is adopting its proposed 
amendment to Rule 150(c)(4), governing parties' service of documents by 
facsimile transmission, to eliminate the requirement that parties who 
seek to serve each other by facsimile agree to do so in writing. As 
proposed, the Commission also is amending Rule 150(c)(4) to eliminate 
the requirement that receipt of each document served by facsimile be 
confirmed by a manually signed receipt. The Commission's experience has 
shown that, in many instances, parties were serving each other by 
facsimile but were not entering into the agreements or confirming by 
manually signed receipt. Under Rule 150(c)(4), persons who choose 
service by facsimile must provide the Commission and the parties with 
notice of the facsimile machine telephone number to be used and the 
hours of facsimile machine operation. As amended, Rule 150(c)(4)(ii) 
requires that facsimile transmissions be made at a time that results in 
their receipt during

[[Page 13170]]

the Commission's business hours as defined in Rule 104.\20\
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    \20\ 17 CFR 201.104.
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    The Commission is also adopting proposed Rule 150(c)(4)(iii). That 
rule permits a party to decline to receive service by facsimile. Such a 
declination must be made in writing and served in accordance with Rule 
150.
    The Commission has determined to retain Rule 150(d)'s requirement 
that service by facsimile is complete upon confirmation of transmission 
by delivery of a manually signed receipt. The Commission asked for 
comment as to whether parties making service by facsimile should 
continue to provide a non-facsimile original contemporaneously with 
service by facsimile unless the parties agreed otherwise. The 
Commission received no comment, and has determined to eliminate this 
requirement.
    9. Former Rule 151 provided that all papers required to be served 
by a party should be filed with the Commission ``at the time of service 
or promptly thereafter.'' Some parties have delayed making filings with 
the Commission. The rule is amended to make clear that filings with the 
Commission must be done ``contemporaneously'' with service on the 
parties. The Commission is also adopting its proposal to permit filings 
with the Commission to be made by facsimile transmission if the party 
also contemporaneously transmits to the Commission a non-facsimile 
original with a manual signature. Any person filing with the Commission 
by facsimile transmission assumes the risk that the transmission will 
not be completed in a timely or legible fashion.
    10. The Commission is adopting its proposed amendment to Rule 
152(a)(2) to require the use of 12-point or larger type (and eliminate 
the use of 10-point type) in order to enhance the legibility of 
filings.
    11. Rule 154 previously limited a brief in support of or in 
opposition to a motion to 10 pages, exclusive of pages containing any 
table of contents, table of authorities, and/or addendum. As a result, 
the Commission received filings by parties who attempted to circumvent 
this page limitation by filing 10-page briefs and extremely lengthy 
motions. The Commission is adopting the proposed amendment to Rule 154 
to establish a combined page limit of 15 pages for the motion and 
brief. This limitation is exclusive of any table of contents, table of 
authorities, or any addendum that consists solely of applicable cases, 
pertinent legislative provisions, or relevant exhibits. The proposal 
has been clarified to provide that the excluded addendum may include 
pertinent rule provisions.
    12. Current Rule 151 provides that persons must file papers with 
the Commission within any time specified for filing.\21\ Rule 160 
provided generally that a prescribed period for response may be 
extended three days for service by mail. The Commission is adopting its 
proposed amendment to Rule 160 to make clear that a person does not 
receive additional time for service by mail if the order of the 
Commission or the hearing officer specifies a date certain for filing. 
If a party requires a short extension, the Commission believes that the 
party could request that extension under Rule 161.
---------------------------------------------------------------------------

    \21\ 17 CFR 201.151.
---------------------------------------------------------------------------

    13. Current Rule 201 provides for the consolidation of 
proceedings.\22\ In accordance with the proposal, new Rule 201(b) 
permits the Commission to order any proceeding severed with respect to 
some or all of the parties. Motions to sever must be addressed to the 
Commission and represent that a settlement offer has been submitted to 
the Secretary for Commission consideration or otherwise show good 
cause.
---------------------------------------------------------------------------

    \22\ 17 CFR 201.201.
---------------------------------------------------------------------------

    14. Former Rule 230(a)(1)(vi) required production of final 
examination and inspection reports. The Commission is adopting its 
proposed amendment to Rule 230(a)(1)(vi). The amendment states that any 
final examination or inspection reports prepared by the Office of 
Compliance Inspections and Examinations, the Division of Market 
Regulation, or the Division of Investment Management must be produced 
only if the Division of Enforcement intends either to introduce them 
into evidence or to use them to refresh a witness's recollection.
    The Commission provides examined parties with notice of examination 
findings in the examination process. As a result, the amendment limits 
the production of examination and inspection reports to circumstances 
where the Division of Enforcement intends to introduce the report into 
evidence, either in reliance on the report to prove its case, or to 
refresh the recollection of any witness. The amendment does not alter 
the requirement that the Division produce documents containing material 
exculpatory evidence as required by Brady v. Maryland.\23\
---------------------------------------------------------------------------

    \23\ 373 U.S. 83, 87 (1963).
---------------------------------------------------------------------------

    Current Rule 230(c) permits the hearing officer to require the 
Division of Enforcement to submit for review a list of withheld 
documents.\24\ The Commission is adopting its proposed amendment to 
provide that, when documents are withheld, those documents may be 
identified by category instead of individual document. Under the 
amendment, the hearing officer retains discretion to determine when an 
identification by category is insufficient.\25\
---------------------------------------------------------------------------

    \24\ 17 CFR 201.230(c).
    \25\ The amendment of Rule 230 also corrects typographical 
errors in the cross-reference to paragraphs pursuant to which 
documents may be withheld.
---------------------------------------------------------------------------

    15. Rule 231(a), relating to the production of witness statements, 
refers to ``any statement * * * that would be required to be produced 
by the Jencks Act, 18 U.S.C. 3500.'' The Commission is adopting, as 
proposed, an amendment that provides that the Commission will rely on 
the definition of ``statement'' contained in the Jencks Act \26\ in 
applying this Rule.
---------------------------------------------------------------------------

    \26\ 18 U.S.C. 3500(e).
---------------------------------------------------------------------------

    16. Rule 232(e)(1) formerly allowed only the person to whom a 
subpoena is directed or a person who is an owner, creator, or the 
subject of the documents to be produced pursuant to a subpoena, to 
oppose the subpoena. Subpoenas directed at third party witnesses can be 
overly broad. Some recipients of such subpoenas may lack the 
sophistication or resources to dispute the scope of the subpoenas. The 
Commission therefore has determined to adopt its proposed amendment to 
allow any party to the proceeding to present arguments about whether a 
subpoena directed to any witness is unreasonable, oppressive, or unduly 
burdensome.
    17. Current Rule 233 sets forth the basis for ordering a 
deposition.\27\ The Commission is enacting its proposed amendment to 
allow the taking of a deposition of a witness who currently is within 
the United States, but who is expected to be outside the United States 
during the time of the hearing, provided that the deposition will serve 
the interests of justice, and that it appears that the party requesting 
the deposition did not procure the witness's absence.
---------------------------------------------------------------------------

    \27\ 17 CFR 201.233.
---------------------------------------------------------------------------

    18. Rule 350(b) requires the Secretary to retain documents offered 
into evidence, but excluded from the record, so that in the event of an 
objection, the Commission may consider any arguments that the documents 
should be admitted. The Commission is amending Rule 350(b) to eliminate 
the requirement that the Secretary also retain documents that are 
marked for identification but not offered into evidence.
    19. Rule 351(a) is amended to delete a reference to a practice 
abandoned

[[Page 13171]]

several years ago in which the interested division took custody of the 
exhibits after a hearing and was responsible for having them sent to 
the Secretary. Currently, the court reporter takes custody of exhibits.
    20. Rule 360(a)(2) directs the hearing officer to issue an initial 
decision within the time period specified in the order instituting 
proceedings. To address the hearing officer's inability to comply with 
this directive when a proceeding is stayed by order of the hearing 
officer or the Commission under Rule 210(c)(3),\28\ the Commission is, 
as proposed, amending Rule 360(a)(2) to state that, in the event of a 
stay of the proceeding under the authority of Rule 210(c)(3), the 
specified time period for issuance of the initial decision, as well as 
any other time limits established in orders issued by the hearing 
officer under Rule 360(a)(2), will be automatically tolled during the 
period in which the stay is in effect.
---------------------------------------------------------------------------

    \28\ 17 CFR 201.210(c)(3). This rule will apply to all cases 
instituted on or after July 17, 2003, the effective date of the 
Commission's recent amendments to its Rules of Practice. Securities 
Act Rel. No. 8240, 68 FR 35787 (June 17, 2003).
---------------------------------------------------------------------------

    21. Rule 360(b)(1) formerly provided that the Commission will enter 
an order of finality as to each party unless a party or aggrieved 
person timely files a petition for review of the initial decision or 
the Commission decides on its own initiative to review the initial 
decision. The rule is amended to provide further that the Commission 
will not enter an order of finality if a motion to correct a manifest 
error of fact in the initial decision is filed with the hearing 
officer.
    22. Rule 360(d)(1) is amended to provide that an initial decision 
becomes final upon the Commission's issuance of a finality order. The 
prior rule provided that an initial decision became final on the lapse 
of time but also required the issuance of a finality order. The 
amendment makes clear when a decision becomes final. As adopted, Rule 
360(d)(1) provides that notice of the order will appear in the SEC 
Docket and on the website.
    Former Rule 360(d)(2) provided that the initial decision would not 
become final as to a party or person if a timely petition for review 
were filed by that party or person. New Rule 360(d)(1) provides that 
timely filing, by a party or an aggrieved person entitled to review, of 
a motion to correct an initial decision to the hearing officer, as well 
as a timely petition for review, will mean that the initial decision 
will not become the final decision of the Commission as to that party 
or person. The amendment also makes conforming changes to Rule 360(b) 
specifying that an initial decision shall include a statement 
reflecting the provisions of Rule 360(d).
    Rule 410(b) is amended to provide that the time to file a petition 
for review is stayed until 21 days after resolution of any motion to 
correct an initial decision filed before the hearing officer. While a 
motion to correct is pending, a party need not file a petition for 
review to preserve its appeal rights.
    23. The Commission adopts proposed Rule 400 to make clear that 
petitions for interlocutory review are ``disfavored'' and rarely will 
be granted. The amendment recognizes, however, that the Commission 
retains discretion to undertake such review on its own motion at any 
time.
    24. As proposed, Rule 400 also is amended to state that it is the 
sole route for interlocutory review of determinations by a hearing 
officer, and the sole mechanism for appeal of actions delegated 
pursuant to 17 CFR 200.30-9 and 200.30-10.\29\
---------------------------------------------------------------------------

    \29\ Rule 430 is amended to delete reference to 17 CFR 200.30-9 
and 200.30-10.
---------------------------------------------------------------------------

    25. The Commission is adopting its proposed Rule 401(d)(1) to 
clarify that an applicant can seek a stay of an action by a self-
regulatory organization only at the time an application for review is 
filed or thereafter. Filing an application for review brings the action 
before the Commission. Since Rule 420(c) is being amended to reduce the 
length of an application for review, the requirement that an 
application be filed either when or before a stay is sought will not 
impose a significant burden.
    26. Rule 410(b), as proposed, is amended to permit an opposing 
party to file a cross-petition for review within ten days from the 
filing of a petition for review. This amendment will make it 
unnecessary for parties to file protective defensive petitions for 
review.
    Rule 410(d) is deleted, as proposed, thus abolishing the opposition 
to the petition for review. The Commission believes that a motion for 
summary affirmance will permit the Commission to dispose of matters 
suited to more abbreviated review.
    27. The Commission is adopting its proposed amendments to Rule 
411(e), governing summary affirmance. Rule 411(e) is amended to provide 
a 21-day time limit after the filing of a petition for review for 
filing a motion for summary affirmance. The amendment also sets forth 
standards for granting and denying summary affirmance. Summary 
affirmance will be granted if the Commission finds that no issue raised 
in the initial decision warrants consideration by the Commission of 
further oral or written argument. Summary affirmance will be denied 
upon a reasonable showing that a prejudicial error was committed in the 
conduct of the proceeding or that the decision embodies an exercise of 
discretion or decision of law or policy that is important and that the 
Commission should review.
    28. Section 19(d) of the Exchange Act requires a person who appeals 
from self-regulatory organization disciplinary action to do so within 
30 days after the notice of determination is filed with the Commission 
and received by the aggrieved person ``or within such longer period 
as'' the Commission ``may determine.'' The Commission is adopting its 
proposed change to Rule 420(b) to make clear that an appeal from self-
regulatory organization action must be filed within 30 days, absent a 
showing of extraordinary circumstances. This standard is consistent 
with prior Commission precedent.\30\
---------------------------------------------------------------------------

    \30\ See, e.g., Lance E. Van Alstyne, 53 S.E.C. 1093, 1099 
(1998) (Commission will not authorize late filing of appeals of 
self-regulatory organization proceedings absent extraordinary 
circumstances).
---------------------------------------------------------------------------

    As proposed, Rule 420(c) is amended to provide that an application 
for review of a self-regulatory organization action is limited to two 
pages. Former Rule 420 contained language suggesting that the 
applicant's address could be used to serve only the record index. Rule 
420(c) is amended to provide that the applicant identify where he or 
she may be served for all purposes.
    29. Former Rule 450(c) sets limits on the number of pages in 
briefs. In accordance with Federal Rule of Appellate Procedure 32, the 
Commission is adopting its proposed word limits--14,000 for principal 
briefs and 7,000 for any reply brief. The amendment also states that 
motions to file oversized briefs are disfavored. In exceptional cases, 
however, where more pages may be needed to address the issues--for 
example, where the Division of Enforcement must address arguments by 
multiple respondents--the Commission may, upon motion, allow longer 
filings.
    The proposal provided that, if a principal brief exceeded 30 pages 
in length, or a reply brief exceeded 15 pages in length, the attorney 
filing the brief (or an unrepresented party) was required to certify 
that the brief complied with the length limitation and to state the 
number of words in the brief. As adopted, this requirement has been 
extended to any representative of a party. The amendment permits the 
person certifying the length of the brief to rely on the word count of 
the word

[[Page 13172]]

processing system used to prepare the brief.
    The Commission has received briefs that sought to incorporate by 
reference briefs filed before the hearing officer in the proceeding on 
appeal. Incorporation of other pleadings by reference erodes the page-
limit requirements of Rule 450(c). The Commission is adopting the 
proposed amendment that provides that pleadings incorporated by 
reference will be included in determining the word count of briefs. The 
amendment is intended to promote adherence to the length limitations of 
Rule 450(c) and to encourage parties to exercise judgment in selecting 
the arguments that best advance their positions rather than simply 
repeating previously formulated contentions.
    30. Current Rule 451, governing oral argument, did not contemplate 
visual aids. As it proposed, the Commission is amending Rule 451(b) to 
prohibit the use of visual aids unless copies are provided to the 
Commission and parties at least five business days before the argument 
is to be held.\31\
---------------------------------------------------------------------------

    \31\ A further amendment conforms the language of Rule 451(b) to 
reflect Commission practice not to issue the order setting oral 
argument in a Commission administrative proceeding until the date 
for argument is set.
---------------------------------------------------------------------------

    31. Former Rule 470 specified a 15-page limit for a motion for 
reconsideration. There does not seem to be any reason for treating 
motions for reconsideration differently from other motions. As it 
proposed, the Commission is amending Rule 470 to limit the party 
seeking reconsideration to the same number of pages and the same format 
used for other motions under the Rules of Practice.
    32. Current Rule 601 codifies existing practice for payment of 
disgorgement, interest, and penalties. As the Commission proposed, the 
amendment of Rule 601 standardizes the language currently used by 
hearing officers in initial decisions and the Commission in its orders, 
as follows:

    (c) Method of making payment. Payment shall be made by United 
States postal money order, wire transfer, certified check, bank 
cashier's check, or bank money order made payable to the Securities 
and Exchange Commission. The payment shall be mailed or delivered to 
the office designated by this Commission. Payment shall be 
accompanied by a letter that identifies the name and number of the 
case and the name of the respondent making payment. A copy of the 
letter and the instrument of payment shall be sent to counsel for 
the Division of Enforcement.

II. Administrative Procedure Act, Regulatory Flexibility Act, and 
Paperwork Reduction Act

    The Commission finds, in accordance with section 553(b)(3)(A) of 
the Administrative Procedure Act,\32\ that this revision relates solely 
to agency organization, procedure, or practice. It is therefore not 
subject to the provisions of the Administrative Procedure Act requiring 
notice, opportunity for public comment, and publication. The Regulatory 
Flexibility Act \33\ therefore does not apply. Nonetheless, the 
Commission had previously determined that it would be useful to publish 
the proposed rule changes for notice and comment before adoption. The 
Commission considered all comments received. Because these rules relate 
to ``agency organization, procedure or practice that does not 
substantially affect the rights or obligations of non-agency parties,'' 
they are not subject to the Small Business Regulatory Enforcement 
Fairness Act.\34\
---------------------------------------------------------------------------

    \32\ 5 U.S.C. 553(b)(3)(A).
    \33\ 5 U.S.C. 601 et seq.
    \34\ 5 U.S.C. 804(3)(C).
---------------------------------------------------------------------------

    These rules do not contain any collection of information 
requirements as defined by the Paperwork Reduction Act of 1995, as 
amended.\35\
---------------------------------------------------------------------------

    \35\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

III. Costs and Benefits of the Rules and Amendments

    The Sarbanes-Oxley Act authorizes the Commission to review 
disciplinary actions by the Public Company Accounting Oversight Board 
as well as actions resulting in disapproval of registration of public 
accounting firms. In response, the Commission has revised certain of 
its rules in order to enhance the transparency and facilitate parties' 
understanding of the applicability of the review process to Board 
proceedings. The Sarbanes-Oxley Act also provides that, where the 
Commission or a hearing officer in a Commission administrative 
proceeding enters an order requiring disgorgement and a civil money 
penalty, the Commission may create a ``Fair Fund'' combining the 
disgorgement and the civil money penalty to be disbursed for the 
benefit of the victims of the securities law violations at issue in the 
proceeding. The Commission has enacted rules for the submission and 
administration of Fair Fund plans and disgorgement plans. The 
Commission also has amended other provisions of the rules.
    Taken as a whole, the Commission's Rules create governmental review 
and remedial processes. That is, they are procedural and administrative 
in nature. The benefits to the parties are the familiar benefits of due 
process: Notice, opportunity to be heard, efficiency, and fairness. The 
cost of these processes, on the other hand, falls largely on the 
oversight bodies.
    For purposes of cost/benefit analysis, given the procedural nature 
of these Rules, we believe that the regulatory provisions are best 
viewed as a whole. To the extent possible, we discuss specific benefits 
and costs that can be more narrowly associated with separate 
provisions. However, because there are so many provisions, and because 
the costs tend to be primarily governmental, we do not provide separate 
sections for our respective cost and benefit analyses. Rather, we 
simply identify each provision proposed and discuss any benefits and 
costs that may be associated with it beyond the more general points 
summarized above.
    Rule 19d-4(b) requires the Board to file with the Commission and 
serve on the public accounting firm a notice of disapproval of 
registration within 30 days of the Board's action. Rule 19d-4(c) 
imposes on the Board a similar filing and service requirement for 
notices of any disciplinary sanction other than a disapproval of 
registration. Timely notice is a fundamental aspect of due process. It 
benefits those who receive notice by allowing them to plan and take 
action in light of the Board's findings. Timely filing with the 
Commission lets the Commission know of the conclusion of Board 
proceedings so that it can exert oversight over the quality and 
fairness of those proceedings, which benefits parties to the 
proceedings as well as the general public. These rules will impose a 
small administrative cost on the Board.
    Rules 440 and 441 provide for Commission review of Board actions. 
Rule 440 allows review upon application of a person aggrieved by a 
final Board disciplinary sanction, including disapproval of a completed 
application for registration of a public accounting firm. Rule 441 
permits Commission review of Board disciplinary sanctions upon the 
Commission's own motion. The Rules pertain to the review mechanism 
required by the Sarbanes-Oxley Act, informing those upon whom Board 
sanctions are imposed of the option of Commission review and 
instructing them about procedures involved in initiating the review 
process.
    Commission review of Board findings benefits parties to Board 
proceedings (and, to a lesser extent, the general public) by protecting 
against arbitrary, capricious, or otherwise unlawful

[[Page 13173]]

treatment. Review also allows the Commission to exercise a check on, 
and protect the public interest in, the quality and consistency of 
Board findings and determinations.
    Parties involved in review proceedings will incur legal and other 
costs. Review upon application by a person aggrieved, under Rule 440, 
is optional. Thus, a party would incur these costs only if it expected 
a net benefit from the review process. In the case of review upon the 
Commission's own motion under Rule 441, however, the parties involved 
might otherwise have chosen to avoid incurring the costs.
    In accordance with section 105(e)(1) of the Sarbanes-Oxley Act, 
Rule 440(c) provides that filing an application for review with the 
Commission acts as a stay of the Board's action unless the Commission 
orders otherwise. Rule 401(e) allows: (1) Persons aggrieved by such an 
automatic stay to ask the Commission to lift the stay; (2) the 
Commission to lift such a stay summarily, without notice and 
opportunity for a hearing; and (3) persons opposing the lifting of such 
a stay to file an opposition.
    Rule 440(c) benefits the party upon whom Board sanctions have been 
imposed by allowing that party an opportunity to be heard in the review 
process before the Board's sanctions take effect. The automatic stay 
imposes a cost upon third parties who would benefit if the sanctions 
went into place immediately.
    Allowing a person aggrieved by the automatic stay to ask to have 
the stay lifted benefits the aggrieved person by offering the option of 
a possible earlier termination of the stay. Those availing themselves 
of this option will incur legal and other costs. Because the procedure 
is optional, they will presumably do so only if they conclude that 
doing so yields an expected net benefit. Similarly, allowing opposition 
to a motion to lift permits those opposing the motion an opportunity to 
be heard. Although opposing a motion could involve legal and other 
expenses, because opposition is optional, parties would incur those 
costs only if they expected a net benefit from opposing.
    Allowing the Commission to lift a stay summarily could benefit 
persons aggrieved by the stay by providing prompt and inexpensive 
relief. At the same time, those who might oppose the lifting of the 
stay would be denied notice and an opportunity to be heard in 
connection with the lifting of the stay.
    Section 308(a) of the Sarbanes Oxley-Act provides that, in a 
Commission administrative proceeding where the Commission or a hearing 
officer enters an order requiring disgorgement and a civil money 
penalty, the Commission may create a ``Fair Fund'' by including the 
civil penalty with the disgorgement amount. The Commission is required 
to disburse money from a Fair Fund for the benefit of the victims of 
the securities law violations at issue in the proceeding.
    Rule 1101 authorizes the Commission to create a Fair Fund in any 
administrative proceeding in which a final order is entered imposing 
disgorgement and a civil money penalty. The Commission also may create 
a Fair Fund if it approves a settlement of an administrative proceeding 
that provides for payment of disgorgement and a civil money penalty. 
Where the relative value of the ill-gotten gains and the number of 
potential claimants results in high administrative costs and de minimis 
distributions to investors, the Commission would not expect to create a 
Fair Fund. The disgorgement and civil penalty amounts would be paid 
directly to the United States Treasury.
    Creating and administering Fair Funds benefits victims of 
securities law violations, who are more likely to be made whole. 
Allowing monies that otherwise would go into a Fair Fund to be paid to 
the Treasury where investors would receive only de minimis 
distributions will prevent those monies from being consumed by 
administrative costs, although at a cost to victims who might have 
received a minimal payment from a Fair Fund.
    Rule 102(d)(4) is amended to allow a person seeking to withdraw his 
or her appearance before the Commission in a representative capacity to 
file a notice of withdrawal rather than the motion to withdraw that was 
required under the former Rule. Filing a notice preserves the benefits 
of the existing requirement by giving the Commission and the parties 
timely notice of withdrawal. Preparing and filing a notice should be 
less expensive than preparing and filing a motion. Additionally, this 
amendment increases efficiency by eliminating the need for the 
Commission or a hearing officer to rule on a motion for withdrawal.
    The amendment of Rule 150(c)(4) deletes the requirements that 
parties who choose to serve each other by facsimile transmission (1) 
agree to do so in a signed writing, and (2) confirm receipt of each 
document by a manually signed receipt. Elimination of these 
requirements results in lower costs to the serving parties. However, 
eliminating the requirement of a signed receipt could make it more 
difficult to prove that a transmission was received.
    The amendment of Rule 151 allows parties to file documents with the 
Commission by facsimile transmission. This amendment provides parties 
an additional option for transmitting documents to the Commission. 
Facsimile filing allows the Commission to receive and be able to 
address documents in as timely a fashion as possible. Costs of 
transmission by facsimile are likely to be lower than overnight or 
courier fees. The amendment does not impose any new costs, since the 
existing methods for filing with the Commission remain available.
    The amendment to Rule 154 establishes a combined page limit of 15 
pages for a motion and a brief in support of the motion. The 15-page 
limit also applies to a brief in opposition to a motion and to any 
reply brief. The amendment to Rule 450(c) provides that pleadings 
incorporated by reference will be included in determining the page 
count of briefs. Reducing page limits may result in lower legal costs 
to the parties. Limiting the number of pages submitted also keeps 
proceedings efficient.
    The amendment of Rule 233 allows the taking of a deposition of a 
witness, then within the United States, who is expected to be outside 
the United States at the time of an administrative hearing, so long as 
the deposition will serve the interests of justice and it appears that 
the party requesting the deposition did not procure the witness's 
absence. The amendment serves the interests of justice by making 
available a statement that otherwise might not have been made part of 
the record. Using a deposition results in the absence from a hearing of 
a witness who otherwise would have appeared. This results in the 
hearing officer's having no opportunity to assess demeanor. However, 
since the Rule allows a deposition only where it appears that the party 
requesting the deposition did not procure the witness's absence, such a 
series of events should rarely occur.
    The remaining amendments clarify existing practice, relate to 
internal agency management, increase the efficiency of proceedings, or 
promote due process.
    The Commission requested data to quantify the costs and the value 
of the benefits identified. We received no comments in response to this 
request.

[[Page 13174]]

IV. Effect on Efficiency, Competition and Capital Formation

    Section 2(b) of the Securities Act of 1933,\36\ section 3(f) of the 
Exchange Act,\37\ section 2(c) of the Investment Company Act of 
1940,\38\ and section 202(c) of the Investment Advisers Act of 1940 
\39\ require us, when engaging in rulemaking that requires us to 
consider or determine whether an act is necessary or appropriate in the 
public interest, to consider whether the action will promote 
efficiency, competition, and capital formation. Section 23(a)(2) of the 
Exchange Act \40\ prohibits us from adopting any rule that would impose 
a burden on competition not necessary or appropriate in furtherance of 
the Exchange Act's purposes.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 77b(b).
    \37\ 15 U.S.C. 78c(f).
    \38\ 15 U.S.C. 80a-2(c).
    \39\ 15 U.S.C. 80b-2(c).
    \40\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    These rules are intended to enhance the transparency and facilitate 
parties' understanding of the applicability of the Commission review 
process to Board proceedings. The rules and amendments also include 
regulatory provisions for the submission and administration of Fair 
Funds plans and disgorgement plans. They are intended to clarify 
existing practice and increase the efficiency of Commission enforcement 
and self-regulatory organization disciplinary review proceedings.
    The rules and amendments apply to all persons involved in 
administrative proceedings before the Commission. Therefore, the 
Commission does not expect the proposed rules and amendments to have an 
anti-competitive effect. To the extent the rules and amendments foster 
making whole victims of securities laws violations and increase the 
transparency of the Commission's administrative practice and the 
efficiency of its proceedings, there should be an increase in investor 
confidence in market fairness and efficiency. However, the magnitude of 
the effect of the amendments in this regard is difficult to quantify. 
We requested comment on the possible effects of our rule proposals on 
efficiency, competition, and capital formation. We received no comments 
in response to this request.

V. Statutory Basis for the Rules

    These amendments to the Rules of Practice and related provisions 
are being adopted pursuant to statutory authority granted to the 
Commission, including section 3 of the Sarbanes-Oxley Act, 15 U.S.C. 
7202; section 19 of the Securities Act, 15 U.S.C. 77s; sections 4A, 19, 
and 23 of the Exchange Act, 15 U.S.C. 78s and 78w; section 20 of the 
Public Utility Holding Company Act, 15 U.S.C. 79t; section 319 of the 
Trust Indenture Act, 15 U.S.C. 77sss; sections 38 and 40 of the 
Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and section 211 of 
the Investment Advisers Act, 15 U.S.C. 80b-11.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government Agencies).

17 CFR Part 201

    Administrative practice and procedure.

17 CFR Part 240

    Reporting and recordkeeping requirements; Securities.

Text of Adopted Rules

0
For the reasons set out in the preamble, Title 17, Chapter II of the 
Code of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

0
1. The general authority citation for part 200, subpart A is revised to 
read as follows:

Subpart A--Organization and Program Management

    Authority: 15 U.S.C. 77s, 77o, 77sss, 78d, 78d-1, 78d-2, 78w, 
78ll(d), 78mmm, 79t, 80a-37, 80b-11, and 7202, unless otherwise 
noted.
* * * * *


Sec.  200.21  [Amended]

0
2. In Sec.  200.21, paragraph (b), remove the words ``Rule 2(e) of the 
Commission's Rules of Practice (Sec.  201.2(e) of this chapter)'', and 
in their place, add the words ``Rule 102(e) of the Commission's Rules 
of Practice (Sec.  201.102(e) of this chapter)''.

0
3. Section 200.30-7 is amended by revising the introductory text of 
paragraph (a) and paragraphs (a)(5), (a)(6), and (a)(11) to read as 
follows:


Sec.  200.30-7  Delegation of authority to Secretary of the Commission.

* * * * *
    (a) With respect to proceedings conducted pursuant to the 
Securities Act of 1933, 15 U.S.C. 77a et seq., the Securities Exchange 
Act of 1934, 15 U.S.C. 78a et seq., the Public Utility Holding Company 
Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture Act of 1939, 15 
U.S.C. 77aaa et seq., the Investment Company Act of 1940, 15 U.S.C. 
80a-1 et seq., the Investment Advisers Act of 1940, 15 U.S.C. 80b-1 et 
seq., the Securities Investor Protection Act of 1970, 15 U.S.C. 78aaa 
et seq., the provisions of Rule 102(e) of the Commission's Rules of 
Practice, Section 201.102(e) of this chapter, and Title I of the 
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219;
* * * * *
    (5) To permit the filing of briefs with the Commission exceeding 50 
pages in length, pursuant to Rule 450(c) of the Commission's Rules of 
Practice, Sec.  201.450(c) of this chapter;
    (6) To certify records of proceedings upon which are entered orders 
the subject of review in courts of appeals pursuant to section 9 of the 
Securities Act of 1933, 15 U.S.C. 77i, section 25 of the Securities 
Exchange Act of 1934, 15 U.S.C. 78y, section 24 of the Public Utility 
Holding Company Act of 1935, 15 U.S.C. 79x, section 322(a) of the Trust 
Indenture Act of 1939, 15 U.S.C. 77vvv(a), section 43 of the Investment 
Company Act of 1940, 15 U.S.C. 80a-42, section 213 of the Investment 
Advisers Act of 1940, 15 U.S.C. 80b-13, and Title I of the Sarbanes-
Oxley Act of 2002, 15 U.S.C. 7211-7219;
* * * * *
    (11) To publish pursuant to Rule 1103 of the Commission's Rules of 
Practice (Sec.  201.1103 of this chapter) notice for fair fund and 
disgorgement plans, and if no negative comments are received, to issue 
orders approving proposed fair fund plans and disgorgement plans 
pursuant to Rule 1104 of the Commission's Rules of Practice (Sec.  
201.1104 of this chapter). Upon the motion of the staff for good cause 
shown, to approve the publication of proposed fair fund plans and 
disgorgement plans that omit plan elements required by Rule 1101 of the 
Commission's Rules of Practice (Sec.  201.1101 of this chapter).
* * * * *

0
4. Section 200.30-10 is amended by:
0
a. Removing the authority citations following the sections; and
0
b. Revising the introductory text of paragraph (a) and paragraph 
(a)(5).
    The revisions read as follows:


Sec.  200.30-10  Delegation of authority to Chief Administrative Law 
Judge.

* * * * *
    (a) With respect to proceedings conducted before an administrative 
law judge, pursuant to the Securities Act of 1933, 15 U.S.C. 77a et 
seq., the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., the 
Public Utility

[[Page 13175]]

Holding Company Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture 
Act of 1939, 15 U.S.C. 77aaa et seq., the Investment Company Act of 
1940, 15 U.S.C. 80a-1 et seq., the Investment Advisers Act of 1940, 15 
U.S.C. 80b-1 et seq., the Securities Investor Protection Act of 1970, 
15 U.S.C. 78aaa et seq., and the provisions of Rule 102(e) of the 
Commission's Rules of Practice, Sec.  201.102(e) of this chapter:
* * * * *
    (5) To permit the filing of briefs exceeding 50 pages in length, 
pursuant to Rule 450(c) of the Commission's Rules of Practice, Sec.  
201.450(c) of this chapter;
* * * * *

0
5. Section 200.30-14 is amended by:
0
a. Revising the introductory text of paragraph (g)(1) and of paragraphs 
(g)(1)(vii), (g)(4), (g)(5), and (g)(7); and
0
b. Adding paragraph (g)(8).
    The revisions and addition read as follows:


Sec.  200.30-14  Delegation of authority to the General Counsel.

* * * * *
    (g)(1) With respect to proceedings conducted pursuant to the 
Securities Act of 1933, 15 U.S.C. 77a et seq., the Securities Exchange 
Act of 1934, 15 U.S.C. 78a et seq., the Public Utility Holding Company 
Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture Act of 1939, 15 
U.S.C. 77aaa et seq., the Investment Company Act of 1940, 15 U.S.C. 
80a-1 et seq., the Investment Advisers Act of 1940, 15 U.S.C. 80b-1 et 
seq., the Securities Investor Protection Act of 1970, 15 U.S.C. 78aaa 
et seq., the provisions of Rule 102(e) of the Commission Rules of 
Practice, Sec.  201.102(e) of this chapter, and Title I of the 
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219:
* * * * *
    (vii) To request additional briefs or grant requests for the 
submission of late or additional briefs, or the acceptance of 
affidavits or other material for inclusion in the record or in support 
of motions or petitions addressed to the Commission.
* * * * *
    (4) With respect to proceedings conducted under sections 19(d), 
(e), and (f) of the Securities Exchange Act of 1934, 15 U.S.C. 78s(d), 
(e), and (f), and Title I of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 
7211-7219, to determine that an application for review under any of 
those sections has been abandoned, under the provisions of Rule 420 or 
440 of the Commission's Rules of Practice, Sec.  201.420 or 201.440 of 
this chapter, or otherwise, and accordingly to issue an order 
dismissing the application.
    (5) With respect to proceedings conducted pursuant to the 
Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., the Investment 
Company Act of 1940, 15 U.S.C. 80a-1 et seq., the Investment Advisers 
Act of 1940, 15 U.S.C. 80b-1 et seq., the provisions of Rule 102(e) of 
the Commission's Rules of Practice, Sec.  201.102(e) of this chapter, 
and Title I of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to 
determine applications to stay Commission orders pending appeal of 
those orders to the federal courts and to determine application to 
vacate such stays.
* * * * *
    (7) In connection with Commission review of actions taken by self-
regulatory organizations pursuant to sections 19(d), (e), and (f) of 
the Securities Exchange Act of 1934, 15 U.S.C. 78s(d), (e), and (f), or 
by the Public Company Accounting Oversight Board pursuant to Title I of 
the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to grant or deny 
requests for oral argument in accordance with the provisions of Rule 
451 of the Commission's Rules of Practice, Sec.  201.451 of this 
chapter.
    (8) In connection with Commission review of actions taken by the 
Public Company Accounting Oversight Board pursuant to Title I of the 
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to determine whether 
to lift the automatic stay of a disciplinary sanction.
* * * * *

Subpart B--Disposition of Commission Business

0
6. The authority citation for part 200, subpart B continues to read as 
follows:

    Authority: 5 U.S.C. 552b; 15 U.S.C. 78d-1 and 78w.


Sec.  200.43  [Amended]

0
7. In Sec.  200.43, paragraph (c)(3), remove the words ``Rule 26 of the 
Commission's rules of practice, 17 CFR 201.26'' and, in their place, 
add the words ``Rules 430 and 431 of the Commission's Rules of 
Practice, Sec. Sec.  201.430 and 201.431 of this chapter''.

0
8. The authority citation for part 200, subpart F, is revised to read 
as follows:

Subpart F--Code of Behavior Governing Ex Parte Communications 
Between Persons Outside the Commission and Decisional Employees

    Authority: 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11, and 
7202; and 5 U.S.C. 557.


0
9. Section 200.111 is amended by:
0
a. Revising paragraph (c)(1)(ii);
0
b. Redesignating paragraph (c)(1)(iii) as paragraph (c)(1)(iv); and
0
c. Adding new paragraph (c)(1)(iii).
    The revision and addition read as follows:


Sec.  200.111  Prohibitions; application; definitions.

* * * * *
    (c) * * *
    (1) * * *
    (ii) That in proceedings under section 19(d) of the Securities 
Exchange Act of 1934, 15 U.S.C. 78s(d), these prohibitions shall 
commence at the time that a copy of an application for review has been 
filed with the Commission and served on the self-regulatory 
organization.
    (iii) That in proceedings under Title I of the Sarbanes-Oxley Act 
of 2002, 15 U.S.C. 7211-7219, these prohibitions shall commence at the 
time that a copy of an application for review has been filed with the 
Commission and served on the Public Company Accounting Oversight Board; 
and
* * * * *

PART 201--RULES OF PRACTICE

Subpart D--Rules of Practice

0
10. The authority citation for part 201, subpart D, is revised to read 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u, 
78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 78u-
3, 78v, 78w, 79c, 79s, 79t, 79z-5a, 77sss, 77ttt, 80a-8, 80a-9, 80a-
37, 80a-38, 80a-39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 
80b-12, 7202, 7215, and 7217.


0
11. Section 201.100 is amended by adding paragraph (c) to read as 
follows:


Sec.  201.100  Scope of the rules of practice.

* * * * *
    (c) The Commission, upon its determination that to do so would 
serve the interests of justice and not result in prejudice to the 
parties to the proceeding, may by order direct, in a particular 
proceeding, that an alternative procedure shall apply or that 
compliance with an otherwise applicable rule is unnecessary.

0
12. Section 201.101 is amended by:
0
a. Revising paragraph (a)(9);
0
b. Removing the word ``and'' at the end of paragraph (a)(10);
0
c. Removing the period at the end of paragraph (a)(11), and in its 
place adding ``; and''; and
0
d. Adding paragraph (a)(12).
    The revision and addition read as follows:

[[Page 13176]]

Sec.  201.101  Definitions.

    (a) * * *
    (9) Proceeding means any agency process initiated:
    (i) By an order instituting proceedings; or
    (ii) By the filing, pursuant to Sec.  201.410, of a petition for 
review of an initial decision by a hearing officer; or
    (iii) By the filing, pursuant to Sec.  201.420, of an application 
for review of a self-regulatory organization determination; or
    (iv) By the filing, pursuant to Sec.  201.430, of a notice of 
intention to file a petition for review of a determination made 
pursuant to delegated authority; or
    (v) By the filing, pursuant to Sec.  201.440, of an application for 
review of a determination by the Public Company Accounting Oversight 
Board; or
    (vi) By the filing, pursuant to Sec.  240.11Aa3-1(f) of this 
chapter, of an application for review of an action or failure to act in 
connection with the implementation or operation of any effective 
transaction reporting plan; or
    (vii) By the filing, pursuant to Sec.  240.11Aa3-2(e) of this 
chapter, of an application for review of an action taken or failure to 
act in connection with the implementation or operation of any effective 
national market system plan; or
    (viii) By the filing, pursuant to Section 11A(b)(5) of the 
Securities Exchange Act of 1934, of an application for review of a 
determination of a registered securities information processor;
* * * * *
    (12) Board means the Public Company Accounting Oversight Board.
* * * * *

0
13. Section 201.102 is amended by revising paragraph (d)(4) to read as 
follows:


Sec.  201.102  Appearance and practice before the Commission.

* * * * *
    (d) * * *
    (4) Withdrawal. Any person seeking to withdraw his or her 
appearance in a representative capacity shall file a notice of 
withdrawal with the Commission or the hearing officer. The notice shall 
state the name, address, and telephone number of the withdrawing 
representative; the name, address, and telephone number of the person 
for whom the appearance was made; and the effective date of the 
withdrawal. If the person seeking to withdraw knows the name, address, 
and telephone number of the new representative, or knows that the 
person for whom the appearance was made intends to represent him- or 
herself, that information shall be included in the notice. The notice 
must be served on the parties in accordance with Sec.  201.150. The 
notice shall be filed at least five days before the proposed effective 
date of the withdrawal.
* * * * *

0
14. Section 201.111 is amended by revising paragraph (h) to read as 
follows:


Sec.  201.111  Hearing officer: Authority.

* * * * *
    (h) Subject to any limitations set forth elsewhere in these Rules 
of Practice, considering and ruling upon all procedural and other 
motions, including a motion to correct a manifest error of fact in the 
initial decision, provided that such a motion to correct is filed 
within ten days of the initial decision;
* * * * *

0
15. Section 201.141 is amended by:
0
a. Revising the section heading; and
0
b. Revising paragraphs (a)(3) and (b) to read as follows:
    The revisions read as follows:


Sec.  201.141  Orders and decisions: Service of orders instituting 
proceedings and other orders and decisions.

    (a) * * *
    (3) Record of service. The Secretary shall maintain a record of 
service on parties (in hard copy or computerized format), identifying 
the party given notice, the method of service, the date of service, the 
address to which service was made, and the person who made service. If 
service is made in person, the certificate of service shall state, if 
available, the name of the individual to whom the order was given. If 
service is made by U.S. Postal Service certified or Express Mail, the 
Secretary shall maintain the confirmation of receipt or of attempted 
delivery. If service is made to an agent authorized by appointment to 
receive service, the certificate of service shall be accompanied by 
evidence of the appointment.
* * * * *
    (b) Service of orders or decisions other than an order instituting 
proceedings. Written orders or decisions issued by the Commission or by 
a hearing officer shall be served promptly on each party pursuant to 
any method of service authorized under paragraph (a) of this section or 
Sec.  201.150(c)(1)-(3). Such orders or decisions may also be served by 
facsimile transmission if the party to be served has agreed to accept 
such service in a writing, signed by the party, and has provided the 
Commission with information concerning the facsimile machine telephone 
number and hours of facsimile machine operation. Service of orders or 
decisions by the Commission, including those entered pursuant to 
delegated authority, shall be made by the Secretary or, as authorized 
by the Secretary, by a member of an interested division. Service of 
orders or decisions issued by a hearing officer shall be made by the 
Secretary or the hearing officer.

0
16. Section 201.150 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  201.150  Service of papers by parties.

* * * * *
    (c) * * *
    (4) Transmitting the papers by facsimile transmission where the 
following conditions are met:
    (i) The persons so serving each other have provided the Commission 
and the parties with notice of the facsimile machine telephone number 
to be used and the hours of facsimile machine operation;
    (ii) The transmission is made at such a time that it is received 
during the Commission's business hours as defined in Sec.  201.104; and
    (iii) The sender of the transmission previously has not been served 
in accordance with Sec.  201.150 with a written notice from the 
recipient of the transmission declining service by facsimile 
transmission.
* * * * *

0
17. Section 201.151 is amended by revising paragraph (a) to read as 
follows:


Sec.  201.151  Filing of papers with the Commission: Procedure.

    (a) When to file. All papers required to be served by a party upon 
any person shall be filed contemporaneously with the Commission. Papers 
required to be filed with the Commission must be received within the 
time limit, if any, for such filing. Filing with the Commission may be 
made by facsimile transmission if the party also contemporaneously 
transmits to the Commission a non-facsimile original with a manual 
signature. However, any person filing with the Commission by facsimile 
transmission will be responsible for assuring that the Commission 
receives a complete and legible filing within the time limit set for 
such filing.
* * * * *

0
18. Section 201.152 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  201.152  Filing of papers: Form.

    (a) * * *
    (2) Be typewritten or printed in 12-point or larger typeface or 
otherwise

[[Page 13177]]

reproduced by a process that produces permanent and plainly legible 
copies;
* * * * *

0
19. Section 201.154 is amended by revising paragraph (c) to read as 
follows:


Sec.  201.154  Motions.

* * * * *
    (c) Length limitation. A motion, together with the brief in support 
of the motion, the brief in opposition to the motion, or any reply 
brief, shall not exceed 15 pages, exclusive of pages containing any 
table of contents or table of authorities. The page limit shall not 
apply to any addendum that consists solely of copies of applicable 
cases, pertinent legislative provisions or rules, or relevant exhibits. 
Requests for leave to file motions and briefs in excess of 15 pages are 
disfavored.

0
20. Section 201.160 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.160  Time computation.

* * * * *
    (b) Additional time for service by mail. If service is made by 
mail, three days shall be added to the prescribed period for response 
unless an order of the Commission or the hearing officer specifies a 
date certain for filing. In the event that an order of the Commission 
or the hearing officer specifies a date certain for filing, no time 
shall be added for service by mail.

0
21. Section 201.201 is amended by:
0
a. Revising the section heading;
0
b. Designating the current text as paragraph (a) and adding a paragraph 
heading; and
0
c. Adding paragraph (b).
    The revision and additions read as follows:


Sec.  201.201  Consolidation and severance of proceedings.

    (a) Consolidation. * * *
    (b) Severance. By order of the Commission, any proceeding may be 
severed with respect to some or all parties. Any motion to sever must 
be made solely to the Commission and must include a representation that 
a settlement offer is pending before the Commission or otherwise show 
good cause.

0
22. Section 201.202 is amended by revising the introductory text of 
paragraph (a) to read as follows:


Sec.  201.202  Specification of procedures by parties in certain 
proceedings.

    (a) Motion to specify procedures. In any proceeding other than an 
enforcement or disciplinary proceeding, a proceeding to review a 
determination by a self-regulatory organization pursuant to Sec. Sec.  
201.420 and 201.421, or a proceeding to review a determination of the 
Board pursuant to Sec. Sec.  201.440 and 201.441, a party may, at any 
time up to 20 days prior to the start of a hearing, make a motion to 
specify the procedures necessary or appropriate for the proceeding with 
particular reference to:
* * * * *
0
23. Section 201.210 is amended by revising the introductory text of 
paragraph (a), revising paragraph (a)(1) and the introductory text of 
paragraphs (b)(1) and (c) read to read as follows:


Sec.  201.210  Parties, limited participants and amici curiae.

    (a) Parties in an enforcement or disciplinary proceeding, a 
proceeding to review a self-regulatory organization determination, or a 
proceeding to review a Board determination.
    (1) Generally. No person shall be granted leave to become a party 
or a non-party participant on a limited basis in an enforcement or 
disciplinary proceeding, a proceeding to review a determination by a 
self-regulatory organization pursuant to Sec. Sec.  201.420 and 
201.421, or a proceeding to review a determination by the Board 
pursuant to Sec. Sec.  201.440 and 201.441, except as authorized by 
paragraph (c) of this section.
* * * * *
    (b) * * * (1) Generally. In any proceeding, other than an 
enforcement proceeding, a disciplinary proceeding, a proceeding to 
review a self-regulatory determination, or a proceeding to review a 
Board determination, any person may seek leave to intervene as a party 
by filing a motion setting forth the person's interest in the 
proceeding:
* * * * *
    (c) Leave to participate on a limited basis. In any proceeding, 
other than an enforcement proceeding, a disciplinary proceeding, a 
proceeding to review a self-regulatory determination, or a proceeding 
to review a Board determination, any person may seek leave to 
participate on a limited basis as a non-party participant as to any 
matter affecting the person's interests:
* * * * *

0
24. Section 201.230 is amended by revising paragraphs (a)(1)(vi) and 
(c) to read as follows:


Sec.  201.230  Enforcement and disciplinary proceedings: Availability 
of documents for inspection and copying.

* * * * *
    (a) * * *
    (1) * * *
    (vi) Any final examination or inspection reports prepared by the 
Office of Compliance Inspections and Examinations, the Division of 
Market Regulation, or the Division of Investment Management, if the 
Division of Enforcement intends either to introduce any such report 
into evidence or to use any such report to refresh the recollection of 
any witness.
* * * * *
    (c) Withheld document list. The hearing officer may require the 
Division of Enforcement to submit for review a list of documents or 
categories of documents withheld pursuant to paragraphs (b)(1)(i) 
through (b)(1)(iv) of this section or to submit any document withheld, 
and may determine whether any such document should be made available 
for inspection and copying. When similar documents are withheld 
pursuant to paragraphs (b)(1)(i) through (b)(1)(iv) of this section, 
those documents may be identified by category instead of by individual 
document. The hearing officer retains discretion to determine when an 
identification by category is insufficient.
* * * * *

0
25. Section 201.231 is amended by revising paragraph (a) to read as 
follows:


Sec.  201.231  Enforcement and disciplinary proceedings: Production of 
witness statements.

    (a) Availability. Any respondent in an enforcement or disciplinary 
proceeding may move that the Division of Enforcement produce for 
inspection and copying any statement of any person called or to be 
called as a witness by the Division of Enforcement that pertains, or is 
expected to pertain, to his or her direct testimony and that would be 
required to be produced pursuant to the Jencks Act, 18 U.S.C. 3500. For 
purposes of this section, statement shall have the meaning set forth in 
18 U.S.C. 3500(e). Such production shall be made at a time and place 
fixed by the hearing officer and shall be made available to any party, 
provided, however, that the production shall be made under conditions 
intended to preserve the items to be inspected or copied.
* * * * *

0
26. Section 201.232 is amended by revising paragraph (e)(1) to read as 
follows:


Sec.  201.232  Subpoenas.

* * * * *
    (e) * * * (1) Any person to whom a subpoena is directed, or who is 
an owner, creator or the subject of the documents that are to be 
produced pursuant to a subpoena, or any party may, prior to the time 
specified therein for compliance, but in no event more than 15 days 
after the date of service of

[[Page 13178]]

such subpoena, request that the subpoena be quashed or modified. Such 
request shall be made by application filed with the Secretary and 
served on all parties pursuant to Sec.  201.150. The party on whose 
behalf the subpoena was issued may, within five days of service of the 
application, file an opposition to the application. If a hearing 
officer has been assigned to the proceeding, the application to quash 
shall be directed to that hearing officer for consideration, even if 
the subpoena was issued by another person.
* * * * *

0
27. Section 201.233 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.233  Deposition upon oral examination.

* * * * *
    (b) Required finding when ordering a deposition. In the discretion 
of the Commission or the hearing officer, an order for a deposition may 
be issued upon a finding that the prospective witness will likely give 
testimony material to the proceeding; that it is likely the prospective 
witness, who is then within the United States, will be unable to attend 
or testify at the hearing because of age, sickness, infirmity, 
imprisonment, other disability, or absence from the United States, 
unless it appears that the absence of the witness was procured by the 
party requesting the deposition; and that the taking of a deposition 
will serve the interests of justice.
* * * * *

0
28. Section 201.350 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.350  Record in proceedings before hearing officer; retention 
of documents; copies.

* * * * *
    (b) Retention of documents not admitted. Any document offered into 
evidence but excluded shall not be considered a part of the record. The 
Secretary shall retain any such document until the later of the date 
upon which a Commission order ending the proceeding becomes final, or 
the conclusion of any judicial review of the Commission's order.
* * * * *

0
29. Section 201.351 is amended by revising paragraph (a) to read as 
follows:


Sec.  201.351  Transmittal of documents to Secretary; record index; 
certification.

    (a) Transmittal from hearing officer to Secretary of partial record 
index. The hearing officer may, at any time, transmit to the Secretary 
motions, exhibits or any other original documents filed with or 
accepted into evidence by the hearing officer, together with a list of 
such documents.
* * * * *

0
30. Section 201.360 is amended by:
0
a. Adding a sentence at the end of paragraph (a)(2);
0
b. Revising paragraphs (b)(1), (b)(2), and (d); and
0
c. Removing paragraph (e).
    The addition and revisions read as follows:


Sec.  201.360  Initial decision of hearing officer.

    (a)(1) * * *
    (2) * * * If a stay is granted pursuant to Sec.  201.210(c)(3), the 
time period specified in the order instituting proceedings in which the 
hearing officer's initial decision must be filed with the Secretary, as 
well as any other time limits established in orders issued by the 
hearing officer in the proceeding, shall be automatically tolled during 
the period while the stay is in effect.
* * * * *
    (b) * * *
    (1) The Commission will enter an order of finality as to each party 
unless a party or an aggrieved person entitled to review timely files a 
petition for review of the initial decision or a motion to correct a 
manifest error of fact in the initial decision with the hearing 
officer, or the Commission determines on its own initiative to review 
the initial decision; and
    (2) If a party or an aggrieved person entitled to review timely 
files a petition for review or a motion to correct a manifest error of 
fact in the initial decision with the hearing officer, or if the 
Commission takes action to review as to a party or an aggrieved person 
entitled to review, the initial decision shall not become final as to 
that party or person.
* * * * *
    (d) Finality. (1) If a party or an aggrieved person entitled to 
review timely files a petition for review or a motion to correct a 
manifest error of fact in the initial decision, or if the Commission on 
its own initiative orders review of a decision with respect to a party 
or a person aggrieved who would be entitled to review, the initial 
decision shall not become final as to that party or person.
    (2) If a party or aggrieved person entitled to review fails to file 
timely a petition for review or a motion to correct a manifest error of 
fact in the initial decision, and if the Commission does not order 
review of a decision on its own initiative, the Commission will issue 
an order that the decision has become final as to that party. The 
decision becomes final upon issuance of the order. The order of 
finality shall state the date on which sanctions, if any, take effect. 
Notice of the order shall be published in the SEC Docket and on the SEC 
Web site.

0
31. Section 201.400 is amended by revising paragraph (a) to read as 
follows:


Sec.  201.400  Interlocutory review.

    (a) Availability. The Commission may, at any time, on its own 
motion, direct that any matter be submitted to it for review. Petitions 
by parties for interlocutory review are disfavored, and the Commission 
ordinarily will grant a petition to review a hearing officer ruling 
prior to its consideration of an initial decision only in extraordinary 
circumstances. The Commission may decline to consider a ruling 
certified by a hearing officer pursuant to paragraph (c) of this 
section or the petition of a party who has been denied certification if 
it determines that interlocutory review is not warranted or appropriate 
under the circumstances. This section is the exclusive remedy for 
review of a hearing officer's ruling prior to Commission consideration 
of the entire proceeding and is the sole mechanism for appeal of 
actions delegated pursuant to Sec. Sec.  200.30-9 and 200.30-10 of this 
chapter.
* * * * *

0
32. Section 201.401 is amended by:
0
a. Revising the section heading and paragraph (d)(1); and
0
b. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  201.401  Consideration of stays.

* * * * *
    (d) * * *
    (1) Availability. A motion for a stay of an action by a self-
regulatory organization for which the Commission is the appropriate 
regulatory agency, for which action review may be sought pursuant to 
Sec.  201.420, may be made by any person aggrieved thereby at the time 
an application for review is filed in accordance with Sec.  201.420 or 
thereafter.
* * * * *
    (e) Lifting of stay of action by the Public Company Accounting 
Oversight Board. (1) Availability. Any person aggrieved by a stay of 
action by the Board entered in accordance with 15 U.S.C. 7215(e) for 
which review has been sought pursuant to Sec.  201.440 or which the 
Commission has taken up on its motion pursuant to Sec.  201.441 may 
make a motion to lift the stay. The Commission may, at any time, on its 
own motion determine whether to lift the automatic stay.

[[Page 13179]]

    (2) Summary action. The Commission may lift a stay summarily, 
without notice and opportunity for hearing.
    (3) Expedited consideration. The Commission may expedite 
consideration of a motion to lift a stay of Board action, consistent 
with the Commission's other responsibilities. Where consideration is 
expedited, persons opposing the lifting of the stay may file a 
statement in opposition within two days of service of the motion 
requesting lifting of the stay unless the Commission, by written order, 
shall specify a different period.

0
33. Section 201.410 is amended by:
0
a. Revising paragraph (b); and
0
b. Removing and reserving paragraph (d).
    The revision reads as follows:


Sec.  201.410  Appeal of initial decisions by hearing officers.

* * * * *
    (b) Procedure. The petition for review of an initial decision shall 
be filed with the Commission within such time after service of the 
initial decision as prescribed by the hearing officer pursuant to Sec.  
201.360(b) unless a party has filed a motion to correct an initial 
decision with the hearing officer. If such correction has been sought, 
a party shall have 21 days from the date of the hearing officer's order 
resolving the motion to correct to file a petition for review. The 
petition shall set forth the specific findings and conclusions of the 
initial decision as to which exception is taken, together with 
supporting reasons for each exception. Supporting reasons may be stated 
in summary form. Any exception to an initial decision not stated in the 
petition for review, or in a previously filed proposed finding made 
pursuant to Sec.  201.340 may, at the discretion of the Commission, be 
deemed to have been waived by the petitioner. In the event a petition 
for review is filed, any other party to the proceeding may file a 
cross-petition for review within the original time allowed for seeking 
review or within ten days from the date that the petition for review 
was filed, whichever is later.
* * * * *

0
34. Section 201.411 is amended by revising paragraph (e) as follows:


Sec.  201.411  Commission consideration of decisions by hearing 
officers.

* * * * *
    (e) Summary affirmance. (1) At any time within 21 days after the 
filing of a petition for review pursuant to Sec.  201.410(b), any party 
may file a motion in accordance with Sec.  201.154 asking that the 
Commission summarily affirm an initial decision. Any party may file an 
opposition and reply to such motion in accordance with Sec.  201.154. 
Pending determination of the motion for summary affirmance, the 
Commission, in its discretion, may delay issuance of a briefing 
schedule order pursuant to Sec.  201.450.
    (2) Upon consideration of the motion and any opposition or upon its 
own initiative, the Commission may summarily affirm an initial 
decision. The Commission may grant summary affirmance if it finds that 
no issue raised in the initial decision warrants consideration by the 
Commission of further oral or written argument. The Commission will 
decline to grant summary affirmance upon a reasonable showing that a 
prejudicial error was committed in the conduct of the proceeding or 
that the decision embodies an exercise of discretion or decision of law 
or policy that is important and that the Commission should review.
* * * * *

0
35. Section 201.420 is amended by:
0
a. Revising paragraph (b);
0
b. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e); and
0
c. Adding new paragraph (c).
    The revision and addition read as follows:


Sec.  201.420  Appeal of determinations by self-regulatory 
organizations.

* * * * *
    (b) Procedure. As required by section 19(d)(1) of the Securities 
Exchange Act of 1934, 15 U.S.C. 78s(d)(1), an applicant must file an 
application for review with the Commission within 30 days after the 
notice of the determination is filed with the Commission and received 
by the aggrieved person applying for review. The Commission will not 
extend this 30-day period, absent a showing of extraordinary 
circumstances. This section is the exclusive remedy for seeking an 
extension of the 30-day period.
    (c) Application. The application shall be filed with the Commission 
pursuant to Sec.  201.151. The applicant shall serve the application on 
the self-regulatory organization. The application shall identify the 
determination complained of and set forth in summary form a brief 
statement of the alleged errors in the determination and supporting 
reasons therefor. The application shall state an address where the 
applicant can be served. The application should not exceed two pages in 
length. If the applicant will be represented by a representative, the 
application shall be accompanied by the notice of appearance required 
by Sec.  201.102(d).
* * * * *

0
36. Section 201.430 is amended by revising paragraph (a) to read as 
follows:


Sec.  201.430  Appeal of actions made pursuant to delegated authority.

    (a) Scope of rule. Any person aggrieved by an action made by 
authority delegated in Sec. Sec.  200.30-1 through 200.30-8 or 
Sec. Sec.  200.30-11 through 200.30-18 of this chapter may seek review 
of the action pursuant to paragraph (b) of this section.
* * * * *

0
37. Sections 201.440 and 201.441 are added to read as follows:


Sec.  201.440  Appeal of determinations by the Public Company 
Accounting Oversight Board.

    (a) Application for review; when available. Any person who is 
aggrieved by a determination of the Board with respect to any final 
disciplinary sanction, including disapproval of a completed application 
for registration of a public accounting firm, may file an application 
for review.
    (b) Procedure. An aggrieved person may file an application for 
review with the Commission pursuant to Sec.  201.151 within 30 days 
after the notice filed by the Board of its determination with the 
Commission pursuant to Sec.  240.19d-4 of this chapter is received by 
the aggrieved person applying for review. The applicant shall serve the 
application on the Board at the same time. The application shall 
identify the determination complained of, set forth in summary form a 
brief statement of alleged errors in the determination and supporting 
reasons therefor, and state an address where the applicant can be 
served. The notice of appearance required by Sec.  201.102(d) shall 
accompany the application.
    (c) Stay of determination. Filing an application for review with 
the Commission pursuant to paragraph (b) of this section operates as a 
stay of the Board's determination unless the Commission otherwise 
orders either pursuant to a motion filed in accordance with Sec.  
201.401(e) or upon its own motion.
    (d) Certification of the record; service of the index. Within 
fourteen days after receipt of an application for review, the Board 
shall certify and file with the Commission one copy of the record upon 
which it took the complained-of action. The Board shall file with the 
Commission three copies of an index of such record, and shall serve one 
copy of the index on each party.

[[Page 13180]]

Sec.  201.441  Commission consideration of Board determinations.

    (a) Commission review other than pursuant to an application for 
review. The Commission may, on its own initiative, order review of any 
final disciplinary sanction, including disapproval of a completed 
application for registration of a public accounting firm, imposed by 
the Board that could be subject to an application for review pursuant 
to Sec.  201.440(a) within 40 days after the Board filed notice thereof 
pursuant to Sec.  240.19d-4 of this chapter.
    (b) Supplemental briefing. The Commission may at any time prior to 
the issuance of its decision raise or consider any matter that it deems 
material, whether or not raised by the parties. The Commission will 
give notice to the parties and an opportunity for supplemental briefing 
with respect to issues not briefed by the parties where the Commission 
believes that such briefing could significantly aid the decisional 
process.

0
38. Section 201.450 is amended by:
0
a. Redesignating paragraphs (a)(2)(iii) and (a)(2)(iv) as paragraphs 
(a)(2)(iv) and (a)(2)(v);
0
b. Adding new paragraph (a)(2)(iii);
0
c. Revising paragraph (c); and
0
d. Adding paragraph (d).
    The additions and revision read as follows:


Sec.  201.450  Briefs filed with the Commission.

    (a) * * *
    (2) * * *
    (iii) Receipt by the Commission of an index to the record of a 
determination by the Board filed pursuant to Sec.  201.440(d);
* * * * *
    (c) Length limitation. Except with leave of the Commission, opening 
and opposition briefs shall not exceed 14,000 words and reply briefs 
shall not exceed 7,000 words, exclusive of pages containing the table 
of contents, table of authorities, and any addendum that consists 
solely of copies of applicable cases, pertinent legislative provisions 
or rules, and exhibits. The number of words shall include pleadings 
incorporated by reference. Motions to file briefs in excess of these 
limitations are disfavored.
    (d) Certificate of compliance. An opening or opposition brief that 
does not exceed 30 pages in length, exclusive of pages containing the 
table of contents, table of authorities, and any addendum that consists 
solely of copies of applicable cases, pertinent legislative provisions, 
or rules and exhibits, but inclusive of pleadings incorporated by 
reference, is presumptively considered to contain no more than 14,000 
words. A reply brief that does not exceed 15 pages in length, exclusive 
of pages containing the table of contents, table of authorities, and 
any addendum that consists solely of copies of applicable cases, 
pertinent legislative provisions, or rules and exhibits, but inclusive 
of pleadings incorporated by reference, is presumptively considered to 
contain no more than 7,000 words. Any brief that exceeds these page 
limits must include a certificate by the party's representative, or an 
unrepresented party, stating that the brief complies with the length 
limitation set forth in Sec.  201.450(c) and stating the number of 
words in the brief. The person preparing the certificate may rely on 
the word count of the word-processing system used to prepare the brief.

0
39. Section 201.451 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.451  Oral argument before the Commission.

* * * * *
    (b) Procedure. Requests for oral argument shall be made by separate 
motion accompanying the initial brief on the merits. The Commission 
shall issue an order as to whether oral argument is to be heard, and if 
so, the time and place therefor. If oral argument is granted, the time 
fixed for oral argument shall be changed only by written order of the 
Commission, for good cause shown. The order shall state at whose 
request the change is made and the reasons for any such changes. No 
visual aids may be used at oral argument unless copies have been 
provided to the Commission and all parties at least five business days 
before the argument is to be held.
* * * * *

0
40. Section 201.460 is amended by adding paragraph (a)(3) to read as 
follows:


Sec.  201.460  Record before the Commission.

* * * * *
    (a) * * *
    (3) In a proceeding for final decision before the Commission 
reviewing a determination of the Board, the record shall consist of:
    (i) The record certified pursuant to Sec.  201.440(d) by the Board;
    (ii) Any application for review; and
    (iii) Any submissions, moving papers, and briefs filed on appeal or 
review.
* * * * *

0
41. Section 201.470 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.470  Reconsideration.

* * * * *
    (b) Procedure. A motion for reconsideration shall be filed within 
10 days after service of the order complained of, or within such time 
as the Commission may prescribe upon motion for extension of time filed 
by the person seeking reconsideration, if the motion is made within the 
foregoing 10-day period. The motion for reconsideration shall briefly 
and specifically state the matters of record alleged to have been 
erroneously decided, the grounds relied upon, and the relief sought. A 
motion for reconsideration shall conform to the requirements, including 
page length, provided in Sec.  201.154. No response to a motion for 
reconsideration shall be filed unless requested by the Commission. Any 
response so requested shall comply with Sec.  201.154.

0
42. Section 201.601 is amended by adding paragraph (c) to read as 
follows:


Sec.  201.601  Prompt payment of disgorgement, interest and penalties.

* * * * *
    (c) Method of making payment. Payment shall be made by United 
States postal money order, wire transfer, certified check, bank 
cashier's check, or bank money order made payable to the Securities and 
Exchange Commission. The payment shall be mailed or delivered to the 
office designated by this Commission. Payment shall be accompanied by a 
letter that identifies the name and number of the case and the name of 
the respondent making payment. A copy of the letter and the instrument 
of payment shall be sent to counsel for the Division of Enforcement.


Sec. Sec.  201.610 through 201.614 and 201.620  [Removed and Reserved]

0
43. Sections 201.610 through 201.614 and Sec.  201.620 are removed and 
reserved.

0
44. Sections 201.1100 through 201.1106, Subpart F--Fair Fund and 
Disgorgement Plans--are added to read as follows:

Subpart F--Fair Fund and Disgorgement Plans

Sec.
201.1100 Creation of Fair Fund.
201.1101 Submission of plan of distribution; contents of plan.
201.1102 Provisions for payment.
201.1103 Notice of proposed plan and opportunity for comment by non-
parties.
201.1104 Order approving, modifying, or disapproving proposed plan.
201.1105 Administration of plan.
201.1106 Right to challenge.

    Authority: 15 U.S.C. 77h-1, 77s, 77u, 78c(b), 78d-1, 78d-2, 78u-
2, 78u-3, 78v, 78w, 80a-9, 80a-37, 80a-39, 80a-40, 80b-3, 80b-11, 
80b-12, and 7246.

[[Page 13181]]

Sec.  201.1100  Creation of Fair Fund.

    In any agency process initiated by an order instituting proceedings 
in which the Commission issues an order requiring the payment of 
disgorgement by a respondent and also assessing a civil money penalty 
against that respondent, the Commission may order that the amount of 
the disgorgement and of the civil money penalty, together with any 
funds received by the Commission pursuant to 15 U.S.C. 7246(b), be used 
to create a fund for the benefit of investors who were harmed by the 
violation.


Sec.  201.1101  Submission of plan of distribution; contents of plan.

    (a) Submission. The Commission or the hearing officer may, at any 
time, order any party to submit a plan for the administration and 
distribution of funds in a Fair Fund or disgorgement fund. Unless 
ordered otherwise, the Division of Enforcement shall submit a proposed 
plan no later than 60 days after the respondent has turned over the 
funds or other assets pursuant to the Commission's order imposing 
disgorgement and, if applicable, a civil money penalty and any appeals 
of the Commission's order have been waived or completed, or appeal is 
no longer available.
    (b) Contents of plan. Unless otherwise ordered, a plan for the 
administration of a Fair Fund or a disgorgement fund shall include the 
following elements:
    (1) Procedures for the receipt of additional funds, including the 
specification of any account where funds will be held, the instruments 
in which the funds may be invested; and, in the case of a Fair Fund, 
the receipt of any funds pursuant to 15 U.S.C. 7246(b), if applicable;
    (2) Specification of categories of persons potentially eligible to 
receive proceeds from the fund;
    (3) Procedures for providing notice to such persons of the 
existence of the fund and their potential eligibility to receive 
proceeds of the fund;
    (4) Procedures for making and approving claims, procedures for 
handling disputed claims, and a cut-off date for the making of claims;
    (5) A proposed date for the termination of the fund, including 
provision for the disposition of any funds not otherwise distributed;
    (6) Procedures for the administration of the fund, including 
selection, compensation, and, as necessary, indemnification of a fund 
administrator to oversee the fund, process claims, prepare accountings, 
file tax returns, and, subject to the approval of the Commission, make 
distributions from the fund to investors who were harmed by the 
violation; and
    (7) Such other provisions as the Commission or the hearing officer 
may require.


Sec.  201.1102  Provisions for payment.

    (a) Payment to registry of the court or court-appointed receiver. 
Subject to such conditions as the Commission or the hearing officer 
shall deem appropriate, a plan for the administration of a Fair Fund or 
a disgorgement fund may provide for payment of funds into a court 
registry or to a court-appointed receiver in any case pending in 
federal or state court against a respondent or any other person based 
upon a complaint alleging violations arising from the same or 
substantially similar facts as those alleged in the Commission's order 
instituting proceedings.
    (b) Payment to the United States Treasury under certain 
circumstances. When, in the opinion of the Commission or the hearing 
officer, the cost of administering a plan of disgorgement relative to 
the value of the available disgorgement funds and the number of 
potential claimants would not justify distribution of the disgorgement 
funds to injured investors, the plan may provide that the disgorgement 
funds and any civil penalty shall be paid directly to the general fund 
of the United States Treasury.


Sec.  201.1103  Notice of proposed plan and opportunity for comment by 
non-parties.

    Notice of a proposed plan of disgorgement or a proposed Fair Fund 
plan shall be published in the SEC Docket, on the SEC website, and in 
such other publications as the Commission or the hearing officer may 
require. The notice shall specify how copies of the proposed plan may 
be obtained and shall state that persons desiring to comment on the 
proposed plan may submit their views, in writing, to the Commission.


Sec.  201.1104  Order approving, modifying, or disapproving proposed 
plan.

    At any time after 30 days following publication of notice of a 
proposed plan of disgorgement or of a proposed Fair Fund plan, the 
Commission shall, by order, approve, approve with modifications, or 
disapprove the proposed plan. In the discretion of the Commission, a 
proposed plan that is substantially modified prior to adoption may be 
republished for an additional comment period pursuant to Sec.  
201.1103. The order approving or disapproving the plan should be 
entered within 30 days after the end of the final period allowed for 
comments on the proposed plan unless the Commission or the hearing 
officer, by written order, allows a longer period for good cause shown.


Sec.  201.1105  Administration of plan.

    (a) Appointment and removal of administrator. The Commission or the 
hearing officer shall have discretion to appoint any person, including 
a Commission employee, as administrator of a plan of disgorgement or a 
Fair Fund plan and to delegate to that person responsibility for 
administering the plan. An administrator may be removed at any time by 
order of the Commission or hearing officer.
    (b) Assistance by respondent. A respondent may be required or 
permitted to administer or assist in administering a plan of 
disgorgement subject to such terms and conditions as the Commission or 
the hearing officer deems appropriate to ensure the proper distribution 
of the funds.
    (c) Administrator to post bond. If the administrator is not a 
Commission employee, the administrator shall be required to obtain a 
bond in the manner prescribed in 11 U.S.C. 322, in an amount to be 
approved by the Commission. The cost of the bond may be paid for as a 
cost of administration. The Commission may waive posting of a bond for 
good cause shown.
    (d) Administrator's fees. If the administrator is a Commission 
employee, no fee shall be paid to the administrator for his or her 
services. If the administrator is not a Commission employee, the 
administrator may file an application for fees for completed services, 
and upon approval by the Commission or a hearing officer, may be paid a 
reasonable fee for those services. Any objections thereto shall be 
filed within 21 days of service of the application on the parties.
    (e) Source of funds. Unless otherwise ordered, fees and other 
expenses of administering the plan shall be paid first from the 
interest earned on the funds, and if the interest is not sufficient, 
then from the corpus.
    (f) Accountings. During the first 10 days of each calendar quarter, 
or as otherwise directed by the Commission or the hearing officer, the 
administrator shall file an accounting of all monies earned or received 
and all monies spent in connection with the administration of the plan 
of disgorgement. A final accounting shall be submitted for approval of 
the Commission or hearing officer prior to discharge of the 
administrator and cancellation of the administrator's bond, if any.

[[Page 13182]]

    (g) Amendment. A plan may be amended upon motion by any party or by 
the plan administrator or upon the Commission's or the hearing 
officer's own motion.


Sec.  201.1106  Right to challenge.

    Other than in connection with the opportunity to submit comments as 
provided in Sec.  201.1103, no person shall be granted leave to 
intervene or to participate or otherwise to appear in any agency 
proceeding or otherwise to challenge an order of disgorgement or 
creation of a Fair Fund; or an order approving, approving with 
modifications, or disapproving a plan of disgorgement or a Fair Fund 
plan; or any determination relating to a plan based solely upon that 
person's eligibility or potential eligibility to participate in a fund 
or based upon any private right of action such person may have against 
any person who is also a respondent in the proceeding.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
45. The authority citation for part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless 
otherwise noted.
* * * * *

0
46. Section 240.19d-4 is added to read as follows:


Sec.  240.19d-4  Notice by the Public Company Accounting Oversight 
Board of disapproval of registration or of disciplinary action.

    (a) Definitions--(1) Board means the Public Company Accounting 
Oversight Board.
    (2) Public accounting firm shall have the meaning set forth in 15 
U.S.C. 7201(a)(11).
    (3) Registered public accounting firm shall have the meaning set 
forth in 15 U.S.C. 7201(a)(12).
    (4) Associated person shall mean a person associated with a 
registered public accounting firm as defined in 15 U.S.C. 7201(a)(9).
    (b)(1) Notice of disapproval of registration. If the Board 
disapproves a completed application for registration by a public 
accounting firm, the Board shall file a notice of its disapproval with 
the Commission within 30 days and serve a copy on the public accounting 
firm.
    (2) Contents of the notice. The notice required by paragraph (b)(1) 
of this section shall provide the following information:
    (i) The name of the public accounting firm and the public 
accounting firm's last known address as reflected in the Board's 
records;
    (ii) The basis for the Board's disapproval, and a copy of the 
Board's written notice of disapproval; and
    (iii) Such other information as the Board may deem relevant.
    (c)(1) Notice of disciplinary action. If the Board imposes any 
final disciplinary sanction on any registered public accounting firm or 
any associated person of a registered public accounting firm under 15 
U.S.C. 7215(b)(3) or 7215(c), the Board shall file a notice of the 
disciplinary sanction with the Commission within 30 days and serve a 
copy on the person sanctioned.
    (2) Contents of the notice. The notice required by paragraph (c)(1) 
of this section shall provide the following information:
    (i) The name of the registered public accounting firm or the 
associated person, together with the firm's or the person's last known 
address as reflected in the Board's records;
    (ii) A description of the acts or practices, or omissions to act, 
upon which the sanction is based;
    (iii) A statement of the sanction imposed, the reasons therefor, or 
a copy of the Board's statement justifying the sanction, and the 
effective date of such sanction; and
    (iv) Such other information as the Board may deem relevant.

    Dated: March 12, 2004.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-6069 Filed 3-18-04; 8:45 am]
BILLING CODE 8010-01-P