[Federal Register Volume 69, Number 117 (Friday, June 18, 2004)]
[Notices]
[Pages 34205-34207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13842]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49852; File No. SR-NASD-2004-039]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 by National Association of Securities 
Dealers, Inc. Relating to Reducing the Time for Chairperson Selection

June 14, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 4, 2004, National Association of Securities Dealers, Inc. 
(``NASD''), through its wholly owned subsidiary, NASD Dispute 
Resolution, Inc. (``Dispute Resolution'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by NASD. On May 13, 2004,

[[Page 34206]]

NASD filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Mignon McLemore, Counsel, NASD, to Katherine 
England, Assistant Director, Division of Market Regulation, 
Commission, dated May 12, 2004.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Dispute Resolution is proposing to amend NASD Rule 10308 of 
the NASD Code of Arbitration Procedure (``Code'') to reduce the time 
allotted the parties for chairperson selection. Below is the text of 
the proposed rule change. Proposed new language is in italics; proposed 
deletions are in brackets.
* * * * *
10308. Selection of Arbitrators
* * * * *
    (c) Striking, Ranking, and Appointing Arbitrators on Lists
* * * * *
(5) Selecting a Chairperson for the Panel
    The parties shall have [15] 7 days from the date the Director sends 
notice of the names of the arbitrators to select a chairperson. If the 
parties notify Dispute Resolution staff prior to the expiration of the 
original deadline that they need more time in which to reach agreement, 
Dispute Resolution staff will extend the time to select a chairperson 
for an additional 8 days. If the parties cannot agree within the 
allotted time, the Director shall appoint a chairperson from the panel 
as follows:
    (Remainder of rule unchanged.)
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASD has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    NASD Dispute Resolution proposes to reduce the time allotted for 
chairperson selection in Rule 10308(c)(5) of the Code from 15 days to 7 
days after the Director of Arbitration sends notice of the arbitrators 
to the parties.
1. Purpose
    Rule 10308 sets forth the procedures for how arbitrators and 
chairpersons are selected for an arbitration panel. First, the 
arbitrators are selected for the panel and then, from this list, the 
parties must select a chairperson within a 15-day timeframe. Currently, 
Rule 10308(c)(5) states, in relevant part, that ``the parties shall 
have 15 days from the date the Director sends notice of the names of 
the arbitrators to select a chairperson.'' NASD proposes to reduce the 
chairperson selection period from 15 days to 7 days.\4\ NASD believes 
the 15-day waiting period causes unnecessary delay in the selection 
process since Dispute Resolution staff estimates that parties fail to 
agree on a chairperson in nearly 80 percent of the cases. If the 
parties notify staff that they are negotiating to select a chairperson, 
but are unable to conclude the process within the allotted timeframe, 
staff will grant extensions to facilitate the negotiations.
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    \4\ In cases where parties must respond to Dispute Resolution by 
mail, the computer system that tracks the parties' responses adds 
two days to the response deadline to account for mailing time, and 
calculates the date their response is due. Parties then receive a 
letter specifying the date their response is due, based on system 
calculations.
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    NASD monitors continuously the claim filing process to determine 
how it can be improved and streamlined. In light of the failure of the 
parties to agree on a chairperson in nearly 80 percent of the cases and 
the delay caused by the 15-day waiting period, NASD believes that the 
claim filing process would become more efficient if the time required 
to select a chairperson were reduced. NASD believes that this proposal 
should provide sufficient time for the parties to reach agreement on a 
chairperson, if they wish to, and will allow the Initial Prehearing 
Conference to be scheduled more expeditiously. Further, the proposed 
rule change would expedite the processing of arbitrations by reducing 
the turnaround time for chairperson selection.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act, which requires, among other 
things, that the Association's rules must be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest. NASD believes that reducing the time it takes 
to select a chairperson will help streamline the arbitration process 
and ultimately make the process more efficient.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor received.

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

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change as amended is consistent with the Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an E-mail to [email protected]. Please include 
File Number SR-NASD-2004-039 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

All submissions should refer to File Number SR-NASD-2004-039. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your

[[Page 34207]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies 
of such filing also will be available for inspection and copying at the 
principal office of NASD. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-NASD-2004-039 and should be submitted on or before July 9, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-13842 Filed 6-17-04; 8:45 am]
BILLING CODE 8010-01-P