[Federal Register Volume 69, Number 125 (Wednesday, June 30, 2004)]
[Notices]
[Pages 39532-39534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14814]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49910; File No. SR-NASD-2004-087]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Technical Amendments to Section 4 
of Schedule A to the NASD By-Laws and to Rule 10308(d) of the NASD Code 
of Arbitration Procedure

June 24, 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 June 8, 2004, the National Association of Securities Dealers, Inc. 
(``NASD'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by NASD. NASD filed the 
proposed rule change pursuant

[[Page 39533]]

to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is filing with the Commission a proposed rule change to: (1) 
amend Section 4 of Schedule A to the NASD By-Laws to re-label a 
subparagraph that inadvertently was not correctly re-labeled as part of 
a recent rule filing, and (2) amend Rule 10308(d) of the NASD Code of 
Arbitration Procedure to provide a title for recently approved rule 
language and to replace and re-label rule language that inadvertently 
was omitted in a recent rule filing. Below is the text of the proposed 
rule change. Proposed new language is italicized; proposed deletions 
are [bracketed].\5\
---------------------------------------------------------------------------

    \5\ The language between paragraph marks (]) in Rule 10308(d)(4) 
(Vacancies Created by Disqualification or Resignation) is already 
existing language. The language previously was approved by the 
Commission, but inadvertently was not reflected in the publication 
of a recent rule filing, as discussed below. The language is 
designated in this manner in order to reflect its omission from the 
previous rule filing.
---------------------------------------------------------------------------

* * * * *

Schedule A to NASD By-Laws

    Assessments and fees pursuant to the provisions of Article VI of 
the By-Laws of NASD shall be determined on the following basis.
    Section 1 through 3--No Change.
    Section 4--Fees
    (a) through (l) No Change.
    (m) There shall be a session fee of $65.00 assessed as to each 
individual who is required to complete the Regulatory Element of the 
Continuing Education Requirements pursuant to the provisions of Rule 
1120.
    (n) No Change.
    [(m)] (o) NASD shall assess each member a fee of $10 per day, up to 
a maximum of $300, for each day that a new disclosure event or a change 
in the status of a previously reported disclosure event is not timely 
filed as required by NASD on an initial Form U5, an amendment to a Form 
U5, or an amendment to a Form U4, with such fee to be assessed starting 
on the day following the last date on which the event was required to 
be reported.
* * * * *

10300. UNIFORM CODE OF ARBITRATION

* * * * *

10308. Selection of Arbitrators

    (a) through (c) No change.
    (d) Disqualification and Removal of Arbitrator Due to Conflict of 
Interest or Bias
    (1)-(2) No change.
    (3) Standards for Deciding Challenges for Cause
    The Director will grant a party's request to disqualify an 
arbitrator if it is reasonable to infer, based on information known at 
the time of the request, that the arbitrator is biased, lacks 
impartiality, or has an interest in the outcome of the arbitration. The 
interest or bias must be direct, definite, and capable of reasonable 
demonstration, rather than remote or speculative.
    [(3)] (4) ] Vacancies Created by Disqualification or Resignation ]
    ] Prior to the commencement of the earlier of (A) the first pre-
hearing conference or (B) the first hearing, if an arbitrator appointed 
to an arbitration panel is disqualified or is otherwise unable or 
unwilling to serve, the Director shall appoint from the consolidated 
list of arbitrators the arbitrator who is the most highly ranked 
available arbitrator of the proper classification remaining on the 
list. If there are no available arbitrators of the proper 
classification on the consolidated list, the Director shall appoint an 
arbitrator of the proper classification subject to the limitation set 
forth in paragraph (c)(4)(B). The Director shall provide the parties 
information about the arbitrator as provided in paragraph (b)(6), and 
the parties shall have the right to object to the arbitrator as 
provided in paragraph (d)(1).]
* * * * *

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

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

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

1. Purpose
Technical Amendment to the NASD By-Laws
    On December 22, 2003, NASD filed with the Commission for immediate 
effectiveness a proposed rule change to amend Section 4 of Schedule A 
to the NASD By-Laws to establish a late fee to be assessed against NASD 
members that fail timely to pay their yearly renewal fees to the 
Central Registration Depository. On January 29, 2004, NASD submitted 
Amendment No. 1 to the proposed rule change. The Commission published 
notice of the proposed rule change and Amendment No. 1 in the Federal 
Register on February 19, 2004.\6\ The proposed rule change added 
paragraph (m) to Section 4.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 49224 (February 11, 
2004), 69 FR 7833 (notice of filing and immediate effectiveness of 
File No. SR-NASD-2003-192).
---------------------------------------------------------------------------

    On March 19, 2004, NASD filed with the Commission for immediate 
effectiveness a proposed rule change to amend Section 4 of Schedule A 
to the NASD By-Laws to establish an examination fee for the new 
Research Analyst Qualification Examination program.\7\ Among other 
changes, NASD re-labeled the existing paragraph (k) in Section 4 as 
paragraph (m), but it inadvertently did not correctly re-label the 
existing paragraph (m). As a result, Section 4 has two provisions 
identified as paragraph (m). NASD is filing this proposed rule change 
to re-label the paragraph (m) that was added pursuant to SR-NASD-2003-
192 as paragraph (o).
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 49527 (April 2, 
2004), 69 FR 19255 (April 12, 2004) (notice of filing and immediate 
effectiveness of File No. SR-NASD-2004-049).
---------------------------------------------------------------------------

Technical Amendment to the NASD Code of Arbitration Procedure
    On June 12, 2003, NASD filed a notice of proposed rule change with 
the Commission to amend Rules 10308 and 10312 of the NASD Code of 
Arbitration Procedure (``Code'') to modify arbitrator classification. 
The Commission published the notice in the Federal Register on August 
21, 2003.\8\ The Commission approved the proposed rule change on April 
16, 2004.\9\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 48347 (August 14, 
2003), 68 FR 50563 (notice of filing of File No. SR-NASD-2003-95).
    \9\ See Securities Exchange Act Release No. 49573, 69 FR 21871 
(April 22, 2004).
---------------------------------------------------------------------------

    The proposed rule change added, among other things, a provision to 
Rule

[[Page 39534]]

10308(d) of the Code concerning a party's request to disqualify an 
arbitrator. When this provision was inserted as new subparagraph (3) of 
the rule, the existing subparagraph (3) was inadvertently omitted from 
the notice that was published in the Federal Register. NASD is filing 
this proposed rule change to reflect the omitted subparagraph, and to 
provide a title for the new subparagraph (to maintain uniformity within 
the rule). Thus, the title for the new language in subparagraph (3) 
will be ``Standards for Deciding Challenges for Cause,'' and the 
omitted subparagraph will be re-labeled as subparagraph (4).
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among 
other things, that NASD's rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. NASD believes that the technical changes are 
consistent with the protection of investors and the public interest in 
that they will avoid any confusion when reading the provisions of 
Section 4 of Schedule A to the NASD By-Laws and Rule 10308(d) of the 
Code.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

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

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

    Written comments were neither solicited nor received.

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

    NASD has designated the proposed rule change as one that: (i) Does 
not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 days from the date on which 
it was filed, or such shorter time as the Commission may designate. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
thereunder.\12\ At any time within 60 days of the filing of such 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\13\ the proposal 
may not become operative for 30 days after the date of its filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, and the self-
regulatory organization must file notice of its intent to file the 
proposed rule change at least five business days beforehand. NASD has 
requested that the Commission waive the five-day pre-filing requirement 
and the 30-day operative delay so that the proposed rule change will 
become immediately effective upon filing.
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the five-day pre-filing 
provision and the 30-day operative delay is consistent with the 
protection of investors and the public interest.\14\ Waiving the pre-
filing requirement and accelerating the operative date will merely 
permit the immediate implementation of changes that are technical in 
nature. For these reasons, the Commission designates the proposed rule 
change as effective and operative immediately.
---------------------------------------------------------------------------

    \14\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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-2004-087 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-2004-087. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your 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 the 
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-2004-087 and should be submitted on or before July 21, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-14814 Filed 6-29-04; 8:45 am]
BILLING CODE 8010-01-P