[Federal Register Volume 70, Number 96 (Thursday, May 19, 2005)]
[Notices]
[Pages 28972-28973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2506]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51693; File No. SR-NASD-2005-052]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendments 
No. 1 and No. 2 Thereto Relating to Honorarium for Arbitrators Deciding 
Discovery-Related Motions

May 12, 2005.
    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 
the National Association of Securities Dealers, Inc. (``NASD''), 
through its wholly owned subsidiary, NASD Dispute Resolution, Inc. 
(``NASD Dispute Resolution'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') on April 14, 2005, on April 29, 
2005 (Amendment No. 1) and on May 6, 2005, (Amendment No. 2), the 
proposed rule change as described in items I, II, and III below, which 
items have been prepared by NASD. 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.
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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 Interpretive Material 
(IM) 10104 of the NASD Code of Arbitration Procedure (``Code'') to 
provide payment to arbitrators for deciding discovery-related motions 
without a hearing.\3\ Below is the text of the proposed rule change.\4\ 
Proposed new language is in italics; proposed deletions are in 
brackets.
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    \3\ On March 15, 2005, NASD filed a proposed rule change to 
provide written explanations in arbitration awards upon the request 
of customers, or of associated persons in industry controversies. 
This proposal amends IM-10104. See SR-NASD-2005-032.
    \4\ This IM will be renumbered as appropriate following 
Commission approval of the pending revisions to be NASD Code of 
Arbitration Procedure for Customer Disputes filed on October 15, 
2003, and amended on January 3, 2005, January 19, 2005, and april 8, 
2005 (SR-NASD-2003-158); and the NASD Code of Arbitration Procedure 
for Industry Disputes filed on January 16, 2004, and amended on 
February 26, 2004, January 3, 2005, and April 8, 2005 (SR-NASD-2004-
011).
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* * * * *

IM-10104. Arbitrators' Honorarium

    (a) All persons selected to serve as arbitrators pursuant to the 
Association's Code of Arbitration Procedure shall be paid an honorarium 
for each hearing session (including a prehearing conference) in which 
they participate.
    (b) The honorarium shall be $200 for each hearing session and $75 
per day additional honorarium to the chairperson of the panel. The 
honorarium for a case not requiring a hearing shall be $125.
    (c) The honorarium for travel to a canceled hearing session shall 
be $50. If a hearing session other than a prehearing conference is 
adjourned pursuant to Rule 10319(d), each arbitrator shall receive an 
additional honorarium of $100.
    (d) The Director may authorize a higher or additional honorarium 
for the use of a foreign hearing location.
    (e) Payment for Deciding Discovery-Related Motions Without a 
Hearing Session
    (1) NASD will pay each arbitrator an honorarium of $200 to decide a 
discovery-related motion without a hearing session. This paragraph does 
not apply to cases administered under Rules 10203 and 10302.
    (2) For purposes of paragraph (e)(1), a discovery-related motion 
and any replies or other correspondence relating to the motion shall be 
considered to be a single motion.
    (3) The panel will allocate the cost of the honoraria under 
paragraph (e)(1) to the parties pursuant to Rules 10205(c) and 
10332(c).
* * * * *

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

1. Purpose
    In 2002, NASD Dispute Resolution conducted arbitrator focus groups 
across the country. One of the consistently raised concerns was the 
amount of time and effort invested by chairpersons in reviewing and 
deciding various discovery motions, especially in situations in which 
the motions are decided without a hearing (i.e., on the papers). Also, 
Dispute Resolution staff has found that the current lack of 
compensation for deciding such motions has made it more difficult to 
recruit current arbitrators to become chairpersons. Currently, 
arbitrators are not compensated for deciding discovery motions on the 
papers. Arbitrators are compensated, however, when they conduct pre-
hearing conferences to hear argument from parties regarding discovery 
motions.
    NASD is, therefore, proposing to adopt a rule to compensate 
arbitrators in the amount of $200 (the same amount that is paid for an 
arbitrator to participate in a pre-hearing conference regarding 
discovery) to decide discovery motions on the papers. The new rule 
language states that NASD will pay arbitrators an honorarium of $200 to 
decide a discovery-related motion without a hearing session. For 
purposes of this rule, a discovery-related motion and any replies or 
other correspondence relating to the motion will be considered to be a 
single motion. If more than one arbitrator considers a discovery-
related motion, each arbitrator will receive $200. The panel will 
allocate the cost of the honoraria as part of the eventual arbitration 
award. The rule will not apply to simplified cases administered under 
Rules 10203 and 10302.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of sections 15A(b)(5) \5\ and 15A(b)(6) \6\ of the Act, 
which require, among other things, that the NASD's rules provide

[[Page 28973]]

for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility 
or system that the NASD operates or controls, and that NASD 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 
proposed rule change accomplishes these goals by encouraging 
arbitrators to decide discovery-related motions on the papers without 
the need for a pre-hearing conference, thereby expediting the pace of 
arbitrations, which should reduce the time between the filing of an 
arbitration claim and the rendering of an award. Moreover, the panel 
would allocate the honorarium for deciding a discovery-related motion 
equitably among the parties.
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    \5\ 15 U.S.C. 78o-3(b)(5).
    \6\ 15 U.S.C. 78o-3(b)(6).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

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

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

    Written comments were neither solicited nor received.

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

    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 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-2005-052 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-2005-052. 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 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 the File Number SR-NASD-2005-052 and should be 
submitted on or before June 9, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-2506 Filed 5-18-05; 8:45 am]
BILLING CODE 8010-01-P