[Federal Register Volume 72, Number 234 (Thursday, December 6, 2007)]
[Notices]
[Pages 68922-68924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-23592]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56864; File No. SR-FICC-2007-06]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Modify the Hearing 
Procedures Afforded to Members and Applicants for Membership and 
Harmonize Them With Similar Rules of Its Affiliates

November 29, 2007.
    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 April 30, 2007, the Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') and 
on July 24, 2007, amended \3\ the proposed rule change described in 
Items I, II, and III below, which items have been prepared primarily by 
FICC. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The amendment corrected a typographical error in the 
proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change seeks (1) to modify the rules of FICC's 
Government Securities Division (``GSD'') and Mortgage-Backed Securities 
Division (``MBSD'') (GSD and MBSD are collectively referred to as the 
``Divisions''), including the EPN rules of MBSD, regarding hearing 
procedures afforded to members and applicants for membership and (2) 
where practicable or beneficial, to harmonize them with similar rules 
of FICC's affiliates, The Depository Trust Company (``DTC'') and the 
National Securities Clearing Corporation (``NSCC'').

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

    In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\4\
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    \4\ The Commission has modified the text of the summaries 
prepared by FICC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Minor Rule Violation Plan
    In 1984, the Commission adopted amendments to Rule 19d-1(c) under 
the Act \5\ that allow self-regulatory organizations to adopt with 
Commission approval plans for the disposition of minor violations of 
rules.\6\
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    \5\ 17 CFR 240.19d-1(c).
    \6\ Securities Exchange Act Release No. 21013 (June 1, 1984), 49 
FR 23828 (June 8, 1984) File No. S7-983A].
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    Currently under each Division's rules, a member or applicant 
subject to disciplinary action has a right to a hearing before a panel 
comprised of members of FICC's Board of Directors regardless of the 
severity of the action for which the member or applicant is being 
disciplined.\7\ Because some rule violations are not sufficiently 
serious to merit Board review, FICC is proposing to adopt a Minor Rule 
Violation Plan within the meaning of Rule 19d-1(c)(2) of the Act for 
those rule violations FICC deems minor. Consistent with Rule 19d-
1(c)(2) of the Act, FICC would designate those rule violations for 
which a fine may be assessed in an amount not to exceed $5,000 as minor 
rule violations. If a member were to dispute a fine imposed by FICC by 
filing a written request for hearing and a written statement, FICC 
management would have the authority to waive the fine. FICC management 
would notify the Board of Directors (or a Committee authorized by the 
Board of Directors) of its determination to waive the fine and would 
provide the reasons for the waiver. The Board or Committee could in its 
discretion decide to reinstate any fine waived by FICC management. If 
FICC management were not to waive the fine, the member could appeal the 
decision to a panel comprised of FICC officers (``Minor Rule Violation 
Panel'').
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    \7\ MBSD Article V, Rule 7 (``Appeals''); EPN Article X, Rule 7 
(``Appeals''); and GSD Rule 37 (``Hearing Procedures'').
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2. Hearings for All Other Violations and Minor Rule Violation Appeals
    For matters involving (i) an alleged violation of a GSD or MBSD 
rule for which a fine in an amount of over $5,000 is assessed, (ii) 
applicants for membership, or (iii) other disciplinary actions to which 
the Minor Rule Violation Plan would not apply or for appeals from a 
Minor Rule Violation

[[Page 68923]]

Panel decision adverse to a member or applicant, the member or 
applicant would be entitled to a hearing before a panel comprised of 
three individuals of the FICC Board of Directors (or their designees) 
appointed by the Chairman of the FICC Board. Decisions of the panel 
would be final; however, the full Board of Directors would retain the 
right to modify any sanction or reverse any decision of the Board panel 
that was adverse to the member or applicant.
    Currently with respect to hearings, a member or applicant is 
afforded the opportunity to be heard and may be represented by counsel 
if desired. A record is kept of the hearing, and at the discretion of 
the Board panel, the associated cost may be charged in whole or part to 
the member or applicant in the event that the decision is adverse to 
the member or applicant. The member or applicant is advised of the 
Board panel's decision within ten business days after the conclusion of 
the hearing. These procedures would also apply with respect to the 
Minor Rule Violation Plan.
3. Administrative Changes: Uniformity of Time Frames
    The proposed rule changes seek to implement uniform time periods 
for the Divisions governing actions a member or applicant would be 
required to take in order to request a hearing. The deadlines a member 
or applicant must adhere to in order to request a hearing currently 
vary between the Divisions. Under the proposed rule change, a member or 
applicant would have five business days, or two business days in the 
case of a summary action taken against the member or applicant pursuant 
to Rule 21 or 22,\8\ from the date on which FICC first informs it of a 
sanction or a denial of membership in which to request a hearing.
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    \8\ Examples of a summary action are a suspension of a member or 
restriction of a member's access to services as described in Rule 
21, Section 1 (``Restrictions on Access to Services'').
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    Within seven business days, or three business days in the case of a 
summary action taken against the member or applicant, after filing a 
request for a hearing with FICC, the member or applicant would be 
required to submit to FICC a clear and concise written statement 
setting forth the action or proposed action of FICC with respect to 
which the hearing is requested, the basis for objection to such action, 
whether the member or applicant intends to attend the hearing, and 
whether the member or applicant chooses to be represented by counsel at 
the hearing. These proposed time frames would be consistent with time 
frames being proposed by DTC and NSCC.
4. Technical Changes
    MBSD Article V, Rule 3 (``Fines and Other Sanctions'') would be 
amended in accordance with the proposed changes to the hearing 
procedures of MBSD.
    In addition, minor technical changes would be made to the rules of 
both Divisions where necessary to implement the proposed changes set 
forth above.
5. Implementation of the Proposed Changes
    The proposed changes will be implemented upon approval of this 
proposed filing by the Commission. Members will be advised of the 
implementation through an FICC Important Notice.
    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \9\ and the rules and 
regulations thereunder because the adoption of a Minor Rule Violation 
Plan furthers the statutory objective of providing a fair procedure for 
disciplining members and will provide FICC with the ability to impose 
meaningful sanctions for those rule violations that do not necessarily 
rise to a level meriting a full disciplinary proceeding. Accordingly, 
the proposed rule change promotes the prompt and accurate clearance and 
settlement of securities transactions.
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    \9\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

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

    Written comments relating to the proposed rule change have not been 
solicited or received. FICC will notify the Commission of any written 
comments received by FICC.

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

    Within thirty-five 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 ninety 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-FICC-2007-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2007-06. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of FICC and on FICC's 
Web site at http://www.dtcc.com/downloads/legal/rule_filings/2007/ficc/2007-06.pdf. 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-
FICC-

[[Page 68924]]

2007-06 and should be submitted on or before December 21, 2007.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-23592 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P