regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.,

[Federal Register: June 22, 1999 (Volume 64, Number 119)]

[Notices]

[Page 33335-33336]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr22jn99-129]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41532; File No. SR-NASD-99-27]

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc. Extending the Effectiveness of the Pilot Injunctive Relief Rule

June 16, 1999.

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 May 31, 1999, the National Association of Securities Dealers, Inc. (``NASD'' or ``Association'') filedwith the Securities and Exchange Commission (``Commission'' or ``SEC'') the proposed rule change as described in Items I and II below, which Items have been prepared by NASD Regulation, Inc. (``NASD Regulation''). The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. For the reasons discussed below,the Commission is granting accelerated approval of the proposed rule change.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

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

    NASD Regulation is proposing to amend Rule 10335 of the Code of Arbitration (``Code'') of the Association to extend the pilot injunctive relief rule for six months. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets.

    10335. Injunctions

    (i) Effective Date

    This Rule shall apply to arbitration claims filedon or after January 3, 1996. Except as otherwise provided in this Rule, the remaining provisions of the Code shall apply to proceedings instituted under this Rule. This Rule shall expire on [July 3, 1999] January 3, 2000, unless extended by the Association's Board of Governors.

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

    In its filing with the Commission, NASD Regulation 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 III below. NASD Regulation has prepared summaries, set forth in section A, B, and C below, of the most significant aspects of such statements.

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

      1. Purpose

      Rule 10335 took effect on January 3, 1996 for a one-year pilot period. The Commission has periodically extended the initial pilot period in order to permit NASD Regulation's Office of Dispute Resolution to assess the effectiveness of the rule. The rule is currently due to expire on July 3, 1999. In July 1998, the NASD fileda rule filing proposing to amend Rule 10335 and to make it a permanent part of the Code. The NASD

      [[Page 33336]]

      filedamendments and responses to comments received by the Commission regarding the rule filing in December 1998. In response to additional comments received regarding both the original rule filing and the amendments, as well as comments from the Commission staff, the NASD is preparing further amendments to the pending rule filing. These amendments will be considered shortly by the National Arbitration and Mediation Committee (``NAMC''). If approved, the amendments will then be considered by the Board of NASD Regulation. NASD Regulation believes that it is in the interest of members and associated persons that the effectiveness of the rule remain uninterrupted pending the filing of amendment to, and Commission action on, the permanent rule filing. 2. Statutory Basis

      NASD Regulation 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 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 Regulation believes that the current pilot rule serves the public interest by enhancing the satisfaction with the arbitration process afforded by expeditious resolution of certain disputes.\3\

      \3\ Telephone conversation between Laura Leedy Gansler, Office of the General Counsel, NASD Regulation, and Daniel M. Gray, Special Counsel, Division of Market Regulation, SEC, on June 14, 1999.

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

      NASD Regulation 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.

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

      Written comments were neither solicited or received.

  3. 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 460 Fifth Street, N.W., Washington, D.C. 20549- 0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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 Room. Copies of such filing also will be available for inspection and copying at the principal office of the NASD. All submissions should refer to File No. SR-NASD-99-27 and should be submitted by July 13, 1999.

  4. Commission Findings and Order Granting Accelerated Approval of Proposed Rule Change

    NASD Regulation has requested that the Commission find good cause pursuant to Section 19(b)(2) of the Act \4\ for approving the proposed rule change prior to the 30th day after publication in the Federal Register. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the NASD and, in particular, the requirements of Section 15A of the Act.\5\ Rule 10335 is intended to provide a pilot system within the NASD arbitration forum to process requests for temporary injunctive relief. Rule 10335 is intended primarily to facilitate the disposition of employment disputes and other related disputes concerning members who file for injunctive relief to prevent registered representatives from transferring their client accounts to new firms. The Commission expects that, during the pilot's extension, NASD Regulation will consider amendments to the proposed rule change to permanently add Rule 10335 to the Code.\6\

    \4\ 15 U.S.C. 78s(b)(2).

    \5\ 15 U.S.C. 78o-3. In reviewing the proposed rule change, the Commission considered its potential impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

    \6\ See Securities Exchange Act Release No. 40441 (September 15, 1998), 63 FR 50611 (September 22, 1998) providing notice of File No. SR-NASD-98-49.

    The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of notice of filing thereof in the Federal Register. The Commission believes that accelerated approval of the proposal is appropriate because members will continue to have the benefit of injunctive relief in arbitration pending filing of amendments to, and Commission action on, the rule filing that would amend Rule 10335 and make it a permanent part of the Code. The Commission finds, therefore, that granting accelerated approval of the proposed rule change in consistent with Section 15A of the Act.

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\7\ that the proposed rule change (SR-NASD-99-27) is approved on an accelerated basis through January 3, 2000.

    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12).

    Margaret H. McFarland Deputy Secretary

    [FR Doc. 99-15843Filed6-21-99; 8:45 am]

    BILLING CODE 8010-01-M

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