regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.,
[Federal Register: December 14, 1998 (Volume 63, Number 239)]
[Notices]
[Page 68814-68815]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de98-96]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40755; File No. SR-NASD-98-90]
Self-Regulatory Organizations, Notice of Filing of Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Proposed Amendments to the Code of Procedure to Provide for the Office of Disciplinary Affairs of NASD Regulation, Inc. to Authorize all Enforcement Actions
December 7, 1998.
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 December 4, 1998, the National Association of Securities Dealers, Inc. (``NASD'' or ``Association''), through it wholly-owned subsidiary NASD Regulation (``NASDR''), filedwith the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by NASDR.\3\ 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\ Several non-substantive changes were provided by the NASDR in a telephone conversation between Eric Moss, Office of General Counsel, NASDR, and Joseph Corcoran, Division of Market Regulation, Commission, on December 7, 1998.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
NASDR proposes to amend Rules 9120 and 9211 of the NASD's Code of Procedure to enable the Office of Disciplinary Affairs of NASDR to authorize all disciplinary actions. Below is the text of the proposed rule change. Proposed new language is italicized, proposed deletions are in brackets. * * * * * 9120. Definitions.
(a) through (d).
No change.
(e) ``Department of Enforcement''
The term ``Department of Enforcement'' means the Department of Enforcement or its delegatee, the Department of Market Regulation[, except that the term excludes the Department of Market Regulation with respect to the action of:
(1) authorizing a complaint under Rule 9211;
(2) determining the terms of a letter of acceptance, waiver, and consent or the terms of a minor rule violation plan letter under Rule 9216;
(3) determining whether to contest an offer of settlement under Rule 9270; and
(4) authorizing the filing of an appeal under Rule 9311]. (f) through (u).
No change.
(v) ``Office of Disciplinary Affairs''
The term ``Office of Disciplinary Affairs'' means the Office of Disciplinary Affairs for NASD Regulation.
(w) [v] ``Panelist''
No change.
(x) [w] ``Party''
No change.
(v)[x] ``Primary District Committee''
No change.
(z)[y] ``Respondent''
No change.
(aa)[z] ``Review Subcommittee''
No change.
(bb)[aa] ``Statutory Disqualification Committee''
No change.
(cc)[bb] ``Subcommittee''
No change. * * * * * 9200. DISCIPLINARY PROCEEDINGS
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Complaint and Answer
[[Page 68815]]
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Issuance of Complaint
(a) Complaint
(1) If the Department of Enforcement believes that any NASD member or associated person is violating or has violated any rule, regulation, or statutory provision, including the federal securities laws and the regulations thereunder, which the Association has jurisdiction to enforce, the Department of Enforcement may request authorization from the Office of Disciplinary Affairs to issue a complaint.
(2) the NASD Regulation Board and the NASD Board each shall have the authority to direct the Office of Disciplinary Affairs [Department of Enforcement] to authorize and the Department of Enforcement to issue a complaint when, on the basis of information and belief, either of such boards is of the opinion that any NASD member or associated person is violating or has violated any rule, regulation, or statutory provision, including the federal securities laws and the regulations thereunder, which the Association has jurisdiction to enforce.
(b) No change. * * * * *
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDR included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it receive on the proposed rule change. The text of these statements may be examined at the place specified in Item IV below. NASDR has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
Currently, the Case Authorization Unit (``CAU''), located in the Department of Enforcement (``Enforcement'') of NASDR, authorized all disciplinary actions. The Office of Disciplinary Policy (``ODP''), which reports to the Office of the President of NASDR, is the primary reviewer of cases developed in the Washington, D.C. office and those involving ``quality-of-market'' issues. ODP also review and comments on all cases involving policy issues. The NASD is proposing amendment so that the Code of Procedure (``Code'') that would provide for ODP to authorize all disciplinary actions. ODP would be renamed Office of Disciplinary Affairs (``ODA'') to reflect its additional role as a case authorizer.
Under the existing structure, CAU and ODP have coordinated efforts, minimized areas of potential duplication, and worked well together during the first year of staff authorization of cases. There is, however, an overlap of functions between these two offices. To increase overall operating efficiency and to maintain the consistency and independence of the case authorization function, NASDR proposes to place the functions performed by ODP and CAU in one office. Under the proposed rule changes, all cases would be authorized by ODA, which would review the legal, policy and consistency issues presented by each case. 2. Statutory Basis
NASDR believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,\4\ 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. The NASD believes that the proposed rule change is consistent with Sections 15A(b) (7) and (8) of the Act,\5\ which mandate that the Association maintain a fair disciplinary process. The proposed rule change would provide for the same review of all Enforcement cases--whether developed in the districts or the Washington office.
\4\ U.S.C. 78o-3(b)(6).
\5\ U.S.C. 78o-3 (b)(7), (b)(8).
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Self-Regulatory Organization's Statement on Burden on Competition
NASDR 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.
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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.
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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.
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Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 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 will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to File No. SR-NASD-98-90 and should be submitted by December 29, 1998.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\6\
\6\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 98-33071Filed12-11-98; 8:45 am]
BILLING CODE 8010-01-M
