regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.,
[Federal Register: May 12, 1998 (Volume 63, Number 91)]
[Notices]
[Page 26238-26240]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12my98-145]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39957; File No. SR-NASD-98-34]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by National Association of Securities Dealers, Inc.; Relating to Cancellations and Suspensions for Failure To Comply with Arbitration Award
May 5, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ notice is hereby given that on May 1, 1998, the National Association of Securities Dealers, Inc. (``NASD'' or ``Association'') 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 NASD Regulation, Inc. (``NASD Regulation''). 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).
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Association proposes to amend that portion of Rule 9514 of the Rules of the Association relating to review of non-compliance with arbitration awards and settlements. The Association proposes to change the composition of the hearing panels used in such proceedings. Below is the text of the proposed rule change. Proposed new language is italicized; proposed deletions are in brackets. 9514. Hearing and Decision. * * * * *
(b) Designation of Party for the Association and Appointment of Hearing Panel
If a member, association person, or other person subject to a notice under Rule 9512 or 9513 files a written request for a hearing, an appropriate department or office of the Association shall be
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designated as a Party in the proceeding, and a Hearing Panel shall be appointed.
(1) If the President of NASD Regulation or NASD Regulation staff issued the notice initiating the proceeding under Rule 9512(a) or 9513(a), the President of NASD Regulation shall designate an appropriate NASD Regulation department or office as a Party[, and the NASD Regulation Board shall appoint a Hearing Panel. The Hearing Panel shall be composed of two or more members]. For proceedings initiated under Rule 9513(a) concerning failure to comply with an arbitration award or a settlement agreement related to an NASD arbitration or mediation, the Chief Hearing Officer shall appoint a Hearing Panel composed of a Hearing Officer. For any other proceedings initiated under Rule 9512(a) or 9513(a) by the President of NASD Regulation or NASD Regulation staff, the NASD Regulation Board shall appoint a Hearing Panel composed of two or more members: [One] one member shall be a Director of NASD Regulation, and the remaining member or members shall be current or former Directors of NASD Regulation or Governors. The President of NASD Regulation may not serve on [the] a Hearing Panel. * * * * *
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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, 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 IV below. NASD Regulation 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
The purpose of the proposed rule change is to change the composition of the Hearing Panel used for proceedings under the Rule 9510 Series in which NASD Regulation seeks to suspend or cancel the membership of a member or the registration of a person for failure to comply with an arbitration award or a settlement agreement related to an NASD arbitration or mediation. Currently, Rule 9514(b) requires that the Hearing Panel for such proceedings be composed of two or more members, one of whom must be a Director of NASD Regulation, and the remaining member or members must be a current or former Director of NASD Regulation or Governor of the NASD. NASD Regulation has determined that board-level panelists are not necessary for such hearings because the issues to be resolved are narrow and largely administrative. Generally, the only issues to be addressed are whether: (1) the member or person paid the award in full or fully complied with the settlement agreement; (2) the claimant agreed to installment payments or has otherwise settled the matter; (3) the member or person has fileda timely motion to vacate or modify the arbitration award and such motion has not been denied; (4) the member or person has fileda petition in bankruptcy and the bankruptcy proceeding is pending, or the award or payment owed under the settlement agreement has been discharged by the bankruptcy court; and (5) the member or person is unable to pay the award. The Commission has stated that a bona fide inability to pay an arbitration award is an important consideration determining whether any sanction for failure to pay an arbitration award is excessive or oppressive.\2\ NASD Regulation has determined that it would be more efficient to have one Hearing Officer conduct the hearing on these issues and render a decision. Hearing Officers are well-suited to resolve the issues presented in these types of hearings due to their training and experience in the NASD's disciplinary proceedings under the Rule 9200 Series.
\2\ See In the Matter of the Application of Bruce M. Zipper, Securities Exchange Act Release 33376, Admin. Proc. File No. 3-7908. (Dec. 23, 1993).
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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 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. The NASD believes that the proposed rule change will result in a fair and efficient procedure for suspending or canceling the membership of a member or the registration of a person for failure to comply with an arbitration award or a settlement agreement related to an NASD arbitration or mediation so that where appropriate, such members or persons are not permitted to continue to do business with investors.
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Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation does not believe the proposed rule change would 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 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.
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Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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 NASD Regulation. Al submissions should refer to the file number in the caption above and should be submitted by May 27, 1998.
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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\3\
\3\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 98-12456Filed5-11-98; 8:45 am]
BILLING CODE 8010-01-M
