[Federal Register Volume 63, Number 3 (Tuesday, January 6, 1998)]
[Notices]
[Pages 586-588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-161]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39494; File No. SR-NASD-97-97]
Self-Regulatory Organizations; Notice of Filing, Immediate
Effectiveness and Designation of Accelerated Operative Date of Proposed
Rule Change by National Association of Securities Dealers, Inc.,
Relating to Conforming, Technical Amendments to Certain Rules Relating
to Procedures on Grievances Concerning The Automated Systems
December 29, 1997.
Pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of
1934 (``Act''),\1\ notice is hereby given that on December 24, 1997,
the National Association of Securities Dealers, Inc. (``NASD'' or
``Association''), through its wholly owned subsidiary, The Nasdaq Stock
Market, Inc. (``Nasdaq'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by Nasdaq. Several technical amendments were made to the proposal on
the same date.\2\ The Association has designated the proposed rule
change as constituting a ``non-controversial'' rule change under
paragraph (e)(6) of Rule 19b-4 under the Act \3\ which renders the
proposal effective upon receipt of this filing by the Commission.\4\
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)(3)(a).
\2\ Conversation between Arnold Golub, Office of General
Counsel, Nasdaq with Mandy Cohen, Division of Market Regulation,
Commission (December 24, 1995).
\3\ 17 CFR 240.19b-4(e)(6).
\4\ The Association has represented that this proposed rule
change: (1) Will not significantly affect the protection of
investors or the public interest; (ii) will not impose any
significant burden on competition, and (iii) will not become
operative for 30 days after the date of this filing, unless
otherwise accelerated by the Commission. The Association also has
provided at least five business days notice to the Commission of its
intent to file this proposed rule change, as required by Rule 19b-
4(e)(6) under the Act. Id.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Association is filing the proposed rule change to make
conforming technical changes to the Rule 9700 Series to substitute the
``Nasdaq Hearing Review Committee,'' whose tenure will terminate next
month, with the ``Nasdaq Listing and Hearing Council,'' which will
perform similar functions thereafter. These changes are necessary to
conform the Rule 9700 Series to the recently approved revisions to the
Nasdaq By-Laws that will take effect in January 1998.\5\ In addition,
the text of new rule 4880 has been revised to reflect recent changes in
the review process approved by the Commission at the same time as the
by-laws.\6\ Finally, for ease of reference, the Rule 9700 Series has
been renumbered as the Rule 4800 Series, since the rules contained
therein relate to other rules within the Rule 4000 Series. The text of
the proposed rule change follows: \7\
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\5\ See Securities Exchange Act Release No. 39326 (November 14,
1997), 62 FR 62385 (November 21, 1997) (File No. SR-NASD-97-71).
\6\ See Id.
\7\ Proposed new language is underline, proposed deletions are
in brackets.
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* * * * *
Rules of the Association
* * * * *
4000. The Nasdaq Stock Market
* * * * *
[9700] 4800. Procedures on Grievances Concerning the Automated
Systems
[9710] 4810. Purpose
The purpose of this Rule [9700] 4800 Series is to provide, where
justified, redress for persons aggrieved by the operations of any
automated quotation, execution, or communication system owned or
operated by the Association, or any subsidiary thereof, and approved by
the Commission, not otherwise provided for by the [this] Code of
Procedure as set forth in the Rule 9000 Series or the Uniform Practice
Code as set forth in the Rule 11000 Series, and to provide procedures
for the handling of qualification matters pursuant to The Nasdaq Stock
Market Rules, as set forth in the Rule 4000 Series.
[[Page 587]]
[9720] 4820. Form of Application
All applications shall be in writing, and shall specify in
reasonable detail the nature of and basis for the redress requested. If
the application consists of several allegations, each allegation shall
be stated separately. All applications must be signed and shall be
directed to [the Association] Nasdaq.
[9730] 4830. Request for Hearing
Upon request, the applicant shall be granted a hearing after
reasonable notice. In the absence of such request for a hearing, [the
Association] Nasdaq may, in its discretion, have any application set
down for hearing or consider the matter on the basis of the application
and supporting documents.
[9740] 4840. Consideration of Applications
All applications shall be considered by a hearing panel designated
by the Board of Governors. The applicant shall be entitled to be hear
in person and by counsel and to submit any relevant matter. In any such
proceeding a record shall be kept.
[9750] 4850. Decision
Decisions on applications shall be in writing and a copy shall be
sent by mail to the applicant. The hearing panel may communicate its
determination to the applicant prior to the issuance of a written
decision, which shall be effective as of the time of such
communication. The written decision shall contain the reasons
supporting the hearing panel's conclusions.
[9760] 4860. Review by the Nasdaq Listing and Hearing Review
[Committee] Council
The decision shall be subject to review by the Nasdaq Listing and
Hearing Review [Committee] Council on its own motion within 45 calendar
days after issuance of the written decision. Any such decision shall
also be subject to review upon application of any person aggrieved
thereby, filed within 15 calendar days after issuance. The institution
of a review, whether on application or on the initiative of the Nasdaq
Listing and Hearing Review [Committee] Council, shall not operate as a
stay of the decision.
[9770] 4870. Findings of the Nasdaq Listing and Hearing Review
[Committee] Council on Review
Upon consideration of the record, and after such further hearings
as it shall order, the Nasdaq Listing and Hearing Review [Committee]
Council shall affirm, modify, reverse, dismiss, or remand the decision.
The Nasdaq Listing and Hearing Review [Committee] Council shall set
forth specific grounds upon which its determination is based.
[9780] 4880. Discretionary Review by the Board
Determinations of the Nasdaq Listing and Hearing Review [Committee]
Council may be reviewed by the NASD Board of Governors solely upon the
request of one or more Governors not later than the NASD Board meeting
next following the Nasdaq Listing and Hearing Review Council's decision
but which is 15 calendar days or more following the decision of the
Nasdaq Listing and Hearing Review Council. Notwithstanding the
preceding sentence, the NASD Board may determine it is advisable to
call for review any decision of the Nasdaq Listing and Hearing Review
Council within the 15 calendar day period following the decision of the
Nasdaq Listing and Hearing Review Council. Such review, which may be
undertaken solely at the discretion of the Board, shall be in
accordance with resolutions of the Board governing the review of Nasdaq
Listing and Hearing Review [Committee] Council determinations. The
Board shall affirm, modify or reverse the determinations of the Nasdaq
Listing and Hearing Review [Committee] Council or remand the matter to
the Nasdaq Listing and Hearing Review [Committee] Council with
appropriate instructions. The institution of discretionary review by
the Board shall not operate as a stay of the decision.
[9790] 4890. Application to Commission for Review
Any decision not appealed under Rule 4860 or called for review
under Rule 4860 or Rule 4880 shall become the final action of the
Association upon expiration of the time allowed for appeal or call for
review. In any case where a person feels aggrieved by any final action
of the Association [decision] issued pursuant to Rule [9770] 4870 or
Rule [9780] 4880, the person may make application for review to the
Commission in accordance with the Act.
* * * * *
In addition to the specific changes set forth above, the following
conforming amendments are also necessary to ensure conformance to the
corporate governance documents:
In Rules 4480(e), 4530, 5360, and 9511(a)(3), all
references to Rule 9700 Series should be changed to refer to the Rule
4800 Series.
In Rule 4330(a), the reference to the Rule 9000 Series
should be changed to refer to the Rule 4800 Series.
In Rule 9110(a), the last sentence should be amended to
read ``The Rule 9100 Series is of general applicability to all
proceedings set forth in Rule 9000 Series, [except the proceedings set
forth in the Rule 9700 Series,] unless a Rule specifically provides
otherwise.''
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis For, the Proposed Rule Change
In its filing with the Commission, the Association 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. The Association 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 of the Rule Change
The purpose of the proposed rule change is to technically conform
the Rule 9700 Series (as renumbered the Rule 4800 Series), to the
recently revised Nasdaq By-Laws that will become effective upon
conclusion of the NASD annual meeting in January 1998. The proposed
changes are necessary to allow for the expedited and smooth transition
from the Association's current corporate structure to the new corporate
structure recently approved by the Commission.\8\
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\8\ See Release No. 34-39326.
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To conform the Rule 9700 Series to the Nasdaq By-Laws, as revised,
the term ``Nasdaq Hearing Review Committee,'' is being replaced by the
term, ``Nasdaq Listing and Hearing Review Council.'' Additionally, the
Association is conforming proposed Rule 4880 (currently Rule 9780) to
parallel the review process changes recently approved by the Commission
at the same time the Nasdaq By-Laws revisions were approved.\9\ As
revised, proposed Rule 4880 establishes a period of at least 15
calendar days between the date of the decision of the Nasdaq Listing
and Hearing Review Council decision and the meeting at which the NASD
Board may consider whether to call a decision for review. Relocation to
the Rule 4800 Series is proposed because the 9700 Series relates to the
[[Page 588]]
grievance procedures currently set forth in the Rule 4000 Series.
Finally, other conforming changes are being made to correct existing
cross references to the Rule 9700 Series to those of the new Rule 4800
Series.
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\9\ See id.
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2. Statutory Basis of Rule Change
The Association believes that the proposed rule change is
consistent with Section 15A(b)(4) of the Act \10\ in that it assures a
fair representation of its members in the selection of its directors
and administration of its affairs and provides that one or more
directors shall be representatives of issuers and investors and not be
associated with a member of the Association, a broker, or a dealer.
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\10\ 15 U.S.C. 78o-3(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Association 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
The proposed rule change has been filed by the Association as a
``non-controversial'' rule change under Rule 19b-4(e)(6).\11\
Consequently, the rule change shall become operative 30 days after the
date of this filing, or such shorter time as the Commission may
designate if the change: (i) Will not significantly affect the
protection of investors or the public interest; and (ii) will not
impose any significant burden on competition, pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and subparagraph (e)(6) of Rule 19b-4
thereunder.\13\ To ensure conformity with the revised Nasdaq By-Laws,
however, which are scheduled to become effective at the conclusion of
the January 1998 annual meeting of the NASD, the Association requests
acceleration of the operative date of the changes contained in this
rule filing, so that the revised Rules of the Association and related
corporate governance documents will be in force simultaneously.
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\11\ 17 CFR 240.19b-4(e)(6).
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(e)(6).
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At any time within 60 days of this filing, the Commission may
summarily abrogate this proposal if it appears to the Commission that
such action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
For the reasons stated, and since such action is in the public
interest, does not significantly affect the protection of investors or
impose any significant burden on competition, and because the changes
in this rule filing conform the Rules of the Association to the by-laws
recently approved by the Commission (which will become effective at the
conclusion of the NASA's annual meeting), the Commission finds good
cause to accelerate the operative date of the changes contained herein,
and designate such changes to become operative at the conclusion of the
annual meeting of the NASD.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. 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 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 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 the file number in the caption
above and should be submitted by January 27, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-161 Filed 1-5-98; 8:45 am]
BILLING CODE 8010-01-M
