[Federal Register Volume 64, Number 4 (Thursday, January 7, 1999)]
[Notices]
[Pages 1050-1051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-298]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40864; File No. SR-NASD-98-90]
Self-Regulatory Organizations; Order Granting Accelerated
Approval to 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 30, 1998.
I. Introduction
On December 4, 1998, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association''), filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule
change pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934 (``Act''),\1\ and Rule 19b-4 thereunder.\2\ In its proposal, NASD
Regulation seeks to amend the rules of the Association to permit the
Office of Disciplinary Affairs to authorize enforcement actions. Notice
of the proposal was published in the Federal Register on December 14,
1998 (``Notice'').\3\ The Commission received no comment letters on the
filing. This order approves the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 40755 (December 7,
1998), 63 FR 68814 (December 14, 1998) (File No. SR-NASD-98-90)
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II. Description of the Proposal
The Association proposes centralizing review and authorization of
all disciplinary actions within a single department, the Office of
Disciplinary Affairs of NASD Regulation. Currently, the Case
Authorization Unit (``CAU''), located in the Department of Enforcement
of NASD Regulation, authorizes all disciplinary actions. Review of
these cases, however, can take place in a separate office. Known as the
Office of Disciplinary Policy (``ODP''), this office is the primary
reviewer of cases developed in the Washington, DC, office and cases
involving ``quality-of-market'' issues. The ODP, which reports to the
Office of the President of NASD Regulation, also reviews and comments
on all cases involving policy issues.
Because of the overlap between the CAU and the ODP, the Association
wishes to consolidate their functions in a single place--the Office of
Disciplinary Affairs (``ODA''). Under the proposed rule change, as
approved hereby, all cases would be authorized by the ODA. Both the ODP
and the CAU will cease to function following approval of these changes.
According to NASD Regulation, the change will increase overall
operating efficiency and maintain the consistency and independence of
the case authorization function.
III. Discussion
As discussed below, the Commission has determined to approve the
Association's proposal centralizing the authorization of all
enforcement actions within the ODA. The standard by which the
Commission must evaluate a proposed rule change is set forth in Section
19(b) of the Act. the Commission must approve a proposed NASD rule
change if it finds that the proposal is consistent with the
requirements of Section 15A of the Act \4\ and the rules and
regulations thereunder that govern the NASD.\5\ In evaluating a given
proposal, the Commission examines the record before it and all relevant
factors and necessary information. In addition, Section 15A of the Act
establishes specific standards for NASD rules against which the
Commission must measure the proposal.\6\
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\4\ 15 U.S.C. 78o-3.
\5\ U.S.C. 78s(b).
\6\ 15 U.S.C. 78o-3.
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Specifically, the Commission finds that the proposed rule change is
consistent with Sections 15A(b)(7) and (8) of the Act, which require
that the rules of the Association provide a fair procedure for the
disciplining of members and associated persons. According to NASD
Regulation, centralizing the authorization of disciplinary actions
within the ODA will help maintain the consistency of the case
authorization process. The Commission agrees that consistency in the
authorizing of disciplinary actions contributes to maintaining fair
procedures for the disciplining of members.
Additionally, NASD Regulation asserts that the proposed rule change
will help maintain the independence of the case authorization function.
Under the current rules, disciplinary actions were authorized by the
CAU, which is located within the Department of Enforcement of NASD
Regulation. Under the proposed rule, the ODA, which will authorize all
enforcement actions, will report directly to Office of the President of
NASD Regulation; thus separating it from the Department of Enforcement,
who is a party to the proceeding. The Commission agrees that
independence in the authorizing of disciplinary actions also
contributes to maintaining fair procedures for the disciplining of
members.
NASD Regulation requested that the Commission find good cause
pursuant to Section 19(b)(2) of the Act to approve the proposed rule
change prior to the 30th day after its publication in the Federal
Register. According to the NASD, accelerated approval is necessary to
facilitate the orderly transfer of functions to the ODA, which will
start operating on January 1, 1999. The Commission finds that this is
an appropriate reason for accelerating approval, and notes this
approval follows a notice and comment period of fifteen days that
expired without receipt of comment.
IV. Conclusion
The Commission believes that the proposed rule change is consistent
with the Act, and, particularly, with Section 15A thereof.\7\ In
approving the
[[Page 1051]]
proposed, the Commission has considered its impact on efficiency,
competition, and capital formation.\8\
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\7\ 15 U.S.C. 78o-3.
\8\ 15 U.S.C. 78(c)f.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-NASD-98-90) relating to
proposed amendments to the Rules of the Association to permit the
Office of Disciplinary Affairs of NASD Regulation to authorize all
enforcement actions, is approved.
\9\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-298 Filed 1-6-99; 8:45 am]
BILLING CODE 8010-01-M
