[Federal Register Volume 62, Number 247 (Wednesday, December 24, 1997)]
[Notices]
[Pages 67423-67425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33526]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39458; File No. SR-NASD-97-87]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the National
Association of Securities Dealers, Inc. Relating to Extending the Pilot
Injunctive Relief Rule
December 17, 1997.
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 8, 1997, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the self-regulatory organization. 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)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
NASD Regulatory is herewith filing a proposed rule change to extend
for six months the pilot injunctive relief rule, Rule 10335 (formerly
Section 47) of the Code of Arbitration Procedure (``Code'').
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 self-regulatory organization
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. The self-regulatory
organization 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
NASD Regulation's injunctive relief rule, Rule 10335 of the Code,
provides a procedure for obtaining injunctive relief in arbitration and
for expediting proceedings for injunctive relief in
[[Page 67424]]
intra-industry disputes. Rule 10335 took effect on January 3, 1996, for
a one-year pilot period. The initial pilot period was subsequently
extended on January 3, 1997 for another year in order to permit NASD
Regulation's Office of Dispute Resolution to gain additional experience
with the rule before determining whether the rule should be made
permanent, the pilot period should be extended, or the rule should be
permitted to terminate by its terms.\3\
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\3\ See Securities Exchange Act Release No. 38069 (December 20,
1996), 61 FR 68806 (December 30, 1996).
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In September 1997, the NASD published a Notice to Members (97-59)
requesting comment on the rule.\4\ At that time, approximately 433
cases had been filed in which injunctive relief was sought pursuant to
the rule. The average number of days between filing and the
arbitrator's initial injunctive relief order was approximately 7.5
days. The majority of cases in which injunctive relief was sought
involved associated persons leaving one firm for another. In most but
not all cases, the associated person's former firm was the petitioner.
The Notice to Members sought comment on how the injunctive relief and
expedited proceedings work and how they could be improved, and
identified more than twenty specific questions based on previous
comments received from users of the rule. The comment period closed on
October 31, 1997. The NASD has received 19 comment letters in response
to the Notice to Members.\5\
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\4\ A copy of Notice to Members 97-59 is attached as Exhibit 2
to the filing.
\5\ The comment letters are attached as Exhibit 3 to the filing.
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On the basis of NASD Regulation's experience and the comments of
the participants, NASD Regulation believes that the procedures set
forth in Rule 10335 represent a significant improvement to the
procedures for resolving intra-industry disputes. However, NASD
Regulation also believes that additional time is necessary to
adequately review the comments received about the rule and to evaluate
how the Rule could be improved to meet the needs of the participants
more effectively.
Accordingly, NASD Regulation is proposing to extend the injunctive
relief Rule as a pilot program for another six months. During the next
six months NASD Regulation will review the comments received in
response to Notice to Members 97-59, as well as comments from
arbitrators and NASD employees who have had experience with the
application of the rule, and will develop modifications or
interpretations of the Rule in response thereto.
The NASD requests the Commission to find good cause, pursuant to
Section 19(b)(2) of the Act, for approving the proposed rule change
prior to the thirtieth day after publication in the Federal Register.
Rule 10335 expires by its terms on January 3, 1998. As discussed above,
NASD Regulation believes that Rule 10335 represents a significant
improvement to the procedures for resolving intra-industry disputes,
and that an extension will permit more careful consideration of
modifications in response to comments. Accordingly, NASD Regulation
believes that it is in the interest of users of Rule 10335 for the
procedures to remain in effect without interruption.
2. Statutory Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Act \6\ in
that extending the effectiveness of the injunctive relief procedures
will serve the public interest by enhancing the satisfaction with the
arbitration process afforded by expeditious resolution of certain
disputes.
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\6\ 15 U.S.C. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD does not believe that the proposed rule change will impose
any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. 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 at 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-97-87 and should
be submitted by January 14, 1998.
IV. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
The Commission finds that the proposed rule change to extend the
pilot injunctive relief rule is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange, and particularly with Section 15A(b)(6) of the
Act.\7\ Rule 10335 is intended to provide a pilot system within the
NASD arbitration forum to process requests for temporary injunctive
relief. The Rule is intended principally to facilitate the disposition
of employment disputes and related disputes concerning whether
registered representatives who move to other firms may transfer their
accounts to their new firms. The Commission finds it is appropriate to
extend the pilot for six months. During that time the NASD Regulation
will be able to evaluate the success of the Rule, to adequately review
the comments received, and to determine whether to extend the pilot
further or make the Rule permanent.
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\7\ 15 U.S.C. 78o-3(b)(6).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth 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 without interruption. The Rule was previously available
through the pilot and the Commission is extending the pilot for only
six months. The Commission believes, therefore, that granting
accelerated approval of the proposed rule change is consistent with
Section 15A of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) \8\ that the
proposed rule change (SR-NASD-97-87) is hereby approved on an
accelerated basis for a six-month pilot basis, through July 3, 1998.
\8\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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[[Page 67425]]
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-33526 Filed 12-23-97; 8:45 am]
BILLING CODE 8010-01-M
