[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Notices]
[Pages 26238-26240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12456]
-----------------------------------------------------------------------
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'')
filed with 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).
---------------------------------------------------------------------------
I. 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
[[Page 26239]]
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.
* * * * *
II. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. 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 filed a
timely motion to vacate or modify the arbitration award and such motion
has not been denied; (4) the member or person has filed a 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).
---------------------------------------------------------------------------
2. 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.
B. 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.
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
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.
IV. 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 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 NASD Regulation. Al
submissions should refer to the file number in the caption above and
should be submitted by May 27, 1998.
[[Page 26240]]
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. 98-12456 Filed 5-11-98; 8:45 am]
BILLING CODE 8010-01-M
