[Federal Register Volume 63, Number 127 (Thursday, July 2, 1998)]
[Notices]
[Pages 36282-36283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17559]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40124; File No. SR-NASD-98-42]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to Proposed Rule Change by the National
Association of Securities Dealers, Inc. Relating to Extension of
Effectiveness of the Pilot Injunctive Relief Rule
June 24, 1998.
Pursuant to Section 19(b)(1) of the Securities and Exchange Act of
1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 12, 1998, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in Items I and II 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. For the reasons discussed below, the
Commission is granting accelerated approval of the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1) (1994).
\2\ 17 CFR 240.19b-4 (1997).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
NASD Regulation is proposing to amend Rule 10335 of the Code of
Arbitration (``Code'') of the NASD to extend the pilot injunctive
relief rule for six months. Below is the text of the proposed rule
change. Proposed new language is italicized; proposed deletions are in
brackets.
10335. Injunctions
* * * * *
(i) Effective Date
This Rule shall apply to arbitration claims filed on or after
January 3, 1996. Except as otherwise provided in this Rule, the
remaining provisions of the Code shall apply to proceedings instituted
under this Rule. This Rule shall expire on [July 3, 1998] January 3,
1999, unless extended by the Association's Board of Governors.
[[Page 36283]]
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 III 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
The NASD'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 intra-industry
disputes. Rule 10335 became effective on January 3, 1996, for a one-
year pilot period.\3\ The initial pilot period was subsequently
extended twice by the Commission 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.\4\ The rule is currently due to expire on July 3, 1998.
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\3\ Securities and Exchange Act Release No. 36145 (August 23,
1995), 60 FR 45200 (Aug. 30, 1995).
\4\ Securities and Exchange Act Release No. 38069 (December 20,
1996), 61 FR 68806 (December 30, 1996), and Securities and Exchange
Act Release No. 39458 (December 17, 1997), 62 FR 67423 (December 24,
1997).
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NASD Regulation is currently developing a proposed rule change to
amend Rule 10335 and make it a permanent part of the Code. NASD
Regulation anticipates filing this proposed rule change by July 17,
1998. The purpose of the requested six-month extension of the existing
injunctive relief rule is to maintain the rule's effectiveness pending
filing of and Commission action on that proposed rule change.
(b) Statutory Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Act,\5\
which requires, among other things, that the Association's rules 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
current pilot injunctive relief rule serves the public interest by
enhancing the satisfaction with the arbitration process afforded by
expeditious resolution of certain disputes. The NASD also believes that
it is in the interest of members that the effectiveness of the rule
remains uninterrupted pending Commission action on the permanent
proposed rule change.
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\5\ 15 U.S.C. 78o-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation 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. Solicitation of Comments
Interested person are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change 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 the
NASD. All submissions should refer to the file number SR-NASD-98-42 and
should submitted by July 23, 1998.
IV. Commission Findings and Order Granting Accelerated Approval of
Proposed Rule Change
NASD Regulation has requested that the Commission find good cause
pursuant to Section 19(b)(2) of the Act \6\ for approving the proposed
rule change prior to the 30th day after publication in the Federal
Register. To avoid interruption of the pilot injunctive relief rule,
the Commission finds that the proposed rule change is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities association and, in particular, the
requirements of 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. Rule 10335 is intended
principally to facilitate the disposition of employment disputes, and
related disputes, concerning members who file for injunctive relief to
prevent registered representatives from transferring their client
accounts to their new firms. The commission finds it is appropriate to
extend the pilot for six months to avoid interruption of the pilot
injunctive relief rule During that time the NASD Regulation will be
able to evaluate the success of Rule 10335 and adequately review
comments received. The Commission expects the NASD to submit a proposed
rule change to add Rule 10355 to the Code on a permanent basis in the
near future.
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\6\ 15 U.S.C. 78s(b)(2).
\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 Commission is extending the
pilot for six months. During that time NASD Regulation will submit a
proposed rule change to amend Rule 10335 to make it a permanent part of
the Code. The Commission believes, therefore, that granting accelerated
approval of the proposed rule change is consistent with Section 15A of
the Act.\8\
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\8\ 15 U.S.C. 78o(b)(2).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change be, and hereby is, approved on an
accelerated basis for a six month pilot basis through January 3, 1999.
\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. 98-17559 Filed 7-1-98; 8:45 am]
BILLING CODE 8010-01-M
