[Federal Register Volume 62, Number 148 (Friday, August 1, 1997)]
[Notices]
[Pages 41454-41456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20372]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38879; File No. SR-NASD-97-52]
Notice of Filing of Proposed Rule Change by the National
Association of Securities Dealers, Inc.
July 28, 1997.
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc.
Relating to Extension of the Large and Complex Case Rule and Making
Application of the Rule Voluntary and Order Granting Temporary
Accelerated Approval of Extension of Effectiveness of the Current
Pilot.
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 July 22, 1997 \3\, the National Association of Securities Dealers,
Inc. (``NASD'' or
[[Page 41455]]
``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. For the
reasons discussed below, the Commission is also granting temporary
accelerated approval of an extension of the effectiveness of Rule 10334
of the NASD's Code of Arbitration Procedure.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The NASD filed Amendment No. 1 to the proposed rule change
on July 25, 1997, the substance of which is incorporated into the
notice. See letter from Elliott R. Curzon, Assistant General
Counsel, NASDR, to Katherine A. England, Assistant Director, Market
Regulation, Commission, dated July 25, 1997 (``Amendment No. 1'').
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD Regulation is proposing to amend Rule 10334 of the NASD's Code
of Arbitration Procedure (``Code'') to extend the effectiveness of Rule
10334 to August 1, 2001, and to make application of Rule 10334
voluntary. Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
10334. Procedures for Large and Complex Cases
(a) Applicability
* * * * *
(2) Any eligible matter shall be scheduled for an Administrative
Conference pursuant to paragraph (b), below, only if the parties
jointly file a written request for such a conference with the
appropriate Office of Dispute Resolution. An eligible matter shall not
be eligible for further proceedings under this Rule following the
Administrative Conference unless all parties agree in writing and
submit the agreement to the appropriate Office of Dispute Resolution.
* * * * *
(c) Appointment of Arbitrators
(1) Eligible matters shall be heard and determined by a panel of
three arbitrators, at least one of [which] whom shall be an attorney;
provided, however, that the parties may agree to submit an eligible
matter to a single mutually acceptable arbitrator selected pursuant to
the provisions of this paragraph (c).
* * * * *
(h) Temporary Effectiveness
This Rule shall remain in effect until August 1, [1997] 2002 unless
modified or extended prior thereto by the Board of Governors.
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 IV 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
Rule 10334 provides special procedures for large and complex cases.
The rule became effective for one year on May 2, 1995, was extended,
and is now due to expire on August 1, 1997. Any claim where the amount
in controversy is $1 million or more, or where all parties agree, is
eligible for disposition under the procedures.
Currently, Rule 10334 requires that the parties in any eligible
case participate in an administrative conference with a member of the
staff of the Office of Dispute Resolution (``Office''). The purpose of
the conference is to permit the parties and staff to develop a plan for
administering the case, including planning for discovery and narrowing
the issues to be decided at the hearing. Application of all other
provisions of the Rule to a case is completely voluntary.
Rule 10334 was developed to meet the special needs of parties in
large and complex cases, including the need for arbitrators with
particular experience and the need in some cases for additional
discovery, including the availability of depositions. NASD Regulation's
experience in the two years that Rule 10334 has been effective is that
few parties use the procedures. From May 2, 1995 until January 28,
1997, 880 cases were eligible for treatment under Rule 10334. Parties
agreed to proceed under Rule 10334, however, in only 43 cases.
NASD Regulation has found that parties are deterred from using
these procedures by the extra compensation paid to arbitrators and the
additional administrative fees required under Rule 10334. At the same
time, NASD Regulation found that one of the most attractive aspects of
Rule 10334 is the availability of a list selection procedure for the
appointment of arbitrators, which is not yet generally available for
other types of arbitration cases.
In addition, the attractiveness of the procedures may be affected
by the required administrative conference with the staff. This
conference may be beneficial in assisting the parties to develop a road
map for a proceeding, even if the parties do not agree to use other
procedures under Rule 10334. However, the requirement that the
administrative conference be conducted in all cases over $1 million,
regardless of whether the parties plan to proceed under Rule 10334,
creates a cost burden to the parties and to the Office.
Accordingly, NASD Regulation is proposing to amend the Rule 10334
to provide for an administrative conference with the staff only if all
parties request such a conference in writing. The procedures will be
available if the parties voluntarily agree to proceed with an
administrative conference and to develop a written agreement to proceed
under Rule 10334. The elimination of the requirement for an
administrative conference in all cases should result in reduced costs
to the parties and to NASD Regulation. An administrative conference
will, however, continue to be a prerequisite to the use of the special
procedures provided by Rule 10334.
In addition, NASD Regulation is proposing to amend Rule 10334 to
extend the Rule for five more years to August 1, 2002. By extending the
rule for five years, NASD Regulation will gain experience with the
procedures based on voluntary use of the administrative conference, and
will be better able to determine whether to continue them in effect,
either temporarily or permanently.
2. Statutory Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Act \4\ in
that extending the effectiveness of the procedures for large and
complex cases and making their use voluntary will serve the public
interest by enhancing the satisfaction and perceived fairness of such
proceedings by the parties to the proceedings.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78o-3.
---------------------------------------------------------------------------
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.
[[Page 41456]]
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The NASD requests the Commission to find good cause, pursuant to
section 19(b)(2) of the Act, for temporarily approving an extension of
Rule 10334 prior to the thirtieth day after publication in the Federal
Register. The Commission finds that extending Rule 10334 pending final
action by the Commission on 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.\5\ The Commission finds
good cause for approving the temporary extension of Rule 10334 prior
the thirtieth day after the date of publication of notice of filing
thereof in the Federal Register in that temporary accelerated approval
will benefit users of the arbitration process in that providing a
temporary extension of the Procedures will permit arbitration
participants to continue to use the Procedures. In addition, except
with respect to the administrative conference required under the Rule,
the current application of Rule 10334 to any case submitted to
arbitration is voluntary. Thus, temporarily accelerating the approval
of Rule 10334 while simultaneously requesting comment on the five year
extension of the program and the amendment to make the entire program
voluntary in nature will permit the NASD to maintain the continuity of
the process will not have any adverse impact on the investing public.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Within 35 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 90 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 approved 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. 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-97-52 and should
be submitted by August 22, 1997.
It is therefore ordered, pursuant to section 19(b)(2) \6\ that NASD
Rule 10334 is temporarily extended until the Commission takes final
action on the present proposal.
\6\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-20372 Filed 7-31-97; 8:45 am]
BILLING CODE 8010-01-M
