[Federal Register: December 16, 2003 (Volume 68, Number 241)]
[Notices]
[Page 70066-70070]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16de03-97]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48887; File No. SR-NASD-2003-110]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment Nos. 1 and 2 by the National Association of
Securities Dealers, Inc. Relating to Uniform Hearing Procedures for and
Consolidation of Rules Applicable to Expedited Proceedings
December 5, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 70067]]
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 15, 2003, the National Association of Securities Dealers, Inc.
(``NASD'') 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 the NASD. On September
2, 2003, the NASD filed an amendment to the proposed rule change.\3\ On
November 18, 2003, the NASD again amended the proposed rule change.\4\
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Barbara Z. Sweeney, Senior Vice President
and Corporate Secretary, NASD, to Kathy England, Assistant Director,
Division of Market Regulation (``Division''), Commission dated
August 29, 2003 (``Amendment No. 1''). Amendment No. 1 amended and
superseded the proposed rule change in its entirety.
\4\ See letter from Barbara Z. Sweeney, Senior Vice President
and Corporate Secretary, NASD, to Kathy England, Assistant Director,
Division, Commission dated November 17, 2003 (``Amendment No. 2'').
Amendment No. 2 amended and superseded the proposed rule change in
its entirety.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is proposing to create a new rule series, the proposed
NASD Rule 9550 Series, to consolidate, clarify and streamline those
existing procedural rules that have an expedited proceeding component.
The text of the proposed rule change is available at the NASD and at
the Commission.
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 NASD 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 NASD 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The NASD proposes to modify certain NASD rules that have an
expedited proceeding component to make them more understandable and
uniform, and to make the overall process for actions covered by such
rules more efficient. Existing NASD rules recognize that expedited
treatment is needed for certain types of actions. These actions fall
into two general categories: (i) Those that involve misconduct capable
of causing further harm to the investing public, other members or the
integrity of the markets; and (ii) those that can be appropriately
expedited for administrative ease. Unlike disciplinary actions that may
concern complex sales-practice violations, the expedited actions that
are affected by this proposal generally involve straightforward issues
unrelated to complicated securities transactions (e.g., whether the
respondent paid an arbitration award or NASD fee, provided information
requested by NASD staff, or complied with the net capital
requirements).\5\
---------------------------------------------------------------------------
\5\ In most instances, the issues raised by these types of
proceedings are uncomplicated and the defenses are limited. For
example, in a case involving a respondent's failure to pay an
arbitration award, the issue presented is whether the member or
person has paid the award. A respondent cannot collaterally attack
the actual arbitration award. See John G. Pearce, 52 S.E.C. 796,
798, 1996 SEC LEXIS 1329, at *5 (1996) (``To permit a party
dissatisfied with an arbitral award to attack it collaterally for
legal flaws in a subsequent disciplinary proceeding would subvert
the salutary objective that the NASD's [arbitration] resolution
seeks to promote.''); see also James Anthony Morrill, 51 S.E.C.
1162, 1164 n.6, 1994 SEC LEXIS 1766, at *6 (1994) (same). Similarly,
in an action for failure to provide information, the issue presented
is whether the respondent provided information requested by the
NASD. It is well settled that respondents must fully and promptly
cooperate with the NASD, see Mark Allen Elliott, 51 S.E.C. 1148,
1150, 1994 SEC LEXIS 1765, at *5-6 (1994), and respondents cannot
second guess NASD information requests or impose conditions on
responding. See Joseph Patrick Hannan, 53 S.E.C. 854, 859, 1998 SEC
LEXIS 1955, at *11 (1998) (``[A]n NASD member may not `second guess'
or `impose conditions on' the NASD's request for information.'');
Michael David Borth, 51 S.E.C. 178, 181, 1992 SEC LEXIS 3248, at *7
(1992) (``The Rules do not permit second guessing the NASD's
requests'' or permit a respondent ``to shift his responsibility to
others * * *''). The issues also are very narrow in a net capital
case. Indeed, ``[t]he gravamen of the charge is the conduct of
business by the firm while its net capital is deficient. The cause
of the deficiency does not bear on this issue.'' Charters & Co. of
Miami, 43 S.E.C. 175, 177, 1966 SEC LEXIS 189, at *6 (1966). See
also Litwin Securities, Inc., 52 S.E.C. 1339, 1344-45, 1997 SEC
LEXIS 1146, at *16 (1997) (holding that intent is irrelevant to
whether a respondent violated the net-capital requirements).
---------------------------------------------------------------------------
However, the present NASD rules that have provisions for fast-track
procedures vary considerably in some respects and overlap in others, at
times without any clear rationale. The proposed rule change, discussed
in detail below, streamlines and clarifies the existing expedited rules
and makes them more uniform. At the same time, the modifications, which
do not abrogate any substantive rights held by members or associated
persons, continue to ensure that expedited actions are fair to all
parties. The current rules that have been renumbered and otherwise
affected by the proposed rule change are as follows:
[sbull] NASD Rule 8220 Series (Suspension for Obstructing
Investigations);\6\
---------------------------------------------------------------------------
\6\ The current NASD Rule 8220 Series (Suspension for
Obstructing Investigations) is now located at proposed NASD Rule
9552 (Failure to Provide Information or Keep Information Current).
---------------------------------------------------------------------------
[sbull] NASD Rule 9410 Series (Procedures for Regulating Activities
of a Member Experiencing Financial or Operational Difficulties);\7\
---------------------------------------------------------------------------
\7\ The current NASD Rule 9410 Series (Procedures for Regulating
Activities of a Member Experiencing Financial or Operational
Difficulties) is now located at proposed NASD Rule 9557 (Procedures
for Regulating Activities Under NASD Rules 3130 and 3131 Regarding a
Member Experiencing Financial or Operational Difficulties). As noted
above, on September 4, 2003, the Commission approved certain NASD
proposed changes to NASD Rules 3130 and 3131 and the NASD Rule 9410
Series. See Securities Exchange Act Release No. 48438 (September 4,
2003), 68 FR 53766 (September 12, 2003) (SR-NASD-2003-74)
(Commission Approval Order of NASD Proposed Rule Change Regarding
the Regulation of Activities of Members Experiencing Financial and/
or Operational Difficulties).
---------------------------------------------------------------------------
[sbull] NASD Rule 9510 Series (Summary and Non-Summary
Proceedings);\8\
---------------------------------------------------------------------------
\8\ The current NASD Rule 9510 Series (Summary and Non-Summary
Proceedings) has been separated into a number of individual proposed
rules. Summary proceedings under NASD Rule 9511(a)(1) for actions
authorized under section 15A(h)(3) of the Act are now located at
proposed NASD Rule 9558 (Summary Proceedings for Actions Authorized
by section 15A(h)(3) of the Act). Non-summary proceedings under NASD
Rule 9511(a)(2)(A) for failure to comply with an arbitration award
or related settlement agreement are now located at proposed NASD
Rule 9554 (Failure to Comply with an Arbitration Award or Related
Settlement). Non-summary proceedings under NASD Rule 9511(a)(2)(B)
for failure to meet the qualification requirements or other
prerequisites for access to the NASD or member services is now
located at proposed NASD Rule 9555 (Failure to Meet the Eligibility
or Qualification Standards or Prerequisites for Access to Services).
Non-summary proceedings under NASD Rule 9511(a)(2)(C) for failure to
adhere to certain public communication standards are now located at
proposed NASD Rule 9551 (Failure to Comply with the Public
Communication Standards). Finally, non-summary proceedings under
NASD Rule 9511(a)(2)(D) for failure to comply with a temporary or
permanent cease and desist order are now located at proposed NASD
Rule 9556 (Failure to Comply with a Temporary or Permanent Cease and
Desist Order). It should be noted that proposed NASD Rule 9556,
along with the NASD Rule 9800 Series and related amendments adopted
by SR-NASD-98-80, will expire on June 23, 2005, unless extended or
permanently adopted by the NASD pursuant to Commission approval at
or before such date.
---------------------------------------------------------------------------
[sbull] NASD Rule 9530 Series (Suspension or Cancellation for
Failure to Pay Dues, Fees and Other Charges);\9\ and
---------------------------------------------------------------------------
\9\ The current NASD Rule 9530 Series (Suspension or
Cancellation for Failure to Pay Dues, Fees and Other Charges) is now
located at proposed NASD Rule 9553 (Failure to Pay NASD Dues, Fees
and Other Charges).
---------------------------------------------------------------------------
[[Page 70068]]
[sbull] NASD Rule 9540 Series (Failure to Provide Information or
---------------------------------------------------------------------------
Meet the Eligibility and Qualification Standards).\10\
\10\ The current NASD Rule 9540 Series (Failure to Provide
Information or Meet the Eligibility and Qualification Standards) has
been combined with two proposed rules. NASD Rules 9541(a) and (b)
regarding failure to provide information is now located at proposed
NASD Rule 9552 (Failure to Provide Information or Keep Information
Current). NASD Rule 9541(c) regarding failure to meet the
eligibility and qualification standards is now located at proposed
NASD Rule 9555 (Failure to Meet the Eligibility or Qualification
Standards or Prerequisites for Access to Services).
---------------------------------------------------------------------------
With this proposed rule change, the NASD believes that the first
major improvement to the expedited proceedings provisions is that they
are reorganized into a single rule series, the proposed NASD Rule 9550
Series, and each type of action is clearly labeled. At present, the
various types of expedited proceedings are scattered throughout the
NASD's rules, in many instances without clear headings,\11\ increasing
the likelihood of confusion for interested parties and adjudicators.
Going forward, interested parties will simply need to review the NASD
Rule 9550 Series, with its clearly marked subheadings, to ascertain
their rights and obligations with regard to expedited actions.
---------------------------------------------------------------------------
\11\ For instance, NASD Rule 9511(a)(2) covers three distinct
and unrelated types of conduct without any description in the title
beyond ``non-summary proceedings.''
---------------------------------------------------------------------------
The proposed amendments also consolidate some current expedited
rules that have similar or overlapping provisions. For instance,
current NASD Rules 8221(a) and (b) and 9541(a) and (b) have identical
provisions that allow NASD staff to issue a notice of suspension if a
member or associated person ``fails to provide any information, report,
material, data, or testimony.'' These provisions are consolidated into
a single rule, proposed NASD Rule 9552, under the proposed amendments.
Similarly, current NASD Rules 9511(a)(2)(B) and 9541(c) both cover
situations where a member or associated person fails to meet
eligibility or qualification standards. Under the proposal, these
provisions are now consolidated and clarified under the amendments as
proposed NASD Rule 9555. The NASD believes that the consolidation of
these various rules will alleviate the current confusion over which
rule to use in a particular situation.
The proposed amendments, moreover, separate into individual rules
some provisions, the consolidation of which has caused confusion. The
proposed amendments, for example, separate the four ``non-summary''
actions currently located in NASD Rule 9511(a)(2) for failure to pay an
arbitration award, failure to meet eligibility or qualification
standards, failure to comply with certain public communication
standards and failure to comply with a cease and desist order. The NASD
believes that these provisions were not logically connected to one
another; they are separated into individual rules under the proposed
amendments.\12\ The substance of the four provisions remains intact,
however. The NASD proposes to separate these four provisions into
individual rules so that the rule headings clearly denote the substance
of the actions. The NASD believes that the previous heading of ``non-
summary'' proceedings was confusing because there are a number of rules
that have an expedited component that could be viewed as ``non-
summary'' in nature.
---------------------------------------------------------------------------
\12\ As discussed above, current NASD Rule 9511(a)(2)(A)
(Failure to Comply with an Arbitration Award) is now located at
proposed NASD Rule 9554. Current NASD Rule 9511(a)(2)(B) (Failure to
Meet Eligibility or Qualification Standards) is now located at
proposed NASD Rule 9555. Current NASD Rule 9511(a)(2)(C) (Failure to
Comply with Certain Public Communication Standards) is now located
at proposed NASD Rule 9551. Finally, current NASD Rule 9511(a)(2)(D)
(Failure to Comply with a Temporary or Permanent Cease and Desist
Order) is now located at proposed NASD Rule 9556.
---------------------------------------------------------------------------
In addition, the proposed rule change modifies the authorization
provision for initiating certain summary proceedings. Pursuant to
section 15A(h)(3) of the Act,\13\ existing NASD Rule 9512 allows the
summary suspension or limitation of activities of a member or
associated person when, for example, another self-regulatory
organization has expelled, barred or suspended the member or associated
person, or when the member is in such financial or operating difficulty
that it cannot be permitted to continue to do business as a member with
safety to investors, creditors, other members or the NASD. Currently,
the NASD may only invoke NASD Rule 9512 with NASD Board
authorization.\14\ The proposed rule change would allow the President
of NASD Regulatory Policy and Oversight or the Executive Vice President
for NASD Regulatory Policy and Programs (rather than the Board) to
authorize the issuance of summary proceeding notices, which begin the
summary proceeding process. The NASD would only initiate a summary
proceeding under circumstances demanding quick action. This
modification to the authorization provision would avoid the logistical
difficulties of having to obtain the necessary authorization from the
Board on short notice, while at the same time ensuring that such
decisions are made at the highest NASD staff levels.\15\ Unlike the
current summary provision, moreover, the modified provision provides
that a respondent's request for a hearing generally will result in a
stay of the action.\16\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78o-3(h)(3).
\14\ The present requirement that the NASD Board must authorize
such actions is set forth in NASD's rule and not in the Act.
\15\ This proposed change makes the authorization provision for
summary proceedings consistent with the authorization provision for
temporary cease and desist orders under NASD Rule 9810(a).
\16\ As mentioned supra, the summary proceedings provisions have
been renumbered and will be located at proposed NASD Rule 9558.
---------------------------------------------------------------------------
The proposed amendments also reorganize the hearing provisions of
these various rules into a single rule within the new NASD Rule 9550
Series. The NASD believes that the new hearing rule, proposed NASD Rule
9559, creates a uniform, efficient and manageable expedited procedure
consistent with the NASD's obligations to the investing public, the
securities markets and NASD members. Under the proposal, a respondent
may request a hearing at any time prior to the effective date of the
action contained in the notice issued pursuant to the new NASD Rule
9550 Series. Under the present scheme, some rules have five-day periods
while others have seven-day periods to request hearings,\17\ even
though the notices often do not become effective for much longer
periods of time.\18\ This new provision ties the periods together,
giving respondents more time to request a hearing without altering the
expedited nature of the proceedings.
---------------------------------------------------------------------------
\17\ Compare NASD Rules 8222(a) (a respondent must request a
hearing within five days of the service of the notice); 9413(a)
(same); 9532(a) (same); 9542(a) (same) with NASD Rule 9514(a)(1) (a
respondent must request a hearing within seven days of the service
of the notice).
\18\ See, e.g., NASD Rules 8221-22 (respondent must request
hearing within five days of service of notice but the notice of
suspension does not become effective for 20 days); NASD Rules 9531-
32 (respondent must request hearing within five days of the notice
but the notice of suspension or cancellation does not become
effective until 15 days after service of the notice); NASD Rule
9541-42 (respondent must request hearing within five days of service
of notice but the notice of suspension does not become effective for
20 days).
---------------------------------------------------------------------------
The NASD believes that the proposed NASD Rule 9550 Series also
simplifies the actual hearing process in a number of ways. First, the
rule series channels all requests for hearings to the Office of Hearing
Officers (``OHO''). At present, various expedited proceedings are held
before different adjudicative bodies--e.g., NASD Board hearing panels,
National Adjudicatory Council (``NAC'') hearing panels, OHO hearing
panels,
[[Page 70069]]
Hearing Officers--with little justification. This practice has proven
to be cumbersome. Under the proposed amendments, respondents file a
written request for a hearing with OHO. For actions involving a failure
to pay an arbitration award or NASD fees, a Hearing Officer from OHO
will act as the sole adjudicator, as is the current practice. For all
other matters involving expedited proceedings, an OHO-appointed hearing
panel, consisting of a hearing officer and two hearing panelists, will
act as the adjudicative body.\19\ Second, the amendments allow
adjudicators to conduct hearings by telephone. Third, the proposed rule
series will allow various expedited actions to be consolidated,
eliminating the need for parties to litigate related matters in
separate venues.\20\ In brief, the NASD believes that the fairness of
the process will not be impaired--and the efficiency will be improved--
by these changes.
---------------------------------------------------------------------------
\19\ The Chief Hearing Officer will select as Panelists persons
who meet the qualifications delineated in NASD Rule 9231(b).
\20\ It is not uncommon for a firm to experience multiple,
related problems, for example, a financial crisis, issues about the
qualifications of the Financial Operations Principal, and a failure
to provide information in response to NASD staff's queries about the
problems. Under the current rules, NASD staff would be required to
initiate multiple proceedings to address the issues.
---------------------------------------------------------------------------
Furthermore, the NASD believes that the proposed NASD Rule 9550
Series provides respondents with greater protection by mandating that
the action be stayed while the matter is pending, save for limited
circumstances. The current rules with expedited components take
different approaches as to whether a request for a hearing stays the
action.\21\ In general, under the proposed NASD Rule 9550 Series, a
request for a hearing automatically stays the action, unless the
Hearing Officer orders otherwise (e.g., where there is a threat of harm
to the public or other members if the suspension or limitation is not
immediately effective). In the ordinary case, this provision will allow
respondents to be heard before the suspension, bar or expulsion takes
effect. However, the streamlined procedures for final NASD action,
discussed below, ensure that the action will not be stayed for a
prolonged period (as can now happen due, in part, to the infrequency of
NAC and NASD Board meetings and the difficulty of using special mailing
ballots). The NASD believes that the rule change strikes an appropriate
balance between the need to ensure fairness to respondents and the need
for swift action in appropriate cases.
---------------------------------------------------------------------------
\21\ Compare NASD Rule 8220 Series (request for a hearing does
not stay the action); NASD Rule 9514 (c)(1) (request for a hearing
does not stay the action); with NASD Rule 9413(c) (request for a
hearing does stay the action); NASD Rule 9514(c)(2) (request for a
hearing does stay action as to certain alleged violations but does
not as to others); NASD Rule 9532(a) (request for a hearing does
stay the action); NASD Rule 9542(a) (request for a hearing does stay
the action).
---------------------------------------------------------------------------
As indicated above, the NASD believes that the proposed NASD Rule
9550 Series streamlines the procedures for final NASD action. In
general, hearings must be conducted and matters resolved within a
specified, shortened timeframe once a respondent requests a
hearing.\22\ The NASD believes that the use of such deadlines is
consistent with the Commission's recent adoption of amendments to its
Rules of Practice that impose binding completion dates in certain
Commission administrative proceedings.\23\ The NASD believes that the
deadlines also are consistent with both the Commission's and the NASD's
emphasis on ``real-time enforcement.''
---------------------------------------------------------------------------
\22\ For instance, proposed NASD Rule 9559(f) requires that
hearings for failure to comply with cease and desist orders, summary
proceedings and members experiencing financial or operational
difficulties be held within 14 days, and hearings for all other
actions be held within 60 days of a request for a hearing. In
addition, under proposed NASD Rule 9559(o), OHO must issue a
decision in cases involving a failure to comply with cease and
desist orders, a summary proceeding or a member experiencing
financial or operational difficulty within 21 days and in all other
cases within 60 days of the date of the close of the hearing.
However, the Hearing Officer or, if applicable, hearing panel is
given flexibility to manage the progress of the case. In some
instances, parties legitimately may need more time to explore the
issues in the case, gather and provide detailed documentation, make
preparations for witnesses, draft and file motions, etc. For good
cause shown, or with the consent of all of the parties to a
proceeding, the Hearing Officer or, if applicable, the hearing panel
may extend or shorten any time limits prescribed by the rule. The
proposed rule change thus gives adjudicators the discretion to adapt
to the circumstances of each case.
\23\ See Release Nos. 33-8240, 34-48018, 35-27686, 39-2408 (June
11, 2003), 68 FR 35787 (June 17, 2003) (Commission Adoption of
Amendments to Rules of Practice). In the release, the Commission
stated, ``Based upon [our] experience with non-binding completion
dates, the Commission has determined that timely completion of
proceedings can be achieved more successfully through the adoption
of mandatory deadlines and procedures designed to meet these
deadlines.'' Id. The Commission also stated, ``Any and all deadlines
and timelines established by these amendments to the Commission's
Rules of Practice confer no substantive rights on respondents.'' Id.
at 35788. As with the Commission's amendments, the deadlines and
timelines established by the NASD's proposed amendments for hearing
panels and the NAC to hold hearings and issue decisions confer no
substantive rights on respondents.
---------------------------------------------------------------------------
Once the hearing panel or Hearing Officer issues the initial
decision, the NAC's Review Subcommittee has the ability to call the
matter for review in a condensed timeframe. As is currently the case
with most expedited rules, respondents will not have the right to
appeal the matter to the NAC,\24\ and the NASD Board will not have the
ability to call the matter for review. Thus, the hearing panel or
Hearing Officer decision, if not called for review by the NAC, is the
NASD's final action. However, the respondent would have the ability to
appeal a hearing panel or Hearing Officer decision to the
Commission.\25\ The NASD believes that these provisions ensure that
respondents have a right to a full and fair hearing before OHO and that
the NAC has the ability to call matters for review when appropriate,
while eliminating time-consuming review that can significantly delay
the effectiveness of the subject action without necessarily adding
benefit to the decision-making process in these uncomplicated
matters.\26\
---------------------------------------------------------------------------
\24\ Under many of the existing rules with expedited components,
respondents may not appeal the matter to an NASD appellate body,
such as the NAC. For example, the NAC appoints the original, ``trial
level'' hearing panel in actions under the NASD Rule 8220 Series
(failure to provide information). The NASD Board appoints the
hearing panel in actions under the NASD Rule 9510 Series (summary
and non-summary proceedings). Under neither rule series does a
respondent have any right of appeal to an internal, NASD appellate
body. Similarly, an OHO appointed hearing panel's decision in
actions under the NASD Rule 9410 Series (member experiencing
financial or operational difficulties) and NASD Rule 9530 (failure
to pay fees) is not appealable to the NAC or any other internal,
NASD appellate body under the existing system.
\25\ As is currently the case, a respondent's appeal of an
expedited action to the Commission would be governed by Section
19(f) of the Act. See William J. Gallagher, Securities Exchange Act
Release No. 47501, 2003 SEC LEXIS 599, at *5 (March 14, 2003)
(reviewing appeal involving failure to pay arbitration award under
Section 19(f) of the Act and explaining that the Commission need
only to find that ``the `specific grounds' on which the SRO based
its action `exist in fact' ''). Of course, an adjudicator's
determination regarding a request for extraordinary relief (e.g., a
motion for leave to file a late request for a hearing) is not
appealable to the Commission. See Warren B. Minton, Jr., Securities
Exchange Act Release No. 46709, 2002 SEC LEXIS 2712, at *9-10
(October 23, 2002) (``[W]e do not have jurisdiction to review the
NASD's denial of Minton's motion to vacate the default. * * * [T]he
NASD merely rejected Minton's collateral attack on the NASD's
[previous] action. * * * [E]ven if an applicant is adversely
affected by the NASD's denial of a motion to set aside a default,
that fact `does not transform the denial into a reviewable NASD
order.' ''); Gary A. Fox, Securities Exchange Act Release. No.
46511, 2002 SEC LEXIS 2381, at *3-5 (September 18, 2002) (``[W]e are
precluded from considering an applicant's application for review if
that applicant failed to follow the NASD's procedures. * * * Fox
failed to respond to NASD requests for information, failed to
respond to the * * * notice of his suspension, and failed to apply
for reinstatement within the time required''. [W]e are [thus]
precluded from considering Fox's application for review.'').
\26\ See supra note 5 and accompanying text.
---------------------------------------------------------------------------
Finally, NASD no longer refers to itself or its subsidiary, NASD
Regulation, Inc., using its full corporate name, ''the Association,''
``the NASD''
[[Page 70070]]
or ``NASD Regulation, Inc.'' Instead, the NASD uses ``NASD'' unless
otherwise appropriate for corporate or regulatory reasons. Accordingly,
the proposed rule change replaces several references to ``the
Association'' and ``the NASD'' in the text of the proposed rule change
with the name ``NASD'' and deletes several references to ``NASD
Regulation, Inc.'' Although the proposal would delete the name ``NASD
Regulation, Inc.'' NASD Regulation, Inc. will continue to perform the
functions described in the rule.
2. Statutory Basis
The NASD believes that the proposed rule change is consistent with
the provisions of section 15A(b)(6) of the Act,\27\ which requires,
among other things, that the NASD'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 is consistent with the provisions of section 15A(b)(7) of the
Act,\28\ which provides that NASD members, or persons associated with
its members, are appropriately disciplined for violations of any
provisions of the Act or the NASD's rules.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78o-3(b)(6).
\28\ 15 U.S.C. 78o-3(b)(7).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD 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.
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 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 NASD 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 proposed rule
change, as amended, is consistent with the Act. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609. Comments may also be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters
should refer to File No. SR-NASD-2003-110. This file number should be
included on the subject line if e-mail is used. To help the Commission
process and review your comments more efficiently, comments should be
sent in hardcopy or by e-mail but not by both methods. 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 the File No. SR-NASD-2003-110 and should be
submitted by January 6, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-30989 Filed 12-15-03; 8:45 am]
BILLING CODE 8010-01-P