[Federal Register: June 2, 2003 (Volume 68, Number 105)]
[Notices]
[Page 32791-32793]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jn03-118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47929; File No. SR-NYSE-2003-15]
Self Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc. Relating to Arbitration
May 27, 2003.
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 May 12, 2003 the New York Stock Exchange, Inc. filed with the
Securities and Exchange Commission (``Commission'') the proposed
amendments to its arbitration rules as described in Items I, II and III
below, which items have been prepared by the Exchange. The Exchange
filed the proposed rule change pursuant to section 19(b)(3)(A) of the
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change consists of amendments to NYSE Rules 609
(Peremptory Challenge), 610 (Disclosures Required of Arbitrators), 619
(General Provisions Governing Subpoenas, Production of Documents,
etc.), and the Voluntary Supplemental Procedures for Selecting
Arbitrators (Pilot Program). The text of the proposed rule change is
below. New language is italicized; deleted language is in brackets.
* * * * *
Rule 609. [Peremptory] Challeng[e]ing Potential Arbitrators
(a) In any arbitration proceeding, each party shall have the right
to one peremptory challenge. In arbitrations where there are multiple
claimants, respondents and/or third party respondents, the claimants
shall have one peremptory challenge, the respondents shall have one
peremptory challenge and the third-party respondents shall have one
peremptory challenge, unless the Director of Arbitration determines
that the interests of justice would be best served by awarding
additional peremptory challenges. Unless extended by the Director of
Arbitration, a party wishing to exercise a peremptory challenge must do
so by notifying the Director of Arbitration in writing within ten (10)
business days of notification of the identity of the person(s) named
under Rule 619(d), (e) or Rule 608 whichever comes first.
(b) There shall be unlimited challenges for cause. A challenge for
cause to a particular arbitrator will be granted where it is reasonable
to infer an absence of impartiality, the presence of bias, or the
existence of some interest on the part of the arbitrator in the outcome
of the arbitration as it affects one of the parties. The interest or
bias must be direct, definite, and capable of reasonable demonstration,
rather than remote or speculative.
Rule 610. Disclosures Required of Arbitrators
(a) No change.
(1) Any direct or indirect financial or personal interest in the
outcome of the arbitration;
(2) Any existing or past financial, business, professional, family
or social relationships that are likely to affect impartiality or might
reasonably create an appearance of partiality or bias. Persons
requested to serve as arbitrators [should] shall disclose any such
relationships which they personally have with any party or its counsel,
or with any individual whom they have been told will be a witness. They
[should] shall also disclose any such relationship involving members of
their families or their current employers, partners or business
associates.
(b) Persons who are requested to accept appointment as arbitrators
[should] shall make a reasonable effort to inform themselves of any
interests or relationships described in Paragraph (a) above.
(c) & (d) No change.
Rule 619. General Provision Governing Subpoenas, Production of
Documents, etc.
(a) No changes.
(b) Document Production and Information Exchange.
(1) Any party may serve a written request for information or
documents (``information request'') upon another party twenty (20)
business days or more after service of the Statement of Claim by the
Director of Arbitration or upon filing of the Answer, whichever is
earlier. The requesting party shall serve the information request on
all parties [and file a copy with the Director of Arbitration]. The
parties shall endeavor to resolve disputes regarding an information
request prior to serving any objection to the request. Such efforts
shall be set forth in the objection.
(2) Unless a greater time is allowed by the requesting party,
information requests shall be satisfied or objected to within thirty
(30) calendar days from the date of service. Any objection to an
information request shall be served by the objecting party on all
parties [and filed with the Director of Arbitration].
(3) Any response to objections to an information request shall be
served on all parties [and filed with the Director of Arbitration]
within ten (10) calendar days of receipt to the objection.
(4) Upon the written request of a party whose information request
is unsatisfied, the matter will be referred by the Director of
Arbitration to either a pre-hearing conference under
[[Page 32792]]
paragraph (d) of this section or to a selected arbitrator under
paragraph (e) of this section. Copies of the request, objections to the
request and response to the objections, if any, must accompany the
request to the Director of Arbitration.
(c) through (g) No Changes
* * * * *
Voluntary Supplemental Procedures for Selecting Arbitrators
(a) No changes.
(b) Random List Selection
1. The Number and Type of Arbitrators
(i) Claims up to $[10]25,000. One public arbitrator will decide
claims up to $[10]25,000 (not including costs and interest).
(ii) Claims above $[10]25,000 or where no dollar amount is claimed
or disclosed. Three arbitrators will decide claims above $[10]25,000
(not including costs and interest) or where no dollar amount is claimed
or disclosed. The arbitration panel shall consist of a majority of
public arbitrators, unless the customer or non-member requests a
majority from the securities industry.
(iii) No changes.
2. through 5. No changes.
(c) No changes.
* * * * *
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 NYSE 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 NYSE 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 NYSE represents that the proposed rule change is intended to:
[sbull] Provide greater transparency with respect to challenges for
cause by including the cause standard in the rules (NYSE Rule 609).
[sbull] Emphasize that all arbitrator disclosures are mandatory
(NYSE Rule 610).
[sbull] Reduce paperwork by eliminating the requirement that
parties in arbitration file with the Director of Arbitration copies of
all requests for information, objections to requests and responses to
objections until such time as a party requests a pre-hearing conference
(NYSE Rule 619).
[sbull] Conform the Voluntary Supplemental Procedures for Selecting
Arbitrators Pilot Program to the recently approved change in Simplified
Arbitration (NYSE Rule 601) by increasing the ceiling from $10,000 to
$25,000 for a single arbitrator to be selected to decide an arbitration
claim.
The NYSE represents that the proposed amendments to NYSE Rules 609
and 610 are consistent with the recommendations of Professor Michael A.
Perino as contained in his Report to the Securities and Exchange
Commission Regarding Arbitrator Conflict Disclosure Requirements in
NASD and NYSE Securities Arbitrations (``Perino Report''). Commissioned
by the then-Chairman of the Commission to assess the adequacy of
current NASD and NYSE disclosure requirements, the Perino Report
concluded that current SRO conflict disclosure rules are adequate.
However, in order to provide additional assurance to investors that
arbitrators are in fact neutral and impartial the Perino Report
proposed four recommendations. The proposed amendments to NYSE Rules
609 and 610 are consistent with two of the Perino Report's
recommendations that have been approved by the Securities Industry
Conference on Arbitration (``SICA''). The other two recommendations are
currently under consideration by SICA. The proposed amendment to NYSE
Rule 609 codifies existing policy and provides greater transparency
with respect to challenges for cause by including the cause standard in
the rules. The proposed amendment to NYSE Rule 610 emphasizes that all
arbitrator disclosures are mandatory and the NYSE represents that it is
consistent with current self-regulatory organization interpretation of
the rule.
NYSE represents that the proposed amendment to NYSE Rule 619 is
intended to reduce the volume of paperwork the Exchange receives from
parties by eliminating the requirement that all information requests,
objections to the requests and responses be filed with the Director of
Arbitration. Under the proposed amended rule, the parties will only be
required to file the aforementioned documents at the time they request
a pre-hearing conference to resolve a discovery dispute. NYSE
represents that the proposed amendment is consistent with an amendment
to the Uniform Code of Arbitration adopted by SICA.
The proposed amendment to the Voluntary Supplemental Procedures for
Selecting Arbitrators will increase the ceiling from $10,000 to $25,000
for a single arbitrator to be selected to decide an arbitration claim.
This amendment is consistent with the amendment to Simplified
Arbitration (NYSE Rule 601) recently approved by the Commission.\5\
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\5\ See Securities Exchange Act Release No. 47089 (December 23,
2002), 68 FR 139 (January 2, 2003) (SR-NYSE-2002-43).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\6\ in general, and furthers the
objectives of section 6(b)(5),\7\ in particular, in that it promotes
just and equitable principles of trade by ensuring that members and
member organizations and the public have a fair and impartial forum for
the resolution of their disputes.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from the date of filing,
or such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, and the Exchange
has provided the Commission with written notice of its intent to file
the proposed rule change at least five business days prior to the
filing date, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \8\ and Rule 19b-894(f)(6)
thereunder.\9\ In addition, the NYSE requests that the proposed
[[Page 32793]]
rule change become effective upon filing because:
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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i. The proposed amendment to NYSE Rule 609 codifies the Exchange's
existing practice regarding challenges for cause and duplicates
publicly available information in SICA's Arbitrator's Manual.
ii. The proposed amendment to NYSE Rule 610 codifies the Exchange's
existing interpretation of NYSE Rule 610 and its practices regarding
arbitrators' obligations to make a reasonable effort to inform
themselves of any interests or relationships described in NYSE Rule
610(a) and to disclose such information.
iii. The proposed amendments to NYSE Rule 619 will eliminate the
need for parties to file information requests and responses with the
Director of Arbitration since those documents do not require action by
arbitrators.
iv. The proposed amendment to the Voluntary Supplemental Procedures
for Selecting Arbitrators will conform the threshold for single
arbitrator cases under the Supplemental Procedures with the higher
threshold approved by the Commission in NYSE Rule 601 (Simplified
Arbitration).
A proposed rule change filed under Rule 19b-4(f)(6)\10\ does not
become operative prior to 30 days after the date of filing or such
shorter time as the Commission may designate if such action is
consistent with the protection of investors and the public interest.
The NYSE has requested that the Commission accelerate the
implementation of the proposed rule change so that it may take effect
prior to the 30 days specified in Rule 19b-4(f)(6)(iii).\11\ The
Commission believes waiving the 30-day operative date is consistent
with the protection of investors and the public interest. For this
reason, the Commission has determined to make the proposed rule change
operative as of the date of this notice.\12\
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\10\ Id.
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of filing of such proposed rule change,
the Commission may summarily abrogate such rule change if its appears
to the Commission that such action is necessary or appropriate in the
public interest, for the protection of investors, or otherwise in the
furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons 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, NW., Washington, DC 20549-0609.
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
NYSE. All submissions should refer to SR-NYSE-2003-15 and should be
submitted by June 23, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-13685 Filed 5-30-03; 8:45 am]
BILLING CODE 8010-01-P