[Federal Register: December 6, 2007 (Volume 72, Number 234)]
[Notices]
[Page 68930-68932]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de07-103]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56865; File No. SR-NSCC-2007-06]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Modify the
Hearing Procedures Afforded to Members and Applicants for Membership
and Harmonize Them With Similar Rules of Its Affiliates
November 29, 2007.
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 April 30, 2007, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change described in Items I, II, and
III below, which items have been prepared primarily by NSCC. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change seeks (1) to modify NSCC's rules regarding
hearing procedures afforded to members and applicants for membership
and (2) where practicable or beneficial, to harmonize them with similar
rules of NSCC's affiliates, The Depository Trust Company (``DTC'') and
the Fixed Income Clearing Corporation (``FICC'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(1) Minor Rule Violation Plan
In 1984, the Commission adopted amendments to Rule 19d-1(c) under
the Act \4\ that allow self-regulatory organizations to adopt with
Commission approval plans for the disposition of minor violations of
rules.\5\
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\4\ 17 CFR 240.19d-1(c).
\5\ Securities Exchange Act Release No. 21013 (June 1, 1984), 49
FR 23828 (June 8, 1984) [File No. S7-983A].
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Currently under NSCC's rules, a member or applicant subject to
disciplinary action has a right to a hearing before a panel comprised
of members of NSCC's Credit and Market Risk Management Committee
regardless of the severity of the action for which the member or
applicant is being disciplined.\6\ Because some rule violations are not
sufficiently serious to merit Board review, NSCC is proposing to adopt
a Minor Rule Violation Plan within the meaning of Rule 19d-1(c)(2) of
the Act for those rule violations NSCC deems minor. Consistent with
Rule 19d-1(c)(2) of the Act, NSCC would designate those rule violations
for which a fine may be assessed in an amount not to exceed $5,000 as
minor rule violations. If a member were to dispute a fine imposed by
NSCC by filing a written request for hearing and a written statement,
NSCC management would have the authority to waive the fine. NSCC
management would notify the Board of Directors (or a Committee
authorized by the Board of Directors) of its determination to waive the
fine and would provide the reasons for the
[[Page 68931]]
waiver. The Board or Committee could in its discretion decide to
reinstate any fine waived by NSCC management. If NSCC management were
not to waive the fine, the member could appeal the decision to a panel
comprised of NSCC officers (``Minor Rule Violation Panel'').
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\6\ If the action or proposed action of NSCC as to which the
hearing relates has been taken or has been proposed to be taken by
the Credit and Market Risk Management Committee, the members of the
panel shall be drawn from members of the Executive Committee of
NSCC's Board of Directors. See Rule 37 (Hearing Procedures), Section
2.
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(2) Hearings for All Other Violations and Minor Rule Violation Appeals
For matters involving (i) an alleged violation of an NSCC rule for
which a fine in an amount of over $5,000 is assessed, (ii) applicants
for membership, or (iii) other disciplinary actions to which the Minor
Rule Violation Plan would not apply or for appeals from a Minor Rule
Violation Panel decision adverse to a member or applicant, the member
or applicant would be entitled to a hearing before a panel comprised of
three individuals of the NSCC Board of Directors (or their designees)
appointed by the Chairman of the NSCC Board. Decisions of the panel
would be final; however, the full Board of Directors would retain the
right to modify any sanction or reverse any decision of the Board panel
that was adverse to the member or applicant.
Currently with respect to hearings, a member or applicant is
afforded the opportunity to be heard and may be represented by counsel
if desired. A record is kept of the hearing, and at the discretion of
the Board panel, the associated cost may be charged in whole or part to
the member or application in the event that the decision is adverse to
the member or applicant. The member or applicant is advised of the
Board panel's decision within ten business days after the conclusion of
the hearing. These procedures would also apply with respect to the
Minor Rule Violation Plan.
(3) Administrative Changes: Uniformity of Time Frames
The proposed rule changes seek to implement uniform time periods
among NSCC, DTC, and FICC governing actions a member or applicant would
be required to take in order to request a hearing. The deadlines a
member or applicant must adhere to in order to request a hearing
currently vary between NSCC, DTC, and FICC. Under the proposed rule
change, a member or applicant would have five business days, or two
business days in the case of summary action taken against the member or
applicant pursuant to Rule 46,\7\ from the date on which NSCC first
informs it of a sanction or a denial of membership in which to request
a hearing.
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\7\ Examples of a summary action are a suspension of a member or
restriction of a member's access to services as described in Rule 46
(``Restrictions on Access to Services'').
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Within seven business days, or three business days in the case of a
summary action being taken against the member or applicant, after
filing a request for a hearing with NSCC, the member or applicant would
be required to submit to NSCC a clear and concise written statement
setting forth the action or proposed action of NSCC with respect to
which the hearing is requested, the basis for objection to such action,
whether the member or applicant intends to attend the hearing, and
whether the member or applicant chooses to be represented by counsel at
the hearing. These proposed time frames would be consistent with time
frames being proposed by DTC and FICC.
(4) Pending Changes From NSCC Rule Filing SR-NSCC-2006-17
The current time frame for an applicant or member to request a
hearing appears in the following rules: Rule 2 (``Members''), Rule 3
(``Lists to Be Maintained''), Rule 51 (``Fund Member''), Rule 54
(``Settling Bank Only Members''), Rule 56 (``Insurance Carrier/
Retirement Services Member''), and Rule 60 (``TPA Member'').\8\ Each of
those rules is pending deletion as part of rule filing SR-NSCC-2006-17.
Accordingly, in the event that this filing is approved prior to SR-
NSCC-2006-17, the time frame for an applicant or member to request a
hearing that appears in those rules will be deleted.
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\8\ The current time frame for an applicant or member to request
a hearing also appears in Rule 45 (``Notices''). This proposed rule
filing would delete that reference also.
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(5) Implementation of the Proposed Changes
The proposed changes would be implemented upon approval of this
proposed filing by the Commission. Members would be advised of the
implementation through an NSCC Important Notice.
NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \9\ and the rules and
regulations thereunder because the adoption of a Minor Rule Violation
Plan furthers the statutory objective of providing a fair procedure for
disciplining members and will provide NSCC with the ability to impose
meaningful sanctions for those rule violations that do not necessarily
rise to a level meriting a full disciplinary proceeding. Accordingly,
the proposed rule change promotes the prompt and accurate clearance and
settlement of securities transactions.
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\9\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have any
impact or impose any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not been
solicited or received. NSCC will notify the Commission of any written
comments received by NSCC.
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 proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
) or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSCC-2007-06 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2007-06. 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, please use
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only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
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 Section, 100 F Street, NE., Washington,
DC 20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filings also will be available for inspection and
copying at the principal office of NSCC and on NSCC's Web site at
http://www.dtcc.com/downloads/legal/rule_filings/2007/nscc/2007-06.pdf.
All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NSCC-2007-06 and should be submitted on or before December 21, 2007.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23594 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P