[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Notices]
[Page 15815-15817]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57525; File No. SR-FINRA-2008-005]
Self-Regulatory Organizations: Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
Amendments to the Codes of Arbitration Procedure To Permit Submissions
to Arbitrators After a Case Has Closed Under Limited Circumstances
March 18, 2008.
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 February 7, 2008, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a 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 substantially prepared by FINRA.
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing Rule 12905 of the NASD Code of Arbitration
Procedure for Customer Disputes (``Customer Code'') and Rule 13905 of
the NASD Code of Arbitration Procedure for Industry Disputes
(``Industry Code'') to permit submissions to arbitrators after a case
has closed only under the following circumstances: (1) As ordered by a
court; (2) at the request of any party within 30 days of service of an
award or notice that a matter has been closed, for ministerial matters;
or (3) if all parties agree and submit documents within 30 days of
service of an award or notice that a matter has been closed. Below is
the text of the proposed rule change. All the text is new.
* * * * *
12905. Submissions After a Case Has Closed
(a) Parties may not submit documents to arbitrator(s) in cases that
have been closed except under the following limited circumstances:
As ordered by a court;
At the request of any party within 30 days of service of
an award or notice that a matter has been closed, for ministerial
matters such as miscalculation of figures, mistake in the description
of any person, thing or property referred to in the award, or if the
award is imperfect in a matter of form that does not affect the
decision on the merits; or
If all parties agree and submit documents within 30 days
of (1) service of an award or (2) notice that a matter has been closed.
(b) Parties must make requests under this rule in writing to the
Director and must include the basis relied on under this rule for the
request. The Director will forward the documents, along with any
responses from other parties, to the arbitrators. Unless the
arbitrators rule within 20 days after the Director forwards the
documents to the arbitrators, the request shall be deemed denied.
13905. Submissions After a Case Has Closed
(a) Parties may not submit documents to arbitrator(s) in cases that
have been closed except under the following limited circumstances:
As ordered by a court;
At the request of any party within 30 days of service of
an award or notice that a matter has been closed, for
[[Page 15816]]
ministerial matters such as miscalculation of figures, mistake in the
description of any person, thing or property referred to in the award,
or if the award is imperfect in a matter of form that does not affect
the decision on the merits; or
If all parties agree and submit documents within 30 days
of (1) service of an award or (2) notice that a matter has been closed.
(b) Parties must make requests under this rule in writing to the
Director and must include the basis relied on under this rule for the
request. The Director will forward the documents, along with any
responses from other parties, to the arbitrators. Unless the
arbitrators rule within 20 days after the Director forwards the
documents to the arbitrators, the request shall be deemed denied.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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
FINRA is proposing to amend its Customer Code and Industry Code to
adopt new rules to permit submissions to arbitrators after a case has
closed only under limited circumstances. The proposed rule change would
reduce attorneys' fees and other costs associated with responding to
such submissions and would support the finality of arbitration awards
issued in the forum.
FINRA staff receives several requests each year from parties to
submit documents to arbitrators (the panel) in cases that have been
closed for long periods of time. Parties file these requests for a
number of reasons, such as to obtain expungement relief that a party
failed to request during the life of the case, to correct what a party
perceives to be a mistake in the award, or to request that forum fee
allocations be changed.
Currently, the Customer and Industry Codes do not contain deadlines
for such submissions and, indeed, do not address the matter. Therefore,
staff forwards to panels the requests, along with any responses from
other parties, regardless of the time that has elapsed since the case
was closed. The panels rarely determine to reopen a matter.
A case is deemed closed on the date FINRA serves an award or sends
to the parties a letter notifying them that a case is closed (for
example, by settlement). The absence of deadlines in the Customer and
Industry Codes for submissions in closed cases can cause numerous
problems. For example, parties might submit documents to the panel
years after cases have closed. Also, arbitrators might have resigned
from the roster or died by the time such submissions are made. Finally,
parties might incur substantial attorneys' fees and other costs in
responding to closed-case submissions.
Potential legal issues are also present. Some states empower
arbitrators to correct technical or mathematical errors in their
awards, but only for a short period of time following the award's
issuance, and courts may remand a matter to the original arbitrators
when they vacate awards in whole or in part.\3\ Beyond these examples,
however, the law generally provides that the arbitrators' authority
ends when the arbitrators render their decisions.
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\3\ See N.Y. CPLR 7509, 7511 (McKinney 2008).
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To address the problems associated with submissions in closed
cases, FINRA is proposing to permit submissions to arbitrators after a
case has closed only under the following limited circumstances:
As ordered by a court;
At the request of any party within 30 days of service of
an award or notice that a matter has been closed, for ministerial
matters such as miscalculation of figures, mistake in the description
of any person, thing or property referred to in the award, or if the
award is imperfect in a matter of form that does not affect the
decision on the merits; or
If all parties agree and submit documents within 30 days
of (1) service of an award or (2) notice that a matter has been closed.
The 30-day limit is in line with time limits allowed under many
state laws \4\ and would ensure that a majority of the arbitrators that
served on the panel will be available to review the submissions. Under
the second alternative, request by only one party, FINRA would follow
its normal procedure of soliciting a response from the other parties
before forwarding the request to the panel.
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\4\ Id.; see also, CAL. CODE CIV. PROC. 1284 (2007); FLA. STAT.
682.10 (2007); TEX. CIV. PRAC. & REM. 171.054 (2007); VA. CODE ANN.
8.01-581.08 (2007).
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2. Statutory Basis
FINRA 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 FINRA 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 proposed rule change would reduce the costs
associated with responding to submissions in closed cases and support
the finality of arbitration awards issued in the forum.
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\5\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA 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 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:
[[Page 15817]]
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-FINRA-2008-005 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-FINRA-2008-005. 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 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 Room, 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 filing also will be available for
inspection and copying at the principal office of FINRA.
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-FINRA-2008-005
and should be submitted on or before April 15, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12) .
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5964 Filed 3-24-08; 8:45 am]
BILLING CODE 8011-01-P