[Federal Register: March 19, 2004 (Volume 69, Number 54)]
[Rules and Regulations]
[Page 13165-13182]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19mr04-7]
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Part III
Securities and Exchange Commission
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17 CFR Parts 200, 201, and 240
Adoption of Amendments to the Rules of Practice and Delegations of
Authority of the Commission; Final Rule
[[Page 13166]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200, 201, and 240
[Release No. 34-49412; File No. S7-25-03]
RIN 3235-AI98
Adoption of Amendments to the Rules of Practice and Delegations
of Authority of the Commission
AGENCY: Securities and Exchange Commission.
ACTION: Final rules.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
amending its Rules of Practice and certain of its delegations of
authority to the staff in light of the Sarbanes-Oxley Act of 2002. The
Sarbanes-Oxley Act, among other things, authorizes the Commission to
review disciplinary actions of the Public Company Accounting Oversight
Board and to create ``Fair Funds'' in Commission administrative
proceedings. The Commission also is amending other provisions of the
Rules of Practice and its delegations as a result of its experience
with those rules and to correct certain citations. The amendments will
enhance the transparency and facilitate parties' understanding of the
applicability of the review process to Board proceedings. The
amendments also will make practice under the rules easier and more
efficient.
EFFECTIVE DATE: April 19, 2004.
FOR FURTHER INFORMATION CONTACT: Bari S. Podell, Office of the General
Counsel, (202) 942-0950, Securities and Exchange Commission, 450 5th
Street, NW., Washington, DC 20549-0208.
SUPPLEMENTARY INFORMATION: On November 25, 2003, the Commission
proposed amendments to the Rules of Practice (``Rules'').\1\ The
Commission proposed new rules to effectuate the provisions of the
Sarbanes-Oxley Act of 2002.\2\ The Commission also proposed additional
amendments to its existing Rules as a result of experience with those
rules. Additional amendments were proposed to correct typographical
errors and change certain citations to conform to the amended rules.
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\1\ Proposed Amendments to the Rules of Practice and Related
Provisions, Exchange Act Release No. 48832, 68 FR 68185 (Dec. 5,
2003). It is noted that the release incorrectly was dated November
23, 2003. The correct date of the release is November 25, 2003.
\2\ 15 U.S.C. 7201 et seq.
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I. Discussion
The Commission requested comment from interested persons. The
Commission received two comment letters in response to the Proposing
Release.\3\ One comment letter expressed concern that the Commission
preserve funds for future disgorgement funds. The other comment letter
recommended certain bookkeeping measures. The Commission will consider
the two commenters' observations and suggestions in connection with
these issues. There were no comment letters addressing the text or
operation of the proposed Rules. After careful consideration, the
Commission is adopting the amendments to the Rules of Practice and
related provisions, as well as certain delegations of authority to the
staff, essentially as proposed.
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\3\ Letters from Donna L. Greer, Vice-President of Business
Development, Greer Information Services, Ltd. (December 31, 2003),
and from Joseph E. Dryer, Houston, Texas (December 4, 2003).
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A. Amendments as a Result of the Sarbanes-Oxley Act
Section 107(c) of the Sarbanes-Oxley Act \4\ provides for
Commission review of disciplinary actions imposed by the Public Company
Accounting Oversight Board (``Board'') and actions that result in the
disapproval of registration of a public accounting firm.\5\ Sections
105(d) and 107(c) of the Sarbanes-Oxley Act require the Board to give
the Commission notice if the Board disapproves the registration of a
public accounting firm or if the Board disciplines a registered public
accounting firm or a person associated with a registered public
accounting firm.
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\4\ 15 U.S.C. 7217(c).
\5\ Under section 102(c) of the Sarbanes-Oxley Act, 15 U.S.C.
7212(c), the Board's written notice of disapproval of a complete
application for registration as a registered public accounting firm
is treated as a ``disciplinary sanction'' for purposes of sections
105(d) and 107(c) of that Act, 15 U.S.C. 7215(d), 7217(c).
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In creating its framework for Commission review of Board actions,
section 107(c) of the Sarbanes-Oxley Act specifies that sections
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934,\6\ which
govern Commission review of self-regulatory organization disciplinary
proceedings, shall govern Commission review of final disciplinary
sanctions imposed by the Board ``as fully as if the Board were a self-
regulatory organization and the Commission were the appropriate
regulatory agency for such organization for purposes of those sections
19(d)(2) and 19(e)(1). * * *'' As described in the proposing release,
the effect of section 107(c) of the Sarbanes-Oxley Act is to make Board
actions subject to Commission review under those Exchange Act
provisions on the same basis as actions by existing self-regulatory
organizations, and to make relevant rules under those provisions
applicable to that review.
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\6\ 15 U.S.C. 78s(d)(2) and 78s(e)(1).
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The Commission nonetheless proposed to enact new rules and to amend
others for purposes of clarity. The Commission has now determined to
adopt the new proposed rules and those changes as proposed. The changes
include specific references to Commission review of Board actions and,
for example, identify the process by which the Board will provide
notice to the Commission of its actions.
1. Disapproval of Registration
Rule 19d-4(a) adds definitions. As proposed and adopted, rule 19d-
4(b) will require the Board to file with the Commission and to serve on
the public accounting firm a notice of disapproval of registration
within 30 days of the Board's action.\7\ The notice must include the
firm's name and last known address (as reflected in the Board's
records), the basis for the Board's disapproval, a copy of the Board's
written notice of disapproval, and such other information as the Board
deems relevant.
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\7\ The 30-day period for filing is consistent with the thirty
days provided in section 19(d)(2) of the Exchange Act for the filing
of an application for review by a person aggrieved by certain
actions taken by a self-regulatory organization.
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2. Review of Disciplinary Sanctions
The Commission has determined to adopt proposed Rule 19d-4(c). That
rule requires the Board to file and serve a notice of any disciplinary
sanction, other than a disapproval of registration, within 30 days of
the Board's action. The notice must provide the name and last address
(as reflected in the Board's records) of the associated person or
registered public accounting firm disciplined and a description of the
acts or omissions on which the sanction is based. The notice must also
specify the sanction imposed, give the effective date of the sanction,
and include a statement of the reasons for the sanction or a copy of
the Board's statement justifying the sanction, as well as such other
information as the Board deems relevant.
The Commission is also adopting proposed Rule 440(a) with respect
to applications for review from actions of the Board. Rule 440(a)
permits any person aggrieved by a final disciplinary sanction
(including disapproval of a completed application for registration of a
public accounting firm) imposed by the Board to file an application for
review with the Commission. Rule
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440(b) requires any application to be filed within 30 days after the
Board's notice under Rule 19d-4 is received by the aggrieved person.
The application must identify the determination complained of and
contain a brief statement of the alleged errors in the determination.
If the applicant is represented by counsel, the application must be
accompanied by a notice of counsel's appearance, filed in accordance
with new Rule 102(d). Under Rule 440(d), the Board has fourteen days
after receipt of the application to certify the record to the
Commission and serve one copy of the record index on each party.
3. Stay of Board Action
In accordance with section 105(e)(1) of the Sarbanes-Oxley Act,\8\
proposed Rule 440(c) provided that filing an application for review
would act as a stay of the Board's action unless the Commission
otherwise orders. Proposed Rule 401(e)(1) would permit any person
aggrieved by the automatic stay to ask the Commission to lift the stay.
The Commission may, in any event, lift the stay on its own motion.
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\8\ 15 U.S.C. 7215(e)(1).
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As permitted under section 105(e)(1) of the Sarbanes-Oxley Act,
proposed Rule 401(e)(2) provided that the Commission may act to lift a
stay of Board action summarily, without notice and opportunity for a
hearing. The Commission could also expedite consideration of a motion
to lift a stay of Board action to the extent expedition is consistent
with the Commission's other responsibilities. If the consideration of a
motion to lift is expedited, proposed Rule 401(e)(3) permitted persons
opposing the lifting of the stay to file an opposition within two days
of service of the motion to lift unless the Commission orders a
different period.\9\ The Commission is adopting all these provisions.
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\9\ The two-day period is modeled after Rule 401(d)(3), which
permits persons opposing a motion to the Commission for a stay to
file a statement in opposition within two days of service of the
motion.
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4. Review on Motion of the Commission
The Commission is also adopting proposed Rule 441(a), which permits
the Commission to review a Board disciplinary sanction on its own
motion. The Commission must determine whether to take review of a Board
disciplinary sanction within 40 days after the Board files its notice
of the action.\10\ Rule 441(b) permits the Commission to raise any
material matter, whether or not the parties previously raised that
matter. The Commission can raise material matters in cases it takes up
on its own motion and in cases that are appealed to it. The Commission
may provide notice and an opportunity for supplemental briefing if the
Commission believes that such briefing would significantly aid its
decisional process.
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\10\ Rule 421(a) permits the Commission to order review of
certain determinations by a self-regulatory organization within 40
days after notice thereof is filed with the Commission.
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5. Amendments to Existing Rules
The Commission also adopts as proposed certain amendments to the
following Rules with respect to the review proceedings created by the
Sarbanes-Oxley Act:
The definition of ``proceeding'' in Rule
101(a)(9) (Definitions) is amended to include review of Board
disciplinary sanctions under Rule 440.\11\
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\11\ Rule 101(a)(12) defines the term ``Board'' to mean the
Public Company Accounting Oversight Board.
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Rule 202(a) (Specification of procedures by
parties in certain proceedings) and Rule 210 (Parties, limited
participants and amici curiae), which permit intervention and leave to
participate on a limited basis, are amended to exclude review of Board
disciplinary sanctions under Rule 440. These Rules currently do not
apply to Commission enforcement or disciplinary proceedings or to
review of determinations by self-regulatory organizations.
Rule 450(a)(2) (Briefs filed with the
Commission) is amended to include a provision for briefs to be filed in
the Commission's review of final disciplinary sanctions imposed by the
Board. Under the Rule, the Commission would issue a briefing schedule
order within 21 days (or such longer time as provided by the
Commission) following its receipt of the Board's index of the record of
the Board's determination.
Rule 460(a)(3) (Record before the Commission)
defines the contents of the record before the Commission to include the
record certified to the Commission by the Board, any application for
review, and any submissions made to the Commission.
The Commission is revising its ex parte rule, 17 CFR 200.111
(Prohibitions; application, definitions), to provide that, in
proceedings to review Board action, the prohibitions against ex parte
communications commence when a copy of the application for review of
the Board's action has been filed with the Commission and served on the
Board.\12\
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\12\ At the same time, the Commission is correcting 17 CFR
200.111(c)(1)(ii) to provide that, in proceedings under section
19(d) of the Securities Exchange Act of 1934, the prohibitions
against ex parte communications commence when a copy of the
application for review of the self-regulatory organization's action
is filed with the Commission. The rule currently provides that the
prohibition commences when the Secretary serves the application on
the self-regulatory organization. This no longer is the Commission's
practice. The change conforms the language of the provision to
reflect current practice.
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6. Delegations of Authority
To implement these rule amendments, the Commission adds certain
delegations to the staff. Title 17 CFR 200.30-7 (Delegation of
authority to the Secretary of the Commission) currently delegates to
the Commission's Secretary the authority, among other things, to
postpone or adjourn hearings, set and reallocate time for oral
argument, extend the time to make filings, issue orders pursuant to
offers of settlement, and certify records to the appropriate United
States Court of Appeals. The Commission is amending this delegation to
make clear that the delegations extend, where appropriate, to
proceedings under the Sarbanes-Oxley Act.
The Commission also is amending 17 CFR 200.30-7(a)(5) and 200.30-
10(a)(5), which currently permit the Secretary or the Chief
Administrative Law Judge, respectively, to authorize a party to file
briefs exceeding 60 pages ``in accordance with Rule 450(c).'' However,
existing Rule 450(c) provides that briefs cannot exceed 50 pages,
absent leave of the Commission.\13\ The Commission therefore is
correcting these delegations to provide that the Secretary or the Chief
Administrative Law Judge may authorize a party to file briefs exceeding
50 pages. The Commission also is making clear that its delegation of
authority to the Secretary and its delegation of authority to the Chief
Administrative Law Judge include proceedings under the Securities
Investor Protection Act of 1970 and under Rule 102(e).
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\13\ 17 CFR 201.450(c).
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The Commission further amends 17 CFR 200.30-14(g)(1) to delegate to
the General Counsel the authority, among other things, to grant
requests for the submission of late briefs, issue an order dismissing a
proceeding as to a party if the party requests to withdraw its appeal,
permit a party to supplement the record, and issue briefing schedule
orders in proceedings under the Sarbanes-Oxley Act. The General Counsel
also is delegated the authority, in proceedings under the Sarbanes-
Oxley Act, to determine that an application for review has been
abandoned, to determine whether to stay a Commission order or vacate a
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preexisting stay pending appeal of the order to the Federal courts, to
grant or deny requests for oral argument, and to determine whether to
lift the automatic stay of a disciplinary sanction. The General Counsel
is further delegated the authority to request additional briefs from
the parties. See 17 CFR 200.30-14(g)(1)(vii), (g)(4), (g)(5), (g)(7),
and (g)(8).
B. Fair Funds and Disgorgement
Section 308(a) of the Sarbanes-Oxley Act \14\ provides that, in a
Commission administrative proceeding where the Commission or a hearing
officer enters an order requiring disgorgement from a respondent for a
violation of the securities laws, or where the respondent agrees in
settlement to payment of such disgorgement, any civil penalty also
ordered against that respondent may be added to the disgorgement funds
to create a ``Fair Fund'' to be disbursed by the Commission for the
benefit of the victims of such violation. Section 308(b) of the
Sarbanes-Oxley Act \15\ authorizes the Commission to accept gifts or
bequests to the United States of real and personal property for deposit
in a Fair Fund.
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\14\ 15 U.S.C. 7246(a).
\15\ 15 U.S.C. 7246(b).
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Administration of, and distribution to investors under, Fair Funds
and disgorgement plans occur after the conclusion of the principal
action against a respondent. The functions involved are administrative
in nature and not subject to provisions such as Rule 120 of the Rules
of Practice and the ex parte communication rule. Recognizing this, the
Commission has determined to adopt its proposal to remove, from subpart
D of the Rules of Practice, Rules 610 through 620, which relate to the
development, submission, approval, and administration of orders of
disgorgement, and to the right to challenge orders of disgorgement, and
to include them in a new subpart F.
The Commission is adopting Rules 1100, 1101, and 1102 as proposed.
New Rule 1100 authorizes the Commission to create a Fair Fund in any
administrative proceeding in which a final order is entered against a
respondent requiring disgorgement and payment of a civil money penalty.
The Commission may also create a Fair Fund if it approves a settlement
of an administrative proceeding that provides for a respondent's
payment of disgorgement and a civil money penalty. The Commission may
add to the Fair Fund any property received in accordance with section
308(b) of the Sarbanes-Oxley Act.\16\
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\16\ Section 308(b) of the Sarbanes-Oxley Act provides that the
Commission may accept, hold, and utilize gifts of property for a
Fair Fund.
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The Commission has the power to require disgorgement of a wrong-
doer's ill-gotten gains obtained by virtue of his or her securities law
violation, regardless of whether particular investors suffered any
damages.\17\ The Commission notes that Fair Funds must be disbursed to
the investors harmed by the securities law violation at issue. Where
there are no identifiable victims of a violation, the Commission will
continue to require that any disgorgement and civil money penalty
amounts be paid to the United States Treasury.
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\17\ See, e.g., SEC v. First City Financial Corp., 890 F.2d
1215, 1230 (D.C. Cir. 1989) (defendant who violated Exchange Act
section 13 required to disgorge although harm was to the market as a
whole, not to particular persons).
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In some cases, the Commission may conclude that it is in the public
interest to impose a civil money penalty and order disgorgement even
though the relative value of the ill-gotten gains and the number of
potential claimants would result in high administrative costs and de
minimis distributions to individual investors. Under such
circumstances, the Commission will not create a Fair Fund and will
continue its practice of ordering that the disgorgement and civil
penalty amount be paid directly to the United States Treasury.
The Rules permit the Commission or the hearing officer, as
appropriate, to oversee the administration of both disgorgement funds
and Fair Funds. As adopted, Rule 1101(a) allows the Commission or the
hearing officer at any time to order any party to submit a plan for the
administration of either a Fair Fund or a disgorgement fund. Unless
ordered otherwise, the Division of Enforcement must submit such a plan
within 60 days after the respondent has tendered the funds or other
assets pursuant to the Commission's order to pay disgorgement and, if
applicable, a civil money penalty.
Rule 1101(b) requires that a Fair Fund plan or disgorgement fund
plan shall provide for: Receiving and holding additional funds,
including any funds received under section 308(b) of the Sarbanes-Oxley
Act; identifying categories of persons potentially eligible to receive
funds; providing notice to those persons of the fund's existence and
their potential eligibility; processing claims; termination of the fund
and disposition of any remaining assets not otherwise distributed;
administration of the fund; and such other provisions as the Commission
or the hearing officer deems appropriate.
Rule 1102(a) provides that the Commission may authorize payment of
disgorgement funds into any court registry or to a court-appointed
receiver in any case that alleges the same or similar facts against the
respondent.
Rule 1102(b) permits the Commission or the hearing officer to order
that funds be paid directly to the United States Treasury if the cost
of administering the fund relative to the value of the disgorgement
fund, together with any civil money penalty, and the number of
potential claimants do not justify distribution of the funds.
As adopted, Rule 1103 requires that notice of a proposed
disgorgement plan or a proposed Fair Fund plan be published in the SEC
Docket or such other publications as the Commission or the hearing
officer directs. The notice must specify how to obtain copies of the
proposed plan and inform those desiring to comment to submit their
written views to the Commission. The Commission also would post notice
of a proposed plan on its Web site. The reference in the proposed rule
to publication in the SEC News Digest has been deleted since the News
Digest now is available through the Commission's Web site.
The Commission is also adopting Rules 1104, 1105, and 1106 as
proposed. Rule 1104 provides that, at any time after 30 days following
publication of the notice of a proposed disgorgement plan or a proposed
Fair Fund plan, the Commission or the hearing officer may approve,
modify, or disapprove the proposed plan. If a plan is substantially
modified, the Commission or the hearing officer may order publication
of the modified plan before its adoption.
Rule 1105 provides for the administration of Fair Funds and
disgorgement funds. It permits the Commission or the hearing officer to
appoint any person, including a Commission employee, as a fund
administrator. Either the Commission or the hearing officer would be
able to remove an administrator.
An administrator who is not a Commission employee must post a bond
in an amount designated by the Commission, unless the bond is waived by
the Commission. An administrator who is not a Commission employee may
receive a fee for reasonable services, subject to approval by the
Commission or the hearing officer. Commission employees may not receive
such fees. Fees and expenses from fund administration would be paid
first from interest and then, if the interest were
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insufficient, from corpus. The administrator must give periodic
accountings, as ordered, and submit a final accounting prior to his or
her discharge and cancellation of any bond. On motion of a party or the
administrator or upon notice of the hearing officer or the Commission,
the plan may be amended.
Rule 1105(b) provides that a respondent may be required or
permitted to administer a plan of disgorgement, subject to terms the
Commission or the hearing officer deems appropriate. At this time, the
Commission does not propose to extend this provision to Fair Funds. A
Fair Fund would include a civil penalty and might include funds
conveyed to the United States pursuant to section 308(b) of the
Sarbanes-Oxley Act.
Rule 1106 states that no person will be granted the right to
intervene or appear in a proceeding to challenge an order of
disgorgement, an order creating a Fair Fund, an order approving,
modifying, or disapproving a disgorgement plan or a Fair Fund plan, or
any determination relating to a plan based solely on the person's
eligibility or potential eligibility to participate in a fund or based
on a private right of action. As was the case under the Commission's
disgorgement rules before these amendments, such person's participation
is limited to submitting comments in accordance with Rule 1103.
C. Other Proposed Amendments
In 1995, the Commission substantially amended its Rules of
Practice. After several years of experience with these Rules, the
Commission has determined to make certain changes to the Rules to make
practice under them easier and more efficient.
1. The existing Rules do not make explicit the Commission's
authority to order a variation from the rules governing proceedings
before it. The Commission is adopting proposed Rule 100(c), which
specifies that the Commission may, by order, direct in a particular
proceeding that an alternative procedure shall apply or that compliance
with an otherwise applicable rule is unnecessary. Such an order would
be based on the Commission's determination that to do so would serve
the interests of justice and not result in prejudice to any party to
the proceeding.
2. Section 11A of the Exchange Act and the rules thereunder
authorize the Commission to adjudicate certain disputes involving
registered securities information processors, national market system
plans, or transaction reporting plans.\18\ In addition to the inclusion
of review of Board disciplinary sanctions discussed above, as proposed,
Rule 101(a)(9) is amended to expand the definition of ``proceeding'' to
make clear that the Rules of Practice are applicable to such
adjudications.\19\
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\18\ See Exchange Act section 11A(b)(5) (requiring Commission to
review prohibitions or limitations of access to services offered by
registered securities information processors); Exchange Act Rule
11Aa3-2(e) (giving Commission discretion to entertain appeals from
actions under national market system plans); Exchange Act Rule
11Aa3-1(f) (giving Commission discretion to entertain appeals in
connection with implementation or operation of transaction reporting
plans).
\19\ Because the current Rules of Practice do not specify a
particular procedure for proceedings under Exchange Act section 11A,
the Commission has been required to specify by order the procedural
rules that are to be employed in section 11A review proceedings.
See, e.g., The Cincinnati Stock Exchange, Exchange Act Release No.
43316 (Sept. 21, 2000), 73 SEC Docket 1006 (Order Accepting
Jurisdiction, Establishing Procedures, and Ordering Briefs).
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3. The Commission previously required counsel to file a motion to
withdraw as counsel. The Commission is adopting proposed Rule
102(d)(4), which will now require only that a person who seeks to
withdraw his or her appearance in a representative capacity file a
notice of withdrawal with the Commission or the hearing officer. The
notice should state the withdrawing representative's name, address, and
telephone number; the name, address, and telephone number of the person
for whom the appearance was made; and the withdrawal's effective date.
If the person who seeks to withdraw knows the new representative's
name, address, and telephone number, or knows that the person for whom
the appearance was made intends to represent him- or herself, that
information would also be required to be included in the notice. The
notice must be served on the parties in accordance with Rule 150. In
addition, the notice must be filed at least five days before the
proposed effective date of the withdrawal.
4. The Commission has found that some appeals could be streamlined
if certain issues were addressed first to the hearing officer. The
Commission is therefore adopting the proposed amendment to Rule 111.
The amendment authorizes hearing officers to consider and rule on a
motion to correct a manifest error of fact, provided that the motion is
filed within ten days of the initial decision.
5. Former Rule 141(a)(3) required the Secretary to ``maintain a
record of service on parties.'' The rule is amended to authorize the
Secretary to maintain records of service in computerized records,
rather than hard copy records.
6. Former Rule 141(a)(3) required the Secretary to place in the
record of the proceeding confirmations of delivery of service. The
Commission has concluded that it is easier to maintain confirmations of
service by certified mail in a single file. The Commission believes
this form of recordkeeping will permit easier retrieval of these
documents. The Commission amends Rule 141(a)(3) accordingly.
7. Former Rule 141(b) provided that service of written orders or
decisions by the Commission or by a hearing officer, other than an
order instituting proceedings, must be made by any method of service
authorized under Rule 141(a) or Rule 150(c)(1)-(3). As discussed below,
the Commission now is amending Rule 150 to abolish the requirement that
the parties agree in writing to accept service by facsimile
transmission.
However, the Commission has determined that it is important to be
able to demonstrate that a party has agreed to accept service of an
order or decision by facsimile transmission. Therefore, as amended,
Rule 141(b) provides that orders and decisions may be served by
facsimile only if the party to be served has agreed to accept such
service in a writing, signed by the party, and has provided the
Commission with facsimile machine telephone number and hours of
facsimile machine operation. Rule 141(b) replaces the reference to Rule
150(c) with a reference to Rules 150(c)(1)-(3).
8. As noted above, the Commission is adopting its proposed
amendment to Rule 150(c)(4), governing parties' service of documents by
facsimile transmission, to eliminate the requirement that parties who
seek to serve each other by facsimile agree to do so in writing. As
proposed, the Commission also is amending Rule 150(c)(4) to eliminate
the requirement that receipt of each document served by facsimile be
confirmed by a manually signed receipt. The Commission's experience has
shown that, in many instances, parties were serving each other by
facsimile but were not entering into the agreements or confirming by
manually signed receipt. Under Rule 150(c)(4), persons who choose
service by facsimile must provide the Commission and the parties with
notice of the facsimile machine telephone number to be used and the
hours of facsimile machine operation. As amended, Rule 150(c)(4)(ii)
requires that facsimile transmissions be made at a time that results in
their receipt during
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the Commission's business hours as defined in Rule 104.\20\
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\20\ 17 CFR 201.104.
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The Commission is also adopting proposed Rule 150(c)(4)(iii). That
rule permits a party to decline to receive service by facsimile. Such a
declination must be made in writing and served in accordance with Rule
150.
The Commission has determined to retain Rule 150(d)'s requirement
that service by facsimile is complete upon confirmation of transmission
by delivery of a manually signed receipt. The Commission asked for
comment as to whether parties making service by facsimile should
continue to provide a non-facsimile original contemporaneously with
service by facsimile unless the parties agreed otherwise. The
Commission received no comment, and has determined to eliminate this
requirement.
9. Former Rule 151 provided that all papers required to be served
by a party should be filed with the Commission ``at the time of service
or promptly thereafter.'' Some parties have delayed making filings with
the Commission. The rule is amended to make clear that filings with the
Commission must be done ``contemporaneously'' with service on the
parties. The Commission is also adopting its proposal to permit filings
with the Commission to be made by facsimile transmission if the party
also contemporaneously transmits to the Commission a non-facsimile
original with a manual signature. Any person filing with the Commission
by facsimile transmission assumes the risk that the transmission will
not be completed in a timely or legible fashion.
10. The Commission is adopting its proposed amendment to Rule
152(a)(2) to require the use of 12-point or larger type (and eliminate
the use of 10-point type) in order to enhance the legibility of
filings.
11. Rule 154 previously limited a brief in support of or in
opposition to a motion to 10 pages, exclusive of pages containing any
table of contents, table of authorities, and/or addendum. As a result,
the Commission received filings by parties who attempted to circumvent
this page limitation by filing 10-page briefs and extremely lengthy
motions. The Commission is adopting the proposed amendment to Rule 154
to establish a combined page limit of 15 pages for the motion and
brief. This limitation is exclusive of any table of contents, table of
authorities, or any addendum that consists solely of applicable cases,
pertinent legislative provisions, or relevant exhibits. The proposal
has been clarified to provide that the excluded addendum may include
pertinent rule provisions.
12. Current Rule 151 provides that persons must file papers with
the Commission within any time specified for filing.\21\ Rule 160
provided generally that a prescribed period for response may be
extended three days for service by mail. The Commission is adopting its
proposed amendment to Rule 160 to make clear that a person does not
receive additional time for service by mail if the order of the
Commission or the hearing officer specifies a date certain for filing.
If a party requires a short extension, the Commission believes that the
party could request that extension under Rule 161.
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\21\ 17 CFR 201.151.
---------------------------------------------------------------------------
13. Current Rule 201 provides for the consolidation of
proceedings.\22\ In accordance with the proposal, new Rule 201(b)
permits the Commission to order any proceeding severed with respect to
some or all of the parties. Motions to sever must be addressed to the
Commission and represent that a settlement offer has been submitted to
the Secretary for Commission consideration or otherwise show good
cause.
---------------------------------------------------------------------------
\22\ 17 CFR 201.201.
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14. Former Rule 230(a)(1)(vi) required production of final
examination and inspection reports. The Commission is adopting its
proposed amendment to Rule 230(a)(1)(vi). The amendment states that any
final examination or inspection reports prepared by the Office of
Compliance Inspections and Examinations, the Division of Market
Regulation, or the Division of Investment Management must be produced
only if the Division of Enforcement intends either to introduce them
into evidence or to use them to refresh a witness's recollection.
The Commission provides examined parties with notice of examination
findings in the examination process. As a result, the amendment limits
the production of examination and inspection reports to circumstances
where the Division of Enforcement intends to introduce the report into
evidence, either in reliance on the report to prove its case, or to
refresh the recollection of any witness. The amendment does not alter
the requirement that the Division produce documents containing material
exculpatory evidence as required by Brady v. Maryland.\23\
---------------------------------------------------------------------------
\23\ 373 U.S. 83, 87 (1963).
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Current Rule 230(c) permits the hearing officer to require the
Division of Enforcement to submit for review a list of withheld
documents.\24\ The Commission is adopting its proposed amendment to
provide that, when documents are withheld, those documents may be
identified by category instead of individual document. Under the
amendment, the hearing officer retains discretion to determine when an
identification by category is insufficient.\25\
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\24\ 17 CFR 201.230(c).
\25\ The amendment of Rule 230 also corrects typographical
errors in the cross-reference to paragraphs pursuant to which
documents may be withheld.
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15. Rule 231(a), relating to the production of witness statements,
refers to ``any statement * * * that would be required to be produced
by the Jencks Act, 18 U.S.C. 3500.'' The Commission is adopting, as
proposed, an amendment that provides that the Commission will rely on
the definition of ``statement'' contained in the Jencks Act \26\ in
applying this Rule.
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\26\ 18 U.S.C. 3500(e).
---------------------------------------------------------------------------
16. Rule 232(e)(1) formerly allowed only the person to whom a
subpoena is directed or a person who is an owner, creator, or the
subject of the documents to be produced pursuant to a subpoena, to
oppose the subpoena. Subpoenas directed at third party witnesses can be
overly broad. Some recipients of such subpoenas may lack the
sophistication or resources to dispute the scope of the subpoenas. The
Commission therefore has determined to adopt its proposed amendment to
allow any party to the proceeding to present arguments about whether a
subpoena directed to any witness is unreasonable, oppressive, or unduly
burdensome.
17. Current Rule 233 sets forth the basis for ordering a
deposition.\27\ The Commission is enacting its proposed amendment to
allow the taking of a deposition of a witness who currently is within
the United States, but who is expected to be outside the United States
during the time of the hearing, provided that the deposition will serve
the interests of justice, and that it appears that the party requesting
the deposition did not procure the witness's absence.
---------------------------------------------------------------------------
\27\ 17 CFR 201.233.
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18. Rule 350(b) requires the Secretary to retain documents offered
into evidence, but excluded from the record, so that in the event of an
objection, the Commission may consider any arguments that the documents
should be admitted. The Commission is amending Rule 350(b) to eliminate
the requirement that the Secretary also retain documents that are
marked for identification but not offered into evidence.
19. Rule 351(a) is amended to delete a reference to a practice
abandoned
[[Page 13171]]
several years ago in which the interested division took custody of the
exhibits after a hearing and was responsible for having them sent to
the Secretary. Currently, the court reporter takes custody of exhibits.
20. Rule 360(a)(2) directs the hearing officer to issue an initial
decision within the time period specified in the order instituting
proceedings. To address the hearing officer's inability to comply with
this directive when a proceeding is stayed by order of the hearing
officer or the Commission under Rule 210(c)(3),\28\ the Commission is,
as proposed, amending Rule 360(a)(2) to state that, in the event of a
stay of the proceeding under the authority of Rule 210(c)(3), the
specified time period for issuance of the initial decision, as well as
any other time limits established in orders issued by the hearing
officer under Rule 360(a)(2), will be automatically tolled during the
period in which the stay is in effect.
---------------------------------------------------------------------------
\28\ 17 CFR 201.210(c)(3). This rule will apply to all cases
instituted on or after July 17, 2003, the effective date of the
Commission's recent amendments to its Rules of Practice. Securities
Act Rel. No. 8240, 68 FR 35787 (June 17, 2003).
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21. Rule 360(b)(1) formerly provided that the Commission will enter
an order of finality as to each party unless a party or aggrieved
person timely files a petition for review of the initial decision or
the Commission decides on its own initiative to review the initial
decision. The rule is amended to provide further that the Commission
will not enter an order of finality if a motion to correct a manifest
error of fact in the initial decision is filed with the hearing
officer.
22. Rule 360(d)(1) is amended to provide that an initial decision
becomes final upon the Commission's issuance of a finality order. The
prior rule provided that an initial decision became final on the lapse
of time but also required the issuance of a finality order. The
amendment makes clear when a decision becomes final. As adopted, Rule
360(d)(1) provides that notice of the order will appear in the SEC
Docket and on the website.
Former Rule 360(d)(2) provided that the initial decision would not
become final as to a party or person if a timely petition for review
were filed by that party or person. New Rule 360(d)(1) provides that
timely filing, by a party or an aggrieved person entitled to review, of
a motion to correct an initial decision to the hearing officer, as well
as a timely petition for review, will mean that the initial decision
will not become the final decision of the Commission as to that party
or person. The amendment also makes conforming changes to Rule 360(b)
specifying that an initial decision shall include a statement
reflecting the provisions of Rule 360(d).
Rule 410(b) is amended to provide that the time to file a petition
for review is stayed until 21 days after resolution of any motion to
correct an initial decision filed before the hearing officer. While a
motion to correct is pending, a party need not file a petition for
review to preserve its appeal rights.
23. The Commission adopts proposed Rule 400 to make clear that
petitions for interlocutory review are ``disfavored'' and rarely will
be granted. The amendment recognizes, however, that the Commission
retains discretion to undertake such review on its own motion at any
time.
24. As proposed, Rule 400 also is amended to state that it is the
sole route for interlocutory review of determinations by a hearing
officer, and the sole mechanism for appeal of actions delegated
pursuant to 17 CFR 200.30-9 and 200.30-10.\29\
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\29\ Rule 430 is amended to delete reference to 17 CFR 200.30-9
and 200.30-10.
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25. The Commission is adopting its proposed Rule 401(d)(1) to
clarify that an applicant can seek a stay of an action by a self-
regulatory organization only at the time an application for review is
filed or thereafter. Filing an application for review brings the action
before the Commission. Since Rule 420(c) is being amended to reduce the
length of an application for review, the requirement that an
application be filed either when or before a stay is sought will not
impose a significant burden.
26. Rule 410(b), as proposed, is amended to permit an opposing
party to file a cross-petition for review within ten days from the
filing of a petition for review. This amendment will make it
unnecessary for parties to file protective defensive petitions for
review.
Rule 410(d) is deleted, as proposed, thus abolishing the opposition
to the petition for review. The Commission believes that a motion for
summary affirmance will permit the Commission to dispose of matters
suited to more abbreviated review.
27. The Commission is adopting its proposed amendments to Rule
411(e), governing summary affirmance. Rule 411(e) is amended to provide
a 21-day time limit after the filing of a petition for review for
filing a motion for summary affirmance. The amendment also sets forth
standards for granting and denying summary affirmance. Summary
affirmance will be granted if the Commission finds that no issue raised
in the initial decision warrants consideration by the Commission of
further oral or written argument. Summary affirmance will be denied
upon a reasonable showing that a prejudicial error was committed in the
conduct of the proceeding or that the decision embodies an exercise of
discretion or decision of law or policy that is important and that the
Commission should review.
28. Section 19(d) of the Exchange Act requires a person who appeals
from self-regulatory organization disciplinary action to do so within
30 days after the notice of determination is filed with the Commission
and received by the aggrieved person ``or within such longer period
as'' the Commission ``may determine.'' The Commission is adopting its
proposed change to Rule 420(b) to make clear that an appeal from self-
regulatory organization action must be filed within 30 days, absent a
showing of extraordinary circumstances. This standard is consistent
with prior Commission precedent.\30\
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\30\ See, e.g., Lance E. Van Alstyne, 53 S.E.C. 1093, 1099
(1998) (Commission will not authorize late filing of appeals of
self-regulatory organization proceedings absent extraordinary
circumstances).
---------------------------------------------------------------------------
As proposed, Rule 420(c) is amended to provide that an application
for review of a self-regulatory organization action is limited to two
pages. Former Rule 420 contained language suggesting that the
applicant's address could be used to serve only the record index. Rule
420(c) is amended to provide that the applicant identify where he or
she may be served for all purposes.
29. Former Rule 450(c) sets limits on the number of pages in
briefs. In accordance with Federal Rule of Appellate Procedure 32, the
Commission is adopting its proposed word limits--14,000 for principal
briefs and 7,000 for any reply brief. The amendment also states that
motions to file oversized briefs are disfavored. In exceptional cases,
however, where more pages may be needed to address the issues--for
example, where the Division of Enforcement must address arguments by
multiple respondents--the Commission may, upon motion, allow longer
filings.
The proposal provided that, if a principal brief exceeded 30 pages
in length, or a reply brief exceeded 15 pages in length, the attorney
filing the brief (or an unrepresented party) was required to certify
that the brief complied with the length limitation and to state the
number of words in the brief. As adopted, this requirement has been
extended to any representative of a party. The amendment permits the
person certifying the length of the brief to rely on the word count of
the word
[[Page 13172]]
processing system used to prepare the brief.
The Commission has received briefs that sought to incorporate by
reference briefs filed before the hearing officer in the proceeding on
appeal. Incorporation of other pleadings by reference erodes the page-
limit requirements of Rule 450(c). The Commission is adopting the
proposed amendment that provides that pleadings incorporated by
reference will be included in determining the word count of briefs. The
amendment is intended to promote adherence to the length limitations of
Rule 450(c) and to encourage parties to exercise judgment in selecting
the arguments that best advance their positions rather than simply
repeating previously formulated contentions.
30. Current Rule 451, governing oral argument, did not contemplate
visual aids. As it proposed, the Commission is amending Rule 451(b) to
prohibit the use of visual aids unless copies are provided to the
Commission and parties at least five business days before the argument
is to be held.\31\
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\31\ A further amendment conforms the language of Rule 451(b) to
reflect Commission practice not to issue the order setting oral
argument in a Commission administrative proceeding until the date
for argument is set.
---------------------------------------------------------------------------
31. Former Rule 470 specified a 15-page limit for a motion for
reconsideration. There does not seem to be any reason for treating
motions for reconsideration differently from other motions. As it
proposed, the Commission is amending Rule 470 to limit the party
seeking reconsideration to the same number of pages and the same format
used for other motions under the Rules of Practice.
32. Current Rule 601 codifies existing practice for payment of
disgorgement, interest, and penalties. As the Commission proposed, the
amendment of Rule 601 standardizes the language currently used by
hearing officers in initial decisions and the Commission in its orders,
as follows:
(c) Method of making payment. Payment shall be made by United
States postal money order, wire transfer, certified check, bank
cashier's check, or bank money order made payable to the Securities
and Exchange Commission. The payment shall be mailed or delivered to
the office designated by this Commission. Payment shall be
accompanied by a letter that identifies the name and number of the
case and the name of the respondent making payment. A copy of the
letter and the instrument of payment shall be sent to counsel for
the Division of Enforcement.
II. Administrative Procedure Act, Regulatory Flexibility Act, and
Paperwork Reduction Act
The Commission finds, in accordance with section 553(b)(3)(A) of
the Administrative Procedure Act,\32\ that this revision relates solely
to agency organization, procedure, or practice. It is therefore not
subject to the provisions of the Administrative Procedure Act requiring
notice, opportunity for public comment, and publication. The Regulatory
Flexibility Act \33\ therefore does not apply. Nonetheless, the
Commission had previously determined that it would be useful to publish
the proposed rule changes for notice and comment before adoption. The
Commission considered all comments received. Because these rules relate
to ``agency organization, procedure or practice that does not
substantially affect the rights or obligations of non-agency parties,''
they are not subject to the Small Business Regulatory Enforcement
Fairness Act.\34\
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\32\ 5 U.S.C. 553(b)(3)(A).
\33\ 5 U.S.C. 601 et seq.
\34\ 5 U.S.C. 804(3)(C).
---------------------------------------------------------------------------
These rules do not contain any collection of information
requirements as defined by the Paperwork Reduction Act of 1995, as
amended.\35\
---------------------------------------------------------------------------
\35\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
III. Costs and Benefits of the Rules and Amendments
The Sarbanes-Oxley Act authorizes the Commission to review
disciplinary actions by the Public Company Accounting Oversight Board
as well as actions resulting in disapproval of registration of public
accounting firms. In response, the Commission has revised certain of
its rules in order to enhance the transparency and facilitate parties'
understanding of the applicability of the review process to Board
proceedings. The Sarbanes-Oxley Act also provides that, where the
Commission or a hearing officer in a Commission administrative
proceeding enters an order requiring disgorgement and a civil money
penalty, the Commission may create a ``Fair Fund'' combining the
disgorgement and the civil money penalty to be disbursed for the
benefit of the victims of the securities law violations at issue in the
proceeding. The Commission has enacted rules for the submission and
administration of Fair Fund plans and disgorgement plans. The
Commission also has amended other provisions of the rules.
Taken as a whole, the Commission's Rules create governmental review
and remedial processes. That is, they are procedural and administrative
in nature. The benefits to the parties are the familiar benefits of due
process: Notice, opportunity to be heard, efficiency, and fairness. The
cost of these processes, on the other hand, falls largely on the
oversight bodies.
For purposes of cost/benefit analysis, given the procedural nature
of these Rules, we believe that the regulatory provisions are best
viewed as a whole. To the extent possible, we discuss specific benefits
and costs that can be more narrowly associated with separate
provisions. However, because there are so many provisions, and because
the costs tend to be primarily governmental, we do not provide separate
sections for our respective cost and benefit analyses. Rather, we
simply identify each provision proposed and discuss any benefits and
costs that may be associated with it beyond the more general points
summarized above.
Rule 19d-4(b) requires the Board to file with the Commission and
serve on the public accounting firm a notice of disapproval of
registration within 30 days of the Board's action. Rule 19d-4(c)
imposes on the Board a similar filing and service requirement for
notices of any disciplinary sanction other than a disapproval of
registration. Timely notice is a fundamental aspect of due process. It
benefits those who receive notice by allowing them to plan and take
action in light of the Board's findings. Timely filing with the
Commission lets the Commission know of the conclusion of Board
proceedings so that it can exert oversight over the quality and
fairness of those proceedings, which benefits parties to the
proceedings as well as the general public. These rules will impose a
small administrative cost on the Board.
Rules 440 and 441 provide for Commission review of Board actions.
Rule 440 allows review upon application of a person aggrieved by a
final Board disciplinary sanction, including disapproval of a completed
application for registration of a public accounting firm. Rule 441
permits Commission review of Board disciplinary sanctions upon the
Commission's own motion. The Rules pertain to the review mechanism
required by the Sarbanes-Oxley Act, informing those upon whom Board
sanctions are imposed of the option of Commission review and
instructing them about procedures involved in initiating the review
process.
Commission review of Board findings benefits parties to Board
proceedings (and, to a lesser extent, the general public) by protecting
against arbitrary, capricious, or otherwise unlawful
[[Page 13173]]
treatment. Review also allows the Commission to exercise a check on,
and protect the public interest in, the quality and consistency of
Board findings and determinations.
Parties involved in review proceedings will incur legal and other
costs. Review upon application by a person aggrieved, under Rule 440,
is optional. Thus, a party would incur these costs only if it expected
a net benefit from the review process. In the case of review upon the
Commission's own motion under Rule 441, however, the parties involved
might otherwise have chosen to avoid incurring the costs.
In accordance with section 105(e)(1) of the Sarbanes-Oxley Act,
Rule 440(c) provides that filing an application for review with the
Commission acts as a stay of the Board's action unless the Commission
orders otherwise. Rule 401(e) allows: (1) Persons aggrieved by such an
automatic stay to ask the Commission to lift the stay; (2) the
Commission to lift such a stay summarily, without notice and
opportunity for a hearing; and (3) persons opposing the lifting of such
a stay to file an opposition.
Rule 440(c) benefits the party upon whom Board sanctions have been
imposed by allowing that party an opportunity to be heard in the review
process before the Board's sanctions take effect. The automatic stay
imposes a cost upon third parties who would benefit if the sanctions
went into place immediately.
Allowing a person aggrieved by the automatic stay to ask to have
the stay lifted benefits the aggrieved person by offering the option of
a possible earlier termination of the stay. Those availing themselves
of this option will incur legal and other costs. Because the procedure
is optional, they will presumably do so only if they conclude that
doing so yields an expected net benefit. Similarly, allowing opposition
to a motion to lift permits those opposing the motion an opportunity to
be heard. Although opposing a motion could involve legal and other
expenses, because opposition is optional, parties would incur those
costs only if they expected a net benefit from opposing.
Allowing the Commission to lift a stay summarily could benefit
persons aggrieved by the stay by providing prompt and inexpensive
relief. At the same time, those who might oppose the lifting of the
stay would be denied notice and an opportunity to be heard in
connection with the lifting of the stay.
Section 308(a) of the Sarbanes Oxley-Act provides that, in a
Commission administrative proceeding where the Commission or a hearing
officer enters an order requiring disgorgement and a civil money
penalty, the Commission may create a ``Fair Fund'' by including the
civil penalty with the disgorgement amount. The Commission is required
to disburse money from a Fair Fund for the benefit of the victims of
the securities law violations at issue in the proceeding.
Rule 1101 authorizes the Commission to create a Fair Fund in any
administrative proceeding in which a final order is entered imposing
disgorgement and a civil money penalty. The Commission also may create
a Fair Fund if it approves a settlement of an administrative proceeding
that provides for payment of disgorgement and a civil money penalty.
Where the relative value of the ill-gotten gains and the number of
potential claimants results in high administrative costs and de minimis
distributions to investors, the Commission would not expect to create a
Fair Fund. The disgorgement and civil penalty amounts would be paid
directly to the United States Treasury.
Creating and administering Fair Funds benefits victims of
securities law violations, who are more likely to be made whole.
Allowing monies that otherwise would go into a Fair Fund to be paid to
the Treasury where investors would receive only de minimis
distributions will prevent those monies from being consumed by
administrative costs, although at a cost to victims who might have
received a minimal payment from a Fair Fund.
Rule 102(d)(4) is amended to allow a person seeking to withdraw his
or her appearance before the Commission in a representative capacity to
file a notice of withdrawal rather than the motion to withdraw that was
required under the former Rule. Filing a notice preserves the benefits
of the existing requirement by giving the Commission and the parties
timely notice of withdrawal. Preparing and filing a notice should be
less expensive than preparing and filing a motion. Additionally, this
amendment increases efficiency by eliminating the need for the
Commission or a hearing officer to rule on a motion for withdrawal.
The amendment of Rule 150(c)(4) deletes the requirements that
parties who choose to serve each other by facsimile transmission (1)
agree to do so in a signed writing, and (2) confirm receipt of each
document by a manually signed receipt. Elimination of these
requirements results in lower costs to the serving parties. However,
eliminating the requirement of a signed receipt could make it more
difficult to prove that a transmission was received.
The amendment of Rule 151 allows parties to file documents with the
Commission by facsimile transmission. This amendment provides parties
an additional option for transmitting documents to the Commission.
Facsimile filing allows the Commission to receive and be able to
address documents in as timely a fashion as possible. Costs of
transmission by facsimile are likely to be lower than overnight or
courier fees. The amendment does not impose any new costs, since the
existing methods for filing with the Commission remain available.
The amendment to Rule 154 establishes a combined page limit of 15
pages for a motion and a brief in support of the motion. The 15-page
limit also applies to a brief in opposition to a motion and to any
reply brief. The amendment to Rule 450(c) provides that pleadings
incorporated by reference will be included in determining the page
count of briefs. Reducing page limits may result in lower legal costs
to the parties. Limiting the number of pages submitted also keeps
proceedings efficient.
The amendment of Rule 233 allows the taking of a deposition of a
witness, then within the United States, who is expected to be outside
the United States at the time of an administrative hearing, so long as
the deposition will serve the interests of justice and it appears that
the party requesting the deposition did not procure the witness's
absence. The amendment serves the interests of justice by making
available a statement that otherwise might not have been made part of
the record. Using a deposition results in the absence from a hearing of
a witness who otherwise would have appeared. This results in the
hearing officer's having no opportunity to assess demeanor. However,
since the Rule allows a deposition only where it appears that the party
requesting the deposition did not procure the witness's absence, such a
series of events should rarely occur.
The remaining amendments clarify existing practice, relate to
internal agency management, increase the efficiency of proceedings, or
promote due process.
The Commission requested data to quantify the costs and the value
of the benefits identified. We received no comments in response to this
request.
[[Page 13174]]
IV. Effect on Efficiency, Competition and Capital Formation
Section 2(b) of the Securities Act of 1933,\36\ section 3(f) of the
Exchange Act,\37\ section 2(c) of the Investment Company Act of
1940,\38\ and section 202(c) of the Investment Advisers Act of 1940
\39\ require us, when engaging in rulemaking that requires us to
consider or determine whether an act is necessary or appropriate in the
public interest, to consider whether the action will promote
efficiency, competition, and capital formation. Section 23(a)(2) of the
Exchange Act \40\ prohibits us from adopting any rule that would impose
a burden on competition not necessary or appropriate in furtherance of
the Exchange Act's purposes.
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\36\ 15 U.S.C. 77b(b).
\37\ 15 U.S.C. 78c(f).
\38\ 15 U.S.C. 80a-2(c).
\39\ 15 U.S.C. 80b-2(c).
\40\ 15 U.S.C. 78w(a)(2).
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These rules are intended to enhance the transparency and facilitate
parties' understanding of the applicability of the Commission review
process to Board proceedings. The rules and amendments also include
regulatory provisions for the submission and administration of Fair
Funds plans and disgorgement plans. They are intended to clarify
existing practice and increase the efficiency of Commission enforcement
and self-regulatory organization disciplinary review proceedings.
The rules and amendments apply to all persons involved in
administrative proceedings before the Commission. Therefore, the
Commission does not expect the proposed rules and amendments to have an
anti-competitive effect. To the extent the rules and amendments foster
making whole victims of securities laws violations and increase the
transparency of the Commission's administrative practice and the
efficiency of its proceedings, there should be an increase in investor
confidence in market fairness and efficiency. However, the magnitude of
the effect of the amendments in this regard is difficult to quantify.
We requested comment on the possible effects of our rule proposals on
efficiency, competition, and capital formation. We received no comments
in response to this request.
V. Statutory Basis for the Rules
These amendments to the Rules of Practice and related provisions
are being adopted pursuant to statutory authority granted to the
Commission, including section 3 of the Sarbanes-Oxley Act, 15 U.S.C.
7202; section 19 of the Securities Act, 15 U.S.C. 77s; sections 4A, 19,
and 23 of the Exchange Act, 15 U.S.C. 78s and 78w; section 20 of the
Public Utility Holding Company Act, 15 U.S.C. 79t; section 319 of the
Trust Indenture Act, 15 U.S.C. 77sss; sections 38 and 40 of the
Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and section 211 of
the Investment Advisers Act, 15 U.S.C. 80b-11.
List of Subjects
17 CFR Part 200
Administrative practice and procedure, Authority delegations
(Government Agencies).
17 CFR Part 201
Administrative practice and procedure.
17 CFR Part 240
Reporting and recordkeeping requirements; Securities.
Text of Adopted Rules
0
For the reasons set out in the preamble, Title 17, Chapter II of the
Code of Federal Regulations is amended as follows:
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
0
1. The general authority citation for part 200, subpart A is revised to
read as follows:
Subpart A--Organization and Program Management
Authority: 15 U.S.C. 77s, 77o, 77sss, 78d, 78d-1, 78d-2, 78w,
78ll(d), 78mmm, 79t, 80a-37, 80b-11, and 7202, unless otherwise
noted.
* * * * *
Sec. 200.21 [Amended]
0
2. In Sec. 200.21, paragraph (b), remove the words ``Rule 2(e) of the
Commission's Rules of Practice (Sec. 201.2(e) of this chapter)'', and
in their place, add the words ``Rule 102(e) of the Commission's Rules
of Practice (Sec. 201.102(e) of this chapter)''.
0
3. Section 200.30-7 is amended by revising the introductory text of
paragraph (a) and paragraphs (a)(5), (a)(6), and (a)(11) to read as
follows:
Sec. 200.30-7 Delegation of authority to Secretary of the Commission.
* * * * *
(a) With respect to proceedings conducted pursuant to the
Securities Act of 1933, 15 U.S.C. 77a et seq., the Securities Exchange
Act of 1934, 15 U.S.C. 78a et seq., the Public Utility Holding Company
Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture Act of 1939, 15
U.S.C. 77aaa et seq., the Investment Company Act of 1940, 15 U.S.C.
80a-1 et seq., the Investment Advisers Act of 1940, 15 U.S.C. 80b-1 et
seq., the Securities Investor Protection Act of 1970, 15 U.S.C. 78aaa
et seq., the provisions of Rule 102(e) of the Commission's Rules of
Practice, Section 201.102(e) of this chapter, and Title I of the
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219;
* * * * *
(5) To permit the filing of briefs with the Commission exceeding 50
pages in length, pursuant to Rule 450(c) of the Commission's Rules of
Practice, Sec. 201.450(c) of this chapter;
(6) To certify records of proceedings upon which are entered orders
the subject of review in courts of appeals pursuant to section 9 of the
Securities Act of 1933, 15 U.S.C. 77i, section 25 of the Securities
Exchange Act of 1934, 15 U.S.C. 78y, section 24 of the Public Utility
Holding Company Act of 1935, 15 U.S.C. 79x, section 322(a) of the Trust
Indenture Act of 1939, 15 U.S.C. 77vvv(a), section 43 of the Investment
Company Act of 1940, 15 U.S.C. 80a-42, section 213 of the Investment
Advisers Act of 1940, 15 U.S.C. 80b-13, and Title I of the Sarbanes-
Oxley Act of 2002, 15 U.S.C. 7211-7219;
* * * * *
(11) To publish pursuant to Rule 1103 of the Commission's Rules of
Practice (Sec. 201.1103 of this chapter) notice for fair fund and
disgorgement plans, and if no negative comments are received, to issue
orders approving proposed fair fund plans and disgorgement plans
pursuant to Rule 1104 of the Commission's Rules of Practice (Sec.
201.1104 of this chapter). Upon the motion of the staff for good cause
shown, to approve the publication of proposed fair fund plans and
disgorgement plans that omit plan elements required by Rule 1101 of the
Commission's Rules of Practice (Sec. 201.1101 of this chapter).
* * * * *
0
4. Section 200.30-10 is amended by:
0
a. Removing the authority citations following the sections; and
0
b. Revising the introductory text of paragraph (a) and paragraph
(a)(5).
The revisions read as follows:
Sec. 200.30-10 Delegation of authority to Chief Administrative Law
Judge.
* * * * *
(a) With respect to proceedings conducted before an administrative
law judge, pursuant to the Securities Act of 1933, 15 U.S.C. 77a et
seq., the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., the
Public Utility
[[Page 13175]]
Holding Company Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture
Act of 1939, 15 U.S.C. 77aaa et seq., the Investment Company Act of
1940, 15 U.S.C. 80a-1 et seq., the Investment Advisers Act of 1940, 15
U.S.C. 80b-1 et seq., the Securities Investor Protection Act of 1970,
15 U.S.C. 78aaa et seq., and the provisions of Rule 102(e) of the
Commission's Rules of Practice, Sec. 201.102(e) of this chapter:
* * * * *
(5) To permit the filing of briefs exceeding 50 pages in length,
pursuant to Rule 450(c) of the Commission's Rules of Practice, Sec.
201.450(c) of this chapter;
* * * * *
0
5. Section 200.30-14 is amended by:
0
a. Revising the introductory text of paragraph (g)(1) and of paragraphs
(g)(1)(vii), (g)(4), (g)(5), and (g)(7); and
0
b. Adding paragraph (g)(8).
The revisions and addition read as follows:
Sec. 200.30-14 Delegation of authority to the General Counsel.
* * * * *
(g)(1) With respect to proceedings conducted pursuant to the
Securities Act of 1933, 15 U.S.C. 77a et seq., the Securities Exchange
Act of 1934, 15 U.S.C. 78a et seq., the Public Utility Holding Company
Act of 1935, 15 U.S.C. 79a et seq., the Trust Indenture Act of 1939, 15
U.S.C. 77aaa et seq., the Investment Company Act of 1940, 15 U.S.C.
80a-1 et seq., the Investment Advisers Act of 1940, 15 U.S.C. 80b-1 et
seq., the Securities Investor Protection Act of 1970, 15 U.S.C. 78aaa
et seq., the provisions of Rule 102(e) of the Commission Rules of
Practice, Sec. 201.102(e) of this chapter, and Title I of the
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219:
* * * * *
(vii) To request additional briefs or grant requests for the
submission of late or additional briefs, or the acceptance of
affidavits or other material for inclusion in the record or in support
of motions or petitions addressed to the Commission.
* * * * *
(4) With respect to proceedings conducted under sections 19(d),
(e), and (f) of the Securities Exchange Act of 1934, 15 U.S.C. 78s(d),
(e), and (f), and Title I of the Sarbanes-Oxley Act of 2002, 15 U.S.C.
7211-7219, to determine that an application for review under any of
those sections has been abandoned, under the provisions of Rule 420 or
440 of the Commission's Rules of Practice, Sec. 201.420 or 201.440 of
this chapter, or otherwise, and accordingly to issue an order
dismissing the application.
(5) With respect to proceedings conducted pursuant to the
Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., the Investment
Company Act of 1940, 15 U.S.C. 80a-1 et seq., the Investment Advisers
Act of 1940, 15 U.S.C. 80b-1 et seq., the provisions of Rule 102(e) of
the Commission's Rules of Practice, Sec. 201.102(e) of this chapter,
and Title I of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to
determine applications to stay Commission orders pending appeal of
those orders to the federal courts and to determine application to
vacate such stays.
* * * * *
(7) In connection with Commission review of actions taken by self-
regulatory organizations pursuant to sections 19(d), (e), and (f) of
the Securities Exchange Act of 1934, 15 U.S.C. 78s(d), (e), and (f), or
by the Public Company Accounting Oversight Board pursuant to Title I of
the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to grant or deny
requests for oral argument in accordance with the provisions of Rule
451 of the Commission's Rules of Practice, Sec. 201.451 of this
chapter.
(8) In connection with Commission review of actions taken by the
Public Company Accounting Oversight Board pursuant to Title I of the
Sarbanes-Oxley Act of 2002, 15 U.S.C. 7211-7219, to determine whether
to lift the automatic stay of a disciplinary sanction.
* * * * *
Subpart B--Disposition of Commission Business
0
6. The authority citation for part 200, subpart B continues to read as
follows:
Authority: 5 U.S.C. 552b; 15 U.S.C. 78d-1 and 78w.
Sec. 200.43 [Amended]
0
7. In Sec. 200.43, paragraph (c)(3), remove the words ``Rule 26 of the
Commission's rules of practice, 17 CFR 201.26'' and, in their place,
add the words ``Rules 430 and 431 of the Commission's Rules of
Practice, Sec. Sec. 201.430 and 201.431 of this chapter''.
0
8. The authority citation for part 200, subpart F, is revised to read
as follows:
Subpart F--Code of Behavior Governing Ex Parte Communications
Between Persons Outside the Commission and Decisional Employees
Authority: 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11, and
7202; and 5 U.S.C. 557.
0
9. Section 200.111 is amended by:
0
a. Revising paragraph (c)(1)(ii);
0
b. Redesignating paragraph (c)(1)(iii) as paragraph (c)(1)(iv); and
0
c. Adding new paragraph (c)(1)(iii).
The revision and addition read as follows:
Sec. 200.111 Prohibitions; application; definitions.
* * * * *
(c) * * *
(1) * * *
(ii) That in proceedings under section 19(d) of the Securities
Exchange Act of 1934, 15 U.S.C. 78s(d), these prohibitions shall
commence at the time that a copy of an application for review has been
filed with the Commission and served on the self-regulatory
organization.
(iii) That in proceedings under Title I of the Sarbanes-Oxley Act
of 2002, 15 U.S.C. 7211-7219, these prohibitions shall commence at the
time that a copy of an application for review has been filed with the
Commission and served on the Public Company Accounting Oversight Board;
and
* * * * *
PART 201--RULES OF PRACTICE
Subpart D--Rules of Practice
0
10. The authority citation for part 201, subpart D, is revised to read
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u,
78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 78u-
3, 78v, 78w, 79c, 79s, 79t, 79z-5a, 77sss, 77ttt, 80a-8, 80a-9, 80a-
37, 80a-38, 80a-39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11,
80b-12, 7202, 7215, and 7217.
0
11. Section 201.100 is amended by adding paragraph (c) to read as
follows:
Sec. 201.100 Scope of the rules of practice.
* * * * *
(c) The Commission, upon its determination that to do so would
serve the interests of justice and not result in prejudice to the
parties to the proceeding, may by order direct, in a particular
proceeding, that an alternative procedure shall apply or that
compliance with an otherwise applicable rule is unnecessary.
0
12. Section 201.101 is amended by:
0
a. Revising paragraph (a)(9);
0
b. Removing the word ``and'' at the end of paragraph (a)(10);
0
c. Removing the period at the end of paragraph (a)(11), and in its
place adding ``; and''; and
0
d. Adding paragraph (a)(12).
The revision and addition read as follows:
[[Page 13176]]
Sec. 201.101 Definitions.
(a) * * *
(9) Proceeding means any agency process initiated:
(i) By an order instituting proceedings; or
(ii) By the filing, pursuant to Sec. 201.410, of a petition for
review of an initial decision by a hearing officer; or
(iii) By the filing, pursuant to Sec. 201.420, of an application
for review of a self-regulatory organization determination; or
(iv) By the filing, pursuant to Sec. 201.430, of a notice of
intention to file a petition for review of a determination made
pursuant to delegated authority; or
(v) By the filing, pursuant to Sec. 201.440, of an application for
review of a determination by the Public Company Accounting Oversight
Board; or
(vi) By the filing, pursuant to Sec. 240.11Aa3-1(f) of this
chapter, of an application for review of an action or failure to act in
connection with the implementation or operation of any effective
transaction reporting plan; or
(vii) By the filing, pursuant to Sec. 240.11Aa3-2(e) of this
chapter, of an application for review of an action taken or failure to
act in connection with the implementation or operation of any effective
national market system plan; or
(viii) By the filing, pursuant to Section 11A(b)(5) of the
Securities Exchange Act of 1934, of an application for review of a
determination of a registered securities information processor;
* * * * *
(12) Board means the Public Company Accounting Oversight Board.
* * * * *
0
13. Section 201.102 is amended by revising paragraph (d)(4) to read as
follows:
Sec. 201.102 Appearance and practice before the Commission.
* * * * *
(d) * * *
(4) Withdrawal. Any person seeking to withdraw his or her
appearance in a representative capacity shall file a notice of
withdrawal with the Commission or the hearing officer. The notice shall
state the name, address, and telephone number of the withdrawing
representative; the name, address, and telephone number of the person
for whom the appearance was made; and the effective date of the
withdrawal. If the person seeking to withdraw knows the name, address,
and telephone number of the new representative, or knows that the
person for whom the appearance was made intends to represent him- or
herself, that information shall be included in the notice. The notice
must be served on the parties in accordance with Sec. 201.150. The
notice shall be filed at least five days before the proposed effective
date of the withdrawal.
* * * * *
0
14. Section 201.111 is amended by revising paragraph (h) to read as
follows:
Sec. 201.111 Hearing officer: Authority.
* * * * *
(h) Subject to any limitations set forth elsewhere in these Rules
of Practice, considering and ruling upon all procedural and other
motions, including a motion to correct a manifest error of fact in the
initial decision, provided that such a motion to correct is filed
within ten days of the initial decision;
* * * * *
0
15. Section 201.141 is amended by:
0
a. Revising the section heading; and
0
b. Revising paragraphs (a)(3) and (b) to read as follows:
The revisions read as follows:
Sec. 201.141 Orders and decisions: Service of orders instituting
proceedings and other orders and decisions.
(a) * * *
(3) Record of service. The Secretary shall maintain a record of
service on parties (in hard copy or computerized format), identifying
the party given notice, the method of service, the date of service, the
address to which service was made, and the person who made service. If
service is made in person, the certificate of service shall state, if
available, the name of the individual to whom the order was given. If
service is made by U.S. Postal Service certified or Express Mail, the
Secretary shall maintain the confirmation of receipt or of attempted
delivery. If service is made to an agent authorized by appointment to
receive service, the certificate of service shall be accompanied by
evidence of the appointment.
* * * * *
(b) Service of orders or decisions other than an order instituting
proceedings. Written orders or decisions issued by the Commission or by
a hearing officer shall be served promptly on each party pursuant to
any method of service authorized under paragraph (a) of this section or
Sec. 201.150(c)(1)-(3). Such orders or decisions may also be served by
facsimile transmission if the party to be served has agreed to accept
such service in a writing, signed by the party, and has provided the
Commission with information concerning the facsimile machine telephone
number and hours of facsimile machine operation. Service of orders or
decisions by the Commission, including those entered pursuant to
delegated authority, shall be made by the Secretary or, as authorized
by the Secretary, by a member of an interested division. Service of
orders or decisions issued by a hearing officer shall be made by the
Secretary or the hearing officer.
0
16. Section 201.150 is amended by revising paragraph (c)(4) to read as
follows:
Sec. 201.150 Service of papers by parties.
* * * * *
(c) * * *
(4) Transmitting the papers by facsimile transmission where the
following conditions are met:
(i) The persons so serving each other have provided the Commission
and the parties with notice of the facsimile machine telephone number
to be used and the hours of facsimile machine operation;
(ii) The transmission is made at such a time that it is received
during the Commission's business hours as defined in Sec. 201.104; and
(iii) The sender of the transmission previously has not been served
in accordance with Sec. 201.150 with a written notice from the
recipient of the transmission declining service by facsimile
transmission.
* * * * *
0
17. Section 201.151 is amended by revising paragraph (a) to read as
follows:
Sec. 201.151 Filing of papers with the Commission: Procedure.
(a) When to file. All papers required to be served by a party upon
any person shall be filed contemporaneously with the Commission. Papers
required to be filed with the Commission must be received within the
time limit, if any, for such filing. Filing with the Commission may be
made by facsimile transmission if the party also contemporaneously
transmits to the Commission a non-facsimile original with a manual
signature. However, any person filing with the Commission by facsimile
transmission will be responsible for assuring that the Commission
receives a complete and legible filing within the time limit set for
such filing.
* * * * *
0
18. Section 201.152 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 201.152 Filing of papers: Form.
(a) * * *
(2) Be typewritten or printed in 12-point or larger typeface or
otherwise
[[Page 13177]]
reproduced by a process that produces permanent and plainly legible
copies;
* * * * *
0
19. Section 201.154 is amended by revising paragraph (c) to read as
follows:
Sec. 201.154 Motions.
* * * * *
(c) Length limitation. A motion, together with the brief in support
of the motion, the brief in opposition to the motion, or any reply
brief, shall not exceed 15 pages, exclusive of pages containing any
table of contents or table of authorities. The page limit shall not
apply to any addendum that consists solely of copies of applicable
cases, pertinent legislative provisions or rules, or relevant exhibits.
Requests for leave to file motions and briefs in excess of 15 pages are
disfavored.
0
20. Section 201.160 is amended by revising paragraph (b) to read as
follows:
Sec. 201.160 Time computation.
* * * * *
(b) Additional time for service by mail. If service is made by
mail, three days shall be added to the prescribed period for response
unless an order of the Commission or the hearing officer specifies a
date certain for filing. In the event that an order of the Commission
or the hearing officer specifies a date certain for filing, no time
shall be added for service by mail.
0
21. Section 201.201 is amended by:
0
a. Revising the section heading;
0
b. Designating the current text as paragraph (a) and adding a paragraph
heading; and
0
c. Adding paragraph (b).
The revision and additions read as follows:
Sec. 201.201 Consolidation and severance of proceedings.
(a) Consolidation. * * *
(b) Severance. By order of the Commission, any proceeding may be
severed with respect to some or all parties. Any motion to sever must
be made solely to the Commission and must include a representation that
a settlement offer is pending before the Commission or otherwise show
good cause.
0
22. Section 201.202 is amended by revising the introductory text of
paragraph (a) to read as follows:
Sec. 201.202 Specification of procedures by parties in certain
proceedings.
(a) Motion to specify procedures. In any proceeding other than an
enforcement or disciplinary proceeding, a proceeding to review a
determination by a self-regulatory organization pursuant to Sec. Sec.
201.420 and 201.421, or a proceeding to review a determination of the
Board pursuant to Sec. Sec. 201.440 and 201.441, a party may, at any
time up to 20 days prior to the start of a hearing, make a motion to
specify the procedures necessary or appropriate for the proceeding with
particular reference to:
* * * * *
0
23. Section 201.210 is amended by revising the introductory text of
paragraph (a), revising paragraph (a)(1) and the introductory text of
paragraphs (b)(1) and (c) read to read as follows:
Sec. 201.210 Parties, limited participants and amici curiae.
(a) Parties in an enforcement or disciplinary proceeding, a
proceeding to review a self-regulatory organization determination, or a
proceeding to review a Board determination.
(1) Generally. No person shall be granted leave to become a party
or a non-party participant on a limited basis in an enforcement or
disciplinary proceeding, a proceeding to review a determination by a
self-regulatory organization pursuant to Sec. Sec. 201.420 and
201.421, or a proceeding to review a determination by the Board
pursuant to Sec. Sec. 201.440 and 201.441, except as authorized by
paragraph (c) of this section.
* * * * *
(b) * * * (1) Generally. In any proceeding, other than an
enforcement proceeding, a disciplinary proceeding, a proceeding to
review a self-regulatory determination, or a proceeding to review a
Board determination, any person may seek leave to intervene as a party
by filing a motion setting forth the person's interest in the
proceeding:
* * * * *
(c) Leave to participate on a limited basis. In any proceeding,
other than an enforcement proceeding, a disciplinary proceeding, a
proceeding to review a self-regulatory determination, or a proceeding
to review a Board determination, any person may seek leave to
participate on a limited basis as a non-party participant as to any
matter affecting the person's interests:
* * * * *
0
24. Section 201.230 is amended by revising paragraphs (a)(1)(vi) and
(c) to read as follows:
Sec. 201.230 Enforcement and disciplinary proceedings: Availability
of documents for inspection and copying.
* * * * *
(a) * * *
(1) * * *
(vi) Any final examination or inspection reports prepared by the
Office of Compliance Inspections and Examinations, the Division of
Market Regulation, or the Division of Investment Management, if the
Division of Enforcement intends either to introduce any such report
into evidence or to use any such report to refresh the recollection of
any witness.
* * * * *
(c) Withheld document list. The hearing officer may require the
Division of Enforcement to submit for review a list of documents or
categories of documents withheld pursuant to paragraphs (b)(1)(i)
through (b)(1)(iv) of this section or to submit any document withheld,
and may determine whether any such document should be made available
for inspection and copying. When similar documents are withheld
pursuant to paragraphs (b)(1)(i) through (b)(1)(iv) of this section,
those documents may be identified by category instead of by individual
document. The hearing officer retains discretion to determine when an
identification by category is insufficient.
* * * * *
0
25. Section 201.231 is amended by revising paragraph (a) to read as
follows:
Sec. 201.231 Enforcement and disciplinary proceedings: Production of
witness statements.
(a) Availability. Any respondent in an enforcement or disciplinary
proceeding may move that the Division of Enforcement produce for
inspection and copying any statement of any person called or to be
called as a witness by the Division of Enforcement that pertains, or is
expected to pertain, to his or her direct testimony and that would be
required to be produced pursuant to the Jencks Act, 18 U.S.C. 3500. For
purposes of this section, statement shall have the meaning set forth in
18 U.S.C. 3500(e). Such production shall be made at a time and place
fixed by the hearing officer and shall be made available to any party,
provided, however, that the production shall be made under conditions
intended to preserve the items to be inspected or copied.
* * * * *
0
26. Section 201.232 is amended by revising paragraph (e)(1) to read as
follows:
Sec. 201.232 Subpoenas.
* * * * *
(e) * * * (1) Any person to whom a subpoena is directed, or who is
an owner, creator or the subject of the documents that are to be
produced pursuant to a subpoena, or any party may, prior to the time
specified therein for compliance, but in no event more than 15 days
after the date of service of
[[Page 13178]]
such subpoena, request that the subpoena be quashed or modified. Such
request shall be made by application filed with the Secretary and
served on all parties pursuant to Sec. 201.150. The party on whose
behalf the subpoena was issued may, within five days of service of the
application, file an opposition to the application. If a hearing
officer has been assigned to the proceeding, the application to quash
shall be directed to that hearing officer for consideration, even if
the subpoena was issued by another person.
* * * * *
0
27. Section 201.233 is amended by revising paragraph (b) to read as
follows:
Sec. 201.233 Deposition upon oral examination.
* * * * *
(b) Required finding when ordering a deposition. In the discretion
of the Commission or the hearing officer, an order for a deposition may
be issued upon a finding that the prospective witness will likely give
testimony material to the proceeding; that it is likely the prospective
witness, who is then within the United States, will be unable to attend
or testify at the hearing because of age, sickness, infirmity,
imprisonment, other disability, or absence from the United States,
unless it appears that the absence of the witness was procured by the
party requesting the deposition; and that the taking of a deposition
will serve the interests of justice.
* * * * *
0
28. Section 201.350 is amended by revising paragraph (b) to read as
follows:
Sec. 201.350 Record in proceedings before hearing officer; retention
of documents; copies.
* * * * *
(b) Retention of documents not admitted. Any document offered into
evidence but excluded shall not be considered a part of the record. The
Secretary shall retain any such document until the later of the date
upon which a Commission order ending the proceeding becomes final, or
the conclusion of any judicial review of the Commission's order.
* * * * *
0
29. Section 201.351 is amended by revising paragraph (a) to read as
follows:
Sec. 201.351 Transmittal of documents to Secretary; record index;
certification.
(a) Transmittal from hearing officer to Secretary of partial record
index. The hearing officer may, at any time, transmit to the Secretary
motions, exhibits or any other original documents filed with or
accepted into evidence by the hearing officer, together with a list of
such documents.
* * * * *
0
30. Section 201.360 is amended by:
0
a. Adding a sentence at the end of paragraph (a)(2);
0
b. Revising paragraphs (b)(1), (b)(2), and (d); and
0
c. Removing paragraph (e).
The addition and revisions read as follows:
Sec. 201.360 Initial decision of hearing officer.
(a)(1) * * *
(2) * * * If a stay is granted pursuant to Sec. 201.210(c)(3), the
time period specified in the order instituting proceedings in which the
hearing officer's initial decision must be filed with the Secretary, as
well as any other time limits established in orders issued by the
hearing officer in the proceeding, shall be automatically tolled during
the period while the stay is in effect.
* * * * *
(b) * * *
(1) The Commission will enter an order of finality as to each party
unless a party or an aggrieved person entitled to review timely files a
petition for review of the initial decision or a motion to correct a
manifest error of fact in the initial decision with the hearing
officer, or the Commission determines on its own initiative to review
the initial decision; and
(2) If a party or an aggrieved person entitled to review timely
files a petition for review or a motion to correct a manifest error of
fact in the initial decision with the hearing officer, or if the
Commission takes action to review as to a party or an aggrieved person
entitled to review, the initial decision shall not become final as to
that party or person.
* * * * *
(d) Finality. (1) If a party or an aggrieved person entitled to
review timely files a petition for review or a motion to correct a
manifest error of fact in the initial decision, or if the Commission on
its own initiative orders review of a decision with respect to a party
or a person aggrieved who would be entitled to review, the initial
decision shall not become final as to that party or person.
(2) If a party or aggrieved person entitled to review fails to file
timely a petition for review or a motion to correct a manifest error of
fact in the initial decision, and if the Commission does not order
review of a decision on its own initiative, the Commission will issue
an order that the decision has become final as to that party. The
decision becomes final upon issuance of the order. The order of
finality shall state the date on which sanctions, if any, take effect.
Notice of the order shall be published in the SEC Docket and on the SEC
Web site.
0
31. Section 201.400 is amended by revising paragraph (a) to read as
follows:
Sec. 201.400 Interlocutory review.
(a) Availability. The Commission may, at any time, on its own
motion, direct that any matter be submitted to it for review. Petitions
by parties for interlocutory review are disfavored, and the Commission
ordinarily will grant a petition to review a hearing officer ruling
prior to its consideration of an initial decision only in extraordinary
circumstances. The Commission may decline to consider a ruling
certified by a hearing officer pursuant to paragraph (c) of this
section or the petition of a party who has been denied certification if
it determines that interlocutory review is not warranted or appropriate
under the circumstances. This section is the exclusive remedy for
review of a hearing officer's ruling prior to Commission consideration
of the entire proceeding and is the sole mechanism for appeal of
actions delegated pursuant to Sec. Sec. 200.30-9 and 200.30-10 of this
chapter.
* * * * *
0
32. Section 201.401 is amended by:
0
a. Revising the section heading and paragraph (d)(1); and
0
b. Adding paragraph (e).
The revisions and addition read as follows:
Sec. 201.401 Consideration of stays.
* * * * *
(d) * * *
(1) Availability. A motion for a stay of an action by a self-
regulatory organization for which the Commission is the appropriate
regulatory agency, for which action review may be sought pursuant to
Sec. 201.420, may be made by any person aggrieved thereby at the time
an application for review is filed in accordance with Sec. 201.420 or
thereafter.
* * * * *
(e) Lifting of stay of action by the Public Company Accounting
Oversight Board. (1) Availability. Any person aggrieved by a stay of
action by the Board entered in accordance with 15 U.S.C. 7215(e) for
which review has been sought pursuant to Sec. 201.440 or which the
Commission has taken up on its motion pursuant to Sec. 201.441 may
make a motion to lift the stay. The Commission may, at any time, on its
own motion determine whether to lift the automatic stay.
[[Page 13179]]
(2) Summary action. The Commission may lift a stay summarily,
without notice and opportunity for hearing.
(3) Expedited consideration. The Commission may expedite
consideration of a motion to lift a stay of Board action, consistent
with the Commission's other responsibilities. Where consideration is
expedited, persons opposing the lifting of the stay may file a
statement in opposition within two days of service of the motion
requesting lifting of the stay unless the Commission, by written order,
shall specify a different period.
0
33. Section 201.410 is amended by:
0
a. Revising paragraph (b); and
0
b. Removing and reserving paragraph (d).
The revision reads as follows:
Sec. 201.410 Appeal of initial decisions by hearing officers.
* * * * *
(b) Procedure. The petition for review of an initial decision shall
be filed with the Commission within such time after service of the
initial decision as prescribed by the hearing officer pursuant to Sec.
201.360(b) unless a party has filed a motion to correct an initial
decision with the hearing officer. If such correction has been sought,
a party shall have 21 days from the date of the hearing officer's order
resolving the motion to correct to file a petition for review. The
petition shall set forth the specific findings and conclusions of the
initial decision as to which exception is taken, together with
supporting reasons for each exception. Supporting reasons may be stated
in summary form. Any exception to an initial decision not stated in the
petition for review, or in a previously filed proposed finding made
pursuant to Sec. 201.340 may, at the discretion of the Commission, be
deemed to have been waived by the petitioner. In the event a petition
for review is filed, any other party to the proceeding may file a
cross-petition for review within the original time allowed for seeking
review or within ten days from the date that the petition for review
was filed, whichever is later.
* * * * *
0
34. Section 201.411 is amended by revising paragraph (e) as follows:
Sec. 201.411 Commission consideration of decisions by hearing
officers.
* * * * *
(e) Summary affirmance. (1) At any time within 21 days after the
filing of a petition for review pursuant to Sec. 201.410(b), any party
may file a motion in accordance with Sec. 201.154 asking that the
Commission summarily affirm an initial decision. Any party may file an
opposition and reply to such motion in accordance with Sec. 201.154.
Pending determination of the motion for summary affirmance, the
Commission, in its discretion, may delay issuance of a briefing
schedule order pursuant to Sec. 201.450.
(2) Upon consideration of the motion and any opposition or upon its
own initiative, the Commission may summarily affirm an initial
decision. The Commission may grant summary affirmance if it finds that
no issue raised in the initial decision warrants consideration by the
Commission of further oral or written argument. The Commission will
decline to grant summary affirmance upon a reasonable showing that a
prejudicial error was committed in the conduct of the proceeding or
that the decision embodies an exercise of discretion or decision of law
or policy that is important and that the Commission should review.
* * * * *
0
35. Section 201.420 is amended by:
0
a. Revising paragraph (b);
0
b. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e); and
0
c. Adding new paragraph (c).
The revision and addition read as follows:
Sec. 201.420 Appeal of determinations by self-regulatory
organizations.
* * * * *
(b) Procedure. As required by section 19(d)(1) of the Securities
Exchange Act of 1934, 15 U.S.C. 78s(d)(1), an applicant must file an
application for review with the Commission within 30 days after the
notice of the determination is filed with the Commission and received
by the aggrieved person applying for review. The Commission will not
extend this 30-day period, absent a showing of extraordinary
circumstances. This section is the exclusive remedy for seeking an
extension of the 30-day period.
(c) Application. The application shall be filed with the Commission
pursuant to Sec. 201.151. The applicant shall serve the application on
the self-regulatory organization. The application shall identify the
determination complained of and set forth in summary form a brief
statement of the alleged errors in the determination and supporting
reasons therefor. The application shall state an address where the
applicant can be served. The application should not exceed two pages in
length. If the applicant will be represented by a representative, the
application shall be accompanied by the notice of appearance required
by Sec. 201.102(d).
* * * * *
0
36. Section 201.430 is amended by revising paragraph (a) to read as
follows:
Sec. 201.430 Appeal of actions made pursuant to delegated authority.
(a) Scope of rule. Any person aggrieved by an action made by
authority delegated in Sec. Sec. 200.30-1 through 200.30-8 or
Sec. Sec. 200.30-11 through 200.30-18 of this chapter may seek review
of the action pursuant to paragraph (b) of this section.
* * * * *
0
37. Sections 201.440 and 201.441 are added to read as follows:
Sec. 201.440 Appeal of determinations by the Public Company
Accounting Oversight Board.
(a) Application for review; when available. Any person who is
aggrieved by a determination of the Board with respect to any final
disciplinary sanction, including disapproval of a completed application
for registration of a public accounting firm, may file an application
for review.
(b) Procedure. An aggrieved person may file an application for
review with the Commission pursuant to Sec. 201.151 within 30 days
after the notice filed by the Board of its determination with the
Commission pursuant to Sec. 240.19d-4 of this chapter is received by
the aggrieved person applying for review. The applicant shall serve the
application on the Board at the same time. The application shall
identify the determination complained of, set forth in summary form a
brief statement of alleged errors in the determination and supporting
reasons therefor, and state an address where the applicant can be
served. The notice of appearance required by Sec. 201.102(d) shall
accompany the application.
(c) Stay of determination. Filing an application for review with
the Commission pursuant to paragraph (b) of this section operates as a
stay of the Board's determination unless the Commission otherwise
orders either pursuant to a motion filed in accordance with Sec.
201.401(e) or upon its own motion.
(d) Certification of the record; service of the index. Within
fourteen days after receipt of an application for review, the Board
shall certify and file with the Commission one copy of the record upon
which it took the complained-of action. The Board shall file with the
Commission three copies of an index of such record, and shall serve one
copy of the index on each party.
[[Page 13180]]
Sec. 201.441 Commission consideration of Board determinations.
(a) Commission review other than pursuant to an application for
review. The Commission may, on its own initiative, order review of any
final disciplinary sanction, including disapproval of a completed
application for registration of a public accounting firm, imposed by
the Board that could be subject to an application for review pursuant
to Sec. 201.440(a) within 40 days after the Board filed notice thereof
pursuant to Sec. 240.19d-4 of this chapter.
(b) Supplemental briefing. The Commission may at any time prior to
the issuance of its decision raise or consider any matter that it deems
material, whether or not raised by the parties. The Commission will
give notice to the parties and an opportunity for supplemental briefing
with respect to issues not briefed by the parties where the Commission
believes that such briefing could significantly aid the decisional
process.
0
38. Section 201.450 is amended by:
0
a. Redesignating paragraphs (a)(2)(iii) and (a)(2)(iv) as paragraphs
(a)(2)(iv) and (a)(2)(v);
0
b. Adding new paragraph (a)(2)(iii);
0
c. Revising paragraph (c); and
0
d. Adding paragraph (d).
The additions and revision read as follows:
Sec. 201.450 Briefs filed with the Commission.
(a) * * *
(2) * * *
(iii) Receipt by the Commission of an index to the record of a
determination by the Board filed pursuant to Sec. 201.440(d);
* * * * *
(c) Length limitation. Except with leave of the Commission, opening
and opposition briefs shall not exceed 14,000 words and reply briefs
shall not exceed 7,000 words, exclusive of pages containing the table
of contents, table of authorities, and any addendum that consists
solely of copies of applicable cases, pertinent legislative provisions
or rules, and exhibits. The number of words shall include pleadings
incorporated by reference. Motions to file briefs in excess of these
limitations are disfavored.
(d) Certificate of compliance. An opening or opposition brief that
does not exceed 30 pages in length, exclusive of pages containing the
table of contents, table of authorities, and any addendum that consists
solely of copies of applicable cases, pertinent legislative provisions,
or rules and exhibits, but inclusive of pleadings incorporated by
reference, is presumptively considered to contain no more than 14,000
words. A reply brief that does not exceed 15 pages in length, exclusive
of pages containing the table of contents, table of authorities, and
any addendum that consists solely of copies of applicable cases,
pertinent legislative provisions, or rules and exhibits, but inclusive
of pleadings incorporated by reference, is presumptively considered to
contain no more than 7,000 words. Any brief that exceeds these page
limits must include a certificate by the party's representative, or an
unrepresented party, stating that the brief complies with the length
limitation set forth in Sec. 201.450(c) and stating the number of
words in the brief. The person preparing the certificate may rely on
the word count of the word-processing system used to prepare the brief.
0
39. Section 201.451 is amended by revising paragraph (b) to read as
follows:
Sec. 201.451 Oral argument before the Commission.
* * * * *
(b) Procedure. Requests for oral argument shall be made by separate
motion accompanying the initial brief on the merits. The Commission
shall issue an order as to whether oral argument is to be heard, and if
so, the time and place therefor. If oral argument is granted, the time
fixed for oral argument shall be changed only by written order of the
Commission, for good cause shown. The order shall state at whose
request the change is made and the reasons for any such changes. No
visual aids may be used at oral argument unless copies have been
provided to the Commission and all parties at least five business days
before the argument is to be held.
* * * * *
0
40. Section 201.460 is amended by adding paragraph (a)(3) to read as
follows:
Sec. 201.460 Record before the Commission.
* * * * *
(a) * * *
(3) In a proceeding for final decision before the Commission
reviewing a determination of the Board, the record shall consist of:
(i) The record certified pursuant to Sec. 201.440(d) by the Board;
(ii) Any application for review; and
(iii) Any submissions, moving papers, and briefs filed on appeal or
review.
* * * * *
0
41. Section 201.470 is amended by revising paragraph (b) to read as
follows:
Sec. 201.470 Reconsideration.
* * * * *
(b) Procedure. A motion for reconsideration shall be filed within
10 days after service of the order complained of, or within such time
as the Commission may prescribe upon motion for extension of time filed
by the person seeking reconsideration, if the motion is made within the
foregoing 10-day period. The motion for reconsideration shall briefly
and specifically state the matters of record alleged to have been
erroneously decided, the grounds relied upon, and the relief sought. A
motion for reconsideration shall conform to the requirements, including
page length, provided in Sec. 201.154. No response to a motion for
reconsideration shall be filed unless requested by the Commission. Any
response so requested shall comply with Sec. 201.154.
0
42. Section 201.601 is amended by adding paragraph (c) to read as
follows:
Sec. 201.601 Prompt payment of disgorgement, interest and penalties.
* * * * *
(c) Method of making payment. Payment shall be made by United
States postal money order, wire transfer, certified check, bank
cashier's check, or bank money order made payable to the Securities and
Exchange Commission. The payment shall be mailed or delivered to the
office designated by this Commission. Payment shall be accompanied by a
letter that identifies the name and number of the case and the name of
the respondent making payment. A copy of the letter and the instrument
of payment shall be sent to counsel for the Division of Enforcement.
Sec. Sec. 201.610 through 201.614 and 201.620 [Removed and Reserved]
0
43. Sections 201.610 through 201.614 and Sec. 201.620 are removed and
reserved.
0
44. Sections 201.1100 through 201.1106, Subpart F--Fair Fund and
Disgorgement Plans--are added to read as follows:
Subpart F--Fair Fund and Disgorgement Plans
Sec.
201.1100 Creation of Fair Fund.
201.1101 Submission of plan of distribution; contents of plan.
201.1102 Provisions for payment.
201.1103 Notice of proposed plan and opportunity for comment by non-
parties.
201.1104 Order approving, modifying, or disapproving proposed plan.
201.1105 Administration of plan.
201.1106 Right to challenge.
Authority: 15 U.S.C. 77h-1, 77s, 77u, 78c(b), 78d-1, 78d-2, 78u-
2, 78u-3, 78v, 78w, 80a-9, 80a-37, 80a-39, 80a-40, 80b-3, 80b-11,
80b-12, and 7246.
[[Page 13181]]
Sec. 201.1100 Creation of Fair Fund.
In any agency process initiated by an order instituting proceedings
in which the Commission issues an order requiring the payment of
disgorgement by a respondent and also assessing a civil money penalty
against that respondent, the Commission may order that the amount of
the disgorgement and of the civil money penalty, together with any
funds received by the Commission pursuant to 15 U.S.C. 7246(b), be used
to create a fund for the benefit of investors who were harmed by the
violation.
Sec. 201.1101 Submission of plan of distribution; contents of plan.
(a) Submission. The Commission or the hearing officer may, at any
time, order any party to submit a plan for the administration and
distribution of funds in a Fair Fund or disgorgement fund. Unless
ordered otherwise, the Division of Enforcement shall submit a proposed
plan no later than 60 days after the respondent has turned over the
funds or other assets pursuant to the Commission's order imposing
disgorgement and, if applicable, a civil money penalty and any appeals
of the Commission's order have been waived or completed, or appeal is
no longer available.
(b) Contents of plan. Unless otherwise ordered, a plan for the
administration of a Fair Fund or a disgorgement fund shall include the
following elements:
(1) Procedures for the receipt of additional funds, including the
specification of any account where funds will be held, the instruments
in which the funds may be invested; and, in the case of a Fair Fund,
the receipt of any funds pursuant to 15 U.S.C. 7246(b), if applicable;
(2) Specification of categories of persons potentially eligible to
receive proceeds from the fund;
(3) Procedures for providing notice to such persons of the
existence of the fund and their potential eligibility to receive
proceeds of the fund;
(4) Procedures for making and approving claims, procedures for
handling disputed claims, and a cut-off date for the making of claims;
(5) A proposed date for the termination of the fund, including
provision for the disposition of any funds not otherwise distributed;
(6) Procedures for the administration of the fund, including
selection, compensation, and, as necessary, indemnification of a fund
administrator to oversee the fund, process claims, prepare accountings,
file tax returns, and, subject to the approval of the Commission, make
distributions from the fund to investors who were harmed by the
violation; and
(7) Such other provisions as the Commission or the hearing officer
may require.
Sec. 201.1102 Provisions for payment.
(a) Payment to registry of the court or court-appointed receiver.
Subject to such conditions as the Commission or the hearing officer
shall deem appropriate, a plan for the administration of a Fair Fund or
a disgorgement fund may provide for payment of funds into a court
registry or to a court-appointed receiver in any case pending in
federal or state court against a respondent or any other person based
upon a complaint alleging violations arising from the same or
substantially similar facts as those alleged in the Commission's order
instituting proceedings.
(b) Payment to the United States Treasury under certain
circumstances. When, in the opinion of the Commission or the hearing
officer, the cost of administering a plan of disgorgement relative to
the value of the available disgorgement funds and the number of
potential claimants would not justify distribution of the disgorgement
funds to injured investors, the plan may provide that the disgorgement
funds and any civil penalty shall be paid directly to the general fund
of the United States Treasury.
Sec. 201.1103 Notice of proposed plan and opportunity for comment by
non-parties.
Notice of a proposed plan of disgorgement or a proposed Fair Fund
plan shall be published in the SEC Docket, on the SEC website, and in
such other publications as the Commission or the hearing officer may
require. The notice shall specify how copies of the proposed plan may
be obtained and shall state that persons desiring to comment on the
proposed plan may submit their views, in writing, to the Commission.
Sec. 201.1104 Order approving, modifying, or disapproving proposed
plan.
At any time after 30 days following publication of notice of a
proposed plan of disgorgement or of a proposed Fair Fund plan, the
Commission shall, by order, approve, approve with modifications, or
disapprove the proposed plan. In the discretion of the Commission, a
proposed plan that is substantially modified prior to adoption may be
republished for an additional comment period pursuant to Sec.
201.1103. The order approving or disapproving the plan should be
entered within 30 days after the end of the final period allowed for
comments on the proposed plan unless the Commission or the hearing
officer, by written order, allows a longer period for good cause shown.
Sec. 201.1105 Administration of plan.
(a) Appointment and removal of administrator. The Commission or the
hearing officer shall have discretion to appoint any person, including
a Commission employee, as administrator of a plan of disgorgement or a
Fair Fund plan and to delegate to that person responsibility for
administering the plan. An administrator may be removed at any time by
order of the Commission or hearing officer.
(b) Assistance by respondent. A respondent may be required or
permitted to administer or assist in administering a plan of
disgorgement subject to such terms and conditions as the Commission or
the hearing officer deems appropriate to ensure the proper distribution
of the funds.
(c) Administrator to post bond. If the administrator is not a
Commission employee, the administrator shall be required to obtain a
bond in the manner prescribed in 11 U.S.C. 322, in an amount to be
approved by the Commission. The cost of the bond may be paid for as a
cost of administration. The Commission may waive posting of a bond for
good cause shown.
(d) Administrator's fees. If the administrator is a Commission
employee, no fee shall be paid to the administrator for his or her
services. If the administrator is not a Commission employee, the
administrator may file an application for fees for completed services,
and upon approval by the Commission or a hearing officer, may be paid a
reasonable fee for those services. Any objections thereto shall be
filed within 21 days of service of the application on the parties.
(e) Source of funds. Unless otherwise ordered, fees and other
expenses of administering the plan shall be paid first from the
interest earned on the funds, and if the interest is not sufficient,
then from the corpus.
(f) Accountings. During the first 10 days of each calendar quarter,
or as otherwise directed by the Commission or the hearing officer, the
administrator shall file an accounting of all monies earned or received
and all monies spent in connection with the administration of the plan
of disgorgement. A final accounting shall be submitted for approval of
the Commission or hearing officer prior to discharge of the
administrator and cancellation of the administrator's bond, if any.
[[Page 13182]]
(g) Amendment. A plan may be amended upon motion by any party or by
the plan administrator or upon the Commission's or the hearing
officer's own motion.
Sec. 201.1106 Right to challenge.
Other than in connection with the opportunity to submit comments as
provided in Sec. 201.1103, no person shall be granted leave to
intervene or to participate or otherwise to appear in any agency
proceeding or otherwise to challenge an order of disgorgement or
creation of a Fair Fund; or an order approving, approving with
modifications, or disapproving a plan of disgorgement or a Fair Fund
plan; or any determination relating to a plan based solely upon that
person's eligibility or potential eligibility to participate in a fund
or based upon any private right of action such person may have against
any person who is also a respondent in the proceeding.
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
45. The authority citation for part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless
otherwise noted.
* * * * *
0
46. Section 240.19d-4 is added to read as follows:
Sec. 240.19d-4 Notice by the Public Company Accounting Oversight
Board of disapproval of registration or of disciplinary action.
(a) Definitions--(1) Board means the Public Company Accounting
Oversight Board.
(2) Public accounting firm shall have the meaning set forth in 15
U.S.C. 7201(a)(11).
(3) Registered public accounting firm shall have the meaning set
forth in 15 U.S.C. 7201(a)(12).
(4) Associated person shall mean a person associated with a
registered public accounting firm as defined in 15 U.S.C. 7201(a)(9).
(b)(1) Notice of disapproval of registration. If the Board
disapproves a completed application for registration by a public
accounting firm, the Board shall file a notice of its disapproval with
the Commission within 30 days and serve a copy on the public accounting
firm.
(2) Contents of the notice. The notice required by paragraph (b)(1)
of this section shall provide the following information:
(i) The name of the public accounting firm and the public
accounting firm's last known address as reflected in the Board's
records;
(ii) The basis for the Board's disapproval, and a copy of the
Board's written notice of disapproval; and
(iii) Such other information as the Board may deem relevant.
(c)(1) Notice of disciplinary action. If the Board imposes any
final disciplinary sanction on any registered public accounting firm or
any associated person of a registered public accounting firm under 15
U.S.C. 7215(b)(3) or 7215(c), the Board shall file a notice of the
disciplinary sanction with the Commission within 30 days and serve a
copy on the person sanctioned.
(2) Contents of the notice. The notice required by paragraph (c)(1)
of this section shall provide the following information:
(i) The name of the registered public accounting firm or the
associated person, together with the firm's or the person's last known
address as reflected in the Board's records;
(ii) A description of the acts or practices, or omissions to act,
upon which the sanction is based;
(iii) A statement of the sanction imposed, the reasons therefor, or
a copy of the Board's statement justifying the sanction, and the
effective date of such sanction; and
(iv) Such other information as the Board may deem relevant.
Dated: March 12, 2004.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-6069 Filed 3-18-04; 8:45 am]
BILLING CODE 8010-01-P