Federal Register / Vol. 65, No. 91 / Wednesday, May 10, 2000 / Notices 30163

46 15 U.S.C. 78s(b)(2).

47 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter from Alden S. Adkins, Senior Vice

President and General Counsel, NASD Regulation,

to Katherine A. England, Assistant Director,

Division of Market Regulation, Commission, dated

April 17, 2000 (‘‘Amendment No. 1’’). Amendment

No. 1 made substantive changes to the proposed

rule language, including the deletion of certain

provisions in the 9300 Series, Review of

Disciplinary Proceeding by National Adjudicatory

Council and NASD Board; Application for

Commission Review.

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room in Washington, D.C. Copies of

such filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–Amex–98–

49 and should be submitted by May 31,

2000.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,46 that the

proposed rule change (SR–Amex–98–

49), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.47

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11611 Filed 5–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42751; File No. SR–NASD–

99–76]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 by the National

Association of Securities Dealers, Inc.

Relating to Amendments to the Code

of Procedure and Other Provisions

May 3, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934 (‘‘Act’’

or ‘‘Exchange Act’’),1 and rule 19b–4

thereunder,2 notice is hereby given that

on December 28, 1999, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly-owned subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’),

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by NASD

Regulation. On April 17, 2000, NASD

Regulation amended its proposal.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing

amendments to the NASD Code of

Procedure and other provisions of the

NASD Rules, that include: (1) Clarifying

the Department of Market Regulation’s

role in disciplinary proceedings; (2)

requiring members to designate, as the

custodian of the record of the Form

BDW, persons who are associated with

the firm at the time the forms are filed;

(3) clarifying the authority of hearing

officers and making some limited

changes to that authority; (4) clarifying

the scope of the Association’s document

production requirements; (5) providing

for hearing panel review of staff

determinations to impose limitations on

member firm’s business activities

because of financial and/or operational

difficulties; (6) providing for changes to

the process for appeals of disciplinary

actions, statutory disqualification

proceedings, and certain other

accelerated proceedings; (7) providing

for a streamlined process to impose bars

or expulsions for the failure to provide

information to the Association; and (8)

providing for a process by which the

Association can more expeditiously

cancel memberships of firms that fail to

meet the Association’s eligibility and

qualification standards. The text of the

proposed rule change is available at the

Office of the Secretary, the NASD and

at the Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation included statements

concerning the purpose of, and basis for,

the proposed rule change and discussed

any comments it received on the

proposed rule change. The text of these

statements may be examined at the

places specified in Item IV below.

NASD Regulation has prepared

summaries, set forth in Sections A, B,

and C below, of the most significant

aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The NASD Code of Procedure (the

‘‘Code’’), implemented on August 7,

1997, provides detailed requirements

governing NASD Regulation’s process

for:

(1) Authorizing, litigating, and issuing

disciplinary decisions;

(2) Providing for appeals of those

decisions;

(3) Taking certain actions through

categories of accelerated proceedings;

and

(4) Determining requests for relief

from statutory disqualifications.

Since August 7, 1997, the Association

staff has had significant experience

under the Code, and has noted certain

areas that need to be clarified or

changed. The Association is proposing a

series of clarifying and substantive

amendments to the Code and other

provisions as described below.

Custodian of the Record. Firms often

list persons not associated with the

firms as custodians of records on the

SEC Form BDW, and then the

Association may have difficulty

obtaining records when firms no longer

conduct business. The Association is

proposing to establish NASD Rule 3121

that would require members to

designate, as the custodians of the

record on the Form BDW, persons who

are associated with the firms at the time

the forms are filed.

Eligibility of Panel Members. In

certain circumstances, the National

Adjudicatory Council (NAC) or the

Review Subcommittee of the NAC

(Review Subcommittee) may appoint

panels to conduct hearings. Under

NASD Rule 1015, only one panel

member can be from the NAC, unless a

panel member is also a former NASD

Regulation Director or NASD Governor.

The Association believes that this

unnecessarily limits the pool of

potential panelists. The Association

believes that members of the NAC

possess specialized expertise that may

not be fully utilized under the current

rule language. Accordingly, the

Association is proposing to eliminate

this restriction.

Market Regulation’s Role in

Disciplinary Process. Both the

Department of Market Regulation and

the Department of Enforcement

represent NASD Regulation in formal

disciplinary matters under the Code.

However, the disciplinary rules only

refer to the Department of Enforcement

as the representative of the Association

30164 Federal Register / Vol. 65, No. 91 / Wednesday, May 10, 2000 / Notices

in these matters. The Department of

Market Regulation also represents

NASD Regulation under a delegation of

authority from the Department of

Enforcement, as stated in NASD Rule

9120(e). The Association is proposing

amending the Code to clarify the

Department of Market Regulation’s role

in the disciplinary process.

Investigations. The NASD Rule 8220

Series permits the Department of

Enforcement to initiate proceedings to

suspend or cancel membership from the

Association or suspend the association

of a person with a member based upon

the failure to provide information.

These proceedings may be initiated for

the failure to provide information

pursuant to an Association request or

the failure to make required filings with

the Association, such as FOCUS reports,

or to keep membership applications or

supporting documents current. Since

the Rule 8220 Series proceedings are

brought on an accelerated basis, the

Association is proposing to amend the

Rule 8220 Series to:

(1) As discussed below (under the

heading Failure To Respond), limit the

use of Rule 8220 Series proceedings to

address the most serious on-going

violations concerning associated

persons and members who fail to

provide the Association with requested

information; and

(2) Limit the sanctions available

under Rule 8220 proceedings to

suspensions.

Finally, the Association is proposing

to amend the service provision under

the Rule 8220 Series to make it

consistent with the service provision

under the Rule 9530 Series, a similar

rule series. The Association is proposing

that both the Rule 8220 Series and the

Rule 9530 Series service provisions

permit personal service, service by

facsimile, and service by overnight

courier. The Association is further

proposing to clarify that attempted

delivery of a document by an overnight

courier constitutes service under these

provisions.

Service of Papers—Address Changes.

NASD Rule 9134(b)(1) states that service

of papers on a natural person in a

disciplinary proceeding must be at the

person’s residential address as reflected

in the Central Registration Depository

(CRD). If the Association staff has actual

knowledge that the person’s residential

CRD address is out of date, then in

addition to service at the residential

address as reflected in the CRD, service

should also be make at the person’s last

know residential address and the CRD

address of the firm with which the

person is associated or affiliated, if he/

she is currently in the industry. The

Association is proposing to modify the

rule to permit adjudicators to waive the

requirement of sending papers to CRD

addresses when they are no longer

valid, and there is a more current

address available. This change would

only relate to documents served on

respondents after complaints have been

served.

Further, the Association is proposing

to amend NASD Rule 9135(a) to clarify

that complaints shall be deemed timely

filed so long as they are either mailed

or delivered to the Office of Hearing

Officers within the two-year

jurisdictional period, as outlined in the

By-Laws.

Severance of Cases. NASD Rule 9214,

‘‘Consolidation of Disciplinary

Proceedings,’’ authorizes the Chief

Hearing Officer to order the

consolidation of disciplinary hearings.

The Association is now proposing to

amend NASD Rule 9214 to state that the

Chief Hearing Officer has authority to

sever disciplinary proceedings

involving multiple respondents into two

or more proceedings. Under the rule

proposal, the Chief Hearing Officer may

order the severance of a disciplinary

matter into two or more disciplinary

proceedings, upon his or her own

motion, or upon motion of a Party.

In determining whether to order the

severance, the Chief Hearing Office shall

consider: (1) Whether the same or

similar evidence reasonably should be

expected to be offered at each of the

possible hearings; (2) whether the

severance would conserve the time and

resources of the Parties; and (3) whether

any unfair prejudice would be suffered

by one or more of the Parties if the

severance is (not) ordered. If the Chief

Hearing Officer issues an order to sever

a disciplinary proceeding for which a

Hearing Panel, or if applicable,

Extended Hearing Panel has been

appointed, the Chief Hearing Officer’s

order shall specify whether the same

Hearing Panel or, if applicable,

Extended Hearing Panel, shall preside

over the severed disciplinary

proceedings, or whether a new Hearing

Panel(s) or, if applicable extended

Hearing Panel(s), shall preside over all

severed proceedings, based on the

criteria set forth in NASD Rules 9231

and 9232.

Producing Documents. The

Association is proposing amendments to

NASD Rule 9253 to clarify the scope of

the Association’s document production

requirements. NASD Rule 9251(a)

requires Association staff to make

available to respondents documents

prepared or obtained by the staff in

connection with the investigations that

led to the institution of a disciplinary

proceeding. Exceptions to the

production requirements are listed in

NASD Rule 9251(b), and include

examination and inspection reports and

internal employee communication.

Notwithstanding these exceptions,

documents containing the staff’s

investigative techniques might become

discoverable under Rule 9253, if staff

members are called as witnesses during

hearings. NASD Rule 9253 requires

Association staff to produce written

statements made or adopted by staff

members, if they relate to the subject

matter of those persons’ testimony. It

also requires the staff to produce

contemporaneously recorded recitals of

oral statements made by witnesses, if

those written statements are

substantially verbatim.

The proposed modifications of NASD

Rule 9253 clarify that the only portions

of routine examination or inspection

reports, internal employee

communications, and any other internal

documents that are required to be

produced, under this rule, are the

portions outlining the substance of (and

any conclusions regarding) oral

statement made by persons who are not

employees of the Association when

evidence of those statements are offered

by Association staff during disciplinary

hearings.

Amending Complaints. The

Association is proposing to modify its

rules regarding amending complaints to

more closely follow the Federal Rules of

Civil Procedure (‘‘FRCP). The FRECP do

not limit the types of amendments that

may be made to complaints. NASD Rule

9212, however, only permits

amendments to ‘‘new matters of fact or

law.’’ The Association is proposing to

amend the rule to eliminate this

restriction. Thus, for instance, under the

proposed rule change, the Association

staff could amend complaints to include

additional respondents. Further, the

FRCP permit amendments to make

complaints conform to the evidence

presented. The Association is proposing

to modify NASD Rule 9212 to permit

such amendments. Also, the FRCP state

that amendments to complaints will be

freely granted when justice so requires.

The Association is proposing to amend

NASD Rule 9212 to state that

amendments to complaints will be

freely granted when justice so requires.

Association staff will need to obtain

hearing officer approval to amend

complaints after answers have been

filed.

Effective Dates of Sanctions. The

Central Registration Depository

currently sets the effective dates of the

imposition of sanctions imposed under

the Code by notifying respondents in

Federal Register / Vol. 65, No. 91 / Wednesday, May 10, 2000 / Notices 30165

4 15 U.S.C. 78o–3(h)(3).

writing when fines are due and of the

effective date of suspensions. The

Association is proposing to amend

NASD Rules 9216, 9268, 9269, and 9360

to state that the effective dates of

sanctions are the dates set by the

Association staff, unless stated

otherwise in orders, decisions, or

settlement agreements. As a result of

these changes, the Association believes

that IM–8310–2 is no longer needed

and, accordingly, is proposing it be

deleted. This change will not affect the

NASD’s policy of automatically staying

the imposition of the fines,

disgorgement and suspensions, pending

review.

Summary Dispositions. NASD Rule

9264(a) authorizes either the

Association or respondents to file

motions to summarily dispose of ‘‘any

or all the causes of action in the

complaint.’’ This rule however, does not

permit parties to move to eliminate

issues that do not involve entire ‘‘causes

of actions.’’ The Association is

proposing to modify NASD Rule 9264(a)

to track the language in the FRCP,

which permits courts to dismiss issues.

Further, the Association is proposing

to modify NASD Rule 9264 to authorize

hearing officers to deny, grant, or defer

motions to dismiss without referring the

matter to the full panel. The authority

to grant such motions would be limited

to jurisdictional issues, such as whether

the complaint was filed within the twoyear jurisdictional period. The

Association believes that Hearing

Officers should be permitted to dismiss

such motions which generally are

technical legal questions, and do not

require the input of industry

representatives.

Default Decisions. NASD Rule 9269

provides that motions to set aside

default decisions should be made to the

Review Subcommittee or the NAC. The

hearing officers who issue the default

decisions, however, are particularly

familiar with the matters. The

Association is proposing to modify the

rule to state that a motion to set aside

a default decision should be made to the

hearing officers that originally decided

the motion for a default decision. If the

hearing officer that issued the original

order is not available, the Chief Hearing

Officer shall appoint another hearing

officer to decide the motion. Appeals

from such denials could be made to the

NAC or the Review Subcommittee.

Remand Cases. NASD Rule 9349

authorizes the NAC to remand

disciplinary cases to hearing panels.

The Association is proposing to amend

NASD Rules 9344 and 9349 to clarify

that the Review Subcommittee may also

remand disciplinary cases to hearing

panels.

Office of General Counsel. Under

NASD Rules 9311 and 9312, the General

Counsel of NASD Regulation is required

to obtain Review Subcommittee or NAC

authorization to order parties to brief

particular matters. The General Counsel

rarely seeks additional briefing on

particular points, but where the General

Counsel believes that additional briefing

is necessary, the Review Subcommittee

or the NAC would most likely order it.

Thus, requiring the General counsel to

seek authorization for additional

briefing is an unnecessary use of

resources. The Association is proposing

that this requirement be eliminated. The

Association is proposing to include in

the rules a process by which parties may

challenge, before the Review

subcommittee or the NAC, requests for

additional briefing made by the General

Counsel.

Briefing Schedules. NASD Rule

9347(b) establishes briefing schedules

for papers filed in NAC proceedings.

The Association is proposing amending

this rule to clarify that the time periods

listed in the rule are only applicable to

the principal briefing schedule and not

applicable to the briefing of subsequent

collateral issues.

Procedures for Regulation of Activities

of a Member Experiencing Financing or

Operational Difficulties. Under the

NADA Rule 9410 Series, the Department

of Member Regulation issues notices

and holds initial hearings to determine

whether members must limit their

business activities as a result of

financial and/or operational difficulties.

Members can appeal Member

Regulation’s decisions to NAC, and the

NAC or the Review Subcommittee will

appoint a Subcommittee to participate

in the review. The Association is

proposing to amend the rule series to

provide that firms may appeal

limitations in notices issued by the

Department of Member Regulation to

hearing panels that will consist of a

hearing officer and two other panelists.

Under the proposal, the Department of

Member Regulation would not hold

hearings, and the NAC would not

participate in matters handled under

this rule series.

Currently, an NASD Governor may

initiate the review of a decision issued

by the NAC, under the NASD rule 9410

Series, not later than the next meeting

of the NASD Board that is at least 15

days after the date on which the NASD

Board reviews the proposed written

decision of the NAC. The Association is

proposing to replace this procedure

with a mechanism by which the

Executive Committee of the NASD

Board may initiate the review of the

hearing panel decision for a period of 15

days. Currently, the Department of

Member Regulations’s decision is stayed

unless otherwise ordered by the NAC

decision. The Association is proposing

to modify this provision to provide that

the Department of Member Regulation’s

recommendation is stayed unless

ordered otherwise by the Executive

Committee.

Other Proceedings. Two categories of

expedited proceedings available under

the NASD Rule 9510 Series are referred

to as ‘‘Summary Proceedings‘‘ and

‘‘Non-Summary Proceedings.’’ The key

differences between Summary and NonSummary proceedings are that: (1) In a

Summary Proceeding, the Association

can impose sanctions against a member

or associated person before a hearing is

held and a final Association decision is

served, whereas in a Non-Summary

Proceeding, generally a hearing must be

held and a final decision served before

any sanction may be imposed; (2) a

Summary Proceeding requires prior

authorization by the NASD Board of

Governors, whereas a Non-Summary

Proceeding may be initiated by staff

without Board involvement; and (3)

while the various forms of Summary

Proceedings are enumerated in Section

15A(h)(3) of the Act, 4 the othe reforms

of expedited proceedings, including

Non-Summary, are not.

The Association is proposing several

amendments to the rules that govern the

Code’s Summary and Non-Summary

Proceedings. Under the current rules, it

is unclear as to whether hearing officers

have all of the powers in Summary and

Non-Summary Proceedings (the Rule

9500 Series) that they have in regular

disciplinary proceedings (the Rule 9200

Series). The Association is proposing to

add a provision to the NASD Rule 9500

series stating that: The hearing officer

shall have authority to do all things

necessary and appropriate to discharge

his or her duties as set forth under Rule

9235.’’

NASD Rule 9514(a)(1) requires that

requests for hearings be filed within 7

days of receipt of suspension letters (or,

with respect to notice of a pre-use filing

requirement under Rule 2210(c)(4) and

Rule 2220(c)(2), within 30 days of such

notice). The Association is proposing to

amend NASD Rule 9514(a)(2) to clarify

that if the member or person subject to

the notice does not timely request a

hearing under Rule 9514(a)(1), the

notice shall constitute final Association

action.

NASD Rule 9514(d)(2) states that

Non-Summary Proceedings held under

30166 Federal Register / Vol. 65, No. 91 / Wednesday, May 10, 2000 / Notices

5 17 CFR 240.19h–1.

the Rule 9500 Series need to be held

within 21 days after respondent requests

a hearing. Hearing panels may, during

the initial 21-day periods, extend the

time in which the hearings shall be held

by additional 21-day periods. The

Association believes that these periods

are too short, and is proposing

amending the rule to extend the initial

period to 40 days, with an additional 30

days of further extension. Since the

suspension is not in effect during this

time, this additional time will not

prejudice respondents, and it will

provide the staff and respondents with

ample time to prepare for hearings.

NASD Rule 9516 gives firms/persons

suspended or limited under these

provisions the opportunity to become

reinstated on the grounds of full

compliance with the conditions of the

suspension or limitation. The request

needs to be filed with the department or

office of the Association that acted as

the party in the proceeding. If the

department head denies reinstatement,

the party may file a request for relief

with the NASD Board, and the NASD

Board must respond in writing within

14 days. The Association believes that

the matters appealed, however, do not

require NASD Board review. The

Association is proposing that appeals

under NASD Rule 9516 be addressed by

the Review Subcommittee of the

National Adjudicatory Council, rather

than the NASD Board.

Eligibility Proceedings. The

Association is proposing several

changes to the NASD Rule 9520 Series

that govern the process by which

persons may become or remain

associated with a member,

notwithstanding the existence of a

statutory disqualification or for a

current member or person associated

with a member to obtain relief from the

eligibility or qualification requirements.

First, the NASD Rule 9520 Series does

not state whether extensions of time or

waivers of time limitations for filing of

papers or holding of hearings may be

granted. The Association is proposing to

create NASD Rule 9524(a)(5) that

permits such actions by consent of all

the parties. Further, the eligibility rules

do not state whether the disqualification

hearing panel or the NAC may order

that the record be supplemented. The

Association is proposing to create NASD

Rule 9524(a)(3)(c) to permit the Hearing

Panel to order the Parties to supplement

the record with any additional evidence

the Hearing Panel deems necessary.

NASD Rule 9524(b)(3) states that

NASD Regulation’s statutory

disqualification recommendations

become effective upon service on

applicants. However, only the denials

are effective upon service on applicants

(subject to the applicant requesting a

stay of effectiveness from the

Commission). Approval decisions are

not effective until the Commission has

either sent an acknowledgment letter to

NASD Regulation (usually within 30

days, and the SEC can request a further

60-day extension of that period), or the

Commission has entered an order in

cases that have involved a previouslyentered SEC bar (there is no time

limitation for the entry of such an

order). The Association is proposing to

amend this rule to reflect these points.

If a member files an application for

relief under the eligibility rules, the

NAC or the Review Subcommittee

appoints a hearing panel composed of

two or more members who are current

or former members of the NAC or former

Directors or Governors. The Association

is proposing that NASD Rule 9524(a)(1)

be amended to state that members of the

Statutory Disqualification Committee

may also serve on hearing panels.

NASD Rule 9524(a)(3) states that if

the Association staff initiated the

proceedings, the Association will give to

the applicant all documents that were

relied on by the Association in issuing

its notice. However, most applications

are started by member firms, not the

Association. The Association is

proposing to amend this rule to reflect

this fact.

The Association is also proposing to

amend NASD Rule 9524(a)(3) to provide

that once an application is filed, CRD

will gather all of the information

necessary to process the application,

including:

(1) CRD records for the disqualified

member, sponsoring member, and/or

disqualified person, and the proposed

supervisor; and

(2) All of the information submitted

by the disqualified member or

sponsoring member in support of the

application.

Proposed NASD Rule 9524(a)(3)

would further provide that CRD will

prepare an index of these documents,

and simultaneously provide this index

and copies of the documents to the

disqualified member or sponsoring

member, the Office of the General

Counsel of NASD Regulation, and the

Department of Member Regulation. The

rule also would require the Department

of Member Regulation to submit its

recommendation and supporting

documents to the hearing panel and the

disqualified member or sponsoring

member within 10 business days of the

hearing, unless the parties otherwise

agree. Similarly, the disqualified

member or sponsoring member would

be required to submit its documents to

the hearing panel and the Department of

Member Regulation within 10 business

days of the hearing, unless otherwise

agreed.

Amendments to the NASD Rule 9520

Series also concern the review

procedures undertaken by Association

staff in the case of certain disqualifying

events. In particular, the Association is

proposing to amend NASD Rule 9522(e)

to permit members to submit a written

request for relief (rather than an MC–

400 application) in cases where the

disqualified member or person is subject

to an injunction that was entered 10 or

more years prior to the proposed

administration or association. Under

Exchange Act Rule 19h–1,5 the NASD is

not required to provide any notice to the

Commission of the proposed admission

or association in these types of cases.

The Association also proposes that

members be able to file a written request

for relief in cases where a member

requests to change the supervisor of a

disqualified person or where, for

instance, the New York Stock Exchange

has determined to approve the proposed

association of a disqualified person and

the NASD concurs with the

determination. Member Regulation

would also be granted discretion to

approve the written request for relief in

these cases, if it deemed such action to

be consistent with the public interest

and the protection of investors.

The Association also proposes to

amend the NASD Rule 9520 Series to

permit Member Regulation to approve

an MC–400 application for relief in

those cases where the disqualifying

event is excepted from the ‘‘full’’ notice

requirements of Rule 19h–1, but where

a‘‘short form’’ notification to the

Commission under Rule 19h–1 is still

required. In these cases, the member

would be required to file an MC–400,

but Member Regulation would have the

discretion to approve the application

when consistent with the public interest

and the protection of investors.

In addition, the Association is

proposing new Rule 9523 to permit

Member Regulation to recommend the

membership or continued membership

of a disqualified member or sponsoring

member or the association or continuing

association of a disqualified person

pursuant to a supervisory plan. The

procedures set forth in proposed NASD

Rule 9523 are modeled on current Rule

9216 concerning Acceptance, Waiver,

and Consent procedures, and are

intended to avoid the requirement of a

formal hearing and decision by the

Statutory Disqualification Committee

(and its hearing panels) in cases that

Federal Register / Vol. 65, No. 91 / Wednesday, May 10, 2000 / Notices 30167

6 15 U.S.C. 78o–3(b)(6).

7 15 U.S.C. 78o–3(b)(7).

8 15 U.S.C. 78o–3(b)(8). 9 17 CFR 200.30–3(a)(12).

generally only involve the issue of what

type of supervisory plan is appropriate

for the disqualified member or person.

Under proposed NASD Rule 9523, the

member would be required to file an

MC–400 application with the NASD.

Member Regulation, however, would

have the discretion to recommend the

approval of the application in the event

an appropriate supervisory plan is

established. The member would be

required to execute a letter consenting

to the imposition of the supervisory

plan. The letter and the supervisory

plan would then be submitted to the

Office of General Counsel and/or the

Chairman of the Statutory

Disqualification Committee for review

and possible approval. While both the

Office of General Counsel and the

Committee Chairman would have

authority to approve the application or

refer it to the NAC, only the Committee

Chairman would be permitted to reject

the application.

Failure To Respond. As noted above

(under the heading ‘‘Investigations’’),

proceedings initiated under the Rule

8220 Series are designed to address the

most serious on-going violations

concerning associated persons and

members that are failing to provide the

Association with information. For this

reason, these proceedings are brought

on an accelerated basis.

The Association is proposing to create

a new Rule 9540 Series that could be

used against those who fail to provide

the Association with information,

required filings, or keep membership

applications or supporting documents

current. Under the proposed NASD Rule

9540 Series, the Association would send

notices informing respondents that

failure to provide the Association with

previously requested information or

required filings or the failure to keep its

membership application or supporting

documents current will result in

suspensions, unless the information is

provided to the Association within 20

days. Respondents would have five days

to request hearings to challenge

proposed suspensions. These hearings

would be conducted before threemember hearing panels, and the hearing

panels would have the authority to

order any fitting sanctions, including

expulsions and bars. Respondents who

fail to request hearings to challenge the

suspension during the six-month period

following the receipt of notices

initiating proceedings under this rule

series will be automatically barred or

expelled.

Further, the Association is proposing

to include in the proposed NASD Rule

9540 Series a process by which the

Department of Member Regulation

could quickly cancel the memberships

of firms that fail to meet the

Association’s eligibility and

qualification standards. Under the

proposal, the Association would send

letters to members informing them that

their memberships will be canceled

within 20 days of receipt of the letters,

unless the firm becomes eligible for

continuance in membership within this

time period. The members will be

provided opportunities to request

hearings within five days of service of

the notices to challenge the proposed

cancellations. The hearings would be

held before Hearings Officers.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act,6 which require that the rules of

an association be designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade and, in general, to

protect investors and the public interest.

The NASD believes that the proposed

rule change is consistent with Section

15A(b)(7) of the Act 7 in that it works to

adequately safeguard the interests of

investors while establishing fair and

reasonable rules for its members and

persons associated with its members.

The rule change is consistent with

Section 15A(b)(8) of the Act 8 in that it

furthers the statutory goals of providing

a fair procedure for disciplining

members and associated persons.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will

impose any burden on competition that

is not necessary or appropriate in

furtherance of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

On August 10, 1999, the proposed

rule change was published for comment

in NASD Notice to Members Number

99–73. No comments were received in

response to the Notice to Members.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the NASD consents, the

Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposal is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, N.W., Washington, D.C.

20549–0609. Copies of the submission,

all subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–99–76 and should be

submitted by May 31, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11610 Filed 5–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42754; File No. SR–NASD–

00–18]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. and Amendment No. 1

thereto Relating to the Entry of

Locking/Crossing Quotations Prior to

the Nasdaq Market Opening

May 3, 2000.

Pursuant to Section 19(b0(1) of the

Securities Exchange Act of 1934