Federal Register / Vol. 72, No. 71 / Friday, April 13, 2007 / Notices 18703 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 makes clarifying changes to 

the rule text emphasizing that attorneys may 

represent parties in NASD’s forum, unless state law 

prohibits such representation. Amendment No. 1 

also makes several clarifying and technical changes 

to the proposed rule filing. 

4Amendment No. 2 makes clarifying changes to 

the rule text concerning restrictions on non-attorney 

representation. Amendment No. 2 also includes 

minor organizational changes to a paragraph and 

footnotes describing the American Bar Association 

Model Rule of Professional Conduct 5.5. 

5The proposed rule change contemplates changes 

to Rules 12208 and 13208 of the Customer and 

Industry Codes, which restate old Rule 10316. See 

Securities Exchange Act Release No. 55158 (Jan. 24, 

2007); 72 FR 4574 (Jan. 31, 2007) (File Nos. SR–

NASD–2003–158 and SR–NASD–2004–011) (Order 

Approving Proposed Rule Change and Amendments 

1, 2, 3, and 4 to Amend NASD Arbitration Rules 

for Customer Disputes and Notice of Filing and 

Order Granting Accelerated Approval of 

Amendments 5, 6, and 7 Thereto; Order Approving 

Proposed Rule Change and Amendments 1, 2, 3, 

and 4 to Amend NASD Arbitration Rules for 

Industry Disputes and Notice of Filing and Order 

Granting Accelerated Approval of Amendments 5, 

6, and 7 Thereto). The changes to Proposed Rule 

10407 reflect changes to the new NASD Code of 

Mediation Procedure. See Securities Exchange Act 

Rel. No. 52705 (Oct. 31, 2005); 70 FR 67525 (Nov. 

7, 2005) (SR–NASD–2004–013). The new NASD 

Code of Mediation Procedure is currently included 

in the Code, but will be removed and renumbered 

as a separate Code now that the Customer and 

Industry Codes have been approved. 

necessary or appropriate in the public 

interest, for the protection of investors 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–ISE–2007–19 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–ISE–2007–19. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of the filing also will be 

available for inspection and copying at 

the principal office of ISE. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–ISE–2007–19 and should be 

submitted on or before May 4, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6961 Filed 4–12–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55604; File No. SR–NASD–

2006–109] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment Nos. 1 and 2 Thereto 

Relating to Representation of Parties 

in Arbitration and Mediation 

April 9, 2007. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’), through its wholly owned 

subsidiary, NASD Dispute Resolution, 

Inc. (‘‘NASD Dispute Resolution’’) filed 

with the Securities and Exchange 

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

on September 14, 2006, and amended 

on November 9, 2006 (Amendment No. 

1) 3 and February 23, 2007 (Amendment 

No. 2),4 the proposed rule change as 

described in Items I, II, and III below, 

which Items have been prepared by 

NASD Dispute Resolution. 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 Dispute Resolution is 

proposing to amend the Code of 

Arbitration Procedure for Customer 

Disputes (‘‘Customer Code’’), the Code 

of Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’), and the 

NASD Code of Arbitration Procedure 

(‘‘Code’’) to address representation of 

parties in arbitration and mediation.5

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

Customer Code 

12208. Representation of Parties 

(a) Representation by a Party 

Parties may represent themselves in 

an arbitration held in a United States 

hearing location. A member of a 

partnership may represent the 

partnership; and a bona fide officer of 

a corporation, trust, or association may 

represent the corporation, trust, or 

association. 

(b) Representation by an Attorney 

At any stage of an arbitration 

proceeding held in a United States 

hearing location, [All] all parties shall 

have the right to be represented by 

[counsel during any stage of an 

arbitration] an attorney at law in good 

standing and admitted to practice 

before the Supreme Court of the United 

States or the highest court of any state 

of the United States, the District of 

Columbia, or any commonwealth, 

territory, or possession of the United 

States, unless state law prohibits such 

representation. 

(c) Representation by Others 

Parties may be represented in an 

arbitration by a person who is not an 

attorney, unless: 

• state law prohibits such 

representation, or 

• the person is currently suspended 

or barred from the securities industry in 

any capacity, or 

• the person is currently suspended 

from the practice of law or disbarred. 


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6See Birbrower, Montalbano, Condo & Frank v. 

Superior Court, 949 P.2d 1 (Cal. 1998); see also 

Florida Bar v. Rapoport, 845 So. 2d 874, 2003 Fla. 

LEXIS 250 (Fla. 2003). 

7ABA Model Rule 5.5, as amended, would allow 

a United States lawyer, admitted in one United 

States jurisdiction, to engage in certain types of 

legal activity in another United States jurisdiction 

where he is not licensed to practice, without being 

deemed to be engaging in the unauthorized practice 

of law. For purposes of the dispute resolution 

forum, ABA Model Rule 5.5, as amended, states, in 

relevant part, that a lawyer may provide legal 

services on a temporary basis in an out-of-state 

jurisdiction that are in or reasonably related to a 

pending or potential arbitration, mediation, or other 

alternative dispute resolution proceeding in the 

jurisdiction or another jurisdiction, if the services 

(d) Qualifications of Representative 

Issues regarding the qualifications of 

a person to represent a party in 

arbitration are governed by applicable 

law and may be determined by an 

appropriate court or other regulatory 

agency. In the absence of a court order, 

the arbitration proceeding shall not be 

stayed or otherwise delayed pending 

resolution of such issues. 

* * * * * 

Industry Code 

13208. Representation of Parties 

(a) Representation by a Party 

Parties may represent themselves in 

an arbitration held in a United States 

hearing location. A member of a 

partnership may represent the 

partnership; and a bona fide officer of 

a corporation, trust, or association may 

represent the corporation, trust, or 

association. 

(b) Representation by an Attorney 

At any stage of an arbitration 

proceeding held in a United States 

hearing location, [All] all parties shall 

have the right to be represented by 

[counsel during any stage of an 

arbitration] an attorney at law in good 

standing and admitted to practice 

before the Supreme Court of the United 

States or the highest court of any state 

of the United States, the District of 

Columbia, or any commonwealth, 

territory, or possession of the United 

States, unless state law prohibits such 

representation. 

(c) Representation by Others 

Parties may be represented in an 

arbitration by a person who is not an 

attorney, unless: 

• state law prohibits such 

representation, or 

• the person is currently suspended 

or barred from the securities industry in 

any capacity, or 

• the person is currently suspended 

from the practice of law or disbarred. 

(d) Qualifications of Representative 

Issues regarding the qualifications of 

a person to represent a party in 

arbitration are governed by applicable 

law and may be determined by an 

appropriate court or other regulatory 

agency. In the absence of a court order, 

the arbitration proceeding shall not be 

stayed or otherwise delayed pending 

resolution of such issues. 

* * * * * 

Code of Arbitration Procedure 

10407. Representation of Parties 

(a) Representation by Party 

Parties may represent themselves in 

mediation held in a United States 

hearing location. A member of a 

partnership may represent the 

partnership; and a bona fide officer of 

a corporation, trust, or association may 

represent the corporation, trust, or 

association. 

(b) Representation by an Attorney 

At any stage of a mediation 

proceeding held in a United States 

hearing location, all parties shall have 

the right to be represented by an 

attorney at law in good standing and 

admitted to practice before the Supreme 

Court of the United States or the highest 

court of any state of the United States, 

the District of Columbia, or any 

commonwealth, territory, or possession 

of the United States, unless state law 

prohibits such representation. 

(c) Representation by Others 

Parties may be represented in 

mediation by a person who is not an 

attorney, unless: 

• state law prohibits such 

representation, or 

• the person is currently suspended 

or barred from the securities industry in 

any capacity, or 

• the person is currently suspended 

from the practice of law or disbarred. 

(d) Qualifications of Representatives 

Issues regarding the qualifications of 

a person to represent a party in 

mediation are governed by applicable 

law and may be determined by an 

appropriate court or other regulatory 

agency. In the absence of a court order, 

the mediation proceeding shall not be 

delayed pending resolution of such 

issues. 

[10407] 10408. Mediator Selection 

(a)–(d) No change. 

[10408] 10409. Limitation on Liability 

No change. 

[10409] 10410. Mediation Ground Rules 

(a)–(g) No change. 

[10410] 10411. Mediation Fees 

(a)–(c) No change. 

* * * * * 

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 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 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 

Background 

NASD Dispute Resolution believes a 

rule is needed to clarify the issue of 

representation of parties in dispute 

resolution. NASD Rule 10316 states that 

all parties shall have the right to 

representation by counsel at any stage of 

the proceedings. The rule provides no 

guidance on the kind of representatives 

who are permitted to practice in the 

NASD dispute resolution forum, or on 

the qualifications those representatives 

must have to participate in the forum. 

Moreover, Rule 10316 does not address 

a growing trend in American 

jurisprudence, the multi-jurisdictional 

practice of law. 

The multi-jurisdictional practice of 

law occurs when attorneys, licensed in 

one United States (U.S.) jurisdiction, 

practice law in a jurisdiction in which 

they are not licensed. In the area of 

dispute resolution, for example, it is 

common for an attorney licensed to 

practice law in one state to represent a 

client in a dispute resolution proceeding 

in another state in which the attorney is 

not licensed. Although this practice is 

permitted in many jurisdictions, it may 

be a violation of certain other states’

unauthorized practice of law provisions. 

Until recent years, most states had taken 

no action against this practice. However, 

two state courts have found that out-ofstate attorneys must meet certain 

conditions in order to participate in a 

dispute resolution proceeding in their 

jurisdictions.6 In light of these 

developments, the American Bar 

Association (ABA) amended its Model 

Rule of Professional Conduct 5.5 (ABA 

Model Rule 5.5) to promote the multijurisdictional practice of law.7


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arise out of or are reasonably related to the lawyer’s 

practice in a jurisdiction in which the lawyer is 

admitted to practice and are not services for which 

the forum requires pro hac vice admission. This 

rule is sometimes referred to as the temporary 

practice rule. Twenty-seven states have either 

adopted ABA Model Rule 5.5 or a similar version 

of the rule or currently have a temporary practice 

rule in effect. American Bar Association, Charts on 

State Adoption of MJP Proposals (visited Aug. 23, 

2006) http://www.abanet.org/cpr/mjp/ 

state_adoption.html. Other states have adopted a 

temporary practice rule that, like ABA Model Rule 

5.5, allows an attorney not licensed in a state to 

provide certain types of legal services in the state 

on a limited basis. The laws of Michigan and 

Virginia specifically authorize occasional or 

incidental practice by out-of-state lawyers. See 

Mich. Comp. Law Ann. sec. 600.916 and Va. State 

Bar Rule, Pt. 6, sec. 1(C). 

8See File No. SR–NASD–2005–023. 

9 Id. at Amendment No. 1. 

10See Securities Exchange Act Rel. No. 34–52045 

(July 15, 2005); 70 FR 42123 (July 21, 2005) (File 

No. SR–NASD–2005–023). 

11The requirement to be licensed to practice in 

a U.S. jurisdiction and be in good standing in that 

jurisdiction is in addition to and not in lieu of the 

requirement that an attorney must comply with 

applicable laws of the relevant jurisdiction. As 

previously noted, while the multi-jurisdictional 

practice of law may be permitted in many 

jurisdictions, it may constitute a violation of certain 

states’ unauthorized practice of law provisions. 

12This rule has been enforced in NASD 

Enforcement proceedings. In two similar cases, a 

respondent’s answer was stricken from the record 

because the respondent’s representative had not 

indicated that he was a licensed attorney. See 

NASDR Office of the Hearing Officers, OHO Order 

97–15 (C01970032) (visited Aug. 24, 2006), 

available at: http://www.nasd.com/web/groups/ 

enforcement/documents/oho_disciplinary_orders/

nasdw_007839.pdf; see also OHO Order 98–10 

(C10970176) (visited Aug. 24, 2006), available at: 

http://www.nasd.com/web/groups/enforcement/

documents/oho_disciplinary_orders/

nasdw_007695.pdf. 

13See SEC Rules of Practice, 17 CFR § 201.102(b) 

(2004). 

14Consistent with current practice, the proposed 

rule would allow a relative, friend or associate to 

Continued 

Accordingly, NASD proposes to 

codify its current practice of permitting 

the multi-jurisdictional practice of law 

in NASD’s dispute resolution forum to 

the extent permitted under applicable 

state law. NASD also proposes to codify 

its current practice which allows nonattorney representatives to represent 

parties in arbitration or mediation. 

Previous Proposal Relating to 

Representation in Arbitration and 

Mediation 

On February 9, 2005, NASD filed a 

proposed rule change with the 

Commission to address attorney 

representation in arbitration and 

mediation.8 The proposed rule change 

would have: 

• Allowed parties to represent 

themselves in an arbitration or 

mediation; 

• Allowed parties to be represented 

by an attorney at law admitted to 

practice before a U.S. jurisdiction at any 

stage of the proceeding; and 

• Deferred to the states any issues 

regarding qualifications of a person to 

represent a party. 

NASD amended this proposal on July 

8, 2005 to clarify that it was intended to 

address the issue of multi-jurisdictional 

practice of law by attorneys, and was 

not intended to address the issue of 

representation by non-attorneys in 

arbitration or mediation proceedings.9

As amended, the attorney 

representation proposal was published 

in the Federal Register on July 21, 

2005.10 The SEC received fifteen 

comments, which primarily focused on 

two issues: Whether the rule should 

preempt state law regarding attorney 

licensing, and whether the rule should 

prohibit non-attorneys from practicing 

in NASD’s forum. The comments and 

NASD’s response are discussed in 

subsection C below. 

Based on the comments received on 

the attorney representation proposal, as 

amended, NASD recognized that the 

proposal may have been ambiguous. 

NASD did not intend to change current 

practice in the forum regarding 

representation of parties by nonattorneys, or to preempt state law on the 

issue of attorney licensing. Because the 

comments indicated that these positions 

were unclear, NASD withdrew its 

proposal. The current proposed rule 

change addresses representation of 

parties by themselves, by attorneys and 

by non-attorneys in arbitration and 

mediation. 

Representation of Parties by 

Themselves, Attorneys and NonAttorneys in Arbitration and Mediation 

NASD is proposing to amend Rules 

12208 and 13208 of the Customer and 

Industry Codes, respectively, and Rule 

10407 of the Code to clarify that in both 

arbitration and mediation: (1) Parties 

may represent themselves; (2) parties 

may be represented by an attorney, 

provided certain criteria are met; (3) 

parties may be represented by a person 

who is not an attorney, unless state law 

prohibits such representation or the 

person is currently suspended or barred 

from the securities industry in any 

capacity or is an attorney who is 

currently suspended from the practice 

of law or disbarred; and (4) issues 

regarding qualifications of a 

representative are governed by 

applicable law. 

First, the proposed rule change 

codifies current practice by explicitly 

stating that parties may represent 

themselves in arbitration. 

Second, the proposed rule change 

codifies current practice permitting the 

multi-jurisdictional practice of law by 

attorneys in the NASD dispute 

resolution forum to the extent permitted 

by state law. In addition, the proposed 

rule change states that if a party chooses 

to be represented by an attorney, the 

attorney must be licensed to practice in 

a U.S. jurisdiction and be in good 

standing in that jurisdiction.11 NASD 

believes that requiring an attorney to be 

licensed in a U.S. jurisdiction and to be 

in good standing in that jurisdiction will 

protect investors by prohibiting 

individuals who have been suspended 

from the practice of law or disbarred 

from representing parties in the NASD 

forum. Further, the requirement that an 

attorney must be licensed to practice in 

a U.S. jurisdiction sets a standard of 

practice for the arbitration forum that is 

consistent with the other rules and 

proceedings of NASD. In particular, 

Rule 9141(b) of the NASD Code of 

Procedure states, in relevant part, that a 

person may be represented in any 

disciplinary proceeding by an attorney 

at law admitted to practice before the 

highest court of any state of the United 

States, the District of Columbia, or any 

commonwealth, territory, or possession 

of the United States.12 The proposed 

rule change also is consistent with Rule 

102(b) of the SEC Rules of Practice, 

which states that, ‘‘[i]n any proceeding, 

a person may be represented by an 

attorney at law admitted to practice 

before the Supreme Court of the United 

States or the highest court of any State 

***’’ 13

Third, the proposed rule change 

addresses the representation of parties 

by non-attorneys in the NASD forum. 

Under the proposed rule change, parties 

may be represented in an arbitration or 

mediation by a person who is not an 

attorney, unless state law prohibits such 

representation or the person is currently 

suspended or barred from the securities 

industry in any capacity or is an 

attorney who is currently suspended 

from the practice of law or disbarred. 

This provision would be applicable to 

all arbitration claims. NASD 

understands, however, that it may be 

difficult for investors with claims of less 

than $100,000 to retain an attorney on 

a contingency-fee basis because the 

attorney may believe that the attorney’s 

share of the award might be too small 

to justify the effort. In these 

circumstances, NASD believes that 

investors should be able to seek other 

assistance to resolve their arbitration or 

mediation claims for a more affordable 

fee.14 At the same time, NASD believes 


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represent or assist a person (e.g., an elderly or 

disabled person) with his or her arbitration or 

mediation. In addition, law school securities 

arbitration clinics can provide investors with 

affordable legal representation. NASD notes that a 

securities arbitration clinic also can help an 

investor who has a smaller claim but is unable to 

hire an attorney, provided the investor qualifies for 

assistance. See How to Find an Attorney (for more 

information on clinic locations and eligibility 

requirements) (visited Sept. 13, 2006), available at: 

<http://www.nasd.com/ArbitrationMediation/ 

StartanArbitrationorMediation/ 

HowtoFindanAttorney/index.htm>. 

15 15 U.S.C. 78o–3(b)(6). 

16Comments were submitted by Timothy A. 

Canning, Esq., Law Offices of Timothy A. Canning, 

dated February 11, 2005 (‘‘Canning I Letter’’); Albert 

A. Rapoport, Esq., dated June 20, 2005 (‘‘Rapoport 

Letter’’); Joseph C. Korsak, Esq., Law Office of 

Joseph C. Korsak, dated July 22, 2005 (‘‘Korsak 

Letter’’); Michael Firestein, Esq. and Navid Yadegar, 

Esq., Proskauer Rose LLP, dated August 1, 2005 

(‘‘Firestein Letter’’); Rodney J. Heggy, Esq., Heggy & 

Associates, LLC, dated August 4, 2005 (‘‘Heggy 

Letter’’); Richard L. Sacks, Securities Arbitration 

Consultant, dated August 9, 2005 (‘‘Sacks Letter’’); 

Rosemary Shockman, President, Public Investors 

Arbitration Bar Association, dated August 9, 2005 

(‘‘PIABA Letter’’); Joseph O’Donnell, dated August 

10, 2005 (‘‘O’Donnell Letter’’); Irwin G. Stein, dated 

August 10, 2005 (‘‘Stein Letter’’); Montgomery G. 

Griffin, Esq., Securities Arbitration Offices of 

Montgomery G. Griffin, dated August 10, 2005 

(‘‘Griffin Letter’’); Timothy A. Canning, Esq., Law 

Offices of Timothy A. Canning, dated August 10, 

2005 (‘‘Canning II Letter’’); Kevin P. Takacs, CCO, 

Dominion Investor Services, Inc., dated August 11, 

2005 (‘‘Takacs Letter’’); Jill I. Gross, Director of 

Advocacy and Barbara Black, Director of Research, 

Pace Investor Rights Project, dated August 11, 2005 

(‘‘Pace Letter’’); and Stephen C. Krosschell, Esq., 

Goodman & Nekvasil, P.A., dated August 11, 2005 

(‘‘Krosschell Letter’’). The letter received from 

Marie W. Hayes, dated March 25, 2005, does not 

comment on the proposed rule change. 

17See Firestein Letter, Heggy Letter, Pace Letter, 

PIABA Letter and Rapoport Letter. 

18See Canning I & II Letters, Korsak Letter, 

Krosschell Letter, Sacks Letter and Stein Letter. 

19See, Griffin Letter, O’Donnell Letter, Rapoport 

Letter, Sacks Letter, Stein Letter and Takacs Letter. 

20See Firestein Letter, Heggy Letter, Korsak 

Letter, Pace Letter and PIABA Letter. 

that such non-attorney representatives 

should not be persons who have been 

found by a regulatory body in essence 

to be unfit to represent clients or to 

conduct securities business with the 

public. Thus, to protect investors, the 

rule would prohibit non-attorney 

representatives who are currently 

suspended or barred from the securities 

industry, or attorneys who are currently 

suspended from the practice of law or 

disbarred, from representing parties in 

the NASD dispute resolution forum. 

While NASD remains concerned about 

some aspects of non-attorney 

representation, NASD does not wish to 

prohibit investors from retaining a nonattorney representative if that person is 

the only affordable representation 

available, and the requirements of the 

proposed rule are met. 

Last, the proposed rule change would 

allow an attorney to represent a client 

in an NASD arbitration or mediation 

held in any U.S. hearing location, 

regardless of the jurisdiction in which 

the attorney is licensed. An attorney’s 

ability to represent clients in a 

jurisdiction in which he or she is not 

licensed, however, would be subject to 

the applicable law of that jurisdiction. 

The proposed rule change is not 

intended to preempt state law; it is 

intended to reflect current practice in 

the forum which, based on experience, 

indicates that the outcome of a dispute 

resolution proceeding depends more on 

the level of knowledge, training and 

skill of the attorneys, rather than the 

jurisdiction from which the attorneys 

received their license to practice. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,15 which 

requires, among other things, that 

NASD’s rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. NASD believes that the 

proposed rule change balances the 

needs of investors to have access to 

representation, particularly in small 

cases, with NASD’s responsibility to 

protect investors, the integrity of its 

forum, and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received by NASD. The 

SEC received fifteen comments on the 

attorney representation proposal that it 

published for comment on July 21, 

2005.16 Commenters primarily focused 

on two issues: Whether the rule should 

preempt state law regarding attorney 

licensing, and whether the rule should 

prohibit non-attorneys from practicing 

in NASD’s forum. 

With respect to the state preemption 

issue, several commenters agreed that 

state law should control whether 

attorneys may participate in arbitrations 

in a state in which they are not 

licensed.17 These commenters stated 

that representatives should be licensed 

legal practitioners who are regulated 

and have demonstrated a minimum 

level of competence required to 

represent clients. Several other 

commenters opposed the provision of 

the proposal that would allow state law 

to control attorney-licensure issues, 

stating that the provision could result in 

delays in arbitration proceedings as 

representatives make the qualifications 

of an out-of-state representative the 

focus of the proceedings.18

Other commenters addressed whether 

the proposal would prohibit, in effect, 

non-attorneys from practicing in 

NASD’s forum. Several commenters 

contended that the proposal should 

address non-attorney representation and 

should allow non-attorneys to practice 

in the forum.19 These commenters 

argued that the proposal attempted to 

deny investors access to qualified nonattorney representatives who have 

securities industry experience and are 

willing to accept cases that are too small 

to enable investors to retain a securities 

attorney. Other commenters contended 

that the proposal should prohibit 

compensated non-attorney 

representation in securities arbitration, 

stating that the lack of legal training 

makes non-attorneys less knowledgeable 

or competent to deal fully with the laws 

and issues that arise in an arbitration 

proceeding.20

As noted above, based on the 

disparate comments received on the 

proposal, NASD recognized that the 

proposal may not have been clear. 

NASD did not intend to change current 

practice in the forum regarding 

representation of parties by nonattorneys; nor did it intend to preempt 

state law on the issue of attorney 

licensing. Because the comments 

indicated that these positions were 

unclear, NASD has withdrawn the 

attorney representation proposal and is 

filing this new proposal to replace it. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve such proposed 

rule change, or 

B. Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 71 / Friday, April 13, 2007 / Notices 18707 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5 17 CFR 242.600 et seq. 

6Odd-lot orders are orders for a size less than the 

standard unit (round lot) of trading, which is 100 

shares for most stocks, although some stocks trade 

in 10 share units. 

7The Exchange notes that trading centers that 

provide sub-penny executions are currently 

developing order types that allow market 

participants to request a non-sub-penny execution. 

The Exchange states that the Routing Broker will 

perform this function only until such time as 

needed for the creation of these new order types 

and the completion of any systems modifications 

associated with the handling of the new order 

types. 

8On February 27, 2006, the Commission 

approved the Exchange’s business combination 

with Archipelago Holdings, Inc. (‘‘Merger’’). See 

Securities Exchange Act Release No. 53382 

(February 27, 2006), 71 FR 11251 (March 6, 2006) 

(SR–NYSE–2005–77). Pursuant to the Merger, NYSE 

Group, Inc. became the overall parent company of 

the Exchange and Archipelago Holdings, Inc. NYSE 

Group, Inc. operates two securities exchanges: The 

Exchange and NYSE Arca, Inc. (formerly known as 

the Archipelago Exchange, or ArcaEx, and the 

Pacific Exchange). ArcaSec remains a wholly 

owned subsidiary of Archipelago Holdings, Inc. and 

is therefore an affiliate of the Exchange. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASD–2006–109 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASD–2006–109. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing will also be 

available for inspection and copying at 

the principal office of NASD. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to the File 

Number SR–NASD–2006–109 and 

should be submitted on or before May 

4, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7008 Filed 4–12–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55590; File No. SR–NYSE–

2007–29] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change and 

Amendment No. 1 Thereto Relating to 

Rules 13 (‘‘Definitions of Orders’’) and 

17 (‘‘Use of Exchange Facilities’’) 

April 5, 2007. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 16, 

2007, the New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been substantially prepared by the 

Exchange. On April 5, 2007, NYSE filed 

Amendment No. 1 to the proposed rule 

change. The Exchange has filed the 

proposal as a ‘‘non-controversial’’ rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 

The Exchange is proposing to amend 

Exchange Rules 13 (‘‘Definitions of 

Orders’’) and 17 (‘‘Use of Exchange 

Facilities’’) in order to establish a 

mechanism to route orders to away 

market centers when that market center 

is displaying the national best bid and 

offer in accordance with Exchange Rules 

and Regulation NMS under the Act 5

(‘‘Reg. NMS’’). The Exchange further 

proposes to have its order router 

facilitate the acceptance of executions 

that result in an odd-lot or a sub-penny 

execution. The text of the proposed rule 

change is available at NYSE, the 

Commission’s Public Reference Room, 

and www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NYSE included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. NYSE has prepared 

summaries, set forth in Sections, A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to amend 

Exchange Rules 13 and 17 to establish 

a mechanism to route orders to away 

market centers (‘‘Routing Broker’’) when 

that market center is displaying the 

national best bid and offer in 

accordance with Exchange Rules and 

Reg. NMS. Through this filing the 

Exchange further proposes to have its 

Routing Broker facilitate the acceptance 

of executions that result in an odd-lot 6

or a sub-penny 7 execution after the 

Routing Broker routed an Exchange 

order to an away market center. 

The Exchange intends to use its 

broker-dealer affiliate,8 Archipelago 

Securities LLC (‘‘ArcaSec’’), as its 


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