[Federal Register Volume 62, Number 232 (Wednesday, December 3, 1997)]
[Notices]
[Pages 64000-64034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31523]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39350; File No. SR-NASD-97-81]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Changes to the Rule 1010 Series, the Rule 8000 Series, and the Rule 
9000 Series To Reflect Changes in the Corporate Organization of the 
National Association of Securities Dealers, Inc. and Its Subsidiaries

November 21, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October 
31, 1997, the National Association of Securities Dealers, Inc. 
(``NASD''), through its regulatory subsidiary NASD Regulation,

[[Page 64001]]

Inc. (``NASD Regulation'' and collectively, the ``Association'') 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.\1\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ Amendment Nos. 1 and 2 to this proposed rule filing were 
filed on November 12, 1997 and November 18, 1997, respectively. The 
changes contained in these amendments have been included in this 
Notice. See Letter Amendment No. 1 from T. Grant Callery, Senior 
Vice President and General Counsel, NASD to Katherine A. England, 
Assistant Director, Division of Market Regulation, Commission dated 
November 12, 1997; Letter Amendment No. 2 from Alden S. Adkins, Vice 
President and General Counsel, NASD Regulation to Katherine A. 
England, Assistant Director, Division of Market Regulation, 
Commission dated November 18, 1997. Several additional technical 
amendments are also included in this Notice. Telephone conversation 
between Sharon Zakula, Office of General Counsel, NASD Regulation 
and Mandy S. Cohen, Office of Market Supervision, Commission 
(November 20, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Association is proposing to amend (a) Article V of the NASD 
Regulation By-Laws; (b) the Rule 1010 Series; (c) the Rule 8000 Series; 
(d) the Rule 9000 Series; and (e) certain other rules of the 
Association, generally to conform such rules to the corporate 
restructuring of the Association and to make clarifying and technical 
changes to such rules.
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

BY-LAWS OF NASD REGULATION, INC.

Article V--National Adjudicatory Council

Sec. 5.1 Through 5.10
    No change.
    Sec. 5.11  The National Adjudicatory Council shall appoint a Review 
Subcommittee to determine whether disciplinary and membership 
proceeding decisions should be called for review by the National 
Adjudicatory Council under the Rules of the Association and to perform 
any other function authorized by the Rules of the Association. The 
Review Subcommittee shall be composed of no fewer than two and no more 
than four members of the National Adjudicatory Council. The number of 
Non-Industry members shall equal or exceed the number of Industry 
members. At all meetings of the Review Subcommittee, a quorum for the 
transaction of business shall consist of not less than 50 percent of 
the members of the Review Subcommittee, including not less than 50 
percent of the Non-Industry members.
* * * * *

RULES OF THE ASSOCIATION

1000. MEMBERSHIP, REGISTRATION AND QUALIFICATION REQUIREMENTS
1010. Membership Proceedings
1011. Definitions
    Unless otherwise provided, terms used in the Rule 1010 Series shall 
have the meaning as defined in Rule 0120.
(a) ``Applicant''
    No change;
(b) ``Associated Person''
    The term ``Associated Person'' means a natural person registered 
under the Rules of the Association or a sole proprietor, partner, 
officer, director, branch manager, or natural person occupying a 
similar status or performing similar functions who will be or is 
anticipated to be associated with the Applicant, or [any] a natural 
person engaged in the investment banking or securities business who 
will be or is anticipated to be directly or indirectly controlling or 
controlled by the Applicant, whether or not any such person is 
registered or exempt from registration under the NASD By-Laws or the 
Rules of the Association.
(c) ``Department''
    No change.
(d) ``Director''
    The term ``Director'' means a member of the NASD Regulation Board[, 
excluding the Chief Executive Officer of the NASD].
* * * * *
(I) ``Subcommittee''
    The term ``Subcommittee'' means a subcommittee of the National 
[Business Conduct Committee] Adjudicatory Council that is constituted 
pursuant to Rule 1015 to conduct a review of a Department decision 
issued under the Rule 1010 Series.
1012. General Provisions
(a) Service of Notices and Decisions; Filing by Applicant
    No change.
(b) Ex Parte Communications
    (1) Unless on notice and opportunity for an Applicant and 
Interested Association Staff to participate, or to the extent required 
for the disposition of ex parte matters as authorized by the Rules of 
the Association:
    (A) an Applicant, a counsel or representative of an Applicant, or 
an Interested Association Staff shall not make or knowingly cause to be 
made an ex parte communication relevant to the merits of a membership 
proceeding under the Rule 1010 Series to a Governor, [a Director,] a 
member of the National [Business Conduct Committee] Adjudicatory 
Council or a Subcommittee thereof, or an Association employee who is 
participating or advising in a decision of such a person with respect 
to that proceeding; and
    (B) a Governor, [a Director,] a member of the National [Business 
Conduct Committee] Adjudicatory Council or a Subcommittee thereof, or 
an Association employee who is participating or advising in the 
decision of such a person with respect to a membership proceeding shall 
not make or knowingly cause to be made to an Applicant, a counsel or 
representative of the Applicant, or an Interested Association Staff an 
ex parte communication relevant to the merits of that proceeding.
    (2) A Governor, [a Director,] a member of the National [Business 
Conduct Committee] Adjudicatory Council or a Subcommittee thereof, or 
an Association employee participating or advising in the decision of 
such a person, who receives, makes, or knowingly causes to be made a 
communication prohibited by this paragraph shall place in the record of 
the membership proceeding:
    (A) all such written communications;
    (B) memoranda stating the substance of all such oral 
communications; and
    (C) all written responses and memoranda stating the substance of 
all oral responses to all such communications.
    (3) The prohibitions against ex parte communications shall become 
effective when Association staff has knowledge that an Applicant 
intends to file a written request for review by the National [Business 
Conduct Committee] Adjudicatory Council under Rule 1015.
(c) Recusal or Disqualification
    A Governor[, a Director,] or a member of the National [Business 
Conduct Committee] Adjudicatory Council or a Subcommittee thereof shall 
not participate in a matter governed by the Rule 1010 Series as to 
which that person has a conflict of interest or bias, or if 
circumstances otherwise exist where his

[[Page 64002]]

or her fairness might reasonably be questioned. In such a case, the 
person shall recuse himself or shall be disqualified as follows:
    (1) The Chair of the NASD Board shall have authority to direct the 
disqualification of a Governor, and [the Vice Chair] a majority of the 
Governors of the NASD Board excluding the Chair shall have authority to 
direct the disqualification of the Chair of the NASD Board.
    (2) The Chair of the [NASD Regulation Board] National Adjudicatory 
Council shall have authority to direct the disqualification of a 
[Director] member of the Council or a member of a Subcommittee 
appointed pursuant to Rule 1015, and the Vice Chair of the [NASD 
Regulation Board] Council shall have authority to direct the 
disqualification of the Chair of the [NASD Regulation Board] National 
Adjudicatory Council.
    [(3) The Chair of the National Business Conduct Committee shall 
have authority to direct the disqualification of a member of the 
Committee or a member of a Subcommittee appointed pursuant to Rule 
1015, and the Vice Chair of the Committee shall have authority to 
direct the disqualification of the Chair of the National Business 
Conduct Committee.]
[(d) Separation of Review Functions
    A Director shall not participate or advise in the decision of a 
Governor with respect to the review of a membership proceeding under 
the Rule 1010 Series, and a Governor shall not participate or advise in 
the decision of a Director with respect to the review of a membership 
proceeding under the Rule 1010 Series.]
[(e)](d) Computation of Time
    No change.
1013. Application and Membership Interview
(a) Filing of Application
    (1) No change.
    (2) The second part of the application shall be filed with the 
Department of Member Regulation at the district office in the district 
in which the Applicant intends to have its principal place of business 
and shall include the following information and documents:
* * * * *
    (C) [evidence of all registrations and licenses required by the 
Commission, state securities authorities, the Municipal Securities 
Rulemaking Board, the National Securities Clearing Corporation, and 
self-regulatory organizations, and] a copy of any decision by a federal 
or state authority or self-regulatory organization taking permanent or 
temporary adverse action with respect to a registration or licensing 
determination regarding the Applicant or an Associated Person;
* * * * *
1014. Department Decision
* * * * *
(e) Service and Effectiveness of Decision
    The Department shall serve its decision and the membership 
agreement on the Applicant in accordance with Rule 1012. The decision 
shall become effective upon service and shall remain in effect during 
the pendency of any review until a decision constituting final action 
of the Association is issued under Rule 1015 or 1016, unless otherwise 
directed by the National [Business Conduct Committee, the NASD 
Regulation Board] Adjudicatory Council, the NASD Board, or the 
Commission.
(f) Effectiveness of Restriction
    A restriction imposed under this Rule shall remain in effect and 
bind the Applicant and all successors to the ownership or control of 
the Applicant unless:
    (1) removed or modified by the Department under Rule 1017;
    (2) removed or modified by a decision constituting final action of 
the Association issued under Rule 1015 or 1016; or
    (3) stayed by the National [Business Conduct Committee, the NASD 
Regulation Board] Adjudicatory Council, the NASD Board, or the 
Commission.
(g) Final Action
    No change.
1015. Review by National [Business Conduct Committee] Adjudicatory 
Council
(a) [Request ]Initiation of Review
(1) Request by Applicant
    Within 25 days after service of a decision under Rule 1014, 1017, 
or 1018, an Applicant may file a written request for review with the 
National [Business Conduct Committee] Adjudicatory Council. A request 
for review shall state with specificity why the Applicant believes that 
the Department's decision is inconsistent with the membership standards 
set forth in Rule 1014, or otherwise should be set aside, and state 
whether a hearing is requested. The Applicant simultaneously shall send 
by first-class mail a copy of the request to the district office where 
the Applicant filed its membership application.
(2) Notice of National Adjudicatory Council
    A decision issued under Rule 1014, 1017, or 1018 shall be subject 
to a call for review by any member of the National Adjudicatory Council 
or the Review Subcommittee defined in Rule 9120 within 30 days after 
service of the decision. If the National Adjudicatory Council calls a 
decision for review, a written notice of review shall be served 
promptly on the Applicant by first-class mail. The written notice of 
review shall state the specific grounds for the review and whether a 
hearing is directed. If a decision is called for review by any member 
of the National Adjudicatory Council or the Review Subcommittee the 
decision shall be reviewed by the National Adjudicatory Council. The 
National Adjudicatory Council simultaneously shall send by first-class 
mail a copy of the notice to the district office where the Applicant 
filed its membership application.
(b) Transmission of Documents
    Within ten days after receipt of a request for or notice of review, 
the Department shall:
    (1) transmit to the National [Business Conduct Committee] 
Adjudicatory Council copies of all documents that were considered in 
connection with the Department's decision and an index to the 
documents; and
    (2) serve on the Applicant a copy of such documents (other than 
those documents originally submitted by Applicant) and a copy of the 
index.
(c) Membership Application Docket
    The Department shall promptly record in the Association's 
membership application docket each request for or notice of review 
filed with the National [Business Conduct Committee] Adjudicatory 
Council under this Rule and each material subsequent event, filing, and 
change in the status of a membership proceeding.
(d) Appointment of Subcommittee
    The National [Business Conduct Committee] Adjudicatory Council or 
the Review Subcommittee defined in Rule 9120 shall appoint a 
Subcommittee to participate in the review. The Subcommittee shall be 
composed of at least two members. One member shall be a current member 
of the National [Business Conduct Committee] Adjudicatory Council. The 
remaining member or members shall be current or past Directors or past 
Governors.

[[Page 64003]]

(e) Powers of Subcommittee
    If a hearing is requested or directed, the Subcommittee shall 
conduct the hearing. If a hearing is not requested, the Subcommittee 
may serve a notice directing that a hearing be held. If a hearing is 
not requested or directed, the Subcommittee shall conduct its review on 
the basis of the record developed before the Department and any written 
submissions made by the Applicant or the Department in connection with 
the request for review.
(f) Hearing
(1) Notice
    If a hearing is requested or directed, the hearing shall be held 
within 45 days after the receipt of the request or service of the 
notice by the National [Business Conduct Committee] Adjudicatory 
Council. The National [Business Conduct Committee] Adjudicatory Council 
shall send written notice of the date and time of the hearing to the 
Applicant by facsimile or commercial courier not later than 14 days 
before the hearing.
(2) Counsel
    No change.
(3) Evidence
    Formal rules of evidence shall not apply to a hearing under this 
Rule. Not later than five days before the hearing, the Applicant and 
the Department shall exchange copies of their proposed hearing exhibits 
and witness lists and provide copies of the same to the National 
[Business Conduct Committee] Adjudicatory Council. If the Applicant or 
the Department fails to provide copies of its proposed hearing exhibits 
or witness list within such time, the Subcommittee shall exclude the 
evidence or witnesses from the proceeding, unless the Subcommittee 
determines that good cause is shown for failure to comply with the 
production date set forth in this subparagraph.
(4) Transcript
    No change.
(5) Failure to Appear at Hearing
    If an Applicant fails to appear at a hearing for which it has 
notice, the National [Business Conduct Committee] Adjudicatory Council 
may dismiss the request for review as abandoned, and the decision of 
the Department shall become the final action of the Association. Upon a 
showing of good cause, the National [Business Conduct Committee] 
Adjudicatory Council may withdraw a dismissal entered pursuant to this 
subparagraph.
(g) Additional Information, Briefs
    At any time during its consideration, the Subcommittee of the 
National [Business Conduct Committee] Adjudicatory Council may direct 
the Applicant or the Department to submit additional information and to 
file briefs. Any additional information or brief submitted shall be 
provided to all parties before the National [Business Conduct 
Committee] Adjudicatory Council renders its decision.
(h) Subcommittee Recommendation
    The Subcommittee shall present a recommended decision in writing to 
the National [Business Conduct Committee and all other Directors] 
Adjudicatory Council within 60 days after the date of the hearing held 
pursuant to paragraph (f), and not later than seven days before the 
meeting of the National [Business Conduct Committee] Adjudicatory 
Council at which the membership proceeding shall be considered.
(i) Decision
(1) Proposed Written Decision
    After considering all matters presented in the review and the 
Subcommittee's recommended written decision, the National [Business 
Conduct Committee] Adjudicatory Council may affirm, modify, or reverse 
the Department's decision or remand the membership proceeding with 
instructions. The National [Business Conduct Committee] Adjudicatory 
Council shall prepare a proposed written decision pursuant to 
subparagraph (2).
(2) Contents
    No change.
(3) Issuance of Decision After Expiration of Call for Review Periods
    The National [Business Conduct Committee] Adjudicatory Council 
shall provide its proposed written decision to the NASD [Regulation 
Board, and, if such decision is not called for review by the NASD 
Regulation Board, to the NASD Board. The NASD Regulation] Board. The 
NASD Board may call the membership proceeding for review pursuant to 
Rule 1016[(a). The]. If the NASD Board [may] does not call the 
membership proceeding for review [pursuant to Rule 1016(b). If neither 
the NASD Regulation Board nor the NASD Board calls the membership 
proceeding for review], the proposed written decision of the National 
[Business Conduct Committee] Adjudicatory Council shall become final. 
The National [Business Conduct Committee] Adjudicatory Council shall 
serve the Applicant with a written notice specifying the date on which 
the call for review period expired and stating that the final written 
decision will be served within 15 days after such date. The National 
[Business Conduct Committee] Adjudicatory Council shall serve its final 
written decision within 15 days after the date on which the call for 
review period expired. The decision shall constitute the final action 
of the Association for purposes of SEC Rule 19d-3, unless the National 
[Business Conduct Committee] Adjudicatory Council remands the 
membership proceeding.
(4) Failure To Issue Decision
    If the National [Business Conduct Committee] Adjudicatory Council 
fails to serve its final written decision within the time prescribed in 
subparagraph (3), the Applicant may file a written request with the 
NASD Board requesting that the NASD Board direct the National [Business 
Conduct Committee] Adjudicatory Council to serve its decision 
immediately or to show good cause for an extension of time. Within 
seven days after receipt of such a request, the NASD Board shall direct 
the National [Business Conduct Committee] Adjudicatory Council to serve 
its written decision immediately or to show good cause for an extension 
of time. If the National [Business Conduct Committee] Adjudicatory 
Council shows good cause for an extension of time, the NASD Board may 
extend the 15 day time limit by not more than 15 days.
1016. Discretionary Review by [Boards] NASD Board
[(a) Discretionary Review by the NASD Regulation Board
(1) Call For Review By Director
    A Director may call a membership proceeding for review by the NASD 
Regulation Board if the call for review is made within the period 
prescribed in paragraph (2).
(2) Seven Day Period; Waiver
    After receiving the proposed written decision of the National 
Business Conduct Committee pursuant to Rule 1015, a Director shall have 
not less than seven days to determine if the membership proceeding 
should be called for review. A Director shall call a membership 
proceeding for review by notifying the General Counsel of NASD 
Regulation. By a unanimous vote of the NASD Regulation Board, The NASD 
Regulation Board may shorten the period to less than seven days. By an 
affirmative vote of the majority of the NASD Regulation Board then in 
office,

[[Page 64004]]

the NASD Regulation Board may, during the seven day period, vote to 
extend the period to more than seven days.
(3) Review at Next Meeting
    If a Director calls a membership proceeding for review within the 
time prescribed in subparagraph (2), the NASD Regulation Board shall 
review the membership proceeding not later than the next meeting of the 
NASD Regulation Board. The NASD Regulation Board may direct the 
Applicant and the Department to file briefs in connection with review 
proceedings pursuant to this paragraph.
(4) Decision of NASD Regulation Board, Including Remand
    After review, the NASD Regulation Board may affirm, modify, or 
reverse the proposed written decision of the National Business Conduct 
Committee. Alternatively, the NASD Regulation Board may remand the 
membership proceeding with instructions. The NASD Regulation Board 
shall prepare a proposed written decision that includes all of the 
elements described in Rule 1015(i)(2).
(5) Issuance of Decision After Expiration of Call for Review Period
    The NASD Regulation Board shall provide its proposed written 
decision to the NASD Board. The NASD Board may call the membership 
proceeding for review pursuant to paragraph (b). If the NASD Board does 
not call the membership proceeding for review, the proposed written 
decision of the NASD Regulation Board shall become final. The NASD 
Regulation Board shall serve the Applicant with a written notice 
specifying the date on which the call for review period expired and 
stating that a final written decision will be served within 15 days 
after such date. The NASD Regulation Board shall serve its final 
written decision within 15 days after the date on which the call for 
review period expired. The decision shall constitute the final action 
of the Association for purposes of SEC Rule 19d-3, unless the NASD 
Regulation Board remands the membership proceeding.
(6) Failure To Issue Decision
    If the NASD Regulation Board fails to serve its final written 
decision within the time prescribed in subparagraph (5), the Applicant 
may file a written request with the NASD Board requesting that the NASD 
Board direct the NASD Regulation Board to serve its decision 
immediately or to show good cause for an extension of time. Within 
seven days after receipt of such a request, the NASD Board shall direct 
the NASD Regulation Board to serve its written decision immediately or 
to show good cause for an extension of time. If the NASD Regulation 
Board shows good cause for an extension of time, the NASD Board may 
extend the 15 day time limit by not more than 15 days.]
[(b) Discretionary Review by the NASD Board]
[(1)](a) Call for Review by Governor
    A Governor may call a membership proceeding for review by the NASD 
Board if the call for review is made within the period prescribed in 
subparagraph (2).
[(2) Seven Day Period; Waiver](b) 15 Day Period; Waiver
[(A) Membership Proceeding Called for Review by NASD Regulation Board
    If the NASD Regulation Board reviewed the membership proceeding 
under paragraph (a), a] A Governor shall make his or her call for 
review at the next meeting of the NASD Board that is at least [seven] 
15 days after the date on which the NASD Board receives the proposed 
written decision of the National Adjudicatory Council [NASD Regulation 
Board].
[(B) Membership Proceeding Not Called For by NASD Regulation Board
    If no Director of the NASD Regulation Board called the membership 
proceeding for review under paragraph (a), a Governor shall make his or 
her call for review at the next meeting of the NASD Board that is at 
least seven days after the date on which the NASD Board receives the 
proposed written decision of the National Business Conduct Committee.]
[(C) Waiver]
    By unanimous vote of the NASD Board, the NASD Board may shorten the 
period [in subparagraph (A) or (B)] to less than [seven] 15 days. By an 
affirmative vote of the majority of the NASD Board then in office, the 
NASD Board may, during the [seven] 15 day period [in subparagraph (A) 
or (B)], vote to extend the period [in subparagraph (A) or (B)] to more 
than [seven] 15 days.
[(3)](c) Review At Next Meeting
    If a Governor calls a membership proceeding for review within the 
time prescribed in [subparagraph (2)] paragraph (b), the NASD Board 
shall review the membership proceeding not later than the next meeting 
of the NASD Board. The NASD Board may order the Applicant and the 
Department to file briefs in connection with review proceedings 
pursuant to this paragraph.
[(4)](d) Decision of NASD Board, Including Remand
    After review, the NASD Board may affirm, modify, or reverse [: (1)] 
the proposed written decision of the [NASD Regulation Board, or (2) if 
the NASD Regulation Board did not call the membership proceeding for 
review under paragraph (a), the proposed written decision of the 
National Business Conduct Committee] National Adjudicatory Council. 
Alternatively, the NASD Board may remand the membership proceeding with 
instructions. The NASD Board shall prepare a written decision that 
includes all of the elements described in Rule 1015(i)(2).
[(5)](e) Issuance of Decision
    The NASD Board shall serve its written decision on the Applicant 
within 15 days after the meeting at which it conducted its review. The 
decision shall constitute the final action of the Association for 
purposes of SEC Rule 19d-3, unless the NASD Board remands the 
membership proceeding.
1017. Removal or Modification of Business Restriction
* * * * *
(f) Service and Effectiveness of Decision
    The Department shall serve its decision on the Applicant in 
accordance with Rule 1012. The decision shall become effective upon 
service and shall remain in effect during the pendency of any review 
until a decision constituting final action of the Association is issued 
under Rule 1015 or 1016, unless otherwise directed by the National 
[Business Conduct Committee, the NASD Regulation Board] Adjudicatory 
Council, the NASD Board, or the Commission.
(g) Request for Review; Final Action
    An Applicant may file a written request for review of the 
Department's decision with the National [Business Conduct Committee] 
Adjudicatory Council pursuant to Rule 1015. The procedures set forth in 
Rule 1015 shall apply to such review, and the National [Business 
Conduct Committee's] Adjudicatory Council's decision shall be subject 
to discretionary review by [the NASD Regulation Board and] the NASD 
Board pursuant to Rule 1016. If the Applicant does not file a request 
for a review, the Department's decision shall constitute final action 
by the Association.

[[Page 64005]]

(h) Removal or Modification of Restriction on Department's Initiative
    No change.
1018. Change in Ownership, Control, or Operations
* * * * *
(h) Service and Effectiveness of Decision
    The Department shall serve its decision on the Applicant in 
accordance with Rule 1012. The decision shall become effective upon 
service and shall remain in effect during the pendency of any review 
until a decision constituting final action of the Association is issued 
under Rule 1015 or 1016, unless otherwise directed by the National 
[Business Conduct Committee, the NASD Regulation Board] Adjudicatory 
Council, the NASD Board, or the Commission.
(i) Request for Review; Final Action
    An Applicant may file a written request for review of the 
Department's decision with the National [Business Conduct Committee] 
Adjudicatory Council pursuant to Rule 1015. The procedures set forth in 
Rule 1015 shall apply to such a review, and the National [Business 
Conduct Committee's] Adjudicatory Council's decision shall be subject 
to discretionary review by [the NASD Regulation Board and] the NASD 
Board pursuant to Rule 1016. If the Applicant does not file a request 
for review, the Department's action shall constitute the final action 
of the Association.
* * * * *
[4615. Automated Submission of Trading Data Requested by Association
    (a) A member shall submit the trade data specified below in 
automated format as may be prescribed by the Association from time to 
time. This information shall be supplied with respect to any 
transaction or transactions that are the subject of a request for 
information made by the Association.
    (1) If the transaction was a proprietary transaction effected or 
caused to be effected by the member for any account in which such 
member, or person associated with a member, is directly or indirectly 
interested, such member shall submit or cause to be submitted the 
following information:
    (A) Clearing house number, or alpha symbol as used by the member 
submitting the data;
    (B) Clearing house number(s) or alpha symbol(s) as may be used from 
time to time, of the member(s) on the opposite side of the transaction;
    (C) Identifying symbol assigned to the security;
    (D) Date transaction was executed;
    (E) Number of shares, or quantity of bonds or options contracts for 
each specific transaction and whether each transaction was a purchase, 
sale, short sale, or if an options contract, whether open long or short 
or close long or short;
    (F) Transaction price;
    (G) Account number; and
    (H) Market center where transaction was executed.
    (2) If the transaction was effected or caused to be effected by the 
number for any customer account, such member shall submit or cause to 
be submitted the following information:
    (A) The data described in subparagraphs (1)(A) through (H) above; 
and
    (B) Customer name, address(es) branch office number, registered 
representative number, whether order was solicited or unsolicited, date 
account opened and employer name and the tax identification number(s).
    (C) If transaction was effected for another member whether the 
other member was acting as principal or agent on the transaction or 
transactions that are the subject of the Association's request.
    (3) In addition to the above trade data, a member shall submit such 
other information in such automated format as may from time to time be 
required by the Association.
    (4) The Association may grant exceptions from the requirement that 
the data prescribed in subparagraphs (1) and (2) above be submitted to 
the Association in an automated format, in such cases and for such time 
periods as it deems appropriate.]
* * * * *
[5107. Automated Submission of Trading Data
    Every Association member and approved affiliate that participates 
in Nasdaq International as a Service market maker or an order-entry 
firm shall submit to the Association the trade data specified below in 
automated format as may be prescribed by the Association from time to 
time. This information shall be supplied with respect to any 
transaction or transactions that are the subject of a request for 
information made by the Association. As used in paragraphs (a) through 
(d) hereof, the terms ``participating firm'' and ``firm'' include both 
Association members and approved affiliates that utilize the Service.
    (a) If the transaction was a proprietary transaction effected or 
caused to be effected by the participating firm for any account in 
which such firm, or person associated with the firm, is directly or 
indirectly interested, the participating firm shall submit or cause to 
be submitted the following information:
    (1) Clearing house number, or alpha symbol as used by the 
participating firm submitting the data;
    (2) Clearing house number(s), or alpha symbol(s) as may be used 
from time to time, of the participating firm on the opposite side of 
the transaction;
    (3) Identifying symbol assigned to the security;
    (4) Date transaction was executed;
    (5) Number of shares, ADRs, units, warrants or rights for each 
specific transaction and whether each transaction was a purchase, sale, 
or short sale;
    (6) Transaction price;
    (7) Account number; and
    (8) Market center where transaction was executed.
    (b) If the transaction was effected or caused to be effected by the 
participating firm for any customer account, such firm shall submit or 
cause to be submitted the following information:
    (1) The data described in subparagraphs (1) through (8) of 
paragraph (a);
    (2) Customer name, address(es), branch office number, registered 
representative number; whether order was solicited or unsolicited, date 
account opened and employer name, and the tax identification number(s); 
and
    (3) If the transaction was effected for another Association member 
or participating firm, whether the other party was acting as principal 
or agent on the transaction or transactions that are the subject of the 
Association's request.
    (c) In addition to the above trade data, a participating firm shall 
submit such other information in such automated format as may from time 
to time be required by the Association.
    (d) The Association may grant exceptions from the requirement that 
the data prescribed in paragraphs (a) and (b) above be submitted to the 
Association in an automated format, in such cases and for such time 
periods as it deems appropriate.]
* * * * *
[6730. Automated Submission of Trade Data
    Each member shall submit the trade data specified in Rule 4615 in 
automated format as may be prescribed by the Association from time to 
time with respect to any transaction or transactions involving non-
Nasdaq

[[Page 64006]]

securities that are the subject of a request for information made by 
the Association.]
* * * * *

Investigations and Sanctions

Table of Contents \2\

8000. INVESTIGATIONS AND SANCTIONS
---------------------------------------------------------------------------

    \2\ This table of contents is provided for convenience only, and 
is not a part of the amended Rules of the Association submitted for 
approval in this rule filing.
---------------------------------------------------------------------------

    8100. GENERAL PROVISIONS
    8110. Availability of Manual to Customers
    8120. Definitions
8200. INVESTIGATIONS
    8210. Provision of Information and Testimony and Inspection and 
Copying of Books
    8211. Automated Submission of Trading Data Requested by the 
Association
    8212. Automated Submission of Trading Data for the Nasdaq 
International Service Requested by the Association
    8213. Automated Submission of Trading Data for non-Nasdaq 
Securities Requested by the Association
    8220. Suspension for Failure to Provide Requested Information
    8221. Notice to Members and Persons Associated with Members
    8222. Hearing
    8223. Decision
    8224. Notice to Membership
    8225. Termination of Suspension
    8226. Copies of Notices and Decisions to Members
    8227. Other Action Not Foreclosed
8300. SANCTIONS
    8310. Sanctions for Violation of the Rules
    IM-8310-1. Effect of a Suspension, Revocation, Cancellation, or 
Bar
    IM-8310-2. Release of Disciplinary Information
    8320. Payment of Fines, Other Monetary Sanctions, or Costs; 
Summary Action for Failure to Pay
    8330. Costs of Proceedings
* * * * *
8000. INVESTIGATIONS AND SANCTIONS
8100. GENERAL PROVISIONS
8110. Availability of Manual to Customers
    [Every member of the Association shall keep in its main office and 
each of its branch offices] Members shall keep and maintain a current 
copy of the [Association's Manual and all amendments to it. Upon 
request, a member shall make the Manual and amendments available to any 
customer for examination.] NASD Manual in a readily accessible place 
and shall make it available for examination by customers upon request.
8120. Definitions
    No change
8200. INVESTIGATIONS
8210. Provision of Information and Testimony and Inspection and Copying 
of Books
* * * * *
(d) [Receipt of] Notice
    A notice under this Rule shall be deemed [to have been] received by 
the member or person to whom it is directed by [the mailing thereof to 
the] mailing or otherwise transmitting the notice to the last known 
business address of [such] the  member or the last known residential 
address of the person as reflected in the Central Registration 
Depository[, unless]. If the Adjudicator or Association staff 
responsible for [serving] mailing or otherwise transmitting the notice 
to the member or [associated] person has actual knowledge that the 
address in the Central Registration Depository is out of date[. In such 
case,] or inaccurate, then a copy of the notice shall be [served on the 
member at its last known address, or in the case of an associated 
person, at the associated person's] mailed or otherwise transmitted to: 
(1) the last known business address of the member or the  last known 
residential address [and] of the [business address] person as reflected 
in the Central Registration Depository [of the member with which the 
person is employed or affiliated], and (2) any other more current 
address of the member or the person known to the Adjudicator or 
Association staff who is responsible for mailing or otherwise 
transmitting the notice.
* * * * *
8211. Automated Submission of Trading Data Requested by the Association
    (a) A member shall submit the trade data specified below in 
automated format as may be prescribed by the Association from time to 
time. This information shall be supplied with respect to any 
transaction or transactions that are the subject of a request for 
information made by the Association.
    (b) If the transaction was a proprietary transaction effected or 
caused to be effected by the member for any account in which such 
member, or person associated with a member, is directly or indirectly 
interested, such member shall submit or cuase to be submitted the 
following information:
    (1) Clearing house number, or alpha symbol as used by the member 
submitting the data;
    (2) Clearing house number(s), or alpha symbol(s) as may be used 
from time to time, of the member(s) on the opposite side of the 
transaction;
    (3) Identifying symbol assigned to the security;
    (4) Date transaction was executed;
    (5) Number of shares, or quantity of bonds or options contracts for 
each specific transaction and whether each transaction was a purchase, 
sale, short sale, or, if an options contract, whether open long or 
short or close long or short;
    (6) Transaction price;
    (7) Account number; and
    (8) Market center where transaction was executed.
    (c) If the transaction was effected or caused to be effected by the 
member for any customer account, such member shall submit or cause to 
be submitted the following information:
    (1) The data described in subparagraphs (b) (1) through (8) above;
    (2) The customer name, address(es), branch office number, 
registered representative number, whether order was solicited or 
unsolicited, date account opened, employer name, and the tax 
identification number(s); and
    (3) If thee transaction was effected for another member, whether 
the other member was acting as principal or agent.
    (d) In addition to the above trade data, a member shall submit such 
other information in such automated format as may from time to time be 
required by the Association.
    (e) Pursuant to the Rule 9600 Series, the Association may exempt a 
member from the requirement that the data prescribed in paragraphs (b) 
through (d) above be submitted to the Association in an automated 
format for good cause shown.
8212. Automated Submission of Trading Data for the Nasdaq International 
Service Requested by the Association
    (a) Every Association member and approved affiliate that 
participates in the Nasdaq International Service as defined in the Rule 
5100 Series (``Nasdaq International'') as a Service market maker or an 
order-entry firm shall submit to the Association the trade data 
specified below in automated format as may be prescribed by the 
Association from time to time. This information shall be supplied with 
respect to any transaction or transactions that are the subject of a 
request for information made by the Association. In this rule the terms 
``participating firm'' and ``firm'' include both Association members 
and approved affiliates that utilize the Service.
    (b) If the transaction was a proprietary transaction effected or 
caused to be effected by the participating firm for any account in whch 
such firm, or person

[[Page 64007]]

associated with the firm, is directly or indirectly interested, the 
participating firm shall submit or cause to be submitted the following 
information:
    (1) Clearing house number, or alpha symbol as used by the 
participating firm submitting the data;
    (2) Clearing house number(s), or alpha symbol(s) as may be used 
from time to time, of the participating firm on the opposite side of 
the transaction;
    (3) Identifying symbol assigned to the security;
    (4) Date transaction was executed;
    (5) Number of shares, ADRs, units, warrants or rights for each 
specific transaction and whether each transaction was a purchase, sale 
or short sale;
    (6) Transaction price;
    (7) Account number; and
    (8) Market center where transaction was executed.
    (c) If the transaction was effected or caused to be effected by the 
participating firm for any customer account, such firm shall submit or 
cause to be submitted the following information:
    (1) The data described in subparagraphs (b)(1) through (8);
    (2) Customer name, address(es), branch office number, registered 
representative number, whether order was solicited or unsolicited, date 
account opened and employer name, and the tax identification number(s); 
and
    (3) If the transaction was effected for another Association member 
or participating firm, whether the other party was acting as principal 
or agent on the transaction or transactions that are the subject of the 
Association's request.
    (d) In addition to the above trade data, a participating firm shall 
submit such other information in such automated format as may from time 
to time be required by the Association.
    (e) Pursuant to the Rule 9600 Series, the Association may exempt a 
person from the requirement that the data prescribed in paragraphs (b) 
through (d) above be submitted to the Association in an automated 
format for good cause shown.
8213. Automated Submission of Trading Data for Non-Nasdaq Securities 
Requested by the Association
    Each member shall submit trade data specified in Rule 8211 in 
automated format as may be prescribed by the Association from time to 
time with respect to any transaction or transactions involving non-
Nasdaq securities as defined in the rule 6700 Series that are the 
subject of a request for information made by the Association. Pursuant 
to the Rule 9600 Series, the Association may exempt a member from the 
requirement that the data prescribed in paragraphs (b) through (d) of 
Rule 8211 be submitted to the Association in an automated format for 
good cause shown.
8220. Suspension for Failure to Provide Requested Information
8221. Notice
(a) Notice to Member
    If a member fails to provide any information, report, material, 
data, or testimony requested pursuant to the NASD By-Laws or the Rules 
of the Association, or fails to keep its membership application or 
supporting documents current, the National [Business Conduct Committee] 
Adjudicatory Council may provide written notice to such member 
specifying the nature of the failure and stating that the failure to 
take such action within 20 days after service of the notice constitutes 
grounds for suspension from membership.
(b) Notice to Person Associated with Member
    If a person associated with a member fails to provide any 
information, report, material, data, or testimony requested pursuant to 
the NASD By-Laws or the Rules of the Association, the National 
[Business Conduct Committee] Adjudicatory Council may provide written 
notice to such person specifying the nature of the failure and stating 
that the failure to take such action within 20 days after service of 
the notice constitutes grounds for suspending the association of the 
person with the member.
(c) Service of Notice
    The National [Business Conduct Committee] Adjudicatory Council 
shall serve the member of person associated [person] with a member with 
such notice via personal service or commercial courier.
8222. Hearing
(a) Request for Hearing
    Within five days after the date of service of a notice issued under 
Rule 8221, a member or person associated [person] with a member served 
with a notice under Rule 8221(c) may file with the National [Business 
Conduct Committee] Adjudicatory Council a written request for an 
expedited hearing before a subcommittee of the National [Business 
Conduct Committee] Adjudicatory Council. The request shall state with 
specificity why the member or associated person believes that there are 
insufficient grounds for suspension or any other reason for setting 
aside the notice issued by the National [Business Conduct Committee] 
Adjudicatory Council.
(b) Hearing Procedures
(1) Appointment of Subcommittee
    If a hearing is requested, the National [Business Conduct 
Committee] Adjudicatory Council or the Review Subcommittee described in 
Rule 9120 shall appoint a subcommittee to conduct the hearing and 
decide whether the member or person associated [person] with a member 
should be suspended. The subcommittee shall be composed of a member of 
the National [Business Conduct Committee] Adjudicatory Council and one 
or more [current or past] former members of the NASD Regulation Board 
and the NASD Board.
(2) Time of Hearing
    The hearing shall be held within 20 days after the date of service 
of the notice issued under Rule 8221. Not later than seven days before 
the hearing, the subcommittee shall serve the member or person 
associated [person] with a member with written notice of the date and 
time of the hearing via commercial courier or facsimile and notify the 
appropriate department or office of NASD Regulation of the date and 
time of the hearing. The appropriate department or office of NASD 
Regulation (hereinafter ``appropriate department or office'' in the 
Rule 8220 Series) shall be the department or office that issued the 
request for the information, report, material, data, or testimony that 
the member or associated person failed to provide, or in the case of a 
member that failed to keep its membership application or supporting 
documents current, the Department of Member Regulation.
(3) Transmission of Documents
    Not later than seven days before the hearing, the subcommittee 
shall serve the member or person associated [person] with a member via 
commercial courier with all documents that were considered in 
connection with the National [Business Conduct Committee's] 
Adjudicatory Council's decision to issue a notice under Rule 8221.
(4) Counsel
    The member or person associated [person] with a member and the 
appropriate department or office may be represented by counsel at a 
hearing conducted under this Rule.

[[Page 64008]]

(5) Evidence
    Formal rules of evidence shall not apply to a hearing under this 
Rule. Not later than four days before the hearing, the member or person 
associated [person] with a member and the appropriate department or 
office shall exchange copies of proposed hearing exhibits and witness 
lists and provide copies of the same to the subcommittee.
(6) Witnesses
    No change.
(7) Additional Information
    At any time during its consideration, the subcommittee may direct 
the member or person associated [person] with a member or the 
appropriate department or office to submit additional information. Any 
additional information submitted shall be provided to all parties 
before the subcommittee renders its decision.
(8) Transcript
    The hearing shall be recorded and a transcript prepared by a court 
reporter. The member or person associated [person] with a member may 
purchase a copy of the transcript from the court reporter at prescribed 
rates. A witness may purchase a copy of the transcript of his or her 
own testimony from the court reporter at prescribed rates. Proposed 
corrections to the transcript may be submitted by affidavit to the 
subcommittee within a reasonable time determined by the subcommittee. 
Upon notice to the participants in the hearing, the subcommittee may 
order corrections to the transcript as requested or sua sponte.
(9) Record
    The record shall consist of all documents that were considered in 
connection with the National [Business Conduct Committee's] 
Adjudicatory Council's decision to issue a notice under Rule 8221, the 
notice issued under Rule 8221, the request for hearing filed under Rule 
8222, the transcript of the hearing, and each document or other item of 
evidence presented to or considered by the Subcommittee. The Office of 
the General Counsel of NASD Regulation shall be the custodian of the 
record.
(10) Failure to Appear at Hearing
    If a member or person associated [person] with a member fails to 
appear at a hearing for which it has notice, the subcommittee may 
dismiss the request for a hearing as abandoned, and the notice of the 
National [Business Conduct Committee] Adjudicatory Council issued under 
Rule 8221 shall become the final action of the Association. Upon a 
showing of good cause, the subcommittee may withdraw a dismissal 
entered pursuant to this subparagraph.
8223. Decision
(a) Subcommittee
    No change.
(b) NASD Board of Governors
(1) Call for Review by Governor
    No change.
(2) Review and Decision
    If a Governor calls the suspension proceeding for review within the 
time prescribed in subparagraph (1), the NASD Board of Governors shall 
conduct a review not later than its next meeting. The NASD Board of 
Governors may affirm, modify, or reverse the decision of the 
subcommittee. Not later than seven days after the NASD Board of 
Governors meeting, the NASD Board of Governors shall serve a final 
written decision on the member or person associated [person] with a 
member via commercial courier or facsimile. The decision shall state 
the disposition of the suspension proceeding, and if a suspension is 
imposed, state the grounds for the suspension and the conditions for 
terminating the suspension.
* * * * *
8225. Termination of Suspension
    A suspended member or person associated [person] with a member may 
file a written request for termination if the suspension on the ground 
of full compliance with the notice issued under Rule 8221 or, if 
applicable, the conditions of a decision under Rule 8223, with the head 
of the appropriate department or office. The head of the appropriate 
department or office shall respond to the request in writing within 
five days after receipt of the request. If the head of the appropriate 
department or office grants the request, he or she shall serve the 
member or person associated [person] with a member with written notice 
of the termination of the suspension via commercial courier or 
facsimile. If the head of the department or office denies the request, 
the suspended member or person associated [person] with a member may 
file a written request for relief with the National [Business Conduct 
Committee] Adjudicatory Council. The National [Business Conduct 
Committee] Adjudicatory Council shall respond to the request in writing 
within ten days after receipt of the request. The National [Business 
Conduct Committee] Adjudicatory Council's response shall be served on 
the member or person associated [person] with a member via commercial 
courier or facsimile.
8226. Copies of Notices and Decisions to Member
    No change.
8227. Other Action Not Foreclosed
    No change.
8300. SANCTIONS
8310. Sanctions for Violation of the Rules
(a) Imposition of Sanction
    After compliance with the Rule 9000 Series, the Association may 
impose one or more of the following sanctions on a member or person 
associated [person] with a member for each violation of the federal 
securities laws, rules or regulations thereunder, the rules of the 
Municipal Securities Rulemaking Board, or Rules of the Association, or 
may impose one or more of the following sanctions on a member or person 
associated [person] with a member for any neglect or refusal to comply 
with an order, direction, or decision issued under the Rules of the 
Association:
    (1) censure member or person associated with a member;
    (2) impose a fine upon a member or person associated with a member;
    (3) suspend the membership of a member or suspend the registration 
of a person associated with a member for a definite period or a period 
contingent on the performance of a particular act;
    (4) expel a member, cancel the membership of a member, or revoke or 
cancel the registration of a person associated with a member;
    (5) suspend or bar a member or person associated with a member from 
association with all members; or
    (6) impose any other fitting sanction.
(b) Assent To Sanction
    Each party to a proceeding resulting in a sanction shall be deemed 
to have assented to the imposition of the sanction unless such party 
files a written application for appeal, review, or relief pursuant to 
the Rule 9000 Series.
IM-8310-1. Effect of a Suspension, Revocation, Cancellation, or Bar
    If the Association or the Commission issues an order that imposes a 
suspension, revocation, or cancellation of the registration of a person 
associated with a member or bars a person from further association with 
any member, a member shall not allow such person to remain associated 
with it in any

[[Page 64009]]

capacity, including a clerical or ministerial capacity. If the 
Association or the commission suspends a person associated with a 
member, the member also shall not pay or credit any salary, or any 
commission, profit, or other remuneration that results directly or 
indirectly from any securities transaction, that the person associated 
[person] with a member might have earned during the period of 
suspension.
* * * * * * *

Code of Procedure

Table of Contents \3\

9000. CODE OF PROCEDURE
---------------------------------------------------------------------------

    \3\ This table of contents is provided for convenience only, and 
is not a part of the amended Rules of the Association submitted for 
approval in this rule filing.
---------------------------------------------------------------------------

    9100. Application and Purpose
    9110. Application
    9120. Definitions
    9130. Service; Filing of Papers
    9131. Service of Complaint and Document Initiating a Proceeding
    9132. Service of Orders, Notices, and Decisions by Adjudicator
    9133. Service of Papers Other Than Complaints, Orders, Notices, 
or Decisions
    9134. Methods of, Procedures for Service
    9135. Filing of Papers With Adjudicator: Procedure
    9136. Filing of Papers: Form
    9137. Filing of Papers: Signature Requirement and Effect
    9138. Computation of Time
    9140. Proceedings
    9141. Appearance and Practice; Notice of Appearance
    9142. Withdrawal By Attorney or Representative
    9143. Ex Parte Communications
    9144. Separation of Functions
    9145. Rules of Evidence; Official Notice
    9146. Motions
    9147. Rulings on Procedural Matters
    9148. Interlocutory Review
    9150. Exclusion From Rule 9000 Series Proceeding
    9160. Recusal or Disqualification
    9200. DISCIPLINARY PROCEEDINGS
    9210. Complaint and Answer
    9211. [Issuance] Authorization of Complaint
    9212. Complaint Issuance--Requirements, Service, Amendment, 
Withdrawal and Docketing
    9213. Assignment of Hearing Officer and Appointment of Panelists 
to Hearing Panel or Extended Hearing Panel
    9214. Consolidation of Disciplinary Proceedings
    9215. Answer to Complaint
    9216. Acceptance, Waiver, and Consent; Plan Pursuant to SEC Rule 
19d-1(c)(2)
    IM-9216. Violations Appropriate For Disposition Under Plan 
Pursuant to SEC Rule 19d-1(c)(2)
    9220. Request for Hearing; Extensions of Time, Postponements, 
Adjournments
    9221. Request for Hearing
    9222. Extensions of Time, Postponements, and Adjournments
    9230. Appointment of Hearing Panel, Extended Hearing Panel
    9231. Appointment By the Chief Hearing Officer of Hearing Panel 
or Extended Hearing Panel
    9232. Criteria for Selection of Panelists [;] And Replacement 
Panelists
    9233. Hearing Panel or Extended Hearing Panel; Recusal and 
Disqualification of Hearing Officers
    9234. Hearing Panel or Extended Hearing Panel: Recusal and 
Disqualification of Panelists
    9235. Hearing Officer Authority
    9240. Pre-hearing Conference and Submission
    9241. Pre-hearing Conference
    9242. Pre-hearing Submission
    9250. Discovery
    9251. Inspection and Copying of Documents in Possession of Staff
    9252. Requests for Information
    9253. Production of Witness Statements
    9260. Hearing and Decision
    9261. Evidence and Procedure in Hearing
    9262. Testimony
    9263. Evidence: Admissibility
    9264. Motion for Summary Dispositon
    9265. Record of Hearing
    9266. Proposed Findings of Fact, Conclusions of Law, and Post-
Hearing Briefs
    9267. Record; Supplemental Documents Attached to Record; 
Retention
    9268. Decision of Hearing Panel or Extended Hearing Panel
    9269. Failure to Appear at Hearing; Default
    9270. Settlement Procedure
    9280. Contemptuous Conduct
    9300. REVIEW OF DISCIPLINARY PROCEEDING BY NATIONAL ADJUDICATORY 
COUNCIL AND NASD BOARD [BUSINESS CONDUCT COMMITTEE, NASD REGULATION 
AND NASD BOARDS]; APPLICATION FOR COMMISSION REVIEW
    9310. Appeal to or Review by National [Business Conduct 
Committee] Adudicatory Council
    9311. Appeal By Any Party; Cross-Appeal
    9312. Review Proceeding Initiated By National [Business Conduct 
Committee] Adjudicatory Council
    9313. Counsel to National [Business Conduct Committee] 
Adjudicatory Council
    9320. Transmission of Record; Extensions of Time, Postponements, 
Adjournments
    9321. Transmission of Record
    9322. Extensions of Time, Postponements, Adjournments
    9330. Appointment of Subcommittee or Extended Proceeding 
Committee; Disqualification and Recusal
    9331. Appointment of Subcommittee or Extended Proceeding 
Committee
    9332. Disqualification and Recusal
    9340. Proceedings
    9341. Oral Argument
    9342. Failure to Appear at Oral Argument
    9343. Disposition Without Oral Argument
    9344. Failure to Participate Below; Abandonment of Appeal
    9345. Subcommittee or Extended Proceeding Committee Recommended 
Decision to National [Business Conduct Committee] Adjudicatory 
Council
    9346. Evidence in National [Business Conduct Committee] 
Adjudicatory Council Proceedings
    9347. Filing of Papers In National [Business Conduct Committee] 
Adjudicatory Council Proceedings
    9348. Powers of the National [Business Conduct Committee] 
Adjudicatory Council on Review
    9349. National [Business Conduct Committee] Adjudicatory Council 
Formal Consideration; Decision
    9350. Discretionary Review by [Boards] NASD Board
    [9351. Discretionary Review by NASD Regulation Board
    9352] 9351. Discretionary Review by NASD Board
    9360. Effectiveness of Sanctions
    9370. Application to Commission for Review
    9400. LIMITATION PROCEDURES UNDER RULES 3130 AND 3131
    9410. Proceedings for Regulating Activities of Members 
Experiencing Financial or Operating Difficulties
    9411. Purpose
    9412. Notice of Limitations
    9413. Department of Member Regulation Consideration
    9414. National [Business Conduct Committee Review] Adjudicatory 
Council Review
    [9415. Discretionary Review by NASD Regulation Board
    9416] 9415. Discretionary Review by the NASD Board
    [9417] 9416. Enforcement of Sanctions
    [9418] 9417. Additional Limitations; Reduction or Removal of 
Limitations
    [9419] 9418. Application to Commission for Review
    [;] 9419. Other Action Not Foreclosed
    9500. SUSPENSION, CANCELLATION, BAR, DENIAL OF ACCESS, AND 
ELIGIBILITY PROCEDURES
    9510. Procedures for Summary and Non-Summary Suspension, 
Cancellation, Bar, Limitation, or Prohibition
    9511. Purpose and Computation of Time
    9512. Initiation of Proceedings for Summary Suspension, 
Limitation, or Prohibition
    9513. Initiation of Proceeding for Non-Summary Suspension, 
Cancellation, Bar, Limitation, or Prohibition
    9514. Hearing and Decision
    9515. Discretionary Review by the NASD Board
    9516. Reinstatement
    9517. Copies of Notices and Decisions to Members
    9518. Application to Commission for Review
    9519. Other Action Not Foreclosed; Costs
    9520. Eligibility Proceedings
    9521. Purpose
    9522. Initiation of Eligibility Proceedings
    9523. National [Business Conduct Committee Consideration] 
Adjudicatory Council Consideration
    [9524. Discretionary Review by the NASD Regulation Board

[[Page 64010]]

    9525] 9524. Discretionary Review by the NASD Board
    [9526] 9525. Application to Commission for Review
* * * * *
9000. CODE OF PROCEDURE
9100. Application and Purpose
9110. Application
    No change.
9120. Definitions
(a) ``Adjudicator''
    The term ``Adjudicator'' means: (1) a body, board, committee, 
group, or natural person that presides over a proceeding and renders a 
decision; (2) a body, board, committee, group, or natural person that 
presides over a proceeding and renders a recommended or proposed 
decision which is acted upon by an Adjudicator described in (1); or (3) 
a natural person who serves on a body, board, committee, or group 
described in (1) or (2). The term includes a Review Subcommittee as 
defined in paragraph (z), a Subcommittee as defined in paragraph (bb), 
an Extended Proceeding Committee as defined in paragraph [(k)](l), and 
a Statutory Disqualification Committee as defined in paragraph 
[(y)](aa).
* * * * *
(d) ``Counsel to the National [Business Conduct Committee] Adjudicatory 
Council''
    The term ``Counsel to the National [Business Conduct Committee] 
Adjudicatory Council'' means an attorney of the Office of the General 
Counsel of NASD Regulation who is responsible for advising the National 
[Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, a Subcommittee, or an Extended Proceeding Committee 
regarding a disciplinary proceeding on appeal or review before the 
National [Business Conduct Committee.] Adjudicatory Council.

(e) ``Department of Enforcement''

    The term ``Department of Enforcement'' means the Department of 
Enforcement or its delegatee, the Department of Market Regulation, 
except that the term excludes the Department of Market Regulation with 
respect to the actions of: (1) authorizing a complaint under Rule 9211; 
(2) determining the terms of a letter of acceptance, waiver, and 
consent or the terms of a minor rule violation plan letter under Rule 
9216; (3) determining whether to contest an offer of settlement under 
Rule 9270; and (4) authorizing the filing of an appeal under Rule 9311.
(f) ``Director''
    The term ``Director'' means a member of the Board of Directors of 
NASD Regulation[, excluding the Chief Executive Officer of the NASD.].
[(f)](g) ``District Committee''
    The term ``District Committee'' means a district committee elected 
pursuant to the NASD Regulation By-Laws or a resolution of the NASD 
Regulation Board.
[(g)](h) ``Document''
    The term ``Document'' means a writing, drawing, graph, chart, 
photograph, recording, or any other data compilation, including data 
stored by computer, from which information can be obtained.
[(h)](i) ``Extended Hearing''
    The term ``Extended Hearing'' means a disciplinary proceeding 
described in Rule 9231(c).
[(i)(j) ``Extended Hearing Panel''
    The term ``Extended Hearing Panel'' means an Adjudicator that is 
constituted under Rule 9231(c) to conduct a disciplinary proceeding 
that is classified as an ``Extended Hearing'' and is governed by the 
Rule 9200 Series.
[(j)](k) ``Extended Proceeding''
    The term ``Extended Proceeding'' means a disciplinary proceeding 
described in Rule 9331(a)(2).
[(k)](l) ``Extended Proceeding Committee''
    The term ``Extended Proceeding Committee'' means an appellate 
Adjudicator that is [appointed by the National Business Conduct 
Committee and] constituted under Rule 9331[(a)(2)] to participate in 
the National [Business Conduct Committee's] Adjudicatory Council's 
considertation of a disciplinary proceeding that is classified as an 
``Extended Proceeding'' and governed by the Rule 9300 Series.
[(l)](m) ``General Counsel''
    The term ``General Counsel'' means the General Counsel of NASD 
Regulation, or his or her delegatee, who shall be a person who reports 
to the General Counsel of NASD Regulation and is an Associate General 
Counsel, an Assistant General Counsel, or a person who has 
substantially the same or equivalent duties and responsibilities as an 
Associate General Counsel or an Assistant General Counsel.
[(m)](n) ``Governor''
    The term ``Governor'' means member of the Board of Governors of the 
NASD.
[(n)](o) ``Head of Enforcement''
    The term ``Head of Enforcement'' means the individual designated by 
the President of NASD Regulation to manage the Department of 
Enforcement, or his or her delegate in the Department of Enforcement.
(p)[(o)] ``Hearing Officer''
    The term ``Hearing Officer'' means an employee of NASD Regulation 
who is an attorney and who is appointed by the Chief Hearing Officer to 
act in a adjudicative role and fulfill various adjudicative 
responsibilities and duties in the Rule 9200 Series regarding 
disciplinary proceedings brought against members and associated 
persons.
[(p)](q)  ``Hearing Panel''
    The term ``Hearing Panel'' means an Adjudicator that is constituted 
under Rule 9231 to conduct a disciplinary proceeding governed by the 
Rule 9200 Series or that is constituted under the Rule 9500 Series to 
conduct a proceeding.
[(q)](r) ``Interested Association Staff''
    The term ``Interested Association Staff'' means, in the context of:
    (1) a disciplinary proceeding under the Rule 9200 Series and the 
Rule 9300 Series:
    (A) the Head of Enforcement;
    (B) [a] an employee of the Department of Enforcement [employee] who 
reports, directly or indirectly, to the Head of Enforcement;
    (C) an Association employee who directly participated in the 
authorization of the complaint; or
    (D) an Association employee who directly participated in an 
examination, investigation, prosecution, or litigation related to a 
specific disciplinary proceeding, and a district director or department 
head to whom such employee reports;
    (2) a proceeding under the Rule 9410 Series:
    (A) the head of the Department of Member Regulation;
    (B) a Department of Member Regulation employee who reports, 
directly or indirectly, to the head of the Department of Member 
Regulation;
    (C) an Association employee who directly participated in the 
authorization of or the initial decision in the proceeding; or
    (D) an Association employee who directly participated in an 
examination, investigation, prosecution, or litigation

[[Page 64011]]

related to a specific proceeding, and a district director or department 
head to whom such employee reports; or
    (3) a proceeding under the Rule 9510 or 9520 Series:
    (A) the head of the department or office that issues the notice or 
is designated as a Party;
    (B) an Association employee who reports, directly or indirectly, to 
such person;
    (C) an Association employee who directly participated in the 
initiation of the proceeding; or
    (D) an Association employee who directly participated in an 
examination, investigation, prosecution, or litigation related to a 
specific proceeding, and a district director or department head to whom 
such employee reports; or[.]
    [(r)](4) a proceeding under the Rule 9600 Series:
    (A) the head of the department or office that issues the decision 
granting or denying an exemption or is designated as a Party;
    (B) an Association employee who reports, directly or indirectly, to 
such person;
    (C) an Association employee who directly participated in the 
exemption proceeding; or
    (D) an Association employee who directly participated in an 
examination, investigation, prosecution, or litigation related to a 
specific exemption proceeding, and a district director or department 
head to whom such employee reports.
(s) ``Market Regulation Committee''
    The term ``Market Regulation Committee'' means the committee of 
NASD Regulation designated to consider the federal securities laws and 
rules and regulations adopted thereunder and various Rules of the 
Association and policies relating to:
    (1) the quotations of securities;
    (2) the execution of transactions;
    (3) the reporting of transactions; and
    (4) trading practices, including rules prohibiting manipulation and 
insider trading, and those Rules designated as Trading Rules (Rule 3300 
Series), the Nasdaq Stock Market Rules (Rule 4000 Series), other Nasdaq 
and NASD Market Rules (Rule 5000 Series), NASD Systems and Programs 
Rules (Rule 6000 Series), and Charges for Services and Equipment Rules 
(Rule 7000 Series).
[(s)](t) ``NASD Board''
    The term ``NASD Board'' means the Board of Governors of the NASD.
[(t)](u) ``NASD Regulation Board''
    The term ``NASD Regulation Board'' means the Board of Directors of 
NASD Regulation.
[(u)](v) ``Panelist''
    The term ``Panelist'' as used in the Rule 9200 Series, means a 
member of a Hearing Panel or Extended Hearing Panel who is not a 
Hearing Officer. As used in the Rule 9300 Series, the term means a 
current or former Director or a former Governor who is appointed to 
serve on a Subcommittee or an Extended Proceeding Committee.
[(v)](w) ``Party''
    With respect to a particular proceeding, the term ``Party'' means:
    (1) in the Rule 9200 Series and the Rule 9300 Series, the 
Department of Enforcement or a Respondent;
    (2) in the Rule 9410 Series and the Rule 9520 Series, the 
Department of Member Regulation or
    (A) a member that is the subject of a notice under Rule 9412;
    (B) a member that is the subject of a notice or files an 
application under Rule 9522;
    [or]
    (3) in the Rule 9510 Series, the department or office designated 
under Rule 9514(b) or a member or person that is the subject of a 
notice under Rule 9512 or Rule 9513; or[.]
    [(w)](4) in the Rule 9600 Series, the department or office 
designated under Rule 9620 to issue the decision granting or denying an 
exemption or a member that seeks the exemption under Rule 9610.
(x) ``Primary District Committee''
    The term ``Primary District Committee'' means, in a disciplinary 
proceeding under the Rule 9200 Series, the District Committee 
designated by the Chief Hearing Officer pursuant to Rule 9232 to 
provide one or more of the Panelists to a Hearing Panel or, if 
applicable, to an Extended Hearing Panel, for such disciplinary 
proceeding.
[(x)](y) ``Respondent''
    The term ``Respondent'' means, in a disciplinary proceeding 
governed by the Rule 9200 Series and in an appeal or review governed by 
the Rule 9300 Series, an NASD member or associated person against whom 
a complaint is issued.
(z) ``Review Subcommittee''
    The term ``Review Subcommittee'' means a body appointed by the 
National Adjudicatory Council pursuant to Article V of the NASD 
Regulation By-Laws.
(aa)[(y)] ``Statutory Disqualification Committee''
    The term ``Statutory Disqualification Committee'' means a 
Subcommittee of the National [Business Conduct Committee] Adjudicatory 
Council [that is composed of current members of the NASD Regulation 
Board] that makes a recommended decision to grant or deny an 
application for relief from the eligibility requirements of the 
Association to the National [Business Conduct Committee] Adjudicatory 
Council pursuant to the Rule 9520 Series.
[(z)](bb) ``Subcommittee''
    The term ``Subcommittee'' means an Adjudicator that is [appointed 
by the National Business Conduct Committee]:
    (1) constituted [by] under Rule 9331(a) to participate in the 
National [Business Conduct Committee's] Adjudicatory Council's 
consideration of an appeal or a review of a disciplinary proceeding 
pursuant to the Rule 9300 Series; [or]
    (2) constituted under the Rule 9410 Series or Rule 9630 to conduct 
a review proceeding.
* * * * *
9140. Proceedings
9141. Appearance and Practice; Notice of Appearance
(a) Representing Oneself
    No change.
(b) Representing Others
    A person shall not be represented before an Adjudicator, except as 
provided in this paragraph. Subject to the prohibitions of Rules 9150 
and 9280, a person may be represented in any 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. 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. When a person first makes any filing or 
otherwise appears in a representative capacity before an Adjudicator in 
a proceeding, that person shall file with the Adjudicator, and keep 
current[,] a Notice of Appearance. The Notice of Appearance is a 
written notice stating the name of the proceeding; the representative's 
name, business address, and telephone number; and the name and address 
of the person or persons represented. Any individual appearing or 
practicing in a representative capacity before an Adjudicator may be 
required to file a power of attorney with the Adjudicator showing his 
or her authority to act in such capacity.

[[Page 64012]]

9142. Withdrawal by Attorney or Representative
    No change.
9143. Ex Parte Communications
(a) Prohibited Communications
    Unless on notice and opportunity for all Parties to participate, or 
to the extent required for the disposition of ex parte matters as 
authorized by the Rule 9000 Series:
    (1) No Party, or counsel to or representative of a Party, or 
Interested Association Staff shall make or knowingly cause to be made 
an ex parte communication relevant to the merits of a proceeding to [a 
Governor, a Director, or] an Adjudicator who is participating in a 
decision with respect to that proceeding, or to an Association employee 
who is participating or advising in the decision of [a Governor, a 
Director, or] an Adjudicator with respect to that proceeding; and
    (2) No [Governor, Director, or] Adjudicator who is participating in 
a decision with respect to a proceeding, or no Association employee who 
is participating or advising in the decision of [a Governor, a 
Director, or] an Adjudicator with respect to a proceeding shall make or 
knowingly cause to be made to a Party, a counsel or representative to a 
Party, or Interested Association Staff an ex parte communication 
relevant to the merits of that proceeding.
(b) Disclosure of Prohibited Communication
    [A Governor, a Director, or an ] An Adjudicator who is 
participating in a decision with respect to a proceeding, or an 
Association employee who is participating or advising in the decision 
of [a Governor, a Director, or] an Adjudicator, who receives, makes, or 
knowingly causes to be made a communication prohibited by this Rule 
shall place in the record of the proceeding:
    (1) all such written communications;
    (2) memoranda stating the substance of all such oral 
communications; and
    (3) all written responses and memoranda stating the substance of 
all oral responses to all such communications.
(c) Remedies
    No change.
(d) Timing
    No change.
(e) Waiver of Ex Parte Prohibition
    No change.
9144. Separation of Functions
(a) Interested Association Staff
    Except as counsel or a witness in a proceeding or as provided in 
the Rule 9400 Series, Interested Association Staff is prohibited from 
advising an Adjudicator regarding a decision or otherwise participating 
in a decision of an Adjudicator. An Adjudicator is prohibited from 
advising Interested Association Staff regarding a decision or otherwise 
participating in a decision of Interested Association Staff, including 
the decision to issue a complaint and a decision whether to appeal or 
cross-appeal a disciplinary proceeding to the National [Business 
Conduct Committee] Adjudicatory Council.
(b) Separation of Adjudicators
    A Hearing Officer, including the Chief Hearing Officer, or a 
Panelist of a Hearing Panel or an Extended Hearing Panel, is prohibited 
from participating in: a decision whether to issue a complaint pursuant 
to Rule 9211; a decision whether to appeal or cross-appeal a 
disciplinary proceeding to the National [Business Conduct Committee] 
Adjudicatory Council pursuant to Rule 9311; and a discussion or 
decision relating to a call for review, a review, or an appeal pursuant 
to the Rule 9300 Series. [A Director] Except for the Chair of the 
National Adjudicatory Council, a Governor is prohibited from 
participating in a discussion or a decision relating to the above 
referenced acts with the Review Subcommittee or the Adjudicators 
referenced above[, a Governor, or the NASD Board. A Governor is 
prohibited from participating in a discussion or a decision relating to 
the above referenced acts with the Adjudicators referenced above, a 
Director, or the NASD Regulation Board].
(c) Waiver of Prohibitions of Separation of Functions
    No change.
9145. Rules of Evidence; Official Notice
    No change.
9146. Motions
* * * * *
(j) Disposition of Procedural Motions; Disposition of Motions for 
Summary Disposition
    (1) No change.
    (2) In the Rule 9300 Series, a motion on a procedural matter may be 
decided by Counsel to the National [Business Conduct Committee, the 
Chair and the Vice Chair of the National Business Conduct Committee (or 
either one, acting alone, in the event the other is recused or 
disqualified)] Adjudicatory Council, the Review Subcommittee, a 
Subcommittee or, if applicable, an Extended Proceeding Committee, or 
the National [Business Conduct Committee] Adjudicatory Council. A 
motion for disposition of a cause of action shall be decided by the 
National [Business Conduct Committee] Adjudicatory Council, except that 
a motion to dismiss a case for abandonment made under Rule 9344 may be 
decided by the [Chair and the Vice Chair of the National Business 
Conduct Committee (or either one, acting alone, in the event the other 
is recused or disqualified) or the National Business Conduct 
Committee.] Review Subcommittee.
    (3) No change.
(k) Motion for Protective Order
    (1) A Party, a person who is the owner, subject, or creator of a 
Document subject to production under Rule 8210 or any other Rule which 
may be introduced as evidence in a disciplinary proceeding, or a 
witness who testifies at a hearing in a disciplinary proceeding may 
file a motion requesting a protective order to limit disclosure or 
prohibit from disclosure to other Parties, witnesses or other persons, 
except the Department of Enforcement and other Association staff, 
Documents or testimony that contain confidential information. The 
motion shall include a general summary or extract of the Documents or 
testimony without revealing confidential details. If the movant seeks a 
protective order against disclosure to other Parties, copies of the 
Documents shall not be served on the other Parties. Unless the 
Documents are unavailable, the movant shall file for in camera 
inspection a sealed copy of the Documents for which the order is 
sought. If the movant is not a Party, the motion shall be served on 
each Party by the movant using a method in Rule 9134(a) and filed with 
the Adjudicator. A motion for a protective order shall be granted only 
upon a finding that disclosure of the Document or testimony would have 
a demonstrated adverse business effect on the movant or would involve 
an unreasonable breach of the movant's personal privacy.
    (2) If a protective order is granted, the order shall set forth the 
restrictions on use and disclosure of such Document or testimony. [A 
Hearing Officer) An Adjudicator does not have the authority to issue a 
protective order that would limit in any manner the use by the staff of 
the Association of such Documents or testimony in the Association 
staff's performance of their regulatory and self-regulatory 
responsibilities and

[[Page 64013]]

functions, including the transmittal, without restriction to the 
recipient, of such Documents or testimony to state, federal, or foreign 
regulatory authorities or other self-regulatory organizations. [A 
Hearing Officer] An Adjudicator does not have the authority to issue a 
protective order that purports to protect from production such 
Documents or testimony in the event that the Association is subject to 
a subpoena requiring that the Documents or testimony be produced.
(l) General
    No change.
9147. Rulings on Procedural Matters
    The NASD Board, the [NASD Regulation Board, the National Business 
Conduct Committee] National Adjudicatory Council, a Hearing Officer, or 
any other Adjudicator shall have full authority, except as otherwise 
provided by the Code, to rule on a procedural motion and any other 
procedural or administrative matter arising during the course of a 
proceeding conducted pursuant to the Code, subject to the rights of 
review or appeal provided by the Code.
9148. Interlocutory Review
    No change.
9150. Exclusion From Rule 9000 Series Proceeding
(a) Exclusion
    An Adjudicator may exclude an attorney for a Party or other person 
authorized to represent others by Rule 9141 from acting as counsel, 
acting in any representative capacity, or otherwise appearing in a 
particular Rule 9000 Series proceeding for contemptuous conduct under 
Rule 9280 or unethical or improper professional conduct in that 
proceeding. If an attorney for a Party, or other person authorized to 
represent others by Rule 9141, is excluded from a disciplinary hearing 
or conference, or any portion thereof, such attorney or person may seek 
review by the National [Business Conduct Committee] Adjudicatory 
Council of such exclusion under Rule 9280(c).
(b) Other Proceedings Not Precluded
    No change.
9160. Recusal or Disqualification
    No person shall participate as an Adjudicator in a matter governed 
by the Code as to which he or she has a conflict of interest or bias, 
or circumstances otherwise exist where his or her fairness might 
reasonably be questioned. In any such case the person shall recuse 
himself or herself, or shall be disqualified as follows:
(a) NASD Board
    The Chair of the NASD Board shall have authority to order the 
disqualification of a Governor, and [the Vice] a majority of the NASD 
Board excluding the Chair of the NASD Board, shall have authority to 
order the disqualification of the Chair [of the NASD Board;):
[(b) NASD Regulation Board](b) National Adjudicatory Council, Review 
Subcommittee, or Certain Subcommittees
    [The Chair of the NASD Regulation Board] The Chair of the National 
Adjudicatory Council shall have authority to order the disqualification 
of a member of the National Adjudicatory Council or the Review 
Subcommittee, a member of [Director and the Vice Chair of the NASD 
Regulation Board shall have authority to order the disqualification of 
the Chair of the NASD Regulation Board;
(c) National Business Conduct Committee or Certain Subcommittees
    The Chair of the National Business Conduct Committee shall have 
authority to order the disqualification of a member of the National 
Business Conduct Committee,] a Subcommittee appointed pursuant to the 
Rule 9410 Series or The Rule 9600 Series, a Hearing Panel appointed 
pursuant to the Rule 9520 Series, and the Statutory Disqualification 
Committee; and the Vice Chair of the National [Business Conduct 
Committee] Adjudicatory Council shall have the authority to order the 
disqualification of the Chair of the National [Business Conduct 
Committee; ] Adjudicatory Council;
[(d)](c) Rule 9331 Subcommittee or Extended Proceeding Committee
    Disqualification of a Panelist of a Subcommittee or Extended 
Proceeding Committee appointed under the Rule 9300 Series shall be 
governed by Rule 9332;
[(e)](d) Rule 9514 Hearing Panel
    The NASD Regulation Board or Nasdaq Board shall have authority to 
order the disqualification of a member of a Hearing Panel appointed by 
such Board under Rule 9514(b).
[(f)](e) Panelist of Hearing Panel or Extended Hearing Panel
    Disqualification of a Panelist of a Hearing Panel or Extended 
Hearing Panel appointed under the Rule 9200 Series shall be governed by 
Rule 9234;
[(g)](f) Hearing Officer
    Disqualification of a Hearing Officer of a Hearing Panel or an 
Extended Hearing Panel shall be governed by Rule 9233; and
[(h)](g) NASD Regulation Staff As Adjudicator
    The President of NASD Regulation shall have authority to order the 
disqualification of a member of the staff of the Department of Member 
Regulation participating in a Rule 9410 Series decision.
9200. DISCIPLINARY PROCEEDINGS
9210. Complaint and Answer
9211. [Issuance] Authorization of Complaint
(a) Complaint
    (1) If the Department of Enforcement believes that any NASD member 
or associated person is violating or has violated any rule, regulation, 
or statutory provision, including the federal securities laws and the 
regulations thereunder, which the Association has jurisdiction to 
enforce, the Department of Enforcement may authorize [and issue a 
complaint as set forth in Rule 9212] a complaint.
    (2) The NASD Regulation Board and the NASD Board each shall have 
the authority to direct the Department of Enforcement to authorize and 
issue a complaint when, on the basis of information and belief, either 
of such boards is of the opinion that any NASD member or associated 
person is violating or has violated any rule, regulation, or statutory 
provision, including the federal securities laws and the regulations 
thereunder, which the Association has jurisdiction to enforce.
    [(3) At the time of authorization and issuance of a complaint, the 
Department of Enforcement may propose:
    (A) an appropriate location for the hearing; and
    (B) if the complaint alleges at least one cause of action involving 
a violation of a statute or a rule described in Rule 9120(r), that the 
Chief Hearing Officer select a Market Regulation Committee Panelist for 
the Hearing Panel, or, if applicable, the Extended Hearing Panel as 
described in Rule 9231.]
(b) Commencement of Disciplinary Proceeding
    No change.

[[Page 64014]]

9212. Complaint[-]Issuance--Requirements, Service, Amendment, 
Withdrawal, and Docketing
(a) Form, Content, Notice, Docketing, and Service
    (1) If a complaint is authorized, the Department of Enforcement 
shall issue the complaint. Each complaint shall be in writing and 
signed by the Department of Enforcement. The complaint shall specify in 
reasonable detail the conduct alleged to constitute the violative 
activity and the rule, regulation, or statutory provision the 
Respondent is alleged to be violating or to have violated. If the 
complaint consists of several causes of action, each cause shall be 
stated separately. Complaints shall be served by the Department of 
Enforcement on each Party pursuant to Rules 9131 and 9134, and filed at 
the time of service with the Office of Hearing Officers pursuant to 
Rules 9135, 9136, and 9137.
    (2) At the time of issuance of a complaint, the Department of 
Enforcement may propose:
    (A) an appropriate location for the hearing; and
    (B) if the complaint alleges at least one cause of action involving 
a violation of a statute or a rule described in Rule 9120 (s), that the 
Chief Hearing Officer select a Market Regulation Committee Panelist for 
the Hearing Panel, or, if applicable, the Extended Hearing Panel as 
described in Rule 9231.
* * * * *
9213. Assignment of Hearing Officer and Appointment of Panelists to 
Hearing Panel or Extended Hearing Panel
    No change.
9214. Consolidation of Disciplinary Proceedings
(a) Initiated by Chief Hearing Officer
    No change.
(b) Initiated by a Party
    A Party may file a motion to consolidate two or more disciplinary 
proceedings if such consolidation would further the efficiency of the 
disciplinary process, if the subject complaints involve common 
questions of law or fact or one or more of the same Respondents, or if 
one or more of the factors favoring consolidation set forth in 
paragraph (a) appear to be present. If a Party moves to consolidate two 
or more disciplinary proceedings, the party shall file such motion, 
together with a copy of each relevant complaint and any answer thereto 
that has been filed, with the Office of Hearing Officers, and, pursuant 
to Rule 9133, shall serve the same upon the Parties [pursuant to Rule 
9133] in each of the cases proposed to be consolidated. The Parties 
shall have 14 days after service to file a response, stating any 
arguments in favor of or opposition to consolidation, and shall serve 
the response upon the Parties in each of the cases proposed to be 
consolidated. The Chief Hearing Officer shall issue an order approving 
or denying the request for consolidation.
(c) Impact on Hearing Panel or Extended Hearing Panel
    No change.
9215. Answer to Complaint
(a) Form, Service, Notice
    [Each] Pursuant to Rule 9133, each Respondent named in a complaint 
shall [answer and] serve an answer to the complaint on all other 
Parties within 25 days after service of the complaint on such 
Respondent [pursuant to Rule 9133], and at the time of service shall 
file such answer with the Office of Hearing Officers pursuant to Rule 
9135, 9136 and 9137. The Hearing Officer assigned to a disciplinary 
proceeding pursuant to Rule 9213 may extend such period for good cause. 
Upon the Receipt of a Respondent's answer, the Office of Hearing 
Officers shall promptly send written notice of the receipt of such 
answer to all Parties.
* * * * *
(e) Extension of Time to Answer Amended Complaint
    If a complaint is amended pursuant to Rule 9212(b), the time for 
filing an answer or amended answer shall be extended to 14 days after 
service of the amended complaint. If any Respondent has already filed 
an answer, such Respondent shall have [15] 14 days after service of the 
amended complaint, unless otherwise ordered by the Hearing Officer, 
within which to file an amended answer.
(f) Failure to Answer, Default
    If a Respondent does not file an answer or make any other filing or 
request related to the complaint with the Office of Hearing Officers 
within the time required, the [Hearing Officer shall order the] 
Department of Enforcement [to] shall send a second notice to such 
Respondent requiring an answer within 14 days after service of the 
second notice[, or within such longer period as the Hearing Officer in 
his or her discretion may order]. The second notice shall state that 
failure of the Respondent to reply within the period specified shall 
allow the Hearing Officer, in the exercise of his or her discretion, 
to: (1) treat as admitted by the Respondent the allegations in the 
complaint; and (2) enter a default decision against the Respondent 
pursuant to Rule 9269. If no answer is filed with the Office of Hearing 
Officers within the time required [by the second notice], the 
allegations of the complaint may be considered admitted by such 
Respondent and a default decision may be issued by the Hearing Officer. 
A Respondent may, for good cause shown, move the National [Business 
Conduct Committee] Adjudicatory Council to set aside a default.
9216. Acceptance, Waiver, and Consent; Plan Pursuant to SEC Rule 19d-
1(c)(2)
(a) Acceptance, Waiver, and Consent Procedures
    (1) Notwithstanding Rule 9211, if the Department of Enforcement has 
reason to believe a violation has occurred and the member or associated 
person does not dispute the violation, the Department of Enforcement 
may prepare and request that the member or associated person execute a 
letter accepting a finding of violation, consenting to the imposition 
of sanctions, and agreeing to waive such member's or associated 
person's right to a hearing before a Hearing Panel or, if applicable, 
an Extended Hearing Panel, and any right of appeal to the National 
[Business Conduct Committee] Adjudicatory Council, the Commission, and 
the courts, or to otherwise challenge the validity of the letter, if 
the letter is accepted. The letter shall describe the act or practice 
engaged in or omitted, the rule, regulation, or statutory provision 
violated, and the sanction or sanctions to be imposed.
    (2)(A) If a member or person associated with a member submits an 
executed letter of acceptance, waiver, and consent, by the submission 
such member or person associated with a member also waives:
    (i) Any right of such member or person associated with a member to 
claim bias or prejudgment of the General Counsel, the National 
[Business Conduct Committee] Adjudicatory Council, or any member of the 
National [Business Conduct Committee] Adjudicatory Council, in 
connection with such person's or body's participation in discussions 
regarding the terms and conditions of the letter of acceptance, waiver, 
and consent, or other consideration of the letter of acceptance, 
waiver, and consent, including acceptance or rejection of such letter 
of acceptance, waiver, and consent; and

[[Page 64015]]

    (ii) Any right of such member or person associated with a member to 
claim that a person violated the ex parte prohibitions of Rule 9143 or 
the separation of functions prohibitions of Rule 9144, in connection 
with such person's or body's participation in discussions regarding the 
terms and conditions of the letter of acceptance, waiver, and consent, 
or other consideration of the letter of acceptance, waiver, and 
consent, including acceptance or rejection of such letter of 
acceptance, waiver, and consent.
    (B) If a letter of acceptance, waiver, and consent is rejected, the 
member or associated person shall be bound by the waivers made under 
subparagraphs (a)(1) and (a)(2)(A) for conduct by persons or bodies 
occurring during the period beginning on the date of the letter of 
acceptance, waiver, and consent was executed and submitted and ending 
upon the rejection of the letter of acceptance, waiver, and consent.
    (3) If the member or associated person executes the letter of 
acceptance, waiver, and consent, it shall be submitted to the National 
[Business Conduct Committee. The Chair and the Vice Chair of the 
National Business Conduct Committee (or either one, acting alone, in 
the event the other is recused or disqualified)] Adjudicatory Council. 
The Review Subcommittee or the General Counsel may accept such letter 
or refer it to the National [Business Conduct Committee] Adjudicatory 
Council for acceptance or rejection by the National [Business Conduct 
Committee. The Chair and the Vice Chair of the National Business 
Conduct Committee (or either one, acting alone, in the event the other 
is recused or disqualified)] Adjudicatory Council. The Review 
Subcommittee may reject such letter or refer it to the National 
[Business Conduct Committee] Adjudicatory Council for acceptance or 
rejection by the National [Business Conduct Committee] Adjudicatory 
Council.
    (4) If the letter is accepted by the National [Business Conduct 
Committee, the Chair and the Vice Chair of the National Business 
Conduct Committee (or either one, acting alone, in the event the other 
is recused or disqualified)] Adjudicatory Council, the Review 
Subcommittee, or the General Counsel, it shall be deemed final and 
shall constitute the complaint, answer, and decision in the matter. If 
the letter is rejected by the [Chair and Vice Chair of the National 
Business Conduct Committee (or either one, acting alone, in the event 
the other is recused or disqualified) or the National Business Conduct 
Committee] Review Subcommittee or the National Adjudicatory Council, 
NASD Regulation may take any other appropriate disciplinary action with 
respect to the alleged violation or violations. If the letter is 
rejected, the member or associated person shall not be prejudiced by 
the execution of the letter of acceptance, waiver, and consent under 
subparagraph (a)(1) and the letter may not be introduced into evidence 
in connection with the determination of the issues set forth in any 
complaint or in any other proceeding.
(b) Procedure for Violation Under Plan Pursuant to SEC Rule 19d-1(c)(2)
    (1) Notwithstanding Rule 9211, NASD Regulation or the National 
[Business Conduct Committee] Adjudicatory Council may, subject to the 
requirements set forth in subparagraphs (b)(2) through (b)(4) and in 
SEC Rule 19d-1(c)(2), impose a fine (not to exceed $2,500) and/or a 
censure on any member or associated person with respect to any rule 
listed in IM-9216. If the Department of Enforcement has reason to 
believe a violation has occurred and if the member or associated person 
does not dispute the violation, the Department of Enforcement may 
prepare and request that the member or associated person execute a 
minor rule violation plan letter accepting a finding of violation, 
consenting to the imposition of sanctions, and agreeing to waive such 
member's or associated person's right to a hearing before the Hearing 
Panel or, if applicable, an Extended Hearing Panel, and any right of 
appeal to the National [Business Conduct Committee] Adjudicatory 
Council, the Commission, and the courts, or to otherwise challenge the 
validity of the letter, if the letter is accepted. The letter shall 
describe the act or practice engaged in or omitted, the rule, 
regulation, or statutory provision violated, and the sanction or 
sanctions to be imposed.
    (2)(A) If a member or person associated with a member submits an 
executed minor rule violation plan letter, by the submission such 
member or person associated with a member also waives:
    (i) any right of such member or person associated with a member to 
claim bias or prejudgment of the General Counsel, the National 
[Business Conduct Committee] Adjudicatory Council, or any member of the 
National [Business Conduct Committee] Adjudicatory Council, in 
connection with such person's or body's participation in discussions 
regarding the terms and conditions of the minor rule violation plan 
letter or other consideration of the minor rule violation plan letter, 
including acceptance or rejection of such minor rule violation plan 
letter; and
    (ii) any right of such member or person associated with a member to 
claim that a person violated the ex parte prohibitions of Rule 9143 or 
the separation of functions prohibitions of Rule 9144, in connection 
with such person's or body's participation in discussions regarding the 
terms and conditions of the minor rule violation plan letter or other 
consideration of the minor rule violation plan letter, including 
acceptance or rejection of such minor rule violation plan letter.
    (B) if a minor rule violation plan letter is rejected, the member 
or person associated with a member shall be bound by the waivers made 
under subparagraphs (b)(1) and (b)(2)(A) for conduct by persons or 
bodies occurring during the period beginning on the date the minor rule 
violation plan letter was executed and submitted and ending upon the 
rejection of the minor rule violation plan letter.
    (3) If the member or associated person executes the minor rule 
violation plan letter, it shall be submitted to the National [Business 
Conduct Committee. The Chair and the Vice Chair of the National 
Business Conduct Committee (or either one, acting alone, in the event 
the other is recused or disqualified)] Adjudicatory Council. The Review 
Subcommittee or the General Counsel may accept such letter or refer it 
to the National [Business Conduct Committee] Adjudicatory Council for 
acceptance or rejection by the National [Business Conduct Committee. 
The Chair and the Vice Chair of the National Business Conduct Committee 
(or either one, acting alone, in the event the other is recused or 
disqualified)] Adjudicatory Council. The Review Subcommittee may reject 
such letter or refer it to the National [Business Conduct Committee] 
Adjudicatory Council for acceptance or rejection by the National 
[Business Conduct Committee] Adjudicatory Council.
    (4) If the letter is accepted by the National [Business Conduct 
Committee, the Chair and the Vice Chair of the National Business 
Conduct Committee (or either one, acting alone, in the event the other 
is recused or disqualified)] Adjudicatory Council, the Review 
Subcommittee, or the General Counsel, it shall be deemed final and the 
Association shall report the violation to the Commission as required by 
the Commission pursuant to a plan approved under SEC Rule 19d-1(c)(2). 
If the letter is rejected by the [Chair and the Vice Chair of the 
National Business

[[Page 64016]]

Conduct Committee (or either one, acting alone, in the event the other 
is recused or disqualified), or by the National Business Conduct 
Committee] Review Subcommittee or the National Adjudicatory Council, 
NASD Regulation may take any other appropriate disciplinary action with 
respect to the alleged violation or violations. If the letter is 
rejected, the member or associated person shall not be prejudiced by 
the execution of the minor rule violation plan letter under 
subparagraph (b)(1) and the letter may not be introduced into evidence 
in connection with the determination of the issues set forth in any 
complaint or in any other proceeding.
IM-9216. Violations Appropriate for Disposition Under Plan Pursuant to 
SEC Rule 19d-1(c)(2)
    <bullet> Rule 2210(b) and (c) and Rule 2220 (b) and (c)--Failure to 
have advertisements and sales literature approved by a principal prior 
to use; failure to maintain separate files of advertisements and sales 
literature containing required information; and failure to file 
advertisements with the Association within the required time limits.
    <bullet> Rule 3360--Failure to timely file reports of short 
positions on Form NS-1.
    <bullet> Rule 3110--Failure to keep and preserve books, accounts, 
records, memoranda, and correspondence in conformance with all 
applicable laws, rules, regulations and statements of policy 
promulgated thereunder, and with the Rules of the Association.
    <bullet> Rule 8211, Rule 8212, and Rule 8213--Failure to submit 
trading data as requested.
9220. Request for Hearing; Extensions of Time, Postponements, 
Adjournments
9221. Request for Hearing
(a) Respondent Request for Hearing
    With the filing of any Respondent's answer, such Respondent may: 
(1) request a hearing; (2) propose an appropriate location for the 
hearing; and (3) propose, if the complaint alleges at least one cause 
of action involving a violation of a statute or rule described in Rule 
9120 [(r)(s), that the Chief Hearing Officer select a Market Regulation 
Committee Panelist for a Hearing Panel or, if applicable, an Extended 
Hearing Panel as described in Rule 9231. If a Respondent requests a 
hearing, a hearing shall be granted. A Respondent who fails to request 
a hearing with the filing of his or her answer waives the right to a 
hearing unless a Hearing Officer, Hearing Panel, or, if applicable, an 
Extended Hearing Panel, grants, for good cause shown, a later filed 
motion by such Respondent requesting a hearing.
* * * * *
9230. Appointment of Hearing Panel, Extended Hearing Panel
9231. Appointment by the Chief Hearing Officer of Hearing Panel or 
Extended Hearing Panel
(a) Appointment
    No change.
(b) Hearing Panel
    The Hearing Panel shall be composed of a Hearing Officer and two 
Panelists, except as provided in Rule 9234 (a), (c), (d), or (e). The 
Hearing Officer shall serve as the chair of the Hearing Panel. Each 
Panelist shall be associated with a member of the Association or 
retired therefrom.
    (1) Except as provided in (2), the Chief Hearing Officer shall 
select as a Panelist a person who:
    (A) currently serves or previously served on a District Committee;
    (B) previously served on the National [Business Conduct Committee] 
Adjudicatory Council;
    (C) previously served on a disciplinary subcommittee of the 
National Adjudicatory Council or the National Business Conduct 
Committee, including a Subcommittee, an Extended Proceeding Committee, 
or their predecessor subcommittees; or,
    (D) previously served as a Director, a director of the Nasdaq Board 
of Directors, or a Governor, but does not serve currently in any of 
these positions.
    (2) If the complaint alleges at least one cause of action involving 
a violation of a statute or a rule described in Rule 9120 [r](s), the 
Chief Hearing Officer may select as a Panelist a person who currently 
serves on the Market Regulation Committee or who previously served on 
the Market Regulation Committee not earlier than four years before the 
date the complaint was served upon the Respondent who was the first 
served Respondent in the disciplinary proceeding for which the Hearing 
Panel or the Extended Hearing Panel is being appointed.
(c) Extended Hearing Panel
    Upon consideration of the complexity of the issues involved, the 
probable length of the hearing, or other factors that the Chief Hearing 
Officer deems material, the Chief Hearing Officer may determine that a 
matters shall be designated an Extended Hearing, and that such matter 
shall be considered by an Extended Hearing Panel. The Extended Hearing 
Panel shall be composed of a Hearing Officer and two Panelists, except 
as provided in Rule 9234(a), (c), (d), or (e). The Hearing Officer will 
serve as the chair of the Extended Hearing Panel. The Panelists shall 
be associated with a member of the Association, or retired therefrom. 
The Chief Hearing Officer shall have discretion to compensate any or 
all Panelists of an Extended Hearing Panel at the rate then in effect 
for arbitrators appointed under the Rule 10000 Series.
    (1) Except as provided in (2), the Chief Hearing Officer shall 
select as a Panelist a person who meets the criteria set forth in 
paragraph (b)(1).
    (2) If the complaint alleges at least one cause of action involving 
a violation of a statute or a rule described in Rule 9120 [r](s), the 
Chief Hearing Officer may select as a Panelist a person who currently 
serves on the Market Regulation Committee or who previously served on 
the Market Regulation Committee not earlier than four years before the 
date the complaint was served upon the Respondent who was the first 
served Respondent in the disciplinary proceeding for which the Hearing 
Panel or the Extended Hearing Panel is being appointed.
(d) Observer
    A person who is qualified to serve as a Panelist may be designated 
by the Chief Hearing Officer to serve as an observer to a Hearing Panel 
or an Extended Hearing Panel. If the Chief Hearing Officer designates 
more than two people to serve as observers to a Hearing Panel or an 
Extended Hearing Panel, the Chief Hearing Officer shall obtain the 
consent of the Parties. An observer may attend any hearing of a 
disciplinary proceeding and observe the proceeding, but may not vote or 
participate in any other manner in the hearing or the deliberations of 
the Hearing Panel or the Extended Hearing Panel, or participate in the 
administration of the disciplinary proceeding.
9232. Criteria for Selection of Panelists and Replacement Panelists
(a) Chief Hearing Officer Selection Alternatives
    No change.
(b) Criteria for Selection of Panelist from Market Regulation Committee
    The Chief Hearing Officer may select one but not more than one 
Panelist from the Market Regulation Committee, as provided in Rule 
9231, to serve in a disciplinary proceeding if the complaint alleges at 
least one cause of action

[[Page 64017]]

involving a violation of a statute or a rule described in Rule 
9120[(r)](s).
* * * * *
9235. Hearing Officer Authority
(a) Hearing Officer Authority
    No change.
(b) Authority in the Absence of Hearing Officer
    If the Hearing Officer appointed to a case is temporarily 
unavailable or unable for any reason to discharge his or her duties in 
a particular proceeding under conditions not requiring the appointment 
of a replacement Hearing Officer, the Chief Hearing Officer or the 
Deputy Chief Hearing Officer in his or her discretion may exercise the 
necessary authority in the same manner as if he or she had been 
appointed Hearing Officer in the particular proceeding.
9240. Pre-hearing Conference and Submission
9241. Pre-hearing Conference
* * * * *
(d) Scheduling
    An initial pre-hearing conference, unless determined by the Hearing 
Officer to be unnecessary or premature, shall be held within 21 days 
after [service] filing of an answer, or after the expiration of the 
second period provided for filing an answer as set forth in Rule 
9215(f). When a complaint names multiple Respondents, the 21-day period 
shall commence from the later of (i) the date on which the last timely 
answer was filed, or (ii) if one or more Respondents have failed to 
answer, from the expiration of the second period provided for filing an 
answer under Rule 9215(f).
* * * * *
9250. Discovery
9251. Inspection and Copying of Documents in Possession of Staff
* * * * *
(g) Failure to Make Documents Available--Harmless Error
    In the event that a Document required to be made available to a 
Respondent pursuant to this Rule is not made available by the 
Department of Enforcement, no rehearing or amended decision of a 
proceeding already heard or decided shall be required unless the 
Respondent establishes that the failure to make the Document available 
was not harmless error. The Hearing Officer, or, upon appeal or review, 
a Subcommittee, an Extended Proceeding Committee, or the National 
[Business Conduct Committee] Adjudicatory Council, shall determine 
whether the failure to make the document available was not harmless 
error, applying applicable Association, Commission, and federal 
judicial precedent.
9252. Requests for Information
    No change.
9253. Production of Witness Statements
(a) Availability
    A Respondent in a disciplinary proceeding may file a motion 
requesting that the Department of Enforcement produce for inspection 
and copying [a] any statement of any person called or to be called as a 
witness by the Department of Enforcement that pertains, or is expected 
to pertain, to his or her direct testimony [, including statements] and 
that would be required to be produced pursuant to the Jencks Act, 18 
U.S.C. Sec. 3500. The production shall be made at a time and place 
fixed by the Hearing Officer and shall be made available to all 
Parties. Such production shall be made under conditions intended to 
preserve the items to be inspected or copied.
(b) Failure to Produce--Harmless Error
    In the event that a statement required to be made available for 
inspection and copying by a Respondent is not provided by the 
Department of Enforcement, there shall be no rehearing of a proceeding 
already heard, or issuance of an amended decision in a proceeding 
already decided, unless the Respondent establishes that the failure to 
provide the statement was not harmless error. The Hearing Officer, or 
upon appeal or review, a Subcommittee, an Extended Proceeding 
Committee, or the National [Business Conduct Committee] Adjudicatory 
Council, shall determine whether the failure to provide any statement 
was not harmless error, applying applicable Association, Commission, 
and federal judicial precedent.
* * * * *
9270. Settlement Procedure
(a) When Offer Allowed; No Stay of Proceeding
    A Respondent who is notified that a proceeding has been instituted 
against him or her may propose in writing an offer of settlement at any 
time. If a Respondent proposes an offer of settlement [30 or fewer 
days] before the hearing on the merits [is scheduled to begin, or] has 
begun, the making of an offer of settlement shall not stay the 
proceeding, unless otherwise decided by the Hearing Officer. If a 
Respondent proposes an offer of settlement after the hearing on the 
merits has begun, the making of an offer of settlement shall not stay 
the proceeding, unless otherwise decided by the Hearing Panel or, if 
applicable, the Extended Hearing Panel.
* * * * *
(d) Waiver
    (1) If a Respondent submits an offer of settlement, by the 
submission such Respondent waives:
    (A) any right of such Respondent to a hearing before a Hearing 
Panel or, if applicable, and Extended Hearing Panel, and any right of 
appeal to the National [Business Conduct Committee] Adjudicatory 
Council, the Commission, and the courts, or any right otherwise to 
challenge or contest the validity of the order issued, if the offer of 
settlement and order of acceptance are accepted;
    (B) any right of such Respondent to claim bias or prejudgment of 
the Chief Hearing Officer, Hearing Officer, a Hearing Panel or, if 
applicable, an Extended Hearing Panel, a Panelist on a Hearing Panel, 
or, if applicable, an Extended Hearing Panel, the General Counsel, the 
National [Business Conduct Committee] Adjudicatory Council, or any 
member of the National [Business Conduct Committee] Adjudicatory 
Council, in connection with such person's or body's participation in 
discussions regarding the terms and conditions of the offer of 
settlement and the order of acceptance, or other consideration of the 
offer of settlement and order of acceptance, including acceptance, or 
rejection of such offer of settlement and order of acceptance; and
    (C) any right of such Respondent to claim that a person or body 
violated the ex parte prohibitions of Rule 9143 or the separation of 
functions prohibitions of Rule 9144, in connection with such person's 
or body's participation in discussion regarding the terms and 
conditions of the offer of settlement and the order of acceptance, or 
other consideration of the offer of settlement and order of settlement, 
including acceptance or rejection of such offer of settlement and order 
of acceptance.
    (2) If an offer of settlement and an order of acceptance are 
rejected, the Respondent shall be bound by the waivers made in this 
paragraph (d) for conduct by persons or bodies occurring during the 
period beginning from the date the offer of settlement was submitted 
and ending upon the rejection of the offer of settlement and order of 
acceptance.

[[Page 64018]]

(e) Uncontested Offers of Settlement
    If a Respondent makes an offer of settlement and the Department of 
Enforcement does not oppose it, the offer of settlement is uncontested. 
If an offer of settlement is determined to be uncontested by the 
Department of Enforcement before a hearing on the merits has begun, the 
Department of Enforcement shall transmit the uncontested offer of 
settlement and a proposed order of acceptance to the National [Business 
Conduct Committee] Adjudicatory Council with its recommendation. If an 
offer of settlement is determined to be uncontested by the Department 
of Enforcement after a hearing on the merits has begun, the Department 
of Enforcement shall transmit the offer of settlement and a proposed 
order of acceptance to the Hearing Panel or, if applicable, the 
Extended Hearing Panel for acceptance or rejection. If accepted by the 
Hearing Panel or, if applicable, Extended Hearing Panel, the offer of 
settlement and the order of acceptance shall be forwarded to the 
National [Business Conduct Committee] Adjudicatory Council to accept or 
reject.
    (1) A proposed order of acceptance shall make findings of fact, 
including a statement of the rule, regulation, or statutory provision 
violated, and impose sanctions consistent with the terms of the offer 
of settlement.
    (2) Before an offer of settlement and an order of acceptance shall 
become effective, they shall be submitted to and accepted by the 
National [Business Conduct Committee. The Chair and the Vice Chair of 
the National Business Conduct Committee (or either one, acting alone, 
in the event the other is recused or disqualified)] Adjudicatory 
Council. The Review Subcommittee or the General Counsel may accept such 
offer of settlement and order of acceptance or refer them to the 
National [Business Conduct Committee] Adjudicatory Council for 
acceptance or rejection by the National [Business Conduct Committee. 
The Chair and the Vice Chair of the National Business Conduct Committee 
(or either one, acting alone, in the event the other is recused or 
disqualified)] Adjudicatory Council. The Review Subcommittee may reject 
such offer of settlement and order of acceptance or refer them to the 
National [Business Conduct Committee] Adjudicatory Council for 
acceptance or rejection by the National [Business Conduct Committee] 
Adjudicatory Council.
    (3) If the offer of settlement and order of acceptance are accepted 
by the National [Business Conduct Committee, the Chair and the Vice 
Chair of the National Business Conduct Committee (or either one, acting 
alone, in the event the other is recused or disqualified)] Adjudicatory 
Council, the Review Subcommittee, or the General Counsel, they shall 
become final and the National [Business Conduct Committee, the Chair 
and the Vice Chair of the National Business Conduct Committee (or 
either one, acting alone, in the event the other is recused or 
disqualified),] Adjudicatory Council. The Review Subcommittee or the 
General Counsel shall communicate the acceptance to the Hearing Officer 
who shall thereafter issue the order.
(f) Contested Offers of Settlement
    If a Respondent makes an offer of settlement and the Department of 
Enforcement opposes it, the offer of settlement is contested. When the 
Department of Enforcement opposes an offer of settlement, the 
Respondent's written offer and the Department of Enforcement's written 
opposition shall be submitted to a Hearing Panel or, if applicable, an 
Extended Hearing Panel. The Hearing Panel or, if applicable, the 
Extended Hearing Panel, may order the Department of Enforcement and the 
Respondent to attend a settlement conference.
    (1) If a contested offer of settlement is approved by the Hearing 
Panel or, if applicable, Extended Hearing Panel, the Hearing Officer 
shall draft an order of acceptance of the offer of settlement. The 
order of acceptance shall make findings of fact, including a statement 
of the rule, regulation, or statutory provision violated, and impose 
sanctions consistent with the terms of the offer of settlement. The 
offer of settlement, any written opposition thereto, and the order of 
acceptance shall be forwarded to the National [Business Conduct 
Committee] Adjudicatory Council to accept or reject.
    (2) Before an offer of settlement and order of acceptance shall 
become effective, they shall be submitted to, and accepted by, the 
National [Business Conduct Committee. The Chair and the Vice Chair of 
the National Business Conduct Committee (or either one, acting alone, 
in the event the other is recused or disqualified)] Adjudicatory 
Council. The Review Subcommittee may accept or reject such offer of 
settlement and order of acceptance or refer them to the National 
[Business Conduct Committee] Adjudicatory Council for acceptance or 
rejection by the National [Business Conduct Committee] Adjudicatory 
Council.
    (3) If the offer of settlement and order of acceptance are accepted 
by the National [Business Conduct Committee or the Chair and the Vice 
Chair of the National Business Conduct Committee (or either one, acting 
alone, in the event the other is recused or disqualified), the National 
Business Conduct Committee or the Chair or the Vice Chair of the 
National Business Conduct Committee (or either one, acting alone, in 
the event the other is recused or disqualified)] Adjudicatory Council 
or the Review Subcommittee, the National Adjudicatory Council or the 
Review Subcommittee shall communicate the acceptance to the Hearing 
Officer who shall thereafter issue the order.
 (g) Final Disciplinary Action of Association
    No Change.
(h) Rejection of Offer of Settlement
    If an uncontested offer of settlement or an order of acceptance is 
rejected by the Hearing Panel or, if applicable, the Extended Hearing 
Panel, the [Chair and Vice Chair of the National Business Conduct 
Committee (or either one, acting alone, in the event the other is 
recused or disqualified), or the National Business Conduct Committee] 
Review Subcommittee, or the National Adjudicatory Council, the 
Respondent shall be notified in writing and the offer of settlement and 
proposed order of acceptance shall be deemed withdrawn. If a contested 
offer of settlement or an order of acceptance is rejected by the 
Hearing Panel or, if applicable, the Extended Hearing Panel, the [Chair 
and Vice Chair of the National Business Conduct Committee (or either 
one, acting alone, in the event the other is recused or disqualified), 
or the National Business Conduct Committee] Review Subcommittee, or the 
National Adjudicatory Council, the Respondent shall be notified in 
writing and the offer of settlement and proposed order of acceptance 
shall be deemed withdrawn. The rejected offer and proposed order of 
acceptance shall not constitute a part of the record in any proceeding 
against the Respondent making the offer.
(i) Disciplinary Proceeding With Multiple Respondents
    No change.
(j) No Prejudice From Rejected Offer of Settlement
    If an offer of settlement is rejected by a Hearing Panel or, if 
applicable, an Extended Hearing Panel, the [Chair and the Vice Chair of 
the National Business Conduct Committee (or either one, acting alone, 
in the event the other is recused or disqualified), or the National 
Business Conduct Committee] Review

[[Page 64019]]

Subcommittee, or the National Adjudicatory Council, the Respondent 
shall not be prejudiced by the offer, which may not be introduced into 
evidence in connection with the determination of the issues involved in 
the pending complaint or in any other proceeding.
9280. Contemptuous Conduct
* * * * *
(c) National [Business Conduct Committee] Adjudicatory Council Review 
of Exclusions
    If an attorney for a Party, or other person authorized to represent 
others by Rule 9141, is excluded from a disciplinary hearing or 
conference, or any portion thereof, such attorney or other person may 
seek review of the exclusion by filing a motion to vacate with the 
National [Business Conduct Committee] Adjudicatory Council. Such motion 
to vacate shall be filed and served on all Parties within five days 
after service of the exclusion order. Any response shall be filed with 
the National [Business Conduct Committee] Adjudicatory Council and 
served on all Parties within five days after the service to the motion 
to vacate. The National [Business Conduct Committee] Adjudicatory 
Council or the Review Subcommittee shall consider such motion on an 
expedited basis and promptly issue a written order. The filing of a 
motion to vacate shall stay all aspects of the disciplinary proceeding 
until at least seven days after service of the order of the National 
[Business Conduct Committee. The National Business Conduct Committee] 
Adjudicatory Council or the Review Subcommittee. The review proceedings 
shall be conducted on the basis of the written record without oral 
argument.
(d) Adjournment
    The hearing, conferences, or other activities relating to the 
disciplinary proceeding shall be stayed pending the [National Business 
Conduct Committee's review] review by the National Adjudicatory Council 
or the Review Subcommittee of an exclusion order in paragraph (c). In 
the event that the National [Business Conduct Committee] Adjudicatory 
Council or the Review Subcommittee upholds an exclusion of an attorney 
or other person authorized to represent others by Rule 9141, the 
Hearing Officer may, upon motion by a Party represented by an attorney 
or other person subject to an order of exclusion, grant an adjournment 
to allow the retention of new counsel or selection of a new 
representative. In determining whether to grant an adjournment or the 
length of an adjournment, the Hearing Officer shall consider whether 
there are other counsel or representatives of record on behalf of the 
Party, the availability of other counsel or other members of an 
excluded attorney's firm, or the availability of other representatives 
for the Party, and any other relevant factors.
9300. REVIEW OF DISCIPLINARY PROCEEDING BY NATIONAL [BUSINESS CONDUCT 
COMMITTEE, NASD REGULATION AND NASD BOARDS] ADJUDICATORY COUNCIL AND 
NASD BOARD; APPLICATION FOR COMMISSION REVIEW
9310. Appeal to or Review by National [Business Conduct Committee] 
Adjudicatory Council
9311. Appeal by Any Party; Cross-Appeal
(a) Time to File Notice of Appeal
    No change.
(B) Effect
    An appeal to the National [Business Conduct Committee] Adjudicatory 
Council from a decision issued pursuant to Rule 9268 or Rule 9269 shall 
operate as a stay of that decision until the National [Business Conduct 
Committee] Adjudicatory Council issues a decision pursuant to Rule 9349 
or, in cases called for discretionary review by the NASD Regulation or 
NASD Boards, until a decision is issued pursuant to Rule 9351 or Rule 
9352.
(c) Notice of Appeal Content and Signature Requirements
    A Party appealing pursuant to this Rule shall file a written notice 
of appeal with the Office of Hearing Officers and service the notice on 
the Parties. The notice of appeal shall be signed by the appealing 
Party, or his or her counsel or representative, and shall contain:
    (1) The name of the disciplinary proceeding;
    (2) The disciplinary proceeding docket number;
    (3) The name of the Party on whose behalf the appeal is made;
    (4) A statement on whether oral argument before the National 
[Business Conduct Committee] Adjudicatory Council is requested; and
    (5) A brief statement of the findings, conclusions, or sanctions as 
to which exceptions are taken.
(d) Notice of Cross-Appeal
    No change.
(e) Waiver of Issues Not Raised
    The National [Business Conduct Committee] Adjudicatory Council may, 
in its discretion, deem waived any issued not raised in the notice of 
appeal or cross-appeal. The National [Business Conduct Committee] 
Adjudicatory Council, the Review Subcommittee, a Subcommittee or, if 
applicable, an Extended Proceeding Committee, or, for a disciplinary 
proceeding decided under Rule 9269, the General Counsel, shall provide 
the Parties with notice of, and an opportunity to submit briefs on, any 
issue that shall be considered by the National [Business Conduct 
Committee] Adjudicatory Council if such issue was not previously set 
forth in the notice of appeal.
(f) Withdrawal of Notice of Appeal or Cross-Appeal
    No change.
9312. Review Proceeding Initiated By National [Business Conduct 
Committee] Adjudicatory Council
(a) Call for Review
(1) Rule 9268 Decision
    A decision issued pursuant to Rule 9268 may be subject to a call 
for review by any member of the National [Business Conduct Committee] 
Adjudicatory Council or, pursuant to authority delegated from the 
National [Business Conduct Committee] Adjudicatory Council, by any 
member of the Review Subcommittee [of the National Business Conduct 
Committee. The Review Subcommittee shall be composed of two to four 
persons who are current members of the National Business Conduct 
Committee. At least 50 percent of the persons making up the Review 
Subcommittee shall be Non-Industry Directors]. A decision issued 
pursuant to Rule 9268 shall be subject to a call for review within 45 
days after the date of service of the decision. If called for review, 
such [decision shall be reviewed by the National [Business Conduct 
Committee] Adjudicatory Council.
(2) Rule 9269 Decision
    A default decision issued pursuant to Rule 9269 shall be subject to 
a call for review by the General Counsel, on his or her own motion 
within 45 days after the date of service of the decision. If called for 
review, such decision shall be reviewed by the National [Business 
Conduct Committee] Adjudicatory Council. 
(b) Effect
    Institution of review by a member of the National [Business Conduct 
Committee] Adjudicatory Council on his or her own motion, a member of 
the Review Subcommittee on his or her own

[[Page 64020]]

motion, or the General Counsel, on his or her own motion, shall operate 
as a stay of a final decision issued pursuant to Rule 9268 or Rule 9269 
as to all Parties subject to the notice of review, until the National 
[Business Conduct Committee] Adjudicatory Council issues a decision 
pursuant to Rule 9349, or, in cases called for discretionary review by 
the NASD [Regulation or NASD Boards] Board, until a decision is issued 
pursuant to Rule 9351 [or Rule 9352].
(c) Requirements
    (1) If a member of the National [Business Conduct Committee] 
Adjudicatory Council, a member of the Review Subcommittee, or, for a 
disciplinary proceeding decided under Rule 9269, the General Counsel 
determines to call a case for review, a written notice of review shall 
be served promptly on each Party to the proceeding and filed with the 
Office of Hearing Officers. Such notice of review shall contain:
    (A) the name of the disciplinary proceeding;
    (B) the disciplinary proceeding docket number; and
    (C) a brief statement of the findings, conclusions, or sanctions 
with respect to which the National [Business Conduct Committee] 
Adjudicatory Council, the Review Subcommittee, or the General Counsel 
determined that a call for review was necessary.
    (2) The statement contained in the notice of review shall not limit 
the scope of the National [Business Conduct Committee's] Adjudicatory 
Council's authority under Rule 9346 to review any issues raised in the 
[decision rendered pursuant to Rule 9268 or Rule 9269.] record. The 
National [Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, a Subcommittee or, if applicable, an Extended Proceeding 
Committee, or, for a disciplinary proceeding decided under Rule 9269, 
the General Counsel shall provide the Parties with notice of, and an 
opportunity to submit briefs on, any issue that shall be considered by 
the National [Business Conduct Committee] Adjudicatory Council if such 
issue was not previously set forth in the notice of review.
(d) Effect of Withdrawal of Notice of Appeal, Cross-Appeal
    If the review of a disciplinary proceeding by the National 
[Business Conduct Committee] Adjudicatory Council is terminated before 
the National [Business Conduct Committee] Adjudicatory Council issues a 
decision on the merits because all appealing Parties file a notice of 
withdrawal of appeal and no Party previously filed a notice of cross-
appeal, or all Parties who previously filed a notice of cross-appeal 
file a notice of withdrawal of cross-appeal:
    (1) a member of the National [Business Conduct Committee or of] 
Adjudicatory Council or the Review Subcommittee shall have the right to 
call for review a decision issued pursuant to Rule 9268 in accordance 
with Rule 9312(a)(1), except that the 45 day period during which a call 
for review may be made shall begin on the day the Association receives 
the last filed notice of withdrawal of appeal or, if applicable, the 
last filed notice of withdrawal of cross-appeal; and,
    (2) No change.
9313. Counsel to National [Business Conduct Committee] Adjudicatory 
Council
(a) Authority
    A Counsel to the National [Business Conduct Committee] Adjudicatory 
Council shall be appointed by the General Counsel for each disciplinary 
case on appeal or review. A Counsel to the National [Business Conduct 
Committee] Adjudicatory Council shall have authority to take 
ministerial and administrative actions to further the efficient 
administration of a proceeding, including the authority to:
    (1) direct the Office of Hearing Officers to complete and transmit 
a record of a disciplinary proceeding to the National [Business Conduct 
Committee] Adjudicatory Council in accordance with Rule 9267;
* * * * *
(b) Review
    A Party seeking the review of a decision of a Counsel to the 
National [Business Conduct Committee] Adjudicatory Council, may make a 
motion to the National [Business Conduct Committee] Adjudicatory 
Council, the Review Subcommittee, a Subcommittee or, if applicable, an 
Extended Proceeding Committee.
9320. [Transmission] Transmission of Record; Extensions of Time, 
Postponements, Adjournments
9321. Transmission of Record
    Within 21 days after the filing of a notice of appeal or notice of 
review, or at such later time as the National [Business Conduct 
Committee] Adjudicatory Council may designate, the Office of Hearing 
Officers shall assemble and prepare an index to the record, transmit 
the record and the index to the National [Business Conduct Committee] 
Adjudicatory Council, and serve copies of the index upon all Parties. 
The Hearing Officer who participated in the disciplinary proceeding, or 
the Chief Hearing Officer, shall certify that the record transmitted to 
the National [Business Conduct Committee] Adjudicatory Council is 
complete.
9322. Extensions of Time, Postponements, Adjournments
(a) Availability
    At any time prior to the issuance of a decision pursuant to Rule 
9349, the National [Business Conduct Committee] Adjudicatory Council, 
the Review Subcommittee, a Subcommittee or, if applicable, and Extended 
Proceeding Committee, or Counsel to the National [Business Conduct 
Committee] Adjudicatory Council, for good cause shown, may extend or 
shorten a period prescribed by the Code for the filing of any papers, 
except that Counsel to the National [Business Conduct Committee] 
Adjudicatory Council may shorten a period so prescribed only with the 
consent of the Parties. The National [Business Conduct Committee] 
Adjudicatory Council, the Review Subcommittee, a Subcommittee or, if 
applicable, an Extended Proceeding Committee, or Counsel to the 
National [Business Conduct Committee] Adjudicatory Council, for good 
cause shown, may postpone or adjourn a hearing consistent with 
paragraph (b), except that Counsel to the National [Business Conduct 
Committee] Adjudicatory Council may postpone or adjourn a hearing only 
with the consent of the Parties.
(b) Limitations on Postponements, Adjournments, and Changes in Location
    Oral argument shall begin at the time and place ordered, unless the 
National [Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, a Subcommittee or, if applicable, an Extended Proceeding 
Committee, or Counsel to the National [Business Conduct Committee] 
Adjudicatory Council, for good cause shown, postpones, adjourns, or 
changes the location of the oral argument, except that Counsel to the 
National [Business Conduct Committee] Adjudicatory Council may postpone 
or adjourn the oral argument only with the consent of the Parties. In 
considering a motion for the postponement or adjournment of an oral 
argument, the National [Business Conduct Committee] Adjudicatory 
Council, the Review Subcommittee, a Subcommittee or, if applicable, and 
Extended Proceeding Committee, or Counsel to the National [Business

[[Page 64021]]

Conduct Committee] Adjudicatory Council shall consider, in addition to 
any other relevant factors:
* * * * *
9330. Appointment of Subcommittee or Extended Proceeding Committee; 
Disqualification and Recusal
9331. Appointment of Subcommittee or Extended Proceeding Committee
(a) Appointment by National [Business Conduct Committee] Adjudicatory 
Council
    Following the filing of a notice of appeal pursuant to Rule 9311 or 
a notice of review pursuant to Rule 9312, the National [Business 
Conduct Committee] Adjudicatory Council or the Review Subcommittee 
shall appoint a Subcommittee or an Extended Proceeding Committee to 
participate, subject to Rule 9345, in a disciplinary proceeding 
appealed or called for review.
(1) Subcommittee
    Except as provided in subparagraph (2), for each disciplinary 
proceeding appealed or called for review, the National [Business 
Conduct Committee] Adjudicatory Council or the Review Subcommittee 
shall appoint a Subcommittee to participate, subject to Rule 9345, in 
the appeal or review. A Subcommittee shall be composed of two or more 
persons who shall be [current or] former Directors[,] or [former] 
Governors.
(2) Extended Proceeding Committee
    Upon consideration of the volume and complexity of the certified 
record, or other factors the National [Business Conduct Committee] 
Adjudicatory Council or the Review Subcommittee deems material, the 
National [Business Conduct Committee] Adjudicatory Council or the 
Review Subcommittee may determine that a disciplinary proceeding 
appealed or called for review shall be designated an Extended 
Proceeding and shall appoint an Extended Proceeding Committee to 
participate, subject to Rule 9345, in the appeal or review. The 
Extended Proceeding Committee shall be composed of two or more persons 
who shall be [current or] former Directors[,] or [former] Governors. 
The [Chair of the National Business Conduct Committee] Review 
Subcommittee shall have discretion to compensate any or all Panelists 
of an Extended Proceeding Committee at the rate then in effect for 
arbitrators appointed under the Rule 1000 Series.
(b) Function
    If a hearing is held, the Subcommittee or, if applicable, the 
Extended Proceeding Committee, shall hear oral arguments and consider, 
if allowed under Rule 9346(b), any new evidence. Based on the hearing 
and the record on appeal or review, the Subcommittee or, if applicable, 
the Extended Hearing Committee, shall make a recommendation to the 
National [Business Conduct Committee] Adjudicatory Council regarding 
the disposition of all matters on appeal, cross-appeal, or review. The 
recommendation shall be in the form of a written recommended decision.
9332. Disqualification and Recusal
(a) Recusal, Withdrawal of Member or Panelist
    If at any time a member of the National [Business Conduct 
Committee] Adjudicatory Council, including a member of the Review 
Subcommittee, a Panelist of a Subcommittee or an Extended Proceeding 
Committee, or a Counsel to the National [Business Conduct Committee] 
Adjudicatory Council determines that the member, the Panelist, or the 
Counsel to the National [Business Conduct Committee] Adjudicatory 
Council has a conflict of interest or bias or circumstances otherwise 
exist where the fairness of the member, the Panelist, or the Counsel to 
the National [Business Conduct Committee] Adjudicatory Council might 
reasonably be questioned, the member, the Panelist, or the Counsel to 
National [Business Conduct Committee] Adjudicatory Council shall notify 
the Chair or the Vice [-] Chair of the National [Business Conduct 
Committee] Adjudicatory Council, and the Chair or the Vice [-] Chair of 
the National [Business Conduct Committee] Adjudicatory Council shall 
issue and serve on the Parties a notice stating that the member, the 
Panelist, or the Counsel to the National [Business Conduct Committee] 
Adjudicatory Council has withdrawn from the matter. In the event that a 
Panelist withdraws, is incapacitated, or is otherwise unable to 
continue service after a hearing has been convened, the Chair or Vice 
[-] Chair of the National [Business Conduct Committee] Adjudicatory 
Council shall appoint a replacement Panelist. In the event that a 
[Counsel to the National Business Conduct Committee] member of the 
Review Subcommitte withdraws, is incapacitated, or is otherwise unable 
to continue service after assignment, the Chair or Vice Chair of the 
National Adjudicatory Council shall appoint another member of the 
National Adjudicatory Council to serve on the Review Subcommittee for 
the limited purpose of considering the issues raised in the 
disciplinary proceeding in which the withdrawal action was taken. The 
replacement member of the Review Subcommittee must have the same 
classification (Industry or Non-Industry) as the member who withdrew. 
In the event that a Counsel to the National Adjudicatory Council 
withdraws, is incapacitated, or is otherwise unable to continue service 
after assignment, the General Counsel shall assign a replacement 
Counsel to the National [Business Conduct Committee] Adjudicatory 
Council.
(b) Motion for Disqualification
    A Party may move for the disqualification of a member of the 
National [Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, a Panelist of a Subcommittee or an Extended Proceeding 
Committee, or a Counsel to the National [Business Conduct Committee] 
Adjudicatory Council. All such motions shall be based upon a 
reasonable, good faith belief that a conflict of interest or bias 
exists or circumstances otherwise exist where the fairness of the 
member, the Panelist, or the Council to the National [Business Conduct 
Committee] Adjudicatory Council might reasonably be questioned, and 
shall be accompanied by an affidavit setting forth in detail the facts 
alleged to constitute grounds for disqualification, and the dates on 
which the Party learned of those facts. Such motions shall be filed not 
later than 15 days after the later of:
    (1) When the Party learned of the facts believed to constitute the 
disqualification; or
    (2) When the Party was notified of the composition of the 
Subcommittee or, if applicable, the Extended Proceeding Committee or 
the assignment to the disciplinary proceeding of the Counsel to the 
National [Business Conduct Committee] Adjudicatory Council.
(c) Disposition of Disqualification Motions: Challenges to Single 
Member of National [Business Conduct Committee] Adjudicatory Council or 
Review Subcommittee, Single Panelist of Subcommittee or Extended 
Hearing Committee, or Counsel to the National [Business Conduct 
Committee] Adjudicatory Council
    Motions for disqualification of a member of the National [Business 
Conduct Committee] Adjudicatory Council, including a member of the 
Review Subcommittee, a Panelist of a Subcommittee or an Extended

[[Page 64022]]

Proceeding Committee, or a Counsel to the National [Business Conduct 
Committee] Adjudicatory Council shall be decided by the Chair or Vice 
[-] Chair of the National [Business Conduct Committee] Adjudicatory 
Council, who shall promptly determine whether disqualification is 
required and issue a written ruling on the motion. If a member of the 
Review Subcommittee is disqualified, the Chair or Vice Chair of the 
National Adjudicatory Council shall appoint another member of the 
National Adjudicatory Council to serve on the Review Subcommittee for 
the limited purpose of considering the issues raised in the 
disciplinary proceeding in which the motion was made. The replacement 
member of the Review Subcommittee must have the same classification 
(Industry or Non-Industry) as the member being replaced. If a Panelist 
is disqualified, the Chair or the Vice [-] Chair of the National 
[Business Conduct Committee] Adjudicatory Council shall appoint a 
replacement Panelist. If a Counsel is disqualified, the General Counsel 
shall assign a replacement Counsel to the National [Business Conduct 
Committee] Adjudicatory Council.
(d) Disposition of Disqualification Motions: Challenges to Multiple 
Members or  Panelists
(1) National [Business Conduct Committee] Adjudicatory Council
    If a Party files a motion to disqualify more than one member of the 
National [Business Conduct Committee] Adjudicatory Council, the Chair 
or the Vice [-] Chair of the National [Business Conduct Committee] 
Adjudicatory Council shall promptly determine whether disqualification 
is required, and shall issue a written ruling on the matter. In the 
event of such disqualification, the remaining members of the National 
[Business Conduct Committee] Adjudicatory Council shall consider the 
review or appeal of the disciplinary matter.
(2) Review Subcommittee
    If a Party files a motion to disqualify more than one member of the 
Review Subcommittee, the Chair or the Vice Chair of the National 
Adjudicatory Council shall promptly determine whether disqualification 
is required, and shall issue a written ruling on the matter. If members 
of the Review Subcommittee are disqualified, the Chair or Vice Chair of 
the National Adjudicatory Council shall appoint other members of the 
National Adjudicatory Council to serve on the Review Subcommittee for 
the limited purpose of considering the issues raised in the 
disciplinary proceeding in which the motion was made. The replacement 
members of the Review Subcommittee must have the same classification 
(Industry or Non-Industry) as the members being replaced.
(3) Subcommittee; Extended Proceeding Committee
    If a Party files a motion to disqualify more than one Panelist of a 
Subcommittee or an Extended Proceeding Committee, the Chair or the Vice 
[-] Chair of the National [Business Conduct Committee] Adjudicatory 
Council shall promptly determine whether disqualification is required, 
and shall issue a written ruling on the motion. If multiple Panelists 
are disqualified, the Chair or the Vice [-] Chair of the National 
[Business Conduct Committee] Adjudicatory Council shall appoint 
replacement Panelists.
9340. Proceedings
9341. Oral Argument
(a) Request for Oral Argument
    A Party may request oral argument before the Subcommittee or, if 
applicable, the Extended Proceeding Committee. Oral argument shall be 
requested in writing either in the Party's notice of appeal or cross-
appeal or within 15 days after service of the National [Business 
Conduct Committee's] Adjudicatory Council's notice of review. Subject 
to the limitations of Rules 9342 and 9344, oral argument shall be 
granted if timely requested. The right to oral argument set forth in 
this Rule is unaffected by a Party's waiver of, or failure to request, 
a hearing pursuant to the Rule 9200 Series.
(b) Discretion to Proceed With or Without Oral Argument
    No change.
(c) Notice Regarding Oral Argument
    If oral argument is held, a notice stating the date, time, and 
location of the oral argument shall be served on the Parties at least 
21 days before the hearing. The Parties may agree in writing to waive 
the notice period or, in extraordinary circumstances, the Subcommittee 
or, if applicable, the Extended Proceeding Committee, or Counsel to the 
National [Business Conduct Committee] Adjudicatory Council may provide 
for a shorter notice period, except that Counsel to the National 
[Business Conduct Committee] Adjudicatory Council may provide for a 
shorter notice period only with the consent of the Parties.
* * * * *
9342. Failure to Appear at Oral Argument
    No change.
9343. Disposition Without Oral Argument
    If an oral argument is not held, the matter shall be considered by 
a Subcommittee or, if applicable, an Extended Proceeding Committee, on 
the basis of the record, as defined in Rule 9267, and supplemented by 
any written materials submitted to or issued by the Subcommittee or, if 
applicable, the Extended Proceeding Committee, or the National 
[Business Conduct Committee] Adjudicatory Council in connection with 
the appeal, cross-appeal, or call for review.
9344. Failure to Participate Below; Abandonment of Appeal
(a) Failure to Participate Below
    When an appealing Party did not participate in the disciplinary 
proceeding before a Hearing Officer, a Hearing Panel or, if applicable, 
an Extended Hearing Panel, but shows good cause for the failure to 
participate, the National [Business Conduct Committee] Adjudicatory 
Council or the Review Subcommittee may dismiss the appeal and remand 
the matter for further proceedings, or may [hear evidence and consider 
the matter] order that the appeal proceed. If the appealing Party did 
not participate in the disciplinary proceeding before a Hearing 
Officer, a Hearing Panel or, if applicable, an Extended Hearing Panel, 
and fails to show good cause for the failure to participate, the matter 
shall be considered by the Subcommittee or, if applicable, the Extended 
Proceeding Committee, and the National [Business Conduct Committee] 
Adjudicatory Council on the basis of the record and other documents, as 
provided in Rules 9346 and 9347. For purposes of this paragraph, 
failure to participate shall include failure to file an answer or 
otherwise respond to a complaint, or failure to appear at a scheduled 
hearing, but shall not include failure to request a hearing pursuant to 
Rule 9221.
(b) Abandonment of Appeal
    If an appealing Party fails to advise the National [Business 
Conduct Committee] Adjudicatory Council or the Review Subcommittee of 
the basis for seeking review or otherwise fails to provide information 
or submit a written brief in response to a request pursuant

[[Page 64023]]

to Rules 9346 and 9347, the National [Business Conduct Committee or the 
Chair and the Vice Chair of the National business Conduct Committee (or 
either one, acting alone, in the event the other is recused or 
disqualified)] Adjudicatory Council or the Review Subcommittee may 
dismiss the appeal as abandoned, and the decision of the Hearing 
Officer, the Hearing Panel or, if applicable, the Extended Hearing 
Panel, shall become the final disciplinary action of the Association. 
If a cross-appealing Party fails to advise the National [Business 
Conduct Committee] Adjudicatory Council or the Review Subcommittee of 
the basis for seeking review or otherwise fails to provide information 
or submit a written brief in response to a request pursuant to Rules 
9346 and 9347, the National [Business Conduct Committee or the Chair 
and the Vice Chair of the National Business Conduct Committee (or 
either one, acting alone, in the event the other is recused or 
disqualified)] Adjudicatory Council or the Review Subcommittee may 
dismiss the cross-appeal as abandoned. Upon a showing of good cause, 
the National [Business Conduct Committee] Adjudicatory Council may 
withdraw any dismissal entered pursuant to this Rule.
9345. Subcommittee or Extended Proceeding Committee Recommended 
Decision to National [Business Conduct Committee] Adjudicatory Council
    A Subcommittee or, if applicable, an Extended Proceeding Committee, 
shall present a recommended decision in writing to the National 
[Business Conduct Committee and all other Directors not later than 
seven days] Adjudicatory Council before the meeting of the National 
[Business Conduct Committee] Adjudicatory Council at which the 
disciplinary proceeding shall be considered.
9346. Evidence in National [Business Conduct Committee] Adjudicatory 
Council Proceedings
(a) Scope of Review
    Except as otherwise set forth in this paragraph, the National 
[Business Conduct Committee's] Adjudicatory Council's review shall be 
limited to consideration of: (i) the record, as defined in Rule 9267, 
supplemented by briefs and other papers submitted to the Subcommittee 
or, if applicable, the Extended Proceeding Committee, and the National 
[Business Conduct Committee] Adjudicatory Council; and (ii) any oral 
argument permitted under this Code. A Party may introduce additional 
evidence only with prior approval of the Subcommittee or, if 
applicable, the Extended Proceeding Committee, or the National 
[Business Conduct Committee] Adjudicatory Council, upon a showing that 
extraordinary circumstances exist under paragraph (b). If an appealing 
Party shows good cause for failure to participate in the disciplinary 
proceeding below, the National [Business Conduct Committee] 
Adjudicatory Council may hear evidence and consider the disciplinary 
proceeding pursuant to Rule 9344(a).
(b) Leave to Introduce Additional Evidence
    A Party may apply to the Subcommittee or, if applicable, the 
Extended Proceeding Committee, or the National [Business Conduct 
Committee] Adjudicatory Council for leave to introduce additional 
evidence by motion filed not later than 30 days after service of such 
Party's notice of appeal or cross-appeal or not later than 35 days 
after service upon the Party by the National [Business Conduct 
Committee] Adjudicatory Council of a notice of review. The motion shall 
describe each item of proposed new evidence, demonstrate that there was 
good cause for failing to introduce it below, demonstrate why the 
evidence is material to the proceeding, and be filed and served. The 
Party may attach the documentary evidence as an exhibit to the motion. 
By a motion filed in accordance with Rule 9146, a Party may request an 
extension of the period during which a Party may file a motion for 
leave to introduce additional evidence. A Party shall demonstrate that 
there was good cause for failing to file the motion for leave to 
introduce additional evidence during the period prescribed.
(c) Motion In Opposition; Motion to Introduce Rebuttal Evidence
    No change.
(d) Discretion Regarding Review of Additional Evidence
    Upon consideration of any motion to introduce additional evidence 
and any opposition thereto, the Subcommittee or, if applicable, the 
Extended Proceeding Committee, or the National [Business Conduct 
Committee] Adjudicatory Council may permit the evidence to be 
introduced into the record on review, or the National [Business Conduct 
Committee] Adjudicatory Council may remand the disciplinary proceeding 
for further proceedings consistent with its ruling or for further fact 
finding.
(e) Requirements for Submitting Additional Documentary Evidence
    A Party that is permitted to introduce additional documentary 
evidence before the Subcommittee or, if applicable, the Extended 
Proceeding Committee, or the National [Business Conduct Committee] 
Adjudicatory Council pursuant to paragraph (d) shall make copies of the 
evidence available to the Subcommittee or, if applicable, the Extended 
Proceeding Committee, or the National [Business Conduct Committee] 
Adjudicatory Council, and to all Parties at such time as the 
Subcommittee or, if applicable, the Extended Proceeding Committee, the 
National [Business Conduct Committee] Adjudicatory Council, or Counsel 
to the National [Business Conduct Committee] Adjudicatory Council may 
specify.
(f) Subcommittee or Extended Proceeding Committee Order Requiring 
Additional Evidence
    On its own motion, the Subcommittee or, if applicable, the Extended 
Proceeding Committee, or the National [Business Conduct Committee] 
Adjudicatory Council may order that the record be supplemented with 
such additional evidence as it may deem relevant. Among other things, 
the Subcommittee, or if applicable, the Extended Proceeding Committee, 
or the National [Business Conduct Committee] Adjudicatory Council may 
order a Respondent who asserts his or her inability to pay a monetary 
sanction to file a sworn financial statement and to keep such statement 
current as ordered by the Subcommittee or, if applicable, the Extended 
Proceeding Committee, or the National [Business Conduct Committee] 
Adjudicatory Council.
9347. Filing of Papers in National [Business Conduct Committee] 
Adjudicatory Council Proceedings
(a) Briefs; Reply Briefs; Requirements
    Parties may file briefs in connection with proceedings governed by 
the Rule 9300 Series. Briefs shall be confined to the particular 
matters at issue. An exception to findings, conclusions, or sanctions 
shall be supported by citation to the relevant portions of the record, 
including references to specific pages relied upon, and by concise 
argument, including citation of such statutes, decisions, and other 
authorities as may be relevant. If an exception relates to the 
admission or exclusion of evidence, the substance of the evidence 
admitted or excluded shall be set forth in the brief, an appendix 
thereto, or by citation to the record. Parties may file reply briefs. 
If a Party files a reply brief, such brief

[[Page 64024]]

shall be limited to matters in reply. All briefs shall conform to the 
requirements of the Rule 9130 Series, and, except with advance leave of 
the Subcommittee or, if applicable, the Extended Proceeding Committee, 
the National [Business Conduct Committee] Adjudicatory Council, the 
Review Subcommittee, or Counsel to the National [Business Conduct 
Committee] Adjudicatory Council, exclusive of pages containing tables 
of contents or tables of authorities, a brief other than a reply brief 
shall not exceed 25 double-spaced pages, and a reply brief shall not 
exceed 12 double-spaced pages.
(b) Timely Filing of Briefs
    Briefs shall be due upon dates established by the Subcommittee or, 
if applicable, the Extended Proceeding Committee, the National 
[Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, or Counsel to the National [Business Conduct Committee] 
Adjudicatory Council in a scheduling order. Unless the Subcommittee or, 
if applicable, the Extended Proceeding Committee, the National 
[Business Conduct Committee] Adjudicatory Council, the Review 
Subcommittee, or Counsel to the National [Business Conduct Committee] 
Adjudicatory Council specifies otherwise, opening briefs shall be 
submitted not less than 21 days from the date of the scheduling order, 
and answering briefs shall be submitted 21 days thereafter. When reply 
briefs are submitted, such briefs shall be filed not later than ten 
days after service of the answering brief. Counsel to the National 
[Business Conduct Committee] Adjudicatory Council may not shorten a 
period previously established for the filing of briefs except with the 
consent of the Parties.
9348. Powers of the National [Business Conduct Committee] Adjudicatory 
Council on Review
    In any appeal or review proceeding pursuant to the Rule 9300 
Series, the National [Business Conduct Committee] Adjudicatory Council 
may affirm, dismiss, modify, or reverse with respect to each finding, 
or remand the disciplinary proceeding with instructions. The National 
[Business Conduct Committee] Adjudicatory Council may affirm, modify, 
reverse, increase, or reduce any sanction, or impose any other fitting 
sanction.
9349. National [Business Conduct Committee] Adjudicatory Council Formal 
Consideration; Decision
(a) Decision of National [Business Conduct Committee] Adjudicatory 
Council, Including Remand
    In an appeal or review of a disciplinary proceeding governed by the 
Rule 9300 Series that is not withdrawn or dismissed prior to a decision 
on the merits, the National [Business Conduct Committee] Adjudicatory 
Council, after considering all matters presented in the appeal or 
review, and the written recommended decision of the Subcommittee or, if 
applicable, the Extended Proceeding Committee, may affirm, dismiss, 
modify or reverse the decision of the Hearing Panel or, if applicable, 
Extended Hearing Panel, with respect to each Respondent who has 
appealed or cross-appealed or is subject to a call for review. The 
National [Business Conduct Committee] Adjudicatory Council may affirm, 
modify, reverse, increase, or reduce any sanction, or impose any other 
fitting sanction. Alternatively, the National [Business Conduct 
Committee] Adjudicatory Council may remand the disciplinary proceeding 
with instructions. The National [Business Conduct Committee] 
Adjudicatory Council shall prepare a proposed written decision pursuant 
to paragraph (b).
(b) Contents of Decision
    No change.
(c) Issuance of Decision After Expiration of Call for Review Period
    The National [Business Conduct Committee] Adjudicatory Council 
shall provide its proposed written decision to the NASD [Regulation 
Board, and, if the disciplinary proceeding is not called for review by 
the NASD Regulation Board, to the NASD Board. The NASD Regulation] 
Board. The NASD Board may call the disciplinary proceeding for review 
pursuant to Rule 9351. If the NASD Board does not call the disciplinary 
proceeding for review, the proposed written decision of the [NASD 
Regulation Board] National Adjudicatory Council shall become final, and 
the [NASD Regulation Board] National Adjudicatory Council shall serve 
its written decision on the Parties and provide a copy to each member 
of the Association with which a Respondent is associated. The decision 
shall constitute the final disciplinary action of the Association for 
purposes of SEC Rule 19d-1(c)(1), unless the [NASD Regulation Board] 
National Adjudicatory Council remands the proceeding.
    [The NASD Board may call the disciplinary proceeding for review 
pursuant to Rule 9352. If neither the NASD Regulation Board nor the 
NASD Board calls the disciplinary proceeding for review, the proposed 
written decision of the National Business Conduct Committee shall 
become final, and the National Business Conduct Committee shall serve 
its written decision on the Parties and provide a copy to each member 
of the Association with which a Respondent is associated. The decision 
shall constitute the final disciplinary action of the Association for 
purposes of SEC Rule 19d-1(c)(1), unless the National Business Conduct 
Committee remands the proceeding.]
9350. Discretionary Review by NASD Board[s]
9351. [Discretionary Review by NASD Regulation Board]
(a) Call for Review by Director
    A Director may call a disciplinary proceeding for review by the 
NASD Regulation Board, if the call for review is made within the period 
prescribed in paragraph (b).
(b) Seven Day Period; Waiver
    After receiving the proposed written decision of the National 
Business Conduct Committee pursuant to Rule 9349, a Director shall have 
not less than seven days to determine if the disciplinary proceeding 
should be called for review. A Director shall call a disciplinary 
proceeding for review by notifying the General Counsel. By a unanimous 
vote of the NASD Regulation Board, the NASD Regulation Board may 
shorten the period to less than seven days. By an affirmative vote of 
the majority of the NASD Regulation Board then in office, the NASD 
Regulation Board may, during the seven day period, vote to extend the 
period to more than seven days.
(c) Review at Next Meeting
    If a Director calls a disciplinary proceeding for review within the 
period prescribed in paragraph (b), the NASD Regulation Board shall 
review the disciplinary proceeding not later than the next meeting of 
the NASD Regulation Board. The NASD Regulation Board may order the 
Parties (excluding any Respondent who did not appeal or cross-appeal, 
or as to whom the issues appealed or called for review do not apply), 
to file briefs in connection with the NASD Regulation Board review 
proceedings pursuant to this Rule.

[[Page 64025]]

(d) Decision of NASD Regulation Board, Including Remand
    After review, the NASD Regulation Board may affirm, modify, or 
reverse the proposed written decision of the National Business Conduct 
Committee. The NASD Regulation Board may affirm, modify, reverse, 
increase, or reduce any sanction, or impose any other fitting sanction. 
Alternatively, the NASD Regulation Board may remand the disciplinary 
proceeding with instructions. The NASD Regulation Board shall prepare a 
proposed written decision that includes all of the elements described 
in Rule 9349(b)(1) through (6).
(e) Issuance of Decision After Expiration of Call for Review Period
    The NASD Regulation Board shall provide its proposed written 
decision to the NASD Board. The NASD Board may call the disciplinary 
proceeding for review pursuant to Rule 9352.
9352.] Discretionary Review by NASD Board
(a) Call for Review by Governor
    No change.
(b) [Seven] 15 Day Period; Waiver
(1) A [Disciplinary Proceeding Called for Review by NASD Regulation 
Board
    If the NASD Regulation Board reviewed the disciplinary proceeding 
under Rule 9351, a] Governor shall make his or her call for review not 
later than the next meeting of the NASD Board that is at least [seven] 
15 days after the date on which the NASD Board receives the proposed 
written decision of the [NASD Regulation Board.] National Adjudicatory 
Council.
[(2) Disciplinary Proceeding Not Called for Review by NASD Regulation 
Board
    If no Director of the NASD Regulation Board called the disciplinary 
proceeding for review under Rule 9351, a Governor shall make his or her 
call for review not later than the next meeting of the NASD Board that 
is at least seven days after the date on which the NASD Board receives 
the proposed written decision of the National Business Conduct 
Committee.
(3)](2) Waiver
    By a unanimous vote for the NASD Board, the NASD Board may shorten 
the period in subparagraph (1) [or (2)] to less than [seven] 15 days. 
By an affirmative vote of the majority of the NASD Board then in 
office, the NASD Board may, during the [seven] 15 day period in 
subparagraph (1) or (2), vote to extend the period in subparagraph (1) 
[or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
    No change.
(d) Decision of NASD Board, Including Remand.
    After review, the NASD Board may affirm, modify, or reverse [: (1)] 
the proposed written decision of the [NASD Regulation Board; or (2) if 
the NASD Regulation Board did not call a disciplinary proceeding for 
review under Rule 9351, the proposed written decision of the National 
Business Conduct Committee] National Adjudicatory Council. The NASD 
Board may affirm, modify, reverse, increase, or reduce any sanction, or 
impose any other fitting sanction. Alternatively, the NASD Board may 
remand the disciplinary proceeding with instructions. The NASD Board 
shall prepare a written decision that includes all of the elements 
described in Rule 9349 (b)(1) through (6).
* * * * *
9400. LIMITATION PROCEDURES UNDER RULES 3130 AND 3131
9410. Procedures for Regulating Activities of a Member Experiencing 
Financial or Operational Difficulties
* * * * *
9413. Department of Member Regulation Consideration
(a) Request for Hearing
    No change.
(b) Stay
    A request for hearing shall stay the notice of limitations served 
under Rule 9412 unless the National [Business Conduct Committee] 
Adjudicatory Council orders otherwise.
* * * * *
(j) Failure to Request Hearing
    If a member does not request a hearing under paragraph (a), the 
limitations specified in the notice shall become effective on the date 
specified in the notice. Unless the National [Business Conduct 
Committee] Adjudicatory Council calls the notice for review under Rule 
9414(a)(2), the limitations specified in the notice shall remain in 
effect until the Department of Member Regulation reduces or removes the 
limitations pursuant to Rule [9418(b)] 9417(b).
9414. National [Business Conduct Committee] Adjudicatory Council Review
(a) Initiation of a Review
(1) Application by Member
    A member aggrieved by a decision issued under Rule 9413 may file a 
written application for review by the National [Business Conduct 
Committee] Adjudicatory Council. The application shall state the 
specific grounds for the review and whether oral argument is requested. 
The application shall be filed pursuant to Rules 9135, 9136, and 9137 
within seven days after service of the decision. The member may 
withdraw its application for review at any time by filing a written 
notice with the National [Business Conduct Committee] Adjudicatory 
Council pursuant to Rules 9135, 9136, and 9137.
(2) Motion of National [Business Conduct Committee] Adjudicatory 
Council
    A decision issued under Rule 9413 shall be subject to a call for 
review by any member of the National [Business Conduct Committee] 
Adjudicatory Council or the Review Subcommittee [described in Rule 
9312(a)(1)] within 30 days after service of the decision. If a member 
that receives a notice under Rule 9412 does not request a hearing under 
rule 9413, the notice shall be subject to a call for review by any 
member of the National [Business Conduct Committee] Adjudicatory 
Council or the Review Subcommittee within 30 days after the effective 
date of the notice. If the National [Business Conduct Committee] 
Adjudicatory Council or the Review Subcommittee calls a decision or 
notice for review, a written notice of review shall be served promptly 
on the member pursuant to Rules 9132 and 9134. The notice of review 
shall state the specific grounds for the review and whether an oral 
argument is ordered. If a decision is called for review by a member of 
the National [Business Conduct Committee] Adjudicatory Council or the 
Review Subcommittee, the National [Business Conduct Committee] 
Adjudicatory Council shall review the decision.
(3) Stay
    Unless otherwise ordered by the National [Business Conduct 
Committee] Adjudicatory Council, the initiation of a review under this 
paragraph shall stay the decision of the Department of Member 
Regulation or an uncontested notice until a decision constituting final 
action of the Association is issued.

[[Page 64026]]

(4) Transmission of the Record
    If a review is initiated under this paragraph, the Department of 
Member Regulation shall assemble and prepare an index of the record, 
transmit the record and index to the National [Business Conduct 
Committee] Adjudicatory Council, certify to the National [Business 
Conduct Committee] Adjudicatory Council that the record is complete, 
and serve a copy of the record and index on the member.
(5) Ex Parte Communications
    The prohibitions against ex parte communications in Rule 9143 shall 
become effective under the Rule 9410 Series when Association staff has 
knowledge that a member intends to file a written application for 
review or that the National [Business Conduct Committee] Adjudicatory 
Council intends to review a decision on its own motion under this Rule.
(b) Subcommittee Consideration
(1) Appointment of Subcommittee
    The National [Business Conduct Committee] Adjudicatory Council or 
the Review Subcommittee shall appoint a Subcommittee to participate in 
the review. The Subcommittee shall be composed of two or more members. 
One member shall be a member of the National [Business Conduct 
Committee] Adjudicatory Council, and the remaining member or members 
shall be current or former [Directors of the NASD Regulation Board or 
former Governors of the NASD Board.] member of the National 
Adjudicatory Council or a former Director or Governor.
* * * * *
(5) Recommendation
    The Subcommittee shall present a recommended decision in writing to 
the National [Business Conduct Committee and all other Directors] 
Adjudicatory Council not later than seven days before the meeting of 
the National [Business Conduct Committee] Adjudicatory Council at which 
the proceeding shall be considered.
(c) Decision
(1) Decision of National [Business Conduct Committee] Adjudicatory 
Council, Including Remand
    After considering all matters presented in the review and the 
written recommended decision of the Subcommittee, the National 
[Business Conduct Committee] Adjudicatory Council may affirm, modify, 
or reverse the Department of Member Regulation's decision or remand the 
proceeding with instructions. The National [Business Conduct Committee] 
Adjudicatory Council shall prepare a proposed written decision pursuant 
to subparagraph (2).
(2) Contents of Decision
    The decision shall include:
* * * * *
    (E) if any limitations are imposed: (i) a description of the 
limitations and a statement describing a fitting sanction that will be 
imposed under Rule [9417] 9416 if the member fails to comply with any 
of the limitations; and (ii) the conditions for terminating the 
limitations.
(3) Issuance of Decision After Expiration of Call for Review Period
    The National [Business Conduct Committee] Adjudicatory Council 
shall provide its proposed written decision to the NASD [Regulation 
Board, and, if the proceeding is not called for review by the NASD 
Regulation Board, to the NASD Board. The NASD Regulation] Board. The 
NASD Board may call the proceeding for review pursuant to Rule 9415. 
[The] If the NASD Board [may] does not call the proceeding for review 
[pursuant to Rule 9416. If neither the NASD Regulation Board nor the 
NASD Board calls the proceeding for review], the proposed written 
decision of the National [Business Conduct Committee] Adjudicatory 
Council shall become final, and the National [Business Conduct 
Committee] Adjudicatory Council shall serve its written decision on the 
member and the Department of Member Regulation pursuant to Rules 9132 
and 9134. The decision shall be effective upon service. [The decision 
shall constitute the final action of the Association, unless the 
National Business Conduct Committee remands the proceeding.]
[9415. Discretionary Review by the NASD Regulation Board
(a) Call for Review by Director
    A Director may call a proceeding for review by the NASD Regulation 
Board if the call for review is made within the period prescribed in 
paragraph (b).
(b) Seven Day Period; Waiver
    After receiving the proposed written decision of the National 
Business Conduct Committee pursuant to Rule 9414, a Director shall have 
not less than seven days to determine if the proceeding should be 
called for review. A Director shall call a proceeding for review by 
notifying the General Counsel of NASD Regulation. By a unanimous vote 
of the NASD Regulation Board, the NASD Regulation Board may shorten the 
period to less than seven days. By an affirmative vote of the majority 
of the NASD Regulation Board then in office, the NASD Regulation Board 
may, during the seven day period, vote to extend the period to more 
than seven days.
(c) Review at Next Meeting
    If a Director calls a proceeding for review within the period 
prescribed by paragraph (b), the NASD Regulation Board shall review the 
proceeding not later than the next meeting of the NASD Regulation 
Board. The NASD Regulation Board may order the filing of briefs in 
connection with its review proceedings pursuant to this Rule.
(d) Decision of NASD Regulation Board, Including Remand
    After review, the NASD Regulation Board may affirm, modify, or 
reverse the proposed written decision of the National Business Conduct 
Committee or remand the proceeding with instructions. The NASD 
Regulation Board shall prepare a proposed written decision that 
includes all of the elements described in Rule 9414(c)(2).
(e) Issuance of Decision After Expiration of Call for Review Period
    The NASD Regulation Board shall provide its proposed written 
decision to the NASD Board. The NASD Board may call the proceeding for 
review pursuant to Rule 9416. If the NASD Board does not call the 
proceeding for review, the proposed written decision of the NASD 
Regulation Board shall become final, and the NASD Regulation Board 
shall serve its written decision on the member and the Department of 
Member Regulation pursuant to Rules 9132 and 9134. The decision shall 
be effective upon service.] The decision shall constitute the final 
action of the Association, unless the [NASD Regulation Board] National 
Adjudicatory Council remands the proceeding.
[9416]9415. Discretionary Review by the NASD Board
(a) Call for Review by Governor
    No change.
(b) [Seven] 15 Day Period; Waiver
[(1) Proceeding Called for Review by NASD Regulation Board
    If the NASD Regulation Board reviewed the proceeding under Rule 
9415, a] A Governor shall make his or her call for review not later 
than the next meeting of the NASD Board that is at least [seven] 15 
days after the date on which the NASD Board receives the proposed 
written decision of the

[[Page 64027]]

National Adjudicatory Council. [NASD Regulation Board.
(2) Proceeding Not Called for Review by NASD Regulation Board
    If no Director of the NASD Regulation Board called the proceeding 
for review under Rule 9415, a Governor shall make his or her call for 
review not later than the next meeting of the NASD Board that is at 
least seven days after the date on which the NASD Board receives the 
proposed written decision of the National Business Conduct Committee.
(3) Waiver
    ] By a unanimous vote of the NASD Board, the NASD Board may shorten 
the period [in subparagraph (1) or (2)] to less than [seven] 15 days. 
By an affirmative vote of the majority of the NASD Board then in 
office, the NASD Board may, during the [seven] 15 day period [in 
subparagraph (1) or (2)], vote to extend the period [in subparagraph 
(1) or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
    No change.
(d) Decision of NASD Board, Including Remand
    After review, the NASD Board may affirm, modify, or reverse [: (1)] 
the proposed written decision of the [NASD Regulation Board, or (2) if 
the NASD Regulation Board did not call the proceeding for review under 
Rule 9415, the proposed written decision of the National Business 
Conduct Committee] National Adjudicatory Council. Alternatively, the 
NASD Board may remand the proceeding with instructions. The NASD Board 
shall prepare a written decision that includes all of the elements 
described in Rule 9414(c)(2).
(e) Issuance of Decision
    No change.
[9417] 9416. Enforcement of Sanctions
* * * * *
(c) No Stay of Sanctions
    Unless otherwise ordered by the National [Business Conduct 
Committee] Adjudicatory Council, a request for a hearing pursuant to 
this Rule shall not stay the effectiveness of the order issued under 
paragraph (a).
(d) Decision
    No change.
[9418] 9417. Additional Limitations; Reduction or Removal of 
Limitations
(a) Additional Limitations
    If a member continues to experience financial or operational 
difficulty specified in Rule 3130 or 3131, notwithstanding an effective 
notice or decision under the Rule 9410 Series, the Department of Member 
Regulation may impose additional limitations by issuing a notice under 
Rule 9412. The notice shall state that the member may apply for relief 
from the additional limitations by filing a written application for a 
hearing under Rule 9413 and that the procedures in Rules 9413 through 
[9417] 9416 shall be applicable. An application for a hearing also 
shall include a detailed statement of the member's objections to the 
additional limitations.
(b) Reduction or Removal of Limitations
    No change.
[9419] 9418. Application to Commission for Review[; Other Action Not 
Foreclosed
    (a)] The right to have any action taken by the Association pursuant 
to this Rule Series reviewed by the Commission is governed by Section 
19 of the Act. The filing of an application for review shall not stay 
the effectiveness of the action taken by the Association, unless the 
Commission otherwise orders.
9419. Other Action Not Foreclosed
    [(b)] Action by the Association under the Rule 9410 Series shall 
not foreclose action by the Association under any other Rule.
[9420. Approval of Change in Business Operations That Will Result in a 
Change in Exemptive Status under SEC Rule 15c3-3
    Deleted].
9500. SUSPENSION, CANCELLATION, BAR, DENIAL OF ACCESS, AND ELIGIBILITY 
PROCEDURES
9510. Procedures for Summary and Non-Summary Suspension, Cancellation, 
Bar, Limitation, or Prohibition
9511. Purpose and Computation of Time
(a) Purpose
    (1) No change.
    (2) The Association also may take the following actions, after 
notice and opportunity for hearing:
    (A) cancel the membership of a member that becomes ineligible for 
continuance in membership, or that continues to be associated with an 
ineligible person, or suspend or bar a person from continuing to be 
associated with a member because such person is or becomes ineligible 
for association under Article [II] III, Section 3 of the NASD By-Laws;
    (B) suspend or cancel the membership of a member or the 
registration of a person for failure to pay fees, dues, assessments, or 
other charges; failure to submit a required report or information 
related to such payment; or failure to comply with an arbitration award 
or a settlement agreement related to an arbitration or mediation under 
Article [V] VI, Section [2] 3 of the NASD By-Laws;
    (C) cancel the membership of a member for failure to file or submit 
on request any report, document, or other information required to be 
filed with or requested by the Association under Article [VI] VII, 
Section 2 of the NASD By-Laws; and
    (D) limit or prohibit any member, associated person, or other 
person with respect to access to services offered by the Association or 
a member thereof if the Association determines that such person does 
not meet the qualification requirements or other prerequisites for such 
access or such person cannot be permitted to continue to have such 
access with safety to investors, creditors, members, or the 
Association.
* * * * *
9513. Initiation of Proceeding for Non-Summary Suspension, 
Cancellation, Bar, Limitation, or Prohibition
(a) Notice
    Association staff shall initiate a proceeding authorized under 
Section 3 of Article [II,] III, Section [2] 3 of Article [VI] VII of 
the NASD By-Laws, or Rule 9511(a)(2)(D), by issuing a written notice to 
the member, associated person, or other person. The notice shall 
specify the grounds for and effective date of the cancellation, 
suspension, bar, limitation, or prohibition and shall state that the 
member, associated person, or other person may file a written request 
for a hearing under Rule 9514. The notice shall be served by facsimile 
or overnight commercial courier.
(b) Effective Date
    For any cancellation, suspension, or bar under Section 3 of Article 
[II] III of the NASD By-Laws, the effective date shall be at least 
seven days after service of the notice on the member or associated 
person. For any cancellation or suspension under Section [2] 3 of 
Article [V] VI or Section 2 of Article [VI] VII of the NASD By-Laws, 
the effective date shall be at least 15 days after service of the 
notice on the member or

[[Page 64028]]

associated person. For any limitation or prohibition on access to 
services offered by the Association or a member thereof pursuant to 
Rule 9511(a)(2)(D), the effective date shall be upon receipt of the 
notice with respect to services to which the member, associated person, 
or other person does not have access and shall be at least seven days 
after service of the notice with respect to services to which the 
member, associated person, or other person already has access.
9514. Hearing and Decision
(a) Request
    No change.
(b) Designation of Party for the Association and Appointment of Hearing 
Panel
    If a member, associated person, or other person subject to a notice 
under Rule 9512 or 9513 files a written request for a hearing, an 
appropriate department or office of the Association shall be designated 
as a Party in the proceeding, and a Hearing Panel shall be appointed.
    (1) If the President of NASD Regulation or NASD Regulation staff 
issued the notice initiating the proceeding under Rule 9512(a) or 
9513(a), the President of NASD Regulation shall designate an 
appropriate NASD Regulation department or office as a Party, and the 
NASD Regulation Board shall appoint a Hearing Panel. The Hearing Panel 
shall be composed of two or more members. One member shall be a 
Director of NASD Regulation, and the remaining member or members shall 
be [a] current or former [Director] Directors of NASD Regulation or [a 
former Governor of the NASD] Governors. The President of NASD 
Regulation may not serve on the Hearing Panel.
    (2) If the President of Nasdaq or Nasdaq staff issued the notice 
under Rule 9512(a) or 9513(a), the President of Nasdaq shall designate 
an appropriate Nasdaq department or office as a Party, and the Nasdaq 
Board shall appoint a Hearing Panel. The Hearing Panel shall be 
composed of two or more members. One member shall be a [Director] 
Director of Nasdaq, and the remaining member or members shall be [a] 
current or former [Director] Directors of Nasdaq or [a former governor 
of the NASD] Governors. The President of Nasdaq may not serve on the 
Hearing Panel.
* * * * *
9515. Discretionary Review by the NASD Board
(a) Call for Review by Governor
    No change.
(b) [Seven] 15 Day Period; Waiver
    A Governor shall make his or her call for review not later than the 
next meeting of the NASD Board that is at least [seven] 15 days after 
the date on which the NASD Board receives the proposed written decision 
of the Hearing Panel. By a unanimous vote of the NASD Board, the NASD 
Board may shorten this period. By an affirmative vote of the majority 
of the NASD Board then in office, the NASD Board may, during the 
period, vote to extend the period.
* * * * *
9522. Initiation of Eligibility Proceedings
(a) Notice of Disqualification or Ineligibility
(1) Issuance
    No change.
(2) Notice to Member
    A notice issued to a member that is subject to a statutory 
disqualification or is otherwise ineligible for membership shall state 
that the member may apply for relief by filing a written application 
for relief with the National [Business Conduct Committee] Adjudicatory 
Council within ten days after service of the notice.
(3) Notice to Associated Person
    A notice issued to an associated person who is subject to a 
statutory disqualification or is otherwise ineligible for association 
shall state that a member may apply for relief on behalf of itself and 
such person by filing a written application for relief with the 
National [Business Conduct Committee] Adjudicatory Council within ten 
days after service of the notice.
(4) Service
    No change.
(b) Application by Member
    A member shall file a written application for relief from the 
eligibility requirements of the Association with the National [Business 
Conduct Committee] Adjudicatory Council if the member:
    (1) determines that it is subject to a statutory disqualification 
or otherwise is no longer eligible for membership;
    (2) determines that a person associated with it is subject to a 
statutory disqualification or otherwise is no longer eligible for 
association with the member; or
    (3) wishes to sponsor the association of a person who is subject to 
a statutory disqualification or otherwise is ineligible for association 
with a member.
(c) Form of Application for Relief
    No change.
(d) Withdrawal of Application
    A member may withdraw its application for relief at any time by 
filing a written notice with the National [Business Conduct Committee] 
Adjudicatory Council pursuant to Rules 9135, 9136, and 9137.
(e) Ex Parte Communications
    The prohibitions against ex parte communications set forth in Rule 
9143 shall become effective under the Rule 9520 Series when Association 
staff has initiated the eligibility proceeding and Association staff 
has knowledge that a member intends to file a written application for 
relief with the National [Business Conduct Committee] Adjudicatory 
Council.
9523. National [Business Conduct Committee] Adjudicatory Council 
Consideration
(a) Hearing Panel Consideration
(1) Appointment of Hearing Panel
    If a member files an application for relief, the National [Business 
Conduct Committee] Adjudicatory Council or the Review Subcommittee 
shall appoint a Hearing Panel composed of two or more members, who 
shall be current or former [Directors] members of the [NASD Regulation 
Board] National Adjudicatory Council or former Directors or Governors 
[of the NASD Board]. The Hearing Panel shall conduct a hearing and 
recommend a decision on the request for relief.
(2) Notice of Hearing
    No change.
(3) Transmission of Documents
* * * * *
    (ii) Not less than ten days before the hearing, the Department of 
Member Regulation, [who] which shall act as a Party in the eligibility 
proceeding, and the member and its current or prospective associated 
person shall exchange proposed exhibit and witness lists. The exhibit 
and witness lists shall be served by facsimile or commercial courier.
* * * * *
(9) Recommendation
    On the basis of the record, the Hearing Panel shall present a 
recommended decision in writing on the request for relief to the 
Statutory Disqualification Committee. After considering the record

[[Page 64029]]

and recommendation of the Hearing Panel, the Statutory Disqualification 
Committee shall present its recommended decision in writing to the 
National [Business Conduct Committee and all other Directors] 
Adjudicatory Council not later than seven days before the meeting of 
the National [Business Conduct Committee] Adjudicatory Council at which 
the eligibility proceeding shall be considered.
(b) Decision
(1) Decision of the National [Business Conduct Committee] Adjudicatory 
Council
    After considering all matters presented in the request for relief, 
the Statutory Disqualification Committee's recommended decision, the 
public interest, and the protection of investors, the National 
[Business Conduct Committee] Adjudicatory Council may grant or deny the 
request for relief, and, if relief is granted, impose conditions on the 
member and its current or prospective associated person. Alternatively, 
the National [Business Conduct Committee] Adjudicatory Council may 
remand the eligibility proceeding. The National [Business Conduct 
Committee] Adjudicatory Council shall prepare a proposed written 
decision pursuant to subparagraph (2).
(2) Contents of Decision
    No change.
(3) Issuance of Decision After Expiration of Call for Review Period
    The National Adjudicatory Council [Business Conduct Committee shall 
provide its proposed written decision to the NASD Regulation Board, 
and, if the eligibility proceeding is not called for review by the NASD 
Regulation Board, the NASD Board. The NASD Regulation Board may call 
the eligibility proceeding for review pursuant to Rule 9524. The NASD 
Board may call the eligibility proceeding for review pursuant to Rule 
9525. If neither the NASD Regulation Board nor the NASD Board calls the 
eligibility proceeding for review, the proposed written decision of the 
National Business Conduct Committee shall become final, and the 
National Business Conduct Committee shall serve its written decision on 
the member, the current or prospective associated person, and 
Department of Member Regulation pursuant to Rules 9132 and 9134. The 
decision shall be effective upon service. The decision shall constitute 
final action of the Association, unless the National Business Conduct 
Committee remands the eligibility proceeding.
9524. Discretionary Review by the NASD Regulation Board
(a) Call for Review by Director
    A Director may call an eligibility proceeding for review by the 
NASD Regulation Board if the call for review is made within the period 
prescribed in paragraph (b).
(b) Seven Day Period; Waiver
    After receiving the proposed written decision of the National 
Business Conduct Committee pursuant to Rule 9523, a Director shall have 
not less than seven days to determine if the eligibility proceeding 
should be called for review. A Director shall call an eligibility 
proceeding for review by notifying the General Counsel of NASD 
Regulation. By a unanimous vote of the NASD Regulation Board, the NASD 
Regulation Board may shorten the period to less than seven days. By an 
affirmative vote of the majority of the NASD Regulation Board then in 
office, the NASD Regulation Board may, during the seven day period, 
vote to extend the period to more than seven days.
(c) Review at Next Meeting
    If a Director calls the eligibility proceeding for review within 
the period prescribed by paragraph (b), the NASD Regulation Board shall 
review the eligibility proceeding not later than the next meeting of 
the NASD Regulation Board. The NASD Regulation Board may order the 
filing of briefs in connection with its review proceedings pursuant to 
this Rule.
(d) Decision of NASD Regulation Board, Including Remand
    After review, the NASD Regulation Board may affirm, modify, or 
reverse the proposed written decision of the National Business Conduct 
Committee. Alternatively, the NASD Regulation Board may remand the 
eligibility proceeding with instructions. The NASD Regulation Board 
shall prepare a proposed written decision that includes all of the 
elements described in Rule 9523(b)(2).
(e) Issuance of Decision After Expiration of Call for Review Period
    The NASD Regulation Board shall provide its proposed written 
decision to the NASD Board. The NASD Board may call the eligibility 
proceeding for review pursuant to Rule [9525] 9524. If the NASD Board 
does not call the eligibility proceeding for review, the proposed 
written decision of the [NASD Regulation Board] National Adjudicatory 
Council shall become final, and the [NASD Regulation Board] National 
Adjudicatory Council shall serve its written decision on the member, 
the current or prospective associated person, and Department of Member 
Regulation pursuant to Rules 9132 and 9134. The decision shall be 
effective upon service. The decision shall constitute [the] final 
action of the Association, unless the [NASD Regulation Board] National 
Adjudicatory Council remands the eligibility proceeding.
[9525] 9524. Discretionary Review by the NASD Board
(a) Call for Review by Governor
    No change.
(b) [Seven Day Period; Waiver] 15 Day Period; Waiver
[(1) Eligibility Proceeding Called for Review by NASD Regulation Board
    If the NASD Regulation Board reviewed the eligibility proceeding 
under Rule 9524, as a] A Governor shall make his or her call for review 
not later than the next meeting of the NASD Board that is at least 
[seven] 15 days after the date on which the NASD Board receives the 
proposed written decision of the National Adjudicatory Council [NASD 
Regulation Board.
(2) Eligibility Proceeding Not Called for Review by NASD Regulation 
Board
    If no Director of the NASD Regulation Board called the eligibility 
proceeding for review under Rule 9524, a Governor shall make his or her 
call for review not later than the next meeting of the NASD Board that 
is at least seven days after the date on which the NASD Board receives 
the proposed written decision of the National Business Conduct 
Committee.
(3) Waiver
    ] By a unanimous vote of the NASD Board, the NASD Board may shorten 
the period [in subparagraph (1) or (2)] to less than [seven] 15 days. 
By an affirmative vote of the majority of the NASD Board then in 
office, the NASD Board may, during the [seven] 15 day period [in 
subparagraph (1) or (2)], vote to extend the period [in subparagraph 
(1) or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
    No change.
(d) Decision of NASD Board, Including Remand
    After review, the NASD Board may affirm, modify, or reverse [: (1)] 
the proposed written decision of the [NASD Regulation Board, or (2) if 
the NASD Regulation Board did not call an eligibility proceeding for 
review under

[[Page 64030]]

Rule 9524, the proposed written decision of the National Business 
Conduct Committee] National Adjudicatory Council. Alternatively, the 
NASD Board may remand the eligibility proceeding with instructions. The 
NASD Board shall prepare a written decision that includes all of the 
elements described in Rule 9523(b)(2).
(e) Issuance of Decision
    No change.
[9526] 9525. Application to Commission for Review
    The right to have any action taken pursuant to this Rule Series 
reviewed by the Commission is governed by Section 19 of the Act. The 
filing of an application for review shall not stay the effectiveness of 
final action by the Association, unless the Commission otherwise 
orders.
9600. PROCEDURES FOR EXEMPTIONS
9610. Application
(a) File with General Counsel
    A member seeking an exemption from Rule 1021, 1022, 1070, 2210, 
2340, 2520, 2710, 2720, 2810, 2850, 2851, 2860, Interpretive Material 
2860-1, 3010, 3210, 3350, 8211, 8212, 8213, 11870, or 11900, 
Interpretive Material 2110-1, or Municipal Securities Rulemaking Board 
Rule G-37 shall file a written application with the appropriate 
department or staff of the Association and provide a copy of the 
application to the Office of General Counsel of NASD Regulation.
* * * * *
9630. Appeal
(a) Notice
    An Applicant may file a written notice of appeal within 15 calendar 
days after service of a decision issued under Rule 9620. The Notice of 
appeal shall be filed with the Office of General Counsel of NASD 
Regulation, with a copy of the notice also provided to the appropriate 
department or staff of the Association. The notice of appeal shall 
contain a brief statement of the findings and conclusions as to which 
exception is taken. The National [Business Conduct] Adjudicatory 
Council [Committee] may order oral argument. If the Applicant does not 
want the National [Business Conduct Committee's] Adjudicatory Council's 
decision on the appeal to be publicly available in whole or in part, 
the Applicant also shall include in its notice of appeal a detailed 
statement, including supporting facts, showing good cause for treating 
the decision as confidential in whole or in part. The notice of appeal 
shall be signed by the Applicant.
(b) Expedited Review
    Where the failure to promptly review a decision to deny a request 
for exemption would unduly or unfairly harm the applicant, the National 
[Business Conduct Committee] Adjudicatory Council shall provide 
expedited review.
(c) Withdrawal of Appeal
    An Applicant may withdraw its notice of appeal at any time by 
filing a written notice of withdrawal of appeal with the National 
[Business Conduct Committee] Adjudicatory Council.
(d) Appointment of Subcommittee
    Following the filing of a notice of appeal, the National [Business 
Conduct Committee shall] Adjudicatory Council or Review Subcommittee 
may designate a Subcommittee to hear an oral argument, if ordered, 
consider any new evidence that the Applicant can show good cause for 
not including in its application, and recommend to the National 
[Business Conduct Committee] Adjudicatory Council a disposition of all 
matters on appeal.
(e) Decision
    After considering all matters on appeal and the Subcommittee's 
recommendation, the National [Business Conduct Committee] Adjudicatory 
Council shall affirm, modify, or reverse the decision issued under Rule 
9620. The National [Business Conduct Committee] Adjudicatory Council 
shall issue a written decision setting forth its findings and 
conclusions and serve the decision on the Applicant. The decision shall 
be served pursuant to Rules 9132 and 9134. The decisions shall be 
effective upon service and shall constitute final action of the 
Association.
* * * * *

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 Association is proposing changes to the Rule 1010 Series, the 
Rule 8000 Series, the Rule 9000 Series, and various other rules to 
conform the rules to the changes adopted by the NASD Board to 
reorganize the NASD, NASD Regulation, and Nasdaq. The proposed rule 
amendments are intended to conform the Rule 1010 Series, the Rule 8000 
Series, and the Rule 9000 Series to reflect the terms of the corporate 
reorganization that the NASD Board of Governors approved on June 26, 
1997.\4\
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    \4\ The Commission recently approved a comprehensive amendment 
of the NASD By-Laws, the NASD Regulation By-Laws, the Nasdaq By-
Laws, and the Delegation Plan containing the terms of the corporate 
reorganization. See Securities Exchange Act Release No. 39326 
(November 14, 1997) (File No. SR-NASD-97-71).
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    Among other things, the corporate reorganization modifies the 
structure of the NASD Board. As a result, the structure of the NASD 
Regulation Board, and the Nasdaq Board and certain committees of NASD 
Regulation and Nasdaq will also change. Of all the structural changes 
approved by the NASD Board and the two subsidiary boards, two are most 
related to the operations described in the Rule 1010 Series, the Rule 
8000 Series, and the Rule 9000 Series and are the impetus for a number 
of the rule changes described below.
    First, the adjudicatory functions currently performed by the 
National Business Conduct Committee (``NBCC''), a committee of the NASD 
Regulation Board, will be performed instead by the National 
Adjudicatory Council (``NAC''). The proposed NAC members will be 
appointed by the NASD Regulation Board, but, except for the NAC Chair, 
will not be members of the NASD Regulation Board or the NASD Board.
    Second, the process for reviewing a disciplinary proceeding has 
been streamlined. Under the proposal, if a disciplinary proceeding is 
subject to discretionary review at an executive level, such 
discretionary review will be performed solely by the NASD Board. In 
contrast, the Association's current practice requires that both the 
NASD Regulation Board and the NASD Board have an opportunity to review 
a disciplinary proceeding before the Association may issue a final 
decision. Although the regulatory responsibility of the NASD Regulation 
Board to engage in a review of a disciplinary proceeding

[[Page 64031]]

has been eliminated, all directors of NASD Regulation will continue to 
play a vital role in the review of disciplinary proceedings, because, 
under the new board structure, all directors of the NASD Regulation 
Board also sit as Governors on the NASD Board.
    As a result of these structural changes, the Association is 
proposing changes to Article V of the NASD Regulation By-Laws, the Rule 
1010 Series, the Rule 8000 Series, and the Rule 9000 Series. First, the 
references to the adjudicatory functions currently performed by the 
NBCC have been redesignated as those performed by the proposed NAC. 
Second, the Association proposes amendments to the Rule 1010 Series, 
the Rule 8000 Series, and the Rule 9000 Series to delete the 
discretionary review function of the NASD Regulation Board in a Series 
of rules in which such function is currently set forth. Finally, other 
changes are proposed in this rule filing to clarify or simplify the 
rules that were approved on August 7, 1997, as part of SR-NASD-97-
28.<SUP>5</SUP> Such changes are described later in detail.
---------------------------------------------------------------------------

    \5 \See Securities Exchange Release No. 38908 (August 7, 1997), 
62 FR 43385 (August 13, 1997).
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    (a) Changes to Article V of NASD Regulation By-Laws. The 
Association is proposing to add a new Section 5.11 to Article V of the 
NASD Regulation By-Laws. This section will set the quorum requirements 
and composition of the Review Subcommittee, a subcommittee of the new 
NAC. As described in greater detail below, the Review Subcommittee 
shall perform those functions in membership and disciplinary 
proceedings that are set forth in the membership and disciplinary 
procedure rules.
    (b) Changes to the Rule 1010 Series. The Rule 1010 Series is 
entitled ``Membership, Registration and Qualification Requirement.'' 
The Association is proposing changes to the Rule 1010 Series in order 
to reflect the changes required pursuant to the corporate 
reorganization approved by the NASD Board while SR-NASD-97-28 was under 
consideration by the Commission.
    First, in order to reflect the changes proposed as part of the 
corporate reorganization, the Association will amend the Rule 1010 
Series generally by deleting each reference to the term, ``National 
Business Conduct Committee,'' and substituting the term, ``National 
Adjudicatory Council.''
    Second, in current Rule 1016, the NASD Regulation Board has the 
authority to review an NBCC decision following an appeal or review 
proceeding regarding an applicant whose request for NASD membership has 
been denied, granted without restriction, or granted but is subject to 
one or more restrictions set forth in Rule 1014(b)(2). This change 
parallels the authority of the NBCC to call any disciplinary proceeding 
decision for review in the Rule 9000 Series. The Association is 
proposing to eliminate the discretionary review authority of the NASD 
Regulation Board in current Rule 1016 for the purpose of making the 
review process more efficient. Generally, this change means that an 
applicant will receive a final decision of the Association regarding 
membership status at least 30 days before the applicant would have 
received such notification under the current Rule 1010 Series. The NASD 
Board will continue to have the authority now set forth in Rule 1016.
    (c) Changes to the Rule 8000 Series. The Rule 8000 Series is 
entitled ``Investigations and Sanctions.'' Several changes to the Rule 
8000 Series were approved by the Commission on August 7, 1997, in SR-
NASD-97-28. The Association is now proposing additional changes to the 
Rule 8000 Series in order to reflect the changes required pursuant to 
the corporate reorganization approved while SR-NASD-97-28 was under 
consideration by the Commission. In addition, the Association is 
proposing changes to Rule 8110 regarding the availability of the NASD 
Manual and Rule 8210(d) regarding notices sent under the Rule. Finally, 
the NASD is proposing to move three rules requiring that certain 
persons provide the Association with information to the Rule 8000 
Series from other rule series.
    First, in order to reflect the changes proposed as part of the 
corporate reorganization, the Association will amend the Rule 8000 
Series generally by deleting each reference to the term, ``National 
Business Conduct Committee,'' and substituting the term, ``National 
Adjudicatory Council,'' and make other conforming changes discussed 
above to reflect the corporate reorganization.
    Second, the Association proposes minor changes to Rule 8110 and 
Rule 8210(d). Rule 8110 requires a member to maintain an NASD Manual. 
If approved, the proposed change to Rule 8110 would allow a member to 
comply with the obligation of Rule 8110 to maintain a copy of the NASD 
Manual in its offices, including branch offices, by allowing the member 
to maintain an electronic version of the NASD Manual, among other 
options, in such offices.
    Third, the proposed change to Rule 8210(d) is intended to clarify 
how the Association will determine if a member or a person subject to 
the Rule 8000 Series obligation to provide information to the 
Association upon request receives a notice sent by the Association. 
Additional addresses at which a person may be served have been added to 
the list to provide additional safeguards to potential recipients of 
such notices.
    Fourth, the Association proposes to renumber three rules, Rule 
4615, Rule 5107, and Rule 6730, as proposed Rule 8211, proposed Rule 
8212, and proposed Rule 8213. Each of these rules requires certain 
persons to provide information to the Association. The Rule 8000 
Series, by Rule 8210, contains the general requirement that a member or 
another person must provide information to the Association when 
requested to do so. The rules, in the current form and as renumbered 
proposed rules, set forth the same type of obligation as to specific 
types of information. The Association believes that members and other 
persons will be more aware of these information sharing obligations by 
placing the three current rules in the Rule 8000 Series. The 
Association also proposes minor, technical changes to such renumbered 
rules, as described below.
    Rule 4615 requires a member to submit automated trading data upon 
request to the Association. The Association does not propose to amend 
the text of current Rule 4615, renumbered as Rule 8211, except as 
follows. The Association proposes to add an explicit reference to the 
Rule 9600 Series to identify the Rule 9600 Series as the avenue by 
which a member may seek a good cause exemption and to set forth clearly 
that ``good cause'' is the standard for seeking an exemption. The other 
amendments proposed are technical (e.g., the paragraphs and 
subparagraphs of the rule are renumbered and a redundant clause is 
stricken).
    Proposed Rule 8212, now Rule 5107, requires a member and an 
approved affiliate that participates in Nasdaq International as a 
Service market maker or an order-entry firm to submit certain trading 
data. The minor changes the Association proposes to the existing rule 
text include amending the title to clarify that the proposed Rule 8212 
obligation is to provide information on trading data for the Nasdaq 
International Service transactions, adding a reference to the Rule 9600 
Series as the appropriate rule series under which a member may seek a 
good cause exemption from the obligations of the rule, and stating 
explicitly that ``good cause'' is the standard for obtaining an 
exemption.

[[Page 64032]]

    Proposed Rule 8212, now Rule 6730, requires a member to submit 
certain types of trade data pursuant to proposed Rule 8211 (current 
Rule 4615) in automated format. Proposed Rule 8213 differs from current 
Rule 6730 in that the Association proposes to clarify the title of the 
rule, make an explicit reference to the Rule 6700 Series, and add a 
sentence at the end of the rule referring a member to the Rule 9600 
Series in order to request exemptive relief.
    The Association notes that its proposal to move Rule 4615, Rule 
5107, and Rule 6730 to the Rule 8000 Series will not affect the 
Association's ability to seek information pursuant to any other 
Association rule under which the Association may do so from persons 
subject to the rule. For example, under proposed Rule 4623, Nasdaq is 
proposing to request information from electronic communications 
networks (``ECNs'') and the changes the Association is proposing with 
respect to the Rule 8000 Series are not intended to have any impact on 
the Association's proposal to gather information under proposed Rule 
4623.
    (d) Changes to the Rule 9000 Series. The Rule 9000 Series is 
entitled the ``Code of Procedure.'' The Rule 9000 Series was 
comprehensively changed pursuant to the Commission approval of SR-NASD-
97-28 on August 7, 1997.\6\ The Association is now proposing additional 
changes to the Rule 9000 Series in order to reflect the changes 
required pursuant to the corporate reorganization approved while SR-
NASD-97-28 was under consideration by the Commission. In addition, the 
Association is amending Rule 9102(d), Rule 9844(b), and Rule 9347 (a-
b), to clarify the role of the Review Subcommittee of the NAC. Finally, 
the Association is proposing minor changes to several other Rules, 
including Rule 9120, Rule 9141, Rule 9214, Rule 9215, Rule 9216, Rule 
9231, Rule 9235, Rule 9241, Rule 9270, and 9312.
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    \6\ See Release No. 34-38908, supra note 5.
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    (1) Changes Related to the Corporate Reorganization. In order to 
reflect the changes proposed as part of the corporate reorganization, 
the Association will amend the Rule 9000 Series generally by deleting 
each reference to the term, ``National Business Conduct Committee,'' 
and substituting the term, ``National Adjudicatory Council.''
    In addition, there are several proceedings described in the current 
Rule 9000 Series in which the NASD Regulation Board has the authority 
to review a disciplinary or other decision of the NBCC relating to the 
proceeding (e.g., Rule 9351, relating to a Rule 9300 Series 
disciplinary proceeding that has been appealed to or reviewed by the 
proposed National Adjudicatory Council, and Rule 9415, relating to a 
Rule 9400 proceeding used to regulate the activities of a member 
experiencing financial or operational difficulties). The Association is 
proposing to eliminate such authority. Generally, if this proposed 
change is approved by the Commission, persons subject to disciplinary 
and other proceedings in which the discretionary review function of the 
NASD Regulation Board is eliminated will be notified of the final 
decision of the Association approximately 30 days earlier than such 
persons would be notified under the current Rule 9000 Series.
    In order to reflect the increased role of the Review Subcommittee 
of the NAC in the administration of disciplinary proceedings during the 
appeal or review stages, the Association is proposing to amend several 
rules in the Rule 9300 Series, or other rules relating to a Rule 9300 
Series appeal or review proceeding, by granting authority to the Review 
Subcommittee to make a number of decisions, and deleting from the same 
rules the authority of the Chair and Vice Chair of the proposed NAC 
(formerly, the NBCC) to make such decisions. In addition, in proposed 
amendments to Rule 9216 and Rule 9270, the Review Subcommittee is 
substituted for the Chair and the Vice Chair of the NAC (formerly, the 
NBCC) in: (a) Rule 9216(a), relating to the review and acceptance of 
letters of acceptance, waiver, and consent; (b) Rule 9216(b), relating 
to the review and acceptance of minor rule plan violation letters; and, 
(c) Rule 9270, relating to the review and acceptance of offers of 
settlement. As a result of the restructuring of the NBCC as the NAC and 
the proposed changes in procedural operations, the Association believes 
that it is more appropriate for either the full disciplinary committee, 
the proposed NAC, or by delegation, the smaller Review Subcommittee, 
balanced as to Industry and Non-Industry members, to make certain 
decision and rulings within the authority of the NBCC (the proposed 
NAC) that had been delegated previously to the Chair and the Vice Chair 
of the NBCC. Each of the above changes are reflected in amendments to a 
number of Rules in the Rule 9000 Series.
    (2) Rule 9100 Series, Rule 9200 Series, and Rule 9300 Series--Other 
Changes. The Association proposes to add a new definition, ``Department 
of Enforcement,'' in Rule 9120, as new paragraph (e) and renumber all 
other paragraphs. The definition of ``Department of Enforcement'' is 
being added because a substantial number of Association disciplinary 
proceedings are conducted cooperatively by the Department of 
Enforcement and the Department of Market Regulation. In some cases, 
staff of the Department of Market Regulation will perform many of the 
functions of the complaining Party by delegated authority.
    Proposed paragraph (e) provides that the Department of Enforcement 
means the Department of Enforcement itself, and for most purposes under 
the Code, its delegatee, the Department of Market Regulation as well. 
Although the Department of Market Regulation would have delegated 
authority to prosecute a disciplinary matter after authorization of the 
complaint by the Division of Enforcement, however, it would not have 
authority to authorize a disciplinary proceeding under Rule 9211, 
determine the terms of a letter of acceptance, waiver, and consent, or 
of a minor rule violation plan letter under Rule 9216 (a) and (b), or 
authorize the filing of a notice of appeal under Rule 9311.
    The Association purposes many other minor changes to Rule 9120 
which reflect renumbering or a change in the term, ``National Business 
Conduct Committee'' to the term, ``National Adjudicatory Council.'' In 
addition, certain definitions contain technical corrections to add 
references to proceedings in the Rule 9600 Series. Finally the 
Association is proposing to amend the definition of ``Review 
Subcommittee.'' The Association proposes to delete the definition from 
the Rule 9300 Series, locate it in Rule 9120, and amend it to clarify 
the composition of the Review Subcommittee and other terms of the 
Review Subcommittee by a cross reference to new Article V, Section 5.11 
of the NASD Regulation By-Laws.
    The Association proposes to amend Rule 9141(b) to clarify that the 
written notice one is required to file under that provision is a 
``notice of appearance.'' Rule 9141(b) indicates that when a Respondent 
is represented by a third party, a written notice stating the name of 
the representative, among other things, shall be filed. The proposed 
change to paragraph (b) would make explicit that the written notice is 
a notice of appearance, and that the notice of appearance must be filed 
in each case. This procedure will avoid any misunderstanding as to who 
the representative is for a particular Respondent.

[[Page 64033]]

    The Association proposes to amend Rule 9214(b) to clarify that when 
the consolidation of two or more cases is being considered, all Parties 
to all such cases will be served with all papers filed and all orders 
issued. The proposed amendment also makes explicit that when a Party 
moves to consolidate two or more cases, the Chief Hearing Officer will 
decide which panel will hear the case and will issue an order 
accordingly.
    The Association proposes to amend Rule 9215 in paragraph (a) to 
clarify that service of an answer occurs under Rule 9133, in paragraph 
(e) to change a 15 day period to a 14 day period, which is consistent 
with other periods in the Code, and in paragraph (f) to permit the 
Department of Enforcement to send a second notice to a Respondent who 
fails to file an answer. Paragraph (a) includes a reference to Rule 
9133 which could be read as incorrectly stating that service of the 
complaint is made pursuant to Rule 9133. The amendment to paragraph (a) 
clarifies that service of an answer must be made pursuant to Rule 9133.
    Currently, paragraph (e) of Rule 9215 provides for an extension of 
time for the Respondent to file an answer to an amended complaint. The 
time period is 14 days if the Respondent has not filed an answer to the 
original complaint and 15 days if the Respondent has filed an answer to 
the original complaint. The Association is proposing to make both 
periods 14 days, to eliminate confusion.
    Rule 9215(f) provides that if a Respondent does not file an answer 
within the time period of the original complaint, the Hearing Officer 
will direct the Department of Enforcement to send a second notice of 
the complaint to the Respondent. Subsequently, the Hearing Officer may 
treat a failure to respond to the second notice as a default. In those 
cases in which the Respondent has filed an extension request or a 
letter or some other document with the Office of Hearing Officers, and 
subsequently fails to file an answer, it is unnecessary to have the 
Department of Enforcement send a second notice before a default is 
declared because the earlier filing by the Respondent is evidence that 
the Respondent received the original complaint. If there is evidence in 
the form of a communication to the Office of Hearing Officers that 
Respondent received the original complaint and failed to file an 
answer, the Association believes that there should be no requirement 
that a second notice of the complaint be sent before a default judgment 
can be entered. In addition, in the interests of efficiency, in those 
cases in which the Respondent does not file anything, the Department of 
Enforcement on its own initiative should send the second notice without 
an order from the Office of Hearing Officers. Therefore, the 
Association is proposing to amend Rule 9215 (f) to (i) delete the 
requirement that the Office of Hearing Officers order the Department of 
Enforcement to send the second notice when required, and (ii) delete 
the requirement to send a second notice before declaring a default if 
the Respondent has made a filing with the Office of Hearing Officers 
but has failed to answer the complaint in a timely manner.
    The Association proposes to amend IM-9216, which follows Rule 
9216(b), the provision allowing a person to resolve some rule 
violations by submitting a minor rule violation plan letter (``MRV'') 
to the Association. In IM-9216, the Association lists the rules that 
the Association may resolve violations of by using an MRV. The 
Association proposes to add Rule 4615, Rule 6730 and Rule 5107 to IM-
9216 (as renumbered proposed Rules 8211 through proposed Rules 8213).
    The Association inadvertently omitted Rule 4615 and Rule 6730 in 
IM-9216 in the submission of the proposed Rule 9000 Series in SR-NASD-
97-28. Prior to August 7, 1997, when SR-NASD-97-28 was approved by the 
Commission, old Rule IM-9217, the former provision listing rule 
violations appropriate for resolution by an MRV included Rule 4615 and 
the Rule 6730 Series, which included Rule 6730. The Association also 
proposes to add Rule 5107 (proposed as Rule 8212) to IM-9216 because it 
is similar to Rule 4615 and Rule 6730. Rule 5107, like Rule 4615 and 
Rule 6730, is a ``blue sheeting'' rule, requiring the same type of 
information to be submitted as do the Rules 4615 and Rule 6730.
    The Office of Hearing Officers has determined that without express 
authority in the Code of Procedure the Chief Hearing Officer would be 
unable to appoint persons to serve as observers to observe a 
disciplinary proceeding. Rule 9231 (b) and (c) currently provides that 
a Hearing Panel or an Extended Hearing Panel shall consist of a Hearing 
Officer and two Panelists, except in extraordinary circumstances 
relating to the prior disqualification or recusal of a Panelist as set 
forth in Rule 9234. The Association is proposing to add paragraph (d) 
to Rule 9231 to assure that, for training purposes only, the Chief 
Hearing Officer could appoint an observer to observe a disciplinary 
proceeding. Under paragraph (d), the Chief Hearing Officer could 
designate a person as an observer to a Hearing Panel or an Extended 
Hearing Panel if the person is eligible to be appointed as a Panelist. 
The Function is being established to provide future Panelists with the 
opportunity to observe a disciplinary proceeding hearing for training 
purposes.
    The Association proposes to amend Rule 9235 to allow the Chief 
Hearing Officer or the Deputy Chief Hearing Officer to issue an order 
in a disciplinary proceeding in the event a Hearing Officer is 
unavailable. The Association is proposing to add new paragraph (b) to 
state explicitly that, in the event the appointed Hearing Officer is 
temporarily unavailable and exigent circumstances require action by the 
Hearing Officer, the Chief Hearing Officer or the Deputy Chief Hearing 
Officer may temporarily function as the appointed Hearing Officer in a 
proceeding until the appointed Hearing Officer is available.
    The Association is proposing to amend Rule 9241 to trigger the 21 
day period in the rule from the filing of an answer, rather than from 
the service of the answer. The Office of Hearing Officers knows when as 
answer has been filed; it may not know for a period of time whether the 
answer has been served.
    The Association is proposing to amend Rule 9270(a) to allow a 
Hearing Officer to determine if an offer of settlement made before a 
hearing on the merits has begun should stay the hearing. Currently, a 
Hearing Panel must issue such decisions if the offer of settlement is 
filed within 30 days prior to the date the hearing is scheduled to 
begin. The specific change would provide that if a settlement motion is 
filed prior to the commencement of a hearing, the Hearing Officer has 
the authority to determine whether the hearing should be stayed. In 
contrast, if the settlement motion is filed after commencement of a 
hearing, the panel, rather than the Hearing Officer, has the authority 
to determine whether the hearing should be stayed.
    In Rule 9312(e), the Association proposes to clarify that the 
National Adjudicatory Council's authority to review a case extends to 
any issue raised in the ``record'' of the disciplinary proceeding, 
rather than the ``decision'' as the Code now provides.
    (3) Rule 9600 Series--Other Changes. The Association is proposing 
to amend the Rule 9600 Series under the Code of Procedure to require a 
member seeking an exemption from proposed Rule 8211, 8212, and 8213 
(current Rule 4615, Rule 5107, and Rule 6730, discussed, supra, as 
changes to the Rule 8000 Series), to follow the procedures outlined in 
the

[[Page 64034]]

recently adopted Rule 9600 Series. Currently, the exemptive authority 
under Rule 4615, Rule 5107, and Rule 6730 is a generalized authority 
vested in the Association.
    In addition, to eliminate delays in processing a request for an 
exemption, the Association proposes to modify Rule 9610. Proposed Rule 
9610 requires a person seeking exemptive relief to file a written 
application with ``the appropriate department or staff of the 
Association, and provide a copy of the application to the Office of 
General Counsel of NASD Regulation,'' rather than filing the 
application only with the Office of the General Counsel of NASD 
Regulation. The same change is proposed in Rule 9630(a), which deals 
with filing a notice of an appeal of a decision regarding exemptive 
relief.
2. Statutory Basis
    (a) The Association is requesting that the proposed rule change be 
effective within 45 days of SEC approval, but not later than January 1, 
1998.
    (b) The Association believes that the proposed rule change is 
consistent with Section 15A(b)(6), (7), and (8) of the Act.\7\ The 
proposed rule change is consistent with Section 15A(b)(6) of the Act in 
that it will promote just and equitable principles of trade by 
providing fair procedures and standards for membership admission, and 
fair procedures and consistent treatment for requesting information 
from members or other persons who are obligated to provide the 
Association with information. The proposed rule change is consistent 
with Section 15A(b)(7) in that it furthers the statutory mandate that 
the Association establish rules providing that its members and persons 
associated with its members shall be appropriately disciplined for 
violation of any provision of this title, the rules or regulations 
thereunder, the rules of the Municipal Securities Rulemaking Board, or 
the rules of the association, by expulsion, suspension, limitation of 
activities, functions, and operations, fine, censure, being suspended 
or barred from being associated with a member, or any other fitting 
sanction. The rule change is consistent with Section 15A(b)(8) in that 
it furthers the statutory goals of providing a fair procedure for 
disciplining members and persons associated with members, fair 
procedures for admitting or denying membership to any person seeking 
membership to the Association, fair procedures for barring any person 
from becoming associated with a member of the Association, and fair 
procedures for prohibiting or limiting the association of any person 
with respect to access to services offered by the Association or a 
member thereof.
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    \7\ 15 U.S.C. Sec. 780-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation 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 proposes 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.

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 if the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. by order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. 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. 
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 the 
NASD. All submissions should refer to file number SR-NASD-97-81 and 
should be submitted by December 18, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31523 Filed 12-2-97; 8:45 am]
BILLING CODE 8010-01-M