64000 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

series of Prairie Funds reorganized into

a corresponding series of The

Woodward Funds. On September 21,

1996, Prairie Managed Assets Income

Fund, Prairie Equity Income Fund,

Prairie Special Opportunity Fund,

Prairie International Bond Fund and

Prairie Intermediate Municipal Bond

Fund, each a series of Prairie Funds,

reorganized into a corresponding series

of The Woodward Funds. First Chicago

NBD Corporation, the parent company

of applicant’s co-investment advisers,

paid approximately $1,888,347 in

expenses related to the reorganization.

On July 15, 1996, Prairie Cash

Management Fund, Prairie Treasury

Prime Cash Management Fund, and

Prairie U.S. Government Securities Cash

Management Fund, each a series of

Prairie Institutional Funds, reorganized

into a corresponding series of The

Woodward Funds. First Chicago NBD

Corporation, the parent company of

applicant’s co-investment advisers, paid

approximately $995,137 in expenses

related to the reorganization.

Filing Dates: Each application was

filed on June 27, 1997, and amended on

October 20, 1997, and November 14,

1997.

Applicants’ Address: Three First

National Plaza, Chicago, Illinois 60670.

Target Income Fund, Inc. [File No. 811–6542]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. On March 13,

1997, applicant completed a liquidation

and sale of all of its investment assets

to Concord Growth Corporation, a

commercial finance services firm

unaffiliated with applicant. On April 3,

1997, applicant completed a tender offer

where each shareholder received its pro

rata share of the aggregate net asset

value of applicant. Applicant paid

approximately $25,000 in expenses

related to the liquidation.

Filing Dates: The application was

filed on July 24, 1997, and amended on

October 23, 1997.

Applicant’s Address: 26691 Plaza

Drive, Suite 222, Mission Viejo, CA

92691.

Neuberger & Berman Genesis Fund, Inc. [File

No. 811–5562]

Neuberger & Berman Manhattan Fund, Inc.

[File No. 811–1363]

Neuberger & Berman Partners Fund, Inc. [File

No. 811–1601]

Neuberger & Berman Selected Sectors Fund,

Inc. [File No. 811–691]

Summary: Each applicant requests an

order declaring that it has ceased to be

an investment company. On August 2,

1993, each applicant transferred its

assets and liabilities to a new,

identically named portfolio of the

Neuberger & Berman Equity Funds,

based on the relative net asset value per

share of each fund. The approximate

expenses of each merger, which were

shared by the transferring and acquiring

funds, were as follows: Neuberger &

Berman Genesis Fund, $40,000;

Neuberger & Berman Manhattan Fund,

$141,000; Neuberger & Berman Partners

Fund, $147,000; Neuberger & Berman

Selected Sectors Fund, $84,000. In

effect, the shareholders of each

applicant paid the expenses related to

the transaction because the relevant

acquiring fund had no assets or

shareholders prior to the transaction

and its shareholders therefore were

substantially the same as applicants’

shareholders.

Filing Dates: The applications were

filed on April 1, 1996, and amended on

October 23, 1996.

Applicants’ Address: 605 Third

Avenue, New York, NY 10158–3698.

JP Investment Grade Bond Fund, Inc. [File

No. 811–3544]

JP Capital Appreciation Fund, Inc. [File No.

811–3543]

Summary: Each applicant seeks an

order declaring that it has ceased to be

an investment company. On December

20, 1996, each applicant sold

substantially all of its assets to

Oppenheimer Fund, Inc. All expenses of

the sale were paid by Oppenheimer

Fund, Inc. and the management of each

applicant; shareholders paid no

expenses in connection with the sale.

Filing Date: Both applications were

filed on November 10, 1997.

Applicants’ Address: 100 North

Greene Street, Greensboro, North

Carolina 27401.

Bankers National Variable Account C [File

No. 811–4373]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. Applicant, a

separate account organized as a unit

investment trust, liquidated its holdings

in Conseco Series Trust and made

liquidating distributions to its security

holders between December 10, 1991 and

March 5, 1992. All expenses associated

with Applicant’s liquidation and

dissolution were borne by Applicant’s

depositor.

Filing Dates: The application was

filed on July 12, 1994, and amended and

restated on October 15, 1997.

Applicant’s Address: 11815 N.

Pennsylvania Street, Carmel, IN 46032.

Jackson National Capital Management Funds

[File No. 811–6611]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. On December 20,

1996, applicant distributed its assets to

its public shareholders of record at the

net asset value per share. On December

23, 1996, applicant distributed all

remaining assets to Jackson National

Life Insurance Company, the sole

remaining shareholder of record.

Applicant’s liquidation expenses totaled

approximately $89,000 and were borne

by Applicant’s investment adviser.

Filing Dates: The application was

filed on May 19, 1997, and amended on

October 14, 1997.

Applicant’s Address: 5901 Executive

Drive, Lansing, Michigan 48911.

John Hancock Series, Inc. [File No. 811–

5254]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. On December 2,

1996, applicant on behalf of its series

John Hancock Emerging Growth Fund

transferred all of its assets to a new,

identically named series of John

Hancock Series Trust (‘‘Series Trust’’),

based on the relevant net asset value per

share of each fund. Reorganization

expenses of approximately $225,106

were borne equally by applicant and the

Series Trust.

Filing Date: The application was filed

on July 7, 1997.

Applicant’s Address: 101 Huntington

Avenue, Boston, Massachusetts 02199–

7603.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31685 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

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,
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64001

1Amendment 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).

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.

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 NonIndustry 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
64002 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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,
64004 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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
64006 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

2This 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.

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

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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.
64008 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

(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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64009

3This 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.

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

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 NonSummary 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 NonSummary 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
64010 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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 ByLaws.

(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.
64012 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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 crossappeal 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 crossappeal 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 selfregulatory responsibilities and
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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.
64014 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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
64016 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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)

• 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.

• Rule 3360—Failure to timely file

reports of short positions on Form NS–

1.

• 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.

• 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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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.

§ 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.
64018 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

(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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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; CrossAppeal

(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 NonIndustry 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
64020 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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 crossappeal:

(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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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
64022 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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 crossappeal 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
64024 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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 doublespaced 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.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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.
64026 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

(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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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 ByLaws;

(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 NonSummary 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
64028 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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
64030 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

4The Commission recently approved a

comprehensive amendment of the NASD By-Laws,

the NASD Regulation By-Laws, the Nasdaq ByLaws, 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).

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

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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64031

5See Securities Exchange Release No. 38908

(August 7, 1997), 62 FR 43385 (August 13, 1997).

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 ByLaws, 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–97–28.5 Such changes

are described later in detail.

(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 ByLaws. 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.
64032 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

6See Release No. 34–38908, supra note 5.

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.

(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.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 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
64034 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

7 15 U.S.C. § 780–3.

8 17 CFR 200.30–3(a)(12).

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

2New section (j) of NASD Rule 4200 defines a

direct registration program as any program by an

issuer, directly or through its transfer agent

whereby a shareholder may have securities

registered in the shareholder’s name on the books

of the issuer or its transfer agent without the need

for a physical certificate to evidence ownership.

3 15 U.S.C. 78q–1.

4Securities Exchange Act Release No. 39082

(September 16, 1997), 62 FR 49719.

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.

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

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31523 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39369; File No. SR–NASD–

97–51]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving a

Proposed Rule Change Regarding the

Transfer of Securities of Issuers Listed

on the Nasdaq Stock Market That Are

Held Pursuant to a Direct Registration

Program

November 26, 1997.

I. Introduction

On July 16, 1997, The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–NASD–97–51) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 The rule

change will amend Rules 4200, 4310,

4320, and 4460 of the National

Association of Securities Dealers, Inc.

(‘‘NASD’’) to require Nasdaq issuers that

elect to offer a direct registration

program 2 to shareholders to participate,

either directly or through the issuer’s

transfer agent, in an electronic link with

a securities depository registered under

Section 17A of the Act.3 Notice of the

proposal was published in the Federal

Register on September 23, 1997.4 No

comment letters were received. For the

reasons discussed below, the

Commission is approving the proposed

rule change.

II. Description of the Proposal

In 1994, the Commission requested

comments on the establishment of a

transfer agent operated direct

registration system (‘‘DRS’’) for

securities which would allow investors

to have their securities registered in

book-entry form directly on the books of