66164 Federal Register / Vol. 62, No. 242 / Wednesday, December 17, 1997 / Notices

1The NASD filed Amendment No. 1 to the

proposed rule filing on November 21, 1997, the

substance of which is incorporated into the notice.

See letter from Joan C. Conley, Corporate Secretary,

NASD Regulation, to Katherine A. England,

Assistant Director, Market Regulation, Commission,

dated November 20, 1997 (‘‘Amendment No. 1’’).

2The number of employment discrimination

claims filed with the NASD rose from 4 to 1991 to

109 in 1996. The latter figure represents, however,

less than 2 percent of all arbitration claims filed

with the NASD in 1996

3 17 C.F.R. 240.15b7–1. The rule provides as

follows: ‘‘No registered broker or dealer shall effect

any transaction in, or induce the purchase or sale

of, any security unless any natural person

associated with such broker or dealer who effects

or is involved in effecting such transaction is

registered or approved in accordance with the

standards of training, experience, competence, and

other qualification standards (including but not

limited to submitting and maintaining all required

forms, paying all required fees, and passing any

required examinations) established by the rules of

any national securities exchange or national

securities association of which such broker or

dealer is a member or under the rules of the

Municipal Securities Rulemaking Board (if it is

subject to the rules of that organization).’’

4The Form U–4 was adopted effective October 1,

1975.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39421; File No. SR-NASD–

97–77]

Self-Regulatory Commission

Organizations; Notice of Filing of

Proposed Rule Change by the National

Association of Securities Dealers, Inc.

Relating to the Arbitration of

Employment Discrimination Claims

December 10, 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 17, 1997,1

the National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘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 the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organizations

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend Rule 10201 of the NASD’s Code

of Arbitration Procedure (‘‘Code’’) to

remove the requirement to arbitrate

claims of statutory employment

discrimination. Below is the text of the

proposed rule change. Proposed new

language is in italics; proposed

deletions are in brackets.

* * * * *

CODE OF ARBITRATION PROCEDURE

10200. INDUSTRY AND CLEARING

CONTROVERSIES

10201. Required Submission

(a) Except as provided in paragraph

(b), [Any] a dispute, claim or

controversy eligible for submission

under the Rule 10100 Series between or

among members and/or associated

persons, and/or certain others, arising in

connection with the business of such

member(s) or in connection with the

activities of such associated person(s),

or arising out of the employment or

termination of employment of such

associated person(s) with such member,

shall be arbitrated under this Code, at

the instance of:

(1) a member against another member;

(2) a member against a person

associated with a member or a person

associated with a member against a

member; and (3) a person associated

with a member against a person

associated with a member.

(b) A claim alleging employment

discrimination or sexual harassment in

violation of a statute is not required to

be arbitrated. Such a claim may be

arbitrated only if the parties have agreed

to arbitrate it, either before or after the

dispute arose.

[(b)] (c) Any dispute, claim or

controversy involving an act or failure

to act by a clearing member; a registered

clearing agency; or participants,

pledgees, or other persons using the

facilities of a registered clearing agency,

under the rules of any registered

clearing agency with which the

Association has entered into an

agreement to utilize the Association’s

arbitration facilities and procedures

shall be arbitrated in accordance with

such agreement and the rules of such

registered clearing agency.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization 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.

The self-regulatory organization 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 proposed rule change will modify

the current requirement that associated

persons arbitrate all disputes arising out

of their employment or termination of

employment with a member broker/

dealer. The proposed rule provides that

associated persons are no longer

required, solely by virtue of their

association of their registration with the

NASD, to arbitrate claims of statutory

employment discrimination. Associated

persons still will be required to arbitrate

other employment-related claims, as

well as any business-related claims

involving investors or other persons.

Background

Although most arbitration claims

submitted to the NASD involve disputes

between members and customers, a

growing number of matters involve

employment-related disputes between

members and their associated persons.2

The growth in this area is the result of

several recent court decisions

concerning the requirement of persons

associated with a broker/dealer to

arbitrate their employment disputes.

The requirement for associated

persons to register with the NASD arises

from Section 15A(g)(3)(B) of the Act,

which provides that the NASD may

‘‘require a natural person associated

with a member, or any class of such

natural persons, to be registered with

the association in accordance with

procedures so established [by the rules

of the association].’’ The registration

requirement was made mandatory by

Exchange Act Rule 15b7–1 in 1993.3

The NASD, other self-regulatory

organizations (‘‘SROs’’), and state

regulatory authorities require all

applicants for registration as persons

associated with a broker/dealer

(registered representatives, assistant

representatives or principals) to

complete and sign the Form U–4, the

‘‘Uniform Application for Securities

Industry Registration or Transfer.’’ 4

Form U–4 requires registered persons to

submit to arbitration any claim that is

eligible under the rules of the

organizations with which they register

(as indicated in Item 10 of the Form U–

4). The relevant language on the Form

U–4 states:

I agree to arbitrate any dispute, claim or

controversy that may arise between me and

my firm, or a customer, or any other person,

that is required to be arbitrated under the

rules, constitutions, or by-laws of the

organizations indicated in Item 10 as may be

amended from time to time and that any
Federal Register / Vol. 62, No. 242 / Wednesday, December 17, 1997 / Notices 66165

5From page 4 of the Form U–4 as revised in

November 1991. A new version of the Form U–4

was approved by the Commission on July 5, 1996.

Securities Exchange Act Release No. 37407 (July 5,

1996), 61 FR 36595 (July 11, 1996). Use of the

revised form has been deferred pending related

changes to the Central Registration Depository

(‘‘CRD’’). Securities Exchange Act Release No.

37994 (November 27, 1996), 61 FR 64549

(December 5, 1996). The substance of the quoted

language was not changed in the revision.

6As one court explained, ‘‘Section 1 [now Rule

10101] defines the general universe of issues that

may be arbitrated, and Section 8 [now Rule 10201]

describes a subset of that universe that must be

arbitrated under the Code.’’ Armijo v. Prudential

Ins. Co., of Am., 72 F.3d 793, 798 (10th Cir. 1995).

7Higgins v. Superior Court of Los Angeles County,

No. B057028 (Cal. App. Oct. 8, 1991), review denied

and decision ordered not officially published, 1 Cal.

Rptr. 2d 57 (1992). The state court noted the

difference between the NYSE rule (at issue in the

Supreme Court’s Gilmer decision, discussed below),

which refers to disputes arising out of the

employment or termination of employment of an

associated person, and the NASD rule, which at the

time did not contain the phrase relating to

employment. A federal court reached the same

conclusion while the rule change was pending

approval. Farrand v. Lutheran Bhd., 993 F.2d 1253

(7th Cir. 1993). The Association stated in its rule

filing that the amendment was a clarification of

existing intent rather than a new policy; some

courts accepted this view, while other courts

interpreted the rule amendment as a change in

policy. See Kuehner v. Dickinson & Company, 84

F.3d 316, 320 n.1 (9th Cir. 1996) (describing splits

in the Seventh, Tenth and Eleventh Circuits of this

issue).

8Securities Exchange Act Release No. 32802

(August 25, 1993), 58 FR 45932 (August 31, 1993).

In its order approving this change and a related

change in the composition of arbitration panels to

hear employment disputes, the Commission

recognized that claims based on allegations of age,

sex, or race discrimination, or relating to sexual

harassment, were subject to the arbitration

requirement.

9 500 U.S. 20 (1991). Those challenges included

contentions that anti-discrimination laws are

designed to further important social policies that

should be addressed in a public forum, that

arbitration panels may be biased, that discovery is

more limited in arbitration than in court, that

arbitrators often do not issue written opinions, that

arbitration procedures do not provide for broad

equitable relief and class actions, and that there is

unequal bargaining power between employers and

employees. The Court noted that most of these

contentions were generalized attacks on arbitration

that had been rejected in prior Supreme Court

decisions. Id. at 30.

10 Id. at 35. The Court cited its earlier holding

that, ‘‘So long as the prospective litigant effectively

may vindicate [his or her] statutory cause of action

in the arbitral forum, the statute will continue to

serve both its remedial and deterrent function.’’ 500

U.S. at 28, quoting Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985).

11The U.S. Court of Appeals for the Ninth Circuit

has held that a registered person’s waiver of the

right to adjudication in court through signing of the

Form U–4 must be ‘‘knowing’’ in order for the

arbitration requirement to be enforced. Prudential

Ins. Co. of Am. v. Lai, 42 F.3d 1299, 1305 (9th Cir.

1994), cert. denied, 116 S. Ct. 61 (1995). But see

Prudential Ins. Co. of Am. Sales Prac. Litig., 924 F.

Supp. 627, 642 (D.N.J. 1996) (‘‘. . . Lai has been

rather extensively criticized’’), and cases cited

therein.

12See, e.g., Alford v. Dean Witter Reynolds, Inc.,

939 F.2d 229 (5th Cir. 1991).

13See, e.g., Austin v. Owens-Brockway Glass

Container, Inc., 78 F.3d 875, 881 (4th Cir.), cert.

denied, 117 S. Ct. 432 (1996).

14See, e.g., Kaliden v. Shearson Lehman Hutton,

Inc., 789 F. Supp. 179, 180 (W.D. Pa. 1991).

15See, e.g., Metz v. Merrill Lynch Pierce, Fenner

& Smith, Inc., 39 F.3d 1482, 1488 (10th Cir. 1994).

16See, e.g. Commission on Future of WorkerManagement Relations (‘‘Dunlop Commission’’),

Report and Recommendations 33 n.15 (1994); Equal

Employment Opportunity Commission, Policy

Statement on Mandatory Binding Arbitration of

Employment Discrimination Disputes as a

Condition of Employment n.2 (1997).

17The NASD formed the Arbitration Policy Task

Force in September 1994 for the purposes of

studying the securities arbitration process

administered by the NASD and of making

suggestions for reform. The Task Force, chaired by

David S. Ruder, former Chairman of the Securities

and Exchange Commission, delivered its Report to

the NASD Board in January 1996.

18The Task Force directed its attention primarily

to customer-member arbitration. See Task Force

Report at 123.

arbitration award rendered against me may

be entered as a judgement in any court of

competent jurisdiction.5

Thus, the Form U–4 incorporates by

reference the rules of the SRO with

which the individual is to be registered.

NASD Rule 10101 provides as follows:

This Code of Arbitration Procedure is

prescribed . . . for the arbitration of any

dispute, claim, or controversy arising out of

or in connection with the business of any

member of the Association, or arising out of

the employment or termination of

employment of associated person(s) with any

member, with the exception of disputes

involving the insurance business of any

member which is also an insurance company

. . . between or among members and

associated persons . . . .

For industry and clearing controversies,

Rule 10201 requires that all matters

eligible under Rule 10101 be submitted

to arbitration at the request of any

member or associated person.6 Rules

10101 and 10201 were amended in 1993

to include the language relating to

disputes ‘‘arising out of the employment

or termination of employment’’ of an

associated person. This language was

added in order to clarify that

employment disputes were required to

be arbitrated, since a California court

had held that the Code of Arbitration

Procedure did not cover such disputes,

but only covered disputes arising out of

or in connection with business

transactions.7 The Commission found

the amendment to be consistent with

Section 15A(b)(6) of the Act and

approved the rule change.8

Over the past several years,

employees have raised several

challenges to the mandatory arbitration

of employment discrimination disputes.

Such challenges were addressed by the

Supreme Court in Gilmer v. Interstate/

Johnson Lane Corp.9 In Gilmer, which

involved a person registered with the

New York Stock Exchange, the Court

examined many challenges to the

adequacy of arbitration procedures

raised by the registered representative

and found that none was sufficient to

prevent the Court from enforcing the

representative’s agreement, pursuant to

his signing of the Form U–4, to arbitrate

his federal age discrimination claim.

Therefore, the Court held that Mr.

Gilmer had not met his burden of

showing that Congress intended to

preclude arbitration of claims under the

Age Discrimination in Employment Act

of 1967.10

Subsequent to the Gilmer decision,

courts have declined to find a

Constitutional or statutory bar to

enforcement of the agreement to

arbitrate contained in the Form U–4.11

They have extended the reasoning of

Gilmer to cover disputes arising under

Title VII of the Civil Rights Act of

1964,12 the Americans with Disabilities

Act,13 and state statutes of similar

nature.14 Courts also have extended the

application of Gilmer to the NASD,

since its rules are similar to the NYSE

rule at issue in Gilmer.15 Nevertheless,

registered persons and others have

continued to challenge the requirement

to arbitrate claims of statutory

employment discrimination.16

Task Force Views

In January 1996, the NASD’s

Arbitration Policy Task Force (‘‘Task

Force’’)17 released its Report on

Securities Arbitration Reform

(‘‘Report’’). The Task Force’s Report

made numerous recommendations to

improve the arbitration process. Since

the Report was released, NASD

Regulation has been engaged in a major

effort to implement the Task Force

recommendations.

Employment arbitration was not an

area of major focus for the Task Force.18

The Task Force found, however, that

such arbitration offers the advantages of

speed and cost that are identified with

customer arbitration, and observed that

statutory discrimination claims are

almost always interwoven with

industry-specific issues. Moreover, the

Task Force believed that arbitration’s

equitable approach to dispute resolution

is fully capable of vindicating the

important public rights expressed in the

anti-discrimination statutes. The Task

Force, therefore, found compelling

reasons to keep employment-related

disputes within NASD arbitration. The

Task Force Report recommended that

employment-related disputes, including

statutory discrimination claims, remain

eligible for arbitration with certain

enumerated enhancements, many of
66166 Federal Register / Vol. 62, No. 242 / Wednesday, December 17, 1997 / Notices

19The Task Force noted that employment

arbitration, and in particular the issue of whether

cases that raise statutory civil rights claims should

remain subject to predispute arbitration agreements,

is an area in which the law and commentary are

rapidly evolving. Therefore, the Task Force

recommended that the NASD closely monitor

developments in employment arbitration and look

to other sources in formulating future

recommendations for the direction the NASD

should pursue in this area. Task Force Report at 123

and n.164.

20The Task Force recommended certain changes

that would enhance the NASD’s ability to handle

employment-related arbitrations, including

expanded arbitrator education, greater disclosure to

registered person, the inclusion of employmentrelated disputes in the early neutral evaluation

pilot, and development of a list of documents that

parties should produce during discovery for various

kinds of employment-related claims. In addition,

the Task Force felt that its other recommendations

relating to early automatic document production,

mediation, simplified arbitration, punitive damages,

and list selection should apply to arbitration of

employment-related disputes.

21Letter from Representatives Edward J. Markey,

Anna G. Eshoo, and Jesse L. Jackson, Jr., to Arthur

Levitt, Chairman, SEC (February 3, 1997). With

regard to whether the mandatory arbitration

requirement was within the scope of the NASD’s

authority, the Commission’s response stated that

sound arguments could be made on both sides of

the issue. Letter from Chairman Levitt to

Representative Markey (March 17, 1997). The

Commission acknowledged that the NASD rule

requiring registered persons to arbitrate

employment disputes was approved by the

Commission as being consistent with the Act, and

that it would not be unreasonable to conclude that

SROs do have the authority to mandate the

arbitration of discrimination claims, provided that

fair procedures are in place. The response also

acknowledged the concerns of the Equal

Employment Opportunity Commission, members of

Congress, and others about the special role of civil

rights legislation. The Commission concluded that,

given the self-regulatory scheme of the Act, it

would be premature for the Commission to take any

action, and suggested that it would defer expressing

any conclusions until the matter was sent to the

Commission by the NASD in the form of a proposed

rule change.

22H.R. 983 and S. 63, 105th Cong. (1997).

23The text of the proposed rule change was

provided to the NASD Regulation Board at its

meeting on September 22, 1997, and the NASD

Board had an opportunity to review the final rule

language at its meeting on October 9, 1997.

24The NASD takes no position regarding private

agreements between employees and firms to

arbitrate employment disputes.

25The Task Force Report observed that arbitration

of employment related disputes offers advantages in

terms of speed and cost, and that arbitration’s

essentially equitable approach to dispute resolution

is fully capable of vindicating the important public

rights expressed in anti-discrimination statutes.

Task Force Report at 119. Therefore, the NASD

expects that many employees will continue to file

their discrimination claims in arbitration if the

proposed rule becomes effective, and the NASD

intends to make further enhancements to its

arbitration forum to make it even more attractive to

parties.

26Sexual harassment has been held to be a form

of sex discrimination, and thus a violation of Title

VII. Meritor Savings Bank versus Vinson, 477 U.S.

57, 64 (1986).

27 the term ‘‘statute’’ is intended to be interpreted

in its broad sense, as defined in Black’s Law

Dictionary 1410 (6th Ed. 1990): ‘‘A formal written

enactment of a legislative body, whether federal,

state, city, or county.’’

which had been recommended

elsewhere in the Report in the context

of customer arbitration.19 The NASD

intends to implement many of the

recommended enhancements to its

arbitration forum in the next year.20

Controversy Surrounding the Issue

In the past year, there has been a great

deal of activity and public discussion

about the arbitration of employment

discrimination disputes. In February of

1997, three members of Congress wrote

to the SEC and questioned the authority

of the NASD and other SROs to require

arbitration of discrimination claims in

employment disputes through an

associated person’s signing of the Form

U–4.21 Legislation was introduced this

year in both the House and the Senate 22

that would prohibit employers and

employees from entering into

predispute arbitration agreements

concerning claims of unlawful

employment discrimination. Under the

proposed legislation, the parties could

agree, after a dispute arose, whether to

resolve it by arbitration or to go to court.

The NASD has received letters on this

subject from groups with differing

points of view, such as the Securities

Industry Association, the Equal

Employment Opportunity Commission

(‘‘EEOC’’), the National Women’s Law

Center, the Women’s Legal Defense

Fund, the American Civil Liberties

Union, the National Employment

Lawyers Association, the National

Association of Investment Professionals,

several members of Congress, and

attorneys representing parties in

employment disputes.

Recent NASD Actions

To gather a wide assortment of views

on this issue, NASD staff met with

various groups and individuals,

including national and regional member

firms, members of NASD Regulation

District Committees, attorneys

representing employees and attorneys

representing employers in employment

litigation, members of the Bar of the City

of New York Labor and Employment

Committee, and staff of the New York

Stock Exchange. In general, the groups

from or representing the securities

industry believed the current practice is

fair, and that it is more cost-effective for

all parties than going to court. The

groups representing employees were

unanimous in believing that the NASD

and other SROs should remove the

requirement for registered persons to

arbitrate employment discrimination

disputes as a condition of registration in

the industry.

Many persons meeting with NASD

staff recommended that the SROs adopt

the Due Process Protocol endorsed by

the American Bar Association and

various dispute resolution

organizations. Some attendees

expressed a willingness to work with

the SROs in revising the process if

arbitration of discrimination claims

were made voluntary.

In May 1997, NASD Regulation

formed an Advisory Committee to assist

it in reaching a decision on the

outstanding questions. The Advisory

Committee consisted of six persons of

varying and distinguished backgrounds.

The Advisory Committee held a meeting

in Washington, D.C. on June 16, 1997

and invited to speak representatives of

civil rights organizations, the EEOC,

general counsels of member firms,

attorneys who represent employees,

representatives of employee

organizations, and attorneys who

represent member firms. Afterward, the

Advisory Committee spoke with neutral

experts in the alternative dispute

resolution field, and discussed the

issues with NASD management and

staff.

After consideration of all the views

presented, and in light of the public

perception that civil rights claims may

present important legal issues better

dealt with in a judicial setting, the

NASD determined that the appropriate

action was to remove the arbitration

requirement for such claims, but to

further improve the forum so that it is

viewed by both registered employees

and firms as the fairest and most

efficient forum for resolving all

employment disputes. In August 1997,

proposals were presented to the NASD

Regulation and NASD Boards, which

authorized the proposed rule change.23

Details of the Proposed Rule Change

Paragraph (a) of the proposed rule

adds a prefatory phrase indicating that

the requirement to arbitrate employment

disputes contains an exception, set forth

in paragraph (b).

New paragraph (b) provides that

claims alleging employment

discrimination or sexual harassment in

violation of a statute are not required to

be arbitrated by NASD rules. This

means that such claims may be filed in

the appropriate court, if the employee

chooses to do so and is not under a

separate predispute obligation to

arbitrate the dispute.24 An employee

also may agree to arbitrate after a

dispute arises, and may choose to do so

for a number of reasons.25

Paragraph (b) applies only to claims

alleging employment discrimination or

sexual harassment 26 in violation of a

statute.27 Paragraph (b) does not apply
Federal Register / Vol. 62, No. 242 / Wednesday, December 17, 1997 / Notices 66167

28Such judicially created causes of action might

include, for example, claims alleging ‘‘wrongful

discharge’’ without any accompanying claim of

discrimination on account of age, sex, race, or other

status protected by a specific law.

29 15 U.S.C. 78o-3.

1The amendment was technical in nature and

therefore did not require republication of notice of

filing.

2 15 U.S.C. 78s(b)(1)(1988).

3Securities Exchange Act Release No. 38954

(August 23, 1997) 62 FR 45901.

4To distinguish the title of the current Vice

Chairman from the staff position of Management

Vice Chairman, the modifier ‘‘Member’’ has been

added to the office’s title. Conforming changes have

also been made to several other sections of OCC’s

by-laws to reflect addition of the modifier

‘‘Member’’ to the office’s title.

to causes of action created solely by

judicial precedents.28 Similarly, it does

not apply to other causes of action

under state or federal law, which remain

subject to mandatory arbitration under

paragraph (a).

Paragraph (c) of the proposed rule is

former paragraph (b), which is

unchanged except for the renumbering.

Effective Date and Related Issues

The NASD has requested that the

proposed rule become effective one year

from the date of Commission approval

for several reasons. The NASD believes

that a one year period from the date of

Commission approval would permit

employees and firms to determine what

agreements they might wish to reach

with regard to dispute resolution.

During this period, the NASD will make

related enhancements to the forum so

that employees will have confidence

that there are adequate procedures and

safeguards of their rights in NASD

arbitration. The NASD has formed an

advisory working group to explore

various options for the employment

arbitration area, including additional

due process standards, standard

discovery lists, arbitrator list selection,

and other related issues. It is expected

that the working group will be able to

provide advice to NASD management

and the Boards during 1998. Such

enhancements to the NASD’s arbitration

forum are expected to be the subject of

future rule proposals.

In this connection, the NASD also

plans to provide improved disclosure to

employees of the effect of signing the

Form U–4, their rights under the

proposed rule, and the features of

arbitration, so that they can make

informed decisions.

Finally, the NASD intends to work

with other regulators to consider

expanded disclosure on the Form U–4

itself. Amendment to the Form U–4, an

industry-wide form, requires the

agreement of the SROs, the state

regulatory authorities, and NASAA, as

well as approval by the Commission.

This process could take several months

or longer.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

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

the Act 29 in that the amendment will

protect the public interest by allowing

associated persons to choose whether to

pursue their statutory claims of

employment discrimination in court or

in arbitration, and by improving parties’

confidence in the arbitration process.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

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 at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–97–77 and should be

submitted by January 7, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32825 Filed 12–16–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39420; File No. SR–OCC–

97–08]

Self-Regulatory Organizations; The

Options Clearing Corporation; Order

Approving a Proposed Rule Change to

Create a New Office of Management

Vice Chairman and to Change the Title

of Vice Chairman to Member Vice

Chairman

December 10, 1997.

On May 9, 1997, The Options Clearing

Corporation (‘‘OCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) and on May 12, 1997,

amended 1 a proposed rule change (File

No. SR–OCC–97–08) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).2 Notice

of the proposal was published in the

FEDERAL REGISTER on August 29, 1997.3

On September 29, 1997, OCC filed a

second amendment to the proposed rule

change. No comment letters were

received. For the reasons discussed

below, the Commission is approving the

proposed rule change.

The proposal amends OCC’s by-laws

to create a new office of Management

Vice Chairman and to change the title of

Vice Chairman to Member Vice

Chairman. The proposal amends Article

IV, Section 1 to clarify that the existing

Vice Chairman is elected by the Board

of Directors from among OCC’s Member

Directors 4 and will be renamed the

Member Vice Chairman. Article IV,

Section 1 is also amended to create the

position of Management Vice Chairman

which will be elected at the discretion

of the Board of Directors. The board will

not be required to fill this position. Only

OCC staff members will be eligible to

serve as the Management Vice

Chairman, and any person serving in