[Federal Register Volume 62, Number 242 (Wednesday, December 17, 1997)]
[Notices]
[Pages 66164-66167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32825]



[[Page 66164]]

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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 self-regulatory organization. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ The 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'').
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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.
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    \2\ The 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
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    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:

    \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).''
    \4\ The Form U-4 was adopted effective October 1, 1975.
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    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

[[Page 66165]]

arbitration award rendered against me may be entered as a judgement 
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in any court of competent jurisdiction.\5\

    \5\ From 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.

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 
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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\
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    \6\ As 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).
    \7\ Higgins 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).
    \8\ Securities 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.
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    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\
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    \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).
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    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\
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    \11\ The 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.
    \12\ See, e.g., Alford v. Dean Witter Reynolds, Inc., 939 F.2d 
229 (5th Cir. 1991).
    \13\ See, e.g., Austin v. Owens-Brockway Glass Container, Inc., 
78 F.3d 875, 881 (4th Cir.), cert. denied, 117 S. Ct. 432 (1996).
    \14\ See, e.g., Kaliden v. Shearson Lehman Hutton, Inc., 789 F. 
Supp. 179, 180 (W.D. Pa. 1991).
    \15\ See, e.g., Metz v. Merrill Lynch Pierce, Fenner & Smith, 
Inc., 39 F.3d 1482, 1488 (10th Cir. 1994).
    \16\ See, e.g. Commission on Future of Worker-Management 
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).
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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.
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    \17\ The 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.
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    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

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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\
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    \18\ The Task Force directed its attention primarily to 
customer-member arbitration. See Task Force Report at 123.
    \19\ The 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.
    \20\ The 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 employment-related 
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.
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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.
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    \21\ Letter 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.
    \22\ H.R. 983 and S. 63, 105th Cong. (1997).
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    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\
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    \23\ The 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.
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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\
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    \24\ The NASD takes no position regarding private agreements 
between employees and firms to arbitrate employment disputes.
    \25\ The 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.
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    Paragraph (b) applies only to claims alleging employment 
discrimination or sexual harassment \26\ in violation of a statute.\27\ 
Paragraph (b) does not apply

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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).
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    \26\ Sexual 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.''
    \28\ Such 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.
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    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.
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    \29\ 15 U.S.C. 78o-3.
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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