[Federal Register Volume 62, Number 247 (Wednesday, December 24, 1997)]
[Notices]
[Pages 67423-67425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33526]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39458; File No. SR-NASD-97-87]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the National 
Association of Securities Dealers, Inc. Relating to Extending the Pilot 
Injunctive Relief Rule

December 17, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 8, 1997, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II 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\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulatory is herewith filing a proposed rule change to extend 
for six months the pilot injunctive relief rule, Rule 10335 (formerly 
Section 47) of the Code of Arbitration Procedure (``Code'').

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 III 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
    NASD Regulation's injunctive relief rule, Rule 10335 of the Code, 
provides a procedure for obtaining injunctive relief in arbitration and 
for expediting proceedings for injunctive relief in

[[Page 67424]]

intra-industry disputes. Rule 10335 took effect on January 3, 1996, for 
a one-year pilot period. The initial pilot period was subsequently 
extended on January 3, 1997 for another year in order to permit NASD 
Regulation's Office of Dispute Resolution to gain additional experience 
with the rule before determining whether the rule should be made 
permanent, the pilot period should be extended, or the rule should be 
permitted to terminate by its terms.\3\
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    \3\ See Securities Exchange Act Release No. 38069 (December 20, 
1996), 61 FR 68806 (December 30, 1996).
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    In September 1997, the NASD published a Notice to Members (97-59) 
requesting comment on the rule.\4\ At that time, approximately 433 
cases had been filed in which injunctive relief was sought pursuant to 
the rule. The average number of days between filing and the 
arbitrator's initial injunctive relief order was approximately 7.5 
days. The majority of cases in which injunctive relief was sought 
involved associated persons leaving one firm for another. In most but 
not all cases, the associated person's former firm was the petitioner. 
The Notice to Members sought comment on how the injunctive relief and 
expedited proceedings work and how they could be improved, and 
identified more than twenty specific questions based on previous 
comments received from users of the rule. The comment period closed on 
October 31, 1997. The NASD has received 19 comment letters in response 
to the Notice to Members.\5\
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    \4\ A copy of Notice to Members 97-59 is attached as Exhibit 2 
to the filing.
    \5\ The comment letters are attached as Exhibit 3 to the filing.
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    On the basis of NASD Regulation's experience and the comments of 
the participants, NASD Regulation believes that the procedures set 
forth in Rule 10335 represent a significant improvement to the 
procedures for resolving intra-industry disputes. However, NASD 
Regulation also believes that additional time is necessary to 
adequately review the comments received about the rule and to evaluate 
how the Rule could be improved to meet the needs of the participants 
more effectively.
    Accordingly, NASD Regulation is proposing to extend the injunctive 
relief Rule as a pilot program for another six months. During the next 
six months NASD Regulation will review the comments received in 
response to Notice to Members 97-59, as well as comments from 
arbitrators and NASD employees who have had experience with the 
application of the rule, and will develop modifications or 
interpretations of the Rule in response thereto.
    The NASD requests the Commission to find good cause, pursuant to 
Section 19(b)(2) of the Act, for approving the proposed rule change 
prior to the thirtieth day after publication in the Federal Register. 
Rule 10335 expires by its terms on January 3, 1998. As discussed above, 
NASD Regulation believes that Rule 10335 represents a significant 
improvement to the procedures for resolving intra-industry disputes, 
and that an extension will permit more careful consideration of 
modifications in response to comments. Accordingly, NASD Regulation 
believes that it is in the interest of users of Rule 10335 for the 
procedures to remain in effect without interruption.
2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act \6\ in 
that extending the effectiveness of the injunctive relief procedures 
will serve the public interest by enhancing the satisfaction with the 
arbitration process afforded by expeditious resolution of certain 
disputes.
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    \6\ 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 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. 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-97-87 and should 
be submitted by January 14, 1998.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission finds that the proposed rule change to extend the 
pilot injunctive relief rule is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange, and particularly with Section 15A(b)(6) of the 
Act.\7\ Rule 10335 is intended to provide a pilot system within the 
NASD arbitration forum to process requests for temporary injunctive 
relief. The Rule is intended principally to facilitate the disposition 
of employment disputes and related disputes concerning whether 
registered representatives who move to other firms may transfer their 
accounts to their new firms. The Commission finds it is appropriate to 
extend the pilot for six months. During that time the NASD Regulation 
will be able to evaluate the success of the Rule, to adequately review 
the comments received, and to determine whether to extend the pilot 
further or make the Rule permanent.
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    \7\ 15 U.S.C. 78o-3(b)(6).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. The Commission 
believes that accelerated approval of the proposal is appropriate 
because members will continue to have the benefit of injunctive relief 
in arbitration without interruption. The Rule was previously available 
through the pilot and the Commission is extending the pilot for only 
six months. The Commission believes, therefore, that granting 
accelerated approval of the proposed rule change is consistent with 
Section 15A of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) \8\ that the 
proposed rule change (SR-NASD-97-87) is hereby approved on an 
accelerated basis for a six-month pilot basis, through July 3, 1998.

    \8\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

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[[Page 67425]]

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-33526 Filed 12-23-97; 8:45 am]
BILLING CODE 8010-01-M