22788 Federal Register / Vol. 74, No. 92 / Thursday, May 14, 2009 / Notices 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Rule 13802(c)(3). These specially qualified 

arbitrators are attorneys familiar with employment 

law who have at least ten years of legal experience. 

In addition, a chair or single arbitrator may not have 

represented primarily the views of employers or of 

employees within the last five years. Primarily 

means 50 percent or more of the arbitrator’s 

business or professional activities within the last 

five years. 

4The $100,000 threshold was chosen because 

FINRA recently raised the threshold for a single 

chair-qualified arbitrator in all cases to $100,000. 

Under the rule change, if the amount of a claim is 

more than $100,000, exclusive of interest and 

expenses, or is unspecified, or if the claim does not 

request money damages, the panel will consist of 

three arbitrators, unless the parties agree in writing 

to one arbitrator. See Exchange Act Release No. 

59340 (February 2, 2009), 74 FR 6335 (February 6, 

2009) (SR–FINRA–2008–047). 

5Rule 13800(d) (Simplified Arbitration— 

Discovery and Additional Evidence) provides for 

limited discovery in arbitrations involving $25,000 

or less, exclusive of interest and expenses. 

6 In simplified arbitration proceedings 

administered under Rules 12800 and 13800 

(Simplified Arbitration), the arbitrator honorarium 

is $125. The honorarium under proposed Rule 

13806 is intended to be consistent with these rules. 

7The 13500 series of rules would provide for 

prehearing procedures and discovery in these cases. 

8Rule 13100(k) defines the term ‘‘Director’’ to 

mean the ‘‘Director of FINRA Dispute Resolution. 

Unless the Code provides that the Director may not 

delegate a specific function, the term includes 

FINRA staff to whom the Director has delegated 

authority.’’ 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–11264 Filed 5–13–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59885; File No. SR-FINRA– 

2009–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Expedited Administration of 

Promissory Note Cases 

May 7, 2009. 

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 April 17, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) 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 

substantially prepared by FINRA. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adopt Rule 

13806 of the Code of Arbitration 

Procedure for Industry Disputes 

(‘‘Industry Code’’), to establish 

procedures to expedite the 

administration of arbitrations in which 

a member’s only claim is that an 

associated person failed to pay money 

owed on a promissory note; and to 

amend Rules 13214 and 13600 of the 

Industry Code to make conforming 

changes. The text of the proposed rule 

change is available on FINRA’s Web site 

at http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA 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. FINRA 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 

FINRA is proposing to amend the 

Industry Code to establish new 

procedures to expedite the 

administration of promissory note cases. 

Proposed new Rule 13806 would apply 

to arbitrations solely involving a 

member’s claim that an associated 

person failed to pay money owed on a 

promissory note. In order to proceed 

under the new rule, a claimant would 

not be permitted to include any 

additional allegations in the Statement 

of Claim. FINRA is also proposing to 

amend Rules 13214 and 13600 of the 

Industry Code to make conforming 

changes. 

In the absence of additional 

allegations by members or associated 

persons, promissory note cases involve 

straightforward contracts with few 

documents being entered into evidence. 

The new procedures would streamline 

the process for promissory note cases 

and reduce expenses for the parties 

while maintaining the procedural 

safeguards in the Industry Code for the 

associated person against whom a 

member asserts a claim. 

Specifically, under the proposed 

procedures: 

• Parties would choose a single 

public arbitrator from the roster of 

arbitrators approved to hear statutory 

discrimination claims,3 unless an 

associated person files a counterclaim or 

third party claim of more than $100,000, 

exclusive of interest or expenses, or the 

counterclaim or third party claim is 

unspecified or does not request money 

damages.4 FINRA believes that the 

arbitrators on this roster would be 

especially suited to resolve these 

disputes because of the depth of their 

experience and their familiarity with 

employment law; 

• If the associated person does not 

file an answer, simplified discovery 

procedures would apply 5 and, 

regardless of the amount in controversy, 

the single arbitrator would render an 

award based on the pleadings and other 

materials submitted by the parties. The 

arbitrator would be paid an honorarium 

of $125 for each arbitration resolved in 

this manner;6

• If the associated person files an 

answer (but does not seek any 

additional relief or assert any 

counterclaims or third party claims), 

regular discovery procedures would 

apply 7 and, regardless of the amount in 

controversy, the single arbitrator would 

hold a hearing; and 

• If the associated person files a 

counterclaim or third party claim, then 

regular discovery procedures would 

apply and panel composition would be 

based on the amount of the 

counterclaim or third party claim. If the 

counterclaim and/or third party claim is 

not more than $100,000, exclusive of 

interest and expenses, the Director 8

would appoint a single public arbitrator 

from the roster of arbitrators approved 

to hear statutory discrimination claims. 

If the counterclaim and/or third party 

claim is more than $100,000, exclusive 

of interest and expenses, then the 

Director would appoint a threearbitrator panel. The Director would 

appoint one public arbitrator from the 

roster of arbitrators approved to hear 

statutory discrimination claims who 

would serve as chairperson, one 

arbitrator from the public roster, and 

one arbitrator from the non-public 

roster. If the counterclaim or third party 

claim is filed after a single arbitrator is 

appointed, and a three-arbitrator panel 

is required, the Director would retain 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 92 / Thursday, May 14, 2009 / Notices 22789 

9The rationale for the proposed rule change was 

confirmed in a phone conversation with Margo 

Hassan and Ken Andrichik of FINRA, on May 6, 

2009. 10 15 U.S.C. 78o-3(b)(6). 11 17 CFR 200.30–3(a)(12). 

the appointed arbitrator as chair and 

appoint two additional arbitrators (one 

public and one non-public arbitrator). 

Regardless of whether the panel is 

composed of one or three arbitrators, 

FINRA would pay the arbitrators the 

honoraria provided for in the Industry 

Code for arbitrations resolved by a 

hearing. 

FINRA is proposing to amend Rule 

13214 (Payment of Arbitrators) to reflect 

that the rule applies to arbitrator 

honoraria except as specified in new 

Rule 13806(f) or as specifically excluded 

in Rule 13214. Under the proposal, 

FINRA would pay an arbitrator an 

honorarium of $125 for each arbitration 

in which the associated person does not 

file an answer and the award is based 

on the arbitrator’s review of the 

pleadings and other materials submitted 

by the parties. As these are expedited 

proceedings, FINRA would not pay an 

honorarium for resolving a discoveryrelated motion without a hearing 

session or for resolving a contested 

motion concerning issuance of a 

subpoena without a hearing session. In 

instances where full discovery would be 

conducted under the 13500 series of 

rules, FINRA would pay the honorarium 

prescribed in Rule 13214 for discoveryrelated motions without a hearing 

session and for contested motions 

concerning issuance of a subpoena 

without a hearing session. 

FINRA is also proposing to amend 

Rule 13600 (Required Hearings) to 

reflect that a hearing will be held unless 

new Rule 13806(e)(1) provides 

otherwise. Under the proposal, if the 

associated person does not file an 

answer, no initial prehearing conference 

or hearing would be held. Generally, in 

the absence of additional allegations by 

members or associated persons, 

promissory note cases involve straight 

forward contracts with few documents 

entered into evidence. FINRA believes 

that, in these situations, promissory 

note cases would be processed more 

quickly and efficiently and expenses 

would be reduced for the parties and the 

forum if the arbitrator were to render the 

award on the pleadings and other 

materials submitted by the parties.9

As noted in Item 2 of this filing, 

FINRA will announce the effective date 

of the proposed rule change in a 

Regulatory Notice to be published no 

later than 60 days following 

Commission approval. The effective 

date will be 30 days following 

publication of the Regulatory Notice 

announcing Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,10 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. Generally, in the 

absence of additional allegations by 

members or associated persons, 

promissory note cases involve straight 

forward contracts with few documents 

entered into evidence. FINRA believes 

that, under the proposal, these 

promissory note cases would be 

processed more quickly and efficiently 

and expenses would be reduced for the 

parties and the forum. FINRA does not 

believe that the new procedures would 

negatively impact its administration of 

other cases filed with the forum. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA 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 purposes of the Act. 

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 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 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, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–015 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2009–015. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2009–015 and 

should be submitted on or before June 

4, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–11263 Filed 5–13–09; 8:45 am] 

BILLING CODE 8010–01–P 


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