[Federal Register Volume 66, Number 247 (Wednesday, December 26, 2001)]
[Notices]
[Pages 66489-66491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31565]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45162; File No. SR-NASD-2001-89]


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

December 18, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 66490]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 7, 2001, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly-owned subsidiary 
NASD Dispute Resolution, Inc. (``NASD Dispute Resolution'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') a 
proposed rule change as described in Items I and II below, which Items 
have been prepared by NASD Dispute Resolution. For the reasons 
discussed below, the Commission is publishing this notice is solicit 
comments on the proposed rule change and to approve the proposal on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Dispute Resolution is proposing to amend Rule 10335 of the 
Code of Arbitration (``Code'') of the NASD, to extend the pilot 
injunctive relief rule for six months, pending Commission action on a 
pending rule filing, SR-NASD-00-02, to amend Rule 10335 and make it a 
permanent part of the Code. Below is the text of the proposed rule 
change. Proposed new language is in italics; proposed deletions are in 
brackets.

1000.  Code of Arbitration Procedure

* * *

10335.  Injunctions

    (a)-(h) Unchanged.
    (i) Effective Date.
    This Rule shall apply to arbitration claims filed on or after 
January 3, 1996. Except as otherwise provided in this Rule, the 
remaining provisions of the Code shall apply to proceedings instituted 
under this Rule. This Rule shall expire on [January 4, 2002] July 1, 
20002, unless extended by the Association's Board of Governors.

* * *

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 Dispute Resolution 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. NASD Dispute Resolution 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

I. Purpose
    Rule 10335, the NASD's pilot injunctive relief rule, provides 
procedures for obtaining interim injunctive relief in controversies 
involving member firms and associated persons in arbitration. The rule 
has primarily been used in ``raiding cases,'' or cases involving the 
transfer of an employee from one firm to another firm. Rule 10335 took 
effect on January 3, 1996, for a one-year pilot period. The SEC has 
periodically extended the initial pilot period in order to permit the 
NASD to assess the effectiveness of the rule. The pilot rule is 
currently due to expire on January 4, 2002.\3\
---------------------------------------------------------------------------

    \3\ On January 12, 2000, NASD Regulation, Inc. filed a proposed 
rule filing, SR-NASD-00-02 to amend Rule 10335 and to make it a 
permanent part of the Code. See Securities Exchange Act Release No. 
42606 (April 3, 2000), 65 FR 18405 (April 7, 2000) (File No. NASD-
00-02). The NASD has amended the rule filing on several occasions, 
most recently on August 9, 2001. The most recent amendments were 
published for comment on October 25, 2001. See Securities Exchange 
Act Release No. 44950 (October 18, 2001), 66 FR 54041 (October 25, 
2001).
---------------------------------------------------------------------------

    NASD Dispute Resolution believes that it is in the interest of 
members and associated persons that the effectiveness of the pilot rule 
remain uninterrupted pending final Commission action on SR-NASD-00-02. 
Therefore, NASD Dispute Resolution believes that the pilot rule should 
be extended to July 1, 2002, or such earlier time as permitted by 
Commission action on the permanent rule filing, which makes clear that, 
if approved, the amended rule would supersede the pilot rule in its 
entirety.
2. Statutory Basis
    NASD Dispute Resolution believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\4\ 
which requires, among other things, that the Association's rules 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Dispute Resolution 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, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. 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.\5\ Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, 
DC 20549-0609. 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 No. 
SR-NASD-2001-89 and should be submitted by January 16, 2002.
---------------------------------------------------------------------------

    \5\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

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

    NASD Dispute Resolution has requested that the Commission find good 
cause pursuant to Section 19(b)(2) \6\ for approving the proposed rule 
change prior to the 30th day after publication in the Federal Register. 
The Commission finds that the proposed rule change is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to the NASD and, in particular, the requirements of Section 
15A of the Act and the rules and regulations thereunder.\7\ Rule 10335 
is intended to provide a pilot system within the NASD arbitration forum 
to process request for temporary injunctive relief. Rule 10335 is 
intended principally to facilitate the disposition of employment 
disputes,

[[Page 66491]]

and related disputes, concerning members who file for injunctive relief 
to prevent registered representatives from transferring their client 
accounts to their new firms.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(2).
    \7\ 15 U.S.C. 78o-3.
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice of 
filing thereof in that accelerated approval will permit members to have 
the benefit of injunctive relief in arbitration pending Commission 
action on the rule filing proposing to amend Rule 10335 and make it a 
permanent part of the Code.\8\ The Commission believes, therefore, that 
granting accelerated approval of the proposed rule change is consistent 
with Section 15A of the Act.\9\
---------------------------------------------------------------------------

    \8\ See supra note 3.
    \9\ 15 U.S.C. 78o-3
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NASD-2001-89) is approved on 
an acclerated basis through July 1, 2002.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12)
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-31565 Filed 12-21-01; 8:45 am]
BILLING CODE 8010-01-M