Document ID: SEC-2006-1593-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-12-08T05:00Z

[Federal Register: December 8, 2006 (Volume 71, Number 236)]
[Notices]               
[Page 71213-71215]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de06-144]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54857; File No. SR-NASD-2006-101]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto To Provide for the Payment of a $200 Honorarium Per Case 
for Each Arbitrator Who Considers Contested Motions for the Issuance of 
Subpoenas

December 1, 2006.
    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 August 23, 2006, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NASD. On November 13, 
2006, NASD filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, NASD clarified provisions to the 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to provide for the payment of a $200 honorarium 
per case for each arbitrator who considers contested motions for the 
issuance of subpoenas. Below is the text of the proposed rule 
change.\4\ Proposed new language is in italics.
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    \4\ If the Commission approves the pending revisions to the NASD 
Code of Arbitration Procedure for Customer Disputes, the rules 
proposed in this filing will be renumbered as appropriate; see 
Securities Exchange Act Release No. 51856 (June 15, 2005) (SR-NASD-
2003-158), 70 FR 36442 (June 23, 2005); and the NASD Code of 
Arbitration Procedure for Industry Disputes; see Securities Exchange 
Act Release No. 51857 (June 15, 2005) (SR-NASD-2004-011), 70 FR 
36430 (June 23, 2005).
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* * * * *

IM-10104. Arbitrators' Honorarium

    (a)-(e) No change
    (f) Payment for Deciding Contested Subpoena Requests Without a 
Hearing Session
    (1) The honorarium for deciding one or more contested motions 
requesting the issuance of a subpoena without a hearing session shall 
be $200. The

[[Page 71214]]

honorarium shall be paid on a per case basis to each arbitrator who 
decides the contested motion(s). The parties shall not be assessed more 
than $600 in fees under this paragraph in any arbitration proceeding. 
The honorarium shall not be paid for cases administered under Rules 
10203 or 10302.
    (2) For purposes of paragraph (f)(1), a contested motion requesting 
the issuance of a subpoena shall include a motion requesting the 
issuance of a subpoena, the draft subpoena, a written objection from 
the party opposing the issuance of the subpoena, and any other 
documents supporting a party's position.
    (3) The panel will allocate the cost of the honorarium under 
paragraph (f)(1) to the parties pursuant to Rules 10205(c) and 
10332(c).
* * * * *

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 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. NASD 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 purpose of the proposed rule change is to provide for the 
payment of a $200 honorarium per case for each arbitrator who considers 
contested motions for the issuance of subpoenas. Last year, NASD 
amended IM-10104 of the NASD Code of Arbitration Procedure (``Code''), 
to provide arbitrators with an honorarium of $200 to decide discovery-
related motions without a hearing session.\5\ The revised rule, 
however, does not address whether a contested motion concerning a 
subpoena constitutes a discovery-related motion. As a result, NASD has 
received questions regarding the appropriate payment, if any, for 
arbitrators who decide subpoena issues. These questions have focused on 
whether, under the rule, arbitrators should be paid to decide contested 
motions requesting the issuance of a subpoena.
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    \5\ See Securities Exchange Act Release No. 51931 (June 28, 
2005) (File No. SR-NASD-2005-052), 70 FR 38989 (July 6, 2005).
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    The issue of whether arbitrators should receive an honorarium for 
deciding contested subpoena motions will become even more significant 
if the Commission approves amendments to Rule 10322 as proposed by 
NASD.\6\ The proposed changes to Rule 10322 would permit only 
arbitrators to issue subpoenas in arbitration disputes.\7\ If the 
proposed changes to Rule 10322 are approved by the Commission, 
attorneys would no longer have the authority to issue subpoenas. NASD 
anticipates that this would result in a significant increase in the 
number of subpoena requests considered by arbitrators.
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    \6\ See Securities Exchange Act Release No. 54134 (July 12, 
2006) (File No. SR-NASD-2005-079), 71 FR 40762 (July 18, 2006).
    \7\ Currently, Rule 10322 allows arbitrators and any counsel of 
record to the proceedings to issue subpoenas as provided by law.
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    NASD recognizes that arbitrators may spend a considerable amount of 
time and effort deciding contested subpoena motions and believes that 
arbitrators should be compensated for this work. Therefore, NASD 
proposes to provide a $200 honorarium to each arbitrator who decides 
contested motions for subpoenas.\8\ NASD anticipates that if its 
proposed changes to Rule 10322 are approved, under most circumstances, 
the chairperson will be the only arbitrator considering subpoena 
requests based on the documents supplied by the parties. If the entire 
panel decides a contested motion, each arbitrator who participates in 
the subpoena ruling will receive an honorarium of $200. The $200 
honorarium paid to an arbitrator would provide payment for all 
contested subpoena motions in a case (i.e., the honorarium would be 
paid on a per case basis, regardless of the number of contested 
subpoena motions considered by an arbitrator or panel during the 
case).\9\ Furthermore, the maximum amount that would be paid by the 
parties, collectively, for any one case would be $600, irrespective of 
any changes to the composition of the panel.\10\ NASD believes that 
structuring the honorarium in this manner will limit the arbitration 
costs for parties while at the same time compensating arbitrators for 
the time that they spend considering contested subpoena requests.
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    \8\ For purposes of this rule, a contested motion is defined as 
a motion to issue a subpoena, the draft subpoena, a written 
objection from the party opposing the issuance of the subpoena, and 
any other documents supporting a party's position. Arbitrators will 
not be entitled to receive the honorarium if a motion for a subpoena 
is uncontested.
    \9\ This differs from other discovery-related motions, for which 
an arbitrator receives an honorarium for each motion considered. See 
IM-10104(e). If the panel has received the honorarium for 
considering a contested subpoena request and subsequently receives a 
number of new contested subpoena requests, however, the chairperson 
may call a prehearing conference to hear and decide these maters, 
for which the participating arbitrator(s) would receive the normal 
prehearing honorarium. See IM-10104(a) and (b).
    \10\ In situations where more than three different arbitrators 
consider contested subpoena requests, NASD will pay the additional 
honorarium. For example, if all three members of a panel have 
decided a contested subpoena request and the chairperson is 
thereafter replaced by another arbitrator, NASD would pay the $200 
honorarium to the replacement chairperson for deciding any later 
contested subpoena requests, because the parties already would have 
incurred $600 in costs relating to the requests. Likewise, if there 
have been three different chairpersons in the same proceeding, each 
of whom has considered a contested subpoena request, NASD would pay 
the $200 honorarium should a fourth chairperson consider a contested 
subpoena request. NASD does not anticipate that either of these 
situations will occur frequently.
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Sections 15A(b)(5) \11\ and 15A(b)(6) \12\ of the Act, 
which require, among other things, that NASD's rules provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
members and issuers and other persons using any facility or system that 
the NASD operates or controls, and that NASD'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. NASD believes that the proposed rule 
change is consistent with the provisions of the Act noted above because 
the panel will allocate the honorarium for deciding a discovery-related 
motion equitably among the parties. Moreover, NASD believes the 
proposed rule change will encourage arbitrators to decide contested 
subpoena requests without scheduling a prehearing conference, thereby 
expediting the arbitration process for parties.
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    \11\ 15 U.S.C. 78o-3(b)(5).
    \12\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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.

[[Page 71215]]

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, as amended, 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 rule-comments@sec.gov. Please include 

File Number SR-NASD-2006-101 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2006-101. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NASD.
    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-NASD-2006-101 
and should be submitted on or before December 29, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-20873 Filed 12-7-06; 8:45 am]

BILLING CODE 8011-01-P