Document ID: SEC-2006-0502-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations: Nasdaq Stock Market LLC
Posted Date: 2006-04-17T04:00Z

[Federal Register: April 17, 2006 (Volume 71, Number 73)]
[Notices]               
[Page 19769-19770]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap06-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53623; File No. 4-514]

 
Self-Regulatory Organizations; Order Approving Minor Rule 
Violation Plan for The NASDAQ Stock Market LLC

April 10, 2006.
    On February 22, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed minor rule violation plan (``MRVP'') 
pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP was 
published for public comment on March 16, 2006.\3\ The Commission 
received no comments on the proposal. This order approves Nasdaq's 
proposed MRVP.
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    \1\ 15 U.S.C. 78s(d)(1).
    \2\ 17 CFR 240.19d-1(c)(2).
    \3\ See Securities Exchange Act Release No. 53428 (March 7, 
2006), 71 FR 13645.

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[[Page 19770]]

    Nasdaq's MRVP specifies those uncontested minor rule violations 
with sanctions not exceeding $2,500 which would not be subject to the 
provisions of Rule 19d-1(c)(1) under the Act \4\ requiring that a self-
regulatory organization promptly file notice with the Commission of any 
final disciplinary action taken with respect to any person or 
organization.\5\ In accordance with paragraph (c)(2) of Rule 19d-1 of 
the Act, Nasdaq proposes to designate certain specified rule violations 
as minor rule violations, and requests that it be relieved of the 
reporting requirements regarding such violations, provided it gives 
notice of such violations to the Commission on a quarterly basis. 
Nasdaq proposes to include in its proposed MRVP the policies and 
procedures currently included in Nasdaq Rule 9216(b) (``Procedure for 
Violations Under Plan Pursuant to SEC Rule 19d-1(c)(2)'') and the rule 
violations currently included in Nasdaq Rule IM-9216 (``Violations 
Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-
1(c)(2)'').\6\
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    \4\ 17 CFR 240.19d-1(c)(1).
    \5\ The Commission adopted amendments to paragraph (c) of Rule 
19d-1 to allow self-regulatory organizations (``SROs'') to submit 
for Commission approval plans for the abbreviated reporting of minor 
disciplinary infractions. See Securities Exchange Act Release No. 
21013 (June 1, 1984), 49 FR 23828 (June 8, 1984). Any disciplinary 
action taken by an SRO against any person for violation of a rule of 
the SRO which has been designated as a minor rule violation pursuant 
to such a plan filed with the Commission shall not be considered 
``final'' for purposes of Section 19(d)(1) of the Act if the 
sanction imposed consists of a fine not exceeding $2,500 and the 
sanctioned person has not sought an adjudication, including a 
hearing, or otherwise exhausted his administrative remedies.
    \6\ On January 13, 2006, the Commission approved Nasdaq's 
application for registration as a national securities exchange, 
including the rules governing the Nasdaq exchange. Securities 
Exchange Act Release No. 53128, 71 FR 3550 (January 23, 2006). In 
the approval order, the Commission noted that Nasdaq Rule 9216(b) 
and IM-9216 provided for the imposition of fines for minor rule 
violations pursuant to a minor rule violation plan. Accordingly, the 
Commission noted that as a condition to the operation of the Nasdaq 
Exchange, Nasdaq must file a minor rule violation plan with the 
Commission. Nasdaq represented that modifications may be made to IM-
9216 in the future. Nasdaq proposed that when amendments to IM-9216 
are made pursuant to a rule filing submitted under Rule 19b-4 of the 
Act, such a filing would automatically be deemed a request by Nasdaq 
for Commission approval of a modification to its MRVP.
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    Pursuant to Nasdaq's proposed MRVP, under Rule 9216(b) and IM-9216, 
Nasdaq or the Nasdaq Review Counsel may impose a fine (not to exceed 
$2,500) and/or a censure on a member or an associated person with 
respect to any rule listed in IM-9216. If the person against whom the 
fine or censure is imposed does not dispute the violation, the 
Department of Enforcement or the Department of Market Regulation may 
prepare and request that such person execute a minor rule violation 
plan letter. In such a letter, the member or associated person accepts 
a finding of violation, consents to the imposition of sanctions, and 
agrees to waive the right to a hearing before a Hearing Panel (or, if 
applicable, an Extended Hearing Panel); any right of appeal to the 
Nasdaq Review Council, the Commission, or the courts; and any other 
challenge to the validity of the letter. The letter will describe the 
act or practice engaged in or omitted; the rule, regulation, or 
statutory provision violated; and the sanction or sanctions to be 
imposed.
    If a member or associated person executes the minor rule violation 
plan letter, the letter is submitted to the Nasdaq Review Council. The 
Office of Disciplinary Affairs may accept the letter or refer it to the 
Nasdaq Review Council for acceptance or rejection. Similarly, the 
Review Subcommittee of the Nasdaq Review Council may accept or reject 
the letter or refer it to the Nasdaq Review Council for acceptance or 
rejection. If the letter is rejected, Nasdaq may take any other 
appropriate disciplinary action with respect to the alleged violation 
or violations.
    Nasdaq proposed that the quarterly report of actions taken on minor 
rule violations under Rule 9216(b) and IM-9216 would list for each 
violation: Nasdaq's internal file number for the case, the name of the 
individual and/or organization, the nature of the violation, the 
specific rule provision(s) violated, the sanction imposed, the number 
of times the rule violation has occurred, and the date of disposition.
    The Commission finds that the proposed MRVP is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange. In particular, the 
Commission believes that the proposal is consistent with Section 
6(b)(5) of the Act,\7\ which requires that the rules of an exchange be 
designed to promote just and equitable principles of trade, to remove 
impediments and to perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission also believes that that proposal is 
consistent with Sections 6(b)(1) and 6(b)(6) of the Act \8\ which 
require that the rules of an exchange enforce compliance with, and 
provide appropriate discipline for, violations of the Commission and 
Exchange rules. In addition, because the MRVP offer procedural rights 
to a person sanctioned under Rule 9216(b), the Commission believes that 
Rule 9216(b) provides a fair procedure for the disciplining of members 
and persons associated with members, consistent with Sections 6(b)(7) 
and 6(d)(1) of the Act.\9\
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \9\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
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    Finally, the Commission finds that the proposal is consistent with 
the public interest, the protection of investors, or otherwise in 
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2) 
under the Act,\10\ because the MRVP strengthens Nasdaq's ability to 
carry out its oversight and enforcement responsibilities as a self-
regulatory organization in cases where full disciplinary proceedings 
are unsuitable in view of the minor nature of the particular violation.
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    \10\ 17 CFR 240.19d-1(c)(2).
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    In approving this proposal, the Commission in no way minimizes the 
importance of compliance with Exchange rules and all other rules 
subject to the imposition of sanctions under Rule 9216(b). The 
Commission believes that the violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, Rule 9216(b) provides a reasonable means of addressing 
violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that Nasdaq will 
continue to conduct surveillance with due diligence and make a 
determination based on its findings, on a case-by-case basis, whether a 
sanction under the MRVP is appropriate, or whether a violation requires 
formal disciplinary action.
    It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the 
Act,\11\ that the proposed MRVP for Nasdaq, File No. 4-514, be, and 
hereby is, approved.
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    \11\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Nancy M. Morris,
Secretary.
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    \12\ 17 CFR 200.30-3(a)(44).
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 [FR Doc. E6-5653 Filed 4-14-06; 8:45 am]

BILLING CODE 8010-01-P