Document ID: SEC-2008-0458-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-03-25T04:00Z

[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Notices]               
[Page 15817-15818]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57529; File No. SR-FINRA-2008-009]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change to the Code 
of Arbitration Procedure for Customer Disputes and the Code of 
Arbitration Procedure for Industry Disputes To Amend the Chairperson 
Eligibility Requirements

March 19, 2008.
    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 
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'') on 
March 12, 2008, the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by FINRA 
Dispute Resolution. 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

    FINRA Dispute Resolution is proposing to amend the chairperson 
eligibility requirements under NASD Rule 12400(c) of the Code of 
Arbitration Procedure for Customer Disputes (``Customer Code'') and 
NASD Rule 13400(c) of the Code of Arbitration Procedure for Industry 
Disputes (``Industry Code''). Below is the text of the proposed rule 
change. Proposed deletions are in brackets.
* * * * *
12400. Neutral List Selection System and Arbitrator Rosters
    (a)-(b) No change.
    (c) Eligibility for Chairperson Roster
    In customer disputes, chairpersons must be public arbitrators. 
Arbitrators are eligible for the chairperson roster if they have 
completed chairperson training provided by NASD [or have substantially 
equivalent training or experience] and:
    [Remainder of the rule unchanged.]
* * * * *
13400. Neutral List Selection System and Arbitrator Rosters
    (a)-(b) No change.
    (c) Eligibility for Chairperson Roster
    Arbitrators are eligible to serve as chairperson of panels 
submitted for arbitration under the Code if they have completed 
chairpersons training provided by NASD [or have substantially 
equivalent training or experience] and:
    [Remainder of the rule unchanged.]
* * * * *

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 \3\ proposes to amend the chairperson eligibility 
requirements under Rule 12400(c) of the Customer Code and Rule 13400(c) 
of the Industry Code.
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    \3\ Although some of the events referenced in this rule filing 
occurred prior to the formation of FINRA, the rule filing refers to 
FINRA throughout for simplicity.
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    On January 24, 2007, the SEC approved the NASD Codes of Arbitration 
Procedure for Customer and Industry Disputes (collectively referred to 
as ``Codes'').\4\ The Codes reorganized the dispute resolution rules 
into separate procedural codes, simplified the language of the old NASD 
Code of Arbitration Procedure, codified current practices, and 
implemented several substantive changes. One such substantive change 
involved improving the arbitrator selection process by creating and 
maintaining a new roster of arbitrators who are qualified to serve as 
chairpersons.
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    \4\ See Securities Exchange Act Release No. 55158 (January 24, 
2007); 72 FR 4574 (January 31, 2007) (File Nos. SR-NASD-2003-158 and 
SR-NASD-2004-011). The new Codes became effective on April 16, 2007.
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    Under the Codes, arbitrators are eligible for the chairperson 
roster if they have completed chairperson training

[[Page 15818]]

provided by FINRA or have substantially equivalent training or 
experience, and satisfy one of two remaining requirements of the 
rule.\5\ In the rule filing proposing this change, FINRA explained that 
``substantially equivalent training or experience would include service 
as a judge or administrative hearing officer, chairperson training 
offered by another recognized dispute resolution forum, or the like. 
Decisions regarding whether particular training or experience other 
than FINRA chairperson training would qualify under this provision 
would be in the sole discretion of the Director.'' \6\ In referring to 
the ``substantially equivalent training or experience'' criterion 
(hereinafter, ``substantially equivalent''), the proposal also stated 
that FINRA believed that the proposal would allow arbitrators of all 
professional backgrounds to qualify as chairpersons.\7\ FINRA believed 
that this criterion would help ensure that the forum could meet the 
demands of the Codes concerning the new chairperson roster, while 
continuing to administer effectively the arbitrator selection process.
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    \5\ Rule 12400(c) of the Customer Code and Rule 13400(c) of the 
Industry Code.
    \6\ See Securities Exchange Act Release No. 51856 (June 15, 
2005); 70 FR 36442, at 36446 (June 23, 2005).
    \7\ Id.
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    In the year since the Codes were approved, FINRA has determined 
that the ``substantially equivalent'' criterion has not been essential 
to creating and maintaining the chairperson roster, and is, therefore, 
proposing to remove this criterion from the rule. FINRA notes that all 
arbitrators currently coded as chairpersons have completed the FINRA 
Chairperson Training course (chair training),\8\ and the chair training 
has never been waived for an arbitrator claiming to satisfy the 
``substantially equivalent'' criterion. FINRA believes that all 
arbitrators wishing to serve as chairpersons would benefit from the 
information contained in the chair training, which instructs 
arbitrators on the added responsibilities of arbitrators assuming the 
essential role of chairperson in the FINRA forum. Moreover, FINRA 
believes that removing the ``substantially equivalent'' criterion would 
make the chairperson eligibility standards more objective and uniform, 
thereby eliminating any perception that large numbers of arbitrators 
may be added to the chairperson roster without the benefit of the chair 
training.
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    \8\ The online Chairperson training course is $50 and is 
available at http://www.finra.org/ArbitrationMediation/
ResourcesforArbitratorsandMediators/ArbitratorTraining/
ArbitratorTrainingPrograms/index.htm (last visited, March 5, 2008).
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2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act, 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. FINRA believes that the proposed rule change would 
enhance investor confidence in the fairness and neutrality of FINRA's 
arbitration forum because the chairperson eligibility rules would 
become more objective and uniform.

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, as amended.

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 by FINRA.

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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2008-009 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-FINRA-2008-009. 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. Copies of such filings also will be available for 
inspection and copying at the principal office of FINRA. 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 the File Number SR-FINRA-2008-009 and 
should be submitted on or before April 15, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5967 Filed 3-24-08; 8:45 am]

BILLING CODE 8011-01-P