Document ID: SEC-2011-0237-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-02-22T05:00Z

[Federal Register Volume 76, Number 35 (Tuesday, February 22, 2011)]
[Notices]
[Pages 9840-9841]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3800]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63910; File No. SR-FINRA-2011-006]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Motions in Arbitration

February 15, 2011.
    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 February 4, 2011, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') 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.
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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 is proposing to amend FINRA Rules 12206, 12503, and 12504 of 
the Code of Arbitration Procedure for Customer Disputes, and Rules 
13206, 13503, and 13504 of the Code of Arbitration Procedure for 
Industry Disputes (collectively, ``Codes''), to provide moving parties 
with a five-day period to reply to responses to motions.
    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. 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
    The Codes specify time periods for a party to respond to a 
motion,\3\ including a motion to dismiss.\4\ They do not expressly 
provide time periods for the party that made the original motion (the 
``moving party'') to reply to a response, which happens on occasion. 
FINRA's practice has been to forward the reply to the arbitrators, even 
when staff already have sent the motion and response to the 
arbitrators. Since the Codes do not prescribe a time period for 
replying to responses to motions, there have been instances where 
arbitrators reviewed the motion papers and even ruled on a motion 
before receiving a reply, causing confusion and wasting time.
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    \3\ Rules 12503(b) and 13503(b) (Responding to Motions) provide, 
generally, that parties have 10 days from the receipt of a written 
motion to respond to the motion.
    \4\ Rules 12206(b) and 13206(b) (Dismissal under Rule) provide 
that parties have 30 days to respond to motions. Rules 12504(a) and 
13504(a) (Motions to Dismiss Prior to Conclusion of Case in Chief) 
provide that parties have 45 days to respond to motions.
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    FINRA is proposing to amend Rules 12206 and 13206 (Time Limits), 
Rules 12503 and 13503 (Motions), and Rules 12504 and 13504 (Motions to 
Dismiss), to provide a moving party with a five-day period to reply to 
a response to a motion. The proposed amendments would codify FINRA's 
practice relating to replies to responses to motions and make it 
transparent. The proposal would provide parties with an opportunity to 
brief fully the issues in dispute, and ensure that arbitrators have all 
of the motion papers before issuing a final decision on the motion.
    FINRA considered whether codifying a reply period might encourage 
additional replies to responses to motions, or cause significant delays 
in the arbitration proceeding. FINRA believes that a five-day period 
for replies gives moving parties sufficient time to react to responses 
to motions without causing significant delays to proceedings. 
Currently, FINRA Rules 12512 and 13512 (Subpoenas) provide moving 
parties with a 10-day period in which to reply to opposing parties' 
objections to motions. FINRA has not experienced any increase in 
replies related to subpoenas because of these rules and the 10-day 
reply period has not caused significant delays.
    Further, on June 21, 2010, FINRA revised its practice relating to 
responses to motions and published a Notice to Parties on its Web site 
stating that moving parties have five calendar days from receipt of a 
response to a motion to submit a reply to the response.\5\ After the 
five-day period, FINRA forwards the motion, any response to the motion, 
and any reply to the panel at the same time. If FINRA receives a reply 
after the five-day period expires, staff forwards the reply to the 
panel upon its receipt. However, FINRA staff does not delay sending the 
motion, response to the motion, and reply to the panel after the five-
day period expires, and the panel may issue a decision upon receipt of 
those documents.
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    \5\ See http://www.finra.org/ArbitrationMediation/Parties/ArbitrationProcess/NoticesToParties/P121652.
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    Based on our experience with the subpoena rules and our revised 
practice relating to replies to responses, FINRA does not expect the 
proposal to add a five-day period for replies to responses to motions 
to result in undue delays.
    FINRA proposes to 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,\6\ 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 will 
assist parties in arbitrations by codifying FINRA's practice relating 
to replies to responses to motions. The proposed rule change would 
ensure that parties have an opportunity to brief fully the issues in 
dispute, and that arbitrators have all of the motion papers before 
issuing a final decision on the motion.
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    \6\ 15 U.S.C. 78o-3(b)(6).
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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

[[Page 9841]]

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 45 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 shall:
    (A) By order approve or disapprove 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-2011-006 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-2011-006. 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 Web site 
viewing and printing 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 filing 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 File Number SR-FINRA-2011-006 
and should be submitted on or before March 15, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3800 Filed 2-18-11; 8:45 am]
BILLING CODE 8011-01-P