Document ID: SEC-2007-0556-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-04-17T04:00Z

[Federal Register: April 17, 2007 (Volume 72, Number 73)]
[Notices]               
[Page 19223-19225]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap07-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55617; File No. SR-NASD-2007-022]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Make Technical Amendments to the Code of Mediation 
Procedure

April 11, 2007.
    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 March 16, 2007, the National Association of Securities Dealers, Inc. 
(``NASD''), through its wholly owned subsidiary, NASD Dispute 
Resolution, Inc. (``NASD Dispute Resolution'') 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 prepared by NASD Dispute Resolution. NASD has 
designated the proposed rule change as concerned solely with the 
administration of the self-regulatory organization under Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(3) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(3).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Dispute Resolution is proposing to amend the Code of Mediation 
Procedure to re-number Rules 10401 through 10410 and update cross 
references within the re-numbered rules. The text of the proposed rule 
change is available on NASD's Web site (http://www.nasd.com), at NASD's 

principal office, 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, 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
    In 1998, the SEC launched an initiative to encourage issuers and 
self-regulatory organizations to use ``plain English'' in disclosure 
documents and other materials used by investors. In response, NASD 
undertook to rewrite the NASD Code of Arbitration Procedure (``old 
Code'') in ``plain

[[Page 19224]]

English.'' This undertaking became the Code Revision Project 
(``Project'').
    NASD began to implement the Project in 2003 when it filed with the 
SEC a proposed rule change to the old Code to reorganize the rules, 
simplify the language, codify current practices, and implement several 
substantive changes.\5\ The proposal reorganized NASD's old dispute 
resolution rules (Rules 10000 et seq.) into three separate procedural 
codes: the NASD Code of Arbitration Procedure for Customer Disputes 
(``Customer Code''); the NASD Code of Arbitration Procedure for 
Industry Disputes (``Industry Code''); and the NASD Code of Mediation 
Procedure (``Mediation Code'').\6\ The three new Codes would replace 
the old Code in its entirety.
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    \5\ See Exchange Act Release No. 51856 (June 15, 2005), 70 FR 
36442 (June 23, 2005) (File No. SR-NASD-2003-158) (Notice of Filing 
of Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 Thereto to 
Amend NASD Arbitration Rules for Customer Disputes).
    \6\ In 2004, NASD filed separately with the SEC the Industry and 
Mediation Codes. See Exchange Act Release No. 51857 (June 15, 2005), 
70 FR 36430 (June 23, 2005) (File No. SR-NASD-2004-011) (Notice of 
Filing of Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 
Thereto to Amend NASD Arbitration Rules for Industry Disputes); and 
Exchange Act Release No. 51855 (June 15, 2005), 70 FR 36440 (June 
23, 2005) (File No. SR-NASD-2004-013) (Notice of Filing of Proposed 
Rule Change and Amendments No. 1 and 2 Thereto to Amend NASD 
Arbitration Rules for Mediation Proceedings).
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    On October 31, 2005, the SEC approved the Mediation Code.\7\ It 
became effective on January 30, 2006.\8\ On January 24, 2007, the SEC 
approved the Customer Code and Industry Code.\9\ The Customer and 
Industry Codes will become effective on April 16, 2007.\10\
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    \7\ See Exchange Act Release No. 52705 (Oct. 31, 2005), 70 FR 
67525 (Nov. 7, 2005) (File No. SR-NASD-2004-013) (Order Granting 
Approval to Proposed Rule Change and Amendments Nos. 1 and 2 
Thereto, and Notice of Filing and Order Granting Accelerated 
Approval to Amendment No. 3, to Amend NASD Rules for Mediation 
Proceedings).
    \8\ The changes were announced in Notice to Members 05-85 (Dec. 
2005).
    \9\ See Exchange Act Release No. 55158 (Jan. 24, 2007), 72 FR 
4574 (Jan. 31, 2007) (File Nos. SR-NASD-2003-158 and SR-NASD-2004-
011) (Order Approving Proposed Rule Change and Amendments 1, 2, 3, 
and 4 to Amend NASD Arbitration Rules for Customer Disputes and 
Notice of Filing and Order Granting Accelerated Approval of 
Amendments 5, 6, and 7 Thereto; Order Approving Proposed Rule Change 
and Amendments 1, 2, 3, and 4 to Amend NASD Arbitration Rules for 
Industry Disputes and Notice of Filing and Order Granting 
Accelerated Approval of Amendments 5, 6, and 7 Thereto).
    \10\ The changes were announced in Notice to Members 07-07 (Feb. 
2007).
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    Because the Mediation Code became effective before the Customer and 
Industry Codes were approved, NASD implemented the Mediation Code by 
replacing the old rules governing mediation (Rules 10400 et seq.) in 
the old Code with the rules of the Mediation Code. To minimize 
confusion and to assist the users of the dispute resolution forum, NASD 
re-numbered the rules of the Mediation Code so that they would be 
consistent with the numbering in the old Code, which was still in 
effect at the time the Mediation Code became effective. In replacing 
the old rules with those of the Mediation Code, NASD changed cross-
references to proposed rules of the Customer and Industry Codes to 
applicable rules of the old Code, and removed rule language that was 
based on the proposed codes.
    Under this proposed rule change, NASD is proposing to remove Rules 
10401 through 10410 of the Mediation Code from the old Code and re-
number them so that the Mediation Code becomes a separate procedural 
code, as proposed and approved by the SEC.\11\ NASD also is proposing 
to change cross-references to applicable rules of the Customer and 
Industry Codes, and re-insert definitions of ``NASD Customer Code'' and 
``NASD Industry Code'' in Rules 14100(g) and Rules 14100(h) 
respectively, which had been reserved until the new Codes were 
approved.
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    \11\ See Id. at nn. 7 & 9. The Customer Code will use the Rule 
12000 series, the Industry Code will use the Rule 13000 series, and 
the Mediation Code will use the Rule 14000 series, all of which are 
currently unused under the NASD numbering system. Id.
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among 
other things, that NASD's 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. NASD believes that the proposed rule change is 
consistent with the provision of the Act noted above because it will 
provide useful guidance to parties, mediators and staff, and will help 
standardize the administration of NASD mediations.
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    \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 by NASD.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act and Rule 19b-4(f)(3) thereunder because it 
is concerned solely with the administration of the self-regulatory 
organization.\13\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \13\ 17 CFR 240.19b-4(f)(3).
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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-NASD-2007-022 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-2007-022. 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

[[Page 19225]]

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 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 the File Number SR-NASD-2007-
022 and should be submitted on or before May 8, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-7222 Filed 4-16-07; 8:45 am]

BILLING CODE 8010-01-P