Document ID: SEC-2008-0465-0001
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 15815-15817]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57525; File No. SR-FINRA-2008-005]

 
Self-Regulatory Organizations: Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Amendments to the Codes of Arbitration Procedure To Permit Submissions 
to Arbitrators After a Case Has Closed Under Limited Circumstances

 March 18, 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 
on February 7, 2008, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a 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 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 Rule 12905 of the NASD Code of Arbitration 
Procedure for Customer Disputes (``Customer Code'') and Rule 13905 of 
the NASD Code of Arbitration Procedure for Industry Disputes 
(``Industry Code'') to permit submissions to arbitrators after a case 
has closed only under the following circumstances: (1) As ordered by a 
court; (2) at the request of any party within 30 days of service of an 
award or notice that a matter has been closed, for ministerial matters; 
or (3) if all parties agree and submit documents within 30 days of 
service of an award or notice that a matter has been closed. Below is 
the text of the proposed rule change. All the text is new.
* * * * *
12905. Submissions After a Case Has Closed
    (a) Parties may not submit documents to arbitrator(s) in cases that 
have been closed except under the following limited circumstances:
     As ordered by a court;
     At the request of any party within 30 days of service of 
an award or notice that a matter has been closed, for ministerial 
matters such as miscalculation of figures, mistake in the description 
of any person, thing or property referred to in the award, or if the 
award is imperfect in a matter of form that does not affect the 
decision on the merits; or
     If all parties agree and submit documents within 30 days 
of (1) service of an award or (2) notice that a matter has been closed.
    (b) Parties must make requests under this rule in writing to the 
Director and must include the basis relied on under this rule for the 
request. The Director will forward the documents, along with any 
responses from other parties, to the arbitrators. Unless the 
arbitrators rule within 20 days after the Director forwards the 
documents to the arbitrators, the request shall be deemed denied.
13905. Submissions After a Case Has Closed
    (a) Parties may not submit documents to arbitrator(s) in cases that 
have been closed except under the following limited circumstances:
     As ordered by a court;
     At the request of any party within 30 days of service of 
an award or notice that a matter has been closed, for

[[Page 15816]]

ministerial matters such as miscalculation of figures, mistake in the 
description of any person, thing or property referred to in the award, 
or if the award is imperfect in a matter of form that does not affect 
the decision on the merits; or
     If all parties agree and submit documents within 30 days 
of (1) service of an award or (2) notice that a matter has been closed.
    (b) Parties must make requests under this rule in writing to the 
Director and must include the basis relied on under this rule for the 
request. The Director will forward the documents, along with any 
responses from other parties, to the arbitrators. Unless the 
arbitrators rule within 20 days after the Director forwards the 
documents to the arbitrators, the request shall be deemed denied.
* * * * *

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 is proposing to amend its Customer Code and Industry Code to 
adopt new rules to permit submissions to arbitrators after a case has 
closed only under limited circumstances. The proposed rule change would 
reduce attorneys' fees and other costs associated with responding to 
such submissions and would support the finality of arbitration awards 
issued in the forum.
    FINRA staff receives several requests each year from parties to 
submit documents to arbitrators (the panel) in cases that have been 
closed for long periods of time. Parties file these requests for a 
number of reasons, such as to obtain expungement relief that a party 
failed to request during the life of the case, to correct what a party 
perceives to be a mistake in the award, or to request that forum fee 
allocations be changed.
    Currently, the Customer and Industry Codes do not contain deadlines 
for such submissions and, indeed, do not address the matter. Therefore, 
staff forwards to panels the requests, along with any responses from 
other parties, regardless of the time that has elapsed since the case 
was closed. The panels rarely determine to reopen a matter.
    A case is deemed closed on the date FINRA serves an award or sends 
to the parties a letter notifying them that a case is closed (for 
example, by settlement). The absence of deadlines in the Customer and 
Industry Codes for submissions in closed cases can cause numerous 
problems. For example, parties might submit documents to the panel 
years after cases have closed. Also, arbitrators might have resigned 
from the roster or died by the time such submissions are made. Finally, 
parties might incur substantial attorneys' fees and other costs in 
responding to closed-case submissions.
    Potential legal issues are also present. Some states empower 
arbitrators to correct technical or mathematical errors in their 
awards, but only for a short period of time following the award's 
issuance, and courts may remand a matter to the original arbitrators 
when they vacate awards in whole or in part.\3\ Beyond these examples, 
however, the law generally provides that the arbitrators' authority 
ends when the arbitrators render their decisions.
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    \3\ See N.Y. CPLR 7509, 7511 (McKinney 2008).
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    To address the problems associated with submissions in closed 
cases, FINRA is proposing to permit submissions to arbitrators after a 
case has closed only under the following limited circumstances:
     As ordered by a court;
     At the request of any party within 30 days of service of 
an award or notice that a matter has been closed, for ministerial 
matters such as miscalculation of figures, mistake in the description 
of any person, thing or property referred to in the award, or if the 
award is imperfect in a matter of form that does not affect the 
decision on the merits; or
     If all parties agree and submit documents within 30 days 
of (1) service of an award or (2) notice that a matter has been closed.
    The 30-day limit is in line with time limits allowed under many 
state laws \4\ and would ensure that a majority of the arbitrators that 
served on the panel will be available to review the submissions. Under 
the second alternative, request by only one party, FINRA would follow 
its normal procedure of soliciting a response from the other parties 
before forwarding the request to the panel.
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    \4\ Id.; see also, CAL. CODE CIV. PROC. 1284 (2007); FLA. STAT. 
682.10 (2007); TEX. CIV. PRAC. & REM. 171.054 (2007); VA. CODE ANN. 
8.01-581.08 (2007).
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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,\5\ 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. The proposed rule change would reduce the costs 
associated with responding to submissions in closed cases and support 
the finality of arbitration awards issued in the forum.
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    \5\ 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 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 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:

[[Page 15817]]

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-2008-005 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-2008-005. 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 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-2008-005 
and should be submitted on or before April 15, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12) .
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5964 Filed 3-24-08; 8:45 am]

BILLING CODE 8011-01-P