Document ID: SEC-2007-0657-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-05-10T04:00Z

[Federal Register: May 10, 2007 (Volume 72, Number 90)]
[Notices]               
[Page 26664-26666]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10my07-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55703; File No. SR-NASD-2007-026]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Implement Technical Changes to the Customer, Industry 
and Mediation Codes

May 3, 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 April 13, 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 (``Commission''), the proposed rule 
change as described in Items I, II, and III below, which Items have 
been substantially 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 receipt of this filing by 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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[[Page 26665]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Dispute Resolution is proposing to amend the NASD Codes of 
Arbitration Procedure for Customer Disputes (``Customer Code'') and for 
Industry Disputes (``Industry Code''), and to amend the NASD Code 
Mediation Procedure (``Mediation Code'') (collectively, the ``Codes'') 
to delete rule language that was rescinded prior to the approval of the 
Codes, to change a reference that was amended by a separate NASD 
proposal, and to insert rule language that was approved by the 
Commission prior to its approval of the Customer and Industry Codes, 
but was inadvertently omitted from the Customer and Industry Codes. 
Proposed new language is in italics; proposed deletions are in 
brackets. The text of the proposed rule change is available at NASD, on 
NASD's Web site (http://www.nasd.com) 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
    Recently, NASD reorganized its dispute resolution rules (Rules 
10000 et seq.) into three separate procedural codes: the Customer Code; 
the Industry Code; and the Mediation Code.\5\ The Customer, Industry 
and Mediation Codes replaced the NASD Code of Arbitration Procedure 
(``old Code'') in its entirety.
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    \5\ In 2004, NASD filed separately with the Commission the 
Industry and Mediation Codes. See Securities Exchange Act Release 
No. 51857 (June 15, 2005), 70 FR 36430 (June 23, 2005) (File No. SR-
NASD-2004-011) (notice); and Securities Exchange Act Release No. 
51855 (June 15, 2005), 70 FR 36440 (June 23, 2005) (File No. SR-
NASD-2004-013) (notice).
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    The Commission approved the Mediation Code on October 31, 2005.\6\ 
The Commission approved the Customer Code and Industry Code 
(collectively, ``new Codes'') on January 24, 2007,\7\ and the new Codes 
became effective on April 16, 2007.\8\
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    \6\ See Securities Exchange Act Release No. 52705 (October 31, 
2005), 70 FR 67525 (November 7, 2005) (File No. SR-NASD-2004-013) 
(approval order).
    \7\ See Securities 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) (approval orders).
    \8\ The changes were announced in Notice to Members 07-07 (Feb. 
2007).
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    NASD is proposing several technical, nonsubstantive amendments to 
the Mediation Code and the new Arbitration Codes. With these 
amendments, NASD is proposing to delete provisions that were rescinded 
prior to the Codes' approval, to change a reference that was amended by 
a separate NASD proposal, and to add a provision that was approved by 
the Commission prior to its approval of the new Mediation and 
Arbitration Codes, but was inadvertently omitted from the new Codes.
    First, NASD proposes to delete Interpretive Material (IM) 12000(f) 
and IM-13000(f) from the Arbitration Codes because these paragraphs 
were rescinded by SR-NASD-2005-070.\9\ These paragraphs state that 
failure by a member or person associated with a member to waive the 
California Rules of Court, Division VI of the Appendix, entitled, 
``Ethics Standards for Neutral Arbitrators in Contractual Arbitration'' 
in certain circumstances may be deemed conduct inconsistent with just 
and equitable principle of trade, and a violation of Rule 2110. These 
provisions were included in IM-12000 and IM-13000 of the new Codes 
inadvertently, and should be removed.
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    \9\ See Securities Exchange Act Release No. 51825 (June 13, 
2005), 70 FR 35482 (June 20, 2005) (File No. SR-NASD-2005-070) 
(approval order).
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    Second, NASD proposes to amend the numerical reference in Rule 
12102(a) of the Customer Code, Rule 13102(a) of the Industry Code and 
Rule 14102(a) of the Mediation Code, which identify the part of the 
Plan of Allocation and Delegation of Functions by NASD to Subsidiaries 
(``Delegation Plan'') that applies to NASD Dispute Resolution. In a 
proposal filed on September 5, 2006 to reflect the complete separation 
of NASD from the Nasdaq Stock Market, NASD amended the number of the 
section of the Delegation Plan that applies to NASD Dispute 
Resolution.\10\ As a result of this change, NASD is proposing to amend 
Rules 12102(a), 13102(a), and 14102(a) to change the reference to the 
Delegation Plan.
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    \10\ See Securities Exchange Act Release No. 54798 (November 21, 
2006), 71 FR 69156 (November 29, 2006) (File No. SR-NASD-2006-104) 
(approval order).
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    Finally, NASD proposes to insert a provision in the proposed 
amendments to Rules 12206(c) and 13206(c) of the Customer Code and 
Industry Code, respectively, stating that the six-year time limit on 
the submission of claims shall not apply to any claim that is directed 
to arbitration by a court of competent jurisdiction upon request of a 
member or associated person. This provision was approved by the 
Commission prior to its approval of the new Arbitration Codes, but was 
inadvertently omitted from them.\11\
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    \11\ See Securities Exchange Act Release No. 50714 (November 22, 
2004), 69 FR 69971 (December 1, 2004) (File No. SR-NASD-2003-101) 
(approval order).
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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 provides, 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 
assist in the administration of arbitrations by clarifying the 
Customer, Industry, and Mediation Codes, which will make them easier to 
understand and apply.
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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

[[Page 26666]]

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-2007-026 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-2007-026. 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 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-2007-026 and should be 
submitted on or before May 31, 2007.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-8914 Filed 5-9-07; 8:45 am]

BILLING CODE 8010-01-P