Document ID: SEC-2010-0704-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-05-12T04:00Z

[Federal Register: May 12, 2010 (Volume 75, Number 91)]
[Notices]               
[Page 26823-26825]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12my10-124]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62044; File No. SR-NASDAQ-2010-057]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rules 9552, 9554 and 9559 To Conform NASDAQ's Rules to Recent 
Changes to the Rules of FINRA

May 5, 2010.
    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 May 3, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by NASDAQ. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    NASDAQ is proposing to amend Rules 9552, 9554 and 9559 to conform 
NASDAQ's rules to recent changes to the rules of the Financial Industry 
Regulatory Authority (``FINRA''). The text of the proposed rule change 
is below. Proposed new language is italicized and proposed deletions 
are in brackets.
* * * * *

9550. Expedited Proceedings

* * * * *

9552. Failure To Provide Information or Keep Information Current

    (a)-(g) No change.
    (h) Defaults
    A member or person who is suspended under this Rule and fails to 
request termination of the suspension within three[six] months of 
issuance of

[[Page 26824]]

the original notice of suspension will automatically be expelled or 
barred.
* * * * *

9554. Failure To Comply with an Arbitration Award or Related Settlement 
or an Order of Restitution or Settlement Providing for Restitution

    (a) Notice of Suspension or[,] Cancellation[ or Bar]
    If a member, person associated with a member or person subject to 
Nasdaq's jurisdiction fails to comply with an arbitration award or a 
settlement agreement related to an arbitration or mediation under the 
Nasdaq By-Laws, or a FINRA order of restitution or FINRA settlement 
agreement providing for restitution, Nasdaq Regulation staff may 
provide written notice to such member or person stating that the 
failure to comply within 21 days of service of the notice will result 
in a suspension or cancellation of membership or a suspension [or bar] 
from associating with any member.
    (b) Service of Notice of Suspension or[,] Cancellation[ or Bar]
    Nasdaq Regulation staff shall serve the member or person with such 
notice in accordance with Rule 9134. A copy of a notice under this Rule 
that is served on a person associated with a member also shall be 
served on such member.
    (c) No change.
    (d) Effective Date of Suspension or[,] Cancellation[ or Bar]
    The suspension or[,] cancellation [or bar ]referenced in a notice 
issued and served under this Rule shall become effective 21 days after 
service of the notice, unless stayed by a request for a hearing 
pursuant to Rule 9559.
    (e) No change.
    (f) Failure to Request Hearing
    If a member or person does not timely request a hearing, the 
suspension or[,] cancellation [or bar ]specified in the notice shall 
become effective 21 days after the service of the notice and the notice 
shall constitute final Nasdaq action.
    (g) No change.
* * * * *

9559. Hearing Procedures for Expedited Proceedings Under the Rule 9550 
Series

    (a)-(e) No change.
    (f) Time of Hearing
    (1)-(2) No change.
    (3) A hearing shall be held within 30[60] days after a respondent 
subject to a notice issued under Rules 9551 through 9555 files a 
written request for a hearing with the Office of Hearing Officers.
    (4) No change.
    (g) No change.
    (h) Transmission of Documents
    (1) Not less than two business days before the hearing in an action 
brought under Rule 9557, not less than seven days before the hearing in 
an action brought under Rules 9556 and 9558, and not less than 14[40] 
days before the hearing in an action brought under Rules 9551 through 
9555, Nasdaq Regulation staff shall provide to the respondent who 
requested the hearing, by facsimile or overnight courier, all documents 
that were considered in issuing the notice unless a document meets the 
criteria of Rule 9251(b)(1)(A), (B) or (C). A document that meets such 
criteria shall not constitute part of the record, but shall be retained 
until the date upon which the Nasdaq's final decision is served or, if 
applicable, upon the conclusion of any review by the Securities and 
Exchange Commission or the federal courts.
    (2) Not less than two business days before the hearing in an action 
brought under Rule 9557, not less than three days before the hearing in 
an action brought under Rules 9556 and 9558, and not less than 
seven[14] days before the hearing in an action brought under Rules 9551 
through 9555, the parties shall exchange proposed exhibit and witness 
lists. The exhibit and witness lists shall be served by facsimile or by 
overnight courier.
    (i)-(s) No change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ 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, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ proposes certain conforming changes to its rules concerning 
expedited hearings in light of changes made to the rules of FINRA. Many 
of NASDAQ's rules are based on rules of FINRA (formerly the National 
Association of Securities Dealers (``NASD'')). NASDAQ endeavors to keep 
such common rules identical to the extent practicable. FINRA recently 
amended certain rules under its Rule 9000 Series concerning expedited 
proceedings, which are closely mirrored in NASDAQ's Rule 9000 
Series.\3\ Accordingly, NASDAQ is proposing to amend its analogous 
rules consistent with the changes made by FINRA, as discussed below.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 61242 (December 28, 
2009), 75 FR 167 (January 4, 2010) (SR-FINRA-2009-076).
---------------------------------------------------------------------------

    The expedited proceedings rules of FINRA, and in turn of NASDAQ, 
address certain types of misconduct more quickly than would be possible 
under the ordinary disciplinary process, while also affording members 
numerous procedural protections. In its rule change,\4\ FINRA modified 
various time requirements regarding expedited proceedings, added an 
expedited proceeding for failure to pay restitution, and harmonized a 
remedy in an expedited procedure with a remedy in the FINRA By-Laws. 
With respect to modifying time requirements, FINRA amended Rule 9552 to 
shorten the period before a suspension automatically turns into an 
expulsion or bar from six to three months. In addition, FINRA amended 
Rule 9559 to shorten the timeframe within which a hearing must be held 
from 60 days after a hearing request to 30 days after the request. As 
consequence of shortening the timeframe for hearings, FINRA also 
shortened the timeframes under Rule 9559(h) concerning the pre-hearing 
exchange of documents between the parties to the expedited proceeding.
---------------------------------------------------------------------------

    \4\ Id.
---------------------------------------------------------------------------

    FINRA amended Rule 9554, which contains expedited procedures for 
failure to pay FINRA arbitration awards, to also permit FINRA to take 
expedited action for failure to comply with a FINRA order of 
restitution or a FINRA settlement providing for restitution. FINRA 
noted that it did not have explicit authority to take expedited action 
against firms or associated persons who fail to pay restitution to a 
third party (usually investors who have been harmed), and that its only 
recourse was to initiate an ordinary disciplinary action, which can 
take several months to conclude. In adding the new expedited procedure, 
FINRA stated it believed that firms and associated persons should not 
be permitted to continue doing business for prolonged periods when they 
have failed to pay restitution to third parties.
    FINRA also eliminated from Rule 9554 the remedy of barring an 
individual for failure to pay an arbitration award. FINRA noted that it 
had no such authority under its by-laws, and as such that it was 
harmonizing the

[[Page 26825]]

remedy for this misconduct with the remedy provided in its by-laws. 
NASDAQ is proposing to incorporate all the changes made by FINRA to its 
expedited proceedings rules into the analogous NASDAQ Rules 9552, 9554, 
and 9559.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general and with Section 
6(b)(5) of the Act,\6\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The proposed changes will 
conform NASDAQ's rules to recent changes made to corresponding FINRA 
rules, which will promote the application of consistent regulatory 
standards.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ 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.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \7\ of the Act and Rule 19b-
4(f)(6) thereunder.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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. NASDAQ has provided the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change.
    NASDAQ believes that the proposed rule change does not 
significantly affect the protection of investors or the public interest 
because it merely eliminates erroneous citations that, if left in the 
rule text, would cause investor confusion.\9\
---------------------------------------------------------------------------

    \9\ The Commission believes that this statement is incorrect. 
The proposed rule change does not simply eliminate erroneous 
citations; instead, the proposed rule change makes specific changes 
to align Nasdaq's rules with that of FINRA.
---------------------------------------------------------------------------

    NASDAQ asks that the Commission waive the 30-day pre-operative 
waiting period contained in Exchange Act Rule 19b-4(f)(6)(iii).\10\ 
NASDAQ requests this waiver so that these corrections can be both 
immediately effective and operative, thus minimizing any confusion that 
may be caused by the differing rule sets.
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission acknowledges that the proposal presents no novel 
issues, and that it will provide a benefit to market participants by 
aligning Nasdaq's rules with those of FINRA. For these reasons, the 
Commission believes it is consistent with the protection of investors 
and the public interest to waive the 30-day operative delay, and hereby 
grants such waiver.\11\
---------------------------------------------------------------------------

    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

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-NASDAQ-2010-057 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-NASDAQ-2010-057. 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. Copies of the filing also will 
be available for inspection and copying at the principal office of the 
Exchange. 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-
NASDAQ-2010-057 and should be submitted on or before June 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11255 Filed 5-11-10; 8:45 am]
BILLING CODE 8011-01-P