Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the National Association of Securities Dealers, Inc. To Extend the Effectiveness of the Pilot Injunctive Relief Rule

[Federal Register Volume 65, Number 5 (Friday, January 7, 2000)]
[Notices]
[Pages 1211-1212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-392]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42280; File No. SR-NASD-99-72]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the National 
Association of Securities Dealers, Inc. To Extend the Effectiveness of 
the Pilot Injunctive Relief Rule

December 28, 1999.
    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 December 15, 1999, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly owned subsidiary 
NASD Regulation, Inc. (``NASD Regulation'') filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule 
change as described in Items I and II below, which Items have been 
prepared by NASD Regulation. On December 28, 1999, NASD Regulation 
submitted Amendment No. 1 to the proposed rule change.\3\ For the 
reasons discussed below, the Commission is granting accelerated 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter to Katherine A. England, Assistant Director, 
Division of Market Regulation, Commission, from Joan C. Conely, 
Senior Vice President and Corporate Secretary, NASD Regulation, 
dated December 23, 1999 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation is proposing to amend Rule 10335 of the Code of 
Arbitration (``Code'') of the NASD, to extend the pilot injunctive 
relief rule for one year, pending Commission action on a rule filing to 
amend Rule 10335 and make it a permanent part of the Code. Below is the 
text of the proposed rule change. Proposed new language is in italics; 
proposed deletions are in brackets.
10335. Injunctions
(i) Effective Date
    This Rule shall apply to arbitration claims filed on or after 
January 3, 1996. Except as otherwise provided in this Rule, the 
remaining provisions of the Code shall apply to proceedings instituted 
under this Rule. This Rule shall expire on [January 3, 2000] January 5, 
2001, unless extended by the Association's Board of Governors.

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 Regulation 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 III below. NASD Regulation 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
    Rule 10335 took effect on January 3, 1996 for a one-year pilot 
period. The Commission has periodically extended the initial pilot 
period in order to permit NASD Regulation's Office of Dispute 
Resolution to assess the effectiveness of the rule. The rule is 
currently due to expire on January 3, 2000. In July 1998, the NASD 
filed a rule filing proposing to amend Rule 10335 and to make it a 
permanent part of the Code. The NASD filed amendments and responses to 
comments received by the Commission regarding the rule filing in 
December 1998.
    After considering additional comments received by the Commission 
regarding both the original rule filing and the amendments, as well as 
comments from the Commission staff, the Injunctive Relief Rule 
Subcommittee of NASD Regulation, Inc.'s National Arbitration and 
Mediation Committee (``NAMC'') reconsidered every aspect of the 
proposed rule change.
    After careful consideration of the comments received, the 
Subcommittee unanimously approved new amendments to the rule filing. 
The amendments were approved by the Board of NASD Regulation, Inc. at 
its meeting on December 8, 1999 and will be filed with the Commission 
shortly.
2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\4\ 
which requires, among other things, that the Association rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect

[[Page 1212]]

investors and the public interest.\5\ NASD Regulation believes that it 
is in the interest of members and associated persons that the rule 
remain in effect pending the filing of amendments to, and Commission 
action on, the permanent rule filing.\6\ Therefore, the staff 
recommends that the pilot rule be extended to January 5, 2001. However, 
the permanent rule filing will make clear that, once approved, the 
permanent rule change would supersede the pilot in its entirety.
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    \4\ 15 U.S.C. 78o-3(b)(6).
    \5\ See Amendment No. 1, supra note 3.
    \6\ See Securities Exchange Act Release No. 40441 (September 15, 
1998), 63 FR 50611 (September 22, 1998).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. 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.\7\ Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-99-72 and should 
be submitted by January 28, 2000.
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    \7\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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IV. Commission Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    NASD Regulation has requested that the Commission find good cause 
pursuant to Section 19(b)(2) \8\ for approving the proposed rule change 
prior to the 30th day after publication in the Federal Register. The 
commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to the NASD and, in particular, the requirements of Section 
15A of the Act and the rules regulations thereunder.\9\ Rule 10335 is 
intended to provide a pilot system within the NASD arbitration forum to 
process requests for temporary injunctive relief. Rule 10335 is 
intended principally to facilitate the disposition of employment 
disputes, and related disputes, concerning members who file for 
injunctive relief to prevent registered representatives from 
transferring their client accounts to their new firms.
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 15 U.S.C. 78o-3.
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice of 
filing thereof in that accelerated approval will permit members to have 
the benefit of injunctive relief in arbitration pending filing of 
amendments to, and Commission action on, the permanent rule filing that 
would amend Rule 10335 and make it a permanent part of the Code. The 
Commission expects that during the extension of the pilot NASD 
Regulation will amend the proposal to permanently add Rule 10335 to the 
Code.\10\ The Commission believes, therefore, that granting accelerated 
approval of the proposed rule change is consistent with Section 15A of 
the Act.\11\
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    \10\ See supra note 6.
    \11\ 17 U.S.C. 78o-3.
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    It is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
\12\ that the proposed rule change (SR-NASD-99-72) is approved on an 
accelerated basis through January 5, 2001.

    \12\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-392 Filed 1-6-00; 8:45 am]
BILLING CODE 8010-01-M