[Federal Register Volume 62, Number 232 (Wednesday, December 3, 1997)]
[Notices]
[Pages 64000-64034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31523]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39350; File No. SR-NASD-97-81]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. Relating
to Changes to the Rule 1010 Series, the Rule 8000 Series, and the Rule
9000 Series To Reflect Changes in the Corporate Organization of the
National Association of Securities Dealers, Inc. and Its Subsidiaries
November 21, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October
31, 1997, the National Association of Securities Dealers, Inc.
(``NASD''), through its regulatory subsidiary NASD Regulation,
[[Page 64001]]
Inc. (``NASD Regulation'' and collectively, the ``Association'') 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 Regulation.\1\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ Amendment Nos. 1 and 2 to this proposed rule filing were
filed on November 12, 1997 and November 18, 1997, respectively. The
changes contained in these amendments have been included in this
Notice. See Letter Amendment No. 1 from T. Grant Callery, Senior
Vice President and General Counsel, NASD to Katherine A. England,
Assistant Director, Division of Market Regulation, Commission dated
November 12, 1997; Letter Amendment No. 2 from Alden S. Adkins, Vice
President and General Counsel, NASD Regulation to Katherine A.
England, Assistant Director, Division of Market Regulation,
Commission dated November 18, 1997. Several additional technical
amendments are also included in this Notice. Telephone conversation
between Sharon Zakula, Office of General Counsel, NASD Regulation
and Mandy S. Cohen, Office of Market Supervision, Commission
(November 20, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Association is proposing to amend (a) Article V of the NASD
Regulation By-Laws; (b) the Rule 1010 Series; (c) the Rule 8000 Series;
(d) the Rule 9000 Series; and (e) certain other rules of the
Association, generally to conform such rules to the corporate
restructuring of the Association and to make clarifying and technical
changes to such rules.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
BY-LAWS OF NASD REGULATION, INC.
Article V--National Adjudicatory Council
Sec. 5.1 Through 5.10
No change.
Sec. 5.11 The National Adjudicatory Council shall appoint a Review
Subcommittee to determine whether disciplinary and membership
proceeding decisions should be called for review by the National
Adjudicatory Council under the Rules of the Association and to perform
any other function authorized by the Rules of the Association. The
Review Subcommittee shall be composed of no fewer than two and no more
than four members of the National Adjudicatory Council. The number of
Non-Industry members shall equal or exceed the number of Industry
members. At all meetings of the Review Subcommittee, a quorum for the
transaction of business shall consist of not less than 50 percent of
the members of the Review Subcommittee, including not less than 50
percent of the Non-Industry members.
* * * * *
RULES OF THE ASSOCIATION
1000. MEMBERSHIP, REGISTRATION AND QUALIFICATION REQUIREMENTS
1010. Membership Proceedings
1011. Definitions
Unless otherwise provided, terms used in the Rule 1010 Series shall
have the meaning as defined in Rule 0120.
(a) ``Applicant''
No change;
(b) ``Associated Person''
The term ``Associated Person'' means a natural person registered
under the Rules of the Association or a sole proprietor, partner,
officer, director, branch manager, or natural person occupying a
similar status or performing similar functions who will be or is
anticipated to be associated with the Applicant, or [any] a natural
person engaged in the investment banking or securities business who
will be or is anticipated to be directly or indirectly controlling or
controlled by the Applicant, whether or not any such person is
registered or exempt from registration under the NASD By-Laws or the
Rules of the Association.
(c) ``Department''
No change.
(d) ``Director''
The term ``Director'' means a member of the NASD Regulation Board[,
excluding the Chief Executive Officer of the NASD].
* * * * *
(I) ``Subcommittee''
The term ``Subcommittee'' means a subcommittee of the National
[Business Conduct Committee] Adjudicatory Council that is constituted
pursuant to Rule 1015 to conduct a review of a Department decision
issued under the Rule 1010 Series.
1012. General Provisions
(a) Service of Notices and Decisions; Filing by Applicant
No change.
(b) Ex Parte Communications
(1) Unless on notice and opportunity for an Applicant and
Interested Association Staff to participate, or to the extent required
for the disposition of ex parte matters as authorized by the Rules of
the Association:
(A) an Applicant, a counsel or representative of an Applicant, or
an Interested Association Staff shall not make or knowingly cause to be
made an ex parte communication relevant to the merits of a membership
proceeding under the Rule 1010 Series to a Governor, [a Director,] a
member of the National [Business Conduct Committee] Adjudicatory
Council or a Subcommittee thereof, or an Association employee who is
participating or advising in a decision of such a person with respect
to that proceeding; and
(B) a Governor, [a Director,] a member of the National [Business
Conduct Committee] Adjudicatory Council or a Subcommittee thereof, or
an Association employee who is participating or advising in the
decision of such a person with respect to a membership proceeding shall
not make or knowingly cause to be made to an Applicant, a counsel or
representative of the Applicant, or an Interested Association Staff an
ex parte communication relevant to the merits of that proceeding.
(2) A Governor, [a Director,] a member of the National [Business
Conduct Committee] Adjudicatory Council or a Subcommittee thereof, or
an Association employee participating or advising in the decision of
such a person, who receives, makes, or knowingly causes to be made a
communication prohibited by this paragraph shall place in the record of
the membership proceeding:
(A) all such written communications;
(B) memoranda stating the substance of all such oral
communications; and
(C) all written responses and memoranda stating the substance of
all oral responses to all such communications.
(3) The prohibitions against ex parte communications shall become
effective when Association staff has knowledge that an Applicant
intends to file a written request for review by the National [Business
Conduct Committee] Adjudicatory Council under Rule 1015.
(c) Recusal or Disqualification
A Governor[, a Director,] or a member of the National [Business
Conduct Committee] Adjudicatory Council or a Subcommittee thereof shall
not participate in a matter governed by the Rule 1010 Series as to
which that person has a conflict of interest or bias, or if
circumstances otherwise exist where his
[[Page 64002]]
or her fairness might reasonably be questioned. In such a case, the
person shall recuse himself or shall be disqualified as follows:
(1) The Chair of the NASD Board shall have authority to direct the
disqualification of a Governor, and [the Vice Chair] a majority of the
Governors of the NASD Board excluding the Chair shall have authority to
direct the disqualification of the Chair of the NASD Board.
(2) The Chair of the [NASD Regulation Board] National Adjudicatory
Council shall have authority to direct the disqualification of a
[Director] member of the Council or a member of a Subcommittee
appointed pursuant to Rule 1015, and the Vice Chair of the [NASD
Regulation Board] Council shall have authority to direct the
disqualification of the Chair of the [NASD Regulation Board] National
Adjudicatory Council.
[(3) The Chair of the National Business Conduct Committee shall
have authority to direct the disqualification of a member of the
Committee or a member of a Subcommittee appointed pursuant to Rule
1015, and the Vice Chair of the Committee shall have authority to
direct the disqualification of the Chair of the National Business
Conduct Committee.]
[(d) Separation of Review Functions
A Director shall not participate or advise in the decision of a
Governor with respect to the review of a membership proceeding under
the Rule 1010 Series, and a Governor shall not participate or advise in
the decision of a Director with respect to the review of a membership
proceeding under the Rule 1010 Series.]
[(e)](d) Computation of Time
No change.
1013. Application and Membership Interview
(a) Filing of Application
(1) No change.
(2) The second part of the application shall be filed with the
Department of Member Regulation at the district office in the district
in which the Applicant intends to have its principal place of business
and shall include the following information and documents:
* * * * *
(C) [evidence of all registrations and licenses required by the
Commission, state securities authorities, the Municipal Securities
Rulemaking Board, the National Securities Clearing Corporation, and
self-regulatory organizations, and] a copy of any decision by a federal
or state authority or self-regulatory organization taking permanent or
temporary adverse action with respect to a registration or licensing
determination regarding the Applicant or an Associated Person;
* * * * *
1014. Department Decision
* * * * *
(e) Service and Effectiveness of Decision
The Department shall serve its decision and the membership
agreement on the Applicant in accordance with Rule 1012. The decision
shall become effective upon service and shall remain in effect during
the pendency of any review until a decision constituting final action
of the Association is issued under Rule 1015 or 1016, unless otherwise
directed by the National [Business Conduct Committee, the NASD
Regulation Board] Adjudicatory Council, the NASD Board, or the
Commission.
(f) Effectiveness of Restriction
A restriction imposed under this Rule shall remain in effect and
bind the Applicant and all successors to the ownership or control of
the Applicant unless:
(1) removed or modified by the Department under Rule 1017;
(2) removed or modified by a decision constituting final action of
the Association issued under Rule 1015 or 1016; or
(3) stayed by the National [Business Conduct Committee, the NASD
Regulation Board] Adjudicatory Council, the NASD Board, or the
Commission.
(g) Final Action
No change.
1015. Review by National [Business Conduct Committee] Adjudicatory
Council
(a) [Request ]Initiation of Review
(1) Request by Applicant
Within 25 days after service of a decision under Rule 1014, 1017,
or 1018, an Applicant may file a written request for review with the
National [Business Conduct Committee] Adjudicatory Council. A request
for review shall state with specificity why the Applicant believes that
the Department's decision is inconsistent with the membership standards
set forth in Rule 1014, or otherwise should be set aside, and state
whether a hearing is requested. The Applicant simultaneously shall send
by first-class mail a copy of the request to the district office where
the Applicant filed its membership application.
(2) Notice of National Adjudicatory Council
A decision issued under Rule 1014, 1017, or 1018 shall be subject
to a call for review by any member of the National Adjudicatory Council
or the Review Subcommittee defined in Rule 9120 within 30 days after
service of the decision. If the National Adjudicatory Council calls a
decision for review, a written notice of review shall be served
promptly on the Applicant by first-class mail. The written notice of
review shall state the specific grounds for the review and whether a
hearing is directed. If a decision is called for review by any member
of the National Adjudicatory Council or the Review Subcommittee the
decision shall be reviewed by the National Adjudicatory Council. The
National Adjudicatory Council simultaneously shall send by first-class
mail a copy of the notice to the district office where the Applicant
filed its membership application.
(b) Transmission of Documents
Within ten days after receipt of a request for or notice of review,
the Department shall:
(1) transmit to the National [Business Conduct Committee]
Adjudicatory Council copies of all documents that were considered in
connection with the Department's decision and an index to the
documents; and
(2) serve on the Applicant a copy of such documents (other than
those documents originally submitted by Applicant) and a copy of the
index.
(c) Membership Application Docket
The Department shall promptly record in the Association's
membership application docket each request for or notice of review
filed with the National [Business Conduct Committee] Adjudicatory
Council under this Rule and each material subsequent event, filing, and
change in the status of a membership proceeding.
(d) Appointment of Subcommittee
The National [Business Conduct Committee] Adjudicatory Council or
the Review Subcommittee defined in Rule 9120 shall appoint a
Subcommittee to participate in the review. The Subcommittee shall be
composed of at least two members. One member shall be a current member
of the National [Business Conduct Committee] Adjudicatory Council. The
remaining member or members shall be current or past Directors or past
Governors.
[[Page 64003]]
(e) Powers of Subcommittee
If a hearing is requested or directed, the Subcommittee shall
conduct the hearing. If a hearing is not requested, the Subcommittee
may serve a notice directing that a hearing be held. If a hearing is
not requested or directed, the Subcommittee shall conduct its review on
the basis of the record developed before the Department and any written
submissions made by the Applicant or the Department in connection with
the request for review.
(f) Hearing
(1) Notice
If a hearing is requested or directed, the hearing shall be held
within 45 days after the receipt of the request or service of the
notice by the National [Business Conduct Committee] Adjudicatory
Council. The National [Business Conduct Committee] Adjudicatory Council
shall send written notice of the date and time of the hearing to the
Applicant by facsimile or commercial courier not later than 14 days
before the hearing.
(2) Counsel
No change.
(3) Evidence
Formal rules of evidence shall not apply to a hearing under this
Rule. Not later than five days before the hearing, the Applicant and
the Department shall exchange copies of their proposed hearing exhibits
and witness lists and provide copies of the same to the National
[Business Conduct Committee] Adjudicatory Council. If the Applicant or
the Department fails to provide copies of its proposed hearing exhibits
or witness list within such time, the Subcommittee shall exclude the
evidence or witnesses from the proceeding, unless the Subcommittee
determines that good cause is shown for failure to comply with the
production date set forth in this subparagraph.
(4) Transcript
No change.
(5) Failure to Appear at Hearing
If an Applicant fails to appear at a hearing for which it has
notice, the National [Business Conduct Committee] Adjudicatory Council
may dismiss the request for review as abandoned, and the decision of
the Department shall become the final action of the Association. Upon a
showing of good cause, the National [Business Conduct Committee]
Adjudicatory Council may withdraw a dismissal entered pursuant to this
subparagraph.
(g) Additional Information, Briefs
At any time during its consideration, the Subcommittee of the
National [Business Conduct Committee] Adjudicatory Council may direct
the Applicant or the Department to submit additional information and to
file briefs. Any additional information or brief submitted shall be
provided to all parties before the National [Business Conduct
Committee] Adjudicatory Council renders its decision.
(h) Subcommittee Recommendation
The Subcommittee shall present a recommended decision in writing to
the National [Business Conduct Committee and all other Directors]
Adjudicatory Council within 60 days after the date of the hearing held
pursuant to paragraph (f), and not later than seven days before the
meeting of the National [Business Conduct Committee] Adjudicatory
Council at which the membership proceeding shall be considered.
(i) Decision
(1) Proposed Written Decision
After considering all matters presented in the review and the
Subcommittee's recommended written decision, the National [Business
Conduct Committee] Adjudicatory Council may affirm, modify, or reverse
the Department's decision or remand the membership proceeding with
instructions. The National [Business Conduct Committee] Adjudicatory
Council shall prepare a proposed written decision pursuant to
subparagraph (2).
(2) Contents
No change.
(3) Issuance of Decision After Expiration of Call for Review Periods
The National [Business Conduct Committee] Adjudicatory Council
shall provide its proposed written decision to the NASD [Regulation
Board, and, if such decision is not called for review by the NASD
Regulation Board, to the NASD Board. The NASD Regulation] Board. The
NASD Board may call the membership proceeding for review pursuant to
Rule 1016[(a). The]. If the NASD Board [may] does not call the
membership proceeding for review [pursuant to Rule 1016(b). If neither
the NASD Regulation Board nor the NASD Board calls the membership
proceeding for review], the proposed written decision of the National
[Business Conduct Committee] Adjudicatory Council shall become final.
The National [Business Conduct Committee] Adjudicatory Council shall
serve the Applicant with a written notice specifying the date on which
the call for review period expired and stating that the final written
decision will be served within 15 days after such date. The National
[Business Conduct Committee] Adjudicatory Council shall serve its final
written decision within 15 days after the date on which the call for
review period expired. The decision shall constitute the final action
of the Association for purposes of SEC Rule 19d-3, unless the National
[Business Conduct Committee] Adjudicatory Council remands the
membership proceeding.
(4) Failure To Issue Decision
If the National [Business Conduct Committee] Adjudicatory Council
fails to serve its final written decision within the time prescribed in
subparagraph (3), the Applicant may file a written request with the
NASD Board requesting that the NASD Board direct the National [Business
Conduct Committee] Adjudicatory Council to serve its decision
immediately or to show good cause for an extension of time. Within
seven days after receipt of such a request, the NASD Board shall direct
the National [Business Conduct Committee] Adjudicatory Council to serve
its written decision immediately or to show good cause for an extension
of time. If the National [Business Conduct Committee] Adjudicatory
Council shows good cause for an extension of time, the NASD Board may
extend the 15 day time limit by not more than 15 days.
1016. Discretionary Review by [Boards] NASD Board
[(a) Discretionary Review by the NASD Regulation Board
(1) Call For Review By Director
A Director may call a membership proceeding for review by the NASD
Regulation Board if the call for review is made within the period
prescribed in paragraph (2).
(2) Seven Day Period; Waiver
After receiving the proposed written decision of the National
Business Conduct Committee pursuant to Rule 1015, a Director shall have
not less than seven days to determine if the membership proceeding
should be called for review. A Director shall call a membership
proceeding for review by notifying the General Counsel of NASD
Regulation. By a unanimous vote of the NASD Regulation Board, The NASD
Regulation Board may shorten the period to less than seven days. By an
affirmative vote of the majority of the NASD Regulation Board then in
office,
[[Page 64004]]
the NASD Regulation Board may, during the seven day period, vote to
extend the period to more than seven days.
(3) Review at Next Meeting
If a Director calls a membership proceeding for review within the
time prescribed in subparagraph (2), the NASD Regulation Board shall
review the membership proceeding not later than the next meeting of the
NASD Regulation Board. The NASD Regulation Board may direct the
Applicant and the Department to file briefs in connection with review
proceedings pursuant to this paragraph.
(4) Decision of NASD Regulation Board, Including Remand
After review, the NASD Regulation Board may affirm, modify, or
reverse the proposed written decision of the National Business Conduct
Committee. Alternatively, the NASD Regulation Board may remand the
membership proceeding with instructions. The NASD Regulation Board
shall prepare a proposed written decision that includes all of the
elements described in Rule 1015(i)(2).
(5) Issuance of Decision After Expiration of Call for Review Period
The NASD Regulation Board shall provide its proposed written
decision to the NASD Board. The NASD Board may call the membership
proceeding for review pursuant to paragraph (b). If the NASD Board does
not call the membership proceeding for review, the proposed written
decision of the NASD Regulation Board shall become final. The NASD
Regulation Board shall serve the Applicant with a written notice
specifying the date on which the call for review period expired and
stating that a final written decision will be served within 15 days
after such date. The NASD Regulation Board shall serve its final
written decision within 15 days after the date on which the call for
review period expired. The decision shall constitute the final action
of the Association for purposes of SEC Rule 19d-3, unless the NASD
Regulation Board remands the membership proceeding.
(6) Failure To Issue Decision
If the NASD Regulation Board fails to serve its final written
decision within the time prescribed in subparagraph (5), the Applicant
may file a written request with the NASD Board requesting that the NASD
Board direct the NASD Regulation Board to serve its decision
immediately or to show good cause for an extension of time. Within
seven days after receipt of such a request, the NASD Board shall direct
the NASD Regulation Board to serve its written decision immediately or
to show good cause for an extension of time. If the NASD Regulation
Board shows good cause for an extension of time, the NASD Board may
extend the 15 day time limit by not more than 15 days.]
[(b) Discretionary Review by the NASD Board]
[(1)](a) Call for Review by Governor
A Governor may call a membership proceeding for review by the NASD
Board if the call for review is made within the period prescribed in
subparagraph (2).
[(2) Seven Day Period; Waiver](b) 15 Day Period; Waiver
[(A) Membership Proceeding Called for Review by NASD Regulation Board
If the NASD Regulation Board reviewed the membership proceeding
under paragraph (a), a] A Governor shall make his or her call for
review at the next meeting of the NASD Board that is at least [seven]
15 days after the date on which the NASD Board receives the proposed
written decision of the National Adjudicatory Council [NASD Regulation
Board].
[(B) Membership Proceeding Not Called For by NASD Regulation Board
If no Director of the NASD Regulation Board called the membership
proceeding for review under paragraph (a), a Governor shall make his or
her call for review at the next meeting of the NASD Board that is at
least seven days after the date on which the NASD Board receives the
proposed written decision of the National Business Conduct Committee.]
[(C) Waiver]
By unanimous vote of the NASD Board, the NASD Board may shorten the
period [in subparagraph (A) or (B)] to less than [seven] 15 days. By an
affirmative vote of the majority of the NASD Board then in office, the
NASD Board may, during the [seven] 15 day period [in subparagraph (A)
or (B)], vote to extend the period [in subparagraph (A) or (B)] to more
than [seven] 15 days.
[(3)](c) Review At Next Meeting
If a Governor calls a membership proceeding for review within the
time prescribed in [subparagraph (2)] paragraph (b), the NASD Board
shall review the membership proceeding not later than the next meeting
of the NASD Board. The NASD Board may order the Applicant and the
Department to file briefs in connection with review proceedings
pursuant to this paragraph.
[(4)](d) Decision of NASD Board, Including Remand
After review, the NASD Board may affirm, modify, or reverse [: (1)]
the proposed written decision of the [NASD Regulation Board, or (2) if
the NASD Regulation Board did not call the membership proceeding for
review under paragraph (a), the proposed written decision of the
National Business Conduct Committee] National Adjudicatory Council.
Alternatively, the NASD Board may remand the membership proceeding with
instructions. The NASD Board shall prepare a written decision that
includes all of the elements described in Rule 1015(i)(2).
[(5)](e) Issuance of Decision
The NASD Board shall serve its written decision on the Applicant
within 15 days after the meeting at which it conducted its review. The
decision shall constitute the final action of the Association for
purposes of SEC Rule 19d-3, unless the NASD Board remands the
membership proceeding.
1017. Removal or Modification of Business Restriction
* * * * *
(f) Service and Effectiveness of Decision
The Department shall serve its decision on the Applicant in
accordance with Rule 1012. The decision shall become effective upon
service and shall remain in effect during the pendency of any review
until a decision constituting final action of the Association is issued
under Rule 1015 or 1016, unless otherwise directed by the National
[Business Conduct Committee, the NASD Regulation Board] Adjudicatory
Council, the NASD Board, or the Commission.
(g) Request for Review; Final Action
An Applicant may file a written request for review of the
Department's decision with the National [Business Conduct Committee]
Adjudicatory Council pursuant to Rule 1015. The procedures set forth in
Rule 1015 shall apply to such review, and the National [Business
Conduct Committee's] Adjudicatory Council's decision shall be subject
to discretionary review by [the NASD Regulation Board and] the NASD
Board pursuant to Rule 1016. If the Applicant does not file a request
for a review, the Department's decision shall constitute final action
by the Association.
[[Page 64005]]
(h) Removal or Modification of Restriction on Department's Initiative
No change.
1018. Change in Ownership, Control, or Operations
* * * * *
(h) Service and Effectiveness of Decision
The Department shall serve its decision on the Applicant in
accordance with Rule 1012. The decision shall become effective upon
service and shall remain in effect during the pendency of any review
until a decision constituting final action of the Association is issued
under Rule 1015 or 1016, unless otherwise directed by the National
[Business Conduct Committee, the NASD Regulation Board] Adjudicatory
Council, the NASD Board, or the Commission.
(i) Request for Review; Final Action
An Applicant may file a written request for review of the
Department's decision with the National [Business Conduct Committee]
Adjudicatory Council pursuant to Rule 1015. The procedures set forth in
Rule 1015 shall apply to such a review, and the National [Business
Conduct Committee's] Adjudicatory Council's decision shall be subject
to discretionary review by [the NASD Regulation Board and] the NASD
Board pursuant to Rule 1016. If the Applicant does not file a request
for review, the Department's action shall constitute the final action
of the Association.
* * * * *
[4615. Automated Submission of Trading Data Requested by Association
(a) A member shall submit the trade data specified below in
automated format as may be prescribed by the Association from time to
time. This information shall be supplied with respect to any
transaction or transactions that are the subject of a request for
information made by the Association.
(1) If the transaction was a proprietary transaction effected or
caused to be effected by the member for any account in which such
member, or person associated with a member, is directly or indirectly
interested, such member shall submit or cause to be submitted the
following information:
(A) Clearing house number, or alpha symbol as used by the member
submitting the data;
(B) Clearing house number(s) or alpha symbol(s) as may be used from
time to time, of the member(s) on the opposite side of the transaction;
(C) Identifying symbol assigned to the security;
(D) Date transaction was executed;
(E) Number of shares, or quantity of bonds or options contracts for
each specific transaction and whether each transaction was a purchase,
sale, short sale, or if an options contract, whether open long or short
or close long or short;
(F) Transaction price;
(G) Account number; and
(H) Market center where transaction was executed.
(2) If the transaction was effected or caused to be effected by the
number for any customer account, such member shall submit or cause to
be submitted the following information:
(A) The data described in subparagraphs (1)(A) through (H) above;
and
(B) Customer name, address(es) branch office number, registered
representative number, whether order was solicited or unsolicited, date
account opened and employer name and the tax identification number(s).
(C) If transaction was effected for another member whether the
other member was acting as principal or agent on the transaction or
transactions that are the subject of the Association's request.
(3) In addition to the above trade data, a member shall submit such
other information in such automated format as may from time to time be
required by the Association.
(4) The Association may grant exceptions from the requirement that
the data prescribed in subparagraphs (1) and (2) above be submitted to
the Association in an automated format, in such cases and for such time
periods as it deems appropriate.]
* * * * *
[5107. Automated Submission of Trading Data
Every Association member and approved affiliate that participates
in Nasdaq International as a Service market maker or an order-entry
firm shall submit to the Association the trade data specified below in
automated format as may be prescribed by the Association from time to
time. This information shall be supplied with respect to any
transaction or transactions that are the subject of a request for
information made by the Association. As used in paragraphs (a) through
(d) hereof, the terms ``participating firm'' and ``firm'' include both
Association members and approved affiliates that utilize the Service.
(a) If the transaction was a proprietary transaction effected or
caused to be effected by the participating firm for any account in
which such firm, or person associated with the firm, is directly or
indirectly interested, the participating firm shall submit or cause to
be submitted the following information:
(1) Clearing house number, or alpha symbol as used by the
participating firm submitting the data;
(2) Clearing house number(s), or alpha symbol(s) as may be used
from time to time, of the participating firm on the opposite side of
the transaction;
(3) Identifying symbol assigned to the security;
(4) Date transaction was executed;
(5) Number of shares, ADRs, units, warrants or rights for each
specific transaction and whether each transaction was a purchase, sale,
or short sale;
(6) Transaction price;
(7) Account number; and
(8) Market center where transaction was executed.
(b) If the transaction was effected or caused to be effected by the
participating firm for any customer account, such firm shall submit or
cause to be submitted the following information:
(1) The data described in subparagraphs (1) through (8) of
paragraph (a);
(2) Customer name, address(es), branch office number, registered
representative number; whether order was solicited or unsolicited, date
account opened and employer name, and the tax identification number(s);
and
(3) If the transaction was effected for another Association member
or participating firm, whether the other party was acting as principal
or agent on the transaction or transactions that are the subject of the
Association's request.
(c) In addition to the above trade data, a participating firm shall
submit such other information in such automated format as may from time
to time be required by the Association.
(d) The Association may grant exceptions from the requirement that
the data prescribed in paragraphs (a) and (b) above be submitted to the
Association in an automated format, in such cases and for such time
periods as it deems appropriate.]
* * * * *
[6730. Automated Submission of Trade Data
Each member shall submit the trade data specified in Rule 4615 in
automated format as may be prescribed by the Association from time to
time with respect to any transaction or transactions involving non-
Nasdaq
[[Page 64006]]
securities that are the subject of a request for information made by
the Association.]
* * * * *
Investigations and Sanctions
Table of Contents \2\
8000. INVESTIGATIONS AND SANCTIONS
---------------------------------------------------------------------------
\2\ This table of contents is provided for convenience only, and
is not a part of the amended Rules of the Association submitted for
approval in this rule filing.
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8100. GENERAL PROVISIONS
8110. Availability of Manual to Customers
8120. Definitions
8200. INVESTIGATIONS
8210. Provision of Information and Testimony and Inspection and
Copying of Books
8211. Automated Submission of Trading Data Requested by the
Association
8212. Automated Submission of Trading Data for the Nasdaq
International Service Requested by the Association
8213. Automated Submission of Trading Data for non-Nasdaq
Securities Requested by the Association
8220. Suspension for Failure to Provide Requested Information
8221. Notice to Members and Persons Associated with Members
8222. Hearing
8223. Decision
8224. Notice to Membership
8225. Termination of Suspension
8226. Copies of Notices and Decisions to Members
8227. Other Action Not Foreclosed
8300. SANCTIONS
8310. Sanctions for Violation of the Rules
IM-8310-1. Effect of a Suspension, Revocation, Cancellation, or
Bar
IM-8310-2. Release of Disciplinary Information
8320. Payment of Fines, Other Monetary Sanctions, or Costs;
Summary Action for Failure to Pay
8330. Costs of Proceedings
* * * * *
8000. INVESTIGATIONS AND SANCTIONS
8100. GENERAL PROVISIONS
8110. Availability of Manual to Customers
[Every member of the Association shall keep in its main office and
each of its branch offices] Members shall keep and maintain a current
copy of the [Association's Manual and all amendments to it. Upon
request, a member shall make the Manual and amendments available to any
customer for examination.] NASD Manual in a readily accessible place
and shall make it available for examination by customers upon request.
8120. Definitions
No change
8200. INVESTIGATIONS
8210. Provision of Information and Testimony and Inspection and Copying
of Books
* * * * *
(d) [Receipt of] Notice
A notice under this Rule shall be deemed [to have been] received by
the member or person to whom it is directed by [the mailing thereof to
the] mailing or otherwise transmitting the notice to the last known
business address of [such] the member or the last known residential
address of the person as reflected in the Central Registration
Depository[, unless]. If the Adjudicator or Association staff
responsible for [serving] mailing or otherwise transmitting the notice
to the member or [associated] person has actual knowledge that the
address in the Central Registration Depository is out of date[. In such
case,] or inaccurate, then a copy of the notice shall be [served on the
member at its last known address, or in the case of an associated
person, at the associated person's] mailed or otherwise transmitted to:
(1) the last known business address of the member or the last known
residential address [and] of the [business address] person as reflected
in the Central Registration Depository [of the member with which the
person is employed or affiliated], and (2) any other more current
address of the member or the person known to the Adjudicator or
Association staff who is responsible for mailing or otherwise
transmitting the notice.
* * * * *
8211. Automated Submission of Trading Data Requested by the Association
(a) A member shall submit the trade data specified below in
automated format as may be prescribed by the Association from time to
time. This information shall be supplied with respect to any
transaction or transactions that are the subject of a request for
information made by the Association.
(b) If the transaction was a proprietary transaction effected or
caused to be effected by the member for any account in which such
member, or person associated with a member, is directly or indirectly
interested, such member shall submit or cuase to be submitted the
following information:
(1) Clearing house number, or alpha symbol as used by the member
submitting the data;
(2) Clearing house number(s), or alpha symbol(s) as may be used
from time to time, of the member(s) on the opposite side of the
transaction;
(3) Identifying symbol assigned to the security;
(4) Date transaction was executed;
(5) Number of shares, or quantity of bonds or options contracts for
each specific transaction and whether each transaction was a purchase,
sale, short sale, or, if an options contract, whether open long or
short or close long or short;
(6) Transaction price;
(7) Account number; and
(8) Market center where transaction was executed.
(c) If the transaction was effected or caused to be effected by the
member for any customer account, such member shall submit or cause to
be submitted the following information:
(1) The data described in subparagraphs (b) (1) through (8) above;
(2) The customer name, address(es), branch office number,
registered representative number, whether order was solicited or
unsolicited, date account opened, employer name, and the tax
identification number(s); and
(3) If thee transaction was effected for another member, whether
the other member was acting as principal or agent.
(d) In addition to the above trade data, a member shall submit such
other information in such automated format as may from time to time be
required by the Association.
(e) Pursuant to the Rule 9600 Series, the Association may exempt a
member from the requirement that the data prescribed in paragraphs (b)
through (d) above be submitted to the Association in an automated
format for good cause shown.
8212. Automated Submission of Trading Data for the Nasdaq International
Service Requested by the Association
(a) Every Association member and approved affiliate that
participates in the Nasdaq International Service as defined in the Rule
5100 Series (``Nasdaq International'') as a Service market maker or an
order-entry firm shall submit to the Association the trade data
specified below in automated format as may be prescribed by the
Association from time to time. This information shall be supplied with
respect to any transaction or transactions that are the subject of a
request for information made by the Association. In this rule the terms
``participating firm'' and ``firm'' include both Association members
and approved affiliates that utilize the Service.
(b) If the transaction was a proprietary transaction effected or
caused to be effected by the participating firm for any account in whch
such firm, or person
[[Page 64007]]
associated with the firm, is directly or indirectly interested, the
participating firm shall submit or cause to be submitted the following
information:
(1) Clearing house number, or alpha symbol as used by the
participating firm submitting the data;
(2) Clearing house number(s), or alpha symbol(s) as may be used
from time to time, of the participating firm on the opposite side of
the transaction;
(3) Identifying symbol assigned to the security;
(4) Date transaction was executed;
(5) Number of shares, ADRs, units, warrants or rights for each
specific transaction and whether each transaction was a purchase, sale
or short sale;
(6) Transaction price;
(7) Account number; and
(8) Market center where transaction was executed.
(c) If the transaction was effected or caused to be effected by the
participating firm for any customer account, such firm shall submit or
cause to be submitted the following information:
(1) The data described in subparagraphs (b)(1) through (8);
(2) Customer name, address(es), branch office number, registered
representative number, whether order was solicited or unsolicited, date
account opened and employer name, and the tax identification number(s);
and
(3) If the transaction was effected for another Association member
or participating firm, whether the other party was acting as principal
or agent on the transaction or transactions that are the subject of the
Association's request.
(d) In addition to the above trade data, a participating firm shall
submit such other information in such automated format as may from time
to time be required by the Association.
(e) Pursuant to the Rule 9600 Series, the Association may exempt a
person from the requirement that the data prescribed in paragraphs (b)
through (d) above be submitted to the Association in an automated
format for good cause shown.
8213. Automated Submission of Trading Data for Non-Nasdaq Securities
Requested by the Association
Each member shall submit trade data specified in Rule 8211 in
automated format as may be prescribed by the Association from time to
time with respect to any transaction or transactions involving non-
Nasdaq securities as defined in the rule 6700 Series that are the
subject of a request for information made by the Association. Pursuant
to the Rule 9600 Series, the Association may exempt a member from the
requirement that the data prescribed in paragraphs (b) through (d) of
Rule 8211 be submitted to the Association in an automated format for
good cause shown.
8220. Suspension for Failure to Provide Requested Information
8221. Notice
(a) Notice to Member
If a member fails to provide any information, report, material,
data, or testimony requested pursuant to the NASD By-Laws or the Rules
of the Association, or fails to keep its membership application or
supporting documents current, the National [Business Conduct Committee]
Adjudicatory Council may provide written notice to such member
specifying the nature of the failure and stating that the failure to
take such action within 20 days after service of the notice constitutes
grounds for suspension from membership.
(b) Notice to Person Associated with Member
If a person associated with a member fails to provide any
information, report, material, data, or testimony requested pursuant to
the NASD By-Laws or the Rules of the Association, the National
[Business Conduct Committee] Adjudicatory Council may provide written
notice to such person specifying the nature of the failure and stating
that the failure to take such action within 20 days after service of
the notice constitutes grounds for suspending the association of the
person with the member.
(c) Service of Notice
The National [Business Conduct Committee] Adjudicatory Council
shall serve the member of person associated [person] with a member with
such notice via personal service or commercial courier.
8222. Hearing
(a) Request for Hearing
Within five days after the date of service of a notice issued under
Rule 8221, a member or person associated [person] with a member served
with a notice under Rule 8221(c) may file with the National [Business
Conduct Committee] Adjudicatory Council a written request for an
expedited hearing before a subcommittee of the National [Business
Conduct Committee] Adjudicatory Council. The request shall state with
specificity why the member or associated person believes that there are
insufficient grounds for suspension or any other reason for setting
aside the notice issued by the National [Business Conduct Committee]
Adjudicatory Council.
(b) Hearing Procedures
(1) Appointment of Subcommittee
If a hearing is requested, the National [Business Conduct
Committee] Adjudicatory Council or the Review Subcommittee described in
Rule 9120 shall appoint a subcommittee to conduct the hearing and
decide whether the member or person associated [person] with a member
should be suspended. The subcommittee shall be composed of a member of
the National [Business Conduct Committee] Adjudicatory Council and one
or more [current or past] former members of the NASD Regulation Board
and the NASD Board.
(2) Time of Hearing
The hearing shall be held within 20 days after the date of service
of the notice issued under Rule 8221. Not later than seven days before
the hearing, the subcommittee shall serve the member or person
associated [person] with a member with written notice of the date and
time of the hearing via commercial courier or facsimile and notify the
appropriate department or office of NASD Regulation of the date and
time of the hearing. The appropriate department or office of NASD
Regulation (hereinafter ``appropriate department or office'' in the
Rule 8220 Series) shall be the department or office that issued the
request for the information, report, material, data, or testimony that
the member or associated person failed to provide, or in the case of a
member that failed to keep its membership application or supporting
documents current, the Department of Member Regulation.
(3) Transmission of Documents
Not later than seven days before the hearing, the subcommittee
shall serve the member or person associated [person] with a member via
commercial courier with all documents that were considered in
connection with the National [Business Conduct Committee's]
Adjudicatory Council's decision to issue a notice under Rule 8221.
(4) Counsel
The member or person associated [person] with a member and the
appropriate department or office may be represented by counsel at a
hearing conducted under this Rule.
[[Page 64008]]
(5) Evidence
Formal rules of evidence shall not apply to a hearing under this
Rule. Not later than four days before the hearing, the member or person
associated [person] with a member and the appropriate department or
office shall exchange copies of proposed hearing exhibits and witness
lists and provide copies of the same to the subcommittee.
(6) Witnesses
No change.
(7) Additional Information
At any time during its consideration, the subcommittee may direct
the member or person associated [person] with a member or the
appropriate department or office to submit additional information. Any
additional information submitted shall be provided to all parties
before the subcommittee renders its decision.
(8) Transcript
The hearing shall be recorded and a transcript prepared by a court
reporter. The member or person associated [person] with a member may
purchase a copy of the transcript from the court reporter at prescribed
rates. A witness may purchase a copy of the transcript of his or her
own testimony from the court reporter at prescribed rates. Proposed
corrections to the transcript may be submitted by affidavit to the
subcommittee within a reasonable time determined by the subcommittee.
Upon notice to the participants in the hearing, the subcommittee may
order corrections to the transcript as requested or sua sponte.
(9) Record
The record shall consist of all documents that were considered in
connection with the National [Business Conduct Committee's]
Adjudicatory Council's decision to issue a notice under Rule 8221, the
notice issued under Rule 8221, the request for hearing filed under Rule
8222, the transcript of the hearing, and each document or other item of
evidence presented to or considered by the Subcommittee. The Office of
the General Counsel of NASD Regulation shall be the custodian of the
record.
(10) Failure to Appear at Hearing
If a member or person associated [person] with a member fails to
appear at a hearing for which it has notice, the subcommittee may
dismiss the request for a hearing as abandoned, and the notice of the
National [Business Conduct Committee] Adjudicatory Council issued under
Rule 8221 shall become the final action of the Association. Upon a
showing of good cause, the subcommittee may withdraw a dismissal
entered pursuant to this subparagraph.
8223. Decision
(a) Subcommittee
No change.
(b) NASD Board of Governors
(1) Call for Review by Governor
No change.
(2) Review and Decision
If a Governor calls the suspension proceeding for review within the
time prescribed in subparagraph (1), the NASD Board of Governors shall
conduct a review not later than its next meeting. The NASD Board of
Governors may affirm, modify, or reverse the decision of the
subcommittee. Not later than seven days after the NASD Board of
Governors meeting, the NASD Board of Governors shall serve a final
written decision on the member or person associated [person] with a
member via commercial courier or facsimile. The decision shall state
the disposition of the suspension proceeding, and if a suspension is
imposed, state the grounds for the suspension and the conditions for
terminating the suspension.
* * * * *
8225. Termination of Suspension
A suspended member or person associated [person] with a member may
file a written request for termination if the suspension on the ground
of full compliance with the notice issued under Rule 8221 or, if
applicable, the conditions of a decision under Rule 8223, with the head
of the appropriate department or office. The head of the appropriate
department or office shall respond to the request in writing within
five days after receipt of the request. If the head of the appropriate
department or office grants the request, he or she shall serve the
member or person associated [person] with a member with written notice
of the termination of the suspension via commercial courier or
facsimile. If the head of the department or office denies the request,
the suspended member or person associated [person] with a member may
file a written request for relief with the National [Business Conduct
Committee] Adjudicatory Council. The National [Business Conduct
Committee] Adjudicatory Council shall respond to the request in writing
within ten days after receipt of the request. The National [Business
Conduct Committee] Adjudicatory Council's response shall be served on
the member or person associated [person] with a member via commercial
courier or facsimile.
8226. Copies of Notices and Decisions to Member
No change.
8227. Other Action Not Foreclosed
No change.
8300. SANCTIONS
8310. Sanctions for Violation of the Rules
(a) Imposition of Sanction
After compliance with the Rule 9000 Series, the Association may
impose one or more of the following sanctions on a member or person
associated [person] with a member for each violation of the federal
securities laws, rules or regulations thereunder, the rules of the
Municipal Securities Rulemaking Board, or Rules of the Association, or
may impose one or more of the following sanctions on a member or person
associated [person] with a member for any neglect or refusal to comply
with an order, direction, or decision issued under the Rules of the
Association:
(1) censure member or person associated with a member;
(2) impose a fine upon a member or person associated with a member;
(3) suspend the membership of a member or suspend the registration
of a person associated with a member for a definite period or a period
contingent on the performance of a particular act;
(4) expel a member, cancel the membership of a member, or revoke or
cancel the registration of a person associated with a member;
(5) suspend or bar a member or person associated with a member from
association with all members; or
(6) impose any other fitting sanction.
(b) Assent To Sanction
Each party to a proceeding resulting in a sanction shall be deemed
to have assented to the imposition of the sanction unless such party
files a written application for appeal, review, or relief pursuant to
the Rule 9000 Series.
IM-8310-1. Effect of a Suspension, Revocation, Cancellation, or Bar
If the Association or the Commission issues an order that imposes a
suspension, revocation, or cancellation of the registration of a person
associated with a member or bars a person from further association with
any member, a member shall not allow such person to remain associated
with it in any
[[Page 64009]]
capacity, including a clerical or ministerial capacity. If the
Association or the commission suspends a person associated with a
member, the member also shall not pay or credit any salary, or any
commission, profit, or other remuneration that results directly or
indirectly from any securities transaction, that the person associated
[person] with a member might have earned during the period of
suspension.
* * * * * * *
Code of Procedure
Table of Contents \3\
9000. CODE OF PROCEDURE
---------------------------------------------------------------------------
\3\ This table of contents is provided for convenience only, and
is not a part of the amended Rules of the Association submitted for
approval in this rule filing.
---------------------------------------------------------------------------
9100. Application and Purpose
9110. Application
9120. Definitions
9130. Service; Filing of Papers
9131. Service of Complaint and Document Initiating a Proceeding
9132. Service of Orders, Notices, and Decisions by Adjudicator
9133. Service of Papers Other Than Complaints, Orders, Notices,
or Decisions
9134. Methods of, Procedures for Service
9135. Filing of Papers With Adjudicator: Procedure
9136. Filing of Papers: Form
9137. Filing of Papers: Signature Requirement and Effect
9138. Computation of Time
9140. Proceedings
9141. Appearance and Practice; Notice of Appearance
9142. Withdrawal By Attorney or Representative
9143. Ex Parte Communications
9144. Separation of Functions
9145. Rules of Evidence; Official Notice
9146. Motions
9147. Rulings on Procedural Matters
9148. Interlocutory Review
9150. Exclusion From Rule 9000 Series Proceeding
9160. Recusal or Disqualification
9200. DISCIPLINARY PROCEEDINGS
9210. Complaint and Answer
9211. [Issuance] Authorization of Complaint
9212. Complaint Issuance--Requirements, Service, Amendment,
Withdrawal and Docketing
9213. Assignment of Hearing Officer and Appointment of Panelists
to Hearing Panel or Extended Hearing Panel
9214. Consolidation of Disciplinary Proceedings
9215. Answer to Complaint
9216. Acceptance, Waiver, and Consent; Plan Pursuant to SEC Rule
19d-1(c)(2)
IM-9216. Violations Appropriate For Disposition Under Plan
Pursuant to SEC Rule 19d-1(c)(2)
9220. Request for Hearing; Extensions of Time, Postponements,
Adjournments
9221. Request for Hearing
9222. Extensions of Time, Postponements, and Adjournments
9230. Appointment of Hearing Panel, Extended Hearing Panel
9231. Appointment By the Chief Hearing Officer of Hearing Panel
or Extended Hearing Panel
9232. Criteria for Selection of Panelists [;] And Replacement
Panelists
9233. Hearing Panel or Extended Hearing Panel; Recusal and
Disqualification of Hearing Officers
9234. Hearing Panel or Extended Hearing Panel: Recusal and
Disqualification of Panelists
9235. Hearing Officer Authority
9240. Pre-hearing Conference and Submission
9241. Pre-hearing Conference
9242. Pre-hearing Submission
9250. Discovery
9251. Inspection and Copying of Documents in Possession of Staff
9252. Requests for Information
9253. Production of Witness Statements
9260. Hearing and Decision
9261. Evidence and Procedure in Hearing
9262. Testimony
9263. Evidence: Admissibility
9264. Motion for Summary Dispositon
9265. Record of Hearing
9266. Proposed Findings of Fact, Conclusions of Law, and Post-
Hearing Briefs
9267. Record; Supplemental Documents Attached to Record;
Retention
9268. Decision of Hearing Panel or Extended Hearing Panel
9269. Failure to Appear at Hearing; Default
9270. Settlement Procedure
9280. Contemptuous Conduct
9300. REVIEW OF DISCIPLINARY PROCEEDING BY NATIONAL ADJUDICATORY
COUNCIL AND NASD BOARD [BUSINESS CONDUCT COMMITTEE, NASD REGULATION
AND NASD BOARDS]; APPLICATION FOR COMMISSION REVIEW
9310. Appeal to or Review by National [Business Conduct
Committee] Adudicatory Council
9311. Appeal By Any Party; Cross-Appeal
9312. Review Proceeding Initiated By National [Business Conduct
Committee] Adjudicatory Council
9313. Counsel to National [Business Conduct Committee]
Adjudicatory Council
9320. Transmission of Record; Extensions of Time, Postponements,
Adjournments
9321. Transmission of Record
9322. Extensions of Time, Postponements, Adjournments
9330. Appointment of Subcommittee or Extended Proceeding
Committee; Disqualification and Recusal
9331. Appointment of Subcommittee or Extended Proceeding
Committee
9332. Disqualification and Recusal
9340. Proceedings
9341. Oral Argument
9342. Failure to Appear at Oral Argument
9343. Disposition Without Oral Argument
9344. Failure to Participate Below; Abandonment of Appeal
9345. Subcommittee or Extended Proceeding Committee Recommended
Decision to National [Business Conduct Committee] Adjudicatory
Council
9346. Evidence in National [Business Conduct Committee]
Adjudicatory Council Proceedings
9347. Filing of Papers In National [Business Conduct Committee]
Adjudicatory Council Proceedings
9348. Powers of the National [Business Conduct Committee]
Adjudicatory Council on Review
9349. National [Business Conduct Committee] Adjudicatory Council
Formal Consideration; Decision
9350. Discretionary Review by [Boards] NASD Board
[9351. Discretionary Review by NASD Regulation Board
9352] 9351. Discretionary Review by NASD Board
9360. Effectiveness of Sanctions
9370. Application to Commission for Review
9400. LIMITATION PROCEDURES UNDER RULES 3130 AND 3131
9410. Proceedings for Regulating Activities of Members
Experiencing Financial or Operating Difficulties
9411. Purpose
9412. Notice of Limitations
9413. Department of Member Regulation Consideration
9414. National [Business Conduct Committee Review] Adjudicatory
Council Review
[9415. Discretionary Review by NASD Regulation Board
9416] 9415. Discretionary Review by the NASD Board
[9417] 9416. Enforcement of Sanctions
[9418] 9417. Additional Limitations; Reduction or Removal of
Limitations
[9419] 9418. Application to Commission for Review
[;] 9419. Other Action Not Foreclosed
9500. SUSPENSION, CANCELLATION, BAR, DENIAL OF ACCESS, AND
ELIGIBILITY PROCEDURES
9510. Procedures for Summary and Non-Summary Suspension,
Cancellation, Bar, Limitation, or Prohibition
9511. Purpose and Computation of Time
9512. Initiation of Proceedings for Summary Suspension,
Limitation, or Prohibition
9513. Initiation of Proceeding for Non-Summary Suspension,
Cancellation, Bar, Limitation, or Prohibition
9514. Hearing and Decision
9515. Discretionary Review by the NASD Board
9516. Reinstatement
9517. Copies of Notices and Decisions to Members
9518. Application to Commission for Review
9519. Other Action Not Foreclosed; Costs
9520. Eligibility Proceedings
9521. Purpose
9522. Initiation of Eligibility Proceedings
9523. National [Business Conduct Committee Consideration]
Adjudicatory Council Consideration
[9524. Discretionary Review by the NASD Regulation Board
[[Page 64010]]
9525] 9524. Discretionary Review by the NASD Board
[9526] 9525. Application to Commission for Review
* * * * *
9000. CODE OF PROCEDURE
9100. Application and Purpose
9110. Application
No change.
9120. Definitions
(a) ``Adjudicator''
The term ``Adjudicator'' means: (1) a body, board, committee,
group, or natural person that presides over a proceeding and renders a
decision; (2) a body, board, committee, group, or natural person that
presides over a proceeding and renders a recommended or proposed
decision which is acted upon by an Adjudicator described in (1); or (3)
a natural person who serves on a body, board, committee, or group
described in (1) or (2). The term includes a Review Subcommittee as
defined in paragraph (z), a Subcommittee as defined in paragraph (bb),
an Extended Proceeding Committee as defined in paragraph [(k)](l), and
a Statutory Disqualification Committee as defined in paragraph
[(y)](aa).
* * * * *
(d) ``Counsel to the National [Business Conduct Committee] Adjudicatory
Council''
The term ``Counsel to the National [Business Conduct Committee]
Adjudicatory Council'' means an attorney of the Office of the General
Counsel of NASD Regulation who is responsible for advising the National
[Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, a Subcommittee, or an Extended Proceeding Committee
regarding a disciplinary proceeding on appeal or review before the
National [Business Conduct Committee.] Adjudicatory Council.
(e) ``Department of Enforcement''
The term ``Department of Enforcement'' means the Department of
Enforcement or its delegatee, the Department of Market Regulation,
except that the term excludes the Department of Market Regulation with
respect to the actions of: (1) authorizing a complaint under Rule 9211;
(2) determining the terms of a letter of acceptance, waiver, and
consent or the terms of a minor rule violation plan letter under Rule
9216; (3) determining whether to contest an offer of settlement under
Rule 9270; and (4) authorizing the filing of an appeal under Rule 9311.
(f) ``Director''
The term ``Director'' means a member of the Board of Directors of
NASD Regulation[, excluding the Chief Executive Officer of the NASD.].
[(f)](g) ``District Committee''
The term ``District Committee'' means a district committee elected
pursuant to the NASD Regulation By-Laws or a resolution of the NASD
Regulation Board.
[(g)](h) ``Document''
The term ``Document'' means a writing, drawing, graph, chart,
photograph, recording, or any other data compilation, including data
stored by computer, from which information can be obtained.
[(h)](i) ``Extended Hearing''
The term ``Extended Hearing'' means a disciplinary proceeding
described in Rule 9231(c).
[(i)(j) ``Extended Hearing Panel''
The term ``Extended Hearing Panel'' means an Adjudicator that is
constituted under Rule 9231(c) to conduct a disciplinary proceeding
that is classified as an ``Extended Hearing'' and is governed by the
Rule 9200 Series.
[(j)](k) ``Extended Proceeding''
The term ``Extended Proceeding'' means a disciplinary proceeding
described in Rule 9331(a)(2).
[(k)](l) ``Extended Proceeding Committee''
The term ``Extended Proceeding Committee'' means an appellate
Adjudicator that is [appointed by the National Business Conduct
Committee and] constituted under Rule 9331[(a)(2)] to participate in
the National [Business Conduct Committee's] Adjudicatory Council's
considertation of a disciplinary proceeding that is classified as an
``Extended Proceeding'' and governed by the Rule 9300 Series.
[(l)](m) ``General Counsel''
The term ``General Counsel'' means the General Counsel of NASD
Regulation, or his or her delegatee, who shall be a person who reports
to the General Counsel of NASD Regulation and is an Associate General
Counsel, an Assistant General Counsel, or a person who has
substantially the same or equivalent duties and responsibilities as an
Associate General Counsel or an Assistant General Counsel.
[(m)](n) ``Governor''
The term ``Governor'' means member of the Board of Governors of the
NASD.
[(n)](o) ``Head of Enforcement''
The term ``Head of Enforcement'' means the individual designated by
the President of NASD Regulation to manage the Department of
Enforcement, or his or her delegate in the Department of Enforcement.
(p)[(o)] ``Hearing Officer''
The term ``Hearing Officer'' means an employee of NASD Regulation
who is an attorney and who is appointed by the Chief Hearing Officer to
act in a adjudicative role and fulfill various adjudicative
responsibilities and duties in the Rule 9200 Series regarding
disciplinary proceedings brought against members and associated
persons.
[(p)](q) ``Hearing Panel''
The term ``Hearing Panel'' means an Adjudicator that is constituted
under Rule 9231 to conduct a disciplinary proceeding governed by the
Rule 9200 Series or that is constituted under the Rule 9500 Series to
conduct a proceeding.
[(q)](r) ``Interested Association Staff''
The term ``Interested Association Staff'' means, in the context of:
(1) a disciplinary proceeding under the Rule 9200 Series and the
Rule 9300 Series:
(A) the Head of Enforcement;
(B) [a] an employee of the Department of Enforcement [employee] who
reports, directly or indirectly, to the Head of Enforcement;
(C) an Association employee who directly participated in the
authorization of the complaint; or
(D) an Association employee who directly participated in an
examination, investigation, prosecution, or litigation related to a
specific disciplinary proceeding, and a district director or department
head to whom such employee reports;
(2) a proceeding under the Rule 9410 Series:
(A) the head of the Department of Member Regulation;
(B) a Department of Member Regulation employee who reports,
directly or indirectly, to the head of the Department of Member
Regulation;
(C) an Association employee who directly participated in the
authorization of or the initial decision in the proceeding; or
(D) an Association employee who directly participated in an
examination, investigation, prosecution, or litigation
[[Page 64011]]
related to a specific proceeding, and a district director or department
head to whom such employee reports; or
(3) a proceeding under the Rule 9510 or 9520 Series:
(A) the head of the department or office that issues the notice or
is designated as a Party;
(B) an Association employee who reports, directly or indirectly, to
such person;
(C) an Association employee who directly participated in the
initiation of the proceeding; or
(D) an Association employee who directly participated in an
examination, investigation, prosecution, or litigation related to a
specific proceeding, and a district director or department head to whom
such employee reports; or[.]
[(r)](4) a proceeding under the Rule 9600 Series:
(A) the head of the department or office that issues the decision
granting or denying an exemption or is designated as a Party;
(B) an Association employee who reports, directly or indirectly, to
such person;
(C) an Association employee who directly participated in the
exemption proceeding; or
(D) an Association employee who directly participated in an
examination, investigation, prosecution, or litigation related to a
specific exemption proceeding, and a district director or department
head to whom such employee reports.
(s) ``Market Regulation Committee''
The term ``Market Regulation Committee'' means the committee of
NASD Regulation designated to consider the federal securities laws and
rules and regulations adopted thereunder and various Rules of the
Association and policies relating to:
(1) the quotations of securities;
(2) the execution of transactions;
(3) the reporting of transactions; and
(4) trading practices, including rules prohibiting manipulation and
insider trading, and those Rules designated as Trading Rules (Rule 3300
Series), the Nasdaq Stock Market Rules (Rule 4000 Series), other Nasdaq
and NASD Market Rules (Rule 5000 Series), NASD Systems and Programs
Rules (Rule 6000 Series), and Charges for Services and Equipment Rules
(Rule 7000 Series).
[(s)](t) ``NASD Board''
The term ``NASD Board'' means the Board of Governors of the NASD.
[(t)](u) ``NASD Regulation Board''
The term ``NASD Regulation Board'' means the Board of Directors of
NASD Regulation.
[(u)](v) ``Panelist''
The term ``Panelist'' as used in the Rule 9200 Series, means a
member of a Hearing Panel or Extended Hearing Panel who is not a
Hearing Officer. As used in the Rule 9300 Series, the term means a
current or former Director or a former Governor who is appointed to
serve on a Subcommittee or an Extended Proceeding Committee.
[(v)](w) ``Party''
With respect to a particular proceeding, the term ``Party'' means:
(1) in the Rule 9200 Series and the Rule 9300 Series, the
Department of Enforcement or a Respondent;
(2) in the Rule 9410 Series and the Rule 9520 Series, the
Department of Member Regulation or
(A) a member that is the subject of a notice under Rule 9412;
(B) a member that is the subject of a notice or files an
application under Rule 9522;
[or]
(3) in the Rule 9510 Series, the department or office designated
under Rule 9514(b) or a member or person that is the subject of a
notice under Rule 9512 or Rule 9513; or[.]
[(w)](4) in the Rule 9600 Series, the department or office
designated under Rule 9620 to issue the decision granting or denying an
exemption or a member that seeks the exemption under Rule 9610.
(x) ``Primary District Committee''
The term ``Primary District Committee'' means, in a disciplinary
proceeding under the Rule 9200 Series, the District Committee
designated by the Chief Hearing Officer pursuant to Rule 9232 to
provide one or more of the Panelists to a Hearing Panel or, if
applicable, to an Extended Hearing Panel, for such disciplinary
proceeding.
[(x)](y) ``Respondent''
The term ``Respondent'' means, in a disciplinary proceeding
governed by the Rule 9200 Series and in an appeal or review governed by
the Rule 9300 Series, an NASD member or associated person against whom
a complaint is issued.
(z) ``Review Subcommittee''
The term ``Review Subcommittee'' means a body appointed by the
National Adjudicatory Council pursuant to Article V of the NASD
Regulation By-Laws.
(aa)[(y)] ``Statutory Disqualification Committee''
The term ``Statutory Disqualification Committee'' means a
Subcommittee of the National [Business Conduct Committee] Adjudicatory
Council [that is composed of current members of the NASD Regulation
Board] that makes a recommended decision to grant or deny an
application for relief from the eligibility requirements of the
Association to the National [Business Conduct Committee] Adjudicatory
Council pursuant to the Rule 9520 Series.
[(z)](bb) ``Subcommittee''
The term ``Subcommittee'' means an Adjudicator that is [appointed
by the National Business Conduct Committee]:
(1) constituted [by] under Rule 9331(a) to participate in the
National [Business Conduct Committee's] Adjudicatory Council's
consideration of an appeal or a review of a disciplinary proceeding
pursuant to the Rule 9300 Series; [or]
(2) constituted under the Rule 9410 Series or Rule 9630 to conduct
a review proceeding.
* * * * *
9140. Proceedings
9141. Appearance and Practice; Notice of Appearance
(a) Representing Oneself
No change.
(b) Representing Others
A person shall not be represented before an Adjudicator, except as
provided in this paragraph. Subject to the prohibitions of Rules 9150
and 9280, a person may be represented in any proceeding by an attorney
at law admitted to practice before the highest court of any state of
the United States, the District of Columbia, or any commonwealth,
territory, or possession of the United States. A member of a
partnership may represent the partnership; and a bona fide officer of a
corporation, trust, or association may represent the corporation,
trust, or association. When a person first makes any filing or
otherwise appears in a representative capacity before an Adjudicator in
a proceeding, that person shall file with the Adjudicator, and keep
current[,] a Notice of Appearance. The Notice of Appearance is a
written notice stating the name of the proceeding; the representative's
name, business address, and telephone number; and the name and address
of the person or persons represented. Any individual appearing or
practicing in a representative capacity before an Adjudicator may be
required to file a power of attorney with the Adjudicator showing his
or her authority to act in such capacity.
[[Page 64012]]
9142. Withdrawal by Attorney or Representative
No change.
9143. Ex Parte Communications
(a) Prohibited Communications
Unless on notice and opportunity for all Parties to participate, or
to the extent required for the disposition of ex parte matters as
authorized by the Rule 9000 Series:
(1) No Party, or counsel to or representative of a Party, or
Interested Association Staff shall make or knowingly cause to be made
an ex parte communication relevant to the merits of a proceeding to [a
Governor, a Director, or] an Adjudicator who is participating in a
decision with respect to that proceeding, or to an Association employee
who is participating or advising in the decision of [a Governor, a
Director, or] an Adjudicator with respect to that proceeding; and
(2) No [Governor, Director, or] Adjudicator who is participating in
a decision with respect to a proceeding, or no Association employee who
is participating or advising in the decision of [a Governor, a
Director, or] an Adjudicator with respect to a proceeding shall make or
knowingly cause to be made to a Party, a counsel or representative to a
Party, or Interested Association Staff an ex parte communication
relevant to the merits of that proceeding.
(b) Disclosure of Prohibited Communication
[A Governor, a Director, or an ] An Adjudicator who is
participating in a decision with respect to a proceeding, or an
Association employee who is participating or advising in the decision
of [a Governor, a Director, or] an Adjudicator, who receives, makes, or
knowingly causes to be made a communication prohibited by this Rule
shall place in the record of the proceeding:
(1) all such written communications;
(2) memoranda stating the substance of all such oral
communications; and
(3) all written responses and memoranda stating the substance of
all oral responses to all such communications.
(c) Remedies
No change.
(d) Timing
No change.
(e) Waiver of Ex Parte Prohibition
No change.
9144. Separation of Functions
(a) Interested Association Staff
Except as counsel or a witness in a proceeding or as provided in
the Rule 9400 Series, Interested Association Staff is prohibited from
advising an Adjudicator regarding a decision or otherwise participating
in a decision of an Adjudicator. An Adjudicator is prohibited from
advising Interested Association Staff regarding a decision or otherwise
participating in a decision of Interested Association Staff, including
the decision to issue a complaint and a decision whether to appeal or
cross-appeal a disciplinary proceeding to the National [Business
Conduct Committee] Adjudicatory Council.
(b) Separation of Adjudicators
A Hearing Officer, including the Chief Hearing Officer, or a
Panelist of a Hearing Panel or an Extended Hearing Panel, is prohibited
from participating in: a decision whether to issue a complaint pursuant
to Rule 9211; a decision whether to appeal or cross-appeal a
disciplinary proceeding to the National [Business Conduct Committee]
Adjudicatory Council pursuant to Rule 9311; and a discussion or
decision relating to a call for review, a review, or an appeal pursuant
to the Rule 9300 Series. [A Director] Except for the Chair of the
National Adjudicatory Council, a Governor is prohibited from
participating in a discussion or a decision relating to the above
referenced acts with the Review Subcommittee or the Adjudicators
referenced above[, a Governor, or the NASD Board. A Governor is
prohibited from participating in a discussion or a decision relating to
the above referenced acts with the Adjudicators referenced above, a
Director, or the NASD Regulation Board].
(c) Waiver of Prohibitions of Separation of Functions
No change.
9145. Rules of Evidence; Official Notice
No change.
9146. Motions
* * * * *
(j) Disposition of Procedural Motions; Disposition of Motions for
Summary Disposition
(1) No change.
(2) In the Rule 9300 Series, a motion on a procedural matter may be
decided by Counsel to the National [Business Conduct Committee, the
Chair and the Vice Chair of the National Business Conduct Committee (or
either one, acting alone, in the event the other is recused or
disqualified)] Adjudicatory Council, the Review Subcommittee, a
Subcommittee or, if applicable, an Extended Proceeding Committee, or
the National [Business Conduct Committee] Adjudicatory Council. A
motion for disposition of a cause of action shall be decided by the
National [Business Conduct Committee] Adjudicatory Council, except that
a motion to dismiss a case for abandonment made under Rule 9344 may be
decided by the [Chair and the Vice Chair of the National Business
Conduct Committee (or either one, acting alone, in the event the other
is recused or disqualified) or the National Business Conduct
Committee.] Review Subcommittee.
(3) No change.
(k) Motion for Protective Order
(1) A Party, a person who is the owner, subject, or creator of a
Document subject to production under Rule 8210 or any other Rule which
may be introduced as evidence in a disciplinary proceeding, or a
witness who testifies at a hearing in a disciplinary proceeding may
file a motion requesting a protective order to limit disclosure or
prohibit from disclosure to other Parties, witnesses or other persons,
except the Department of Enforcement and other Association staff,
Documents or testimony that contain confidential information. The
motion shall include a general summary or extract of the Documents or
testimony without revealing confidential details. If the movant seeks a
protective order against disclosure to other Parties, copies of the
Documents shall not be served on the other Parties. Unless the
Documents are unavailable, the movant shall file for in camera
inspection a sealed copy of the Documents for which the order is
sought. If the movant is not a Party, the motion shall be served on
each Party by the movant using a method in Rule 9134(a) and filed with
the Adjudicator. A motion for a protective order shall be granted only
upon a finding that disclosure of the Document or testimony would have
a demonstrated adverse business effect on the movant or would involve
an unreasonable breach of the movant's personal privacy.
(2) If a protective order is granted, the order shall set forth the
restrictions on use and disclosure of such Document or testimony. [A
Hearing Officer) An Adjudicator does not have the authority to issue a
protective order that would limit in any manner the use by the staff of
the Association of such Documents or testimony in the Association
staff's performance of their regulatory and self-regulatory
responsibilities and
[[Page 64013]]
functions, including the transmittal, without restriction to the
recipient, of such Documents or testimony to state, federal, or foreign
regulatory authorities or other self-regulatory organizations. [A
Hearing Officer] An Adjudicator does not have the authority to issue a
protective order that purports to protect from production such
Documents or testimony in the event that the Association is subject to
a subpoena requiring that the Documents or testimony be produced.
(l) General
No change.
9147. Rulings on Procedural Matters
The NASD Board, the [NASD Regulation Board, the National Business
Conduct Committee] National Adjudicatory Council, a Hearing Officer, or
any other Adjudicator shall have full authority, except as otherwise
provided by the Code, to rule on a procedural motion and any other
procedural or administrative matter arising during the course of a
proceeding conducted pursuant to the Code, subject to the rights of
review or appeal provided by the Code.
9148. Interlocutory Review
No change.
9150. Exclusion From Rule 9000 Series Proceeding
(a) Exclusion
An Adjudicator may exclude an attorney for a Party or other person
authorized to represent others by Rule 9141 from acting as counsel,
acting in any representative capacity, or otherwise appearing in a
particular Rule 9000 Series proceeding for contemptuous conduct under
Rule 9280 or unethical or improper professional conduct in that
proceeding. If an attorney for a Party, or other person authorized to
represent others by Rule 9141, is excluded from a disciplinary hearing
or conference, or any portion thereof, such attorney or person may seek
review by the National [Business Conduct Committee] Adjudicatory
Council of such exclusion under Rule 9280(c).
(b) Other Proceedings Not Precluded
No change.
9160. Recusal or Disqualification
No person shall participate as an Adjudicator in a matter governed
by the Code as to which he or she has a conflict of interest or bias,
or circumstances otherwise exist where his or her fairness might
reasonably be questioned. In any such case the person shall recuse
himself or herself, or shall be disqualified as follows:
(a) NASD Board
The Chair of the NASD Board shall have authority to order the
disqualification of a Governor, and [the Vice] a majority of the NASD
Board excluding the Chair of the NASD Board, shall have authority to
order the disqualification of the Chair [of the NASD Board;):
[(b) NASD Regulation Board](b) National Adjudicatory Council, Review
Subcommittee, or Certain Subcommittees
[The Chair of the NASD Regulation Board] The Chair of the National
Adjudicatory Council shall have authority to order the disqualification
of a member of the National Adjudicatory Council or the Review
Subcommittee, a member of [Director and the Vice Chair of the NASD
Regulation Board shall have authority to order the disqualification of
the Chair of the NASD Regulation Board;
(c) National Business Conduct Committee or Certain Subcommittees
The Chair of the National Business Conduct Committee shall have
authority to order the disqualification of a member of the National
Business Conduct Committee,] a Subcommittee appointed pursuant to the
Rule 9410 Series or The Rule 9600 Series, a Hearing Panel appointed
pursuant to the Rule 9520 Series, and the Statutory Disqualification
Committee; and the Vice Chair of the National [Business Conduct
Committee] Adjudicatory Council shall have the authority to order the
disqualification of the Chair of the National [Business Conduct
Committee; ] Adjudicatory Council;
[(d)](c) Rule 9331 Subcommittee or Extended Proceeding Committee
Disqualification of a Panelist of a Subcommittee or Extended
Proceeding Committee appointed under the Rule 9300 Series shall be
governed by Rule 9332;
[(e)](d) Rule 9514 Hearing Panel
The NASD Regulation Board or Nasdaq Board shall have authority to
order the disqualification of a member of a Hearing Panel appointed by
such Board under Rule 9514(b).
[(f)](e) Panelist of Hearing Panel or Extended Hearing Panel
Disqualification of a Panelist of a Hearing Panel or Extended
Hearing Panel appointed under the Rule 9200 Series shall be governed by
Rule 9234;
[(g)](f) Hearing Officer
Disqualification of a Hearing Officer of a Hearing Panel or an
Extended Hearing Panel shall be governed by Rule 9233; and
[(h)](g) NASD Regulation Staff As Adjudicator
The President of NASD Regulation shall have authority to order the
disqualification of a member of the staff of the Department of Member
Regulation participating in a Rule 9410 Series decision.
9200. DISCIPLINARY PROCEEDINGS
9210. Complaint and Answer
9211. [Issuance] Authorization of Complaint
(a) Complaint
(1) If the Department of Enforcement believes that any NASD member
or associated person is violating or has violated any rule, regulation,
or statutory provision, including the federal securities laws and the
regulations thereunder, which the Association has jurisdiction to
enforce, the Department of Enforcement may authorize [and issue a
complaint as set forth in Rule 9212] a complaint.
(2) The NASD Regulation Board and the NASD Board each shall have
the authority to direct the Department of Enforcement to authorize and
issue a complaint when, on the basis of information and belief, either
of such boards is of the opinion that any NASD member or associated
person is violating or has violated any rule, regulation, or statutory
provision, including the federal securities laws and the regulations
thereunder, which the Association has jurisdiction to enforce.
[(3) At the time of authorization and issuance of a complaint, the
Department of Enforcement may propose:
(A) an appropriate location for the hearing; and
(B) if the complaint alleges at least one cause of action involving
a violation of a statute or a rule described in Rule 9120(r), that the
Chief Hearing Officer select a Market Regulation Committee Panelist for
the Hearing Panel, or, if applicable, the Extended Hearing Panel as
described in Rule 9231.]
(b) Commencement of Disciplinary Proceeding
No change.
[[Page 64014]]
9212. Complaint[-]Issuance--Requirements, Service, Amendment,
Withdrawal, and Docketing
(a) Form, Content, Notice, Docketing, and Service
(1) If a complaint is authorized, the Department of Enforcement
shall issue the complaint. Each complaint shall be in writing and
signed by the Department of Enforcement. The complaint shall specify in
reasonable detail the conduct alleged to constitute the violative
activity and the rule, regulation, or statutory provision the
Respondent is alleged to be violating or to have violated. If the
complaint consists of several causes of action, each cause shall be
stated separately. Complaints shall be served by the Department of
Enforcement on each Party pursuant to Rules 9131 and 9134, and filed at
the time of service with the Office of Hearing Officers pursuant to
Rules 9135, 9136, and 9137.
(2) At the time of issuance of a complaint, the Department of
Enforcement may propose:
(A) an appropriate location for the hearing; and
(B) if the complaint alleges at least one cause of action involving
a violation of a statute or a rule described in Rule 9120 (s), that the
Chief Hearing Officer select a Market Regulation Committee Panelist for
the Hearing Panel, or, if applicable, the Extended Hearing Panel as
described in Rule 9231.
* * * * *
9213. Assignment of Hearing Officer and Appointment of Panelists to
Hearing Panel or Extended Hearing Panel
No change.
9214. Consolidation of Disciplinary Proceedings
(a) Initiated by Chief Hearing Officer
No change.
(b) Initiated by a Party
A Party may file a motion to consolidate two or more disciplinary
proceedings if such consolidation would further the efficiency of the
disciplinary process, if the subject complaints involve common
questions of law or fact or one or more of the same Respondents, or if
one or more of the factors favoring consolidation set forth in
paragraph (a) appear to be present. If a Party moves to consolidate two
or more disciplinary proceedings, the party shall file such motion,
together with a copy of each relevant complaint and any answer thereto
that has been filed, with the Office of Hearing Officers, and, pursuant
to Rule 9133, shall serve the same upon the Parties [pursuant to Rule
9133] in each of the cases proposed to be consolidated. The Parties
shall have 14 days after service to file a response, stating any
arguments in favor of or opposition to consolidation, and shall serve
the response upon the Parties in each of the cases proposed to be
consolidated. The Chief Hearing Officer shall issue an order approving
or denying the request for consolidation.
(c) Impact on Hearing Panel or Extended Hearing Panel
No change.
9215. Answer to Complaint
(a) Form, Service, Notice
[Each] Pursuant to Rule 9133, each Respondent named in a complaint
shall [answer and] serve an answer to the complaint on all other
Parties within 25 days after service of the complaint on such
Respondent [pursuant to Rule 9133], and at the time of service shall
file such answer with the Office of Hearing Officers pursuant to Rule
9135, 9136 and 9137. The Hearing Officer assigned to a disciplinary
proceeding pursuant to Rule 9213 may extend such period for good cause.
Upon the Receipt of a Respondent's answer, the Office of Hearing
Officers shall promptly send written notice of the receipt of such
answer to all Parties.
* * * * *
(e) Extension of Time to Answer Amended Complaint
If a complaint is amended pursuant to Rule 9212(b), the time for
filing an answer or amended answer shall be extended to 14 days after
service of the amended complaint. If any Respondent has already filed
an answer, such Respondent shall have [15] 14 days after service of the
amended complaint, unless otherwise ordered by the Hearing Officer,
within which to file an amended answer.
(f) Failure to Answer, Default
If a Respondent does not file an answer or make any other filing or
request related to the complaint with the Office of Hearing Officers
within the time required, the [Hearing Officer shall order the]
Department of Enforcement [to] shall send a second notice to such
Respondent requiring an answer within 14 days after service of the
second notice[, or within such longer period as the Hearing Officer in
his or her discretion may order]. The second notice shall state that
failure of the Respondent to reply within the period specified shall
allow the Hearing Officer, in the exercise of his or her discretion,
to: (1) treat as admitted by the Respondent the allegations in the
complaint; and (2) enter a default decision against the Respondent
pursuant to Rule 9269. If no answer is filed with the Office of Hearing
Officers within the time required [by the second notice], the
allegations of the complaint may be considered admitted by such
Respondent and a default decision may be issued by the Hearing Officer.
A Respondent may, for good cause shown, move the National [Business
Conduct Committee] Adjudicatory Council to set aside a default.
9216. Acceptance, Waiver, and Consent; Plan Pursuant to SEC Rule 19d-
1(c)(2)
(a) Acceptance, Waiver, and Consent Procedures
(1) Notwithstanding Rule 9211, if the Department of Enforcement has
reason to believe a violation has occurred and the member or associated
person does not dispute the violation, the Department of Enforcement
may prepare and request that the member or associated person execute a
letter accepting a finding of violation, consenting to the imposition
of sanctions, and agreeing to waive such member's or associated
person's right to a hearing before a Hearing Panel or, if applicable,
an Extended Hearing Panel, and any right of appeal to the National
[Business Conduct Committee] Adjudicatory Council, the Commission, and
the courts, or to otherwise challenge the validity of the letter, if
the letter is accepted. The letter shall describe the act or practice
engaged in or omitted, the rule, regulation, or statutory provision
violated, and the sanction or sanctions to be imposed.
(2)(A) If a member or person associated with a member submits an
executed letter of acceptance, waiver, and consent, by the submission
such member or person associated with a member also waives:
(i) Any right of such member or person associated with a member to
claim bias or prejudgment of the General Counsel, the National
[Business Conduct Committee] Adjudicatory Council, or any member of the
National [Business Conduct Committee] Adjudicatory Council, in
connection with such person's or body's participation in discussions
regarding the terms and conditions of the letter of acceptance, waiver,
and consent, or other consideration of the letter of acceptance,
waiver, and consent, including acceptance or rejection of such letter
of acceptance, waiver, and consent; and
[[Page 64015]]
(ii) Any right of such member or person associated with a member to
claim that a person violated the ex parte prohibitions of Rule 9143 or
the separation of functions prohibitions of Rule 9144, in connection
with such person's or body's participation in discussions regarding the
terms and conditions of the letter of acceptance, waiver, and consent,
or other consideration of the letter of acceptance, waiver, and
consent, including acceptance or rejection of such letter of
acceptance, waiver, and consent.
(B) If a letter of acceptance, waiver, and consent is rejected, the
member or associated person shall be bound by the waivers made under
subparagraphs (a)(1) and (a)(2)(A) for conduct by persons or bodies
occurring during the period beginning on the date of the letter of
acceptance, waiver, and consent was executed and submitted and ending
upon the rejection of the letter of acceptance, waiver, and consent.
(3) If the member or associated person executes the letter of
acceptance, waiver, and consent, it shall be submitted to the National
[Business Conduct Committee. The Chair and the Vice Chair of the
National Business Conduct Committee (or either one, acting alone, in
the event the other is recused or disqualified)] Adjudicatory Council.
The Review Subcommittee or the General Counsel may accept such letter
or refer it to the National [Business Conduct Committee] Adjudicatory
Council for acceptance or rejection by the National [Business Conduct
Committee. The Chair and the Vice Chair of the National Business
Conduct Committee (or either one, acting alone, in the event the other
is recused or disqualified)] Adjudicatory Council. The Review
Subcommittee may reject such letter or refer it to the National
[Business Conduct Committee] Adjudicatory Council for acceptance or
rejection by the National [Business Conduct Committee] Adjudicatory
Council.
(4) If the letter is accepted by the National [Business Conduct
Committee, the Chair and the Vice Chair of the National Business
Conduct Committee (or either one, acting alone, in the event the other
is recused or disqualified)] Adjudicatory Council, the Review
Subcommittee, or the General Counsel, it shall be deemed final and
shall constitute the complaint, answer, and decision in the matter. If
the letter is rejected by the [Chair and Vice Chair of the National
Business Conduct Committee (or either one, acting alone, in the event
the other is recused or disqualified) or the National Business Conduct
Committee] Review Subcommittee or the National Adjudicatory Council,
NASD Regulation may take any other appropriate disciplinary action with
respect to the alleged violation or violations. If the letter is
rejected, the member or associated person shall not be prejudiced by
the execution of the letter of acceptance, waiver, and consent under
subparagraph (a)(1) and the letter may not be introduced into evidence
in connection with the determination of the issues set forth in any
complaint or in any other proceeding.
(b) Procedure for Violation Under Plan Pursuant to SEC Rule 19d-1(c)(2)
(1) Notwithstanding Rule 9211, NASD Regulation or the National
[Business Conduct Committee] Adjudicatory Council may, subject to the
requirements set forth in subparagraphs (b)(2) through (b)(4) and in
SEC Rule 19d-1(c)(2), impose a fine (not to exceed $2,500) and/or a
censure on any member or associated person with respect to any rule
listed in IM-9216. If the Department of Enforcement has reason to
believe a violation has occurred and if the member or associated person
does not dispute the violation, the Department of Enforcement may
prepare and request that the member or associated person execute a
minor rule violation plan letter accepting a finding of violation,
consenting to the imposition of sanctions, and agreeing to waive such
member's or associated person's right to a hearing before the Hearing
Panel or, if applicable, an Extended Hearing Panel, and any right of
appeal to the National [Business Conduct Committee] Adjudicatory
Council, the Commission, and the courts, or to otherwise challenge the
validity of the letter, if the letter is accepted. The letter shall
describe the act or practice engaged in or omitted, the rule,
regulation, or statutory provision violated, and the sanction or
sanctions to be imposed.
(2)(A) If a member or person associated with a member submits an
executed minor rule violation plan letter, by the submission such
member or person associated with a member also waives:
(i) any right of such member or person associated with a member to
claim bias or prejudgment of the General Counsel, the National
[Business Conduct Committee] Adjudicatory Council, or any member of the
National [Business Conduct Committee] Adjudicatory Council, in
connection with such person's or body's participation in discussions
regarding the terms and conditions of the minor rule violation plan
letter or other consideration of the minor rule violation plan letter,
including acceptance or rejection of such minor rule violation plan
letter; and
(ii) any right of such member or person associated with a member to
claim that a person violated the ex parte prohibitions of Rule 9143 or
the separation of functions prohibitions of Rule 9144, in connection
with such person's or body's participation in discussions regarding the
terms and conditions of the minor rule violation plan letter or other
consideration of the minor rule violation plan letter, including
acceptance or rejection of such minor rule violation plan letter.
(B) if a minor rule violation plan letter is rejected, the member
or person associated with a member shall be bound by the waivers made
under subparagraphs (b)(1) and (b)(2)(A) for conduct by persons or
bodies occurring during the period beginning on the date the minor rule
violation plan letter was executed and submitted and ending upon the
rejection of the minor rule violation plan letter.
(3) If the member or associated person executes the minor rule
violation plan letter, it shall be submitted to the National [Business
Conduct Committee. The Chair and the Vice Chair of the National
Business Conduct Committee (or either one, acting alone, in the event
the other is recused or disqualified)] Adjudicatory Council. The Review
Subcommittee or the General Counsel may accept such letter or refer it
to the National [Business Conduct Committee] Adjudicatory Council for
acceptance or rejection by the National [Business Conduct Committee.
The Chair and the Vice Chair of the National Business Conduct Committee
(or either one, acting alone, in the event the other is recused or
disqualified)] Adjudicatory Council. The Review Subcommittee may reject
such letter or refer it to the National [Business Conduct Committee]
Adjudicatory Council for acceptance or rejection by the National
[Business Conduct Committee] Adjudicatory Council.
(4) If the letter is accepted by the National [Business Conduct
Committee, the Chair and the Vice Chair of the National Business
Conduct Committee (or either one, acting alone, in the event the other
is recused or disqualified)] Adjudicatory Council, the Review
Subcommittee, or the General Counsel, it shall be deemed final and the
Association shall report the violation to the Commission as required by
the Commission pursuant to a plan approved under SEC Rule 19d-1(c)(2).
If the letter is rejected by the [Chair and the Vice Chair of the
National Business
[[Page 64016]]
Conduct Committee (or either one, acting alone, in the event the other
is recused or disqualified), or by the National Business Conduct
Committee] Review Subcommittee or the National Adjudicatory Council,
NASD Regulation may take any other appropriate disciplinary action with
respect to the alleged violation or violations. If the letter is
rejected, the member or associated person shall not be prejudiced by
the execution of the minor rule violation plan letter under
subparagraph (b)(1) and the letter may not be introduced into evidence
in connection with the determination of the issues set forth in any
complaint or in any other proceeding.
IM-9216. Violations Appropriate for Disposition Under Plan Pursuant to
SEC Rule 19d-1(c)(2)
Rule 2210(b) and (c) and Rule 2220 (b) and (c)--Failure to
have advertisements and sales literature approved by a principal prior
to use; failure to maintain separate files of advertisements and sales
literature containing required information; and failure to file
advertisements with the Association within the required time limits.
Rule 3360--Failure to timely file reports of short
positions on Form NS-1.
Rule 3110--Failure to keep and preserve books, accounts,
records, memoranda, and correspondence in conformance with all
applicable laws, rules, regulations and statements of policy
promulgated thereunder, and with the Rules of the Association.
Rule 8211, Rule 8212, and Rule 8213--Failure to submit
trading data as requested.
9220. Request for Hearing; Extensions of Time, Postponements,
Adjournments
9221. Request for Hearing
(a) Respondent Request for Hearing
With the filing of any Respondent's answer, such Respondent may:
(1) request a hearing; (2) propose an appropriate location for the
hearing; and (3) propose, if the complaint alleges at least one cause
of action involving a violation of a statute or rule described in Rule
9120 [(r)(s), that the Chief Hearing Officer select a Market Regulation
Committee Panelist for a Hearing Panel or, if applicable, an Extended
Hearing Panel as described in Rule 9231. If a Respondent requests a
hearing, a hearing shall be granted. A Respondent who fails to request
a hearing with the filing of his or her answer waives the right to a
hearing unless a Hearing Officer, Hearing Panel, or, if applicable, an
Extended Hearing Panel, grants, for good cause shown, a later filed
motion by such Respondent requesting a hearing.
* * * * *
9230. Appointment of Hearing Panel, Extended Hearing Panel
9231. Appointment by the Chief Hearing Officer of Hearing Panel or
Extended Hearing Panel
(a) Appointment
No change.
(b) Hearing Panel
The Hearing Panel shall be composed of a Hearing Officer and two
Panelists, except as provided in Rule 9234 (a), (c), (d), or (e). The
Hearing Officer shall serve as the chair of the Hearing Panel. Each
Panelist shall be associated with a member of the Association or
retired therefrom.
(1) Except as provided in (2), the Chief Hearing Officer shall
select as a Panelist a person who:
(A) currently serves or previously served on a District Committee;
(B) previously served on the National [Business Conduct Committee]
Adjudicatory Council;
(C) previously served on a disciplinary subcommittee of the
National Adjudicatory Council or the National Business Conduct
Committee, including a Subcommittee, an Extended Proceeding Committee,
or their predecessor subcommittees; or,
(D) previously served as a Director, a director of the Nasdaq Board
of Directors, or a Governor, but does not serve currently in any of
these positions.
(2) If the complaint alleges at least one cause of action involving
a violation of a statute or a rule described in Rule 9120 [r](s), the
Chief Hearing Officer may select as a Panelist a person who currently
serves on the Market Regulation Committee or who previously served on
the Market Regulation Committee not earlier than four years before the
date the complaint was served upon the Respondent who was the first
served Respondent in the disciplinary proceeding for which the Hearing
Panel or the Extended Hearing Panel is being appointed.
(c) Extended Hearing Panel
Upon consideration of the complexity of the issues involved, the
probable length of the hearing, or other factors that the Chief Hearing
Officer deems material, the Chief Hearing Officer may determine that a
matters shall be designated an Extended Hearing, and that such matter
shall be considered by an Extended Hearing Panel. The Extended Hearing
Panel shall be composed of a Hearing Officer and two Panelists, except
as provided in Rule 9234(a), (c), (d), or (e). The Hearing Officer will
serve as the chair of the Extended Hearing Panel. The Panelists shall
be associated with a member of the Association, or retired therefrom.
The Chief Hearing Officer shall have discretion to compensate any or
all Panelists of an Extended Hearing Panel at the rate then in effect
for arbitrators appointed under the Rule 10000 Series.
(1) Except as provided in (2), the Chief Hearing Officer shall
select as a Panelist a person who meets the criteria set forth in
paragraph (b)(1).
(2) If the complaint alleges at least one cause of action involving
a violation of a statute or a rule described in Rule 9120 [r](s), the
Chief Hearing Officer may select as a Panelist a person who currently
serves on the Market Regulation Committee or who previously served on
the Market Regulation Committee not earlier than four years before the
date the complaint was served upon the Respondent who was the first
served Respondent in the disciplinary proceeding for which the Hearing
Panel or the Extended Hearing Panel is being appointed.
(d) Observer
A person who is qualified to serve as a Panelist may be designated
by the Chief Hearing Officer to serve as an observer to a Hearing Panel
or an Extended Hearing Panel. If the Chief Hearing Officer designates
more than two people to serve as observers to a Hearing Panel or an
Extended Hearing Panel, the Chief Hearing Officer shall obtain the
consent of the Parties. An observer may attend any hearing of a
disciplinary proceeding and observe the proceeding, but may not vote or
participate in any other manner in the hearing or the deliberations of
the Hearing Panel or the Extended Hearing Panel, or participate in the
administration of the disciplinary proceeding.
9232. Criteria for Selection of Panelists and Replacement Panelists
(a) Chief Hearing Officer Selection Alternatives
No change.
(b) Criteria for Selection of Panelist from Market Regulation Committee
The Chief Hearing Officer may select one but not more than one
Panelist from the Market Regulation Committee, as provided in Rule
9231, to serve in a disciplinary proceeding if the complaint alleges at
least one cause of action
[[Page 64017]]
involving a violation of a statute or a rule described in Rule
9120[(r)](s).
* * * * *
9235. Hearing Officer Authority
(a) Hearing Officer Authority
No change.
(b) Authority in the Absence of Hearing Officer
If the Hearing Officer appointed to a case is temporarily
unavailable or unable for any reason to discharge his or her duties in
a particular proceeding under conditions not requiring the appointment
of a replacement Hearing Officer, the Chief Hearing Officer or the
Deputy Chief Hearing Officer in his or her discretion may exercise the
necessary authority in the same manner as if he or she had been
appointed Hearing Officer in the particular proceeding.
9240. Pre-hearing Conference and Submission
9241. Pre-hearing Conference
* * * * *
(d) Scheduling
An initial pre-hearing conference, unless determined by the Hearing
Officer to be unnecessary or premature, shall be held within 21 days
after [service] filing of an answer, or after the expiration of the
second period provided for filing an answer as set forth in Rule
9215(f). When a complaint names multiple Respondents, the 21-day period
shall commence from the later of (i) the date on which the last timely
answer was filed, or (ii) if one or more Respondents have failed to
answer, from the expiration of the second period provided for filing an
answer under Rule 9215(f).
* * * * *
9250. Discovery
9251. Inspection and Copying of Documents in Possession of Staff
* * * * *
(g) Failure to Make Documents Available--Harmless Error
In the event that a Document required to be made available to a
Respondent pursuant to this Rule is not made available by the
Department of Enforcement, no rehearing or amended decision of a
proceeding already heard or decided shall be required unless the
Respondent establishes that the failure to make the Document available
was not harmless error. The Hearing Officer, or, upon appeal or review,
a Subcommittee, an Extended Proceeding Committee, or the National
[Business Conduct Committee] Adjudicatory Council, shall determine
whether the failure to make the document available was not harmless
error, applying applicable Association, Commission, and federal
judicial precedent.
9252. Requests for Information
No change.
9253. Production of Witness Statements
(a) Availability
A Respondent in a disciplinary proceeding may file a motion
requesting that the Department of Enforcement produce for inspection
and copying [a] any statement of any person called or to be called as a
witness by the Department of Enforcement that pertains, or is expected
to pertain, to his or her direct testimony [, including statements] and
that would be required to be produced pursuant to the Jencks Act, 18
U.S.C. Sec. 3500. The production shall be made at a time and place
fixed by the Hearing Officer and shall be made available to all
Parties. Such production shall be made under conditions intended to
preserve the items to be inspected or copied.
(b) Failure to Produce--Harmless Error
In the event that a statement required to be made available for
inspection and copying by a Respondent is not provided by the
Department of Enforcement, there shall be no rehearing of a proceeding
already heard, or issuance of an amended decision in a proceeding
already decided, unless the Respondent establishes that the failure to
provide the statement was not harmless error. The Hearing Officer, or
upon appeal or review, a Subcommittee, an Extended Proceeding
Committee, or the National [Business Conduct Committee] Adjudicatory
Council, shall determine whether the failure to provide any statement
was not harmless error, applying applicable Association, Commission,
and federal judicial precedent.
* * * * *
9270. Settlement Procedure
(a) When Offer Allowed; No Stay of Proceeding
A Respondent who is notified that a proceeding has been instituted
against him or her may propose in writing an offer of settlement at any
time. If a Respondent proposes an offer of settlement [30 or fewer
days] before the hearing on the merits [is scheduled to begin, or] has
begun, the making of an offer of settlement shall not stay the
proceeding, unless otherwise decided by the Hearing Officer. If a
Respondent proposes an offer of settlement after the hearing on the
merits has begun, the making of an offer of settlement shall not stay
the proceeding, unless otherwise decided by the Hearing Panel or, if
applicable, the Extended Hearing Panel.
* * * * *
(d) Waiver
(1) If a Respondent submits an offer of settlement, by the
submission such Respondent waives:
(A) any right of such Respondent to a hearing before a Hearing
Panel or, if applicable, and Extended Hearing Panel, and any right of
appeal to the National [Business Conduct Committee] Adjudicatory
Council, the Commission, and the courts, or any right otherwise to
challenge or contest the validity of the order issued, if the offer of
settlement and order of acceptance are accepted;
(B) any right of such Respondent to claim bias or prejudgment of
the Chief Hearing Officer, Hearing Officer, a Hearing Panel or, if
applicable, an Extended Hearing Panel, a Panelist on a Hearing Panel,
or, if applicable, an Extended Hearing Panel, the General Counsel, the
National [Business Conduct Committee] Adjudicatory Council, or any
member of the National [Business Conduct Committee] Adjudicatory
Council, in connection with such person's or body's participation in
discussions regarding the terms and conditions of the offer of
settlement and the order of acceptance, or other consideration of the
offer of settlement and order of acceptance, including acceptance, or
rejection of such offer of settlement and order of acceptance; and
(C) any right of such Respondent to claim that a person or body
violated the ex parte prohibitions of Rule 9143 or the separation of
functions prohibitions of Rule 9144, in connection with such person's
or body's participation in discussion regarding the terms and
conditions of the offer of settlement and the order of acceptance, or
other consideration of the offer of settlement and order of settlement,
including acceptance or rejection of such offer of settlement and order
of acceptance.
(2) If an offer of settlement and an order of acceptance are
rejected, the Respondent shall be bound by the waivers made in this
paragraph (d) for conduct by persons or bodies occurring during the
period beginning from the date the offer of settlement was submitted
and ending upon the rejection of the offer of settlement and order of
acceptance.
[[Page 64018]]
(e) Uncontested Offers of Settlement
If a Respondent makes an offer of settlement and the Department of
Enforcement does not oppose it, the offer of settlement is uncontested.
If an offer of settlement is determined to be uncontested by the
Department of Enforcement before a hearing on the merits has begun, the
Department of Enforcement shall transmit the uncontested offer of
settlement and a proposed order of acceptance to the National [Business
Conduct Committee] Adjudicatory Council with its recommendation. If an
offer of settlement is determined to be uncontested by the Department
of Enforcement after a hearing on the merits has begun, the Department
of Enforcement shall transmit the offer of settlement and a proposed
order of acceptance to the Hearing Panel or, if applicable, the
Extended Hearing Panel for acceptance or rejection. If accepted by the
Hearing Panel or, if applicable, Extended Hearing Panel, the offer of
settlement and the order of acceptance shall be forwarded to the
National [Business Conduct Committee] Adjudicatory Council to accept or
reject.
(1) A proposed order of acceptance shall make findings of fact,
including a statement of the rule, regulation, or statutory provision
violated, and impose sanctions consistent with the terms of the offer
of settlement.
(2) Before an offer of settlement and an order of acceptance shall
become effective, they shall be submitted to and accepted by the
National [Business Conduct Committee. The Chair and the Vice Chair of
the National Business Conduct Committee (or either one, acting alone,
in the event the other is recused or disqualified)] Adjudicatory
Council. The Review Subcommittee or the General Counsel may accept such
offer of settlement and order of acceptance or refer them to the
National [Business Conduct Committee] Adjudicatory Council for
acceptance or rejection by the National [Business Conduct Committee.
The Chair and the Vice Chair of the National Business Conduct Committee
(or either one, acting alone, in the event the other is recused or
disqualified)] Adjudicatory Council. The Review Subcommittee may reject
such offer of settlement and order of acceptance or refer them to the
National [Business Conduct Committee] Adjudicatory Council for
acceptance or rejection by the National [Business Conduct Committee]
Adjudicatory Council.
(3) If the offer of settlement and order of acceptance are accepted
by the National [Business Conduct Committee, the Chair and the Vice
Chair of the National Business Conduct Committee (or either one, acting
alone, in the event the other is recused or disqualified)] Adjudicatory
Council, the Review Subcommittee, or the General Counsel, they shall
become final and the National [Business Conduct Committee, the Chair
and the Vice Chair of the National Business Conduct Committee (or
either one, acting alone, in the event the other is recused or
disqualified),] Adjudicatory Council. The Review Subcommittee or the
General Counsel shall communicate the acceptance to the Hearing Officer
who shall thereafter issue the order.
(f) Contested Offers of Settlement
If a Respondent makes an offer of settlement and the Department of
Enforcement opposes it, the offer of settlement is contested. When the
Department of Enforcement opposes an offer of settlement, the
Respondent's written offer and the Department of Enforcement's written
opposition shall be submitted to a Hearing Panel or, if applicable, an
Extended Hearing Panel. The Hearing Panel or, if applicable, the
Extended Hearing Panel, may order the Department of Enforcement and the
Respondent to attend a settlement conference.
(1) If a contested offer of settlement is approved by the Hearing
Panel or, if applicable, Extended Hearing Panel, the Hearing Officer
shall draft an order of acceptance of the offer of settlement. The
order of acceptance shall make findings of fact, including a statement
of the rule, regulation, or statutory provision violated, and impose
sanctions consistent with the terms of the offer of settlement. The
offer of settlement, any written opposition thereto, and the order of
acceptance shall be forwarded to the National [Business Conduct
Committee] Adjudicatory Council to accept or reject.
(2) Before an offer of settlement and order of acceptance shall
become effective, they shall be submitted to, and accepted by, the
National [Business Conduct Committee. The Chair and the Vice Chair of
the National Business Conduct Committee (or either one, acting alone,
in the event the other is recused or disqualified)] Adjudicatory
Council. The Review Subcommittee may accept or reject such offer of
settlement and order of acceptance or refer them to the National
[Business Conduct Committee] Adjudicatory Council for acceptance or
rejection by the National [Business Conduct Committee] Adjudicatory
Council.
(3) If the offer of settlement and order of acceptance are accepted
by the National [Business Conduct Committee or the Chair and the Vice
Chair of the National Business Conduct Committee (or either one, acting
alone, in the event the other is recused or disqualified), the National
Business Conduct Committee or the Chair or the Vice Chair of the
National Business Conduct Committee (or either one, acting alone, in
the event the other is recused or disqualified)] Adjudicatory Council
or the Review Subcommittee, the National Adjudicatory Council or the
Review Subcommittee shall communicate the acceptance to the Hearing
Officer who shall thereafter issue the order.
(g) Final Disciplinary Action of Association
No Change.
(h) Rejection of Offer of Settlement
If an uncontested offer of settlement or an order of acceptance is
rejected by the Hearing Panel or, if applicable, the Extended Hearing
Panel, the [Chair and Vice Chair of the National Business Conduct
Committee (or either one, acting alone, in the event the other is
recused or disqualified), or the National Business Conduct Committee]
Review Subcommittee, or the National Adjudicatory Council, the
Respondent shall be notified in writing and the offer of settlement and
proposed order of acceptance shall be deemed withdrawn. If a contested
offer of settlement or an order of acceptance is rejected by the
Hearing Panel or, if applicable, the Extended Hearing Panel, the [Chair
and Vice Chair of the National Business Conduct Committee (or either
one, acting alone, in the event the other is recused or disqualified),
or the National Business Conduct Committee] Review Subcommittee, or the
National Adjudicatory Council, the Respondent shall be notified in
writing and the offer of settlement and proposed order of acceptance
shall be deemed withdrawn. The rejected offer and proposed order of
acceptance shall not constitute a part of the record in any proceeding
against the Respondent making the offer.
(i) Disciplinary Proceeding With Multiple Respondents
No change.
(j) No Prejudice From Rejected Offer of Settlement
If an offer of settlement is rejected by a Hearing Panel or, if
applicable, an Extended Hearing Panel, the [Chair and the Vice Chair of
the National Business Conduct Committee (or either one, acting alone,
in the event the other is recused or disqualified), or the National
Business Conduct Committee] Review
[[Page 64019]]
Subcommittee, or the National Adjudicatory Council, the Respondent
shall not be prejudiced by the offer, which may not be introduced into
evidence in connection with the determination of the issues involved in
the pending complaint or in any other proceeding.
9280. Contemptuous Conduct
* * * * *
(c) National [Business Conduct Committee] Adjudicatory Council Review
of Exclusions
If an attorney for a Party, or other person authorized to represent
others by Rule 9141, is excluded from a disciplinary hearing or
conference, or any portion thereof, such attorney or other person may
seek review of the exclusion by filing a motion to vacate with the
National [Business Conduct Committee] Adjudicatory Council. Such motion
to vacate shall be filed and served on all Parties within five days
after service of the exclusion order. Any response shall be filed with
the National [Business Conduct Committee] Adjudicatory Council and
served on all Parties within five days after the service to the motion
to vacate. The National [Business Conduct Committee] Adjudicatory
Council or the Review Subcommittee shall consider such motion on an
expedited basis and promptly issue a written order. The filing of a
motion to vacate shall stay all aspects of the disciplinary proceeding
until at least seven days after service of the order of the National
[Business Conduct Committee. The National Business Conduct Committee]
Adjudicatory Council or the Review Subcommittee. The review proceedings
shall be conducted on the basis of the written record without oral
argument.
(d) Adjournment
The hearing, conferences, or other activities relating to the
disciplinary proceeding shall be stayed pending the [National Business
Conduct Committee's review] review by the National Adjudicatory Council
or the Review Subcommittee of an exclusion order in paragraph (c). In
the event that the National [Business Conduct Committee] Adjudicatory
Council or the Review Subcommittee upholds an exclusion of an attorney
or other person authorized to represent others by Rule 9141, the
Hearing Officer may, upon motion by a Party represented by an attorney
or other person subject to an order of exclusion, grant an adjournment
to allow the retention of new counsel or selection of a new
representative. In determining whether to grant an adjournment or the
length of an adjournment, the Hearing Officer shall consider whether
there are other counsel or representatives of record on behalf of the
Party, the availability of other counsel or other members of an
excluded attorney's firm, or the availability of other representatives
for the Party, and any other relevant factors.
9300. REVIEW OF DISCIPLINARY PROCEEDING BY NATIONAL [BUSINESS CONDUCT
COMMITTEE, NASD REGULATION AND NASD BOARDS] ADJUDICATORY COUNCIL AND
NASD BOARD; APPLICATION FOR COMMISSION REVIEW
9310. Appeal to or Review by National [Business Conduct Committee]
Adjudicatory Council
9311. Appeal by Any Party; Cross-Appeal
(a) Time to File Notice of Appeal
No change.
(B) Effect
An appeal to the National [Business Conduct Committee] Adjudicatory
Council from a decision issued pursuant to Rule 9268 or Rule 9269 shall
operate as a stay of that decision until the National [Business Conduct
Committee] Adjudicatory Council issues a decision pursuant to Rule 9349
or, in cases called for discretionary review by the NASD Regulation or
NASD Boards, until a decision is issued pursuant to Rule 9351 or Rule
9352.
(c) Notice of Appeal Content and Signature Requirements
A Party appealing pursuant to this Rule shall file a written notice
of appeal with the Office of Hearing Officers and service the notice on
the Parties. The notice of appeal shall be signed by the appealing
Party, or his or her counsel or representative, and shall contain:
(1) The name of the disciplinary proceeding;
(2) The disciplinary proceeding docket number;
(3) The name of the Party on whose behalf the appeal is made;
(4) A statement on whether oral argument before the National
[Business Conduct Committee] Adjudicatory Council is requested; and
(5) A brief statement of the findings, conclusions, or sanctions as
to which exceptions are taken.
(d) Notice of Cross-Appeal
No change.
(e) Waiver of Issues Not Raised
The National [Business Conduct Committee] Adjudicatory Council may,
in its discretion, deem waived any issued not raised in the notice of
appeal or cross-appeal. The National [Business Conduct Committee]
Adjudicatory Council, the Review Subcommittee, a Subcommittee or, if
applicable, an Extended Proceeding Committee, or, for a disciplinary
proceeding decided under Rule 9269, the General Counsel, shall provide
the Parties with notice of, and an opportunity to submit briefs on, any
issue that shall be considered by the National [Business Conduct
Committee] Adjudicatory Council if such issue was not previously set
forth in the notice of appeal.
(f) Withdrawal of Notice of Appeal or Cross-Appeal
No change.
9312. Review Proceeding Initiated By National [Business Conduct
Committee] Adjudicatory Council
(a) Call for Review
(1) Rule 9268 Decision
A decision issued pursuant to Rule 9268 may be subject to a call
for review by any member of the National [Business Conduct Committee]
Adjudicatory Council or, pursuant to authority delegated from the
National [Business Conduct Committee] Adjudicatory Council, by any
member of the Review Subcommittee [of the National Business Conduct
Committee. The Review Subcommittee shall be composed of two to four
persons who are current members of the National Business Conduct
Committee. At least 50 percent of the persons making up the Review
Subcommittee shall be Non-Industry Directors]. A decision issued
pursuant to Rule 9268 shall be subject to a call for review within 45
days after the date of service of the decision. If called for review,
such [decision shall be reviewed by the National [Business Conduct
Committee] Adjudicatory Council.
(2) Rule 9269 Decision
A default decision issued pursuant to Rule 9269 shall be subject to
a call for review by the General Counsel, on his or her own motion
within 45 days after the date of service of the decision. If called for
review, such decision shall be reviewed by the National [Business
Conduct Committee] Adjudicatory Council.
(b) Effect
Institution of review by a member of the National [Business Conduct
Committee] Adjudicatory Council on his or her own motion, a member of
the Review Subcommittee on his or her own
[[Page 64020]]
motion, or the General Counsel, on his or her own motion, shall operate
as a stay of a final decision issued pursuant to Rule 9268 or Rule 9269
as to all Parties subject to the notice of review, until the National
[Business Conduct Committee] Adjudicatory Council issues a decision
pursuant to Rule 9349, or, in cases called for discretionary review by
the NASD [Regulation or NASD Boards] Board, until a decision is issued
pursuant to Rule 9351 [or Rule 9352].
(c) Requirements
(1) If a member of the National [Business Conduct Committee]
Adjudicatory Council, a member of the Review Subcommittee, or, for a
disciplinary proceeding decided under Rule 9269, the General Counsel
determines to call a case for review, a written notice of review shall
be served promptly on each Party to the proceeding and filed with the
Office of Hearing Officers. Such notice of review shall contain:
(A) the name of the disciplinary proceeding;
(B) the disciplinary proceeding docket number; and
(C) a brief statement of the findings, conclusions, or sanctions
with respect to which the National [Business Conduct Committee]
Adjudicatory Council, the Review Subcommittee, or the General Counsel
determined that a call for review was necessary.
(2) The statement contained in the notice of review shall not limit
the scope of the National [Business Conduct Committee's] Adjudicatory
Council's authority under Rule 9346 to review any issues raised in the
[decision rendered pursuant to Rule 9268 or Rule 9269.] record. The
National [Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, a Subcommittee or, if applicable, an Extended Proceeding
Committee, or, for a disciplinary proceeding decided under Rule 9269,
the General Counsel shall provide the Parties with notice of, and an
opportunity to submit briefs on, any issue that shall be considered by
the National [Business Conduct Committee] Adjudicatory Council if such
issue was not previously set forth in the notice of review.
(d) Effect of Withdrawal of Notice of Appeal, Cross-Appeal
If the review of a disciplinary proceeding by the National
[Business Conduct Committee] Adjudicatory Council is terminated before
the National [Business Conduct Committee] Adjudicatory Council issues a
decision on the merits because all appealing Parties file a notice of
withdrawal of appeal and no Party previously filed a notice of cross-
appeal, or all Parties who previously filed a notice of cross-appeal
file a notice of withdrawal of cross-appeal:
(1) a member of the National [Business Conduct Committee or of]
Adjudicatory Council or the Review Subcommittee shall have the right to
call for review a decision issued pursuant to Rule 9268 in accordance
with Rule 9312(a)(1), except that the 45 day period during which a call
for review may be made shall begin on the day the Association receives
the last filed notice of withdrawal of appeal or, if applicable, the
last filed notice of withdrawal of cross-appeal; and,
(2) No change.
9313. Counsel to National [Business Conduct Committee] Adjudicatory
Council
(a) Authority
A Counsel to the National [Business Conduct Committee] Adjudicatory
Council shall be appointed by the General Counsel for each disciplinary
case on appeal or review. A Counsel to the National [Business Conduct
Committee] Adjudicatory Council shall have authority to take
ministerial and administrative actions to further the efficient
administration of a proceeding, including the authority to:
(1) direct the Office of Hearing Officers to complete and transmit
a record of a disciplinary proceeding to the National [Business Conduct
Committee] Adjudicatory Council in accordance with Rule 9267;
* * * * *
(b) Review
A Party seeking the review of a decision of a Counsel to the
National [Business Conduct Committee] Adjudicatory Council, may make a
motion to the National [Business Conduct Committee] Adjudicatory
Council, the Review Subcommittee, a Subcommittee or, if applicable, an
Extended Proceeding Committee.
9320. [Transmission] Transmission of Record; Extensions of Time,
Postponements, Adjournments
9321. Transmission of Record
Within 21 days after the filing of a notice of appeal or notice of
review, or at such later time as the National [Business Conduct
Committee] Adjudicatory Council may designate, the Office of Hearing
Officers shall assemble and prepare an index to the record, transmit
the record and the index to the National [Business Conduct Committee]
Adjudicatory Council, and serve copies of the index upon all Parties.
The Hearing Officer who participated in the disciplinary proceeding, or
the Chief Hearing Officer, shall certify that the record transmitted to
the National [Business Conduct Committee] Adjudicatory Council is
complete.
9322. Extensions of Time, Postponements, Adjournments
(a) Availability
At any time prior to the issuance of a decision pursuant to Rule
9349, the National [Business Conduct Committee] Adjudicatory Council,
the Review Subcommittee, a Subcommittee or, if applicable, and Extended
Proceeding Committee, or Counsel to the National [Business Conduct
Committee] Adjudicatory Council, for good cause shown, may extend or
shorten a period prescribed by the Code for the filing of any papers,
except that Counsel to the National [Business Conduct Committee]
Adjudicatory Council may shorten a period so prescribed only with the
consent of the Parties. The National [Business Conduct Committee]
Adjudicatory Council, the Review Subcommittee, a Subcommittee or, if
applicable, an Extended Proceeding Committee, or Counsel to the
National [Business Conduct Committee] Adjudicatory Council, for good
cause shown, may postpone or adjourn a hearing consistent with
paragraph (b), except that Counsel to the National [Business Conduct
Committee] Adjudicatory Council may postpone or adjourn a hearing only
with the consent of the Parties.
(b) Limitations on Postponements, Adjournments, and Changes in Location
Oral argument shall begin at the time and place ordered, unless the
National [Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, a Subcommittee or, if applicable, an Extended Proceeding
Committee, or Counsel to the National [Business Conduct Committee]
Adjudicatory Council, for good cause shown, postpones, adjourns, or
changes the location of the oral argument, except that Counsel to the
National [Business Conduct Committee] Adjudicatory Council may postpone
or adjourn the oral argument only with the consent of the Parties. In
considering a motion for the postponement or adjournment of an oral
argument, the National [Business Conduct Committee] Adjudicatory
Council, the Review Subcommittee, a Subcommittee or, if applicable, and
Extended Proceeding Committee, or Counsel to the National [Business
[[Page 64021]]
Conduct Committee] Adjudicatory Council shall consider, in addition to
any other relevant factors:
* * * * *
9330. Appointment of Subcommittee or Extended Proceeding Committee;
Disqualification and Recusal
9331. Appointment of Subcommittee or Extended Proceeding Committee
(a) Appointment by National [Business Conduct Committee] Adjudicatory
Council
Following the filing of a notice of appeal pursuant to Rule 9311 or
a notice of review pursuant to Rule 9312, the National [Business
Conduct Committee] Adjudicatory Council or the Review Subcommittee
shall appoint a Subcommittee or an Extended Proceeding Committee to
participate, subject to Rule 9345, in a disciplinary proceeding
appealed or called for review.
(1) Subcommittee
Except as provided in subparagraph (2), for each disciplinary
proceeding appealed or called for review, the National [Business
Conduct Committee] Adjudicatory Council or the Review Subcommittee
shall appoint a Subcommittee to participate, subject to Rule 9345, in
the appeal or review. A Subcommittee shall be composed of two or more
persons who shall be [current or] former Directors[,] or [former]
Governors.
(2) Extended Proceeding Committee
Upon consideration of the volume and complexity of the certified
record, or other factors the National [Business Conduct Committee]
Adjudicatory Council or the Review Subcommittee deems material, the
National [Business Conduct Committee] Adjudicatory Council or the
Review Subcommittee may determine that a disciplinary proceeding
appealed or called for review shall be designated an Extended
Proceeding and shall appoint an Extended Proceeding Committee to
participate, subject to Rule 9345, in the appeal or review. The
Extended Proceeding Committee shall be composed of two or more persons
who shall be [current or] former Directors[,] or [former] Governors.
The [Chair of the National Business Conduct Committee] Review
Subcommittee shall have discretion to compensate any or all Panelists
of an Extended Proceeding Committee at the rate then in effect for
arbitrators appointed under the Rule 1000 Series.
(b) Function
If a hearing is held, the Subcommittee or, if applicable, the
Extended Proceeding Committee, shall hear oral arguments and consider,
if allowed under Rule 9346(b), any new evidence. Based on the hearing
and the record on appeal or review, the Subcommittee or, if applicable,
the Extended Hearing Committee, shall make a recommendation to the
National [Business Conduct Committee] Adjudicatory Council regarding
the disposition of all matters on appeal, cross-appeal, or review. The
recommendation shall be in the form of a written recommended decision.
9332. Disqualification and Recusal
(a) Recusal, Withdrawal of Member or Panelist
If at any time a member of the National [Business Conduct
Committee] Adjudicatory Council, including a member of the Review
Subcommittee, a Panelist of a Subcommittee or an Extended Proceeding
Committee, or a Counsel to the National [Business Conduct Committee]
Adjudicatory Council determines that the member, the Panelist, or the
Counsel to the National [Business Conduct Committee] Adjudicatory
Council has a conflict of interest or bias or circumstances otherwise
exist where the fairness of the member, the Panelist, or the Counsel to
the National [Business Conduct Committee] Adjudicatory Council might
reasonably be questioned, the member, the Panelist, or the Counsel to
National [Business Conduct Committee] Adjudicatory Council shall notify
the Chair or the Vice [-] Chair of the National [Business Conduct
Committee] Adjudicatory Council, and the Chair or the Vice [-] Chair of
the National [Business Conduct Committee] Adjudicatory Council shall
issue and serve on the Parties a notice stating that the member, the
Panelist, or the Counsel to the National [Business Conduct Committee]
Adjudicatory Council has withdrawn from the matter. In the event that a
Panelist withdraws, is incapacitated, or is otherwise unable to
continue service after a hearing has been convened, the Chair or Vice
[-] Chair of the National [Business Conduct Committee] Adjudicatory
Council shall appoint a replacement Panelist. In the event that a
[Counsel to the National Business Conduct Committee] member of the
Review Subcommitte withdraws, is incapacitated, or is otherwise unable
to continue service after assignment, the Chair or Vice Chair of the
National Adjudicatory Council shall appoint another member of the
National Adjudicatory Council to serve on the Review Subcommittee for
the limited purpose of considering the issues raised in the
disciplinary proceeding in which the withdrawal action was taken. The
replacement member of the Review Subcommittee must have the same
classification (Industry or Non-Industry) as the member who withdrew.
In the event that a Counsel to the National Adjudicatory Council
withdraws, is incapacitated, or is otherwise unable to continue service
after assignment, the General Counsel shall assign a replacement
Counsel to the National [Business Conduct Committee] Adjudicatory
Council.
(b) Motion for Disqualification
A Party may move for the disqualification of a member of the
National [Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, a Panelist of a Subcommittee or an Extended Proceeding
Committee, or a Counsel to the National [Business Conduct Committee]
Adjudicatory Council. All such motions shall be based upon a
reasonable, good faith belief that a conflict of interest or bias
exists or circumstances otherwise exist where the fairness of the
member, the Panelist, or the Council to the National [Business Conduct
Committee] Adjudicatory Council might reasonably be questioned, and
shall be accompanied by an affidavit setting forth in detail the facts
alleged to constitute grounds for disqualification, and the dates on
which the Party learned of those facts. Such motions shall be filed not
later than 15 days after the later of:
(1) When the Party learned of the facts believed to constitute the
disqualification; or
(2) When the Party was notified of the composition of the
Subcommittee or, if applicable, the Extended Proceeding Committee or
the assignment to the disciplinary proceeding of the Counsel to the
National [Business Conduct Committee] Adjudicatory Council.
(c) Disposition of Disqualification Motions: Challenges to Single
Member of National [Business Conduct Committee] Adjudicatory Council or
Review Subcommittee, Single Panelist of Subcommittee or Extended
Hearing Committee, or Counsel to the National [Business Conduct
Committee] Adjudicatory Council
Motions for disqualification of a member of the National [Business
Conduct Committee] Adjudicatory Council, including a member of the
Review Subcommittee, a Panelist of a Subcommittee or an Extended
[[Page 64022]]
Proceeding Committee, or a Counsel to the National [Business Conduct
Committee] Adjudicatory Council shall be decided by the Chair or Vice
[-] Chair of the National [Business Conduct Committee] Adjudicatory
Council, who shall promptly determine whether disqualification is
required and issue a written ruling on the motion. If a member of the
Review Subcommittee is disqualified, the Chair or Vice Chair of the
National Adjudicatory Council shall appoint another member of the
National Adjudicatory Council to serve on the Review Subcommittee for
the limited purpose of considering the issues raised in the
disciplinary proceeding in which the motion was made. The replacement
member of the Review Subcommittee must have the same classification
(Industry or Non-Industry) as the member being replaced. If a Panelist
is disqualified, the Chair or the Vice [-] Chair of the National
[Business Conduct Committee] Adjudicatory Council shall appoint a
replacement Panelist. If a Counsel is disqualified, the General Counsel
shall assign a replacement Counsel to the National [Business Conduct
Committee] Adjudicatory Council.
(d) Disposition of Disqualification Motions: Challenges to Multiple
Members or Panelists
(1) National [Business Conduct Committee] Adjudicatory Council
If a Party files a motion to disqualify more than one member of the
National [Business Conduct Committee] Adjudicatory Council, the Chair
or the Vice [-] Chair of the National [Business Conduct Committee]
Adjudicatory Council shall promptly determine whether disqualification
is required, and shall issue a written ruling on the matter. In the
event of such disqualification, the remaining members of the National
[Business Conduct Committee] Adjudicatory Council shall consider the
review or appeal of the disciplinary matter.
(2) Review Subcommittee
If a Party files a motion to disqualify more than one member of the
Review Subcommittee, the Chair or the Vice Chair of the National
Adjudicatory Council shall promptly determine whether disqualification
is required, and shall issue a written ruling on the matter. If members
of the Review Subcommittee are disqualified, the Chair or Vice Chair of
the National Adjudicatory Council shall appoint other members of the
National Adjudicatory Council to serve on the Review Subcommittee for
the limited purpose of considering the issues raised in the
disciplinary proceeding in which the motion was made. The replacement
members of the Review Subcommittee must have the same classification
(Industry or Non-Industry) as the members being replaced.
(3) Subcommittee; Extended Proceeding Committee
If a Party files a motion to disqualify more than one Panelist of a
Subcommittee or an Extended Proceeding Committee, the Chair or the Vice
[-] Chair of the National [Business Conduct Committee] Adjudicatory
Council shall promptly determine whether disqualification is required,
and shall issue a written ruling on the motion. If multiple Panelists
are disqualified, the Chair or the Vice [-] Chair of the National
[Business Conduct Committee] Adjudicatory Council shall appoint
replacement Panelists.
9340. Proceedings
9341. Oral Argument
(a) Request for Oral Argument
A Party may request oral argument before the Subcommittee or, if
applicable, the Extended Proceeding Committee. Oral argument shall be
requested in writing either in the Party's notice of appeal or cross-
appeal or within 15 days after service of the National [Business
Conduct Committee's] Adjudicatory Council's notice of review. Subject
to the limitations of Rules 9342 and 9344, oral argument shall be
granted if timely requested. The right to oral argument set forth in
this Rule is unaffected by a Party's waiver of, or failure to request,
a hearing pursuant to the Rule 9200 Series.
(b) Discretion to Proceed With or Without Oral Argument
No change.
(c) Notice Regarding Oral Argument
If oral argument is held, a notice stating the date, time, and
location of the oral argument shall be served on the Parties at least
21 days before the hearing. The Parties may agree in writing to waive
the notice period or, in extraordinary circumstances, the Subcommittee
or, if applicable, the Extended Proceeding Committee, or Counsel to the
National [Business Conduct Committee] Adjudicatory Council may provide
for a shorter notice period, except that Counsel to the National
[Business Conduct Committee] Adjudicatory Council may provide for a
shorter notice period only with the consent of the Parties.
* * * * *
9342. Failure to Appear at Oral Argument
No change.
9343. Disposition Without Oral Argument
If an oral argument is not held, the matter shall be considered by
a Subcommittee or, if applicable, an Extended Proceeding Committee, on
the basis of the record, as defined in Rule 9267, and supplemented by
any written materials submitted to or issued by the Subcommittee or, if
applicable, the Extended Proceeding Committee, or the National
[Business Conduct Committee] Adjudicatory Council in connection with
the appeal, cross-appeal, or call for review.
9344. Failure to Participate Below; Abandonment of Appeal
(a) Failure to Participate Below
When an appealing Party did not participate in the disciplinary
proceeding before a Hearing Officer, a Hearing Panel or, if applicable,
an Extended Hearing Panel, but shows good cause for the failure to
participate, the National [Business Conduct Committee] Adjudicatory
Council or the Review Subcommittee may dismiss the appeal and remand
the matter for further proceedings, or may [hear evidence and consider
the matter] order that the appeal proceed. If the appealing Party did
not participate in the disciplinary proceeding before a Hearing
Officer, a Hearing Panel or, if applicable, an Extended Hearing Panel,
and fails to show good cause for the failure to participate, the matter
shall be considered by the Subcommittee or, if applicable, the Extended
Proceeding Committee, and the National [Business Conduct Committee]
Adjudicatory Council on the basis of the record and other documents, as
provided in Rules 9346 and 9347. For purposes of this paragraph,
failure to participate shall include failure to file an answer or
otherwise respond to a complaint, or failure to appear at a scheduled
hearing, but shall not include failure to request a hearing pursuant to
Rule 9221.
(b) Abandonment of Appeal
If an appealing Party fails to advise the National [Business
Conduct Committee] Adjudicatory Council or the Review Subcommittee of
the basis for seeking review or otherwise fails to provide information
or submit a written brief in response to a request pursuant
[[Page 64023]]
to Rules 9346 and 9347, the National [Business Conduct Committee or the
Chair and the Vice Chair of the National business Conduct Committee (or
either one, acting alone, in the event the other is recused or
disqualified)] Adjudicatory Council or the Review Subcommittee may
dismiss the appeal as abandoned, and the decision of the Hearing
Officer, the Hearing Panel or, if applicable, the Extended Hearing
Panel, shall become the final disciplinary action of the Association.
If a cross-appealing Party fails to advise the National [Business
Conduct Committee] Adjudicatory Council or the Review Subcommittee of
the basis for seeking review or otherwise fails to provide information
or submit a written brief in response to a request pursuant to Rules
9346 and 9347, the National [Business Conduct Committee or the Chair
and the Vice Chair of the National Business Conduct Committee (or
either one, acting alone, in the event the other is recused or
disqualified)] Adjudicatory Council or the Review Subcommittee may
dismiss the cross-appeal as abandoned. Upon a showing of good cause,
the National [Business Conduct Committee] Adjudicatory Council may
withdraw any dismissal entered pursuant to this Rule.
9345. Subcommittee or Extended Proceeding Committee Recommended
Decision to National [Business Conduct Committee] Adjudicatory Council
A Subcommittee or, if applicable, an Extended Proceeding Committee,
shall present a recommended decision in writing to the National
[Business Conduct Committee and all other Directors not later than
seven days] Adjudicatory Council before the meeting of the National
[Business Conduct Committee] Adjudicatory Council at which the
disciplinary proceeding shall be considered.
9346. Evidence in National [Business Conduct Committee] Adjudicatory
Council Proceedings
(a) Scope of Review
Except as otherwise set forth in this paragraph, the National
[Business Conduct Committee's] Adjudicatory Council's review shall be
limited to consideration of: (i) the record, as defined in Rule 9267,
supplemented by briefs and other papers submitted to the Subcommittee
or, if applicable, the Extended Proceeding Committee, and the National
[Business Conduct Committee] Adjudicatory Council; and (ii) any oral
argument permitted under this Code. A Party may introduce additional
evidence only with prior approval of the Subcommittee or, if
applicable, the Extended Proceeding Committee, or the National
[Business Conduct Committee] Adjudicatory Council, upon a showing that
extraordinary circumstances exist under paragraph (b). If an appealing
Party shows good cause for failure to participate in the disciplinary
proceeding below, the National [Business Conduct Committee]
Adjudicatory Council may hear evidence and consider the disciplinary
proceeding pursuant to Rule 9344(a).
(b) Leave to Introduce Additional Evidence
A Party may apply to the Subcommittee or, if applicable, the
Extended Proceeding Committee, or the National [Business Conduct
Committee] Adjudicatory Council for leave to introduce additional
evidence by motion filed not later than 30 days after service of such
Party's notice of appeal or cross-appeal or not later than 35 days
after service upon the Party by the National [Business Conduct
Committee] Adjudicatory Council of a notice of review. The motion shall
describe each item of proposed new evidence, demonstrate that there was
good cause for failing to introduce it below, demonstrate why the
evidence is material to the proceeding, and be filed and served. The
Party may attach the documentary evidence as an exhibit to the motion.
By a motion filed in accordance with Rule 9146, a Party may request an
extension of the period during which a Party may file a motion for
leave to introduce additional evidence. A Party shall demonstrate that
there was good cause for failing to file the motion for leave to
introduce additional evidence during the period prescribed.
(c) Motion In Opposition; Motion to Introduce Rebuttal Evidence
No change.
(d) Discretion Regarding Review of Additional Evidence
Upon consideration of any motion to introduce additional evidence
and any opposition thereto, the Subcommittee or, if applicable, the
Extended Proceeding Committee, or the National [Business Conduct
Committee] Adjudicatory Council may permit the evidence to be
introduced into the record on review, or the National [Business Conduct
Committee] Adjudicatory Council may remand the disciplinary proceeding
for further proceedings consistent with its ruling or for further fact
finding.
(e) Requirements for Submitting Additional Documentary Evidence
A Party that is permitted to introduce additional documentary
evidence before the Subcommittee or, if applicable, the Extended
Proceeding Committee, or the National [Business Conduct Committee]
Adjudicatory Council pursuant to paragraph (d) shall make copies of the
evidence available to the Subcommittee or, if applicable, the Extended
Proceeding Committee, or the National [Business Conduct Committee]
Adjudicatory Council, and to all Parties at such time as the
Subcommittee or, if applicable, the Extended Proceeding Committee, the
National [Business Conduct Committee] Adjudicatory Council, or Counsel
to the National [Business Conduct Committee] Adjudicatory Council may
specify.
(f) Subcommittee or Extended Proceeding Committee Order Requiring
Additional Evidence
On its own motion, the Subcommittee or, if applicable, the Extended
Proceeding Committee, or the National [Business Conduct Committee]
Adjudicatory Council may order that the record be supplemented with
such additional evidence as it may deem relevant. Among other things,
the Subcommittee, or if applicable, the Extended Proceeding Committee,
or the National [Business Conduct Committee] Adjudicatory Council may
order a Respondent who asserts his or her inability to pay a monetary
sanction to file a sworn financial statement and to keep such statement
current as ordered by the Subcommittee or, if applicable, the Extended
Proceeding Committee, or the National [Business Conduct Committee]
Adjudicatory Council.
9347. Filing of Papers in National [Business Conduct Committee]
Adjudicatory Council Proceedings
(a) Briefs; Reply Briefs; Requirements
Parties may file briefs in connection with proceedings governed by
the Rule 9300 Series. Briefs shall be confined to the particular
matters at issue. An exception to findings, conclusions, or sanctions
shall be supported by citation to the relevant portions of the record,
including references to specific pages relied upon, and by concise
argument, including citation of such statutes, decisions, and other
authorities as may be relevant. If an exception relates to the
admission or exclusion of evidence, the substance of the evidence
admitted or excluded shall be set forth in the brief, an appendix
thereto, or by citation to the record. Parties may file reply briefs.
If a Party files a reply brief, such brief
[[Page 64024]]
shall be limited to matters in reply. All briefs shall conform to the
requirements of the Rule 9130 Series, and, except with advance leave of
the Subcommittee or, if applicable, the Extended Proceeding Committee,
the National [Business Conduct Committee] Adjudicatory Council, the
Review Subcommittee, or Counsel to the National [Business Conduct
Committee] Adjudicatory Council, exclusive of pages containing tables
of contents or tables of authorities, a brief other than a reply brief
shall not exceed 25 double-spaced pages, and a reply brief shall not
exceed 12 double-spaced pages.
(b) Timely Filing of Briefs
Briefs shall be due upon dates established by the Subcommittee or,
if applicable, the Extended Proceeding Committee, the National
[Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, or Counsel to the National [Business Conduct Committee]
Adjudicatory Council in a scheduling order. Unless the Subcommittee or,
if applicable, the Extended Proceeding Committee, the National
[Business Conduct Committee] Adjudicatory Council, the Review
Subcommittee, or Counsel to the National [Business Conduct Committee]
Adjudicatory Council specifies otherwise, opening briefs shall be
submitted not less than 21 days from the date of the scheduling order,
and answering briefs shall be submitted 21 days thereafter. When reply
briefs are submitted, such briefs shall be filed not later than ten
days after service of the answering brief. Counsel to the National
[Business Conduct Committee] Adjudicatory Council may not shorten a
period previously established for the filing of briefs except with the
consent of the Parties.
9348. Powers of the National [Business Conduct Committee] Adjudicatory
Council on Review
In any appeal or review proceeding pursuant to the Rule 9300
Series, the National [Business Conduct Committee] Adjudicatory Council
may affirm, dismiss, modify, or reverse with respect to each finding,
or remand the disciplinary proceeding with instructions. The National
[Business Conduct Committee] Adjudicatory Council may affirm, modify,
reverse, increase, or reduce any sanction, or impose any other fitting
sanction.
9349. National [Business Conduct Committee] Adjudicatory Council Formal
Consideration; Decision
(a) Decision of National [Business Conduct Committee] Adjudicatory
Council, Including Remand
In an appeal or review of a disciplinary proceeding governed by the
Rule 9300 Series that is not withdrawn or dismissed prior to a decision
on the merits, the National [Business Conduct Committee] Adjudicatory
Council, after considering all matters presented in the appeal or
review, and the written recommended decision of the Subcommittee or, if
applicable, the Extended Proceeding Committee, may affirm, dismiss,
modify or reverse the decision of the Hearing Panel or, if applicable,
Extended Hearing Panel, with respect to each Respondent who has
appealed or cross-appealed or is subject to a call for review. The
National [Business Conduct Committee] Adjudicatory Council may affirm,
modify, reverse, increase, or reduce any sanction, or impose any other
fitting sanction. Alternatively, the National [Business Conduct
Committee] Adjudicatory Council may remand the disciplinary proceeding
with instructions. The National [Business Conduct Committee]
Adjudicatory Council shall prepare a proposed written decision pursuant
to paragraph (b).
(b) Contents of Decision
No change.
(c) Issuance of Decision After Expiration of Call for Review Period
The National [Business Conduct Committee] Adjudicatory Council
shall provide its proposed written decision to the NASD [Regulation
Board, and, if the disciplinary proceeding is not called for review by
the NASD Regulation Board, to the NASD Board. The NASD Regulation]
Board. The NASD Board may call the disciplinary proceeding for review
pursuant to Rule 9351. If the NASD Board does not call the disciplinary
proceeding for review, the proposed written decision of the [NASD
Regulation Board] National Adjudicatory Council shall become final, and
the [NASD Regulation Board] National Adjudicatory Council shall serve
its written decision on the Parties and provide a copy to each member
of the Association with which a Respondent is associated. The decision
shall constitute the final disciplinary action of the Association for
purposes of SEC Rule 19d-1(c)(1), unless the [NASD Regulation Board]
National Adjudicatory Council remands the proceeding.
[The NASD Board may call the disciplinary proceeding for review
pursuant to Rule 9352. If neither the NASD Regulation Board nor the
NASD Board calls the disciplinary proceeding for review, the proposed
written decision of the National Business Conduct Committee shall
become final, and the National Business Conduct Committee shall serve
its written decision on the Parties and provide a copy to each member
of the Association with which a Respondent is associated. The decision
shall constitute the final disciplinary action of the Association for
purposes of SEC Rule 19d-1(c)(1), unless the National Business Conduct
Committee remands the proceeding.]
9350. Discretionary Review by NASD Board[s]
9351. [Discretionary Review by NASD Regulation Board]
(a) Call for Review by Director
A Director may call a disciplinary proceeding for review by the
NASD Regulation Board, if the call for review is made within the period
prescribed in paragraph (b).
(b) Seven Day Period; Waiver
After receiving the proposed written decision of the National
Business Conduct Committee pursuant to Rule 9349, a Director shall have
not less than seven days to determine if the disciplinary proceeding
should be called for review. A Director shall call a disciplinary
proceeding for review by notifying the General Counsel. By a unanimous
vote of the NASD Regulation Board, the NASD Regulation Board may
shorten the period to less than seven days. By an affirmative vote of
the majority of the NASD Regulation Board then in office, the NASD
Regulation Board may, during the seven day period, vote to extend the
period to more than seven days.
(c) Review at Next Meeting
If a Director calls a disciplinary proceeding for review within the
period prescribed in paragraph (b), the NASD Regulation Board shall
review the disciplinary proceeding not later than the next meeting of
the NASD Regulation Board. The NASD Regulation Board may order the
Parties (excluding any Respondent who did not appeal or cross-appeal,
or as to whom the issues appealed or called for review do not apply),
to file briefs in connection with the NASD Regulation Board review
proceedings pursuant to this Rule.
[[Page 64025]]
(d) Decision of NASD Regulation Board, Including Remand
After review, the NASD Regulation Board may affirm, modify, or
reverse the proposed written decision of the National Business Conduct
Committee. The NASD Regulation Board may affirm, modify, reverse,
increase, or reduce any sanction, or impose any other fitting sanction.
Alternatively, the NASD Regulation Board may remand the disciplinary
proceeding with instructions. The NASD Regulation Board shall prepare a
proposed written decision that includes all of the elements described
in Rule 9349(b)(1) through (6).
(e) Issuance of Decision After Expiration of Call for Review Period
The NASD Regulation Board shall provide its proposed written
decision to the NASD Board. The NASD Board may call the disciplinary
proceeding for review pursuant to Rule 9352.
9352.] Discretionary Review by NASD Board
(a) Call for Review by Governor
No change.
(b) [Seven] 15 Day Period; Waiver
(1) A [Disciplinary Proceeding Called for Review by NASD Regulation
Board
If the NASD Regulation Board reviewed the disciplinary proceeding
under Rule 9351, a] Governor shall make his or her call for review not
later than the next meeting of the NASD Board that is at least [seven]
15 days after the date on which the NASD Board receives the proposed
written decision of the [NASD Regulation Board.] National Adjudicatory
Council.
[(2) Disciplinary Proceeding Not Called for Review by NASD Regulation
Board
If no Director of the NASD Regulation Board called the disciplinary
proceeding for review under Rule 9351, a Governor shall make his or her
call for review not later than the next meeting of the NASD Board that
is at least seven days after the date on which the NASD Board receives
the proposed written decision of the National Business Conduct
Committee.
(3)](2) Waiver
By a unanimous vote for the NASD Board, the NASD Board may shorten
the period in subparagraph (1) [or (2)] to less than [seven] 15 days.
By an affirmative vote of the majority of the NASD Board then in
office, the NASD Board may, during the [seven] 15 day period in
subparagraph (1) or (2), vote to extend the period in subparagraph (1)
[or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
No change.
(d) Decision of NASD Board, Including Remand.
After review, the NASD Board may affirm, modify, or reverse [: (1)]
the proposed written decision of the [NASD Regulation Board; or (2) if
the NASD Regulation Board did not call a disciplinary proceeding for
review under Rule 9351, the proposed written decision of the National
Business Conduct Committee] National Adjudicatory Council. The NASD
Board may affirm, modify, reverse, increase, or reduce any sanction, or
impose any other fitting sanction. Alternatively, the NASD Board may
remand the disciplinary proceeding with instructions. The NASD Board
shall prepare a written decision that includes all of the elements
described in Rule 9349 (b)(1) through (6).
* * * * *
9400. LIMITATION PROCEDURES UNDER RULES 3130 AND 3131
9410. Procedures for Regulating Activities of a Member Experiencing
Financial or Operational Difficulties
* * * * *
9413. Department of Member Regulation Consideration
(a) Request for Hearing
No change.
(b) Stay
A request for hearing shall stay the notice of limitations served
under Rule 9412 unless the National [Business Conduct Committee]
Adjudicatory Council orders otherwise.
* * * * *
(j) Failure to Request Hearing
If a member does not request a hearing under paragraph (a), the
limitations specified in the notice shall become effective on the date
specified in the notice. Unless the National [Business Conduct
Committee] Adjudicatory Council calls the notice for review under Rule
9414(a)(2), the limitations specified in the notice shall remain in
effect until the Department of Member Regulation reduces or removes the
limitations pursuant to Rule [9418(b)] 9417(b).
9414. National [Business Conduct Committee] Adjudicatory Council Review
(a) Initiation of a Review
(1) Application by Member
A member aggrieved by a decision issued under Rule 9413 may file a
written application for review by the National [Business Conduct
Committee] Adjudicatory Council. The application shall state the
specific grounds for the review and whether oral argument is requested.
The application shall be filed pursuant to Rules 9135, 9136, and 9137
within seven days after service of the decision. The member may
withdraw its application for review at any time by filing a written
notice with the National [Business Conduct Committee] Adjudicatory
Council pursuant to Rules 9135, 9136, and 9137.
(2) Motion of National [Business Conduct Committee] Adjudicatory
Council
A decision issued under Rule 9413 shall be subject to a call for
review by any member of the National [Business Conduct Committee]
Adjudicatory Council or the Review Subcommittee [described in Rule
9312(a)(1)] within 30 days after service of the decision. If a member
that receives a notice under Rule 9412 does not request a hearing under
rule 9413, the notice shall be subject to a call for review by any
member of the National [Business Conduct Committee] Adjudicatory
Council or the Review Subcommittee within 30 days after the effective
date of the notice. If the National [Business Conduct Committee]
Adjudicatory Council or the Review Subcommittee calls a decision or
notice for review, a written notice of review shall be served promptly
on the member pursuant to Rules 9132 and 9134. The notice of review
shall state the specific grounds for the review and whether an oral
argument is ordered. If a decision is called for review by a member of
the National [Business Conduct Committee] Adjudicatory Council or the
Review Subcommittee, the National [Business Conduct Committee]
Adjudicatory Council shall review the decision.
(3) Stay
Unless otherwise ordered by the National [Business Conduct
Committee] Adjudicatory Council, the initiation of a review under this
paragraph shall stay the decision of the Department of Member
Regulation or an uncontested notice until a decision constituting final
action of the Association is issued.
[[Page 64026]]
(4) Transmission of the Record
If a review is initiated under this paragraph, the Department of
Member Regulation shall assemble and prepare an index of the record,
transmit the record and index to the National [Business Conduct
Committee] Adjudicatory Council, certify to the National [Business
Conduct Committee] Adjudicatory Council that the record is complete,
and serve a copy of the record and index on the member.
(5) Ex Parte Communications
The prohibitions against ex parte communications in Rule 9143 shall
become effective under the Rule 9410 Series when Association staff has
knowledge that a member intends to file a written application for
review or that the National [Business Conduct Committee] Adjudicatory
Council intends to review a decision on its own motion under this Rule.
(b) Subcommittee Consideration
(1) Appointment of Subcommittee
The National [Business Conduct Committee] Adjudicatory Council or
the Review Subcommittee shall appoint a Subcommittee to participate in
the review. The Subcommittee shall be composed of two or more members.
One member shall be a member of the National [Business Conduct
Committee] Adjudicatory Council, and the remaining member or members
shall be current or former [Directors of the NASD Regulation Board or
former Governors of the NASD Board.] member of the National
Adjudicatory Council or a former Director or Governor.
* * * * *
(5) Recommendation
The Subcommittee shall present a recommended decision in writing to
the National [Business Conduct Committee and all other Directors]
Adjudicatory Council not later than seven days before the meeting of
the National [Business Conduct Committee] Adjudicatory Council at which
the proceeding shall be considered.
(c) Decision
(1) Decision of National [Business Conduct Committee] Adjudicatory
Council, Including Remand
After considering all matters presented in the review and the
written recommended decision of the Subcommittee, the National
[Business Conduct Committee] Adjudicatory Council may affirm, modify,
or reverse the Department of Member Regulation's decision or remand the
proceeding with instructions. The National [Business Conduct Committee]
Adjudicatory Council shall prepare a proposed written decision pursuant
to subparagraph (2).
(2) Contents of Decision
The decision shall include:
* * * * *
(E) if any limitations are imposed: (i) a description of the
limitations and a statement describing a fitting sanction that will be
imposed under Rule [9417] 9416 if the member fails to comply with any
of the limitations; and (ii) the conditions for terminating the
limitations.
(3) Issuance of Decision After Expiration of Call for Review Period
The National [Business Conduct Committee] Adjudicatory Council
shall provide its proposed written decision to the NASD [Regulation
Board, and, if the proceeding is not called for review by the NASD
Regulation Board, to the NASD Board. The NASD Regulation] Board. The
NASD Board may call the proceeding for review pursuant to Rule 9415.
[The] If the NASD Board [may] does not call the proceeding for review
[pursuant to Rule 9416. If neither the NASD Regulation Board nor the
NASD Board calls the proceeding for review], the proposed written
decision of the National [Business Conduct Committee] Adjudicatory
Council shall become final, and the National [Business Conduct
Committee] Adjudicatory Council shall serve its written decision on the
member and the Department of Member Regulation pursuant to Rules 9132
and 9134. The decision shall be effective upon service. [The decision
shall constitute the final action of the Association, unless the
National Business Conduct Committee remands the proceeding.]
[9415. Discretionary Review by the NASD Regulation Board
(a) Call for Review by Director
A Director may call a proceeding for review by the NASD Regulation
Board if the call for review is made within the period prescribed in
paragraph (b).
(b) Seven Day Period; Waiver
After receiving the proposed written decision of the National
Business Conduct Committee pursuant to Rule 9414, a Director shall have
not less than seven days to determine if the proceeding should be
called for review. A Director shall call a proceeding for review by
notifying the General Counsel of NASD Regulation. By a unanimous vote
of the NASD Regulation Board, the NASD Regulation Board may shorten the
period to less than seven days. By an affirmative vote of the majority
of the NASD Regulation Board then in office, the NASD Regulation Board
may, during the seven day period, vote to extend the period to more
than seven days.
(c) Review at Next Meeting
If a Director calls a proceeding for review within the period
prescribed by paragraph (b), the NASD Regulation Board shall review the
proceeding not later than the next meeting of the NASD Regulation
Board. The NASD Regulation Board may order the filing of briefs in
connection with its review proceedings pursuant to this Rule.
(d) Decision of NASD Regulation Board, Including Remand
After review, the NASD Regulation Board may affirm, modify, or
reverse the proposed written decision of the National Business Conduct
Committee or remand the proceeding with instructions. The NASD
Regulation Board shall prepare a proposed written decision that
includes all of the elements described in Rule 9414(c)(2).
(e) Issuance of Decision After Expiration of Call for Review Period
The NASD Regulation Board shall provide its proposed written
decision to the NASD Board. The NASD Board may call the proceeding for
review pursuant to Rule 9416. If the NASD Board does not call the
proceeding for review, the proposed written decision of the NASD
Regulation Board shall become final, and the NASD Regulation Board
shall serve its written decision on the member and the Department of
Member Regulation pursuant to Rules 9132 and 9134. The decision shall
be effective upon service.] The decision shall constitute the final
action of the Association, unless the [NASD Regulation Board] National
Adjudicatory Council remands the proceeding.
[9416]9415. Discretionary Review by the NASD Board
(a) Call for Review by Governor
No change.
(b) [Seven] 15 Day Period; Waiver
[(1) Proceeding Called for Review by NASD Regulation Board
If the NASD Regulation Board reviewed the proceeding under Rule
9415, a] A Governor shall make his or her call for review not later
than the next meeting of the NASD Board that is at least [seven] 15
days after the date on which the NASD Board receives the proposed
written decision of the
[[Page 64027]]
National Adjudicatory Council. [NASD Regulation Board.
(2) Proceeding Not Called for Review by NASD Regulation Board
If no Director of the NASD Regulation Board called the proceeding
for review under Rule 9415, a Governor shall make his or her call for
review not later than the next meeting of the NASD Board that is at
least seven days after the date on which the NASD Board receives the
proposed written decision of the National Business Conduct Committee.
(3) Waiver
] By a unanimous vote of the NASD Board, the NASD Board may shorten
the period [in subparagraph (1) or (2)] to less than [seven] 15 days.
By an affirmative vote of the majority of the NASD Board then in
office, the NASD Board may, during the [seven] 15 day period [in
subparagraph (1) or (2)], vote to extend the period [in subparagraph
(1) or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
No change.
(d) Decision of NASD Board, Including Remand
After review, the NASD Board may affirm, modify, or reverse [: (1)]
the proposed written decision of the [NASD Regulation Board, or (2) if
the NASD Regulation Board did not call the proceeding for review under
Rule 9415, the proposed written decision of the National Business
Conduct Committee] National Adjudicatory Council. Alternatively, the
NASD Board may remand the proceeding with instructions. The NASD Board
shall prepare a written decision that includes all of the elements
described in Rule 9414(c)(2).
(e) Issuance of Decision
No change.
[9417] 9416. Enforcement of Sanctions
* * * * *
(c) No Stay of Sanctions
Unless otherwise ordered by the National [Business Conduct
Committee] Adjudicatory Council, a request for a hearing pursuant to
this Rule shall not stay the effectiveness of the order issued under
paragraph (a).
(d) Decision
No change.
[9418] 9417. Additional Limitations; Reduction or Removal of
Limitations
(a) Additional Limitations
If a member continues to experience financial or operational
difficulty specified in Rule 3130 or 3131, notwithstanding an effective
notice or decision under the Rule 9410 Series, the Department of Member
Regulation may impose additional limitations by issuing a notice under
Rule 9412. The notice shall state that the member may apply for relief
from the additional limitations by filing a written application for a
hearing under Rule 9413 and that the procedures in Rules 9413 through
[9417] 9416 shall be applicable. An application for a hearing also
shall include a detailed statement of the member's objections to the
additional limitations.
(b) Reduction or Removal of Limitations
No change.
[9419] 9418. Application to Commission for Review[; Other Action Not
Foreclosed
(a)] The right to have any action taken by the Association pursuant
to this Rule Series reviewed by the Commission is governed by Section
19 of the Act. The filing of an application for review shall not stay
the effectiveness of the action taken by the Association, unless the
Commission otherwise orders.
9419. Other Action Not Foreclosed
[(b)] Action by the Association under the Rule 9410 Series shall
not foreclose action by the Association under any other Rule.
[9420. Approval of Change in Business Operations That Will Result in a
Change in Exemptive Status under SEC Rule 15c3-3
Deleted].
9500. SUSPENSION, CANCELLATION, BAR, DENIAL OF ACCESS, AND ELIGIBILITY
PROCEDURES
9510. Procedures for Summary and Non-Summary Suspension, Cancellation,
Bar, Limitation, or Prohibition
9511. Purpose and Computation of Time
(a) Purpose
(1) No change.
(2) The Association also may take the following actions, after
notice and opportunity for hearing:
(A) cancel the membership of a member that becomes ineligible for
continuance in membership, or that continues to be associated with an
ineligible person, or suspend or bar a person from continuing to be
associated with a member because such person is or becomes ineligible
for association under Article [II] III, Section 3 of the NASD By-Laws;
(B) suspend or cancel the membership of a member or the
registration of a person for failure to pay fees, dues, assessments, or
other charges; failure to submit a required report or information
related to such payment; or failure to comply with an arbitration award
or a settlement agreement related to an arbitration or mediation under
Article [V] VI, Section [2] 3 of the NASD By-Laws;
(C) cancel the membership of a member for failure to file or submit
on request any report, document, or other information required to be
filed with or requested by the Association under Article [VI] VII,
Section 2 of the NASD By-Laws; and
(D) limit or prohibit any member, associated person, or other
person with respect to access to services offered by the Association or
a member thereof if the Association determines that such person does
not meet the qualification requirements or other prerequisites for such
access or such person cannot be permitted to continue to have such
access with safety to investors, creditors, members, or the
Association.
* * * * *
9513. Initiation of Proceeding for Non-Summary Suspension,
Cancellation, Bar, Limitation, or Prohibition
(a) Notice
Association staff shall initiate a proceeding authorized under
Section 3 of Article [II,] III, Section [2] 3 of Article [VI] VII of
the NASD By-Laws, or Rule 9511(a)(2)(D), by issuing a written notice to
the member, associated person, or other person. The notice shall
specify the grounds for and effective date of the cancellation,
suspension, bar, limitation, or prohibition and shall state that the
member, associated person, or other person may file a written request
for a hearing under Rule 9514. The notice shall be served by facsimile
or overnight commercial courier.
(b) Effective Date
For any cancellation, suspension, or bar under Section 3 of Article
[II] III of the NASD By-Laws, the effective date shall be at least
seven days after service of the notice on the member or associated
person. For any cancellation or suspension under Section [2] 3 of
Article [V] VI or Section 2 of Article [VI] VII of the NASD By-Laws,
the effective date shall be at least 15 days after service of the
notice on the member or
[[Page 64028]]
associated person. For any limitation or prohibition on access to
services offered by the Association or a member thereof pursuant to
Rule 9511(a)(2)(D), the effective date shall be upon receipt of the
notice with respect to services to which the member, associated person,
or other person does not have access and shall be at least seven days
after service of the notice with respect to services to which the
member, associated person, or other person already has access.
9514. Hearing and Decision
(a) Request
No change.
(b) Designation of Party for the Association and Appointment of Hearing
Panel
If a member, associated person, or other person subject to a notice
under Rule 9512 or 9513 files a written request for a hearing, an
appropriate department or office of the Association shall be designated
as a Party in the proceeding, and a Hearing Panel shall be appointed.
(1) If the President of NASD Regulation or NASD Regulation staff
issued the notice initiating the proceeding under Rule 9512(a) or
9513(a), the President of NASD Regulation shall designate an
appropriate NASD Regulation department or office as a Party, and the
NASD Regulation Board shall appoint a Hearing Panel. The Hearing Panel
shall be composed of two or more members. One member shall be a
Director of NASD Regulation, and the remaining member or members shall
be [a] current or former [Director] Directors of NASD Regulation or [a
former Governor of the NASD] Governors. The President of NASD
Regulation may not serve on the Hearing Panel.
(2) If the President of Nasdaq or Nasdaq staff issued the notice
under Rule 9512(a) or 9513(a), the President of Nasdaq shall designate
an appropriate Nasdaq department or office as a Party, and the Nasdaq
Board shall appoint a Hearing Panel. The Hearing Panel shall be
composed of two or more members. One member shall be a [Director]
Director of Nasdaq, and the remaining member or members shall be [a]
current or former [Director] Directors of Nasdaq or [a former governor
of the NASD] Governors. The President of Nasdaq may not serve on the
Hearing Panel.
* * * * *
9515. Discretionary Review by the NASD Board
(a) Call for Review by Governor
No change.
(b) [Seven] 15 Day Period; Waiver
A Governor shall make his or her call for review not later than the
next meeting of the NASD Board that is at least [seven] 15 days after
the date on which the NASD Board receives the proposed written decision
of the Hearing Panel. By a unanimous vote of the NASD Board, the NASD
Board may shorten this period. By an affirmative vote of the majority
of the NASD Board then in office, the NASD Board may, during the
period, vote to extend the period.
* * * * *
9522. Initiation of Eligibility Proceedings
(a) Notice of Disqualification or Ineligibility
(1) Issuance
No change.
(2) Notice to Member
A notice issued to a member that is subject to a statutory
disqualification or is otherwise ineligible for membership shall state
that the member may apply for relief by filing a written application
for relief with the National [Business Conduct Committee] Adjudicatory
Council within ten days after service of the notice.
(3) Notice to Associated Person
A notice issued to an associated person who is subject to a
statutory disqualification or is otherwise ineligible for association
shall state that a member may apply for relief on behalf of itself and
such person by filing a written application for relief with the
National [Business Conduct Committee] Adjudicatory Council within ten
days after service of the notice.
(4) Service
No change.
(b) Application by Member
A member shall file a written application for relief from the
eligibility requirements of the Association with the National [Business
Conduct Committee] Adjudicatory Council if the member:
(1) determines that it is subject to a statutory disqualification
or otherwise is no longer eligible for membership;
(2) determines that a person associated with it is subject to a
statutory disqualification or otherwise is no longer eligible for
association with the member; or
(3) wishes to sponsor the association of a person who is subject to
a statutory disqualification or otherwise is ineligible for association
with a member.
(c) Form of Application for Relief
No change.
(d) Withdrawal of Application
A member may withdraw its application for relief at any time by
filing a written notice with the National [Business Conduct Committee]
Adjudicatory Council pursuant to Rules 9135, 9136, and 9137.
(e) Ex Parte Communications
The prohibitions against ex parte communications set forth in Rule
9143 shall become effective under the Rule 9520 Series when Association
staff has initiated the eligibility proceeding and Association staff
has knowledge that a member intends to file a written application for
relief with the National [Business Conduct Committee] Adjudicatory
Council.
9523. National [Business Conduct Committee] Adjudicatory Council
Consideration
(a) Hearing Panel Consideration
(1) Appointment of Hearing Panel
If a member files an application for relief, the National [Business
Conduct Committee] Adjudicatory Council or the Review Subcommittee
shall appoint a Hearing Panel composed of two or more members, who
shall be current or former [Directors] members of the [NASD Regulation
Board] National Adjudicatory Council or former Directors or Governors
[of the NASD Board]. The Hearing Panel shall conduct a hearing and
recommend a decision on the request for relief.
(2) Notice of Hearing
No change.
(3) Transmission of Documents
* * * * *
(ii) Not less than ten days before the hearing, the Department of
Member Regulation, [who] which shall act as a Party in the eligibility
proceeding, and the member and its current or prospective associated
person shall exchange proposed exhibit and witness lists. The exhibit
and witness lists shall be served by facsimile or commercial courier.
* * * * *
(9) Recommendation
On the basis of the record, the Hearing Panel shall present a
recommended decision in writing on the request for relief to the
Statutory Disqualification Committee. After considering the record
[[Page 64029]]
and recommendation of the Hearing Panel, the Statutory Disqualification
Committee shall present its recommended decision in writing to the
National [Business Conduct Committee and all other Directors]
Adjudicatory Council not later than seven days before the meeting of
the National [Business Conduct Committee] Adjudicatory Council at which
the eligibility proceeding shall be considered.
(b) Decision
(1) Decision of the National [Business Conduct Committee] Adjudicatory
Council
After considering all matters presented in the request for relief,
the Statutory Disqualification Committee's recommended decision, the
public interest, and the protection of investors, the National
[Business Conduct Committee] Adjudicatory Council may grant or deny the
request for relief, and, if relief is granted, impose conditions on the
member and its current or prospective associated person. Alternatively,
the National [Business Conduct Committee] Adjudicatory Council may
remand the eligibility proceeding. The National [Business Conduct
Committee] Adjudicatory Council shall prepare a proposed written
decision pursuant to subparagraph (2).
(2) Contents of Decision
No change.
(3) Issuance of Decision After Expiration of Call for Review Period
The National Adjudicatory Council [Business Conduct Committee shall
provide its proposed written decision to the NASD Regulation Board,
and, if the eligibility proceeding is not called for review by the NASD
Regulation Board, the NASD Board. The NASD Regulation Board may call
the eligibility proceeding for review pursuant to Rule 9524. The NASD
Board may call the eligibility proceeding for review pursuant to Rule
9525. If neither the NASD Regulation Board nor the NASD Board calls the
eligibility proceeding for review, the proposed written decision of the
National Business Conduct Committee shall become final, and the
National Business Conduct Committee shall serve its written decision on
the member, the current or prospective associated person, and
Department of Member Regulation pursuant to Rules 9132 and 9134. The
decision shall be effective upon service. The decision shall constitute
final action of the Association, unless the National Business Conduct
Committee remands the eligibility proceeding.
9524. Discretionary Review by the NASD Regulation Board
(a) Call for Review by Director
A Director may call an eligibility proceeding for review by the
NASD Regulation Board if the call for review is made within the period
prescribed in paragraph (b).
(b) Seven Day Period; Waiver
After receiving the proposed written decision of the National
Business Conduct Committee pursuant to Rule 9523, a Director shall have
not less than seven days to determine if the eligibility proceeding
should be called for review. A Director shall call an eligibility
proceeding for review by notifying the General Counsel of NASD
Regulation. By a unanimous vote of the NASD Regulation Board, the NASD
Regulation Board may shorten the period to less than seven days. By an
affirmative vote of the majority of the NASD Regulation Board then in
office, the NASD Regulation Board may, during the seven day period,
vote to extend the period to more than seven days.
(c) Review at Next Meeting
If a Director calls the eligibility proceeding for review within
the period prescribed by paragraph (b), the NASD Regulation Board shall
review the eligibility proceeding not later than the next meeting of
the NASD Regulation Board. The NASD Regulation Board may order the
filing of briefs in connection with its review proceedings pursuant to
this Rule.
(d) Decision of NASD Regulation Board, Including Remand
After review, the NASD Regulation Board may affirm, modify, or
reverse the proposed written decision of the National Business Conduct
Committee. Alternatively, the NASD Regulation Board may remand the
eligibility proceeding with instructions. The NASD Regulation Board
shall prepare a proposed written decision that includes all of the
elements described in Rule 9523(b)(2).
(e) Issuance of Decision After Expiration of Call for Review Period
The NASD Regulation Board shall provide its proposed written
decision to the NASD Board. The NASD Board may call the eligibility
proceeding for review pursuant to Rule [9525] 9524. If the NASD Board
does not call the eligibility proceeding for review, the proposed
written decision of the [NASD Regulation Board] National Adjudicatory
Council shall become final, and the [NASD Regulation Board] National
Adjudicatory Council shall serve its written decision on the member,
the current or prospective associated person, and Department of Member
Regulation pursuant to Rules 9132 and 9134. The decision shall be
effective upon service. The decision shall constitute [the] final
action of the Association, unless the [NASD Regulation Board] National
Adjudicatory Council remands the eligibility proceeding.
[9525] 9524. Discretionary Review by the NASD Board
(a) Call for Review by Governor
No change.
(b) [Seven Day Period; Waiver] 15 Day Period; Waiver
[(1) Eligibility Proceeding Called for Review by NASD Regulation Board
If the NASD Regulation Board reviewed the eligibility proceeding
under Rule 9524, as a] A Governor shall make his or her call for review
not later than the next meeting of the NASD Board that is at least
[seven] 15 days after the date on which the NASD Board receives the
proposed written decision of the National Adjudicatory Council [NASD
Regulation Board.
(2) Eligibility Proceeding Not Called for Review by NASD Regulation
Board
If no Director of the NASD Regulation Board called the eligibility
proceeding for review under Rule 9524, a Governor shall make his or her
call for review not later than the next meeting of the NASD Board that
is at least seven days after the date on which the NASD Board receives
the proposed written decision of the National Business Conduct
Committee.
(3) Waiver
] By a unanimous vote of the NASD Board, the NASD Board may shorten
the period [in subparagraph (1) or (2)] to less than [seven] 15 days.
By an affirmative vote of the majority of the NASD Board then in
office, the NASD Board may, during the [seven] 15 day period [in
subparagraph (1) or (2)], vote to extend the period [in subparagraph
(1) or (2)] to more than [seven] 15 days.
(c) Review at Next Meeting
No change.
(d) Decision of NASD Board, Including Remand
After review, the NASD Board may affirm, modify, or reverse [: (1)]
the proposed written decision of the [NASD Regulation Board, or (2) if
the NASD Regulation Board did not call an eligibility proceeding for
review under
[[Page 64030]]
Rule 9524, the proposed written decision of the National Business
Conduct Committee] National Adjudicatory Council. Alternatively, the
NASD Board may remand the eligibility proceeding with instructions. The
NASD Board shall prepare a written decision that includes all of the
elements described in Rule 9523(b)(2).
(e) Issuance of Decision
No change.
[9526] 9525. Application to Commission for Review
The right to have any action taken pursuant to this Rule Series
reviewed by the Commission is governed by Section 19 of the Act. The
filing of an application for review shall not stay the effectiveness of
final action by the Association, unless the Commission otherwise
orders.
9600. PROCEDURES FOR EXEMPTIONS
9610. Application
(a) File with General Counsel
A member seeking an exemption from Rule 1021, 1022, 1070, 2210,
2340, 2520, 2710, 2720, 2810, 2850, 2851, 2860, Interpretive Material
2860-1, 3010, 3210, 3350, 8211, 8212, 8213, 11870, or 11900,
Interpretive Material 2110-1, or Municipal Securities Rulemaking Board
Rule G-37 shall file a written application with the appropriate
department or staff of the Association and provide a copy of the
application to the Office of General Counsel of NASD Regulation.
* * * * *
9630. Appeal
(a) Notice
An Applicant may file a written notice of appeal within 15 calendar
days after service of a decision issued under Rule 9620. The Notice of
appeal shall be filed with the Office of General Counsel of NASD
Regulation, with a copy of the notice also provided to the appropriate
department or staff of the Association. The notice of appeal shall
contain a brief statement of the findings and conclusions as to which
exception is taken. The National [Business Conduct] Adjudicatory
Council [Committee] may order oral argument. If the Applicant does not
want the National [Business Conduct Committee's] Adjudicatory Council's
decision on the appeal to be publicly available in whole or in part,
the Applicant also shall include in its notice of appeal a detailed
statement, including supporting facts, showing good cause for treating
the decision as confidential in whole or in part. The notice of appeal
shall be signed by the Applicant.
(b) Expedited Review
Where the failure to promptly review a decision to deny a request
for exemption would unduly or unfairly harm the applicant, the National
[Business Conduct Committee] Adjudicatory Council shall provide
expedited review.
(c) Withdrawal of Appeal
An Applicant may withdraw its notice of appeal at any time by
filing a written notice of withdrawal of appeal with the National
[Business Conduct Committee] Adjudicatory Council.
(d) Appointment of Subcommittee
Following the filing of a notice of appeal, the National [Business
Conduct Committee shall] Adjudicatory Council or Review Subcommittee
may designate a Subcommittee to hear an oral argument, if ordered,
consider any new evidence that the Applicant can show good cause for
not including in its application, and recommend to the National
[Business Conduct Committee] Adjudicatory Council a disposition of all
matters on appeal.
(e) Decision
After considering all matters on appeal and the Subcommittee's
recommendation, the National [Business Conduct Committee] Adjudicatory
Council shall affirm, modify, or reverse the decision issued under Rule
9620. The National [Business Conduct Committee] Adjudicatory Council
shall issue a written decision setting forth its findings and
conclusions and serve the decision on the Applicant. The decision shall
be served pursuant to Rules 9132 and 9134. The decisions shall be
effective upon service and shall constitute final action of the
Association.
* * * * *
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 IV below. NASD Regulation 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
The Association is proposing changes to the Rule 1010 Series, the
Rule 8000 Series, the Rule 9000 Series, and various other rules to
conform the rules to the changes adopted by the NASD Board to
reorganize the NASD, NASD Regulation, and Nasdaq. The proposed rule
amendments are intended to conform the Rule 1010 Series, the Rule 8000
Series, and the Rule 9000 Series to reflect the terms of the corporate
reorganization that the NASD Board of Governors approved on June 26,
1997.\4\
---------------------------------------------------------------------------
\4\ The Commission recently approved a comprehensive amendment
of the NASD By-Laws, the NASD Regulation By-Laws, the Nasdaq By-
Laws, and the Delegation Plan containing the terms of the corporate
reorganization. See Securities Exchange Act Release No. 39326
(November 14, 1997) (File No. SR-NASD-97-71).
---------------------------------------------------------------------------
Among other things, the corporate reorganization modifies the
structure of the NASD Board. As a result, the structure of the NASD
Regulation Board, and the Nasdaq Board and certain committees of NASD
Regulation and Nasdaq will also change. Of all the structural changes
approved by the NASD Board and the two subsidiary boards, two are most
related to the operations described in the Rule 1010 Series, the Rule
8000 Series, and the Rule 9000 Series and are the impetus for a number
of the rule changes described below.
First, the adjudicatory functions currently performed by the
National Business Conduct Committee (``NBCC''), a committee of the NASD
Regulation Board, will be performed instead by the National
Adjudicatory Council (``NAC''). The proposed NAC members will be
appointed by the NASD Regulation Board, but, except for the NAC Chair,
will not be members of the NASD Regulation Board or the NASD Board.
Second, the process for reviewing a disciplinary proceeding has
been streamlined. Under the proposal, if a disciplinary proceeding is
subject to discretionary review at an executive level, such
discretionary review will be performed solely by the NASD Board. In
contrast, the Association's current practice requires that both the
NASD Regulation Board and the NASD Board have an opportunity to review
a disciplinary proceeding before the Association may issue a final
decision. Although the regulatory responsibility of the NASD Regulation
Board to engage in a review of a disciplinary proceeding
[[Page 64031]]
has been eliminated, all directors of NASD Regulation will continue to
play a vital role in the review of disciplinary proceedings, because,
under the new board structure, all directors of the NASD Regulation
Board also sit as Governors on the NASD Board.
As a result of these structural changes, the Association is
proposing changes to Article V of the NASD Regulation By-Laws, the Rule
1010 Series, the Rule 8000 Series, and the Rule 9000 Series. First, the
references to the adjudicatory functions currently performed by the
NBCC have been redesignated as those performed by the proposed NAC.
Second, the Association proposes amendments to the Rule 1010 Series,
the Rule 8000 Series, and the Rule 9000 Series to delete the
discretionary review function of the NASD Regulation Board in a Series
of rules in which such function is currently set forth. Finally, other
changes are proposed in this rule filing to clarify or simplify the
rules that were approved on August 7, 1997, as part of SR-NASD-97-
28.5 Such changes are described later in detail.
---------------------------------------------------------------------------
\5 \See Securities Exchange Release No. 38908 (August 7, 1997),
62 FR 43385 (August 13, 1997).
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(a) Changes to Article V of NASD Regulation By-Laws. The
Association is proposing to add a new Section 5.11 to Article V of the
NASD Regulation By-Laws. This section will set the quorum requirements
and composition of the Review Subcommittee, a subcommittee of the new
NAC. As described in greater detail below, the Review Subcommittee
shall perform those functions in membership and disciplinary
proceedings that are set forth in the membership and disciplinary
procedure rules.
(b) Changes to the Rule 1010 Series. The Rule 1010 Series is
entitled ``Membership, Registration and Qualification Requirement.''
The Association is proposing changes to the Rule 1010 Series in order
to reflect the changes required pursuant to the corporate
reorganization approved by the NASD Board while SR-NASD-97-28 was under
consideration by the Commission.
First, in order to reflect the changes proposed as part of the
corporate reorganization, the Association will amend the Rule 1010
Series generally by deleting each reference to the term, ``National
Business Conduct Committee,'' and substituting the term, ``National
Adjudicatory Council.''
Second, in current Rule 1016, the NASD Regulation Board has the
authority to review an NBCC decision following an appeal or review
proceeding regarding an applicant whose request for NASD membership has
been denied, granted without restriction, or granted but is subject to
one or more restrictions set forth in Rule 1014(b)(2). This change
parallels the authority of the NBCC to call any disciplinary proceeding
decision for review in the Rule 9000 Series. The Association is
proposing to eliminate the discretionary review authority of the NASD
Regulation Board in current Rule 1016 for the purpose of making the
review process more efficient. Generally, this change means that an
applicant will receive a final decision of the Association regarding
membership status at least 30 days before the applicant would have
received such notification under the current Rule 1010 Series. The NASD
Board will continue to have the authority now set forth in Rule 1016.
(c) Changes to the Rule 8000 Series. The Rule 8000 Series is
entitled ``Investigations and Sanctions.'' Several changes to the Rule
8000 Series were approved by the Commission on August 7, 1997, in SR-
NASD-97-28. The Association is now proposing additional changes to the
Rule 8000 Series in order to reflect the changes required pursuant to
the corporate reorganization approved while SR-NASD-97-28 was under
consideration by the Commission. In addition, the Association is
proposing changes to Rule 8110 regarding the availability of the NASD
Manual and Rule 8210(d) regarding notices sent under the Rule. Finally,
the NASD is proposing to move three rules requiring that certain
persons provide the Association with information to the Rule 8000
Series from other rule series.
First, in order to reflect the changes proposed as part of the
corporate reorganization, the Association will amend the Rule 8000
Series generally by deleting each reference to the term, ``National
Business Conduct Committee,'' and substituting the term, ``National
Adjudicatory Council,'' and make other conforming changes discussed
above to reflect the corporate reorganization.
Second, the Association proposes minor changes to Rule 8110 and
Rule 8210(d). Rule 8110 requires a member to maintain an NASD Manual.
If approved, the proposed change to Rule 8110 would allow a member to
comply with the obligation of Rule 8110 to maintain a copy of the NASD
Manual in its offices, including branch offices, by allowing the member
to maintain an electronic version of the NASD Manual, among other
options, in such offices.
Third, the proposed change to Rule 8210(d) is intended to clarify
how the Association will determine if a member or a person subject to
the Rule 8000 Series obligation to provide information to the
Association upon request receives a notice sent by the Association.
Additional addresses at which a person may be served have been added to
the list to provide additional safeguards to potential recipients of
such notices.
Fourth, the Association proposes to renumber three rules, Rule
4615, Rule 5107, and Rule 6730, as proposed Rule 8211, proposed Rule
8212, and proposed Rule 8213. Each of these rules requires certain
persons to provide information to the Association. The Rule 8000
Series, by Rule 8210, contains the general requirement that a member or
another person must provide information to the Association when
requested to do so. The rules, in the current form and as renumbered
proposed rules, set forth the same type of obligation as to specific
types of information. The Association believes that members and other
persons will be more aware of these information sharing obligations by
placing the three current rules in the Rule 8000 Series. The
Association also proposes minor, technical changes to such renumbered
rules, as described below.
Rule 4615 requires a member to submit automated trading data upon
request to the Association. The Association does not propose to amend
the text of current Rule 4615, renumbered as Rule 8211, except as
follows. The Association proposes to add an explicit reference to the
Rule 9600 Series to identify the Rule 9600 Series as the avenue by
which a member may seek a good cause exemption and to set forth clearly
that ``good cause'' is the standard for seeking an exemption. The other
amendments proposed are technical (e.g., the paragraphs and
subparagraphs of the rule are renumbered and a redundant clause is
stricken).
Proposed Rule 8212, now Rule 5107, requires a member and an
approved affiliate that participates in Nasdaq International as a
Service market maker or an order-entry firm to submit certain trading
data. The minor changes the Association proposes to the existing rule
text include amending the title to clarify that the proposed Rule 8212
obligation is to provide information on trading data for the Nasdaq
International Service transactions, adding a reference to the Rule 9600
Series as the appropriate rule series under which a member may seek a
good cause exemption from the obligations of the rule, and stating
explicitly that ``good cause'' is the standard for obtaining an
exemption.
[[Page 64032]]
Proposed Rule 8212, now Rule 6730, requires a member to submit
certain types of trade data pursuant to proposed Rule 8211 (current
Rule 4615) in automated format. Proposed Rule 8213 differs from current
Rule 6730 in that the Association proposes to clarify the title of the
rule, make an explicit reference to the Rule 6700 Series, and add a
sentence at the end of the rule referring a member to the Rule 9600
Series in order to request exemptive relief.
The Association notes that its proposal to move Rule 4615, Rule
5107, and Rule 6730 to the Rule 8000 Series will not affect the
Association's ability to seek information pursuant to any other
Association rule under which the Association may do so from persons
subject to the rule. For example, under proposed Rule 4623, Nasdaq is
proposing to request information from electronic communications
networks (``ECNs'') and the changes the Association is proposing with
respect to the Rule 8000 Series are not intended to have any impact on
the Association's proposal to gather information under proposed Rule
4623.
(d) Changes to the Rule 9000 Series. The Rule 9000 Series is
entitled the ``Code of Procedure.'' The Rule 9000 Series was
comprehensively changed pursuant to the Commission approval of SR-NASD-
97-28 on August 7, 1997.\6\ The Association is now proposing additional
changes to the Rule 9000 Series in order to reflect the changes
required pursuant to the corporate reorganization approved while SR-
NASD-97-28 was under consideration by the Commission. In addition, the
Association is amending Rule 9102(d), Rule 9844(b), and Rule 9347 (a-
b), to clarify the role of the Review Subcommittee of the NAC. Finally,
the Association is proposing minor changes to several other Rules,
including Rule 9120, Rule 9141, Rule 9214, Rule 9215, Rule 9216, Rule
9231, Rule 9235, Rule 9241, Rule 9270, and 9312.
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\6\ See Release No. 34-38908, supra note 5.
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(1) Changes Related to the Corporate Reorganization. In order to
reflect the changes proposed as part of the corporate reorganization,
the Association will amend the Rule 9000 Series generally by deleting
each reference to the term, ``National Business Conduct Committee,''
and substituting the term, ``National Adjudicatory Council.''
In addition, there are several proceedings described in the current
Rule 9000 Series in which the NASD Regulation Board has the authority
to review a disciplinary or other decision of the NBCC relating to the
proceeding (e.g., Rule 9351, relating to a Rule 9300 Series
disciplinary proceeding that has been appealed to or reviewed by the
proposed National Adjudicatory Council, and Rule 9415, relating to a
Rule 9400 proceeding used to regulate the activities of a member
experiencing financial or operational difficulties). The Association is
proposing to eliminate such authority. Generally, if this proposed
change is approved by the Commission, persons subject to disciplinary
and other proceedings in which the discretionary review function of the
NASD Regulation Board is eliminated will be notified of the final
decision of the Association approximately 30 days earlier than such
persons would be notified under the current Rule 9000 Series.
In order to reflect the increased role of the Review Subcommittee
of the NAC in the administration of disciplinary proceedings during the
appeal or review stages, the Association is proposing to amend several
rules in the Rule 9300 Series, or other rules relating to a Rule 9300
Series appeal or review proceeding, by granting authority to the Review
Subcommittee to make a number of decisions, and deleting from the same
rules the authority of the Chair and Vice Chair of the proposed NAC
(formerly, the NBCC) to make such decisions. In addition, in proposed
amendments to Rule 9216 and Rule 9270, the Review Subcommittee is
substituted for the Chair and the Vice Chair of the NAC (formerly, the
NBCC) in: (a) Rule 9216(a), relating to the review and acceptance of
letters of acceptance, waiver, and consent; (b) Rule 9216(b), relating
to the review and acceptance of minor rule plan violation letters; and,
(c) Rule 9270, relating to the review and acceptance of offers of
settlement. As a result of the restructuring of the NBCC as the NAC and
the proposed changes in procedural operations, the Association believes
that it is more appropriate for either the full disciplinary committee,
the proposed NAC, or by delegation, the smaller Review Subcommittee,
balanced as to Industry and Non-Industry members, to make certain
decision and rulings within the authority of the NBCC (the proposed
NAC) that had been delegated previously to the Chair and the Vice Chair
of the NBCC. Each of the above changes are reflected in amendments to a
number of Rules in the Rule 9000 Series.
(2) Rule 9100 Series, Rule 9200 Series, and Rule 9300 Series--Other
Changes. The Association proposes to add a new definition, ``Department
of Enforcement,'' in Rule 9120, as new paragraph (e) and renumber all
other paragraphs. The definition of ``Department of Enforcement'' is
being added because a substantial number of Association disciplinary
proceedings are conducted cooperatively by the Department of
Enforcement and the Department of Market Regulation. In some cases,
staff of the Department of Market Regulation will perform many of the
functions of the complaining Party by delegated authority.
Proposed paragraph (e) provides that the Department of Enforcement
means the Department of Enforcement itself, and for most purposes under
the Code, its delegatee, the Department of Market Regulation as well.
Although the Department of Market Regulation would have delegated
authority to prosecute a disciplinary matter after authorization of the
complaint by the Division of Enforcement, however, it would not have
authority to authorize a disciplinary proceeding under Rule 9211,
determine the terms of a letter of acceptance, waiver, and consent, or
of a minor rule violation plan letter under Rule 9216 (a) and (b), or
authorize the filing of a notice of appeal under Rule 9311.
The Association purposes many other minor changes to Rule 9120
which reflect renumbering or a change in the term, ``National Business
Conduct Committee'' to the term, ``National Adjudicatory Council.'' In
addition, certain definitions contain technical corrections to add
references to proceedings in the Rule 9600 Series. Finally the
Association is proposing to amend the definition of ``Review
Subcommittee.'' The Association proposes to delete the definition from
the Rule 9300 Series, locate it in Rule 9120, and amend it to clarify
the composition of the Review Subcommittee and other terms of the
Review Subcommittee by a cross reference to new Article V, Section 5.11
of the NASD Regulation By-Laws.
The Association proposes to amend Rule 9141(b) to clarify that the
written notice one is required to file under that provision is a
``notice of appearance.'' Rule 9141(b) indicates that when a Respondent
is represented by a third party, a written notice stating the name of
the representative, among other things, shall be filed. The proposed
change to paragraph (b) would make explicit that the written notice is
a notice of appearance, and that the notice of appearance must be filed
in each case. This procedure will avoid any misunderstanding as to who
the representative is for a particular Respondent.
[[Page 64033]]
The Association proposes to amend Rule 9214(b) to clarify that when
the consolidation of two or more cases is being considered, all Parties
to all such cases will be served with all papers filed and all orders
issued. The proposed amendment also makes explicit that when a Party
moves to consolidate two or more cases, the Chief Hearing Officer will
decide which panel will hear the case and will issue an order
accordingly.
The Association proposes to amend Rule 9215 in paragraph (a) to
clarify that service of an answer occurs under Rule 9133, in paragraph
(e) to change a 15 day period to a 14 day period, which is consistent
with other periods in the Code, and in paragraph (f) to permit the
Department of Enforcement to send a second notice to a Respondent who
fails to file an answer. Paragraph (a) includes a reference to Rule
9133 which could be read as incorrectly stating that service of the
complaint is made pursuant to Rule 9133. The amendment to paragraph (a)
clarifies that service of an answer must be made pursuant to Rule 9133.
Currently, paragraph (e) of Rule 9215 provides for an extension of
time for the Respondent to file an answer to an amended complaint. The
time period is 14 days if the Respondent has not filed an answer to the
original complaint and 15 days if the Respondent has filed an answer to
the original complaint. The Association is proposing to make both
periods 14 days, to eliminate confusion.
Rule 9215(f) provides that if a Respondent does not file an answer
within the time period of the original complaint, the Hearing Officer
will direct the Department of Enforcement to send a second notice of
the complaint to the Respondent. Subsequently, the Hearing Officer may
treat a failure to respond to the second notice as a default. In those
cases in which the Respondent has filed an extension request or a
letter or some other document with the Office of Hearing Officers, and
subsequently fails to file an answer, it is unnecessary to have the
Department of Enforcement send a second notice before a default is
declared because the earlier filing by the Respondent is evidence that
the Respondent received the original complaint. If there is evidence in
the form of a communication to the Office of Hearing Officers that
Respondent received the original complaint and failed to file an
answer, the Association believes that there should be no requirement
that a second notice of the complaint be sent before a default judgment
can be entered. In addition, in the interests of efficiency, in those
cases in which the Respondent does not file anything, the Department of
Enforcement on its own initiative should send the second notice without
an order from the Office of Hearing Officers. Therefore, the
Association is proposing to amend Rule 9215 (f) to (i) delete the
requirement that the Office of Hearing Officers order the Department of
Enforcement to send the second notice when required, and (ii) delete
the requirement to send a second notice before declaring a default if
the Respondent has made a filing with the Office of Hearing Officers
but has failed to answer the complaint in a timely manner.
The Association proposes to amend IM-9216, which follows Rule
9216(b), the provision allowing a person to resolve some rule
violations by submitting a minor rule violation plan letter (``MRV'')
to the Association. In IM-9216, the Association lists the rules that
the Association may resolve violations of by using an MRV. The
Association proposes to add Rule 4615, Rule 6730 and Rule 5107 to IM-
9216 (as renumbered proposed Rules 8211 through proposed Rules 8213).
The Association inadvertently omitted Rule 4615 and Rule 6730 in
IM-9216 in the submission of the proposed Rule 9000 Series in SR-NASD-
97-28. Prior to August 7, 1997, when SR-NASD-97-28 was approved by the
Commission, old Rule IM-9217, the former provision listing rule
violations appropriate for resolution by an MRV included Rule 4615 and
the Rule 6730 Series, which included Rule 6730. The Association also
proposes to add Rule 5107 (proposed as Rule 8212) to IM-9216 because it
is similar to Rule 4615 and Rule 6730. Rule 5107, like Rule 4615 and
Rule 6730, is a ``blue sheeting'' rule, requiring the same type of
information to be submitted as do the Rules 4615 and Rule 6730.
The Office of Hearing Officers has determined that without express
authority in the Code of Procedure the Chief Hearing Officer would be
unable to appoint persons to serve as observers to observe a
disciplinary proceeding. Rule 9231 (b) and (c) currently provides that
a Hearing Panel or an Extended Hearing Panel shall consist of a Hearing
Officer and two Panelists, except in extraordinary circumstances
relating to the prior disqualification or recusal of a Panelist as set
forth in Rule 9234. The Association is proposing to add paragraph (d)
to Rule 9231 to assure that, for training purposes only, the Chief
Hearing Officer could appoint an observer to observe a disciplinary
proceeding. Under paragraph (d), the Chief Hearing Officer could
designate a person as an observer to a Hearing Panel or an Extended
Hearing Panel if the person is eligible to be appointed as a Panelist.
The Function is being established to provide future Panelists with the
opportunity to observe a disciplinary proceeding hearing for training
purposes.
The Association proposes to amend Rule 9235 to allow the Chief
Hearing Officer or the Deputy Chief Hearing Officer to issue an order
in a disciplinary proceeding in the event a Hearing Officer is
unavailable. The Association is proposing to add new paragraph (b) to
state explicitly that, in the event the appointed Hearing Officer is
temporarily unavailable and exigent circumstances require action by the
Hearing Officer, the Chief Hearing Officer or the Deputy Chief Hearing
Officer may temporarily function as the appointed Hearing Officer in a
proceeding until the appointed Hearing Officer is available.
The Association is proposing to amend Rule 9241 to trigger the 21
day period in the rule from the filing of an answer, rather than from
the service of the answer. The Office of Hearing Officers knows when as
answer has been filed; it may not know for a period of time whether the
answer has been served.
The Association is proposing to amend Rule 9270(a) to allow a
Hearing Officer to determine if an offer of settlement made before a
hearing on the merits has begun should stay the hearing. Currently, a
Hearing Panel must issue such decisions if the offer of settlement is
filed within 30 days prior to the date the hearing is scheduled to
begin. The specific change would provide that if a settlement motion is
filed prior to the commencement of a hearing, the Hearing Officer has
the authority to determine whether the hearing should be stayed. In
contrast, if the settlement motion is filed after commencement of a
hearing, the panel, rather than the Hearing Officer, has the authority
to determine whether the hearing should be stayed.
In Rule 9312(e), the Association proposes to clarify that the
National Adjudicatory Council's authority to review a case extends to
any issue raised in the ``record'' of the disciplinary proceeding,
rather than the ``decision'' as the Code now provides.
(3) Rule 9600 Series--Other Changes. The Association is proposing
to amend the Rule 9600 Series under the Code of Procedure to require a
member seeking an exemption from proposed Rule 8211, 8212, and 8213
(current Rule 4615, Rule 5107, and Rule 6730, discussed, supra, as
changes to the Rule 8000 Series), to follow the procedures outlined in
the
[[Page 64034]]
recently adopted Rule 9600 Series. Currently, the exemptive authority
under Rule 4615, Rule 5107, and Rule 6730 is a generalized authority
vested in the Association.
In addition, to eliminate delays in processing a request for an
exemption, the Association proposes to modify Rule 9610. Proposed Rule
9610 requires a person seeking exemptive relief to file a written
application with ``the appropriate department or staff of the
Association, and provide a copy of the application to the Office of
General Counsel of NASD Regulation,'' rather than filing the
application only with the Office of the General Counsel of NASD
Regulation. The same change is proposed in Rule 9630(a), which deals
with filing a notice of an appeal of a decision regarding exemptive
relief.
2. Statutory Basis
(a) The Association is requesting that the proposed rule change be
effective within 45 days of SEC approval, but not later than January 1,
1998.
(b) The Association believes that the proposed rule change is
consistent with Section 15A(b)(6), (7), and (8) of the Act.\7\ The
proposed rule change is consistent with Section 15A(b)(6) of the Act in
that it will promote just and equitable principles of trade by
providing fair procedures and standards for membership admission, and
fair procedures and consistent treatment for requesting information
from members or other persons who are obligated to provide the
Association with information. The proposed rule change is consistent
with Section 15A(b)(7) in that it furthers the statutory mandate that
the Association establish rules providing that its members and persons
associated with its members shall be appropriately disciplined for
violation of any provision of this title, the rules or regulations
thereunder, the rules of the Municipal Securities Rulemaking Board, or
the rules of the association, by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure, being suspended
or barred from being associated with a member, or any other fitting
sanction. The rule change is consistent with Section 15A(b)(8) in that
it furthers the statutory goals of providing a fair procedure for
disciplining members and persons associated with members, fair
procedures for admitting or denying membership to any person seeking
membership to the Association, fair procedures for barring any person
from becoming associated with a member of the Association, and fair
procedures for prohibiting or limiting the association of any person
with respect to access to services offered by the Association or a
member thereof.
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\7\ 15 U.S.C. Sec. 780-3.
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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 proposes 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
Within 35 days of the date of publication of this notice if 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 number SR-NASD-97-81 and
should be submitted by December 18, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31523 Filed 12-2-97; 8:45 am]
BILLING CODE 8010-01-M