[Federal Register Volume 64, Number 16 (Tuesday, January 26, 1999)]
[Notices]
[Pages 3993-3994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1699]
[[Page 3993]]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40954; File No. SR-NASD-98-91]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to the Time Period for Filing
Information Requests in Arbitration
January 19, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on December 8, 1998, the National Association of Securities
Dealers, Inc., through its wholly owned subsidiary, NASD Regulation,
Inc. (``NASD Regulation''), 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. NASD Regulation has designated the proposed rule
change as constituting a ``non-controversial'' rule change under
paragraph (e)(6) of Rule 19b-4 under the Exchange Act,\3\ which renders
the proposal effective upon receipt of this filing by the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(e)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
NASD Regulation is proposing to amend Rule 10321 of the National
Association of Securities Dealers, Inc. (``NASD'' or ``Association''),
to modify the earliest date to file document and information requests
in arbitration proceedings from 20 business days to 45 calendar days
after service of the Statement of Claim or upon filing of the Answer,
whichever is earlier. Below is the text of the proposed rule change.
Proposed new language is in italics; proposed deletions are in
brackets.
* * * * *
RULES OF THE ASSOCIATION
* * * * *
10000. CODE OF ARBITRATION PROCEDURE
* * * * *
10321. General Provisions Governing Pre-Hearing Proceedings
(a) (No change)
(b) Document Production and Information Exchange
(1) Any party may serve a written request for information or
documents (``information request'') upon another party [twenty (20)
business] 45 calendar days or more after service of the Statement of
Claim by the Director of Arbitration or upon filing of the Answer,
whichever is earlier. The requesting party shall serve the information
request on all parties and file a copy with the Director of
Arbitration. The parties shall endeavor to resolve disputes regarding
an information request prior to serving any objection to the request.
Such efforts shall be set forth in the objection.
(2)-(4) (No change)
(c)-(e) (No change)
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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
The proposed rule change is intended to modify the earliest date to
file document and information requests in arbitration proceedings from
20 business days to 45 calendar days after service of the Statement of
Claim or upon filing of the Answer, whichever is earlier, to coincide
with the recently amended time period to file an Answer to the
Statement of Claim.
In a previous filing approved by the Commission \4\ and effective
on March 16, 1998, NASD Regulation enlarged the time to answer an
arbitration claim from 20 business days to 45 calendar days, and
eliminated extensions of time to answer except in extraordinary
circumstances. That change was proposed because requests for extensions
of time were common, generally because respondents needed additional
time to develop a complete answer to the claim. The extension of time
to 45 days was designed to ease the administrative burden on NASD
Regulation staff by eliminating the burden of processing and granting
routine extensions of time.
---------------------------------------------------------------------------
\4\ Exchange Act Rel. No. 39664 (February 13, 1998) (File No.
SR-NASD-98-07) 63 FR 8727 (February 20, 1998).
---------------------------------------------------------------------------
NASD Regulation has determined that a related change is necessary
to the rule on discovery in arbitration, Rule 10321, which currently
permits requests for documents and information to be made 20 business
days or more after service of the Statement of Claim by the Director of
Arbitration or upon filing of the Answer, whichever is earlier. The 20-
day period was originally intended to coincide with the time to answer
claims, in order to prevent the respondent from having to respond to a
discovery request before it had prepared its answer. Since the time to
answer has been extended to 45 days, however, Rule 10321 could require
a party to respond to a document request in 20 business days
(approximately a month), which would be over two weeks before the
party's answer was due. Therefore, to maintain the original purpose of
the discovery time period, NASD Regulation proposes that the time
period in Rule 10321 be extended to 45 calendar days as well.
(b) Statutory Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Exchange
Act, which requires, among other things, that the Association's rules
must be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest. The NASD
believes that the proposed rule change will protect investors and the
public interest by facilitating a more orderly discovery procedure for
all parties.
(B) Self-Regulatory Organization's Statement of Burden on Competition
NASD Regulation does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Exchange 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.
[[Page 3994]]
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The proposed rule change has been filed by the Association as a
``non-controversial'' rule change under Rule 19b-4(e)(6) under the
Exchange Act.\5\ Consequently, because the foregoing proposed rule
change: (1) does not significantly affect the protection of investors
or the public interest; (2) does not impose any significant burden on
competition; and (3) does not become operative until January 11, 1999,
more than 30 days from December 8, 1998, the date on which it was
filed, and the NASD provided the Commission with written notice of its
intent to file the proposed rule change at least five days prior to the
filing date, it has become effective pursuant to Section 19(b)(3)(A) of
the Exchange Act and Rule 19b-4(e)(6) thereunder.
---------------------------------------------------------------------------
\5\ 17 CFR 240.19b-4(e)(6).
---------------------------------------------------------------------------
At any time within 60 days of this filing, the Commission may
summarily abrogate this proposal if it appears to the Commission that
such action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Exchange Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal is
consistent with the Exchange Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, 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-98-91 and
should be submitted by February 16, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-1699 Filed 1-25-99; 8:45 am]
BILLING CODE 8010-01-M