Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to Amendments to the Classification of Arbitrators Pursuant to Rule 10308 of the NASD Code of Arbitration, 51395-51398 [E5-4726]
Download as PDF
<![CDATA[
Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Notices
Exchange is not proposing any
substantive (or typographical) change to
the pilot; rather, the Exchange proposes
that the pilot remain in effect through
January 31, 2006, the compliance date of
Rule 612 of Regulation NMS.
2. Statutory Basis
CHX believes the proposal is
consistent with the requirements of the
Act and the rules and regulations
thereunder that are applicable to a
national securities exchange, and, in
particular, with the requirements of
Section 6(b) of the Act.8 CHX believes
the proposal is consistent with Section
6(b)(5) of the Act 9 in that it is designed
to promote just and equitable principles
of trade; to remove impediments to, and
to perfect the mechanism of, a free and
open market and a national market
system; and, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes would
impose any burden on competition.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange asserts the foregoing
rule change has become effective
pursuant to Section 19(b)(3)(A) of the
Act 10 and Rule 19b–4(f)(6) 11 thereunder
because the proposed rule change does
not:
(i) Significantly affect the protection
of investors or the public interest;
(ii) Impose any significant burden on
competition; and
(iii) Become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, if consistent with the
protection of investors and the public
2002) (extending the pilot through January 31,
2003); 47372 (February 14, 2003), 68 FR 8955
(February 26, 2003) (extending the pilot through
May 31, 2003); 47951 (May 30, 2003), 68 FR 34448
(June 9, 2003) (extending the pilot through
December 1, 2003); 48871 (December 3, 2003), 68
FR 69097 (December 11, 2003) (extending pilot
through June 30, 2004); 49994 (July 9, 2004), 69 FR
42486 (July 15, 2004) (extending pilot through June
30, 2005); 51944 (June 30, 2005), 70 FR 39539
(August 8, 2005) (extending pilot through August
29, 2005, the effective date of Rule 612).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6).
VerDate Aug<18>2005
15:17 Aug 29, 2005
Jkt 205001
interest.12 The Exchange has requested
that the Commission waive the 30-day
operative delay and designate the
proposed rule change operative
immediately so that the pilot can
continue uninterrupted.
The Commission hereby grants the
request.13 The Commission believes that
such waiver is consistent with the
protection of investors and the public
interest because it will allow the
protection of customer limit orders
provided by the pilot to continue
without interruption and designates the
proposed rule change to be operative
upon filing with the Commission.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–CHX–2005–22 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
No. SR–CHX–2005–22. This file number
should be included on the subject line
if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
12 In addition, Rule 19b-4(f)(6)(iii) states that the
Exchange must provide the Commission with
written notice of its intent to file the proposed rule
change at least five days prior to the date of filing
of the proposed rule change or such shorter time as
designated by the Commission. The Commission
has determined to waive the requirement in this
case.
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
51395
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of the filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No.
SR–CHX–2005–22 and should be
submitted on or before September 20,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–4723 Filed 8–29–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52332; File No. SR–NASD–
2005–094]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment No. 1 Thereto Relating to
Amendments to the Classification of
Arbitrators Pursuant to Rule 10308 of
the NASD Code of Arbitration
August 24, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on June 22, 2005, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) 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. On August 5, 2005,
NASD filed amendment No. 1 to the
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\30AUN1.SGM
30AUN1
51396
Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Notices
proposed rule.3 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to amend Rule
10308 of the NASD Code of Arbitration
Procedure (‘‘Code’’) relating to the
classification of arbitrators to further
ensure that individuals with significant
ties to the securities industry do not
serve as public arbitrators. Below is the
text of the proposed rule change.4
Proposed new language is italics;
proposed deletions are in brackets.
*
*
*
*
*
10308. Selection of Arbitrators
(a) Definitions
(1) through (3) No change
(4) ‘‘non-public arbitrator’’
The term ‘‘non-public arbitrator’’
means a person who is otherwise
qualified to serve as an arbitrator and:
(A) is, or within the past 5 years, was:
(i) associated with, including
registered through, a broker or a dealer
(including a government securities
broker or dealer or a municipal
securities dealer);
(ii) registered under the Commodity
Exchange Act;
(iii) a member of a commodities
exchange or a registered futures
association; or
(iv) associated with a person or firm
registered under the Commodity
Exchange Act;
(B) is retired from, or spent a
substantial part of a career, engaging in
any of the business activities listed in
subparagraph (4)(A);
(C) is an attorney, accountant, or other
professional who has devoted 20
percent or more of his or her
professional work, in the last two years,
to clients who are engaged in any of the
business activities listed in
subparagraph (4)(A); or
(D) is an employee of a bank or other
financial institution and effects
transactions in securities, including
government or municipal securities, and
commodities futures or options or
3 The amendment clarified the rule’s text and
purpose, and revised the effective date of the rule.
4 The rules proposed in this filing will be
renumbered as appropriate following Commission
approval of the pending revisions to the NASD
Code of Arbitration Procedure for Customer
Disputes; see Securities Exchange Act Release No.
51856 (June 15, 2005), 70 FR 36442 (June 23, 2005)
(SR–NASD–2003–158); and the NASD Code of
Arbitration Procedure for Industry Disputes; see
Securities Exchange Act Release No. 51857 (June
15, 2005), 70 FR 36430 (June 23, 2005) (SR–NASD–
2004–011).
VerDate Aug<18>2005
15:17 Aug 29, 2005
Jkt 205001
supervises or monitors the compliance
with the securities and commodities
laws of employees who engage in such
activities.
(5) ‘‘public arbitrator’’
(A) The term ‘‘public arbitrator’’
means a person who is otherwise
qualified to serve as an arbitrator and:
(i) is not engaged in the conduct or
activities described in paragraphs
(a)(4)(A) through (D);
(ii) was not engaged in the conduct or
activities described in paragraphs
(a)(4)(A) through (D) for a total of 20
years or more;
(iii) is not an investment adviser;
(iv) is not an attorney, accountant, or
other professional whose firm derived
10 percent or more of its annual revenue
in the past 2 years from any persons or
entities listed in paragraph (a)(4)(A);
[and]
(v) is not employed by, and is not the
spouse or an immediate family member
of a person who is employed by, an
entity that directly or indirectly controls,
is controlled by, or is under common
control with, any partnership,
corporation, or other organization that
is engaged in the securities business;
(vi) is not a director or officer of, and
is not the spouse or an immediate
family member of a person who is a
director or officer of, an entity that
directly or indirectly controls, is
controlled by, or is under common
control with, any partnership,
corporation, or other organization that
is engaged in the securities business;
and
(vii) is not the spouse or an immediate
family member of a person who is
engaged in the conduct or activities
described in paragraphs (a)(4)(A)
through (D).
(B) No change
(6) through (7) No change
(b) through (f) 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 included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. NASD has prepared
summaries, set forth in Sections (A), (B),
and (C) below, of the most significant
aspects of such statements.
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the arbitrator
classification criteria in Rule 10308 of
the Code to ensure that individuals with
significant ties to the securities industry
may not serve as public arbitrators in
NASD arbitrations.
The Code classifies arbitrators as
public or non-public. When investors
have a dispute with member firms or
associated persons in NASD arbitration,
they are entitled to have their cases
heard by a panel consisting of either a
single public arbitrator, or a majority
public panel consisting of two public
arbitrators and one non-public
arbitrator, depending on the amount of
the claim.5
Under Rule 10308(a)(4) of the Code, a
person is classified as a non-public
arbitrator if he or she:
(A) Is, or within the past 5 years, was:
(i) Associated with a broker or a
dealer (including a government
securities broker or dealer or a
municipal securities dealer);
(ii) Registered under the Commodity
Exchange Act;
(iii) A member of a commodities
exchange or a registered futures
association; or
(iv) Associated with a person or firm
registered under the Commodity
Exchange Act;
(B) Is retired from, or spent a
substantial part of a career, engaging in
any of the business activities listed in
subparagraph (4)(A);
(C) Is an attorney, accountant, or other
professional who has devoted 20
percent or more of his or her
professional work, in the last two years,
to clients who are engaged in any of the
business activities listed in
subparagraph (4)(A); or
(D) Is an employee of a bank or other
financial institution and effects
transactions in securities, including
government or municipal securities, and
commodities futures or options or
supervises or monitors the compliance
with the securities and commodities
laws of employees who engage in such
activities.
The criteria for public arbitrators are
set forth in Rule 10308(a)(5) of the Code.
5 The panel composition for intra-industry
disputes (not involving any parties who are
investors) is governed by Rule 10202. Depending on
the nature of the dispute, intra-industry panels may
consists of all public arbitrators, all non-public
arbitrators, or a majority of public arbitrators. The
arbitrator classification provisions of Rule 10308
apply to all such panels.
E:\FR\FM\30AUN1.SGM
30AUN1
Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Notices
In general, an individual will be
classified as a public arbitrator if he or
she is qualified to serve as an arbitrator
and is not either personally engaged in
certain activities that would make him
or her non-public, or the immediate
family member of a person engaged in
such activities.
In order to ensure that individuals
with significant ties to the securities
industry may not serve as public
arbitrators in NASD arbitrations, NASD
believes that revisions to the definitions
of public and non-public arbitrators are
warranted.
NASD is proposing to amend the
definition of public arbitrator to exclude
individuals who work for, or are officers
or directors of, an entity that controls,
is controlled by, or is under common
control with, a broker/dealer, or who
have a spouse or immediate family
member who works for, or is an officer
or director of, an entity that is in such
a control relationship with a broker/
dealer. Currently, such individuals are
not covered by the rule. For example, a
person who works for a real estate firm
that is under common control with a
broker/dealer and perhaps shares the
same corporate name may be classified
as a public arbitrator under current
rules. Since investors may feel that an
arbitrator who is employed by a firm in
such a control relationship with a
broker/dealer is not truly ‘‘public,’’
NASD is proposing to revise the
definition of public arbitrator to exclude
any person who is employed by, or who
has a spouse or an immediate family
member who is employed by, an entity
that directly or indirectly controls, is
controlled by, or is under common
control with, any partnership,
corporation, or other organization that is
engaged in the securities business.6
Similarly, NASD also proposes to
exclude from the definition of public
arbitrator persons who are officers or
directors of, or who have a spouse or an
immediate family member who is an
officer or director of, an entity in a
6 For purposes of this rule, the term ‘‘control’’ has
the same meaning that it has for purposes of Form
BD, which broker/dealers use to register with NASD
and to make periodic updates. Specifically, control
is defined as ‘‘The power, directly or indirectly, to
direct the management or policies of a company,
whether through ownership of securities, by
contract, or otherwise. Any person that (i) is a
director, general partner or officer exercising
executive responsibility (or having similar status or
functions); (ii) directly or indirectly has the right to
vote 25% or more of a class of a voting security or
has the power to sell or direct the sale of 25% or
more of a class of voting securities; or (iii) in the
case of a partnership, has the right to receive upon
dissolution, or has contributed, 25% or more of the
capital, is presumed to control that company.’’ See
Uniform Application for Broker-Dealer Registration
(Form BD).
VerDate Aug<18>2005
15:17 Aug 29, 2005
Jkt 205001
control relationship with a broker/
dealer.
In addition, NASD is proposing to
revise the definition of non-public
arbitrator to clarify that persons who are
registered with a broker/dealer may not
be classified as public arbitrators. Under
current rules, arbitrators who are
associated with a broker or dealer are
considered non-public. In the financial
services industry, it is not uncommon
for a person to be employed by one
company (such as a bank or insurance
company) and to be registered to sell
securities through another company
(such as an affiliated broker/dealer).
NASD believes that there may be some
uncertainty among arbitrators who work
for entities in a control relationship
with a broker/dealer as to whether they
are associated with a broker/dealer for
purposes of Rule 10308, even though
they hold licenses through the broker/
dealer. Since the definition of ‘‘person
associated with a member’’ in the NASD
By-Laws includes persons who are
registered with a broker/dealer,
regardless of their status as employees,
such persons should be considered nonpublic arbitrators. Therefore, NASD
proposes to amend the definition of
non-public arbitrator to specifically
include anyone registered through a
broker/dealer.7
NASD will announce the effective
date of the proposed rule change in a
Notice to Members to be published no
later than 30 days following
Commission approval. The effective
date will be no later than 60 days
following publication of the Notice to
Members announcing Commission
approval.8
2. Statutory Basis
NASD believes that the proposed rule
change is consistent with the provisions
of Section 15A of the Act,9 in general,
7 For purposes of Rule 10308(a)(4)(A)(i), the term
‘‘including’’ is expanding or illustrative, not
exclusive or limiting. The use of the term
‘‘including but not limited to’’ in Rule 10321(d) of
the Code is not intended to create a negative
implication regarding the use of ‘‘including’’
without the term ‘‘but not limited to’’ in Rule
10308(a)(4)(A)(i) or other provisions of the Code.
8 If an arbitrator’s classification changes solely
because of an amendment to the definitions in Rule
10308, the arbitrator’s classification will be changed
prospectively, that is, for future appointments only.
In ongoing cases, staff will notify the parties of the
prospective change in the arbitrator’s classification.
In such situations, because the arbitrator’s
classification was correct when the arbitrator was
appointed, NASD normally will not grant
challenges for cause based on a prospective change
in classification. This provides continuity and
avoids unnecessary disruption to ongoing cases.
Challenges for cause still may be made based upon
the disqualification and removal criteria in Rules
10308(d) and 10312(d).
9 15 U.S.C. 78o–3.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
51397
and with Section 15A(b)(6) of the Act,10
in particular, which requires, among
other things, that NASD’s rules must be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest. NASD
believes that, by providing further
assurance to parties that individuals
with significant ties to the securities
industry are not able to serve as public
arbitrators in NASD arbitrations, the
proposed rule change will enhance
investor confidence in the fairness and
neutrality of NASD’s arbitration forum.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
NASD does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, 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 in 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,
including whether the proposed rule
change is consistent with the Act. The
Commission particularly urges
commenters to consider the proposed
amendment to the definition of ‘‘nonpublic arbitrator.’’ Specifically, the
NASD has proposed to amend Rule
10308(4)(A)(i) to clarify that persons
‘‘associated’’ with a broker or a dealer
include persons ‘‘registered through’’ a
broker or a dealer because there has
been some uncertainty among certain
10 15
E:\FR\FM\30AUN1.SGM
U.S.C. 78o–3(b)(6).
30AUN1
51398
Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Notices
arbitrators. Although it is clear under
NASD rules that persons who are
registered through a broker or a dealer
are associated persons of that brokerdealer, is this amendment helpful?
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2005–094 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52328; File No. SR–NYSE–
2005–45]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Order
Approving Proposed Rule Change To
Amend NYSE Rule 80A (Index
Arbitrage Trading Restrictions) To
Calculate Limitations on Index
Arbitrage Trading Based on the NYSE
Composite Index
August 24, 2005.
On June 28, 2005, the New York Stock
Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
• Send paper comments in triplicate
Commission (‘‘Commission’’), pursuant
to Jonathan G. Katz, Secretary,
to Section 19(b)(1) of the Securities
Securities and Exchange Commission,
Exchange Act of 1934 (‘‘Act’’),1 and
100 F Street, NE., Washington, DC
Rule 19b–4 thereunder,2 a proposed rule
20549–2001.
change to amend NYSE Rule 80A (Index
All submissions should refer to File
Arbitrage Trading Restrictions) relating
Number SR–NASD–2005–094. This file
to limitations on index arbitrage trading.
number should be included on the
subject line if e-mail is used. To help the The proposed rule change was
published for comment in the Federal
Commission process and review your
Register on July 25, 2005.3 The
comments more efficiently, please use
only one method. The Commission will Commission received no comments on
post all comments on the Commission’s the proposal. This order approves the
proposed rule change.
Internet Web site (https://www.sec.gov/
Current NYSE Rule 80A provides for
rules/sro.shtml). Copies of the
limitations on index arbitrage trading in
submission, all subsequent
any component stock of the S&P 500
amendments, all written statements
Stock Price Index on any day that the
with respect to the proposed rule
Dow Jones Industrial Average (‘‘DJIA’’) 4
change that are filed with the
advances or declines at least 2% 5 from
Commission, and all written
its previous day’s closing value.6 The
communications relating to the
NYSE proposes to amend NYSE Rule
proposed rule change between the
Commission and any person, other than 80A to calculate the limitations on
index arbitrage trading as provided in
those that may be withheld from the
the rule based on the average closing
public in accordance with the
value of the NYSE Composite Index
provisions of 5 U.S.C. 552, will be
(‘‘NYA’’), replacing the current usage of
available for inspection and copying at
the DJIA.
the Commission’s Public Reference
The Commission finds that the
Room. Copies of such filing also will be
proposed rule change is consistent with
available for inspection and copying at
the requirements of the Act and the
the principal office of NASD. All
rules and regulations thereunder
comments received will be posted
applicable to a national securities
without change; the Commission does
not edit personal identifying
1 15 U.S.C. 78s(b)(1).
information from submissions. You
2 17 CFR 240.19b–4.
should submit only information that
3 Securities Exchange Act Release No. 52051 (July
you wish to make available publicly. All 18, 2005), 70 FR 42608.
submissions should refer to the File
4 ‘‘Dow Jones Industrial Average’’ is a service
mark of Dow Jones & Company, Inc.
Number SR–NASD–2005–094 and
5 Current NYSE Rule 80A provides that collars are
should be submitted on or before
based on a quarterly calculation of ‘‘two percent
September 20, 2005.
Paper Comments
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–4726 Filed 8–29–05; 8:45 am]
BILLING CODE 8010–01–P
11 17
CFR 200.30–3(a)(12).
VerDate Aug<18>2005
15:17 Aug 29, 2005
Jkt 205001
value,’’ which is 2%, rounded down to the nearest
ten points, of the average closing value of the DJIA
for the last month of the previous calendar quarter.
6 NYSE Rule 80A’s current limitations on index
arbitrage trading provide that if the market
advances by 2% or more, all index arbitrage orders
to buy must be stabilizing (buy minus); similarly,
if the market declines by 2% or more, all index
arbitrage orders to sell must be stabilizing (sell
plus). The stabilizing requirements are removed if
the DJIA moves back to or within 1% of its closing
value.
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
exchange 7 and, in particular, the
requirements of Section 6 of the Act 8
and the rules and regulations
thereunder. Specifically, the
Commission finds the proposal to be
consistent with Section 6(b)(5) of the
Act,9 in that it is designed to promote
just and equitable principles of trade, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. According to the
Exchange, the NYA is a better reflection
of market activity with respect to the
S&P 500 and thus, a better indicator as
to when the restrictions on index
arbitrage trading provided by NYSE
Rule 80A should be triggered. Therefore,
the Commission believes that it is
consistent with the Act for the NYSE to
amend NYSE Rule 80A to calculate
limitations on index arbitrage trading
based on the NYA.10
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–NYSE–2005–
45) be, and it hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–4724 Filed 8–29–05; 8:45 am]
BILLING CODE 8010–01–P
UNITED STATES SENTENCING
COMMISSION
Sentencing Guidelines for United
States Courts
United States Sentencing
Commission.
ACTION: Notice of final priorities.
AGENCY:
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f.
9 15 U.S.C. 78f(b)(5).
10 The Commission notes that approval of the
proposed rule change is based, in part, on the fact
that NYSE Rule 80A affects only certain types of
trading by NYSE members trading on the floor of
the Exchange. The rule’s cross-market implications
are minimal. The Commission, therefore, believes
that the NYSE should have considerable discretion
in determining which index to apply under this
rule. The Commission’s approval of the proposed
rule change should in no way be interpreted as an
indication that a similar change to NYSE Rule 80B
(Trading Halts Due to Extraordinary Market
Volatility), which is integral to the cross-market
trading halt procedures known as ‘‘Circuit
Breakers,’’ would be subject to the same analysis or
similarly approved by the Commission.
11 15 U.S.C. 78s(b)(2).
12 17 CFR 200.30–3(a)(12).
E:\FR\FM\30AUN1.SGM
30AUN1
]]>Agencies
[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Notices]
[Pages 51395-51398]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4726]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52332; File No. SR-NASD-2005-094]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment
No. 1 Thereto Relating to Amendments to the Classification of
Arbitrators Pursuant to Rule 10308 of the NASD Code of Arbitration
August 24, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on June 22, 2005, the National Association of
Securities Dealers, Inc. (``NASD'') 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. On August 5, 2005, NASD filed amendment No. 1 to
the
[[Page 51396]]
proposed rule.\3\ 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\ The amendment clarified the rule's text and purpose, and
revised the effective date of the rule.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to amend Rule 10308 of the NASD Code of
Arbitration Procedure (``Code'') relating to the classification of
arbitrators to further ensure that individuals with significant ties to
the securities industry do not serve as public arbitrators. Below is
the text of the proposed rule change.\4\ Proposed new language is
italics; proposed deletions are in brackets.
---------------------------------------------------------------------------
\4\ The rules proposed in this filing will be renumbered as
appropriate following Commission approval of the pending revisions
to the NASD Code of Arbitration Procedure for Customer Disputes; see
Securities Exchange Act Release No. 51856 (June 15, 2005), 70 FR
36442 (June 23, 2005) (SR-NASD-2003-158); and the NASD Code of
Arbitration Procedure for Industry Disputes; see Securities Exchange
Act Release No. 51857 (June 15, 2005), 70 FR 36430 (June 23, 2005)
(SR-NASD-2004-011).
---------------------------------------------------------------------------
* * * * *
10308. Selection of Arbitrators
(a) Definitions
(1) through (3) No change
(4) ``non-public arbitrator''
The term ``non-public arbitrator'' means a person who is otherwise
qualified to serve as an arbitrator and:
(A) is, or within the past 5 years, was:
(i) associated with, including registered through, a broker or a
dealer (including a government securities broker or dealer or a
municipal securities dealer);
(ii) registered under the Commodity Exchange Act;
(iii) a member of a commodities exchange or a registered futures
association; or
(iv) associated with a person or firm registered under the
Commodity Exchange Act;
(B) is retired from, or spent a substantial part of a career,
engaging in any of the business activities listed in subparagraph
(4)(A);
(C) is an attorney, accountant, or other professional who has
devoted 20 percent or more of his or her professional work, in the last
two years, to clients who are engaged in any of the business activities
listed in subparagraph (4)(A); or
(D) is an employee of a bank or other financial institution and
effects transactions in securities, including government or municipal
securities, and commodities futures or options or supervises or
monitors the compliance with the securities and commodities laws of
employees who engage in such activities.
(5) ``public arbitrator''
(A) The term ``public arbitrator'' means a person who is otherwise
qualified to serve as an arbitrator and:
(i) is not engaged in the conduct or activities described in
paragraphs (a)(4)(A) through (D);
(ii) was not engaged in the conduct or activities described in
paragraphs (a)(4)(A) through (D) for a total of 20 years or more;
(iii) is not an investment adviser;
(iv) is not an attorney, accountant, or other professional whose
firm derived 10 percent or more of its annual revenue in the past 2
years from any persons or entities listed in paragraph (a)(4)(A); [and]
(v) is not employed by, and is not the spouse or an immediate
family member of a person who is employed by, an entity that directly
or indirectly controls, is controlled by, or is under common control
with, any partnership, corporation, or other organization that is
engaged in the securities business;
(vi) is not a director or officer of, and is not the spouse or an
immediate family member of a person who is a director or officer of, an
entity that directly or indirectly controls, is controlled by, or is
under common control with, any partnership, corporation, or other
organization that is engaged in the securities business; and
(vii) is not the spouse or an immediate family member of a person
who is engaged in the conduct or activities described in paragraphs
(a)(4)(A) through (D).
(B) No change
(6) through (7) No change
(b) through (f) 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 included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASD has prepared summaries, set forth in Sections (A),
(B), and (C) below, of the most significant aspects of such statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the arbitrator
classification criteria in Rule 10308 of the Code to ensure that
individuals with significant ties to the securities industry may not
serve as public arbitrators in NASD arbitrations.
The Code classifies arbitrators as public or non-public. When
investors have a dispute with member firms or associated persons in
NASD arbitration, they are entitled to have their cases heard by a
panel consisting of either a single public arbitrator, or a majority
public panel consisting of two public arbitrators and one non-public
arbitrator, depending on the amount of the claim.\5\
---------------------------------------------------------------------------
\5\ The panel composition for intra-industry disputes (not
involving any parties who are investors) is governed by Rule 10202.
Depending on the nature of the dispute, intra-industry panels may
consists of all public arbitrators, all non-public arbitrators, or a
majority of public arbitrators. The arbitrator classification
provisions of Rule 10308 apply to all such panels.
---------------------------------------------------------------------------
Under Rule 10308(a)(4) of the Code, a person is classified as a
non-public arbitrator if he or she:
(A) Is, or within the past 5 years, was:
(i) Associated with a broker or a dealer (including a government
securities broker or dealer or a municipal securities dealer);
(ii) Registered under the Commodity Exchange Act;
(iii) A member of a commodities exchange or a registered futures
association; or
(iv) Associated with a person or firm registered under the
Commodity Exchange Act;
(B) Is retired from, or spent a substantial part of a career,
engaging in any of the business activities listed in subparagraph
(4)(A);
(C) Is an attorney, accountant, or other professional who has
devoted 20 percent or more of his or her professional work, in the last
two years, to clients who are engaged in any of the business activities
listed in subparagraph (4)(A); or
(D) Is an employee of a bank or other financial institution and
effects transactions in securities, including government or municipal
securities, and commodities futures or options or supervises or
monitors the compliance with the securities and commodities laws of
employees who engage in such activities.
The criteria for public arbitrators are set forth in Rule
10308(a)(5) of the Code.
[[Page 51397]]
In general, an individual will be classified as a public arbitrator if
he or she is qualified to serve as an arbitrator and is not either
personally engaged in certain activities that would make him or her
non-public, or the immediate family member of a person engaged in such
activities.
In order to ensure that individuals with significant ties to the
securities industry may not serve as public arbitrators in NASD
arbitrations, NASD believes that revisions to the definitions of public
and non-public arbitrators are warranted.
NASD is proposing to amend the definition of public arbitrator to
exclude individuals who work for, or are officers or directors of, an
entity that controls, is controlled by, or is under common control
with, a broker/dealer, or who have a spouse or immediate family member
who works for, or is an officer or director of, an entity that is in
such a control relationship with a broker/dealer. Currently, such
individuals are not covered by the rule. For example, a person who
works for a real estate firm that is under common control with a
broker/dealer and perhaps shares the same corporate name may be
classified as a public arbitrator under current rules. Since investors
may feel that an arbitrator who is employed by a firm in such a control
relationship with a broker/dealer is not truly ``public,'' NASD is
proposing to revise the definition of public arbitrator to exclude any
person who is employed by, or who has a spouse or an immediate family
member who is employed by, an entity that directly or indirectly
controls, is controlled by, or is under common control with, any
partnership, corporation, or other organization that is engaged in the
securities business.\6\ Similarly, NASD also proposes to exclude from
the definition of public arbitrator persons who are officers or
directors of, or who have a spouse or an immediate family member who is
an officer or director of, an entity in a control relationship with a
broker/dealer.
---------------------------------------------------------------------------
\6\ For purposes of this rule, the term ``control'' has the same
meaning that it has for purposes of Form BD, which broker/dealers
use to register with NASD and to make periodic updates.
Specifically, control is defined as ``The power, directly or
indirectly, to direct the management or policies of a company,
whether through ownership of securities, by contract, or otherwise.
Any person that (i) is a director, general partner or officer
exercising executive responsibility (or having similar status or
functions); (ii) directly or indirectly has the right to vote 25% or
more of a class of a voting security or has the power to sell or
direct the sale of 25% or more of a class of voting securities; or
(iii) in the case of a partnership, has the right to receive upon
dissolution, or has contributed, 25% or more of the capital, is
presumed to control that company.'' See Uniform Application for
Broker-Dealer Registration (Form BD).
---------------------------------------------------------------------------
In addition, NASD is proposing to revise the definition of non-
public arbitrator to clarify that persons who are registered with a
broker/dealer may not be classified as public arbitrators. Under
current rules, arbitrators who are associated with a broker or dealer
are considered non-public. In the financial services industry, it is
not uncommon for a person to be employed by one company (such as a bank
or insurance company) and to be registered to sell securities through
another company (such as an affiliated broker/dealer). NASD believes
that there may be some uncertainty among arbitrators who work for
entities in a control relationship with a broker/dealer as to whether
they are associated with a broker/dealer for purposes of Rule 10308,
even though they hold licenses through the broker/dealer. Since the
definition of ``person associated with a member'' in the NASD By-Laws
includes persons who are registered with a broker/dealer, regardless of
their status as employees, such persons should be considered non-public
arbitrators. Therefore, NASD proposes to amend the definition of non-
public arbitrator to specifically include anyone registered through a
broker/dealer.\7\
---------------------------------------------------------------------------
\7\ For purposes of Rule 10308(a)(4)(A)(i), the term
``including'' is expanding or illustrative, not exclusive or
limiting. The use of the term ``including but not limited to'' in
Rule 10321(d) of the Code is not intended to create a negative
implication regarding the use of ``including'' without the term
``but not limited to'' in Rule 10308(a)(4)(A)(i) or other provisions
of the Code.
---------------------------------------------------------------------------
NASD will announce the effective date of the proposed rule change
in a Notice to Members to be published no later than 30 days following
Commission approval. The effective date will be no later than 60 days
following publication of the Notice to Members announcing Commission
approval.\8\
---------------------------------------------------------------------------
\8\ If an arbitrator's classification changes solely because of
an amendment to the definitions in Rule 10308, the arbitrator's
classification will be changed prospectively, that is, for future
appointments only. In ongoing cases, staff will notify the parties
of the prospective change in the arbitrator's classification. In
such situations, because the arbitrator's classification was correct
when the arbitrator was appointed, NASD normally will not grant
challenges for cause based on a prospective change in
classification. This provides continuity and avoids unnecessary
disruption to ongoing cases. Challenges for cause still may be made
based upon the disqualification and removal criteria in Rules
10308(d) and 10312(d).
---------------------------------------------------------------------------
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A of the Act,\9\ in general, and with Section
15A(b)(6) of the Act,\10\ in particular, which requires, among other
things, that NASD's rules must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that, by providing further assurance to
parties that individuals with significant ties to the securities
industry are not able to serve as public arbitrators in NASD
arbitrations, the proposed rule change will enhance investor confidence
in the fairness and neutrality of NASD's arbitration forum.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3.
\10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, 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 in 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, including whether the proposed rule
change is consistent with the Act. The Commission particularly urges
commenters to consider the proposed amendment to the definition of
``non-public arbitrator.'' Specifically, the NASD has proposed to amend
Rule 10308(4)(A)(i) to clarify that persons ``associated'' with a
broker or a dealer include persons ``registered through'' a broker or a
dealer because there has been some uncertainty among certain
[[Page 51398]]
arbitrators. Although it is clear under NASD rules that persons who are
registered through a broker or a dealer are associated persons of that
broker-dealer, is this amendment helpful?
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2005-094 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-2001.
All submissions should refer to File Number SR-NASD-2005-094. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying at the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of NASD. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to the File
Number SR-NASD-2005-094 and should be submitted on or before September
20, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4726 Filed 8-29-05; 8:45 am]
BILLING CODE 8010-01-P
