[Federal Register Volume 75, Number 91 (Wednesday, May 12, 2010)]
[Notices]
[Pages 26823-26825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11255]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62044; File No. SR-NASDAQ-2010-057]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rules 9552, 9554 and 9559 To Conform NASDAQ's Rules to Recent
Changes to the Rules of FINRA
May 5, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 3, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by NASDAQ. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is proposing to amend Rules 9552, 9554 and 9559 to conform
NASDAQ's rules to recent changes to the rules of the Financial Industry
Regulatory Authority (``FINRA''). The text of the proposed rule change
is below. Proposed new language is italicized and proposed deletions
are in brackets.
* * * * *
9550. Expedited Proceedings
* * * * *
9552. Failure To Provide Information or Keep Information Current
(a)-(g) No change.
(h) Defaults
A member or person who is suspended under this Rule and fails to
request termination of the suspension within three[six] months of
issuance of
[[Page 26824]]
the original notice of suspension will automatically be expelled or
barred.
* * * * *
9554. Failure To Comply with an Arbitration Award or Related Settlement
or an Order of Restitution or Settlement Providing for Restitution
(a) Notice of Suspension or[,] Cancellation[ or Bar]
If a member, person associated with a member or person subject to
Nasdaq's jurisdiction fails to comply with an arbitration award or a
settlement agreement related to an arbitration or mediation under the
Nasdaq By-Laws, or a FINRA order of restitution or FINRA settlement
agreement providing for restitution, Nasdaq Regulation staff may
provide written notice to such member or person stating that the
failure to comply within 21 days of service of the notice will result
in a suspension or cancellation of membership or a suspension [or bar]
from associating with any member.
(b) Service of Notice of Suspension or[,] Cancellation[ or Bar]
Nasdaq Regulation staff shall serve the member or person with such
notice in accordance with Rule 9134. A copy of a notice under this Rule
that is served on a person associated with a member also shall be
served on such member.
(c) No change.
(d) Effective Date of Suspension or[,] Cancellation[ or Bar]
The suspension or[,] cancellation [or bar ]referenced in a notice
issued and served under this Rule shall become effective 21 days after
service of the notice, unless stayed by a request for a hearing
pursuant to Rule 9559.
(e) No change.
(f) Failure to Request Hearing
If a member or person does not timely request a hearing, the
suspension or[,] cancellation [or bar ]specified in the notice shall
become effective 21 days after the service of the notice and the notice
shall constitute final Nasdaq action.
(g) No change.
* * * * *
9559. Hearing Procedures for Expedited Proceedings Under the Rule 9550
Series
(a)-(e) No change.
(f) Time of Hearing
(1)-(2) No change.
(3) A hearing shall be held within 30[60] days after a respondent
subject to a notice issued under Rules 9551 through 9555 files a
written request for a hearing with the Office of Hearing Officers.
(4) No change.
(g) No change.
(h) Transmission of Documents
(1) Not less than two business days before the hearing in an action
brought under Rule 9557, not less than seven days before the hearing in
an action brought under Rules 9556 and 9558, and not less than 14[40]
days before the hearing in an action brought under Rules 9551 through
9555, Nasdaq Regulation staff shall provide to the respondent who
requested the hearing, by facsimile or overnight courier, all documents
that were considered in issuing the notice unless a document meets the
criteria of Rule 9251(b)(1)(A), (B) or (C). A document that meets such
criteria shall not constitute part of the record, but shall be retained
until the date upon which the Nasdaq's final decision is served or, if
applicable, upon the conclusion of any review by the Securities and
Exchange Commission or the federal courts.
(2) Not less than two business days before the hearing in an action
brought under Rule 9557, not less than three days before the hearing in
an action brought under Rules 9556 and 9558, and not less than
seven[14] days before the hearing in an action brought under Rules 9551
through 9555, the parties shall exchange proposed exhibit and witness
lists. The exhibit and witness lists shall be served by facsimile or by
overnight courier.
(i)-(s) No change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ proposes certain conforming changes to its rules concerning
expedited hearings in light of changes made to the rules of FINRA. Many
of NASDAQ's rules are based on rules of FINRA (formerly the National
Association of Securities Dealers (``NASD'')). NASDAQ endeavors to keep
such common rules identical to the extent practicable. FINRA recently
amended certain rules under its Rule 9000 Series concerning expedited
proceedings, which are closely mirrored in NASDAQ's Rule 9000
Series.\3\ Accordingly, NASDAQ is proposing to amend its analogous
rules consistent with the changes made by FINRA, as discussed below.
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\3\ Securities Exchange Act Release No. 61242 (December 28,
2009), 75 FR 167 (January 4, 2010) (SR-FINRA-2009-076).
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The expedited proceedings rules of FINRA, and in turn of NASDAQ,
address certain types of misconduct more quickly than would be possible
under the ordinary disciplinary process, while also affording members
numerous procedural protections. In its rule change,\4\ FINRA modified
various time requirements regarding expedited proceedings, added an
expedited proceeding for failure to pay restitution, and harmonized a
remedy in an expedited procedure with a remedy in the FINRA By-Laws.
With respect to modifying time requirements, FINRA amended Rule 9552 to
shorten the period before a suspension automatically turns into an
expulsion or bar from six to three months. In addition, FINRA amended
Rule 9559 to shorten the timeframe within which a hearing must be held
from 60 days after a hearing request to 30 days after the request. As
consequence of shortening the timeframe for hearings, FINRA also
shortened the timeframes under Rule 9559(h) concerning the pre-hearing
exchange of documents between the parties to the expedited proceeding.
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\4\ Id.
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FINRA amended Rule 9554, which contains expedited procedures for
failure to pay FINRA arbitration awards, to also permit FINRA to take
expedited action for failure to comply with a FINRA order of
restitution or a FINRA settlement providing for restitution. FINRA
noted that it did not have explicit authority to take expedited action
against firms or associated persons who fail to pay restitution to a
third party (usually investors who have been harmed), and that its only
recourse was to initiate an ordinary disciplinary action, which can
take several months to conclude. In adding the new expedited procedure,
FINRA stated it believed that firms and associated persons should not
be permitted to continue doing business for prolonged periods when they
have failed to pay restitution to third parties.
FINRA also eliminated from Rule 9554 the remedy of barring an
individual for failure to pay an arbitration award. FINRA noted that it
had no such authority under its by-laws, and as such that it was
harmonizing the
[[Page 26825]]
remedy for this misconduct with the remedy provided in its by-laws.
NASDAQ is proposing to incorporate all the changes made by FINRA to its
expedited proceedings rules into the analogous NASDAQ Rules 9552, 9554,
and 9559.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\5\ in general and with Section
6(b)(5) of the Act,\6\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed changes will
conform NASDAQ's rules to recent changes made to corresponding FINRA
rules, which will promote the application of consistent regulatory
standards.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \7\ of the Act and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. NASDAQ has provided the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of the
proposed rule change.
NASDAQ believes that the proposed rule change does not
significantly affect the protection of investors or the public interest
because it merely eliminates erroneous citations that, if left in the
rule text, would cause investor confusion.\9\
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\9\ The Commission believes that this statement is incorrect.
The proposed rule change does not simply eliminate erroneous
citations; instead, the proposed rule change makes specific changes
to align Nasdaq's rules with that of FINRA.
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NASDAQ asks that the Commission waive the 30-day pre-operative
waiting period contained in Exchange Act Rule 19b-4(f)(6)(iii).\10\
NASDAQ requests this waiver so that these corrections can be both
immediately effective and operative, thus minimizing any confusion that
may be caused by the differing rule sets.
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\10\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission acknowledges that the proposal presents no novel
issues, and that it will provide a benefit to market participants by
aligning Nasdaq's rules with those of FINRA. For these reasons, the
Commission believes it is consistent with the protection of investors
and the public interest to waive the 30-day operative delay, and hereby
grants such waiver.\11\
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\11\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-057 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2010-057. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for web site viewing and printing in
the Commission's Public Reference Room. Copies of the filing also will
be available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NASDAQ-2010-057 and should be submitted on or before June 2, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11255 Filed 5-11-10; 8:45 am]
BILLING CODE 8011-01-P