[Federal Register Volume 76, Number 35 (Tuesday, February 22, 2011)]
[Notices]
[Pages 9840-9841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3800]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63910; File No. SR-FINRA-2011-006]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
Motions in Arbitration
February 15, 2011.
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 February 4, 2011, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') 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 substantially prepared by
FINRA. 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
FINRA is proposing to amend FINRA Rules 12206, 12503, and 12504 of
the Code of Arbitration Procedure for Customer Disputes, and Rules
13206, 13503, and 13504 of the Code of Arbitration Procedure for
Industry Disputes (collectively, ``Codes''), to provide moving parties
with a five-day period to reply to responses to motions.
The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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 Codes specify time periods for a party to respond to a
motion,\3\ including a motion to dismiss.\4\ They do not expressly
provide time periods for the party that made the original motion (the
``moving party'') to reply to a response, which happens on occasion.
FINRA's practice has been to forward the reply to the arbitrators, even
when staff already have sent the motion and response to the
arbitrators. Since the Codes do not prescribe a time period for
replying to responses to motions, there have been instances where
arbitrators reviewed the motion papers and even ruled on a motion
before receiving a reply, causing confusion and wasting time.
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\3\ Rules 12503(b) and 13503(b) (Responding to Motions) provide,
generally, that parties have 10 days from the receipt of a written
motion to respond to the motion.
\4\ Rules 12206(b) and 13206(b) (Dismissal under Rule) provide
that parties have 30 days to respond to motions. Rules 12504(a) and
13504(a) (Motions to Dismiss Prior to Conclusion of Case in Chief)
provide that parties have 45 days to respond to motions.
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FINRA is proposing to amend Rules 12206 and 13206 (Time Limits),
Rules 12503 and 13503 (Motions), and Rules 12504 and 13504 (Motions to
Dismiss), to provide a moving party with a five-day period to reply to
a response to a motion. The proposed amendments would codify FINRA's
practice relating to replies to responses to motions and make it
transparent. The proposal would provide parties with an opportunity to
brief fully the issues in dispute, and ensure that arbitrators have all
of the motion papers before issuing a final decision on the motion.
FINRA considered whether codifying a reply period might encourage
additional replies to responses to motions, or cause significant delays
in the arbitration proceeding. FINRA believes that a five-day period
for replies gives moving parties sufficient time to react to responses
to motions without causing significant delays to proceedings.
Currently, FINRA Rules 12512 and 13512 (Subpoenas) provide moving
parties with a 10-day period in which to reply to opposing parties'
objections to motions. FINRA has not experienced any increase in
replies related to subpoenas because of these rules and the 10-day
reply period has not caused significant delays.
Further, on June 21, 2010, FINRA revised its practice relating to
responses to motions and published a Notice to Parties on its Web site
stating that moving parties have five calendar days from receipt of a
response to a motion to submit a reply to the response.\5\ After the
five-day period, FINRA forwards the motion, any response to the motion,
and any reply to the panel at the same time. If FINRA receives a reply
after the five-day period expires, staff forwards the reply to the
panel upon its receipt. However, FINRA staff does not delay sending the
motion, response to the motion, and reply to the panel after the five-
day period expires, and the panel may issue a decision upon receipt of
those documents.
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\5\ See http://www.finra.org/ArbitrationMediation/Parties/ArbitrationProcess/NoticesToParties/P121652.
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Based on our experience with the subpoena rules and our revised
practice relating to replies to responses, FINRA does not expect the
proposal to add a five-day period for replies to responses to motions
to result in undue delays.
FINRA proposes to announce the effective date of the proposed rule
change in a Regulatory Notice to be published no later than 60 days
following Commission approval. The effective date will be 30 days
following publication of the Regulatory Notice announcing Commission
approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\6\ which requires, among
other things, that FINRA 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. FINRA believes that the proposed rule change will
assist parties in arbitrations by codifying FINRA's practice relating
to replies to responses to motions. The proposed rule change would
ensure that parties have an opportunity to brief fully the issues in
dispute, and that arbitrators have all of the motion papers before
issuing a final decision on the motion.
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\6\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not
[[Page 9841]]
necessary or appropriate in furtherance of the purposes of the Act.
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 45 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 shall:
(A) By order approve or disapprove 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. 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-FINRA-2011-006 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-FINRA-2011-006. 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, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of FINRA.
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-FINRA-2011-006
and should be submitted on or before March 15, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3800 Filed 2-18-11; 8:45 am]
BILLING CODE 8011-01-P