Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to Publication of Final NASD Disciplinary Decisions

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34954; File No. SR-NASD-94-59]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by National Association of Securities Dealers, Inc. Relating to

Publication of Final NASD Disciplinary Decisions

November 9, 1994.

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

26, 1994, the National Association of Securities Dealers, Inc.

(``NASD'' or ``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 the NASD.

I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The NASD is proposing to amend its Resolution of the Board of

Governors--Notice to Membership and Press Suspensions, Expulsions,

Revocations, and Monetary Sanctions and Release of Certain Information

Regarding Disciplinary History of Members and Their Associated Persons

(``Resolution'') under Article V, Section 1 of the Association's Rules

of Fair Practice.\1\ Below is the text of the proposed rule change.

Proposed new language is italicized; proposed deletions are in

brackets.

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\1\NASD Manual, Rules of Fair Practice, Art. V, Sec. 1 (CCH)

2301.

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Rules of Fair Practice

Article V Sanctions for Violation of the Rules

Section 1

* * * * *

Resolution of the Board of Governors

Notice to Membership and Press of Suspensions, Expulsions, Revocations,

and Monetary Sanctions and Release of Certain Information Regarding

Disciplinary History of Members and Their Associated Persons

The Association shall, in response to a written inquiry or

telephonic inquiry via a toll-free telephone listing, release certain

information as contained in its files regarding the employment and

disciplinary history of members and their associated persons, including

information regarding past and present employment history with NASD

members, all final disciplinary actions taken by federal or state or

foreign securities agencies or self-regulatory organizations that

relate to securities or commodities transactions; all pending

disciplinary actions that have been taken by federal or state

securities agencies or self-regulatory organizations that relate to

securities and commodities transactions and have been reported on Form

BD or U-4 and all foreign government or self-regulatory organizations

disciplinary actions that are securities or commodities related and

reported on Form BD or U-4; and all criminal indictments, informations

or convictions reported on Form BD or Form U-4. The Association will

also release information concerning civil judgments and arbitration

decisions in securities and commodities disputes involving public

customers.

The Association shall report to the membership and to the press

pursuant to the procedures and at the times outlined herein any order

of suspension, cancellation or expulsion of a member; or suspension or

revocation of the registration of a person associated with a member; or

suspension or barring of a member or person associated with a member

from association with all members; or imposition of monetary sanctions

of $10,000 or more upon a member or person associated with a member.

The Board of Governors may, in its discretion, determine to waive the

notice provisions set forth herein as to an order of imposition of

monetary sanctions of $10,000 or more upon a member or person

associated with a member, under those extraordinary circumstances where

notice would violate fundamental notions of fairness or work an

injustice.

If a decision of a District Business Conduct Committee is not

appealed to or called for review by the NBCC, the order of the District

Business Conduct Committee shall become effective on a date set by the

Association but not before the expiration of 45 days after the date of

decision. Notices of decisions imposing monetary sanctions of $10,000

or more or penalties of expulsion, revocation, suspension and/or the

barring of a person from being associated with all members shall

promptly be transmitted to the membership and to the press,

concurrently; provided, however, no such notice shall be sent prior to

the expiration of 45 days from the date of the said decision.

Notwithstanding the preceding paragraph, expulsions and bars

imposed pursuant to the provisions of Article II, Sections 10 and 11 of

the Code of Procedure shall become effective upon approval or

acceptance by the National Business Conduct Committee, and publicity

regarding any sanctions imposed pursuant to Article II, Sections 10 and

11 of the Code may be issued immediately upon such approval or

acceptance.

If a decision of a District Business Conduct Committee is appealed

to or called for review by the Board of Governors, the order of the

District Business Conduct Committee is stayed pending a final

determination and decision by the Board and notice of the action of the

District Business Conduct Committee shall not be sent to the membership

or the press during the pendency of proceedings before the Board of

Governors.

If a final decision of the Association is not appealed to the

Securities and Exchange Commission, the sanctions specified in the

decision (other than bars and expulsions) shall become effective on a

date established by the Association but not before the expiration of 30

days after the date of the decision, unless the decision specifies

otherwise. Notices of decisions imposing monetary sanctions of $10,000

or more on penalties of expulsion, revocation, suspension and/or the

barring of a person from being associated with all members shall

promptly be transmitted to the membership and to the press,

concurrently; provided, however, no such notice shall be sent prior to

the expiration of 30 days from the date of a [said] decision imposing

sanctions other than expulsion, revocation, and/or the barring of a

person from being associated with all members.

If a decision of the Board of Governors imposing monetary sanctions

of $10,000 or more or a penalty of expulsion, revocation, suspension

and/or barring of a member from being associated with all members is

appealed to the Securities and Exchange Commission, notice thereof

shall be given to the membership and to the press as soon as possible

after receipt by the Association of notice from the Securities and

Exchange Commission of such appeal and the Association's notice shall

whether the effectiveness of the Board's decision has or has not been

stayed pending the outcome of proceedings before the Securities and

Exchange Commission.

In the event an appeal to the courts is filed from a decision by

the Securities and Exchange Commission in a case previously appealed to

it from a decision of the Board of Governors, involving the imposition

of monetary sanctions of $10,000 or more or a penalty of expulsion,

revocation, suspension and/or barring of a member from being associated

with all members, notice thereof shall be given to the membership as

soon as possible after receipt by the Association of a formal notice of

appeal. Such notice shall include a statement that the order of the

Commission has or has not been stayed.

Any order issued by the Securities and Exchange Commission of

revocation or suspension of a member's broker/dealer registration with

the Commission; or the suspension or expulsion of a member from the

Association; or the suspension or barring of a member or person

associated with a member from association with all broker/dealers or

membership; or the imposition of monetary sanctions of $10,000 or more

shall be made known to the membership of the Association through a

notice containing the effective date thereof sent as soon as possible

after receipt by the Association of the order of the Securities and

Exchange Commission.

Cancellations of membership or registration pursuant to the

Association's By-Laws, Rules or Regulations shall be sent to the

membership and, when appropriate, to the press as soon after the

effective date of the cancellation as possible.

Notices to the membership and releases to the press referred to

above shall identify the section of the Association's Rules and By-Laws

or the Securities and Exchange Commission Rules violated, and shall

describe the conduct constituting such violation. Notices may also

identify the member with which an individual was associated at the time

the violations occurred if such identification is determined by the

Association to be in the public interest.

II. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the 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. The 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

The Resolution requires that a final NASD decision of the National

Business Conduct Committee (``NBCC'') or the Board of Governors of the

NASD (``Board'') imposing monetary sanctions of $10,000 or more or

penalties of expulsion, revocation, suspension and/or the barring of a

person from being associated with all members be promptly transmitted

to the membership and to the press, concurrently; provided, however, no

such notice shall be sent prior to the expiration of 30 days from the

date of the said decision. Upon review, the Association has determined

that the elimination of the 30 day notification delay regarding NASD

final decisions ordering the most serious sanctions (i.e., expulsion,

revocation, and/or the barring of a person from being associated with

all members) would further investor protection and the public interest

and that notification to the membership and to the press should be made

promptly upon issuance of such final decisions. The NASD, therefore,

proposes to amend the Resolution to provide that no such notice shall

be sent prior to the expiration of 30 days from the date of a decision

imposing sanctions other than expulsion, revocation, and/or the barring

of a person from being associated with all members. Such sanctions

generally are imposed immediately.

The proposed rule change would not amend the Resolution's current

30 day notification delay on final decisions of the NBCC or the Board

regarding the lesser sanctions, nor amend the procedures with respect

to decisions of the District Business Conduct Committees.

The NASD believes that the proposed rule change is consistent with

the provisions of Section 15A(b)(6) of the Act which provides that the

rules of the association are designed to prevent fraudulent and

manipulative acts and practices, and, in general, to protect investors

and the public interest, in that the proposed rule change would amend

the Resolution to provide that notice of the issuance of a final

decision of the NBCC or the Board ordering an expulsion, revocation,

and/or the barring of a person from being associated with all members

would not be subject to the current 30 day notification delay to the

membership and to the press. The NASD believes that prompt notification

to the membership and the press of final decisions regarding such

sanctions against members or persons associated with members will

provide important information to investors and further the public

interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The 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. 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 the file number in the caption

above and should be submitted by December 7, 1994.

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. 94-28264 Filed 11-15-94; 8:45 am]

BILLING CODE 8010-01-M