Rules of Practice
Federal RegisterJun 23, 1995
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SUMMARY: The Securities and Exchange Commission today announces the
adoption of comprehensive revisions to its Rules of Practice
(``Rules''), the procedural rules that govern Commission administrative
proceedings. Enforcement proceedings initiated by the Commission and
review of disciplinary proceedings brought by self-regulatory
organizations are among the most frequently occurring and significant
proceedings governed by the Rules. Adoption of the Rules and the other
actions taken today implement recommendations made by the Commission's
Task Force on Administrative Proceedings in its final Report, entitled
Fair and Efficient Administrative Proceedings.
The Rules contain procedures implementing authority granted to the
Commission by the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 to issue administrative temporary cease-and-desist
and disgorgement orders. The Rules also implement revised procedures
for the conduct of hearings, including simplified service of orders
instituting proceeding, expanded use of prehearing conferences,
codification of policies on the availability of certain investigation
files to respondents in enforcement and disciplinary proceedings,
issuance of subpoenas returnable prior to hearing and the consideration
by administrative law judges of dispositive motions prior to hearing.
In addition, the Rules contain revised procedures governing appeals to
the Commission including various procedural requirements governing
Commission review of self-regulatory determinations that were
previously contained in part in Rules 19d-2 and 19d-3 under the
Securities Exchange Act of 1934.
The revised Rules better facilitate full, fair and efficient
proceedings by setting forth applicable procedural requirements more
completely and in an easier to use format; by streamlining procedures
that had become burdened with archaic requirements; and by the addition
of provisions that address changes in statutory requirements, judicial
and administrative case law developments, Commission policies, and
litigation practices since the Rules were last revised.
The Commission also announces the issuance of a statement of
Informal Procedures and Supplementary Information Concerning
Adjudicatory Proceedings. This statement establishes guidelines for the
completion of key phases of contested adjudications; requires periodic
case status reports that will formally apprise the Commission if an
adjudicatory matter is pending for longer than specified periods of
time, so that the Commission can determine whether additional steps are
necessary to reach a fair and timely resolution of the matter; and
provides for increased and more timely disclosure concerning the
Commission's adjudicatory docket through the periodic publication in
the SEC Docket of summary statistical information concerning changes in
the Commission's case load.
EFFECTIVE DATE: These rules are effective July 24, 1995.
TRANSITION PROVISION: Any administrative proceeding that has been
docketed by the Commission--i.e., in which an administrative
proceedings file number has been assigned by the Secretary--prior to
the date of this Federal Register publication, June 23, 1995, shall be
completed pursuant to the former Rules of Practice. Any proceeding
docketed by the Commission after the date of this Federal Register
publication but prior to the effective date shall be conducted under
the former Rules of Practice unless, within 30 days of the effective
date, each respondent in the proceeding submits a request in writing to
the Secretary that the proceedings be conducted under the Rules of
Practice adopted today.
ADDRESSES: Printed copies of the revised Rules of Practice including
the comments will be available from the Commission's Publications
Branch, U.S. Securities and Exchange Commission, 450 Fifth Street, NW.;
Stop C-11; Washington, D.C. 20549.
FOR FURTHER INFORMATION CONTACT: Andrew Z. Glickman or Daniel O.
Hirsch, Office of the General Counsel at (202) 942-0870; U.S.
Securities and Exchange Commission; 450 Fifth Street, N.W.; Stop 6-6;
Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Discussion of the Revised Rules
A. New Organizational Structure of the Rules
B. Comments Accompanying the Rules
C. Summary of Major Changes to the Rules from the Former Rules
D. Technical Changes and Appendices
III. Discussion of the Statement of Informal Procedures and
Supplemental Information Concerning Adjudicatory Proceedings
A. Guidelines for the Timely Completion of Proceedings
B. Reports to the Commission on Pending Cases
C. Increased Public Disclosure Concerning the Pending Case
Docket
IV. Rules of Practice: Table of Contents
100 Series--General Rules
200 Series--Initiation of Proceedings and Prehearing Rules
300 Series--Rules Regarding Hearings
400 Series--Appeal to the Commission and Commission Review
500 Series--Rules Relating to Temporary Orders and Suspensions
600 Series--Rules Regarding Disgorgement and Penalty Payments
Form D-A Disclosure of Assets and Financial Information
V. Regulatory Flexibility Analysis
VI. Statutory Basis for Rules
TEXT OF ADOPTED RULES
I. Background
Today's adoption of comprehensive revisions to the Rules of
Practice (``Rules'') of the Securities and Exchange Commission
(``Commission'') and issuance of a statement of informal procedures
with respect to Commission adjudications culminate an extensive review
of the Commission's adjudication procedures and process. In July 1990,
then-Commissioner Mary L. Schapiro was appointed chairman of the Task
Force on Administrative Proceedings (``Task Force'' or ``Schapiro Task
Force''). The mission of the Task Force was to review the rules and
procedures relating to Commission administrative proceedings, to
identify sources of delay in those proceedings and to recommend steps
to make the adjudicatory process more efficient and effective.1
Following passage of the Securities Enforcement Remedies and Penny
Stock Reform Act (``Remedies Act''),2 the Task Force greatly
expanded its work to include preparing procedures to implement the
authority granted to the Commission by the Remedies Act. The Task Force
ultimately determined that it would be [[Page 32739]] necessary and
appropriate to revise completely the entire Rules of Practice.
\1\ SEC Creates Task Force on Administrative Proceedings, News
Release 90-39 (July 19, 1990).
\2\ Pub. L. 101-429, 104 Stat. 931 (1990).
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In January 1991 and December 1991, the Schapiro Task Force
presented to the Chairman interim findings and recommendations
concerning the need to reduce the pending case backlog. Implementation
of these recommendations included, among other things, a reorganization
of the Adjudications Group within the Office of the General Counsel,
significant increases in staff resources assigned to adjudicatory
proceedings, and more frequent Commission meetings to consider proposed
adjudicatory opinions.
In August 1992, the Secretary published approximately 400 orders
issued by the Commission and administrative law judges between 1964 and
1992.3 The previously unpublished orders, which were assembled and
organized by the Task Force, concerned interpretations of the Rules of
Practice or other procedural issues. The orders provide litigants with
additional information about applicable procedure and thereby reduce
the likelihood that previously decided issues will need to be
relitigated. Also, as recommended by the Task Force, the Commission
began regular publication in the SEC Docket of initial decisions of the
administrative law judges as well as significant procedural orders.
\3\ 52 SEC Docket 3, 3-792 (Aug. 18, 1992).
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In March 1993, the Schapiro Task Force issued its final report,
Fair and Efficient Administrative Proceedings (``the Task Force
Report'').4 The Task Force concluded that the fundamental
structure of the Commission's administrative process is sound. The Task
Force found, however, that there was unnecessary delay in deciding
litigated adjudicatory proceedings.5 The Task Force recommended a
comprehensive revision of the Rules of Practice and included proposed
new Rules in its Report. In addition, the Task Force made various other
recommendations designed to improve the efficiency and fairness of the
Commission's administrative proceedings.6 These included steps
that were intended to make structural changes that would reduce the
likelihood of a recurrence of the conditions that led to unnecessary
delay and a backlog of pending cases.
\4\ Task Force on Administrative Proceedings, Securities and
Exchange Commission, Fair and Efficient Administrative Proceedings:
Report of the Task Force (Feb. 1993) [hereinafter Task Force
Report].
\5\ Id. at 13. See also id. at 19-22 (summary of statistical
data concerning proceedings adjudicated from 1982 through 1992).
\6\ Id. 12-19.
In November 1993, the Commission published in the Federal Register
a release proposing to adopt the Task Force's proposals pertaining to
the Rules and asking interested persons for comment.7
\7\ Proposed Rules of Practice, Exchange Act Release No. 33163,
58 FR 61732 (Nov. 22, 1993). Most of the rules in the Rules of
Practice deal with agency procedure and practice and are exempt from
the Administrative Procedure Act's notice and comment requirement
for rulemaking, 5 U.S.C. 553(b)(3). Consistent with the
recommendation of the Task Force, though, all the Rules were
published for comment. See Task Force Report, supra note 4, at 12.
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II. Discussion of the Revised Rules
The Commission received seven comment letters from various
interested persons.8 Although not numerous, the comment letters as
a group contained very extensive commentary on the proposed Rules.
Commenters generally greeted the Commission's proposals favorably. All
commenters praised the Commission's initiating a review of its Rules
with the goal of further promoting fair and efficient administrative
proceedings. All commenters submitted proposals to make various
modifications to the Rules including many suggestions in response to
the specific requests for comment contained in the proposing release. A
number of comments also addressed matters not directly within the scope
of the Rules. These included internal Commission management issues,
such as the organizational structure of the Commission's divisions and
offices, or enforcement policy issues, such as the frequency with which
the Commission will initiate administrative proceedings. Significant
changes to the Rules are discussed below.
\8\ The comment letters may be inspected and copied at the
Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, File No. S7-40-92.
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A. New Organizational Structure of the Rules
The former Rules, which had not been comprehensively revised since
1960, contained requirements which were out-of-date or inconsistent
with current practices and, in a few cases, inconsistent with other
rules. In revising the Rules, emphasis was placed on maintaining
consistency with applicable statutory language while improving
intelligibility, ensuring that the Rules accurately reflected current
Commission practice, and providing internal consistency in the use of
terms between individual rules.
The Commission has adopted a new organizational structure and
numbering system for the Rules of Practice based on model
administrative rules prepared by the Administrative Conference of the
United States (``ACUS''). As originally proposed, the Commission's
Rules had been arranged in roughly the order in which an administrative
proceeding progresses and numbered consecutively. The new format groups
rules together in six broad categories based on which phase or type of
proceeding they govern. The first four groups--general rules;
institution of proceedings and prehearing rules; hearing rules; and
rules regarding appeals to the Commission and Commission review--are
predicated upon the four classifications suggested by ACUS. The two
additional groups are related to specific Commission proceedings and
administrative remedies and sanctions--rules regarding temporary
orders, suspension of a registration and summary suspensions of
trading; and rules governing disgorgement and penalty payments.
Within each group, related rules are placed together. Rules which,
as proposed, covered multiple topics have been divided into shorter
rules each limited to fewer topics. The new structure increases the use
of rule headings and subheadings to guide a user to the appropriate
rule. To the extent possible, related provisions cross-reference each
other. Each of the six major groups of rules is numbered in a separate
series, from 100 through 600. In addition to improving the ease of use
of the rules, the new numbering system will provide the Commission with
greater flexibility when future amendments and additions to the Rules
occur.
B. Comments Accompanying the Rules
The Commission has prepared explanatory comments for the Rules of
Practice; these comments appear with the Rules in this ``Supplementary
Information'' section. The complete text of the Rules without comments
appears below in Section VII. Each explanatory remark is identified as
either a ``comment'' or a ``revision comment.'' ``Comments'' are
statements explaining the basis for a rule, describing the rule's
rationale, referencing related rules, or providing information
concerning pertinent Commission practice. Comments are not a part of
the rules, and are not included in the Code of Federal Regulations. The
Commission believes, however, that information in the comment section
will assist persons consulting the Rules in a more thorough
understanding of the Rules. Printed copies of the revised Rules of
Practice including the comments will be [[Page 32740]] available from
the Commission's Publications Branch, U.S. Securities and Exchange
Commission; 450 Fifth Street, N.W.; Stop C-11; Washington, D.C. 20549.
A copy of this publication will be provided to each respondent by the
Secretary at the commencement of proceedings.
``Revision comments'' are statements explaining changes from the
proposed Rules to the adopted Rules. In addition, revision comments
include, where appropriate, a brief discussion of responses to the
requests for comment in the proposing release.
C. Summary of Major Changes to the Rules From the Former Rules
This section contains a capsule summary of major changes from the
former Rules.
1. Temporary cease-and-desist orders. The Rules include procedures
for the issuance of a temporary cease-and-desist order
(``TCDO'').9-10 Rules 510, 511 and 512 contain the application
procedures, notice requirements, hearing procedures and issuance
requirements for TCDO's. Rule 513 contains additional requirements for
ex parte issuance of a TCDO. Rule 514 sets forth the availability of
judicial review and the duration of a TCDO. Rule 530 governs special
procedures relating to issuance of an initial decision whether to enter
a permanent order if a temporary order is pending. Rules 531 and 540
govern Commission review of that initial decision, and duration of the
temporary order pending that review.
\9-10\ Rules 510-514, 530, 531 and 540.
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The Division of Enforcement may file an application for a TCDO
simultaneously with or after the commencement of proceedings seeking a
permanent cease-and-desist order with respect to a registered entity or
associated person.11 The application must be accompanied by a
declaration of facts signed by a person with knowledge of the facts
contained therein; a memorandum of points and authorities; a proposed
order imposing the temporary relief sought; and, unless relief is
sought ex parte, a proposed notice of hearing and order to show cause
whether the temporary relief should be imposed. If a proceeding for a
permanent cease-and-desist order has not already been commenced, the
Division must also file a proposed order instituting proceedings to
determine whether a permanent cease-and-desist order should be imposed.
\11\ Prior to filing an application for temporary relief, the
staff would, in all cases, have to obtain authority to seek a
temporary order from the Commission. As with any other decision to
initiate enforcement action prior to the institution of proceedings,
Commission deliberations and discussions with the staff concerning
the decision whether to authorize an application for temporary
relief would be nonpublic, privileged, and not ordinarily reviewable
by a court.
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Unless the conditions warranting issuance of an ex parte order are
met, a respondent shall be served with the application and additional
papers and a hearing on the application shall be scheduled.
If a respondent has been served with a temporary cease-and-desist
order entered without a prior Commission hearing, the respondent may
apply to the Commission to have the order set aside, limited, or
suspended, and if the application is made within 10 days after the date
on which the order was served, may request a hearing on such
application. The Commission shall hold a hearing and render a decision
on such an application at the earliest possible time. The hearing shall
begin within two days of the filing of the application unless the
applicant consents to a longer period or the Commission, by order, for
good cause shown, sets a later date. If the Commission does not render
its decision within 10 days of the application or such longer time as
consented to by the applicant, the temporary order shall be suspended
until a decision is rendered.
A temporary cease-and-desist order may be appealed to a federal
district court within 10 days of service of an order entered with prior
notice, or within 10 days after the Commission's issuance of its
decision upon a respondent's application to set aside, limit or suspend
an ex parte order.
After issuance of a temporary cease-and-desist order, the
proceeding to determine whether to enter a permanent order shall go
forward with a hearing before a hearing officer and the issuance of an
initial decision. The Rules establish procedures with respect to
expedited consideration of any appeal of the initial decision. The
Rules also set forth limitations on the duration and scope of the
temporary cease-and-desist order pending issuance of the Commission's
opinion on review of the initial decision.
2. Suspension of Registered Entity. Rules 520, 521, 522 and 524
include extensive revisions to the provisions of former Rule 19
relating to the suspension of a registered broker or dealer pending a
final determination whether the registration shall be revoked.
Consistent with amendments to the Securities Exchange Act, the new
rules apply to a municipal securities dealer, government securities
broker, government securities dealer, or transfer agent as well as a
broker or dealer. Where possible, the new procedures for suspensions
pending a final determination whether to revoke a registration parallel
the procedures relating to temporary cease-and-desist orders.
3. Disgorgement. The 600 series of the revised Rules contains new
provisions governing payment of disgorgement, interest and penalties.
Rule 600 requires prejudgment interest to be assessed on any sum
required to be paid pursuant to an order of disgorgement. The rate of
interest is set at the IRS underpayment rate and compounded quarterly
unless the Commission specifies a lower rate with respect to funds
placed in an approved escrow. Under Rule 601 unless otherwise provided,
funds due pursuant to an order by the Commission requiring the payment
of disgorgement, interest or penalties must be paid no later than 21
days after service of the order. After disgorgement has been paid, a
proposed plan of disgorgement will be submitted pursuant to Rule 610.
Rule 611 lists the required elements of such disgorgement plan. A
plan may provide for distribution of funds to investors or to a court
registry or court-appointed receiver for injured investors. Where
return of disgorged funds to investors is not justified, funds may be
paid to the U.S. Treasury. Rule 612 requires that notice of a proposed
plan be published in the SEC News Digest and the SEC Docket and other
publications as required. A plan may be approved, approved with
modifications, republished for additional comments or disapproved
pursuant to Rule 613. Rule 614 contains provisions governing the
administration of an approved plan.
Rule 620 addresses conditions under which a non-party will be
granted leave to intervene or to participate in a proceeding for the
purpose of challenging a disgorgement order or plan of disgorgement.
The Rule provides that no person shall be granted leave to intervene or
to participate for such a purpose based solely upon that person's
eligibility or potential eligibility to participate in a disgorgement
fund or based upon any private right of action such person may have
against any person who is also a respondent in an enforcement
proceeding.
Persons claiming an inability to pay disgorgement, interest or a
penalty must do so in accordance with Rule 630. A respondent who
asserts inability to pay may be required to file a sworn financial
statement and to keep the statement current. Failure to file a required
statement may be deemed a waiver of the claim of inability to pay.
4. Expanded Role for Prehearing Conferences. The Rules
significantly expand the role of prehearing [[Page 32741]] conferences
and encourage more active prehearing case management by administrative
law judges. Under the proposed rule, no initial prehearing conference
was required. In accordance with suggestions by commenters, revised
Rule 221 requires that except where the emergency nature of a
proceeding would make a prehearing conference clearly inappropriate,
both an initial and a final prehearing conference shall be held. The
initial conference is to be held within 14 days of service of an
answer, or if no answer is required, within 14 days of the issuance of
an order instituting proceedings. The final conference is to be held as
close to the beginning of the hearing as is reasonable.
The Rules make an initial prehearing conference mandatory in most
cases because such a conference can eliminate unnecessary delay and
improve the quality of adjudicative decisionmaking by sharpening the
preparation of cases and presentation of issues. The increased role for
prehearing conferences will facilitate the new procedures that provide
for access to certain categories of investigation file documents in
enforcement and disciplinary proceedings and for the prehearing
production of documents pursuant to subpoena.
5. Prehearing Access to Certain Investigative Documents. Pursuant
to new Rule 230, in an enforcement or disciplinary proceeding, the
Division of Enforcement will provide any party with an opportunity for
inspection and copying of certain categories of documents obtained by
the Division in connection with the investigation leading to the
Division's recommendation to institute proceedings. The rule codifies
the prevailing practice of the Division of Enforcement staff in the
Headquarters Office and various regional offices. A respondent's right
to inspect and copy documents under this Rule is automatic; the
respondent does not need to make a formal request for access through
the hearing officer.
Documents to which access must be provided include: (1) Each
subpoena issued; (2) every other written request to persons not
employed by the Commission to provide documents or to be interviewed;
(3) the documents turned over in response to any such subpoenas or
other written requests; (4) all transcripts and transcript exhibits;
(5) any other documents obtained from persons not employed by the
Commission; and (6) any final examination or inspection reports
prepared by the Division of Market Regulation or the Division of
Investment Management. The Division of Enforcement's obligation under
this rule relates only to documents obtained by the Division of
Enforcement. Documents located only in the files of other divisions or
offices are beyond the scope of the rule.
The Division of Enforcement may withhold a document if: (1) The
document is privileged; (2) the document is an internal memorandum,
note or writing prepared by a Commission employee, other than certain
examination or inspection reports prepared by the Divisions of Market
Regulation or Investment Management, or is otherwise attorney work-
product and will not be offered in evidence; (3) the document would
disclose the identity of a confidential source; or (4) the hearing
officer grants leave to withhold a document or category of documents as
not relevant to the subject matter of the proceeding or otherwise, for
good cause shown.
Rule 230 is not the exclusive means by which a respondent may
obtain access to documents. Production of documents prepared by the
staff may be required under the doctrine of Brady v. Maryland, 373 U.S.
83 (1963), or pursuant to Jencks Act requirements made applicable to
the Commission pursuant to rule, or may be sought by subpoena or
through other procedures. See, e.g., the Freedom of Information Act, 5
U.S.C. 552.
The document access policy in Rule 230 has been revised
significantly from the proposed rule. Under the proposed rule, the
staff was required to make a relevancy determination before a document
would be produced. The Commission decided to change this rule, based in
part upon comments received that contended that a relevancy
determination by the staff was problematic.12
\12\ Specifically, it was suggested that the proposed standard
might deny respondents access to documents that ``while possibly not
directly relevant to any of the Commission's allegations, may bear
directly on the lines of defense the respondent is developing.'' ABA
comment letter dated Feb. 28, 1994, at 59. It was also suggested
that asking the staff to make such a determination was inappropriate
because of the staff's ``outlook and allegiance.'' Id.
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6. Prehearing Document Production Pursuant to Subpoena. Rule 232(a)
allows for production of documents pursuant to subpoena prior to the
start of a hearing. The Rule states that a party may request
``subpoenas requiring the production of documentary or other tangible
evidence returnable at any designated time or place.'' Under former
Rule 14(b)(1), such documents were only to be turned over at the
hearing. As adopted, the rule will reduce delay and eliminate the need
for postponements by allowing for documents to be reviewed and copied,
and for proposed exhibits to be selected, all prior to a final
prehearing conference.
7. Summary Disposition. Under former Rule 11(e), a motion that
would dispose of a proceeding in whole or in part could not be made, or
considered by a hearing officer, prior to the completion of the
interested division's case or the conclusion of the hearing. See 17 CFR
201.11(e) (1994). Rule 250 makes substantial changes to these
procedures. The Rule provides for a motion for summary disposition by
any party after each party required to file an answer has done so and,
in an enforcement or disciplinary proceeding, after documents have been
made available to the respondent for inspection and copying. If the
interested division has not completed presentation of its case in chief
at the hearing, a summary decision motion may be made only with leave
of the hearing officer. The facts of the pleadings of the party against
whom the motion is made shall be taken as true, except as modified by
stipulations or admissions made by that party, by uncontested
affidavits, or by facts officially noted. In accordance with
suggestions of a commenter, the Rule now provides that if a party
cannot, for good cause, present facts essential to justify opposition
to the motion by affidavit prior to hearing, the hearing officer shall
deny the motion.
A motion for summary disposition is subject to a 35-page limit.
8. Protective Orders. The revised Rules contain provisions allowing
certain persons involved in an evidentiary hearing to obtain a
protective order for confidential information. Documents and testimony
introduced in a public hearing are presumed to be public. Rule 322
allows any party intending to introduce material as evidence during a
hearing, any person who is the subject or creator of such material, or
any witness who testifies at a hearing to file a motion requesting a
protective order for such material or testimony. A protective order
shall be granted only upon a finding that the harm resulting from
disclosure would outweigh the benefits of disclosure.
The former Rules of Practice contained a confidential treatment
provision that related solely to applications for materials filed in
connection with registration statements and other statutorily required
filings; it required that confidential treatment be sought at the time
of filing. See 17 CFR 201.25 (1994). Proposed Rule 33 would have
responded to this situation by [[Page 32742]] allowing a party to seek
confidential treatment under any ``applicable statute or rule,''
without limiting the scope of materials sought to be protected or the
timing of the application.
The Commission has decided that a separate rule for protective
orders would be more efficient and easier for adjudicatory litigants to
use than a rule that encompassed not only protective orders, but also
requests for confidential treatment under the federal securities laws
13 or the Freedom of Information Act.14
\13\ See Clause 30 of Schedule A of the Securities Act of 1933,
15 U.S.C. 77aa(30), and Rule 406 thereunder, 17 CFR 230.406; Section
24(b)(2) of the Securities Exchange Act of 1934, 15 U.S.C.
78x(b)(2), and Rule 24b-2 thereunder, 17 CFR 240.24b-2; Section
22(b) of the Public Utility Holding Company Act of 1935, 15 U.S.C.
79v(b), and Rule 104 thereunder, 17 CFR 250.104; Section 45(a) of
the Investment Company Act of 1940, 15 U.S.C. 80a-44(a), and Rule
45a-1 thereunder, 17 CFR 270.45a-1; and Section 210(a) of the
Investment Advisers Act of 1940, 15 U.S.C. 80b-10(a). See also Rule
of Practice 190, 17 CFR 201.190 (specifying procedures by which
registrants may request confidential treatment of certain
information contained in regulatory filings).
\14\ See 17 CFR 200.83 (providing for procedures by which
persons submitting information to the Commission can request that
the information not be disclosed pursuant to a request under the
Freedom of Information Act, 5 U.S.C. Sec. 552).
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9. Service. The rule for service of orders by the Commission, Rule
141, and the rule for service of papers by parties, Rule 150, contain a
number of revisions. Rule 141 contains new provisions specifically
addressing service upon persons in a foreign country and upon persons
currently registered with the Commission. Rule 141 also contains a new
provision allowing a waiver of formal service to permit a party to
accept service by facsimile transmission. For parties wishing to use
facsimile transmission to serve one another, Rule 150 allows delivery
of papers by fax when two conditions are met: (i) there must be a
written agreement between the persons intending to serve each other by
fax specifying such terms as they deem necessary with respect to
telephone numbers, hours of facsimile operation, provision of paper
original or other matters; and (ii) receipt of each document served by
fax must be confirmed by a manually signed receipt delivered by fax or
other means agreed to by the parties. These conditions are intended to
ensure that service by fax will be both an efficient and an effective
means of service.
D. Technical Changes and Appendices
A number of technical changes have been made and appendices created
in order to implement the Rules. First, former Rule 24 concerning
incorporation by reference, which related to the making of disclosure
or regulatory filings has been moved from the Rules of Practice to
Regulation S-K section 10, paragraph (d) (17 CFR 229.10(d); a
comparable provision has been added to Regulation S-B section 10,
paragraph (f) (17 CFR 228.10(f)). Second, Commission procedures for
summary suspensions pursuant to Section 12(k) of the Exchange Act, 15
U.S.C. 78l(k), have been moved from Part 202 of 17 CFR into new Rule
550. Third, new cross-reference tables showing the location of the
former rules in the revised rules and vice versa have been included in
an appendix to appear in the Code of Federal Regulations. Finally, all
references to the Rules of Practice in the Commission's other rules and
forms have been updated.
III. Discussion of the Statement of Informal Procedures and
Supplemental Information Concerning Adjudicatory Proceedings
In 1990, at the time the Schapiro Task Force was created, there was
significant delay in the disposition of administrative proceedings. For
example, in fiscal years 1991 and 1992, the Commission issued a total
of 10 opinions in Commission-initiated administrative proceedings.
These 10 cases took an average of four years from institution of
proceedings to conclusion.15
\15\ See Task Force Report, supra note 4, at 20-22.
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Interim recommendations made by the Task Force to eliminate
unnecessary delay and reduce the backlog were implemented in 1991 and
1992. The Commission reorganized the Adjudications Group within the
Office of the General Counsel and appointed new senior staff to
supervise the adjudicatory work assigned to the Office of the General
Counsel. On a Commission-wide basis, the total number of staff assigned
to adjudicatory matters was increased over three fold. For
approximately one year attorneys throughout the General Counsel's
Office assisted the Adjudications Group in preparing opinions for the
Commission. Further, the Commission gave greater priority to
adjudicatory matters, held oral arguments on a more timely basis, and
met to consider proposed opinions more frequently.16
\16\ Also pursuant to a recommendation of the Task Force, the
Office of the General Counsel organized a conference with self-
regulatory organizations, held in June 1994, to address problems of
mutual concern. Changes in adjudicatory procedures or practices by
the self-regulatory organizations resulting from the conference may
eliminate or simplify certain issues that would otherwise be
appealed to the Commission.
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In fiscal year 1994, the number of new appeals to the Commission
declined and the number of cases resolved increased compared with the
prior year. As a result, in fiscal year 1994 the pending appellate
caseload declined for the first time in over a decade. In addition, the
number of cases pending on appeal for more than one year has declined
significantly from the level of four years ago.
Despite these strides, the Commission's past experience strongly
suggests that additional steps should be taken, especially given the
increase in proceedings assigned to the administrative law judges
17 and the likelihood that the number and complexity of new
appeals may increase again in coming years. Backlogs in the
Commission's disposition of adjudicatory proceedings have recurred
periodically over at least the past 30 years.18 The Task Force
examined prior efforts to address delay in the administrative
proceedings process, and considered why earlier ``solutions'' gave way
to new backlogs.
\17\ There were 56 cases pending before the administrative law
judges as of October 1, 1994, up from 32 cases on October 1, 1993
and 25 cases on October 1, 1992.
\18\ See Task Force Report, supra note 4, at 33 n.46.
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The Task Force considered various alternatives aimed at eliminating
systemic causes of the recurring backlog problems. In its Report, the
Task Force recommended: (1) That the Commission establish guidelines
for the timely completion of adjudicatory proceedings; (2) that the
Commission be specifically apprised of matters not completed within
designated periods, so that the Commission has a specific opportunity
to determine what, if any, steps to take to advance the fair and timely
resolution of those particular matters; and (3) that the Commission
make increased public disclosure of the status of the pending case
docket and changes in its case load.
The Statement of Informal Procedures and Supplementary Information
Concerning Adjudicatory Proceedings (``Statement of Informal
Procedures'') adopts, with modifications, these three recommendations.
Implementation of these recommendations will increase accountability
for the timely and efficient completion of adjudicatory proceedings and
consolidate on a more permanent basis the improvements in the
adjudications process made since the creation of the Task Force.
A. Guidelines for the Timely Completion of Proceedings
The Guidelines For the Timely Completion of Proceedings provide
that an administrative law judge's initial [[Page 32743]] decision
should be filed within 10 months of issuance of the order for
proceedings and that a decision by the Commission on appeal of an
initial decision, review of a self-regulatory organization
determination or remand of a prior decision by a court of appeals
should be issued within 11 months of the filing of a petition for
review or application for review or the issuance of a mandate of the
court.19
\19\ The guidelines also set 45 days for a Commission decision
on interlocutory matters, and up to 45 days to decide a motion for
stay, depending upon whether the action to be stayed has already
taken effect.
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The primary purposes of the guidelines are to provide a basis to
gauge the Commission's and administrative law judges' productivity in
issuing opinions, and to permit the allocation of appropriate
Commission, management and staff resources for the timely completion of
proceedings. Establishment of guidelines by the Commission indicates
the priority of adjudicatory matters for the Commission, as well as for
persons delegated authority or assigned responsibility for adjudicatory
matters. Among other benefits, the guidelines can lend important
authority to the deadlines set by the administrative law judges for
hearing dates and pre- and post-hearing submissions, and by the General
Counsel and the Secretary for oral argument dates and the filing of
briefs.
The Schapiro Task Force had recommended that ``normative
guidelines'' for the completion of adjudicatory proceedings be included
in the Rules of Practice themselves. The existing Rules of Practice use
this approach in some instances,20 and other federal agencies and
departments also have used similar approaches.21 The Commission
believes, however, that since the guidelines are not themselves rules,
it is preferable to publish them in a supplemental statement, and
thereby eliminate a potential source of confusion or collateral
litigation concerning their status as non-binding criteria for
monitoring the age of pending cases rather than a legal standard. This
approach is consistent with the publication in the Code of Federal
Regulation of other non-binding, informal procedures.22
\20\ See, e.g., former Rule 16(e), 17 CFR 201.16(e) (1994)
(period prescribed for filing of proposed findings and conclusions
``normally should be no more than 30 days after the close of the
hearing, and if the hearing officer directs that the first filing be
made at a date later than 30 days after the close of the hearing,
the reasons for so doing shall be stated in his order'').
\21\ See, e.g., 37 CFR 10.139(c) (ALJ in Patent and Trademark
Office, Dept. of Commerce, shall normally issue initial decisions in
disciplinary cases within six months of the date a complaint is
filed).
\22\ See, e.g., 17 CFR 202.
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The guidelines do not create a requirement that each portion of a
proceeding or the entire proceeding be completed within the periods
described. Proceedings at either the hearing stage or on review by the
Commission may require additional time because they are unusually
complex or because the record is exceptionally long or for other
reasons. In addition, fairness to all parties requires that the
Commission's deliberative process not be constrained by an inflexible
schedule. In some proceedings, deliberation may be delayed by the need
to consider more urgent matters, to permit the preparation of
dissenting opinions or for other good cause. The guidelines will be
used by the Commission as one of several criteria in monitoring and
evaluating its adjudicatory program.
As noted in the supplemental statement, the guidelines adopted
today will need to be examined periodically and may need to be
readjusted in light of changes in the Commission's case load and the
availability of Commission resources.
One alternative approach, considered by the Task Force, was to set
fixed deadlines for the issuance of initial decisions and Commission
opinions, and to provide for a remedy, such as dismissal, if cases were
not completed within the deadline. Applying this approach to
adjudicatory proceedings, including enforcement actions and review of
self-regulatory organization determinations, places too great a premium
on the benefits of achieving resolution of a proceeding, without due
consideration to the resolution reached. In light of its broad
responsibilities, the Commission should retain the flexibility to delay
the resolution of proceedings in order to address higher priority
matters, without abandoning the opportunity to adjudicate issues
properly before it, particularly those relating to whether the
protection of the public or investors requires that a securities law
violator be subject to remedial sanctions.
B. Reports to the Commission on Pending Cases
Prior reviews of the administrative process concluded that
delegation of certain functions to the staff is desirable, as it frees
the Commission from having to deal with routine matters and can
expedite Commission action.23 Unmonitored delegation, however, can
also create a source of delay. The Schapiro Task Force observed that,
once a case is assigned to an administrative law judge or to the staff,
``there is no procedure to return cases to the Commission for a status
conference if significant milestones are not reached or no opinion is
prepared within specified periods.'' 24 The Task Force recommended
that if a case does not proceed through each major phase on a timely
basis, it should automatically be returned to the Commission to
determine whether any additional steps should be taken to advance the
resolution of the case. The Task Force stated that ``[b]y establishing
this procedure, the Commission will require the staff to identify non-
routine matters, shortages in staff or other impediments that are
preventing the timely completion of delegated decisionmaking.'' 25
\23\ Task Force Report, supra note , at 32-33.
\24\ Id. at 33.
\25\ Id. at 42.
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In response to this recommendation, one commenter advocated that
the Commission should ``encourage more ALJ autonomy and thereby avoid
SEC involvement between the times when cases are authorized and
appealed.'' 26 Accordingly, this commenter suggested, unless
absolutely necessary, interim Commission review of cases assigned to an
administrative law judge should not occur, even on a case management
basis such as for status conferences. The commenter suggested, as an
alternative to status conferences, that the administrative law judges
have a periodic requirement to report any case backlog to the
Commission and the public. The Commission has modified the
recommendation of the Schapiro Task Force to address the concerns
raised by this commenter.
\26\ ABA comment letter to Commissioner Mary Schapiro on the
Report of the Task Force on Administrative Proceedings dated Nov.
10, 1993, at 8.
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Under the informal procedures adopted today, a requirement formally
to apprise the Commission of proceedings beyond a specified age is
being integrated into a case status reporting system overseen by the
Secretary. Use of written status reports as a tool to improve docket
control is a widely accepted practice. For example, federal court
judges are required to report periodically to the Office of United
States Courts on the status of certain matters pending beyond specified
periods. Face-to-face status conferences between the Commission and an
administrative law judge, or discussion of the merits of a proceeding,
will not be a part of the more formal case status reporting system.
Periodically, confidential status reports with respect to all filed
[[Page 32744]] adjudicatory proceedings shall be made to the
Commission. The Chief Administrative Law Judge shall report on
proceedings assigned to an administrative law judge. The General
Counsel shall report on proceedings assigned to the Office of the
General Counsel, as well as any other pending proceedings. These status
reports shall be made through the Secretary, with a minimum frequency
established by the Commission. In connection with these reports, the
Chief Administrative Law Judge and the General Counsel shall
specifically apprise the Commission of any proceeding that exceeds the
guidelines established for the timely completion of proceedings by more
than 30 days. The report shall describe the procedural posture of any
such proceeding, estimate a date for conclusion of the proceeding, and
provide such other information as is necessary to enable the Commission
to determine whether additional steps are necessary to reach a fair and
timely resolution of the matter.
In some cases, additional resources may be necessary to free an
administrative law judge or staff to address a matter of unusually
large size or exceptional complexity.27 In some instances,
consultation with the Commission by the General Counsel may speed the
completion of a particular case. In others, the length of the hearing,
the number or respondents, the complexity of a case or the urgency of
other matters may justify delay in reaching a decision at a delegated
level, in which case no action in response to the status report would
be needed. Coupled with the guidelines for the timely completion of
proceedings, however, the use of a comprehensive and formalized case
status reporting system will provide greater assurance that the
resolution of a proceeding that has been delayed will be treated as a
priority matter.
\27\ For example, additional administrative law judges might be
necessary on a temporary basis, see, e.g., 5 U.S.C. 3344, to allow
the judge assigned responsibility for a proceeding to complete that
proceeding without the burden of new cases, or additional law
clerks, paralegals or other staff might be needed on temporary
assignment.
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As noted by the Schapiro Task Force, an increasing number of status
reports concerning cases that are not completed within the guidelines
may provide an ``early warning signal'' that additional resources are
necessary. Had a more detailed and more formal case status reporting
requirement been in effect in the mid-1980's, the Commission might have
been in a better position to address the developing case backlog before
it gained the magnitude it had reached by 1990 when the Task Force was
created.
The Commission believes that the case status reporting requirements
announced today will fulfill the purpose of the Schapiro Task Force
recommendation discussed above by establishing a mechanism that will
automatically address cases that are not timely resolved and by
increasing accountability by and to the Commission for management of
the docket.
The Task Force recommended that the requirement to formally apprise
the Commission if a proceeding is not completed within specified
periods should be implemented through changes in the Commission's
formal delegations to the administrative law judges, the Secretary, and
the General Counsel. See 17 CFR 200.30-1 et. seq. The Commission
believes that publication of these case status reporting procedures in
the Statement of Informal Procedures will be equally effective in
implementing this recommendation.
C. Increased Public Disclosure Concerning the Pending Case Docket
The Task Force recommended publishing more information concerning
the status of the Commission's adjudicatory docket.28 Ongoing
disclosure of information about the adjudication program caseload
increases awareness of the importance of the program, facilitates
oversight of the program, and promotes public confidence in the
efficiency and fairness of the program. Under the procedures adopted
today, the Secretary will publish each October and April in the SEC
Docket summary statistical information about the status of the pending
adjudicatory docket and changes in the Commission's caseload over the
prior six months.29
\28\ See Recommendation 4, Task Force Report, supra note , at
43-44.
\29\ The report shall include the number of cases pending before
the administrative law judges and the Commission at the beginning
and end of the six-month period. The report shall also show
increases in the caseload arising from new cases being instituted,
appealed or remanded to the Commission, and decreases in the
caseload arising from the disposition of proceedings by issuance of
initial decisions, issuance of final decisions issued on appeal of
initial decisions, other dispositions of appeals of initial
decisions, final decisions on review of self-regulatory organization
determinations, other dispositions on review of self-regulatory
organization determinations, and decisions with respect to stays or
interlocutory motions. For each category of decision, the report
shall also show the median age of the cases at the time of the
decision and the number of cases decided within the guidelines for
the timely completion of adjudicatory proceedings.
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The Commission will also continue to follow the Task Force
recommendation that it adopt the practice of several federal courts of
appeals by publishing with each opinion the date the appeal or review
was commenced and the date of oral argument, if any.
The Task Force suggested publication of information about the
Commission's caseload in the Annual Report. Although a useful adjunct
to publication in the SEC Docket, publication in the Annual Report
alone is not sufficient. The Docket is more widely available (both on
commercial database services and in other places such as libraries)
than the Annual Report. In addition, publication in the Docket allows
more frequent and more timely disclosure.
IV. Rules of Practice: Table of Contents
General Rules
Rule 100. Scope of the Rules of Practice.
Rule 101. Definitions.
Rule 102. Appearance and Practice Before the Commission.
Rule 103. Construction of Rules.
Rule 104. Business Hours.
Rule 110. Presiding Officer.
Rule 111. Hearing Officer: Authority.
Rule 112. Hearing Officer: Disqualification and Withdrawal.
Rule 120. Ex Parte Communications.
Rule 121. Separation of Functions.
Rule 140. Commission Orders and Decisions: Signature and
Availability.
Rule 141. Orders and Decisions: Service of Orders Instituting
Proceeding and Other Orders and Decisions.
Rule 150. Service of Papers by Parties.
Rule 151. Filing of Papers With the Commission: Procedure.
Rule 152. Filing of Papers: Form.
Rule 153. Filing of Papers: Signature Requirement and Effect.
Rule 154. Motions.
Rule 155. Default; Motion to Set Aside Default.
Rule 160. Time Computation.
Rule 161. Extensions of Time, Postponements and Adjournments.
Rule 180. Sanctions.
Rule 190. Confidential Treatment of Information in Certain Filings.
Rule 191. Adjudications Not Required to Be Determined on the Record
After Notice and Opportunity for Hearing.
Rule 192. Rulemaking: Issuance, Amendment and Repeal of Rules of
General Application.
Rule 193. Applications by Barred Individuals for Consent to
Associate.
Initiation of Proceedings and Prehearing Rules
Rule 200. Initiation of Proceedings.
Rule 201. Consolidation of Proceedings.
Rule 202. Specification of Procedures by Parties in Certain
Proceedings.
Rule 210. Parties, Limited Participants and Amici Curiae.
Rule 220. Answer to Allegations.
Rule 221. Prehearing Conferences.
Rule 222. Prehearing Submissions. [[Page 32745]]
Rule 230. Enforcement and Disciplinary Proceedings: Availability of
Documents for Inspection and Copying
Rule 231. Enforcement and Disciplinary Proceedings: Production of
Witness Statements.
Rule 232. Subpoenas.
Rule 233. Depositions Upon Oral Examination.
Rule 234. Depositions Upon Written Questions.
Rule 235. Introducing Prior Sworn Statements of Witnesses into the
Record.
Rule 240. Settlement.
Rule 250. Motion for Summary Disposition.
Rules Regarding Hearings
Rule 300. Hearings.
Rule 301. Hearings to Be Public.
Rule 302. Record of Hearings.
Rule 310. Failure to Appear at Hearings: Default
Rule 320. Evidence: Admissibility.
Rule 321. Evidence: Objections and Offers of Proof.
Rule 322. Evidence: Confidential Information, Protective Orders.
Rule 323. Evidence: Official Notice.
Rule 324. Evidence: Stipulations.
Rule 325. Evidence: Presentation Under Oath or Affirmation.
Rule 326. Evidence: Presentation, Rebuttal and Cross-examination.
Rule 340. Proposed Findings, Conclusions and Supporting Briefs.
Rule 350. Record in Proceedings Before Hearing Officer; Retention of
Documents; Copies.
Rule 351. Transmittal of Documents to Secretary; Record Index;
Certification.
Rule 360. Initial Decision of Hearing Officer.
Appeal to the Commission and Commission Review
Rule 400. Interlocutory Review.
Rule 401. Issuance of Stays.
Rule 410. Appeal of Initial Decisions by Hearing Officers.
Rule 411. Commission Consideration of Initial Decisions by Hearing
Officers.
Rule 420. Appeal of Determinations by Self-Regulatory Organizations.
Rule 421. Commission Consideration of Determinations by Self-
Regulatory Organizations.
Rule 430. Appeal of Actions Made Pursuant to Delegated Authority.
Rule 431. Commission Consideration of Actions Made Pursuant to
Delegated Authority.
Rule 450. Briefs Filed with the Commission.
Rule 451. Oral Argument Before the Commission.
Rule 452. Additional Evidence.
Rule 460. Record Before the Commission.
Rule 470. Reconsideration.
Rule 490. Receipt of Petitions for Judicial Review Pursuant to 28
U.S.C. 2112(a)(1).
Rules Relating to Temporary Orders and Suspensions
Rule 500. Expedited Consideration of Proceedings.
Rule 510. Temporary Cease-and-Desist Orders: Application Process.
Rule 511. Temporary Cease-and-Desist Orders: Notice; Procedures for
Hearing.
Rule 512. Temporary Cease-and-Desist Orders: Issuance After Notice
and Opportunity for Hearing.
Rule 513. Temporary Cease-and-Desist Orders: Issuance Without Prior
Notice and Opportunity For Hearing.
Rule 514. Temporary Cease-and-Desist Orders: Judicial Review;
Duration.
Rule 520. Suspension of Registration of Brokers, Dealers, or other
Exchange Act-Registered Entities: Application.
Rule 521. Suspension of Registration of Brokers, Dealers, or other
Exchange Act-Registered Entities: Notice and Opportunity for Hearing
on Application.
Rule 522. Suspension of Registration of Brokers, Dealers, or other
Exchange Act-Registered Entities: Issuance and Review of Order.
Rule 523. [Reserved].
Rule 524. Suspension of Registrations: Duration.
Rule 530. Initial Decision on Permanent Order: Timing for Submitting
Proposed Findings and Preparation of Decision.
Rule 531. Initial Decision on Permanent Order: Effect on Temporary
Order.
Rule 540. Appeal and Commission Review of Initial Decision Making a
Temporary Order Permanent.
Rule 550. Summary Suspensions Pursuant to Exchange Act Section
12(k)(1)(A).
Rules Regarding Disgorgement and Penalty Payments
Rule 600. Interest on Sums Disgorged.
Rule 601. Prompt Payment of Disgorgement, Interest and Penalties.
Rule 610. Submission of Proposed Plan of Disgorgement.
Rule 611. Contents of Plan of Disgorgement; Provisions for Payment.
Rule 612. Notice of Proposed Plan of Disgorgement and Opportunity
for Comment by Non-Parties.
Rule 613. Order Approving, Modifying or Disapproving Proposed Plan
of Disgorgement.
Rule 614. Administration of Plan of Disgorgement.
Rule 620. Right to Challenge Order of Disgorgement.
Rule 630. Inability to Pay Disgorgement, Interest or Penalties.
Form
209.1. Form D-A: Disclosure of Assets and Financial Information.
General Rules
Rule 100. Scope of the Rules of Practice
(a)Unless provided otherwise, these Rules of Practice govern
proceedings before the Commission under the statutes that it
administers.
(b) These rules do not apply to:
(1) investigations, except where made specifically applicable by
the Rules Relating to Investigations, part 203 of this chapter; or
(2) actions taken by the duty officer pursuant to delegated
authority under 17 CFR 200.43.
Comment: The Rules of Practice govern a wide range of Commission
processes, including Commission-initiated enforcement and disciplinary
proceedings, proceedings to review disciplinary actions initiated by
self-regulatory organizations and certain other self-regulatory
decisions, proceedings to review Commission staff decisions made
pursuant to delegated authority, and proceedings in which an exemptive
application is contested and a hearing ordered. Certain agency
processes are specifically excluded from the scope of the Rules. First,
Commission investigations are not governed by the Rules unless a rule
explicitly provides otherwise. See, e.g., Rule 240 (concerning offers
of settlement); see also 17 CFR 203.8 (service of subpoenas in formal
investigations is governed by Rule 232). Second, these Rules do not
cover an appeal from a decision of the duty officer. Rules governing
appeals of such decisions are contained in 17 CFR 200.43(c).
Each rule indicates whether that rule applies generally to all
proceedings, or only to a particular category of proceedings, such as
ones in which an order instituting proceedings has been entered. A
majority of the Rules address procedures in those matters where the
Commission has ordered an evidentiary hearing pursuant to an order
instituting proceedings. When an order instituting proceedings has been
entered, it may specify particular procedures to be used in the
proceeding to which it applies.
The Administrative Procedure Act (``APA''), 5 U.S.C. 551 et seq.,
is the source of various provisions of the Rules. In addition, in any
particular proceeding the APA may govern the Rules or the specific
procedures that the Commission is required to employ. Which
requirements of the Administrative Procedure Act are applicable to a
particular Commission proceeding depends on the language of the statute
authorizing the proceeding. An adjudication is subject to the
requirements of 5 U.S.C. 554, 556 and 557 if the Commission is
authorized by statute to make its determination ``on the record, after
notice and opportunity for an agency hearing.'' Such adjudications are
often referred to as ``on the record'' or formal adjudications. Other
adjudications, including those where the Commission is authorized by
statute to make its determination ``after opportunity for hearing,''
are often referred to as informal adjudications. See Rules 191 and 326
and associated comments. [[Page 32746]]
Rule 101. Definitions
(a) For purposes of these Rules of Practice, unless explicitly
stated to the contrary:
(1) Commission means the United States Securities and Exchange
Commission, or a panel of Commissioners constituting a quorum of the
Commission, or a single Commissioner acting as duty officer pursuant to
17 CFR 200.43;
(2) counsel means any attorney representing a party or any other
person representing a party pursuant to Rule 102(b);
(3) disciplinary proceeding means an action pursuant to Rule
102(e);
(4) enforcement proceeding means an action, initiated by an order
instituting proceedings, held for the purpose of determining whether or
not a person is about to violate, has violated, has caused a violation
of, or has aided or abetted a violation of any statute or rule
administered by the Commission, or whether to impose a sanction as
defined in section 551(10) of the Administrative Procedure Act, 5
U.S.C. 551(10);
(5) hearing officer means an administrative law judge, a panel of
Commissioners constituting less than a quorum of the Commission, an
individual Commissioner, or any other person duly authorized to preside
at a hearing;
(6) interested division means a division or an office assigned
primary responsibility by the Commission to participate in a particular
proceeding;
(7) order instituting proceedings means an order issued by the
Commission commencing a proceeding or an order issued by the Commission
to hold a hearing;
(8) party means the interested division, any person named as a
respondent in an order instituting proceedings, any applicant named in
the caption of any order, persons entitled to notice in a stop order
proceeding as set forth in Rule 200(a)(2) or any person seeking
Commission review of a decision;
(9) proceeding means any agency process initiated by an order
instituting proceedings; or by the filing, pursuant to Rule 410, of a
petition for review of an initial decision by a hearing officer; or by
the filing, pursuant to Rule 420, of an application for review of a
self-regulatory organization determination; or by the filing, pursuant
to Rule 430, of a notice of intention to file a petition for review of
a determination made pursuant to delegated authority;
(10) Secretary means the Secretary of the Commission; and
(11) temporary sanction means a temporary cease-and-desist order or
a temporary suspension of the registration of a broker, dealer,
municipal securities dealer, government securities broker, government
securities dealer, or transfer agent pending final determination
whether the registration shall be revoked.
(b) [Reserved]
Rule 102. Appearance and Practice Before the Commission
A person shall not be represented before the Commission or a
hearing officer except as stated in paragraphs (a) and (b) of this rule
or as otherwise permitted by the Commission or a hearing officer.
(a) Representing Oneself. In any proceeding, an individual may
appear on his or her own behalf.
(b) Representing Others. In any proceeding, a person may be
represented by an attorney at law admitted to practice before the
Supreme Court of the United States or the highest court of any State
(as defined in Section 3(a)(16) of the Exchange Act, 15 U.S.C.
78c(a)(16)); a member of a partnership may represent the partnership; a
bona fide officer of a corporation, trust or association may represent
the corporation, trust or association; and an officer or employee of a
state commission or of a department or political subdivision of a state
may represent the state commission or the department or political
subdivision of the state.
(c) Former Commission Employees. Former employees of the Commission
must comply with the restrictions on practice contained in the
Commission's Conduct Regulation, Subpart M, 17 CFR 200.735.
(d) Designation of Address for Service; Notice of Appearance; Power
of Attorney; Withdrawal.
(1) Representing Oneself. When an individual first makes any filing
or otherwise appears on his or her own behalf before the Commission or
a hearing officer in a proceeding as defined in Rule 101(a), he or she
shall file with the Commission, or otherwise state on the record, and
keep current, an address at which any notice or other written
communication required to be served upon him or her or furnished to him
or her may be sent and a telephone number where he or she may be
reached during business hours.
(2) Representing Others. When a person first makes any filing or
otherwise appears in a representative capacity before the Commission or
a hearing officer in a proceeding as defined in Rule 101(a), that
person shall file with the Commission, and keep current, a written
notice stating the name of the proceeding; the representative's name,
business address and telephone number; and the name and address of the
person or persons represented.
(3) Power of Attorney. Any individual appearing or practicing
before the Commission in a representative capacity may be required to
file a power of attorney with the Commission showing his or her
authority to act in such capacity.
(4) Withdrawal. Withdrawal by any individual appearing in a
representative capacity shall be permitted only by order of the
Commission or the hearing officer. A motion seeking leave to withdraw
shall state with specificity the reasons for such withdrawal.
(e) Suspension and Disbarment.
(1) Generally. The Commission may censure a person or deny,
temporarily or permanently, the privilege of appearing or practicing
before it in any way to any person who is found by the Commission after
notice and opportunity for hearing in the matter:
(i) not to possess the requisite qualifications to represent
others; or
(ii) to be lacking in character or integrity or to have engaged in
unethical or improper professional conduct; or
(iii) to have willfully violated, or willfully aided and abetted
the violation of any provision of the Federal securities laws or the
rules and regulations thereunder.
(2) Certain Professionals and Convicted Persons. Any attorney who
has been suspended or disbarred by a court of the United States or of
any State; or any person whose license to practice as an accountant,
engineer, or other professional or expert has been revoked or suspended
in any State; or any person who has been convicted of a felony or a
misdemeanor involving moral turpitude shall be forthwith suspended from
appearing or practicing before the Commission. A disbarment,
suspension, revocation or conviction within the meaning of this rule
shall be deemed to have occurred when the disbarring, suspending,
revoking or convicting agency or tribunal enters its judgment or order,
including a judgment or order on a plea of nolo contendere, regardless
of whether an appeal of such judgment or order is pending or could be
taken.
(3) Temporary Suspensions. An order of temporary suspension shall
become effective upon service on the respondent. No order of temporary
suspension shall be entered by the Commission pursuant to paragraph
(e)(3)(i) of this rule more than 90 days after the date on which the
final judgment or order entered in a judicial [[Page 32747]] or
administrative proceeding described in paragraph (e)(3)(i)(A) or
(e)(3)(i)(B) has become effective, whether upon completion of review or
appeal procedures or because further review or appeal procedures are no
longer available.
(i) The Commission, with due regard to the public interest and
without preliminary hearing, may, by order, temporarily suspend from
appearing or practicing before it any attorney, accountant, engineer,
or other professional or expert who has been by name:
(A) permanently enjoined by any court of competent jurisdiction, by
reason of his or her misconduct in an action brought by the Commission,
from violating or aiding and abetting the violation of any provision of
the Federal securities laws or of the rules and regulations thereunder;
or
(B) found by any court of competent jurisdiction in an action
brought by the Commission to which he or she is a party or found by the
Commission in any administrative proceeding to which he or she is a
party to have violated (unless the violation was found not to have been
willful) or aided and abetted the violation of any provision of the
Federal securities laws or of the rules and regulations thereunder.
(ii) Any person temporarily suspended from appearing and practicing
before the Commission in accordance with paragraph (e)(3)(i) of this
rule may, within 30 days after service upon him or her of the order of
temporary suspension, petition the Commission to lift the temporary
suspension. If no petition has been received by the Commission within
30 days after service of the order, the suspension shall become
permanent.
(iii) Within 30 days after the filing of a petition in accordance
with paragraph (e)(3)(ii) of this rule, the Commission shall either
lift the temporary suspension, or set the matter down for hearing at a
time and place designated by the Commission, or both, and, after
opportunity for hearing, may censure the petitioner or disqualify the
petitioner from appearing or practicing before the Commission for a
period of time or permanently. In every case in which the temporary
suspension has not been lifted, every hearing held and other action
taken pursuant to this paragraph (e)(3) shall be expedited in
accordance with Rule 500. If the hearing is held before a hearing
officer, the time limits set forth in Rule 531 will govern review of
the hearing officer's initial decision.
(iv) In any hearing held on a petition filed in accordance with
paragraph (e)(3)(ii) of this rule, the staff of the Commission shall
show either that the petitioner has been enjoined as described in
paragraph (e)(3)(i)(A) of this rule or that the petitioner has been
found to have committed or aided and abetted violations as described in
paragraph (e)(3)(i)(B) of this rule and that showing, without more, may
be the basis for censure or disqualification. Once that showing has
been made, the burden shall be upon the petitioner to show cause why he
or she should not be censured or temporarily or permanently
disqualified from appearing and practicing before the Commission. In
any such hearing, the petitioner may not contest any finding made
against him or her or fact admitted by him or her in the judicial or
administrative proceeding upon which the proceeding under this
paragraph (e)(3) is predicated. A person who has consented to the entry
of a permanent injunction as described in paragraph (e)(3)(i)(A) of
this rule without admitting the facts set forth in the complaint shall
be presumed for all purposes under this paragraph (e)(3) to have been
enjoined by reason of the misconduct alleged in the complaint.
(4) Filing of Prior Orders. Any person appearing or practicing
before the Commission who has been the subject of an order, judgment,
decree, or finding as set forth in paragraph (e)(3) of this rule shall
promptly file with the Secretary a copy thereof (together with any
related opinion or statement of the agency or tribunal involved).
Failure to file any such paper, order, judgment, decree or finding
shall not impair the operation of any other provision of this rule.
(5) Reinstatement. (i) An application for reinstatement of a person
permanently suspended or disqualified under paragraph (e)(1) or (e)(3)
of this rule may be made at any time, and the applicant may, in the
Commission's discretion, be afforded a hearing; however, the suspension
or disqualification shall continue unless and until the applicant has
been reinstated by the Commission for good cause shown.
(ii) Any person suspended under paragraph (e)(2) of this rule shall
be reinstated by the Commission, upon appropriate application, if all
the grounds for application of the provisions of that paragraph are
subsequently removed by a reversal of the conviction or termination of
the suspension, disbarment, or revocation. An application for
reinstatement on any other grounds by any person suspended under
paragraph (e)(2) of this rule may be filed at any time and the
applicant shall be accorded an opportunity for a hearing in the matter;
however, such suspension shall continue unless and until the applicant
has been reinstated by order of the Commission for good cause shown.
(6) Other Proceedings Not Precluded. A proceeding brought under
paragraph (e)(1), (e)(2) or (e)(3) of this rule shall not preclude
another proceeding brought under these same paragraphs.
(7) Public Hearings. All hearings held under this paragraph (e)
shall be public unless otherwise ordered by the Commission on its own
motion or after considering the motion of a party.
(f) Practice Defined. For the purposes of these Rules of Practice,
practicing before the Commission shall include, but shall not be
limited to:
(1) transacting any business with the Commission; and
(2) the preparation of any statement, opinion or other paper by any
attorney, accountant, engineer or other professional or expert, filed
with the Commission in any registration statement, notification,
application, report or other document with the consent of such
attorney, accountant, engineer or other professional or expert.
Revision Comment: Rule 102, which governs appearance and practice
before the Commission, contains two changes from former Rule 2. First,
as suggested by one commenter, the rule now explicitly requires that
individuals and other persons filing a notice of appearance keep the
information contained in the notice, such as address and telephone
number, up-to-date. Current information is necessary to permit the
expeditious service of orders as well as other efforts to contact a
party.
The same commenter suggested that the Commission consider adopting
a provision that would require an attorney to file a written notice of
withdrawal when the attorney seeks to withdraw from a matter before the
Commission. New paragraph (d)(4) accomplishes this by requiring that, a
person appearing in a representative capacity who wishes to withdraw
from a proceeding, must file a motion seeking leave to withdraw and
obtain such leave from the Commission or the hearing officer.
In addition, language has been added to paragraph (d) (1) and (2)
to clarify the longstanding policy of the Commission that a person who
makes a filing with the Commission thereby makes an appearance before
the Commission.
Rule 103. Construction of Rules
(a) The Rules of Practice shall be construed and administered to
secure the just, speedy, and inexpensive determination of every
proceeding. [[Page 32748]]
(b) In any particular proceeding, to the extent that there is a
conflict between these rules and a procedural requirement contained in
any statute, or any rule or form adopted thereunder, the latter shall
control.
(c) For purposes of these rules:
(1) any term in the singular includes the plural, and any term in
the plural includes the singular, if such use would be appropriate;
(2) any use of a masculine, feminine, or neuter gender encompasses
such other genders as would be appropriate; and
(3) unless the context requires otherwise, counsel for a party may
take any action required or permitted to be taken by such party.
Comment (a): Paragraph (a) is based on Rule 1 of the Federal Rules
of Civil Procedure. See Fed. R. Civ. P. 1.
Rule 104. Business Hours
The Headquarters office of the Commission, at 450 Fifth Street,
NW., Washington, DC 20549, is open each day, except Saturdays, Sundays,
and Federal legal holidays, from 9 a.m. to 5:30 p.m., Eastern Standard
Time or Eastern Daylight Saving Time, whichever is currently in effect
in Washington, DC Federal legal holidays consist of New Year's Day;
Birthday of Martin Luther King, Jr.; Presidents Day; Memorial Day;
Independence Day; Labor Day; Columbus Day; Veterans Day; Thanksgiving
Day; Christmas Day; and any other day appointed as a holiday in
Washington, D.C. by the President or the Congress of the United States.
Rule 110. Presiding Officer
All proceedings shall be presided over by the Commission or, if the
Commission so orders, by a hearing officer. When the Commission
designates that the hearing officer shall be an administrative law
judge, the Chief Administrative Law Judge shall select, pursuant to 17
CFR 200.30-10, the administrative law judge to preside.
Comment: Ordinarily the assignment to a hearing officer is part of
the order instituting proceedings. The Rules use the term ``hearing
officer,'' defined in Rule 101(a), to refer to a person who presides at
a hearing. While an administrative law judge presides at most hearings
at which the Commission itself does not preside, other persons may
preside. See Securities Exchange Act Sec. 4A, 15 U.S.C. 78d-1;
Administrative Procedure Act Sec. 556(b), 5 U.S.C. 556(b).
Revision Comment: Rule 110 has been revised to specify the process
by which administrative law judges are assigned by referencing the
authority the Commission has previously delegated to the Chief
Administrative Law Judge to assign matters to any of the administrative
law judges.
Rule 111. Hearing Officer: Authority
The hearing officer shall have the authority to do all things
necessary and appropriate to discharge his or her duties. No provision
of these Rules of Practice shall be construed to limit the powers of
the hearing officer provided by the Administrative Procedure Act, 5
U.S.C. 556, 557. The powers of the hearing officer include, but are not
limited to, the following:
(a) administering oaths and affirmations;
(b) issuing subpoenas authorized by law and revoking, quashing, or
modifying any such subpoena;
(c) receiving relevant evidence and ruling upon the admission of
evidence and offers of proof;
(d) regulating the course of a proceeding and the conduct of the
parties and their counsel;
(e) holding prehearing and other conferences as set forth in Rule
221 and requiring the attendance at any such conference of at least one
representative of each party who has authority to negotiate concerning
the resolution of issues in controversy;
(f) recusing himself or herself upon motion made by a party or upon
his or her own motion;
(g) ordering, in his or her discretion, in a proceeding involving
more than one respondent, that the interested division indicate, on the
record, at least one day prior to the presentation of any evidence,
each respondent against whom that evidence will be offered;
(h) subject to any limitations set forth elsewhere in these rules,
considering and ruling upon all procedural and other motions;
(i) preparing an initial decision as provided in Rule 360;
(j) upon notice to all parties, reopening any hearing prior to the
filing of an initial decision therein, or, if no initial decision is to
be filed, prior to the time fixed for the filing of final briefs with
the Commission; and
(k) informing the parties as to the availability of one or more
alternative means of dispute resolution, and encouraging the use of
such methods.
Comment: This rule is based upon Section 556(c) of the
Administrative Procedure Act, 5 U.S.C. 556(c). By its terms, the list
of powers is illustrative, not exhaustive. The hearing officer is
permitted to take any action necessary and appropriate to discharge his
or her duties.
Revision Comment: One commenter suggested that the Commission
include in Rule 111 two powers recently added to Section 556(c) of the
Administrative Procedure Act by the Administrative Dispute Resolution
Act: the power to require attendance at a prehearing conference by a
representative of each party who has the authority to negotiate
concerning the resolution of issues in controversy and the power to
inform parties as to the availability of alternate means of dispute
resolution (ADR) and to encourage the use of such methods.
The Commission has decided to modify this rule to address these
concerns.
Rule 112. Hearing Officer: Disqualification and Withdrawal
(a) Notice of Disqualification. At any time a hearing officer
believes himself or herself to be disqualified from considering a
matter, the hearing officer shall issue a notice stating that he or she
is withdrawing from the matter and setting forth the reasons therefor.
(b) Motion for Withdrawal. Any party who has a reasonable, good
faith basis to believe that a hearing officer has a personal bias, or
is otherwise disqualified from hearing a case, may make a motion to the
hearing officer that the hearing officer withdraw. The motion shall be
accompanied by an affidavit setting forth in detail the facts alleged
to constitute grounds for disqualification. If the hearing officer
finds himself or herself not disqualified, he or she shall so rule and
shall continue to preside over the proceeding.
Comment: Section 556(b) of the Administrative Procedure Act, 5
U.S.C. 556(b), provides that a hearing officer may disqualify himself
or herself at any time. The standard for making a motion to disqualify
requires that the movant have a reasonable good-faith basis. This
standard is intended to emphasize that there must be objective reasons
to seek a disqualification, not just a subjective, though sincerely
held, belief. A party seeking disqualification must do so promptly upon
learning of the relevant information. A party may not await the outcome
of the hearing officer's decision to determine if the alleged grounds
for disqualification affected the decision.
Rule 120. Ex Parte Communications
(a) Except to the extent required for the disposition of ex parte
matters as authorized by law, the person presiding over an evidentiary
hearing may not:
(1) consult a person or party on a fact in issue, unless on notice
and opportunity for all parties to participate; or [[Page 32749]]
(2) be responsible to or subject to the supervision or direction of
an employee or agent engaged in the performance of investigative or
prosecuting functions for the Commission.
(b) The Commission's code of behavior regarding ex parte
communications between persons outside the Commission and decisional
employees, 17 CFR 200.110-200.114, governs other prohibited
communications during a proceeding conducted under the Rules of
Practice.
Comment: Paragraph (a) is based on Section 554(d)(1) of the
Administrative Procedure Act (APA), 5 U.S.C. 554(d)(1). Paragraph (b)
references the Commission's rules applying to communications between
Commission members or decisional employees and persons outside the
agency, which incorporate the requirements of Section 557(d)(1) of the
APA, 5 U.S.C. 557(d)(1). See also 17 CFR 200.62 (ethical canon for
Commission members regarding ex parte communications); Securities Act
Release No. 5815 (Mar. 10, 1977), 11 SEC Docket 1933 (Mar. 22, 1977)
(amending Commission's code of behavior governing ex parte
communications between persons outside the Commission and decisional
employees to conform to requirements of Section 4 of the Government in
the Sunshine Act, 5 U.S.C. Sec. 552b).
Revision Comment: Although the Commission's administrative
proceedings were previously subject to the requirements of the
Administrative Procedure Act governing ex parte communications, 5
U.S.C. 554(d)(1) and 557(d)(1), the prior rules did not mention them.
Rule 120 makes no substantive changes to these requirements--it simply
restates the APA's directive with regard to ex parte contacts. The Rule
was added so that these requirements were more readily available to
persons subject to proceedings under the Rules of Practice. See, Model
Adjudication Rule 120(A), Administrative Conference of the United
States (Dec. 1993).
Rule 121. Separation of Functions
Any Commission officer, employee or agent engaged in the
performance of investigative or prosecutorial functions for the
Commission in a proceeding as defined in Rule 101(a) may not, in that
proceeding or one that is factually related, participate or advise in
the decision, or in Commission review of the decision pursuant to
Section 557 of the Administrative Procedure Act, 5 U.S.C. 557, except
as a witness or counsel in the proceeding.
Comment: Rule 121 is based on Section 554(d) of the Administrative
Procedure Act (APA), 5 U.S.C. 554(d), which governs the separation of
personnel involved in prosecutorial and investigative functions in
certain cases from decisionmaking in those cases.
Revision Comment: Although the Commission's administrative
proceedings were previously subject to the requirements of Section
554(d) of the APA governing separation of functions, 5 U.S.C. 554(d),
the prior rules did not mention them. Rule 121 makes no substantive
changes to these requirements--it simply restates the APA's position on
separation of functions. The Rule was added so that these requirements
were more readily available to persons subject to proceedings under the
Rules of Practice. See Model Adjudication Rule 121, Administrative
Conference of the United States (Dec. 1993).
Rule 140. Commission Orders and Decisions: Signature and Availability
(a) Signature Required. All orders and decisions of the Commission
shall be signed by the Secretary or any other person duly authorized by
the Commission.
(b) Availability for Inspection. Each order and decision shall be
available for inspection by the public from the date of entry, unless
the order or decision is nonpublic. A nonpublic order or decision shall
be available for inspection by any person entitled to inspect it from
the date of entry.
(c) Date of Entry of Orders. The date of entry of a Commission
order shall be the date the order is signed. Such date shall be
reflected in the caption of the order, or if there is no caption, in
the order itself.
Revision Comment (b): Changes to the text of the Commission's rule
regarding availability of orders are technical. The Office of the
Secretary has for many years maintained a practice of holding
Commission orders for five days before release to the public. Under
Rule 140(b), unless an order or decision is nonpublic, it will be
available to the public from the date of entry.
Revision comment (c): This paragraph has been simplified. No
substantive change is intended.
Rule 141. Orders and Decisions: Service of Orders Instituting
Proceeding and Other Orders and Decisions
(a) Service of an Order Instituting Proceedings.
(1) By Whom Made. The Secretary, or another duly authorized officer
of the Commission, shall serve a copy of an order instituting
proceedings on each person named in the order as a party. The Secretary
may direct an interested division to assist in making service.
(2) How made.
(i) To Individuals. Notice of a proceeding shall be made to an
individual by delivering a copy of the order instituting proceedings to
the individual or to an agent authorized by appointment or by law to
receive such notice. Delivery means--handing a copy of the order to the
individual; or leaving a copy at the individual's office with a clerk
or other person in charge thereof; or leaving a copy at the
individual's dwelling house or usual place of abode with some person of
suitable age and discretion then residing therein; or sending a copy of
the order addressed to the individual by U.S. Postal Service certified,
registered or Express Mail and obtaining a confirmation of receipt; or
giving confirmed telegraphic notice.
(ii) To Corporations or Entities. Notice of a proceeding shall be
made to a person other than a natural person by delivering a copy of
the order instituting proceedings to an officer, managing or general
agent, or any other agent authorized by appointment or by law to
receive such notice, by any method specified in paragraph (a)(2)(i) of
this rule.
(iii) Upon Persons Registered with the Commission. In addition to
any other method of service specified in paragraph (a)(2) of this rule,
notice may be made to a person currently registered with the Commission
as a broker, dealer, municipal securities dealer, government securities
broker, government securities dealer, investment adviser, investment
company or transfer agent by sending a copy of the order addressed to
the most recent business address shown on the person's registration
form by U.S. Postal Service certified, registered or Express Mail and
obtaining a confirmation of attempted delivery.
(iv) Upon Persons in a Foreign Country. Notice of a proceeding to a
person in a foreign country may be made by any method specified in
paragraph (a)(2) of this rule, or by any other method reasonably
calculated to give notice, provided that the method of service used is
not prohibited by the law of the foreign country.
(v) In Stop Order Proceedings. Notwithstanding any other provision
of paragraph (a)(2) of this rule, in proceedings pursuant to Sections 8
or 10 of the Securities Act of 1933, 15 U.S.C. 77h or 77j, or Sections
305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 77eee or
77ggg, notice of the institution of proceedings shall be made by
personal service or confirmed [[Page 32750]] telegraphic notice, or a
waiver obtain pursuant to paragraph (a)(4) of this rule.
(3) Certificate of Service. The Secretary shall place in the record
of the proceeding a certificate of service identifying the party given
notice, the method of service, the date of service, the address to
which service was made and the person who made service. If service is
made in person, the certificate shall state, if available, the name of
the individual to whom the order was given. If service is made by U.S.
Postal Service certified, registered or Express Mail, the certificate
shall be accompanied by a confirmation of receipt or of attempted
delivery, as required. If service is made to an agent authorized by
appointment to receive service, the certificate shall be accompanied by
evidence of the appointment.
(4) Waiver of Service. In lieu of service as set forth in paragraph
(a)(2) of this rule, the party may be provided a copy of the order
instituting proceedings by first-class mail or other reliable means if
a waiver of service is obtained from the party and placed in the
record.
(b) Service of Orders or Decisions Other Than an Order Instituting
Proceedings. Written orders or decisions issued by the Commission or by
a hearing officer shall be served promptly on each party pursuant to
any method of service authorized under paragraph (a) of this rule or
Rule 150(c). Service of orders or decisions by the Commission,
including those entered pursuant to delegated authority, shall be made
by the Secretary or, as authorized by the Secretary, by a member of an
interested division. Service of orders or decisions issued by a hearing
officer shall be made by the Secretary or the hearing officer.
Comment (a): The Rule is derived, in part, from Rules 4 and 5(b) of
the Federal Rules of Civil Procedure. The Rule is also based, in part,
on Section 40(a) of the Investment Company Act, 15 U.S.C. 80a-39(a),
and Section 211(c) of the Investment Advisers Act, 15 U.S.C. 80b-11(c),
which set forth acceptable methods for service of orders instituting
proceedings under those Acts, and on Sections 8 and 10 of the
Securities Act of 1933, 15 U.S.C. 77h and 77j, and Sections 305 and 307
of the Trust Indenture Act of 1939, 15 U.S.C. 77eee and 77ggg, which
set forth acceptable methods of service for orders instituting stop
order proceedings pursuant to those statutory sections.
The Commission commences proceedings to enforce the Federal
securities laws by issuing an ``order instituting proceedings.'' The
Commission is required to give each party appropriate notice of an
order instituting proceedings. See Rule 200 (setting forth requirements
in connection with the issuance of such orders). While service of the
order instituting proceedings satisfies notice requirements, it is not
the exclusive means of providing notice sufficient to meet the
requirements of due process. In some circumstances--for example, where
emergency or expedited relief is sought--actual notice of the
institution of a proceeding may be made by telephone. See, e.g., Rule
511. Although formal service of the order is still required in such
circumstances, action on an application for emergency or expedited
relief may precede service of the order.
Rule 141(a)(2) allows service by those means specifically mentioned
by statute. Rule 141 also allows service to be made by U.S. Postal
Service Express Mail which, like certified or registered mail, both
traditionally relied upon under the former rule, is a U.S. Post Office
service that provides each letter a unique identification number, is
traceable, and allows for a receipt upon delivery. Under Rule 141,
alternative methods of service to persons located in the United States,
such as service by publication, are not permitted. A party may,
however, waive service and receive notice by accepting a copy of an
order instituting proceedings by facsimile transmission, U.S. Mail,
private overnight courier, or other means. Whatever method of service
is used, Rule 141 requires a certificate of service establishing how
notice was given, or a written waiver of service.
The Rule establishes specific criteria for service of orders upon
persons registered with the Commission and upon persons in a foreign
country. A person who is currently registered with the Commission to
engage in the securities business with the public may reasonably be
expected to receive mail sent to the address shown on their
registration form or to make appropriate arrangements for such mail to
be forwarded or delivered. Rule 141 provides that a person currently
registered with the Commission as a broker, dealer, municipal
securities dealer, government securities broker, government securities
dealer, investment adviser, investment company or transfer agent may be
served by sending a copy of the order to the last business address
shown on their registration form by U.S. Postal Service certified,
registered or Express Mail and that confirmation of attempted delivery
to that address is sufficient for valid service if no confirmation of
receipt can be obtained.
A person in a foreign country may be served by any method of
service, reasonably calculated to give notice, that is not prohibited
by the law of the foreign country.
Comment (b): Service of an order instituting proceedings places a
party on notice that there will be subsequent filings or other papers.
Unless a party defaults, a party's response to receipt of an order
instituting proceedings must include the filing of a notice of
appearance. Cf. Rule 155 (governing defaults). The notice will provide
an address of record where the party can be served with subsequent
orders. Therefore, a return receipt or other confirmation of delivery
is not required for subsequent orders.
Subject to statutory limitations governing particular types of
orders, orders other than an order instituting proceedings may be
served pursuant to any method provided for in Rule 141(a) or in Rule
150(c), which governs service of papers filed by parties. The
Commission may serve an order on a party, as well as on the party's
counsel. It is the Commission's practice to send orders instituting
proceedings and final orders to each party in addition to serving
counsel, if any. Cf. Rule 150(b) (if a party is represented by counsel,
counsel shall be served with papers filed by other parties with the
Commission).
Revision Comment (a): The Rule has been revised to permit a waiver
of formal service and thereby allow the use of methods of service, such
as private courier service or facsimile transmission, in circumstances
where such methods might otherwise be inconsistent with statutory
requirements.
The Rule has been revised to include a provision specifically
addressing service by the Commission on a person in a foreign country.
The Hague Convention on the Service Abroad of Judicial and
Extrajudicial Documents does not apply to the service of Commission
orders.
The rule has also been revised to include a specific provision for
service on persons registered with the Commission as a broker, dealer,
municipal securities dealer, government securities broker, government
securities dealer, investment adviser, investment company or transfer
agent.
Rule 150. Service of Papers by Parties
(a) When Required. In every proceeding as defined in Rule 101(a),
each paper, including each notice of appearance, written motion, brief,
or other written communication, shall be served upon each party in the
[[Page 32751]] proceeding in accordance with the provisions of this
rule; provided, however, that absent an order to the contrary, no
service shall be required for motions which may be heard ex parte.
(b) Upon a Person Represented by Counsel. Whenever service is
required to be made upon a person represented by counsel who has filed
a notice of appearance pursuant to Rule 102, service shall be made
pursuant to paragraph (c) of this rule upon counsel, unless service
upon the person represented is ordered by the Commission or the hearing
officer.
(c) How Made. Service shall be made by delivering a copy of the
filing. Delivery means:
(1) personal service--handing a copy to the person required to be
served; or leaving a copy at the person's office with a clerk or other
person in charge thereof; or leaving a copy at the person's dwelling
house or usual place of abode with some person of suitable age and
discretion then residing therein;
(2) mailing the papers through the U.S. Postal Service by first
class, certified, registered, or Express Mail delivery addressed to the
person;
(3) sending the papers through a commercial courier service or
express delivery service addressed to the person; or
(4) transmitting the papers by facsimile machine where the
following conditions are met:
(i) the persons serving each other by facsimile transmission have
agreed to do so in a writing, signed by each party, which specifies
such terms as they deem necessary with respect to facsimile machine
telephone numbers to be used, hours of facsimile machine operation, the
provision of non-facsimile original or copy, and any other such
matters; and
(ii) receipt of each document served by facsimile is confirmed by a
manually signed receipt delivered by facsimile machine or other means
agreed to by the parties.
(d) When Service Is Complete. Personal service, service by U.S.
Postal Service Express Mail or service by a commercial courier or
express delivery service is complete upon delivery. Service by mail is
complete upon mailing. Service by facsimile is complete upon
confirmation of transmission by delivery of a manually signed receipt.
Comment (a): Each document a party files in connection with a
proceeding, as defined in Rule 101(a), must be served on all other
parties admitted to the proceeding. In general, the party serving a
paper should use the same method of service on all other parties and
for filing with the Commission. Where a party uses different methods of
service, the reason for doing so must be stated. Where a party is
represented by counsel who has filed a notice of appearance, service
ordinarily shall be made on counsel.
Revision Comment: The rule now contains a provision, paragraph
(c)(4), allowing the use of facsimile transmission (``fax'') for the
delivery of papers. The Commission received a large number of comments
on this subject. Commenters had a number of suggestions for how to
implement service by fax, including: that service should not be deemed
complete unless a manually signed receipt acknowledges that the
transmission was readable and was received in full within the time
permitted for filing; that the hearing officer be given discretion to
determine whether, and under what circumstances, fax service should be
allowed; that an initial agreement to allow service by fax should
include an undertaking to serve documents leaving sufficient time
before the filing deadline and to notify the sender promptly of any fax
transmission errors; that simultaneous service of an original copy
should also be made through other means; and that a written agreement
of terms should be required when the parties agree to the use of fax
service. Commenters disagreed whether the Commission should limit the
use of facsimile transmission to cases in which all parties agree on
the terms for service.
In federal court, filing by fax is permitted where authorized by
local rule subject to standards approved by the Judicial Conference.
See Fed. R. Civ. P. 5(e); Fed. R. App. P. 25(a). The Commission has
decided to allow service by facsimile transmission where two conditions
have been met. First, persons serving each other by fax must agree to
do so in writing. The written agreement shall contain such terms as are
necessary with respect to telephone numbers, hours of operation, and
provision of paper original and any other matters. Second, receipt of a
document served by fax must be confirmed by a manually signed receipt.
These conditions are intended to ensure that service by fax will be
both an efficient and an effective means of service.
One commenter objected to the provision in the proposed rule that
would have allowed service directly upon a party where the party was
represented by counsel. In response, Rule 150(b) has been amended to
clarify that service upon counsel by another party is required unless
service upon the person represented is specifically ordered by the
Commission or the hearing officer.
Rule 151. Filing of Papers With the Commission: Procedure
(a) When to File. All papers required to be served by a party upon
any person shall be filed with the Commission at the time of service or
promptly thereafter. Papers required to be filed with the Commission
must be received within the time limit, if any, for such filing.
(b) Where to File. Filing of papers with the Commission shall be
made by filing them with the Secretary. When a proceeding is assigned
to a hearing officer, a person making a filing with the Secretary shall
promptly provide to the hearing officer a copy of any such filing;
provided, however, that the hearing officer may direct or permit
filings to be made with him or her, in which event the hearing officer
shall note thereon the filing date and promptly provide the Secretary
with either the original or a copy of any such filings.
(c) To Whom to Direct the Filing. Unless otherwise provided, where
the Commission has assigned a case to a hearing officer, all motions,
objections, applications or other filings made during a proceeding
prior to the filing of an initial decision therein, or, if no initial
decision is to be filed, prior to the time fixed for the filing of
briefs with the Commission, shall be directed to and decided by the
hearing officer.
(d) Certificate of Service. Papers filed with the Commission or a
hearing officer shall be accompanied by a certificate stating the name
of the person or persons served, the date of service, the method of
service and the mailing address or facsimile telephone number to which
service was made, if not made in person. If the method of service to
any party is different from the method of service to any other party or
the method for filing with the Commission, the certificate shall state
why a different means of service was used.
Comment: Since hearing officers frequently preside at locations
away from the Commission's Headquarters in Washington, D.C., persons
are permitted to make filings with the hearing officer, who then can
forward the filings to the Secretary. Rule 351 contains additional
procedures for the transmittal of the record of a proceeding before a
hearing officer (and the index of the record) from the hearing officer
to the Secretary.
Rule 151 requires that where the Commission has assigned a hearing
officer to preside at a proceeding, the person making a motion direct
his or her requests and arguments to the hearing officer, not the
Commission. If [[Page 32752]] a motion is directed to the Commission in
a case in which a hearing officer is assigned, the Secretary must refer
the motion to the hearing officer unless a motion directly to the
Commission is authorized. In those unusual circumstances where a motion
is properly directed to the Commission, the proceeding before the
hearing officer should continue, unless otherwise ordered.
Revision Comment (d): The requirements for the certificate of
service have been modified to require that the certificate list the
name of the person served and the method of service used if other than
personal service is made. Additionally, if the method of service to any
party is different from the method of service to any other party or the
method for filing with the Commission, the certificate must state why a
different method was used.
Rule 152. Filing of Papers: Form
(a) Specifications. Papers filed in connection with any proceeding
as defined in Rule 101(a) shall:
(1) be on one grade of unglazed white paper measuring 8\1/2\ x 11
inches, except that, to the extent that the reduction of larger
documents would render them illegible, such documents may be filed on
larger paper;
(2) be typewritten or printed in either 10- or 12-point typeface or
otherwise reproduced by a process that produces permanent and plainly
legible copies;
(3) include at the head of the paper, or on a title page, the name
of the Commission, the title of the proceeding, the names of the
parties, the subject of the particular paper or pleading, and the file
number assigned to the proceeding;
(4) be paginated with left hand margins at least 1 inch wide, and
other margins of at least 1 inch;
(5) be double-spaced, with single-spaced footnotes and single-
spaced indented quotations; and
(6) be stapled, clipped or otherwise fastened in the upper left
corner.
(b) Signature Required. All papers must be dated and signed as
provided in Rule 153.
(c) Suitability for Recordkeeping. Documents which, in the opinion
of the Commission, are not suitable for computer scanning or
microfilming may be rejected.
(d) Number of Copies. An original and three copies of all papers
shall be filed.
(e) Form of Briefs. All briefs containing more than 10 pages shall
include a table of contents, an alphabetized table of cases, a table of
statutes, and a table of other authorities cited, with references to
the pages of the brief wherein they are cited.
(f) Scandalous or Impertinent Matter. Any scandalous or impertinent
matter contained in any brief or pleading or in connection with any
oral presentation in a proceeding may be stricken on order of the
Commission or the hearing officer.
Rule 153. Filing of Papers: Signature Requirement and Effect
(a) General Requirements. Following the issuance of an order
instituting proceedings, every filing of a party represented by counsel
shall be signed by at least one counsel of record in his or her name
and shall state that counsel's business address and telephone number. A
party who acts as his or her own counsel shall sign his or her
individual name and state his or her address and telephone number on
every filing.
(b) Effect of Signature.
(1) The signature of a counsel or party shall constitute a
certification that:
(i) the person signing the filing has read the filing;
(ii) to the best of his or her knowledge, information, and belief,
formed after reasonable inquiry, the filing is well grounded in fact
and is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law; and
(iii) the filing is not made for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the cost
of adjudication.
(2) If a filing is not signed, the hearing officer or the
Commission shall strike the filing, unless it is signed promptly after
the omission is called to the attention of the person making the
filing.
Comment: Rule 153(b) is based upon Rule 11 of the Federal Rules of
Civil Procedure. Persons signing a filing bear personal responsibility
for the contents of the filing. If a filing is contrary to the
provisions of this rule, the person or persons signing the filing may
be subject to sanctions under Rule 180.
Rule 154. Motions
(a) Generally. Unless made during a hearing or conference, a motion
shall be in writing, shall state with particularity the grounds
therefor, shall set forth the relief or order sought, and shall be
accompanied by a written brief of the points and authorities relied
upon. All written motions shall be served in accordance with Rule 150,
be filed in accordance with Rule 151, meet the requirements of Rule
152, and be signed in accordance with Rule 153. The Commission or the
hearing officer may order that an oral motion be submitted in writing.
Unless otherwise ordered by the Commission or the hearing officer, if a
motion is properly made to the Commission concerning a proceeding to
which a hearing officer is assigned, the proceeding before the hearing
officer shall continue pending the determination of the motion by the
Commission. No oral argument shall be heard on any motion unless the
Commission or the hearing officer otherwise directs.
(b) Opposing and Reply Briefs. Except as provided in Rule 401,
briefs in opposition to a motion shall be filed within five days after
service of the motion. Reply briefs shall be filed within three days
after service of the opposition.
(c) Length Limitation. A brief in support of or opposition to a
motion shall not exceed 10 pages, exclusive of pages containing any
table of contents, table of authorities, and/or addendum. Requests for
leave to file briefs in excess of 10 pages are disfavored.
Rule 155. Default; Motion to Set Aside Default
(a) A party to a proceeding may be deemed to be in default and the
Commission or the hearing officer may determine the proceeding against
that party upon consideration of the record, including the order
instituting proceedings, the allegations of which may be deemed to be
true, if that party fails:
(1) to appear, in person or through a representative, at a hearing
or conference of which that party has been notified;
(2) to answer, to respond to a dispositive motion within the time
provided, or otherwise to defend the proceeding; or
(3) to cure a deficient filing within the time specified by the
Commission or the hearing officer pursuant to Rule 180(b).
(b) A motion to set aside a default shall be made within a
reasonable time, state the reasons for the failure to appear or defend,
and specify the nature of the proposed defense in the proceeding. In
order to prevent injustice and on such conditions as may be
appropriate, the hearing officer, at any time prior to the filing of
the initial decision, or the Commission, at any time, may for good
cause shown set aside a default.
Comment: Pursuant to Rule 155 the Commission or the hearing officer
may enter a default against any party who fails to appear in person or,
if appropriate, through a representative, at a hearing or conference of
which the party has notice. Thus, for example, failure to appear at a
prehearing conference may be a grounds for default. [[Page 32753]] In
addition, for example, this rule permits the entry of default against
any party who fails to answer, to respond to a dispositive motion, or
otherwise to defend the proceeding, or to file a required brief either
before the hearing officer or on appeal before the Commission. This
provision retains the existing standards for setting aside a default
contained in former Rule of Practice 12(d), 17 CFR 201.12(d) (1994).
Revision Comment: Failure to file a notice of appearance has been
eliminated as a basis for a default. Failure to file a notice of
appearance, like the failure to make any other required filing, is
subject to sanctions under Rule 180(c).
Rule 160. Time Computation
(a) Computation. In computing any period of time prescribed in or
allowed by these Rules of Practice or by order of the Commission, the
day of the act, event, or default from which the designated period of
time begins to run shall not be included. The last day of the period so
computed shall be included unless it is a Saturday, Sunday, or Federal
legal holiday (as defined in Rule 104), in which event the period runs
until the end of the next day that is not a Saturday, Sunday, or
Federal legal holiday. Intermediate Saturdays, Sundays, and Federal
legal holidays shall be excluded from the computation when the period
of time prescribed or allowed is seven days or less, not including any
additional time allowed for service by mail in paragraph (b) of this
rule. If on the day a filing is to be made, weather or other conditions
have caused the Secretary's office or other designated filing location
to close, the filing deadline shall be extended to the end of the next
day that is neither a Saturday, a Sunday, nor a Federal legal holiday.
(b) Additional Time For Service by Mail. If service is made by
mail, three days shall be added to the prescribed period for response.
Revision Comment (b): This paragraph has been simplified. No
substantive change is intended. One commenter requested that the amount
of time for service by mail be increased. Rule 6(e) of the Federal
Rules of Civil Procedure, which allows only three days to be added to a
prescribed period when service is by mail, establishes a widely used
and familiar standard for the computation of additional time when
service is by mail. No change in the additional time period for service
by mail was deemed warranted.
Rule 161. Extensions of Time, Postponements and Adjournments
(a) Availability. Except as otherwise provided by law, the
Commission, at any time, or the hearing officer, at any time prior to
the filing of his or her initial decision or, if no initial decision is
to be filed, at any time prior to the closing of the record, may, for
good cause shown, extend or shorten any time limits prescribed by these
Rules of Practice for the filing of any papers and may, consistent with
paragraph (b) of this rule, postpone or adjourn any hearing.
(b) Limitations on Postponements, Adjournments and Extensions. A
hearing shall begin at the time and place ordered, provided that,
within the limits provided by statute, the Commission or the hearing
officer may for good cause shown postpone the commencement of the
hearing or adjourn a convened hearing for a reasonable period of time
or change the place of hearing.
(1) Additional Considerations. In considering a motion for
postponement of the start of a hearing, adjournment once a hearing has
begun, or extensions of time for filing papers, the hearing officer or
the Commission shall consider, in addition to any other factors:
(i) the length of the proceeding to date;
(ii) the number of postponements, adjournments or extensions
already granted;
(iii) the stage of the proceedings at the time of the request; and
(iv) any other such matters as justice may require.
(2) Time Limit. Postponements, adjournments or extensions of time
for filing papers shall not exceed 21 days unless the Commission or the
hearing officer states on the record or sets forth in a written order
the reasons why a longer period of time is necessary.
Comment: The rule requires the hearing officer to consider
explicitly the efficient and timely administration of justice when
determining whether to grant a postponement, adjournment or extension
of time for filing of papers. The need for delay must be balanced
against the need to bring each case to a timely conclusion, consistent
with the public interest. The factors listed in the rule build on
existing standards applied by the administrative law judges.
Rule 180. Sanctions
(a) Contemptuous Conduct.
(1) Subject to Exclusion or Suspension. Contemptuous conduct by any
person before the Commission or a hearing officer during any
proceeding, including any conference, shall be grounds for the
Commission or the hearing officer to:
(i) exclude that person from such hearing or conference, or any
portion thereof; and/or
(ii) summarily suspend that person from representing others in the
proceeding in which such conduct occurred for the duration, or any
portion, of the proceeding.
(2) Review Procedure. A person excluded from a hearing or
conference, or a counsel summarily suspended from practice for the
duration or any portion of a proceeding, may seek review of the
exclusion or suspension by filing with the Commission, within three
days of the exclusion or suspension order, a motion to vacate the
order. The Commission shall consider such motion on an expedited basis
as provided in Rule 500.
(3) Adjournment. Upon motion by a party represented by counsel
subject to an order of exclusion or suspension, an adjournment shall be
granted to allow the retention of new counsel. In determining the
length of an adjournment, the Commission or hearing officer shall
consider, in addition to the factors set forth in Rule 161, the
availability of co-counsel for the party or of other members of a
suspended counsel's firm.
(b) Deficient Filings; Leave to Cure Deficiencies. The Commission
or the hearing officer may reject, in whole or in part, any filing that
fails to comply with any requirements of these Rules of Practice or of
any order issued in the proceeding in which the filing was made. Any
such filings shall not be part of the record. The Commission or the
hearing officer may direct a party to cure any deficiencies and to
resubmit the filing within a fixed time period.
(c) Failure to Make Required Filing or to Cure Deficient Filing.
The Commission or the hearing officer may enter a default pursuant to
Rule 155, dismiss the case, decide the particular matter at issue
against that person, or prohibit the introduction of evidence or
exclude testimony concerning that matter if a person fails:
(1) to make a filing required under these Rules of Practice; or
(2) to cure a deficient filing within the time specified by the
Commission or the hearing officer pursuant to paragraph (b) of this
rule.
Comment (a): Paragraph (a) is based on former Rule 2(f), which
provided that contemptuous conduct was grounds for exclusion and
summary suspension for the duration of a hearing. Contemptuous conduct
during the course of a proceeding that would warrant
[[Page 32754]] sanctions has been rare. Under Rule 180(a), any person
found to have engaged in contemptuous conduct can be excluded from all
or a portion of a particular hearing or conference.
In the event that a hearing officer or the Commission excludes or
suspends a party's counsel, the party may make a motion for an
adjournment to obtain new counsel. See 5 U.S.C. 555(b) (right in
administrative proceedings to be accompanied by retained counsel); cf.
Feeney v. SEC, 564 F.2d 260, 262 (8th Cir. 1977), cert. denied, 435
U.S. 969 (1978) (no right to appointed counsel in administrative
proceedings where respondent assumed to be indigent (citing Boruski v.
SEC, 340 F.2d 991, 992 (2d Cir.), cert. denied, 381 U.S. 943 (1965)).
Whether or not an exclusion or summary suspension order is issued,
conduct during a hearing may be the basis for further disciplinary
action, e.g., pursuant to Rule 102(e), or, as to a staff member, under
the Commission's personnel regulations.
Comment (b): A filing may be rejected if it fails to meet the
requirements of any rule or order. See In the Matter of Fischbach,
Admin. Proc. File No. 3-7384 (June 18, 1991). For example, filings that
are not served as required by Rule 150, that fail to cite to the record
as required by Rule 450, that are longer than permitted by Rule 450, or
that fail to comply with a prehearing order pursuant to Rule 221, could
be found to be deficient.
The rule permits the hearing officer or the Commission to fix a
period of time during which a deficiency must be cured and a new filing
made. The authority to reject a filing or to permit an opportunity to
cure a deficiency is discretionary. Whether a particular filing should
be rejected or whether leave to cure a deficient filing should be
granted requires a case-by-case determination. Parties, including those
appearing pro se, are obligated to familiarize themselves with the
Rules of Practice. The fact that a person may represent himself or
herself or be represented by counsel who has not previously practiced
before the Commission may be a factor in considering how to address a
deficient filing, but should not, standing alone, be determinative.
Deficiencies that are technical, de minimis, or non-prejudicial,
however, may not warrant any action pursuant to this rule.
Comment (c): This provision permits the entry of sanctions for the
failure to file a document required under the Commission's Rules of
Practice or for failure to cure a deficient filing within the time
ordered. In response to such failures, the Commission or the hearing
officer may determine the particular matter at issue against the person
who has failed to perform or may preclude that person from introducing
evidence or testimony on that matter. It is intended that the provision
will be invoked for failures that do not warrant the entry of a default
under Rule 155.
Revision Comment (b): The rule now states explicitly that a
rejected filing is not part of the record. If a filing is rejected, the
entry of that filing on the docket may be stricken.
Revision Comment (c): The revised rule allows for a sanction less
severe than a default for a deficient filing.
Rule 190. Confidential Treatment of Information in Certain Filings
(a) Application. An application for confidential treatment pursuant
to the provisions of Clause 30 of Schedule A of the Securities Act of
1933, 15 U.S.C. 77aa(30), and Rule 406 thereunder, 17 CFR 230.406;
Section 24(b)(2) of the Securities Exchange Act of 1934, 15 U.S.C.
78x(b)(2), and Rule 24b-2 thereunder, 17 CFR 240.24b-2; Section 22(b)
of the Public Utility Holding Company Act of 1935, 15 U.S.C. 79v(b),
and Rule 104 thereunder, 17 CFR 250.104; Section 45(a) of the
Investment Company Act of 1940, 15 U.S.C. 80a-44(a), and Rule 45a-1
thereunder, 17 CFR 270.45a-1; or Section 210(a) of the Investment
Advisers Act of 1940, 15 U.S.C. 80b-10(a), shall be filed with the
Secretary. The application shall be accompanied by a sealed copy of the
materials as to which confidential treatment is sought.
(b) Procedure For Supplying Additional Information. The applicant
may be required to furnish in writing additional information with
respect to the grounds for objection to public disclosure. Failure to
supply the information so requested within 14 days from the date of
receipt by the applicant of a notice of the information required shall
be deemed a waiver of the objection to public disclosure of that
portion of the information to which the additional information relates,
unless the Commission or the hearing officer shall otherwise order for
good cause shown at or before the expiration of such 14-day period.
(c) Confidentiality of Materials Pending Final Decision. Pending
the determination of the application for confidential treatment,
transcripts, non-final orders including an initial decision, if any,
and other materials in connection with the application shall be placed
under seal; shall be for the confidential use only of the hearing
officer, the Commission, the applicant, and any other parties and
counsel; and shall be made available to the public only in accordance
with orders of the Commission.
(d) Public Availability of Orders. Any final order of the
Commission denying or sustaining an application for confidential
treatment shall be made public. Any prior findings or opinions relating
to an application for confidential treatment under this rule shall be
made public at such time as the material as to which confidentiality
was requested is made public.
Comment: Pursuant to the statutory provisions and rules set forth
in paragraph (a), persons who file a registration statement, report,
application or other such materials may file an application for
confidential treatment of required information included in such
filings. Securities Act Rule 406, 17 CFR 230.406, Exchange Act Rule
24b-2, 17 CFR 240.24b-2, and Pubic Utility Holding Company Act Rule
104, 15 CFR 250.104, set forth certain procedures governing application
for confidential treatment for materials filed under the Securities
Act, Exchange Act and Public Utility Holding Company Act respectively.
There are no corresponding rules governing applications for
confidential treatment under the Investment Company Act or Investment
Advisers Act, although Investment Company Act Rule 45a-1, 17 CFR
270.45a-1, sets forth certain procedures governing applications for
confidential treatment of the names and addresses of dealers of
registered investment companies.
Rule 190 is based in part on former Rule 25. The Rule governs
applications for confidential treatment with respect to information
required to be filed with the Commission in connection with a
registration statement, report, application or other such materials.
Rule 322 applies to requests for a protective order for materials
introduced at hearings conducted pursuant to these Rules of Practice.
Thus, both rules address material that would ordinarily be placed in a
public file but is treated as confidential pending the determination of
the request for confidentiality. The Commission's Freedom of
Information Act regulations, 17 CFR 200.83, apply to requests for
confidential treatment of information, such as testimony in an
enforcement investigation, that is not ordinarily placed in a public
file at the time received by the Commission but which may be made
public pursuant to a request under the Freedom of Information Act
(``FOIA''). Requests to keep materials confidential under FOIA are not
evaluated until the Commission [[Page 32755]] receives a request for
access to the information.
An application for confidential treatment may be heard by the
Commission or referred to a hearing officer. Authority to act on
applications for confidential treatment has been delegated to the
staff, see, e.g., Delegation to the Director of the Division of
Corporation Finance, 17 CFR 200.30-1(a)(3). In practice, applications
are determined by delegated authority. Review of delegated
decisionmaking may be sought pursuant to Rule 430.
Rule 191. Adjudications Not Required To Be Determined on the Record
After Notice and Opportunity for Hearing
(a) Scope of the Rule. This rule applies to every case of
adjudication, as defined in 5 U.S.C. 551, pursuant to any statute which
the Commission administers, where adjudication is not required to be
determined on the record after notice and opportunity for hearing and
which the Commission has not chosen to determine on the record after
notice and opportunity for hearing.
(b) Procedure. In every case of adjudication under paragraph (a) of
this rule, the Commission shall (1) give prompt notice of any adverse
action or final disposition to any person who has requested the
Commission to make (or not to make) any such adjudication, and (2)
furnish to any such person a written statement of reasons therefor.
Additional procedures may be specified in rules relating to specific
types of such adjudications. Where any such rule provides for the
publication of a Commission order, notice of the action or disposition
shall be deemed to be given by such publication.
(c) Contents of the Record. If the Commission provides notice and
opportunity for the submission of written comments by parties to the
adjudication or, as the case may be, by other interested persons,
written comments received on or before the closing date for comments,
unless accorded confidential treatment pursuant to statute or rule of
the Commission, become a part of the record of the adjudication. The
Commission, in its discretion, may accept and include in the record
written comments filed with the Commission after the closing date.
Comment: Section 23(c) of the Exchange Act, 15 U.S.C. 78w(c)
requires the Commission to prescribe the procedures applicable to
Exchange Act adjudications ``not required to be determined on the
record after notice and opportunity for hearing.'' Rule 191 contains
these required procedures and also applies them to adjudications
arising under all statutes administered by the Commission.
The Administrative Procedure Act recognizes a distinction between
an ``adjudication required by statute to be determined on the record
after opportunity for an agency hearing,'' See 5 U.S.C. 554(a), and
other types of adjudications. The former are often referred to as
``formal'' or ``on the record'' adjudications. The latter, such as
proceedings in which a hearing is required to be conducted after
``notice and opportunity for hearing,'' but not specifically ``on the
record,'' are often referred to as ``informal'' adjudications. Various
Administrative Procedure Act requirements, particularly with respect to
hearing procedures, apply only to an ``adjudication required by statute
to be determined on the record after opportunity for an agency hearing
***'' See, e.g., 5 U.S.C. 556(a), 557(a) (requirements of those
sections apply only to an adjudication ``on the record'' as set forth
in Section 554(a)); cf. 5 U.S.C. 555 (requirements not limited to
proceedings ``on the record'' as set forth in Section 554(a)).
Where an ``on the record'' hearing is not mandated by statute, this
rule establishes certain basic requirements for the proceedings. The
Commission, as a matter of discretion, can order a ``formal'' hearing
or provide other alternative procedures in addition to the minimum
requirements of Rule 191.
Rule 192. Rulemaking: Issuance, Amendment and Repeal of Rules of
General Application
(a) By Petition. Any person desiring the issuance, amendment or
repeal of a rule of general application may file a petition therefor
with the Secretary. Such petition shall include a statement setting
forth the text or the substance of any proposed rule or amendment
desired or specifying the rule the repeal of which is desired, and
stating the nature of his or her interest and his or her reasons for
seeking the issuance, amendment or repeal of the rule. The Secretary
shall acknowledge, in writing, receipt of the petition and refer it to
the appropriate division or office for consideration and
recommendation. Such recommendations shall be transmitted with the
petition to the Commission for such action as the Commission deems
appropriate. The Secretary shall notify the petitioner of the action
taken by the Commission.
(b) Notice of Proposed Issuance, Amendment or Repeal of Rules.
Except where the Commission finds that notice and public procedure are
impracticable, unnecessary, or contrary to the public interest,
whenever the Commission proposes to issue, amend, or repeal any rule or
regulation of general application other than an interpretive rule;
general statement of policy; or rule of agency organization, procedure,
or practice; or any matter relating to agency management or personnel
or to public property, loans, grants, benefits, or contracts, there
shall first be published in the Federal Register a notice of the
proposed action. Such notice shall include:
(1) a statement of the time, place, and nature of the rulemaking
proceeding, with particular reference to the manner in which interested
persons shall be afforded the opportunity to participate in such
proceeding;
(2) reference to the authority under which the rule is proposed;
and
(3) the terms or substance of the proposed rule or a description of
the subjects and issues involved.
Rule 193. Applications by Barred Individuals for Consent to Associate
Preliminary Note
This rule governs applications to the Commission by certain
persons, barred by Commission order from association with brokers,
dealers, municipal securities dealers, government securities brokers,
government securities dealers, investment advisers, investment
companies or transfer agents, for consent to become so associated.
Applications made pursuant to this rule must show that the proposed
association would be consistent with the public interest. In addition
to the information specifically required by the rule, applications
should be supplemented, where appropriate, by written statements of
individuals (other than the applicant) who are competent to attest to
the applicant's character, employment performance, and other relevant
information. Intentional misstatements or omissions of fact may
constitute criminal violations of 18 U.S.C. 1001 et seq. and other
provisions of law.
The nature of the supervision that an applicant will receive or
exercise as an associated person with a registered entity is an
important matter bearing upon the public interest. In meeting the
burden of showing that the proposed association is consistent with the
public interest, the application and supporting documentation must
demonstrate that the proposed supervision, procedures, or terms and
conditions of employment are reasonably designed to prevent a
recurrence of the conduct that led to imposition of the bar. As an
associated person, the applicant will be limited to association in a
specified capacity with [[Page 32756]] a particular registered entity
and may also be subject to specific terms and conditions.
Normally, the applicant's burden of demonstrating that the proposed
association is consistent with the public interest will be difficult to
meet where the applicant is to be supervised by, or is to supervise,
another barred individual. In addition, where an applicant wishes to
become the sole proprietor of a registered entity and thus is seeking
Commission consent notwithstanding an absence of supervision, the
applicant's burden will be difficult to meet.
In addition to the factors set forth in paragraph (d) of this rule,
the Commission will consider the nature of the findings that resulted
in the bar when making its determination as to whether the proposed
association is consistent with the public interest. In this regard,
attention is directed to Rule 5(e) of the Commission's Rules on
Informal and Other Procedures, 17 CFR 202.5(e). Among other things,
Rule 5(e) sets forth the Commission's policy ``not to permit a ***
respondent [in an administrative proceeding] to consent to *** [an]
order that imposes a sanction while denying the allegations in the ***
order for proceedings.'' Consistent with the rationale underlying that
policy, and in order to avoid the appearance that an application made
pursuant to this rule was granted on the basis of such denial, the
Commission will not consider any application that attempts to reargue
or collaterally attack the findings that resulted in the Commission's
bar order.
(a) Scope of Rule. Applications for Commission consent to
associate, or to change the terms and conditions of association, with a
registered broker, dealer, municipal securities dealer, government
securities broker, government securities dealer, investment adviser,
investment company or transfer agent may be made pursuant to this rule
where a Commission order bars the individual from association with a
registered entity and:
(1) such barred individual seeks to become associated with an
entity that is not a member of a self-regulatory organization; or
(2) the order contains a proviso that application may be made to
the Commission after a specified period of time.
(b) Form of Application. Each application shall be supported by an
affidavit, manually signed by the applicant, that addresses the factors
set forth in paragraph (d) of this rule. One original and three copies
of the application shall be filed pursuant to Rules 151, 152 and 153.
Each application shall include as exhibits:
(1) a copy of the Commission order imposing the bar;
(2) an undertaking by the applicant to notify immediately the
Commission in writing if any information submitted in support of the
application becomes materially false or misleading while the
application is pending;
(3) the following forms, as appropriate:
(i) a copy of a completed Form U-4, where the applicant's proposed
association is with a broker-dealer or municipal securities dealer;
(ii) a copy of a completed Form MSD-4, where the applicant's
proposed association is with a bank municipal securities dealer;
(iii) the information required by Form ADV, 17 CFR 279.1, with
respect to the applicant, where the applicant's proposed association is
with an investment adviser;
(iv) the information required by Form TA-1, 17 CFR 249b.100, with
respect to the applicant, where the applicant's proposed association is
with a transfer agent; and
(4) a written statement by the proposed employer that describes:
(i) the terms and conditions of employment and supervision to be
exercised over such applicant and, where applicable, by such applicant;
(ii) the qualifications, experience, and disciplinary records of
the proposed supervisor(s) of the applicant;
(iii) the compliance and disciplinary history, during the two years
preceding the filing of the application, of the office in which the
applicant will be employed; and
(iv) the names of any other associated persons in the same office
who have previously been barred by the Commission, and whether they are
to be supervised by the applicant.
(c) Required Showing. The applicant shall make a showing
satisfactory to the Commission that the proposed association would be
consistent with the public interest.
(d) Factors to be Addressed. The affidavit required by paragraph
(b) of this rule shall address each of the following:
(1) the time period since the imposition of the bar;
(2) any restitution or similar action taken by the applicant to
recompense any person injured by the misconduct that resulted in the
bar;
(3) the applicant's compliance with the order imposing the bar;
(4) the applicant's employment during the period subsequent to
imposition of the bar;
(5) the capacity or position in which the applicant proposes to be
associated;
(6) the manner and extent of supervision to be exercised over such
applicant and, where applicable, by such applicant;
(7) any relevant courses, seminars, examinations or other actions
completed by the applicant subsequent to imposition of the bar to
prepare for his or her return to the securities business; and
(8) any other information material to the application.
(e) Notification to Applicant and Written Statement. In the event
an adverse recommendation is proposed by the staff with respect to an
application made pursuant to this rule, the applicant shall be so
advised and provided with a written statement of the reasons for such
recommendation. The applicant shall then have 30 days to submit a
written statement in response.
(f) Concurrent Applications. The Commission will not consider any
application submitted pursuant to this rule if any other application
for consent to associate concerning the same applicant is pending
before any self-regulatory organization.
Initiation of Proceedings and Prehearing Rules
Rule 200. Initiation of Proceedings.
(a) Order Instituting Proceedings: Notice and Opportunity For
Hearing.
(1) Generally. Whenever an order instituting proceedings is issued
by the Commission, appropriate notice thereof shall be given to each
party to the proceeding by the Secretary or another duly designated
officer of the Commission. Each party shall be given notice of any
hearing within a time reasonable in light of the circumstances, in
advance of the hearing; provided, however, no prior notice need be
given to a respondent if the Commission has authorized the Division of
Enforcement to seek a temporary sanction ex parte.
(2) Stop Order Proceedings: Additional Persons Entitled to Notice.
Any notice of a proceeding relating to the issuance of a stop order
suspending the effectiveness of a registration statement pursuant to
Section 8(d) of the Securities Act of 1933, 15 U.S.C. 77h(d), shall be
sent to or served on the issuer; or, in the case of a foreign
government or political subdivision thereof, sent to or served on the
underwriter; or, in the case of a foreign or territorial person, sent
to or served on its duly authorized representative in the United States
named in the registration statement, properly directed in the case of
telegraphic notice to the address [[Page 32757]] given in such
statement. In addition, if such proceeding is commenced within 90 days
after the registration statement has become effective, notice of the
proceeding shall be given to the agent for service named on the facing
sheet of the registration statement and to each other person designated
on the facing sheet of the registration statement as a person to whom
copies of communications to such agent are to be sent.
(b) Content of Order. The order instituting proceedings shall:
(1) state the nature of any hearing;
(2) state the legal authority and jurisdiction under which the
hearing is to be held;
(3) contain a short and plain statement of the matters of fact and
law to be considered and determined, unless the order directs an answer
pursuant to Rule 220 in which case the order shall set forth the
factual and legal basis alleged therefor in such detail as will permit
a specific response thereto; and
(4) state the nature of any relief or action sought or taken.
(c) Time and Place of Hearing. The time and place for any hearing
shall be fixed with due regard for the public interest and the
convenience and necessity of the parties, other participants, or their
representatives.
(d) Amendment to Order Instituting Proceedings.
(1) By the Commission. Upon motion by a party, the Commission may,
at any time, amend an order instituting proceedings to include new
matters of fact or law.
(2) By the Hearing Officer. Upon motion by a party, the hearing
officer may, at any time prior to the filing of an initial decision or,
if no initial decision is to be filed, prior to the time fixed for the
filing of final briefs with the Commission, amend an order instituting
proceedings to include new matters of fact or law that are within the
scope of the original order instituting proceedings.
(e) Publication of Notice of Public Hearings. Unless otherwise
ordered by the Commission, notice of any public hearing shall be given
general circulation by release to the public, by publication in the SEC
News Digest and, where directed, by publication in the Federal
Register.
Comment (a): Paragraph (a) requires that appropriate notice of an
order instituting proceedings be given. Ordinarily, notice is
accomplished through service of the order pursuant to the procedures
set forth in Rule 141. Where emergency or expedited action is sought,
however, notice of a hearing may be given prior to formal service of
the order instituting proceedings. See Rules 511(a) and 521(a). Notice
may be delayed if the Commission determines to hear a matter ex parte.
See Rule 513.
Comment (c): The provisions of this paragraph are based on Section
554(b) of the Administrative Procedure Act, 5 U.S.C. Sec. 554(b). It is
the policy of the Commission that in a proceeding under the Public
Utility Holding Company Act, the Investment Company Act (except Section
9(b)), Section 206A of the Investment Advisers Act, Section 8 of the
Securities Act, or Sections 305 and 307 of the Trust Indenture Act or
any proceeding in which a temporary sanction is sought, the hearing
should normally be held at the Commission's Headquarters.
Comment (d): The Commission has stated that amendment of orders
instituting proceeding should be freely granted, subject only to the
consideration that other parties should not be surprised, nor their
rights prejudiced. Carl L. Shipley, 45 S.E.C. 589, 595 (1974). Where
amendments to an order instituting proceedings are intended to correct
an error, to conform the order to the evidence or to take into account
subsequent developments which should be considered in disposing of the
proceeding, and the amendments are within the scope of the original
order, either a hearing officer or the Commission has authority to
amend the order. See, e.g., Don A. Long, Admin. Proc. Rulings Release
No. 233 (Mar. 31, 1980), 52 SEC Docket 497 (Aug. 18, 1992) (hearing
officer's grant of motion to conform pleading to evidence adduced at
hearing). Since, however, the Commission has not delegated its
authority to authorize orders instituting proceedings, hearing officers
do not have authority to initiate new charges or to expand the scope of
matters set down for hearing beyond the framework of the original order
instituting proceedings. See Securities Act Release No. 5309 (Sept. 27,
1972).
Revision Comment (c): Comment was requested as to the Commission's
practice with respect to holding hearings in multiple cities, in
locations outside Washington, or in locations other than those where
the Commission maintains Regional Offices. Commenters supported the
current practice. The Commission has determined not to change the
substance of the rule. The statement of policy in former Rule 6(b) that
certain specified hearings would normally be held in Washington, D.C.
has been moved into a comment to Rule 200. The policy statement
contained in the comment has been modified to reflect that the hearing
location should normally be at the Commission's Headquarters, and that
hearings as to whether a temporary sanction will be imposed are covered
by the policy.
Rule 201. Consolidation of Proceedings
By order of the Commission or a hearing officer, proceedings
involving a common question of law or fact may be consolidated for
hearing of any or all the matters at issue in such proceedings. The
Commission or the hearing officer may make such orders concerning the
conduct of such proceedings as it deems appropriate to avoid
unnecessary cost or delay. Consolidation shall not prejudice any rights
under these Rules of Practice and shall not affect the right of any
party to raise issues that could have been raised if consolidation had
not occurred. For purposes of this rule, no distinction is made between
joinder and consolidation of proceedings.
Comment: Rule 201 is modeled after Model Adjudication Rule 201,
Administrative Conference of the United States (Dec. 1993).
Revision Comment: Former Rule 10 provided that proceedings could be
``joined'' and ``consolidated.'' Rule 201 does not draw a distinction
between joinder and consolidation.
One commenter suggested that the Commission should refrain from
making decisions on whether to consolidate proceedings in order to
avoid the appearance that in deciding the consolidation issue the
Commission had reached an opinion as to the merits of a case. Just as
judges make preliminary decisions regarding joinder, consolidation,
evidentiary motions and other matters without losing either their
objectivity or the appearance of objectivity, so the Commission or a
hearing officer must decide matters preliminary to a final decision.
There is neither a loss of objectivity nor an appearance of less
objectivity from doing so. Although the Commission does not agree with
the rationale provided by the commenter, the rule as adopted permits
the decision on consolidation to be made by a hearing officer because
it may be more efficient to have a hearing officer issue a decision on
consolidation.
The commenter also suggested that consolidation should be permitted
only if consolidation tends to avoid unnecessary cost or delay as under
former Rule 10. Rule 201 as revised includes a standard substantially
similar to that of former Rule 10.
Rule 202. Specification of Procedures by Parties in Certain Proceedings
(a) Motion to Specify Procedures. In any proceeding other than an
enforcement or disciplinary proceeding [[Page 32758]] or a proceeding
to review a determination by a self-regulatory organization pursuant to
Rules 420 and 421, a party may, at any time up to 20 days prior to the
start of a hearing, make a motion to specify the procedures necessary
or appropriate for the proceeding, with particular reference to:
(1) whether there should be an initial decision by a hearing
officer;
(2) whether any interested division of the Commission may assist in
the preparation of the Commission's decision; and
(3) whether there should be a 30-day waiting period between the
issuance of the Commission's order and the date it is to become
effective.
(b) Objections; Effect of Failure to Object. Any other party may
object to the procedures so specified, and such party may specify such
additional procedures as it considers necessary or appropriate. In the
absence of such objection or such specification of additional
procedures, such other party may be deemed to have waived objection to
the specified procedures.
(c) Approval Required. Any proposal pursuant to paragraph (a) of
this rule, even if not objected to by any party, shall be subject to
the written approval of the hearing officer.
(d) Procedure Upon Agreement to Waive an Initial Decision. If an
initial decision is waived pursuant to paragraph (a) of this rule, the
hearing officer shall notify the Secretary and, unless the Commission
directs otherwise within 14 days, no initial decision shall be issued.
Comment: Allowing for the specification of procedures by the
parties under the supervision of a hearing officer has been effective
in promoting efficiency in certain proceedings involving regulatory
matters. By contrast, in an enforcement or disciplinary proceeding in
which the government is seeking to impose sanctions on particular
persons, or on review of a determination by a self-regulatory
organization, it is not in the public interest to subject basic
procedures to negotiation by the parties. Accordingly, Rule 202
excludes enforcement, disciplinary, and self-regulatory organization
review proceedings from its scope.
Consistent with the operation of Rule 221, the Rule requires
motions to specify procedures to be made at least 20 days prior to a
hearing. As a result, any such motions may be timely answered and
resolved prior to the final prehearing conference.
Rule 210. Parties, Limited Participants and Amici Curiae
(a) Parties in an Enforcement or Disciplinary Proceeding or a
Proceeding to Review a Self-Regulatory Organization Determination.
(1) Generally. No person shall be granted leave to become a party
or a non-party participant on a limited basis in an enforcement or
disciplinary proceeding or a proceeding to review a determination by a
self-regulatory organization pursuant to Rules 420 and 421.
(2) Disgorgement Proceedings. In an enforcement proceeding, a
person may state his or her views with respect to a proposed plan of
disgorgement or file a proof of claim pursuant to Rule 612.
(b) Intervention as a Party.
(1) Generally. In any proceeding, other than an enforcement
proceeding, a disciplinary proceeding or a proceeding to review a self-
regulatory organization determination, any person may seek leave to
intervene as a party by filing a motion setting forth the person's
interest in the proceeding. No person, however, shall be admitted as a
party to a proceeding by intervention unless it is determined that
leave to participate pursuant to paragraph (c) of this rule would be
inadequate for the protection of his or her interests.
(i) In a proceeding under the Public Utility Holding Company Act of
1935, any representative of interested consumers or security holders,
or any other person whose participation in the proceeding may be in the
public interest or for the protection of investors or consumers, may be
admitted as a party upon the filing of a written motion setting forth
the person's interest in the proceeding.
(ii) In a proceeding under the Investment Company Act of 1940, any
representative of interested security holders, or any other person
whose participation in the proceeding may be in the public interest or
for the protection of investors, may be admitted as a party upon the
filing of a written motion setting forth the person's interest in the
proceeding.
(2) Intervention as of Right.
(i) In proceedings under the Public Utility Holding Company Act of
1935, any interested representative, agency, authority or
instrumentality of the United States or any interested State, State
commission, municipality or other political subdivision of a state
shall be admitted as a party to any proceeding upon the filing of a
written motion requesting leave to be admitted.
(ii) In proceedings under the Investment Company Act of 1940, any
interested State or State agency shall be admitted as a party to any
proceeding upon the filing of a written motion requesting leave to be
admitted.
(c) Leave to Participate On a Limited Basis. In any proceeding,
other than an enforcement proceeding, a disciplinary proceeding or a
proceeding to review a self-regulatory organization determination, any
person may seek leave to participate on a limited basis as a non-party
participant as to any matter affecting the person's interests.
(1) Procedure. Motions for leave to participate shall be in
writing, shall set forth the nature and extent of the movant's interest
in the proceeding, and, except where good cause for late filing is
shown, shall be filed not later than 20 days prior to the date fixed
for the commencement of the hearing. Leave to participate pursuant to
this paragraph (c) may include such rights of a party as the hearing
officer may deem appropriate. Persons granted leave to participate
shall be served in accordance with Rule 150; provided, however, that a
party to the proceeding may move that the extent of notice of filings
or other papers to be provided to persons granted leave to participate
be limited, or may move that the persons granted leave to participate
bear the cost of being provided copies of any or all filings or other
papers. Persons granted leave to participate shall be bound, except as
may be otherwise determined by the hearing officer, by any stipulation
between the parties to the proceeding with respect to procedure,
including submission of evidence, substitution of exhibits, corrections
of the record, the time within which briefs or exceptions may be filed
or proposed findings and conclusions may be submitted, the filing of
initial decisions, the procedure to be followed in the preparation of
decisions and the effective date of the Commission's order in the case.
Where the filing of briefs or exceptions or the submission of proposed
findings and conclusions are waived by the parties to the proceedings,
a person granted leave to participate pursuant to this paragraph (c)
shall not be permitted to file a brief or exceptions or submit proposed
findings and conclusions except by leave of the Commission or of the
hearing officer.
(2) Certain Persons Entitled to Leave to Participate. The hearing
officer is directed to grant leave to participate under this paragraph
(c) to any person to whom it is proposed to issue any security in
exchange for one or more bona fide outstanding securities, claims or
property interests, or partly in such exchange and partly for cash,
where the Commission is authorized to approve [[Page 32759]] the terms
and conditions of such issuance and exchange after a hearing upon the
fairness of such terms and conditions.
(d) Amicus Participation.
(1) Availability. An amicus brief may be filed only if:
(i) a motion for leave to file the brief has been granted;
(ii) the brief is accompanied by written consent of all parties;
(iii) the brief is filed at the request of the Commission or the
hearing officer; or
(iv) the brief is presented by the United States or an officer or
agency thereof, or by a State, Territory or Commonwealth.
(2) Procedure. An amicus brief may be filed conditionally with the
motion for leave. The motion for leave shall identify the interest of
the movant and shall state the reasons why a brief of an amicus curiae
is desirable. Except as all parties otherwise consent, any amicus
curiae shall file its brief within the time allowed the party whose
position the amicus will support, unless the Commission or hearing
officer, for cause shown, grants leave for a later filing. In the event
that a later filing is allowed, the order granting leave to file shall
specify when an opposing party may reply to the brief. A motion of an
amicus curiae to participate in oral argument will be granted only for
extraordinary reasons.
(e) Permission to State Views. Any person may make a motion seeking
leave to file a memorandum or make an oral statement of his or her
views. Any such communication may be included in the record; provided,
however, that unless offered and admitted as evidence of the truth of
the statements therein made, any assertions of fact submitted pursuant
to the provisions of this paragraph (e) will be considered only to the
extent that the statements therein made are otherwise supported by the
record.
(f) Modification of Participation Provisions. The Commission or the
hearing officer may, by order, modify the provisions of this rule which
would otherwise be applicable, and may impose such terms and conditions
on the participation of any person in any proceeding as it may deem
necessary or appropriate in the public interest.
Comment (b): Paragraph (b) reflects requirements of Section 19 of
the Public Utility Holding Company Act of 1935, 15 U.S.C. Sec. 79s, and
Section 40(c) of the Investment Company Act of 1940, 15 U.S.C.
Sec. 80a-39(c).
Comment (c): Through leave to participate on a limited basis, this
rule provides an interested person the opportunity to express concerns
relating to any matter affecting the person's interests. Unlike the
consent to submission by an amicus, written consent of all parties is
not sufficient to obtain status as a limited participant. Approval from
the hearing officer is required.
By their terms, certain rules within the Rules of Practice apply to
the rights and responsibilities of ``parties.'' When non-party
participants are admitted, the order granting leave to participate may
specify the extent to which they are to have the obligations or rights
of a party under the Rules. Depending on the extent of the
participant's interest and the facts of each case, the degree of
participation will vary. See, e.g., In the Matter of College Retirement
Equities Fund, Admin. Proc. Rulings Rele
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