Mary L. Schapiro
March 21, 2003
VIA E-MAIL - firstname.lastname@example.org
Re: File No. S7-04-03
Dear Mr. Katz:
NASD staff appreciates the opportunity to submit comments related to the Securities and Exchange Commission's ("Commission") proposal to amend the Commission's Rules of Practice as set forth in Release No. 34-47355 (the "Release") dated February 12, 2003. NASD staff supports the Release and recommends that it be adopted.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business-from registering and educating broker/dealers and their associated persons to examining securities firms and enforcing both NASD rules and the federal securities laws.
NASD's disciplinary program includes trial-level proceedings conducted before professional Hearing Officers and appeals that are handled by the National Adjudicatory Council, which issues final disciplinary actions on behalf of NASD, subject to discretionary review by NASD's Board of Governors. The National Adjudicatory Council's decisions are appealable to the Commission pursuant to Section 19 of the Securities Exchange Act of 1934 and the Commission's Rules of Practice. NASD is frequently the appellee in appeals filed with the Commission. Over the last five years-from the beginning of 1998 to the end of 2002-NASD was the appellee in 85 cases that were appealed to the Commission.1
The Commission's proposed amendments to the Rules of Practice would establish a three, six or nine month deadline for Administrative Law Judges ("ALJs") to issue decisions after an administrative proceeding has been filed. At the same time, the proposed amendments provide some flexibility for extensions of time when a strong showing of substantial prejudice is made. NASD staff supports the proposed amendments, which should promote the timely adjudication and disposition of proceedings conducted by the Commission's ALJs.
The Commission's Division of Enforcement occasionally files administrative proceedings against NASD member firms and their associated persons. In light of NASD's commitment to investor protection and market integrity and its obligation to regulate members and associated persons, NASD staff believes that it is important that ALJs resolve such proceedings expeditiously. When a respondent in a Commission administrative proceeding is found not to have committed any violations, a prompt finding in this regard serves the interests of justice. Similarly, when an ALJ finds that a respondent has committed a serious violation and imposes a bar on an associated person or expels a firm, the public interest is served when such a decision is issued without undue delay.
NASD staff believes that the proposed deadlines contained in the Release are an appropriate mechanism to focus the parties and ALJs on achieving timely resolution of cases. In a similar vein, NASD's Board recently approved a proposed rule change to consolidate, clarify and streamline certain of our existing procedural rules that have an expedited proceeding component. Similar to the approach proposed in the Release, NASD's proposed rule change will set forth time requirements that adjudicators and parties must follow in resolving expedited actions.
The amendments proposed in the Release also will reduce the Commission's guidelines for issuance of Commission opinions in self-regulatory organization and ALJ appeals from eleven to seven months. NASD staff supports the Commission's goal of issuing appellate opinions promptly and applauds the Commission for acknowledging responsibility for much of the time that passes during an appeal. Changes in the Commission's internal processes are therefore key to reducing the duration of appellate review by the Commission.
NASD staff appreciates the opportunity to provide its observations and comments on the Commission's proposed amendments. Please do not hesitate to contact me with any questions concerning this letter.
cc: Hon. William H. Donaldson, Chairman