SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 40238 / July, 21, 1998 Admin. Proc. File No. 3-9480 ------------------------------------------------- In the Matter of the Application of | | FRANK R. RUBBA | 14 Willow Way | Seabright, NJ 07760 | | For Review of Action Taken by the | | NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.| ------------------------------------------------- OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION -- REVIEW OF ASSOCIATION ACTION DENYING RE-ENTRY TO SECURITIES INDUSTRY WITHOUT REQUALIFICATION BY EXAMINATION AFTER SUMMARY REVOCATION OF REGISTRATION Registered securities association denied the request of a former registered representative, whose registration had been revoked for failure to pay an $8,000 fine, to re-enter the securities industry upon full payment of the fine, without requalifying for registration by examination. Held, since association's rules do not require requalification by examination under these circumstances, association's action is set aside. APPEARANCES: Frank R. Rubba, pro se. Alden S. Adkins and Norman Sue, Jr., for NASD Regulation, Inc. Appeal Filed: September 18, 1997 Briefing Completed: January 30, 1998 I. Frank R. Rubba, a former registered representative of Americorp Securities Inc., a member of the National Association of Securities Dealers, Inc. ("NASD"), seeks review of NASD action. The NASD had previously summarily revoked Rubba's registration pursuant to NASD Complaints, Investigations and Sanctions Rule 8320 for Rubba's failure to pay an $8,000 fine. [/] Rubba seeks review of the NASD's subsequent denial of Rubba's request to re- enter the securities industry without requalifying by examination. We base our findings on an independent review of the record. II. On April 23, 1996, Rubba signed a letter of Acceptance, Waiver and Consent ("AWC") in which he consented, for the purposes of the AWC, to a finding that he made discretionary trades without prior written authorization in a customer account. Rubba also agreed to accept a censure and to pay an $8,000 fine. The NASD approved the AWC on June 24, 1996. Rubba thereafter applied to the NASD for a payment plan to pay the fine in installments. In October 1996, Rubba called the NASD to check on the status of his request, and was told that he would "soon" receive a response by mail. The NASD subsequently responded to Rubba's request for a payment plan, by certified mail, to the address listed for Rubba on his Uniform Application for Securities Industry Registration or Transfer ("Form U-4"). However, because the Form U-4 did not reflect Rubba's then correct address, the mail was returned to the NASD as undeliverable. On January 7, 1997, the NASD revoked Rubba's registration for Rubba's failure to pay the $8,000 fine. [/] Sometime after January 7, 1997, Rubba discovered that his registration had been revoked. During ensuing discussions with the NASD, Rubba asserted that he had not paid the fine because he had been waiting for a response to his request for an installment plan. Rubba further blamed Americorp, his employer until November 2, 1996, for the misdirected mailing from the NASD. Rubba contended that the outdated information on his Form U-4 resulted from Americorp's failure to update the Form U-4 with Rubba's correct home address. On April 2, 1997, the NASD received a written request from Rubba seeking "reinstatement" of his Series 7 license upon payment of the fine. Rubba stated in his request, "[m]y problem is not paying the fine, my problem is a retest of the series 7 [examination] . . . ." In a letter dated September 8, 1997, the NASD denied Rubba's request to re-enter the securities industry without requalifying by examination. The $8,000 fine apparently remains unpaid. III. A. The NASD raises the threshold issue of whether we have jurisdiction to review this matter. Section 19(d) of the Securities Exchange Act of 1934 ("Exchange Act") delineates the scope of our authority to review actions of self-regulatory organizations. We may review any action of the NASD that imposes a final disciplinary action on a person associated with a member; denies membership to any applicant; prohibits or limits access to services offered by the organization or any of its members to any person; or bars any person from associating with a member. [/] We agree with the NASD that its action was not a final disciplinary action, denial of membership, nor a prohibition or limitation of access to services. However, the NASD further argues that it did not bar Rubba from associating with a member. It asserts that the requalification requirement was triggered by the "administrative revocation" of Rubba's registration and not imposed directly through an affirmative act of the NASD. The association contends that it merely maintained the "status quo ante" by denying Rubba's request for "extraordinary relief" -- the "waiver" of an NASD rule. We disagree. The NASD has effectively barred Rubba from applying for association with any NASD member until he satisfies the requalification requirement. In Exchange Services, Inc., [/] we reviewed the NASD's denial of an applicant's request for examination waivers on behalf of its order takers under Section 19(f) of the Exchange Act. We concluded that the NASD's action there effectively barred the order takers from associating with the applicant until they qualified for registration by examination. As in Exchange Services, the NASD's denial had the effect of barring Rubba from associating with any NASD member until his requalification for registration by examination. Under the circumstances presented here, as discussed in section IV below, we conclude that our review of this matter is authorized by Section 19(d) of the Exchange Act. [/] B. We note that Rubba has apparently not yet paid his fine, although he committed to do so. As Rubba's application raises an issue of first impression concerning Rule 8320 summary revocations, we have accepted this matter for review. In other circumstances, we may not entertain applications for review of NASD action that effectively denies association unless the applicant has satisfied all other conditions necessary for that association. IV. Section 19(f) of the Exchange Act requires the Commission to set aside any action of the NASD that bars a person from associating with a member if, among other considerations, the Commission does not find that the bar is in accordance with NASD rules. [/] We conclude that Rule 1031(c) does not require Rubba to requalify. Rule 1031(c) provides, in relevant part, that "[a]ny person whose registration has been revoked pursuant to Rule 8310 . . . shall be required to pass a Qualification Examination for Representatives appropriate to the category of registration . . . ." [/] The NASD, however, summarily revoked Rubba's registration pursuant to Sanctions Rule 8320 for his failure to pay an $8,000 fine. Since the requalification requirement in Rule 1031(c) does not refer to revocation under Rule 8320, the authority for the revocation of Rubba's registration, we are constrained to conclude that the NASD did not act in accordance with its rules in denying Rubba's request to re-enter the securities industry without requalifying for registration. While the omission of a reference to Rule 8320 in Rule 1031(c) appears to have been an oversight, we must construe the NASD's rules as written. V. Rubba states that he failed promptly to pay the fine because he was waiting for the NASD to act on his request for an installment plan. Rubba contends that he missed the NASD's mailing solely because Americorp failed to update his Form U-4. We wish to reiterate that the responsibility for maintaining the accuracy of the Form U-4, by updating the information in the filing, as necessary, lies with the registered representative. [/] Rubba should have ensured that his Form U-4 contained the correct home address. VI. We set aside the NASD's determination, on the basis of Rule 1031(c), that Rubba must requalify for registration by examination. Rubba must, of course, pay the $8,000 fine in full before seeking to re-enter the securities industry. An appropriate order will issue. [/] By the Commission (Chairman LEVITT and Commissioners JOHNSON, HUNT, and UNGER); Commissioner CAREY not participating. Jonathan G. Katz Secretary **FOOTNOTES** [/]:/Rule 8320 provides that the NASD may, on seven days written notice, "summarily revoke the registration of a person associated with a member if such person fails to pay promptly a fine or other monetary sanction imposed pursuant to Rule 8310 . . . ." Complaints, Investigations and Sanctions Rule 8320(c), NASD Manual (CCH), p. 7274. [/]:/The record does not indicate whether the NASD sent the seven-day notice required by Rule 8320, before a summary revocation may occur, to the same address. However, Rubba does not contend that the NASD failed to provide the requisite notice of its action, nor does he challenge the revocation of his registration on any other ground. The only matter at issue here is the requalification requirement. [/]:/15 U.S.C. 78s(d)(2) (1998). [/]: [/]:/48 S.E.C. 210 (1985). [/]:/We take no position on the general question of whether the determinations of self-regulatory organizations relating to requests for a waiver or an exemption from an NASD rule are reviewable. [/]:/15 U.S.C. 78s(f) (1998). [/]:/Membership and Registration Rule 1031(c), NASD Manual (CCH), p. 3201. [/]:/Richard J. Lanigan, Securities Exchange Act Rel. No. 36028 (July 27, 1995), 59 S.E.C. Docket 2693, 2697 ("Registered representatives are required to sign and file with the NASD a Form U-4 which is to be 'kept current at all times.'"); see also NASD Notice to Members 97-31 (May 1997) ("NASD Regulation reminds registered persons that they must notify the NASD of any changes to their current addresses and that they may face disciplinary action for failing to respond to requests for information that are mailed to the last known address reflected in the NASD's records."). [/]:/All of the contentions advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed herein. UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-9480 ------------------------------------------------- In the Matter of the Application of | | FRANK R. RUBBA | 14 Willow Way | Seabright, NJ 07760 | | For Review of Action Taken by the | | NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.| ------------------------------------------------- ORDER SETTING ASIDE ACTION OF REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that Frank R. Rubba's application to set aside the denial by the National Association of Securities Dealers, Inc. of Rubba's request to re-enter the securities industry without requalifying by examination for registration, after his registration was summarily revoked due to his failure to pay a fine be, and it hereby is, granted. By the Commission. Jonathan G. Katz Secretary