limitations on hearsay, including heightened standards for admitting
hearsay; notice requirements; and provisions allowing additional
depositions to counter proposed hearsay.\136\
---------------------------------------------------------------------------

    \133\ Gibson; CCMC.
    \134\ Gibson; CCMC.
    \135\ Gibson.
    \136\ CCMC.
---------------------------------------------------------------------------

    A number of the commenters argued that the proposed standards
provide insufficient guidance and are prone to unfair application.\137\
One commenter argued that hearing officers currently ``err on the side
of admitting hearsay'' and apply the reliability standard
inconsistently.\138\ Commenters further objected that the proposed
standards will ``fail to offer any meaningful protection'' or improve
current practices.\139\ Commenters claimed that the absence of more
bright-line guidance or procedural hurdles to introducing hearsay
creates an undue burden on hearing officers and parties.\140\
---------------------------------------------------------------------------

    \137\ FSR; Brune.
    \138\ Gibson.
    \139\ Gibson; Grundfest.
    \140\ Brune; FSR.
---------------------------------------------------------------------------

3. Final Rule
    We are adopting the amendments to Rule 320 as proposed. As the
proposing release explained, the standard for excluding unreliable
evidence is consistent with the APA. The admission of hearsay evidence
that satisfies a threshold showing of relevance, materiality, and
reliability also is consistent with the APA, and the ``indicia of
reliability'' standard for admitting such evidence is grounded in well-
established interpretations of administrative law.\141\
---------------------------------------------------------------------------

    \141\ See 5 U.S.C. 556(d) (stating that any oral or documentary
evidence may be received, but the agency as a matter of policy shall
provide for the exclusion of irrelevant, immaterial or unduly
repetitious evidence); see, e.g., J.A.M. Builders, Inc. v. Herman,
233 F.3d 1350, 1354 (11th Cir. 2000) (hearsay admissible in
administrative proceedings if ``reliable and credible''); Calhoun v.
Bailar, 626 F.2d 145, 148 (9th Cir. 1980) (hearsay admissible if
``it bear[s] satisfactory indicia of reliability'' and is
``probative and its use fundamentally fair''). Courts also have held
that hearsay can constitute substantial evidence that satisfies the
APA requirement. See, e.g., Echostar Communications Corp. v. FCC,
292 F.3d 749, 753 (D.C. Cir. 2002) (hearsay evidence is admissible
in administrative proceedings if it ``bear[s] satisfactory indicia
of reliability'' and ``can constitute substantial evidence if it is
reliable and trustworthy''); see generally Richardson v. Perales,
402 U.S. 389, 407-08 (1971) (holding that a medical report, though
hearsay, could constitute substantial evidence in social security
disability claim hearing); cf. Federal Rule of Evidence 403 (stating
that relevant, material, and reliable evidence shall be admitted).
---------------------------------------------------------------------------

    We are not persuaded of the need to incorporate federal court
hearsay rules or the other suggested standards for pre-emptively
excluding or challenging hearsay.\142\ We believe that Rule 320(b)
appropriately focuses on the relevance, materiality, reliability and
fairness of proposed hearsay evidence. Nor are we persuaded that the
proposed admissibility standards provide insufficient guidance or
impose an undue burden on hearing officers or the parties. Hearsay
evidence is currently evaluated on a case-by-case basis in light of,
among other things, the motives or potential bias of the declarant; the
availability and credibility of the declarant; whether the statements
are contradicted or consistent with direct

testimony; the type of hearsay (e.g., sworn, written, attributable to
an identified person); the availability of the missing witness and any
attempts to compel witness testimony; and whether or not the hearsay is
corroborated by other evidence in the record.\143\ We continue to
believe that a case-by-case determination of the admissibility of
hearsay evidence is more appropriate than the broad exclusionary rules
and procedures proposed by the commenters, and therefore adopt the rule
as proposed.
---------------------------------------------------------------------------

    \142\ The Supreme Court has stated that ``. . . it has long been
settled that the technical rules for the exclusion of evidence
applicable in jury trials [the Federal Rules of Evidence] do not
apply to proceedings before federal administrative agencies in the
absence of a statutory requirement that such rules are to be
observed.'' Opp. Cotton Mills v. Administrator, 312 U.S. 126, 155
(1941).
    \143\ See, e.g., Guy P. Riordan, Exchange Act Release No. 61153,
2009 WL 4731397, at *14 (Dec. 11, 2009); Edgar B. Alacan, Exchange
Act Release No. 49970, 2004 WL 1496843, at *6 (July 6, 2004); Wheat,
First Securities, Inc., Exchange Act Release No. 48378, 2003 WL
21990950, at *12 (Aug. 20, 2003); Harry Gliksman, Exchange Act
Release No. 42255, 1999 WL 1211765 (Dec. 20, 1999); Carlton Wade
Fleming, Jr., Exchange Act Release No. 36215, 1995 WL 539462 (Sept.
11, 1995). The Commission and hearing officers have declined to
credit hearsay evidence based on these standards. See, e.g., Wheat,
2003 WL 21990950, at *12 (noting that hearing officer declined to
admit statements that ``had no bearing on'' the relevant issue and
concluding they were ``unreliable,'' were not ``written, signed, or
made under oath'' and ``[t]here was no showing that any of the
officials was unavailable to testify at the hearing''); Mark James
Hankoff, Exchange Act Release No. 30778, 1992 WL 129520, at *3
(finding an affidavit and hearsay statement an unreliable basis for
the NASD's finding of fact); Gary L. Greenberg, Exchange Act Release
No. 28076, 1990 WL 1104065, at *3 (June 1, 1990) (noting that the
record as a whole did not provide ``sufficient assurance'' of the
truthfulness or reliability of hearsay evidence to ``justify [ ]
crediting it over the first-hand testimony'' of the respondent).
---------------------------------------------------------------------------

O. Amendments to Appellate Procedure in Rules 410, 411, 420, 440, and
450

1. Proposed Rules
    We proposed amendments to Rules 410 (Appeal of Initial Decisions by
Hearing Officers),\144\ 411 (Commission Consideration of Initial
Decisions by Hearing Officers),\145\ 420 (Appeal of Determinations by
Self-Regulatory Organizations),\146\ 440 (Appeal of Determinations by
the Public Company Accounting Oversight Board),\147\ and 450 (Briefs
Filed with the Commission),\148\ which govern appeals to the
Commission.
---------------------------------------------------------------------------

    \144\ 17 CFR 201.410.
    \145\ 17 CFR 201.411.
    \146\ 17 CFR 201.420.
    \147\ 17 CFR 201.440.
    \148\ 17 CFR 201.450.
---------------------------------------------------------------------------

    Rule 410(b) currently requires petitioners to set forth all the
specific findings and conclusions of the initial decision to which
exception is taken, and provides that an exception that is not stated
in the notice may be deemed to have been waived by the petitioner.\149\
We proposed to amend Rule 410(b) to state, instead, that a petitioner
is required to set forth only a summary statement of the issues
presented for review.\150\ In addition, we proposed to amend Rule
410(c) to limit the length of petitions for review to three pages and
to bar incorporation of pleadings or filings by reference.\151\ We
reasoned that these changes would be consistent with Federal Rule of
Appellate Procedure 3(c), which requires only notice pleading and
filing where an appellant may appeal as of right.\152\
---------------------------------------------------------------------------

    \149\ 17 CFR 201.410(b).
    \150\ 80 FR at 60096.
    \151\ Id.
    \152\ Id. at n.36.
---------------------------------------------------------------------------

    To help effectuate the amendments to Rule 410(b), we also proposed
an amendment to Rule 411(d).\153\ Current Rule 411(d) provides that
Commission review of an initial decision is limited to the issues
specified in the petition for review and any issues specified in the
order scheduling briefs.\154\ We proposed to amend Rule 411(d) to state
that Commission review of an initial decision is limited to the issues
specified in an opening brief and that any exception to an initial
decision not supported in an opening brief may be deemed to have been
waived by the petitioner.\155\
---------------------------------------------------------------------------

    \153\ Id. at 60096.
    \154\ 17 CFR 201.411(d).
    \155\ 80 FR at 60096.
---------------------------------------------------------------------------

    We also proposed to amend Rule 450(c) to no longer allow parties to
incorporate pleadings or filings by reference.\156\ We explained that,
as a practical matter, it is difficult to enforce a word count that
allows for incorporation by reference.\157\ In addition, we reasoned
that current Rule 450(c) encouraged parties to rely on pleadings or
filings from the hearing below, rather than addressing the relevant
evidence or developing the arguments central to the appeal before the
Commission.\158\ We explained that prohibiting incorporation by
reference was intended to sharpen the arguments and require parties to
provide specific support for each assertion.\159\
---------------------------------------------------------------------------

    \156\ Id.
    \157\ Id. at 60097.
    \158\ Id.
    \159\ Id.
---------------------------------------------------------------------------

    Finally, we proposed amendments to Rules 420(c) and 440(b) to make
them consistent with the proposed amendments to Rules 410(b) and
450(b).\160\ Rule 420 governs appeals of determinations by self-
regulatory organizations (SROs), and Rule 440 governs appeals of
determinations by the Public Company Accounting Oversight Board
(PCAOB).\161\ We proposed to amend Rule 440(b) to include a two-page
limit for the application for review from a PCAOB decision, which is
consistent with the current page limit under Rule 420(c) for
applications from SROs.\162\ We also proposed to amend both Rule 420(c)
and Rule 440(b) to include a provision stating that any exception to a
determination that is not supported in an opening brief may be deemed
to have been waived by the applicant.\163\ We explained that these
proposed amendments to Rules 420 and 440 would align these rules with
the rules governing appeals from initial decisions issued by Commission
hearing officers.\164\
---------------------------------------------------------------------------

    \160\ Id. at 60097.
    \161\ Id.
    \162\ Id.
    \163\ Id.
    \164\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Two commenters generally supported the proposed amendment to Rule
410(b) insofar as the amended rule would adopt a notice standard for
filing appeals with the Commission.\165\ But both commenters opposed
the proposed limit of the notice of appeal to three pages.\166\
---------------------------------------------------------------------------

    \165\ FSR; NJSBA.
    \166\ FSR; NJSBA.
---------------------------------------------------------------------------

    One of the commenters argued that, because the notice of appeal
will provide for a caption and other identifying information, three
pages may not be sufficient to accurately describe the issues even in a
summary format. This commenter suggested that the Commission increase
the page limit for notices to five pages.\167\
---------------------------------------------------------------------------

    \167\ NJSBA.
---------------------------------------------------------------------------

    The second commenter argued that the Commission's analogy to
Federal Rule of Appellate Practice 3(c) was misplaced because, the
commenter reasoned, appeals of initial decisions are not as of
right.\168\ This commenter suggested that, if the Commission were to
limit petitions for review to three pages, it should also adopt one or
more of the following proposals: (i) Extend the word limit to opening
briefs to 16,000 words; (ii) permit pleadings to be incorporated by
reference, without counting their contents against any word limit; or
(iii) remove language in Rule 450(c) providing that motions to file
oversized briefs are disfavored.\169\
---------------------------------------------------------------------------

    \168\ FSR.
    \169\ FSR.
---------------------------------------------------------------------------

3. Final Rules
    We are adopting the rules as proposed. We continue to believe that
a three-page limit for petitions for review is sufficient to allow
petitioners to provide notice of the issues that they are

appealing. Based on the Commission's experience with appeals from
initial decisions, we continue to believe that a default limit of
14,000 words is reasonable, that allowing briefs to incorporate
pleadings by reference would be impractical, and that motions to file
oversized briefs should be disfavored.
    Finally, and in response to the comment regarding appeals from
initial decisions not being as of right, we note that we are unaware of
any case in which the Commission has declined to grant a procedurally
proper petition for review.\170\ As we explained when we eliminated the
filing of oppositions to petitions for review, such oppositions are
``pointless'' because `` `the Commission has long had a policy of
granting petitions for review, believing that there is a benefit to
Commission review when a party takes exception to a decision.' '' \171\
We therefore do not find persuasive the argument that ``the content and
length of a petition for review should be compared to that described by
Federal Rules of Appellate Practice Rule 5 (governing discretionary
appeals).'' \172\
---------------------------------------------------------------------------

    \170\ See David F. Bandimere, Exchange Act Release No. 76308,
2015 WL 6575665, at *20, n.110 (Oct. 29, 2015).
    \171\ Id. (quoting Exchange Act Release No. 48832, 2003 WL
22827684, at *13 (Nov. 23, 2003)).
    \172\ FSR.
---------------------------------------------------------------------------

P. Amendments to Rule 900 Guidelines

1. Proposed Rule
    Rule 900 sets forth guidelines for the timely completion of
proceedings, and provides for status reports to the Commission on
pending cases and the publication of information concerning the pending
case docket.\173\ As noted in the proposing release, these guidelines
are examined periodically for readjustment in light of changes in the
pending caseload and staff resources. Consistent with such examination,
we proposed to amend Rule 900(a) to state that a decision by the
Commission with respect to an appeal from the initial decision of a
hearing officer, a review of a determination by an SRO or the PCAOB, or
a remand of a prior Commission decision by a court of appeals
ordinarily will be issued within eight months from the completion of
briefing on the petition for review, application for review, or remand
order. Under the proposed rule, if the Commission determines that the
complexity of the issues presented in an appeal warrant additional
time, the decision of the Commission may be issued within ten months of
the completion of briefing. If a decision cannot be issued within the
specified eight or ten-month period, the proposed rule provides that
the Commission may issue orders extending the period as it deems
appropriate in its discretion.
---------------------------------------------------------------------------

    \173\ 17 CFR 201.900.
---------------------------------------------------------------------------

    We also proposed to amend Rule 900(c), which sets forth the
information to be included in a semi-annual published report concerning
the pending case docket. The current rule requires that the report
show, among other things, the number of pending cases before the
administrative law judges and the Commission, changes in the caseload,
the median age of cases at resolution, and the number of cases decided
within the guidelines. Proposed Rule 900(c) provides that the report
for each time period would include, in addition to the information
currently provided, the median number of days from the completion of
briefing to the Commission's decision for each appeal resolved.
2. Comments Received
    One commenter objected to the proposed changes to the Commission
review timeframes under Rule 900(a), arguing that the length of
Commission review undermines the efficiency of administrative
proceedings.\174\ This commenter argued that the proposed amendments
improperly relaxed the guidelines. Another commenter raised similar
concerns about the length of time required to resolve Commission
appeals.\175\
---------------------------------------------------------------------------

    \174\ CCMC.
    \175\ Grundfest.
---------------------------------------------------------------------------

3. Final Rule
    We are adopting the amendments as proposed. We believe that the
amendments appropriately balance the public interest in efficient
resolution of litigated matters with the public interest in carefully
considered decision-making, particularly in resolving complex matters.
Moreover, we believe that the final amendments balance these revised
timeframes with mechanisms for enhancing the efficiency, transparency,
and oversight of administrative proceedings, including through the
mechanism for Commission orders extending periods for review in
individual cases under Rule 900(a)(1)(iv) and the enhanced disclosure
required under Rule 900(c).

Q. Effective Date, Applicability Dates and Transition Period

1. Proposed Rule
    We proposed that amendments govern any proceeding commenced after
the effective date of the final rules.\176\ We solicited comments as to
whether the amendments as proposed should be applied, in whole or in
part, to proceedings that are pending or have been docketed before or
on the effective date, and, if so, the standard for applying any
amended rules to such pending proceedings.\177\
---------------------------------------------------------------------------

    \176\ 80 FR at 60097.
    \177\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Commenters generally agreed that certain of the amended rules
should apply to at least some pending proceedings. But commenters
offered different standards for determining when and how the amended
rules should apply.
    One commenter, for instance, suggested that the amended rules apply
``in whole to cases pending as of the effective date where possible.''
\178\ Another commenter proposed that any changes that ``enhance the
rights of respondents, no matter how small, should apply to proceedings
pending on their effective date.'' \179\ A third commenter, citing the
general practice in federal court, argued that ``[i]nstead of
implementing a uniform prospective application,'' the Commission should
require that the amendments apply to pending cases ``insofar as just
and practicable''--that is, to ``pending cases which have yet to
proceed to an evidentiary hearing.'' \180\
---------------------------------------------------------------------------

    \178\ Navistar.
    \179\ Zornow/Gunther/Silverman.
    \180\ Hudson I (citing Landgraf v. USI Film Prods., 511 U.S.
244, 275 n.29 (1994)).
---------------------------------------------------------------------------

    Finally, one commenter suggested that the amended rules apply to
pending matters ``to the fullest extent possible,'' and provided
specific examples of how the various rules would apply to pending
proceedings, depending on the phase of the proceeding.\181\
Specifically, this commenter suggested that ``the new rules for timing
and depositions should apply at least to proceedings for which the
prehearing conference has not yet taken place, and the new evidentiary
rules should apply to any matter for which no hearing has yet taken
place.'' \182\
---------------------------------------------------------------------------

    \181\ Gibson.
    \182\ Gibson.
---------------------------------------------------------------------------

3. Final Rule
    The amended rules will become effective 60 days after publication
in the Federal Register and shall apply to proceedings initiated on or
after that date.\183\ For proceedings instituted on or

after the date of these amended rules \184\ but before the effective
date, there will be a transition period. The parties may elect to have
these amended rules apply to such proceedings. Specifically, in
proceedings that are instituted on or after the date of these amended
rules but before the effective date, all of the amended rules (except
the amendments to Rule 141, governing service of OIPs) shall apply to
such proceedings if, within 14 days of service of the OIP, every party
to the proceeding, including the Division, submits a request in writing
to the Secretary that the proceedings be conducted under the amended
rules. This approach is similar to the approach we took in the 1995
amendments to the Rules of Practice.\185\ If any party does not submit
such a request, the former rules shall apply, except as provided below.
---------------------------------------------------------------------------

    \183\ See 5 U.S.C. 553(d).
    \184\ For purposes of this section, the ``date of these amended
rules'' means the date on the last page of this release.
    \185\ See 1995 Release, 60 FR at 32738 (``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 proceeding be conducted under the Rules of
Practice adopted today.'').
---------------------------------------------------------------------------

    For all other proceedings instituted before the effective date of
these rules, the applicability of the amended rules is described more
fully below.
    There are many rational ways to implement amendments to procedural
rules. When we amended the Rules of Practice in 1995, the new rules
became effective one month after publication in the Federal Register,
and the former rules continued to apply in full to pending
administrative proceedings.\186\ Other agencies take varying
approaches; sometimes they apply amendments to rules
prospectively,\187\ and at other times they apply such amendments to
pending proceedings.\188\ Finally, as commenters observed, amendments
to the Federal Rules of Civil Procedure generally apply to pending
proceedings ``insofar as just and practicable.'' \189\
---------------------------------------------------------------------------

    \186\ See 1995 Release, 60 FR at 32738.
    \187\ See, e.g., Department of Labor, Rules of Practice and
Procedure for Administrative Hearings Before the Office of
Administrative Law Judges, 80 FR 28767 (May 19, 2015), providing
that the rules would be effective 30 days after publication.
    \188\ See, e.g., Federal Trade Commission, Revisions to Rules of
Practice, 80 FR 25940 (May 6, 2015), providing that the rules would
generally apply to pending proceedings, as well as to newly
instituted proceedings.
    \189\ Federal Rules of Civil Procedure, 2015 Amendments.
---------------------------------------------------------------------------

    We conclude that the amended evidentiary rules should apply to
proceedings where the hearing has not begun as of the effective date,
and that other amended rules should sometimes apply, depending on the
stage of the proceeding, as set forth in detail below.\190\ For
example, amended Rules 221, 233, and 360 shall apply to proceedings
where the prehearing conference has not been held as of the effective
date of these rules, as well as to proceedings that are stayed (other
than pursuant to consideration of a settlement offer under Rule
161(c)(2)(i)),\191\ whether by court or Commission order, as of the
effective date. Based on the Commission's experience with
administrative proceedings, we believe that applying the amended rules
in such proceedings would not unduly disrupt pending proceedings.
---------------------------------------------------------------------------

    \190\ Gibson.
    \191\ Under current Rule 161(c)(2)(i), proceedings may be stayed
upon notification by the parties that they have agreed in principle
to a settlement on all major terms. In the interest of prompt
resolution of such proceedings, we are excluding such proceedings
from the application of amended Rules 221, 233 and 360. Such
proceedings would have been operating under the current rules, and
should a stay in such a proceeding be lifted, we believe that
application of these amended rules could result in unnecessary
delays.
---------------------------------------------------------------------------

    With respect to a commenter's suggestion of using a ``just and
practicable'' standard to determine whether the amended rules should
apply in a given proceeding, the tables below reflect the Commission's
determinations of what is just and practicable.
    The tables below provide whether and how the amended rules apply:
\192\
---------------------------------------------------------------------------

    \192\ All of the amended rules apply to proceedings instituted
on or after the effective date of these amendments.

 Rules Regarding Initial Filings--Apply to Proceedings Instituted on or
              After the Effective Date of These Amendments
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 141.............................  Requirements for serving OIP.
Rule 220.............................  Requirements for answers to OIP.
Rule 230.............................  Documents that may be withheld or
                                        redacted by the Division.
------------------------------------------------------------------------

   Rules Regarding Depositions, Timing of Proceedings and Dispositive
 Motions--Apply to Those Proceedings Where, as of the Effective Date of
These Amendments: (i) the Initial Prehearing Conference Pursuant to Rule
 221 Has Not Been Held; or (ii) the Proceedings Have Been Stayed, Except
          for Proceedings Stayed Pursuant To Rule 161(c)(2)(i)
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 221.............................  Rule amended to add depositions,
                                        expert witness disclosures or
                                        reports, and timing for
                                        completion of production of
                                        documents by the Division to the
                                        list of subjects to be discussed
                                        at the prehearing conference.
Rule 222.............................  Rule amended to change
                                        information that is required to
                                        be submitted in conjunction with
                                        expert reports.
Rule 233.............................  Rule amended to expand use of
                                        depositions.
Rule 234.............................  Rule amended to provide that
                                        moving party may take a
                                        deposition on written questions
                                        either by stipulation of the
                                        parties or by filing a motion
                                        demonstrating good cause.
Rule 250.............................  Dispositive motions.
Rule 360.............................  Rule amended to change timing of
                                        proceedings.
------------------------------------------------------------------------

Evidentiary Rules and Rules Governing Hearings--Apply to All Proceedings
Where Hearing Has Not Begun as of the Effective Date of These Amendments
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 180.............................  Rule amended to allow the
                                        Commission or a hearing officer
                                        to exclude or summarily suspend
                                        a person for any portion of a
                                        deposition if the person engages
                                        in contemptuous conduct before
                                        either the Commission or a
                                        hearing officer.

Rule 232.............................  Rule amended to clarify standards
                                        for the issuance of subpoenas
                                        and motions to quash.
Rule 235.............................  Standard for granting a motion to
                                        introduce prior sworn statement
                                        of a non-party witness.
Rule 320.............................  Standard for admissibility of
                                        evidence.
------------------------------------------------------------------------

   Rule Governing Motions--Apply to All Proceedings Pending as of the
                   Effective Date of These Amendments
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 154.............................  Rule governing motions and
                                        related filings, except where
                                        another rule expressly governs.
------------------------------------------------------------------------

  Rule Governing Extensions of Time, Postponements, and Adjournments--
   Apply to All Proceedings Pending As of the Effective Date of These
                               Amendments
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 161.............................  Rule governing extensions of
                                        time, postponements, and
                                        adjournments requested by
                                        parties--amended to allow a stay
                                        pending Commission consideration
                                        of settlement offers to also
                                        stay timelines set forth in Rule
                                        360.
------------------------------------------------------------------------

  Amendments to Appellate Procedure Rules--Apply to Appeals Filed on or
              After the Effective Date of These Amendments
------------------------------------------------------------------------

------------------------------------------------------------------------
Rule 410.............................  Procedure for filing petition for
                                        review.
Rule 411.............................  Standards for granting petition
                                        for review and limitation on
                                        matters reviewed.
Rule 420.............................  Appeals from SRO determinations.
Rule 440.............................  Appeals from PCAOB
                                        determinations.
Rule 450.............................  Briefs filed with the Commission.
Rule 900.............................  Guidelines for timely completion
                                        of proceedings.
------------------------------------------------------------------------

III. Economic Analysis

    The Commission is sensitive to the economic effects that could
result from the final rules, including the benefits and costs of the
final rules, as well as effects on efficiency, competition, and capital
formation. These quantitative and qualitative economic effects are
discussed below.
    In adopting these amendments, we seek to enhance flexibility in the
conduct of administrative proceedings while maintaining the ability to
timely and efficiently resolve administrative proceedings. The
amendments include changes or clarifications to, among other things,
the timing of hearings, the use of depositions, the filing of motions
for summary disposition, and the submission of expert reports. The
current rules governing administrative proceedings serve as the
baseline against which we assess these final rules.
    We continue to believe that there will not be significant economic
consequences stemming from the amendments to Rules 141, 154, 161, 220,
230, 235, 320, 410, 411, 420, 440, 450, and 900. Thus, those sections
are not discussed below. As explained in further detail below, we
expect the amendments to Rules 222, 232, 233, 250, and 360 will have an
impact on the costs and efficiency of administrative proceedings, but
we do not expect them to significantly affect the efficiency of
securities markets, competition, or capital formation.

A. Benefits, Costs, and Effects on Efficiency, Competition, and Capital
Formation

    As discussed in further detail above, the amendments to Rule 360
concern the timing for the various stages of an administrative
proceeding, providing additional time for discovery. The amendments to
Rule 233 permit a limited number of depositions, while the amendments
to Rule 232 support this change by providing standards governing
motions to quash or modify deposition notices or subpoenas. The
amendments to Rule 222 concern requirements for a written report for
expert witnesses. The amendments to Rule 250 clarify how dispositive
motions will operate with the amendments to Rules 233 and 360 and
provide the procedures and standards governing the various types of
dispositive motions.
    Current Commission rules set the prehearing period of a proceeding
at approximately four months for a 300-day proceeding and do not permit
parties to take depositions solely for the purpose of discovery. In
addition, rules governing the testimony of expert witnesses have not
previously been formalized, but some hearing officers require expert
reports in proceedings before them.
    We continue to believe that the aggregate benefits and costs of the
final rules will depend, among other things, on the expected volume of
administrative proceedings. For example, Rule 360 adjusts the potential
timing of administrative proceedings, and an increase or a decrease in
the number of administrative proceedings will scale up or down,
respectively, the total magnitude of costs and benefits of the new
timeline for administrative proceedings. Similarly, Rules 232 and 233
provide the framework for expanded use of depositions in administrative
proceedings, and an increase or a decrease in the number of
administrative proceedings may scale up or down, respectively, the
total magnitude of the costs and benefits of the expanded use of
depositions.
    However, we are unable to precisely predict the economic effect of
the final rules on administrative proceedings, as the number and type
of proceedings can vary based on many factors unrelated to the Rules of
Practice. Over the last three completed fiscal years, the number of new
administrative proceedings initiated and not immediately settled has
ranged from approximately 170 to approximately 230 proceedings, only a
portion of which would be impacted by certain of the amended
rules.\193\ As a

result, we are unable to quantify the overall costs and benefits
expected to flow from the amended rules.
---------------------------------------------------------------------------

    \193\ The total number of administrative proceedings initiated
and not immediately settled each fiscal year encompasses various
types of proceedings. These include proceedings under Section 12(j)
of the Exchange Act and ``follow-on'' proceedings following certain
injunctions or criminal convictions, which constitute the vast
majority of all proceedings instituted. On average, approximately
20% of all administrative proceedings initiated over the last three
completed fiscal years were designated as 300-day proceedings.
---------------------------------------------------------------------------

1. Amendments to Rules Governing Depositions and the Timing of Hearings
in Administrative Proceedings
    The amendments to Rules 232, 233, and 360, as described above, may
benefit both respondents and the Division by providing them with
additional time and tools to potentially discover additional relevant
facts. Specifically, the amendments to Rule 233 permit respondents and
the Division to notice the oral depositions of fact witnesses, expert
witnesses and document custodians. The amendments to Rule 232
correspond with the new provisions for depositions in Rule 233 and
establish the requirement that a proposed deponent be a fact witness,
an expert witness, or a document custodian. The amendments to Rule 360
enlarge the potential maximum prehearing period. We anticipate that the
potential for a longer maximum prehearing period would allow, in
appropriate cases, additional time to review investigative records,
conduct depositions under amended Rule 233, and prepare for a hearing.
    These amendments may facilitate information acquisition during the
prehearing stage, ultimately resulting in more focused hearings. We are
unable to quantify these benefits, however, because any potential cost
savings would depend on multiple factors, including the specific
claims, facts, and defenses in a particular proceeding.
    The depositions and a longer prehearing period will, however,
impose additional costs compared to the current practice in
administrative proceedings where, with limited exception, depositions
are not permitted and maximum prehearing periods are shorter. We
continue to believe that the costs of the adopted amendments will be
borne by the Division as well as by respondents and deponents who
provide deposition testimony. These costs will primarily stem from the
potential costs of depositions and the extension of the maximum
prehearing period.
    Aggregate costs stemming from depositions depend on the number of
depositions that respondents and the Division take and assume they
attend depositions of third parties noticed by another party to the
proceeding. Costs of depositions may include travel expenses,
attorney's fees, and reporter and transcription expenses. Based on
Commission staff experience, we estimate the cost to a respondent of
conducting one non-expert deposition to be approximately $45,640, and
the cost of conducting one expert witness deposition to be
approximately $75,696.\194\ This cost estimate has been increased
relative to the cost estimate in the proposal to reflect the increased
time-limit for depositions in amended Rule 233 from six hours to seven
hours and to include the costs associated with expert depositions. In
single-respondent proceedings, if both the Division and the respondent
each take three depositions, one of which is of an expert witness, and
each attend each other's depositions, then respondents may incur the
cost of conducting or attending up to six depositions plus expert
witness fees and costs--an estimated total of $303,896. Similarly, in
multi-respondent proceedings, respondents may incur the cost of
conducting or attending up to ten depositions plus expert witness fees
and costs--an estimated total of $486,456. We recognize that
respondents and the Division play a large role in managing their own
costs by determining, for example, whether to take depositions or
participate in the depositions of others, and whether to mitigate
attorney costs, including by adjusting the number of attorneys
attending each deposition, contracting with a competitively priced
reporter, or arranging for less expensive travel. We note that
determinations regarding the approach to requesting depositions will
likely reflect parties' beliefs regarding the potential benefits they
expect to realize from taking or attending depositions. However, the
costs of depositions are borne by all attendees of the deposition,
including not only the deposing party, but also the other parties to
the proceeding, the deponent, and third parties, in the form of lost
wages, travel, preparation, and attorney costs.\195\
---------------------------------------------------------------------------

    \194\ The $45,640 estimate is comprised of the following
expenses: (i) Travel expenses: $4,000; (ii) reporter/videographer:
$8,200; and (iii) professional costs for two attorneys (including
reasonable preparation for the deposition): 40 hours x $504/hr and
40 hours x $332/hr = $33,440. The hourly rates for the attorneys and
paralegal are based on the 2015-2016 Laffey Matrix. The Laffey
Matrix is a matrix of hourly rates for attorneys of varying
experience levels and paralegals that is prepared annually by the
Civil Division of the United States Attorney's Office for the
District of Columbia. See Laffey Matrix--2015-2016, available at
https://www.justice.gov/usao-dc/file/796471/download (last visited
July 8, 2016) (the ``Laffey Matrix''). In addition, if the deponent
is an expert witness, we estimate the expert's fees and travel
expenses will be approximately $30,056 per deposition, for a
combined total of $75,696. This includes (i) file review and
preparation costs estimated at 80 hours, at a rate of $333/hr, which
totals $26,640; and (ii) expert fees incurred with appearing for the
deposition, 8 hours x $427/hr = $3,416. The hourly rate for expert
witnesses is based on survey data of expert witness fees from the
SEAK, Inc. 2014 Survey of Expert Witness Fees. See SEAK, Inc. 2014
Survey of Expert Witness Fees, which can be found at http://www.seak.com/wp-content/uploads/2014/07/Expert-Witness-Fee-Data.pdf
(last visited July 8, 2016). These estimates exclude transcription
costs, which are estimated at $3.65 per page, based on the Federal
Court Maximum Transcription Rates for Court Reporters, available at
http://www.uscourts.gov/services-forms/federal-court-reporting-program (last visited July 8, 2016).
    \195\ Some witnesses who are deposed might bear little if any
out-of-pocket cost if, for example, the deposition is conducted in
the city in which they live or work, and they choose not be
represented by counsel at the deposition. Moreover, the party
seeking the deposition might choose to reimburse the witness for
some costs.
---------------------------------------------------------------------------

    Relative to the proposed amendments to Rule 233, the adopted
amendments expand the potential use of depositions by allowing each
side to request an additional two depositions from a hearing officer.
This would place the ultimate limit on depositions at five depositions
for each side in a single-respondent proceeding, and seven depositions
for each side in a proceeding against multiple respondents. In single-
respondent proceedings, if the Division and the respondent each take
five depositions, one of which is of an expert witness, and each attend
each other's depositions, then respondents may incur the cost of
conducting or attending as many as ten depositions plus expert witness
fees and costs--an estimated total of $486,456. Similarly, in multi-
respondent proceedings, respondents may incur the cost of conducting or
attending as many as fourteen depositions plus expert witness fees and
costs--an estimated total of $669,016.\196\ Although the total number
of depositions increases, we believe that parties will make the
decision to request an additional deposition by considering the
expected costs and benefits of acquiring information from the deponent.
To the extent that additional depositions may reveal important
information or evidence relevant to the proceeding and thus lead to
more focused hearings, this provision may improve the efficiency of
administrative proceedings. However, neither the parties to a
proceeding nor the hearing officer can predict whether additional
depositions will ultimately have such an effect, and in situations
where additional depositions ultimately prove to be unhelpful or
unnecessary,

permitting those additional depositions may impose delays and costs
that can have an adverse effect on efficiency.
---------------------------------------------------------------------------

    \196\ See supra note 194.
---------------------------------------------------------------------------

    Similarly, the longer maximum prehearing periods permitted by the
amendment to Rule 360 may impose costs on the parties. Based on our
estimates of staffing requirements and corresponding hourly rates, we
estimate that the potential to lengthen the overall timeline in 120-day
proceedings by up to six months to allow more time for discovery may
result in additional costs to respondents of up to $754,080.\197\ We
thus estimate that the combined costs of the lengthened prehearing
period and the availability of depositions could cost respondents in a
single-respondent 120-day proceeding $1,240,536.\198\ Similar combined
costs for respondents in a 120-day multi-respondent proceeding could be
as high as $1,423,096.\199\ Again, however, we recognize that while a
party is likely to take actions under the amended rules that result in
these costs only to the extent that the party expects to receive
benefits from a longer maximum prehearing period and the availability
of depositions, actions taken by one party to a proceeding during the
additional time for discovery may result in costs incurred by the other
parties to the proceeding.
---------------------------------------------------------------------------

    \197\ The $754,080 estimate is comprised of the following
expenses: (i) 1 senior attorney x 40 hours per week x 24 weeks x
$504/hr = $483,840; (ii) 1 mid-level attorney x 20 hours per week x
24 weeks x $332/hr = $159,360; (iii) 1 paralegal x 30 hours per week
x 24 weeks x $154/hr = $110,880. The hourly rates for the attorneys
and paralegal are based on the Laffey Matrix. We do not anticipate
the amendments to Rule 360 concerning the timing of hearings in 75-
day and 30-day proceedings will generally result in a significant
departure from current practice in the length of time necessary for
completion of such proceedings, which often are resolved by default
or summary disposition.
    \198\ $754,080 + $486,456 = $1,240,536. This estimate is
comprised of the potential costs associated with the maximum
lengthening of the prehearing period in 120-day proceedings and the
total estimated costs of depositions in single-respondent
proceedings. To the extent the hours spent during the prehearing
period are used to prepare and/or respond to depositions, this may
overestimate the total costs of a single-respondent proceeding.
    \199\ $754,080 + $669,016 = $1,423,096. As explained supra, this
figure may overestimate the total costs in multi-respondent
proceedings to the extent there is overlap with the hourly rate
calculations associated with depositions.
---------------------------------------------------------------------------

    The amendments related to the timing of hearings and the use of
depositions may also affect the efficiency of proceedings. To the
extent that the adopted amendments facilitate the discovery of relevant
facts and information through depositions and the extension of the
maximum prehearing periods, they may lead to more expeditious
resolution of proceedings. For example, for cases that may benefit
significantly from the additional information, there could be
efficiency gains from the final rules if the costs associated with the
use of depositions are smaller than the value of the information gained
from depositions. However, we note that because parties may not take
into account the costs that depositions may impose on other individuals
and/or entities, a potential consequence of the adopted amendments to
Rule 233 is that parties may engage in more discovery than is
efficient. For example, for proceedings that may not benefit
significantly from information gained from a deposition, requesting
depositions may result in inefficiency by imposing costs on all
attendees of the deposition, including the deposing party, the other
parties to the proceeding, the deponent, and third parties, without any
significant informational benefit. However, we believe that the
amendments to Rules 232 and 233 may mitigate the risk of this
efficiency loss by setting forth standards for the issuance of
subpoenas and motions to quash deposition notices and subpoenas, and
setting a limit on the maximum number of depositions each side may
notice.
    Ultimately, it is difficult to predict with any certainty the
economic efficiency gains, if any, from the addition of depositions, a
longer prehearing period, and associated rule changes. At the same
time, we recognize that there are necessarily cost increases from
longer hearing periods and additional discovery tools, and as we have
explained, those costs are borne by respondents and the Division, as
well as other attendees of depositions, including deponents, and third
parties. We continue to believe that any such costs are appropriate
given the benefits of such rule changes.
2. Amendments Concerning Expert Reports and Testimony
    The final amendments to Rule 222 specify a set of submissions and
disclosures that hearing officers may require from parties to a
proceeding, and require parties to a proceeding who intend to call
expert witnesses to submit information about these expert witnesses.
Though producing submissions and disclosures may cause parties to
proceedings to incur costs, these amendments may yield benefits by
facilitating access to information that may aid in interpreting
statements, evidence, and testimony during hearings. We are aware that
some hearing officers may currently require submissions and disclosures
similar to those referenced in amended Rule 222, so the final rule will
impose costs and yield benefits only to the extent that they result in
additional information being submitted to hearing officers beyond that
submitted under current practice.
3. Amendments Concerning Dispositive Motions
    As discussed above, Rule 250 has been amended to provide that both
sides to a proceeding shall be permitted, as a matter of right, to make
certain dispositive motions in certain types of proceedings. The
amendments to Rule 250 clarify how dispositive motions will operate in
conjunction with the amendments to Rules 233 and 360, which permit
parties to take depositions and provide for a longer maximum prehearing
period.
    Amended Rule 250 may improve the efficiency of administrative
proceedings by eliminating unnecessary hearings. The ability of either
side to bring a dispositive motion serves several functions, including
those attendant to potential early resolution of claims. For example,
in proceedings where the underlying facts are not in dispute, the
granting of a dispositive motion may reduce the costs borne by all
parties by narrowing the focus of or entirely eliminating the need for
a hearing. On the other hand, where motions are filed in proceedings
not susceptible to resolution via dispositive motion, the decision to
allow dispositive motions could delay proceedings or otherwise result
in inefficiencies. For example, if the hearing officer grants summary
disposition, delays could result if the Commission subsequently remands
the case for an evidentiary hearing. Such delays could result in costs
to parties to the proceeding.
    Because the amendments to Rule 250 largely clarify how pre-existing
motion practice will operate alongside the amendments to Rules 233 and
360, the rule change may not result in a significant departure from
current practice. Further, we cannot predict with certainty how
practice will change in response to the availability of dispositive
motions filed pursuant to amended Rules 250(a), (b), and (d) as a
matter of right--rather than with leave of the hearing officer--given
that parties will respond based on the individual facts of each case
and their own cost estimates of filing the motions. We are thus unable
to estimate the total potential costs associated with these amendments.
Moreover, to the extent a party files a motion under amended Rule 250
where it would not have filed under previous Rule 250, we do not have
sufficient information to quantify the individual costs associated with

such a motion because the scope of each motion may vary significantly
depending on the facts and circumstances of each case and the approach
of the filing party.

B. Alternatives

    As mentioned previously, although commenters generally supported
extensions of the prehearing period previously proposed under Rule 360,
some suggested that longer periods be adopted. Longer prehearing
periods for discovery, whether restricted only to 120-day proceedings,
or permitted for all proceedings as one commenter suggested, would
allow parties more time to prepare for a hearing, but might adversely
affect the timely and efficient resolution of administrative
proceedings.
    As alternatives to the final rule amending Rule 233, we could
continue to permit depositions only when a witness is likely to be
unable to attend or testify at a hearing, or we could authorize other
limited discovery tools, such as the use of interrogatories or requests
for admissions in lieu of depositions. Although alternatives such as
interrogatories or admissions might reduce some of the costs of the
discovery process (i.e., the cost of depositions), they might entail
other costs (resulting from the time attorneys and parties need to
prepare responses) and also might yield less useful information for the
administrative proceeding given the limited nature of questioning and
information these forms permit. Therefore, regardless of their lower
cost, interrogatories and other discovery tools may not provide the
same qualitative benefits.
    Commenters also suggested that the Commission allow even more
depositions per side than proposed. As we have noted previously,
permitting parties to the proceedings to take additional depositions
may result in both benefits and costs for all parties. Additional
depositions could lead to more focused hearings, but may impose costs
on entities involved in the depositions, and ultimate resolution of the
proceeding may be delayed. We believe that the final amendments to Rule
233 that permit the hearing officer to grant an additional two
depositions to a side will make administrative proceedings flexible
enough to realize the benefits of additional depositions when they are
necessary, while avoiding unnecessarily delaying proceedings for
additional depositions.
    Another alternative to amended Rule 233 would be to adopt the
proposed limit of three depositions per side for single-respondent
proceedings and five depositions per side for multi-respondent
proceedings and not permit the hearing officer to allow two additional
depositions per side. As discussed previously, the informational
benefit of each additional deposition would depend on the particulars
of the administrative proceeding, and some proceedings may present
unique challenges that warrant affording the parties additional
opportunities to conduct prehearing depositions. The Commission
believes that providing an opportunity for two additional depositions
strikes a balance between the potential benefits from additional fact-
finding and the corresponding impact on the overall goal of timely
resolving administrative proceedings.

IV. Administrative Law Matters

    The Commission finds, in accordance with Section 553(b)(3)(A) of
the Administrative Procedure Act,\200\ that these revisions relate
solely to agency organization, procedure, or practice. They are
therefore not subject to the provisions of the Administrative Procedure
Act requiring notice, opportunity for public comment, and publication.
The Regulatory Flexibility Act \201\ therefore does not apply.\202\
Nonetheless, we previously determined that it would be useful to
publish the rules for notice and comment before adoption. The
Commission has considered all comments received. To the extent these
rules relate to agency information collections during the conduct of
administrative proceedings, they are exempt from review under the
Paperwork Reduction Act.\203\
---------------------------------------------------------------------------

    \200\ 5 U.S.C. 553(b)(3)(A).
    \201\ 5 U.S.C. 601-612.
    \202\ See 5 U.S.C. 604.
    \203\ See 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 (exempting
collections during the conduct of administrative proceedings or
investigations).
---------------------------------------------------------------------------

VI. Statutory Basis

    These amendments to the Rules of Practice are being adopted
pursuant to statutory authority granted to the Commission, including
section 3 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7202; section 19
of the Securities Act, 15 U.S.C. 77s; sections 4A, 19, and 23 of the
Exchange Act, 15 U.S.C. 78d-1, 78s, and 78w; section 319 of the Trust
Indenture Act of 1939, 15 U.S.C. 77sss; sections 38 and 40 of the
Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and section 211 of
the Investment Advisers Act, 15 U.S.C. 80b-11.

List of Subjects in 17 CFR Part 201

    Administrative practice and procedure.

Text of the Amendments

    For the reasons set out in the preamble, 17 CFR part 201 is amended
as follows:

PART 201--RULES OF PRACTICE

Subpart D--Rules of Practice

0
1. The authority citation for part 201, subpart D, continues to read as
follows:

    Authority: 5 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u, 77sss,
77ttt, 78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-
2, 78u-3, 78v, 78w, 80a-8, 80a-9, 80a-37, 80a-38, 80a-39, 80a-40,
80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 80b-12, 7202, 7215, and 7217.

0
2. Section 201.141 is amended by revising paragraphs (a)(2)(iv) and (v)
and (a)(3) to read as follows:

Sec.  201.141  Orders and decisions: Service of orders instituting
proceedings and other orders and decisions.

    (a) * * *
    (2) * * *
    (iv) Upon persons in a foreign country. Notice of a proceeding to a
person in a foreign country may be made by any of the following
methods:
    (A) Any method specified in paragraph (a)(2) of this section that
is not prohibited by the law of the foreign country; or
    (B) By any internationally agreed means of service that is
reasonably calculated to give notice, such as those authorized by the
Hague Convention on the Service Abroad of Judicial and Extrajudicial
Documents; or
    (C) Any method that is reasonably calculated to give notice:
    (1) As prescribed by the foreign country's law for service in that
country in an action in its courts of general jurisdiction; or
    (2) As the foreign authority directs in response to a letter
rogatory or letter of request; or
    (3) Unless prohibited by the foreign country's law, by delivering a
copy of the order instituting proceedings to the individual personally,
or using any form of mail that the Secretary or the interested division
addresses and sends to the individual and that requires a signed
receipt; or
    (D) By any other means not prohibited by international agreement,
as the Commission or hearing officer orders.
    (v) In stop order proceedings. Notwithstanding any other provision
of paragraph (a)(2) of this section, 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 telegraphic notice, or a waiver obtained pursuant to
paragraph (a)(4) of this section.
* * * * *
    (3) Record of service. The Secretary shall maintain a record of
service on parties (in hard copy or computerized format), 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
a division serves a copy of an order instituting proceedings, the
division shall file with the Secretary either an acknowledgement of
service by the person served or proof of service consisting of a
statement by the person who made service certifying the date and manner
of service; the names of the persons served; and their mail or
electronic addresses, facsimile numbers, or the addresses of the places
of delivery, as appropriate for the manner of service. If service is
made in person, the certificate of service 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 or Express Mail, the Secretary
shall maintain the confirmation of receipt or of attempted delivery,
and tracking number. If service is made to an agent authorized by
appointment to receive service, the certificate of service shall be
accompanied by evidence of the appointment.
* * * * *

0
3. Section 201.154 is amended by adding introductory text and revising
the first sentence of paragraph (b) to read as follows:

Sec.  201.154.  Motions.

    The requirements in this section apply to motions and related
filings except where another rule expressly governs.
* * * * *
    (b) * * * Briefs in opposition to a motion shall be filed within
five days after service of the motion. * * *
* * * * *

0
4. Section 201.161 is amended by revising paragraph (c)(2)(iii) to read
as follows:

Sec.  201.161  Extensions of time, postponements and adjournments.

* * * * *
    (c) * * *
    (2) * * *
    (iii) The granting of any stay pursuant to this paragraph (c) shall
stay the timeline pursuant to Sec.  201.360(a).

0
5. Section 201.180 is amended by revising paragraphs (a)(1)
introductory text, (a)(1)(i), (a)(2), and (c) introductory text to read
as follows:

Sec.  201.180  Sanctions.

    (a) * * *
    (1) Subject to exclusion or suspension. Contemptuous conduct by any
person before the Commission or a hearing officer during any
proceeding, including at or in connection with any conference,
deposition or hearing, shall be grounds for the Commission or the
hearing officer to:
    (i) Exclude that person from such deposition, hearing or
conference, or any portion thereof; and/or
* * * * *
    (2) Review procedure. A person excluded from a deposition, 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 Sec.  201.500.
* * * * *
    (c) Failure to make required filing or to cure deficient filing.
The Commission or the hearing officer may enter a default pursuant to
Sec.  201.155, dismiss one or more claims, decide the particular
claim(s) at issue against that person, or prohibit the introduction of
evidence or exclude testimony concerning that claim if a person fails:
* * * * *

0
6. Revise Sec.  201.220 to read as follows:

Sec.  201.220  Answer to allegations.

    (a) When required. In its order instituting proceedings, the
Commission may require any respondent to file an answer to each of the
allegations contained therein. Even if not so ordered, any respondent
in any proceeding may elect to file an answer. Any other person granted
leave by the Commission or the hearing officer to participate on a
limited basis in such proceedings pursuant to Sec.  201.210(c) may be
required to file an answer.
    (b) When to file. Except where a different period is provided by
rule or by order, a respondent required to file an answer as provided
in paragraph (a) of this section shall do so within 20 days after
service upon the respondent of the order instituting proceedings.
Persons granted leave to participate on a limited basis in the
proceeding pursuant to Sec.  201.210(c) may file an answer within a
reasonable time, as determined by the Commission or the hearing
officer. If the order instituting proceedings is amended, the
Commission or the hearing officer may require that an amended answer be
filed and, if such an answer is required, shall specify a date for the
filing thereof.
    (c) Contents; effect of failure to deny. Unless otherwise directed
by the hearing officer or the Commission, an answer shall specifically
admit, deny, or state that the party does not have, and is unable to
obtain, sufficient information to admit or deny each allegation in the
order instituting proceedings. When a party intends in good faith to
deny only a part of an allegation, the party shall specify so much of
it as is true and shall deny only the remainder. A statement of a lack
of information shall have the effect of a denial. Any allegation not
denied shall be deemed admitted. A respondent must affirmatively state
in the answer any avoidance or affirmative defense, including but not
limited to res judicata and statute of limitations. In this regard, a
respondent must state in the answer whether the respondent relied on
the advice of counsel, accountants, auditors, or other professionals in
connection with any claim, violation alleged or remedy sought. Failure
to do so may be deemed a waiver.
    (d) Motion for more definite statement. A respondent may file with
an answer a motion for a more definite statement of specified matters
of fact or law to be considered or determined. Such motion shall state
the respects in which, and the reasons why, each such matter of fact or
law should be required to be made more definite. If the motion is
granted, the order granting such motion shall set the periods for
filing such a statement and any answer thereto.
    (e) Amendments. A respondent may amend its answer at any time by
written consent of each adverse party or with leave of the Commission
or the hearing officer. Leave shall be freely granted when justice so
requires.
    (f) Failure to file answer: Default. If a respondent fails to file
an answer required by this section within the time provided, such
respondent may be deemed in default pursuant to Sec.  201.155(a). A
party may make a motion to set aside a default pursuant to Sec.
201.155(b).

0
7. Section 201.221 is amended by revising paragraph (c) to read as
follows.

Sec.  201.221  Prehearing conference.

* * * * *
    (c) Subjects to be discussed. At a prehearing conference
consideration may be given and action taken with respect to any and all
of the following:

    (1) Simplification and clarification of the issues;
    (2) Exchange of witness and exhibit lists and copies of exhibits;
    (3) Timing of expert witness disclosures and reports, if any;
    (4) Stipulations, admissions of fact, and stipulations concerning
the contents, authenticity, or admissibility into evidence of
documents;
    (5) Matters of which official notice may be taken;
    (6) The schedule for exchanging prehearing motions or briefs, if
any;
    (7) The method of service for papers other than Commission orders;
    (8) The filing of any motion pursuant to Sec.  201.250;
    (9) Settlement of any or all issues;
    (10) Determination of hearing dates;
    (11) Amendments to the order instituting proceedings or answers
thereto;
    (12) Production, and timing for completion of the production, of
documents as set forth in Sec.  201.230, and prehearing production of
documents in response to subpoenas duces tecum as set forth in Sec.
201.232;
    (13) Specification of procedures as set forth in Sec.  201.202;
    (14) Depositions to be conducted, if any, and date by which
depositions shall be completed; and
    (15) Such other matters as may aid in the orderly and expeditious
disposition of the proceeding.
* * * * *

0
8. Section 201.222 is amended by revising the section heading and
paragraph (b) to read as follows:

Sec.  201.222  Prehearing submissions and disclosures.

* * * * *
    (b) Expert witnesses--(1) Information to be supplied; reports. Each
party who intends to call an expert witness shall submit, in addition
to the information required by paragraph (a)(4) of this section, a
statement of the expert's qualifications, a listing of other
proceedings in which the expert has given expert testimony during the
previous four years, and a list of publications authored or co-authored
by the expert in the previous ten years. Additionally, if the witness
is one retained or specially employed to provide expert testimony in
the case or one whose duties as the party's employee regularly involve
giving expert testimony, then the party must include in the disclosure
a written report--prepared and signed by the witness. The report must
contain:
    (i) A complete statement of all opinions the witness will express
and the basis and reasons for them;
    (ii) The facts or data considered by the witness in forming them;
    (iii) Any exhibits that will be used to summarize or support them;
and
    (iv) A statement of the compensation to be paid for the study and
testimony in the case.
    (2) Drafts and communications protected. (i) Drafts of any report
or other disclosure required under this section need not be furnished
regardless of the form in which the draft is recorded.
    (ii) Communications between a party's attorney and the party's
expert witness who is required to provide a report under this section
need not be furnished regardless of the form of the communications,
except if the communications relate to compensation for the expert's
study or testimony, identify facts or data that the party's attorney
provided and that the expert considered in forming the opinions to be
expressed, or identify assumptions that the party's attorney provided
and that the expert relied on in forming the opinions to be expressed.

0
9. Section 201.230 is amended by:
0
a. In paragraph (a)(1)(vi), removing the term ``Division of Market
Regulation'' and adding in its place ``Division of Trading and
Markets'';
0
b. Revising the paragraph (b) heading;
0
c. Removing ``or'' at the end of paragraph (b)(1)(iii);
0
d. Redesignating paragraph (b)(1)(iv) as paragraph (b)(1)(v) and adding
a new paragraph (b)(1)(iv);
0
e. Redesignating paragraph (b)(2) as paragraph (b)(3) and adding a new
paragraph (b)(2); and
0
f. In paragraph (c), removing the term ``(b)(1)(i) through (b)(1)(iv)''
and adding in its place ``(b)(1)(i) through (v)'' wherever it occurs.
    The revision and additions read as follows:

Sec.  201.230  Enforcement and disciplinary proceedings: Availability
of documents for inspection and copying.

* * * * *
    (b) Documents that may be withheld or redacted.
    (1) * * *
    (iv) The document reflects only settlement negotiations between the
Division of Enforcement and a person or entity who is not a respondent
in the proceeding; or
* * * * *
    (2) Unless the hearing officer orders otherwise upon motion, the
Division of Enforcement may redact information from a document if:
    (i) The information is among the categories set forth in paragraphs
(b)(1)(i) through (v) of this section; or
    (ii) The information consists of the following with regard to a
person other than the respondent to whom the information is being
produced:
    (A) An individual's social-security number;
    (B) An individual's birth date;
    (C) The name of an individual known to be a minor; or
    (D) A financial account number, taxpayer-identification number,
credit card or debit card number, passport number, driver's license
number, or state-issued identification number other than the last four
digits of the number.
* * * * *

0
10. Section 201.232 is amended by revising paragraphs (a) introductory
text, (c), (d), (e), and (f) to read as follows:

Sec.  201.232  Subpoenas.

    (a) Availability; procedure. In connection with any hearing ordered
by the Commission or any deposition permitted under Sec.  201.233, a
party may request the issuance of subpoenas requiring the attendance
and testimony of witnesses at such depositions or at the designated
time and place of hearing, and subpoenas requiring the production of
documentary or other tangible evidence returnable at any designated
time or place. Unless made on the record at a hearing, requests for
issuance of a subpoena shall be made in writing and served on each
party pursuant to Sec.  201.150. A person whose request for a subpoena
has been denied or modified may not request that any other person issue
the subpoena.
* * * * *
    (c) Service. Service shall be made pursuant to the provisions of
Sec.  201.150(b) through (d). The provisions of this paragraph (c)
shall apply to the issuance of subpoenas for purposes of
investigations, as required by 17 CFR 203.8, as well as depositions and
hearings.
    (d) Tender of fees required. When a subpoena ordering the
attendance of a person at a hearing or deposition is issued at the
instance of anyone other than an officer or agency of the United
States, service is valid only if the subpoena is accompanied by a
tender to the subpoenaed person of the fees for one day's attendance
and mileage specified by paragraph (f) of this section.
    (e) Application to quash or modify--(1) Procedure. Any person to
whom a subpoena or notice of deposition is directed, or who is an
owner, creator or the subject of the documents that are to be produced
pursuant to a subpoena, or any party may, prior to the time

specified therein for compliance, but in no event more than 15 days
after the date of service of such subpoena or notice, request that the
subpoena or notice be quashed or modified. Such request shall be made
by application filed with the Secretary and served on all parties
pursuant to Sec.  201.150. The party on whose behalf the subpoena or
notice was issued may, within five days of service of the application,
file an opposition to the application. If a hearing officer has been
assigned to the proceeding, the application to quash shall be directed
to that hearing officer for consideration, even if the subpoena or
notice was issued by another person.
    (2) Standards governing application to quash or modify. If
compliance with the subpoena or notice of deposition would be
unreasonable, oppressive, unduly burdensome or would unduly delay the
hearing, the hearing officer or the Commission shall quash or modify
the subpoena or notice, or may order a response to the subpoena, or
appearance at a deposition, only upon specified conditions. These
conditions may include but are not limited to a requirement that the
party on whose behalf the subpoena was issued shall make reasonable
compensation to the person to whom the subpoena was addressed for the
cost of copying or transporting evidence to the place for return of the
subpoena.
    (3) Additional standards governing application to quash deposition
notices or subpoenas filed pursuant to Sec.  201.233(a). The hearing
officer or the Commission shall quash or modify a deposition notice or
subpoena filed or issued pursuant to Sec.  201.233(a) unless the
requesting party demonstrates that the deposition notice or subpoena
satisfies the requirements of Sec.  201.233(a), and:
    (i) The proposed deponent was a witness of or participant in any
event, transaction, occurrence, act, or omission that forms the basis
for any claim asserted by the Division of Enforcement, any defense, or
anything else required to be included in an answer pursuant to Sec.
201.220(c) by any respondent in the proceeding (this excludes a
proposed deponent whose only knowledge of these matters arises from the
Division of Enforcement's investigation or the proceeding);
    (ii) The proposed deponent is a designated as an ``expert witness''
under Sec.  201.222(b); provided, however, that the deposition of an
expert who is required to submit a written report under Sec.
201.222(b) may only occur after such report is served; or
    (iii) The proposed deponent has custody of documents or electronic
data relevant to the claims or defenses of any party (this excludes
Division of Enforcement or other Commission officers or personnel who
have custody of documents or data that was produced by the Division to
the respondent).
    (f) Witness fees and mileage. Witnesses summoned before the
Commission shall be paid the same fees and mileage that are paid to
witnesses in the courts of the United States, and witnesses whose
depositions are taken and the persons taking the same shall severally
be entitled to the same fees as are paid for like services in the
courts of the United States. Witness fees and mileage shall be paid by
the party at whose instance the witnesses appear. Except for such
witness fees and mileage, each party is responsible for paying any fees
and expenses of the expert witnesses whom that party designates under
Sec.  201.222(b), for appearance at any deposition or hearing.

0
11. Section 201.233 is revised to read as follows:

Sec.  201.233  Depositions upon oral examination.

    (a) Depositions upon written notice. In any proceeding under the
120-day timeframe designated pursuant to Sec.  201.360(a)(2),
depositions upon written notice may be taken as set forth in this
paragraph. No other depositions shall be permitted except as provided
in paragraph (b) of this section.
    (1) If the proceeding involves a single respondent, the respondent
may file written notices to depose no more than three persons, and the
Division of Enforcement may file written notices to depose no more than
three persons.
    (2) If the proceeding involves multiple respondents, the
respondents collectively may file joint written notices to depose no
more than five persons, and the Division of Enforcement may file
written notices to depose no more than five persons. The depositions
taken under this paragraph (a)(2) shall not exceed a total of five
depositions for the Division of Enforcement, and five depositions for
all respondents collectively.
    (3) Additional depositions upon motion. Any side may file a motion
with the hearing officer seeking leave to notice up to two additional
depositions beyond those permitted pursuant to paragraphs (a)(1) and
(2) of this section.
    (i) Procedure. (A) A motion for additional depositions must be
filed no later than 90 days prior to the hearing date. Any party
opposing the motion may submit an opposition within five days after
service of the motion. No reply shall be permitted. The motion and any
oppositions each shall not exceed seven pages in length. These
limitations exclusively govern motions under this section;
notwithstanding Sec.  201.154(a), any points and authorities shall be
included in the motion or opposition, with no separate statement of
points and authorities permitted, and none of the requirements in Sec.
201.154(b) or (c) shall apply.
    (B) Upon consideration of the motion and any opposing papers, the
hearing officer will issue an order either granting or denying the
motion. The hearing officer shall consider the motion on an expedited
basis.
    (C) The proceeding shall not automatically be stayed pending the
determination of the motion.
    (ii) Grounds and standards for motion. A motion under this
paragraph (a)(3) shall not be granted unless the additional depositions
satisfy Sec.  201.232(e) and the moving side demonstrates a compelling
need for the additional depositions by:
    (A) Identifying each of the witnesses whom the moving side plans to
depose pursuant to paragraph (a)(1) or (2) of this section as well as
the additional witnesses whom the side seeks to depose;
    (B) Describing the role of each witness and proposed additional
witness;
    (C) Describing the matters concerning which each witness and
proposed additional witness is expected to be questioned, and why the
deposition of each witness and proposed additional witness is necessary
for the moving side's arguments, claims, or defenses; and
    (D) Showing that the additional deposition(s) requested will not be
unreasonably cumulative or duplicative.
    (iii) If the moving side proposes to take and submit the additional
deposition(s) on written questions, as provided in Sec.  201.234, the
motion shall so state. The motion for additional depositions shall
constitute a motion under Sec.  201.234(a), and the moving party is
required to submit its questions with its motion under this rule. The
procedures for such a deposition shall be governed by Sec.  201.234.
    (4) A deponent's attendance may be ordered by subpoena issued
pursuant to the procedures in Sec.  201.232; and
    (5) The Commission or hearing officer may rule on a motion that a
deposition noticed under paragraph (a)(1) or (2) of this section shall
not be taken upon a determination under Sec.  201.232(e). The fact that
a witness testified during an investigation does not preclude the
deposition of that witness.
    (b) Depositions when witness is unavailable. In addition to
depositions permitted under paragraph (a) of this

section, the Commission or the hearing officer may grant a party's
request to file a written notice of deposition if the requesting party
shows that the prospective witness will likely give testimony material
to the proceeding; that it is likely the prospective witness, who is
then within the United States, will be unable to attend or testify at
the hearing because of age, sickness, infirmity, imprisonment, other
disability, or absence from the United States, unless it appears that
the absence of the witness was procured by the party requesting the
deposition; and that the taking of a deposition will serve the
interests of justice.
    (c) Service and contents of notice. Notice of any deposition
pursuant to this section shall be made in writing and served on each
party pursuant to Sec.  201.150. A notice of deposition shall designate
by name a deposition officer. The deposition officer may be any person
authorized to administer oaths by the laws of the United States or of
the place where the deposition is to be held. A notice of deposition
also shall state:
    (1) The name and address of the witness whose deposition is to be
taken;
    (2) The time and place of the deposition; provided that a subpoena
for a deposition may command a person to attend a deposition only as
follows:
    (i) Within 100 miles of where the person resides, is employed, or
regularly transacts business in person;
    (ii) Within the state where the person resides, is employed, or
regularly transacts business in person, if the person is a party or a
party's officer;
    (iii) At such other location that the parties and proposed deponent
stipulate; or
    (iv) At such other location that the hearing officer or the
Commission determines is appropriate; and
    (3) The manner of recording and preserving the deposition.
    (d) Producing documents. In connection with any deposition pursuant
to this section, a party may request the issuance of a subpoena duces
tecum under Sec.  201.232. The party conducting the deposition shall
serve upon the deponent any subpoena duces tecum so issued. The
materials designated for production, as set out in the subpoena, must
be listed in the notice of deposition.
    (e) Method of recording--(1) Method stated in the notice. The party
who notices the deposition must state in the notice the method for
recording the testimony. Unless the hearing officer or Commission
orders otherwise, testimony may be recorded by audio, audiovisual, or
stenographic means. The noticing party bears the recording costs. Any
party may arrange to transcribe a deposition, at that party's expense.
Each party shall bear its own costs for obtaining copies of any
transcripts or audio or audiovisual recordings.
    (2) Additional method. With prior notice to the deponent and other
parties, any party may designate another method for recording the
testimony in addition to that specified in the original notice. That
party bears the expense of the additional record or transcript unless
the hearing officer or the Commission orders otherwise.
    (f) By remote means. The parties may stipulate--or the hearing
officer or Commission may on motion order--that a deposition be taken
by telephone or other remote means. For the purpose of this section,
the deposition takes place where the deponent answers the questions.
    (g) Deposition officer's duties--(1) Before the deposition. The
deposition officer designated pursuant to paragraph (c) of this section
must begin the deposition with an on-the-record statement that
includes:
    (i) The deposition officer's name and business address;
    (ii) The date, time, and place of the deposition;
    (iii) The deponent's name;
    (iv) The deposition officer's administration of the oath or
affirmation to the deponent; and
    (v) The identity of all persons present.
    (2) Conducting the deposition; avoiding distortion. If the
deposition is recorded non-stenographically, the deposition officer
must repeat the items in paragraphs (g)(1)(i) through (iii) of this
section at the beginning of each unit of the recording medium. The
deponent's and attorneys' appearance or demeanor must not be distorted
through recording techniques.
    (3) After the deposition. At the end of a deposition, the
deposition officer must state on the record that the deposition is
complete and must set out any stipulations made by the attorneys about
custody of the transcript or recording and of the exhibits, or about
any other pertinent matters.
    (h) Order and record of the examination--(1) Order of examination.
The examination and cross-examination of a deponent shall proceed as
they would at the hearing. After putting the deponent under oath or
affirmation, the deposition officer must record the testimony by the
method designated under paragraph (e) of this section. The testimony
must be recorded by the deposition officer personally or by a person
acting in the presence and under the direction of the deposition
officer. The witness being deposed may have counsel present during the
deposition.
    (2) Form of objections stated during the deposition. An objection
at the time of the examination--whether to evidence, to a party's
conduct, to the deposition officer's qualifications, to the manner of
taking the deposition, or to any other aspect of the deposition--must
be noted on the record, but the examination shall still proceed and the
testimony shall be taken subject to any objection. An objection must be
stated concisely in a nonargumentative and nonsuggestive manner. A
person may instruct a deponent not to answer only when necessary to
preserve a privilege, to enforce a limitation ordered by the hearing
officer or the Commission, or to present a motion to the hearing
officer or the Commission for a limitation on the questioning in the
deposition.
    (i) Waiver of objections--(1) To the notice. An objection to an
error or irregularity in a deposition notice is waived unless promptly
served in writing on the party giving the notice.
    (2) To the deposition officer's qualification. An objection based
on disqualification of the deposition officer before whom a deposition
is to be taken is waived if not made:
    (i) Before the deposition begins; or
    (ii) Promptly after the basis for disqualification becomes known
or, with reasonable diligence, could have been known.
    (3) To the taking of the deposition--(i) Objection to competence,
relevance, or materiality. An objection to a deponent's competence--or
to the competence, relevance, or materiality of testimony--is not
waived by a failure to make the objection before or during the
deposition, unless the ground for it might have been corrected at that
time.
    (ii) Objection to an error or irregularity. An objection to an
error or irregularity at an oral examination is waived if:
    (A) It relates to the manner of taking the deposition, the form of
a question or answer, the oath or affirmation, a party's conduct, or
other matters that might have been corrected at that time; and
    (B) It is not timely made during the deposition.
    (4) To completing and returning the deposition. An objection to how
the deposition officer transcribed the testimony--or prepared, signed,
certified, sealed, endorsed, sent, or otherwise dealt with the
deposition--is waived unless a motion to suppress is made promptly
after the error or irregularity becomes known or, with reasonable
diligence, could have been known.

    (j) Duration; cross-examination; motion to terminate or limit--(1)
Duration. Unless otherwise stipulated or ordered by the hearing officer
or the Commission, a deposition is limited to one day of seven hours,
including cross-examination as provided in this subsection. In a
deposition conducted by or for a respondent, the Division of
Enforcement shall be allowed a reasonable amount of time for cross-
examination of the deponent. In a deposition conducted by the Division,
the respondents collectively shall be allowed a reasonable amount of
time for cross-examination of the deponent. The hearing officer or the
Commission may allow additional time if needed to fairly examine the
deponent or if the deponent, another person, or any other circumstance
impedes or delays the examination.
    (2) Motion to terminate or limit--(i) Grounds. At any time during a
deposition, the deponent or a party may move to terminate or limit it
on the ground that it is being conducted in bad faith or in a manner
that unreasonably annoys, embarrasses, or oppresses the deponent or
party. If the objecting deponent or party so demands, the deposition
must be suspended for the time necessary to present the motion to the
hearing officer or the Commission.
    (ii) Order. Upon a motion under paragraph (j)(2)(i) of this
section, the hearing officer or the Commission may order that the
deposition be terminated or may limit its scope. If terminated, the
deposition may be resumed only by order of the hearing officer or the
Commission.
    (k) Review by the witness; changes--(1) Review; statement of
changes. On request by the deponent or a party before the deposition is
completed, and unless otherwise ordered by the hearing officer or the
Commission, the deponent must be allowed 14 days after being notified
by the deposition officer that the transcript or recording is
available, unless a longer time is agreed to by the parties or
permitted by the hearing officer, in which:
    (i) To review the transcript or recording; and
    (ii) If there are changes in form or substance, to sign a statement
listing the changes and the reasons for making them.
    (2) Changes indicated in the deposition officer's certificate. The
deposition officer must note in the certificate prescribed by paragraph
(l)(1) of this section whether a review was requested and, if so, must
attach any changes the deponent makes during the 14-day period.
    (l) Certification and delivery; exhibits; copies of the transcript
or recording--(1) Certification and delivery. The deposition officer
must certify in writing that the witness was duly sworn and that the
deposition accurately records the witness's testimony. The certificate
must accompany the record of the deposition. Unless the hearing officer
orders otherwise, the deposition officer must seal the deposition in an
envelope or package bearing the title of the action and marked
``Deposition of [witness's name]'' and must promptly send it to the
attorney or party who arranged for the transcript or recording. The
attorney or party must store it under conditions that will protect it
against loss, destruction, tampering, or deterioration.
    (2) Documents and tangible things--(i) Originals and copies.
Documents and tangible things produced for inspection during a
deposition must, on a party's request, be marked for identification and
attached to the deposition. Any party may inspect and copy them. But if
the person who produced them wants to keep the originals, the person
may:
    (A) Offer copies to be marked, attached to the deposition, and then
used as originals--after giving all parties a fair opportunity to
verify the copies by comparing them with the originals; or
    (B) Give all parties a fair opportunity to inspect and copy the
originals after they are marked--in which event the originals may be
used as if attached to the deposition.
    (ii) Order regarding the originals. Any party may move for an order
that the originals be attached to the deposition pending final
disposition of the case.
    (3) Copies of the transcript or recording. Unless otherwise
stipulated or ordered by the hearing officer or Commission, the
deposition officer must retain the stenographic notes of a deposition
taken stenographically or a copy of the recording of a deposition taken
by another method. When paid reasonable charges, the deposition officer
must furnish a copy of the transcript or recording to any party or the
deponent, as directed by the party or person paying such charges.
    (m) Presentation of objections or disputes. Any party seeking
relief with respect to disputes over the conduct of a deposition may
file a motion with the hearing officer to obtain relief as permitted by
this part.

0
12. Section 201.234 is amended by revising paragraphs (a) and (c) to
read as follows:

Sec.  201.234  Depositions upon written questions.

    (a) Availability. Any deposition permitted under Sec.  201.233 may
be taken and submitted on written questions upon motion of any party,
for good cause shown, or as stipulated by the parties.
* * * * *
    (c) Additional requirements. The order for deposition, filing of
the deposition, form of the deposition and use of the deposition in the
record shall be governed by paragraphs (c) through (l) of Sec.
201.233, except that no cross-examination shall be made.

0
13. Section 201.235 is amended by revising the section heading and
paragraphs (a) introductory text, (a)(2), (4), and (5) and adding
paragraph (b) to read as follows:

Sec.  201.235  Introducing prior sworn statements or declarations.

    (a) At a hearing, any person wishing to introduce a prior, sworn
deposition taken pursuant to Sec.  201.233 or Sec.  201.234,
investigative testimony, or other sworn statement or a declaration
pursuant to 28 U.S.C. 1746, of a witness, not a party, otherwise
admissible in the proceeding, may make a motion setting forth the
reasons therefor. If only part of a statement or declaration is offered
in evidence, the hearing officer may require that all relevant portions
of the statement or declaration be introduced. If all of a statement or
declaration is offered in evidence, the hearing officer may require
that portions not relevant to the proceeding be excluded. A motion to
introduce a prior sworn statement or declaration may be granted if:
* * * * *
    (2) The witness is out of the United States, unless it appears that
the absence of the witness was procured by the party offering the prior
sworn statement or declaration;
* * * * *
    (4) The party offering the prior sworn statement or declaration has
been unable to procure the attendance of the witness by subpoena; or
    (5) In the discretion of the Commission or the hearing officer, it
would be desirable, in the interests of justice, to allow the prior
sworn statement or declaration to be used. In making this
determination, due regard shall be given to the presumption that
witnesses will testify orally in an open hearing. If the parties have
stipulated to accept a prior sworn statement or declaration in lieu of
live testimony, consideration shall also be given to the convenience of
the parties in avoiding unnecessary expense.

    (b) Sworn statement or declaration of party or agent. An adverse
party may use for any purpose a deposition taken pursuant to Sec.
201.233 or Sec.  201.234, investigative testimony, or other sworn
statement or a declaration pursuant to 28 U.S.C. 1746, of a party or
anyone who, when giving the sworn statement or declaration, was the
party's officer, director, or managing agent.

0
14. Section 201.250 is revised to read as follows:

Sec.  201.250  Dispositive motions.

    (a) Motion for a ruling on the pleadings. No later than 14 days
after a respondent's answer has been filed, any party may move for a
ruling on the pleadings on one or more claims or defenses, asserting
that, even accepting all of the non-movant's factual allegations as
true and drawing all reasonable inferences in the non-movant's favor,
the movant is entitled to a ruling as a matter of law. The hearing
officer shall promptly grant or deny the motion.
    (b) Motion for summary disposition in 30- and 75-day proceedings.
In any proceeding under the 30- or 75-day timeframe designated pursuant
to Sec.  201.360(a)(2), after a respondent's answer has been filed and
documents have been made available to that respondent for inspection
and copying pursuant to Sec.  201.230, any party may make a motion for
summary disposition on one or more claims or defenses, asserting that
the undisputed pleaded facts, declarations, affidavits, documentary
evidence or facts officially noted pursuant to Sec.  201.323 show that
there is no genuine issue with regard to any material fact and that the
movant is entitled to summary disposition as a matter of law. The
hearing officer shall promptly grant or deny the motion for summary
disposition or shall defer decision on the motion. If it appears that a
party, for good cause shown, cannot present prior to the hearing facts
essential to justify opposition to the motion, the hearing officer
shall deny or defer the motion.
    (c) Motion for summary disposition in 120-day proceedings. In any
proceeding under the 120-day timeframe designated pursuant to Sec.
201.360(a)(2), after a respondent's answer has been filed and documents
have been made available to that respondent for inspection and copying
pursuant to Sec.  201.230, a party may make a motion for summary
disposition on one or more claims or defenses, asserting that the
undisputed pleaded facts, declarations, affidavits, deposition
transcripts, documentary evidence or facts officially noted pursuant to
Sec.  201.323 show that there is no genuine issue with regard to any
material fact and that the movant is entitled to summary disposition as
a matter of law. A motion for summary disposition shall be made only
with leave of the hearing officer. Leave shall be granted only for good
cause shown and if consideration of the motion will not delay the
scheduled start of the hearing. The hearing officer shall promptly
grant or deny the motion for summary disposition or shall defer
decision on the motion. If it appears that a party, for good cause
shown, cannot present prior to the hearing facts essential to justify
opposition to the motion, the hearing officer shall deny or defer the
motion.
    (d) Motion for a ruling as a matter of law following completion of
case in chief. Following the interested division's presentation of its
case in chief, any party may make a motion, asserting that the movant
is entitled to a ruling as a matter of law on one or more claims or
defenses.
    (e) Length limitation for dispositive motions. Dispositive motions,
together with any supporting memorandum of points and authorities
(exclusive of any declarations, affidavits, deposition transcripts or
other attachments), shall not exceed 9,800 words. Requests for leave to
file motions and accompanying documents in excess of 9,800 words are
disfavored. A double-spaced motion that does not, together with any
accompanying memorandum of points and authorities, exceed 35 pages in
length, inclusive of pleadings incorporated by reference (but excluding
any declarations, affidavits, deposition transcripts or attachments) in
the dispositive motion, is presumptively considered to contain no more
than 9,800 words. Any motion that exceeds this page limit must include
a certificate by the attorney, or an unrepresented party, stating that
the brief complies with the word limit set forth in this paragraph and
stating the number of words in the motion. The person preparing the
certificate may rely on the word count of a word-processing program to
prepare the document.
    (f) Opposition and reply length limitations and response time. A
non-moving party may file an opposition to a dispositive motion and the
moving party may thereafter file a reply.
    (1) Length limitations. Any opposition must comply with the length
limitations applicable to the movant's motion as set forth in paragraph
(e) of this section. Any reply must comply with the length limitations
set forth in Sec.  201.154(c).
    (2) Response time. (i) For motions under paragraphs (a), (b), and
(d) of this section, the response times set forth in Sec.  201.154(b)
apply to any opposition and reply briefs.
    (ii) For motions under paragraph (c) of this section, any
opposition must be filed within 21 days after service of such a motion,
and any reply must be filed within seven days after service of any
opposition.

0
15. Section 201.320 is revised to read as follows:

Sec.  201.320  Evidence: Admissibility.

    (a) Except as otherwise provided in this section, the Commission or
the hearing officer may receive relevant evidence and shall exclude all
evidence that is irrelevant, immaterial, unduly repetitious, or
unreliable.
    (b) Subject to Sec.  201.235, evidence that constitutes hearsay may
be admitted if it is relevant, material, and bears satisfactory indicia
of reliability so that its use is fair.

0
16. Section 201.360 is amended by revising the section heading and
paragraphs (a)(2) and (3), (b) introductory text, and (c) to read as
follows:

Sec.  201.360  Initial decision of hearing officer and timing of
hearing.

    (a) * * *
    (2) Time period for filing initial decision and for hearing--(i)
Initial decision. In the order instituting proceedings, the Commission
will specify a time period in which the hearing officer's initial
decision must be filed with the Secretary. In the Commission's
discretion, after consideration of the nature, complexity, and urgency
of the subject matter, and with due regard for the public interest and
the protection of investors, this time period will be either 30, 75, or
120 days. The time period will run from the occurrence of the following
events:
    (A) The completion of post-hearing briefing in a proceeding where
the hearing has been completed; or
    (B) The completion of briefing on a Sec.  201.250 motion in the
event the hearing officer has determined that no hearing is necessary;
or
    (C) The determination by the hearing officer that, pursuant to
Sec.  201.155, a party is deemed to be in default and no hearing is
necessary.
    (ii) Hearing. Under the 120-day timeline, the hearing officer shall
issue an order scheduling the hearing to begin approximately four
months (but no more than ten months) from the date of service of the
order instituting the proceeding. Under the 75-day timeline, the
hearing officer shall issue an order scheduling the hearing to begin
approximately 2-\1/2\ months (but no more than six months) from the
date of

service of the order instituting the proceeding. Under the 30-day
timeline, the hearing officer shall issue an order scheduling the
hearing to begin approximately one month (but no more than four months)
from the date of service of the order instituting the proceeding. These
deadlines confer no substantive rights on respondents. If a stay is
granted pursuant to Sec.  201.161(c)(2)(i) or Sec.  201.210(c)(3), the
time period specified in the order instituting proceedings in which the
hearing officer's initial decision must be filed with the Secretary, as
well as any other time limits established in orders issued by the
hearing officer in the proceeding, shall be automatically tolled during
the period while the stay is in effect.
    (3) Certification of extension; motion for extension. (i) In the
event that the hearing officer presiding over the proceeding determines
that it will not be possible to file the initial decision within the
specified period of time, the hearing officer may certify to the
Commission in writing the need to extend the initial decision deadline
by up to 30 days for case management purposes. The certification must
be issued no later than 30 days prior to the expiration of the time
specified for the issuance of an initial decision and be served on the
Commission and all parties in the proceeding. If the Commission has not
issued an order to the contrary within 14 days after receiving the
certification, the extension set forth in the hearing officer's
certification shall take effect.
    (ii) Either in addition to a certification of extension, or instead
of a certification of extension, the Chief Administrative Law Judge may
submit a motion to the Commission requesting an extension of the time
period for filing the initial decision. First, the hearing officer
presiding over the proceeding must consult with the Chief
Administrative Law Judge. Following such consultation, the Chief
Administrative Law Judge may determine, in his or her discretion, to
submit a motion to the Commission requesting an extension of the time
period for filing the initial decision. This motion may request an
extension of any length but must be filed no later than 15 days prior
to the expiration of the time specified in the certification of
extension, or if there is no certification of extension, 30 days prior
to the expiration of the time specified in the order instituting
proceedings. The motion will be served upon all parties in the
proceeding, who may file with the Commission statements in support of
or in opposition to the motion. If the Commission determines that
additional time is necessary or appropriate in the public interest, the
Commission shall issue an order extending the time period for filing
the initial decision.
    (iii) The provisions of this paragraph (a)(3) confer no rights on
respondents.
    (b) Content. An initial decision shall include findings and
conclusions, and the reasons or basis therefor, as to all the material
issues of fact, law or discretion presented on the record and the
appropriate order, sanction, relief, or denial thereof. The initial
decision shall also state the time period, not to exceed 21 days after
service of the decision, except for good cause shown, within which a
petition for review of the initial decision may be filed. The reasons
for any extension of time shall be stated in the initial decision. The
initial decision shall also include a statement that, as provided in
paragraph (d) of this section:
* * * * *
    (c) Filing, service and publication. The Secretary shall promptly
serve the initial decision upon the parties and shall promptly publish
notice of the filing thereof on the SEC Web site. Thereafter, the
Secretary shall publish the initial decision in the SEC Docket;
provided, however, that in nonpublic proceedings no notice shall be
published unless the Commission otherwise directs.
* * * * *

0
17. Section 201.410 is amended by revising paragraph (b), redesignating
paragraph (c) as paragraph (d), and adding a new paragraph (c) to read
as follows:

Sec.  201.410  Appeal of initial decisions by hearing officers.

* * * * *
    (b) Procedure. The petition for review of an initial decision shall
be filed with the Commission within such time after service of the
initial decision as prescribed by the hearing officer pursuant to Sec.
201.360(b) unless a party has filed a motion to correct an initial
decision with the hearing officer. If such correction has been sought,
a party shall have 21 days from the date of the hearing officer's order
resolving the motion to correct to file a petition for review. The
petition shall set forth a statement of the issues presented for review
under Sec.  201.411(b). In the event a petition for review is filed,
any other party to the proceeding may file a cross-petition for review
within the original time allowed for seeking review or within ten days
from the date that the petition for review was filed, whichever is
later.
    (c) Length limitation. Except with leave of the Commission, the
petition for review shall not exceed three pages in length.
Incorporation of pleadings or filings by reference into the petition is
not permitted. Motions to file petitions in excess of those limitations
are disfavored.
* * * * *

0
18. Section 201.411 is amended by:
0
a. In paragraph (c), removing the term ``Sec.  210.410(b)'' and adding
in its place ``Sec.  201.410(b)''; and
0
b. Revising paragraph (d).
    The revision reads as follows:

Sec.  201.411  Commission consideration of initial decisions by hearing
officers.

* * * * *
    (d) Limitations on matters reviewed. Review by the Commission of an
initial decision shall be limited to the issues specified in an opening
brief that complies with Sec.  201.450(b), or the issues, if any,
specified in the briefing schedule order issued pursuant to Sec.
201.450(a). Any exception to an initial decision not supported in an
opening brief that complies with Sec.  201.450(b) may, at the
discretion of the Commission, be deemed to have been waived by the
petitioner. On notice to all parties, however, the Commission may, at
any time prior to issuance of its decision, raise and determine any
other matters that it deems material, with opportunity for oral or
written argument thereon by the parties.
* * * * *

0
19. Section 201.420 is amended by:
0
a. Revising paragraph (a); and
0
b. Adding a sentence to the end of paragraph (c).
    The revision and addition read as follows:

Sec.  201.420  Appeal of determinations by self-regulatory
organizations.

    (a) Application for review; when available. An application for
review by the Commission may be filed by any person who is aggrieved by
a determination of a self-regulatory organization with respect to any:
    (1) Final disciplinary sanction;
    (2) Denial or conditioning of membership or participation;
    (3) Prohibition or limitation in respect to access to services
offered by that self-regulatory organization or a member thereof; or
    (4) Bar from association as to which a notice is required to be
filed with the Commission pursuant to Section 19(d)(1) of the Exchange
Act, 15 U.S.C. 78s(d)(1).
* * * * *
    (c) * * * Any exception to a determination not supported in an

opening brief that complies with Sec.  201.450(b) may, at the
discretion of the Commission, be deemed to have been waived by the
applicant.
* * * * *

0
20. Section 201.440 is amended by revising paragraph (b) to read as
follows:

Sec.  201.440  Appeal of determinations by the Public Company
Accounting Oversight Board.

* * * * *
    (b) Procedure. An aggrieved person may file an application for
review with the Commission pursuant to Sec.  201.151 within 30 days
after the notice filed by the Board of its determination with the
Commission pursuant to 17 CFR 240.19d-4 is received by the aggrieved
person applying for review. The applicant shall serve the application
on the Board at the same time. The application shall identify the
determination complained of, set forth in summary form a brief
statement of alleged errors in the determination and supporting reasons
therefor, and state an address where the applicant can be served. The
application should not exceed two pages in length. The notice of
appearance required by Sec.  201.102(d) shall accompany the
application. Any exception to a determination not supported in an
opening brief that complies with Sec.  201.450(b) may, at the
discretion of the Commission, be deemed to have been waived by the
applicant.
* * * * *
0
21. Section 201.450 is amended by revising paragraphs (b), (c), and (d)
to read as follows.

Sec.  201.450  Briefs filed with the Commission.

* * * * *
    (b) Contents of briefs. Briefs shall be confined to the particular
matters at issue. Each exception to the findings or conclusions being
reviewed shall be stated succinctly. Exceptions shall be supported by
citation to the relevant portions of the record, including references
to the specific pages relied upon, and by concise argument including
citation of such statutes, decisions and other authorities as may be
relevant. If the exception relates to the admission or exclusion of
evidence, the substance of the evidence admitted or excluded shall be
set forth in the brief, or by citation to the record. Reply briefs
shall be confined to matters in opposition briefs of other parties;
except as otherwise determined by the Commission in its discretion, any
argument raised for the first time in a reply brief shall be deemed to
have been waived.
    (c) Length limitation. Except with leave of the Commission, opening
and opposition briefs shall not exceed 14,000 words and reply briefs
shall not exceed 7,000 words, exclusive of pages containing the table
of contents, table of authorities, and any addendum that consists
solely of copies of applicable cases, pertinent legislative provisions
or rules, and exhibits. Incorporation of pleadings or filings by
reference into briefs submitted to the Commission is not permitted.
Motions to file briefs in excess of these limitations are disfavored.
    (d) Certificate of compliance. An opening or opposition brief that
does not exceed 30 pages in length, exclusive of pages containing the
table of contents, table of authorities, and any addendum that consists
solely of copies of applicable cases, pertinent legislative provisions,
or rules and exhibits, is presumptively considered to contain no more
than 14,000 words. A reply brief that does not exceed 15 pages in
length, exclusive of pages containing the table of contents, table of
authorities, and any addendum that consists solely of copies of
applicable cases, pertinent legislative provisions, or rules and
exhibits is presumptively considered to contain no more than 7,000
words. Any brief that exceeds these page limits must include a
certificate by the party's representative, or an unrepresented party,
stating that the brief complies with the requirements set forth in
paragraph (c) of this section and stating the number of words in the
brief. The person preparing the certificate may rely on the word count
of the word-processing system used to prepare the brief.

0
22. Section 201.900 is revised to read as follows:

Sec.  201.900  Informal procedures and supplementary information
concerning adjudicatory proceedings.

    (a) Guidelines for the timely completion of proceedings. (1) Timely
resolution of adjudicatory proceedings is one factor in assessing the
effectiveness of the adjudicatory program in protecting investors,
promoting public confidence in the securities markets and assuring
respondents a fair hearing. Establishment of guidelines for the timely
completion of key phases of contested administrative proceedings
provides a standard for both the Commission and the public to gauge the
Commission's adjudicatory program on this criterion. The Commission has
directed that:
    (i) To the extent possible, a decision by the Commission on review
of an interlocutory matter should be completed within 45 days of the
date set for filing the final brief on the matter submitted for review.
    (ii) To the extent possible, a decision by the Commission on a
motion to stay a decision that has already taken effect or that will
take effect within five days of the filing of the motion, should be
issued within five days of the date set for filing of the opposition to
the motion for a stay. If the decision complained of has not taken
effect, the Commission's decision should be issued within 45 days of
the date set for filing of the opposition to the motion for a stay.
    (iii) Ordinarily, a decision by the Commission with respect to an
appeal from the initial decision of a hearing officer, a review of a
determination by a self-regulatory organization or the Public Company
Accounting Oversight Board, or a remand of a prior Commission decision
by a court of appeals will be issued within eight months from the
completion of briefing on the petition for review, application for
review, or remand order. If the Commission determines that the
complexity of the issues presented in a petition for review,
application for review, or remand order warrants additional time, the
decision of the Commission in that matter may be issued within ten
months of the completion of briefing.
    (iv) If the Commission determines that a decision by the Commission
cannot be issued within the period specified in paragraph (a)(1)(iii)
of this section, the Commission may extend that period by orders as it
deems appropriate in its discretion. The guidelines in this paragraph
(a) confer no rights or entitlements on parties or other persons.
    (2) The guidelines in this paragraph (a) do not create a
requirement that each portion of a proceeding or the entire proceeding
be completed within the periods described. Among other reasons,
Commission review may require additional time because a matter is
unusually complex or because the record is exceptionally long. In
addition, fairness is enhanced if the Commission's deliberative process
is not 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.
The guidelines will be examined periodically, and, if necessary,
readjusted in light of changes

in the pending caseload and the available level of staff resources.
    (b) Reports to the Commission on pending cases. The administrative
law judges, the Secretary and the General Counsel have each been
delegated authority to issue certain orders or adjudicate certain
proceedings. See 17 CFR 200.30-1 through 200.30-18. Proceedings are
also assigned to the General Counsel for the preparation of a proposed
order or opinion which will then be recommended to the Commission for
consideration. In order to improve accountability by and to the
Commission for management of the docket, the Commission has directed
that confidential status reports with respect to all filed adjudicatory
proceedings shall be made periodically to the Commission. These reports
will be made through the Secretary, with a minimum frequency
established by the Commission. In connection with these periodic
reports, if a proceeding pending before the Commission has not been
concluded within 30 days of the guidelines established in paragraph (a)
of this section, the General Counsel shall specifically apprise the
Commission of that fact, and shall describe the procedural posture of
the case, project an estimated date for conclusion of the proceeding,
and provide such other information as is necessary to enable the
Commission to make a determination under paragraph (a)(1)(iv) of this
section or to determine whether additional steps are necessary to reach
a fair and timely resolution of the matter.
    (c) Publication of information concerning the pending case docket.
Ongoing disclosure of information about the adjudication program
caseload increases awareness of the importance of the program,
facilitates oversight of the program and promotes confidence in the
efficiency and fairness of the program by investors, securities
industry participants, self-regulatory organizations and other members
of the public. The Commission has directed the Secretary to publish in
the first and seventh months of each fiscal year summary statistical
information about the status of pending adjudicatory proceedings and
changes in the Commission's caseload over the prior six months. The
report will 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 will 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, the number of cases decided within the guidelines
for the timely completion of adjudicatory proceedings, and, with
respect to appeals from initial decisions, reviews of determinations by
self-regulatory organizations or the Public Company Accounting
Oversight Board, and remands of prior Commission decisions, the median
days from the completion of briefing to the time of the Commission's
decision.

    By the Commission.

    Dated: July 13, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16987 Filed 7-28-16; 8:45 am]
 BILLING CODE 8011-01-P