[Federal Register: November 27, 2007 (Volume 72, Number 227)]
[Notices]
[Page 66201]
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SECURITIES AND EXCHANGE COMMISSION

Submission for OMB Review; Comment Request

Upon Written Request, Copy Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.

Extension:
    Form N-14; SEC File No. 270-297; OMB Control No. 3235-0336

    Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget requests for extension of the previously approved collection
of information discussed below.
    Form N-14 (17 CFR 239.23) is used by investment companies
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) (``Investment Company Act'') and business development companies
as defined by Section 2(a)(48) of the Investment Company Act to
register securities under the Securities Act of 1933 (15 U.S.C. 77a et
seq.) to be issued in business combination transactions specified in
rule 145(a) (17 CFR 230.145(a)) and exchange offers. The securities are
registered under the Securities Act to ensure that investors receive
the material information necessary to evaluate securities issued in
business combination transactions. The Commission staff reviews
registration statements on Form N-14 for the adequacy and accuracy of
the disclosure contained therein. Without Form N-14, the Commission
would be unable to verify compliance with securities law requirements.
The respondents to the collection of information are investment
companies or business development companies issuing securities in
business combination transactions. The estimated number of responses is
375 and the collection occurs only when a merger or other business
combination is planned. The estimated total annual reporting burden of
the collection of information is approximately 620 hours per response
for a new registration statement, and approximately 350 hours per
response for an amended Form N-14, for a total of 196,050 annual burden
hours. Providing the information on Form N-14 is mandatory. Responses
will not be kept confidential. Estimates of the burden hours are made
solely for the purposes of the Paperwork Reduction Act, and are not
derived from a comprehensive or even a representative survey or study
of the costs of SEC rules and forms.
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number.
    Please direct general comments regarding the above information to
the following persons: (i) Desk Officer for the Securities and Exchange
Commission, Office of Management and Budget, Room 10102, New Executive
Office Building, Washington, DC 20503 or e-mail to:
<EMAIL_ADDRESS>and (ii) R. Corey Booth, Director/Chief Information

Officer, Securities and Exchange Commission, C/O Shirley Martinson,
6432 General Green Way, Alexandria, VA 22312; or send an e-mail to:
<EMAIL_ADDRESS>Comments must be submitted to OMB within 30 days

of this notice.

    Dated: November 19, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22980 Filed 11-26-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register: October 31, 2008 (Volume 73, Number 212)]
[Notices]
[Page 64995-64998]
[DOCID:fr31oc08-114]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58862; File No. SR-FINRA-2008-051]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
Amendments to the Codes of Arbitration Procedure To Require Arbitrators
To Provide an Explained Decision Upon the Joint Request of the Parties

October 27, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 14, 2008, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been substantially prepared by
FINRA. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to amend NASD Rules 12214, 12514 and 12904 of
the Code of Arbitration Procedure for Customer Disputes (``Customer
Code'') and NASD Rules 13214, 13514 and 13904 of the Code of
Arbitration Procedure for Industry Disputes (``Industry Code,'' and
together with the Customer Code, the ``Codes'') to require arbitrators
to provide an explained decision upon the joint request of the parties.
Below is the text of the proposed rule change. Proposed new language is
in italics; proposed deletions are in brackets.
* * * * *
Customer Code
12214. Payment of Arbitrators
    (a)-(d) No change.
    (e) Payment for Explained Decisions
    (1) The chairperson who is responsible for writing an explained
decision pursuant to Rule 12904(g) will receive an additional
honorarium of $400. The panel will allocate the cost of the honorarium
under Rule 12904(g) to the parties.
    (2) If the panel decides on its own to write an explained decision,
then no panel member will receive the additional honorarium of $400.
* * * * *
12514. Pre-hearing Exchange of Documents and Witness Lists [Before
Hearing], and Explained Decision Requests
    (a)-(c) No change.
    (d) Explained Decision Request
    At least 20 days before the first scheduled hearing date, all
parties must submit to the panel any joint request for an explained
decision under Rule 12904(g).
* * * * *
12904. Awards
    (a)-(f) No change.
    (g) Explained Decisions
    (1) This paragraph (g) applies only when all parties jointly
request an explained decision.
    (2) An explained decision is a fact-based award stating the general
reason(s) for the arbitrators' decision. Inclusion of legal authorities
and damage calculations is not required.
    (3) Parties must make any request for an explained decision no
later than the time for the pre-hearing exchange of documents and
witness lists under Rule 12514(d).
    (4) The chairperson of the panel will be responsible for writing
the explained decision.
    (5) The chairperson will receive an additional honorarium of $400
for writing the explained decision, as required by this paragraph (g).
The panel will allocate the cost of the chairperson's honorarium to the
parties as part of the final award.
    (6) This paragraph (g) will not apply to simplified cases decided
without a hearing under Rule 12800 or to default cases conducted under
Rule 12801.
    (g)-(i) Renumbered as (h)-(j).
* * * * *
Industry Code
13214. Payment of Arbitrators
    (a)-(d) No change.
    (e) Payment for Explained Decisions
    (1) The chairperson who is responsible for writing an explained
decision pursuant to Rule 13904(g) will receive an additional
honorarium of $400. The panel will allocate the cost of the honorarium
under Rule 13904(g) to the parties.
    (2) If the panel decides on its own to write an explained decision,
then no panel member will receive the additional honorarium of $400.
* * * * *
13514. Pre-hearing Exchange of Documents and Witness Lists [Before
Hearing], and Explained Decision Requests
    (a)-(c) No change.
    (d) Explained Decision Request
    At least 20 days before the first scheduled hearing date, all
parties must submit to the panel any joint request for an explained
decision under Rule 13904(g).
* * * * *
13904. Awards
    (a)-(f) No change.
    (g) Explained Decisions
    (1) This paragraph (g) applies only when all parties jointly
request an explained decision.
    (2) An explained decision is a fact-based award stating the general
reason(s) for the arbitrators' decision. Inclusion of legal authorities
and damage calculations is not required.
    (3) Parties must make any request for an explained decision no
later than the time for the pre-hearing exchange of documents and
witness lists under Rule 13514(d).
    (4) The chairperson of the panel will be responsible for writing
the explained decision.
    (5) The chairperson will receive an additional honorarium of $400
for writing the explained decision, as required by this paragraph (g).
The panel will allocate the cost of the chairperson's honorarium to the
parties as part of the final award.
    (6) This paragraph (g) will not apply to simplified cases decided
without a hearing under Rule 13800 or to default cases conducted under
Rule 13801.
    (g)-(i) Renumbered as (h)-(j).
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    FINRA is proposing to amend its Customer Code and Industry Code to
require arbitrators to provide an explained decision upon the joint
request of the parties. The explained decision would be a fact-based
award stating the general reason(s) for the arbitrators' decision; it
would not be required to include legal authorities and/or damage
calculations. Under the proposed rule change, parties would be required
to submit any joint request for an explained decision at least 20 days
before the first scheduled hearing date.\3\ The chairperson would: (1)
Be required to write the explained decision; and (2) receive an
additional honorarium of $400 for writing the decision. The panel would
allocate the cost of the additional honorarium to the parties as part
of the final award.
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    \3\ The term ``hearing'' means the hearing of an arbitration
under Rules 12600 and 13600 (see Rules 12100(m) and 13100(m)).
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    The arbitrators would not be required to provide an explained
decision in cases resolved without a hearing under simplified
arbitration Rules 12800 and 13800 or in default cases conducted under
Rules 12801 and 13801.
    FINRA is not proposing to amend Rules 12904(f) and 13904(f), which
provide that an award may contain an underlying rationale. This means
that arbitrators would continue to be permitted to decide, on their
own, to write an explained decision. Thus, as is currently the case, if
the panel decides on its own to write an explained decision, FINRA
would not pay an additional honorarium to any panel member.
Background
    The absence of explanations in awards is a common complaint of non-
prevailing parties in the FINRA forum, especially customers and
associated persons. In order to address these complaints and increase
investor confidence in the fairness of the arbitration process, in
March 2005, FINRA filed a proposed rule change with the SEC that would
have required arbitrators to provide explained decisions upon the
request of customers, or of associated persons in industry
controversies. The SEC published the original proposed rule change for
comment in July 2005.\4\ The SEC received almost two hundred comment
letters in response to the original proposed rule change, many of them
critical.
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    \4\ See Securities Exchange Act Release No. 52009 (July 11,
2005); 70 FR 41065 (July 15, 2005) (File No. SR-NASD-2005-032).
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    While FINRA was considering its next steps, there have been several
new developments related to explained decisions in other contexts.
FINRA filed with the Commission dispositive motions \5\ and expungement
procedures \6\ proposals, both of which would require arbitrators to
write an explanation for granting relief. In addition, the Securities
Industry Conference on Arbitration (SICA) conducted a ``Perceptions of
Fairness'' arbitration survey of participants in securities arbitration
proceedings.\7\ The survey results, released in February 2008, indicate
that 55.5% of customers who responded to the survey would be ``more
satisfied if they had an explanation in the award.'' In light of the
comments, and these recent developments, FINRA has withdrawn the
original proposed rule change as filed in SR-NASD-2005-032 and is
filing a new proposed rule change. Key provisions of the proposed rule
change are discussed in more detail below, together with related
comments from the original proposed rule change.
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    \5\ FINRA filed the proposed dispositive motion rule on November
2, 2007 (SR-FINRA-2007-021). The proposal was published for comment
on March 20, 2008 (see Securities Exchange Act Release No. 57497
(March 14, 2008); 73 FR 15019). FINRA submitted a Response to
Comments on September 15, 2008.
    \6\ On March 13, 2008, FINRA filed an expungement procedures
proposal (SR-FINRA-2008-010). This rule would establish procedures
arbitrators must follow when considering requests for expungement
relief under Conduct Rule 2130. The proposal was published for
comment on April 3, 2008 (see Securities Exchange Act Release No.
57572 (March 27, 2008); 73 FR 18308). FINRA submitted a Response to
Comments on June 11, 2008, and a Supplemental Response to Comments
on September 3, 2008.
    \7\ Jill I. Gross and Barbara Black, Perceptions of Fairness of
Securities Arbitration: An Empirical Study, (February 6, 2008). The
report can be downloaded at http://digitalcommons.pace.edu/cgi/
viewcontent.cgi?article=1477&context=lawfaculty.
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Parties Must Jointly Request an Explained Decision
    The original proposed rule change would have permitted a customer,
or an associated person in an intra-industry controversy, to require an
explained decision. Many commenters objected to the one-sided nature of
that provision. Under the new proposed rule change, all parties to a
case would have to agree to an explained decision. While the
arbitrators will be resolving the entire matter and the explained
decision would normally address all the claims asserted by the parties,
the parties may request that an explained decision address only certain
claims. Requiring the parties' joint agreement to an explained decision
is consistent with FINRA's general policy to accommodate a joint
request of the parties.
Parties Must Submit Any Request for an Explained Decision 20 Days
Before the First Scheduled Hearing Date
    The proposed rule change would provide that parties must submit any
joint request for an explained decision no later than 20 days prior to
the first scheduled hearing date. This deadline coincides with the time
that parties must exchange documents and identify witnesses they intend
to present at the hearing. This approach would establish a clear
deadline, give the parties sufficient time to request an explained
decision, and provide notice to the arbitrators that an explained
decision will be required before the hearing begins.
The Chairperson Must Write the Explained Decision
    The new proposed rule change would require that the chairperson
write the explained decision. The original proposed rule change
contemplated that any of the arbitrators, or all of them, might draft
the decision. Many commenters on the original proposed rule change were
concerned that poorly written decisions might harm the public's
perception of arbitration, or increase the likelihood of a party
successfully vacating an award. To address these concerns, the rule
would require that the chairperson write the decision.
    Under the Codes, arbitrators must meet specific experience and
training criteria to serve as chairpersons in arbitrations.\8\
Therefore, chairpersons

may be more experienced than non-chairpersons and should be better able
to produce higher quality explained decisions. Further, assigning this
responsibility to the chairperson would eliminate any confusion over
who would be responsible for drafting the decision and would streamline
the decision writing process. Having one arbitrator draft the decision
after all the arbitrators have been consulted would reduce the time
required to complete the decision. Once the decision was drafted, the
arbitrators still would be required to sign the decision as provided in
Rules 12904(a) and 13904(a).\9\
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    \8\ Pursuant to Rules 12400 and 13400, arbitrators are eligible
for the chairperson roster if they have completed FINRA chairperson
training and:
     Have a law degree and are a member of a bar of at least
one jurisdiction and have served as an arbitrator through award on
at least two arbitrations administered by a self-regulatory
organization in which hearings were held; or
     Have served as an arbitrator through award on at least
three arbitrations administered by a self-regulatory organization in
which hearings were held.
    On June 23, 2008, the SEC approved a proposal to eliminate the
Code provision allowing arbitrators to serve as Chairpersons
provided they have ``substantially equivalent training or
experience'' in lieu of completing FINRA Dispute Resolution's
Chairperson training course (see Securities Exchange Act Release No.
58004 (June 23, 2008); 73 FR 36579 (June 27, 2008) (File No. SR-
FINRA-2008-009). This rule became effective on September 22, 2008.
    \9\ Rules 12904(a) and 13904(a) require all awards to be in
writing and signed by a majority of the arbitrators or as required
by applicable law.
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The Explained Decision Must Be Fact-Based
    Under the proposed rule change, the explained decision would be a
fact-based award stating the general reason(s) for the arbitrators'
decision.\10\ The award would not be required to include legal
authorities and damage calculations. FINRA believes that requiring only
fact-based reasons in explained decisions will reduce the potential for
misstatements in an award, thereby decreasing the possibility of a
subsequent vacatur, modification or remand of an award and ensuring the
continued finality of a FINRA award. FINRA believes the proposed rule
change would provide the parties with the information they want while
simultaneously maintaining the expediency, flexibility, and finality of
arbitration.
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    \10\ While Rules 12604 and 13604 provide that the panel decides
what evidence to admit and is not required to follow state or
federal rules of evidence, FINRA intends that, as with current
arbitration awards, explained decisions will have no precedential
value in other cases. Thus, arbitrators will not be required to
follow any findings or determinations that are set forth in prior
explained decisions. In order to ensure that users of the forum are
aware of the non-precedential nature of explained awards, FINRA
plans to revise the template for all awards to include the following
sentence: ``If the arbitrators have provided an explanation of their
decision in this award, the explanation is for the information of
the parties only and is not precedential in nature.''
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Only the Chairperson Will Be Compensated for an Explained Decision
    The original proposed rule change did not address who would have
been responsible for preparing the explained decision and provided that
each arbitrator would be paid an additional $200 honorarium for cases
in which an explained decision was required. Under the new proposed
rule change, only the chairperson would write the decision, and only
the chairperson would be paid an additional honorarium. The additional
honorarium paid to the chairperson would reflect the increased effort
involved in drafting an explained decision. Under the new proposed rule
change, the panel may allocate the cost of the honorarium to one party,
or may allocate it between or among all parties.\11\
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    \11\ Under the Customer and Industry Codes, the panel has the
authority to assess fees in connection with discovery-related
motions, contested subpoena requests, and hearing session fees to
one party, or may split the fees between or among all parties.
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Parties May Not Require Explained Decisions in Some Cases
    Under the proposed rule change, parties would not be able to
require explained decisions in two types of arbitration proceedings.
The first is simplified arbitrations that are decided solely upon the
pleadings and evidence filed by the parties, as described in Rules
12800 and 13800. The second is arbitrations that are conducted under
the default procedures provided for in Rules 12801 and 13801. Explained
decisions would not be appropriate in either of these situations
because of the abbreviated nature of these arbitration proceedings.
Arbitrators May Choose To Write Explained Decisions in Other
Circumstances
    Under the proposed rule change, arbitrators would continue to be
permitted to decide, on their own or upon the motion of one party, to
write an explained decision. Arbitrators would not receive an
additional honorarium if the panel issues an explained decision that is
not required under the proposed rules. The proposed rule change would
not affect the current rule that permits arbitrators to include a
rationale in an award, even if the parties have not requested it, and
would not encourage arbitrators to write an explained decision when
they are not asked to do so by all the parties.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. The proposed rule change would increase investor
confidence in the fairness of the arbitration process by allowing
parties jointly to require arbitrators to write an explained decision.
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    \12\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File

Number SR-FINRA-2008-051 on the subject line.

Paper Comments

     Send paper comments in triplicate to Florence Harmon,
Acting Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2008-051. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-FINRA-2008-051
and should be submitted on or before November 21, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25976 Filed 10-30-08; 8:45 am]

BILLING CODE 8011-01-P