Amendments to Resolution of the Board of Governors Concerning Its Policy on Publication of Disciplinary Actions
TO: All NASD Members and Other Interested Persons
EXECUTIVE SUMMARY
The NASD has amended its policy regarding the publication of disciplinary actions to provide that actions resulting in monetary sanctions of $10,000 or more will be published in the same manner as actions resulting in suspensions, bars, expulsions and/or revocations. The new policy will be implemented with respect to District Business Conduct Committee, Market Surveillance Committee or Board of Governors decisions issued, and Offers of Settlement, Summary Complaints, and Acceptance, Waiver and Consent filings submitted, after April 24, 1987. Monetary sanctions, such as fines and orders of disgorgement, will be aggregated as to each respondent to determine whether the disciplinary action will be published as to that respondent.
The NASD believes that publishing a more complete description of sanctions imposed for serious misconduct will further the remedial purpose of publication of disciplinary actions.
The text of the amended resolution is attached.
SUMMARY
The Board of Governors of the National Association of Securities Dealers, Inc., has amended its resolution concerning "Notice to Membership and Press of Suspensions, Expulsions and Revocations" (Resolution), which is appended to Article V, Section 1 of the Rules of Fair Practice. The amendments were filed with the Securities and Exchange Commission on January 29, 1987, to be effective immediately, pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934 and SEC Rule 19b-4(e) thereunder.
ANALYSIS OF AMENDMENTS
The amended Resolution continues the NASD's policy of publishing suspensions, expulsions, revocations and bars and, in addition, provides for publication of disciplinary actions where monetary sanctions of $10,000 or more are imposed. The amendments also authorize the inclusion in such publications of more detailed information regarding the nature of the conduct found to violate the rules. Also, where appropriate, the amendments allow for inclusion of the name of the member firm with which an individual was associated at the time such misconduct occurred. The amendments do not change existing provisions regarding the timing and manner of publication.
The amendments were adopted to provide for publication to members and to the press of significant disciplinary actions that do not result in suspensions, expulsions, revocations or bars, and to include for the membership's guidance a more complete description of the violative conduct. The $10,000 threshold will further the remedial purposes of publication by providing for publication of only those actions involving the type of serious misconduct that warrants substantial monetary sanctions.
PLAN OF IMPLEMENTATION
In the interest of fairness and notwithstanding that the amended Resolution was effective upon filing with the Commission, the NASD plans to implement the amended publication policy as follows. Decisions of District Business Conduct Committees, the Market Surveillance Committee or the Board of Governors rendered after April 24, 1987, will be published in accordance with the provisions of the amended Resolution. Offers of Settlement, Summary Complaints and Acceptance, Waiver and Consent proceedings that are submitted to the District Business Conduct Committees after April 24, 1987, will be subject to the amended Resolution.
In determining whether the monetary sanctions imposed warrant publication under the terms of the amended Resolution, fines, orders of disgorgement and any other monetary sanctions will be aggregated as to each respondent individually. For example: If a matter results in a $12,000 fine as to respondent A and fines of $5,000 each as to respondents B and C, only the monetary sanction imposed on respondent A will be published. If a matter results in a $12,000 fine as to respondent A, a $5,000 fine and an order to disgorge $7,500 as to respondent B and a $5,000 fine as to respondent C, only the monetary sanctions imposed on respondents A and B would be published. Joint and several fines and/or orders of disgorgement in excess of $10,000 will be published as to each affected party.
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Questions regarding this notice may be directed to Jacqueline D. Whelan, NASD Office of the General Counsel, at (202) 728-8270.
Sincerely,
Frank J. Wilson
Executive Vice President and General Counsel
Attachment
AMENDMENTS* TO
••• Resolution of the Board of Governors_____
Notice to Membership and Press of Suspensions, Expulsions, [and] Revocations, and Monetary Sanctions
The Association shall report to the membership and to the press pursuant to the procedures and at the times outlined herein any order of suspension, cancellation or expulsion of a member; or suspension or revocation of the registration of a person associated with a member; or suspension or barring of a member or person associated with a member from association with all members; or imposition of monetary sanctions of $10,000 or more upon a member or person associated with a member.
If a decision of a District Business Conduct Committee is not appealed to or called for review by the Board of Governors, the order of the District Business Conduct Committee shall become effective on a date set by the Association but not before the expiration of 30 days after the date of decision. Notices of decisions imposing monetary sanctions of $10,000 or more or penalties of expulsion, revocation, suspension and/or the barring of a person from being associated with all members shall promptly be transmitted to the membership and to the press, concurrently; provided, however, no such notice shall be sent prior to the expiration of 30 days from the date of the said decision.
If a decision of a District Business Conduct Committee is appealed to or called for review by the Board of Governors, the order of the District Business Conduct Committee is stayed pending a final determination and decision by the Board and notice of the action of the District Business Conduct Committee shall not be sent to the membership or the press during the pendency of proceedings before the Board of Governors.
If a decision of the Board of Governors is not appealed to the Securities and Exchange Commission, the decision shall become effective on a date established by the Association but not before the expiration of 30 days after the date of the decision. Notices of decisions imposing monetary sanctions of $10,000 or more or penalties of expulsion, revocation, suspension and/or the barring of a person from being associated with all members shall promptly be transmitted to the membership and to the press, concurrently; provided, however, no such notice shall be sent prior to the expiration of 30 days from the date of the said decision.
If a decision of the Board of Governors imposing monetary sanctions of $10,000 or more or a penalty of expulsion, revocation, suspension and/or barring of a member being associated with all members is appealed to the Securities and Exchange Commission, notice thereof shall be given to the membership and to the press as soon as possible after receipt by the Association of notice from the Securities and Exchange Commission of such appeal and the Association's notice shall state whether the effectiveness of the Board's decision has or has not been stayed pending the outcome of proceedings before the Securities and Exchange Commission.
In the event an appeal to the courts is filed from a decision by the Securities and Exchange Commission in a case previously appealed to it from a decision of the Board of Governors, involving the imposition of monetary sanctions of $10,000 or more or a penalty of expulsion, revocation, suspension and/or barring of a member from being associated with all members, notice thereof shall be given to the membership as soon as possible after receipt by the Association of a formal notice of appeal. Such notice shall include a statement that the order of the Commission has or has not been stayed.
Any order issued by the Securities and Exchange Commission of revocation or suspension of a member's broker/dealer registration with the Commission; or the suspension or expulsion of a member from the Association; or the suspension or barring of a member or person associated with a member from association with all broker/dealers or membership; or the imposition of monetary sanctions of $10,000 or more shall be made known to the membership of the Association through a notice containing the effective date thereof sent as soon as possible after receipt by the Association of the order of the Securities and Exchange Commission.
Cancellations of membership or registration pursuant to the Association's By-Laws, Rules or Resolutions shall be sent to the membership and, when appropriate, to the press as soon after the effective date of the cancellation as possible.
Notices to the membership and releases to the press referred to above shall [briefly describe the violations found and/or] identify the section of the Association's Rules and By-Laws or the Securities and Exchange Commission Rules violated [.], and shall describe the conduct constituting such violation. Notices may also identify the member with which an individual was associated at the time the violations occurred if such identification is determined by the Association to be in the public interest. Notice of all orders and decisions referred to above shall be included in the supplement to the list of members next published.
*New text is underlined; deleted text is bracketed.