Proposed New Rule Re: Suspension or Cancelation of Registration for Failure to Pay Fees, Dues, or Other Assessments; Last Voting Date: June 4, 1991

MAIL VOTE

EXECUTIVE SUMMARY

The NASD invites members to vote on a proposed amendment to Article VI, Sections 3 and 4 of the By-Laws to provide for the suspension or cancelation of the registration of an associated person in the event of nonpayment of fees, dues, or assessments.

BACKGROUND

Article VI of the NASD By-Laws generally provides the Board of Governors with the authority to charge fees, dues, and assessments to members, issuers, and persons using facilities and systems operated or controlled by the NASD. Section 3 of that Article currently authorizes the NASD, after providing written notice, to suspend or cancel the membership of any member that fails to pay any fees, dues, assessments, or other charges. Failure to pay forum fees associated with the arbitration process operated by the NASD may result in the suspension or cancelation of a firm's membership. Section 3, however, does not apply to associated persons who fail to pay fees, dues, or assessments.

Section 2 of Article V of the Rules of Fair Practice authorizes the NASD, after providing written notice, to revoke the registration of an associated person who has failed to pay any fine or cost imposed in connection with disciplinary proceedings or proceedings conducted under the Code of Procedure. At present, however, no provision of the NASD's By-Laws, Rules of Fair Practice, Code of Arbitration Procedure, or Code of Procedure provides for the suspension or cancelation of an associated person's registration for the failure to pay arbitration forum fees. Moreover, the number of associated persons who fail to pay forum fees is increasing.

EXPLANATION

The NASD is proposing to amend Sections 3 and 4 of Article VI of the By-Laws to suspend or cancel after 15 days notice, in writing, the registration of any associated person who has failed to pay fees, dues, assessments, or other charges owed for the use of facilities or systems operated or controlled by the NASD.

The NASD Board of Governors believes that this rule change is warranted to protect the integrity of the arbitration process and the marketplace, and to provide uniformity in the treatment of associated persons failing to pay fees. Thus, the Board believes the proposed amendment is necessary and appropriate and recommends that members vote their approval. Please mark the attached ballot according to your convictions and return it in the enclosed, stamped envelope to The Corporation Trust Company. Ballots must be postmarked no later than June 4, 1991.

Questions regarding this notice may be directed to Craig L. Landauer or Maureen Eisenberg, Office of the General Counsel, at (202) 728-8291 or (202) 728-8245, respectively.

PROPOSED CHANGES TO ARTICLE VI OF THE NASD BY-LAWS

(Note: Proposed new language is underlined.) Dues, Assessments and Other Charges

Suspension or Cancellation of Membership or Registration for Non-Payment of Dues

Sec. 3. The Corporation after fifteen (15) days notice in writing, may suspend or cancel the membership of any member or the registration of any person in arrears in the payment of any fees, dues, assessments or other charges or for failure to furnish any information or reports requested pursuant to Section 2 of this Article.

Reinstatement of Membership or Registration

Sec. 4. Any membership or registration suspended or canceled under this Article may be reinstated by the Corporation upon such terms and conditions as it shall deem just; provided, however, that any applicant for reinstatement shall possess the qualifications required for membership in the Corporation.