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88-75 Amendment Eliminating the Fine Limitation in Disciplinary Proceedings
*These are suggested departments only. Others may be appropriate for your firm.
The Securities and Exchange Commission has approved an amendment to Article V, Section 1 of the NASD Rules of Fair Practice that removes the current fine limitation of $15,000 per violation that would be assessed against a member or a person associated with a member. The text of the amendment follows this notice.
Background and Summary of Amendment
Article V, Section 1 of the NASD Rules of Fair Practice sets forth various types of sanctions that may be imposed in disciplinary proceedings before the NASD. Such sanctions are authorized pursuant to Article XIV of the NASD By-Laws. Since 1984, pursuant to that provision, the Board of Governors and the Association's District Business Conduct Committees (DBCCs) have been able to assess fines up to a maximum, $15,000 for each violation.
However, the NASD Board of Governors has been concerned that the $15,000 fine ceiling limits the NASD's ability to adequately redress violations in cases where the number of alleged violations is small but the underlying misconduct is egregious, involves substantial sums, or both. Therefore, the Board determined to eliminate the $15,000 per violation ceiling in order to respond appropriately to grave misconduct.
On August 16, 1988, the SEC approved the NASD's adoption of an amendment to Article V, Section 1 of the NASD Rules of Fair Practice to eliminate the $15,000 per violation. The removal of the fine ceiling will enable the NASD's DBCC, Market Surveillance Committee, and Board of Governors to craft more effective remedial sanctions in cases involving serious violations of the NASD's rules or activities in contravention of the federal securities laws. Therefore, fines in excess of $15,000 per violation may be assessed by the NASD's DBCCs, Market Surveillance Committee, and Board of Governors for misconduct occurring on or after August 16, 1988.The text of the amendment follows this notice.
Questions can be directed to Norman Sue, Jr., Senior Attorney, NASD Office of General Counsel, at (202) 728-8117.
AMENDMENT TO ARTICLE V, SECTION 1 OF THE NASD RULES OF FAIR PRACTICE
(Note: New language is underlined; deleted language is in brackets.)
Sanctions for Violation of the Rules
Sec. 1. Any District Business Conduct Committee, Market Surveillance Committee, or the Board of Governors, in the administration and enforcement of these Rules, and after compliance with the Code of Procedure, may (1) censure any member or person associated with a member and/or (2) impose a fine [not in excess of Fifteen Thousand Dollars ($15,000)] upon any member or person associated with a member and/or (3) suspend the membership of any member or suspend the registration of a person associated with a member, if any, for a definite period, and/or (4) expel any member or revoke the registration of any person associated with a member, if any, and/or (5) suspend or bar a member or person associated with a member from association with all members, or (6) impose any other fitting penalty deemed appropriate under the circumstances, for each or any violation of any of these Rules by a member or person associated with a member or for any neglect or refusal to comply with any orders, directions or decisions issued by any District Business Conduct Committee, Market Surveillance Committee or by the Board of Governors in the enforcement of these Rules, including any interpretive ruling made by the Board of Governors, as any such Committee or Board, in its discretion, may deem to be just; provided, however, that no such penalty imposed by any District Business Conduct Committee or Market Surveillance Committee shall take effect until the period for appeal therefrom or review has expired, as provided in [Section 14] Article III, Section 1 of the Code of Procedure; and provided, further, that all parties to any proceeding resulting in a penalty shall be deemed to have assented to or to have acquiesced in the imposition of such penalty unless any party aggrieved thereby shall have made application to the Board of Governors for review pursuant to the Code of Procedure, within fifteen (15) days after the date of such notice.