Rules of Practice — SEC — US

SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 201 [Release No. 34–40364; File No. S7–23–98] Rules of Practice AGENCY: Securities and Exchange Commission.

Federal Register / Vol. 63, No. 170 /Wednesday, September 2, 1998 / Proposed Rules 46717 1Final Rules of Practice, Exchange Act Release No. 35833, 60 FR 32738 (June 23, 1995). 2Task Force on Administrative Proceedings, Securities and Exchange Commission, Fair and Efficient Administrative Proceedings: Report of the Task Force (Feb. 1993). 3Rule 210(f) does, however, allow the Commission or a hearing officer to modify the provisions of Rule 210 to impose such terms and conditions on participation of any person in any proceeding as it may deem necessary or appropriate in the public interest. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission is proposing for public comment amendments to its Rules of Practice, Rules 210 and 221. Rule 210 currently prohibits any person from intervening or participating on a limited basis as a party or non-party in an enforcement proceeding, a disciplinary proceeding, or a proceeding to review a self-regulatory organization determination. The Commission is proposing to amend Rule 210 to permit representatives of any federal, state, or local criminal prosecutorial authority limited participation for the purpose of requesting a stay, in order to support efforts to bring criminal prosecutions arising out of securities violations. Rule 221 currently requires that parties generally participate in both an initial and a final prehearing conference. The Commission proposes requiring only one prehearing conference, in order to streamline the administrative process and conserve the parties’ and the Commission’s resources. DATES: Comments must be submitted on or before October 2, 1998. ADDRESSES: Interested persons should submit three copies of their written comments to: Jonathan G. Katz, Secretary; U.S. Securities and Exchange Commission; 450 Fifth Street, N.W., Washington, D.C. 20549. Comments also may be submitted electronically at the following E-mail address:
rulecomments@sec.gov. All comment letters should refer to File No. S7–23–
98. This file number should be included
on the subject line if E-mail is used. All comments received will be available for public inspection and copying in the Commission’s Public Reference Room, 450 Fifth Street, N.W., Washington, DC
20549. Electronically submitted
comment letters will be posted on the Commission’s Internet web site (http:// www.sec.gov). FOR FURTHER INFORMATION CONTACT: Joan
L. Loizeaux, Principal Assistant General
Counsel, or Kathleen O’Mara, Senior Counsel, Office of General Counsel, (202) 942–0950, Securities and Exchange Commission, 450 Fifth Street, N.W., Stop 6–6, Washington, D.C. 20549. SUPPLEMENTARY INFORMATION:
I. Discussion
The Commission adopted, after notice and comment, comprehensive revisions to its Rules of Practice that became effective on July 24, 1995.1 These revisions were the result of an approximately two-and-a-half year study by the Commission’s Task Force on Administrative Proceedings that culminated in a comprehensive report.2 The Task Force found that the fundamental structure of the Commission’s administrative process was sound and successfully protected the essential interests of respondents, investors, and the public, but that some changes were necessary. The Task Force recommended changes to the Rules of Practice in an effort to set forth applicable procedural requirements more completely, in a format easier to use, and to streamline procedures that had become burdensome. In November 1997, the Commission’s Inspector General issued a report evaluating the Commission’s Administrative Proceedings Process in an attempt to assess the impact of the new Rules of Practice. The Inspector General recommended, among other things, that the Commission review Rules 210 and 221. The Commission has reviewed these rules and proposes that the rules be changed as discussed below (and reflected in the text of the rules). Rule 210 currently prohibits intervention or limited participation in Commission enforcement or in disciplinary proceedings to review selfregulatory organization determinations.3 This prohibition exists due to the distinct issues raised by enforcement proceedings, in which the government seeks to impose sanctions upon named persons. The Commission believed that the only parties should be those specified by the Commission in the order instituting proceedings, and no one else, should be granted status as a limited or non-party participant. In addition, prohibiting intervention or participation in Commission cases served the purpose of preventing extraneous issues from diverting proceedings and promoted timely and efficient resolution of particular matters before the Commission. In recent years, the Commission has received requests from representatives of various federal and local criminal prosecutors to enter an appearance in order to request a stay of the Commission’s proceedings during the pendency of a criminal investigation or prosecution based on the same or related underlying conduct. These authorities typically assert that substantial prejudice could result to a criminal prosecution if an administrative proceeding is not postponed. The Commission supports efforts to bring criminal prosecutions arising out of securities violations. Accordingly, the Commission proposes that Rule 210 be amended to allow authorized representatives of the United States Department of Justice, including any United States Attorney’s Office, and of state and local prosecutors to seek leave to participate in a Commission proceeding for the limited purpose of requesting a stay in that proceeding. The process of considering such requests for postponements will be
facilitated if those seeking them are permitted to present their views to the hearing officer. The hearing officer can then evaluate that request in light of the hearing’s status. Any postponement of an administrative proceeding, however, should be based on a showing of good cause and be limited to a reasonable period of time, balancing the need for delay against the need to bring the administrative proceeding to a timely resolution, consistent with the public interest. In addition, the Commission proposes to amend Rule 221 to require a single prehearing conference, instead of the two prehearing conferences currently required. The Commission’s experience with this Rule indicates that, as a routine practice, two conferences are not always necessary. Accordingly, in order to streamline the administrative process, conserving the parties’, as well as the Commission’s, resources, the Commission proposes requiring only one prehearing conference. Rule 221 would continue to permit the hearing officer in his or her discretion to order additional prehearing conferences on his or her own motion or at the request of a party.
II. Administrative Procedure Act and
Regulatory Flexibility Act The Commission finds, in accordance with the Administrative Procedure Act, 5 U.S.C. 553(b)(3)(A), that this revision relates solely to agency organization, procedures, or practice. It is therefore not subject to the provisions of the Administrative Procedure Act requiring notice, opportunity for public comment, and publication. The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., also does not apply. Nonetheless, the Commission has determined it would be useful to publish these proposed rule changes for notice and comment, before adoption.

46718 Federal Register / Vol. 63, No. 170 /Wednesday, September 2, 1998 / Proposed Rules
III. Statutory Basis and Text of
Proposed Amendment
The proposed Rule amendments would be promulgated pursuant to
section 19 of the Securities Act, 15
U.S.C. 77s; section 23 of the Exchange Act, 15 U.S.C. 78w; section 20 of the PUHCA, 15 U.S.C. 79t; section 319 of the Trust Indenture Act, 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 17 CFR Part 201 Administrative practice and procedure. For the reasons set forth in the preamble, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows:
PART 201—SUBPART D—RULES OF
PRACTICE

The authority citation for Part 201,
Subpart D, continues to read as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77h–1, 77j, 77s, 77u, 78c(b), 78d–1, 78d–2, 78l, 78m, 78n, 78o(d), 78o–3, 78s, 78u–2, 78u–3, 78v, 78w, 79c, 79s, 79t, 79z–5a, 77sss, 77ttt, 80a– 8, 80a–9, 80a–37, 80a–38, 80a–39, 80a–40, 80a–41, 80a–44, 80b–3, 80b–9, 80b–11, and 80b–12 unless otherwise noted.
Section 201.210 is amended by
revising paragraph (a)(1) and the introductory text of paragraph (c) and adding paragraph (c)(3) to read as follows:
§ 201.210 Parties, limited participants and amici curiae. (a) Parties in an enforcement or disciplinary proceeding or a proceeding to review a self-regulatory organization determination—(1) Generally. No person shall be granted leave to become a party or non-party participant on a limited basis in an enforcement or disciplinary proceeding or a proceeding to review a determination by a selfregulatory organization pursuant to §§ 201.420 and 201.421, except as authorized by paragraph (c) of this
section.

(c) Leave to participate on a limited basis. In any proceeding, other than an enforcement proceeding, a disciplinary proceeding, or a proceeding to review a self-regulatory organization determination, any person may seek leave to participate on a limited basis as a non-party participant as to any matter affecting the person’s interests. In any enforcement proceeding or disciplinary proceeding, an authorized representative of the United States Department of Justice, an authorized representative of a United States Attorney, or an authorized representative of any criminal prosecutorial authority of any State or any other political subdivision of a State may seek leave to participate on a limited basis as a non-party participant as provided in paragraph (c)(3) of this
section.

(3) Leave to participate in certain Commission proceedings by a representative of the United States Department of Justice, a United States Attorney’s Office, or a criminal prosecutorial authority of any State or any political subdivision of a State. The Commission or the hearing officer may grant leave to participate on a limited basis to an authorized representative of the United States Department of Justice, an authorized representative of a United States Attorney, or an authorized representative of any criminal prosecutorial authority of any State or any political subdivision of a State for the purpose of requesting a stay during the pendency of a criminal investigation or prosecution arising out of the same or similar facts that are at issue in the pending Commission enforcement or disciplinary proceeding. Upon a showing that such a stay is in the public interest or for the protection of investors, the motion for stay shall be favored. A stay granted under this paragraph (c)(3) may be granted for such a period and upon such conditions as the Commission or the hearing officer deems appropriate.

Section 201.221 is amended by
revising the section heading and paragraphs (a) and (d) to read as follows:
§ 201.221 Prehearing conference. (a) Purposes of conference. The purposes of a prehearing conference include, but are not limited to:
(1) Expediting the disposition of the proceeding; (2) Establishing early and continuing control of the proceeding by the hearing officer; and (3) Improving the quality of the hearing through more thorough preparation.

(d) Required prehearing conference. Except where the emergency nature of a proceeding would make a prehearing conference clearly inappropriate, at least one prehearing conference should be held.

By the Commission.
Dated: August 26, 1998.
Jonathan G. Katz,
Secretary.
[FR Doc. 98–23610 Filed 9–1–98; 8:45 am] BILLING CODE 8010–01–P