Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

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Rule 19d-1 -- Notices by Self-Regulatory Organizations of Final Disciplinary Actions, Denials, Bars, or Limitations Respecting Membership, Association, Participation, or Access to Services, and Summary Suspensions

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1. General. If any self-regulatory organization for which the Commission is the appropriate regulatory agency takes any action described in this rule to which the person affected thereby has consented and such action:
   
   
   1. conditions or limits membership or participation in, association with a member of, or access to services offered by, such organization or a member thereof and
      
      
   2. is based upon a statutory disqualification defined in Section 3(a)(39) of the Act, notice thereof shall be filed under Rule 19h-1 and not under this rule.
      
      
2. The notice requirement of Section 19(d)(1) of the Act, concerning an action subject to such section taken by a self-regulatory organization for which the Commission is the appropriate regulatory agency, shall be satisfied by any notice with respect to such action (including a notice filed pursuant to this rule) which contains the information required in the statement supporting the organization's determination required by Section 6(d)(1) or (2), Section 15A(h) (1) or (2), or Section 17A(b)(5)(A) or (B) of the Act, as appropriate.
   
   

3. 1. Any self-regulatory organization for which the Commission is the appropriate regulatory agency that takes any final disciplinary action with respect to any person shall promptly file a notice thereof with the Commission in accordance with paragraph (d) of this section. For the purposes of this rule, a "final disciplinary action" shall mean the imposition of any final disciplinary sanction pursuant to Section 6(b)(6), 15A(b)(7), or 17A(b)(3)(G) of the Act or other action of a self-regulatory organization which, after notice and opportunity for hearing, results in any final disposition of charges of:

      1. one or more violations of--
         
         
         1. The rules of such organization;
            
            
         2. The provisions of the Act or rules thereunder; or
            
            
         3. In the case of a municipal securities broker or dealer, the rules of the Municipal Securities Rulemaking Board;
            
            
      2. Acts or practices constituting a statutory disqualification of a type defined in subparagraph (D) or (E) (except prior convictions) of Section 3(a)(39) of the Act; or
         
         
      3. In the case of a proceeding by a national securities exhange or registered securities association based on Section 6(c)(3)(A)(ii), 6(c)(3)(B)(ii), 15A(g)(3)(A)(ii), or 15A(g)(3)(B)(ii) of the Act, acts or practices inconsistent with just and equitable principles of trade.
         
         Provided, however, That in the case of a disciplinary action in which a national securities exchange imposes a fine not exceeding $1000 or suspends floor privileges of a clerical employee for not more than five days for violation of any of its regulations concerning personal decorum on a trading floor, the disposition shall not be considered "final" for purposes of this paragraph if the sanctioned person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies at the exchange with respect to the matter. Provided further, That this exemption from the notice requirement of this paragraph shall not be available where a decorum sanction is imposed at, or results from, a hearing on the matter.
         
         
   2. Any disciplinary action, other than a decorum sanction not deemed "final" under paragraph (c)(1) of this section, taken by a seld-regulatory organization for which the Commission is the appropriate regulatory agency against any person for violation of a rule of the self-regulatory organization which has been designated as a minor rule violation pursuant to a plan or any amendment thereto filed with and declared effective by the Commission under this paragraph, shall not be considered "final" for purposes of paragraph (c)(1) of this section if the sanction imposed consists of a fine not exceeding $2500 and the sanctioned person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies at the self-regulatory organization with resepect to the matter. After appropriate notice of the terms of substance of the filing or a description of the subjects and issues involved and opportunity for interested persons to submit written comment, the Commission may, by order, declare such plan or amendment effective if it finds that such plan or amendment is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act. The Commission in its order may restrict the categories of violations to be designated as minor rule violations and may impose any other terms or conditions to the plan (including abbreviated reporting of selected minor rule violations) and to the period of its effectiveness which it deems necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Act.
      
      
4. Contents of notice required by paragraph (c)(1) Any notice filed pursuant to paragraph (c)(1) of this section, shall consist of the following, as appropriate:
   
   
   1. the name of the respondent concerned together with his last known place of residence or business as reflected on the records of the self-regulatory organization and the name of the person, committee, or other organizational unit which brought the charges involved; except that, as to any respondent who has been found not to have violated a provision covered by a charge, identifying information with respect to such person may be deleted insofar as the notice reports the disposition of that charge, unless, prior to the filing of the notice, the respondent requests otherwise;
      
      
   2. a statement describing the investigative or other origin of the action;
      
      
   3. as charged in the proceeding, the specific provisions of the Act, the rules or regulations thereunder, the rules of the organization, and, in the case of a registered securities association, the rules of the Municipal Securities Rulemaking Board, and, in the event a violation of other statutes or rules constitutes a violation of any rule of the organization, such other statutes or rules; and a statement describing the answer of the respondent to the charges;
      
      
   4. a statement setting forth findings of fact with respect to any act or practice which such respondent was charged with having engaged in or omitted; the conclusion of the organization as to whether such respondent is deemed to have violated any provision covered by the charges; and a statement of the organization in support of the resolution of the principal issues raised in the proceedings;
      
      
   5. a statement describing any sanction imposed, the reasons therefor, and the date upon which such sanction has or will become effective, together with a finding if appropriate, as to whether such respondent was a cause of any sanction imposed upon any other person; and
      
      
   6. such other matters as the organization may deem relevant.
      
      
5. Notice of final denial, bar, prohibition, termination or limitation based on qualification or administrative rules. Any final action of a self-regulatory organization for which the Commission is the appropriate regulatory agency that is taken with respect to any person constituting a denial, bar, prohibition, or limitation of membership, participation or association with a member, or of access to services offered by a self-regulatory organization or a member thereof, and which is based on an alleged failure of any person to:
   
   
   1. pass any test or examination required by the rules of the Commission or such organization;
      
      
   2. comply with other qualification standards established by rules of the Commission or such organization; or
      
      
   3. comply with any administrative requirements of such organization (including failure to pay entry or other dues or fees or to file prescribed forms or reports) not involving charges of violations which may lead to a disciplinary sanction
      
      Shall not be considered a "disciplinary action" for purposes of paragraph (c) of this rule; but notice thereof shall be promptly filed with the Commission in accordance with paragraph (f) of this section, Provided, however, That no disposition of a matter shall be considered "final" pursuant to this paragraph which results merely from a notice of such failure to the person affected, if such person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies within such organization with respect to such a matter.
      
      
6. Contents of notice required by paragraph (e). Any notice filed pursuant to paragraph (e) of this section shall consist of the following, as appropriate:
   
   
   1. the name of each person concerned together with his last known place of residence or business as reflected on the records of the organization;
      
      
   2. the specific provisions of the Act, the rules or regulations thereunder, the rules of the organization, and, in the case of a registered securities association, the rules of the Municipal Securities Rulemaking Board, upon which the action of the organization was based, and a statement describing the answer of the person concerned;
      
      
   3. a statement setting forth findings of fact and conclusions as to each alleged failure of the person to pass any required examination, comply with other qualification standards, or comply with administrative obligations, and a statement of the organization in support of the resolution of the principal issues raised in the proceeding;
      
      
   4. the date upon which such action has or will become effective; and
      
      
   5. such other matters as the organization may deem relevant.
      
      
7. Notice of final action based upon prior adjudicated statutory disqualifications. Any self-regulatory organization for which the Commission is the appropriate regulatory agency that takes any final action with respect to any person which:
   
   
   1. denies or conditions membership or participation in, or association with a member of, such organization or prohibits or limits access to services offered by such organization or a member thereof; and
      
      
   2. is based upon a statutory disqualification of a type defined in subparagraph (A), (B) , or (C) of Section 3(a)(39) of the Act or consisting of a prior conviction, as described in subparagraph (E) of said Section 3(a)(39), shall promptly file a notice of such action with the Commission in accordance with paragraph (h) of this section, provided, however, That no disposition of a matter shall be considered "final" pursuant to this paragraph where such person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies within such organization with respect to such a matter.
      
      
8. Contents of notice required by paragraph (g). Any notice filed pursuant to paragraph (g) of this section shall consist of the following, as appropriate:
   
   
   1. the name of the person concerned together with his last known place of residence or business as reflected on the record of the organization;
      
      
   2. a statement setting forth the principal issues raised, the answer of any person concerned, and a statement of the organization in support of the resolution of the principal issues raised in the proceeding;
      
      
   3. any description furnished by or on behalf of the person concerned of the activities engaged in by the person since the adjudication upon which the disqualification is based;
      
      
   4. any description furnished by or on behalf of the person concerned of the prospective business or employment in which the person plans to engage and the manner and extent of supervision to be exercised over and by such person;
      
      
   5. a copy of the order or decision of the court, the Commission or the self-regulatory organization which adjudicated the matter giving rise to such statutory disqualification;
      
      
   6. the nature of the action taken and the date upon which such action is to be made effective; and
      
      
   7. such other matters as the organization deems relevant.
      
      
9. Notice of summary suspension of membership, participation, or association, or summary limitation or prohibition of access to services. If any self-regulatory organization for which the Commission is the appropriate regulatory agency summarily suspends a member, participant, or person associated with a member, or summarily limits or prohibits any person with respect to access to or services offered by the organization or (in the case of a national securities exchange or a registered securities association) a member thereof pursuant to the provisions of Section 6(d)(3), 15A(h)(3) or 17A(b)(5)(C) of the Act, such organization shall, within 24 hours of the effectiveness of such summary suspension, limitation or prohibition notify the Commission of such action, which notice shall contain at least the following information:
   
   
   1. the name of the person concerned together with his last known place of residence or business as reflected on the records of the organization;
      
      
   2. the date upon which such summary action has or will become effective;
      
      
   3. if such summary action is based upon the provisions of Section 6(d)(3)(A), 15A(h)(3)(A), or 17A(b)(5) (C)(i) of the Act, a copy of the relevant order or decision of the self-regulatory organization;
      
      
   4. if such summary action is based upon the provisions of Section 6(d)(3)(B) or (C), 15A(h)(3)(B) or (C), or 17A(b)(5)(C)(ii) or (iii) of the Act, a statement describing, as appropriate:
      
      
      1. the financial or operating difficulty of the member or participant upon which such organization determined the member or particpant could not be permitted to continue to do business with safety to investors, creditors, other members or participants, or the organization;
         
         
      2. the pertinent failure to meet qualification requirements or other prerequisites for access and the basis upon which such organization determined that the person concerned could not be permitted to have access with safety to investors, creditors, other members, or the organization; or
         
         
      3. the default of any delivery of funds or securities to a clearing agency by a participant.
         
         
   5. the nature and effective date of the suspension, limitation or prohibition; and
      
      
   6. such other matters as the organization deems relevant.
      
      
10. Notice of limitation or prohibition of access to services by delisting of security. Any national securities exchange for which the Commission is the appropriate regulatory agency that delists a security pursuant to section 12(d) of the Act, and Rule 240.12d2-2 must file a notice with the Commission in accordance with paragraph (k) of this section.
    
    
11. Contents of notice required by paragraph (j) of this section. The national securities exchange shall file notice pursuant to paragraph (j) of this section on Form 25 (Rule 249.25 of this chapter). Form 25 shall serve as notification to the Commission of such limitation or prohibition of access to services. The national securities exchange must attach a copy of its delisting determination to Form 25 and file Form 25 with the attachment on EDGAR.
    
    

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