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SECURITIES AND EXCHANGE COMMISSION

Veterans Affairs Department

CFR Citation: 17 CFR Parts 200, 201, and 240

RIN ID: RIN 3235-AI

DOCUMENT ID: [Release No. 34-48832; File No. S7-25-03]

NOTICE: Part IV

DOCUMENT ACTION: Proposed rule.

SUBJECT CATEGORY: Proposed Amendments to the Rules of Practice and Related Provisions

DATES: Comments must be submitted on or before January 5, 2004.

DOCUMENT SUMMARY: The Securities and Exchange Commission (``Commission'') is proposing for public comment amendments to its Rules of Practice and related provisions in light of the SarbanesOxley Act of 2002. The SarbanesOxley Act, among other things, authorizes the Commission to review disciplinary actions of the Public Company Accounting Oversight Board (``Board'') and to create ``Fair Funds'' in Commission administrative proceedings. The Commission is also proposing for public comment amendments to other provisions of the Rules of Practice (``Rules'') as a result of its experience with those rules and to correct certain citations. The proposed amendments are intended to enhance the transparency and facilitate parties' understanding of the applicability of the review process to Board proceedings, and to make practice under the rules easier and more efficient.

SUMMARY: Securities and Exchange Commission,

SUPPLEMENTAL INFORMATION

The Commission proposes to amend its Rules of Practice and related provisions. The amendments are being proposed in accordance with the provisions of the SarbanesOxley Act of 2002 \2\ and as a result of the Commission's experience with its existing rules. Additional amendments correct typographical errors and change certain citations to conform to the amended rules.\3\
\2\ 15 U.S.C. 7201 et seq.
\3\ Any necessary delegations will be adopted when the rules become final.
I. Discussion
A. Proposed Amendments as a Result of the SarbanesOxley Act

Section 107(c) of the SarbanesOxley Act \4\ authorizes the Commission to review disciplinary actions imposed by the Board and actions that result in the disapproval of registration of a public accounting firm.\5\ Sections 105(d) and 107(c) of the SarbanesOxley Act require the Board to give the Commission notice if it disapproves the registration of a public accounting firm or if it disciplines a registered public accounting firm or a person associated with a registered public accounting firm.
\4\ 15 U.S.C. 7217(c).
\5\ Under section 102(c) of the SarbanesOxley Act, 15 U.S.C. 7212(c), the Board's written notice of disapproval of a complete application for registration as a registered public accounting firm is treated as a ``disciplinary sanction'' for purposes of sections 105(d) and 107(c) of that act, 15 U.S.C. 7215(d), 7217(c).

In creating its framework for Commission review of Board actions, section 107(c) of the SarbanesOxley Act specifies that sections 19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934,\6\ which govern Commission review of selfregulatory organization disciplinary proceedings, shall govern Commission review of final disciplinary sanctions imposed by the Board ``as fully as if the Board were a self regulatory organization and the Commission were the appropriate regulatory agency for such organization for purposes of those sections 19(d)(2) and 19(e)(1) * * *'' The effect of this statutory provision is to make Board actions subject to Commission review under those Exchange Act provisions on the same basis as actions by existing selfregulatory organizations, and to make relevant rules under those provisions applicable to that review. Thus, the administrative structure currently used by the Commission in reviewing selfregulatory disciplinary organization proceedings, including relevant provisions of the Rules, is applicable to persons seeking review of Board actions.

\6\ 15 U.S.C. 78s(d)(2), 78s(e)(1).

The Commission nonetheless has determined to propose amendments to certain of its rules in order to enhance the transparency and facilitate parties' understanding of the applicability of the review process to Board proceedings. Certain of those changes to its Rules will include specific references to Commission review of Board actions and, for example, identify the process by which the Board will provide notice to the Commission of its actions. The Commission asks for comment as to whether adjustments to the existing rules, in addition to those the Commission proposes, are warranted in order to permit the Commission more effectively to exercise its statutory review authority with respect to Board proceedings.

1. Disapproval of Registration

Proposed Rule 19d4(a) would add definitions. Proposed Rule 19d 4(b) would require the Board to file with the Commission and serve on the public accounting firm a notice of disapproval of registration within 30 days of the Board's action.\7\ The notice would include the firm's name and last known address (as reflected in the Board's records) the basis for the Board's disapproval, a copy of the Board's written notice of disapproval, and such other information as the Board deems relevant.
\7\ The thirtyday period for filing is consistent with the thirty days provided in section 19(d)(2) of the Exchange Act for the filing of an application for review by a person aggrieved by certain actions taken by a selfregulatory organization. The Commission requests comment as to whether this period is appropriate in the context of review of actions by the Board, or whether a longer or shorter period would be preferable.

2. Review of Disciplinary Sanctions

Proposed Rule 19d4(c) would require the Board to file and serve a notice of any disciplinary sanction, other than a disapproval of registration, within 30 days of the Board's action.\8\ The notice would provide the name and last address (as reflected in the Board's records) of the associated person or registered public accounting firm [[Page 68187]]
disciplined and a description of the acts or omissions upon which the sanction is based. The notice would also specify the sanction imposed, give the effective date of the sanction, and include a statement of the reasons for the sanction or a copy of the Board's statement justifying the sanction, as well as such other information as the Board deems relevant.
\8\ Comment is requested as to whether the thirtyday period is appropriate in this context, or whether a longer or shorter period would be preferable.

Proposed Rule 440(a) would permit any person aggrieved by a final disciplinary sanction (including disapproval of a completed application for registration of a public accounting firm) imposed by the Board to file an application for review with the Commission. Proposed Rule 440(b) would require that any application be filed within 30 days after the Board's notice under proposed Rule 19d4 is received by the aggrieved person.\9\ The application would identify the determination complained of and would contain a brief statement of the alleged errors in the determination. The application would be accompanied by a notice of appearance by counsel, if any, filed in accordance with Rule 102(d). Under proposed Rule 440(d), the Board would have fourteen days after receipt of the application to certify the record to the Commission and serve one copy of the record index on each party.
\9\ Comment is requested as to whether the thirtyday period is appropriate in this context, or whether a longer or shorter period would be preferable.

3. Stay of Board Action

In accordance with section 105(e)(1) of the SarbanesOxley Act, \10\ proposed Rule 440(c) would provide that filing of an application for review acts as a stay of the Board's action unless the Commission otherwise orders. Proposed Rule 401(e)(1) would permit any person aggrieved by the automatic stay to ask the Commission to lift the stay. The Commission may, in any event, lift the stay on its own motion. The Commission requests comment as to whether other persons should be permitted to request that the stay be lifted.
\10\ 15 U.S.C. 7215(c)(1).

4. Summary Action; Expedition

As permitted under section 105(e)(1) of the SarbanesOxley Act, proposed Rule 401(e)(2) would provide that the Commission may act summarily, without notice and opportunity for hearing. The Commission may also expedite consideration of a motion to lift a stay of Board action to the extent expedition is consistent with the Commission's other responsibilities. If the consideration of a motion to lift is expedited, proposed Rule 401(e)(3) would provide that persons opposing the lifting of the stay may file an opposition within two days of service of the motion to lift unless the Commission orders a different period. \11\
\11\ The twoday period is modeled after current Rule 401(d)(3), which permits persons opposing a motion to the Commission for a stay to file a statement in opposition within two days of service of the motion. Comment is requested as to whether this period is
appropriate, or whether a longer or shorter period would be preferable.

5. Review on Motion of the Commission

Proposed Rule 441(a) would permit the Commission to review a Board disciplinary sanction on its own motion. The Commission proposes that it would determine whether to take review of a Board disciplinary sanction within 40 days after the Board files its notice of the action. \12\ Proposed Rule 441(b) permits the Commission to give notice to the parties that it wishes to raise any material matter, whether or not the parties previously raised that matter. The Commission may provide an opportunity for supplemental briefing if the Commission believes that such briefing would significantly aid its decisional process. \12\ Rule 421(a) permits the Commission to order review of certain determinations by selfregulatory organization within 40 days after notice thereof is filed with the Commission. The Commission requests comment as to whether this period is
appropriate, or whether a longer or shorter period would be preferable.

6. Amendments to Existing Rules

The Commission is also proposing amendments to the following Rules of Practice with respect to the review proceedings created by the SarbanesOxley Act:
[sbull] The definition of ``proceeding'' in Rule 101(a)(9) (Definitions) would be amended to include review of Board disciplinary sanctions under proposed Rule 440.
[sbull] The Commission would amend Rule 202(a) (Specification of procedures by parties in certain proceedings) and Rule 210 (Parties, limited participants and amici curiae), which permits intervention and leave to participate on a limited basis, to exclude review of Board disciplinary sanctions under proposed Rule 440. These Rules currently do not apply to Commission enforcement or disciplinary proceedings or review of determinations by selfregulatory organizations. The Commission asks for comment as to whether proposed Rules 440 and 441 would provide sufficient procedures for review of Board disciplinary sanctions, or whether intervention or limited participation would be appropriate in Commission review of Board disciplinary sanctions. [sbull] Rule 450(a)(2) (Briefs filed with the Commission) would be amended to provide for briefs to be filed in the Commission's review of final disciplinary sanctions imposed by the Board. Under the proposed Rule, the Commission would issue a briefing schedule order within 21 days (or such longer time as provided by the Commission) following its receipt of the Board's index of the record of the Board's
determination.
[sbull] The Commission would define the contents of the record before it in its review of Board action to include the record certified to the Commission by the Board, any application for review, and any submissions made to the Commission, by adding Rule 460(a)(3) (Record before the Commission).

The Commission would also revise its ex parte rule, 17 CFR 200.111 (Prohibitions; application, definitions), to provide that, in proceedings to review Board action, the prohibitions against ex parte communications would commence when a copy of the application for review of the Board's action is served on the Secretary to the Commission. B. Fair Funds and Disgorgement

Section 308(a) of the SarbanesOxley Act \13\ provides that, in a Commission administrative proceeding where the Commission or a hearing officer enters an order requiring disgorgement from a respondent for a violation of the securities laws, or the respondent agrees in settlement to payment of such disgorgement, any civil penalty also ordered against that respondent may be added to the disgorgement funds to create a ``Fair Fund'' to be disbursed by the Commission for the benefit of the victims of such violation. Section 308(b) of the SarbanesOxley Act \14\ authorizes the Commission to accept gifts or bequests to the United States of real and personal property for deposit in a Fair Fund.
\13\ 15 U.S.C. 7246(a).

\14\ 15 U.S.C. 7246(b).

Administration of, and distribution to investors under, Fair Funds and disgorgement plans, occurs after the conclusion of the principal action against a respondent. The functions involved are administrative, and are not subject to provisions such as Rule 120 of the Rules of Practice, the ex parte communication rule in subpart D of the Rules of Practice. Recognizing this, the Commission proposes to remove from subpart D of the Rules of Practice Rules 610 through 620, which relate to the
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development, submission, approval, and administration of orders of disgorgement, and to the right to challenge orders of disgorgement, and to include them in a new subpart F.

Proposed Rule 1100 would state that the Commission is authorized to create a Fair Fund in any administrative proceeding in which a final order is entered against a respondent requiring disgorgement and payment of a civil money penalty. The Commission may also create a Fair Fund if it approves a settlement of an administrative proceeding that provides for a respondent's payment of disgorgement and a civil money penalty. The proposed Rule would also explain that the Commission may add to the Fair Fund any property received in accordance with section 308(b) of the SarbanesOxley Act.\15\
\15\ Section 308(b) of the SarbanesOxley Act provides that the Commission may accept, hold, and utilize gifts of property for a Fair Fund. Gifts of property received pursuant to this section may be deposited only in a Fair Fund.

Certain requirements for Fair Funds would suggest that the Commission's Rules should make some distinctions between Fair Funds and disgorgement funds. For example, Fair Funds must be disbursed to the investors harmed by the securities law violations at issue. The purpose of disgorgement is to require a wrongdoer to pay back the illgotten gains that the wrongdoer obtained by virtue of his or her violation. Thus, the Commission can order a wrongdoer to disgorge illgotten gains whether or not investors suffered any damages as a result of the violation.\16\ Where there are no identifiable victims of a violation, the Commission proposes to permit that the disgorgement and civil money penalty amounts be paid to the United States Treasury. The Commission asks for comment on this proposal.
\16\ See e.g., SEC v. First City Financial Corp., 890 F. 2d 1215, 1230 (D.C. Cir. 1989) (defendant who violated Exchange Act section 13 required to disgorge although harm was to the market as a whole, not to particular persons).

In other respects, the Commission believes that the requirements for Fair Funds and disgorgement funds should be similar. In some cases, the Commission may conclude that it is in the public interest to impose a civil money penalty and order disgorgement even though the relative value of the illgotten gains and the number of potential claimants would result in high administrative costs and de minimis distributions to individual investors. Under such circumstances, the Commission would continue its practice of ordering that the disgorgement and civil penalty amount be paid directly to the United States Treasury.

Current Rule 611(b) provides that the Commission may authorize payment of disgorgement funds to any court registry or courtappointed receiver in any case that alleges the same or similar facts against the respondent. The Commission proposes to continue this authority with respect to disgorgement funds and Fair Funds in proposed Rule 1102(a).

The proposed Rules would permit either the Commission or the hearing officer, as appropriate, to oversee the administration of both disgorgement funds and Fair Funds.

Proposed Rule 1101(a) would continue the practice under current Rule 610 of allowing the Commission or the hearing officer at any time to order a party to submit a plan for the administration of either a Fair Fund or a disgorgement fund. Unless ordered otherwise, the Division of Enforcement would be required to submit such a plan within 60 days after the respondent has tendered the funds or other assets pursuant to the Commission's order to pay disgorgement and, if applicable, a civil money penalty.

Proposed Rule 1101(b) would extend the requirements of current Rule 611(a) to require that both Fair Fund or disgorgement fund plans provide for: receiving and holding additional funds, including funds received under section 308(b) of the SarbanesOxley Act; identifying categories of persons who are potentially eligible to receive funds; providing notice to potentially eligible persons of the fund's existence and their potential eligibility; handling claims; termination of the fund and disposition of any remaining assets; administration of the fund; and such other provisions as the Commission or hearing officer deem appropriate.

As discussed above, proposed Rule 1102(b) would continue to permit the Commission or the hearing officer to order that funds be paid directly to the United States Treasury if the cost of administering the fund and the relative value of the disgorgement fund, together with any civil money penalty, and the number of potential claimants would not justify distribution of the funds.

Proposed Rule 1103 would amend and renumber current Rule 612 to require that notice of either a proposed disgorgement plan or a proposed Fair Fund plan be published in the SEC News Digest, the SEC Docket, and such other publications as the Commission or the hearing officer directs. The notice would specify how to obtain copies of the proposed plan and inform those desiring to comment to submit their written views to the Commission. The Commission also proposes posting notice of a proposed plan on its website. The Commission seeks comment as to how website posting can be done most effectively.

Proposed Rule 1104 would replace and renumber current Rule 613 to provide that, at any time after 30 days following publication of the notice of a proposed disgorgement plan or a proposed Fair Fund plan, the Commission or the hearing officer may approve, modify, or disapprove the proposed plan. The Commission or the hearing officer may order publication of a substantially modified plan prior to adoption.

Proposed Rule 1105 would replace and amend current Rule 614 to provide for administration of Fair Funds, as well as disgorgement funds. The proposed Rule would continue to permit the Commission or hearing officer to appoint any person, including a Commission employee, as fund administrator. Either the Commission or the hearing officer would be able to remove an administrator.

An administrator who is not a Commission employee must post a bond in an amount approved by the Commission. An administrator who is not a Commission employee may receive a fee for reasonable services, subject to approval by the Commission or the hearing officer. Commission employees may not receive such fees. Fees and expenses from fund administration would be paid first from interest and then, if the interest were insufficient, from corpus. The administrator would give periodic accountings, as ordered, and submit a final accounting prior to his or her discharge and cancellation of any bond.

Current Rule 614(a) would be renumbered Rule 1105(b). The Rule currently provides that a respondent may be required or permitted to administer a plan of disgorgement, subject to terms the Commission or the hearing officer deems appropriate. At this time, the Commission does not propose to extend this provision to Fair Funds although it invites comment on this issue. A Fair Fund would include a civil penalty and might include funds conveyed to the United States pursuant to section 308(b) of the SarbanesOxley Act.

Proposed Rule 1106 would renumber Rule 620 to make clear that no person would be granted the right to intervene or appear in a proceeding to challenge an order of disgorgement, an order creating a Fair Fund, an order approving, modifying, or disapproving a disgorgement plan or a Fair Fund plan,
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or any determination relating to a plan based solely upon the person's eligibility or potential eligibility to participate in a fund or based on a private right of action. Under the proposed Rule, as is the case under the existing disgorgement Rule, such person's participation would be limited to submitting comments in accordance with proposed Rule 1103.

C. Other Proposed Amendments

In 1995, the Commission substantially amended its Rules of Practice. After several years of experience with these Rules, the Commission believes that certain changes to the Rules would make practice under those Rules easier and more efficient. The Commission invites comments with respect to these proposed modifications.

1. The existing Rules do not make explicit the Commission's authority to order a variation from the rules governing proceedings before it. The Commission is proposing to include in Rule 100 a new paragraph (c) that would specify that the Commission may by order direct, in a particular proceeding, that an alternative procedure shall apply or that compliance with an otherwise applicable rule is unnecessary, upon its determination that to do so would serve the interests of justice and not result in prejudice to any party to the proceeding.

2. Under section 11A of the Exchange Act and the rules thereunder, the Commission is authorized to adjudicate certain disputes involving registered securities information processors, national market system plans, or transaction reporting plans.\17\ In addition to the inclusion of review of Board disciplinary sanctions discussed above, the Commission proposes to amend Rule 101(a)(9) to expand the definition of ``proceedings'' to make clear that the Rules of Practice are applicable to such adjudications.\18\
\17\ See Exchange Act section 11A(b)(5) (requiring Commission to review prohibitions or limitations of access to services offered by registered securities information processors); Exchange Act Rule 11Aa32(e) (giving Commission discretion to entertain appeals from actions under national market system plans); Exchange Act Rule 11Aa31(f) (giving Commission discretion to entertain appeals in connection with implementation or operation of transaction reporting plans).
\18\ Because the current Rules of Practice do not specify a particular procedure for proceedings under Exchange Act section 11A, the Commission has been required to specify by order the procedural rules that are to be employed in section 11A review proceedings. See, e.g., The Cincinnati Stock Exchange, Exchange Act Rel. No. 43316 (Sept. 21, 2000), 73 SEC Docket 1006 (Order Accepting Jurisdiction, Establishing Procedures, and Ordering Briefs).

Proposed Rule 101(a)(12) would also define the term ``Board'' to refer to the Public Company Accounting Oversight Board.

3. The Commission currently requires counsel to file a motion to withdraw as counsel. Many agencies instead permit counsel to file a notice of withdrawal, which does not require agency action but informs the agency and parties of counsel's withdrawal. The Commission believes that a notice would preserve the intended benefits of the existing requirement by providing timely notice to both the Commission and the parties of the withdrawal. It would also eliminate the need for the Commission or the hearing officer to rule on a motion for withdrawal.

The proposed amendment of Rule 102(d)(4) would require any person seeking to withdraw his or her appearance in a representative capacity to file a notice of withdrawal with the Commission or the hearing officer, stating the name, address, and telephone number of the withdrawing representative; the name, address, and telephone number of the person for whom the appearance was made; and the effective date of the withdrawal. If the person seeking to withdraw knows the name, address, and telephone number of the new representative, or knows that the person for whom the appearance was made intends to represent him or herself, that information would also have to be included in the notice. The amended Rule would require that notice be served on the parties in accordance with Rule 150, and that the notice be filed at least five days before the proposed effective date of the withdrawal.

4. The Commission is considering a proposed amendment that would specifically recognize the authority of hearing officers to correct manifest errors of fact in initial decisions. The Commission has found that some appeals to it could be streamlined if certain issues were addressed first to the hearing officer. The proposed amendment would add to the enumeration of powers of hearing officers in Rule 111 the authority to consider and rule upon a motion to correct a manifest error of fact, provided that such a motion is filed within ten days of the initial decision.

5. Currently, Rule 141(a)(3) requires the Secretary to ``place in the record of the proceeding a certificate of service'' of orders instituting proceedings. The proposed amendment of the Rule would delete this requirement, substituting a requirement that the Secretary ``maintain a record of service on parties.'' The amendment would allow the Secretary to maintain computerized rather than hard copy records of service.

6. Current Rule 141(a)(3) also requires that, if service is effected by mail, the certificate ``shall be accompanied by a confirmation of receipt or of attempted delivery,'' which is also to be maintained in the record of the proceeding. The proposed amendment of Rule 141(a)(3) would delete the requirement that such documents be retained in the record of the proceeding, allowing the Secretary to retain all the confirmation or records of attempted delivery in a single file. The Commission believes that this form of recordkeeping will permit easier retrieval of these documents.

7. Current Rule 141(b) provides for the service of written orders or decisions by the Commission or a hearing officer, other than an order instituting proceedings, to be served by any method of service authorized under Rule 141(a) or Rule 150(c). The proposed amendment of Rule 150(c) discussed below would, among other things, eliminate the requirement that parties seeking to serve each other by facsimile transmission agree to do so in writing. The Commission proposes to retain the requirement of a written agreement as a precondition to service of orders and decisions by facsimile. The proposed amendment of Rule 141(b) would replace the reference to Rule 150(c) with a reference to Rules 150(c)(1)(3).

8. Consistent with Rule 5(b)(2)(D) of the Federal Rules of Civil Procedure, existing Rule 150(c)(4), which governs service of documents on parties by facsimile transmission, requires parties who choose to serve each other by facsimile to agree to do so in a signed writing. The existing Rule also requires that receipt of each document served by facsimile be confirmed by a manually signed receipt. The proposed amendment would delete both of these requirements. It would, however, allow a party to decline to receive service by facsimile. Such a declination would have to be made in writing and served in accordance with Rule 150. The proposed Rule would also require that facsimile transmissions be made at a time that results in their receipt during the Commission's business hours as defined in Rule 104.

The Commission's experience shows that in many instances parties are serving one another by facsimile but are not entering into the agreements or confirming by manually signed receipt. Under the new Rule, parties who choose service by facsimile would be required to provide the Commission and the parties with notice of the facsimile machine telephone number to be used and the hours of facsimile machine operation.

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The Commission solicits views about what might constitute sufficient evidence of completion of facsimile service. See current Rule 150(d). The Commission also seeks comment as to whether parties making service by facsimile, or the Commission serving orders and decisions by facsimile, should be required to transmit a nonfacsimile original contemporaneously with service by facsimile. The current Rule allows parties to specify in the written agreement providing for service by facsimile whether a nonfacsimile document is to be provided.

9. Rule 151 currently does not permit filing of documents with the Commission by facsimile transmission. The proposed amendment would allow such filing. The proposed amendment makes clear, however, that one who seeks to file by facsimile assumes the risk that the transmission will not be completed in a timely or legible fashion. As proposed, Rule 151 would require that parties filing by facsimile should be required to transmit a nonfacsimile original
contemporaneously. At present, the Commission receives a hard copy of filings to satisfy Rule 153(a), which requires that filings be signed by at least one counsel of record, or if a party is acting as his or her own counsel, by the party. The Commission requests comments as to how the signature requirement should be implemented if filings are by facsimile and if no hard copy original is required to be filed.

In addition, the Commission requests comments as to whether filing by email should be permitted. If such filing is permitted, the Commission requests comments as to whether the requirements applicable to filing by facsimile transmission would also be appropriate in that context.

Current Rule 151 requires that papers required to be served on a party shall be filed with the Commission ``at the time of service or promptly thereafter.'' To conform with other Rules, the proposed amendment would require filing with the Commission

``contemporaneously'' with service on a party.

10. Rule 152(a)(2) currently allows the use of either 10point or 12point type in papers filed in Commission proceedings. To enhance the legibility of filings, the proposed amendment would require the use of 12point or larger type.

11. Current Rule 154 limits a brief in support of or in opposition to a motion to 10 pages, exclusive of pages containing any table of contents, table of authorities, and/or addendum. The Commission has received filings by parties who attempt to circumvent this page limitation by filing 10page briefs and extremely lengthy motions. The proposed amendment seeks to establish a combined page limit of 15 pages for the motion and brief.

12. Current Rule 151 provides that persons must file papers with the Commission within the time limit for filing. Rule 160 gives an additional three days for service by mail. Questions have been raised about whether a person receives three additional days to respond if service is made by mail when the Commission's or hearing officer's order specifies a date certain for filing a response. The proposed amendment to Rule 160 would make clear that the person does not receive additional time. If a party requires a short extension, the Commission believes that the party could request that extension under Rule 161.

13. Rule 201 currently provides for the consolidation of proceedings. The proposed amendment would permit the Commission also to order any proceeding severed with respect to some or all of the parties. The proposed amendment would provide that motions to sever must be addressed to the Commission and represent that a settlement offer has been submitted to the Secretary for Commission consideration, or otherwise show good cause. The Commission asks for comment as to whether the law judges should have the power to sever parties from a proceeding.

14. Current Rule 230(a)(1)(vi) requires the Division of Enforcement to make available for inspection and copying by any party any final examination or inspection reports prepared by the Office of Compliance Inspections and Examinations, the Division of Market Regulation, or the Division of Investment Management that have been obtained by the Division of Enforcement prior to the institution of the proceedings, in connection with the investigation leading to the Division of Enforcement's recommendation to institute proceedings. The proposed amendment would state that such reports must be produced only if the Division intends either to introduce them into evidence, or to use them to refresh the recollection of any witness.

Examined parties receive notice of examination findings in the examination process, and do not require notice through the Rules of Practice. Therefore, in order to protect the confidentiality of examination reports, the proposed amendment would limit production of examination and inspection reports to circumstances where the Division intends to introduce the report into evidence, either in reliance on the report to prove its case, or to refresh the recollection of any witness.

The proposed amendment would not alter the requirement that the Division produce documents that contain material exculpatory evidence as required by Brady v. Maryland.\19\

\19\ 373 U.S. 83, 87 (1963).

Current Rule 230(c) permits the hearing officer to require the Division of Enforcement to submit for review a list of withheld documents. The proposed amendment would provide that when similar documents are withheld, those documents may be identified by category instead of individual document. Under the proposed amendment, the hearing officer would retain discretion to determine when an identification by category is insufficient. The proposed amendment would also correct typographical errors in the crossreference to paragraphs pursuant to which documents may be withheld.

15. Current Rule 231(a), relating to production of witness statements, refers to ``any statement * * * that would be required to be produced by the Jencks Act, 18 U.S.C. 3500.'' There has been some question as to what constitutes a ``statement'' under this provision. The proposed change would make clear that the Commission will rely on the definition of ``statement'' contained in the Jencks Act \20\ in applying this Rule.

\20\ 18 U.S.C. 3500(e).

16. Current Rule 232(e)(1) allows only the person to whom a subpoena is directed or a person who is an owner, creator, or the subject of the documents to be produced pursuant to a subpoena, to oppose the subpoena. The proposed amendment would add that any party may also oppose a subpoena.

Subpoenas directed at third party witnesses can be overly broad. Some recipients of such subpoenas may lack the sophistication or resources to dispute the scope of the subpoenas, and it would be unfair to require them to make filings in opposition. The proposed amendment would allow the Division of Enforcement, or any other party, to present arguments about whether subpoenas to any witnesses are unreasonable, oppressive, or unduly burdensome.

17. Current Rule 235(a) provides that a hearing officer may grant a motion to introduce a prior sworn statement of a witness who is out of the United States, unless it appears that the absence of the witness was procured by the party offering the prior sworn statement. Current Rule 233, however, which sets forth the basis for ordering a deposition, does not permit the taking of a deposition when it is anticipated that a
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witness will be absent from the United States. Since depositions can be used only to preserve testimony of a witness who is unlikely to attend the hearing, the proposed revision of Rule 233 would allow the taking of a deposition of a witness currently within the United States who is expected to be outside the United States so long as the deposition will serve the interests of justice and it appears that the party requesting the deposition did not procure the witness's absence.

18. Rule 350(b) currently requires the Secretary to retain documents that are marked for identification but not offered into evidence. There does not seem to be any reason to keep documents that the party did not seek to introduce, and the proposed amendment would delete that requirement. The Secretary would continue to retain documents offered into evidence but excluded from the record so that, in the event of an objection, the Commission could consider any arguments that the documents should be admitted.

19. Proposed Rule 351(a) deletes a reference to a practice abandoned several years ago whereby the interested division took custody of the exhibits after a hearing and was responsible for having them sent to the Secretary. Currently the court reporter takes custody of exhibits.

20. Current Rule 360(d)(1) provides that an initial decision of a hearing officer becomes the final decision of the Commission unless a party or aggrieved person entitled to review files a petition for review, or the Commission orders review on its own initiative. Current Rule 360(e) further provides that, if an initial decision becomes the final decision of the Commission as to a party, the Commission shall issue an order that the decision has become final as to that party. The interplay of these Rules appears to have engendered confusion as to when a decision is final and enforceable. The proposed amendments would renumber paragraph 360(d)(2) as (d)(1) and combine paragraphs (d)(1) and (e) as (d)(2), clarifying that a decision becomes final upon the issuance of a finality order by the Commission.

21. Current Rule 400 provides for the Commission to grant interlocutory review only in ``extraordinary circumstances.'' The proposed amendment would instruct the parties that petitions for interlocutory review are ``disfavored,'' making clear that such petitions rarely would be granted. The proposed amendment would recognize, however, that the Commission retains discretion to undertake such review on its own motion at any time.

22. A proposed amendment to Rules 400 and 430 would provide that certain matters are subject to interlocutory review under Rule 400, not Rule 430. Rule 430 permits review of matters delegated to the staff. Under 17 CFR 200.309 and 3010, certain functions are delegated to the administrative law judges and the chief administrative law judge. As the Rules are currently drafted, such determinations arguably might be reviewable under Rule 430 although the determination would not merit interlocutory review under Rule 400. The amendment would make clear that Rule 400 is the sole route for interlocutory review of determinations by a hearing officer.

23. Current Rule 401(d)(1) provides that any person aggrieved by an action by a selfregulatory organization for which the Commission is the appropriate review agency, for which action review may be sought pursuant to Rule 420, may seek a stay of that action. The proposed amendment would clarify that a stay can be sought only at the time an application for review is filed or thereafter. Filing an application for review brings the action before the Commission. Since the proposed amendment of Rule 420(c) reduces the content requirements for an application for review, the requirement that an application be filed when or before a stay is sought would not impose a significant delay.

24. The Commission requests comment on the proposed amendment of Rule 410(b), which would permit an opposing party to file a cross petition for review within ten days from the filing of a petition for review, making it unnecessary for parties to file protective defensive petitions for review.

Another proposed amendment would delete Rule 410(d), thus abolishing the opposition to the petition for review. The Commission requests comment on the proposal to abolish the petition for review. In the Commission's experience, the utility of such oppositions has been quite limited, given that the Commission has long had a policy of granting petitions for review, believing that there is a benefit to Commission review when a party takes exception to a decision. Moreover, the Commission believes that a motion for summary affirmance would permit the Commission to dispose of matters suited to more abbreviated review.

25. The proposed amendment of Rule 411(e) would provide a 21day time limit for filing a motion for summary affirmance. The proposed amendment would also set forth standards both for granting and for denying summary affirmance. Summary affirmance would be granted if the Commission finds that no issue raised in the initial decision warrants consideration by the Commission of further oral or written argument. Summary affirmance would be denied upon a reasonable showing that a prejudicial error was committed in the conduct of the proceeding or that the decision embodies an exercise of discretion or decision of law or policy that is important and that the Commission should review.

26. Section 19(d) of the Exchange Act requires a person who appeals from selfregulatory organization disciplinary action to do so within 30 days ``or within such longer period as'' the Commission ``may determine.'' The proposed amendment to Rule 420(b) would make clear that an appeal from selfregulatory organization action must be filed within 30 days, absent a showing of extraordinary circumstances, and will not be extended by the Commission under Rule 161. This standard is consistent with prior Commission precedent.\21\
\21\ See, e.g., Lance E. Van Alstyne, 53 S.E.C. 1093, 1099 (1998) (Commission will not authorize late filing of appeals by selfregulatory organizations absent extraordinary circumstances).

Current Rule 420 contains language that might suggest that the applicant's address be used to serve only the record index. The proposed amendment would provide that the applicant identify where he or she may be served for all purposes.

27. Rule 450(c), which sets limits on the page length of briefs, would be amended to limit instead the number of words in briefs. The proposed word limits14,000 for principal briefs and 7,000 for any reply briefare based on Rule 32 of the Federal Rules of Appellate Procedure. The proposed amendment would also state that motions to file oversized briefs are disfavored. In exceptional cases, however, where more pages may be needed to address the issuesfor example, where the Division of Enforcement must address arguments by multiple respondentsthe Commission may, upon motion, allow longer filings.

Except when a principal brief does not exceed 30 pages in length, or a reply brief does not exceed 15 pages in length, the proposed amendment would require the attorney filing the brief (or an unrepresented party) to certify that the brief complies with the length limitation and to state the number of words in the brief. The proposed amendment would permit the party certifying the length of the brief to rely on the word count of the word processing system used to prepare the brief.

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The Commission has received briefs which sought to incorporate by reference briefs filed before the hearing officer in the proceeding on appeal. Such incorporation by reference, if allowed, would erode the pagelimit requirements of Rule 450(c). The proposed amendment provides that pleadings incorporated by reference will be included in determining the word count of briefs. The amendment is intended to promote adherence to the length limitations of Rule 450(c) and to encourage parties to exercise judgment in selecting the arguments that best advance their positions rather than simply repeating previously formulated contentions.

28. The current Rules make no provision for the use of visual aids at oral argument. The proposed amendment of Rule 451(b) would prohibit the use of visual aids unless copies are provided to the Commission and all parties at least five business days before the argument is to be held.\22\ The Commission requests comment as to whether five business days provides sufficient time for the parties to prepare adequate responses to proposed visual aids.
\22\ A further proposed amendment would conform the language of Rule 451(b) to reflect Commission practice not to issue the order setting oral argument in a Commission administrative proceeding until the date for argument is set.

29. Current Rule 360(a)(2) directs the hearing officer to issue an initial decision within the time period specified in the order instituting proceedings. To address the hearing officer's inability to comply with this directive where a proceeding is stayed by order of the hearing officer or the Commission under Rule 210(c)(3) because a criminal investigation or prosecution is pending, the proposed amendment of Rule 360(a)(2) would specify that, if a proceeding is stayed under the authority of Rule 210(c)(3), the specified time period for issuance of the initial decision, as well as any other time limits established in orders issued by the hearing officer under Rule 360(a)(2), will be automatically tolled during the period in which the stay is in effect.

30. Rule 360(d)(2) provides that the initial decision shall not become final as to a party or person if a timely petition for review is filed by that party or person. The proposed amendment would add the timely filing, by a party or an aggrieved person entitled to review, of a motion to correct an initial decision to the hearing officer as an event that prevents the initial decision from becoming the final decision of the Commission as to that party or person until the hearing officer has decided the motion. The proposed amendment would also make conforming changes to Rule 360(b), which specifies that an initial decision shall include a statement reflecting the provisions of Rule 360(d).

A proposed amendment of Rule 410(b) would provide that the time to file a petition for review is stayed until 21 days after resolution of any motion to correct an initial decision filed before the hearing officer so that, while a motion to correct is pending, a party need not file a petition for review to preserve its appeal rights.

Current Rule 470 specifies a 15page limit for a motion for reconsideration, rather than the ten pages permitted for other motions. There does not seem to be any reason for treating motions for reconsideration differently from other motions. The amendment proposes to limit the party seeking reconsideration to the same number of pages and the same format used for other motions under the Rules of Practice. The Commission requests comment as to whether motions for
reconsideration should be subject to different requirements from other motions, and if so, what differences would be appropriate.

31. The proposed amendment of Rule 601 would codify existing practice for payment of disgorgement, interest, and penalties. The proposal standardizes the language currently used by hearing officers in initial decisions and the Commission in its orders, as follows: (c) Method of making payment. Payment shall be made by United States postal money order, wire transfer, certified check, bank cashier's check, or bank money order made payable to the Securities and Exchange Commission. The payment shall be mailed or delivered to the Office of Financial Management of the Commission. Payment shall be accompanied by a letter that identifies the name and number of the case and the name of the respondent making payment. A copy of the letter and the instrument of payment shall be sent to counsel for the Division of Enforcement.

II. Request for Public Comments

We request and encourage any interested person to submit comments regarding: (1) The proposed changes that are the subject of this release, (2) additional or different changes, or (3) other matters that may have an effect on the proposals contained in this release. III. Administrative Procedure Act, Regulatory Flexibility Act, and Paperwork Reduction Act

The Commission finds, in accordance with section 533(b)(3)(A) of the Administrative Procedure Act, \23\ that this revision relates solely to agency organization, procedure, 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 \24\ therefore does not apply. Similarly, because these rules relate to ``agency organization, procedure or practice that does not substantially affect the rights or obligations of nonagency parties,'' the Commission is not soliciting comment for purposes of the Small Business Regulatory Enforcement Fairness Act. \25\ Nonetheless, the Commission has determined that it would be useful to publish these proposed rules for notice and comment, before adoption. \26\
\23\ 5 U.S.C. 553(b)(3)(A).
\24\ 5 U.S.C. 601 et seq.
\25\ 5 U.S.C. 804(3)(C).

\26\ See 5 U.S.C. 603.

These rules do not contain any collection of information requirements as defined by the Paperwork Reduction Act of 1995, as amended. \27\
\27\ 44 U.S.C. 3501 et seq.
IV. Costs and Benefits of the Proposed Rules and Amendments

The SarbanesOxley Act of 2002 authorizes the Commission to review disciplinary actions by the Public Company Accounting Oversight Board as well as actions resulting in disapproval of registration of public accounting firms. In response, the Commission proposes to revise certain of its rules in order to enhance the transparency and facilitate parties' understanding of the applicability of the review process to Board proceedings. The SarbanesOxley Act also provides that where the Commission or a hearing officer in a Commission
administrative proceeding enters an order requiring disgorgement and a civil money penalty, the Commission may create a ``Fair Fund'' combining the disgorgement and the civil money penalty to be disbursed for the benefit of the victims of the securities law violations at issue in the proceeding. In response, the Commission proposes regulatory provisions for the submission and administration of Fair Fund plans and disgorgement plans. The Commission also proposes to take this opportunity to amend other provisions of the rules.

Taken as a whole, the Commission's Rules of Practice (``Rules'') create governmental review and remedial processes. That is, they are procedural and administrative in nature. The benefits to the parties are the familiar benefits of due process: notice,
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opportunity to be heard, efficiency and fairness. The cost of these processes, on the other hand, falls largely on the oversight bodies.

For purposes of cost/benefit analysis, the processes created by the regulatory provisions proposed in this release, given their procedural nature, might best be viewed as a whole. Nonetheless, to the extent possible, specific benefits and costs that can be more narrowly associated with separate provisions are identified below. However, because there are so many provisions, and because the costs tend to be primarily governmental, we do not provide separate sections for our respective cost and benefit analyses. Rather, we simply identify each provision proposed and discuss any benefits and costs that may be associated with it beyond the more general points summarized above.

Proposed Rule 19d4(b) requires the Board to file with the Commission and serve on the public accounting firm a notice of disapproval of registration within 30 days of the Board's action. Proposed Rule 19d4(c) imposes on the Board a similar filing and service requirement for notices of any disciplinary sanction other than a disapproval of registration. Timely notice is a fundamental aspect of due process. It benefits those who receive notice by allowing them to plan and take action in light of the Board's findings. Timely filing with the Commission lets the Commission know of the conclusion of Board proceedings so that it can exert oversight over the quality and fairness of those proceedings, which benefits parties to the proceedings as well as the general public. These rules would impose a small administrative cost on the Board.

Proposed Rules 440 and 441 provide for Commission review of Board actions. Proposed Rule 440 allows review upon application of a person aggrieved by a final Board disciplinary sanction, including disapproval of a completed application for registration of a public accounting firm, and proposed Rule 441 permits Commission review of Board disciplinary sanctions upon the Commission's own motion. The Rules pertain to the review mechanism required by the SarbanesOxley Act, informing those upon whom Board sanctions are imposed of the option of Commission review and instructing them about procedures involved in initiating the review process.

Commission review of Board findings benefits parties to Board proceedings (and, to a lesser extent, the general public) by protecting against arbitrary, capricious, or otherwise unlawful treatment. Review also allows the Commission to exercise a check on, and protect the public interest in, the quality and consistency of Board findings.

Parties involved in review proceedings will incur legal and other costs. Review upon application by a person aggrieved, under proposed Rule 440, is optional. Thus, a party would only incur these costs if it expected a net benefit from the review process. In the case of review upon the Commission's own motion under proposed Rule 441, however, the parties involved might otherwise have chosen to avoid incurring the costs.

In accordance with section 105(e)(1) of the SarbanesOxley Act, proposed Rule 440(c) provides that filing an application for review with the Commission acts as a stay of the Board's action unless the Commission orders otherwise. Proposed Rule 401(e) allows (1) persons aggrieved by such an automatic stay to ask the Commission to lift the stay; (2) the Commission to lift such a stay summarily, without notice and opportunity for a hearing; and (3) persons opposing the lifting of such a stay to file an opposition.

Rule 440(c) benefits the party upon whom Board sanctions have been imposed by allowing that party an opportunity to be heard in the review process before the Board's sanctions take effect. The automatic stay imposes a cost upon third parties who would benefit if the sanctions went into place immediately.

Allowing a person aggrieved by the automatic stay to ask to have the stay lifted benefits the aggrieved person by offering the option of a possible earlier termination of the stay. Those availing themselves of this option will incur legal and other costs, though since the procedure is optional, they will presumably do so only if they conclude that doing so yields an expected net benefit. Similarly, allowing opposition to a motion to lift allows those opposing the motion an opportunity to be heard. Although opposing a motion could involve legal and other expenses, since opposition is optional, parties would only incur those costs if they expected a net benefit from opposing.

Allowing the Commission to lift a stay summarily could benefit persons aggrieved by the stay by providing prompt and inexpensive relief. At the same time, those who might oppose the lifting of the stay would be denied notice and an opportunity to be heard in connection with the lifting of the stay.

Section 308(a) of the SarbanesOxley Act provides that, in a Commission administrative proceeding where the Commission or a hearing officer enters an order requiring disgorgement and a civil money penalty, the Commission may create a ``Fair Fund'' by including the civil penalty with the disgorgement amount. The Commission is required to disburse money from a Fair Fund for the benefit of the victims of the securities law violations at issue in the proceeding.

Proposed Rule 1101 would authorize the Commission to create a Fair Fund in any administrative proceeding in which a final order is entered imposing disgorgement and a civil money penalty, and would permit the Commission to add to the Fair Fund any property received in accordance with section 308(b) of the SarbanesOxley Act. The Commission would also be allowed to create a Fair Fund if it approves a settlement of an administrative proceeding that provides for payment of disgorgement and a civil money penalty. Where the relative value of the illgotten gains and the number of potential claimants would result in high administrative costs and de minimis distributions to investors, the proposed rules would allow the Commission not to create a Fair Fund, and the disgorgement and civil penalty amounts would be paid directly to the United States Treasury.

Creating and administering Fair Funds benefits victims of securities law violations, who would be more likely to be made whole. Allowing monies that would otherwise go into a Fair Fund to be paid to the Treasury where investors would receive only de minimis distributions would prevent those monies from being consumed by administrative costs, though at a cost to victims who might otherwise have received a minimal payment from a Fair Fund.

The proposed amendment of Rule 102(d)(4) would allow a person seeking to withdraw his or her appearance before the Commission in a representative capacity to file a notice of withdrawal rather than the motion to withdraw that is currently required. Filing a notice would preserve the benefits of the existing requirement by giving the Commission and the parties timely notice of withdrawal. Preparing and filing a notice may be less expensive than preparing and filing a motion. Additionally, the proposed amendment would increase efficiency by eliminating the need for the Commission or a hearing officer to rule on a motion for withdrawal.

The proposed amendment of Rule 150(c)(4) would eliminate the requirements that parties who choose to serve each other by facsimile transmission (1) agree to do so in a
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signed writing, and (2) confirm receipt of each document by a manually signed receipt. Eliminating these requirements would result in lower costs to the serving parties. However, eliminating the requirement of a signed receipt could make it more difficult to prove that a transmission was received.

The proposed amendment of Rule 151 would allow parties to file documents with the Commission by facsimile transmission. This amendment provides parties an additional option for transmitting documents to the Commission. Facsimile filing would allow the Commission to receive, and be able to address, documents in as timely a fashion as possible. Costs of transmission by facsimile are likely to be lower than overnight or courier fees. The proposal would not impose any new costs, since the existing methods for filing with the Commission remain available.

The proposed amendment to Rule 154 establishes a combined page limit of 15 pages for a motion and a brief in support of the motion. The 15page limit would also apply to a brief in opposition to a motion and to any reply brief. The proposed amendment to Rule 450(c) provides that pleadings incorporated by reference will be included in determining the page count of briefs.

Reducing page limits may result in lower legal costs to the parties. Limiting the number of pages submitted also keeps proceedings efficient.

The proposed amendment of Rule 233 would allow the taking of a deposition of a witness then within the United States, who is expected to be outside the United States at the time of an administrative hearing, so long as the deposition will serve the interests of justice and it appears that the party requesting the deposition did not procure the witness's absence. The proposal serves the interests of justice by making available a statement that otherwise might not have been made part of the record. If use of such a deposition results in the absence from a hearing of a witness who otherwise would have appeared, there would be a loss in that the hearing officer would have no opportunity to assess demeanor. However, since the Rule allows a deposition only where it appears that the party requesting the deposition did not procure the witness's absence, such a series of events should rarely occur.

The remaining proposals variously clarify existing practice, relate to internal agency management, increase the efficiency of proceedings, or promote due process.

The Commission requests data to quantify the costs and the value of the benefits identified. The Commission also seeks estimates and views regarding these costs and benefits for particular types of market participants, as well as any other costs or benefits that may result from the adoption of the proposed rules.

V. Effect on Efficiency, Competition and Capital Formation

Section 2(b) of the Securities Act of 1933,\28\ section 3(f) of the Exchange Act,\29\ section 2(c) of the Investment Company Act of 1940,\30\ and section 202(c) of the Investment Advisers Act of 1940 \31\ require us, when engaging in rulemaking that requires us to consider or determine whether an act is necessary or appropriate in the public interest, to consider whether the action will promote efficiency, competition, and capital formation. Section 23(a)(2) of the Exchange Act \32\ prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed rules are intended to enhance the transparency and facilitate parties' understanding of the applicability of the Commission review process to Board proceedings. The proposed rules and amendments also include regulatory provisions for the submission and administration of Fair Funds plans and disgorgement plans, and the proposed amendments are intended to clarify existing practice and increase the efficiency of Commission enforcement and selfregulatory organization disciplinary review proceedings. The proposed rules and amendments would apply to all persons involved in administrative proceedings before the Commission and therefore the Commission does not expect the proposed rules and amendments to have an anticompetitive effect. To the extent the proposed rules and amendments would foster making whole victims of securities laws violations and would increase the transparency of the Commission's administrative practice and the efficiency of the Commission's proceedings, there might be an increase in investor confidence in market fairness and efficiency. However, the magnitude of the effect of the proposed amendments in this regard is difficult to quantify. We request comment on the possible effects of our rule proposals on efficiency, competition, and capital formation. Commenters are requested to provide empirical data and other factual support for their views if possible.
\28\ 15 U.S.C. 77b(b).
\29\ 15 U.S.C. 78c(f).
\30\ 15 U.S.C. 80a2(c).
\31\ 15 U.S.C. 80b2(c).
\32\ 15 U.S.C. 78w(a)(2).

VI. Statutory Basis and Text of Proposed Amendments

These amendments to the Rules of Practice and related provisions are being adopted pursuant to statutory authority granted to the Commission, including section 3 of the SarbanesOxley Act, 15 U.S.C. 7202; section 19 of the Securities Act, 15 U.S.C. 77s; sections 19 and 23 of the Securities Exchange Act, 15 U.S.C. 78s and 78w; section 20 of the Public Utility Holding Company Act, 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. 80a37 and 80a39; and section 211 of the Investment Advisers Act, 15 U.S.C. 80b11.
List of Subjects
17 CFR Parts 200 and 201

Administrative practice and procedure.

17 CFR Part 240

Reporting and Recordkeeping Requirements; Securities. Text of the Amendment

For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows: PART 200ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS

1. The general authority citation for part 200, subpart A is revised to read as follows:

Subpart AOrganization and Program Management

Authority: 15 U.S.C. 77s, 77sss, 78d1, 78d2, 78w, 78ll(d), 78mmm, 79t, 80a37, 80b11, and 7202, unless otherwise noted. * * * * *

2. In Sec. 200.21, paragraph (b), remove the words ``Rule 2(e) of the Commission's Rules of Practice (Sec. 201.2(e) of this chapter)'' and, in their place, add the words ``Rule 102(e) of the Commission's Rules of Practice (Sec. 201.102(e) of this chapter)''.

Subpart BDisposition of Commission Business

3. The authority citation for subpart B continues to read as follows:

Authority: 5 U.S.C. 552b; 15 U.S.C. 78d1 and 78w. [[Page 68195]]

4. In Sec. 200.43, paragraph (c)(3), remove the words ``Rule 26 of the Commission's rules of practice, 17 CFR 201.26'' and, in their place, add the words ``Rules 430 and 431 of the Commission's Rules of Practice, Sec. Sec. 201.430 and 201.431 of this cha

FOR FURTHER INFORMATION CONTACT Diane V. White, Office of the General Counsel, (202) 9420950, Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 205490208.