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Release No. 34-35833 60 Fed. Reg. 32737 - June 23, 1995
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 Table of Contents
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I. Background
Today's adoption of comprehensive revisions to the Rules of Practice (''Rules'') of the Securities and Exchange Commission (''Commission'') and issuance of a statement of informal procedures with respect to Commission adjudications culminate an extensive review of the Commission's adjudication procedures and process. In July 1990, then-Commissioner Mary L. Schapiro was appointed chairman of the Task Force on Administrative Proceedings (''Task Force'' or ''Schapiro Task Force''). The mission of the Task Force was to review the rules and procedures relating to Commission administrative proceedings, to identify sources of delay in those proceedings and to recommend steps to make the adjudicatory process more efficient and effective.1 Following passage of the Securities Enforcement Remedies and Penny Stock Reform Act (''Remedies Act''),2 the Task Force greatly expanded its work to include preparing procedures to implement the authority granted to the Commission by the Remedies Act. The Task Force ultimately determined that it would be
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necessary and appropriate to revise completely the entire Rules of Practice.
In January 1991 and December 1991, the Schapiro Task Force presented to the Chairman interim findings and recommendations concerning the need to reduce the pending case backlog. Implementation of these recommendations included, among other things, a reorganization of the Adjudications Group within the Office of the General Counsel, significant increases in staff resources assigned to adjudicatory proceedings, and more frequent Commission meetings to consider proposed adjudicatory opinions.
In August 1992, the Secretary published approximately 400 orders issued by the Commission and administrative law judges between 1964 and 1992.3 The previously unpublished orders, which were assembled and organized by the Task Force, concerned interpretations of the Rules of Practice or other procedural issues. The orders provide litigants with additional information about applicable procedure and thereby reduce the likelihood that previously decided issues will need to be relitigated. Also, as recommended by the Task Force, the Commission began regular publication in the SEC Docket of initial decisions of the administrative law judges as well as significant procedural orders.
In March 1993, the Schapiro Task Force issued its final report, Fair and Efficient Administrative Proceedings (''the Task Force Report'').4 The Task Force concluded that the fundamental structure of the Commission's administrative process is sound. The Task Force found, however, that there was unnecessary delay in deciding litigated adjudicatory proceedings.5 The Task Force recommended a comprehensive revision of the Rules of Practice and included proposed new Rules in its Report. In addition, the Task Force made various other recommendations designed to improve the efficiency and fairness of the Commission's administrative proceedings.6 These included steps that were intended to make structural changes that would reduce the likelihood of a recurrence of the conditions that led to unnecessary delay and a backlog of pending cases.
In November 1993, the Commission published in the Federal Register a release proposing to adopt the Task Force's proposals pertaining to the Rules and asking interested persons for comment.7
II. Discussion of the Revised Rules
The Commission received seven comment letters from various interested persons.8 Although not numerous, the comment letters as a group contained very extensive commentary on the proposed Rules. Commenters generally greeted the Commission's proposals favorably. All commenters praised the Commission's initiating a review of its Rules with the goal of further promoting fair and efficient administrative proceedings. All commenters submitted proposals to make various modifications to the Rules including many suggestions in response to the specific requests for comment contained in the proposing release. A number of comments also addressed matters not directly within the scope of the Rules. These included internal Commission management issues, such as the organizational structure of the Commission's divisions and offices, or enforcement policy issues, such as the frequency with which the Commission will initiate administrative proceedings. Significant changes to the Rules are discussed below.
A. New Organizational Structure of the Rules
The former Rules, which had not been comprehensively revised since 1960, contained requirements which were out-of-date or inconsistent with current practices and, in a few cases, inconsistent with other rules. In revising the Rules, emphasis was placed on maintaining consistency with applicable statutory language while improving intelligibility, ensuring that the Rules accurately reflected current Commission practice, and providing internal consistency in the use of terms between individual rules.
The Commission has adopted a new organizational structure and numbering system for the Rules of Practice based on model administrative rules prepared by the Administrative Conference of the United States (''ACUS''). As originally proposed, the Commission's Rules had been arranged in roughly the order in which an administrative proceeding progresses and numbered consecutively. The new format groups rules together in six broad categories based on which phase or type of proceeding they govern. The first four groups--general rules; institution of proceedings and prehearing rules; hearing rules; and rules regarding appeals to the Commission and Commission review--are predicated upon the four classifications suggested by ACUS. The two additional groups are related to specific Commission proceedings and administrative remedies and sanctions--rules regarding temporary orders, suspension of a registration and summary suspensions of trading; and rules governing disgorgement and penalty payments.
Within each group, related rules are placed together. Rules which, as proposed, covered multiple topics have been divided into shorter rules each limited to fewer topics. The new structure increases the use of rule headings and subheadings to guide a user to the appropriate rule. To the extent possible, related provisions cross-reference each other. Each of the six major groups of rules is numbered in a separate series, from 100 through 600. In addition to improving the ease of use of the rules, the new numbering system will provide the Commission with greater flexibility when future amendments and additions to the Rules occur.
B. Comments Accompanying the Rules
The Commission has prepared explanatory comments for the Rules of Practice; these comments appear with the Rules in this ''Supplementary Information'' section. The complete text of the Rules without comments appears below in Section VII. Each explanatory remark is identified as either a ''comment'' or a ''revision comment.'' ''Comments'' are statements explaining the basis for a rule, describing the rule's rationale, referencing related rules, or providing information concerning pertinent Commission practice. Comments are not a part of the rules, and are not included in the Code of Federal Regulations. The Commission believes, however, that information in the comment section will assist persons consulting the Rules in a more thorough understanding of the Rules. Printed copies of the revised Rules of Practice including the comments will be
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available from the Commission's Publications Branch, U.S. Securities and Exchange Commission; 450 Fifth Street, N.W.; Stop C-11; Washington, D.C. 20549. A copy of this publication will be provided to each respondent by the Secretary at the commencement of proceedings.
''Revision comments'' are statements explaining changes from the proposed Rules to the adopted Rules. In addition, revision comments include, where appropriate, a brief discussion of responses to the requests for comment in the proposing release.
C. Summary of Major Changes to the Rules From the Former Rules
This section contains a capsule summary of major changes from the former Rules.
1. Temporary cease-and-desist orders. The Rules include procedures for the issuance of a temporary cease-and-desist order (''TCDO'').9-10 Rules 510, 511 and 512 contain the application procedures, notice requirements, hearing procedures and issuance requirements for TCDO's. Rule 513 contains additional requirements for ex parte issuance of a TCDO. Rule 514 sets forth the availability of judicial review and the duration of a TCDO. Rule 530 governs special procedures relating to issuance of an initial decision whether to enter a permanent order if a temporary order is pending. Rules 531 and 540 govern Commission review of that initial decision, and duration of the temporary order pending that review.
The Division of Enforcement may file an application for a TCDO simultaneously with or after the commencement of proceedings seeking a permanent cease-and-desist order with respect to a registered entity or associated person.11 The application must be accompanied by a declaration of facts signed by a person with knowledge of the facts contained therein; a memorandum of points and authorities; a proposed order imposing the temporary relief sought; and, unless relief is sought ex parte, a proposed notice of hearing and order to show cause whether the temporary relief should be imposed. If a proceeding for a permanent cease-and-desist order has not already been commenced, the Division must also file a proposed order instituting proceedings to determine whether a permanent cease-and-desist order should be imposed.
Unless the conditions warranting issuance of an ex parte order are met, a respondent shall be served with the application and additional papers and a hearing on the application shall be scheduled.
If a respondent has been served with a temporary cease-and-desist order entered without a prior Commission hearing, the respondent may apply to the Commission to have the order set aside, limited, or suspended, and if the application is made within 10 days after the date on which the order was served, may request a hearing on such application. The Commission shall hold a hearing and render a decision on such an application at the earliest possible time. The hearing shall begin within two days of the filing of the application unless the applicant consents to a longer period or the Commission, by order, for good cause shown, sets a later date. If the Commission does not render its decision within 10 days of the application or such longer time as consented to by the applicant, the temporary order shall be suspended until a decision is rendered.
A temporary cease-and-desist order may be appealed to a federal district court within 10 days of service of an order entered with prior notice, or within 10 days after the Commission's issuance of its decision upon a respondent's application to set aside, limit or suspend an ex parte order.
After issuance of a temporary cease-and-desist order, the proceeding to determine whether to enter a permanent order shall go forward with a hearing before a hearing officer and the issuance of an initial decision. The Rules establish procedures with respect to expedited consideration of any appeal of the initial decision. The Rules also set forth limitations on the duration and scope of the temporary cease-and-desist order pending issuance of the Commission's opinion on review of the initial decision.
2. Suspension of Registered Entity. Rules 520, 521, 522 and 524 include extensive revisions to the provisions of former Rule 19 relating to the suspension of a registered broker or dealer pending a final determination whether the registration shall be revoked. Consistent with amendments to the Securities Exchange Act, the new rules apply to a municipal securities dealer, government securities broker, government securities dealer, or transfer agent as well as a broker or dealer. Where possible, the new procedures for suspensions pending a final determination whether to revoke a registration parallel the procedures relating to temporary cease-and-desist orders.
3. Disgorgement. The 600 series of the revised Rules contains new provisions governing payment of disgorgement, interest and penalties. Rule 600 requires prejudgment interest to be assessed on any sum required to be paid pursuant to an order of disgorgement. The rate of interest is set at the IRS underpayment rate and compounded quarterly unless the Commission specifies a lower rate with respect to funds placed in an approved escrow. Under Rule 601 unless otherwise provided, funds due pursuant to an order by the Commission requiring the payment of disgorgement, interest or penalties must be paid no later than 21 days after service of the order. After disgorgement has been paid, a proposed plan of disgorgement will be submitted pursuant to Rule 610.
Rule 611 lists the required elements of such disgorgement plan. A plan may provide for distribution of funds to investors or to a court registry or court-appointed receiver for injured investors. Where return of disgorged funds to investors is not justified, funds may be paid to the U.S. Treasury. Rule 612 requires that notice of a proposed plan be published in the SEC News Digest and the SEC Docket and other publications as required. A plan may be approved, approved with modifications, republished for additional comments or disapproved pursuant to Rule 613. Rule 614 contains provisions governing the administration of an approved plan.
Rule 620 addresses conditions under which a non-party will be granted leave to intervene or to participate in a proceeding for the purpose of challenging a disgorgement order or plan of disgorgement. The Rule provides that no person shall be granted leave to intervene or to participate for such a purpose based solely upon that person's eligibility or potential eligibility to participate in a disgorgement fund or based upon any private right of action such person may have against any person who is also a respondent in an enforcement proceeding.
Persons claiming an inability to pay disgorgement, interest or a penalty must do so in accordance with Rule 630. A respondent who asserts inability to pay may be required to file a sworn financial statement and to keep the statement current. Failure to file a required statement may be deemed a waiver of the claim of inability to pay.
4. Expanded Role for Prehearing Conferences. The Rules significantly expand the role of prehearing
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conferences and encourage more active prehearing case management by administrative law judges. Under the proposed rule, no initial prehearing conference was required. In accordance with suggestions by commenters, revised Rule 221 requires that except where the emergency nature of a proceeding would make a prehearing conference clearly inappropriate, both an initial and a final prehearing conference shall be held. The initial conference is to be held within 14 days of service of an answer, or if no answer is required, within 14 days of the issuance of an order instituting proceedings. The final conference is to be held as close to the beginning of the hearing as is reasonable.
The Rules make an initial prehearing conference mandatory in most cases because such a conference can eliminate unnecessary delay and improve the quality of adjudicative decisionmaking by sharpening the preparation of cases and presentation of issues. The increased role for prehearing conferences will facilitate the new procedures that provide for access to certain categories of investigation file documents in enforcement and disciplinary proceedings and for the prehearing production of documents pursuant to subpoena.
5. Prehearing Access to Certain Investigative Documents. Pursuant to new Rule 230, in an enforcement or disciplinary proceeding, the Division of Enforcement will provide any party with an opportunity for inspection and copying of certain categories of documents obtained by the Division in connection with the investigation leading to the Division's recommendation to institute proceedings. The rule codifies the prevailing practice of the Division of Enforcement staff in the Headquarters Office and various regional offices. A respondent's right to inspect and copy documents under this Rule is automatic; the respondent does not need to make a formal request for access through the hearing officer.
Documents to which access must be provided include: (1) Each subpoena issued; (2) every other written request to persons not employed by the Commission to provide documents or to be interviewed; (3) the documents turned over in response to any such subpoenas or other written requests; (4) all transcripts and transcript exhibits; (5) any other documents obtained from persons not employed by the Commission; and (6) any final examination or inspection reports prepared by the Division of Market Regulation or the Division of Investment Management. The Division of Enforcement's obligation under this rule relates only to documents obtained by the Division of Enforcement. Documents located only in the files of other divisions or offices are beyond the scope of the rule.
The Division of Enforcement may withhold a document if: (1) The document is privileged; (2) the document is an internal memorandum, note or writing prepared by a Commission employee, other than certain examination or inspection reports prepared by the Divisions of Market Regulation or Investment Management, or is otherwise attorney work- product and will not be offered in evidence; (3) the document would disclose the identity of a confidential source; or (4) the hearing officer grants leave to withhold a document or category of documents as not relevant to the subject matter of the proceeding or otherwise, for good cause shown.
Rule 230 is not the exclusive means by which a respondent may obtain access to documents. Production of documents prepared by the staff may be required under the doctrine of Brady v. Maryland, 373 U.S. 83 (1963), or pursuant to Jencks Act requirements made applicable to the Commission pursuant to rule, or may be sought by subpoena or through other procedures. See, e.g., the Freedom of Information Act, 5 U.S.C. 552.
The document access policy in Rule 230 has been revised significantly from the proposed rule. Under the proposed rule, the staff was required to make a relevancy determination before a document would be produced. The Commission decided to change this rule, based in part upon comments received that contended that a relevancy determination by the staff was problematic.12
6. Prehearing Document Production Pursuant to Subpoena. Rule 232(a) allows for production of documents pursuant to subpoena prior to the start of a hearing. The Rule states that a party may request ''subpoenas requiring the production of documentary or other tangible evidence returnable at any designated time or place.'' Under former Rule 14(b)(1), such documents were only to be turned over at the hearing. As adopted, the rule will reduce delay and eliminate the need for postponements by allowing for documents to be reviewed and copied, and for proposed exhibits to be selected, all prior to a final prehearing conference.
7. Summary Disposition. Under former Rule 11(e), a motion that would dispose of a proceeding in whole or in part could not be made, or considered by a hearing officer, prior to the completion of the interested division's case or the conclusion of the hearing. See 17 CFR 201.11(e) (1994). Rule 250 makes substantial changes to these procedures. The Rule provides for a motion for summary disposition by any party after each party required to file an answer has done so and, in an enforcement or disciplinary proceeding, after documents have been made available to the respondent for inspection and copying. If the interested division has not completed presentation of its case in chief at the hearing, a summary decision motion may be made only with leave of the hearing officer. The facts of the pleadings of the party against whom the motion is made shall be taken as true, except as modified by stipulations or admissions made by that party, by uncontested affidavits, or by facts officially noted. In accordance with suggestions of a commenter, the Rule now provides that if a party cannot, for good cause, present facts essential to justify opposition to the motion by affidavit prior to hearing, the hearing officer shall deny the motion.
A motion for summary disposition is subject to a 35-page limit.
8. Protective Orders. The revised Rules contain provisions allowing certain persons involved in an evidentiary hearing to obtain a protective order for confidential information. Documents and testimony introduced in a public hearing are presumed to be public. Rule 322 allows any party intending to introduce material as evidence during a hearing, any person who is the subject or creator of such material, or any witness who testifies at a hearing to file a motion requesting a protective order for such material or testimony. A protective order shall be granted only upon a finding that the harm resulting from disclosure would outweigh the benefits of disclosure.
The former Rules of Practice contained a confidential treatment provision that related solely to applications for materials filed in connection with registration statements and other statutorily required filings; it required that confidential treatment be sought at the time of filing. See 17 CFR 201.25 (1994). Proposed Rule 33 would have responded to this situation by
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allowing a party to seek confidential treatment under any ''applicable statute or rule,'' without limiting the scope of materials sought to be protected or the timing of the application.
The Commission has decided that a separate rule for protective orders would be more efficient and easier for adjudicatory litigants to use than a rule that encompassed not only protective orders, but also requests for confidential treatment under the federal securities laws 13 or the Freedom of Information Act.14
9. Service. The rule for service of orders by the Commission, Rule 141, and the rule for service of papers by parties, Rule 150, contain a number of revisions. Rule 141 contains new provisions specifically addressing service upon persons in a foreign country and upon persons currently registered with the Commission. Rule 141 also contains a new provision allowing a waiver of formal service to permit a party to accept service by facsimile transmission. For parties wishing to use facsimile transmission to serve one another, Rule 150 allows delivery of papers by fax when two conditions are met: (i) there must be a written agreement between the persons intending to serve each other by fax specifying such terms as they deem necessary with respect to telephone numbers, hours of facsimile operation, provision of paper original or other matters; and (ii) receipt of each document served by fax must be confirmed by a manually signed receipt delivered by fax or other means agreed to by the parties. These conditions are intended to ensure that service by fax will be both an efficient and an effective means of service.
D. Technical Changes and Appendices
A number of technical changes have been made and appendices created in order to implement the Rules. First, former Rule 24 concerning incorporation by reference, which related to the making of disclosure or regulatory filings has been moved from the Rules of Practice to Regulation S-K section 10, paragraph (d) (17 CFR 229.10(d); a comparable provision has been added to Regulation S-B section 10, paragraph (f) (17 CFR 228.10(f)). Second, Commission procedures for summary suspensions pursuant to Section 12(k) of the Exchange Act, 15 U.S.C. 78l(k), have been moved from Part 202 of 17 CFR into new Rule 550. Third, new cross-reference tables showing the location of the former rules in the revised rules and vice versa have been included in an appendix to appear in the Code of Federal Regulations. Finally, all references to the Rules of Practice in the Commission's other rules and forms have been updated.
III. Discussion of the Statement of Informal Procedures and Supplemental Information Concerning Adjudicatory Proceedings
In 1990, at the time the Schapiro Task Force was created, there was significant delay in the disposition of administrative proceedings. For example, in fiscal years 1991 and 1992, the Commission issued a total of 10 opinions in Commission-initiated administrative proceedings. These 10 cases took an average of four years from institution of proceedings to conclusion.15
Interim recommendations made by the Task Force to eliminate unnecessary delay and reduce the backlog were implemented in 1991 and 1992. The Commission reorganized the Adjudications Group within the Office of the General Counsel and appointed new senior staff to supervise the adjudicatory work assigned to the Office of the General Counsel. On a Commission-wide basis, the total number of staff assigned to adjudicatory matters was increased over three fold. For approximately one year attorneys throughout the General Counsel's Office assisted the Adjudications Group in preparing opinions for the Commission. Further, the Commission gave greater priority to adjudicatory matters, held oral arguments on a more timely basis, and met to consider proposed opinions more frequently.16
In fiscal year 1994, the number of new appeals to the Commission declined and the number of cases resolved increased compared with the prior year. As a result, in fiscal year 1994 the pending appellate caseload declined for the first time in over a decade. In addition, the number of cases pending on appeal for more than one year has declined significantly from the level of four years ago.
Despite these strides, the Commission's past experience strongly suggests that additional steps should be taken, especially given the increase in proceedings assigned to the administrative law judges 17 and the likelihood that the number and complexity of new appeals may increase again in coming years. Backlogs in the Commission's disposition of adjudicatory proceedings have recurred periodically over at least the past 30 years.18 The Task Force examined prior efforts to address delay in the administrative proceedings process, and considered why earlier ''solutions'' gave way to new backlogs.
The Task Force considered various alternatives aimed at eliminating systemic causes of the recurring backlog problems. In its Report, the Task Force recommended: (1) That the Commission establish guidelines for the timely completion of adjudicatory proceedings; (2) that the Commission be specifically apprised of matters not completed within designated periods, so that the Commission has a specific opportunity to determine what, if any, steps to take to advance the fair and timely resolution of those particular matters; and (3) that the Commission make increased public disclosure of the status of the pending case docket and changes in its case load.
The Statement of Informal Procedures and Supplementary Information Concerning Adjudicatory Proceedings (''Statement of Informal Procedures'') adopts, with modifications, these three recommendations. Implementation of these recommendations will increase accountability for the timely and efficient completion of adjudicatory proceedings and consolidate on a more permanent basis the improvements in the adjudications process made since the creation of the Task Force.
A. Guidelines for the Timely Completion of Proceedings
The Guidelines For the Timely Completion of Proceedings provide that an administrative law judge's initial
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decision should be filed within 10 months of issuance of the order for proceedings and that a decision by the Commission on appeal of an initial decision, review of a self-regulatory organization determination or remand of a prior decision by a court of appeals should be issued within 11 months of the filing of a petition for review or application for review or the issuance of a mandate of the court.19
The primary purposes of the guidelines are to provide a basis to gauge the Commission's and administrative law judges' productivity in issuing opinions, and to permit the allocation of appropriate Commission, management and staff resources for the timely completion of proceedings. Establishment of guidelines by the Commission indicates the priority of adjudicatory matters for the Commission, as well as for persons delegated authority or assigned responsibility for adjudicatory matters. Among other benefits, the guidelines can lend important authority to the deadlines set by the administrative law judges for hearing dates and pre- and post-hearing submissions, and by the General Counsel and the Secretary for oral argument dates and the filing of briefs.
The Schapiro Task Force had recommended that ''normative guidelines'' for the completion of adjudicatory proceedings be included in the Rules of Practice themselves. The existing Rules of Practice use this approach in some instances,20 and other federal agencies and departments also have used similar approaches.21 The Commission believes, however, that since the guidelines are not themselves rules, it is preferable to publish them in a supplemental statement, and thereby eliminate a potential source of confusion or collateral litigation concerning their status as non-binding criteria for monitoring the age of pending cases rather than a legal standard. This approach is consistent with the publication in the Code of Federal Regulation of other non-binding, informal procedures.22
The guidelines do not create a requirement that each portion of a proceeding or the entire proceeding be completed within the periods described. Proceedings at either the hearing stage or on review by the Commission may require additional time because they are unusually complex or because the record is exceptionally long or for other reasons. In addition, fairness to all parties requires that the Commission's deliberative process not be constrained by an inflexible schedule. In some proceedings, deliberation may be delayed by the need to consider more urgent matters, to permit the preparation of dissenting opinions or for other good cause. The guidelines will be used by the Commission as one of several criteria in monitoring and evaluating its adjudicatory program.
As noted in the supplemental statement, the guidelines adopted today will need to be examined periodically and may need to be readjusted in light of changes in the Commission's case load and the availability of Commission resources.
One alternative approach, considered by the Task Force, was to set fixed deadlines for the issuance of initial decisions and Commission opinions, and to provide for a remedy, such as dismissal, if cases were not completed within the deadline. Applying this approach to adjudicatory proceedings, including enforcement actions and review of self-regulatory organization determinations, places too great a premium on the benefits of achieving resolution of a proceeding, without due consideration to the resolution reached. In light of its broad responsibilities, the Commission should retain the flexibility to delay the resolution of proceedings in order to address higher priority matters, without abandoning the opportunity to adjudicate issues properly before it, particularly those relating to whether the protection of the public or investors requires that a securities law violator be subject to remedial sanctions.
B. Reports to the Commission on Pending Cases
Prior reviews of the administrative process concluded that delegation of certain functions to the staff is desirable, as it frees the Commission from having to deal with routine matters and can expedite Commission action.23 Unmonitored delegation, however, can also create a source of delay. The Schapiro Task Force observed that, once a case is assigned to an administrative law judge or to the staff, ''there is no procedure to return cases to the Commission for a status conference if significant milestones are not reached or no opinion is prepared within specified periods.'' 24 The Task Force recommended that if a case does not proceed through each major phase on a timely basis, it should automatically be returned to the Commission to determine whether any additional steps should be taken to advance the resolution of the case. The Task Force stated that ''[b]y establishing this procedure, the Commission will require the staff to identify non- routine matters, shortages in staff or other impediments that are preventing the timely completion of delegated decisionmaking.'' 25
In response to this recommendation, one commenter advocated that the Commission should ''encourage more ALJ autonomy and thereby avoid SEC involvement between the times when cases are authorized and appealed.'' 26 Accordingly, this commenter suggested, unless absolutely necessary, interim Commission review of cases assigned to an administrative law judge should not occur, even on a case management basis such as for status conferences. The commenter suggested, as an alternative to status conferences, that the administrative law judges have a periodic requirement to report any case backlog to the Commission and the public. The Commission has modified the recommendation of the Schapiro Task Force to address the concerns raised by this commenter.
Under the informal procedures adopted today, a requirement formally to apprise the Commission of proceedings beyond a specified age is being integrated into a case status reporting system overseen by the Secretary. Use of written status reports as a tool to improve docket control is a widely accepted practice. For example, federal court judges are required to report periodically to the Office of United States Courts on the status of certain matters pending beyond specified periods. Face-to-face status conferences between the Commission and an administrative law judge, or discussion of the merits of a proceeding, will not be a part of the more formal case status reporting system.
Periodically, confidential status reports with respect to all filed
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adjudicatory proceedings shall be made to the Commission. The Chief Administrative Law Judge shall report on proceedings assigned to an administrative law judge. The General Counsel shall report on proceedings assigned to the Office of the General Counsel, as well as any other pending proceedings. These status reports shall be made through the Secretary, with a minimum frequency established by the Commission. In connection with these reports, the Chief Administrative Law Judge and the General Counsel shall specifically apprise the Commission of any proceeding that exceeds the guidelines established for the timely completion of proceedings by more than 30 days. The report shall describe the procedural posture of any such proceeding, estimate a date for conclusion of the proceeding, and provide such other information as is necessary to enable the Commission to determine whether additional steps are necessary to reach a fair and timely resolution of the matter.
In some cases, additional resources may be necessary to free an administrative law judge or staff to address a matter of unusually large size or exceptional complexity.27 In some instances, consultation with the Commission by the General Counsel may speed the completion of a particular case. In others, the length of the hearing, the number or respondents, the complexity of a case or the urgency of other matters may justify delay in reaching a decision at a delegated level, in which case no action in response to the status report would be needed. Coupled with the guidelines for the timely completion of proceedings, however, the use of a comprehensive and formalized case status reporting system will provide greater assurance that the resolution of a proceeding that has been delayed will be treated as a priority matter.
As noted by the Schapiro Task Force, an increasing number of status reports concerning cases that are not completed within the guidelines may provide an ''early warning signal'' that additional resources are necessary. Had a more detailed and more formal case status reporting requirement been in effect in the mid-1980's, the Commission might have been in a better position to address the developing case backlog before it gained the magnitude it had reached by 1990 when the Task Force was created.
The Commission believes that the case status reporting requirements announced today will fulfill the purpose of the Schapiro Task Force recommendation discussed above by establishing a mechanism that will automatically address cases that are not timely resolved and by increasing accountability by and to the Commission for management of the docket.
The Task Force recommended that the requirement to formally apprise the Commission if a proceeding is not completed within specified periods should be implemented through changes in the Commission's formal delegations to the administrative law judges, the Secretary, and the General Counsel. See 17 CFR 200.30-1 et. seq. The Commission believes that publication of these case status reporting procedures in the Statement of Informal Procedures will be equally effective in implementing this recommendation.
C. Increased Public Disclosure Concerning the Pending Case Docket
The Task Force recommended publishing more information concerning the status of the Commission's adjudicatory docket.28 Ongoing disclosure of information about the adjudication program caseload increases awareness of the importance of the program, facilitates oversight of the program, and promotes public confidence in the efficiency and fairness of the program. Under the procedures adopted today, the Secretary will publish each October and April in the SEC Docket summary statistical information about the status of the pending adjudicatory docket and changes in the Commission's caseload over the prior six months.29
The Commission will also continue to follow the Task Force recommendation that it adopt the practice of several federal courts of appeals by publishing with each opinion the date the appeal or review was commenced and the date of oral argument, if any.
The Task Force suggested publication of information about the Commission's caseload in the Annual Report. Although a useful adjunct to publication in the SEC Docket, publication in the Annual Report alone is not sufficient. The Docket is more widely available (both on commercial database services and in other places such as libraries) than the Annual Report. In addition, publication in the Docket allows more frequent and more timely disclosure.
IV. Rules of Practice: Table of Contents
General Rules
Rule 100. Scope of the Rules of Practice. Rule 101. Definitions. Rule 102. Appearance and Practice Before the Commission. Rule 103. Construction of Rules. Rule 104. Business Hours. Rule 110. Presiding Officer. Rule 111. Hearing Officer: Authority. Rule 112. Hearing Officer: Disqualification and Withdrawal. Rule 120. Ex Parte Communications. Rule 121. Separation of Functions. Rule 140. Commission Orders and Decisions: Signature and Availability. Rule 141. Orders and Decisions: Service of Orders Instituting Proceeding and Other Orders and Decisions. Rule 150. Service of Papers by Parties. Rule 151. Filing of Papers With the Commission: Procedure. Rule 152. Filing of Papers: Form. Rule 153. Filing of Papers: Signature Requirement and Effect. Rule 154. Motions. Rule 155. Default; Motion to Set Aside Default. Rule 160. Time Computation. Rule 161. Extensions of Time, Postponements and Adjournments. Rule 180. Sanctions. Rule 190. Confidential Treatment of Information in Certain Filings. Rule 191. Adjudications Not Required to Be Determined on the Record After Notice and Opportunity for Hearing. Rule 192. Rulemaking: Issuance, Amendment and Repeal of Rules of General Application. Rule 193. Applications by Barred Individuals for Consent to Associate.
Initiation of Proceedings and Prehearing Rules
Rule 200. Initiation of Proceedings. Rule 201. Consolidation of Proceedings. Rule 202. Specification of Procedures by Parties in Certain Proceedings. Rule 210. Parties, Limited Participants and Amici Curiae. Rule 220. Answer to Allegations. Rule 221. Prehearing Conferences. Rule 222. Prehearing Submissions.
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Rule 230. Enforcement and Disciplinary Proceedings: Availability of Documents for Inspection and Copying Rule 231. Enforcement and Disciplinary Proceedings: Production of Witness Statements. Rule 232. Subpoenas. Rule 233. Depositions Upon Oral Examination. Rule 234. Depositions Upon Written Questions. Rule 235. Introducing Prior Sworn Statements of Witnesses into the Record. Rule 240. Settlement. Rule 250. Motion for Summary Disposition.
Rules Regarding Hearings
Rule 300. Hearings. Rule 301. Hearings to Be Public. Rule 302. Record of Hearings. Rule 310. Failure to Appear at Hearings: Default Rule 320. Evidence: Admissibility. Rule 321. Evidence: Objections and Offers of Proof. Rule 322. Evidence: Confidential Information, Protective Orders. Rule 323. Evidence: Official Notice. Rule 324. Evidence: Stipulations. Rule 325. Evidence: Presentation Under Oath or Affirmation. Rule 326. Evidence: Presentation, Rebuttal and Cross-examination. Rule 340. Proposed Findings, Conclusions and Supporting Briefs. Rule 350. Record in Proceedings Before Hearing Officer; Retention of Documents; Copies. Rule 351. Transmittal of Documents to Secretary; Record Index; Certification. Rule 360. Initial Decision of Hearing Officer.
Appeal to the Commission and Commission Review
Rule 400. Interlocutory Review. Rule 401. Issuance of Stays. Rule 410. Appeal of Initial Decisions by Hearing Officers. Rule 411. Commission Consideration of Initial Decisions by Hearing Officers. Rule 420. Appeal of Determinations by Self-Regulatory Organizations. Rule 421. Commission Consideration of Determinations by Self- Regulatory Organizations. Rule 430. Appeal of Actions Made Pursuant to Delegated Authority. Rule 431. Commission Consideration of Actions Made Pursuant to Delegated Authority. Rule 450. Briefs Filed with the Commission. Rule 451. Oral Argument Before the Commission. Rule 452. Additional Evidence. Rule 460. Record Before the Commission. Rule 470. Reconsideration. Rule 490. Receipt of Petitions for Judicial Review Pursuant to 28 U.S.C. 2112(a)(1).
Rules Relating to Temporary Orders and Suspensions
Rule 500. Expedited Consideration of Proceedings. Rule 510. Temporary Cease-and-Desist Orders: Application Process. Rule 511. Temporary Cease-and-Desist Orders: Notice; Procedures for Hearing. Rule 512. Temporary Cease-and-Desist Orders: Issuance After Notice and Opportunity for Hearing. Rule 513. Temporary Cease-and-Desist Orders: Issuance Without Prior Notice and Opportunity For Hearing. Rule 514. Temporary Cease-and-Desist Orders: Judicial Review; Duration. Rule 520. Suspension of Registration of Brokers, Dealers, or other Exchange Act-Registered Entities: Application. Rule 521. Suspension of Registration of Brokers, Dealers, or other Exchange Act-Registered Entities: Notice and Opportunity for Hearing on Application. Rule 522. Suspension of Registration of Brokers, Dealers, or other Exchange Act-Registered Entities: Issuance and Review of Order. Rule 523. [Reserved]. Rule 524. Suspension of Registrations: Duration. Rule 530. Initial Decision on Permanent Order: Timing for Submitting Proposed Findings and Preparation of Decision. Rule 531. Initial Decision on Permanent Order: Effect on Temporary Order. Rule 540. Appeal and Commission Review of Initial Decision Making a Temporary Order Permanent. Rule 550. Summary Suspensions Pursuant to Exchange Act Section 12(k)(1)(A).
Rules Regarding Disgorgement and Penalty Payments
Rule 600. Interest on Sums Disgorged. Rule 601. Prompt Payment of Disgorgement, Interest and Penalties. Rule 610. Submission of Proposed Plan of Disgorgement. Rule 611. Contents of Plan of Disgorgement; Provisions for Payment. Rule 612. Notice of Proposed Plan of Disgorgement and Opportunity for Comment by Non-Parties. Rule 613. Order Approving, Modifying or Disapproving Proposed Plan of Disgorgement. Rule 614. Administration of Plan of Disgorgement. Rule 620. Right to Challenge Order of Disgorgement. Rule 630. Inability to Pay Disgorgement, Interest or Penalties.
Form
209.1. Form D-A: Disclosure of Assets and Financial Information. General Rules
Rule 100. Scope of the Rules of Practice
(a)Unless provided otherwise, these Rules of Practice govern proceedings before the Commission under the statutes that it administers.
(b) These rules do not apply to:
(1) investigations, except where made specifically applicable by the Rules Relating to Investigations, part 203 of this chapter; or
(2) actions taken by the duty officer pursuant to delegated authority under 17 CFR 200.43.
Comment: The Rules of Practice govern a wide range of Commission processes, including Commission-initiated enforcement and disciplinary proceedings, proceedings to review disciplinary actions initiated by self-regulatory organizations and certain other self-regulatory decisions, proceedings to review Commission staff decisions made pursuant to delegated authority, and proceedings in which an exemptive application is contested and a hearing ordered. Certain agency processes are specifically excluded from the scope of the Rules. First, Commission investigations are not governed by the Rules unless a rule explicitly provides otherwise. See, e.g., Rule 240 (concerning offers of settlement); see also 17 CFR 203.8 (service of subpoenas in formal investigations is governed by Rule 232). Second, these Rules do not cover an appeal from a decision of the duty officer. Rules governing appeals of such decisions are contained in 17 CFR 200.43(c).
Each rule indicates whether that rule applies generally to all proceedings, or only to a particular category of proceedings, such as ones in which an order instituting proceedings has been entered. A majority of the Rules address procedures in those matters where the Commission has ordered an evidentiary hearing pursuant to an order instituting proceedings. When an order instituting proceedings has been entered, it may specify particular procedures to be used in the proceeding to which it applies.
The Administrative Procedure Act (''APA''), 5 U.S.C. 551 et seq., is the source of various provisions of the Rules. In addition, in any particular proceeding the APA may govern the Rules or the specific procedures that the Commission is required to employ. Which requirements of the Administrative Procedure Act are applicable to a particular Commission proceeding depends on the language of the statute authorizing the proceeding. An adjudication is subject to the requirements of 5 U.S.C. 554, 556 and 557 if the Commission is authorized by statute to make its determination ''on the record, after notice and opportunity for an agency hearing.'' Such adjudications are often referred to as ''on the record'' or formal adjudications. Other adjudications, including those where the Commission is authorized by statute to make its determination ''after opportunity for hearing,'' are often referred to as informal adjudications. See Rules 191 and 326 and associated comments.
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Rule 101. Definitions
(a) For purposes of these Rules of Practice, unless explicitly stated to the contrary:
(1) Commission means the United States Securities and Exchange Commission, or a panel of Commissioners constituting a quorum of the Commission, or a single Commissioner acting as duty officer pursuant to 17 CFR 200.43;
(2) counsel means any attorney representing a party or any other person representing a party pursuant to Rule 102(b);
(3) disciplinary proceeding means an action pursuant to Rule 102(e);
(4) enforcement proceeding means an action, initiated by an order instituting proceedings, held for the purpose of determining whether or not a person is about to violate, has violated, has caused a violation of, or has aided or abetted a violation of any statute or rule administered by the Commission, or whether to impose a sanction as defined in section 551(10) of the Administrative Procedure Act, 5 U.S.C. 551(10);
(5) hearing officer means an administrative law judge, a panel of Commissioners constituting less than a quorum of the Commission, an individual Commissioner, or any other person duly authorized to preside at a hearing;
(6) interested division means a division or an office assigned primary responsibility by the Commission to participate in a particular proceeding;
(7) order instituting proceedings means an order issued by the Commission commencing a proceeding or an order issued by the Commission to hold a hearing;
(8) party means the interested division, any person named as a respondent in an order instituting proceedings, any applicant named in the caption of any order, persons entitled to notice in a stop order proceeding as set forth in Rule 200(a)(2) or any person seeking Commission review of a decision;
(9) proceeding means any agency process initiated by an order instituting proceedings; or by the filing, pursuant to Rule 410, of a petition for review of an initial decision by a hearing officer; or by the filing, pursuant to Rule 420, of an application for review of a self-regulatory organization determination; or by the filing, pursuant to Rule 430, of a notice of intention to file a petition for review of a determination made pursuant to delegated authority;
(10) Secretary means the Secretary of the Commission; and
(11) temporary sanction means a temporary cease-and-desist order or a temporary suspension of the registration of a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, or transfer agent pending final determination whether the registration shall be revoked.
(b) [Reserved] Rule 102. Appearance and Practice Before the Commission
A person shall not be represented before the Commission or a hearing officer except as stated in paragraphs (a) and (b) of this rule or as otherwise permitted by the Commission or a hearing officer.
(a) Representing Oneself. In any proceeding, an individual may appear on his or her own behalf.
(b) Representing Others. In any proceeding, a person may be represented by an attorney at law admitted to practice before the Supreme Court of the United States or the highest court of any State (as defined in Section 3(a)(16) of the Exchange Act, 15 U.S.C. 78c(a)(16)); a member of a partnership may represent the partnership; a bona fide officer of a corporation, trust or association may represent the corporation, trust or association; and an officer or employee of a state commission or of a department or political subdivision of a state may represent the state commission or the department or political subdivision of the state.
(c) Former Commission Employees. Former employees of the Commission must comply with the restrictions on practice contained in the Commission's Conduct Regulation, Subpart M, 17 CFR 200.735.
(d) Designation of Address for Service; Notice of Appearance; Power of Attorney; Withdrawal.
(1) Representing Oneself. When an individual first makes any filing or otherwise appears on his or her own behalf before the Commission or a hearing officer in a proceeding as defined in Rule 101(a), he or she shall file with the Commission, or otherwise state on the record, and keep current, an address at which any notice or other written communication required to be served upon him or her or furnished to him or her may be sent and a telephone number where he or she may be reached during business hours.
(2) Representing Others. When a person first makes any filing or otherwise appears in a representative capacity before the Commission or a hearing officer in a proceeding as defined in Rule 101(a), that person shall file with the Commission, and keep current, a written notice stating the name of the proceeding; the representative's name, business address and telephone number; and the name and address of the person or persons represented.
(3) Power of Attorney. Any individual appearing or practicing before the Commission in a representative capacity may be required to file a power of attorney with the Commission showing his or her authority to act in such capacity.
(4) Withdrawal. Withdrawal by any individual appearing in a representative capacity shall be permitted only by order of the Commission or the hearing officer. A motion seeking leave to withdraw shall state with specificity the reasons for such withdrawal.
(e) Suspension and Disbarment.
(1) Generally. The Commission may censure a person or deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter:
(i) not to possess the requisite qualifications to represent others; or
(ii) to be lacking in character or integrity or to have engaged in unethical or improper professional conduct; or
(iii) to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.
(2) Certain Professionals and Convicted Persons. Any attorney who has been suspended or disbarred by a court of the United States or of any State; or any person whose license to practice as an accountant, engineer, or other professional or expert has been revoked or suspended in any State; or any person who has been convicted of a felony or a misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the Commission. A disbarment, suspension, revocation or conviction within the meaning of this rule shall be deemed to have occurred when the disbarring, suspending, revoking or convicting agency or tribunal enters its judgment or order, including a judgment or order on a plea of nolo contendere, regardless of whether an appeal of such judgment or order is pending or could be taken.
(3) Temporary Suspensions. An order of temporary suspension shall become effective upon service on the respondent. No order of temporary suspension shall be entered by the Commission pursuant to paragraph (e)(3)(i) of this rule more than 90 days after the date on which the final judgment or order entered in a judicial
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or administrative proceeding described in paragraph (e)(3)(i)(A) or (e)(3)(i)(B) has become effective, whether upon completion of review or appeal procedures or because further review or appeal procedures are no longer available.
(i) The Commission, with due regard to the public interest and without preliminary hearing, may, by order, temporarily suspend from appearing or practicing before it any attorney, accountant, engineer, or other professional or expert who has been by name:
(A) permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder; or
(B) found by any court of competent jurisdiction in an action brought by the Commission to which he or she is a party or found by the Commission in any administrative proceeding to which he or she is a party to have violated (unless the violation was found not to have been willful) or aided and abetted the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
(ii) Any person temporarily suspended from appearing and practicing before the Commission in accordance with paragraph (e)(3)(i) of this rule may, within 30 days after service upon him or her of the order of temporary suspension, petition the Commission to lift the temporary suspension. If no petition has been received by the Commission within 30 days after service of the order, the suspension shall become permanent.
(iii) Within 30 days after the filing of a petition in accordance with paragraph (e)(3)(ii) of this rule, the Commission shall either lift the temporary suspension, or set the matter down for hearing at a time and place designated by the Commission, or both, and, after opportunity for hearing, may censure the petitioner or disqualify the petitioner from appearing or practicing before the Commission for a period of time or permanently. In every case in which the temporary suspension has not been lifted, every hearing held and other action taken pursuant to this paragraph (e)(3) shall be expedited in accordance with Rule 500. If the hearing is held before a hearing officer, the time limits set forth in Rule 531 will govern review of the hearing officer's initial decision.
(iv) In any hearing held on a petition filed in accordance with paragraph (e)(3)(ii) of this rule, the staff of the Commission shall show either that the petitioner has been enjoined as described in paragraph (e)(3)(i)(A) of this rule or that the petitioner has been found to have committed or aided and abetted violations as described in paragraph (e)(3)(i)(B) of this rule and that showing, without more, may be the basis for censure or disqualification. Once that showing has been made, the burden shall be upon the petitioner to show cause why he or she should not be censured or temporarily or permanently disqualified from appearing and practicing before the Commission. In any such hearing, the petitioner may not contest any finding made against him or her or fact admitted by him or her in the judicial or administrative proceeding upon which the proceeding under this paragraph (e)(3) is predicated. A person who has consented to the entry of a permanent injunction as described in paragraph (e)(3)(i)(A) of this rule without admitting the facts set forth in the complaint shall be presumed for all purposes under this paragraph (e)(3) to have been enjoined by reason of the misconduct alleged in the complaint.
(4) Filing of Prior Orders. Any person appearing or practicing before the Commission who has been the subject of an order, judgment, decree, or finding as set forth in paragraph (e)(3) of this rule shall promptly file with the Secretary a copy thereof (together with any related opinion or statement of the agency or tribunal involved). Failure to file any such paper, order, judgment, decree or finding shall not impair the operation of any other provision of this rule.
(5) Reinstatement. (i) An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) of this rule may be made at any time, and the applicant may, in the Commission's discretion, be afforded a hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated by the Commission for good cause shown.
(ii) Any person suspended under paragraph (e)(2) of this rule shall be reinstated by the Commission, upon appropriate application, if all the grounds for application of the provisions of that paragraph are subsequently removed by a reversal of the conviction or termination of the suspension, disbarment, or revocation. An application for reinstatement on any other grounds by any person suspended under paragraph (e)(2) of this rule may be filed at any time and the applicant shall be accorded an opportunity for a hearing in the matter; however, such suspension shall continue unless and until the applicant has been reinstated by order of the Commission for good cause shown.
(6) Other Proceedings Not Precluded. A proceeding brought under paragraph (e)(1), (e)(2) or (e)(3) of this rule shall not preclude another proceeding brought under these same paragraphs.
(7) Public Hearings. All hearings held under this paragraph (e) shall be public unless otherwise ordered by the Commission on its own motion or after considering the motion of a party.
(f) Practice Defined. For the purposes of these Rules of Practice, practicing before the Commission shall include, but shall not be limited to:
(1) transacting any business with the Commission; and
(2) the preparation of any statement, opinion or other paper by any attorney, accountant, engineer or other professional or expert, filed with the Commission in any registration statement, notification, application, report or other document with the consent of such attorney, accountant, engineer or other professional or expert.
Revision Comment: Rule 102, which governs appearance and practice before the Commission, contains two changes from former Rule 2. First, as suggested by one commenter, the rule now explicitly requires that individuals and other persons filing a notice of appearance keep the information contained in the notice, such as address and telephone number, up-to-date. Current information is necessary to permit the expeditious service of orders as well as other efforts to contact a party.
The same commenter suggested that the Commission consider adopting a provision that would require an attorney to file a written notice of withdrawal when the attorney seeks to withdraw from a matter before the Commission. New paragraph (d)(4) accomplishes this by requiring that, a person appearing in a representative capacity who wishes to withdraw from a proceeding, must file a motion seeking leave to withdraw and obtain such leave from the Commission or the hearing officer.
In addition, language has been added to paragraph (d) (1) and (2) to clarify the longstanding policy of the Commission that a person who makes a filing with the Commission thereby makes an appearance before the Commission.
Rule 103. Construction of Rules
(a) The Rules of Practice shall be construed and administered to secure the just, speedy, and inexpensive determination of every proceeding.
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(b) In any particular proceeding, to the extent that there is a conflict between these rules and a procedural requirement contained in any statute, or any rule or form adopted thereunder, the latter shall control.
(c) For purposes of these rules:
(1) any term in the singular includes the plural, and any term in the plural includes the singular, if such use would be appropriate;
(2) any use of a masculine, feminine, or neuter gender encompasses such other genders as would be appropriate; and
(3) unless the context requires otherwise, counsel for a party may take any action required or permitted to be taken by such party.
Comment (a): Paragraph (a) is based on Rule 1 of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 1. Rule 104. Business Hours
The Headquarters office of the Commission, at 450 Fifth Street, NW., Washington, DC 20549, is open each day, except Saturdays, Sundays, and Federal legal holidays, from 9 a.m. to 5:30 p.m., Eastern Standard Time or Eastern Daylight Saving Time, whichever is currently in effect in Washington, DC Federal legal holidays consist of New Year's Day; Birthday of Martin Luther King, Jr.; Presidents Day; Memorial Day; Independence Day; Labor Day; Columbus Day; Veterans Day; Thanksgiving Day; Christmas Day; and any other day appointed as a holiday in Washington, D.C. by the President or the Congress of the United States. Rule 110. Presiding Officer
All proceedings shall be presided over by the Commission or, if the Commission so orders, by a hearing officer. When the Commission designates that the hearing officer shall be an administrative law judge, the Chief Administrative Law Judge shall select, pursuant to 17 CFR 200.30-10, the administrative law judge to preside.
Comment: Ordinarily the assignment to a hearing officer is part of the order instituting proceedings. The Rules use the term ''hearing officer,'' defined in Rule 101(a), to refer to a person who presides at a hearing. While an administrative law judge presides at most hearings at which the Commission itself does not preside, other persons may preside. See Securities Exchange Act Sec. 4A, 15 U.S.C. 78d-1; Administrative Procedure Act Sec. 556(b), 5 U.S.C. 556(b).
Revision Comment: Rule 110 has been revised to specify the process by which administrative law judges are assigned by referencing the authority the Commission has previously delegated to the Chief Administrative Law Judge to assign matters to any of the administrative law judges. Rule 111. Hearing Officer: Authority
The hearing officer shall have the authority to do all things necessary and appropriate to discharge his or her duties. No provision of these Rules of Practice shall be construed to limit the powers of the hearing officer provided by the Administrative Procedure Act, 5 U.S.C. 556, 557. The powers of the hearing officer include, but are not limited to, the following:
(a) administering oaths and affirmations;
(b) issuing subpoenas authorized by law and revoking, quashing, or modifying any such subpoena;
(c) receiving relevant evidence and ruling upon the admission of evidence and offers of proof;
(d) regulating the course of a proceeding and the conduct of the parties and their counsel;
(e) holding prehearing and other conferences as set forth in Rule 221 and requiring the attendance at any such conference of at least one representative of each party who has authority to negotiate concerning the resolution of issues in controversy;
(f) recusing himself or herself upon motion made by a party or upon his or her own motion;
(g) ordering, in his or her discretion, in a proceeding involving more than one respondent, that the interested division indicate, on the record, at least one day prior to the presentation of any evidence, each respondent against whom that evidence will be offered;
(h) subject to any limitations set forth elsewhere in these rules, considering and ruling upon all procedural and other motions;
(i) preparing an initial decision as provided in Rule 360;
(j) upon notice to all parties, reopening any hearing prior to the filing of an initial decision therein, or, if no initial decision is to be filed, prior to the time fixed for the filing of final briefs with the Commission; and
(k) informing the parties as to the availability of one or more alternative means of dispute resolution, and encouraging the use of such methods.
Comment: This rule is based upon Section 556(c) of the Administrative Procedure Act, 5 U.S.C. 556(c). By its terms, the list of powers is illustrative, not exhaustive. The hearing officer is permitted to take any action necessary and appropriate to discharge his or her duties.
Revision Comment: One commenter suggested that the Commission include in Rule 111 two powers recently added to Section 556(c) of the Administrative Procedure Act by the Administrative Dispute Resolution Act: the power to require attendance at a prehearing conference by a representative of each party who has the authority to negotiate concerning the resolution of issues in controversy and the power to inform parties as to the availability of alternate means of dispute resolution (ADR) and to encourage the use of such methods.
The Commission has decided to modify this rule to address these concerns. Rule 112. Hearing Officer: Disqualification and Withdrawal
(a) Notice of Disqualification. At any time a hearing officer believes himself or herself to be disqualified from considering a matter, the hearing officer shall issue a notice stating that he or she is withdrawing from the matter and setting forth the reasons therefor.
(b) Motion for Withdrawal. Any party who has a reasonable, good faith basis to believe that a hearing officer has a personal bias, or is otherwise disqualified from hearing a case, may make a motion to the hearing officer that the hearing officer withdraw. The motion shall be accompanied by an affidavit setting forth in detail the facts alleged to constitute grounds for disqualification. If the hearing officer finds himself or herself not disqualified, he or she shall so rule and shall continue to preside over the proceeding.
Comment: Section 556(b) of the Administrative Procedure Act, 5 U.S.C. 556(b), provides that a hearing officer may disqualify himself or herself at any time. The standard for making a motion to disqualify requires that the movant have a reasonable good-faith basis. This standard is intended to emphasize that there must be objective reasons to seek a disqualification, not just a subjective, though sincerely held, belief. A party seeking disqualification must do so promptly upon learning of the relevant information. A party may not await the outcome of the hearing officer's decision to determine if the alleged grounds for disqualification affected the decision. Rule 120. Ex Parte Communications
(a) Except to the extent required for the disposition of ex parte matters as authorized by law, the person presiding over an evidentiary hearing may not:
(1) consult a person or party on a fact in issue, unless on notice and opportunity for all parties to participate; or
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(2) be responsible to or subject to the supervision or direction of an employee or agent engaged in the performance of investigative or prosecuting functions for the Commission.
(b) The Commission's code of behavior regarding ex parte communications between persons outside the Commission and decisional employees, 17 CFR 200.110-200.114, governs other prohibited communications during a proceeding conducted under the Rules of Practice.
Comment: Paragraph (a) is based on Section 554(d)(1) of the Administrative Procedure Act (APA), 5 U.S.C. 554(d)(1). Paragraph (b) references the Commission's rules applying to communications between Commission members or decisional employees and persons outside the agency, which incorporate the requirements of Section 557(d)(1) of the APA, 5 U.S.C. 557(d)(1). See also 17 CFR 200.62 (ethical canon for Commission members regarding ex parte communications); Securities Act Release No. 5815 (Mar. 10, 1977), 11 SEC Docket 1933 (Mar. 22, 1977) (amending Commission's code of behavior governing ex parte communications between persons outside the Commission and decisional employees to conform to requirements of Section 4 of the Government in the Sunshine Act, 5 U.S.C. Sec. 552b).
Revision Comment: Although the Commission's administrative proceedings were previously subject to the requirements of the Administrative Procedure Act governing ex parte communications, 5 U.S.C. 554(d)(1) and 557(d)(1), the prior rules did not mention them. Rule 120 makes no substantive changes to these requirements--it simply restates the APA's directive with regard to ex parte contacts. The Rule was added so that these requirements were more readily available to persons subject to proceedings under the Rules of Practice. See, Model Adjudication Rule 120(A), Administrative Conference of the United States (Dec. 1993). Rule 121. Separation of Functions
Any Commission officer, employee or agent engaged in the performance of investigative or prosecutorial functions for the Commission in a proceeding as defined in Rule 101(a) may not, in that proceeding or one that is factually related, participate or advise in the decision, or in Commission review of the decision pursuant to Section 557 of the Administrative Procedure Act, 5 U.S.C. 557, except as a witness or counsel in the proceeding.
Comment: Rule 121 is based on Section 554(d) of the Administrative Procedure Act (APA), 5 U.S.C. 554(d), which governs the separation of personnel involved in prosecutorial and investigative functions in certain cases from decisionmaking in those cases.
Revision Comment: Although the Commission's administrative proceedings were previously subject to the requirements of Section 554(d) of the APA governing separation of functions, 5 U.S.C. 554(d), the prior rules did not mention them. Rule 121 makes no substantive changes to these requirements--it simply restates the APA's position on separation of functions. The Rule was added so that these requirements were more readily available to persons subject to proceedings under the Rules of Practice. See Model Adjudication Rule 121, Administrative Conference of the United States (Dec. 1993). Rule 140. Commission Orders and Decisions: Signature and Availability
(a) Signature Required. All orders and decisions of the Commission shall be signed by the Secretary or any other person duly authorized by the Commission.
(b) Availability for Inspection. Each order and decision shall be available for inspection by the public from the date of entry, unless the order or decision is nonpublic. A nonpublic order or decision shall be available for inspection by any person entitled to inspect it from the date of entry.
(c) Date of Entry of Orders. The date of entry of a Commission order shall be the date the order is signed. Such date shall be reflected in the caption of the order, or if there is no caption, in the order itself.
Revision Comment (b): Changes to the text of the Commission's rule regarding availability of orders are technical. The Office of the Secretary has for many years maintained a practice of holding Commission orders for five days before release to the public. Under Rule 140(b), unless an order or decision is nonpublic, it will be available to the public from the date of entry.
Revision comment (c): This paragraph has been simplified. No substantive change is intended. Rule 141. Orders and Decisions: Service of Orders Instituting Proceeding and Other Orders and Decisions
(a) Service of an Order Instituting Proceedings.
(1) By Whom Made. The Secretary, or another duly authorized officer of the Commission, shall serve a copy of an order instituting proceedings on each person named in the order as a party. The Secretary may direct an interested division to assist in making service.
(2) How made.
(i) To Individuals. Notice of a proceeding shall be made to an individual by delivering a copy of the order instituting proceedings to the individual or to an agent authorized by appointment or by law to receive such notice. Delivery means--handing a copy of the order to the individual; or leaving a copy at the individual's office with a clerk or other person in charge thereof; or leaving a copy at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein; or sending a copy of the order addressed to the individual by U.S. Postal Service certified, registered or Express Mail and obtaining a confirmation of receipt; or giving confirmed telegraphic notice.
(ii) To Corporations or Entities. Notice of a proceeding shall be made to a person other than a natural person by delivering a copy of the order instituting proceedings to an officer, managing or general agent, or any other agent authorized by appointment or by law to receive such notice, by any method specified in paragraph (a)(2)(i) of this rule.
(iii) Upon Persons Registered with the Commission. In addition to any other method of service specified in paragraph (a)(2) of this rule, notice may be made to a person currently registered with the Commission as a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, investment company or transfer agent by sending a copy of the order addressed to the most recent business address shown on the person's registration form by U.S. Postal Service certified, registered or Express Mail and obtaining a confirmation of attempted delivery.
(iv) Upon Persons in a Foreign Country. Notice of a proceeding to a person in a foreign country may be made by any method specified in paragraph (a)(2) of this rule, or by any other method reasonably calculated to give notice, provided that the method of service used is not prohibited by the law of the foreign country.
(v) In Stop Order Proceedings. Notwithstanding any other provision of paragraph (a)(2) of this rule, in proceedings pursuant to Sections 8 or 10 of the Securities Act of 1933, 15 U.S.C. 77h or 77j, or Sections 305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 77eee or 77ggg, notice of the institution of proceedings shall be made by personal service or confirmed
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telegraphic notice, or a waiver obtain pursuant to paragraph (a)(4) of this rule.
(3) Certificate of Service. The Secretary shall place in the record of the proceeding a certificate of service identifying the party given notice, the method of service, the date of service, the address to which service was made and the person who made service. If service is made in person, the certificate shall state, if available, the name of the individual to whom the order was given. If service is made by U.S. Postal Service certified, registered or Express Mail, the certificate shall be accompanied by a confirmation of receipt or of attempted delivery, as required. If service is made to an agent authorized by appointment to receive service, the certificate shall be accompanied by evidence of the appointment.
(4) Waiver of Service. In lieu of service as set forth in paragraph (a)(2) of this rule, the party may be provided a copy of the order instituting proceedings by first-class mail or other reliable means if a waiver of service is obtained from the party and placed in the record.
(b) Service of Orders or Decisions Other Than an Order Instituting Proceedings. Written orders or decisions issued by the Commission or by a hearing officer shall be served promptly on each party pursuant to any method of service authorized under paragraph (a) of this rule or Rule 150(c). Service of orders or decisions by the Commission, including those entered pursuant to delegated authority, shall be made by the Secretary or, as authorized by the Secretary, by a member of an interested division. Service of orders or decisions issued by a hearing officer shall be made by the Secretary or the hearing officer.
Comment (a): The Rule is derived, in part, from Rules 4 and 5(b) of the Federal Rules of Civil Procedure. The Rule is also based, in part, on Section 40(a) of the Investment Company Act, 15 U.S.C. 80a-39(a), and Section 211(c) of the Investment Advisers Act, 15 U.S.C. 80b-11(c), which set forth acceptable methods for service of orders instituting proceedings under those Acts, and on Sections 8 and 10 of the Securities Act of 1933, 15 U.S.C. 77h and 77j, and Sections 305 and 307 of the Trust Indenture Act of 1939, 15 U.S.C. 77eee and 77ggg, which set forth acceptable methods of service for orders instituting stop order proceedings pursuant to those statutory sections.
The Commission commences proceedings to enforce the Federal securities laws by issuing an ''order instituting proceedings.'' The Commission is required to give each party appropriate notice of an order instituting proceedings. See Rule 200 (setting forth requirements in connection with the issuance of such orders). While service of the order instituting proceedings satisfies notice requirements, it is not the exclusive means of providing notice sufficient to meet the requirements of due process. In some circumstances--for example, where emergency or expedited relief is sought--actual notice of the institution of a proceeding may be made by telephone. See, e.g., Rule 511. Although formal service of the order is still required in such circumstances, action on an application for emergency or expedited relief may precede service of the order.
Rule 141(a)(2) allows service by those means specifically mentioned by statute. Rule 141 also allows service to be made by U.S. Postal Service Express Mail which, like certified or registered mail, both traditionally relied upon under the former rule, is a U.S. Post Office service that provides each letter a unique identification number, is traceable, and allows for a receipt upon delivery. Under Rule 141, alternative methods of service to persons located in the United States, such as service by publication, are not permitted. A party may, however, waive service and receive notice by accepting a copy of an order instituting proceedings by facsimile transmission, U.S. Mail, private overnight courier, or other means. Whatever method of service is used, Rule 141 requires a certificate of service establishing how notice was given, or a written waiver of service.
The Rule establishes specific criteria for service of orders upon persons registered with the Commission and upon persons in a foreign country. A person who is currently registered with the Commission to engage in the securities business with the public may reasonably be expected to receive mail sent to the address shown on their registration form or to make appropriate arrangements for such mail to be forwarded or delivered. Rule 141 provides that a person currently registered with the Commission as a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, investment company or transfer agent may be served by sending a copy of the order to the last business address shown on their registration form by U.S. Postal Service certified, registered or Express Mail and that confirmation of attempted delivery to that address is sufficient for valid service if no confirmation of receipt can be obtained.
A person in a foreign country may be served by any method of service, reasonably calculated to give notice, that is not prohibited by the law of the foreign country.
Comment (b): Service of an order instituting proceedings places a party on notice that there will be subsequent filings or other papers. Unless a party defaults, a party's response to receipt of an order instituting proceedings must include the filing of a notice of appearance. Cf. Rule 155 (governing defaults). The notice will provide an address of record where the party can be served with subsequent orders. Therefore, a return receipt or other confirmation of delivery is not required for subsequent orders.
Subject to statutory limitations governing particular types of orders, orders other than an order instituting proceedings may be served pursuant to any method provided for in Rule 141(a) or in Rule 150(c), which governs service of papers filed by parties. The Commission may serve an order on a party, as well as on the party's counsel. It is the Commission's practice to send orders instituting proceedings and final orders to each party in addition to serving counsel, if any. Cf. Rule 150(b) (if a party is represented by counsel, counsel shall be served with papers filed by other parties with the Commission).
Revision Comment (a): The Rule has been revised to permit a waiver of formal service and thereby allow the use of methods of service, such as private courier service or facsimile transmission, in circumstances where such methods might otherwise be inconsistent with statutory requirements.
The Rule has been revised to include a provision specifically addressing service by the Commission on a person in a foreign country. The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents does not apply to the service of Commission orders.
The rule has also been revised to include a specific provision for service on persons registered with the Commission as a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, investment company or transfer agent. Rule 150. Service of Papers by Parties
(a) When Required. In every proceeding as defined in Rule 101(a), each paper, including each notice of appearance, written motion, brief, or other written communication, shall be served upon each party in the
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proceeding in accordance with the provisions of this rule; provided, however, that absent an order to the contrary, no service shall be required for motions which may be heard ex parte.
(b) Upon a Person Represented by Counsel. Whenever service is required to be made upon a person represented by counsel who has filed a notice of appearance pursuant to Rule 102, service shall be made pursuant to paragraph (c) of this rule upon counsel, unless service upon the person represented is ordered by the Commission or the hearing officer.
(c) How Made. Service shall be made by delivering a copy of the filing. Delivery means:
(1) personal service--handing a copy to the person required to be served; or leaving a copy at the person's office with a clerk or other person in charge thereof; or leaving a copy at the person's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein;
(2) mailing the papers through the U.S. Postal Service by first class, certified, registered, or Express Mail delivery addressed to the person;
(3) sending the papers through a commercial courier service or express delivery service addressed to the person; or
(4) transmitting the papers by facsimile machine where the following conditions are met:
(i) the persons serving each other by facsimile transmission have agreed to do so in a writing, signed by each party, which specifies such terms as they deem necessary with respect to facsimile machine telephone numbers to be used, hours of facsimile machine operation, the provision of non-facsimile original or copy, and any other such matters; and
(ii) receipt of each document served by facsimile is confirmed by a manually signed receipt delivered by facsimile machine or other means agreed to by the parties.
(d) When Service Is Complete. Personal service, service by U.S. Postal Service Express Mail or service by a commercial courier or express delivery service is complete upon delivery. Service by mail is complete upon mailing. Service by facsimile is complete upon confirmation of transmission by delivery of a manually signed receipt.
Comment (a): Each document a party files in connection with a proceeding, as defined in Rule 101(a), must be served on all other parties admitted to the proceeding. In general, the party serving a paper should use the same method of service on all other parties and for filing with the Commission. Where a party uses different methods of service, the reason for doing so must be stated. Where a party is represented by counsel who has filed a notice of appearance, service ordinarily shall be made on counsel.
Revision Comment: The rule now contains a provision, paragraph (c)(4), allowing the use of facsimile transmission (''fax'') for the delivery of papers. The Commission received a large number of comments on this subject. Commenters had a number of suggestions for how to implement service by fax, including: that service should not be deemed complete unless a manually signed receipt acknowledges that the transmission was readable and was received in full within the time permitted for filing; that the hearing officer be given discretion to determine whether, and under what circumstances, fax service should be allowed; that an initial agreement to allow service by fax should include an undertaking to serve documents leaving sufficient time before the filing deadline and to notify the sender promptly of any fax transmission errors; that simultaneous service of an original copy should also be made through other means; and that a written agreement of terms should be required when the parties agree to the use of fax service. Commenters disagreed whether the Commission should limit the use of facsimile transmission to cases in which all parties agree on the terms for service.
In federal court, filing by fax is permitted where authorized by local rule subject to standards approved by the Judicial Conference. See Fed. R. Civ. P. 5(e); Fed. R. App. P. 25(a). The Commission has decided to allow service by facsimile transmission where two conditions have been met. First, persons serving each other by fax must agree to do so in writing. The written agreement shall contain such terms as are necessary with respect to telephone numbers, hours of operation, and provision of paper original and any other matters. Second, receipt of a document served by fax must be confirmed by a manually signed receipt. These conditions are intended to ensure that service by fax will be both an efficient and an effective means of service.
One commenter objected to the provision in the proposed rule that would have allowed service directly upon a party where the party was represented by counsel. In response, Rule 150(b) has been amended to clarify that service upon counsel by another party is required unless service upon the person represented is specifically ordered by the Commission or the hearing officer. Rule 151. Filing of Papers With the Commission: Procedure
(a) When to File. All papers required to be served by a party upon any person shall be filed with the Commission at the time of service or promptly thereafter. Papers required to be filed with the Commission must be received within the time limit, if any, for such filing.
(b) Where to File. Filing of papers with the Commission shall be made by filing them with the Secretary. When a proceeding is assigned to a hearing officer, a person making a filing with the Secretary shall promptly provide to the hearing officer a copy of any such filing; provided, however, that the hearing officer may direct or permit filings to be made with him or her, in which event the hearing officer shall note thereon the filing date and promptly provide the Secretary with either the original or a copy of any such filings.
(c) To Whom to Direct the Filing. Unless otherwise provided, where the Commission has assigned a case to a hearing officer, all motions, objections, applications or other filings made during a proceeding prior to the filing of an initial decision therein, or, if no initial decision is to be filed, prior to the time fixed for the filing of briefs with the Commission, shall be directed to and decided by the hearing officer.
(d) Certificate of Service. Papers filed with the Commission or a hearing officer shall be accompanied by a certificate stating the name of the person or persons served, the date of service, the method of service and the mailing address or facsimile telephone number to which service was made, if not made in person. If the method of service to any party is different from the method of service to any other party or the method for filing with the Commission, the certificate shall state why a different means of service was used.
Comment: Since hearing officers frequently preside at locations away from the Commission's Headquarters in Washington, D.C., persons are permitted to make filings with the hearing officer, who then can forward the filings to the Secretary. Rule 351 contains additional procedures for the transmittal of the record of a proceeding before a hearing officer (and the index of the record) from the hearing officer to the Secretary.
Rule 151 requires that where the Commission has assigned a hearing officer to preside at a proceeding, the person making a motion direct his or her requests and arguments to the hearing officer, not the Commission. If
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a motion is directed to the Commission in a case in which a hearing officer is assigned, the Secretary must refer the motion to the hearing officer unless a motion directly to the Commission is authorized. In those unusual circumstances where a motion is properly directed to the Commission, the proceeding before the hearing officer should continue, unless otherwise ordered.
Revision Comment (d): The requirements for the certificate of service have been modified to require that the certificate list the name of the person served and the method of service used if other than personal service is made. Additionally, if the method of service to any party is different from the method of service to any other party or the method for filing with the Commission, the certificate must state why a different method was used. Rule 152. Filing of Papers: Form
(a) Specifications. Papers filed in connection with any proceeding as defined in Rule 101(a) shall:
(1) be on one grade of unglazed white paper measuring 8\1/2\ x 11 inches, except that, to the extent that the reduction of larger documents would render them illegible, such documents may be filed on larger paper;
(2) be typewritten or printed in either 10- or 12-point typeface or otherwise reproduced by a process that produces permanent and plainly legible copies;
(3) include at the head of the paper, or on a title page, the name of the Commission, the title of the proceeding, the names of the parties, the subject of the particular paper or pleading, and the file number assigned to the proceeding;
(4) be paginated with left hand margins at least 1 inch wide, and other margins of at least 1 inch;
(5) be double-spaced, with single-spaced footnotes and single- spaced indented quotations; and
(6) be stapled, clipped or otherwise fastened in the upper left corner.
(b) Signature Required. All papers must be dated and signed as provided in Rule 153.
(c) Suitability for Recordkeeping. Documents which, in the opinion of the Commission, are not suitable for computer scanning or microfilming may be rejected.
(d) Number of Copies. An original and three copies of all papers shall be filed.
(e) Form of Briefs. All briefs containing more than 10 pages shall include a table of contents, an alphabetized table of cases, a table of statutes, and a table of other authorities cited, with references to the pages of the brief wherein they are cited.
(f) Scandalous or Impertinent Matter. Any scandalous or impertinent matter contained in any brief or pleading or in connection with any oral presentation in a proceeding may be stricken on order of the Commission or the hearing officer. Rule 153. Filing of Papers: Signature Requirement and Effect
(a) General Requirements. Following the issuance of an order instituting proceedings, every filing of a party represented by counsel shall be signed by at least one counsel of record in his or her name and shall state that counsel's business address and telephone number. A party who acts as his or her own counsel shall sign his or her individual name and state his or her address and telephone number on every filing.
(b) Effect of Signature.
(1) The signature of a counsel or party shall constitute a certification that:
(i) the person signing the filing has read the filing;
(ii) to the best of his or her knowledge, information, and belief, formed after reasonable inquiry, the filing is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and
(iii) the filing is not made for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of adjudication.
(2) If a filing is not signed, the hearing officer or the Commission shall strike the filing, unless it is signed promptly after the omission is called to the attention of the person making the filing.
Comment: Rule 153(b) is based upon Rule 11 of the Federal Rules of Civil Procedure. Persons signing a filing bear personal responsibility for the contents of the filing. If a filing is contrary to the provisions of this rule, the person or persons signing the filing may be subject to sanctions under Rule 180. Rule 154. Motions
(a) Generally. Unless made during a hearing or conference, a motion shall be in writing, shall state with particularity the grounds therefor, shall set forth the relief or order sought, and shall be accompanied by a written brief of the points and authorities relied upon. All written motions shall be served in accordance with Rule 150, be filed in accordance with Rule 151, meet the requirements of Rule 152, and be signed in accordance with Rule 153. The Commission or the hearing officer may order that an oral motion be submitted in writing. Unless otherwise ordered by the Commission or the hearing officer, if a motion is properly made to the Commission concerning a proceeding to which a hearing officer is assigned, the proceeding before the hearing officer shall continue pending the determination of the motion by the Commission. No oral argument shall be heard on any motion unless the Commission or the hearing officer otherwise directs.
(b) Opposing and Reply Briefs. Except as provided in Rule 401, briefs in opposition to a motion shall be filed within five days after service of the motion. Reply briefs shall be filed within three days after service of the opposition.
(c) Length Limitation. A brief in support of or opposition to a motion shall not exceed 10 pages, exclusive of pages containing any table of contents, table of authorities, and/or addendum. Requests for leave to file briefs in excess of 10 pages are disfavored. Rule 155. Default; Motion to Set Aside Default
(a) A party to a proceeding may be deemed to be in default and the Commission or the hearing officer may determine the proceeding against that party upon consideration of the record, including the order instituting proceedings, the allegations of which may be deemed to be true, if that party fails:
(1) to appear, in person or through a representative, at a hearing or conference of which that party has been notified;
(2) to answer, to respond to a dispositive motion within the time provided, or otherwise to defend the proceeding; or
(3) to cure a deficient filing within the time specified by the Commission or the hearing officer pursuant to Rule 180(b).
(b) A motion to set aside a default shall be made within a reasonable time, state the reasons for the failure to appear or defend, and specify the nature of the proposed defense in the proceeding. In order to prevent injustice and on such conditions as may be appropriate, the hearing officer, at any time prior to the filing of the initial decision, or the Commission, at any time, may for good cause shown set aside a default.
Comment: Pursuant to Rule 155 the Commission or the hearing officer may enter a default against any party who fails to appear in person or, if appropriate, through a representative, at a hearing or conference of which the party has notice. Thus, for example, failure to appear at a prehearing conference may be a grounds for default.
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In addition, for example, this rule permits the entry of default against any party who fails to answer, to respond to a dispositive motion, or otherwise to defend the proceeding, or to file a required brief either before the hearing officer or on appeal before the Commission. This provision retains the existing standards for setting aside a default contained in former Rule of Practice 12(d), 17 CFR 201.12(d) (1994).
Revision Comment: Failure to file a notice of appearance has been eliminated as a basis for a default. Failure to file a notice of appearance, like the failure to make any other required filing, is subject to sanctions under Rule 180(c). Rule 160. Time Computation
(a) Computation. In computing any period of time prescribed in or allowed by these Rules of Practice or by order of the Commission, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday, Sunday, or Federal legal holiday (as defined in Rule 104), in which event the period runs until the end of the next day that is not a Saturday, Sunday, or Federal legal holiday. Intermediate Saturdays, Sundays, and Federal legal holidays shall be excluded from the computation when the period of time prescribed or allowed is seven days or less, not including any additional time allowed for service by mail in paragraph (b) of this rule. If on the day a filing is to be made, weather or other conditions have caused the Secretary's office or other designated filing location to close, the filing deadline shall be extended to the end of the next day that is neither a Saturday, a Sunday, nor a Federal legal holiday.
(b) Additional Time For Service by Mail. If service is made by mail, three days shall be added to the prescribed period for response.
Revision Comment (b): This paragraph has been simplified. No substantive change is intended. One commenter requested that the amount of time for service by mail be increased. Rule 6(e) of the Federal Rules of Civil Procedure, which allows only three days to be added to a prescribed period when service is by mail, establishes a widely used and familiar standard for the computation of additional time when service is by mail. No change in the additional time period for service by mail was deemed warranted. Rule 161. Extensions of Time, Postponements and Adjournments
(a) Availability. Except as otherwise provided by law, the Commission, at any time, or the hearing officer, at any time prior to the filing of his or her initial decision or, if no initial decision is to be filed, at any time prior to the closing of the record, may, for good cause shown, extend or shorten any time limits prescribed by these Rules of Practice for the filing of any papers and may, consistent with paragraph (b) of this rule, postpone or adjourn any hearing.
(b) Limitations on Postponements, Adjournments and Extensions. A hearing shall begin at the time and place ordered, provided that, within the limits provided by statute, the Commission or the hearing officer may for good cause shown postpone the commencement of the hearing or adjourn a convened hearing for a reasonable period of time or change the place of hearing.
(1) Additional Considerations. In considering a motion for postponement of the start of a hearing, adjournment once a hearing has begun, or extensions of time for filing papers, the hearing officer or the Commission shall consider, in addition to any other factors:
(i) the length of the proceeding to date;
(ii) the number of postponements, adjournments or extensions already granted;
(iii) the stage of the proceedings at the time of the request; and
(iv) any other such matters as justice may require.
(2) Time Limit. Postponements, adjournments or extensions of time for filing papers shall not exceed 21 days unless the Commission or the hearing officer states on the record or sets forth in a written order the reasons why a longer period of time is necessary.
Comment: The rule requires the hearing officer to consider explicitly the efficient and timely administration of justice when determining whether to grant a postponement, adjournment or extension of time for filing of papers. The need for delay must be balanced against the need to bring each case to a timely conclusion, consistent with the public interest. The factors listed in the rule build on existing standards applied by the administrative law judges. Rule 180. Sanctions
(a) Contemptuous Conduct.
(1) Subject to Exclusion or Suspension. Contemptuous conduct by any person before the Commission or a hearing officer during any proceeding, including any conference, shall be grounds for the Commission or the hearing officer to:
(i) exclude that person from such hearing or conference, or any portion thereof; and/or
(ii