[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Notices]
[Pages 46106-46108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18152]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58245; File No. SR-FINRA-2008-026]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change and
Amendment No. 1 Thereto, To Adopt the FINRA Rule 0100 Series (General
Standards) in the Consolidated FINRA Rulebook
July 29, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on June 16, 2008, Financial Industry Regulatory
Authority, Inc. (``FINRA'') (f/k/a National Association of Securities
Dealers, Inc. (``NASD'')), filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by FINRA. On July 16, 2008, FINRA filed Amendment No. 1 to the proposed
rule change. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA proposes to adopt the NASD Rule 0100 Series as FINRA rules in
the consolidated FINRA rulebook. The proposed rule change would
renumber the NASD Rule 0100 Series as the FINRA Rule 0100 Series in the
consolidated FINRA rulebook. The text of the proposed rule change is
available at FINRA, the Commission's Public Reference Room, and
www.finra.org.
[[Page 46107]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
As part of the process of developing the new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt the
NASD Rule 0100 Series (General Provisions) as FINRA rules in the
Consolidated FINRA Rulebook, with the exception of NASD Rule 0120,
which will be addressed at a later date in a separate filing. The NASD
Rule 0100 Series governs the adoption, application and interpretation
of NASD rules and sets forth certain definitions not contained in the
FINRA By-Laws. Additionally, these rules address FINRA's delegation of
certain responsibilities to its subsidiaries, and its authority and
access with respect to its subsidiaries. FINRA is proposing to transfer
this rule series as the FINRA Rule 0100 Series, renamed as ``General
Standards,'' to the Consolidated FINRA Rulebook, with only minor
changes, as described below. The proposed rule change would not impose
any new requirements on FINRA members, but would clarify and streamline
these rules for inclusion in the Consolidated FINRA Rulebook. FINRA
notes that, notwithstanding their transfer to the Consolidated FINRA
Rulebook, these rules of general applicability would apply equally to
both the Transitional Rulebook and the Consolidated FINRA Rulebook.\4\
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\3\ The current FINRA rulebook consists of two sets of rules:
(1) NASD Rules and (2) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together referred to as the ``Transitional
Rulebook''). The Incorporated NYSE Rules apply only to those members
of FINRA that are also members of the NYSE (``Dual Members''). Dual
Members also must comply with NASD Rules. For more information about
the rulebook consolidation process, see the FINRA Information
Notice, March 12, 2008 (Rulebook Consolidation Process).
\4\ See SR-FINRA-2008-021 (Proposed Rule Change Relating to the
Adoption of NASD Rules 4000 through 10000 Series and the 12000
through 14000 Series as FINRA Rules in the New Consolidated FINRA
Rulebook), discussing ``Rules of General Applicability.''
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Proposal
NASD Rule 0111 (Adoption of Rules) provides that the provisions of
the rulebook are adopted pursuant to Article VII, Section 1, of the By-
Laws. This section of the By-Laws grants the FINRA Board of Governors
(``Board'') authority to, among other things, adopt such FINRA rules,
and changes or additions thereto, as it deems necessary or appropriate,
provided, however, that the Board may at its option submit to the
membership any such adoption, change or addition to such rules. FINRA
is proposing that this rule be transferred into the Consolidated FINRA
Rulebook with only minor, non-substantive changes (e.g. , replacing
references to NASD with FINRA and certain renumbering to reflect the
new organizational structure of the Consolidated FINRA Rulebook).
NASD Rule 0112 (Effective Date) states that the rules shall become
effective as provided in Article XI, Section 1, of the By-Laws. This
section of the By-Laws provides that, if rules, or amendments to such,
are approved by the Commission, they will become effective as of such
date as the Board may prescribe. Historically, it has been FINRA's
general practice to state the effective date for a rule change in a
Regulatory Notice following approval by the Commission, and FINRA
intends to continue this practice. Accordingly, FINRA is proposing that
this rule be transferred into the Consolidated FINRA Rulebook with only
minor, non-substantive changes.
NASD Rule 0113 (Interpretation) states that the rules shall be
interpreted in such manner as will aid in effectuating the purposes and
business of NASD, and so as to require that all practices in connection
with the investment banking and securities business shall be just,
reasonable and not unfairly discriminatory. FINRA proposes to eliminate
the express reference to ``practices in connection with the investment
banking and securities business'' in the rule to reflect that certain
FINRA rules, such as the requirement to adhere to just and equitable
principles of trade, are not limited in scope to such activities. The
proposal would further provide that FINRA rules shall be interpreted in
light of the purposes sought to be achieved by the rules and to further
FINRA's regulatory programs. FINRA is proposing this rule change to
better reflect that FINRA will continue to interpret its rules in a
manner that promotes the purpose of the rules and FINRA's regulatory
programs.
NASD Rule 0114 (Effect on Transactions in Municipal Securities)
provides, in part, that the rules shall not be construed to apply to
transactions in municipal securities. NASD Rule 0116 (Application of
Rules of the Association to Exempted Securities) states that the terms
``exempted securities'' and ``municipal securities'' shall have the
meanings specified in Exchange Act Sections 3(a)(12) and 3(a)(29),
respectively, and includes a list of NASD rules applicable to
transactions and business activities relating to exempted securities,
except municipal securities. FINRA is proposing to incorporate the
statement in Rule 0114 that the FINRA rules are not applicable to
transactions in municipal securities into Rule 0116, and transfer Rule
0116, as amended, to the Consolidated FINRA Rulebook.
The remainder of Rule 0114 states that the rules shall not be
construed to apply to contracts made prior to the effective date of the
rules. FINRA is proposing to eliminate this provision in Rule 0114 as
unnecessary because the rules by their own terms determine their
applicability.
NASD Rule 0115 (Applicability) provides that the rules shall apply
to all members and persons associated with a member and that persons
associated with a member shall have the same duties and obligations as
a member. Rule 0115 goes on to prescribe the loss of membership and
registration privileges for members or persons associated with a member
who have been expelled, suspended, cancelled or revoked from membership
or registration. FINRA is proposing that this rule be transferred into
the Consolidated FINRA Rulebook with only minor, non-substantive
changes.
NASD Rule 0121 (Definitions in NASD By-Laws) states that, unless
the context otherwise requires, or unless otherwise defined in these
rules, terms used in the rules and interpretive material, if defined in
the By-Laws, shall have the meaning as defined in the By-Laws. FINRA is
proposing non-substantive changes to Rule 0121 to simplify the rule
language.
NASD Rule 0130 (Delegation, Authority and Access) delegates
authority to certain NASD subsidiaries to act on behalf of NASD as set
forth in a Plan of Allocation and Delegation adopted by the Board of
Governors and approved by the SEC. Further, the rule provides that,
notwithstanding any delegation of authority under the rule, the staff,
books, records and premises of
[[Page 46108]]
the subsidiaries are that of NASD, subject to oversight pursuant to the
Exchange Act, and all officers, directors, employees and agents of the
subsidiaries are that of NASD for purposes of the Exchange Act. FINRA
is proposing that this rule be transferred into the Consolidated FINRA
Rulebook with only minor, non-substantive changes.
FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 60 days
following Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\5\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
clarify and streamline the General Provisions rules for adoption as
FINRA rules in the new Consolidated FINRA Rulebook.
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\5\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reason for so finding or (ii) as to
which FINRA consents, the Commission will:
A. By order approve such proposed rule change; or
B. institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-FINRA-2008-026 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-026. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2008-026 and should be
submitted on or before August 28, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18152 Filed 8-6-08; 8:45 am]
BILLING CODE 8010-01-P