Self-Regulatory Organizations; National Futures Association; Notice of Filing and Immediate Effectiveness of Proposed Amendments, as Modified by Amendment No. 1 Thereto, to the Interpretive Notice Regarding Compliance Rule 2-4: Misuse of Trade Secrets and Proprietary Information, 9843-9844 [E8-3255]

Download as PDF Federal Register / Vol. 73, No. 36 / Friday, February 22, 2008 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57335; File No. SR–NFA– 2007–05] Self-Regulatory Organizations; National Futures Association; Notice of Filing and Immediate Effectiveness of Proposed Amendments, as Modified by Amendment No. 1 Thereto, to the Interpretive Notice Regarding Compliance Rule 2–4: Misuse of Trade Secrets and Proprietary Information February 14, 2008. Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),1 and Rule 19b–7 thereunder,2 notice is hereby given that on November 30, 2007, the National Futures Association (‘‘NFA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which Items have been substantially prepared by NFA. On December 19, 2007, NFA 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. NFA also has filed the proposed rule change with the Commodity Futures Trading Commission (‘‘CFTC’’). NFA, on November 30, 2007, submitted the proposed rule change to the CFTC for approval and invoked the ‘‘ten-day’’ provision of section 17(j) of the Commodity Exchange Act (‘‘CEA’’).3 The ‘‘ten-day’’ provision permits NFA to make any rule changes or amendments effective ten days after receipt by the CFTC unless, within those ten days, NFA requests review or approval by the CFTC or the CFTC notifies NFA of its intent to review the filing. By letter dated December 11, 2007, the CFTC notified NFA of its determination not to review the proposed rule change.4 I. Self-Regulatory Organization’s Description of the Proposed Rule Change Text of Rule Change Interpretive Notices mstockstill on PROD1PC66 with NOTICES NFA Compliance Rule 2–4: Misuse of Trade Secrets and Proprietary Information National Futures Association (‘‘NFA’’) Compliance Rule 2–4 provides that 1 15 U.S.C. 78s(b)(7). CFR 240.19b–7. 3 7 U.S.C. 21(j). 4 See Letter from Lawrence B. Patent, Deputy Director, CFTC, to Thomas W. Sexton, III, General Counsel, NFA (Dec. 11, 2007) (‘‘Letter’’). 2 17 VerDate Aug<31>2005 16:38 Feb 21, 2008 Jkt 214001 Members and Associates shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business. Over the years, NFA’s Board of Directors (‘‘Board’’) has provided guidance on certain issues to ensure that Members and Associates understand their responsibilities to observe just and equitable principles of trade and to act honestly, fairly, and in the best interests of customers. Compliance Rule 2–4 prohibits Members and Associates from knowingly obtaining or seeking to obtain another Member’s or Associate’s confidential information or trade secrets without that person’s permission. It also prohibits Members and Associates from knowingly or recklessly misusing confidential information or trade secrets in their possession. Although that rule does not seek to regulate business disputes between Members or extend beyond their commodity futures activities, it does reach conduct that could potentially harm futures customers. Conduct that may violate Compliance Rule 2–4 includes: • Misusing sensitive personal information, such as a Social Security number, or purposefully or recklessly violating the firm’s privacy policy; • Disclosing customer orders prior to execution (except as permitted by exchange rules); or • Obtaining or attempting to obtain information disclosing a CTA’s historical trading positions without the CTA’s permission. These are merely examples of conduct that could potentially harm customers. Any Member or Associate that knowingly obtains or seeks to obtain confidential information or trade secrets of another Member or Associate without that person’s permission or that knowingly or recklessly misuses trade secrets and/or proprietary information in the conduct of its commodity futures business violates Compliance Rule 2–4. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NFA has prepared statements concerning the purpose of, and basis for, the proposed rule change, burdens on competition, and comments received from members, participants, and others. The text of these statements may be examined at the places specified in Item IV below. NFA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 9843 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Section 15A(k) of the Exchange Act 5 makes NFA a national securities association for the limited purpose of regulating the activities of NFA Members who are registered as brokers or dealers in security futures products under section 15(b)(11) of the Exchange Act.6 The revised interpretive notice applies to all NFA Members, including those who are registered as security futures brokers or dealers under section 15(b)(11). NFA Compliance Rule 2–4 requires NFA Members and Associates to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business. The notice makes clear that NFA Members and Associates violate NFA Compliance Rule 2–4 if they knowingly obtain or seek to obtain another NFA Member’s or Associate’s confidential information or trade secrets without that person’s permission, or knowingly or recklessly misuse confidential information or trade secrets in their possession when these activities may harm futures customers. The amendments to the notice make technical changes that do not affect the substance of the interpretive notice. 2. Statutory Basis The rule change is authorized by, and consistent with, section 15A(k) of the Exchange Act. Section 15(A)(k) requires NFA to have rules that are 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 in connection with security futures products. The proposed rule change accomplishes this by prohibiting the misuse of nonpublic information. B. Self-Regulatory Organization’s Statement on Burden on Competition The rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The interpretive notice should, however, prevent NFA Members from using illegitimate means to gain a competitive advantage when those means could harm futures customers. 5 15 6 15 E:\FR\FM\22FEN1.SGM U.S.C. 78o–3(k). U.S.C. 78o(b)(11). 22FEN1 9844 Federal Register / Vol. 73, No. 36 / Friday, February 22, 2008 / Notices C. Self-Regulatory Organization’s Statement of 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 NFA, on November 30, 2007, submitted the proposed Interpretive Notice entitled ‘‘NFA Compliance Rule 2–4: Misuse of Trade Secrets and Proprietary Information’’ to the CFTC for approval and invoked the ‘‘ten-day’’ provision of section 17(j) of the CEA.7 The CFTC notified NFA of its determination not to review the proposed rule change.8 The proposed rule change became effective on December 11, 2007. Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, could have summarily abrogated the proposed rule change and required that the proposed rule change be re-filed in accordance with the provisions of section 19(b)(1) of the Exchange Act.9 IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change conflicts with the Exchange Act. Comments may be submitted by any of the following methods. mstockstill on PROD1PC66 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NFA–2007–05 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NFA–2007–05. 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 (https://www.sec.gov/ U.S.C. 21(j) (2002). Letter, supra note 4. 9 15 U.S.C. 78s(b)(1). 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 20549–1090, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the NFA. 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–NFA–2007–05 and should be submitted on or before March 14, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–3255 Filed 2–21–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57343; File No. SR– NYSEArca–2008–18] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating To Listing Standards for Index-Linked Exchangeable Notes in NYSE Arca Equities Rule 5.2(j)(4) February 15, 2008. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 8, 2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have 77 10 17 8 See 1 15 VerDate Aug<31>2005 16:38 Feb 21, 2008 CFR 200.30–3(a)(75). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Jkt 214001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 been substantially prepared by the Exchange. NYSE Arca filed the proposal pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules governing NYSE Arca, LLC (also referred to as the ‘‘NYSE Arca Marketplace’’), which is the equities trading facility of NYSE Arca Equities. The Exchange is proposing to amend NYSE Arca Equities Rule 5.2(j)(4), the Exchange’s initial listing standards for ‘‘Index-Linked Exchangeable Notes.’’ The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https://www.nyse.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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. The Exchange 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 The Exchange is proposing to amend NYSE Arca Equities Rule 5.2(j)(4)(d), the Exchange’s initial listing standards for ‘‘Index-Linked Exchangeable Notes,’’ to correct certain cross-references to reflect the current numbering of NYSE Arca’s Rules.5 More specifically, NYSE Arca Equities Rule 5.2(j)(4)(d) is being updated to cross-reference provisions of NYSE Arca Rules 5.13(b) and (c), which govern the designation of and 3 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 5 In 2004, in connection with its demutualization, the Exchange amended the numbering of the NYSE Arca Rules, but inadvertently failed to update the numbering of the NYSE Arca rule cross-references in NYSE Arca Equities Rule 5.2(j)(4). See Securities Exchange Act Release No. 49718 (May 17, 2004), 69 FR 29611 (May 24, 2004) (SR–PCX–2004–08). 4 17 E:\FR\FM\22FEN1.SGM 22FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 73, Number 36 (Friday, February 22, 2008)]
[Notices]
[Pages 9843-9844]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-3255]



[[Page 9843]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57335; File No. SR-NFA-2007-05]


Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Amendments, as 
Modified by Amendment No. 1 Thereto, to the Interpretive Notice 
Regarding Compliance Rule 2-4: Misuse of Trade Secrets and Proprietary 
Information

February 14, 2008.
    Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-7 thereunder,\2\ notice is hereby 
given that on November 30, 2007, the National Futures Association 
(``NFA'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I, II, and 
III below, which Items have been substantially prepared by NFA. On 
December 19, 2007, NFA 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. NFA also 
has filed the proposed rule change with the Commodity Futures Trading 
Commission (``CFTC'').
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
---------------------------------------------------------------------------

    NFA, on November 30, 2007, submitted the proposed rule change to 
the CFTC for approval and invoked the ``ten-day'' provision of section 
17(j) of the Commodity Exchange Act (``CEA'').\3\ The ``ten-day'' 
provision permits NFA to make any rule changes or amendments effective 
ten days after receipt by the CFTC unless, within those ten days, NFA 
requests review or approval by the CFTC or the CFTC notifies NFA of its 
intent to review the filing. By letter dated December 11, 2007, the 
CFTC notified NFA of its determination not to review the proposed rule 
change.\4\
---------------------------------------------------------------------------

    \3\ 7 U.S.C. 21(j).
    \4\ See Letter from Lawrence B. Patent, Deputy Director, CFTC, 
to Thomas W. Sexton, III, General Counsel, NFA (Dec. 11, 2007) 
(``Letter'').
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

Text of Rule Change

Interpretive Notices

NFA Compliance Rule 2-4: Misuse of Trade Secrets and Proprietary 
Information

    National Futures Association (``NFA'') Compliance Rule 2-4 provides 
that Members and Associates shall observe high standards of commercial 
honor and just and equitable principles of trade in the conduct of 
their commodity futures business. Over the years, NFA's Board of 
Directors (``Board'') has provided guidance on certain issues to ensure 
that Members and Associates understand their responsibilities to 
observe just and equitable principles of trade and to act honestly, 
fairly, and in the best interests of customers.
    Compliance Rule 2-4 prohibits Members and Associates from knowingly 
obtaining or seeking to obtain another Member's or Associate's 
confidential information or trade secrets without that person's 
permission. It also prohibits Members and Associates from knowingly or 
recklessly misusing confidential information or trade secrets in their 
possession. Although that rule does not seek to regulate business 
disputes between Members or extend beyond their commodity futures 
activities, it does reach conduct that could potentially harm futures 
customers.
    Conduct that may violate Compliance Rule 2-4 includes:
     Misusing sensitive personal information, such as a Social 
Security number, or purposefully or recklessly violating the firm's 
privacy policy;
     Disclosing customer orders prior to execution (except as 
permitted by exchange rules); or
     Obtaining or attempting to obtain information disclosing a 
CTA's historical trading positions without the CTA's permission.
    These are merely examples of conduct that could potentially harm 
customers. Any Member or Associate that knowingly obtains or seeks to 
obtain confidential information or trade secrets of another Member or 
Associate without that person's permission or that knowingly or 
recklessly misuses trade secrets and/or proprietary information in the 
conduct of its commodity futures business violates Compliance Rule 2-4.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NFA has prepared statements 
concerning the purpose of, and basis for, the proposed rule change, 
burdens on competition, and comments received from members, 
participants, and others. The text of these statements may be examined 
at the places specified in Item IV below. NFA 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
    Section 15A(k) of the Exchange Act \5\ makes NFA a national 
securities association for the limited purpose of regulating the 
activities of NFA Members who are registered as brokers or dealers in 
security futures products under section 15(b)(11) of the Exchange 
Act.\6\ The revised interpretive notice applies to all NFA Members, 
including those who are registered as security futures brokers or 
dealers under section 15(b)(11).
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78o-3(k).
    \6\ 15 U.S.C. 78o(b)(11).
---------------------------------------------------------------------------

    NFA Compliance Rule 2-4 requires NFA Members and Associates to 
observe high standards of commercial honor and just and equitable 
principles of trade in the conduct of their commodity futures business. 
The notice makes clear that NFA Members and Associates violate NFA 
Compliance Rule 2-4 if they knowingly obtain or seek to obtain another 
NFA Member's or Associate's confidential information or trade secrets 
without that person's permission, or knowingly or recklessly misuse 
confidential information or trade secrets in their possession when 
these activities may harm futures customers. The amendments to the 
notice make technical changes that do not affect the substance of the 
interpretive notice.
2. Statutory Basis
    The rule change is authorized by, and consistent with, section 
15A(k) of the Exchange Act. Section 15(A)(k) requires NFA to have rules 
that are 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 in connection 
with security futures products. The proposed rule change accomplishes 
this by prohibiting the misuse of nonpublic information.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The rule change will not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the 
Exchange Act. The interpretive notice should, however, prevent NFA 
Members from using illegitimate means to gain a competitive advantage 
when those means could harm futures customers.

[[Page 9844]]

C. Self-Regulatory Organization's Statement of 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

    NFA, on November 30, 2007, submitted the proposed Interpretive 
Notice entitled ``NFA Compliance Rule 2-4: Misuse of Trade Secrets and 
Proprietary Information'' to the CFTC for approval and invoked the 
``ten-day'' provision of section 17(j) of the CEA.\7\ The CFTC notified 
NFA of its determination not to review the proposed rule change.\8\ The 
proposed rule change became effective on December 11, 2007.
---------------------------------------------------------------------------

    \7\ 7 U.S.C. 21(j) (2002).
    \8\ See Letter, supra note 4.
---------------------------------------------------------------------------

    Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, could have 
summarily abrogated the proposed rule change and required that the 
proposed rule change be re-filed in accordance with the provisions of 
section 19(b)(1) of the Exchange Act.\9\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change conflicts with the Exchange Act. Comments may be submitted by 
any of the following methods.

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NFA-2007-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NFA-2007-05. 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 (https://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 20549-1090, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NFA. 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-NFA-
2007-05 and should be submitted on or before March 14, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(75).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-3255 Filed 2-21-08; 8:45 am]
BILLING CODE 8011-01-P

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