Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change as Modified by Amendment No. 1 Thereto To Repeal NASD Rule 1130 and Incorporated NYSE Rules 405A, 440F, 440G and 477 as Part of the Process of Developing the Consolidated FINRA Rulebook, 45258-45260 [E8-17788]

Download as PDF 45258 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Notices roundtable to discuss International Financial Reporting Standards (‘‘IFRS’’) and to update the Commission on IFRS developments, including the experience with use of IFRS during the recent period of market turmoil. The roundtable will be organized as two panels. The panels will include investors, issuers, auditors, and other parties with experience in IFRS reporting. Additionally, representatives from the Financial Accounting Standards Board and the International Accounting Standards Board will be present as observers. The roundtable will be held in the auditorium of SEC headquarters at 100 F Street, NE., Washington, DC. The roundtable will be open to the public with seating on a first-come, first-served basis. The roundtable discussions also will be available via webcast on the SEC’s Web site at https://www.sec.gov. The roundtable agenda and other materials related to the roundtable, including a list of participants and moderators, will be accessible at https://www.sec.gov/spotlight/ ifrsroadmap.htm. The Commission welcomes feedback regarding any of the topics to be addressed at the roundtable. DATES: Comments should be received on or before August 11, 2008. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet submission form (https://www.sec.gov/ rules/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number 4–564 on the subject line. pwalker on PROD1PC71 with NOTICES Paper Comments • Send paper comments in triplicate to Florence Harmon, Acting Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File No. 4–564. This file number should be included on the subject line if e-mail is used. To help us 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/other.shtml). Comments also will be available for public 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. All comments received will be posted without change; we do not edit personal VerDate Aug<31>2005 16:50 Aug 01, 2008 Jkt 214001 identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Liza McAndrew Moberg, Professional Accounting Fellow, at (202) 551–5300, Office of the Chief Accountant, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–6561. SUPPLEMENTARY INFORMATION: The Commission welcomes feedback regarding any of the topics to be addressed at the roundtable. The panel discussions will focus on: • An update on IFRS developments • Experience with the use of IFRS in practice, including during the recent period of market turmoil, more specifically: • Applying IFRS in the preparation of financial statements • Working with financial statements prepared pursuant to IFRS By the Commission. Dated: July 29, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8–17763 Filed 8–1–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58244; File No. SR–FINRA– 2008–029] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change as Modified by Amendment No. 1 Thereto To Repeal NASD Rule 1130 and Incorporated NYSE Rules 405A, 440F, 440G and 477 as Part of the Process of Developing the Consolidated FINRA Rulebook July 29, 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 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’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. On July 15, 2008, FINRA filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00054 Fmt 4703 Sfmt 4703 comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA proposes a rule change to repeal NASD Rule 1130 (Reliance on Current Membership List) and incorporated NYSE Rules 405A (NonManaged Fee-Based Account Programs—Disclosure and Monitoring), 440F (Public Short Sale Transactions Effected on the Exchange), 440G (Transactions in Stocks and Warrants for the Accounts of Members, Allied Members and Member Organizations) and 477 (Retention of Jurisdiction— Failure to Cooperate) as part of the process of developing the consolidated FINRA rulebook. The text of the proposed rule change is available at FINRA, the Commission’s Public Reference Room, and https:// www.finra.org. 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 a rule change to repeal NASD Rule 1130 (Reliance on Current Membership List) and incorporated NYSE Rules 405A (NonManaged Fee-Based Account Programs—Disclosure and Monitoring), 440F (Public Short Sale Transactions 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. From more information about the rulebook consolidation process, see FINRA Information Notice, March 12, 2008 (‘‘Rulebook Consolidation Process’’). E:\FR\FM\04AUN1.SGM 04AUN1 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Notices Effected on the Exchange), 440G (Transactions in Stocks and Warrants for the Accounts of Members, Allied Members and Member Organizations) and 477 (Retention of Jurisdiction— Failure to Cooperate) to eliminate duplicative provisions and remove requirements that are specific to the NYSE marketplace. Proposal pwalker on PROD1PC71 with NOTICES NASD Rule 1130 (Reliance on Current Membership List) The proposed rule change would repeal NASD Rule 1130, which provides that the Secretary of FINRA shall furnish every member a list of all members of FINRA, and shall currently keep every member advised, by amendments to the list or otherwise, of all new members and of all suspensions and cancellations of membership. The rule also requires that each member provide such information to its offices and associated persons as appropriate, and entitles members to rely on the information provided by FINRA for the purpose of complying with the rules. FINRA is proposing to repeal NASD Rule 1130 because the requirement to furnish a membership list is substantially similar to provisions in Article IV, Section 4 of the FINRA ByLaws, which require the Secretary of FINRA to keep a currently accurate and complete membership roll, which shall at all times be available to all members, governmental authorities and the general public.4 NYSE Rule 405A (Non-Managed FeeBased Account Programs—Disclosure and Monitoring) The proposed rule change would repeal Incorporated NYSE Rule 405A, which prescribes certain requirements in connection with placing a customer in a fee-based brokerage account. Among other things, the rule requires a member to provide the customer, in advance of opening such an account, a detailed disclosure document that must include, at a minimum: A description of the services provided, eligible assets, fees charged, an explanation of how costs will be computed and/or the provision of cost estimates based on hypothetical portfolios, any conditions or restrictions imposed and a summary of the program’s advantages and disadvantages. The rule also requires that the member make a determination that the program is appropriate for the 4 Additionally, information about membership suspensions and cancellations is available to firms and the public through BrokerCheck and announced to members in a monthly report of disciplinary actions. VerDate Aug<31>2005 16:50 Aug 01, 2008 Jkt 214001 customer, as well as ongoing monitoring of transactional activity by customers and procedures to follow up with customers whose account activity may be inappropriate in the context of the fee-based program. Incorporated NYSE Rule 405A essentially codifies, in a more prescriptive fashion, guidance regarding the applicability of NASD Rule 2110 (Standards of Commercial Honor and Principles of Trade) to fee-based programs set forth in NASD Notice to Members 03–68. In general, the Notice requires members to have reasonable grounds to believe that a fee-based account is appropriate for a particular customer, taking into account the services provided, cost and customer preferences. The Notice further explains that a member must implement supervisory procedures to require a periodic review of fee-based accounts to determine whether they remain appropriate for their respective customers. As a practical matter, these requirements may have little or no current applicability to brokerage accounts in light of a recent court holding that fee-based compensation constitutes ‘‘special compensation’’ that triggers the requirements of the Investment Advisers Act of 1940.5 As a result of the court’s decision, firms generally have converted fee-based brokerage accounts into advisory accounts or altered the compensation practices for such accounts (e.g. charging transaction-based commissions rather than a fixed fee or percentage of assets under management). However, both the Notice and Incorporated NYSE Rule 405A are aimed at fee-based accounts that do not constitute advisory accounts. To the extent fee-based programs may continue to exist in some form in brokerage accounts, FINRA believes the Notice provides the necessary guidance for members to conform their conduct in accordance with the just and equitable principles of trade mandated by NASD Rule 2110, and further provides firms with the flexibility to adopt policies and procedures to achieve that compliance in a manner consistent with their business structure and practices. 5 See Financial Planning Ass’n v. SEC, 375 U.S. App. D.C. 389, 482 F.3d 481 (D.C. Cir. 2007) PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 45259 NYSE Rules 440F (Public Short Sale Transactions Effected on the Exchange) and 440G (Transactions in Stocks and Warrants for the Accounts of Members, Allied Members and Member Organizations) The proposed rule change would repeal Incorporated NYSE Rules 440F and 440G. Incorporated NYSE Rule 440F requires members to report on Form SS20 round-lot short sale transactions in stocks or warrants effected on the NYSE floor for public customers. Incorporated NYSE Rule 440G requires members to report on Form 121 round-lot purchases or sales of stocks or warrants effected on the NYSE floor for members, allied members or member organizations. FINRA is proposing to repeal these rules as they are specific to the NYSE marketplace and relate solely to exchange transactions. NYSE Rule 477 (Retention of Jurisdiction—Failure to Cooperate) Both FINRA’s By-Laws and Incorporated NYSE Rule 477 provide for retained jurisdiction over former members and associated persons for initiating disciplinary actions. Under Article IV, Section 6 and Article V, Section 4 of the FINRA By-Laws, a former member or former associated person, respectively, remains subject to the filing of a FINRA complaint for two years after termination based on conduct that commenced prior to the termination. In the case of former associated persons, the FINRA By-Laws also provide that the two-year period recommences if an amendment to a notice of termination filed within the original two-year period discloses possible misconduct. Incorporated NYSE Rule 477 provides for retained jurisdiction over a member or a member’s employee for an unspecified time if, prior to termination or within one year following termination, NYSE serves written notice on such member or person that it is making inquiry into matters that occurred prior to termination. Under the proposed rule change, FINRA would continue to use the retention of jurisdiction provisions set forth in the FINRA By-Laws and would repeal the corresponding provisions in Incorporated NYSE Rule 477. 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 E:\FR\FM\04AUN1.SGM 04AUN1 45260 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Notices of Section 15A(b)(6) of the Act,6 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 would eliminate duplicative and unnecessary rules and advance the development of a more efficient and effective Consolidated FINRA Rulebook. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will impose any burden on competition 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 reasons for so finding or (ii) as to which the self-regulatory organization 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: 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–2008–029. 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, 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 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–2008–029 and should be submitted on or before August 25, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Acting Secretary. [FR Doc. E8–17788 Filed 8–1–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58237; File No. SR–ISE– 2008–61] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Non-Customer Options Orders July 29, 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 July 23, 2008, the International Securities Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by ISE. The Exchange has filed the proposal as a ‘‘non-controversial’’ rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it 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 regarding non-customer options orders. The text of the proposed rule change is as follows, with deletions in [brackets] and additions in italics: Rule 717. Limitations on Orders (a) Reserved. [Market Orders and Marketable Limit Orders. Electronic Access Members shall not enter into the System, as principal or agent, Non-Customer market orders. Non-Customer limit orders that cross the market and that cannot be executed within two (2) minimum variations below the best bid or above the best offer cannot be executed on the Exchange. Such limit orders will be canceled by the System.] (b) through (g) no change. pwalker on PROD1PC71 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–FINRA–2008–029 on the subject line. Supplemental Material to Rule 717 .01 through .02 no change. * * * * * Rule 805. Market Maker Orders (a) Options Classes to Which Appointed. Market makers may not 6 15 U.S.C. 78o–3(b)(6). VerDate Aug<31>2005 16:50 Aug 01, 2008 1 15 7 17 Jkt 214001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 2 17 PO 00000 CFR 200.30–3(a)(12). Frm 00056 Fmt 4703 Sfmt 4703 E:\FR\FM\04AUN1.SGM 04AUN1

Agencies

[Federal Register Volume 73, Number 150 (Monday, August 4, 2008)]
[Notices]
[Pages 45258-45260]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17788]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58244; File No. SR-FINRA-2008-029]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change as Modified 
by Amendment No. 1 Thereto To Repeal NASD Rule 1130 and Incorporated 
NYSE Rules 405A, 440F, 440G and 477 as Part of the Process of 
Developing the Consolidated FINRA Rulebook

July 29, 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 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'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by FINRA. On July 15, 
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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA proposes a rule change to repeal NASD Rule 1130 (Reliance on 
Current Membership List) and incorporated NYSE Rules 405A (Non-Managed 
Fee-Based Account Programs--Disclosure and Monitoring), 440F (Public 
Short Sale Transactions Effected on the Exchange), 440G (Transactions 
in Stocks and Warrants for the Accounts of Members, Allied Members and 
Member Organizations) and 477 (Retention of Jurisdiction--Failure to 
Cooperate) as part of the process of developing the consolidated FINRA 
rulebook. The text of the proposed rule change is available at FINRA, 
the Commission's Public Reference Room, and https://www.finra.org.

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 a rule change 
to repeal NASD Rule 1130 (Reliance on Current Membership List) and 
incorporated NYSE Rules 405A (Non-Managed Fee-Based Account Programs--
Disclosure and Monitoring), 440F (Public Short Sale Transactions

[[Page 45259]]

Effected on the Exchange), 440G (Transactions in Stocks and Warrants 
for the Accounts of Members, Allied Members and Member Organizations) 
and 477 (Retention of Jurisdiction--Failure to Cooperate) to eliminate 
duplicative provisions and remove requirements that are specific to the 
NYSE marketplace.
---------------------------------------------------------------------------

    \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. From more information 
about the rulebook consolidation process, see FINRA Information 
Notice, March 12, 2008 (``Rulebook Consolidation Process'').
---------------------------------------------------------------------------

Proposal
NASD Rule 1130 (Reliance on Current Membership List)
    The proposed rule change would repeal NASD Rule 1130, which 
provides that the Secretary of FINRA shall furnish every member a list 
of all members of FINRA, and shall currently keep every member advised, 
by amendments to the list or otherwise, of all new members and of all 
suspensions and cancellations of membership. The rule also requires 
that each member provide such information to its offices and associated 
persons as appropriate, and entitles members to rely on the information 
provided by FINRA for the purpose of complying with the rules.
    FINRA is proposing to repeal NASD Rule 1130 because the requirement 
to furnish a membership list is substantially similar to provisions in 
Article IV, Section 4 of the FINRA By-Laws, which require the Secretary 
of FINRA to keep a currently accurate and complete membership roll, 
which shall at all times be available to all members, governmental 
authorities and the general public.\4\
---------------------------------------------------------------------------

    \4\ Additionally, information about membership suspensions and 
cancellations is available to firms and the public through 
BrokerCheck and announced to members in a monthly report of 
disciplinary actions.
---------------------------------------------------------------------------

NYSE Rule 405A (Non-Managed Fee-Based Account Programs--Disclosure and 
Monitoring)
    The proposed rule change would repeal Incorporated NYSE Rule 405A, 
which prescribes certain requirements in connection with placing a 
customer in a fee-based brokerage account. Among other things, the rule 
requires a member to provide the customer, in advance of opening such 
an account, a detailed disclosure document that must include, at a 
minimum: A description of the services provided, eligible assets, fees 
charged, an explanation of how costs will be computed and/or the 
provision of cost estimates based on hypothetical portfolios, any 
conditions or restrictions imposed and a summary of the program's 
advantages and disadvantages. The rule also requires that the member 
make a determination that the program is appropriate for the customer, 
as well as ongoing monitoring of transactional activity by customers 
and procedures to follow up with customers whose account activity may 
be inappropriate in the context of the fee-based program.
    Incorporated NYSE Rule 405A essentially codifies, in a more 
prescriptive fashion, guidance regarding the applicability of NASD Rule 
2110 (Standards of Commercial Honor and Principles of Trade) to fee-
based programs set forth in NASD Notice to Members 03-68. In general, 
the Notice requires members to have reasonable grounds to believe that 
a fee-based account is appropriate for a particular customer, taking 
into account the services provided, cost and customer preferences. The 
Notice further explains that a member must implement supervisory 
procedures to require a periodic review of fee-based accounts to 
determine whether they remain appropriate for their respective 
customers.
    As a practical matter, these requirements may have little or no 
current applicability to brokerage accounts in light of a recent court 
holding that fee-based compensation constitutes ``special 
compensation'' that triggers the requirements of the Investment 
Advisers Act of 1940.\5\ As a result of the court's decision, firms 
generally have converted fee-based brokerage accounts into advisory 
accounts or altered the compensation practices for such accounts (e.g. 
charging transaction-based commissions rather than a fixed fee or 
percentage of assets under management). However, both the Notice and 
Incorporated NYSE Rule 405A are aimed at fee-based accounts that do not 
constitute advisory accounts.
---------------------------------------------------------------------------

    \5\ See Financial Planning Ass'n v. SEC, 375 U.S. App. D.C. 389, 
482 F.3d 481 (D.C. Cir. 2007)
---------------------------------------------------------------------------

    To the extent fee-based programs may continue to exist in some form 
in brokerage accounts, FINRA believes the Notice provides the necessary 
guidance for members to conform their conduct in accordance with the 
just and equitable principles of trade mandated by NASD Rule 2110, and 
further provides firms with the flexibility to adopt policies and 
procedures to achieve that compliance in a manner consistent with their 
business structure and practices.
NYSE Rules 440F (Public Short Sale Transactions Effected on the 
Exchange) and 440G (Transactions in Stocks and Warrants for the 
Accounts of Members, Allied Members and Member Organizations)
    The proposed rule change would repeal Incorporated NYSE Rules 440F 
and 440G. Incorporated NYSE Rule 440F requires members to report on 
Form SS20 round-lot short sale transactions in stocks or warrants 
effected on the NYSE floor for public customers. Incorporated NYSE Rule 
440G requires members to report on Form 121 round-lot purchases or 
sales of stocks or warrants effected on the NYSE floor for members, 
allied members or member organizations. FINRA is proposing to repeal 
these rules as they are specific to the NYSE marketplace and relate 
solely to exchange transactions.
NYSE Rule 477 (Retention of Jurisdiction--Failure to Cooperate)
    Both FINRA's By-Laws and Incorporated NYSE Rule 477 provide for 
retained jurisdiction over former members and associated persons for 
initiating disciplinary actions. Under Article IV, Section 6 and 
Article V, Section 4 of the FINRA By-Laws, a former member or former 
associated person, respectively, remains subject to the filing of a 
FINRA complaint for two years after termination based on conduct that 
commenced prior to the termination. In the case of former associated 
persons, the FINRA By-Laws also provide that the two-year period 
recommences if an amendment to a notice of termination filed within the 
original two-year period discloses possible misconduct. Incorporated 
NYSE Rule 477 provides for retained jurisdiction over a member or a 
member's employee for an unspecified time if, prior to termination or 
within one year following termination, NYSE serves written notice on 
such member or person that it is making inquiry into matters that 
occurred prior to termination.
    Under the proposed rule change, FINRA would continue to use the 
retention of jurisdiction provisions set forth in the FINRA By-Laws and 
would repeal the corresponding provisions in Incorporated NYSE Rule 
477.
    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

[[Page 45260]]

of Section 15A(b)(6) of the Act,\6\ 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 would 
eliminate duplicative and unnecessary rules and advance the development 
of a more efficient and effective Consolidated FINRA Rulebook.
---------------------------------------------------------------------------

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

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

    FINRA does not believe that the proposed rule change will impose 
any burden on competition 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 reasons for so finding or (ii) as to 
which the self-regulatory organization 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2008-029 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-2008-029. 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, 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 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-2008-029 and should be 
submitted on or before August 25, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17788 Filed 8-1-08; 8:45 am]
BILLING CODE 8010-01-P
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