Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rule 5240 (Anti Intimidation / Coordination) in the Consolidated FINRA Rulebook, 79527-79528 [E8-30790]

Download as PDF Federal Register / Vol. 73, No. 249 / Monday, December 29, 2008 / Notices All submissions should refer to File Number SR–FINRA–2008–063. 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 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–2008–063 and should be submitted on or before January 20, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Florence Harmon, Acting Secretary. [FR Doc. E8–30785 Filed 12–24–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59119; File No. SR–FINRA– 2008–061] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rule 5240 (Anti Intimidation / Coordination) in the Consolidated FINRA Rulebook dwashington3 on PROD1PC60 with NOTICES December 18, 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 December 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Aug<31>2005 13:19 Dec 24, 2008 Jkt 217001 11, 2008, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. 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 FINRA is proposing to adopt Interpretive Material (‘‘IM’’) 2110–5 (Anti-Intimidation/Coordination) as a FINRA rule in the consolidated FINRA rulebook without material change. The proposed rule change would renumber IM–2110–5 as FINRA Rule 5240 in the consolidated FINRA rulebook. The text of the proposed rule change is attached as Exhibit 5.3 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 As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),4 FINRA is proposing to adopt IM–2110– 3 The Commission notes that while provided in Exhibit 5, the text of the proposed rule change is also available at FINRA, the Commission’s Public Reference Room, and http://www.finra.org. 4 The current FINRA rulebook consists of (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the ‘‘Transitional Rulebook’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see FINRA Information Notice, March 12, 2008 (Rulebook Consolidation Process). PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 79527 5 as FINRA Rule 5240 without material change. In 1996, the SEC issued a report pursuant to Section 21(a) of the Act 5 regarding NASD, the Nasdaq market, and the activities of certain Nasdaq market makers that impeded price competition in the Nasdaq market.6 In conjunction with the report, the SEC also issued an order pursuant to Section 19(h)(1) of the Act 7 that made findings regarding the activities and imposed remedial sanctions on FINRA (then NASD).8 As part of that order, FINRA agreed to certain undertakings, including an undertaking to ‘‘propose a rule or rule interpretation for Commission approval which expressly makes unlawful the coordination by or among market makers of their quotes, trades and trade reports, and which prohibits retribution or retaliatory conduct for competitive actions of another market maker or other market participant.’’ To comply with this undertaking, FINRA proposed IM– 2110–5, which was approved by the SEC on July 17, 1997.9 IM–2110–5 identifies three general types of conduct that are inconsistent with just and equitable principles of trade: 10 (1) Coordinating activities by members involving quotations, prices, trades, and trade reporting (e.g., agreements to report trades inaccurately or maintain certain minimum spreads); (2) ‘‘directing or requesting’’ another member to alter prices or quotations; and (3) engaging in conduct that threatens, harasses, coerces, intimidates, or otherwise attempts improperly to influence another member or person associated with a member. The IM also sets forth seven specific exclusions that identify bona fide commercial activity that is permitted (e.g., bona fide 5 15 U.S.C. 78u(a). Report pursuant to Section 21(a) of the Exchange Act regarding NASD and The Nasdaq Stock Market, Inc., Securities Exchange Act Release No. 37542 (August 8, 1996). 7 15 U.S.C. 78s(h)(1). 8 See In the Matter of National Association of Securities Dealers, Inc., Administrative Proceeding File No. 3–9056, Securities Exchange Act Release No. 37538 (August 8, 1996). 9 See Securities Exchange Act Release No. 38845 (July 17, 1997), 62 FR 39564 (July 23, 1997). 10 NASD Rule 2110 requires members to ‘‘observe high standards of commercial honor and just and equitable principles of trade.’’ On September 25, 2008, the Commission approved adopting NASD Rule 2110 into the Consolidated FINRA Rulebook as FINRA Rule 2010 without substantive change. See Securities Exchange Act Release No. 58643 (September 25, 2008), 73 FR 57174 (October 1, 2008). That rule change will take effect on December 15, 2008. See FINRA Regulatory Notice 08–57 (October 2008). The Commission notes that this rule change became effective on December 15, 2008. 6 See E:\FR\FM\29DEN1.SGM 29DEN1 79528 Federal Register / Vol. 73, No. 249 / Monday, December 29, 2008 / Notices negotiations and unilateral decisions regarding spreads). Because FINRA adopted IM–2110–5 to fulfill part of its 1996 settlement agreement with the SEC, the proposed rule change would transfer IM–2110–5 into the Consolidated FINRA Rulebook as FINRA Rule 5240. Although FINRA is not proposing material changes to the rule, one of the minor changes FINRA is proposing is to add the phrase ‘‘or other person’’ to paragraphs (a)(1) and (a)(3) of the rule to clarify that coordination with or intimidation of a non-FINRA member would be covered by the rule. FINRA will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 90 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,11 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. In addition, FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(11) of the Act,12 which requires, among other things, that FINRA rules must be designed to produce fair and informative quotations, to prevent fictitious or misleading quotations, and to promote orderly procedures for collecting, distributing, and publishing quotations. FINRA believes that the rule properly emphasizes certain types of misconduct that can impair the fair and orderly functioning of the market and thus serves as an important provision to help ensure the integrity of information placed into the market. The rule being adopted as part of the Consolidated FINRA Rulebook previously has been found to meet the statutory requirements, and FINRA believes the rule has since proven effective in achieving the statutory mandates. dwashington3 on PROD1PC60 with NOTICES 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. 11 15 12 15 U.S.C. 78o–3(b)(6). U.S.C. 78o–3(b)(11). VerDate Aug<31>2005 13:19 Dec 24, 2008 Jkt 217001 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2008–061 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–2008–061. 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 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 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–2008–061 and should be submitted on or before January 20, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Acting Secretary. [FR Doc. E8–30790 Filed 12–24–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59111; File No. SR-FICC– 2007–04] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change Relating to Applicant and Member Disqualification Criteria December 17, 2008. I. Introduction On April 30, 2007, the Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’).1 On February 7, 2008, and March 19, 2008, FICC amended the proposed rule change. On July 9, 2008, the Commission published notice of the proposed rule change to solicit comments from interested persons.2 The Commission received two comment letters in response to the proposed rule change.3 For the reasons discussed 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 58128, 73 FR 40893 (July 16, 2008). 3 Letters from Susanne Trimbath, Ph.D., STP Advisory Services, LLC (Aug. 27, 2008) and Nikki M. Poulos, Managing Director, General Counsel, FICC (Nov. 7, 2008). 1 15 E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Notices]
[Pages 79527-79528]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-30790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59119; File No. SR-FINRA-2008-061]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt 
FINRA Rule 5240 (Anti Intimidation / Coordination) in the Consolidated 
FINRA Rulebook

December 18, 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 December 11, 2008, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 is proposing to adopt Interpretive Material (``IM'') 2110-5 
(Anti-Intimidation/Coordination) as a FINRA rule in the consolidated 
FINRA rulebook without material change. The proposed rule change would 
renumber IM-2110-5 as FINRA Rule 5240 in the consolidated FINRA 
rulebook.
    The text of the proposed rule change is attached as Exhibit 5.\3\
---------------------------------------------------------------------------

    \3\ The Commission notes that while provided in Exhibit 5, the 
text of the proposed rule change is also available at FINRA, the 
Commission's Public Reference Room, and http://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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\4\ FINRA is proposing to adopt IM-
2110-5 as FINRA Rule 5240 without material change.
---------------------------------------------------------------------------

    \4\ The current FINRA rulebook consists of (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules 
are referred to as the ``Transitional Rulebook''). While the NASD 
Rules generally apply to all FINRA members, the Incorporated NYSE 
Rules apply only to those members of FINRA that are also members of 
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA 
members, unless such rules have a more limited application by their 
terms. For more information about the rulebook consolidation 
process, see FINRA Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
---------------------------------------------------------------------------

    In 1996, the SEC issued a report pursuant to Section 21(a) of the 
Act \5\ regarding NASD, the Nasdaq market, and the activities of 
certain Nasdaq market makers that impeded price competition in the 
Nasdaq market.\6\ In conjunction with the report, the SEC also issued 
an order pursuant to Section 19(h)(1) of the Act \7\ that made findings 
regarding the activities and imposed remedial sanctions on FINRA (then 
NASD).\8\ As part of that order, FINRA agreed to certain undertakings, 
including an undertaking to ``propose a rule or rule interpretation for 
Commission approval which expressly makes unlawful the coordination by 
or among market makers of their quotes, trades and trade reports, and 
which prohibits retribution or retaliatory conduct for competitive 
actions of another market maker or other market participant.'' To 
comply with this undertaking, FINRA proposed IM-2110-5, which was 
approved by the SEC on July 17, 1997.\9\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78u(a).
    \6\ See Report pursuant to Section 21(a) of the Exchange Act 
regarding NASD and The Nasdaq Stock Market, Inc., Securities 
Exchange Act Release No. 37542 (August 8, 1996).
    \7\ 15 U.S.C. 78s(h)(1).
    \8\ See In the Matter of National Association of Securities 
Dealers, Inc., Administrative Proceeding File No. 3-9056, Securities 
Exchange Act Release No. 37538 (August 8, 1996).
    \9\ See Securities Exchange Act Release No. 38845 (July 17, 
1997), 62 FR 39564 (July 23, 1997).
---------------------------------------------------------------------------

    IM-2110-5 identifies three general types of conduct that are 
inconsistent with just and equitable principles of trade: \10\ (1) 
Coordinating activities by members involving quotations, prices, 
trades, and trade reporting (e.g., agreements to report trades 
inaccurately or maintain certain minimum spreads); (2) ``directing or 
requesting'' another member to alter prices or quotations; and (3) 
engaging in conduct that threatens, harasses, coerces, intimidates, or 
otherwise attempts improperly to influence another member or person 
associated with a member. The IM also sets forth seven specific 
exclusions that identify bona fide commercial activity that is 
permitted (e.g., bona fide

[[Page 79528]]

negotiations and unilateral decisions regarding spreads).
---------------------------------------------------------------------------

    \10\ NASD Rule 2110 requires members to ``observe high standards 
of commercial honor and just and equitable principles of trade.'' On 
September 25, 2008, the Commission approved adopting NASD Rule 2110 
into the Consolidated FINRA Rulebook as FINRA Rule 2010 without 
substantive change. See Securities Exchange Act Release No. 58643 
(September 25, 2008), 73 FR 57174 (October 1, 2008). That rule 
change will take effect on December 15, 2008. See FINRA Regulatory 
Notice 08-57 (October 2008). The Commission notes that this rule 
change became effective on December 15, 2008.
---------------------------------------------------------------------------

    Because FINRA adopted IM-2110-5 to fulfill part of its 1996 
settlement agreement with the SEC, the proposed rule change would 
transfer IM-2110-5 into the Consolidated FINRA Rulebook as FINRA Rule 
5240. Although FINRA is not proposing material changes to the rule, one 
of the minor changes FINRA is proposing is to add the phrase ``or other 
person'' to paragraphs (a)(1) and (a)(3) of the rule to clarify that 
coordination with or intimidation of a non-FINRA member would be 
covered by the rule.
    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 90 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,\11\ 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. In addition, FINRA believes that the proposed rule 
change is consistent with the provisions of Section 15A(b)(11) of the 
Act,\12\ which requires, among other things, that FINRA rules must be 
designed to produce fair and informative quotations, to prevent 
fictitious or misleading quotations, and to promote orderly procedures 
for collecting, distributing, and publishing quotations. FINRA believes 
that the rule properly emphasizes certain types of misconduct that can 
impair the fair and orderly functioning of the market and thus serves 
as an important provision to help ensure the integrity of information 
placed into the market. The rule being adopted as part of the 
Consolidated FINRA Rulebook previously has been found to meet the 
statutory requirements, and FINRA believes the rule has since proven 
effective in achieving the statutory mandates.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(b)(11).
---------------------------------------------------------------------------

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 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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2008-061 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-2008-061. 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 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-2008-061 and should be 
submitted on or before January 20, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-30790 Filed 12-24-08; 8:45 am]
BILLING CODE 8011-01-P