Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto, To Amend the FINRA Rule 9520 Series Regarding Eligibility Procedures for Persons Subject to Certain Disqualifications, 1738-1740 [E9-438]
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1738
Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–461 Filed 1–12–09; 8:45 am]
1 replaces and supersedes the proposed
rule change filed on September 8, 2008,
in its entirety, except with regard to
Exhibit 2, a proposed Regulatory Notice
that details the proposed related
eligibility procedures.5
BILLING CODE 8011–01–P
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.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59208; File No. SR–FINRA–
2008–045]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment No. 1 Thereto, To Amend
the FINRA Rule 9520 Series Regarding
Eligibility Procedures for Persons
Subject to Certain Disqualifications
January 6, 2009.
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
September 8, 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’’) and amended
on December 11, 2008,3 the proposed
rule change as described in Items I, II,
and III below, which Items have been
substantially prepared by FINRA. The
Commission is publishing this notice to
solicit 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 is proposing to amend the
FINRA Rule 9520 Series, which governs
the eligibility procedures for persons
subject to certain disqualifications, to
comport with the amended definition of
disqualification in the FINRA By-Laws.
This Amendment No. 1 to SR–
FINRA–2008–045 makes technical
changes to the original filing filed on
September 8, 2008. The text of the
proposed rule change is attached as
Exhibit 5 to this filing.4 Amendment No.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 to SR–FINRA–2008–045
replaced and superseded the original rule filing
submitted to the Commission on September 8, 2008.
4 The text of the proposed rule change to the
FINRA Rule 9520 Series as set forth in Exhibit 5
reflects amendments adopted pursuant to proposed
rule change SR–FINRA–2008–021, which was
approved by the Commission. See Securities
Exchange Act Release No. 58643 (September 25,
2008), 73 FR 57174 (October 1, 2008) (SR–FINRA–
1 15
VerDate Nov<24>2008
19:54 Jan 12, 2009
Jkt 217001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In light of FINRA’s obligation to
enforce the federal securities laws, and
as part of the consolidation of the
member firm regulatory functions of
NASD and NYSE Regulation, Inc., and
the formation of FINRA, FINRA adopted
by Board and membership vote a
revised By-Law definition of
disqualification that is consistent with
the federal securities laws, such that any
person subject to a statutory
disqualification under Section 3(a)(39)
of the Act also is subject to
disqualification under Article III,
Section 4 of the FINRA By-Laws.6
Consequently, as further detailed in the
proposed Regulatory Notice (see Exhibit
2), FINRA’s revised definition of
disqualification incorporates three
additional categories of statutory
disqualification, including willful
violations of the federal securities or
commodities laws, grounds for statutory
disqualification that were enacted in the
Sarbanes-Oxley Act, and associations
2008–021) (approval order). The FINRA Rule 9520
Series, as set forth in SR–FINRA–2008–021, became
effective on December 15, 2008. See FINRA
Regulatory Notice 08–57 (SEC Approves New
Consolidated FINRA Rules) (October 2008).
5 FINRA would issue the proposed Regulatory
Notice upon the Commission’s approval of the
proposed rule change; the Regulatory Notice is
written in a manner that assumes such approval.
6 See Securities Exchange Act Release No. 55495
(March 20, 2007), 72 FR 14149 (March 26, 2007)
(SR–NASD–2007–023) (notice). See also Securities
Exchange Act Release No. 56145 (July 26, 2007), 72
FR 42169 (August 1, 2007) (SR–NASD–2007–023)
(approval order), as amended by Securities
Exchange Act Release No. 56145A (May 30, 2008),
73 FR 32377 (June 6, 2008). See also NASD, SEC
No-Action Letter, 2007 SEC No-Act. LEXIS 540
(July 27, 2007).
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
with certain other persons subject to
disqualification.
Absent the proposed rule change, all
persons subject to any of the added
categories of disqualification would be
required to obtain approval from FINRA
to enter or remain in the securities
industry. The proposed rule change
would both amend the text of the
FINRA Rule 9520 Series generally to
reflect the amended definition of
disqualification in the By-Laws, as well
as include the proposed Regulatory
Notice that outlines in detail the
applicable eligibility procedures. The
amended FINRA Rule 9520 Series
would incorporate by reference the
procedures set forth in the Regulatory
Notice. As further detailed in the
Regulatory Notice, the need for a
member to file an application with
FINRA for approval notwithstanding the
disqualification would depend on (1)
The type of the disqualification; (2) the
date of the disqualification; and (3)
whether the firm or individual is
seeking admission, readmission or
continuation in the securities industry.
The proposed rule change would
amend FINRA Rule 9522 to address the
initiation of eligibility proceedings and
the authority of FINRA’s Department of
Member Regulation (‘‘Member
Regulation’’) to approve applications
relating to a disqualification, where the
disqualification arises from findings or
orders specified in Section 15(b)(4)(D),
(E) or (H) of the Act or arises under
Section 3(a)(39)(E) of the Act (i.e., the
added categories of disqualification).
Currently, FINRA Rule 9522(a)(1)
provides, among other things, that if
FINRA staff has reason to believe that a
disqualification exists, FINRA staff will
issue a written notice to the member or
applicant for membership under NASD
Rule 1013, specifying the grounds for
such disqualification. The proposed
amendments to FINRA Rule 9522(a)(1)
provide that FINRA staff would issue
such written notice with respect to the
added categories of disqualification only
when the member or applicant is
required to file an application pursuant
to the Regulatory Notice. Similarly, the
proposed rule change would amend
FINRA Rule 9522(b) to require a
member to file an application with
FINRA with respect to the added
categories of disqualification only when
instructed to submit one by the
Regulatory Notice.
Moreover, under the current rules,
Member Regulation is responsible for
evaluating applications for relief from a
disqualification filed by a disqualified
member or sponsoring member. In
certain circumstances, Member
E:\FR\FM\13JAN1.SGM
13JAN1
Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices
Regulation is authorized to approve the
application, while in other cases,
Member Regulation must make a
recommendation to either approve or
deny the applications to the National
Adjudicatory Council (‘‘NAC’’). The
proposed amendments to FINRA Rule
9522 would authorize Member
Regulation to approve applications
based on the added categories of
disqualification. In the event Member
Regulation does not approve these
applications, the disqualified member or
sponsoring member would have the
right to have the matter decided by the
NAC after a hearing and consideration
by the Statutory Disqualification
Committee under FINRA Rule 9524.
In addition, if Member Regulation
determines that an application relating
to a disqualification that arises from
findings or orders specified in Section
15(b)(4)(D), (E), or (H) of the Act or
arises under Section 3(a)(39)(E) of the
Act should be approved, but with
specific supervisory requirements that
have the consent of the disqualified
member, sponsoring member and/or
disqualified person, then proposed
FINRA Rule 9523(b) would authorize
Member Regulation to approve a
supervisory plan, without submitting a
recommendation to the Chairman of the
Statutory Disqualification Committee,
acting on behalf of the NAC. Consistent
with the current rule regarding the
submission of supervisory plans,7
proposed FINRA Rule 9523(b)(1) would
provide that, by submitting an executed
letter consenting to a supervisory plan,
a disqualified member, sponsoring
member and/or disqualified person
waive the following (in summary):
(a) The right to a hearing and any
right of appeal to challenge the validity
of the supervisory plan;
(b) The right to claim bias or
prejudgment by Member Regulation or
the General Counsel regarding the
supervisory plan; and
(c) The right to claim a violation of
the ex parte prohibitions or the
separation of functions provisions of
FINRA Rules 9143 and 9144,
respectively, in connection with
participation in the supervisory plan.
If the supervisory plan is rejected, the
disqualified member, sponsoring
member and/or disqualified person
would have the right to proceed under
FINRA Rule 9524.
The proposed rule change also would
make several technical amendments.
For example, the proposed rule change
would amend FINRA Rule 9522(c) to
allow a member that has filed a
7 See FINRA Rule 9523(b)(1) (to be renumbered to
FINRA Rule 9523(a)(1)).
VerDate Nov<24>2008
19:10 Jan 12, 2009
Jkt 217001
statutory disqualification application to
withdraw that application after the start
of a hearing but prior to the issuance of
a decision by the NAC by filing a
written notice with FINRA’s Department
of Registration and Disclosure and
FINRA’s Office of General Counsel. In
addition, for purposes of clarity and
consistency, the proposed rule change
would amend FINRA Rule 9522(e) to
replace references that Member
Regulation ‘‘may grant’’ or ‘‘may
approve’’ certain matters with ‘‘is
authorized to approve’’ such matters.
The effective date will be 90 days
following Commission approval of the
proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,8 which
requires, among other things, that
FINRA’s rules 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 is consistent with the provisions
of the Act noted above because it should
allow FINRA to integrate filings
mandated by the revised definition of
disqualification into established
programs that monitor subject persons
and allow FINRA and the Commission
to focus resources on filings that raise
important investor protection concerns.
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:
8 15
PO 00000
U.S.C. 78o–3(b)(6).
Frm 00078
Fmt 4703
Sfmt 4703
1739
(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 rulecomments@sec.gov. Please include File
Number SR–FINRA–2008–045 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2008–045. 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–2008–045 and
should be submitted on or before
February 3, 2009.
E:\FR\FM\13JAN1.SGM
13JAN1
1740
Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–438 Filed 1–12–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59201; File No. SR–ISE–
2008–101]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by
International Securities Exchange, LLC
Relating to Amending the Fee
Schedule
January 6, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
31, 2008, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission the proposed
rule change as described in Items I, II,
and III below, which items have been
prepared by the self-regulatory
organization. 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 is proposing to amend
its Schedule of Fees with respect to
equity transactions. The text of the
proposed rule change is available on the
Exchange’s Internet Web site at https://
www.ise.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
self-regulatory organization 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 self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Purpose—Currently, the Exchange’s
Schedule of Fees for equity transactions
consists of a tiered rebate structure for
securities priced at or above $1.00
across all Tapes, averaged across an
entire month, where the first five
million maker shares executed on an
average daily volume (ADV) basis
receive a rebate of $0.0032 per share,
with an increase in the rebate to $0.0035
for each maker share executed above
five million ADV.
The Exchange now proposes to
rescind the tiered rebate structure and
implement a flat rebate, irrespective of
ADV. The Exchange is amending the fee
schedule in an effort to increase order
flow in securities that are reported to
Tape B. Accordingly, the Exchange
proposes to adopt a fee structure for
transactions in securities priced at or
above $1.00 (excluding both order
delivery and MidPoint Match orders)
whereby the maker receives a per share
rebate of $0.0035 for transactions in
securities that are reported to Tape B
and a per share rebate of $0.0029 for
transactions in securities that are
reported to Tape A and Tape C. The
aforementioned fee changes will become
operative on January 2, 2009.
The execution fee for orders that
remove liquidity for securities, across
all tapes, that trade at or above $1.00
will remain unchanged at $0.003. The
execution fee for orders that remove
liquidity for securities, across all tapes,
priced under $1.00 remains unchanged,
at 0.3% of trade value with no rebates
for adding liquidity in such securities.
Basis—The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,3
in general, and furthers the objectives of
Section 6(b)(4),4 in particular, in that it
is designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its members and
other persons using its facilities. In
particular, raising the rebate in Tape B
securities may provide incentive to
members to send order flow to the ISE
for securities reported to Tape B.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose 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
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 5 and Rule 19b–4(f)(2) 6
thereunder. At any time within 60 days
of the filing of such proposed rule
change, the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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 rulecomments@sec.gov. Please include File
Number SR–ISE–2008–101 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–ISE–2008–101. 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
9 17
1 15
VerDate Nov<24>2008
19:10 Jan 12, 2009
3 15
4 15
Jkt 217001
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(4).
Frm 00079
Fmt 4703
5 15
6 17
Sfmt 4703
E:\FR\FM\13JAN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 19b–4(f)(2).
13JAN1
]]>Agencies
[Federal Register Volume 74, Number 8 (Tuesday, January 13, 2009)]
[Notices]
[Pages 1738-1740]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-438]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59208; File No. SR-FINRA-2008-045]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change and Amendment
No. 1 Thereto, To Amend the FINRA Rule 9520 Series Regarding
Eligibility Procedures for Persons Subject to Certain Disqualifications
January 6, 2009.
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 September 8, 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'') and amended on December 11, 2008,\3\ the proposed
rule change as described in Items I, II, and III below, which Items
have been substantially prepared by FINRA. 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.
\3\ Amendment No. 1 to SR-FINRA-2008-045 replaced and superseded
the original rule filing submitted to the Commission on September 8,
2008.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the FINRA Rule 9520 Series, which
governs the eligibility procedures for persons subject to certain
disqualifications, to comport with the amended definition of
disqualification in the FINRA By-Laws.
This Amendment No. 1 to SR-FINRA-2008-045 makes technical changes
to the original filing filed on September 8, 2008. The text of the
proposed rule change is attached as Exhibit 5 to this filing.\4\
Amendment No. 1 replaces and supersedes the proposed rule change filed
on September 8, 2008, in its entirety, except with regard to Exhibit 2,
a proposed Regulatory Notice that details the proposed related
eligibility procedures.\5\
---------------------------------------------------------------------------
\4\ The text of the proposed rule change to the FINRA Rule 9520
Series as set forth in Exhibit 5 reflects amendments adopted
pursuant to proposed rule change SR-FINRA-2008-021, which was
approved by the Commission. See Securities Exchange Act Release No.
58643 (September 25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-
2008-021) (approval order). The FINRA Rule 9520 Series, as set forth
in SR-FINRA-2008-021, became effective on December 15, 2008. See
FINRA Regulatory Notice 08-57 (SEC Approves New Consolidated FINRA
Rules) (October 2008).
\5\ FINRA would issue the proposed Regulatory Notice upon the
Commission's approval of the proposed rule change; the Regulatory
Notice is written in a manner that assumes such approval.
---------------------------------------------------------------------------
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
In light of FINRA's obligation to enforce the federal securities
laws, and as part of the consolidation of the member firm regulatory
functions of NASD and NYSE Regulation, Inc., and the formation of
FINRA, FINRA adopted by Board and membership vote a revised By-Law
definition of disqualification that is consistent with the federal
securities laws, such that any person subject to a statutory
disqualification under Section 3(a)(39) of the Act also is subject to
disqualification under Article III, Section 4 of the FINRA By-Laws.\6\
Consequently, as further detailed in the proposed Regulatory Notice
(see Exhibit 2), FINRA's revised definition of disqualification
incorporates three additional categories of statutory disqualification,
including willful violations of the federal securities or commodities
laws, grounds for statutory disqualification that were enacted in the
Sarbanes-Oxley Act, and associations with certain other persons subject
to disqualification.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 55495 (March 20,
2007), 72 FR 14149 (March 26, 2007) (SR-NASD-2007-023) (notice). See
also Securities Exchange Act Release No. 56145 (July 26, 2007), 72
FR 42169 (August 1, 2007) (SR-NASD-2007-023) (approval order), as
amended by Securities Exchange Act Release No. 56145A (May 30,
2008), 73 FR 32377 (June 6, 2008). See also NASD, SEC No-Action
Letter, 2007 SEC No-Act. LEXIS 540 (July 27, 2007).
---------------------------------------------------------------------------
Absent the proposed rule change, all persons subject to any of the
added categories of disqualification would be required to obtain
approval from FINRA to enter or remain in the securities industry. The
proposed rule change would both amend the text of the FINRA Rule 9520
Series generally to reflect the amended definition of disqualification
in the By-Laws, as well as include the proposed Regulatory Notice that
outlines in detail the applicable eligibility procedures. The amended
FINRA Rule 9520 Series would incorporate by reference the procedures
set forth in the Regulatory Notice. As further detailed in the
Regulatory Notice, the need for a member to file an application with
FINRA for approval notwithstanding the disqualification would depend on
(1) The type of the disqualification; (2) the date of the
disqualification; and (3) whether the firm or individual is seeking
admission, readmission or continuation in the securities industry.
The proposed rule change would amend FINRA Rule 9522 to address the
initiation of eligibility proceedings and the authority of FINRA's
Department of Member Regulation (``Member Regulation'') to approve
applications relating to a disqualification, where the disqualification
arises from findings or orders specified in Section 15(b)(4)(D), (E) or
(H) of the Act or arises under Section 3(a)(39)(E) of the Act (i.e.,
the added categories of disqualification). Currently, FINRA Rule
9522(a)(1) provides, among other things, that if FINRA staff has reason
to believe that a disqualification exists, FINRA staff will issue a
written notice to the member or applicant for membership under NASD
Rule 1013, specifying the grounds for such disqualification. The
proposed amendments to FINRA Rule 9522(a)(1) provide that FINRA staff
would issue such written notice with respect to the added categories of
disqualification only when the member or applicant is required to file
an application pursuant to the Regulatory Notice. Similarly, the
proposed rule change would amend FINRA Rule 9522(b) to require a member
to file an application with FINRA with respect to the added categories
of disqualification only when instructed to submit one by the
Regulatory Notice.
Moreover, under the current rules, Member Regulation is responsible
for evaluating applications for relief from a disqualification filed by
a disqualified member or sponsoring member. In certain circumstances,
Member
[[Page 1739]]
Regulation is authorized to approve the application, while in other
cases, Member Regulation must make a recommendation to either approve
or deny the applications to the National Adjudicatory Council
(``NAC''). The proposed amendments to FINRA Rule 9522 would authorize
Member Regulation to approve applications based on the added categories
of disqualification. In the event Member Regulation does not approve
these applications, the disqualified member or sponsoring member would
have the right to have the matter decided by the NAC after a hearing
and consideration by the Statutory Disqualification Committee under
FINRA Rule 9524.
In addition, if Member Regulation determines that an application
relating to a disqualification that arises from findings or orders
specified in Section 15(b)(4)(D), (E), or (H) of the Act or arises
under Section 3(a)(39)(E) of the Act should be approved, but with
specific supervisory requirements that have the consent of the
disqualified member, sponsoring member and/or disqualified person, then
proposed FINRA Rule 9523(b) would authorize Member Regulation to
approve a supervisory plan, without submitting a recommendation to the
Chairman of the Statutory Disqualification Committee, acting on behalf
of the NAC. Consistent with the current rule regarding the submission
of supervisory plans,\7\ proposed FINRA Rule 9523(b)(1) would provide
that, by submitting an executed letter consenting to a supervisory
plan, a disqualified member, sponsoring member and/or disqualified
person waive the following (in summary):
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\7\ See FINRA Rule 9523(b)(1) (to be renumbered to FINRA Rule
9523(a)(1)).
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(a) The right to a hearing and any right of appeal to challenge the
validity of the supervisory plan;
(b) The right to claim bias or prejudgment by Member Regulation or
the General Counsel regarding the supervisory plan; and
(c) The right to claim a violation of the ex parte prohibitions or
the separation of functions provisions of FINRA Rules 9143 and 9144,
respectively, in connection with participation in the supervisory plan.
If the supervisory plan is rejected, the disqualified member,
sponsoring member and/or disqualified person would have the right to
proceed under FINRA Rule 9524.
The proposed rule change also would make several technical
amendments. For example, the proposed rule change would amend FINRA
Rule 9522(c) to allow a member that has filed a statutory
disqualification application to withdraw that application after the
start of a hearing but prior to the issuance of a decision by the NAC
by filing a written notice with FINRA's Department of Registration and
Disclosure and FINRA's Office of General Counsel. In addition, for
purposes of clarity and consistency, the proposed rule change would
amend FINRA Rule 9522(e) to replace references that Member Regulation
``may grant'' or ``may approve'' certain matters with ``is authorized
to approve'' such matters.
The effective date will be 90 days following Commission approval of
the proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among
other things, that FINRA's rules 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 is
consistent with the provisions of the Act noted above because it should
allow FINRA to integrate filings mandated by the revised definition of
disqualification into established programs that monitor subject persons
and allow FINRA and the Commission to focus resources on filings that
raise important investor protection concerns.
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\8\ 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 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-2008-045 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-045. 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-2008-045 and should be
submitted on or before February 3, 2009.
[[Page 1740]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-438 Filed 1-12-09; 8:45 am]
BILLING CODE 8011-01-P
