Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to Proposed Changes to Forms U4 and U5, 13491-13498 [E9-6830]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 58 (Friday, March 27, 2009)]
[Notices]
[Pages 13491-13498]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6830]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59616; File No. SR-FINRA-2009-008]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Proposed Changes to Forms U4 and U5

March 20, 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 March 6, 2009, 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.
---------------------------------------------------------------------------

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

    FINRA is proposing to amend the Uniform Application for Securities 
Industry Registration or Transfer (``Form U4'') and the Uniform 
Termination Notice for Securities Industry Registration (``Form U5'') 
as well as FINRA Rule 8312 (FINRA BrokerCheck Disclosure).
    The text of the proposed rule change is available on FINRA's Web 
site at https://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

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
    Representatives of broker-dealers and investment advisers must use 
Form U4 to become registered in the appropriate jurisdictions and/or 
with appropriate self-regulatory organizations (``SROs''). Broker-
dealers and investment advisers must use Form U5 to terminate 
registration of an individual in the various SROs and jurisdictions. 
(Forms U4 and U5 are together referred to as the ``Forms'').
    As discussed in greater detail below, the proposed rule change 
would:
     Revise questions on the Forms to enable FINRA and other 
regulators to identify more readily individuals and firms (collectively 
referred to as ``persons'') subject to statutory disqualification 
pursuant to Section 15(b)(4)(D) or (E) of the Exchange Act (referred to 
as ``willful violations'').\3\
---------------------------------------------------------------------------

    \3\ A person is subject to statutory disqualification under 
Section 15(b)(4)(D) of the Exchange Act if the person has:
    * * * willfully violated any provision of the Securities Act of 
1933, the Investment Advisers Act of 1940, the Investment Company 
Act of 1940, the Commodity Exchange Act, [the Exchange Act], the 
rules or regulations under any of such statutes, or the rules of the 
Municipal Securities Rulemaking Board, or is unable to comply with 
any such provision.
    A person is subject to statutory disqualification under Section 
15(b)(4)(E) of the Exchange Act if the person has:
    * * * willfully aided, abetted, counseled, commanded, induced, 
or procured the violation by any person of any provision of the 
Securities Act of 1933, the Investment Advisers Act of 1940, the 
Investment Company Act of 1940, the Commodity Exchange Act, [the 
Exchange Act], the rules or regulations under any of such statutes, 
or the rules of the Municipal Securities Rulemaking Board, or has 
failed reasonably to supervise, with a view to preventing violations 
of the provisions of such statutes, rules, and regulations, another 
person who commits such a violation, if such other person is subject 
to his supervision. For the purposes of this subparagraph (E), no 
person shall be deemed to have failed reasonably to supervise any 
other person, if:
    (i) There have been established procedures, and a system for 
applying such procedures, which would reasonably be expected to 
prevent and detect, insofar as practicable, any such violation by 
such other person, and
    (ii) Such person has reasonably discharged the duties and 
obligations incumbent upon him by reason of such procedures and 
system without reasonable cause to believe that such procedures and 
system were not being complied with.
    15 U.S.C. 78o(b)(4)(D) and (E).

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

[[Page 13492]]

     Revise questions on the Forms regarding disclosure of 
arbitrations or civil litigation to elicit reporting of allegations of 
sales practice violations made against a registered person in 
arbitration or litigation in which that person is not named as a party.
     Revise questions on the Forms regarding customer 
complaints, arbitrations or civil litigation to clarify the manner in 
which individuals and firms must report sales practice violations 
alleged against registered persons.
     Raise the monetary threshold for reporting of settlements 
of customer complaints, arbitrations or civil litigation on the Forms 
from $10,000 to $15,000, and make a conforming change to reflect this 
revised monetary threshold in the description of ``Historic 
Complaints'' in FINRA Rule 8312.
     Revise the definition of ``Date of Termination'' in Form 
U5, and enable firms to amend the ``Date of Termination'' and ``Reason 
for Termination'' sections of the Form U5, subject to certain 
conditions and notifications.
     Make certain technical and conforming changes to the Forms 
intended to clarify the information being elicited by regulators and to 
facilitate accurate reporting by firms on the Forms.

Proposed Revisions Regarding Willful Violations

    The proposed rule change would revise the Forms to enable FINRA and 
other regulators \4\ to identify more readily persons subject to 
statutory disqualification as a result of willful violations.\5\ The 
current Forms elicit information that assists regulators in identifying 
persons subject to statutory disqualification based on findings by, or 
sanctions imposed by, the SEC, the Commodity Futures Trading Commission 
(``CFTC''), or an SRO as defined in the Forms,\6\ but the relevant 
questions do not specifically inquire as to willful violations and do 
not capture all of the enumerated types of willful violations. For 
example, Questions 14C and 14E on the Form U4 and the corresponding 
Regulatory Action disclosure reporting page (``DRP'') elicit 
information regarding regulatory or disciplinary action taken by the 
SEC, the CFTC, or an SRO, but currently do not elicit information on 
whether a violation was willful and do not specifically address SRO 
findings of willful violations of the securities laws or the Commodity 
Exchange Act. Similarly, Question 7D on Form U5 asks whether the 
individual was involved in a disciplinary action by a domestic or 
foreign governmental body or SRO; however, neither the question nor the 
corresponding Form U5 Regulatory Action DRP elicits details on whether 
the action involved a willful violation. Accordingly, as described 
below, the proposed rule change would modify these Forms to enable 
FINRA and other regulators to query the CRD system to identify persons 
who are subject to disqualification as a result of a willful violation.
---------------------------------------------------------------------------

    \4\ In addition to FINRA, regulators that use the Forms include 
other SROs and securities regulators of states and other 
jurisdictions.
    \5\ In connection with the consolidation of the member firm 
regulatory functions of NASD and NYSE Regulation, Inc. and the 
formation of FINRA, FINRA adopted a revised definition of 
disqualification to conform to the definition of statutory 
disqualification under Section 3(a)(39) of the Exchange Act. 
Consequently, FINRA's revised definition of disqualification 
incorporates certain additional categories of disqualification, 
including willful violations. FINRA has filed a proposed rule change 
to establish procedures applicable to persons subject to the 
additional categories of disqualification. See Securities Exchange 
Act Release No. 59208 (January 6, 2009), 74 FR 1738 (January 13, 
2009) (Notice of Filing of SR-FINRA-2008-045).
    \6\ The Forms define SRO to include any national securities or 
commodities exchange, as well as any national securities association 
or any registered clearing agency. Accordingly, the proposed rule 
change would delete as redundant certain specific references to 
commodities exchanges in individual questions that already inquire 
as to SRO actions.
---------------------------------------------------------------------------

    With respect to the Form U4, FINRA proposes to add questions to 
existing Questions 14C and 14E. Question 14C inquires about SEC and 
CFTC regulatory actions. The proposed rule change would add new 
Questions 14C(6), (7) and (8) to elicit from persons whether the SEC or 
the CFTC ever:

    (6) found you to have willfully violated any provision of the 
Securities Act of 1933, the Securities Exchange Act of 1934, the 
Investment Advisers Act of 1940, the Investment Company Act of 1940, 
the Commodity Exchange Act, or any rule or regulation under any of 
such Acts, or any of the rules of the Municipal Securities 
Rulemaking Board, or found you to have been unable to comply with 
any provision of such Act, rule or regulation?
    (7) found you to have willfully aided, abetted, counseled, 
commanded, induced, or procured the violation by any person of any 
provision of the Securities Act of 1933, the Securities Exchange Act 
of 1934, the Investment Advisers Act of 1940, the Investment Company 
Act of 1940, the Commodity Exchange Act, or any rule or regulation 
under any of such Acts, or any of the rules of the Municipal 
Securities Rulemaking Board?
    (8) found you to have failed reasonably to supervise another 
person subject to your supervision, with a view to preventing the 
violation of any provision of the Securities Act of 1933, the 
Securities Exchange Act of 1934, the Investment Advisers Act of 
1940, the Investment Company Act of 1940, the Commodity Exchange 
Act, or any rule or regulation under any of such Acts, or any of the 
rules of the Municipal Securities Rulemaking Board?

    The proposed rule change would add identical questions to Question 
14E of the Form U4 (to be numbered as Questions 14E(5), (6) and (7)) in 
the context of findings by any SRO.\7\ FINRA is not proposing any new 
questions addressing willful violations on the Form U4 Regulatory 
Action DRP, which will continue to elicit specific information 
regarding the status of the events reported in response to Questions 
14C and 14E.\8\
---------------------------------------------------------------------------

    \7\ See Exhibit 3a. The Commission notes that there are 
references throughout this notice to exhibits. However, there are no 
exhibits attached to this notice. The exhibits are part of the 
proposed rule change.
    \8\ See Exhibit 3b. FINRA is proposing to add a question to the 
Form U4 Regulatory Action DRP to elicit additional information about 
regulatory actions reported in Question 14D(2)(b) of Form U4 
(actions that result in a final order based on violations of any 
laws or regulations that prohibit fraudulent, manipulative, or 
deceptive conduct).
---------------------------------------------------------------------------

    With respect to the proposed new Questions 14C(6), (7) and (8), and 
14E(5), (6) and (7) on the Form U4, firms will need to determine 
promptly whether any of their registered persons have been subject to 
an action that requires reporting. Firms then will be required to amend 
Forms U4 to respond to these new questions the first time they file a 
Form U4 amendment after the effective date of the proposed rule change, 
but no later than 120 days following the effective date of the proposed 
rule change. If a firm has determined that the registered person must 
answer ``yes'' to any part of

[[Page 13493]]

Questions 14C(6), (7) or (8), or Questions 14E(5), (6) or (7), the 
amendment filings must include completed DRP(s) covering the 
proceedings or action reported.\9\
---------------------------------------------------------------------------

    \9\ Under the proposal, the CRD system will process Form U4 
filings as follows: answers to current Questions 14C(1) through (5) 
and Questions 14E(1) through (4) will be transferred without change 
to proposed new Questions 14C and 14E, respectively. In addition, 
all registered persons will have ``null'' values in the newly added 
Questions 14C(6), (7), and (8), and 14E(5), (6), and (7). In other 
words, answers to these new questions will be blank (i.e., not 
populated with either a ``yes'' or ``no'' answer). Firms must 
affirmatively answer these newly added questions (Questions 14C(6), 
(7), and (8) and 14E(5), (6), and (7)) by clicking the appropriate 
``yes'' or ``no'' radio buttons the first time they file a Form U4 
amendment after the effective date of the proposed rule change, but 
no later than 120 days following the effective date of the proposed 
rule change. If a firm does not affirmatively answer the new 
questions for registered persons, the filing of any amendments to 
the Form will fail the CRD-system completeness check.
---------------------------------------------------------------------------

    FINRA appreciates that adding new disclosure questions to Form U4 
will require firms to amend (or refile) such forms for their registered 
persons, and that this requirement may place an administrative burden 
on firms. Accordingly, FINRA is providing firms with up to 120 days 
from the effective date of the proposed rule change to amend their 
registered persons' Forms U4 to answer the new Questions 14C(6), (7) 
and (8) and 14E(5), (6) and (7), rather than the 30 days provided under 
Article V, Section 2 of the FINRA By-Laws for the filing of such 
amendments. FINRA emphasizes that complete and accurate reporting on 
Forms U4 is the joint responsibility of the registered person and the 
firm.
    With respect to the Form U5, FINRA proposes to leave unchanged 
Question 7D (Regulatory Action Disclosure),\10\ and to add a new 
question, Question 12C, to the Form U5 Regulatory Action DRP. After 
implementation, firms that answer ``yes'' to Question 7D on Form U5 
will be required to provide more detailed information about the 
regulatory action in Question 12C on the DRP. For regulatory actions in 
which the SEC, CFTC or an SRO is the regulator involved, Question 12C 
will require firms to answer questions eliciting whether the action 
involves a willful violation. These questions correspond to those 
questions proposed to be added to the Form U4.\11\ A firm will not be 
required to amend Forms U5 to answer Question 12C on the DRP and/or add 
information to a Form U5 Regulatory Action DRP that was filed 
previously unless it is updating a regulatory action that it reported 
as pending on the current DRP.
---------------------------------------------------------------------------

    \10\ See Exhibit 3c.
    \11\ See Exhibit 3d.
---------------------------------------------------------------------------

Proposed Revisions To Elicit Reporting of Allegations of Sales Practice 
Violations Against Registered Persons Made in Arbitrations or 
Litigation in Which the Registered Person Is Not a Named Party
    The proposed rule change would revise the Forms to require the 
reporting of allegations of sales practice violations made against 
registered persons in a civil lawsuit or arbitration in which the 
registered person is not a named party. Under the current reporting 
structure, a firm is not required to report on a registered person's 
Form U4 that a customer has alleged a sales practice violation against 
such person in the body of a lawsuit or arbitration claim, unless the 
registered person also has been named as a defendant/respondent. A firm 
also is not required to report on Form BD (Uniform Application for 
Broker-Dealer Registration) that it has been named as a respondent in a 
consumer-initiated arbitration or to report that a sales practices 
violation was alleged against one of its registered persons under these 
circumstances. As a result, this form of ``customer complaint'' against 
a registered person or firm is currently unreported via the Forms and, 
therefore, unavailable to regulators or prospective broker-dealer 
employers of the registered person via CRD or to the public through 
BrokerCheck.
    Specifically, current Question 14I(1) on Form U4 requires an 
applicant for registration to answer ``yes'' only if he or she has ever 
been named as a respondent or defendant in an investment-related, 
consumer-initiated arbitration or civil litigation that alleged that he 
or she was involved in one or more sales practice violations \12\ and 
which: (1) Is still pending; (2) resulted in an arbitration award or 
civil judgment against the person, regardless of amount; or (3) was 
settled for an amount of $10,000 or more.\13\ Question 7E(1) on Form U5 
is similarly worded.
---------------------------------------------------------------------------

    \12\ The ``Explanation of Terms'' in Form U4 defines ``sales 
practice violations'' to include ``any conduct directed at or 
involving a customer which would constitute a violation of any rules 
for which a person could be disciplined by any self-regulatory 
organization * * *'' See Exhibit 3a.
    \13\ This proposed rule change proposes to raise from $10,000 to 
$15,000 the monetary threshold for reporting of settlements of 
customer complaints, arbitrations or litigations on the Forms, as 
discussed in more detail infra.
---------------------------------------------------------------------------

    Regulators have interpreted Question 14I(1) on Form U4 and Question 
7E(1) on Form U5 to mean that, even if a registered person is 
identified in the body of an arbitration claim or lawsuit as the person 
responsible for the alleged sales practice violation(s), the event is 
not required to be reported on the person's Form U4 or U5 because he or 
she was not specifically named as a respondent/defendant in the 
arbitration or civil litigation.\14\ In other words, a ``yes'' answer 
to Question 14I(1) on Form U4 and Question 7E(1) on Form U5 is 
currently required only when the customer has sued a registered person 
or filed an arbitration claim naming the registered person as a 
respondent.
---------------------------------------------------------------------------

    \14\ See Question 4 under the 14I(1) set of questions on Forms 
U4/U5 Interpretive Guidance, which is available on FINRA's Web site 
at https://www.finra.org/RegulatorySystems/CRD/FilingGuidance/p005243.
---------------------------------------------------------------------------

    Similarly, if the customer has sued or filed an arbitration claim 
against the firm only and not the registered person, the registered 
person is not required to answer ``yes'' to these questions, even if 
the customer has identified a registered person in the body of the 
lawsuit or arbitration as the person responsible for the alleged sales 
practice violation(s).\15\ If, however, a customer files a written 
complaint with a firm alleging that a registered person is responsible 
for the same sales practice violation(s), the firm and the registered 
person are responsible for reporting that customer complaint on the 
person's Form U4 (Question 14I(3)) or Form U5 (Question 7E(3)), 
provided the complaint meets the threshold reporting requirements.
---------------------------------------------------------------------------

    \15\ Moreover, in addition to not being reportable on Forms U4 
or U5, such a matter is not reportable on Form BD because Form BD 
does not require the reporting of any customer-initiated complaints, 
arbitrations or civil litigations. FINRA notes, however, that 
certain summary information about arbitration awards rendered in 
claims brought by customers against firms may be obtained through 
BrokerCheck.
---------------------------------------------------------------------------

    Settlements of customer disputes are similarly treated. If a 
customer complaint against a registered person is settled (either by 
the person or the person's firm) for $10,000 or more,\16\ the event is 
reported on the registered person's Form U4 or U5 under Questions 
14I(2) or 7E(2), respectively. However, if the firm settles an 
arbitration or civil lawsuit for $10,000 or more,\17\ and the person 
described in the complaint or claim as the person responsible for the 
alleged sales practice violation(s) is not a named respondent/
defendant, the matter is not reported on any of the Forms and is thus 
unavailable to the public through BrokerCheck, and is also unavailable 
to regulators or prospective broker-dealer employers of the person 
through the CRD system.
---------------------------------------------------------------------------

    \16\ See supra note 12.
    \17\ Id.
---------------------------------------------------------------------------

    The inconsistent treatment regarding the reporting of alleged sales 
practice

[[Page 13494]]

violations is difficult to reconcile on principle; whether or not the 
person responsible for the alleged sales practice violation is a named 
respondent or defendant, a sales practice violation has been alleged. 
Moreover, this reporting inconsistency raises practical concerns 
because naming a firm as the sole respondent in an arbitration claim is 
becoming more prevalent in circumstances where the allegations involve 
sales practice violation(s) against a registered person.
    To address this inconsistent treatment, the proposed rule change 
would amend Question 14I on Form U4 and Question 7E on Form U5 to 
require the reporting of alleged sales practice violations made by a 
customer against persons identified in the body of a civil litigation 
complaint or an arbitration claim, even when those persons are not 
named as parties. Specifically, the proposed rule change would add 
Questions 14I(4) and (5) to Form U4 and Questions 7E(4) and (5) to Form 
U5. These questions would in most respects reflect the language of the 
corresponding questions regarding alleged sales practice violations of 
persons identified in consumer complaints (i.e., Questions 14I(2) and 
(3) in Form U4 and Questions 7E(2) and (3) in Form U5).\18\ The 
proposed new questions would apply only to arbitration claims or civil 
litigation filed on or after the effective date of the proposed rule 
change; applicants and firms would not be required to answer Questions 
14I(4) or (5) on Form U4 or Questions 7E(4) or (5) on Form U5 with 
respect to arbitration claims or civil litigation filed before the 
effective date of the proposed rule change.
---------------------------------------------------------------------------

    \18\ For text of the proposed rule changes to Forms U4 and U5, 
see Exhibits 3a and 3c, respectively.
---------------------------------------------------------------------------

    A ``yes'' answer to newly proposed Questions 14I(4) or 14I(5) in 
Form U4 or Questions 7E(4) or 7E(5) in Form U5 would indicate that the 
applicant or registered person, though not named as a respondent/
defendant in a customer-initiated arbitration or civil lawsuit, was 
either named in or could be reasonably identified from the body of the 
arbitration claim or civil litigation as a registered person who was 
involved in one or more of the alleged sales practice violations. A 
firm would be required to report a ``yes'' answer only after it has 
made a good faith determination after a reasonable investigation that 
the alleged sales practice violation(s) involved the registered 
person.\19\
---------------------------------------------------------------------------

    \19\ In this regard, the proposed rule change also would amend 
the Instructions to the Forms, noting that the revised questions 
should be answered ``yes'' if the individual was not named as a 
respondent/defendant but (1) the Statement of Claim or Complaint 
specifically mentions the individual by name and alleges the 
individual was involved in one or more sales practice violations or 
(2) the Statement of Claim or Complaint does not mention the 
individual by name but the firm has made a good faith determination 
that the sales practice violation(s) alleged involves one or more 
particular individuals.
---------------------------------------------------------------------------

    As a result of the proposed rule change, alleged sales practice 
violations made by a customer against persons identified in the body of 
a civil litigation complaint or arbitration claim (as described above) 
would be treated the same way that customer complaints are currently 
treated in the Uniform Forms.\20\ For example, such matters would be 
required to be reported no later than 30 days after receipt by the 
firm. In addition, as is currently the practice with respect to 
customer complaints reported to the CRD system, registered persons 
would have an opportunity to provide context on the reported matter on 
Form U4; persons not currently registered with a FINRA member firm, but 
who were registered within the previous two years, would be afforded an 
opportunity to provide context on the reported matter through a Broker 
Comment.\21\ Such matters would be disclosed through BrokerCheck 
consistent with FINRA Rule 8312. To the extent such a matter becomes 
non-reportable (if, for example, the arbitration or litigation is 
dismissed and the dismissal is not part of a settlement, or it is 
settled for less than the monetary threshold designated on Form U4), it 
would, like other customer complaints that become non-reportable, be 
eligible for disclosure through BrokerCheck as a ``Historic 
Complaint,'' provided it meets certain criteria.\22\ FINRA will 
consider whether, as a result of the proposed rule change, 
corresponding changes to the reporting requirements currently found in 
NASD Rule 3070 and Incorporated NYSE Rule 351 would be warranted.\23\
---------------------------------------------------------------------------

    \20\ The proposed rule change would make corresponding changes 
to Customer Complaint/Arbitration/Civil Litigation DRPs to reflect 
the changes discussed above. See Exhibit 3b. These changes would 
include, e.g., eliciting specifically whether, in the case of an 
arbitration or litigation, the individual was named as a respondent 
or defendant. Furthermore, the DRPs would require the alleged 
damages and disposition for matters in which sales practice 
violations are alleged against an individual who was not named in an 
arbitration or litigation.
    \21\ Individuals who currently are registered with FINRA, are 
associated with a member firm, and who wish to provide an update or 
context to information that is disclosed through BrokerCheck are 
required to file an amended Form U4. Individuals who are no longer 
registered with FINRA, but who have been FINRA-registered within the 
last two years (and thus about whom information is available through 
BrokerCheck pursuant to Rule 8312) may not provide an update or 
context to an event via the Form U4. Instead, such individuals may 
submit a Broker Comment to provide an update or context to 
information that is disclosed through BrokerCheck.
    \22\ See FINRA Rule 8312(b)(7), and proposed conforming 
revisions discussed infra in this rule filing.
    \23\ FINRA has proposed replacing NASD Rule 3070 and 
Incorporated NYSE Rule 351 with a single rule, proposed FINRA Rule 
4530, in the Consolidated FINRA Rulebook. See Regulatory Notice 08-
71 (November 2008).
---------------------------------------------------------------------------

Proposed Revisions To Clarify the Manner in Which Individuals and Firms 
Must Report Sales Practice Violations Alleged Against Registered 
Persons
    The proposed rule change would make additional revisions to 
Questions 14I on Form U4 and 7E on Form U5 to further clarify the 
manner in which individuals and firms must report allegations of sales 
practice violations against registered persons made through arbitration 
or civil litigation or through consumer-initiated complaints.
    Question 14I on Form U4 currently elicits information about 
allegations of sales practice violations for individuals who were named 
in arbitration or civil litigation (in Question 14I(1)) and for 
individuals who were the subject of consumer-initiated complaints (in 
Questions 14I(2) and (3)). Questions 14I(2) and (3) elicit information 
for consumer-initiated complaints ``not otherwise reported under 
Question 14I(1).'' \24\ Similarly, Question 7E on Form U5 currently 
elicits information about allegations of sales practice violations for 
individuals who were named in arbitration or civil litigation (in 
Question 7E(1)) and for individuals who were the subject of consumer-
initiated complaints ``not otherwise reported under Question 7(E)(1)'' 
(in Questions 7(E)(2) and (3)).\25\ To clarify the methods of reporting 
allegations of sales practice violations, the rule proposal would 
eliminate as unnecessary the references to Question 14I(1) in Questions 
14I(2) and (3) on Form U4 and the references to Question 7E(1) in 
Questions 7(E)(2) and (3).\26\
---------------------------------------------------------------------------

    \24\ See Exhibit 3a.
    \25\ See Exhibit 3c.
    \26\ Question 14I(2) in Form U4 and Question 7E(2) in Form U5 
would also add the words ``written or oral'' to describe an 
investment-related, consumer-initiated complaint, to reflect FINRA's 
longstanding interpretation that, for purposes of this question, a 
consumer-initiated complaint can be in either written or oral 
format. In addition, the Customer Complaint/Arbitration/Civil 
Litigation DRPs would elicit whether a complaint is oral or written. 
The references in Question 14I(3) of Form U4 and Question 7E(2) of 
Form U5 to ``written complaint'' would remain unchanged.

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


[[Page 13495]]

Proposed Revisions To Raise the Monetary Threshold for Reporting 
Customer Complaints, Arbitrations or Litigation From $10,000 to $15,000 
on the Forms and Conforming Change to FINRA Rule 8312
    Currently, Question 14I(1)(c) on the Form U4 and Question 7E(1)(c) 
on the Form U5 require consumer-initiated arbitration or litigation to 
be reported only when they have been settled for $10,000 or more. 
Similarly, Question 14I(2) on Form U4 and Question 7E(2) on Form U5 
require customer complaints to be reported only when they have been 
settled for $10,000 or more. Recognizing that the monetary threshold 
for settlements of customer complaints, arbitrations or litigation was 
set in 1998 \27\ and has never been adjusted for inflation, the 
proposed rule change would raise the existing settlement amount to 
$15,000 to reflect more accurately the business criteria (including the 
cost of litigation) firms consider when deciding to settle claims. This 
change would be reflected in the Forms, including in Question 14I on 
Form U4 and Question 7E on Form U5 as discussed supra.
---------------------------------------------------------------------------

    \27\ See, e.g., Securities Exchange Act Release No. 39562 
(January 20, 1998), 63 FR 3942 (January 27, 1998); Special NASD 
Notice to Members 98-27, ``Interim Forms U-4 and U-5 Go Into Effect; 
Interim Form BD Also Approved'' (March 1998).
---------------------------------------------------------------------------

    In addition, the proposed rule change would amend the description 
of ``Historic Complaints'' in FINRA Rule 8312 to conform to the revised 
monetary threshold for reporting of settlements of customer complaints, 
arbitrations or litigation in the Forms. Currently, Historic Complaints 
refer to the information last reported on registration forms relating 
to customer complaints that are more than two years old and that have 
not been settled or adjudicated, and customer complaints, arbitrations 
or litigation settled for an amount less than $10,000 and are no longer 
reported on a registration form. Under FINRA Rule 8312, FINRA will 
release Historic Complaints under BrokerCheck where: (1) Any such 
matter became a Historic Complaint on or after March 19, 2007; (2) the 
most recent Historic Complaint or currently reported customer 
complaint, arbitration or litigation is less than ten years old; and 
(3) the person has a total of three or more currently disclosable 
regulatory actions, currently reported customer complaints, 
arbitrations or litigation, or Historic Complaints (subject to the 
limitation that they became a Historic Complaint on or after March 19, 
2007), or any combination thereof.
    In light of the proposed amendment to raise the monetary threshold 
for reporting customer complaints, arbitrations or litigation on the 
Forms from $10,000 to $15,000, the proposed rule change would make a 
conforming amendment to FINRA Rule 8312 such that Historic Complaints 
would include customer complaints, arbitrations or litigation that have 
been settled for less than $10,000 prior to the effective date of the 
proposed rule change (subject to the limitation that they became a 
Historic Complaint on or after March 19, 2007), or settled for less 
than $15,000 on or after the effective date of the proposed rule 
change. As a result, FINRA would continue to release through 
BrokerCheck those customer complaints, arbitrations or litigation 
settled for more than $10,000 but less than $15,000 prior to the 
effective date of the proposed rule change. Customer complaints, 
arbitrations or litigation settled for less than $15,000 on or after 
the effective date of the proposed rule change would be considered 
Historic Complaints for purposes of BrokerCheck.
Proposed Revisions To Clarify the Definition of ``Date of Termination'' 
in Form U5 and To Allow Firms To Amend the ``Date of Termination'' and 
``Reason for Termination''
    FINRA proposes clarifying revisions to the definition of ``date 
terminated'' in Form U5. The current definition provides that the date 
terminated means the ``effective date of the termination of the 
registration or, in cases where registration has not yet been made 
effective, the date of the withdrawal of the application for 
registration.'' However, as stated in Article V, Section 3(a) of the 
FINRA By-Laws, the authority to declare the effective date of 
termination for purposes of FINRA registration resides with FINRA.\28\ 
As a result, the proposed amendments to Form U5 would clarify that the 
date to be provided by a firm in the ``Date of Termination'' field is 
the ``date that the firm terminated the individual's association with 
the firm in a capacity for which registration is required.'' The 
proposed amendments further would clarify that, in the case of full 
terminations, the ``Date of Termination'' provided by the firm will 
continue to be used by FINRA and other SROs and jurisdictions to 
determine whether an individual is required to requalify by examination 
or obtain an appropriate waiver upon reassociating with a firm.\29\
---------------------------------------------------------------------------

    \28\ Similarly, other SROs and jurisdictions generally determine 
the effective date of termination of registration for their 
purposes.
    \29\ FINRA also proposes to clarify that, for partial 
terminations, a firm is only required to provide a ``Date of 
Termination'' when submitting post-dated termination requests during 
the renewal period (i.e., to effect a termination of registration at 
year-end). For all other partial terminations, the ``Date of 
Termination'' will be an optional field for firms to complete.
---------------------------------------------------------------------------

    With respect to the ``effective date'' of terminations, the 
proposed amendments to the Form U5 would clarify that the SRO/
jurisdiction determines the effective date of termination of 
registration. In general, for purposes of retention of jurisdiction by 
FINRA,\30\ FINRA considers the effective date of termination to be the 
date that the Form U5 is received by CRD (generally the date of filing 
of the Form U5 with CRD).\31\
---------------------------------------------------------------------------

    \30\ Article 5, Section 4 of the FINRA By-Laws provides that 
FINRA generally retains initial jurisdiction over a person whose 
association with a member has been terminated for purposes of a 
complaint under FINRA's rules based upon conduct that commenced 
prior to termination for a period of two years after the effective 
date of termination of registration.
    \31\ FINRA notes that Article 5, Section 3(a) states that 
termination of registration shall not take effect so long as any 
complaint or action under FINRA's rules is pending against a member 
and to which complaint or action such associated person is also a 
respondent or so long as any complaint or action is pending against 
such person individually under FINRA's rules. See also In re Donald 
M. Bickerstaff, 52 S.E.C. 232, 233 (April 17, 1995) (noting that, 
absent a pending complaint or an examination in process, termination 
of registration became effective upon receipt of the Form U5 
termination notice). FINRA further notes that in the case of post-
dated requests for full termination during the renewal period, for 
purposes of retention of jurisdiction by FINRA, the effective date 
of termination generally will be the (post-dated) date of 
termination provided by the firm and not the date that CRD received 
the form.
---------------------------------------------------------------------------

    Currently, firms are explicitly precluded from changing the ``Date 
of Termination'' and ``Reason for Termination'' sections of Form U5 
absent a court order or an arbitration award that meets certain 
criteria. Since 2000, firms have had the ability to add a Registration 
Comment (essentially, a note on the terminated person's CRD record) to 
report an error in connection with the filing of either the reason for, 
or date of, termination. The Registration Comment explains the reason 
for the change, but does not amend the original reason for, or date of, 
termination.
    After reviewing the Registration Comments reported by firms since 
2000, FINRA believes that it would be beneficial for firms and 
regulators to permit firms to amend the date of, or reason for, 
termination because (1) the majority of requests to change a date of, 
or reason for, termination are a result of clerical errors made by a 
firm; and (2) the inaccurate information originally

[[Page 13496]]

reported currently remains on a person's CRD record unless the person 
is able to obtain an arbitration award or a court order directing that 
the original entry be expunged or changed.
    As a result, the proposed rule change would permit a firm to amend 
the ``Date of Termination'' and ``Reason for Termination'' fields in a 
Form U5 it previously submitted, but would require the firm to provide 
a reason for each amendment. To monitor such amendments, including 
those reporting terminations for cause, FINRA would notify other 
regulators and the broker-dealer with which the person is currently 
associated (if the person is associated with another firm) when a date 
of termination or reason for termination has been amended. As proposed, 
the original date of termination or reason for termination would remain 
in the CRD system in form filing history. Importantly, any changes to 
the ``Date of Termination'' filed by firms would not affect the manner 
in which FINRA determines whether an individual is required to 
requalify by examination or obtain an appropriate waiver upon 
reassociating with another firm or whether FINRA has retained 
jurisdiction over the individual. Rather, FINRA would continue to 
determine such periods based on the original ``Date of Termination'' 
provided by the firm and/or the date that the original filing was 
processed by CRD, respectively, as further described above.\32\
---------------------------------------------------------------------------

    \32\ With respect to the requalification period, FINRA is not 
proposing to allow an amended date of termination to systematically 
reset the two-year window in CRD. Instead, should an individual be 
notified that he or she is required to requalify by examination as a 
result of an erroneous date of termination that was subsequently 
amended by a firm, the individual would be required to submit a 
request for a waiver, and FINRA would consider the amended date of 
termination in connection with its review of the request. FINRA does 
not expect this situation to occur often; moreover, FINRA would 
expect to review such requests in an expeditious manner.
---------------------------------------------------------------------------

Proposed Technical and Conforming Changes to the Forms
    The proposed rule change would make various technical and 
conforming changes to the Forms. These changes are generally intended 
to clarify the information elicited by regulators and to facilitate 
reporting by firms and regulators. The proposed rule change would 
convert certain ``free text'' fields to discrete fields on the DRPs of 
Forms U4 and U5. These revisions to the DRPs generally would not change 
the information currently elicited, but would change the presentation 
of the DRPs.\33\ For example, the DRPs would enable filers to provide 
more specific information utilizing pre-established picklists for the 
following types of information:
---------------------------------------------------------------------------

    \33\ As discussed supra, proposed Form U5 Regulatory Action DRP 
would add Question 12C that corresponds to proposed Form U4 
Questions 14C(6-8) and 14E(5-7). The Forms U4 and U5 Regulatory 
Action DRPs would be expanded to ask details with respect to fines 
and penalties, including whether the money has been paid, is subject 
to a payment plan, or has been waived.
---------------------------------------------------------------------------

     Product type;
     Sanction/disposition; and
     Status of the sanction (i.e., whether the sanction remains 
in effect at the time of filing).
    FINRA anticipates this format would elicit additional details from 
respondents at the initial filing stage. This format change would have 
attendant benefits. For example, a completeness check would prevent a 
firm from submitting a filing without having provided information in 
response to the allegations and disposition detail questions which, in 
turn, should reduce the need for additional communications between 
FINRA staff and firms that occur when DRP filings are incomplete, and 
generally should make the filing process more efficient.
    The proposed rule change also would add to Section 7 of Form U5 
(Disclosure Questions) an optional ``Disclosure Certification 
Checkbox'' that would enable firms to affirmatively represent that all 
required disclosure for a terminated person has been reported and the 
record is current at the time of termination. Checking the checkbox 
would allow the firm to bypass the process of re-reviewing a person's 
entire disclosure history for purposes of filing Form U5 in situations 
in which disclosure is up to date at the time of the person's 
termination.
    The proposed change would make additional technical changes to the 
Forms. For example, it would incorporate the definition of ``found'' 
from the Form U4 Instructions into the Form U5 instructions. In 
addition, it would provide more detailed instructions regarding the 
reporting of an internal review (conducted by the firm) to clarify that 
employment-related disputes between a registered person and the firm 
should not be reported in Question 7B. It would also clarify how an 
individual may file comments to an Internal Review DRP (via ``Part II'' 
of that DRP) to emphasize that the individual's signature is required 
(in Section 8 of that DRP).
    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice. FINRA anticipates including the proposed 
changes in a software release to the CRD system in the second quarter 
of 2009.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\34\ 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 is 
designed to accomplish these ends by making changes to the Forms that 
will address regulatory concerns and to ease, clarify or facilitate 
industry reporting requirements. The proposed rule change, among other 
things, would enable FINRA and other regulators to identify more 
readily those persons subject to a statutory disqualification based on 
willful violations. It also would require firms to report allegations 
of sales practice violations made in arbitration claims and civil 
lawsuits against registered persons who are not named as parties in 
those proceedings, thereby eliminating existing inconsistencies 
regarding the reporting of alleged sales practice violations by 
registered persons.
---------------------------------------------------------------------------

    \34\ 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 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

    In April 2008, FINRA staff published Regulatory Notice 08-20 
requesting comment on certain of the proposed changes to the Forms.\35\ 
A copy of the Regulatory Notice is attached as Exhibit 2a. The comment 
period ended on May 27, 2008. FINRA received 36 comments

[[Page 13497]]

in response to the Regulatory Notice.\36\ A list of the commenters in 
response to the Regulatory Notice is attached as Exhibit 2b, and copies 
of the comment letters received in response to the Regulatory Notice 
are attached as Exhibit 2c. Commenters generally supported the proposed 
changes to the Forms. A summary of the comments relevant to the issues 
addressed by the proposed rule change is provided below.
---------------------------------------------------------------------------

    \35\ Regulatory Notice 08-20 requested comment on revisions to 
the Forms regarding reporting of allegations of sale practice 
violations against registered persons made in litigations or 
arbitrations in which the registered person is not a named party; 
raising the monetary threshold for reporting of settlements of 
customer complaints, arbitrations and litigations; enabling firms to 
amend the date of and reason for termination on the Form U5; and 
certain of the technical and conforming changes. It did not request 
comment on the proposed rule change regarding willful violations, 
nor to the proposed conforming change to FINRA Rule 8312. See 
Exhibit 2a.
    \36\ See Exhibits 2b and 2c.
---------------------------------------------------------------------------

(a) Proposed Revisions To Elicit Reporting of Allegations of Sales 
Practice Violations Against Registered Persons Made in Arbitrations or 
Litigation in Which the Registered Person Is Not a Named Party
    Thirty-four commenters commented on the proposal regarding 
eliciting reporting of allegations of sales practice violations against 
registered persons made in litigation or arbitrations in which the 
registered person is not named as a party.\37\ The majority of 
commenters (26) supported or did not oppose this proposed change; \38\ 
a minority (7) opposed it.\39\ One commenter supported the part of the 
proposal that would require firms to report allegations made in an 
arbitration claim where a registered person is identified by name (in 
the Statement of Claim text) but did not support such reporting where 
the registered person is not identified by name.\40\ Generally, 
commenters supporting the proposal stated that allegations of sales 
practice violations made in arbitration claims were no different than 
those made in written customer complaints, and therefore should be 
treated the same for reporting purposes.\41\ Many of the same 
commenters viewed the proposal as ``closing a loophole,'' and noted 
that investors would benefit by having this type of information 
publicly available.\42\
---------------------------------------------------------------------------

    \37\ Aidikoff; ARM; Bakhtiari; Brecek & Young; Brown & Brown; 
Cantella; Caruso; FMSBonds; FSI; Greene/Woodforest; Gross/Pace; 
Harrison; Jacobson/Cornell; Lazaro/St. John's; Lipner/Baruch; 
MassMutual; MWA; NASAA; Nationwide; Nelson; NPB; NPH; Penson; PIABA; 
ProEquities; RND; Sadler; SIFMA; Steiner; Stephens; R. Long/
Wachovia; P. Spitzer/Wachovia; Williams/Woodforest; WSA. The 
Commission notes that Cambridge also commented on this section.
    \38\ Aidikoff; Bakhtiari; Brecek & Young; Cantella; Caruso; 
Gross/Pace; Harrison; Jacobson/Cornell; Lazaro/St. John's; Lipner/
Baruch; Mass Mutual; NASAA; Nationwide; NPB; NPH; Penson; PIABA; 
RND; Sadler; SIFMA; Stephens; Steiner; P. Spitzer/Wachovia; WSA.
    \39\ Brown & Brown; FMSBonds; FSI; MWA; Nelson; ProEquities; R. 
Long/Wachovia.
    \40\ ARM.
    \41\ Aidikoff; Bakhtiari; Caruso; Gross/Pace; Harrison; 
Jacobson/Cornell; Lazaro/St. John's; Lipner/Baruch; Sadler; Steiner; 
Stephens.
    \42\ Aidikoff; Bakhtiari; Caruso; Gross/Pace; Harrison; 
Jacobson/Cornell; Lazaro/St. John's; Lipner/Baruch; PIABA; Steiner.
---------------------------------------------------------------------------

    The commenters opposing the proposed changes generally raised 
concerns about fairness to registered persons regarding potential 
damage to their reputations from the reporting of unadjudicated 
allegations, and possible lack of a meaningful opportunity to respond 
to such allegations.\43\ While FINRA appreciates the concerns raised 
regarding the potential harm to a registered person's reputation based 
on allegations of sales practice violations made in an arbitration 
claim, FINRA believes that such allegations, which are made in writing 
and filed in a formal proceeding, are not appreciably different than 
those made in written customer complaints, and may have even more 
substance. Accordingly, such allegations should be treated in the same 
manner that customer complaints are currently treated in the Uniform 
Forms.
---------------------------------------------------------------------------

    \43\ Brown & Brown; FSI; Greene/Woodforest; MWA; Nelson; 
ProEquities; R. Long/Wachovia; Williams/Woodforest.
---------------------------------------------------------------------------

    Several commenters supported the proposed change, but expressed 
concerns about the burden on firms to identify the ``subject of'' the 
allegations and whether, and under what circumstances, registered 
persons would be afforded an opportunity to remove such matters from 
the CRD.\44\ Several commenters expressed concerns about the ability of 
firms to discern whether reporting as to a particular person was 
required based on the allegations in a claim.\45\ One commenter 
supported the reporting of such matters only after there was an 
adjudication or settlement in favor of the claimant, but opposed 
requiring the reporting of any such matter while it was pending.\46\ 
The commenter also expressed concerns about a firm's ability to report 
the allegations within the 30-day reporting period.\47\ Several 
commenters raised questions about other fact-specific scenarios, and 
requested that FINRA provide interpretive guidance to assist firms in 
determining reporting practices should the proposed questions be 
adopted.\48\ In addition, one commenter recommended that, in 
conjunction with the proposal, FINRA should consider adopting 
reasonable measures to promote responsible pleading.\49\ Specifically, 
the commenter suggested that FINRA apprise customer claimants and their 
counsel of the significant consequences of making allegations against a 
registered person and consider requiring that claimants and their 
attorneys attest that, at the time an arbitration claim is filed, there 
is a good faith basis for the claims and allegations therein.
---------------------------------------------------------------------------

    \44\ ARM; Brecek & Young; Mann; MassMutual; NPH; Penson; RND; 
SIFMA; R. Long/Wachovia; WSA.
    \45\ ARM; Brecek & Young; Cantella; RND; SIFMA; R. Long/
Wachovia; WSA.
    \46\ ARM.
    \47\ ARM.
    \48\ ARM; Brecek & Young; Cantella; MassMutual; NPH; Penson; 
ProEquities; RND; SIFMA; R. Long/Wachovia; WSA.
    \49\ SIFMA.
---------------------------------------------------------------------------

    In response to these comments, FINRA has included instructions 
regarding reporting, and staff is prepared to develop additional 
guidance, if necessary, to assist firms in determining when reporting 
is required under the proposed questions. FINRA further notes that 
there is an existing process for requesting expungement relief under 
NASD Rule 2130. Moreover, while FINRA believes that the existing 30-day 
timeframe for reporting is sufficient, FINRA staff intends to work with 
firms that may need additional time because of extraordinary 
circumstances on a case-by-case basis. With respect to the comment that 
FINRA apprise customers and their representatives of the consequences 
of making allegations against a registered person, FINRA appreciates 
the commenters' concerns but must consider that suggestion in the 
context of the potential chilling effect such an action may have on the 
filing of legitimate customer claims.\50\ Accordingly, FINRA believes 
that it would not be appropriate to implement the suggestion at this 
time.
---------------------------------------------------------------------------

    \50\ SIFMA.
---------------------------------------------------------------------------

(b) Proposed Revisions To Raise the Monetary Threshold for Reporting 
Customer Complaints, Arbitrations or Litigation From $10,000 to $15,000 
on the Forms and Conforming Change to FINRA Rule 8312
    Thirteen commenters responded to the proposal to raise the 
threshold for reporting of settlements. Nine of the commenters 
supported raising the threshold from $10,000 to $15,000 to account for 
increased business costs (legal and economic), and to align the 
threshold with the reporting requirements in NASD Rule 3070 (Reporting 
Requirements).\51\ Of the four commenters who did not support this 
proposal, three suggested raising the

[[Page 13498]]

threshold to a higher amount,\52\ and one suggested requiring the 
reporting of all settlements regardless of dollar amount.\53\
---------------------------------------------------------------------------

    \51\ Cambridge; FSI; Gross/Pace; Jacobson/Cornell; Lazaro/St. 
John's; NASAA; Nationwide; NPH; ProEquities.
    \52\ ARM; R. Long/Wachovia; Williams/Woodforest.
    \53\ PIABA.
---------------------------------------------------------------------------

    FINRA believes that a dollar threshold within the questions is 
appropriate to address those instances where matters are settled for a 
nuisance value; at the same time, FINRA is not persuaded by the 
comments suggesting that an increase to greater than $15,000 is 
warranted at this time.
(c) Proposed Revisions to Form U5 To Allow Firms To Amend the ``Reason 
for Termination'' and the ``Date of Termination''
    Eight commenters responded to the proposal to allow firms to amend 
the ``Reason for Termination'' and ``Date of Termination.'' \54\ Six 
commenters affirmatively supported this proposal on the basis that it 
would result in more accurate information being reported to regulators 
and recorded in the CRD system.\55\ Of the two commenters that 
generally opposed this proposal, one opposed allowing firms to amend 
the Reason for Termination or Date of Termination except in cases of 
clerical error.\56\ The other commenter supported allowing changes to 
the Date of Termination, but opposed allowing changes to the Reason for 
Termination based on a concern about the potential for abuse by 
firms.\57\
---------------------------------------------------------------------------

    \54\ ARM; FSI; Gross/Pace; Jacobson/Cornell; NASAA; Nationwide; 
PIABA; ProEquities.
    \55\ ARM; FSI; Gross/Pace; NASAA; Nationwide; ProEquities.
    \56\ Jacobson/Cornell.
    \57\ PIABA.
---------------------------------------------------------------------------

    FINRA believes that a firm should have the ability to correct 
inaccurate information that it filed on a Form U5 regarding 
terminations through an amendment to that original Form filing. FINRA 
also believes that limiting such changes to clerical errors is 
unnecessary in light of: (1) the attendant requirement that firms 
provide a reason for the Form U5 amendment; and (2) the monitoring of 
such amendments by FINRA and other regulators. FINRA believes that such 
monitoring, in particular, will protect against any potential misuse by 
firms.
(d) Proposed Technical and Conforming Changes to the Forms
    No commenters opposed the proposed technical and conforming changes 
to the Forms, and four commenters affirmatively supported them.\58\
---------------------------------------------------------------------------

    \58\ FSI; Gross/Pace; NASAA; Nationwide.
---------------------------------------------------------------------------

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-2009-008 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-2009-008. 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, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of FINRA. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-FINRA-2009-008 and should be submitted on or before April 17, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\59\
---------------------------------------------------------------------------

    \59\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E Harmon,
Deputy Secretary.
[FR Doc. E9-6830 Filed 3-26-09; 8:45 am]
BILLING CODE 8010-01-P