Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt a Temporary and Permanent Cease and Desist Authority Pilot Program on a Permanent Basis, 27364-27365 [E9-13397]
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27364
Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Notices
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–2009–031 and
should be submitted on or before June
30, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–13395 Filed 6–8–09; 8:45 am]
BILLING CODE 8010–01–P
permanent basis without any
substantive changes to the terms of the
existing program.
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60028; File No. SR–FINRA–
2009–035]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change To Adopt a
Temporary and Permanent Cease and
Desist Authority Pilot Program on a
Permanent Basis
June 2, 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 May 18,
2009, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt the
temporary and permanent cease and
desist authority pilot program on a
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Nov<24>2008
14:45 Jun 08, 2009
Jkt 217001
In May 2003, the Commission
approved, on a two-year pilot basis, a
rule change that gave FINRA authority
to issue temporary cease and desist
orders (‘‘TCDOs’’) 3 and made explicit
FINRA’s ability to impose permanent
cease and desist orders as a remedy in
disciplinary cases.4 The pilot program
also gave FINRA authority to enforce
cease and desist orders. In June 2005
and June 2007, the SEC approved [sic]
two-year extensions of the pilot
program.5 The current two-year pilot
expires on June 23, 2009.6
FINRA is proposing to make the pilot
program permanent without any
substantive changes to the terms of the
existing program.7 The proposed action
3 A TCDO is a preliminary order issued in
connection with an underlying disciplinary
proceeding that has been initiated or will be
initiated immediately.
4 See Securities Exchange Act Release No. 47925
(May 23, 2003), 68 FR 33548 (June 4, 2003) (Order
Approving File No. SR–NASD–98–80).
5 See Securities Exchange Act Release No. 51860
(June 16, 2005), 70 FR 36427 (June 23, 2005) (Notice
of Filing and Immediate Effectiveness of File No.
SR–NASD–2005–061); Securities Exchange Act
Release No. 55819 (May 25, 2007), 72 FR 30895
(June 4, 2007) (Notice of Filing and Immediate
Effectiveness of File No. SR–NASD–2007–033). The
Commission notes that it did not approve these
filings.
6 See Securities Exchange Act Release No. 55819
(May 25, 2007), 72 FR 30895 (June 4, 2007) (Notice
of Filing and Immediate Effectiveness of File No.
SR–NASD–2007–033).
7 In a companion rule filing filed with the SEC
today, FINRA seeks to extend the pilot until the
SEC approves or disapproves the proposal to make
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
would enable FINRA to continue to
issue TCDOs and impose permanent
cease and desist orders as a remedy in
disciplinary cases. The proposed action
also would give FINRA authority to
continue to initiate expedited
proceedings when respondents violate
temporary or permanent cease and
desist orders.
When it first sought cease and desist
authority, FINRA stated that it would
use the authority sparingly. That has
been the case. Since the pilot program
was first approved in 2003, FINRA has
issued only one TCDO and one
permanent cease and desist order (both
in the same case, which is described
below). If adopted on a permanent basis,
the cease and desist rules would
continue to be used judiciously. There
are times, however, when their use is
crucial.
In the one case initiated under the
pilot program, FINRA’s Department of
Enforcement (‘‘Enforcement’’) alleged
that the member in question was
engaged in widespread fraud that
included, among other things, making
material misrepresentations and
omissions in connection with the
private offering of its own stock,
effecting unauthorized transactions and
using customer funds improperly.8
Enforcement showed that not only was
the member attempting to continue the
fraudulent offering, it also was
funneling money and assets to a nonmember affiliate. Enforcement alleged,
and a hearing panel found, that a TCDO
was necessary because the member’s
continuation of the misconduct was
likely to result in further dissipation or
conversion of assets and other
significant harm to investors before the
completion of the underlying
disciplinary proceeding. After the
hearing panel issued a permanent cease
and desist order following a full
disciplinary hearing, the parties settled
the case, resulting in the expulsion of
the member, the bar of its owner and the
imposition of almost $12 million in
fines and restitution.
The proposed permanent adoption of
the pilot program will provide FINRA
with a mechanism to continue to take
appropriate remedial action against a
the pilot permanent so that the cease and desist
authority does not lapse while the proposal is
pending at the SEC. See SR–FINRA–2009–034. The
companion rule filing proposed certain technical
amendments to the rule text, namely to correct
punctuation in FINRA Rule 9556 and update
FINRA Rule 9810 to reflect a change in FINRA style
convention when referencing the federal securities
laws. The companion rule filing does not proposal
[sic] any substantive changes to the existing pilot.
8 See L.H. Ross & Company, Securities Exchange
Act Release No. 51270, 2005 SEC LEXIS 452
(February 28, 2005).
E:\FR\FM\09JNN1.SGM
09JNN1
Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Notices
member or an associated person that has
engaged (or is engaging) in violative
conduct that could cause continuing
harm to the investing public if not
addressed expeditiously. It must be
emphasized, however, that the cease
and desist provisions contain numerous
procedural protections for respondents
to ensure that the proceedings are fair.
The proposed rule change will
become effective on the date of the
SEC’s approval.
2. Statutory Basis
The proposed rule change is
consistent with the provisions of
Section 15A(b)(6) of the Act,9 which
requires, among other things, that
FINRA’s 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. The proposed rule
change also is consistent with the
provisions of Section 15A(b)(7) of the
Act,10 which provides that FINRA
members, or persons associated with its
members, must be appropriately
disciplined for violations of any
provisions of the Act or FINRA’s rules.
Making the pilot program permanent is
consistent with FINRA’s obligations
under the Act because cease and desist
orders are designed to stop violative
conduct that is likely to cause
dissipation or conversion of assets or
other significant harm to investors.
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
9 15
U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(b)(7).
10 15
VerDate Nov<24>2008
14:45 Jun 08, 2009
Jkt 217001
organization consents, the Commission
will:
(A) By order approve the 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–2009–035 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–2009–035. 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 No.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
27365
SR–FINRA–2009–035 and should be
submitted on or before June 30, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–13397 Filed 6–8–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60039; File No. SR–
NASDAQ–2009–050]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change, as Modified
by Amendment No. 1 Thereto, To
Reduce the Length of the Optional PreRouting Display Period for Its DOT,
SCAN and STGY Routing Strategies
June 3, 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 May 21,
2009, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by Nasdaq. On June 2,
2009, Nasdaq filed Amendment No. 1 to
the proposed rule change. Nasdaq has
designated the proposed rule change, as
amended, as constituting a rule change
under Rule 19b–4(f)(6) under the Act,3
which renders the proposal effective
upon filing with the Commission. 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
Nasdaq proposes a rule change to
reduce the length of the optional prerouting display period for its DOT,
SCAN and STGY routing strategies.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
brackets.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
E:\FR\FM\09JNN1.SGM
09JNN1
]]>Agencies
[Federal Register Volume 74, Number 109 (Tuesday, June 9, 2009)]
[Notices]
[Pages 27364-27365]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-13397]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60028; File No. SR-FINRA-2009-035]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt a
Temporary and Permanent Cease and Desist Authority Pilot Program on a
Permanent Basis
June 2, 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 May 18, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') 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 adopt the temporary and permanent cease and
desist authority pilot program on a permanent basis without any
substantive changes to the terms of the existing program.
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
In May 2003, the Commission approved, on a two-year pilot basis, a
rule change that gave FINRA authority to issue temporary cease and
desist orders (``TCDOs'') \3\ and made explicit FINRA's ability to
impose permanent cease and desist orders as a remedy in disciplinary
cases.\4\ The pilot program also gave FINRA authority to enforce cease
and desist orders. In June 2005 and June 2007, the SEC approved [sic]
two-year extensions of the pilot program.\5\ The current two-year pilot
expires on June 23, 2009.\6\
---------------------------------------------------------------------------
\3\ A TCDO is a preliminary order issued in connection with an
underlying disciplinary proceeding that has been initiated or will
be initiated immediately.
\4\ See Securities Exchange Act Release No. 47925 (May 23,
2003), 68 FR 33548 (June 4, 2003) (Order Approving File No. SR-NASD-
98-80).
\5\ See Securities Exchange Act Release No. 51860 (June 16,
2005), 70 FR 36427 (June 23, 2005) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASD-2005-061); Securities Exchange Act
Release No. 55819 (May 25, 2007), 72 FR 30895 (June 4, 2007) (Notice
of Filing and Immediate Effectiveness of File No. SR-NASD-2007-033).
The Commission notes that it did not approve these filings.
\6\ See Securities Exchange Act Release No. 55819 (May 25,
2007), 72 FR 30895 (June 4, 2007) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASD-2007-033).
---------------------------------------------------------------------------
FINRA is proposing to make the pilot program permanent without any
substantive changes to the terms of the existing program.\7\ The
proposed action would enable FINRA to continue to issue TCDOs and
impose permanent cease and desist orders as a remedy in disciplinary
cases. The proposed action also would give FINRA authority to continue
to initiate expedited proceedings when respondents violate temporary or
permanent cease and desist orders.
---------------------------------------------------------------------------
\7\ In a companion rule filing filed with the SEC today, FINRA
seeks to extend the pilot until the SEC approves or disapproves the
proposal to make the pilot permanent so that the cease and desist
authority does not lapse while the proposal is pending at the SEC.
See SR-FINRA-2009-034. The companion rule filing proposed certain
technical amendments to the rule text, namely to correct punctuation
in FINRA Rule 9556 and update FINRA Rule 9810 to reflect a change in
FINRA style convention when referencing the federal securities laws.
The companion rule filing does not proposal [sic] any substantive
changes to the existing pilot.
---------------------------------------------------------------------------
When it first sought cease and desist authority, FINRA stated that
it would use the authority sparingly. That has been the case. Since the
pilot program was first approved in 2003, FINRA has issued only one
TCDO and one permanent cease and desist order (both in the same case,
which is described below). If adopted on a permanent basis, the cease
and desist rules would continue to be used judiciously. There are
times, however, when their use is crucial.
In the one case initiated under the pilot program, FINRA's
Department of Enforcement (``Enforcement'') alleged that the member in
question was engaged in widespread fraud that included, among other
things, making material misrepresentations and omissions in connection
with the private offering of its own stock, effecting unauthorized
transactions and using customer funds improperly.\8\ Enforcement showed
that not only was the member attempting to continue the fraudulent
offering, it also was funneling money and assets to a non-member
affiliate. Enforcement alleged, and a hearing panel found, that a TCDO
was necessary because the member's continuation of the misconduct was
likely to result in further dissipation or conversion of assets and
other significant harm to investors before the completion of the
underlying disciplinary proceeding. After the hearing panel issued a
permanent cease and desist order following a full disciplinary hearing,
the parties settled the case, resulting in the expulsion of the member,
the bar of its owner and the imposition of almost $12 million in fines
and restitution.
---------------------------------------------------------------------------
\8\ See L.H. Ross & Company, Securities Exchange Act Release No.
51270, 2005 SEC LEXIS 452 (February 28, 2005).
---------------------------------------------------------------------------
The proposed permanent adoption of the pilot program will provide
FINRA with a mechanism to continue to take appropriate remedial action
against a
[[Page 27365]]
member or an associated person that has engaged (or is engaging) in
violative conduct that could cause continuing harm to the investing
public if not addressed expeditiously. It must be emphasized, however,
that the cease and desist provisions contain numerous procedural
protections for respondents to ensure that the proceedings are fair.
The proposed rule change will become effective on the date of the
SEC's approval.
2. Statutory Basis
The proposed rule change is consistent with the provisions of
Section 15A(b)(6) of the Act,\9\ which requires, among other things,
that FINRA's 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. The proposed rule change also is consistent with the
provisions of Section 15A(b)(7) of the Act,\10\ which provides that
FINRA members, or persons associated with its members, must be
appropriately disciplined for violations of any provisions of the Act
or FINRA's rules. Making the pilot program permanent is consistent with
FINRA's obligations under the Act because cease and desist orders are
designed to stop violative conduct that is likely to cause dissipation
or conversion of assets or other significant harm to investors.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3(b)(6).
\10\ 15 U.S.C. 78o-3(b)(7).
---------------------------------------------------------------------------
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 the 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-2009-035 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-2009-035. 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 No. SR-FINRA-2009-035 and should be
submitted on or before June 30, 2009.
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-13397 Filed 6-8-09; 8:45 am]
BILLING CODE 8010-01-P
