Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rules 2124 (Net Transactions With Customers), 2220 (Options Communications), 4370 (Business Continuity Plans and Emergency Contact Information) and 5250 (Payments for Market Making) in the Consolidated FINRA Rulebook, 28308-28310 [E9-13971]

Download as PDF 28308 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 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: BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60066; File No. SR–FINRA– 2009–036] 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–NYSEArca–2009–48 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. pwalker on PROD1PC71 with NOTICES For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–13972 Filed 6–12–09; 8:45 am] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rules 2124 (Net Transactions With Customers), 2220 (Options Communications), 4370 (Business Continuity Plans and Emergency Contact Information) and 5250 (Payments for Market Making) in the Consolidated FINRA Rulebook June 8, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 All submissions should refer to File notice is hereby given that on May 21, Number SR–NYSEArca–2009–48. This 2009, Financial Industry Regulatory file number should be included on the subject line if e-mail is used. To help the Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Commission process and review your Dealers, Inc. (‘‘NASD’’)) filed with the comments more efficiently, please use only one method. The Commission will Securities and Exchange Commission post all comments on the Commission’s (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, Internet Web site (https://www.sec.gov/ and III below, which Items have been rules/sro.shtml). Copies of the prepared by FINRA. The Commission is submission, all subsequent publishing this notice to solicit amendments, all written statements comments on the proposed rule change with respect to the proposed rule from interested persons. change that are filed with the Commission, and all written I. Self-Regulatory Organization’s communications relating to the Statement of the Terms of Substance of proposed rule change between the the Proposed Rule Change Commission and any person, other than FINRA is proposing to adopt NASD those that may be withheld from the Rules 2220 (Options Communications), public in accordance with the 2441 (Net Transactions with provisions of 5 U.S.C. 552, will be Customers), 2460 (Payments for Market available for inspection and copying in Making), 3510 (Business Continuity the Commission’s Public Reference Plans) and 3520 (Emergency Contact Room, 100 F Street, NE., Washington, Information) as FINRA rules in the DC 20549, on official business days consolidated FINRA rulebook without between the hours of 10 a.m. and 3 p.m. substantive change. The proposed rule Copies of the filing also will be available change would renumber NASD Rule for inspection and copying at the 2220 as FINRA Rule 2220, NASD Rule principal office of the Exchange. All 2441 as FINRA Rule 2124, NASD Rule comments received will be posted 2460 as FINRA Rule 5250, and NASD without change; the Commission does Rules 3510 and 3520 would be not edit personal identifying combined into FINRA Rule 4370 in the information from submissions. You consolidated FINRA rulebook. should submit only information that The text of the proposed rule change you wish to make available publicly. All is available on FINRA’s Web site at submissions should refer to File Number SR–NYSEArca–2009–48 and 10 17 CFR 200.30–3(a)(12). should be submitted on or before July 6, 1 15 U.S.C. 78s(b)(1). 2009. 2 17 CFR 240.19b–4. VerDate Nov<24>2008 16:47 Jun 12, 2009 Jkt 217001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 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 As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),3 FINRA is proposing to adopt NASD Rules 2220 (Options Communications), 2441 (Net Transactions with Customers), 2460 (Payments for Market Making), 3510 (Business Continuity Plans) and 3520 (Emergency Contact Information) as FINRA rules in the consolidated FINRA rulebook without substantive change. Proposed FINRA Rule 2220 FINRA is proposing to adopt NASD Rule 2220 (Options Communications) without substantive change into the Consolidated FINRA Rulebook as FINRA Rule 2220. NASD Rule 2220 sets forth a member’s obligations with respect to its options communications with the public. In 2008, FINRA revised NASD Rule 2220 to make it more consistent with FINRA’s general rules on communications with the public and the options communications rules of other self-regulatory organizations (SROs).4 As amended, NASD Rule 2220, 3 The current FINRA rulebook consists of (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the ‘‘Transitional Rulebook’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see FINRA Information Notice, March 12, 2008 (Rulebook Consolidation Process). 4 See Securities Exchange Act Release No. 58738 (October 6, 2008), 73 FR 60371 (October 10, 2008) (Order Approving File No. SR–FINRA–2008–013). E:\FR\FM\15JNN1.SGM 15JNN1 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices among other things: (1) Uses, to the extent appropriate, the same terminology and definitions as in FINRA’s general rules on communications with the public; (2) makes the requirements for principal review of correspondence concerning options the same as for correspondence generally; and (3) updates the standards on the content of communications that precede the delivery of the options disclosure document (ODD). The amended rule became effective on March 4, 2009.5 FINRA recommends that NASD Rule 2220 be transferred as FINRA Rule 2220 into the Consolidated FINRA Rulebook without substantive change in light of the recent amendments. Proposed FINRA Rule 2124 FINRA is proposing to adopt NASD Rule 2441 (Net Transactions with Customers) without substantive change into the Consolidated FINRA Rulebook as FINRA Rule 2124. NASD Rule 2441 requires members to provide disclosure and obtain consent when trading on a ‘‘net’’ basis with customers.6 With respect to non-institutional customers, the member must obtain the customer’s written consent on an order-by-order basis prior to executing the transaction and such consent must evidence the customer’s understanding of the terms and conditions of the order. With respect to institutional customers, a member must obtain the customer’s consent prior to executing the transaction and such consent may be obtained by either: (1) Use of a negative consent letter; (2) oral disclosure and consent on an order-by-order basis; or (3) written consent on an order-by-order basis. Rule 2441 was approved by the SEC in 2006, and was the product of notice and comment rulemaking.7 There have pwalker on PROD1PC71 with NOTICES 5 See Regulatory Notice 08–73 (December 2008) (SEC Approves Amendments to NASD Rule 2220 to Update the Standards for Options Communications). There is no longer a comparable Incorporated NYSE Rule. FINRA previously deleted substantially similar Incorporated NYSE Rule 791 (Communications to Customers) as part of a rule change that, among other things, reduced regulatory duplication for Dual Members during the interim period before the completion of the Consolidated FINRA Rulebook. See Securities Exchange Act Release No. 58533 (September 12, 2008), 73 FR 54652 (September 22, 2008) (Order Approving File No. SR–FINRA–2008–036). 6 A ‘‘net’’ transaction is a principal transaction in which a market maker, after having received an order to buy (sell) an equity security, purchases (sells) the equity security at one price (from (to) another broker-dealer or another customer) and then sells to (buys from) the customer at a different price. 7 See Securities Exchange Act Release No. 54088 (June 30, 2006), 71 FR 38950 (July 10, 2006) (Order Approving File No. SR–NASD–2004–135). VerDate Nov<24>2008 16:47 Jun 12, 2009 Jkt 217001 not been subsequent amendments to the rule, and FINRA does not believe any substantive changes to this rule are necessary. Therefore, FINRA recommends that NASD Rule 2441 be transferred without substantive change into the Consolidated FINRA Rulebook as FINRA Rule 2124. Proposed FINRA Rule 5250 FINRA is proposing to adopt NASD Rule 2460 (Payment for Market Making) without substantive change into the Consolidated FINRA Rulebook as FINRA Rule 5250. NASD Rule 2460 prohibits any payments by an issuer or an issuer’s affiliates and promoters, directly or indirectly, to a member or person associated with a member for publishing a quotation, acting as a market maker, or submitting an application in connection therewith. The rule contains two exceptions that permit a member to accept (1) payment for bona fide services, including, but not limited to, investment banking services and (2) reimbursement for registration or listing fees. The SEC approved NASD Rule 2460 after notice and comment in July 1997 with no subsequent amendments.8 FINRA believes no changes to this rule are appropriate or necessary. FINRA continues to believe, as stated in FINRA’s 1997 rule filing, that a market maker should have considerable latitude and freedom to make or terminate market making activities in an issuer’s securities. The decision by a firm to make a market in a given security and the question of price generally are dependent on a number of factors, including, among others, supply and demand, the firm’s expectations toward the market, its current inventory, and exposure to risk and competition. This decision should not be influenced by payments to the member from issuers or promoters. Therefore, FINRA proposes to transfer NASD Rule 2460 without substantive change into the Consolidated FINRA Rulebook as FINRA Rule 5250. Proposed FINRA Rule 4370 FINRA is proposing to adopt NASD Rule 3510 (Business Continuity Plans) and NASD Rule 3520 (Emergency Contact Information) without substantive change into the Consolidated FINRA Rulebook and combine the rules as FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information). NASD Rule 3510 requires members to create 8 See Securities Exchange Act Release No. 38812 (July 3, 1997), 62 FR 37105 (July 10, 1997) (Order Approving File No. SR–NASD–97–29). PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 28309 and maintain a written business continuity plan identifying procedures relating to an emergency or significant business disruption and enumerates the minimum elements that a member’s business continuity plan must address, to the extent those elements are applicable and necessary to the member’s business. NASD Rule 3510 further requires members to update their business continuity plans upon any material change and, at a minimum, conduct an annual review of their plans. Each member also must disclose to its customers how its business continuity plan addresses the possibility of a future significant business disruption and how the member plans to respond to events of varying scope. Each member must make this disclosure, at a minimum, in writing to customers at account opening, by posting it on the member’s Web site (if the member maintains a Web site), and by mailing it to customers upon request. NASD Rules 3510 is one part of the NASD Rule 3500 Series (Emergency Preparedness), which requires members to establish emergency preparedness plans and procedures. NASD Rule 3520, which comprises the remainder of the NASD Rule 3500 Series, requires members to designate two emergency contact persons and provide this information to FINRA via electronic process.9 FINRA recommends that NASD Rules 3510 and 3520 be adopted as one rule, FINRA Rule 4370, in the Consolidated FINRA Rulebook without any substantive changes to the respective rules’ provisions. FINRA will announce the implementation date of the proposed rule change in a Regulatory Notice to be published no later than 90 days following Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,10 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and 9 There is no longer a comparable Incorporated NYSE Rule to NASD Rules 3510 and 3520. FINRA previously deleted from the Transitional Rulebook NYSE Rule 446 (Business Continuity and Contingency Plans), which contained substantially similar requirements as the two NASD rules, as part of the rule change to reduce regulatory duplication for Dual Members during the period before completion of the Consolidated FINRA Rulebook. See Securities Exchange Act Release No. 58533 (September 12, 2008), 73 FR 54652 (September 22, 2008) (Order Approving File No. SR–FINRA–2008– 036). 10 15 U.S.C. 78o–3(b)(6). E:\FR\FM\15JNN1.SGM 15JNN1 28310 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that transferring NASD Rule 2220 into the Consolidated Rulebook protects investors and the public interest by providing the investing public with options communications rules that are designed to provide appropriate safeguards and greater clarity by promoting harmonization between FINRA’s and other SROs’ options communications rules. FINRA believes that transferring NASD Rule 2441 into the Consolidated FINRA Rulebook promotes investor protection by requiring members to provide disclosure and obtain customer consent when trading on a net basis. In addition, FINRA believes that the benefits to investors of requiring certain disclosures and obtaining customer consent when trading on a net basis outweighs the additional responsibilities placed on brokerdealers. FINRA believes that transferring NASD Rule 2460 into the Consolidated FINRA Rulebook will protect investors and the public interest and avert a potential conflict of interest by prohibiting members from receiving compensation or other payments from an issuer or others for listing, quoting or making a market in an issuer’s securities. Finally, FINRA believes that transferring and combining NASD Rules 3510 and 3520 in the Consolidated FINRA Rulebook will help ensure that members are prepared in the event of a significant business disruption. The proposed rule change makes nonsubstantive changes to rules that have proven effective in meeting the statutory mandates. 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. pwalker on PROD1PC71 with NOTICES 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 VerDate Nov<24>2008 16:47 Jun 12, 2009 Jkt 217001 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 rulecomments@sec.gov. Please include File Number SR–FINRA–2009–036 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–2009–036. 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 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 submissions should refer to File Number SR–FINRA–2009–036 and should be submitted on or before July 6, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–13971 Filed 6–12–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60065; File No. SR– NYSEArca–2009–47] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Generic Listing Rules for Currency Trust Shares June 8, 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 28, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘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 the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposed rule change on an accelerated basis.3 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’ or the ‘‘Corporation’’), proposes to amend its rules governing NYSE Arca, LLC, which is the equities trading facility of NYSE Arca. NYSE Arca is proposing to amend NYSE Arca Equities Rule 8.202 (Currency Trust Shares) to provide generic listing and trading rules for such securities. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https://www.nyse.com.4 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See infra notes 7 and 36 and accompanying text. 4 E-mail from Michael Cavalier, Chief Counsel, NYSE Euronext, to Edward Cho, Special Counsel, Division of Trading and Markets, Commission, dated June 4, 2009 (‘‘Exchange Confirmation’’). 1 15 E:\FR\FM\15JNN1.SGM 15JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 113 (Monday, June 15, 2009)]
[Notices]
[Pages 28308-28310]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-13971]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60066; File No. SR-FINRA-2009-036]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt
FINRA Rules 2124 (Net Transactions With Customers), 2220 (Options
Communications), 4370 (Business Continuity Plans and Emergency Contact
Information) and 5250 (Payments for Market Making) in the Consolidated
FINRA Rulebook

June 8, 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, 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 adopt NASD Rules 2220 (Options
Communications), 2441 (Net Transactions with Customers), 2460 (Payments
for Market Making), 3510 (Business Continuity Plans) and 3520
(Emergency Contact Information) as FINRA rules in the consolidated
FINRA rulebook without substantive change. The proposed rule change
would renumber NASD Rule 2220 as FINRA Rule 2220, NASD Rule 2441 as
FINRA Rule 2124, NASD Rule 2460 as FINRA Rule 5250, and NASD Rules 3510
and 3520 would be combined into FINRA Rule 4370 in the consolidated
FINRA rulebook.
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
As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD
Rules 2220 (Options Communications), 2441 (Net Transactions with
Customers), 2460 (Payments for Market Making), 3510 (Business
Continuity Plans) and 3520 (Emergency Contact Information) as FINRA
rules in the consolidated FINRA rulebook without substantive change.
---------------------------------------------------------------------------

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

Proposed FINRA Rule 2220
FINRA is proposing to adopt NASD Rule 2220 (Options Communications)
without substantive change into the Consolidated FINRA Rulebook as
FINRA Rule 2220. NASD Rule 2220 sets forth a member's obligations with
respect to its options communications with the public. In 2008, FINRA
revised NASD Rule 2220 to make it more consistent with FINRA's general
rules on communications with the public and the options communications
rules of other self-regulatory organizations (SROs).\4\ As amended,
NASD Rule 2220,

[[Page 28309]]

among other things: (1) Uses, to the extent appropriate, the same
terminology and definitions as in FINRA's general rules on
communications with the public; (2) makes the requirements for
principal review of correspondence concerning options the same as for
correspondence generally; and (3) updates the standards on the content
of communications that precede the delivery of the options disclosure
document (ODD). The amended rule became effective on March 4, 2009.\5\
---------------------------------------------------------------------------

\4\ See Securities Exchange Act Release No. 58738 (October 6,
2008), 73 FR 60371 (October 10, 2008) (Order Approving File No. SR-
FINRA-2008-013).
\5\ See Regulatory Notice 08-73 (December 2008) (SEC Approves
Amendments to NASD Rule 2220 to Update the Standards for Options
Communications). There is no longer a comparable Incorporated NYSE
Rule. FINRA previously deleted substantially similar Incorporated
NYSE Rule 791 (Communications to Customers) as part of a rule change
that, among other things, reduced regulatory duplication for Dual
Members during the interim period before the completion of the
Consolidated FINRA Rulebook. See Securities Exchange Act Release No.
58533 (September 12, 2008), 73 FR 54652 (September 22, 2008) (Order
Approving File No. SR-FINRA-2008-036).
---------------------------------------------------------------------------

FINRA recommends that NASD Rule 2220 be transferred as FINRA Rule
2220 into the Consolidated FINRA Rulebook without substantive change in
light of the recent amendments.
Proposed FINRA Rule 2124
FINRA is proposing to adopt NASD Rule 2441 (Net Transactions with
Customers) without substantive change into the Consolidated FINRA
Rulebook as FINRA Rule 2124. NASD Rule 2441 requires members to provide
disclosure and obtain consent when trading on a ``net'' basis with
customers.\6\ With respect to non-institutional customers, the member
must obtain the customer's written consent on an order-by-order basis
prior to executing the transaction and such consent must evidence the
customer's understanding of the terms and conditions of the order. With
respect to institutional customers, a member must obtain the customer's
consent prior to executing the transaction and such consent may be
obtained by either: (1) Use of a negative consent letter; (2) oral
disclosure and consent on an order-by-order basis; or (3) written
consent on an order-by-order basis.
---------------------------------------------------------------------------

\6\ A ``net'' transaction is a principal transaction in which a
market maker, after having received an order to buy (sell) an equity
security, purchases (sells) the equity security at one price (from
(to) another broker-dealer or another customer) and then sells to
(buys from) the customer at a different price.
---------------------------------------------------------------------------

Rule 2441 was approved by the SEC in 2006, and was the product of
notice and comment rulemaking.\7\ There have not been subsequent
amendments to the rule, and FINRA does not believe any substantive
changes to this rule are necessary. Therefore, FINRA recommends that
NASD Rule 2441 be transferred without substantive change into the
Consolidated FINRA Rulebook as FINRA Rule 2124.
---------------------------------------------------------------------------

\7\ See Securities Exchange Act Release No. 54088 (June 30,
2006), 71 FR 38950 (July 10, 2006) (Order Approving File No. SR-
NASD-2004-135).
---------------------------------------------------------------------------

Proposed FINRA Rule 5250
FINRA is proposing to adopt NASD Rule 2460 (Payment for Market
Making) without substantive change into the Consolidated FINRA Rulebook
as FINRA Rule 5250. NASD Rule 2460 prohibits any payments by an issuer
or an issuer's affiliates and promoters, directly or indirectly, to a
member or person associated with a member for publishing a quotation,
acting as a market maker, or submitting an application in connection
therewith. The rule contains two exceptions that permit a member to
accept (1) payment for bona fide services, including, but not limited
to, investment banking services and (2) reimbursement for registration
or listing fees. The SEC approved NASD Rule 2460 after notice and
comment in July 1997 with no subsequent amendments.\8\
---------------------------------------------------------------------------

\8\ See Securities Exchange Act Release No. 38812 (July 3,
1997), 62 FR 37105 (July 10, 1997) (Order Approving File No. SR-
NASD-97-29).
---------------------------------------------------------------------------

FINRA believes no changes to this rule are appropriate or
necessary. FINRA continues to believe, as stated in FINRA's 1997 rule
filing, that a market maker should have considerable latitude and
freedom to make or terminate market making activities in an issuer's
securities. The decision by a firm to make a market in a given security
and the question of price generally are dependent on a number of
factors, including, among others, supply and demand, the firm's
expectations toward the market, its current inventory, and exposure to
risk and competition. This decision should not be influenced by
payments to the member from issuers or promoters. Therefore, FINRA
proposes to transfer NASD Rule 2460 without substantive change into the
Consolidated FINRA Rulebook as FINRA Rule 5250.
Proposed FINRA Rule 4370
FINRA is proposing to adopt NASD Rule 3510 (Business Continuity
Plans) and NASD Rule 3520 (Emergency Contact Information) without
substantive change into the Consolidated FINRA Rulebook and combine the
rules as FINRA Rule 4370 (Business Continuity Plans and Emergency
Contact Information). NASD Rule 3510 requires members to create and
maintain a written business continuity plan identifying procedures
relating to an emergency or significant business disruption and
enumerates the minimum elements that a member's business continuity
plan must address, to the extent those elements are applicable and
necessary to the member's business. NASD Rule 3510 further requires
members to update their business continuity plans upon any material
change and, at a minimum, conduct an annual review of their plans. Each
member also must disclose to its customers how its business continuity
plan addresses the possibility of a future significant business
disruption and how the member plans to respond to events of varying
scope. Each member must make this disclosure, at a minimum, in writing
to customers at account opening, by posting it on the member's Web site
(if the member maintains a Web site), and by mailing it to customers
upon request.
NASD Rules 3510 is one part of the NASD Rule 3500 Series (Emergency
Preparedness), which requires members to establish emergency
preparedness plans and procedures. NASD Rule 3520, which comprises the
remainder of the NASD Rule 3500 Series, requires members to designate
two emergency contact persons and provide this information to FINRA via
electronic process.\9\
---------------------------------------------------------------------------

\9\ There is no longer a comparable Incorporated NYSE Rule to
NASD Rules 3510 and 3520. FINRA previously deleted from the
Transitional Rulebook NYSE Rule 446 (Business Continuity and
Contingency Plans), which contained substantially similar
requirements as the two NASD rules, as part of the rule change to
reduce regulatory duplication for Dual Members during the period
before completion of the Consolidated FINRA Rulebook. See Securities
Exchange Act Release No. 58533 (September 12, 2008), 73 FR 54652
(September 22, 2008) (Order Approving File No. SR-FINRA-2008-036).
---------------------------------------------------------------------------

FINRA recommends that NASD Rules 3510 and 3520 be adopted as one
rule, FINRA Rule 4370, in the Consolidated FINRA Rulebook without any
substantive changes to the respective rules' provisions.
FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 90 days
following Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and

[[Page 28310]]

equitable principles of trade, and, in general, to protect investors
and the public interest. FINRA believes that transferring NASD Rule
2220 into the Consolidated Rulebook protects investors and the public
interest by providing the investing public with options communications
rules that are designed to provide appropriate safeguards and greater
clarity by promoting harmonization between FINRA's and other SROs'
options communications rules. FINRA believes that transferring NASD
Rule 2441 into the Consolidated FINRA Rulebook promotes investor
protection by requiring members to provide disclosure and obtain
customer consent when trading on a net basis. In addition, FINRA
believes that the benefits to investors of requiring certain
disclosures and obtaining customer consent when trading on a net basis
outweighs the additional responsibilities placed on broker-dealers.
FINRA believes that transferring NASD Rule 2460 into the Consolidated
FINRA Rulebook will protect investors and the public interest and avert
a potential conflict of interest by prohibiting members from receiving
compensation or other payments from an issuer or others for listing,
quoting or making a market in an issuer's securities. Finally, FINRA
believes that transferring and combining NASD Rules 3510 and 3520 in
the Consolidated FINRA Rulebook will help ensure that members are
prepared in the event of a significant business disruption. The
proposed rule change makes non-substantive changes to rules that have
proven effective in meeting the statutory mandates.
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\10\ 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-2009-036 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-2009-036. 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-2009-036 and should be
submitted on or before July 6, 2009.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-13971 Filed 6-12-09; 8:45 am]
BILLING CODE 8010-01-P

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