Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rule 3310 (Anti-Money Laundering Compliance Program) in the Consolidated FINRA Rulebook, 29527-29529 [E9-14531]
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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Notices
pwalker on PROD1PC71 with NOTICES
consists of a proposal to establish a realtime subscription to the continuing
disclosure document collection. The
real-time data stream subscription to the
EMMA continuing disclosure service to
be provided through a Web service
would be made available for an annual
fee of $45,000.5 The continuing
disclosure subscription service would
make available to subscribers all
continuing disclosure documents and
related information provided by
submitters through the EMMA
submission process that is posted on the
EMMA portal. Such documents and
information would be made available to
subscribers simultaneously with the
posting thereof on the EMMA portal.
The MSRB would make the
continuing disclosure subscription
service available on an equal and nondiscriminatory basis. In addition, the
MSRB would not impose any
limitations on or additional charges for
redistribution of such documents by
subscribers to their customers, clients or
other end-users. Subscribers would be
subject to all of the terms of the
subscription agreement to be entered
into between the MSRB and each
subscriber, including proprietary rights
of third parties in information provided
by such third parties that is made
available through the subscription. The
MSRB would not be responsible for the
content of the information or documents
submitted by submitters distributed to
subscribers through the continuing
disclosure subscription service. The
MSRB has requested approval of the
proposed rule change on or prior to July
1, 2009. A full description of the
proposal is contained in the
Commission’s Notice.
The Commission has carefully
considered the proposed rule change
and finds that the proposed rule change
is consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to the MSRB 6
and, in particular, the requirements of
2008) (File No. SR–MSRB–2008–05) (approving the
continuing disclosure service of EMMA with an
effective date of July 1, 2009).
5 The proposed subscription price would cover a
portion of the administrative, technical and
operating costs of the EMMA continuing disclosure
subscription service but would not cover all costs
of such subscription service or of the EMMA
continuing disclosure service. The MSRB has
proposed establishing the subscription price at a
fair and reasonable level consistent with the
MSRB’s objective that subscriptions be made
available on terms that promote the broad
dissemination of documents and data throughout
the marketplace.
6 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition
and capital formation. 15 U.S.C. 78c(f).
VerDate Nov<24>2008
16:55 Jun 19, 2009
Jkt 217001
Section 15B(b)(2)(C) of the Act 7 and the
rules and regulations thereunder.
Section 15B(b)(2)(C) of the Act requires,
among other things, that the MSRB’s
rules be designed to prevent fraudulent
and manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in municipal
securities, to remove impediments to
and perfect the mechanism of a free and
open market in municipal securities,
and, in general, to protect investors and
the public interest.8 In particular, the
Commission finds that the EMMA
continuing disclosure subscription
service would serve as a mechanism by
which the MSRB works toward
removing impediments to and helping
to perfect the mechanisms of a free and
open market in municipal securities.
The subscription service would make
the indexed comprehensive collection
of continuing disclosure documents of
the EMMA continuing disclosure
service available to marketplace
participants for re-dissemination and for
use in creating value-added products
and services. Such re-dissemination and
third-party use would provide market
participants, including investors and the
general public, additional avenues for
obtaining these key disclosures and
would make additional tools available
in making well-informed investment
decisions. Broad access to continuing
disclosure documents through the
subscription service, in addition to the
public access available through the
EMMA Web portal, should further assist
in preventing fraudulent and
manipulative acts and practices by
improving the opportunity for public
investors to access material information
about issuers, their securities and the
prices at which such securities trade.
Furthermore, broader redissemination and third-party use of
continuing disclosure documents
should promote a more fair and efficient
municipal securities market in which
transactions are effected on the basis of
material information available to all
parties to such transactions, which
should allow for fairer pricing of
transactions based on a more complete
understanding of the terms of the
securities (including any changes
thereto), changes in circumstances of
issuers and obligated persons, and the
potential investment risks arising
therefrom.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,9 that the
proposed rule change (SR–MSRB–2009–
05), be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–14593 Filed 6–19–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60112; File No. SR–FINRA–
2009–039]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change To Adopt
FINRA Rule 3310 (Anti-Money
Laundering Compliance Program) in
the Consolidated FINRA Rulebook
June 15, 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 June 1,
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
substantially 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: (1)
NASD Rule 3011 (Anti-Money
Laundering Compliance Program) as
FINRA Rule 3310 (Anti-Money
Laundering Compliance Program),
without substantive change; (2) NASD
IM–3011–1 (Independent Testing
Requirements) as supplementary
material to proposed FINRA Rule 3310,
subject to certain amendments; and (3)
NASD IM–3011–2 (Review of AntiMoney Laundering Compliance Person
Information) as supplementary material
to proposed FINRA Rule 3310, without
substantive change. The proposed rule
change would delete Incorporated NYSE
Rule 445 (Anti-Money Laundering
9 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
10 17
7 15
U.S.C. 78o–4(b)(2)(C).
8 Id.
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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Notices
Compliance Program) in its entirety as
duplicative.
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: (1) NASD
Rule 3011 (Anti-Money Laundering
Compliance Program) as FINRA Rule
3310 (Anti-Money Laundering
Compliance Program), without
substantive change; (2) NASD IM–3011–
1 (Independent Testing Requirements)
as supplementary material to proposed
FINRA Rule 3310, subject to certain
amendments; and (3) NASD IM–3011–2
(Review of Anti-Money Laundering
Compliance Person Information) as
supplementary material to proposed
FINRA Rule 3310, without substantive
change. The proposed rule change
would delete Incorporated NYSE Rule
445 in its entirety (Anti-Money
Laundering Compliance Program) as
duplicative. The proposed rule change
is discussed in further detail below.
Background
NASD Rule 3011 (Anti-Money
Laundering Compliance Program) and
Incorporated NYSE Rule 445 (AntiMoney Laundering Compliance
Program) are substantially similar rules
requiring members to develop and
implement a written anti-money
laundering (‘‘AML’’) program
reasonably designed to achieve and
monitor compliance with the
requirements of the Bank Secrecy Act
(‘‘BSA’’) 4 and the implementing
regulations promulgated by the
Department of the Treasury. Each
member’s AML compliance program
must be approved, in writing, by a
member of senior management.
The rules require that each AML
compliance program, must, at a
minimum: (1) Establish and implement
policies and procedures that can be
reasonably expected to detect and cause
the reporting of suspicious transactions;
(2) establish and implement policies,
procedures, and internal controls
reasonably designed to achieve
compliance with the BSA and its
implementing regulations; (3) provide
for annual (on a calendar-year basis)
independent testing for compliance to
be conducted by member personnel or
a qualified outside party; 5 (4) designate
and identify to FINRA an individual or
individuals (i.e., AML compliance
person(s)) who will be responsible for
implementing and monitoring the dayto-day operations and internal controls
of the AML compliance program and
provide prompt notification to FINRA of
any changes to the designation; and (5)
provide ongoing training for appropriate
persons.
NASD IM–3011–1 (Independent
Testing Requirements) and the
supplementary material to Incorporated
NYSE Rule 445 also contain
substantially similar provisions
clarifying that: (1) Members should
undertake more frequent testing than
required if circumstances warrant; (2)
the person conducting the independent
test must have a working knowledge of
applicable requirements under the BSA
and its implementing regulations; and
(3) the testing cannot be conducted by
the AML compliance person(s), by any
person who performs the functions
4 See
pwalker on PROD1PC71 with NOTICES
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).
VerDate Nov<24>2008
16:55 Jun 19, 2009
Jkt 217001
31 U.S.C. 5311, et seq.
rules permit a member to conduct the
independent testing every two years (on a calendaryear basis) if it does not execute transactions for
customers or otherwise hold customer accounts or
act as an introducing broker with respect to
customer accounts (e.g., engages solely in
proprietary trading, or conducts business only with
other broker-dealers). Incorporated NYSE Rule 445
uses slightly different terminology to achieve the
same result, specifically providing that a member
may conduct independent testing every two years
(on a calendar-year basis) if it ‘‘does not engage in
a public business (e.g., engages solely in proprietary
trading, or conducts business only with other
broker-dealers).’’
5 Both
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being tested, or by any person who
reports to any of these persons.
NASD IM–3011–1, however, permits
the AML compliance program testing to
be conducted by persons who report to
either the AML compliance person or
persons performing the functions being
tested if: (1) The member has no other
qualified internal personnel to conduct
the test; (2) the member establishes
written policies and procedures to
address conflicts that may arise from
allowing the test to be conducted by a
person who reports to the person(s)
whose activities he or she is testing (e.g.,
anti-retaliation procedures); (3) to the
extent possible, the person conducting
the test reports the results of the test to
someone who is senior to the AML
compliance person or persons
performing the functions being tested;
and (4) the member documents its
rationale, which must be reasonable, for
determining there is no other alternative
than to comply in this manner. In
addition, if the person does not report
the results consistent with (3) above, the
member must document a reasonable
explanation for not doing so.
Incorporated NYSE Rule 445 does not
have a comparable provision.
Finally, NASD IM–3011–2 (Review of
Anti-Money Laundering Compliance
Person Information) requires each
member to identify, review, and if
necessary, update the information
regarding its AML compliance person in
the manner prescribed in NASD Rule
1160.6 This provision is comparable to
SM .03 of NYSE Rule 445.
Proposed FINRA Rule 3310 and Related
Supplementary Material
The proposed rule change would
adopt NASD Rule 3011 without
substantive change into the
Consolidated FINRA Rulebook as
FINRA Rule 3310 (Anti-Money
Laundering Compliance Program). In
addition, the proposed rule change
would adopt NASD IM–3011–2, without
substantive change, as supplementary
material to proposed FINRA Rule 3310.
With respect to NASD IM–3011–1, the
proposed rule change would adopt its
provisions as supplementary material to
proposed FINRA Rule 3310, but would
eliminate the provision that currently
allows, subject to specified conditions,
the AML compliance program testing to
be conducted by persons who report to
either the AML compliance person or
persons performing the functions being
tested (referred to as the ‘‘independent
6 FINRA is proposing to replace NASD Rule 1160
with FINRA Rule 4540 (Member Information and
Data Reporting and Filing Requirements). See
Regulatory Notice 09–02 (January 2009).
E:\FR\FM\22JNN1.SGM
22JNN1
Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Notices
testing exception’’). The Financial
Crimes Enforcement Network
(‘‘FinCEN’’), which is responsible for
administering the BSA and its
implementing regulations, has stated
that the independent testing provision
of the BSA precludes AML program
testing by personnel with an interest in
the outcome of the testing and that an
independent testing exception, such as
the one in NASD IM–3011–1, is
inconsistent with this BSA provision
and FinCEN’s interpretive guidance on
the BSA’s independent testing
requirement.7 Accordingly, consistent
with FinCEN’s guidance, FINRA is
proposing to eliminate the independent
testing exception in connection with its
adoption of proposed FINRA Rule 3310.
Finally, as stated previously, the
proposed rule change would delete
Incorporated NYSE Rule 445 and its
related supplementary material in their
entirety as duplicative. 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,8 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 would continue to
assist members in identifying and
preventing money laundering abuses
that can affect the integrity of the U.S.
capital markets.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
pwalker on PROD1PC71 with NOTICES
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.
7 See Letter from Jamal El-Hindi, Associate
Director, Regulatory Policy & Programs Division,
FinCEN, to Nancy M. Morris, Secretary, SEC
(August 22, 2007). FinCEN submitted the letter to
the SEC in response to the NYSE’s ‘‘omnibus
filing,’’ a rule filing that sought to achieve greater
harmonization between the NYSE and NASD rules,
including the AML compliance program rules (SR–
NYSE–2007–22). See Exchange Act Release No.
56142 (July 16, 2007), 72 FR 42195 (August 1,
2007).
8 15 U.S.C. 78o–3(b)(6).
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16:55 Jun 19, 2009
Jkt 217001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FINRA–2009–039 on the
subject line.
29529
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 insert SR–FINRA–2009–039
and should be submitted on or before
July 13, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–14531 Filed 6–19–09; 8:45 am]
BILLING CODE 8010–01–P
DEPARTMENT OF STATE
[Public Notice 6635]
Announcement of a Meeting of the
International Telecommunication
Advisory Committee
Summary: This notice announces a
meeting of the International
Telecommunication Advisory
Committee (ITAC) to prepare for the
International Telecommunication Union
(ITU) Regional Preparatory Meeting for
Paper Comments
the World Telecommunication
• Send paper comments in triplicate
Development Conference.
to Elizabeth M. Murphy, Secretary,
The ITAC will meet to begin
Securities and Exchange Commission,
preparation of advice for the U.S.
100 F Street, NE., Washington, DC
government for the ITU Regional
20549–1090.
Preparatory Meeting for the World
Telecommunication Development
All submissions should refer to File
Number SR–FINRA–2009–039. This file Conference, which will be held from
August 13–25, 2009 in Lima, Peru.
number should be included on the
subject line if e-mail is used. To help the There will also be reports on recent
developments in the ITU, OECD, and
Commission process and review your
CITEL.
comments more efficiently, please use
The ITAC will meet on July 7,2009 at
only one method. The Commission will
post all comments on the Commission’s 1120 20th Street, NW., 10th floor,
Washington, DC 20036. This meeting is
Internet Web site (https://www.sec.gov/
open to the public as seating capacity
rules/sro.shtml). Copies of the
allows. The public will have an
submission, all subsequent
opportunity to provide comments at this
amendments, all written statements
meeting. Those desiring further
with respect to the proposed rule
information on these meeting may
change that are filed with the
contact the Secretariat at
Commission, and all written
jillsonad@state.gov or at 202–647–7847.
communications relating to the
proposed rule change between the
9 17 CFR 200.30–3(a)(12).
Commission and any person, other than
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]]>Agencies
[Federal Register Volume 74, Number 118 (Monday, June 22, 2009)]
[Notices]
[Pages 29527-29529]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-14531]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60112; File No. SR-FINRA-2009-039]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt
FINRA Rule 3310 (Anti-Money Laundering Compliance Program) in the
Consolidated FINRA Rulebook
June 15, 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 June 1, 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 substantially 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: (1) NASD Rule 3011 (Anti-Money
Laundering Compliance Program) as FINRA Rule 3310 (Anti-Money
Laundering Compliance Program), without substantive change; (2) NASD
IM-3011-1 (Independent Testing Requirements) as supplementary material
to proposed FINRA Rule 3310, subject to certain amendments; and (3)
NASD IM-3011-2 (Review of Anti-Money Laundering Compliance Person
Information) as supplementary material to proposed FINRA Rule 3310,
without substantive change. The proposed rule change would delete
Incorporated NYSE Rule 445 (Anti-Money Laundering
[[Page 29528]]
Compliance Program) in its entirety as duplicative.
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: (1)
NASD Rule 3011 (Anti-Money Laundering Compliance Program) as FINRA Rule
3310 (Anti-Money Laundering Compliance Program), without substantive
change; (2) NASD IM-3011-1 (Independent Testing Requirements) as
supplementary material to proposed FINRA Rule 3310, subject to certain
amendments; and (3) NASD IM-3011-2 (Review of Anti-Money Laundering
Compliance Person Information) as supplementary material to proposed
FINRA Rule 3310, without substantive change. The proposed rule change
would delete Incorporated NYSE Rule 445 in its entirety (Anti-Money
Laundering Compliance Program) as duplicative. The proposed rule change
is discussed in further detail below.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
Background
NASD Rule 3011 (Anti-Money Laundering Compliance Program) and
Incorporated NYSE Rule 445 (Anti-Money Laundering Compliance Program)
are substantially similar rules requiring members to develop and
implement a written anti-money laundering (``AML'') program reasonably
designed to achieve and monitor compliance with the requirements of the
Bank Secrecy Act (``BSA'') \4\ and the implementing regulations
promulgated by the Department of the Treasury. Each member's AML
compliance program must be approved, in writing, by a member of senior
management.
---------------------------------------------------------------------------
\4\ See 31 U.S.C. 5311, et seq.
---------------------------------------------------------------------------
The rules require that each AML compliance program, must, at a
minimum: (1) Establish and implement policies and procedures that can
be reasonably expected to detect and cause the reporting of suspicious
transactions; (2) establish and implement policies, procedures, and
internal controls reasonably designed to achieve compliance with the
BSA and its implementing regulations; (3) provide for annual (on a
calendar-year basis) independent testing for compliance to be conducted
by member personnel or a qualified outside party; \5\ (4) designate and
identify to FINRA an individual or individuals (i.e., AML compliance
person(s)) who will be responsible for implementing and monitoring the
day-to-day operations and internal controls of the AML compliance
program and provide prompt notification to FINRA of any changes to the
designation; and (5) provide ongoing training for appropriate persons.
---------------------------------------------------------------------------
\5\ Both rules permit a member to conduct the independent
testing every two years (on a calendar-year basis) if it does not
execute transactions for customers or otherwise hold customer
accounts or act as an introducing broker with respect to customer
accounts (e.g., engages solely in proprietary trading, or conducts
business only with other broker-dealers). Incorporated NYSE Rule 445
uses slightly different terminology to achieve the same result,
specifically providing that a member may conduct independent testing
every two years (on a calendar-year basis) if it ``does not engage
in a public business (e.g., engages solely in proprietary trading,
or conducts business only with other broker-dealers).''
---------------------------------------------------------------------------
NASD IM-3011-1 (Independent Testing Requirements) and the
supplementary material to Incorporated NYSE Rule 445 also contain
substantially similar provisions clarifying that: (1) Members should
undertake more frequent testing than required if circumstances warrant;
(2) the person conducting the independent test must have a working
knowledge of applicable requirements under the BSA and its implementing
regulations; and (3) the testing cannot be conducted by the AML
compliance person(s), by any person who performs the functions being
tested, or by any person who reports to any of these persons.
NASD IM-3011-1, however, permits the AML compliance program testing
to be conducted by persons who report to either the AML compliance
person or persons performing the functions being tested if: (1) The
member has no other qualified internal personnel to conduct the test;
(2) the member establishes written policies and procedures to address
conflicts that may arise from allowing the test to be conducted by a
person who reports to the person(s) whose activities he or she is
testing (e.g., anti-retaliation procedures); (3) to the extent
possible, the person conducting the test reports the results of the
test to someone who is senior to the AML compliance person or persons
performing the functions being tested; and (4) the member documents its
rationale, which must be reasonable, for determining there is no other
alternative than to comply in this manner. In addition, if the person
does not report the results consistent with (3) above, the member must
document a reasonable explanation for not doing so. Incorporated NYSE
Rule 445 does not have a comparable provision.
Finally, NASD IM-3011-2 (Review of Anti-Money Laundering Compliance
Person Information) requires each member to identify, review, and if
necessary, update the information regarding its AML compliance person
in the manner prescribed in NASD Rule 1160.\6\ This provision is
comparable to SM .03 of NYSE Rule 445.
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\6\ FINRA is proposing to replace NASD Rule 1160 with FINRA Rule
4540 (Member Information and Data Reporting and Filing
Requirements). See Regulatory Notice 09-02 (January 2009).
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Proposed FINRA Rule 3310 and Related Supplementary Material
The proposed rule change would adopt NASD Rule 3011 without
substantive change into the Consolidated FINRA Rulebook as FINRA Rule
3310 (Anti-Money Laundering Compliance Program). In addition, the
proposed rule change would adopt NASD IM-3011-2, without substantive
change, as supplementary material to proposed FINRA Rule 3310.
With respect to NASD IM-3011-1, the proposed rule change would
adopt its provisions as supplementary material to proposed FINRA Rule
3310, but would eliminate the provision that currently allows, subject
to specified conditions, the AML compliance program testing to be
conducted by persons who report to either the AML compliance person or
persons performing the functions being tested (referred to as the
``independent
[[Page 29529]]
testing exception''). The Financial Crimes Enforcement Network
(``FinCEN''), which is responsible for administering the BSA and its
implementing regulations, has stated that the independent testing
provision of the BSA precludes AML program testing by personnel with an
interest in the outcome of the testing and that an independent testing
exception, such as the one in NASD IM-3011-1, is inconsistent with this
BSA provision and FinCEN's interpretive guidance on the BSA's
independent testing requirement.\7\ Accordingly, consistent with
FinCEN's guidance, FINRA is proposing to eliminate the independent
testing exception in connection with its adoption of proposed FINRA
Rule 3310.
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\7\ See Letter from Jamal El-Hindi, Associate Director,
Regulatory Policy & Programs Division, FinCEN, to Nancy M. Morris,
Secretary, SEC (August 22, 2007). FinCEN submitted the letter to the
SEC in response to the NYSE's ``omnibus filing,'' a rule filing that
sought to achieve greater harmonization between the NYSE and NASD
rules, including the AML compliance program rules (SR-NYSE-2007-22).
See Exchange Act Release No. 56142 (July 16, 2007), 72 FR 42195
(August 1, 2007).
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Finally, as stated previously, the proposed rule change would
delete Incorporated NYSE Rule 445 and its related supplementary
material in their entirety as duplicative. 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,\8\ 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 would
continue to assist members in identifying and preventing money
laundering abuses that can affect the integrity of the U.S. capital
markets.
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\8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2009-039 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-2009-039. 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 insert SR-FINRA-2009-039 and
should be submitted on or before July 13, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-14531 Filed 6-19-09; 8:45 am]
BILLING CODE 8010-01-P
