Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Repeal Incorporated NYSE Rule 405(4) (Common Sales Accounts), 17456-17457 [2010-7695]

Download as PDF 17456 Federal Register / Vol. 75, No. 65 / Tuesday, April 6, 2010 / Notices 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: [FR Doc. 2010–7693 Filed 4–5–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–BX–2010–022 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. sroberts on DSKD5P82C1PROD with NOTICES For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Florence E. Harmon, Deputy Secretary. [Release No. 34–61808; File No. SR–FINRA– 2010–005] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Repeal Incorporated NYSE Rule 405(4) (Common Sales Accounts) March 31, 2010. On January 21, 2010, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’), pursuant to Section All submissions should refer to File 19(b)(1) of the Securities Exchange Act Number SR–BX–2010–022. This file of 1934 (‘‘Exchange Act’’ or ‘‘Act’’)1 and number should be included on the Rule 19b–4 thereunder,2 a proposed rule subject line if e-mail is used. To help the change. The proposed rule change was Commission process and review your published for comment in the Federal Register on February 25, 2010.3 The comments more efficiently, please use only one method. The Commission will Commission received no comments on post all comments on the Commission’s the proposed rule change. Internet Web site (https://www.sec.gov/ I. Description of the Proposal rules/sro.shtml). Copies of the As part of the process of developing submission,15 all subsequent a new consolidated rulebook amendments, all written statements (‘‘Consolidated FINRA Rulebook’’),4 with respect to the proposed rule FINRA proposed to repeal NYSE Rule change that are filed with the 405(4) (Common Sales Accounts).5 Commission, and all written NYSE Rule 405(4) (Common Sales communications relating to the Accounts) required proper supervision proposed rule change between the of registered representatives handling Commission and any person, other than common sales accounts. The rule those that may be withheld from the provided that a member might facilitate public in accordance with the the isolated liquidation of securities provisions of 5 U.S.C. 552, will be valued at $1,000 or less registered in the available for Web site viewing and name of an individual who does not printing in the Commission’s Public Reference Room, on official business 16 17 CFR 200.30–3(a)(12). days between the hours of 10 a.m. and 1 15 U.S.C. 78s(b)(1). 3 p.m. Copies of the filing also will be 2 17 CFR 240.19b–4. 3 See Exchange Act Release No. 61543 (February available for inspection and copying at the principal office of the Exchange. All 18, 2010); 75 FR 8770 (February 25, 2010). 4 The current FINRA rulebook consists of (1) comments received will be posted FINRA Rules; (2) NASD Rules; and (3) rules without change; the Commission does incorporated from the New York Stock Exchange not edit personal identifying (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to information from submissions. You as the ‘‘Transitional Rulebook’’). While the NASD should submit only information that you wish to make available publicly. All Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those submissions should refer to File members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to Number SR–BX–2010–022 and should all FINRA members, unless such rules have a more be submitted on or before April 27, limited application by their terms. For more 2010. information about the rulebook consolidation 15 The text of the proposed rule change is available on the Commission’s Web site at https:// www.sec.gov/rules/sro.shtml. VerDate Nov<24>2008 16:37 Apr 05, 2010 Jkt 220001 process, see Information Notice, March 12, 2008 (Rulebook Consolidation Process). 5 For convenience, the Incorporated NYSE Rules are referred to as the ‘‘NYSE Rules.’’ PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 have an account, and which are not part of any distribution, through a common sales account set up for the specific purpose of handling such sales. The rule further provided that such sales might be effected on behalf of the customer without requiring the member to send a periodic customer account statement to the individual as otherwise generally required, provided the following conditions were satisfied: (1) The customer was identified as the individual in whose name the securities are registered; (2) the securities were received by the member, at or prior to the time of the entry of the order, in the exact amount to be sold in good delivery form; (3) a confirmation was sent to the customer; (4) all proceeds of such sales were paid out on or immediately following settlement date; and (5) a record was made in the common sales account that includes certain customerspecific information. FINRA believed that the rule as written might raise potential investor protection concerns. The term ‘‘isolated’’ was not defined.6 Further, NYSE Rule 405(4) permitted a member to effect sales of securities for customers without expressly requiring prior customer consent and without the need to send periodic account statements to the customer. For these reasons, FINRA proposed to eliminate NYSE Rule 405(4) and not adopt its content into the Consolidated FINRA Rulebook.7 6 NYSE Rule 405(4) was adopted by the NYSE in the late 1960s. In 1977, the NYSE proposed amendments to Rule 405(4) to define the term ‘‘isolated’’ to mean ‘‘not exceeding five $2,000 transactions during any twelve-month period unless otherwise approved by the NYSE,’’ and to allow unsolicited purchases as well as sales of securities. In late 1977, the SEC instituted proceedings to determine whether to disapprove the proposed rule change and identified the potential grounds for disapproval. See Securities Exchange Act Release No. 14143 (November 7, 1977) (Order Instituting Proceedings to Determine Whether Proposed Changes to Rule 405 Should be Disapproved; File No. SR–NYSE–76–34). The SEC expressed concern that ‘‘execution of such transactions, and in particular of purchases [as proposed], in the common purchase and sale account may permit opportunities for fraudulent and manipulative acts or practices[.]’’ In February 1978, the NYSE withdrew the filing. See Securities Exchange Act Release No. 14630 (April 3, 1978) (Order Approving Withdrawal of NYSE’s Proposed Changes to Rule 405; File No. SR–NYSE–76–34). 7 FINRA notes that in the event a member may seek permission not to send customer account statements under certain limited circumstances, proposed FINRA Rule 2231, which relates to customer account statements, would authorize FINRA to exempt members from the provisions of such rule, including the requirement to deliver periodic account statements, pursuant to the Rule 9600 Series. See Securities Exchange Act Release No. 59921 (May 14, 2009); 74 FR 23912 (May 21, 2009) (Notice of Filing; File No. SR–FINRA–2009– 028). E:\FR\FM\06APN1.SGM 06APN1 Federal Register / Vol. 75, No. 65 / Tuesday, April 6, 2010 / Notices II. Discussion After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.8 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act, 9 in that it is designed, among other things, to prevent fraudulent and manipulative acts and practices; to promote just and equitable principles of trade; to remove impediments to and perfect the mechanism of a free and open market and a national market system; and, in general, to protect investors and the public interest by eliminating a rule that contains terms that are not clearly defined and raises potential investor protection concerns. III. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities association. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,10 that the proposed rule change (SR–FINRA– 2010–010) be and hereby is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–7695 Filed 4–5–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61818; File No. SR– NYSEAmex–2010–18] Self-Regulatory Organizations; NYSE Amex LLC; Order Granting Accelerated Approval of the Proposed Rule Change Relating to the Designation of a ‘‘Professional Customer’’ March 31, 2010. sroberts on DSKD5P82C1PROD with NOTICES I. Introduction On February 25, 2010, the NYSE Amex LLC (‘‘NYSE Amex’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 to designate any Customer 3 that places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) as a ‘‘Professional Customer.’’ The proposed rule change was published for comment in the Federal Register on March 9, 2010.4 The Commission did not receive any comments on the proposed rule change. This order approves the proposal on an accelerated basis. II. Description of NYSE Amex’s Proposal NYSE Amex proposes to adopt a new term, ‘‘Professional Customer,’’ which would be defined in NYSE Amex Rule 900.2NY(18A) as a person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). Under the proposal, a Professional Customer would be treated in the same manner as a broker or dealer in securities for purposes of certain execution rules of the Exchange. Specifically, the orders of a Professional Customer generally would be treated in the same manner as a broker-dealer in securities for the purposes of NYSE Amex Rules 900.3NY(j) (Facilitation Order), 904G(f) (FLEX Trading Procedures and Principles—Crossing Limitations), 934NY (Crossing), 934.1NY (Facilitation Cross Transactions), 934.2NY (At-Risk Cross Transactions), 934.3NY (Solicitation), 963NY (Priority and Order Allocation Procedures—Open Outcry), 963.1NY (Complex Order Transactions), 964NY (Display, Priority and Order Allocation—Trading Systems), 964.2NY(b)(1)(iii) (Participation Entitlement of Specialists and eSpecialists), 964.2NY(b)(3)(B) (Allocation of Participation Entitlement Amongst Specialist Pool), 980NY(b) (Electronic Complex Order Trading), Rule 995NY(b) (Prohibited Conduct— Limit Orders) and the Exchange’s schedule of fees. Under the proposal, a Professional Customer would participate in NYSE Amex’s allocation process on equal terms with broker-dealers—i.e., 1 15 8 In approving the proposed rule change, the Commission has considered the rule change’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78o–3(b)(6). 10 15 U.S.C. 78s(b)(2). 11 17 CFR 200.30–3(a)(12). VerDate Nov<24>2008 16:37 Apr 05, 2010 Jkt 220001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Under NYSE Amex rules, ‘‘Customer’’ is defined as ‘‘an individual or organization that is not a Broker/Dealer.’’ See NYSE Amex Rule 900.2NY(18). 4 See Securities Exchange Act Release No. 61629 (March 2, 2010), 75 FR 10851 (March 9, 2010) (‘‘Notice’’). 2 17 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 17457 Professional Customers would not receive priority over broker-dealers in the allocation of orders on the Exchange. The Exchange states that the proposal would not otherwise affect non-broker-dealer individuals or entities under NYSE Amex rules. All Customer orders, including non-broker-dealer orders included in the definition of ‘‘Professional Customers,’’ would continue to be treated equally for purposes of the Exchange’s rules concerning away market protection. The proposal requires ATP holders to indicate whether Customer orders are ‘‘Professional Customer’’ orders.5 To comply with this requirement, ATP holders would be required to review their customers’ activity on at least a quarterly basis to determine whether orders that are not for the account of a broker or dealer should be represented as Customer orders or Professional Customer orders.6 The Exchange states that it intends to file a separate proposed rule change to adopt fees for professional orders.7 III. Commission Findings and Order Granting Approval of the Proposed Rule Change Change After careful consideration of the proposed rule change, the Commission finds that the proposed rule change is consistent with the Act. Specifically, the Commission finds that the proposed rule change is consistent with Section 5 The Exchange intends to require firms to identify Professional Customer orders submitted electronically to the system by identifying them with the number ‘‘8’’ in the customer type field— a mandatory field required for order entry. Manual orders submitted outside the electronic system would be marked with an origin code of ‘‘PC.’’ These Professional Customer identifiers would also flow through Exchange systems into audit trail and trade reporting data. See Notice, supra note 4 at 10852. 6 Orders for any customer that had an average of more than 390 orders per day during any month of a calendar quarter must be represented as Professional Customer orders for the next calendar quarter. ATP Holders would be required to conduct a quarterly review and make any appropriate changes to the way in which they are representing orders within five business days after the end of each calendar quarter. While members only would be required to review their accounts on a quarterly basis, if during a quarter the Exchange identifies a customer for which orders are being represented as Customer orders but that has averaged more than 390 orders per day during a month, the Exchange would notify the ATP Holder and the ATP Holder would be required to change the manner in which it is representing the customer’s orders within five business days. The Exchange confirmed that references to ‘‘five days’’ in footnote 10 of the Notice should be read as ‘‘five business days.’’ E-mail from Matthew Vaughn, Counsel, NYSE Euronext to Ronesha Butler, Special Counsel, Division of Trading and Markets, dated March 31, 2010. 7 See Notice, supra note 4 at 10852. E:\FR\FM\06APN1.SGM 06APN1

Agencies

[Federal Register Volume 75, Number 65 (Tuesday, April 6, 2010)]
[Notices]
[Pages 17456-17457]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-7695]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61808; File No. SR-FINRA-2010-005]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change To Repeal 
Incorporated NYSE Rule 405(4) (Common Sales Accounts)

March 31, 2010.
    On January 21, 2010, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change. The proposed rule change was 
published for comment in the Federal Register on February 25, 2010.\3\ 
The Commission received no comments on the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 61543 (February 18, 2010); 75 
FR 8770 (February 25, 2010).
---------------------------------------------------------------------------

I. Description of the Proposal

    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\4\ FINRA proposed to repeal NYSE 
Rule 405(4) (Common Sales Accounts).\5\
---------------------------------------------------------------------------

    \4\ The current FINRA rulebook consists of (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from the New York Stock 
Exchange (``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 Information Notice, March 
12, 2008 (Rulebook Consolidation Process).
    \5\ For convenience, the Incorporated NYSE Rules are referred to 
as the ``NYSE Rules.''
---------------------------------------------------------------------------

    NYSE Rule 405(4) (Common Sales Accounts) required proper 
supervision of registered representatives handling common sales 
accounts. The rule provided that a member might facilitate the isolated 
liquidation of securities valued at $1,000 or less registered in the 
name of an individual who does not have an account, and which are not 
part of any distribution, through a common sales account set up for the 
specific purpose of handling such sales. The rule further provided that 
such sales might be effected on behalf of the customer without 
requiring the member to send a periodic customer account statement to 
the individual as otherwise generally required, provided the following 
conditions were satisfied: (1) The customer was identified as the 
individual in whose name the securities are registered; (2) the 
securities were received by the member, at or prior to the time of the 
entry of the order, in the exact amount to be sold in good delivery 
form; (3) a confirmation was sent to the customer; (4) all proceeds of 
such sales were paid out on or immediately following settlement date; 
and (5) a record was made in the common sales account that includes 
certain customer-specific information.
    FINRA believed that the rule as written might raise potential 
investor protection concerns. The term ``isolated'' was not defined.\6\ 
Further, NYSE Rule 405(4) permitted a member to effect sales of 
securities for customers without expressly requiring prior customer 
consent and without the need to send periodic account statements to the 
customer. For these reasons, FINRA proposed to eliminate NYSE Rule 
405(4) and not adopt its content into the Consolidated FINRA 
Rulebook.\7\
---------------------------------------------------------------------------

    \6\ NYSE Rule 405(4) was adopted by the NYSE in the late 1960s. 
In 1977, the NYSE proposed amendments to Rule 405(4) to define the 
term ``isolated'' to mean ``not exceeding five $2,000 transactions 
during any twelve-month period unless otherwise approved by the 
NYSE,'' and to allow unsolicited purchases as well as sales of 
securities. In late 1977, the SEC instituted proceedings to 
determine whether to disapprove the proposed rule change and 
identified the potential grounds for disapproval. See Securities 
Exchange Act Release No. 14143 (November 7, 1977) (Order Instituting 
Proceedings to Determine Whether Proposed Changes to Rule 405 Should 
be Disapproved; File No. SR-NYSE-76-34). The SEC expressed concern 
that ``execution of such transactions, and in particular of 
purchases [as proposed], in the common purchase and sale account may 
permit opportunities for fraudulent and manipulative acts or 
practices[.]'' In February 1978, the NYSE withdrew the filing. See 
Securities Exchange Act Release No. 14630 (April 3, 1978) (Order 
Approving Withdrawal of NYSE's Proposed Changes to Rule 405; File 
No. SR-NYSE-76-34).
    \7\ FINRA notes that in the event a member may seek permission 
not to send customer account statements under certain limited 
circumstances, proposed FINRA Rule 2231, which relates to customer 
account statements, would authorize FINRA to exempt members from the 
provisions of such rule, including the requirement to deliver 
periodic account statements, pursuant to the Rule 9600 Series. See 
Securities Exchange Act Release No. 59921 (May 14, 2009); 74 FR 
23912 (May 21, 2009) (Notice of Filing; File No. SR-FINRA-2009-028).

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

[[Page 17457]]

II. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\8\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act, \9\ in 
that it is designed, among other things, to prevent fraudulent and 
manipulative acts and practices; to promote just and equitable 
principles of trade; to remove impediments to and perfect the mechanism 
of a free and open market and a national market system; and, in 
general, to protect investors and the public interest by eliminating a 
rule that contains terms that are not clearly defined and raises 
potential investor protection concerns.
---------------------------------------------------------------------------

    \8\ In approving the proposed rule change, the Commission has 
considered the rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

III. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities association.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-FINRA-2010-010) be and 
hereby is approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7695 Filed 4-5-10; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.