Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to FINRA Rule 4160 (Verification of Assets), 62911-62913 [2010-25623]
Download as PDF
<![CDATA[
62911
Federal Register / Vol. 75, No. 197 / Wednesday, October 13, 2010 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change has taken
effect upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act 6 and
subparagraph (f)(2) of Rule 19b–4 7
thereunder, because, as provided in
(f)(2), it changes ‘‘a due, fee or other
charge applicable only to a member’’
(known on the Exchange as an ETP
Holder). At any time within sixty (60)
days of the filing of such proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, 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:
mstockstill on DSKH9S0YB1PROD with NOTICES
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–NSX–2010–13 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
20549–9303.
All submissions should refer to File
No. SR–NSX–2010–13. This file number
should be included in the subject line
if e-mail is used. To help the
Commission process and review
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
6 15
7 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4.
VerDate Mar<15>2010
17:22 Oct 12, 2010
Jkt 223001
available for website viewing and
printing in the Commission’s Public
Reference Section, 100 F Street, NE.,
Washington, DC 20549. Copies of such
filings will also be available for
inspection and copying at the principal
office of the Exchange. 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–NSX–
2010–13 and should be submitted on or
before November 3, 2010.
For the Commission by the Division of
Trading and Markets, pursuant to the
delegated authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25622 Filed 10–12–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63044; File No. SR–FINRA–
2010–042]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, Relating to FINRA
Rule 4160 (Verification of Assets)
October 5, 2010.
I. Introduction
On August 4, 2010, the 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 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change
that provides that a member, when
notified by FINRA, may not continue to
custody or retain record ownership of
assets, at a non-member financial
institution, which, upon FINRA staff’s
request, fails promptly to provide
FINRA with written verification of
assets maintained by the member at
such financial institutions. The
proposed rule change was published for
comment in the Federal Register on
August 11, 2010.3 The Commission
received one comment on the proposed
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 62655
(August 5, 2010), 75 FR 48731 (August 11, 2010).
1 15
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
rule change.4 On October 1, 2010,
FINRA responded to the comments and
filed Amendment No. 1 to the proposed
rule change.5 The Commission is
publishing this notice and order to
solicit comments on Amendment No. 1
and to approve the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
II. Description of Proposed Rule
Change, as Modified by Amendment
No. 1
FINRA has proposed to adopt FINRA
Rule 4160 (Verification of Assets). The
proposed rule provides that a member,
when notified by FINRA, may not
continue to custody or retain record
ownership of assets, at a non-member
financial institution, which, upon
FINRA staff’s request, fails promptly to
provide FINRA with written verification
of assets maintained by the member at
such financial institution. The proposed
rule change also would add a
supplementary material section to the
new rule.
FINRA proposes new paragraph (b) in
its Amendment No. 1. Paragraph (b)(1)
expressly excludes from the rule
proprietary assets of members that are
treated as non-allowable assets pursuant
to Rule 15c3–1 under the Act. Paragraph
(b)(2) provides that the rule would not
apply in instances where FINRA
determines that there is no other
available independent custody or record
ownership of the assets. Amendment
No. 1 would also designate the original
rule text as paragraph (a). Finally, the
Supplementary Material remains
unchanged by Amendment No. 1.
The text of the proposed rule change,
as modified by Amendment No. 1, is
below. Proposed new language is
underlined.
*
*
*
*
*
4000. FINANCIAL AND
OPERATIONAL RULES
4100. FINANCIAL CONDITION
*
*
*
*
*
4160. Verification of Assets
(a) A member, when notified by
FINRA, may not continue to custody or
retain record ownership of assets,
whether such assets are proprietary or
4 See Letter from Howard Spindel, Senior
Managing Director, and Cassondra E. Joseph,
Managing Director, Integrated Management
Solutions USA LLC, dated August 30, 2010 (‘‘IMS
letter’’).
5 See Amendment No. 1 dated October 1, 2010
(‘‘Amendment No. 1’’). The text of Amendment No.
1 is available on FINRA’s Web site at https://
www.finra.org, at the principal office of FINRA, and
on the Commission’s Web site, https://www.sec.gov/
rules/sro.shtml.
E:\FR\FM\13OCN1.SGM
13OCN1
62912
Federal Register / Vol. 75, No. 197 / Wednesday, October 13, 2010 / Notices
customer assets, at a financial
institution that is not a member of
FINRA, which, upon FINRA staff’s
request, fails promptly to provide
FINRA with written verification of
assets maintained by the member at
such financial institution.
(b) The Rule shall not apply:
(1) to proprietary assets of members
that are treated as non-allowable assets
under SEA Rule 15c3–1; or
(2) in instances where FINRA
determines that there is no independent
custody or record ownership of the
assets.
• • • Supplementary Material:
.01 Asset Transfers. Any member
required to transfer its proprietary and/
or customer assets pursuant to this Rule
shall effect such transfer within a
reasonable period of time.
.02 Member Obligations Under SEA
Rule 15c3–3. Nothing in this Rule shall
be construed as altering in any manner
a member’s obligations under SEA Rule
15c3–3.
*
*
*
*
*
mstockstill on DSKH9S0YB1PROD with NOTICES
III. Summary of Comment Letters and
FINRA’s Response
The Commission received one
comment to the proposed rule change.6
The commenter opposed the proposal
and asserted that the harm outweighed
any benefit of the proposed rule.
Specifically, the commenter indicated
that certain assets are hard to verify and
that the proposed rule failed to
differentiate among different types of
assets.7 The commenter suggested,
among other things, that FINRA not
apply the rule to proprietary assets that
are not allowable for net capital
purposes. The commenter further raised
concerns that the proposed rule would
create an unwarranted burden on
members, because it fails to address
instances where a particular asset
cannot be relocated from its country of
origin or readily moved to another
financial institution.8 Additionally, the
commenter asserted that the rule
‘‘indirectly extends the extraterritorial
application of the U.S. securities laws,’’
and that compliance with the rule may
violate foreign law. Finally, the
commenter believed that instead of
adopting the proposed rule, FINRA
should look at other asset verification
options and suggested the alternatives of
conducting a study regarding the
necessity of the proposed rule or
establishing a separate bureau that
would verify customers’ statements
6 IMS
letter.
7 Id.
8 Id.
VerDate Mar<15>2010
17:22 Oct 12, 2010
Jkt 223001
against the books and records of their
broker-dealers.9
FINRA filed Amendment No. 1 and
responded to the comments.
Amendment No. 1 specifically
addresses the commenter’s suggestion
that the rule should not apply to
proprietary assets of members that are
not allowable for net capital purposes.
Accordingly, FINRA is proposing new
paragraph (b)(1) of the rule, which
would expressly exclude from the rule
proprietary assets of members that are
treated as non-allowable assets pursuant
to Rule 15c3–1 of the Act. Moreover, in
response to the commenter’s concerns
regarding the application of the
proposed rule to assets that cannot be
relocated to another financial
institution, such as many limited
partnership or hedge fund investments,
FINRA is proposing new paragraph
(b)(2) of the rule, which provides that
the rule would not apply in instances
where FINRA determines that there is
no independent custody or record
ownership of the assets.
IV. Discussion and Commission
Findings
After carefully considering the
proposal, as modified by Amendment
No. 1, the comments, and FINRA’s
response, the Commission finds that the
proposed rule change is consistent with
the requirements of the Act, and the
rules and regulations thereunder that
are applicable to a national securities
association.10 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,11 which requires, among other
things, that the rules of an exchange be
designed to promote just and equitable
principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest. The proposed rule change is
consistent with FINRA’s statutory
obligations under the Act to protect
investors and the public interest
because it would enhance FINRA’s
ability to verify assets at a financial
institution which is not a member of
FINRA.
The Commission believes that FINRA
adequately addressed the concerns
raised by the commenter. The rule
language in Amendment No. 1
specifically excludes proprietary assets
that are not allowable for net capital
9 Id.
10 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).
11 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
purposes. It also adequately addresses
the commenter’s concerns regarding the
application of the proposed rule to
assets that cannot be relocated to
another financial institution, by adding
paragraph (b)(2) of the rule clarifies that
the rule would not apply in instances
where FINRA determines that there is
no other independent custody or record
ownership of the assets. The
Commission believes the proposed rule,
as modified by Amendment No. 1,
further strengthens FINRA’s ability to
effectively detect fraud and protect
investors.
V. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the Act 12
for approving the proposed rule change,
as modified by Amendment No. 1
thereto, prior to the 30th day after
publication of Amendment No. 1 in the
Federal Register. The changes proposed
in Amendment No. 1 respond to specific
concerns raised by the commenter and
do not raise novel regulatory concerns.
In particular, Amendment No. 1 further
clarifies the scope of the asset
verification rule, which serves to protect
the capital structure of members and to
safeguard the custody of customer
assets.
Accordingly, the Commission finds
that good cause exists to approve the
proposal, as modified by Amendment
No. 1, on an accelerated basis.
VI. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether Amendment No. 1 to
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–2010–042 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–2010–
042. This file number should be
included on the subject line if e-mail is
used. To help the Commission process
12 15
E:\FR\FM\13OCN1.SGM
U.S.C. 78s(b)(2).
13OCN1
Federal Register / Vol. 75, No. 197 / Wednesday, October 13, 2010 / Notices
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 Web site viewing and
printing 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–2010–042
and should be submitted on or before
November 3, 2010.
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–FINRA–
2010–042), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25623 Filed 10–12–10; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
mstockstill on DSKH9S0YB1PROD with NOTICES
[Public Notice: 7205]
30-Day Notice of Proposed Information
Collection: Form DS–5504, Application
for a U.S. Passport: Name Change,
Data Correction, and Limited Passport
Book Replacement, OMB Control
Number 1405–0160
Notice of request for public
comment and submission to OMB of
proposed collection of information.
ACTION:
13 15
14 17
U.S.C. 78(b)(2).
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:22 Oct 12, 2010
Jkt 223001
The Department of State has
submitted the following information
collection request to the Office of
Management and Budget (OMB) for
approval in accordance with the
Paperwork Reduction Act of 1995.
• Title of Information Collection:
Application for a U.S. Passport: Name
Change, Data Correction, and Limited
Passport Book Replacement.
• OMB Control Number: 1405–0160.
• Type of Request: Revision of a
Currently Approved Collection.
• Originating Office: Bureau of
Consular Affairs, Passport Services CA/
PPT.
• Form Number: DS–5504.
• Respondents: Individuals or
Households.
• Estimated Number of Respondents:
181,000 respondents per year.
• Estimated Number of Responses:
181,000 responses per year.
• Average Hours per Response: 30
minutes.
• Total Estimated Burden: 90,500
hours per year.
• Frequency: On occasion.
• Obligation to Respond: Required to
Obtain or Retain a Benefit.
DATES: Submit comments to the Office
of Management and Budget (OMB) for
up to 30 days from October 13, 2010.
ADDRESSES: Direct comments to the
Department of State Desk Officer in the
Office of Information and Regulatory
Affairs at the Office of Management and
Budget (OMB). You may submit
comments by the following methods:
• E-mail:
oira_submission@omb.eop.gov. You
must include the DS form number,
information collection title, and OMB
control number in the subject line of
your message.
• Fax: 202–395–5806. Attention: Desk
Officer for Department of State.
FOR FURTHER INFORMATION CONTACT: You
may obtain copies of the proposed
information collection and supporting
documents from the Passport Forms
Management Officer who may be
reached on 202–663–2457 or at
PPTFormsOfficer@state.gov.
SUPPLEMENTARY INFORMATION: We are
soliciting public comments to permit
the Department to:
• Evaluate whether the proposed
information collection is necessary to
properly perform our functions.
• Evaluate the accuracy of our
estimate of the burden of the proposed
collection, including the validity of the
methodology and assumptions used.
• Enhance the quality, utility, and
clarity of the information to be
collected.
• Minimize the reporting burden on
those who are to respond.
SUMMARY:
PO 00000
Frm 00159
Fmt 4703
Sfmt 4703
62913
Abstract of proposed collection: The
information collected on the DS–5504 is
used to facilitate the re-issuance of
passports to U.S. citizens and nationals
when (a) the passport holder’s name has
changed within the first year of the
issuance of the passport (b) the passport
holder needs correction of descriptive
information on the data page of the
passport (c) the passport holder wishes
to obtain a fully valid passport after
obtaining a full-fee passport with a
limited validity of two years or less. The
primary purpose of soliciting the
information is to establish citizenship,
identity, and entitlement of the
applicant to the U.S. passport or related
service, and to properly administer and
enforce the laws pertaining to the
issuance thereof.
Methodology: Passport Services
collects information from U.S. citizens
and non-citizen nationals when they
complete and submit the Application
for a U.S. Passport: Name Change, Data
Correction, And Limited Passport Book
Replacement. Passport applicants can
either download the DS–5504 from the
internet or obtain one from an
Acceptance Facility/Passport Agency.
The form must be completed, signed,
and submitted along with the
applicant’s valid U.S. passport and
supporting documents for corrective
action.
Dated: October 1, 2010.
Barry J. Conway,
Acting Deputy Assistant Secretary for
Passport Services, Bureau of Consular Affairs,
Department of State.
[FR Doc. 2010–25750 Filed 10–12–10; 8:45 am]
BILLING CODE 4710–06–P
DEPARTMENT OF STATE
[Public Notice: 7206]
30-Day Notice of Proposed Information
Collection: Form DS–3053, Statement
of Consent or Special Circumstances:
Issuance of a Passport to a Minor
Under Age 16, OMB Control Number
1405–0129
Notice of request for public
comment and submission to OMB of
proposed collection of information.
ACTION:
The Department of State has
submitted the following information
collection request to the Office of
Management and Budget (OMB) for
approval in accordance with the
Paperwork Reduction Act of 1995.
• Title of Information Collection:
Statement of Consent or Special
Circumstances: Issuance of a Passport to
a Minor Under Age 16.
SUMMARY:
E:\FR\FM\13OCN1.SGM
13OCN1
]]>Agencies
[Federal Register Volume 75, Number 197 (Wednesday, October 13, 2010)]
[Notices]
[Pages 62911-62913]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-25623]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63044; File No. SR-FINRA-2010-042]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, Relating to FINRA Rule 4160 (Verification of Assets)
October 5, 2010.
I. Introduction
On August 4, 2010, the 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 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change that provides that a member, when
notified by FINRA, may not continue to custody or retain record
ownership of assets, at a non-member financial institution, which, upon
FINRA staff's request, fails promptly to provide FINRA with written
verification of assets maintained by the member at such financial
institutions. The proposed rule change was published for comment in the
Federal Register on August 11, 2010.\3\ The Commission received one
comment on the proposed rule change.\4\ On October 1, 2010, FINRA
responded to the comments and filed Amendment No. 1 to the proposed
rule change.\5\ The Commission is publishing this notice and order to
solicit comments on Amendment No. 1 and to approve the proposed rule
change, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62655 (August 5,
2010), 75 FR 48731 (August 11, 2010).
\4\ See Letter from Howard Spindel, Senior Managing Director,
and Cassondra E. Joseph, Managing Director, Integrated Management
Solutions USA LLC, dated August 30, 2010 (``IMS letter'').
\5\ See Amendment No. 1 dated October 1, 2010 (``Amendment No.
1''). The text of Amendment No. 1 is available on FINRA's Web site
at https://www.finra.org, at the principal office of FINRA, and on
the Commission's Web site, https://www.sec.gov/rules/sro.shtml.
---------------------------------------------------------------------------
II. Description of Proposed Rule Change, as Modified by Amendment No. 1
FINRA has proposed to adopt FINRA Rule 4160 (Verification of
Assets). The proposed rule provides that a member, when notified by
FINRA, may not continue to custody or retain record ownership of
assets, at a non-member financial institution, which, upon FINRA
staff's request, fails promptly to provide FINRA with written
verification of assets maintained by the member at such financial
institution. The proposed rule change also would add a supplementary
material section to the new rule.
FINRA proposes new paragraph (b) in its Amendment No. 1. Paragraph
(b)(1) expressly excludes from the rule proprietary assets of members
that are treated as non-allowable assets pursuant to Rule 15c3-1 under
the Act. Paragraph (b)(2) provides that the rule would not apply in
instances where FINRA determines that there is no other available
independent custody or record ownership of the assets. Amendment No. 1
would also designate the original rule text as paragraph (a). Finally,
the Supplementary Material remains unchanged by Amendment No. 1.
The text of the proposed rule change, as modified by Amendment No.
1, is below. Proposed new language is underlined.
* * * * *
4000. FINANCIAL AND OPERATIONAL RULES
4100. FINANCIAL CONDITION
* * * * *
4160. Verification of Assets
(a) A member, when notified by FINRA, may not continue to custody
or retain record ownership of assets, whether such assets are
proprietary or
[[Page 62912]]
customer assets, at a financial institution that is not a member of
FINRA, which, upon FINRA staff's request, fails promptly to provide
FINRA with written verification of assets maintained by the member at
such financial institution.
(b) The Rule shall not apply:
(1) to proprietary assets of members that are treated as non-
allowable assets under SEA Rule 15c3-1; or
(2) in instances where FINRA determines that there is no
independent custody or record ownership of the assets.
Supplementary Material:
.01 Asset Transfers. Any member required to transfer its
proprietary and/or customer assets pursuant to this Rule shall effect
such transfer within a reasonable period of time.
.02 Member Obligations Under SEA Rule 15c3-3. Nothing in this Rule
shall be construed as altering in any manner a member's obligations
under SEA Rule 15c3-3.
* * * * *
III. Summary of Comment Letters and FINRA's Response
The Commission received one comment to the proposed rule change.\6\
The commenter opposed the proposal and asserted that the harm
outweighed any benefit of the proposed rule. Specifically, the
commenter indicated that certain assets are hard to verify and that the
proposed rule failed to differentiate among different types of
assets.\7\ The commenter suggested, among other things, that FINRA not
apply the rule to proprietary assets that are not allowable for net
capital purposes. The commenter further raised concerns that the
proposed rule would create an unwarranted burden on members, because it
fails to address instances where a particular asset cannot be relocated
from its country of origin or readily moved to another financial
institution.\8\ Additionally, the commenter asserted that the rule
``indirectly extends the extraterritorial application of the U.S.
securities laws,'' and that compliance with the rule may violate
foreign law. Finally, the commenter believed that instead of adopting
the proposed rule, FINRA should look at other asset verification
options and suggested the alternatives of conducting a study regarding
the necessity of the proposed rule or establishing a separate bureau
that would verify customers' statements against the books and records
of their broker-dealers.\9\
---------------------------------------------------------------------------
\6\ IMS letter.
\7\ Id.
\8\ Id.
\9\ Id.
---------------------------------------------------------------------------
FINRA filed Amendment No. 1 and responded to the comments.
Amendment No. 1 specifically addresses the commenter's suggestion that
the rule should not apply to proprietary assets of members that are not
allowable for net capital purposes. Accordingly, FINRA is proposing new
paragraph (b)(1) of the rule, which would expressly exclude from the
rule proprietary assets of members that are treated as non-allowable
assets pursuant to Rule 15c3-1 of the Act. Moreover, in response to the
commenter's concerns regarding the application of the proposed rule to
assets that cannot be relocated to another financial institution, such
as many limited partnership or hedge fund investments, FINRA is
proposing new paragraph (b)(2) of the rule, which provides that the
rule would not apply in instances where FINRA determines that there is
no independent custody or record ownership of the assets.
IV. Discussion and Commission Findings
After carefully considering the proposal, as modified by Amendment
No. 1, the comments, and FINRA's response, the Commission finds that
the proposed rule change is consistent with the requirements of the
Act, and the rules and regulations thereunder that are applicable to a
national securities association.\10\ In particular, the Commission
finds that the proposal is consistent with Section 6(b)(5) of the
Act,\11\ which requires, among other things, that the rules of an
exchange be designed to promote just and equitable principles of trade,
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, protect investors
and the public interest. The proposed rule change is consistent with
FINRA's statutory obligations under the Act to protect investors and
the public interest because it would enhance FINRA's ability to verify
assets at a financial institution which is not a member of FINRA.
---------------------------------------------------------------------------
\10\ 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).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission believes that FINRA adequately addressed the
concerns raised by the commenter. The rule language in Amendment No. 1
specifically excludes proprietary assets that are not allowable for net
capital purposes. It also adequately addresses the commenter's concerns
regarding the application of the proposed rule to assets that cannot be
relocated to another financial institution, by adding paragraph (b)(2)
of the rule clarifies that the rule would not apply in instances where
FINRA determines that there is no other independent custody or record
ownership of the assets. The Commission believes the proposed rule, as
modified by Amendment No. 1, further strengthens FINRA's ability to
effectively detect fraud and protect investors.
V. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act \12\ for approving the proposed rule change, as modified by
Amendment No. 1 thereto, prior to the 30th day after publication of
Amendment No. 1 in the Federal Register. The changes proposed in
Amendment No. 1 respond to specific concerns raised by the commenter
and do not raise novel regulatory concerns. In particular, Amendment
No. 1 further clarifies the scope of the asset verification rule, which
serves to protect the capital structure of members and to safeguard the
custody of customer assets.
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\12\ 15 U.S.C. 78s(b)(2).
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Accordingly, the Commission finds that good cause exists to approve
the proposal, as modified by Amendment No. 1, on an accelerated basis.
VI. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether Amendment No. 1
to 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-2010-042 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-2010-042. This file number should be included on the subject
line if e-mail is used. To help the Commission process
[[Page 62913]]
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 Web site viewing and printing 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-2010-042
and should be submitted on or before November 3, 2010.
VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-FINRA-2010-042), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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\13\ 15 U.S.C. 78(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25623 Filed 10-12-10; 8:45 am]
BILLING CODE 8011-01-P
