Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of a Proposed Rule Change Relating to Promissory Note Proceedings, 20741-20742 [2011-8897]

Download as PDF Federal Register / Vol. 76, No. 71 / Wednesday, April 13, 2011 / Notices be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR–BYX– 2011–006 and should be submitted on or before May 4, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–8848 Filed 4–12–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64226; File No. SR–FINRA– 2011–005] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of a Proposed Rule Change Relating to Promissory Note Proceedings April 7, 2011. mstockstill on DSKH9S0YB1PROD with NOTICES I. Introduction On February 4, 2011, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘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 to amend Rule 13806 of the Code of Arbitration Procedure for Industry Disputes (‘‘Industry Code’’) to provide that FINRA will appoint a chair-qualified public arbitrator also qualified to resolve statutory discrimination cases. The proposed rule change was published for comment in the Federal Register on February 22, 2011.3 The Commission did not receive any comments on the proposal. This order approves the proposed change. II. Description of the Proposal In 2009, FINRA implemented new procedures to expedite the administration of cases that solely involve a broker-dealer’s claim that an associated person failed to pay money owed on a promissory note.4 Under 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities and Exchange Act Release No. 63909 (February 15, 2011), 76 FR 9838 (February 22, 2011) (‘‘Notice’’). 4 See Securities Exchange Act Rel. No. 60132 (June 17, 2009), 74 FR 30191 (June 24, 2009) (File 1 15 VerDate Mar<15>2010 18:37 Apr 12, 2011 Jkt 223001 these procedures, FINRA appoints a single chair-qualified public arbitrator from the roster of arbitrators approved to hear statutory discrimination claims (a statutory discrimination qualified arbitrator) 5 to resolve the dispute.6 These specially qualified arbitrators are public chair-qualified arbitrators who also are attorneys familiar with employment law and have at least ten years of legal experience. In addition, they may not have represented primarily the views of employers or of employees within the last five years. FINRA proposed using statutory discrimination qualified arbitrators because of the depth of their experience and their familiarity with employment law. At the time that FINRA filed the proposed rule change, these arbitrators were underutilized at the forum. Since implementing the new procedures, FINRA has found that promissory note cases do not require extensive experience or depth of knowledge (or the limitation on representation of employers or of employees within the last five years). In a majority of completed cases, arbitrators decided the case on the pleadings and the respondent broker did not appear.7 Experience with the new procedures led FINRA to propose amending the Industry Code to provide that FINRA will appoint a chairqualified public arbitrator to a panel resolving a promissory note dispute instead of appointing a statutory discrimination qualified arbitrator. Chair-qualified arbitrators have completed chair training and are attorneys who have served through award on at least two cases, or, if not attorneys, are arbitrators who have served through award on at least three cases.8 No. SR–FINRA–2009–015). FINRA announced implementation of New Rule 13806 (Promissory Note Proceedings) in Regulatory Notice 09–48 (August 2009). The effective date was September 14, 2009. 5 See Rule 13802(c)(3). 6 Under Rule 13806, if an associated person does not file an answer, or files an answer but does not assert any counterclaims or third party claims, regardless of the amount in dispute, a single statutory discrimination qualified arbitrator decides the case. If an associated person files a counterclaim or third party claim, FINRA bases panel composition on the amount of the counterclaim or third party claim. For counterclaims and third party claims that are not more than $100,000, FINRA appoints a single statutory discrimination qualified arbitrator. For counterclaims and third party claims of more than $100,000, FINRA appoints a threearbitrator panel comprised of a statutory discrimination qualified arbitrator, a public arbitrator, and a non-public arbitrator. 7 Of the first 175 promissory note cases completed, arbitrators decided the case on the pleadings 76 percent of the time (unless the case concluded by settlement or some other means). 8 See Rule 12400(c). PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 20741 In addition, the number of promissory note cases has more than doubled in the past two years. As a result of this substantial increase, it is becoming more difficult to appoint panels solely with statutory discrimination qualified arbitrators to these cases. Under the proposed rule change, the number of arbitrators available for appointment in promissory note cases would increase significantly. The proposed rule change would ensure that FINRA has a sufficient number of qualified arbitrators readily available to resolve these matters. As explained in the Notice, FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,9 which requires, among other things, that FINRA 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 is consistent with the provisions of the Act noted above because it would ensure that FINRA has a sufficient number of qualified arbitrators readily available to resolve promissory note cases. III. Discussion of Comment Letters The Commission did not receive any comment letters regarding the proposed rule change. IV. Commission Findings The Commission has carefully reviewed 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 a national securities association.10 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act,11 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. More specifically, the Commission finds that the proposed rule change to allow chairqualified arbitrators to hear promissory note cases would help to ensure that there are sufficient number of qualified arbitrators readily available to resolve such cases. 9 15 U.S.C. 78o–3(b)(6). approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 11 15 U.S.C. 78o–3(b)(6). 10 In E:\FR\FM\13APN1.SGM 13APN1 20742 Federal Register / Vol. 76, No. 71 / Wednesday, April 13, 2011 / Notices V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,12 that the proposed rule change (SR–FINRA– 2011–005), be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–8897 Filed 4–12–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64268; File No. SR– NASDAQ–2011–051] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Effective Hours of Rule 4753(c) April 8, 2011. 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 April 7, 2011, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’), filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. 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 the Substance of the Proposed Rule Change NASDAQ is proposing to amend Rule 4753(c) to change the effective time of the rule from 9:30 a.m. to 4 p.m., to 9:45 a.m. to 3:35 p.m. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in brackets. * * * * * mstockstill on DSKH9S0YB1PROD with NOTICES 4753. Nasdaq Halt and Imbalance Crosses (a)–(b) No change. (c) For a pilot period ending six months after the date of Commission approval of SR–NASDAQ–2010–074, between 9:45[30] a.m. and 3:35[4:00] p.m. EST, the System will automatically monitor System executions to determine 12 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. 13 17 VerDate Mar<15>2010 18:37 Apr 12, 2011 Jkt 223001 whether the market is trading in an orderly fashion and whether to conduct an Imbalance Cross in order to restore an orderly market in a single Nasdaq Security. (1) An Imbalance Cross shall occur if the System executes a transaction in a Nasdaq Security at a price that is beyond the Threshold Range away from the Triggering Price for that security. The Triggering Price for each Nasdaq Security shall be the price of any execution by the System in that security within the prior 30 seconds. The Threshold Range shall be determined as follows: proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange 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 NASDAQ is proposing to amend Rule 4753(c) to change the effective time of the rule from 9:30 a.m. to 4 p.m., to 9:45 a.m. to 3:35 p.m. On March 11, 2011, Threshold the Commission approved Rule 4753(c) range away Execution price from triggering (the ‘‘Volatility Guard’’), a volatilityprice (percent) based pause in trading in individual NASDAQ-listed securities traded on $1.75 and under ................... 15 NASDAQ (‘‘NASDAQ Securities’’), as a Over $1.75 and up to $25 .... 10 six month pilot applied to the NASDAQ Over $25 and up to $50 ....... 5 100 Index securities.3 The Volatility Over $50 ............................... 3 Guard automatically suspends trading (2) If the System determines pursuant in individual NASDAQ Securities that are the subject of abrupt and significant to subsection (1) above to conduct an intraday price movements between 9:30 Imbalance Cross in a Nasdaq Security, a.m. and 4 p.m. Eastern Standard Time the System shall automatically cease (‘‘EST’’). Volatility Guard is triggered executing trades in that security for a automatically when the execution price 60-second Display Only Period. During of a pilot security moves more than a that 60-second Display Only Period, the fixed amount away from a preSystem shall: established ‘‘triggering price’’ for that (A) maintain all current quotes and security. The triggering price for each orders and continue to accept quotes pilot security is the price of any and orders in that System Security; and execution by the system in that security (B) Disseminate by electronic means within the previous 30 seconds. For an Order Imbalance Indicator every 5 each pilot security, the system seconds. (3) At the conclusion of the 60-second continually compares the price of each execution in the system against the Display Only Period, the System shall prices of all system executions in that re-open the market by executing the security over the 30 seconds. Once Nasdaq Halt Cross as set forth in triggered, NASDAQ institutes a formal subsection (b)(2)–(4) above. (4) If the opening price established by trading halt during which time NASDAQ systems are prohibited from the Nasdaq Halt Cross pursuant to subsection (b)(2)(A)–(D) above is outside executing orders. Members, however, may continue to enter quotes and the benchmarks established by Nasdaq by a threshold amount, the Nasdaq Halt orders, which are queued during a 60second Display Only Period. At the Cross will occur at the price within the threshold amounts that best satisfies the conclusion of the Display Only Period, the queued orders are executed at a conditions of subparagraphs (b)(2)(A) through (D) above. Nasdaq management single price, pursuant to NASDAQ’s Halt Cross mechanism.4 shall set and modify such benchmarks NASDAQ is preparing to implement and thresholds from time to time upon the Volatility Guard in the second prior notice to market participants. quarter of 2011, and through these (d) No change. preparations NASDAQ identified a * * * * * possible concern with the effective time II. Self-Regulatory Organization’s 3 See Securities Exchange Act Release No. 64071 Statement of the Purpose of, and (March 11, 2011), 76 FR 14699 (March 17, 2011) Statutory Basis for, the Proposed Rule (SR–NASDAQ–2010–074). Amendment 1 to SR– Change NASDAQ–2010–074 designated the NASDAQ 100 Index as the 100 pilot securities. In its filing with the Commission, the 4 The Nasdaq Halt Cross is ‘‘the process for Exchange included statements determining the price at which Eligible Interest concerning the purpose of and basis for shall be executed at the open of trading for a halted the proposed rule change and discussed security and for executing that Eligible Interest.’’ any comments it received on the See Nasdaq Rule 4753(a)(3). PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 E:\FR\FM\13APN1.SGM 13APN1

Agencies

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20741-20742]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8897]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64226; File No. SR-FINRA-2011-005]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Approval of a Proposed Rule Change 
Relating to Promissory Note Proceedings

April 7, 2011.

I. Introduction

    On February 4, 2011, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``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 to amend Rule 13806 of the Code of Arbitration 
Procedure for Industry Disputes (``Industry Code'') to provide that 
FINRA will appoint a chair-qualified public arbitrator also qualified 
to resolve statutory discrimination cases. The proposed rule change was 
published for comment in the Federal Register on February 22, 2011.\3\ 
The Commission did not receive any comments on the proposal. This order 
approves the proposed change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities and Exchange Act Release No. 63909 (February 
15, 2011), 76 FR 9838 (February 22, 2011) (``Notice'').
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II. Description of the Proposal

    In 2009, FINRA implemented new procedures to expedite the 
administration of cases that solely involve a broker-dealer's claim 
that an associated person failed to pay money owed on a promissory 
note.\4\ Under these procedures, FINRA appoints a single chair-
qualified public arbitrator from the roster of arbitrators approved to 
hear statutory discrimination claims (a statutory discrimination 
qualified arbitrator) \5\ to resolve the dispute.\6\ These specially 
qualified arbitrators are public chair-qualified arbitrators who also 
are attorneys familiar with employment law and have at least ten years 
of legal experience. In addition, they may not have represented 
primarily the views of employers or of employees within the last five 
years. FINRA proposed using statutory discrimination qualified 
arbitrators because of the depth of their experience and their 
familiarity with employment law. At the time that FINRA filed the 
proposed rule change, these arbitrators were underutilized at the 
forum.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Rel. No. 60132 (June 17, 2009), 
74 FR 30191 (June 24, 2009) (File No. SR-FINRA-2009-015). FINRA 
announced implementation of New Rule 13806 (Promissory Note 
Proceedings) in Regulatory Notice 09-48 (August 2009). The effective 
date was September 14, 2009.
    \5\ See Rule 13802(c)(3).
    \6\ Under Rule 13806, if an associated person does not file an 
answer, or files an answer but does not assert any counterclaims or 
third party claims, regardless of the amount in dispute, a single 
statutory discrimination qualified arbitrator decides the case. If 
an associated person files a counterclaim or third party claim, 
FINRA bases panel composition on the amount of the counterclaim or 
third party claim. For counterclaims and third party claims that are 
not more than $100,000, FINRA appoints a single statutory 
discrimination qualified arbitrator. For counterclaims and third 
party claims of more than $100,000, FINRA appoints a three-
arbitrator panel comprised of a statutory discrimination qualified 
arbitrator, a public arbitrator, and a non-public arbitrator.
---------------------------------------------------------------------------

    Since implementing the new procedures, FINRA has found that 
promissory note cases do not require extensive experience or depth of 
knowledge (or the limitation on representation of employers or of 
employees within the last five years). In a majority of completed 
cases, arbitrators decided the case on the pleadings and the respondent 
broker did not appear.\7\ Experience with the new procedures led FINRA 
to propose amending the Industry Code to provide that FINRA will 
appoint a chair-qualified public arbitrator to a panel resolving a 
promissory note dispute instead of appointing a statutory 
discrimination qualified arbitrator. Chair-qualified arbitrators have 
completed chair training and are attorneys who have served through 
award on at least two cases, or, if not attorneys, are arbitrators who 
have served through award on at least three cases.\8\
---------------------------------------------------------------------------

    \7\ Of the first 175 promissory note cases completed, 
arbitrators decided the case on the pleadings 76 percent of the time 
(unless the case concluded by settlement or some other means).
    \8\ See Rule 12400(c).
---------------------------------------------------------------------------

    In addition, the number of promissory note cases has more than 
doubled in the past two years. As a result of this substantial 
increase, it is becoming more difficult to appoint panels solely with 
statutory discrimination qualified arbitrators to these cases. Under 
the proposed rule change, the number of arbitrators available for 
appointment in promissory note cases would increase significantly. The 
proposed rule change would ensure that FINRA has a sufficient number of 
qualified arbitrators readily available to resolve these matters.
    As explained in the Notice, FINRA believes that the proposed rule 
change is consistent with the provisions of Section 15A(b)(6) of the 
Act,\9\ which requires, among other things, that FINRA 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 is consistent with the provisions of the Act noted 
above because it would ensure that FINRA has a sufficient number of 
qualified arbitrators readily available to resolve promissory note 
cases.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

III. Discussion of Comment Letters

    The Commission did not receive any comment letters regarding the 
proposed rule change.

IV. Commission Findings

    The Commission has carefully reviewed 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 a 
national securities association.\10\ In particular, the Commission 
finds that the proposed rule change is consistent with Section 
15A(b)(6) of the Act,\11\ 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. More 
specifically, the Commission finds that the proposed rule change to 
allow chair-qualified arbitrators to hear promissory note cases would 
help to ensure that there are sufficient number of qualified 
arbitrators readily available to resolve such cases.
---------------------------------------------------------------------------

    \10\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78o-3(b)(6).

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[[Page 20742]]

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-FINRA-2011-005), be, and 
hereby is, approved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8897 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P
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