Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Amend the By-Laws of FINRA Regulation, Inc. With Regard to District Committees, 25397-25399 [2011-10857]
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Federal Register / Vol. 76, No. 86 / Wesnesday, May 4, 2011 / Notices
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, 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.
BSECC believes that changing the
name of the Nominating Committee to
the Nominating and Governance
Committee and amending references to
an exchange name to reflect a corporate
change to a limited liability company
are both clarifying in nature. The
changes will ensure that the
committee’s title accurately reflects its
functions and will ensure that the ByLaws accurately and properly reflect an
exchange entity name. As discussed
above, the amendment that broker
nonvotes will not be counted as a vote
either ‘‘for’’ or ‘‘against’’ in director
elections will codify NASDAQ OMX’s
past practice, providing clarity and
transparency. Accordingly BSECC
believes that the amendments are
consistent with investor protection and
the public interest.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
BSECC does not believe that the
proposed rule change will have any
impact or impose any burden on
competition.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants, or Others
Written comments relating to the
proposed rule change have not been
solicited or received. BSECC will notify
the Commission of any written
comments received by BSECC.
jlentini on DSKJ8SOYB1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) of
the Act 13 and Rule 19b–4(f)(6) 14
thereunder because the proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
13 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. NASDAQ OMX PHLX LLC has
satisfied this requirement.
14 17
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17:45 May 03, 2011
Jkt 223001
Commission may designate. At any time
within 60 days of the filing of the
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. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or 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–BSECC–2011–002 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–BSECC–2011–002. 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 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 filings
also will be available for inspection and
copying at the principal office of BSECC
and on BSECC’s Web site at https://
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
25397
nasdaqomxbx.cchwallstreet.com/
NASDAQOMXBX/pdf/bsecc-filings/
2011/SR-BSECC-2011-002.pdf.
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–BSECC–2011–002 and
should be submitted on or before May
25, 2011.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.15
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–10855 Filed 5–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64363; File No. SR–FINRA–
2011–011]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change To Amend the
By-Laws of FINRA Regulation, Inc.
With Regard to District Committees
April 28, 2011.
I. Introduction
On February 25, 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 the ByLaws of FINRA’s regulatory subsidiary
(‘‘FINRA Regulation’’) with regard to
District Committee structure and
governance to, among other things,
adjust the size and composition of
District Committees to align more
closely with the industry representation
on the FINRA Board and replace District
Nominating Committees with a process
of direct nomination and election based
on firm size. The proposed rule change
was published for comment in the
Federal Register on March 7, 2011.3 The
Commission received one comment
letter on the proposed rule change.4
15 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. 64002
(March 2, 2011), 76 FR 12390 (‘‘Notice’’).
4 See letter from Ed Horwitz, District and
Committee Member, Horwitz and Associates, Inc.,
1 15
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04MYN1
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Federal Register / Vol. 76, No. 86 / Wesnesday, May 4, 2011 / Notices
jlentini on DSKJ8SOYB1PROD with NOTICES
FINRA responded to the Horwitz Letter
on April 15, 2011.5 This order approves
the proposed rule change.
II. Background—District Committees,
District Nominating Committees,
Districts and Regions
Pursuant to the By-Laws, the FINRA
Regulation Board of Directors
determines the boundaries of the
districts and the size of the District
Committees. The FINRA Regulation
Board has established eleven districts,
overseen by FINRA District Offices,
which are administratively grouped
within five regions (the West, the
Midwest, the South, the North and New
York).
Currently, FINRA District Committee
members contribute to the regulatory
process by, among other things, serving
as panelists in disciplinary proceedings
in accordance with FINRA Rules;
considering and recommending policies
and rule changes; and endeavoring to
educate FINRA members and others as
to the objects, purposes and work of
FINRA and FINRA Regulation. The
District Committees meet on average
twice each year, jointly with the other
District Committees in their respective
regions. District Committees are
composed of nine members, with the
exception of the New York District
Committee which has twelve. Due to
staggered three-year District Committee
membership terms, one-third of each
District Committee’s positions are
available for election each year. In some
cases, a District Committee may have
additional positions to fill if a member
has died, resigned, or been removed
creating a vacancy on the Committee.
The District Nominating Committees
are composed of five members each, a
majority of whom have served on a
District Committee, are current or
former FINRA Regulation Directors, or
current or former FINRA Governors. As
part of the election process, the By-Laws
require the Corporate Secretary to
provide each District Nominating
Committee and District Director notice,
on or before June 1 of each year,
identifying the members of the District
Committees and District Nominating
Committees whose terms are expiring
within the next calendar year. After the
vacancies are announced, any interested
party may propose a candidate profile
which will be used by the District
Nominating Committees for review, a
process that usually involves candidate
to Commission, dated March 25, 2011 (‘‘Horwitz
Letter’’).
5 See letter from John Komoroske, Vice President,
Member Regulation, FINRA, to Elizabeth M.
Murphy, Secretary, Commission dated April 15,
2011 (‘‘FINRA Response’’).
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17:45 May 03, 2011
Jkt 223001
interviews and that will conclude with
the nomination of a slate of candidates
for election. The By-Laws also provide
a process whereby a registered person
meeting the vacancy requirements may
be considered for nomination as an
additional (‘‘petition’’) candidate in a
contested election. In recent years,
FINRA has witnessed a decline in the
number of eligible individuals willing to
serve on the District or District
Nominating committees or to undergo
the nomination process. FINRA believes
this decline is due to a number of
perceived problems which FINRA seeks
to address by streamlining the
nomination and election process as
described below.
III. Description of the Proposed Rule
Change
FINRA proposed to modify the FINRA
Regulation By-Laws (‘‘By-Laws’’) with
regard to District Committees in several
respects. FINRA proposed to:
• Adjust the size and composition of
District Committees over a three-year
transition period to align more closely
with the industry representation on the
FINRA Board;
• Replace District Nominating
Committees with a process of direct
nomination and election based on firm
size;
• Codify the current practice of
District Committees meeting on a
regional basis;
• Eliminate the Advisory Council;
• Amend the qualification
requirements and prescribe further term
limits for District Committee members;
• Revise procedures for qualification
and accounting of ballots to be
administered solely by an Independent
Agent; and
• Make other procedural and
administrative changes.
IV. Discussion of Comment Letter
As noted above, the Commission
received one comment letter on the
proposed rule change and FINRA
responded to the comment.6 The
commenter opposed the proposal for
two reasons. First, the commenter states
that the proposed rule change would
give large firms disproportionate
representation on the District
Committees. The commenter notes that
Large Firms make up 8.52 percent of
FINRA’s membership and employ 88.04
percent of the total registered
representatives, while Small Firms
make up 91.48 percent of FINRA’s
membership and employ 11.95 percent
6 See
PO 00000
supra notes 4 and 5.
Frm 00101
Fmt 4703
Sfmt 4703
of the total registered representatives.7
Though the commenter acknowledges
that large firms employ a significant
majority of registered representatives, he
notes that representatives do not count
as members.
FINRA responded to the issues raised
in the Horwitz Letter. FINRA believes
that the proposed composition of the
District Committees which is based on
the size of firms will ensure fairness and
balance between those firms that make
up the largest percentage of membership
and those firms that employ the largest
percentage of the registered
representative population. FINRA noted
that three-sevenths of the District
Committee members would be
associated with Small Firms, oneseventh with Mid-Sized Firms and
three-sevenths with Large Firms, as
these terms are defined in FINRA’s
rules. FINRA believes that having
representation on the District
Committees of firms of different sizes
should result in inclusion of firms
having different business models, and
more fully represent the interests of
FINRA’s diverse membership in
committee discussions. FINRA further
states that the proposed compositional
structure of the District Committees is
similar to the compositional structures
of industry representatives on the
FINRA Board of Governors and the
National Adjudicatory Council (‘‘NAC’’).
Second, the commenter questions the
proposal to eliminate the District
Nominating Committees and replace
them with a process of self-nomination
by individuals who meet the
qualification requirements. The
commenter believes that this proposed
change will make the voting process a
popularity contest rather than a
selection by peers based on proven track
records and industry background.
FINRA stated that it has witnessed a
decline in the number of eligible
individuals willing to serve on the
District or District Nominating
committees or to undergo the
nomination process. In response, FINRA
proposed to replace District Nomination
Committees with a process of direct
candidate nomination and election by
the membership because FINRA
believes the proposal will create a more
accessible, transparent, and effective
election process. Moreover, FINRA
notes that the District Nominating
Committees are made up of a majority
of former District Committee members,
or current or former Directors of the
FINRA Regulation Board and Governors
7 The commenter has combined the categories of
Mid-Sized Firm and Large Firm. See Response letter
at 2.
E:\FR\FM\04MYN1.SGM
04MYN1
Federal Register / Vol. 76, No. 86 / Wesnesday, May 4, 2011 / Notices
jlentini on DSKJ8SOYB1PROD with NOTICES
of the FINRA Board. FINRA stated that
it intends to seek informal input from
retiring District Committee members
regarding potential future members,
thus continuing to draw upon the
expertise of this group, without the need
and expense of the current District
Nominating Committees.
V. Commission Findings
The Commission has carefully
reviewed the proposed rule change, the
comment letter, and FINRA’s response
to the comment, and believes that
FINRA has appropriately responded to
the commenter’s concerns. 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, and, in
particular, with the provisions of
Section 15A(b)(6) of the Act,8 which
requires, among other things, that
FINRA rules 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.9
The proposed rule change is designed
to streamline the nomination and
election process for District Committees,
adjust the size and composition of
District Committees, amend the
qualification requirements, prescribe
further term limits for District
Committee members, and make other
administrative and technical changes to
the process, and should result in
additional candidates willing to serve
on a District Committee. The proposal
aligns the representation of members on
the District Committees to be generally
consistent with the industry
representation on the FINRA Board of
Governors and the industry
representation on the NAC. As FINRA
stated in its Response Letter, threesevenths of the District Committee
members will represent Small Firms,
one-seventh will represent Mid-Sized
Firms and three-sevenths will represent
Large Firms. FINRA’s goal is to more
closely align the membership of the
District Committees with its
membership while streamlining the
process for finding and electing
candidates to serve on the District
Committee.
FINRA will prohibit a District
Committee member from serving
consecutive three-year terms to bring
different perspectives and views to
8 15
U.S.C 78o–3(b)(6).
approving the 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).
9 In
VerDate Mar<15>2010
17:45 May 03, 2011
Jkt 223001
District Committees. Individuals
interested in serving more than one term
may do so on a non-consecutive basis.
FINRA is eliminating the Advisory
Council and will seek views on policy
issues and recommendations directly
from its membership. With these
changes, the Commission believes that
FINRA will be able to realize the goals
of the District Committee system
without the time and resource
expenditures now required of Advisory
Council members and FINRA staff.
Further, centralizing the election
process within the Corporate Secretary’s
office should streamline the process
making it more efficient. The Corporate
Secretary’s office will be able to apply
its administrative experience from other
FINRA elections to the process for
District Committee elections. 10
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–FINRA–
2011–011) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–10857 Filed 5–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64369; File No. SR–FINRA–
2011–021]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Extension of
Implementation Date for Expansion of
the Order Audit Trail System to All
NMS Stocks
April 29, 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 26,
2011, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by FINRA. FINRA has
10 FINRA
will implement the proposal on the first
day of the month following Commission approval.
11 15 U.S.C. 78s(b)(2).
12 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
25399
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to establish
October 3, 2011, as the implementation
date of the amendments to FINRA Rules
7410 and 7470 that the Commission
approved on November 12, 2010.4
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
FINRA is filing the proposed rule
change to establish October 3, 2011, as
the implementation date for the
amendments to the OATS rules
expanding the OATS recording and
reporting requirements to all NMS
stocks.
On November 12, 2010, the SEC
approved SR–FINRA–2010–044, which
amended FINRA Rules 7410 and 7470 to
expand the OATS recording and
reporting requirements to include all
NMS stocks.5 On January 11, 2011,
FINRA published Regulatory Notice 11–
03 announcing that the Commission
approved the amendments and that
FINRA was publishing a new version of
the OATS Reporting Technical
Specifications. Pursuant to the SEC’s
approval of SR–FINRA–2010–044 and
3 17
CFR 240.19b–4(f)(6).
Securities Exchange Act Rel. No. 63311
(November 12, 2010), 75 FR 70757 (November 18,
2010) (SR–FINRA–2010–044).
5 See Securities Exchange Act Rel. No. 63311
(November 12, 2010), 75 FR 70757 (November 18,
2010) (SR–FINRA–2010–044).
4 See
E:\FR\FM\04MYN1.SGM
04MYN1
]]>Agencies
[Federal Register Volume 76, Number 86 (Wednesday, May 4, 2011)]
[Notices]
[Pages 25397-25399]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10857]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64363; File No. SR-FINRA-2011-011]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change To Amend the By-
Laws of FINRA Regulation, Inc. With Regard to District Committees
April 28, 2011.
I. Introduction
On February 25, 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 the By-Laws of FINRA's regulatory
subsidiary (``FINRA Regulation'') with regard to District Committee
structure and governance to, among other things, adjust the size and
composition of District Committees to align more closely with the
industry representation on the FINRA Board and replace District
Nominating Committees with a process of direct nomination and election
based on firm size. The proposed rule change was published for comment
in the Federal Register on March 7, 2011.\3\ The Commission received
one comment letter on the proposed rule change.\4\
[[Page 25398]]
FINRA responded to the Horwitz Letter on April 15, 2011.\5\ This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 64002 (March 2,
2011), 76 FR 12390 (``Notice'').
\4\ See letter from Ed Horwitz, District and Committee Member,
Horwitz and Associates, Inc., to Commission, dated March 25, 2011
(``Horwitz Letter'').
\5\ See letter from John Komoroske, Vice President, Member
Regulation, FINRA, to Elizabeth M. Murphy, Secretary, Commission
dated April 15, 2011 (``FINRA Response'').
---------------------------------------------------------------------------
II. Background--District Committees, District Nominating Committees,
Districts and Regions
Pursuant to the By-Laws, the FINRA Regulation Board of Directors
determines the boundaries of the districts and the size of the District
Committees. The FINRA Regulation Board has established eleven
districts, overseen by FINRA District Offices, which are
administratively grouped within five regions (the West, the Midwest,
the South, the North and New York).
Currently, FINRA District Committee members contribute to the
regulatory process by, among other things, serving as panelists in
disciplinary proceedings in accordance with FINRA Rules; considering
and recommending policies and rule changes; and endeavoring to educate
FINRA members and others as to the objects, purposes and work of FINRA
and FINRA Regulation. The District Committees meet on average twice
each year, jointly with the other District Committees in their
respective regions. District Committees are composed of nine members,
with the exception of the New York District Committee which has twelve.
Due to staggered three-year District Committee membership terms, one-
third of each District Committee's positions are available for election
each year. In some cases, a District Committee may have additional
positions to fill if a member has died, resigned, or been removed
creating a vacancy on the Committee.
The District Nominating Committees are composed of five members
each, a majority of whom have served on a District Committee, are
current or former FINRA Regulation Directors, or current or former
FINRA Governors. As part of the election process, the By-Laws require
the Corporate Secretary to provide each District Nominating Committee
and District Director notice, on or before June 1 of each year,
identifying the members of the District Committees and District
Nominating Committees whose terms are expiring within the next calendar
year. After the vacancies are announced, any interested party may
propose a candidate profile which will be used by the District
Nominating Committees for review, a process that usually involves
candidate interviews and that will conclude with the nomination of a
slate of candidates for election. The By-Laws also provide a process
whereby a registered person meeting the vacancy requirements may be
considered for nomination as an additional (``petition'') candidate in
a contested election. In recent years, FINRA has witnessed a decline in
the number of eligible individuals willing to serve on the District or
District Nominating committees or to undergo the nomination process.
FINRA believes this decline is due to a number of perceived problems
which FINRA seeks to address by streamlining the nomination and
election process as described below.
III. Description of the Proposed Rule Change
FINRA proposed to modify the FINRA Regulation By-Laws (``By-Laws'')
with regard to District Committees in several respects. FINRA proposed
to:
Adjust the size and composition of District Committees
over a three-year transition period to align more closely with the
industry representation on the FINRA Board;
Replace District Nominating Committees with a process of
direct nomination and election based on firm size;
Codify the current practice of District Committees meeting
on a regional basis;
Eliminate the Advisory Council;
Amend the qualification requirements and prescribe further
term limits for District Committee members;
Revise procedures for qualification and accounting of
ballots to be administered solely by an Independent Agent; and
Make other procedural and administrative changes.
IV. Discussion of Comment Letter
As noted above, the Commission received one comment letter on the
proposed rule change and FINRA responded to the comment.\6\ The
commenter opposed the proposal for two reasons. First, the commenter
states that the proposed rule change would give large firms
disproportionate representation on the District Committees. The
commenter notes that Large Firms make up 8.52 percent of FINRA's
membership and employ 88.04 percent of the total registered
representatives, while Small Firms make up 91.48 percent of FINRA's
membership and employ 11.95 percent of the total registered
representatives.\7\ Though the commenter acknowledges that large firms
employ a significant majority of registered representatives, he notes
that representatives do not count as members.
---------------------------------------------------------------------------
\6\ See supra notes 4 and 5.
\7\ The commenter has combined the categories of Mid-Sized Firm
and Large Firm. See Response letter at 2.
---------------------------------------------------------------------------
FINRA responded to the issues raised in the Horwitz Letter. FINRA
believes that the proposed composition of the District Committees which
is based on the size of firms will ensure fairness and balance between
those firms that make up the largest percentage of membership and those
firms that employ the largest percentage of the registered
representative population. FINRA noted that three-sevenths of the
District Committee members would be associated with Small Firms, one-
seventh with Mid-Sized Firms and three-sevenths with Large Firms, as
these terms are defined in FINRA's rules. FINRA believes that having
representation on the District Committees of firms of different sizes
should result in inclusion of firms having different business models,
and more fully represent the interests of FINRA's diverse membership in
committee discussions. FINRA further states that the proposed
compositional structure of the District Committees is similar to the
compositional structures of industry representatives on the FINRA Board
of Governors and the National Adjudicatory Council (``NAC'').
Second, the commenter questions the proposal to eliminate the
District Nominating Committees and replace them with a process of self-
nomination by individuals who meet the qualification requirements. The
commenter believes that this proposed change will make the voting
process a popularity contest rather than a selection by peers based on
proven track records and industry background.
FINRA stated that it has witnessed a decline in the number of
eligible individuals willing to serve on the District or District
Nominating committees or to undergo the nomination process. In
response, FINRA proposed to replace District Nomination Committees with
a process of direct candidate nomination and election by the membership
because FINRA believes the proposal will create a more accessible,
transparent, and effective election process. Moreover, FINRA notes that
the District Nominating Committees are made up of a majority of former
District Committee members, or current or former Directors of the FINRA
Regulation Board and Governors
[[Page 25399]]
of the FINRA Board. FINRA stated that it intends to seek informal input
from retiring District Committee members regarding potential future
members, thus continuing to draw upon the expertise of this group,
without the need and expense of the current District Nominating
Committees.
V. Commission Findings
The Commission has carefully reviewed the proposed rule change, the
comment letter, and FINRA's response to the comment, and believes that
FINRA has appropriately responded to the commenter's concerns. 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, and, in particular,
with the provisions of Section 15A(b)(6) of the Act,\8\ which requires,
among other things, that FINRA rules 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.\9\
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\8\ 15 U.S.C 78o-3(b)(6).
\9\ In approving the 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).
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The proposed rule change is designed to streamline the nomination
and election process for District Committees, adjust the size and
composition of District Committees, amend the qualification
requirements, prescribe further term limits for District Committee
members, and make other administrative and technical changes to the
process, and should result in additional candidates willing to serve on
a District Committee. The proposal aligns the representation of members
on the District Committees to be generally consistent with the industry
representation on the FINRA Board of Governors and the industry
representation on the NAC. As FINRA stated in its Response Letter,
three-sevenths of the District Committee members will represent Small
Firms, one-seventh will represent Mid-Sized Firms and three-sevenths
will represent Large Firms. FINRA's goal is to more closely align the
membership of the District Committees with its membership while
streamlining the process for finding and electing candidates to serve
on the District Committee.
FINRA will prohibit a District Committee member from serving
consecutive three-year terms to bring different perspectives and views
to District Committees. Individuals interested in serving more than one
term may do so on a non-consecutive basis. FINRA is eliminating the
Advisory Council and will seek views on policy issues and
recommendations directly from its membership. With these changes, the
Commission believes that FINRA will be able to realize the goals of the
District Committee system without the time and resource expenditures
now required of Advisory Council members and FINRA staff. Further,
centralizing the election process within the Corporate Secretary's
office should streamline the process making it more efficient. The
Corporate Secretary's office will be able to apply its administrative
experience from other FINRA elections to the process for District
Committee elections. \10\
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\10\ FINRA will implement the proposal on the first day of the
month following Commission approval.
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-FINRA-2011-011) be, and
hereby is, approved.
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\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10857 Filed 5-3-11; 8:45 am]
BILLING CODE 8011-01-P
