Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change To Amend FINRA Rule 5131 (New Issue Allocations and Distributions), 29808-29809 [2011-12620]

Download as PDF 29808 Federal Register / Vol. 76, No. 99 / Monday, May 23, 2011 / Notices 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: srobinson on DSK4SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2011–20 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–NYSE–2011–20. 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 (http://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 the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from VerDate Mar<15>2010 16:22 May 20, 2011 Jkt 223001 submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NYSE– 2011–20 and should be submitted on or before June 13, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–12518 Filed 5–20–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64512; File No. SR–FINRA– 2011–017] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change To Amend FINRA Rule 5131 (New Issue Allocations and Distributions) May 18, 2011. I. Introduction On April 26, 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 FINRA Rule 5131 (New Issue Allocations and Distributions) to simplify the spinning provision in that Rule and to delay the implementation date of paragraphs (b) and (d)(4) under that Rule. This proposal was published for comment in the Federal Register on April 29, 2011.3 The Commission received no comments regarding the proposal.4 This order approves this proposed rule change on an accelerated basis. II. Description of the Proposed Rule Change On November 29, 2010, FINRA issued Regulatory Notice 10–60 announcing Commission approval of SR–NASD– 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 64341 (Apr. 26, 2011), 76 FR 24076 (Apr. 29, 2011) (SR– FINRA–2011–017). 4 The Commission received one comment whose caption indicated that it was filed in response to this proposal, but whose substance was directed to another proposal by the Commission. See comment letter submitted by Nancy DeTine, dated April 29, 2011. 2003–140 5 and designating the effective date of new Rule 5131 (the ‘‘Rule’’) as May 27, 2011.6 Paragraph (b) of the Rule (Spinning), implements a recommendation from the IPO Advisory Committee Report 7 to prohibit spinning—i.e., an underwriter’s allocation of IPO shares to directors or executives of investment banking clients in exchange for receipt of investment banking business. The primary means by which the Rule prohibits spinning is through a series of prophylactic prohibitions on the allocation of new issues. Specifically, the Rule prohibits allocations of a new issue to any account in which an executive officer or director of a public company or a covered non-public company, or a person materially supported by such executive officer or director, has a beneficial interest: (A) If the company is currently an investment banking services client of the member or the member has received compensation from the company for investment banking services in the past 12 months; (B) if the person responsible for making the allocation decision knows or has reason to know that the member intends to provide, or expects to be retained by the company for, investment banking services within the next 3 months; or (C) on the express or implied condition that such executive officer or director, on behalf of the company, will retain the member for the performance of future investment banking services. Paragraph (b)(1) requires that members establish, maintain, and enforce policies and procedures reasonably designed to ensure that investment banking personnel have no involvement or influence, directly or indirectly, in the new issue allocation decisions of the member. Because the term ‘‘investment banking personnel’’ is not defined in the Rule, members have raised concern that, if the term is read co-extensively with the definition of ‘‘investment banking services,’’ certain necessary functions traditionally performed by syndicate personnel would be prohibited. In light of this unintended consequence, FINRA proposes to delete paragraph (b)(1). FINRA believes that benefits of the antispinning provisions can be attained without this particular provision 1 15 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 5 See Securities Exchange Act Release No. 63010 (September 29, 2010), 75 FR 61541 (October 5, 2010) (Order Approving File No. SR–NASD–2003– 140). 6 See Regulatory Notice 10–60 (November 2010) (Approval of New Issue Rule). 7 NYSE/NASD IPO Advisory Committee Report and Recommendations (May 2003). http:// ww.finra.org/web/groups/industry/@ip/@reg/ @guide/documents/industry/p010373.pdf. E:\FR\FM\23MYN1.SGM 23MYN1 Federal Register / Vol. 76, No. 99 / Monday, May 23, 2011 / Notices inasmuch as firms currently are required to have written policies and procedures with respect to the spinning prohibitions in paragraph (b)(2) pursuant to NASD Rule 3010. In addition, upon further discussions with member firms regarding the steps necessary to prepare for compliance with the spinning provisions,8 FINRA proposes to delay the implementation date of paragraph (b), as amended, until September 26, 2011. Paragraph (d)(4) of the Rule (Market Orders) prohibits members from accepting any market order for the purchase of shares of a new issue in the secondary market prior to the commencement of trading of such shares in the secondary market. Members have requested additional time to develop a process for reliably identifying new issues and to modify their order handling systems to prevent the acceptance of market orders in new issue shares in contravention of the Rule. Accordingly, FINRA proposes to delay the implementation date of paragraph (d)(4) until September 26, 2011. FINRA represented that these proposed rule changes would be effective on the date of Commission approval. III. Discussion and Findings srobinson on DSK4SPTVN1PROD with NOTICES After careful review, the Commission finds that the proposed rule change to amend FINRA Rule 5131 is consistent with the requirements of the Act, and the rules and regulations thereunder that are applicable to a national securities association.9 In particular, the Commission finds that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,10 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. The proposed rule change reflects the concern that the Rule, as written, would prohibit certain necessary functions traditionally 8 For example, members have requested additional time to: (1) Create additional forms, account documents and other measures of obtaining information from clients necessary to assess eligibility for new issue allocations under the new Rule; (2) build systems and surveillance infrastructure to ensure appropriate blocks of allocations; and (3) develop appropriate compliance policies and procedures and training materials on the new policies and procedures. 9 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 10 15 U.S.C. 78o–3(b)(6). VerDate Mar<15>2010 16:22 May 20, 2011 Jkt 223001 performed by syndicate personnel. To respond to this concern, the Rule simplifies FINRA members’ obligations with respect to Rule 5131, thereby aiding member compliance efforts and helping to maintain investor confidence in the capital markets. Further, delay of the implementation date of paragraphs (b) and (d)(4) until September 26, 2011 will enable FINRA members to develop a process for reliably identifying new issues and to modify their order handling systems to prevent the acceptance of market orders in new issue shares in contravention of the Rule. In addition, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,11 for approving the proposed rule change on an accelerated basis. Without accelerated approval the Rule would take effect on May 27, 2011, even though the Commission is approving delaying the effective date of the Rule until September 26, 2011. Moreover, accelerated approval is appropriate because the proposed rule changes are minor and do not raise material or novel issues. Accordingly, the Commission finds that good cause exists for approving the rule change on an accelerated basis. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,12 that the proposed rule change (File No. SR– FINRA–2011–017) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–12620 Filed 5–20–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64511; File No. SR– NYSEAmex–2011–18] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Designation of a Longer Period for Commission Action on Proposed Rule Change Relating to the Formation of a Joint Venture Between the Exchange, Its Ultimate Parent NYSE Euronext, and Seven Other Entities To Operate an Electronic Trading Facility for Options Contracts May 18, 2011. On March 23, 2011, NYSE Amex LLC (‘‘Exchange’’) 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 relating to the formation of a joint venture between the Exchange, its ultimate parent NYSE Euronext, and seven other entities to establish a Delaware limited liability company to operate an electronic trading facility for options contracts. The proposed rule change was published for comment in the Federal Register on April 4, 2011.3 The Commission received three comments on the proposal.4 Section 19(b)(2) of the Act 5 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day for this filing is May 19, 2011. The Commission is hereby extending the 45-day time period for Commission action on the proposed rule change. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change. In particular, the extension 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 64144 (March 29, 2011), 76 FR 18591. 4 See Letter from Andrew Rothlein, to the Commission, dated April 14, 2011; Letter from Benjamin Kerensa, to the Commission, dated April 25, 2011; and Letter from Joan C. Conley, Senior Vice President and Corporate Secretary, Nasdaq OMX Group, Inc., to Elizabeth M. Murphy, Secretary, Commission, dated April 29, 2011. 5 15 U.S.C. 78s(b)(2). 2 17 11 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). 13 17 CFR 200.30–3(a)(12). 12 15 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 29809 E:\FR\FM\23MYN1.SGM 23MYN1

Agencies

[Federal Register Volume 76, Number 99 (Monday, May 23, 2011)]
[Notices]
[Pages 29808-29809]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-12620]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64512; File No. SR-FINRA-2011-017]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Accelerated Approval of a Proposed Rule 
Change To Amend FINRA Rule 5131 (New Issue Allocations and 
Distributions)

May 18, 2011.

I. Introduction

    On April 26, 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 FINRA Rule 5131 (New Issue Allocations 
and Distributions) to simplify the spinning provision in that Rule and 
to delay the implementation date of paragraphs (b) and (d)(4) under 
that Rule. This proposal was published for comment in the Federal 
Register on April 29, 2011.\3\ The Commission received no comments 
regarding the proposal.\4\ This order approves this proposed rule 
change on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 64341 (Apr. 26, 2011), 
76 FR 24076 (Apr. 29, 2011) (SR-FINRA-2011-017).
    \4\ The Commission received one comment whose caption indicated 
that it was filed in response to this proposal, but whose substance 
was directed to another proposal by the Commission. See comment 
letter submitted by Nancy DeTine, dated April 29, 2011.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    On November 29, 2010, FINRA issued Regulatory Notice 10-60 
announcing Commission approval of SR-NASD-2003-140 \5\ and designating 
the effective date of new Rule 5131 (the ``Rule'') as May 27, 2011.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 63010 (September 29, 
2010), 75 FR 61541 (October 5, 2010) (Order Approving File No. SR-
NASD-2003-140).
    \6\ See Regulatory Notice 10-60 (November 2010) (Approval of New 
Issue Rule).
---------------------------------------------------------------------------

    Paragraph (b) of the Rule (Spinning), implements a recommendation 
from the IPO Advisory Committee Report \7\ to prohibit spinning--i.e., 
an underwriter's allocation of IPO shares to directors or executives of 
investment banking clients in exchange for receipt of investment 
banking business. The primary means by which the Rule prohibits 
spinning is through a series of prophylactic prohibitions on the 
allocation of new issues. Specifically, the Rule prohibits allocations 
of a new issue to any account in which an executive officer or director 
of a public company or a covered non-public company, or a person 
materially supported by such executive officer or director, has a 
beneficial interest: (A) If the company is currently an investment 
banking services client of the member or the member has received 
compensation from the company for investment banking services in the 
past 12 months; (B) if the person responsible for making the allocation 
decision knows or has reason to know that the member intends to 
provide, or expects to be retained by the company for, investment 
banking services within the next 3 months; or (C) on the express or 
implied condition that such executive officer or director, on behalf of 
the company, will retain the member for the performance of future 
investment banking services.
---------------------------------------------------------------------------

    \7\ NYSE/NASD IPO Advisory Committee Report and Recommendations 
(May 2003). http://ww.finra.org/web/groups/industry/@ip/@reg/@guide/documents/industry/p010373.pdf.
---------------------------------------------------------------------------

    Paragraph (b)(1) requires that members establish, maintain, and 
enforce policies and procedures reasonably designed to ensure that 
investment banking personnel have no involvement or influence, directly 
or indirectly, in the new issue allocation decisions of the member. 
Because the term ``investment banking personnel'' is not defined in the 
Rule, members have raised concern that, if the term is read co-
extensively with the definition of ``investment banking services,'' 
certain necessary functions traditionally performed by syndicate 
personnel would be prohibited. In light of this unintended consequence, 
FINRA proposes to delete paragraph (b)(1). FINRA believes that benefits 
of the anti-spinning provisions can be attained without this particular 
provision

[[Page 29809]]

inasmuch as firms currently are required to have written policies and 
procedures with respect to the spinning prohibitions in paragraph 
(b)(2) pursuant to NASD Rule 3010.
    In addition, upon further discussions with member firms regarding 
the steps necessary to prepare for compliance with the spinning 
provisions,\8\ FINRA proposes to delay the implementation date of 
paragraph (b), as amended, until September 26, 2011.
---------------------------------------------------------------------------

    \8\ For example, members have requested additional time to: (1) 
Create additional forms, account documents and other measures of 
obtaining information from clients necessary to assess eligibility 
for new issue allocations under the new Rule; (2) build systems and 
surveillance infrastructure to ensure appropriate blocks of 
allocations; and (3) develop appropriate compliance policies and 
procedures and training materials on the new policies and 
procedures.
---------------------------------------------------------------------------

    Paragraph (d)(4) of the Rule (Market Orders) prohibits members from 
accepting any market order for the purchase of shares of a new issue in 
the secondary market prior to the commencement of trading of such 
shares in the secondary market. Members have requested additional time 
to develop a process for reliably identifying new issues and to modify 
their order handling systems to prevent the acceptance of market orders 
in new issue shares in contravention of the Rule. Accordingly, FINRA 
proposes to delay the implementation date of paragraph (d)(4) until 
September 26, 2011.
    FINRA represented that these proposed rule changes would be 
effective on the date of Commission approval.

III. Discussion and Findings

    After careful review, the Commission finds that the proposed rule 
change to amend FINRA Rule 5131 is consistent with the requirements of 
the Act, and the rules and regulations thereunder that are applicable 
to a national securities association.\9\ In particular, the Commission 
finds that the proposed rule change is consistent with the provisions 
of Section 15A(b)(6) of the Act,\10\ 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. The proposed rule change reflects the concern that the 
Rule, as written, would prohibit certain necessary functions 
traditionally performed by syndicate personnel. To respond to this 
concern, the Rule simplifies FINRA members' obligations with respect to 
Rule 5131, thereby aiding member compliance efforts and helping to 
maintain investor confidence in the capital markets. Further, delay of 
the implementation date of paragraphs (b) and (d)(4) until September 
26, 2011 will enable FINRA members to develop a process for reliably 
identifying new issues and to modify their order handling systems to 
prevent the acceptance of market orders in new issue shares in 
contravention of the Rule.
---------------------------------------------------------------------------

    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    In addition, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\11\ for approving the proposed rule 
change on an accelerated basis. Without accelerated approval the Rule 
would take effect on May 27, 2011, even though the Commission is 
approving delaying the effective date of the Rule until September 26, 
2011. Moreover, accelerated approval is appropriate because the 
proposed rule changes are minor and do not raise material or novel 
issues. Accordingly, the Commission finds that good cause exists for 
approving the rule change on an accelerated basis.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (File No. SR-FINRA-2011-017) be, 
and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \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. 2011-12620 Filed 5-20-11; 8:45 am]
BILLING CODE 8011-01-P