Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of Proposed Rule Change To Amend FINRA Rule 9251 to Explicitly Protect From Discovery Those Documents That Federal Law Prohibits FINRA From Disclosing, 56848-56850 [2011-23377]
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56848
Federal Register / Vol. 76, No. 178 / Wednesday, September 14, 2011 / Notices
it to offer SPR subsriptions on a daily
basis.
This proposed change to the SPR
service will require an update to the
DTC Fee Schedule to reflect the new
subscription type. Specifically, DTC
proposes to charge $9,450 per year for
the first recipient of the SPR for a
security issue and $6,785 for each
additional recipient of the SPR for that
security. In addition, DTC proposes to
charge $2,785 per year for each
additional CUSIP in the same family
(i.e., securities whose CUSIP numbers
have the same first six characters) of
securities, one of which is the subject of
an existing Daily Report annual
subscription. A one year minimum
Daily Report subscription would be
required to qualify for this new
subscription category.
In addition, DTC proposes to offer a
new ‘‘Commercial Paper Family Report’’
that would indicate DTC’s participants’
closing positions in commercial paper
securities as of a specific date. The fee
for this report would be $22 per report
for each additional CUSIP in the same
family, which, similar to the proposed
Daily Report subscription explained
above, refers to securities with the same
base CUSIP number (i.e., securities
whose CUSIP numbers have the same
first six characters), of securities, one of
which is the subject of an existing Daily
Report annual subscription.
DTC is also updating its SPR Fee
Schedule with certain technical changes
that are detailed in Exhibit 5 to DTC’s
filing and that can be viewed online at
https://www.dtcc.com/legal/rule_filings/
dtc/2011.php.
DTC states that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 5
and the rules and regulations
thereunder applicable to DTC because it
is designed to facilitate the distribution
of security position information to
issuers and trustees in connection with
their regulatory reporting obligations
and, as such, promotes the protection of
investors and the public interest. In
addition and more specifically, DTC
believes that the proposed rule filing is
consistent with Rule 17Ad–8 under the
Act 6 in that the proposed fees are
designed to recover the reasonable costs
of providing the securities position
listing. DTC based its pricing for the
provision of the securities position
listing using the underlying costs of
providing the service versus the
projected volumes.
5 15
U.S.C. 78q–1.
6 Supra note 2.
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Jkt 223001
B. Self-Regulatory Organization’s
Statement on Burden on Competition
DTC 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
DTC has not solicited or received
written comments relating to the
proposed rule change. DTC will notify
the Commission of any written
comments it receives.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
ninety 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
the 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:
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
No. SR–DTC–2011–07 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 No.
SR–DTC–2011–07. 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/
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
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 DTC’s principal office and
DTC’s Web site at https://www.dtcc.com/
legal/rule_filings/dtc/2011.php. 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 No.
SR–DTC–2011–07 and should be
submitted on or before October 5, 2011.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.7
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–23380 Filed 9–13–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65281; File No. SR–FINRA–
2011–031
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Granting
Approval of Proposed Rule Change To
Amend FINRA Rule 9251 to Explicitly
Protect From Discovery Those
Documents That Federal Law Prohibits
FINRA From Disclosing
September 7, 2011.
I. Introduction
On July 8, 2011, 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 to
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 76, No. 178 / Wednesday, September 14, 2011 / Notices
amend FINRA Rule 9251 to explicitly
protect from discovery those documents
that federal law prohibits FINRA from
disclosing. The proposed rule change
was published for comment in the
Federal Register on July 26, 2011.3 The
Commission received two comment
letters on the proposed rule change.4
This order approves the proposed rule
change.
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Description of the Proposal
FINRA Rule 9251 delineates the types
of documents that FINRA’s Department
of Enforcement (‘‘Enforcement’’) and
Department of Market Regulation
(‘‘Market Regulation’’) must produce to
respondents during the discovery phase
of a disciplinary proceeding. The rule
also explicitly shields certain types of
documents from production. For
example, the rule provides that
Enforcement and Market Regulation
may withhold documents that are
protected by attorney-client privilege or
constitute attorney work product.5 The
rule also allows documents to be
withheld where a hearing officer
determines that they are irrelevant to
the proceeding or for other good cause.6
The rule does not, however, explicitly
shield from discovery documents that
federal law prohibits FINRA from
disclosing.
The rule contains procedural
safeguards to protect against
inappropriate withholding of
documents by Enforcement and Market
Regulation. Specifically, the rule
provides that the hearing officer may
require Enforcement or Market
Regulation to submit to the hearing
officer either a list of withheld
documents or any document withheld
so that the hearing officer may privately
review it to determine the appropriate
status of a withheld document.7 Upon
review, the hearing officer may order
Enforcement or Market Regulation to
make the list or document withheld
available to other parties.8 Moreover,
the rule prohibits Enforcement or
Market Regulation from withholding a
document, or part thereof, that contains
material exculpatory evidence.9
FINRA’s proposal would amend
FINRA Rule 9251 to explicitly protect
3 See Securities Exchange Act Release No. 64934
(July 20, 2011), 76 FR 44645 (July 26, 2011)
(‘‘Notice’’).
4 See letter from Neal E. Nakagiri, President, Chief
Executive Officer and Chief Compliance Officer,
NPB Financial Group, LLC, dated July 27, 2011
(‘‘NPB Letter’’); letter from Joyce Dillard, dated
August 16, 2011.
5 FINRA Rule 9251(b)(1)(A).
6 FINRA Rule 9251(b)(1)(D).
7 See FINRA Rule 9251(c).
8 Id.
9 FINRA Rule 9251(b)(2).
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Jkt 223001
from discovery documents that are
prohibited from disclosure pursuant to
federal law. Currently, when
Enforcement and Market Regulation
possess a document that federal law
prohibits them from disclosing, they
must affirmatively seek a hearing officer
determination that they can withhold it
on the grounds of lack of relevancy or
for other good cause.10 The proposed
rule change will eliminate the need for
such a hearing officer determination by
adding a new provision that expressly
provides that Market Regulation or
Enforcement shall withhold a document
from production if disclosure is
prohibited by federal law.
Certain of the rule’s procedural
safeguards discussed above would apply
to documents withheld pursuant to this
new provision. As discussed above, a
hearing officer may review any
documents withheld pursuant to this
new provision, and may order
Enforcement or Market Regulation to
make the list of withheld documents or
the documents withheld available to
other parties. However, the proposed
rule change precludes a hearing officer
from requiring Enforcement or Market
Regulation to make the list of
documents withheld or any document
withheld available to other parties if
federal law prohibits disclosure of the
document or the document’s existence.
Moreover, the rule’s prohibition on
withholding documents, or parts
thereof, that contain exculpatory
evidence does not apply to documents
prohibited from disclosure by federal
law.
FINRA stated that the proposed rule
change will be effective 30 days
following publication of the Regulatory
Notice announcing Commission
approval.
III. Summary of Comment Letters
Both commenters questioned the
fairness of the proposed rule change,
and noted concerns about the
opportunities afforded to those charged
in a FINRA disciplinary proceeding.11
In particular, one commenter stated that
if the present system results in ‘‘testing’’
the federal laws that may prevent
disclosure of certain documents, then
the current system should continue as
is.12 The commenter was particularly
concerned about the ability of Market
Regulation or Enforcement to withhold
documents that contain exculpatory
evidence.13 While the commenter
appreciated FINRA’s desire to
10 See
FINRA Rule 9251(b)(1)(D).
supra, note 4.
12 NPB Letter.
13 Id.
11 See
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Fmt 4703
Sfmt 4703
56849
streamline the disciplinary process, the
commenter believed that given the
stakes involved, ‘‘every opportunity and
effort’’ should be afforded to those
charged in a disciplinary proceeding.14
IV. Discussion and Commission’s
Findings
The Commission has carefully
reviewed the proposed rule change and
the comments received, 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.15 In particular, the
Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act,16 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. The
Commission also believes that the
proposal is consistent with Section
15A(b)(8) of the Act,17 which requires
that the rules of the association provide
a fair procedure for the disciplining of
members and associated persons.
More specifically, the Commission
believes that clarifying that Market
Regulation and Enforcement shall
withhold documents prohibited from
disclosure by federal law both promotes
a fair and efficient disciplinary process
and helps ensure compliance with
federal law by avoiding the need for
unnecessary ‘‘good cause’’ motions
regarding documents that federal law
prohibits FINRA from producing during
a disciplinary proceeding.
The Commission also believes that the
proposed rule change is subject to
adequate procedural safeguards to
protect against inappropriate use by
FINRA and that address the
commenters’ concerns. Specifically, a
hearing officer may review and
determine whether a document was
appropriately withheld by Market
Regulation or Enforcement as prohibited
from disclosure by federal law. If the
hearing officer determines that the
document is not prohibited from
disclosure by federal law, the hearing
officer may order the document be made
available to the other parties.
While the Commission appreciates
the commenter’s concern about FINRA
withholding exculpatory evidence, the
14 Id.
15 In approving this proposed rule change, the
Commission has considered the rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
16 15 U.S.C. 78o–3(b)(6).
17 15 U.S.C. 78o–3(b)(8).
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Federal Register / Vol. 76, No. 178 / Wednesday, September 14, 2011 / Notices
proposed rule would not change current
practice, as FINRA currently cannot
legally disclose a document—even if the
document contains exculpatory
evidence—if federal law prohibits
disclosure of the document in that
instance. Moreover, the Commission
believes that as part of determining
whether FINRA appropriately withheld
a document, the hearing officer would
need to review the applicable federal
law to assess whether the document at
issue is, in fact, prohibited from
disclosure.
For the reasons stated above, the
Commission finds that the rule change
is consistent with the Act and the rules
and regulations thereunder.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–FINRA–
2011–031) be, and it hereby is,
approved.
[FR Doc. 2011–23377 Filed 9–13–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65283; File No. SR–
NYSEAmex–2011–67]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing of
Proposed Rule Change Relating to
Fees for Trading Securities Listed on
the Nasdaq Stock Market LLC
Pursuant to Unlisted Trading
Privileges
mstockstill on DSK4VPTVN1PROD with NOTICES
September 7, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 1, 2011, NYSE Amex LLC
(‘‘NYSE Amex’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
19 17
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19:00 Sep 13, 2011
Jkt 223001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
2011 Price List (‘‘Price List’’) for certain
fees relating to trading pursuant to
unlisted trading privileges (‘‘UTP’’) of
securities listed on the Nasdaq Stock
Market LLC (‘‘Nasdaq’’). The proposed
amendment to the Exchange’s Price List
for equities is attached hereto as Exhibit
5. The text of the proposed rule change
is available at the Exchange, on the
Exchange’s Web site at www.nyse.com,
on the Commission’s Web site at
https://www.sec.gov, 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
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy,
Secretary.
18 15
solicit comments on the proposed rule
change from interested persons.
In its filing with the Commission, the
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Price List for certain fees relating to
trading Nasdaq securities pursuant to
UTP. The amended pricing will become
operative on September 1, 2011.
Currently, market participants,
Supplemental Liquidity Providers
(‘‘SLPs’’) and Designated Market Makers
(‘‘DMMs’’) are charged a fee of $0.0027
per share for orders in Nasdaq securities
with a share price of $1 or more traded
pursuant to UTP that take liquidity.
Under the proposal, there will be a fee
of $0.0004 per share for orders that take
liquidity.
Currently, market participants and
DMMs are charged a fee of $0.0029 per
share for orders in Nasdaq securities
with a share price of $1 or more that
route to other markets when reduced fee
volume requirements are not met. Under
the proposal, there would be a fee of
$0.0025 per share for such orders.
Market participants, other than DMMs
and SLPs, that provide liquidity in
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
Nasdaq securities with a share price of
$1 or more traded pursuant to UTP are
currently paid a rebate of $0.0030 per
share. Under the proposal, such market
participants will be paid a rebate of
$0.0010 per share.
Currently, for orders in Nasdaq
securities with a share price of $1 or
more traded pursuant to UTP that
provide liquidity, DMMs, as well as
SLPs that meet their quoting
requirements pursuant to Rule 107B are
paid a rebate of $0.0031 per share, and
SLPs that do not meet their quoting
requirements are paid a rebate of
$0.0030 per share for orders that
provide liquidity. Under the proposal,
the rebate will be $0.0011 per share for
orders that provide liquidity for SLPs
that meet their quoting requirements
while SLPs that provide liquidity but do
not meet their quoting requirements will
be paid a rebate of $0.0010 per share.
The rebate will be $0.0020 per share for
orders that provide liquidity for DMMs.
Currently, market participants and
SLPs are paid a rebate of $0.0036 per
share for executions of displayed
liquidity in Nasdaq securities with a
share price of $1 or more when they are
adding liquidity in orders that originally
display a minimum of 2,000 shares with
a trading price of at least $5.00 per
share, as long as the order is not
cancelled in an amount that would
reduce the original displayed amount
below 2,000 shares. Under the proposal,
such market participants and SLPs will
be paid a rebate of $0.0020 per share.
Currently, DMMs receive a rebate of
$0.0036 per share in Nasdaq securities
with a share price of $1 or more traded
pursuant to UTP for executions of the
displayed portions of s-Quotes that
provide liquidity and display 2,000
shares or more at the time of execution
with a trading price of at least $5.00 per
share. Under the proposal, DMMs will
be paid a rebate of $0.0020 per share.
In a rule filing submitted on March
29, 2011,4 the Exchange adopted a new
tier with a reduced ‘‘take’’ fee of $0.0019
per share (compared with $0.0027 then
in effect) and a reduced routing fee of
$0.0019 per share (compared with
$0.0029 then in effect) for market
participants and DMMs that meet
certain average daily executed volume
requirements in either shares or a
combination of shares and contracts
traded on the NYSE Amex options
market. Under the proposal, this tier
and the related routing fee will be
4 See Securities Exchange Act Release No. 64195
(April 5, 2011), 75 FR 20428 (April 12, 2011) (SR–
NYSEAmex–2011–21).
E:\FR\FM\14SEN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 178 (Wednesday, September 14, 2011)]
[Notices]
[Pages 56848-56850]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23377]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65281; File No. SR-FINRA-2011-031
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of Proposed Rule Change To
Amend FINRA Rule 9251 to Explicitly Protect From Discovery Those
Documents That Federal Law Prohibits FINRA From Disclosing
September 7, 2011.
I. Introduction
On July 8, 2011, 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 to
[[Page 56849]]
amend FINRA Rule 9251 to explicitly protect from discovery those
documents that federal law prohibits FINRA from disclosing. The
proposed rule change was published for comment in the Federal Register
on July 26, 2011.\3\ The Commission received two comment letters on the
proposed rule change.\4\ 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. 64934 (July 20,
2011), 76 FR 44645 (July 26, 2011) (``Notice'').
\4\ See letter from Neal E. Nakagiri, President, Chief Executive
Officer and Chief Compliance Officer, NPB Financial Group, LLC,
dated July 27, 2011 (``NPB Letter''); letter from Joyce Dillard,
dated August 16, 2011.
---------------------------------------------------------------------------
II. Description of the Proposal
FINRA Rule 9251 delineates the types of documents that FINRA's
Department of Enforcement (``Enforcement'') and Department of Market
Regulation (``Market Regulation'') must produce to respondents during
the discovery phase of a disciplinary proceeding. The rule also
explicitly shields certain types of documents from production. For
example, the rule provides that Enforcement and Market Regulation may
withhold documents that are protected by attorney-client privilege or
constitute attorney work product.\5\ The rule also allows documents to
be withheld where a hearing officer determines that they are irrelevant
to the proceeding or for other good cause.\6\ The rule does not,
however, explicitly shield from discovery documents that federal law
prohibits FINRA from disclosing.
---------------------------------------------------------------------------
\5\ FINRA Rule 9251(b)(1)(A).
\6\ FINRA Rule 9251(b)(1)(D).
---------------------------------------------------------------------------
The rule contains procedural safeguards to protect against
inappropriate withholding of documents by Enforcement and Market
Regulation. Specifically, the rule provides that the hearing officer
may require Enforcement or Market Regulation to submit to the hearing
officer either a list of withheld documents or any document withheld so
that the hearing officer may privately review it to determine the
appropriate status of a withheld document.\7\ Upon review, the hearing
officer may order Enforcement or Market Regulation to make the list or
document withheld available to other parties.\8\ Moreover, the rule
prohibits Enforcement or Market Regulation from withholding a document,
or part thereof, that contains material exculpatory evidence.\9\
---------------------------------------------------------------------------
\7\ See FINRA Rule 9251(c).
\8\ Id.
\9\ FINRA Rule 9251(b)(2).
---------------------------------------------------------------------------
FINRA's proposal would amend FINRA Rule 9251 to explicitly protect
from discovery documents that are prohibited from disclosure pursuant
to federal law. Currently, when Enforcement and Market Regulation
possess a document that federal law prohibits them from disclosing,
they must affirmatively seek a hearing officer determination that they
can withhold it on the grounds of lack of relevancy or for other good
cause.\10\ The proposed rule change will eliminate the need for such a
hearing officer determination by adding a new provision that expressly
provides that Market Regulation or Enforcement shall withhold a
document from production if disclosure is prohibited by federal law.
---------------------------------------------------------------------------
\10\ See FINRA Rule 9251(b)(1)(D).
---------------------------------------------------------------------------
Certain of the rule's procedural safeguards discussed above would
apply to documents withheld pursuant to this new provision. As
discussed above, a hearing officer may review any documents withheld
pursuant to this new provision, and may order Enforcement or Market
Regulation to make the list of withheld documents or the documents
withheld available to other parties. However, the proposed rule change
precludes a hearing officer from requiring Enforcement or Market
Regulation to make the list of documents withheld or any document
withheld available to other parties if federal law prohibits disclosure
of the document or the document's existence. Moreover, the rule's
prohibition on withholding documents, or parts thereof, that contain
exculpatory evidence does not apply to documents prohibited from
disclosure by federal law.
FINRA stated that the proposed rule change will be effective 30
days following publication of the Regulatory Notice announcing
Commission approval.
III. Summary of Comment Letters
Both commenters questioned the fairness of the proposed rule
change, and noted concerns about the opportunities afforded to those
charged in a FINRA disciplinary proceeding.\11\ In particular, one
commenter stated that if the present system results in ``testing'' the
federal laws that may prevent disclosure of certain documents, then the
current system should continue as is.\12\ The commenter was
particularly concerned about the ability of Market Regulation or
Enforcement to withhold documents that contain exculpatory
evidence.\13\ While the commenter appreciated FINRA's desire to
streamline the disciplinary process, the commenter believed that given
the stakes involved, ``every opportunity and effort'' should be
afforded to those charged in a disciplinary proceeding.\14\
---------------------------------------------------------------------------
\11\ See supra, note 4.
\12\ NPB Letter.
\13\ Id.
\14\ Id.
---------------------------------------------------------------------------
IV. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and
the comments received, 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.\15\ In particular, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Act,\16\ 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. The Commission also believes that
the proposal is consistent with Section 15A(b)(8) of the Act,\17\ which
requires that the rules of the association provide a fair procedure for
the disciplining of members and associated persons.
---------------------------------------------------------------------------
\15\ In approving this proposed rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\16\ 15 U.S.C. 78o-3(b)(6).
\17\ 15 U.S.C. 78o-3(b)(8).
---------------------------------------------------------------------------
More specifically, the Commission believes that clarifying that
Market Regulation and Enforcement shall withhold documents prohibited
from disclosure by federal law both promotes a fair and efficient
disciplinary process and helps ensure compliance with federal law by
avoiding the need for unnecessary ``good cause'' motions regarding
documents that federal law prohibits FINRA from producing during a
disciplinary proceeding.
The Commission also believes that the proposed rule change is
subject to adequate procedural safeguards to protect against
inappropriate use by FINRA and that address the commenters' concerns.
Specifically, a hearing officer may review and determine whether a
document was appropriately withheld by Market Regulation or Enforcement
as prohibited from disclosure by federal law. If the hearing officer
determines that the document is not prohibited from disclosure by
federal law, the hearing officer may order the document be made
available to the other parties.
While the Commission appreciates the commenter's concern about
FINRA withholding exculpatory evidence, the
[[Page 56850]]
proposed rule would not change current practice, as FINRA currently
cannot legally disclose a document--even if the document contains
exculpatory evidence--if federal law prohibits disclosure of the
document in that instance. Moreover, the Commission believes that as
part of determining whether FINRA appropriately withheld a document,
the hearing officer would need to review the applicable federal law to
assess whether the document at issue is, in fact, prohibited from
disclosure.
For the reasons stated above, the Commission finds that the rule
change is consistent with the Act and the rules and regulations
thereunder.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-FINRA-2011-031) be, and it
hereby is, approved.
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\18\ 15 U.S.C. 78s(b)(2).
\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23377 Filed 9-13-11; 8:45 am]
BILLING CODE 8011-01-P
