Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to Whistleblower Claims in Arbitration, 77283-77284 [2011-31761]

Download as PDF Federal Register / Vol. 76, No. 238 / Monday, December 12, 2011 / Notices 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 Section, 100 F Street NE., Washington, DC 20549–1090, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filings will also be available for inspection and copying at the principal office of NSCC and on NSCC’s Web site at https:// www.dtcc.com/downloads/legal/ rule_filings/2011/dtc/2011-10.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–DTC–2011–10 and should be submitted on or before January 3, 2012. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–31737 Filed 12–9–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65896; File No. SR–FINRA– 2011–067] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to Whistleblower Claims in Arbitration December 6, 2011. jlentini on DSK4TPTVN1PROD with NOTICES 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 November 21, 2011, the 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, II, and III below, which Items have been prepared by FINRA. 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 Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 13201 of the Code of Arbitration 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 15:55 Dec 09, 2011 Jkt 226001 Procedure for Industry Disputes (‘‘Industry Code’’) to align the rule with statutes that invalidate predispute arbitration agreements for whistleblower claims. The proposed rule change also would make a conforming amendment to FINRA Rule 2263. 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 The proposed rule change would amend FINRA Rule 13201 (Statutory Employment Discrimination Claims) of the Industry Code, and FINRA Rule 2263 (Arbitration Disclosure to Associated Persons Signing or Acknowledging Form U4), to align the rules with statutes that invalidate predispute arbitration agreements for whistleblower claims. The Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘DoddFrank Act’’) 3 amended the SarbanesOxley Act of 2002 (‘‘SOX’’) by adding a new paragraph (e) to 18 U.S.C. 1514A 4 to provide that: (1) WAIVER OF RIGHTS AND REMEDIES—The rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement. (2) PREDISPUTE ARBITRATION AGREEMENTS—No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section. 3 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, § 919 (2010). 4 See Dodd-Frank Section 922(c)(2), adding 18 U.S.C. 1514A(e) (Nonenforceability of Certain Provisions Waiving Rights and Remedies or Requiring Arbitration of Disputes). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 77283 Prior to the Dodd-Frank Act, it was FINRA staff’s articulated position that parties were required to arbitrate SOX whistleblower claims under the Industry Code.5 In light of the changes set forth in the Dodd-Frank Act that invalidate predispute arbitration agreements in the case of SOX whistleblower claims, the proposed rule change would amend FINRA Rule 13201 of the Industry Code to make clear that parties are not required to arbitrate SOX whistleblower claims, superseding the existing guidance to the contrary. While the main impetus for the proposed rule change is the need to update FINRA staff’s stated position on SOX whistleblower claims, FINRA proposes to make the rule text broad enough to cover any statutes that prohibit predispute arbitration agreements for whistleblower claims.6 Rule 13201 of the Industry Code currently provides that a claim alleging employment discrimination, including sexual harassment, in violation of a statute, is not required to be arbitrated under the Industry Code. Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose. The proposed rule change would amend Rule 13201 to add a new provision to provide that a dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements is not required to be arbitrated under the Industry Code. The rule would state that such a dispute may be arbitrated only if the parties have agreed to arbitrate it after the dispute arose. FINRA also would amend the title of Rule 13201 to reflect the addition of the new provision relating to whistleblower claims. FINRA structured the proposed rule change to separate the provision relating to statutory employment discrimination claims from the provision relating to whistleblower claims. While parties may agree to arbitrate a statutory employment discrimination claim either before or after a dispute arises, the Dodd-Frank Act invalidates predispute agreements to arbitrate certain whistleblower claims. The proposed rule change also would make a conforming amendment to FINRA Rule 2263, which requires firms 5 See Arbitrability of Sarbanes-Oxley Whistleblower Claims by Laurence S. Moy, Pearl Zuchlewski, Linda A. Neilan and Katherine Blostein, The Neutral Corner (Volume 1—2008). 6 The Dodd-Frank Act also invalidated predispute arbitration agreements in other whistleblower statutes, including, for example, 7 USCA § 26(n) relating to Commodity Exchange Whistleblower Incentives and Protections. E:\FR\FM\12DEN1.SGM 12DEN1 77284 Federal Register / Vol. 76, No. 238 / Monday, December 12, 2011 / Notices to provide each associated person with certain written disclosures regarding the nature and process of arbitration proceedings whenever the firm asks an associated person, pursuant to FINRA Rule 1010 (Electronic Filing Requirements for Uniform Forms), to manually sign a new or amended Form U4, or to otherwise provide written acknowledgment of an amendment to the form. The proposed rule change would amend FINRA Rule 2263 to add a disclosure provision stating that a dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements is not required to be arbitrated under FINRA rules, and that such a dispute may be arbitrated at FINRA only if the parties have agreed to arbitrate it after the dispute arose. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,7 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 amendments are consistent with the provisions of the Act noted above because they serve to align FINRA rules with those provisions in the DoddFrank Act that invalidate predispute arbitration agreements in the context of certain whistleblower claims. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. jlentini on DSK4TPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 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 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 7 15 U.S.C. 78o–3(b)(6). VerDate Mar<15>2010 15:55 Dec 09, 2011 Jkt 226001 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: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2011–067 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2011–067. This file number should be included on the subject line if email 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 filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA–2011–067 and PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 should be submitted on or before January 3, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–31761 Filed 12–9–11; 8:45 a.m.] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65903; File No. SR–EDGX– 2011–37] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule To Amend EDGX Rule 11.9 December 6, 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 December 2, 2011, the EDGX Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’) 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 Substance of the Proposed Rule Change The Exchange proposes to introduce an additional routing option to Rule 11.9 and amend existing routing options. The text of the proposed rule change is attached as Exhibit 5 and is available on the Exchange’s Web site at www.directedge.com, at the Exchange’s principal office, and at the Public Reference Room of the Commission. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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. The self-regulatory organization has prepared summaries, set forth in 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77283-77284]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31761]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65896; File No. SR-FINRA-2011-067]


 Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Whistleblower Claims in Arbitration

December 6, 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 November 21, 2011, the 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, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 13201 of the Code of 
Arbitration Procedure for Industry Disputes (``Industry Code'') to 
align the rule with statutes that invalidate predispute arbitration 
agreements for whistleblower claims. The proposed rule change also 
would make a conforming amendment to FINRA Rule 2263.
    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
    The proposed rule change would amend FINRA Rule 13201 (Statutory 
Employment Discrimination Claims) of the Industry Code, and FINRA Rule 
2263 (Arbitration Disclosure to Associated Persons Signing or 
Acknowledging Form U4), to align the rules with statutes that 
invalidate predispute arbitration agreements for whistleblower claims.
    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(``Dodd-Frank Act'') \3\ amended the Sarbanes-Oxley Act of 2002 
(``SOX'') by adding a new paragraph (e) to 18 U.S.C. 1514A \4\ to 
provide that:
---------------------------------------------------------------------------

    \3\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, Sec.  919 (2010).
    \4\ See Dodd-Frank Section 922(c)(2), adding 18 U.S.C. 1514A(e) 
(Nonenforceability of Certain Provisions Waiving Rights and Remedies 
or Requiring Arbitration of Disputes).
---------------------------------------------------------------------------

    (1) WAIVER OF RIGHTS AND REMEDIES--The rights and remedies provided 
for in this section may not be waived by any agreement, policy form, or 
condition of employment, including by a predispute arbitration 
agreement.
    (2) PREDISPUTE ARBITRATION AGREEMENTS--No predispute arbitration 
agreement shall be valid or enforceable, if the agreement requires 
arbitration of a dispute arising under this section.
    Prior to the Dodd-Frank Act, it was FINRA staff's articulated 
position that parties were required to arbitrate SOX whistleblower 
claims under the Industry Code.\5\
---------------------------------------------------------------------------

    \5\ See Arbitrability of Sarbanes-Oxley Whistleblower Claims by 
Laurence S. Moy, Pearl Zuchlewski, Linda A. Neilan and Katherine 
Blostein, The Neutral Corner (Volume 1--2008).
---------------------------------------------------------------------------

    In light of the changes set forth in the Dodd-Frank Act that 
invalidate predispute arbitration agreements in the case of SOX 
whistleblower claims, the proposed rule change would amend FINRA Rule 
13201 of the Industry Code to make clear that parties are not required 
to arbitrate SOX whistleblower claims, superseding the existing 
guidance to the contrary. While the main impetus for the proposed rule 
change is the need to update FINRA staff's stated position on SOX 
whistleblower claims, FINRA proposes to make the rule text broad enough 
to cover any statutes that prohibit predispute arbitration agreements 
for whistleblower claims.\6\
---------------------------------------------------------------------------

    \6\ The Dodd-Frank Act also invalidated predispute arbitration 
agreements in other whistleblower statutes, including, for example, 
7 USCA Sec.  26(n) relating to Commodity Exchange Whistleblower 
Incentives and Protections.
---------------------------------------------------------------------------

    Rule 13201 of the Industry Code currently provides that a claim 
alleging employment discrimination, including sexual harassment, in 
violation of a statute, is not required to be arbitrated under the 
Industry Code. Such a claim may be arbitrated only if the parties have 
agreed to arbitrate it, either before or after the dispute arose. The 
proposed rule change would amend Rule 13201 to add a new provision to 
provide that a dispute arising under a whistleblower statute that 
prohibits the use of predispute arbitration agreements is not required 
to be arbitrated under the Industry Code. The rule would state that 
such a dispute may be arbitrated only if the parties have agreed to 
arbitrate it after the dispute arose.
    FINRA also would amend the title of Rule 13201 to reflect the 
addition of the new provision relating to whistleblower claims. FINRA 
structured the proposed rule change to separate the provision relating 
to statutory employment discrimination claims from the provision 
relating to whistleblower claims. While parties may agree to arbitrate 
a statutory employment discrimination claim either before or after a 
dispute arises, the Dodd-Frank Act invalidates predispute agreements to 
arbitrate certain whistleblower claims.
    The proposed rule change also would make a conforming amendment to 
FINRA Rule 2263, which requires firms

[[Page 77284]]

to provide each associated person with certain written disclosures 
regarding the nature and process of arbitration proceedings whenever 
the firm asks an associated person, pursuant to FINRA Rule 1010 
(Electronic Filing Requirements for Uniform Forms), to manually sign a 
new or amended Form U4, or to otherwise provide written acknowledgment 
of an amendment to the form. The proposed rule change would amend FINRA 
Rule 2263 to add a disclosure provision stating that a dispute arising 
under a whistleblower statute that prohibits the use of predispute 
arbitration agreements is not required to be arbitrated under FINRA 
rules, and that such a dispute may be arbitrated at FINRA only if the 
parties have agreed to arbitrate it after the dispute arose.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\7\ 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 amendments are 
consistent with the provisions of the Act noted above because they 
serve to align FINRA rules with those provisions in the Dodd-Frank Act 
that invalidate predispute arbitration agreements in the context of 
certain whistleblower claims.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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 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:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-067 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2011-067. This 
file number should be included on the subject line if email 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 filing also will be available for 
inspection and copying at the principal office of FINRA. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-FINRA-2011-067 and 
should be submitted on or before January 3, 2012.
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31761 Filed 12-9-11; 8:45 a.m.]
BILLING CODE 8011-01-P
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