Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 13024 of the Code of Arbitration Procedure for Industry Disputes To Preclude Collective Action Claims From Being Arbitrated, 22374-22376 [2012-8880]

Download as PDF 22374 Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices DCO, which is subject to regulation by the CFTC under the CEA. This rule change is being made according to regulations promulgated by the CFTC, which were previously subject to notice and comment. Not approving this request on an accelerated basis would have a significant impact on CME’s operations as a DCO. The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of notice in the Federal Register because the proposed rule change allows CME to implement the regulations of another federal regulatory agency, the CFTC, in accordance with those regulations’ effective date. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–CME–2012– 09) is approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–8879 Filed 4–12–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66774; File No. SR–FINRA– 2011–075] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 13024 of the Code of Arbitration Procedure for Industry Disputes To Preclude Collective Action Claims From Being Arbitrated pmangrum on DSK3VPTVN1PROD with NOTICES April 9, 2012. I. Introduction On December 22, 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 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposal to amend Rule 13204 of the Code of Arbitration Procedure for Industry Disputes (‘‘Industry Code’’) to preclude collective action claims by employees of FINRA 6 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 14:16 Apr 12, 2012 Jkt 226001 members under the Fair Labor Standards Act (FLSA), the Age Discrimination in Employment Act (ADEA), or the Equal Pay Act of 1963 (EPA) from being arbitrated under the Industry Code. Specifically, the proposal would, among other things, (1) State that collective action claims under the FLSA, the ADEA, or the EPA may not be arbitrated under the Code; (2) provide that any claim involving similarly situated plaintiffs against the same defendants, such as a courtcertified collective action or a putative collective action, would not be arbitrated in FINRA’s arbitration forum; (3) give arbitrators the authority to decide disputes about whether a claim is part of a collective action; and (4) prohibit a member firm or associated person from enforcing any arbitration agreement against a member of a certified or putative collective action with respect to any claim that is the subject of the certified or putative collective action until either the collective certification is denied or the group is decertified. The proposed rule change was published for comment in the Federal Register on January 11, 2012.3 The Commission received two comments on the proposed rule change.4 On March 29, 2012, FINRA filed a response to comments and a partial amendment to the proposed rule change (‘‘Amendment No. 1’’).5 The Commission is publishing this notice and order to solicit comment on Amendment No. 1 and to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. II. Description of Proposed Rule Change As stated in the Notice, Rule 13204 of the Industry Code generally provides that any claim that is based upon the 3 See Exchange Act Release No. 66109 (Jan. 5, 2012), 77 FR 1773 (Jan. 11, 2012) (Notice of Filing of Proposed Rule Change to Amend the Code of Arbitration Procedure for Industry Disputes to Preclude Collective Action Claims from Being Arbitrated) (‘‘Notice’’). The comment period closed on February 1, 2012. 4 See Letter from Kevin M. Carroll, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, dated February 1, 2012 (‘‘SIFMA Letter’’); and letter from Jill I. Gross, Director, Edward Pekarek, Assistant Director, and Genavieve Shingle, Student Intern, Investor Rights Clinic at Pace Law School, dated February 1, 2012 (‘‘PIRC Letter’’). Comment letters are available at https://www.sec.gov. 5 See Letter from Mignon McLemore, Assistant Chief Counsel, FINRA, FINRA Dispute Resolution, to Elizabeth M. Murphy, Secretary, SEC, dated March 28, 2012 (‘‘Response to Comments No. 1 and Partial Amendment No. 1’’). The text of Response to Comments No. 1 and Partial Amendment No. 1 is available on FINRA’s Web site at https:// www.finra.org, at the principal office of FINRA, and on the Commission’s Web site at https:// www.sec.gov. PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 same facts and law, and involves the same defendants as in a court-certified class action or a putative class action, shall not be arbitrated. The Notice also stated that in 1999 FINRA issued an Interpretive Letter stating that its class action rules should include collective action claims brought under the FLSA and, therefore, considered these claims ineligible for arbitration in its forum.6 However, as described in the Notice, the United States District Court for the Southern District of New York found that an FLSA collective action is not a class action for purposes of Rule 13204 of the Industry Code and compelled arbitration of such claims in FINRA’s dispute resolution forum.7 In response to the court’s finding, FINRA is proposing to amend Rule 13204 to preclude collective action claims from being arbitrated in FINRA’s forum under the Industry Code. The proposed amendments to Rule 13204, would separate Rule 13204 into two sections: subparagraph (a) for class actions, and subparagraph (b) for collective actions. Subparagraph (a) would be titled, ‘‘Class Actions,’’ and renumbered. Subparagraph (b) would be titled, ‘‘Collective Actions,’’ and would contain four subparagraphs. Proposed subparagraph (b)(1) would state that collective action claims under the FLSA, the ADEA, or the EPA may not be arbitrated under the Industry Code. Under proposed subparagraph (b)(2), any claim that involves plaintiffs who are similarly-situated against the same defendants as in a court-certified collective action or a putative collective action, or that is ordered by a court for collective action at a forum not sponsored by a self-regulatory organization, would not be arbitrated under the Industry Code, if the party bringing the claim has opted in to the collective action. Under proposed subparagraph (b)(3), as originally proposed, the Director would have referred to a panel any dispute as to whether a claim is part of a collective action, unless a party asked the court hearing the collective action to resolve the dispute within 10 days of receiving notice that the Director has decided to refer the dispute to a panel. Amendment No. 1, however, would permit a party to ask any forum (not just a court) hearing the collective action to resolve the dispute within the specified time. 6 See Notice (citing FINRA Interpretive Letter to Cliff Palefsky, Esq., dated September 21, 1999). 7 Id. (citing Hugo Gomez et al. v. Brill Securities, Inc. et al., No. 10 Civ. 3503, 2010 U.S. Dist. LEXIS 118162 (S.D.N.Y. Nov. 2, 2010)). E:\FR\FM\13APN1.SGM 13APN1 Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices Subparagraph (b)(4), as originally proposed, would have provided that a member or associated person may not enforce any arbitration agreement against a member of a certified or putative collective action with respect to any claim that is the subject of the certified or putative collective action until the collective action certification is denied or the collective action is decertified. Amendment No. 1, however, would specify that subparagraph (b)(4) would apply only to agreements to arbitrate in the FINRA forum, thus not affecting agreements to arbitrate in fora other than FINRA’s. pmangrum on DSK3VPTVN1PROD with NOTICES III. Summary of Comment Letters As stated above, the proposed rule change was published for comment in the Federal Register on January 11, 2012, and the comment period closed on February 1, 2012. The Commission received two comment letters in response to the proposed rule change. On March 28, 2012, FINRA responded to the comments and filed Amendment No. 1 to the proposed rule change. The PIRC Letter strongly supported the proposed rule change. The SIFMA Letter did not object to the proposed rule change, but recommended revisions to certain language in proposed subparagraph (b). First, SIFMA recommended modifying proposed subparagraph (b)(2) to replace the phrase, ‘‘Any claim that involves plaintiffs who are similarly situated against the same defendants as in a court-certified collective action or a putative collection action,’’ with, ‘‘Any claim that is the subject of a certified or putative collective action.’’ SIFMA argued that FINRA’s proposed language could be misconstrued to include multiparty litigation outside of the collective action context. SIFMA suggested that its proposed change would clarify FINRA’s intent to limit the application of the proposed rule to collective actions. In its Response to Comments No. 1, FINRA declined to amend its proposed subparagraph (b)(2) as SIFMA suggested. FINRA stated that the revision is unnecessary because as proposed the rule already clarifies its applicability to only those parties who opt in to a collective action; furthermore, as proposed the rule would preclude those claims from being arbitrated in FINRA’s forum only, and would not preclude their being arbitrated in other fora. FINRA also declined to remove the term ‘‘similarly situated’’ from proposed subparagraph (b)(2) as SIFMA suggested because the term is consistent with language used in the FLSA to describe party plaintiffs in VerDate Mar<15>2010 14:16 Apr 12, 2012 Jkt 226001 collective actions under the statute,8 and the term helps define the parties to whom the proposal would apply. Second, SIFMA recommended modifying proposed subparagraphs (b)(3) and (b)(4) to limit their scope to FINRA arbitration. Specifically, SIFMA recommended modifying proposed subparagraph (b)(3) by replacing ‘‘the court hearing the collective action’’ with ‘‘the court or other forum hearing the collective action.’’ SIFMA stated that this change would clarify that arbitration fora, other than FINRA’s forum, accept collective action claims. Similarly, SIFMA recommended modifying proposed subparagraph (b)(4) by replacing ‘‘may not enforce any arbitration agreement’’ with ‘‘may not enforce an agreement to arbitrate in this forum.’’ SIFMA stated that this change would clarify that under the proposed rule agreements to arbitrate collective action claims in arbitration fora other than FINRA would remain valid and enforceable. FINRA agreed to amend proposed subparagraphs (b)(3) and (b)(4) as SIFMA recommended. FINRA stated that it made these changes because the proposed rule is designed to prohibit collective action claims from being arbitrated in its forum only; FINRA members and their employees may, however, agree to address collective action claims either by filing them in a court of competent jurisdiction or by arbitrating them in other arbitration fora. IV. Commission’s Findings The Commission has carefully considered the proposed rule change, the comments received, FINRA’s Response to Comments No. 1, and Amendment No. 1. The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Exchange Act, and the rules and regulations thereunder that are applicable to a national securities association.9 In particular, the Commission finds that the proposal is consistent with Section 15A(b)(6) of the Act,10 which requires, among other things, that the rules of a national securities association be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in 8 See 29 U.S.C. 216(b). approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78o–3(b)(6). 9 In PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 22375 general, protect investors and the public interest. The proposed rule change, as amended, would facilitate the efficient resolution of collective actions under the FLSA, ADEA, or the EPA, as courts have established procedures to manage these types of representative actions. It also would preserve access to courts for these types of claims for employees of FINRA members. The Commission believes that FINRA has responded adequately to SIFMA’s comments recommending revisions to certain language in proposed subparagraphs (b)(2), (b)(3) and (b)(4) to the proposed rule by explaining, among other things, why it is proposing to revise proposed subparagraphs (b)(3) and (b)(4), but is not proposing to revise subparagraph (b)(2). In response to SIFMA’s comments, FINRA proposed to amend proposed subparagraphs (b)(3) and (b)(4) to acknowledge that arbitration fora other than FINRA’s dispute resolution forum accept collective action claims. FINRA has suitably explained its reasons for declining to amend proposed subparagraph (b)(2) as SIFMA recommended. V. Accelerated Approval The Commission finds good cause, pursuant to Section 19(b)(2) of the Act 11 for approving the proposed rule change, as modified by Amendment No. 1, prior to the 30th day after publication of Amendment No. 1 in the Federal Register. The changes proposed in Amendment No. 1 revised proposed subparagraphs (b)(3) and (b)(4) in response to specific concerns raised by SIFMA. The amendment addresses these concerns by clarifying that arbitration fora, other than FINRA’s forum, accept collective action claims, and that under the proposed rule agreements to arbitrate collective action claims in arbitration fora other than FINRA would remain valid and enforceable. Accordingly, the Commission finds that good cause exists to approve the proposal, as modified by Amendment No. 1, on an accelerated basis. VI. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether Amendment No. 1 to the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 11 15 E:\FR\FM\13APN1.SGM U.S.C. 78s(b)(2). 13APN1 22376 Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices 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–2011–075 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–2011–075. 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–2011–075 and should be submitted on or before May 4, 2012. pmangrum on DSK3VPTVN1PROD with NOTICES VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,12 that the proposed rule change (SR–FINRA– 2011–075), as modified by Amendment No. 1, be, and hereby is, approved on an accelerated basis. 12 15 U.S.C. 78s(b)(2). VerDate Mar<15>2010 14:16 Apr 12, 2012 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. DEPARTMENT OF TRANSPORTATION [FR Doc. 2012–8880 Filed 4–12–12; 8:45 am] Airport Improvement Program (AIP) Grant Assurances BILLING CODE 8011–01–P [Docket No. FAA–2012–0233] Federal Aviation Administration (FAA). ACTION: Notice of modification of Airport Improvement Program grant assurances; opportunity to comment. AGENCY: DEPARTMENT OF STATE [Public Notice 7845] On February 14, 2012, the FAA Modernization and Reform Act of 2012 was signed into law (Pub. L. 112– 95). Provisions contained in this law necessitate modifications to five grant assurances. SUMMARY: Culturally Significant Objects Imported for Exhibition Determinations: ‘‘Ellsworth Kelly: Plant Drawings’’ Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, et seq.; 22 U.S.C. 6501 note, et seq.), Delegation of Authority No. 234 of October 1, 1999, and Delegation of Authority No. 236–3 of August 28, 2000, I hereby determine that the object to be included in the exhibition ‘‘Ellsworth Kelly: Plant Drawings,’’ imported from abroad for temporary exhibition within the United States, is of cultural significance. The object is imported pursuant to a loan agreement with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit object at The Metropolitan Museum of Art, New York, New York from on or about June 5, 2012, until on or about September 3, 2012, and at possible additional exhibitions or venues yet to be determined, is in the national interest. I have ordered that Public Notice of these Determinations be published in the Federal Register. SUMMARY: For further information, including a list of the exhibit objects, contact Ona M. Hahs, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202–632–6473). The mailing address is U.S. Department of State, SA– 5, L/PD, Fifth Floor (Suite 5H03), Washington, DC 20522–0505. FOR FURTHER INFORMATION CONTACT: Dated: April 9, 2012. Ann Stock, Assistant Secretary, Bureau of Educational and Cultural Affairs, Department of State. [FR Doc. 2012–8925 Filed 4–12–12; 8:45 am] BILLING CODE 4710–05–P 13 17 Jkt 226001 Federal Aviation Administration PO 00000 CFR 200.30–3(a)(12). Frm 00096 Fmt 4703 Sfmt 4703 The effective date the modifications to the grant assurances is April 13, 2012. The FAA will consider comments on the modifications to the grant assurances. If necessary, any appropriate revisions resulting from the comments received will be adopted as of the date of a subsequent publication in the Federal Register. Comments must be submitted on or before May 14, 2012. ADDRESSES: You may send comments [identified by Docket Number FAA– 2012–0233] using any of the following methods: • Government-wide rulemaking web site: Go to https://www.regulations.gov and follow the instructions for sending your comments electronically. • Mail: Docket Operations, U.S. Department of Transportation, West Building, Ground Floor, Room W12– 140, Routing Symbol M–30, 1200 New Jersey Avenue SE., Washington, DC 20590. • Fax: 1–202–493–2251. • Hand Delivery: To Docket Operations, Room W12–140 on the ground floor of the West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Frank San Martin, Manager, Airports Financial Assistance, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591, telephone (202) 267–3831; facsimile: (202) 267–5302. DATES: Authority for Grant Assurance Modifications This notice is published under the authority described in Subtitle VII, Part B, Chapter 471, Sections 47107 and 47122 of Title 49 United States Code. SUPPLEMENTARY INFORMATION: A sponsor (applicant) seeking financial assistance E:\FR\FM\13APN1.SGM 13APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 72 (Friday, April 13, 2012)]
[Notices]
[Pages 22374-22376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8880]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66774; File No. SR-FINRA-2011-075]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, Amending Rule 13024 of the Code of Arbitration
Procedure for Industry Disputes To Preclude Collective Action Claims
From Being Arbitrated

April 9, 2012.

I. Introduction

On December 22, 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 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposal to amend Rule 13204 of the Code of
Arbitration Procedure for Industry Disputes (``Industry Code'') to
preclude collective action claims by employees of FINRA members under
the Fair Labor Standards Act (FLSA), the Age Discrimination in
Employment Act (ADEA), or the Equal Pay Act of 1963 (EPA) from being
arbitrated under the Industry Code. Specifically, the proposal would,
among other things, (1) State that collective action claims under the
FLSA, the ADEA, or the EPA may not be arbitrated under the Code; (2)
provide that any claim involving similarly situated plaintiffs against
the same defendants, such as a court-certified collective action or a
putative collective action, would not be arbitrated in FINRA's
arbitration forum; (3) give arbitrators the authority to decide
disputes about whether a claim is part of a collective action; and (4)
prohibit a member firm or associated person from enforcing any
arbitration agreement against a member of a certified or putative
collective action with respect to any claim that is the subject of the
certified or putative collective action until either the collective
certification is denied or the group is decertified.
---------------------------------------------------------------------------

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

The proposed rule change was published for comment in the Federal
Register on January 11, 2012.\3\ The Commission received two comments
on the proposed rule change.\4\ On March 29, 2012, FINRA filed a
response to comments and a partial amendment to the proposed rule
change (``Amendment No. 1'').\5\ The Commission is publishing this
notice and order to solicit comment on Amendment No. 1 and to approve
the proposed rule change, as modified by Amendment No. 1, on an
accelerated basis.
---------------------------------------------------------------------------

\3\ See Exchange Act Release No. 66109 (Jan. 5, 2012), 77 FR
1773 (Jan. 11, 2012) (Notice of Filing of Proposed Rule Change to
Amend the Code of Arbitration Procedure for Industry Disputes to
Preclude Collective Action Claims from Being Arbitrated)
(``Notice''). The comment period closed on February 1, 2012.
\4\ See Letter from Kevin M. Carroll, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association, dated February 1, 2012 (``SIFMA Letter''); and letter
from Jill I. Gross, Director, Edward Pekarek, Assistant Director,
and Genavieve Shingle, Student Intern, Investor Rights Clinic at
Pace Law School, dated February 1, 2012 (``PIRC Letter''). Comment
letters are available at https://www.sec.gov.
\5\ See Letter from Mignon McLemore, Assistant Chief Counsel,
FINRA, FINRA Dispute Resolution, to Elizabeth M. Murphy, Secretary,
SEC, dated March 28, 2012 (``Response to Comments No. 1 and Partial
Amendment No. 1''). The text of Response to Comments No. 1 and
Partial Amendment No. 1 is available on FINRA's Web site at https://www.finra.org, at the principal office of FINRA, and on the
Commission's Web site at https://www.sec.gov.
---------------------------------------------------------------------------

II. Description of Proposed Rule Change

As stated in the Notice, Rule 13204 of the Industry Code generally
provides that any claim that is based upon the same facts and law, and
involves the same defendants as in a court-certified class action or a
putative class action, shall not be arbitrated. The Notice also stated
that in 1999 FINRA issued an Interpretive Letter stating that its class
action rules should include collective action claims brought under the
FLSA and, therefore, considered these claims ineligible for arbitration
in its forum.\6\ However, as described in the Notice, the United States
District Court for the Southern District of New York found that an FLSA
collective action is not a class action for purposes of Rule 13204 of
the Industry Code and compelled arbitration of such claims in FINRA's
dispute resolution forum.\7\
---------------------------------------------------------------------------

\6\ See Notice (citing FINRA Interpretive Letter to Cliff
Palefsky, Esq., dated September 21, 1999).
\7\ Id. (citing Hugo Gomez et al. v. Brill Securities, Inc. et
al., No. 10 Civ. 3503, 2010 U.S. Dist. LEXIS 118162 (S.D.N.Y. Nov.
2, 2010)).
---------------------------------------------------------------------------

In response to the court's finding, FINRA is proposing to amend
Rule 13204 to preclude collective action claims from being arbitrated
in FINRA's forum under the Industry Code. The proposed amendments to
Rule 13204, would separate Rule 13204 into two sections: subparagraph
(a) for class actions, and subparagraph (b) for collective actions.
Subparagraph (a) would be titled, ``Class Actions,'' and re-numbered.
Subparagraph (b) would be titled, ``Collective Actions,'' and would
contain four subparagraphs.
Proposed subparagraph (b)(1) would state that collective action
claims under the FLSA, the ADEA, or the EPA may not be arbitrated under
the Industry Code.
Under proposed subparagraph (b)(2), any claim that involves
plaintiffs who are similarly-situated against the same defendants as in
a court-certified collective action or a putative collective action, or
that is ordered by a court for collective action at a forum not
sponsored by a self-regulatory organization, would not be arbitrated
under the Industry Code, if the party bringing the claim has opted in
to the collective action.
Under proposed subparagraph (b)(3), as originally proposed, the
Director would have referred to a panel any dispute as to whether a
claim is part of a collective action, unless a party asked the court
hearing the collective action to resolve the dispute within 10 days of
receiving notice that the Director has decided to refer the dispute to
a panel. Amendment No. 1, however, would permit a party to ask any
forum (not just a court) hearing the collective action to resolve the
dispute within the specified time.

[[Page 22375]]

Subparagraph (b)(4), as originally proposed, would have provided
that a member or associated person may not enforce any arbitration
agreement against a member of a certified or putative collective action
with respect to any claim that is the subject of the certified or
putative collective action until the collective action certification is
denied or the collective action is decertified. Amendment No. 1,
however, would specify that subparagraph (b)(4) would apply only to
agreements to arbitrate in the FINRA forum, thus not affecting
agreements to arbitrate in fora other than FINRA's.

III. Summary of Comment Letters

As stated above, the proposed rule change was published for comment
in the Federal Register on January 11, 2012, and the comment period
closed on February 1, 2012. The Commission received two comment letters
in response to the proposed rule change. On March 28, 2012, FINRA
responded to the comments and filed Amendment No. 1 to the proposed
rule change.
The PIRC Letter strongly supported the proposed rule change.
The SIFMA Letter did not object to the proposed rule change, but
recommended revisions to certain language in proposed subparagraph (b).
First, SIFMA recommended modifying proposed subparagraph (b)(2) to
replace the phrase, ``Any claim that involves plaintiffs who are
similarly situated against the same defendants as in a court-certified
collective action or a putative collection action,'' with, ``Any claim
that is the subject of a certified or putative collective action.''
SIFMA argued that FINRA's proposed language could be misconstrued to
include multi-party litigation outside of the collective action
context. SIFMA suggested that its proposed change would clarify FINRA's
intent to limit the application of the proposed rule to collective
actions.
In its Response to Comments No. 1, FINRA declined to amend its
proposed subparagraph (b)(2) as SIFMA suggested. FINRA stated that the
revision is unnecessary because as proposed the rule already clarifies
its applicability to only those parties who opt in to a collective
action; furthermore, as proposed the rule would preclude those claims
from being arbitrated in FINRA's forum only, and would not preclude
their being arbitrated in other fora. FINRA also declined to remove the
term ``similarly situated'' from proposed subparagraph (b)(2) as SIFMA
suggested because the term is consistent with language used in the FLSA
to describe party plaintiffs in collective actions under the
statute,\8\ and the term helps define the parties to whom the proposal
would apply.
---------------------------------------------------------------------------

\8\ See 29 U.S.C. 216(b).
---------------------------------------------------------------------------

Second, SIFMA recommended modifying proposed subparagraphs (b)(3)
and (b)(4) to limit their scope to FINRA arbitration. Specifically,
SIFMA recommended modifying proposed subparagraph (b)(3) by replacing
``the court hearing the collective action'' with ``the court or other
forum hearing the collective action.'' SIFMA stated that this change
would clarify that arbitration fora, other than FINRA's forum, accept
collective action claims. Similarly, SIFMA recommended modifying
proposed subparagraph (b)(4) by replacing ``may not enforce any
arbitration agreement'' with ``may not enforce an agreement to
arbitrate in this forum.'' SIFMA stated that this change would clarify
that under the proposed rule agreements to arbitrate collective action
claims in arbitration fora other than FINRA would remain valid and
enforceable.
FINRA agreed to amend proposed subparagraphs (b)(3) and (b)(4) as
SIFMA recommended. FINRA stated that it made these changes because the
proposed rule is designed to prohibit collective action claims from
being arbitrated in its forum only; FINRA members and their employees
may, however, agree to address collective action claims either by
filing them in a court of competent jurisdiction or by arbitrating them
in other arbitration fora.

IV. Commission's Findings

The Commission has carefully considered the proposed rule change,
the comments received, FINRA's Response to Comments No. 1, and
Amendment No. 1. The Commission finds that the proposed rule change, as
amended, is consistent with the requirements of the Exchange Act, and
the rules and regulations thereunder that are applicable to a national
securities association.\9\ In particular, the Commission finds that the
proposal is consistent with Section 15A(b)(6) of the Act,\10\ which
requires, among other things, that the rules of a national securities
association be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, protect investors and the
public interest.
---------------------------------------------------------------------------

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

The proposed rule change, as amended, would facilitate the
efficient resolution of collective actions under the FLSA, ADEA, or the
EPA, as courts have established procedures to manage these types of
representative actions. It also would preserve access to courts for
these types of claims for employees of FINRA members.
The Commission believes that FINRA has responded adequately to
SIFMA's comments recommending revisions to certain language in proposed
subparagraphs (b)(2), (b)(3) and (b)(4) to the proposed rule by
explaining, among other things, why it is proposing to revise proposed
subparagraphs (b)(3) and (b)(4), but is not proposing to revise
subparagraph (b)(2). In response to SIFMA's comments, FINRA proposed to
amend proposed subparagraphs (b)(3) and (b)(4) to acknowledge that
arbitration fora other than FINRA's dispute resolution forum accept
collective action claims. FINRA has suitably explained its reasons for
declining to amend proposed subparagraph (b)(2) as SIFMA recommended.

V. Accelerated Approval

The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act \11\ for approving the proposed rule change, as modified by
Amendment No. 1, prior to the 30th day after publication of Amendment
No. 1 in the Federal Register. The changes proposed in Amendment No. 1
revised proposed subparagraphs (b)(3) and (b)(4) in response to
specific concerns raised by SIFMA. The amendment addresses these
concerns by clarifying that arbitration fora, other than FINRA's forum,
accept collective action claims, and that under the proposed rule
agreements to arbitrate collective action claims in arbitration fora
other than FINRA would remain valid and enforceable.
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\11\ 15 U.S.C. 78s(b)(2).
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Accordingly, the Commission finds that good cause exists to approve
the proposal, as modified by Amendment No. 1, on an accelerated basis.

VI. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether Amendment No. 1
to the proposed rule change is consistent with the Act. Comments may be
submitted by any of the following methods:

[[Page 22376]]

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-2011-075 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-2011-075. 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-2011-075 and should be
submitted on or before May 4, 2012.

VII. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-FINRA-2011-075), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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\12\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8880 Filed 4-12-12; 8:45 am]
BILLING CODE 8011-01-P

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