Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change Amending FINRA Rule 14107 of the Code of Mediation Procedure To Provide the Director of Mediation With Discretion to Determine Whether Parties to a FINRA Mediation May Select a Mediator Who Is Not on FINRA's Mediator Roster, 31677-31680 [2012-12850]
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Federal Register / Vol. 77, No. 103 / Tuesday, May 29, 2012 / Notices
12. Reports.
13. Pending Major Projects.
Written summaries of the projects to
be presented will be posted on OPIC’s
Web site on or about May 25, 2012.
CONTACT PERSON FOR INFORMATION:
Information on the meeting may be
obtained from Connie M. Downs at (202)
336–8438.
May 24, 2012.
Connie M. Downs,
Corporate Secretary, Overseas Private
Investment Corporation.
[FR Doc. 2012–13058 Filed 5–24–12; 4:15 pm]
BILLING CODE 3210–01–P
OFFICE OF SCIENCE AND
TECHNOLOGY POLICY
Request for Public Comment on
Interagency Arctic Research Policy
Committee (IARPC) Arctic Research
Plan: FY2013–2017
May 22, 2012.
ACTION:
Request for public comment.
The Arctic Research and
Policy Act of 1984 (ARPA), Public Law
98–373, established the Interagency
Arctic Research Policy Committee
(IARPC) to develop national Arctic
research policy five-year Federal
research plans to implement ARPA.
Chaired by the Director of the National
Science Foundation (NSF), IARPC is
composed of representatives from ten
agencies. More information on IARPC
can be found at: https://www.nsf.gov/od/
opp/arctic/iarpc/start.jsp.
The IARPC’s Arctic Research Plan:
FY2013–2017 (Five-Year Plan) describes
research priorities for the next five years
that are expected to benefit from
interagency collaboration; not all
research conducted by Federal agencies
is included in the Five-Year Plan. The
Five-Year Plan focuses on seven priority
areas designed to enhance the goals and
objectives of Federal agencies in Arctic
research:
(1) Sea ice and marine ecosystem
studies.
(2) Terrestrial ecosystem studies.
(3) Atmospheric studies effecting
energy flux.
(4) Observing systems.
(5) Regional climate models.
(6) Adaptation tools for sustaining
communities.
(7) Human health.
DATES: This request will be active
through June 22, 2012, 11:59 EST.
ADDRESSES: The Five-Year Plan and
additional information, including any
updates to this Federal Register notice,
will be available at https://www.nsf.gov/
srobinson on DSK4SPTVN1PROD with NOTICES
SUMMARY:
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od/opp/arctic/iarpc/
arc_res_plan_index.jsp. Comments may
be submitted by any of the following
methods:
Email: agraefe@arctic.gov. Include
‘‘IARPC FIVE-YEAR PLAN COMMENT’’
in the subject line of the message.
Mail: IARPC, c/o Arctic Sciences
Division, National Science Foundation,
Suite 755S, 4201 Wilson Blvd.,
Arlington, VA 22230. Attention: ‘‘Linda
Izzard, IARPC FIVE-YEAR PLAN
COMMENT.’’
Fax: 703–292–9082 Attention: ‘‘Linda
Izzard, IARPC FIVE-YEAR PLAN
COMMENT.’’
All submissions must be in English
and must include your name, return
address and email address, if applicable.
Please clearly label submissions as
‘‘IARPC FIVE-YEAR PLAN
COMMENT.’’
Please do not include classified,
personally identifying information (such
as social security numbers), copyrighted
material, or business confidential
information. Please note that your
submission may be subject to public
release ‘‘as is’’ under applicable law.
FOR FURTHER INFORMATION CONTACT: Any
questions about the content of this
notice should be sent to A. Graefe,
agraefe@arctic.gov. Include ‘‘IARPC
FIVE-YEAR PLAN COMMENT’’ in the
subject line of the message. Questions
may also be sent by mail (please allow
additional time for processing) to:
IARPC, c/o Arctic Sciences Division,
National Science Foundation, Suite
755S, 4201 Wilson Blvd., Arlington, VA
22230. Attention: ‘‘Lind Izzard, IARPC
FIVE-YEAR PLAN COMMENT.’’
SUPPLEMENTARY INFORMATION: For the
purposes of research planning, we
follow Section 112 of the ARPA in
defining the Arctic as ‘‘all United States
and foreign territory north of the Arctic
Circle and all United States territory
north and west of the boundary formed
by the Porcupine, Yukon, and
Kuskokwim Rivers [in Alaska]; all
contiguous seas, including the Arctic
Ocean and the Beaufort, Bering, and
Chukchi Seas; and the Aleutian chain.’’
Ted Wackler,
Deputy Chief of Staff and Assistant Director.
31677
Closed Meeting.
100 F Street NE., Washington,
STATUS:
PLACE:
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: May 24, 2012 at 2:00 p.m.
Additional Item.
The following matter will also be
considered during the 2:00 p.m. Closed
Meeting scheduled for Thursday, May
24, 2012:
A personnel matter.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions as set forth in
5 U.S.C. 552b(c)(2) and (6) and 17 CFR
200.402(a)(2) and (6), permit
consideration of the scheduled matter at
the Closed Meeting.
Commissioner Walter, as duty officer,
voted to consider the item listed for the
Closed Meeting in closed session, and
determined that no earlier notice thereof
was possible.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact the Office
of the Secretary at (202) 551–5400.
CHANGE IN THE MEETING:
Dated: May 24, 2012.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–13069 Filed 5–24–12; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67040; File No. SR–FINRA–
2012–011]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving a
Proposed Rule Change Amending
FINRA Rule 14107 of the Code of
Mediation Procedure To Provide the
Director of Mediation With Discretion
to Determine Whether Parties to a
FINRA Mediation May Select a
Mediator Who Is Not on FINRA’s
Mediator Roster
[FR Doc. 2012–12790 Filed 5–25–12; 8:45 am]
May 22, 2012.
BILLING CODE P
I. Introduction
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: [77 FR 30338, May 22,
2012].
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Frm 00114
On February 9, 2012, 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’’ or ‘‘Act’’) 1 and
1 15
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U.S.C. 78s(b)(1).
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Federal Register / Vol. 77, No. 103 / Tuesday, May 29, 2012 / Notices
Rule 19b–4 thereunder,2 a proposed rule
change to amend FINRA Rule 14107 of
the Code of Mediation Procedure
(‘‘Mediation Code’’) to provide the
Director of Mediation (‘‘Mediation
Director’’) with discretion to determine
whether parties to a FINRA mediation
may select a mediator who is not on
FINRA’s mediator roster, subject to
certain conditions. The proposed rule
change was published for comment in
the Federal Register on February 28,
2011.3 The Commission received five
comment letters on the proposed rule
change,4 and a response to comments
from FINRA.5 This order approves the
proposed rule change.
II. Description of the Proposal
As stated in the Notice, FINRA’s
Mediation Code currently permits
parties to mediation to select a mediator
either from a list of FINRA mediators
supplied by the Mediation Director, or
from a list or other source of their own
choosing. Although parties usually
select a FINRA mediator, parties may
select a mediator who is not on FINRA’s
roster.
FINRA has administered its mediation
program for over 15 years. FINRA stated
in the Notice that during this time it has
developed a deep roster of seasoned
securities mediators. Specifically,
FINRA represented that its staff
carefully screens every mediator
applicant, and that the National
Arbitration and Mediation Committee
(‘‘NAMC’’) 6 (through its Mediation
2 17
CFR 240.19b–4.
Exchange Act Release No. 66441 (Feb. 22,
2012), 77 FR 12098 (Feb. 28, 2012) (‘‘Notice’’). The
comment period closed on March 20, 2012.
4 See Letter from Ryan K. Bakhtiari, President,
Public Investors Arbitration Bar Association, dated
February 28, 2012 (‘‘PIABA Letter’’); letter from
William A. Jacobson, Associate Clinical Professor of
Law, Cornell Law School, and Director, Cornell
Securities Law Clinic, and Patricia Peralta, Cornell
Law School ’13, dated March 15, 2012 (‘‘Cornell
Letter’’); letter from Lisa Catalano, Director,
Christine Lazaro, Supervising Attorney, and Ben
Kralstein, Andrew Mundo, and Daniel Porco, Legal
Interns, St. John’s University School of Law
Securities Arbitration Clinic, dated March 20, 2012
(‘‘St. John’s Letter’’); letter from Jill I. Gross,
Director; Edward Pekarek, Assistant Director, and
Genavieve Shingle, Student Intern, Investor Rights
Clinic at Pace Law School, dated March 20, 2012
(‘‘PIRC Letter’’); and letter from Thomas K. Potter,
III, Burr & Forman LLP, dated March 23, 2012
(‘‘Potter Letter’’). Comment letters are available at
https://www.sec.gov.
5 See Letter from Margo A. Hassan, Assistant
Chief Counsel, FINRA Dispute Resolution, to
Elizabeth M. Murphy, Secretary, Commission, dated
April 30, 2012 (‘‘Response Letter’’). The text of the
proposed rule change and FINRA’s Response Letter
are 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. The
text of the Response Letter is also available on the
Commission’s Web site at https://www.sec.gov.
6 The NAMC makes recommendations to FINRA
staff regarding recruitment, qualification, training,
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3 See
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Subcommittee) reviews and approves
each application. FINRA stated that its
staff then conducts a background check
of approved applicants before placing
them on the mediator roster. FINRA also
stated that its staff engages in ongoing
evaluation of the mediators on its roster
by eliciting evaluations of its mediators
from parties and counsel who have
participated in mediation and
conducting periodic quality control
reviews of their mediators.
Non-FINRA mediators are not subject
to FINRA’s screening process,
background check, and periodic
evaluation. Accordingly, FINRA stated
that the selection of a non-FINRA
mediator raises concerns for the forum.
FINRA stated, however, that if a
mediator expresses an interest in
applying to be a FINRA mediator, and
FINRA’s program would benefit by
adding the mediator, FINRA staff
believes it would be prudent to permit
a non-FINRA mediator chosen by the
parties to serve on a case. But FINRA
stated that if a mediator does not apply
for FINRA’s roster or FINRA believes
the mediator is not appropriate for its
forum, the Mediation Director should
have the discretion to deny the parties’
mediator selection.
For these reasons, in part, FINRA
proposed to amend Rule 14107(a) to
state that a mediator may be selected,
with the Mediation Director’s approval
upon receipt of the parties’ joint request,
from a list or other source the parties
choose. Under the proposed rule, if the
Mediation Director rejects the mediator
selected, the parties would still be able
to select a FINRA approved mediator or
a different non-FINRA mediator subject
to the same conditions as the rejected
mediator, or to mediate their dispute
elsewhere.
FINRA Rule 14107(c) provides that a
mediator selected or assigned to mediate
a matter must comply with FINRA rules
relating to disclosures required of
arbitrators unless, with respect to a
mediator selected from a source other
than a list provided by FINRA, the
parties elect to waive such disclosure.
The proposed rule change would amend
Rule 14107(c) to state that the paragraph
would apply to a non-FINRA mediator
who is approved to serve on a FINRA
mediation.7
and evaluation of arbitrators and mediators. The
NAMC also makes recommendations on rules,
regulations, and procedures that govern the conduct
of arbitration, mediation, and other dispute
resolution matters before FINRA.
7 FINRA mediators pay an annual $200 fee to
remain active on the roster. Additionally, FINRA
deducts $150 from the mediator’s compensation for
each meditation in which the mediator participates
(FINRA stated that mediators typically receive $250
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The proposed rule change also would
make two technical amendments to Rule
14107. It would amend Rule 14107(a) to
change the bullet points to numbers to
facilitate citation to particular
provisions of Rule 14107(a). It would
also amend Rule 14107(c) to replace the
citation to Rule 12408 of the Customer
Code of Arbitration Procedure to Rule
12405 to reflect that former Rule 12408
was re-numbered as part of a prior
FINRA rule change.8
In the Notice, FINRA represented that
giving the Mediation Director discretion
to determine whether parties may select
a mediator who is not on FINRA’s
mediator roster would protect the
quality and integrity of the process for
users of FINRA’s mediation program.
III. Discussion of Comment Letters
The Commission received five
comment letters on the proposed rule
change in response to the Notice.9 Two
commenters supported the proposal,10
one supported the proposal with a
suggested modification,11 and two
opposed the proposal.12
The PIABA Letter stated that the
proposed rule change would assist
forum participants in resolving their
disputes. The St. John’s Letter stated
that giving the Mediation Director
discretion in approving mediators not
on FINRA’s roster would help to ensure
quality and efficiency in mediation.
The Cornell Letter stated that it
supported the proposed rule change
because FINRA should be able to
control the quality of its mediation
program. The letter also noted that, in
the Notice, FINRA stated that if the
Mediation Director rejects the parties’
selected mediator, the parties would
still be able to select a FINRA approved
mediator or a different non-FINRA
mediator subject to the same conditions
as the rejected mediator, or to mediate
their dispute elsewhere. The letter
recommended that FINRA include this
language in the proposed rule text or,
alternatively, that the Commission
acknowledge the language in an order
approving the proposed rule change. In
to $500 per hour). The Notice stated that under the
proposed rule FINRA would require the non-FINRA
mediator to complete the application process for
inclusion on the mediator roster. The Notice also
stated that, if the Commission approves the
proposed rule change, FINRA would require any
non-FINRA mediator who serves on a case to pay
the $200 annual fee charged to FINRA mediators
who are active on the roster prior to serving on the
case, as well as the $150 mediation case fee.
8 See Exchange Act Release No. 63799 (Jan. 31,
2011), 76 FR 6500 (Feb. 4, 2011).
9 Supra note 4.
10 See PIABA Letter and St. John’s Letter.
11 See Cornell Letter.
12 See PIRC Letter and Potter Letter.
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Federal Register / Vol. 77, No. 103 / Tuesday, May 29, 2012 / Notices
its Response Letter, FINRA stated that it
included the language in the Notice to
call attention to the alternatives that
would be available to forum users if the
Mediation Director rejects the parties’
chosen mediator. FINRA stated that it
was unnecessary to include the
suggested language in the rule text, and
declined to amend the proposal. FINRA
also represented that, if the Commission
approves the proposed rule change,
FINRA would include the suggested
language in a Regulatory Notice
announcing approval of the proposed
rule change to ensure that parties are
cognizant of their options under
FINRA’s program. In addition, FINRA
stated that if the Mediation Director
rejects the parties’ chosen mediator,
FINRA would notify the parties of the
alternatives available to them.
The PIRC Letter opposed the
proposed rule change on the basis that
it might inhibit investor choice and
control over the mediation process. The
letter stated that, under the current rule,
an investor has the ability to select a
mediator best suited to represent him or
her in his or her specific claim. The
letter further stated that this level of
choice provides an investor a level of
control over the process and increases
the perception of its fairness. In
particular, the letter stated that under
the current rule, an investor could
choose lower-cost options that suit the
investor’s financial status, such as a
non-FINRA pro bono mediator, or a
mediator who is willing to accept a
reduced fee. The letter expressed
concern that the proposed rule would
increase the overall cost of mediation to
investors because it would inhibit their
ability to choose affordable non-FINRA
mediators. In its Response Letter,
FINRA stated that it has a duty to ensure
the quality of its program and believes
that maintaining control of its mediator
roster is necessary to meet this duty.
Moreover, the letter reiterated that
parties would still have options for
mediating their dispute if the Mediation
Director rejected their selected
mediator: The parties would be able to
select a mediator on FINRA’s roster,
select a different non-FINRA mediator
subject to the same conditions as the
rejected mediator, or choose to mediate
their dispute in another forum.
In its Response Letter, FINRA also
stated that it believes its mediation
program is cost-effective for investors of
all means. FINRA stated it believes that
its filing fees (of up to $300) are modest
and that the Mediation Director has
discretion to waive them. FINRA also
stated that it offers many opportunities
for parties using its mediators to reduce
the cost of mediation, including: (1)
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When FINRA adds mediators to its
roster, it asks them to reduce their rates
for smaller claims; (2) FINRA’s
Mediation Administrators provide,
upon request, parties with a list of
mediators who have agreed to conduct
mediations for $50 per hour in
appropriate cases; (3) some mediators
on FINRA’s roster have agreed to
conduct mediations on a pro bono basis
for parties of limited means; and (4)
every October, FINRA hosts Mediation
Settlement Month during which both
FINRA and the mediators on its roster
lower their fees in order to encourage
participation.13
The Potter Letter stated, among other
things, that FINRA has not established
a need for the proposed rule change.
The letter also stated that the proposed
rule change would prevent parties from
selecting a mediator of their choice and
would restrict their freedom to contract.
Moreover, the letter stated that the
commenter believes the proposed rule
would be difficult to enforce because
FINRA would be unable to monitor a
prohibition against private parties
entering into private contracts.
In its Response Letter, FINRA stated
that it does not believe the proposed
rule change was unnecessary and
reiterated that FINRA has a duty to
ensure the quality of its mediation
program, and that maintaining control
of its mediator roster is a necessary to
meet this duty. With respect to the
letter’s other objections, FINRA stated
that it believes the commenter
misinterpreted the proposal.
Specifically, FINRA stated that
mediation is voluntary, and that the
proposed rule change would not
prohibit parties from choosing their own
mediators, or from choosing their own
forum for mediation. In addition, FINRA
reiterated that if the Mediation Director
rejects a mediator selected by the
parties, they would still be free to
mediate their dispute elsewhere.
Moreover, FINRA stated that it does not
intend to police mediation between
parties that occurs outside of FINRA’s
mediation forum.
For the aforementioned reasons,
FINRA declined to amend the proposed
rule change as suggested by
commenters.
IV. Commission’s Findings
The Commission has carefully
reviewed the proposed rule change, the
comments received, and FINRA’s
13 FINRA lowers its filing fees by 50 percent and
its mediators (who typically charge between $250
and $500 per hour for services rendered) reduce
their rates to $200 per hour for a four-hour
mediation session for claims up to $25,000, and
$400 per hour for claims up to $100,000.
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Fmt 4703
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31679
Response Letter. Based on its review,
the Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities association. In
particular, the Commission finds that
the proposed rule change is consistent
with Section 15A(b)(6) of the Act,14
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.
More specifically, the Commission
finds that the proposed rule change to
provide the Mediation Director with
discretion to determine whether parties
to a FINRA mediation may select a
mediator who is not on FINRA’s
mediator roster would benefit investors
and other participants in the forum by
helping to protect the quality and
integrity of FINRA’s mediation program
for parties using FINRA’s forum. While
the Commission appreciates the
commenters’ concerns, particularly
regarding whether parties using the
forum would understand the options
available to them if the Mediation
Director rejects a mediator selected by
the parties, we believe that FINRA has
responded adequately to the
commenters’ concerns and note that
FINRA has stated that it will include in
a Regulatory Notice announcing
approval of the proposed rule change
language designed to ensure that parties
are cognizant of their options under
FINRA’s program, and that if the
Mediation Director rejects the parties’
chosen mediator, FINRA will notify the
parties of the alternatives available to
them.
The Commission has reviewed the
record for the proposed rule change and
believes that the record does not contain
any information to indicate that the
proposed rule would have a significant
effect on efficiency, competition, or
capital formation. In light of the record,
the Commission has considered the
proposed rule’s impact on efficiency,
competition, and capital formation and
has concluded that the proposed rule is
unlikely to have any significant effect.15
For the reasons stated above, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder.
14 15
U.S.C. 78o–3(b)(6).
15 U.S.C. 78c(f).
15 See
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Federal Register / Vol. 77, No. 103 / Tuesday, May 29, 2012 / Notices
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,16 that the
proposed rule change (SR–FINRA–
2012–011) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–12850 Filed 5–25–12; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67039; File No. SR–ISE–
2012–39]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend the Qualification
Standards for Market Makers To
Receive a Rebate
May 22, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’)1 and Rule 19b–4
thereunder,2 notice is hereby given that
on May 15, 2012, the International
Securities Exchange, LLC (the
‘‘Exchange’’ or the ‘‘ISE’’) 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.
srobinson on DSK4SPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE is proposing to amend the
qualification standards for market
makers to receive a rebate under the
Exchange’s modified maker/taker
pricing structure. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.ise.com), at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
16 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
17 17
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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
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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
1. Purpose
The purpose of this proposed rule
change is to amend the qualification
standards for market makers to receive
a rebate under the Exchange’s maker/
taker pricing structure. The Exchange
currently assesses per contract
transaction fees and provides rebates to
market participants that add or remove
liquidity from the Exchange (‘‘maker/
taker fees and rebates’’) in a number of
options classes (the ‘‘Select Symbols’’).3
The maker/taker fees and rebates apply
to the following categories of market
participants: (i) Market Maker; 4 (ii)
Market Maker Plus; (iii) Non-ISE Market
Maker; 5 (iv) Firm Proprietary; (v)
Customer (Professional);6 (vi) Priority
Customer,7 100 or more contracts; and
(vii) Priority Customer, less than 100
contracts.
In order to promote and encourage
liquidity in the Select Symbols, the
Exchange currently offers a $0.10 per
contract rebate to Market Makers if the
quotes they sent to the Exchange qualify
the Market Maker to become a Market
Maker Plus.8 A Market Maker Plus is a
3 Options classes subject to maker/taker fees are
identified by their ticker symbol on the Exchange’s
Schedule of Fees.
4 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See ISE Rule 100(a)(25).
5 A Non-ISE Market Maker, or Far Away Market
Maker (‘‘FARMM’’), is a market maker as defined
in Section 3(a)(38) of the Securities Exchange Act
of 1934, as amended (‘‘Exchange Act’’), registered
in the same options class on another options
exchange.
6 A Customer (Professional) is a person who is not
a broker/dealer and is not a Priority Customer.
7 A Priority Customer is defined in ISE Rule
100(a)(37A) as a person or entity that is not a
broker/dealer in securities, and does not place more
than 390 orders in listed options per day on average
during a calendar month for its own beneficial
account(s).
8 The concept of incenting market makers with a
rebate is not novel. In 2008, the CBOE established
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Fmt 4703
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Market Maker who is on the National
Best Bid or National Best Offer (NBBO)
80% of the time for series trading
between $0.03 and $5.00 (for options
whose underlying stock’s previous
trading day’s last sale price was less
than or equal to $100) and between
$0.10 and $5.00 (for options whose
underlying stock’s previous trading
day’s last sale price was greater than
$100) in premium in each of the front
two expiration months and 80% of the
time for series trading between $0.03
and $5.00 (for options whose underlying
stock’s previous trading day’s last sale
price was less than or equal to $100)
and between $0.10 and $5.00 (for
options whose underlying stock’s
previous trading day’s last sale price
was greater than $100) in premium for
all expiration months in that symbol
during the current trading month.9
The Exchange now proposes to amend
the Market Maker Plus qualification
standards in order for a Market Maker
to qualify for the $0.10 per contract
rebate when providing liquidity
(making) in the Select Symbols.
Specifically, ISE proposes to exclude
from the NBBO calculation a Market
Maker’s single best and single worst
overall quoting days in a symbol if
doing so qualifies the Market Maker for
the rebate. In effect, this variation to the
current qualification standards will give
a Market Maker the better of the NBBO
average of all days in a month or the
NBBO average of the month excluding
the best and worst days, on a per symbol
basis. The Exchange believes this
proposed change will further encourage
Market Makers to continue to quote
aggressively in a class throughout the
entire month despite an individual
poor-performing day.
The Exchange currently determines
whether a Market Maker qualifies as a
Market Maker Plus at the end of each
month by looking back at each Market
Maker’s quoting statistics per symbol
during that month. If at the end of the
month, a Market Maker meets the
Exchange’s stated criteria, the Exchange
rebates $0.10 per contract for
transactions in that symbol executed by
a program for its Hybrid Agency Liaison whereby
it provides a $0.20 per contact rebate to its market
makers provided that at least 80% of the market
maker’s quotes in a class during a month are on one
side of the national best bid or offer. Market makers
not meeting CBOE’s criteria are not eligible to
receive a rebate. See Securities Exchange Act
Release No. 57231 (January 30, 2008), 73 FR 6752
(February 5, 2008). The CBOE has since lowered the
criteria from 80% to 60%. See Securities Exchange
Act Release No. 57470 (March 11, 2008), 73 FR
14514 (March 18, 2008).
9 See Securities Exchange Act Release No. 62507
(July 15, 2010), 75 FR 42802 (July 22, 2010) (SR–
ISE–2010–68).
E:\FR\FM\29MYN1.SGM
29MYN1
]]>Agencies
[Federal Register Volume 77, Number 103 (Tuesday, May 29, 2012)]
[Notices]
[Pages 31677-31680]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12850]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67040; File No. SR-FINRA-2012-011]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving a Proposed Rule Change Amending FINRA
Rule 14107 of the Code of Mediation Procedure To Provide the Director
of Mediation With Discretion to Determine Whether Parties to a FINRA
Mediation May Select a Mediator Who Is Not on FINRA's Mediator Roster
May 22, 2012.
I. Introduction
On February 9, 2012, 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'' or ``Act'') \1\ and
[[Page 31678]]
Rule 19b-4 thereunder,\2\ a proposed rule change to amend FINRA Rule
14107 of the Code of Mediation Procedure (``Mediation Code'') to
provide the Director of Mediation (``Mediation Director'') with
discretion to determine whether parties to a FINRA mediation may select
a mediator who is not on FINRA's mediator roster, subject to certain
conditions. The proposed rule change was published for comment in the
Federal Register on February 28, 2011.\3\ The Commission received five
comment letters on the proposed rule change,\4\ and a response to
comments from FINRA.\5\ This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 66441 (Feb. 22, 2012), 77 FR
12098 (Feb. 28, 2012) (``Notice''). The comment period closed on
March 20, 2012.
\4\ See Letter from Ryan K. Bakhtiari, President, Public
Investors Arbitration Bar Association, dated February 28, 2012
(``PIABA Letter''); letter from William A. Jacobson, Associate
Clinical Professor of Law, Cornell Law School, and Director, Cornell
Securities Law Clinic, and Patricia Peralta, Cornell Law School '13,
dated March 15, 2012 (``Cornell Letter''); letter from Lisa
Catalano, Director, Christine Lazaro, Supervising Attorney, and Ben
Kralstein, Andrew Mundo, and Daniel Porco, Legal Interns, St. John's
University School of Law Securities Arbitration Clinic, dated March
20, 2012 (``St. John's Letter''); letter from Jill I. Gross,
Director; Edward Pekarek, Assistant Director, and Genavieve Shingle,
Student Intern, Investor Rights Clinic at Pace Law School, dated
March 20, 2012 (``PIRC Letter''); and letter from Thomas K. Potter,
III, Burr & Forman LLP, dated March 23, 2012 (``Potter Letter'').
Comment letters are available at https://www.sec.gov.
\5\ See Letter from Margo A. Hassan, Assistant Chief Counsel,
FINRA Dispute Resolution, to Elizabeth M. Murphy, Secretary,
Commission, dated April 30, 2012 (``Response Letter''). The text of
the proposed rule change and FINRA's Response Letter are 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. The text of
the Response Letter is also available on the Commission's Web site
at https://www.sec.gov.
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II. Description of the Proposal
As stated in the Notice, FINRA's Mediation Code currently permits
parties to mediation to select a mediator either from a list of FINRA
mediators supplied by the Mediation Director, or from a list or other
source of their own choosing. Although parties usually select a FINRA
mediator, parties may select a mediator who is not on FINRA's roster.
FINRA has administered its mediation program for over 15 years.
FINRA stated in the Notice that during this time it has developed a
deep roster of seasoned securities mediators. Specifically, FINRA
represented that its staff carefully screens every mediator applicant,
and that the National Arbitration and Mediation Committee (``NAMC'')
\6\ (through its Mediation Subcommittee) reviews and approves each
application. FINRA stated that its staff then conducts a background
check of approved applicants before placing them on the mediator
roster. FINRA also stated that its staff engages in ongoing evaluation
of the mediators on its roster by eliciting evaluations of its
mediators from parties and counsel who have participated in mediation
and conducting periodic quality control reviews of their mediators.
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\6\ The NAMC makes recommendations to FINRA staff regarding
recruitment, qualification, training, and evaluation of arbitrators
and mediators. The NAMC also makes recommendations on rules,
regulations, and procedures that govern the conduct of arbitration,
mediation, and other dispute resolution matters before FINRA.
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Non-FINRA mediators are not subject to FINRA's screening process,
background check, and periodic evaluation. Accordingly, FINRA stated
that the selection of a non-FINRA mediator raises concerns for the
forum. FINRA stated, however, that if a mediator expresses an interest
in applying to be a FINRA mediator, and FINRA's program would benefit
by adding the mediator, FINRA staff believes it would be prudent to
permit a non-FINRA mediator chosen by the parties to serve on a case.
But FINRA stated that if a mediator does not apply for FINRA's roster
or FINRA believes the mediator is not appropriate for its forum, the
Mediation Director should have the discretion to deny the parties'
mediator selection.
For these reasons, in part, FINRA proposed to amend Rule 14107(a)
to state that a mediator may be selected, with the Mediation Director's
approval upon receipt of the parties' joint request, from a list or
other source the parties choose. Under the proposed rule, if the
Mediation Director rejects the mediator selected, the parties would
still be able to select a FINRA approved mediator or a different non-
FINRA mediator subject to the same conditions as the rejected mediator,
or to mediate their dispute elsewhere.
FINRA Rule 14107(c) provides that a mediator selected or assigned
to mediate a matter must comply with FINRA rules relating to
disclosures required of arbitrators unless, with respect to a mediator
selected from a source other than a list provided by FINRA, the parties
elect to waive such disclosure. The proposed rule change would amend
Rule 14107(c) to state that the paragraph would apply to a non-FINRA
mediator who is approved to serve on a FINRA mediation.\7\
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\7\ FINRA mediators pay an annual $200 fee to remain active on
the roster. Additionally, FINRA deducts $150 from the mediator's
compensation for each meditation in which the mediator participates
(FINRA stated that mediators typically receive $250 to $500 per
hour). The Notice stated that under the proposed rule FINRA would
require the non-FINRA mediator to complete the application process
for inclusion on the mediator roster. The Notice also stated that,
if the Commission approves the proposed rule change, FINRA would
require any non-FINRA mediator who serves on a case to pay the $200
annual fee charged to FINRA mediators who are active on the roster
prior to serving on the case, as well as the $150 mediation case
fee.
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The proposed rule change also would make two technical amendments
to Rule 14107. It would amend Rule 14107(a) to change the bullet points
to numbers to facilitate citation to particular provisions of Rule
14107(a). It would also amend Rule 14107(c) to replace the citation to
Rule 12408 of the Customer Code of Arbitration Procedure to Rule 12405
to reflect that former Rule 12408 was re-numbered as part of a prior
FINRA rule change.\8\
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\8\ See Exchange Act Release No. 63799 (Jan. 31, 2011), 76 FR
6500 (Feb. 4, 2011).
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In the Notice, FINRA represented that giving the Mediation Director
discretion to determine whether parties may select a mediator who is
not on FINRA's mediator roster would protect the quality and integrity
of the process for users of FINRA's mediation program.
III. Discussion of Comment Letters
The Commission received five comment letters on the proposed rule
change in response to the Notice.\9\ Two commenters supported the
proposal,\10\ one supported the proposal with a suggested
modification,\11\ and two opposed the proposal.\12\
---------------------------------------------------------------------------
\9\ Supra note 4.
\10\ See PIABA Letter and St. John's Letter.
\11\ See Cornell Letter.
\12\ See PIRC Letter and Potter Letter.
---------------------------------------------------------------------------
The PIABA Letter stated that the proposed rule change would assist
forum participants in resolving their disputes. The St. John's Letter
stated that giving the Mediation Director discretion in approving
mediators not on FINRA's roster would help to ensure quality and
efficiency in mediation.
The Cornell Letter stated that it supported the proposed rule
change because FINRA should be able to control the quality of its
mediation program. The letter also noted that, in the Notice, FINRA
stated that if the Mediation Director rejects the parties' selected
mediator, the parties would still be able to select a FINRA approved
mediator or a different non-FINRA mediator subject to the same
conditions as the rejected mediator, or to mediate their dispute
elsewhere. The letter recommended that FINRA include this language in
the proposed rule text or, alternatively, that the Commission
acknowledge the language in an order approving the proposed rule
change. In
[[Page 31679]]
its Response Letter, FINRA stated that it included the language in the
Notice to call attention to the alternatives that would be available to
forum users if the Mediation Director rejects the parties' chosen
mediator. FINRA stated that it was unnecessary to include the suggested
language in the rule text, and declined to amend the proposal. FINRA
also represented that, if the Commission approves the proposed rule
change, FINRA would include the suggested language in a Regulatory
Notice announcing approval of the proposed rule change to ensure that
parties are cognizant of their options under FINRA's program. In
addition, FINRA stated that if the Mediation Director rejects the
parties' chosen mediator, FINRA would notify the parties of the
alternatives available to them.
The PIRC Letter opposed the proposed rule change on the basis that
it might inhibit investor choice and control over the mediation
process. The letter stated that, under the current rule, an investor
has the ability to select a mediator best suited to represent him or
her in his or her specific claim. The letter further stated that this
level of choice provides an investor a level of control over the
process and increases the perception of its fairness. In particular,
the letter stated that under the current rule, an investor could choose
lower-cost options that suit the investor's financial status, such as a
non-FINRA pro bono mediator, or a mediator who is willing to accept a
reduced fee. The letter expressed concern that the proposed rule would
increase the overall cost of mediation to investors because it would
inhibit their ability to choose affordable non-FINRA mediators. In its
Response Letter, FINRA stated that it has a duty to ensure the quality
of its program and believes that maintaining control of its mediator
roster is necessary to meet this duty. Moreover, the letter reiterated
that parties would still have options for mediating their dispute if
the Mediation Director rejected their selected mediator: The parties
would be able to select a mediator on FINRA's roster, select a
different non-FINRA mediator subject to the same conditions as the
rejected mediator, or choose to mediate their dispute in another forum.
In its Response Letter, FINRA also stated that it believes its
mediation program is cost-effective for investors of all means. FINRA
stated it believes that its filing fees (of up to $300) are modest and
that the Mediation Director has discretion to waive them. FINRA also
stated that it offers many opportunities for parties using its
mediators to reduce the cost of mediation, including: (1) When FINRA
adds mediators to its roster, it asks them to reduce their rates for
smaller claims; (2) FINRA's Mediation Administrators provide, upon
request, parties with a list of mediators who have agreed to conduct
mediations for $50 per hour in appropriate cases; (3) some mediators on
FINRA's roster have agreed to conduct mediations on a pro bono basis
for parties of limited means; and (4) every October, FINRA hosts
Mediation Settlement Month during which both FINRA and the mediators on
its roster lower their fees in order to encourage participation.\13\
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\13\ FINRA lowers its filing fees by 50 percent and its
mediators (who typically charge between $250 and $500 per hour for
services rendered) reduce their rates to $200 per hour for a four-
hour mediation session for claims up to $25,000, and $400 per hour
for claims up to $100,000.
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The Potter Letter stated, among other things, that FINRA has not
established a need for the proposed rule change. The letter also stated
that the proposed rule change would prevent parties from selecting a
mediator of their choice and would restrict their freedom to contract.
Moreover, the letter stated that the commenter believes the proposed
rule would be difficult to enforce because FINRA would be unable to
monitor a prohibition against private parties entering into private
contracts.
In its Response Letter, FINRA stated that it does not believe the
proposed rule change was unnecessary and reiterated that FINRA has a
duty to ensure the quality of its mediation program, and that
maintaining control of its mediator roster is a necessary to meet this
duty. With respect to the letter's other objections, FINRA stated that
it believes the commenter misinterpreted the proposal. Specifically,
FINRA stated that mediation is voluntary, and that the proposed rule
change would not prohibit parties from choosing their own mediators, or
from choosing their own forum for mediation. In addition, FINRA
reiterated that if the Mediation Director rejects a mediator selected
by the parties, they would still be free to mediate their dispute
elsewhere. Moreover, FINRA stated that it does not intend to police
mediation between parties that occurs outside of FINRA's mediation
forum.
For the aforementioned reasons, FINRA declined to amend the
proposed rule change as suggested by commenters.
IV. Commission's Findings
The Commission has carefully reviewed the proposed rule change, the
comments received, and FINRA's Response Letter. Based on its review,
the Commission finds that the proposed rule change is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities association. In particular, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Act,\14\ 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.
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\14\ 15 U.S.C. 78o-3(b)(6).
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More specifically, the Commission finds that the proposed rule
change to provide the Mediation Director with discretion to determine
whether parties to a FINRA mediation may select a mediator who is not
on FINRA's mediator roster would benefit investors and other
participants in the forum by helping to protect the quality and
integrity of FINRA's mediation program for parties using FINRA's forum.
While the Commission appreciates the commenters' concerns, particularly
regarding whether parties using the forum would understand the options
available to them if the Mediation Director rejects a mediator selected
by the parties, we believe that FINRA has responded adequately to the
commenters' concerns and note that FINRA has stated that it will
include in a Regulatory Notice announcing approval of the proposed rule
change language designed to ensure that parties are cognizant of their
options under FINRA's program, and that if the Mediation Director
rejects the parties' chosen mediator, FINRA will notify the parties of
the alternatives available to them.
The Commission has reviewed the record for the proposed rule change
and believes that the record does not contain any information to
indicate that the proposed rule would have a significant effect on
efficiency, competition, or capital formation. In light of the record,
the Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation and has concluded that the proposed
rule is unlikely to have any significant effect.\15\
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\15\ See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
For the reasons stated above, the Commission finds that the
proposed rule change is consistent with the Act and the rules and
regulations thereunder.
[[Page 31680]]
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-FINRA-2012-011) be, and it
hereby is, approved.
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\16\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12850 Filed 5-25-12; 8:45 am]
BILLING CODE 8011-01-P
