Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Approval of Proposed Rule Change as Modified by Amendment No. 1, To Amend NASD Rules 1012 (General Provisions) and 1017 (Application for Approval of Change in Ownership, Control, or Business Operations) To Adopt Form CMA, 33539-33541 [2012-13639]
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Federal Register / Vol. 77, No. 109 / Wednesday, June 6, 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–2012–026 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.
mstockstill on DSK4VPTVN1PROD with NOTICES
All submissions should refer to File
Number SR–FINRA–2012–026. 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
10:00 a.m. and 3:00 p.m. Copies of the
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–
2012–026, and should be submitted on
or before June 27, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–13642 Filed 6–5–12; 8:45 am]
BILLING CODE 8011–01–P
12 17
CFR 200.30–3(a)(12).
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17:24 Jun 05, 2012
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67082; File No. SR–FINRA–
2012–018]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Approval of Proposed Rule Change as
Modified by Amendment No. 1, To
Amend NASD Rules 1012 (General
Provisions) and 1017 (Application for
Approval of Change in Ownership,
Control, or Business Operations) To
Adopt Form CMA
May 31, 2012.
I. Introduction
On February 28, 2012, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend NASD
Rules 1012 (General Provisions) and
1017 (Application for Approval of
Change in Ownership, Control, or
Business Operations) and to adopt Form
CMA (‘‘Form’’), a new standardized
electronic form. The Form must be used
by members who apply for approval of
a change in ownership, control, or
business operations consistent with
Rule 1017. The proposed rule change
was published for comment in the
Federal Register on March 8, 2012.3 The
Commission received four comment
letters on the proposed rule change.4
On May 8, 2012, FINRA filed
Amendment No. 1 5 and a letter in
response to the comments.6 The
Commission is approving the proposed
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66508
(March 2, 2012), 77 FR 14052.
4 See March 14, 2012 letter from Kevin A.
Carreno, President, Experts Counsel Inc. (‘‘EC
Letter’’); March 29, 2012 letter from David T.
Bellaire, Esq., General Counsel and Director of
Government Affairs, Financial Services Institute, to
Elizabeth M. Murphy, Secretary (‘‘Secretary’’),
Commission (‘‘FSI Letter’’); March 29, 2012 letter
from Stephen H. Cohen, Partner, Loeb & Loeb LLP,
to Secretary, Commission (‘‘LL Letter’’); March 29,
2012 letter from Howard Spindel, Senior Managing
Director, Integrated Management Solutions, to
Secretary, Commission (‘‘IMS Letter’’).
5 Amendment No. 1 is technical in nature, and the
Commission is not publishing it for public
comment.
6 See May 8, 2012, letter from Patricia Albrecht,
Associate General Counsel, FINRA, to Secretary,
Commission (‘‘FINRA Letter’’).
2 17
PO 00000
Frm 00152
Fmt 4703
Sfmt 4703
33539
rule change as modified by Amendment
No 1.7
II. Description of the Proposal
NASD Rule 1017 requires members,
upon specified changes in ownership,
control, or business operations, to file a
continuing membership application and
enumerates the information that must be
provided to FINRA for FINRA to review.
FINRA proposes to amend NASD Rules
1012 (General Provisions) and 1017
(Application for Approval of change in
Ownership, Control, or Business
Operations) to adopt the Form, a new
standardized electronic form to be used
by members subject to the continuing
membership process. FINRA worked
with an industry task force comprised of
representatives from small and large
firms to develop the Form. FINRA
believes that the Form will reduce the
administrative burden for applicants
that must comply with the Rule and
enable its staff to review the
applications in more effective and
efficient manner.
III. Summary of Comments
The Commission received four
comment letters on the proposed rule
change.8 One commenter urged the
Commission to approve the proposed
rule change, stating the use of the Form
will provide member firms with clarity
and will streamline the process.9 The
remaining commenters raised the
following issues:
The Form is Overbroad and Confusing
Three commenters expressed concern
that the Form would impose new and
unnecessary demands for information,
adding to confusion and resulting in
greater delays for most members.10 One
commenter expressed concern the Form
would impose needless, burdensome
requirements on both member firms and
FINRA to sift through irrelevant
information, adding unnecessarily to the
time required for applicants to file, and
for FINRA to review, an application
pursuant to Rule 1017.11 Another
commenter said the amount of detail
requested in the Form will have a
negative effect on most members, and
7 On April 18, 2012, FINRA granted an extension
of time until June 6, 2012, for the Commission to
act on the filing.
8 See supra note 4.
9 FSI Letter at 3. Another commenter supported
the proposed rule change, but expressed concern
about ‘‘problems embedded in the CMA process
that puts [sic] smaller firms at a huge
disadvantage.’’ IMS Letter at 5.
10 IMS Letter, LL Letter, EC Letter.
11 LL Letter at 2. The commenter offered seven
examples of how the Form is overbroad, confusing,
and beyond the scope of a member firm’s current
obligations under Rule 1017. Id. at 3–4.
E:\FR\FM\06JNN1.SGM
06JNN1
33540
Federal Register / Vol. 77, No. 109 / Wednesday, June 6, 2012 / Notices
place an increased administrative
burden on small firms.12 Another
commenter questioned whether the
Form will require members to provide
irrelevant data, given that members will
have one basic application process that
must serve the needs of all FINRA
members, regardless of size and
complexity.13 The commenter expressed
hope that indicating a negative response
that maintains the status quo will result
in an application process that is
relatively short.14 Additionally, the
commenter stated FINRA staff should be
allowed to exercise its judgment when
determining the potential harm to the
public and whether a closer analysis is
warranted, depending on the size and
complexity of operations of the firm.15
FINRA Should Conduct a More
Comprehensive Review of the CMA
Process and Shorten Timeframes for
Approval of Rule 1017 Applications
One commenter stated that Rule 1017
has a disproportionate impact on small
firms, and that FINRA staff ‘‘has
routinely used the 1017 process to delay
potential business opportunities for
small firms to the detriment of the firms
[sic] shareholders, employees and
clients.’’ 16 The commenter asked the
Commission to reject the proposed
amendments, and to require FINRA to
conduct a more comprehensive review
of the Change of Membership process to
allow for greater flexibility for small
firms.17
Two commenters stated FINRA
should reduce the timeframe for
approval of Rule 1017 applications. One
commenter suggested 60 days was
appropriate.18 Another commenter
suggested that 30 days was adequate for
a simple continuing membership
application that has been accepted as
substantially complete, and that 60 days
should suffice for more complex
applications.19
mstockstill on DSK4VPTVN1PROD with NOTICES
IV. FINRA’s Response to Comments
FINRA disagreed that the Form
employed a ‘‘one size fits all’’ approach,
and that the Form would result in
unnecessary burdens, delays, and
confusion.20 FINRA stated the Form is
12 EC Letter (‘‘* * * the amount of detail
requested in over 45 pages in an electronic
application will lead to much greater delays and
confusion for most members. It will also
significantly increase the administrative burden on
small firms.’’).
13 IMS Letter at 1, 3.
14 Id. at 3.
15 Id.
16 EC Letter.
17 Id.
18 EC Letter.
19 IMS Letter at 5.
20 FINRA Letter at 3.
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17:24 Jun 05, 2012
Jkt 226001
designed to gather basic information
necessary for all applicants, with
‘‘embedded flexibility’’ to allow for
differences among applicants,
depending on the type of application
being submitted.21 FINRA noted that the
Form uses pre-populating fields that
contain information applicants
previously provided to FINRA, as well
as optional information fields that
applicants may use to provide
additional information, and that these
features were designed to minimize the
time required of applicants in filling out
the Form, and to reduce the
administrative burden on applicants.22
FINRA stated the use of optional fields
is also intended to accommodate the
differences in structures among
applicants and to allow applicants the
ability to provide relevant information
depending on their circumstances.23
FINRA does not believe that the Form
will increase the administrative burden
on small firm applicants.24 Having
worked with an industry task force
comprised with a majority of
representatives from small firms, FINRA
stated it ‘‘gained valuable insight
regarding the potential impact of Form
CMA on small firm applicants.’’ 25
FINRA used this information ‘‘to make
changes intended to provide flexibility
and reduce all applicants’
administrative burdens’’ when
completing the Form.26
FINRA amended the proposed rule
change in response to concerns raised
by one commenter that FINRA should
delete references to a business plan, pro
forma financials, organization chart, and
written supervisory procedures
contained in NASD Rule 1017(b)(2) to
avoid potential confusion. FINRA
proposes to delete references to those
items, and revised the proposed rule
language to require an applicant to
submit an application that includes a
‘‘Form CMA that includes a detailed
description of the change in ownership,
control, or business operations.’’ 27
FINRA addressed a number of
questions and comments raised by the
commenters regarding the format of the
Form, as well as content issues, by
clarifying the scope of information that
FINRA expects applicants to provide
when completing the Form.28 FINRA
does not believe that the information
requested in the Form is broader and
21 Id.
at 11.
30 Id.
23 Id.
31 15
U.S.C. 78o–3.
78o–3(b)(6).
33 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
24 Id.
32 15.U.S.C.
25 Id.
at 3–4.
26 Id. at 4.
27 Id. at 4.
28 Id., generally, at 4–11.
Frm 00153
V. Discussion and Commission Findings
After careful review of the proposed
rule change, the comment letters, and
FINRA’s response to the comments, 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 and, in
particular, the requirements of 15A of
the Act.31 Specifically, the Commission
finds that the proposed rule change is
consistent with Section 15A(b)(6) 32 of
the Act, which, among other things,
requires that rules of a national
securities association be designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and to protect investors and the
public interest.33
The Commission believes that the
proposed rule change is reasonable, and
specifically, that the Form and
corresponding changes to NASD Rules
1012 and 1017 are reasonably designed
to streamline the process for compliance
with the continuing membership
responsibilities of FINRA members. The
Commission supports FINRA’s efforts to
improve the efficiency of the process
and its desire to reduce the overall
administrative burden shouldered by
members who are subject to the
continuing membership process of Rule
1017.
The Commission is not persuaded by
the commenters’ assertions that the
proposal places undue burdens on small
firms. The Commission believes that
FINRA’s efforts to address this issue are
sufficient. The Commission notes that
29 Id.
22 Id.
PO 00000
beyond the scope of information that
FINRA currently requests during the
continuing membership application
process.
With regard to the commenters’
suggestions that FINRA reduce the 180day timeframe provided in NASD Rule
1017 for approving a continuing
membership application, FINRA
believes these comments are beyond the
scope of the proposed rule change.29
However, FINRA ‘‘continues to evaluate
opportunities to streamline the
application process or, where
appropriate, consider revisions or
amendments to FINRA’s membership
rules.’’ 30
Fmt 4703
Sfmt 4703
E:\FR\FM\06JNN1.SGM
06JNN1
Federal Register / Vol. 77, No. 109 / Wednesday, June 6, 2012 / Notices
FINRA solicited input from small firms
in redesigning the continuing
membership application process, and
the Form is structured to allow for some
degree of flexibility, so that each
applicant may tailor its application
appropriately. Furthermore, in FINRA’s
response to the comments, FINRA
provided detailed guidance and
clarification to help alleviate concerns
and confusion generated by the
proposal. The Commission supports
FINRA’s desire to continually examine
its policies and procedures to reduce
administrative burdens and increase
efficiency with regard to continuing
membership applications whenever
possible. As FINRA undergoes this selfevaluation, the Commission believes
FINRA will consider the commenters’
suggestion that FINRA reevaluate the
necessity of a 180-day approval period
for continuing membership
applications. In the interim, however,
the Commission believes the proposed
rule change is both reasonable and
consistent with the Act.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,34 that the
proposed rule change (SR–FINRA–
2012–018), as modified by Amendment
No. 1, be, and hereby is, approved.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–13639 Filed 6–5–12; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67084; File No. SR–CBOE–
2012–042]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To List and
Trade CBOE S&P 500 AM/PM Basis
Options
mstockstill on DSK4VPTVN1PROD with NOTICES
May 31, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on May 23,
2012, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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17:24 Jun 05, 2012
Jkt 226001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’ or ‘‘Exchange’’)
proposes to amend certain of its rules to
provide for the listing and trading of
cash-settled CBOE S&P 500 AM/PM
Basis (‘‘SPBAS’’) options that will be
P.M.-settled and have European-style
exercise. The text of the rule proposal is
available on the Exchange’s Web site
(https://www.cboe.org/legal), at the
Exchange’s Office of the Secretary and
at 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
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
34 15
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
1. Purpose
The purpose of the proposed rule
change is to permit the Exchange to list
and trade cash-settled CBOE S&P 500
AM/PM Basis (‘‘SPBAS’’) options, that
will be P.M.-settled and will have
European-style exercise.3
Design of the Product
SPBAS options reflect the difference
between the Special Opening Quotation
(‘‘SOQ’’) of the S&P 500 Index 4 and the
closing level of the S&P 500 Index on
the last trading day (which is typically
the third Friday of the month) for
3 See proposed addition of SPBAS options to the
list of European-style index options approved for
trading on the Exchange contained in Rule
24.9(a)(3) (Terms of Index Options Contracts).
4 The SOQ is calculated per normal index
calculation procedures and uses the opening (first)
reported sales price in the primary market of each
component stock in the index on the last business
day (usually a Friday) before the expiration date. If
a stock in the index does not open on the day on
which the exercise-settlement value is determined,
the last reported sales price in the primary market
is used to calculate the exercise-settlement value.
PO 00000
Frm 00154
Fmt 4703
Sfmt 4703
33541
SPBAS options. The options will allow
investors to gain exposure to or hedge
the basis risk between A.M.-Settled S&P
500 Index (‘‘SPX’’) options traded on
CBOE and P.M.-Settled S&P 500 Index
(‘‘SPXPM’’) options traded on the C2
Options Exchange, Incorporated
(‘‘C2’’).5
At expiration, SPBAS options will
settle against the following index
calculation:
SPBAS = MAX (100 + (SOQ of S&P 500)—
(Closing Value of S&P 500), 0)
In other words, SPBAS is the greater
of (1) the SOQ of SPX minus the closing
value of SPX plus 100 and (2) zero. This
formulation ensures that the settlement
value for SPBAS options can never be
less than zero.
Due to the nature of SPBAS options
(e.g., settlement to the difference
between the SOQ of the S&P 500 Index
and the closing level of the S&P 500
Index on the third Friday of each
month) an intraday value will not be
disseminated. Rather, prior to the open
on all trading days, other than the last
trading day (which is typically the third
Friday of the month) CBOE will
disseminate a single value of 100 for
SPBAS options through the Options
Price Reporting Authority (‘‘OPRA’’),
the Consolidated Tape Association
(‘‘CTA’’) tape and/or the Market Data
Index (‘‘MDI’’) feed. After the close of
trading on the last trading day (e.g.,
third Friday of the month), CBOE will
disseminate the exercise settlement
value (calculated as described above) for
the expiring contract.
Options Trading
SPBAS options will be quoted in
points and fractions and one point will
equal $100. The contract multiplier will
be $100. The minimum tick size for
series trading below $3 will be 0.05
($5.00) and above $3 will be 0.10
($10.00). Exhibit 3 presents contract
specifications for SPBAS options.
The Exchange is proposing to list
series at $1 or greater where the strike
price is $200 or less and $5 or greater
where the strike price is greater than
$200.6 The Exchange believes that a
5 See Securities Exchange Act Release No. 65256
(September 2, 2011), 76 FR 55969 (September 9,
2011) (SR–C2–2011–008) (order approving listing
and trading of SPXPM options on C2 on a pilot
basis).
6 See proposed amendment to Rule 24.9.01(e)
(Terms of Index Options Contracts). The Exchange
also proposes to add new Interpretation and Policy
.21 to Rule 5.5 (Series of Option Contracts Open for
Trading), which will be an internal cross reference
stating that the intervals between strike prices for
SPBAS option series will be determined in
accordance with Interpretation and Policy .01(e) to
Rule 24.9.
E:\FR\FM\06JNN1.SGM
Continued
06JNN1
]]>Agencies
[Federal Register Volume 77, Number 109 (Wednesday, June 6, 2012)]
[Notices]
[Pages 33539-33541]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13639]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67082; File No. SR-FINRA-2012-018]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting
Approval of Proposed Rule Change as Modified by Amendment No. 1, To
Amend NASD Rules 1012 (General Provisions) and 1017 (Application for
Approval of Change in Ownership, Control, or Business Operations) To
Adopt Form CMA
May 31, 2012.
I. Introduction
On February 28, 2012, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NASD Rules 1012 (General Provisions) and
1017 (Application for Approval of Change in Ownership, Control, or
Business Operations) and to adopt Form CMA (``Form''), a new
standardized electronic form. The Form must be used by members who
apply for approval of a change in ownership, control, or business
operations consistent with Rule 1017. The proposed rule change was
published for comment in the Federal Register on March 8, 2012.\3\ The
Commission received four comment letters on the proposed rule
change.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 66508 (March 2,
2012), 77 FR 14052.
\4\ See March 14, 2012 letter from Kevin A. Carreno, President,
Experts Counsel Inc. (``EC Letter''); March 29, 2012 letter from
David T. Bellaire, Esq., General Counsel and Director of Government
Affairs, Financial Services Institute, to Elizabeth M. Murphy,
Secretary (``Secretary''), Commission (``FSI Letter''); March 29,
2012 letter from Stephen H. Cohen, Partner, Loeb & Loeb LLP, to
Secretary, Commission (``LL Letter''); March 29, 2012 letter from
Howard Spindel, Senior Managing Director, Integrated Management
Solutions, to Secretary, Commission (``IMS Letter'').
---------------------------------------------------------------------------
On May 8, 2012, FINRA filed Amendment No. 1 \5\ and a letter in
response to the comments.\6\ The Commission is approving the proposed
rule change as modified by Amendment No 1.\7\
---------------------------------------------------------------------------
\5\ Amendment No. 1 is technical in nature, and the Commission
is not publishing it for public comment.
\6\ See May 8, 2012, letter from Patricia Albrecht, Associate
General Counsel, FINRA, to Secretary, Commission (``FINRA Letter'').
\7\ On April 18, 2012, FINRA granted an extension of time until
June 6, 2012, for the Commission to act on the filing.
---------------------------------------------------------------------------
II. Description of the Proposal
NASD Rule 1017 requires members, upon specified changes in
ownership, control, or business operations, to file a continuing
membership application and enumerates the information that must be
provided to FINRA for FINRA to review. FINRA proposes to amend NASD
Rules 1012 (General Provisions) and 1017 (Application for Approval of
change in Ownership, Control, or Business Operations) to adopt the
Form, a new standardized electronic form to be used by members subject
to the continuing membership process. FINRA worked with an industry
task force comprised of representatives from small and large firms to
develop the Form. FINRA believes that the Form will reduce the
administrative burden for applicants that must comply with the Rule and
enable its staff to review the applications in more effective and
efficient manner.
III. Summary of Comments
The Commission received four comment letters on the proposed rule
change.\8\ One commenter urged the Commission to approve the proposed
rule change, stating the use of the Form will provide member firms with
clarity and will streamline the process.\9\ The remaining commenters
raised the following issues:
---------------------------------------------------------------------------
\8\ See supra note 4.
\9\ FSI Letter at 3. Another commenter supported the proposed
rule change, but expressed concern about ``problems embedded in the
CMA process that puts [sic] smaller firms at a huge disadvantage.''
IMS Letter at 5.
---------------------------------------------------------------------------
The Form is Overbroad and Confusing
Three commenters expressed concern that the Form would impose new
and unnecessary demands for information, adding to confusion and
resulting in greater delays for most members.\10\ One commenter
expressed concern the Form would impose needless, burdensome
requirements on both member firms and FINRA to sift through irrelevant
information, adding unnecessarily to the time required for applicants
to file, and for FINRA to review, an application pursuant to Rule
1017.\11\ Another commenter said the amount of detail requested in the
Form will have a negative effect on most members, and
[[Page 33540]]
place an increased administrative burden on small firms.\12\ Another
commenter questioned whether the Form will require members to provide
irrelevant data, given that members will have one basic application
process that must serve the needs of all FINRA members, regardless of
size and complexity.\13\ The commenter expressed hope that indicating a
negative response that maintains the status quo will result in an
application process that is relatively short.\14\ Additionally, the
commenter stated FINRA staff should be allowed to exercise its judgment
when determining the potential harm to the public and whether a closer
analysis is warranted, depending on the size and complexity of
operations of the firm.\15\
---------------------------------------------------------------------------
\10\ IMS Letter, LL Letter, EC Letter.
\11\ LL Letter at 2. The commenter offered seven examples of how
the Form is overbroad, confusing, and beyond the scope of a member
firm's current obligations under Rule 1017. Id. at 3-4.
\12\ EC Letter (``* * * the amount of detail requested in over
45 pages in an electronic application will lead to much greater
delays and confusion for most members. It will also significantly
increase the administrative burden on small firms.'').
\13\ IMS Letter at 1, 3.
\14\ Id. at 3.
\15\ Id.
---------------------------------------------------------------------------
FINRA Should Conduct a More Comprehensive Review of the CMA Process and
Shorten Timeframes for Approval of Rule 1017 Applications
One commenter stated that Rule 1017 has a disproportionate impact
on small firms, and that FINRA staff ``has routinely used the 1017
process to delay potential business opportunities for small firms to
the detriment of the firms [sic] shareholders, employees and clients.''
\16\ The commenter asked the Commission to reject the proposed
amendments, and to require FINRA to conduct a more comprehensive review
of the Change of Membership process to allow for greater flexibility
for small firms.\17\
---------------------------------------------------------------------------
\16\ EC Letter.
\17\ Id.
---------------------------------------------------------------------------
Two commenters stated FINRA should reduce the timeframe for
approval of Rule 1017 applications. One commenter suggested 60 days was
appropriate.\18\ Another commenter suggested that 30 days was adequate
for a simple continuing membership application that has been accepted
as substantially complete, and that 60 days should suffice for more
complex applications.\19\
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\18\ EC Letter.
\19\ IMS Letter at 5.
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IV. FINRA's Response to Comments
FINRA disagreed that the Form employed a ``one size fits all''
approach, and that the Form would result in unnecessary burdens,
delays, and confusion.\20\ FINRA stated the Form is designed to gather
basic information necessary for all applicants, with ``embedded
flexibility'' to allow for differences among applicants, depending on
the type of application being submitted.\21\ FINRA noted that the Form
uses pre-populating fields that contain information applicants
previously provided to FINRA, as well as optional information fields
that applicants may use to provide additional information, and that
these features were designed to minimize the time required of
applicants in filling out the Form, and to reduce the administrative
burden on applicants.\22\ FINRA stated the use of optional fields is
also intended to accommodate the differences in structures among
applicants and to allow applicants the ability to provide relevant
information depending on their circumstances.\23\
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\20\ FINRA Letter at 3.
\21\ Id.
\22\ Id.
\23\ Id.
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FINRA does not believe that the Form will increase the
administrative burden on small firm applicants.\24\ Having worked with
an industry task force comprised with a majority of representatives
from small firms, FINRA stated it ``gained valuable insight regarding
the potential impact of Form CMA on small firm applicants.'' \25\ FINRA
used this information ``to make changes intended to provide flexibility
and reduce all applicants' administrative burdens'' when completing the
Form.\26\
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\24\ Id.
\25\ Id. at 3-4.
\26\ Id. at 4.
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FINRA amended the proposed rule change in response to concerns
raised by one commenter that FINRA should delete references to a
business plan, pro forma financials, organization chart, and written
supervisory procedures contained in NASD Rule 1017(b)(2) to avoid
potential confusion. FINRA proposes to delete references to those
items, and revised the proposed rule language to require an applicant
to submit an application that includes a ``Form CMA that includes a
detailed description of the change in ownership, control, or business
operations.'' \27\
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\27\ Id. at 4.
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FINRA addressed a number of questions and comments raised by the
commenters regarding the format of the Form, as well as content issues,
by clarifying the scope of information that FINRA expects applicants to
provide when completing the Form.\28\ FINRA does not believe that the
information requested in the Form is broader and beyond the scope of
information that FINRA currently requests during the continuing
membership application process.
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\28\ Id., generally, at 4-11.
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With regard to the commenters' suggestions that FINRA reduce the
180-day timeframe provided in NASD Rule 1017 for approving a continuing
membership application, FINRA believes these comments are beyond the
scope of the proposed rule change.\29\ However, FINRA ``continues to
evaluate opportunities to streamline the application process or, where
appropriate, consider revisions or amendments to FINRA's membership
rules.'' \30\
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\29\ Id. at 11.
\30\ Id.
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V. Discussion and Commission Findings
After careful review of the proposed rule change, the comment
letters, and FINRA's response to the comments, 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 and, in particular, the requirements of
15A of the Act.\31\ Specifically, the Commission finds that the
proposed rule change is consistent with Section 15A(b)(6) \32\ of the
Act, which, among other things, requires that rules of a national
securities association be designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and to protect
investors and the public interest.\33\
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\31\ 15 U.S.C. 78o-3.
\32\ 15.U.S.C. 78o-3(b)(6).
\33\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
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The Commission believes that the proposed rule change is
reasonable, and specifically, that the Form and corresponding changes
to NASD Rules 1012 and 1017 are reasonably designed to streamline the
process for compliance with the continuing membership responsibilities
of FINRA members. The Commission supports FINRA's efforts to improve
the efficiency of the process and its desire to reduce the overall
administrative burden shouldered by members who are subject to the
continuing membership process of Rule 1017.
The Commission is not persuaded by the commenters' assertions that
the proposal places undue burdens on small firms. The Commission
believes that FINRA's efforts to address this issue are sufficient. The
Commission notes that
[[Page 33541]]
FINRA solicited input from small firms in redesigning the continuing
membership application process, and the Form is structured to allow for
some degree of flexibility, so that each applicant may tailor its
application appropriately. Furthermore, in FINRA's response to the
comments, FINRA provided detailed guidance and clarification to help
alleviate concerns and confusion generated by the proposal. The
Commission supports FINRA's desire to continually examine its policies
and procedures to reduce administrative burdens and increase efficiency
with regard to continuing membership applications whenever possible. As
FINRA undergoes this self-evaluation, the Commission believes FINRA
will consider the commenters' suggestion that FINRA reevaluate the
necessity of a 180-day approval period for continuing membership
applications. In the interim, however, the Commission believes the
proposed rule change is both reasonable and consistent with the Act.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-FINRA-2012-018), as modified
by Amendment No. 1, be, and hereby is, approved.
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\34\ 15 U.S.C. 78s(b)(2).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13639 Filed 6-5-12; 8:45 am]
BILLING CODE 8011-01-P
