Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend NASD Rule 2711 and Incorporated NYSE Rule 472 To Conform With the Requirements of the Jumpstart Our Business Startups Act and Related Changes, 63908-63911 [2012-25501]

Download as PDF mstockstill on DSK4VPTVN1PROD with NOTICES 63908 Federal Register / Vol. 77, No. 201 / Wednesday, October 17, 2012 / Notices 26G–315 (Terms of the Cleared SNEC Contract), 26G–316 (Relevant Physical Settlement Matrix Updates), 26G–502 (Specified Actions), and 26G–616 (Contract Modification) reflect or incorporate the basic contract specifications for European SN Contracts and are substantially the same as under ICC Section 26B for North American SN Contracts, except as follows. In addition to various nonsubstantive conforming changes, the proposed rules differ from the existing North American SN Contracts in that the contract terms in Rule 26G–315 incorporate the relevant published ISDA physical settlement matrix terms for Standard European Corporate transactions, rather than Standard North American Corporate transactions, and, as noted in the preceding paragraph, certain elections and supplements used for North American SN Contracts are not applicable to European SN Contracts. In addition, the contracts reflect the fact that under the ISDA physical settlement matrix terms, the restructuring credit event and the related additional terms for ‘‘Modified Restructuring Maturity Limitation and Conditionally Transferable Obligation’’ under the ISDA Credit Derivatives Definitions (commonly referred to as ‘‘Mod Mod R’’ terms) apply to European SN Contracts. In addition, ICC proposes to make conforming changes in Section 26E of the Rules (the CDS Restructuring Rules), principally to address the particular restructuring terms that apply to iTraxx Contracts and European SN Contracts. Specifically, ICC proposes to modify the notice delivery procedures in Rule 26E– 104 to include ‘‘notices to exercise movement option’’ under the Mod Mod R terms. In addition, the definition of ‘‘Triggered Restructuring CDS Contract’’ has been modified to reflect that under Mod Mod R terms a CDS contract may be triggered in part following a restructuring credit event. Section 17A(b)(3)(F) of the Act 3 requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions. ICC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICC, in particular, to Section 17(A)(b)(3)(F), because ICC believes that the clearance of iTraxx and European SN Contracts will facilitate the prompt and accurate 3 15 U.S.C. 78q–1(b)(3)(F). VerDate Mar<15>2010 18:49 Oct 16, 2012 Jkt 229001 settlement of swaps and contribute to the safeguarding of securities and funds associated with swap transactions. B. Self-Regulatory Organization’s Statement on Burden on Competition ICC does not believe the proposed rule change would have any impact, or impose any burden, on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the Commission of any written comments received by ICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–ICC–2012–18 on the subject line. 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 such filings will also be available for inspection and copying at the principal office of ICE Clear Credit and on ICE Clear Credit’s Web site at https://www. theice.com/publicdocs/regulatory_ filings/ICEClearCredit_092812.pdf. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ICC–2012–18 and should be submitted on or before November 7, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.4 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–25499 Filed 10–16–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68037; File No. SR–FINRA– 2012–045] 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–ICC–2012–18. 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 Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend NASD Rule 2711 and Incorporated NYSE Rule 472 To Conform With the Requirements of the Jumpstart Our Business Startups Act and Related Changes October 11, 2012. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 I. Introduction Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 4 17 E:\FR\FM\17OCN1.SGM CFR 200.30–3(a)(12). 17OCN1 Federal Register / Vol. 77, No. 201 / Wednesday, October 17, 2012 / Notices (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 28, 2012, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/ k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have substantially been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and to approve the proposed rule change on an accelerated basis. II. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend NASD Rule 2711 (Research Analysts and Research Reports) to conform with the requirements of the Jumpstart Our Business Startups Act (‘‘JOBS Act’’) 3 and make certain additional changes to quiet period restrictions consistent with the policies underlying the JOBS Act. The proposed rule change also makes conforming amendments to Incorporated NYSE Rule 472 (Communications With The Public). The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA, and at the Commission’s Public Reference Room. III. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. mstockstill on DSK4VPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The JOBS Act was signed into law on April 5, 2012. Among other things, the JOBS Act is intended to help facilitate capital formation for ‘‘emerging growth companies’’ (‘‘EGCs’’) by improving the information flow about EGCs to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Pub. L. No. 112–106, 126 Stat. 306. 2 17 VerDate Mar<15>2010 18:49 Oct 16, 2012 Jkt 229001 63909 investors. To that end, Section 105(b) of the JOBS Act amended Section 15D of the Act to prohibit the Commission or any national securities association from adopting or maintaining any rule or regulation in connection with an initial public offering (‘‘IPO’’) of an EGC that: • Restricts, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between an analyst and a potential investor; or • restricts a securities analyst from participating in any communication with the management of an EGC that is also attended by any other associated person of a broker, dealer, or member of a national securities association whose functional role is other than as a securities analyst. Section 105(d) further prohibits the Commission or any national securities association from adopting or maintaining any rule or regulation that prohibits a broker or dealer from publishing or distributing any research report or making a public appearance, with respect to the securities of an EGC either: • within any prescribed period of time following the IPO date of the EGC; or • within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the EGC or its shareholders that restricts or prohibits the sale of securities held by the EGC or its shareholders after the IPO date. These provisions became effective upon signature of the President on April 5, 2012. On August 22, 2012, the SEC’s Division of Trading and Markets provided guidance on these provisions in the form of Frequently Asked Questions (‘‘FAQs’’).4 FINRA is amending the applicable provisions of NASD Rule 2711 to conform with the JOBS Act and SEC staff guidance with regard to the applicable JOBS Act provisions.5 business,’’ including any ‘‘pitches’’ for investment banking business or other communications with companies for the purpose of soliciting investment banking business. The FAQs interpret the JOBS Act to now allow, in connection with an IPO of an EGC, research analysts to attend meetings with issuer management that are also attended by investment banking personnel, including pitch meetings, but not ‘‘engage in otherwise prohibited conduct in such meetings,’’ including ‘‘efforts to solicit investment banking business.’’ The FAQs further explain that a research analyst that attends a pitch meeting ‘‘could, for example, introduce themselves, outline their research program and the types of factors that the analyst would consider in his or her analysis of a company, and ask follow-up questions to better understand a factual statement made by the [EGC]’s management.’’ Accordingly, the proposed rule change creates an exception to NASD Rule 2711(c)(4) to reflect this guidance regarding the application of the JOBS Act.7 The FAQs state that under Section 105(b) of the JOBS Act, an associated person of a broker-dealer, including investment banking personnel, may arrange communications between research analysts and investors in connection with an IPO of an EGC. As an example, the FAQs state that an investment banker could forward a list of clients to a research analyst that the analyst could, ‘‘at his or her own discretion and with appropriate controls, contact.’’ The FAQs acknowledge that FINRA does not have a rule that directly prohibits this activity and further states that such activity, without more, would not constitute conduct by investment banking personnel to directly or indirectly direct a research analyst to engage in sales or marketing efforts related to an investment banking services transaction, in violation of NASD Rule 2711(c)(6).8 Accordingly, this JOBS Act provision requires no conforming rule change. Arranging and Participating in Communications NASD Rule 2711(c)(4) 6 prohibits a research analyst from participating ‘‘in efforts to solicit investment banking Quiet Periods Section 105(d) of the JOBS Act expressly permits publication of research and public appearances with 4 These FAQs are available at https://www.sec.gov/ divisions/marketreg/tmjobsactresearchanalystsfaq.htm. 5 FINRA notes that the SEC staff guidance interprets the JOBS Act provisions as applicable to Incorporated NYSE Rule 472 to the same extent as NASD Rule 2711. As such, the proposed rule change makes corresponding amendments to Incorporated NYSE Rule 472. 6 See also Incorporated NYSE Rule 472(b)(5). PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 7 A corresponding exception is created for Incorporated NYSE Rule 472(b)(5). 8 See also Incorporated NYSE Rule 427(b)(6)(ii). In 2003 and 2004, the Commission, self-regulatory organizations, and other regulators instituted settled enforcement actions against 12 broker-dealers to address conflicts of interest between the firms’ research and investment banking functions (‘‘Global Settlement’’). As the FAQs point out, firms subject to the Global Settlement should also be mindful of the requirements of that court order as they remain in place. E:\FR\FM\17OCN1.SGM 17OCN1 mstockstill on DSK4VPTVN1PROD with NOTICES 63910 Federal Register / Vol. 77, No. 201 / Wednesday, October 17, 2012 / Notices respect to the securities of an EGC any time after the IPO of an EGC or prior to the expiration of any lock up agreement. While the JOBS Act refers only to the ‘‘expiration’’ of a lock-up agreement, the FAQs note a SEC staff belief that Congress intended for the JOBS Act provisions to apply equally to the period before a ‘‘waiver’’ or ‘‘termination’’ of a lock-up agreement. Thus, in accordance with SEC staff guidance on this JOBS Act provision, the proposed rule change amends NASD Rule 2711 to eliminate the following quiet periods with respect to an IPO of an EGC: • NASD Rule 2711(f)(1)(A),9 which imposes a 40-day quiet period after an IPO on a member that acts as a manager or co-manager of such IPO; • NASD Rule 2711(f)(2),10 which imposes a 25-day quiet period after an IPO on a member that participates as an underwriter or dealer (other than manager or co-manager) of such an IPO; and • NASD Rule 2711(f)(4) 11 with respect to the 15-day quiet period applicable to IPO managers and comanagers prior to the expiration, waiver, or termination of a lock-up agreement or any other agreement that such member has entered into with a subject company or its shareholders that restricts or prohibits the sale of securities held by the subject company or its shareholders after the completion of an IPO. The FAQs note that the JOBS Act makes no reference to quiet periods after a secondary offering or during a period of time after expiration, termination, or waiver of a lock-up agreement. Accordingly, the FAQs note that NASD Rule 2711(f)(1)(B),12 which imposes a 10-day quiet period on managers and co-managers following a secondary offering and the remaining portion of NASD Rule 2711(f)(4) 13 relating to quiet periods after the expiration, termination or waiver of a lock up agreement, remain fully in effect. Nonetheless, the FAQs express the SEC staff’s belief that the policies underlying the JOBS Act are equally applicable to quiet periods during these other times. FINRA agrees that elimination of those quiet periods would advance the policy objectives of the JOBS Act and therefore has proposed to amend NASD Rule 2711 accordingly.14 9 See also Incorporated NYSE Rule 472(f)(1). also Incorporated NYSE Rule 472(f)(3). 11 See also Incorporated NYSE Rule 472(f)(4). 12 See also Incorporated NYSE Rule 472(f)(2). 13 See also Incorporated NYSE Rule 472(f)(4). 14 A corresponding change is made to Incorporated NYSE Rule 472(f). 10 See VerDate Mar<15>2010 18:49 Oct 16, 2012 Jkt 229001 FINRA has requested the Commission to find good cause pursuant to Section 19(b)(2) of the Act 15 for approving the proposed rule change prior to the 30th day after its publication in the Federal Register so that FINRA can implement changes to conform with the JOBS Act, which has been effective since April 5, 2012. The proposed changes to NASD Rules 2711(c)(4), (f)(1)(A), (f)(2), and (f)(4) (with respect to the 15-day quiet period before the expiration, termination or waiver of a lock-up agreement) and the corresponding changes to Incorporated NYSE Rule 472 would be effective as of April 5, 2012. FINRA requests that the proposed changes to NASD Rules 2711(f)(1)(B) and (f)(4) (with respect to the 15-day quiet period after the expiration, termination or waiver of a lock-up agreement) and the corresponding changes to Incorporated NYSE Rule 472, which further the policies underlying the statutory mandates, become effective upon Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,16 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and, in general, to protect investors and the public interest. FINRA believes that the changes to NASD Rules 2711(c)(4),17 (f)(1)(A),18 (f)(2),19 and (f)(4) 20 (with respect to the 15-day quiet period before the expiration, termination or waiver of a lock-up agreement) and the corresponding changes to Incorporated NYSE Rule 472 conform those rules to statutory mandates. FINRA also believes that the proposed additional changes to NASD Rules 2711(f)(1)(B) 21 and (f)(4) 22 further the policies underlying the statutory mandates by improving information flow to investors with respect to EGCs without sacrificing the reliability of research reports, as the other objectivity safeguards in NASD Rule 2711 23 and SEC Regulation AC 24 are effective and will continue to apply. 15 15 U.S.C. 78s(b)(2). U.S.C. 78o–3(b)(6). 17 See also Incorporated NYSE Rule 472(b)(5). 18 See also Incorporated NYSE Rule 472(f)(1). 19 See also Incorporated NYSE Rule 472(f)(3). 20 See also Incorporated NYSE Rule 472(f)(4). 21 See also Incorporated NYSE Rule 472(f)(2). 22 See also Incorporated NYSE Rule 472(f)(4). 23 See also Incorporated NYSE Rule 472. 24 17 CFR 242.500–05. 16 15 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended by the JOBS Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2012–045 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–2012–045. 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 E:\FR\FM\17OCN1.SGM 17OCN1 Federal Register / Vol. 77, No. 201 / Wednesday, October 17, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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–2012–045 and should be submitted on or before November 7, 2012. V. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful review of the proposed rule change, 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.25 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act.26 The proposal primarily reflects the changes imposed on FINRA’s rules by Sections 105(b) and 105(d) of the JOBS Act and thus is primarily updating the language of NASD Rule 2711 and Incorporated NYSE Rule 472 to reflect that reality. The one change not expressly mandated by the JOBS Act, removing the quiet periods regarding the secondary offering of the securities of EGCs and after the expiration, termination, or waiver of a lock-up regarding such securities, is consistent with the purpose of the JOBS Act as part of an effort to improve communications with investors regarding EGCs. Furthermore, other safeguards designed to protect the objectivity of research and provide investors with more useful and reliable information remain in effect, including Regulation AC and the parts of NASD Rule 2711 and Incorporated NYSE Rule 472 not affected by these changes. In its filing, FINRA has requested that the Commission find good cause for approving the proposed rule change prior to the 30th day after publication in the Federal Register. FINRA cites as the reason for this request is because the changes conforming to the JOBS Act have been effective since April 5, 2012 and the additional proposed changes further the policies underlying the applicable JOBS Act provision. The Commission finds good cause, pursuant to Section 19(b)(2) of the Act,27 for approving the proposed rule change prior to the 30th day after the 25 In approving this rule change, the Commission notes that it has considered the proposed rule change’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 26 15 U.S.C. 78o–3(b)(6). 27 15 U.S.C. 78s(b)(2). VerDate Mar<15>2010 18:49 Oct 16, 2012 Jkt 229001 date of publication of notice in the Federal Register because the changes required by the JOBS Act have been in effect since April 5, 2012 and the additional proposed changes further the policies underlying the applicable JOBS Act provision. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–FINRA– 2012–045) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–25501 Filed 10–16–12; 8:45 am] BILLING CODE 8011–01–P 63911 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68034; File No. SR–ISE– 2012–85] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees for Certain Complex Orders Executed on the Exchange October 11, 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 October 1, 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend transaction fees for certain complex orders executed on the Exchange. 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. 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 The Exchange currently assesses per contract transaction fees and 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 Exchange’s maker/taker fees and rebates are applicable to regular and complex orders executed in the Select Symbols. The Exchange also currently assesses maker/taker fees and rebates for complex orders in symbols that are in the Penny Pilot program but are not a Select Symbol (‘‘Non-Select Penny Pilot Symbols’’) 4 and in all symbols that are not in the Penny Pilot Program (‘‘NonPenny Pilot Symbols’’).5 The purpose of this proposed rule change is to amend maker/taker fees and rebates for complex orders in the Select Symbols, Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols. For complex orders in the Select Symbols (excluding SPY), the Exchange currently charges a taker fee of: (i) $0.37 per contract for Market Maker,6 Firm 3 Options classes subject to maker/taker fees are identified by their ticker symbol on the Exchange’s Schedule of Fees. 4 See Exchange Act Release Nos. 65724 (November 10, 2011), 76 FR 71413 (November 17, 2011) (SR–ISE–2011–72); 66597 (March 14, 2012), 77 FR 16295 (March 20, 2012) (SR–ISE–2012–17); 66961 (May 10, 2012), 77 FR 28914 (May 16, 2012) (SR–ISE–2012–38); and 67628 (August 9, 2012), 77 FR 49049 (August 15, 2012) (SR–ISE–2012–71). 5 See Exchange Act Release Nos. 66084 (January 3, 2012), 77 FR 1103 (January 9, 2012) (SR–ISE– 2011–84); 66392 (February 14, 2012), 77 FR 10016 (February 21, 2012) (SR–ISE–2012–06); 66962 (May 10, 2012), 77 FR 28917 (May 16, 2012) (SR–ISE– 2012–35); 67400 (July 11, 2012), 77 FR 42036 (July 17, 2012) (SR–ISE- 2012–63) and 67628 (August 9, 2012), 77 FR 49049 (August 15, 2012) (SR–ISE– 2012–71). 6 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). E:\FR\FM\17OCN1.SGM 17OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 201 (Wednesday, October 17, 2012)]
[Notices]
[Pages 63908-63911]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-25501]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68037; File No. SR-FINRA-2012-045]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Order Granting Accelerated
Approval of Proposed Rule Change To Amend NASD Rule 2711 and
Incorporated NYSE Rule 472 To Conform With the Requirements of the
Jumpstart Our Business Startups Act and Related Changes

October 11, 2012.

I. Introduction

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 63909]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 28, 2012, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have substantially been prepared by
FINRA. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons and to approve the
proposed rule change on an accelerated basis.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

FINRA is proposing to amend NASD Rule 2711 (Research Analysts and
Research Reports) to conform with the requirements of the Jumpstart Our
Business Startups Act (``JOBS Act'') \3\ and make certain additional
changes to quiet period restrictions consistent with the policies
underlying the JOBS Act. The proposed rule change also makes conforming
amendments to Incorporated NYSE Rule 472 (Communications With The
Public).
---------------------------------------------------------------------------

\3\ Pub. L. No. 112-106, 126 Stat. 306.
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The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, at the principal office of FINRA, and at
the Commission's Public Reference Room.

III. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The JOBS Act was signed into law on April 5, 2012. Among other
things, the JOBS Act is intended to help facilitate capital formation
for ``emerging growth companies'' (``EGCs'') by improving the
information flow about EGCs to investors. To that end, Section 105(b)
of the JOBS Act amended Section 15D of the Act to prohibit the
Commission or any national securities association from adopting or
maintaining any rule or regulation in connection with an initial public
offering (``IPO'') of an EGC that:
Restricts, based on functional role, which associated
persons of a broker, dealer, or member of a national securities
association, may arrange for communications between an analyst and a
potential investor; or

restricts a securities analyst from participating in any
communication with the management of an EGC that is also attended by
any other associated person of a broker, dealer, or member of a
national securities association whose functional role is other than as
a securities analyst.

Section 105(d) further prohibits the Commission or any national
securities association from adopting or maintaining any rule or
regulation that prohibits a broker or dealer from publishing or
distributing any research report or making a public appearance, with
respect to the securities of an EGC either:
within any prescribed period of time following the IPO
date of the EGC; or
within any prescribed period of time prior to the
expiration date of any agreement between the broker, dealer, or member
of a national securities association and the EGC or its shareholders
that restricts or prohibits the sale of securities held by the EGC or
its shareholders after the IPO date.
These provisions became effective upon signature of the President
on April 5, 2012. On August 22, 2012, the SEC's Division of Trading and
Markets provided guidance on these provisions in the form of Frequently
Asked Questions (``FAQs'').\4\ FINRA is amending the applicable
provisions of NASD Rule 2711 to conform with the JOBS Act and SEC staff
guidance with regard to the applicable JOBS Act provisions.\5\
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\4\ These FAQs are available at https://www.sec.gov/divisions/marketreg/tmjobsact-researchanalystsfaq.htm.
\5\ FINRA notes that the SEC staff guidance interprets the JOBS
Act provisions as applicable to Incorporated NYSE Rule 472 to the
same extent as NASD Rule 2711. As such, the proposed rule change
makes corresponding amendments to Incorporated NYSE Rule 472.
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Arranging and Participating in Communications
NASD Rule 2711(c)(4) \6\ prohibits a research analyst from
participating ``in efforts to solicit investment banking business,''
including any ``pitches'' for investment banking business or other
communications with companies for the purpose of soliciting investment
banking business. The FAQs interpret the JOBS Act to now allow, in
connection with an IPO of an EGC, research analysts to attend meetings
with issuer management that are also attended by investment banking
personnel, including pitch meetings, but not ``engage in otherwise
prohibited conduct in such meetings,'' including ``efforts to solicit
investment banking business.'' The FAQs further explain that a research
analyst that attends a pitch meeting ``could, for example, introduce
themselves, outline their research program and the types of factors
that the analyst would consider in his or her analysis of a company,
and ask follow-up questions to better understand a factual statement
made by the [EGC]'s management.'' Accordingly, the proposed rule change
creates an exception to NASD Rule 2711(c)(4) to reflect this guidance
regarding the application of the JOBS Act.\7\
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\6\ See also Incorporated NYSE Rule 472(b)(5).
\7\ A corresponding exception is created for Incorporated NYSE
Rule 472(b)(5).
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The FAQs state that under Section 105(b) of the JOBS Act, an
associated person of a broker-dealer, including investment banking
personnel, may arrange communications between research analysts and
investors in connection with an IPO of an EGC. As an example, the FAQs
state that an investment banker could forward a list of clients to a
research analyst that the analyst could, ``at his or her own discretion
and with appropriate controls, contact.'' The FAQs acknowledge that
FINRA does not have a rule that directly prohibits this activity and
further states that such activity, without more, would not constitute
conduct by investment banking personnel to directly or indirectly
direct a research analyst to engage in sales or marketing efforts
related to an investment banking services transaction, in violation of
NASD Rule 2711(c)(6).\8\ Accordingly, this JOBS Act provision requires
no conforming rule change.
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\8\ See also Incorporated NYSE Rule 427(b)(6)(ii). In 2003 and
2004, the Commission, self-regulatory organizations, and other
regulators instituted settled enforcement actions against 12 broker-
dealers to address conflicts of interest between the firms' research
and investment banking functions (``Global Settlement''). As the
FAQs point out, firms subject to the Global Settlement should also
be mindful of the requirements of that court order as they remain in
place.
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Quiet Periods
Section 105(d) of the JOBS Act expressly permits publication of
research and public appearances with

[[Page 63910]]

respect to the securities of an EGC any time after the IPO of an EGC or
prior to the expiration of any lock up agreement. While the JOBS Act
refers only to the ``expiration'' of a lock-up agreement, the FAQs note
a SEC staff belief that Congress intended for the JOBS Act provisions
to apply equally to the period before a ``waiver'' or ``termination''
of a lock-up agreement. Thus, in accordance with SEC staff guidance on
this JOBS Act provision, the proposed rule change amends NASD Rule 2711
to eliminate the following quiet periods with respect to an IPO of an
EGC:
NASD Rule 2711(f)(1)(A),\9\ which imposes a 40-day quiet
period after an IPO on a member that acts as a manager or co-manager of
such IPO;
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\9\ See also Incorporated NYSE Rule 472(f)(1).
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NASD Rule 2711(f)(2),\10\ which imposes a 25-day quiet
period after an IPO on a member that participates as an underwriter or
dealer (other than manager or co-manager) of such an IPO; and
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\10\ See also Incorporated NYSE Rule 472(f)(3).
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NASD Rule 2711(f)(4) \11\ with respect to the 15-day quiet
period applicable to IPO managers and co-managers prior to the
expiration, waiver, or termination of a lock-up agreement or any other
agreement that such member has entered into with a subject company or
its shareholders that restricts or prohibits the sale of securities
held by the subject company or its shareholders after the completion of
an IPO.
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\11\ See also Incorporated NYSE Rule 472(f)(4).
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The FAQs note that the JOBS Act makes no reference to quiet periods
after a secondary offering or during a period of time after expiration,
termination, or waiver of a lock-up agreement. Accordingly, the FAQs
note that NASD Rule 2711(f)(1)(B),\12\ which imposes a 10-day quiet
period on managers and co-managers following a secondary offering and
the remaining portion of NASD Rule 2711(f)(4) \13\ relating to quiet
periods after the expiration, termination or waiver of a lock up
agreement, remain fully in effect. Nonetheless, the FAQs express the
SEC staff's belief that the policies underlying the JOBS Act are
equally applicable to quiet periods during these other times. FINRA
agrees that elimination of those quiet periods would advance the policy
objectives of the JOBS Act and therefore has proposed to amend NASD
Rule 2711 accordingly.\14\
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\12\ See also Incorporated NYSE Rule 472(f)(2).
\13\ See also Incorporated NYSE Rule 472(f)(4).
\14\ A corresponding change is made to Incorporated NYSE Rule
472(f).
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FINRA has requested the Commission to find good cause pursuant to
Section 19(b)(2) of the Act \15\ for approving the proposed rule change
prior to the 30th day after its publication in the Federal Register so
that FINRA can implement changes to conform with the JOBS Act, which
has been effective since April 5, 2012. The proposed changes to NASD
Rules 2711(c)(4), (f)(1)(A), (f)(2), and (f)(4) (with respect to the
15-day quiet period before the expiration, termination or waiver of a
lock-up agreement) and the corresponding changes to Incorporated NYSE
Rule 472 would be effective as of April 5, 2012. FINRA requests that
the proposed changes to NASD Rules 2711(f)(1)(B) and (f)(4) (with
respect to the 15-day quiet period after the expiration, termination or
waiver of a lock-up agreement) and the corresponding changes to
Incorporated NYSE Rule 472, which further the policies underlying the
statutory mandates, become effective upon Commission approval.
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\15\ 15 U.S.C. 78s(b)(2).
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2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\16\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade and, in general, to protect investors and the
public interest. FINRA believes that the changes to NASD Rules
2711(c)(4),\17\ (f)(1)(A),\18\ (f)(2),\19\ and (f)(4) \20\ (with
respect to the 15-day quiet period before the expiration, termination
or waiver of a lock-up agreement) and the corresponding changes to
Incorporated NYSE Rule 472 conform those rules to statutory mandates.
FINRA also believes that the proposed additional changes to NASD Rules
2711(f)(1)(B) \21\ and (f)(4) \22\ further the policies underlying the
statutory mandates by improving information flow to investors with
respect to EGCs without sacrificing the reliability of research
reports, as the other objectivity safeguards in NASD Rule 2711 \23\ and
SEC Regulation AC \24\ are effective and will continue to apply.
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\16\ 15 U.S.C. 78o-3(b)(6).
\17\ See also Incorporated NYSE Rule 472(b)(5).
\18\ See also Incorporated NYSE Rule 472(f)(1).
\19\ See also Incorporated NYSE Rule 472(f)(3).
\20\ See also Incorporated NYSE Rule 472(f)(4).
\21\ See also Incorporated NYSE Rule 472(f)(2).
\22\ See also Incorporated NYSE Rule 472(f)(4).
\23\ See also Incorporated NYSE Rule 472.
\24\ 17 CFR 242.500-05.
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

Written comments were neither solicited nor received.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2012-045 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-2012-045. 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

[[Page 63911]]

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-2012-045 and should be submitted
on or before November 7, 2012.

V. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change

After careful review of the proposed rule change, 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.\25\ In particular, the Commission
finds that the proposed rule change is consistent with Section
15A(b)(6) of the Act.\26\ The proposal primarily reflects the changes
imposed on FINRA's rules by Sections 105(b) and 105(d) of the JOBS Act
and thus is primarily updating the language of NASD Rule 2711 and
Incorporated NYSE Rule 472 to reflect that reality. The one change not
expressly mandated by the JOBS Act, removing the quiet periods
regarding the secondary offering of the securities of EGCs and after
the expiration, termination, or waiver of a lock-up regarding such
securities, is consistent with the purpose of the JOBS Act as part of
an effort to improve communications with investors regarding EGCs.
Furthermore, other safeguards designed to protect the objectivity of
research and provide investors with more useful and reliable
information remain in effect, including Regulation AC and the parts of
NASD Rule 2711 and Incorporated NYSE Rule 472 not affected by these
changes.
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\25\ In approving this rule change, the Commission notes that it
has considered the proposed rule change's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\26\ 15 U.S.C. 78o-3(b)(6).
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In its filing, FINRA has requested that the Commission find good
cause for approving the proposed rule change prior to the 30th day
after publication in the Federal Register. FINRA cites as the reason
for this request is because the changes conforming to the JOBS Act have
been effective since April 5, 2012 and the additional proposed changes
further the policies underlying the applicable JOBS Act provision.
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\27\ for approving the proposed rule change prior to the 30th
day after the date of publication of notice in the Federal Register
because the changes required by the JOBS Act have been in effect since
April 5, 2012 and the additional proposed changes further the policies
underlying the applicable JOBS Act provision.
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\27\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-FINRA-2012-045) be, and hereby is,
approved on an accelerated basis.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25501 Filed 10-16-12; 8:45 am]
BILLING CODE 8011-01-P

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