Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules Concerning Communications With the Public To Harmonize Them With Certain Financial Industry Regulatory Authority, Inc. Rules and Make Other Conforming Changes, 73223-73233 [2013-29043]

Download as PDF Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action ehiers on DSK2VPTVN1PROD with NOTICES The Exchange has filed the proposed rule change pursuant to Exchange Act Section 19(b)(3)(A)(iii) 22 and Rule 19b– 4(f)(6) thereunder.23 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Exchange Act Section 19(b)(3)(A) and Rule 19b– 4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 24 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),25 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, because it would allow the Exchange to immediately conform its rules to corresponding FINRA rules. This will ensure that Dual Members generally will be subject to a single set of rules governing communications with the public. As noted by the Exchange, the proposal would harmonize NYSE and FINRA rules. In addition, the proposal would update and add specificity to the Exchange’s requirements governing communications with the public, which are designed to help protect customers of all NYSE members. For these reasons, the Commission designates the proposed rule change to be operative upon filing.26 22 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 24 17 CFR 240.19b–4(f)(6). 25 17 CFR 240.19b–4(f)(6)(iii). 26 For purposes of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 23 17 VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act. If the Commission takes such action, the Commission shall institute proceedings under Exchange Act Section 19(b)(2)(B) 27 to determine whether the proposed rule change should be approved or 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 Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2013–76 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–NYSE–2013–76. 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 (http://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 Section, 100 F Street NE., Washington, DC 20549–1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available for 27 15 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00038 Fmt 4703 Sfmt 4703 73223 inspection and copying at the principal office of the Exchange. 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–NYSE– 2013–76 and should be submitted on or before December 26, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–29042 Filed 12–4–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70963; File No. SR– NYSEMKT–2013–95] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules Concerning Communications With the Public To Harmonize Them With Certain Financial Industry Regulatory Authority, Inc. Rules and Make Other Conforming Changes November 29, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and Rule 19b–4 thereunder,2 notice is hereby given that on November 15, 2013, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) 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 substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. The Exchange has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under Exchange Act Rule 19b–4(f)(6),3 which renders the proposal effective upon receipt of this filing by the Commission. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules concerning communications with the public to harmonize them with 28 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 E:\FR\FM\05DEN1.SGM 05DEN1 73224 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices certain Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) rules and make other conforming changes. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of 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 the Statutory Basis for, the Proposed Rule Change ehiers on DSK2VPTVN1PROD with NOTICES 1. Purpose The Exchange proposes to amend its rules concerning communications with the public to harmonize them with certain FINRA rules and make other conforming changes. Set forth below are descriptions of the harmonization process, the current NYSE MKT rules, and the proposed NYSE MKT rules. Specifically, the Exchange proposes to (i) delete paragraphs (a)(1), (d), (i), (j) and (l) of NYSE MKT Rule 472— Equities and Supplementary Materials 472.10(1), (3), (4) and (5)—Equities, and 472.90—Equities; (ii) adopt new rule text that is substantially similar to FINRA Rules 2210 and 2212; and (iii) make other conforming changes.4 Background On July 30, 2007, FINRA’s predecessor, the National Association of Securities Dealers, Inc. (‘‘NASD’’), and NYSE Regulation, Inc. (‘‘NYSER’’) consolidated their member firm regulation operations into a combined organization, FINRA. Pursuant to Exchange Act Rule 17d–2, New York Stock Exchange LLC (‘‘NYSE’’), NYSER, and FINRA entered into an agreement (the ‘‘Agreement’’) to reduce regulatory duplication for their members by 4 References to rules are to NYSE MKT rules unless otherwise indicated. The remaining provisions of Rule 472—Equities and supplementary material not addressed in this proposal concern research and would remain in place because FINRA and NYSE MKT have not yet harmonized their research rules. VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 allocating to FINRA certain regulatory responsibilities for NYSE rules and rule interpretations (‘‘FINRA Incorporated NYSE Rules’’). NYSE MKT became a party to the Agreement effective December 15, 2008.5 As part of its effort to reduce regulatory duplication and relieve firms that are members of FINRA, the Exchange, and NYSE of conflicting or unnecessary regulatory burdens, FINRA is now engaged in the process of reviewing and amending the NASD and FINRA Incorporated NYSE Rules in order to create a consolidated FINRA rulebook.6 FINRA recently harmonized NASD and FINRA Incorporated NYSE Rules and interpretations concerning communications with the public.7 In that filing, FINRA adopted NASD Rules 2210 and 2211 and NASD Interpretive Materials 2210–1 and 2210–3 through 2210–8 as FINRA Rules 2210 and 2212 through 2216 and deleted paragraphs (a)(1), (i), (j) and (l) of FINRA Incorporated NYSE Rule 472, FINRA Incorporated NYSE Rule Supplementary Materials 472.10(1), (3), (4) and (5) and 472.90, and FINRA Incorporated NYSE Rule Interpretations 472/01 and 472/03 through 472/11. NYSE Rule 472 is virtually identical to Rule 472—Equities except for certain technical differences. FINRA’s rule change became effective on February 4, 2013.8 Current Communications With the Public Rules Rule 472(a)(1)—Equities requires that each advertisement, sales literature or other similar type of communication that is generally distributed or made available by a member organization to customers or the public be approved in advance by an allied member, supervisory analyst, or qualified person 5 See Exchange Act Release No. 56148 (Jul. 26, 2007), 72 FR 42146 (Aug. 1, 2007) (order approving the Agreement); Exchange Act Release No. 56147 (Jul. 26, 2007), 72 FR 42166 (Aug. 1, 2007) (order approving the incorporation of certain NYSE Rules as ‘‘Common Rules’’); Exchange Act Release No. 60409 (July 30, 2009), 74 FR 39353 (Aug. 6, 2009) (order approving the amended and restated Agreement, adding NYSE MKT LLC as a party). Paragraph 2(b) of the Agreement sets forth procedures regarding proposed changes by FINRA, NYSE or NYSE MKT to the substance of any of the Common Rules. 6 FINRA’s rulebook currently has three sets of rules: (1) NASD Rules, (2) FINRA Incorporated NYSE Rules, and (3) consolidated FINRA Rules. The FINRA Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’), while the consolidated FINRA Rules apply to all FINRA members. For more information about the FINRA rulebook consolidation process, see FINRA Information Notice, dated March 12, 2008. 7 See Exchange Act Release No. 66681 (Mar. 29, 2012), 77 FR 20452 (Apr. 4, 2012). 8 See FINRA Regulatory Notice 12–29. PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 designated under the provisions of Rule 342(b)(1)—Equities. Rule 472(d)—Equities requires that communications with the public be retained in accordance with Rule 440— Equities. Rule 472(i)—Equities provides that no member organization may use any communication that contains (i) any untrue statement or omission of a material fact or is otherwise false or misleading; (ii) promises of specific results, exaggerated or unwarranted claims; (iii) opinions for which there is no reasonable basis; or (iv) projections or forecasts of future events that are not clearly labeled as forecasts. Rule 472(j)—Equities sets forth specific standards for recommendations, records of past performance, projections and predictions, comparisons, dating reports, identification of sources, and testimonials. Rule 472(l)—Equities provides that other communications activities may include, but are not limited to, conducting interviews with the media, writing books, conducting seminars or lecture courses, writing newspaper or magazine articles, or making radio/TV appearances. Member organizations must establish specific written supervisory procedures applicable to allied members and employees who engage in these types of communications activities. These procedures must include provisions that require prior approval of such activity by a person designated under the provisions of Rule 342(b)(1)—Equities. These types of activities are subject to the general standards set forth in Rule 472(i)—Equities. In addition, any activity that includes discussion of specific securities is subject to the specific standards in Rule 472(j)— Equities. Supplementary Materials 472.10(1), (3), (4) and (5)—Equities define ‘‘communication,’’ ‘‘advertisement,’’ ‘‘market letter,’’ and ‘‘sales literature,’’ respectively. For purposes of Rule 472(a)(1)—Equities, Supplementary Material 472.90—Equities defines a ‘‘qualified person’’ as one who has passed an examination acceptable to the Exchange. Proposed Rule Change The Exchange proposes to delete the foregoing rules relating to communications with the public and adopt the text of FINRA Rules 2210 and 2212, subject to certain technical and conforming changes.9 As noted in Rule 9 The technical and conforming changes are that the Exchange would (i) substitute the term ‘‘member organization’’ for ‘‘member,’’ (ii) E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices 0—Equities, Exchange rules that refer to NYSER, NYSER staff or departments, Exchange staff, and Exchange departments should be understood as also referring to FINRA staff and FINRA departments acting on behalf of the Exchange pursuant to the Agreement, as applicable. The Exchange does not propose to adopt the text of FINRA Rules 2213, 2214, 2215, and 2216 because they cover products that are not traded on the Exchange or a limited exception for investment analysis tools that is not being adopted. These rules would continue to apply to all Dual Members. ehiers on DSK2VPTVN1PROD with NOTICES Communication Categories Under proposed Rule 2210(a)— Equities, the following three communication categories would be established: • ‘‘Institutional communication’’ would include any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member organization’s internal communications. ‘‘Institutional investor’’ would include any (i) person described in FINRA Rule 4512(c), regardless of whether the person has an account with a member organization; (ii) governmental entity or subdivision thereof; (iii) employee benefit plan, or multiple employee benefit plans offered to employees of the same employer, that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and in the aggregate have at least 100 participants, but does not include any participant of such plans; (iv) qualified plan, as defined in Exchange Act Section 3(a)(12)(C), or multiple qualified plans offered to employees of the same employer, that in the aggregate have at least 100 participants, but does not include any participant of such plans; (v) member organization or registered person of such a member organization; and (vi) person acting solely on behalf of any such institutional investor. • ‘‘Retail communication’’ would include any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. ‘‘Retail investor’’ would include any person other than an institutional investor, regardless of whether the person has an account with the member organization. substitute the term ‘‘Exchange’’ for ‘‘FINRA,’’ (iii) change certain cross-references to FINRA rules to cross-references to Exchange rules, and (iv) add supplementary material to define the term ‘‘associated person.’’ VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 • ‘‘Correspondence’’ would include any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period. The proposed communication categories would replace the communication categories currently defined in Supplementary Material 472.10(1), (3), (4) and (5)—Equities. Approval, Review and Recordkeeping Requirements Proposed Rule 2210(b)(1)(A)— Equities would require an appropriately qualified registered principal of the member organization to approve each retail communication before the earlier of its use or its filing with the Exchange’s Advertising Regulation Department (‘‘Department’’). The principal registration required to approve particular communications would depend upon the permissible activities for each principal registration category. Current Rule 472(a)(1)— Equities requires prior approval of certain communications by an allied member, Supervisory Analyst, or qualified person designated under the provisions of Rule 342(b)(1)—Equities, but the Exchange does not require member organizations to file communications with the Exchange. Proposed Rule 2210(b)(1)(B)—Equities would provide that the requirements of proposed Rule 2210(b)(1)(A)—Equities could be met by a Supervisory Analyst approved pursuant to Rule 344— Equities with respect to (i) research reports on debt and equity securities; (ii) retail communications as described in Rule 472.10(2)(a)—Equities; and (iii) other research that does not meet the definition of ‘‘research report’’ under Rule 472.10(2)—Equities, provided that the Supervisory Analyst has technical expertise in the particular product area. A Supervisory Analyst may not approve a retail communication that requires a separate registration unless the Supervisory Analyst also has such other registration. As stated above, current Rule 472(a)(1)—Equities requires prior approval of certain communications by an allied member, Supervisory Analyst, or qualified person designated under the provisions of Rule 342(b)(1)—Equities. As such, the proposed rule would be limited to approval by Supervisory Analysts only and to certain types of communications. Proposed Rule 2210(b)(1)(C)—Equities would provide an exception from the principal approval requirements of proposed Rule 2210(b)(1)(A)—Equities for retail communications, if at the time that a member organization intends to PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 73225 publish or distribute the retail communication (i) another member organization has filed it with the Department and has received a letter from the Department stating that it appears to be consistent with applicable standards and (ii) the member organization using the communication in reliance on this exception has not materially altered it and will not use it in a manner that is inconsistent with the conditions of the Department’s letter. The Exchange does not currently have a comparable rule because the Exchange has not previously required member organizations to file communications with the Exchange. Proposed Rule 2210(b)(1)(D)— Equities would except from the principal approval requirements of proposed Rule 2210(b)(1)(A)—Equities three additional categories of retail communications, provided that the member organization supervises and reviews such communications in the same manner as required for supervising and reviewing correspondence pursuant to Rule 342—Equities. These communications include (i) any retail communication that is excepted from the definition of ‘‘research report’’ pursuant to Rule 472.10(2)(a)—Equities, unless the communication makes any financial or investment recommendation; (ii) any retail communication that is posted on an online interactive electronic forum; and (iii) any retail communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member organization. Under current Rule 342— Equities, correspondence and communications with the public are subject to all supervisory provisions of the Exchange’s rules. The proposed rule change would specifically delineate these three categories of retail communications that would be excepted from the additional principal approval requirements under proposed Rule 2210—Equities. Proposed Rule 2210(b)(1)(E)—Equities would allow FINRA, pursuant to the FINRA Rule 9600 Series, to grant an exemption from the principal approval requirements of proposed Rule 2210(b)(1)(A)—Equities for good cause shown after taking into consideration all relevant factors, to the extent that the exemption is consistent with the purposes of Rule 2210—Equities, the protection of investors, and the public interest.10 FINRA Rule 9610 sets forth procedures for exemptive relief. 10 Similarly, the Exchange’s affiliate, NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), has FINRA E:\FR\FM\05DEN1.SGM Continued 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES 73226 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices Proposed Rule 2210(b)(1)(F)—Equities would require, notwithstanding any other provision of Rule 2210—Equities, a registered principal to approve a communication prior to the member organization’s filing it with the Department. The Exchange does not currently have a comparable rule because the Exchange has not previously required member organizations to file communications with the Exchange. Proposed Rules 2210(b)(2) and (3)— Equities generally would impose certain supervisory and review requirements with regard to a member organization’s correspondence and institutional communications. Proposed Rule 2210(b)(2)—Equities would subject all correspondence to the supervision and review requirements already in place under Rule 342—Equities. Proposed Rule 2210(b)(3)—Equities would require each member organization to establish written procedures that are appropriate to its business, size, structure, and customers for the review by an appropriately qualified registered principal of institutional communications used by the member organization and its associated persons. Such procedures must be reasonably designed to ensure that institutional communications comply with applicable standards. When such procedures do not require review of all institutional communications prior to first use or distribution, they must include provision for the education and training of associated persons as to the firm’s procedures governing institutional communications, documentation of such education and training, and surveillance and follow-up to ensure that such procedures are implemented and adhered to. Evidence that these supervisory procedures have been implemented and carried out must be maintained and made available to the Exchange upon request. These requirements are similar to current Rule 342.10(B)(v)—Equities, which provides that correspondence and communications with the public are subject to all supervisory provisions of the Exchange’s rules, and Rule 342.17— Equities, which requires member organizations to develop written policies and procedures that are appropriate for their business, size, structure and customers in connection with the review of communications with the public relating to their process certain exemptions under FINRA Rule 9610. See NYSE Arca Equities Rule 9.21(c)(10). The Exchange will propose to adopt its own rules for exemptions when the Exchange conforms its disciplinary rules to FINRA’s and NYSE’s disciplinary rules. VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 business. Rule 472(c)—Equities also requires each member organization to establish written procedures reasonably designed to ensure that allied members, member organizations and their employees are in compliance with Rule 472—Equities, which includes both communications with the public provisions and research provisions. While proposed Rule 2210(b)(3)— Equities would cover written procedures relating to communications with the public, the Exchange would maintain Rule 472(c)—Equities to cover written procedures for the research provisions that will remain in that rule. Proposed Rule 2210(b)(4)(A)— Equities would set forth the recordkeeping requirements for retail and institutional communications. This provision would incorporate by reference the recordkeeping format, medium and retention period requirements of Exchange Act Rule 17a–4.11 Proposed Rule 2210(b)(4)(A)— Equities specifies that such records would have to include: • A copy of the communication and the dates of first and (if applicable) last use; • The name of any registered principal who approved the communication and the date that approval was given; • In the case of a retail communication or institutional communication that is not approved prior to first use by a registered principal, the name of the person who prepared or distributed the communication; 12 • Information concerning the source of any statistical table, chart, graph or other illustration used in the communication; and • For retail communications that would rely on the exception under 11 Exchange Act Rule 17a–4(b) requires brokerdealers to preserve certain records for a period of not less than three years, the first two years in an easily accessible place. Among these records, pursuant to Exchange Act Rule 17a–4(b)(4), are ‘‘[o]riginals of all communications received and copies of all communications sent (and any approvals thereof) by the member, broker or dealer (including inter-office memoranda and communications) relating to its business as such, including all communications which are subject to rules of a self-regulatory organization of which the member, broker or dealer is a member regarding communications with the public. As used in this paragraph, the term communications includes sales scripts.’’ Exchange Act Rule 17a–4(f) permits broker-dealers to maintain and preserve these records on ‘‘micrographic media’’ or by means of ‘‘electronic storage media,’’ as defined in the rule and subject to a number of conditions. 12 To the extent clerical staff is employed in the preparation or distribution of the communication, the records should include the name of the person on whose behalf the communication was prepared or distributed. PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 proposed Rule 2210(b)(1)(C)—Equities, the name of the member organization that filed the retail communication with the Department and a copy of the Department’s review letter. Current Rule 440—Equities also incorporates by reference the recordkeeping format, medium and retention period requirements of Exchange Act Rule 17a–4. Current Rule 472(d)—Equities provides that communications with the public prepared or issued by a member organization must be retained in accordance with Rule 440—Equities, and the names of the persons who prepared, reviewed, and approved the material must be ascertainable from the retained records, and those records must be readily available to the Exchange upon request. The Exchange proposes to delete current Rule 472(d)—Equities because proposed Rule 2210(b)(4)(B)— Equities would address recordkeeping requirements and cross-reference Rule 440—Equities with respect to correspondence recordkeeping requirements. Filing Requirements and Review Procedures Proposed Rule 2210(c)—Equities would set forth the filing requirements and review procedures for retail communications. The Exchange does not currently require member organizations to file communications with the Exchange, and as such, the Exchange does not currently have a comparable rule. Proposed Rule 2210(c)(1)(A)— Equities would require a member organization to file with the Department at least 10 business days prior to first use any retail communication that is published or used in any electronic or other public media, including any generally accessible Web site, newspaper, magazine or other periodical, radio, television, telephone or audio recording, video display, signs or billboards, motion pictures, or telephone directories (other than routine listings). This filing requirement continues for a period of one year beginning on the date reflected in the Central Registration Depository (‘‘CRD’’) system as the date that Exchange membership became effective. To the extent any retail communication is a free writing prospectus that has been filed with the Commission pursuant to Rule 433(d)(1)(ii), promulgated under the Securities Act of 1933 (‘‘Securities Act’’), the member organization may file such retail communication within 10 business days of first use rather than at least 10 business days prior to first use. E:\FR\FM\05DEN1.SGM 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices Proposed Rule 2210(c)(1)(B)—Equities would authorize the Department to require a member organization to file all of its communications, or the portion of the member organization’s material relating to specific types or classes of securities or services, with the Department at least 10 business days prior to first use, if the Department determines that the member organization has departed from the standards of the proposed rule. The Department would notify the member organization in writing of the types of communications to be filed and the length of time such requirement is to be in effect. Any filing requirement imposed would take effect 21 calendar days after service of the written notice, during which time the member organization may request a hearing under FINRA Rules 9551 and 9559.13 Proposed Rule 2210(c)(2)—Equities would require member organizations to file retail communications concerning any registered investment company that include self-created rankings and retail communications concerning security futures at least 10 business days prior to first use and to withhold them from use until any changes specified by the Department have been made. The requirement to file retail communications concerning security futures prior to first use would not apply to (i) retail communications that are submitted to another self-regulatory organization having comparable standards pertaining to such communications and (ii) retail communications in which the only reference to security futures is contained in a listing of the services of a member organization. The Exchange does not propose to adopt the text of FINRA 2210(c)(2)(C), which requires prior filing of retail communications concerning bond mutual funds that include or incorporate bond mutual fund volatility ratings as defined in FINRA Rule 2213 because, as stated above, the Exchange does not propose to adopt the text of FINRA Rule 2213 (the text of which the Exchange also does not propose adopting) because it covers products that are not traded on the Exchange, and FINRA Rule 2213 would continue to apply to all Dual Members. Proposed Rule 2210(c)(3)(A)— Equities would require retail communications concerning registered investment companies (including mutual funds, exchange-traded funds, 13 FINRA currently performs this function for requesting NYSE Arca ETP Holders under NYSE Arca Equities Rule 9.21(c)(5)(B). The Exchange will propose to adopt comparable rules when the Exchange conforms its disciplinary rules to FINRA’s and NYSE’s disciplinary rules. VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 variable insurance products, closed-end funds, and unit investment trusts) to be filed within 10 business days of first use or publication. In addition, the filing of any retail communication that includes or incorporates a performance ranking or performance comparison of the investment company with other investment companies must include a copy of the ranking or comparison used in the retail communication. Proposed Rule 2210(c)(3)(B)—Equities would require retail communications concerning public direct participation programs to be filed within 10 business days of first use or publication. The Exchange does not propose to adopt the text of FINRA Rule 2210(c)(3)(C), which requires prior filing of first use templates for written reports produced by, or retail communications concerning an investment analysis tool, as such term is defined in FINRA Rule 2214 (the text of which the Exchange also does not propose adopting) because it covers a limited exception for investment analysis tools that is not being adopted, and FINRA Rule 2214 would continue to apply to all Dual Members. As such, proposed Rule 2210(c)(3)(C)—Equities would be marked ‘‘Reserved.’’ Proposed Rule 2210(c)(3)(D)—Equities would require member organizations to file within 10 business days of first use retail communications concerning collateralized mortgage obligations that are registered under the Securities Act. Under proposed Rule 2210(c)(3)(E)— Equities, member organizations would have to file within 10 business days of first use all retail communications concerning any security that is registered under the Securities Act and that is derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance or a foreign currency, not included within the requirements of paragraphs (c)(1), (c)(2) or subparagraphs (A) through (E) of paragraph (c)(3) of proposed Rule 2210—Equities. This provision would exclude retail communications that are already subject to a separate filing requirement found elsewhere in proposed paragraph (c), such as retail communications concerning registered investment companies or public direct participation programs. Proposed Rule 2210(c)(4)—Equities would provide that, if a member organization has filed a draft version or ‘‘story board’’ of a television or video retail communication pursuant to a filing requirement, then the member organization also must file the final filmed version within 10 business days of first use or broadcast. Proposed Rule 2210(c)(5)—Equities would specify that a member PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 73227 organization must provide with each filing the actual or anticipated date of first use, the name, title and CRD number of the registered principal who approved the communication, and the date of approval. Proposed Rule 2210(c)(6)—Equities would provide that each member organization’s written communications may be subject to a spot-check procedure, and that member organizations must submit requested material within the time frame specified by the Department. Proposed Rule 2210(c)(7)(A)— Equities would create a filing exclusion for retail communications that previously have been filed with the Department and that are to be used without material change. Proposed Rule 2210(c)(7)(B)—Equities would create an exclusion for retail communications that are based on templates that were previously filed with the Department, the changes to which are limited to updates of more recent statistical or other non-narrative information. Proposed Rule 2210(c)(7)(C)—Equities would exclude retail communications that do not make any financial or investment recommendation or otherwise promote a product or service of the member organization.14 Paragraphs (c)(7)(D), (E), (G) and (H) of proposed Rule 2210—Equities would create a filing exclusion for retail communications that do no more than identify a national securities exchange symbol of the member organization or identify a security for which the member organization is a registered market maker; advertisements and sales literature that do no more than identify the member organization or offer a specific security at a stated price; certain ‘‘tombstone’’ advertisements governed by Securities Act Rule 134; and press releases that are made available only to members of the media. Proposed Rule 2210(c)(7)(F)—Equities would create a filing exclusion for prospectuses, preliminary prospectuses, fund profiles, offering circulars and similar documents that have been filed with the Commission or any state, or that are exempt from such registration, except that an investment company prospectus published pursuant to Securities Act Rule 482 and a free writing prospectus that has been filed with the Commission pursuant to Securities Act Rule 433(d)(1)(ii) would 14 This filing exception would have the same scope as the proposed exception from the principal pre-use approval requirements for retail communications that do not make any financial or investment recommendation or otherwise promote a product or service of the member organization. See Proposed Rule 2210(b)(1)(D)(iii)—Equities. E:\FR\FM\05DEN1.SGM 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES 73228 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices not be considered a prospectus for purposes of this exclusion.15 Proposed Rule 2210(c)(7)(I)—Equities would create a filing exclusion for any reprint or excerpt of any article or report issued by a publisher (‘‘reprint’’), provided that the publisher is not an affiliate of the member organization using the reprint or any underwriter or issuer of a security mentioned in the reprint that the member organization is promoting; neither the member organization using the reprint nor any underwriter or issuer of a security mentioned in the reprint has commissioned the reprinted article or report; and the member organization using the reprint has not materially altered its contents except as necessary to make the reprint consistent with applicable regulatory standards or to correct factual errors. Paragraphs (c)(7)(J) and (K) of proposed Rule 2210—Equities would create filing exclusions for correspondence and institutional communications. Proposed paragraph (c)(7)(L) would exclude from filing communications that refer to types of investments solely as part of a listing of products or services offered by the member organization. Proposed Rule 2210(c)(7)(M)— Equities would exclude from the filing requirements retail communications that are posted on an online interactive electronic forum. Proposed Rule 2210(c)(7)(N)—Equities would exclude from the filing requirements press releases issued by closed-end investment companies that are listed on the Exchange pursuant to Section 401 of the NYSE MKT Company Guide (or any successor provision). The Exchange does not propose to adopt FINRA Rule 2210(c)(8) because Section 24(b) of the Investment Company Act and Rule 24b–3 thereunder only apply to a registered national securities association, i.e., FINRA. As such, Rule 2210(c)(8)— Equities would be marked ‘‘Reserved.’’ Proposed Rule 2210(c)(9)(A)— Equities would allow FINRA to exempt, pursuant to the FINRA Rule 9600 Series, a member organization from the pre-use filing requirements of paragraph (c)(1)(A) for good cause shown. Proposed Rule 2210(c)(9)(B)—Equities would allow FINRA to grant an exemption from the filing requirements of paragraph (c)(3) for good cause shown 15 Securities Act Rule 433(d)(1)(ii) requires any offering participant, other than the issuer, to file with the Commission a free writing prospectus that is used or referred to by such offering participant and distributed by or on behalf of such person in a manner reasonably designed to lead to its broad unrestricted dissemination. VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 after taking into consideration all relevant factors, provided that the exemption is consistent with the purposes of the rule, the protection of investors, and the public interest. Generally, this relief would be limited to the same extent as in proposed paragraph (b)(1)(E), which would authorize FINRA to grant exemptive relief from the principal approval requirements in proposed Rule 2210(b)(1)(A)—Equities for retail communications, subject to the same standards.16 Content Standards Proposed Rule 2210(d)—Equities would incorporate the current content standards applicable to communications with the public that are found in Rules 472(i) and (j)—Equities, subject to certain changes. Proposed Rule 2210(d)(1)—Equities is comparable to the general standards for all communications in Rule 472(i)— Equities; however, the proposed rule would expand upon these general standards. Proposed Rule 2210(d)(1)(A)— Equities would provide that all member organization communications must be based on principles of fair dealing and good faith, must be fair and balanced, and must provide a sound basis for evaluating the facts in regard to any particular security or type of security, industry, or service. In addition, the proposed rule would provide that no member organization may omit any material fact or qualification if the omission, in light of the context of the material presented, would cause the communications to be misleading. Current Rule 472(i)—Equities, which sets forth the general content standards for all communications, is comparable to the proposed rule. As with current Rule 472(i)—Equities, which specifically prohibits promissory statements, proposed Rule 2210(d)(1)(B)—Equities would prohibit a member organization from making any false, exaggerated, unwarranted, promissory or misleading statement or claim in any communication. In addition, no member organization may publish, circulate or distribute any communication that the member organization knows or has reason to know contains any untrue statement of a material fact or is otherwise false or misleading. Proposed Rule 2210(d)(1)(C)— Equities would allow information to be placed in a legend or footnote only in the event that such placement would not inhibit an investor’s understanding 16 See PO 00000 supra note 8. Frm 00043 Fmt 4703 Sfmt 4703 of the communication. The Exchange does not currently have a comparable rule with this specific requirement. Proposed Rule 2210(d)(1)(D)— Equities would provide that member organizations must ensure that statements are clear and not misleading within the context in which they are made, and that they provide balanced treatment of risks and potential benefits. In addition, communications must be consistent with the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield inherent to investments. The Exchange does not currently have a comparable rule with this specific requirement. Proposed Rule 2210(d)(1)(E)—Equities would provide that member organizations must consider the nature of the audience to which the communication will be directed and must provide details and explanations appropriate to the audience. The Exchange does not currently have a comparable rule with this specific requirement. Proposed Rule 2210(d)(1)(F)—Equities would provide that communications may not predict or project performance, imply that past performance will recur or make any exaggerated or unwarranted claim, opinion or forecast; provided, however, the following would not be prohibited: • A hypothetical illustration of mathematical principles, provided that it does not predict or project the performance of an investment or investment strategy; and • A price target contained in a research report on debt or equity securities, provided that the price target has a reasonable basis, the report discloses the valuation methods used to determine the price target, and the price target is accompanied by disclosure concerning the risks that may impede achievement of the price target. The Exchange does not propose to adopt the text of FINRA Rule 2210(d)(1)(F)(ii), which references an investment analysis tool, or a written report produced by an investment analysis tool, that meets the requirements of FINRA Rule 2214 (the text of which the Exchange also does not propose adopting) because it covers a limited exception for investment analysis tools that is not being adopted, and FINRA Rule 2214 would continue to apply to all Dual Members. As such, text of proposed Rule 2210(d)(1)(F)(ii)— Equities would correspond to the text of FINRA Rule 2210(d)(1)(F)(iii). Current Rule 472(j)(3)—Equities provides that any projection or prediction must contain the bases or assumptions upon which they are made E:\FR\FM\05DEN1.SGM 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices and must indicate that the bases or assumptions of the materials upon which such projections and predictions are made are available upon request. The proposed rule would make a blanket prohibition against predictions and projections and carve out certain exemptions. Proposed Rule 2210(d)(2)—Equities would provide that any comparison in retail communications between investments or services must disclose all material differences between them, including (as applicable) investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features. Similarly, current Rule 472(j)(4)—Equities provides that any comparison of one member organization’s service, personnel, facilities or charges with those of other firms must be factually supportable. Rule 2210(d)(3)—Equities would require all retail communications and correspondence to (i) prominently disclose the name of the member organization, and would allow a fictional name by which the member organization is commonly recognized or which is required by any state or jurisdiction; (ii) reflect any relationship between the member organization and any non-member organization that, or individual who, also is named in the communication; and (iii) if the communication includes other names, reflect which products and services are offered by the member organization. Proposed Rule 2210(d)(3)—Equities would apply these standards to correspondence as well as to retail communications. A member organization would be permitted to use the name under which the member organization’s broker-dealer business is conducted as disclosed on the member organization’s Form BD, as well as a fictional name by which the member organization is commonly recognized or which is required by any state or jurisdiction. The proposed rule would not apply to ‘‘blind’’ advertisements used to recruit personnel. The Exchange does not currently have a comparable rule with these specific requirements. Proposed Rule 2210(d)(4)(A)— Equities would specify that in retail communications and correspondence, references to tax-free or tax-exempt income must indicate which income taxes apply, or which do not, unless income is free from all applicable taxes, and provides an example of income from an investment company investing in municipal bonds that is free from federal income tax but subject to state or local income taxes. The Exchange does VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 not currently have a comparable rule with these specific requirements. Proposed Rule 2210(d)(4)(B)— Equities would prohibit communications from characterizing income or investment returns as tax-free or exempt from income tax when tax liability is merely postponed or deferred, such as when taxes are payable upon redemption. The Exchange does not currently have a comparable rule with these specific requirements. Proposed Rule 2210(d)(4)(C)— Equities would add new language concerning comparative illustrations of the mathematical principles of taxdeferred versus taxable compounding. First, the illustration would have to depict both the taxable investment and the tax-deferred investment using identical investment amounts and identical assumed gross investment rates of return, which may not exceed 10 percent per annum. Second, the illustration would have to use and identify actual federal income tax rates. Third, the illustration would be permitted (but not required) to reflect an actual state income tax rate, provided that the communication prominently discloses that the illustration is applicable only to investors that reside in the identified state. Fourth, the tax rates used in the illustration that is intended for a target audience would have to reasonably reflect its tax bracket or brackets as well as the tax character of capital gains and ordinary income. Fifth, if the illustration covers an investment’s payout period, the illustration would have to reflect the impact of taxes during this period. Sixth, the illustration could not assume an unreasonable period of tax deferral. Seventh, the illustration would have to include the following disclosures, as applicable: • The degree of risk in the investment’s assumed rate of return, including a statement that the assumed rate of return is not guaranteed; • The possible effects of investment losses on the relative advantage of the taxable versus tax-deferred investments; • The extent to which tax rates on capital gains and dividends would affect the taxable investment’s return; • The fact that ordinary income tax rates will apply to withdrawals from a tax-deferred investment; • Its underlying assumptions; 17 17 These assumptions may include, for example, the age at which an investor may begin withdrawing funds from a tax-deferred account, the actual federal tax rates applied in the hypothetical taxable illustration, any state income tax rate applied in the illustration, and the charges associated with the hypothetical investment. PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 73229 • The potential impact resulting from federal or state tax penalties (e.g., for early withdrawals or use on nonqualified expenses); and • That an investor should consider his or her current and anticipated investment horizon and income tax bracket when making an investment decision, as the illustration may not reflect these factors. The Exchange does not currently have a comparable rule with these specific requirements. Proposed Rule 2210(d)(5)—Equities would require retail communications and correspondence that present the performance of a non-money market mutual fund, to disclose the fund’s maximum sales charge and operating expense ratio as set forth in the fund’s current prospectus fee table. The Exchange does not currently have a comparable rule with these specific requirements. Proposed Rule 2210(d)(6)(A)— Equities would provide that, if any testimonial in a communication concerns a technical aspect of investing, the person making the testimonial must have the knowledge and experience to form a valid opinion. This requirement would be identical to current Rule 472(j)(7)(iv)—Equities. Proposed Rule 2210(d)(6)(B)— Equities would require any retail communications and correspondence that provide a testimonial concerning the investment advice or investment performance of a member organization or its products to prominently disclose (i) the fact that the testimonial may not be representative of the experience of other customers, (ii) the fact that the testimonial is no guarantee of future performance or success, and (iii) if more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial. The proposed rule would be substantially the same as current Rule 472(j)(7)(i)–(iii)—Equities, except that Rule 472(j)(7)(iii)—Equities refers instead to a ‘‘nominal amount.’’ Proposed Rule 2210(d)(7)—Equities would apply to retail communications that contain a recommendation. Proposed Rule 2210(d)(7)(A)—Equities would require disclosure of certain specified conflicts of interest to the extent applicable. Retail communications that include a recommendation of securities must have a reasonable basis for the recommendation and must disclose, if applicable, the following: (i) That at the time the communication was published or distributed, the member organization was making a market in the security being recommended, or in the underlying security if the recommended E:\FR\FM\05DEN1.SGM 05DEN1 73230 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices ehiers on DSK2VPTVN1PROD with NOTICES security is an option or security future, or that the member organization or associated persons will sell to or buy from customers on a principal basis; (ii) that the member organization or any associated person that is directly and materially involved in the preparation of the content of the communication has a financial interest in any of the securities of the issuer whose securities are recommended, and the nature of the financial interest (including, without limitation, whether it consists of any option, right, warrant, future, long or short position), unless the extent of the financial interest is nominal; and (iii) that the member organization was manager or co-manager of a public offering of any securities of the issuer whose securities were recommended within the past 12 months. The proposed rule would be more detailed than current Rule 472(j)(1)—Equities, which covers recommendations. Proposed Rule 2210(d)(7)(B)— Equities would require a member organization to provide, or offer to furnish upon request, available investment information supporting the recommendation, and if the recommendation is for a corporate equity security, to provide the price at the time the recommendation is made. The proposed rule would be comparable to current Rule 472(j)(1)—Equities, which provides that when recommending the purchase, sale or switch of specific securities, supporting information must be provided or offered, and the market price at the time the recommendation is made must be indicated. Proposed Rule 2210(d)(7)(C)— Equities would amend the provisions governing communications that include past recommendations, which are currently found in Rule 472(j)(2)— Equities. The proposed standards mirror those found in Rule 206(4)–1(a)(2) under the Investment Advisers Act of 1940 (‘‘Advisers Act’’), which apply to investment adviser advertisements that contain past recommendations.18 18 Proposed Rule 2210(d)(7)(C)—Equities, like Advisers Act Rule 206(4)–1(a)(2), generally would prohibit retail communications from referring to past specific recommendations of the member organization that were or would have been profitable to any person. The proposed rule would allow, however, a retail communication or correspondence to set out or offer to furnish a list of all recommendations as to the same type, kind, grade or classification of securities made by the member organization within the immediately preceding period of not less than one year. The list would have to provide certain information regarding each recommended security and include a prescribed cautionary legend warning investors not to assume that future recommendations will be profitable. VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 Proposed Rule 2210(d)(7)(D)— Equities expressly would exclude from its coverage communications that meet the definition of ‘‘research report’’ or that are public appearances by a research analyst for purposes of Rule 472—Equities and that include all of the applicable disclosures required by that rule. Proposed Rule 2210(d)(7)(D)— Equities also would exclude any communication that recommends only registered investment companies or variable insurance products.19 The Exchange does not currently have a comparable rule regarding registered investment companies. Under proposed Rule 2210(d)(8)— Equities, prospectuses, preliminary prospectuses, fund profiles and similar documents that have been filed with the Commission would not be subject to the standards of proposed Rule 2210(d)— Equities; provided, however, that the standards would apply to an investment company prospectus published pursuant to Securities Act Rule 482 and a free writing prospectus that has been filed with the Commission pursuant to Securities Act Rule 433(d)(1)(ii). The Exchange does not currently have a comparable rule. Certain Text Not Adopted The Exchange does not propose to adopt the text of FINRA Rule 2210(e), which relates to limitations on the use of FINRA’s name and any other corporate name owned by FINRA. The Exchange does not propose to adopt the text of FINRA Rule 2210(e)(2) because that provision relates to over-thecounter transactions, which the Exchange does not regulate. Lastly, the Exchange does not propose to adopt the text of FINRA Rule 2210(e)(3) because the Exchange has not previously imposed a requirement on member organizations to provide a link to the Exchange’s Web site in connection with its indication of NYSE MKT membership, and the Exchange does not believe it is necessary to impose such a restriction at this time. FINRA Rule 2210(e)(3) would continue to apply to all Dual Members. As such, Rule 2210(e)—Equities would be marked ‘‘Reserved.’’ Public Appearances Proposed Rule 2210(f)—Equities sets forth the general standards that would 19 The Exchange is proposing to exclude communications that recommend only registered investment companies or variable insurance products because it believes that recommendations of these products do not raise the same kinds of conflicts of interest as recommendations of other types of securities, since they are pooled investment vehicles rather than securities of a single issuer. PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 apply to public appearances. Public appearances would have to meet the general ‘‘fair and balanced’’ standards of proposed Rule 2210(d)(1)—Equities. The disclosure requirements applicable to recommendations in proposed Rule 2210(d)(7)—Equities would apply if the public appearance included a recommendation of a security. The proposed rule also would require member organizations to establish appropriate written policies and procedures to supervise public appearances, and clarify that scripts, slides, handouts or other written (including electronic) materials used in connection with public appearances are considered communications for purposes of proposed Rule 2210— Equities. The proposed requirement to establish supervisory policies and procedures for public appearances would be consistent with Rule 472(l)— Equities, which covers other communications activities. Violations of Other Rules Proposed Rule 2210(g)—Equities would provide that any violation by a member organization of any rule of the Commission or the Securities Investor Protection Corporation applicable to member organization communications would be deemed a violation of proposed Rule 2210—Equities. FINRA Rule 2210(g) also applies to violations of Municipal Securities Rulemaking Board (‘‘MSRB’’) rules because FINRA enforces such rules. Because the Exchange does not enforce MSRB rules, the reference to MSRB rules would not be included in proposed Rule 2210(g)—Equities. Use of Investment Companies Rankings in Retail Communications The Exchange proposes to adopt the text of FINRA Rule 2212, which would cover the use of investment company rankings in retail communications. The Exchange currently does not have a comparable rule. Proposed Rule 2212(a)—Equities would define ‘‘Ranking Entity’’ as ‘‘any entity that provides general information about investment companies to the public, that is independent of the investment company and its affiliates, and whose services are not procured by the investment company or any of its affiliates to assign the investment company a ranking.’’ Proposed Rule 2212(b)—Equities would provide that member organizations may not use investment company rankings in any retail communication other than (i) rankings created and published by Ranking Entities or (ii) rankings created by an investment company or an investment E:\FR\FM\05DEN1.SGM 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices company affiliate but based on the performance measurements of a Ranking Entity. Rankings in retail communications also would have to conform to the requirements described below. Proposed Rule 2212(c)—Equities would require certain disclosures in retail communications. A headline or other prominent statement must not state or imply that an investment company or investment company family is the best performer in a category unless it is actually ranked first in the category. All retail communications containing an investment company ranking also would have to disclose prominently: • The name of the category (e.g., growth); • The number of investment companies or, if applicable, investment company families, in the category; • The name of the Ranking Entity and, if applicable, the fact that the investment company or an affiliate created the category or subcategory; • The length of the period (or the first day of the period) and its ending date; and • Criteria on which the ranking is based (e.g., total return, risk-adjusted performance). In addition, all retail communications containing an investment company ranking also would have to disclose: • The fact that past performance is no guarantee of future results; • For investment companies that assess front-end sales loads, whether the ranking takes those loads into account; • If the ranking is based on total return or the current Commission standardized yield, and fees have been waived or expenses advanced during the period on which the ranking is based, and the waiver or advancement had a material effect on the total return or yield for that period, a statement to that effect; • The publisher of the ranking data (e.g., ‘‘ABC Magazine, June 2011’’); and • If the ranking consists of a symbol (e.g., a star system) rather than a number, the meaning of the symbol (e.g., a four-star ranking indicates that the fund is in the top 30% of all investment companies). Proposed Rule 2212(d)—Equities would provide that any investment company ranking included in a retail communication must be, at a minimum, current to the most recent calendar quarter ended prior to use or submission for publication. If no ranking that meets this requirement is available from the Ranking Entity, then a member organization would only be able to use the most current ranking available from VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 the Ranking Entity unless use of the most current ranking would be misleading, in which case no ranking from the Ranking Entity may be used. In addition, except for money market mutual funds: • Retail communications may not present any ranking that covers a period of less than one year, unless the ranking is based on yield; • An investment company ranking based on total return must be accompanied by rankings based on total return for a one year period for investment companies in existence for at least one year; one and five year periods for investment companies in existence for at least five years; and one, five and ten year periods for investment companies in existence for at least ten years supplied by the same Ranking Entity, relating to the same investment category, and based on the same time period; provided that, if rankings for such one, five and ten year time periods are not published by the Ranking Entity, then rankings representing short, medium and long term performance must be provided in place of rankings for the required time periods; and • An investment company ranking based on yield may be based only on the current Commission standardized yield and must be accompanied by total return rankings for the time periods specified in Rule 2212(d)(2)(B)— Equities. Proposed Rule 2212(e)—Equities would provide specific requirements with respect to categories. The choice of category (including a subcategory of a broader category) on which the investment company ranking is based must be one that provides a sound basis for evaluating the performance of the investment company. An investment company ranking must be based only on (i) a published category or subcategory created by a Ranking Entity or (ii) a category or subcategory created by an investment company or an investment company affiliate, but based on the performance measurements of a Ranking Entity. Retail communications must not use any category or subcategory that is based upon the asset size of an investment company or investment company family, whether or not it has been created by a Ranking Entity. Proposed Rule 2212(f)—Equities would provide that investment company rankings for more than one class of investment company with the same portfolio must be accompanied by prominent disclosure of the fact that the investment companies or classes have a common portfolio and different expense structures. PO 00000 Frm 00046 Fmt 4703 Sfmt 4703 73231 Proposed Rule 2212(g)—Equities would provide that retail communications may contain rankings of investment company families, provided that these rankings comply with proposed Rule 2212—Equities, and further provided that no retail communication for an individual investment company may provide a ranking of an investment company family unless it also prominently discloses the various rankings for the individual investment company supplied by the same Ranking Entity, as described in proposed Rule 2212(d)(2)(B)—Equities. For purposes of Rule 2212—Equities, the term ‘‘investment company family’’ would mean any two or more registered investment companies or series thereof that hold themselves out to investors as related companies for purposes of investment and investor services. Proposed Rule 2212(h)—Equities would specify that Rule 2212—Equities would not apply to any reprint or excerpt of any article or report that is excluded from the Exchange’s Advertising Regulation Department filing requirements pursuant to Rule 2210(c)(7)(I)—Equities. Conforming Changes The Exchange also proposes to make certain conforming changes to Rule 342—Equities. Specifically, the Exchange proposes to amend Supplementary Materials .10(B) and .17 to Rule 342—Equities, which covers the approval, supervision, and control of offices, to include a cross-reference to proposed Rule 2210—Equities in addition to the current cross-references to Rule 472—Equities in that rule. The Exchange also proposes to amend the definition of ‘‘branch office’’ in Supplementary Material .10 to Rule 342—Equities to replace references to ‘‘advertisements’’ and ‘‘sales literature’’ with references to ‘‘retail communications.’’ 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Exchange Act Section 6(b),20 in general, and furthers the objectives of Exchange Act Section 6(b)(5),21 in particular, because it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market and a national market system. Specifically, the Exchange believes that the proposed rule change supports the objectives of the Exchange Act by 20 15 21 15 E:\FR\FM\05DEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 05DEN1 73232 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices providing greater harmonization between NYSE MKT rules and FINRA rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance. In particular, NYSE MKT member organizations that are also FINRA members are subject to Rule 472—Equities and FINRA Rules 2210 and 2212, and harmonizing these rules by adopting proposed Rules 2210—Equities and 2212—Equities would promote just and equitable principles of trade by requiring a single standard for communications with the public. The Exchange believes that to the extent the Exchange has proposed changes that differ from the FINRA version of the NYSE MKT rules, such changes are generally technical in nature and do not change the substance of the proposed rules. The Exchange also believes that the proposed rule change would update and add specificity to the requirements governing communications with the public, which would promote just and equitable principles of trade and help to protect investors. The Exchange further believes that using FINRA’s procedures in the event that a member wishes to obtain an exemption or contest a prefiling requirement would create greater efficiency and consistency while providing members with appropriate procedural protections until the Exchange adopts comparable procedures. As such, the Exchange believes the proposed rule change meets the requirements of Exchange Act Section 6(b)(5). B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange 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 Exchange Act. The Exchange believes that the proposed rule change is not intended to address competitive issues but rather to achieve greater consistency between the Exchange’s rules and FINRA’s rules. ehiers on DSK2VPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Exchange Act VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 Section 19(b)(3)(A)(iii) 22 and Rule 19b– 4(f)(6) thereunder.23 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Exchange Act Section 19(b)(3)(A) and Rule 19b– 4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 24 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),25 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, because it would allow the Exchange to immediately conform its rules to corresponding FINRA rules. This will ensure that Dual Members generally will be subject to a single set of rules governing communications with the public. As noted by the Exchange, the proposal would harmonize NYSE and FINRA rules. In addition, the proposal would update and add specificity to the Exchange’s requirements governing communications with the public, which are designed to help protect customers of all NYSE members. For these reasons, the Commission designates the proposed rule change to be operative upon filing.26 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act. If the Commission takes such action, the Commission shall institute proceedings under Exchange Act Section 19(b)(2)(B) 27 to determine whether the 22 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 24 17 CFR 240.19b–4(f)(6). 25 17 CFR 240.19b–4(f)(6)(iii). 26 For purposes of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 27 15 U.S.C. 78s(b)(2)(B). 23 17 PO 00000 Frm 00047 Fmt 4703 Sfmt 4703 proposed rule change should be approved or 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 Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEMKT–2013–95 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–NYSEMKT–2013–95. 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 (http://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 Section, 100 F Street NE., Washington, DC 20549–1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available for inspection and copying at the principal office of the Exchange. 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– NYSEMKT–2013–95 and should be submitted on or before December 26, 2013. E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–29043 Filed 12–4–13; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice 8543] 60-Day Notice of Proposed Information Collection: Online Application for Nonimmigrant Visa Department of State. ACTION: Notice of request for public comment. AGENCY: The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB. DATES: The Department will accept comments from the public up to February 3, 2014. ADDRESSES: You may submit comments by any of the following methods: • Web: Persons with access to the Internet may use the Federal Docket Management System (FDMS) to comment on this notice by going to www.Regulations.gov. You can search for the document by entering ‘‘Public Notice 8543’’ in the Search bar. If necessary, use the Narrow by Agency filter option on the Results page. • Email: PRA_BurdenComments@ state.gov. You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Sydney Taylor, who may be reached at PRA_BurdenComments@state.gov. SUPPLEMENTARY INFORMATION: • Title of Information Collection: Online Application for Nonimmigrant Visa • OMB Control Number: 1405–0182 • Type of Request: Extension of a currently approved collection ehiers on DSK2VPTVN1PROD with NOTICES SUMMARY: 28 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 • Originating Office: CA/VO/L/R • Form Number: DS–160 • Respondents: All Nonimmigrant Visa Applicants • Estimated Number of Respondents: 11,100,276 • Estimated Number of Responses: 11,100,276 • Average Time per Response: 75 minutes • Total Estimated Burden Time: 13,875,345 • Frequency: Once per respondent • Obligation to Respond: Required to Obtain or Retain a Benefit We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper functions of the Department. • Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review. Abstract of Proposed Collection The Online Application for Nonimmigrant Visa (DS–160) will be used to collect biographical information from individuals seeking a nonimmigrant visa. The consular officer uses the information collected to determine the applicant’s eligibility for a visa. This collection combines questions from current information collections DS–156 Nonimmigrant Visa Application, DS–156E Nonimmigrant Treaty Trader Investor Application (for certain qualifiers), DS–156K ´ Nonimmigrant Fiance Application, DS– 157 Nonimmigrant Supplemental Visa Application, and DS–158 Contact Information and Work History Application. Methodology The DS–160 will be submitted electronically to the Department via the internet. The applicant will be instructed to print a confirmation page containing a bar coded record locator, which will be scanned at the time of processing. Applicants who submit the PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 73233 electronic application will no longer submit paper-based applications to the Department. Dated: November 26, 2013. Edward Ramotowski, Deputy Assistant Secretary, Bureau of Consular Affairs, Department of State. [FR Doc. 2013–29077 Filed 12–04–13; 8:45 am] BILLING CODE 4710–06–P SUSQUEHANNA RIVER BASIN COMMISSION Actions Taken at September 19, 2013, Meeting Susquehanna River Basin Commission. ACTION: Notice. AGENCY: As part of its regular business meeting held on September 19, 2013, in Binghamton, New York, the Commission took the following actions: (1) Approved or tabled the applications of certain water resources projects; (2) rescinded approvals for three projects; (3) took additional actions, as set forth in the Supplementary Information below. SUMMARY: September 19, 2013. Susquehanna River Basin Commission, 4423 N. Front Street, Harrisburg, PA 17110–1788. FOR FURTHER INFORMATION CONTACT: Richard A. Cairo, General Counsel, telephone: (717) 238–0423, ext. 1306; fax: (717) 238–2436; email: rcairo@ srbc.net. Regular mail inquiries may be sent to the above address. See also Commission Web site at www.srbc.net. SUPPLEMENTARY INFORMATION: In addition to the actions taken on projects identified in the summary above and the listings below, the following items were also presented or acted upon at the business meeting: (1) Honored retiring Executive Director Paul O. Swartz for his almost 22 years of dedicated service to the Commission; (2) appointed Andrew D. Dehoff as the new Executive Director of the Commission; (3) heard a presentation from SRBC staff member Luanne Steffy on the Whitney Point Adaptive Management Plan; (4) delegated authority to the Executive Director on certain regulatory matters; and (5) approved/ratified four grants and one service contract. DATES: ADDRESSES: Rescission of Project Approvals The Commission rescinded approvals for the following projects: 1. Project Sponsor and Facility: Chevron Appalachia, LLC (Cambria Somerset Authority), Summerhill E:\FR\FM\05DEN1.SGM 05DEN1

Agencies

[Federal Register Volume 78, Number 234 (Thursday, December 5, 2013)]
[Notices]
[Pages 73223-73233]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29043]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70963; File No. SR-NYSEMKT-2013-95]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Its Rules 
Concerning Communications With the Public To Harmonize Them With 
Certain Financial Industry Regulatory Authority, Inc. Rules and Make 
Other Conforming Changes

November 29, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act'') and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on November 15, 2013, NYSE MKT LLC (the ``Exchange'' 
or ``NYSE MKT'') 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 substantially prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons. The Exchange has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under Exchange Act Rule 19b-4(f)(6),\3\ 
which renders the proposal effective upon receipt of this filing by the 
Commission.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange proposes to amend its rules concerning communications 
with the public to harmonize them with

[[Page 73224]]

certain Financial Industry Regulatory Authority, Inc. (``FINRA'') rules 
and make other conforming changes. The text of the proposed rule change 
is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules concerning communications 
with the public to harmonize them with certain FINRA rules and make 
other conforming changes. Set forth below are descriptions of the 
harmonization process, the current NYSE MKT rules, and the proposed 
NYSE MKT rules. Specifically, the Exchange proposes to (i) delete 
paragraphs (a)(1), (d), (i), (j) and (l) of NYSE MKT Rule 472--Equities 
and Supplementary Materials 472.10(1), (3), (4) and (5)--Equities, and 
472.90--Equities; (ii) adopt new rule text that is substantially 
similar to FINRA Rules 2210 and 2212; and (iii) make other conforming 
changes.\4\
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    \4\ References to rules are to NYSE MKT rules unless otherwise 
indicated. The remaining provisions of Rule 472--Equities and 
supplementary material not addressed in this proposal concern 
research and would remain in place because FINRA and NYSE MKT have 
not yet harmonized their research rules.
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Background
    On July 30, 2007, FINRA's predecessor, the National Association of 
Securities Dealers, Inc. (``NASD''), and NYSE Regulation, Inc. 
(``NYSER'') consolidated their member firm regulation operations into a 
combined organization, FINRA. Pursuant to Exchange Act Rule 17d-2, New 
York Stock Exchange LLC (``NYSE''), NYSER, and FINRA entered into an 
agreement (the ``Agreement'') to reduce regulatory duplication for 
their members by allocating to FINRA certain regulatory 
responsibilities for NYSE rules and rule interpretations (``FINRA 
Incorporated NYSE Rules''). NYSE MKT became a party to the Agreement 
effective December 15, 2008.\5\
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    \5\ See Exchange Act Release No. 56148 (Jul. 26, 2007), 72 FR 
42146 (Aug. 1, 2007) (order approving the Agreement); Exchange Act 
Release No. 56147 (Jul. 26, 2007), 72 FR 42166 (Aug. 1, 2007) (order 
approving the incorporation of certain NYSE Rules as ``Common 
Rules''); Exchange Act Release No. 60409 (July 30, 2009), 74 FR 
39353 (Aug. 6, 2009) (order approving the amended and restated 
Agreement, adding NYSE MKT LLC as a party). Paragraph 2(b) of the 
Agreement sets forth procedures regarding proposed changes by FINRA, 
NYSE or NYSE MKT to the substance of any of the Common Rules.
---------------------------------------------------------------------------

    As part of its effort to reduce regulatory duplication and relieve 
firms that are members of FINRA, the Exchange, and NYSE of conflicting 
or unnecessary regulatory burdens, FINRA is now engaged in the process 
of reviewing and amending the NASD and FINRA Incorporated NYSE Rules in 
order to create a consolidated FINRA rulebook.\6\ FINRA recently 
harmonized NASD and FINRA Incorporated NYSE Rules and interpretations 
concerning communications with the public.\7\ In that filing, FINRA 
adopted NASD Rules 2210 and 2211 and NASD Interpretive Materials 2210-1 
and 2210-3 through 2210-8 as FINRA Rules 2210 and 2212 through 2216 and 
deleted paragraphs (a)(1), (i), (j) and (l) of FINRA Incorporated NYSE 
Rule 472, FINRA Incorporated NYSE Rule Supplementary Materials 
472.10(1), (3), (4) and (5) and 472.90, and FINRA Incorporated NYSE 
Rule Interpretations 472/01 and 472/03 through 472/11.
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    \6\ FINRA's rulebook currently has three sets of rules: (1) NASD 
Rules, (2) FINRA Incorporated NYSE Rules, and (3) consolidated FINRA 
Rules. The FINRA Incorporated NYSE Rules apply only to those members 
of FINRA that are also members of the NYSE (``Dual Members''), while 
the consolidated FINRA Rules apply to all FINRA members. For more 
information about the FINRA rulebook consolidation process, see 
FINRA Information Notice, dated March 12, 2008.
    \7\ See Exchange Act Release No. 66681 (Mar. 29, 2012), 77 FR 
20452 (Apr. 4, 2012).
---------------------------------------------------------------------------

    NYSE Rule 472 is virtually identical to Rule 472--Equities except 
for certain technical differences. FINRA's rule change became effective 
on February 4, 2013.\8\
---------------------------------------------------------------------------

    \8\ See FINRA Regulatory Notice 12-29.
---------------------------------------------------------------------------

Current Communications With the Public Rules
    Rule 472(a)(1)--Equities requires that each advertisement, sales 
literature or other similar type of communication that is generally 
distributed or made available by a member organization to customers or 
the public be approved in advance by an allied member, supervisory 
analyst, or qualified person designated under the provisions of Rule 
342(b)(1)--Equities.
    Rule 472(d)--Equities requires that communications with the public 
be retained in accordance with Rule 440--Equities.
    Rule 472(i)--Equities provides that no member organization may use 
any communication that contains (i) any untrue statement or omission of 
a material fact or is otherwise false or misleading; (ii) promises of 
specific results, exaggerated or unwarranted claims; (iii) opinions for 
which there is no reasonable basis; or (iv) projections or forecasts of 
future events that are not clearly labeled as forecasts.
    Rule 472(j)--Equities sets forth specific standards for 
recommendations, records of past performance, projections and 
predictions, comparisons, dating reports, identification of sources, 
and testimonials.
    Rule 472(l)--Equities provides that other communications activities 
may include, but are not limited to, conducting interviews with the 
media, writing books, conducting seminars or lecture courses, writing 
newspaper or magazine articles, or making radio/TV appearances. Member 
organizations must establish specific written supervisory procedures 
applicable to allied members and employees who engage in these types of 
communications activities. These procedures must include provisions 
that require prior approval of such activity by a person designated 
under the provisions of Rule 342(b)(1)--Equities. These types of 
activities are subject to the general standards set forth in Rule 
472(i)--Equities. In addition, any activity that includes discussion of 
specific securities is subject to the specific standards in Rule 
472(j)--Equities.
    Supplementary Materials 472.10(1), (3), (4) and (5)--Equities 
define ``communication,'' ``advertisement,'' ``market letter,'' and 
``sales literature,'' respectively. For purposes of Rule 472(a)(1)--
Equities, Supplementary Material 472.90--Equities defines a ``qualified 
person'' as one who has passed an examination acceptable to the 
Exchange.
Proposed Rule Change
    The Exchange proposes to delete the foregoing rules relating to 
communications with the public and adopt the text of FINRA Rules 2210 
and 2212, subject to certain technical and conforming changes.\9\ As 
noted in Rule

[[Page 73225]]

0--Equities, Exchange rules that refer to NYSER, NYSER staff or 
departments, Exchange staff, and Exchange departments should be 
understood as also referring to FINRA staff and FINRA departments 
acting on behalf of the Exchange pursuant to the Agreement, as 
applicable. The Exchange does not propose to adopt the text of FINRA 
Rules 2213, 2214, 2215, and 2216 because they cover products that are 
not traded on the Exchange or a limited exception for investment 
analysis tools that is not being adopted. These rules would continue to 
apply to all Dual Members.
---------------------------------------------------------------------------

    \9\ The technical and conforming changes are that the Exchange 
would (i) substitute the term ``member organization'' for 
``member,'' (ii) substitute the term ``Exchange'' for ``FINRA,'' 
(iii) change certain cross-references to FINRA rules to cross-
references to Exchange rules, and (iv) add supplementary material to 
define the term ``associated person.''
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Communication Categories
    Under proposed Rule 2210(a)--Equities, the following three 
communication categories would be established:
     ``Institutional communication'' would include any written 
(including electronic) communication that is distributed or made 
available only to institutional investors, but does not include a 
member organization's internal communications. ``Institutional 
investor'' would include any (i) person described in FINRA Rule 
4512(c), regardless of whether the person has an account with a member 
organization; (ii) governmental entity or subdivision thereof; (iii) 
employee benefit plan, or multiple employee benefit plans offered to 
employees of the same employer, that meet the requirements of Section 
403(b) or Section 457 of the Internal Revenue Code and in the aggregate 
have at least 100 participants, but does not include any participant of 
such plans; (iv) qualified plan, as defined in Exchange Act Section 
3(a)(12)(C), or multiple qualified plans offered to employees of the 
same employer, that in the aggregate have at least 100 participants, 
but does not include any participant of such plans; (v) member 
organization or registered person of such a member organization; and 
(vi) person acting solely on behalf of any such institutional investor.
     ``Retail communication'' would include any written 
(including electronic) communication that is distributed or made 
available to more than 25 retail investors within any 30 calendar-day 
period. ``Retail investor'' would include any person other than an 
institutional investor, regardless of whether the person has an account 
with the member organization.
     ``Correspondence'' would include any written (including 
electronic) communication that is distributed or made available to 25 
or fewer retail investors within any 30 calendar-day period.
    The proposed communication categories would replace the 
communication categories currently defined in Supplementary Material 
472.10(1), (3), (4) and (5)--Equities.
Approval, Review and Recordkeeping Requirements
    Proposed Rule 2210(b)(1)(A)--Equities would require an 
appropriately qualified registered principal of the member organization 
to approve each retail communication before the earlier of its use or 
its filing with the Exchange's Advertising Regulation Department 
(``Department''). The principal registration required to approve 
particular communications would depend upon the permissible activities 
for each principal registration category. Current Rule 472(a)(1)--
Equities requires prior approval of certain communications by an allied 
member, Supervisory Analyst, or qualified person designated under the 
provisions of Rule 342(b)(1)--Equities, but the Exchange does not 
require member organizations to file communications with the Exchange.
    Proposed Rule 2210(b)(1)(B)--Equities would provide that the 
requirements of proposed Rule 2210(b)(1)(A)--Equities could be met by a 
Supervisory Analyst approved pursuant to Rule 344--Equities with 
respect to (i) research reports on debt and equity securities; (ii) 
retail communications as described in Rule 472.10(2)(a)--Equities; and 
(iii) other research that does not meet the definition of ``research 
report'' under Rule 472.10(2)--Equities, provided that the Supervisory 
Analyst has technical expertise in the particular product area. A 
Supervisory Analyst may not approve a retail communication that 
requires a separate registration unless the Supervisory Analyst also 
has such other registration. As stated above, current Rule 472(a)(1)--
Equities requires prior approval of certain communications by an allied 
member, Supervisory Analyst, or qualified person designated under the 
provisions of Rule 342(b)(1)--Equities. As such, the proposed rule 
would be limited to approval by Supervisory Analysts only and to 
certain types of communications.
    Proposed Rule 2210(b)(1)(C)--Equities would provide an exception 
from the principal approval requirements of proposed Rule 
2210(b)(1)(A)--Equities for retail communications, if at the time that 
a member organization intends to publish or distribute the retail 
communication (i) another member organization has filed it with the 
Department and has received a letter from the Department stating that 
it appears to be consistent with applicable standards and (ii) the 
member organization using the communication in reliance on this 
exception has not materially altered it and will not use it in a manner 
that is inconsistent with the conditions of the Department's letter. 
The Exchange does not currently have a comparable rule because the 
Exchange has not previously required member organizations to file 
communications with the Exchange.
    Proposed Rule 2210(b)(1)(D)--Equities would except from the 
principal approval requirements of proposed Rule 2210(b)(1)(A)--
Equities three additional categories of retail communications, provided 
that the member organization supervises and reviews such communications 
in the same manner as required for supervising and reviewing 
correspondence pursuant to Rule 342--Equities. These communications 
include (i) any retail communication that is excepted from the 
definition of ``research report'' pursuant to Rule 472.10(2)(a)--
Equities, unless the communication makes any financial or investment 
recommendation; (ii) any retail communication that is posted on an 
online interactive electronic forum; and (iii) any retail communication 
that does not make any financial or investment recommendation or 
otherwise promote a product or service of the member organization. 
Under current Rule 342--Equities, correspondence and communications 
with the public are subject to all supervisory provisions of the 
Exchange's rules. The proposed rule change would specifically delineate 
these three categories of retail communications that would be excepted 
from the additional principal approval requirements under proposed Rule 
2210--Equities.
    Proposed Rule 2210(b)(1)(E)--Equities would allow FINRA, pursuant 
to the FINRA Rule 9600 Series, to grant an exemption from the principal 
approval requirements of proposed Rule 2210(b)(1)(A)--Equities for good 
cause shown after taking into consideration all relevant factors, to 
the extent that the exemption is consistent with the purposes of Rule 
2210--Equities, the protection of investors, and the public 
interest.\10\ FINRA Rule 9610 sets forth procedures for exemptive 
relief.
---------------------------------------------------------------------------

    \10\ Similarly, the Exchange's affiliate, NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), has FINRA process certain exemptions 
under FINRA Rule 9610. See NYSE Arca Equities Rule 9.21(c)(10). The 
Exchange will propose to adopt its own rules for exemptions when the 
Exchange conforms its disciplinary rules to FINRA's and NYSE's 
disciplinary rules.

---------------------------------------------------------------------------

[[Page 73226]]

    Proposed Rule 2210(b)(1)(F)--Equities would require, 
notwithstanding any other provision of Rule 2210--Equities, a 
registered principal to approve a communication prior to the member 
organization's filing it with the Department. The Exchange does not 
currently have a comparable rule because the Exchange has not 
previously required member organizations to file communications with 
the Exchange.
    Proposed Rules 2210(b)(2) and (3)--Equities generally would impose 
certain supervisory and review requirements with regard to a member 
organization's correspondence and institutional communications. 
Proposed Rule 2210(b)(2)--Equities would subject all correspondence to 
the supervision and review requirements already in place under Rule 
342--Equities. Proposed Rule 2210(b)(3)--Equities would require each 
member organization to establish written procedures that are 
appropriate to its business, size, structure, and customers for the 
review by an appropriately qualified registered principal of 
institutional communications used by the member organization and its 
associated persons. Such procedures must be reasonably designed to 
ensure that institutional communications comply with applicable 
standards. When such procedures do not require review of all 
institutional communications prior to first use or distribution, they 
must include provision for the education and training of associated 
persons as to the firm's procedures governing institutional 
communications, documentation of such education and training, and 
surveillance and follow-up to ensure that such procedures are 
implemented and adhered to. Evidence that these supervisory procedures 
have been implemented and carried out must be maintained and made 
available to the Exchange upon request. These requirements are similar 
to current Rule 342.10(B)(v)--Equities, which provides that 
correspondence and communications with the public are subject to all 
supervisory provisions of the Exchange's rules, and Rule 342.17--
Equities, which requires member organizations to develop written 
policies and procedures that are appropriate for their business, size, 
structure and customers in connection with the review of communications 
with the public relating to their business. Rule 472(c)--Equities also 
requires each member organization to establish written procedures 
reasonably designed to ensure that allied members, member organizations 
and their employees are in compliance with Rule 472--Equities, which 
includes both communications with the public provisions and research 
provisions. While proposed Rule 2210(b)(3)--Equities would cover 
written procedures relating to communications with the public, the 
Exchange would maintain Rule 472(c)--Equities to cover written 
procedures for the research provisions that will remain in that rule.
    Proposed Rule 2210(b)(4)(A)--Equities would set forth the 
recordkeeping requirements for retail and institutional communications. 
This provision would incorporate by reference the recordkeeping format, 
medium and retention period requirements of Exchange Act Rule 17a-
4.\11\
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    \11\ Exchange Act Rule 17a-4(b) requires broker-dealers to 
preserve certain records for a period of not less than three years, 
the first two years in an easily accessible place. Among these 
records, pursuant to Exchange Act Rule 17a-4(b)(4), are 
``[o]riginals of all communications received and copies of all 
communications sent (and any approvals thereof) by the member, 
broker or dealer (including inter-office memoranda and 
communications) relating to its business as such, including all 
communications which are subject to rules of a self-regulatory 
organization of which the member, broker or dealer is a member 
regarding communications with the public. As used in this paragraph, 
the term communications includes sales scripts.'' Exchange Act Rule 
17a-4(f) permits broker-dealers to maintain and preserve these 
records on ``micrographic media'' or by means of ``electronic 
storage media,'' as defined in the rule and subject to a number of 
conditions.
---------------------------------------------------------------------------

    Proposed Rule 2210(b)(4)(A)--Equities specifies that such records 
would have to include:
     A copy of the communication and the dates of first and (if 
applicable) last use;
     The name of any registered principal who approved the 
communication and the date that approval was given;
     In the case of a retail communication or institutional 
communication that is not approved prior to first use by a registered 
principal, the name of the person who prepared or distributed the 
communication; \12\
---------------------------------------------------------------------------

    \12\ To the extent clerical staff is employed in the preparation 
or distribution of the communication, the records should include the 
name of the person on whose behalf the communication was prepared or 
distributed.
---------------------------------------------------------------------------

     Information concerning the source of any statistical 
table, chart, graph or other illustration used in the communication; 
and
     For retail communications that would rely on the exception 
under proposed Rule 2210(b)(1)(C)--Equities, the name of the member 
organization that filed the retail communication with the Department 
and a copy of the Department's review letter.
    Current Rule 440--Equities also incorporates by reference the 
recordkeeping format, medium and retention period requirements of 
Exchange Act Rule 17a-4. Current Rule 472(d)--Equities provides that 
communications with the public prepared or issued by a member 
organization must be retained in accordance with Rule 440--Equities, 
and the names of the persons who prepared, reviewed, and approved the 
material must be ascertainable from the retained records, and those 
records must be readily available to the Exchange upon request. The 
Exchange proposes to delete current Rule 472(d)--Equities because 
proposed Rule 2210(b)(4)(B)--Equities would address recordkeeping 
requirements and cross-reference Rule 440--Equities with respect to 
correspondence recordkeeping requirements.
Filing Requirements and Review Procedures
    Proposed Rule 2210(c)--Equities would set forth the filing 
requirements and review procedures for retail communications. The 
Exchange does not currently require member organizations to file 
communications with the Exchange, and as such, the Exchange does not 
currently have a comparable rule.
    Proposed Rule 2210(c)(1)(A)--Equities would require a member 
organization to file with the Department at least 10 business days 
prior to first use any retail communication that is published or used 
in any electronic or other public media, including any generally 
accessible Web site, newspaper, magazine or other periodical, radio, 
television, telephone or audio recording, video display, signs or 
billboards, motion pictures, or telephone directories (other than 
routine listings). This filing requirement continues for a period of 
one year beginning on the date reflected in the Central Registration 
Depository (``CRD'') system as the date that Exchange membership became 
effective. To the extent any retail communication is a free writing 
prospectus that has been filed with the Commission pursuant to Rule 
433(d)(1)(ii), promulgated under the Securities Act of 1933 
(``Securities Act''), the member organization may file such retail 
communication within 10 business days of first use rather than at least 
10 business days prior to first use.

[[Page 73227]]

    Proposed Rule 2210(c)(1)(B)--Equities would authorize the 
Department to require a member organization to file all of its 
communications, or the portion of the member organization's material 
relating to specific types or classes of securities or services, with 
the Department at least 10 business days prior to first use, if the 
Department determines that the member organization has departed from 
the standards of the proposed rule. The Department would notify the 
member organization in writing of the types of communications to be 
filed and the length of time such requirement is to be in effect. Any 
filing requirement imposed would take effect 21 calendar days after 
service of the written notice, during which time the member 
organization may request a hearing under FINRA Rules 9551 and 9559.\13\
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    \13\ FINRA currently performs this function for requesting NYSE 
Arca ETP Holders under NYSE Arca Equities Rule 9.21(c)(5)(B). The 
Exchange will propose to adopt comparable rules when the Exchange 
conforms its disciplinary rules to FINRA's and NYSE's disciplinary 
rules.
---------------------------------------------------------------------------

    Proposed Rule 2210(c)(2)--Equities would require member 
organizations to file retail communications concerning any registered 
investment company that include self-created rankings and retail 
communications concerning security futures at least 10 business days 
prior to first use and to withhold them from use until any changes 
specified by the Department have been made. The requirement to file 
retail communications concerning security futures prior to first use 
would not apply to (i) retail communications that are submitted to 
another self-regulatory organization having comparable standards 
pertaining to such communications and (ii) retail communications in 
which the only reference to security futures is contained in a listing 
of the services of a member organization. The Exchange does not propose 
to adopt the text of FINRA 2210(c)(2)(C), which requires prior filing 
of retail communications concerning bond mutual funds that include or 
incorporate bond mutual fund volatility ratings as defined in FINRA 
Rule 2213 because, as stated above, the Exchange does not propose to 
adopt the text of FINRA Rule 2213 (the text of which the Exchange also 
does not propose adopting) because it covers products that are not 
traded on the Exchange, and FINRA Rule 2213 would continue to apply to 
all Dual Members.
    Proposed Rule 2210(c)(3)(A)--Equities would require retail 
communications concerning registered investment companies (including 
mutual funds, exchange-traded funds, variable insurance products, 
closed-end funds, and unit investment trusts) to be filed within 10 
business days of first use or publication. In addition, the filing of 
any retail communication that includes or incorporates a performance 
ranking or performance comparison of the investment company with other 
investment companies must include a copy of the ranking or comparison 
used in the retail communication. Proposed Rule 2210(c)(3)(B)--Equities 
would require retail communications concerning public direct 
participation programs to be filed within 10 business days of first use 
or publication. The Exchange does not propose to adopt the text of 
FINRA Rule 2210(c)(3)(C), which requires prior filing of first use 
templates for written reports produced by, or retail communications 
concerning an investment analysis tool, as such term is defined in 
FINRA Rule 2214 (the text of which the Exchange also does not propose 
adopting) because it covers a limited exception for investment analysis 
tools that is not being adopted, and FINRA Rule 2214 would continue to 
apply to all Dual Members. As such, proposed Rule 2210(c)(3)(C)--
Equities would be marked ``Reserved.'' Proposed Rule 2210(c)(3)(D)--
Equities would require member organizations to file within 10 business 
days of first use retail communications concerning collateralized 
mortgage obligations that are registered under the Securities Act.
    Under proposed Rule 2210(c)(3)(E)--Equities, member organizations 
would have to file within 10 business days of first use all retail 
communications concerning any security that is registered under the 
Securities Act and that is derived from or based on a single security, 
a basket of securities, an index, a commodity, a debt issuance or a 
foreign currency, not included within the requirements of paragraphs 
(c)(1), (c)(2) or subparagraphs (A) through (E) of paragraph (c)(3) of 
proposed Rule 2210--Equities. This provision would exclude retail 
communications that are already subject to a separate filing 
requirement found elsewhere in proposed paragraph (c), such as retail 
communications concerning registered investment companies or public 
direct participation programs.
    Proposed Rule 2210(c)(4)--Equities would provide that, if a member 
organization has filed a draft version or ``story board'' of a 
television or video retail communication pursuant to a filing 
requirement, then the member organization also must file the final 
filmed version within 10 business days of first use or broadcast.
    Proposed Rule 2210(c)(5)--Equities would specify that a member 
organization must provide with each filing the actual or anticipated 
date of first use, the name, title and CRD number of the registered 
principal who approved the communication, and the date of approval.
    Proposed Rule 2210(c)(6)--Equities would provide that each member 
organization's written communications may be subject to a spot-check 
procedure, and that member organizations must submit requested material 
within the time frame specified by the Department.
    Proposed Rule 2210(c)(7)(A)--Equities would create a filing 
exclusion for retail communications that previously have been filed 
with the Department and that are to be used without material change. 
Proposed Rule 2210(c)(7)(B)--Equities would create an exclusion for 
retail communications that are based on templates that were previously 
filed with the Department, the changes to which are limited to updates 
of more recent statistical or other non-narrative information. Proposed 
Rule 2210(c)(7)(C)--Equities would exclude retail communications that 
do not make any financial or investment recommendation or otherwise 
promote a product or service of the member organization.\14\
---------------------------------------------------------------------------

    \14\ This filing exception would have the same scope as the 
proposed exception from the principal pre-use approval requirements 
for retail communications that do not make any financial or 
investment recommendation or otherwise promote a product or service 
of the member organization. See Proposed Rule 2210(b)(1)(D)(iii)--
Equities.
---------------------------------------------------------------------------

    Paragraphs (c)(7)(D), (E), (G) and (H) of proposed Rule 2210--
Equities would create a filing exclusion for retail communications that 
do no more than identify a national securities exchange symbol of the 
member organization or identify a security for which the member 
organization is a registered market maker; advertisements and sales 
literature that do no more than identify the member organization or 
offer a specific security at a stated price; certain ``tombstone'' 
advertisements governed by Securities Act Rule 134; and press releases 
that are made available only to members of the media.
    Proposed Rule 2210(c)(7)(F)--Equities would create a filing 
exclusion for prospectuses, preliminary prospectuses, fund profiles, 
offering circulars and similar documents that have been filed with the 
Commission or any state, or that are exempt from such registration, 
except that an investment company prospectus published pursuant to 
Securities Act Rule 482 and a free writing prospectus that has been 
filed with the Commission pursuant to Securities Act Rule 433(d)(1)(ii) 
would

[[Page 73228]]

not be considered a prospectus for purposes of this exclusion.\15\
---------------------------------------------------------------------------

    \15\ Securities Act Rule 433(d)(1)(ii) requires any offering 
participant, other than the issuer, to file with the Commission a 
free writing prospectus that is used or referred to by such offering 
participant and distributed by or on behalf of such person in a 
manner reasonably designed to lead to its broad unrestricted 
dissemination.
---------------------------------------------------------------------------

    Proposed Rule 2210(c)(7)(I)--Equities would create a filing 
exclusion for any reprint or excerpt of any article or report issued by 
a publisher (``reprint''), provided that the publisher is not an 
affiliate of the member organization using the reprint or any 
underwriter or issuer of a security mentioned in the reprint that the 
member organization is promoting; neither the member organization using 
the reprint nor any underwriter or issuer of a security mentioned in 
the reprint has commissioned the reprinted article or report; and the 
member organization using the reprint has not materially altered its 
contents except as necessary to make the reprint consistent with 
applicable regulatory standards or to correct factual errors.
    Paragraphs (c)(7)(J) and (K) of proposed Rule 2210--Equities would 
create filing exclusions for correspondence and institutional 
communications. Proposed paragraph (c)(7)(L) would exclude from filing 
communications that refer to types of investments solely as part of a 
listing of products or services offered by the member organization.
    Proposed Rule 2210(c)(7)(M)--Equities would exclude from the filing 
requirements retail communications that are posted on an online 
interactive electronic forum. Proposed Rule 2210(c)(7)(N)--Equities 
would exclude from the filing requirements press releases issued by 
closed-end investment companies that are listed on the Exchange 
pursuant to Section 401 of the NYSE MKT Company Guide (or any successor 
provision).
    The Exchange does not propose to adopt FINRA Rule 2210(c)(8) 
because Section 24(b) of the Investment Company Act and Rule 24b-3 
thereunder only apply to a registered national securities association, 
i.e., FINRA. As such, Rule 2210(c)(8)--Equities would be marked 
``Reserved.''
    Proposed Rule 2210(c)(9)(A)--Equities would allow FINRA to exempt, 
pursuant to the FINRA Rule 9600 Series, a member organization from the 
pre-use filing requirements of paragraph (c)(1)(A) for good cause 
shown. Proposed Rule 2210(c)(9)(B)--Equities would allow FINRA to grant 
an exemption from the filing requirements of paragraph (c)(3) for good 
cause shown after taking into consideration all relevant factors, 
provided that the exemption is consistent with the purposes of the 
rule, the protection of investors, and the public interest. Generally, 
this relief would be limited to the same extent as in proposed 
paragraph (b)(1)(E), which would authorize FINRA to grant exemptive 
relief from the principal approval requirements in proposed Rule 
2210(b)(1)(A)--Equities for retail communications, subject to the same 
standards.\16\
---------------------------------------------------------------------------

    \16\ See supra note 8.
---------------------------------------------------------------------------

Content Standards
    Proposed Rule 2210(d)--Equities would incorporate the current 
content standards applicable to communications with the public that are 
found in Rules 472(i) and (j)--Equities, subject to certain changes. 
Proposed Rule 2210(d)(1)--Equities is comparable to the general 
standards for all communications in Rule 472(i)--Equities; however, the 
proposed rule would expand upon these general standards.
    Proposed Rule 2210(d)(1)(A)--Equities would provide that all member 
organization communications must be based on principles of fair dealing 
and good faith, must be fair and balanced, and must provide a sound 
basis for evaluating the facts in regard to any particular security or 
type of security, industry, or service. In addition, the proposed rule 
would provide that no member organization may omit any material fact or 
qualification if the omission, in light of the context of the material 
presented, would cause the communications to be misleading. Current 
Rule 472(i)--Equities, which sets forth the general content standards 
for all communications, is comparable to the proposed rule.
    As with current Rule 472(i)--Equities, which specifically prohibits 
promissory statements, proposed Rule 2210(d)(1)(B)--Equities would 
prohibit a member organization from making any false, exaggerated, 
unwarranted, promissory or misleading statement or claim in any 
communication. In addition, no member organization may publish, 
circulate or distribute any communication that the member organization 
knows or has reason to know contains any untrue statement of a material 
fact or is otherwise false or misleading.
    Proposed Rule 2210(d)(1)(C)--Equities would allow information to be 
placed in a legend or footnote only in the event that such placement 
would not inhibit an investor's understanding of the communication. The 
Exchange does not currently have a comparable rule with this specific 
requirement.
    Proposed Rule 2210(d)(1)(D)--Equities would provide that member 
organizations must ensure that statements are clear and not misleading 
within the context in which they are made, and that they provide 
balanced treatment of risks and potential benefits. In addition, 
communications must be consistent with the risks of fluctuating prices 
and the uncertainty of dividends, rates of return and yield inherent to 
investments. The Exchange does not currently have a comparable rule 
with this specific requirement.
    Proposed Rule 2210(d)(1)(E)--Equities would provide that member 
organizations must consider the nature of the audience to which the 
communication will be directed and must provide details and 
explanations appropriate to the audience. The Exchange does not 
currently have a comparable rule with this specific requirement.
    Proposed Rule 2210(d)(1)(F)--Equities would provide that 
communications may not predict or project performance, imply that past 
performance will recur or make any exaggerated or unwarranted claim, 
opinion or forecast; provided, however, the following would not be 
prohibited:
     A hypothetical illustration of mathematical principles, 
provided that it does not predict or project the performance of an 
investment or investment strategy; and
     A price target contained in a research report on debt or 
equity securities, provided that the price target has a reasonable 
basis, the report discloses the valuation methods used to determine the 
price target, and the price target is accompanied by disclosure 
concerning the risks that may impede achievement of the price target.
    The Exchange does not propose to adopt the text of FINRA Rule 
2210(d)(1)(F)(ii), which references an investment analysis tool, or a 
written report produced by an investment analysis tool, that meets the 
requirements of FINRA Rule 2214 (the text of which the Exchange also 
does not propose adopting) because it covers a limited exception for 
investment analysis tools that is not being adopted, and FINRA Rule 
2214 would continue to apply to all Dual Members. As such, text of 
proposed Rule 2210(d)(1)(F)(ii)--Equities would correspond to the text 
of FINRA Rule 2210(d)(1)(F)(iii).
    Current Rule 472(j)(3)--Equities provides that any projection or 
prediction must contain the bases or assumptions upon which they are 
made

[[Page 73229]]

and must indicate that the bases or assumptions of the materials upon 
which such projections and predictions are made are available upon 
request. The proposed rule would make a blanket prohibition against 
predictions and projections and carve out certain exemptions.
    Proposed Rule 2210(d)(2)--Equities would provide that any 
comparison in retail communications between investments or services 
must disclose all material differences between them, including (as 
applicable) investment objectives, costs and expenses, liquidity, 
safety, guarantees or insurance, fluctuation of principal or return, 
and tax features. Similarly, current Rule 472(j)(4)--Equities provides 
that any comparison of one member organization's service, personnel, 
facilities or charges with those of other firms must be factually 
supportable.
    Rule 2210(d)(3)--Equities would require all retail communications 
and correspondence to (i) prominently disclose the name of the member 
organization, and would allow a fictional name by which the member 
organization is commonly recognized or which is required by any state 
or jurisdiction; (ii) reflect any relationship between the member 
organization and any non-member organization that, or individual who, 
also is named in the communication; and (iii) if the communication 
includes other names, reflect which products and services are offered 
by the member organization. Proposed Rule 2210(d)(3)--Equities would 
apply these standards to correspondence as well as to retail 
communications. A member organization would be permitted to use the 
name under which the member organization's broker-dealer business is 
conducted as disclosed on the member organization's Form BD, as well as 
a fictional name by which the member organization is commonly 
recognized or which is required by any state or jurisdiction. The 
proposed rule would not apply to ``blind'' advertisements used to 
recruit personnel. The Exchange does not currently have a comparable 
rule with these specific requirements.
    Proposed Rule 2210(d)(4)(A)--Equities would specify that in retail 
communications and correspondence, references to tax-free or tax-exempt 
income must indicate which income taxes apply, or which do not, unless 
income is free from all applicable taxes, and provides an example of 
income from an investment company investing in municipal bonds that is 
free from federal income tax but subject to state or local income 
taxes. The Exchange does not currently have a comparable rule with 
these specific requirements.
    Proposed Rule 2210(d)(4)(B)--Equities would prohibit communications 
from characterizing income or investment returns as tax-free or exempt 
from income tax when tax liability is merely postponed or deferred, 
such as when taxes are payable upon redemption. The Exchange does not 
currently have a comparable rule with these specific requirements.
    Proposed Rule 2210(d)(4)(C)--Equities would add new language 
concerning comparative illustrations of the mathematical principles of 
tax-deferred versus taxable compounding. First, the illustration would 
have to depict both the taxable investment and the tax-deferred 
investment using identical investment amounts and identical assumed 
gross investment rates of return, which may not exceed 10 percent per 
annum. Second, the illustration would have to use and identify actual 
federal income tax rates. Third, the illustration would be permitted 
(but not required) to reflect an actual state income tax rate, provided 
that the communication prominently discloses that the illustration is 
applicable only to investors that reside in the identified state. 
Fourth, the tax rates used in the illustration that is intended for a 
target audience would have to reasonably reflect its tax bracket or 
brackets as well as the tax character of capital gains and ordinary 
income. Fifth, if the illustration covers an investment's payout 
period, the illustration would have to reflect the impact of taxes 
during this period. Sixth, the illustration could not assume an 
unreasonable period of tax deferral. Seventh, the illustration would 
have to include the following disclosures, as applicable:
     The degree of risk in the investment's assumed rate of 
return, including a statement that the assumed rate of return is not 
guaranteed;
     The possible effects of investment losses on the relative 
advantage of the taxable versus tax-deferred investments;
     The extent to which tax rates on capital gains and 
dividends would affect the taxable investment's return;
     The fact that ordinary income tax rates will apply to 
withdrawals from a tax-deferred investment;
     Its underlying assumptions; \17\
---------------------------------------------------------------------------

    \17\ These assumptions may include, for example, the age at 
which an investor may begin withdrawing funds from a tax-deferred 
account, the actual federal tax rates applied in the hypothetical 
taxable illustration, any state income tax rate applied in the 
illustration, and the charges associated with the hypothetical 
investment.
---------------------------------------------------------------------------

     The potential impact resulting from federal or state tax 
penalties (e.g., for early withdrawals or use on non-qualified 
expenses); and
     That an investor should consider his or her current and 
anticipated investment horizon and income tax bracket when making an 
investment decision, as the illustration may not reflect these factors.
    The Exchange does not currently have a comparable rule with these 
specific requirements.
    Proposed Rule 2210(d)(5)--Equities would require retail 
communications and correspondence that present the performance of a 
non-money market mutual fund, to disclose the fund's maximum sales 
charge and operating expense ratio as set forth in the fund's current 
prospectus fee table. The Exchange does not currently have a comparable 
rule with these specific requirements.
    Proposed Rule 2210(d)(6)(A)--Equities would provide that, if any 
testimonial in a communication concerns a technical aspect of 
investing, the person making the testimonial must have the knowledge 
and experience to form a valid opinion. This requirement would be 
identical to current Rule 472(j)(7)(iv)--Equities.
    Proposed Rule 2210(d)(6)(B)--Equities would require any retail 
communications and correspondence that provide a testimonial concerning 
the investment advice or investment performance of a member 
organization or its products to prominently disclose (i) the fact that 
the testimonial may not be representative of the experience of other 
customers, (ii) the fact that the testimonial is no guarantee of future 
performance or success, and (iii) if more than $100 in value is paid 
for the testimonial, the fact that it is a paid testimonial. The 
proposed rule would be substantially the same as current Rule 
472(j)(7)(i)-(iii)--Equities, except that Rule 472(j)(7)(iii)--Equities 
refers instead to a ``nominal amount.''
    Proposed Rule 2210(d)(7)--Equities would apply to retail 
communications that contain a recommendation. Proposed Rule 
2210(d)(7)(A)--Equities would require disclosure of certain specified 
conflicts of interest to the extent applicable. Retail communications 
that include a recommendation of securities must have a reasonable 
basis for the recommendation and must disclose, if applicable, the 
following: (i) That at the time the communication was published or 
distributed, the member organization was making a market in the 
security being recommended, or in the underlying security if the 
recommended

[[Page 73230]]

security is an option or security future, or that the member 
organization or associated persons will sell to or buy from customers 
on a principal basis; (ii) that the member organization or any 
associated person that is directly and materially involved in the 
preparation of the content of the communication has a financial 
interest in any of the securities of the issuer whose securities are 
recommended, and the nature of the financial interest (including, 
without limitation, whether it consists of any option, right, warrant, 
future, long or short position), unless the extent of the financial 
interest is nominal; and (iii) that the member organization was manager 
or co-manager of a public offering of any securities of the issuer 
whose securities were recommended within the past 12 months. The 
proposed rule would be more detailed than current Rule 472(j)(1)--
Equities, which covers recommendations.
    Proposed Rule 2210(d)(7)(B)--Equities would require a member 
organization to provide, or offer to furnish upon request, available 
investment information supporting the recommendation, and if the 
recommendation is for a corporate equity security, to provide the price 
at the time the recommendation is made. The proposed rule would be 
comparable to current Rule 472(j)(1)--Equities, which provides that 
when recommending the purchase, sale or switch of specific securities, 
supporting information must be provided or offered, and the market 
price at the time the recommendation is made must be indicated.
    Proposed Rule 2210(d)(7)(C)--Equities would amend the provisions 
governing communications that include past recommendations, which are 
currently found in Rule 472(j)(2)--Equities. The proposed standards 
mirror those found in Rule 206(4)-1(a)(2) under the Investment Advisers 
Act of 1940 (``Advisers Act''), which apply to investment adviser 
advertisements that contain past recommendations.\18\
---------------------------------------------------------------------------

    \18\ Proposed Rule 2210(d)(7)(C)--Equities, like Advisers Act 
Rule 206(4)-1(a)(2), generally would prohibit retail communications 
from referring to past specific recommendations of the member 
organization that were or would have been profitable to any person. 
The proposed rule would allow, however, a retail communication or 
correspondence to set out or offer to furnish a list of all 
recommendations as to the same type, kind, grade or classification 
of securities made by the member organization within the immediately 
preceding period of not less than one year. The list would have to 
provide certain information regarding each recommended security and 
include a prescribed cautionary legend warning investors not to 
assume that future recommendations will be profitable.
---------------------------------------------------------------------------

    Proposed Rule 2210(d)(7)(D)--Equities expressly would exclude from 
its coverage communications that meet the definition of ``research 
report'' or that are public appearances by a research analyst for 
purposes of Rule 472--Equities and that include all of the applicable 
disclosures required by that rule. Proposed Rule 2210(d)(7)(D)--
Equities also would exclude any communication that recommends only 
registered investment companies or variable insurance products.\19\ The 
Exchange does not currently have a comparable rule regarding registered 
investment companies.
---------------------------------------------------------------------------

    \19\ The Exchange is proposing to exclude communications that 
recommend only registered investment companies or variable insurance 
products because it believes that recommendations of these products 
do not raise the same kinds of conflicts of interest as 
recommendations of other types of securities, since they are pooled 
investment vehicles rather than securities of a single issuer.
---------------------------------------------------------------------------

    Under proposed Rule 2210(d)(8)--Equities, prospectuses, preliminary 
prospectuses, fund profiles and similar documents that have been filed 
with the Commission would not be subject to the standards of proposed 
Rule 2210(d)--Equities; provided, however, that the standards would 
apply to an investment company prospectus published pursuant to 
Securities Act Rule 482 and a free writing prospectus that has been 
filed with the Commission pursuant to Securities Act Rule 
433(d)(1)(ii). The Exchange does not currently have a comparable rule.
Certain Text Not Adopted
    The Exchange does not propose to adopt the text of FINRA Rule 
2210(e), which relates to limitations on the use of FINRA's name and 
any other corporate name owned by FINRA. The Exchange does not propose 
to adopt the text of FINRA Rule 2210(e)(2) because that provision 
relates to over-the-counter transactions, which the Exchange does not 
regulate. Lastly, the Exchange does not propose to adopt the text of 
FINRA Rule 2210(e)(3) because the Exchange has not previously imposed a 
requirement on member organizations to provide a link to the Exchange's 
Web site in connection with its indication of NYSE MKT membership, and 
the Exchange does not believe it is necessary to impose such a 
restriction at this time. FINRA Rule 2210(e)(3) would continue to apply 
to all Dual Members. As such, Rule 2210(e)--Equities would be marked 
``Reserved.''
Public Appearances
    Proposed Rule 2210(f)--Equities sets forth the general standards 
that would apply to public appearances. Public appearances would have 
to meet the general ``fair and balanced'' standards of proposed Rule 
2210(d)(1)--Equities. The disclosure requirements applicable to 
recommendations in proposed Rule 2210(d)(7)--Equities would apply if 
the public appearance included a recommendation of a security. The 
proposed rule also would require member organizations to establish 
appropriate written policies and procedures to supervise public 
appearances, and clarify that scripts, slides, handouts or other 
written (including electronic) materials used in connection with public 
appearances are considered communications for purposes of proposed Rule 
2210--Equities. The proposed requirement to establish supervisory 
policies and procedures for public appearances would be consistent with 
Rule 472(l)--Equities, which covers other communications activities.
Violations of Other Rules
    Proposed Rule 2210(g)--Equities would provide that any violation by 
a member organization of any rule of the Commission or the Securities 
Investor Protection Corporation applicable to member organization 
communications would be deemed a violation of proposed Rule 2210--
Equities. FINRA Rule 2210(g) also applies to violations of Municipal 
Securities Rulemaking Board (``MSRB'') rules because FINRA enforces 
such rules. Because the Exchange does not enforce MSRB rules, the 
reference to MSRB rules would not be included in proposed Rule 
2210(g)--Equities.
Use of Investment Companies Rankings in Retail Communications
    The Exchange proposes to adopt the text of FINRA Rule 2212, which 
would cover the use of investment company rankings in retail 
communications. The Exchange currently does not have a comparable rule.
    Proposed Rule 2212(a)--Equities would define ``Ranking Entity'' as 
``any entity that provides general information about investment 
companies to the public, that is independent of the investment company 
and its affiliates, and whose services are not procured by the 
investment company or any of its affiliates to assign the investment 
company a ranking.''
    Proposed Rule 2212(b)--Equities would provide that member 
organizations may not use investment company rankings in any retail 
communication other than (i) rankings created and published by Ranking 
Entities or (ii) rankings created by an investment company or an 
investment

[[Page 73231]]

company affiliate but based on the performance measurements of a 
Ranking Entity. Rankings in retail communications also would have to 
conform to the requirements described below.
    Proposed Rule 2212(c)--Equities would require certain disclosures 
in retail communications. A headline or other prominent statement must 
not state or imply that an investment company or investment company 
family is the best performer in a category unless it is actually ranked 
first in the category. All retail communications containing an 
investment company ranking also would have to disclose prominently:
     The name of the category (e.g., growth);
     The number of investment companies or, if applicable, 
investment company families, in the category;
     The name of the Ranking Entity and, if applicable, the 
fact that the investment company or an affiliate created the category 
or subcategory;
     The length of the period (or the first day of the period) 
and its ending date; and
     Criteria on which the ranking is based (e.g., total 
return, risk-adjusted performance).
In addition, all retail communications containing an investment company 
ranking also would have to disclose:
     The fact that past performance is no guarantee of future 
results;
     For investment companies that assess front-end sales 
loads, whether the ranking takes those loads into account;
     If the ranking is based on total return or the current 
Commission standardized yield, and fees have been waived or expenses 
advanced during the period on which the ranking is based, and the 
waiver or advancement had a material effect on the total return or 
yield for that period, a statement to that effect;
     The publisher of the ranking data (e.g., ``ABC Magazine, 
June 2011''); and
     If the ranking consists of a symbol (e.g., a star system) 
rather than a number, the meaning of the symbol (e.g., a four-star 
ranking indicates that the fund is in the top 30% of all investment 
companies).
    Proposed Rule 2212(d)--Equities would provide that any investment 
company ranking included in a retail communication must be, at a 
minimum, current to the most recent calendar quarter ended prior to use 
or submission for publication. If no ranking that meets this 
requirement is available from the Ranking Entity, then a member 
organization would only be able to use the most current ranking 
available from the Ranking Entity unless use of the most current 
ranking would be misleading, in which case no ranking from the Ranking 
Entity may be used. In addition, except for money market mutual funds:
     Retail communications may not present any ranking that 
covers a period of less than one year, unless the ranking is based on 
yield;
     An investment company ranking based on total return must 
be accompanied by rankings based on total return for a one year period 
for investment companies in existence for at least one year; one and 
five year periods for investment companies in existence for at least 
five years; and one, five and ten year periods for investment companies 
in existence for at least ten years supplied by the same Ranking 
Entity, relating to the same investment category, and based on the same 
time period; provided that, if rankings for such one, five and ten year 
time periods are not published by the Ranking Entity, then rankings 
representing short, medium and long term performance must be provided 
in place of rankings for the required time periods; and
     An investment company ranking based on yield may be based 
only on the current Commission standardized yield and must be 
accompanied by total return rankings for the time periods specified in 
Rule 2212(d)(2)(B)--Equities.
    Proposed Rule 2212(e)--Equities would provide specific requirements 
with respect to categories. The choice of category (including a 
subcategory of a broader category) on which the investment company 
ranking is based must be one that provides a sound basis for evaluating 
the performance of the investment company. An investment company 
ranking must be based only on (i) a published category or subcategory 
created by a Ranking Entity or (ii) a category or subcategory created 
by an investment company or an investment company affiliate, but based 
on the performance measurements of a Ranking Entity. Retail 
communications must not use any category or subcategory that is based 
upon the asset size of an investment company or investment company 
family, whether or not it has been created by a Ranking Entity.
    Proposed Rule 2212(f)--Equities would provide that investment 
company rankings for more than one class of investment company with the 
same portfolio must be accompanied by prominent disclosure of the fact 
that the investment companies or classes have a common portfolio and 
different expense structures.
    Proposed Rule 2212(g)--Equities would provide that retail 
communications may contain rankings of investment company families, 
provided that these rankings comply with proposed Rule 2212--Equities, 
and further provided that no retail communication for an individual 
investment company may provide a ranking of an investment company 
family unless it also prominently discloses the various rankings for 
the individual investment company supplied by the same Ranking Entity, 
as described in proposed Rule 2212(d)(2)(B)--Equities. For purposes of 
Rule 2212--Equities, the term ``investment company family'' would mean 
any two or more registered investment companies or series thereof that 
hold themselves out to investors as related companies for purposes of 
investment and investor services.
    Proposed Rule 2212(h)--Equities would specify that Rule 2212--
Equities would not apply to any reprint or excerpt of any article or 
report that is excluded from the Exchange's Advertising Regulation 
Department filing requirements pursuant to Rule 2210(c)(7)(I)--
Equities.
Conforming Changes
    The Exchange also proposes to make certain conforming changes to 
Rule 342--Equities. Specifically, the Exchange proposes to amend 
Supplementary Materials .10(B) and .17 to Rule 342--Equities, which 
covers the approval, supervision, and control of offices, to include a 
cross-reference to proposed Rule 2210--Equities in addition to the 
current cross-references to Rule 472--Equities in that rule. The 
Exchange also proposes to amend the definition of ``branch office'' in 
Supplementary Material .10 to Rule 342--Equities to replace references 
to ``advertisements'' and ``sales literature'' with references to 
``retail communications.''
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Exchange Act Section 6(b),\20\ in general, and furthers the 
objectives of Exchange Act Section 6(b)(5),\21\ in particular, because 
it is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Specifically, the Exchange 
believes that the proposed rule change supports the objectives of the 
Exchange Act by

[[Page 73232]]

providing greater harmonization between NYSE MKT rules and FINRA rules 
of similar purpose, resulting in less burdensome and more efficient 
regulatory compliance. In particular, NYSE MKT member organizations 
that are also FINRA members are subject to Rule 472--Equities and FINRA 
Rules 2210 and 2212, and harmonizing these rules by adopting proposed 
Rules 2210--Equities and 2212--Equities would promote just and 
equitable principles of trade by requiring a single standard for 
communications with the public. The Exchange believes that to the 
extent the Exchange has proposed changes that differ from the FINRA 
version of the NYSE MKT rules, such changes are generally technical in 
nature and do not change the substance of the proposed rules. The 
Exchange also believes that the proposed rule change would update and 
add specificity to the requirements governing communications with the 
public, which would promote just and equitable principles of trade and 
help to protect investors. The Exchange further believes that using 
FINRA's procedures in the event that a member wishes to obtain an 
exemption or contest a pre-filing requirement would create greater 
efficiency and consistency while providing members with appropriate 
procedural protections until the Exchange adopts comparable procedures. 
As such, the Exchange believes the proposed rule change meets the 
requirements of Exchange Act Section 6(b)(5).
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 Exchange Act. The 
Exchange believes that the proposed rule change is not intended to 
address competitive issues but rather to achieve greater consistency 
between the Exchange's rules and FINRA's rules.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to 
Exchange Act Section 19(b)(3)(A)(iii) \22\ and Rule 19b-4(f)(6) 
thereunder.\23\ Because the proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative prior to 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Exchange Act Section 19(b)(3)(A) and Rule 19b-
4(f)(6)(iii) thereunder.
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    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\25\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, 
because it would allow the Exchange to immediately conform its rules to 
corresponding FINRA rules. This will ensure that Dual Members generally 
will be subject to a single set of rules governing communications with 
the public. As noted by the Exchange, the proposal would harmonize NYSE 
and FINRA rules. In addition, the proposal would update and add 
specificity to the Exchange's requirements governing communications 
with the public, which are designed to help protect customers of all 
NYSE members. For these reasons, the Commission designates the proposed 
rule change to be operative upon filing.\26\
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    \26\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Exchange Act. If the 
Commission takes such action, the Commission shall institute 
proceedings under Exchange Act Section 19(b)(2)(B) \27\ to determine 
whether the proposed rule change should be approved or disapproved.
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    \27\ 15 U.S.C. 78s(b)(2)(B).
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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 Exchange Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2013-95 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-NYSEMKT-2013-95. 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 (http://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 Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be 
available for inspection and copying at the principal office of the 
Exchange. 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-
NYSEMKT-2013-95 and should be submitted on or before December 26, 2013.


[[Page 73233]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Kevin M. O'Neill,
Deputy Secretary.
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    \28\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-29043 Filed 12-4-13; 8:45 am]
BILLING CODE 8011-01-P