Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Adopt FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions), as Modified by Partial Amendment No. 1, in the Consolidated FINRA Rulebook, 72118-72124 [2015-29394]
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<![CDATA[
72118
Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Notices
II. Notice of Commission Action
The Commission establishes Docket
No. CP2016–19 for consideration of
matters raised by the Notice.
The Commission invites comments on
whether the Postal Service’s filing is
consistent with 39 U.S.C. 3632, 3633, or
3642, 39 CFR part 3015, and 39 CFR
part 3020, subpart B. Comments are due
no later than November 19, 2015. The
public portions of the filing can be
accessed via the Commission’s Web site
(https://www.prc.gov).
The Commission appoints Curtis E.
Kidd to serve as Public Representative
in this docket.
III. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. CP2016–19 for consideration of the
matters raised by the Postal Service’s
Notice.
2. Pursuant to 39 U.S.C. 505, Curtis E.
Kidd is appointed to serve as an officer
of the Commission to represent the
interests of the general public in this
proceeding (Public Representative).
3. Comments are due no later than
November 19, 2015.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2015–29399 Filed 11–17–15; 8:45 am]
BILLING CODE 7710–FW–P
POSTAL REGULATORY COMMISSION
[Docket No. CP2016–18; Order No. 2811]
Postal Regulatory Commission.
ACTION: Notice.
AGENCY:
The Commission is noticing a
recent Postal Service filing concerning
an additional Global Expedited Package
Services 3 negotiated service agreement.
This notice informs the public of the
filing, invites public comment, and
takes other administrative steps.
DATES: Comments are due: November
19, 2015.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
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By the Commission.
Stacy L. Ruble,
Secretary.
SUPPLEMENTARY INFORMATION:
[FR Doc. 2015–29398 Filed 11–17–15; 8:45 am]
BILLING CODE 7710–FW–P
Table of Contents
I. Introduction
II. Notice of Commission Action
III. Ordering Paragraphs
SECURITIES AND EXCHANGE
COMMISSION
I. Introduction
On November 10, 2015, the Postal
Service filed notice that it has entered
into an additional Global Expedited
Package Services 3 (GEPS 3) negotiated
service agreement (Agreement).1
To support its Notice, the Postal
Service filed a copy of the Agreement,
a redacted copy of the Governors’
Decision authorizing the product, a
certification of compliance with 39
U.S.C. 3633(a), and an application for
non-public treatment of certain
materials. It also filed supporting
financial workpapers.
II. Notice of Commission Action
The Commission establishes Docket
No. CP2016–18 for consideration of
matters raised by the Notice.
The Commission invites comments on
whether the Postal Service’s filing is
consistent with 39 U.S.C. 3632, 3633, or
3642, 39 CFR part 3015, and 39 CFR
part 3020, subpart B. Comments are due
no later than November 19, 2015. The
public portions of the filing can be
accessed via the Commission’s Web site
(https://www.prc.gov).
The Commission appoints Curtis E.
Kidd to serve as Public Representative
in this docket.
III. Ordering Paragraphs
New Postal Product
SUMMARY:
David A. Trissell, General Counsel, at
202–789–6820.
FOR FURTHER INFORMATION CONTACT:
It is ordered:
1. The Commission establishes Docket
No. CP2016–18 for consideration of the
matters raised by the Postal Service’s
Notice.
2. Pursuant to 39 U.S.C. 505, Curtis E.
Kidd is appointed to serve as an officer
of the Commission to represent the
interests of the general public in this
proceeding (Public Representative).
3. Comments are due no later than
November 19, 2015.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
1 Notice of United States Postal Service of Filing
a Functionally Equivalent Global Expedited
Package Services 3 Negotiated Service Agreement
and Application for Non-Public Treatment of
Materials Filed Under Seal, November 10, 2015
(Notice).
PO 00000
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[Release No. 34–76430; File No. SR–FINRA–
2015–029]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule
Change To Adopt FINRA Rule 3210
(Accounts at Other Broker-Dealers and
Financial Institutions), as Modified by
Partial Amendment No. 1, in the
Consolidated FINRA Rulebook
November 12, 2015.
I. Introduction
On July 31, 2015, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt a new, consolidated rule
addressing accounts opened or
established by associated persons of
members at firms other than the firm
with which they are associated.
The proposed rule change was
published for comment in the Federal
Register on August 14, 2015.3 On
September 22, 2015, FINRA extended
the time period in which the
Commission must approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change to
November 12, 2015. The Commission
received four comment letters in
response to the proposed rule change.4
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Act Rel. No. 75655 (Aug. 10,
2015), 80 FR 48941 (Aug. 14, 2015) (File No. SR–
FINRA–2015–029) (‘‘Notice’’).
4 See Letters from Eric Arnold and Clifford
Kirsch, Sutherland Asbill & Brennan LLP (for the
Committee of Annuity Insurers), dated September 4,
2015 (‘‘Sutherland Letter’’); Michael J. Hogan,
President and Chief Executive Officer, FOLIOfn
Investments, Inc., dated September 4, 2015
(‘‘FOLIOfn Letter’’); Joseph C. Peiffer, President,
Public Investors Arbitration Bar Association
(‘‘PIABA’’), dated September 3, 2015 (‘‘PIABA
Letter’’); and Kevin Zambrowicz, Associate General
Counsel & Managing Director, and Stephen Vogt,
Assistant Vice President & Assistant General
Counsel, Securities Industry and Financial Markets
2 17
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Notices
On November 10, 2015, FINRA
responded to the comments and filed
Partial Amendment No. 1 to the
proposal.5 The Commission is
publishing this order to solicit
comments on Partial Amendment No. 1
from interested persons and to institute
proceedings pursuant to Exchange Act
Section 19(b)(2)(B) 6 to determine
whether to approve or disapprove the
proposed rule change, as modified by
Partial Amendment No. 1.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
the proposed rule change, nor does it
mean that the Commission will
ultimately disapprove the proposed rule
change. Rather, as discussed below, the
Commission seeks additional input on
the proposed rule change, as modified
by Partial Amendment No. 1, and issues
presented by the proposal.
II. Description of the Proposed Rule
Change 7
As part of the process of developing
a new consolidated rulebook
(‘‘Consolidated FINRA Rulebook’’),8
FINRA is proposing to adopt new
FINRA Rule 3210 (Accounts at Other
Broker-Dealers and Financial
Institutions) in the Consolidated FINRA
Rulebook, and to delete NASD Rule
3050, Incorporated New York Stock
Exchange (‘‘NYSE’’) Rules 407 and
407A, and Incorporated NYSE Rule
Interpretations 407/01 and 407/02.9
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A. Current NASD Rule 3050
Current NASD Rule 3050 provides a
means to inform member firms about
transactions effected by their associated
persons in accounts established outside
the firm. This information gives
members an opportunity to weigh the
effect these accounts may have on the
firm and its customers.10 The rule
imposes specified obligations on
Association, dated September 3, 2015 (‘‘SIFMA
Letter’’).
5 See Letter from Patrice Gliniecki, Senior Vice
President and Deputy General Counsel, FINRA, to
the Commission, dated November 10, 2015
(‘‘FINRA Response Letter’’). The FINRA Response
Letter and the text of Partial Amendment No. 1 are
available on FINRA’s Web site at https://
www.finra.org, at the principal office of FINRA, and
at the Commission’s Public Reference Room.
6 15 U.S.C. 78s(b)(2)(B).
7 The proposed rule change, as described in this
Item II, is excerpted, in part, from the Notice, which
was substantially prepared by FINRA. See supra
note 3.
8 The current FINRA rulebook consists of: (1)
FINRA Rules; (2) NASD Rules; and (3) rules
incorporated from NYSE (‘‘Incorporated NYSE
Rules’’). See supra note 3.
9 For convenience, the Incorporated NYSE Rules
are referred to as the ‘‘NYSE Rules.’’
10 See Exchange Act Release No. 4924 (Aug. 21,
1953); see also supra note 3.
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member firms and associated persons,
including:
• Obligations of Member Firms:
NASD Rule 3050(a) requires that a
member (called an ‘‘executing member’’)
that knowingly executes a transaction
for the purchase or sale of a security for
the account of a person associated with
another member (called an ‘‘employer
member’’), or for any account over
which the associated person has
discretionary authority, must use
reasonable diligence to determine that
the execution of the transaction will not
adversely affect the interests of the
employer member. NASD Rule 3050(b)
requires that, when an executing
member knows that a person associated
with an employer member has or will
have a financial interest in, or
discretionary authority over, any
existing or proposed account carried by
the executing member, the executing
member must:
(1) Notify the employer member in
writing, prior to the execution of a
transaction for the account, of the
executing member’s intention to open or
maintain that account;
(2) upon written request by the
employer member, transmit duplicate
copies of confirmations, statements, or
other information with respect to the
account; and
(3) notify the person associated with
the employer member of the executing
member’s intention to provide the
notice and information required by (1)
and (2), above.
• Obligations of Associated Persons:
Associated persons who: (1) Open
securities accounts or place securities
orders through (a) a member firm other
than their employer, or (b) other
financial institution that is not a FINRA
member, and (2) have a financial
interest in, or discretionary authority
over, such accounts or orders 11 must
comply with the following:
(1) NASD Rule 3050(c) requires that a
person associated with a member, prior
to opening an account or placing an
initial order for the purchase or sale of
securities with another member, must
notify both the employer member and
the executing member, in writing, of his
or her association with the other
member. The rule also provides that if
the account was established prior to the
person’s association with the employer
member, the person must notify both
members in writing promptly after
becoming associated; and
(2) NASD Rule 3050(d) provides that
if the associated person opens a
securities account or places an order for
the purchase or sale of securities with
11 See
PO 00000
NASD Rule 3050(e).
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72119
a broker-dealer that is registered
pursuant to Exchange Act Section
15(b)(11) (a notice-registered brokerdealer), a domestic or foreign
investment adviser, bank, or other
financial institution (i.e., firms that are
not FINRA members), then he or she
must: (i) Notify his or her employer
member in writing, prior to the
execution of any initial transactions, of
the intention to open the account or
place the order; and (ii) upon written
request by the employer member,
request in writing and assure that the
notice-registered broker-dealer,
investment adviser, bank, or other
financial institution provides the
employer member with duplicate copies
of confirmations, statements, or other
information concerning the account or
order. NASD Rule 3050(d) also provides
that if an account subject to Rule
3050(d) was established prior to the
person’s association with the member,
the person must comply with the rule
promptly after becoming associated.
In addition, NASD Rule 3050(f)
provides that the requirements of Rule
3050 do not apply to transactions in
unit investment trusts and variable
contracts or redeemable securities of
companies registered under the
Investment Company Act of 1940
(‘‘Investment Company Act’’), or to
accounts which are limited to
transactions in such securities.
B. Current NYSE Rules 407 and 407A
The purpose of NYSE Rule 407 is
similar to the purpose of FINRA Rule
3050—to provide member firms
information about transactions effected
by their associated persons in accounts
established outside their firm.
According to FINRA, the NYSE and
NASD rules are similar with some
variations, including:
• NYSE Rule 407(a) is similar to
NASD Rule 3050(b), except that Rule
407(a) requires that an executing
member receive an employer member’s
prior written consent before: (1)
Opening a securities or commodities
account, or (2) executing any transaction
in which a member or employee
associated with another member or
member organization is directly or
indirectly interested. The rule also
requires that duplicate confirmations
and account statements be sent
promptly to the employer.
• NYSE Rule 407(b) is similar to
NASD Rules 3050(c) and (d), except that
Rule 407(b) generally requires that
associated persons who: (1) Establish or
maintain a securities or commodities
account, or enter into a securities
transaction at (a) another member firm,
or (b) a domestic or foreign non-member
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broker-dealer, investment adviser, bank,
or other financial institution,12 and (2)
have a financial interest in, or
discretionary authority over, such
accounts or transactions must obtain the
employer firm’s prior written consent.
The rule also requires that persons
having accounts or effecting
transactions as covered by the rule must
arrange for duplicate confirmations and
statements (or their equivalents) to be
sent to the employer firm. The rule
further requires that all such accounts
and transactions must periodically be
reviewed by the employer member.
• NYSE Rule 407.12 is similar to
NASD Rule 3050(f), except that Rule
407.12 excepts the specified
transactions and accounts (i.e.,
transactions in unit investment trusts
and variable contracts or redeemable
securities of companies registered under
the Investment Company Act, or to
accounts which are limited to
transactions in such securities, or to
monthly investment plan type accounts)
only from the obligation to send
duplicate confirmations and statements
unless requested by the employer.
In addition, NYSE Rule 407A
(Disclosure of All Member Accounts)
requires members to promptly report to
the NYSE any securities account
(including accounts at a member or nonmember broker-dealer, investment
adviser, bank or other financial
institution), in which the member has a
financial interest or the power to make
investment decisions. NYSE Rule 407A
also requires a member having such an
account to notify the financial
institution that carries or services the
account that it is a member of the NYSE.
In addition, the rule requires that
members report to the NYSE when any
such securities account is closed.
FINRA states that ‘‘[t]hese reporting
requirements were designed to provide
the NYSE with current information
about where floor members carry
securities accounts.’’ 13
NYSE Rule Interpretation 407/01
addresses the process for determining
whether the account of a spouse of an
associated person should be subject to
NYSE Rule 407.
NYSE Rule Interpretation 407/02
provides that NYSE Rule 407(b) applies
when an associated person is also a
majority stockholder of a non-public
corporation that wishes to open a
discretionary margin account at another
member.
12 NYSE Rule 407.13 states that, for purposes of
the rule, the term ‘‘other financial institution’’
includes, but is not limited to, insurance
companies, trust companies, credit unions, and
investment companies.
13 See supra note 3.
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C. Proposed New FINRA Rule 3210 14
Proposed FINRA Rule 3210(a) would
require an associated person to obtain
his or her employer firm’s prior written
consent before opening or otherwise
establishing an account in which
securities transactions can be effected
and in which the associated person has
a beneficial interest at a member other
than the employer member (i.e.,
executing member), or at any other
financial institution.15 Proposed FINRA
Rule 3210.02 would deem the
associated person to have a beneficial
interest in any account that is held by:
(a) The spouse of the associated person;
(b) a child of the associated person or of
the associated person’s spouse,
provided that the child resides in the
same household as or is financially
dependent upon the associated person;
(c) any other related individual over
whose account the associated person
has control; or (d) any other individual
over whose account the associated
person has control and to whose
financial support the associated person
materially contributes. Notably, the
proposal would ‘‘[eliminate] the
language in the current rules that
references accounts or transactions
where the associated person has ‘the
power, directly or indirectly, to make
investment decisions,’ as set forth in
NYSE Rule 407(b), and accounts where
the associated person has ‘discretionary
authority,’ as set forth in NASD Rule
3050(b).’’ 16
Proposed FINRA Rule 3210(b) would
require an associated person to provide
written notice to the executing member,
or other financial institution, of his or
her association with the employer
member prior to opening or otherwise
establishing an account subject to the
rule.
Proposed FINRA Rule 3210(c) would
require an executing member, upon
written request by the employer
member, to transmit duplicate copies of
confirmations and statements, or the
transactional data contained therein,
with respect to an account subject to the
rule.
Proposed FINRA Rule 3210.01 would
require an associated person to obtain
14 The description in this section describes the
proposed rules change prior to the proposed
amendments, which are described below.
15 Based on NYSE Rule 407.13 and NASD Rule
3050(d), proposed FINRA Rule 3210.05 provides
that the terms ‘‘other financial institution’’ and
‘‘financial institution other than a member’’
include, but are not limited to, any broker-dealer
that is registered pursuant to Exchange Act Section
15(b)(11), domestic or foreign non-member brokerdealer, investment adviser, bank, insurance
company, trust company, credit union, and
investment company.
16 See supra note 3.
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Fmt 4703
Sfmt 4703
the written consent of the employer
member, within 30 calendar days of
becoming so associated, to maintain an
account that was opened or otherwise
established prior to the person’s
association with the employer member.
The proposed rule also would require
the associated person to notify in
writing the executing member or other
financial institution of his or her
association with the employer member.
Proposed FINRA Rule 3210.03 states
that proposed FINRA Rule 3210(c)
(discussed above) would not apply to
transactions in unit investment trusts,
municipal fund securities as defined
under MSRB Rule D–12, qualified
tuition programs pursuant to Section
529 of the Internal Revenue Code, and
variable contracts or redeemable
securities of companies registered under
the Investment Company Act, as
amended, or to accounts that are limited
to transactions in such securities, or to
monthly investment plan type accounts.
Proposed FINRA Rule 3210.04 would
require an employer member to consider
the extent to which it will be able to
obtain, upon written request, duplicate
copies of confirmations and statements,
or the transactional data contained
therein, directly from the non-member
financial institution in determining
whether to provide its written consent
to an associated person to open or
maintain an account subject to the rule
at a financial institution other than a
member.
D. Partial Amendment No. 1
In its amendment, FINRA is
proposing to amend proposed FINRA
Rule 3210.03 to exclude from the
requirements of FINRA Rule 3210
transactions in unit investment trusts,
municipal fund securities as defined
under MSRB Rule D–12, qualified
tuition programs pursuant to Section
529 of the Internal Revenue Code, and
variable contracts or redeemable
securities of companies registered under
the Investment Company Act, as
amended, or to accounts that are limited
to transactions in such securities, or to
monthly investment plan type accounts.
This proposed amendment would
establish a rebuttable presumption that
an associated person has a beneficial
interest in an account held by an
individual listed in proposed Rule
3210.02(a)–(d). Specifically, the
proposal would state that for purposes
of Rule 3210, an associated person
would be presumed (not deemed) to
have a beneficial interest in any account
that is held by an individual listed in
Rule 3210.02(a)–(d). Further, the
amendment to proposed Rule 3210.02(a)
would require that in order for an
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associated person to be presumed to
have a beneficial interest in an account
held by his or her spouse, the spouse
must ‘‘[reside] in the same household as
the associated person.’’ Moreover,
amendment to proposed FINRA Rule
3210.02 would state that an associated
person could overcome the presumption
of beneficial interest in an account by
‘‘[demonstrating], to the satisfaction of
the employer member, that the
associated person derives no economic
benefit from the account.’’
The text of the proposed rule change,
as amended, is available, at the
principal office of FINRA, on FINRA’s
Web site at https://www.finra.org, and at
the Commission’s Public Reference
Room. In addition, you may also find a
more detailed description of the original
proposed rule change in the Notice.17
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III. Summary of Comments
As noted above, the Commission
received four comment letters on the
proposed rule change. Two commenters
generally expressed support for FINRA’s
proposal.18 The other two commenters
did not support the proposed rule.19 All
four commenters recommended
amendments to the proposal. FINRA
also responded to the comments.
A. Receipt of Duplicate Confirmations
and Account Statements
One commenter stated that despite
specifying that an employing firm is
‘‘responsible for supervising its broker’s
trading activities,’’ the proposal only
requires an executing member to
provide duplicate account documents
(with respect to an account subject to
the rule) upon written request by the
employer member.20 This commenter
recommended that FINRA amend the
proposal to require the employing firm
to obtain these confirmations and
statements from the executing firm so
that the employing firm has sufficient
information available for its supervisory
personnel to monitor associated
persons’ outside trading activity.21
Similarly, this commenter stated its
view that the proposed requirement for
an employing firm to consider the
extent to which it would be able to
obtain duplicate account documents in
determining whether to consent to an
associated person opening or
maintaining an account with a nonmember financial institution would be
ineffective.22 This commenter
recommended that FINRA amend the
rule to require that duplicate copies of
monthly statements and confirmations
or the equivalent be available for the
employing firm’s review as a
precondition to the opening of outside
accounts.23
In its response, FINRA stated that the
proposed requirement to transmit
duplicate account documents ‘‘upon
written request’’ by the employer
member is intended to provide
employer members reasonable
flexibility to craft appropriate
supervisory policies and procedures
according to their business model and
the risk profile of their activities.24
Similarly, FINRA stated that with
respect to accounts at non-member
institutions the approach reflected in
the proposal rule should permit
employer members the flexibility they
need to carry out their supervisory
responsibilities under FINRA rules.25
FINRA believes that specifying
preconditions for such accounts would
negate the flexibility the rule aims to
achieve.26
Accordingly, FINRA declined to make
the suggested changes.
B. Non-Member Accounts
One commenter stated its view that in
trying to provide FINRA members
greater flexibility in determining
whether to consent to an associated
person opening or maintaining an
account at non-member financial
institutions, the proposal focuses too
much on only one element of the
analysis (i.e., duplicate statements).27
This commenter believes that the
proposal would be made easier to
implement from a supervisory and
operational standpoint if FINRA uses
‘‘principles based’’ language in
Proposed FINRA Rule 3210.04.28
Accordingly, the commenter
recommended that FINRA amend the
proposal to provide that if a firm
decides to permit accounts of its
associated persons to be opened and
maintained at an outside institution, the
firm must, at a minimum, determine
that the account activity can be properly
monitored pursuant to the requirements
of Rule 3110(d).29
In its response, FINRA stated that the
proposal is sufficient to imply, in light
of the supervisory obligations that apply
to all members, that members will
consider whether activity in the account
17 See
24 See
18 See
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C. Discretionary Accounts
One commenter recommended that
FINRA maintain the requirement that
brokers obtain prior written consent
from their employing firm before
opening discretionary accounts for
customers at other firms.32 The
commenter believes that knowledge of
the opening of these types of accounts
allows employing members to take
appropriate steps to supervise outside
trading activity.33
In its response, FINRA stated that the
proposal is designed to demarcate more
clearly the respective scope of FINRA
Rule 3210, which is meant to address
monitoring of personal and related
accounts, versus FINRA Rule 3280,
which addresses private securities
transactions.34 Specifically, FINRA
stated that to the extent associated
persons make investment decisions or
have discretionary authority in contexts
that involve private securities
transactions within the scope of FINRA
Rule 3280, then such transactions are
subject to that rule’s provisions.35
Accordingly, FINRA declined to make
the suggested change.
D. Accessing Transactional Data
Two commenters expressed concern
that the proposed rule change would
limit the methods that an employer firm
could use to receive and, consequently,
access transactional data.36 One
commenter stated its view that by
requiring transactional data to be
‘‘transmitted’’ to the employer firm,
FINRA unintentionally restricts the
various ways by which employer firms
can have access to the transactional
data.37 Accordingly, this commenter
recommended that FINRA amend the
proposal to leave it up to the executing
firm to decide, in considering its
business model and technical
sophistication, how to best make
FINRA Response Letter.
32 See
34 See
SIFMA Letter.
36 See
29 Id.
37 See
Frm 00082
Fmt 4703
FINRA Response Letter.
35 Id.
28 Id.
PO 00000
PIABA Letter.
33 Id.
26 Id.
27 See
FINRA Response Letter.
31 Id.
25 Id.
supra note 3.
SIFMA Letter and FOLIOfn Letter.
19 See PIABA Letter and Sutherland Letter.
20 See PIABA Letter.
21 Id.
22 Id.
can be properly monitored when
determining whether to provide their
written consent to an associated person
to open or maintain an account at a nonmember financial institution.30 In
addition, FINRA reminded its members
that the rule in no way lessens the
breadth and scope of members’
supervisory obligations.31 Accordingly,
FINRA declined to make the suggested
changes.
30 See
23 Id.
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FOLIOfn Letter and SIFMA Letter.
FOLIOfn Letter.
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available the information.38 Similarly,
the other commenter recommended that
FINRA amend the proposal to state that
an employing member may satisfy its
obligations under the proposal by
receiving transactional data through
automated means, such as electronic
data feeds, in lieu of receiving hardcopy
or imaged confirmations and
statements.39
In its response, FINRA stated that it
did not intend to specify any particular
methodology as to transmission of the
specified information.40 FINRA also
stated that it believes that the proposed
rule change is sufficiently broad by its
terms to permit members all reasonable
flexibility as to the manner of obtaining
and reviewing the specified
information, whether by hard copy or
electronic means.41 Accordingly, FINRA
declined to make the suggested changes.
E. Definition of ‘‘Beneficial Interest’’
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Two commenters recommended that
FINRA amend proposed Rule 3210.02 to
revise the proposed definition of
‘‘beneficial interest.’’ 42 One commenter
stated its view that presuming beneficial
interest in any account held by the
spouse of an associated person (and
other familial relationships) is overly
broad.43 Instead, the commenter
recommended that FINRA amend the
proposed definition to apply only when
and if an associated person has control
over an account.44
Similarly, the other commenter stated
its view that including all spousal
accounts in the list of accounts in which
an associated person is deemed to have
a beneficial interest is overly broad and
costly.45 In particular, the commenter
stated that it is not uncommon for
spouses to maintain completely separate
financial lives.46 Accordingly, the
commenter suggested that FINRA
amend the definition of beneficial
interest to apply to the spouse of the
associated person, provided that the
spouse resides in the same household as
the associated person and that the
associated person has control over such
account.47
In its response, FINRA stated that it
is aware of the potential difficulties that
could arise with respect to spouse
accounts as proposed in the original
38 Id.
39 See
40 See
SIFMA Letter.
FINRA Response Letter.
filing.48 Accordingly, FINRA proposes
in Partial Amendment No. 1 to amend
to proposed Rule 3210.02 to: (1) State
that for purposes of Rule 3210, an
associated person would be presumed
(not deemed) to have a beneficial
interest in any account that is held by
an individual listed in Rule 3210.02(a)–
(d); (2) require that in order for an
associated person to be presumed to
have a beneficial interest in an account
held by his or her spouse, the spouse
must ‘‘[reside] in the same household as
the associated person;’’ and (3) state that
an associated person could overcome
the presumption of beneficial interest in
an account by ‘‘[demonstrating], to the
satisfaction of the employer member,
that the associated person derives no
economic benefit from the account.’’
FINRA believes that these changes
would address commenters’ concerns
regarding the potential issues that could
be posed by different family
circumstances.49 In addition, FINRA
believes that where a spouse resides
with the associated person, it serves a
legitimate purpose that there should be
a presumption that the spouse’s
accounts are subject to the rule,
regardless of whether the associated
person exercises control.50 However,
FINRA also believes that the proposed
rebuttable presumption would afford
adequate flexibility for employer
members to exclude accounts that pose
little or no supervisory risk.51
F. Application of the Proposed Rule
1. Prospective Application
One commenter argued that proposed
Rules 3210(a) (the consent requirement)
and 3210(b) (the notice requirement)
should not apply to accounts already
opened by associated persons with
executing members before the proposed
rule’s compliance date.52 The
commenter requested that FINRA
confirm that these requirements would
only apply to associated persons who
open accounts after the compliance
date.53
In response, FINRA clarified in Partial
Amendment No. 1 that proposed Rules
3210(a) and 3210(b) would apply to
accounts that an associated person
opens or otherwise establishes on or
after the proposed new rule’s
implementation date.54 FINRA also
stated, however, that if the associated
person has an existing account prior to
his or her association with an employer
member, proposed FINRA Rule 3210.01
would apply, without regard to when
the account was opened, whenever the
associated person enters into a new
association with a member.55
2. 30-Day Notice for Existing Accounts
One commenter argued that requiring
an employing firm to consent to
accounts established by an associated
person prior to his or her association
with the firm within 30-day (pursuant to
proposed FINRA Rule 3210.01) might
raise operational, supervisory, and
related challenges.56 Accordingly, the
commenter recommended that FINRA
amend the rule to require that within 30
calendar days of becoming so
associated, the associated person shall
notify in writing the executing member
or other financial institution of his or
her association with the employer
member and seek written consent of the
employer member to maintain the
account.57
In its response, FINRA disagreed with
the commenter and stated that it
believes that employer members should
be able to make a determination within
the 30-day period.58 Accordingly,
FINRA declined to make the suggested
change.
G. Exemptions for Certain Account
Transactions
1. Exemption From Providing
Transaction Data
One commenter recommended that
FINRA amend proposed Rule 3210.03 to
exempt transactions in all insurance
contracts that are securities from the
requirement that an executing member
must provide the employing member
with duplicate account confirmations
and statements. The commenter argued
that all insurance contracts that are
securities are substantially similar to
‘‘variable contracts’’ that would be
exempted under proposed Rule 3210.03,
and therefore also pose limited risk with
respect to the need to oversee associated
persons accounts.59
In its response, FINRA stated that the
original proposal added to the
exemption products that are clearly
identifiable and bear similarity to and
are consistent with the rationale
underlying the other products set forth
in the rule.60 FINRA also stated,
however, that it is not prepared at this
time to broadly except insurance
41 Id.
48 See
42 See
49 Id.
55 Id.
50 Id.
56 See
51 Id.
57 Id.
FOLIOfn Letter and SIFMA Letter.
43 See FOLIOfn Letter.
44 Id.
45 See SIFMA Letter.
46 Id.
47 Id.
VerDate Sep<11>2014
18:50 Nov 17, 2015
Jkt 238001
52 See
FINRA Response Letter.
Sutherland Letter.
58 See
53 Id.
54 See
PO 00000
SIFMA Letter.
FINRA Response Letter.
Sutherland Letter.
60 See FINRA Response Letter.
59 See
FINRA Response Letter.
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products from the rule’s requirements,
but will consider whether further
exceptions are appropriate based on the
attributes of specific insurance
products.61 Accordingly, FINRA
declined to make the suggested change.
2. Exemption From the Notice and
Consent Requirements
Two commenters recommended that
FINRA also exempt certain transactions
(i.e., transactions in unit investment
trusts, municipal fund securities, 529
Plans, variable contracts, or mutual fund
shares) from the requirement that an
associated person must notify the
executing member and obtain the prior
written consent of the employer member
before opening an account.62 One of
these commenters noted that current
NASD Rule 3050 provides a complete
exemption from all provisions of the
rule for the exempted transactions and
believes that adoption of the structure
under NASD Rule 3050 would more
closely track the policy determinations
articulated under the proposed rule
change and creates less regulatory
burden on firms.63 Similarly, the other
commenter reasoned that: (1) Employees
have no ability to engage in insider
trading or other manipulative practices
through these accounts or types of
products; (2) firms will incur significant
operational and supervisory costs
associated with this new requirement
without any appreciable investor
protection benefits; and (3) not
excluding these types of transactions
and accounts from the entire rule will
have a negative impact on firms’ ability
to design, implement, and maintain a
reasonably designed, risk-based
compliance system because firms will
be required to direct limited compliance
resources to processing notice requests
for accounts and transactions that
represent little, if any, risk of insider
trading or other violative conduct.64
In its response, FINRA stated its goal
that members not be burdened with
information collection where the
specified transactions and account types
pose limited risk from the standpoint of
the rule’s supervisory purposes.65
Accordingly, FINRA proposes in Partial
Amendment No. 1 to amend
Supplementary Material .03 to provide
that the specified transactions and
accounts shall not be subject to the
requirements of proposed FINRA Rule
3210.66
61 Id.
62 See
Sutherland Letter and SIFMA Letter.
Sutherland Letter.
64 See SIFMA Letter.
65 See FINRA Response Letter.
66 Id.
63 See
VerDate Sep<11>2014
18:50 Nov 17, 2015
Jkt 238001
72123
H. Consistency With MSRB Rule G–28
V. Request for Written Comments
One commenter recommended that,
since both FINRA and the Municipal
Securities Rulemaking Board (‘‘MSRB’’)
have rules governing employee
transactions, FINRA and the MSRB
should work together to develop a
uniform standard for the industry.67
In its response letter, FINRA stated
that it believes that the comment is
outside the scope of the proposed rule
change.68
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
raised by the proposed rule change, as
modified by Partial Amendment No. 1.
In particular, the Commission invites
the written views of interested persons
on whether the proposed rule change, as
modified by Partial Amendment No. 1,
is inconsistent with Section 15A(b)(6),
or any other provision, of the Exchange
Act, or the rules and regulations
thereunder.
Although there do not appear to be
any issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b-4, any
request for an opportunity to make an
oral presentation.72
Interested persons are invited to
submit written data, views, and
arguments by December 9, 2015
concerning whether the proposed rule
change should be approved or
disapproved. Any person who wishes to
file a rebuttal to any other person’s
submission must file that rebuttal by
January 4, 2016. Comments may be
submitted by any of the following
methods:
IV. Proceedings to Determine Whether
to Approve or Disapprove SR–FINRA–
2015–029 and Grounds for Disapproval
Under Consideration
The Commission is instituting
proceedings pursuant to Exchange Act
Section 19(b)(2)(B) to determine
whether the proposed rule change
should be approved or disapproved.69
Institution of proceedings appears
appropriate at this time in view of the
legal and policy issues raised by the
proposal. As noted above, institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, the Commission
seeks and encourages interested persons
to comment on the issues presented by
the proposed rule change and provide
the Commission with arguments to
support the Commission’s analysis as to
whether to approve or disapprove the
proposal.
Pursuant to Exchange Act Section
19(b)(2)(B),70 the Commission is
providing notice of the grounds for
disapproval under consideration. In
particular, Exchange Act Section
15A(b)(6) 71 requires, among other
things, that FINRA rules must be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest.
The Commission believes FINRA’s
proposed rule change raises questions as
to whether it is consistent with the
requirements of Exchange Act Sections
15A(b)(6).
67 See
SIFMA Letter.
FINRA Response Letter.
69 15 U.S.C. 78s(b)(2). Exchange Act Section
19(b)(2)(B) provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. The time for conclusion of the
proceedings may be extended for up to an
additional 60 days if the Commission finds good
cause for such extension and publishes its reasons
for so finding or if the self-regulatory organization
consents to the extension.
70 15 U.S.C. 78s(b)(2)(B).
71 15 U.S.C. 78o–3(b)(6).
68 See
PO 00000
Frm 00084
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2015–029 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2015–029. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
72 Exchange Act Section 19(b)(2), as amended by
the Securities Acts Amendments of 1975, Pub. L.
94–29, 89 Stat. 97 (1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Acts Amendments of
1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Notices
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principle
office of FINRA. All comments received
will be posted without change. The
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–FINRA–
2015–029 and should be submitted on
or before December 9, 2015. If
comments are received, any rebuttal
comments should be submitted by
January 4, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.73
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–29394 Filed 11–17–15; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Discontinue the NYSE
MKT Realtime Reference Price Market
Data Product Offering
asabaliauskas on DSK5VPTVN1PROD with NOTICES
November 12, 2015.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on October
30, 2015, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
18:50 Nov 17, 2015
Jkt 238001
The Exchange proposes to
discontinue the NYSE MKT Realtime
Reference Price (‘‘NYSE MKT RRP’’)
market data product offering. 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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1. Purpose
[Release No. 34–76428; File No. SR–
NYSEMKT–2015–93]
VerDate Sep<11>2014
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
73 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(57).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
In 2009, the Securities and Exchange
Commission (‘‘Commission’’) approved
the NYSE MKT RRP market data
product and certain fees for it.4 The
NYSE MKT RRP market data product
provides, on a real-time basis, last sale
prices in all securities that trade on the
Exchange. Currently, there are no
subscribers to the NYSE MKT RRP
market data product. Therefore, the
Exchange has determined to discontinue
the NYSE MKT RRP market data
product. The Exchange also proposes to
update the Fee Schedule to remove
reference to the NYSE MKT RRP in
connection with this change.
The Exchange will announce the date
that the NYSE MKT RRP will be
decommissioned via an NYSE Market
Data Notice.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 5 of the Act,
in general, and furthers the objectives of
Section 6(b)(5) 6 of the Act, in particular,
in that it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
to remove impediments to and perfect
the mechanism of a free and open
market and a national market system
and, in general, to protect investors and
the public interest, and it is not
designed to permit unfair
discrimination among customers,
brokers, or dealers.
The Exchange believes that
discontinuing NYSE MKT RRP and
removing it from the Fee Schedule
would remove impediments to and
perfect a free and open market by
streamlining the Exchange’s market data
product offerings to include those for
which there has been more demand and
would provide vendors and subscribers
with a simpler and more standardized
suite of market data products. The
proposal to discontinue NYSE MKT
RRP is applicable to all members,
issuers and other persons and does not
unfairly discriminate between
customers, issuers, brokers or dealers.
In adopting Regulation NMS, the
Commission granted self-regulatory
organizations (‘‘SROs’’) and brokerdealers increased authority and
flexibility to offer new and unique
market data to consumers of such data.
It was believed that this authority would
expand the amount of data available to
users and consumers of such data and
also spur innovation and competition
for the provision of market data. The
Commission concluded that Regulation
NMS—by lessening regulation of the
market in proprietary data—would itself
further the Act’s goals of facilitating
efficiency and competition:
[E]fficiency is promoted when brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
the NBBO and consolidated last sale
information are not required to receive (and
pay for) such data. The Commission also
believes that efficiency is promoted when
broker-dealers may choose to receive (and
pay for) additional market data based on their
own internal analysis of the need for such
data.7
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
7 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005) (File
No. S7–10–04).
6 15
4 See Securities Exchange Act Release No. 61144
(December 10, 2009), 74 FR 67275 (December 18,
2009) (SR–NYSEMKT–2009–85).
PO 00000
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]]>Agencies
[Federal Register Volume 80, Number 222 (Wednesday, November 18, 2015)]
[Notices]
[Pages 72118-72124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29394]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76430; File No. SR-FINRA-2015-029]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule Change To Adopt FINRA Rule 3210
(Accounts at Other Broker-Dealers and Financial Institutions), as
Modified by Partial Amendment No. 1, in the Consolidated FINRA Rulebook
November 12, 2015.
I. Introduction
On July 31, 2015, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt a new, consolidated rule
addressing accounts opened or established by associated persons of
members at firms other than the firm with which they are associated.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The proposed rule change was published for comment in the Federal
Register on August 14, 2015.\3\ On September 22, 2015, FINRA extended
the time period in which the Commission must approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to approve or disapprove the proposed rule change
to November 12, 2015. The Commission received four comment letters in
response to the proposed rule change.\4\
[[Page 72119]]
On November 10, 2015, FINRA responded to the comments and filed Partial
Amendment No. 1 to the proposal.\5\ The Commission is publishing this
order to solicit comments on Partial Amendment No. 1 from interested
persons and to institute proceedings pursuant to Exchange Act Section
19(b)(2)(B) \6\ to determine whether to approve or disapprove the
proposed rule change, as modified by Partial Amendment No. 1.
---------------------------------------------------------------------------
\3\ See Exchange Act Rel. No. 75655 (Aug. 10, 2015), 80 FR 48941
(Aug. 14, 2015) (File No. SR-FINRA-2015-029) (``Notice'').
\4\ See Letters from Eric Arnold and Clifford Kirsch, Sutherland
Asbill & Brennan LLP (for the Committee of Annuity Insurers), dated
September 4, 2015 (``Sutherland Letter''); Michael J. Hogan,
President and Chief Executive Officer, FOLIOfn Investments, Inc.,
dated September 4, 2015 (``FOLIOfn Letter''); Joseph C. Peiffer,
President, Public Investors Arbitration Bar Association (``PIABA''),
dated September 3, 2015 (``PIABA Letter''); and Kevin Zambrowicz,
Associate General Counsel & Managing Director, and Stephen Vogt,
Assistant Vice President & Assistant General Counsel, Securities
Industry and Financial Markets Association, dated September 3, 2015
(``SIFMA Letter'').
\5\ See Letter from Patrice Gliniecki, Senior Vice President and
Deputy General Counsel, FINRA, to the Commission, dated November 10,
2015 (``FINRA Response Letter''). The FINRA Response Letter and the
text of Partial Amendment No. 1 are available on FINRA's Web site at
https://www.finra.org, at the principal office of FINRA, and at the
Commission's Public Reference Room.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Institution of proceedings does not indicate that the Commission
has reached any conclusions with respect to the proposed rule change,
nor does it mean that the Commission will ultimately disapprove the
proposed rule change. Rather, as discussed below, the Commission seeks
additional input on the proposed rule change, as modified by Partial
Amendment No. 1, and issues presented by the proposal.
II. Description of the Proposed Rule Change \7\
---------------------------------------------------------------------------
\7\ The proposed rule change, as described in this Item II, is
excerpted, in part, from the Notice, which was substantially
prepared by FINRA. See supra note 3.
---------------------------------------------------------------------------
As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\8\ FINRA is proposing to adopt new
FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial
Institutions) in the Consolidated FINRA Rulebook, and to delete NASD
Rule 3050, Incorporated New York Stock Exchange (``NYSE'') Rules 407
and 407A, and Incorporated NYSE Rule Interpretations 407/01 and 407/
02.\9\
---------------------------------------------------------------------------
\8\ The current FINRA rulebook consists of: (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules''). See supra note 3.
\9\ For convenience, the Incorporated NYSE Rules are referred to
as the ``NYSE Rules.''
---------------------------------------------------------------------------
A. Current NASD Rule 3050
Current NASD Rule 3050 provides a means to inform member firms
about transactions effected by their associated persons in accounts
established outside the firm. This information gives members an
opportunity to weigh the effect these accounts may have on the firm and
its customers.\10\ The rule imposes specified obligations on member
firms and associated persons, including:
---------------------------------------------------------------------------
\10\ See Exchange Act Release No. 4924 (Aug. 21, 1953); see also
supra note 3.
---------------------------------------------------------------------------
Obligations of Member Firms: NASD Rule 3050(a) requires
that a member (called an ``executing member'') that knowingly executes
a transaction for the purchase or sale of a security for the account of
a person associated with another member (called an ``employer
member''), or for any account over which the associated person has
discretionary authority, must use reasonable diligence to determine
that the execution of the transaction will not adversely affect the
interests of the employer member. NASD Rule 3050(b) requires that, when
an executing member knows that a person associated with an employer
member has or will have a financial interest in, or discretionary
authority over, any existing or proposed account carried by the
executing member, the executing member must:
(1) Notify the employer member in writing, prior to the execution
of a transaction for the account, of the executing member's intention
to open or maintain that account;
(2) upon written request by the employer member, transmit duplicate
copies of confirmations, statements, or other information with respect
to the account; and
(3) notify the person associated with the employer member of the
executing member's intention to provide the notice and information
required by (1) and (2), above.
Obligations of Associated Persons: Associated persons who:
(1) Open securities accounts or place securities orders through (a) a
member firm other than their employer, or (b) other financial
institution that is not a FINRA member, and (2) have a financial
interest in, or discretionary authority over, such accounts or orders
\11\ must comply with the following:
---------------------------------------------------------------------------
\11\ See NASD Rule 3050(e).
---------------------------------------------------------------------------
(1) NASD Rule 3050(c) requires that a person associated with a
member, prior to opening an account or placing an initial order for the
purchase or sale of securities with another member, must notify both
the employer member and the executing member, in writing, of his or her
association with the other member. The rule also provides that if the
account was established prior to the person's association with the
employer member, the person must notify both members in writing
promptly after becoming associated; and
(2) NASD Rule 3050(d) provides that if the associated person opens
a securities account or places an order for the purchase or sale of
securities with a broker-dealer that is registered pursuant to Exchange
Act Section 15(b)(11) (a notice-registered broker-dealer), a domestic
or foreign investment adviser, bank, or other financial institution
(i.e., firms that are not FINRA members), then he or she must: (i)
Notify his or her employer member in writing, prior to the execution of
any initial transactions, of the intention to open the account or place
the order; and (ii) upon written request by the employer member,
request in writing and assure that the notice-registered broker-dealer,
investment adviser, bank, or other financial institution provides the
employer member with duplicate copies of confirmations, statements, or
other information concerning the account or order. NASD Rule 3050(d)
also provides that if an account subject to Rule 3050(d) was
established prior to the person's association with the member, the
person must comply with the rule promptly after becoming associated.
In addition, NASD Rule 3050(f) provides that the requirements of
Rule 3050 do not apply to transactions in unit investment trusts and
variable contracts or redeemable securities of companies registered
under the Investment Company Act of 1940 (``Investment Company Act''),
or to accounts which are limited to transactions in such securities.
B. Current NYSE Rules 407 and 407A
The purpose of NYSE Rule 407 is similar to the purpose of FINRA
Rule 3050--to provide member firms information about transactions
effected by their associated persons in accounts established outside
their firm. According to FINRA, the NYSE and NASD rules are similar
with some variations, including:
NYSE Rule 407(a) is similar to NASD Rule 3050(b), except
that Rule 407(a) requires that an executing member receive an employer
member's prior written consent before: (1) Opening a securities or
commodities account, or (2) executing any transaction in which a member
or employee associated with another member or member organization is
directly or indirectly interested. The rule also requires that
duplicate confirmations and account statements be sent promptly to the
employer.
NYSE Rule 407(b) is similar to NASD Rules 3050(c) and (d),
except that Rule 407(b) generally requires that associated persons who:
(1) Establish or maintain a securities or commodities account, or enter
into a securities transaction at (a) another member firm, or (b) a
domestic or foreign non-member
[[Page 72120]]
broker-dealer, investment adviser, bank, or other financial
institution,\12\ and (2) have a financial interest in, or discretionary
authority over, such accounts or transactions must obtain the employer
firm's prior written consent. The rule also requires that persons
having accounts or effecting transactions as covered by the rule must
arrange for duplicate confirmations and statements (or their
equivalents) to be sent to the employer firm. The rule further requires
that all such accounts and transactions must periodically be reviewed
by the employer member.
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\12\ NYSE Rule 407.13 states that, for purposes of the rule, the
term ``other financial institution'' includes, but is not limited
to, insurance companies, trust companies, credit unions, and
investment companies.
---------------------------------------------------------------------------
NYSE Rule 407.12 is similar to NASD Rule 3050(f), except
that Rule 407.12 excepts the specified transactions and accounts (i.e.,
transactions in unit investment trusts and variable contracts or
redeemable securities of companies registered under the Investment
Company Act, or to accounts which are limited to transactions in such
securities, or to monthly investment plan type accounts) only from the
obligation to send duplicate confirmations and statements unless
requested by the employer.
In addition, NYSE Rule 407A (Disclosure of All Member Accounts)
requires members to promptly report to the NYSE any securities account
(including accounts at a member or non-member broker-dealer, investment
adviser, bank or other financial institution), in which the member has
a financial interest or the power to make investment decisions. NYSE
Rule 407A also requires a member having such an account to notify the
financial institution that carries or services the account that it is a
member of the NYSE. In addition, the rule requires that members report
to the NYSE when any such securities account is closed. FINRA states
that ``[t]hese reporting requirements were designed to provide the NYSE
with current information about where floor members carry securities
accounts.'' \13\
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\13\ See supra note 3.
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NYSE Rule Interpretation 407/01 addresses the process for
determining whether the account of a spouse of an associated person
should be subject to NYSE Rule 407.
NYSE Rule Interpretation 407/02 provides that NYSE Rule 407(b)
applies when an associated person is also a majority stockholder of a
non-public corporation that wishes to open a discretionary margin
account at another member.
C. Proposed New FINRA Rule 3210 \14\
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\14\ The description in this section describes the proposed
rules change prior to the proposed amendments, which are described
below.
---------------------------------------------------------------------------
Proposed FINRA Rule 3210(a) would require an associated person to
obtain his or her employer firm's prior written consent before opening
or otherwise establishing an account in which securities transactions
can be effected and in which the associated person has a beneficial
interest at a member other than the employer member (i.e., executing
member), or at any other financial institution.\15\ Proposed FINRA Rule
3210.02 would deem the associated person to have a beneficial interest
in any account that is held by: (a) The spouse of the associated
person; (b) a child of the associated person or of the associated
person's spouse, provided that the child resides in the same household
as or is financially dependent upon the associated person; (c) any
other related individual over whose account the associated person has
control; or (d) any other individual over whose account the associated
person has control and to whose financial support the associated person
materially contributes. Notably, the proposal would ``[eliminate] the
language in the current rules that references accounts or transactions
where the associated person has `the power, directly or indirectly, to
make investment decisions,' as set forth in NYSE Rule 407(b), and
accounts where the associated person has `discretionary authority,' as
set forth in NASD Rule 3050(b).'' \16\
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\15\ Based on NYSE Rule 407.13 and NASD Rule 3050(d), proposed
FINRA Rule 3210.05 provides that the terms ``other financial
institution'' and ``financial institution other than a member''
include, but are not limited to, any broker-dealer that is
registered pursuant to Exchange Act Section 15(b)(11), domestic or
foreign non-member broker-dealer, investment adviser, bank,
insurance company, trust company, credit union, and investment
company.
\16\ See supra note 3.
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Proposed FINRA Rule 3210(b) would require an associated person to
provide written notice to the executing member, or other financial
institution, of his or her association with the employer member prior
to opening or otherwise establishing an account subject to the rule.
Proposed FINRA Rule 3210(c) would require an executing member, upon
written request by the employer member, to transmit duplicate copies of
confirmations and statements, or the transactional data contained
therein, with respect to an account subject to the rule.
Proposed FINRA Rule 3210.01 would require an associated person to
obtain the written consent of the employer member, within 30 calendar
days of becoming so associated, to maintain an account that was opened
or otherwise established prior to the person's association with the
employer member. The proposed rule also would require the associated
person to notify in writing the executing member or other financial
institution of his or her association with the employer member.
Proposed FINRA Rule 3210.03 states that proposed FINRA Rule 3210(c)
(discussed above) would not apply to transactions in unit investment
trusts, municipal fund securities as defined under MSRB Rule D-12,
qualified tuition programs pursuant to Section 529 of the Internal
Revenue Code, and variable contracts or redeemable securities of
companies registered under the Investment Company Act, as amended, or
to accounts that are limited to transactions in such securities, or to
monthly investment plan type accounts.
Proposed FINRA Rule 3210.04 would require an employer member to
consider the extent to which it will be able to obtain, upon written
request, duplicate copies of confirmations and statements, or the
transactional data contained therein, directly from the non-member
financial institution in determining whether to provide its written
consent to an associated person to open or maintain an account subject
to the rule at a financial institution other than a member.
D. Partial Amendment No. 1
In its amendment, FINRA is proposing to amend proposed FINRA Rule
3210.03 to exclude from the requirements of FINRA Rule 3210
transactions in unit investment trusts, municipal fund securities as
defined under MSRB Rule D-12, qualified tuition programs pursuant to
Section 529 of the Internal Revenue Code, and variable contracts or
redeemable securities of companies registered under the Investment
Company Act, as amended, or to accounts that are limited to
transactions in such securities, or to monthly investment plan type
accounts.
This proposed amendment would establish a rebuttable presumption
that an associated person has a beneficial interest in an account held
by an individual listed in proposed Rule 3210.02(a)-(d). Specifically,
the proposal would state that for purposes of Rule 3210, an associated
person would be presumed (not deemed) to have a beneficial interest in
any account that is held by an individual listed in Rule 3210.02(a)-
(d). Further, the amendment to proposed Rule 3210.02(a) would require
that in order for an
[[Page 72121]]
associated person to be presumed to have a beneficial interest in an
account held by his or her spouse, the spouse must ``[reside] in the
same household as the associated person.'' Moreover, amendment to
proposed FINRA Rule 3210.02 would state that an associated person could
overcome the presumption of beneficial interest in an account by
``[demonstrating], to the satisfaction of the employer member, that the
associated person derives no economic benefit from the account.''
The text of the proposed rule change, as amended, is available, at
the principal office of FINRA, on FINRA's Web site at https://www.finra.org, and at the Commission's Public Reference Room. In
addition, you may also find a more detailed description of the original
proposed rule change in the Notice.\17\
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\17\ See supra note 3.
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III. Summary of Comments
As noted above, the Commission received four comment letters on the
proposed rule change. Two commenters generally expressed support for
FINRA's proposal.\18\ The other two commenters did not support the
proposed rule.\19\ All four commenters recommended amendments to the
proposal. FINRA also responded to the comments.
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\18\ See SIFMA Letter and FOLIOfn Letter.
\19\ See PIABA Letter and Sutherland Letter.
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A. Receipt of Duplicate Confirmations and Account Statements
One commenter stated that despite specifying that an employing firm
is ``responsible for supervising its broker's trading activities,'' the
proposal only requires an executing member to provide duplicate account
documents (with respect to an account subject to the rule) upon written
request by the employer member.\20\ This commenter recommended that
FINRA amend the proposal to require the employing firm to obtain these
confirmations and statements from the executing firm so that the
employing firm has sufficient information available for its supervisory
personnel to monitor associated persons' outside trading activity.\21\
---------------------------------------------------------------------------
\20\ See PIABA Letter.
\21\ Id.
---------------------------------------------------------------------------
Similarly, this commenter stated its view that the proposed
requirement for an employing firm to consider the extent to which it
would be able to obtain duplicate account documents in determining
whether to consent to an associated person opening or maintaining an
account with a non-member financial institution would be
ineffective.\22\ This commenter recommended that FINRA amend the rule
to require that duplicate copies of monthly statements and
confirmations or the equivalent be available for the employing firm's
review as a precondition to the opening of outside accounts.\23\
---------------------------------------------------------------------------
\22\ Id.
\23\ Id.
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In its response, FINRA stated that the proposed requirement to
transmit duplicate account documents ``upon written request'' by the
employer member is intended to provide employer members reasonable
flexibility to craft appropriate supervisory policies and procedures
according to their business model and the risk profile of their
activities.\24\ Similarly, FINRA stated that with respect to accounts
at non-member institutions the approach reflected in the proposal rule
should permit employer members the flexibility they need to carry out
their supervisory responsibilities under FINRA rules.\25\ FINRA
believes that specifying preconditions for such accounts would negate
the flexibility the rule aims to achieve.\26\
---------------------------------------------------------------------------
\24\ See FINRA Response Letter.
\25\ Id.
\26\ Id.
---------------------------------------------------------------------------
Accordingly, FINRA declined to make the suggested changes.
B. Non-Member Accounts
One commenter stated its view that in trying to provide FINRA
members greater flexibility in determining whether to consent to an
associated person opening or maintaining an account at non-member
financial institutions, the proposal focuses too much on only one
element of the analysis (i.e., duplicate statements).\27\ This
commenter believes that the proposal would be made easier to implement
from a supervisory and operational standpoint if FINRA uses
``principles based'' language in Proposed FINRA Rule 3210.04.\28\
Accordingly, the commenter recommended that FINRA amend the proposal to
provide that if a firm decides to permit accounts of its associated
persons to be opened and maintained at an outside institution, the firm
must, at a minimum, determine that the account activity can be properly
monitored pursuant to the requirements of Rule 3110(d).\29\
---------------------------------------------------------------------------
\27\ See SIFMA Letter.
\28\ Id.
\29\ Id.
---------------------------------------------------------------------------
In its response, FINRA stated that the proposal is sufficient to
imply, in light of the supervisory obligations that apply to all
members, that members will consider whether activity in the account can
be properly monitored when determining whether to provide their written
consent to an associated person to open or maintain an account at a
non-member financial institution.\30\ In addition, FINRA reminded its
members that the rule in no way lessens the breadth and scope of
members' supervisory obligations.\31\ Accordingly, FINRA declined to
make the suggested changes.
---------------------------------------------------------------------------
\30\ See FINRA Response Letter.
\31\ Id.
---------------------------------------------------------------------------
C. Discretionary Accounts
One commenter recommended that FINRA maintain the requirement that
brokers obtain prior written consent from their employing firm before
opening discretionary accounts for customers at other firms.\32\ The
commenter believes that knowledge of the opening of these types of
accounts allows employing members to take appropriate steps to
supervise outside trading activity.\33\
---------------------------------------------------------------------------
\32\ See PIABA Letter.
\33\ Id.
---------------------------------------------------------------------------
In its response, FINRA stated that the proposal is designed to
demarcate more clearly the respective scope of FINRA Rule 3210, which
is meant to address monitoring of personal and related accounts, versus
FINRA Rule 3280, which addresses private securities transactions.\34\
Specifically, FINRA stated that to the extent associated persons make
investment decisions or have discretionary authority in contexts that
involve private securities transactions within the scope of FINRA Rule
3280, then such transactions are subject to that rule's provisions.\35\
Accordingly, FINRA declined to make the suggested change.
---------------------------------------------------------------------------
\34\ See FINRA Response Letter.
\35\ Id.
---------------------------------------------------------------------------
D. Accessing Transactional Data
Two commenters expressed concern that the proposed rule change
would limit the methods that an employer firm could use to receive and,
consequently, access transactional data.\36\ One commenter stated its
view that by requiring transactional data to be ``transmitted'' to the
employer firm, FINRA unintentionally restricts the various ways by
which employer firms can have access to the transactional data.\37\
Accordingly, this commenter recommended that FINRA amend the proposal
to leave it up to the executing firm to decide, in considering its
business model and technical sophistication, how to best make
[[Page 72122]]
available the information.\38\ Similarly, the other commenter
recommended that FINRA amend the proposal to state that an employing
member may satisfy its obligations under the proposal by receiving
transactional data through automated means, such as electronic data
feeds, in lieu of receiving hardcopy or imaged confirmations and
statements.\39\
---------------------------------------------------------------------------
\36\ See FOLIOfn Letter and SIFMA Letter.
\37\ See FOLIOfn Letter.
\38\ Id.
\39\ See SIFMA Letter.
---------------------------------------------------------------------------
In its response, FINRA stated that it did not intend to specify any
particular methodology as to transmission of the specified
information.\40\ FINRA also stated that it believes that the proposed
rule change is sufficiently broad by its terms to permit members all
reasonable flexibility as to the manner of obtaining and reviewing the
specified information, whether by hard copy or electronic means.\41\
Accordingly, FINRA declined to make the suggested changes.
---------------------------------------------------------------------------
\40\ See FINRA Response Letter.
\41\ Id.
---------------------------------------------------------------------------
E. Definition of ``Beneficial Interest''
Two commenters recommended that FINRA amend proposed Rule 3210.02
to revise the proposed definition of ``beneficial interest.'' \42\ One
commenter stated its view that presuming beneficial interest in any
account held by the spouse of an associated person (and other familial
relationships) is overly broad.\43\ Instead, the commenter recommended
that FINRA amend the proposed definition to apply only when and if an
associated person has control over an account.\44\
---------------------------------------------------------------------------
\42\ See FOLIOfn Letter and SIFMA Letter.
\43\ See FOLIOfn Letter.
\44\ Id.
---------------------------------------------------------------------------
Similarly, the other commenter stated its view that including all
spousal accounts in the list of accounts in which an associated person
is deemed to have a beneficial interest is overly broad and costly.\45\
In particular, the commenter stated that it is not uncommon for spouses
to maintain completely separate financial lives.\46\ Accordingly, the
commenter suggested that FINRA amend the definition of beneficial
interest to apply to the spouse of the associated person, provided that
the spouse resides in the same household as the associated person and
that the associated person has control over such account.\47\
---------------------------------------------------------------------------
\45\ See SIFMA Letter.
\46\ Id.
\47\ Id.
---------------------------------------------------------------------------
In its response, FINRA stated that it is aware of the potential
difficulties that could arise with respect to spouse accounts as
proposed in the original filing.\48\ Accordingly, FINRA proposes in
Partial Amendment No. 1 to amend to proposed Rule 3210.02 to: (1) State
that for purposes of Rule 3210, an associated person would be presumed
(not deemed) to have a beneficial interest in any account that is held
by an individual listed in Rule 3210.02(a)-(d); (2) require that in
order for an associated person to be presumed to have a beneficial
interest in an account held by his or her spouse, the spouse must
``[reside] in the same household as the associated person;'' and (3)
state that an associated person could overcome the presumption of
beneficial interest in an account by ``[demonstrating], to the
satisfaction of the employer member, that the associated person derives
no economic benefit from the account.'' FINRA believes that these
changes would address commenters' concerns regarding the potential
issues that could be posed by different family circumstances.\49\ In
addition, FINRA believes that where a spouse resides with the
associated person, it serves a legitimate purpose that there should be
a presumption that the spouse's accounts are subject to the rule,
regardless of whether the associated person exercises control.\50\
However, FINRA also believes that the proposed rebuttable presumption
would afford adequate flexibility for employer members to exclude
accounts that pose little or no supervisory risk.\51\
---------------------------------------------------------------------------
\48\ See FINRA Response Letter.
\49\ Id.
\50\ Id.
\51\ Id.
---------------------------------------------------------------------------
F. Application of the Proposed Rule
1. Prospective Application
One commenter argued that proposed Rules 3210(a) (the consent
requirement) and 3210(b) (the notice requirement) should not apply to
accounts already opened by associated persons with executing members
before the proposed rule's compliance date.\52\ The commenter requested
that FINRA confirm that these requirements would only apply to
associated persons who open accounts after the compliance date.\53\
---------------------------------------------------------------------------
\52\ See Sutherland Letter.
\53\ Id.
---------------------------------------------------------------------------
In response, FINRA clarified in Partial Amendment No. 1 that
proposed Rules 3210(a) and 3210(b) would apply to accounts that an
associated person opens or otherwise establishes on or after the
proposed new rule's implementation date.\54\ FINRA also stated,
however, that if the associated person has an existing account prior to
his or her association with an employer member, proposed FINRA Rule
3210.01 would apply, without regard to when the account was opened,
whenever the associated person enters into a new association with a
member.\55\
---------------------------------------------------------------------------
\54\ See FINRA Response Letter.
\55\ Id.
---------------------------------------------------------------------------
2. 30-Day Notice for Existing Accounts
One commenter argued that requiring an employing firm to consent to
accounts established by an associated person prior to his or her
association with the firm within 30-day (pursuant to proposed FINRA
Rule 3210.01) might raise operational, supervisory, and related
challenges.\56\ Accordingly, the commenter recommended that FINRA amend
the rule to require that within 30 calendar days of becoming so
associated, the associated person shall notify in writing the executing
member or other financial institution of his or her association with
the employer member and seek written consent of the employer member to
maintain the account.\57\
---------------------------------------------------------------------------
\56\ See SIFMA Letter.
\57\ Id.
---------------------------------------------------------------------------
In its response, FINRA disagreed with the commenter and stated that
it believes that employer members should be able to make a
determination within the 30-day period.\58\ Accordingly, FINRA declined
to make the suggested change.
---------------------------------------------------------------------------
\58\ See FINRA Response Letter.
---------------------------------------------------------------------------
G. Exemptions for Certain Account Transactions
1. Exemption From Providing Transaction Data
One commenter recommended that FINRA amend proposed Rule 3210.03 to
exempt transactions in all insurance contracts that are securities from
the requirement that an executing member must provide the employing
member with duplicate account confirmations and statements. The
commenter argued that all insurance contracts that are securities are
substantially similar to ``variable contracts'' that would be exempted
under proposed Rule 3210.03, and therefore also pose limited risk with
respect to the need to oversee associated persons accounts.\59\
---------------------------------------------------------------------------
\59\ See Sutherland Letter.
---------------------------------------------------------------------------
In its response, FINRA stated that the original proposal added to
the exemption products that are clearly identifiable and bear
similarity to and are consistent with the rationale underlying the
other products set forth in the rule.\60\ FINRA also stated, however,
that it is not prepared at this time to broadly except insurance
[[Page 72123]]
products from the rule's requirements, but will consider whether
further exceptions are appropriate based on the attributes of specific
insurance products.\61\ Accordingly, FINRA declined to make the
suggested change.
---------------------------------------------------------------------------
\60\ See FINRA Response Letter.
\61\ Id.
---------------------------------------------------------------------------
2. Exemption From the Notice and Consent Requirements
Two commenters recommended that FINRA also exempt certain
transactions (i.e., transactions in unit investment trusts, municipal
fund securities, 529 Plans, variable contracts, or mutual fund shares)
from the requirement that an associated person must notify the
executing member and obtain the prior written consent of the employer
member before opening an account.\62\ One of these commenters noted
that current NASD Rule 3050 provides a complete exemption from all
provisions of the rule for the exempted transactions and believes that
adoption of the structure under NASD Rule 3050 would more closely track
the policy determinations articulated under the proposed rule change
and creates less regulatory burden on firms.\63\ Similarly, the other
commenter reasoned that: (1) Employees have no ability to engage in
insider trading or other manipulative practices through these accounts
or types of products; (2) firms will incur significant operational and
supervisory costs associated with this new requirement without any
appreciable investor protection benefits; and (3) not excluding these
types of transactions and accounts from the entire rule will have a
negative impact on firms' ability to design, implement, and maintain a
reasonably designed, risk-based compliance system because firms will be
required to direct limited compliance resources to processing notice
requests for accounts and transactions that represent little, if any,
risk of insider trading or other violative conduct.\64\
---------------------------------------------------------------------------
\62\ See Sutherland Letter and SIFMA Letter.
\63\ See Sutherland Letter.
\64\ See SIFMA Letter.
---------------------------------------------------------------------------
In its response, FINRA stated its goal that members not be burdened
with information collection where the specified transactions and
account types pose limited risk from the standpoint of the rule's
supervisory purposes.\65\ Accordingly, FINRA proposes in Partial
Amendment No. 1 to amend Supplementary Material .03 to provide that the
specified transactions and accounts shall not be subject to the
requirements of proposed FINRA Rule 3210.\66\
---------------------------------------------------------------------------
\65\ See FINRA Response Letter.
\66\ Id.
---------------------------------------------------------------------------
H. Consistency With MSRB Rule G-28
One commenter recommended that, since both FINRA and the Municipal
Securities Rulemaking Board (``MSRB'') have rules governing employee
transactions, FINRA and the MSRB should work together to develop a
uniform standard for the industry.\67\
---------------------------------------------------------------------------
\67\ See SIFMA Letter.
---------------------------------------------------------------------------
In its response letter, FINRA stated that it believes that the
comment is outside the scope of the proposed rule change.\68\
---------------------------------------------------------------------------
\68\ See FINRA Response Letter.
---------------------------------------------------------------------------
IV. Proceedings to Determine Whether to Approve or Disapprove SR-FINRA-
2015-029 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Exchange Act
Section 19(b)(2)(B) to determine whether the proposed rule change
should be approved or disapproved.\69\ Institution of proceedings
appears appropriate at this time in view of the legal and policy issues
raised by the proposal. As noted above, institution of proceedings does
not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to comment on the issues presented by the
proposed rule change and provide the Commission with arguments to
support the Commission's analysis as to whether to approve or
disapprove the proposal.
---------------------------------------------------------------------------
\69\ 15 U.S.C. 78s(b)(2). Exchange Act Section 19(b)(2)(B)
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
The time for conclusion of the proceedings may be extended for up to
an additional 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding or if the self-
regulatory organization consents to the extension.
---------------------------------------------------------------------------
Pursuant to Exchange Act Section 19(b)(2)(B),\70\ the Commission is
providing notice of the grounds for disapproval under consideration. In
particular, Exchange Act Section 15A(b)(6) \71\ requires, among other
things, that FINRA rules must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\70\ 15 U.S.C. 78s(b)(2)(B).
\71\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
The Commission believes FINRA's proposed rule change raises
questions as to whether it is consistent with the requirements of
Exchange Act Sections 15A(b)(6).
V. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues raised by the proposed rule change, as modified by Partial
Amendment No. 1. In particular, the Commission invites the written
views of interested persons on whether the proposed rule change, as
modified by Partial Amendment No. 1, is inconsistent with Section
15A(b)(6), or any other provision, of the Exchange Act, or the rules
and regulations thereunder.
Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\72\
---------------------------------------------------------------------------
\72\ Exchange Act Section 19(b)(2), as amended by the Securities
Acts Amendments of 1975, Pub. L. 94-29, 89 Stat. 97 (1975), grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking, Housing and Urban Affairs
to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments by December 9, 2015 concerning whether the proposed rule
change should be approved or disapproved. Any person who wishes to file
a rebuttal to any other person's submission must file that rebuttal by
January 4, 2016. Comments may be submitted by any of the following
methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2015-029 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2015-029. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the
[[Page 72124]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principle office of FINRA. All comments received
will be posted without change. The Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make publicly available. All submissions
should refer to File Number SR-FINRA-2015-029 and should be submitted
on or before December 9, 2015. If comments are received, any rebuttal
comments should be submitted by January 4, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\73\
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\73\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29394 Filed 11-17-15; 8:45 am]
BILLING CODE 8011-01-P
