Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Notices 10629 

6 In 2010, DTC implemented a new function that 

allows DTC Participants to set a profile in PBS so 

that they can request that excess funds be wired to 

their settling bank account at approximately 3:20 

p.m. Eastern Time. Securities Exchange Act Release 

No. 61922 (Apr. 15, 2010), 75 FR 21072 (Apr. 22, 

2010). Also in 2010, DTC updated its processing 

schedule in order to extend the end-of-day cutoff 

time for processing pledges and releases to and 

from the New York Federal Reserve Bank from 3 

p.m. to 5 p.m. Securities Exchange Act Release No. 

63415 (Dec. 2, 2010), 75 FR 76506 (Dec. 8, 2010). 

7Supra note 2. 

8Supra note 3. 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 63316 (Nov. 15, 

2010), 75 FR 71166 (Nov. 22, 2010) (‘‘Notice’’). 

4See letter from Board of Directors, ASG 

Securities Inc., to the Commission, dated Dec. 13, 

2010 (‘‘ASG Letter’’); letter from Manuel P. AsensioGarcia, to the Commission, dated Dec. 20, 2010; 

Continued 

Participant that an alert has been 

triggered, but the Participant will be 

required to sign into the Dashboard in 

order to receive the alert message. While 

this alert message will provide 

Participants with greater efficiency in 

how they view settlement events, 

Participants will continue to have the 

responsibility to independently check 

the settlement functions to verify all of 

their settlement related events. 

Additionally, DTC is making 

unrelated technical updates to its 

Settlement Service Guide to conform to 

certain rule changes that have 

previously been filed with the 

Commission.6 These changes will 

necessitate revisions to the existing DTC 

Settlement Guide and those revisions 

are attached to DTC’s proposed rule 

filing as Exhibit 5. 

DTC states that the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

DTC because it will promote efficiencies 

in the way that Participants view 

settlement related transactions and as 

such will promote the safeguarding of 

securities and funds in DTC’s custody or 

control or for which it is responsible. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

DTC does not believe that the 

proposed rule change will have any 

impact or impose any burden on 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

DTC has not solicited or received 

written comments relating to the 

proposed rule change. DTC will notify 

the Commission of any written 

comments it receives. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective upon filing pursuant to Section 

19(b)(3)(A)(iii) of the Act 7 and Rule 

19b–4(f)(4) 8 because the proposed rule 

change effects a change in an existing 

service of DTC that (i) does not 

adversely affect the safeguarding of 

securities or funds in DTC’s custody or 

control or for which it is responsible 

and (ii) does not significantly affect the 

respective rights of DTC or persons 

using the service. At any time within 60 

days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml) or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–DTC–2011–03 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File No. 

SR–DTC–2011–03. This file number 

should be included on the subject line 

if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filings 

also will be available for inspection and 

copying at DTC’s principal office and 

DTC’s Web site at http://www.dtcc.com/ 

downloads/legal/rule_filings/2011/dtc/ 

2011-03.pdf. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–DTC–2011– 

03 and should be submitted on or before 

March 18, 2011. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4289 Filed 2–24–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63933; File No. SR–FINRA– 

2010–056] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change To Adopt 

FINRA Rule 1113 (Restriction 

Pertaining to New Member 

Applications) and To Amend the FINRA 

Rule 9520 Series (Eligibility 

Proceedings) 

February 18, 2011. 

I. Introduction 

On November 1, 2010, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’ or ‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to adopt new FINRA Rule 1113 

(Restriction Pertaining to New Member 

Applications) and to amend the FINRA 

Rule 9520 Series (Eligibility 

Proceedings) to restrict new member 

applicants’ and certain members’ 

association with disqualified persons. 

The proposed rule change was 

published for comment in the Federal 

Register on November 22, 2010.3 The 

Commission received three comment 

letters on the proposed rule change.4


srobinson on DSKHWCL6B1PROD with NOTICES
10630 Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Notices 

and, letter from Manuel P. Asensio-Garcia, to Robert 

W. Cook, Director, Division of Trading and Markets, 

dated Dec. 20, 2010 (Because both letters from Mr. 

Asensio raise substantially the same issues with 

respect to the proposed rule change, they are 

addressed in this order as a single comment letter, 

collectively referred to herein as the ‘‘Asensio 

Letter’’). 

5See letter from Patricia M. Albrecht, Assistant 

General Counsel, FINRA, to Elizabeth M. Murphy, 

Secretary, Commission, dated Feb. 4, 2011 (‘‘FINRA 

Response’’). 

6See 15 U.S.C. 78c(a)(39). Pursuant to Exchange 

Act Section 3(a)(39), a person is subject to a 

‘‘statutory disqualification’’ with respect to 

membership or participation in, or association with 

a member of, a self-regulatory organization (‘‘SRO’’) 

if such person, among other things: (1) Has been 

convicted of certain misdemeanors or any felony 

criminal convictions within the ten years preceding 

the date of the filing of an application for 

membership or participation in, or to become 

associated with a member of, such SRO; (2) is 

subject to a temporary or permanent injunction 

(regardless of its age) issued by a court of competent 

jurisdiction involving at least one of a broad range 

of unlawful investment activities; (3) has been 

expelled or suspended from membership or 

participation in an SRO; or, (4) is subject to an SEC 

order denying, suspending, or revoking brokerdealer registration. 

7Proposed FINRA Rule 1113, by its terms, would 

not apply to a member submitting a continuing 

membership application pursuant to NASD Rule 

1017 (Application for Approval of Change in 

Ownership, Control, or Business Operations). 

8Article I of the FINRA By-Laws defines an 

‘‘associated person’’ as a: (1) A natural person who 

is registered or has applied for registration under 

FINRA rules; (2) a sole proprietor, partner, officer, 

director, or branch manager of a member, or other 

natural person occupying a similar status or 

performing similar functions, or a natural person 

engaged in the investment banking or securities 

business who is directly or indirectly controlling or 

controlled by a member, whether or not any such 

person is registered or exempt from registration 

with FINRA under its By-Laws or rules; and (3) for 

purposes of FINRA Rule 8210, any other person 

listed in Schedule A of Form BD of a member. See 

FINRA By-Laws, Article I (rr) (definition of ‘‘person 

associated with a member’’ or ‘‘associated person of 

a member’’). 

9As previously noted, Article III, Section 4 of the 

FINRA By-Laws incorporates the definition of 

‘‘statutory disqualification’’ as such term is defined 

in Exchange Act Section 3(a)(39). 

10FINRA Rule 9521(b)(4). 

11The proposed rule change also would make 

conforming amendments throughout the FINRA 

Rule 9520 Series to reflect the proposed amendment 

discussed above that a new member applicant may 

not sponsor a person subject to a disqualification. 

12FINRA Rule 9521(b)(2). 

13Asensio Letter. 

FINRA responded to these comments in 

a letter dated February 4, 2011.5 This 

order approves the proposed rule 

change. 

II. Description of Proposal 

Article III, Section 3(b) of the FINRA 

By-Laws provides that no person shall 

be associated with a member, continue 

to be associated with a member, or 

transfer association to another member 

if such person is or becomes subject to 

a disqualification; and, that no person 

shall be admitted to membership, and 

no member shall be continued in 

membership, if any person associated 

with it is subject to a disqualification. 

Pursuant to Article III, Section 4 of the 

FINRA By-Laws, a person is subject to 

a ‘‘disqualification’’ with respect to 

membership, or association with a 

member, if such person is subject to any 

‘‘statutory disqualification’’ as such term 

is defined in Exchange Act Section 

3(a)(39).6

The FINRA Rule 9520 Series sets forth 

procedures for a person to become or 

remain associated with a member, 

notwithstanding the existence of a 

statutory disqualification, and for a 

current member or person associated 

with a member to obtain relief from the 

eligibility or qualification requirements 

of the FINRA By-Laws and rules. The 

FINRA Rule 9520 Series also 

contemplates that a new member 

applicant may sponsor a proposed 

associated person or itself for relief from 

the eligibility or qualification 

requirements. A member (or new 

member applicant) seeking to associate 

with a person subject to a 

disqualification must seek approval 

from FINRA by filing a Form MC–400 

application, pursuant to the FINRA Rule 

9520 Series. Members (and new member 

applicants) that are themselves subject 

to a disqualification that wish to obtain 

relief from the eligibility requirements 

are required to submit a Form MC–400A 

application. 

FINRA proposed to adopt new FINRA 

Rule 1113 (Restriction Pertaining to 

New Member Applications) and to 

amend the FINRA Rule 9520 Series 

(Eligibility Proceedings) to further 

restrict new member applicants’ and 

certain members’ association with 

disqualified persons. 

New FINRA Rule 1113 would direct 

FINRA’s Department of Member 

Regulation (‘‘Department’’) to reject an 

application for FINRA membership 7 in 

which either the applicant or an 

associated person of the applicant, as 

defined in Article I of the FINRA ByLaws,8 is subject to a statutory 

disqualification, as defined in Article 

III, Section 4 of the FINRA By-Laws.9

The proposed new rule would also 

provide that any new member 

application that the Department 

approves due to a Department or 

applicant error (including, but not 

limited to, an inadvertent or intentional 

misstatement or omission by the 

applicant or associated person) shall be 

subject to membership cancellation in 

accordance with FINRA Rule 9555 

(Failure to Meet the Eligibility or 

Qualification Standards or Prerequisites 

for Access to Services). 

The proposed amendments to the 

FINRA Rule 9520 Series, which sets 

forth the eligibility proceedings for 

membership, would have the following 

effects: First, they would amend the 

FINRA Rule 9520 Series definition of 

‘‘sponsoring member’’ 10 to eliminate the 

reference to new member applicants. 

FINRA believes that because new 

member applicants do not have any 

prior operating or supervisory history 

there is nothing to indicate the 

necessary experience to supervise 

disqualified persons. FINRA believes 

that the proposed amendment would 

alleviate its concerns about the ability of 

new member applicants to supervise 

adequately a disqualified person. 

Furthermore, FINRA believes this 

amendment would conform to the 

proposed new membership application 

rule (FINRA Rule 1113), discussed 

above, by precluding new member 

applicants from being able to sponsor 

disqualified persons.11

Second, the proposed rule change 

would amend the definition of 

‘‘disqualified member’’ 12 in the FINRA 

Rule 9520 Series to clarify that a new 

member applicant is not eligible to 

submit an application for relief under 

the FINRA Rule 9520 Series if the new 

member applicant itself is subject to a 

disqualification. FINRA believes a new 

member applicant should enter FINRA 

membership free of the supervisory and 

operating concerns raised by association 

with a statutorily disqualified person or 

being itself subject to a statutory 

disqualification and believes this 

proposed rule change is consistent with 

that belief. 

Third, the proposed rule change 

would further amend the definition of 

‘‘sponsoring member’’ to preclude any 

member from sponsoring the association 

or continued association of a 

disqualified person, who is directly or 

indirectly a beneficial owner of more 

than five percent of the sponsoring 

member, to be admitted, readmitted, or 

permitted to continue in association. 

FINRA believes that a member cannot 

effectively supervise a disqualified 

person in light of the inherent conflict 

of interest resulting from the 

disqualified person’s ownership interest 

in the member. FINRA believes the 

proposed amendment to the definition 

of ‘‘sponsoring member’’ would address 

this issue. 

III. Discussion of Comment Letters 

One commenter, Manuel P. AsensioGarcia, a principal of Asensio & 

Company, Inc. (‘‘ACO’’), submitted a 

letter opposing the proposed rule 

change on several grounds.13 First, the 

Asensio Letter asserts that the proposed 


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Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Notices 10631 

14FINRA Response. 

15Asensio Letter. 

16FINRA Response. 

17Asensio Letter. 

18FINRA Response. 

19The Asensio Letter also describes the 

foreclosure of a review of a FINRA-imposed 

sanction through the eligibility proceedings as 

‘‘contrary to the most basic ideals of constitutional 

due process.’’ As referenced above, FINRA believes 

that the eligibility proceedings are not the 

appropriate forum for reviewing FINRA-imposed 

sanctions; however, a process does exist for 

individuals to challenge a FINRA-imposed 

sanction. As such, FINRA also believes the Asensio 

Letter’s argument lacks merit. 

20ASG Letter. 

21FINRA Response. 

22 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

23 15 U.S.C. 78o–3(b)(6). 

24 15 U.S.C. 78s(b)(2). 

25 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

rule change was an improper attempt to 

adversely impact a New Member 

Application Form (‘‘NMA’’) filed by 

ACO and concurrent MC–400 

application filed by ACO on Mr. 

Asensio’s behalf. In the FINRA 

Response, FINRA contests this 

assertion. Specifically, the FINRA 

Response states that the proposed rule 

change is a separate policy-driven 

proceeding based on its belief that a 

new member applicant should enter 

FINRA membership free of the 

supervisory and operating concerns 

raised by association with a statutorily 

disqualified person or being itself 

subject to a statutory disqualification.14

The FINRA Response further notes that 

the proposed rule change would apply 

only to NMAs and applications for relief 

from a statutory disqualification filed on 

or after the effective date of the 

proposed rule change and, 

consequently, would not impact any 

applications pending before such 

effective date. 

The Asensio Letter also states that the 

proposed rule change was unnecessary 

because FINRA already has authority 

under its current rules to deny an NMA 

based on the existence of a statutory 

disqualification and to deny an MC–400 

application based on the fact that a 

disqualified person is proposing to 

associate with a new member.15 The 

FINRA Response contests this assertion 

by citing the public policy interests 

underlying the proposed rule change’s 

objective—to promote initiation of 

FINRA membership free of statutory 

disqualification concerns. Moreover, 

FINRA believes the proposed rule 

would allow FINRA to conserve 

regulatory resources that would 

otherwise be devoted to considering an 

NMA or MC–400 application that the 

proposed rule change would preclude at 

the outset.16

The Asensio Letter also states that the 

proposal would effectively foreclose use 

of the eligibility proceedings by a 

disqualified person seeking relief from 

FINRA sanctions. Specifically, the 

Asensio Letter states that the eligibility 

proceedings represent the only avenue 

for seeking relief outside of an appeal 

and to effectively use the eligibility 

proceedings for this purpose, a 

disqualified person must be able to 

create a new member applicant to be his 

sponsor; otherwise, a disqualified 

person cannot present his arguments for 

relief free from possible restrictions that 

could be imposed by a member 

sponsor.17 The FINRA Response states 

that the eligibility proceedings are not 

the appropriate forum for reviewing 

sanctions imposed in a formal 

disciplinary action brought by FINRA; 

rather, the correct process for an 

individual to challenge any FINRAimposed sanctions is set forth in the 

FINRA Rule 9300 Series (Review of 

Disciplinary Proceeding By National 

Adjudicatory Council and FINRA Board; 

Application for SEC Review).18

Accordingly, FINRA believes this 

objection lacks merit.19

The second commenter, ASG 

Securities, did not oppose the proposed 

rule change but requested that FINRA 

amend the proposal to (1) extend from 

ten business days to twenty business 

days the period in FINRA Rule 

9522(a)(3) (Notice Regarding an 

Associated Person) during which a 

member may file a Form MC–400A 

application for itself and an associated 

person upon receiving a disqualification 

notice from FINRA staff; and (2) 

prohibit a disqualified person or entity 

from financing a member or providing 

or lending funds to an associated person 

for re-investment into a member.20 The 

FINRA Response states that the 

commenter’s suggestions are outside the 

scope of the rule proposal; as such, it 

does not intend to expand the proposal 

to address these additional issues at this 

time. However, it will consider whether 

to propose additional changes at a later 

date.21

IV. Discussion and Commission 

Findings 

The Commission has carefully 

reviewed the proposed rule change, the 

comments received, and FINRA’s 

response to the comments, and finds 

that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities association.22 In particular, 

the Commission finds that the proposed 

rule change is consistent with Section 

15A(b)(6) of the Act,23 which, among 

other things, requires that FINRA rules 

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. In 

particular, the Commission agrees that a 

new member applicant should enter 

FINRA membership free of the 

supervisory and operating concerns 

raised by association with a statutorily 

disqualified person or being itself 

subject to a statutory disqualification. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,24 that the 

proposed rule change (SR–FINRA– 

2010–056), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4216 Filed 2–24–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63934; File No. SR–NYSE– 

2011–04] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Exchange Price List 

February 18, 2011. 

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 February 

14, 2011, New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

2011 Price List (‘‘Price List’’) for equity 


srobinson on DSKHWCL6B1PROD with NOTICES