12390 Federal Register / Vol. 76, No. 44 / Monday, March 7, 2011 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 56145 

(July 26, 2007), 72 FR 42169 (August 1, 2007), as 

amended by Securities Exchange Act Release No. 

56145A (May 30, 2008), 73 FR 32377 (June 6, 2008) 

(Order Approving File No. SR–NASD–2007–023). 

4See Securities Exchange Act Release No. 37106 

(April 11, 1996), 61 FR 16944 (April 18, 1996) 

(Order Approving File No. SR–NASD–96–02). 

5See FINRA Regulation By-Laws, Article VIII, 

Section 8.1 (Establishment of Districts) and Section 

8.2 (Composition of District Committees). 

6See Securities Exchange Act Release No. 39326 

(November 14, 1997), 62 FR 62385 (November 21, 

1997) (Order Approving File No. SR–NASD–96–29). 

7See In the Matter of National Association of 

Securities Dealers, Inc., Securities Exchange Act 

Release No. 37538, 1996 SEC LEXIS 2146 (August 

8, 1996). 

8Supra note 7, at Undertaking 4. 

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 on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filing also will be 

available for inspection and copying at 

the principal offices of the Exchange. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2011–014, and 

should be submitted on or before March 

28, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5061 Filed 3–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64002; File No. SR–FINRA– 

2011–011] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

By-Laws of FINRA Regulation, Inc. 

With Regard to District Committee 

Structure and Governance 

March 2, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

25, 2011, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. 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 

FINRA is proposing to amend the ByLaws of FINRA’s regulatory subsidiary 

(‘‘FINRA Regulation’’) with regard to 

District Committee structure and 

governance to, among other things, 

adjust the size and composition of 

District Committees to align more 

closely with the industry representation 

on the FINRA Board and replace District 

Nominating Committees with a process 

of direct nomination and election based 

on firm size, as discussed in more detail 

below. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Background 

On July 30, 2007, NASD and the New 

York Stock Exchange consolidated their 

member firm regulation operations into 

a combined organization, FINRA. As 

part of the consolidation, the SEC 

approved amendments to the NASD ByLaws to implement governance and 

related changes.3 The approved changes 

included a FINRA Board governance 

structure that balanced public and 

industry representation and designated 

seven governor seats to represent 

member firms based on the criteria of 

firm size. 

FINRA Regulation (formerly known as 

NASD Regulation) is a subsidiary of 

FINRA that operates according to the 

Plan of Allocation and Delegation of 

Functions by NASD to Subsidiaries, as 

amended, which was first adopted at 

NASD Regulation’s formation in 1996.4

The proposed rule change would 

modify the FINRA Regulation By-Laws 

(or ‘‘By-Laws’’) with regard to District 

Committees in several respects. It 

would: 

• Adjust the size and composition of 

District Committees over a three-year 

transition period to align more closely 

with the industry representation on the 

FINRA Board; 

• Replace District Nominating 

Committees with a process of direct 

nomination and election based on firm 

size; 

• Codify current practice that District 

Committees meet on a regional basis; 

• Eliminate the Advisory Council; 

• Amend the qualification 

requirements and prescribe further term 

limits for District Committee members; 

• Revise procedures for qualification 

and accounting of ballots to be 

administered solely by an Independent 

Agent; and 

• Make other procedural and 

administrative changes. 

District Committees, District 

Nominating Committees, Districts and 

Regions 

The By-Laws establish the procedures 

for setting the size and electing the 

members to FINRA District Committees 

and District Nominating Committees.5

These By-Law provisions have not 

changed significantly since becoming 

permanently effective in January 1998.6

They were adopted in part to respond to 

undertakings ordered by the SEC in 

1996 (the ‘‘1996 SEC Settlement Order’’) 

concurrent with the issuance of a report 

pursuant to Section 21(a) of the 

Exchange Act regarding NASD (the 

‘‘1996 21(a) Report’’).7

The role of the District Committees 

was significantly narrowed as a result of 

undertakings in the 1996 SEC 

Settlement Order.8 Until January 1998, 


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9See NASD By-Laws, Article VIII, Section 2(c) 

(District Committees and District Business Conduct 

Committees), amended effective September 4, 1990, 

prior to the permanent adoption of the NASD 

Regulation By-Laws effective January 15, 1998 

(‘‘The District Committees shall also serve as the 

District Business Conduct Committees for their 

respective districts’’). 

10Supra note 7, at Undertaking 4. 

11See Securities Exchange Act Release No. 39326 

(November 14, 1997), 62 FR 62385 (November 21, 

1997) (File No. SR–NASD–96–29). 

12See FINRA Regulation By-Laws, Article VIII, 

Section 8.1 (Establishment of Districts) and Section 

8.2 (Composition of District Committees). 

13See Schedule A to FINRA Regulation By-Laws. 

14See FINRA Regulation By-Laws, Article VIII, 

Section 8.2 (Composition of District Committees). 

15See FINRA Regulation By-Laws, Article VIII, 

Section 8.4 (Filling of Vacancies on District 

Committees). 

16See FINRA Regulation By-Laws, Article VIII, 

Section 8.9 (Composition of District Nominating 

Committees). 

17See FINRA Regulation By-Laws, Article VIII, 

Section 8.15 (Notice to District Nominating 

Committee). 

18See FINRA Regulation By-Laws, Article VIII, 

Section 8.16 (Solicitation of Candidates and 

Secretary’s Notice to FINRA Members). 

19See FINRA Regulation By-Laws, Article VIII, 

Section 8.17 (District Nominating Committee Slate). 

20Supra note 19. 

21See FINRA Regulation By-Laws, Article VIII, 

Section 8.18 (Notification of Nomination). 22Supra note 21. 23See FINRA Regulation By-Laws, Article VIII, 

Section 8.19 (Uncontested Election). 24See FINRA Regulation By-Laws, Article VIII, 

Section 8.20 (Designation of Additional 

Candidates). 25See FINRA Regulation By-Laws, Article VIII, 

Section 8.21 (List of FINRA Members Eligible to 

Vote). 26See FINRA Regulation By-Laws, Article VIII, 

Section 8.22 (Requirement for Petition Supporting 

Additional Candidate). 

27See FINRA Regulation By-Laws, Article VIII, 

Section 8.22 (Requirement for Petition Supporting 

Additional Candidate) and Section 8.23 (Notice of 

Contested Election). 

the role of District Committees was 

addressed in the NASD By-Laws, which 

provided in part that District 

Committees shall also serve as the 

District Business Conduct Committees 

(‘‘DBCCs’’) for their respective districts.9

The undertakings in the 1996 

Settlement Order provided, among other 

things, that DBCCs not be involved in 

deciding whether or not to institute 

disciplinary proceedings, and that 

District Committees not be involved in 

the review or approval of membership 

applications.10 As a consequence, 

NASD amended its corporate 

governance documents to comply with 

these undertakings, including adopting 

NASD Regulation By-Laws that, among 

other things, did not provide a role for 

District Committees in the review or 

approval of membership applications 

and eliminated DBCCs.11

The By-Laws task the FINRA 

Regulation Board of Directors with 

determining the boundaries of the 

districts and the size of the District 

Committees.12 The FINRA Regulation 

Board has established eleven districts, 

overseen by FINRA District Offices, 

which are administratively grouped 

within five regions: 

• West Region—Districts 1 (San 

Francisco), 2 (Los Angeles), and 3 

(Denver and Seattle); 

• Midwest Region—Districts 4 

(Kansas City) and 8 (Chicago); 

• South Region—Districts 5 (New 

Orleans), 6 (Dallas) and 7 (Atlanta and 

Boca Raton); 

• North Region—Districts 9 

(Philadelphia and Woodbridge) and 11 

(Boston); and 

• New York Region—District 10 (New 

York City and Long Island).13

Today, as provided in the By-Laws, 

FINRA District Committee members 

contribute to the regulatory process by, 

among other things, serving as panelists 

in disciplinary proceedings in 

accordance with FINRA Rules; 

considering and recommending policies 

and rule changes; and endeavoring to 

educate FINRA members and others as 

to the objects, purposes and work of 

FINRA and FINRA Regulation.14 The 

District Committees meet on average 

twice each year, jointly with the other 

District Committees in their respective 

regions. Currently, District Committees 

are composed of nine members, with the 

exception of the New York District 

Committee’s twelve. Due to staggered 

three-year District Committee 

membership terms, one-third of each 

District Committee’s positions are 

available for election each year. In some 

cases, a District Committee may have 

additional positions to fill if a vacancy 

has been created by death, resignation, 

removal or other cause.15 The District 

Nominating Committees are composed 

of five members each, a majority of 

whom have served on a District 

Committee, are current or former FINRA 

Regulation Directors, or current or 

former FINRA Governors.16

Current Nomination and Election 

Process 

As part of the election process, the 

By-Laws require the Corporate Secretary 

to provide each District Nominating 

Committee and District Director annual 

notice, due on or before June 1 of each 

year, identifying the members of the 

District Committees and District 

Nominating Committees whose terms 

are expiring within the next calendar 

year.17 FINRA’s Office of the Corporate 

Secretary issues an Election Notice 

announcing the vacancies in all eleven 

districts and soliciting any interested 

party to complete and submit a 

candidate profile form to the applicable 

FINRA District Director.18

Completed candidate profile forms 

received before the prescribed cutoff 

date are shared with the District 

Nominating Committees for review, a 

process that usually involves candidate 

interviews.19 After its review, each 

District Nominating Committee 

nominates a slate of candidates for 

election, which may include an 

alternate candidate for each position.20

The District Directors, acting for the 

District Nominating Committees, notify 

FINRA’s Corporate Secretary of each 

nominated candidate and the office to 

which the candidate is nominated (i.e., 

District Committee member or District 

Nominating Committee member).21

Soon after receiving the District 

Nominating Committees’ slates (and, as 

mandated by the By-Laws, on or before 

October 1 of each year), FINRA’s Office 

of the Corporate Secretary issues 

another Election Notice announcing the 

nominees for upcoming vacancies on 

the District and the District Nominating 

Committees and informing members 

about the petition and election 

process.22 If the slate is not contested 

(i.e., there is one candidate for each 

position), it is deemed elected without 

a vote by the district’s member firms.23

The By-Laws also provide a process 

whereby a registered person meeting the 

vacancy requirements may be 

considered for nomination as an 

additional (‘‘petition’’) candidate in a 

contested election. To be considered for 

nomination as a petition candidate, 

such individual must deliver a written 

notice to the District Director within 14 

calendar days of the issuance of the 

Election Notice of nominated 

candidates.24 The Secretary of FINRA 

Regulation must provide to any such 

candidate a list, with applicable contact 

information, of FINRA members eligible 

to vote in the candidate’s district.25

Within 30 calendar days after the date 

of mailing of the list to the candidate, 

the candidate must submit a petition to 

the District Nominating Committee with 

signatures from at least ten percent of 

the FINRA members eligible to vote in 

his or her district.26 If a candidate 

submits a petition with the requisite 

number of valid signatures by the 

designated date, he or she is nominated 

and a contested election is held.27

In recent years, FINRA has witnessed 

a decline in eligible individuals willing 

to serve on the District or District 

Nominating Committees or undergo the 

nomination process. Potential 

candidates have expressed several 

reasons for their lack of interest, 


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28See, e.g., proposed deletions of FINRA 

Regulation By-Laws, Article VIII, Section 8.9 

(Composition of District Nominating Committees); 

Section 8.10 (Term of Office of District Nominating 

Committee Members); Section 8.11 (Filling of 

Vacancies for District Nominating Committees); 

Section 8.12 (Meetings of District Nominating 

Committees); Section 8.13 (Election of District 

Nominating Committee Officers); Section 8.14 

(Expenses of District Nominating Committees); 

Section 8.15 (Notice to District Nominating 

Committee); Section 8.17 (District Nominating 

Committee Slate); Section 8.18 (Notification of 

Nomination); Section 8.19 (Uncontested Election); 

Section 8.20 (Designation of Additional 

Candidates); Section 8.22 (Requirement for Petition 

Supporting Additional Candidate); Section 8.23 

(Notice of Contested Election). See also proposed 

deletion of the term ‘‘District Nominating 

Committee’’ in FINRA Regulation By-Laws, Article 

I (Definitions) and Article IV, Section 4.16 

(Communication of Views Regarding Contested 

Election or Nomination). 

29See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.8 (Self-Nomination of 

Candidates and Vacancy Appointments). 

30Supra note 29. 

31See FINRA Regulation By-Laws, Article VIII, 

Section 8.17 (District Nominating Committee Slate). 

32FINRA Regulation By-Laws, Article I, 

paragraph (kk). 

33FINRA Regulation By-Laws, Article I, 

paragraph (bb). 

34FINRA Regulation By-Laws, Article I, 

paragraph (z). 

35See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.2 (Composition of District 

Committees). 

36Supra note 35. 

37See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.2 (Composition of District 

Committees), Section 8.9 (FINRA Members Eligible 

to Vote) and Section 8.17 (Election Results). 

38See FINRA By-Laws, Article I (Definitions) and 

Article VII, Section 4 (Composition and 

Qualifications of the Board); FINRA Regulation ByLaws, Article V, Section 5.2 (Number of Members 

and Qualifications). See also Securities Exchange 

Act Release No. 56145 (July 26, 2007), 72 FR 42169 

(August 1, 2007), as amended by Securities 

Exchange Act Release No. 56145A (May 30, 2008), 

73 FR 32377 (June 6, 2008) (Order Approving File 

No. SR–NASD–2007–023). 

39See FINRA Regulation By-Laws, Article VIII, 

Section 8.2 (Composition of District Committees). 

40See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.2 (Composition of District 

Committees). 

41See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.3 (Term of Office of District 

Committee Members). 

42See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.5 (Meetings of District 

Committees). See also proposed FINRA Regulation 

By-Laws, Article VIII, Section 8.1 (Establishment of 

Districts and Regions) (authorizing the Board to 

organize the districts into regions to promote 

efficiency and sound administration). 

including: the reduced role of the 

District Committees following the 1996 

21(a) Report; the perceived difficulties 

of undergoing the District Nominating 

Committee process (usually including 

rigorous interviews) as compared to the 

signature-collecting process of becoming 

a petition candidate; and the perception 

that slate candidates nominated by 

District Nominating Committees 

represent the industry less effectively 

than more ‘‘independent’’ petition 

candidates. 

Proposed Changes to the Nomination 

Process and Composition of District 

Committees 

Based on the concerns described 

above, FINRA proposes to eliminate the 

current nomination and petition 

process, including eliminating District 

Nominating Committees in their 

entirety,28 and to adopt a more 

streamlined self-nomination and 

election process that facilitates member 

candidacy and fosters representation 

from Small Firms, Mid-Size Firms and 

Large Firms (as further described 

below). As proposed, an individual 

meeting the qualification requirements 

of Section 8.2(a) of the By-Laws who is 

interested in running for election to a 

District Committee would simply 

deliver written notice of such intent to 

the Secretary of FINRA Regulation 

within 30 calendar days of the 

Secretary’s issuance of the Notice of 

election to FINRA members.29 Any 

individual meeting the qualification 

requirements would be designated as a 

candidate without having to undergo 

the current nominating or petition 

process.30 FINRA believes that direct 

candidate nomination and election by 

the membership would create a more 

accessible, transparent and effective 

election process. 

The current By-Laws task District 

Nominating Committees with 

endeavoring to secure appropriate and 

fair representation of the various 

sections of the district and classes and 

types of FINRA members within the 

district.31 To further this goal, FINRA 

proposes to require that each District 

Committee member represent and be 

directly elected by the applicable 

classification of members (that are 

eligible to vote in the district) based on 

the size of the firm with which he or she 

is associated. Specifically, candidates 

would represent one of the following 

three classifications, as are currently 

defined in the By-Laws, depending on 

the size of the firm with which they are 

associated: Small Firm (up to 150 

registered representatives),32 Mid-Size 

Firm (151 to 499 registered 

representatives),33 or Large Firm (500 or 

more registered representatives) 34 (the 

‘‘firm size classifications’’).35 As 

proposed, the Board would determine 

the composition of District Committees 

based on firm size classifications, taking 

into account the composition of the 

membership and the Board.36

To reflect the District Committees’ 

current composition, as well as the 

representation classifications employed 

by the FINRA Board of Governors (i.e., 

Large Firm, Mid-Size Firm and Small 

Firm Governors), the FINRA Regulation 

Board has determined that, if the 

proposed rule change is approved, 

three-sevenths of the District Committee 

members would be associated with 

Small Firms, one-seventh with Mid-Size 

Firms, and three-sevenths with Large 

Firms. Each classification of candidates 

would self-nominate and be subject to 

the vote of eligible firms in their size 

classification.37 Such ratios are 

generally consistent with those 

established under the FINRA By-Laws 

for the election of industry Governors 

on the Board of Governors and under 

the FINRA Regulation By-Laws for the 

election of industry members of the 

National Adjudicatory Council.38

The FINRA Regulation By-Laws 

currently require that a District 

Committee member be registered with a 

FINRA member eligible to vote in the 

applicable district and work primarily 

from such member’s principal office or 

a branch office that is located within the 

district where the member serves on a 

District Committee.39 The proposal 

would clarify that each District 

Committee member be associated with a 

FINRA member eligible to vote in the 

district for District Committee elections 

and registered in the capacity of a 

branch manager or principal or denoted 

as a corporate officer of the FINRA 

member.40 This requirement is designed 

to ensure that District Committee 

members have requisite experience for 

purposes of participating in the District 

Committee meetings. 

The FINRA Regulation By-Laws 

currently limit District Committee 

members to serving no more than two 

full three-year terms consecutively. The 

proposed rule change would limit this 

provision further, to prohibit 

consecutive full terms.41 This 

requirement would provide for turnover 

of representation on the District 

Committees, with the goal of bringing 

different perspectives and views to 

them, while still allowing individuals 

interested in serving multiple terms to 

do so on a non-consecutive basis. 

The proposed rule change would 

codify that District Committees would 

meet on a regional level, as has been 

their practice for several years; 42 as 

proposed, Schedule A of the By-Laws 

sets out the five regions and the districts 

in them. The proposed rule change 

would also eliminate the requirement 

for the election of district officers in 


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43See FINRA Regulation By-Laws, Article VIII, 

Section 8.6 (Election of District Officers). 44The proposed rule change would make a 

conforming amendment to eliminate the reference 

to consultation with the Chair of the District 

Committee regarding the logistics of District 

Committee meetings. See proposed FINRA 

Regulation By-Laws, Article VIII, Section 8.5 

(Meetings of District Committees). 

45See FINRA Regulation By-Laws, Article VIII, 

Section 8.2 (Composition of District Committees). 

46As noted above, all District Committees 

currently have nine members, with the exception of 

the New York District Committee, which has 12 

members; one-third of each District Committee’s 

positions are available for election each year. To 

effect the transition for all District Committees 

(except New York), and assuming the transition 

period were to start in 2011, the three current 

District Committee members whose terms expire in 

2011 would be replaced with three newly elected 

District Committee members, each representing a 

different firm size classification (Small Firm, MidSize Firm and Large Firm); in 2012 and 2013, the 

three current District Committee members whose 

terms expire in each of those years would be 

replaced with two newly elected District Committee 

members (in each year, one representing a Small 

Firm and one representing a Large Firm). At the end 

of the three-year transition period, the District 

Committee would consist of seven District 

Committee members with the proposed 3–1–3 ratio 

of Small Firm, Mid-Size Firm and Large Firm 

representation. The New York District Committee, 

which currently has four positions available for 

election each year, would elect five District 

Committee members in 2011 and 2012 (in each 

year, two representing Small Firms, one 

representing a Mid-Size Firm and two representing 

Large Firms) and four District Committee members 

in 2013 (two representing Small Firms and two 

representing Large Firms). The New York District 

Committee would then consist of 14 District 

Committee members, meeting the proposed 3–1–3 

ratio of Small Firm, Mid-Size Firm and Large Firm 

representation. 

47See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.8 (Self-Nomination of 

Candidates and Vacancy Appointments). 

48Supra note 47. See also proposed FINRA 

Regulation By-Laws, Article VIII, Section 8.4 

(Filling of Vacancies on District Committees) 

(granting comparable authority to the District 

Committee members to fill vacancies arising prior 

to the expiration of a District Committee member’s 

term of office, where the CEO or his or her designee 

determines, pursuant to Section 8.2(d), that such 

vacancy should be filled). 

49See FINRA Regulation By-Laws, Article VIII, 

Section 8.7 (Advisory Council). 

50See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.2 (Composition of District 

Continued 

current Section 8.6,43 to allow the 

flexibility to run a District Committee 

without officers if that is more efficient 

in particular districts, especially since 

the meetings are held on a regional basis 

and many administrative duties 

formerly performed by District 

Committee chairpersons (e.g., preparing 

meeting agendas and inviting speakers) 

are currently performed by FINRA 

staff.44

Committee Size Recalibration 

The FINRA Regulation By-Laws 

provide that a District Committee shall 

consist of between five and 20 members, 

unless otherwise provided by resolution 

of the Board, and that the authorized 

number of members shall be determined 

from time to time by the Board, with the 

caveat that any reduction in the 

authorized number of such members 

shall not shorten any existing member’s 

term.45 FINRA is proposing a 

recalibration of District Committee size 

consistent with this provision. 

Specifically, the Board has determined 

to reduce the size of each District 

Committee other than the New York 

District Committee by two, from nine to 

seven, and to increase the New York 

District Committee—the only district 

comprising its entire region—by two, 

from 12 to 14. 

The proposed reduction in the size of 

most District Committees would address 

the membership’s generally reduced 

interest in serving on District 

Committees, as described above, and 

accommodate the larger number of 

participants in current regional 

combined District Committee meetings 

as compared with former individual 

District Committee meetings. Both 

current and former District Committee 

members and FINRA staff have stated 

that while the meetings should be held 

on a regional basis, the number of 

participants can inhibit productive 

discussion by all committee members. 

Under the current structure, the West 

and South Regions, each composed of 

three districts, have up to 27 District 

Committee members attend regional 

meetings. The Midwest and North 

Regions, each composed of two districts, 

have up to 18 District Committee 

members attend regional meetings. The 

proposed structure would reduce 

attendees to 21 in the West and South 

Regions and 14 in the Midwest and 

North Regions. This size recalibration 

would allow each District Committee to 

meet the proposed 3–1–3 ratio of Small 

Firm, Mid-Size Firm and Large Firm 

representation. 

In contrast, the proposed increased 

District Committee size for the New 

York District would assure a larger pool 

of District Committee members is 

available to serve on hearing panels in 

the district; recognize the fact that, 

unlike any other district, it comprises its 

own region entirely; and allow it to 

meet the proposed 3–1–3 ratio of Small 

Firm, Mid-Size Firm and Large Firm 

representation. 

The proposed decrease in the 

authorized number of members from 

nine to seven on each District 

Committee (except New York, which 

would increase from 12 to 14) would 

not shorten the term of office of any 

existing District Committee member. 

The change in District Committee size 

would be effected over three years, 

concurrent with the expiration of 

current District Committee members’ 

terms, so that all current District 

Committee members would serve out 

their full terms.46

FINRA proposes that, if no individual 

seeks to be a candidate for a particular 

District Committee vacancy, the FINRA 

CEO, or his or her designee, will 

appoint an individual meeting the 

qualification requirements of Section 

8.2(a), including representing the 

applicable firm size classification, to the 

full term of that vacancy.47 If the FINRA 

CEO, or his or her designee, is unable 

to identify or appoint an individual 

meeting the requirement of representing 

the applicable firm size classification, 

he or she may appoint for that vacancy 

a qualified individual from another firm 

size classification.48

Proposed Elimination of the Advisory 

Council 

The proposed rule change would 

eliminate the Advisory Council. The 

Advisory Council is composed of the 

chairs of each of the District 

Committees, and is charged to provide 

input to the Committees and the Board 

on policy issues, including evaluation of 

the hearing process and industry 

practices, and to work closely with the 

District Committees to develop policy 

recommendations.49 The proposed 

streamlined District Committee 

structure and directly nominated and 

elected representation process, together 

with an initiative by FINRA to refocus 

District Committee meetings to better 

seek member views on their districts’ 

needs and responses to FINRA 

proposals, obviate the need for the 

Advisory Council. Given the changes 

proposed, FINRA would be able to 

realize the goals of the District 

Committee system, i.e., to seek member 

views on policy issues and 

recommendations, directly from the 

membership without the time and 

resource expenditures now required of 

Advisory Council members and FINRA 

staff. 

Other Proposed Changes 

The proposed rule change would 

make several other procedural and 

administrative changes. It would replace 

references to ‘‘Executive Vice President, 

Regulatory Policy and Programs’’ and 

the ‘‘Executive Vice President, Member 

Regulation’’ with the ‘‘Chief Executive 

Officer or his or her designee’’ to 

recognize organizational changes and 

provide for flexibility for future 

organizational changes without the need 

to amend the By-Laws in the future.50 It 


srobinson on DSKHWCL6B1PROD with NOTICES
12394 Federal Register / Vol. 76, No. 44 / Monday, March 7, 2011 / Notices 

Committees), Section 8.4 (Filling of Vacancies on 

District Committees), Section 8.5 (Meeting of 

District Committees), and Section 8.8 (SelfNomination of Candidates and Vacancy 

Appointments). 

51See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.10 (Administrative Support). 

52See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.11 (Ballots). 

53See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.12 (Vote Qualification List). 

54See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.14 (General Procedures for 

Qualification and Accounting of Ballots). 

55See proposed FINRA Regulation By-Laws, 

Article VIII, Section 8.17 (Election Results). 

56See proposed FINRA Regulation By-Laws, 

Article II, Section 2.1 (Location). 

57See proposed Schedule A to the FINRA 

Regulation By-Laws. 58 15 U.S.C. 78o–3(b)(6). 59 17 CFR 200.30–3(a)(12). 

would also make several changes to the 

election process to make it more 

streamlined and efficient, including 

centralizing it within the Corporate 

Secretary’s office, and diminishing the 

need for FINRA District office effort. 

FINRA proposes to permit the Corporate 

Secretary to develop published 

procedures for administrative support 

provided to candidates, which would 

allow the Secretary’s administrative 

experience with other FINRA elections 

to inform these procedures.51 The 

proposed rule change also would 

modify the ballot preparation to 

recognize this centralization within the 

Corporate Secretary’s office and the 

elimination of the District Nomination 

Committees.52 In addition, the proposed 

rule change would make the vote 

qualification lists in current Section 

8.26 tailored to firm size classification 

and the applicable list available upon 

request to a candidate based on the size 

of the firm with which he or she is 

associated, since many more candidates 

are foreseen under the new process, and 

FINRA anticipates that not all of them 

would likely need or seek these lists.53

The proposed rule change would 

simplify the tabulation of ballots by the 

Independent Agent by centralizing it 

under the Corporate Secretary.54 In 

addition, it would recognize that 

election results would be determined 

based on those firms in particular firm 

size classifications.55 Finally, it would 

make certain other administrative 

changes, such as revising the By-Laws to 

reflect the current address of FINRA 

Regulation’s registered office 56 and 

eliminating the obsolete reference to the 

Canal Zone in District No. 7.57

As noted in Item 2 of this filing, the 

effective date of the proposed rule 

change will be the date of Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,58 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change will result in a 

more accessible, transparent and 

effective District Committee election 

process and will align the 

representation of members on the 

District Committees to follow more 

closely the industry representation on 

the FINRA Board. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–FINRA–2011–011 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Cathy H. Ahn, Deputy Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2011–011. 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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

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

also will be available for inspection and 

copying at the principal office of 

FINRA. All comments received will be 

posted without change; the Commission 

does not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2011–011 and 

should be submitted on or before March 

28, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.59

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5080 Filed 3–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SELECTIVE SERVICE SYSTEM 

Form Submitted to the Office of 

Management and Budget for Extension 

of Clearance 

AGENCY: Selective Service System. 

ACTION: Notice. 

The following form has been 

submitted to the Office of Management 

and Budget (OMB) for extension of 


srobinson on DSKHWCL6B1PROD with NOTICES