8770 Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 

14See Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca–2006–21). 

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

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of 

(1) FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from the New York Stock Exchange 

(‘‘Incorporated NYSE Rules’’) (together, the NASD 

Rules and Incorporated NYSE Rules are referred to 

as the ‘‘Transitional Rulebook’’). While the NASD 

Rules generally apply to all FINRA members, the 

Incorporated NYSE Rules apply only to those 

members of FINRA that are also members of the 

NYSE (‘‘Dual Members’’). The FINRA Rules apply to 

all FINRA members, unless such rules have a more 

limited application by their terms. For more 

information about the rulebook consolidation 

process, see Information Notice, March 12, 2008 

(Rulebook Consolidation Process). 

4For convenience, the Incorporated NYSE Rules 

are referred to as the ‘‘NYSE Rules.’’ 

5NYSE Rule 405(4) was adopted by the NYSE in 

the late 1960’s. In 1977, the NYSE proposed 

amendments to Rule 405(4) to define the term 

‘‘isolated’’ to mean ‘‘not exceeding five $2,000 

transactions during any twelve-month period unless 

otherwise approved by the NYSE,’’ and to allow 

unsolicited purchases as well as sales of securities. 

In late 1977, the SEC instituted proceedings to 

determine whether to disapprove the proposed rule 

change and identified the potential grounds for 

disapproval. See Securities Exchange Act Release 

No. 14143 (November 7, 1977) (Order Instituting 

Proceedings to Determine Whether Proposed 

Changes to Rule 405 Should be Disapproved; File 

No. SR–NYSE–76–34). The SEC expressed concern 

that ‘‘execution of such transactions, and in 

particular of purchases [as proposed], in the 

common purchase and sale account may permit 

opportunities for fraudulent and manipulative acts 

or practices[.]’’ In February 1978, the NYSE 

withdrew the filing. See Securities Exchange Act 

Release No. 14630 (April 3, 1978) (Order Approving 

Withdrawal of NYSE’s Proposed Changes to Rule 

405; File No. SR–NYSE–76–34). 

6FINRA notes that in the event a member may 

seek permission not to send customer account 

statements under certain limited circumstances, 

proposed FINRA Rule 2231 which relates to 

customer account statements, would authorize 

FINRA to exempt members from the provisions of 

such rule, including the requirement to deliver 

periodic account statements, pursuant to the Rule 

9600 Series. See Securities Exchange Act Release 

No. 59921 (May 14, 2009), 74 FR 23912 (May 21, 

2009) (Notice of Filing; File No. SR–FINRA–2009– 

028). 

non-members and do not unfairly or 

unreasonably discriminate between 

customers, issuers, brokers, or dealers 

because the proposed physical port fees 

do not distinguish among the type of 

participant but rather are the same for 

all Members and non-members. The 

Commission also believes that BATS 

was subject to significant competitive 

pressure to act equitably, fairly, and 

reasonably in setting the physical port 

fees, in light of the highly competitive 

nature of the market for execution and 

routing services.14

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,15 that the 

proposed rule change (SR–BATS–2009– 

032), as modified by Amendment No. 1 

thereto, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–3822 Filed 2–24–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61543; File No. SR–FINRA– 

2010–005] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Repeal 

Incorporated NYSE Rule 405(4) 

(Common Sales Accounts) 

February 18, 2010. 

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 January 21, 2010, 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II, 

and III below, which Items have 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 repeal 

Incorporated NYSE Rule 405(4) 

(Common Sales Accounts) as part of the 

process to develop the consolidated 

FINRA rulebook. 

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 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to repeal NYSE 

Rule 405(4) (Common Sales Accounts).4

NYSE Rule 405(4) (Common Sales 

Accounts) requires proper supervision 

of registered representatives handling 

common sales accounts. The rule 

provides that a member may facilitate 

the isolated liquidation of securities 

valued at $1,000 or less registered in the 

name of an individual who does not 

have an account, and which are not part 

of any distribution, through a common 

sales account set up for the specific 

purpose of handling such sales. The rule 

further provides that such sales may be 

effected on behalf of the customer 

without requiring the member to send a 

periodic customer account statement to 

the individual as otherwise generally 

required, provided the following 

conditions are satisfied: (1) The 

customer is identified as the individual 

in whose name the securities are 

registered; (2) the securities are received 

by the member, at or prior to the time 

of the entry of the order, in the exact 

amount to be sold in good delivery 

form; (3) a confirmation is sent to the 

customer; (4) all proceeds of such sales 

are paid out on or immediately 

following settlement date; and (5) a 

record is made in the common sales 

account that includes certain customerspecific information. 

FINRA believes that the rule as 

written may raise potential investor 

protection concerns. The term ‘‘isolated’’ 

is not defined.5 Further, NYSE Rule 

405(4) permits a member to effect sales 

of securities for customers without 

expressly requiring prior customer 

consent and without the need to send 

periodic account statements to the 

customer. For these reasons, FINRA 

proposes to eliminate NYSE Rule 405(4) 

and not adopt its content into the 

Consolidated FINRA Rulebook.6

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than 90 days 

following Commission approval. The 

implementation date will be no later 

than 180 days following Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 8771 

7 15 U.S.C. 78o–3(b)(6). 8 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 of 1934 Release No. 

61253 (December 29, 2009), 75 FR 0475. 

4The current FINRA rulebook consists of 

(1) FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see Information 

Notice, March 12, 2008 (Rulebook Consolidation 

Process). 

5For purposes of the rule, ‘‘customer’’ means any 

person who, in the regular course of such member’s 

business, has cash or securities in the possession of 

such member. 

of Section 15A(b)(6) of the Act,7 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 streamline 

and improve FINRA’s rulebook by 

eliminating a rule that contains terms 

that are not clearly defined and may 

raise potential investor protection 

concerns. 

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 35 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 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–2010–005 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2010–005. 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 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–2010–005 and 

should be submitted on or before March 

18, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–3780 Filed 2–24–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61540; File No. SR–FINRA– 

2009–081] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

FINRA Rule 2261 (Disclosure of 

Financial Condition) in the 

Consolidated FINRA Rulebook 

February 18, 2010. 

On November 18, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association of 

Securities Dealers, Inc. (‘‘NASD’’)) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to adopt FINRA Rule 2261 

(Disclosure of Financial Condition) in 

the Consolidated FINRA Rulebook. The 

proposed rule change was published for 

comment in the Federal Register on 

January 5, 2010.3 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change. 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),4

FINRA proposed adopting NASD Rule 

2270 (Disclosure of Financial Condition 

to Customers) and NASD Rule 2910 

(Disclosure of Financial Condition to 

Other Members), subject to certain 

amendments, as FINRA Rule 2261 in the 

Consolidated FINRA Rulebook. 

NASD Rule 2270 requires members to 

make available for inspection, upon the 

request of any bona fide regular 

customer,5 the information relative to 

such member’s financial condition as 

disclosed in its most recent balance 

sheet prepared either in accordance 


jlentini on DSKJ8SOYB1PROD with NOTICES