Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices 47631 

9See 31 U.S.C. 5318(h)(1)(D). See also 31 CFR 

103.120 (AML programs requirements for financial 

institutions regulated by, among others, selfregulatory organizations). 

10See Letter from Jamal El-Hindi, Associate 

Director, Regulatory Policy & Programs Division, 

FinCEN, to Nancy M. Morris, Secretary, SEC 

(August 22, 2007) (‘‘FinCEN Comment Letter’’). 

FinCEN submitted the letter to the SEC in response 

to the NYSE’s ‘‘omnibus filing,’’ which sought to 

achieve greater harmonization between the NYSE 

and NASD rules, including the AML compliance 

program rules (SR–NYSE–2007–22). See Securities 

Exchange Act Release No. 56142 (July 16, 2007), 72 

FR 42195 (August 1, 2007). 

11See supra note 4. 

12Cutter, Dorn, and Nestlerode. 

13 Id. The commenters asserted that employees of 

a small broker-dealer have an interest in bringing 

problems to light, not ignoring them. 

14Cutter, Dorn, Joseph James, RW Smith, Sage 

Rutty, and Trubee Collins. 

15Nestlerode, Cutter, RW Smith, and Dorn. 

16See FINRA’s Response, supra note 5. See also 

FinCEN Comment Letter, supra note 10 and 

accompanying text. 

17 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). 

18 15 U.S.C. 78o–3(b)(6). 

19See FinCEN Comment Letter, supra note 10 and 

accompanying text. 

20 15 U.S.C. 78s(b)(2). 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

substantive change into the 

Consolidated FINRA Rulebook as 

FINRA Rule 3310 (AML Compliance 

Program). In addition, the proposed rule 

change would adopt NASD IM–3011–2, 

without substantive change, as 

supplementary material to proposed 

FINRA Rule 3310. 

With respect to NASD IM–3011–1, the 

proposed rule change would adopt its 

provisions as supplementary material to 

proposed FINRA Rule 3310, but would 

eliminate the independent testing 

exception. The Financial Crimes 

Enforcement Network (‘‘FinCEN’’), a 

bureau within the Department of the 

Treasury that is responsible for 

administering the BSA and its 

implementing regulations, has stated 

that the independent testing provision 

of the BSA 9 precludes AML program 

testing by personnel with an interest in 

the outcome of the testing and that an 

independent testing exception, such as 

the one in NASD IM–3011–1, is 

inconsistent with the BSA’s 

independent testing provision and 

FinCEN’s interpretation of this 

provision.10 Accordingly, consistent 

with FinCEN’s guidance, FINRA is 

proposing to eliminate the independent 

testing exception in connection with its 

adoption of proposed FINRA Rule 3310. 

Finally, as stated previously, the 

proposed rule change would delete 

Incorporated NYSE Rule 445 and its 

related supplementary material in their 

entirety as duplicative. 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. 

III. Comment Letters 

Seven commenters raised objections 

to the elimination of the independent 

testing exception.11 Three commenters 

expressed their view that the exception 

was being eliminated to address a 

problem that has not been shown to 

exist.12 These commenters also took 

exception with FinCEN’s view that the 

independent testing exception was 

inconsistent with the requirements of 

the BSA.13 Commenters also expressed 

concern that elimination of the 

independent testing exception would 

require small firms to incur additional 

expenses.14 Some commenters also 

suggested that FINRA should seek 

additional member comment on the 

proposed elimination of the 

independent testing exception.15 In 

responding to the comments, FINRA 

stated that it was proposing to eliminate 

the independent testing exception to be 

consistent with FinCEN’s views 

regarding the BSA’s independent testing 

requirements.16

IV. Discussion and Findings 

After a careful review of the proposal, 

the comments received, and FINRA’s 

Response, the Commission finds that 

the proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder applicable to FINRA.17 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 15A(b)(6) of the Exchange 

Act,18 which requires, among other 

things, that FINRA’s rules be designed 

to prevent fraudulent and manipulative 

practices and to promote just and 

equitable principles of trade. 

The Commission finds that the 

proposed rule change is reasonably 

designed to accomplish these ends by 

aligning the independent testing 

requirements of proposed FINRA Rule 

3310 with FinCEN’s interpretation of 

the BSA’s independent testing 

requirement. The Commission notes in 

particular that FinCEN is responsible for 

administering the BSA and its 

implementing regulations. In light of 

FinCEN’s view that the independent 

testing provisions of the BSA preclude 

AML program testing by persons with 

an interest in the outcome of the test, 

the independent testing exception in 

NASD IM–3011–1, is not consistent 

with the BSA.19

V. Conclusion 

It is therefore concluded, pursuant to 

Section 19(b)(2) of the Exchange Act,20

that the proposed rule change (SR– 

FINRA–2009–039) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22240 Filed 9–15–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60642; File No. SR–ISE– 

2009–61] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Regarding Exposure of 

Reserve Orders 

September 9, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on August 

27, 2009, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission the proposed 

rule change as described in Items I, II, 

and III below, which items have been 

prepared by the self-regulatory 

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 is proposing to amend 

its rules to adopt an interpretation to its 

rules related to the exposure of reserve 

orders. The text of the proposed rule 

change is as follows, with additions in 

italics: 

Rule 717. Limitations on Orders 

(a) through (g) no change. 

Supplementary Material to Rule 717 

.01–.04 no change. 

.05 With respect to the non-displayed 

reserve portion of a reserve order, the 

exposure requirement of paragraphs (d) 

and (e) are satisfied if the displayable 


srobinson on DSKHWCL6B1PROD with NOTICES
47632 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices 

3 ISE Rule 715(g). 

4Nasdaq Rules, Chapter VII, Sec. 12 (Order 

Exposure Requirements), Commentary .03. 

5 Id. 

6 17 CFR 240.19b–4(f)(6). 

7Supra note 4. 

portion of the reserve order is displayed 

at its displayable price for one second. 

* * * * * 

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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 

(a) Purpose—The purpose of the 

proposal is to adopt an interpretation to 

ISE Rule 717(d) and (e) to specify that 

the exposure requirement contained in 

these paragraphs is satisfied with 

respect to the non-displayed reserve 

portion of a reserve order if the 

displayable portion is displayed at its 

displayable price for one second. A 

reserve order is an order where only a 

portion of the full size is included in the 

Exchange’s disseminated quotation.3

The displayed size is executed 

according to the Exchange’s regular 

priority rules, and is refreshed with 

additional volume from the nondisplayed portion of the order. The nondisplayed portion of the reserve order is 

available for execution only after the 

exchange’s displayed quote is fully 

exhausted. 

Under the proposed interpretation, 

after entering a reserve order, a member 

may enter a contra-side order for its own 

account or a contra-side order that was 

solicited from another broker-dealer that 

would execute against the displayable 

and non-displayed portions of the order 

so long as the displayable portion of the 

order was displayed on the ISE (i.e., the 

price of the order is at the ISE BBO) for 

at least one second. This proposed 

interpretation is the same as an existing 

interpretation to the rule of the Nasdaq 

Options Market that contains the same 

exposure requirements as ISE Rule 

717(d) and (e).4 Accordingly, the 

Commission has previously determined 

that display of the displayable portion 

of a reserve order is sufficient to satisfy 

the exposure requirements of ISE Rule 

717(d) and (e). 

(b) Basis—The basis under the Act for 

this proposed rule change is the 

requirement under Section 6(b)(5) that 

an exchange have rules that are 

designed to promote just and equitable 

principles of trade, and to remove 

impediments to and perfect the 

mechanism for a free and open market 

and a national market system, and in 

general, to protect investors and the 

public interest. In particular, the 

proposal is the same as an existing rule 

of another exchange,5 and will provide 

members with certainty with respect to 

the applicable exposure requirements 

for reserve orders. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose 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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

This proposed rule change does not 

significantly affect the protection of 

investors or the public interest, does not 

impose any significant burden on 

competition, and, by its terms, does not 

become operative for 30 days after the 

date of the filing, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest. The 

Exchange provided the Commission 

with written notice of its intent to file 

the proposed rule change, along with a 

brief description and text of the 

proposed rule change, at least five 

business days prior to the date of filing 

the proposed rule change as required by 

Rule 19b–4(f)(6).6 The proposed rule 

change is the same as a rule that the 

Commission has previously approved 

for another self-regulatory organization.7

For the foregoing reason, this rule filing 

qualifies for immediate effectiveness as 

a ‘‘non-controversial’’ rule change under 

paragraph (f)(6) of Rule 19b–4 of the 

Act. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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 proposal 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–ISE–2009–61 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–ISE–2009–61. 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 inspection and copying 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 ISE. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices 47633 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5See Securities Exchange Act Release No. 59757 

(April 13, 2009), 74 FR 18268 (April 21, 2009) 

(Order Approving File No. SR–FINRA–2009–006). 

6See Securities Exchange Act Release No. 60424 

(August 4, 2009), 74 FR 39984 (August 10, 2009) 

(Notice of Filing and Immediate Effectiveness; File 

No. SR–FINRA–2009–049). 

7See Regulatory Notice 09–41 (July 2009). 

8Within the six-month period following the 

implementation of Rule 1032(i), individuals who 

are registered as a General Securities Representative 

and function in a member’s investment banking 

business line as described in Rule 1032(i) may opt 

in to the Limited Representative-Investment 

Banking registration category. After the six-month 

opt-in period, individuals who perform the job 

functions set out in Rule 1032(i) will be required 

to pass the Series 79 exam in lieu of the General 

Securities Representative (‘‘Series 7’’) exam (or 

equivalent exams), unless subject to an exception in 

the Rule. 

9 15 U.S.C. 78o–3(b)(5). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(2). 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–ISE–2009–61 and should be 

submitted on or before October 7, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22245 Filed 9–15–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60640; File No. SR–FINRA– 

2009–056] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Fee for 

Investment Banking Representative 

Examination 

September 9, 2009. 

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 August 

26, 2009, 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. FINRA has 

designated the proposed rule change as 

‘‘establishing or changing a due, fee or 

other charge’’ under Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 

4(f)(2) thereunder,4 which renders the 

proposal effective upon receipt of this 

filing by the Commission. 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 

Schedule A to the FINRA By-Laws to 

establish a fee for the new Investment 

Banking Representative Examination 

(‘‘Series 79’’). 

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 

On April 13, 2009, the Commission 

approved NASD Rule 1032(i), which 

establishes a new limited representative 

category—Limited RepresentativeInvestment Banking—for persons whose 

activities are limited to investment 

banking and those who supervise such 

activities.5 FINRA has developed the 

Series 79 program to ensure that persons 

associated with FINRA members 

seeking to register as investment 

banking representatives have attained 

specified levels of competence and 

knowledge. On July 28, 2009, FINRA 

filed with the Commission the Series 79 

selection specifications and content 

outline.6 The examination will be 

implemented on November 2, 2009.7

The proposed rule change would 

amend Section 4 of Schedule A to 

FINRA By-Laws to establish a fee of 

$265 for an associated person to take the 

Series 79 exam. The fee is the same as 

that for the General Securities 

Representative exam (‘‘Series 7’’) 8 and 

is based on the costs to FINRA to 

develop and administer the exam. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

implementation date will be November 

2, 2009, to coincide with the 

implementation date of NASD Rule 

1032(i). 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the Act, 

including Section 15A(b)(5) of the Act,9

which requires, among other things, that 

FINRA rules provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among members and 

issuers and other persons using any 

facility or system that FINRA operates 

or controls. FINRA believes the 

proposed rule change is designed to 

accomplish these ends by equitably 

assessing the costs associated with 

developing and administering the 

examination program. 

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 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 10 and subparagraph (f)(2) of 

Rule 19b–4 thereunder.11 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

may summarily abrogate 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: 


srobinson on DSKHWCL6B1PROD with NOTICES