46828 Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For example, FINRA records show that since 

2000, the average number of registered persons per 

year has been approximately 667,680 and that for 

each of the past three years the population has been 

669,626 (2009), 676,927 (2008) and 662,742 (2007) 

(based on numbers at the end of the preceding 

calendar year). 

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 the filing also will be available 

for inspection and copying at the 

principal office 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–NYSEAmex–2009–59 and 

should be submitted on or before 

October 2, 2009. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21887 Filed 9–10–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60624; File No. SR–FINRA– 

2009–057] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Section 1(c) of Schedule A to the 

FINRA By-Laws To Amend the 

Personnel Assessment and Gross 

Income Assessment 

September 3, 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 

20, 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. 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 change Section 

1(c) of Schedule A to the FINRA ByLaws (‘‘Schedule A’’) to amend the 

Personnel Assessment and Gross 

Income Assessment paid by each FINRA 

member. 

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 

FINRA’s primary member regulatory 

pricing structure consists of the 

following fees: the Personnel 

Assessment (‘‘PA’’); the Gross Income 

Assessment (‘‘GIA’’); the Trading 

Activity Fee; and the Branch Office 

Assessment. These fees are used to fund 

FINRA’s regulatory activities, including 

rulemaking and FINRA’s examination 

and enforcement programs. 

The proposed rule change would 

amend the PA and GIA to achieve a 

more consistent and predictable funding 

stream to carry out FINRA’s regulatory 

mandate. The economic and industry 

downturns experienced in 2008 and 

2009 have strained FINRA’s resources, 

yet its regulatory responsibilities remain 

constant and its programs robust. 

FINRA believes the proposed rule 

change is needed to stabilize its 

revenues and provide protection against 

future industry downturns. 

To those ends, the proposed rule 

change first would increase the PA for 

all members. The PA is currently 

assessed on a three-tiered rate structure: 

members with one to five registered 

representatives and principals are 

assessed $75 for each such registered 

person; 6–25 registered persons, $70 

each; and 26 or more registered persons, 

$65 each. The proposed rule change 

would increase those rates to $150, $140 

and $130, respectively, based on the 

same tiered structure. This proposal 

would represent the first PA rate 

increase in over five years. Moreover, 

given the correlation between the cost of 

FINRA’s regulatory programs and the 

number of registered persons within a 

firm, FINRA notes that the population of 

registered persons has remained fairly 

stable, even throughout the recent 

economic downturn.3 Accordingly, 

FINRA believes an increase of the PA is 

both a fair and appropriate means to 

achieve a more consistent and reliable 

foundation to fund its regulatory 

operations. 

Even with the proposed increase of 

the PA, the GIA remains the most 

important component of FINRA’s 

regulatory funding. The GIA is currently 

assessed through a seven-tier rate 

structure with a minimum GIA of 

$1,200.00. Under the existing GIA rate 

structure, members are required to pay 

an annual GIA as follows: 

(1) $1,200.00 on annual gross revenue 

up to $1 million; 

(2) 0.1215% of annual gross revenue 

greater than $1 million up to $25 

million; 

(3) 0.2599% of annual gross revenue 

greater than $25 million up to $50 

million; 

(4) 0.0518% of annual gross revenue 

greater than $50 million up to $100 

million; 

(5) 0.0365% of annual gross revenue 

greater than $100 million up to $5 

billion; 

(6) 0.0397% of annual gross revenue 

greater than $5 billion up to $25 billion; 

and 

(7) 0.0855% of annual gross revenue 

greater than $25 billion. 

For 2010, the current year GIA would 

be subject to the cap set forth in 

Regulatory Notice 08–07 (February 

2008), which describes the new funding 

structure that resulted from the 

consolidation of NASD’s and the New 

York Stock Exchange’s member 

regulation operations. FINRA states in 

the Notice that it will apply a tenpercent cap on any increase or decrease 

to a firm’s 2010 current year GIA 

resulting from the new pricing structure 

implemented in January 2008. 


cprice-sewell on DSKGBLS3C1PROD with NOTICES
Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 46829 

4 Gross revenue for assessment purposes is set out 

in Section 2 of Schedule A, which defines gross 

revenue as total income as reported on FOCUS form 

Part II or IIA excluding commodities income. 

5The actual amount of GIA assessed in any given 

year—e.g., the current year GIA (including a cap, if 

applicable) or the three-year average—will be used 

to calculate subsequent three-year average 

determinations. 6 15 U.S.C. 78o–3(b)(5). 7 17 CFR 200.30–3(a)(12). 

Since the GIA is assessed based on a 

member’s annual gross revenue for the 

preceding calendar year,4 FINRA’s 

revenues derived from the GIA are 

subject to the year-to-year volatility of 

member revenues. In years where 

industry revenues are significantly 

down, FINRA’s operating revenues can 

drop precipitously: in 2009, for 

example, GIA revenues are down 

approximately 37 percent due to 2008 

fourth quarter write-offs taken by 

members, particularly the largest 

securities firms. 

The proposed rule change thus seeks 

to ameliorate this vulnerability by not 

only shifting some of FINRA’s revenue 

generation to the more consistent PA 

stream, but also by smoothing out the 

volatility inherent in the GIA. To that 

end, the proposed rule change would 

further amend Schedule A to assess a 

GIA of the greater of (1) the amount that 

would be the GIA based on the existing 

rate structure (‘‘current year GIA’’) or (2) 

a three-year average of the GIA to be 

calculated by adding the current year 

GIA plus the GIA assessed on the 

member over the previous two calendar 

years, divided by three. For a newer 

firm that has only been assessed in the 

prior year, FINRA would compare the 

current year GIA to the two-year average 

and assess the greater amount. The 

existing GIA rate structure and phase-in 

implementation through 2010 would 

remain the same.5 Accordingly, the 

proposed rule change would preserve 

the current rate structure, while 

building a buffer against industry 

downturns. FINRA notes that it has a 

long history of providing rebates to 

members when revenues exceed the 

expenditures necessary to discharge its 

regulatory obligations and is committed 

to continuing that practice in the future. 

FINRA believes the proposed rule 

change will stabilize its operating cash 

flows by augmenting revenues based on 

the registered person population, where 

FINRA’s costs are more closely aligned, 

and reducing dependency on, and 

exposure to, less predictable industry 

revenues. FINRA estimates that if the 

proposed rule change had been in effect 

for 2009, it would have replaced about 

90% of the revenue shortfall that 

resulted primarily from the significant 

drop in GIA revenues. In general, those 

replacement revenues would come from 

several larger firms whose steep income 

declines in 2008 primarily account for 

FINRA’s current revenue deficit. 

As noted in Item 2 of this filing, 

FINRA will announce the proposed rule 

change and subsequent approval in a 

Regulatory Notice. The proposed rule 

change will become effective January 1, 

2010. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(5) of the Act,6 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. 

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–2009–057 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–2009–057. 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 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–2009–057 and 

should be submitted on or before 

October 2, 2009. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21885 Filed 9–10–09; 8:45 am] 

BILLING CODE 8010–01–P 


cprice-sewell on DSKGBLS3C1PROD with NOTICES