47302 Federal Register / Vol. 74, No. 177 / Tuesday, September 15, 2009 / 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. 59788 

(April 17, 2009), 74 FR 18777 (‘‘Notice’’). 

4NASD Rule 2320 paragraph (a) governs best 

execution and paragraph (b) governs 

interpositioning. 

5See NASD Rule 2320(a). 

6 Id. 

7See NASD Rule 2320(b). 

8 Id. 

9See NASD Rule 2320(a). 

10 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). 

11 15 U.S.C. 78o–3(b)(6). 

12See, e.g., In re Thomson & McKinnon, 

Securities Exchange Act Release No. 8310 (May 8, 

1968). In that proceeding, an NASD member firm 

interposed broker-dealers between itself and the 

best available market, and the added transaction 

cost was borne by its customers. The Commission 

found that, ‘‘[i]n view of the obligation of a broker 

to obtain the most favorable price for his customer, 

where he interposes another broker-dealer between 

himself and a third broker-dealer, he prima facie 

has not met that obligation and he has the burden 

of showing that the customer’s total cost or 

proceeds of the transaction is the most favorable 

obtainable under the circumstances.’’ 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BX–2009–052. 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 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–BX–2009–052 and should 

be submitted on or before October 6, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22107 Filed 9–14–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60635; File No. SR–FINRA– 

2007–024] 

Self-Regulatory Organizations; 

Financial Industry Regulatory, Inc.; 

Order Approving Proposed Rule 

Change as Modified by Amendment 

No. 1 Thereto Amending Rule 2320 

Regarding Best Execution and 

Interpositioning 

September 8, 2009. 

On November 27, 2007, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) 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 amend NASD 

Rule 2320, Best Execution and 

Interpositioning. On April 13, 2009, 

FINRA filed Amendment No. 1 to the 

proposed rule change. The proposed 

rule change was published for comment 

in the Federal Register on April 24, 

2009.3 The Commission received no 

comments regarding the proposal. This 

order approves the proposed rule 

change, as modified by Amendment No. 

1. 

In its filing, FINRA proposed to 

amend NASD Rule 2320, which governs 

members’ obligations regarding best 

execution and interpositioning.4 Rule 

2320(a) provides that, in any transaction 

for or with a customer or a customer of 

another broker-dealer, a member must 

use ‘‘reasonable diligence to ascertain 

the best market for the subject security,’’ 

so that the resulting price to the 

customer is ‘‘as favorable as possible 

under prevailing market conditions.’’ 5

A number of factors will be considered 

in determining whether the member 

exercised reasonable diligence, 

including the character of the market for 

the security, the size and type of the 

transaction, and the terms and 

conditions of the order that resulted in 

the transaction.6

Currently, Rule 2320(b) prohibits a 

member from interposing a third party 

between the member and the best 

available market for a security, unless 

the member ‘‘can demonstrate that to 

his knowledge at the time of the 

transaction the total cost or proceeds of 

the transaction * * * was better than 

the prevailing inter-dealer market for 

the security.’’ 7 In addition, a member’s 

obligations to its customer ‘‘are 

generally not fulfilled’’ under the 

current Rule when interposing a third 

party, unless the member can show that 

the interpositioning ‘‘reduced the costs 

of the transactions to the customer.’’ 8

With this rule change, FINRA 

proposed to apply the standards 

governing best execution, which are set 

forth in Rule 2320(a), to 

interpositioning. As such, a member 

interposing a third party will have to 

use ‘‘reasonable diligence to ascertain 

the best market for the subject security,’’ 

so that the resulting price to the 

customer is ‘‘as favorable as possible 

under prevailing market conditions.’’ 9

FINRA also proposed to make 

conforming amendments to other NASD 

and FINRA rules to reflect the redesignation of Rule 2320. 

The Commission has carefully 

reviewed the proposed rule change and 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a registered 

securities association 10 and, in 

particular, Section 15A(b)(6) of the 

Act,11 which 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 stating that interpositioning 

generally does not fulfill a member’s 

obligation to its customer unless that 

interpositioning ‘‘reduced the costs of 

the transactions to the customer,’’ the 

current rule contains a presumption 

against interpositioning.12 FINRA stated 

in its filing that the presumption is 

overbroad and may not accurately 

reflect the realities of the current 

market. The Commission understands 


sroberts on DSKD5P82C1PROD with NOTICES
Federal Register / Vol. 74, No. 177 / Tuesday, September 15, 2009 / Notices 47303 

13See, e.g., In re Andrew P. Gonchar and 

Polyvious T. Polyviou, Securities Exchange Act 

Release No. 34–60506 (August 14, 2009). 

14See Notice, supra note 3, at 18778. 

15 Id. at 18778. 

16 Id. at 18779. 

In addition to the proposed rule language, other 

FINRA and NASD rules would continue to govern 

the handling of customer orders. In particular, 

FINRA Rule 2010 requires that members observe 

high standards of commercial honor and just and 

equitable principles of trade, and NASD Rule 2440 

requires that members charge fair prices and 

commissions in their dealings with customers. 

17 Id. at 18778 n.4. 

18See In re Andrew P. Gonchar and Polyvious T. 

Polyviou, supra note 13. 19 17 CFR 200.30–3(a)(12). 

FINRA’s argument that the rule, as 

currently written, may be overbroad. 

There have been a number of changes in 

the markets since the time the rule was 

adopted by the NASD in 1968. However, 

the Commission believes that there 

continue to be opportunities for 

unscrupulous participants in the 

marketplace to interposition third 

parties in a securities transaction 

between themselves and their customers 

to the disadvantage of those 

customers.13 The Commission expects 

FINRA, when it finds evidence of 

interpositioning by members that was 

detrimental to the customer, to charge 

member firms or associated persons, as 

appropriate, with violations of its rules. 

The Commission notes that its 

approval of this rule change is not an 

indication that interpositioning is no 

longer an issue. Rather, it is meant to 

reflect changes in the market place that 

have occurred since 1968 when the rule 

was adopted.14 The Commission notes 

that, even with this rule change, the cost 

to the customer under the proposed rule 

will ‘‘remain a crucial factor in 

determining whether a member has 

fulfilled its best execution obligations 

under Rule 2320,’’ including 

transactions involving interposed third 

parties.15 The Commission also notes 

that interpositioning ‘‘that is 

unnecessary or violates a member’s 

general best execution obligations— 

either because of unnecessary costs to 

the customer or improperly delayed 

executions—would still be 

prohibited.’’ 16 In this respect, the 

Commission takes comfort from 

FINRA’s representations that 

interpositioning that harms a customer 

violates NASD Rule 2440 and FINRA 

Rule 2010.17

The proposed rule will thus continue 

to prohibit interpositioning that 

adversely affects the customer, and the 

cost to the customer will remain a 

central part of that determination. The 

Commission expects FINRA to 

diligently pursue such conduct by 

members.18

It is therefore ordered, pursuant to 

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

proposed rule change (SR–FINRA– 

2007–024), as modified by Amendment 

No. 1, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22109 Filed 9–14–09; 8:45 am] 

BILLING CODE 8010–01–P 

DEPARTMENT OF STATE 

[Public Notice 6760] 

Culturally Significant Objects Imported 

for Exhibition Determinations: ‘‘Art of 

the Samurai: Japanese Arms and 

Armor, 1156–1868’’ 

SUMMARY: Notice is hereby given of the 

following determinations: Pursuant to 

the authority vested in me by the Act of 

October 19, 1965 (79 Stat. 985; 22 U.S.C. 

2459), Executive Order 12047 of March 

27, 1978, the Foreign Affairs Reform and 

Restructuring Act of 1998 (112 Stat. 

2681, et seq.; 22 U.S.C. 6501 note, et 

seq.), Delegation of Authority No. 234 of 

October 1, 1999, Delegation of Authority 

No. 236 of October 19, 1999, as 

amended, and Delegation of Authority 

No. 257 of April 15, 2003 [68 FR 19875], 

I hereby determine that the objects to be 

included in the exhibition ‘‘Art of the 

Samurai,’’ imported from abroad for 

temporary exhibition within the United 

States, are of cultural significance. The 

objects are imported pursuant to loan 

agreements with the foreign owners or 

custodians. I also determine that the 

exhibition or display of the exhibit 

objects at the Metropolitan Museum of 

Art, New York, NY, from on or about 

October 19, 2009, until on or about 

January 10, 2010, and at possible 

additional exhibitions or venues yet to 

be determined, is in the national 

interest. Public Notice of these 

Determinations is ordered to be 

published in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: For 

further information, including a list of 

the exhibit objects, contact Carol B. 

Epstein, Attorney-Adviser, Office of the 

Legal Adviser, U.S. Department of State 

(telephone: 202/632–6473). The address 

is U.S. Department of State, SA–5, L/PD, 

Fifth Floor, Washington, DC 20522– 

0505. 

Dated: September 8, 2009. 

Maura M. Pally, 

Deputy Assistant Secretary for Professional 

and Cultural Exchanges, Bureau of 

Educational and Cultural Affairs, Department 

of State. 

[FR Doc. E9–22173 Filed 9–14–09; 8:45 am] 

BILLING CODE 4710–05–P 

DEPARTMENT OF STATE 

[Public Notice 6761] 

Determination and Certification 

Related to Colombian Armed Forces 

Under Section 7046(B) of the 

Department of State, Foreign 

Operations, and Related Programs 

Appropriations Act, 2009 (DiV. H, Pub. 

L. 111–8) 

Pursuant to the authority vested in the 

Secretary of State, including under 

section 7046 (b)(1)(B) and section 

7046(b)(2) of the Department of State, 

Foreign Operations, and Related 

Programs Appropriations Act, 2009 

(Div. H, Pub. L. 111–8 (‘‘FY 2009 

SFOAA’’), I hereby determine, certify, 

and report that the Colombian Armed 

Forces are meeting the conditions 

contained in section 7046(b)(1)(B) and 

section 7046(b)(2). 

The Department of State has 

periodically consulted with 

internationally recognized human rights 

organizations regarding the Colombian 

Armed Forces’ progress in meeting the 

above-mentioned conditions, as 

provided in section 7046(c) of the FY 

2009 SFOAA. 

This Determination and Certification 

shall be published in the Federal 

Register and copies shall be transmitted 

to the appropriate committees of 

Congress. 

Dated: September 8, 2009. 

James B. Steinberg, 

Deputy Secretary of State. 

[FR Doc. E9–22174 Filed 9–14–09; 8:45 am] 

BILLING CODE 4710–29–P 

DEPARTMENT OF STATE 

[Public Notice 6759] 

Determination Under the Foreign 

Assistance Act and the Department of 

State, Foreign Operations, and Related 

Programs Appropriations Acts 

Pursuant to section 654(c) of the 

Foreign Assistance Act of 1961, as 

amended, notice is hereby given that the 

Deputy Secretary of State has made a 

determination pursuant to section 620H 

of the Foreign Assistance Act, and 

section 7021 of the Department of State, 


sroberts on DSKD5P82C1PROD with NOTICES