8938 Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / 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. 65700 

(November 7, 2011), 76 FR 70523 (November 14, 

2011). 

4See Letter from Pat Nelson, dated November 30, 

2011 (‘‘Nelson’’); George Hessler, Stock USA 

Execution Services, Inc., to Marcia Asquith, 

Secretary, FINRA, dated November 25, 2011 (‘‘Stock 

USA’’); Holly H. Smith and Susan S. Krawczyk, 

Sutherland Asbill & Brennan LLP, for the 

Committee of Annuity Insurers, to Elizabeth M. 

Murphy, Secretary, SEC, dated December 5, 2011 

(‘‘CAI’’); Howard Spindel and Cassondra E. Joseph, 

Integrated Management Solutions USA LLC, dated 

December 5, 2011 (‘‘IMS letter’’); Nancy Brda to 

Elizabeth M. Murphy, Newedge USA, LLC, dated 

December 5, 2011 (‘‘Newedge’’) (Available at 

http://www.sec.gov/comments/sr-finra-2011-064/

finra2011064.shtml). 

5Amendment No. 1, dated February 8, 2012, was 

withdrawn on February 8, 2012. 

6See Amendment No. 2 dated February 8, 2012 

(‘‘Amendment No. 2’’). The text of Amendment No. 

2 is available on FINRA’s Web site at 

http:www.finra.org, at the principal office of FINRA, 

and on the Commission’s Web site, http:// 

www.sec.gov/rules/sro.shtml. 7 17 CFR 240.17a–5. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2012–024 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–NASDAQ–2012–024. This 

file number should be included on the 

subject line if email 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 

10:00 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– 

NASDAQ–2012–024 and should be 

submitted on or before March 7, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3556 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66364; File No. SR–FINRA– 

2011–064] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 2, Adopting FINRA 

Rule 4524 (Supplemental FOCUS 

Information) and Proposed 

Supplementary Schedule to the 

Statement of Income (Loss) Page of 

FOCUS Reports 

February 9, 2012. 

I. Introduction 

On November 1, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

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

19b–4 thereunder,2 proposed FINRA 

Rule 4524 (Supplemental FOCUS 

Information) to require each member, as 

FINRA shall designate, to file such 

additional financial or operational 

schedules or reports as FINRA may 

deem necessary as a supplement to the 

FOCUS report. The proposed rule 

change was published for comment in 

the Federal Register on November 14, 

2011.3 The Commission received five 

comments on the proposed rule 

change.4 FINRA filed Amendment No. 1 

on February 8, 2012, which was 

subsequently withdrawn.5 FINRA filed 

Amendment No. 2 to the proposed rule 

change on February 8, 2012.6 The 

Commission is publishing this notice 

and order to solicit comments on 

Amendment No. 2 and to approve the 

proposed rule change, as modified by 

Amendment No. 2, on an accelerated 

basis. 

II. Description of Proposed Rule Change 

Pursuant to Exchange Act Rule 17a– 

5, FINRA members are required to file 

with FINRA reports concerning their 

financial and operational status using 

SEC Form X–17A–5, Financial and 

Operational Combined Uniform Single 

(FOCUS) Report.7 FINRA is proposing 

to adopt FINRA Rule 4524, which 

provides that as a supplement to filing 

FOCUS reports pursuant to Exchange 

Act Rule 17a–5 and FINRA Rule 2010, 

each member, as FINRA shall designate, 

shall file such additional financial or 

operational schedules or reports as 

FINRA may deem necessary or 

appropriate for the protection of 

investors or in the public interest. 

FINRA Rule 4524 also provides that 

FINRA will specify the content of such 

additional schedules or reports, their 

format, and the timing and the 

frequency of such supplemental filings 

in a Regulatory Notice (or similar 

communication) issued pursuant to the 

Rule. Finally, FINRA Rule 4524 

provides that FINRA will file with the 

Commission pursuant to Exchange Act 

Section 19(b) the content of any such 

Regulatory Notice (or similar 

communication) issued pursuant to the 

Rule. 

Pursuant to proposed FINRA Rule 

4524, FINRA is proposing a 

Supplemental Statement of Income 

(‘‘SSOI’’) to magnify the data from the 

Statement of Income (Loss) page of the 

FOCUS Reports. The proposed SSOI is 

intended to capture more granular detail 

of a firm’s revenue and expense 

information. The lack of more specific 

revenue and expense categories for 

certain business activities on the 

Statement of Income (Loss) page of the 

FOCUS Reports has led many firms to 

report much of their revenue and 

expenses as ‘‘other’’ (miscellaneous), a 

very general categorization that provides 

FINRA limited visibility into revenue 

and expense trends. The proposed SSOI 

is divided into sections containing line 

items that seek additional detail to 

permit FINRA to better understand 

revenue sources and expense 

composition on an ongoing basis. This 

additional detail would allow FINRA to 

better assess risk at a firm, and as a 

result, better allocate examination 

resources. As modified by Amendment 

No. 2, each member would be required 


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8See supra note 4. 

9See supra note 5. On December 21, 2011, FINRA 

extended the time period for Commission action 

until February 10, 2012. See http://www.finra.org/ 

web/groups/industry/@ip/@reg/@rulfil/documents/ 

rulefilings/p125317.pdf. 

10CAI; Newedge; IMS; Stock USA. 

11CAI. 

12Newedge; IMS. 

13Stock USA. 

14 Id. 

15See Letter from Matthew E. Vitek, Counsel, 

FINRA, to Elizabeth M. Murphy, Secretary, 

Commission dated February 8, 2012 (‘‘Response to 

Comments’’). 

16Newedge. 

17 Id. 

18Response to Comments. 

19Newedge. 

20 Id. 

21 IMS. 

22Response to Comments. 

23 IMS. 

24Stock USA. 

to file with FINRA the proposed SSOI 

within 20 business days of the end of 

each calendar quarter. 

The proposed SSOI contains a de 

minimis exception for providing details 

of revenue and expenses for certain 

designated sections. If a member’s total 

dollar amount for a designated section 

is $5,000 or less for the reporting period, 

the member would only be required to 

enter the total dollar amount to 

complete the section. As modified by 

Amendment No. 2, the reporting 

threshold has been amended to include 

as a component to the de minimis 

exception for certain designated 

sections a percentage of gross revenue 

threshold. Additionally, not every line 

item would apply to every member, 

especially those with limited product 

offerings, thus limiting the burden of 

completing the form. 

The proposed SSOI includes a new 

Operational Page that would collect 

additional information from certain 

members with respect to participation 

in unregistered offerings during the 

reporting period. Members whose 

revenue from unregistered offerings 

exceeds 10% of total revenue for the 

reporting period would be required to 

complete the Operational Page by 

providing specific information about 

each unregistered offering. FINRA 

believes that such information would 

provide it with greater transparency and 

a stronger understanding regarding the 

types of unregistered offerings that 

generate significant revenue for 

members. 

FINRA will announce the 

implementation dates of the proposed 

SSOI in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval of the 

proposed rule change. The 

implementation date of the proposed 

schedule will be no sooner than 180 

days, and no later than 365 days, 

following Commission approval of the 

proposed rule change. 

III. Summary of Comment Letters 

The proposed rule change was 

published for comment in the Federal 

Register on November 14, 2011, and the 

comment period closed on December 5, 

2011. The Commission received five 

comment letters in response to the 

proposed rule change.8 On February 8, 

2012, FINRA responded to the 

comments and filed Amendment No. 2 

to the proposed rule change.9

A. Reporting Threshold 

Several commenters expressed 

concerns that the reporting threshold 

was too low and should be raised.10 One 

commenter suggested moving to a range 

that would allow a large firm with 

significant revenues to have a de 

minimis exception in the range of 

$250,000–$500,000.11 Two commenters 

thought the $5,000 threshold was too 

low and suggested a reporting threshold 

of $10,000 or of 5% or 10% of gross 

revenue (i.e., firms would not be 

required to report any information on 

product lines that represented less than 

5% or 10% of their gross revenue).12

One commenter suggested a de minimis 

exception for items less than $25,000.13

This commenter also expressed 

concerns that the proposal was antismall business, because it required the 

same level of detail for every brokerdealer.14

In its response to comments, FINRA 

stated that Amendment No. 2 amends 

the SSOI and the instructions to include 

as a component of the de minimis 

exception for certain designated 

sections a percentage of the gross 

revenue threshold.15 FINRA explained 

that if the aggregate amount for the 

designated section is less than the 

greater of $5,000 or 5% of the firm’s 

total revenue or total expense, as 

applicable, for a reporting period, the 

member would only be required to enter 

the aggregate amount to complete the 

section. FINRA also stated that it added 

a de minimis exception for the revenue 

from sale of insurance based products 

section on the SSOI. Finally, FINRA 

stated that it had clarified language on 

the SSOI and the instructions regarding 

the reporting thresholds for other 

expenses and other revenue. 

B. Filing Time Frame 

One commenter suggested that firms 

needed additional time to file the 

SSOI.16 Since the FOCUS filings are due 

on the 17th business day of the month, 

the commenter suggested an additional 

3–5 days to submit the Supplemental 

Filing after the FOCUS report would be 

helpful.17 In its Response to Comments 

FINRA stated that it recognizes that the 

new report will involve an additional 

amount of work for members and 

believes that it is reasonable to give 

members an additional three business 

days to file the SSOI. FINRA, therefore, 

amended its proposal to require the 

SSOI to be filed within 20 business days 

after the end of the calendar quarter.18

C. Instructions and Definitions 

One commenter believes that FINRA 

should provide more precise definitions 

for certain product lines on the SSOI, in 

order to avoid duplicative or 

inconsistent reporting.19 This 

commenter also stated that FINRA 

should define more precisely the 

product lines listed on the SSOI.20

Another commenter believes that the 

instructions could be construed as 

misleading, because of the choices 

available for a firm to use ‘‘firm selected 

methodology’’ (i.e., firm discretion).21

In its Response to Comments, FINRA 

stated that for certain revenue items, 

where specific and/or detailed 

instructions are not provided on the 

SSOI, FINRA expects firms to report the 

revenue in accordance with the 

definition and/or methodology used for 

preparing the FOCUS report. FINRA 

further stated that it believed the 

instructions to the SSOI contained 

sufficient clarity for certain definitions, 

such as ‘‘commodities,’’ ‘‘corporate 

debt,’’ ‘‘US Government and Agency 

Securities,’’ and ‘‘asset backed 

securities;’’ however, FINRA clarified 

the instructions with respect to the term 

‘‘foreign exchange.’’ FINRA also added 

instructions regarding non-securities 

insurance based products. Finally, 

FINRA stated that the term ‘‘derivatives 

other than listed or unlisted options’’ 

does not appear in the proposed SSOI.22

D. Small Firm Concerns 

One commenter believes that FINRA 

should make available a less detailed 

SSOI to small broker-dealers.23 Another 

commenter was concerned that the new 

categories of product lines will be 

difficult to complete and that firms may 

make mistakes when completing the 

report, leading to fines levied for late or 

incorrect submissions.24

In its Response to Comments, FINRA 

stated that it believed the information 

being required in the SSOI is important 

to identify regulatory risks and trends, 

irrespective of firm size. FINRA also 

explained that many of the line items 

will not apply to smaller firms with 

limited product offerings. Further, 


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25Response to Comments. 

26CAI. 

27 Id. 

28 Id. 

29Response to Comments. 

30 Id. 

31 Id. 

32CAI. 

33 Id. 

34 Id. 

35Response to Comments (citing FINRA 

Regulatory Notice 10–22 (April 2010) in regard to 

Regulation D offerings and FINRA press release 

regarding sanction of eight firms and ten 

individuals for selling interests in troubled private 

placements). 

36 IMS. 

37 Id. 

38 Id. 

39 Id. 

40Nelson. 

41 IMS. 

42CAI; Nelson; Stock USA. 

FINRA reiterated that it was modifying 

the SSOI to broaden the de minimis 

exception, making the form much less 

complicated and time consuming for 

smaller firms, and that the form should 

not require sophisticated systems to 

generate the information.25

E. Reporting Exemption 

One commenter believes that firms 

that ‘‘do not engage in risky business 

lines, and who provide financial 

information that is already transparent’’ 

should be exempted from completing 

the SSOI.26 As an example, the 

commenter suggested that mutual fund 

wholesalers and variable annuity 

principal underwriters and wholesalers 

that are limited purpose broker-dealers 

are categories of firms that should be 

exempted.27 One commenter also 

discussed the role the supplemental 

filing would play with respect to a 

broker-dealer’s annual audit.28

In its Response to Comments, FINRA 

stated that it does not agree that firms 

such as variable annuity principal 

underwriters and wholesalers should be 

exempt. FINRA believes the required 

information is important to identify 

revenue sources, enable FINRA to 

segment firms, and identify regulatory 

risk and trends without regard to the 

business model of the member or 

whether a particular business segment 

or product line has raised recent 

regulatory concerns.29 FINRA also noted 

that revenue streams of variable annuity 

principal underwriters and wholesalers 

are not transparent from the FOCUS 

report as it currently exists.30 Finally, 

FINRA noted that many of the line items 

will not apply to firms with limited 

product offerings, such as mutual fund 

wholesalers and variable annuity 

principal underwriters and 

wholesalers.31

F. Exemption From Operational Page 

Reporting 

One commenter, CAI, suggested that 

there was an inconsistency between the 

proposed Operational Page and FINRA 

offering rules, specifically FINRA Rule 

5110.32 CAI notes that FINRA Rule 5110 

exempts ten types of offerings from the 

rule, including offerings of open and 

closed-end investment companies, 

offerings of variable annuities, and 

offerings of modified guaranteed 

annuity contracts and modified 

guaranteed life insurance policies.33

CAI suggested that there is an 

inconsistency between the proposed 

Operational Page and certain FINRA 

offering rules, stating, ‘‘that offerings 

that are exempted from FINRA offering 

rules should not be subject to the 

Operational Page.’’ 34

In response to these concerns, FINRA 

explained its view that the commenter 

did not recognize the different purposes 

the Operational Page serves from FINRA 

Rule 5110. The Operational Page of the 

SSOI is intended to provide FINRA with 

greater transparency as to the source of 

the revenues associated with 

unregistered offerings when such 

revenues are a material percentage of a 

firm’s overall revenues. FINRA Rule 

5110 regulates the underwriting terms 

and arrangements of most public 

offerings of securities sold through 

FINRA members. While not subject to 

FINRA Rule 5110, information about the 

exempted offerings identified by this 

commenter would provide FINRA with 

a better understanding regarding the 

types of unregistered offerings that 

generate significant revenue for 

members. In this regard, FINRA notes 

that it has found significant problems in 

several recent examinations and 

investigations, including fraud and sales 

practice abuses in Regulation D 

offerings.35 FINRA further noted that the 

SSOI would not be a report that is 

required to be audited under Exchange 

Act Rule 17a–5. 

G. Reporting Issues 

One commenter stated that FINRA 

should give more consideration to 

member practices and procedures with 

respect to their books and records.36

This commenter stated that firms 

organize ‘‘revenue data based on 

internal definitions of business lines 

and to comply with generally accepted 

accounting principles (‘‘GAAP’’). These 

internal categories allocate income 

based on how member firms view the 

nature and scope of their business 

lines.’’ 37 The commenter believes, 

therefore, that FINRA’s proposed 

schedule, which requires reporting by 

product lines, contradicts GAAP rules 

and procedures. The commenter also 

believes that, ‘‘FINRA is artificially 

forcing firms to differentiate income 

generated by investments from that of 

trading by requiring that revenue be 

reported by how the income might be 

taxed.’’ 38 Further, this commenter 

noted that FINRA’s stated purpose of 

obtaining more granular information is 

not achieved, because the proposal 

allows for a dozen separate categories 

for trading income data but only one 

line for capital gains or losses related to 

longer-term investments.39

In its Response to Comments, FINRA 

disagreed that the proposal is at odds 

with member practices. FINRA stated 

that the SSOI is similar to the FOCUS 

Report in that it requires members to 

break-out revenues based on product 

line and distinguishes between trading 

and investment gains. FINRA also stated 

that requesting information to be 

reported by product line is not 

inconsistent with GAAP. Further, the 

instructions to the SSOI require that all 

revenue and expense items must be 

reported in accordance with GAAP. 

With respect to breaking out trading 

revenue data compared to investment 

capital gains or losses, FINRA believes 

that more granular detail for trading 

revenue is warranted because the 

regulatory risks associated with trading 

activities differ from the regulatory risks 

associated with longer-term investment 

activities. 

H. Alternatives 

Two commenters suggested 

alternatives to the SSOI. One 

commenter asked if FINRA had 

researched and considered other 

alternatives to obtain the same 

information on the SSOI in another 

manner.40 Another commenter 

suggested that FINRA establish a joint 

task force to consider producing a 

revised FOCUS report.41

In response to these objections to the 

SSOI, FINRA reiterated its previous 

statement that it considered various 

alternatives and believes that the SSOI 

is the most effective and timely way to 

obtain the additional detail of revenues 

earned or expenses incurred by product 

or more specific categories. Further, 

FINRA notes that it consulted with its 

advisory committees in connection with 

the development of the proposed SSOI. 

I. Future Reports or Schedules 

Several commenters expressed 

concerns about the implementation of 

future FINRA reports or schedules.42

These commenters thought that 


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43Stock USA; Nelson; CAI. 

44Response to Comments. 

45CAI. 

46 Id. 

47 Id. 

48Newedge; Nelson. 

49Stock USA. 50Response to Comments. 51 Id. 52CAI. 53Response to Comments. 54CAI. 55Response to Comments. 

56 Id. 

57 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

58 15 U.S.C. 78o–3(b)(6). 

59See Response to Comments. 

publication via a Regulatory Notice was 

insufficient and suggested that any 

future schedules or reports be done 

through the more typical self-regulatory 

organization (‘‘SRO’’) proposed rule 

change process.43 In its Response to 

Comments FINRA stated that it has 

modified the proposed rule change to 

clarify that all future reports or 

schedules will be filed with the 

Commission pursuant to Exchange Act 

Section 19(b).44 Thus, commenters will 

be assured of having an opportunity to 

comment on any request for such 

additional substantive information 

made pursuant to the proposed rule, 

which must be approved by the 

Commission before it can become 

effective. 

J. Implementation Date 

One commenter suggested an 

alternative compliance effective date of 

no sooner than 365 days following the 

Commission’s approval of the proposed 

rule change because members not 

already collecting this information will 

require much more time than larger 

firms to implement the operational and 

system changes the SSOI necessitates.45

The commenter noted that many of its 

members are ‘‘mid-sized firms that will 

not have the granular, detailed financial 

information required by the SSOI at 

their fingertips.’’ 46

In its Response to Comments, FINRA 

stated that it disagrees with the 

commenter and believes that the 

proposed implementation date, which 

would be no sooner than 180 days and 

no later than 365 days following SEC 

approval, strikes the proper balance of 

ensuring FINRA receives timely 

information while giving members 

sufficient time to file the first proposed 

SSOI. 

K. SRO Rulemaking 

Several commenters were concerned 

that FINRA did not conduct a costbenefit analysis in its rule proposal. 

Specifically, one commenter stated that 

FINRA should conduct a more rigorous 

and detailed cost-benefit analysis that 

the industry can use to consider 

alternatives to the rule proposal.47 Other 

commenters were concerned about the 

overall lack of a detailed cost-benefit 

analysis by both the Commission and 

FINRA.48 Stock USA believes that a 

better justification is needed, to show 

‘‘how the proposed rule will be used to 

enhance its meeting of both the 

economic and protective provisions of 

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

Act.’’ 49

In its Response to Comments, FINRA 

noted that it believed it had complied 

with its rulemaking obligations under 

the Exchange Act, by submitting a 

‘‘concise general statement of the basis 

and purpose’’ of its proposed rule. 

FINRA believes its proposed rule will 

‘‘further strengthen FINRA’s ability to 

protect investors through a more 

informed understanding of the drivers 

of members’ business that can be used 

for more targeted examinations and to 

understand trends in those drivers that 

may portend greater risk to the firm and 

the protection of customer assets.’’ 50

FINRA also noted that the burden 

arising from completing the SSOI is 

outweighed by FINRA’s enhanced 

ability to protect investors by having a 

more detailed understanding of 

members’ sources of revenue and 

expense drivers.51

L. Comment Period 

One commenter noted that the 

twenty-one day comment period did not 

allow firms sufficient time to properly 

estimate the costs associated with the 

operational and systems changes needed 

to complete the SSOI.52 In its Response 

to Comments, FINRA noted that the 

length of a comment period is 

determined by the SEC and therefore 

outside the scope of its response.53

M. FINRA’s Authority 

One commenter questioned FINRA’s 

authority to adopt a supplement to the 

FOCUS report and stated that no one 

has addressed the role such a 

supplement would play with respect to 

a broker-dealer’s annual audits.54 In 

response, FINRA stated that as a general 

matter the proposed rule is consistent 

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

Act and is ‘‘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.’’ 55 FINRA further stated that 

with respect to the role the SSOI would 

play with respect to a broker-dealer’s 

annual audits, the SSOI is not one of the 

reports required to be audited under 

Exchange Act Rule 17a–5 and that 

FINRA does not expect or require the 

SSOI to be audited unless the auditor 

believes there is a concern for such 

review.56

IV. Commission’s Findings 

The Commission has carefully 

considered the proposed rule change, 

the comments received, Amendment 

No. 2, and FINRA’s Response to 

Comments. The Commission finds that 

the proposed rule change is consistent 

with the requirements of the Exchange 

Act, and the rules and regulations 

thereunder that are applicable to a 

national securities association.57 In 

particular, the Commission finds that 

the proposal is consistent with Section 

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

among other things, that the rules of a 

national securities association be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, protect 

investors and the public interest. 

Proposed FINRA Rule 4524 and the 

SSOI will provide FINRA with the 

ability to obtain more specific 

information about the finances of a 

member broker-dealer. The Commission 

believes that the proposed rule change 

works in conjunction with the existing 

Commission broker-dealer financial 

responsibility rules and will further 

FINRA’s ability to oversee its members 

by, among other things, increasing the 

transparency of the various revenue 

streams and sources of income of 

broker-dealers. For example, FINRA 

noted in its Response to Comments that 

FINRA has found significant problems 

in several recent examinations and 

investigations, including fraud and sales 

practice abuses in Regulation D 

offerings.59 The Commission believes 

the proposed rule change will give 

FINRA greater ability to examine the 

revenues of its members and therefore 

improve its ability to, among other 

things, uncover fraudulent and abusive 

practices that undermine public 

confidence in the securities markets and 

thus impede efficiency and capital 

formation. 

With respect to commenter concerns 

that the proposed rule change would 

give FINRA the ability to circumvent 

filing proposed rule changes with the 

Commission and thus avoid the notice 

and comment process attendant thereto, 


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60The Commission notes that such reports or 

schedules, or changes to any existing reports or 

schedules, fall within the definition of ‘‘rules of an 

association’’ under Exchange Act Section 3(a)(27), 

subject to the self-regulatory organization 

rulemaking provisions set forth in Exchange Act 

Section 19(b) and Rule 19b–4 thereunder. 

61 15 U.S.C. 78s(b)(2). 

62 15 U.S.C. 78(b)(2). 

63 17 CFR 200.30–3(a)(12). 

FINRA has clarified the proposed rule 

change in Amendment No. 2 to make 

clear that any such new reports or 

schedules will be filed with the 

Commission pursuant to Exchange Act 

Section 19(b).60 Accordingly, the 

proposed rule change is clear that 

interested parties will have opportunity 

to have notice of, and comment upon, 

future schedules or reports issued by 

FINRA under FINRA Rule 4524. 

The Commission believes that FINRA 

carefully considered all comments on 

the proposal and has responded 

appropriately. FINRA’s Amendment No. 

2 changed the proposed rule change in 

response to commenter concerns to 

provide broker-dealers with additional 

time to file the SSOI and to include an 

additional component to the de minimis 

exception based on a percentage of gross 

revenue threshold. FINRA has suitably 

explained its reasons for declining to 

amend Rule 4524 and the SSOI in 

response to the remainder of comments 

it received. 

V. Accelerated Approval 

The Commission finds goods cause, 

pursuant to Section 19(b)(2) of the Act 61

for approving the proposed rule change, 

as modified by Amendment No. 2 

thereto, prior to the 30th day after 

publication of Amendment No. 2 in the 

Federal Register. The changes proposed 

in Amendment No. 2 respond to specific 

concerns raised by the commenters and 

do not raise regulatory concerns. 

Accordingly, the Commission finds 

that good cause exists to approve the 

proposal, as modified by Amendment 

No. 2, on an accelerated basis. 

VI. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether Amendment No. 2 to 

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 email to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2011–064 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–2011– 

064. This file number should be 

included on the subject line if email 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–2011–064 and 

should be submitted on or before March 

7, 2012. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,62 that the 

proposed rule change (SR–FINRA– 

2011–064), as modified by Amendment 

No. 2, be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.63

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3471 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Reporting and Recordkeeping 

Requirements Under OMB Review 

AGENCY: Small Business Administration. 

ACTION: Notice of Reporting 

Requirements Submitted for OMB 

Review. 

SUMMARY: Under the provisions of the 

Paperwork Reduction Act (44 U.S.C. 

Chapter 35), agencies are required to 

submit proposed reporting and 

recordkeeping requirements to OMB for 

review and approval, and to publish a 

notice in the Federal Register notifying 

the public that the agency has made 

such a submission. 

DATES: Submit comments on or before 

March 16, 2012. If you intend to 

comment but cannot prepare comments 

promptly, please advise the OMB 

Reviewer and the Agency Clearance 

Officer before the deadline. 

Copies: Request for clearance (OMB 

83–1), supporting statement, and other 

documents submitted to OMB for 

review may be obtained from the 

Agency Clearance Officer. 

ADDRESSES: Address all comments 

concerning this notice to: Agency 

Clearance Officer, Jacqueline White, 

Small Business Administration, 409 3rd 

Street SW., 5th Floor, Washington, DC 

20416; and OMB Reviewer, Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, New 

Executive Office Building, Washington, 

DC 20503. 

FOR FURTHER INFORMATION CONTACT: 

Jacqueline White, Agency Clearance 

Officer, (202) 205–7044. 

SUPPLEMENTARY INFORMATION: Title: 

‘‘Intellectual Property and Women 

Entrepreneurs.’’ 

Frequency: On Occasion. 

SBA Form Number: N/A. 

Description of Respondents: Women 

Entrepreneurs. 

Responses: 60. 

Annual Burden: 100. 

Jacqueline White, 

Chief, Administrative Information Branch. 

[FR Doc. 2012–3539 Filed 2–14–12; 8:45 am] 

BILLING CODE P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration # 13002 and # 13003] 

Alabama Disaster Number AL–00040 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Amendment 1. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 


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