15824 Federal Register / Vol. 77, No. 52 / Friday, March 16, 2012 / Notices 

4 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 65896 (Dec. 6, 

2011) (‘‘Notice’’). 

4See letter from Kevin M. Carroll, Managing 

Director and Associate General Counsel, SIFMA, 

dated January 3, 2012 (‘‘SIFMA Letter’’). 

5See letter from Margo A. Hassan, Assistant Chief 

Counsel, FINRA, to Elizabeth M. Murphy, 

Secretary, Commission, dated March 5, 2012 

(‘‘Response Letter’’). 

6See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203 

(2010). 

7Sarbanes-Oxley Act of 2002, Public Law 107– 

204 (2002). 

8See Dodd-Frank Act Section 922(c)(2). 

9See Arbitrability of Sarbanes-Oxley 

Whistleblower Claims by Laurence S. Moy, Pearl 

Zuchlewski, Linda A. Neilan and Katherine 

Blostein, The Neutral Corner (Volume 1—2008). 

10The Dodd-Frank Act also invalidated 

predispute arbitration agreements in other 

whistleblower statutes, including, for example, 7 

All submissions should refer to File 

Number SR–FICC–2012–02. 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 Section, 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 FICC 

and on FICC’s Web site at http://www.

dtcc.com/downloads/legal/rule_filings/

2012/ficc/SR_FICC_2012_02.pdf. 

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–FICC–2012–02 and should 

be submitted on or before April 6, 2012. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.4

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6384 Filed 3–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66575; File No. SR–FINRA– 

2011–067] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change Amending 

FINRA Rules 13201 (Statutory 

Employment Discrimination Claims) 

and 2263 (Arbitration Disclosure to 

Associated Persons Signing or 

Acknowledging Form U4) Relating to 

Whistleblower Disputes in Arbitration 

March 12, 2012. 

I. Introduction 

On November 21, 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’’ or ‘‘Act’’) 1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to amend FINRA Rule 13201 of 

the Code of Arbitration Procedure for 

Industry Disputes (‘‘Industry Code’’) to 

align the rule with statutes that 

invalidate predispute arbitration 

agreements for whistleblower disputes. 

Specifically, the proposed rule change 

would amend Rule 13201 to add a new 

provision to provide that a dispute 

arising under a whistleblower statute 

that prohibits the use of predispute 

arbitration agreements is not required to 

be arbitrated under the Industry Code. 

The proposed rule change would also 

make a conforming amendment to 

FINRA Rule 2263. The proposed rule 

change was published for comment in 

the Federal Register on December 12, 

2011.3 The Commission received one 

comment letter, from the Securities 

Industry and Financial Markets 

Association (‘‘SIFMA’’), on the 

proposed rule change,4 and a response 

to SIFMA’s comments from FINRA.5

The text of the proposed rule change 

and FINRA’s Response Letter are 

available on FINRA’s Web site at http:// 

www.finra.org, at the principal office of 

FINRA, on the Commission’s Web site at 

http://www.sec.gov, and at the 

Commission’s Public Reference Room. 

This order approves the proposed rule 

change. 

II. Purpose 

The proposed rule change would 

amend FINRA Rule 13201 (Statutory 

Employment Discrimination Claims) of 

the Industry Code, and FINRA Rule 

2263 (Arbitration Disclosure to 

Associated Persons Signing or 

Acknowledging Form U4), to align the 

rules with statutes that invalidate 

predispute arbitration agreements for 

whistleblower disputes. 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘DoddFrank Act’’) 6 amended the SarbanesOxley Act of 2002 (‘‘SOX’’) 7 by adding 

a new paragraph (e) to 18 U.S.C. 1514A 

(Nonenforceability of Certain Provisions 

Waiving Rights and Remedies or 

Requiring Arbitration of Disputes) 8 to 

provide that: 

(1) Waiver of Rights and Remedies— 

The rights and remedies provided for in 

this section may not be waived by any 

agreement, policy form, or condition of 

employment, including by a predispute 

arbitration agreement. 

(2) Predispute Arbitration 

Agreements—No predispute arbitration 

agreement shall be valid or enforceable, 

if the agreement requires arbitration of 

a dispute arising under this section. 

Prior to the Dodd-Frank Act, it was 

FINRA staff’s articulated position that 

parties were required to arbitrate SOX 

whistleblower claims under the 

Industry Code.9

In light of the changes set forth in the 

Dodd-Frank Act that invalidate 

predispute arbitration agreements in the 

case of SOX whistleblower disputes, the 

proposed rule change would amend 

FINRA Rule 13201 of the Industry Code 

to make clear that parties are not 

required to arbitrate SOX whistleblower 

disputes, superseding any existing 

guidance to the contrary. While FINRA’s 

main impetus for the proposed rule 

change was the need to update its staff’s 

stated position on SOX whistleblower 

claims, FINRA proposed to make the 

rule text broad enough to cover any 

statutes that prohibit predispute 

arbitration agreements for whistleblower 

disputes.10

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Federal Register / Vol. 77, No. 52 / Friday, March 16, 2012 / Notices 15825 

USCA § 26(n) relating to Commodity Exchange 

Whistleblower Incentives and Protections. 

11 15 U.S.C. 78o–3(b)(6). 

12 In approving this proposed rule change, the 

Commission has considered the rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

13 15 U.S.C. 78o–3(b)(6). 

Rule 13201 of the Industry Code 

currently provides that a claim alleging 

employment discrimination, including 

sexual harassment, in violation of a 

statute, is not required to be arbitrated 

under the Industry Code. Such a claim 

may be arbitrated only if the parties 

have agreed to arbitrate it, either before 

or after the dispute arose. The proposed 

rule change would amend Rule 13201 to 

add a new provision to provide that a 

dispute arising under a whistleblower 

statute that prohibits the use of 

predispute arbitration agreements is not 

required to be arbitrated under the 

Industry Code. The rule would state that 

such a dispute may be arbitrated only if 

the parties have agreed to arbitrate it 

after the dispute arose. 

FINRA also would amend the title of 

Rule 13201 to reflect the addition of the 

new provision relating to whistleblower 

disputes. FINRA structured the 

proposed rule change to separate the 

provision relating to statutory 

employment discrimination claims from 

the provision relating to whistleblower 

disputes. 

The proposed rule change also would 

make a conforming amendment to 

FINRA Rule 2263, which requires firms 

to provide each associated person with 

certain written disclosures regarding the 

nature and process of arbitration 

proceedings whenever the firm asks an 

associated person, pursuant to FINRA 

Rule 1010 (Electronic Filing 

Requirements for Uniform Forms), to 

manually sign a new or amended Form 

U4, or to otherwise provide written 

acknowledgment of an amendment to 

the form. The proposed rule change 

would amend FINRA Rule 2263 to add 

a disclosure provision stating that a 

dispute arising under a whistleblower 

statute that prohibits the use of 

predispute arbitration agreements is not 

required to be arbitrated under FINRA 

rules, and that such a dispute may be 

arbitrated at FINRA only if the parties 

have agreed to arbitrate it after the 

dispute arose. 

As explained in the Notice, FINRA 

believes that the proposed rule change 

is consistent with the provisions of 

Section 15A(b)(6) of the Act,11 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 amendments are consistent 

with the provisions of the Act noted 

above because they serve to align FINRA 

rules with those provisions in the DoddFrank Act that invalidate predispute 

arbitration agreements in the context of 

certain whistleblower disputes. 

III. Discussion of Comment Letters 

In the SIFMA Letter, the commenter 

raised three distinct concerns about the 

proposal. First, the commenter 

questioned FINRA’s use of the word 

‘‘dispute’’ in its proposed rule change. 

Specifically, the commenter believed 

that using the word ‘‘dispute’’ would 

allow a claimant in an arbitration to 

assert a whistleblower claim under a 

whistleblower statute in an effort to 

improperly remove the entire case (i.e., 

‘‘dispute’’) from arbitration. The 

commenter suggested that FINRA 

replace ‘‘dispute’’ with ‘‘claim’’ because 

it would allow a claim asserted under a 

whistleblower statute to be severed and 

removed from the arbitration case but 

would not allow parties ‘‘to avoid 

arbitrating other claims in the case that 

are properly subject to securities 

arbitration.’’ 

In the Response Letter, FINRA stated 

that it purposefully used the word 

‘‘dispute’’ in the proposed rule to track 

the language used in the Dodd-Frank 

Act. However, FINRA also stated that it 

would administer the proposed rule in 

a manner that would permit an 

associated person of a member to bring 

a whistleblower claim in court while 

claims that are part of the same case that 

are properly subject to arbitration could 

remain in arbitration. FINRA also stated, 

however, that it would comply with any 

court order responding to an associated 

person’s request to consolidate such 

claims. Therefore, FINRA declined to 

make the requested change. 

Second, the commenter suggested that 

the proposed rule should apply only to 

claims under applicable Federal 

whistleblower statutes instead of both 

Federal and state statutes. Specifically, 

the commenter believed that because 

the Federal Arbitration Act (‘‘FAA’’) 

‘‘generally preempts state statutes that 

invalidate arbitration agreements,’’ it 

also generally preempts any state 

statutes that remove whistleblower 

claims from arbitration. Accordingly, 

the proposal should only apply to 

Federal whistleblower statutes. 

In its Response Letter, FINRA stated 

that it did not believe that it would be 

appropriate to compel a registered 

person to arbitrate a whistleblower 

dispute when there is a statute 

precluding enforcement of a predispute 

arbitration agreement, regardless of 

whether the statute is promulgated 

under federal or state law. FINRA 

further stated that it would continue to 

accept whistleblower claims under a 

state statute if the parties agreed to 

arbitrate the claim, or if a court ordered 

the claim to be arbitrated at the forum. 

Therefore, FINRA declined to make the 

requested change. 

Third, the commenter recommended 

that FINRA include an effective date in 

its proposal so that the rule would only 

be applied prospectively. 

In its Response Letter, FINRA stated 

that since Section 922 of the DoddFrank Act invalidates all predispute 

arbitration agreements relating to 

whistleblower disputes, FINRA believed 

it was inappropriate to establish a new 

effective date. Therefore, FINRA 

declined to make the requested change. 

IV. Discussion and Commission’s 

Findings 

The Commission has carefully 

reviewed the proposed rule change, the 

comments received, and FINRA’s 

response to the comments, in particular 

FINRA’s representation that it would 

comply with a court’s ruling to 

consolidate all claims (including 

whistleblower claims) associated with a 

particular case. Based on its review, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.12 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 15A(b)(6) of the Act,13

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. 

More specifically, the Commission 

finds that that the proposed rule change 

to align FINRA Rule 13201 with statutes 

that invalidate predispute arbitration 

agreements for whistleblower disputes 

would ensure that a dispute arising 

under a whistleblower statute that 

prohibits the use of predispute 

arbitration agreements would not be 

required to be arbitrated. 

While the Commission appreciates 

the commenter’s concern about FINRA’s 

choice of language, the proposed rule 

purposefully tracks the language used in 

the Dodd-Frank Act. 

For the reasons stated above, the 

Commission finds that the rule change 

is consistent with the Act and the rules 

and regulations thereunder. 

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15826 Federal Register / Vol. 77, No. 52 / Friday, March 16, 2012 / Notices 

14 15 U.S.C. 78s(b)(2). 

15 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. 66218 

(January 24, 2012), 77 FR 4604 (‘‘Notice’’). 

4See NYSE Rule 1600(a). 

5See NYSE Rule 1600(b)(2)(C). 

6See proposed NYSE Rule 1600(c)(2)(D). 

7See id. 

8See id. See also NYSE Rule 1600(b)(2)(E). 

9Accordingly, as set forth in the Notice, the 

NYBX Facility would apply the order execution 

process that is set forth in Rule 1600(d)(1)(C)(i) to 

NYBX IOC orders, including that an NYBX IOC 

order may execute at multiple price points that may 

be available in the DBK and NYBX Facility that are 

within the limit price of the NYBX IOC order. 

Because by its terms, an NYBX IOC order does not 

route to other markets, have an MTV, or leave a 

residual in the NYBX, certain aspects of the order 

execution processing rules are inapplicable, 

specifically NYSE Rules 1600(d)(1)(C)(ii)–(vi) and 

1600(d)(1)(D). 

10 In the Notice, the Exchange provided the 

following example: If a buy NYBX IOC order for 

1,000 shares arrives at the Facility with a limit price 

of $10.05, the Facility would review the available 

contra-side liquidity in the DBK (both displayed 

and undisplayed) and the NYBX. Assuming the 

contra-side liquidity in the DBK is 300 shares at 

$10.04 (undisplayed), 200 shares at $10.05 (NBO 

displayed), and 200 shares at $10.05 (undisplayed), 

and in the NYBX is 200 shares at $10.05, the NYBX 

IOC buy order would simultaneously be routed to 

DBK as 300 shares at $10.04 and 400 shares at 

$10.05, and 200 shares would execute in the 

Facility at $10.05, for a total execution of 900 

shares. The remaining 100 shares of the buy NYBX 

IOC order would be cancelled. Assuming the buy 

NYBX IOC order is instead for 700 shares, pursuant 

to the tie-breaker rule in NYSE Rule 

1600(d)(1)(C)(i), the full volume of the order would 

route to the DBK, executing 300 shares at $10.04 

and 400 shares at $10.05, and the Facility’s 200 

share contra-side order at $10.05 would not be 

filled. 

11See Securities Exchange Act Release No. 60356 

(July 21, 2009), 74 FR 37281 (July 28, 2009) (SR– 

NYSE–2009–08) (Rescinding Rules 110 and 107A, 

which established the roles of Competitive Traders 

and Registered Competitive Market Makers). 

12 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

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

13 15 U.S.C. 78f(b)(5). 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–FINRA– 

2011–067) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6386 Filed 3–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66576; File No. SR–NYSE– 

2012–01] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving a Proposed Rule Change To 

Establish an NYBX Immediate-orCancel Order 

March 12, 2012. 

I. Introduction 

On January 11, 2012, the New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’) 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 NYSE Rule 1600 to establish a 

new order type known as an ‘‘NYBX 

IOC order.’’ A NYBX IOC order would 

execute exclusively against contra-side 

liquidity in the Exchange’s Display 

Book (‘‘DBK’’) and/or in the New York 

Block Exchange (‘‘NYBX’’ or ‘‘Facility’’). 

The proposed rule change was 

published for comment in the Federal 

Register on January 30, 2012.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

NYBX is a facility of the Exchange 

and provides for electronic matching 

and execution of non-displayed orders 

with the aggregate of all displayed and 

non-displayed orders residing within 

NYBX and the DBK.4 Only securities 

listed on NYSE are eligible to trade on 

NYBX.5

NYSE proposes to establish a new 

order type, the NYBX IOC order, which 

is a limit order to buy or sell that is 

designated as immediate or cancel and 

would be cancelled if the order is not 

immediately able to execute, in whole 

or in part, exclusively against contraside liquidity in the DBK and/or NYBX 

at a price that is at or within the 

national best bid or offer (‘‘NBBO’’).6

Any unexecuted portion of an NYBX 

IOC order would be immediately 

cancelled. No portion of an NYBX IOC 

order would be routed elsewhere, 

placed on the DBK, or remain in the 

NYBX Facility. Instead the order would 

be cancelled back to the User.7 Unlike 

other NYBX order types, the NYBX IOC 

order will not allow a minimum 

triggering volume quantity (‘‘MTV’’) 

designation.8

A NYBX IOC order would be entered 

in the same manner as other NYBX 

orders, as provided under NYSE Rule 

1600(c)(1), and, except for the optional 

time in force order parameters of NYSE 

Rule 1600(c)(3)(B)(i), would be required 

to contain the order parameters listed in 

NYSE Rule 1600(c)(3)(A). A NYBX IOC 

order would be subject to order 

processing set forth in NYSE Rule 

1600(d)(1).9 In a situation in which the 

size of the NYBX IOC order is less than 

the total available contra side liquidity 

that is potentially executable within the 

limit price in the NYBX and the DBK, 

the existing ‘‘tie breaker’’ rules set forth 

in NYSE Rule 1600(d)(1)(C)(i) for 

routing decision purposes will provide 

that an execution in the DBK has 

priority over an execution at the same 

price in the NYBX.10

Since NYBX IOC order would not be 

routed elsewhere, if another automated 

trading center is displaying a better 

price than either the NYBX or the DBK, 

and an execution in the NYBX Facility 

or DBK would result in a trade through 

in violation of Regulation NMS, the 

NYBX IOC order would be cancelled. 

Likewise, if another automated trading 

center is displaying prices that are the 

same or inferior to prices in the NYBX 

or the DBK, and routing is not required 

by Regulation NMS, the NYBX IOC 

order would execute within the DBK 

and/or the NYBX without routing to 

such automated trading center. 

NYSE also proposes certain technical 

changes to NYSE Rule 1600. First, the 

Exchange proposes to amend NYSE 

Rule 1600(g) to add references to trading 

pauses in individual securities, as 

provided for under NYSE Rule 80C. 

Second, because the Exchange has 

eliminated the class of market 

participants formerly known as 

Registered Competitive Market Makers, 

the Exchange proposes to delete NYSE 

Rule 1600(h)(3), which is no longer 

applicable.11 Third, the Exchange 

proposes to clarify NYSE Rule 

1600(b)(2)(D) that NYBX orders are 

defined within NYSE Rule 1600(c)(2), 

not only within NYSE Rule 

1600(c)(2)(A) as is currently reflected. 

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.12 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,13 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts, promote just and 

equitable principles of trade, remove 

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