Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices 1737 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 59038 

(December 2, 2008), 73 FR 74543. 

4 In the event a party to a transaction requests that 

the President or his/her designee review a 

transaction, the CBOE officer nonetheless would 

need to determine, on his or her own motion, 

whether to review the transaction. In addition, if a 

transaction is reviewed and a determination is 

rendered pursuant to paragraphs (b)(1) and (b)(2) of 

CBOE Rule 6.25 or Rule 24.16, relief shall not be 

granted under the new provision of the applicable 

Obvious Error Rule. 

5The transaction would be adjusted or nullified 

in accordance with the provision under which it is 

deemed an erroneous transaction, including 

consideration of whether the parties involved are 

CBOE market-makers, non-CBOE market makers, or 

customers pursuant to CBOE Rule 6.25(a)(1)(i)–(iv) 

and CBOE Rule 24.16(c). 

6 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9See, e.g., Securities Exchange Act Release Nos. 

58778 (October 14, 2008), 73 FR 62577 (October 21, 

2008) and 54228 (July 27, 2006), 71 FR 44066 

(August 3, 2006) (SR–CBOE–2006–14) (approving 

revisions to CBOE’s Obvious Error Rules). 

10 15 U.S.C. 78s(b)(2). 

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, 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–CBOE– 

2008–132 and should be submitted on 

or before February 3, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–391 Filed 1–12–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59210; File No. SR–CBOE– 

2008–118] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

of Proposed Rule Change Related to 

Obvious Error Rules 

January 7, 2009. 

On November 26, 2008, the Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’ 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 CBOE Rules 6.25 and 24.16 

(collectively, the ‘‘Obvious Error Rules’’) 

to adopt procedures that would allow 

CBOE to review transactions on its own 

motion. The proposed rule change was 

published for comment in the Federal 

Register on December 8, 2008.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

The proposed rule change would 

provide that, in the interest of 

maintaining a fair and orderly market 

and for the protection of investors, the 

President of CBOE or his/her designee, 

who shall be an officer of CBOE but may 

not be a member (collectively ‘‘CBOE 

officer’’), may, on his or her own motion 

or upon request, determine to review 

any transaction occurring on CBOE that 

is believed to be erroneous.4 CBOE 

would nullify or adjust a transaction 

reviewed pursuant to this new provision 

only if it is determined that the 

transaction is erroneous as provided in 

CBOE Rule 6.25(a)(1)–(6) or Rule 

24.16(a)(1)–(6), as applicable.5 Trading 

Officials (or the senior official in the 

control room, in the case of opening 

trades in CBOE Rule 5.4 restricted series 

being reviewed under CBOE Rule 

6.25(a)(6) or Rule 24.16(a)(6)) may assist 

the CBOE officer in reviewing a 

transaction. 

Under the proposed rule change, the 

CBOE officer would be required to act 

as soon as possible after receiving 

notification of the transaction, and 

ordinarily would be expected to act on 

the same day as the transaction. 

However, because a transaction under 

review may have occurred near the 

close of trading or due to unusual 

circumstances, the rule provides that 

the CBOE officer would be required to 

act no later than 8:30 a.m. (CT) on the 

next trading day following the date of 

the transaction at issue. A member 

affected by a determination to nullify or 

adjust a transaction pursuant to this 

new provision would be permitted to 

appeal such determination in 

accordance with Rule 6.25(d) or Rule 

24.16(d); however, a determination by a 

CBOE officer not to review a 

transaction, or a determination not to 

nullify or adjust a transaction for which 

a review was requested or conducted, is 

not appealable. Transactions adjusted or 

nullified pursuant to this new provision 

cannot be reviewed by an Obvious Error 

Panel under paragraph (c) of Rule 6.25. 

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 6 and, in particular, the 

requirements of Section 6(b) of the Act 7

and the rules and regulations 

thereunder. Specifically, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,8 in that the proposal is designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and to perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

The Commission notes that, in 

approving proposals relating to 

adjustment or nullification of trades 

involving obvious errors, it has stated 

that the determination of whether an 

obvious error has occurred and the 

process for reviewing such a 

determination should be based on 

specific and objective criteria and 

subject to specific and objective 

procedures.9 The Commission notes that 

the new provisions in the Obvious Error 

Rules also have specific and objective 

procedures for determining whether a 

trade should be adjusted or nullified. 

The purpose of the new provisions is 

only to enable a CBOE officer on his/her 

own motion or upon request, to provide 

relief in instances where parties failed 

to meet the established time reporting 

requirements in CBOE’s Obvious Error 

Rules. The new provisions still require 

that the transaction be erroneous as 

provided in CBOE Rules 6.25 or 24.16, 

as applicable, and the new provisions 

set forth specific time frames and 

procedures. Therefore, the Commission 

believes that that proposed rule change 

is appropriate. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–CBOE–2008– 

118) is hereby approved. 

1738 Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices 

11 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 to SR–FINRA–2008–045 

replaced and superseded the original rule filing 

submitted to the Commission on September 8, 2008. 4The text of the proposed rule change to the 

FINRA Rule 9520 Series as set forth in Exhibit 5 

reflects amendments adopted pursuant to proposed 

rule change SR–FINRA–2008–021, which was 

approved by the Commission. See Securities 

Exchange Act Release No. 58643 (September 25, 

2008), 73 FR 57174 (October 1, 2008) (SR–FINRA– 

2008–021) (approval order). The FINRA Rule 9520 

Series, as set forth in SR–FINRA–2008–021, became 

effective on December 15, 2008. See FINRA 

Regulatory Notice 08–57 (SEC Approves New 

Consolidated FINRA Rules) (October 2008). 5FINRA would issue the proposed Regulatory 

Notice upon the Commission’s approval of the 

proposed rule change; the Regulatory Notice is 

written in a manner that assumes such approval. 6See Securities Exchange Act Release No. 55495 

(March 20, 2007), 72 FR 14149 (March 26, 2007) 

(SR–NASD–2007–023) (notice). See also Securities 

Exchange Act Release No. 56145 (July 26, 2007), 72 

FR 42169 (August 1, 2007) (SR–NASD–2007–023) 

(approval order), as amended by Securities 

Exchange Act Release No. 56145A (May 30, 2008), 

73 FR 32377 (June 6, 2008). See also NASD, SEC 

No-Action Letter, 2007 SEC No-Act. LEXIS 540 

(July 27, 2007). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–461 Filed 1–12–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59208; File No. SR–FINRA– 

2008–045] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment No. 1 Thereto, To Amend 

the FINRA Rule 9520 Series Regarding 

Eligibility Procedures for Persons 

Subject to Certain Disqualifications 

January 6, 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 

September 8, 2008, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) (f/ 

k/a National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) and amended 

on December 11, 2008,3 the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

substantially prepared by FINRA. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend the 

FINRA Rule 9520 Series, which governs 

the eligibility procedures for persons 

subject to certain disqualifications, to 

comport with the amended definition of 

disqualification in the FINRA By-Laws. This Amendment No. 1 to SR– 

FINRA–2008–045 makes technical 

changes to the original filing filed on 

September 8, 2008. The text of the 

proposed rule change is attached as 

Exhibit 5 to this filing.4 Amendment No. 

1 replaces and supersedes the proposed 

rule change filed on September 8, 2008, 

in its entirety, except with regard to 

Exhibit 2, a proposed Regulatory Notice 

that details the proposed related 

eligibility procedures.5

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 

In light of FINRA’s obligation to 

enforce the federal securities laws, and 

as part of the consolidation of the 

member firm regulatory functions of 

NASD and NYSE Regulation, Inc., and 

the formation of FINRA, FINRA adopted 

by Board and membership vote a 

revised By-Law definition of 

disqualification that is consistent with 

the federal securities laws, such that any 

person subject to a statutory 

disqualification under Section 3(a)(39) 

of the Act also is subject to 

disqualification under Article III, 

Section 4 of the FINRA By-Laws.6

Consequently, as further detailed in the 

proposed Regulatory Notice (see Exhibit 

2), FINRA’s revised definition of 

disqualification incorporates three 

additional categories of statutory 

disqualification, including willful 

violations of the federal securities or 

commodities laws, grounds for statutory 

disqualification that were enacted in the 

Sarbanes-Oxley Act, and associations 

with certain other persons subject to 

disqualification. 

Absent the proposed rule change, all 

persons subject to any of the added 

categories of disqualification would be 

required to obtain approval from FINRA 

to enter or remain in the securities 

industry. The proposed rule change 

would both amend the text of the 

FINRA Rule 9520 Series generally to 

reflect the amended definition of 

disqualification in the By-Laws, as well 

as include the proposed Regulatory 

Notice that outlines in detail the 

applicable eligibility procedures. The 

amended FINRA Rule 9520 Series 

would incorporate by reference the 

procedures set forth in the Regulatory 

Notice. As further detailed in the 

Regulatory Notice, the need for a 

member to file an application with 

FINRA for approval notwithstanding the 

disqualification would depend on (1) 

The type of the disqualification; (2) the 

date of the disqualification; and (3) 

whether the firm or individual is 

seeking admission, readmission or 

continuation in the securities industry. 

The proposed rule change would 

amend FINRA Rule 9522 to address the 

initiation of eligibility proceedings and 

the authority of FINRA’s Department of 

Member Regulation (‘‘Member 

Regulation’’) to approve applications 

relating to a disqualification, where the 

disqualification arises from findings or 

orders specified in Section 15(b)(4)(D), 

(E) or (H) of the Act or arises under 

Section 3(a)(39)(E) of the Act (i.e., the 

added categories of disqualification). 

Currently, FINRA Rule 9522(a)(1) 

provides, among other things, that if 

FINRA staff has reason to believe that a 

disqualification exists, FINRA staff will 

issue a written notice to the member or 

applicant for membership under NASD 

Rule 1013, specifying the grounds for 

such disqualification. The proposed 

amendments to FINRA Rule 9522(a)(1) 

provide that FINRA staff would issue 

such written notice with respect to the 

added categories of disqualification only 

when the member or applicant is 

required to file an application pursuant 

to the Regulatory Notice. Similarly, the 

proposed rule change would amend 

FINRA Rule 9522(b) to require a 

member to file an application with 

FINRA with respect to the added 

categories of disqualification only when 

instructed to submit one by the 

Regulatory Notice. 

Moreover, under the current rules, 

Member Regulation is responsible for 

evaluating applications for relief from a 

disqualification filed by a disqualified 

member or sponsoring member. In 

certain circumstances, Member