10632 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

28 15 U.S.C. 77a et seq. 

29 17 CFR 230.901–905. 

30 17 CFR 230.144A. 

31 17 CFR 230.144A. 

32 17 CFR 230.144A. 

33Currently, as provided in Rule 6750, FINRA 

does not disseminate Securities Act Rule 144A 

transactions, and FINRA does not propose to amend 

Rule 6750. See e-mail from Sharon Zackula, 

Associate Vice President and Associate General 

Counsel, FINRA, to Geoffrey Pemble, Special 

Counsel, Division of Trading and Markets, 

Commission, dated March 4, 2009. 

34 15 U.S.C. 78o–3(b)(6). 

35 17 CFR 200.30–3(a)(12). 

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

2Securities Exchange Act Release No. 59253 

(January 15, 2009), 74 FR 4792. 

provisions of the Securities Act.28 For 

example, in a global offering, some debt 

securities may be issued as part of a 

foreign tranche pursuant to Regulation 

S.29 Under the proposed amendment, 

U.S. resales of securities from that 

tranche effected as Rule 144A 30

transactions would be required to be 

reported to TRACE. The proposed 

amendment regarding Rule 144A 31

transactions will allow FINRA to obtain 

a more complete audit trail of Rule 

144A 32 transactions in corporate bonds. 

This additional transaction data will 

enhance the regulatory surveillance of 

the corporate bond market as a whole.33

FINRA will announce the effective 

date of the proposed rule change in a 

Regulatory Notice to be published no 

later than 60 days following 

Commission approval. The effective 

date will be no later than 30 days 

following publication of the Regulatory 

Notice announcing Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,34 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 rule change will provide 

FINRA with heightened capabilities to 

regulate and conduct surveillance in the 

corporate debt securities markets, 

enhance market transparency and 

protect investors and other market 

participants by including in TRACE 

certain corporate debt securities that 

currently are traded in the same markets 

in which TRACE-eligible securities are 

traded by the same market participants 

and investors. 

B.Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change would impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of 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–2009–004 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–2009–004. 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–2009–004 and 

should be submitted on or before April 

1, 2009.35

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5203 Filed 3–10–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59495; File No. SR–FINRA– 

2008–052] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change 

Relating to the Adoption of FINRA Rule 

2140 (Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes) in the 

Consolidated FINRA Rulebook 

March 3, 2009. 

I. Introduction 

On October 29, 2008, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. [‘‘NASD’’]) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FINRA–2008–052 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’).1 Notice of the proposal was 

published in the Federal Register on 

January 27, 2009.2 No comment letters 

were received. For the reasons 

discussed below, the Commission is 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 10633 

3The current Consolidated FINRA Rulebook 

includes, in addition to FINRA Rules, (1) NASD 

Rules and (2) rules incorporated from NYSE 

(‘‘Incorporated NYSE Rules’’) (until the completion 

of the rulebook consolidation process, the FINRA 

rulebook includes NASD Rules and Incorporated 

NYSE Rules, together referred to as the 

‘‘Transitional Rulebook’’), in addition to the new 

consolidated FINRA Rules). While the NASD Rules 

generally apply to all FINRA members, the 

Incorporated NYSE Rules apply only to those 

members of FINRA that are also members of the 

NYSE (‘‘Dual Members’’). For more information 

about the rulebook consolidation process, see 

FINRA Information Notice, March 12, 2008 

(Rulebook Consolidation Process). 

4The term ‘‘person associated with a member’’ 

includes, among others, registered representatives. 

See FINRA By-Laws, Article I, Paragraph (rr). 

5 IM–2110–7 further states that nothing in the 

Interpretation shall affect the operation of NASD 

Rule 11870 (Customer Account Transfer Contracts). 

Generally, Rule 11870 addresses the transfer of 

securities account assets from one member to 

another member in connection with a customer 

request. FINRA intends to review NASD Rule 11870 

and related interpretive materials as part of a later 

phase in the rulebook consolidation process. Note 

that the Commission has approved FINRA’s 

proposed rule change to rescind, as duplicative of 

Rule 11870 Incorporated NYSE Rule 412 and its 

Interpretation. See Securities Exchange Act Release 

No. 58533 (September 12, 2008), 73 FR 54652 

(September 22, 2008) [File No. SR–FINRA–2008– 

036]. 

6See NASD Notice to Members 02–07 (January 

2002) (Interfering With Customer Account 

Transfers); see also Securities Exchange Act Release 

No. 45239 (January 4, 2002), 67 FR 1790 (January 

14, 2002) [File No. SR-NASD–2001–95]. 

7NASD Notice to Members 79–7 (February 1979) 

(Fair Treatment of Customer Accounts); see also 

Securities Exchange Act Release No. 15194 

(September 28, 1978) (Notice to Broker-Dealers 

Concerning Fair Treatment of Customer Accounts). 

8The exact revised text of IM–2100–8 is attached 

as Exhibit 5 to the proposed rule change and is 

available at http://www.finra.org/Industry/ 

Regulation/RuleFilings/2008/P117330. Similarly, 

FINRA has transferred NASD Rule 2110 to the 

Consolidated FINRA Rulebook without change as 

FINRA Rule 2010. Securities Exchange Act Release 

No. 58643 (September 25, 2008), 73 FR 57174 

(October 1, 2008) [File No. SR–FINRA–2008–028]. 

9 15 U.S.C. 78o–3(b)(6). 

10 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

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

granting approval of the proposed rule 

change. 

II. Description 

The proposed rule change adopts 

without material change NASD 

Interpretive Material 2110–7 (IM–2110– 

7) (Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes) as a FINRA rule 

in the consolidated FINRA rulebook. 

(1) Purpose 

As part of the process of developing 

the new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to adopt without 

material change NASD IM–2110–7 as a 

FINRA rule in the Consolidated FINRA 

Rulebook. The proposed rule change 

would renumber NASD IM–2110–7 as 

FINRA Rule 2140 in the Consolidated 

FINRA Rulebook. 

(A) Background 

NASD IM–2110–7 provides that it 

shall be inconsistent with just and 

equitable principles of trade for a 

member or person associated with a 

member 4 to interfere with a customer’s 

request to transfer his or her account in 

connection with the change in 

employment of the customer’s registered 

representative provided that the account 

is not subject to any lien for monies 

owed by the customer or other bona fide 

claim. Prohibited interference includes, 

but is not limited to, seeking a judicial 

order or decree that would bar or restrict 

the submission, delivery, or acceptance 

of a written request from a customer to 

transfer his or her account.5

FINRA adopted IM–2110–7 to address 

the practice of delaying customer 

account transfers.6 In adopting IM– 

2110–7, FINRA noted in a Notice to 

Members that, when a registered 

representative leaves his or her firm for 

a position at a different firm, clients 

serviced by the registered representative 

may decide to continue their 

relationship with the registered 

representative by transferring their 

accounts to the registered 

representative’s new firm. FINRA 

expressed concern that the registered 

representative’s former firm, concerned 

that its former employee may have 

breached his or her employment 

contract by sharing client information 

with the new firm or by soliciting 

clients to transfer their accounts to the 

new firm, sometimes would seek a court 

order to prevent the transfer of accounts. 

FINRA noted that in a prior Notice to 

Members it had already alerted 

members that unnecessary delays in 

transferring customer accounts, 

including delays accompanied by 

attempts to persuade customers not to 

transfer their accounts, are inconsistent 

with just and equitable principles of 

trade.7 FINRA stated that obtaining 

court orders to prevent customers from 

following a registered representative to 

a different firm is similar to the unfair 

practice of delaying transfers that the 

prior Notice had warned about. 

In adopting IM–2110–7, FINRA 

further stated that the Interpretive 

Material does not affect the ability of 

member firms to use employment 

agreements to prevent former 

representatives from soliciting firm 

customers. Members are not prevented 

from pursuing other remedies they may 

have arising from employment disputes 

with former registered representatives. 

Rather, IM–2110–7 is limited to 

restricting a member from interfering 

with a customer’s right to transfer his or 

her account once the customer has 

asked the firm to move the account. 

(B) Proposal 

FINRA believes that NASD IM–2110– 

7 is consistent with the goal of investor 

protection and serves the public 

interest. FINRA proposes to transfer 

NASD IM–2110–7 with only minor 

changes into the Consolidated FINRA 

Rulebook. Specifically, IM–2110–7 

would be recodified with conforming 

revisions as a stand-alone FINRA rule 

rather than as interpretive material to 

NASD Rule 2110 (Standards of 

Commercial Honor and Principles of 

Trade).8

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than ninety days 

following Commission approval. 

III. Discussion 

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 association. In particular, the 

Commission finds that the proposed 

rule change is consistent with the 

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

Act,9 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. The 

proposed rule change is an 

interpretation to an existing rule of 

NASD that is being adopted without 

material change to the FINRA rulebook. 

The proposed rule change should 

continue to protect investors and the 

public interest by addressing 

interference with the transfer of 

customer accounts in the context of 

employment disputes between 

registered representatives and their 

former firms. For these reasons, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

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

and the rules and regulations 

thereunder.10

IV. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 


rwilkins on PROD1PC63 with NOTICES
10634 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

11 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. 53854; 

(May 24, 2006), 71 FR 30975 (May 31, 2006) (SR– 

BSE–2006–23). 

FINRA–2008–052) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5212 Filed 3–10–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59497; File No. SR–BX– 

2009–015] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

of Proposed Rule Change Relating to 

Order Handling and Exposure Periods 

on the Boston Options Exchange 

Facility 

March 4, 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 February 

27, 2009, NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

certain Rules of the Boston Options 

Exchange (‘‘BOX’’) to reduce the order 

handling and exposure periods 

contained within the BOX Rules from 

three seconds to one second. The text of 

the proposed rule change is available 

from the principal office of the 

Exchange, at the Commission’s Public 

Reference Room and also on the 

Exchange’s Internet Web site at http:// 

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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. 

The self-regulatory organization 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 

The purpose of the proposed rule 

change is to reduce the order handling 

and exposure periods from three 

seconds to one second in the 

Supplementary Material to Section 17 

(Customer Orders and Order Flow 

Providers) and in Section 18 (The Price 

Improvement Period (‘‘PIP’’)) of Chapter 

V (Doing Business on BOX) of the BOX 

Rules. These sections require that orders 

entered into the BOX limit order book 

(‘‘BOX Book’’), or the PIP, respectively, 

are currently exposed to all market 

participants for three seconds before the 

orders are automatically executed, 

giving Options Participants 

(‘‘Participants’’) an opportunity to enter 

additional trading interests. 

Chapter V of the BOX Rules outlines 

certain requirements related to order 

handling by BOX Options Participants 

and Market Makers. A Participant may 

not execute an order it represents as 

agent with a facilitation or a solicited 

order unless it complies with the order 

exposure requirements contained in 

Chapter V, Section 17, Supplementary 

Materials .02 and .03. Specifically, 

Supplementary Material .02 to Section 

17 provides that an Options Participant 

may not cause the execution of an order 

it represents as agent on BOX through 

the use of orders it solicited unless the 

agency order is first exposed to the BOX 

Book for at least three seconds. 

Furthermore, Supplementary Material 

.03 to Section 17 provides that an order 

flow provider (‘‘OFP’’) may not execute 

as principal an order it represents as 

agent unless the OFP (i) exposes the 

order to the BOX Book for three 

seconds; (ii) has been bidding or 

offering on BOX for at least three 

seconds prior to receiving an agency 

order that is executable against such bid 

or offer; or (iii) sends the agency order 

to the PIP or Universal Price 

Improvement Period (‘‘UPIP’’). Under 

the proposal, these time periods would 

be reduced to one second. 

The Exchange is also proposing to 

reduce the PIP in Section 18 of Chapter 

V from three seconds to one second. 

Currently the PIP allows Participants to 

designate certain customer orders for 

price improvement and submit such 

orders to the PIP with a matching contra 

order (‘‘Primary Improvement Order’’). 

Once an order is submitted to the PIP, 

BOX broadcasts a message to Options 

Participants that commences the PIP 

and (1) states that a Primary 

Improvement Order has been processed; 

(2) contains information concerning 

series, size, price and side of the market 

of the order; and (3) states when the PIP 

will conclude. This proposal would 

reduce the PIP to one second. 

When approving the existing three 

second order handling and exposure 

periods, the Commission concluded 

that, in the electronic environment of 

BOX, reducing these time periods to 

three seconds was fully consistent with 

the electronic nature of the BOX 

market.3 BOX recognized that three 

seconds would not be long enough to 

allow human interaction with orders. 

Rather, Participants have been operating 

with sufficiently automated electronic 

systems so that they can react and 

respond to orders in a meaningful way 

within three seconds and BOX fully 

anticipates that this will continue 

within the proposed one second time 

frame. BOX believes that further 

reducing its order handling and 

exposure periods from three seconds to 

one second will benefit all market 

participants. BOX believes it is in all 

participants’ best interests to minimize 

the time of the exposure period while 

continuing to allow Participants 

adequate time to electronically respond, 

as both the order being exposed and 

Participants responding are subject to 

market risk during the exposure period. 

Indeed, most participants wait until the 

end of the last second of the current 

three second period before responding 

to exposed orders so as to minimize 

market risk. BOX believes that one 

second will continue to provide market 

participants with sufficient time to 

respond, compete, and provide price 

improvement for orders and will 

provide investors and other market 

participants with more timely 

executions, thereby reducing their 

market risk. 

Recently, BOX distributed a survey to 

Participants that regularly participate in 

the PIP or would otherwise be affected 

by this proposal. To substantiate that its 

Participants could receive, process, and 

communicate a response back to BOX 

within one second, the survey asked 

Participants to identify (i) 

approximately how many milliseconds 

it takes for an order broadcast from BOX 


rwilkins on PROD1PC63 with NOTICES