Federal Register / Vol. 74, No. 58 / Friday, March 27, 2009 / Notices 13491 

3 15 U.S.C. 78q–1(b)(3)(D). 

4 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A person is subject to statutory disqualification 

under Section 15(b)(4)(D) of the Exchange Act if the 

person has: 

* * * willfully violated any provision of the 

Securities Act of 1933, the Investment Advisers Act 

of 1940, the Investment Company Act of 1940, the 

Commodity Exchange Act, [the Exchange Act], the 

rules or regulations under any of such statutes, or 

the rules of the Municipal Securities Rulemaking 

Board, or is unable to comply with any such 

provision. 

Continued 

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Monthly Report (one-year minimum subscription required) $450.00 per year for the first security issue, plus a one time charge of $300 per additional copy/recipient for that security issue. 

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III. Discussion 

Section 19(b) of the Act directs the 

Commission to approve a proposed rule 

change of a self-regulatory organization 

if it finds that such proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

such organization. Section 17A(b)(3)(D) 

of the Act requires that the rules of a 

clearing agency provide for the 

equitable allocation of reasonable dues, 

fees, and other charges.3 The 

Commission believes that DTC’s rule 

change is consistent with this Section 

because it will provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among the users of DTC’s 

services. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular Section 17A of the Act and 

the rules and regulations thereunder. In 

approving the proposed rule change, the 

Commission considered the proposal’s 

impact on efficiency, competition, and 

capital formation. 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

DTC–2009–04) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.4

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–6832 Filed 3–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59616; File No. SR–FINRA– 

2009–008] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Proposed Changes to Forms U4 and 

U5 

March 20, 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 March 6, 

2009, 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’’) the proposed 

rule change as described in Items I, II 

and III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

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 

Uniform Application for Securities 

Industry Registration or Transfer (‘‘Form 

U4’’) and the Uniform Termination 

Notice for Securities Industry 

Registration (‘‘Form U5’’) as well as 

FINRA Rule 8312 (FINRA BrokerCheck 

Disclosure). 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

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 

Representatives of broker-dealers and 

investment advisers must use Form U4 

to become registered in the appropriate 

jurisdictions and/or with appropriate 

self-regulatory organizations (‘‘SROs’’). 

Broker-dealers and investment advisers 

must use Form U5 to terminate 

registration of an individual in the 

various SROs and jurisdictions. (Forms 

U4 and U5 are together referred to as the 

‘‘Forms’’). 

As discussed in greater detail below, 

the proposed rule change would: 

• Revise questions on the Forms to 

enable FINRA and other regulators to 

identify more readily individuals and 

firms (collectively referred to as 

‘‘persons’’) subject to statutory 

disqualification pursuant to Section 

15(b)(4)(D) or (E) of the Exchange Act 

(referred to as ‘‘willful violations’’).3

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13492 Federal Register / Vol. 74, No. 58 / Friday, March 27, 2009 / Notices 

A person is subject to statutory disqualification 

under Section 15(b)(4)(E) of the Exchange Act if the 

person has: 

* * * willfully aided, abetted, counseled, 

commanded, induced, or procured the violation by 

any person of any provision of the Securities Act 

of 1933, the Investment Advisers Act of 1940, the 

Investment Company Act of 1940, the Commodity 

Exchange Act, [the Exchange Act], the rules or 

regulations under any of such statutes, or the rules 

of the Municipal Securities Rulemaking Board, or 

has failed reasonably to supervise, with a view to 

preventing violations of the provisions of such 

statutes, rules, and regulations, another person who 

commits such a violation, if such other person is 

subject to his supervision. For the purposes of this 

subparagraph (E), no person shall be deemed to 

have failed reasonably to supervise any other 

person, if: 

(i) There have been established procedures, and 

a system for applying such procedures, which 

would reasonably be expected to prevent and 

detect, insofar as practicable, any such violation by 

such other person, and 

(ii) Such person has reasonably discharged the 

duties and obligations incumbent upon him by 

reason of such procedures and system without 

reasonable cause to believe that such procedures 

and system were not being complied with. 

15 U.S.C. 78o(b)(4)(D) and (E). 

4 In addition to FINRA, regulators that use the 

Forms include other SROs and securities regulators 

of states and other jurisdictions. 

5 In connection with the consolidation of the 

member firm regulatory functions of NASD and 

NYSE Regulation, Inc. and the formation of FINRA, 

FINRA adopted a revised definition of 

disqualification to conform to the definition of 

statutory disqualification under Section 3(a)(39) of 

the Exchange Act. Consequently, FINRA’s revised 

definition of disqualification incorporates certain 

additional categories of disqualification, including 

willful violations. FINRA has filed a proposed rule 

change to establish procedures applicable to 

persons subject to the additional categories of 

disqualification. See Securities Exchange Act 

Release No. 59208 (January 6, 2009), 74 FR 1738 

(January 13, 2009) (Notice of Filing of SR–FINRA– 

2008–045). 

6The Forms define SRO to include any national 

securities or commodities exchange, as well as any 

national securities association or any registered 

clearing agency. Accordingly, the proposed rule 

change would delete as redundant certain specific 

references to commodities exchanges in individual 

questions that already inquire as to SRO actions. 

7See Exhibit 3a. The Commission notes that there 

are references throughout this notice to exhibits. 

However, there are no exhibits attached to this 

notice. The exhibits are part of the proposed rule 

change. 

8See Exhibit 3b. FINRA is proposing to add a 

question to the Form U4 Regulatory Action DRP to 

elicit additional information about regulatory 

actions reported in Question 14D(2)(b) of Form U4 

(actions that result in a final order based on 

violations of any laws or regulations that prohibit 

fraudulent, manipulative, or deceptive conduct). 

• Revise questions on the Forms 

regarding disclosure of arbitrations or 

civil litigation to elicit reporting of 

allegations of sales practice violations 

made against a registered person in 

arbitration or litigation in which that 

person is not named as a party. 

• Revise questions on the Forms 

regarding customer complaints, 

arbitrations or civil litigation to clarify 

the manner in which individuals and 

firms must report sales practice 

violations alleged against registered 

persons. 

• Raise the monetary threshold for 

reporting of settlements of customer 

complaints, arbitrations or civil 

litigation on the Forms from $10,000 to 

$15,000, and make a conforming change 

to reflect this revised monetary 

threshold in the description of ‘‘Historic 

Complaints’’ in FINRA Rule 8312. 

• Revise the definition of ‘‘Date of 

Termination’’ in Form U5, and enable 

firms to amend the ‘‘Date of 

Termination’’ and ‘‘Reason for 

Termination’’ sections of the Form U5, 

subject to certain conditions and 

notifications. 

• Make certain technical and 

conforming changes to the Forms 

intended to clarify the information 

being elicited by regulators and to 

facilitate accurate reporting by firms on 

the Forms. 

Proposed Revisions Regarding Willful 

Violations 

The proposed rule change would 

revise the Forms to enable FINRA and 

other regulators 4 to identify more 

readily persons subject to statutory 

disqualification as a result of willful 

violations.5 The current Forms elicit 

information that assists regulators in 

identifying persons subject to statutory 

disqualification based on findings by, or 

sanctions imposed by, the SEC, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’), or an SRO as 

defined in the Forms,6 but the relevant 

questions do not specifically inquire as 

to willful violations and do not capture 

all of the enumerated types of willful 

violations. For example, Questions 14C 

and 14E on the Form U4 and the 

corresponding Regulatory Action 

disclosure reporting page (‘‘DRP’’) elicit 

information regarding regulatory or 

disciplinary action taken by the SEC, 

the CFTC, or an SRO, but currently do 

not elicit information on whether a 

violation was willful and do not 

specifically address SRO findings of 

willful violations of the securities laws 

or the Commodity Exchange Act. 

Similarly, Question 7D on Form U5 asks 

whether the individual was involved in 

a disciplinary action by a domestic or 

foreign governmental body or SRO; 

however, neither the question nor the 

corresponding Form U5 Regulatory 

Action DRP elicits details on whether 

the action involved a willful violation. 

Accordingly, as described below, the 

proposed rule change would modify 

these Forms to enable FINRA and other 

regulators to query the CRD system to 

identify persons who are subject to 

disqualification as a result of a willful 

violation. 

With respect to the Form U4, FINRA 

proposes to add questions to existing 

Questions 14C and 14E. Question 14C 

inquires about SEC and CFTC regulatory 

actions. The proposed rule change 

would add new Questions 14C(6), (7) 

and (8) to elicit from persons whether 

the SEC or the CFTC ever: 

(6) found you to have willfully violated 

any provision of the Securities Act of 1933, 

the Securities Exchange Act of 1934, the 

Investment Advisers Act of 1940, the 

Investment Company Act of 1940, the 

Commodity Exchange Act, or any rule or 

regulation under any of such Acts, or any of 

the rules of the Municipal Securities 

Rulemaking Board, or found you to have 

been unable to comply with any provision of 

such Act, rule or regulation? 

(7) found you to have willfully aided, 

abetted, counseled, commanded, induced, or 

procured the violation by any person of any 

provision of the Securities Act of 1933, the 

Securities Exchange Act of 1934, the 

Investment Advisers Act of 1940, the 

Investment Company Act of 1940, the 

Commodity Exchange Act, or any rule or 

regulation under any of such Acts, or any of 

the rules of the Municipal Securities 

Rulemaking Board? 

(8) found you to have failed reasonably to 

supervise another person subject to your 

supervision, with a view to preventing the 

violation of any provision of the Securities 

Act of 1933, the Securities Exchange Act of 

1934, the Investment Advisers Act of 1940, 

the Investment Company Act of 1940, the 

Commodity Exchange Act, or any rule or 

regulation under any of such Acts, or any of 

the rules of the Municipal Securities 

Rulemaking Board? 

The proposed rule change would add 

identical questions to Question 14E of 

the Form U4 (to be numbered as 

Questions 14E(5), (6) and (7)) in the 

context of findings by any SRO.7 FINRA 

is not proposing any new questions 

addressing willful violations on the 

Form U4 Regulatory Action DRP, which 

will continue to elicit specific 

information regarding the status of the 

events reported in response to 

Questions 14C and 14E.8

With respect to the proposed new 

Questions 14C(6), (7) and (8), and 

14E(5), (6) and (7) on the Form U4, firms 

will need to determine promptly 

whether any of their registered persons 

have been subject to an action that 

requires reporting. Firms then will be 

required to amend Forms U4 to respond 

to these new questions the first time 

they file a Form U4 amendment after the 

effective date of the proposed rule 

change, but no later than 120 days 

following the effective date of the 

proposed rule change. If a firm has 

determined that the registered person 

must answer ‘‘yes’’ to any part of 

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Federal Register / Vol. 74, No. 58 / Friday, March 27, 2009 / Notices 13493 

9Under the proposal, the CRD system will 

process Form U4 filings as follows: answers to 

current Questions 14C(1) through (5) and Questions 

14E(1) through (4) will be transferred without 

change to proposed new Questions 14C and 14E, 

respectively. In addition, all registered persons will 

have ‘‘null’’ values in the newly added Questions 

14C(6), (7), and (8), and 14E(5), (6), and (7). In other 

words, answers to these new questions will be 

blank (i.e., not populated with either a ‘‘yes’’ or 

‘‘no’’ answer). Firms must affirmatively answer 

these newly added questions (Questions 14C(6), (7), 

and (8) and 14E(5), (6), and (7)) by clicking the 

appropriate ‘‘yes’’ or ‘‘no’’ radio buttons the first 

time they file a Form U4 amendment after the 

effective date of the proposed rule change, but no 

later than 120 days following the effective date of 

the proposed rule change. If a firm does not 

affirmatively answer the new questions for 

registered persons, the filing of any amendments to 

the Form will fail the CRD-system completeness 

check. 

10See Exhibit 3c. 

11See Exhibit 3d. 

12The ‘‘Explanation of Terms’’ in Form U4 

defines ‘‘sales practice violations’’ to include ‘‘any 

conduct directed at or involving a customer which 

would constitute a violation of any rules for which 

a person could be disciplined by any self-regulatory 

organization * * *’’ See Exhibit 3a. 

13This proposed rule change proposes to raise 

from $10,000 to $15,000 the monetary threshold for 

reporting of settlements of customer complaints, 

arbitrations or litigations on the Forms, as discussed 

in more detail infra. 

14See Question 4 under the 14I(1) set of questions 

on Forms U4/U5 Interpretive Guidance, which is 

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

www.finra.org/RegulatorySystems/CRD/ 

FilingGuidance/p005243. 

15Moreover, in addition to not being reportable 

on Forms U4 or U5, such a matter is not reportable 

on Form BD because Form BD does not require the 

reporting of any customer-initiated complaints, 

arbitrations or civil litigations. FINRA notes, 

however, that certain summary information about 

arbitration awards rendered in claims brought by 

customers against firms may be obtained through 

BrokerCheck. 

16See supra note 12. 

17 Id. 

Questions 14C(6), (7) or (8), or 

Questions 14E(5), (6) or (7), the 

amendment filings must include 

completed DRP(s) covering the 

proceedings or action reported.9

FINRA appreciates that adding new 

disclosure questions to Form U4 will 

require firms to amend (or refile) such 

forms for their registered persons, and 

that this requirement may place an 

administrative burden on firms. 

Accordingly, FINRA is providing firms 

with up to 120 days from the effective 

date of the proposed rule change to 

amend their registered persons’ Forms 

U4 to answer the new Questions 14C(6), 

(7) and (8) and 14E(5), (6) and (7), rather 

than the 30 days provided under Article 

V, Section 2 of the FINRA By-Laws for 

the filing of such amendments. FINRA 

emphasizes that complete and accurate 

reporting on Forms U4 is the joint 

responsibility of the registered person 

and the firm. 

With respect to the Form U5, FINRA 

proposes to leave unchanged Question 

7D (Regulatory Action Disclosure),10

and to add a new question, Question 

12C, to the Form U5 Regulatory Action 

DRP. After implementation, firms that 

answer ‘‘yes’’ to Question 7D on Form 

U5 will be required to provide more 

detailed information about the 

regulatory action in Question 12C on the 

DRP. For regulatory actions in which 

the SEC, CFTC or an SRO is the 

regulator involved, Question 12C will 

require firms to answer questions 

eliciting whether the action involves a 

willful violation. These questions 

correspond to those questions proposed 

to be added to the Form U4.11 A firm 

will not be required to amend Forms U5 

to answer Question 12C on the DRP 

and/or add information to a Form U5 

Regulatory Action DRP that was filed 

previously unless it is updating a 

regulatory action that it reported as 

pending on the current DRP. 

Proposed Revisions To Elicit Reporting 

of Allegations of Sales Practice 

Violations Against Registered Persons 

Made in Arbitrations or Litigation in 

Which the Registered Person Is Not a 

Named Party 

The proposed rule change would 

revise the Forms to require the reporting 

of allegations of sales practice violations 

made against registered persons in a 

civil lawsuit or arbitration in which the 

registered person is not a named party. 

Under the current reporting structure, a 

firm is not required to report on a 

registered person’s Form U4 that a 

customer has alleged a sales practice 

violation against such person in the 

body of a lawsuit or arbitration claim, 

unless the registered person also has 

been named as a defendant/respondent. 

A firm also is not required to report on 

Form BD (Uniform Application for 

Broker-Dealer Registration) that it has 

been named as a respondent in a 

consumer-initiated arbitration or to 

report that a sales practices violation 

was alleged against one of its registered 

persons under these circumstances. As 

a result, this form of ‘‘customer 

complaint’’ against a registered person 

or firm is currently unreported via the 

Forms and, therefore, unavailable to 

regulators or prospective broker-dealer 

employers of the registered person via 

CRD or to the public through 

BrokerCheck. 

Specifically, current Question 14I(1) 

on Form U4 requires an applicant for 

registration to answer ‘‘yes’’ only if he 

or she has ever been named as a 

respondent or defendant in an 

investment-related, consumer-initiated 

arbitration or civil litigation that alleged 

that he or she was involved in one or 

more sales practice violations 12 and 

which: (1) Is still pending; (2) resulted 

in an arbitration award or civil 

judgment against the person, regardless 

of amount; or (3) was settled for an 

amount of $10,000 or more.13 Question 

7E(1) on Form U5 is similarly worded. 

Regulators have interpreted Question 

14I(1) on Form U4 and Question 7E(1) 

on Form U5 to mean that, even if a 

registered person is identified in the 

body of an arbitration claim or lawsuit 

as the person responsible for the alleged 

sales practice violation(s), the event is 

not required to be reported on the 

person’s Form U4 or U5 because he or 

she was not specifically named as a 

respondent/defendant in the arbitration 

or civil litigation.14 In other words, a 

‘‘yes’’ answer to Question 14I(1) on 

Form U4 and Question 7E(1) on Form 

U5 is currently required only when the 

customer has sued a registered person or 

filed an arbitration claim naming the 

registered person as a respondent. 

Similarly, if the customer has sued or 

filed an arbitration claim against the 

firm only and not the registered person, 

the registered person is not required to 

answer ‘‘yes’’ to these questions, even if 

the customer has identified a registered 

person in the body of the lawsuit or 

arbitration as the person responsible for 

the alleged sales practice violation(s).15

If, however, a customer files a written 

complaint with a firm alleging that a 

registered person is responsible for the 

same sales practice violation(s), the firm 

and the registered person are 

responsible for reporting that customer 

complaint on the person’s Form U4 

(Question 14I(3)) or Form U5 (Question 

7E(3)), provided the complaint meets 

the threshold reporting requirements. 

Settlements of customer disputes are 

similarly treated. If a customer 

complaint against a registered person is 

settled (either by the person or the 

person’s firm) for $10,000 or more,16 the 

event is reported on the registered 

person’s Form U4 or U5 under 

Questions 14I(2) or 7E(2), respectively. 

However, if the firm settles an 

arbitration or civil lawsuit for $10,000 

or more,17 and the person described in 

the complaint or claim as the person 

responsible for the alleged sales practice 

violation(s) is not a named respondent/ 

defendant, the matter is not reported on 

any of the Forms and is thus unavailable 

to the public through BrokerCheck, and 

is also unavailable to regulators or 

prospective broker-dealer employers of 

the person through the CRD system. 

The inconsistent treatment regarding 

the reporting of alleged sales practice 

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13494 Federal Register / Vol. 74, No. 58 / Friday, March 27, 2009 / Notices 

18For text of the proposed rule changes to Forms 

U4 and U5, see Exhibits 3a and 3c, respectively. 

19 In this regard, the proposed rule change also 

would amend the Instructions to the Forms, noting 

that the revised questions should be answered 

‘‘yes’’ if the individual was not named as a 

respondent/defendant but (1) the Statement of 

Claim or Complaint specifically mentions the 

individual by name and alleges the individual was 

involved in one or more sales practice violations or 

(2) the Statement of Claim or Complaint does not 

mention the individual by name but the firm has 

made a good faith determination that the sales 

practice violation(s) alleged involves one or more 

particular individuals. 20The proposed rule change would make 

corresponding changes to Customer Complaint/ 

Arbitration/Civil Litigation DRPs to reflect the 

changes discussed above. See Exhibit 3b. These 

changes would include, e.g., eliciting specifically 

whether, in the case of an arbitration or litigation, 

the individual was named as a respondent or 

defendant. Furthermore, the DRPs would require 

the alleged damages and disposition for matters in 

which sales practice violations are alleged against 

an individual who was not named in an arbitration 

or litigation. 

21 Individuals who currently are registered with 

FINRA, are associated with a member firm, and 

who wish to provide an update or context to 

information that is disclosed through BrokerCheck 

are required to file an amended Form U4. 

Individuals who are no longer registered with 

FINRA, but who have been FINRA-registered within 

the last two years (and thus about whom 

information is available through BrokerCheck 

pursuant to Rule 8312) may not provide an update 

or context to an event via the Form U4. Instead, 

such individuals may submit a Broker Comment to 

provide an update or context to information that is 

disclosed through BrokerCheck. 

22See FINRA Rule 8312(b)(7), and proposed 

conforming revisions discussed infra in this rule 

filing. 

23FINRA has proposed replacing NASD Rule 

3070 and Incorporated NYSE Rule 351 with a single 

rule, proposed FINRA Rule 4530, in the 

Consolidated FINRA Rulebook. See Regulatory 

Notice 08–71 (November 2008). 

24See Exhibit 3a. 

25See Exhibit 3c. 

26Question 14I(2) in Form U4 and Question 7E(2) 

in Form U5 would also add the words ‘‘written or 

oral’’ to describe an investment-related, consumerinitiated complaint, to reflect FINRA’s longstanding 

interpretation that, for purposes of this question, a 

consumer-initiated complaint can be in either 

written or oral format. In addition, the Customer 

Complaint/Arbitration/Civil Litigation DRPs would 

elicit whether a complaint is oral or written. The 

references in Question 14I(3) of Form U4 and 

Question 7E(2) of Form U5 to ‘‘written complaint’’ 

would remain unchanged. 

violations is difficult to reconcile on 

principle; whether or not the person 

responsible for the alleged sales practice 

violation is a named respondent or 

defendant, a sales practice violation has 

been alleged. Moreover, this reporting 

inconsistency raises practical concerns 

because naming a firm as the sole 

respondent in an arbitration claim is 

becoming more prevalent in 

circumstances where the allegations 

involve sales practice violation(s) 

against a registered person. 

To address this inconsistent 

treatment, the proposed rule change 

would amend Question 14I on Form U4 

and Question 7E on Form U5 to require 

the reporting of alleged sales practice 

violations made by a customer against 

persons identified in the body of a civil 

litigation complaint or an arbitration 

claim, even when those persons are not 

named as parties. Specifically, the 

proposed rule change would add 

Questions 14I(4) and (5) to Form U4 and 

Questions 7E(4) and (5) to Form U5. 

These questions would in most respects 

reflect the language of the 

corresponding questions regarding 

alleged sales practice violations of 

persons identified in consumer 

complaints (i.e., Questions 14I(2) and 

(3) in Form U4 and Questions 7E(2) and 

(3) in Form U5).18 The proposed new 

questions would apply only to 

arbitration claims or civil litigation filed 

on or after the effective date of the 

proposed rule change; applicants and 

firms would not be required to answer 

Questions 14I(4) or (5) on Form U4 or 

Questions 7E(4) or (5) on Form U5 with 

respect to arbitration claims or civil 

litigation filed before the effective date 

of the proposed rule change. 

A ‘‘yes’’ answer to newly proposed 

Questions 14I(4) or 14I(5) in Form U4 or 

Questions 7E(4) or 7E(5) in Form U5 

would indicate that the applicant or 

registered person, though not named as 

a respondent/defendant in a customerinitiated arbitration or civil lawsuit, was 

either named in or could be reasonably 

identified from the body of the 

arbitration claim or civil litigation as a 

registered person who was involved in 

one or more of the alleged sales practice 

violations. A firm would be required to 

report a ‘‘yes’’ answer only after it has 

made a good faith determination after a 

reasonable investigation that the alleged 

sales practice violation(s) involved the 

registered person.19

As a result of the proposed rule 

change, alleged sales practice violations 

made by a customer against persons 

identified in the body of a civil 

litigation complaint or arbitration claim 

(as described above) would be treated 

the same way that customer complaints 

are currently treated in the Uniform 

Forms.20 For example, such matters 

would be required to be reported no 

later than 30 days after receipt by the 

firm. In addition, as is currently the 

practice with respect to customer 

complaints reported to the CRD system, 

registered persons would have an 

opportunity to provide context on the 

reported matter on Form U4; persons 

not currently registered with a FINRA 

member firm, but who were registered 

within the previous two years, would be 

afforded an opportunity to provide 

context on the reported matter through 

a Broker Comment.21 Such matters 

would be disclosed through 

BrokerCheck consistent with FINRA 

Rule 8312. To the extent such a matter 

becomes non-reportable (if, for example, 

the arbitration or litigation is dismissed 

and the dismissal is not part of a 

settlement, or it is settled for less than 

the monetary threshold designated on 

Form U4), it would, like other customer 

complaints that become non-reportable, 

be eligible for disclosure through 

BrokerCheck as a ‘‘Historic Complaint,’’ 

provided it meets certain criteria.22

FINRA will consider whether, as a 

result of the proposed rule change, 

corresponding changes to the reporting 

requirements currently found in NASD 

Rule 3070 and Incorporated NYSE Rule 

351 would be warranted.23

Proposed Revisions To Clarify the 

Manner in Which Individuals and Firms 

Must Report Sales Practice Violations 

Alleged Against Registered Persons 

The proposed rule change would 

make additional revisions to Questions 

14I on Form U4 and 7E on Form U5 to 

further clarify the manner in which 

individuals and firms must report 

allegations of sales practice violations 

against registered persons made through 

arbitration or civil litigation or through 

consumer-initiated complaints. 

Question 14I on Form U4 currently 

elicits information about allegations of 

sales practice violations for individuals 

who were named in arbitration or civil 

litigation (in Question 14I(1)) and for 

individuals who were the subject of 

consumer-initiated complaints (in 

Questions 14I(2) and (3)). Questions 

14I(2) and (3) elicit information for 

consumer-initiated complaints ‘‘not 

otherwise reported under Question 

14I(1).’’ 24 Similarly, Question 7E on 

Form U5 currently elicits information 

about allegations of sales practice 

violations for individuals who were 

named in arbitration or civil litigation 

(in Question 7E(1)) and for individuals 

who were the subject of consumerinitiated complaints ‘‘not otherwise 

reported under Question 7(E)(1)’’ (in 

Questions 7(E)(2) and (3)).25 To clarify 

the methods of reporting allegations of 

sales practice violations, the rule 

proposal would eliminate as 

unnecessary the references to Question 

14I(1) in Questions 14I(2) and (3) on 

Form U4 and the references to Question 

7E(1) in Questions 7(E)(2) and (3).26

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27See, e.g., Securities Exchange Act Release No. 

39562 (January 20, 1998), 63 FR 3942 (January 27, 

1998); Special NASD Notice to Members 98–27, 

‘‘Interim Forms U–4 and U–5 Go Into Effect; Interim 

Form BD Also Approved’’ (March 1998). 

28Similarly, other SROs and jurisdictions 

generally determine the effective date of 

termination of registration for their purposes. 

29FINRA also proposes to clarify that, for partial 

terminations, a firm is only required to provide a 

‘‘Date of Termination’’ when submitting post-dated 

termination requests during the renewal period (i.e., 

to effect a termination of registration at year-end). 

For all other partial terminations, the ‘‘Date of 

Termination’’ will be an optional field for firms to 

complete. 

30Article 5, Section 4 of the FINRA By-Laws 

provides that FINRA generally retains initial 

jurisdiction over a person whose association with 

a member has been terminated for purposes of a 

complaint under FINRA’s rules based upon conduct 

that commenced prior to termination for a period 

of two years after the effective date of termination 

of registration. 

31FINRA notes that Article 5, Section 3(a) states 

that termination of registration shall not take effect 

so long as any complaint or action under FINRA’s 

rules is pending against a member and to which 

complaint or action such associated person is also 

a respondent or so long as any complaint or action 

is pending against such person individually under 

FINRA’s rules. See also In re Donald M. Bickerstaff, 

52 S.E.C. 232, 233 (April 17, 1995) (noting that, 

absent a pending complaint or an examination in 

process, termination of registration became effective 

upon receipt of the Form U5 termination notice). 

FINRA further notes that in the case of post-dated 

requests for full termination during the renewal 

period, for purposes of retention of jurisdiction by 

FINRA, the effective date of termination generally 

will be the (post-dated) date of termination 

provided by the firm and not the date that CRD 

received the form. 

Proposed Revisions To Raise the 

Monetary Threshold for Reporting 

Customer Complaints, Arbitrations or 

Litigation From $10,000 to $15,000 on 

the Forms and Conforming Change to 

FINRA Rule 8312 

Currently, Question 14I(1)(c) on the 

Form U4 and Question 7E(1)(c) on the 

Form U5 require consumer-initiated 

arbitration or litigation to be reported 

only when they have been settled for 

$10,000 or more. Similarly, Question 

14I(2) on Form U4 and Question 7E(2) 

on Form U5 require customer 

complaints to be reported only when 

they have been settled for $10,000 or 

more. Recognizing that the monetary 

threshold for settlements of customer 

complaints, arbitrations or litigation was 

set in 1998 27 and has never been 

adjusted for inflation, the proposed rule 

change would raise the existing 

settlement amount to $15,000 to reflect 

more accurately the business criteria 

(including the cost of litigation) firms 

consider when deciding to settle claims. 

This change would be reflected in the 

Forms, including in Question 14I on 

Form U4 and Question 7E on Form U5 

as discussed supra. 

In addition, the proposed rule change 

would amend the description of 

‘‘Historic Complaints’’ in FINRA Rule 

8312 to conform to the revised monetary 

threshold for reporting of settlements of 

customer complaints, arbitrations or 

litigation in the Forms. Currently, 

Historic Complaints refer to the 

information last reported on registration 

forms relating to customer complaints 

that are more than two years old and 

that have not been settled or 

adjudicated, and customer complaints, 

arbitrations or litigation settled for an 

amount less than $10,000 and are no 

longer reported on a registration form. 

Under FINRA Rule 8312, FINRA will 

release Historic Complaints under 

BrokerCheck where: (1) Any such matter 

became a Historic Complaint on or after 

March 19, 2007; (2) the most recent 

Historic Complaint or currently reported 

customer complaint, arbitration or 

litigation is less than ten years old; and 

(3) the person has a total of three or 

more currently disclosable regulatory 

actions, currently reported customer 

complaints, arbitrations or litigation, or 

Historic Complaints (subject to the 

limitation that they became a Historic 

Complaint on or after March 19, 2007), 

or any combination thereof. 

In light of the proposed amendment to 

raise the monetary threshold for 

reporting customer complaints, 

arbitrations or litigation on the Forms 

from $10,000 to $15,000, the proposed 

rule change would make a conforming 

amendment to FINRA Rule 8312 such 

that Historic Complaints would include 

customer complaints, arbitrations or 

litigation that have been settled for less 

than $10,000 prior to the effective date 

of the proposed rule change (subject to 

the limitation that they became a 

Historic Complaint on or after March 19, 

2007), or settled for less than $15,000 on 

or after the effective date of the 

proposed rule change. As a result, 

FINRA would continue to release 

through BrokerCheck those customer 

complaints, arbitrations or litigation 

settled for more than $10,000 but less 

than $15,000 prior to the effective date 

of the proposed rule change. Customer 

complaints, arbitrations or litigation 

settled for less than $15,000 on or after 

the effective date of the proposed rule 

change would be considered Historic 

Complaints for purposes of 

BrokerCheck. 

Proposed Revisions To Clarify the 

Definition of ‘‘Date of Termination’’ in 

Form U5 and To Allow Firms To 

Amend the ‘‘Date of Termination’’ and 

‘‘Reason for Termination’’ 

FINRA proposes clarifying revisions 

to the definition of ‘‘date terminated’’ in 

Form U5. The current definition 

provides that the date terminated means 

the ‘‘effective date of the termination of 

the registration or, in cases where 

registration has not yet been made 

effective, the date of the withdrawal of 

the application for registration.’’ 

However, as stated in Article V, Section 

3(a) of the FINRA By-Laws, the 

authority to declare the effective date of 

termination for purposes of FINRA 

registration resides with FINRA.28 As a 

result, the proposed amendments to 

Form U5 would clarify that the date to 

be provided by a firm in the ‘‘Date of 

Termination’’ field is the ‘‘date that the 

firm terminated the individual’s 

association with the firm in a capacity 

for which registration is required.’’ The 

proposed amendments further would 

clarify that, in the case of full 

terminations, the ‘‘Date of Termination’’ 

provided by the firm will continue to be 

used by FINRA and other SROs and 

jurisdictions to determine whether an 

individual is required to requalify by 

examination or obtain an appropriate 

waiver upon reassociating with a firm.29

With respect to the ‘‘effective date’’ of 

terminations, the proposed amendments 

to the Form U5 would clarify that the 

SRO/jurisdiction determines the 

effective date of termination of 

registration. In general, for purposes of 

retention of jurisdiction by FINRA,30

FINRA considers the effective date of 

termination to be the date that the Form 

U5 is received by CRD (generally the 

date of filing of the Form U5 with 

CRD).31

Currently, firms are explicitly 

precluded from changing the ‘‘Date of 

Termination’’ and ‘‘Reason for 

Termination’’ sections of Form U5 

absent a court order or an arbitration 

award that meets certain criteria. Since 

2000, firms have had the ability to add 

a Registration Comment (essentially, a 

note on the terminated person’s CRD 

record) to report an error in connection 

with the filing of either the reason for, 

or date of, termination. The Registration 

Comment explains the reason for the 

change, but does not amend the original 

reason for, or date of, termination. 

After reviewing the Registration 

Comments reported by firms since 2000, 

FINRA believes that it would be 

beneficial for firms and regulators to 

permit firms to amend the date of, or 

reason for, termination because (1) the 

majority of requests to change a date of, 

or reason for, termination are a result of 

clerical errors made by a firm; and (2) 

the inaccurate information originally 

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32With respect to the requalification period, 

FINRA is not proposing to allow an amended date 

of termination to systematically reset the two-year 

window in CRD. Instead, should an individual be 

notified that he or she is required to requalify by 

examination as a result of an erroneous date of 

termination that was subsequently amended by a 

firm, the individual would be required to submit a 

request for a waiver, and FINRA would consider the 

amended date of termination in connection with its 

review of the request. FINRA does not expect this 

situation to occur often; moreover, FINRA would 

expect to review such requests in an expeditious 

manner. 

33As discussed supra, proposed Form U5 

Regulatory Action DRP would add Question 12C 

that corresponds to proposed Form U4 Questions 

14C(6–8) and 14E(5–7). The Forms U4 and U5 

Regulatory Action DRPs would be expanded to ask 

details with respect to fines and penalties, 

including whether the money has been paid, is 

subject to a payment plan, or has been waived. 

34 15 U.S.C. 78o–3(b)(6). 

35Regulatory Notice 08–20 requested comment on 

revisions to the Forms regarding reporting of 

allegations of sale practice violations against 

registered persons made in litigations or arbitrations 

in which the registered person is not a named party; 

raising the monetary threshold for reporting of 

settlements of customer complaints, arbitrations 

and litigations; enabling firms to amend the date of 

and reason for termination on the Form U5; and 

certain of the technical and conforming changes. It 

did not request comment on the proposed rule 

change regarding willful violations, nor to the 

proposed conforming change to FINRA Rule 8312. 

See Exhibit 2a. 

reported currently remains on a person’s 

CRD record unless the person is able to 

obtain an arbitration award or a court 

order directing that the original entry be 

expunged or changed. 

As a result, the proposed rule change 

would permit a firm to amend the ‘‘Date 

of Termination’’ and ‘‘Reason for 

Termination’’ fields in a Form U5 it 

previously submitted, but would require 

the firm to provide a reason for each 

amendment. To monitor such 

amendments, including those reporting 

terminations for cause, FINRA would 

notify other regulators and the brokerdealer with which the person is 

currently associated (if the person is 

associated with another firm) when a 

date of termination or reason for 

termination has been amended. As 

proposed, the original date of 

termination or reason for termination 

would remain in the CRD system in 

form filing history. Importantly, any 

changes to the ‘‘Date of Termination’’ 

filed by firms would not affect the 

manner in which FINRA determines 

whether an individual is required to 

requalify by examination or obtain an 

appropriate waiver upon reassociating 

with another firm or whether FINRA has 

retained jurisdiction over the 

individual. Rather, FINRA would 

continue to determine such periods 

based on the original ‘‘Date of 

Termination’’ provided by the firm and/ 

or the date that the original filing was 

processed by CRD, respectively, as 

further described above.32

Proposed Technical and Conforming 

Changes to the Forms 

The proposed rule change would 

make various technical and conforming 

changes to the Forms. These changes are 

generally intended to clarify the 

information elicited by regulators and to 

facilitate reporting by firms and 

regulators. The proposed rule change 

would convert certain ‘‘free text’’ fields 

to discrete fields on the DRPs of Forms 

U4 and U5. These revisions to the DRPs 

generally would not change the 

information currently elicited, but 

would change the presentation of the 

DRPs.33 For example, the DRPs would 

enable filers to provide more specific 

information utilizing pre-established 

picklists for the following types of 

information: 

• Product type; 

• Sanction/disposition; and 

• Status of the sanction (i.e., whether 

the sanction remains in effect at the 

time of filing). 

FINRA anticipates this format would 

elicit additional details from 

respondents at the initial filing stage. 

This format change would have 

attendant benefits. For example, a 

completeness check would prevent a 

firm from submitting a filing without 

having provided information in 

response to the allegations and 

disposition detail questions which, in 

turn, should reduce the need for 

additional communications between 

FINRA staff and firms that occur when 

DRP filings are incomplete, and 

generally should make the filing process 

more efficient. 

The proposed rule change also would 

add to Section 7 of Form U5 (Disclosure 

Questions) an optional ‘‘Disclosure 

Certification Checkbox’’ that would 

enable firms to affirmatively represent 

that all required disclosure for a 

terminated person has been reported 

and the record is current at the time of 

termination. Checking the checkbox 

would allow the firm to bypass the 

process of re-reviewing a person’s entire 

disclosure history for purposes of filing 

Form U5 in situations in which 

disclosure is up to date at the time of 

the person’s termination. 

The proposed change would make 

additional technical changes to the 

Forms. For example, it would 

incorporate the definition of ‘‘found’’ 

from the Form U4 Instructions into the 

Form U5 instructions. In addition, it 

would provide more detailed 

instructions regarding the reporting of 

an internal review (conducted by the 

firm) to clarify that employment-related 

disputes between a registered person 

and the firm should not be reported in 

Question 7B. It would also clarify how 

an individual may file comments to an 

Internal Review DRP (via ‘‘Part II’’ of 

that DRP) to emphasize that the 

individual’s signature is required (in 

Section 8 of that DRP). 

FINRA will announce the effective 

date of the proposed rule change in a 

Regulatory Notice. FINRA anticipates 

including the proposed changes in a 

software release to the CRD system in 

the second quarter of 2009. 

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 is designed to 

accomplish these ends by making 

changes to the Forms that will address 

regulatory concerns and to ease, clarify 

or facilitate industry reporting 

requirements. The proposed rule 

change, among other things, would 

enable FINRA and other regulators to 

identify more readily those persons 

subject to a statutory disqualification 

based on willful violations. It also 

would require firms to report allegations 

of sales practice violations made in 

arbitration claims and civil lawsuits 

against registered persons who are not 

named as parties in those proceedings, 

thereby eliminating existing 

inconsistencies regarding the reporting 

of alleged sales practice violations by 

registered persons. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

In April 2008, FINRA staff published 

Regulatory Notice 08–20 requesting 

comment on certain of the proposed 

changes to the Forms.35 A copy of the 

Regulatory Notice is attached as Exhibit 

2a. The comment period ended on May 

27, 2008. FINRA received 36 comments 

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36See Exhibits 2b and 2c. 

37Aidikoff; ARM; Bakhtiari; Brecek & Young; 

Brown & Brown; Cantella; Caruso; FMSBonds; FSI; 

Greene/Woodforest; Gross/Pace; Harrison; 

Jacobson/Cornell; Lazaro/St. John’s; Lipner/Baruch; 

MassMutual; MWA; NASAA; Nationwide; Nelson; 

NPB; NPH; Penson; PIABA; ProEquities; RND; 

Sadler; SIFMA; Steiner; Stephens; R. Long/ 

Wachovia; P. Spitzer/Wachovia; Williams/ 

Woodforest; WSA. The Commission notes that 

Cambridge also commented on this section. 

38Aidikoff; Bakhtiari; Brecek & Young; Cantella; 

Caruso; Gross/Pace; Harrison; Jacobson/Cornell; 

Lazaro/St. John’s; Lipner/Baruch; Mass Mutual; 

NASAA; Nationwide; NPB; NPH; Penson; PIABA; 

RND; Sadler; SIFMA; Stephens; Steiner; P. Spitzer/ 

Wachovia; WSA. 

39Brown & Brown; FMSBonds; FSI; MWA; 

Nelson; ProEquities; R. Long/Wachovia. 

40ARM. 

41Aidikoff; Bakhtiari; Caruso; Gross/Pace; 

Harrison; Jacobson/Cornell; Lazaro/St. John’s; 

Lipner/Baruch; Sadler; Steiner; Stephens. 

42Aidikoff; Bakhtiari; Caruso; Gross/Pace; 

Harrison; Jacobson/Cornell; Lazaro/St. John’s; 

Lipner/Baruch; PIABA; Steiner. 

43Brown & Brown; FSI; Greene/Woodforest; 

MWA; Nelson; ProEquities; R. Long/Wachovia; 

Williams/Woodforest. 

44ARM; Brecek & Young; Mann; MassMutual; 

NPH; Penson; RND; SIFMA; R. Long/Wachovia; 

WSA. 

45ARM; Brecek & Young; Cantella; RND; SIFMA; 

R. Long/Wachovia; WSA. 

46ARM. 

47ARM. 

48ARM; Brecek & Young; Cantella; MassMutual; 

NPH; Penson; ProEquities; RND; SIFMA; R. Long/ 

Wachovia; WSA. 

49SIFMA. 

50SIFMA. 

51Cambridge; FSI; Gross/Pace; Jacobson/Cornell; 

Lazaro/St. John’s; NASAA; Nationwide; NPH; 

ProEquities. 

in response to the Regulatory Notice.36

A list of the commenters in response to 

the Regulatory Notice is attached as 

Exhibit 2b, and copies of the comment 

letters received in response to the 

Regulatory Notice are attached as 

Exhibit 2c. Commenters generally 

supported the proposed changes to the 

Forms. A summary of the comments 

relevant to the issues addressed by the 

proposed rule change is provided 

below. 

(a) Proposed Revisions To Elicit 

Reporting of Allegations of Sales 

Practice Violations Against Registered 

Persons Made in Arbitrations or 

Litigation in Which the Registered 

Person Is Not a Named Party 

Thirty-four commenters commented 

on the proposal regarding eliciting 

reporting of allegations of sales practice 

violations against registered persons 

made in litigation or arbitrations in 

which the registered person is not 

named as a party.37 The majority of 

commenters (26) supported or did not 

oppose this proposed change; 38 a 

minority (7) opposed it.39 One 

commenter supported the part of the 

proposal that would require firms to 

report allegations made in an arbitration 

claim where a registered person is 

identified by name (in the Statement of 

Claim text) but did not support such 

reporting where the registered person is 

not identified by name.40 Generally, 

commenters supporting the proposal 

stated that allegations of sales practice 

violations made in arbitration claims 

were no different than those made in 

written customer complaints, and 

therefore should be treated the same for 

reporting purposes.41 Many of the same 

commenters viewed the proposal as 

‘‘closing a loophole,’’ and noted that 

investors would benefit by having this 

type of information publicly available.42

The commenters opposing the 

proposed changes generally raised 

concerns about fairness to registered 

persons regarding potential damage to 

their reputations from the reporting of 

unadjudicated allegations, and possible 

lack of a meaningful opportunity to 

respond to such allegations.43 While 

FINRA appreciates the concerns raised 

regarding the potential harm to a 

registered person’s reputation based on 

allegations of sales practice violations 

made in an arbitration claim, FINRA 

believes that such allegations, which are 

made in writing and filed in a formal 

proceeding, are not appreciably 

different than those made in written 

customer complaints, and may have 

even more substance. Accordingly, such 

allegations should be treated in the 

same manner that customer complaints 

are currently treated in the Uniform 

Forms. 

Several commenters supported the 

proposed change, but expressed 

concerns about the burden on firms to 

identify the ‘‘subject of’’ the allegations 

and whether, and under what 

circumstances, registered persons would 

be afforded an opportunity to remove 

such matters from the CRD.44 Several 

commenters expressed concerns about 

the ability of firms to discern whether 

reporting as to a particular person was 

required based on the allegations in a 

claim.45 One commenter supported the 

reporting of such matters only after 

there was an adjudication or settlement 

in favor of the claimant, but opposed 

requiring the reporting of any such 

matter while it was pending.46 The 

commenter also expressed concerns 

about a firm’s ability to report the 

allegations within the 30-day reporting 

period.47 Several commenters raised 

questions about other fact-specific 

scenarios, and requested that FINRA 

provide interpretive guidance to assist 

firms in determining reporting practices 

should the proposed questions be 

adopted.48 In addition, one commenter 

recommended that, in conjunction with 

the proposal, FINRA should consider 

adopting reasonable measures to 

promote responsible pleading.49

Specifically, the commenter suggested 

that FINRA apprise customer claimants 

and their counsel of the significant 

consequences of making allegations 

against a registered person and consider 

requiring that claimants and their 

attorneys attest that, at the time an 

arbitration claim is filed, there is a good 

faith basis for the claims and allegations 

therein. 

In response to these comments, 

FINRA has included instructions 

regarding reporting, and staff is 

prepared to develop additional 

guidance, if necessary, to assist firms in 

determining when reporting is required 

under the proposed questions. FINRA 

further notes that there is an existing 

process for requesting expungement 

relief under NASD Rule 2130. Moreover, 

while FINRA believes that the existing 

30-day timeframe for reporting is 

sufficient, FINRA staff intends to work 

with firms that may need additional 

time because of extraordinary 

circumstances on a case-by-case basis. 

With respect to the comment that 

FINRA apprise customers and their 

representatives of the consequences of 

making allegations against a registered 

person, FINRA appreciates the 

commenters’ concerns but must 

consider that suggestion in the context 

of the potential chilling effect such an 

action may have on the filing of 

legitimate customer claims.50

Accordingly, FINRA believes that it 

would not be appropriate to implement 

the suggestion at this time. 

(b) Proposed Revisions To Raise the 

Monetary Threshold for Reporting 

Customer Complaints, Arbitrations or 

Litigation From $10,000 to $15,000 on 

the Forms and Conforming Change to 

FINRA Rule 8312 

Thirteen commenters responded to 

the proposal to raise the threshold for 

reporting of settlements. Nine of the 

commenters supported raising the 

threshold from $10,000 to $15,000 to 

account for increased business costs 

(legal and economic), and to align the 

threshold with the reporting 

requirements in NASD Rule 3070 

(Reporting Requirements).51 Of the four 

commenters who did not support this 

proposal, three suggested raising the 

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52ARM; R. Long/Wachovia; Williams/ 

Woodforest. 

53PIABA. 

54ARM; FSI; Gross/Pace; Jacobson/Cornell; 

NASAA; Nationwide; PIABA; ProEquities. 

55ARM; FSI; Gross/Pace; NASAA; Nationwide; 

ProEquities. 

56 Jacobson/Cornell. 

57PIABA. 

58FSI; Gross/Pace; NASAA; Nationwide. 

59 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

threshold to a higher amount,52 and one 

suggested requiring the reporting of all 

settlements regardless of dollar 

amount.53

FINRA believes that a dollar threshold 

within the questions is appropriate to 

address those instances where matters 

are settled for a nuisance value; at the 

same time, FINRA is not persuaded by 

the comments suggesting that an 

increase to greater than $15,000 is 

warranted at this time. 

(c) Proposed Revisions to Form U5 To 

Allow Firms To Amend the ‘‘Reason for 

Termination’’ and the ‘‘Date of 

Termination’’ 

Eight commenters responded to the 

proposal to allow firms to amend the 

‘‘Reason for Termination’’ and ‘‘Date of 

Termination.’’ 54 Six commenters 

affirmatively supported this proposal on 

the basis that it would result in more 

accurate information being reported to 

regulators and recorded in the CRD 

system.55 Of the two commenters that 

generally opposed this proposal, one 

opposed allowing firms to amend the 

Reason for Termination or Date of 

Termination except in cases of clerical 

error.56 The other commenter supported 

allowing changes to the Date of 

Termination, but opposed allowing 

changes to the Reason for Termination 

based on a concern about the potential 

for abuse by firms.57

FINRA believes that a firm should 

have the ability to correct inaccurate 

information that it filed on a Form U5 

regarding terminations through an 

amendment to that original Form filing. 

FINRA also believes that limiting such 

changes to clerical errors is unnecessary 

in light of: (1) the attendant requirement 

that firms provide a reason for the Form 

U5 amendment; and (2) the monitoring 

of such amendments by FINRA and 

other regulators. FINRA believes that 

such monitoring, in particular, will 

protect against any potential misuse by 

firms. 

(d) Proposed Technical and Conforming 

Changes to the Forms 

No commenters opposed the proposed 

technical and conforming changes to the 

Forms, and four commenters 

affirmatively supported them.58

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–2009–008 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–2009–008. 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, 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 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– 

2009–008 and should be submitted on 

or before April 17, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.59

Florence E Harmon, 

Deputy Secretary. 

[FR Doc. E9–6830 Filed 3–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59611; File No. SR–Phlx– 

2009–22] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Administration of Certain Rules in 

Respect of Index Data Dissemination 

March 20, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on March 16, 

2009, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to reflect in 

the administration of its rules the 

expected discontinuation by the 

NASDAQ OMX Futures Exchange, Inc. 

(‘‘NFX’’) of index value distribution 

over NFX’s Market Data Distribution 

Network (‘‘MDDN’’). Index values will 

continue to be distributed via another 

NASDAQ OMX data dissemination 

service, and the discontinuation of 

MDDN index value dissemination will 

not have any impact on the listing or 

trading of any instruments on the 

mstockstill on PROD1PC66 with NOTICES