[Federal Register Volume 74, Number 64 (Monday, April 6, 2009)]
[Notices]
[Pages 15563-15568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-7589]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59655; File No. SR-NYSE-2009-25]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange LLC, as Modified by Amendment No. 2, 
Changing Certain NYSE Rules and Rule Interpretations To Harmonize Them 
With Changes to Corresponding Rules Recently Filed by the Financial 
Industry Regulatory Authority, Inc.

March 30, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 9, 2009, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'' or ``SEC'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
self-regulatory organization. On March 27, 2009, the Exchange filed 
Amendment No. 1 to the proposed rule change, which was withdrawn.\4\ On 
March 30, 2009, the Exchange filed Amendment No. 2 to the proposed rule 
change.\5\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ On March 30, 2009, the Exchange withdrew Amendment No. 1.
    \5\ Amendment No. 2 to SR-NYSE-2009-25 replaces the original 
filing in its entirety. References to Amendment No. 1 in Amendment 
No. 2 should be read as Amendment No. 2. Telephone call between 
Nancy Burke-Sanow, Division of Trading and Markets, Commission, and 
Clare Saperstein, Managing Director, NYSE, March 30, 2009.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes changes to certain NYSE Rules and Rule 
Interpretations, retroactively effective to December 15, 2008, to 
harmonize them with changes to corresponding rules recently filed by 
the Financial Industry Regulatory Authority, Inc. (``FINRA'') and 
approved by the Commission or submitted for immediate effectiveness.\6\ 
FINRA filed the rule changes as part of its effort to develop a new 
consolidated rulebook for its members (the ``Consolidated FINRA 
Rulebook'').\7\ The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
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    \6\ See Securities Exchange Act Release No. 58461 (September 4, 
2008), 73 FR 52710 (September 10, 2008) (SR-FINRA-2008-033); 
Securities Exchange Act Release No. 58514 (September 11, 2008), 73 
FR 54190 (September 18, 2008) (SR-FINRA-2008-039); Securities 
Exchange Act Release No. 58643 (September 25, 2008), 73 FR 57174 
(October 1, 2008) (SR-FINRA-2008-021, -022, -026, -028, -029); 
Securities Exchange Act Release No. 58660 (September 26, 2008), 73 
FR 57393 (October 2, 2008) (SR-FINRA-2008-027); Securities Exchange 
Act Release No. 58661 (September 26, 2008), 73 FR 57395 (October 2, 
2008) (SR-FINRA-2008-030); and Securities Exchange Act Release No. 
59097 (December 12, 2008), 73 FR 78412 (December 22, 2008) (SR-
FINRA-2008-057). See also FINRA Regulatory Notice 08-57, October 16, 
2008.
    \7\ The current FINRA rulebook consists of three sets of rules: 
(1) NASD Rules, (2) rules and rule interpretations incorporated from 
the NYSE (``FINRA Incorporated NYSE Rules'') (together, referred to 
as the ``Transitional Rulebook''), and (3) consolidated FINRA Rules. 
The FINRA Incorporated NYSE Rules apply only to those members of 
FINRA that are also members of the NYSE (``Dual Members''), while 
the consolidated FINRA Rules apply to all FINRA members. For more 
information about the FINRA rulebook consolidation process, see 
FINRA Information Notice, March 12, 2008 (Rulebook Consolidation 
Process).
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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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On July 30, 2007, the National Association of Securities Dealers, 
Inc. (``NASD'') and NYSE Regulation, Inc. (``NYSER'') consolidated 
their member firm regulation operations into a combined organization, 
FINRA.\8\ As discussed in more detail below, FINRA recently filed, and 
the Commission approved, changes to certain NASD and FINRA Incorporated 
NYSE Rules and adopted a number of Consolidated FINRA Rules to replace 
other NASD and FINRA Incorporated NYSE Rules. The effective date for 
the FINRA rule changes was December 15, 2008.
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    \8\ Pursuant to Rule 17d-2 under the Act, NYSE, NYSER and NASD 
entered into an agreement (the ``Agreement'') to reduce regulatory 
duplication for Dual Members by allocating to FINRA regulatory 
responsibility for certain NYSE and NASD Rules (the ``Common 
Rules''). See Securities Exchange Act Release No. 56148 (July 26, 
2007), 72 FR 42146 (August 1, 2007) (Notice of Filing and Order 
Approving and Declaring Effective a Plan for the Allocation of 
Regulatory Responsibilities). The Common Rules include the FINRA 
Incorporated NYSE Rules. See Securities Exchange Act Release No. 
56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule 
Change to Incorporate Certain NYSE Rules Relating to Member Firm 
Conduct) (SR-NASD-2007-054). Paragraph 2(b) of the Agreement sets 
forth procedures regarding proposed changes by either NYSE or FINRA 
to the substance of any of the Common Rules.
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    To reduce regulatory duplication, the Exchange proposes to 
harmonize NYSE Rules with the recently approved FINRA rule changes by 
deleting certain NYSE Rules and Rule Interpretations and replacing them 
with rules that are

[[Page 15564]]

identical to, or substantially identical to, the recently approved 
FINRA Rules, subject to technical amendments to make them specific to 
the Exchange. To more readily identify those NYSE Rules that are 
harmonized with FINRA Rules, the Exchange proposes to adopt the same 
rule numbering used in the Consolidated FINRA Rulebook.
    The Exchange further proposes that these rule changes be 
retroactively effective to December 15, 2008, the same as the effective 
date of FINRA's rule changes on which this filing is based.
    The FINRA approved rule changes and the Exchange's proposed 
conforming rule changes are summarized below.\9\
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    \9\ NYSE Amex LLC has filed a companion rule filing to conform 
its Equities Rules to the changes proposed in this filing. See SR-
NYSEALTR-2009-26 (formally submitted March 9, 2009), amended.
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FINRA Rule Filing SR-FINRA-2008-027 \10\
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    \10\ See Securities Exchange Act Release No. 58660 (September 
26, 2008), 73 FR 57393 (October 2, 2008).
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    FINRA adopted NASD Rules 3060 (Influencing or Rewarding Employees 
of Others) and 3090 (Transactions Involving Association and American 
Stock Exchange Employees) as FINRA Rules 3220 and 2070, respectively. 
FINRA Rule 3220 prohibits members or associated persons from giving 
gifts or gratuities in excess of $100 per year to an agent or employee 
of another person where it relates to the business of the employer of 
the recipient. FINRA Rule 2070 addresses conflicts of interest 
involving FINRA employees.
    Because they are substantively duplicative of these FINRA Rules, 
FINRA deleted the corresponding provisions of FINRA Incorporated NYSE 
Rules 407(a) and 407.10 (Transactions--Employees of Members, Member 
Organizations and the Exchange) and 350 (Compensation or Gratuities to 
Employees of Others), and Rule Interpretations 350/01 (Application) 
and/02 (Conflicts of Interest).\11\ FINRA also deleted FINRA 
Incorporated NYSE Rule Interpretation 350/03 (Entertainment), which 
deals with business entertainment expenses, since it is addressed in a 
separate rule filing.\12\
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    \11\ FINRA also noted that certain provisions of FINRA 
Incorporated NYSE Rules 350 and 350.10 and Rule Interpretation 350/
02 related to operations/Floor employees of the Exchange are not 
applicable to FINRA and could be deleted. See Securities Exchange 
Act Release No. 58660 (September 26, 2008), 73 FR 57393 (October 2, 
2008). The Exchange believes that the substance of these provisions 
is adequately addressed in existing NYSE Rules and the proposed NYSE 
Rules 2070 and 3220.
    \12\ See Securities Exchange Act Release No. 55765 (May 15, 
2007), 72 FR 28743 (May 22, 2007) (SR-NASD-2006-44), as subsequently 
amended, January 2, 2008. The Exchange has proposed the adoption of 
a new NYSE Rule 350A that is substantively duplicative of the rule 
proposed in SR-NASD-2006-044. See Securities Exchange Act Release 
No. 55766 (May 15, 2007), 72 FR 28534 (May 21, 2007) (SR-NYSE-2006-
06). These filings have not been approved by the Commission as of 
the date of this filing.
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    Accordingly, to harmonize the NYSE Rules with the approved FINRA 
rule changes, the Exchange proposes to (i) delete NYSE Rule 350 and 
Rule Interpretations 350/01-/03, and (ii) adopt proposed NYSE Rules 
2070 and 3220, which are nearly identical to FINRA Rules 2070 and 3220, 
to replace the deleted NYSE Rules. The Exchange believes that proposed 
NYSE Rules 2070 and 3220, together with other existing and/or proposed 
NYSE Rules, address the specific provisions of NYSE Rule 350 and the 
related Rule Interpretations.
    Specifically, NYSE Rule 350(a) addresses the giving of gifts or 
gratuities by members, member organizations and their employees to 
other members, member organizations, their employees or the employees 
of non-members engaged in certain businesses. NYSE Rules 350(a) and (b) 
address the employment or compensation of others by members, member 
organizations and their employees, including Floor-based employees of 
other members or member organizations. Under Rule 350(b), payment in 
excess of $200 for employment or compensation of a Floor employee of 
another member or member organization requires the employee to become 
registered with such member or member organization.
    The Exchange believes that proposed new NYSE Rule 3220 replaces 
NYSE Rule 350(a) because it addresses the giving of gifts or gratuities 
to, and the employment or compensation for services of, the employees 
of others, both members and non-members. Proposed Rule 3220(a) 
harmonizes with FINRA Rule 3220(a) because it prohibits the giving of 
gifts or gratuities in excess of $100 per year to ``any person, 
principal, proprietor, employee, agent or representative of another 
person'' where that gift is related to the business of the recipient's 
employer.
    Proposed NYSE Rule 3220(b) replaces NYSE Rule 350(b) because it 
addresses situations requiring dual employment and prior written 
consent when compensation provided to another employee exceeds a 
specified amount. Rule 350(b) requires dual employment for any payments 
over $200 to Floor employees whereas proposed Rule 3220(b) requires 
dual employment for any payment made to any employee for employment or 
services over the $100 limit prescribed by 3220(a), including Floor 
employees of a member organization.
    Because under proposed NYSE Rule 3220(a) any employee, including 
Floor employees, receiving more than $100 for services from another 
member organization must be dually employed with that member 
organization, the requirement under NYSE Rule 350(b) that a Floor 
employee receiving more than $200 in compensation be dually registered 
is no longer necessary. Under NYSE Rules 35 and 35.50, which require 
that all member and member organization Floor employees must be 
registered with the Exchange on Form U-4, any Floor employee that is 
dually employed must be registered with each member organization for 
whom he or she works. Accordingly, because the new dual employment 
requirement under proposed Rule 3220(b) triggers the Rule 35 dual 
registration requirements, it is not necessary to specify dual 
registration in proposed Rule 3220. Upon adoption of Rule 3220 the 
Exchange intends to issue guidance to its members and member 
organizations reminding them that any person who is dually employed by 
two or more members or member organizations must be registered with 
each such member or member organization pursuant to Rule 35.
    NYSE Rules 350(a) and 350.10 also specifically address, inter alia, 
the giving of gifts or gratuities to, or the employment or compensation 
of, employees of the Exchange by members, member organizations and 
their employees. In particular, Rule 350.10 specifies, inter alia, the 
procedures for seeking the Exchange's consent for the employment or 
compensation of Exchange employees and describes the types of dual-
employment arrangements generally acceptable to the Exchange and those 
that are not acceptable.
    The Exchange believes that proposed NYSE Rules 3220 and 2070 
specifically address the provisions of NYSE Rule 350(a) and 350.10 
dealing expressly with Exchange employees. To begin with, proposed Rule 
3220 concerns the giving of gifts or gratuities to, or the employment 
or compensation of, any employee of another, which would include 
employees of the Exchange. In addition, proposed Rule 2070(c) 
specifically provides that, notwithstanding the more general 
prescriptions of Rule 3220(a), members and member organizations are 
prohibited from giving anything of value to an Exchange employee 
responsible for any regulatory matter involving such member or member 
organization. The Exchange did not include the standards

[[Page 15565]]

or procedures for dual-employment arrangements for its employees 
contained in Rule 350.10 into the proposed Rules 2070 and 3220 because 
those rules bind only Exchange members and member organizations and not 
its employees. The Exchange does believe, however, that proposed Rules 
2070 and 3220 governing member conduct, together with the Exchange's 
internal policies and procedures governing the acceptance of gifts and 
gratuities and dual employment arrangements by its employees, provide 
sufficient protection against any improper relationships between its 
employees and its members.
    NYSE Rule Interpretation 350/01 prohibits, in conjunction with NYSE 
Rule 401 (Business Conduct), conflicts of interest (via gifts, 
gratuities or compensation) between member organizations and agents or 
employees of customers. Rule Interpretation 350/01 also specifically 
prohibits member organizations from aiding and abetting fraudulent 
practices by money managers. NYSE Rule Interpretation 350/02 cautions 
member organizations about possible conflicts of interest when Floor 
employees are employed by other member organizations, including the 
monitoring of the amount and type of compensation paid to such 
employees.
    The Exchange believes that proposed NYSE Rule 3220--which, as 
described above, deals more generally with the provision of gifts or 
compensation to employees of others--when read with other current and 
proposed NYSE Rules, prohibits the same types of conduct specifically 
referenced in NYSE Rule Interpretations 350/01 and /02. For example, 
current NYSE Rule 476(a)(1) prohibits members and member organizations 
from violating any provision of the Act and current NYSE Rule 476(a)(5) 
prohibits engaging in fraud or fraudulent acts. In addition, proposed 
NYSE Rules 2010 and 2020, which require member organizations to observe 
high standards of commercial honor, to use just and equitable 
principles of trade, and prohibit the use of manipulative, deceptive or 
fraudulent devices, would also apply to such conduct.\13\
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    \13\ In this filing, infra, the Exchange proposes to replace 
current NYSE Rule 401(a), concerning good business practices, with 
proposed NYSE Rules 2010 and 2020, which are substantially identical 
to FINRA Rules 2010 and 2020, approved by the Commission.
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    NYSE Rule Interpretation 350/03 concerns business entertainment 
expenses. As noted above, FINRA deleted this Rule Interpretation on the 
grounds that its current interpretations of FINRA Rule 3220 concerning 
business expenses, together with a pending rule filing, sufficiently 
govern this conduct. The Exchange believes that proposed NYSE Rule 
3220--which is virtually identical to FINRA's Rule and, with respect to 
business entertainment expenses, FINRA would have regulatory 
responsibility for the NYSE rule pursuant to Rule 17d-2 of the Act--
harmonizes with FINRA's approach to business entertainment expenses. 
Upon adoption of new NYSE Rule 3220, the Exchange intends to issue an 
Information Memorandum to its members and member organizations, which 
would include both dual FINRA and NYSE members and member organizations 
as well as NYSE-only members and member organizations, informing them 
of their obligations under the new Rule incorporating the FINRA 
interpretations under its Rule 3220 concerning business entertainment 
expenses.\14\
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    \14\ Specifically, FINRA's interpretative guidance concerning 
business entertainment expenses includes a June 24, 1999, Letter to 
Henry H. Hopkins and Sarah McCafferty, T. Rowe Price Investment 
Services, Inc. This interpretative letter and other interpretive 
guidance concerning business entertainment expenses are currently 
available at FINRA's Web site at http://www.finra.org/Industry/Regulation/Guidance/InterpretiveLetters/ConductRules/index.htm.
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    As proposed, new NYSE Rules 2070 and 3220 are virtually identical 
to FINRA Rules 2070 and 3220, previously approved by the Commission. 
With respect to proposed NYSE Rule 2070, the Exchange proposes minor 
changes to the approved FINRA version of that Rule to conform it to the 
Exchange, including changing the title of the Rule to ``Transactions 
Involving Exchange Employees,'' adding the term ``member 
organization,'' and adding language that requires member organizations 
to provide statements to the Exchange, rather than FINRA, for accounts 
held by Exchange employees. In addition, the Exchange proposes to add 
language to 2070(c) to include listing applications and delisting 
proceedings, and to remove the reference to dispute-resolution 
proceedings.\15\ With respect to proposed NYSE Rule 3220, to conform 
that Rule to Exchange definitions, the Exchange proposes adding the 
term ``member organization.''
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    \15\ Unlike FINRA, the Exchange still reviews listing 
applications and conducts delisting proceedings and believes it is 
appropriate to include these matters in proposed NYSE Rule 2070(c). 
In addition, since the Exchange no longer engages in dispute-
resolution proceedings (i.e., arbitrations), it does not need such a 
designation in proposed Rule 2070.
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    Finally, although FINRA has deleted language from FINRA 
Incorporated NYSE Rule 407, because the Exchange uses its corresponding 
NYSE Rule to, inter alia, monitor accounts held by Exchange employees, 
the Exchange will retain NYSE Rule 407 without change.\16\
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    \16\ Even though FINRA amended FINRA Incorporated NYSE Rule 407 
when it adopted FINRA Rule 2070, those two rules are not 
inconsistent. NYSE Rule 407(a) provides, inter alia, that a member 
or member organization must obtain prior written consent before 
opening an account or executing a trade for an Exchange employee. 
FINRA Rule 2070(a) and proposed NYSE Rule 2070(a) simply require 
that, once a member or member organization has actual notice of an 
account held by a FINRA or Exchange employee, it must provide 
duplicate account statements to the Exchange. In addition, NYSE Rule 
407.10 prescribes procedures for how Exchange employees may open 
accounts that are not addressed by FINRA Rule 2070 or proposed NYSE 
Rule 2070. Thus, the Exchange can retain NYSE Rule 407 in its 
original form as well as adopt NYSE Rule 2070 without any regulatory 
conflict for its members and member organizations.
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FINRA Rule Filing SR-FINRA-2008-028 \17\
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    \17\ See Securities Exchange Act Release No. 58643 (September 
25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-2008-021, -022, -
026, -028, -029).
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    FINRA adopted, inter alia, NASD Rules 2110 (Standards of Commercial 
Honor and Principles of Trade) and 2120 (Use of Manipulative, Deceptive 
or Other Fraudulent Devices) as FINRA Rules 2010 and 2020, 
respectively. FINRA Rule 2010 requires members to observe high 
standards of commercial honor and just and equitable principles of 
trade in the conduct of their business. This Rule is used to protect 
market participants from dishonest and unfair practices even where 
those practices do not violate a specific law, rule or regulation. 
FINRA Rule 2020 is a general antifraud provision that is used to 
address a range of conduct, including market manipulation, excessive 
trading, insider trading and fraudulent misrepresentation. In a 
separate filing, FINRA also adopted FINRA Rule 6140 (Other Trading 
Practices), which replaces NASD Rule 5120 and governs a number of 
prohibited trading practices, including manipulation and disseminating 
false and misleading information about a security.\18\
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    \18\ FINRA Rule 6140 was adopted in SR-FINRA-2008-021. See 
Securities Exchange Act Release No. 58643 (September 25, 2008), 73 
FR 57174 (October 1, 2008) (SR-FINRA-2008-021, -022, -026, -028, -
029).
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    Because they are substantively duplicative of these FINRA Rules, 
FINRA deleted the corresponding provisions of FINRA Incorporated NYSE 
Rules 401(a) (Business Conduct) and 435(1), (3) and (4) (Miscellaneous 
Prohibitions) and Rule Interpretation 401/01 (Trading Against Firm 
Recommendations).\19\ In addition,

[[Page 15566]]

FINRA deleted NYSE Rule Interpretation 401/02 (Private Sales), which 
requires members to monitor personnel that market securities through 
private offerings, for being substantively duplicative of NASD Rule 
3040 (Private Securities Transactions of an Associated Person) and NYSE 
Rules 407(b) and 407.11.\20\ FINRA also deleted FINRA Incorporated NYSE 
Rule 435 provisions (6) and (7) as being obsolete and/or substantively 
duplicative of Federal Reserve Board Regulation T.
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    \19\ In addition to being covered more generally by FINRA Rules 
2010 and 2020, provisions (1), (3) and (4) of FINRA Incorporated 
NYSE Rule 435 are also substantially the same as FINRA Rule 6140. 
See Securities Exchange Act Release No. 58643 (September 25, 2008), 
73 FR 57174 (October 1, 2008) (SR-FINRA-2008-021, -022, -026, -028, 
-029).
    \20\ FINRA has stated that these particular NASD and NYSE Rules 
are proposed for inclusion in the so-called ``supervision rules'' 
that are to be adopted at some later date as part of the 
Consolidated FINRA Rulebook. See FINRA Regulatory Notice 08-24.
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    Accordingly, to harmonize NYSE Rules with the approved FINRA Rules, 
the Exchange similarly proposes to delete (i) NYSE Rule 401(a) and Rule 
Interpretations 401/01 and /02, (ii) NYSE Rule 476(a)(6),\21\ and (iii) 
NYSE Rules 435(1), (3), (4), (6), and (7). To replace NYSE Rules 401(a) 
and 476(a)(6) and Rule Interpretation 401/01, the Exchange proposes to 
adopt NYSE Rules 2010 and 2020, which are substantially identical to 
FINRA Rules 2010 and 2020, except for adding the term ``member 
organization.'' To replace NYSE Rules 435(1), (3), and (4), the 
Exchange proposes to adopt NYSE Rule 6140, which is substantially 
identical to FINRA Rule 6140, except for adding the term ``member 
organization.'' For the same reasons proposed by FINRA, the Exchange 
proposes deleting NYSE Rule Interpretation 401/02 as being 
substantively duplicative of NYSE Rules 407(b) and 407.11, and deleting 
NYSE Rules 435(6) and (7) as being obsolete and/or substantively 
duplicative of Reserve Board Regulation T.
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    \21\ Although it is not addressed by FINRA in its filing because 
it is not a FINRA Incorporated NYSE Rule subject to FINRA's 
regulatory responsibility under the Agreement, NYSE Rule 476(a)(6) 
prescribes that NYSE members and member organizations and their 
employees may not engage in conduct ``inconsistent with just and 
equitable principles of trade[.]'' The Exchange is hereby including 
this provision for deletion since ``just and equitable principles of 
trade'' are addressed in new NYSE Rule 2010, proposed for adoption 
herein.
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FINRA Rule Filing SR-FINRA-2008-029 \22\
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    \22\ See Securities Exchange Act Release No. 58643 (September 
25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-2008-021, -022, -
026, -028, -029).
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    FINRA deleted, inter alia, FINRA Incorporated NYSE Rules 405A (Non-
Managed Fee-Based Account Programs--Disclosure and Monitoring), 440F 
(Public Short Sale Transactions Effected on the Exchange), 440G 
(Transactions in Stocks and Warrants for the Accounts of Members, 
Allied Members and Member Organizations) and 477 (Retention of 
Jurisdiction--Failure to Cooperate) as being duplicative of other NASD, 
FINRA or SEC rules or regulations or as being specific to the NYSE 
marketplace.
    For the same reasons set forth in the approved FINRA filing, the 
Exchange proposes to delete NYSE Rule 405A. As FINRA noted, the 
prescriptions of Rule 405A are addressed under the Investment Advisers 
Act of 1940 and also, to the extent fee-based programs continue to 
exist in brokerage accounts, in NASD Notice to Members 03-68, which 
applies NASD Rule 2110 (Standards of Commercial Honor and Principles of 
Trade) to such accounts.\23\ The Exchange is proposing to adopt NYSE 
Rule 2010, which is substantially the same as FINRA 2010, and so, to 
the extent fee-based programs continue to exist in brokerage accounts 
they would be addressed under the proposed Rule.\24\
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    \23\ NASD Rule 2110 was adopted by FINRA as FINRA Rule 2010 in 
SR-FINRA-2008-028. See Securities Exchange Act Release No. 58643 
(September 25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-2008-
021, -022, -026, -028, -029).
    \24\ The Exchange is not adopting NASD Notice 03-68 as it is not 
a formally adopted rule. It is important to note that all of the 
Exchange's members and member organizations that have public 
customers are also members of, and have their member firm conduct 
regulated by, FINRA. Thus, to the extent FINRA Rule 2010 and new 
NYSE Rule 2010 apply to conduct involving non-managed fee-based 
account programs, which concerns member firm conduct, such 
application will be administered by FINRA. Upon adoption of new NYSE 
Rule 2010, the Exchange intends to issue guidance to its members and 
member organizations informing them of their obligations for such 
programs under the new Rule and FINRA rules.
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    With respect to NYSE Rules 440F and 440G, as FINRA noted these 
Rules are Exchange specific--they require member organizations to file 
with the Exchange certain information about short sale and proprietary 
transactions executed at the Exchange. These Rules date to a time when 
trading at the Exchange was not as automated as it is today. Today, the 
Exchange is able to track short sale and proprietary trades through its 
``OCS'' and ``PTP'' systems and run surveillances based on that 
information. Because the Exchange can derive that information from its 
trading systems, the Exchange no longer needs member organizations to 
file separately that information. The Exchange therefore believes that 
these Rules can be deleted in their entirety.
    Finally, although FINRA has deleted FINRA Incorporated NYSE Rule 
477, because the Exchange uses that Rule for disciplinary purposes 
specific to the Exchange, the Exchange will retain NYSE Rule 477 
without change. Because FINRA has deleted FINRA Incorporated NYSE Rule 
477, NYSE Rule 477 will lose its status as a Common Rule and FINRA will 
no longer retain any regulatory responsibility for this Rule.
FINRA Rule Filing SR-FINRA-2008-030 \25\
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    \25\ See Securities Exchange Act Release No. 58661 (September 
26, 2008), 73 FR 57395 (October 2, 2008) (SR-FINRA-2008-030).
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    FINRA adopted NASD Rule 3013 (Annual Certification of Compliance 
and Supervisory Processes) and IM-3013 (Annual Compliance and 
Supervision Certification) as FINRA Rule 3130. FINRA Rule 3130 requires 
each member firm to designate one or more principals to serve as Chief 
Compliance Officer and also requires that the Chief Executive Officer 
certify annually that the firm has established and maintained 
procedures and processes reasonably designed to ensure compliance with 
all applicable FINRA Rules and federal laws and regulations.
    Because they are substantively duplicative of the FINRA Rule, FINRA 
deleted the corresponding provisions of FINRA Incorporated NYSE Rules 
342.30(d) and (e) (Annual Report and Certification) and Rule 
Interpretations 311(b)(5)/04 (Formation and Approval of Member 
Organizations--Officers--Other Dual or Multi-Designations) and/05 (Co-
Designation of Principle Executive Officers) and 342.30(d)/01 (Annual 
Reports and Certification--Designation of Chief Compliance Officer) and 
(e)/01 (Annual Certification).
    To harmonize NYSE Rules with the approved FINRA Rules, the Exchange 
proposes to (i) delete NYSE Rules 342.30(d) and (e) and Rule 
Interpretations 311(b)(5)/04 and/05 and 342.30(d)/01 and (e)/01, and 
(ii) replace them with proposed NYSE Rule 3130, which is substantially 
similar to FINRA Rule 3130. As proposed, NYSE Rule 3130 adopts the same 
language as FINRA Rule 3130, except for changing the term ``member'' to 
``member organization.'' Therefore, as proposed, NYSE Rule 3130 would 
require NYSE member organizations to complete their annual 
certifications at the same time they complete their certifications for 
FINRA.

[[Page 15567]]

FINRA Rule Filing SR-FINRA-2008-033 \26\
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    \26\ See Securities Exchange Act Release No. 58461 (September 4, 
2008), 73 FR 52710 (September 10, 2008) (SR-FINRA-2008-033).
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    FINRA adopted NASD Rule 3360 (Short-Interest Reporting) and FINRA 
Incorporated NYSE Rules 421(1) (Periodic Reports) and 421.10 (Short 
Positions) as new FINRA Rule 4560 and deleted these provisions from the 
Common Rules. FINRA Rule 4560 adopted rule text to consolidate the NASD 
and NYSE short-interest reporting requirements, including requiring 
members to follow certain reporting requirements for short positions in 
over-the-counter (``OTC'') and exchange-listed securities for all 
customer and proprietary accounts.
    Accordingly, the Exchange proposes to (i) delete NYSE Rules 421(1) 
and 421.10, and (ii) adopt proposed NYSE Rule 4560 to replace the 
deleted NYSE Rules. Proposed NYSE Rule 4560 is substantially identical 
to FINRA Rule 4560. To conform NYSE Rule 4560 to the Exchange, the 
Exchange proposes to remove the references to ``OTC Equity Securities'' 
in the rule, including provision (b)(3), and change the term ``member'' 
to ``member organization.'' Because FINRA processes short-interest 
reporting on behalf of multiple exchanges, including the NYSE, proposed 
NYSE Rule 4560 will retain the requirement that member organizations 
report to FINRA.
FINRA Rule Filing SR-FINRA-2008-039 \27\
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    \27\ See Securities Exchange Act Release No. 58514 (September 
11, 2008), 73 FR 54190 (September 18, 2008) (SR-FINRA-2008-039).
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    FINRA adopted, inter alia, provisions of NASD Rules 2710(b)(10) and 
(11) (Corporate Financing Rule--Underwriting Terms and Arrangements) 
and FINRA Incorporated NYSE Rule 392(a) (Notification Requirements for 
Offerings of Listed Securities) as consolidated FINRA Rule 5190. FINRA 
Rule 5190 contains the Regulation M-related notice requirements for 
members participating in securities offerings. FINRA also deleted FINRA 
Incorporated NYSE Rule 392(b) as specific to the NYSE marketplace.
    The Exchange continues to have regulatory responsibility with 
respect to Regulation M and relies on reports filed by member 
organizations pursuant to NYSE Rule 392 to conduct certain 
surveillances. Accordingly, the Exchange continues to need an Exchange-
specific rule requiring firms to report this information to the 
Exchange. However, in an effort to harmonize the reporting obligations 
across the Exchange and FINRA as much as possible, the Exchange 
proposes to delete NYSE Rule 392 and adopt proposed NYSE Rule 5190.
    Proposed NYSE Rule 5190 is substantially identical to FINRA Rule 
5190, except for replacing the term ``member'' with the term ``member 
organization'', changing the references to ``OTC Equity Securities'' 
and ``securities'' in the Rule to ``listed securities'' in order to 
apply the Rule to the Exchange, and adding language to paragraphs (b) 
and (e) of the Rule concerning stabilizing bids in order to ensure that 
the requirements of NYSE Rule 392(b) are fully imported into new NYSE 
Rule 5190. The substantive reporting requirements of NYSE Rule 392 are 
essentially being reorganized and renumbered into new NYSE Rule 5190 to 
help eliminate confusion and regulatory duplication for its member 
organizations. Member organizations will therefore continue to file 
these reports with the Exchange.
FINRA Rule Filing SR-FINRA-2008-057 \28\
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    \28\ See Securities Exchange Act Release No. 59097 (December 12, 
2008), 73 FR 78412 (December 22, 2008) (SR-FINRA-2008-057).
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    In this filing, FINRA proposed additional clean-up rule changes, 
including to FINRA Rules 3130, 4560 and 5190 addressed in this filing. 
The Exchange has included the proposed rule changes to NYSE Rule 5190; 
the proposed changes to FINRA Rules 3130 and 4560 are not applicable to 
NYSE Rules 3130 and 4560 as proposed for adoption.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6(b) of the Act,\29\ in general, and further the 
objectives of Section 6(b)(5) of the Act,\30\ in particular, in that 
they are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The proposed rule changes also support the principles 
of Section 11A(a)(1) \31\ of the Act in that they seek to ensure the 
economically efficient execution of securities transactions and fair 
competition among brokers and dealers and among exchange markets.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78k-1(a)(1).
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    The Exchange believes that the proposed rule changes will provide 
greater harmonization between NYSE Rules and FINRA Rules of similar 
purpose, resulting in less burdensome and more efficient regulatory 
compliance for Dual Members. To the extent the Exchange has proposed 
changes that differ from the FINRA version of the Rules, such changes 
are technical in nature and do not change the substance of the proposed 
NYSE Rules. The Exchange therefore believes that the proposed rule 
changes support the objectives of the Act by providing greater 
regulatory clarity and relieving unnecessary regulatory burdens.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 the 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#750700191058161a1818101b0106350610165b121a03"><span class="__cf_email__" data-cfemail="c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5">[email protected]</span></a>. Please include 
File

[[Page 15568]]

Number SR-NYSE-2009-25 on the subject line.

Paper Comments

    <bullet> 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-NYSE-2009-25. 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 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-NYSE-2009-25 and should be 
submitted on or before April 27, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-7589 Filed 4-3-09; 8:45 am]
BILLING CODE 8011-01-P


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