Federal Register / Vol. 74, No. 74 / Monday, April 20, 2009 / Notices 18007 

1 17 CFR 202.11. See Release No. 33–8724 (July 

18, 2006) [71 FR 41998 (July 24, 2006)]. 

2See Release No. 33–8989 (December 17, 2008) 

[73 FR 78861 (December 23, 2008)]. 

3See 17 CFR 202.11(d)(3), which provides that, 

‘‘In addition to amounts needed to fund 

disbursements during the budget year, a budget may 

reflect receipts in amounts needed to fund expend 

expected disbursements during a period not to 

exceed the first five months of the fiscal year 

immediately following the budget year (the working 

capital reserve), provided such amounts shall be 

disbursed only as specified in the following year’s 

budget or in a supplemental budget approved by the 

Commission.’’ 

4See 17 CFR 202.11(i). 

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

2 17 CFR 240.19b–4. 

annual accounting support fee shall not 

exceed the PCAOB’s aggregate 

‘‘recoverable budget expenses,’’ which 

may include operating, capital and 

accrued items. Section 109(b) of the Act 

directs the PCAOB to establish a budget 

for each fiscal year in accordance with 

the PCAOB’s internal procedures, 

subject to approval by the Securities and 

Exchange Commission (the 

‘‘Commission’’). 

On July 18, 2006, the Commission 

amended its Rules of Practice related to 

its Informal and Other Procedures to 

add a rule to facilitate the Commission’s 

review and approval of PCAOB budgets 

and accounting support fees.1 This 

budget rule provides, among other 

things, a timetable for the preparation 

and submission of the PCAOB budget 

and for Commission actions related to 

each budget, a description of the 

information that should be included in 

each budget submission, limits on the 

PCAOB’s ability to incur expenses and 

obligations except as provided in the 

approved budget, procedures relating to 

supplemental budget requests, 

requirements for the PCAOB to furnish 

on a quarterly basis certain budgetrelated information, a list of definitions 

that apply to the rule and to general 

discussions of PCAOB budget matters, 

and the ability of the Commission to 

waive compliance with any provisions 

of the rule. 

On December 17, 2008, the 

Commission approved the PCAOB’s 

2009 budget of $157.6 million and 2009 

annual accounting support fee of $151.8 

million.2 Due to the development of 

certain unforeseen contingencies, on 

March 16, 2009 the PCAOB requested 

Commission approval to increase its 

2009 annual accounting support fee by 

$5.6 million, to $157.4 million. The 

primary reason for the requested 

increase relates to proposed legislation 

in Congress that would increase the 

PCAOB’s responsibilities over auditors 

of broker-dealers. 

Specifically, the PCAOB’s request 

would create an additional reserve for 

contingencies in addition to the five 

month working capital reserve provided 

for in the Commission’s budget rule.3

Therefore, the requested amount of the 

increase to the annual accounting 

support fee would result in the PCAOB 

being noncompliant with certain 

provisions of the Commission’s budget 

rule. The Commission’s budget rule 

provides that the Commission, in its 

discretion, may waive compliance with 

any provision of the rule,4 and the 

PCAOB has requested a waiver. In 

approving the PCAOB’s request to 

increase its 2009 annual accounting 

support fee, the Commission is hereby 

waiving paragraph (d)(3) of the budget 

rule with respect to the PCAOB’s 2009 

budget and annual accounting support 

fee. 

Pursuant to the budget rule, and as 

the PCAOB indicates in its request, the 

incremental monies collected by the 

PCAOB are to be held by the PCAOB 

until the Commission, through the 

approval of a supplemental budget, later 

approves disbursement of such monies. 

The procedures for submitting a 

supplemental budget request are 

provided in the budget rule. Prior to 

submission of any such supplemental 

budget request or to the implementation 

of any legislation that expands the 

PCAOB’s authority over the auditors of 

broker-dealers, the PCAOB shall consult 

with the Commission on a timely basis 

about the PCAOB’s plans for additional 

resources, program changes, or 

information technology developments 

and enhancements contemplated. 

The Commission has determined that 

the PCAOB’s increased annual 

accounting support fee is consistent 

with Section 109 of the Act. 

Accordingly, 

It is ordered, pursuant to Section 109 

of the Act, that the PCAOB’s increase to 

its annual accounting support fee for 

calendar year 2009 is approved. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–8886 Filed 4–17–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59754; File No. SR–FINRA– 

2009–018] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Adopt IM– 

2830–1 (‘‘Breakpoint’’ Sales) in the 

Consolidated FINRA Rulebook 

April 13, 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 26, 

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 adopt NASD 

Interpretive Material 2830–1 (‘‘IM– 

2830–1’’) (‘‘Breakpoint’’ Sales) as a 

FINRA rule in the consolidated FINRA 

rulebook with minor changes. The 

proposed rule change would renumber 

NASD IM–2830–1 as FINRA Rule 2342 

in the consolidated FINRA rulebook. 

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. 


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18008 Federal Register / Vol. 74, No. 74 / Monday, April 20, 2009 / Notices 

3The current FINRA rulebook consists of (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see FINRA 

Information Notice, March 12, 2008 (Rulebook 

Consolidation Process). 

4See Securities Exchange Act Release No. 40659 

(Nov. 10, 1998), 63 FR 64136 (Nov. 18, 1998) (Order 

Approving Proposed Rule Change Relating to 

Mutual Fund Breakpoint Sales). 

5NASD Special Notice to Members 02–85, NASD 

Requires Immediate Member Firm Action Regarding 

Mutual Fund Purchases and Breakpoint Schedules 

(December 2002). 

6See Joint SEC/NASD/NYSE Report of 

Examinations of Broker/Dealers Regarding 

Discounts on Front-End Sales Charges on Mutual 

Funds (March 2003), available at http:// 

www.finra.org/Industry/Issues/Breakpoints/

P006438. 

7See Report of the Joint NASD/Industry Task 

Force on Breakpoints (July 2003), available at 

http://www.finra.org/Industry/Issues/Breakpoints/ 

P006422. 

8 15 U.S.C. 78o–3(b)(6). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to adopt NASD IM– 

2830–1 into the Consolidated FINRA 

Rulebook with minor changes discussed 

below. The proposed rule change would 

renumber NASD IM–2830–1 as FINRA 

Rule 2342. NASD IM–2830–1 prohibits 

sales of mutual fund shares in amounts 

below a ‘‘breakpoint’’ if such sales are 

made ‘‘so as to share in the higher sales 

charges.’’ In the context of mutual fund 

sales, a ‘‘breakpoint’’ is that point at 

which the sales charge is reduced for 

quantity purchases of fund shares. 

The application of the standard in 

NASD IM–2830–1 depends on the facts 

and circumstances of particular 

transactions to determine whether a 

member executed a transaction for the 

purpose of earning a higher sales charge. 

In 1998, NASD IM–2830–1 was 

amended to address the use of modern 

portfolio investment strategies that 

utilize many different mutual funds 

with varying investment objectives.4

The amendments specify more precisely 

those facts and circumstances that 

FINRA will consider when examining 

whether trades that miss breakpoints, 

but are made pursuant to bona fide asset 

allocation programs, may have violated 

NASD IM–2830–1. In making such 

determinations, the rule provides that 

FINRA will consider, among other 

things, whether a member has retained 

records that demonstrate that the trade 

was executed in accordance with a bona 

fide asset allocation program that the 

member offers to its customers which is 

designed to meet their diversification 

needs and investment goals; and under 

which the member discloses to its 

customers that they may not qualify for 

breakpoint reductions that are otherwise 

available. 

Breakpoint issues have been of 

concern to the regulatory community. 

On December 23, 2002, FINRA issued 

Special Notice to Members 02–85, 

which reminded firms of their 

obligation to apply correctly breakpoint 

discounts to front-end sales load mutual 

fund transactions.5 In 2003, the staffs of 

FINRA, the SEC, and the NYSE 

conducted examinations of brokerdealers to assess their ability to deliver 

breakpoint discounts and memorialized 

the findings of those examinations in a 

joint report.6 Concurrently, FINRA staff 

and industry members formed a joint 

task force to consider issues regarding 

breakpoints. The joint task force issued 

a report in July 2003 containing 

recommendations for the industry to 

facilitate the accurate delivery of 

breakpoint discounts.7

FINRA proposes to adopt NASD IM– 

2830–1 as FINRA Rule 2342 as it 

believes this rule continues to be an 

important tool in regulating members’ 

sales of mutual fund shares to ensure 

that they are not sold in dollar amounts 

just below breakpoints so as to share in 

higher sales charges. FINRA proposes to 

eliminate references to ‘‘just and 

equitable principles of trade’’ and make 

other minor changes to the text to reflect 

that it would be a stand-alone rule, 

rather than Interpretive Material, and to 

eliminate certain redundant text that is 

inconsistent with a rules-based format. 

As noted above, FINRA will announce 

the implementation date of the 

proposed rule change in a Regulatory 

Notice to be published no later than 90 

days following Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,8 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 would continue to 

provide FINRA with an important tool 

in regulating members’ sales of mutual 

fund shares, consistent with the goals of 

protecting investors and the public 

interest. 

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 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve such proposed 

rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–018 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–2009–018. This file 

number should be included on the 

subject line if e-mail is used. To help the 


rmajette on PRODPC74 with NOTICES
Federal Register / Vol. 74, No. 74 / Monday, April 20, 2009 / Notices 18009 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

5See Securities Exchange Act Release Nos. 59489 

(March 3, 2009), 74 FR 10330 (SR–NYSE–2009–18) 

and 59488 (March 3, 2009), 74 FR 10334 (SR– 

NYSEAltr–2009–15) (each a ‘‘Notice’’ and 

collectively, the ‘‘Notices’’). 

6See Securities Exchange Act Release No. 58743 

(October 7, 2008), 73 FR 60742 (October 14, 2008) 

(SR–NYSE–2008–102) (referred to herein as 

‘‘NYSE’s October 2, 2008 filing’’). 

7Rule 48.10. See also Securities Exchange Act 

Release Nos. 59168 (December 29, 2008), 74 FR 483 

(January 6, 2009) (SR–NYSE–2008–139) and 59666 

(March 31, 2009), 74 FR 15792 (April 7, 2009) (SR– 

NYSE–2009–35). 

8See Securities Exchange Act Release Nos. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008) 

(SR–Amex–2008–63) and 59022 (November 26, 

2008), 73 FR 73683 (December 3, 2008) (SR– 

NYSEALTR–2008–10). 

9Rule 48(c)(1)(A). 

10Rule 48(b)(2)(A). 

11Rule 48(b)(2)(A)(ii). 

12Rule 48(b)(2)(B). 

13Rule 48(c)(2). 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2009–018 and 

should be submitted on or before May 

11, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8877 Filed 4–17–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59755; File Nos. SR–NYSE– 

2009–18 and SR–NYSEAltr–2009–15] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC and NYSE 

Alternext US LLC (n/k/a NYSE Amex 

LLC); Order Granting Approval of 

Proposed Rule Changes Amending 

Rule 123C to Provide the Exchanges 

with the Ability to Temporarily 

Suspend Certain Requirements 

Relating to the Closing of Securities on 

the Exchange 

April 13, 2009. 

I. Introduction 

On February 19, 2009, the New York 

Stock Exchange LLC (‘‘NYSE’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend NYSE Rule 123C to 

provide the Exchange with the ability to 

temporarily suspend certain NYSE 

requirements relating to the closing of 

securities at the Exchange. On February 

20, 2009, NYSE Alternext US LLC 

(n/k/a NYSE Amex LLC) (‘‘NYSE 

Amex’’ and, with NYSE, each an 

‘‘Exchange’’ and collectively, the 

‘‘Exchanges’’) filed with the 

Commission, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 a substantively identical 

proposed rule change to amend NYSE 

Amex Equities Rule 123C. The proposed 

rule changes were published for 

comment in the Federal Register on 

March 10, 2009.5 The Commission 

received no comments regarding the 

proposals. This order approves the 

proposed rule changes, as amended. 

II. Description of the Proposal 

A. NYSE’s October 2, 2008 Amendments 

to Rule 48 

On October 2, 2008, NYSE filed for 

immediate effectiveness to amend NYSE 

Rule 48 to provide NYSE with the 

ability to suspend certain rules at the 

close when extremely high market 

volatility could negatively affect the 

ability to ensure a fair and orderly 

close.6 NYSE amended Rule 48 on a 

temporary basis in order to respond 

swiftly to market conditions at that 

time. The Rule 48 amendments are 

scheduled to end on April 30, 2009.7

On December 1, 2008, NYSE Amex 

(then known as NYSE Alternext US 

LLC) relocated its equities trading to 

facilities located at NYSE’s main trading 

floor at 11 Wall Street, New York, New 

York (the ‘‘Equities Relocation’’). NYSE 

Amex’s equity trading systems and the 

facilities at 11 Wall Street are operated 

by NYSE on behalf of NYSE Amex. In 

connection with the Equities Relocation, 

NYSE Amex adopted NYSE Rules 1– 

1004, subject to such changes as 

necessary to apply the rules to NYSE 

Amex, to govern trading on the NYSE 

Alternext Trading System beginning on 

December 1, 2008.8 In particular, among 

the rules adopted in substantively 

identical form were the rules at issue in 

this proposal—most notably, NYSE 

Rules 48, 52, and 123C. 

The temporary provisions of Rule 48 

provide that a qualified Exchange officer 

could declare an extreme market 

volatility condition before the 

scheduled close of trading in cases 

where the Exchange noted volatility 

during the day’s trading session and 

evidence of significant order imbalances 

at the close.9 A declaration of extreme 

market volatility at the close under Rule 

48 permits each Exchange to 

temporarily suspend Rule 52 (Hours of 

Operation) to allow the DMM to solicit 

and enter into Exchange systems 

additional orders in order to offset any 

imbalance in a security at the close.10

Rule 48 requires that any additional 

interest be represented manually on the 

Floor by an Exchange Floor broker.11 A 

declaration of extreme market volatility 

at the close also permits each Exchange 

to temporarily suspend NYSE Rules 

123C(1) and (2) (Market on the Close 

Policy and Expiration Policy) in order to 

allow cancellation or reduction of 

market-at-the-close (‘‘MOC’’) and limitat-the-close (‘‘LOC’’) orders after 3:50 

p.m. if such orders are the result of a 

legitimate error and would cause 

significant price dislocation at the close, 

among other requirements.12 Each 

Exchange is required to make a 

reasonable effort to consult with 

Commission staff before declaring an 

extreme market volatility condition and 

granting a suspension of NYSE rules or 

procedures.13

The Exchanges now propose to adopt 

the amendments to Rule 48 on a 

permanent basis by deleting these 

provisions from Rule 48 and moving 

them to Rule 123C. As part of the 

amendments to Rule 123C, the 

Exchanges further propose modifying 

the terms of the temporary suspensions 

by permitting the Exchange to invoke 

such relief on a security-by-security 

basis without first declaring a Floorwide extreme market volatility 

condition and codifying certain 


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