Federal Register / Vol. 75, No. 104 / Tuesday, June 1, 2010 / Notices 30453 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(4). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(2). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 34–61575 (Feb. 

23, 2010); 75 FR 9459 (Mar. 2, 2010). 

4See letter from Barry D. Estell, Esq., dated March 

24, 2010 (‘‘Estell Letter’’). 

Trading Permit Applications where the 

initial application was submitted prior 

to the close of business on May 21, 

2010. 

The existing CBOE Membership 

application fees are set forth in Section 

11 of the CBOE Fees Schedule as well 

as in a regulatory circular (‘‘Membership 

Fees Circular’’). The Exchange proposes 

to add the Post-Demutualization 

Trading Permit Application Fee to 

Section 11 of the CBOE Fees Schedule 

and to revise the Membership Fees 

Circular. The proposed changes to the 

CBOE Fees Schedule are included as 

part of Exhibit 5 to the 19b–4. The 

proposed changes to the Membership 

Fees Circular are included as Exhibit 2 

to the 19b–4. 

CBOE proposes to add a new Section 

8 to the CBSX Fees Schedule for 

Membership Fees that includes the PostDemutualization Trading Permit 

Application Fee. The proposed changes 

to the CBSX Fees Schedule are included 

as part of Exhibit 5 to the 19b–4. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) of the Securities Exchange Act of 

1934 (‘‘Act’’) 6, in general, and furthers 

the objectives of Section 6(b)(4) 7 of the 

Act in particular, in that it is designed 

to provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using its facilities. In particular, the 

proposed fee would be assessed to all 

members in a consistent manner and 

encourage the submission of PostDemutualization Trading Permit 

Applications with sufficient time to 

allow for the efficient processing of 

these applications. CBOE believes this 

fee is reasonable as compared to other 

application fees assessed by the 

Exchange and is reflective of the amount 

of work necessary to process the 

applications. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE 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 

Because the foregoing rule change 

establishes or changes a due, fee, or 

other charge imposed by the Exchange, 

it has become effective pursuant to 

Section 19(b)(3)(A) of the Act 8 and 

subparagraph (f)(2) of Rule 19b–4 9

thereunder. At any time within 60 days 

of the filing of the proposed rule change, 

the Commission may summarily 

abrogate such rule change if it appears 

to the Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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–CBOE–2010–045 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–CBOE–2010–045. 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 Web site viewing and 

printing 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 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 No. SR–CBOE– 

2010–045 and should be submitted on 

or before June 22, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13038 Filed 5–28–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62156; File No. SR–FINRA– 

2010–007] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Amend the 

By-Laws of NASD Dispute Resolution 

May 24, 2010. 

On January 22, 2010, 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’’), 

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 the bylaws of NASD Dispute Resolution. The 

proposed rule change was published for 

comment in the Federal Register on 

March 2, 2010.3 The Commission 

received one comment on the proposed 

rule change.4 This order approves the 

proposed rule change. 

I. Description of Proposed Rule Change 

FINRA proposed to amend the NASD 

Dispute Resolution By-Laws to: (1) 

Modify the composition of the FINRA 

Dispute Resolution Board; (2) adopt 

changes to conform the NASD Dispute 


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5Pub. L. 106–102, 113 Stat. 1338 (1999). 

6 15 U.S.C. 78c(a)(4) and (a)(5). 

7See Securities Exchange Act Rel. No. 44052 

(March 8, 2001), 66 FR 15157 (March 15, 2001) (File 

No. SR–NASD–01–13). 

8The new term ‘‘electronic transmission’’ would 

be added as proposed Article I(k) of the By-Laws 

of NASD Dispute Resolution. 

9The new term ‘‘FINRA member’’ would be added 

as proposed Article I(o) of the By-Laws of NASD 

Dispute Resolution. 

10The term ‘‘Industry Director’’ will be defined in 

proposed Article I(r); ‘‘Industry Member’’ in 

proposed Article I(s). 

11See FINRA By-Laws, Article I(s) and I(t). 

12See FINRA By-Laws, Article I(t). 

13The term ‘‘Public Director’’ will be defined in 

proposed Article I(w); ‘‘Public Member’’ in proposed 

Article I(x). 

14See Securities Exchange Act Rel. No. 60159 

(June 22, 2009), 74 FR 31779 (July 2, 2009) (File No. 

SR–FINRA–2009–041). 

15See Securities Exchange Act Rel. No. 60878, 74 

FR 56679 (Nov. 2, 2009) (Notice of Filing of 

Amendment No. 1 and Order Granting Accelerated 

Approval of SR–2009–041, as Modified by 

Amendment No. 1). 

16Rule 12100(r) of the Customer Code and Rule 

13100(r) of the Industry Code define ‘‘person 

associated with a member’’ to mean: (1) A natural 

person registered under the Rules of FINRA; or (2) 

A sole proprietor, partner, officer, director, or 

branch manager of a member, or a natural person 

occupying a similar status or performing similar 

functions, or a natural person engaged in the 

investment banking or securities business who is 

directly or indirectly controlling or controlled by a 

member, whether or not any such person is 

registered or exempt from registration with FINRA 

under the By-Laws or the Rules of FINRA. 

For purposes of the Code, a person formerly 

associated with a member is a person associated 

with a member. 

Resolution By-Laws to the FINRA ByLaws; and (3) implement other 

conforming changes to reflect the 

corporate name change and other 

similar matters. The proposed 

amendments to the NASD Dispute 

Resolution By-Laws are modeled on 

those of the FINRA and FINRA 

Regulation By-Laws (which were both 

previously approved by the 

Commission), with modifications as 

appropriate to the particular functions 

of FINRA Dispute Resolution. 

The following discussion addresses 

the proposed amendments to NASD 

Dispute Resolution’s By-Laws under the 

article of the By-Laws of NASD Dispute 

Resolution in which the amendments 

would first appear. 

Amendments to Article I—Definitions 

Article I contains definitions of terms 

used in the By-Laws. FINRA proposed 

to add to or amend some of these 

definitions. 

Broker and Dealer 

FINRA proposed to amend the 

definitions of ‘‘broker’’ and ‘‘dealer’’ in 

Article I to conform them to the 

definitions of ‘‘broker’’ and ‘‘dealer’’ in 

the Act, as amended by the GrammLeach-Bliley Act of 1999.5 As proposed, 

FINRA would incorporate by reference 

the definitions of the terms ‘‘broker’’ and 

‘‘dealer’’ as set forth in Sections 3(a)(4) 

and 3(a)(5), respectively, of the Act.6

The Commission approved the same 

change to definitions of the terms 

‘‘broker’’ and ‘‘dealer’’ in the then-NASD 

Regulation’s By-Laws in March 2001.7

Corporation 

FINRA proposed to add the term 

‘‘Corporation’’ to Article I to reflect the 

change of the Corporation’s name from 

‘‘NASD’’ to ‘‘FINRA.’’ Proposed Article 

I(e) would define Corporation to mean 

the National Association of Securities 

Dealers, Inc., the Financial Industry 

Regulatory Authority, Inc., or any future 

name of the entity. 

Electronic Transmission 

FINRA proposed to add the term 

‘‘electronic transmission’’ to Article I to 

reflect the common usage of electronic 

transmission as a means of 

communication.8 The term ‘‘electronic 

transmission’’ would be defined to mean 

communicating or disseminating 

information or documents to 

individuals or entities by telegraph, 

telefax, cable, radio, wireless or other 

device or method. FINRA intends ‘‘other 

device or method’’ to include email, text 

messages, and related technologies, for 

example. 

FINRA Member 

FINRA proposed to add the term 

‘‘FINRA member’’ to Article I.9 As 

proposed, the term ‘‘FINRA member’’ 

would mean ‘‘any broker or dealer 

admitted to membership in FINRA, 

whether or not the membership has 

been terminated or cancelled; and any 

broker or dealer admitted to 

membership in a self-regulatory 

organization that, with FINRA consent, 

has required its members to arbitrate 

pursuant to the Code of Arbitration 

Procedure for Customer Disputes 

(‘‘Customer Code’’) or the Code of 

Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’, and together 

with the Customer Code, ‘‘Codes’’) and/ 

or to be treated as members of FINRA 

for purposes of the Codes, whether or 

not the membership has been 

terminated or cancelled.’’ 

Industry Director or Industry Member 

and Public Director or Public Member 

FINRA proposed to modify the terms 

‘‘Industry Director’’ or ‘‘Industry 

member’’ and ‘‘Public Director’’ or 

‘‘Public member’’ in Articles I(k) and I(t), 

respectively. With regard to the term 

‘‘Industry Director’’ or ‘‘Industry 

member’’, the proposed rule change 

would amend the NASD Dispute 

Resolution’s By-Laws by separating 

these definitions into two definitions for 

ease of reference.10

FINRA also proposed to amend the 

revised terms ‘‘Industry Director’’ and 

‘‘Industry Member’’ to limit the lookback test that characterizes committee 

members as industry if they have served 

as an officer, director, or employee of a 

broker or dealer, among other reasons, 

to the past twelve months. The current 

provision uses a three-year look-back 

test. The proposed change would make 

the definitions of ‘‘Industry Director’’ 

and ‘‘Industry Member’’ under the NASD 

Dispute Resolution By-Laws consistent 

with the definitions of ‘‘Industry 

Director’’, ‘‘Industry Governor’’, and 

‘‘Industry committee member’’ in the 

FINRA By-Laws.11

The proposal would also add the term 

‘‘independent director’’ to the portion of 

the definitions of ‘‘Industry Director’’ 

and ‘‘Industry Member’’ that excludes 

outside directors of a broker or dealer. 

The term ‘‘independent director’’ is 

synonymous with outside director, but 

FINRA proposed to add it to the 

exclusionary clause to harmonize the 

NASD Dispute Resolution By-Laws with 

the definition of ‘‘Industry Governor’’ in 

the FINRA By-Laws.12

Similarly, FINRA proposed to modify 

the term ‘‘Public Director’’ or ‘‘Public 

member’’ by separating it into two 

definitions for ease of reference.13

FINRA would also amend the proposed 

terms ‘‘Public Director’’ or ‘‘Public 

Member’’ to clarify that an individual’s 

service as a public director of a self 

regulatory organization does not 

disqualify that person from serving as a 

Pubic Director or Public Member under 

NASD Dispute Resolution’s By-Laws. 

Person Associated With a Member or 

Associated Person of a Member 

On June 5, 2009, FINRA filed a 

proposed rule change to amend Rules 

12100(r), 12506(a), and 12902(a) of the 

Customer Code and Rule 13100(r) of the 

Industry Code to amend the definition 

of ‘‘associated person,’’ streamline a case 

administration procedure, and clarify 

that customers could be assessed 

hearing session fees based on their own 

claims for relief in connection with an 

industry claim.14 The Commission 

approved the proposal on October 26, 

2009.15

Under that proposal, FINRA amended 

the definition of associated person 

under the Codes 16 to match the 


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17FINRA’s By-Laws define ‘‘person associated 

with a member or associated person of a member’’ 

as (1) a natural person who is registered or has 

applied for registration under the Rules of the 

Corporation; (2) a sole proprietor, partner, officer, 

director, or branch manager of a member, or other 

natural person occupying a similar status or 

performing similar functions, or a natural person 

engaged in the investment banking or securities 

business who is directly or indirectly controlling or 

controlled by a member, whether or not any such 

person is registered or exempt from registration 

with the Corporation under these By-Laws or the 

Rules of the Corporation; and (3) for purposes of 

Rule 8210, any other person listed in Schedule A 

of Form BD of a member. See By-Laws of the 

Corporation, Article I, Definitions (rr). 

18See By-Laws of the Corporation, Article VII 

(Board of Governors), section 4(a). 

19See NASD Dispute Resolution By-Laws, Article 

IV, Sections 4.3(a) (Qualifications), 4.5 

(Resignation), 4.11(c) (Meetings), 4.13(f) (Executive 

Committee), and 4.13(g) (Finance Committee). 

Section 141(c)(2) of the General Corporation Law of 

the State of Delaware provides that ‘‘[t]he board of 

directors may designate 1 or more committees, each 

committee to consist of 1 or more directors of the 

corporation.’’ (Emphasis added). Committees of the 

board, therefore, may be comprised exclusively of 

board members. In addition, any committee of the 

board that is delegated any power and authority of 

the board, such as the Executive Committee, must 

be comprised exclusively of board members. See 

Delaware General Corporation Law, section 

141(c)(2). 

20See Delaware General Corporation Law section 

142, which allows the sole stockholder to make this 

selection if expressly provided for in the By-Laws. 

21The sole stockholder of the capital stock of 

FINRA Dispute Resolution, Inc. is FINRA, Inc. See 

Article VIII, section 8.1 (Sole Stockholder). 

22See Delaware General Corporation Law, section 

141(k). As a practical matter, the FINRA Board 

generally would be asked to pass a resolution 

authorizing an officer of FINRA to execute a sole 

stockholder consent on behalf of FINRA (who is the 

sole stockholder of FINRA Dispute Resolution) 

before such a consent is executed. As such, the 

FINRA Board would have a voice in the matter, but 

as a matter of Delaware law, the consent authorizing 

the removal must be executed by a duly authorized 

officer of FINRA in FINRA’s capacity as sole 

stockholder. 

23See current NASD Dispute Resolution By-Laws, 

Article IV, section 4.4 (Election). 

24 Id. 

25Pursuant to Delaware law, FINRA, as the sole 

stockholder of FINRA Dispute Resolution, has the 

authority to execute a stockholder consent electing 

an individual to the fill the vacancy pursuant to 

directions of the FINRA Board. Alternatively, the 

FINRA Board may pass a resolution making it 

known who they would like appointed to fill the 

vacancy. Under this scenario, it is likely that the 

remaining members of the FINRA Dispute 

Resolution Board will follow the advice of its 

controlling stockholder and elect the recommended 

individual. See Delaware General Corporation Law, 

section 223. 

definition in FINRA’s By-Laws.17 The 

proposal amended the definition of 

‘‘person associated with a member’’ in 

the Codes in two ways: (1) by inserting 

the word ‘‘other’’ before the second 

reference to ‘‘natural person’’ to clarify 

that the definition does not include 

corporate entities; and (2) by inserting 

the criterion that a natural person 

includes someone who has applied for 

registration. 

FINRA proposed to implement the 

same changes to the definition of 

associated person of a member in the 

NASD Dispute Resolution By-Laws, as 

have been approved recently by the 

Commission to same definitions under 

the Codes. 

Amendments to Article IV—Board of 

Directors 

FINRA proposed to make limited 

conforming changes to Article IV to 

parallel more closely the governance 

structure of the FINRA Board. 

Section 4.3—Qualifications 

The proposed rule change would 

amend Article IV, section 4.3(a) to 

reflect FINRA’s current governance 

structure by establishing that NASD 

Dispute Resolution Board members 

would be drawn exclusively from the 

FINRA Board. The proposed rule change 

would also amend section 4.3(a) to 

streamline the composition of NASD 

Dispute Resolution’s Board and 

implement a requirement that it contain 

more Public Directors than Industry 

Directors. Thus, section 4.3(a) would be 

amended to state that ‘‘the number of 

Public Directors shall exceed the 

number of Industry Directors.’’ FINRA’s 

By-Laws contain a similar 

requirement.18

The proposal would make other 

changes to Article IV, section 4.3 as 

follows: 

• Re-structure the Board to remove 

the President of NASD Dispute 

Resolution. The President would not be 

deemed a Director, and therefore, the 

proposed rule change would delete 

several references to the President of 

NASD Dispute Resolution; 19

• Clarify that the Chair of the FINRA 

Board and the Chief Executive Officer of 

FINRA shall be ex-officio non-voting 

members of the Board; 

• Transfer the task of selecting the 

Chair of the NASD Dispute Resolution 

Board from the Board members to NASD 

Dispute Resolution’s stockholder;20

• Eliminate the requirement that the 

Board select a Vice Chair; and 

• State that the stockholder will 

designate the Chair at the same time that 

the Directors are elected. 

Section 4.4—Election 

The proposed rule change would 

eliminate as unnecessary the reference 

to the first meeting of NASD Regulation 

at which Directors initially were 

elected. 

Section 4.5—Resignation 

The proposal would remove the 

requirement that Directors submit 

written notice of resignation to the 

President. Under the proposal, such 

notice would be submitted to the Chair 

of the Board, instead of the President. 

Section 4.6—Removal 

The proposed rule change would 

transfer the authority to remove 

Directors from a majority vote of the 

FINRA Board to the stockholder of 

FINRA Regulation.21 The proposed 

amendment would reflect Delaware law, 

which requires that a stock corporation 

vest the power to remove directors with 

the stockholder.22

Section 4.7—Disqualification 

In connection with the proposed 

change to section 4.3(a), which would 

require the number of Public Directors 

to exceed the number of Industry 

Directors, the proposal would also 

amend section 4.7 to clarify that when 

a Director is disqualified from Board 

service and the Director’s remaining 

term is not more than six months, the 

Board may continue to operate and will 

not violate any compositional 

requirements if it does not replace the 

disqualified Director. 

Section 4.8—Filling of Vacancies 

Currently, Directors of FINRA Dispute 

Resolution are elected annually at the 

meeting of FINRA Dispute Resolution’s 

stockholder meeting or at a special 

meeting dedicated to Board elections.23

When the annual election of Directors is 

not held on the designated date, the 

NASD Dispute Resolution By-Laws 

charge the Directors to ‘‘cause such 

election’’ to be held.24 The proposed 

rule change would confirm that the 

same process should be used by the 

FINRA Dispute Resolution Board when 

filling vacancies among its ranks. Thus, 

the proposal would amend section 4.8 

to provide that the FINRA Board shall 

‘‘cause the election’’ of a qualified 

Director to fill the vacant position.25

Section 4.9—Quorum and Voting 

The proposed rule change would 

remove a cross-reference to section 

4.14(b) in the quorum provision, and 

also amend the provision to clarify that, 

when there is a quorum, a majority vote 

of the Directors present at a meeting 

constitutes action of the Board. 

Section 4.12—Notice of Meetings; 

Waiver of Notice 

The proposal would clarify the 

conditions under which the NASD 

Dispute Resolution Board may meet. 

The current NASD Dispute Resolution 

By-Laws provide that a Director may 

waive notice of a Board meeting by 

being present at the meeting, so long as 


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26See current NASD Dispute Resolution By-Laws, 

Article IV, section 4.12(b) (Notice of Meeting; 

Waiver of Notice) and Article IX, section 9.3(b) 

(Waiver of Notice). 

27FINRA proposed similar changes to Article IV, 

Section 4.12 (Notice of Meeting; Waiver of Notice) 

and Article XII, Section 12.3 (Waiver of Notice) of 

the FINRA Regulation By-Laws. See Securities 

Exchange Act Rel. No. 59696 (April 2, 2009), 74 FR 

16020 (April 8, 2009) (File No. SR–FINRA–2009– 

020). 

28See also proposed Article I(r) (Industry 

Director); proposed Article I(s) (Industry Member); 

proposed Article I(w) (Public Director); and 

proposed Article I(x) (Public Member). 

29See Article IV, section 4.12(f) (Executive 

Committee). 30Supra note 18. 

31The proposal would delete as imprecise the 

words ‘‘certificates for’’ in the discussion of 

potential registration of shares of capital stock. See 

proposed NASD Dispute Resolution By-Laws, 

Article VIII, section 8.4(b) (Stock Ledger), 8.5 

(Transfers of Stock), 8.6 (Cancellation), and 8.7 

(Lost, Stolen, Destroyed, and Mutilated 

Certificates). 

32See supra note 26, and the explanation of the 

term ‘‘electronic transmission’’ under ‘‘Amendments 

to Article I—Definitions.’’ 

33See supra, note 4. 

the Director did not attend the meeting 

solely to object to the meeting taking 

place.26 FINRA proposed to amend 

section 4.12(c) to clarify that a Board 

meeting is a legal meeting if all 

Directors are present and no Director is 

present solely for the purpose of 

objecting to the meeting taking place. 

The proposed rule change also would 

amend section 4.12(a) and (b) to replace 

the phrase ‘‘telegraph, telefax, cable, 

radio, or wireless’’ with the new term 

‘‘electronic transmission.’’ 27 For an 

explanation of the term ‘‘electronic 

transmission,’’ see the discussion under 

‘‘Amendments to Article I—Definitions’’ 

above. 

Section 4.13—Committees 

As explained under the discussion of 

section 4.3(a), the proposal would 

implement a requirement that the 

FINRA Dispute Resolution Board 

contain more Public Directors than 

Industry Directors.28 In furtherance of 

this change, references throughout 

Article IV to balancing ‘‘Industry’’ and 

‘‘Non-Industry’’ Board members would 

be replaced with references to balancing 

‘‘Industry’’ and ‘‘Public’’ Board members. 

Similarly, the proposal would remove 

the requirement that the Executive 

Committee include at least one NonIndustry Member and institute the 

requirement that Public Directors shall 

exceed Industry Directors on FINRA 

Dispute Resolution’s Executive 

Committee of the Board.29

Section 4.15—Action Without Meeting 

The proposal would make a related 

change to section 4.15 to eliminate the 

requirement that unanimous consent for 

taking action without a meeting 

specifically be in writing and filed with 

the minutes of the meeting. Instead, the 

proposal would require the consent to 

be ‘‘in accordance with applicable law,’’ 

which in the instance of FINRA Dispute 

Resolution, would be Delaware law. 

Amendment to Article V—Officers, 

Agents, and Employees 

Section 5.1—Officers 

As explained under the discussion of 

Article IV, section 4.3, the proposed rule 

change would re-structure the Board to 

remove the President of FINRA Dispute 

Resolution as a Director of the Board.30

In connection with this change, the 

proposal would remove a reference to 

the President from section 5.1, so that 

the amended language would state, in 

relevant part, that none of the officers 

need to be Directors of FINRA Dispute 

Resolution. 

Amendments to Article VIII—Capital 

Stock 

Section 8.3—Signatures 

The proposed rule change would 

amend several provisions regarding 

FINRA Dispute Resolution’s capital 

stock. Currently, under section 8.3(a), 

FINRA’s approach to the corporate law 

issue of signing certificates representing 

shares of FINRA Dispute Resolution 

capital stock is to have these shares 

signed by FINRA Dispute Resolution 

officers. Under the proposed restructuring of the Board, FINRA Dispute 

Resolution would not have an officer as 

Chair of the Board. Thus, FINRA 

proposed to remove the provision that 

permits the Chair of the Board to sign 

stock certificates, and limit the authority 

to sign such certificates to the President, 

Vice President, Secretary or Treasurer of 

FINRA Dispute Resolution. 

FINRA proposed to amend section 

8.3(b) to remove the limitations on the 

type of signatures required on 

certificates of capital stock. The current 

provision states, in relevant part, that ‘‘if 

any such certificates are countersigned 

by a transfer agent other than NASD 

Dispute Resolution or its employee, or 

by a registrar other than NASD Dispute 

Resolution or its employee, any other 

signature on the certificate may be a 

facsimile.’’ The proposed amendment 

would eliminate limitations on when 

signatures on certificates representing 

shares of FINRA Dispute Resolution’s 

capital stock may be facsimiles and 

permit any signature to be a facsimile. 

Thus, under the proposal, the provision 

would be amended to state that ‘‘any 

signature on the stock certificate may be 

a facsimile.’’ 

Section 8.4—Stock Ledger 

Currently, section 8.4(a) of the NASD 

Dispute Resolution By-Laws requires 

that the FINRA Dispute Resolution 

Secretary, or another officer, employee, 

or agent, keep a record of FINRA 

Dispute Resolution’s capital stock 

ownership and ‘‘the number of shares 

represented by each such certificate.’’ 

FINRA proposed to change several 

references to ‘‘capital stock’’ to 

‘‘certificates representing shares of 

capital stock’’ or similar constructions, 

instead of ‘‘certificates for shares of 

capital stock.’’ 31

Amendments to Article IX— 

Miscellaneous Provisions 

Section 9.3—Waiver of Notice 

FINRA proposed to amend section 

9.3(a) of the NASD Dispute Resolution 

By-Laws to replace the phrase 

‘‘telegraph, telefax, cable, radio, or 

wireless’’ with the new term ‘‘electronic 

transmission.’’ 32

Conforming Changes Relating to the 

New FINRA Name and Other Technical 

Changes 

FINRA proposed to implement certain 

other non-substantive changes to all 

articles of the NASD Dispute Resolution 

By-Laws, as follows: 

• ‘‘The NASD’’ or ‘‘NASD’’ would be 

replaced with ‘‘FINRA’’ or ‘‘the 

Corporation;’’ 

• ‘‘NASD Dispute Resolution’’ would 

be changed to ‘‘FINRA Dispute 

Resolution;’’ 

• ‘‘The Rules of the Association’’ 

would be replaced with ‘‘the Rules of 

the Corporation;’’ 

• ‘‘National Nominating Committee’’ 

would be replaced with ‘‘Nominating 

Committee;’’ 

• A reference to ‘‘FINRA Regulation’’ 

would be added; and 

• ‘‘Association’’ would be replaced 

with ‘‘Corporation.’’ 

FINRA also proposed to amend 

Article II, section 2.1 to change the 

name and address of the registered agent 

from The Corporation Trust Company, 

1209 Orange Street, Wilmington, DE 

19801 to Corporation Creations Network 

Inc., 1308 Delaware Avenue, 

Wilmington, DE 19806. 

II. Comments 

The Commission received one 

comment on the proposed rule 

change,33 as well as FINRA’s response 


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Federal Register / Vol. 75, No. 104 / Tuesday, June 1, 2010 / Notices 30457 

34See letter from Mignon McLemore, Assistant 

Chief Counsel, FINRA Dispute Resolution, dated 

May 5, 2010 (‘‘FINRA Letter’’). 35See Estell Letter. 36See FINRA Letter at page 1. 37 Id. 38See FINRA Letter at page 2. 

39 Id. 

40 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition and capital 

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

41 15 U.S.C. 78o–3(b)(6). 

42 15 U.S.C. 78s(b)(2). 

43 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

to the comment.34 The commenter 

opposed the rule filing arguing that the 

proposed rule change would not 

‘‘redound to the benefit of investors’’ 

because: (1) The Chair of the FINRA 

Dispute Resolution Board would be 

selected by FINRA; (2) FINRA, by 

selecting the Chair of the FINRA 

Dispute Resolution Board, may prevent 

a director of FINRA Dispute Resolution 

from ‘‘suggesting a measure that might 

bring some element of fairness to the 

dispute resolution process’’; and (3) 

FINRA would have the power to remove 

directors of FINRA Dispute 

Resolution.35

FINRA responded to the commenter’s 

concern regarding the selection of the 

Chair of the FINRA Dispute Resolution 

Board by stating that since the FINRA 

Board is comprised of a majority of 

public governors, ‘‘the majority will be 

able to represent the interests of the 

investing public regarding the selection 

of the [Chair of the FINRA Dispute 

Resolution Board]’’.36 FINRA also noted 

that, ‘‘as the proposed FINRA Dispute 

Resolution By-Laws require that the 

number of Public Directors exceeds the 

number of Industry Directors, matters 

affecting the dispute resolution process 

also would be controlled by a majority 

of Public Directors’’.37

With respect to the commenter’s 

concern that the proposed rule change 

would provide the Chair with the 

authority to prevent matters from being 

raised at a meeting, FINRA stated that 

the Chair cannot prevent an item from 

being raised at a meeting. FINRA also 

noted that any member of the Board 

may raise a matter for consideration and 

that the Chair may influence when the 

matter is heard, but cannot prevent it 

from being heard.38

In response to the commenter’s 

concern regarding FINRA’s power to 

remove directors of FINRA Dispute 

Resolution with or without cause, 

FINRA reiterated that Delaware law 

requires that the stockholder have the 

power to remove directors. Since FINRA 

is the stockholder of FINRA Dispute 

Resolution, the removal of a Director 

from FINRA Dispute Resolution’s Board 

is also a function that is controlled by 

FINRA’s Board. FINRA also stated that 

since the FINRA Board is comprised of 

a majority of public governors, that 

majority would consider the public 

interests and market implications in 

determining whether to remove a 

Director from FINRA Dispute 

Resolution’s Board.39

III. Discussion and Findings 

After careful review of the proposed 

rule change, the comment received, and 

FINRA’s response to the comment, the 

Commission finds the proposed rule 

change to be consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.40 In 

particular, the Commission finds that 

the proposed rule change is consistent 

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

of the Act.41, 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; 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 Commission believes that the 

proposed rule change is consistent with 

FINRA’s obligations under the Act. In 

particular, the proposed rule change 

will conform definitions in the By-Laws 

with definitions in the Act, as well as 

to the By-Laws of FINRA and FINRA 

Regulation. The proposed rule change 

will also conform other provisions of 

the By-Laws with the FINRA and FINRA 

Regulation By-Laws and be consistent 

with Delaware law, under which all the 

entities are organized. In addition, the 

proposed rule change would clarify that 

FINRA members remain subject to the 

requirements of the Codes after their 

membership has been terminated or 

cancelled. 

IV. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities association. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,42 that the 

proposed rule change (SR–FINRA– 

2010–007) be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13005 Filed 5–28–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62160; File No. SR–FINRA– 

2010–027] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to the 

Restated Certificate of Incorporation of 

Financial Industry Regulatory 

Authority, Inc. 

May 24, 2010. 

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 May 21, 

2010, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) 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 

Restated Certificate of Incorporation of 

FINRA (the ‘‘Certificate of 

Incorporation’’) to specify the quorum 

requirements for a meeting of FINRA 

members, in anticipation of 

amendments to the General Corporation 

Law of the State of Delaware (the 

‘‘General Corporation Law’’). The 

proposed rule change would serve to 

maintain the status quo with respect to 

the quorum requirements for meetings 

of members. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, on the 

Commission’s Web site at http:// 

www.sec.gov, at the principal office of 

FINRA and at the Commission’s Public 

Reference Room. 


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