Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 32523 

16See Notice to Members 06–62 (November 2006). 

FINRA would retain the reporting threshold 

specified in Notice to Members 06–62 of requiring 

a report for all introducing or correspondent firms 

that have overall ratios of requests for extensions of 

time to total transactions for the month that exceed 

2%. In the event FINRA adjusts the reporting 

threshold, or the limitation threshold stated in note 

16 below, it would advise members of the new 

parameters in a Regulatory Notice. 

17See supra note 15. FINRA will continue to 

prohibit further extension of time requests for (1) 

introducing or correspondent firms that exceed a 

3% ratio of the number of extension of time 

requests to total transactions for the month and (2) 

clearing firms that exceed a 1% ratio of extension 

of time requests to total transactions. 

18 15 U.S.C. 78o–3(b)(6). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

clearing member that submits 

extensions of time on behalf of brokerdealers for which it clears to submit a 

monthly report to FINRA that indicates 

overall ratios of requested extensions of 

time to total transactions that have 

exceeded a percentage specified by 

FINRA.16 FINRA monitors the number 

of Regulation T and SEC Rule 15c3–3 

extension requests for each firm to 

determine whether to impose 

prohibitions on further extensions of 

time.17

FINRA proposes to add a provision to 

proposed FINRA Rule 4230 to clarify 

that for the months when no brokerdealer for which a clearing member 

clears exceeds the extension of time 

ratio criteria (i.e., 2%), the clearing 

member must submit a report indicating 

such. FINRA had previously requested 

such submissions but believes the 

submissions are essential to ensure 

FINRA has a complete and accurate 

understanding of correspondent firm 

extension requests. 

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. 

The implementation date will be no 

later than 180 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,18 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change will clarify and 

streamline the margin requirements 

applicable to its members, as well as 

those rules addressing extension of time 

requests under Regulation T and SEC 

Rule 15c3–3. 

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–2010–024 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–2010–024. 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 

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–2010–024 and 

should be submitted on or before June 

29, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13662 Filed 6–7–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62204; File No. SR–CBOE– 

2010–049] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Eligible Order 

Types 

June 2, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on May 25, 

2010, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A)(iii) of 


emcdonald on DSK2BSOYB1PROD with NOTICES
32524 Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 

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

4 17 CFR 240.19b–4(f)(6). 

5Rule 6.53 sets out definitions for the following 

order types: market order; limit order; contingency 

order (market-if-touched order, market-on-close 

order, stop (stop-loss) order, stop-limit order); 

spread order; combination order; straddle order; not 

held order; one-cancels-the-other order; all-or-none 

order; fill-or-kill order; immediate-or-cancel order; 

opening rotation order; facilitation order; ratio 

order; attributable order; intermarket sweep order; 

AIM sweep order; sweep and AIM order; CBOEonly order; and reserve order. 6 15 U.S.C. 78f(b)(5). 

7The Exchange has fulfilled the five day prefiling 

requirement. 

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

9 17 CFR 240.19b–4(f)(6). 

the Act 3 and Rule 19b–4(f)(6) 

thereunder.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is proposing to amend 

its rules to clarify the applicability of 

various order types on the Exchange. 

The text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/Legal), at the 

Exchange’s Office of the Secretary and 

at the Commission. 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to modify 

Rule 6.53, Certain Types of Orders 

Defined, to clarify that one or more of 

the various order types may be made 

available on a class-by-class basis.5 The 

proposed text would also clarify that 

certain order types may not be made 

available for all Exchange systems. The 

classes and/or systems for which the 

order types shall be available will be as 

provided in the Rules, as the context 

may indicate, or as otherwise specified 

via Regulatory Circular generally at least 

one day in advance. 

The proposed rule change provides 

additional clarity and consistency in our 

rules, which already provide in various 

places that the Exchange may designate 

the eligible order types on a class-byclass basis for various systems/ 

processes. For example, the proposed 

change is consistent with Rules 6.13A, 

Simple Auction Liaison (SAL), 6.14A, 

Hybrid Agency Liaison 2 (HAL2), and 

6.53C(d), Process for Complex Order 

RFR Auction (‘‘COA’’), which provide 

that the Exchange, among other things, 

shall designate the eligible order types 

and classes in which SAL, HAL2 or 

COA will be activated. As another 

example, Rule 6.53(o), Attributable 

Order, provides that attributable orders 

may not be available for all Exchange 

systems and the Exchange will issue a 

Regulatory Circular specifying the 

systems for which the attributable order 

type shall be available. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 6 that an exchange 

have rules that are designed to promote 

just and equitable principles of trade, 

and to remove impediments to and 

perfect the mechanism for a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. In 

particular, the Exchange believes the 

proposed change would provide more 

clarity on the applicability of eligible 

order types in a manner that is 

consistent with other provisions in the 

existing CBOE rules. 

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 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 

The Exchange neither solicited nor 

received comments on the proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing rule does not (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, provided that the selfregulatory organization has given the 

Commission written notice of its intent 

to file the proposed rule change at least 

five business days prior to the date of 

filing of the proposed rule change or 

such shorter time as designated by the 

Commission,7 the proposed rule change 

has become effective pursuant to 

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

19b–4(f)(6) thereunder.9 At any time 

within 60 days of the filing of such 

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–2010–049 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–2010–049. 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 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 32525 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 61938 

(Apr. 19, 2010), 75 FR 21686 (Apr. 26, 2010). 

4See letters from Michael T. Nommensen, dated 

May 14, 2010; William A Jacobson, Esq., Associate 

Clinical Professor of Law, Cornell Law School, and 

Director, Cornell Securities Law Clinic, and Lennie 

Sliwinski, Cornell Law School class of 2011, dated 

May 15, 2010; and Scott R. Shewan, President, 

Public Investors Arbitration Bar Association 

(‘‘PIABA’’), dated May 17, 2010. 

5Expedited actions allow FINRA to address 

certain types of misconduct quicker than would be 

possible using the ordinary disciplinary process. In 

general, expedited actions are designed to 

encourage respondents to comply with the law or 

take corrective action rather than sanction them for 

past misconduct. Moreover, as discussed in detail 

below, the Act uses a different standard of review 

for expedited actions than it does for disciplinary 

cases. 

6FINRA Rule 10330(h). 

7 In its order approving changes to the 

predecessor to Rule 9554, the SEC noted that the 

issues raised in cases in which at least one of the 

aforementioned defenses is raised are narrow and 

generally limited to determining whether the 

respondent has proven any of these four defenses 

or an inability-to-pay the award. See Securities 

Exchange Act Release No. 40026 (May 26, 1998), 63 

FR 30789 (June 5, 1998). 

8See 4 Collier on Bankruptcy, ¶¶ 521.01, 521.09 

(15th ed. 2009). 

9See 18 U.S.C. 151–58 (2010). Bankruptcy fraud 

is punishable by a fine, or by up to five years in 

prison, or both. Id. 

10The ability to legally discharge debts, the more 

thorough and accurate verification of a bankruptcy 

Continued 

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 pm. Copies of such filing also 

will be available for inspection and 

copying at the principal office of the 

CBOE. 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–CBOE–2010–049 and 

should be submitted on or before June 

29, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13663 Filed 6–7–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62211; File No. SR–FINRA– 

2010–014] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change Relating to 

FINRA Rule 9554 To Eliminate 

Explicitly the Inability-To-Pay Defense 

in the Expedited Proceedings Context 

June 2, 2010. 

On March 31, 2010, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

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

Rule 19b–4 thereunder,2 a proposed rule 

change to FINRA Rule 9554 to eliminate 

explicitly the inability-to-pay defense in 

the expedited proceedings context. The 

proposed rule change was published for 

comment in the Federal Register on 

April 26, 2010.3 The Commission 

received three comments, all of which 

supported the proposed rule change.4

This order approves the proposed rule 

change. 

I. Description of the Proposed Rule 

Change 

FINRA proposed to amend FINRA 

Rule 9554 to eliminate explicitly the 

inability-to-pay defense in the expedited 

proceedings context when a member or 

associated person fails to pay an 

arbitration award to a customer. 

FINRA Rule 9554 allows FINRA to 

bring expedited actions to address 

failures to pay FINRA arbitration 

awards.5 Once a monetary award has 

been issued in a FINRA arbitration 

proceeding, the party that must pay the 

award has thirty days to do so.6 If the 

party that must pay the award is a 

respondent, (i.e., a member or an 

associated person, FINRA coordinates 

between FINRA Dispute Resolution’s 

arbitration forum and FINRA’s 

enforcement program to verify whether 

such respondent has done so. If the 

respondent has not paid, FINRA 

initiates an expedited proceeding by 

sending a notice explaining that the 

respondent will be suspended unless 

the respondent pays the award or 

requests a hearing. 

A respondent that requests a hearing 

may raise a number of defenses to the 

suspension. One of the current defenses 

is establishing a bona fide inability-topay. When a respondent successfully 

demonstrates a bona fide inability-topay, it is a complete defense to the 

suspension. Consequently, the inabilityto-pay defense currently precludes a 

harmed customer from obtaining 

payment of a valid arbitration award. 

FINRA’s expedited proceedings for 

failure to pay an arbitration award use 

the leverage of a potential suspension to 

help ensure that a member or an 

associated person promptly pays a valid 

arbitration award. However, if a 

respondent demonstrates a financial 

inability to pay the award—regardless of 

the reason—the leverage is removed. 

When FINRA’s efforts to suspend a 

respondent who has not paid an award 

have been defeated, a claimant is much 

less likely to be paid. FINRA believes 

that by eliminating the inability-to-pay 

defense, it will increase the probability 

of customers having their awards paid, 

or, at a minimum, it should prompt 

meaningful settlement discussions 

between claimants and respondents. 

The ability to work in the securities 

industry carries with it, among other 

things, an obligation to comply with the 

federal securities laws, FINRA rules, 

and orders imposed by the disciplinary 

and arbitration processes. Allowing 

members or their associated persons 

that fail to pay arbitration awards to 

remain in the securities industry 

presents regulatory risks and is unfair to 

harmed customers. 

Although FINRA proposes to 

eliminate the inability-to-pay defense, a 

respondent would still have available 

the following four defenses: 

• The member or person paid the 

award in full or fully complied with the 

settlement agreement; 

• The arbitration claimant has agreed 

to installment payments or has 

otherwise settled the matter; 

• The member or person has filed a 

timely motion to vacate or modify the 

arbitration award and such motion has 

not been denied; and 

• The member or person has filed a 

petition in bankruptcy and the 

bankruptcy proceeding is pending or the 

award or payment owed under the 

settlement agreement has been 

discharged by the bankruptcy court.7

Regarding the last defense, FINRA 

believes that a federal bankruptcy court 

is the best forum for adjudicating a 

financial condition defense. Bankruptcy 

judges are experts in evaluating whether 

a debtor’s obligations should be legally 

discharged. The bankruptcy process and 

associated filings are designed to 

consider fully and evaluate the financial 

condition of bankruptcy debtors.8 In 

addition, bankruptcy filings, which are 

subject to federal perjury charges, 

provide greater penalties for hiding 

assets.9 FINRA’s lack of subpoena 

power over banks and other third 

parties raises practical concerns 

regarding its ability to confirm 

accurately the assets of the firm or 

person asserting the defense.10


emcdonald on DSK2BSOYB1PROD with NOTICES