46664 Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of two sets 

of rules: (1) NASD Rules and (2) rules incorporated 

from NYSE (‘‘Incorporated NYSE Rules’’) (together 

referred to as the ‘‘Transitional Rulebook’’). The 

Incorporated NYSE Rules (hereinafter, ‘‘NYSE 

Rules’’) apply only to those members of FINRA that 

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

Dual Members also must comply with NASD Rules. 

For more information about the rulebook 

consolidation process, see FINRA Information 

Notice, March 12, 2008 (Rulebook Consolidation 

Process). 

(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–2008–043 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2008–043. This file 

number should be included on the 

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

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room, on official business days between 

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

of the filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA–

2008–043 and should be submitted on 

or before September 2, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18384 Filed 8–8–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58308; File No. SR–FINRA–

2008–027] 

Self-Regulatory Organizations: 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to the 

Adoption of FINRA Rule 3220 

(Influencing or Rewarding Employees 

of Others) and FINRA Rule 2070 

(Transactions Involving FINRA 

Employees) in the Consolidated FINRA 

Rulebook 

August 5, 2008. 

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 July 18, 

2008, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

substantially 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 transfer 

without material change NASD Rules 

3060 (Influencing or Rewarding 

Employees of Others) and 3090 

(Transactions Involving Association and 

American Stock Exchange Employees) 

into the new consolidated FINRA 

rulebook (‘‘Consolidated FINRA 

Rulebook’’) 3 and to delete the 

corresponding provisions in NYSE 

Rules 350, 350.10, 407(a), 407.10 and 

NYSE Rule Interpretations 350/01 

through 350/03. The proposed rule 

change would renumber NASD Rule 

3060 as FINRA Rule 3220 and NASD 

Rule 3090 as FINRA Rule 2070 in the 

Consolidated FINRA Rulebook, and 

would delete NASD Rules 3060 and 

3090 in their entirety from the 

Transitional Rulebook. The text of the 

proposed rule change is available at 

FINRA, the Commission’s Public 

Reference Room, and http:// 

www.finra.org. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

(1) Purpose 

As part of the process of developing 

the Consolidated FINRA Rulebook, 

FINRA is proposing to transfer without 

material change NASD Rules 3060 

(Influencing or Rewarding Employees of 

Others) and 3090 (Transactions 

Involving Association and American 

Stock Exchange Employees) into the 

Consolidated FINRA Rulebook and to 

delete the corresponding provisions in 

Incorporated NYSE Rules 350, 350.10, 

407(a), 407.10 and NYSE Rule 

Interpretations 350/01 through 350/03. 

The proposed rule change would 

renumber NASD Rule 3060 as FINRA 

Rule 3220 and NASD Rule 3090 as 

FINRA Rule 2070 in the Consolidated 

FINRA Rulebook, and would delete 

NASD Rules 3060 and 3090 in their 

entirety from the Transitional Rulebook. 

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval. 

(A) Proposed FINRA Rule 3220 

(1) Background 

NASD Rule 3060 (Influencing or 

Rewarding Employees of Others) 

currently states that no member or 


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Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices 46665 

4See NASD Notice to Members 93–8 (February 

1993) (SEC Approval of Amendment Relating to the 

Payment of Gratuities or Anything of Value by 

Members to Others); see also Securities Exchange 

Act Release No. 21074 (June 20, 1984), 49 FR 26330 

(June 27, 1984) (SR–NASD–84–8) (approval order). 

5 In addition, NYSE Rule 350(a)(1) prohibits any 

member from employing or compensating any 

person for services rendered except with the prior 

consent of that person’s employer. FINRA proposes 

to delete this provision, even though it does not 

pertain to gifts, because a substantively identical 

provision exists in NYSE Rule 346(b). FINRA 

intends to review NYSE Rule 346(b) as part of a 

later phase of the rulebook consolidation process. 

6See NASD Notice to Members 06–69 (December 

2006) (Gifts and Gratuities). 

7See Interpretive Letter dated December 17, 2007 

to Amal Aly, SIFMA from Gary L. Goldsholle, 

FINRA, available at: <http://www.finra.org/ 

RulesRegulation/ PublicationsGuidance/ 

InterpretiveLetters/ConductRules/P037695>. 

8NYSE Rule Interpretation 350/02 would be 

deleted in its entirety. Note that NYSE Rule 350 

also contains provisions that address gifts and 

gratuities to employees of the NYSE. These 

provisions are addressed in connection with 

FINRA’s proposal to adopt FINRA Rule 2070. See 

Section (B) under Item II.A.1. FINRA’s proposals 

with respect to FINRA Rules 3220 and 2070 would, 

in combination, delete NYSE Rule 350 in its 

entirety. 

9NYSE Rule 350.10 also contains provisions that 

address employment or compensation of NYSE 

employees by members or member organizations. 

These provisions are addressed in connection with 

FINRA’s proposal to adopt FINRA Rule 2070. See 

Section (B) under Item II.A.1. Because Proposed 

FINRA Rules 3220 and 2070 would address the 

substance of NYSE Rule 350.10, FINRA proposes to 

delete NYSE Rule 350.10 in its entirety. 

10See Securities Exchange Act Release No. 55765 

(May 15, 2007), 72 FR 28743 (May 22, 2007) (Notice 

of Filing of Proposed Rule Change; File No. SR–

NASD–2006–044); see also Amendment No. 3 to 

File No. SR–NASD–2006–044 (January 2, 2008). 

associated person shall give gifts or 

gratuities to an agent or employee of 

another person in excess of $100 per 

year where the gift or gratuity is in 

relation to the business of the employer 

of the recipient. The rule, which 

protects against improprieties that may 

arise when members or their associated 

persons give gifts or gratuities to 

employees of a customer, has been in 

effect in its current form since 1969, 

with changes only to the dollar 

amounts, rising from $25 to $50 to 

$100.4 The rule requires each member to 

maintain a separate record of all gifts or 

gratuities. The rule also contains an 

express exclusion for payments made 

pursuant to bona fide, written 

employment contracts. 

NYSE Rule 350 (Compensation or 

Gratuities to Employees of Others) 

reaches similar conduct in prohibiting, 

absent prior written consent of the 

recipient’s employer, any member or 

member organization from giving any 

gratuity in excess of $100 per person per 

year to any principal, officer, or 

employee of another member or member 

organization, financial institution, news 

or financial information media, or nonmember broker or dealer in securities, 

commodities or money instruments.5

NYSE Rule 350 has specific provisions 

addressing compensation to operations 

employees of members (e.g., NYSE Floor 

personnel). In addition, NYSE Rule 350 

requires that records of all such 

gratuities and compensation be retained 

for at least three years. 

(2) Proposal 

FINRA proposes that NASD Rule 3060 

be transferred into the Consolidated 

FINRA Rulebook without material 

change and renumbered as FINRA Rule 

3220. One of the advantages of the 

existing regulatory standard is the 

clarity of the rule’s application—it 

prevents gifts in excess of a fixed 

amount, currently $100. Both the NASD 

and NYSE rules have a $100 limitation 

on gifts. 

FINRA believes that NASD Rule 3060 

generally is well understood by 

members. FINRA recently issued 

additional guidance on NASD Rule 3060 

in Notice to Members 06–69.6 Among 

the issues addressed in that Notice was 

the fact that NASD Rule 3060 does not 

apply to gifts of de minimis value, or to 

promotional items of nominal value 

displaying a firm’s logo. The Notice 

stated that NASD Rule 3060 does not 

prohibit customary Lucite tombstones, 

plaques or other similar solely 

decorative items commemorating a 

business transaction or event. The 

Notice also stated that gifts should be 

valued at the higher of cost or market 

value and tickets should be valued at 

the higher of cost or face value. In 

addition, FINRA staff has used its 

interpretive authority to address 

unintended consequences of the rule, 

such as unreasonable limitations on 

giving a bereavement or sympathy gift.7

FINRA would eliminate the provision 

in NYSE Rule 350 permitting member 

firms to obtain prior written consent of 

the recipient’s employer for any gift 

over $100. FINRA believes that the gift 

rule should establish a fixed amount 

and does not see any business need to 

justify giving gifts in amounts greater 

than the limits specified in the rule. 

FINRA also would delete the provisions 

in NYSE Rule 350 and NYSE Rule 

Interpretation 350/02 addressing 

compensation to operations/Floor 

employees of NYSE as they are not 

relevant for FINRA.8 For similar 

reasons, provisions in NYSE Rule 

350.10 pertaining to employment of or 

gratuities to personnel working the 

Floor of other exchanges would be 

deleted.9 Finally, FINRA would 

eliminate the provisions of NYSE Rule 

350 relating to record retention, as 

NASD Rule 3060(c) addresses the same 

issue. 

FINRA would eliminate NYSE Rule 

Interpretation 350/01, and provisions in 

NYSE Rule 350.10 pertaining to gifts 

among close relatives, because the 

concepts contained in both are 

adequately addressed by proposed 

FINRA Rule 3220 and existing guidance. 

Lastly, FINRA would eliminate NYSE 

Rule Interpretation 350/03 because 

FINRA has proposed a separate rule that 

addresses business entertainment.10

(B) Proposed FINRA Rule 2070 

(1) Background 

Both NASD and NYSE rules address 

conflicts of interest involving FINRA 

and NYSE employees. 

NASD Rule 3090 addresses this issue 

in three ways. First, NASD Rule 3090(a) 

requires a member, when it has actual 

notice that an NASD employee has a 

financial interest or controls trading in 

an account, to promptly obtain and 

implement an instruction from the 

employee directing that duplicate 

account statements be provided by the 

member to NASD. Second, NASD Rule 

3090(b) prohibits a member from 

making any loan of money or securities 

to an NASD employee. This prohibition 

does not apply to loans made in the 

context of disclosed, routine banking 

and brokerage agreements, or loans that 

are clearly motivated by a personal or 

family relationship. Third, NASD Rule 

3090(c) prohibits any member from 

directly or indirectly giving, or 

permitting to be given, anything of more 

than nominal value to any NASD 

employee who has responsibility for a 

regulatory matter involving the member. 

This applies regardless of the $100 per 

individual per year limitation set forth 

in NASD Rule 3060(a). The term 

‘‘regulatory matter’’ is defined to 

include, without limitation, 

examinations, disciplinary proceedings, 

membership applications, listing 

applications, delisting proceedings, and 

dispute-resolution proceedings that 

involve the member. 

The NYSE rules governing conflicts of 

interest involving NYSE employees 

differ from the NASD approach in two 

ways. First, rather than applying the 

duplicate statement approach to NYSE 

employees (which applies to NASD 

employees under NASD Rule 3090(a)), 

NYSE Rule 407(a) prohibits a member or 

member organization, without the prior 

written consent of the NYSE, from 

opening a securities or commodities 

account or executing any transaction in 

which an employee of the NYSE is 


rmajette on PRODPC74 with NOTICES
46666 Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices 

11NYSE Rule 407(a) requires duplicate 

confirmations and account statements with respect 

to accounts or transactions of members, allied 

members and employees associated with another 

member or member organization. 

12NYSE Rule 350.10 provides that requests for 

NYSE consent under Rule 350(a)(1) should be sent 

to the NYSE’s Human Resources Department at 

least 10 days in advance of the proposed date of 

employment. NYSE Rule 350.10 states that approval 

to employ an NYSE employee outside the hours of 

regular employment by the NYSE will be limited to 

employment of a routine or clerical nature. NYSE 

Rule 350.10 further states that when the NYSE has 

granted permission for part-time employment of a 

NYSE employee, no approval is required for a 

subsequent gratuity or bonus to such person 

provided it is in proportion to gratuities given to 

full-time employees of the employing organization. 

13The proposal includes stylistic edits to NASD 

Rule 3090 for purposes of clarity and readability. 

14With respect to NYSE Rule 407(a), the only 

change to the rule at this stage in the rulebook 

consolidation would be to delete language 

pertaining to employees of the NYSE. See Exhibit 

5. NYSE Rule 407.10 would be deleted in its 

entirety. With respect to NYSE Rules 350(a)(1), 

350(a)(2) and 350.10, see supra notes 8 and 9. 15 15 U.S.C. 78o–3(b)(6). 

directly or indirectly interested.11 NYSE 

Rule 401.10 states that an employee of 

the NYSE or any of its affiliated 

companies who wishes to open a 

securities or commodities account 

should apply for permission from the 

NYSE’s Ethics Officer. Second, the 

NYSE Rules differ from the nominal 

value approach set forth in NASD Rule 

3090(c) by instead setting procedures for 

outside compensation and placing a 

dollar limit on gifts. Specifically, with 

respect to outside compensation, NYSE 

Rule 350(a)(1) prohibits any member, 

allied member, member organization or 

employee thereof from employing or 

compensating any person for services 

rendered without the prior consent of 

the person’s employer (i.e., the NYSE 

with respect to NYSE employees).12

With respect to gifts, NYSE Rule 

350(a)(2) prohibits giving any gift or 

gratuity in excess of $50 per person per 

year to any principal, officer, or 

employee of the NYSE or its 

subsidiaries without the prior written 

consent of the NYSE. This rule is 

written without regard to whether the 

NYSE employee has responsibility for 

regulatory matters affecting the member. 

(2) Proposal 

FINRA proposes that NASD Rule 3090 

be transferred into the Consolidated 

FINRA Rulebook without material 

change,13 renumbered as FINRA Rule 

2070 and that the corresponding 

provisions in NYSE Rules 350(a)(1), 

350(a)(2), 350.10, 407(a) and 407.10 be 

eliminated.14 Rather than requiring the 

member to obtain FINRA’s consent to 

open a securities or commodities 

account or execute a trade (as set forth 

under NYSE Rules 407(a) and 407.10), 

FINRA believes that it is sufficient, as 

set forth under NASD Rule 3090(a), to 

continue to require the member to 

obtain and implement an instruction 

from the FINRA employee directing the 

member to provide duplicate statements 

to FINRA. The proposed rule change 

would, as set forth in NASD Rule 

3090(b), continue to prohibit members 

from making any loan of money or 

securities to a FINRA employee, subject 

to the exceptions set forth in that rule. 

Lastly, the proposed rule change would, 

as set forth in NASD Rule 3090(c), 

continue to prohibit members from 

directly or indirectly giving, or 

permitting to be given, anything above 

nominal value to any FINRA employee 

who has responsibility for a ‘‘regulatory 

matter’’ involving the member. FINRA 

does not believe that its employees 

should be permitted to receive gifts of 

up to $50 per year when such 

employees have responsibility for a 

regulatory matter. In addition, FINRA 

proposes not to adopt the $50 limit in 

NYSE Rule 350(a)(2) for gifts to all other 

employees to maintain consistency with 

the FINRA Code of Conduct, which, like 

NASD Rule 3060(a) (and proposed 

FINRA Rule 3220(a)), establishes a $100 

limit. Rule 3090(c) need not be amended 

to address the employment and 

compensation issues as to NYSE 

employees in NYSE Rules 350(a)(1) and 

350.10 because the FINRA Code of 

Conduct addresses these issues through 

its provisions on Outside Activities or 

Employment. 

FINRA proposes to delete listing and 

delisting proceedings as potential 

‘‘regulatory matters’’ under NASD Rule 

3090(c) in light of FINRA’s separation 

from NASDAQ and The American Stock 

Exchange. 

(2) Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of section 15A(b)(6) of the Act,15 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 further the 

purposes of the Act because, as part of 

the FINRA rulebook consolidation 

process, the proposed rule change 

would streamline and reorganize 

existing rules that govern influencing or 

rewarding the employees of others and 

transactions involving FINRA 

employees. Further, the proposed rule 

change would provide greater regulatory 

clarity with respect to these issues. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change would 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–2008–027 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2008–027. 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/ 


rmajette on PRODPC74 with NOTICES
Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices 46667 

16 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)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5See Letter to Richard Holley, Division of Market 

Regulation, Securities and Exchange Commission 

from Nyieri Nazarian, Assistant General Counsel, 

American Stock Exchange, October 29, 2007. 

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

7 15 U.S.C. 78f(b)(5). 

8 17 CFR 240.19d–1(c)(2). 

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–2008–027 and 

should be submitted on or before 

September 2, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18460 Filed 8–8–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58289; File No. SR–ISE–

2008–62] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Exchange Rules 

Related to the Imposition of Fines for 

Minor Rule Violations 

August 1, 2008. 

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 July 30, 

2008, the International Securities 

Exchange, LLC (‘‘ISE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

a ‘‘non-controversial’’ proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 

thereunder,4 which renders the proposal 

effective upon filing with the 

Commission. 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 ISE proposes to amend Rule 

1614—Imposition of Fines for Minor 

Rule Violations to increase the summary 

fines for violations of Rule 412—

Position Limits. The text of the 

proposed rule change is available at ISE, 

http://www.ise.com, and 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, the 

Exchange 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. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to increase 

and strengthen the sanctions imposed 

pursuant to its Minor Rule Violation 

Plan (‘‘MRVP’’) in connection with any 

member or customer who exceeds the 

Exchange’s position limits in 

accordance with Exchange Rule 412. 

The Exchange believes that increasing 

the fine levels specified, consolidating 

individual members, member 

organizations, and customers into one 

category, and lengthening the 

surveillance period from a 12-month 

period to a rolling 24-month period will 

serve as an effective deterrent to such 

violative conduct. In addition, the 

Exchange, as a member of the 

Intermarket Surveillance Group (‘‘ISG’’), 

as well as certain other self-regulatory 

organizations (‘‘SROs’’) on October 29, 

2007 executed and filed with the 

Commission a final version of an 

Agreement pursuant to Section 17(d) of 

the Act (the ‘‘17d–2 Agreement’’).5 The 

members of the ISG intend to enter into 

an amendment to the 17d–2 Agreement 

in the near future concerning the 

surveillance and sanctions of position 

limit violations. As such, the SROs have 

agreed that their respective rules 

concerning position limits regarding 

options contracts are common rules. As 

a result, the proposal to amend the 

Exchange’s MRVP will further result in 

consistency in sanctions among the 

SROs that are signatories to the 17d–2 

Agreement and the forthcoming 

amendment concerning position limit 

violations. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the requirement under Section 6(b) of 

the Act,6 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,7

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and to 

protect investors and the public interest 

in that it is designed to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, 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. 

Additionally, this proposed rule change 

will promote consistency in minor rule 

violations and respective SRO reporting 

obligations as set forth pursuant to 

Section 240.19d–1(c)(2) of the Act.8

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change will not 

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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any written 


rmajette on PRODPC74 with NOTICES