Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Notices 7339 

5 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. 57010 

(December 20, 2007); 72 FR 73928 (Dec. 28, 2007). 

4See letter from Neal E. Nakagiri, President, CEO 

& CCO, NPB Financial Group, LLC, dated January 

16, 2008 (‘‘NPB letter’’); letter from Dale E. Brown, 

President & CEO, Financial Services Institute, dated 

January 18, 2008 (‘‘FSI letter’’); and letter from 

Dorothy Donohue, Senior Associate Counsel, 

Investment Company Institute, dated January 18, 

2008 (‘‘ICI letter’’). 

5NASD established the Small Firms Rules Impact 

Task Force in September 2006 to examine how 

existing NASD rules impact smaller firms. In 

particular, the Task Force focuses on possible 

opportunities to amend or modernize certain 

conduct rules that may be particularly burdensome 

for small firms, where such changes are consistent 

with investor protection and market integrity. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve 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 

rule-comments@sec.gov. Please include 

File Number SR–CBOE–2008–09 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2008–09. 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 at (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 the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2008–09 and should 

be submitted on or before February 28, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2266 Filed 2–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57257; File No. SR–FINRA–

2007–020] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Create 

Exception to Principal Approval 

Requirements for Certain Filed Sales 

Material 

February 1, 2008. 

I. Introduction 

On November 1, 2007, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. (‘‘NASD’’)) 

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 relating to amendments to NASD 

Rule 2210. The proposed rule change 

was published for comment in the 

Federal Register on December 28, 

2007.3 The Commission received three 

comment letters in response to the 

proposed rule change.4 This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

The proposed rule change amends 

NASD Rule 2210 (Communications with 

the Public) to create an exception from 

the principal approval requirements for 

certain filed sales material. 

NASD Rule 2210 (Communications 

with the Public) requires that a 

registered principal of a FINRA member 

firm approve in writing all 

advertisements, sales literature, and 

independently prepared reprints 

(collectively, ‘‘sales material’’) prior to 

use. Certain types of sales materials, 

such as advertisements and sales 

literature concerning mutual funds or 

variable insurance products must be 

filed with the FINRA Advertising 

Regulation Department (‘‘Department’’). 

For funds and variable products that 

are sold through intermediary firms, a 

registered principal at the fund’s or 

variable product’s underwriter typically 

approves sales material internally and 

files the material with the Department. 

FINRA rules require registered 

principals at each of the intermediary 

firms that use the underwriter’s sales 

material to re-approve in writing each of 

these items used by their firms. (The 

intermediary firm is not required to refile the sales material with the 

Department so long as it is used without 

material change.) If firms have selling 

agreements with multiple fund families 

and insurance companies, the number 

of items that require re-approval can 

easily be in the hundreds, and often 

thousands, per firm annually. 

Based on recommendations made by 

its Small Firms Rules Impact Task 

Force,5 and to eliminate what FINRA 

regards as a compliance redundancy, 

FINRA proposed to create an exception 

to Rule 2210’s registered principal 

approval requirements for intermediary 

firms that use the sales material of 

another firm. The exception would 

apply only to sales material that another 

firm has filed with the Department, and 

for which the Department has issued a 


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7340 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Notices 

6The proposed rule change would not affect the 

contractual obligations that exist between 

underwriters and intermediary firms. Some dealer 

agreements may, for example, restrict the ability of 

underwriters and product wholesalers to send their 

sales material directly to a retail firm’s sales force. 

These restrictions can facilitate the intermediary 

firm’s ability to supervise its sales force. The 

proposed rule change would not alter the 

underwriter’s obligations to comply with these 

contractual restrictions. 

7Supra note 4. 

8FSI letter; NPB letter. 

9 ICI letter. 

10FSI letter; ICI letter. 

11NPB letter. 

12 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition and capital formation. See 

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

13 15 U.S.C. 78o–3(b)(6). 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On July 26, 2007, the Commission approved a 

proposed rule change filed by NASD to amend 

NASD’s Certificate of Incorporation to reflect its 

name change to the Financial Industry Regulatory 

Authority, Inc., or FINRA, in connection with the 

consolidation of the member firm regulatory 

functions of NASD and NYSE Regulation, Inc. See 

Securities Exchange Act Release No. 56145 (July 26, 

2007), 72 FR 42169 (August 1, 2007). 

review letter finding that the material 

appears to be consistent with applicable 

standards. 

The intermediary firm that relies on 

this exception could not materially alter 

the sales material or use it in a manner 

that is inconsistent with any conditions 

stated in the Department’s review letter. 

For example, if the Department’s review 

letter was based in part upon the 

representation by the filing firm that the 

sales material would be accompanied by 

a fund prospectus, the intermediary firm 

would be subject to a similar constraint. 

Although FINRA anticipates that 

firms will utilize the exception 

primarily with respect to mutual fund 

and variable insurance product sales 

material, the exception is not limited to 

sales material for particular products. 

Thus, the exception also would apply to 

sales material for other products, such 

as real estate investment trusts or direct 

participation programs, provided the 

sales material meets the exception’s 

requirements. 

FINRA believes this exception would 

save intermediary firms’ compliance 

personnel numerous hours that are 

currently spent reviewing sales material 

that has already been approved by a 

registered principal at the product 

underwriter, and that the Department 

staff also has reviewed and found to be 

consistent with applicable standards. Of 

course, some firms may want to 

continue to review this sales material, 

and the proposal would allow them to 

do so.6

The proposed rule change would also 

revise certain of the advertising recordkeeping requirements. Today, Rule 

2210(b)(2)(A) states that firms must 

maintain a copy of all sales material for 

a period of three years from the date of 

last use. Existing practice has been to 

assume that the recordkeeping 

requirement begins on the date of first 

use. The proposal would codify this 

position. For sales material subject to 

the principal approval exception, firms 

would have to keep a record of the name 

of the firm that filed the sales material 

and a copy of the related FINRA review 

letter. 

III. Comment Letters 

The Commission received three 

comment letters in response to the 

proposed rule change.7 All of the 

commenters supported the proposed 

rule change. Two commenters stated 

that the proposed rule change would 

eliminate hours of unnecessary work.8

One commenter expressed support for 

the proposal, stating it would be a less 

burdensome alternative for intermediary 

firms.9 Moreover, two commenters 

indicated that the proposed rule change 

should not compromise investor 

protection.10 Similarly, one commenter 

opined that the existing requirement 

serves no useful or beneficial purpose, 

in terms of additional investor 

protection concerns.11

IV. Discussion and Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act, and the rules and regulations 

thereunder that are applicable to a 

national securities association. 12 In 

particular, the Commission believes that 

the proposed rule change is consistent 

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

of the Act,13 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. The 

Commission believes that eliminating 

the requirement for firms to re-approve 

sales material in limited circumstances 

when a registered principal of a firm has 

previously approved the sales material 

and the Department has previously 

supplied a favorable review letter will 

eliminate a compliance redundancy 

while maintaining investor protections. 

Notably, the initial firm creating all 

sales material subject to this exception 

will continue to be required to obtain 

sales material approval from its 

registered principal, file the sales 

material for review with the 

Department, and obtain a favorable 

review letter from the Department. 

V. Conclusions 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–FINRA–

2007–020) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2161 Filed 2–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57259; File No. SR–FINRA–

2008–001] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Amendments to FINRA’s Gross Income 

Assessment and Technical Changes to 

Schedule A to FINRA’s By-Laws 

February 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 January 

10, 2008, the 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 

substantially prepared by FINRA.3 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 

Schedule A to the FINRA By-Laws to 

amend the Gross Income Assessment 

(‘‘GIA’’) paid by each FINRA member 

and to update the references to NASD 

that appear in Schedule A to the FINRA 

By-Laws. The text of the proposed rule 

change is available at NASD, the 

Commission’s Public Reference Room, 

and http://www.finra.org. 


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