54646 Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices 

4 Deloitte and Touche LLP, Grant Thornton LLP, 

and PricewaterhouseCoopers LLP. 

5One commenter also noted that the adoption of 

Auditing Standard No. 6 would cause existing 

published PCAOB Staff Questions and Answers to 

require updating. The Commission encourages the 

PCAOB to ensure that its guidance is up to date 

with its current standards and presumes the PCAOB 

will update these Questions and Answers once 

these amendments are approved. 

1 15 U.S.C. 78q(d). 

2 17 CFR 240.17d–2. 

3See Securities Exchange Act Release No. 58350 

(August 13, 2008), 73 FR 48248 (File No. 4–566) 

(‘‘Notice’’). 

4 15 U.S.C. 78s(g)(1). 

5 15 U.S.C. 78q(d). 

6 15 U.S.C. 78s(g)(2). 

7 15 U.S.C. 78q(d)(1). 

8See Securities Act Amendments of 1975, Report 

of the Senate Committee on Banking, Housing, and 

Urban Affairs to Accompany S. 249, S. Rep. No. 94– 

75, 94th Cong., 1st Session 32 (1975). 

interim standards are intended to 

update and clarify the auditing 

standards in light of SFAS No. 154 and 

SFAS No. 162. In particular, these 

updates and clarifications are intended 

to enhance the clarity of auditor 

reporting on accounting changes and 

corrections of misstatements by 

distinguishing between these events. 

III. Discussion 

The Commission received three 

comment letters in response to its 

request for comments on Auditing 

Standard No. 6 and conforming 

amendments. The comment letters came 

from three registered public accounting 

firms.4 All three commenters expressed 

support for the Commission’s approval 

of the proposed standard. 

As noted above, the PCAOB’s 

proposed amendment to AU section 431 

deletes a reference to Rule 301 of the 

AICPA’s Code of Professional 

Conduct—a rule the PCAOB did not 

adopt as part of its original interim 

standards. Similar to comments made to 

the PCAOB during its comment period, 

one commenter believed concerns exist 

that the Board’s action in removing a 

reference to a rule the PCAOB did not 

adopt might be construed as minimizing 

the auditor’s responsibilities for 

maintaining the confidentiality of client 

information. The commenter requested 

that the Commission encourage the 

PCAOB to adopt a rule establishing the 

auditor’s responsibility with respect to 

maintaining the confidentiality of client 

information. 

In its adopting release, the PCAOB 

discussed the concerns the comments 

raised about client confidentiality and 

noted its awareness of many auditors’ 

legal or professional obligations to 

maintain the confidentiality of client 

information, and made reference to the 

confidentiality requirements included 

in the provisions of the Uniform 

Accountancy Act and the provisions of 

the International Federation of 

Accountants’ Code of Ethics for 

Professional Accountants. The PCAOB 

also noted that its decision to omit Rule 

301 from its interim standards was 

based on a determination that 

incorporation of that rule was not 

necessary to fulfill the Board’s mandate 

under Section 103(a)(1) and (3) of the 

Act at that time, and that it did not 

reflect a decision that auditor 

confidentiality requirements imposed 

by other authorities were inappropriate. 

Similarly, in amending AU section 431, 

the PCAOB noted that it seeks neither 

to modify nor detract from existing 

confidentiality requirements. 

The Commission agrees with the 

Board’s proposed action to remove from 

its interim standards a reference to a 

rule it did not adopt. However, the 

Commission encourages the PCAOB to 

develop and adopt a rule addressing the 

auditor’s responsibility with respect to 

maintaining the confidentiality of client 

information.5

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that proposed 

Auditing Standard No. 6 and the 

Conforming Amendments are consistent 

with the requirements of the Act and the 

securities laws and are necessary and 

appropriate in the public interest and 

for the protection of investors. 

It is therefore ordered, pursuant to 

Section 107 of the Act and Section 

19(b)(2) of the Exchange Act, that 

proposed Auditing Standard No. 6, 

Evaluating Consistency of Financial 

Statements, and Conforming 

Amendments (File No. PCAOB–2008– 

01) be and hereby are approved. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22015 Filed 9–19–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58536; File No. 4–566] 

Program for Allocation of Regulatory 

Responsibilities Pursuant to Rule 17d– 

2; Order Approving and Declaring 

Effective a Plan for the Allocation of 

Regulatory Responsibilities Among the 

American Stock Exchange LLC, 

Boston Stock Exchange, Inc., CBOE 

Stock Exchange, LLC, Chicago Stock 

Exchange, Inc., Financial Industry 

Regulatory Authority, Inc., 

International Securities Exchange, 

LLC, The NASDAQ Stock Market LLC, 

National Stock Exchange, Inc., New 

York Stock Exchange, LLC, NYSE Arca 

Inc., NYSE Regulation, Inc., and 

Philadelphia Stock Exchange, Inc. 

September 12, 2008. 

On August 12, 2008, the American 

Stock Exchange LLC (‘‘Amex’’), Boston 

Stock Exchange, Inc. (‘‘BSE’’), CBOE 

Stock Exchange, LLC (‘‘CBOE’’), Chicago 

Stock Exchange, Inc. (‘‘CHX’’), Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’), International Securities 

Exchange, LLC (‘‘ISE’’), The NASDAQ 

Stock Market, LLC (‘‘NASDAQ’’), 

National Stock Exchange, Inc. (‘‘NSX’’), 

New York Stock Exchange LLC 

(‘‘NYSE’’), NYSE Arca Inc. (‘‘NYSE 

Arca’’), NYSE Regulation, Inc. (acting 

under authority delegated to it by 

NYSE) (‘‘NYSE Regulation’’), and 

Philadelphia Stock Exchange, Inc. 

(‘‘Phlx’’) (collectively, ‘‘Participating 

Organizations’’ or ‘‘Parties’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 17(d) of the Securities 

Exchange Act of 1934 (‘‘Act’’),1 and 

Rule 17d–2 thereunder,2 a proposed 

plan for the allocation of regulatory 

responsibilities (‘‘Plan’’). The Plan was 

published for comment on August 18, 

2008.3 The Commission received no 

comments on the Plan. This order 

approves and declares effective the 

Plan. 

I. Introduction 

Section 19(g)(1) of the Act,4 among 

other things, requires every selfregulatory organization (‘‘SRO’’) 

registered as either a national securities 

exchange or national securities 

association to examine for, and enforce 

compliance by, its members and persons 

associated with its members with the 

Act, the rules and regulations 

thereunder, and the SRO’s own rules, 

unless the SRO is relieved of this 

responsibility pursuant to Section 

17(d) 5 or Section 19(g)(2) 6 of the Act. 

Section 17(d)(1) of the Act 7 was 

intended, in part, to eliminate 

unnecessary multiple examinations and 

regulatory duplication for those brokerdealers that maintain memberships in 

more than one SRO (‘‘common 

members’’).8 With respect to a common 

member, Section 17(d)(1) authorizes the 

Commission, by rule or order, to relieve 

an SRO of the responsibility to receive 

regulatory reports, to examine for and 

enforce compliance with applicable 

statutes, rules, and regulations, or to 


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Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices 54647 

9 17 CFR 240.17d–1 and 17 CFR 240.17d–2, 

respectively. 

10See Securities Exchange Act Release No. 12352 

(April 20, 1976), 41 FR 18808 (May 7, 1976). 

11See Securities Exchange Act Release No. 12935 

(October 28, 1976), 41 FR 49091 (November 8, 

1976). 

12Common NYSE Members include members of 

the NYSE and at least one of the Participating 

Organizations. 13Common FINRA Members are members of 

FINRA and at least one of the Participating 

Organizations. 14Common Rules are defined as: (i) Federal 

securities laws and rules promulgated by the 

Commission pertaining to insider trading, and (ii) 

the rules of the Participating Organizations that are 

related to insider trading. See Exhibit A to the Plan. 

15 15 U.S.C. 78q(d). 

16 17 CFR 240.17d–2. 

perform other specified regulatory 

functions. 

To implement Section 17(d)(1), the 

Commission adopted two rules: Rule 

17d–1 and Rule 17d–2 under the Act.9

Rule 17d–1 authorizes the Commission 

to name a single SRO as the designated 

examining authority (‘‘DEA’’) to 

examine common members for 

compliance with the financial 

responsibility requirements imposed by 

the Act, or by Commission or SRO 

rules.10 When an SRO has been named 

as a common member’s DEA, all other 

SROs to which the common member 

belongs are relieved of the responsibility 

to examine the firm for compliance with 

the applicable financial responsibility 

rules. On its face, Rule 17d–1 deals only 

with an SRO’s obligations to enforce 

broker dealers’ compliance with 

financial responsibility requirements. 

Rule 17d–1 does not relieve an SRO 

from its obligation to examine a 

common member for compliance with 

its own rules and provisions of the 

federal securities laws governing 

matters other than financial 

responsibility, including sales practices 

and trading activities and practices. 

To address regulatory duplication in 

these and other areas, the Commission 

adopted Rule 17d–2 under the Act.11

Rule 17d–2 permits SROs to propose 

joint plans for the allocation of 

regulatory responsibilities with respect 

to their common members. Under 

paragraph (c) of Rule 17d–2, the 

Commission may declare such a plan 

effective if, after providing for notice 

and comment, it determines that the 

plan is necessary or appropriate in the 

public interest and for the protection of 

investors, to foster cooperation and 

coordination among the SROs, to 

remove impediments to, and foster the 

development of, a national market 

system and a national clearance and 

settlement system, and is in conformity 

with the factors set forth in Section 

17(d) of the Act. Commission approval 

of a plan filed pursuant to Rule 17d–2 

relieves an SRO of those regulatory 

responsibilities allocated by the plan to 

another SRO. 

II. The Plan 

The proposed Plan is designed to 

eliminate regulatory duplication by 

allocating regulatory responsibility over 

Common NYSE Members 12 or Common 

FINRA Members,13 as applicable, 

(collectively, ‘‘Common Members’’) for 

the surveillance, investigation, and 

enforcement of common insider trading 

rules (‘‘Common Rules’’).14 The Plan 

assigns regulatory responsibility over 

Common NYSE Members to NYSE 

Regulation for surveillance, 

investigation, and enforcement of 

insider trading by broker-dealers, and 

their associated persons, with respect to 

NYSE-listed stocks and NYSE Arcalisted stocks, irrespective of the 

marketplace(s) maintained by the 

Participating Organizations on which 

the relevant trading may occur. The 

Plan assigns regulatory responsibility 

over Common FINRA Members to 

FINRA for surveillance, investigation, 

and enforcement of insider trading by 

broker-dealers, and their associated 

persons, with respect to NASDAQ-listed 

stocks and Amex-listed stocks, as well 

as any CHX solely-listed stock, 

irrespective of the marketplace(s) 

maintained by the Participating 

Organizations on which the relevant 

trading may occur. The full text of the 

Plan and Exhibits A, B, and C thereto 

can be found in the Notice. 

In addition to the Plan, the 

Participating Organizations have 

entered into two regulatory services 

agreements that address investigation 

and enforcement in situations that 

involve trading in equity securities by 

non-Common Members, as Rule 17d–2 

covers only situations involving 

Common Members. The first agreement 

is between NYSE Regulation (acting as 

the regulatory services provider), 

FINRA, and each of the exchanges 

(‘‘NYSE Regulation Agreement’’). The 

second agreement is between FINRA 

(acting as the regulatory services 

provider), NYSE Regulation, and each of 

the exchanges (‘‘FINRA Agreement’’). 

The agreements provide for the 

investigation and enforcement of 

suspected insider trading against brokerdealers and their associated persons that 

(i) are not Common Members of NYSE 

in the case of insider trading in NYSElisted stocks and NYSE–Arca listed 

stocks; or (ii) are not Common Members 

of FINRA in the case of insider trading 

in NASDAQ-listed stocks, Amex-listed 

stocks, and any CHX solely-listed stock. 

Under the agreements, NYSE 

Regulation and FINRA, respectively, 

will provide to the exchanges ‘‘Core 

Services’’ related and limited to the 

investigation and enforcement activities 

for non-Common Members where these 

activities relate to insider trading of 

equity securities listed on the NYSE or 

NYSE Arca in the case of the NYSE 

Regulation Agreement, and to the 

insider trading of equity securities listed 

on the Nasdaq or Amex, and any CHX 

solely-listed security in the case of the 

FINRA Agreement. The Core Services 

provided under the agreements are 

rendered (a) only upon completion of a 

surveillance review under the 17d–2 

Plan, and (b) at the request of the 

relevant exchange. Pursuant to the Plan, 

NYSE Regulation and FINRA will 

conduct surveillance, investigation, and 

enforcement for insider trading for 

Common NYSE Members and Common 

FINRA Members, respectively. 

Surveillance for non-Common Members 

is excluded from the Plan and remains 

the responsibility of the SROs in which 

such non-Common Members maintain 

membership. However, due to the 

nature of insider trading surveillance 

technology and processes, the 

surveillance conducted by NYSE 

Regulation and FINRA will encompass 

non-Common Members as the 

surveillance function does not 

differentiate between Common and nonCommon Members. Accordingly, the 

investigation and enforcement services 

performed under the agreements will 

arise from surveillance undertaken by 

NYSE Regulation and FINRA. 

III. Discussion 

The Commission finds that the 

proposed Plan is consistent with the 

factors set forth in Section 17(d) of the 

Act 15 and Rule 17d–2 thereunder 16 in 

that the proposed Plan is necessary or 

appropriate in the public interest and 

for the protection of investors, fosters 

cooperation and coordination among 

SROs, and removes impediments to and 

fosters the development of the national 

market system. In particular, the 

Commission believes that the proposed 

Plan should reduce unnecessary 

regulatory duplication by allocating 

regulatory responsibility for the 

surveillance, investigation, and 

enforcement of Common Rules over 

Common NYSE Members, with respect 

to NYSE-listed stocks and NYSE Arcalisted stocks, to NYSE and over 

Common FINRA Members, with respect 

to NASDAQ-listed stocks, Amex-listed 

stocks, and any CHX solely-listed stock, 


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54648 Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices 

17 17 CFR 240.17d–2(b). 

18Members only of the NYSE would be the 

responsibility of NYSE; members only of FINRA 

would be the responsibility of FINRA. 

19 15 U.S.C. 78q(d). 

20 17 CFR 200.30–3(a)(34). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 58324 

(August 7, 2008), 73 FR 46936 (August 12, 2008); 

Securities Exchange Act Release No. 57757 (May 1, 

2008), 73 FR 26159 (May 8, 2008) (SR–BSE–2008– 

23). 

to FINRA. Accordingly, the proposed 

Plan promotes efficiency by 

consolidating these regulatory functions 

in a single SRO based on the listing 

market for a stock, with regard to 

Common NYSE Members and Common 

FINRA Members. 

In addition, the Commission notes 

that the Plan provides that the costs for 

insider trading surveillance would be 

shared among the Participating 

Organizations based on their relative 

trade volume, subject to certain 

minimum payment amounts for smaller 

markets. Modifications to the fees 

assessed the Participating Organizations 

pursuant to the cost allocation 

methodologies established in the Plan 

do not require an amendment to the 

Plan; however, any modifications to the 

cost allocation methodologies would 

require approval by the Commission. 

The Commission believes that the Plan 

provides a reasonable method to 

allocate among the Parties expenses 

reasonably incurred by the SRO having 

regulatory responsibilities under the 

Plan.17

The Commission also notes that 

because under Rule 17d–2 regulatory 

responsibility may be allocated from 

one SRO to another SRO only for 

Common Members, the Participating 

Organizations have entered into two 

regulatory services agreements with 

NYSE Regulation and FINRA, 

respectively, to address investigation 

and enforcement of suspected insider 

trading involving members who are 

neither Common NYSE Members nor 

Common FINRA Members.18 The 

Commission is neither approving nor 

disapproving the terms of the regulatory 

services agreements. However, the 

Commission does note that under these 

regulatory services agreements the 

ultimate responsibility and primary 

liability for self-regulatory obligations 

would remain with each exchange and 

association, rather than the SRO 

retained to perform such functions. 

IV. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–566. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act,19 that the Plan 

in File No. 4–566 by and among Amex, 

BSE, CBOE, CHX, FINRA, ISE, 

NASDAQ, NSX, NYSE, NYSE Arca, 

NYSE Regulation, and Phlx filed 

pursuant to Rule 17d–2 is hereby 

approved and declared effective. 

It is further ordered that the 

Participating Organizations are relieved 

of those regulatory responsibilities 

allocated to NYSE and FINRA under the 

Plan in File No. 4–566. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22013 Filed 9–19–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58547; File No. SR–BSE– 

2008–45] 

Self-Regulatory Organizations; Boston 

Stock Exchange, Incorporated; Notice 

of Filing of Proposed Rule Change To 

Amend By-Laws 

September 15, 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 

September 5, 2008, the Boston Stock 

Exchange (the ‘‘Exchange’’) 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 prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

by-laws to make certain changes that the 

Exchange committed to make in SR– 

BSE–2008–23.3 The text of the proposed 

rule change is available from the 

principal office of the Exchange, at the 

Commission’s Public Reference Room, 

and is also available at http:// 

nasdaqtrader.com/Trader.aspx?id=

Boston_Stock_Exchange. 

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 

On August 29, 2008, the Exchange 

was acquired by The NASDAQ OMX 

Group, Inc. (‘‘NASDAQ OMX’’). In SR– 

BSE–2008–23, the Exchange’s filing 

seeking approval of this acquisition, the 

Exchange committed that it would, 

immediately following closing of the 

acquisition, seek Board of Directors and 

Commission approval for several 

changes to its By-Laws. The changes, 

which were requested by Commission 

staff, could not be included in SR–BSE– 

2008–23 because Article XX of the 

Exchange’s former Constitution, which 

was replaced by the new By-Laws at the 

closing, provided that the Exchange’s 

members must approve amendments to 

the Exchange’s Constitution. The 

Exchange’s members voted, on 

December 7, 2007, to approve the ByLaws as originally submitted in SR– 

BSE–2008–23, and it would have been 

impracticable and unduly expensive to 

seek a second member vote for approval 

of these additional changes prior to 

closing. The changes in question are as 

follows: 

• In Article I, the Exchange is 

amending the definition of ‘‘Voting 

Date’’ to make it clear that the Exchange 

Board of Directors must annually select 

a Voting Date for the selection of 

Member Representative Directors, 

although a vote will actually occur on 

that date only if members have 

nominated candidates for election other 

than those nominated by the Exchange’s 

Member Nominating Committee. 

Accordingly, the amended definition 

reads: ‘‘ ‘Voting Date’ means the date 

selected by the Board on an annual 

basis, on which Exchange Members may 

vote with respect to Member 

Representative Directors in the event of 

a Contested Vote.’’ 


sroberts on PROD1PC70 with NOTICES