57174 Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 

14 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. 58176 

(July 16, 2008), 73 FR 42844 (July 23, 2008) (SR– 

FINRA–2008–021) (‘‘Release No. 34–58176’’). 

4See Securities Exchange Act Release No. 58206 

(July 22, 2008), 73 FR 43808 (July 28, 2008) (SR– 

FINRA–2008–022). 

5See Securities Exchange Act Release No. 58095 

(July 3, 2008), 73 FR 39751 (July 10, 2008) (SR– 

FINRA–2008–028). 

6See Securities Exchange Act Release No. 58245 

(July 29, 2008), 73 FR 46106 (August 7, 2008) (SR– 

FINRA–2008–026). 

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 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–BATS– 

2008–005 and should be submitted on 

or before October 22, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23041 Filed 9–30–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58643; File Nos. SR– 

FINRA–2008–021; SR–FINRA–2008–022; 

SR–FINRA–2008–026; SR–FINRA–2008–028 

and SR–FINRA–2008–029] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change, as Modified by 

Amendment No. 1, Relating to the 

Adoption of NASD Rules 4000 Through 

10000 Series and the 12000 Through 

14000 Series as FINRA Rules in the 

New Consolidated FINRA Rulebook; 

Order Approving Proposed Rule 

Change Relating to the Membership 

Waive-In Process for Certain New York 

Stock Exchange Members; Order 

Approving Proposed Rule Change, as 

Modified by Amendment No. 1, To 

Adopt the FINRA Rule 0100 Series 

(General Standards) in the 

Consolidated FINRA Rulebook; Order 

Approving Proposed Rule Change To 

Adopt FINRA Rule 2010 (Standards of 

Commercial Honor and Principles of 

Trade), FINRA Rule 2020 (Use of 

Manipulative, Deceptive or Other 

Fraudulent Devices), and FINRA Rule 

5150 (Fairness Opinions) in the 

Consolidated FINRA Rulebook; and 

Order Approving Proposed Rule 

Change, as Modified by Amendment 

No. 1, To Repeal NASD Rule 1130 and 

Incorporated Rules 405A, 440F, 440G 

and 447 as Part of the Process of 

Developing the Consolidated FINRA 

Rulebook 

September 25, 2008. 

I. Introduction 

On May 23, 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 (‘‘Commission’’ or 

‘‘Exchange’’), 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 

adopt the following NASD rules (which 

are part of the existing FINRA rulebook) 

as FINRA rules into a new consolidated 

rulebook (‘‘Consolidated FINRA 

Rulebook’’): The 4000 through 10000 

Series and the 12000 through 14000 

Series (collectively, the ‘‘Marketplace 

and Procedural Rules Proposal’’). The 

Marketplace and Procedural Rules 

Proposal, as modified by Amendment 

No. 1, was published for comment in 

the Federal Register on July 23, 2008.3

The Commission received no comments 

on the Marketplace and Procedural 

Rules Proposal. This order approves the 

Marketplace and Procedural Rules 

Proposal, as modified by Amendment 

No. 1. 

On May 23, 2008, FINRA filed with 

the Commission, pursuant to Section 

19(b)(1) of the Act and Rule 19b–4 

thereunder, a proposed rule change 

relating to the membership waive-in 

process for certain New York Stock 

Exchange LLC (‘‘NYSE’’) members 

(‘‘Waive-In Firms Proposal’’). The 

Waive-In Firms Proposal was published 

for comment in the Federal Register on 

July 28, 2008.4 The Commission 

received no comments on the Waive-In 

Firms Proposal. This order approves the 

Waive-In Firms Proposal. 

On June 13, 2008, FINRA filed with 

the Commission, pursuant to Section 

19(b)(1) of the Act and Rule 19b–4 

thereunder, a proposed rule change to 

adopt FINRA Rule 2010 (Standards of 

Commercial Honor and Principles of 

Trade), FINRA Rule 2020 (Use of 

Manipulative, Deceptive or Other 

Fraudulent Devices), and FINRA Rule 

5150 (Fairness Opinions) in the 

Consolidated FINRA Rulebook 

(collectively, the ‘‘Ethical Conduct and 

Fairness Opinion Rules Proposal’’). The 

Ethical Conduct and Fairness Opinion 

Rules Proposal was published for 

comment in the Federal Register on July 

10, 2008.5 The Commission received no 

comments on this proposed rule change. 

This order approves the Ethical Conduct 

and Fairness Opinion Rules Proposal. 

On June 16, 2008, FINRA filed with 

the Commission, pursuant to Section 

19(b)(1) of the Act and Rule 19b–4 

thereunder, a proposed rule change to 

adopt the FINRA Rule 0100 Series 

(General Standards) in the Consolidated 

FINRA Rulebook (‘‘General Standards 

Proposal’’). The General Standards 

Proposal, as modified by Amendment 

No. 1, was published for comment in 

the Federal Register on August 7, 2008.6

The Commission received no comments 

on the General Standards Proposal. This 

order approves the General Standards 

Proposal as modified by Amendment 

No. 1. 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 57175 

7See Securities Exchange Act Release No. 58244 

(July 29, 2008), 73 FR 45258 (August 4, 2008) (SR– 

FINRA–2008–029). 

8See Securities Exchange Act Release No. 56145 

(July 26, 2007); 72 FR 42169 (August 1, 2007) 

(Order Approving SR–NASD–2007–023). 

9 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). 

10 15 U.S.C. 78o–3(b)(6). 

11 15 U.S.C. 78o–3(b)(5). 

On June 16, 2008, FINRA filed with 

the Commission, pursuant to Section 

19(b)(1) of the Act and Rule 19b–4 

thereunder, a proposed rule change to 

repeal NASD Rule 1130 and 

Incorporated NYSE Rules NYSE 405A, 

440F, 440G and 477 as part of the 

process of developing the Consolidated 

FINRA Rulebook (collectively, the 

‘‘Miscellaneous Rules Proposal’’). The 

Miscellaneous Rules Proposal, as 

modified by Amendment No. 1, was 

published for comment in the Federal 

Register on August 4, 2008.7 The 

Commission received no comments on 

the Miscellaneous Rules Proposal. This 

order approves the Miscellaneous Rules 

Proposal, as modified by Amendment 

No. 1. 

II. Description 

On July 30, 2007, the NASD and 

NYSE Regulation, Inc. (‘‘NYSE 

Regulation’’), a wholly-owned 

subsidiary of NYSE, consolidated their 

member firm regulation operations into 

a combined organization, FINRA.8 As 

part of the transaction, FINRA 

incorporated into its existing rulebook, 

comprised of NASD rules, certain NYSE 

rules related to member firm conduct 

(‘‘Incorporated NYSE Rules’’). 

Consequently, the current FINRA 

rulebook consists of two sets of rules: (1) 

NASD rules; and (2) the Incorporated 

NYSE Rules (together referred to as the 

‘‘Transitional Rulebook’’). Following the 

consolidation of NASD and NYSE 

Regulation into FINRA, FINRA 

established a process to develop the 

Consolidated FINRA Rulebook. During 

this process, FINRA members generally 

will be subject to both the Consolidated 

FINRA Rulebook, as it becomes 

populated with rules filed with and 

approved by the Commission, and the 

Transitional Rulebook. As the 

Consolidated FINRA Rulebook expands 

with Commission-approved FINRA 

rules, the Transitional Rulebook will be 

reduced by the elimination of those 

rules, or sections thereof, that address 

the same subject matter. Therefore, 

when the Consolidated FINRA Rulebook 

is complete, the Transitional Rulebook 

will have been eliminated in its entirety. 

The proposed rule changes would 

incorporate various rules into the 

Consolidated FINRA Rulebook, 

eliminate certain Incorporated NYSE 

Rules, and apply the consolidated 

FINRA rules to the NYSE firms admitted 

pursuant to IM–1013–1 (‘‘Waive-In 

Firms’’). 

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the Marketplace and 

Procedural Rules Proposal, as amended, 

the Waive-In Firms Proposal, the 

General Standards Proposal, as 

amended, the Ethical Conduct and 

Fairness Opinion Rules Proposal, and 

the Miscellaneous Rules Proposal, as 

amended, are consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.9 In 

particular, the Commission finds that 

these proposed rule changes are 

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

Act,10 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. In addition, for 

purposes of the Marketplace and 

Procedural Rules Proposal, the 

Commission finds that this proposed 

rule change is consistent with Section 

15A(b)(5) of the Act,11 which requires, 

among other things, that FINRA rules 

provide for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility or system that 

FINRA operates and controls. 

The Commission notes that FINRA 

will announce the implementation date 

of the proposed rule changes in a 

Regulatory Notice to be published no 

later than 60 days following 

Commission approval. The discussion 

below does not review every detail of 

each of the proposed rule changes, but 

focuses on the most significant rules 

and policy issues considered by the 

Commission in reviewing the proposals. 

A. Marketplace and Procedural Rules 

Proposal (SR–FINRA–2008–021) 

The Marketplace and Procedural 

Rules Proposal will transfer from the 

Transitional Rulebook to the 

Consolidated FINRA Rulebook the 

NASD Rule 4000 through 14000 Series, 

with the exception of the Rule 11000 

Series (Uniform Practice Code). The 

proposed rule change generally will 

transfer these rules into the 

Consolidated FINRA Rulebook in their 

entirety with certain non-material 

changes, including: Replacing 

references to NASD or the Association 

with FINRA; renumbering and 

relocating certain rules, or sections 

thereof, to effectuate a new 

organizational framework; and making 

certain other non-substantive and 

conforming changes. Additionally, the 

Marketplace and Procedural Rules 

Proposal will reserve Rule Series 0100 

through 5000 for future transfers and 

amendments to member conduct rules 

relating to requirements such as the 

member application processes and 

associated person registration, 

transactions with customers, 

supervision, communications and 

disclosures, and financial responsibility. 

Further, with the exception of the 

arbitration and meditation procedures, 

the Consolidated FINRA Rulebook will 

no longer contain Interpretive Materials 

(‘‘IMs’’). The IMs will become standalone rules or will be integrated into 

existing rule text or moved to a 

‘‘Supplementary Material’’ section at the 

end of a rule. The ‘‘Supplementary 

Material’’ will set forth the same type of 

legally binding guidance and additional 

information that IMs provide presently 

and will be filed with the Commission. 

The Marketplace and Procedural 

Rules Proposal also provides that 

certain rules in the Transitional 

Rulebook have general application to 

the entirety of rules that govern FINRA 

members. These rules, described in 

greater detail in the Marketplace and 

Procedural Rules Proposal, will apply to 

both the Transitional Rulebook and the 

Consolidated Rulebook. 

The Commission believes that the 

Marketplace and Procedural Rules 

Proposal is consistent with Section 

15A(b)(6) of the Act and would further 

the objective of the NASD/NYSE 

Regulation consolidation to create a 

more efficient regulatory system for 

firms that are members of both FINRA 

and NYSE. The Commission believes 

that the proposed rule change is 

designed to clarify, harmonize and 

streamline the Rule 4000 through 14000 

Series (not including the 11000 Series) 

for adoption as FINRA rules in the new 

Consolidated FINRA Rulebook. The 

Commission also believes that the 

proposed rule change is consistent with 

Section 15A(b)(5) of the Act by 

providing for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility or system that 

FINRA operates or controls. 

B. Waive-In Firms Proposal (SR–FINRA– 

2008–022) 

As part of the consolidation process, 

NYSE required that its members also be 


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57176 Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 

12See Securities Exchange Act Release No. 56653 

(October 12, 2007), 72 FR 59127 (October 18, 2007) 

(SR–NASD–2007–056). 

13 If a Waive-In Firm wished to expand its 

business beyond the permitted floor activities 

indicated in IM–1013–1, it must apply for such 

business expansion pursuant to NASD Rule 1017 

and, upon approval, become subject to all NASD 

rules in addition to the consolidated FINRA rules 

and the Incorporated NYSE Rules. 

14See Release No. 34–58176, supra note 3. 

15 15 U.S.C. 78o–3(b)(6). 

16See Release No. 34–58176, supra note 3. 

17FINRA also proposed to delete as obsolete 

paragraphs (6) and (7) of Incorporated NYSE Rule 

435, but retained paragraph (5) of this rule. 

18 15 U.S.C. 78o–3. 

registered FINRA members. 

Accordingly, FINRA adopted IM–1013– 

1, which provided an expedited waivein process for NYSE member 

organizations to become FINRA 

members.12 IM–1013–1 requires these 

Waive-In Firms to be subject to the 

Incorporated NYSE Rules, FINRA’s ByLaws, the Schedules to the By-Laws, 

including Schedule A (Assessments and 

Fees), and the NASD Rule 8000 

(Investigations and Sanctions) and Rule 

9000 (Code of Procedure) Series, 

provided that their securities business is 

limited to permitted floor activities.13

FINRA proposed to amend IM–1013–1 

to add that the Waive-In Firms also will 

be subject to the consolidated FINRA 

rules and to remove references to the 

NASD Rule 8000 and Rule 9000 Series, 

whose content is being transferred 

without substantive change to the 

Consolidated FINRA Rulebook.14 The 

amended IM–1013–1 will continue to 

require that the Waive-In Firms be 

subject to the Incorporated NYSE Rules 

until they are eliminated from the 

Transitional Rulebook and replaced by 

rules adopted into the FINRA 

Consolidated Rulebook. 

The Commission notes that the 

proposed rule change would ensure that 

Waive-In Firms will continue to be 

subject to FINRA’s investigation and 

disciplinary procedure rules as those 

rules will be incorporated into the 

Consolidated FINRA Rulebook. The 

Commission further notes that the 

proposed rule change, by subjecting the 

Waive-In Firms to all the consolidated 

FINRA rules, also would ensure that 

Waive-In Firms will continue to be 

subject to FINRA’s regulation 

throughout the consolidation process, as 

the Incorporated NYSE Rules are 

eliminated and replaced by rules 

adopted into the FINRA Consolidated 

Rulebook. Thus, the Commission 

believes that the proposed rule change 

should minimize the potential for 

regulatory and jurisdictional gaps 

during the period that the rule 

consolidation process occurs. Therefore, 

because the Waive-In Firms will 

continue to be subject to FINRA’s 

regulation, the Commission believes 

that the proposed rule change is 

consistent with the requirements of the 

Act, in particular, Section 15A(b)(6),15

which requires the rules of a national 

securities association to be designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade and, in 

general, to protect investors and the 

public interest. 

C. General Standards Proposal (SR– 

FINRA–2008–026) 

The General Standards proposal will 

adopt the NASD Rule 0100 Series 

(General Provisions) as FINRA rules in 

the Consolidated FINRA Rulebook, with 

the exception of NASD Rule 0120, 

which FINRA advises will be addressed 

at a later date in a separate filing. The 

NASD Rule 0100 Series governs the 

adoption, application and interpretation 

of NASD rules and sets forth certain 

definitions not contained in the FINRA 

By-Laws. In addition, these rules 

address FINRA’s delegation of certain 

responsibilities to its subsidiaries, and 

its authority and access with respect to 

its subsidiaries. FINRA is proposing to 

transfer this rule series as the FINRA 

Rule 0100 Series, to be renamed as 

‘‘General Standards,’’ to the 

Consolidated FINRA Rulebook, with 

only minor, non-substantive changes. 

The proposed rule change will not 

impose any new requirements on 

FINRA members, but will clarify and 

streamline these rules for inclusion in 

the Consolidated FINRA Rulebook. 

FINRA notes that, notwithstanding their 

transfer to the Consolidated FINRA 

Rulebook, these rules of general 

applicability will apply equally to both 

the Transitional Rulebook and the 

Consolidated FINRA Rulebook.16

The Commission believes that the 

General Standards Proposal is 

consistent with the Act and is 

appropriate in light of the objective to 

create a Consolidated FINRA Rulebook. 

The Commission believes that the 

proposed rule change is designed to 

clarify and streamline the Rule 0100 

Series for adoption as FINRA rules in 

the new Consolidated FINRA Rulebook. 

D. Ethical Conduct and Fairness 

Opinion Rules Proposal (SR–FINRA– 

2008–028) 

FINRA proposed to adopt NASD 

Rules 2110, 2120, and 2290 as FINRA 

Rules 2010, 2020, and 5150, 

respectively, in the Consolidated FINRA 

Rulebook. The rules, which include the 

general standards of commercial honor 

and principles of trade, anti-fraud and 

manipulation requirements, and 

disclosure of conflicts of interest in 

fairness opinions, will be adopted 

without change, with the exception of 

re-numbering the rules to reflect the 

new organizational structure of the 

Consolidated FINRA Rulebook. As 

noted above, this proposal does not 

address the Interpretive Materials 

(‘‘IMs’’) to NASD Rule 2110, which 

FINRA advises will be considered in a 

later phase of the rulebook 

consolidation process. Consequently, 

the IMs will remain in the Transitional 

Rulebook. In the process of transferring 

NASD Rule 2110, which requires 

adherence to just and equitable 

principles of trade, FINRA proposed to 

delete Incorporated NYSE Rule 401(a) 

and its two accompanying 

Interpretations because they are 

subsumed under the general principles 

of NASD Rule 2110. In addition, FINRA 

proposed to delete paragraphs (1), (3) 

and (4) of Incorporated NYSE Rule 435, 

because they are subsumed under the 

anti-fraud and manipulation 

requirements of NASD Rule 2120.17

The transfer of NASD Rules 2110 and 

2020 to the Consolidated FINRA 

Rulebook, in addition to the deletion of 

Incorporated NYSE Rule 401(a), its 

corresponding Interpretations, and 

certain provisions of Incorporated NYSE 

Rule 435, will continue to require 

FINRA members to adhere to the 

requirements of the overarching 

principles of just and equitable trade 

and the prohibitions against fraudulent 

and manipulative acts and practices. 

The Commission believes that the 

proposed rule change is consistent with 

the requirements of Section 15A of the 

Act, and with Section 15A(b)(6) in 

particular, because the rules to be 

transferred to the Consolidated FINRA 

Rulebook are designed to allow FINRA 

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.18 The Commission also 

believes that it is reasonable for FINRA 

to transfer to the Consolidated FINRA 

Rulebook the provisions of NASD Rule 

2290, which requires the disclosure of 

conflicts of interest in connection with 

fairness opinions and procedures 

designed to mitigate those conflicts. 

E. Miscellaneous Rules Proposal (SR– 

FINRA–2008–029) 

FINRA proposed a rule change to 

repeal various NASD and Incorporated 

NYSE Rules to eliminate duplicative 

provisions and remove requirements 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 57177 

19 15 U.S.C. 78o–3(b)(6). 

20 15 U.S.C. 78s(b)(2). 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 Items include non-substantive edits discussed 

during a September 24, 2008 telephone call 

between Philip Shaikun, Associate Vice President 

and Associate General Counsel, FINRA; Haimera 

Workie, Branch Chief, Office of Chief Counsel, 

Division of Trading and Markets, SEC; and Timothy 

Cornell, Attorney, Office of Chief Counsel, Division 

of Trading and Markets, SEC. 

4The FINRA rulebook currently includes (1) 

NASD Rules and (2) rules incorporated from NYSE 

(‘‘Incorporated NYSE Rules’’). While the NASD 

Rules generally apply to all FINRA members, the 

Incorporated NYSE Rules apply only to members of 

both FINRA and the NYSE, referred to as Dual 

Members. 

that are specific to the NYSE 

marketplace. NASD Rule 1130 (Reliance 

on Current Membership List) is to be 

deleted as it is duplicative of Article IV, 

Section 4 of the FINRA By-Laws. Also, 

Incorporated NYSE Rules 405A (NonManaged Fee-Based Account 

Programs—Disclosure and Monitoring) 

will be repealed because it is subsumed 

under NASD Rule 2110’s Notice to 

Members 03–68. Further, Incorporated 

NYSE Rules 440F (Public Short Sale 

Transactions Effected on the Exchange) 

and 440G (Transactions in Stocks and 

Warrants for the Accounts of Members, 

Allied Members and Member 

Organizations) will be eliminated 

because they are specific to the NYSE 

marketplace and relate solely to 

exchange transactions. Finally, 

Incorporated NYSE Rule 477 (Retention 

of Jurisdiction—Failure to Cooperate) 

will be repealed because it retains 

jurisdiction over former members and 

associated person for initiating 

disciplinary action, which is also 

specified under Article IV, Section 6 

and Article V, Section 4 of the FINRA 

By-Laws. 

The Commission notes that the 

deletion of these rules will eliminate 

duplicative provisions covered by other 

rules in the Consolidated FINRA 

Rulebook and remove unnecessary 

requirements that are specific to the 

NYSE marketplace. In eliminating 

duplicative and unnecessary rules, the 

proposed rule change should further the 

objectives of Section 15A(b)(6) of the 

Act,19 which requires 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. 

Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,20 that the 

Marketplace and Procedural Rules 

Proposal (SR–FINRA–2008–021), as 

modified by Amendment No. 1; the 

Waive-In Firms Proposal (SR–FINRA– 

2008–022); the General Standards 

Proposal (SR–FINRA–2008–026), as 

modified by Amendment No. 1; the 

Ethical Conduct and Fairness Opinion 

Rules Proposal (SR–FINRA–2008–028); 

and the Miscellaneous Rules Proposal 

(SR–FINRA–2008–029), as modified by 

Amendment No. 1, be, and hereby are, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23040 Filed 9–30–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58648; File No. SR–FINRA– 

2008–044] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to the 

Supervision of Market Letters 

September 25, 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 4, 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’’ or ‘‘SEC’’) 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 NASD 

Rules 2210 (Communications with the 

Public) and 2211 (Institutional Sales 

Material and Correspondence) and 

Incorporated New York Stock Exchange 

(‘‘NYSE’’) Rule 472 (Communications 

with the Public) to address the 

supervision of market letters.4 Among 

other things, the proposed rule change 

would amend the definition of ‘‘sales 

literature’’ in NASD Rule 2210 to 

exclude market letters that qualify as 

‘‘correspondence’’ and would define 

‘‘correspondence’’ in NASD Rule 2211 

to include market letters distributed by 

a member to one or more of its existing 

retail customers and fewer than 25 

prospective retail customers within any 

30 calendar-day period. 

Below is the text of the proposed rule 

change. Proposed new language is 

underlined; proposed deletions are in 

brackets. 

* * * * * 

NASD Rules 

2200. COMMUNICATIONS WITH 

CUSTOMERS AND THE PUBLIC 

2210. Communications with the Public 

(a) Definitions. For purposes of this 

Rule and any interpretation thereof, 

‘‘communications with the public’’ 

consist of: 

(1) No Change. 

(2) ‘‘Sales Literature.’’ Any written or 

electronic communication, other than 

an advertisement, independently 

prepared reprint, institutional sales 

material and correspondence, that is 

generally distributed or made generally 

available to customers or the public, 

including circulars, research reports, 

[market letters,] performance reports or 

summaries, form letters, telemarketing 

scripts, seminar texts, reprints (that are 

not independently prepared reprints) or 

excerpts of any other advertisement, 

sales literature or published article, and 

press releases concerning a member’s 

products or services. 

(3) through (6) No Change. 

(b) through (e) No Change. 

* * * * * 

2211. Institutional Sales Material and 

Correspondence 

(a) Definitions 

For purposes of Rule 2210, this Rule, 

and any interpretation thereof: 

(1) ‘‘Correspondence’’ consists of any 

written letter or electronic mail message 

and any market letter distributed by a 

member to: 

(A) one or more of its existing retail 

customers; and 

(B) fewer than 25 prospective retail 

customers within any 30 calendar-day 

period. 

(2) through (4) No Change. 

(5) ‘‘Market Letter’’ means any written 

communication excepted from the 

definition of ‘‘research report’’ pursuant 

to Rule 2711(a)(9)(A). 

(b) through (e) No Change. 

* * * * * 


jlentini on PROD1PC65 with NOTICES