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will be repealed because it is subsumed 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will be repealed because it retains 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
57178 Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 

5Pursuant to NASD Rule 2211(a)(2), 

communications of any kind sent only to 

institutional investors (as defined in NASD Rule 

2211(a)(3)) are considered to be ‘‘institutional sales 

material.’’ NASD Rule 2210 does not require 

approval of institutional sales material by a 

registered principal prior to use. However, 

institutional sales material remains subject to the 

supervision and review requirements of NASD Rule 

2211(b)(1)(B). 

6See also Incorporated NYSE Rule 342. FINRA 

has proposed to amend the current requirements 

governing the supervision and review of 

correspondence. See Regulatory Notice 08–24 (May 

2008) (Proposed Consolidated FINRA Rules 

Governing Supervision and Supervisory Controls). 

That proposal, if adopted, would reorganize the 

supervision rules and codify existing guidance with 

respect to the supervision and review of 

correspondence. Thus, FINRA does not anticipate 

any significant changes to the supervision standards 

on which the proposed rule change is predicated. 

Incorporated NYSE Rules 

Rule 472. Communications with the 

Public 

(a) Approval of Communications and 

Research Reports 

(1) Each advertisement, [market 

letter,] sales literature or other similar 

type of communication which is 

generally distributed or made available 

by a member organization to customers 

or the public must be approved in 

advance by an allied member, 

supervisory analyst, or qualified person 

designated under the provisions of Rule 

342(b)(1). 

(2) No Change. 

(b) through (m) No Change. 

* * * Supplementary Material: * * * 

.10 Definitions 

(1) through (3) No Change. 

(4) Market letter[s]. ‘‘Market letter[s]’’ 

[are]is defined as[, but are not limited to, 

any written comments on market 

conditions, individual securities, or 

other investment vehicles that are not 

defined as research reports. They may 

also include ‘‘follow-ups’’ to research 

reports and articles prepared by member 

organizations which appear in 

newspapers and periodicals.] any 

written communication excepted from 

the definition of ‘‘research report’’ 

pursuant to Rule 472.10(2)(a). 

(5) No Change. 

.20 through .140 No Change. 

* * * * * 

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 

NASD Rule 2210 (Communications 

with the Public) requires a registered 

principal of a member to approve prior 

to use any item of sales literature. The 

term ‘‘sales literature’’ does not include 

any item distributed or made available 

only to institutional investors.5

‘‘Sales literature’’ includes ‘‘market 

letters.’’ Incorporated NYSE Rule 472 

similarly requires a qualified person to 

approve in advance of distribution any 

market letter, but contains no exception 

for market letters sent only to 

institutional investors. FINRA is 

concerned that the pre-approval 

requirements may, in some 

circumstances, inhibit the flow of 

information to traders and other 

investors who base their investment 

decisions on timely market analysis. 

To address this concern, the proposed 

rule change would amend the definition 

of ‘‘sales literature’’ in NASD Rule 2210 

to exclude market letters that qualify as 

a ‘‘correspondence’’ and further would 

amend ‘‘correspondence’’ in NASD Rule 

2211 to include market letters (as well 

as any written letter or electronic mail 

message) 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. Pursuant to 

NASD Rule 2211(b)(1)(A), 

correspondence does not require 

approval by a registered principal prior 

to use, unless such correspondence is 

distributed to 25 or more existing retail 

customers within any 30 calendar-day 

period and makes a financial or 

investment recommendation or 

otherwise promotes a product or service 

of the member. The proposed rule 

change also would amend Incorporated 

NYSE Rule 472 to eliminate the 

requirement that a qualified person 

approve market letters in advance of 

distribution. 

Thus, under the proposed rule 

change, all FINRA members would be 

permitted under FINRA rules to 

distribute market letters to institutional 

investors (as defined in NASD Rule 

2211(a)(3)) without requiring prior 

approval by a registered principal or 

qualified person. In addition, under the 

proposed rules, a member also could 

distribute without prior approval by a 

registered principal a market letter that 

is sent only to existing retail customers 

and fewer than 25 prospective retail 

customers within a 30 calendar-day 

period. However, if the market letter 

both (1) is sent to 25 or more existing 

retail customers and (2) makes a 

financial or investment 

recommendation or otherwise promotes 

a product or service of the member, 

prior principal approval would be 

required. In addition, similar to the 

manner in which other forms of 

correspondence (i.e., written letters and 

electronic mail messages) are addressed 

by NASD Rules 2210 and 2211, if a 

market letter were sent to 25 or more 

prospective retail customers within a 

30-calendar day period, the market 

letter would fall within the definition of 

sales literature and have to be 

supervised as such, including approval 

by a registered principal prior to use. 

As correspondence, market letters 

would remain subject to the supervision 

and review requirements of NASD Rule 

3010, which requires each firm to 

establish written procedures that are 

appropriate to its business, size, 

structure and customers for the review 

of outgoing correspondence. If these 

procedures do not require review of all 

correspondence prior to use or 

distribution, they must provide for the 

education and training of associated 

persons as to the firm’s procedures 

governing correspondence, 

documentation of such education and 

training, and surveillance and follow-up 

to ensure that such procedures are 

implemented and adhered to.6

The proposed changes would allow 

firms to distribute most market letters in 

a timely manner without requiring a 

registered principal to review each 

market letter prior to distribution, but 

would maintain investor protection by 

requiring firms to review such 

correspondence in accordance with 

mandated supervisory policies and 

procedures. 

The proposal also would create a new 

definition of the term ‘‘market letter’’ in 

NASD Rule 2211—and modify the 

existing definition in Incorporated 

NYSE Rule 472—to mean any 

communication specifically excepted 

from the definition of ‘‘research report’’ 

under NASD Rule 2711(a)(9)(A) and 

Incorporated NYSE Rule 472.10(2)(a), 

respectively. This exception consists of: 

• Discussions of broad-based indices; 

• Commentaries on economic, 

political or market conditions; 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 191 / Wednesday, October 1, 2008 / Notices 57179 

7 15 U.S.C. 78o–3(b)(6). 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Premium Product [sic] is defined in the 

Schedule of Fees as the products enumerated 

therein. 

• Technical analyses concerning the 

demand and supply for a sector, index 

or industry based on trading volume 

and price; 

• Statistical summaries of multiple 

companies’ financial data, including 

listings of current ratings; 

• Recommendations regarding 

increasing or decreasing holdings in 

particular industries or sectors; and 

• Notices of ratings or price target 

changes (subject to certain disclosure 

requirements). 

FINRA proposes to define market 

letters by reference to an exception from 

the definition of ‘‘research report’’ 

under NASD Rule 2711 and 

Incorporated NYSE Rule 472 to make 

clear that a firm may not supervise as 

correspondence communications that 

fall within the definition of ‘‘research 

report.’’ The proposed rule change 

would, however, increase a firm’s 

flexibility in supervising market letter 

communications that do not qualify as 

research reports. 

FINRA would announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval. The 

implementation date would be the date 

FINRA publishes the Regulatory Notice 

announcing Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,7 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 proposed 

amendment would allow firms to 

distribute market letters in a timely and 

expedient manner, while still requiring 

firms to review and supervise these 

communications to ensure that they are 

fair, balanced and not misleading. 

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–2008–044 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–2008–044. 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, 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–2008–044 and 

should be submitted on or before 

October 22, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23047 Filed 9–30–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58635; File No. SR–ISE– 

2008–68] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Fee Changes. 

September 24, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on 

September 16, 2008, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

the proposed rule change, as described 

in Items I, II, and III below, which items 

have been prepared by the selfregulatory organization. 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 is proposing to amend its 

Schedule of Fees to establish fees for 

transactions in options on 8 Premium 

Products.3 The text of the proposed rule 

change is available at the Exchange. 


jlentini on PROD1PC65 with NOTICES