56872 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 

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

16 15 U.S.C. 78f(b)(5). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

also obtain the customer’s name, Tax 

Identification Number, address, and 

telephone number. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule changes are consistent 

with Section 6 of the Act,15 in general, 

and further the objectives of Section 

6(b)(5),16 in particular, in that they are 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanisms of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest, by providing the 

investing public with options 

communications rules that are designed 

to provide appropriate safeguards and 

greater clarity by promoting 

harmonization between the Amex and 

other SRO options communications 

rules and conforming Rule 921 to the 

requirements of Rule 17a–3(a)(17) under 

the Exchange Act. The Exchange also 

believes that the proposal is consistent 

with Section 6(b)(5) of the Exchange Act 

because the proposed amendments to 

Amex Rule 991 reflect amendments to 

the Securities Act that generally exempt 

standardized options, and will update 

and reorganize the Rule. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act. 

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 Exchange 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–Amex–2008–51 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–Amex–2008–51. 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 

Section, 100 F Street, NE., Washington, 

DC 20549. Copies of such filing also will 

be available for inspection and copying 

at the principal office of the Amex. 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–Amex–2008–51 and should 

be submitted on or before October 21, 

2008. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22962 Filed 9–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58626; File No. SR–FINRA– 

2008–046] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change, and 

Amendment No. 1 Thereto, To Amend 

the By-Laws of FINRA Regulation To 

Realign the Representation of Industry 

Members on the National Adjudicatory 

Council To Follow More Closely the 

Categories of Industry Representation 

on the FINRA Board 

September 23, 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 8, 2008, 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. On 

September 17, 2008, FINRA filed 

Amendment No. 1 to the proposed rule 

change. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend the ByLaws of FINRA’s regulatory subsidiary 

(‘‘FINRA Regulation’’) to realign the 

representation of industry members on 

the National Adjudicatory Council 

(‘‘NAC’’) to follow more closely the 

industry representation on the FINRA 

Board of Governors (‘‘FINRA Board’’), to 

eliminate the Regional Nominating 

Committees, to transfer such 

committees’ responsibilities for NAC 

industry appointments to the FINRA 

Nominating Committee (‘‘Nominating 

Committee’’), and to change the name of 

‘‘NASD Regulation’’ and ‘‘NASD’’ to 


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3See Securities Exchange Act Release No. 56145 

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

amended by Securities Exchange Act Release No. 

56145A (May 30, 2008), 73 FR 32377 (June 6, 2008) 

(File No. SR–NASD–2007–023). 

4The proposed rule change would revise, delete, 

and/or renumber various provisions of the FINRA 

Regulation By-Laws. Renumbered sections are 

referred to herein as ‘‘proposed FINRA Regulation 

By-Laws.’’ All other sections (that is, sections for 

which new numbering did not result from the 

proposed revisions) are referred to as ‘‘current 

FINRA Regulation By-Laws.’’ 

5See current FINRA Regulation By-Laws, Article 

V, Section 5.1 (Appointment and Authority). 

6The 2008 NAC consists of 14 members, and the 

NAC has had no fewer than 14 members 

consistently for many years. To reflect past 

practices, the proposed rule change would 

eliminate the 12 to 14 member range currently 

indicated in the FINRA Regulation By-Laws and 

state instead that the NAC shall consist of 14 

members, divided equally between industry and 

non-industry. The proposal would eliminate the 

concept of non-industry members exceeding 

industry members and state simply that nonindustry NAC members will equal industry NAC 

members. Given that the population of the NAC 

will be 14, its balanced nature can be achieved with 

an equal industry/non-industry composition. 

7See current FINRA Regulation By-Laws, Article 

V, Section 5.2 (Number of Members and 

Qualifications). 

8Consistent with Article V of the FINRA 

Regulation By-Laws, the current 14-member NAC 

includes seven industry and seven non-industry 

members. Five of the industry NAC members 

represent the five geographic regions. The 

remaining two industry seats are ‘‘at-large’’ seats, 

which NASD historically used and FINRA currently 

uses to add balance to the types of firms being 

represented on the NAC. 

9The FINRA Board consists of eleven Public 

Governors (who are appointed), ten Industry 

Governors (seven of whom are elected by industry 

members), the current Chief Executive Officer 

(‘‘CEO’’) of NYSE Regulation, and the current CEO 

of FINRA. The ten Industry Governors include: (a) 

Three elected Governors who are registered with 

member firms that employ 500 or more registered 

persons (Large Firm Governors); (b) one elected 

Governor who is registered with a member firm that 

employs at least 151 and no more than 499 

registered persons (Mid-Size Firm Governor); (c) 

three elected Governors who are registered with 

member firms that employ at least one and no more 

than 150 registered persons (Small Firm Governors); 

(d) one appointed Governor who is associated with 

a floor member of the New York Stock Exchange; 

(e) one appointed Governor who is associated with 

an independent contractor financial planning 

member firm or an insurance company affiliate; and 

(f) one appointed Governor who is associated with 

an affiliate of an investment company. See FINRA 

By-Laws, Article VII (Board of Governors). 

10A public member of the NAC has no material 

business relationship with a broker or dealer or a 

self-regulatory organization registered under the 

Act. 

‘‘FINRA Regulation’’ and ‘‘FINRA’’ 

respectively. The text of the proposed 

rule change is available at FINRA, on its 

Web site (http://www.finra.org), and at 

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, 

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 

Background on FINRA and Its 

Regulatory Subsidiary 

On July 30, 2007, NASD and the New 

York Stock Exchange consolidated their 

member firm regulation operations into 

a combined organization, FINRA. As 

part of the consolidation, the SEC 

approved amendments to the NASD ByLaws to implement governance and 

related changes.3 The approved changes 

included a FINRA Board governance 

structure that balanced public and 

industry representation and designated 

seven governor seats to represent 

member firms of various sizes based on 

the criteria of firm size. 

FINRA Regulation (formerly known as 

NASD Regulation) is a subsidiary of 

FINRA that operates according to the 

Plan of Allocation and Delegation of 

Functions by NASD to Subsidiaries, as 

amended, which NASD adopted first in 

1996 when it formed NASD Regulation. 

FINRA Regulation’s By-Laws were not 

amended at the time of the 

consolidation, other than in a few 

sections where those By-Laws conflicted 

with the new FINRA By-Laws. 

The proposed rule change would 

modify the FINRA Regulation By-Laws 

to: Restructure the industry 

representation on the NAC to parallel 

the firm-size criteria for industry 

representation on the FINRA Board; 

modify the nomination process for 

certain industry member seats on the 

NAC by using the Nominating 

Committee and discontinuing the 

Regional Nominating Committees; and 

adopt conforming changes to reflect the 

corporate name change and similar 

matters.4

The National Adjudicatory Council 

The NAC is appointed pursuant to the 

FINRA Regulation By-Laws to review all 

disciplinary decisions issued by Hearing 

Panels and presides over disciplinary 

matters that have been appealed to or 

called for review by the NAC. The NAC 

also reviews statutory disqualification 

matters and considers appeals of 

membership proceedings and 

exemption requests.5

Under current FINRA Regulation ByLaw provisions, the NAC must consist 

of no fewer than 12 and no more than 

14 members.6 The number of nonindustry members, including at least 

three public members, must equal or 

exceed the number of industry 

members.7 Since 1999, each of five 

geographic regions, which had been 

established by the NASD Board of 

Governors, has been represented on the 

NAC. Non-industry members of the 

NAC and two ‘‘at-large’’ industry 

members currently are nominated to 

serve on the NAC by the Nominating 

Committee and then appointed by the 

FINRA Regulation Board.8 The five 

industry members of the NAC who are 

drawn from the five geographic regions 

are first selected through Regional 

Nominating Committees (through either 

an uncontested or a contested 

nomination process), then nominated by 

the Nominating Committee, and finally 

appointed by the FINRA Regulation 

Board. 

Discussion of Changes to the NAC 

Election Process 

The proposed rule change would 

amend Article I (Definitions), Article V 

(National Adjudicatory Council), and 

Article VI (National Adjudicatory 

Council Regional Nominations for 

Industry Members) of the FINRA 

Regulation By-Laws to replace the 

current regionally based approach for 

appointing industry representatives to 

the NAC with a process that is based on 

firm size and is similar to the FINRA 

Board’s approach.9 The NAC’s 

regionally based election process is a 

legacy NASD practice that no longer 

parallels the governance structure of the 

FINRA Board. The proposed rule change 

would replace the five regionally based 

industry members of the NAC with two 

small firm, one mid-size firm, and two 

large firm industry representatives. The 

make-up of the NAC under the proposed 

rule change would follow more closely 

the current make-up of the FINRA 

Board. 

The restructured NAC would 

therefore consist of 14 members, 

including seven industry members, two 

of whom are ‘‘at large’’ and five of 

whom are designated specifically as 

representatives of large firms, mid-size 

firms, and small firms, and seven nonindustry members, three of whom are 

public.10 The tenure of NAC members is 

generally three years and the terms of 

the NAC members are staggered. The 

proposal would not disrupt the process 


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11See proposed FINRA Regulation By-Laws, 

Article V, Section 5.3 (Appointments). 

12Compare current FINRA Regulation By-Laws, 

Article VI, Section 6.15 (Requirement for Petition 

Supporting Additional Candidate) with proposed 

FINRA Regulation By-Laws, Article VI, Section 6.2 

(Designation of Additional Candidates). 

13See proposed FINRA Regulation By-Laws, 

Article VI, Section 6.3 (List of FINRA Members 

Eligible to Vote) and Article VI, Section 6.7 

(Ballots). 

14The seven non-industry members and two atlarge industry members would continue to follow 

the nomination and Board appointment process 

currently employed for non-industry and at-large 

industry NAC members. 

15See proposed FINRA Regulation By-Laws, 

Article V, Section 5.3 (Appointments) and 5.5 

(Rejection of Nominating Committee Nominee). 

16The proposed FINRA Regulation By-Laws 

retain the possibility that the Nominating 

Committee could propose two or more candidates 

for a single open small, mid-size, or large firm NAC 

seat. See proposed FINRA Regulation By-Laws, 

Article VI, Section 6.5 (Notice of Contested 

Nomination). In such a case, there would be a 

contested election. The proposed rule change 

would clarify that only when the Nominating 

Committee nominates two or more candidates for 

the same open seat would the Nominating 

Committee trigger a contested election. 

17See proposed FINRA Regulation By-Laws, 

Article V, Section 5.4 (Nomination Process). 

18See proposed FINRA Regulation By-Laws, 

Article IV, Section 4.16(b) (Communication of 

Views Regarding Contested Election or 

Nomination). Section 4.16(b) would also mirror the 

language of the FINRA By-Law provision that 

allows, in contested elections, the appropriate 

FINRA committee to communicate a responsive 

message in reply to an additional candidate’s 

communication. See FINRA By-Laws, Article VII, 

Section 11(b) (Communication of Views). 

19See proposed FINRA Regulation By-Laws, 

Article VI, Section 6.6 (Administrative Support). 

20See proposed FINRA Regulation By-Laws, 

Article VI, Sections 6.5, 6.7, 6.8, 6.10, 6.11, 6.13, 

and 6.14. 

of approximately one-third of the NAC 

members completing their service in a 

particular year and being replaced with 

newly appointed NAC members. The 

proposal would result in a Small Firm 

and a Large Firm NAC Member joining 

the NAC near the beginning of 2009; a 

Mid-Sized Firm NAC Member joining in 

2010; and a Small Firm and Large Firm 

NAC Member joining in 2011. The 

proposed selection process would allow 

for the service of NAC members with 

knowledge, impartiality, and judicial 

temperament, while maintaining the 

same level of indirect representation of 

FINRA’s membership. 

In conjunction with eliminating the 

regionally based criteria for identifying 

industry NAC members, the proposed 

rule change also would simplify the 

NAC appointment process for industry 

representatives and follow more closely 

the procedures for electing industry 

members of the FINRA Board. The 

process proposed would eliminate the 

five Regional Nominating Committees 

and have the Nominating Committee 

perform their functions instead. Rather 

than relying on Regional Nominating 

Committees to first identify possible 

industry candidates before submission 

of the candidates to the Nominating 

Committee and the FINRA Regulation 

Board, the Nominating Committee 

would identify and solicit candidates 

for all NAC seats, including the five 

industry-member positions that are 

based on firm size.11 The Nominating 

Committee would be free to consult 

with or receive recommendations for 

industry NAC members from other 

FINRA committees, such as the District 

Nominating Committees, before 

communicating its nominations to the 

FINRA Board. 

The proposed rule change would 

continue the current process of allowing 

individuals who seek to serve on the 

NAC but were not nominated, known as 

additional candidates, to gather 

petitions in support of their candidacy 

and potentially compete in a contested 

election. Additional candidates would 

petition to be considered as Small, MidSize, or Large Firm NAC Members based 

on the size of the firm with which they 

are registered. 

Under the proposal, additional 

candidates would be able to qualify for 

a contested election by gathering 

petitions from three percent of the firms 

in their size category, which is lower 

than the ten percent requirement 

additional candidates currently need to 

gather when they seek to qualify for a 

regional NAC seat.12 In the event of a 

contested election, FINRA members 

would have an opportunity to vote for 

a NAC candidate based on firm size.13

Specifically, small, mid-size, or large 

firms would vote for NAC candidates 

only if the contested election was for a 

NAC seat designated for a firm of 

corresponding size. 

The proposed rule change would 

ensure that the winner of a contested 

election serves on the NAC. While all 

NAC members would continue to be 

recommended initially by the 

Nominating Committee and appointed 

by the FINRA Board,14 the candidate 

who receives the most votes in any 

contested election for a Small, Mid-Size, 

or Large Firm NAC Member seat would 

be required under the FINRA Regulation 

By-Laws to be appointed to the NAC.15

The current By-Law section that 

discusses the procedure in the event 

that the Regional Nominating 

Committee’s nominee is rejected by the 

National Nominating Committee would 

accordingly be deleted. The proposal 

would not change the NAC selection 

process if no additional candidates 

reach the threshold to qualify for a 

contested election. As in the past when 

there are no additional candidates, the 

industry NAC members selected by the 

Nominating Committee would not have 

a contested election and would be 

recommended for appointment to the 

NAC.16

To verify that a NAC nominee or 

candidate would satisfy the definition of 

an Industry, Small Firm, Mid-Sized 

Firm, Large Firm, Non-Industry, or 

Public Member of the NAC, the 

proposed rule change would authorize 

the FINRA Secretary to collect 

information from candidates as is 

reasonably necessary to serve as the 

basis for such a determination.17

The proposed rule change would 

modify slightly the provision that 

restricts NAC members and certain 

committees from communicating in an 

official capacity in support of a 

candidate in a contested election. The 

current rules, which permit individuals 

who are Directors or NAC or other 

committee members to communicate 

their views regarding a candidate in an 

individual capacity, would remain the 

same. The modification would specify 

the narrow circumstances under which 

the Nominating Committee may support 

its candidate by sending a maximum of 

two mailings in support of its 

nominee.18 The proposal would clarify 

that this limited support is available 

during contested NAC elections by 

referring to support allowed ‘‘under 

these By-Laws,’’ which includes the 

support allowed under Article IV, 

Section 4.16.19

The proposed rule change would 

designate the Secretary of FINRA, 

instead of the FINRA Regulation 

Secretary, as the person who would 

send notice to FINRA members 

announcing a contested NAC election; 

assist in preparing ballots; prepare a list 

of FINRA members eligible to vote; 

arrange for the location for counting of 

ballots by an independent agent; resolve 

ballots that were set aside, if necessary; 

extend a time period regarding elections 

for good cause; and similar duties.20 The 

proposal designates the FINRA 

Secretary because this office fulfills the 

same role when FINRA holds elections 

for the Board of Governors. 

As a result of the NAC’s restructuring, 

FINRA would continue to promote fair 

representation of its members because 

seven of the NAC seats will be drawn 

from members of the industry and the 

industry candidates for five of those 

seats will be announced to the 

membership and are subject to a 

potential election by member firms of a 

similar size. 


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21See current FINRA Regulation By-Laws, Article 

V, Sections 5.1 (Appointment and Authority), and 

proposed Sections 5.7–5.9. 

22See Rule 9351. 

23Additional changes to the FINRA Regulation 

By-Laws regarding the FINRA Regulation Board and 

capital stock will be proposed by FINRA in a 

related proposed rule change that FINRA 

anticipates filing in the near future. 

24See FINRA By-Laws, Article I(t). 

25See proposed FINRA Regulation By-Laws, 

Article I(hh) and (ii). 

26 15 U.S.C. 78o–3(b)(6). 

27 15 U.S.C. 78o–3(b)(4). 

In addition, the rule change would 

indicate in proposed Article V, Section 

5.10 (Filling of Vacancies) that the NAC 

may continue to function while FINRA 

fills a vacancy on the NAC. The 

proposal also would incorporate the 

concept into Section 5.10 from proposed 

Section 5.9 (Disqualification), which 

specifies that a vacancy on the NAC 

lasting six months or less will not cause 

a violation of the compositional 

requirements of current Article V, 

Section 5.2 (Number of Members and 

Qualifications). 

The proposed rule change would 

amend the FINRA Regulation By-Law 

provisions regarding resignation, 

removal, appointment, and 

disqualification of NAC members and 

the NAC’s authority to act on FINRA’s 

behalf by designating the FINRA Board 

as the body authorized to oversee the 

NAC.21 The FINRA Board has long had 

explicit authority under Articles XII and 

XIII of its By-Laws to establish 

procedures for disciplinary proceedings 

and to impose sanctions in certain 

circumstances, and has consistently 

relied on the NAC to render judgment 

on disciplinary matters, including 

imposing sanctions. The proposal 

would reinforce these roles by 

simplifying the FINRA Board’s 

relationship with the NAC and 

establishing directly with the FINRA 

Board the authority to remove all NAC 

members (for refusal, failure, neglect, or 

inability to discharge duties), accept 

their resignations, appoint them, and 

declare them disqualified. Moreover, the 

FINRA Board’s direct authority over 

resignation, removal, appointment, and 

disqualification would logically extend 

the FINRA Board’s existing authority to 

review the substance of the NAC’s 

appellate decisions, which exists 

through the FINRA Board’s 

discretionary power to call a case for 

review by the FINRA Board.22 FINRA 

believes that the proposed rule change 

will benefit the appellate portion of the 

disciplinary process by extending the 

FINRA Board’s oversight of the NAC’s 

members. 

The proposed rule change would 

amend current Article V, Section 5.2 of 

the FINRA Regulation By-Laws (Number 

of Members and Qualifications) to 

eliminate the reference that the Chair of 

the NAC shall automatically serve as a 

Director of the FINRA Regulation Board 

for a one-year term. As a result of the 

NASD and NYSE consolidation, the 

NAC Chair’s automatic service on the 

FINRA Board of Governors was 

previously eliminated in 2007. 

Accordingly, the NAC Chair no longer 

automatically has the prerequisite 

requirement to be appointed to the 

FINRA Regulation Board.23

Conforming Changes Relating to the 

New FINRA Name 

The proposed rule change would 

make certain non-substantive changes to 

several articles of the FINRA Regulation 

By-Laws as follows: 

• ‘‘The NASD’’ or ‘‘NASD’’ is 

replaced with ‘‘FINRA’’ or ‘‘the 

Corporation’’; 

• ‘‘NASD Regulation’’ is changed to 

‘‘FINRA Regulation’’; 

• ‘‘the Rules of the Association’’ is 

replaced with ‘‘the Rules of the 

Corporation;’’ and 

• ‘‘National Nominating Committee’’ 

is replaced with ‘‘Nominating 

Committee.’’ 

The proposed rule change would 

modify the term ‘‘Industry Member’’ in 

the definitional section of FINRA 

Regulation’s By-Laws, Article I, by 

limiting the look-back test that 

characterizes NAC or committee 

members as industry if they have served 

as an officer, director, or employee of a 

broker or dealer, among other reasons, 

within the past twelve months. The 

current provision uses a three year lookback test. This proposed change would 

make the definition of ‘‘Industry 

Member’’ for NAC and other committee 

members consistent with the ‘‘Industry 

Governor’’ and ‘‘Industry committee 

member’’ definitions in the FINRA ByLaws.24

The proposal would also add the term 

‘‘independent director’’ to the portion of 

the definition of ‘‘Industry Member’’ 

that excludes outside directors of a 

broker or dealer. Independent director is 

synonymous with outside director, but 

would be added to the exclusionary 

clause to harmonize the FINRA 

Regulation By-Laws with the FINRA ByLaws’ use of the term ‘‘independent 

director’’ when defining an Industry 

Governor. In addition, the definition of 

‘‘Public Director’’ and ‘‘Public 

Member,’’ which refers to NAC or 

committee members, would be modified 

to clarify that, for example, a Public 

Director’s service on FINRA 

Regulation’s Board or a Public Member’s 

service on the NAC does not disqualify 

that person from satisfying the 

definition of Pubic Director or Public 

Member.25

The proposed rule change would 

reflect that FINRA Regulation’s 

Delaware registered agent is Corporate 

Creations Network Inc. 

The effective date of the proposed 

rule change will be the date of 

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,26 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; and Section 15A(b)(4) of 

the Act,27 which requires that FINRA 

rules are designed to assure a fair 

representation of FINRA’s members in 

the administration of its affairs. The 

composition of the FINRA Board has 

previously been found to meet the 

statutory requirement, and FINRA 

believes that the proposed rule change 

will align the representation of industry 

members on the NAC to follow more 

closely the industry representation on 

the FINRA Board. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will 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 reason for so finding or (ii) 

as to which FINRA consents, the 

Commission will: 

A. By order approve such proposed 

rule change; or 


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28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Changes are marked to the rule text that appears 

in the electronic Nasdaq Manual found at http:// 

nasdaq.complinet.com. 

4Securities Exchange Act Release No. 27956 

(April 27, 1990), 55 FR 18781 (May 4, 1990) (the 

‘‘original PORTAL rule filing’’). 5Securities Act Release No. 6862 (April 23, 1990), 

55 FR 17933 (April 30, 1990). 

6 17 [sic] U.S.C. 77e. 

7 17 CFR 230.144A(a)(1). 

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–2008–046 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–2008–046. 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 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– 

2008–046 and should be submitted on 

or before October 21, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22927 Filed 9–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58622; File No. SR– 

NASDAQ–2008–072] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Establish a PORTAL Reference 

Database and Related Fees 

September 23, 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 16, 2008, the NASDAQ Stock 

Market LLC (‘‘Nasdaq’’) 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 Nasdaq. 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 

Nasdaq proposes to establish a 

PORTAL Reference Database. Nasdaq 

will make the proposed rule change 

effective immediately upon approval. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized.3

* * * * * 

7050. PORTAL Reference Database 

The following charges shall apply to 

access to the PORTAL Reference 

Database: 

(1) For PORTAL data for 2008 and 

future years, the annual fee is: 

1–20 Users ............................ $20,000 

21 to 100 Users .................... $50,000 

101+ Users ........................... $100,000 

(2) For PORTAL data for 1990 to 2007, 

the fee for each year of reference data 

shall be: 

1–20 Users ......... $20,000 (not to exceed 

$200,000 for access to 

all PORTAL historical 

data files from 1990 to 

2007). 

21 to 100 Users $50,000 (not to exceed 

$500,000 for access to 

all PORTAL historical 

data files from 1990 to 

2007). 

101+ Users ......... $100,000 (not to exceed 

$1,000,000 for access 

to all PORTAL historical data files from 

1990 to 2007). 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq 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. Nasdaq 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 

Background 

The National Association of Securities 

Dealers, Inc. (‘‘NASD’’) created the 

PORTAL Market in 1990,4

simultaneously with the SEC’s adoption 

of Rule 144A,5 to be a new trading 

system for the purpose of quoting, 

trading, and reporting trades in 

securities deemed eligible for resale by 

Qualified Institutional Buyers under 

Rule 144A. Rule 144A provides an 

exemption from registration under 

Section 5 of the Securities Act 6 for 

resales of privately placed securities to 

investors that meet the eligibility 

requirements of being a qualified 

institutional buyer (‘‘QIB’’) under Rule 

144A(a)(1),7 i.e., institutional investors 

that in the aggregate own or invest on 

a discretionary basis at least $100 

million in securities and broker/dealers 

that in the aggregate own or invest on 

a discretionary basis at least $10 million 

in securities. The PORTAL Market did 


ebenthall on PROD1PC60 with NOTICES