Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Notices 57395 

19With respect to NYSE Rule 407(a), the only 

change to the rule at this stage in the rulebook 

consolidation would be to delete language 

pertaining to employees of the NYSE. See Exhibit 

5. NYSE Rule 407.10 would be deleted in its 

entirety. With respect to NYSE Rules 350(a)(1), 

350(a)(2) and 350.10, see supra notes 10 and 11. 

20See supra, footnote 5. 

21See letter from Gary L. Goldsholle, Vice 

President and Associate General Counsel, FINRA 

Regulatory Group, dated September 11, 2008. 

22See SIFMA letter. 

23 Id. 

24 Id. 

25 Id. 

26See supra, footnote 21. 

27 Id. 

28 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). 

29 15 U.S.C. 78o–3(b)(6). 

30 15 U.S.C. 78s(b)(2). 

31 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See infra note 7 for discussion about the 

Consolidated FINRA Rulebook. 

4See infra note 7 regarding ‘‘Incorporated NYSE 

Rules.’’ 

407(a) and 407.10 be eliminated.19

Rather than requiring the member to 

obtain FINRA’s consent to open a 

securities or commodities account or 

execute a trade (as set forth under NYSE 

Rules 407(a) and 407.10), FINRA 

believes that it is sufficient, as set forth 

under NASD Rule 3090(a), to continue 

to require the member to obtain and 

implement an instruction from the 

FINRA employee directing the member 

to provide duplicate statements to 

FINRA. The proposed rule change 

would, as set forth in NASD Rule 

3090(b), continue to prohibit members 

from making any loan of money or 

securities to a FINRA employee, subject 

to the exceptions set forth in that rule. 

Lastly, the proposed rule change would, 

as set forth in NASD Rule 3090(c), 

continue to prohibit members from 

directly or indirectly giving, or 

permitting to be given, anything above 

nominal value to any FINRA employee 

who has responsibility for a ‘‘regulatory 

matter’’ involving the member. FINRA 

does not believe that its employees 

should be permitted to receive gifts of 

up to $50 per year when such 

employees have responsibility for a 

regulatory matter. In addition, FINRA 

proposed not to adopt the $50 limit in 

NYSE Rule 350(a)(2) for gifts to all other 

employees to maintain consistency with 

the FINRA Code of Conduct, which, like 

NASD Rule 3060(a) (and proposed 

FINRA Rule 3220(a)), establishes a $100 

limit. Rule 3090(c) need not be amended 

to address the employment and 

compensation issues as to NYSE 

employees in NYSE Rules 350(a)(1) and 

350.10 because the FINRA Code of 

Conduct addresses these issues through 

its provisions on Outside Activities or 

Employment. 

FINRA proposed to delete listing and 

delisting proceedings as potential 

‘‘regulatory matters’’ under NASD Rule 

3090(c) in light of FINRA’s separation 

from NASDAQ and The American Stock 

Exchange. 

III. Comment Letters 

The Commission received one 

comment letter on the proposal 20 and a 

response to comments from FINRA.21 In 

its comment letter, SIFMA supported 

FINRA’s effort to consolidate its two 

rulebooks.22 However, SIFMA suggested 

that FINRA should amend the proposed 

rule change with respect to NASD Rule 

3060 to incorporate a principles-based 

approach to gifts and gratuities.23

SIFMA said that FINRA should permit 

firms to establish their own gifts and 

gratuities policies and limits rather than 

retain the limits set forth in the rule.24

SIFMA also supports the inclusion of a 

safe harbor in new Rule 3220, under 

which a FINRA member firm would be 

deemed to be in compliance with new 

Rule 3220, if the aggregate annual 

amount of gifts and gratuities to any one 

person did not exceed a de minimis 

amount, such as $250.25

FINRA responded to the request by 

SIFMA for a principles-based approach 

to gifts and gratuities by stating that 

FINRA had given a great deal of 

consideration to this approach, but had 

determined to maintain the existing 

standards, which offer predictability 

and clarity.26 FINRA also noted that it 

does not believe that it is appropriate at 

this time to increase the limit for gifts 

and gratuities to $250 from $100.27

IV. Discussion and Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act, and the rules and regulations 

thereunder that are applicable to a 

national securities association.28 In 

particular, the Commission believes that 

the proposed rule change is consistent 

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

of the Act,29 which requires, among 

other things, that FINRA rules must be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. The 

Commission believes that, as part of the 

FINRA rulebook consolidation process, 

the proposed rule change would 

streamline and reorganize existing rules 

that govern influencing or rewarding the 

employees of others and transactions 

involving FINRA employees. Further, 

the proposed rule change would provide 

greater regulatory clarity with respect to 

these issues. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,30 that the 

proposed rule change (SR–FINRA– 

2008–027) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23196 Filed 10–1–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Release No. 34–58661; File No. SR–FINRA– 

2008–030] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

FINRA Rule 3130 (Annual Certification 

of Compliance and Supervisory 

Processes) in the Consolidated FINRA 

Rulebook 

September 26, 2008. 

I. Introduction 

On June 18, 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’’), 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 NASD Rule 3013 

(Annual Certification of Compliance 

and Supervisory Processes) and IM– 

3013 (Annual Compliance and 

Supervision Certification) as a FINRA 

rule in the consolidated FINRA 

rulebook (‘‘Consolidated FINRA 

Rulebook’’) 3 without material change, 

and to delete the corresponding 

provisions in Incorporated NYSE Rule 

342.30 and NYSE Rule Interpretations 

311(b)(5)/04 through /05 and 342.30(d)/ 

01 through (e)/01.4 The proposed rule 

change would renumber NASD Rule 

3013 and IM–3013 as FINRA Rule 3130 

in the Consolidated FINRA Rulebook. 

The proposed rule change was 

published for comment in the Federal 

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57396 Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Notices 

5See Securities Exchange Act Release No. 358118 

(July 8, 2008); 73 FR 40647 (July 15, 2008) 

(‘‘notice’’). 

6See letters from Amal Aly, Managing Director 

and Associate General Counsel, Securities Industry 

and Financial Markets Association (‘‘SIFMA’’) to 

Florence Harmon, Acting Secretary, Commission, 

dated August 4, 2008 (‘‘SIFMA Letter’’), and letter 

from Christine LaBastille, Managing Director, 

Integrated Management Solutions (‘‘IMS’’) to 

Secretary, Commission, dated August 5, 2008 (‘‘IMS 

Letter’’). 

7The current FINRA rulebook consists of two sets 

of rules: (1) NASD Rules and (2) rules incorporated 

from NYSE (‘‘Incorporated NYSE Rules’’) (together 

referred to as the ‘‘Transitional Rulebook’’). The 

Incorporated NYSE Rules apply only to those 

members of FINRA that are also members of the 

NYSE (‘‘Dual Members’’). Dual Members also must 

comply with NASD Rules. For more information 

about the rulebook consolidation process, see 

FINRA Information Notice, March 12, 2008 

(Rulebook Consolidation Process). 

8See supra note 6. 

9See letter from Philip Shaikun, Associate Vice 

President and Associate General Counsel, FINRA to 

Florence E. Harmon, Acting Secretary, Commission, 

dated September 4, 2008 (‘‘FINRA Letter’’). 

10SIFMA Letter. 

11SIFMA Letter. 

Register on July 15, 2008.5 The 

Commission received two comment 

letters in response to the proposed rule 

change.6 This order approves the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

As part of the process of developing 

the new consolidated rulebook (the 

‘‘Consolidated FINRA Rulebook’’),7

FINRA proposed to adopt NASD Rule 

3013 (Annual Certification of 

Compliance and Supervisory Processes) 

and IM–3013 (Annual Compliance and 

Supervision Certification) as a FINRA 

rule without material change and, delete 

the corresponding provisions in 

Incorporated NYSE Rule 342.30 and 

NYSE Rule Interpretations 311(b)(5)/04 

through /05 and 342.30(d)/01 through 

(e)/01. The proposed rule change would 

renumber NASD Rule 3013 and IM– 

3013 as FINRA Rule 3130 in the 

Consolidated FINRA Rulebook. 

Currently, NASD Rule 3013 and 

Incorporated NYSE Rule 342 require 

each member to designate one or more 

principals to serve as a chief compliance 

officer (‘‘CCO’’). These Rules further 

require that the chief executive officer(s) 

(‘‘CEO’’) certify annually that the 

member has in place processes to 

establish, maintain, review, modify and 

test policies and procedures reasonably 

designed to achieve compliance with 

applicable NASD (or NYSE) rules and 

federal securities laws and regulations. 

The certification includes not only a 

statement that the member has in place 

certain compliance processes, but also 

that the CEO(s) has conducted one or 

more meetings with the CCO(s) in the 

preceding 12 months to discuss the 

processes. Incorporated NYSE Rule 342 

and NASD IM–3013 explain that the 

mandated meetings between the CEO(s) 

and CCO(s) must include a discussion of 

the member’s compliance efforts to date 

and identify and address significant 

compliance problems and plans for 

emerging business areas. NASD IM– 

3013 contains additional guidance, 

including setting forth the expertise that 

is expected of a CCO. The same 

expertise requirements are also found in 

Incorporated NYSE Rule Interpretation 

342.30. 

There currently are four differences 

between the NASD and NYSE rules. 

First, NASD IM–3013 requires that the 

member provide to its board of directors 

and audit committees (or equivalent 

bodies) the report that evidences the 

processes to which the CEO(s) certifies 

either prior to execution of the 

certification or at the earlier of their 

next scheduled meetings or within 45 

days of certification. The Incorporated 

NYSE rules require submission of the 

report to those bodies prior to 

certification. FINRA does not intend to 

require the board of directors or audit 

committee to review or consider the 

report as a condition to the CEO 

executing the certification; rather, 

FINRA intends the provision to ensure 

that those governing bodies remain 

informed of this aspect of the member’s 

compliance system in the context of 

their overall responsibility for 

governance and internal controls of the 

member for which they serve. 

Accordingly, the proposed rule change 

would maintain the NASD rule 

requirements. 

Second, the current rules differ in the 

certification deadline. Incorporated 

NYSE Rule 342.30 requires certification 

as part of the submission of a member’s 

annual compliance report, which is due 

by April 1 of each year. NASD Rule 

3013 requires certification not later than 

the anniversary of the prior year’s 

certification. And while NASD allowed 

members to execute their first 

certification no later than April 1, 2006, 

to accommodate Dual Members, many 

FINRA-only firms executed their first 

certification earlier than that and thus 

have differing anniversary dates. 

Moreover, new members are required to 

execute their first certification within a 

year of approval for membership; 

therefore some firms necessarily are on 

a cycle that does not correspond to 

April 1. The proposed rule change 

would maintain the NASD rule deadline 

to provide firms the flexibility to certify 

on a schedule that meets with their 

organizational structure and procedures. 

Firms that have certified on April 1 of 

each year could continue to do so on 

that date. 

Third, Incorporated NYSE Rule 

342.30 requires that the member submit 

its certification to the Exchange, 

whereas the NASD rule requires only 

that the certification be maintained for 

inspection. FINRA believes the 

submission of the certification creates 

an unnecessary—albeit small— 

additional burden on members with no 

attendant benefits to FINRA’s 

examination program. Therefore, the 

proposed rule change would retain the 

NASD requirement that the 

certifications be kept for inspection by 

members. 

Finally, while both rules permit 

designation of multiple CCOs subject to 

certain conditions, Incorporated NYSE 

Rule Interpretation 311(b)(5) requires 

Exchange approval of the allocation of 

supervisory responsibilities between 

those CCOs. By comparison, the NASD 

rules rely on the business judgment of 

the member and require only that the 

member define and document the areas 

of responsibility allocated to each CCO. 

FINRA believes the NASD approach is 

more appropriate, and therefore the 

proposed rule change would not adopt 

the approval requirement into the new 

rule in the Consolidated FINRA 

Rulebook. 

III. Comment Letters 

The Commission received two 

comment letters on the proposal,8 to 

which FINRA responded to in a letter to 

the Commission.9 The first commenter 

generally supported the proposal but 

disagreed with the deletion of the April 

1 certification deadline contained in 

Incorporated NYSE Rule 342.30.10 In 

this commenter’s view, adopting the 

NASD rule requiring certification no 

later than on the anniversary date of the 

previous year’s certification could make 

the process less predictable and 

potentially more cumbersome for 

member firms. Specifically, the 

commenter indicated that for larger 

firms, the annual deadline would 

‘‘inject uncertainty as to when the entire 

report and process should commence 

each year’’ and that ‘‘the time period 

covered by the report and certification 

will be constantly shifting.’’ 11 As an 

alternative, the commenter suggested 

either: (1) Retaining the April 1 deadline 

of Incorporated NYSE rule 342.30 or; (2) 

amending the proposed rule to allow 

member firms to effect annual 

certifications no later than three weeks 

after the anniversary date of the 

previous year’s certification, but in no 

event later than April 1. 

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Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Notices 57397 

12FINRA Letter. 

13 Id. 

14 IMS Letter. IMS also commented on the 

requirements of NASD Rule 3012, which is not part 

of the proposal. 

15FINRA Letter. 

16 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). 

17 15 U.S.C. 78o–3(b)(6). 

18See e.g. Securities Exchange Act Release No. 

53509 (March 17, 2006), 71 FR 15238 (March 27, 

2006) (SR–NASD–2006–036) (order approving rule 

change to IM–3013 finding that the proposed 

change furthered investor protection goals and 

provided clarity regarding application of the rule); 

Securities Exchange Act Release No. 56285 (August 

17, 2007), 72 FR 48715 (August 24, 2007) (SR– 

NASD–2007–049) (order approving rule change to 

NASD Rule 3013 and IM–3013 finding that the 

proposed changes decreased the likelihood of fraud 

and manipulative acts in addition to increasing 

investor protection). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange made 

technical, non-substantive corrections to Exhibits 3 

and 5. 

4This filing deletes references to the opinion of 

counsel requirements from the ‘‘Reference Guide 

For Subsequent Listing Applications’’ section at the 

front of the Manual and replaces them with a 

requirement (i) furnish the Exchange with copies of 

opinions of counsel filed in connection with recent 

public offerings or (ii) if no opinions of counsel 

exist, provide to the Exchange a certificate of good 

standing from the company’s jurisdiction of 

incorporation. In addition, the filing makes the 

same modification to the following sections of the 

Manual: 702.04 (Supporting Documents); 703.01 

(part 2) (General Information); 703.02 (part 3) (Stock 

Split/Stock Rights/Stock Dividend Listing Process); 

703.03 (Short Term Rights Offerings Relating to 

Continued 

FINRA responded that under the 

proposed rule change, firms that 

previously certified on or near April 1 

may continue to do so, so long as the 

certification is executed no later than 

the anniversary of the prior year’s 

certification.12 Furthermore, FINRA 

indicated that the commenter’s concern 

appears to result from the mistaken 

assumption that firms that are members 

of both FINRA and the NYSE must 

couple the CEO certification with the 

annual compliance report that is 

required to be submitted each year on 

April 1 under Incorporated NYSE Rule 

342.30. FINRA stated that a firm may 

choose to time the process of the CEO 

certification so that it coincides with the 

Annual Compliance Report 

requirement, but that the proposed rule 

change does not compel this outcome, 

thus giving a firm flexibility as to when 

the certification process begins and 

ends. In addition, FINRA indicated that 

the commenter did not adequately 

consider the needs of FINRA-only firms 

that have chosen a cycle other than 

April 1 that better meets their 

organizational structure and 

procedures.13

The second commenter asserted that 

NASD Rule 3013 is unworkable and 

ineffectual for small FINRA member 

firms and urged FINRA to adopt a small 

firm exemption as part of the 

proposal.14 The commenter stated that 

the provision requiring the CEO and 

CCO to meet to discuss and review 

elements related to the certification is 

unworkable for small firms when the 

CEO and CCO are the same person. 

FINRA indicated that it expects that a 

person who is both CEO and CCO of a 

firm will contemplate the required 

topics of the meeting and document that 

he or she has reviewed those matters.15

IV. Discussion and Findings 

After careful review of the proposed 

rule change, the comment letters and 

FINRA’s response to the comment 

letters, the Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act, and the 

rules and regulations thereunder that 

are applicable to national securities 

associations,16 and in particular, 

Section 15A(b)(6) of the Act,17 which 

requires among other things, that FINRA 

rules be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general to protect 

investors and the public interest. The 

Commission believes that it is 

reasonable for FINRA to adopt NASD 

Rule 3013 and IM–3013 as FINRA Rule 

3130 in the Consolidated FINRA 

Rulebook because they have previously 

been found to meet statutory 

requirements.18

It is therefore ordered, pursuant to 

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

proposed rule change (SR–FINRA– 

2008–030) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23197 Filed 10–1–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58649; File No. SR–NYSE– 

2008–82] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change, as Modified 

by Amendment No. 1, To Modify Its 

Policy With Respect to Legal Opinions 

in Connection With Listings of 

Securities 

September 25, 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 9, 2008, New York Stock 

Exchange LLC (‘‘NYSE’’ or ‘‘the 

Exchange’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. On 

September 21, 2008, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 The Commission is publishing 

this notice, as amended, to solicit 

comments on the proposal from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

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 III below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

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 III 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 

The Exchange proposes to amend the 

Manual by removing the provisions 

throughout Chapter Seven that require 

issuers to supply opinions of counsel to 

the Exchange in connection with any 

initial listing application or 

supplemental listing application.4

mstockstill on PROD1PC66 with NOTICES