Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / Notices 60371 

7See Securities Exchange Act Release No. 57293 

(February 8, 2008), 73 FR 8729 (February 14, 2008) 

(SR–CBOE–2008–12), which established the 

original Temporary Member access fee, for detail 

regarding the rationale in support of the original 

Temporary Member access fee and the process used 

to set that fee, which is also applicable to this 

proposed change to the Temporary Member access 

fee as well. 

8See Securities Exchange Act Release No. 58200 

(July 21, 2008), 73 FR 43805 (July 28, 2008) (SR– 

CBOE–2008–77), which established the original ITP 

access fee, for detail regarding the rationale in 

support of the original ITP access fee and the 

process used to set that fee, which is also applicable 

to this proposed change to the ITP access fee as 

well. 

9 15 U.S.C. 78s(b)(3)(A)(ii). 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(4). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(2). 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Temporary Member access fee and the 

proposed Temporary Member access fee 

itself are appropriate for the same 

reasons set forth in CBOE rule filing SR– 

CBOE–2008–12 with respect to the 

original Temporary Member access fee.7

Similarly, the Exchange believes that 

the process used to set the proposed ITP 

access fee and the proposed ITP access 

fee itself are appropriate for the same 

reasons set forth in CBOE rule filing SR– 

CBOE–2008–77 with respect to the 

original ITP access fee.8

Each of the proposed access fees will 

remain in effect until such time either 

that the Exchange submits a further rule 

filing pursuant to Section 19(b)(3)(A)(ii) 

of the Act 9 to modify the applicable 

access fee or the applicable status (i.e., 

the Temporary Membership status or 

the ITP status) is terminated. 

Accordingly, the Exchange may, and 

likely will, further adjust the proposed 

access fees in the future if the Exchange 

determines that it would be appropriate 

to do so taking into consideration lease 

rates for transferable CBOE 

memberships prevailing at that time. 

The procedural provisions of the 

CBOE Fee Schedule related to the 

assessment of each proposed access fee 

are not proposed to be changed and will 

remain the same as the current 

procedural provisions relating to the 

assessment of that access fee. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,10 in general, and 

furthers the objectives of Section 6(b)(4) 

of the Act,11 in particular, in that it is 

designed to provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among persons using its 

facilities. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose 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 

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 

Because the foregoing rule change 

establishes or changes a due, fee, or 

other charge imposed by the Exchange, 

it has become effective pursuant to 

Section 19(b)(3)(A) of the Act 12 and 

subparagraph (f)(2) of Rule 19b–4 13

thereunder. At any time within 60 days 

of the filing of the proposed rule change, 

the Commission may summarily 

abrogate such rule change if it appears 

to the Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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–CBOE–2008–104 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–CBOE–2008–104. 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 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 No. 

SR–CBOE–2008–104 and should be 

submitted on or before October 31, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–24120 Filed 10–9–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58738; File No. SR–FINRA– 

2008–013] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of Proposed 

Rule Change as Modified by 

Amendment No. 1 Relating to 

Amending NASD Rule 2220 (Options 

Communications With the Public) 

October 6, 2008. 

I. Introduction 

On April 7, 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 (‘‘SEC’’ or ‘‘Commission’’) 

a proposed rule change pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder.2 Notice of the 

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3See Securities Exchange Act Release No. 57720 

(April 25, 2008), 73 FR 24332 (May 2, 2008) (SR– 

FINRA–2008–013) (notice). 

4See letter from Melissa MacGregor, Vice 

President and Assistant General Counsel, Securities 

Industry and Financial Markets Association 

(‘‘SIFMA’’), dated May 22, 2008. 

5Amendment No. 1 responds to the issues raised 

in the comment letter and proposes to amend the 

rule text to reflect certain rule changes that have 

already taken effect, and to change the term 

‘‘Registered Options and Security Futures 

Principal’’ to ‘‘Registered Options Principal,’’ as 

discussed in further detail in the section titled 

‘‘Amended Proposal’’ below. 

6Options communications that qualify as public 

appearances (e.g., seminars, radio, forums) may also 

qualify as other forms of options communications 

(e.g., advertisements, sales literature). For example, 

the writing of a print media article would generally 

qualify as both an advertisement and a public 

appearance. Seminar scripts, handouts, slides, or 

other visual presentations would also generally be 

deemed to be sales literature. 

7See NASD Rule 2210(a)(1), (2), (5) & (6)(A); 

NASD Rule 2211(a)(1), and (2). 8The definition of ‘‘sales literature’’ in NASD 

Rule 2210(a)(2) includes many examples but does 

not include worksheets. In view of that fact that 

other SROs’ definitions of ‘‘sales literature’’ include 

‘‘worksheets,’’ FINRA has expressly included 

‘‘worksheet templates’’ in the definition of sales 

literature in proposed Rule 2220(a)(1)(B) to ensure 

consistency and avoid any ambiguity. 

9See Rule NASD 2211(a)(4). 

10See NASD Rule 2860(b)(2)(T). 

11As discussed in the section titled ‘‘Amended 

Proposal’’ below, FINRA is proposing to change the 

term ‘‘Registered Options and Security Futures 

Principal’’ to ‘‘Registered Options Principal.’’ 

12See Securities Exchange Act Release No. 54217 

(July 26, 2006), 71 F.R. 43831 (August 2, 2006) (SR– 

NASD–2006–011) (approval order). 

proposal was published for comment in 

the Federal Register on May 2, 2008. 3

The Commission received one comment 

letter in response to the proposed rule 

change.4 On September 16, 2008, FINRA 

filed Amendment No. 1 to the proposed 

rule change (‘‘Amendment No. 1’’).5

This order provides notice of the 

proposed rule change, as modified by 

Amendment No. 1, and approves the 

proposed rule change, as amended, on 

an accelerated basis. 

II. Description 

Background 

FINRA and other SROs have sought to 

modernize their rules concerning 

options communications with the 

public. One of the goals of this rule 

modernization is to make the rules on 

options communications consistent 

with the general rules on 

communications with the public. To 

this end, FINRA proposes to: (1) Use, to 

the extent appropriate, the same 

terminology and definitions as in its 

general communications rules; (2) make 

the requirements for principal review of 

correspondence concerning options the 

same as for correspondence generally; 

and (3) update the standards on the 

content of communications that precede 

the delivery of the options disclosure 

document (‘‘ODD’’). A discussion of the 

specific changes is provided below. 

NASD Rule 2220(a) Definitions 

The proposed rule change would 

amend the definitions in NASD Rule 

2220(a) to adopt (and classify 

collectively as ‘‘options 

communications’’) definitions of 

‘‘advertisement,’’ ‘‘sales literature,’’ 

‘‘independently prepared reprint,’’ 

‘‘correspondence,’’ ‘‘institutional sales 

material,’’ and ‘‘public appearance’’ 6

that are consistent with those terms as 

they are defined in FINRA’s general 

advertising rules—NASD Rule 2210 

(Communications with the Public) and 

NASD Rule 2211 (Institutional Sales 

Material and Correspondence).7 With 

respect to the definition of ‘‘sales 

literature,’’ the proposed rule change 

also would make clear that worksheet 

templates, which are commonly used in 

the marketing of options, are included 

within the definition of sales literature.8

The proposed rule change also would 

adopt the definition of ‘‘existing retail 

customer’’ set forth in NASD Rule 

2211.9

In addition, the proposed rule change 

would eliminate NASD Rule 2220’s 

current definition of ‘‘educational 

material,’’ which is a term unique to 

options communications. 

Communications that would previously 

have been considered ‘‘educational 

material’’ would now be classified as 

either ‘‘advertisements’’ or ‘‘sales 

literature.’’ This approach also would 

allow FINRA members to continue to 

create educational material concerning 

options, while at the same time 

providing members with greater 

flexibility in designing such materials. 

The proposed rule change would also 

adopt the definition of ‘‘options’’ as 

defined in NASD Rule 2860(a) 

(Options), FINRA’s general rule 

governing members’ conduct when 

engaging in options activity. NASD Rule 

2220 currently does not have a 

definition for the term ‘‘options.’’ 

Adopting NASD Rule 2860’s definition 

of that term would not only clarify the 

meaning of ‘‘options’’ as it is used in 

NASD Rule 2220, it would also promote 

consistency between the two rules. 

Additionally, the proposed rule 

change would define the term 

‘‘standardized option’’ for purposes of 

NASD Rule 2220 to mean any option 

contract issued, or subject to issuance, 

by The Options Clearing Corporation 

(‘‘OCC’’), that has standardized terms for 

the strike price, expiration date, and 

amount of the underlying security, and 

is traded on a national securities 

exchange registered pursuant to Section 

6(a) of the Act. FINRA proposed this 

definition to help members understand 

the meaning of this term as it is used in 

proposed NASD Rule 2220(d)(1), which 

details the standards applicable to 

communications regarding standardized 

options exempted under SEC Rule 238 

under the Securities Act of 1933 

(‘‘Securities Act’’) that are used prior to 

delivery of the ODD, and to 

communications regarding options not 

exempted under SEC Rule 238 that are 

used prior to delivery of a prospectus 

that meets the requirements of Section 

10(a) of the Securities Act. 

Finally, the proposed rule change 

would define ‘‘options disclosure 

document’’ as having the same meaning 

as the definition of the term ‘‘disclosure 

document’’ defined in NASD Rule 

2860.10 FINRA believes that having a 

specific definition of ‘‘options 

disclosure document’’ would assist 

members in correctly understanding and 

applying the proposed rule changes. 

NASD Rule 2220(b) Approval by 

Registered Options Principal 11 and 

Recordkeeping 

The proposed rule change would 

remove the outdated term ‘‘educational 

material’’ in the requirement in NASD 

Rule 2220(b) to have an options 

principal approve prior to use certain 

options communications and would add 

‘‘independently prepared reprints’’ to 

the types of options communications 

that require pre-use approval by an 

options principal. The proposed rule 

change would also exclude ‘‘completed 

worksheets’’ from those materials 

requiring approval of an options 

principal. Because the definition of 

‘‘sales literature’’ includes ‘‘worksheet 

templates’’ this exclusion would clarify 

that only the templates, and not each 

subsequent worksheet with data, is 

required to be approved by an options 

principal. 

In addition, the proposed rule change 

would include new requirements for 

principal review of correspondence in 

NASD Rule 2220(b) that are consistent 

with recently amended correspondence 

principal approval requirements in 

NASD Rule 2211.12 As noted 

previously, because Rule NASD 2220 

currently does not have a definition of 

correspondence, the proposed rule 

change would incorporate NASD Rule 

2211’s definition of ‘‘correspondence,’’ 

which classifies correspondence as any 

written letter or electronic mail message 

distributed by a member to one or more 

of its existing retail customer and to 

fewer than 25 prospective retail 

customers within any 30 calendar-day 

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13Previously, such material would have been 

examined to determine whether it should be 

considered an advertisement, sales literature, or 

educational material. 

14See NASD Notice to Members 06–45 (August 

2006). FINRA anticipates that other SROs will 

adopt similar standards to FINRA. 

15Previously, such material would have been 

examined to determine whether it should be 

considered an advertisement, sales literature or 

educational material. 

16NASD Rule 2211(b)(1)(B) requires such 

procedures to be in writing and be designed to 

reasonably supervise each registered representative. 

Where such procedures do not require review of all 

institutional sales material prior to use or 

distribution, they must include provision for the 

education and training of associated persons as to 

the firm’s procedures governing institutional sales 

material, documentation of such education and 

training, and surveillance and follow-up to ensure 

that such procedures are implemented and adhered 

to. Evidence that these supervisory procedures have 

been implemented and carried out must be 

maintained and made available to FINRA upon 

request. 

period.13 Pursuant to the proposed rule 

change, correspondence would not need 

to be approved by a Registered Options 

Principal prior to use, unless such 

correspondence is distributed to 25 or 

more existing retail customers within 

any 30 calendar-day period and makes 

any financial or investment 

recommendation or otherwise promotes 

a product or service of the member. Also 

consistent with NASD Rule 2210, any 

written letters, emails, or instant 

messages to 25 or more prospective 

retail customers within any 30 calendarday period would be deemed sales 

literature, which would have to be 

approved prior to use by a Registered 

Options Principal.14 Finally, as with 

NASD Rule 2210, the proposed rule 

change would make clear that all 

correspondence concerning options is 

subject to NASD Rule 3010(d)’s 

supervision and review requirements. 

The proposed rule change would also 

include new requirements for principal 

review of institutional sales material in 

NASD Rule 2220(b)(3) that are 

consistent with the principal review 

requirements for general institutional 

sales material in NASD Rule 2211. As 

noted previously, because NASD Rule 

2220 does not have a definition of 

institutional sales material, the 

proposed rule change would incorporate 

NASD Rule 2211’s definition of 

‘‘institutional sales material,’’ which 

classifies institutional sales material as 

any communication that is distributed 

or made available only to institutional 

customers.15 Pursuant to the proposed 

rule change, each member would be 

required to establish written procedures 

that are appropriate for its business size, 

structure, and customers for the review 

by a Registered Options Principal of 

institutional sales material used by the 

member and its registered 

representatives as described in NASD 

Rule 2211(b)(1)(B).16

The proposed rule change also would 

require that a member retain copies of 

the options communications in 

accordance with Rule 17a–4 under the 

Act. Additionally, a member would be 

required to retain the names of the 

persons who prepared the 

communications and the source of any 

recommendations contained in the 

communications and keep them in the 

form and for the time period required 

for options communications required in 

Rule 17a–4 under the Act. 

NASD Rule 2220(c) FINRA Approval 

Requirements and Review Procedures 

Currently, NASD Rule 2220(c)(1) 

requires members to submit all options 

advertisements and educational material 

to FINRA’s Advertising Regulation 

Department (the ‘‘Department’’) for 

approval at least ten days prior to use 

(or such shorter period as FINRA may 

allow) but does not require members to 

submit sales literature. The effect has 

been that widely disseminated 

communications (i.e., advertisements 

and educational material) used prior to 

delivery of the ODD are filed for 

approval while more targeted 

communications (i.e., sales literature, as 

previously defined) that must be 

preceded or accompanied by the ODD 

are exempted from filing. FINRA 

intends to follow a similar approach in 

the proposed rule change. 

Communications concerning 

standardized options that are likely to 

be widely disseminated such as 

advertisements, sales literature (as 

newly defined), and independently 

prepared reprints would be subject to 

filing under the proposed rule change. 

In contrast, more targeted 

communications—generally 

correspondence—that will be used once 

the applicable ODD or prospectus has 

been delivered would continue to be 

exempt from the filing requirements. In 

addition, as discussed below, 

communications used prior to the 

delivery of the ODD or prospectus 

would be subject to the more stringent 

content standards in subparagraph 

(d)(1). The proposed rule change would 

also modify existing rule text to clarify 

that the filing must occur at least ten 

calendar days prior to use (or such 

shorter period as the Department may 

allow in particular instances). 

The proposed rule change would 

delete NASD Rule 2220(c)(5), which 

prohibits the distribution of any written 

material, except as described in 

subparagraphs (d)(2)(B) and (C), 

respecting options to any person who 

had not previously or 

contemporaneously received one or 

more current options disclosure 

documents. This requirement would be 

subsumed into proposed NASD Rule 

2220(d)(1) which would establish the 

standards for communications that may 

be used prior to delivery of the options 

disclosure document or prospectus. 

NASD Rule 2220(d) Standards 

Applicable to Communications 

The proposed rule change would 

make several amendments to the 

standards applicable to options 

communications contained in NASD 

Rule 2220(d). First, new NASD Rule 

2220(d)(1) would clarify and update the 

standards limiting the content of 

communications regarding standardized 

options, as that term is defined and 

discussed earlier in the proposed rule 

change. Specifically, proposed new 

NASD Rule 2220(d)(1)(A) would 

provide that communications regarding 

standardized options exempted under 

SEC Rule 238 under the Securities Act 

that are used prior to delivery of the 

ODD must be limited to general 

descriptions of the options being 

discussed. This could include a brief 

description of options, including a 

statement that identifies registered 

clearing agencies for options and a brief 

description of the general attributes and 

method of operation of the exchanges on 

which such options are traded, 

including a discussion of how an option 

is priced. In addition, such options 

communications would be required to 

include contact information for 

obtaining a copy of the ODD, but could 

not contain recommendations or past or 

projected performance figures, 

including annualized rates of return, or 

names of specific securities. These 

options communications could also 

include any statement required by any 

state law and administrative authority 

as well as any advertising designs and 

devices, provided such material is not 

misleading. 

Second, proposed new NASD Rule 

2220(d)(1)(B) would provide that 

options communications regarding 

options not exempted under SEC Rule 

238 that are used prior to delivery of a 

prospectus that meets the requirements 

of the Securities Act Section 10(a) must 

conform to SEC Rule 134 or 134a under 

the Securities Act, as applicable. 

Third, the proposed rule change 

would broaden NASD Rule 2220(d)(2), 

which prohibits hedge clauses or 

disclaimers that are not legible, attempt 

to disclaim responsibility, or are 

otherwise inconsistent, by deleting 

references to disclaimers and the 

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17See Rule NASD 2220(d)(2)(D)(ii). 

18See Rule 2210(e). 

19The Guidelines for Options Communications is 

an industry-wide publication prepared by FINRA 

and the options exchanges. The Guidelines explain 

the SROs’ options communications rules and 

interpretations, address frequently asked questions 

and common problems, and provide a framework 

for informative and effective communications with 

the public. 

20See Securities Exchange Act Release No. 57775 

(May 5, 2008), 73 FR 26453 (May 9, 2008) (SRFINRA–2007–035). 

21See Securities Exchange Act Release No. 58333 

(August 8, 2008); 73 FR 47991 (August 15, 2008) 

(SR-FINRA–2008–032) (proposing the same term 

change for related options rules). 

22See supra, note 4. 

23See SIFMA letter. 

24 Id. 

25 Id. 

26 Id. 

27The SEC’s 1995 and 1996 releases on the use 

of electronic media for delivery of information 

provide that a hyperlink contained in sales 

literature is sufficient for electronic delivery of a 

prospectus (or other required information) as it is 

analogous to an investor’s selecting an envelope 

containing a paper prospectus and sales literature 

from a display at an office of a broker-dealer. See 

Securities Act Release No. 7233 (October 6, 1995); 

60 FR 53458 (October 13, 1995); see also Securities 

Act Release No. 7288 (May 9, 1996); 61 FR 24644, 

n.16 (May 15, 1996) (recognizing that the ability to 

jump via hyperlink from the sales literature to view 

and download the prospectus would be sufficient 

to comply with Securities Act Section 5(b) requiring 

sales literature to be preceded or accompanied by 

a final prospectus). 

Delivery of the ODD for purposes of NASD Rule 

2860(b)(11) also can be satisfied by a hyperlink to 

the ODD, subject to the limitations set forth in the 

SEC’s 1995 and 1996 releases. See Notice to 

Members 98–03 (January 1998) (members may 

electronically transmit documents that they are 

required or permitted to furnish to customers under 

NASD Rules, including the delivery of the ODD 

required by NASD Rule 2860(b)(11)); see also 

Securities Exchange Act Release No. 39356 

(November 25, 1997); 62 FR 64421 (December 5, 

1997) (order approving Notice to Members 98–03). 

outdated term ‘‘hedge clauses’’ and 

instead generally prohibiting the use of 

illegible, misleading, or inconsistent 

cautionary statements or caveats. 

Fourth, the proposed rule change 

would require all options 

communications, with the exception of 

institutional sales material, to include a 

statement that supporting 

documentation for any claims 

(including any claims made on behalf of 

options programs or the options 

expertise of sales persons), comparison, 

recommendations, statistics, or other 

technical data, will be supplied upon 

request. Currently, NASD Rule 

2220(d)(2)(D) only requires sales 

literature to include this statement. 

Fifth, the proposed rule change would 

except institutional sales materials from 

being required to include the existing 

required disclosure that options are not 

suitable for all investors. This 

disclaimer appears unnecessary in 

institutional sales material because, for 

purposes of this provision, institutions 

are viewed to be sufficiently 

sophisticated to be aware that options 

are not suitable for all investors. 

Sixth, proposed changes to NASD 

Rules 2220(d)(3) and (d)(4) would 

permit projected and historical 

performance figures in any options 

communications. Currently, only 

communications defined as sales 

literature may contain this 

information.17 The proposed rule 

change also would require all such 

communications regarding standardized 

options to be preceded or accompanied 

by the ODD. In addition, all relevant 

costs would be required to be disclosed 

and reflected in the projections. 

Seventh, the proposed rule change 

would amend Rule NASD 2220(d)(6) to 

provide that any violation by a member 

or associated person of any rule or 

requirement of the SEC or any rule of 

the Securities Investor Protection 

Corporation applicable to member 

communications regarding options will 

be deemed a violation of NASD Rule 

2220. This approach is consistent with 

NASD Rule 2210.18

General Technical Amendments to 

NASD Rule 2220 

The proposed rule change also would 

delete and update outdated rule 

language identified by the Options Self 

Regulatory Council and the 

subcommittee assigned to update the 

SROs’ options communications rules. In 

particular, the proposed rule change 

would replace references throughout 

NASD Rule 2220 to ‘‘material’’ with the 

term ‘‘communications.’’ 

FINRA believes that the proposed rule 

change will better address the needs for 

regulating current options 

communications practices and promote 

consistency across SROs. After these 

proposed changes are filed with the 

SEC, FINRA and other SROs will begin 

work on updating the Guidelines for 

Options Communications.19

Amendment No. 1 

In addition, FINRA is proposing 

several technical changes to reflect 

recently approved changes in the 

current rule text and to change the term 

‘‘Registered Options and Security 

Futures Principal’’ to ‘‘Registered 

Options Principal.’’ The term Registered 

Options Principal (‘‘ROP’’) was recently 

changed to Registered Options and 

Security Futures Principal (‘‘ROSFP’’).20

However, FINRA believes that the 

change to ROSFP has generated 

confusion among the members and 

believes that reverting to ROP will 

alleviate these issues. In addition, 

FINRA believes that using the term ROP 

would promote consistency with the 

rules of options exchanges, all of which 

use the term ROP.21

III. Comment Letter 

The Commission received one 

comment letter from SIFMA in response 

to the proposed rule change.22 FINRA 

responded to this comment letter in 

Amendment No. 1. 

In general, SIFMA supported the 

proposed rule change noting, among 

other things, that it was better aligned 

with the other FINRA communications 

rules.23 Most of SIFMA’s substantive 

comments addressed the requirements 

in NASD Rule 2860 (Options) to deliver 

the Options Disclosure Document 

(‘‘ODD’’) and recent supplements 

thereto.24 FINRA stated that these 

comments, which include a request to 

consider a ‘‘notice-equals-delivery’’ 

standard for ODD supplements, are 

outside the scope of the proposed rule 

change, which is limited to NASD Rule 

2220, and therefore, are not addressed 

in this filing. 

With respect to the proposed rule 

change, SIFMA opposed limitations on 

the types of options communications 

that can be made prior to delivery of the 

ODD because all customers must receive 

the ODD at or prior to the time an 

options account is opened.25 SIFMA 

stated that the requirement to distribute 

the ODD prior to certain types of 

options communications is unnecessary 

and duplicative, and limits firms to 

sending prospective customers 

generalized materials that do not 

provide the necessary information for 

analyzing potential options 

investments.26

FINRA stated in its response, that this 

issue was considered by FINRA and 

other SROs governing options prior to 

filing the proposed rule change. FINRA 

indicated that the subsequent delivery 

of the ODD would not aid an investor 

in understanding or evaluating options 

communications, and therefore decided 

to maintain the existing limitations on 

the types of options communications 

that may precede delivery of the ODD. 

FINRA noted that delivery of the ODD 

can be effected by a hyperlink to the 

ODD, so the requirement that the ODD 

either precede or accompany these 

options communications poses virtually 

no burden with respect to electronic 

communications that would be 

considered sales literature or 

advertisements.27

SIFMA also opposed the requirement 

to deliver the full text of the ODD to 

prospective customers during a seminar 

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Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / Notices 60375 

28See SIFMA letter. 

29 Id. 

30 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). 

31 15 U.S.C. 78o–3(b)(6). 

32See supra note 3. 33 15 U.S.C. 78s(b)(2). 

34 15 U.S.C. 78s(b)(2). 

35 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5 15 U.S.C. 78s(b)(1). 

or a similar in-person meeting.28 SIFMA 

suggested that instead of providing the 

full ODD, firms should provide 

information on how to access the 

ODD.29 FINRA responded by stating that 

the requirement to deliver the ODD to 

prospective customers during a seminar 

or in-person meeting should be 

maintained as it also poses virtually no 

burden and makes the disclosures to a 

prospective customer as accessible as 

other forms of options communications. 

IV. Discussion and Findings 

After careful review of the proposed 

rule change, the comment letter and 

FINRA’s response to the comment letter, 

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.30 In particular, the 

Commission believes that the proposed 

rule change is consistent with the 

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

Act,31 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 the proposed rule change 

would provide the investing public with 

options communications rules that are 

designed to provide appropriate 

safeguards and greater clarity by 

promoting harmonization between 

FINRA’s and other SROs’ options 

communications rules. 

The Commission also finds good 

cause to approve the proposed rule 

change, as modified by Amendment No. 

1, prior to the thirtieth day after the date 

of publication of notice of filing of the 

amendment in the Federal Register. The 

proposed rule change was published in 

the Federal Register on May 2, 2008.32

FINRA submitted Amendment No. 1 in 

response to comments received on the 

proposed rule change and to reflect 

recently approved changes to the rule 

text. Amendment No. 1 does not 

materially modify the scope of the 

proposed rule change as published in 

the Federal Register. The Commission 

believes that approving Amendment No. 

1 will simplify firms’ compliance, and 

is consistent with the public interest 

and the investor protection goals of the 

Act. Finally, the Commission finds that 

it is in the public interest to approve the 

proposed rule change as soon as 

possible to expedite its implementation. 

Accordingly, the Commission believes 

good cause exists, consistent with 

Section 19(b)(2) of the Act 33 to approve 

the proposed rule change, as modified 

by Amendment No. 1, on an accelerated 

basis. 

VI. 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–2008–013 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–2008–013. 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–2008–013 and 

should be submitted on or before 

October 31, 2008. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,34 that the 

proposed rule change (SR–FINRA– 

2008–013), as modified by Amendment 

No. 1, be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.35

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–24121 Filed 10–9–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58733; File No. SR–Phlx– 

2008–67] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

NASDAQ OMX PHLX, Inc. Relating to 

Clarification Regarding CapitalizationWeighting of Indexes 

October 3, 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 29, 2008, the NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’), 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. Phlx 

filed the proposal pursuant to Section 

19(b)(3)(A) of the Act3 and Rule 19b– 

4(f)(6) thereunder,4 which renders the 

proposal effective upon filing with the 

Commission. 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 Exchange, pursuant to Section 

19(b)(1) of the Act5 and Rule 19b–4 

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