53362 Federal Register / Vol. 75, No. 168 / Tuesday, August 31, 2010 / Notices 

1See Securities Exchange Act Release No. 60199 

(June 30, 2009), 74 FR 32668 (July 8, 2009). 

2See letter from Dale E. Brown, CAE, Financial 

Services Institute, to Elizabeth M. Murphy, 

Secretary, Commission, dated July 29, 2009 (‘‘FSI 

letter’’); letter from Joan Hinchman, National 

Society of Compliance Professionals, to Elizabeth 

M. Murphy, Secretary, Commission, dated July 29, 

2009 (‘‘NSCP letter’’); letter from Clifford E. Kirsch 

and Susan Krawczyk, Sutherland Asbill & Brennan 

LLP, on behalf of the Committee of Annuity 

Insurers, to Elizabeth M. Murphy, Secretary, 

Commission, dated July 29, 2009 (‘‘Sutherland 

letter’’); letter from Gary A. Sanders, National 

Association of Insurance and Financial Advisors, to 

Elizabeth M. Murphy, Secretary, Commission, dated 

July 29, 2009 (‘‘NAIFA letter’’); letter from James 

Livingston, National Planning Holdings, Inc., to 

Elizabeth M. Murphy Secretary, Commission, dated 

July 28, 2009 (‘‘NPH letter’’); and letter from 

Stephanie L. Brown, LPL Financial Corporation, to 

Elizabeth M. Murphy, Secretary, Commission, dated 

August 6, 2009 (‘‘LPL letter’’). 

3See letter from Gary L. Goldsholle, FINRA, to 

Elizabeth M. Murphy, Secretary, Commission, dated 

July 30, 2010 (‘‘FINRA Response’’). 

4The current FINRA rulebook consists of (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The new FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see FINRA 

Information Notice, March 12, 2008 (Rulebook 

Consolidation Process). 

5For convenience, the proposed rule change 

refers to Incorporated NYSE Rules as NYSE Rules. 

6FINRA is proposing to replace NASD Rule 3040 

with new provisions in proposed FINRA Rule 

3110(b)(3), as part of the consolidated FINRA rules 

addressing supervision and supervisory controls. 

See Notice of Filing of Proposed Rule Change to 

Adopt FINRA Rules 2090 (Know Your Customer) 

and 2111 (Suitability) in the Consolidated FINRA 

Rulebook, Securities Exchange Act Release No. 

62718 (August 13, 2010), 75 FR 51310 (August 19, 

2010). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62762; File No. SR–FINRA– 

2009–042] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, Relating to Outside 

Business Activities of Registered 

Persons 

August 23, 2010. 

On June 8, 2009, 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 relating to the outside 

business activities of registered persons. 

FINRA proposed to adopt NASD Rule 

3030 (Outside Business Activities of an 

Associated Person) as FINRA Rule 3270 

(Outside Business Activities of 

Registered Persons) in the consolidated 

FINRA rulebook with moderate changes. 

The proposed rule change would delete 

Incorporated NYSE Rule 346 

(Limitations—Employment and 

Association with Members and Member 

Organizations) and its interpretations. 

The proposed rule change was 

published for comment in the Federal 

Register on July 8, 2009.1 The 

Commission received six comments on 

the proposed rule change.2 On July 30, 

2010, FINRA responded to the 

comments.3 Also on July 30, 2010, 

FINRA filed Amendment No. 1 to the 

proposed rule change. 

II. Description of Proposed Rule Change 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),4

FINRA proposed to adopt NASD Rule 

3030 (Outside Business Activities of an 

Associated Person) as FINRA Rule 3270 

(Outside Business Activities of 

Registered Persons) in the Consolidated 

FINRA Rulebook with moderate 

changes. The proposed rule change 

would delete NYSE Rule 3465

(Limitations—Employment and 

Association with Members and Member 

Organizations) and its interpretations. 

However, as further described below, 

the proposed rule change would 

incorporate certain provisions of NYSE 

Rule 346 into new FINRA Rule 3270. 

Proposed FINRA Rule 3270 (Outside 

Business Activities of Registered 

Persons) 

Proposed FINRA Rule 3270 would 

prohibit any registered person from 

being an employee, independent 

contractor, sole proprietor, officer, 

director or partner of another person, or 

being compensated, or having the 

reasonable expectation of compensation, 

from another person as a result of any 

business activity outside the scope of 

the relationship with his or her member 

firm, unless he or she has provided 

prior written notice to the member. The 

proposed rule change would expand the 

obligations imposed under NASD Rule 

3030, which prohibits any registered 

person from being employed by or 

accepting any compensation from any 

person as a result of any outside 

business activity, other than passive 

investment, unless he has provided 

prompt written notice to his member 

firm. In contrast, NYSE Rule 346(b) 

generally prohibits any member (as 

defined in the NYSE rules) or employee 

of a member organization from being 

engaged in any other business, or being 

employed or compensated by any other 

person, or serving as an officer, director, 

partner or employee of another business 

organization or owning any stock or 

having any direct or indirect financial 

interest in any other organization 

engaged in any securities, financial or 

kindred business unless such person 

has made a written request to, and 

received prior written consent from, his 

or her member organization employer. 

The primary difference between the 

existing NASD and NYSE rules is the 

timing of the required notice and the 

requirement in the NYSE rule for a 

member’s prior written consent. With 

respect to timing, FINRA believes that 

registered persons should not be 

permitted to engage in outside business 

activities without the firm’s prior 

knowledge. Potential investor harm 

could ensue in the interim period 

between the time the registered person 

commences an outside business activity 

and the time a firm receives ‘‘prompt’’ 

written notice. Also, because the term 

‘‘prompt’’ is susceptible to differing 

interpretations, adopting a prior written 

notice standard in this context would 

promote consistency within the 

securities industry, though FINRA 

understands that, in practice, many 

firms already require prior written 

notice. Further, a prior written notice 

standard would allow a firm an 

opportunity to determine whether the 

proposed outside business activity is 

properly being characterized by the 

registered representative as an outside 

business activity, or whether it is an 

outside securities activity, subject to 

NASD Rule 3040 (Private Securities 

Transactions of an Associated Person).6

For these reasons, FINRA proposed 

that FINRA Rule 3270 require prior 

written notice whenever a registered 

representative will be an employee, 

independent contractor, sole proprietor, 

officer, director or partner of another 

person, or will be compensated, or have 

the reasonable expectation of 

compensation, from any other person as 

a result of any outside business activity. 

With respect to the requirement in 

NYSE Rule 346(b) for prior written 

consent, FINRA believes that requiring 

prior written consent for outside 

business activities is unnecessary. To 

the extent that these activities may 

nevertheless raise investor protection 

concerns and adversely impact the 

individual’s business within the firm, 

the proposed rule change has 

supplementary material, drawn in part 

from procedures required in NYSE Rule 


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Federal Register / Vol. 75, No. 168 / Tuesday, August 31, 2010 / Notices 53363 

7FINRA is separately considering NASD Rule 

3050 (Transactions for or by Associated Persons) as 

part of the rulebook consolidation process and will 

consider whether transactions subject to NASD 

Rule 3050, as proposed to be amended, also should 

be exempted from proposed FINRA Rule 3270. 

8 15 U.S.C. 78o–3. 

9See supra note 6. 

10 15 U.S.C. 78c(a)(39). 

11For further discussion, see Securities Exchange 

Act Release No. 59586 (March 17, 2009), 74 FR 

12166 (March 23, 2009) (Order Approving SR– 

FINRA–2008–045). 

346(e), that sets forth the obligations of 

a member upon receipt of a written 

notice of a proposed outside business 

activity. Under the proposal as 

amended, the supplementary material 

states that, upon receiving written 

notice under Rule 3270, a member must 

consider whether the proposed activity 

will: (1) Interfere with or otherwise 

compromise the registered person’s 

responsibilities to the member and/or 

the member’s customers or (2) be 

viewed by customers or the public as 

part of the member’s business based 

upon, among other factors, the nature of 

the proposed activity and the manner in 

which it will be offered. Based upon 

this review, the member must evaluate 

the advisability of imposing specific 

conditions or limitations on a registered 

person’s outside business activity, 

including where circumstances warrant, 

prohibiting the activity. A member also 

must evaluate the proposed activity to 

determine whether the activity properly 

is characterized as an outside business 

activity or whether it should be treated 

as an outside securities activity subject 

to the requirements of NASD Rule 3040. 

A member must also keep a record of its 

compliance with these obligations with 

respect to each written notice received 

and must preserve this record for the 

period of time and accessibility 

specified in Rule 17a-4(e)(1) under the 

Securities Exchange Act of 1934. 

The proposed rule change also 

harmonizes and simplifies the standards 

for what constitutes an outside business 

activity. Currently, the NASD and NYSE 

rules have a number of overlapping 

provisions. NYSE Rule 346(b) generally 

requires, subject to certain exceptions, 

written notice whenever a member or 

employee of a member organization is 

employed or compensated by any other 

person; serves as an officer, director, 

partner or employee of another 

organization; or owns any stock or has, 

directly or indirectly, any financial 

interest in any other organization 

engaged in any securities, financial or 

kindred business. NASD Rule 3030 

generally requires notice whenever a 

registered person is employed by or 

accepts any compensation from any 

person as a result of any outside 

business activity, other than passive 

investment. In reconciling these two 

standards, the proposed rule change 

requires prior written notice whenever a 

registered representative will be an 

employee, independent contractor, sole 

proprietor, officer, director or partner of 

another person, or will be compensated, 

or have the reasonable expectation of 

compensation, from any other person as 

a result of any outside business activity. 

The inclusion of the phrase ‘‘or have the 

reasonable expectation of 

compensation’’ addresses situations in 

which an outside activity does not 

immediately yield compensation (e.g., 

where a registered person intends to 

work for a start-up business). FINRA 

believes that a registered person should 

not be able to engage in an activity in 

which he or she reasonably expects to 

be compensated without providing the 

firm with prior written notice, and 

FINRA believes that a rule dependent 

on the prior receipt of compensation is 

too narrow and may be susceptible to 

abuse. Proposed Rule 3270 retains the 

exemptions in NASD Rule 3030 for 

‘‘passive investments’’ and activities 

subject to the requirements of NASD 

Rule 3040.7

In addition, the proposed rule would 

streamline the text by replacing the 

phrase ‘‘person associated with a 

member in any registered capacity’’ with 

‘‘registered person’’ and would re-title 

the rule ‘‘Outside Business Activities of 

Registered Persons’’ to better reflect its 

application to registered persons. 

Deleted Provisions of Incorporated 

NYSE Rule 346 and Its Supplementary 

Material and Interpretations 

FINRA proposes to delete other 

provisions of NYSE Rule 346 that are 

unnecessary and/or duplicative of 

provisions in the federal securities laws 

or the FINRA Rulebook and delete 

NYSE Rule Interpretations that are 

unnecessary or inconsistent with 

Proposed Rule 3270. 

NYSE Rule 346(a) and related NYSE 

Interpretation 346/01 require natural 

persons not associated with entities that 

are registered broker-dealers to register 

with the Commission unless specifically 

exempted by the Exchange Act. FINRA 

has proposed to delete these provisions 

as redundant in light of Section 15(a) of 

the Exchange Act.8

NYSE Rule 346(c) provides that where 

a member organization approves an 

employee’s participation in a private 

securities transaction in which regard 

the employee has or may receive selling 

compensation, the transaction shall be 

recorded on the books and records of 

the member organization, which shall 

supervise such participation as if the 

transaction were executed on its behalf. 

FINRA has proposed to delete this 

provision as redundant of NASD Rule 

3040 (Private Securities Transactions of 

an Associated Person).9

NYSE Rule 346(d) provides that no 

member shall qualify more than one 

member organization for membership. 

This provision is inconsistent with 

FINRA’s approach to membership, 

which allows the same individual to 

qualify more than one firm for 

membership, as appropriate. FINRA 

examines separately the merits of each 

membership application and has 

proposed to delete the prohibition in the 

NYSE rule. 

NYSE Rule 346(e) requires every 

employee of a member organization who 

is assigned or delegated any 

responsibility or authority pursuant to 

NYSE Rule 342 to devote his entire time 

during business hours to the business of 

such member organization unless an 

alternative arrangement has been 

approved in writing by the member 

organization. FINRA believes that the 

existing and proposed rules on 

supervision and outside business 

activities adequately ensure that the 

member firm’s business is not adversely 

affected by outside activities. Moreover, 

associated persons in the independent 

broker-dealer channel at times devote 

substantial time to non-member 

business and this provision would 

create unnecessary administrative 

burdens if applied to them. 

Accordingly, FINRA has proposed to 

delete this provision. 

NYSE 346(f) provides that unless 

otherwise permitted by the Exchange, 

no member, member organization, 

approved person, employee or any 

person directly or indirectly controlling, 

controlled by or under common control 

with a member or member organization 

shall have associated with him or it any 

person who is known, or in the exercise 

of reasonable care should be known, to 

be subject to any ‘‘statutory 

disqualification’’ defined in Section 

3(a)(39) of the Exchange Act.10 In 

connection with FINRA’s consolidation 

transaction, FINRA amended its 

definition of disqualification in its ByLaws to align with the Exchange Act 

definition, thereby incorporating 

additional categories of statutory 

disqualification, including certain 

affiliated relationships.11 Accordingly, 

FINRA has proposed to delete NYSE 

Rule 346(f) as redundant. 

Finally, FINRA has proposed to delete 

NYSE Rule Interpretations 346/02 and 

/03, which address personal business 


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53364 Federal Register / Vol. 75, No. 168 / Tuesday, August 31, 2010 / Notices 

12NPH letter. 

13FSI letter, LPL letter. 

14FSI letter, LPL letter. 

15NAIFA letter. 

16NAIFA letter. 

17Sutherland letter. This commenter requested 

guidance on facts and circumstances that would be 

relevant in making this initial determination. Also, 

the commenter recommended that FINRA clarify 

that the initial determination should be made by the 

member, based on information provided by the 

registered person, and that it would not be triggered 

absent a concrete understanding or agreement 

between the registered person and its outside 

business that compensation will or will likely be 

paid over time. 

18FSI letter. 

19FSI letter. 

20FSI letter, LPL letter, NPH letter. 

21FSI letter, LPL letter. 

expenses and factors to consider when 

approving outside activities, FINRA 

believes the Interpretations are 

unnecessary or inconsistent with 

proposed FINRA Rule 3270. In 

particular, the provisions in NYSE Rule 

Interpretation 346/02 requiring a firm to 

assume responsibility for all activities 

effected on its behalf and under its 

name are addressed by other FINRA 

rules, including supervision rules. In 

addition, FINRA has chosen not to 

impose a requirement for firms to 

approve all advertisements of an outside 

business, although a firm may impose 

such restrictions as part of its 

obligations under supplementary 

material .01. FINRA requires firms to 

approve all advertisements for member 

firm business, even if an advertisement 

relates to the firm’s non-securities 

business; however, FINRA does not 

believe that approval should be required 

for outside business activities permitted 

under the proposed rule change. 

For the reasons noted above, FINRA 

has proposed to transfer NASD Rule 

3030 into the Consolidated FINRA 

Rulebook with the changes described 

herein. In addition, FINRA has 

proposed to delete NYSE Rule 346 and 

its interpretations from the Transitional 

Rulebook also as described herein. 

III. Summary of Comments and 

Amendment No. 1 

Prior Member Consent to Outside 

Business Activities of Registered Persons 

Certain commenters suggested that 

FINRA amend proposed FINRA Rule 

3270 to require a member’s consent 

before a registered person may engage in 

any outside business activity. One 

commenter noted that in practice most 

registered persons are required to get 

written acknowledgement from their 

firm prior to engaging in outside 

business activities, and believes that 

requiring member consent ensures that 

the registered person does not engage in 

an outside business activity before the 

member completes its due diligence as 

required under the proposed 

Supplementary Material in proposed 

FINRA Rule 3270.12 According to two 

commenters, allowing a registered 

person to engage in outside business 

activities upon notice of the proposed 

activity without a requirement that the 

firm consent to such activity places the 

firm in a position of risk during the 

interim period since the firm may not 

have had ample time to review the 

matter.13 Certain commenters believed 

the proposed rule should require an 

affirmative written response from the 

member 14 or a written response noting 

any objections or concerns to the 

proposed activity.15 One commenter 

supported the proposal not to 

incorporate a member consent 

requirement but notes that the 

requirements of proposed 

Supplementary Material .01 are the 

functional equivalent of requiring prior 

consent from the member.16

FINRA responded that it does not 

plan to amend the proposal to 

incorporate a prior member consent 

requirement for a registered person’s 

outside business activities as such a 

requirement is not necessary for all 

types of firms. FINRA noted that the 

proposal does not preclude any member 

from including a prior member consent 

requirement as part of its procedures to 

manage the outside business activities 

of its registered persons. 

‘‘Compensation’’ and ‘‘Reasonable 

Expectation of Compensation’’ 

One commenter believed that the 

‘‘reasonable expectation of 

compensation’’ standard in proposed 

FINRA Rule 3270 is too vague, 

particularly if this initial determination 

is made by the registered person, and 

expressed concern that FINRA will 

question the initial determinations 

made by registered persons and/or their 

supervisors.17 Another commenter 

requested that FINRA define the term 

‘‘compensation.’’ 18 FINRA, in its 

response, stated that it believes that the 

standards in the proposed rule are 

appropriate and workable; that members 

will demand sufficient information to 

enable them to make the necessary 

determinations; and that the 

reasonableness of a determination will 

not be judged in hindsight, but rather 

based on the information requested and 

obtained at the time of the registered 

person’s prior written notice. Also in its 

response, FINRA stated that it does not 

intend to amend the proposal to adopt 

a definition for the term ‘‘compensation’’ 

in the proposed rule. FINRA notes that 

neither NASD Rule 3030 nor NYSE Rule 

346, upon which the proposed rule 

change is based, includes a definition of 

the term ‘‘compensation,’’ and FINRA 

believes that incorporating a definition 

of this term in the proposed rule may 

frustrate the intent and application of 

the rule as it may encourage registered 

persons to structure outside business 

arrangements to purposefully evade the 

requirements of the proposed rule. 

Also, a commenter suggested 

changing language in the general 

requirement of proposed FINRA Rule 

3270.19 The proposed rule provides that 

‘‘[n]o registered person may be an 

employee, independent contractor, sole 

proprietor, officer, director or partner of 

another person, or be compensated, or 

have the reasonable expectation of 

compensation from any other person as 

a result of any business activity outside 

the scope of the relationship with his or 

her member.’’ The commenter requested 

that the phrase ‘‘as a result of any 

business activity’’ be replaced with ‘‘in 

conjunction with an established 

business enterprise.’’ The commenter 

advocated a revised approach noting 

that an individual is an employee, 

officer or director in a business entity or 

not, so it does not make sense to 

connect these relationships to the 

phrase ‘‘as a result of any business 

activity.’’ In its response, FINRA notes 

that the reference to ‘‘as a result of any 

business activity’’ is from NASD Rule 

3030 and has not been changed under 

the proposal. FINRA states that the 

phrase the compensation language 

directly preceding it and, accordingly, 

the proposed rule prohibits a registered 

person from either acting in one of the 

enumerated roles or from being 

compensated by, or having the 

reasonable expectation of compensation 

from, any other person as a result of any 

business activity outside the scope of 

the relationship with his or her member 

firm, unless he or she has provided 

prior notice to the member. FINRA does 

not intend to amend the proposal to 

incorporate the suggested language. 

Reporting Material Changes to Outside 

Business Activities 

A few commenters requested that the 

proposed rule impose an ongoing 

obligation on registered persons to 

provide prior written notice to a 

member should an outside business 

activity undergo a material change.20

Two commenters noted that without 

such a requirement, a member has no 

way to make knowledgeable decisions 

regarding these activities subjecting the 

firm to regulatory risk and harm.21 One 


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22NSCP letter. 23FSI letter, LPL letter, NAIFA letter, Sutherland 

letter. 24FSI letter, LPL letter, NAIFA letter, NPH letter, 

NSCP letter, Sutherland letter. 25NPH letter. 

26FSI letter, NAIFA letter. 

27LPL letter, NPH letter, NSCP letter. 

28FSI letter, NSCP letter, Sutherland letter. 

29LPL letter. 

30NSCP letter. 

31Sutherland letter. 

32 In approving the proposed rule change, the 

Commission has considered the rule change’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

33See 15 U.S.C. 78o–3(b)(6). 

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

commenter requested clarification on a 

member’s liability in the event an 

outside business activity changes over 

time.22 In its response, FINRA states 

that it believes that the requirement for 

a registered person to amend or 

supplement the nature of the prior 

written notice is implicit in the 

proposed rule change. FINRA explains 

that a registered person’s prior written 

notice is valid only to the extent that it 

continues to accurately describe the 

outside business activity and, thus, it is 

incumbent on the registered person to 

provide prior written notice before 

altering the nature of any outside 

business activity previously disclosed in 

writing to the firm. FINRA also notes 

that a member’s supervisory system 

should demand that each registered 

person notify the member in the event 

of a material change to his or her 

outside business activities. 

Supplementary Material .01 

(Obligations of Member Receiving 

Notice) 

All of the comment letters received by 

the Commission addressed proposed 

Supplementary Material .01. The 

Supplementary Material initially had 

provided that firms must review the 

registered person’s participation in the 

outside activity to determine whether it 

raises investor protection concerns. As 

initially proposed, the Supplementary 

Material would have required that a 

member must make a determination as 

to whether the proposed activity raises 

investor protection concerns, and if so, 

the firm must implement procedures or 

restrictions on the activity to protect 

investors, or prohibit the activity. 

Certain commenters opposed the 

proposed Supplementary Material, in 

whole or in part, and request that it be 

removed from the proposal.23

Generally, the commenters believed 

that the proposal exceeds FINRA’s 

jurisdiction by imposing on members a 

supervisory obligation for the outside 

business activities of its registered 

persons.24 The commenters stated that 

members do not have the resources to 

supervise the wide variety of outside 

business activities in which their 

registered persons engage. One 

commenter further provided that this 

limited knowledge or expertise would 

impede the determination of whether an 

outside business activity raises investor 

protection concerns.25 Certain other 

commenters believed that the proposed 

Supplementary Material would distract 

members from core supervisory 

functions by requiring supervision of 

activities beyond their purview or 

practical control.26

Certain commenters suggested that 

FINRA clarify the due diligence 

required in making a determination 

whether a proposed outside business 

activity raises ‘‘investor protection 

concerns’’ 27 and, further, how FINRA 

would define the terms ‘‘investor,’’ 

‘‘protect investors’’ and ‘‘investor 

protection concerns’’ for purposes of the 

proposed rule.28 One commenter noted 

that the term ‘‘investor protection 

concerns’’ could be subject to 

interpretation and applied differently 

across member firms.29 Another 

commenter stated that almost any 

activity could raise investor protection 

concerns and suggests that, unless this 

term is defined as it relates to nonsecurities activities, FINRA should 

remove it from the proposal.30 One 

commenter believed the Supplementary 

Material, as initially proposed, was 

overly broad because many outside 

business activities have nothing to do 

with traditional investors or investor 

protection issues.31

In response to the comments received 

by the Commission, FINRA is amending 

proposed Supplementary Material .01. 

Under the Supplementary Material, as 

amended, FINRA will expect members 

to assess the impact of the outside 

activity on the member’s business and 

the member’s customers, as well as the 

extent to which customers or the public 

would perceive the outside activity to 

be part of the member’s business. 

Specifically, the revised proposal 

provides that, upon receipt of a written 

notice under proposed FINRA Rule 

3270, a member shall consider whether 

the proposed activity will: (1) Interfere 

with or otherwise compromise the 

registered person’s responsibilities to 

the member and/or the member’s 

customers or (2) be viewed by customers 

or the public as part of the member’s 

business based upon, among other 

factors, the nature of the proposed 

activity and the manner in which it will 

be offered. Additionally, based on the 

member’s review of such factors, the 

member would be required to evaluate 

the advisability of imposing specific 

conditions or limitations on a registered 

person’s outside business activity, 

including where circumstances warrant, 

prohibiting the activity. 

IV. Discussion and Finding 

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 applicable to a national 

securities association.32 The 

Commission believes that the proposed 

rule change, as amended, is consistent 

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

of the Act, 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.33 The 

proposed rule change will clarify and 

streamline NASD Rule 3030 for 

adoption as a FINRA rule in the new 

Consolidated FINRA Rulebook, while 

also implementing additional 

protections such as the need for 

registered persons to provide prior 

written notice to its member firms of 

proposed outside business activities and 

for firms to implement a system to 

assess the risk that these outside 

business activities may cause potential 

harm to investors and to manage these 

risks by taking appropriate actions as 

prescribed by the proposed rule. 

V. Accelerated Approval 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,34 for approving the proposed rule 

change, as amended by Amendment No. 

1 thereto, prior to the 30th day after the 

date of publication in the Federal 

Register. The changes proposed in 

Amendment No. 1 do not raise novel 

regulatory concerns. Moreover, 

accelerating approval of this proposal 

should benefit FINRA member firms 

and investors by streamlining and 

clarifying a member’s obligations upon 

receipt of notice of a proposed outside 

business activity by a registered person. 

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: 


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53366 Federal Register / Vol. 75, No. 168 / Tuesday, August 31, 2010 / Notices 

35 15 U.S.C. 78s(b)(2). 

36 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The single-stock circuit breaker pilot program 

was initially approved on June 10, 2010. See 

Securities Exchange Act Release Nos. 62251 (June 

10, 2010), 75 FR 34183 (June 16, 2010); 62252 (June 

10, 2010), 75 FR 34186 (June 16, 2010). 

5 15 U.S.C. 78s(b)(2). 

6See Securities Exchange Act Release No. 

62688A (August 11, 2010), 75 FR 51138 (August 18, 

2010). 

7 15 U.S.C. 78s(b)(2). 

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

2 17 CFR 240.19b–4. 

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–2009–042 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2009–042. 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 Web site viewing and 

printing 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–2009–042 and 

should be submitted on or before 

September 21, 2010. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,35 that the 

proposed rule change (SR–FINRA– 

2009–042), as amended, be, and hereby 

is, approved on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–21606 Filed 8–30–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62763; File Nos. SR–BATS– 

2010–018; SR–BX–2010–044; SR–CBOE– 

2010–065; SR–CHX–2010–14; SR–EDGA– 

2010–05; SR–EDGX–2010–05; SR–FINRA– 

2010–033; SR–ISE–2010–66; SR–NYSE– 

2010–49; SR–NYSEAmex–2010–63; SR– 

NYSEArca–2010–61; SR–NASDAQ–2010– 

079; SR–NSX–2010–08] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Chicago Board 

Options Exchange, Incorporated; 

Chicago Stock Exchange, Inc.; EDGA 

Exchange, Inc.; EDGX Exchange, Inc.; 

Financial Industry Regulatory 

Authority, Inc.; International Securities 

Exchange LLC; NASDAQ OMX BX, 

Inc.; The NASDAQ Stock Market LLC; 

National Stock Exchange, Inc.; New 

York Stock Exchange LLC; NYSE 

Amex LLC; NYSE Arca, Inc.; Notice of 

Designation of Longer Period for 

Commission Action on Proposed Rule 

Changes Relating to Trading Pauses 

Due to Extraordinary Market Volatility 

August 24, 2010. 

On June 30, 2010, each of BATS 

Exchange, Inc., Chicago Board Options 

Exchange, Incorporated, Chicago Stock 

Exchange, Inc., EDGA Exchange, Inc., 

EDGX Exchange, Inc., Financial 

Industry Regulatory Authority, Inc., 

International Securities Exchange, LLC, 

The NASDAQ Stock Market LLC, 

NASDAQ OMX BX, Inc., National Stock 

Exchange, Inc., New York Stock 

Exchange LLC, NYSE Amex LLC, and 

NYSE Arca, Inc. filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) 1 of the Securities Exchange Act 

of 1934 (‘‘Act’’),2 and Rule 19b–4 

thereunder,3 proposed rule changes to 

amend certain of their respective rules 

to add securities to the single-stock 

circuit breaker pilot program.4

Section 19(b)(2) of the Act 5 provides 

that, within thirty-five days of the 

publication of notice of the filing of a 

proposed rule change, or within such 

longer period as the Commission may 

designate up to ninety days of such date 

if it finds such longer period to be 

appropriate and publishes its reasons 

for so finding, the Commission shall 

either approve the proposed rule change 

or institute proceedings to determine 

whether the proposed rule change 

should be disapproved. The 

Commission extended this time period 

from August 11, 2010 to August 25, 

2010.6 The Commission is again 

extending this time period. 

The Commission finds it appropriate 

to designate a longer period within 

which to take action on the proposed 

rule changes so that it has sufficient 

time to consider these proposed rule 

changes, which relate to the addition of 

securities to the single-stock circuit 

breaker pilot program, and issues raised 

in the comment letters that have been 

submitted in connection with these 

filings. 

Accordingly, the Commission, 

pursuant to Section 19(b)(2) of the Act,7

designates September 10, 2010, as the 

date by which the Commission should 

either approve or institute proceedings 

to determine whether to disapprove the 

proposed rule changes. 

By the Commission. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–21630 Filed 8–30–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62766; File No. SR–Phlx– 

2010–117] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Routing Fees, the Monthly Cap and 

Electronic Auctions 

August 25, 2010. 

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 August 

23, 2010, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 


srobinson on DSKHWCL6B1PROD with NOTICES