540 Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 

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

2 17 CFR 240.19b–4. 

3The Commission approved Nasdaq Rule 5735 in 

Securities Exchange Act Release No. 57962 (June 

13, 2008) 73 FR 35175 (June 20, 2008) (SR– 

NASDAQ–2008–039). There are already multiple 

actively-managed funds listed on the Exchange; see 

e.g., Securities Exchange Act Release No. 72411 

(June 17, 2014), 79 FR 35598 (June 23, 2014) (SR– 

NASDAQ–2014–40) (order approving listing and 

trading of Calamos Focus Growth ETF). The 

Exchange believes the proposed rule change raises 

no significant issues not previously addressed in 

those prior Commission orders. 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized 

as an open-end investment company or similar 

entity that invests in a portfolio of securities 

selected by its investment adviser consistent with 

its investment objectives and policies. In contrast, 

an open-end investment company that issues Index 

Fund Shares, listed and traded on the Exchange 

under Nasdaq Rule 5705, seeks to provide 

investment results that correspond generally to the 

price and yield performance of a specific foreign or 

domestic stock index, fixed income securities index 

or combination thereof. 

5The Commission has issued an order granting 

certain exemptive relief to the Trust under the 1940 

Act (the ‘‘Exemptive Order’’). See Investment 

Company Act Release No. 30607 (July 23, 2013). In 

compliance with Nasdaq Rule 5735(b)(5), which 

applies to Managed Fund Shares based on an 

international or global portfolio, the Trust’s 

application for exemptive relief under the 1940 Act 

states that the Fund will comply with the federal 

securities laws in accepting securities for deposits 

and satisfying redemptions with redemption 

securities, including that the securities accepted for 

deposits and the securities used to satisfy 

redemption requests are sold in transactions that 

would be exempt from registration under the 

Securities Act of 1933 (15 U.S.C. 77a). 

6See Registration Statement on Form N–1A for 

the Trust filed on July 24, 2014 (File Nos. 333– 

187668 and 811–22819). The descriptions of the 

Fund and the Shares contained herein are based, in 

part, on information in the Registration Statement. 

7An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940 (the ‘‘Advisers Act’’). As a 

result, the Adviser, the Sub-Adviser and their 

related personnel are subject to the provisions of 

Rule 204A–1 under the Advisers Act relating to 

codes of ethics. This Rule requires investment 

advisers to adopt a code of ethics that reflects the 

fiduciary nature of the relationship to clients as 

well as compliance with other applicable securities 

laws. Accordingly, procedures designed to prevent 

the communication and misuse of non-public 

information by an investment adviser must be 

consistent with Rule 204A–1 under the Advisers 

Act. In addition, Rule 206(4)–7 under the Advisers 

Act makes it unlawful for an investment adviser to 

provide investment advice to clients unless such 

investment adviser has (i) adopted and 

implemented written policies and procedures 

reasonably designed to prevent violation, by the 

investment adviser and its supervised persons, of 

the Advisers Act and the Commission rules adopted 

thereunder; (ii) implemented, at a minimum, an 

annual review regarding the adequacy of the 

policies and procedures established pursuant to 

subparagraph (i) above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

consider the matters raised in each 

docket. 

2. Pursuant to 39 U.S.C. 505, James F. 

Callow is appointed to serve as an 

officer of the Commission to represent 

the interests of the general public in 

these proceedings (Public 

Representative). 

3. Comments are due no later than 

January 7, 2015. 

4. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

By the Commission. 

Shoshana M. Grove, 

Secretary. 

[FR Doc. 2014–30968 Filed 1–5–15; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73960; File No. SR– 

NASDAQ–2014–127] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change 

Relating to the Listing and Trading of 

the Shares of the Tuttle Tactical 

Management U.S. Core ETF of ETFis 

Series Trust I 

December 30, 2014. 

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 December 

19, 2014, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or the ‘‘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 Nasdaq. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to list and trade the 

shares of the Tuttle Tactical 

Management U.S. Core ETF (the 

‘‘Fund’’), a series of ETFis Series Trust 

I (the ‘‘Trust’’), under Nasdaq Rule 5735 

(‘‘Managed Fund Shares’’).3 The shares 

of the Fund are collectively referred to 

herein as the ‘‘Shares.’’ 

The text of the proposed rule change 

is available at http://

nasdaq.cchwallstreet.com/, at Nasdaq’s 

principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of, and basis for, the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. 

Nasdaq has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares of the Fund under 

Nasdaq Rule 5735, which governs the 

listing and trading of Managed Fund 

Shares 4 on the Exchange. The Fund will 

be an actively managed exchange-traded 

fund (‘‘ETF’’). The Shares will be 

offered by the Trust, which was 

established as a Delaware statutory trust 

on September 20, 2012.5 The Trust is 

registered with the Commission as an 

investment company and has filed a 

registration statement on Form N–1A 

(‘‘Registration Statement’’) with the 

Commission.6 The Fund is a series of 

the Trust. 

Etfis Capital LLC will be the 

investment adviser (‘‘Adviser’’) to the 

Fund. Tuttle Tactical Management, LLC 

will be the investment sub-adviser 

(‘‘Sub-Adviser’’) to the Fund. ETF 

Distributors LLC (the ‘‘Distributor’’) will 

be the principal underwriter and 

distributor of the Fund’s Shares. The 

Bank of New York Mellon (‘‘BNY 

Mellon’’) will act as the administrator, 

accounting agent, custodian, and 

transfer agent to the Fund. 

Paragraph (g) of Rule 5735 provides 

that if the investment adviser to the 

investment company issuing Managed 

Fund Shares is affiliated with a brokerdealer, such investment adviser shall 

erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such investment 

company portfolio.7 In addition, 

paragraph (g) further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material, non-public information 

regarding the open-end fund’s portfolio. 

Rule 5735(g) is similar to Nasdaq Rule 

5705(b)(5)(A)(i); however, paragraph (g) 

in connection with the establishment of 

a ‘‘fire wall’’ between the investment 

adviser and the broker-dealer reflects 


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Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 541 

8As described in the Registration Statement, an 

ETF is an investment company registered under the 

1940 Act that holds a portfolio of securities. Many 

ETFs are designed to track the performance of a 

securities index, including industry, sector, country 

and region indexes. ETFs included in the Fund will 

be listed and traded in the U.S. on registered 

exchanges. The Fund may invest in the securities 

of ETFs in excess of the limits imposed under the 

1940 Act pursuant to exemptive orders obtained by 

other ETFs and their sponsors from the 

Commission. The ETFs in which the Fund may 

invest include Index Fund Shares (as described in 

Nasdaq Rule 5705), Portfolio Depositary Receipts 

(as described in Nasdaq Rule 5705), and Managed 

Fund Shares (as described in Nasdaq Rule 5735). 

While the Fund may invest in leveraged ETFs (e.g., 

2X or 3X), the Fund will not invest in inverse or 

inverse leveraged ETFs. The shares of ETFs in 

which a Fund may invest will be limited to 

securities that trade in markets that are members of 

the Intermarket Surveillance Group (‘‘ISG’’), which 

includes all U.S. national securities exchanges, or 

are parties to a comprehensive surveillance sharing 

agreement with the Exchange. 

9The ETNs are limited to those described in 

Nasdaq Rule 5710. 

10Such securities will include securities that are 

issued or guaranteed by the U.S. Treasury, by 

various agencies of the U.S. government, or by 

various instrumentalities, which have been 

established or sponsored by the U.S. government. 

U.S. Treasury obligations are backed by the ‘‘full 

faith and credit’’ of the U.S. government. Securities 

issued or guaranteed by federal agencies and U.S. 

government-sponsored instrumentalities may or 

may not be backed by the full faith and credit of 

the U.S. government. 

11The Commission has stated that long-standing 

Commission guidelines have required open-end 

funds to hold no more than 15% of their net assets 

in illiquid securities and other illiquid assets. See 

Investment Company Act Release No. 28193 (March 

11, 2008), 73 FR 14618 (March 18, 2008), FN 34. 

See also Investment Company Act Release No. 5847 

(October 21, 1969), 35 FR 19989 (December 31, 

1970) (Statement Regarding ‘‘Restricted 

Securities’’); Investment Company Act Release No. 

18612 (March 12, 1992), 57 FR 9828 (March 20, 

1992) (Revisions of Guidelines to Form N–1A). A 

fund’s portfolio security is illiquid if it cannot be 

disposed of in the ordinary course of business 

within seven days at approximately the value 

ascribed to it by the fund. See Investment Company 

Act Release No. 14983 (March 12, 1986), 51 FR 

9773 (March 21, 1986) (adopting amendments to 

Rule 2a–7 under the 1940 Act); Investment 

Company Act Release No. 17452 (April 23, 1990), 

55 FR 17933 (April 30, 1990) (adopting Rule 144A 

under the Securities Act of 1933). 

12 26 U.S.C. 851. 

the applicable open-end fund’s 

portfolio, not an underlying benchmark 

index, as is the case with index-based 

funds. The Adviser and Sub-Adviser are 

not registered as broker-dealers; 

however the Adviser (but not the SubAdviser) is affiliated with a brokerdealer and has implemented a fire wall 

with respect to such broker-dealer 

regarding access to information 

concerning the composition and/or 

changes to the portfolio, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding the portfolio. In the event (a) 

the Adviser or the Sub-Adviser becomes 

newly affiliated with a broker-dealer or 

registers as a broker-dealer, or (b) any 

new adviser or sub-adviser is a 

registered broker-dealer or becomes 

affiliated with a broker-dealer, it will 

implement a fire wall with respect to its 

relevant personnel and/or such brokerdealer affiliate, if applicable, regarding 

access to information concerning the 

composition and/or changes to the 

portfolio and will be subject to 

procedures designed to prevent the use 

and dissemination of material nonpublic information regarding such 

portfolio. 

Tuttle Tactical Management U.S. Core 

ETF 

Principal Investments 

The Fund’s investment objective will 

be to provide long-term capital 

appreciation while maintaining a 

secondary emphasis on capital 

preservation, primarily through 

investments in the U.S. equity market. 

The Fund will be an actively managed 

ETF that seeks to achieve its investment 

objective by utilizing a long-only, multistrategy, tactically-managed exposure to 

the U.S. equity market. To obtain such 

exposure, the Sub-Adviser will invest, 

under normal circumstances, not less 

than 80% of its assets in exchangetraded funds (‘‘ETFs’’),8 exchangetraded notes (‘‘ETNs’’),9 exchangetraded trusts that hold commodities 

(‘‘ETTs’’) (collectively, ETFs, ETNs and 

ETTs are referred to hereinafter as 

‘‘exchange-traded products’’ or ‘‘ETPs’’), 

individually selected U.S. exchangetraded common stocks (when the SubAdviser determines that is more 

efficient or otherwise advantageous to 

do so), money market funds, U.S. 

treasuries or money market 

instruments.10 To the extent that the 

Fund invests in ETFs or money market 

funds to gain domestic exposure, the 

Fund is considered, in part, a ‘‘fund of 

funds.’’ 

The Sub-Adviser will employ four 

tactical models in seeking to achieve the 

Fund’s investment objective: ‘‘S&P 500 

Absolute Momentum,’’ ‘‘Relative 

Strength Equity,’’ ‘‘Beta Opportunities,’’ 

and ‘‘Short-Term S&P 500 Counter 

Trend.’’ While the Sub-Adviser will 

generally seek to maintain an equal 

weighting among these four tactical 

models, market movements may result 

in the Fund being overweight or 

underweight one or more of the tactical 

models. 

Other Investments 

In order to seek its investment 

objective, the Fund does not employ 

other strategies outside of the abovedescribed ‘‘Principal Investments.’’ 

However, the Fund may, from time to 

time, take temporary defensive positions 

that are inconsistent with the Fund’s 

principal investment strategies in an 

attempt to respond to adverse market, 

economic, political, or other conditions. 

In such circumstances, the Fund may 

also hold up to 100% of its portfolio in 

cash or other short-term, highly liquid 

investments, such as money market 

instruments, U.S. government 

obligations, commercial paper, 

repurchase agreements or other cash 

equivalents. When the Fund takes a 

temporary defensive position, the Fund 

may not be able to achieve its 

investment objective. 

Investment Restrictions 

Under normal market conditions, the 

Fund will invest not less than 80% of 

its total assets in shares of ETPs, 

individually selected U.S. exchangetraded common stocks (when the SubAdviser determines that is more 

efficient or otherwise advantageous to 

do so), money market funds, U.S. 

treasuries or money market instruments. 

The Fund will not purchase securities of 

open-end or closed-end investment 

companies except in compliance with 

the 1940 Act. The Fund will not use 

derivative instruments, including 

options, swaps, forwards and futures 

contracts, both listed and over-thecounter (‘‘OTC’’). Under normal 

circumstances, the Fund will not invest 

more than 25% of its total assets in 

leveraged ETPs. 

The Fund may hold up to an aggregate 

amount of 15% of its net assets in 

illiquid securities and other illiquid 

assets (calculated at the time of 

investment). The Fund will monitor its 

portfolio liquidity on an ongoing basis 

to determine whether, in light of current 

circumstances, an adequate level of 

liquidity is being maintained, and will 

consider taking appropriate steps in 

order to maintain adequate liquidity if, 

through a change in values, net assets, 

or other circumstances, more than 15% 

of the Fund’s net assets are held in 

illiquid securities or other illiquid 

assets. Illiquid securities and other 

illiquid assets include securities subject 

to contractual or other restrictions on 

resale and other instruments that lack 

readily available markets as determined 

in accordance with Commission staff 

guidance.11

The Fund intends to qualify for and 

to elect to be treated as a separate 

regulated investment company under 

SubChapter M of the Internal Revenue 

Code.12


tkelley on DSK3SPTVN1PROD with NOTICES
542 Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 

13 In re Securities Trading Practices of Investment 

Companies, SEC Rel. No. IC–10666 (April 27, 1979). 

Under the 1940 Act, the Fund’s 

investment in investment companies 

will be limited to, subject to certain 

exceptions: (i) 3% of the total 

outstanding voting stock of any one 

investment company, (ii) 5% of the 

Fund’s total assets with respect to any 

one investment company, and (iii) 10% 

of the Fund’s total assets with respect to 

investment companies in the aggregate. 

The Fund’s investments will be 

consistent with its investment objective. 

In pursuing its investment objective, the 

Fund may utilize instruments that have 

a leveraging effect on the Fund. This 

effective leverage occurs when the 

Fund’s market exposure exceeds the 

amounts actually invested. Any instance 

of effective leverage will be covered in 

accordance with guidance promulgated 

by the Commission and its staff. 13 The 

Fund does not presently intend to 

engage in any form of borrowing for 

investment purposes, and will not be 

operated as a ‘‘leveraged ETF’’, i.e., it 

will not be operated in a manner 

designed to seek a multiple of the 

performance of an underlying reference 

index. 

Net Asset Value 

The Fund’s net asset value (‘‘NAV’’) 

will be determined as of the close of 

trading (normally 4:00 p.m., Eastern 

time (‘‘E.T.’’)) on each day the New York 

Stock Exchange (‘‘NYSE’’) is open for 

business. NAV will be calculated for the 

Fund by taking the market price of the 

Fund’s total assets, including interest or 

dividends accrued but not yet collected, 

less all liabilities, and dividing such 

amount by the total number of Shares 

outstanding. The result, rounded to the 

nearest cent, will be the NAV per Share. 

All valuations will be subject to review 

by the Board or its delegate. 

The Fund’s investments will be 

valued at market value (i.e., the price at 

which a security is trading and could 

presumably be purchased or sold) or, in 

the absence of market value with respect 

to any investment, at fair value in 

accordance with valuation procedures 

adopted by the Board and in accordance 

with the 1940 Act. Common stocks and 

equity securities (including shares of 

ETPs) will be valued at the last sales 

price on that exchange. Portfolio 

securities traded on more than one 

securities exchange will be valued at the 

last sale price or, if so disseminated by 

an exchange, the official closing price, 

as applicable, at the close of the 

exchange representing the principal 

exchange or market for such securities 

on the business day as of which such 

value is being determined. U.S. 

Treasuries are valued using quoted 

market prices, and money market funds 

are valued at the net asset value 

reported by the funds. For all security 

types in which the Fund may invest, the 

Fund’s primary pricing source is IDC; its 

secondary source is Reuters; and its 

tertiary source is Bloomberg. 

Certain securities may not be able to 

be priced by pre-established pricing 

methods. Such securities may be valued 

by the Board or its delegate at fair value. 

The use of fair value pricing by the 

Fund will be governed by valuation 

procedures adopted by the Board and in 

accordance with the provisions of the 

1940 Act. These securities generally 

include, but are not limited to, restricted 

securities (securities which may not be 

publicly sold without registration under 

the Securities Act of 1933) for which a 

pricing service is unable to provide a 

market price; securities whose trading 

has been formally suspended; a security 

whose market price is not available from 

a pre-established pricing source; a 

security with respect to which an event 

has occurred that is likely to materially 

affect the value of the security after the 

market has closed but before the 

calculation of the Fund’s net asset value 

or make it difficult or impossible to 

obtain a reliable market quotation; and 

a security whose price, as provided by 

the pricing service, does not reflect the 

security’s ‘‘fair value.’’ As a general 

principle, the current ‘‘fair value’’ of a 

security would appear to be the amount 

which the owner might reasonably 

expect to receive for the security upon 

its current sale. The use of fair value 

prices by the Fund generally results in 

the prices used by the Fund that may 

differ from current market quotations or 

official closing prices on the applicable 

exchange. A variety of factors may be 

considered in determining the fair value 

of such securities. 

Creation and Redemption of Shares 

The Trust will issue and sell Shares 

of the Fund only in Creation Unit 

aggregations, and only in aggregations of 

50,000 Shares, on a continuous basis 

through the Distributor, without a sales 

load, at the NAV next determined after 

receipt, on any business day, of an order 

in proper form. 

The consideration for purchase of 

Creation Unit aggregations of the Fund 

will consist of (i) a designated portfolio 

of securities determined by the Adviser 

that generally will conform to the 

holdings of the Fund consistent with its 

investment objective (the ‘‘Deposit 

Securities’’) per each Creation Unit 

aggregation and generally an amount of 

cash (the ‘‘Cash Component’’) computed 

as described below, or (ii) cash in lieu 

of all or a portion of the Deposit 

Securities, as defined below. Together, 

the Deposit Securities and the Cash 

Component (including the cash in lieu 

amount) will constitute the ‘‘Fund 

Deposit,’’ which will represent the 

minimum initial and subsequent 

investment amount for a Creation Unit 

aggregation of the Fund. 

The consideration for redemption of 

Creation Unit aggregations of the Fund 

will consist of (i) a designated portfolio 

of securities determined by the Adviser 

that generally will conform to the 

holdings of the Fund consistent with its 

investment objective per each Creation 

Unit aggregation (‘‘Fund Securities’’) 

and generally a Cash Component, as 

described below, or (ii) cash in lieu of 

all or a portion of the Fund Securities 

as defined below. 

The Cash Component is sometimes 

also referred to as the Balancing 

Amount. The Cash Component will 

serve the function of compensating for 

any differences between the NAV per 

Creation Unit aggregation and the 

Deposit Amount (as defined below). For 

example, for a creation the Cash 

Component will be an amount equal to 

the difference between the NAV of Fund 

Shares (per Creation Unit aggregation) 

and the ‘‘Deposit Amount’’—an amount 

equal to the market value of the Deposit 

Securities and/or cash in lieu of all or 

a portion of the Deposit Securities. If the 

Cash Component is a positive number 

(i.e., the NAV per Creation Unit 

aggregation exceeds the Deposit 

Amount), the Authorized Participant 

(defined below) will deliver the Cash 

Component. If the Cash Component is a 

negative number (i.e., the NAV per 

Creation Unit aggregation is less than 

the Deposit Amount), the Authorized 

Participant will receive the Cash 

Component. 

BNY Mellon, through the National 

Securities Clearing Corporation 

(‘‘NSCC’’), will make available on each 

business day, prior to the opening of 

business of the Exchange (currently 9:30 

a.m., E.T.), the list of the names and the 

quantity of each Deposit Security to be 

included in the current Fund Deposit 

(based on information at the end of the 

previous business day). Such Fund 

Deposit will be applicable, subject to 

any adjustments as described below, in 

order to effect creations of Creation Unit 

aggregations of the Fund until such time 

as the next-announced composition of 

the Deposit Securities is made available. 

BNY Mellon, through the NSCC, will 

also make available on each business 

day, prior to the opening of business of 

the Exchange (currently 9:30 a.m., E.T.), 

the list of the names and the quantity of 


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Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 543 

14The Bid/Ask Price of the Fund will be 

determined using the midpoint of the highest bid 

and the lowest offer on the Exchange as of the time 

of calculation of the Fund’s NAV. The records 

relating to Bid/Ask Prices will be retained by the 

Fund and its service providers. 

15See Nasdaq Rule 4120(b)(4) (describing the 

three trading sessions on the Exchange: (1) PreMarket Session from 4 a.m. to 9:30 a.m. E.T.; (2) 

Regular Market Session from 9:30 a.m. to 4 p.m. or 

4:15 p.m. E.T.; and (3) Post-Market Session from 4 

p.m. or 4:15 p.m. to 8 p.m. E.T.). 

16Under accounting procedures to be followed by 

the Fund, trades made on the prior business day 

(‘‘T’’) will be booked and reflected in NAV on the 

current business day (‘‘T+1’’). Notwithstanding the 

foregoing, portfolio trades that are executed prior to 

the opening of the Exchange on any business day 

may be booked and reflected in NAV on such 

business day. Accordingly, the Fund will be able to 

disclose at the beginning of the business day the 

portfolio that will form the basis for the NAV 

calculation at the end of the business day. 

17Currently, the NASDAQ OMX Global Index 

Data Service (‘‘GIDS’’) is the NASDAQ OMX global 

index data feed service, offering real-time updates, 

daily summary messages, and access to widely 

followed indexes and Intraday Indicative Values for 

ETFs. GIDS provides investment professionals with 

the daily information needed to track or trade 

NASDAQ OMX indexes, listed ETFs, or third-party 

partner indexes and ETFs. 

each security to be included (based on 

information at the end of the previous 

business day), subject to any 

adjustments as described below, in 

order to affect redemptions of Creation 

Unit aggregations of the Fund until such 

time as the next-announced 

composition of the Fund Securities is 

made available. 

The Trust will reserve the right to 

permit or require the substitution of an 

amount of cash, i.e., a ‘‘cash in lieu’’ 

amount, to be added to the Cash 

Component to replace any Deposit 

Security that may not be available in 

sufficient quantity for delivery or which 

might not be eligible for trading by an 

Authorized Participant or the investor 

for which it is acting or other relevant 

reason. To the extent the Trust effects 

the redemption of Shares in cash, such 

transactions will be effected in the same 

manner for all Authorized Participants. 

In addition to the list of names and 

numbers of securities constituting the 

current Deposit Securities of a Fund 

Deposit, BNY Mellon, through the 

NSCC, will also make available on each 

business day, the estimated Cash 

Component, effective through and 

including the previous business day, per 

Creation Unit aggregation of the Fund. 

To be eligible to place orders with 

respect to creations and redemptions of 

Creation Units, an entity must be (i) a 

‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the 

clearing process through the continuous 

net settlement system of the NSCC or (ii) 

a Depository Trust Company (‘‘DTC’’) 

Participant (a ‘‘DTC Participant’’). In 

addition, each Participating Party or 

DTC Participant (each, an ‘‘Authorized 

Participant’’) must execute an agreement 

that has been agreed to by the 

Distributor and BNY Mellon with 

respect to purchases and redemptions of 

Creation Units. 

All orders to create Creation Unit 

aggregations must be received by the 

Distributor no later than 3:00 p.m., E.T., 

an hour earlier than the closing time of 

the regular trading session on the 

Exchange (ordinarily 4:00 p.m., E.T.), in 

each case on the date such order is 

placed in order for creations of Creation 

Unit aggregations to be effected based 

on the NAV of Shares of the Fund as 

next determined on such date after 

receipt of the order in proper form. 

In order to redeem Creation Units of 

the Fund, an Authorized Participant 

must submit an order to redeem for one 

or more Creation Units. All such orders 

must be received by the Distributor in 

proper form no later than 3:00 p.m., 

E.T., an hour earlier than the close of 

regular trading on the Exchange 

(ordinarily 4:00 p.m., E.T.), in order to 

receive that day’s closing NAV per 

Share. 

Availability of Information 

The Fund’s Web site 

(www.tuttlefunds.com), which will be 

publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for the Fund that may 

be downloaded. The Web site will 

include the Fund’s ticker, Cusip [sic] 

and exchange information along with 

additional quantitative information 

updated on a daily basis, including, for 

the Fund: (1) Daily trading volume, the 

prior business day’s reported NAV and 

closing price, mid-point of the bid/ask 

spread at the time of calculation of such 

NAV (the ‘‘Bid/Ask Price’’) 14 and a 

calculation of the premium and 

discount of the Bid/Ask Price against 

the NAV; and (2) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

Bid/Ask Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters. On each 

business day, before commencement of 

trading in Shares in the Regular Market 

Session 15 on the Exchange, the Fund 

will disclose on its Web site the 

identities and quantities of the portfolio 

of securities and other assets (the 

‘‘Disclosed Portfolio’’ as defined in 

Nasdaq Rule 5735(c)(2)) held by the 

Fund that will form the basis for the 

Fund’s calculation of NAV at the end of 

the business day.16

On a daily basis, the Fund will 

disclose for each portfolio security and 

other asset of the Fund the following 

information on the Fund’s Web site (if 

applicable): Ticker symbol, CUSIP 

number or other identifier, if any; a 

description of the holding (including 

the type of holding); the identity of the 

security, commodity, index, or other 

asset or instrument underlying the 

holding, if any; maturity date, if any; 

coupon rate, if any; effective date, if 

any; market value of the holding; and 

the percentage weighting of the holdings 

in the Fund’s portfolio. The Web site 

information will be publicly available at 

no charge. 

In addition, for the Fund, an 

estimated value, defined in Rule 

5735(c)(3) as the ‘‘Intraday Indicative 

Value,’’ that reflects an estimated 

intraday value of the Fund’s portfolio, 

will be disseminated. Moreover, the 

Intraday Indicative Value, available on 

the NASDAQ OMX Information LLC 

proprietary index data service 17 will be 

based upon the current value for the 

components of the Disclosed Portfolio 

and will be updated and widely 

disseminated by one or more major 

market data vendors and broadly 

displayed at least every 15 seconds 

during the Regular Market Session. The 

dissemination of the Intraday Indicative 

Value, together with the Disclosed 

Portfolio, will allow investors to 

determine the value of the underlying 

portfolio of the Fund on a daily basis 

and will provide a close estimate of that 

value throughout the trading day. 

Price information regarding the ETPs, 

equity securities, U.S. treasuries, money 

market instruments and money market 

Funds [sic] held by the Fund will be 

available through the U.S. exchanges 

trading such assets, in the case of 

exchange-traded securities, as well as 

automated quotation systems, published 

or other public sources, or on-line 

information services such as Bloomberg 

or Reuters. For all security types in 

which the Fund may invest, the Fund’s 

primary pricing source is IDC; its 

secondary source is Reuters; and its 

tertiary source is Bloomberg. 

Intra-day price information will also 

be available through subscription 

services, such as Bloomberg, Markit and 

Thomson Reuters, which can be 

accessed by Authorized Participants and 

other investors. 

Investors will also be able to obtain 

the Fund’s Statement of Additional 

Information (‘‘SAI’’), the Fund’s 

Shareholder Reports, and its Form N– 

CSR and Form N–SAR, filed twice a 

year. The Fund’s SAI and Shareholder 

Reports will be available free upon 

request from the Fund, and those 

documents and the Form N–CSR and 

Form N–SAR may be viewed on-screen 


tkelley on DSK3SPTVN1PROD with NOTICES
544 Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 

18See 17 CFR 240.10A–3. 

19FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

20For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Disclosed Portfolio may trade on 

markets that are members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. 21 Id. 

or downloaded from the Commission’s 

Web site at www.sec.gov. Information 

regarding market price and volume of 

the Shares will be continually available 

on a real-time basis throughout the day 

on brokers’ computer screens and other 

electronic services. The previous day’s 

closing price and trading volume 

information for the Shares will be 

published daily in the financial section 

of newspapers. Quotation and last sale 

information for the Shares will be 

available via Nasdaq proprietary quote 

and trade services, as well as in 

accordance with the Unlisted Trading 

Privileges and the Consolidated Tape 

Association plans for the Shares and 

any underlying exchange-traded 

products. 

Additional information regarding the 

Fund and the Shares, including 

investment strategies, risks, creation and 

redemption procedures, fees, Fund 

holdings disclosure policies, 

distributions and taxes will be included 

in the Registration Statement. 

Initial and Continued Listing 

The Shares will be subject to Rule 

5735, which sets forth the initial and 

continued listing criteria applicable to 

Managed Fund Shares. The Exchange 

represents that, for initial and/or 

continued listing, the Fund must be in 

compliance with Rule 10A–3 18 under 

the Act. A minimum of 100,000 Shares 

will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares that the NAV per Share will be 

calculated daily and that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Fund. Nasdaq will halt trading in 

the Shares under the conditions 

specified in Nasdaq Rules 4120 and 

4121, including the trading pauses 

under Nasdaq Rules 4120(a)(11) and 

(12). Trading may be halted because of 

market conditions or for reasons that, in 

the view of the Exchange, make trading 

in the Shares inadvisable. These may 

include: (1) The extent to which trading 

is not occurring in the securities and 

other assets constituting the Disclosed 

Portfolio of the Fund; or (2) whether 

other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares also will be subject to Rule 

5735(d)(2)(D), which sets forth 

circumstances under which Shares of 

the Fund may be halted. 

Trading Rules 

Nasdaq deems the Shares to be equity 

securities, thus rendering trading in the 

Shares subject to Nasdaq’s existing rules 

governing the trading of equity 

securities. Nasdaq will allow trading in 

the Shares from 4:00 a.m. until 8:00 

p.m. E.T. The Exchange has appropriate 

rules to facilitate transactions in the 

Shares during all trading sessions. As 

provided in Nasdaq Rule 5735(b)(3), the 

minimum price variation for quoting 

and entry of orders in Managed Fund 

Shares traded on the Exchange is $0.01. 

Surveillance 

The Exchange represents that trading 

in the Shares will be subject to the 

existing trading surveillances, 

administered by both Nasdaq and also 

the Financial Industry Regulatory 

Authority (‘‘FINRA’’) on behalf of the 

Exchange, which are designed to detect 

violations of Exchange rules and 

applicable federal securities laws.19 The 

Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

When such situations are detected, 

surveillance analysis follows and 

investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

FINRA, on behalf of the Exchange, 

will communicate as needed regarding 

trading in the Shares and other 

exchange-traded securities and 

instruments held by the Fund with 

other markets and other entities that are 

members of the ISG 20 and FINRA may 

obtain trading information regarding 

trading in the Shares and other 

exchange-traded securities and 

instruments held by the Fund from such 

markets and other entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares and 

other exchange-traded securities and 

instruments held by the Fund from 

markets and other entities that are 

members of ISG,21 or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. The 

Fund’s net assets that are invested in 

exchange-traded equities, including 

ETPs and common stock, will be 

invested in instruments that trade in 

markets that are members of ISG or are 

parties to a comprehensive surveillance 

sharing agreement with the Exchange. 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Information Circular 

Prior to the commencement of 

trading, the Exchange will inform its 

members in an Information Circular of 

the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Circular 

will discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in Creation Units 

(and that Shares are not individually 

redeemable); (2) Nasdaq Rule 2111A, 

which imposes suitability obligations on 

Nasdaq members with respect to 

recommending transactions in the 

Shares to customers; (3) how 

information regarding the Intraday 

Indicative Value and Disclosed Portfolio 

is disseminated; (4) the risks involved in 

trading the Shares during the PreMarket and Post-Market Sessions when 

an updated Intraday Indicative Value 

will not be calculated or publicly 

disseminated; (5) the requirement that 

members deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (6) 

trading information. 

In addition, the Information Circular 

will advise members, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Fund. Members 

purchasing Shares from the Fund for 

resale to investors will deliver a 

prospectus to such investors. The 

Information Circular will also discuss 

any exemptive, no-action and 

interpretive relief granted by the 

Commission from any rules under the 

Act. 

Additionally, the Information Circular 

will reference that the Fund is subject 

to various fees and expenses described 

in the Registration Statement. The 

Information Circular will also disclose 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 545 

the trading hours of the Shares of the 

Fund and the applicable NAV 

calculation time for the Shares. The 

Information Circular will disclose that 

information about the Shares of the 

Fund will be publicly available on the 

Fund’s Web site. 

2. Statutory Basis 

Nasdaq believes that the proposal is 

consistent with Section 6(b) of the Act 

in general and Section 6(b)(5) of the Act 

in particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in Nasdaq Rule 5735. The 

Exchange represents that trading in the 

Shares will be subject to the existing 

trading surveillances, administered by 

both Nasdaq and FINRA on behalf of the 

Exchange, which are designed to detect 

violations of Exchange rules and 

applicable federal securities laws. In 

addition, paragraph (g) of Nasdaq Rule 

5735 further requires that personnel 

who make decisions on the open-end 

fund’s portfolio composition must be 

subject to procedures designed to 

prevent the use and dissemination of 

material, non-public information 

regarding the open-end fund’s portfolio. 

The Fund’s investments will be 

consistent with the Fund’s investment 

objective. FINRA may obtain 

information via ISG from other 

exchanges that are members of ISG. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and other exchange-traded 

securities and instruments held by the 

Fund from markets and other entities 

that are members of ISG, which includes 

all U.S. and some foreign securities and 

futures exchanges, or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. The 

Fund may invest up to an aggregate 

amount of 15% of its net assets in 

illiquid assets (calculated at the time of 

investment). The proposed rule change 

is designed to promote just and 

equitable principles of trade and to 

protect investors and the public interest 

in that the Exchange will obtain a 

representation from the issuer of the 

Shares that the NAV per Share will be 

calculated daily and that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. In addition, a large 

amount of information will be publicly 

available regarding the Fund and the 

Shares, thereby promoting market 

transparency. Moreover, the Intraday 

Indicative Value, available on the 

NASDAQ OMX Information LLC 

proprietary index data service will be 

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Regular Market 

Session. On each business day, before 

commencement of trading in Shares in 

the Regular Market Session on the 

Exchange, the Fund will disclose on its 

Web site the Disclosed Portfolio of the 

Fund that will form the basis for the 

Fund’s calculation of NAV at the end of 

the business day. Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services, and quotation and 

last sale information for the Shares will 

be available via Nasdaq proprietary 

quote and trade services, as well as in 

accordance with the Unlisted Trading 

Privileges and the Consolidated Tape 

Association plans for the Shares and 

any underlying exchange-traded 

products. Intra-day price information 

will be available through subscription 

services, such as Bloomberg, Markit and 

Thomson Reuters, which can be 

accessed by Authorized Participants and 

other investors. 

The Fund’s Web site will include a 

form of the prospectus for the Fund and 

additional data relating to NAV and 

other applicable quantitative 

information. Trading in Shares of the 

Fund will be halted under the 

conditions specified in Nasdaq Rules 

4120 and 4121 or because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable, and trading in 

the Shares will be subject to Nasdaq 

Rule 5735(d)(2)(D), which sets forth 

circumstances under which Shares of 

the Fund may be halted. In addition, as 

noted above, investors will have ready 

access to information regarding the 

Fund’s holdings, the Intraday Indicative 

Value, the Disclosed Portfolio, and 

quotation and last sale information for 

the Shares. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of activelymanaged exchange-traded product that 

will enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

FINRA, on behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares and other 

exchange-traded securities and 

instruments held by the Fund with 

other markets and other entities that are 

members of the ISG and FINRA may 

obtain trading information regarding 

trading in the Shares and other 

exchange-traded securities and 

instruments held by the Fund from such 

markets and other entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares and 

other exchange-traded securities and 

instruments held by the Fund from 

markets and other entities that are 

members of ISG, which includes all U.S. 

and some foreign securities and futures 

exchanges, or with which the Exchange 

has in place a comprehensive 

surveillance sharing agreement. 

Furthermore, as noted above, investors 

will have ready access to information 

regarding the Fund’s holdings, the 

Intraday Indicative Value, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. 

For the above reasons, Nasdaq 

believes the proposed rule change is 

consistent with the requirements of 

Section 6(b)(5) of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange 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. The 

Exchange believes that the proposed 

rule change will facilitate the listing and 

trading of an additional type of activelymanaged exchange-traded fund that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 


tkelley on DSK3SPTVN1PROD with NOTICES
546 Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices 

22 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 73238 

(September 26, 2014), 79 FR 59884 (October 3, 

2014) (Notice of Filing of SR–FINRA–2014–038) 

(‘‘Notice’’). 

4See Letters to Brent J. Fields, Secretary, 

Commission, from Joseph C. Peiffer, Executive Vice 

President and President-Elect, Public Investors 

Arbitration Bar Association, dated October 16, 2014 

(‘‘PIABA Letter’’); William A. Jacobson, Clinical 

Professor of Law, Cornell University Law School, 

dated October 20, 2014 (‘‘Cornell Letter’’); William 

Beatty, President, North American Securities 

Administrators Association, Inc., dated October 22, 

2014 (‘‘NASAA Letter’’); Kyle Ortiz and Kathryn 

Hespe, Law Student Clinicians, Investor Advocacy 

Clinic, Michigan State University College of Law, 

dated October 23, 2014 (‘‘Michigan State Letter’’); 

John Astarita and Olivia Darius, Student Interns, 

John Jay Legal Services, Inc., Pace University 

School of Law, dated October 24, 2014 (‘‘Pace 

Letter’’); Kevin Zambrowicz, Associate General 

Counsel and Managing Director, the Securities 

Industry and Financial Markets Association, dated 

October 24, 2014 (‘‘SIFMA Letter’’); Michele Van 

Tassel, President, Association of Registration 

Management, dated October 24, 2014 (‘‘ARM 

Letter’’); Robert J. McCarthy, Director of Regulatory 

Policy, Wells Fargo Advisors, LLC, dated October 

24, 2014 (‘‘Wells Fargo Letter’’); and David T. 

Bellaire, Executive Vice President and General 

Counsel, the Financial Services Institute, dated 

October 24, 2014 (‘‘FSI Letter’’). See also email from 

Suzanne Shatto, dated October 6, 2014 (‘‘Shatto 

Letter’’). Comment Letters are available at: http://

www.sec.gov/comments/sr-finra-2014-038/

finra2014038.shtml. 

5See SR–FINRA–2014–038, Amendment No. 1, 

dated December 8, 2014, (‘‘Amendment No. 1’’). 

Amendment No. 1 is described below in Section II 

and the text of Amendment No. 1 is available on 

FINRA’s Web site at http://www.finra.org, at the 

principal office of FINRA, and on the Commission’s 

Web site at http://www.sec.gov/rules/sro.shtml. 

6FINRA also is proposing to re-label current 

FINRA Rule 3110(e) (Definitions) as FINRA Rule 

3110(f) (Definitions) and update the crossreferences in FINRA Rule 3110 to reflect this 

change. 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2014–127 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–NASDAQ–2014–127. This 

file number should be included on the 

subject line if email 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 

10:00 a.m. and 3:00 p.m. Copies of the 

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 Number SR– 

NASDAQ–2014–127 and should be 

submitted on or before January 27, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–30896 Filed 1–5–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73966; File No. SR–FINRA– 

2014–038] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1 Thereto, Relating to 

the Adoption of FINRA Rule 3110(e) 

(Responsibility of Member To 

Investigate Applicants for Registration) 

in the Consolidated FINRA Rulebook 

December 30, 2014. 

I. Introduction 

On September 18, 2014, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

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

Securities and Exchange Act of 1934 

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

proposed rule change to adopt NASD 

Rule 3010(e) relating to background 

investigations as FINRA Rule 3110(e) in 

the consolidated FINRA rulebook 

(‘‘Consolidated FINRA Rulebook’’). The 

proposed rule change was published for 

comment in the Federal Register on 

October 3, 2014.3 The Commission 

received 10 comment letters in response 

to the Notice.4 On December 8, 2014, 

FINRA filed Amendment No.1 

responding to these comments and 

proposing amendments in response to 

the comments.5 The Commission is 

publishing this notice to solicit 

comments from interested persons on 

the filing as amended by Amendment 

No.1 and is approving the proposed rule 

change, as amended, on an accelerated 

basis. 

II. Description of the Proposal, as 

Modified by Amendment No. 1 

As part of the process of developing 

the Consolidated FINRA Rulebook, 

FINRA is proposing to adopt NASD 

Rule 3010(e) (Qualifications 

Investigated) relating to background 

investigations as FINRA Rule 3110(e). 

According to FINRA, the proposed rule 

change streamlines and clarifies the rule 

language. For instance, NASD Rule 

3010(e) currently provides that ‘‘[e]ach 

member shall have the responsibility 

and duty to ascertain by investigation 

the good character, business repute, 

qualifications, and experience of any 

person prior to making such a 

certification in the application of such 

person for registration with this 

Association,’’ whereas proposed FINRA 

Rule 3110(e) provides that ‘‘[e]ach 

member shall ascertain by investigation 

the good character, business reputation, 

qualifications and experience of an 

applicant before the member applies to 

register that applicant with FINRA and 

before making a representation to that 

effect on the application for 

registration.’’ Further, proposed FINRA 

Rule 3110(e) clarifies that a firm is 

required to review a copy of an 

applicant’s most recent Form U5 

(Uniform Termination Notice for 

Securities Industry Registration) if the 

applicant previously has been registered 

with FINRA or another self-regulatory 

organization.6


tkelley on DSK3SPTVN1PROD with NOTICES