Federal Register / Vol. 74, No. 100 / Wednesday, May 27, 2009 / Notices 25291 

3 During the restriction period (i.e., prior to the 

lapse of the forfeiture restrictions), the Restricted 

Stock may not be sold, transferred, hypothecated, 

margined, or otherwise encumbered by the 

Participant. 

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

2 17 CFR 240.19b-4. 

3See Securities Exchange Act Release No. 59650 

(March 30, 2009), 74 FR 15545. 

4See Securities Exchange Act Release No. 59064 

(December 5, 2008), 73 FR 76082 (December 15, 

2008) (order approving SR–NYSE–2008–91) 

(‘‘Release No. 34–59064’’). 

5 17 CFR 240.19b–4(f)(6). 

6See Securities Exchange Act Release No. 59453 

(February 25, 2009), 74 FR 9463 (March 4, 2009) 

(SR–NYSEArca–2009–09) (‘‘Release No. 34– 

59453’’). 

transfer and the value of the vesting 

shares is deemed to be compensation for 

a Participant.3 As discussed more fully 

in the application, certain exercises of 

options result in a Participant being 

deemed to have received compensation 

in the amount by which the fair market 

value of the shares of the Company’s 

common stock, determined as of the 

date of exercise, exceeds the exercise 

price. Applicants state that any 

compensation income recognized by a 

Participant generally is subject to 

federal withholding for income and 

employment tax purposes. Accordingly, 

arrangements must be made to satisfy 

the necessary withholding tax 

obligations. 

3. The Company’s stockholders 

approved the terms and provisions of 

the Plan on June 17, 2008. The Plan 

explicitly permits the Company to 

withhold shares of the Company’s 

common stock or purchase shares of the 

Company’s common stock from the 

Participants to satisfy tax withholding 

obligations related to the vesting of 

Restricted Stock or the exercise of 

options granted pursuant to the Plan. 

The Plan further provides that 

Participants may pay the exercise price 

of options to purchase shares of the 

Company’s stock with shares of the 

Company’s stock already held by such 

Participants or pursuant to net share 

settlement. 

Applicants’ Legal Analysis 

1. Section 23(c) of the Act, which is 

made applicable to BDCs by section 63 

of the Act, generally prohibits a BDC 

from purchasing any securities of which 

it is the issuer except in the open 

market, pursuant to tender offers or 

under other circumstances as the 

Commission may permit to ensure that 

the purchase is made on a basis that 

does not unfairly discriminate against 

any holders of the class or classes of 

securities to be purchased. Applicants 

state that the withholding or purchase of 

shares of Restricted Stock and common 

stock in payment of applicable 

withholding tax obligations or of 

common stock in payment for the 

exercise price of a stock option might be 

deemed to be purchases by the 

Company of its own securities within 

the meaning of section 23(c) and 

therefore prohibited by the Act. 

2. Section 23(c)(3) provides that the 

Commission may issue an order that 

would permit a BDC to repurchase its 

shares in circumstances in which the 

repurchase is made in a manner or on 

a basis that does not unfairly 

discriminate against any holders of the 

class or classes of securities to be 

purchased. Applicants believe that the 

requested relief meets the standards of 

section 23(c)(3). 

3. Applicants state that these 

purchases will be made on a basis 

which does not unfairly discriminate 

against the stockholders of the Company 

because all purchases of the Company’s 

stock will be at the closing price of the 

common stock on the NASDAQ Global 

Select Market (or any primary exchange 

on which the shares are traded) on the 

relevant date (i.e., the public market 

price on the date the Restricted Stock 

vests or the date of the exercise of any 

options). Applicants further state that 

no transactions will be conducted 

pursuant to the requested order on days 

where there are no reported market 

transactions involving the Company’s 

shares. Applicants submit that because 

all transactions would take place at the 

public market price for the Company’s 

common stock, the transactions would 

not be significantly different than could 

be achieved by any stockholder selling 

in a market transaction. 

4. Applicants submit that the 

proposed purchases do not raise 

concerns about preferential treatment of 

the Company’s insiders because the 

Plan is a bona fide compensation plan 

of the type that is common among 

corporations generally. Further, the 

vesting schedule is determined at the 

time of the initial grant of the Restricted 

Stock while the option exercise price is 

determined at the time of the initial 

grant of the options. Applicants 

represent that all purchases will be 

made only as permitted by the Plan, 

which was approved by the Company’s 

stockholders. Applicants argue that 

granting the requested relief would be 

consistent with precedent and the 

Commission’s recognition of the 

important role that equity compensation 

can play in attracting and retaining 

qualified personnel with respect to 

certain types of investment companies, 

including BDCs. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12219 Filed 5–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59937; File No. SR– 

NYSEArca–2009–24] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving Proposed 

Rule Change To Adopt a Policy With 

Respect to the Treatment of Aberrant 

Trades 

May 18, 2009. 

I. Introduction 

On March 18, 2009, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

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

19b-4 thereunder,2 a proposed rule 

change to adopt a policy relating to its 

treatment of trade reports that it 

determines to be inconsistent with the 

prevailing market and to make such 

policy retroactive to January 1, 2008. 

The proposed rule change was 

published for comment in the Federal 

Register on April 6, 2009.3 The 

Commission received no comments on 

the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

Trades in listed securities 

occasionally occur at prices that deviate 

from prevailing market prices and those 

trades sometimes establish a high, low 

or last sale price for a security that does 

not reflect the true market for the 

security. The Exchange seeks to address 

such instances of ‘‘aberrant’’ trades by 

adopting a policy that is substantially 

similar to a policy of the New York 

Stock Exchange (‘‘NYSE’’).4 On 

February 9, 2009, the Exchange also 

filed a proposed rule change, which it 

designated as eligible for immediate 

effectiveness pursuant to Rule 19b– 

4(f)(6) under the Act,5 to adopt a policy 

relating to the Exchange’s treatment of 

trade reports that it determines to be 

inconsistent with the prevailing 

market.6 The policy proposed in the 

instant rule change is identical to the 

policy set forth in Release No. 34– 

59453, except that the instant proposal 


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25292 Federal Register / Vol. 74, No. 100 / Wednesday, May 27, 2009 / Notices 

7 15 U.S.C. 78f(b). 

is retroactive to January 1, 2008. This 

retroactive application is similar to the 

retroactivity provision in the NYSE 

policy set forth in Release No. 34– 

59064. 

The Consolidated Tape Association 

(‘‘CTA’’) offers each Participant in the 

CTA Plan the discretion to append an 

indicator (an ‘‘Aberrant Report 

Indicator’’) to a trade report to indicate 

that the market believes that the trade 

price in a trade executed on that market 

does not accurately reflect the 

prevailing market for the security. The 

CTA recommends that data recipients 

should exclude the price of any trade to 

which the Aberrant Report Indicator has 

been appended from any calculation of 

the high, low and last sale prices for the 

security. 

During the course of surveillance by 

the Exchange or as a result of 

notification by another market, listed 

company or market participant, the 

Exchange may become aware of trade 

prices that do not accurately reflect the 

prevailing market for a security. In such 

a case, the Exchange proposes to adopt 

as policies that it: 

i. May determine to append an 

Aberrant Report Indicator to any trade 

report with respect to any trade 

executed on the Exchange that the 

Exchange determines to be inconsistent 

with the prevailing market; and 

ii. Shall discourage vendors and other 

data recipients from using prices to 

which the Exchange has appended the 

Aberrant Report Indicator in any 

calculation of the high, low or last sale 

price of a security. 

The Exchange believes that retroactive 

application of its aberrant trade policy 

is warranted because of the significant 

market volatility and trade reporting 

issues that all market centers 

experienced during 2008. Therefore, the 

Exchange believes that it should be 

permitted to act retroactively to append 

the Aberrant Report Indicator to trades 

that do not accurately reflect the 

prevailing market for a security 

commencing as of January 1, 2008. 

The Exchange will urge vendors to 

disclose the exclusion from high, low or 

last sale price data of any aberrant 

trades excluded from high, low or last 

sale price information they disseminate 

and to provide to data users an 

explanation of the parameters used in 

the Exchange’s aberrant trade policy. 

Upon initial adoption of the Aberrant 

Report Indicator, the Exchange will also 

contact all of its listed companies to 

explain the aberrant trade policy and 

will notify users of the information that 

these are still valid trades. The 

Exchange will inform the affected listed 

company each time the Exchange or 

another market appends the Aberrant 

Report Indicator to a trade in an NYSE 

Arca listed stock and will remind the 

users of the information that these are 

still valid trades in that they were 

executed and not unwound as in the 

case of a clearly erroneous trade. 

While the CTA disseminates its own 

calculations of high, low and last sale 

prices, vendors and other data 

recipients—and not the Exchange— 

frequently determine their own 

methodology by which they wish to 

calculate high, low and last sale prices. 

Therefore, the Exchange shall endeavor 

to explain to those vendors and other 

data recipients the deleterious effects 

that can result from including in the 

calculations a trade to which the 

Aberrant Report Indicator has been 

appended. 

In making the determination to 

append the Aberrant Report Indicator, 

the Exchange shall consider all factors 

related to a trade, including, but not 

limited to, the following: 

• Material news released for the 

security; 

• Suspicious trading activity; 

• System malfunctions or 

disruptions; 

• Locked or crossed markets; 

• A recent trading halt or resumption 

of trading in the security; 

• Whether the security is in its initial 

public offering; 

• Volume and volatility for the 

security; 

• Whether the trade price represents 

a 52-week high or low for the security; 

• Whether the trade price deviates 

significantly from recent trading 

patterns in the security; 

• Whether the trade price reflects a 

stock-split, reorganization or other 

corporate action; 

• The validity of consolidated tape 

trades and quotes in comparison to 

national best bids and offers; and 

• The general volatility of market 

conditions. 

In addition, the Exchange proposes 

that its policy shall be to consult with 

the listing exchange (if the Exchange is 

not the listing exchange) and with other 

markets (in the case of executions that 

take place across multiple markets) and 

to seek a consensus as to whether the 

trade price is consistent with the 

prevailing market for the security. 

In determining whether trade prices 

are inconsistent with the prevailing 

market, the Exchange proposes that its 

policy shall be to follow the following 

general guidelines: The Exchange will 

determine whether a trade price does 

not reflect the prevailing market for a 

security if the trade occurs during 

regular trading hours (i.e., 9:30 a.m. to 

4 p.m.) and occurs at a price that 

deviates from the ‘‘Reference Price’’ by 

an amount that meets or exceeds the 

following thresholds: 

Trade price 

Numerical 

threshold 

(percent) 

Between $0 and $15.00 ........... 7 

Between $15.01 and $50.00 .... 5 

In excess of $50.00 .................. 3 

The ‘‘Reference Price’’ refers to (a) if 

the primary market for the security is 

open at the time of the trade, the 

national best bid or offer for the 

security, or (b) if the primary market for 

the security is not open at the time of 

the trade, the first executable quote or 

print for the security on the primary 

market after execution of the trade in 

question. However, if the circumstances 

suggest that a different Reference Price 

would be more appropriate, the 

Exchange will use the different 

Reference Price. For instance, if the 

national best bid and offer for the 

security are so wide apart as to fail to 

reflect the market for the security, the 

Exchange might use as the Reference 

Price a trade price or best bid or offer 

that was available prior to the trade in 

question. 

If the Exchange determines that a 

trade price does not reflect the 

prevailing market for a security and the 

trade represented the last sale of the 

security on the Exchange during a 

trading session, the Exchange may also 

determine to remove that trade’s 

designation as the last sale. The 

Exchange may do so either on the day 

of the trade or at a later date, so as to 

provide reasonable time for the 

Exchange to conduct due diligence 

regarding the trade, including the 

consideration of input from markets and 

other market participants. 

The Exchange advises that it proposes 

to use the Aberrant Report Indicator in 

accordance with the guidelines set forth 

above and that it may apply the 

Aberrant Report Indicator on a 

retroactive basis commencing January 1, 

2008. 

III. Discussion 

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 exchange and, in particular, 

with Section 6(b) of the Act 7 and the 

rules and regulations thereunder. 

Specifically, the Commission finds that 

the proposed rule change is consistent 


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Federal Register / Vol. 74, No. 100 / Wednesday, May 27, 2009 / Notices 25293 

8 15 U.S.C. 78f(b)(5). 

9 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

10See supra note 4. 

11 Id. 

12 15 U.S.C. 78s(b)(2). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of two sets 

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

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

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

Incorporated NYSE Rules apply only to those 

members of FINRA that are also members of the 

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

comply with NASD Rules. For more information 

about the rulebook consolidation process, see 

FINRA Information Notice, March 12, 2008 

(‘‘Rulebook Consolidation Process’’). 

4See Exchange Act Release No. 59745 (April 10, 

2009), 74 FR 17705 (April 16, 2009) (‘‘notice’’ or 

‘‘proposal’’). 

5See supra note 3. 

6Members are subject to additional requirements 

regarding customer accounts. See, e.g., Rule 17a– 

3(a)(9) under the Act (requiring records indicating 

the name and address of the beneficial owner of 

each cash and margin customer account). 17 CFR 

240.17a–3(a)(9). 

7See, e.g., Robert S. Bartek, Exchange Hearing 

Panel Decision 73–60 (August 28, 1973); Jeffrey 

Alan Schultz, Exchange Hearing Panel Decision 82– 

23 (March 18, 1982); Kery Shane Hutner, Exchange 

Hearing Panel Decision 02–27 (January 31, 2002). 

See also NYSE Information Memo 78–80, Members’ 

Accounts and Initiating Orders on the NYSE Floor 

(November 10, 1978) (addressing, among other 

things, NYSE Rule 406(1), now Rule 406). 

8FINRA also stated that it will announce the 

implementation date of the proposed rule change in 

a Regulatory Notice to be published no later than 

90 days following Commission approval. 

9 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

Continued 

with Section 6(b)(5) of the Act 8 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of, a free and 

open market and a national market 

system, to protect investors and the 

public interest, and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers.9

The Commission believes that the 

Exchange’s proposal to append an 

Aberrant Report Indicator to certain 

trade reports is a reasonable means to 

alert investors and others that the 

Exchange believes that the trade price 

for a trade executed in its market does 

not accurately reflect the prevailing 

market for the security. In addition, the 

Commission notes that the Exchange 

will use objective numerical thresholds 

in determining whether a trade report is 

eligible to have an Aberrant Trade 

Indicator appended to it. The 

Commission further notes that the 

Exchange’s appending the Aberrant 

Trade Indicator to a trade report has no 

effect on the validity of the underlying 

trade. The Commission previously 

found a similar proposal by the NYSE 

to be consistent with the Act.10 Finally, 

the Commission notes that the 

retroactive application of this proposal 

to January 1, 2008 is similar to the 

retroactive period approved for the 

NYSE.11

For the reasons set forth above, the 

Commission finds that the proposed 

rule change is consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,12 that the 

proposed rule change (SR–NYSEArca2009–24) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12215 Filed 5–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 59947; File No. SR–FINRA– 

2009–017] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

Incorporated NYSE Rule 406 

(Designation of Accounts) as a FINRA 

Rule in the Consolidated FINRA 

Rulebook 

May 20, 2009. 

I. Introduction 

On March 26, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. (‘‘NASD’’)), 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to adopt 

Incorporated NYSE Rule 406 

(Designation of Accounts) as a FINRA 

rule in the consolidated FINRA 

rulebook (‘‘Consolidated FINRA 

Rulebook’’) 3 with the minor changes 

discussed below. The proposed rule 

change was published in the Federal 

Register on April 16, 2009.4 The 

Commission received no comments on 

the proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

As part of the process of developing 

the Consolidated FINRA Rulebook,5

FINRA proposed to adopt Incorporated 

NYSE Rule 406, with minor changes, as 

renumbered FINRA Rule 3250 in the 

Consolidated FINRA Rulebook. 

Incorporated NYSE Rule 406 provides 

that no member organization shall carry 

an account on its books in the name of 

a person other than that of the customer, 

except that an account may be 

designated by a number or symbol, 

provided that the member has on file a 

written statement signed by the 

customer attesting to the ownership of 

such account. In effect, this rule 

establishes a general requirement that a 

member must hold each customer 

account in the customer’s name, except 

that a member may identify a customer’s 

account with a number or symbol, as 

long as the member maintains 

documentation identifying the 

customer.6 Currently, Incorporated 

NYSE Rule 406 applies only to Dual 

Members. 

NYSE’s enforcement of the rule has 

addressed, among other things, sales 

practice abuses such as co-mingling of 

funds, the failure to disclose ownership 

interests in accounts and unauthorized 

trading.7 In the notice, FINRA proposed 

to adopt Incorporated NYSE Rule 406 as 

FINRA Rule 3250, stating it believes that 

the rule will continue to be an 

important enforcement tool and should 

be expanded to apply to the entire 

FINRA membership. In the notice, 

FINRA stated that Incorporated NYSE 

Rule 406 could provide members’ 

customers with a level of anonymity 

within the member and with certain 

external relationships that they find 

useful, while still allowing customers’ 

identities to be clearly known to 

members and available to regulators. In 

the proposal, FINRA indicated that 

Incorporated NYSE Rule 406 would be 

renumbered as FINRA Rule 3250 with 

minor changes to replace references to 

‘‘member organization’’ or 

‘‘organization’’ with the term 

‘‘member.’’ 8

III. Discussion and Findings 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and the rules 

and regulations thereunder that are 

applicable to a national securities 

associations,9 and in particular, with 


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