27364 Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Notices 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A TCDO is a preliminary order issued in 

connection with an underlying disciplinary 

proceeding that has been initiated or will be 

initiated immediately. 

4See Securities Exchange Act Release No. 47925 

(May 23, 2003), 68 FR 33548 (June 4, 2003) (Order 

Approving File No. SR–NASD–98–80). 

5See Securities Exchange Act Release No. 51860 

(June 16, 2005), 70 FR 36427 (June 23, 2005) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–NASD–2005–061); Securities Exchange Act 

Release No. 55819 (May 25, 2007), 72 FR 30895 

(June 4, 2007) (Notice of Filing and Immediate 

Effectiveness of File No. SR–NASD–2007–033). The 

Commission notes that it did not approve these 

filings. 

6See Securities Exchange Act Release No. 55819 

(May 25, 2007), 72 FR 30895 (June 4, 2007) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–NASD–2007–033). 

7 In a companion rule filing filed with the SEC 

today, FINRA seeks to extend the pilot until the 

SEC approves or disapproves the proposal to make 

the pilot permanent so that the cease and desist 

authority does not lapse while the proposal is 

pending at the SEC. See SR–FINRA–2009–034. The 

companion rule filing proposed certain technical 

amendments to the rule text, namely to correct 

punctuation in FINRA Rule 9556 and update 

FINRA Rule 9810 to reflect a change in FINRA style 

convention when referencing the federal securities 

laws. The companion rule filing does not proposal 

[sic] any substantive changes to the existing pilot. 

8See L.H. Ross & Company, Securities Exchange 

Act Release No. 51270, 2005 SEC LEXIS 452 

(February 28, 2005). 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2009–031 and 

should be submitted on or before June 

30, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13395 Filed 6–8–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60028; File No. SR–FINRA– 

2009–035] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Adopt a 

Temporary and Permanent Cease and 

Desist Authority Pilot Program on a 

Permanent Basis 

June 2, 2009. 

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 May 18, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II, 

and III, below, which Items have been 

prepared by FINRA. 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 

FINRA is proposing to adopt the 

temporary and permanent cease and 

desist authority pilot program on a 

permanent basis without any 

substantive changes to the terms of the 

existing program. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA 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 

In May 2003, the Commission 

approved, on a two-year pilot basis, a 

rule change that gave FINRA authority 

to issue temporary cease and desist 

orders (‘‘TCDOs’’) 3 and made explicit 

FINRA’s ability to impose permanent 

cease and desist orders as a remedy in 

disciplinary cases.4 The pilot program 

also gave FINRA authority to enforce 

cease and desist orders. In June 2005 

and June 2007, the SEC approved [sic] 

two-year extensions of the pilot 

program.5 The current two-year pilot 

expires on June 23, 2009.6

FINRA is proposing to make the pilot 

program permanent without any 

substantive changes to the terms of the 

existing program.7 The proposed action 

would enable FINRA to continue to 

issue TCDOs and impose permanent 

cease and desist orders as a remedy in 

disciplinary cases. The proposed action 

also would give FINRA authority to 

continue to initiate expedited 

proceedings when respondents violate 

temporary or permanent cease and 

desist orders. 

When it first sought cease and desist 

authority, FINRA stated that it would 

use the authority sparingly. That has 

been the case. Since the pilot program 

was first approved in 2003, FINRA has 

issued only one TCDO and one 

permanent cease and desist order (both 

in the same case, which is described 

below). If adopted on a permanent basis, 

the cease and desist rules would 

continue to be used judiciously. There 

are times, however, when their use is 

crucial. 

In the one case initiated under the 

pilot program, FINRA’s Department of 

Enforcement (‘‘Enforcement’’) alleged 

that the member in question was 

engaged in widespread fraud that 

included, among other things, making 

material misrepresentations and 

omissions in connection with the 

private offering of its own stock, 

effecting unauthorized transactions and 

using customer funds improperly.8

Enforcement showed that not only was 

the member attempting to continue the 

fraudulent offering, it also was 

funneling money and assets to a nonmember affiliate. Enforcement alleged, 

and a hearing panel found, that a TCDO 

was necessary because the member’s 

continuation of the misconduct was 

likely to result in further dissipation or 

conversion of assets and other 

significant harm to investors before the 

completion of the underlying 

disciplinary proceeding. After the 

hearing panel issued a permanent cease 

and desist order following a full 

disciplinary hearing, the parties settled 

the case, resulting in the expulsion of 

the member, the bar of its owner and the 

imposition of almost $12 million in 

fines and restitution. 

The proposed permanent adoption of 

the pilot program will provide FINRA 

with a mechanism to continue to take 

appropriate remedial action against a 

Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Notices 27365 

9 15 U.S.C. 78o–3(b)(6). 

10 15 U.S.C. 78o–3(b)(7). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

member or an associated person that has 

engaged (or is engaging) in violative 

conduct that could cause continuing 

harm to the investing public if not 

addressed expeditiously. It must be 

emphasized, however, that the cease 

and desist provisions contain numerous 

procedural protections for respondents 

to ensure that the proceedings are fair. 

The proposed rule change will 

become effective on the date of the 

SEC’s approval. 

2. Statutory Basis 

The proposed rule change is 

consistent with the provisions of 

Section 15A(b)(6) of the Act,9 which 

requires, among other things, that 

FINRA’s rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. The proposed rule 

change also is consistent with the 

provisions of Section 15A(b)(7) of the 

Act,10 which provides that FINRA 

members, or persons associated with its 

members, must be appropriately 

disciplined for violations of any 

provisions of the Act or FINRA’s rules. 

Making the pilot program permanent is 

consistent with FINRA’s obligations 

under the Act because cease and desist 

orders are designed to stop violative 

conduct that is likely to cause 

dissipation or conversion of assets or 

other significant harm to investors. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–035 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–2009–035. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File No. 

SR–FINRA–2009–035 and should be 

submitted on or before June 30, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13397 Filed 6–8–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60039; File No. SR– 

NASDAQ–2009–050] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change, as Modified 

by Amendment No. 1 Thereto, To 

Reduce the Length of the Optional PreRouting Display Period for Its DOT, 

SCAN and STGY Routing Strategies 

June 3, 2009. 

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 May 21, 

2009, 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. On June 2, 

2009, Nasdaq filed Amendment No. 1 to 

the proposed rule change. Nasdaq has 

designated the proposed rule change, as 

amended, as constituting a rule change 

under Rule 19b–4(f)(6) under the Act,3

which renders the proposal effective 

upon filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes a rule change to 

reduce the length of the optional prerouting display period for its DOT, 

SCAN and STGY routing strategies. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized; proposed deletions are in 

brackets.