Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 28743 

8 15 U.S.C. 78o–3(b)(6). 9 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 (1) 

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

incorporated from NYSE (‘‘Incorporated NYSE 

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

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

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

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see FINRA 

Information Notice, March 12, 2008 (Rulebook 

Consolidation Process). 

4See Securities Exchange Act Release No. 59762 

(April 14, 2009), 74 FR 18269 (‘‘Notice’’). 

5See letter from Clifford E. Kirsch and Eric A. 

Arnold for the Committee of Annuity Insurers, 

Sutherland Asbill & Brennan LLP, to Elizabeth M. 

Murphy, Secretary, Commission, dated May 12, 

2009 (‘‘CAI Comment Letter’’). 

6See letter from Stan Macel, Assistant General 

Counsel, FINRA, to Elizabeth M. Murphy, 

Secretary, Commission, dated June 1, 2009. 

later than 60 days following 

Commission approval. The effective 

date will be 30 days following 

publication of the Regulatory Notice 

announcing Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,8 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change will promote 

more uniform recordkeeping and 

compliance with SEA Rule 15c2–11’s 

unsolicited customer order exception. 

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 such 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–2009–030 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–2009–030. This file 

number should be included on the 

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

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

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

Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2009–030 and 

should be submitted on or before July 8, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14147 Filed 6–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60086; File No. SR–FINRA– 

2009–023] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

FINRA Rule 2320 in the Consolidated 

FINRA Rulebook 

June 10, 2009. 

I. Introduction 

On March 31, 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 (‘‘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 NASD Rule 2820 as 

FINRA Rule 2320 in the consolidated 

FINRA rulebook (‘‘Consolidated FINRA 

Rulebook) 3 with minor changes. The 

proposal was published in the Federal 

Register on April 21, 2009.4 The 

Commission received one comment 

letter on the proposal.5 On June 1, 2009, 

FINRA responded to the comment 

letter.6 This order approves the 

proposed rule change. 

II. Description of the Proposal 

NASD Rule 2820 prohibits members 

from participating in the offer or sale of 

variable life insurance and variable 

annuity contracts unless certain 

conditions are met (collectively, 

‘‘variable contract’’). Specifically, 

members: (i) May not participate in the 

offering or sale of a variable contract on 

any basis other than at a value to be 


dwashington3 on PROD1PC60 with NOTICES
28744 Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 

7FINRA has proposed to transfer NASD Rule 

2810 without material change into the Consolidated 

FINRA Rulebook as FINRA Rule 2310. See SR– 

FINRA–2009–016. 

8See CAI Comment Letter, supra note 5. 

9See FINRA Rule 5110(i)(2). 

10See NASD Rule 2810(c)(2). See also note 7. 

11 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). 

12 15 U.S.C. 78o–3(b)(6). 

13 15 U.S.C. 78s(b)(2). 

determined following receipt of 

payment in accordance with the 

provisions of the contract, the 

prospectus and the Investment 

Company Act; (ii) must promptly 

transmit to the issuing insurance 

company all contract applications and 

at least the portion of the purchase 

payment required to be credited to the 

contract; and (iii) requires selling 

agreements between principal 

underwriters of variable contracts and 

selling broker-dealers that provide that 

the sales commission will be returned to 

the issuer if the contract is rendered for 

redemption within seven business days 

after acceptance. Additionally, under 

NASD Rule 2820, members may not sell 

variable contracts unless the insurance 

company promptly honors customer 

redemption requests in accordance with 

the contract, its prospectus and the 

Investment Company Act. 

Furthermore, NASD Rule 2820(g) 

prohibits associated persons of a 

member from accepting any 

compensation from any person other 

than the member with which the person 

is associated, in connection with the 

sale and distribution of variable 

contracts. However, there is an 

exception permitting arrangements 

where a non-member pays 

compensation directly to associated 

person, provided that the member 

agrees to the arrangement, and relies on 

appropriate rules or guidance from the 

Commission that apply to the specific 

fact situation of the arrangement, and 

the relevant associated persons treat the 

funds as compensation. Additionally, it 

prohibits associated person from 

accepting securities as compensation, 

limits the payment or receipt of noncash compensation (such as gifts, 

entertainment, training or education 

meetings and sales contests), and 

requires that certain records be kept. 

Currently, this provision requires a 

member to keep a record of all 

compensation received by the member 

or its associated persons from 

‘‘offerors,’’ other than small gifts and 

entertainment permitted by the rule, 

and include the nature of, and ‘‘if 

known,’’ the value of any non-cash 

compensation received. 

The proposed rule change would 

renumber NASD Rule 2820 as FINRA 

Rule 2320 in the Consolidated FINRA 

Rulebook and eliminate the phrase ‘‘if 

known’’ regarding the value of non-cash 

compensation. The deletion would 

require members to estimate the actual 

value of non-cash compensation for 

which a receipt (or similar 

documentation) assigning a value is not 

available and would be more consistent 

with the non-cash compensation 

recordkeeping requirements regarding 

public offerings of securities (FINRA 

Rule 5110(i)(2)) and direct participation 

programs (NASD Rule 2810(c)(2)).7 As 

stated in the Notice, FINRA will 

announce the implementation date of 

the proposed rule change in a 

Regulatory Notice. 

III. Summary of Comments and 

FINRA’s Response 

As previously noted, the Commission 

received one comment letter on the 

proposed rule change.8 While 

expressing general approval of the 

proposed rule change, the commenter 

expressed concern and sought 

clarification about the proposed change 

regarding the rule’s non-cash 

compensation provision. The 

commenter requested that FINRA 

confirm that it would respect a 

member’s reasonable estimate of the 

value of non-cash compensation. 

Specifically, the commenter asserted 

that, because the proposed ‘‘estimation’’ 

standard would be inherently imprecise, 

it would undoubtedly result in members 

valuing similar forms of non-cash 

compensation differently. As such, the 

commenter requested that a member’s 

estimate of value be respected, unless it 

is patently unreasonable. 

In response, FINRA stated that 

members would be required to use good 

faith when estimating the value of noncash compensation if a receipt or similar 

documentation is not available. FINRA 

acknowledged that, while there could be 

some differences regarding firms’ 

estimates, FINRA believes that a good 

faith standard should help ensure that 

such differences are not significant, or 

can be distinguished based on 

underlying facts and circumstances. In 

addition, as stated in the Notice, the 

change would be consistent with the 

recordkeeping requirements for noncash compensation received in 

connection with public offerings of 

securities 9 and the offer or sale of direct 

participation programs.10

The commenter also requested no less 

than 180 days to implement the 

proposed rule change. It noted that 

members would need this amount of 

time to adopt new policies and 

procedures, modify or create 

computerized and/or other 

compensation tracking systems, notify 

and educate their registered 

representatives, and adjust their training 

programs to ensure compliance with the 

new requirements. 

In response, FINRA stated that its 

general protocol is to announce the 

effective dates for new FINRA rules in 

Regulatory Notices that are published 

every other month. Each Regulatory 

Notice announces the effective dates of 

the new FINRA rules approved by the 

Commission during the preceding two 

months. The new FINRA rules’ effective 

dates generally are sixty days following 

publication of the relevant Regulatory 

Notice. Accordingly, FINRA would 

announce the effective date of the 

approved rule change, FINRA Rule 

2320, in a Regulatory Notice to be 

published on or about August 17, 2009, 

which would establish an effective date 

for the rule on or about October 19, 

2009. FINRA believes that an 

implementation period consistent with 

this general protocol would be adequate 

to implement the proposal, considering 

that the changes proposed are minor. 

IV. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act, and the rule and regulations 

thereunder that are applicable to a 

national securities association,11 and in 

particular, with Section 15A(b)(6) of the 

Act,12 which requires, among other 

things, that FINRA rules be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA’s adoption of 

NASD 2820 with minor changes as 

FINRA Rule 2320 in the Consolidated 

FINRA Rulebook will continue the 

regulation of members in connection 

with the sale and distribution of 

variable contracts. Requiring members 

to assign a value for non-cash 

compensation based on a good faith 

estimate should make members’ records 

more complete. The Commission also 

notes that a good faith standard should 

encourage reasonable estimates of the 

value of non-cash compensation. The 

Commission believes FINRA responded 

appropriately to the issues raised by the 

commenter. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,13 that the 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 28745 

14 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. 59842 

(April 29, 2009), 74 FR 21037. 

4 In approving this rule, the Commission notes 

that it has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

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

6See, e.g., Securities Exchange Act Release Nos. 

57109 (January 7, 2008), 73 FR 2295 (January 14, 

2008) (SR–CBOE–2007–134); and 57186 (January 

22, 2008), 73 FR 4931 (January 28, 2008) (SR– 

NYSEArca-2007–121). 

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

8 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78s(b)(3)(A)(iii). 

3 17 CFR 240.19b–4(f)4). 

proposed rule change (SR–FINRA– 

2009–023) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14148 Filed 6–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60084; File No. SR–Phlx2009–37] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Order 

Granting Approval of Proposed Rule 

Change Relating to Quoting 

Requirements for Streaming Quote 

Traders, Remote Streaming Quote 

Traders and Specialists 

June 10, 2009. 

On April 21, 2009, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or ‘‘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 modify the quoting 

requirements for Streaming Quote 

Traders (‘‘SQTs’’), Remote Streaming 

Quote Traders (‘‘RSQTs’’), and 

specialists. The proposed rule change 

was published for comment in the 

Federal Register on May 6, 2009.3 The 

Commission received no comments on 

the proposed rule change. This order 

approves the proposed rule change. 

The Exchange proposes to replace its 

continuous quoting requirement for 

SQTs, RSQTs, and specialists with a 

reference to the portion of the trading 

day when a quote must be available. 

Specifically, a market participant that is 

currently subject to continuous quoting 

obligations would, instead, be required 

to maintain a two-sided quote in a series 

for a total time equal to at least 90% (or 

higher, if so announced by the Exchange 

in advance) of the duration of the 

trading day. If a technical failure or 

limitation of a system of the Exchange 

prevents a participant from maintaining, 

or prevents a participant from 

communicating to the Exchange, timely 

and accurate quotes, the duration of 

such failure or limitation would not be 

included in any of the calculations with 

respect to the affected quotes. The 

Exchange would have the ability to 

consider other exceptions to the quoting 

requirements based on demonstrated 

legal or regulatory requirements or other 

mitigating circumstances. 

The Exchange also proposes to modify 

the requirement applicable to Directed 

SQTs (‘‘DSQTs’’), Directed RSQTs 

(‘‘DRSQTs’’), and specialists to quote 

99% of their assigned series. 

Specifically, the Exchange proposes to 

replace the 99% requirement in all of 

these instances with the lesser of two 

alternatives: 99% of the series, or 100% 

minus a single call-and-put ‘‘pair.’’ The 

eligible pair in this case would consist 

of two individual options, one call and 

one put, which cover the same 

underlying instrument and have the 

same expiration date and exercise price. 

The Commission notes that the 

Exchange’s proposal would make minor 

adjustments to the quoting requirements 

of SQTs, RSQTs, DSQTs, DRSQTs, and 

specialists. 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 

exchange.4 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,5 in that it is designed 

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, and, in general, to protect 

investors and the public interest. In 

addition, the Commission notes that it 

has approved similar quoting 

requirements applicable to market 

makers on other options exchanges.6

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,7 that the 

proposed rule change (SR–Phlx–2009– 

37) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14169 Filed 6–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60096; File No. SR–DTC– 

2009–10] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Establish 

the Web Inquiry Notification System 

June 11, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

May 22, 2009, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared primarily by DTC. DTC filed 

the proposed rule change pursuant to 

Section 19(b)(3)(A)(iii) of the Act 2 and 

Rule 19b–4(f)(4) thereunder 3 so that the 

proposal was effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change will replace 

DTC’ Participant Inquiry Notification 

System (‘‘PINS’’) with a new Web 

Inquiry Notification System (‘‘WINS’’) 

as a means for participants and DTC to 

communicate with each other about 

records pertaining to various services 

such as dividends, corporate 

reorganizations, custody services, and 

securities processing. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

DTC 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. DTC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 


dwashington3 on PROD1PC60 with NOTICES