Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 28315 

33See id. and accompanying text. 

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

35See supra note 7. 

36See id. (noting that the Exchange subsequently 

withdrew the proposed rule change on May 18, 

2009). 

37 15 U.S.C. 78s(b)(2). 

38 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. 59835 

(April 28, 2009), 74 FR 21041 (‘‘Notice’’). 

4 It should be noted that the trust holdings will 

be actively managed in accordance with the trust’s 

investment objectives; therefore, products listed 

under proposed NYSE Arca Equities Rule 8.700 are 

ineligible for listing under any other existing 

Exchange rule (e.g., NYSE Arca Equities Rules 8.203 

and 8.204). 

5The trust may only hold exchange-traded 

futures contracts on sovereign, private, and 

mortgage- or asset-backed debt and not the debt 

itself. 

prospectus to such investors. Finally, 

the Information Bulletin will reference 

that: An issue of Currency Trust Shares 

is subject to various fees and expenses 

described in the applicable prospectus; 

that there is no regulated source of lastsale information regarding non-U.S. 

currencies; and the Commission has no 

jurisdiction over the trading of physical 

currencies on which the value of an 

issue of Currency Trust Shares may be 

based. 

E. Firewall Procedures 

Currency Trust Shares, which are 

securities issued by a trust that may 

hold multiple currencies, will be subject 

to the firewall requirements under 

proposed Commentary .05 to NYSE 

Arca Equities Rule 8.202. The firewall 

requirements provide that, if the value 

of a Currency Trust Share is based in 

whole or in part on an index that is 

maintained by a broker-dealer, the 

broker-dealer shall erect a ‘‘firewall’’ 

around the personnel responsible for the 

maintenance of the underlying index or 

who have access to information 

concerning changes and adjustments to 

the index, and the index shall be 

calculated by a third party who is not 

a broker-dealer. Furthermore, any 

advisory committee, supervisory board, 

or similar entity that advises an index 

licensor or administrator or that makes 

decisions regarding the index or 

portfolio composition, methodology, 

and related matters must implement and 

maintain, or be subject to, procedures 

designed to prevent the use and 

dissemination of material, non-public 

information regarding the applicable 

index or portfolio. 

The Commission believes that the 

proposed ‘‘firewall’’ restrictions 

applicable to Currency Trust Shares are 

designed to prevent the use and 

dissemination of material, non-public 

information regarding an underlying 

index and prevent conflicts of interest 

with respect to personnel of a brokerdealer maintaining an index underlying 

such securities. The Commission notes 

that such proposed restrictions are 

substantially similar to restrictions 

adopted for the listing and trading of 

Index-Linked Securities and Units.33

F. Accelerated Approval 

The Commission finds good cause, 

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

Act,34 for approving the proposed rule 

change prior to the 30th day after 

publication of notice in the Federal 

Register. The Commission notes that the 

Exchange previously filed a proposed 

rule change (NYSEArca–2008–51) 

seeking to adopt generic listing 

standards for Currency Trust Shares and 

other commodity-related derivative 

securities products.35 Notice of the 

proposed rule change was published in 

the Federal Register on August 15, 2008 

for a 21-day comment period, and no 

comments were received by the 

Commission.36 The Commission further 

notes that the proposed changes to 

NYSE Arca Equities Rule 8.202 in 

NYSEArca–2008–51 are substantively 

identical to this proposed rule change. 

The Commission believes that the 

Exchange’s proposed amendments to 

NYSE Arca Equities Rule 8.202 do not 

raise any new issues or significant 

regulatory concerns. The Commission 

believes that accelerating approval of 

this proposal should benefit investors 

by creating, without undue delay, 

enhanced competition in the market for 

Currency Trust Shares, consistent with 

Section 6(b) of the Act and Rule 19b– 

4(e) thereunder. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,37 that the 

proposed rule change (SR–NYSEArca– 

2009–47) be, and it hereby is, approved 

on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13970 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60064; File No. SR– 

NYSEArca–2009–30] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change, as Modified by 

Amendment No. 1 Thereto, Relating to 

the Adoption of Listing Standards for 

Managed Trust Securities and the 

Listing and Trading of Shares of the 

iShares® Diversified Alternatives Trust 

June 8, 2009. 

I. Introduction 

On April 9, 2009, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or ‘‘Exchange’’), through 

its wholly owned subsidiary, NYSE 

Arca Equities, Inc. (‘‘NYSE Arca 

Equities’’ or ‘‘Corporation’’), 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: (1) Adopt listing standards 

for Managed Trust Securities; (2) amend 

NYSE Arca Equities Rule 7.34 and its 

Listing Fees to add references to 

proposed NYSE Arca Equities Rule 

8.700 relating to Managed Trust 

Securities; and (3) list and trade shares 

(‘‘Shares’’) of the iShares® Diversified 

Alternatives Trust (‘‘Trust’’). On April 

24, 2009, the Exchange filed 

Amendment No. 1 to the proposed rule 

change. The proposed rule change, as 

amended, was published for comment 

in the Federal Register on May 6, 2009.3

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change, as amended. 

II. Description of the Proposal 

A. Listing Standards for Managed Trust 

Securities 

The Exchange proposes to adopt new 

NYSE Arca Equities Rule 8.700 to list 

and trade, or trade pursuant to unlisted 

trading privileges, Managed Trust 

Securities. A Managed Trust Security as 

a security that is registered under the 

Securities Act of 1933, as amended, and 

(a) is issued by a trust that (i) is a 

commodity pool, as defined in the 

Commodity Exchange Act (‘‘CEA’’) and 

regulations thereunder, and is managed 

by a commodity pool operator registered 

with the Commodity Futures Trading 

Commission (‘‘CFTC’’), and (ii) holds 

long and/or short positions in exchangetraded futures contracts and/or currency 

forward contracts selected by the trust’s 

advisor consistent with the trust’s 

investment objectives,4 which would 

only include exchange-traded futures 

contracts involving commodities, 

currencies, stock indices, fixed income 

indices, interest rates and sovereign, 

private, and mortgage or asset backed 

debt instruments 5 and/or forward 

contracts on specified currencies, as 

disclosed in the trust’s prospectus, as 


pwalker on PROD1PC71 with NOTICES
28316 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 

6The Exchange represents that the Shares will 

conform to the initial and continued listing criteria 

under proposed NYSE Arca Equities Rule 8.700 and 

that the Trust is required to comply with Rule 10A– 

3 under the Act for the initial and continued listing 

of the Shares. See 17 CFR 240.10A–3. Rule 10A– 

3(e)(3) provides that, in the case of a listed limited 

partnership or limited liability company where 

such entity does not have a board of directors or 

equivalent body, the term ‘‘board of directors’’ 

means the board of directors of the managing 

general partner, managing member or equivalent 

body. The Trust itself has no employees or board 

of directors and its operations are conducted by the 

Trustee, subject to the direction by the Sponsor. 

Accordingly, the Trust has designated a committee 

of the board of directors of the Sponsor to act as 

the audit committee of the Trust for Rule 10A–3 

purposes. The Sponsor’s role under the governing 

documents of the Trust makes the Sponsor 

analogous to the managing member of a limited 

liability company. The Exchange believes it is 

reasonable to interpret Rule 10A–3(e)(3) as 

permitting a trust to utilize a committee of the 

board of directors of its sponsor as the trust’s audit 

committee for purposes of compliance with Rule 

10A–3, provided that the sponsor’s role with 

respect to the trust is analogous to the relationship 

between a managing member and a limited liability 

company. 

7The Trust is not an investment company 

registered under the Investment Company Act of 

1940, according to the Registration Statement on 

Form S–1 for the Trust, which was filed with the 

Commission on August 20, 2008 (File No. 333– 

153099) (‘‘Registration Statement’’). 

8See supra note 5. 

9 In approving this proposed rule change, 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). 

10 15 U.S.C. 78f(b)(5). 

11See Securities Exchange Act Release No. 57619 

(April 4, 2008), 73 FR 19544 (April 10, 2008) (SR– 

NYSEArca-2008–25) (approving the adoption of 

NYSE Arca Equities Rule 8.600 governing the 

listing and trading of Managed Fund Shares). See 

also NYSE Arca Equities Rule 8.600. 

12See, e.g., NYSE Arca Equities Rule 8.200 (Trust 

Issued Receipts), NYSE Arca Equities Rule 8.201 

(Commodity-Based Trust Shares), NYSE Arca 

Equities Rule 8.202 (Currency-Based Trust Shares), 

and NYSE Arca Equities Rule 8.204 (Commodity 

Futures Trust Shares). 

13See id. 

14 15 U.S.C. 78k–1(a)(1)(C)(iii). 

such may be amended from time to 

time, and (b) is issued and redeemed 

continuously in specified aggregate 

amounts at the next applicable net asset 

value (‘‘NAV’’). 

Additional details of proposed NYSE 

Arca Equities Rule 8.700 and the 

proposed conforming changes to NYSE 

Arca Equities Rule 7.34 and the NYSE 

Arca Equities Listing Fee Schedule can 

be found in the Notice. 

B. Description of the Trust and the 

Shares 

The Exchange also proposes to list 

and trade the Shares.6 The Shares 

represent ownership of a fractional 

undivided beneficial interest in the net 

assets of the Trust. The Trust will be a 

commodity pool, as defined in the CEA 

and the applicable rules of the CFTC, 

and will be formed as a Delaware 

statutory trust.7

The investment objective of the Trust 

will be to maximize absolute returns 

from its portfolio of (i) exchange-traded 

futures contracts involving 

commodities, currencies, certain eligible 

stock and/or bond indices, interest rates 

and sovereign, private and mortgage- or 

asset-backed debt instruments 8 and/or 

(ii) certain currency forward contracts in 

the top 25 most liquid or actively traded 

currencies measured by turnover in the 

most recent BIS Central Bank Survey, 

each as disclosed in the Trust’s 

prospectus as such may be amended 

from time to time, while seeking to 

reduce the risks and volatility inherent 

in those investments by taking long and 

short positions in historically correlated 

assets. The Trust will also earn interest 

on the assets used to collateralize its 

trading positions. The return on assets 

in the portfolio, if any, is not intended 

to track the performance of any index or 

benchmark. 

Additional details regarding creations 

and redemptions of the Shares, the 

organization and structure of the Trust, 

the commodity trading advisor of the 

Trust, the dissemination and availability 

of information about the underlying 

assets, trading halts, applicable trading 

rules, surveillance, and the Information 

Bulletin can be found in the Notice and/ 

or the Registration Statement. 

III. Discussion and Commission’s 

Findings 

After careful consideration, 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.9 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with the requirements of Section 6(b)(5) 

of the Act,10 which requires, among 

other things, that the Exchange’s rules 

be designed to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, 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. 

With respect to the Exchange’s 

proposal to adopt new NYSE Arca 

Equities Rule 8.700 relating to the 

listing and trading of Managed Trust 

Securities, the Commission notes that 

the standards proposed therein are 

based on listing standards of other 

derivative securities products that have 

previously been approved by the 

Commission. Except for the definition of 

‘‘Managed Trust Securities,’’ each of the 

defined terms under new NYSE Arca 

Equities Rule 8.700(c) are substantively 

identical to those applicable to Managed 

Fund Shares under NYSE Arca Equities 

Rule 8.600.11 In addition, almost all of 

the proposed initial and continued 

listing criteria and Commentaries under 

new NYSE Arca Equities Rule 8.700 are 

substantively identical to those 

applicable to Managed Fund Shares set 

forth in NYSE Arca Equities Rule 8.600. 

Specifically with respect to the 

proposed continued listing criteria for 

Managed Trust Securities, the 

Commission notes that new NYSE Arca 

Equities Rule 8.700(e)(2)(C)(i) is 

substantively identical to the continued 

listing criteria applicable to other types 

of commodity- and currency-based 

derivative securities products.12 The 

Commission also notes that proposed 

NYSE Arca Equities Rules 

8.700(e)(2)(E), 8.700(e)(3)–(5), and 

8.700(f)–(g), relating to the trust, trustee, 

voting rights, Market Maker accounts, 

and limitation of liability of the 

Corporation, are substantively identical 

to those respective provisions 

applicable to other types of commodityand currency-based derivative securities 

products.13 Further, the Commission 

notes that the Exchange is required to 

file a proposed rule change pursuant to 

Section 19(b)(1) of the Act to list and 

trade each issue of Managed Trust 

Securities. The Commission believes 

that the proposed new listing rule, 

NYSE Arca Equities Rule 8.700, is 

reasonably designed to protect investors 

and the public interest. 

In addition, the Commission finds 

that the proposal to list and trade the 

Shares on the Exchange is consistent 

with Section 11A(a)(1)(C)(iii) of the 

Act,14 which sets forth Congress’ finding 

that it is in the public interest and 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets to assure the 

availability to brokers, dealers and 

investors of information with respect to 

quotations for and transactions in 

securities. Quotation and last-sale 

information for the Shares will be 

available via the Consolidated Tape 

Association CQ High-Speed Lines, and 

one or more major market data vendors 

will disseminate the Intraday Indicative 

Value (‘‘IIV’’) at least every 15 seconds 

during the time the Shares trade on the 

Exchange. In addition, the Trust will 

make available daily on its Web site the 

Disclosed Portfolio, which will include, 

as applicable, the name identifier and 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 28317 

15The most recent end-of-day NAV of the Trust 

and NAV per Share will be published by the 

Sponsor as of 4 p.m. Eastern Time daily on Reuters 

and/or Bloomberg and on the Trust’s Web site at 

http://www.iShares.com. The end-of-day NAV per 

Share will also be published the following morning 

on the Consolidated Tape. 16The Bid-Ask Price of Shares is determined 

using the highest bid and lowest offer as of the time 

of calculation of the NAV per Share. 17Monthly account statements conforming to 

applicable CFTC and NFA requirements are posted 

on the Trust’s Web site at http://www.iShares.com. 

Additional reports may be posted on the Trust’s 

Web site in the discretion of the Sponsor or as 

required by regulatory authorities. 

18See proposed NYSE Arca Equities Rule 

8.700(e)(1)(B). 

19See proposed NYSE Arca Equities Rule 

8.700(e)(2)(D). 

20See id. Trading in the Shares may also 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 

underlying futures contracts or currency forward 

contracts; or (2) whether other unusual conditions 

or circumstances detrimental to the maintenance of 

a fair and orderly market are present. E-mail from 

Sudhir Bhattacharrya, Vice President—Legal, NYSE 

Euronext, to Edward Cho, Special Counsel, Division 

of Trading and Markets, Commission, dated May 

26, 2009. 

21E-mail from Sudhir Bhattacharrya, Vice 

President—Legal, NYSE Euronext, to Edward Cho, 

Special Counsel, Division of Trading and Markets, 

Commission, dated May 26, 2009. The Exchange 

further represents that personnel who make 

decisions concerning the Trust’s portfolio 

composition are subject to procedures designed to 

prevent the use and dissemination of material, nonpublic information, including information relating 

to the applicable Trust portfolio. See Commentary 

.05 to proposed NYSE Arca Equities Rule 8.700. 

22See proposed NYSE Arca Equities Rule 

8.700(e)(2)(B)(ii). 23See supra note 6. 

number of each futures contract, the 

amount and currency type of each 

forward contract, and the amount of 

cash held. The Web site for the Trust 

will also contain the following 

information: (1) The prior business 

day’s NAV per Share 15 and the reported 

closing price; (2) the mid-point of the 

bid-ask price in relation to the NAV per 

Share as of the time the NAV is 

calculated (‘‘Bid-Ask Price’’); 16 (3) 

calculation of the premium or discount 

of such price against such NAV per 

Share; (4) data in chart form displaying 

the frequency distribution of discounts 

and premiums of the Bid-Ask Price 

against the NAV per Share, within 

appropriate ranges for each of the four 

previous calendar quarters; (5) the 

prospectus and the most recent periodic 

reports filed with the Commission or 

required by the CFTC;17 and (6) other 

applicable quantitative information. The 

Exchange will disseminate for the Trust 

on a daily basis by means of 

Consolidated Tape Association CQ High 

Speed Lines information with respect to 

the recent Trust NAV, number of Shares 

outstanding, and the basket amount. 

The Exchange will also make available 

on its Web site daily trading volume, 

closing prices, and the Trust’s NAV per 

Share. The Exchange states that pricing 

for futures contracts is available from 

the relevant exchange on which such 

futures contracts trade, and pricing for 

forward contracts is available from 

major market data vendors. Lastly, 

information regarding the 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, and the previous day’s closing 

price and trading volume information 

for the Shares will be published daily in 

the financial sections of newspapers. 

The Commission further believes that 

the proposal to list and trade the Shares 

is reasonably designed to promote fair 

disclosure of information that may be 

necessary to price the Shares 

appropriately and to prevent trading 

when a reasonable degree of 

transparency cannot be assured. The 

Commission notes that the Exchange 

will obtain a representation from the 

Trust 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.18 Additionally, if the 

Exchange becomes aware that the NAV 

or the Disclosed Portfolio is not 

disseminated daily to all market 

participants at the same time, the 

Exchange will halt trading in the Shares 

until such information is available to all 

market participants.19 Further, if the IIV 

is not being disseminated as required, 

the Exchange may halt trading during 

the day in which the disruption occurs; 

if the interruption persists past the day 

in which it occurred, the Exchange will 

halt trading no later than the beginning 

of the trading day following the 

interruption.20 The Exchange represents 

that Barclays Global Fund Advisors, the 

commodity trading advisor of the Trust, 

is affiliated with a broker-dealer. As a 

result, Barclays Global Fund Advisors 

and its applicable affiliated brokerdealers that are authorized to conduct 

trading have in place (or will erect 

before launch) policies and procedures 

designed to prevent the disclosure of 

material non-public information, 

including changes and adjustments to 

the Disclosed Portfolio.21 Finally, the 

Commission notes that the Reporting 

Authority that provides the Disclosed 

Portfolio must implement and maintain, 

or be subject to, procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding the actual components of the 

portfolio.22

The Exchange has represented that 

the Shares are deemed equity securities 

subject to the Exchange’s rules 

governing the trading of equity 

securities. In support of this proposal, 

the Exchange has made representations, 

including: 

(1) The Shares will conform to the 

initial and continued listing criteria 

under proposed NYSE Arca Equities 

Rule 8.700. 

(2) The Exchange’s surveillance 

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. In 

addition, the Exchange has an 

Information Sharing Agreement in place 

with the New York Mercantile 

Exchange, the Kansas City Board of 

Trade, ICE Futures, and the London 

Metal Exchange for the purpose of 

providing information in connection 

with trading in or related to futures 

contracts traded on such exchanges. 

Further, for components traded on 

exchanges, not more than 10% of the 

weight of the Trust’s portfolio in the 

aggregate shall consist of components 

whose principal trading market is not a 

member of the Intermarket Surveillance 

Group or is a market with which the 

Exchange does not have a 

comprehensive surveillance sharing 

agreement. 

(3) Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (a) The 

procedures for purchases and 

redemptions of Shares and that Shares 

are not individually redeemable; (b) 

NYSE Arca Equities Rule 9.2(a), which 

imposes a duty of due diligence on its 

ETP Holders to learn the essential facts 

relating to every customer prior to 

trading the Shares; (c) the requirement 

that ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; (d) the 

risks involved in trading the Shares 

during the Opening and Late Trading 

Sessions when an updated IIV will not 

be calculated or publicly disseminated; 

and (e) trading information. 

(4) The Fund will be in compliance 

with Rule 10A–3 under the Act.23


pwalker on PROD1PC71 with NOTICES
28318 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 

24See proposed NYSE Arca Equities Rule 

8.700(e)(1)(A). 

25 15 U.S.C. 78f(b)(5). 

26 15 U.S.C. 78s(b)(2). 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 59836 (April 28, 

2009); 74 FR 20519 (May 4, 2009). 

4 If the panel consists of one arbitrator, the 

arbitrator will be a non-public arbitrator selected 

from the non-public chairperson roster described in 

Rule 13400(c). See Rule 13402(a). 

5 If the panel consists of one arbitrator, the 

arbitrator will be a public arbitrator selected from 

the chairperson roster described in Rule 12400(c) of 

the Code of Arbitration Procedure for Customer 

Disputes (‘‘Customer Code’’). See Rule 13402(b). 

6The proposed changes discussed in this order 

will not apply to claims filed under the Customer 

Code. 

7The proposal would not apply to disputes 

involving a claim of statutory employment 

discrimination. See Rule 13802. 

8See Rule 13802(c) (panel composition rule for 

statutory employment discrimination claims). 

9The proposed change would be consistent with 

the rules and procedures of the former New York 

Stock Exchange (‘‘NYSE’’) arbitration forum. In the 

NYSE arbitration forum, cases involving associated 

persons received a majority public panel because 

the rules classified associated persons as nonmembers, and non-members received a majority 

public panel. See NYSE Rule 607(a)(1). 

(5) A minimum of 100,000 Shares will 

be required to be outstanding at the start 

of trading.24

This approval order is based on the 

Exchange’s representations. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act 25 and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,26 that the 

proposed rule change (SR–NYSEArca– 

2009–30), as modified by Amendment 

No. 1 thereto, be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13969 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60061; File No. SR–FINRA– 

2009–011] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change as Modified by 

Amendment No. 1 Thereto To Amend 

the Panel Composition Rules of the 

Code of Arbitration Procedure for 

Industry Disputes 

June 5, 2009. 

On March 4, 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 

(‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend the panel composition 

rules of the Code of Arbitration 

Procedure for Industry Disputes 

(‘‘Industry Code’’). On April 7, 2009, 

FINRA filed Amendment No. 1 to the 

proposed rule change. The proposed 

rule change, as modified by Amendment 

No. 1, was published for comment in 

the Federal Register on May 4, 2009.3

The Commission received no comments 

on the proposed rule change. This order 

approves the proposed rule change, as 

modified by Amendment No. 1. 

I. Description of the Proposal 

FINRA proposed to amend the 

Industry Code to change the criteria for 

determining the panel composition 

when the claim involves an associated 

person in industry disputes. 

Currently, Rule 13402(a) of the 

Industry Code requires an all non-public 

panel for disputes between members, 

and for employment disputes between 

or among members and associated 

persons that relate exclusively to 

employment contracts, promissory 

notes, or receipt of commissions.4 In all 

other disputes between or among 

members and associated persons, Rule 

13402(b) requires a majority public 

panel, where one arbitrator would be a 

non-public arbitrator and two would be 

public arbitrators.5

FINRA proposed to amend the 

Industry Code to change the criteria for 

determining panel composition when 

the claim involves an associated person 

in industry disputes.6 Specifically, 

FINRA proposed to amend Rule 13402 

and related rules of the Industry Code 

to: 

• Require that the parties receive a 

majority public panel for all industry 

disputes involving associated persons 

(excluding disputes involving statutory 

employment discrimination claims 

which require a specialized all public 

panel); 7

• Clarify that in disputes involving 

only members, parties will receive an all 

non-public panel; and 

• Provide that if a party amends its 

pleadings to add an associated person to 

a previously all member case, parties 

will receive a majority public panel. 

Thus, cases involving only members 

would have an all non-public panel; 

cases involving a member and an 

associated person (excluding cases 

involving a claim for statutory 

discrimination) would have a majority 

public panel; and cases involving an 

associated person with a statutory 

discrimination claim would have a 

specialized all public panel.8 Moreover, 

if a member amends its pleadings to add 

an associated person, the case would 

receive a majority public panel, and the 

rules that apply to cases between 

associated persons and members would 

govern list selection and the 

administration of the arbitration 

proceeding. 

Employment Disputes Involving 

Associated Persons 

Currently, in employment disputes 

between or among members and 

associated persons, FINRA requires that 

the panel consist of all non-public 

arbitrators in cases that arise out of the 

employment or termination of 

employment of an associated person, 

and that relate exclusively to (1) 

employment contracts, (2) promissory 

notes, or (3) receipt of commissions. 

However, if a party adds a claim that 

does not meet these criteria, the parties 

receive a majority public panel. 

FINRA proposed to amend Rule 

13402 of the Industry Code to clarify 

that for all employment disputes 

between or among members and 

associated persons (except for statutory 

employment discrimination cases), the 

parties must select a majority public 

panel.9 Rule 13402(a) would be 

amended to delete the title of the rule, 

which contains the exceptions to the 

majority public panel requirement, and 

replace it with a concise description, 

which clarifies that Rule 13402(a) 

would apply to disputes involving only 

members. Rule 13402(b) would be 

amended to modify the title of the rule 

to clarify that for all industry disputes 

involving associated persons (excluding 

disputes involving statutory 

employment discrimination claims), the 

parties would receive a majority public 

panel. FINRA also proposed to make 

similar title changes to Rules 13403(a) 

and 13403(b), which govern generating 

and sending lists to parties, and to Rules 

13406(a) and 13406(b), which govern 

appointment of arbitrators and 

discretion to appoint arbitrators not on 

the list. 


pwalker on PROD1PC71 with NOTICES