Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Notices 31779 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 55158 

(January 24, 2007); 72 FR 4574 (January 31, 2007) 

(File Nos. SR–NASD–2003–158 and SR–NASD– 

2004–011). 

4The Mediation Code was filed separately with 

the Commission as SR–NASD–2004–013. The 

Commission approved the Mediation Code on 

October 31, 2005, and it became effective on 

January 30, 2006. See Order Granting Approval to 

Proposed Rule Change and Amendments Nos. 1 and 

2 Thereto, and Notice of Filing and Order Granting 

Accelerated Approval to Amendment No. 3, to 

Amend NASD Rules for Mediation Proceedings, 

Securities Exchange Act Rel. No. 52705 (October 31, 

2005), 70 FR 67525 (November 7, 2005) (SR–NASD– 

2004–013). 

5Rules 12100(r) and 13100(r) define ‘‘person 

associated with a member’’ to mean: 

(1) A natural person registered under the Rules 

of FINRA; or 

(2) A sole proprietor, partner, officer, director, or 

branch manager of a member, or a natural person 

occupying a similar status or performing similar 

functions, or a natural person engaged in the 

investment banking or securities business who is 

directly or indirectly controlling or controlled by a 

member, whether or not any such person is 

registered or exempt from registration with FINRA 

under the By-Laws or the Rules of FINRA. 

For purposes of the Code, a person formerly 

associated with a member is a person associated 

with a member. 

6FINRA’s By-Laws define ‘‘person associated 

with a member or associated person of a member’’ 

as (1) a natural person who is registered or has 

applied for registration under the Rules of the 

Corporation; (2) a sole proprietor, partner, officer, 

director, or branch manager of a member, or other 

natural person occupying a similar status or 

performing similar functions, or a natural person 

engaged in the investment banking or securities 

business who is directly or indirectly controlling or 

controlled by a member, whether or not any such 

person is registered or exempt from registration 

with the Corporation under these By-Laws or the 

Rules of the Corporation; and (3) for purposes of 

Rule 8210, any other person listed in Schedule A 

of Form BD of a member. See By-Laws of the 

Corporation, Article I, Definitions (rr). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60159; No. SR–FINRA– 

2009–041] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend 

Rules 12100, 12506, and 12902 of the 

Code of Arbitration Procedure for 

Customer Disputes and Rule 13100 of 

the Code of Arbitration Procedure for 

Industry Disputes To Implement 

Conforming Changes 

June 22, 2009. 

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

Securities Exchange Act of 1934 

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

19b–4 thereunder,2 notice is hereby 

given that Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’ or the 

‘‘Corporation’’) (f/k/a National 

Association of Securities Dealers, Inc. 

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

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) on June 5, 2009, the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been substantially 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 amend the 

Code of Arbitration Procedure for 

Industry Disputes (‘‘Industry Code’’) to 

amend Rules 12100(r), 12506(a), and 

12902(a) of the Code of Arbitration 

Procedure for Customer Disputes 

(‘‘Customer Code’’) and Rule 13100(r) of 

the Code of Arbitration Procedure for 

Industry Disputes (‘‘Industry Code’’) to 

amend the definition of ‘‘associated 

person,’’ streamline a case 

administration procedure, and clarify 

that customers could be assessed 

hearing session fees based on their own 

claims for relief in connection with an 

industry claim. 

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 

On January 24, 2007, the SEC 

approved amendments to the NASD 

Code of Arbitration Procedure (‘‘old 

Code’’) in connection with rules 

applicable to customer disputes and to 

industry disputes,3 a final step in the 

reorganization of the old Code into three 

separate procedural codes: the Customer 

Code, the Industry Code, and the 

Mediation Code (the ‘‘Code Revision’’).4

The Code Revision simplified the 

language of the old Code, codified 

current dispute resolution practices, and 

implemented several substantive 

changes to dispute resolution rules. 

Since the SEC approved the Code 

Revision, Dispute Resolution staff 

(‘‘staff’’) has found rule language that 

was omitted inadvertently from the 

Customer Code and the Industry Code 

(collectively, ‘‘Codes’’), as well as rule 

language that could be improved to 

better convey FINRA’s intent or to 

clarify current practice regarding certain 

dispute resolution rules. To address 

these concerns, FINRA is proposing to 

amend: 

• Rules 12100(r) and 13100(r) of the 

Codes (the definition of ‘‘person 

associated with a member’’) so that the 

definition in the Codes conforms to the 

definition in FINRA’s By-Laws; 

• Rule 12506(a) of Customer Code 

(Document Production Lists) to 

encourage parties to download the 

Discovery Guide from FINRA’s Web site 

instead of having a copy mailed to them 

automatically when a claim is filed; and 

• Rule 12902(a) of the Customer Code 

(Hearing Session Fees, and Other Costs 

and Expenses) to clarify that the 

arbitrators may assess hearing session 

fees against a customer in connection 

with a claim filed by a member against 

a customer in cases where there is also 

a responsive customer claim. 

A discussion of the proposed 

amendments to each rule follows. 

Rules 12100(r) and 13100(r)—Person 

Associated With a Member 

A ‘‘person associated with a member’’ 

or an ‘‘associated person’’ is an 

individual who is licensed by FINRA to 

buy and sell securities for a FINRA 

member and its customers.5 An 

associated person works for a member 

and, in most cases, is the individual 

with whom customers communicate to 

discuss their accounts or securities 

transactions. 

FINRA intended the definition of 

associated person in the Codes to match 

the By-Laws definition,6 except for one 

phrase relating only to Procedural Rule 

8210. To that end, FINRA is proposing 

to amend Rules 12100(r) and 13100(r) of 

the Codes to make these definitions 

consistent with the definition in 

FINRA’s By-Laws. The proposal would 

amend the definition of ‘‘person 

associated with a member’’ in the Codes 

in two ways: (1) Insert the word ‘‘other’’ 

31780 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Notices 

7See supra note 6. 

8 In January 1996, FINRA (then-NASD) created a 

Discovery Guide to assist customers in an 

arbitration with directing discovery and resolving 

discovery disputes. The Discovery Guide was 

approved by the SEC after a public comment 

period, see Exchange Act Release No. 41833 

(September 2, 1999), 64 FR 49256 (September 10, 

1999). and was made available for use in arbitration 

proceedings involving customer disputes upon the 

publication of Notice to Members 99–90 (November 

1999). 

9Many of the provisions of the Discovery Guide 

were incorporated into the Codes as part of the 

Code Revision. See supra note 3. 

10Although there are discovery rules in each 

Code, the Discovery Guide applies only in customer 

arbitration disputes. 

11Rule 10332(c) of the old Code stated, in 

relevant part, that ‘‘no fees shall be assessed against 

a customer in connection with an industry claim 

that is dismissed; however, in cases where there is 

also a customer claim, the customer may be 

assessed forum fees based on the customer claim.’’ 

12For example, if a member filed a claim against 

a customer, and the arbitrators dismissed the claim, 

the customer would not be assessed any forum fees. 

However, if, in connection with the industry claim, 

the customer filed a counterclaim against the 

member, the customer would be subject to potential 

forum fees based on the customer’s own claim for 

relief. 

13Rule 12902(a)(4) maintains the protection of 

old Rule 10332(c) by requiring that ‘‘the amount of 

hearing session fees the customer must pay must be 

based on the amount actually awarded to the 

member or associated person, rather than on the 

amount claimed by the member or associated 

person.’’ 

14 15 U.S.C. 78o–3(b)(6). 

before the second reference to ‘‘natural 

person’’ to clarify that the definition 

does not include corporate entities; and 

(2) insert the criterion that a natural 

person includes someone who has 

applied for registration. 

FINRA believes that amending the 

definition in Rules 12100(r) and 

13100(r) to clearly exclude corporate 

entities from the definition of associated 

person would remove any ambiguity 

concerning how the definition will be 

applied. Further, amending these rules 

to expand the forum’s jurisdiction to 

natural persons who have applied for 

registration would ensure that these 

individuals, who may be working in 

some capacity with a firm while 

awaiting their license, are subject to 

FINRA’s rules, and hence would be 

required to arbitrate should a dispute 

involving them arise. Moreover, FINRA 

notes that this amendment would 

conform the definitions under the Codes 

to the Corporation’s definition of person 

associated with a member.7

Rule 12506—Document Production 

Lists 

During the arbitration process, parties 

can request discovery of documents, 

names of witnesses, and other 

information from each other to prepare 

their cases for the arbitration hearing. 

To help parties understand what 

information they should disclose, staff 

provides a copy of the FINRA Discovery 

Guide 8 to parties when the Director 

serves the statement of claim. The 

Discovery Guide provides parties in 

customer cases with guidance on which 

documents they should exchange 

without arbitrator or staff intervention 

(called Document Production Lists) 9

and provides guidance to arbitrators in 

determining which documents parties 

are presumptively required to 

produce.10

Rule 12506 of the Customer Code 

states that when the Director serves the 

statement of claim, ‘‘the Director will 

provide the FINRA Discovery Guide and 

Document Production Lists to the 

parties.’’ In light of the availability of 

Dispute Resolution forms, guides and 

the claim filing system on FINRA’s Web 

site, FINRA believes that it is no longer 

necessary to disseminate the Discovery 

Guide to parties automatically when 

they file a claim in the dispute 

resolution forum. Further, many parties 

and counsel who use FINRA’s 

arbitration forum are repeat users who 

are likely to have a current copy of the 

Discovery Guide in their files. Due to 

these circumstances, FINRA believes 

that automatic distribution of the 

Discovery Guide is not an efficient use 

of resources. 

Therefore, FINRA is proposing to 

amend Rule 12506(a) to state that, when 

the Director serves the statement of 

claim, the Director will notify parties of 

the location of the Discovery Guide 

(which includes the Document 

Production Lists) on FINRA’s Web site, 

but will not provide a copy except upon 

request. FINRA believes the proposed 

change would enhance the efficiency of 

the case administration process, and 

would reduce FINRA’s printing and 

mailing costs. Moreover, the proposal 

would encourage parties, especially 

those who frequently use the forum, to 

download relevant information from 

FINRA’s Web site as needed. 

Rule 12902—Hearing Session Fees, and 

Other Costs and Expenses 

Under the old Code, arbitrators could 

allocate hearing session fees against any 

party. Rule 10332(c) 11 of the old Code 

protected customers from potentially 

higher forum fees (now hearing session 

fees) triggered by amounts sought in 

industry claims by prohibiting the 

arbitrators from assessing forum fees 

against customers if the industry claim 

was dismissed. Moreover, the rule 

protected customers from higher forum 

fees by requiring the amount of the 

forum fees to be based on the amount 

awarded to an industry party and not on 

the amount of damages requested by the 

industry claim. However, Rule 10332(c) 

also provided that customers could be 

fairly subject to potential forum fees 

based on their own claims for relief in 

connection with the industry claim.12

During the Code Revision, FINRA 

inadvertently omitted from the 

corresponding provision, Rule 

12902(a)(4) of the Customer Code, the 

provision in old Rule 10332(c) that 

permitted the forum to assess fees 

against the customer based on the 

customer’s claim in an industry dispute. 

Thus, FINRA is proposing to amend 

Rule 12902(a)(4) to incorporate the 

omitted language at the end of the rule. 

Specifically, the new language would 

state that ‘‘in cases where there is also 

a customer claim, the customer may be 

assessed a filing fee under Rule 

12900(a), and may be subject to hearing 

session fees under Rule 12902(a).’’ 

FINRA notes that the proposed 

amendment does not reflect a change in 

FINRA’s stated policy or practice. Under 

the Customer Code, if a customer files 

a claim, counterclaim, cross claim or 

third party claim, Rule 12900(a)(1) 

requires the customer to pay a filing fee. 

Moreover, the first sentence of Rule 

12902(a)(4) addresses the instance in 

which a customer may be assessed 

hearing session fees in connection with 

a claim filed by a member or associated 

person.13 Similarly, the proposed 

amendment to Rule 12902(a)(4) would 

make clear to customers that if they file 

a claim in connection with a claim filed 

by a member, they may be subject to 

filing fees and hearing session fees 

based on their own claim for relief. 

FINRA believes the proposed 

amendment would clarify the forum’s 

policy concerning fees in connection 

with a customer counterclaim for relief 

and make the Code easier to administer 

for staff. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,14 which 

requires, among other things, that the 

Association’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 is consistent with FINRA’s 

statutory obligations under the Act to 

protect investors and the public interest 

because the proposal would ensure that 

individuals who have applied for 

registration are bound by FINRA’s rules, 

and therefore subject to the jurisdiction 

Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Notices 31781 

15The rationale for the proposed rule change was 

confirmed in a phone conversation with Mignon 

McLemore of FINRA, on June 22, 2009. 

16 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). 

4The term ‘‘Actual Participants Fund Deposit’’ 

means the actual amount the participant has 

deposited to the Participants Fund including its 

Required Participants Fund Deposit and Voluntary 

Participants Fund Deposit. 

of the dispute resolution forum, and 

would assist in the efficient 

administration of the arbitration process 

by streamlining certain procedures and 

clarifying the allocation of hearing 

fees.15

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, as amended. 

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 by FINRA. 

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–2009–041 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–2009–041. 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. 

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 the File 

Number SR–FINRA–2009–041 and 

should be submitted on or before July 

23, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–15610 Filed 7–1–09; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60173; File No. SR–DTC– 

2009–12] 

Self-Regulatory Organizations; the 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Voluntary Participants Fund Deposit 

June 25, 2009. 

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

Securities Exchange Act of 1934 

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

June 12, 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 primariy 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) 3 thereunder 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 allow 

a DTC participant to submit a request to 

have its Voluntary Participants Fund 

Deposit credited to its settlement 

account on the next business day 

following the request. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The Participants Fund is a mandatory 

risk management control for all DTC 

participants and is comprised of the 

Required Participants Fund Deposits, 

which are collected through DTC’s 

Settlement System, and any Voluntary 

Participants Fund Deposits (collectively, 

‘‘Actual Participants Fund Deposits’’ 4) 

of all participants. Currently, 

participants may request a return of 

their Voluntary Participants Fund 

Deposit on a monthly basis by sending 

free form wire instructions to DTC 

through the Participants Fund Return 

Request application. DTC’s Risk 

Management Department reviews each 

request and, if appropriate, DTC will 

make the return through Fedwire to the 

account requested on the wire 

instruction. 

DTC’s participants have requested the 

ability to also receive their Voluntary