4792 Federal Register / Vol. 74, No. 16 / Tuesday, January 27, 2009 / Notices 

53700 (April 21, 2006), 71 FR 25257 (April 28, 

2006) (SR–BSE–2005–46). 

19 17 CFR 240.12d2–2. 

20 15 U.S.C. 78f(b)(5). 

21 17 CFR 200.30–3(a)(12). 

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

2The current FINRA rulebook includes, in 

addition to FINRA Rules, (1) NASD Rules and (2) 

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’’). 

For more information about the rulebook 

consolidation process, see FINRA Information 

Notice, March 12, 2008 (Rulebook Consolidation 

Process). 

3The term ‘‘person associated with a member’’ 

includes, among others, registered representatives. 

See FINRA By-Laws, Article I, Paragraph (rr). 

4 IM–2110–7 further states that nothing in the 

Interpretation shall affect the operation of NASD 

Rule 11870 (Customer Account Transfer Contracts). 

Generally, Rule 11870 addresses the transfer of 

securities account assets from one member to 

another member in connection with a customer 

request. (FINRA intends to review NASD Rule 

11870 and related interpretive materials as part of 

a later phase in the rulebook consolidation process. 

Note that the Commission has approved FINRA’s 

proposed rule change to rescind, as duplicative of 

Rule 11870, Incorporated NYSE Rule 412 and its 

Interpretation. See Securities Exchange Act Release 

No. 58533 (September 12, 2008), 73 FR 54652 

(September 22, 2008) [File No. SR–FINRA–2008– 

036]. 

5See NASD Notice to Members 02–07 (January 

2002) (Interfering With Customer Account 

Transfers); see also Securities Exchange Act Release 

No. 45239 (January 4, 2002), 67 FR 1790 (January 

14, 2002) [File No. SR–NASD–2001–95]. 

6NASD Notice to Members 79–7 (February 1979) 

(Fair Treatment of Customer Accounts); see also 

Securities Exchange Act Release No. 15194 

(September 28, 1978) (Notice to Broker-Dealers 

Concerning Fair Treatment of Customer Accounts). 

Finally, the proposed rule change 

requires that public notice of the final 

delisting determination by the Exchange 

be provided no fewer than 10 days 

before the delisting becomes effective, 

in accordance with Rule 12d2–2 under 

the Act.19 The Commission believes that 

public notice of the Exchange’s final 

determination should ensure that 

investors have adequate notice of an 

exchange delisting and is consistent 

with the protection of investors under 

Section 6(b)(5) of the Act.20

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular Section 6 of the Act and the 

rules and regulations thereunder. 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

BSE–2008–36) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1673 Filed 1–26–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59253; File No. SR–FINRA– 

2008–052] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to the 

Adoption of FINRA Rule 2140 

(Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes) in the 

Consolidated FINRA Rulebook 

January 15, 2009. 

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

Securities Exchange Act of 1934 

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

October 29, 2008, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

(f/k/a National Association of Securities 

Dealers, Inc. [‘‘NASD’’]) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which items have been prepared 

by FINRA. The Commission is 

publishing this notice to solicit 

comments from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adopt without 

material change NASD Interpretive 

Material 2110–7 (IM–2110–7) 

(‘‘Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes’’) as a FINRA rule 

in the consolidated FINRA rulebook. 

The proposed rule change would 

renumber NASD IM–2110–7 as FINRA 

Rule 2140 in the consolidated FINRA 

rulebook. 

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 these statements. 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of the process of developing 

the new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),2

FINRA is proposing to adopt without 

material change NASD Interpretive 

Material 2110–7 (IM–2110–7) 

(‘‘Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes’’) as a FINRA rule 

in the Consolidated FINRA Rulebook. 

The proposed rule change would 

renumber NASD IM–2110–7 as FINRA 

Rule 2140 in the Consolidated FINRA 

Rulebook. 

(A) Background 

NASD IM–2110–7 provides that it 

shall be inconsistent with just and 

equitable principles of trade for a 

member or person associated with a 

member 3 to interfere with a customer’s 

request to transfer his or her account in 

connection with the change in 

employment of the customer’s registered 

representative provided that the account 

is not subject to any lien for monies 

owed by the customer or other bona fide 

claim. Prohibited interference includes, 

but is not limited to, seeking a judicial 

order or decree that would bar or restrict 

the submission, delivery, or acceptance 

of a written request from a customer to 

transfer his or her account.4

FINRA adopted IM–2110–7 to address 

the practice of delaying customer 

account transfers.5 In adopting IM– 

2110–7, FINRA noted that, when a 

registered representative leaves his or 

her firm for a position at a different 

firm, clients serviced by the registered 

representative may decide to continue 

their relationship with the registered 

representative by transferring their 

accounts to the registered 

representative’s new firm. FINRA 

expressed concern that the registered 

representative’s former firm, concerned 

that its former employee may have 

breached his or her employment 

contract by sharing client information 

with the new firm or by soliciting 

clients to transfer their accounts to the 

new firm, sometimes would seek a court 

order to prevent the transfer of accounts. 

FINRA noted that in a prior Notice to 

Members it had already alerted members 

that unnecessary delays in transferring 

customer accounts, including delays 

accompanied by attempts to persuade 

customers not to transfer their accounts, 

are inconsistent with just and equitable 

principles of trade.6 FINRA stated that 

mstockstill on PROD1PC66 with NOTICES6

Federal Register / Vol. 74, No. 16 / Tuesday, January 27, 2009 / Notices 4793 

7The exact revised text of IM–2100–8 is attached 

as Exhibit 5 to the proposed rule change and is 

available at http://www.finra.org/Industry/ 

Regulation/RuleFilings/2008/P117330. Similarly, 

FINRA has transferred NASD Rule 2110 to the 

Consolidated FINRA Rulebook without change as 

FINRA Rule 2010. Securities Exchange Act Release 

No. 58643 (September 25, 2008), 73 FR 57174 

(October 1, 2008) [File No. SR–FINRA–2008–028]. 

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. 

obtaining court orders to prevent 

customers from following a registered 

representative to a different firm is 

similar to the unfair practice of delaying 

transfers that the earlier Notice had 

warned about. 

In adopting IM–2110–7, FINRA 

further stated that the Interpretive 

Material does not affect the ability of 

member firms to use employment 

agreements to prevent former 

representatives from soliciting firm 

customers. Members are not prevented 

from pursuing other remedies they may 

have arising from employment disputes 

with former registered representatives. 

Rather, IM–2110–7 is limited to 

restricting a member from interfering 

with a customer’s right to transfer his or 

her account once the customer has 

asked the firm to move the account. 

(B) Proposal 

FINRA believes that NASD IM–2110– 

7 is consistent with the goal of investor 

protection and serves the public 

interest. FINRA proposes to transfer 

NASD IM–2110–7 with only minor 

changes into the Consolidated FINRA 

Rulebook. Specifically, IM–2110–7 

would be recodified with conforming 

revisions as a stand-alone FINRA rule 

rather than as interpretive material to 

NASD Rule 2110 (Standards of 

Commercial Honor and Principles of 

Trade).7

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than ninety days 

following 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 would further the 

purposes of the Act because as part of 

the Consolidated FINRA Rulebook the 

proposed rule change will protect 

investors and the public interest by 

addressing interference with the transfer 

of customer accounts in the context of 

employment disputes. 

(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 thirty-five 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 ninety 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–2008–052 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–2008–052. 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 and on 

FINRA’s Web site at http:// 

www.finra.org/Industry/Regulation/ 

RuleFilings/2008/P117330. 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–2008–052 and 

should be submitted on or before 

February 17, 2009. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1656 Filed 1–26–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59267; File No. SR–FINRA– 

2009–003] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Implement Technical 

Changes to the Code of Arbitration 

Procedure for Customer Disputes and 

Industry Disputes 

January 16, 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 Financial 

Industry Regulatory Authority, Inc. 

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

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

mstockstill on PROD1PC66 with NOTICES6