Document ID: SEC-2010-0103-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Adopt FINRA Rule 4570 (Custodian of Books and Records) in the Consolidated FINRA Rulebook
Posted Date: 2010-01-20T05:00Z

[Federal Register: January 20, 2010 (Volume 75, Number 12)]
[Notices]               
[Page 3270-3271]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20ja10-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61332; File No. SR-FINRA-2009-080]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Adopt FINRA 
Rule 4570 (Custodian of Books and Records) in the Consolidated FINRA 
Rulebook

January 12, 2010.
    On November 17, 2009, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') 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 FINRA Rule 4570 (Custodian of Books and 
Records) in the Consolidated FINRA Rulebook. The proposed rule change 
was published for comment in the Federal Register on December 11, 
2009.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61116 (December 4, 
2009), 74 FR 65817.
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    Rule 17a-4 of the Act requires members to retain their books and 
records for specified retention periods.\4\ Pursuant to Rule 17a-4(g), 
a member that ceases doing business as a

[[Page 3271]]

registered broker-dealer has a continuing obligation to retain its 
required books and records for the remainder of the specified retention 
periods.\5\
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    \4\ 17 CFR 240.17a-4.
    \5\ 17 CFR 240.17a-4(g).
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    To that end, Form BDW (Uniform Request for Broker-Dealer 
Withdrawal) requires that the member identify and provide the contact 
information of the person who will have custody of the firm's books and 
records after the firm has discontinued its business operations. The 
form also requires that the firm provide the address where the books 
and records will be located, if different than the custodian's address. 
In addition, Form BDW provides that the firm and the person signing the 
form on behalf of the firm must certify that the firm's books and 
records will be preserved and made available for inspection.
    NASD Rule 3121 requires a member to designate as the custodian of 
its required books and records on Form BDW a person who is associated 
with the firm at the time Form BDW is filed. The rule, which was 
approved by the Commission in 2000,\6\ is intended to enhance FINRA's 
ability to obtain required books and records from firms that are no 
longer conducting business and to ensure that the custodian of the 
books and records has been subject to certain background checks.\7\ 
There is no comparable Incorporated NYSE Rule. Therefore, FINRA 
proposed to adopt NASD Rule 3121 as FINRA Rule 4570 in the Consolidated 
FINRA Rulebook, with only minor technical changes. Specifically, NASD 
Rule 3121 currently states that a member must designate an associated 
person ``as the custodian of the record''; the revised rule text will 
reflect that the associated person is designated ``as the custodian of 
the member's books and records,'' which is consistent with the 
terminology used in Form BDW.
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    \6\ See Securities Exchange Act Release No. 43102 (August 1, 
2000), 65 FR 48266 (August 7, 2000) (Order Approving File No. SR-
NASD-99-76).
    \7\ For example, associated persons who have custody of a 
member's original books and records relating to securities or funds 
are subject to the fingerprinting requirements of SEA Rule 17f-2 for 
purposes of a criminal background check.
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    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 association.\8\ In 
particular, the Commission finds that the proposal is consistent with 
Section 15A(b)(6) of the Act,\9\ which requires, among other things, 
that FINRA's 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. The 
Commission believes that the proposed rule change will further the 
purposes of the Act by, among other things, enhancing FINRA's ability 
to obtain required books and records from member firms that are no 
longer conducting business. The Commission therefore believes that it 
is appropriate and consistent with the Act for the Exchange to include 
adopt the Custodian of Books and Records rule.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-FINRA-2009-080) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-924 Filed 1-19-10; 8:45 am]
BILLING CODE 8011-01-P