Document ID: SEC-2009-1749-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rule 4570
Posted Date: 2009-12-11T05:00Z

[Federal Register: December 11, 2009 (Volume 74, Number 237)]
[Notices]               
[Page 65817-65819]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11de09-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61116; File No. SR-FINRA-2009-080]

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

December 4, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on November 17, 2009, 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'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by FINRA. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt NASD Rule 3121 (Custodian of the 
Record) as FINRA Rule 4570 (Custodian of Books and Records) in the 
consolidated FINRA rulebook with minor changes.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets:
4500. BOOKS, RECORDS AND REPORTS
* * * * *
[3121]4570. Custodian of [the] Books and Records

    A member who files a [Securities and Exchange Commission] Form BDW 
shall designate on the Form BDW, as the custodian of the member's books 
and records, a person associated with the

[[Page 65818]]

member at the time that the Form BDW is filed.
* * * * *

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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD 
Rule 3121 as FINRA Rule 4570 in the Consolidated FINRA Rulebook with 
minor changes as described below.
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    \3\ The 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 Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
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Background
    SEA Rule 17a-4 requires members to retain their books and records 
for specified retention periods.\4\ Pursuant to SEA Rule 17a-4(g), a 
member that ceases doing business as a 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.
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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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Proposal
    FINRA proposes to adopt NASD Rule 3121 as FINRA Rule 4570 in the 
Consolidated FINRA Rulebook, with only minor changes. Specifically, 
NASD Rule 3121 currently states that a member must designate an 
associated person ``as the custodian of the record''; FINRA proposes to 
revise the text of the rule to 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. For similar 
reasons, FINRA proposes to change the title of the rule from 
``Custodian of the Record'' to ``Custodian of Books and Records.''
    FINRA will announce the implementation date of the proposed rule 
change in a Regulatory Notice to be published no later than 90 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 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.
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    \8\ 15 U.S.C. 78o-3(b)(6).
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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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2009-080 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-2009-080. 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

[[Page 65819]]

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-2009-080 and should be submitted on or before January 4, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29524 Filed 12-10-09; 8:45 am]

BILLING CODE 8011-01-P