Document ID: SEC-2016-1096-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2016-06-28T04:00Z

[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42016-42017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15178]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78130; File No. SR-FINRA-2016-019]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt NASD Rule 2830 as FINRA Rule 2341 
(Investment Company Securities) in the Consolidated FINRA Rulebook

June 22, 2016.
    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 
on June 9, 2016, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') 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. FINRA has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt NASD Rule 2830 (Investment Company 
Securities) as FINRA Rule 2341 (Investment Company Securities) in the 
consolidated FINRA rulebook without any substantive changes. FINRA also 
proposes to update cross-references within other FINRA rules 
accordingly.
    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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\4\ FINRA is proposing to transfer 
NASD Rule 2830 (Investment Company Securities) into the Consolidated 
FINRA Rulebook as FINRA Rule 2341 (Investment Company Securities) 
without any substantive changes. NASD Rule 2830 regulates members' 
activities in connection with the sale and distribution of securities 
of companies registered under the Investment Company Act of 1940 
(``investment company securities'').\5\ In connection with the 
distribution and sale of investment company securities, NASD Rule 2830 
limits the sales charges members may receive, prohibits directed 
brokerages arrangements, limits the payment and receipt of cash and 
non-cash compensation, sets conditions on discounts to dealers, and 
addresses other issues such as members' purchases and sales of 
investment company securities as principal.
---------------------------------------------------------------------------

    \4\ The current FINRA rulebook consists of: (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from New York Stock Exchange 
LLC (``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).
    \5\ As with NASD Rule 2830, FINRA Rule 2341 would not regulate 
members' activities in connection with variable insurance contracts, 
which are regulated by FINRA Rule 2320 (Variable Contracts of an 
Insurance Company).
---------------------------------------------------------------------------

    Proposed FINRA Rule 2341 closely tracks the language of NASD Rule 
2830 and makes only non-substantive, technical changes to the text of 
the NASD rule by, for instance, replacing the reference to a legacy 
NASD rule with the applicable FINRA rule and making other non-
substantive, technical conforming changes.\6\
---------------------------------------------------------------------------

    \6\ FINRA previously solicited comment on a proposal to move 
NASD Rule 2830 to the Consolidated FINRA Rulebook with substantive 
changes. See Regulatory Notice 09-34 (June 2009); see also 
Securities Exchange Act Release No. 64386 May 3, 2011), 76 FR 26779 
(May 9, 2011) (Notice of Filing File No. SR-FINRA-2011-018) 
(withdrawn on August 1, 2011). Given that FINRA would like to 
proceed with the rulebook consolidation process expeditiously to 
provide greater clarity and regulatory efficiency to FINRA members, 
FINRA is proposing to move NASD Rule 2830 to the Consolidated FINRA 
Rulebook without substantive changes at this time, but FINRA may 
consider proposing substantive changes to the rule as part of future 
rulemaking.

---------------------------------------------------------------------------

[[Page 42017]]

    In addition, the proposed rule change makes technical changes to 
paragraph (b)(10) of NASD Rule 2830. Paragraph (b)(10) of NASD Rule 
2830 incorporates by reference several definitions under the Investment 
Company Act, including ``open-end management investment company.'' 
However, the Investment Company Act does not define the term ``open-end 
management investment company,'' but defines ``management company,'' 
and divides this term into two sub-classifications, ``open-end 
company'' and ``closed-end company.'' \7\ Accordingly, paragraph 
(b)(10) of proposed FINRA Rule 2341 would incorporate the definitions 
of ``open-end company'' and ``closed-end company'' from the Investment 
Company Act, rather than ``open-end management investment company.'' 
The proposed rule change would then replace references to the terms 
``open-end management investment company,'' ``open-end investment 
company,'' and ``open-end management company'' in NASD Rule 2830(c), 
(d), (g), (h), (i) and (j) with references to ``open-end company.'' 
Similarly, the proposed rule change would replace references to the 
term ``closed-end investment company'' in NASD Rule 2830(d) and (j) 
with a reference to ``closed-end company.'' These proposed changes 
would correct these references in the NASD rule for the purposes of 
adopting it as a FINRA rule, without changing the substantive meaning. 
FINRA has filed the proposed rule change for immediate effectiveness. 
The implementation date will be 30 days after the date of the filing.
---------------------------------------------------------------------------

    \7\ See Sections 4(3) and 5(a) of the Investment Company Act.
---------------------------------------------------------------------------

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, which 
does not substantively change the rule, is consistent with the Act 
because it is being undertaken pursuant to the rulebook consolidation 
process, which is designed to provide additional clarity and regulatory 
efficiency to FINRA members by consolidating the applicable NASD, 
Incorporated NYSE, and FINRA rules into one rule set.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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 noted above, the proposed 
rule change will not substantively change either the text or 
application of the rule. FINRA would like to proceed with the rulebook 
consolidation process expeditiously, which is believed will provide 
additional clarity and regulatory efficiency to members.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2016-019 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2016-019. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing 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-2016-019 and should be 
submitted on or before July 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-15178 Filed 6-27-16; 8:45 am]
 BILLING CODE 8011-01-P