Document ID: SEC-2010-1056-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-07-12T04:00Z

[Federal Register: July 12, 2010 (Volume 75, Number 132)]
[Notices]               
[Page 39715-39720]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jy10-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62454; File No. SR-FINRA-2010-030]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt 
FINRA Rule 11000 Series (Uniform Practice Code) in the Consolidated 
FINRA Rulebook

July 6, 2010.
    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 14, 2010, 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 as described in Items I, II, 
and III below, which Items have been prepared primarily 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 the 
Substance of the Proposed Rule Change

    FINRA is proposing to adopt the NASD Rule 11000 Series (Uniform 
Practice Code [``UPC'']) as FINRA rules in the consolidated FINRA 
rulebook, subject to certain amendments, and to delete NASD Rule 3370 
(Purchases) and the following corresponding provisions in the 
Incorporated NYSE Rules and Interpretations: 176 (Delivery Time), 180 
(Failure to Deliver), 282 (Buy-in Procedures) and its Supplementary 
Material paragraphs .10-.80, 291 (Failure to Fulfill Closing Contract), 
292 (Restrictions on Members' Participation in Transaction to Close 
Defaulted Contracts), 293 (Closing Contracts in Suspended Securities), 
294 (Default in Loan of Money), 387 (COD Orders) and its Supplementary 
Material paragraphs .10-.60, Rule 387 Interpretations/01-/18, 430 
(Partial Delivery of Securities to Customers on C.O.D. Purchases), and 
Rule 430 Interpretation/01.\3\
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    \3\ The text of the proposed rule change is available on FINRA's 
Web site at http://www.finra.org.
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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

[[Page 39716]]

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.\4\
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    \4\ Some of the text of the summaries prepared by FINRA may have 
been modified by the Commission.
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(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''),\5\ FINRA is proposing to adopt the 
NASD Rule 11000 Series (Uniform Practice Code [``UPC'']) into the 
Consolidated FINRA Rulebook, subject to certain amendments described 
below. The UPC was originally adopted on January 20, 1941, and became 
effective on August 1, 1941. The UPC prescribes the manner in which 
over-the-counter securities transactions other than those cleared 
through a registered clearing agency are compared, cleared, and settled 
between member firms.
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    \5\ 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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    As a general matter, the UPC does not apply to:
    a. Transactions in securities between members that are compared, 
cleared, or settled through the facilities of a registered clearing 
agency;
    b. Transactions in securities exempted under Section 3(a)(12) of 
the Act or municipal securities as defined in Section 3(a)(29) of the 
Act;
    c. Transactions in redeemable securities issued by companies 
registered under the Investment Company Act of 1940; or
    d. Transactions in Direct Participation Program securities.
    The UPC is designed to make uniform, where practicable, custom, 
practice, usage, and trading technique in the investment banking and 
securities business, particularly with respect to operational and 
settlement issues. This can include such matters as trade terms, 
deliveries, payments, dividends, rights, interest, stamp taxes, claims, 
assignments, powers of substitution, due-bills, transfer fees, and 
marking to the market. The UPC, among other things, was created so that 
the transaction of day-to-day business by members may be simplified and 
facilitated.
1. UPC Rules Generally
    FINRA is proposing to transfer a significant portion of the NASD 
Rule 11000 Series into the Consolidated FINRA Rulebook with the minor 
changes detailed below.\6\ Specifically, FINRA is proposing to update 
certain terminology in the UPC. For example, NASD Rule 11120 defines 
the term ``written notice'' as used in the UPC to include a notice 
delivered by hand, letter, teletype, telegraph, TWX, facsimile 
transmission, or other comparable media. FINRA is proposing to delete 
the references to teletype, telegraph, and TWX and to include notice 
delivered by electronic mail. In addition, FINRA is proposing to update 
cross-references throughout the rules and to make other minor changes 
primarily to reflect the new conventions of the Consolidated FINRA 
Rulebook.
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    \6\ NASD Rules 11890 (Clearly Erroneous Transactions), IM-11890-
1 (Refusal To Abide by Rulings), and IM-11890-2 (Review by Panels of 
the UPC Committee) were adopted, with significant changes, into the 
Consolidated FINRA Rulebook as the FINRA Rule 11890 Series (Clearly 
Erroneous Transactions) pursuant to a separate rule filing and are 
not being addressed as part of this rule filing. Securities Exchange 
Act Release No. 61080 (Dec. 1, 2009), 74 FR 64117 (Dec. 7, 2009) 
(SR-FINRA-2009-068).
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2. Proposed FINRA Rules 11111 (Refusal To Abide by Rulings of the 
Committee) and 11112 (Review by Panels of the UPC Committee)
    FINRA is proposing to adopt two new provisions that are largely 
based on former NASD IM-11890-1 (Refusal To Abide by Rulings) and NASD 
IM-11890-2 (Review by Panels of the UPC Committee).\7\ FINRA is 
proposing that the provisions of former NASD IM-11890-1 be incorporated 
into and merged with current NASD IM-11110 (Refusal To Abide by Rulings 
of the Committee) into proposed new FINRA Rule 11111, as the two 
provisions are largely identical. Former NASD IM-11890-1 provided that 
a refusal by a member to take action necessary to effectuate a final 
decision of a FINRA officer or the UPC Committee under NASD Rule 11890 
(Clearly Erroneous Transactions) would be considered conduct 
inconsistent with just and equitable principles of trade. Current NASD 
IM-11110 provides that a refusal by a member to abide by an official 
ruling of the UPC Committee, acting within its appropriate sphere, 
shall be considered conduct inconsistent with just and equitable 
principles of trade. Proposed FINRA Rule 11111 would merge the two 
provisions by providing that a refusal by a member to take action 
necessary to effectuate a final decision of a FINRA officer or the UPC 
Committee under the UPC Code (FINRA Rule 11000 Series) or other FINRA 
rules that permit review of FINRA decisions by the UPC Committee would 
be considered conduct inconsistent with just and equitable principles 
of trade.
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    \7\ Id.
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    FINRA is also proposing that the provisions of former NASD IM-
11890-2, which applied only to rulings under NASD Rule 11890, be 
adopted as proposed new FINRA Rule 11112 (Review by Panels of the UPC 
Committee) and be generally applicable to all rulings by the UPC 
Committee. Proposed FINRA Rule 11112 would provide that a decision of 
the UPC Committee may be rendered by a panel of the Committee, which 
shall consist of three or more members of the UPC Committee, provided 
no more than 50 percent of the members of any panel are directly 
engaged in market making activity or employed by a firm whose revenues 
from market making activity exceed ten percent of its total revenues.
3. Proposed FINRA Rules 11810 (Buying-In) and 11810.03 (Sample Buy-In 
Forms)
    FINRA is proposing that NASD Rule 11810 (Buying-In) be adopted as 
FINRA Rule 11810 (Buy-In Procedures and Requirements) in the 
Consolidated FINRA Rulebook with certain clarifications and changes and 
that Incorporated NYSE Rules 282 (Buy-in Procedures) and related 
Supplementary Material paragraphs .10-.80 be deleted. The proposed 
changes are intended to harmonize the differences between the NYSE rule 
and the NASD rule and to update certain procedures and time frames. 
FINRA is also proposing to adopt NASD IM-11810, which contains the 
sample buy-in forms, into the Consolidated FINRA Rulebook as 
accompanying Supplementary Material .03 to FINRA Rule 11810 with minor 
changes to replace references to NASD with FINRA.
    Proposed FINRA Rule 11810 would continue to set forth the required 
steps that members must follow to effect the ``buy-in'' of securities 
including the procedures to be followed in issuing a ``buy-in'' notice, 
the contents of such notice, the expectations of the receiving

[[Page 39717]]

party to respond to such notice, and the time frames in which a ``buy-
in'' may be issued, retransmitted, and effected.
    FINRA is proposing to make certain minor clarifications and to add 
the following more substantive provisions to proposed FINRA Rule 11810, 
which are contained in NYSE Rule 282 either with or without 
modifications, as specified:
    a. Include as proposed paragraph (a) a statement clarifying that 
the rule does not apply to, among other things, securities contracts 
that are subject to the requirements of a national securities exchange 
or a registered clearing agency.
    b. Amend certain time frames for action specified in the proposed 
rule:
    i. Clarify the time frames within which members must take action to 
effect the ``buy-in'' of securities as required therein. Specifically, 
the NASD rule requires that a member act within the specified local 
time at the member's location, whereas the NYSE rule requires action to 
be taken based on Eastern Time (ET). To promote operational consistency 
among members, the proposal would amend the required time frame for 
action to be ET.
    ii. Amend the current time frame specified by the NASD and NYSE 
rules for the acknowledgement of a ``buy-in'' notice and the 
notification of an execution of the buy-in from 5 p.m. to 6 p.m. ET. 
FINRA understands that the 5 p.m. time may be operationally difficult 
for members to achieve in some cases and the 6 p.m. ET time frame would 
be more operationally feasible.
    iii. Add Supplementary Material .01 (Early Closure of Markets) to 
clarify that in the event of an announced early closure of the market 
upon which the security subject to the ``buy-in'' notice is traded, 
members may take the action required by the proposed rule not earlier 
than one hour prior to the announced early closure of such market.
    c. Add new paragraph (b)(4) (Notice of ``Buy-In'' and Confirmation 
of Receipt) to specify that (1) the buyer must maintain as part of its 
records, confirmation of receipt of the notice by the seller and (2) if 
the seller does not accept the notice of ``buy-in,'' it must reject it 
by response to the buyer no later than 6 p.m. ET on the same date that 
it receives such notice, and in the absence of doing so, the seller 
will have been deemed by the buyer to have accepted such notice. The 
proposed provision would clarify that the seller, in such case, would 
have the right to request proof of the fail obligation from the buyer, 
which the buyer must deliver to the seller prior to the effective date 
of the ``buy-in.'' However, in no event would a buyer be entitled to a 
``buy-in'' that exceeds the liability of a seller under an unsettled 
securities contract because of the failure of the seller to reject a 
``buy-in'' notice as provided in the rule, and a buyer may not execute 
a ``buy-in'' notice to such extent the buyer fails to deliver the proof 
of fail obligation in accordance with the requirements of the rule. 
Requirements (1) and (2) described above are contained in the NYSE 
rule, in a similar form, except FINRA is proposing to change the time 
to 6 p.m. ET. FINRA is also proposing to add new provisions regarding 
``passive acceptance'' of the ``buy-in'' by the seller as described 
above, subject to certain safeguards for the benefit of the seller such 
as requiring the buyer to provide the proof of fail obligation and 
``buying-in'' the seller only for the securities contract amount in 
accordance with the proposed rule.
    d. Add new paragraph (b)(5) (Notice of ``Buy-In'' and Confirmation 
of Receipt) to specify that the receiving party shall immediately 
retransmit a notice of ``buy-in'' to other parties from which the 
securities may be due in the form of a retransmitted ``buy-in'' notice. 
Consistent with proposed paragraph (b)(4) described above, the 
provision would clarify that each party receiving a retransmitted 
``buy-in'' notice will be required to maintain confirmation of receipt 
of the notice as part of its books and records and either reject a 
retransmitted ``buy-in'' notice that it has received by 6 p.m. ET on 
the date such notice is received or be deemed to have accepted the 
notice (``passive acceptance''). The safeguards described above in 
proposed paragraph (b)(4) would also apply to sellers receiving a 
retransmitted notice.
    e. Add new paragraph (b)(6) (Notice of ``Buy-In'' and Confirmation 
of Receipt), which is contained in the NYSE rule, to clarify that when 
a notice of ``buy-in'' or a retransmitted notice thereof is given for 
less than the full amount of securities due, it shall not be for less 
than one trading unit.
    f. Amend proposed paragraph (d) (Procedures for Closing of 
Contracts) as follows:
    i. Retitle proposed paragraph (d) from the current rule title 
``Seller's Failure to Deliver After Receipt of Notice'' to ``Procedures 
for Closing of Contracts'' to better align with the content of that 
paragraph.
    ii. Amend the time frames, as discussed generally above, to 
generally require the party receiving the ``buy-in'' notice to deliver 
the securities to the party issuing the notice by 3 p.m. ET on the 
effective date of the ``buy-in'' notice.
    iii. Add language to clarify that if the buyer/issuing party prior 
to executing the ``buy-in'' is notified by the seller/delivering party 
that some or all of the securities are in the seller's physical 
possession and will be delivered to the issuing party then the order to 
``buy-in'' shall not be executed with respect to such securities and 
the member that initiated the original order to ``buy-in'' shall accept 
and pay for such securities. However, if such securities are not 
promptly delivered the seller that represented that it would make such 
delivery shall be liable for any resulting damages.
    iv. Add language contained in the NYSE rule to clarify the 
operation of the rule when a retransmitted notice is sent to the 
defaulting party but not received by such party prior to the delivery 
of shares or the execution of the ``buy-in.'' In such case, the sender 
of the notice may unless otherwise agreed promptly reestablish by a new 
sale the contract subject to the notice of ``buy-in.''
    g. Amend proposed paragraph (h) (Notice of Executed ``Buy-In'') as 
follows:
    i. Amend the time frame, as discussed above, for notice to be made 
to the party for whose account the securities were bought to 6 p.m. ET 
on the date of execution of the ``buy-in.''
    ii. Add new language, not contained in either legacy rule, to 
clarify that the confirmation of the executed ``buy-in'' provided for 
by the rule shall be forwarded to the party entitled to such by no 
later than 9:30 a.m. ET on the following business day after the 
execution of the ``buy-in.''
    iii. Add a provision contained in the NYSE rule that requires that 
a statement of any resulting money differences from the execution of 
the ``buy-in'' be provided immediately and that such money differences 
shall be paid by no later than 3 p.m. ET on the business day after the 
settlement date of the executed ``buy-in.''
    h. Amend proposed paragraph (i) (``Close-Out'' Under the Uniform 
Practice Code Committee Rulings) to clarify, as provided in the NYSE 
rule, that notification of all close-outs as provided by the paragraph 
shall be sent immediately to the member in question pursuant to the 
confirmation provisions of the Rule 11200 Series at least thirty 
minutes before such ``close-out.''
    i. Add proposed Supplementary Material .02 (Securities Delivered by 
Seller After Execution of ``Buy-In'') to clarify, as provided in the 
NYSE rule, that where securities have been delivered by the seller 
after the ``buy-in''

[[Page 39718]]

order has been placed but not executed, such securities may be returned 
to the seller if the ``buy-in'' was executed in accordance with the 
rule before it could reasonably be cancelled by the initiating party.
4. Proposed FINRA Rule 11820 (Selling-Out)
    FINRA is proposing that NASD Rule 11820 (Selling-Out) be adopted as 
FINRA Rule 11820 (Selling-Out) into the Consolidated FINRA Rulebook, 
subject to minor changes. There is no comparable NYSE Incorporated 
Rule. NASD Rule 11820 generally requires the party executing the 
``sell-out'' to notify the buyer on the day of execution, but no later 
than the close of business local time, where the buyer maintains his 
office, of the quantity sold and the price received. FINRA is proposing 
to conform the time frames in the proposed rule to the time frames in 
proposed FINRA Rule 11810 (Buy-In Procedures and Requirements). 
Specifically, the proposal would replace the requirement to provide 
notice ``no later than the close of business local time, where the 
buyer maintains his office,'' with the requirement that such notice 
must be provided no later than ``6:00 p.m. ET.'' FINRA believes this 
change provides clarity and uniformity to the industry. In addition, 
the proposal would amend certain references in the proposed rule from 
``should'' to ``shall.'' Specifically, in proposed paragraph (b) 
(Notice of ``Sell-Out''), notification by the party executing a ``sell-
out'' shall be in written or electronic form and a formal confirmation 
of such sale shall be forwarded as promptly as possible after execution 
of the ``sell-out.''
5. Proposed FINRA Rule 11860 (COD Orders)
    FINRA is proposing to adopt NASD Rule 11860 (Acceptance and 
Settlement of COD Orders) as FINRA Rule 11860 (COD Orders) into the 
Consolidated FINRA Rulebook, subject to minor changes and to delete 
NASD Rule 3370 (Purchases) and Incorporated NYSE Rule 387 (COD Orders) 
and its Supplementary Material paragraphs .10-.60, NYSE Rule 387 
Interpretations/01-/18, Rule 430 (Partial Delivery of Securities to 
Customers on C.O.D. Purchases), and NYSE Rule 430 Interpretation/01.
    NASD Rule 11860 and NYSE Rule 387 provide generally that no member 
can accept an order from a customer pursuant to an arrangement whereby 
payment for the securities purchased or delivery of the securities sold 
is to be made to or by an agent of the customer unless certain 
specified procedures are followed. NASD Rule 3370 and NYSE Rule 430 
both generally provide that no member or associated person may accept a 
customer's purchase order for securities unless it has first 
ascertained that the customer placing the order or its agent has agreed 
to receive the securities against payment in an amount equal to the 
execution price even though such purchase may represent only a part of 
a larger order. NYSE Rule 430 has an exception for obligations of the 
U.S. government.
    Proposed FINRA Rule 11860 would continue the requirement in NYSE 
Rule 430 and NASD Rule 3370 that members prior to accepting a purchase 
order for a security (without the exception of U.S. government 
obligations contained in Rule 430) ascertain that the customer or its 
agent will receive against payment securities in an amount equal to any 
execution confirmed to the customer even if such execution may 
represent a partial fill of the order. In that members have been 
subject to NASD Rule 3370, which includes transactions in U.S. 
government obligations, FINRA is proposing to eliminate the exemption 
for such securities as provided by Rule 430. Further, the proposed rule 
would continue to require the use of either a Clearing Agency or a 
Qualified Vendor for the electronic confirmation and affirmation of all 
depository eligible transactions. FINRA is proposing to clarify that 
the proposed rule would, similar to NYSE Rule 387, apply to (1) 
transactions of foreign customers and broker-dealers that settle in the 
U.S. and (2) eligible sinking funds and/or dividend reinvestment 
transactions. The proposed rule would add a new requirement that is 
contained in NYSE Rule 387 that requires a ``Qualified Vendor'' to 
provide FINRA with copies of its required submissions to the SEC staff.
6. Proposed FINRA Rules 11870 (Customer Account Transfer Contracts) and 
11870.03 (Sample Transfer Instruction Forms)
    FINRA is proposing to adopt NASD Rule 11870 as FINRA Rule 11870 
(Customer Account Transfer Contracts) into the Consolidated FINRA 
Rulebook with the following changes. There is no comparable NYSE 
Incorporated Rule.\8\ FINRA is also proposing that NASD IM-11870, which 
contains the Sample Transfer Instruction Forms, be adopted into the 
Consolidated FINRA Rulebook with minor changes to replace references to 
NASD with FINRA.
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    \8\ Previously, NYSE Rule 412 (Customer Account Transfer 
Contracts) and its related interpretations similarly regulated the 
transfer of customer accounts. FINRA eliminated NYSE Rule 412 and 
its interpretations from the Transitional Rulebook as part of a rule 
change to reduce regulatory duplication for Dual Members during the 
period before completion of the Consolidated FINRA Rulebook. The 
NYSE subsequently amended its version of NYSE Rule 412 to state that 
NYSE members and member organizations shall comply with NASD Rule 
11870, concerning the transfer of customer accounts between members, 
and any amendments thereto, as if such rule is part of the NYSE's 
rules. See Securities Exchange Act Release No. 58640 (Sept. 12, 
2008), 73 FR 54652 (Sept. 22, 2008) (Approval Oder; SR-FINRA-2008-
036).
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    Generally, NASD Rule 11870 provides that when a brokerage customer 
wishes to transfer his or her account to another member and gives 
written notice of that fact to the receiving member, both members must 
expedite and coordinate the transfer. Proposed FINRA Rule 11870 would 
continue to set forth the required steps that members must follow to 
effect the transfer of customers' accounts, including the initial 
request to transfer an account, the time frame in which a transfer 
request must be acted upon, the validation of such transfer request, 
and the documentation required to effect the transfer. However, FINRA 
is proposing to add minor clarifications as well as the following more 
substantive provisions to proposed FINRA Rule 11870, which were 
interpretations to the prior version of NYSE Rule 412 \9\:
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    \9\ Id.
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    a. Add a new provision regarding the procedures for the transfer of 
book-entry mutual fund shares that clarifies the obligations of the 
parties when transferring a customer's positions in such securities. 
FINRA proposes to add this provision to paragraph (f)(9) of proposed 
FINRA Rule 11870.
    b. Add a definition of the term ``participant in a registered 
clearing agency'' for purposes of the rule to mean a member that is 
eligible to use the agency's automated customer securities account 
transfer capabilities.
    c. Add Supplementary Material .01 to clarify that members must 
establish written procedures to effect and supervise the transfer of 
customer account assets pursuant to the requirements of the proposed 
rule.
    d. Add Supplementary Material .02 to require members to inform 
customers with respect to retirement plan securities that the choice of 
the method of disposition of such assets may result in liability for 
the payment of taxes and penalties.
    e. Amend the time frames in the proposed rule for notice and 
completion of close-outs of fail contracts resulting from the not 
completing a transfer of a customer's account to conform to the

[[Page 39719]]

time frames for all close-outs as specified in proposed FINRA Rule 
11810 (Buy-In Procedures and Requirements). Specifically, the proposed 
rule would require the receiving member to provide notice to the 
carrying member not later than 12 noon ET two business days preceding 
the execution of the proposed close-out (as opposed to 12 noon ``his'' 
time). In addition, the proposed rule would require that every notice 
of close-out state that the securities may be closed out ``unless 
delivery is effected at or before a certain specified time, which may 
not be prior to 3 p.m. ET,'' as opposed to ``the local time in the 
community where the carrying member maintains his office.'' The 
proposed rule also would replace the requirement that the party 
executing the ``close-out'' notify the seller as to the quantity 
purchased and the price paid not later than ``the close of business, 
local time, where the seller maintains his office,'' with the 
requirement to provide such notice not later than ``6 p.m. ET on the 
date of the execution of such ``close-out''.''
    f. Amend certain references in the proposed rule from ``should'' to 
``shall.'' Specifically, (1) In proposed paragraph (f) (Fail Contracts 
Established) the obligation that fail contracts established pursuant to 
the rule shall be clearly marked or captioned as such and that a 
receiving member shall reject delivery of a security that cannot be 
deemed a safekeeping position against a fail contract; (2) in proposed 
paragraph (h) (Close-Out Procedures) that notification shall be in 
written or electronic form and that confirmation of purchase along with 
a billing or payment shall be forwarded as promptly as possible; (3) in 
proposed paragraph (i) (Sell-Out Procedures) that notification shall be 
in written or electronic form; and (4) in proposed paragraph (m) 
(Participant in a Registered Clearing Agency) that when both members 
are participants in a registered clearing agency, the securities 
account asset transfer procedures shall be accomplished in accordance 
with the rule and the rules of the registered clearing agency.
    g. Eliminate paragraph (n)(3) which requires that a copy of each 
customer account transfer instruction issued on an ``ex-clearing 
house'' basis be sent to the local District Office of NASD having 
jurisdiction over the carrying member. FINRA believes that a majority 
of customer account transfers now occur between members of a clearing 
agency and the volume of transactions that occur ``ex-clearing'' has 
significantly decreased.
    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. The implementation date will be no later 
than 365 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,\10\ 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 
adopt a majority of the UPC Rules into the new Consolidated FINRA 
Rulebook without significant changes. FINRA is primarily proposing the 
changes to update cross-references and reflect the new conventions of 
the Consolidated FINRA Rulebook. Certain other UPC Rules are being 
updated to reflect current industry practices.
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    \10\ 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 would impose 
any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. FINRA will notify the Commission of any written 
comments received by FINRA.

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 the 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-2010-030 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-2010-030. 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 Web site 
viewing and printing in the Commission's Public Reference Section, 100 
F Street, NE., Washington, DC 20549-1090, on official business days 
between the hours of 10 a.m. and 3 p.m. Copies of such filings will 
also be available for inspection and copying at the principal office of 
FINRA and on FINRA's Web site at http://www.finra.org. 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-2010-030 and should be 
submitted on or before August 2, 2010.

[[Page 39720]]

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-16866 Filed 7-9-10; 8:45 am]
BILLING CODE 8010-01-P