Document ID: SEC-2009-0174-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2009-02-06T05:00Z

[Federal Register: February 6, 2009 (Volume 74, Number 24)]
[Notices]               
[Page 6335]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06fe09-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59335; File No. SR-FINRA-2008-061]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change To Adopt FINRA 
Rule 5240 (Anti-Intimidation/Coordination) in the Consolidated FINRA 
Rulebook

February 2, 2009.
    On December 11, 2008, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') (f/k/a National Association of Securities Dealers, 
Inc. (``NASD'')), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 NASD IM-2110-5 as FINRA 
Rule 5240 in the consolidated FINRA rulebook (``Consolidated FINRA 
Rulebook'') \3\ without material change. The proposed rule change was 
published for comment in the Federal Register on December 29, 2008.\4\ 
The Commission received no comment letters in response to the proposed 
rule change. 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\ The current FINRA rulebook consists of two sets of rules: 
(1) NASD Rules and (2) rules incorporated from NYSE (``Incorporated 
NYSE Rules'') (together referred to as the ``Transitional 
Rulebook''). The Incorporated NYSE Rules apply only to those members 
of FINRA that are also members of the NYSE (``Dual Members''). Dual 
members must also comply with NASD Rules. For more information about 
the rulebook consolidation process, see FINRA Information Notice, 
March 12, 2008 (``Rulebook Consolidation Process'').
    \4\ See Securities Exchange Act Release No. 59119 (December 18, 
2008), 73 FR 79527.
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    NASD IM-2110-5 currently identifies three general types of conduct 
that are inconsistent with just and equitable principles of trade: \5\ 
(1) Coordinating activities by members involving quotations, prices, 
trades, and trade reporting (e.g., agreements to report trades 
inaccurately or maintain certain minimum spreads); (2) ``directing or 
requesting'' another member to alter prices or quotations; and (3) 
engaging in conduct that threatens, harasses, coerces, intimidates, or 
otherwise attempts improperly to influence another member or person 
associated with a member. The IM also sets forth seven specific 
exclusions that identify bona fide commercial activity that is 
permitted (e.g., bona fide negotiations and unilateral decisions 
regarding spreads). The proposed rule change would renumber NASD IM-
2110-5 as FINRA Rule 5240 in the Consolidated FINRA Rulebook.
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    \5\ NASD Rule 2110 requires members to ``observe high standards 
of commercial honor and just and equitable principles of trade.'' On 
September 25, 2008, the Commission approved adopting NASD Rule 2110 
into the Consolidated FINRA Rulebook as FINRA Rule 2010 without 
substantive change. See Securities Exchange Act Release No. 58643 
(September 25, 2008), 73 FR 57174 (October 1, 2008). That rule 
change took effect on December 15, 2008. See FINRA Regulatory Notice 
08-57 (October 2008).
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act, and the rules 
and regulations thereunder that are applicable to a national securities 
association,\6\ and in particular, with Section 15A(b)(6) of the 
Act,\7\ which requires, among other things, that FINRA 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 notes that 
FINRA originally adopted NASD IM-2110-5 to fulfill part of its 1996 
settlement agreement \8\ with the SEC.\9\ FINRA's adoption of NASD IM-
2110-5 as FINRA Rule 5240 in the Consolidated FINRA Rulebook provides 
notice to members of behavior that violates just and equitable 
principles of trade.
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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition and capital 
formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3(b)(6).
    \8\ See In the Matter of National Association of Securities 
Dealers, Inc., Administrative Proceeding File No. 3-9056, Securities 
Exchange Act Release No. 37538 (August 8, 1996).
    \9\ See Securities Exchange Act Release No. 38845 (July 17, 
1997), 62 FR 39564 (July 23, 1997). Although FINRA is not making 
material changes to the rule, one of the minor changes made by FINRA 
is to add the phrase ``or other person'' to paragraphs (a)(1) and 
(a)(3) of the rule to clarify that coordination with or intimidation 
of a non-FINRA member is covered by the rule.
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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-2008-061) be, and 
hereby 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. E9-2530 Filed 2-5-09; 8:45 am]

BILLING CODE 8011-01-P