Document ID: SEC-2010-0260-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-02-19T05:00Z

[Federal Register: February 19, 2010 (Volume 75, Number 33)]
[Notices]               
[Page 7532-7534]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe10-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61513; File No. SR-FINRA-2010-008]

 
 Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Amend Incorporated NYSE Rule 312(g)(1)

February 12, 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 February 4, 2010, 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 and 
II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA proposes to make a technical change to the FINRA rulebook. 
FINRA proposes to amend Incorporated NYSE Rule 312(g)(1) so as to 
delete certain provisions that are rendered obsolete by the adoption of 
new FINRA Rule 4110 in FINRA's consolidated rulebook (``Consolidated 
FINRA Rulebook'').\4\

[[Page 7533]]

Proposed new language is italicized; proposed deletions are in 
brackets:
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    \4\ See Regulatory Notice 09-71 (December 2009) (SEC Approves 
Consolidated FINRA Rules Governing Financial Responsibility). FINRA 
announced in Regulatory Notice 09-71 that the new financial 
responsibility rules will be implemented on February 8, 2010.
    See also Securities Exchange Act Release No. 60933 (November 4, 
2009), 74 FR 58334 (November 12, 2009) (Order Granting Approval to 
Proposed Rule Change; File No. SR-FINRA-2008-067); Securities 
Exchange Act Release No. 61408 (January 22, 2010), 75 FR 4596 
(January 28, 2010) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change; File No. SR-FINRA-2010-004).
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* * * * *
Rule 312. Changes Within Member Organizations
    (a) through (f) No Change.
    (g) A member corporation shall not without the prior written 
approval of the Exchange:
    (1) [Reduce its capital or purchase or redeem any shares of any 
class of its stock or] I[i]n any way amend its charter, certificate of 
incorporation or by-laws[, and the Exchange may at any time in its 
discretion require the corporation to restore or increase capital or 
surplus, or both].
    (2) through (3) No Change.
    The Exchange will approve any action described in (1), (2) or (3) 
above unless it determines that such action will impair the financial 
responsibility or operational capability of the member corporation.
    (h) through (j) No Change.
* * * * *

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
    FINRA proposes to make a technical change to the FINRA rulebook.\5\ 
FINRA proposes to delete from Incorporated NYSE Rule 312(g)(1) the 
phrases that read ``[r]educe its capital or purchase or redeem any 
shares of any class of its stock or'' and ``and the Exchange may at any 
time in its discretion require the corporation to restore or increase 
capital or surplus, or both.'' FINRA is proposing the rule change 
because the Commission has approved for inclusion in the Consolidated 
FINRA Rulebook a set of new financial responsibility rules that, among 
other things, regulate withdrawals of equity capital by members. 
Accordingly, the new FINRA rules render the above-mentioned 
Incorporated NYSE rule provisions obsolete.\6\ Specifically:
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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).
    \6\ See note 4.
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     New FINRA Rule 4110(c)(1) prohibits a member from 
withdrawing equity capital for a period of one year from the date such 
equity capital is contributed, unless otherwise permitted by FINRA in 
writing. The rule provides that, subject to the requirements of FINRA 
Rule 4110(c)(2), members are not precluded from withdrawing profits 
earned. FINRA Rule 4110(c)(2) prohibits any carrying or clearing 
member,\7\ without the prior written approval of FINRA, from 
withdrawing capital, paying a dividend or effecting a similar 
distribution that would reduce the member's equity, or making any 
unsecured advance or loan to a stockholder, partner, sole proprietor, 
employee or affiliate, where such withdrawals, payments, reductions, 
advances or loans in the aggregate, in any 35 rolling calendar day 
period, on a net basis, would exceed 10 percent of the member's excess 
net capital.
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    \7\ FINRA Rule 4110.02 provides that, for purposes of the rule, 
all requirements that apply to a member that clears or carries 
customer accounts also apply to any member that, operating pursuant 
to the exemptive provisions of SEA Rule 15c3-3(k)(2)(i), either 
clears customer transactions pursuant to such exemptive provisions 
or holds customer funds in a bank account established thereunder.
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     New FINRA Rule 4110(a) provides that, when necessary for 
the protection of investors or in the public interest, FINRA may, at 
any time or from time to time with respect to a particular carrying or 
clearing member or all carrying or clearing members, pursuant to 
authority exercised by FINRA's Executive Vice President charged with 
oversight for financial responsibility, or his or her written officer 
delegate, prescribe greater net capital or net worth requirements than 
those otherwise applicable, including more stringent treatment of items 
in computing net capital or net worth, or require such member to 
restore or increase its net worth. The rule provides that, in any such 
instance, FINRA shall issue a notice pursuant to new FINRA Rule 9557.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, such that FINRA can implement the proposed rule 
change on February 8, 2010.
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 is 
consistent with the purposes of the Act because it will provide greater 
clarity to members and the public regarding FINRA's rules.
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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

    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\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally does not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \11\ permits the Commission to

[[Page 7534]]

designate a shorter time if such action is consistent with the 
protection of investors and the public interest. As noted above, the 
Commission approved FINRA 4110 as part of a new, consolidated set of 
financial responsibility rules, which, among other things, regulates 
withdrawals of equity capital.\12\ FINRA has requested that the 
Commission waive the 30-day operative delay set forth in Rule 19b-
4(f)(6)(iii) under the Act \13\ in order for the rule to become 
operative upon filing. The Commission notes that the proposed rule 
changes render the above-mentioned Incorporated NYSE rule provisions 
obsolete. The Commission further notes that the operative date of FINRA 
4110 was February 8, 2009.\14\ The Commission believes that the earlier 
operative date is consistent with the protection of investors and the 
public interest because it permits FINRA to implement the rule without 
further delay and in recognition of the operative date of the financial 
responsibility rules was February 8, 2010.\15\
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    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. The Commission notes that FINRA has satisfied the five-
day pre-filing notice requirement.
    \12\ See notes 4 and 5.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See FINRA Regulatory Notice 09-71 (December 2009).
    \15\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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-2010-008 on the subject line.

Paper Comments

     Send paper comments in triplicate 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-2010-008. 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 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-2010-008 
and should be submitted on or before March 12, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3230 Filed 2-18-10; 8:45 am]
BILLING CODE 8011-01-P