Document ID: SEC-2010-0794-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-06-01T04:00Z

[Federal Register: June 1, 2010 (Volume 75, Number 104)]
[Notices]               
[Page 30457-30459]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn10-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62160; File No. SR-FINRA-2010-027]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
the Restated Certificate of Incorporation of Financial Industry 
Regulatory Authority, Inc.

May 24, 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 May 21, 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, 
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 amend the Restated Certificate of 
Incorporation of FINRA (the ``Certificate of Incorporation'') to 
specify the quorum requirements for a meeting of FINRA members, in 
anticipation of amendments to the General Corporation Law of the State 
of Delaware (the ``General Corporation Law''). The proposed rule change 
would serve to maintain the status quo with respect to the quorum 
requirements for meetings of members.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, on the Commission's Web site at http://
www.sec.gov, at the principal office of FINRA and at the Commission's 
Public Reference Room.

[[Page 30458]]

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
    The proposed rule change would amend FINRA's Certificate of 
Incorporation to specify the quorum required at a meeting of FINRA 
members and where a separate vote by classes or groups is required. 
FINRA is proposing this rule change in anticipation of amendments to 
the General Corporation Law, described in detail below, to preserve 
FINRA's current quorum requirements.
    FINRA is a nonstock corporation under the General Corporation Law. 
Generally, Section 215(c) of the General Corporation Law provides that 
the certificate of incorporation or bylaws of a nonstock corporation 
may specify the number of members having voting power who shall be 
present or represented by proxy at any meeting in order to constitute a 
quorum for, and the votes that shall be necessary for, the transaction 
of any business.\3\ However, in the absence of such specification in 
the certificate of incorporation or bylaws of a nonstock corporation, 
one-third of the members of such corporation constitute a quorum at a 
meeting of such members.\4\
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    \3\ Del. Code Ann. tit. 8 Sec.  215(c) (2010).
    \4\ Del. Code Ann. tit. 8 Sec.  215(c)(1) (2010).
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    Neither FINRA's Certificate of Incorporation nor its By-Laws 
specify the quorum required at a meeting of its members. Accordingly, 
pursuant to Section 215(c)(1) of the General Corporation Law, 
attendance in person or by proxy of one-third of FINRA members 
currently constitutes a quorum at a meeting of such members.\5\
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    \5\ Del. Code Ann. tit. 8 Sec.  215(c)(1) (2010).
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    On August 1, 2010, the General Corporation Law will be amended to, 
among other things, clarify the application of the statute to nonstock 
corporations. As part of the amendments, a new Section 215(c)(4) will 
define the quorum necessary to take action where a separate vote by a 
class or group of members is required and the certificate of 
incorporation or bylaws of the nonstock corporation do not specify the 
requisite quorum. Specifically, from and after August 1, 2010, if the 
certificate of incorporation or bylaws of a nonstock corporation do not 
specify the quorum necessary to transact business at a meeting of its 
members, (1) one-third of the members shall constitute a quorum at a 
meeting of members; and (2) ``[w]here a separate vote by a class or 
group or classes or groups is required, a majority of the members of 
such class or group or classes or groups, present in person or 
represented by proxy, shall constitute a quorum entitled to take action 
with respect to that vote on that matter * * *'' \6\
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    \6\ Del. H.B. 341, 145th Gen. Assem. Sec.  19 (2010) (emphasis 
added).
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    FINRA is proposing an amendment to its Certificate of Incorporation 
to maintain the status quo with respect to its current quorum 
requirements. Accordingly, the proposed rule change would amend Article 
Ninth of FINRA's Certificate of Incorporation to specify that, at all 
meetings of members of FINRA, the presence in person or by proxy of 
one-third of the members entitled to vote at the meeting shall be 
necessary and sufficient to constitute a quorum; provided, however, 
where a separate vote by a class or group or classes or groups is 
required, the presence in person or by proxy of one-third of the 
members of such class or group or classes or groups shall be necessary 
and sufficient to constitute a quorum with respect to that vote on that 
matter.
    By specifying the quorum requirements in the Certification of 
Incorporation, the proposed rule change would maintain the one-third 
quorum requirement where separate votes of classes or groups of members 
is required, thus avoiding the new default quorum requirement (i.e., a 
majority) for such votes as set forth in the new Section 215(c)(4) of 
the General Corporation Law. Pursuant to the FINRA Certificate of 
Incorporation and the FINRA By-Laws, members vote as three distinct 
classes, based upon firm size, to elect the FINRA Board of Governors, 
i.e., Small Firm Governors, Mid-Size Firm Governors and Large Firm 
Governors. In this regard, the proposed rule change not only would 
preserve the status quo, but it also would facilitate the ability of 
members to conduct business at meetings and exercise their voting 
rights.
    The effective date of the proposed rule change will be the date of 
approval by the Commission; provided, however, assuming Commission 
approval of the proposed rule change, the amendment to the Certificate 
of Incorporation will become effective upon filing with the Secretary 
of State of the State of Delaware.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\7\ including Section 15A(b)(2) of 
the Act,\8\ in that it will permit FINRA to carry out the purposes of 
the Act, to comply with the Act, and to enforce compliance by FINRA 
members and persons associated with members with the Act, the rules and 
regulations thereunder, and FINRA rules. The proposed rule change will 
preserve FINRA's current quorum requirements, facilitating the ability 
of members to conduct business at meetings.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(2).
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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

[[Page 30459]]

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-2010-027 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-2010-027. 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 the 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-2010-027 
and should be submitted on or before June 22, 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. 2010-12987 Filed 5-28-10; 8:45 am]
BILLING CODE 8010-01-P