Document ID: SEC-2013-0106-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-01-18T05:00Z

[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Notices]
[Pages 4182-4184]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00969]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68650; File No. SR-FINRA-2013-001]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Update Cross-References and Make Other Non-
Substantive Changes Within FINRA Rules and By-Laws

January 14, 2013.
    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 January 3, 2013, 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 Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) \4\ thereunder, 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\ 15 U.S.C. 78s(b)(3)(A)
    \4\ 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 is proposing to update cross-references and make other non-
substantive changes within certain FINRA rules and By-Laws, primarily 
as the result of approval of new consolidated FINRA rules.
    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
    FINRA is in the process of developing a consolidated rulebook 
(``Consolidated FINRA Rulebook'').\5\ That process involves FINRA 
submitting to the Commission for approval a series of proposed rule 
changes over time to adopt rules in the Consolidated FINRA Rulebook. 
The phased adoption and implementation of those rules necessitates 
periodic amendments to update rule cross-references and other non-
substantive changes in the Consolidated FINRA Rulebook.
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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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    The proposed rule change would make several such changes, as well 
as certain other non-substantive changes unrelated to the adoption of 
rules in the Consolidated FINRA Rulebook. First, the proposed rule 
change would update rule cross-references and make other non-
substantive changes to reflect the adoption of new consolidated FINRA 
communications with the public rules. On March 29, 2012, the SEC 
approved a proposed rule change to adopt NASD Rules 2210 and 2211 and 
NASD Interpretive Materials 2210-1 and 2210-3 through 2210-8 as FINRA 
Rules 2210 and 2212 through 2216, with several

[[Page 4183]]

changes.\6\ The new rules will be implemented on February 4, 2013. As 
such, the proposed rule change would update references to the new rule 
numbers in FINRA Rules 0150 (Application of Rules to Exempted 
Securities Except Municipal Securities), 2111 (Suitability), 2220 
(Options Communications), 6630 (Applicability of FINRA Rules to 
Securities Previously Designated as PORTAL Securities), 9217 
(Violations Appropriate for Disposition Under Plan Pursuant to SEA Rule 
19d-1(c)(2)), 9551 (Failure to Comply with Public Communication 
Standards) and 9610 (Application).
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    \6\ See Securities Exchange Act Release No. 66681 (March 29, 
2012), 77 FR 20452 (April 4, 2012) (Order Approving File No. SR-
FINRA-2011-035).
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    Second, the proposed rule change similarly would update the rule 
references in FINRA Rules 2214 (Requirements for the Use of Investment 
Analysis Tools) and 9610 as the result of adoption of new consolidated 
FINRA Rules 2111 (Suitability) and 5123 (Private Placement of 
Securities), respectively.\7\
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    \7\ See Securities Exchange Act Release No. 63325 (November 17, 
2010), 75 FR 71479 (November 23, 2010) (Order Approving File No. SR-
FINRA-2010-039); and Securities Exchange Act Release No. 67157 (June 
7, 2012), 77 FR 35457 (June 13, 2012) (Order Approving File No. SR-
FINRA-2011-057).
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    Third, the proposed rule change would make additional non-
substantive changes as a result of new definitions in FINRA Rule 
2210.\8\ That rule combines the current definitions of ``sales 
literature,'' ``advertisement'' and ``independently prepared reprint'' 
into a single category of ``retail communications.'' Accordingly, the 
proposed rule change makes corresponding changes in the rulebook where 
the current terms are used: Section 13, Schedule A to the FINRA By-Laws 
(Review Charge for Communications Filed or Submitted), FINRA Rules 2130 
(Approval Procedures for Day-Trading Accounts), 2220 (Options 
Communications),\9\ 2270 (Day-Trading Risk Disclosure Statement), 3160 
(Networking Arrangements Between Members and Financial Institutions) 
and NASD Rule 3010 (Supervision).\10\
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    \8\ See Securities Exchange Act Release No. 66681 (March 29, 
2012), 77 FR 20452 (April 4, 2012) (Order Approving File No. SR-
FINRA-2011-035).
    \9\ New FINRA Rule 2210(a)(2) defines ``correspondence'' as any 
written (including electronic) communication that is distributed or 
made available to 25 or fewer retail investors within any 30 
calendar-day period. The proposed change to Rule 2220(b) would 
delete the requirement for principal approval for correspondence 
that is distributed to 25 or more existing retail customers within a 
30 calendar-day period that makes any financial or investment 
recommendation or otherwise promotes the product or service of a 
member. Under the new communications with the public rule, 
communications distributed to more than 25 retail investors within 
any 30 calendar-day period that include such recommendations or 
promotions would be considered retail communications and therefore 
subject to the principal approval requirement. As such, the proposed 
change to Rule 2210(b) does not substantively change the scope of 
options communications that would require principal approval.
    \10\ FINRA Rules 2130 and 2270 impose approval procedures and 
disclosure requirements, respectively, on a member that is 
``promoting a day-trading strategy.'' For purposes of the rules, a 
member shall be deemed to be ``promoting a day trading strategy'' if 
``* * * it affirmatively endorses a `day trading strategy,' as 
defined in [the Rules] through advertising, its Web site, trading 
seminars or direct outreach programs. For example, a member 
generally shall be deemed to be `promoting a day-trading strategy' 
if its advertisements address the benefits of day trading, rapid 
fire trading, or momentum trading, or encourage persons to trade or 
profit like a professional trader.'' The proposed rule change would 
change ``advertisements'' in the example provided to ``retail 
communications.'' FINRA believes that any member that currently uses 
sales literature or independently prepared reprints to promote day 
trading would be subject to the existing rule, and thus the change 
would not expand the scope of the rule. In addition, Rules 2130 and 
2270 both provide that members may submit advertisements to FINRA's 
Advertising Department for guidance on whether the content 
constitutes ``promoting a day-trading strategy.'' FINRA believes it 
consistent with the changes to the communications with the public 
rules to allow members to now submit ``retail communications'' for 
such guidance.
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    Fourth, the proposed rule change would make technical changes to 
FINRA Rules 2210 (Communications with the Public) and 4210 (Margin 
Requirements) to reflect FINRA Manual style convention changes and 
FINRA Rule 3230 (Telemarketing) to reflect changes adopted in a recent 
FINRA proposed rule change regarding telemarketing.\11\
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    \11\ See Securities Exchange Act Release No. 66279 (January 30, 
2012), 77 FR 5611 (February 3, 2012) (Order Approving File No. SR-
FINRA-2011-059).
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    Finally, FINRA is proposing to make non-substantive changes to 
certain other rules. FINRA is proposing to delete paragraph (c) 
(Aggregate Volume Match) of FINRA Rules 7240A and 7340 (Trade Report 
Processing) relating to the FINRA/Nasdaq Trade Reporting Facility 
(``FINRA/Nasdaq TRF'') and OTC Reporting Facility (``ORF''), 
respectively. The aggregate volume match functionality was eliminated 
when the facilities were migrated to a new operating platform in 2007, 
but the rules were inadvertently not updated to reflect the system 
changes. In addition, FINRA is proposing to re-designate paragraph (d) 
of FINRA Rules 7240A and 7340 as paragraph (c), and to replace the 
reference to 5:15 p.m. with 8:00 p.m. in this paragraph. The reference 
to 5:15 p.m. was inadvertently not amended when the system closing time 
for the FINRA/Nasdaq TRF and ORF was extended to 8:00 p.m. in 2006.\12\
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    \12\ See Securities Exchange Act Release No. 54772 (November 17, 
2006), 71 FR 68665 (November 27, 2006) (Notice of Filing and 
Immediate Effectiveness of File No. SR-NASD-2006-120).
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date for the proposed rule change 
will be February 4, 2013.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\13\ 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 the proposed rule change will provide 
greater clarity to members and the public regarding FINRA's rules.
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    \13\ 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. The proposed rule change brings 
clarity and consistency to FINRA rules without adding any burden on 
firms.

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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    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

[[Page 4184]]

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-2013-001 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-2013-001. 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-2013-001 and should be 
submitted on or before February 8, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00969 Filed 1-17-13; 8:45 am]
BILLING CODE 8011-01-P