Document ID: SEC-2009-1755-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 2330 and IM-2330
Posted Date: 2009-12-14T05:00Z

[Federal Register: December 14, 2009 (Volume 74, Number 238)]
[Notices]               
[Page 66191-66193]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de09-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61128; File No. SR-NASDAQ-2009-106]

 
 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 2330 and IM-2330 To Reflect Changes to Corresponding FINRA 
Rule

December 8, 2009.

    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 December 4, 2009, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') 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 by the Exchange. The 
Exchange has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with 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

    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ the 
NASDAQ Stock Market LLC (the ``Exchange'' or ``NASDAQ'') is filing with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change to amend NASDAQ Rule 2330 and IM-2330 to reflect recent changes 
to a corresponding rule of the Financial Industry Regulatory Authority 
(``FINRA''). The text of the proposed rule change is below. Proposed 
new language is italicized; proposed deletions are in brackets:
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
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NASDAQ Stock Market Rules

* * * * *

2150. Customers' Securities or Funds

    (a) Nasdaq Members and persons associated with a member shall 
comply with FINRA Rule 2150 as if such Rule were part of Nasdaq's 
Rules.
    (b) Nothing in FINRA Rule 2150, as applied to Nasdaq members and 
their

[[Page 66192]]

associated persons, shall be construed to authorize any Nasdaq 
member or associated person to act in a manner inconsistent with 
Section 11(a) of the Act.

IM-2150. Segregation of Customers' Securities

    (a) Nasdaq Members and persons associated with a member shall 
comply with FINRA Interpretive Material 2150 as if such Rule were 
part of Nasdaq's Rules.
    (b) For purposes of this Rule, references to Rule 2150 shall be 
construed as references to Nasdaq Rule 2150.
* * * * *

[2330. Customers' Securities or Funds

    (a) Nasdaq Members and persons associated with a member shall 
comply with NASD Rule 2330 as if such Rule were part of Nasdaq's 
Rules.
    (b) Nothing in NASD Rule 2330, as applied to Nasdaq members and 
their associated persons, shall be construed to authorize any Nasdaq 
member or associated person to act in a manner inconsistent with 
Section 11(a) of the Act.]
    [IM-2330. Segregation of Customers' Securities
    (a) Nasdaq Members and persons associated with a member shall 
comply with NASD Interpretive Material 2330 as if such Rule were 
part of Nasdaq's Rules.
    (b) For purposes of this Rule, references to Rule 2330 shall be 
construed as references to Nasdaq Rule 2330.]
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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. The Exchange 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
    Many of NASDAQ's rules are based on rules of FINRA (formerly the 
National Association of Securities Dealers (``NASD'')). During 2008, 
FINRA embarked on an extended process of moving rules formerly 
designated as ``NASD Rules'' into a consolidated FINRA rulebook. In 
most cases, FINRA has renumbered these rules, and in some cases has 
substantively amended them. Accordingly, NASDAQ also proposes to 
initiate a process of modifying its rulebook to ensure that NASDAQ 
rules corresponding to FINRA/NASD rules continue to mirror them as 
closely as practicable. In some cases, it will not be possible for the 
rule numbers of NASDAQ rules to mirror corresponding FINRA rules, 
because existing or planned NASDAQ rules make use of those numbers. 
However, wherever possible, NASDAQ plans to update its rules to reflect 
changes to corresponding FINRA rules.
    This filing addresses NASDAQ Rule 2330 entitled ``Customers' 
Securities or Funds'' and IM-2330 entitled ``Segregation of Customers' 
Securities.'' NASDAQ Rule 2330 and IM-2330 both make reference to NASD 
Rule 2330 entitled ``Improper Use of Customer's Securities or Funds; 
Prohibitions Against Guarantees and Sharing in Accounts.'' FINRA filed 
a proposed rule change, which will be effective December 14, 2009, to 
adopt NASD Rule 2330 as FINRA Rule 2150.\6\ FINRA made minor changes to 
Rule 2150, specifically amending 2150(c). FINRA Rule 2150 prohibits 
members and associated person from: (a) Making improper use of a 
customer's securities or funds; (b) guaranteeing a customer against 
loss in connection with any securities transaction or in any securities 
account of the customer; and (c) sharing in the profits or losses in 
the customer's account except under certain limited conditions 
specified in the Rule. In addition, FINRA added Supplementary 
Information to Rule 2150 that codifies existing staff guidance 
clarifying that: (i) A ``guarantee'' extended to all holders of a 
particular security by an issuer as part of that security generally 
would not be subject to the prohibition against guarantees and that a 
permissible sharing arrangement remains subject to other applicable 
FINRA rules; (ii) the rule does not preclude a member from determining 
on an after-the-fact basis, to reimburse a customer for transaction 
losses, provided however that the member shall comply with all 
reporting requirements that may be applicable to such payment; (iii) 
the rule does not preclude a member from correcting a bona fide error; 
and (iv) the required written authorization(s) shall be preserved for a 
period of at least six years after the date the account is closed, 
which is consistent with the retention period under the Act for similar 
records.
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    \6\ Securities Exchange Act Release No. 60701 (September 21, 
2009), 74 FR 49425 (September 28, 2009) (SR-FINRA-2009-014).
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    NASDAQ is proposing to amend NASDAQ Rule 2330 and IM-2330 by 
renaming Rule 2330 to new Rule 2150 and renaming IM-2330 to new IM-
2150, in order to incorporate by reference the FINRA rule. NASDAQ would 
delete current Rule 2330 and IM-2330. NASDAQ also proposes to amend the 
references to NASD Rule 2330 to instead state FINRA Rule 2150 in the 
new Rule 2150 and IM-2150 to reflect the change to the FINRA rules.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 6(b)(5) of the Act,\8\ in particular, in that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The proposed 
changes will conform NASDAQ Rule 2330 and IM-2330 to recent changes 
made to a corresponding FINRA rule, to promote application of 
consistent regulatory standards.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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, as amended.

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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[[Page 66193]]

    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-NASDAQ-2009-106 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-NASDAQ-2009-106. 
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 inspection 
and copying 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 the Exchange. 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-NASDAQ-2009-106 and should 
be submitted on or before January 4, 2010.

    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.E9-29648 Filed 12-11-09; 8:45 am]

BILLING CODE 8011-01-P