Document ID: SEC-2010-1235-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-08-13T04:00Z

[Federal Register: August 13, 2010 (Volume 75, Number 156)]
[Notices]               
[Page 49542-49543]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13au10-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62664; File No. SR-FINRA-2010-037]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Amend 
FINRA Rule 5190 (Notification Requirements for Offering Participants)

August 9, 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 July 27, 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 substantially 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 FINRA Rule 5190 (Notification 
Requirements for Offering Participants) relating to the notice 
requirements applicable to distributions of ``actively traded'' 
securities, as defined under SEC Regulation M.
    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 Rule 5190 imposes certain notice requirements on members 
participating in distributions of listed and unlisted securities and is 
designed to ensure that FINRA receives pertinent distribution-related 
information from its members in a timely fashion to facilitate its 
Regulation M compliance program.
    Rule 5190(d) sets forth the notice requirements applicable to 
distributions of securities that are considered ``actively traded'' and 
thus are not subject to a restricted period under Rule 101 of 
Regulation M.\3\ In connection with such distributions, pursuant to 
Rule 5190(d)(1), members are required to provide written notice to 
FINRA of the member's determination that no restricted period applies 
and the basis for such determination. Members must provide such notice 
at least one business day prior to the pricing of the distribution, 
unless later notification is necessary under specific circumstances. 
Rule 5190(d)(2) requires that upon pricing a distribution of an 
``actively traded'' security, members provide written notice to FINRA, 
along with pricing-related information such as the offering price, the 
last sale before the distribution and the pricing basis. Notice of 
pricing must be provided no later than the close of business the next 
business day following the pricing of the distribution, unless later 
notification is necessary under specific circumstances.
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    \3\ The exclusion for ``actively traded'' securities removes 
from Rule 101 of Regulation M securities with an ``ADTV'' value, as 
defined in Rule 100 of Regulation M, of at least $1 million where 
the issuer's common equity securities have a public float value of 
at least $150 million.
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    FINRA is proposing to amend Rule 5190(d) to require that notice 
under subparagraphs (1) and (2) be provided at the same time; 
specifically, no later than the close of business the next business day 
following the pricing of the distribution. While the timing of notice 
under subparagraph (1) would change, the information required would not 
change. Thus, pursuant to the proposed rule change, members will be 
required to provide a single notice after pricing of the distribution 
and will be required to provide all of the same information that they 
provide today.
    FINRA has determined that it will be sufficient for members to 
provide notice

[[Page 49543]]

of their determination that no restricted period applies following the 
pricing of the distribution. The proposed rule change will not impact 
FINRA's Regulation M surveillance program.\4\
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    \4\ See e-mail from Lisa Horrigan, Asssociate General Counsel, 
FINRA, to Elizabeth Sandoe, Branch Chief and Brad Gude, Special 
Counsel, Division of Trading and Markets, Commission, dated August 
6, 2010 (``FINRA Email'').
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    Additionally, a significant number of distributions of ``actively 
traded'' securities evolve quickly after the market close and are 
priced overnight before the next trading session. Thus, members 
frequently do not have sufficient advance knowledge of their 
participation in the distribution to provide notice to FINRA at least 
one business day prior to pricing and in such instances are unable to 
comply with the express terms of Rule 5190(d)(1). FINRA then must make 
a determination whether later notification was necessary under the 
circumstances, in accordance with the rule. The proposed rule change 
will clarify members' notice obligations in the context of such 
distributions.
    The proposed rule change will be effective on the date of 
Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\5\ 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 will 
streamline FINRA's Regulation M-related notice requirements and, 
combined with FINRA's existing Regulation M compliance program, will 
protect investors.\6\
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    \5\ 15 U.S.C. 78o-3(b)(6).
    \6\ See FINRA E-mail, supra note 4.
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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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the 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 
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-2010-037 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-2010-037. 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-2010-037 
and should be submitted on or before September 3, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19966 Filed 8-12-10; 8:45 am]
BILLING CODE 8010-01-P