Document ID: SEC-2008-1286-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-09-22T04:00Z

[Federal Register: September 22, 2008 (Volume 73, Number 184)]
[Notices]               
[Page 54652-54653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22se08-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58533; File No. SR-FINRA-2008-036]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change Relating to 
Incorporated NYSE Rules

September 12, 2008

I. Introduction

    On July 3, 2008, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend certain rules of the New York Stock 
Exchange LLC (``NYSE'') that relate to member firm conduct, and that 
have been incorporated into the FINRA rulebook (``Incorporated NYSE 
Rules''). The proposed rule change was published for comment in the 
Federal Register on July 14, 2008.\3\ The Commission received one 
comment letter regarding the proposal.\4\ This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58103 (July 3, 
2008), 73 FR 40403.
    \4\ See letter from Amal Aly, Managing Director and Associate 
General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA''), to Florence E. Harmon, Acting Secretary, 
Commission, dated August 4, 2008 (``SIFMA letter'').
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II. Description of the Proposed Rule Change

    Currently, the FINRA rulebook consists of rules of the National 
Association of Securities Dealers, Inc. (``NASD Rules''), and the 
Incorporated NYSE Rules. The Incorporated NYSE Rules apply only to 
firms that are members of FINRA and the NYSE (``Dual Members''). FINRA 
is currently developing a consolidated rulebook which will consist only 
of FINRA rules. In the interim period, FINRA proposes

[[Page 54653]]

several amendments to the Incorporated NYSE Rules.
    In some instances, FINRA proposes to harmonize inconsistencies 
between the Incorporated NYSE Rules and the NASD Rules. For example, 
FINRA proposes to delete the term ``allied member'' from the 
Incorporated NYSE Rules, as that concept has no direct FINRA 
analogue.\5\ Similarly, FINRA proposes to re-position the Incorporated 
NYSE Rules governing the closing-out of securities contracts (``Buy-In 
Rules''), combining NYSE Rules 283, 285, 286, 287, 288, 289, and 290 in 
NYSE Rule 282. This proposed change would consolidate the NYSE Buy-In 
Rules into one rule, and would make NYSE Rule 282 more similar in 
format to the corresponding NASD rule.
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    \5\ Where the use of the term ``allied member'' in the 
Incorporated NYSE Rules denotes an individual's status as a 
``control person'' of a member organization, FINRA proposes to 
substitute ``allied member'' with the newly-created category of 
``principal executive.''
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    In other instances, FINRA proposes to rescind provisions of the 
Incorporated NYSE Rules that are substantively addressed by NASD Rules. 
For example, FINRA proposes to rescind NYSE Rule 404, which regulates 
the carrying of accounts for customers by members, as that rule is 
duplicative of the FINRA Letter of Approval. Similarly, FINRA proposes 
to rescind NYSE Rule 446, which relates to business continuity and 
contingency plans, as that rule is nearly identical to NASD Rules 3510 
and 3520.
    FINRA also proposes to delete certain NYSE Rules that are outdated, 
and that have no equivalent NASD rules. For example, FINRA proposes to 
rescind NYSE Rule 311(h), which prescribes the number of partners a 
member organization must have in order for that member to conduct 
business. There is no comparable NASD rule, and, according to FINRA, 
this rule no longer applies to members' current business models.

III. Summary of Comments

    The Commission received one comment letter in response to the 
proposed rule change.\6\ That commenter supported the proposed rule 
change, and urged that the Commission approve it as expeditiously as 
possible.\7\ However, that commenter also requested that the 
Commission, upon approving the proposed rule change, take steps to 
ensure that NYSE adopts conforming changes to its rulebook.\8\ 
According to the commenter, until the NYSE rulebook is conformed to the 
Incorporated NYSE Rules, Dual Members will be subject to the 
Incorporated NYSE Rules, the legacy NASD rules that currently form part 
of the FINRA rulebook, and the NYSE rules.\9\ The commenter stated that 
this would be ``entirely inconsistent with one of the key benefits in 
the creation of FINRA.'' \10\
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    \6\ Supra note 4.
    \7\ Id. at 1.
    \8\ Id. at 2.
    \9\ Id.
    \10\ Id.
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IV. Discussion and Commission Findings

    The Commission has reviewed the proposed rule change and finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities association \11\ and, in particular, Section 15A(b)(6) of 
the Act,\12\ which requires that FINRA have rules 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.
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    \11\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78o-3(b)(6).
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    FINRA's proposal provides greater harmonization between the 
Incorporated NYSE Rules and the NASD Rules. The amendments to the 
Incorporated NYSE Rules will reduce regulatory disparities, and will 
lessen the regulatory burden on Dual Members. Additionally, the concern 
articulated by the commenter has been effectively addressed by a recent 
NYSE filing.\13\ In SR-NYSE-2008-80, NYSE proposes to amend its 
rulebook to conform its rules to the Incorporated NYSE Rules.\14\
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    \13\ See SR-NYSE-2008-80 (filed September 5, 2008).
    \14\ Id.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-FINRA-2008-036) be, and it hereby is, 
approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22012 Filed 9-19-08; 8:45 am]

BILLING CODE 8010-01-P