Document ID: SEC-2011-0519-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-04-13T04:00Z

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20759-20760]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8873]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64260; File No. SR-FINRA-2011-016]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Delay the Implementation date of FINRA Rule 
2090 (Know Your Customer) and FINRA Rule 2111 (Suitability)

April 8, 2011.
    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 April 7, 2011, 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 been substantially prepared by FINRA. FINRA 
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ 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\ 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 a rule change to delay the implementation date 
for FINRA Rule 2090 (Know Your Customer) and FINRA Rule 2111 
(Suitability), as approved in SR-FINRA-2010-039, until July 9, 2012.
    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
    On November 17, 2010, the SEC approved FINRA's proposal to adopt 
rules governing know-your-customer and suitability obligations \4\ for 
the consolidated FINRA rulebook.\5\ On January 10, 2011, FINRA issued 
Regulatory Notice 11-02, which provided guidance regarding the new 
rules and announced an implementation date of October 7, 2011. 
Following SEC approval of the rules and publication of the Regulatory 
Notice, numerous firms requested that the approved rules' 
implementation date be delayed to allow firms additional time to 
determine the types of systems and procedural changes they need to 
make, implement those changes, and educate associated persons and 
supervisors regarding compliance with the rules. FINRA is filing this 
rule change to move the implementation date for Rules 2090 and 2111 
from October 7, 2011, to July 9, 2012, and has filed it as a ``non-
controversial'' rule change that is effective upon filing.
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    \4\ See Securities Exchange Act Release No. 63325 (November 17, 
2010), 75 FR 71479 (November 23, 2010) (Order Approving File No. SR-
FINRA-2010-039).
    \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 member firms, 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 member, 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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2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ 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. The proposed rule change furthers these purposes 
because it will allow firms to better prepare procedures and systems 
and better educate associated persons to comply with the requirements 
of these important rules.
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    \6\ 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.

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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally 
may not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to

[[Page 20760]]

designate a shorter time if such action is consistent with the 
protection of investors and the public interest. Because FINRA is 
delaying the implementation of Rules 2090 and 2111 only, FINRA requests 
that the Commission waive the 30-day operative delay so that this 
proposed rule change may become operative upon filing.
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). Among other things, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Commission notes that FINRA has satisfied the 
pre-filing notice requirement.
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    SR-FINRA-2010-039 would amend and convert existing NYSE and NASD 
know your customer and suitability rules into the consolidated FINRA 
rulebook \11\ and, to the extent implementation of SR-FINRA-2010-039 is 
postponed, FINRA members remain subject to those existing NYSE and NASD 
know-your-customer and suitability obligations. Further, the delay in 
the implementation date will allow firms additional time to better 
prepare procedures and systems and better educate associated persons 
and supervisors to comply with the requirements of new FINRA Rules 2090 
and 2111. For these reasons, the Commission believes it is consistent 
with the protection of investors and the public interest to waive the 
30-day operative delay, and hereby grants such waiver.\12\
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    \11\ 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 member firms, 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).
    \12\ For the purposes only of waiving the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-016 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-2011-016. 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-2011-016 
and should be submitted on or before May 4, 2011.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8873 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P