Document ID: SEC-2012-0464-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-03-21T04:00Z

[Federal Register Volume 77, Number 55 (Wednesday, March 21, 2012)]
[Notices]
[Pages 16574-16579]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6765]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66609; File No. SR-CBOE-2012-024]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Telemarketing Rules

March 15, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 2, 2012, the Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been substantially 
prepared by the Exchange. 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

    The Exchange proposes to amend Rule 9.24, Telephone Solicitation, 
to revise and add provisions that are substantially similar to Federal 
Trade Commission (``FTC'') rules that prohibit deceptive and other 
abusive telemarketing acts or practices.\3\ The text of the proposed 
rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's 
Office of the Secretary, and at the Commission's Public Reference Room.
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    \3\ The proposed rule change is substantially similar in all 
material respects to Financial Industry Regulatory Authority, Inc. 
(``FINRA'') Rule 3230 (Telemarketing), which the Commission recently 
approved. See Securities Exchange Act Release No. 66279 (Jan. 30, 
2012), 77 FR 5611 (Feb. 3, 2012) (SR-FINRA-2011-059) (approval order 
of proposed rule change to adopt telemarketing rule). The proposed 
rule change amends the name of Rule 9.24 from Telephone Solicitation 
to Telemarketing.
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 9.24, Telephone 
Solicitation,\4\ to revise and add provisions that are substantially 
similar to FTC rules that prohibit deceptive and other abusive 
telemarketing acts or practices.\5\ Rule 9.24 requires Trading Permit 
Holders to, among other things, maintain do-not-call lists, limit the 
hours of telephone solicitations, and not use deceptive and abusive 
acts and practices in connection with telemarketing. The Commission 
directed CBOE to enact these telemarketing rules in accordance with the 
Telemarketing Consumer Fraud and Abuse Prevention Act of 1994 
(``Prevention Act'').\6\ The Prevention Act requires the Commission to 
promulgate, or direct any national securities exchange or registered 
securities association to promulgate, rules substantially similar to 
the FTC rules \7\ to prohibit deceptive and other abusive telemarketing 
acts or practices, unless the Commission determines either that the 
rules are not necessary or appropriate for the protection of investors 
or the maintenance of orderly markets, or that existing federal 
securities laws or Commission rules already provide for such 
protection.\8\
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    \4\ The Exchange adopted Rule 9.24, effective December 13, 2005, 
in response to the recommendations of an industry task force, 
comprised of representatives from various industry regulatory and 
self-regulatory organizations, formed to review broker-dealer 
telemarketing practices and compliance with the Telephone Consumer 
Protection Act of 1991 (``TCPA''), 47 U.S.C. 227, as well as with 
Federal Communications Commission (``FCC'') rules and regulations 
that implemented the TCPA. See Securities Exchange Act Release No. 
36588 (Dec. 13, 1995), 60 FR 65703 (Dec. 20, 21995) (SR-CBOE-1995-
063) (order approving adoption of Rule 9.24).
    \5\ The proposed rule change also amends Appendix A to the CBOE 
Stock Exchange, LLC (``CBSX'') Rules to explicitly incorporate 
proposed Rule 9.24 CBSX Rules. CBSX is a stock trading facility of 
CBOE.
    \6\ 15 U.S.C. 6101-6108.
    \7\ 16 CFR 310.1-.9. The FTC adopted these rules under the 
Prevention Act in 1995. See Federal Trade Commission, Telemarketing 
Sales Rule, 60 FR 43842 (Aug. 23, 1995).
    \8\ 15 U.S.C. 6102.
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    In 1997, the Commission determined that telemarketing rules 
promulgated and expected to be promulgated by self-regulatory 
organizations, together with the other rules of the self-regulatory 
organizations, the federal securities laws and the Commission's rules 
thereunder, satisfied the requirements of the Prevention Act because, 
at the time, the applicable provisions of those laws and rules were 
substantially similar to the FTC's telemarketing rules.\9\ CBOE amended 
Rule 9.24 at that time in response to the Commission's 
determination.\10\ Since 1997, the FTC has amended its telemarketing 
rules in light of changing telemarketing practices and technology.\11\
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    \9\ See Telemarketing and Consumer Fraud and Abuse Prevention 
Act; Determination that No Additional Rulemaking Required, 
Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62 FR 
18666 (Apr. 16, 1996). The Commission also determined that some 
provisions of the FTC's telemarketing rules related to areas already 
extensively regulated by existing securities laws or activities not 
applicable to securities transactions See id.
    \10\ See Securities Exchange Act Release No. 39010 (Sept. 3, 
1997), 62 FR 47712 (Sept. 10, 1997) (SR-CBOE-1997-039) (order 
granting accelerated approval of amendments to Rule 9.24).
    \11\ See, e.g., Federal Trade Commission, Telemarketing Sales 
Rule, 73 FR 51164 (Aug. 29, 2008) (amendments to the Telemarketing 
Sales Rule relating to prerecorded messages and call abandonments); 
and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 
(Jan. 29, 2003) (amendments to the Telemarketing Sales Rule 
establishing requirements for sellers and telemarketers to 
participate in the national do-not-call registry).

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[[Page 16575]]

    As mentioned above, the Prevention Act requires the Commission to 
promulgate, or direct any national securities exchange or registered 
securities association to promulgate, rules substantially similar to 
the FTC rules to prohibit deceptive and other abusive telemarketing 
acts or practices.\12\ In May 2011, Commission staff directed CBOE to 
conduct a review of its telemarketing rule and propose rule amendments 
that provide protections that are at least as strong as those provided 
by the FTC's telemarketing rules.\13\ Commission staff had concerns 
``that the [self-regulatory organization] rules overall have not kept 
pace with the FTC's rules, and thus may no longer meet the standards of 
the [Prevention] Act.'' \14\
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    \12\ See supra note 8.
    \13\ See Letter from Robert W. Cook, Director, Division of 
Trading and Markets, Securities and Exchange Commission, to William 
J. Brodsky, Chairman and Chief Executive Officer of CBOE Holdings, 
Inc. (May 12, 2011).
    \14\ Id.
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    The proposed rule change, as directed by the Commission staff, 
amends and adopts provisions in Rule 9.24 that are substantially 
similar to the FTC's current rules that prohibit deceptive and other 
abusive telemarketing acts or practices as described below.\15\
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    \15\ The proposed rule change is also substantially similar to 
FINRA Rule 3230. See supra note 3.
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Telemarketing Restrictions

    The proposed rule change amends the telemarketing restrictions in 
Rule 9.24(a) to provide that no Trading Permit Holder or associated 
person \16\ may make an outbound telephone call \17\ to:
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    \16\ An ``associated person'' is any partner, officer, director, 
or branch manager of a Trading Permit Holder (or any person 
occupying a similar status or performing similar functions), any 
person directly or indirectly controlling, controlled by, or under 
common control with a Trading Permit Holder, or any employee of a 
Trading Permit Holder. See Rule 1.1(qq).
    \17\ An ``outbound telephone call'' is a telephone call 
initiated by a telemarketer to induce the purchase of goods or 
services or to solicit a charitable contribution from a donor. A 
``telemarketer'' is any person who, in connection with 
telemarketing, initiates or receives telephone calls to or from a 
customer or donor. A ``customer'' is any person who is or may be 
required to pay for goods or services through telemarketing. A 
``donor'' means any person solicited to make a charitable 
contribution. A ``person'' is any individual, group, unincorporated 
association, limited or general partnership, corporation, or other 
business entity. ``Telemarketing'' means consisting of or relating 
to a plan, program, or campaign involving at least one outbound 
telephone call, for example cold-calling. The term does not include 
the solicitation of sales through the mailing of written marketing 
materials, when the person making the solicitation does not solicit 
customers by telephone but only receives calls initiated by 
customers in response to the marketing materials and during those 
calls takes orders only without further solicitation. For purposes 
of the previous sentence, the term ``further solicitation'' does not 
include providing the customer with information about, or attempting 
to sell, anything promoted in the same marketing materials that 
prompted the customer's call. A ``charitable contribution'' means 
any donation or gift of money or any other thing of value, for 
example a transfer to a pooled income fund. See proposed Rule 
9.24(n)(3), (11), (16), (17), (20), and (21); see also FINRA Rule 
3230(m)(11), (14), (16), (17), and (20); and 16 CFR 310.2(f), (l), 
(n), (v), (w), (cc), and (dd).
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    (1) Any person's residence at any time other than between 8 a.m. 
and 9 p.m. local time at the called person's locations;
    (2) Any person that previously has stated that he or she does not 
wish to receive any outbound telephone calls made by or on behalf of 
the Trading Permit Holder;\18\ or
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    \18\ This restriction was previously included under Rule 
9.24(d). See the discussion below under Item 3(a), Trading Permit 
Holder's Firm-Specific Do-Not-Call List.
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    (3) Any person who has registered his or her telephone number on 
the FTC's national do-not-call registry.

The proposed rule change is substantially similar to the FTC's 
provisions regarding abusive telemarketing acts or practices.\19\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\20\
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    \19\ See 16 CFR 310.4(b)(1)(iii)(A) and (B) and (c); see also 
FINRA Rule 3230(a). The proposed rule change also deletes language 
in Rule 9.24(a) regarding the purpose of an outbound telephone call 
and the definition of telemarketing, which are now included in the 
proposed definitions of those terms. See proposed Rule 9.24(n)(16) 
and (21) and supra note 17. In addition, the proposed rule change 
amends Rule 9.24(a) to delete an exception to the telemarketing 
restriction that permits outbound telephone calls to a person with 
the person's prior consent and moves that exception to proposed Rule 
9.24(c). See the discussion below under Item 3(a), Exceptions.
    \20\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Caller Disclosures

    The proposed rule change amends Rule 9.24(b) to delete the phrase 
``for the purpose of telemarketing,'' which concept is included in the 
proposed definition of ``outbound telephone call.'' \21\ The proposed 
rule change also provides that the telephone number that a caller 
provides to a person as the number at which the caller may be contacted 
may not be a 900 number or any other number for which charges exceed 
local or long-distance transmission charges.\22\
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    \21\ See proposed Rule 9.24(n)(16) and supra note 17.
    \22\ See proposed Rule 9.24(b); see also FINRA Rule 3230(d)(4). 
The proposed rule change is substantially similar to the FCC's 
regulations regarding call disclosures. See 47 CFR 64.1200(d)(4).
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Exceptions

    The proposed rule change amends Rule 9.24(c) to provide that the 
prohibition in paragraph (a)(1) \23\ does not apply to outbound 
telephone calls by a Trading Permit Holder or an associated person if:
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    \23\ The proposed rule change amends Rule 9.24(c) to provide 
that the exception in that paragraph will apply only to the 
prohibition in proposed paragraph (a)(1) and will no longer apply to 
the requirement in paragraph (b) regarding caller disclosures. The 
Exchange believes that even if a Trading Permit Holder satisfies the 
exception in paragraph (c), the Trading Permit Holder should still 
make the caller disclosures required by paragraph (b) to the called 
person to ensure that the called person receives sufficient 
information regarding the purpose of the call.
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    (1) The Trading Permit Holder has received that person's express 
prior written consent;
    (2) The Trading Permit Holder has an established business 
relationship \24\ with the person; or
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    \24\ An ``established business relationship'' is a relationship 
between a Trading Permit Holder and a person if (a) the person has 
made a financial transaction or has a security position, a money 
balance, or account activity with the Trading Permit Holder or at a 
clearing firm that provides clearing services to the Trading Permit 
Holder within the 18 months immediately preceding the date of an 
outbound telephone call; (b) the Trading Permit Holder is the 
broker-dealer of record for an account of the person within the 18 
months immediately preceding the date of an outbound telephone call; 
or (c) the person has contacted the Trading Permit Holder to inquire 
about a product or service offered by the Trading Permit Holder 
within the three months immediately preceding the date of an 
outbound telephone call. A person's established business 
relationship with a Trading Permit Holder does not extend to the 
Trading Permit Holder's affiliated entities unless the person would 
reasonably expect them to be included. Similarly, a person's 
established business relationship with a Trading Permit Holder's 
affiliate does not extend to the Trading Permit Holder unless the 
person would reasonably expect the Trading Permit Holder to be 
included. The term ``account activity'' includes, but is not limited 
to, purchases, sales, interest credits or debits, charges or 
credits, dividend payments, transfer activity, securities receipts 
or deliveries, and/or journal entries relating to securities or 
funds in the possession or control of the Trading Permit Holder. The 
term ``broker-dealer of record'' refers to the broker or dealer 
identified on a customer's account application for accounts held 
directly at a mutual fund or variable insurance product issuer. See 
proposed Rule 9.24(n)(1), (4), and (12); see also 16 CFR 310.2(o) 
and FINRA Rule 3230(m)(1), (4), and (12).
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    (3) The person is a broker or dealer.

This amendment deletes the exception related to existing customers and 
replaces it with the exception for proposed defined term ``established 
business relationships,'' the definition of which is substantially 
similar to the FTC's definition of that term.\25\
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    \25\ See id.; see also FINRA Rule 3230(a).

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[[Page 16576]]

Trading Permit Holder's Firm-Specific Do-Not-Call List

    The proposed rule change amends Rule 9.24(d) to provide that each 
Trading Permit Holder must make and maintain a centralized list of 
persons who have informed the Trading Permit Holder or any of its 
associated persons that they do not wish to receive outbound telephone 
calls.\26\ The proposed rule change replaces the term ``solicitations'' 
with the proposed term ``outbound telephone calls,'' the definition of 
which is substantially similar to the FTC's definition of that 
term.\27\ The proposed rule change also deletes the prohibition on 
making outbound telephone calls to persons on the Trading Permit 
Holder's firm-specific do-not-call list and moves this prohibition to 
proposed Rule 9.24(a)(2), as described above.
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    \26\ The proposed rule change also renumbers this provision as 
paragraph (d)(1).
    \27\ See 16 CFR 310.4(b)(1)(iii)(A) and supra note 17; see also 
FINRA Rule 3230(a)(2). Additionally, this proposed rule change 
replaces a reference to the term ``member'' with ``Trading Permit 
Holder,'' which conforms to the term currently used in CBOE's Rules.
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    Proposed Rule 9.24(d)(2) adopts procedures that Trading Permit 
Holders must institute to comply with Rule 9.24(a) and (b) prior to 
engaging in telemarketing. These procedures must meet the following 
minimum standards:
    (1) Trading Permit Holders must have a written policy for 
maintaining their firm-specific do-not-call lists.
    (2) Personnel engaged in any aspect of telemarketing must be 
informed and trained in the existence and use of the Trading Permit 
Holder's firm-specific do-not-call list.
    (3) If a Trading Permit Holder receives a request from a person not 
to receive calls from that Trading Permit Holder, the Trading Permit 
Holder must record the request and place the person's name, if 
provided, and telephone number on its firm-specific do-not-call list at 
the time the request is made.\28\
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    \28\ Trading Permit Holders must honor a person's do-not-call 
request within a reasonable time from the date the request is made, 
which may not exceed 30 days from the date of the request. If these 
requests are recorded or maintained by a party other than the 
Trading Permit Holder on whose behalf the outbound telephone call is 
made, the Trading Permit Holder on whose behalf the outbound 
telephone call is made will still be liable for any failures to 
honor the do-not-call request.
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    (4) Trading Permit Holders or associated persons making an outbound 
telephone call must make the caller disclosures set forth in Rule 
9.24(b).
    (5) In the absence of a specific request by the person to the 
contrary, a person's do-not-call request shall apply to the Trading 
Permit Holder making the call, and shall not apply to affiliated 
entities unless the consumer reasonably would expect them to be 
included given the identification of the call and the product being 
advertised.
    (6) A Trading Permit Holder making outbound telephone calls must 
maintain a record of a person's request not to receive further calls.

Inclusion of this requirement to adopt these procedures will not create 
any new obligations on Trading Permit Holders, as they are already 
subject to identical provisions under FCC telemarketing 
regulations.\29\
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    \29\ See 47 CFR 64.1200(d); see also FINRA Rule 3230(d).
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Do-Not-Call Safe Harbors

    Proposed Rule 9.24(e) provides for certain exceptions to the 
telemarketing restriction set forth in proposed Rule 9.24(a)(3), which 
prohibits outbound telephone calls to persons on the FTC's national do-
not-call registry.
    First, proposed Rule 9.24(e)(1) provides that a Trading Permit 
Holder or associated person making outbound telephone calls will not be 
liable for violating proposed Rule 9.24(a)(3) if:
    (1) The Trading Permit Holder has an established business 
relationship with the called person; however, a person's request to be 
placed on the Trading Permit Holder's firm-specific do-not-call list 
terminates the established business relationship exception to the 
national do-not-call registry provision for that Trading Permit Holder 
even if the person continues to do business with the Trading Permit 
Holder;
    (2) The Trading Permit Holder has obtained the person's prior 
express written consent, which must be clearly evidenced by a signed, 
written agreement (which may be obtained electronically under the E-
Sign Act \30\) between the person and the Trading Permit Holder that 
states that the person agrees to be contacted by the Trading Permit 
Holder and includes the telephone number to which the calls may be 
placed; or
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    \30\ 15 U.S.C. 7001 et seq.
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    (3) The Trading Permit Holder or associated person making the call 
has a personal relationship \31\ with the called person.

    \31\ The term ``personal relationship'' means any family member, 
friend, or acquaintance of the person making an outbound telephone 
call. See proposed Rule 9.24(n)(18); see also FINRA Rule 
3230(m)(18).
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The proposed rule change is substantially similar to the FTC's 
provision regarding an exception to the prohibition on making outbound 
telephone calls to persons on the FTC's do-not-call registry.\32\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\33\
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    \32\ See 16 CFR 310.4(b)(1)(iii)(B); see also FINRA Rule 
3230(b).
    \33\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43854.
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    Second, proposed Rule 9.24(e)(2) provides that a Trading Permit 
Holder or associated person making outbound telephone calls will not be 
liable for violating proposed Rule 9.24(a)(3) if the Trading Permit 
Holder or associated person demonstrates that the violation is the 
result of an error and that as part of the Trading Permit Holder's 
routine business practice:
    (1) The Trading Permit Holder has established and implemented 
written procedures to comply with Rule 9.24(a) and (b);
    (2) The Trading Permit Holder has trained its personnel, and any 
entity assisting in its compliance, in the procedures established 
pursuant to the preceding clause;
    (3) The Trading Permit Holder has maintained and recorded a list of 
telephone numbers that it may not contact in compliance with Rule 
9.24(d); and
    (4) The Trading Permit Holder uses a process to prevent outbound 
telephone calls to any telephone number on the Trading Permit Holder's 
firm-specific do-not-call list or the national do-not-call registry, 
employing a version of the national do-not-call registry obtained from 
the FTC no more than 31 days prior to the date any call is made, and 
maintains records documenting this process.

The proposed rule change is substantially similar to the FTC's safe 
harbor to the prohibition on making outbound telephone calls to persons 
on the FTC's national do-not-call registry.\34\ The FTC provided a 
discussion of the provision when it was adopted pursuant to the 
Prevention Act.\35\
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    \34\ See 16 CFR 310.4(b)(3); see also FINRA Rule 3230(c).
    \35\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Wireless Communications

    Proposed Rule 9.24(f) clarifies that the provisions set forth in 
Rule 9.24 are applicable to Trading Permit Holders and associated 
persons making outbound telephone calls to wireless telephone 
numbers.\36\
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    \36\ See also FINRA Rule 3230(e).

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[[Page 16577]]

Outsourcing Telemarketing

    Proposed Rule 9.24(g) states that if a Trading Permit Holder uses 
another entity to perform telemarketing services on its behalf, the 
Trading Permit Holder remains responsible for ensuring compliance with 
Rule 9.24. The proposed rule change also provides that an entity or 
person to which a Trading Permit Holder outsources its telemarketing 
services must be appropriately registered or licensed, where 
required.\37\
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    \37\ See also FINRA Rule 3230(f).
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Billing Information

    The proposed rule change reletters Rule 9.24(e) as Rule 9.24(h) and 
provides that, for any telemarketing transaction, no Trading Permit 
Holder or associated person may submit billing information \38\ for 
payment without the express informed consent of the customer. Proposed 
Rule 9.24(h) requires that each Trading Permit Holder or associated 
person must obtain the express informed consent of the person to be 
charged and to be charged using the identified account.
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    \38\ The term ``billing information'' means any data that 
enables any person to access a customer's or donor's account, such 
as a credit or debit card number, a brokerage, checking, or savings 
account number, or a mortgage loan account number. See proposed Rule 
9.24(n)(3).
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    If the telemarketing transaction involves preacquired account 
information \39\ and a free-to-pay conversion \40\ feature, the Trading 
Permit Holder or associated person must:
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    \39\ The term ``preacquired account information'' means any 
information that enables a Trading Permit Holder or associated 
person to cause a charge to be placed against a customer's or 
donor's account without obtaining the account number directly from 
the customer or donor during the telemarketing transaction pursuant 
to which the account will be charged. See proposed Rule 9.24(n)(19).
    \40\ The term ``free-to-pay conversion'' means, in an offer or 
agreement to sell or provide any goods or services, a provision 
under which a customer receives a product or service for free for an 
initial period and will incur an obligation to pay for the product 
or service if he or she does not take affirmative action to cancel 
before the end of that period. See proposed Rule 9.24(n)(13).
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    (1) Obtain from the customer, at a minimum, the last four digits of 
the account number to be charged;
    (2) Obtain from the customer an express agreement to be charged and 
to be charged using the identified account number; and
    (3) Make and maintain an audio recording of the entire 
telemarketing transaction.
    For any other telemarketing transaction involving preacquired 
account information, the Trading Permit Holder or associated person 
must:
    (1) Identify the account to be charged with sufficient specificity 
for the customer to understand what account will be charged; and
    (2) Obtain from the customer an express agreement to be charged and 
to be charged using the identified account number.

    The proposed rule change is substantially similar to the FTC's 
provision regarding the submission of billing information.\41\ The FTC 
provided a discussion of the provision when it was adopted pursuant to 
the Prevention Act.\42\
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    \41\ See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
    \42\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4616.
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Caller Identification Information

    Proposed Rule 9.24(i) provides that Trading Permit Holders that 
engage in telemarketing must transmit caller identification information 
\43\ and are explicitly prohibited from blocking caller identification 
information. The telephone number provided must permit any person to 
make a do-not-call request during normal business hours. These 
provisions are similar to the caller identification provision in the 
FTC rules.\44\ Inclusion of these caller identification provisions in 
this proposed rule change will not create any new obligations on 
Trading Permit Holders, as they are already subject to identical 
provisions under FCC telemarketing regulations.\45\
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    \43\ Caller identification information includes the telephone 
number and, when made available by the Trading Permit Holder's 
telephone carrier, the name of the Trading Permit Holder.
    \44\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
    \45\ See 47 CFR 64.1601(e).
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Unencrypted Consumer Account Numbers

    Proposed Rule 9.24(j) prohibits a Trading Permit Holder or 
associated person from disclosing or receiving, for consideration, 
unencrypted consumer account numbers for use in telemarketing. The 
proposed rule change is substantially similar to the FTC's provision 
regarding unencrypted consumer account numbers.\46\ The FTC provided a 
discussion of the provision when it was adopted pursuant to the 
Prevention Act.\47\ Additionally, the proposed rule change defines 
``unencrypted'' as not only complete, visible account numbers, whether 
provided in lists or singly, but also encrypted information with a key 
to its decryption. The proposed definition is substantially similar to 
the view taken by the FTC.\48\
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    \46\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
    \47\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4615.
    \48\ See id. at 4616.
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Abandoned Calls

    Proposed Rule 9.24(k) prohibits a Trading Permit Holder or 
associated person from abandoning \49\ any outbound telephone call. The 
abandoned calls prohibition is subject to a ``safe harbor'' under 
proposed Rule 9.24(k)(2) that requires a Trading Permit Holder or 
associated person:
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    \49\ An outbound telephone call is ``abandoned'' if the called 
person answers it and the call is not connected to a Trading Permit 
Holder or associated person within two seconds of the called 
person's completed greeting.
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    (1) To employ technology that ensures abandonment of no more than 
three percent of all calls answered by a person, measured over the 
duration of a single calling campaign, if less than 30 days, or 
separately over each successive 30-day period or portion thereof that 
the campaign continues;
    (2) For each outbound telephone call placed, to allow the telephone 
to ring for at least 15 seconds or four rings before disconnecting an 
unanswered call;
    (3) Whenever a Trading Permit Holder or associated person is not 
available to speak with the person answering the outbound telephone 
call within two seconds after the person's completed greeting, promptly 
to play a prerecorded message stating the name and telephone number of 
the Trading Permit Holder or associated person on whose behalf the call 
was placed; and
    (4) To maintain records documenting compliance with the ``safe 
harbor.''

The proposed rule change is substantially similar to the FTC's 
provisions regarding abandoned calls.\50\ The FTC provided a discussion 
of the provisions when they were adopted pursuant to the Prevention 
Act.\51\
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    \50\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 
3230(j).
    \51\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4641.
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Prerecorded Messages

    Proposed Rule 9.24(l) prohibits a Trading Permit Holder or 
associated person from initiating any outbound telephone call that 
delivers a prerecorded message without a person's express written 
agreement \52\ to receive

[[Page 16578]]

such calls. The proposed rule change also requires that all prerecorded 
outbound telephone calls provide specified opt-out mechanisms so that a 
person can opt out of future calls. The prohibition does not apply to a 
prerecorded message permitted for compliance with the ``safe harbor'' 
for abandoned calls under proposed Rule 9.24(k)(2). The proposed rule 
change is substantially similar to the FTC's provisions regarding 
prerecorded messages.\53\ The FTC provided a discussion of the 
provisions when they were adopted pursuant to the Prevention Act.\54\
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    \52\ The express written agreement must: (a) Have been obtained 
only after a clear and conspicuous disclosure that the purpose of 
the agreement is to authorize the Trading Permit Holder to place 
prerecorded calls to such person; (b) have been obtained without 
requiring, directly or indirectly, that the agreement be executed as 
a condition of purchasing any good or service; (c) evidence the 
willingness of the called person to receive calls that deliver 
prerecorded messages by or on behalf of the Trading Permit Holder; 
and (d) include the person's telephone number and signature (which 
may be obtained electronically under the E-Sign Act).
    \53\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
    \54\ See Federal Trade Commission, Telemarketing Sales Rule, 73 
FR 51164 (Aug. 29, 2008) at 51165.
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Credit Card Laundering

    Proposed Rule 9.24(m) prohibits credit card laundering, the 
practice of depositing into the credit card system \55\ a sales draft 
that is not the result of a credit card transaction between the 
cardholder \56\ and the Trading Permit Holder. Except as expressly 
permitted, the proposed rule change prohibits a Trading Permit Holder 
or associated person from:
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    \55\ The term ``credit card system'' means any method or 
procedure used to process credit card transactions involving credit 
cards issued or licensed by the operator of that system. The term 
``credit card'' means any card, plate, coupon book, or other credit 
device existing for the purpose of obtaining money, property, labor, 
or services on credit. The term ``credit'' means the right granted 
by a creditor to a debtor to defer payment of debt or to incur debt 
and defer its payment. See proposed Rule 9.24(n)(7), (8), and (10).
    \56\ The term ``cardholder'' means a person to whom a credit 
card is issued or who is authorized to use a credit card on behalf 
of or in addition to the person to whom the credit card is issued. 
See proposed Rule 9.24(n)(6).
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    (1) Presenting to or depositing into the credit card system for 
payment, a credit card sales draft \57\ generated by a telemarketing 
transaction that is not the result of a telemarketing credit card 
transaction between the cardholder and the Trading Permit Holder;
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    \57\ The term ``credit card sales draft'' means any record or 
evidence of a credit card transaction. See proposed Rule 9.24(n)(9).
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    (2) Employing, soliciting, or otherwise causing a merchant,\58\ or 
an employee, representative or agent of the merchant to present to or 
to deposit into the credit card system for payment, a credit card sales 
draft generated by a telemarketing transaction that is not the result 
of a telemarketing credit card transaction between the cardholder and 
the Trading Permit Holder; or
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    \58\ The term ``merchant'' means a person who is authorized 
under a written contract with an acquirer to honor or accept credit 
cards, or to transmit or process for payment credit card payments, 
for the purchase of goods or services or a charitable contribution. 
The term ``acquirer'' means a business organization, financial 
institution, or an agent of a business organization or financial 
institution that has authority from an organization that operates or 
licenses a credit card system to authorize merchants to accept, 
transmit, or process payment by credit card through the credit card 
system for money, goods or services, or anything else of value. See 
proposed Rule 9.24(n)(2) and (14).
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    (3) Obtaining access to the credit card system through the use of a 
business relationship or an affiliation with a merchant, when such 
access is not authorized by the merchant agreement \59\ or the 
applicable credit card system.
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    \59\ The term ``merchant agreement'' means a written contract 
between a merchant and an acquirer to honor or accept credit cards, 
or to transmit or process for payment credit card payments, for the 
purchase of goods or services or a charitable contribution. See 
proposed Rule 9.24(n)(15).

The proposed rule change is substantially similar to the FTC's 
provision regarding credit card laundering.\60\ The FTC provided a 
discussion of the provisions when they were adopted pursuant to the 
Prevention Act.\61\
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    \60\ See 16 CFR 310.3(c); see also FINRA Rule 3230(l).
    \61\ See Federal Trade Commission, Telemarketing Sales Rule, 60 
FR 43842 (Aug. 23, 1995) at 43852.
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Definitions

    Proposed Rule 9.24(n) adopts the following definitions, which are 
substantially similar to the FTC's definitions of these terms: 
``Acquirer,'' ``billing information,'' ``caller identification 
service,'' ``cardholder,'' ``charitable contribution,'' ``credit,'' 
``credit card,'' ``credit card sales draft,'' ``credit card system,'' 
``customer,'' ``donor,'' ``established business relationship,'' ``free-
to-pay conversion,'' ``merchant,'' ``merchant agreement,'' ``outbound 
telephone call,'' ``person,'' ``preacquired account information,'' 
``telemarketer,'' and ``telemarketing.'' \62\ The FTC provided a 
discussion of each definition when they were adopted pursuant to the 
Prevention Act.\63\
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    \62\ See proposed Rule 9.24(n)(2), (3), (5), (6), (7), (8), (9), 
(10), (11), (12), (13), (14), (15), (16), (17), (19), (20), and 
(21); and 16 CFR 310.2(a), (c), (d), (e), (f), (h), (i), (j), (k), 
(l), (n), (o), (p), (s), (t), (v), (w), (x), (cc), and (dd); see 
also FINRA Rule 3230(m)(2), (3), (5), (6), (7), (8), (9), (10), 
(11), (12), (13), (14), (15), (16), (17), (19), and (20). The 
proposed rule change also adopts definitions of ``account 
activity,'' ``broker-dealer of record,'' and ``personal 
relationship'' that are substantially similar to FINRA's definitions 
of these terms. See proposed Rule 9.24(n)(1), (4), and (18) and 
FINRA Rule 3230(m)(1), (4), and (18); see also 47 CFR 64.1200(f)(14) 
(FCC's definition of ``personal relationship'').
    \63\ See Federal Trade Commission, Telemarketing Sales Rule, 60 
FR 43842 (Aug. 23, 1995) at 43843; and Federal Trade Commission, 
Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 2003) at 4587.
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State and Federal Laws

    The proposed rule change amends Rule 9.24, Interpretation and 
Policy .01 \64\ to remind Trading Permit Holders and associated persons 
that engage in telemarketing that they also are subject to the 
requirements of relevant state and federal laws and rules, including 
the Prevention Act, the TCPA,\65\ and the rules of the FCC relating to 
telemarketing practices and the rights of telephone consumers.\66\
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    \64\ See also FINRA Rule 3230, Supplementary Material .01, 
Compliance with Other Requirements.
    \65\ See 47 U.S.C. 227.
    \66\ See 47 CFR 64.1200.
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Applicability to CBSX

    The proposed rule change also amends Appendix A, Applicability of 
Rules of the Exchange, to the CBSX Rules to add Rule 9.24 to the list 
of CBOE Rules that apply to CBSX. The Introduction to the CBSX Rules 
provides that the trading of non-option securities on CBSX are subject 
to the Rules in Chapters 1 through 29 (including Rule 9.24) of the 
Exchange Rules to the same extent such Rules apply to the trading of 
the products to which those Rules apply, in some cases supplemented or 
replaced by the Rules in Chapters 50 through 54, except for Rules that 
have been replaced by rules in Chapters 50 through 54 and except where 
the context otherwise requires. Through this provision, the 
telemarketing restrictions in Rule 9.24 have always applied to CBSX 
Trading Permit Holders. The proposed rule change merely makes the 
applicability of Rule 9.24 to CBSX Trading Permit Holders explicit in 
Appendix A.

Announcement in Regulatory Circular

    The Exchange will announce the implementation date of the proposed 
rule change in a Regulatory Circular to be published no later than 90 
days following the effective date. The implementation date will be no 
later than 180 days following the effective date.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\67\ Specifically,

[[Page 16579]]

the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \68\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to remove impediments to and to 
perfect the mechanism for a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \67\ 15 U.S.C. 78f(b).
    \68\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change will prevent fraudulent and 
manipulative acts and protect investors and the public interest by 
continuing to prohibit Trading Permit Holders from engaging in 
deceptive and other abusive telemarketing acts or practices. 
Additionally, the proposed rule change removes impediments to and 
perfects the mechanism for a free and open market and a national market 
system, because it provides consistency among telemarketing rules of 
national securities exchanges and FINRA, therefore making it easier for 
investors to comply with these rules. The proposed rule change to 
include Rule 9.24 in the list of Exchange Rules that apply to CBSX also 
protects investors by eliminating any potential confusion among 
investors as to whether Rule 9.24 applies to CBSX Trading Permit 
Holders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose 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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. Impose any significant burden on competition; and
    C. 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) \69\ of the Act and 
Rule 19b-4(f)(6) \70\ thereunder.
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    \69\ 15 U.S.C. 78s(b)(3)(A).
    \70\ 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 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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2012-024 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2012-024. 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 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-CBOE-2012-024 and should be 
submitted on or before April 11, 2012.

    \71\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\71\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6765 Filed 3-20-12; 8:45 am]
BILLING CODE 8011-01-P