Document ID: SEC-2010-1484-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-09-28T04:00Z

[Federal Register: September 28, 2010 (Volume 75, Number 187)]
[Notices]               
[Page 59771-59772]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se10-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62970; File No. SR-FINRA-2010-037]

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

September 22, 2010.

I. Introduction

    On July 27, 2010, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) 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 
proposal 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 
Regulation M. This proposal was published for comment in the Federal 
Register on August 13, 2010.\3\ The Commission received no comments 
regarding the proposal. This order approves this proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 62664 (Aug. 9, 2010), 75 
FR 49542 (Aug. 13, 2010) (SR-FINRA-2010-037).
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II. Description of the Proposed Rule Change

    FINRA Rule 5190 imposes certain notice requirements on FINRA 
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 surveillance 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.\4\ In connection with such distributions, pursuant to 
Rule 5190(d)(1), FINRA 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. FINRA 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, FINRA 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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    \4\ The exception for ``actively traded'' securities in Rule 101 
of Regulation M applies to securities with an ADTV value, as defined 
in Rule 100 of Regulation M, of at least $1 million and are issued 
by an issuer whose common equity securities have a public float 
value of at least $150 million, provided, however, that such 
securities are not issued by the distribution participant or an 
affiliate of the distribution participant. 17 CFR 242.101(c)(1).
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    FINRA proposed 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, FINRA 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 of their determination that no restricted period applies 
following the pricing of the distribution. FINRA clarified that the 
proposed rule change will not impact FINRA's Regulation M surveillance 
program.
    In its filing, FINRA stated that 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, FINRA believes that its 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. FINRA has stated that the proposed rule change will clarify 
members' notice obligations in the context of such distributions.
    FINRA represented that the proposed rule change will be effective 
on the date of Commission approval.

III. Discussion and Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act, and the rules 
and regulations thereunder that are applicable to a national securities 
association.\5\ In particular, the Commission 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 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 will streamline FINRA member obligations and continue 
FINRA's surveillance program regarding Regulation M to protect 
investors.
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    \5\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78o-3(b)(6).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-FINRA-2010-037) be, 
and hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).

[[Page 59772]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-24227 Filed 9-27-10; 8:45 am]
BILLING CODE 8010-01-P