Document ID: SEC-2012-1393-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2012-08-23T04:00Z

[Federal Register Volume 77, Number 164 (Thursday, August 23, 2012)]
[Notices]
[Pages 51076-51081]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20712]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67681; File No. SR-NSX-2012-13]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Rules To Add Rule 3.21 Regarding Telephone Solicitation

August 17, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on August 13, 2012, National Stock Exchange, Inc. 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change, as described in Items I, II and III below, which 
Items have been prepared by the National Stock Exchange. The Commission 
is publishing this notice to solicit comment on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is 
proposing to add Rule 3.21, Telephone Solicitation, to its Rulebook to 
codify provisions that are substantially similar to Federal Trade 
Commission (``FTC'') rules that prohibit deceptive and other abusive 
telemarketing acts or practices.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.com, at the principal office of the 
Exchange, 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, 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add Rule 3.21, Telephone Solicitation, to 
its Rulebook to codify provisions that are substantially similar to FTC 
rules that prohibit deceptive and other abusive telemarketing acts or 
practices. Rule 3.21 requires Equity Trading Permit (``ETP'') 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 the 
Exchange to enact these telemarketing rules in accordance with the 
Telemarketing Consumer Fraud and Abuse Prevention Act of 1994 
(``Prevention Act'').\3\ 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 \4\ 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.\5\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 6101--6108.
    \4\ 16 CFR 310.1--.9. The FTC adopted these rules under the 
Prevention Act in 1995. See FTC, Telemarketing Sales Rule, 60 FR 
43842 (Aug. 23, 1995).
    \5\ 15 U.S.C. 6102.
---------------------------------------------------------------------------

    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.\6\ Since 1997, 
the FTC has amended its telemarketing rules in light of changing 
telemarketing practices and technology.\7\
---------------------------------------------------------------------------

    \6\ See Telemarketing and Consumer Fraud and Abuse Prevention 
Act; Determination that No Additional Rulemaking Required, 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.
    \7\ See, e.g., FTC, Telemarketing Sales Rule, 73 FR 51164 (Aug. 
29, 2008) (amendments to the Telemarketing Sales Rule relating to 
prerecorded messages and call abandonments); and FTC, 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).

---------------------------------------------------------------------------

[[Page 51077]]

    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.\8\ In May 2011, Commission staff directed the 
Exchange 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.\9\ 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.''\10\
---------------------------------------------------------------------------

    \8\ See supra note 4.
    \9\ See Letter from Robert W. Cook, Director, Division of 
Trading and Markets, Securities and Exchange Commission, to Joseph 
Rizzello, Chief Executive Officer, National Stock Exchange (May 12, 
2011).
    \10\ Id.
---------------------------------------------------------------------------

    The proposed rule change, as directed by the Commission staff, 
adopts provisions in Rule 3.21 that are substantially similar to the 
FTC's current rules that prohibit deceptive and other abusive 
telemarketing acts or practices as described below.\11\
---------------------------------------------------------------------------

    \11\ The proposed rule change is also substantially similar to 
FINRA Rule 3230. See supra note 1.
---------------------------------------------------------------------------

Telemarketing Restrictions
    The proposed rule change codifies the telemarketing restrictions in 
Rule 3.21 to provide that no ETP Holder or person associated with an 
ETP Holder \12\ may make an outbound telephone call \13\ to:
---------------------------------------------------------------------------

    \12\ A ``person associated with an ETP Holder'' or ``associated 
person of an ETP Holder'' means any partner, officer, director, or 
branch manager of an ETP 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 
an ETP Holder, or any employee of an ETP Holder, except that any 
person associated with an ETP Holder whose functions are solely 
clerical or ministerial shall not be included in the meaning of such 
terms. See Rule 1.5(P)(1).
    \13\ 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 
3.21(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).
---------------------------------------------------------------------------

    (1) Any person's residence at any time other than between 8:00 a.m. 
and 9:00 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 ETP Holder; or
    (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.\14\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\15\
---------------------------------------------------------------------------

    \14\ See 16 CFR 310.4(b)(1)(iii)(A) and (B) and (c); see also 
FINRA Rule 3230(a). See proposed Rule 3.21(n)(16) and (21) and supra 
note 12.
    \15\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4628; and FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 
23, 1995) at 43855.
---------------------------------------------------------------------------

Caller Disclosures
    The proposed rule change codifies in Rule 3.21(b) that no ETP 
Holder or associated person of an ETP Holder shall make an outbound 
telephone call to any person without disclosing truthfully, promptly 
and in a clear and conspicuous manner to the called person the 
following information: (i) the identity of the caller and the ETP 
Holder; (ii) the telephone number or address at which the caller may be 
contacted; and (iii) that the purpose of the call is to solicit the 
purchase of securities or related services. 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.\16\
---------------------------------------------------------------------------

    \16\ See proposed Rule 3.21(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).
---------------------------------------------------------------------------

Exceptions
    The proposed rule change adds Rule 3.21 to provide that the 
prohibition in paragraph (a)(1) \17\ does not apply to outbound 
telephone calls by an ETP Holder or an associated person of an ETP 
Holder if:
---------------------------------------------------------------------------

    \17\ The Exchange believes that even if an ETP Holder satisfies 
the exception in paragraph (c), the ETP 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.
---------------------------------------------------------------------------

    (1) The ETP Holder has received that person's express prior written 
consent;
    (2) The ETP Holder has an established business relationship \18\ 
with the person; or
---------------------------------------------------------------------------

    \18\ An ``established business relationship'' is a relationship 
between an ETP 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 ETP Holder or at a clearing firm that 
provides clearing services to the ETP Holder within the 18 months 
immediately preceding the date of an outbound telephone call; (b) 
the ETP 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 ETP 
Holder to inquire about a product or service offered by the ETP 
Holder within the three months immediately preceding the date of an 
outbound telephone call. A person's established business 
relationship with an ETP Holder does not extend to the ETP Holder's 
affiliated entities unless the person would reasonably expect them 
to be included. Similarly, a person's established business 
relationship with an ETP Holder's affiliate does not extend to the 
ETP Holder unless the person would reasonably expect the ETP 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 ETP 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 3.21(n)(1), (4), and (12); see also 16 CFR 310.2(o) 
and FINRA Rule 3230(m)(1), (4), and (12).
---------------------------------------------------------------------------

    (3) The person is a broker or dealer.
ETP Holder's Firm-Specific Do-Not-Call List
    The proposed rule change adds Rule 3.21(d) to provide that each ETP 
Holder must make and maintain a centralized list of persons who have 
informed the ETP Holder or any of its associated persons of an ETP 
Holder that they do not wish to receive outbound telephone calls. The 
proposed term ``outbound telephone calls'' is substantially similar to 
the FTC's definition of that term.\19\
---------------------------------------------------------------------------

    \19\ See 16 CFR 310.4(b)(1)(iii)(A) and supra note 12; see also 
FINRA Rule 3230(a)(2). Additionally, this proposed rule change 
replaces a reference to the term ``member'' with ``ETP Holder,'' 
which conforms to the term currently used in NSX's Rules.
---------------------------------------------------------------------------

    Proposed Rule 3.21(d)(2) adopts procedures that ETP Holders must 
institute to comply with Rule 3.21(a)

[[Page 51078]]

and (b) prior to engaging in telemarketing. These procedures must meet 
the following minimum standards:
    (1) ETP 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 ETP Holder's firm-
specific do-not-call list.
    (3) If an ETP Holder receives a request from a person not to 
receive calls from that ETP Holder, the ETP 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.\20\
---------------------------------------------------------------------------

    \20\ ETP 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 ETP 
Holder on whose behalf the outbound telephone call is made, the ETP 
Holder on whose behalf the outbound telephone call is made will 
still be liable for any failures to honor the do-not-call request.
---------------------------------------------------------------------------

    (4) ETP Holders or associated persons of an ETP Holder making an 
outbound telephone call must make the caller disclosures set forth in 
Rule 3.21(b).
    (5) In the absence of a specific request by the person to the 
contrary, a person's do-not-call request will apply to the ETP Holder 
making the call, and will 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) An ETP 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 ETP Holders, as they are already subject to 
identical provisions under FCC telemarketing regulations.\21\
---------------------------------------------------------------------------

    \21\ See 47 CFR 64.1200(d); see also FINRA Rule 3230(d).
---------------------------------------------------------------------------

Do-Not-Call Safe Harbors
    Proposed Rule 3.21(e) provides for certain exceptions to the 
telemarketing restriction set forth in proposed Rule 3.21(a)(3), which 
prohibits outbound telephone calls to persons on the FTC's national do-
not-call registry. First, proposed Rule 3.21(e)(1) provides that an ETP 
Holder or associated person of an ETP Holder making outbound telephone 
calls will not be liable for violating proposed Rule 3.21(a)(3) if:
    (1) The ETP Holder has an established business relationship with 
the called person; however, a person's request to be placed on the ETP 
Holder's firm-specific do-not-call list terminates the established 
business relationship exception to the national do-not-call registry 
provision for that ETP Holder even if the person continues to do 
business with the ETP Holder;
    (2) The ETP 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)\22\ between 
the person and the ETP Holder that states that the person agrees to be 
contacted by the ETP Holder and includes the telephone number to which 
the calls may be placed; or
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 7001 et seq.
---------------------------------------------------------------------------

    (3) The ETP Holder or associated person of an ETP Holder making the 
call has a personal relationship \23\ with the called person.
---------------------------------------------------------------------------

    \23\ The term ``personal relationship'' means any family member, 
friend, or acquaintance of the person making an outbound telephone 
call. See proposed Rule 3.21(n)(18); see also FINRA Rule 
3230(m)(18).
---------------------------------------------------------------------------

    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.\24\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\25\
---------------------------------------------------------------------------

    \24\ See 16 CFR 310.4(b)(1)(iii)(B); see also FINRA Rule 
3230(b).
    \25\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4628; and FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 
23, 1995) at 43854.
---------------------------------------------------------------------------

    Second, proposed Rule 3.21(e)(2) provides that an ETP Holder or 
associated person of an ETP Holder making outbound telephone calls will 
not be liable for violating proposed Rule 3.21(a)(3) if the ETP Holder 
or associated person of an ETP Holder demonstrates that the violation 
is the result of an error and that as part of the ETP Holder's routine 
business practice:
    (1) The ETP Holder has established and implemented written 
procedures to comply with Rule 3.21(a) and (b);
    (2) The ETP Holder has trained its personnel, and any entity 
assisting in its compliance, in the procedures established pursuant to 
the preceding clause;
    (3) The ETP Holder has maintained and recorded a list of telephone 
numbers that it may not contact in compliance with Rule 3.21(d); and
    (4) The ETP Holder uses a process to prevent outbound telephone 
calls to any telephone number on the ETP 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 a firm-specific do-not-call list or on the FTC's national do-not-
call registry.\26\ The FTC provided a discussion of the provision when 
it was adopted pursuant to the Prevention Act.\27\
---------------------------------------------------------------------------

    \26\ See 16 CFR 310.4(b)(3); see also FINRA Rule 3230(c).
    \27\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4628; and FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 
23, 1995) at 43855.
---------------------------------------------------------------------------

Wireless Communications
    Proposed Rule 3.21(f) clarifies that the provisions set forth in 
Rule 3.21 are applicable to ETP Holders and associated persons of an 
ETP Holder making outbound telephone calls to wireless telephone 
numbers.\28\
---------------------------------------------------------------------------

    \28\ See also FINRA Rule 3230(e).
---------------------------------------------------------------------------

Outsourcing Telemarketing
    Proposed Rule 3.21(g) states that if an ETP Holder uses another 
entity to perform telemarketing services on its behalf, the ETP Holder 
remains responsible for ensuring compliance with Rule 3.21. The 
proposed rule change also provides that an entity or person to which an 
ETP Holder outsources its telemarketing services must be appropriately 
registered or licensed, where required.\29\
---------------------------------------------------------------------------

    \29\ See also FINRA Rule 3230(f).
---------------------------------------------------------------------------

Billing Information
    The proposed Rule provides that, for any telemarketing transaction, 
no ETP Holder or associated person of an ETP Holder may submit billing 
information \30\ for payment without the express informed consent of 
the customer. Proposed Rule 3.21(h) requires that each ETP Holder or 
associated person of an ETP Holder must obtain the express informed 
consent of the person to be charged and to be charged using the 
identified account.
---------------------------------------------------------------------------

    \30\ 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 
3.21(n)(3).
---------------------------------------------------------------------------

    If the telemarketing transaction involves preacquired account 
information \31\ and a free-to-pay

[[Page 51079]]

conversion \32\ feature, the ETP Holder or associated person of an ETP 
Holder must:
---------------------------------------------------------------------------

    \31\ The term ``preacquired account information'' means any 
information that enables an ETP Holder or associated person of an 
ETP Holder 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 3.21(n)(19).
    \32\ 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 3.21(n)(13).
---------------------------------------------------------------------------

    (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 ETP Holder or associated person of an ETP 
Holder must:
    (1) Identify the account to be charged with sufficient specificity 
for the customer to understand which 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.\33\ The FTC 
provided a discussion of the provision when it was adopted pursuant to 
the Prevention Act.\34\
---------------------------------------------------------------------------

    \33\ See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
    \34\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4616.
---------------------------------------------------------------------------

Caller Identification Information
    Proposed Rule 3.21(i) provides that ETP Holders that engage in 
telemarketing must transmit caller identification information \35\ and 
are explicitly prohibited from blocking this 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.\36\ Inclusion of 
these caller identification provisions in this proposed rule change 
will not create any new obligations on ETP Holders, as they are already 
subject to identical provisions under FCC telemarketing 
regulations.\37\
---------------------------------------------------------------------------

    \35\ Caller identification information includes the telephone 
number and, when made available by the ETP Holder's telephone 
carrier, the name of the ETP Holder.
    \36\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
    \37\ See 47 CFR 64.1601(e).
---------------------------------------------------------------------------

Unencrypted Consumer Account Numbers
    Proposed Rule 3.21(j) prohibits an ETP Holder or associated person 
of an ETP Holder 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.\38\ The FTC provided a 
discussion of the provision when it was adopted pursuant to the 
Prevention Act.\39\ 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.\40\
---------------------------------------------------------------------------

    \38\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
    \39\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4615.
    \40\ See id. at 4616.
---------------------------------------------------------------------------

Abandoned Calls
    Proposed Rule 3.21(k) prohibits an ETP Holder or associated person 
of an ETP Holder from abandoning \41\ any outbound telephone call. The 
abandoned calls prohibition is subject to a ``safe harbor'' under 
proposed Rule 3.21(k)(2) that requires an ETP Holder or associated 
person of an ETP Holder:
---------------------------------------------------------------------------

    \41\ An outbound telephone call is ``abandoned'' if the called 
person answers it and the call is not connected to an ETP Holder or 
associated person of an ETP Holder within two seconds of the called 
person's completed greeting.
---------------------------------------------------------------------------

    (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 an ETP Holder or associated person of an ETP Holder 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 ETP Holder or associated person of an ETP Holder 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.\42\ The FTC provided a 
discussion of the provisions when they are adopted pursuant to the 
Prevention Act.\43\
---------------------------------------------------------------------------

    \42\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 
3230(j).
    \43\ See FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 
2003) at 4641.
---------------------------------------------------------------------------

Prerecorded Messages
    Proposed Rule 3.21(l) prohibits an ETP Holder or associated person 
of an ETP Holder from initiating any outbound telephone call that 
delivers a prerecorded message without a person's express written 
agreement \44\ to receive 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 3.21(k)(2). The proposed rule change is 
substantially similar to the FTC's provisions regarding prerecorded 
messages.\45\ The FTC provided a discussion of the provisions when they 
were adopted pursuant to the Prevention Act.\46\
---------------------------------------------------------------------------

    \44\ 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 ETP 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 ETP Holder; and (d) 
include the person's telephone number and signature (which may be 
obtained electronically under the E-Sign Act).
    \45\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
    \46\ See FTC, Telemarketing Sales Rule, 73 FR 51164 (Aug. 29, 
2008) at 51165.
---------------------------------------------------------------------------

Credit Card Laundering
    Proposed Rule 3.21(m) prohibits credit card laundering, the 
practice of depositing into the credit card system \47\ a sales draft 
that is not the result of a credit card transaction between the

[[Page 51080]]

cardholder \48\ and the ETP Holder. Except as expressly permitted, the 
proposed rule change prohibits an ETP Holder or associated person of an 
ETP Holder from:
---------------------------------------------------------------------------

    \47\ 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 3.21(n)(7), (8), and (10).
    \48\ 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 3.21(n)(6).
---------------------------------------------------------------------------

    (1) Presenting to or depositing into the credit card system for 
payment, a credit card sales draft \49\ generated by a telemarketing 
transaction that is not the result of a telemarketing credit card 
transaction between the cardholder and the ETP Holder;
---------------------------------------------------------------------------

    \49\ The term ``credit card sales draft'' means any record or 
evidence of a credit card transaction. See proposed Rule 3.21(n)(9).
---------------------------------------------------------------------------

    (2) Employing, soliciting, or otherwise causing a merchant,\50\ 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 ETP Holder; or
---------------------------------------------------------------------------

    \50\ 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 3.21(n)(2) and (14).
---------------------------------------------------------------------------

    (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 \51\ or the 
applicable credit card system.
---------------------------------------------------------------------------

    \51\ 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 3.21(n)(15).

The proposed rule change is substantially similar to the FTC's 
provision regarding credit card laundering.\52\ The FTC provided a 
discussion of the provisions when they were adopted pursuant to the 
Prevention Act.\53\
---------------------------------------------------------------------------

    \52\ See 16 CFR 310.3(c); see also FINRA Rule 3230(l).
    \53\ See FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 
1995) at 43852.
---------------------------------------------------------------------------

Definitions
    Proposed Rule 3.21(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.'' \54\ The FTC provided a 
discussion of each definition when they were adopted pursuant to the 
Prevention Act.\55\
---------------------------------------------------------------------------

    \54\ See proposed Rule 3.21(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 3.21(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'').
    \55\ See FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 
1995) at 43843; and FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 
29, 2003) at 4587.
---------------------------------------------------------------------------

State and Federal Laws
    Proposed Rule 3.21, Interpretation and Policy .01 \56\ reminds ETP 
Holders and associated persons of an ETP Holder 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 Telephone Consumer Protection Act (``TCPA''),\57\ and the 
rules of the FCC relating to telemarketing practices and the rights of 
telephone consumers.\58\
---------------------------------------------------------------------------

    \56\ See also FINRA Rule 3230, Supplementary Material .01, 
Compliance with Other Requirements.
    \57\ See 47 U.S.C. 227.
    \58\ See 47 CFR 64.1200.
---------------------------------------------------------------------------

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 Exchange Act and the rules and regulations thereunder applicable to 
the Exchange and, in particular, the requirements of Section 6(b) of 
the Exchange Act.\59\ Specifically, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \60\ 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 to protect investors and 
the public interest generally.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78f(b).
    \60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the proposed rule change will prevent fraudulent and 
manipulative acts and protect investors and the public interest by 
continuing to prohibit ETP 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.

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

    The Exchange 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 Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change 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:
    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) \61\ of the Act and 
Rule 19b-4(f)(6) \62\ thereunder.
---------------------------------------------------------------------------

    \61\ 15 U.S.C. 78s(b)(3)(A).
    \62\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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

[[Page 51081]]

investors or otherwise in furtherance of the purposes of the Exchange 
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-NSX-2012-13 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 No. SR-NSX-2012-13. This file 
number should be included in the subject line if email is used. To help 
the Commission process and review 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. eastern time. Copies of such filings will also 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-NSX-2012-13 and should be 
submitted on or before September 13, 2012.
---------------------------------------------------------------------------

    \63\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to the delegated authority.\63\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20712 Filed 8-22-12; 8:45 am]
BILLING CODE 8011-01-P