Document ID: SEC-2010-0129-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rules 3330 and 9810 To Reflect Changes to Corresponding FINRA Rules
Posted Date: 2010-01-25T05:00Z

[Federal Register: January 25, 2010 (Volume 75, Number 15)]
[Notices]               
[Page 3948-3950]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja10-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61371; File No. SR-NASDAQ-2010-005]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend Rules 3330 and 9810 
To Reflect Changes to Corresponding FINRA Rules

January 15, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 3949]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 13, 2010, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') 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 Exchange. The 
Exchange has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing this proposed rule change to amend NASDAQ 
Rules 3330 (Payment Designed to Influence Market Prices, Other than 
Paid Advertising) and 9810 (Initiation of Proceeding) to reflect recent 
changes to corresponding rules of the Financial Industry Regulatory 
Authority (``FINRA''). The text of the proposed rule change is 
available at http://nasdaqomxbx.cchwallstreet.com, at the Exchange's 
principal office, 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 aspects of such 
statements.

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

1. Purpose
    Many of NASDAQ's rules are based on rules of FINRA (formerly the 
National Association of Securities Dealers (``NASD'')). During 2008, 
FINRA embarked on an extended process of moving rules formerly 
designated as ``NASD Rules'' into a consolidated FINRA rulebook. In 
most cases, FINRA has renumbered these rules, and in some cases has 
substantively amended them. Accordingly, NASDAQ also proposes to 
initiate a process of modifying its rulebook to ensure that NASDAQ 
rules corresponding to FINRA/NASD rules continue to mirror them as 
closely as practicable. In some cases, it will not be possible for the 
rule numbers of NASDAQ rules to mirror corresponding FINRA rules, 
because existing or planned NASDAQ rules make use of those numbers. 
However, wherever possible, NASDAQ plans to update its rules to reflect 
changes to corresponding FINRA rules.
    This filing addresses NASDAQ Rules 3330 (Payment Designed to 
Influence Market Prices, Other than Paid Advertising) and 9810 
(Initiation of Proceeding) to update cross-references to corresponding 
rules of FINRA.
    In SR-FINRA-2009-078,\4\ FINRA made changes that reflected, among 
other things, incorporation into the consolidated FINRA rulebook of 
NASD Rule 3330 as FINRA Rule 5230 (Payments Involving Publications that 
Influence the Market Price of a Security) \5\ and NASD Rule 2330 as 
FINRA Rule 2150 (Improper Use of Customers' Securities or Funds; 
Prohibition Against Guarantees and Sharing in Accounts).\6\
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    \4\ See Securities Exchange [sic] Release No. 61087 (December 1, 
2009), 74 FR 65190 (December 9, 2009)(SR-FINRA-2009-078)(notice of 
filing and immediate effectiveness).
    \5\ See Securities Exchange Act Release No. 60648 (September 10, 
2009), 74 FR 47837 (September 17, 2009)(SR-FINRA-2009-048)(order 
approving adoption of FINRA Rule 5230).
    \6\ See Securities Exchange Act Release No. 60701 (September 21, 
2009); 74 FR 49425 (September 28, 2009)(SR-FINRA-2009-014)(order 
approving adoption of FINRA Rule 2150).
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    NASD Rule 3330 prohibits a member from giving, or offering to give, 
anything of value to any person for the purpose of influencing or 
rewarding the action of such person in connection with the publication 
or circulation in any newspaper, investment service, or similar 
publication, of any matter that has, or is intended to have, an effect 
upon the market price of any security; and provides an exception for 
any matter that is clearly distinguishable as paid advertising. As part 
of transferring NASD Rule 3330 into the consolidated FINRA rulebook as 
FINRA Rule 5230, FINRA proposed two changes to the rule to modernize 
its terms and clarify its scope by: (a) Updating the list of media to 
which the rule refers to include electronic and other types of media, 
including magazines, Web sites, and television programs; and (b) 
expanding the exceptions in the rule beyond paid advertising to also 
include compensation paid in connection with research reports and 
communications published in reliance on Section 17(b) of the Securities 
Act of 1933 (the ``1933 Act'').
    NASDAQ is, by this filing, re-numbering its Rule 3330 to Rule 5230A 
and upgrading its rule by clarifying that the media the rule refers to 
includes electronic and other types of media and expanding the 
exceptions in the rule beyond paid advertising.
    NASD Rule 2330 prohibits members and associated persons from: (a) 
Making improper use of a customer's securities or funds; (b) 
guaranteeing a customer against loss in connection with any securities 
transaction or in any securities account of the customer; and (c) 
sharing in the profits or losses in the customer's account except under 
certain limited conditions specified in the Rule. As part of 
transferring NASD Rule 2330 into the consolidated FINRA rulebook as 
FINRA Rule 2150, FINRA proposed minor changes to Rule 2150(c) and added 
Supplementary Information to the rule that codified existing staff 
guidance in respect of when a guarantee is not subject to prohibition, 
when a member can reimburse for transaction losses, correction of bona 
fide errors, and preservation of written authorizations.\7\
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    \7\ Supplementary Material to FINRA Rule 2150 states: (i) A 
``guarantee'' extended to all holders of a security by an issuer as 
part of that security generally would not be subject to the 
prohibition against guarantees and that a permissible sharing 
arrangement remains subject to other applicable FINRA rules; (ii) 
the rule does not preclude a member from determining on an after-
the-fact basis, to reimburse a customer for transaction losses, 
provided however that the member shall comply with all reporting 
requirements that may be applicable to such payment; (iii) the rule 
does not preclude a member from correcting a bona fide error; and 
(iv) the required written authorization(s) shall be preserved for a 
period of at least six years after the date the account is closed, 
which is consistent with the retention period under the Act for 
similar records.
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    NASDAQ has proposed, in a recent immediately effective filing,\8\ 
to re-number its Rule 2330 and IM-2330 to Rule 2150 and IM-2150, 
respectively; clarify cross-references in its rule and IM; and reflect 
the changes to FINRA Rule 2150. NASDAQ is, by this filing, clarifying 
the cross-reference in its Rule 9810 to NASDAQ Rule 2150.
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    \8\ See Securities Exchange [sic] Release No. 61128 (December 8, 
2009), 74 FR 66191 (December 14, 2009)(SR-NASDAQ-2009-106)(notice of 
filing and immediate effectiveness).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\9\

[[Page 3950]]

in general, and with Sections 6(b)(5) of the Act,\10\ in particular, in 
that the proposal is designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The proposed changes will conform NASDAQ Rules 3330 and 9810 
to recent changes made to several corresponding FINRA rules, to promote 
application of consistent regulatory standards.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2010-005 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2010-005. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room 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 NASDAQ. 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-NASDAQ-2010-005 and should be submitted on or before 
February 16, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1267 Filed 1-22-10; 8:45 am]
BILLING CODE 8011-01-P