Document ID: SEC-2010-1319-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-08-31T04:00Z

[Federal Register: August 31, 2010 (Volume 75, Number 168)]
[Notices]               
[Page 53362-53366]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au10-124]                         

[[Page 53362]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62762; File No. SR-FINRA-2009-042]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, Relating to Outside Business Activities of Registered 
Persons

August 23, 2010.
    On June 8, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') a proposed rule change relating to the outside 
business activities of registered persons. FINRA proposed to adopt NASD 
Rule 3030 (Outside Business Activities of an Associated Person) as 
FINRA Rule 3270 (Outside Business Activities of Registered Persons) in 
the consolidated FINRA rulebook with moderate changes. The proposed 
rule change would delete Incorporated NYSE Rule 346 (Limitations--
Employment and Association with Members and Member Organizations) and 
its interpretations.
    The proposed rule change was published for comment in the Federal 
Register on July 8, 2009.\1\ The Commission received six comments on 
the proposed rule change.\2\ On July 30, 2010, FINRA responded to the 
comments.\3\ Also on July 30, 2010, FINRA filed Amendment No. 1 to the 
proposed rule change.
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    \1\ See Securities Exchange Act Release No. 60199 (June 30, 
2009), 74 FR 32668 (July 8, 2009).
    \2\ See letter from Dale E. Brown, CAE, Financial Services 
Institute, to Elizabeth M. Murphy, Secretary, Commission, dated July 
29, 2009 (``FSI letter''); letter from Joan Hinchman, National 
Society of Compliance Professionals, to Elizabeth M. Murphy, 
Secretary, Commission, dated July 29, 2009 (``NSCP letter''); letter 
from Clifford E. Kirsch and Susan Krawczyk, Sutherland Asbill & 
Brennan LLP, on behalf of the Committee of Annuity Insurers, to 
Elizabeth M. Murphy, Secretary, Commission, dated July 29, 2009 
(``Sutherland letter''); letter from Gary A. Sanders, National 
Association of Insurance and Financial Advisors, to Elizabeth M. 
Murphy, Secretary, Commission, dated July 29, 2009 (``NAIFA 
letter''); letter from James Livingston, National Planning Holdings, 
Inc., to Elizabeth M. Murphy Secretary, Commission, dated July 28, 
2009 (``NPH letter''); and letter from Stephanie L. Brown, LPL 
Financial Corporation, to Elizabeth M. Murphy, Secretary, 
Commission, dated August 6, 2009 (``LPL letter'').
    \3\ See letter from Gary L. Goldsholle, FINRA, to Elizabeth M. 
Murphy, Secretary, Commission, dated July 30, 2010 (``FINRA 
Response'').
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II. Description of Proposed Rule Change

    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\4\ FINRA proposed to adopt NASD Rule 
3030 (Outside Business Activities of an Associated Person) as FINRA 
Rule 3270 (Outside Business Activities of Registered Persons) in the 
Consolidated FINRA Rulebook with moderate changes. The proposed rule 
change would delete NYSE Rule 346\5\ (Limitations--Employment and 
Association with Members and Member Organizations) and its 
interpretations. However, as further described below, the proposed rule 
change would incorporate certain provisions of NYSE Rule 346 into new 
FINRA Rule 3270.
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    \4\ The current FINRA rulebook consists of (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules 
are referred to as the ``Transitional Rulebook''). While the NASD 
Rules generally apply to all FINRA members, the Incorporated NYSE 
Rules apply only to those members of FINRA that are also members of 
the NYSE (``Dual Members''). The new FINRA Rules apply to all FINRA 
members, unless such rules have a more limited application by their 
terms. For more information about the rulebook consolidation 
process, see FINRA Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
    \5\ For convenience, the proposed rule change refers to 
Incorporated NYSE Rules as NYSE Rules.
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Proposed FINRA Rule 3270 (Outside Business Activities of Registered 
Persons)

    Proposed FINRA Rule 3270 would prohibit any registered person from 
being an employee, independent contractor, sole proprietor, officer, 
director or partner of another person, or being compensated, or having 
the reasonable expectation of compensation, from another person as a 
result of any business activity outside the scope of the relationship 
with his or her member firm, unless he or she has provided prior 
written notice to the member. The proposed rule change would expand the 
obligations imposed under NASD Rule 3030, which prohibits any 
registered person from being employed by or accepting any compensation 
from any person as a result of any outside business activity, other 
than passive investment, unless he has provided prompt written notice 
to his member firm. In contrast, NYSE Rule 346(b) generally prohibits 
any member (as defined in the NYSE rules) or employee of a member 
organization from being engaged in any other business, or being 
employed or compensated by any other person, or serving as an officer, 
director, partner or employee of another business organization or 
owning any stock or having any direct or indirect financial interest in 
any other organization engaged in any securities, financial or kindred 
business unless such person has made a written request to, and received 
prior written consent from, his or her member organization employer.
    The primary difference between the existing NASD and NYSE rules is 
the timing of the required notice and the requirement in the NYSE rule 
for a member's prior written consent. With respect to timing, FINRA 
believes that registered persons should not be permitted to engage in 
outside business activities without the firm's prior knowledge. 
Potential investor harm could ensue in the interim period between the 
time the registered person commences an outside business activity and 
the time a firm receives ``prompt'' written notice. Also, because the 
term ``prompt'' is susceptible to differing interpretations, adopting a 
prior written notice standard in this context would promote consistency 
within the securities industry, though FINRA understands that, in 
practice, many firms already require prior written notice. Further, a 
prior written notice standard would allow a firm an opportunity to 
determine whether the proposed outside business activity is properly 
being characterized by the registered representative as an outside 
business activity, or whether it is an outside securities activity, 
subject to NASD Rule 3040 (Private Securities Transactions of an 
Associated Person).\6\
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    \6\ FINRA is proposing to replace NASD Rule 3040 with new 
provisions in proposed FINRA Rule 3110(b)(3), as part of the 
consolidated FINRA rules addressing supervision and supervisory 
controls. See Notice of Filing of Proposed Rule Change to Adopt 
FINRA Rules 2090 (Know Your Customer) and 2111 (Suitability) in the 
Consolidated FINRA Rulebook, Securities Exchange Act Release No. 
62718 (August 13, 2010), 75 FR 51310 (August 19, 2010).
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    For these reasons, FINRA proposed that FINRA Rule 3270 require 
prior written notice whenever a registered representative will be an 
employee, independent contractor, sole proprietor, officer, director or 
partner of another person, or will be compensated, or have the 
reasonable expectation of compensation, from any other person as a 
result of any outside business activity.
    With respect to the requirement in NYSE Rule 346(b) for prior 
written consent, FINRA believes that requiring prior written consent 
for outside business activities is unnecessary. To the extent that 
these activities may nevertheless raise investor protection concerns 
and adversely impact the individual's business within the firm, the 
proposed rule change has supplementary material, drawn in part from 
procedures required in NYSE Rule

[[Page 53363]]

346(e), that sets forth the obligations of a member upon receipt of a 
written notice of a proposed outside business activity. Under the 
proposal as amended, the supplementary material states that, upon 
receiving written notice under Rule 3270, a member must consider 
whether the proposed activity will: (1) Interfere with or otherwise 
compromise the registered person's responsibilities to the member and/
or the member's customers or (2) be viewed by customers or the public 
as part of the member's business based upon, among other factors, the 
nature of the proposed activity and the manner in which it will be 
offered. Based upon this review, the member must evaluate the 
advisability of imposing specific conditions or limitations on a 
registered person's outside business activity, including where 
circumstances warrant, prohibiting the activity. A member also must 
evaluate the proposed activity to determine whether the activity 
properly is characterized as an outside business activity or whether it 
should be treated as an outside securities activity subject to the 
requirements of NASD Rule 3040. A member must also keep a record of its 
compliance with these obligations with respect to each written notice 
received and must preserve this record for the period of time and 
accessibility specified in Rule 17a-4(e)(1) under the Securities 
Exchange Act of 1934.
    The proposed rule change also harmonizes and simplifies the 
standards for what constitutes an outside business activity. Currently, 
the NASD and NYSE rules have a number of overlapping provisions. NYSE 
Rule 346(b) generally requires, subject to certain exceptions, written 
notice whenever a member or employee of a member organization is 
employed or compensated by any other person; serves as an officer, 
director, partner or employee of another organization; or owns any 
stock or has, directly or indirectly, any financial interest in any 
other organization engaged in any securities, financial or kindred 
business. NASD Rule 3030 generally requires notice whenever a 
registered person is employed by or accepts any compensation from any 
person as a result of any outside business activity, other than passive 
investment. In reconciling these two standards, the proposed rule 
change requires prior written notice whenever a registered 
representative will be an employee, independent contractor, sole 
proprietor, officer, director or partner of another person, or will be 
compensated, or have the reasonable expectation of compensation, from 
any other person as a result of any outside business activity. The 
inclusion of the phrase ``or have the reasonable expectation of 
compensation'' addresses situations in which an outside activity does 
not immediately yield compensation (e.g., where a registered person 
intends to work for a start-up business). FINRA believes that a 
registered person should not be able to engage in an activity in which 
he or she reasonably expects to be compensated without providing the 
firm with prior written notice, and FINRA believes that a rule 
dependent on the prior receipt of compensation is too narrow and may be 
susceptible to abuse. Proposed Rule 3270 retains the exemptions in NASD 
Rule 3030 for ``passive investments'' and activities subject to the 
requirements of NASD Rule 3040.\7\
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    \7\ FINRA is separately considering NASD Rule 3050 (Transactions 
for or by Associated Persons) as part of the rulebook consolidation 
process and will consider whether transactions subject to NASD Rule 
3050, as proposed to be amended, also should be exempted from 
proposed FINRA Rule 3270.
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    In addition, the proposed rule would streamline the text by 
replacing the phrase ``person associated with a member in any 
registered capacity'' with ``registered person'' and would re-title the 
rule ``Outside Business Activities of Registered Persons'' to better 
reflect its application to registered persons.

Deleted Provisions of Incorporated NYSE Rule 346 and Its Supplementary 
Material and Interpretations

    FINRA proposes to delete other provisions of NYSE Rule 346 that are 
unnecessary and/or duplicative of provisions in the federal securities 
laws or the FINRA Rulebook and delete NYSE Rule Interpretations that 
are unnecessary or inconsistent with Proposed Rule 3270.
    NYSE Rule 346(a) and related NYSE Interpretation 346/01 require 
natural persons not associated with entities that are registered 
broker-dealers to register with the Commission unless specifically 
exempted by the Exchange Act. FINRA has proposed to delete these 
provisions as redundant in light of Section 15(a) of the Exchange 
Act.\8\
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    \8\ 15 U.S.C. 78o-3.
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    NYSE Rule 346(c) provides that where a member organization approves 
an employee's participation in a private securities transaction in 
which regard the employee has or may receive selling compensation, the 
transaction shall be recorded on the books and records of the member 
organization, which shall supervise such participation as if the 
transaction were executed on its behalf. FINRA has proposed to delete 
this provision as redundant of NASD Rule 3040 (Private Securities 
Transactions of an Associated Person).\9\
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    \9\ See supra note 6.
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    NYSE Rule 346(d) provides that no member shall qualify more than 
one member organization for membership. This provision is inconsistent 
with FINRA's approach to membership, which allows the same individual 
to qualify more than one firm for membership, as appropriate. FINRA 
examines separately the merits of each membership application and has 
proposed to delete the prohibition in the NYSE rule.
    NYSE Rule 346(e) requires every employee of a member organization 
who is assigned or delegated any responsibility or authority pursuant 
to NYSE Rule 342 to devote his entire time during business hours to the 
business of such member organization unless an alternative arrangement 
has been approved in writing by the member organization. FINRA believes 
that the existing and proposed rules on supervision and outside 
business activities adequately ensure that the member firm's business 
is not adversely affected by outside activities. Moreover, associated 
persons in the independent broker-dealer channel at times devote 
substantial time to non-member business and this provision would create 
unnecessary administrative burdens if applied to them. Accordingly, 
FINRA has proposed to delete this provision.
    NYSE 346(f) provides that unless otherwise permitted by the 
Exchange, no member, member organization, approved person, employee or 
any person directly or indirectly controlling, controlled by or under 
common control with a member or member organization shall have 
associated with him or it any person who is known, or in the exercise 
of reasonable care should be known, to be subject to any ``statutory 
disqualification'' defined in Section 3(a)(39) of the Exchange Act.\10\ 
In connection with FINRA's consolidation transaction, FINRA amended its 
definition of disqualification in its By-Laws to align with the 
Exchange Act definition, thereby incorporating additional categories of 
statutory disqualification, including certain affiliated 
relationships.\11\ Accordingly, FINRA has proposed to delete NYSE Rule 
346(f) as redundant.
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    \10\ 15 U.S.C. 78c(a)(39).
    \11\ For further discussion, see Securities Exchange Act Release 
No. 59586 (March 17, 2009), 74 FR 12166 (March 23, 2009) (Order 
Approving SR-FINRA-2008-045).
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    Finally, FINRA has proposed to delete NYSE Rule Interpretations 
346/02 and /03, which address personal business

[[Page 53364]]

expenses and factors to consider when approving outside activities, 
FINRA believes the Interpretations are unnecessary or inconsistent with 
proposed FINRA Rule 3270. In particular, the provisions in NYSE Rule 
Interpretation 346/02 requiring a firm to assume responsibility for all 
activities effected on its behalf and under its name are addressed by 
other FINRA rules, including supervision rules. In addition, FINRA has 
chosen not to impose a requirement for firms to approve all 
advertisements of an outside business, although a firm may impose such 
restrictions as part of its obligations under supplementary material 
.01. FINRA requires firms to approve all advertisements for member firm 
business, even if an advertisement relates to the firm's non-securities 
business; however, FINRA does not believe that approval should be 
required for outside business activities permitted under the proposed 
rule change.
    For the reasons noted above, FINRA has proposed to transfer NASD 
Rule 3030 into the Consolidated FINRA Rulebook with the changes 
described herein. In addition, FINRA has proposed to delete NYSE Rule 
346 and its interpretations from the Transitional Rulebook also as 
described herein.

III. Summary of Comments and Amendment No. 1

Prior Member Consent to Outside Business Activities of Registered 
Persons

    Certain commenters suggested that FINRA amend proposed FINRA Rule 
3270 to require a member's consent before a registered person may 
engage in any outside business activity. One commenter noted that in 
practice most registered persons are required to get written 
acknowledgement from their firm prior to engaging in outside business 
activities, and believes that requiring member consent ensures that the 
registered person does not engage in an outside business activity 
before the member completes its due diligence as required under the 
proposed Supplementary Material in proposed FINRA Rule 3270.\12\ 
According to two commenters, allowing a registered person to engage in 
outside business activities upon notice of the proposed activity 
without a requirement that the firm consent to such activity places the 
firm in a position of risk during the interim period since the firm may 
not have had ample time to review the matter.\13\ Certain commenters 
believed the proposed rule should require an affirmative written 
response from the member \14\ or a written response noting any 
objections or concerns to the proposed activity.\15\ One commenter 
supported the proposal not to incorporate a member consent requirement 
but notes that the requirements of proposed Supplementary Material .01 
are the functional equivalent of requiring prior consent from the 
member.\16\
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    \12\ NPH letter.
    \13\ FSI letter, LPL letter.
    \14\ FSI letter, LPL letter.
    \15\ NAIFA letter.
    \16\ NAIFA letter.
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    FINRA responded that it does not plan to amend the proposal to 
incorporate a prior member consent requirement for a registered 
person's outside business activities as such a requirement is not 
necessary for all types of firms. FINRA noted that the proposal does 
not preclude any member from including a prior member consent 
requirement as part of its procedures to manage the outside business 
activities of its registered persons.

``Compensation'' and ``Reasonable Expectation of Compensation''

    One commenter believed that the ``reasonable expectation of 
compensation'' standard in proposed FINRA Rule 3270 is too vague, 
particularly if this initial determination is made by the registered 
person, and expressed concern that FINRA will question the initial 
determinations made by registered persons and/or their supervisors.\17\ 
Another commenter requested that FINRA define the term 
``compensation.'' \18\ FINRA, in its response, stated that it believes 
that the standards in the proposed rule are appropriate and workable; 
that members will demand sufficient information to enable them to make 
the necessary determinations; and that the reasonableness of a 
determination will not be judged in hindsight, but rather based on the 
information requested and obtained at the time of the registered 
person's prior written notice. Also in its response, FINRA stated that 
it does not intend to amend the proposal to adopt a definition for the 
term ``compensation'' in the proposed rule. FINRA notes that neither 
NASD Rule 3030 nor NYSE Rule 346, upon which the proposed rule change 
is based, includes a definition of the term ``compensation,'' and FINRA 
believes that incorporating a definition of this term in the proposed 
rule may frustrate the intent and application of the rule as it may 
encourage registered persons to structure outside business arrangements 
to purposefully evade the requirements of the proposed rule.
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    \17\ Sutherland letter. This commenter requested guidance on 
facts and circumstances that would be relevant in making this 
initial determination. Also, the commenter recommended that FINRA 
clarify that the initial determination should be made by the member, 
based on information provided by the registered person, and that it 
would not be triggered absent a concrete understanding or agreement 
between the registered person and its outside business that 
compensation will or will likely be paid over time.
    \18\ FSI letter.
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    Also, a commenter suggested changing language in the general 
requirement of proposed FINRA Rule 3270.\19\ The proposed rule provides 
that ``[n]o registered person may be an employee, independent 
contractor, sole proprietor, officer, director or partner of another 
person, or be compensated, or have the reasonable expectation of 
compensation from any other person as a result of any business activity 
outside the scope of the relationship with his or her member.'' The 
commenter requested that the phrase ``as a result of any business 
activity'' be replaced with ``in conjunction with an established 
business enterprise.'' The commenter advocated a revised approach 
noting that an individual is an employee, officer or director in a 
business entity or not, so it does not make sense to connect these 
relationships to the phrase ``as a result of any business activity.'' 
In its response, FINRA notes that the reference to ``as a result of any 
business activity'' is from NASD Rule 3030 and has not been changed 
under the proposal. FINRA states that the phrase the compensation 
language directly preceding it and, accordingly, the proposed rule 
prohibits a registered person from either acting in one of the 
enumerated roles or from being compensated by, or having the reasonable 
expectation of compensation from, any other person as a result of any 
business activity outside the scope of the relationship with his or her 
member firm, unless he or she has provided prior notice to the member. 
FINRA does not intend to amend the proposal to incorporate the 
suggested language.
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    \19\ FSI letter.
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Reporting Material Changes to Outside Business Activities

    A few commenters requested that the proposed rule impose an ongoing 
obligation on registered persons to provide prior written notice to a 
member should an outside business activity undergo a material 
change.\20\ Two commenters noted that without such a requirement, a 
member has no way to make knowledgeable decisions regarding these 
activities subjecting the firm to regulatory risk and harm.\21\ One

[[Page 53365]]

commenter requested clarification on a member's liability in the event 
an outside business activity changes over time.\22\ In its response, 
FINRA states that it believes that the requirement for a registered 
person to amend or supplement the nature of the prior written notice is 
implicit in the proposed rule change. FINRA explains that a registered 
person's prior written notice is valid only to the extent that it 
continues to accurately describe the outside business activity and, 
thus, it is incumbent on the registered person to provide prior written 
notice before altering the nature of any outside business activity 
previously disclosed in writing to the firm. FINRA also notes that a 
member's supervisory system should demand that each registered person 
notify the member in the event of a material change to his or her 
outside business activities.
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    \20\ FSI letter, LPL letter, NPH letter.
    \21\ FSI letter, LPL letter.
    \22\ NSCP letter.
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Supplementary Material .01 (Obligations of Member Receiving Notice)

    All of the comment letters received by the Commission addressed 
proposed Supplementary Material .01. The Supplementary Material 
initially had provided that firms must review the registered person's 
participation in the outside activity to determine whether it raises 
investor protection concerns. As initially proposed, the Supplementary 
Material would have required that a member must make a determination as 
to whether the proposed activity raises investor protection concerns, 
and if so, the firm must implement procedures or restrictions on the 
activity to protect investors, or prohibit the activity. Certain 
commenters opposed the proposed Supplementary Material, in whole or in 
part, and request that it be removed from the proposal.\23\
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    \23\ FSI letter, LPL letter, NAIFA letter, Sutherland letter.
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    Generally, the commenters believed that the proposal exceeds 
FINRA's jurisdiction by imposing on members a supervisory obligation 
for the outside business activities of its registered persons.\24\ The 
commenters stated that members do not have the resources to supervise 
the wide variety of outside business activities in which their 
registered persons engage. One commenter further provided that this 
limited knowledge or expertise would impede the determination of 
whether an outside business activity raises investor protection 
concerns.\25\ Certain other commenters believed that the proposed 
Supplementary Material would distract members from core supervisory 
functions by requiring supervision of activities beyond their purview 
or practical control.\26\
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    \24\ FSI letter, LPL letter, NAIFA letter, NPH letter, NSCP 
letter, Sutherland letter.
    \25\ NPH letter.
    \26\ FSI letter, NAIFA letter.
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    Certain commenters suggested that FINRA clarify the due diligence 
required in making a determination whether a proposed outside business 
activity raises ``investor protection concerns'' \27\ and, further, how 
FINRA would define the terms ``investor,'' ``protect investors'' and 
``investor protection concerns'' for purposes of the proposed rule.\28\ 
One commenter noted that the term ``investor protection concerns'' 
could be subject to interpretation and applied differently across 
member firms.\29\ Another commenter stated that almost any activity 
could raise investor protection concerns and suggests that, unless this 
term is defined as it relates to non-securities activities, FINRA 
should remove it from the proposal.\30\ One commenter believed the 
Supplementary Material, as initially proposed, was overly broad because 
many outside business activities have nothing to do with traditional 
investors or investor protection issues.\31\
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    \27\ LPL letter, NPH letter, NSCP letter.
    \28\ FSI letter, NSCP letter, Sutherland letter.
    \29\ LPL letter.
    \30\ NSCP letter.
    \31\ Sutherland letter.
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    In response to the comments received by the Commission, FINRA is 
amending proposed Supplementary Material .01. Under the Supplementary 
Material, as amended, FINRA will expect members to assess the impact of 
the outside activity on the member's business and the member's 
customers, as well as the extent to which customers or the public would 
perceive the outside activity to be part of the member's business. 
Specifically, the revised proposal provides that, upon receipt of a 
written notice under proposed FINRA Rule 3270, a member shall consider 
whether the proposed activity will: (1) Interfere with or otherwise 
compromise the registered person's responsibilities to the member and/
or the member's customers or (2) be viewed by customers or the public 
as part of the member's business based upon, among other factors, the 
nature of the proposed activity and the manner in which it will be 
offered. Additionally, based on the member's review of such factors, 
the member would be required to evaluate the advisability of imposing 
specific conditions or limitations on a registered person's outside 
business activity, including where circumstances warrant, prohibiting 
the activity.

IV. Discussion and Finding

    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 applicable to a national securities 
association.\32\ The Commission believes that the proposed rule change, 
as amended, is consistent with the provisions of Section 15A(b)(6) of 
the Act, which requires, among other things, that FINRA rules must be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.\33\ The proposed rule change 
will clarify and streamline NASD Rule 3030 for adoption as a FINRA rule 
in the new Consolidated FINRA Rulebook, while also implementing 
additional protections such as the need for registered persons to 
provide prior written notice to its member firms of proposed outside 
business activities and for firms to implement a system to assess the 
risk that these outside business activities may cause potential harm to 
investors and to manage these risks by taking appropriate actions as 
prescribed by the proposed rule.
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    \32\ In approving the proposed rule change, the Commission has 
considered the rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \33\ See 15 U.S.C. 78o-3(b)(6).
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V. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\34\ for approving the proposed rule change, as amended by 
Amendment No. 1 thereto, prior to the 30th day after the date of 
publication in the Federal Register. The changes proposed in Amendment 
No. 1 do not raise novel regulatory concerns. Moreover, accelerating 
approval of this proposal should benefit FINRA member firms and 
investors by streamlining and clarifying a member's obligations upon 
receipt of notice of a proposed outside business activity by a 
registered person.
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    \34\ 15 U.S.C. 78s(b)(2).
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VI. 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:

[[Page 53366]]

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2009-042 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2009-042. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of FINRA. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-FINRA-2009-042 
and should be submitted on or before September 21, 2010.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposed rule change (SR-FINRA-2009-042), as amended, 
be, and hereby is, approved on an accelerated basis.
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    \35\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21606 Filed 8-30-10; 8:45 am]
BILLING CODE 8010-01-P