Document ID: SEC-2011-1248-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-08-19T04:00Z

[Federal Register Volume 76, Number 161 (Friday, August 19, 2011)]
[Notices]
[Pages 52040-52042]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21176]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65137; File No. SR-FINRA-2011-040]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Order Granting Accelerated 
Approval of Proposed Rule Change To Amend the Supplementary Material to 
FINRA Rule 1230(b)(6) (Operations Professional)

August 15, 2011.
    On August 12, 2011, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by FINRA. The 
Commission is publishing this notice and order to solicit comment on 
the proposed rule change and approve the proposed rule change on an 
accelerated basis.

I. Description of Proposed Rule Change

    FINRA is proposing to amend the supplementary material to FINRA 
Rule 1230(b)(6) (Operations Professional), FINRA Rule 1230.06 (Scope of 
Operations Professional Requirement), to clarify the application of the 
Operations Professional requirements to employees of a foreign broker-
dealer whose activities, relating to certain transactions in foreign 
securities on behalf of a member's customers, as further detailed 
herein, are limited to facilitating the clearance and settlement of 
such transactions.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

[[Page 52041]]

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

    In its filing with the Commission, FINRA 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. FINRA 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
    On June 16, 2011, the Commission approved SR-FINRA-2011-013, which 
adopted FINRA Rule 1230(b)(6) (Operations Professional), and its 
accompanying supplementary material in FINRA Rule 1230.06 (Scope of 
Operations Professional Requirement), to establish a registration 
category and qualification examination requirement for certain 
operations personnel (Operations Professionals).\1\ FINRA Rule 
1230(b)(6), and its accompanying supplementary material in FINRA Rule 
1230.06, takes effect on October 17, 2011.\2\
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    \1\ See Securities Exchange Act Release No. 64687 (June 16, 
2011), 76 FR 36586 (June 22, 2011) (Order Approving Proposed Rule 
Change; File No. SR-FINRA-2011-013). This rule change also 
established continuing education requirements for Operations 
Professionals and adopted NASD Rule 1120 (Continuing Education 
Requirements) as FINRA Rule 1250 (Continuing Education Requirements) 
in the consolidated FINRA rulebook with certain changes.
    \2\ See Regulatory Notice 11-33 (July 2011).
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    Questions have been raised regarding the application of the 
Operations Professional requirements to employees of a foreign broker-
dealer whose activities, relating to certain transactions in foreign 
securities on behalf of a member's customers, are limited to 
facilitating the clearance and settlement of such transactions. These 
arrangements between the member and the foreign broker-dealer involve 
transactions in foreign securities to be executed by the foreign 
broker-dealer on the foreign market, where the foreign broker-dealer 
accepts the member's customer's instructions to settle the transactions 
on a DVP/RVP basis through the foreign clearing system and settle 
directly with the customer's custodian.
    To provide clarification with respect to the application of FINRA 
Rule 1230(b)(6) to such arrangements, the proposed rule change would 
amend supplementary material .06 to FINRA Rule 1230(b)(6) to provide 
that an employee of a foreign broker-dealer whose activities, relating 
to a transaction in foreign securities on behalf of a customer of a 
member, are limited to facilitating the clearance and settlement of the 
transaction shall not be required to register as an Operations 
Professional pursuant to FINRA Rule 1230(b)(6)(A) where: (1) The member 
sending the order for a transaction in foreign securities on behalf of 
the customer to the foreign broker-dealer is not a direct participant 
of the applicable foreign clearing system; and (2) in executing such 
order in the foreign market, the foreign broker-dealer accepts the 
member's customer's instructions to settle the transaction in foreign 
securities on a DVP/RVP basis through the foreign clearing system and 
settle directly with a custodian for the customer.\3\
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    \3\ We are approving this rule change as it addresses the 
application of FINRA Rule 1230(b)(6) to the fact pattern described 
above. No statement in the proposed rule or this order otherwise 
affects the Commission's interpretation of any provision of the 
Securities Exchange Act of 1934, or any rule thereunder, including 
Rule 15c3-3 (17 CFR 240.15c3-3).
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    The effective date of the proposed rule change will be October 17, 
2011, the effective date of FINRA Rule 1230(b)(6) (Operations 
Professional) and its accompanying supplementary material in FINRA Rule 
1230.06 (Scope of Operations Professional Requirement).
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\4\ 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. FINRA believes the proposed rule change would provide 
clarification in response to questions raised regarding the application 
of the Operations Professional requirements to employees of a foreign 
broker-dealer facilitating the clearance and settlement of certain 
transactions in foreign securities on behalf of a member's customers 
pursuant to the arrangements described above.
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    \4\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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.

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. Commission's Findings

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to FINRA and, in particular, the requirements of 
Section 15A of the Act \5\ and the rules and regulations thereunder.
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    \5\ 15 U.S.C. 78o-3.
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    FINRA has requested that the Commission find good cause pursuant to 
Section 19(b)(2) of the Act \6\ for approving the proposed rule change 
prior to the 30th day after publication in the Federal Register. The 
Commission finds good cause, pursuant to Section 19(b)(2), for 
approving the proposed rule change prior to the 30th day after 
publication of notice of the filing in the Federal Register. The 
proposed rule change is intended to clarify the scope of application of 
FINRA's Rule 1230(b)(6), which rule comes into effect on October 17, 
2011.\7\ By accelerating the approval of the proposed rule, and 
allowing it to become effective on October 17, 2011, the Commission can 
eliminate uncertainty about the rule's applicability to the persons who 
are the subject of this interpretation, improve the ability of FINRA 
members to plan accordingly for the upcoming compliance date of Rule 
1230(b)(6), and avoid undue burdens associated with preparing for the 
registration of persons who will not be required to register under this 
interpretation.\8\
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    \6\ 15 U.S.C. 78s(b)(2).
    \7\ See Regulatory Notice 11-33 (July 2011) (Operations 
Professionals).
    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
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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:

[[Page 52042]]

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-2011-040 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-2011-040. 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 website (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 website 
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-2011-040 
and should be submitted on or before September 9, 2011.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-FINRA-2011-040) is approved 
on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21176 Filed 8-18-11; 8:45 am]
BILLING CODE 8011-01-P