Document ID: SEC-2010-1064-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-07-13T04:00Z

[Federal Register: July 13, 2010 (Volume 75, Number 133)]
[Notices]               
[Page 40000-40001]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy10-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62441; File No. SR-FINRA-2010-027]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change Relating to the 
Restated Certificate of Incorporation of Financial Industry Regulatory 
Authority, Inc.

July 2, 2010.
    On May 21, 2010, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend the Restated Certificate of Incorporation 
of FINRA (``Certificate of Incorporation'') to specify its quorum 
requirements. The proposed rule change was published for comment in the 
Federal Register on June 1, 2010.\3\ The Commission received no comment 
letters on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62160 (May 24, 
2010), 75 FR 30457.
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    The proposed rule change would amend FINRA's Certificate of 
Incorporation to specify the quorum required for a meeting of FINRA 
members and the quorum required to take action on a matter where a 
separate vote by a class or group is required.\4\ FINRA has represented 
that it has proposed this rule change in order to preserve FINRA's 
current quorum requirements in anticipation of amendments to the 
General Corporation Law of the State of Delaware (the ``General 
Corporation Law'') that will take effect on August 1, 2010.
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    \4\ Pursuant to FINRA's Certificate of Incorporation and By-
Laws, FINRA members vote as three distinct classes, based upon firm 
size, for the election of members to the Board of Governors, i.e., 
Small Firm Governors, Mid-Size Firm Governor, and Large Firm 
Governors.
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    Section 215(c) of the General Corporation Law, as currently in 
effect, provides that the certificate of incorporation or bylaws of a 
nonstock corporation may specify the number of members having voting 
power who shall be present or represented by proxy at any meeting in 
order to constitute a quorum for the transaction of any business and, 
that in the absence of such specification, one-third of the members of 
such corporation shall constitute a quorum at a meeting of such 
members.\5\ FINRA is a nonstock corporation and neither FINRA's 
Certificate of Incorporation nor its By-Laws specify the quorum 
required at a meeting of its members. Accordingly, pursuant to Section 
215(c) of the General Corporation Law, attendance in person or by proxy 
of one-third of FINRA's members currently constitutes a quorum at a 
meeting of such members.\6\
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    \5\ Del. Code Ann. tit. 8 Sec.  215(c) and (c)(1) (2010).
    \6\ See id.
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    On August 1, 2010, the General Corporation Law will be amended to, 
among other things, add new Section 215(c)(4), which section will add a 
new default quorum requirement for instances where a separate vote by a 
class or group of members is required. Specifically, effective August 
1, 2010, unless the certificate of incorporation or bylaws of a 
nonstock corporation provides otherwise, where a separate vote by a 
class or group of members is required, a majority of the members of 
such class or group shall constitute a quorum entitled to take action 
with respect to the vote on such matter.\7\
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    \7\ Del. H.B. 341, 145th Gen. Assem. Sec.  19 (2010).
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    In anticipation of the foregoing amendment to the General 
Corporation Law, FINRA has proposed to amend its Certificate of 
Incorporation to set forth quorum requirements for its meetings of 
members, including in instances where a separate vote by a class or 
group is required. Specifically, FINRA has proposed that, at all 
meetings of its members, the presence in person or by proxy of one-
third of the members entitled to vote at the meeting shall constitute a 
quorum; provided, however, where a separate vote by a class or group of 
members is required, the presence in person or by proxy of one-third of 
the members of such class or group shall constitute a quorum with 
respect to the vote on that matter. By incorporating these quorum 
requirements into the Certification of Incorporation, FINRA has 
represented that the proposed rule change would maintain FINRA's 
current one-third quorum requirement where a separate vote of classes 
or groups of members is required instead of resorting to the default 
requirement in the General Corporation Law.
    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.\8\ In particular, the

[[Page 40001]]

Commission finds that the proposed rule change is consistent with 
Section 15A(b)(2) of the Act,\9\ which requires, among other things, 
that FINRA be so organized and have the capacity to be able to carry 
out the purposes of the Act, to comply with the Act, and to enforce 
compliance by FINRA members and persons associated with members with 
the Act, the rules and regulations thereunder, and FINRA rules.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(2).
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    The Commission notes that the proposed rule change would codify 
FINRA's current quorum requirements. By clearly specifying FINRA's 
quorum requirements in its Certificate of Incorporation, the Commission 
believes that the proposed rule change would provide greater 
transparency about FINRA's deliberative and voting processes, which 
should facilitate the ability of FINRA's members to conduct business at 
meetings and exercise their voting rights. Therefore, the Commission 
believes that the proposed rule change is consistent with the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-FINRA-2010-027), be, and 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16988 Filed 7-12-10; 8:45 am]
BILLING CODE 8010-01-P