Document ID: SEC-2016-1704-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2016-09-21T04:00Z

[Federal Register Volume 81, Number 183 (Wednesday, September 21, 2016)]
[Notices]
[Pages 64969-64970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22729]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78851; File No. SR-FINRA-2016-036]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt NASD Interpretive Material 2210-2 as 
FINRA Rule 2211 (Communications With the Public About Variable Life 
Insurance and Variable Annuities) in the Consolidated FINRA Rulebook

September 15, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 31, 2016, 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, 
II, and III below, which Items have been prepared by FINRA. FINRA has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by 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 Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt NASD Interpretive Material 2210-2 
(Communications with the Public About Variable Life Insurance and 
Variable Annuities) as FINRA Rule 2211 (Communications with the Public 
About Variable Life Insurance and Variable Annuities) in the 
consolidated FINRA rulebook without any substantive changes. FINRA also 
proposes to update cross-references within other FINRA rules 
accordingly.
    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.

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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\4\ FINRA is proposing to transfer 
NASD Interpretive Material 2210-2 (Communications with the Public About 
Variable Life Insurance and Variable Annuities) (``NASD IM-2210-2'') 
into the Consolidated FINRA Rulebook as FINRA Rule 2211 (Communications 
with the Public About Variable Life Insurance and Variable Annuities) 
without any substantive changes.
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    \4\ The current FINRA rulebook consists of: (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from New York Stock Exchange 
LLC (``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 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 
Information Notice, March 12, 2008 (Rulebook Consolidation Process).
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    As with NASD IM-2210-2, proposed FINRA Rule 2211 provides a set of 
guidelines (``Guidelines'') that must be considered--in addition to the 
standards governing communications with the public under FINRA Rule 
2210 (Communications with the Public)--in preparing communications 
about variable life insurance and variable annuities.
    NASD IM-2210-2 states that the Guidelines are applicable to 
``advertisements'' and ``sales literature'' as defined in NASD Rule 
2210, as well as ``individualized communications such as personalized 
letters and computer generated illustrations, whether printed or made 
available on-screen.'' The proposed rule change makes technical changes 
to NASD IM-2210-2 by replacing references to ``advertisements,'' 
``sales literature,'' and ``individualized communications'' with the 
current corresponding terms defined in FINRA Rule 2210. In adopting 
FINRA Rule 2210, FINRA updated the definitions under NASD Rule 2210 by 
adopting the defined terms ``retail communication,'' for written 
communications that are distributed or made available to more than 25 
retail investors within any 30 calendar-day period, and 
``correspondence'' for written communications that are distributed or 
made available to 25 or fewer retail investors within any 30 calendar-
day period.'' \5\ Accordingly, the proposed rule change would replace 
references in NASD IM-2210-2, where applicable, to the terms (1) 
``advertisements'' and ``sales literature'' with the term ``retail 
communications,'' \6\ (2) ``individualized communications'' with the 
term ``correspondence,'' and (3) ``communications'' with the term 
``retail communications and correspondence,'' as such terms are defined 
in FINRA Rule 2210. The proposed rule change also would amend paragraph 
(b)(5) of NASD IM-2210-2 by replacing the heading ``sales literature 
and personalized illustrations'' with ``retail communications and 
correspondence,'' and by replacing the term ``sales literature'' in 
paragraph (b)(5)(B) with the term ``retail communications and 
correspondence,'' to reflect the current intent and scope of this 
provision to include communications containing personalized 
illustrations that are sent to retail investors irrespective of whether 
a member distributes or makes them available to more than 25 retail 
investors within any 30 calendar-day period (qualifying the 
communication as a ``retail communication'') or 25 or

[[Page 64970]]

fewer retail investors within any 30 calendar-day period (qualifying 
the communication as ``correspondence'').
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    \5\ See Securities Exchange Act Release No. 66681 (March 29, 
2012), 77 FR 20452 (April 4, 2012) (Order Approving File No. SR-
FINRA-2011-035). In addition, to the extent that a member 
distributed or made available a communication that qualified as an 
independently prepared reprint to more than 25 retail investors 
within a 30 calendar-day period, the communication also would fall 
under the definition of ``retail communication.''
    \6\ See Securities Exchange Act Release No. 64984 (July 28, 
2011), 76 FR 46870 (August 3, 2011) (Notice of Filing File No. SR-
FINRA-2011-035) (stating that communications that qualified as 
advertisements and sales literature generally would fall within the 
term ``retail communication'').
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    In addition, proposed FINRA Rule 2211 closely tracks the language 
of IM-2210-2 and makes only non-substantive, technical changes to the 
text of the NASD rule by, for instance, replacing the reference to a 
legacy NASD rule with the applicable FINRA rule.\7\
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    \7\ FINRA previously solicited comment on a proposal to move IM-
2210-2 to the Consolidated FINRA Rulebook with substantive changes. 
See Regulatory Notice 08-39 (July 2008); see also Securities 
Exchange Act Release No. 61107 (December 3, 2009), 74 FR 65180 
(December 9, 2009) (Notice of Filing File No. SR-FINRA-2009-070) 
(withdrawn on April 27, 2012). Given that FINRA would like to 
proceed with the rulebook consolidation process expeditiously to 
provide greater clarity and regulatory efficiency to FINRA members, 
FINRA is proposing to move IM-2210-2 to the Consolidated FINRA 
Rulebook without substantive changes at this time, but FINRA may 
consider proposing substantive changes to the rule as part of future 
rulemaking.
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    These proposed rule changes would correct references in IM-2210-2 
for purposes of adopting it as a FINRA rule without changing the 
substantive meaning.
    The proposed rule change also would replace all references to IM-
2210-2 in FINRA Rules 0150 (Application of Rules to Exempted Securities 
Except Municipal Securities) and 9217 (Violations Appropriate for 
Disposition Under Plan Pursuant to SEA Rule 19d-1(c)(2)) with 
references to FINRA Rule 2211, accordingly.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date will be 30 days after the date 
of filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ 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 that the proposed rule change, which 
does not substantively change the rule, is consistent with the Act 
because it is being undertaken pursuant to the rulebook consolidation 
process, which is designed to provide additional clarity and regulatory 
efficiency to FINRA members by consolidating the applicable NASD, 
Incorporated NYSE, and FINRA rules into one rule set.
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    \8\ 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. As noted above, the proposed 
rule change will not substantively change either the text or 
application of the rule. FINRA would like to proceed with the rulebook 
consolidation process expeditiously, which it believes will provide 
additional clarity and regulatory efficiency to members.

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 with respect 
to the proposed rule change to transfer IM-2210-2 into the Consolidated 
FINRA Rulebook without any substantive changes.\9\
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    \9\ But see supra note 7.
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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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 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 investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-FINRA-2016-036 on the subject line.

Paper Comments

     Send paper comments in triplicate to Robert W. Errett, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2016-036. This 
file number should be included on the subject line if email 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-2016-036 and should be 
submitted on or before October 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-22729 Filed 9-20-16; 8:45 am]
 BILLING CODE 8011-01-P