Document ID: SEC-2013-0107-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-01-18T05:00Z

[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Notices]
[Pages 4186-4188]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68633; File No. SR-FINRA-2013-005]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Adopt Interim Form for Funding Portals Under 
the Jumpstart Our Business Startups Act

January 11, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 10, 2013, 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 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 the Interim Form for Funding Portals 
(``IFFP''). The IFFP is an online form for prospective intermediaries 
that intend to apply for membership with FINRA as funding portals 
(``prospective funding portal members'') pursuant to Title III of the 
Jumpstart Our Business Startups Act (the ``JOBS Act''). FINRA is 
inviting prospective funding portal members, on a voluntary basis, to 
submit information to FINRA using the IFFP until FINRA and the SEC 
adopt final rules with respect to registered funding portals.
    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
    The JOBS Act \4\ is aimed at increasing American job creation and 
economic growth and, in furtherance of that aim, contains provisions 
relating to securities offered or sold pursuant to crowdfunding.\5\ 
Intermediaries in transactions involving the offer or sale of 
securities for the account of others pursuant to the crowdfunding 
exemption must, among other things, register with the SEC as a funding 
portal \6\ or broker and must register with an applicable self-
regulatory organization.\7\
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    \4\ Public Law 112-106, 126 Stat. 306 (2012).
    \5\ In general, crowdfunding refers to the use of the Internet 
by small businesses to raise capital through limited investments 
from a large number of investors. The JOBS Act creates an exemption 
(the ``crowdfunding exemption'') from registration under the 
Securities Act of 1933 (``Securities Act'') for securities offered 
by issuers pursuant to Title III of the JOBS Act. See Securities Act 
Section 4(a)(6) (15 U.S.C. 77d(a)(6)).
    \6\ The term ``funding portal'' is defined under Exchange Act 
Section 3(a)(80) (15 U.S.C. 78c(80)).
    \7\ See Securities Act Section 4A (15 U.S.C. 77d-1).
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    The SEC is considering rules to require registration of funding 
portals and to implement the provisions of the JOBS Act.\8\ FINRA is 
developing rules that would apply to SEC-registered funding portals 
that become FINRA members, although the precise nature of FINRA's rules 
will depend upon the rules that the SEC adopts.\9\ Pending the 
implementation of these FINRA and SEC rules, FINRA invites prospective 
funding portal members, on a voluntary basis, to submit information to 
FINRA using the proposed IFFP.\10\ The

[[Page 4187]]

information that prospective funding portal members would submit using 
the proposed IFFP would help FINRA to become more familiar with their 
proposed business models, activities and operations. Further, the 
requested information will inform FINRA's ongoing development of rules 
for registered funding portals.
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    \8\ See, e.g., Securities Act Release No. 9354 (August 29, 
2012), 77 FR 54464 (September 5, 2012) (Proposed Rule: Eliminating 
the Prohibition Against General Solicitation and General Advertising 
in Rule 506 and Rule 144A Offerings); see also Spotlight: Jumpstart 
Our Business Startups Act, available at: http://www.sec.gov/spotlight/jobs-act.shtml.
    \9\ See Regulatory Notice 12-34 (July 2012).
    \10\ The IFFP is attached to this filing as Exhibit 3 and is 
available on the FINRA Web site at: www.finra.org/fundingportals. 
Prospective funding portal members would submit their information 
via a dedicated FINRA email address using the online version of the 
IFFP on the FINRA Web site.
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    FINRA intends for the information request in the IFFP to be simple 
for prospective funding portals. For that reason, FINRA has limited the 
information request to the following items:
     Contact and general information about the funding portal;
     Ownership and funding information about the prospective 
funding portal;
     Information about the prospective funding portal's 
management; and
     Information about the funding portal's business 
relationships, business model and compensation.

FINRA will accord confidential treatment to the information that 
prospective funding portal members submit on the IFFP.
    FINRA may not accept funding portals as FINRA members until the SEC 
has adopted its registration rules for funding portals and has approved 
the necessary FINRA rules, including adoption of a final application 
form for funding portal applicants. FINRA intends to adopt a 
streamlined membership application process for registered funding 
portals that reflects the nature of their business. This membership 
application process may require additional information from prospective 
funding portal members that voluntarily respond to the IFFP, depending 
upon the nature of the rules adopted by FINRA and the SEC. FINRA notes 
that prospective funding portal members are not bound by the responses 
they indicate on the IFFP and will be permitted to change their 
responses on the final application form that FINRA adopts.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\11\ 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 is 
consistent with the Act because collecting information, on a voluntary 
basis, from prospective funding portal members will assist FINRA in 
becoming more familiar with the proposed business models, activities 
and operations of funding portals. Further, the requested information 
will inform FINRA's efforts to timely develop final rules for 
registered funding portals with a view to facilitating the JOBS Act 
goals of job creation and economic growth.
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    \11\ 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 because prospective funding 
portal members would submit the information requested on the proposed 
IFFP on a voluntary basis. As noted above, the proposed IFFP will allow 
FINRA to better understand the proposed business models, activities and 
operations of prospective funding portal members. FINRA anticipates 
that the information gathered through the IFFP will better position 
FINRA to streamline the application process for any prospective funding 
portal members. Further, the proposed IFFP will inform FINRA's efforts 
to timely develop final rules for registered funding portals with a 
view to developing a tailored regulatory approach for such members 
consistent with the goals of the JOBS Act. FINRA will impose no charge 
for submission of the proposed IFFP by prospective funding portal 
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.

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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    FINRA has requested that the Commission waive the 30-day operative 
delay, so that the proposed rule change may become operative upon 
filing. The Commission hereby grants FINRA's request and believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Waiving the 30-day operative delay 
will permit FINRA to implement the proposed rule change immediately and 
thereby facilitate its efforts to collect information, on a voluntary 
basis, from prospective funding portal members. This will assist FINRA 
to become more familiar with the proposed business models, activities 
and operations of funding portals and, further, will inform FINRA's 
efforts to timely develop final rules for registered funding portals 
with a view to facilitating the JOBS Act goals of job creation and 
economic growth. This information will also assist FINRA to propose 
rules for funding portals that are necessary and appropriate for the 
protection of investors. For the purposes only of waiving the 30-day 
operative delay, the Commission has reviewed the record for the 
proposed rule change and believes that the record does not contain any 
information to indicate that the proposed rule would have a significant 
effect on efficiency, competition, or capital formation. In light of 
the record, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation and has concluded that 
the proposed rule is unlikely to have any significant effect.\14\
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    \14\ See 15 U.S.C. 78c(f).
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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:

[[Page 4188]]

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-2013-005 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-2013-005. 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-2013-005 and should be 
submitted on or before February 8, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00966 Filed 1-17-13; 8:45 am]
BILLING CODE 8011-01-P