Document ID: SEC-2013-0367-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-02-20T05:00Z

[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11925-11927]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03818]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68918; File No. SR-FINRA-2013-014]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the General Securities Sales 
Supervisor (Series 9/10) Registration Category

February 13, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on February 1, 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 filing with 
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 amend NASD Rule 1022(g) (Limited Principal--
General Securities Sales Supervisor) and NASD IM-1022-2 (Limited 
Principal--General Securities Sales Supervisor) to remove the 
restriction on General Securities Sales Supervisors from approving 
advertisements as defined in NASD Rule 2210 (Communications with the 
Public).

[[Page 11926]]

    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
    Pursuant to NASD Rule 1022(g), if a principal's supervisory 
activities are limited solely to securities sales activities, the 
principal may register and qualify as a General Securities Sales 
Supervisor (Series 9/10) rather than separately register and qualify in 
multiple principal registration categories as may be applicable, such 
as registering and qualifying as a General Securities Principal (Series 
24) and Registered Options Principal (Series 4) to supervise sales of 
corporate securities and options, respectively. A person registering as 
a General Securities Sales Supervisor must satisfy the General 
Securities Representative (Series 7) prerequisite registration and pass 
the appropriate qualification examinations for General Securities Sales 
Supervisors. In addition, General Securities Sales Supervisors are 
eligible to supervise security futures activities if they complete a 
firm-element continuing education program that addresses security 
futures products.\4\ NASD IM-1022-2 explains the purpose of the General 
Securities Sales Supervisor registration category.
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    \4\ See NASD Rule 1022(g)(3).
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    NASD Rule 1022(g) expressly prohibits a General Securities Sales 
Supervisor from performing any of the following activities: (1) 
Supervision of the origination and structuring of underwritings; (2) 
supervision of market making commitments; (3) final approval of 
advertisements as defined in NASD Rule 2210; (4) supervision of the 
custody of firm or customer funds or securities for purposes of SEA 
Rule 15c3-3 (Customer Protection--Reserves and Custody of Securities); 
\5\ or (5) supervision of overall compliance with financial 
responsibility rules.\6\
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    \5\ 17 CFR 240.15c3-3.
    \6\ In addition, General Securities Sales Supervisors cannot be 
included for purposes of satisfying the two-principal requirement 
under NASD Rule 1021(e)(1). See NASD Rule 1022(g)(2)(B).
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    While General Securities Sales Supervisors are currently prohibited 
from approving ``advertisements'' as defined in NASD Rule 2210, they 
may approve ``sales literature'' \7\ relating to most types of 
securities.\8\
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    \7\ NASD Rule 2210 currently defines the term ``advertisement'' 
as any material, other than an independently prepared reprint and 
institutional sales material, that is published, or used in any 
electronic or other public media, including any Web site, newspaper, 
magazine or other periodical, radio, television, telephone or tape 
recording, videotape display, signs or billboards, motion pictures, 
or telephone directories (other than routine listings). See NASD 
Rule 2210(a)(1). NASD Rule 2210 currently defines the term ``sales 
literature'' as any written or electronic communication, other than 
an advertisement, independently prepared reprint, institutional 
sales material and correspondence, that is generally distributed or 
made generally available to customers or the public, including 
circulars, research reports, performance reports or summaries, form 
letters, telemarketing scripts, seminar texts, reprints (that are 
not independently prepared reprints) or excerpts of any other 
advertisement, sales literature or published article, and press 
releases concerning a member's products or services. See NASD Rule 
2210(a)(2). The Commission notes that NASD Rule 2210 was replaced by 
FINRA Rule 2210 (Communications with the Public), effective February 
4, 2013. See infra note 10.
    \8\ General Securities Sales Supervisors may not approve sales 
literature relating to options and security futures unless they have 
additional registrations or qualifications. A Registered Options 
Principal must approve sales literature relating to options. See 
FINRA Rule 2220(b)(1) (Options Communications) (currently in 
effect). Further, as discussed above, General Securities Sales 
Supervisors must complete a firm-element continuing education 
program that addresses security futures products to approve sales 
literature relating to security futures. See NASD Rule 1022(g)(3). 
In addition, the content of any equity research report that 
constitutes sales literature must be approved by a Research 
Principal or a Supervisory Analyst. See Notices to Members 04-81 
(November 2004) and 07-04 (January 2007).
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    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\9\ FINRA adopted NASD Rule 2210 as 
FINRA Rule 2210 (Communications with the Public).\10\ Among other 
changes from NASD Rule 2210, FINRA Rule 2210 combines the definitions 
of advertisement, sales literature and independently prepared reprint 
into a single category--retail communications,\11\ and it no longer 
defines advertisements as a separate category of communications. FINRA 
made this change because modes of communication have largely rendered 
obsolete the distinction between sales literature and advertisements. 
For example, information in a blast email sent to a thousand 
prospective customers currently would be considered sales literature, 
but the same information posted to a firm's Web site would be 
considered an advertisement. Sales literature and advertisements 
generally are subject to the same content standards under NASD Rule 
2210. Because FINRA has removed the distinction between advertisements 
and sales literature in FINRA Rule 2210, FINRA is proposing to amend 
NASD Rule 1022(g) and NASD IM-1022-2 to remove the restriction on 
approving advertisements.\12\ Thus, the proposed rule change will allow 
General Securities Sales Supervisors to approve most types of retail 
communications.\13\
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    \9\ 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 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).
    \10\ FINRA Rule 2210 was approved by the Commission, but it is 
not yet effective. See Securities Exchange Act Release No. 66681 
(March 29, 2012), 77 FR 20452 (April 4, 2012) (Notice of Filing of 
Amendment No. 3 and Order Granting Accelerated Approval of Proposed 
Rule Change; File No. SR-FINRA-2011-035). FINRA Rule 2210 will 
become effective on February 4, 2013. See Regulatory Notice 12-29 
(June 2012).
    \11\ The term ``retail communication'' is defined as any written 
(including electronic) communication that is distributed or made 
available to more than 25 retail investors within any 30 calendar-
day period. See FINRA Rule 2210(a)(5).
    \12\ FINRA had originally proposed to make these changes as part 
of the proposed consolidated registration and qualification rules. 
See Regulatory Notice 09-70 (December 2009).
    \13\ General Securities Sales Supervisors may not approve retail 
communications relating to options or security futures unless they 
have additional registrations or qualifications. A Registered 
Options Principal must approve retail communications relating to 
options. See FINRA Rule 2220(b)(1) (Options Communications) 
(effective February 4, 2013). Further, as discussed above, General 
Securities Sales Supervisors must complete a firm-element continuing 
education program that addresses security futures products to 
approve retail communications relating to security futures. See NASD 
Rule 1022(g)(3). In addition, the content of any equity research 
report that constitutes a retail communication must be approved by a 
Research Principal or a Supervisory Analyst. See Notices to Members 
04-81 (November 2004) and 07-04 (January 2007). Finally, pursuant to 
MSRB Rule G-21 (Advertising), advertisements relating to municipal 
securities must be approved by a Municipal Securities Principal or a 
General Securities Principal.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The

[[Page 11927]]

implementation date will be February 4, 2013.
 2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ 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 also 
consistent with the provisions of Section 15A(g)(3) of the Act,\15\ 
which authorizes FINRA to prescribe standards of training, experience, 
and competence for persons associated with FINRA members. FINRA 
believes that the proposed rule change will further these purposes by 
maintaining consistency between the communications with the public 
rules and the registration and qualification rules, which will assist 
members and their associated persons in complying with these rules.
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    \14\ 15 U.S.C. 78o-3(b)(6).
    \15\ 15 U.S.C. 78o-3(g)(3).
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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.
    The proposed rule change will reduce the burden on firms that may 
employ a General Securities Sales Supervisor by allowing such firms to 
more efficiently review and approve retail communications that do not 
require a specialized registration. The proposed rule change further 
will streamline the approval process by eliminating any need for a 
General Securities Principal to review some or all of a retail 
communication that a General Securities Sales Supervisor is competent 
to review.

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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
FINRA has satisfied this requirement.
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    FINRA has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Doing so will allow FINRA to implement the proposed rule change on 
February 4, 2013, the same date that FINRA Rule 2210 became effective. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposal operative upon filing.\18\
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    \18\ For purposes only of waiving the 30-day operative delay, 
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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    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-2013-014 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-2013-014. 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 
10:00 a.m. and 3:00 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-2013-014 and should be 
submitted on or before March 13, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03818 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P