[Federal Register Volume 73, Number 155 (Monday, August 11, 2008)]
[Notices]
[Pages 46657-46661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18371]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58302; File No. SR-FINRA-2008-039]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt
FINRA Rules 5110 (Corporate Financing Rule), 5190 (Notification
Requirements for Offering Participants) and 6470 (Withdrawal of
Quotations in an OTC Equity Security in Compliance With SEC Regulation
M) in the Consolidated FINRA Rulebook
August 4, 2008.
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 July 16, 2008, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) 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 substantially prepared by
FINRA. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to (1) adopt NASD Rule 2710, without material
change except for paragraphs (b)(10) and (11), as a FINRA rule in the
consolidated FINRA rulebook; and (2) clarify and streamline the notice
and other requirements in FINRA rules relating to Regulation M under
the Act (including paragraphs (b)(10) and (11) of NASD Rule 2710 and
paragraph (a) of Incorporated NYSE Rule 392). The proposed rule change
would renumber NASD Rule 2710 as FINRA Rule 5110 and adopt new FINRA
Rules 5190 and 6470 in the consolidated FINRA rulebook.
The text of the proposed rule change is available at FINRA, on
FINRA's Web site at http://www.finra.org, and in 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 the new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to (1) adopt
NASD Rule 2710 as FINRA Rule 5110, with the exception of paragraphs
(b)(10) and (11); (2) adopt new FINRA Rule 5190, which would house the
Regulation M-related notice requirements applicable to members
participating in securities offerings (including paragraphs (b)(10) and
(11) of NASD Rule 2710 and paragraph (a) of Incorporated NYSE Rule
392); (3) adopt new FINRA Rule 6470, which would house certain
Regulation M-related requirements that are currently in the OTC
Bulletin Board (``OTCBB'') rules and would apply to all OTC Equity
Securities;\4\ and (4) make conforming amendments to the Regulation M-
related rules applicable to the Alternative Display Facility (``ADF'').
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\3\ The current FINRA rulebook consists of two sets of rules:
(1) NASD Rules and (2) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together referred to as the ``Transitional
Rulebook''). The Incorporated NYSE Rules apply only to those members
of FINRA that are also members of the NYSE (``Dual Members''). Dual
Members also must comply with NASD Rules. For more information about
the rulebook consolidation process, see FINRA Information Notice,
March 12, 2008 (Rulebook Consolidation Process).
\4\ NASD Rule 6610(d) defines OTC Equity Security as ``any non-
exchange-listed security and certain exchange-listed securities that
do not otherwise qualify for real-time trade reporting.''
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Corporate Financing Rule
NASD Rule 2710 (Corporate Financing Rule), except paragraphs
(b)(10) and (11) (which are discussed below), regulates the
underwriting terms
[[Page 46658]]
and arrangements of most public offerings, including shelf offerings,
of securities sold through FINRA members. The Rule requires members to
file with FINRA's Corporate Financing Department (the ``Corporate
Financing Department'') information regarding initial public offerings
and certain secondary offerings and to submit pertinent documentation,
including registration statements. The Corporate Financing Department
reviews this information prior to commencement of the offering to
determine whether the underwriting compensation and other terms and
arrangements meet the requirements of applicable FINRA rules. Members
are required to receive the Corporate Financing Department's opinion of
no-objections to the offering terms prior to participating in the
offering.
FINRA is proposing to adopt NASD Rule 2710 as FINRA Rule 5110 in
the Consolidated FINRA Rulebook. With the exception of the deletion of
paragraphs (b)(10) and (11), as discussed below, FINRA is proposing to
make only technical non-substantive changes to the Rule, such as
replacing references to NASD or the Association with FINRA, and certain
conforming changes to references in the Rule to, e.g., the Exchange
Act, SEA Rules, the Securities Act and Securities Act Rules.
Regulation M-Related Requirements
Background and Discussion of Current FINRA Rules
Regulation M is designed to prevent manipulation by persons with an
interest in the outcome of an offering and generally prohibits
activities and conduct that could artificially influence the market for
an offered security.\5\ In this regard, Regulation M generally
prohibits underwriters, broker-dealers, issuers and other persons
participating in a distribution from directly or indirectly bidding for
or purchasing the offered security (or inducing another person to do
so) during the ``restricted period,'' which commences on the later of
either one or five business days prior to the determination of the
offering price or such time that a person becomes a distribution
participant. For purposes of determining whether a one or five-day or
no restricted period applies under Regulation M, the SEC has adopted a
dual standard of world-wide average daily trading volume (``ADTV'') and
public float value. Regulation M also governs certain market
activities, usually undertaken by the managing underwriter or
underwriting group (i.e., stabilizing bids, syndicate covering
transactions and penalty bids) \6\ in connection with an offering and
requires that notice of such activity be provided to the relevant self-
regulatory organization or, in the case of stabilizing bids, the market
where the stabilizing bid is to be posted. Finally, Regulation M
generally prohibits any person from selling short a security that is
the subject of a public offering and purchasing the security in the
offering if such short sale was effected during the restricted period
(which, for purposes of the short sale restrictions, generally is the
five-day period prior to pricing).\7\
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\5\ See Exchange Act Release No. 38067 (December 20, 1996), 62
FR 520 (January 3, 1997).
\6\ A ``stabilizing bid'' is a bid that is intended to maintain
the price of the offered security and is necessary to prevent or
retard a decline in the security's price. A ``penalty bid'' allows a
lead underwriter to reclaim a selling concession paid to a syndicate
member if that member's customers sell their allocated shares in the
immediate aftermarket. A ``syndicate covering transaction'' is
generally defined as placing a bid or effecting a purchase to reduce
a syndicate short position.
\7\ See Exchange Act Release No. 56206 (August 6, 2007), 72 FR
45094 (August 10, 2007).
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As part of FINRA's program to monitor for member compliance with
Regulation M, FINRA's Market Regulation Department (the ``Market
Regulation Department'') reviews members' over-the-counter (``OTC'')
trading and quoting activity for prohibited purchases and/or bids
during the applicable restricted period and short sales during the
five-day period prior to pricing the offering. FINRA rules must ensure
that FINRA receives pertinent distribution-related information in a
timely fashion to facilitate this component of FINRA's Regulation M
compliance program.
FINRA's current Regulation M-related rules comprise notice
requirements set forth in NASD Rule 2710(b)(10) and (11) and
Incorporated NYSE Rule 392 (Notification Requirements for Offerings of
Listed Securities), as well as marketplace-specific requirements in the
OTCBB and ADF rules. NASD Rule 2710(b)(10) requires members that are
acting as manager (or in a similar capacity) of a distribution of
unlisted securities that are considered a subject or reference security
subject to Rule 101 of Regulation M or an ``actively traded'' security
under Rule 101 of Regulation M to submit a request for an Underwriting
Activity Report (``UAR'') from the Market Regulation Department. The
request for a UAR, which is the mechanism by which FINRA currently
receives notice of prospective distributions, must be submitted at the
time a registration statement or similar offering document is filed
with the Corporate Financing Department, the SEC or other regulatory
agency and if not filed with any regulatory agency, at least two
business days prior to commencement of the restricted period. Such
request must include a copy of the registration statement or similar
offering document. If no member is acting as manager, then each member
that is a distribution participant or affiliated purchaser shall submit
the request for a UAR, unless another member has assumed responsibility
for compliance.
NASD Rule 2710(b)(11) requires members that are acting as manager
(or in a similar capacity) of a distribution of securities that are
listed on a national securities exchange and considered a subject
security or reference security subject to Rule 101 of Regulation M or
an ``actively traded'' security under Rule 101 of Regulation M to
provide notice to the Market Regulation Department of the pricing of
the distribution, including the date and time of pricing, the offering
price and the time the distribution terminated. Such notice must be
provided no later than the close of business the day the offering
terminates and may be submitted on the UAR.
Incorporated NYSE Rule 392(a) requires that Dual Members provide
notice of pricing and related information (including the restricted
period, if any, the offering price and the basis for pricing) in
connection with an offering of an NYSE-listed security. Incorporated
NYSE Rule 392(b) requires that Dual Members provide notice of syndicate
covering transactions and penalty and stabilizing bids in connection
with an offering of an NYSE-listed security.
FINRA's OTCBB and ADF-related marketplace rules also include
certain Regulation M-related requirements. Any member that is a
distribution participant or affiliated purchaser in a distribution of
an OTCBB-eligible security must provide notice to the Corporate
Financing Department of its intention to impose a penalty bid or
conduct a syndicate covering transaction pursuant to Rule 104 of
Regulation M.\8\
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\8\ See NASD Rule 6540(d)(1)(D)(iii).
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In addition, members are required to withdraw their quotations in
the OTCBB (in OTCBB-eligible securities) and the ADF (in NMS stocks) to
comply with applicable restricted periods under Regulation M.
Specifically, a member that is a distribution participant or affiliated
purchaser in a distribution of an OTCBB-eligible security must withdraw
its quotations in the offered security \9\ and provide notice to
FINRA's Operations Department prior to
[[Page 46659]]
pricing.\10\ The member must also provide notice to the Market
Regulation Department upon the pricing of the distribution.\11\
Additionally, members are prohibited from entering stabilizing bids
pursuant to Rule 104 of Regulation M in the OTCBB.\12\
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\9\ See NASD Rule 6540(d)(1)(D)(ii).
\10\ See NASD Rule 6540(d)(1)(D)(i).
\11\ See NASD Rule 6540(d)(1)(D)(iv).
\12\ See NASD Rule 6540(d)(1)(D)(ii).
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With respect to quotations in the ADF, FINRA's Operations
Department may grant excused withdrawal status to a Registered
Reporting ADF Market Maker, as defined in NASD Rule 4200A(a)(14), that
is a distribution participant or affiliated purchaser in a distribution
of an NMS stock in order to comply with the applicable restricted
period under Regulation M.\13\ A member acting as manager (or in a
similar capacity), or any member that is a distribution participant or
affiliated purchaser in a distribution that does not have a manager,
must notify FINRA's ADF Operations and the Market Regulation Department
of a prospective distribution and request a withdrawal of each market
maker's quotations.\14\ Members also must submit a written request to
ADF Operations and the Market Regulation Department to rescind the
market maker's excused withdrawal status and provide notice of the date
and time of the pricing of the offering, the offering price, and the
time the offering terminated.\15\
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\13\ See NASD Rule 4619A(f).
\14\ See NASD Rule 4619A(f)(1).
\15\ See NASD Rule 4619A(f)(3).
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Proposed New FINRA Rule 5190
To clarify and streamline FINRA's rules in this area, FINRA is
proposing to consolidate and house all Regulation M-related notice
requirements in a single rule--proposed new FINRA Rule 5190
(Notification Requirements for Offering Participants). The scope of the
current rules and information required would be expanded, as necessary,
to impose consistent notice requirements relating to distributions of
listed and unlisted securities. The proposed rule change would ensure
that FINRA receives from its members pertinent distribution-related
information in a timely fashion.
Proposed Rule 5190(c) sets forth the notice requirements applicable
to distributions of listed and unlisted securities that are ``covered
securities'' (as that term is defined under Regulation M) subject to a
restricted period under Rule 101 or 102 of Regulation M. Specifically,
proposed Rule 5190(c)(1)(A) would require members to determine, in
accordance with Regulation M, whether a distribution is subject to a
one-day or five-day restricted period under Rule 101 of Regulation M,
and provide written notice to FINRA of the members' determination and
the basis for such determination.\16\ Additionally, pursuant to
proposed Rule 5190(c)(1)(A), members would be required to include in
the written notice the contemplated date and time of commencement of
the restricted period, identifying the distribution participants and
affiliated purchasers.
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\16\ While the proposed rule change would place the onus of
determining the applicable restricted period on the member for all
distributions, as a practical matter, FINRA would accept
notification by a member that the maximum five-day restricted period
applies to a prospective distribution, without providing the basis
for that determination. If, on the other hand, a member were to
assert that a one-day or no restricted period applied to a
particular distribution, FINRA would require that the member
demonstrate the basis for that determination.
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Members would be required to provide such notice no later than the
business day prior to the first complete trading session of the
applicable restricted period, unless later notification is necessary
under specific circumstances.\17\ FINRA notes that where the principal
market closes early, e.g., for a holiday, the shortened session would
constitute a complete trading session for purposes of the proposed
Rule. NASD Rule 2710(b)(10) requires that notice be provided at the
time of filing the registration statement. However, for some
distributions, particularly shelf offerings, the registration statement
may be filed well in advance of commencement of the distribution. As a
result, by the time the distribution takes place, the information
previously provided by the member could be out-of-date or the ADTV or
public float levels could have changed, in which case a different
restricted period would apply.
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\17\ In most instances, FINRA would expect to receive
notification within the prescribed time frame, but may permit later
notification in limited circumstances. Such determination would be
made by the Market Regulation Department on a case-by-case basis.
For example, there may be instances where the nature of the
transaction has made it impossible to provide timely notice (e.g., a
private investment in public equity (``PIPE'') offering is commenced
and priced on the same day, and thus the member could not have
provided notice on the business day prior to the first complete
trading session of the applicable restricted period). Current NASD
Rule 4619A(f)(1), which sets forth the notice and withdrawal of
quotations requirements applicable to ADF participants for purposes
of compliance with Regulation M, similarly contemplates later
notification where necessary under the specific circumstances.
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The proposed rule change would eliminate the express requirement
under FINRA rules that members request a UAR and would instead permit
FINRA to prescribe the form in which notice and the required
information must be submitted to FINRA (including, as discussed above,
notice of the member's independent determination regarding whether a
restricted period applies).\18\ The proposed rule change also would
eliminate the requirement in NASD Rule 2710(b)(10) that members submit
a copy of the registration statement. The Market Regulation Department
does not rely on the registration statement in monitoring member
quoting and trading activity for purposes of Regulation M compliance.
Moreover, FINRA believes that this requirement could potentially
suggest that the Regulation M-related requirements are applicable only
to registered offerings when, in fact, certain unregistered offerings,
e.g., private placements and PIPEs, are subject to Regulation M and
FINRA's notice requirements.
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\18\ FINRA will announce the form and method of transmission in
a Notice to be published on its Web site. For example, such form
could include the request for a UAR in connection with distributions
of Nasdaq-listed securities.
Additionally, FINRA notes that the Market Regulation Department
monitors for purposes of compliance with Regulation M on behalf of
the Nasdaq Exchange pursuant to a Regulatory Services Agreement
(RSA). The Market Regulation Department will continue to generate
UARs on behalf of the Nasdaq Exchange under the RSA to assist firms
in determining the applicable restricted period, as well as
applicable Nasdaq passive market making limits, under Regulation M
with respect to Nasdaq-listed securities pursuant to Nasdaq Exchange
rules.
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Proposed Rule 5190(c)(1)(B) would require that upon pricing a
distribution that is subject to a restricted period under Rule 101 of
Regulation M, members provide written notice to FINRA and the following
information: The security name and symbol, the type of security, the
number of shares offered, the offering price, the last sale before the
distribution, the pricing basis (e.g., the prior day closing price, a
negotiated price, last sale, etc.), the SEC effective date and time,
the trade date and the restricted period. Consistent with proposed
paragraph (c)(1)(A), members also would be required to identify the
distribution participants and affiliated purchasers.
The notice under proposed Rule 5190(c)(1)(B) would be required to
be submitted no later than the close of business the next business day
following the pricing of the distribution, unless later notification is
necessary under specific circumstances. NASD Rule 2710(b)(11) requires
that notice of pricing be provided no later than the close of business
the day the offering terminates; however, most members immediately
provide notice of pricing today. In addition to being consistent
[[Page 46660]]
with current practice, the proposed rule change would ensure that FINRA
gets timely pricing information in instances where a distribution does
not terminate for weeks or even months after pricing.
Finally, proposed Rule 5190(c)(1)(C) would require that members
provide written notice of the cancellation or postponement of any
distribution for which prior notice of commencement of the restricted
period has been provided to FINRA. Members would be required to provide
such notice immediately upon the cancellation or postponement of the
distribution.
Proposed Rule 5190(c)(2) would require that any member that is an
issuer or selling security holder in a distribution of any security
that is a covered security subject to a restricted period under Rule
102 of Regulation M comply with the notice requirements of proposed
Rule 5190(c)(1), unless another member has assumed responsibility in
writing for compliance therewith. The proposed provision would ensure
that FINRA receives notice of any distribution in which a member is
participating as an issuer or selling security holder, to the extent
that notice of such distribution has not already been provided under
proposed Rule 5190.
Proposed Rule 5190(d) sets forth the notice requirements applicable
to distributions of listed and unlisted securities that are considered
``actively traded'' securities and thus are not subject to a restricted
period under Rule 101 of Regulation M.\19\ In connection with such
distributions, pursuant to proposed Rule 5190(d)(1), members would be
required to provide written notice to FINRA of the member's
determination that no restricted period applies and the basis for such
determination. Proposed Rule 5190(d)(1) would require that such notice
be provided at least one business day prior to the pricing of the
distribution, unless later notification is necessary under specific
circumstances.
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\19\ The exclusion for ``actively traded securities'' removes
from Rule 101 of Regulation M securities with an ADTV value of at
least $1 million where the issuer's common equity securities have a
public float value of at least $150 million.
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Proposed Rule 5190(d)(2) would require that upon pricing a
distribution of a security that is considered ``actively traded'' under
Rule 101 of Regulation M, members provide written notice to FINRA and
the same pricing-related information that would be required under
proposed paragraph (c)(1)(B) (discussed above). Also consistent with
proposed paragraph (c)(1)(B), proposed Rule 5190(d)(2) would require
members to identify the distribution participants and affiliated
purchasers, and provide the required notice no later than the close of
business the next business day following the pricing of the
distribution, unless later notification is necessary under specific
circumstances.\20\
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\20\ FINRA notes that a member that is an issuer or selling
security holder in a distribution of an actively traded security
that is subject to a restricted period under Rule 102 of Regulation
M would be required to comply with the notice requirements under
proposed Rule 5190(c)(2).
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Under paragraphs (c)(1) and (d) of proposed Rule 5190, a member
acting as manager (or in a similar capacity) of the distribution would
have the obligation to submit the requisite notice to FINRA. However,
if no member is acting as manager (or in a similar capacity), then each
member that is a distribution participant or affiliated purchaser would
be required to provide notice to FINRA, unless another FINRA member has
assumed responsibility in writing for compliance with the notice
requirement. This is consistent with the current approach under NASD
Rule 2710(b)(10).\21\
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\21\ Members would be required to update the notice required
under the proposed Rule, as necessary (e.g., a manager would update
the notice where distribution participants are added after
commencement of the restricted period).
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Finally, proposed Rule 5190(e) would require members to provide
notice to FINRA of penalty bids or syndicate covering transactions in
connection with an offering of an OTC Equity Security. Members would be
required to provide notice to FINRA of their intention to conduct such
activity, prior to imposing the penalty bid or engaging in the first
syndicate covering transaction, as well as pertinent information, such
as identification of the security and its symbol and the date such
activity will occur. In addition, members would be required to
subsequently confirm such activity within one business day of
completion, including identification of the security and its symbol,
the total number of shares and the date(s) of such activity. The
proposed provision is substantially similar to NASD Rule
6540(d)(1)(D)(iii). By including these notice requirements in proposed
Rule 5190, the proposed rule change would clarify that they apply to
distributions of all OTC Equity Securities and are not limited to
distributions of OTCBB-eligible securities.
In light of the foregoing, FINRA is proposing to delete paragraphs
(b)(10) and (11) from NASD Rule 2710 and Incorporated NYSE Rule 392 in
its entirety. The notice requirements of NASD Rule 2710(b)(10) and (11)
and Incorporated NYSE Rule 392(a) largely would be incorporated in
proposed Rule 5190. Because Incorporated NYSE Rule 392(b) is specific
to the NYSE marketplace, FINRA is not proposing that these requirements
become part of the Consolidated FINRA Rulebook.
Proposed Amendments to Marketplace Rules
FINRA also is proposing to clarify the scope and application of the
Regulation M-related requirements that are in the current OTCBB and ADF
marketplace rules.\22\ FINRA is proposing to adopt new FINRA Rule 6470
(Withdrawal of Quotations in an OTC Equity Security in Compliance with
SEC Regulation M), which would (1) require a member that is a
distribution participant, affiliated purchaser, selling security holder
or issuer in a distribution of an OTC Equity Security that is a covered
security subject to Rule 101 or Rule 102 of Regulation M to withdraw
all quotations in the security during the restricted period; and (2)
prohibit the entry of stabilizing bids for the OTC Equity Security
pursuant to Rule 104 of Regulation M. Proposed Rule 6470 is
substantially similar to NASD Rule 6540(d)(1)(D)(ii) and would clarify
that the requirements apply not only to OTCBB-eligible securities, but
to all OTC Equity Securities quoted in any inter-dealer quotation
system (i.e., OTCBB and Pink Sheets). Thus, under the proposed rule
change, the Regulation M-related provisions would be deleted from the
OTCBB rules (specifically, paragraphs (d)(1)(D), (E) and (F) would be
deleted from NASD Rule 6540) and comparable requirements would be
housed in either proposed Rule 5190, as discussed above, or proposed
Rule 6470.
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\22\ On May 23, 2008, FINRA filed proposed rule change SR-FINRA-
2008-021, in which FINRA proposes, among other things, to adopt NASD
Marketplace Rules 4200A, 4619A and 6540 as FINRA Rules 6220, 6275
and 6540, respectively, and the NASD Rule 6600 Series as the FINRA
Rule 6400 Series, without material change, in the Consolidated FINRA
Rulebook. Assuming Commission approval of SR-FINRA-2008-021 prior to
the approval of this proposed rule change, FINRA will amend this
filing, as necessary, to reflect such approval.
The Staff of the Commission (``Staff'') also notes that FINRA
has filed two other proposals related to NASD Rule 2710 previously
(SR-NASD-2004-022 and SR-FINRA-2007-009) that are outstanding. The
Staff has confirmed with FINRA that they will amend those filings to
reflect the movement of NASD Rule 2710 to the Consolidated FINRA
Rulebook.
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Second, FINRA is proposing to make certain conforming changes to
the Regulation M-related rules applicable to the ADF. Specifically,
FINRA is proposing to amend NASD Rule 4619A(f) to conform to the
language and structure of proposed Rule 6470. Thus, a Registered
Reporting ADF Market
[[Page 46661]]
Maker that is a distribution participant, affiliated purchaser, selling
security holder or issuer in a distribution of an NMS stock that is a
covered security subject to Rule 101 or 102 of Regulation M would be
required to request an excused withdrawal of its quotations in the ADF
in the offered security. FINRA believes that it is more appropriate to
impose such obligation on the member that is posting the quotation,
rather than require the manager of the distribution to do so on behalf
of each member. FINRA also is proposing to amend NASD Rule 4200A, which
sets forth the definitions applicable to the ADF rules, to make
technical and conforming changes such as adding necessary references to
Regulation M and deleting definitions that are currently not used in
the ADF rules.
FINRA believes that the proposed rule change will significantly
improve the clarity of the current rules and enhance the information
FINRA receives, which will better enable FINRA to monitor member OTC
quoting and trading for purposes of Regulation M compliance.
FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 60 days
following Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\23\ 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. The rules being adopted as part of the Consolidated
FINRA Rulebook previously have been found to meet the statutory
requirements, and FINRA believes that those rules have since proven
effective in achieving the statutory mandates. In addition, FINRA
believes that the proposed rule change will significantly improve the
clarity of FINRA's current Regulation M-related rules and enhance
FINRA's ability to monitor member OTC quoting and trading for purposes
of Regulation M compliance.
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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\23\ 15 U.S.C. 78o-3(b)(6).
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Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 e-mail to [email protected]. Please include
File Number insert SR-FINRA-2008-039 on the subject line.
Paper Comments
Send paper comments in triplicate to Florence Harmon,
Acting Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-039. 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 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 inspection
and copying 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-2008-039 and should be
submitted on or before September 2, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence Harmon,
Acting Secretary.
[FR Doc. E8-18371 Filed 8-8-08; 8:45 am]
BILLING CODE 8010-01-P