[Federal Register Volume 73, Number 184 (Monday, September 22, 2008)]
[Notices]
[Pages 54652-54653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22012]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58533; File No. SR-FINRA-2008-036]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change Relating to
Incorporated NYSE Rules
September 12, 2008
I. Introduction
On July 3, 2008, 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 certain rules of the New York Stock
Exchange LLC (``NYSE'') that relate to member firm conduct, and that
have been incorporated into the FINRA rulebook (``Incorporated NYSE
Rules''). The proposed rule change was published for comment in the
Federal Register on July 14, 2008.\3\ The Commission received one
comment letter regarding the proposal.\4\ 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. 58103 (July 3,
2008), 73 FR 40403.
\4\ See letter from Amal Aly, Managing Director and Associate
General Counsel, Securities Industry and Financial Markets
Association (``SIFMA''), to Florence E. Harmon, Acting Secretary,
Commission, dated August 4, 2008 (``SIFMA letter'').
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II. Description of the Proposed Rule Change
Currently, the FINRA rulebook consists of rules of the National
Association of Securities Dealers, Inc. (``NASD Rules''), and the
Incorporated NYSE Rules. The Incorporated NYSE Rules apply only to
firms that are members of FINRA and the NYSE (``Dual Members''). FINRA
is currently developing a consolidated rulebook which will consist only
of FINRA rules. In the interim period, FINRA proposes
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several amendments to the Incorporated NYSE Rules.
In some instances, FINRA proposes to harmonize inconsistencies
between the Incorporated NYSE Rules and the NASD Rules. For example,
FINRA proposes to delete the term ``allied member'' from the
Incorporated NYSE Rules, as that concept has no direct FINRA
analogue.\5\ Similarly, FINRA proposes to re-position the Incorporated
NYSE Rules governing the closing-out of securities contracts (``Buy-In
Rules''), combining NYSE Rules 283, 285, 286, 287, 288, 289, and 290 in
NYSE Rule 282. This proposed change would consolidate the NYSE Buy-In
Rules into one rule, and would make NYSE Rule 282 more similar in
format to the corresponding NASD rule.
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\5\ Where the use of the term ``allied member'' in the
Incorporated NYSE Rules denotes an individual's status as a
``control person'' of a member organization, FINRA proposes to
substitute ``allied member'' with the newly-created category of
``principal executive.''
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In other instances, FINRA proposes to rescind provisions of the
Incorporated NYSE Rules that are substantively addressed by NASD Rules.
For example, FINRA proposes to rescind NYSE Rule 404, which regulates
the carrying of accounts for customers by members, as that rule is
duplicative of the FINRA Letter of Approval. Similarly, FINRA proposes
to rescind NYSE Rule 446, which relates to business continuity and
contingency plans, as that rule is nearly identical to NASD Rules 3510
and 3520.
FINRA also proposes to delete certain NYSE Rules that are outdated,
and that have no equivalent NASD rules. For example, FINRA proposes to
rescind NYSE Rule 311(h), which prescribes the number of partners a
member organization must have in order for that member to conduct
business. There is no comparable NASD rule, and, according to FINRA,
this rule no longer applies to members' current business models.
III. Summary of Comments
The Commission received one comment letter in response to the
proposed rule change.\6\ That commenter supported the proposed rule
change, and urged that the Commission approve it as expeditiously as
possible.\7\ However, that commenter also requested that the
Commission, upon approving the proposed rule change, take steps to
ensure that NYSE adopts conforming changes to its rulebook.\8\
According to the commenter, until the NYSE rulebook is conformed to the
Incorporated NYSE Rules, Dual Members will be subject to the
Incorporated NYSE Rules, the legacy NASD rules that currently form part
of the FINRA rulebook, and the NYSE rules.\9\ The commenter stated that
this would be ``entirely inconsistent with one of the key benefits in
the creation of FINRA.'' \10\
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\6\ Supra note 4.
\7\ Id. at 1.
\8\ Id. at 2.
\9\ Id.
\10\ Id.
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IV. Discussion and Commission Findings
The Commission has reviewed the proposed rule change and 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 \11\ and, in particular, Section 15A(b)(6) of
the Act,\12\ which requires that FINRA have rules 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.
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\11\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78o-3(b)(6).
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FINRA's proposal provides greater harmonization between the
Incorporated NYSE Rules and the NASD Rules. The amendments to the
Incorporated NYSE Rules will reduce regulatory disparities, and will
lessen the regulatory burden on Dual Members. Additionally, the concern
articulated by the commenter has been effectively addressed by a recent
NYSE filing.\13\ In SR-NYSE-2008-80, NYSE proposes to amend its
rulebook to conform its rules to the Incorporated NYSE Rules.\14\
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\13\ See SR-NYSE-2008-80 (filed September 5, 2008).
\14\ Id.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-FINRA-2008-036) be, and it hereby is,
approved.
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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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22012 Filed 9-19-08; 8:45 am]
BILLING CODE 8010-01-P