[Federal Register Volume 75, Number 104 (Tuesday, June 1, 2010)]
[Notices]
[Pages 30457-30459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12987]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62160; File No. SR-FINRA-2010-027]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
the Restated Certificate of Incorporation of Financial Industry
Regulatory Authority, Inc.
May 24, 2010.
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 May 21, 2010, 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the Restated Certificate of
Incorporation of FINRA (the ``Certificate of Incorporation'') to
specify the quorum requirements for a meeting of FINRA members, in
anticipation of amendments to the General Corporation Law of the State
of Delaware (the ``General Corporation Law''). The proposed rule change
would serve to maintain the status quo with respect to the quorum
requirements for meetings of members.
The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, on the Commission's Web site at http://www.sec.gov, at the principal office of FINRA and at the Commission's
Public Reference Room.
[[Page 30458]]
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 proposed rule change would amend FINRA's Certificate of
Incorporation to specify the quorum required at a meeting of FINRA
members and where a separate vote by classes or groups is required.
FINRA is proposing this rule change in anticipation of amendments to
the General Corporation Law, described in detail below, to preserve
FINRA's current quorum requirements.
FINRA is a nonstock corporation under the General Corporation Law.
Generally, Section 215(c) of the General Corporation Law provides that
the certificate of incorporation or bylaws of a nonstock corporation
may specify the number of members having voting power who shall be
present or represented by proxy at any meeting in order to constitute a
quorum for, and the votes that shall be necessary for, the transaction
of any business.\3\ However, in the absence of such specification in
the certificate of incorporation or bylaws of a nonstock corporation,
one-third of the members of such corporation constitute a quorum at a
meeting of such members.\4\
---------------------------------------------------------------------------
\3\ Del. Code Ann. tit. 8 Sec. 215(c) (2010).
\4\ Del. Code Ann. tit. 8 Sec. 215(c)(1) (2010).
---------------------------------------------------------------------------
Neither FINRA's Certificate of Incorporation nor its By-Laws
specify the quorum required at a meeting of its members. Accordingly,
pursuant to Section 215(c)(1) of the General Corporation Law,
attendance in person or by proxy of one-third of FINRA members
currently constitutes a quorum at a meeting of such members.\5\
---------------------------------------------------------------------------
\5\ Del. Code Ann. tit. 8 Sec. 215(c)(1) (2010).
---------------------------------------------------------------------------
On August 1, 2010, the General Corporation Law will be amended to,
among other things, clarify the application of the statute to nonstock
corporations. As part of the amendments, a new Section 215(c)(4) will
define the quorum necessary to take action where a separate vote by a
class or group of members is required and the certificate of
incorporation or bylaws of the nonstock corporation do not specify the
requisite quorum. Specifically, from and after August 1, 2010, if the
certificate of incorporation or bylaws of a nonstock corporation do not
specify the quorum necessary to transact business at a meeting of its
members, (1) one-third of the members shall constitute a quorum at a
meeting of members; and (2) ``[w]here a separate vote by a class or
group or classes or groups is required, a majority of the members of
such class or group or classes or groups, present in person or
represented by proxy, shall constitute a quorum entitled to take action
with respect to that vote on that matter * * *'' \6\
---------------------------------------------------------------------------
\6\ Del. H.B. 341, 145th Gen. Assem. Sec. 19 (2010) (emphasis
added).
---------------------------------------------------------------------------
FINRA is proposing an amendment to its Certificate of Incorporation
to maintain the status quo with respect to its current quorum
requirements. Accordingly, the proposed rule change would amend Article
Ninth of FINRA's Certificate of Incorporation to specify that, at all
meetings of members of FINRA, the presence in person or by proxy of
one-third of the members entitled to vote at the meeting shall be
necessary and sufficient to constitute a quorum; provided, however,
where a separate vote by a class or group or classes or groups is
required, the presence in person or by proxy of one-third of the
members of such class or group or classes or groups shall be necessary
and sufficient to constitute a quorum with respect to that vote on that
matter.
By specifying the quorum requirements in the Certification of
Incorporation, the proposed rule change would maintain the one-third
quorum requirement where separate votes of classes or groups of members
is required, thus avoiding the new default quorum requirement (i.e., a
majority) for such votes as set forth in the new Section 215(c)(4) of
the General Corporation Law. Pursuant to the FINRA Certificate of
Incorporation and the FINRA By-Laws, members vote as three distinct
classes, based upon firm size, to elect the FINRA Board of Governors,
i.e., Small Firm Governors, Mid-Size Firm Governors and Large Firm
Governors. In this regard, the proposed rule change not only would
preserve the status quo, but it also would facilitate the ability of
members to conduct business at meetings and exercise their voting
rights.
The effective date of the proposed rule change will be the date of
approval by the Commission; provided, however, assuming Commission
approval of the proposed rule change, the amendment to the Certificate
of Incorporation will become effective upon filing with the Secretary
of State of the State of Delaware.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A of the Act,\7\ including Section 15A(b)(2) of
the Act,\8\ in that it will permit FINRA to carry out the purposes of
the Act, to comply with the Act, and to enforce compliance by FINRA
members and persons associated with members with the Act, the rules and
regulations thereunder, and FINRA rules. The proposed rule change will
preserve FINRA's current quorum requirements, facilitating the ability
of members to conduct business at meetings.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78o-3.
\8\ 15 U.S.C. 78o-3(b)(2).
---------------------------------------------------------------------------
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
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
[[Page 30459]]
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 SR-FINRA-2010-027 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-2010-027. 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 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 the 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-2010-027
and should be submitted on or before June 22, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12987 Filed 5-28-10; 8:45 am]
BILLING CODE 8010-01-P