[Federal Register Volume 75, Number 114 (Tuesday, June 15, 2010)]
[Notices]
[Pages 33877-33878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14361]
[[Page 33877]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62240; File No. SR-NYSE-2010-41]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Deleting NYSE Rule 405(4) To Correspond With Rule Changes of the
Financial Industry Regulatory Authority, Inc.
June 8, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 17, 2010, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. 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
The Exchange proposes to delete NYSE Rule 405(4) to correspond with
rule changes filed by the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and approved by the Commission.\3\ The text of the proposed
rule change is available at the Exchange, the Commission's Public
Reference Room, and http://www.nyse.com.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 61808 (March 31,
2010), 75 FR 17456 (April 6, 2010) (order approving SR-FINRA-2010-
005).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule changes is to delete NYSE Rule
405(4) (Diligence as to Accounts) to correspond with rule changes filed
by FINRA and approved by the Commission.
Background
On July 30, 2007, FINRA's predecessor, the National Association of
Securities Dealers, Inc. (``NASD''), and NYSE Regulation, Inc.
(``NYSER'') consolidated their member firm regulation operations into a
combined organization, FINRA. Pursuant to Rule 17d-2 under the Act,
NYSE, NYSER and FINRA entered into an agreement (the ``Agreement'') to
reduce regulatory duplication for their members by allocating to FINRA
certain regulatory responsibilities for certain NYSE rules and rule
interpretations (``FINRA Incorporated NYSE Rules''). NYSE Amex LLC
(``NYSE Amex'') became a party to the Agreement effective December 15,
2008.\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos. 56148 (July 26,
2007), 72 FR 42146 (August 1, 2007) (order approving the Agreement);
56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (SR-NASD-2007-
054) (order approving the incorporation of certain NYSE Rules as
``Common Rules''); and 60409 (July 30, 2009), 74 FR 39353 (August 6,
2009) (order approving the amended and restated Agreement, adding
NYSE Amex LLC as a party). Paragraph 2(b) of the Agreement sets
forth procedures regarding proposed changes by FINRA, NYSE or NYSE
Amex to the substance of any of the Common Rules.
---------------------------------------------------------------------------
As part of its effort to reduce regulatory duplication and relieve
firms that are members of FINRA, NYSE and NYSE Amex of conflicting or
unnecessary regulatory burdens, FINRA is now engaged in the process of
reviewing and amending the NASD and FINRA Incorporated NYSE Rules in
order to create a consolidated FINRA rulebook.\5\
---------------------------------------------------------------------------
\5\ FINRA's rulebook currently has three sets of rules: (1) NASD
Rules, (2) FINRA Incorporated NYSE Rules, and (3) consolidated FINRA
Rules. The FINRA Incorporated NYSE Rules apply only to those members
of FINRA that are also members of the NYSE (``Dual Members''), while
the consolidated FINRA Rules apply to all FINRA members. For more
information about the FINRA rulebook consolidation process, see
FINRA Information Notice, March 12, 2008.
---------------------------------------------------------------------------
Proposed Conforming Amendments to NYSE Rules
FINRA recently deleted FINRA Incorporated NYSE Rule 405(4)
(Diligence as to Accounts), which required proper supervision of
registered representatives handling common sales accounts in accordance
with FINRA Incorporated NYSE Rule 342. FINRA Incorporated NYSE Rule
405(4) provided that a member firm could facilitate the isolated
liquidation of securities valued at $1,000 or less registered in the
name of an individual who did not have an account with the firm, and
which were not part of any distribution, through a common sales account
set up for the purpose of handling such sales. NYSE Rule 405(4) further
provided that, subject to certain requirements, such sales could be
made on behalf of the customer without the member having to send a
periodic account statement to the customer pursuant to NYSE Rule
409.\6\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 61808 (March 31,
2010), 75 FR 17456 (April 6, 2010).
---------------------------------------------------------------------------
In deleting FINRA Incorporated NYSE Rule 405(4), FINRA noted that
the rule as written raised potential investor protection concerns and
that certain terms in the rule would benefit from additional
clarification. FINRA also noted that, to the extent that the deletion
of FINRA Incorporated NYSE Rule 405(4) eliminated the exception for
member firms from sending periodic account statements to a customer,
proposed FINRA Rule 2231, which relates to customer account statements,
would authorize FINRA to exempt members from the provisions of FINRA
Rule 2231 including the requirement to deliver periodic account
statements.\7\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 61808 (March 31,
2010), 75 FR 17456 (April 6, 2010). See also Securities Exchange Act
Release No. 59921 (May 14, 2009), 74 FR 23912 (May 21, 2009) (SR-
FINRA-2009-028) (proposal to adopt FINRA Rule 2231).
---------------------------------------------------------------------------
In order to harmonize the NYSE Rules with the approved,
consolidated FINRA Rules, the Exchange proposes to delete NYSE Rule
405(4).\8\ Notwithstanding the deletion of NYSE Rule 405(4), NYSE Rules
405(1)-(2) will continue to require member firms to properly supervise
all registered representatives handling common sales accounts and any
transactions executed therein. Finally, the Exchange believes that
removing the exemption for member firms from the requirement to send
customer account statements for the types of transactions described in
NYSE Rule 405(4) will ensure a harmonized standard among NYSE, NYSE
Amex, and FINRA, particularly since all NYSE member organizations with
customers are also FINRA members and subject to FINRA rules. To the
extent that FINRA Rule 2231 is approved, the Exchange will consider
proposing to adopt a similar
[[Page 33878]]
rule as part of the rule harmonization process.\9\
---------------------------------------------------------------------------
\8\ NYSE Amex has submitted a companion rule filing amending its
rules in accordance with FINRA's rule changes. See SR-NYSEAmex-2010-
48.
\9\ See also Securities Exchange Act Release No. 59921 (May 14,
2009), 74 FR 23912 (May 21, 2009).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Act,\10\ in general, and further the
objectives of Section 6(b)(5) of the Act,\11\ in particular, in that
they are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule changes support the
objectives of the Act by providing greater harmonization between NYSE
Rules and FINRA Rules (including Common Rules) of similar purpose,
resulting in less burdensome and more efficient regulatory compliance
for Dual Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission hereby
grants the Exchange's request.\16\ The Commission believes that waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest because the proposed rule change will
maintain the harmonization of NYSE Rules and previously approved FINRA
Rules.
---------------------------------------------------------------------------
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For the purposes only of waiving the 30-day operative
delay, the Commission has considered the proposed rule change's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78(c)(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.
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 SR-NYSE-2010-41 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-NYSE-2010-41. 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). Comments are also 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. 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-NYSE-2010-41 and
should be submitted on or before July 6, 2010.
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14361 Filed 6-14-10; 8:45 am]
BILLING CODE 8010-01-P