[Federal Register Volume 75, Number 133 (Tuesday, July 13, 2010)]
[Notices]
[Pages 40000-40001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16988]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62441; File No. SR-FINRA-2010-027]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change Relating to the
Restated Certificate of Incorporation of Financial Industry Regulatory
Authority, Inc.
July 2, 2010.
On May 21, 2010, 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 the Restated Certificate of Incorporation
of FINRA (``Certificate of Incorporation'') to specify its quorum
requirements. The proposed rule change was published for comment in the
Federal Register on June 1, 2010.\3\ The Commission received no comment
letters on the proposed rule change. 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. 62160 (May 24,
2010), 75 FR 30457.
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The proposed rule change would amend FINRA's Certificate of
Incorporation to specify the quorum required for a meeting of FINRA
members and the quorum required to take action on a matter where a
separate vote by a class or group is required.\4\ FINRA has represented
that it has proposed this rule change in order to preserve FINRA's
current quorum requirements in anticipation of amendments to the
General Corporation Law of the State of Delaware (the ``General
Corporation Law'') that will take effect on August 1, 2010.
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\4\ Pursuant to FINRA's Certificate of Incorporation and By-
Laws, FINRA members vote as three distinct classes, based upon firm
size, for the election of members to the Board of Governors, i.e.,
Small Firm Governors, Mid-Size Firm Governor, and Large Firm
Governors.
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Section 215(c) of the General Corporation Law, as currently in
effect, 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 the transaction of any business and,
that in the absence of such specification, one-third of the members of
such corporation shall constitute a quorum at a meeting of such
members.\5\ FINRA is a nonstock corporation and 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) of the General Corporation Law, attendance in person or by proxy
of one-third of FINRA's members currently constitutes a quorum at a
meeting of such members.\6\
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\5\ Del. Code Ann. tit. 8 Sec. 215(c) and (c)(1) (2010).
\6\ See id.
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On August 1, 2010, the General Corporation Law will be amended to,
among other things, add new Section 215(c)(4), which section will add a
new default quorum requirement for instances where a separate vote by a
class or group of members is required. Specifically, effective August
1, 2010, unless the certificate of incorporation or bylaws of a
nonstock corporation provides otherwise, where a separate vote by a
class or group of members is required, a majority of the members of
such class or group shall constitute a quorum entitled to take action
with respect to the vote on such matter.\7\
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\7\ Del. H.B. 341, 145th Gen. Assem. Sec. 19 (2010).
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In anticipation of the foregoing amendment to the General
Corporation Law, FINRA has proposed to amend its Certificate of
Incorporation to set forth quorum requirements for its meetings of
members, including in instances where a separate vote by a class or
group is required. Specifically, FINRA has proposed that, at all
meetings of its members, the presence in person or by proxy of one-
third of the members entitled to vote at the meeting shall constitute a
quorum; provided, however, where a separate vote by a class or group of
members is required, the presence in person or by proxy of one-third of
the members of such class or group shall constitute a quorum with
respect to the vote on that matter. By incorporating these quorum
requirements into the Certification of Incorporation, FINRA has
represented that the proposed rule change would maintain FINRA's
current one-third quorum requirement where a separate vote of classes
or groups of members is required instead of resorting to the default
requirement in the General Corporation Law.
After careful review, the Commission 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.\8\ In particular, the
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Commission finds that the proposed rule change is consistent with
Section 15A(b)(2) of the Act,\9\ which requires, among other things,
that FINRA be so organized and have the capacity to be able 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.
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\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78o-3(b)(2).
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The Commission notes that the proposed rule change would codify
FINRA's current quorum requirements. By clearly specifying FINRA's
quorum requirements in its Certificate of Incorporation, the Commission
believes that the proposed rule change would provide greater
transparency about FINRA's deliberative and voting processes, which
should facilitate the ability of FINRA's members to conduct business at
meetings and exercise their voting rights. Therefore, the Commission
believes that the proposed rule change is consistent with the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-FINRA-2010-027), be, and
hereby is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16988 Filed 7-12-10; 8:45 am]
BILLING CODE 8010-01-P