[Federal Register Volume 75, Number 156 (Friday, August 13, 2010)]
[Notices]
[Pages 49542-49543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19966]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62664; File No. SR-FINRA-2010-037]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Amend
FINRA Rule 5190 (Notification Requirements for Offering Participants)
August 9, 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 July 27, 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 and
II below, which Items have substantially 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 FINRA Rule 5190 (Notification
Requirements for Offering Participants) relating to the notice
requirements applicable to distributions of ``actively traded''
securities, as defined under SEC Regulation M.
The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
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
FINRA Rule 5190 imposes certain notice requirements on members
participating in distributions of listed and unlisted securities and is
designed to ensure that FINRA receives pertinent distribution-related
information from its members in a timely fashion to facilitate its
Regulation M compliance program.
Rule 5190(d) sets forth the notice requirements applicable to
distributions of securities that are considered ``actively traded'' and
thus are not subject to a restricted period under Rule 101 of
Regulation M.\3\ In connection with such distributions, pursuant to
Rule 5190(d)(1), members are required to provide written notice to
FINRA of the member's determination that no restricted period applies
and the basis for such determination. Members must provide such notice
at least one business day prior to the pricing of the distribution,
unless later notification is necessary under specific circumstances.
Rule 5190(d)(2) requires that upon pricing a distribution of an
``actively traded'' security, members provide written notice to FINRA,
along with pricing-related information such as the offering price, the
last sale before the distribution and the pricing basis. Notice of
pricing must be provided 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.
---------------------------------------------------------------------------
\3\ The exclusion for ``actively traded'' securities removes
from Rule 101 of Regulation M securities with an ``ADTV'' value, as
defined in Rule 100 of Regulation M, of at least $1 million where
the issuer's common equity securities have a public float value of
at least $150 million.
---------------------------------------------------------------------------
FINRA is proposing to amend Rule 5190(d) to require that notice
under subparagraphs (1) and (2) be provided at the same time;
specifically, no later than the close of business the next business day
following the pricing of the distribution. While the timing of notice
under subparagraph (1) would change, the information required would not
change. Thus, pursuant to the proposed rule change, members will be
required to provide a single notice after pricing of the distribution
and will be required to provide all of the same information that they
provide today.
FINRA has determined that it will be sufficient for members to
provide notice
[[Page 49543]]
of their determination that no restricted period applies following the
pricing of the distribution. The proposed rule change will not impact
FINRA's Regulation M surveillance program.\4\
---------------------------------------------------------------------------
\4\ See e-mail from Lisa Horrigan, Asssociate General Counsel,
FINRA, to Elizabeth Sandoe, Branch Chief and Brad Gude, Special
Counsel, Division of Trading and Markets, Commission, dated August
6, 2010 (``FINRA Email'').
---------------------------------------------------------------------------
Additionally, a significant number of distributions of ``actively
traded'' securities evolve quickly after the market close and are
priced overnight before the next trading session. Thus, members
frequently do not have sufficient advance knowledge of their
participation in the distribution to provide notice to FINRA at least
one business day prior to pricing and in such instances are unable to
comply with the express terms of Rule 5190(d)(1). FINRA then must make
a determination whether later notification was necessary under the
circumstances, in accordance with the rule. The proposed rule change
will clarify members' notice obligations in the context of such
distributions.
The proposed rule change will be effective on the date of
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,\5\ 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. FINRA believes that the proposed rule change will
streamline FINRA's Regulation M-related notice requirements and,
combined with FINRA's existing Regulation M compliance program, will
protect investors.\6\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78o-3(b)(6).
\6\ See FINRA E-mail, supra note 4.
---------------------------------------------------------------------------
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 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate 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 or disapprove the 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 SR-FINRA-2010-037 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-2010-037. 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 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-2010-037
and should be submitted on or before September 3, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19966 Filed 8-12-10; 8:45 am]
BILLING CODE 8010-01-P