[Federal Register Volume 75, Number 187 (Tuesday, September 28, 2010)]
[Notices]
[Pages 59771-59772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24227]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62970; File No. SR-FINRA-2010-037]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving the Proposed Rule Change To Amend
FINRA Rule 5190 (Notification Requirements for Offering Participants)
September 22, 2010.
I. Introduction
On July 27, 2010, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) 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
proposal 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
Regulation M. This proposal was published for comment in the Federal
Register on August 13, 2010.\3\ The Commission received no comments
regarding the proposal. This order approves this proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 62664 (Aug. 9, 2010), 75
FR 49542 (Aug. 13, 2010) (SR-FINRA-2010-037).
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II. Description of the Proposed Rule Change
FINRA Rule 5190 imposes certain notice requirements on FINRA
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 surveillance 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.\4\ In connection with such distributions, pursuant to
Rule 5190(d)(1), FINRA 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. FINRA 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, FINRA 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.
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\4\ The exception for ``actively traded'' securities in Rule 101
of Regulation M applies to securities with an ADTV value, as defined
in Rule 100 of Regulation M, of at least $1 million and are issued
by an issuer whose common equity securities have a public float
value of at least $150 million, provided, however, that such
securities are not issued by the distribution participant or an
affiliate of the distribution participant. 17 CFR 242.101(c)(1).
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FINRA proposed 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, FINRA 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 of their determination that no restricted period applies
following the pricing of the distribution. FINRA clarified that the
proposed rule change will not impact FINRA's Regulation M surveillance
program.
In its filing, FINRA stated that 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, FINRA believes that its 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. FINRA has stated that the proposed rule change will clarify
members' notice obligations in the context of such distributions.
FINRA represented that the proposed rule change will be effective
on the date of Commission approval.
III. Discussion and Findings
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 that are applicable to a national securities
association.\5\ In particular, the Commission believes that the
proposed rule change is consistent with the provisions of Section
15A(b)(6) of the Act,\6\ which requires, among other things, that FINRA
rules 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. The proposed
rule change will streamline FINRA member obligations and continue
FINRA's surveillance program regarding Regulation M to protect
investors.
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\5\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78o-3(b)(6).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (File No. SR-FINRA-2010-037) be,
and hereby is, approved.
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\7\ 15 U.S.C. 78s(b)(2).
[[Page 59772]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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\8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-24227 Filed 9-27-10; 8:45 am]
BILLING CODE 8010-01-P