[Federal Register Volume 75, Number 45 (Tuesday, March 9, 2010)]
[Notices]
[Pages 10855-10856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4912]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61626; File No. SR-NYSE-2010-07]
Self-Regulatory Organizations; New York Stock Exchange, LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 476 To Add a Provision for Violations Relating to
Failing To Observe High Standards of Commercial Honor and Just and
Equitable Principles of Trade
March 2, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on February 5, 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
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Rule 476 to add a provision for
violations relating to failing to observe high standards of commercial
honor and just and equitable principles of trade. The text of the
proposed rule change is available at the Exchange, the Commission's
Public Reference Room, and http://www.nyse.com.
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 self-regulatory organization
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
In this filing, the New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') proposes to amend Rule 476 to add a provision for
violations relating to failing to observe high standards of commercial
honor and just and equitable principles of trade. The Commission
previously approved an amendment to NYSE Rule 476 to delete subsection
(a)(6), which concerned just and equitable principles of trade.\4\ The
rationale for that deletion was because NYSE adopted Rule 2010, which
provided for the same content as the prior version of Rule 476(a)(6)
and which harmonized the Exchange rule with the NYSE Amex LLC (``NYSE
Amex'') and Financial Industry Regulatory Authority, Inc. (``FINRA'')
standards for just and equitable principles of trade.
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\4\ See Securities Exchange [sic] Release No. 59965 (May 21,
2009), 74 FR 25783 (May 29, 2009) (SR-NYSE-2009-25).
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However, in deleting Rule 476(a)(6) and replacing it with Rule
2010, the Exchange inadvertently deleted the ability for the Exchange
to bring charges relating to failing to observe high standards of
commercial honor and just and equitable principles of trade against
approved persons, principal executives, and employees of member
organizations. As approved, NYSE Rule 2010 is applicable only to
members and member organizations. Accordingly, the Exchange proposes to
amend Rule 476, which has an enabling provision to bring charges
against approved persons and employees of member organizations, to add
subsection (a)(6) to cover the same content that was previously
deleted. To ensure that the standards for just and equitable principles
of trade are consistent across Exchange rules, NYSE Amex, and FINRA,
the Exchange proposes to adopt rule text that mirrors the standard set
forth in Rule 2010, which is virtually identical to NYSE Amex Equities
Rule 2010 and FINRA Rule 2010. As proposed, NYSE Rule 476(a)(6) would
read as follows: ``failing to observe high standards of commercial
honor and just and equitable principles of trade.''
In adopting this revised rule text for Rule 476(a)(6), the Exchange
would be able to bring a charge relating to failing to observe high
standards of commercial honor and just and equitable principles of
trade against not only members and member organizations, but also
against principal executives, approved persons, and employees of member
organizations. This proposal is consistent with FINRA Rule 2010 because
under FINRA Rule 0140, persons associated with a FINRA member have the
same duties and obligations as a member under FINRA rules. Accordingly,
FINRA has the authority to charge an associated person with a violation
of Rule 2010. By adding this standard to Rule 476(a)(6), the Exchange
will similarly have the authority to charge an employee of a member
organization with a violation relating to failing to observe high
standards of commercial honor and just and equitable principles of
trade.
To ensure full harmonization, the Exchange also proposes amending
Rule 476(a)(5) and deleting the phrase ``fraud or fraudulent acts'' and
replacing it with the rule text from Rule 2020 to provide that the
Exchange can bring charges against an employee of a member organization
for effecting any transaction in, or inducing the purchase or sale of,
any security by means of any manipulative, deceptive or other
fraudulent device or contrivance.
Finally, the Exchange proposes deleting the reference to ``allied
member,'' which no longer is a category
[[Page 10856]]
at the Exchange, and replacing it with ``principal executive.'' \5\
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\5\ See Securities Exchange Act Release No. 58549 (Sept. 15,
2008), 73 FR 54444 (Sept. 19, 2008) (SR-NYSE-2008-80) (deleting the
term ``allied member'' and replacing it with ``principal
executive'').
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2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Act \6\ which requires the rules of an exchange 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. The
proposed rule change also is designed to support the principles of
Section 11A(a)(1) \7\ of the Act in that it seeks to assure fair
competition among brokers and dealers and among exchange markets. The
Exchange believes this rule proposal ensures that it will be enabled to
charge, as necessary, when a member, member organization, principal
executive, approved person, or employee of a member organization fails
to observe high standards of commercial honor and just and equitable
principles of trade, as contemplated by the Act, or effects any
transaction in, or induces the purchase or sale of, any security by
means of any manipulative, deceptive or other fraudulent device or
contrivance.
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\6\ 15 U.S.C. 78f(b)(5).
\7\ 15 U.S.C. 78k-1(a)(1).
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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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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.
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ 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 notes that
the proposed rule change is restoring the Exchange's ability to
discipline employees of member organizations under paragraphs (a)(5)
and (a)(6) of Rule 476. The proposed rule change does not raise any new
substantive issues and will harmonize NYSE Rules and FINRA Rules in
this regard. For these reasons, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Therefore, the Commission designates
the proposed rule change effective and operative upon filing.\12\
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\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires that a self-regulatory organization submit to the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that NYSE has satisfied the five-
day pre-filing notice requirement.
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-2010-07 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-2010-07. 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,\13\ 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 NYSE
and on its Internet Web site at http://www.nyse.com. 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-2010-07 and should be
submitted on or before March 30, 2010.
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\13\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4912 Filed 3-8-10; 8:45 am]
BILLING CODE 8011-01-P