[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20759-20760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8873]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64260; File No. SR-FINRA-2011-016]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Delay the Implementation date of FINRA Rule
2090 (Know Your Customer) and FINRA Rule 2111 (Suitability)
April 8, 2011.
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 April 7, 2011, 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 been substantially prepared by FINRA. FINRA
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under
the Act,\3\ which renders the proposal effective upon receipt of this
filing by the Commission. 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\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing a rule change to delay the implementation date
for FINRA Rule 2090 (Know Your Customer) and FINRA Rule 2111
(Suitability), as approved in SR-FINRA-2010-039, until July 9, 2012.
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
On November 17, 2010, the SEC approved FINRA's proposal to adopt
rules governing know-your-customer and suitability obligations \4\ for
the consolidated FINRA rulebook.\5\ On January 10, 2011, FINRA issued
Regulatory Notice 11-02, which provided guidance regarding the new
rules and announced an implementation date of October 7, 2011.
Following SEC approval of the rules and publication of the Regulatory
Notice, numerous firms requested that the approved rules'
implementation date be delayed to allow firms additional time to
determine the types of systems and procedural changes they need to
make, implement those changes, and educate associated persons and
supervisors regarding compliance with the rules. FINRA is filing this
rule change to move the implementation date for Rules 2090 and 2111
from October 7, 2011, to July 9, 2012, and has filed it as a ``non-
controversial'' rule change that is effective upon filing.
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\4\ See Securities Exchange Act Release No. 63325 (November 17,
2010), 75 FR 71479 (November 23, 2010) (Order Approving File No. SR-
FINRA-2010-039).
\5\ The current FINRA rulebook consists of (1) FINRA rules; (2)
NASD rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE rules'') (together, the NASD Rules, and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
rules generally apply to all FINRA member firms, the Incorporated
NYSE rules apply only to those members of FINRA that are also
members of the NYSE (``Dual Members''). The FINRA rules apply to all
FINRA member, unless such rules have a more limited application by
their terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
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2. Statutory Basis
FINRA 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 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. The proposed rule change furthers these purposes
because it will allow firms to better prepare procedures and systems
and better educate associated persons to comply with the requirements
of these important rules.
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\6\ 15 U.S.C. 78o-3(b)(6).
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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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally
may not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to
[[Page 20760]]
designate a shorter time if such action is consistent with the
protection of investors and the public interest. Because FINRA is
delaying the implementation of Rules 2090 and 2111 only, FINRA requests
that the Commission waive the 30-day operative delay so that this
proposed rule change may become operative upon filing.
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\9\ 17 CFR 240.19b-4(f)(6).
\10\ 17 CFR 240.19b-4(f)(6)(iii). Among other things, 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 date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. The Commission notes that FINRA has satisfied the
pre-filing notice requirement.
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SR-FINRA-2010-039 would amend and convert existing NYSE and NASD
know your customer and suitability rules into the consolidated FINRA
rulebook \11\ and, to the extent implementation of SR-FINRA-2010-039 is
postponed, FINRA members remain subject to those existing NYSE and NASD
know-your-customer and suitability obligations. Further, the delay in
the implementation date will allow firms additional time to better
prepare procedures and systems and better educate associated persons
and supervisors to comply with the requirements of new FINRA Rules 2090
and 2111. For these reasons, the Commission believes it is consistent
with the protection of investors and the public interest to waive the
30-day operative delay, and hereby grants such waiver.\12\
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\11\ The current FINRA rulebook consists of (1) FINRA rules; (2)
NASD rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE rules'') (together, the NASD Rules, and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
rules generally apply to all FINRA member firms, the Incorporated
NYSE rules apply only to those members of FINRA that are also
members of the NYSE (``Dual Members''). The FINRA rules apply to all
FINRA members, unless such rules have a more limited application by
their terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
\12\ For the purposes only of waiving the operative date of this
proposal, 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 summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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-2011-016 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-2011-016. 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-2011-016
and should be submitted on or before May 4, 2011.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8873 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P