[Federal Register Volume 75, Number 11 (Tuesday, January 19, 2010)]
[Notices]
[Pages 2917-2920]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-797]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61314; File No. SR-NASDAQ-2009-112]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Amend NASDAQ Rules 1140 and 3080 to Reflect Changes to a Corresponding
FINRA Rule
January 7, 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 December 30, 2009, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\
which renders the proposal effective upon filing with 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 the
Substance of the Proposed Rule Change
The Exchange is filing this proposed rule change to amend NASDAQ
Rules 1140 and 3080 to reflect recent changes to a corresponding rule
of the Financial Industry Regulatory Authority (``FINRA''). The
Exchange will implement the proposed rule change thirty days after the
date of the filing. The text of the proposed rule change is available
at http://nasdaqomx.cchwallstreet.com, at the Exchange's principal
office, on the Commission's Web site at http://www.sec.gov, 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, the Exchange 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
[[Page 2918]]
places specified in Item IV below. The Exchange 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
Many of NASDAQ's rules are based on rules of FINRA (formerly the
National Association of Securities Dealers (``NASD'')). Beginning in
2008, FINRA embarked on an extended process of moving rules formerly
designated as ``NASD Rules'' into a consolidated FINRA rulebook. In
most cases, FINRA has renumbered these rules, and in some cases has
substantively amended them. Accordingly, NASDAQ also has initiated a
process of modifying its rulebook to ensure that NASDAQ rules
corresponding to FINRA/NASD rules continue to mirror them as closely as
practicable. In some cases, it is not possible for the rule numbers of
NASDAQ rules to mirror corresponding FINRA rules, because existing or
planned NASDAQ rules make use of those numbers. However, wherever
possible, NASDAQ plans to update its rules to reflect changes to
corresponding FINRA rules.
This filing addresses NASDAQ Rules 1140 and 3080 which follow or
incorporate by reference former NASD Rules 1140 and 3080. In SR-FINRA-
2009-019,\4\ FINRA modified, re-numbered, and transitioned these NASD
rules into the FINRA Consolidated Rule Manual. This proposal makes
conforming changes to the NASDAQ rules but does not re-number them.
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\4\ See Securities Exchange Act Release No. 60348 (July 20,
2009), 74 FR 37077 (July 27, 2009) (SR-FINRA-2009-019).
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Rule 1140 requires each Nasdaq member to file its Forms U4, U5, BR,
BDW, and BD amendments (referred to collectively as ``Uniform Forms'')
via electronic process or such other process as Nasdaq may prescribe to
the Web CRD, the centralized database for registration and
qualification information for firms and their associated persons. Rule
1140 also requires that the member retain and provide upon regulatory
request every original, signed initial and transfer Form U4 that form
the basis of the member's electronically filed Forms U4 and every
record of the member's electronically filed initial and amended Forms
U5.
In SR-FINRA-2009-019, FINRA proposed and the Commission approved
the following changes to Rule 1140:
Codified that every initial and transfer electronic Form
U4 must be based on an original, manually signed Form U4 provided to
the member by the person on whose behalf the Form U4 is being filed.
Modified the signature requirement with respect to
amendments to disclosure information in the Form U4. The new FINRA rule
would permit a firm to file amendments to the Form U4 disclosure
information without obtaining the registered person's manual signature
if the firm uses reasonable efforts to (1) provide the registered
person with a copy of the amended disclosure information prior to
filing and (2) obtain the registered person's written acknowledgment
(which may be electronic) prior to filing that the information has been
received and reviewed. The proposed rule change also requires a member,
as part of its recordkeeping requirements, to retain the written
acknowledgment in accordance with SEA Rule 17a-4(e)(1) and make it
available promptly upon regulatory request.
Clarified that a member must submit disclosure information
to which it has knowledge in those cases where the member is not able
to obtain an associated person's manual signature or written
acknowledgement of the amendment. Proposed supplementary material sets
forth examples of reasons why a member may not be able to obtain the
associated person's manual signature or written acknowledgement.
Incorporated Web CRD's current practice of permitting Form
U4 administrative information to be amended without obtaining the
associated person's signature (manual or otherwise). Proposed
supplementary material explains that such administrative information
includes items such as the addition of state or self regulatory
organization registrations, exam scheduling, and updates to
residential, business, and personal history.
Proposed supplementary material expressly permitted the
registered principal(s) or corporate officer(s) who is responsible for
supervising a firm's electronic filings to delegate to another
associated person (who need not be registered) the electronic filing of
the member's forms via Web CRD. The delegatee may also acknowledge,
electronically, that he is making the filing on behalf of the member
and the member's associated person. The proposed supplementary material
makes clear, however, that the principal(s) or corporate officer(s) may
not delegate any of his or her supervision, review and approval
responsibilities and must take reasonable and appropriate action to
ensure that all delegated electronic filing functions are properly
executed and supervised.
Continued to permit firms to enter into third-party
agreements for the electronic filing of the required forms. The
supplementary material makes clear that the firm remains responsible
for complying with the requirements of the rule.
Made other technical changes, such as making clarifying
rule cross-references, replacing the reference to fingerprint ``cards''
with fingerprint ``information,'' and noting the applicable retention
periods for the forms under SEA Rule 17a-4.
NASDAQ proposes to adopt these approved changes in Nasdaq Rule 1140.
NASDAQ does not propose to re-number Rule 1140 to 1010 as did FINRA.
Nasdaq Rule 3080 (Disclosure to Associated Persons When Signing
Form U-4) requires members to provide each associated person, whenever
the associated person is asked to sign a new or amended Form U4, with
certain written disclosures regarding the nature and process of
arbitration proceedings. The associated person agrees to be bound by
this process upon signing a Form U4. The disclosures required by NASD
Rule 3080 may be given by the same member firm to the same associated
person on more than one occasion during that person's employment, if
the associated person has reason to re-sign the Form U4. NASD Rule 3080
does not address any private arbitration agreements that the associated
person might enter into with the member firm. The disclosure language
in NASD Rule 3080 explains that the Form U4 contains a pre-dispute
arbitration clause, indicates in which Item of the Form U4 the clause
is located and advises the associated person to read the pre-dispute
arbitration clause. Rule 3080 was modeled on the disclosure given to
customers when signing pre-dispute arbitration agreements with member
firms, as contained in NASD Rule 3110(f).
NASDAQ Rule 3080 currently incorporates by reference NASD Rule
3080. In SR-FINRA-2009-019, FINRA transferred NASD Rule 3080 to the
FINRA Consolidated Rule Manual and re-numbered it as FINRA Rule 2263.
FINRA's proposed rule change made the following changes:
Amended the current title ``Disclosure to Associated
Person When
[[Page 2919]]
Signing Form U4'' to clarify that the rule relates to arbitration
disclosures. Accordingly, the new proposed title is ``Arbitration
Disclosure to Associated Persons Signing or Acknowledging Form U4.''
Clarified that a member must provide the required
arbitration disclosures whenever a member asks an associated person,
pursuant to proposed FINRA Rule 1010 (as described above), to manually
sign an initial or amended Form U4, or to otherwise provide written
(which may be electronic) acknowledgement of an amendment to the Form.
Updated the rule language to reflect recent amendments to
FINRA's Code of Arbitration Procedure requiring arbitrators to provide
an explained decision to the parties in eligible cases if there is a
joint request by all parties at least 20 days before the first
scheduled hearing date.
NASDAQ is proposing to continue to incorporate FINRA Rule 2263 in
NASDAQ Rule 3080. This will result in NASDAQ adopting the changes
described above.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\5\ in general, and with
Sections 6(b)(5) of the Act,\6\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, 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
changes will conform NASDAQ Rules 1140 and 3080 to recent changes made
to corresponding FINRA rules, to promote application of consistent
regulatory standards.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
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, if consistent with
the protection of investors and the public interest, 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). 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 date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that Nasdaq satisfied the five-day
pre-filing notice requirement.
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Normally, a proposed rule change filed under 19b-4(f)(6) may not
become operative prior to 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. Nasdaq has requested that the Commission waive the
30-day operative delay. In its filing, Nasdaq noted that the proposal
would amend NASDAQ Rules 1140 and 3080 to reflect recent changes to a
corresponding rule of FINRA.
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\9\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the 30-day operative period
is consistent with the protection of investors and the public interest.
The proposed rule change would allow greater consistency between NASDAQ
and FINRA rules, which should benefit NASDAQ and FINRA members,
regulators, and the investing public. In addition, the Commission notes
that the changes proposed in this filing are in all material respects
the same as changes proposed in FINRA's filing, which was published for
comment, and for which no comment letters were received.\10\
Accordingly, the Commission designates the proposal to be effective
upon filing with the Commission.\11\
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\10\ See Securities Exchange Act Release No. 61151 (December 10,
2009)(SR-NASDAQ-2009-109).
\11\ For the 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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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 rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2009-112 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-NASDAQ-2009-112. 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 inspection
and copying in the Commission's Public Reference Room 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 offices of the Exchange. 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-NASDAQ-2009-112, and should be submitted on or before
February 9, 2010.
[[Page 2920]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-797 Filed 1-15-10; 8:45 am]
BILLING CODE 8011-01-P