[Federal Register Volume 76, Number 143 (Tuesday, July 26, 2011)]
[Notices]
[Pages 44645-44646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18802]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64934; File No. SR-FINRA-2011-031]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Amend
FINRA Rule 9251 to Explicitly Protect From Discovery Those Documents
That Federal Law Prohibits FINRA From Disclosing
July 20, 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 July 8, 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,
II, and III below, which Items have been prepared by FINRA. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 9251 to explicitly protect
from discovery those documents that federal law prohibits FINRA from
disclosing.
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 9251 delineates the types of documents that FINRA's
Department of Enforcement (``Enforcement'') and Department of Market
Regulation (``Market Regulation'') must produce to respondents during
the discovery phase of a disciplinary proceeding. The rule also
explicitly shields certain types of documents from production. For
example, Enforcement and Market Regulation may withhold documents that
are protected by attorney-client privilege or constitute attorney work
product.\3\ The rule allows additional types of documents to be
withheld where a hearing officer determines that they are irrelevant to
the proceeding or for other good cause.\4\ The rule, moreover, contains
procedural safeguards. For example, a hearing officer may privately
review and determine the appropriate status of a withheld document.\5\
The rule does not, however, explicitly shield from discovery documents
that federal law prohibits FINRA from disclosing. To help ensure both
an efficient discovery process and compliance with federal law, the
proposed rule change clarifies that Enforcement and Market Regulation
shall withhold such documents from respondents during a disciplinary
proceeding. Further, the proposed rule change precludes a hearing
officer from requiring Enforcement or Market Regulation to either
produce or reveal information about the existence of a document if
federal law prohibits such disclosure.
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\3\ FINRA Rule 9251(b)(1)(A).
\4\ FINRA Rule 9251(b)(1)(D).
\5\ FINRA Rule 9251(c).
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The proposed rule change would amend FINRA Rule 9251 to explicitly
protect from discovery those documents that federal law prohibits FINRA
from disclosing. Currently, when Enforcement and Market Regulation
possess a document that federal law prohibits them from disclosing,
they must affirmatively seek a hearing officer determination that they
can withhold it on the grounds of a lack of relevancy or for other good
cause. The proposed rule change would increase efficiency by avoiding
the need for the parties to brief, and hearing officers to resolve,
unnecessary ``good cause'' motions regarding documents that FINRA
cannot legally produce during disciplinary proceedings. The procedural
safeguard discussed above would apply to this category of withheld
documents.
FINRA will announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. The effective date will be 30 days following
[[Page 44646]]
publication of the Regulatory Notice announcing Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with
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. FINRA believes that the proposal also is consistent
with Section 15A(b)(7) of the Act,\7\ which provides that FINRA members
and associated persons must be appropriately disciplined for violations
of any provisions of the Act or FINRA rules. FINRA believes that the
proposed rule change is consistent with these purposes because it
promotes a fair and efficient disciplinary process by avoiding the need
for unnecessary ``good cause'' motions regarding documents that federal
law prohibits FINRA from producing.
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\6\ 15 U.S.C. 78o-3(b)(6).
\7\ 15 U.S.C. 78o-3(b)(7).
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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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date 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 such 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-2011-031 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-2011-031. 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-2011-031
and should be submitted on or before August 16, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18802 Filed 7-25-11; 8:45 am]
BILLING CODE 8011-01-P