[Federal Register Volume 76, Number 161 (Friday, August 19, 2011)]
[Notices]
[Pages 52040-52042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21176]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65137; File No. SR-FINRA-2011-040]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Order Granting Accelerated
Approval of Proposed Rule Change To Amend the Supplementary Material to
FINRA Rule 1230(b)(6) (Operations Professional)
August 15, 2011.
On August 12, 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. The
Commission is publishing this notice and order to solicit comment on
the proposed rule change and approve the proposed rule change on an
accelerated basis.
I. Description of Proposed Rule Change
FINRA is proposing to amend the supplementary material to FINRA
Rule 1230(b)(6) (Operations Professional), FINRA Rule 1230.06 (Scope of
Operations Professional Requirement), to clarify the application of the
Operations Professional requirements to employees of a foreign broker-
dealer whose activities, relating to certain transactions in foreign
securities on behalf of a member's customers, as further detailed
herein, are limited to facilitating the clearance and settlement of
such transactions.
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.
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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 June 16, 2011, the Commission approved SR-FINRA-2011-013, which
adopted FINRA Rule 1230(b)(6) (Operations Professional), and its
accompanying supplementary material in FINRA Rule 1230.06 (Scope of
Operations Professional Requirement), to establish a registration
category and qualification examination requirement for certain
operations personnel (Operations Professionals).\1\ FINRA Rule
1230(b)(6), and its accompanying supplementary material in FINRA Rule
1230.06, takes effect on October 17, 2011.\2\
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\1\ See Securities Exchange Act Release No. 64687 (June 16,
2011), 76 FR 36586 (June 22, 2011) (Order Approving Proposed Rule
Change; File No. SR-FINRA-2011-013). This rule change also
established continuing education requirements for Operations
Professionals and adopted NASD Rule 1120 (Continuing Education
Requirements) as FINRA Rule 1250 (Continuing Education Requirements)
in the consolidated FINRA rulebook with certain changes.
\2\ See Regulatory Notice 11-33 (July 2011).
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Questions have been raised regarding the application of the
Operations Professional requirements to employees of a foreign broker-
dealer whose activities, relating to certain transactions in foreign
securities on behalf of a member's customers, are limited to
facilitating the clearance and settlement of such transactions. These
arrangements between the member and the foreign broker-dealer involve
transactions in foreign securities to be executed by the foreign
broker-dealer on the foreign market, where the foreign broker-dealer
accepts the member's customer's instructions to settle the transactions
on a DVP/RVP basis through the foreign clearing system and settle
directly with the customer's custodian.
To provide clarification with respect to the application of FINRA
Rule 1230(b)(6) to such arrangements, the proposed rule change would
amend supplementary material .06 to FINRA Rule 1230(b)(6) to provide
that an employee of a foreign broker-dealer whose activities, relating
to a transaction in foreign securities on behalf of a customer of a
member, are limited to facilitating the clearance and settlement of the
transaction shall not be required to register as an Operations
Professional pursuant to FINRA Rule 1230(b)(6)(A) where: (1) The member
sending the order for a transaction in foreign securities on behalf of
the customer to the foreign broker-dealer is not a direct participant
of the applicable foreign clearing system; and (2) in executing such
order in the foreign market, the foreign broker-dealer accepts the
member's customer's instructions to settle the transaction in foreign
securities on a DVP/RVP basis through the foreign clearing system and
settle directly with a custodian for the customer.\3\
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\3\ We are approving this rule change as it addresses the
application of FINRA Rule 1230(b)(6) to the fact pattern described
above. No statement in the proposed rule or this order otherwise
affects the Commission's interpretation of any provision of the
Securities Exchange Act of 1934, or any rule thereunder, including
Rule 15c3-3 (17 CFR 240.15c3-3).
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The effective date of the proposed rule change will be October 17,
2011, the effective date of FINRA Rule 1230(b)(6) (Operations
Professional) and its accompanying supplementary material in FINRA Rule
1230.06 (Scope of Operations Professional Requirement).
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\4\ 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 the proposed rule change would provide
clarification in response to questions raised regarding the application
of the Operations Professional requirements to employees of a foreign
broker-dealer facilitating the clearance and settlement of certain
transactions in foreign securities on behalf of a member's customers
pursuant to the arrangements described above.
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\4\ 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. Commission's Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to FINRA and, in particular, the requirements of
Section 15A of the Act \5\ and the rules and regulations thereunder.
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\5\ 15 U.S.C. 78o-3.
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FINRA has requested that the Commission find good cause pursuant to
Section 19(b)(2) of the Act \6\ for approving the proposed rule change
prior to the 30th day after publication in the Federal Register. The
Commission finds good cause, pursuant to Section 19(b)(2), for
approving the proposed rule change prior to the 30th day after
publication of notice of the filing in the Federal Register. The
proposed rule change is intended to clarify the scope of application of
FINRA's Rule 1230(b)(6), which rule comes into effect on October 17,
2011.\7\ By accelerating the approval of the proposed rule, and
allowing it to become effective on October 17, 2011, the Commission can
eliminate uncertainty about the rule's applicability to the persons who
are the subject of this interpretation, improve the ability of FINRA
members to plan accordingly for the upcoming compliance date of Rule
1230(b)(6), and avoid undue burdens associated with preparing for the
registration of persons who will not be required to register under this
interpretation.\8\
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\6\ 15 U.S.C. 78s(b)(2).
\7\ See Regulatory Notice 11-33 (July 2011) (Operations
Professionals).
\8\ 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).
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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:
[[Page 52042]]
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-2011-040 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-2011-040. 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 website (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 website
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-2011-040
and should be submitted on or before September 9, 2011.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-FINRA-2011-040) is approved
on an accelerated basis.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21176 Filed 8-18-11; 8:45 am]
BILLING CODE 8011-01-P