[Federal Register Volume 77, Number 54 (Tuesday, March 20, 2012)]
[Notices]
[Pages 16290-16295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6619]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66595; File No. SR-ISE-2012-11]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change Relating to Telemarketing Rules
March 14, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 28, 2012, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which items have been
substantially prepared by the Exchange. 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
The Exchange proposes to amend ISE Rule 626 (Telephone
Solicitation) to revise and add provisions that are substantially
similar to Federal Trade Commission (``FTC'') rules that prohibit
deceptive and other abusive telemarketing acts or practices.\3\ The
text of the proposed rule change is available on the Exchange's Web
site at http://www.ise.com, at the principal
[[Page 16291]]
office of the Exchange, and at the Commission's Public Reference Room.
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\3\ The proposed rule change is substantially similar in all
material respects to Financial Industry Regulatory Authority, Inc.
(``FINRA'') Rule 3230 (Telemarketing), which the Commission recently
approved. See Securities Exchange Act Release No. 66279 (Jan. 30,
2012), 77 FR 5611 (Feb. 3, 2012) (SR-FINRA-2011-59) (approval order
of proposed rule change to adopt telemarketing rule). The proposed
rule change amends the name of Rule 626 from Telephone Solicitation
to Telemarketing.
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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, 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 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
(a) Purpose--The Exchange proposes to amend Rule 626 (Telephone
Solicitation), to revise and add provisions that are substantially
similar to FTC rules that prohibit deceptive and other abusive
telemarketing acts or practices. Rule 626 requires Members to, among
other things, maintain do-not-call lists, limit the hours of telephone
solicitation, and not use deceptive and abusive acts and practices in
connection with telemarketing. The Commission directed ISE to enact
these telemarketing rules in accordance with the Telemarketing Consumer
Fraud and Abuse Prevention Act of 1994 (``Prevention Act'').\4\ The
Prevention Act requires the Commission to promulgate, or direct any
national securities exchange or registered securities association to
promulgate, rules substantially similar to the FTC rules \5\ to
prohibit deceptive and other abusive telemarketing acts or practices,
unless the Commission determines either that the rules are not
necessary or appropriate for the protection of investors or the
maintenance of orderly markets, or that existing federal securities
laws or Commission rules already provide for such protection.\6\
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\4\ 15 U.S.C. 6101-6108.
\5\ 16 CFR 310.1-.9. The FTC adopted these rules under the
Prevention Act in 1995. See Federal Trade Commission, Telemarketing
Sales Rule, 60 FR 43842 (Aug. 23, 1995).
\6\ 15 U.S.C. 6102.
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In 1997, the Commission determined that telemarketing rules
promulgated and expected to be promulgated by self-regulatory
organizations, together with the other rules of the self-regulatory
organizations, the federal securities laws and the Commission's rules
thereunder, satisfied the requirements of the Prevention Act because,
at the time, the applicable provisions of those laws and rules were
substantially similar to the FTC's telemarketing rules.\7\ Since 1997,
the FTC has amended its telemarketing rules in light of changing
telemarketing practices and technology.\8\
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\7\ See Telemarketing and Consumer Fraud and Abuse Prevention
Act; Determination that No Additional Rulemaking Required,
Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62 FR
18666 (Apr. 16, 1996). The Commission also determined that some
provisions of the FTC's telemarketing rules related to areas already
extensively regulated by existing securities laws or activities not
applicable to securities transactions. See id.
\8\ See, e.g., Federal Trade Commission, Telemarketing Sales
Rule, 73 FR 51164 (Aug. 29, 2008) (amendments to the Telemarketing
Sales Rule relating to prerecorded messages and call abandonments);
and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580
(Jan. 29, 2003) (amendments to the Telemarketing Sales Rule
establishing requirements for sellers and telemarketers to
participate in the national do-not-call registry).
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As mentioned above, the Prevention Act requires the Commission to
promulgate, or direct any national securities exchange or registered
securities association to promulgate, rules substantially similar to
the FTC rules to prohibit deceptive and other abusive telemarketing
acts or practices.\9\ In May 2011, Commission staff directed ISE to
conduct a review of its telemarketing rule and propose rule amendments
that provide protections that are at least as strong as those provided
by the FTC's telemarketing rules.\10\ Commission staff had concerns
``that the [self-regulatory organization] rules overall have not kept
pace with the FTC's rules, and thus may no longer meet the standards of
the [Prevention] Act.'' \11\
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\9\ See supra note 6.
\10\ See Letter from Robert W. Cook, Director, Division of
Trading and Markets, Securities and Exchange Commission, to Gary
Katz, President and Chief Executive Officer of International
Securities Exchange, LLC (May 12, 2011).
\11\ Id.
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The proposed rule change, as directed by the Commission staff,
amends and adopts provisions in Rule 626 that are substantially similar
to the FTC's current rules that prohibit deceptive and other abusive
telemarketing acts or practices as described below.\12\
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\12\ The proposed rule change is also substantially similar to
FINRA Rule 3230. See supra note 3.
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Telemarketing Restrictions
The proposed rule change amends the telemarketing restrictions in
Rule 626(a) to provide that no Member or associated person \13\ may
make an outbound telephone call \14\ to: (1) Any person's residence at
any time other than between 8 a.m. and 9 p.m. local time at the called
person's locations; (2) any person that previously has stated that he
or she does not wish to receive any outbound telephone calls made by or
on behalf of the Member \15\; or (3) any person who has registered his
or her telephone number on the FTC's national do-not-call registry.
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\13\ An ``associated person'' or ``person associated with a
Member'' means any partner, officer, director, or branch manager of
a Member (or any person occupying a similar status or performing
similar functions), any person directly or indirectly controlling,
controlled by, or under common control with a Member, or any
employee of a Member. See Rule 100(a)(3).
\14\ An ``outbound telephone call'' is a telephone call
initiated by a telemarketer to induce the purchase of goods or
services or to solicit a charitable contribution from a donor. A
``telemarketer'' is any person who, in connection with
telemarketing, initiates or receives telephone calls to or from a
customer or donor. A ``customer'' is any person who is or may be
required to pay for goods or services through telemarketing. A
``donor'' means any person solicited to make a charitable
contribution. A ``person'' is any individual, group, unincorporated
association, limited or general partnership, corporation, or other
business entity. ``Telemarketing'' means consisting of or relating
to a plan, program, or campaign involving at least one outbound
telephone call, for example cold-calling. The term does not include
the solicitation of sales through the mailing of written marketing
materials, when the person making the solicitation does not solicit
customers by telephone but only receives calls initiated by
customers in response to the marketing materials and during those
calls takes orders only without further solicitation. For purposes
of the previous sentence, the term ``further solicitation'' does not
include providing the customer with information about, or attempting
to sell, anything promoted in the same marketing materials that
prompted the customer's call. See proposed Rule 626(n)(l1), (16),
(17), (20), and (21); see also FINRA Rule 3230(m)(1l), (14), (16),
(17), and (20); and 16 CFR 310.2(f), (1), (n), (v), (w), (cc), and
(dd).
\15\ This restriction was previously included under Rule 626(e).
See the discussion below under Member's Firm-Specific Do-Not-Call
List.
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The proposed rule change is substantially similar to the FTC's
provisions regarding abusive telemarketing acts or practices.\16\ The
FTC provided a discussion of the provision when it was adopted pursuant
to the Prevention Act.\17\
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\16\ See 16 CFR 310.4(b)(1)(iii)(A) and (B) and (c); see also
FINRA Rule 3230(a). The proposed rule change also deletes language
in Rule 626(a) regarding the purpose of an outbound telephone call
and the definition of telemarketing, which are now included in the
proposed definitions of those terms. See proposed Rule 626(n)(16)
and (21) and supra note 14.
\17\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission,
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Caller Disclosures
The proposed rule change amends Rule 626(b) to delete the phrase
``for the purpose of telemarketing,'' which concept is included in the
proposed definition of ``outbound telephone
[[Page 16292]]
call.'' \18\ The proposed rule change also provides that the telephone
number that a caller provides to a person as the number at which the
caller may be contacted may not be a 900 number or any other number for
which charges exceed local or long-distance transmission charges.\19\
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\18\ See proposed Rule 626(n)(16) and supra note 14.
\19\ See proposed Rule 626(b); see also FINRA Rule 3230(d)(4).
The proposed rule change is substantially similar to the FCC
regulations regarding call disclosures. See 47 CFR 64.1200(d)(4).
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Exceptions
The proposed rule change amends Rule 626(a) to provide that the
prohibition in paragraph (a)(1) \20\ does not apply to outbound
telephone calls by a Member or an associated person if:
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\20\ The proposed rule change amends Rule 626(a) to provide that
the exception in that paragraph will apply only to the prohibition
in proposed paragraph (a)(1) and will no longer apply to the
requirement in paragraph (b) regarding caller disclosures. The
Exchange believes that even if a Member satisfies the exception in
paragraph (a), the Member should still make the caller disclosures
required by paragraph (b) to the called person to ensure that the
called person receives sufficient information regarding the purpose
of the call.
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(1) The Member has received that person's express prior written
consent;
(2) The Member has an established business relationship \21\ with
the person; or
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\21\ An ``established business relationship'' is a relationship
between a Member and a person if (i) the person has made a financial
transaction or has a security position, a money balance, or account
activity with the Member or at a clearing firm that provides
clearing services to the Member within the 18 months immediately
preceding the date of an outbound telephone call; (b) the Member is
the broker-dealer of record for an account of the person within the
18 months immediately preceding the date of an outbound telephone
call; or (c) the person has contacted the Member to inquire about a
product or service offered by the Member within the three months
immediately preceding the date of an outbound telephone call. A
person's established business relationship with a Member does not
extend to the Member's affiliated entities unless the person would
reasonably expect them to be included. Similar, a person's
established business relationship with a Member's affiliate does not
extend to the Member unless the person would reasonably expect the
Member to be included. The term ``account activity'' includes, but
is not limited to, purchases, sales, interest credits or debits,
charges or credits, dividend payments, transfer activity, securities
receipts or deliveries, and/or journal entries relating to
securities or funds in the possession or control of the Member. The
term ``broker-dealer of record'' refers to the broker or dealer
identified on a customer's account application for accounts held
directly at a mutual fund or variable insurance product issuer. See
proposed Rule 626(n)(1), (4), and (12); see also 16 CFR 310.2(o) and
FINRA Rule 3230(m)(1), (4), and (12).
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(3) the person is a broker or dealer.
This amendment deletes the exception related to existing customers and
replaces it with the exception for proposed defined term ``established
business relationships,'' the definition of which is substantially
similar to the FTC's definition of that term.\22\
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\22\ See id.; see also FINRA Rule 3230(a).
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Member's Firm-Specific Do-Not-Call List
The proposed rule change reletters Rule 626(e) as 626(c) and
provides that, each Member must make and maintain a centralized list of
persons who have informed the Member or any of its associated persons
that they do not wish to receive outbound telephone calls. The proposed
rule change replaces the term ``solicitations'' with the proposed term
``outbound telephone calls,'' the definition of which is substantially
similar to the FTC's definition of that term.\23\ The proposed rule
change also deletes the prohibition on making outbound telephone calls
to persons on the Member's firm-specific do-not-call list and moves
this prohibition to proposed Rule 626(a)(2), as described above.
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\23\ See 16 CFR 310.4(b)(1)(iii)(A) and supra note 14; see also
FINRA Rule 3230(a)(2).
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Proposed Rule 626(c) adopts procedures that Members must institute
to comply with Rule 626(a) and (b) prior to engaging in telemarketing.
These procedures must meet the following minimum standards:
(1) Members must have a written policy for maintaining their firm-
specific do-not-call lists.
(2) Personnel engaged in any aspect of telemarketing must be
informed and trained in the existence and use of the Member's firm-
specific do-not-call list.
(3) If a Member receives a request from a person not to receive
calls from that Member, the Member must record the request and place
the person's name, if provided, and telephone number on its firm-
specific do-not-call list at the time the request is made.\24\
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\24\ Members must honor a person's do-not-call request within a
reasonable time from the date the request is made, which may not
exceed 30 days from the date of the request. If these requests are
recorded or maintained by a party other than the Member on whose
behalf the outbound telephone call is made, the Member on whose
behalf the outbound telephone call is made will still be liable for
any failures to honor the do-not-call request.
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(4) Members or associated persons making an outbound telephone call
must make the caller disclosures set forth in Rule 626(b).
(5) In the absence of a specific request by the person to the
contrary, a person's do-not-call request shall apply to the Member
making the call, and will not apply to affiliated entities unless the
consumer reasonably would expect them to be included given the
identification of the call and the product being advertised.
(6) A Member making outbound telephone calls must maintain a record
of a person's request not to receive further calls.
Inclusion of this requirement to adopt these procedures will not
create any new obligations on Members, as they are already subject to
identical provisions under FCC telemarketing regulations.\25\
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\25\ See 47 CFR 64.1200(d); see also FINRA Rule 3230(d).
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Do-Not-Call Safe Harbors
Proposed Rule 626(d) provides for certain exceptions to the
telemarketing restrictions set forth in proposed Rule 626(a)(3), which
prohibits outbound telephone calls to persons on the FTC's national do-
not-call registry.
First, proposed Rule 626(d)(1) provides that a Member or associated
person making outbound telephone calls will not be liable for violating
proposed Rule 626(a)(3) if:
(1) The Member has an established business relationship with the
called person; however, a person's request to be placed on the Member's
firm-specific do-not-call list terminates the established business
relationship exception to the national do-not-call registry provision
for that Member even if the person continues to do business with the
Member;
(2) The Member has obtained the person's prior express written
consent, which must be clearly evidenced by a signed, written agreement
(which may be obtained electronically under the E-Sign Act \26\)
between the person and the Member that states that the person agrees to
be contacted by the Member and includes the telephone number to which
the calls may be placed; or
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\26\ 15 U.S.C. 7001 et seq.
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(3) The Member or associated person making the call has a personal
relationship \27\ with the called person.
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\27\ The term ``personal relationship'' means any family member,
friend, or acquaintance of the person making an outbound telephone
call. See proposed Rule 626(n)(18); see also FINRA Rule 3230(m)(18).
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The proposed rule change is substantially similar to the FTC's
provision regarding an exception to the prohibition on making outbound
telephone calls to persons on the FTC's Do-not-call registry.\28\ The
FTC provided a discussion of the provision when it was adopted pursuant
to the Prevention Act.\29\
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\28\ See 16 CFR 3l0.4(b)(1)(iii)(B); see also FINRA Rule
3230(b).
\29\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission,
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43854.
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Second, proposed Rule 626(d)(2) provides that a Member or
associated
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person making outbound telephone calls will not be liable for violating
proposed Rule 626(a)(3) if the Member or associated person demonstrates
that the violation is the result of an error and that as part of the
Member's routine business practice:
(l) The Member has established and implemented written procedures
to comply with Rule 626(a) and (b);
(2) The Member has trained its personnel, and any entity assisting
in its compliance, in the procedures established pursuant to the
preceding clause;
(3) The Member has maintained and recorded a list of telephone
numbers that it may not contact in compliance with Rule 626(c); and
(4) The Member uses a process to prevent outbound telephone calls
to any telephone number on the Member's firm-specific do-not-call list
or the national do-not-call registry, employing a version of the
national do-not-call registry obtained from the FTC no more than 31
days prior to the date any call is made, and maintains records
documenting this process.
The proposed rule change is substantially similar to the FTC's safe
harbor to the prohibition on making outbound telephone calls to persons
on the FTC's national do-not-call registry.\30\ The FTC provided a
discussion of the provision when it was adopted pursuant to the
Prevention Act.\31\
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\30\ See 16 CFR 310.4(b)(1)(iii)(B); see also FINRA Rule
3230(c).
\31\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission,
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Wireless Communications
Proposed Rule 626(e) clarifies that the provisions set forth in
Rule 626 are applicable to Members and associated persons making
outbound telephone calls to wireless telephone numbers.\32\
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\32\ See also FINRA Rule 3230(e).
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Outsourcing Telemarketing
Proposed Rule 626(f) states that if a Member uses another entity to
perform telemarketing services on its behalf, the Member remains
responsible for ensuring compliance with Rule 626. The proposed rule
change also provides that an entity or person to which a Member
outsources its telemarketing services must be appropriately registered
or licensed, where required.\33\
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\33\ See also FINRA Rule 3230(f).
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Billing Information
The proposed rule change reletters Rule 626(f) as Rule 626(g) and
provides that, for any telemarketing transaction, no Member or
associated person may submit billing information \34\ for payment
without the express informed consent of the customer. Proposed Rule
626(g) requires that each Member or associated person must obtain the
express informed consent of the person to be charged and to be charged
using the identified account.
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\34\ The term ``billing information'' means any data that
enables any person to access a customer's or donor's account, such
as a credit or debit card number, a brokerage, checking, or savings
account number, or a mortgage loan account number. See proposed Rule
626(n)(3).
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If the telemarketing transaction involves preacquired account
information \35\ and a free-to-pay conversion \36\ feature, the Member
or associated person must:
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\35\ The term ``preacquired account information'' means any
information that enables a Member or associated person to cause a
charge to be placed against a customer's or donor's account without
obtaining the account number directly from the customer or donor
during the telemarketing transaction pursuant to which the account
will be charged. See proposed Rule 626(n)(19).
\36\ The term ``free-to-pay conversion'' means, in an offer or
agreement to sell or provide any goods or services, a provision
under which a customer receives a product or service for free for an
initial period and will incur an obligation to pay for the product
or service if he or she does not take affirmative action to cancel
before the end of that period. See proposed Rule 626(n)(13).
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(1) Obtain from the customer, at a minimum, the last four digits of
the account number to be charged;
(2) Obtain from the customer an express agreement to be charged and
to be charged using the identified account number; and
(3) Make and maintain an audio recording of the entire
telemarketing transaction.
For any other telemarketing transaction involving preacquired
account information, the Member or associated person must:
(1) Identify the account to be charged with sufficient specificity
for the customer to understand what account will be charged; and
(2) Obtain from the customer an express agreement to be charged and
to be charged using the identified account number.
The proposed rule change is substantially similar to the FTC's
provision regarding the submission of billing information.\37\ The FTC
provided a discussion of the provision when it was adopted pursuant to
the Prevention Act.\38\
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\37\ See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
\38\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4616.
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Caller Identification Information
Proposed Rule 626(h) provides that Members that engage in
telemarketing must transmit caller identification information \39\ and
are explicitly prohibited from blocking caller identification
information. The telephone number provided must permit any person to
make a do-not-call request during normal business hours. These
provisions are similar to the caller identification provision in the
FTC rules.\40\ Inclusion of these caller identification provisions in
this proposed rule change will not create any new obligations on
Members, as they are already subject to identical provisions under FCC
telemarketing regulations.\41\
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\39\ Caller identification information includes the telephone
number and, when made available by the Member's telephone carrier,
the name of the Member.
\40\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
\41\ See 47 CFR 64.1601 (e).
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Unencrypted Consumer Account Numbers
Proposed Rule 626(i) prohibits a Member or associated person from
disclosing or receiving, for consideration, unencrypted consumer
account numbers for use in telemarketing. The proposed rule change is
substantially similar to the FTC's provision regarding unencrypted
consumer account numbers.\42\ The FTC provided a discussion of the
provision when it was adopted pursuant to the Prevention Act.\43\
Additionally, the proposed rule change defines ``unencrypted'' as not
only complete, visible account numbers, whether provided in lists or
singly, but also encrypted information with a key to its decryption.
The proposed definition is substantially similar to the view taken by
the FTC.\44\
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\42\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
\43\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4615.
\44\ See id. at 4616.
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Abandoned Calls
Proposed Rule 626(j) prohibits a Member or associated person from
abandoning \45\any outbound telephone call. The abandoned calls
prohibition is subject to a ``safe harbor'' under proposed Rule
626(j)(2) that requires a Member or associated person:
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\45\ An outbound telephone call is ``abandoned'' if the called
person answers it and the call is not connected to a Member or
associated person within two seconds of the called person's
completed greeting.
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(1) To employ technology that ensures abandonment of no more than
three percent of all calls answered by a person, measured over the
duration of a single calling campaign, if less than 30 days, or
separately over each successive
[[Page 16294]]
30-day period or portion thereof that the campaign continues;
(2) For each outbound telephone call placed, to allow the telephone
to ring for at least 15 seconds or four rings before disconnecting an
unanswered call;
(3) Whenever a Member or associated person is not available to
speak with the person answering the outbound telephone call within two
seconds after the person's completed greeting, promptly to play a
prerecorded message stating the name and telephone number of the Member
or associated person on whose behalf the call was placed; and
(4) To maintain records documenting compliance with the ``safe
harbor.'' The proposed rule change is substantially similar to the
FTC's provisions regarding abandoned calls.\46\ The FTC provided a
discussion of the provisions when they were adopted pursuant to the
Prevention Act.\47\
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\46\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule
3230(j).
\47\ See Federal Trade Commission, Telemarketing Sales Rule, 68
FR 4580 (Jan. 29, 2003) at 4641.
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Prerecorded Messages
Proposed Rule 626(k) prohibits a Member or associated person from
initiating any outbound telephone call that delivers a prerecorded
message without a person's express written agreement \48\ to receive
such calls. The proposed rule change also requires that all prerecorded
outbound telephone calls provide specified opt-out mechanisms so that a
person can opt out of future calls. The prohibition does not apply to a
prerecorded message permitted for compliance with the ``safe harbor''
for abandoned calls under proposed Rule 626(j)(2). The proposed rule
change is substantially similar to the FTC's provisions regarding
prerecorded messages.\49\ The FTC provided a discussion of the
provisions when they were adopted pursuant to the Prevention Act.\50\
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\48\ The express written agreement must: (a) have been obtained
only after a clear and conspicuous disclosure that the purpose of
the agreement is to authorize the Member to place prerecorded calls
to such person; (b) have been obtained without requiring, directly
or indirectly, that the agreement be executed as a condition of
purchasing any good or service; (c) evidence the willingness of the
called person to receive calls that deliver prerecorded messages by
or on behalf of the Member; and (d) include the person's telephone
number and signature (which may be obtained electronically under the
E-Sign Act).
\49\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
\50\ See Federal Trade Commission, Telemarketing Sales Rule, 73
FR 51164 (Aug. 29, 2008) at 51165.
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Credit Card Laundering
Proposed Rule 626(m) prohibits credit card laundering, the practice
of depositing into the credit card system \51\ a sales draft that is
not the result of a credit card transaction between the cardholder \52\
and the Member. Except as expressly permitted, the proposed rule change
prohibits a Member or associated person from:
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\51\ The term ``credit card system'' means any method or
procedure used to process credit card transactions involving credit
cards issued or licensed by the operator of that system. The term
``credit card'' means any card, plate, coupon book, or other credit
device existing for the purpose of obtaining money, property, labor,
or services on credit. The term ``credit'' means the right granted
by a creditor to a debtor to defer payment of debt or to incur debt
and defer its payment. See proposed Rule 626(n)(7), (8), and (10).
\52\ The term ``cardholder'' means a person to whom a credit
card is issued or who is authorized to use a credit card on behalf
of or in addition to the person to whom the credit card is issued.
See proposed Rule 626(n)(6).
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(1) Presenting to or depositing into the credit card system for
payment, a credit card sales draft \53\ generated by a telemarketing
transaction that is not the result of a telemarketing credit card
transaction between the cardholder and the Member;
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\53\ The term ``credit card sales draft'' means any record or
evidence of a credit card transaction. See proposed Rule 626(n)(9).
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(2) Employing, soliciting, or otherwise causing a merchant,\54\ or
an employee, representative or agent of the merchant to present to or
to deposit into the credit card system for payment, a credit card sales
draft generated by a telemarketing transaction that is not the result
of a telemarketing credit card transaction between the cardholder and
the Member; or
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\54\ The term ``merchant'' means a person who is authorized
under written contract with an acquirer to honor or accept credit
cards, or to transmit or process for payment credit card payments,
for the purchase of goods or services or a charitable contribution.
The term ``acquirer'' means a business organization, financial
institution, or an agent of a business organization or financial
institution that has authority from an organization that operates or
licenses a credit card system to authorize merchants to accept,
transmit, or process payment by credit card through the credit card
system for money, goods or services, or anything else of value. A
``charitable contribution'' means any donation or gift of money or
any other thing of value, for example a transfer to a pooled income
fund. See proposed Rule 626(n)(2) and (14).
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(3) Obtaining access to the credit card system through the use of a
business relationship or an affiliation with a merchant, when such
access is not authorized by the merchant agreement \55\ or the
applicable credit card system.
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\55\ The term ``merchant agreement'' means a written contract
between a merchant and an acquirer to honor or accept credit cards,
or to transmit or process for payment credit card payments, for the
purchase of goods or services or charitable contribution. See
proposed Rule 626(n)(15).
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The proposed rule change is substantially similar to the FTC's
provision regarding credit card laundering.\56\ The FTC provided a
discussion of the provisions when they were adopted pursuant to the
Prevention Act.\57\
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\56\ See 16 CFR 3 10.3(c); see also FINRA Rule 3230(1).
\57\ See Federal Trade Commission, Telemarketing Sales Rule, 60
FR 43842 (Aug. 23, 1995) at 43852.
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Definitions
Proposed Rule 626(n) adopts the following definitions, which are
substantially similar to the FTC's definitions of these terms:
``acquirer,'' ``billing information,'' ``caller identification
service,'' ``cardholder,'' ``charitable contribution,'' ``credit,''
``credit card,'' ``credit card sales draft,'' ``credit card system,''
``customer,'' ``donor,'' ``established business relationship,'' ``free-
to-pay conversion,'' ``merchant,'' ``merchant agreement,'' ``outbound
telephone call,'' ``person,'' ``preacquired account information,''
``telemarketer,'' and ``telemarketing.\58\'' The FTC provided a
discussion of each definition when they were adopted pursuant to the
Prevention Act.\59\
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\58\ See proposed Rule 626(n)(2), (3), (5), (6), (7), (8), (9),
(10), (11), (12), (13), (14), (15), (16), (17), (19), (20), and
(21); and 16 CFR 310.2(a), (c), (d), (e), (f), (h), (i), (j), (k),
(l), (n), (o), (p), (s), (t), (v), (w), (x), (cc), and (dd); see
also FINRA Rule 3230(m)(2), (3), (5), (6), (7), (8), (9), (10),
(11), (12), (13), (14), (15), (16), (17), (19), and (20). The
proposed rule change also adopts definitions of ``account
activity,'' ``broker-dealer of record,'' and ``personal
relationship'' that are substantially similar to FINRA's definitions
of these terms. See proposed Rule 626(n)(1), (4), (14) and (18) and
FINRA Rule 3230(m)(1), (4), (14) and (18); see also 47 CFR
64.1200(t)(14) (FCC's definition of ``personal relationship'').
\59\ See Federal Trade Commission, Telemarketing Sales Rule, 60
FR 43842 (Aug. 23, 1995) at 43843; and Federal Trade Commission,
Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 2003) at 4587.
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State and Federal Laws
The proposed rule change amends Rule 626, Interpretation and Policy
.01 \60\ to remind Members and associated persons that engage in
telemarketing that they also are subject to the requirements of
relevant state and federal laws and rules, including the Prevention
Act, the TCPA,\61\ and the rules of the FCC relating to telemarketing
practices and the rights of telephone consumers.\62\
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\60\ See also FINRA Rule 3230, Supplementary Material .01,
Compliance with Other Requirements.
\61\ See 47 U.S.C. 227.
\62\ See 47 CFR 64.1200.
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Announcement in Regulatory Circular
The Exchange will announce the implementation date of the proposed
rule change in a Regulatory Circular to be published no later than 90
days following the effective date. The implementation date will be no
later
[[Page 16295]]
than 180 days following the effective date.
Basis--The Exchange believes the proposed rule change is consistent
with the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\63\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \64\ requirements that the rules
of an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest.
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\63\ 15 U.S.C. 78f(b).
\64\ 15 U.S.C. 78f(b)(5).
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In particular, the proposed rule change will prevent fraudulent and
manipulative acts and protect investors and the public interest by
continuing to prohibit Members from engaging in deceptive and other
abusive telemarketing acts or practices. Additionally, the proposed
rule change removes impediments to and perfects the mechanism for a
free and open market and a national market system, because it provides
consistency among telemarketing rules of national securities exchanges
and FINRA, therefore making it easier for investors to comply with
these rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
ISE 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
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not 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) \65\ of the Act and Rule 19b-
4(f)(6) \66\ thereunder. The Exchange provided the Commission with
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 the proposed rule
change.
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\65\ 15 U.S.C. 78s(b)(3)(A).
\66\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including the proposed rule change,
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 email to [email protected]. Please include
File No. SR-ISE-2012-11 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-ISE-2012-11. This file
number should be included on the subject line if email 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 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 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-ISE-2012-11 and
should be submitted on or before April 10, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\67\
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\67\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6619 Filed 3-19-12; 8:45 am]
BILLING CODE 8011-01-P