[Federal Register Volume 77, Number 240 (Thursday, December 13, 2012)]
[Notices]
[Pages 74253-74258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30049]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68386; File No. SR-FINRA-2009-060]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment Nos. 1 and 2, and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2, Relating to FINRA Rule 8210 (Provision of
Information and Testimony and Inspection and Copying of Books)
December 7, 2012.
I. Introduction
On September 10, 2009, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed a proposed rule change with the Securities and
Exchange Commission (``SEC'' or ``Commission'') pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Exchange Act'') \1\
and Rule 19b-4 thereunder \2\ to amend FINRA Rule 8210 (Provision of
Information and Testimony and Inspection and Copying of Books). The
proposed rule change was published for comment in the Federal Register
on October 22, 2009.\3\ The Commission received seven comment letters
on the proposed rule change.\4\ On December 22, 2009, FINRA filed a
letter with the Commission responding to these comments,\5\ and on
[[Page 74254]]
December 21, 2011, FINRA filed Amendment No. 1 with the Commission to
further respond to the comments and to propose amendments in response
thereto.\6\ On December 5, 2012, FINRA filed Amendment No. 2 with the
Commission to modify a phrase that was included in Amendment No. 1.\7\
The Commission is publishing this notice and order to solicit comments
on Amendment Nos. 1 and 2 and to approve the proposed rule change, as
modified by Amendment Nos.1 and 2, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 60836 (Oct. 16, 2009), 74 FR
54614 (Oct. 22, 2009) (Notice of Filing of Proposed Rule Change;
File No. SR-FINRA-2009-060) (``Notice'').
\4\ See letters from BTUD, to Elizabeth Murphy, Secretary, SEC,
dated October 29, 2009 (the ``BTUD Letter''); Frederick T. Greene,
CIMA, Senior V.P., Portfolio Manager, Woodforest Financial Services,
Inc., to Elizabeth M. Murphy, Secretary, SEC, dated October 29, 2009
(the ``Woodforest Letter''); Neal E. Nakagiri, President, CEO, CCO,
NPB Financial Group, LLC, to Elizabeth Murphy, Secretary, SEC, dated
October 29, 2009 (the ``NPB Letter''); Dale E. Brown, CAE, President
& CEO, Financial Services Institute, Inc., to Elizabeth M. Murphy,
Secretary, SEC, dated November 4, 2009 (the ``FSI Letter''); Bari
Havlik, Chief Compliance Officer, Charles Schwab & Co., Inc., to
Elizabeth M. Murphy, Secretary, SEC, dated November 12, 2009 (the
``Schwab Letter''); Ronald C. Long, Director, Regulatory Affairs,
Wells Fargo Advisors, to Elizabeth M. Murphy, Secretary, SEC, dated
November 12, 2009 (the ``Wells Fargo Letter''); and Ira D.
Hammerman, Senior Managing Director and General Counsel, Securities
Industry and Financial Markets Association, to Elizabeth M. Murphy,
Secretary, SEC, dated December 16, 2009 (the ``SIFMA Letter'').
These letters are available on the SEC's Web site at http://www.sec.gov/comments/sr-finra-2009-060/finra2009060.shtml.
\5\ See letter from Stan Macel, Assistant General Counsel,
Regulatory Policy and Oversight, FINRA, to Elizabeth M. Murphy,
Secretary, SEC, dated December 22, 2009 (``Response to Comments'').
This letter is available on the SEC's Web site at http://www.sec.gov/comments/sr-finra-2009-060/finra2009060.shtml.
\6\ See Amendment No. 1 dated December 21, 2011 (``Amendment No.
1''). Amendment No. 1 is described below in Section III.B., and the
text of Amendment No. 1 is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA, and on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
\7\ See Amendment No. 2 dated December 5, 2012 (``Amendment No.
2''). Amendment No. 2 is described below in Section III.B., and the
text of Amendment No. 2 is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA, and on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
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II. Description of the Proposal
FINRA has proposed to amend FINRA Rule 8210, which confers on FINRA
staff the authority to compel a member, person associated with a
member, or other person over whom FINRA has jurisdiction, to produce
documents, provide testimony, or supply written responses or electronic
data in connection with an investigation, complaint, examination or
adjudicatory proceeding. The proposed rule change would clarify the
scope of FINRA's authority under the rule to inspect and copy the
books, records, and accounts of such member or person, specify the
method of service for certain unregistered persons under the rule, and
authorize service on attorneys who are representing clients.
FINRA Rule 8210 applies to all members, associated persons, and
other persons over whom FINRA has jurisdiction, including former
associated persons subject to FINRA's jurisdiction as described in the
FINRA By-Laws.\8\ FINRA Rule 8210(c) provides that a member's or
associated person's failure to provide information or testimony or to
permit an inspection and copying of books, records, or accounts is a
violation of the rule.
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\8\ See FINRA By-Laws, Article V, Section 4(a) (Retention of
Jurisdiction).
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Information in a Member's or Person's Possession, Custody or Control
FINRA Rule 8210(a)(2) currently provides that FINRA staff shall
have the right to inspect and copy the books, records, and accounts of
all applicable members and persons with respect to any matter involved
in an investigation, complaint, examination or proceeding.\9\ The
proposed rule change would clarify that the information that FINRA
staff shall have the right to inspect and copy must be in the member's
or person's ``possession, custody or control.'' \10\ This language
parallels the Federal Rules of Civil Procedure regarding document
requests and subpoenas for documents.\11\
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\9\ FINRA Rule 8210(a) provides FINRA adjudicators with the same
rights as FINRA staff to request information. Although the proposed
rule change would also clarify a FINRA adjudicator's authority, no
commenters expressed any concerns that specifically addressed the
powers of FINRA adjudicators.
\10\ When filing the proposed rule change with the Commission,
FINRA indicated that in using the word ``control,'' in addition to
possession and custody, it intended to require members or persons
covered by the rule to provide, for example, records that they have
the legal right, authority, or ability to obtain upon demand. See
Camden Iron & Metal v. Marubeni Am. Corp., 138 F.R.D. 438, 441
(D.N.J. 1991) (``Federal courts construe `control' very broadly
under [Federal] Rule [of Civil Procedure] 34.''). Moreover, FINRA
indicated that the proposed addition of ``possession, custody or
control'' to Rule 8210(a)(2) would address questions that have
arisen in litigation regarding the scope of the rule. See, e.g., In
re: Jay Alan Ochanpaugh, Exchange Act Release No. 54363 (Aug. 25,
2006) (referred to hereafter as the ``Jay Alan Ochanpaugh'' decision
or litigation).
\11\ See Fed. R. Civ. P. 34.
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Notice to Associated But Unregistered Persons
FINRA Rule 8210 addresses the legal concept of service of a written
request by using the term ``notice'' of a request. Currently, FINRA
Rule 8210(d) states that, with respect to members and associated
persons, notice shall be deemed received by the member or associated
person when a copy of the notice is mailed or otherwise transmitted to
the last known relevant address of the member or associated person as
reflected in the Central Registration Depository (``CRD''). The CRD
system contains information concerning registered members and
persons,\12\ but in most instances it does not contain information
concerning unregistered persons who are or were associated with a
member.\13\
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\12\ Members and registered persons have an affirmative duty to
update CRD with their current address for at least two years after
they have had their registration terminated. See Notice to Members
99-77 (noting that FINRA requests for information and disciplinary
complaints issued during the period of FINRA's retained jurisdiction
will be mailed to a person's last address in FINRA's records).
\13\ In some limited instances, CRD may contain information
concerning unregistered associated persons who were required to
submit information, including fingerprint information, to CRD in
connection with their employment.
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Although not routine, some investigations require FINRA examiners
or investigators to request information from persons currently or
formerly associated with a member in an unregistered capacity.\14\ The
current rule is unclear as to what would constitute proper notice on
such persons for whom information is not available in CRD. The proposed
rule change would explicitly address the methods by which notice would
be deemed received by persons currently or formerly associated with a
member in an unregistered capacity.
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\14\ Persons associated with a member who are unregistered may
include persons exempt from registration, e.g., those whose
functions are solely and exclusively clerical or ministerial; those
whose functions are related solely and exclusively to the member's
need for nominal corporate officers or for capital participation;
and those whose functions are related solely and exclusively to
transactions in municipal securities, transactions in commodities,
or transactions in security futures (provided they are registered
with a registered futures association). See, e.g., NASD Rule
1060(a). For purposes of FINRA Rule 8210, unregistered persons
associated with a member may also include direct owners and
executive officers listed in Schedule A of Form BD of a member whose
job functions do not otherwise require them to register with FINRA.
See FINRA By-Laws, Article I(rr) (definition of ``person associated
with a member'').
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With respect to unregistered persons currently associated with a
member, the proposed rule change would provide that notice shall be
deemed received by mailing or otherwise transmitting the notice to the
last known business address of the member as reflected in CRD. In
addition, the proposed rule change would retain the provision that if
FINRA staff responsible for transmitting the notice has actual
knowledge that the member's address provided through CRD is out of date
or inaccurate, then a copy of the notice must be transmitted to both
the address provided through CRD, as well as any more current address
known to FINRA staff.
With respect to unregistered persons formerly associated with a
member, the proposed rule change would provide that notice shall be
deemed received upon personal service, which is defined as set forth in
FINRA Rule 9134(a)(1).\15\ FINRA Rule 9134(a)(1) is based on
traditional concepts for serving a summons under Rule 4 of the Federal
Rules of Civil Procedure.
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\15\ FINRA Rule 9134(a)(1) provides as follows: ``Personal
service may be accomplished by handing a copy of the papers to the
person required to be served; leaving a copy at the person's office
with an employee or other person in charge thereof; or leaving a
copy at the person's dwelling or usual place of abode with a person
of suitable age and discretion then residing therein[.]''
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[[Page 74255]]
Notice to Members and Persons Represented By Counsel
The proposed rule change would amend FINRA Rule 8210(d) to
explicitly address issues of service on members or persons that are
known to be represented by counsel. Currently, the rule does not
explicitly permit FINRA staff to serve notice on a member's or person's
counsel in situations in which FINRA staff knows that the member or
person is represented by counsel regarding the matter in question. The
proposed rule change would allow FINRA staff to recognize that counsel
can act as an authorized agent on behalf of a member or person. It
would provide that, if FINRA staff knows that a member or person is
represented by counsel regarding the matter in question, then notice
shall be provided to counsel rather than to the member or person. The
proposed rule change would harmonize FINRA's rule in this regard with
Codes of Professional Conduct in many states regarding service on
counsel.\16\
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\16\ See, e.g., American Bar Association model Rule of
Professional Conduct 4.2 (``ABA Rule 4.2''). ABA Rule 4.2 provides
as follows: ``In representing a client, a lawyer shall not
communicate about the subject of the representation with a person
the lawyer knows to be represented by another lawyer in the matter,
unless the lawyer has the consent of the other lawyer or is
authorized to do so by law or a court order.'' Many states have
rules regarding communication with a person represented by counsel
that are based on ABA Rule 4.2.
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Effective Date
In its filing with the Commission, FINRA stated that it would
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 would be 30 days following publication of
the Regulatory Notice announcing Commission approval.
III. Summary of Comments, FINRA's Response, and Amendment Nos. 1 and 2
As stated above, the Commission received seven comment letters in
response to the proposed rule change.\17\ Three commenters supported
the amendments as proposed \18\ and four commenters expressed various
concerns with different aspects of the proposal.\19\ On December 22,
2009, FINRA filed a letter with the Commission responding to these
comments,\20\ and on December 21, 2011, FINRA filed Amendment No. 1
with the Commission to further respond to the comments and to propose
amendments in response thereto.\21\ On December 5, 2012, FINRA filed
Amendment No. 2 with the Commission to modify a phrase that was
included in Amendment No. 1.\22\
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\17\ See supra note 4.
\18\ See FSI Letter; NPB Letter; and Woodforest Letter.
\19\ See BTUD Letter; Schwab Letter; SIFMA Letter; and Wells
Fargo Letter.
\20\ See Response to Comments, supra note 5.
\21\ See Amendment No. 1, supra note 6.
\22\ See Amendment No. 2, supra note 7.
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A. Summary of, and FINRA's Responses to, Comment Letters
1. Information in a Member's or Person's Possession, Custody or Control
Four commenters addressed FINRA's proposal to amend FINRA Rule
8210(a)(2).\23\ FINRA Rule 8210(a)(2) currently provides that FINRA
staff shall have the right to inspect and copy the books, records and
accounts of all applicable members and persons ``with respect to any
matter involved in the investigation, complaint, examination or
proceeding.'' The proposed rule change would clarify that the
information subject to FINRA inspection and copying must be in the
member's or person's ``possession, custody or control.''
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\23\ See BTUD Letter; Schwab Letter; SIFMA Letter; and Wells
Fargo Letter.
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Three commenters expressed concern that FINRA's intent to clarify
the scope of its authority regarding requests pursuant to FINRA Rule
8210 represented an expansion of the current rule without a meaningful
discussion or consideration of the possible legal and practical
implications and consequences for member firms, associated persons, and
persons over whom FINRA has jurisdiction.\24\ These commenters were
particularly concerned that FINRA would be able to compel its members
and persons over whom it has jurisdiction to provide FINRA with
information within the member's or person's ``control.'' In its filing
of the proposed rule change, FINRA stated that it intended for the word
``control,'' in addition to possession and custody, to require members
or persons covered by the rule to provide, for example, records that
they have the legal right, authority, or ability to obtain upon
demand.\25\ In support of their comments, two commenters cited to the
Commission's Jay Alan Ochanpaugh decision, in which the Commission
considered the authority of the NASD (now FINRA) under Rule 8210 in a
litigation context and stated that a ``fuller exploration'' of the
scope of Rule 8210 would be required by the NASD to support its view in
the case that the rule authorized it to obtain information within a
member's or person's possession or control.\26\
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\24\ See Schwab Letter; SIFMA Letter; and Wells Fargo Letter.
\25\ See Notice, supra note 3.
\26\ See Schwab Letter and SIFMA Letter.
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In its Response to Comments, FINRA stated that commenters were
incorrect in their analysis of the Jay Alan Ochanpaugh litigation.\27\
FINRA noted that although the Commission's decision in that case
addressed both the legal argument that Rule 8210 did not include the
concept of ``possession and control'' and the factual argument that the
NASD failed to prove that the applicant had possession and control of
the documents, the Commission's decision to set aside FINRA's action in
the case was based on factual grounds.\28\ FINRA also noted that the
Exchange Act, not the decision in Jay Alan Ochanpaugh, provides the
standard the Commission uses when analyzing a self-regulatory
organization's proposed rule change.\29\ FINRA further argued that the
purpose of proposed FINRA Rule 8210 is to facilitate investigations and
that the consequences or burdens of any particular request are
factually specific to that investigation.\30\
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\27\ See Response to Comments, supra note 5.
\28\ Id.
\29\ Id. See also Section 19(b)(2)(C) of the Exchange Act, which
states that the Commission shall approve a proposed rule change of a
self-regulatory organization ``if it finds that such proposed rule
change is consistent with the requirements of this title and the
rules and regulations issued under this title that are applicable to
such organization.''
\30\ See Response to Comments, supra note 5.
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2. Issues Regarding Access to Third-Party Documents and Procedural
Protections
Three commenters raised concerns that the proposed rule change
could permit FINRA to compel members or associated persons to produce
documents that belong to a third party.\31\ For example, two commenters
expressed concern that FINRA would not be required to maintain
confidentiality of third party documents it receives pursuant to a Rule
8210 request, which could be made public when attached to pleadings in
court filings, when sought by another party pursuant to a subpoena, and
when disclosed pursuant to Freedom of Information Act requests.\32\ One
of these commenters expressed further concern that public disclosure of
confidential or proprietary third party documents as a result of the
proposed rule change may result in the owner of the documents suffering
material harm, which, in turn, could prompt the owner of the records
[[Page 74256]]
to seek damages or other recourse from FINRA and the member firm for
publicly disclosing the information.\33\
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\31\ See Schwab Letter; SIFMA Letter; and Wells Fargo Letter.
\32\ See Schwab Letter and SIFMA Letter.
\33\ See Schwab Letter.
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To address these concerns, one commenter recommended that FINRA's
right to demand possession, custody, or control of third party records
should be limited to when an associated person is acting in its
capacity as an associated person.\34\ This commenter also stated that
FINRA should access documents of third parties through subpoenas to
provide third parties with a means of addressing their issues against
the production of their documents and to help protect member firms
against claims of improper disclosure.\35\
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\34\ See Wells Fargo Letter.
\35\ Id.
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One commenter stated that FINRA's proposal does not address issues
relating to the ownership of records where FINRA is seeking records of
a third party not within FINRA's jurisdiction.\36\ For example,
according to this commenter, an unrelated third party may own and have
absolute control over the material requested, while the person or
entity over whom FINRA has jurisdiction may have limited access to the
documents or only the right to request the documents from the third
party for a specific purpose consistent with their role in the
organization or relationship with the third party.\37\ The commenter
believes that this may result in the member firm breaching contractual
obligations owed to the third party and potentially result in a
violation of Rule 8210.\38\ Another commenter expressed concern that
under the proposed rule change, regulators could rely on the subject of
an investigation to supply information related to third parties as
opposed to independently obtaining those records from the third
party.\39\
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\36\ See Schwab Letter.
\37\ Id.
\38\ Id.
\39\ See Wells Fargo Letter.
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Two commenters expressed concern about the procedural protections
of which FINRA members may avail themselves when in receipt of a Rule
8210 request for information.\40\ These commenters stated that,
although the rule seeks to adopt the same standard found in the Federal
Rules of Civil Procedure, FINRA members may not receive the same
procedural protections as those found in federal court, such as the
right to object to the production of requested documents.\41\ These
commenters also stated that if a FINRA member cannot comply with a
request under Rule 8210, and the firm is found to have violated the
rule, the procedural process to appeal to the SEC and federal courts is
long and arduous.\42\
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\40\ See Schwab Letter and SIFMA Letter.
\41\ Id.
\42\ Id.
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FINRA believes that the concerns described above relating to issues
regarding access to third party documents and procedural protections
incorrectly assume that FINRA's investigations into the conduct of its
members and associated persons are strictly limited in scope to the
FINRA members and associated persons under investigation.\43\ FINRA
stated that although it has jurisdiction to file an action against its
members and associated persons (and those otherwise subject to its
jurisdiction), its investigations can involve non-FINRA members,
including customers, issuers, or foreign businesses.\44\ Consequently,
FINRA contends that third party documents within the ``possession,
custody or control'' of the FINRA member or associated person that
relate to the investigation should be produced pursuant to proposed
FINRA Rule 8210 and concerns solely based on their status as third
party documents should not prevent the Commission from approving the
proposed rule change.\45\
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\43\ See Response to Comments, supra note 5.
\44\ Id.
\45\ Id.
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FINRA agrees in part that its authority to request documents is
contractual. However, FINRA notes that its authority is also based on
its rules applying to all members and their associated persons.\46\
FINRA states that, in light of these relationships, its investigations
are based on a model of implied cooperation as opposed to the
adversarial system that is governed by the Federal Rules of Civil
Procedure.\47\ Specifically, FINRA's members and persons subject to its
jurisdiction have already agreed, either explicitly or implicitly, to
supply FINRA with information during its investigations.\48\ FINRA
notes that once an investigation has matured into the filing of a
complaint, the FINRA Code of Procedure affords a respondent several
procedural rights and that its investigatory process should not be
fundamentally altered as a result of the proposed rule change.\49\
FINRA also notes that the current rule provides FINRA staff with the
right to inspect and copy books, records, and accounts of members,
associated persons and others subject to FINRA's jurisdiction ``with
respect to any matter involved in the investigation, complaint,
examination or proceeding,'' and because the rule is purposefully
designed to cover a broad range of activities, concerns about limiting
the scope of the rule are misplaced.\50\
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\46\ Id.
\47\ Id.
\48\ Id.
\49\ Id.
\50\ Id.
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3. Participation in Charitable, Non-Profit, and Board Service
Three commenters indicated that FINRA Rule 8210(a)(2), as proposed
to be amended, may inhibit or discourage individuals in the securities
industry from participating in charitable, non-profit, and board
service due to the potential for third party organizations to have to
provide private or confidential documents owned by the organization to
FINRA.\51\ FINRA responded that it did not find merit in the suggestion
by these commenters that adopting the ``possession, custody or
control'' language in FINRA Rule 8210(a)(2) would chill the likelihood
of associated persons participating in non-profit entities due to fear
by those entities that their documents would be disclosed during FINRA
investigations.\52\ FINRA stated further that in as much as board
members of non-profit organizations often are employed in a for-profit
industry, FINRA found no greater likelihood that a non-profit
corporation's confidential information would be disclosed because they
have associated persons as board members than if their board members
were not associated with the securities industry.\53\
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\51\ See Schwab Letter; SIFMA Letter; and Wells Fargo Letter.
\52\ See Response to Comments, supra note 5.
\53\ Id.
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4. Additional Analysis and Consideration of the Proposed Rule Change
Two commenters recommended that FINRA engage in additional analysis
and consideration with respect to the proposed rule change and the
process and protections afforded to members, associated persons, and
others over whom FINRA has jurisdiction.\54\ FINRA did not directly
respond to these recommendations; however, FINRA's Response to Comments
and its filing of Amendment Nos. 1 and 2, which, as discussed below,
limit the scope of the proposed rule change, reflect FINRA's efforts to
engage in such additional analysis and consideration of the proposed
rule change.
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\54\ See Schwab Letter and SIFMA Letter.
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[[Page 74257]]
5. Notice to Unregistered Persons and Members and Persons Represented
by Counsel
FINRA did not receive any specific comments on its proposals under
Rule 8210(d) to specify the method of service for certain unregistered
persons and to authorize service on members or persons that are known
to be represented by counsel.
6. Comment Outside the Scope of the Proposed Rule Change
One commenter expressed concern regarding a witness's ability to
access a written transcript of on-the-record testimony in a FINRA
proceeding.\55\ FINRA responded that this comment is outside the scope
of the proposed rule change.\56\
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\55\ See BTUD Letter.
\56\ See Response to Comments, supra note 5.
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B. Description of Amendment Nos. 1 and 2
After further consideration and analysis of the proposed rule
change and the comments thereon, on December 21, 2011, FINRA filed
Amendment No. 1, in which it proposed to add Supplementary Material
limiting the scope of its proposal.\57\ On December 5, 2012, FINRA
filed Amendment No. 2 to modify a phrase in the proposed Supplementary
Material.\58\
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\57\ See Amendment No. 1, supra note 6.
\58\ See Amendment No. 2, supra note 7.
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First, the proposed Supplementary Material would provide that
books, records and accounts of a broker-dealer, associated person or
person subject to FINRA's jurisdiction (as referenced in Rule 8210(a)),
would include those books, records and accounts that the broker-dealer
or its associated persons would make or keep relating to its operation
as a broker-dealer or relating to the person's association with the
member.\59\ This would include, but not be limited to, investigations
of outside business activities, private securities transactions, or
possible violations of just and equitable principles of trade, as well
as other FINRA rules, MSRB rules, and the federal securities laws.\60\
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\59\ Id.
\60\ Id.
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The proposed Supplementary Material also would clarify that books,
records and accounts of a broker-dealer, associated person or person
subject to FINRA's jurisdiction would not ordinarily include books and
records that are in the possession, custody or control of a member or
associated person, but whose bona fide ownership is held by an
independent third party and the records are unrelated to the business
of the member.\61\
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\61\ Id.
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Finally, the proposed Supplementary Material would provide that a
FINRA member, associated person, or person subject to FINRA's
jurisdiction must make available its books, records or accounts when
these books, records or accounts are in the possession of another
person or entity, such as an attorney, accountant, or other
professional service provider, but the FINRA member, associated person,
or person subject to FINRA's jurisdiction controls or has a right to
demand them.\62\
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\62\ Id. Amendment No. 1 also makes a technical change to the
text of Rule 8210 to reflect the addition of paragraph (g) to the
Rule, which was added through a separate and unrelated intervening
proposed rule change that was submitted and became effective
subsequent to the filing of this proposal. See Exchange Act Release
No. 63016 (Sep. 29, 2010), 75 FR 61793 (Oct. 6, 2010) (Order
Approving Proposed Rule Change; File No. SR-FINRA-2010-021). This
change has no effect on the text of Rule 8210(g), which requires the
encryption of certain information provided via portable media
device. Id.
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IV. Discussion and Commission Findings
The Commission has carefully considered the proposed rule change,
as modified by Amendment Nos. 1 and 2, the comment letters received,
and FINRA's response and finds that the proposed rule change, as
modified by Amendment Nos. 1 and 2, is consistent with the requirements
of the Exchange Act and the rules and regulations thereunder that are
applicable to a national securities association.\63\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment Nos. 1 and 2, is consistent with Section 15A(b)(6) of the
Exchange Act, which requires, among other things, that the rules of a
national securities association be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system, and, in general,
protect investors and the public interest.\64\ The Commission believes
that FINRA, in its Response to Comments and Amendment Nos. 1 and 2,
adequately addressed the comments raised in response to the Notice.
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\63\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\64\ 15 U.S.C. 78o-3(b)(6).
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Current FINRA Rule 8210 confers on FINRA staff authority to compel
a member, person associated with a member, or other person subject to
FINRA's jurisdiction, to produce documents, provide testimony, or
supply written responses or electronic data in connection with an
investigation, complaint, examination or adjudicatory proceeding.
Additionally, the current rule provides FINRA with the authority to
inspect and copy the books, records, and accounts of all applicable
members and persons with respect to any matter involved in the
investigation, complaint, examination, or proceeding. FINRA's proposed
rule, as modified by Amendment Nos. 1 and 2, clarifies that information
subject to a FINRA Rule 8210 request must be in the member's or
person's ``possession, custody or control'' and explicitly provides the
methods by which certain types of notice must be made. These changes
will help eliminate existing confusion with respect to the scope of
FINRA Rule 8210. The proposed rule change, as modified by Amendment
Nos. 1 and 2, also will further the purposes of the Exchange Act by,
among other things, clarifying and streamlining the requirements
surrounding providing information and testimony and inspecting and
copying books and records. The clarifying nature of the proposed rule,
as modified by Amendment Nos. 1 and 2, will be helpful to FINRA members
in understanding the scope of, and notice requirements under, Rule
8210, and will assist FINRA in facilitating investigations and
fulfilling its responsibilities as a self-regulatory organization under
the Exchange Act.
V. Accelerated Approval
The Commission finds goods cause, pursuant to Section 19(b)(2) of
the Act,\65\ for approving the proposed rule change, as modified by
Amendment Nos. 1 and 2, prior to the 30th day after publication of
Amendment Nos. 1 and 2 in the Federal Register. The changes proposed in
Amendment Nos. 1 and 2 respond to specific concerns raised by
commenters and do not raise novel regulatory concerns. In particular,
Amendment Nos. 1 and 2 clarify the scope of FINRA Rule 8210 and FINRA's
authority to inspect and copy the books, records and accounts of
members and persons with respect to any matter involved in an
investigation, complaint, examination, or proceeding. The proposed
rule, as modified by Amendment Nos. 1 and 2, also furthers FINRA's
investor protection mandate.
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\65\ 15 U.S.C. 78s(b)(2).
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Accordingly, the Commission finds that good cause exists to approve
the
[[Page 74258]]
proposal, as modified by Amendment Nos. 1 and 2, on an accelerated
basis.
VI. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether Amendment Nos. 1
and 2 to the proposed rule change are consistent with the Exchange 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 Number SR-FINRA-2009-060 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-2009-060. 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 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-2009-060 and should be
submitted on or before January 3, 2013.
VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\66\ that the proposed rule change (SR-FINRA-2009-060), as modified
by Amendment Nos. 1 and 2, be, and hereby is, approved on an
accelerated basis.
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\66\ 15 U.S.C. 78(b)(2).
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. 2012-30049 Filed 12-12-12; 8:45 am]
BILLING CODE 8011-01-P