[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11925-11927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03818]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68918; File No. SR-FINRA-2013-014]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the General Securities Sales
Supervisor (Series 9/10) Registration Category
February 13, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on February 1, 2013, 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 prepared by
FINRA. FINRA has designated the proposed rule change as constituting a
``non-controversial'' rule change under paragraph (f)(6) of Rule 19b-4
under the Act,\3\ which renders the proposal effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend NASD Rule 1022(g) (Limited Principal--
General Securities Sales Supervisor) and NASD IM-1022-2 (Limited
Principal--General Securities Sales Supervisor) to remove the
restriction on General Securities Sales Supervisors from approving
advertisements as defined in NASD Rule 2210 (Communications with the
Public).
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The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Pursuant to NASD Rule 1022(g), if a principal's supervisory
activities are limited solely to securities sales activities, the
principal may register and qualify as a General Securities Sales
Supervisor (Series 9/10) rather than separately register and qualify in
multiple principal registration categories as may be applicable, such
as registering and qualifying as a General Securities Principal (Series
24) and Registered Options Principal (Series 4) to supervise sales of
corporate securities and options, respectively. A person registering as
a General Securities Sales Supervisor must satisfy the General
Securities Representative (Series 7) prerequisite registration and pass
the appropriate qualification examinations for General Securities Sales
Supervisors. In addition, General Securities Sales Supervisors are
eligible to supervise security futures activities if they complete a
firm-element continuing education program that addresses security
futures products.\4\ NASD IM-1022-2 explains the purpose of the General
Securities Sales Supervisor registration category.
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\4\ See NASD Rule 1022(g)(3).
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NASD Rule 1022(g) expressly prohibits a General Securities Sales
Supervisor from performing any of the following activities: (1)
Supervision of the origination and structuring of underwritings; (2)
supervision of market making commitments; (3) final approval of
advertisements as defined in NASD Rule 2210; (4) supervision of the
custody of firm or customer funds or securities for purposes of SEA
Rule 15c3-3 (Customer Protection--Reserves and Custody of Securities);
\5\ or (5) supervision of overall compliance with financial
responsibility rules.\6\
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\5\ 17 CFR 240.15c3-3.
\6\ In addition, General Securities Sales Supervisors cannot be
included for purposes of satisfying the two-principal requirement
under NASD Rule 1021(e)(1). See NASD Rule 1022(g)(2)(B).
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While General Securities Sales Supervisors are currently prohibited
from approving ``advertisements'' as defined in NASD Rule 2210, they
may approve ``sales literature'' \7\ relating to most types of
securities.\8\
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\7\ NASD Rule 2210 currently defines the term ``advertisement''
as any material, other than an independently prepared reprint and
institutional sales material, that is published, or used in any
electronic or other public media, including any Web site, newspaper,
magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures,
or telephone directories (other than routine listings). See NASD
Rule 2210(a)(1). NASD Rule 2210 currently defines the term ``sales
literature'' as any written or electronic communication, other than
an advertisement, independently prepared reprint, institutional
sales material and correspondence, that is generally distributed or
made generally available to customers or the public, including
circulars, research reports, performance reports or summaries, form
letters, telemarketing scripts, seminar texts, reprints (that are
not independently prepared reprints) or excerpts of any other
advertisement, sales literature or published article, and press
releases concerning a member's products or services. See NASD Rule
2210(a)(2). The Commission notes that NASD Rule 2210 was replaced by
FINRA Rule 2210 (Communications with the Public), effective February
4, 2013. See infra note 10.
\8\ General Securities Sales Supervisors may not approve sales
literature relating to options and security futures unless they have
additional registrations or qualifications. A Registered Options
Principal must approve sales literature relating to options. See
FINRA Rule 2220(b)(1) (Options Communications) (currently in
effect). Further, as discussed above, General Securities Sales
Supervisors must complete a firm-element continuing education
program that addresses security futures products to approve sales
literature relating to security futures. See NASD Rule 1022(g)(3).
In addition, the content of any equity research report that
constitutes sales literature must be approved by a Research
Principal or a Supervisory Analyst. See Notices to Members 04-81
(November 2004) and 07-04 (January 2007).
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As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\9\ FINRA adopted NASD Rule 2210 as
FINRA Rule 2210 (Communications with the Public).\10\ Among other
changes from NASD Rule 2210, FINRA Rule 2210 combines the definitions
of advertisement, sales literature and independently prepared reprint
into a single category--retail communications,\11\ and it no longer
defines advertisements as a separate category of communications. FINRA
made this change because modes of communication have largely rendered
obsolete the distinction between sales literature and advertisements.
For example, information in a blast email sent to a thousand
prospective customers currently would be considered sales literature,
but the same information posted to a firm's Web site would be
considered an advertisement. Sales literature and advertisements
generally are subject to the same content standards under NASD Rule
2210. Because FINRA has removed the distinction between advertisements
and sales literature in FINRA Rule 2210, FINRA is proposing to amend
NASD Rule 1022(g) and NASD IM-1022-2 to remove the restriction on
approving advertisements.\12\ Thus, the proposed rule change will allow
General Securities Sales Supervisors to approve most types of retail
communications.\13\
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\9\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
\10\ FINRA Rule 2210 was approved by the Commission, but it is
not yet effective. See Securities Exchange Act Release No. 66681
(March 29, 2012), 77 FR 20452 (April 4, 2012) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of Proposed
Rule Change; File No. SR-FINRA-2011-035). FINRA Rule 2210 will
become effective on February 4, 2013. See Regulatory Notice 12-29
(June 2012).
\11\ The term ``retail communication'' is defined as any written
(including electronic) communication that is distributed or made
available to more than 25 retail investors within any 30 calendar-
day period. See FINRA Rule 2210(a)(5).
\12\ FINRA had originally proposed to make these changes as part
of the proposed consolidated registration and qualification rules.
See Regulatory Notice 09-70 (December 2009).
\13\ General Securities Sales Supervisors may not approve retail
communications relating to options or security futures unless they
have additional registrations or qualifications. A Registered
Options Principal must approve retail communications relating to
options. See FINRA Rule 2220(b)(1) (Options Communications)
(effective February 4, 2013). Further, as discussed above, General
Securities Sales Supervisors must complete a firm-element continuing
education program that addresses security futures products to
approve retail communications relating to security futures. See NASD
Rule 1022(g)(3). In addition, the content of any equity research
report that constitutes a retail communication must be approved by a
Research Principal or a Supervisory Analyst. See Notices to Members
04-81 (November 2004) and 07-04 (January 2007). Finally, pursuant to
MSRB Rule G-21 (Advertising), advertisements relating to municipal
securities must be approved by a Municipal Securities Principal or a
General Securities Principal.
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FINRA has filed the proposed rule change for immediate
effectiveness. The
[[Page 11927]]
implementation date will be February 4, 2013.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\14\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change is also
consistent with the provisions of Section 15A(g)(3) of the Act,\15\
which authorizes FINRA to prescribe standards of training, experience,
and competence for persons associated with FINRA members. FINRA
believes that the proposed rule change will further these purposes by
maintaining consistency between the communications with the public
rules and the registration and qualification rules, which will assist
members and their associated persons in complying with these rules.
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\14\ 15 U.S.C. 78o-3(b)(6).
\15\ 15 U.S.C. 78o-3(g)(3).
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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.
The proposed rule change will reduce the burden on firms that may
employ a General Securities Sales Supervisor by allowing such firms to
more efficiently review and approve retail communications that do not
require a specialized registration. The proposed rule change further
will streamline the approval process by eliminating any need for a
General Securities Principal to review some or all of a retail
communication that a General Securities Sales Supervisor is competent
to review.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
FINRA has satisfied this requirement.
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FINRA has requested that the Commission waive the 30-day operative
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
Doing so will allow FINRA to implement the proposed rule change on
February 4, 2013, the same date that FINRA Rule 2210 became effective.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposal operative upon filing.\18\
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\18\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2013-014 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-2013-014. 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
10:00 a.m. and 3:00 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-2013-014 and should be
submitted on or before March 13, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03818 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P