[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Notices]
[Pages 2924-2926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00706]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71287; File No. SR-FINRA-2014-001]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Extend the Expiration Date of FINRA Rule 0180
(Application of Rules to Security-Based Swaps)
January 10, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on January 8, 2014, Financial Industry Regulatory
Authority, Inc. (``FINRA'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by FINRA. 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 receipt
of this filing by 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 extend the expiration date of FINRA Rule 0180
(Application of Rules to Security-Based Swaps) to February 11, 2015.
FINRA Rule 0180 temporarily limits, with certain exceptions, the
application of FINRA rules with respect to security-based swaps.
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
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summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On July 1, 2011, the SEC issued an Order granting temporary
exemptive relief (the ``Temporary Exemptions'') from compliance with
certain provisions of the Exchange Act in connection with the revision,
pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act''),\4\ of the Exchange Act
definition of ``security'' to encompass security-based swaps.\5\
Consistent with the Commission's action, on July 8, 2011, FINRA filed
for immediate effectiveness FINRA Rule 0180,\6\ which, with certain
exceptions, is intended to temporarily limit the application of FINRA
rules \7\ with respect to security-based swaps, thereby helping to
avoid undue market disruptions resulting from the change to the
definition of ``security'' under the Act.\8\
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\4\ Public Law 111-203, 124 Stat. 1376 (2010).
\5\ See Securities Exchange Act Release No. 64795 (July 1,
2011), 76 FR 39927 (July 7, 2011) (Order Granting Temporary
Exemptions Under the Securities Exchange Act of 1934 in Connection
With the Pending Revision of the Definition of ``Security'' To
Encompass Security-Based Swaps, and Request for Comment) (the
``Exemptive Release''). The term ``security-based swap'' is defined
in Section 761 of the Dodd-Frank Act. See also Securities Exchange
Act Release No. 67453 (July 18, 2012), 77 FR 48208 (August 13, 2012)
(Further Definition of ``Swap,'' ``Security-Based Swap,'' and
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap
Agreement Recordkeeping).
\6\ See Securities Exchange Act Release No. 64884 (July 14,
2011), 76 FR 42755 (July 19, 2011) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-033)
(``FINRA Rule 0180 Notice of Filing''). See also Securities Exchange
Act Release No. 66156 (January 13, 2012), 77 FR 3027 (January 20,
2012) (Notice of Filing and Immediate Effectiveness of Proposed Rule
Change; File No. SR-FINRA-2012-004) (extending the expiration date
of FINRA Rule 0180 to January 17, 2013); Securities Exchange Act
Release No. 68471 (December 19, 2012), 77 FR 76113 (December 26,
2012) (Notice of Filing and Immediate Effectiveness of Proposed Rule
Change; File No. SR-FINRA-2012-056) (extending the expiration date
of FINRA Rule 0180 to July 17, 2013); Securities Exchange Act
Release No. 69262 (April 1, 2013), 78 FR 20708 (April 5, 2013)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change; File No. SR-FINRA-2013-019) (extending the expiration date
of FINRA Rule 0180 to February 11, 2014).
\7\ The current FINRA rulebook consists of: (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules''). 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. 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).
\8\ In its Exemptive Release, the Commission noted that the
relief is targeted and does not include, for instance, relief from
the Act's antifraud and anti-manipulation provisions. FINRA has
noted that FINRA Rule 0180 is similarly targeted. For instance,
paragraph (a) of FINRA Rule 0180 provides that FINRA rules shall not
apply to members' activities and positions with respect to security-
based swaps, except for FINRA Rules 2010 (Standards of Commercial
Honor and Principles of Trade), 2020 (Use of Manipulative, Deceptive
or Other Fraudulent Devices), 3310 (Anti-Money Laundering Compliance
Program) and 4240 (Margin Requirements for Credit Default Swaps).
See also paragraphs (b) and (c) of FINRA Rule 0180 (addressing the
applicability of additional rules) and FINRA Rule 0180 Notice of
Filing.
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The Commission, noting the need to avoid a potential unnecessary
disruption to the security-based swap market in the absence of an
extension of the Temporary Exemptions, and the need for additional time
to consider the potential impact of the revision of the Exchange Act
definition of ``security'' in light of recent Commission rulemaking
efforts under Title VII of the Dodd-Frank Act, issued an Order
extending the expiration date of the Temporary Exemptions until
February 11, 2014.\9\ The Commission noted that extending the Temporary
Exemptions would facilitate a coordinated consideration of these issues
with the relief provided pursuant to FINRA Rule 0180. In conjunction
with the Commission's action, on March 18, 2013, FINRA filed for
immediate effectiveness a proposed rule change to extend the expiration
date of FINRA Rule 0180 to February 11, 2014.\10\ In establishing Rule
0180, and in extending the rule's expiration date,\11\ FINRA noted its
intent, pending the implementation of any SEC rules and guidance that
would provide greater regulatory clarity in relation to security-based
swap activities, to align the expiration date of FINRA Rule 0180 with
the termination of relevant provisions of the Temporary Exemptions.
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\9\ See Securities Exchange Act Release No. 68864 (February 7,
2013), 78 FR 10218 (February 13, 2013) (Order Extending Temporary
Exemptions Under the Securities Exchange Act of 1934 in Connection
With the Revision of the Definition of ``Security'' to Encompass
Security-Based Swaps, and Request for Comment) (``Temporary
Exemptions Extension Release''). See also Securities Exchange Act
Release No. 68753 (January 29, 2013), 78 FR 7654 (February 4, 2013)
(Extension of Exemptions for Security-Based Swaps) (extending the
expiration dates in interim final rules that provide exemptions
under the Securities Act of 1933 (the ``Securities Act''), the
Exchange Act, and the Trust Indenture Act of 1939 for those
security-based swaps that prior to July 16, 2011 were security-based
swap agreements and are defined as ``securities'' under the
Securities Act and the Exchange Act as of July 16, 2011 due solely
to the provisions of Title VII of the Dodd-Frank Act).
\10\ See Securities Exchange Act Release No. 69262 (April 1,
2013), 78 FR 20708 (April 5, 2013) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2013-019).
\11\ See FINRA Rule 0180 Notice of Filing. See also footnote 10.
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The Commission's rulemaking and development of guidance in relation
to security-based swap activities is ongoing. As such, FINRA believes
it is appropriate and in the public interest, in light of the
Commission's goals as set forth in the Exemptive Release and the
Temporary Exemptions Extension Release, to extend FINRA Rule 0180 for a
limited period, to February 11, 2015, so as to avoid undue market
disruptions resulting from the change to the definition of ``security''
under the Act. As noted in the FINRA Rule 0180 Notice of Filing, FINRA
will amend the expiration date of Rule 0180 in subsequent filings as
necessary such that the expiration date will be coterminous with the
termination of relevant provisions of the Temporary Exemptions.
FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the implementation date of the
proposed rule change will be February 11, 2014.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\12\ 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 would
further the purposes of the Act because, consistent with the goals set
forth by the Commission in the Exemptive Release and in the Temporary
Exemptions Extension Release, the proposed rule change will help to
avoid undue market disruption that could result if FINRA Rule 0180
expires before the implementation of any SEC rules and guidance that
would provide greater regulatory clarity in relation to security-based
swap activities.
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\12\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. FINRA believes that the
proposed rule change would prevent undue market disruption that would
otherwise result if security-
[[Page 2926]]
based swaps were, by virtue of the expansion of the Act's definition of
``security'' to encompass security-based swaps, subject to the
application of all FINRA rules before the implementation of any SEC
rules and guidance that would provide greater regulatory clarity in
relation to security-based swap activities. FINRA believes that, by
extending the expiration of FINRA Rule 0180, the proposed rule change
will serve to promote regulatory clarity and consistency, thereby
reducing burdens on the marketplace and facilitating investor
protection.
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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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 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-2014-001 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-2014-001. 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-2014-001
and should be submitted on or before February 6, 2014.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00706 Filed 1-15-14; 8:45 am]
BILLING CODE 8011-01-P