[Federal Register: August 3, 2007 (Volume 72, Number 149)]
[Notices]
[Page 43310-43312]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03au07-111]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56169; File No. SR-NYSE-2007-69]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to an Information Memorandum That Reflects the Changes to
Disciplinary Proceedings at NYSE Regulation, Inc. as a Result of the
Regulatory Consolidation With the National Association of Securities
Dealers, Inc.
July 30, 2007.
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 July 26, 2007, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') 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
NYSE. The NYSE has designated the proposed rule change as constituting
a stated policy, practice, or interpretation with respect to the
meaning, administration, or enforcement of an existing rule of the
self-regulatory organization under section 19(b)(3)(A)(i) of the Act
\3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal
[[Page 43311]]
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\ 15 U.S.C. 78s(b)(3)(A)(i).
\4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
This filing consists of an NYSE Regulation, Inc. (``NYSE
Regulation'') Information Memo that reflects the changes to
disciplinary proceedings at NYSE Regulation as a result of the
regulatory consolidation with the National Association of Securities
Dealers, Inc (``NASD''). The text of the proposed rule change,
including the Information Memo, is available on the NYSE's Web site
(http://www.nyse.com), at the principal office of the NYSE, 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, the NYSE 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 NYSE has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On November 28, 2006, NYSE Regulation and NASD announced a plan to
consolidate their member regulation operations into a combined
organization, which will be known as the Financial Industry Regulatory
Authority (``FINRA''). FINRA will be the sole U.S. private-sector
provider of member firm regulation for securities firms that conduct
business with the public (the ``Transaction''). The purpose of this
filing is to submit to the Commission an Information Memo concerning
changes to disciplinary proceedings at NYSE Regulation because of the
Transaction.
As explained in the Information Memo, FINRA will incorporate
certain NYSE rules that pertain to member conduct, including rules
relating to financial and operational standards of member
organizations, books and records, and other non-trading functions of
firms (``NYSE Member Firm Rules'').\5\ However, NASD will not be
incorporating NYSE Rules 475, 476, and 476A, which are the Exchange's
rules that govern disciplinary procedures at the Exchange (the ``NYSE
Disciplinary Rules'').
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\5\ NASD's incorporation of the NYSE Member Firm Rules is the
subject of SR-NASD-2007-054. See Securities Exchange Act Release No.
56147 (July 26, 2007). Pursuant to Section 17(d) of the Act and Rule
17d-2 thereunder, FINRA and NYSE Regulation have agreed on a plan to
allocate regulatory responsibility relating to the NYSE Member Firm
Rules to FINRA (the ``17d-2 Agreement''). See Securities Exchange
Act Release No. 56148 (July 26, 2007) (File No. 4-544).
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In particular, in connection with the Transaction, certain staff
and functions of NYSE Regulation's Division of Enforcement will
transfer to FINRA, which will assume responsibility for all
investigations and disciplinary proceedings relating to violations of
NYSE Member Firm Rules by NYSE member organizations and members.
However, whether FINRA will conduct existing NYSE Regulation
Enforcement actions pursuant to FINRA Code of Procedure or the NYSE
Disciplinary Rules will depend on the status of the investigation as of
the closing date.\6\
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\6\ In connection with the Transaction, the Exchange has filed
with the Commission a proposed rule filing to amend NYSE Rule 2 to
require FINRA membership as a prerequisite to becoming an NYSE
member organization. See SR-NYSE-2007-67. In addition, NASD has
filed with the Commission amendments to its membership requirements
to provide for a waive-in process to approve current NYSE member
organizations that are not also NASD members (``NYSE-only member
organizations'') as FINRA members. See SR-NASD-2007-56. If these two
filings are approved and NYSE-only member organizations are then
approved as FINRA members, FINRA will be responsible for
disciplinary proceedings described herein pursuant to the 17d-2
Agreement. In that interim period before the two filings are
approved, FINRA will have authority to conduct disciplinary
proceedings relating to the NYSE Member Firm Rules pursuant to a
Regulatory Services Agreement among FINRA, NYSE Regulation, and the
NYSE (the ``RSA'').
Prior to the date that an NYSE-only member organization is
approved as a FINRA member, it will continue to be subject to NYSE
Regulation disciplinary procedures. Accordingly, whether NYSE
Regulation or FINRA procedures will govern disciplinary proceedings
will be based on the date that the NYSE-only member organization is
approved as a FINRA member, and not on the closing date.
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The Information Memo advises NYSE members and member organizations
how NYSE Regulation disciplinary actions will be handled following the
close of the Transaction. In particular, the Information Memo explains
how the status of the investigation as of the closing date will govern
which procedures will apply to a particular investigation, as follows:
If NYSE Regulation asserted jurisdiction over an individual or
member organization pursuant to NYSE Rule 477 before the closing date
of the Transaction, for those investigations relating to NYSE Member
Firm Rules, depending on the date of termination from the industry,
FINRA may have jurisdiction after the closing date of the Transaction
to continue any investigation noticed in such letter and to bring a
disciplinary proceeding at the conclusion of such investigation if it
is deemed appropriate. If FINRA does not have jurisdiction, FINRA may
continue to investigate such matters, but any resulting disciplinary
proceedings will be subject to the NYSE Disciplinary Rules.\7\
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\7\ FINRA will have the authority to conduct such disciplinary
proceedings pursuant to the RSA.
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The applicable disciplinary rules and forum for any disciplinary
proceedings that may result from a current NYSE Regulation
investigation will depend on whether NYSE Regulation has already filed
a Charge Memorandum or Stipulation of Facts and Consent to Penalty
(``Stipulation and Consent'') as of the closing date of the
Transaction.
If NYSE Regulation has filed a Charge Memorandum or Stipulation and
Consent as of the date of the closing, such matter (including any later
appeals) will be adjudicated in accordance with the NYSE Disciplinary
Rules and before the NYSE Hearing Board. Pursuant to the RSA, NYSE
Regulation staff who will be transferring to FINRA may continue to
participate in such proceedings.
If NYSE Regulation has not filed a Charge Memorandum or Stipulation
and Consent as of the date of the closing in connection with an
investigation relating to NYSE Member Firm Rules, the matter (including
any later appeals) would be adjudicated by FINRA, pursuant to the FINRA
(currently NASD) Code of Procedure, which includes FINRA's Acceptance,
Waiver, and Consent process.
NYSE Hearing Board decisions that have been, or could be, appealed
under NYSE Rule 476 will be addressed pursuant to the current NYSE
disciplinary rules. Matters initiated by FINRA pursuant to its Code of
Procedure following the closing date, even if initiated as the result
of an investigation that began at NYSE Regulation, would be appealed in
accordance with FINRA's rules and procedures for such appeals.
The applicable rule and forum for summary proceedings that are
currently adjudicated pursuant to NYSE Rule 475 will depend on whether
NYSE Regulation has notified the person or entity in writing of the
summary action before the date of closing. If the
[[Page 43312]]
notification in writing has occurred before the date of closing, the
matter will be adjudicated pursuant to NYSE Disciplinary Rules. If no
such notification has occurred, the matter will be addressed by FINRA,
pursuant to FINRA rules.
Minor violations of Member Firm Rules that are currently
adjudicated under NYSE Rule 476A (Imposition of Fines for Minor
Violation(s) of Rules) (also known as summary fines) will be handled as
follows: If a summary fine notice relating to any violation, including
violations of Member Firm Rules, is issued before the date of closing,
the matter will be adjudicated pursuant to NYSE rules. With respect to
matters arising after the date of closing, NASD expects to file a rule
change to modify its Minor Rule Violation Plan (``MRVP'') to include
the NYSE Member Firm Rules that, as of the date of such filing, are
listed in NYSE Rule 476A. If the Commission approves that filing, after
the closing, FINRA will be authorized to impose fines under FINRA's
MRVP for minor violations by dual members of the NYSE Member Firm Rules
enumerated in FINRA's MRVP.\8\
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\8\ Pending approval of SR-NASD-2007-55, FINRA will have the
authority to impose MRVP fines that relate to the NYSE Member Firm
Rules pursuant to the RSA.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of section 6 \9\ of the Act \10\ in general and
furthers the objectives of section 6(b)(5) \11\ in particular, in that
it is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78a.
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(1) \13\ thereunder
because it constitutes a stated policy, practice or interpretation with
respect to the meaning, administration, or enforcement of an existing
rule. At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate 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.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(1).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2007-69 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2007-69. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet 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 inspection
and copying 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 NYSE. 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-NYSE-2007-69 and should be
submitted on or before August 24, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-15096 Filed 8-2-07; 8:45 am]
BILLING CODE 8010-01-P