
[Federal Register: August 7, 2009 (Volume 74, Number 151)]
[Notices]               
[Page 39725-39726]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au09-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60422; File No. SR-FINRA-2009-048]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change to Adopt 
FINRA Rule 5230 (Payments Involving Publications that Influence the 
Market Price of a Security) in the Consolidated FINRA Rulebook

August 3, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 21, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) 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. 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

    FINRA is proposing to adopt NASD Rule 3330 (Payment Designed to 
Influence Market Prices, Other than Paid Advertising) as FINRA Rule 
5230 in the consolidated FINRA rulebook, with several changes to 
clarify the scope of the rule.
    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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD 
Rule 3330 into the Consolidated FINRA Rulebook as FINRA Rule 5230 with

[[Page 39726]]

several changes, which are described below.\4\
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    \3\ 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 FINRA Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
    \4\ The proposed rule change also changes the title of the rule 
to ``Payments Involving Publications that Influence the Market Price 
of a Security.''
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    NASD Rule 3330 provides that no member may, ``directly or 
indirectly, give, permit to be given, or offer to give, anything of 
value to any person for the purpose of influencing or rewarding the 
action of such person in connection with the publication or circulation 
in any newspaper, investment service, or similar publication, of any 
matter which has, or is intended to have, an effect upon the market 
price of any security.* * *'' The rule includes an exception for any 
matter that is ``clearly distinguishable as paid advertising.''
    As part of transferring NASD Rule 3330 into the Consolidated FINRA 
Rulebook, FINRA is proposing two changes to the rule to modernize its 
terms and clarify its scope. First, the proposed rule change updates 
the list of media to which the rule refers. Because NASD Rule 3330 has 
not been amended for over 60 years, it refers only to matters published 
or circulated in any ``newspaper, investment service, or similar 
publication.'' The proposed rule change updates this language to 
include electronic and other types of media, including magazines, Web 
sites, and television programs.
    Second, the proposed rule change expands the exceptions in the rule 
beyond paid advertising to also include compensation paid in connection 
with research reports and communications published in reliance on 
Section 17(b) of the Securities Act of 1933.\5\ FINRA is proposing 
these changes to clarify that the prohibitions in the rule are not 
intended to cover compensation paid for publications that are 
explicitly permitted pursuant to other rules. For example, NASD Rule 
3330 could be read to prohibit a member from paying for a third-party 
research report if the report affected the market price of a security; 
however, NASD Rule 2711(h)(13) contemplates that members might pay for 
and distribute third-party research reports.\6\ In addition, FINRA does 
not believe that the rule should be read to prohibit compensation paid 
in connection with the publication of information that is specifically 
permitted pursuant to Section 17(b) of the Securities Act, provided the 
required disclosures are made.
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    \5\ Section 17(b) of the Securities Act of 1933 provides that no 
person may ``publish, give publicity to, or circulate any * * * 
communication which, though not purporting to offer a security for 
sale, describes such security for a consideration received or to be 
received, directly or indirectly, from an issuer, underwriter, or 
dealer, without fully disclosing the receipt, whether past or 
prospective, of such consideration and the amount thereof.'' 15 
U.S.C. 77q(b).
    \6\ Although the proposed rule change would exempt research 
reports from FINRA Rule 5230, research reports would still be 
subject to applicable FINRA rules and guidance governing research 
reports and other communications with the public. See NASD Rules 
2711, 2210(d), IM-2210-1. Among other things, these rules require 
that research reports include certain disclosures, be fair and 
balanced, and not be misleading.
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    FINRA will announce the implementation date of the proposed rule 
change in a Regulatory Notice to be published no later than 90 days 
following Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\7\ 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 will 
clarify the scope of the rule in the new Consolidated FINRA Rulebook.
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    \7\ 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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2009-048 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-2009-048. 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 the 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-2009-048 and should be 
submitted on or before August 28, 2009.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18978 Filed 8-6-09; 8:45 am]

BILLING CODE 8010-01-P
