
[Federal Register: March 22, 2010 (Volume 75, Number 54)]
[Notices]               
[Page 13632-13636]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr10-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61706; File No. SR-FINRA-2009-047]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, To Adopt FINRA Rule 3160 (Networking Arrangements 
Between Members and Financial Institutions) in the Consolidated FINRA 
Rulebook

March 15, 2010.

I. Introduction

    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''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt NASD Rule 2350 (Broker/
Dealer Conduct on the Premises of Financial Institutions) as FINRA Rule 
3160 in the consolidated FINRA rulebook, subject to certain amendments.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on August 11, 2009.\3\ The Commission received five comments 
on the proposed rule change.\4\ On February 5, 2010, FINRA responded to 
the comments.\5\ Also on February 5, 2010, FINRA filed Amendment No. 1 
to the proposed rule change.\6\ The Commission is publishing this 
notice and order to solicit comments on Amendment No. 1 and to approve 
the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.
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    \3\ See Securities Exchange Act Release No. 60475 (August 11, 
2009), 74 FR 41774 (August 18, 2009).
    \4\ See letter from Frederick T. Greene, Woodforest Financial 
Services, Inc., to Elizabeth M. Murphy, Secretary, Commission, dated 
September 4, 2009 (``Woodforest Letter''); letter from William A. 
Jacobson and Eric D. Johnson, Cornell Securities Law Clinic, to 
Elizabeth M. Murphy, Secretary, Commission, dated September 8, 2009 
(``Cornell Letter''); letter from Dale E. Brown, Financial Services 
Institute, Inc., to Elizabeth M. Murphy, Secretary, Commission, 
dated September 8, 2009 (``FSI Letter''); letter from Jill I. Gross 
and Ed Pekarek, Pace University School of Law Investor Rights 
Clinic, operating through John Jay Legal Services, Inc., to 
Elizabeth M. Murphy, Secretary, Commission, dated September 8, 2009 
(``PIRC Letter''); letter from Ronald C. Long, Wells Fargo Advisors, 
to Elizabeth M. Murphy, Secretary, Commission, dated September 18, 
2009 (``WFA Letter'').
    \5\ See letter from Gary L. Goldsholle, FINRA, to Elizabeth M. 
Murphy, Secretary, Commission, dated February 5, 2010 (``FINRA 
Response'').
    \6\ Amendment No. 1 made minor edits to the rule text and the 
description of the proposal.
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II. Description of Proposed Rule Change

    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\7\ FINRA proposed to adopt NASD Rule 
2350 (Broker/Dealer Conduct on the Premises of Financial Institutions), 
subject to certain amendments, as FINRA Rule 3160 (Networking 
Arrangements Between Members and Financial Institutions). The details 
of the proposed rule change are described below.
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    \7\ 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).
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NASD Rule 2350

    NASD Rule 2350 governs the activities of broker-dealers on the 
premises of financial institutions.\8\ Also known as the ``bank broker-
dealer rule,'' Rule 2350 generally requires broker-dealers that conduct 
business on the premises of a financial institution where retail 
deposits are taken to: (1) Enter into a written agreement with the 
financial institution specifying each party's responsibilities and the 
terms of compensation (networking agreement); (2) segregate the 
securities activities conducted on the premises of the financial 
institution from the retail deposit-taking area; (3) allow access for 
inspection and examination by the SEC and FINRA; (4) ensure that 
communications with customers clearly identify that the broker-dealer 
services are provided by the member; (5) disclose to customers that the 
securities

[[Page 13633]]

products offered by the broker-dealer are not insured like other 
banking products; and (6) make reasonable efforts at account opening to 
obtain a customer's written acknowledgement of the receipt of such 
disclosure. Rule 2350 applies only when broker-dealer services are 
conducted either in person, over the telephone, or through any other 
electronic medium, on the premises of a financial institution where 
retail deposits are taken, by a broker-dealer that has a physical 
presence on those premises.\9\
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    \8\ Under the rule, the term ``financial institution'' includes 
federal and state-chartered banks, savings and loan associations, 
savings banks, credit unions, and the service corporations of such 
institutions required by law.
    \9\ See Notice to Members 97-89 (December 1997).
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    NASD Rule 2350 was adopted to reduce potential customer confusion 
in dealing with broker-dealers that conduct business on the premises of 
financial institutions, and to clarify the relationship between a 
broker-dealer and a financial institution entering into a networking 
agreement.\10\
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    \10\ See Securities Exchange Act Release No. 39294 (November 4, 
1997), 62 FR 60542, 60547 (November 10, 1997) (Approval Order).
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The Gramm-Leach Bliley Act and Regulation R

    In 2007, the SEC and the Board of Governors of the Federal Reserve 
jointly adopted rules, known as Regulation R,\11\ that implement the 
bank broker provisions of the Gramm-Leach Bliley Act of 1999 
(``GLB'').\12\ These provisions replaced what had been a blanket 
exception for banks from the definition of ``broker'' under the 
Exchange Act with eleven exceptions from the definition of ``broker'' 
that are codified in Exchange Act Section 3(a)(4)(B).\13\
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    \11\ See 17 CFR 247.700-781.
    \12\ Pub. L. 106-102, 113 Stat. 1338 (1999).
    \13\ See 15 U.S.C. 78c(a)(4).
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    Exchange Act Section 3(a)(4)(B)(i) provides an exception from the 
definition of ``broker'' for banks that enter into third-party 
brokerage (or networking) arrangements with a broker-dealer (the 
networking exception). Under this exception, a bank is not considered 
to be a broker if it enters into a contractual or other written 
arrangement with a registered broker-dealer under which the broker-
dealer offers brokerage services on or off bank premises, subject to 
certain conditions (this differs from NASD Rule 2350, which only 
applies to broker-dealers offering brokerage services on a financial 
institution's premises).\14\ Although this exception generally provides 
that a bank may not pay its unregistered employees incentive 
compensation for referring a customer to a broker-dealer, it does 
permit a bank employee to receive a ``nominal one-time cash fee of a 
fixed dollar amount'' that is not contingent on whether the referral 
results in a transaction with the broker-dealer.\15\ Further, Rule 701 
of Regulation R provides an exemption for referrals of certain 
institutional and high net worth clients that may result in the payment 
of a higher referral fee (i.e., incentive compensation of more than a 
nominal amount) to bank employees and may be contingent on the 
occurrence of a securities transaction, subject to certain additional 
requirements.\16\
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    \14\ The exceptions in Section 3(a)(4)(B) of the Exchange Act 
apply to ``banks'' as defined in Exchange Act Section 3(a)(6). NASD 
Rule 2350 addresses ``financial institutions.'' See supra note 8.
    \15\ See 17 CFR 247.700 for definitions of the terms ``nominal 
one-time cash fee of a fixed dollar amount,'' ``referral,'' 
``contingent on whether the referral results in a transaction'' and 
``incentive compensation.''
    \16\ See 17 CFR 247.701.
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Proposed FINRA Rule 3160

    FINRA proposed to adopt NASD Rule 2350 into the Consolidated FINRA 
Rulebook as FINRA Rule 3160, subject to certain amendments to 
streamline the rule and to reflect applicable provisions of GLB and 
Regulation R.
    First, the proposed rule change would amend the scope of the rule 
to conform to the networking exception in GLB. NASD Rule 2350 applies 
only to broker-dealer conduct on the premises of a financial 
institution where retail deposits are taken. However, the networking 
exception in GLB applies to networking arrangements in which a broker 
or dealer offers brokerage services on or off the premises of a 
bank.\17\ Accordingly, with the exception of those requirements 
addressing the physical setting, proposed FINRA Rule 3160 would apply 
to a member that is a party to a networking arrangement with a 
financial institution under which the member offers broker-dealer 
services, regardless of whether the member is conducting broker-dealer 
services on or off the premises of a financial institution.\18\
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    \17\ See 15 U.S.C. 78c(a)(4)(B)(i).
    \18\ The title of the rule would be changed from ``Broker/Dealer 
Conduct on the Premises of Financial Institutions'' to ``Networking 
Arrangements Between Members and Financial Institutions.''
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    Second, the proposed rule change would make certain minor changes 
to the provisions addressing setting, as set forth in NASD Rule 
2350(c)(1) (Setting). The setting provision establishes the 
requirements regarding a member's presence on the premises of a 
financial institution. To better align the rule text with the language 
in the networking exception in GLB and its associated rules in 
Regulation R, proposed FINRA Rule 3160 would provide that a member 
conducting broker-dealer services on the premises of a financial 
institution: (1) Be clearly identified as the person performing broker-
dealer services and distinguish its broker-dealer services from the 
services of the financial institution; (2) conduct its broker-dealer 
services in an area that displays clearly the member's name; and (3) to 
the extent practicable, maintain its broker-dealer services in a 
location physically separate from the routine retail deposit-taking 
activities of the financial institution.
    Third, the proposed rule change would amend the provisions 
addressing networking agreements, in NASD Rule 2350(c)(2) (Networking 
and Brokerage Affiliate Agreements), to reference certain requirements 
in GLB and Regulation R regarding written agreements between banks and 
broker-dealers. As noted above, Rule 701 of Regulation R allows a bank 
employee to receive a contingent referral fee not subject to the 
``nominal amount'' restriction, so long as the client referred to the 
broker-dealer by the bank employee is an ``institutional'' or ``high 
net worth'' customer, as defined in Rule 701, and the other conditions 
of the rule are satisfied.
    Rule 701 requires that the written agreement between a bank relying 
on the exception from the definition of ``broker'' under Exchange Act 
Section (3)(a)(4)(B)(i) and the exemption under Rule 701 for 
institutional and high net worth customers and its networking broker-
dealer include terms that obligate the broker-dealer to take certain 
actions.\19\ In particular, the written agreement between the bank and 
broker-dealer must require that the broker-dealer:
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    \19\ See 17 CFR 247.701(a)(3). See also Securities Exchange Act 
Release No. 56501, 72 FR 56514, 56523 (October 3, 2007) (Definitions 
of Terms and Exemptions Relating to the ``Broker'' Exceptions for 
Banks) (``Banks and broker-dealers are expected to comply with the 
terms of their written networking arrangements. If a bank or broker-
dealer does not comply with the terms of the agreement, however, the 
bank would not become a `broker' under Section 3(a)(4) of the 
Exchange Act or lose its ability to operate under the proposed 
exemption.'').

    (1) Determine that a bank employee is not subject to a statutory 
disqualification under Section 3(a)(39) of the Exchange Act, have a 
reasonable basis to believe that the customer is a ``high net worth 
customer'' or an ``institutional customer'' and conduct a 
suitability or sophistication analysis for customers and securities 
transactions by customers; \20\
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    \20\ See 17 CFR 247.701(a)(3)(ii)-(iii).
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    (2) promptly inform the bank if the broker-dealer determines 
that the customer referred to the broker-dealer is not a ``high net 
worth customer'' or an ``institutional customer,'' as applicable, or 
the bank employee receiving

[[Page 13634]]

the referral fee is subject to a statutory disqualification under 
Section 3(a)(39) of the Exchange Act; \21\ and
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    \21\ See 17 CFR 247.701(a)(3)(v).
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    (3) inform the customer if the customer or the securities 
transaction(s) to be conducted by the customer does not meet the 
applicable standard set forth in the suitability or sophistication 
determination in Rule 701; \22\
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    \22\ See 17 CFR 247.701(a)(3)(iv). See Securities Exchange Act 
Release No. 56501 (October 3, 2007) (re: Suitability or 
Sophistication Analysis by Broker-Dealer). The ``sophistication'' 
analysis is based on the elements of NASD IM-2310-3 (Suitability 
Obligations to Institutional Customers). FINRA is seeking comment on 
a proposal regarding a consolidated FINRA rule addressing 
suitability obligations. See Regulatory Notice 09-25 (May 2009).

    In addition, the broker-dealer may be contractually obligated to 
provide certain disclosures to a referred customer.\23\
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    \23\ See 17 CFR 247.701(b).
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    Proposed FINRA Rule 3160 would clarify that networking agreements 
must include all broker-dealer obligations, as applicable, in Rule 701, 
and that independent of their contractual obligations, members must 
comply with all such broker-dealer obligations. In this regard, the 
release adopting Regulation R specifically contemplated that FINRA 
might adopt a rule to require that broker-dealers comply with the 
requirements of Rule 701.\24\
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    \24\ See Securities Exchange Act Release No. 56501, 72 FR 56514, 
56528 n.135 (October 3, 2007) (``As stated in the proposal, the 
Commission anticipates that it may be necessary for either FINRA or 
the Commission to propose a rule that would require broker-dealers 
to comply with the written agreements entered into pursuant to Rule 
701.'').
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    Next, the proposed rule change would modify the provisions 
addressing customer disclosure and acknowledgements, in NASD Rule 
2350(c)(3) (Customer Disclosure and Written Acknowledgement), which 
require members to make certain disclosures to customers regarding 
securities products, at or prior to account opening, and to make 
reasonable efforts to obtain a customer's written acknowledgement of 
the receipt of such disclosures at account opening. Such disclosures 
include that the securities products are: (1) Not insured by the 
Federal Deposit Insurance Corporation (``FDIC''); (2) not deposits or 
other obligations of the financial institution and not guaranteed by 
the financial institution; and (3) subject to investment risk, 
including possible loss of the principal invested.
    The proposal would not incorporate the written acknowledgement 
requirement into proposed FINRA Rule 3160, in light of the application 
of the rule to networking arrangements regardless of whether the member 
is conducting broker-dealer services on or off the premises of a 
financial institution and the obligation that members provide the 
requisite disclosures orally and in writing. In this context, FINRA 
believes that oral and written disclosure to customers regarding 
securities products is sufficient and that requiring a written 
acknowledgement of receipt from customers is unnecessary.
    Lastly, the proposed rule change would amend the provisions 
addressing communications with the public in NASD Rule 2350(c)(4) 
(Communications with the Public), consistent with the extension of 
proposed FINRA Rule 3160 to networking arrangements where the member 
conducts broker-dealer services on or off the premises of a financial 
institution. NASD Rule 2350(c)(4) requires a member to make the same 
disclosures regarding securities products discussed above on 
advertisements and sales literature that announce the location of a 
financial institution where broker-dealer services are provided by the 
member or that are distributed by the member on the premises of a 
financial institution. To further reduce potential customer confusion, 
proposed FINRA Rule 3160 would extend this requirement to include all 
of the member's advertisements and sales literature that promote the 
name or services of the financial institution or that are distributed 
by the member at any other location where the financial institution is 
present or represented.

III. Summary of Comments and Amendment No. 1

    The Commission received five comments in response to the rule 
proposal. Four of the commenters generally supported the proposed rule 
change,\25\ and one opposed it, stating that the proposal did not go 
far enough to distinguish between banking and investment 
activities.\26\ The comments also raised specific issues, discussed 
below.
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    \25\ See Cornell Letter, FSI Letter, WFA Letter and Woodforest 
Letter.
    \26\ See PIRC Letter.
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Networking Arrangements on and off the Premises of Financial 
Institutions

    One commenter \27\stated that the application of proposed FINRA 
Rule 3160 to broker-dealer services off the premises of a financial 
institution would unreasonably expand the requirements of NASD Rule 
2350 to provide certain disclosures orally and in writing to customers 
beyond bank brokerage clients to include all other customers of the 
broker-dealer, including institutional clients, on-line brokerage 
clients and off-shore clients. In its response, FINRA stated that it 
believes that extending proposed FINRA Rule 3160 to apply to member 
conduct pursuant to a networking arrangement, regardless of where such 
activities take place, will enhance investor protection. However, in 
light of comments received regarding the application of the proposed 
rule to customer accounts that are not opened as a result of a member's 
networking arrangement with a financial institution, FINRA amended the 
proposal to require that oral disclosures only be provided at or prior 
to the time that a customer account is opened on the premises of a 
financial institution by a member that is a party to a networking 
arrangement with the financial institution. Written disclosures that 
the broker-dealer services are being provided by the member and not by 
the financial institution, and that the securities products purchased 
or sold in a transaction with the member are not insured by the FDIC, 
not obligations of or guaranteed by the financial institution, and are 
subject to investment risks, including possible loss of principal, 
would still be required as set forth in the original proposal. FINRA 
notes that a written acknowledgement is not required under GLB or 
Regulation R. FINRA believes that this change will retain the benefits 
of applying the rule to member conduct on or off the premises of a 
financial institution without imposing potentially unnecessary oral 
disclosures to customers whose account openings may be wholly unrelated 
to the networking arrangement.\28\
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    \27\ See WFA Letter.
    \28\ See FINRA Response.
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    One commenter \29\ suggested that if a member's networking 
agreement with a financial institution does not explicitly address off 
premises brokerage services to be provided by the member, then the 
member should not have to comply with the proposed rule in its 
application to off premises activities. In its response, FINRA 
disagreed with this interpretation of the proposed rule. Proposed FINRA 
Rule 3160 would apply to a member conducting broker-dealer services 
under a networking arrangement off the premises of a financial 
institution, regardless of the specific contractual agreements between 
the parties. FINRA stated that the proposed rule is intended to impose 
certain requirements on members in networking arrangements that apply

[[Page 13635]]

notwithstanding any contractual obligations of the parties.
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    \29\ See WFA Letter.
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    One commenter \30\ opposed proposed FINRA Rule 3160 stating that it 
appears designed to maintain the status quo. The commenter stated that 
the proposed rule is insufficient and does not adequately protect 
investors, and specifically noted that senior citizens are often 
confused regarding the role of financial institutions with respect to 
securities activities through networking arrangements. In its response, 
FINRA stated that it does not believe that the proposed rule maintains 
the status quo, and noted that the proposed rule change expands 
existing requirements to encompass activities of a broker-dealer 
operating under a networking agreement with a financial institution 
occurring off the premises of a financial institution. Moreover, FINRA 
stated that its examination and enforcement mechanisms will continue to 
bolster the application of FINRA's requirements governing members' 
networking arrangements with financial institutions.\31\
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    \30\ See PIRC Letter.
    \31\ See FINRA Response.
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Written Acknowledgement of Receipt of Disclosures

    Certain commenters \32\ suggested that FINRA maintain in proposed 
FINRA Rule 3160 a requirement that a member make a reasonable effort to 
obtain from each customer during the account opening process a written 
acknowledgement of receipt of the disclosures required under the rule. 
One commenter \33\ noted that, if this requirement was eliminated, 
members would have less incentive to ensure that associated persons are 
making the required disclosures. Another commenter \34\ viewed FINRA's 
reasons for removing the acknowledgement requirement as unpersuasive. 
This commenter suggested that members have the technology to obtain 
adequate written acknowledgement from customers, and any administrative 
burden imposed upon members by a written acknowledgment requirement 
would be greatly outweighed by the benefit of reducing customer 
confusion. One commenter \35\ asserted that notwithstanding the current 
requirement to obtain written acknowledgment from customers, many 
investors do not know that they are acquiring a securities product as 
opposed to a bank product. Additionally, one commenter \36\ noted that 
FINRA's proposal may conflict with the Interagency Statement on Retail 
Sales of Nondeposit Investment Products,\37\ which requires firms to 
obtain written acknowledgement for the receipt of nondepository product 
disclosures. While the commenter did not oppose FINRA's proposal in 
this respect, it views the proposal as an opportunity for regulatory 
harmonization in this area. In its response, FINRA stated that it 
continues to believe that retaining a written acknowledgement in its 
rule is unnecessary. Moreover, FINRA opined that its proposal would not 
conflict with a firm's obligations under the Interagency Statement, and 
a written acknowledgement is not required under GLB or Regulation R.
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    \32\ See Woodforest Letter, Cornell Letter and PIRC Letter.
    \33\ See PIRC Letter.
    \34\ See Cornell Letter.
    \35\ See PIRC Letter.
    \36\ See WFA Letter.
    \37\ Board of Governors of the Federal Reserve System, Office of 
the Comptroller of the Currency, Federal Deposit Insurance 
Corporation, Office of Thrift Supervision, ``Interagency Statement 
on Retail Sale of Nondeposit Investment Products,'' Feb. 15, 1994, 
as supplemented by Joint Interpretations of the Interagency 
Statement on Retail Sales of Nondeposit Investment Products, Sept. 
12, 1995 (the ``Interagency Statement'').
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Setting Provision

    One commenter \38\ expressed the view that it is common industry 
practice for a registered representative to use conference rooms at a 
bank location to meet with customers because many representatives' 
``offices'' are cubicles within the operations area of the financial 
institution. The commenter \39\ suggested that FINRA eliminate proposed 
FINRA Rule 3160(a)(1)(B), which would require members to conduct 
broker-dealer activities in an area that clearly displays the member's 
name so that the use of shared conference rooms may continue. Another 
commenter \40\ added that the ``to the extent practicable'' language in 
the setting provision is problematic because it invites a subjective 
and self-serving interpretation of this provision by the financial 
institution and the member. One commenter \41\ read proposed FINRA Rule 
3160 as excluding electronic broker-dealer activities and noted that 
the setting provision ignores that bank deposits are often done 
electronically.
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    \38\ See Woodforest Letter.
    \39\ See id.
    \40\ See PIRC Letter.
    \41\ See id.
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    In its response, FINRA stated that it does not believe that the 
proposed rule prevents a registered person from using a conference room 
at a financial institution inasmuch as each of the elements of 
paragraph (a)(1) of the proposed rule, including the signage 
requirement in subparagraph (B), can be satisfied. FINRA also noted 
that the language ``to the extent practicable'' exists in current NASD 
Rule 2350 and was not amended under the proposal. Additionally, GLB 
includes identical language in a corresponding provision.\42\ Finally, 
although the provisions of proposed FINRA Rule 3160(a)(1) provide 
specific guidance for physical separation on the premises of a 
financial institution, other provisions in the proposed rule (i.e., 
paragraphs (a)(3) and (a)(4)) address potential customer confusion for 
electronic or otherwise off-premises broker-dealer conduct. With 
respect to electronic deposits made on the premises of a financial 
institution, FINRA noted that the ``retail deposit-taking area'' would 
include areas that have ATMs where electronic deposits are made.
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    \42\ See Exchange Act Section 3(a)(4)(B)(i)(II).
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Disclosures on Advertisements and Sales Literature

    One commenter \43\ suggested clarifying proposed FINRA Rule 
3160(a)(4)(B), stating that the rule appears to require financial 
institutions to include disclosures on advertisements that do not refer 
to the broker-dealer or its services. In its response, FINRA noted that 
proposed FINRA Rule 3160 would apply to the conduct and communications 
of a FINRA member in a networking arrangement, and not to the 
activities or communications of a financial institution that are 
unrelated to the networking arrangement. As such, FINRA declined to 
amend the proposal in response to this comment.
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    \43\ See FSI Letter.
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    Proposed FINRA Rule 3160(a)(4)(C) would provide a list of certain 
advertisements and sales literature that do not have to include the 
disclosures required under the proposed rule. One commenter \44\ 
recommended adding business cards of a registered representative that 
are printed on a standard size 2'' x 3'' card to this list, stating 
that it would be difficult to fit the disclosures on such 
communications. In its response, FINRA stated that it does not intend 
to amend proposed FINRA Rule 3160(a)(4)(C) to exclude business cards 
from the required disclosures. FINRA explained that, to the extent 
business cards are sales literature, disclosures should be provided to 
assist customers in recognizing the distinctions between the brokerage 
services offered by the member and the banking services

[[Page 13636]]

offered by the financial institution.\45\ FINRA also noted that, where 
necessary, members may use the short form legend as provided in 
proposed FINRA Rule 3160(a)(4)(B) on business cards.
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    \44\ See Woodforest Letter.
    \45\ See FINRA Interpretive Letter to Tamara K. Salmon, 
Investment Company Institute (September 6, 2007).
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IV. Discussion and Finding

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\46\ The Commission believes that the proposed rule change, 
as amended, is consistent with the provisions of Section 15A(b)(6) of 
the Act, 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.\47\ In particular, the 
proposed rule change, as amended, will clarify and streamline the FINRA 
requirements for broker-dealer networking arrangements and better align 
FINRA requirements with GLB and Regulation R. This, in turn, should 
promote member firm's compliance efforts.
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    \46\ In approving the proposed rule change, the Commission has 
considered the rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \47\ See 15 U.S.C. 78o-3(b)(6).
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V. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\48\ for approving the proposed rule change, as amended by 
Amendment No. 1 thereto, prior to the 30th day after the date of 
publication in the Federal Register. The changes proposed in Amendment 
No. 1 are minor, and do not raise novel regulatory concerns. Moreover, 
accelerating approval of this proposal should benefit FINRA member 
firms and investors by more closing aligning, without undue delay, 
FINRA requirements with both GLB and Regulation R.
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    \48\ 15 U.S.C. 78o-3(b)(5).
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VI. 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-2009-047 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-2009-047. 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 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-2009-047 and should be 
submitted on or before April 12, 2010.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\49\ that the proposed rule change (SR-FINRA-2009-047), as amended, 
be, and hereby is, approved on an accelerated basis.
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    \49\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
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    \50\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6214 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P

