
[Federal Register: July 9, 2010 (Volume 75, Number 131)]
[Notices]               
[Page 39603-39608]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy10-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62434; File No. SR-FINRA-2009-089]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed FINRA Rule 6490 (Processing 
of Company-Related Actions) To Clarify the Scope of FINRA's Authority 
When Processing Documents Related to Announcements for Company-Related 
Actions for Non-Exchange Listed Securities and To Implement Fees for 
Such Services

July 1, 2010.

I. Introduction

    On December 7, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ 
proposed FINRA Rule 6490 (Processing of Company-Related Actions), to 
clarify the scope of FINRA's regulatory authority and discretionary 
power when processing documents relating to announcements for company-
related actions for non-exchange listed equity and debt securities 
(collectively ``OTC Securities'') and to implement fees for such 
services. The proposed rule change was published for comment in the 
Federal Register on December 28, 2009.\3\ The Commission received two 
comment letters on the proposed rule change,\4\ and a letter from FINRA 
responding to the comment letters.\5\ This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61189 (December 17, 
2009), 74 FR 68648 (``Notice'').
    \4\ See Letter to Elizabeth M. Murphy, Secretary, Commission, 
from Liz Heese, Managing Director, Issuer Services, Pink OTC 
Markets, Inc. (``Pink OTC''), dated January 20, 2010 (``Pink OTC 
Letter''), and Letter to Elizabeth M. Murphy, Secretary, Commission, 
from Stephen J. Nelson, The Nelson Law Firm, LLC (``Nelson Law 
Firm''), dated February 18, 2010 (``Nelson Law Firm Letter'').
    \5\ See Letter from Kosha K. Dalal, Associate Vice President and 
Associate General Counsel, FINRA, to Elizabeth M. Murphy, Secretary, 
Commission, dated April 30, 2010 (``FINRA Response Letter'').
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II. Background

    FINRA performs several critical functions in the over-the-counter 
(``OTC'') market. FINRA currently operates the OTC Bulletin Board 
(``OTCBB''), which provides a mechanism for FINRA members to quote 
certain registered OTC equity securities. FINRA also operates the OTC 
Reporting Facility, which provides a mechanism for FINRA members to 
report, for both regulatory and dissemination purposes, transactions in 
OTC equity securities. More broadly, FINRA also oversees the activities 
of broker-dealer member firms, and their associated persons, that quote 
and trade OTC Securities to ensure their compliance with the Federal 
securities laws and FINRA rules.
    In addition to these functions, FINRA reviews and processes 
requests to announce or publish certain actions taken by issuers of OTC 
Securities. FINRA performs other more limited functions relating to the 
processing of certain actions by non-exchange listed companies whose 
securities are traded in the OTC market. In this regard, FINRA reviews 
and processes documents relating to announcements for company-related 
actions pursuant to Rule 10b-17 under the Act (``Rule 10b-

[[Page 39604]]

17 Actions'').\6\ These documents include announcements of dividends or 
other distributions in cash or in kind, stock splits or reverse stock 
splits, or rights or other subscriptions offerings. FINRA also reviews 
requests to process documents relating to other company actions 
(``Other Company-Related Actions''), including the issuance or change 
to a trading symbol or company name, merger, acquisition, dissolution 
or other company control transactions, bankruptcy or liquidation.\7\ In 
addition, FINRA maintains the symbols database for OTC Securities. 
Based on information it receives regarding Company-Related Actions, 
FINRA, in turn, provides notice to the marketplace of such events and 
adjusts names, symbols, and the issuers' stock prices, if necessary. 
According to FINRA, these functions are important both to the trading 
of securities in the OTC marketplace and to the settlement of 
transactions involving OTC Securities. FINRA notes that the issuer-
related services it performs are aimed not only at facilitating trading 
and settlement, but also at promoting investor protection and market 
integrity.
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    \6\ 17 CFR 240.10b-17. Rule 10b-17 requires issuers to give 
FINRA, in a timely fashion, information relating to: (1) A dividend 
or other distribution in cash or in kind; (2) a stock split or 
reverse split; and (3) a rights or other subscription offering. 
Under Rule 10b-17, the issuer is required to provide this 
information to FINRA no later than 10 days prior to the record date 
or, in case of a rights subscription or other offering if such 10 
days advance notice is not practical, on or before the record date, 
and in no event later than the effective date of the registration 
statement to which the offer relates. Pursuant to Rule 10b-17(b)(3), 
comparable notice given by the issuer of an exchange-listed security 
in accordance with the procedures of the national securities 
exchange upon which a security of such issuer is registered 
satisfies this requirement.
    \7\ Rule 10b-17 Actions and Other Company-Related Actions 
collectively are referred to herein as ``Company-Related Actions.'' 
FINRA publishes Company-Related Actions pursuant to requests from 
issuers and their agents on its Web site in a document known as the 
``Daily List.'' Publication of Company-Related Actions in the Daily 
List effectively announces the Company-Related Action to the OTC 
market.
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    Historically, FINRA has viewed its role in performing issuer-
related functions as primarily ministerial, due in large part to its 
limited jurisdictional reach. FINRA does not impose listing standards 
for securities and maintains no formal relationship with, or direct 
jurisdiction over, issuers. FINRA's authority to perform issuer-related 
functions flows primarily from two sources: Rule 10b-17 under the Act 
and FINRA's Uniform Practice Code (NASD Rule 11000 Series) 
(``UPC'').\8\ Recently, there has been growing concern that FINRA's 
Company-Related Action processing services may potentially be used by 
certain parties to further fraudulent activities.\9\ Accordingly, in 
furtherance of its authority to adopt rules to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, and protect investors and the public interest, FINRA proposes 
Rule 6490 to clarify the scope of its regulatory authority and to 
codify procedures that it will apply when reviewing requests to process 
Company-Related Actions. FINRA also proposes to establish fees for its 
review and processing of documentation relating to Rule 10b-17 Actions 
and Other Company-Related Actions, as well as a fee for appealing FINRA 
staff determinations.
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    \8\ The UPC sets forth a basic framework of rules governing 
broker-dealers with respect to the settlement of OTC Securities.
    \9\ See, e.g., Commission Order of Suspension of Trading In the 
Matter of Andros Isle, Corporation, et al., dated March 13, 2008 
(File No. 500-1), in which the Commission suspended trading pursuant 
to Section 12(k) of the Act, 15 U.S.C. 78l(k), in the securities of 
approximately 26 Pink Sheet securities, stating ``[c]ertain persons 
appear to have usurped the identity of a defunct or inactive 
publicly traded corporation, initially by incorporating a new entity 
using the same name, and then by obtaining a new CUSIP number and 
ticker symbol based on the apparently false representation that they 
were duly authorized officers, directors and/or agents of the 
original publicly traded corporation.'' See also SEC v. Irwin Boock, 
Stanton B.J. DeFreitas, Nicolette D. Loisel, Roger L. Shoss, and 
Jason C. Wong, Birte Boock, and 1621566 Ontario, Inc., Civil Action 
No. 09 CV 8261 (S.D.N.Y.) (DLC), Litigation Release No. 21243 
(October 8, 2009) (Commission Charges Five With Dozens of Fraudulent 
Corporate Hijackings and Unregistered Offerings of Securities and 
Names Two Relief Defendants).
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III. Description of the Proposal

A. Processing Announcements of Company Related Actions

    Rule 6490 would codify the authority of FINRA's Department of 
Operations (``Department'') to conduct in-depth reviews of requests to 
process Company-Related Actions and to provide FINRA staff the 
discretion not to process incomplete requests and requests for which 
there are certain indicators of potential fraud. Specifically, the 
proposed rule would establish procedures for the submission, review, 
and determination of the sufficiency of requests made to FINRA to 
process Company-Related Actions. The proposed rule would permit the 
Department to prescribe the forms, supporting documentation and 
procedures necessary to conduct more in-depth reviews of requests to 
process Company-Related Actions. The proposed rule would require that 
an issuer or other duly authorized representative of the issuer 
(``Requesting Party'') submit a request for FINRA to review and process 
documentation related to a Rule 10b-17 Action or Other Company-Related 
Action within the time frames specified by either Rule 10b-17, in the 
event of a Rule 10b-17 Action, or no later than ten calendar days prior 
to the effective date of the Company-Related Action in the event of 
Other Company-Related Actions. The proposed rule would require all such 
requests to be accompanied by proof of payment of a non-refundable fee 
specified in the fee table that would be included in Rule 6490, as more 
fully described below. In addition, the proposed rule would provide 
that initial symbol set up requests may be submitted by FINRA members 
or their associated persons in order to comply with regulatory 
reporting requirements.
    In recognition of FINRA's lack of privity with issuers of OTC 
Securities, FINRA is proposing to adopt Supplementary Material .02 
(Requests by Third-Parties) to Rule 6490, which would permit FINRA, in 
its discretion, to announce a Company-Related Action when it is 
contacted by a third party, such as The Depository Trust & Clearing 
Corporation (``DTC''), foreign exchanges or regulators, or members or 
associated persons. FINRA would request that the third party contact 
the issuer in question regarding the issuer's obligations under Rule 
10b-17 or other rules and regulations, as applicable, and instruct the 
issuer to contact FINRA directly to provide notice and complete the 
requisite forms. However, FINRA would, in its discretion, be permitted 
to review and process a Company-Related Action based on information 
from a third party when it believes that such action is necessary for 
the protection of investors and the public interest and to maintain 
fair and orderly markets, and/or FINRA has been unable to obtain 
notification of the Company-Related Action from the issuer.
    The proposed rule would permit the Department to request additional 
information or documentation as may be necessary for the Department to 
verify the accuracy of the information submitted by the Requesting 
Party. If the Requesting Party does not sufficiently respond within 90 
calendar days of the date the Department requests additional 
information or documentation, the request would be deemed ``lapsed'' 
and then closed. The proposed rule also would provide that if a request 
to process a Company-Related Action is deficient, and the Department 
determines that it is necessary for the protection of investors and the 
public interest and to maintain fair and orderly markets, the 
Department may determine

[[Page 39605]]

that documentation related to a Company-Related Action shall not be 
processed.
    The proposal sets forth five factors that the Department can 
consider in determining whether a request to process documentation is 
deficient: (1) FINRA staff reasonably believes the forms and all 
supporting documentation, in whole or in part, may not be complete, 
accurate or with proper authority; (2) the issuer is not current in its 
reporting obligations, if applicable, to the Commission or other 
regulatory authority; (3) FINRA has actual knowledge that parties 
related to the Company-Related Action are the subject of pending, 
adjudicated or settled regulatory action or investigation by a 
regulatory body, or civil or criminal action related to fraud or 
securities laws violations; \10\ (4) a government authority or 
regulator has provided information to FINRA, or FINRA has actual 
knowledge, indicating that persons related to the Company-Related 
Action may be potentially involved in fraudulent activities related to 
the securities market and/or pose a threat to public investors; and/or 
(5) there is significant uncertainty in the settlement and clearance 
process for the security.
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    \10\ According to FINRA, this factor would include instances 
when FINRA has actual knowledge of a Commission Order pursuant to 
Section 12(k) of the Act, 15 U.S.C. 78l(k), temporarily suspending 
the issuer's securities or pursuant to Section 12(j) of the Act, 15 
U.S.C. 78l(j), revoking registration of the issuer's securities.
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    Following a Department determination that a request to process a 
Company-Related Action is deficient, the Department would be required 
to provide written notice to the Requesting Party. Such written notice 
would be required to state the specific factor(s) that caused the 
request to be deemed deficient. The proposal permits a Requesting Party 
to appeal a deficiency determination to a three-member subcommittee 
comprised of current or former industry members of FINRA's UPC 
Committee in writing within seven calendar days after service of the 
notice. Any written request for an appeal would be required to: (1) Be 
accompanied by proof of payment of a non-refundable Action 
Determination Appeal Fee; and (2) specifically set forth any and all 
defenses to the Department's deficiency determination. Under the 
proposal, an appeal would stay the processing of the Company-Related 
Action (i.e., the requested Company-Related Action would not be 
processed during the period that the Requesting Party requests an 
appeal or while any such appeal is pending).
    Under the proposal, the subcommittee would convene once each 
calendar month to consider all appeals received during the prior month 
and would render a determination within three business days following 
the day the subcommittee considered the appeal. The subcommittee's 
determination would constitute final FINRA action. If a Requesting 
Party fails to file a written request for an appeal within seven 
calendar days after service of notice, the Department's deficiency 
determination would constitute final FINRA action.

B. Fees

    FINRA also proposes to establish fees in connection with its review 
and processing of Company-Related Actions. The proposed fees would 
include late fees for Requesting Parties that fail to provide timely 
notice of and requests to process Company-Related Actions. According to 
FINRA, the proposed late fees would help encourage issuers of OTC 
Securities to meet deadlines, including those associated with Rule 10b-
17, which are critical to enabling FINRA to process such requests in a 
timely fashion in order to provide adequate notice to market 
participants. Further, FINRA states that the proposed fees would be 
beneficial because they would offset some of the significant costs that 
FINRA currently bears for the benefit of issuers of OTC Securities that 
are not otherwise paying to support the OTC symbol database and the 
processing of Company-Related Actions.
    Specifically, FINRA proposes to charge the following non-refundable 
fees for the review and processing of documentation related to Rule 
10b-17 Actions and Other Company-Related Actions:

------------------------------------------------------------------------
                                                              Fee
------------------------------------------------------------------------
Rule 10b-17 Action:
    Timely Rule 10b-17 Notification..................               $200
    Late Rule 10b-17 Notification Submitted at least               1,000
     5 calendar days prior to Corporate Action Date..
    Late SEA Rule 10b-17 Notification Submitted at                 2,000
     least 1 calendar day prior to Corporate Action
     Date............................................
    Late SEA Rule 10b-17 Notification Submitted on or              5,000
     after Corporate Action Date.....................
Other Company-Related Action:
    Voluntary Symbol Request Change..................                500
    Initial Symbol Set Up............................                (*)
    Symbol Deletion..................................                (*)
Appeals:
    Action Determination Appeal Fee..................              4,000
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* No charge.

    FINRA also proposes Supplementary Material .01, which would permit 
FINRA to process documentation for Company-Related Actions, absent a 
determination that the action is deficient, even if the required fee is 
not paid. Proposed Supplementary Material .01 provides that unpaid Rule 
10b-17 Action fees associated with a specific issuer would be 
accumulated, and further, that FINRA would not process Voluntary Symbol 
Request Changes until all accumulated fees are paid. According to 
FINRA, this accumulation authority would create incentives for issuers 
that are not otherwise subject to FINRA's direct jurisdiction to comply 
with the proposed rule's requirements without compromising FINRA's 
investor protection mission. FINRA states further that acceptance and 
processing of untimely Company-Related Action requests and related fees 
by FINRA will not act to relieve an issuer of potential violations of 
Rule 10b-17 or other Federal or State rules or self-regulatory 
organization rules.
    In addition, the Voluntary Symbol Request Change Fee would not 
apply to mandatory symbol set ups or changes. Specifically, FINRA would 
not charge a Voluntary Symbol Request Change Fee in connection with a 
mandatory symbol change that results from a Rule 10b-17 Action (i.e., a 
mandatory symbol change required because of a CUSIP number change or 
otherwise in direct connection with a Rule 10b-17 Action

[[Page 39606]]

would not require the payment of the Voluntary Symbol Request Change 
Fee). However, the request (and its granting, subject to symbol 
availability) of a specific symbol in connection with a Rule 10b-17 
Action would result in assessment of such a fee in addition to the 
requisite Rule 10b-17 Action fee.

IV. Discussion and Commission's Findings

    The Commission has reviewed carefully the proposed rule change, the 
comment letters received, and the FINRA Response Letter and finds that 
the proposal is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities association, including 
the provisions of Section 15A(b)(6) of the Act,\11\ which requires, 
among other things, that FINRA rules be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
transactions in securities, and, in general, to protect investors and 
the public interest; and Section 15A(b)(5) of the Act,\12\ which 
requires, among other things, that FINRA rules provide for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system that 
FINRA operates or controls.\13\
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    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(b)(5).
    \13\ In approving the proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that FINRA's proposal to codify procedures 
for the submission, review, and determination of the sufficiency of 
requests to process Company-Related Actions will benefit the OTC 
marketplace and investors in OTC Securities. The proposal clarifies 
FINRA's authority to conduct reviews of requests to process Company-
Related Actions and reserves to FINRA the right to process Rule 10b-17 
Actions and Other Company-Related Actions when, notwithstanding the 
failure of an issuer to timely submit a notice or pay the applicable 
processing fee, such processing is necessary for the protection of 
investors and the public interest and to maintain fair and orderly 
markets. Accordingly, the Commission believes that the proposal is 
designed to encourage issuers and their agents to provide complete, 
accurate and timely information to FINRA concerning Company-Related 
Actions involving OTC Securities, and thereby to prevent fraudulent and 
manipulative acts and practices with respect to these securities.
    The Commission notes that the proposal sets forth five factors that 
FINRA can look to as a basis for denying a request to process 
documentation concerning a Company-Related Action: (1) FINRA staff 
reasonably believes the forms and all supporting documentation, in 
whole or in part, may not be complete, accurate or with proper 
authority; (2) the issuer is not current in its reporting obligations, 
if applicable, to the Commission or other regulatory authority; (3) 
FINRA has actual knowledge that parties related to the Company-Related 
Action are the subject of pending, adjudicated or settled regulatory 
action or investigation by a regulatory body, or civil or criminal 
action related to fraud or securities laws violations; \14\ (4) a 
government authority or regulator has provided information to FINRA, or 
FINRA has actual knowledge, indicating that persons related to the 
Company-Related Action may be potentially involved in fraudulent 
activities related to the securities market and/or pose a threat to 
public investors; and/or (5) there is significant uncertainty in the 
settlement and clearance process for the security. The Commission also 
notes that the proposal includes provisions pursuant to which an 
aggrieved party may appeal the denial of a request to process a 
Company-Related Action.
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    \14\ See supra note 10.
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    As noted above, the Commission received two comment letters in 
response to the proposal.\15\ Both commenters generally supported the 
goals of the proposal, but questioned certain aspects of it. One 
commenter requested that FINRA provide additional guidance on two of 
the factors FINRA would consider when determining whether a request to 
process documentation related to a Company-Related Action is deficient, 
namely, whether an issuer is not current in its reporting obligations, 
if applicable, to the Commission or other regulatory authority, and 
whether there is significant uncertainty in the clearance and 
settlement process.\16\ Specifically, this commenter inquired whether 
delinquent issuers would automatically have their requests to process a 
Company-Related Action determined to be deficient, and also whether 
issuers that are not designated as eligible for the DTC's FAST systems 
would have their requests viewed as raising significant uncertainty in 
the clearance and settlement process.\17\
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    \15\ See Pink OTC Letter and Nelson Law Firm Letter, supra note 
4.
    \16\ See Pink OTC Letter.
    \17\ Id.
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    In response to this commenter, FINRA explained that when the 
Department reasonably believes that an issuer submitting a request to 
process documentation related to a Company-Related Action has triggered 
one of the explicitly enumerated factors, the Department would 
generally conduct an in-depth review of the Company-Related Action and 
seek additional information or documentation from the issuer.\18\ FINRA 
noted that it would have the discretion not to process any such actions 
that are incomplete or when it determines that not processing such an 
action is necessary for the protection of investors and the public 
interest and to maintain fair and orderly markets.\19\ FINRA stated 
that the failure of an issuer to remain current it its reporting 
obligations is one of five factors that FINRA ``may'' consider in 
making a deficiency determination.\20\ FINRA further noted that the 
proposal does not mandate any particular mechanism of clearance and 
settlement for an issuer's securities, including FAST designation by 
DTC.\21\
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    \18\ See FINRA Response Letter, supra note 5 at 3-4.
    \19\ Id.
    \20\ Id.
    \21\ Id.
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    The Commission believes that the proposed factors are reasonably 
designed to allow FINRA to deny a request to process a Company-Related 
Action based on the above-noted objective criteria. As FINRA pointed 
out, if FINRA believes that one of the enumerated factors has been 
triggered, FINRA staff would conduct an in depth review and follow up 
with the issuer to seek additional information or documentation. The 
Commission believes that the proposal furthers FINRA's goal to assure 
that documents supporting a request to process a Company-Related Action 
are complete and correct and that its facilities are not misused in 
furtherance of fraudulent or manipulative acts and practices. At the 
same time, the proposal recognizes the interests of a Requesting Party 
in receiving fair consideration from FINRA in connection with a request 
to process a Company-Related Action and in having a fair process for an 
appeal in the event a request to process a Company-Related Action is 
denied. The Commission therefore finds the proposal to be consistent 
with Section 15A(b)(6) of the Act.\22\ The Commission

[[Page 39607]]

notes that FINRA's administration of its proposed rule is subject to 
continuing Commission oversight, and that FINRA, as a registered 
national securities association, remains bound by its obligations as a 
self-regulatory organization under the Act and all relevant rules and 
regulations thereunder.
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    \22\ 15 U.S.C. 78o-3(b)(6).
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    Two commenters questioned the effects of the proposed fees.\23\ 
Specifically, one commenter expressed concern that the proposal would 
permit FINRA to decline to set an ex-dividend date for distributions of 
``Liquidating OTC Securities'' if an issuer failed to timely notify 
FINRA of an upcoming distribution, as required by Rule 10b-17, and pay 
the required processing fee.\24\ According to this commenter, a failure 
by FINRA to set an ex-dividend date for these securities would ``burden 
transactions in Liquidating OTC Securities with wholly unnecessary 
risks and transaction costs'' and potentially permit FINRA to ``escape 
from its responsibilities under Section 15A'' of the Act when the 
required fee is not paid.\25\
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    \23\ See Pink OTC Letter and Nelson Law Firm Letter, supra note 
4.
    \24\ See Nelson Law Firm Letter. This commenter defines 
``Liquidating OTC Securities'' as securities whose issuers are 
``bankrupt, in liquidation, or involved in various forms of 
reorganization.''
    \25\ Id.
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    In response to this concern, FINRA clarified that the proposal 
expressly permits FINRA to set ex-dividend dates, as well as process 
other Company-Related Actions, in certain circumstances even if FINRA 
fails to receive the required notice and accompanying fee from the 
issuer. In particular, FINRA noted that the text of proposed 
Supplementary Material .01 (SEA Rule 10b-17 Fee Accumulations) states 
that ``notwithstanding the timeliness of the SEA Rule 10b-17 Action 
submission or the failure to pay applicable fees, FINRA will make its 
best efforts to process documentation related to SEA Rule 10b-17 
Actions that are not otherwise deemed incomplete or otherwise deficient 
by FINRA because of the critical nature of this information to the 
marketplace.'' \26\ Similarly, FINRA noted that the rule text of 
proposed Supplementary Material .02 (Requests by Third-Parties) 
provides that when FINRA is unable to obtain notification from an 
issuer, it may in its discretion review and process a Rule 10b-17 
Action or Other Company-Related Action based on information from a 
third-party, such as DTC, foreign exchanges or regulators, or members 
or associated persons, when it believes such action is necessary under 
its statutory obligations.\27\
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    \26\ See FINRA Response Letter, supra note 5 at 2-3.
    \27\ Id.
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    One commenter noted that issuers of OTC Liquidating Securities may 
believe that they are not obligated to provide a Rule 10b-17 notice to 
FINRA, particularly, if, for example a bankruptcy trustee views its 
obligations to maximize the value of the issuer's estate to be in 
conflict with payment of processing fees to FINRA.\28\ In response to 
this comment, FINRA remarked that an issuer that files for bankruptcy, 
or a trustee acting on its behalf, faces numerous fees and charges in 
an effort to discharge the issuer's obligations and stated that it saw 
no reason why its proposed fees should not apply to these issuers.\29\
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    \28\ See Nelson Law Firm Letter supra note 4 at 3.
    \29\ See FINRA Response Letter, supra note 5 at 2.
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    The other commenter questioned whether the proposed fees for 
providing Company-Related Action processing services might cause 
issuers to effect corporate actions without notifying FINRA.\30\ In 
response to this point, FINRA noted that an issuer that fails to notify 
FINRA of a proposed corporate action, as required by Rule 10b-17 is 
potentially violating an anti-fraud rule of the Federal securities laws 
and stated that where it has actual knowledge of issuer non-compliance 
with Rule 10b-17, FINRA will use its best efforts to notify the 
Commission.\31\ According to FINRA, non-compliance with Rule 10b-17 has 
been an ongoing concern, and it suggested that heightened awareness of 
Rule 10b-17 that could result from adoption of the proposal, graduated 
fees for delayed compliance with Rule 10b-17, and the potential for 
referral to the Commission for non-compliance may lead issuers to 
proceed more cautiously in this area.\32\
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    \30\ See Pink OTC Letter, supra note 4 at 2.
    \31\ See FINRA Response Letter, supra note 5 at 5.
    \32\ See id at 6. FINRA also stated that if its proposal is 
approved, it (i) will notify issuers of the proposed rule and fees 
by issuing a Regulatory Notice, sending out alerts through 
electronic platforms used by market participants, and posting this 
information on its dedicated Web page for OTC Actions; (ii) will 
reach out to industry groups involved in issuer corporate actions to 
notify parties that will be impacted by the proposal; and (iii) 
expects the percentage of late notifications will decline over time.
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    The Commission finds that FINRA's proposed fees to review requests 
to process Company-Related Actions are consistent with the Act. The 
Commission believes that the proposed fees are reasonable because they 
are intended to offset some of the significant costs FINRA currently 
incurs in processing Company-Related Actions and that they are 
equitably allocated because they apply to any Requesting Party that 
submits a request to process a Company-Related Action (other than those 
enumerated actions for which no fees would be charged). The Commission 
believes that FINRA has adequately responded to commenters' concerns 
about the impact of the proposed fees.
    Finally, one commenter offered suggestions relating to the 
operation of the proposed rule.\33\ In response to the comment that 
FINRA should limit intra-day processing of Company-Related Actions to 
emergency situations such as security revocations and quotation and 
trading halts, FINRA explained that, with the exception of security 
revocations, quotation and trading halts, and cancellation of 
securities pursuant to an effective bankruptcy court order, its general 
policy is to announce actions on the Daily List published on OTCBB.com 
with a future effective date, but that in some cases, often because of 
failure to receive timely notification, setting a future effective date 
is not possible.\34\ This commenter also suggested that FINRA 
coordinate processing of Company-Related Actions across FINRA 
departments and ensure information regarding Company-Related Actions is 
disseminated accurately and consistently on the Daily List on the 
OTCBB.com and NasdaqTrader Web sites.\35\ In response to these 
comments, FINRA noted that, although FINRA departments work closely in 
this regard, not all systems and platforms used by market participants 
to access such data are controlled by FINRA, and there could be a lag 
in the dissemination of certain information.\36\ FINRA also noted that 
because the NasdaqTrader Web site simply provides a hyperlink to the 
OTCBB.com Daily List, there should be no inconsistencies in information 
on these two Web sites.\37\ The Commission believes that FINRA has 
adequately responded to the commenters' suggestions relating to the 
operation of the proposed rule.
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    \33\ See Pink OTC Letter, supra note 4.
    \34\ See FINRA Response Letter, supra note 5.
    \35\ See Pink OTC Letter, supra note 4.
    \36\ See FINRA Response Letter, supra note 5.
    \37\ Id.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-FINRA-2009-89), be, and it hereby is, 
approved.


[[Page 39608]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
Elizabeth M. Murphy,
Secretary.
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    \38\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-16687 Filed 7-8-10; 8:45 am]
BILLING CODE 8010-01-P

