
[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Notices]
[Pages 43892-43897]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18218]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67477; File No. SR-BATS-2012-028]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by BATS 
Exchange, Inc. To Amend BATS Rules Related to Telemarketing

July 20, 2012.
    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 6, 2012, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
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).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt BATS Rule 3.23 ``Telemarketing'', to 
its rulebook to codify provisions that are substantially similar to 
Federal Trade Commission (``FTC'') rules that prohibit deceptive and 
other abusive telemarketing acts or practices.\5\ The text of the 
proposed rule change is available at the Exchange's Web site at http://www.batstrading.com, at the principal office of the Exchange, on the 
Commission's Web site at http://www.sec.gov, and at the Commission's 
Public Reference Room.
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    \5\ The proposed rule change is substantially similar in all 
material respects to Financial Industry Regulatory Authority, Inc. 
(``FINRA'') Rule 3230 (Telemarketing), which the Commission recently 
approved. See Securities Exchange Act Release No. 34-66279 (January 
30, 2012), 77 FR 5611 (February 3, 2012) (SR-FINRA-2011-059) 
(approval order of proposed rule change to adopt telemarketing 
rule).
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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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add Rule 3.23, ``Telemarketing'', to its 
rulebook to codify provisions that are substantially similar to FTC 
rules that prohibit deceptive and other abusive telemarketing acts or 
practices. Rule 3.23 will require Members to, among other things, 
maintain do-not-call lists, limit the hours of telephone solicitations, 
and not use deceptive and abusive acts and practices in connection with 
telemarketing. The Commission directed BATS to enact these 
telemarketing rules in accordance with the Telemarketing Consumer Fraud 
and Abuse Prevention Act of 1994 (``Prevention Act'').\6\ The 
Prevention Act requires the Commission to promulgate, or direct any 
national securities exchange or registered securities association to 
promulgate, rules substantially similar to the FTC rules \7\ to 
prohibit deceptive and other abusive telemarketing acts or practices, 
unless the Commission determines either that the rules are not 
necessary or appropriate for the protection of investors or the 
maintenance of orderly markets, or that existing federal securities 
laws or Commission rules already provide for such protection.\8\
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    \6\ 15 U.S.C. 6101-6108.
    \7\ 16 CFR 310.1-.9. The FTC adopted these rules under the 
Prevention Act in 1995. See Federal Trade Commission, Telemarketing 
Sales Rule, 60 FR 43842 (Aug. 23, 1995).
    \8\ 15 U.S.C. 6102.
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    In 1997, the Commission determined that telemarketing rules 
promulgated and expected to be promulgated by self-regulatory 
organizations, together with the other rules of the self-regulatory 
organizations, the federal securities laws and the Commission's rules 
thereunder, satisfied the requirements of the Prevention Act because, 
at the time, the applicable provisions of those laws and rules were 
substantially similar to the FTC's telemarketing rules.\9\ Since 1997, 
the FTC has amended its telemarketing rules in light of changing 
telemarketing practices and technology.\10\
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    \9\ See Telemarketing and Consumer Fraud and Abuse Prevention 
Act; Determination that No Additional Rulemaking Required, 
Securities Exchange Act Release No. 38480 (Apr.7, 1997), 62 FR 18666 
(Apr. 16, 1996). The Commission also determined that some provisions 
of the FTC's telemarketing rules related to areas already 
extensively regulated by existing securities laws or activities not 
applicable to securities transactions See id.
    \10\ See, e.g., Federal Trade Commission, Telemarketing Sales 
Rule, 73 FR 51164 (Aug. 29, 2008) (amendments to the Telemarketing 
Sales Rule relating to prerecorded messages and call abandonments); 
and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 
(Jan. 29, 2003) (amendments to the Telemarketing Sales Rule 
establishing requirements for sellers and telemarketers to 
participate in the national do-not-call registry).
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    As mentioned above, the Prevention Act requires the Commission to 
promulgate, or direct any national securities exchange or registered

[[Page 43893]]

securities association to promulgate, rules substantially similar to 
the FTC rules to prohibit deceptive and other abusive telemarketing 
acts or practices.\11\ In May 2011, Commission staff directed BATS to 
conduct a review of its telemarketing rule and propose rule amendments 
that provide protections that are at least as strong as those provided 
by the FTC's telemarketing rules.\12\ Commission staff had concerns 
``that the [Exchange] rules overall have not kept pace with the FTC's 
rules, and thus may no longer meet the standards of the [Prevention] 
Act.'' \13\
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    \11\ See supra note 7.
    \12\ See Letter from Robert W. Cook, Director, Division of 
Trading and Markets, Securities and Exchange Commission, to Joe 
Ratterman, President and Chief Executive Officer, BATS Global 
Markets, Inc., dated May 12, 2011.
    \13\ Id.
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    The proposed rule change, as directed by the Commission staff, 
adopts provisions in Rule 3.23 that are substantially similar to the 
FTC's current rules that prohibit deceptive and other abusive 
telemarketing acts or practices as described below.\14\
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    \14\ The proposed rule change is also substantially similar to 
FINRA Rule 3230. See supra note 3.
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Telemarketing Restrictions

    The proposed rule change codifies the telemarketing restrictions in 
Rule 3.23(a) to provide that no Member or associated person of a Member 
\15\ may make an outbound telephone call \16\ to:
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    \15\ An ``associated person of a Member'' is any partner, 
officer, director, or branch manager of a Member (or person 
occupying a similar status or performing similar functions), any 
person directly or indirectly controlling, controlled by, or under 
common control with such Member, or any employee of such Member, 
except that any person associated with a Member whose functions are 
solely clerical or ministerial shall not be included in the meaning 
of such term. See Rule 1.5(q).
    \16\ An ``outbound telephone call'' is a telephone call 
initiated by a telemarketer to induce the purchase of goods or 
services or to solicit a charitable contribution from a donor. A 
``telemarketer'' is any person who, in connection with 
telemarketing, initiates or receives telephone calls to or from a 
customer or donor. A ``customer'' is any person who is or may be 
required to pay for goods or services through telemarketing. A 
``donor'' means any person solicited to make a charitable 
contribution. A ``person'' is any individual, group, unincorporated 
association, limited or general partnership, corporation, or other 
business entity. ``Telemarketing'' means consisting of or relating 
to a plan, program, or campaign involving at least one outbound 
telephone call, for example cold-calling. The term does not include 
the solicitation of sales through the mailing of written marketing 
materials, when the person making the solicitation does not solicit 
customers by telephone but only receives calls initiated by 
customers in response to the marketing materials and during those 
calls takes orders only without further solicitation. For purposes 
of the previous sentence, the term ``further solicitation'' does not 
include providing the customer with information about, or attempting 
to sell, anything promoted in the same marketing materials that 
prompted the customer's call. A ``charitable contribution'' means 
any donation or gift of money or any other thing of value, for 
example a transfer to a pooled income fund. See proposed Rule 
3.23(n)(3), (11), (16), (17), (20), and (21); see also FINRA Rule 
3230(m)(11), (14), (16), (17), and (20); and 16 CFR 310.2(f), (l), 
(n), (v), (w), (cc), and (dd).
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    (1) Any person's residence at any time other than between 8 a.m. 
and 9 p.m. local time at the called person's locations;
    (2) Any person that previously has stated that he or she does not 
wish to receive any outbound telephone calls made by or on behalf of 
the Member; or
    (3) Any person who has registered his or her telephone number on 
the FTC's national do-not-call registry.
    The proposed rule change is substantially similar to the FTC's 
provisions regarding abusive telemarketing acts or practices.\17\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\18\
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    \17\ See 16 CFR 310.4(b)(1)(iii)(A) and (B) and (c); see also 
FINRA Rule 3230(a). See proposed Rule 3.23(n)(16) and (21) and supra 
note 15.
    \18\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Caller Disclosures

    The proposed rule change codifies in Rule 3.23(b) that no Member or 
associated person of a Member shall make an outbound telephone call to 
any person without disclosing truthfully, promptly and in a clear and 
conspicuous manner to the called person the following information: (i) 
The identity of the caller and the Member; (ii) the telephone number or 
address at which the caller may be contacted; and (iii) that the 
purpose of the call is to solicit the purchase of securities or related 
services. The proposed rule change also provides that the telephone 
number that a caller provides to a person as the number at which the 
caller may be contacted may not be a 900 number or any other number for 
which charges exceed local or long-distance transmission charges.\19\
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    \19\ See proposed Rule 3.23(b); see also FINRA Rule 3230(d)(4). 
The proposed rule change is substantially similar to the Federal 
Communications Commission's regulations regarding call disclosures. 
See 47 CFR 64.1200(d)(4).
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Exceptions

    The proposed rule change adds Rule 3.23(c) to provide that the 
prohibition in paragraph (a)(1) \20\ does not apply to outbound 
telephone calls by a Member or an associated person of a Member if:
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    \20\ The Exchange believes that even if a Member satisfies the 
exception in paragraph (c), the Member should still make the caller 
disclosures required by paragraph (b) to the called person to ensure 
that the called person receives sufficient information regarding the 
purpose of the call.
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    (1) The Member has received that person's express prior written 
consent;
    (2) The Member has an established business relationship \21\ with 
the person; or
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    \21\ An ``established business relationship'' is a relationship 
between a Member and a person if (a) the person has made a financial 
transaction or has a security position, a money balance, or account 
activity with the Member or at a clearing firm that provides 
clearing services to the Member within the 18 months immediately 
preceding the date of an outbound telephone call; (b) the Member is 
the broker-dealer of record for an account of the person within the 
18 months immediately preceding the date of an outbound telephone 
call; or (c) the person has contacted the Member to inquire about a 
product or service offered by the Member within the three months 
immediately preceding the date of an outbound telephone call. A 
person's established business relationship with a Member does not 
extend to the Member's affiliated entities unless the person would 
reasonably expect them to be included. Similarly, a person's 
established business relationship with a Member's affiliate does not 
extend to the Member unless the person would reasonably expect the 
Member to be included. The term ``account activity'' includes, but 
is not limited to, purchases, sales, interest credits or debits, 
charges or credits, dividend payments, transfer activity, securities 
receipts or deliveries, and/or journal entries relating to 
securities or funds in the possession or control of the Member. The 
term ``broker-dealer of record'' refers to the broker or dealer 
identified on a customer's account application for accounts held 
directly at a mutual fund or variable insurance product issuer. See 
proposed Rule 3.23(n)(1), (4), and (12); see also 16 CFR 310.2(o) 
and FINRA Rule 3230(m)(1), (4), and (12).
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    (3) The person is a broker or dealer.

Member's Firm-Specific Do-Not-Call List

    The proposed rule change adds Rule 3.23(d) to provide that each 
Member must make and maintain a centralized list of persons who have 
informed the Member or any of its associated persons that they do not 
wish to receive outbound telephone calls. The proposed term ``outbound 
telephone call'' is defined substantially similar to the FTC's 
definition of that term.\22\
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    \22\ See 16 CFR 310.4(b)(1)(iii)(A) and supra note 15; see also 
FINRA Rule 3230(a)(2).
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    Proposed Rule 3.23(d)(2) adopts procedures that Members must 
institute to comply with Rule 3.23(a) and (b) prior to engaging in 
telemarketing. These procedures must meet the following minimum 
standards:
    (1) Member must have a written policy for maintaining their firm-
specific do-not-call lists.
    (2) Personnel engaged in any aspect of telemarketing must be 
informed and trained in the existence and use of the Member's firm-
specific do-not-call list.
    (3) If a Member receives a request from a person not to receive 
calls from that Member, the Member must record the request and place 
the person's name, if provided, and telephone number on

[[Page 43894]]

its firm-specific do-not-call list at the time the request is made.\23\
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    \23\ Members must honor a person's do-not-call request within a 
reasonable time from the date the request is made, which may not 
exceed 30 days from the date of the request. If these requests are 
recorded or maintained by a party other than the Member on whose 
behalf the outbound telephone call is made, the Member on whose 
behalf the outbound telephone call is made will still be liable for 
any failures to honor the do-not-call request.
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    (4) Members or associated persons of Members making an outbound 
telephone call must make the caller disclosures set forth in Rule 
3.23(b).
    (5) In the absence of a specific request by the person to the 
contrary, a person's do-not-call request will apply to the Member 
making the call, and will not apply to affiliated entities unless the 
consumer reasonably would expect them to be included given the 
identification of the call and the product being advertised.
    (6) A Member making outbound telephone calls must maintain a record 
of a person's request not to receive further calls.
    Inclusion of this requirement to adopt these procedures will not 
create any new obligations on Members, as they are already subject to 
identical provisions under Federal Communications Commission (``FCC'') 
telemarketing regulations.\24\
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    \24\ See 47 CFR 64.1200(d); see also FINRA Rule 3230(d).
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Do-Not-Call Safe Harbors

    Proposed Rule 3.23(e) provides for certain exceptions to the 
telemarketing restriction set forth in proposed Rule 3.23(a)(3), which 
prohibits outbound telephone calls to persons on the FTC's national do-
not-call registry. First, proposed Rule 3.23(e)(1) provides that a 
Member or associated person of a Member making outbound telephone calls 
will not be liable for violating proposed Rule 3.23(a)(3) if:
    (1) The Member has an established business relationship with the 
called person; however, a person's request to be placed on the Member's 
firm-specific do-not-call list terminates the established business 
relationship exception to the national do-not-call registry provision 
for that Member even if the person continues to do business with the 
Member;
    (2) the Member has obtained the person's prior express written 
consent, which must be clearly evidenced by a signed, written agreement 
(which may be obtained electronically under the E-Sign Act \25\) 
between the person and the Member that states that the person agrees to 
be contacted by the Member and includes the telephone number to which 
the calls may be placed; or
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    \25\ 15 U.S.C. 7001 et seq.
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    (3) the Member or associated person of a Member making the call has 
a personal relationship \26\ with the called person.
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    \26\ The term ``personal relationship'' means any family member, 
friend, or acquaintance of the person making an outbound telephone 
call. See proposed Rule 3.23(n)(18); see also FINRA Rule 
3230(m)(18).
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    The proposed rule change is substantially similar to the FTC's 
provision regarding an exception to the prohibition on making outbound 
telephone calls to persons on the FTC's do-not-call registry.\27\ The 
FTC provided a discussion of the provision when it was adopted pursuant 
to the Prevention Act.\28\
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    \27\ See 16 CFR 310.4(b)(1)(iii)(B); see also FINRA Rule 
3230(b).
    \28\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43854.
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    Second, proposed Rule 3.23(e)(2) provides that a Member or 
associated person of a Member making outbound telephone calls will not 
be liable for violating proposed Rule 3.23(a)(3) if the Member or 
associated person of a Member demonstrates that the violation is the 
result of an error and that as part of the Member's routine business 
practice:
    (1) The Member has established and implemented written procedures 
to comply with Rule 3.23(a) and (b);
    (2) The Member has trained its personnel, and any entity assisting 
in its compliance, in the procedures established pursuant to the 
preceding clause;
    (3) The Member has maintained and recorded a list of telephone 
numbers that it may not contact in compliance with Rule 3.23(d); and
    (4) The Member uses a process to prevent outbound telephone calls 
to any telephone number on the Member's firm-specific do-not-call list 
or the national do-not-call registry, employing a version of the 
national do-not-call registry obtained from the FTC no more than 31 
days prior to the date any call is made, and maintains records 
documenting this process.
    The proposed rule change is substantially similar to the FTC's safe 
harbor to the prohibition on making outbound telephone calls to persons 
on a firm-specific do-not-call list or on the FTC's national do-not-
call registry.\29\ The FTC provided a discussion of the provision when 
it was adopted pursuant to the Prevention Act.\30\
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    \29\ See 16 CFR 310.4(b)(3); see also FINRA Rule 3230(c).
    \30\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4628; and Federal Trade Commission, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995) at 43855.
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Wireless Communications

    Proposed Rule 3.23(f) clarifies that the provisions set forth in 
Rule 3.23 are applicable to Members and associated persons of Members 
making outbound telephone calls to wireless telephone numbers.\31\
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    \31\ See also FINRA Rule 3230(e).
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Outsourcing Telemarketing

    Proposed Rule 3.23(g) states that if a Member uses another entity 
to perform telemarketing services on its behalf, the Member remains 
responsible for ensuring compliance with Rule 3.23. The proposed rule 
change also provides that an entity or person to which a Member 
outsources its telemarketing services must be appropriately registered 
or licensed, where required.\32\
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    \32\ See also FINRA Rule 3230(f).
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Billing Information

    Proposed Rule 3.23(h) provides that, for any telemarketing 
transaction, no Member or associated person of a Member may submit 
billing information \33\ for payment without the express informed 
consent of the customer. Proposed Rule 3.23(h) requires that each 
Member or associated person of a Member must obtain the express 
informed consent of the person to be charged and to be charged using 
the identified account.
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    \33\ The term ``billing information'' means any data that 
enables any person to access a customer's or donor's account, such 
as a credit or debit card number, a brokerage, checking, or savings 
account number, or a mortgage loan account number. See proposed Rule 
3.23(n)(3).
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    If the telemarketing transaction involves pre-acquired account 
information \34\ and a free-to-pay conversion \35\ feature, the Member 
or associated person of a Member must:
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    \34\ The term ``preacquired account information'' means any 
information that enables a Member or associated person of a Member 
to cause a charge to be placed against a customer's or donor's 
account without obtaining the account number directly from the 
customer or donor during the telemarketing transaction pursuant to 
which the account will be charged. See proposed Rule 3.23(n)(19).
    \35\ The term ``free-to-pay conversion'' means, in an offer or 
agreement to sell or provide any goods or services, a provision 
under which a customer receives a product or service for free for an 
initial period and will incur an obligation to pay for the product 
or service if he or she does not take affirmative action to cancel 
before the end of that period. See proposed Rule 3.23(n)(13).
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    (1) Obtain from the customer, at a minimum, the last four digits of 
the account number to be charged;
    (2) Obtain from the customer an express agreement to be charged and 
to be charged using the identified account number; and

[[Page 43895]]

    (3) Make and maintain an audio recording of the entire 
telemarketing transaction.
    For any other telemarketing transaction involving preacquired 
account information, the Member or associated person of a Member must:
    (1) Identify the account to be charged with sufficient specificity 
for the customer to understand what account will be charged; and
    (2) Obtain from the customer an express agreement to be charged and 
to be charged using the identified account number.
    The proposed rule change is substantially similar to the FTC's 
provision regarding the submission of billing information.\36\ The FTC 
provided a discussion of the provision when it was adopted pursuant to 
the Prevention Act.\37\
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    \36\ See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
    \37\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4616.
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Caller Identification Information

    Proposed Rule 3.23(i) provides that Members that engage in 
telemarketing must transmit caller identification information \38\ and 
are explicitly prohibited from blocking caller identification 
information. The telephone number provided must permit any person to 
make a do-not-call request during normal business hours. These 
provisions are similar to the caller identification provision in the 
FTC rules.\39\ Inclusion of these caller identification provisions in 
this proposed rule change will not create any new obligations on 
Members, as they are already subject to identical provisions under FCC 
telemarketing regulations.\40\
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    \38\ Caller identification information includes the telephone 
number and, when made available by the Member's telephone carrier, 
the name of the Member.
    \39\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
    \40\ See 47 CFR 64.1601(e).
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Unencrypted Consumer Account Numbers

    Proposed Rule 3.23(j) prohibits a Member or associated person of a 
Member from disclosing or receiving, for consideration, unencrypted 
consumer account numbers for use in telemarketing. The proposed rule 
change is substantially similar to the FTC's provision regarding 
unencrypted consumer account numbers.\41\ The FTC provided a discussion 
of the provision when it was adopted pursuant to the Prevention 
Act.\42\ Additionally, the proposed rule change defines ``unencrypted'' 
as not only complete, visible account numbers, whether provided in 
lists or singly, but also encrypted information with a key to its 
decryption. The proposed definition is substantially similar to the 
view taken by the FTC.\43\
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    \41\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
    \42\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4615.
    \43\ See id. at 4616.
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Abandoned Calls

    Proposed Rule 3.23(k) prohibits a Member or associated person of a 
Member from abandoning \44\ any outbound telephone call. The abandoned 
calls prohibition is subject to a ``safe harbor'' under proposed Rule 
3.23(k)(2) that requires a Member or associated person of a Member:
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    \44\ An outbound telephone call is ``abandoned'' if the called 
person answers it and the call is not connected to a Member or 
associated person of a Member within two seconds of the called 
person's completed greeting.
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    (1) To employ technology that ensures abandonment of no more than 
three percent of all calls answered by a person, measured over the 
duration of a single calling campaign, if less than 30 days, or 
separately over each successive 30-day period or portion thereof that 
the campaign continues;
    (2) For each outbound telephone call placed, to allow the telephone 
to ring for at least 15 seconds or four rings before disconnecting an 
unanswered call;
    (3) Whenever a Member or associated person of a Member is not 
available to speak with the person answering the outbound telephone 
call within two seconds after the person's completed greeting, promptly 
to play a prerecorded message stating the name and telephone number of 
the Member or associated person of a Member on whose behalf the call 
was placed; and
    (4) To maintain records documenting compliance with the ``safe 
harbor.''
    The proposed rule change is substantially similar to the FTC's 
provisions regarding abandoned calls.\45\ The FTC provided a discussion 
of the provisions when they are adopted pursuant to the Prevention 
Act.\46\
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    \45\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 
3230(j).
    \46\ See Federal Trade Commission, Telemarketing Sales Rule, 68 
FR 4580 (Jan. 29, 2003) at 4641.
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Prerecorded Messages

    Proposed Rule 3.23(l) prohibits a Member or associated person of a 
Member from initiating any outbound telephone call that delivers a 
prerecorded message without a person's express written agreement \47\ 
to receive such calls. The proposed rule change also requires that all 
prerecorded outbound telephone calls provide specified opt-out 
mechanisms so that a person can opt out of future calls. The 
prohibition does not apply to a prerecorded message permitted for 
compliance with the ``safe harbor'' for abandoned calls under proposed 
Rule 3.23(k)(2). The proposed rule change is substantially similar to 
the FTC's provisions regarding prerecorded messages.\48\ The FTC 
provided a discussion of the provisions when they were adopted pursuant 
to the Prevention Act.\49\
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    \47\ The express written agreement must: (a) Have been obtained 
only after a clear and conspicuous disclosure that the purpose of 
the agreement is to authorize the Member to place prerecorded calls 
to such person; (b) have been obtained without requiring, directly 
or indirectly, that the agreement be executed as a condition of 
purchasing any good or service; (c) evidence the willingness of the 
called person to receive calls that deliver prerecorded messages by 
or on behalf of the Member; and (d) include the person's telephone 
number and signature (which may be obtained electronically under the 
E-Sign Act).
    \48\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
    \49\ See Federal Trade Commission, Telemarketing Sales Rule, 73 
FR 51164 (Aug. 29, 2008) at 51165.
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Credit Card Laundering

    Proposed Rule 3.23(m) prohibits credit card laundering, the 
practice of depositing into the credit card system \50\ a sales draft 
that is not the result of a credit card transaction between the 
cardholder \51\ and the Member. Except as expressly permitted, the 
proposed rule change prohibits a Member or associated person of a 
Member from:
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    \50\ The term ``credit card system'' means any method or 
procedure used to process credit card transactions involving credit 
cards issued or licensed by the operator of that system. The term 
``credit card'' means any card, plate, coupon book, or other credit 
device existing for the purpose of obtaining money, property, labor, 
or services on credit. The term ``credit'' means the right granted 
by a creditor to a debtor to defer payment of debt or to incur debt 
and defer its payment. See proposed Rule 3.23(n)(7), (8), and (10).
    \51\ The term ``cardholder'' means a person to whom a credit 
card is issued or who is authorized to use a credit card on behalf 
of or in addition to the person to whom the credit card is issued. 
See proposed Rule 3.23(n)(6).
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    (1) Presenting to or depositing into the credit card system for 
payment, a credit card sales draft \52\ generated by a telemarketing 
transaction that is not the result of a telemarketing credit card 
transaction between the cardholder and the Member;
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    \52\ The term ``credit card sales draft'' means any record or 
evidence of a credit card transaction. See proposed Rule 3.23(n)(9).

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[[Page 43896]]

    (2) Employing, soliciting, or otherwise causing a merchant,\53\ or 
an employee, representative or agent of the merchant to present to or 
to deposit into the credit card system for payment, a credit card sales 
draft generated by a telemarketing transaction that is not the result 
of a telemarketing credit card transaction between the cardholder and 
the Member; or
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    \53\ The term ``merchant'' means a person who is authorized 
under a written contract with an acquirer to honor or accept credit 
cards, or to transmit or process for payment credit card payments, 
for the purchase of goods or services or a charitable contribution. 
The term ``acquirer'' means a business organization, financial 
institution, or an agent of a business organization or financial 
institution that has authority from an organization that operates or 
licenses a credit card system to authorize merchants to accept, 
transmit, or process payment by credit card through the credit card 
system for money, goods or services, or anything else of value. See 
proposed Rule 3.23(n)(2) and (14).
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    (3) Obtaining access to the credit card system through the use of a 
business relationship or an affiliation with a merchant, when such 
access is not authorized by the merchant agreement \54\ or the 
applicable credit card system.
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    \54\ The term ``merchant agreement'' means a written contract 
between a merchant and an acquirer to honor or accept credit cards, 
or to transmit or process for payment credit card payments, for the 
purchase of goods or services or a charitable contribution. See 
proposed Rule 3.23(n)(15).
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    The proposed rule change is substantially similar to the FTC's 
provision regarding credit card laundering.\55\ The FTC provided a 
discussion of the provisions when they were adopted pursuant to the 
Prevention Act.\56\
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    \55\ See 16 CFR 310.3(c); see also FINRA Rule 3230(l).
    \56\ See Federal Trade Commission, Telemarketing Sales Rule, 60 
FR 43842 (Aug. 23, 1995) at 43852.
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Definitions

    Proposed Rule 3.23(n) adopts the following definitions, which are 
substantially similar to the FTC's definitions of these terms: 
``acquirer,'' ``billing information,'' ``caller identification 
service,'' ``cardholder,'' ``charitable contribution,'' ``credit,'' 
``credit card,'' ``credit card sales draft,'' ``credit card system,'' 
``customer,'' ``donor,'' ``established business relationship,'' ``free-
to-pay conversion,'' ``merchant,'' ``merchant agreement,'' ``outbound 
telephone call,'' ``person,'' ``pre-acquired account information,'' 
``telemarketer,'' and ``telemarketing.'' \57\ The FTC provided a 
discussion of each definition when they were adopted pursuant to the 
Prevention Act.\58\
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    \57\ See proposed Rule 3.23(n)(2), (3), (5), (6), (7), (8), (9), 
(10), (11), (12), (13), (14), (15), (16), (17), (19), (20), and 
(21); and 16 CFR 310.2(a), (c), (d), (e), (f), (h), (i), (j), (k), 
(l), (n), (o), (p), (s), (t), (v), (w), (x), (cc), and (dd); see 
also FINRA Rule 3230(m)(2), (3), (5), (6), (7), (8), (9), (10), 
(11), (12), (13), (14), (15), (16), (17), (19), and (20). The 
proposed rule change also adopts definitions of ``account 
activity,'' ``broker-dealer of record,'' and ``personal 
relationship'' that are substantially similar FINRA's definitions of 
these terms. See proposed Rule 3.23(n)(1), (4), and (18) and FINRA 
Rule 3230(m)(1), (4), and (18); see also 47 CFR 64.1200(f)(14) 
(FCC's definition of ``personal relationship'').
    \58\ See Federal Trade Commission, Telemarketing Sales Rule, 60 
FR 43842 (Aug. 23, 1995) at 43843; and Federal Trade Commission, 
Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 2003) at 4587.
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State and Federal Laws

    Proposed Rule 3.23, Interpretation and Policy .01 \59\ reminds 
Members and associated persons of Members that engage in telemarketing 
that they also are subject to the requirements of relevant state and 
federal laws and rules, including the Prevention Act, the Telephone 
Consumer Protection Act of 1991,\60\ and the rules of the FCC relating 
to telemarketing practices and the rights of telephone consumers.\61\
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    \59\ See also FINRA Rule 3230, Supplementary Material .01, 
Compliance with Other Requirements.
    \60\ See 47 U.S.C. 227.
    \61\ See 47 CFR 64.1200.
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Announcement in Regulatory Circular

    The Exchange will announce the implementation date of the proposed 
rule change in a Regulatory Notice to be published no later than 90 
days following the effective date. The implementation date will be no 
later than 180 days following the effective date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\62\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \63\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest. In particular, the proposed rule change will 
prevent fraudulent and manipulative acts and protect investors and the 
public interest by continuing to prohibit Members from engaging in 
deceptive and other abusive telemarketing acts or practices. 
Additionally, the proposed rule change removes impediments to and 
perfects the mechanism for a free and open market and a national market 
system, because it provides consistency among telemarketing rules of 
national securities exchanges and FINRA, therefore making it easier for 
investors to comply with these rules.
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    \62\ 15 U.S.C. 78f(b).
    \63\ 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 imposes 
any burden on competition.

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 Changes and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \64\ and Rule 19b-
4(f)(6)(iii) thereunder.\65\
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    \64\ 15 U.S.C. 78s(b)(3)(A).
    \65\ 17 CFR 240.19b-4(f)(6).
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    For the foregoing reasons, this rule filing qualifies as a ``non-
controversial'' rule change under Rule 19b-4(f)(6), which renders the 
proposed rule change effective upon filing with the Commission. The 
Exchange has requested that the Commission waive the 30-day operative 
delay period after which a proposed rule change under Rule 19b-4(f)(6) 
becomes effective. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver will afford Exchange members the 
benefit of the proposal--the prohibition of deceptive and other abusive 
telemarketing acts or practices--without unnecessary delay. Such waiver 
will also allow the Exchange to comply with the Commission's directive 
and implement uniform telemarketing rules across self-regulatory 
organizations, creating consistency among these rules for investors, as 
soon as possible. For these reasons, the Commission designates the 
proposed rule change as operative under upon filing.\66\
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    \66\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 43897]]

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-BATS-2012-028 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 No. SR-BATS-2012-028. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. 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 No. SR-BATS-2012-028 and should be 
submitted on or before August 16, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\67\
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    \67\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18218 Filed 7-25-12; 8:45 am]
BILLING CODE 8011-01-P


