
[Federal Register Volume 78, Number 156 (Tuesday, August 13, 2013)]
[Notices]
[Pages 49313-49317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19509]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70131; File No. SR-FINRA-2013-033]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend 
FINRA Rule 9217 (Violations Appropriate for Disposition Under Plan 
Pursuant to SEC Rule 19d-1(c)(2))

August 7, 2013.
    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 24, 2013, Financial Industry Regulatory Authority 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by FINRA. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 9217 (Violations Appropriate 
for Disposition Under Plan Pursuant to SEA Rule 19d-1(c)(2)) to include 
additional rule violations eligible for disposition under FINRA's Minor 
Rule Violation Plan (``MRVP'').
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    FINRA Rule 9216(b) provides procedures for disposition of certain 
rule violations designated as minor rule violations pursuant to a plan 
declared effective by the Commission in accordance with Section 
19(d)(1) of the Act and Rule 19d-1(c)(2) thereunder. FINRA's MRVP 
allows FINRA to impose a fine of up to $2,500 on any member or person 
associated with a member for a minor violation of an eligible rule. 
FINRA Rule 9217 sets forth the rules eligible for disposition pursuant 
to FINRA's MRVP. FINRA is proposing to expand the universe of eligible 
rules as part of an effort to concentrate regulatory resources on 
higher risk matters: expanded use of the MRVP could free up resources 
better allocated to high-risk matters because MRVP settlements 
typically are handled more efficiently and expeditiously.
    The purpose of the MRVP is to provide reasonable but meaningful 
sanctions for minor or technical violations of rules when the conduct 
at issue does not warrant stronger, reportable disciplinary sanctions. 
The inclusion of a rule in FINRA's MRVP does not minimize the 
importance of compliance with such rule, nor does it preclude FINRA 
from choosing to pursue violations of eligible rules through an 
Acceptance, Waiver and Consent (``AWC'') or Complaint if the nature of 
the violations or prior disciplinary history warrants more significant 
sanctions. Rather, the option to impose an MRVP sanction gives FINRA 
additional flexibility to administer its enforcement program in the 
most effective and efficient manner, while still fully meeting FINRA's 
remedial objectives in addressing violative conduct. For example, MRVP 
dispositions provide a useful tool for implementing the concept of 
progressive discipline to remediate misconduct. FINRA will continue to 
examine and surveil for compliance with eligible rules in a manner 
consistent with its examination programs and will determine on a case-
by-case basis whether disposition pursuant to the MRVP is appropriate.
    FINRA conducted a comprehensive review of its rules and examination 
dispositions to determine the rules it proposes to add to the MRVP. 
Among other things, FINRA considered (1) rules routinely cited in 
formal disciplinary actions that are not currently part of the MRVP; 
(2) rules cited frequently in informal actions; (3) rules comparable to 
existing rules in the MRVP; and (4) rules included in other self-
regulatory organization MRVPs.
    The rules proposed for inclusion in the MRVP broadly can be grouped 
into several categories.
Filings and Notifications
    In general, FINRA believes that isolated failures to comply with 
rules that require periodic reporting, filings or notifications are 
appropriate for inclusion in the MRVP. At the same time FINRA 
recognizes that willful, widespread or repeated failures under such 
eligible rules may be more appropriate for disposition through an AWC 
or the filing of a Complaint. FINRA notes that the current MRVP 
includes several such rules. Accordingly, the proposed rule change 
would add the following rules to the MRVP for violations involving late 
or incomplete notices or filings: FINRA Rule 2251(a) (Forwarding of 
Proxy and other Issuer-Related Materials) (failure to timely forward 
proxy and other issuer-related materials); FINRA Rule 4524 
(Supplemental FOCUS Information) (failure to timely file or filing of 
incomplete reports or information); FINRA Rule 5110(b) (Corporate 
Financing Rule--

[[Page 49314]]

Underwriting Terms and Arrangements) (failure to timely file or filing 
of incomplete documents or information); FINRA Rule 5121(b)(2) (Public 
Offerings of Securities with Conflicts of Interest) (failure to give 
timely notification of termination or settlement of public offering or 
failure to file net capital computation); FINRA Rule 5122(b)(2) 
(Private Placements of Securities Issued by Members) (failure to timely 
file private placement documents); FINRA Rule 5190 (Notification 
Requirements for Offering Participants) (failure to give timely 
notification of participation in offerings); and FINRA Rule 6760 
(Obligation to Provide Notice) (failure to give timely or complete 
notification concerning offerings of TRACE-Eligible Securities). FINRA 
believes inclusion of these rules is appropriate, as certain instances 
of late filings or notifications may constitute minor, technical 
violations of the applicable rules that can be remediated through the 
MRVP.
Late Registrations
    For many of the same reasons, the proposed rule change also would 
include in the MRVP the following MSRB and FINRA rules for certain 
isolated or technical failures to timely register: MSRB Rule G-2 
(Standards of Professional Qualification) and MSRB Rule G-3(b)(ii)(D) 
and (c)(ii)(D) (Classification of Principals and Representatives; 
Numerical Requirements; Testing; Continuing Education Requirements) 
(failure to pass qualification examination within 90 days of becoming a 
principal) \3\ and NASD Rule 1021(d) (Registration Requirements) 
(failure to pass qualification examination within 90 days of acting in 
a principal capacity). These provisions permit a municipal securities 
representative or registered representative, as applicable, to 
temporarily function in a principal capacity, provided such person 
registers as a principal and passes the appropriate qualification 
examination within 90 days of acting in such capacity. Typically, these 
circumstances occur when a registered principal leaves a firm or has an 
extended absence. FINRA believes MRV disposition may be appropriate in 
limited circumstances where a representative assumes principal duties 
but takes more than 90 days to pass the corresponding qualification 
examination.
---------------------------------------------------------------------------

    \3\ The proposed rule change includes both MSRB Rule G-2 and G-3 
because the two are linked. Rule G-3 states that no broker, dealer 
or municipal securities dealer ``shall be qualified for the purposes 
of Rule G-2'' unless the requirements set forth in Rule G-3 are met. 
FINRA typically charges a violation of both rules where there is a 
failure to comply with the requirements of Rule G-3.
---------------------------------------------------------------------------

Untimely Marking, Transaction Reporting and Other Market Rules
    The proposed rule change similarly would add to the MRVP late 
filing and notification requirements related to market regulation. The 
current FINRA MRVP includes several such market rules, including, for 
example, FINRA Rule 4560 (failure to timely file reports of short 
positions); FINRA Rules 6380A, 6622, 6730 (transaction reporting); 
FINRA Rule 7450 (OATS reporting); and MSRB Rule G-14 (failure to submit 
reports). Thus, the proposed rule change would include: Rule 605(a)(1) 
and (3) of SEC Regulation NMS (Disclosure of Order Execution 
Information) (failure to timely report or provide complete order 
execution information); Rule 606 of SEC Regulation NMS (Disclosure of 
Order Routing Information) (failure to timely disclose or provide 
complete order routing information); FINRA Rule 6181 (Timely 
Transaction Reporting) (failure to timely report transactions in NMS 
securities); and FINRA Rule 6623 (Timely Transaction Reporting) 
(failure to timely report transactions in OTC and restricted equity 
securities).
    The proposed rule change further would make eligible for MRVP 
disposition other marking and reporting requirements related to trade 
and audit data: Rule 200(g) of SEC Regulation SHO (Definition of 
``Short Sale'' and Marking Requirements) (failure to accurately mark 
sell orders of equity securities); FINRA Rule 6182 (Trade Reporting of 
Short Sales) (failure to accurately mark short sales in NMS stocks); 
FINRA Rule 6250 (Quote and Order Access Requirements) (failure to 
comply with quote and order access requirements for FINRA's Alternative 
Display Facility); FINRA Rule 6624 (Trade Reporting of Short Sales) 
(failure to accurately mark short sales in OTC Equity Securities); 
FINRA Rule 7330 (Trade Report Input) (failure to timely and accurately 
input trade reports into the OTC Reporting Facility); and FINRA Rule 
7360 (Audit Trail Requirements) (ongoing obligation to input trade 
reporting requirements in Rule 7330(d) accurately and completely). In 
addition, the proposed rule change would add three rules governing the 
FINRA/NYSE Trade Reporting Facility whose counterpart rules regarding 
the FINRA/NASDAQ Trade Reporting Facility are already subject to MRV 
treatment: FINRA Rule 6380B (Transaction Reporting); FINRA Rule 7230B 
(Trade Report Input); and FINRA Rule 7260B (Audit Trail Requirements).
Rules To Achieve Consistency
    In addition to the market rules referenced above, FINRA further 
proposes to add certain rules to the MRVP to achieve consistency with 
rules that already are part of the plan. Thus, the proposed rule change 
would add FINRA Rule 1250(a), the Regulatory Element of FINRA's 
continuing education requirements. The current MRVP includes FINRA Rule 
1250(b), the Firm Element provision of the continuing education 
requirements, and FINRA believes there is no compelling reason to 
differentiate with respect to the MRVP minor violations of the 
regulatory element. Similarly, the proposed rule change further would 
bring consistency to the enforcement of the MSRB Rules by adding to the 
MRVP MSRB Rule G-3(h) (Classification of Principals and 
Representatives; Numerical Requirements; Testing; Continuing Education 
Requirements) (failure to comply with the continuing education 
requirements) to include in the MRVP both the Firm and Regulatory 
Elements of the MSRB's equivalent continuing education requirements 
rule. The proposed rule change also seeks consistency by adding MSRB 
Rule G-21 (Advertising) to the MRVP, since the FINRA communications 
with the public counterparts, FINRA Rules 2210, 2212, 2213, 2215, 2216 
and NASD Interpretive Material 2210-2, already are subject to MRVP 
disposition.
    FINRA Rule 9217 currently states that ``[f]ailures to provide or 
update contact information as required by FINRA or NASD rules'' may be 
resolved pursuant to the MRVP. Accordingly, FINRA proposes to add NASD 
Rule 1150 (Executive Representative) (failure to review and update 
executive representative designation and contact information) and NASD 
Rule 1160 (Contact Information Requirements) to the MRVP. For the same 
reason, FINRA also proposes to add MSRB Rules G-40(a) and (c) 
(Electronic Mail Contacts), which require each broker, dealer or 
municipal securities dealer to designate and update electronic mail 
contact information for communications with the MSRB, and FINRA Rule 
4370(f) (Business Continuity and Emergency Contact Information), which 
requires a member to report to FINRA emergency contact information and 
to designate emergency contact persons. Rule 4370(f)(2) further 
requires member to promptly update such information in the event of any 
material change in accordance with NASD Rule 1160. FINRA also proposes 
to include in the MRVP other provisions of Rule 4370, which are 
discussed below.

[[Page 49315]]

Recordkeeping
    The current MRVP includes violations of FINRA Rule 4510 Series 
(Books and Records Requirements) for failure to keep and preserve 
books, accounts, records, memoranda, and correspondence in conformance 
with all applicable laws, rules and regulations and statements of 
policy promulgated thereunder, and with FINRA rules. Rule 4511 requires 
firms to preserve for at least six years those FINRA books and records 
for which there is no specified period under FINRA rules or applicable 
Exchange Act rules. Otherwise, the rule mandates compliance with the 
books and record requirements under FINRA rules, the Exchange Act and 
the applicable Exchange Act rules. The proposed rule change would add 
to the MRVP specific SEC and MSRB rules that require records to be made 
and preserved: Exchange Act Rule 17a-3(a) (Records to Be Made By 
Certain Exchange Members, Brokers and Dealers); Exchange Act Rule 17a-4 
(Records to Be Preserved By Certain Exchange Members, Brokers and 
Dealers); MSRB Rule G-8 (Books and Records to Be Made By Brokers, 
Dealers and Municipal Securities Dealers); and MSRB Rule G-9 
(Preservation of Records). FINRA typically charges recordkeeping 
violations under both FINRA Rule 4511 or MSRB Rule G-9 and the 
applicable Exchange Act rules. FINRA includes the Exchange Act rules 
because those rules have greater specificity than the self-regulatory 
organization rules. In addition, the violation often involves a record 
specified in the Exchange Act rules, such as an order ticket. Under 
such circumstances, FINRA believes it appropriate to charge a violation 
of the specific Exchange Act provision, as well as the more general 
FINRA rule that requires compliance with the Exchange Act books and 
records rules.
Supervisory Procedures Regarding MRVP Rules
    The current MRVP includes NASD Rule 3010(b) (Supervision; Written 
Procedures), but only with respect to failures to timely file reports 
required of a firm subject to the ``Taping Rule''--a requirement to, 
among other things, tape record conversations of its registered persons 
and file with FINRA periodic reports on supervision of telemarketing 
activities of its registered persons. The proposed rule change would 
expand the MRVP to include any violation of NASD Rule 3010(b) 
(Supervision; Written Procedures) for failure to maintain adequate 
written supervisory procedures with respect to the provision of a rule 
that is eligible for MRV disposition. Thus, for example, FINRA Rules 
7440 and 7450 currently are included in FINRA's MRVP and require 
recording and transmission of Order Audit Trail System (``OATS'') data. 
NASD Rule 3010(b) requires members with such data to have written 
supervisory procedures reasonably designed to achieve compliance with 
the OATS rules. The proposed rule change would allow FINRA to resolve 
as an MRV a failure to maintain adequate written supervisory procedures 
with respect to compliance with OATS rules, whether or not there is a 
violation of the OATS rules themselves. The proposed rule change would 
also include the parallel MSRB Rule G-27 (Supervision) to the same 
extent. FINRA believes inclusion of these provisions is logically 
consistent with the purposes of the MRVP: If the potential underlying 
violation is eligible for MRV disposition, the procedures to require 
compliance with that rule also should be eligible for such disposition.
Options
    FINRA Rule 2360(b)(5) (Reporting of Options Positions) requires, 
among other things, members to report each account in which a member 
has an interest that has established an aggregate position of 200 or 
more option contracts. The proposed rule change makes this rule 
eligible for disposition under the MRVP for, among other things, 
technical or manual inputting problems that in the judgment of FINRA do 
not materially affect the market. FINRA notes that other provisions of 
FINRA's options reporting rules are eligible for MRVP disposition \4\ 
and that options reporting requirements are part of the MRVP for almost 
all of the options exchanges,\5\ thus including them in FINRA's plan 
would promote greater consistency across the markets. The need for such 
consistency is heightened because FINRA is party to an agreement 
allocating regulatory responsibility for options reporting rules.\6\
---------------------------------------------------------------------------

    \4\ The MRVP currently covers violations of FINRA Rule 
2360(b)(3) regarding position limits, (b)(4) regarding exercise 
limits and (b)(23) regarding tendering procedures for exercise of 
options.
    \5\ See NYSE MKT Rule 590(g) (referencing violations of 
reporting rules including Rule 906 (Reporting of Options 
Positions)); NYSE Arca Options Rule 10.12(h)(23); BATS Rule 25.3(b); 
Nasdaq Options Rule Chapter X, Section 7(d); BX Options Rule Chapter 
X, Section 7(d); CBOE Rule 17.50(g)(15); C2 Rule Chapter 17 (which 
incorporates the rules contained in CBOE Chapter XVII); ISE Rule 
1614(d)(10).
    \6\ See Securities Exchange Act Release No. 68362 (December 5, 
2012) 77 FR 73719 (December 11, 2012) (Notice of Filing and Order 
Approving and Declaring Effective an Amendment to the Plan for the 
Allocation of Regulatory Responsibilities Among the NYSE MKT LLC, 
BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, 
Incorporated, the Chicago Board Options Exchange, Incorporated, the 
International Securities Exchange LLC, Financial Industry Regulatory 
Authority, Inc., the NYSE Arca, Inc., The NASDAQ Stock Market LLC, 
NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Inc., and Miami International 
Securities Exchange, LLC concerning options-related market 
surveillance).
---------------------------------------------------------------------------

Other Rules
    Finally, the proposed rule change would make violations of several 
other rules eligible for disposition under the MRVP. With respect to 
each rule, FINRA believes that a minor violation, depending on the 
circumstances, could appropriately be remediated under the terms of the 
MRVP without compromising investor protection.
    Exchange Act Rule 10b-10 (Confirmation of Transactions) requires 
broker-dealers to disclose specified information in writing to 
customers at or before completion of a transaction, including but not 
limited to information concerning the date and time of the transaction, 
the number of shares bought or sold, the price or average price of the 
transaction, the capacity in which the member is acting in connection 
with the transaction, and the nature of the remuneration received or to 
be received by the member. FINRA has observed circumstances where 
members have committed minor violations of the rule by failing to fully 
or accurately disclose such information. For example, FINRA has seen 
circumstances where a broker-dealer mistakenly reported the ``average 
price'' of a transaction as the ``price'' or mismarked a principal 
transaction as an agency transaction. Depending upon the specific facts 
and circumstances of the transaction, including the sophistication of 
the customer and the nature of the information that was not disclosed 
or improperly disclosed, FINRA believes an MRV could be an appropriate 
disposition.
    FINRA Rule 4360(b) (Fidelity Bonds) requires a member to maintain 
minimum fidelity bond coverage commensurate with its net capital 
requirements. MSRB Rule G-6 (Fidelity Bonding Requirements) requires a 
broker, dealer or municipal securities dealer to maintain the minimum 
fidelity bond coverage that is required by the national securities 
association with which it is registered. FINRA has observed instances 
where a member had fidelity bond coverage but less than the required 
coverage. FINRA believes MRV disposition may be appropriate in such 
circumstances, depending on the reason for the shortfall and the 
magnitude and

[[Page 49316]]

duration of the failure. For example, a modest shortfall in coverage 
based on a miscalculation of net capital that was quickly discovered 
and remedied might be appropriate for an MRV disposition.
    MSRB Rule G-10 (Delivery of Investor Brochure) requires a broker, 
dealer or municipal securities dealer to deliver a copy of an investor 
brochure to a customer promptly after receiving a complaint from the 
customer. As with other provisions referenced above and those already 
part of FINRA's MRVP involving a late filing or delivery, FINRA 
believes that a failure to timely deliver such brochure may be 
appropriate for MRV disposition under certain factual circumstances; 
e.g., where a violation is not widespread or willful.
    FINRA By-Laws Schedule A, Sec. 1(b) (Member Regulatory Fees) 
assesses on members a Trading Activity Fee for the sale of covered 
securities. The provision defines covered securities, exempts certain 
transactions, sets forth fee rates and provides that members shall 
report the volume of applicable sales in a manner prescribed by FINRA. 
FINRA has observed that firms sometimes fail to make accurate payment 
of the Trading Activity Fee based on an inadvertent miscalculation of 
the fee or failure to apply the fee to the proper universe of trades. 
FINRA has also observed instances where a firm has inadvertently failed 
to accurately report the volume of sales of covered securities, thus 
impacting the proper calculation of the fee. FINRA believes such 
circumstances may be appropriate for MRVP disposition and therefore has 
included the By-Law provision in the proposed rule change.
    FINRA Rule 2266 (SIPC Information) requires members to provide 
customers with written notification of the availability of SIPC 
information at account opening and annually thereafter. FINRA may 
consider isolated failures to satisfy this requirement without customer 
harm to be minor in nature and therefore appropriate for an MRV.
    FINRA Rules 3160(a)(1), (3), (4) and (5) (Networking Arrangements 
Between Members and Financial Institutions) set forth standards of 
conduct for conducting broker-dealer services on or off the premises of 
a financial institution pursuant to a networking arrangement. These 
provisions specify: the setting in which a member may conduct broker-
dealer services on the premises of a financial institution; the 
disclosure required to inform the customer that the broker-dealer 
products sold are not guaranteed or federally insured; the content 
requirements of communications with the public; and the requirement to 
promptly notify the financial institution if any associated person of a 
member employed by the institution has been terminated for cause. FINRA 
believes there are several potential factual scenarios where a minor 
violation could occur under these provisions. For example, Rule 
3160(a)(3)(B) requires a member to disclose orally, in addition to 
written disclosure, that the securities products purchased are not 
guaranteed or federally insured. FINRA could foresee a circumstance 
where either written or oral disclosure is provided rather than both 
and believes an MRV may be appropriate under such facts. FINRA notes 
that the proposed rule change excludes Rule 3160(a)(2), which sets 
forth the requirement that a written agreement govern any networking 
arrangement and include key broker-dealer obligations pursuant to Rule 
701 of SEC Regulation R and ensure access to the financial 
institution's premises by broker-dealer supervisory personnel and 
regulators from FINRA and the SEC.
    FINRA Rules 4370(a), (b), (c) and (e) (Business Continuity Plans 
and Emergency Contact Information) require a member to create, maintain 
and update a written business continuity plan and to disclose the 
elements of the plan to customers at account opening, on its Web site 
and upon customer request. The provisions allow for flexibility in the 
design of the plan but also include a number of minimum elements. While 
FINRA recognizes the importance of an effective business continuity 
plan, we also have seen minor violations of the provisions that may not 
implicate the overall effectiveness of a plan. For example, FINRA has 
observed instances where members have failed for a short duration to 
timely update their plans in violation of Rule 4370(b) or failed to 
address one of the ten elements set forth in Rule 4370(c). FINRA could 
also envision circumstances where a member failed to address an 
existing relationship with another broker dealer in violation of Rule 
4370(a) or failed in an isolated circumstance to timely provide 
disclosure about its business continuity plan after receiving a request 
from a customer under Rule 4370(e). FINRA believes these examples may 
be appropriate for MRV disposition. However, FINRA does not believe MRV 
disposition would be appropriate where a member has no business 
continuity plan or procedures as required by Rule 4370(a).
    FINRA has not proposed to include Rule 4370(d) for MRVP 
eligibility. That provision requires a member to designate a member of 
senior management to approve the plan and be responsible for an annual 
review of it, and FINRA does not foresee any circumstances where a 
violation of those requirements would be appropriate for MRVP 
disposition.
    FINRA Rule 5121(a) (Public Offerings of Securities with Conflicts 
of Interest) sets forth requirements for participation in public 
offerings of a member's securities where a conflict of interest is 
present. The rule requires prominent disclosure in the prospectus, 
offering circular or similar document of the nature of the conflict of 
interest, the name of a qualified independent underwriter that has 
participated in the preparation of the offering documents and the role 
and responsibilities of that independent underwriter. FINRA believes 
that under certain facts, a failure to prominently disclose these 
items--e.g., disclosing them in smaller font--may constitute a minor 
violation appropriate for MRVP disposition.
    FINRA Rule 7430 (Synchronization of Member Business Clocks) 
requires members to synchronize their business clocks for the purposes 
of recording the date and time of events that must be reported pursuant 
to FINRA By-Laws and rules. FINRA believes that isolated violations 
where certain business clocks fall out of synch due to software 
glitches or other technical reasons may be appropriate to resolve as an 
MRV, and therefore FINRA has proposed to include the rule in the MRVP.
    FINRA reiterates that inclusion of a rule in the MRVP does not mean 
that all violations of that rule must be treated pursuant to the MRVP. 
FINRA staff maintains the discretion to handle any violation of such 
rules through AWCs or Complaints with the full range of applicable 
sanctions.\7\ Similarly, members and associated persons maintain the 
right to a hearing, with all the same procedural rights accorded all 
formal disciplinary proceedings, instead of accepting a Minor Rule 
Violation.
---------------------------------------------------------------------------

    \7\ FINRA does not intend to develop a formula as to when a 
matter must be handled pursuant to the MRVP, as opposed to informal 
action, or when an otherwise eligible MRVP matter would be handled 
through an AWC or the filing of a complaint. The disposition of any 
matter will depend on the particular facts and circumstances.
---------------------------------------------------------------------------

    The implementation date will be the date of Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that FINRA rules must be designed to

[[Page 49317]]

prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade and, in general, to protect investors 
and the public interest. FINRA further believes that the proposed rule 
change is consistent with Sections 15A(b)(2) and (b)(7) of the Act,\9\ 
which require that FINRA enforce and provide appropriate discipline for 
violation of FINRA rules and applicable federal securities laws, rules 
and regulations. FINRA believes that adopting the proposed rule change 
will strengthen FINRA's ability to carry out its oversight and 
enforcement responsibilities in cases where full disciplinary 
proceedings are unwarranted in view of the minor nature of the 
particular violation.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).
    \9\ 15 U.S.C. 78o-3(b)(2) and 78o-3(b)(7).
---------------------------------------------------------------------------

    In addition, FINRA's MRVP, as amended by this proposal, provides a 
fair procedure for disciplining members and persons associated with 
members, consistent with Sections 15A(b)(8) and 15A(h)(1) of the 
Act.\10\ The MRVP does not preclude a member or associated person from 
contesting an alleged violation and receiving a hearing on the matter 
with the same procedural rights through a litigated disciplinary 
proceeding.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(8) and 78o-3(h)(1).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change will 
allow for a quicker, more efficient means to resolve minor violations 
of the eligible rules, potentially lessening the burden on firms in 
those circumstances where, absent the rule's inclusion in the MRVP, a 
more resource-intense formal proceeding might ensue.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2013-033 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-2013-033. 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 offices 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 Number SR-FINRA-2013-
033, and should be submitted on or before September 3, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------


Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19509 Filed 8-12-13; 8:45 am]
BILLING CODE 8011-01-P


