			  UNITED STATES OF AMERICA

		        DEPARTMENT OF TRANSPORTATION

			  OFFICE OF THE SECRETARY

			          WASHINGTON, D.C.

Issued by the Department of Transportation on February 4, 2003

NOTICE OF ACTION TAKEN -- DOCKET OST 1998-4482

________________________________________________________________________
________________________________________________________

This serves as notice to the public of the action described below, taken
by the Department official indicated (no additional confirming order
will be issued in this matter).

Applicant:  AEROVIAS de MEXICO, S.A. de C.V.
                       Date Filed:  December 19, 2002

Relief requested:  Exemption from 49 USC section 41301 to permit the
applicant to continue to conduct scheduled, combination service between
Mexico City, Mexico, and Orlando, Florida.

If renewal, date and citation of last action:  January 30, 2002, in this
Docket.

Applicant representative(s):  William C. Evans,<PHONE_NUMBER>        DOT
analyst:  Allen F. Brown,<PHONE_NUMBER>

Responsive pleadings:  None.

	DISPOSITION

Action:  Approved.			       			                        Action date:
February 4, 2003

Effective dates of authority granted:  February 4, 2003, through Febuary
4, 2004.

Basis for approval:  United States-Mexico Air Transport Services
Agreement

Except to the extent exempted/waived, this authority is subject to the
terms, conditions, and limitations indicated: Standard exemption
conditions.

Special conditions/Remarks:

Action taken by:   Paul L. Gretch, Director

		      Office of International Aviation

________________________________________________________________________
_______________________________________________________

Under authority assigned by the Department in its regulations, 14 CFR
Part 385, we found that (1) our action was consistent with Department
policy; (2) the applicant was qualified to perform its proposed
operations; (3) grant of the authority was consistent with the public
interest; and (4) grant of the authority would not constitute a major
regulatory action under the Energy Policy and Conservation Act of 1975.
To the extent not granted/deferred/dismissed, we denied all requests in
the referenced Docket.  We may amend, modify, or revoke the authority
granted in this Notice at any time without hearing at our discretion.

Persons entitled to petition the Department for review of the action set
forth in this Notice under the Department’s regulations, 14 CFR
§385.30, may file their petitions within seven (7) days after the date
of issuance of this Notice.  This action was effective when taken, and
the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide
Web
瑡ഺ瑨灴⼺搯獭搮瑯朮癯⼯敲潰瑲⽳敲潰瑲彳癡慩楴湯
愮灳


[Federal Register: December 23, 2009 (Volume 74, Number 245)]
[Notices]
[Page 68263]
[DOCID:fr23de09-53]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER09-1717-000]

Duke Energy Carolinas, LLC; Notice of Filing

December 15, 2009.
    Take notice that on December 2, 2009, Duke Energy Carolinas, LLC
tendered for filing additional requested information in order to assist
the Commission in rendering a decision.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211, 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed on or before the comment date.
Anyone filing a motion to intervene or protest must serve a copy of
that document on the Applicant and all the parties in this proceeding.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://
www.ferc.gov. Persons unable to file electronically should submit an
original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time on December 23, 2009.

Kimberly D. Bose,
Secretary.
[FR Doc. E9-30451 Filed 12-22-09; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 85, Number 73 (Wednesday, April 15, 2020)]
[Notices]
[Pages 21052-21056]
[FR Doc No: 2020-07897]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88614; File No. SR-ICC-2020-005]

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the ICC Clearing Participant
Default Management Procedures

April 9, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
\1\ and Rule 19b-4,\2\ notice is hereby given that

on April 3, 2020, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
primarily by ICC. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the
ICC Clearing Participant (``CP'') Default Management Procedures
(``Default Management Procedures''). These revisions do not require any
changes to the ICC Clearing Rules (the ``Rules'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change,
security-based swap submission, or advance notice and discussed any
comments it received on the proposed rule change, security-based swap
submission, or advance notice. The text of these statements may be
examined at the places specified in Item IV below. ICC has prepared
summaries, set forth in sections (A), (B), and (C) below, of the most
significant aspects of these statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

(a) Purpose
    ICC proposes to revise the Default Management Procedures, which set
forth ICC's default management process, including the actions taken by
ICC to determine that a CP is in default as well as the actions taken
by ICC in connection with such default to close-out the defaulter's
portfolio. The proposed revisions update the default contacts that ICC
maintains for each CP, include language on the development of the scope
of a default management test, and make additional clarification and
clean-up changes throughout the document. ICC believes such revisions
will facilitate the prompt and accurate clearance and settlement of
securities transactions and derivative agreements, contracts, and
transactions for which it is responsible. ICC proposes to make such
changes effective following Commission approval of the proposed rule
change. The proposed revisions are described in detail as follows.
    ICC proposes to amend the list of defined terms in Section 2
(Definitions). Specifically, ICC proposes to update the composition of
the individuals that comprise ICC management.
    The proposed changes to Subsection <IP_ADDRESS> (Role-Based Contacts)
revise certain types of contacts that ICC maintains for each CP in
respect of the default management process. Currently, ICC maintains
contact information for the Chief Executive Officer (``CEO''), Chief
Financial Officer (``CFO''), and General Counsel of each CP, as well as
other role-based contacts that are specific to the default management
process. The proposed changes remove the requirement that ICC maintain
contact information for the CEO, CFO, and General Counsel of each CP in
connection with the default management process and instead require ICC
to maintain contact information for the most senior person in charge of
the CDS business and the most senior person responsible for providing
compliance oversight for the CDS business.
    In Subsection 4.5 (Default Management Tests), ICC proposes
clarification changes regarding the coordination of a default
management test, which is a test of ICC's default management process.
ICC proposes to clarify that it coordinates default management tests
with its Risk Committee and Board, among other external participants.
ICC proposes to specify that it conducts a default management test at
least every twelve months, rather than once per calendar year.
Additionally, the proposed changes direct the ICC Risk Oversight
Officer to work with other members of the Close-Out Team, instead of
ICC management, to determine the scope of each default management test.
The Close-Out Team is responsible for overseeing the default management
process and includes ICC management, the most senior member of the ICC
Treasury Department, and the ICC Risk Oversight Officer. The proposed
amendments also reference proposed Appendix 1 that includes language on
the development of the scope of a default management test. The scope
would be presented to the Board for review prior to executing the
default management test.
    In Subsection 6.1.1 (President Pre-Declaration Initiated Actions),
ICC proposes to update the contacts that the ICC President notifies of
a possible default, including Intercontinental Exchange, Inc. contacts
and CP contacts. As discussed above, ICC proposes to replace the
requirement that the ICC President contact the CEO or CFO of each CP
that is at risk of defaulting or in default (``Default Risk CP'') with
the requirement to contact the default contacts of each Default Risk
CP.
    ICC proposes updates to Subsection 6.1.5 (CCO Pre-Declaration
Initiated Actions) regarding particular actions that occur prior to a
declaration of default. The Chief Compliance Officer (``CCO'') works
with ICC personnel to draft certain notices for CPs that are used as
part of the default management process. Under the amended Default
Management Procedures, the Close-Out Team, instead of ICC management,
reviews and approves such notices, which are addressed to the default
contacts at each Default Risk CP, rather than the CEO, CFO, and General
Counsel.
    ICC proposes further updates to Subsection 6.4 (Default Declaration
Notification) regarding specific actions that follow a default
declaration. Under the revisions, the CCO sends certain notices to the
default contacts of each defaulting CP, rather than the CEO, CFO, and
General Counsel of each defaulting CP. Further, the ICC President is
required to notify the Risk Committee and Board, rather than the
chairman of the Risk Committee, of the CP that has been declared in
default.
    ICC proposes a clarification update to Subsection 8.6 (Direct
Liquidation) to clarify that certain actions relating to direct
liquidation are only taken if ICC obtains Board approval.
    Amended Subsection 9.1 (Calling for Assessments) includes a minor
update to the procedures for calling for assessment contributions. ICC
may call for assessment contributions, which CPs are obligated to meet
by providing additional amounts to the Guaranty Fund, in the event that
the Guaranty Fund has been depleted or ICC anticipates the need for
additional funds related to a default. Currently, ICC distributes
notices calling for assessment contributions to each CP's Execution
Coordinator. Such role is responsible for coordinating internally and
with ICC for hedging and liquidation related activities. ICC proposes
replacing ``Execution Coordinator'' with ``Central Point of Contact,''
which is a role that has overall responsibility for coordinating
internally and with ICC during the default management process and is
thus more relevant to the subject task.
    In proposed Appendix 1 to the Default Management Procedures, ICC
includes language on the development of the scope of a default
management test. Specifically, proposed Appendix 1 sets forth key
scenario components that ICC may consider when developing a

default management test. ICC may supplement the list of factors
included in this appendix from time to time as it identifies additional
factors to test. This appendix considers (1) scenarios resulting in CP
defaults, such as a CP's failure to meet payment obligations to ICC,
insolvency or bankruptcy; (2) default management tools available to ICC
in case of default, including consulting with the CDS Default Committee
or performing Secondary Default Management Actions (e.g., calling for
assessment contributions); (3) timing considerations, such as the time
and length of a default event; (4) planning strategy (e.g., whether
there is advance notice of a test); and (5) event specific elements
that may occur in a default scenario, such as the occurrence of
multiple CP defaults or stressed market conditions.
    ICC proposes other non-material changes that would fix
typographical or grammatical errors by amending:
     Section 4 (Operational Readiness), to replace
``described'' with ``describes'' in the phrase ``This section described
the steps taken.''
     Subsection 4.4 (Secure Trading Facility), to replace
``review'' with ``reviewed'' in the phrase ``periodically review by the
Risk Department.''
     Subsection 4.5 (Default Management Tests), to add ``to''
to the phrase ``also be included.''
     Subsection 5.2 (Close-Out Team Activation), to add ``to''
to the phrase ``Default Risk Alert the President.''
     Subsection 6.1.3 (COO Pre-Declaration Initiated Actions),
to add ``and'' to the phrase ``the Court a no action.''
     Subsection 6.4 (Default Declaration Notification), to
replace ``confirm'' with ``confirms'' in the phrase ``and confirm
with.''
     Subsection 7.3 (Initial CDS Default Committee Meeting), to
replace ``provide'' with ``provides'' in the phrase ``ICC provide'' and
replace the phrase ``receive'' with ``receives'' in the phrase ``ICC
receive.''
     Subsection 9.1 (Calling for Assessments), to remove ``are
subject'' from the phrase ``CPs are subject are considered.''
     Subsection 9.2 (Initiating a Cooling-Off Period), to
replace ``Colling-Off Period'' with ``Cooling-Off Period.''
     Subsection 9.3 (Liquidation by Secondary Auction), to
replace ``addition'' with ``additional'' in the phrase ``on or more
addition CP Default''; remove an unfinished sentence; and replace
``extend'' with ``extent'' in the phrase ``to the extend.''
     Subsections 9.4 (Entering a Loss Distribution Period) and
9.5 (Continuing a Loss Distribution Period), to remove reference to a
section that does not exist.
     Subsection 9.7 (Termination of Clearing), to replace
``Partial Tear-Up'' with ``Termination'' in the phrase ``Partial Tear-
Up Circular.''
     Subsection 10.7 (Execute Transfers), to change the title
to ``Execution of Transfers.''
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \3\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, and
to the extent applicable, derivative agreements, contracts and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible; in general, to protect investors and the public interest;
and to comply with the provisions of the Act and the rules and
regulations thereunder. ICC believes that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17(A)(b)(3)(F),\4\ because ICC believes that the proposed rule change
enhances ICC's ability to manage the risk of a default by providing
updates and additional clarity with respect to ICC's default management
process and procedures. The amendments to the Default Management
Procedures update the default contacts that ICC maintains so relevant
individuals are notified and can take timely action as part of the
default management process. Proposed Appendix 1 includes language on
the development of the scope of a default management test and sets
forth key scenario components that ICC may consider, which promotes
robust and effective default management tests. The clarification and
clean-up changes throughout the document ensure that the documentation
of ICC's Default Management Procedures remains up-to-date, transparent,
and focused on clearly articulating the policies and procedures used to
support ICC's default management process. ICC believes that such
changes augment ICC's procedures relating to default management and
enhance ICC's ability to withstand defaults and continue providing
clearing services, thereby promoting the prompt and accurate clearance
and settlement of securities transactions, derivatives agreements,
contracts, and transactions; the safeguarding of securities and funds
which are in the custody or control of ICC or for which it is
responsible; and the protection of investors and the public interest.
As such, the proposed rule change is designed to promote the prompt and
accurate clearance and settlement of securities transactions,
derivatives agreements, contracts, and transactions; to contribute to
the safeguarding of securities and funds associated with security-based
swap transactions in ICC's custody or control, or for which ICC is
responsible; and, in general, to protect investors and the public
interest within the meaning of Section 17A(b)(3)(F) of the Act.\5\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ Id.
    \5\ Id.
---------------------------------------------------------------------------

    In addition, the proposed rule change is consistent with the
relevant requirements of Rule 17Ad-22.\6\ Rule 17Ad-22(b)(3) \7\
requires ICC to establish, implement, maintain and enforce written
policies and procedures reasonably designed to maintain sufficient
financial resources to withstand, at a minimum, a default by the two CP
families to which it has the largest exposures in extreme but plausible
market conditions. The proposed revisions update certain types of
contact information that ICC maintains as part of the default
management process to ensure that relevant individuals are notified and
can take timely action. The proposed revisions further include language
on the development of the scope of a default management test in
Appendix 1, which promotes robust and effective default management
tests that ensure operational readiness by ICC and its CPs to execute
the default management process. ICC believes that such changes
strengthen ICC's ability to manage its financial resources and
withstand the pressures of defaults, including by ensuring that
relevant individuals are notified and can take timely action during the
default management process and through robust and effective default
management tests that enhance ICC's ability to manage financial stress
from CP defaults, thereby ensuring that ICC continues to maintain
sufficient financial resources to withstand, at a minimum, a default by
the two CP families to which it has the largest exposures in extreme
but plausible market conditions, consistent with the requirements of
Rule 17Ad-22(b)(3).\8\
---------------------------------------------------------------------------

    \6\ 17 CFR 240.17Ad-22.
    \7\ 17 CFR 240.17Ad-22(b)(3).
    \8\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(4) \9\ requires ICC to establish, implement,
maintain and enforce written policies and procedures

reasonably designed to, in relevant part, identify sources of
operational risk and minimize them through the development of
appropriate systems, controls, and procedures and implement systems
that are reliable, resilient and secure, and have adequate scalable
capacity. The proposed amendments provide additional clarity and detail
regarding the coordination of default management tests, including by
specifying that ICC conducts a default management test at least every
twelve months; clarifying that ICC receives input from relevant
stakeholders, including the Board, Risk Committee, and the Close-Out
Team; and adding proposed Appendix 1 that promotes robust and effective
default management tests. Such testing and preparation strengthens
ICC's ability to detect and manage financial stress from CP defaults
and allows ICC to identify sources of operational risk and minimize
them through the development of appropriate systems, controls, and
procedures and implement systems that are reliable, resilient and
secure, and have adequate scalable capacity, consistent with the
requirements of Rule 17Ad-22(d)(4).\10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22(d)(4).
    \10\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(8) \11\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to have governance arrangements that are clear and transparent
to fulfill the public interest requirements in Section 17A of the Act
\12\ applicable to clearing agencies, to support the objectives of
owners and participants, and to promote the effectiveness of ICC's risk
management procedures. The Default Management Procedures clearly assign
and document responsibility and accountability for default management
actions and decisions. The proposed revisions allow for feedback from,
and notification to, relevant stakeholders, such as the Board, Risk
Committee, and the Close-Out Team. The proposed changes note the
coordination of a default management test with the Risk Committee and
Board, the review of the scope of a default management test by the
Board, the notification to the Risk Committee and Board of the CP in
default, and the input of the Close-Out Team on various default
management matters. These governance arrangements are clear and
transparent, such that information relating to the assignment of
responsibilities and the requisite involvement of the Board, relevant
committees, and ICC personnel is clearly documented, and also promote
the effectiveness of ICC's risk management procedures by detailing the
responsibilities of relevant stakeholders throughout the Default
Management Procedures, consistent with the requirements of Rule 17Ad-
22(d)(8).\13\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.17Ad-22(d)(8).
    \12\ 15 U.S.C. 78q-1.
    \13\ 17 CFR 240.17Ad-22(d)(8).
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(11) \14\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to make key aspects of the clearing agency's default
procedures publicly available and establish default procedures that
ensure that the clearing agency can take timely action to contain
losses and liquidity pressures and to continue meeting its obligations
in the event of a participant default. ICC's default management rules
and procedures contained in the ICC Rules, the Default Auction
Procedures--Initial Default Auctions, and the Secondary Auction
Procedures are publically available on ICC's website. The proposed
changes to the Default Management Procedures update certain contacts
that ICC maintains so relevant individuals are notified and can take
timely action as part of the default management process. Additionally,
the proposed changes clarify and augment ICC's default management
process and enhance ICC's ability to withstand defaults and continue
providing clearing services, including by promoting robust and
effective default management tests that ensure operational readiness by
ICC and its CPs through the additional detail included in proposed
Appendix 1 and by making clarification and clean-up changes to ensure
that the documentation of ICC's Default Management Procedures remains
up-to-date, transparent, and focused on clearly articulating the
procedures used to support ICC's default management process, to ensure
that ICC can take timely action to contain losses and liquidity
pressures and to continue meeting its obligations in the event of a
participant default, consistent with the requirements of Rule 17Ad-
22(d)(11).\15\
---------------------------------------------------------------------------

    \14\ 17 CFR 240.17Ad-22(d)(11).
    \15\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed changes to
the ICC Default Management Procedures will apply uniformly across all
market participants. Therefore, ICC does not believe the proposed rule
change imposes any burden on competition that is inappropriate in
furtherance of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received from Members, Participants or Others

    Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.

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 up to 90 days (i) as the
Commission may designate 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<EMAIL_ADDRESS>Please include
File Number SR-ICC-2020-005 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-ICC-2020-005. 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 website (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 website 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 filings will also be available
for inspection and copying at the principal office of ICE Clear Credit
and on ICE Clear Credit's website at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICC-2020-005 and should be
submitted on or before May 6, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07897 Filed 4-14-20; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: August 3, 2010 (Volume 75, Number 148)]
[Notices]
[Page 45685-45692]
[DOCID:fr03au10-133]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62584; File No. SR-FINRA-2010-035]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Amendments to
the Discovery Guide and Rules 12506 and 12508 of the Code of
Arbitration Procedure for Customer Disputes

July 28, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 12, 2010, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    FINRA is proposing to amend the Discovery Guide, which includes
Document Production Lists, and to make conforming changes to Rules
12506 and 12508 of the Code of Arbitration Procedure for Customer
Disputes (``Customer Code'').
    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 proposes to revise the Discovery Guide (``Guide'') to expand
the guidance FINRA gives to parties and arbitrators on the discovery
process and to update the Document Production Lists (``Lists''). The
proposal includes conforming changes to Rules 12506 and 12508 of the
Customer Code.

Background

    The SEC approved the current Guide in 1999 and FINRA made it
available for use in arbitration proceedings involving customer
disputes upon the publication of Notice to Members (NTM) 99-90
(November 1999). The Guide provides guidance to parties on which
documents parties should exchange without arbitrator or staff
intervention, and to arbitrators in determining which documents
customers and member firms or associated persons are presumptively
required to produce in customer arbitrations.
    In March 2004, FINRA determined to review the Guide and consider
whether FINRA should update the Guide after more than four years of
use. A FINRA Advisory Committee, the National Arbitration and Mediation
Committee (``NAMC''), conducted the review. The NAMC is a majority
public committee made up of attorneys who represent investors,
attorneys who represent brokerage firms, arbitrators, and mediators. In
addition, FINRA staff met with other frequent users of the forum
representing both the public and the industry to listen to the concerns
of each side about the current lists, their proposals for changes, and
their reactions to other constituents' proposals. FINRA worked for
three years to build a consensus on revisions to the Guide.
    In 2008, FINRA filed a proposed rule change with the SEC to update
the Guide (``the 2008 proposal''). The 2008 proposal added clarifying
and conforming language to the introduction in the Guide and updated
the Lists. The SEC received 53 comment letters on the 2008 proposal
that clearly signaled that the consensus reached on revisions to the
Guide was not broad enough. In light of the comment letters, FINRA
withdrew the filing.\3\
---------------------------------------------------------------------------

    \3\ FINRA filed SR-FINRA 2008-024 on June 11, 2008 and withdrew
the filing on May 21, 2009.
---------------------------------------------------------------------------

    FINRA staff drafted a new Guide which would replace the current
Guide in its entirety. The starting point was the 2008 proposal and the
comment letters submitted to the SEC on the 2008 proposal. NAMC members
shared the staff's draft with interested parties including, among
others, attorneys who represent investors, in-house counsel at
brokerage firms, and attorneys who handle investor claims at Law School
clinics. The NAMC recommended that FINRA appoint a Subcommittee to
review the proposal. The Subcommittee, comprised of public and industry
NAMC members, reached consensus on a number of revisions to the Guide.
The NAMC reviewed the Subcommittee's recommended changes and agreed to
make additional revisions. The proposed rule change incorporates the
NAMC's suggested revisions.
    Commenters on the 2008 proposal suggested that it may be
appropriate to eliminate the Lists for specific types of claims since
claimants are not required to plead causes of action under the Customer
Code. In response to these comments, FINRA proposes to replace the 14
current Lists (two general Lists and 12 separate Lists for specific
types of claims) with two Lists. The Lists identify ``presumptively
discoverable'' documents--one for firms/associated persons to produce
and one for customers to produce. Although each item on the Lists (with
a few exceptions) would be presumptively discoverable in every customer
case, parties can still urge that certain documents should not be
discoverable. Likewise, parties can ask arbitrators to order production
of additional documents that are not on the Lists. The proposed rule
change emphasizes that arbitrators retain the flexibility necessary to
tailor the Guide to the facts and circumstances of each case. This is
especially important because, with the reduction of the Lists from 14
to two, production is no longer dependent on the nature of the claim.

Proposed Revisions to the Guide's Introduction

    FINRA is proposing a number of revisions to the Guide's
introduction that expand the guidance given to parties and arbitrators
on the discovery process generally and clarify how arbitrators should
apply the Guide in arbitration proceedings.
    The current Guide states that it does not intend to remove the
arbitrators' and parties' flexibility in the discovery

process and that arbitrators can order parties to produce documents
that are not on the Lists or alter the parties' production schedule.
FINRA would revise the introduction to add that arbitrators also can
order that parties do not have to produce certain documents on the
Lists. The proposed revision would add clarity to the Guide by
indicating that the arbitrator's flexibility also includes the ability
to order that parties do not have to produce particular documents.
    FINRA is proposing to add guidance on how arbitrators should handle
objections based on cost or burden of production. The introduction
would state that if a party demonstrates that the cost or burden is
disproportionate to the need for the document, the arbitrators should
determine if the document is relevant or likely to lead to relevant
evidence. If the arbitrators determine that the document is relevant or
likely to lead to relevant evidence they should consider whether there
are alternatives that can lessen the impact of production, such as
narrowing the time frame or scope of an item, or determining whether
another document can provide the same information. Since FINRA is
proposing to require production of most of the List items in every
case, it is important to emphasize that arbitrators may consider
alternative ways to facilitate discovery. FINRA believes the discussion
will help arbitrators to balance the parties' discovery needs with the
need to keep the arbitration process expeditious and cost effective.
    FINRA is proposing to move to the introduction the content in
current footnote one, which explains that only parties must produce
documents pursuant to the Guide. FINRA is not proposing to make any
substantive changes to the content of the footnote.
    FINRA is proposing to state that certain items on the Lists may not
be relevant in a particular case when the firm's business model (e.g.,
full service firm, discount broker, or online broker) is considered.
FINRA members create and retain various documents for business and
regulatory purposes. Depending on how a firm operates, a particular
item on the Lists may or may not be relevant. The proposed addition to
the introduction would enhance the Guide because it makes parties and
arbitrators aware that it is appropriate to recognize firm differences
during the discovery process.
    FINRA considers electronic files to be documents within the meaning
of the Guide. FINRA is proposing to update the Guide by expressly
stating that electronic files are documents within the meaning of the
Guide and that arbitrators shall decide any disputes that arise about
the form in which a party produces a document.
    Commenters on the 2008 proposal expressed concerns that FINRA does
not give arbitrators and parties enough guidance about what information
they should treat as confidential. The commenters asked FINRA to
incorporate into the Guide language from an article in FINRA's
newsletter for arbitrators and mediators, the Neutral Corner,\4\ that
advises arbitrators that the party asserting confidentiality in the
discovery process has the burden of establishing that the documents
require confidential treatment and enumerates factors that arbitrators
should consider when deciding questions about confidentiality. In
response to the comments, FINRA is proposing to expand the discussion
on confidentiality in the Guide to include the statement relating to
the burden of establishing that documents require confidential
treatment and to enumerate factors that arbitrators should consider
when deciding questions about confidentiality. The factors include:
---------------------------------------------------------------------------

    \4\ The article, Arbitrators and Orders of Confidentiality, The
Neutral Corner, April 2004, is available at: http://www.finra.org/
ArbitrationMediation/Neutrals/Education/NeutralCorner/P010040.
---------------------------------------------------------------------------

     Whether the disclosure would constitute an unwarranted
invasion of personal privacy (e.g., an individual's Social Security
number, or medical information);
     Whether there is a threat of harm attendant to disclosure
of the information;
     Whether the information contains proprietary confidential
business plans and procedures or trade secrets;
     Whether the information has previously been published or
produced without confidentiality or is already in the public domain;
     Whether an excessively broad confidentiality order could
be against the public interest or could otherwise impede the interests
of justice; and
     Whether there are legal or ethical issues which might be
raised by excessive restrictions on the parties.
    Currently, if a party states that no responsive documents for a
particular item ``exist,'' and the requesting party asks for an
affirmation to that effect, the responding party is required to make
such an affirmation. FINRA is proposing to delete the word ``exist''
and to refer instead to documents ``in the party's possession, custody,
or control.'' FINRA believes that ``exist'' is vague and that the new
phrase would add clarity to the Guide by explaining which documents
parties are required to produce. FINRA would clarify that, in
appropriate cases, the arbitrators may order a party to provide an
affirmation regarding a discovery request for documents beyond those
contained in the Guide. FINRA also proposes to revise the Guide to
emphasize that parties are not required to create documents in response
to items on the Lists that are not already in the parties' possession,
custody, or control.

List 1--Documents the Firm/Associated Persons Shall Produce in All
Customer Cases

    The documents identified in each numbered item are presumptively
discoverable in every case unless the item specifically limits
production to a specific type of claim. To distinguish between
customers who are parties to an arbitration and other customers of a
brokerage firm, the discussion below refers to customer parties as
``claimants'' throughout.
    Proposed List 1, Item 1--In the current Guide, firms/associated
persons are required to produce agreements with claimants relating to
account opening documents, and new account forms, cash, margin, and
option agreements, trading authorizations, discretionary
authorizations, and powers of attorney (see current List 1, Item 1).
FINRA is also proposing to expand this item to require firms/associated
persons to produce account record information (including the claimants'
names, tax identification numbers, addresses, telephone numbers, dates
of birth, employment statuses, annual incomes, net worth, and account
investment objectives) and documents relating to the claimants' risk
tolerance. The account record contains information about the claimants
that the firm recorded. The record also indicates whether the
associated persons responsible for the account signed the record and
whether a principal at the firm approved or accepted the record.
    Proposed List 1, Item 2--The current Guide requires firms/
associated persons to produce all correspondence between the claimants
and the firm/associated person relating to the transactions at issue
(see current List 1, item 5). Firms/associated persons are also
required to produce account statements for the claimants' accounts (see
current List 1, Item 2) and confirmations for the claimants'
transactions at issue (see current List 1, Item 3).
    FINRA is proposing to add clarity to the item by: (1) Specifying
that the required documents are those that were sent to the claimants
or received by the firm and relate to the accounts or

transactions at issue; and (2) specifying that firms/associated persons
are required to produce, among other documents, those that relate to
asset allocation, diversification, trading strategies, and market
conditions.
    Commenters on the 2008 proposal requested that FINRA require firms/
associated persons to produce statement inserts and marketing materials
if requested. In response to the commenters' request, FINRA proposes to
expand the item to require firms/associated persons to produce all
advertising materials sent to customers of the firm that refer to the
securities and/or account types that are at issue. This addition would
provide claimants with documents the firm disseminated which advertised
the specific products or account types that are at issue in the case,
without requiring firms to produce all generic materials sent to all
customers.
    FINRA is proposing to eliminate the requirement that firms/
associated persons produce account statements for the claimants'
accounts and confirmations for the claimants' transactions at issue. In
many instances, the claimants have retained account statements and/or
confirmations, and requiring production of these documents in every
case adds unnecessary delay and cost to the discovery process. If
necessary, the claimants may request these documents separately.
    Proposed List 1, Item 3--FINRA is proposing to require firms/
associated persons to produce documents evidencing investment or
trading strategies utilized or recommended in the claimants' accounts,
including, but not limited to, options programs, and any supervisory
review of such strategies. This new item in the Guide would ensure that
claimants have access to evidence of trading strategies utilized or
recommended that the firm/associated persons may not have publicly
disseminated. The proposal also provides claimants with documentation
of any management supervision over the accounts.
    Proposed List 1, Item 4--In the current Guide, for claims alleging
unauthorized trading, firms/associated persons are required to produce
the documents they relied on to establish that claimants authorized the
transactions at issue (See current List 11, Item 3). For claims
alleging unauthorized trading, the proposed Guide would also require
firms/associated persons to produce all documents relating to the
claimants' authorization of transactions. This addition acknowledges
that there may be documents in addition to those relied on by the firm
that are relevant or could lead to relevant evidence.
    Proposed List 1, Item 5--The current Guide requires firms/
associated persons to produce, for specified claim types, all materials
prepared or used by the firm/associated persons relating to the
transactions or products at issue, including research reports,
prospectuses, and other offering documents such as documents intended
or identified as being ``for internal use only,'' and worksheets or
notes indicating the associated persons reviewed or read such
documents. As an alternative, the firm/associated persons may produce a
list of such documents that contains sufficient detail for the
claimants to identify each document listed. Upon request by a party,
the firm/associated persons are required to provide any documents
identified on that alternative list (see current List 7 titled
Misrepresentation/Omissions, List 9 titled Negligence/Breach of
Fiduciary Duty, and List 13, Item 1 relating to claims alleging
unsuitability).
    FINRA is proposing to add clarity to this item by specifying that,
in addition to materials prepared or used by the firm/associated
persons, the firm/associated persons must produce the materials
provided to the claimants. The amendments would also require production
of sales materials and performance or risk data. FINRA is proposing to
delete the alternative two-step production procedure to reduce delays
in the discovery process.
    Proposed List 1, Item 6--The current Guide requires firms/
associated persons to produce all notes, including entries in any diary
or calendar, relating to the claimants' accounts at issue (see current
List 1, Item 6). FINRA is proposing to expand the scope of the item by
requiring production of notes relating to the claimants in addition to
the claimants' accounts or transactions at issue. For example, notes
about the claimants' other accounts may provide evidence in the case.
    Proposed List 1, Item 7--The current Guide requires firms/
associated persons to produce records relating to the claimants'
accounts at issue, such as internal reviews and exception and activity
reports, which reference the claimants' accounts at issue (see current
List 1, Item 11). FINRA is proposing to clarify the item by specifying
that firms/associated persons would be required to produce notes or
memoranda evidencing supervisory, compliance, or managerial review of
the claimants' accounts or trades for the period at issue. The item
would also require production of correspondence between the claimants
and the firm/associated persons relating to the claimants' accounts or
transactions that bear indications of managerial, compliance, or
supervisory review of such correspondence. The Guide would address
exception reports and supervisory reviews, among other documents, in
proposed Item 13.
    Proposed List 1, Item 8--The current Guide requires firms/
associated persons to produce recordings and notes of telephone calls
or conversations about the claimants' accounts at issue that occurred
between the associated persons and the claimants (see current List 1,
Item 7). FINRA proposes to expand this item to include telephone logs.
Currently, telephone logs are only required in cases alleging
unauthorized trading (see current List 11, Item 2). However, FINRA
would narrow the item from records relating to the claimant's
``accounts at issue'' to records relating to the ``transactions at
issue.'' Producing recordings of telephone calls is labor intensive,
expensive, and difficult for firms unless the claimants are able to
specify a telephone call's date and time, provide the name of a person
the claimants spoke to at the firm, and/or specify the trade placed
during the conversation.
    Proposed List 1, Item 9--FINRA is proposing to require firms/
associated persons to produce writings reflecting communications
between the associated persons assigned to the claimants' accounts at
issue during the time period at issue and members of the firm's
compliance department relating to the securities/products at issue and/
or the claimants' accounts. FINRA believes that such writings may
provide evidence relating to, among other matters, supervision of the
associated persons handling the claimants' accounts. This item would be
new in the Guide.
    Proposed List 1, Item 10--The current Guide requires firms/
associated persons to produce Forms RE-3, U-4, and U-5, including all
amendments, customer complaints identified in the forms, and customer
complaints of a similar nature against the associated persons handling
the accounts at issue (see current List 1, Item 8).
    FINRA proposes to amend this item to require that firms/associated
persons produce Forms RE-3, U-4, and U-5, and the Disclosure Reporting
Pages for the associated persons assigned to the claimants' accounts at
issue during the time period at issue. Disclosure Reporting Pages,
which are actually part of Forms U-4 and U-5, provide claimants with
valuable, detailed information about prior customer

complaints. FINRA would narrow production of these forms to the
associated persons assigned to the claimants' accounts at issue during
the time period at issue, to ease the burden of production for the
firms. Because of the sensitive nature of the personal information,
FINRA would permit the firm to redact the associated persons' Social
Security numbers.
    Commenters on the 2008 proposal requested that FINRA require firms/
associated persons to produce all customer complaints against the
associated persons. To respond to these comments, FINRA proposes to
require firms/associated persons to produce all customer complaints
filed against the associated persons assigned to the accounts at issue
that were generated between three years prior to the first transactions
at issue through filing of the Statement of Claim, redacted to prevent
disclosure of nonpublic personal information about complaining
customers.
    Proposed List 1, Item 11--The current Guide requires firms/
associated persons to produce all sections of the firm's Compliance
Manuals related to the claims alleged in the Statement of Claim,
including any separate or supplemental manuals governing the duties and
responsibilities of the associated persons and supervisors, any
bulletins (or similar notices) issued by the compliance department, and
the table of contents and index to each Manual (see current List 1,
Item 9).
    FINRA is proposing to amend this Item to replace compliance manuals
with ``manuals and all updates thereto'' and compliance department with
``firm.'' The proposal would clarify that the firm/associated persons
must produce the manuals regardless of whether the firm characterizes
them as ``compliance manuals,'' and firms/associated persons must
produce bulletins from any department issuing them. FINRA is also
proposing to clarify that production of manuals, bulletins, and updates
is required for all years in which the Statement of Claim alleges that
the conduct occurred. Updates are material to establishing the firm
procedures in place during a specified time frame.
    FINRA would also amend the item to require firms/associated persons
to provide a list of all of manuals and bulletins which may contain
directives related to the conduct or product at issue in the claim. The
list would enable claimants to identify any additional manual or
bulletin sections that may be relevant to their claims.
    Proposed List 1, Item 12--The current Guide requires firms/
associated persons to produce all analyses and reconciliations of the
claimants' accounts during the time period and/or relating to the
transactions at issue (see current List 1, Item 10). FINRA is proposing
to amend this item to clarify that production is limited to analyses
and reconciliations ``prepared'' during the time period at issue, and
includes analyses and reconciliations prepared as part of a review of
the claimants' accounts or transactions at issue. These documents are
valuable because they may contain firm findings concerning reviews of
claimants' accounts.
    Proposed List 1, Item 13--For claims alleging failure to supervise,
the current Guide requires the production of all exception reports and
supervisory activity reviews relating to the associated persons and/or
the claimants' accounts generated not earlier than one year before or
not later than one year after the transactions at issue, and all other
documents reflecting supervision of the associated persons and the
claimants' accounts (see current List 5, Item 2).
    FINRA is proposing to require firms/associated persons to produce
all exception reports, supervisory activity reviews, concentration
reports, active account runs, and similar documents produced to review
for activity in the claimants' accounts related to the allegations in
the Statement of Claim or in which the transactions at issue are
referenced or listed.
    For claims alleging failure to supervise, FINRA is proposing to
expand production beyond the review of activity in the claimants'
accounts also to cover other customer accounts handled by associated
persons at the firm. In such cases, FINRA is proposing to require
firms/associated persons to produce all exception reports, supervisory
activity reviews, concentration reports, active account runs, and
similar documents produced to review for activity in customer accounts
handled by associated persons and related to the allegations in the
Statement of Claim that were generated not earlier than one year before
or not later than one year after the transactions at issue.
    FINRA would limit production to documents related to the
allegations made in the Statement of Claim to ease the burden of
production for firms/associated persons. FINRA believes that narrowing
the item would not negatively impact claimants because firms/associated
persons would continue to produce reports related to the claimants'
claims.
    Proposed List 1, Item 14--For claims alleging failure to supervise,
the current Guide requires production of the portions of internal audit
reports at the branch in which the claimants maintained accounts that
focused on the associated persons or the transactions at issue, and
were generated not earlier than one year before or not later than one
year after the transactions at issue and discussed alleged improper
behavior in the branch against other individuals similar to the
improper conduct alleged in the Statement of Claim (see current List 5,
Item 3). FINRA is not proposing any substantive changes to this Item.
    Proposed List 1, Item 15--The current Guide requires the production
of records of disciplinary action taken against associated persons by
any regulator or employer for all sales practice violations or conduct
similar to the conduct alleged to be at issue (see current List 1, Item
12). FINRA is not proposing any substantive changes to this item.
    Proposed List 1, Item 16--FINRA is proposing to require firms/
associated persons to produce all investigations, charges, or findings
by any regulator (state, federal or self-regulatory organization) and
the firm/associated persons' responses to such investigations, charges,
or findings for the associated persons' alleged improper behavior
similar to that alleged in the Statement of Claim. This new item in the
Guide would expand the scope of documents that relate to the associated
persons' disciplinary history.
    Proposed List 1, Item 17--For claims alleging failure to supervise,
the current Guide requires production of the portions of examination
reports or similar reports following an examination or an inspection
conducted by a state or federal agency or a self-regulatory
organization that focused on the associated persons or the transactions
at issue or that discussed alleged improper behavior in the branch
against other individuals similar to the improper conduct alleged in
the Statement of Claim (see current List 5, Item 4). Commenters on the
2008 proposal requested that FINRA include a time limit for production
of these documents. In response to these comments, FINRA is proposing
to limit production to those reports issued for the period one year
before the transactions at issue through the filing of the Statement of
Claim. FINRA believes that restricting the time frame for production
would reduce the firms' burden of production and offset the expansion
of this production to all cases while ensuring that claimants have
access to the reports that relate to their claims.

    Proposed List 1, Item 18--FINRA is proposing to require firms/
associated persons to produce documents the respondents obtained by
subpoena or by document requests directed to third parties. While this
item would be new in the Guide, it is not a new requirement because the
subpoena rule, Rule 12512(e), already requires production of subpoenaed
documents. FINRA is proposing to cross-reference that rule in the
Guide. FINRA would also add documents received by request directed to
third parties at any time during the case to ensure that all parties
have access to documents obtained without a subpoena from non-parties.
    Proposed List 1, Items 19, 20, and 21--In the current Guide, firms/
associated persons are required to produce documents relating to
associated persons' commissions and/or compensation when claimants
allege churning (see current List 3, Items 1-3), failure to supervise
(see current List 5, Item 1), or unsuitability (see current List 13,
Item 2).
    Proposed List 1, Item 19--FINRA is proposing to require firms/
associated persons to produce documents showing the associated persons'
gross and net compensation for the transactions at issue in the
Statement of Claim. This is new in the Guide. Documentation of
compensation on an order-by-order basis provides parties with a clear
understanding of how much firms paid associated persons for the trading
at issue. If the accounts at issue were the subject of fee arrangements
that are not based on remuneration per trade, firms/associated persons
would be required to produce a record of compensation earned for the
period when the transactions in the accounts took place.
    Proposed List 1, Item 20--The current Guide requires firms/
associated persons to produce commission runs relating to the
claimants' accounts at issue or, in the alternative, a consolidated
commission report relating to the accounts (see current List 3, Item
1). It also requires firms/associated persons to produce documents
reflecting compensation of any kind, including commissions, from all
sources generated by the associated persons assigned to the claimants'
accounts for the two months preceding, through the two months
following, the transactions at issue, or up to 12 months, whichever is
longer. The firm may redact all information identifying customers who
are not parties to the action except for the last four digits of the
non-party customer account number for each transaction (see current
List 3, Item 2).
    In addition, for claims related to solicited trading activity,
FINRA is proposing to require the firm/associated persons to produce a
record of all compensation, monetary and non-monetary, including, but
not limited to, monthly commission runs for the associated persons who
handled the claimants' accounts. That record should reflect the
securities traded, dates traded, whether the trades were solicited or
unsolicited, and the gross and net commission from each trade. Firms
would be required to produce this record for a period of time beginning
three months before and ending three months after the trades at issue
in the claimants' accounts. FINRA is proposing to impose this
additional production only in claims relating to solicited trading
activity because the records would be most relevant to such activity.
The required documents may provide claimants with evidence regarding
the extent to which the associated person recommended securities to
other customers.
    The firm may redact names and other non-public personal information
concerning customers who are not parties to this claim, but would be
required to provide sufficient information to identify: (1) The non-
party customers' accounts, including the last four digits of the non-
party customers' account numbers; (2) the associated persons' own and
related accounts, including the last four digits of the associated
persons' account numbers; and (3) the type of account (IRA, 401(k),
etc.). Activity in the associated persons' account may be correlated to
the transactions in the customers' accounts.
    Proposed List 1, Item 21--The current Guide requires firms/
associated persons to produce documents describing the basis upon which
the firm compensated the associated persons during the years in which
the transactions or occurrences in question occurred, including any
bonus or incentive program, and compensation and commission schedules
(see current List 3, Item 3 and current List 13, Item 2). FINRA would
add clarity to this item by requiring production of a record of all
agreements pertaining to the relationship between the associated person
and the firm, summarizing the associated person's compensation
arrangement or plan with the firm, including commission and concession
schedules, bonus or incentive plans, and schedules showing
compensation. If the firm based the associated persons' compensation on
factors other than remuneration per trade, the item would require
documentation of the method by which compensation was determined.
    Proposed List 1, Item 22--For claims with allegations relating to
an insurance product that includes a death benefit, FINRA is proposing
to require firms/associated persons to produce all information
concerning the claimants' insurance holdings and the recommendations,
if any, to the claimants regarding insurance products. This new
requirement in the Guide could provide parties with evidence in cases
involving annuities.

Items Firms/Associated Persons Would No Longer Be Required To Produce

    Holding Pages--In the current Guide, firms/associated persons are
required to produce holding pages for the claimants' accounts at issue
(see current List 1, Item 4). FINRA is proposing to delete this item
from the Guide because holding pages (hand written records of
transactions made and kept by associated persons) are, generally, no
longer in use. Firms provide transaction information to customers on
account statements and/or confirmations.
    Order tickets--In the current Guide, firms/associated persons are
required to produce order tickets for the claimants' transactions in
cases alleging unauthorized trading (see current List 11, Item 1).
FINRA is proposing to delete this requirement from the Guide because
production of order tickets is burdensome and evidence relating to
whether the claimants authorized a particular transaction would be
produced under proposed List 1, Items 4, 6, and 8.

List 2--Documents the Customers Shall Produce in All Customer Cases

    The documents identified in each numbered item are presumptively
discoverable in every case unless the item specifically limits
production to a specific type of claim.
    As stated above, to distinguish between customers who are parties
to an arbitration and other customers of a brokerage firm, the
discussion below refers to customer parties as ``claimants''
throughout.
    Proposed List 2, Item 1--In the current Guide, claimants are
required to produce all claimant and claimant-owned business (including
partnership or corporate) federal income tax returns, limited to pages
1 and 2 of Form 1040, Schedules B, D, and E, or the equivalent for any
other type of return, for the three years prior to the first
transaction at issue in the Statement of Claim through the date the
Statement of Claim was filed (see current List 2, Item 1). FINRA is
proposing to expand this item to require production of Form 1040
schedule A and the IRS worksheets

related to Schedules A, B, D, and E. The expanded production would
provide parties with a broader understanding of the claimants'
financial status and investment activity during the relevant period.
The amendments would provide that the income tax returns must be
identical to those that the claimants filed with the Internal Revenue
Service.
    Because of the sensitive nature of the personal information, FINRA
would permit claimants to redact their Social Security numbers. FINRA
would also permit claimants to redact information relating to medical
and dental expenses and the names of charities on Schedule A unless the
information relates to the allegations in the Statement of Claim.
    Proposed List 2, Item 2--The current Guide requires claimants to
produce financial statements or similar statements of the claimants'
assets, liabilities, and/or net worth for the period covering the three
years prior to the first transaction at issue in the Statement of Claim
through the date the claimants filed the Statement of Claim (see
current List 2, Item 2). FINRA is proposing to add clarity to this item
by specifying that financial statements include statements within a
loan application. The item would also provide that claimants are not
required to create financial statements in order to comply with the
item.
    Proposed List 2, Item 3--The current Guide requires claimants to
produce copies of all documents received from the firm/associated
persons and from any entities in which the claimants invested through
the firm/associated persons, including monthly statements, opening
account forms, confirmations, prospectuses, annual and periodic
reports, and correspondence (see current List 2, Item 3). FINRA is
proposing to expand this item to include research reports. Research
reports may provide evidence concerning the basis for the claimants'
investment decisions.
    FINRA is proposing to eliminate mandatory production of account
statements and confirmations if claimants stipulate to having received
them. The amendments would require claimants to produce any statements
or confirmations with hand written notations on them or which are not
identical to those sent by the firm. The amendments would decrease
claimants' discovery costs while preserving the requirement to produce
documents that may have probative value.
    Proposed List 2, Item 4--The current Guide requires claimants to
produce account statements and confirmations for accounts maintained at
securities firms other than the respondent firm for the three years
prior to the first transaction at issue in the Statement of Claim
through the date the claimants filed the Statement of Claim (see
current List 2, Item 4). FINRA is proposing to amend this item to
permit claimants to provide written authorization allowing the firm/
associated persons to obtain account statements directly from the
securities firms instead of providing copies of the statements. If the
claimants elect to provide written authorization to the firm/associated
persons to obtain the account statements, the claimants would still be
required to provide all account statements in the claimants'
possession, custody, or control with hand written notations on them or
which are not identical to those sent by the firm. The proposal would
ensure that other parties to the matter have a complete understanding
of the claimants' investing history. FINRA proposes to eliminate
confirmations from the item to ease the burden for investors. If
necessary, firms would be able to request confirmations separately.
    Proposed List 2, Item 5--The current Guide requires claimants to
produce agreements, forms, information, or documents relating to the
accounts at issue signed by or provided by the claimants to the firm/
associated persons (see current List 2, Item 5). FINRA is proposing to
expand the scope of this item by requiring production of documents
relating to accounts or transactions at the firm regardless of whether
claimants signed the documents.
    Proposed List 2, Item 6--The current Guide requires claimants to
produce account analyses and reconciliations prepared by or for the
claimants relating to the accounts at issue (see current List 2, Item
6). FINRA is proposing to provide clarity to this item by changing
``the account(s) at issue'' to ``the accounts at the respondent firm or
transactions with the respondent firm during the time period at
issue.''
    Proposed List 2, Item 7--The current Guide requires claimants to
produce notes, including entries in diaries or calendars, relating to
the accounts at issue (see current List 2, Item 7). FINRA is proposing
to amend this item to provide clarity by changing ``the account(s) at
issue'' to ``accounts at the respondent firm or transactions at issue
with the respondent firm.''
    Proposed List 2, Item 8--The current Guide requires claimants to
produce recordings and notes of telephone calls or conversations about
the claimants' accounts at issue that occurred between the associated
persons and the claimants (and any person purporting to act on behalf
of the claimants) (see current List 2, Item 8). For claims alleging
unauthorized trading, claimants are also required to produce telephone
records, including telephone logs, evidencing telephonic contact
between the claimants and the firm/associated persons (see current List
12, Item 1). FINRA is proposing to combine these items into new Item 8.
FINRA is not proposing any substantive changes to the items.
    Proposed List 2, Item 9--The current Guide requires claimants to
produce correspondence between the claimants (and any person acting on
behalf of the claimants) and the firm/associated persons relating to
the accounts at issue (see current List 2, Item 9). FINRA is proposing
to amend this item to broaden the scope of production by deleting the
reference to firm/associated persons. The claimants may have
corresponded with persons/entities unrelated to the firm concerning the
transactions at issue.
    Proposed List 2, Item 10--The current Guide requires claimants to
produce previously prepared written statements by persons with
knowledge of the facts and circumstances related to the accounts at
issue, including those by accountants, tax advisors, financial
planners, other associated persons, and any other third party (see
current List 2, Item 10). FINRA is not proposing any substantive
changes to the current item.
    Proposed List 2, Item 11--The current Guide requires claimants to
produce complaints/Statements of Claim and answers filed in all civil
actions involving securities matters and securities arbitration
proceedings, and all final decisions and awards entered in these
matters (see current List 2, Item 12). FINRA is proposing to expand the
scope of this item by requiring claimants to produce non-confidential
settlements entered in these matters because the subject matter of non-
confidential settlements may be relevant to the pending case. The item
would specify that claimants must produce the documents for all claims
or complaints filed prior to the filing of the current Statement of
Claim.
    FINRA is also proposing to add that, if a person is party to a
confidential settlement agreement that by its terms does not preclude
identification of the existence of the settlement agreement, the party
must identify the documents comprising the confidential settlement
agreement. The proposed change would state that, although not
presumptively discoverable, the panel could order the claimants to
produce a confidential settlement agreement. The proposal would ensure
that parties are aware of

other securities actions in which the claimants were parties.
    Proposed List 2, Item 12--For claims alleging misrepresentation/
omissions (see current List 8, Item 1), negligence/breach of fiduciary
duty (see current List 10, item 1), or unsuitability (see current List
14, Item 1), the current Guide requires claimants to produce documents
showing the claimants' ownership in or control over any business
entity, including general and limited partnerships and closely held
corporations. FINRA is proposing to expand the scope of this item to
require that if the claimants are Trustees, they must also provide
documents showing all accounts over which they have trading authority.
The Trustees' trading activity for other accounts may provide evidence
of the Trustees' investment sophistication.
    Proposed List 2, Item 13--For claims alleging unsuitability, the
current Guide requires claimants to produce written documents they
relied upon in making the investment decisions at issue (see current
List 14, Item 2). FINRA is proposing to delete the reference to
``documents relied upon'' and require production of all documents the
claimants ``received, including documents found through the claimants'
own efforts, relating to the investments at issue.'' Documents the
claimants received that relate to the investment at issue could provide
relevant evidence in a case even if the claimants did not rely on them
in making an investment decision.
    Proposed List 2, Item 14--For claims alleging unauthorized trading,
the current Guide requires claimants to produce documents relied on to
show that transactions were made without the claimants' knowledge or
consent (see current List 12, Item 2). FINRA is not proposing any
substantive changes to the item and is proposing to limit the item to
claims alleging unauthorized trading.
    Proposed List 2, Item 15--FINRA is proposing to require claimants
to produce all materials received or obtained from any source relating
to the transactions or products at issue, and other investment
opportunities, including research reports, sales literature,
performance or risk data, prospectuses, and other offering documents,
including documents intended or identified as being ``for internal use
only,'' and worksheets or notes. This item would be new in the Guide.
Production of these documents may provide evidence concerning the bases
for claimants' trading decisions. Therefore, FINRA also is proposing to
require claimants to produce any similar materials received or obtained
relating to other investment opportunities.
    Proposed List 2, Item 16--For claims alleging misrepresentation/
omission (see current List 8, Item 2), negligence/breach of fiduciary
duty (see current List 10, Item 2), or unsuitability (see current List
14, Item 3), claimants are required to produce a copy of their resumes.
While FINRA is not proposing any substantive changes to the item,
claimants would be required to produce the documents in every case.
    Proposed List 2, Item 17--For claims alleging misrepresentation/
omission (see current List 8, Item 3), negligence/breach of fiduciary
duty (see current List 10, Item 3), or unsuitability (see current List
14, Item 4), claimants are required to produce documents showing their
educational and employment background, or a description of their
background if not set forth in a resume. While FINRA is not proposing
any substantive changes to the item, claimants would be required to
produce the documents in every case.
    Proposed List 2, Item 18--FINRA is proposing to require claimants
to produce documents the claimants obtained by subpoena or by document
requests directed to third parties. While this item would be new in the
Guide, it is not a new requirement because the subpoena rule, Rule
12512(e), already requires production of subpoenaed documents. FINRA is
proposing to cross-reference that rule in the Guide. FINRA would also
add documents received by request directed to third parties at any time
during the case, to ensure that all parties have access to documents
obtained without a subpoena from non-parties.
    Proposed List 2, Item 19--For claims involving an insurance product
that provides a death benefit, FINRA is proposing to require claimants
to produce all insurance information received from an insurance sales
agent or securities broker relating to the insurance. This new
requirement in the Guide could provide parties with evidence that may
be relevant in cases involving annuities.

Items Customers Would No Longer Be Required To Produce

    Claimants' complaints--The current Guide requires claimants to
produce all prior complaints by or on behalf of the claimants involving
securities matters and the firm's/associated persons' responses (see
current List 2, Item 11). FINRA is proposing to delete this item as
unnecessary because the respondent firm/associated persons would be in
possession of such complaints and any responsive documents.
    Claimants' action to limit losses--The current Guide requires
claimants to produce all documents showing action taken by the
claimants to limit losses in the transactions at issue (see current
List 2, Item 13). FINRA is proposing to delete this item because, in
most instances, the firm/associated persons are in possession of any
documents that would be responsive to this item. If necessary, firms
would be able to request additional documents.

Conforming Changes

    FINRA is proposing to amend Rules 12506 (Document Production Lists)
and 12508 (Objecting to Discovery; Waiver of Objection) to remove
references to Lists three through 14 since FINRA would delete these
lists in the proposed Guide.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\5\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that these revisions to the Guide will
reduce the number and limit the scope of disputes involving document
production and other matters, thereby improving the arbitration process
for the benefit of the public investors, broker-dealer firms, and
associated persons who use the process.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or

(ii) as to which the self-regulatory organization consents, the
Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2010-035 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-2010-035. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for 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 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of FINRA.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-FINRA-2010-035
and should be submitted on or before August 24, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18999 Filed 8-2-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register: December 8, 2005 (Volume 70, Number 235)]
[Notices]
[Page 73043-73044]
[DOCID:fr08de05-116]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52872; File No. SR-CBOE-2005-92]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change To Prohibit the
Practice of Unbundling Orders to Maximize Rebates of Fees

December 1, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, as amended, (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on November 7, 2005, the Chicago Board Options
Exchange, Incorporated (``CBOE'' or ``Exchange'') 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 the Exchange. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------

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

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

    CBOE proposes to adopt a new rule to prohibit the practice of
unbundling orders in order to maximize rebates of fees. The text of the
proposed rule change appears below. Additions are in italics.
* * * * *

Rule 4.23--Unbundling of Orders to Maximize Rebates of Fees

    Rule 4.23. No member shall divide an order into multiple smaller
orders for the primary purpose of maximizing rebates of fees resulting
from the execution of such orders, or any other similar payment of
value to the member.
* * * * *

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 CBOE 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 CBOE 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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule change is to amend CBOE rules to expressly
prohibit the practice of tape shredding, i.e., the practice of
splitting large orders into multiple smaller orders for the purpose of
maximizing market data revenues. The Commission has requested that all
U.S. self-regulatory organizations implement rule changes to inhibit
the practice of tape shredding.
    CBOE agrees that the practice of ``tape shredding'' is a distortive
practice. For options trading, CBOE's members do not have any incentive
to engage in this practice because CBOE does not share its market data
revenue in options with its members. With regard to its limited stock
trading, until very recently CBOE did not share market data revenue
with its members.\3\ Nonetheless, because CBOE shares the Commission's
concerns about this dubious practice, CBOE agrees that it would be
appropriate for CBOE to amend its rules to expressly prohibit its
members from dividing single orders into multiple orders for the sole
purpose of maximizing market data rebates.
---------------------------------------------------------------------------

    \3\ CBOE recently adopted a revenue sharing program with its
Designated Primary Market-Makers and Market-Makers for trades in
Tape B securities, of which CBOE trades a very small number, upon
the launch of CBOE's new stock trading platform. Because CBOE's
revenue sharing plan does not propose to share revenue with order
flow providers, only with CBOE's DPMs and Market-Makers in these
Tape B securities, CBOE does not believe that its plan promotes the
breaking up of single orders into multiple orders to maximize market
data rebates.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Act,\4\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\5\ in particular, in that it is 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
information with respect to, and facilitating transactions in
securities, to remove impediments to, and perfect the mechanism of, a
free and open market and a national market system, and in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change will impose no
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

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

    The Exchange has neither solicited nor received comments on this
proposal.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-CBOE-2005-92 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-92. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,

all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal offices of CBOE. 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-CBOE-2005-92 and should be submitted on or before December 29, 2005.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. E5-7071 Filed 12-7-05; 8:45 am]

BILLING CODE 8010-01-P