[Federal Register: November 30, 2009 (Volume 74, Number 228)]
[Notices]
[Page 62616-62623]
[DOCID:fr30no09-99]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61042; File No. SR-FINRA-2009-057]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of a Proposed Rule Change
Relating to Section 1(c) of Schedule A to the FINRA By-Laws To Amend
the Personnel Assessment and Gross Income Assessment

November 20, 2009.

I. Introduction

    On August 20, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (formerly known as the National Association of Securities
Dealers, Inc. (``NASD'')) filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 thereunder \2\ to amend Section 1(c) of Schedule A to the FINRA
By-Laws (``Schedule A'') to increase the Personnel Assessment and to
revise the formulation of the Gross Income Assessment calculation to be
paid by each FINRA member. The proposed rule change was published for
comment in the Federal Register on September 11, 2009.\3\ The
Commission received 745 comment letters on the proposal.\4\ FINRA
submitted a response to the comment letters on November 18, 2009.\5\
This order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60624 (September 3,
2009), 74 FR 46828 (September 11, 2009) (``Notice'').
    \4\ 676 of the letters were form comment letters. Of these, four
utilized ``Letter Type A'' and 672 utilized ``Letter Type B.'' An
example of Letter Type A and Letter B as well as all of the non-form
comment letters are posted on the Commission's Internet Web site
(http://www.sec.gov/comments/sr-finra-2009-057/finra2009057.shtml).
See Exhibit 1 for a list of comment letters noted on the
Commission's Internet Web site. All 745 comment letters are
available for inspection and copying at the Commission's Public
Reference Room.
    \5\ See letter from Phillip Shaikun, Associate Vice President
and Associate General Counsel, FINRA, to Elizabeth M. Murphy,
Secretary, Commission, dated November 18, 2009. (``Response
Letter'').
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II. Description of FINRA's Proposal

    Currently, FINRA's primary fee structure to support its regulatory
programs consists of the following fees: the Personnel Assessment
(``PA''); the Gross Income Assessment (``GIA''); the Trading Activity
Fee; and the Branch Office Assessment. These fees are used to fund
FINRA's regulatory activities, including rulemaking and FINRA's
examination and enforcement programs. According to FINRA, the economic
and industry downturns experienced in 2008 and 2009 have strained
FINRA's resources, yet its regulatory responsibilities remain constant
and its programs robust. To stabilize its revenues and provide
protection against future industry downturns, FINRA proposes to
increase the PA and revise the calculation of the GIA. This will enable
FINRA to achieve a more consistent and predictable funding stream to
carry out FINRA's regulatory mandate.
    To those ends, the proposed rule change will increase the PA for
all members. The PA currently is assessed on a three-tiered rate
structure based on the number of the firm's registered representatives
and principals (``registered persons'') as follows: members with one to
five registered persons are assessed $75 for each such registered
person; 6-25 registered persons, $70 for each such registered person;
and 26 or more registered persons, $65 for each such registered person.
The proposed rule change will increase those rates, for the first time
in five years, to $150, $140, and $130, respectively, based on the same
tiered structure. FINRA notes that there is a correlation between the
cost of FINRA's regulatory programs and the number of registered
persons within a firm and that the population of registered persons has
remained fairly stable, even throughout the recent economic
downturn.\6\ Accordingly, FINRA believes that an increase of the PA is

both a fair and appropriate means to achieve a more consistent and
reliable foundation to fund its regulatory operations.
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    \6\ For example, FINRA records show that since 2000, the average
number of registered persons per year has been approximately 667,680
and that for each of the past three years the population has been
669,626 (2009), 676,927 (2008) and 662,742 (2007) (based on numbers
at the end of the preceding calendar year).
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    FINRA states that even with the proposed increase of the PA, the
GIA remains the most important component of FINRA's regulatory funding.
The GIA is currently assessed through a seven-tier rate structure with
a minimum GIA of $1,200.00. Under the existing GIA rate structure,
members are required to pay an annual GIA as follows:
    (1) $1,200.00 on annual gross revenue up to $1 million;
    (2) 0.1215% of annual gross revenue greater than $1 million up to
$25 million;
    (3) 0.2599% of annual gross revenue greater than $25 million up to
$50 million;
    (4) 0.0518% of annual gross revenue greater than $50 million up to
$100 million;
    (5) 0.0365% of annual gross revenue greater than $100 million up to
$5 billion;
    (6) 0.0397% of annual gross revenue greater than $5 billion up to
$25 billion; and
    (7) 0.0855% of annual gross revenue greater than $25 billion.
    For 2010, the current year GIA will be subject to the cap set forth
in Regulatory Notice 08-07 (February 2008), which describes the funding
structure that resulted from the consolidation of NASD's and the New
York Stock Exchange's member regulation operations. FINRA states in
Regulatory Notice 08-07 that it will apply a 10% cap on any increase or
decrease to a firm's 2010 current year GIA \7\ resulting from the new
pricing structure implemented in January 2008.
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    \7\ ``2010 current year GIA'' means the amount of GIA assessment
due under the proposed new formulation. However, if 2010 current
year GIA represents an increase or decrease of more than 10%
compared to 2009 current year GIA, the increase or decrease will be
capped at 10%.
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    According to FINRA, since the GIA is assessed based on a member's
annual gross revenue for the preceding calendar year,\8\ FINRA's
revenues derived from the GIA are subject to the year-to-year
volatility of member revenues. In years when industry revenues are
significantly lower, FINRA's operating revenues can drop precipitously.
In 2009, for example, GIA revenues are down by approximately 37%
compared to 2008 due to 2008 fourth quarter write-offs taken by
members, particularly the largest securities firms.
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    \8\ Gross revenue for assessment purposes is set out in Section
2 of Schedule A, which defines gross revenue as total income as
reported on FOCUS form Part II or IIA excluding commodities income.
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    The proposed rule change seeks to ameliorate this vulnerability not
only by shifting some of FINRA's revenue generation to the more
consistent PA stream, but also by smoothing out the volatility inherent
in the GIA. To that end, the proposed rule change will amend Schedule A
to assess a GIA that is the greater of: (1) The amount that will be the
GIA based on the existing rate structure (``current year GIA''); or (2)
a three-year average of the GIA to be calculated by adding the current
year GIA plus the GIA assessed on the member over the previous two
calendar years, divided by three. For a newer firm that has been
assessed only in the prior year, FINRA will compare the current year
GIA to the two-year average and assess the greater amount. The existing
GIA rate structure and phase-in implementation through 2010 will remain
the same.\9\ Accordingly, the proposed rule change will preserve the
current rate structure, while building a buffer against industry
downturns. FINRA notes that it has a long history of providing rebates
to members when revenues exceed the expenditures necessary to discharge
its regulatory obligations and is committed to continuing that practice
in the future.
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    \9\ The actual amount of GIA assessed in any given year, e.g.,
the current year GIA (including a cap, if applicable) or the three-
year average, will be used to calculate subsequent three-year
average determinations.
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    FINRA believes that the proposed rule change will stabilize its
operating cash flows by augmenting revenues based on the registered
person population (on which FINRA's costs are more closely aligned) and
reducing dependency on, and exposure to, less predictable industry
revenues. FINRA estimates that, if the proposed rule change had been in
effect for 2009, it would have replaced about 90% of the revenue
shortfall that resulted primarily from the significant drop in GIA
revenues. FINRA notes that, in general, those replacement revenues will
come from several larger firms whose steep income declines in 2008
primarily account for FINRA's current revenue deficit.
    FINRA intends to announce the proposed rule change and its approval
by the Commission in a Regulatory Notice. The proposed rule change will
become effective January 1, 2010.

III. Discussion of Comments and Commission Findings

    The Commission received 676 form comment letters, and 69 individual
comment letters, regarding this proposal. FINRA responded to the
comment letters on November 18, 2009.\10\ After careful review of the
proposal and consideration of the comment letters and the Response
Letter, the Commission finds, for the reasons discussed below, that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities association.\11\ In particular, the Commission finds that
the proposed rule change is consistent with Section 15A(b)(5) of the
Act,\12\ which requires, among other things, that FINRA's rules provide
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility
or system which the association operates or controls.
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    \10\ See Response Letter, supra note 5.
    \11\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78o-3(b)(5).
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    The commenters object to FINRA's fee proposal primarily for the
following reasons: (1) FINRA should have anticipated the market
downturn and budgeted accordingly; (2) the proposed assessment
increases are unreasonable in light of the difficult economic times for
the industry and fee increases imposed by other entities, including
regulators and market operators; (3) the percentage increase of the PA
is too steep and out of step with inflation; and (4) the proposed
increases will disproportionately impact small and independent broker-
dealers that were not responsible for FINRA's revenue shortfalls. Some
commenters question whether the proposed rule change meets the
statutory requirements of Section 15A(b)(5) of the Act. Several
commenters offer alternative approaches to the proposed changes to the
PA and GIA fees, including: implementing caps on the PA and GIA
increases; implementing a phase-in period for the PA and GIA increases;
reversing the volume discount structure for the PA assessment; and
using a three-year GIA average instead of the proposed higher of actual
year GIA or the three-year GIA average.
    As an initial matter, the Commission notes that, as a national
securities association, FINRA is obligated to be so organized and to
have the capacity to be able to carry out the purposes of the Act and
(subject to any rule or order of the Commission pursuant to Section
17(d) or 19(g)(2) of the Act) \13\ to enforce compliance by its members
and persons associated with its members, with the provisions of the
Act, and rules and

regulations thereunder, and FINRA's own rules.\14\ Adequate regulatory
funding is critical to FINRA's ability to meet these statutory
requirements.
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    \13\ See 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2).
    \14\ 15 U.S.C. 78o-3(b)(2).
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    While some member firms understandably question whether it is
reasonable for FINRA to increase regulatory fees at a time when the
securities industry has faced declining revenues as a result of the
economic downturn, it is incumbent on FINRA to continue to support a
robust regulatory program irrespective of market events. The discussion
below addresses the significant issues raised by the commenters,
FINRA's response to those comments, and the Commission's views with
respect to those issues.

A. PA Increase Is Equitable

    Currently, FINRA member firms are charged annually per registered
person at the following rates: firms with up to five registered persons
pay $75 for each such person; firms with between 6-25 registered
persons pay $70 for each such person (a 6.7% discount from $75); firms
with over 25 registered persons pay $65 for each person (a 13.3%
discount from $75). The proposal will increase the rates to $150, $140
(a 6.7% discount from $150), and $130 (a 13.3% discount from $150),
respectively. While most commenters, including the 672 Form B
commenters, state specifically that the GIA assessment changes unfairly
burden small independent broker-dealers,\15\ some commenters note in
general that any increase in fees, including the PA increase, unfairly
burdens independent broker-dealers, especially in the current economic
climate.\16\ One of these commenters advocates for a reversal of the
discount structure, noting that FINRA should offer per person discounts
to the smallest firms instead of the largest firms, to remedy the
alleged inequities.\17\ Another commenter argues that the number of
representatives is not necessarily a better indicator of FINRA
resources consumed than overall income.\18\ This commenter advocates
for a more complex PA structure with additional tiers and possible
differentiation of PA rates based on the activity that the registered
representative conducts, e.g., a higher PA rate for Series 7 registered
representatives than for Series 6. Another commenter supports placing a
limit on the annual percentage increase in the PA to ten percent, if
the PA increase is approved.\19\ This commenter favors a fee structure
in which firms engaging in higher-risk activities would be subject to
higher fees.
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    \15\ The issue of whether the GIA fee revision is equitable is
addressed in Section III.C. infra.
    \16\ See, e.g., First Independent Letter, Financial Network
Letter, Form Letter B, Sykes Financial Letter, and Whitestone
Letter, infra in Exhibit 1.
    \17\ See Abel Noser Letter, infra in Exhibit 1.
    \18\ See State Farm Letter, infra in Exhibit 1.
    \19\ See MetLife Letter, infra in Exhibit 1.
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    The Commission notes that the current three-tiered PA structure,
including the discount percentages, was found to be consistent with the
Act and was approved by the Commission nearly seven years ago.\20\ The
proposed increase to the PA will not change the three-tiered structure
of the PA or the level of the discount percentages for larger firms.
Also, the manner of allocation of the PA fee among FINRA members will
remain unchanged. Moreover, viewing the increase in absolute dollar
terms, FINRA estimates that the average increase in total PA fees for
firms with 100 or fewer registered persons, a population that
constitutes 4,074 out of 4,868, or nearly 84%, of FINRA firms, will
amount to approximately $1,000 per firm, whereas the largest 100 firms
(based on the number of registered persons as of year end 2008) will
experience an average increase of approximately $300,000.\21\ Lastly,
as FINRA notes, the number of registered representatives is a
significant factor that impacts FINRA's oversight responsibilities and
thus is an equitable criterion for assessing PA fees.\22\ Therefore,
additional tiers and/or differentiation based on Series 6 or Series 7
or other criteria is not necessarily a better solution. The Commission
finds that the PA increase based on the current three-tiered PA fee
structure is an equitable allocation of fees.\23\
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    \20\ See Securities Exchange Act Release No. 47106 (December 30,
2002), 68 FR 819 (January 7, 2003) (NASD-2002-99) (order approving
current PA fee structure).
    \21\ See Response Letter, supra note 5 at page 6.
    \22\ In 2008, FINRA conducted 4,924 oversight and cause
examinations. These examinations, in large part, focused on broker-
dealer conduct and activity involving interaction with customers. As
result, in that year, FINRA brought 586 formal disciplinary actions
against registered representatives and an additional 115 formal
actions against member firms for failing to supervise their
employees. See Response Letter, supra note 5 at page 6.
    \23\ A discussion of the appropriateness of a PA fee increase
given these economic circumstances follows in Section III.E.2.
infra.
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B. PA Increase Is Reasonable

    735 commenters argue that a 100% increase in annual PA fees is an
unreasonably large increase.\24\ Many commenters note that an increase
of 100% is not commensurate with the rate of inflation over the past
five years and, in general, is not justified.\25\ FINRA responds to
these comments by stating that assessing the proposed fee change in
percentage terms and measuring it against an inflation benchmark such
as the Consumer Price Index is not the proper method of analysis.\26\
FINRA contends that the proper measure of reasonableness is arrived at
by comparing the absolute dollar value of the increase against the
costs associated with operating FINRA's regulatory oversight programs
and examination and enforcement responsibilities.\27\
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    \24\ See, e.g., Form Letter B, Sykes Financial Letter, and
Whitestone Letter, infra in Exhibit 1.
    \25\ See, e.g., Form Letter B, Curnes Financial Letter, and
Marvel Financial Letter, infra in Exhibit 1.
    \26\ See Response Letter, supra note 5 at page 5.
    \27\ See Id. at page 5.
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    FINRA notes that over the past two years, a time marked by modest
inflation, FINRA's annual funding mechanisms have proven insufficient
to sustain its regulatory programs.\28\ FINRA believes that, by
assessing the fee increase from this perspective, the PA increase is
reasonable and will better align FINRA's revenues with its costs. Based
on projections that the registered representative population will
modulate at a rate consistent with historical trends, FINRA estimates
that the proposal will result in a total increase of $42 million in PA
fees, an average of approximately $8,600 per firm. As noted above,
FINRA further estimates that the average increase in total PA fees for
firms with 100 or fewer registered persons--a population that
constitutes 4,074 out of 4,868, or nearly 84%, of FINRA firms--will
amount to approximately $1,000 per firm, whereas the largest 100 firms
(based on the number of registered persons as of year end 2008) will
see an average increase of approximately $300,000. FINRA notes that
these estimates assume that firms do not pass along the PA to the
individual registered persons, a practice that FINRA understands is
done in certain segments of the securities industry. For firms that do
engage in such practice, FINRA notes that the impact will shift from
the firm to the registered persons.\29\
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    \28\ See Id. at page 5.
    \29\ See Id. at page 6.
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    Furthermore, FINRA believes that a PA fee of between $130 and $150
per year is reasonable, particularly when compared to other
professional licensing fees.\30\ According to FINRA, for the past two
years, the PA has accounted for approximately 10-11% of FINRA's
regulatory revenue.\31\ With

adoption of the proposed rule change, PA assessments will account for
approximately 19% of FINRA's regulatory revenue.\32\ FINRA believes
that this PA increase as a percentage of total regulatory revenue
creates a more stable funding source with respect to FINRA's ability to
mitigate any potentially negative fluctuations in GIA due to market
conditions. FINRA believes that this is particularly important because
regulatory demands typically rise in declining markets.\33\
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    \30\ See Id. at page 6.
    \31\ In 2008, PA accounted for $44 million of $454 million in
total revenue or 9.7% and in 2009, PA accounted for $44 million of
$383 million in total revenue or 11.5% See Response Letter, supra
note 5 at page 4.
    \32\ See Id. at page 4.
    \33\ See Id. at pages 4 and 6.
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    After reviewing the comment letters and considering FINRA's
response to the commenters' issues, the Commission believes that the PA
increase is reasonable. As FINRA notes, PA revenue is less vulnerable
to economic fluctuations than the GIA. As a result, increasing the
portion of regulatory revenue FINRA derives from the PA should reduce
overall revenue volatility. In addition, the Commission believes that
the dollar amount of the PA increase is reasonably correlated to
FINRA's oversight of member firms and their registered representatives
and will assist FINRA to comply with the statutory requirement that it
have the capacity to be able to carry out the purposes of the Act and
to enforce compliance by its members and persons associated with its
members, with provisions of the Act, the rules and regulations
thereunder, and FINRA's own rules.\34\ Therefore, the Commission finds
the increase in PA fees to be reasonable.\35\
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    \34\ See 15 U.S.C. 78o-3(b)(1)-(2).
    \35\ In addition, should large revenue surpluses occur in the
future, FINRA notes that it will consider rebating those surpluses
to members.
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C. GIA Reformulation Is Equitable

    719 commenters argue that the burdens resulting from the
reformulation of the GIA calculation will fall disproportionately on
small firms and independent broker-dealers. Under the existing GIA rate
structure, members are required to pay an annual GIA as follows:
    (1) $1,200.00 on annual gross revenue up to $1 million;
    (2) 0.1215% of annual gross revenue greater than $1 million up to
$25 million;
    (3) 0.2599% of annual gross revenue greater than $25 million up to
$50 million;
    (4) 0.0518% of annual gross revenue greater than $50 million up to
$100 million;
    (5) 0.0365% of annual gross revenue greater than $100 million up to
$5 billion;
    (6) 0.0397% of annual gross revenue greater than $5 billion up to
$25 billion; and
    (7) 0.0855% of annual gross revenue greater than $25 billion.
    The proposed rule change will leave this seven-tiered structure
unchanged but will assess GIA based on the greater of the amount that
will be the current year GIA or a three-year average of the GIA to be
calculated by adding the current year GIA plus the GIA assessed on the
member over the previous two calendar years.\36\ In its Response
Letter, FINRA disagrees with the commenters that the revised GIA
formulation will disadvantage small firms.\37\ FINRA believes that the
proposal instead aligns the fee revision with the largest 100 firms
(based on the number of registered persons as of year-end of 2008 for
PA and the amount of GIA assessed for 2008) \38\ that primarily caused
the GIA shortfall because of substantial write-downs against their
FOCUS income. FINRA offers evidence, discussed in detailed below, in
the form of data and projections to demonstrate that the change to the
GIA formulation will not unfairly burden small firms and independent
broker-dealers but will largely fall on the largest 100 firms (based on
the number of registered persons as of year-end of 2008 for PA and the
amount of GIA assessed for 2008 for GIA) whose dramatic GIA decline in
2009 resulted in FINRA's need for additional fees.
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    \36\ For newer firms that have only been assessed in the prior
year, FINRA will use a two-year average instead of a three-year
average.
    \37\ See Response Letter, supra note 5 at page 6.
    \38\ See Id. at pages 6-7.
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    FINRA notes that revenues from the GIA have dropped nearly $100
million since 2008. Nearly $95 million of that decline relates to the
GIA paid in by the largest 100 GIA-assessed firms. Had the new proposed
GIA calculation been in place for the 2009 billing cycle, FINRA
projects that approximately $47 million (nearly 49%) of the lost
revenues would have been replaced, and these largest 100 GIA-assessed
firms would have absorbed approximately $44 million, or nearly 94%, of
the shortfall. For 2010, FINRA estimates that with the proposed fee
structure, the percentage of GIA paid will shift back toward the
largest 100 GIA-assessed firms, rising to 63% from 57% in 2009. If the
current GIA structure remains in place, these 100 firms are estimated
to account for only 59% of GIA in 2010.\39\
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    \39\ See Id. at page 7.
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    For firms with 100 or fewer registered persons, FINRA estimates
that, if the proposal had been implemented for 2009, the new GIA
calculation would have resulted in an average increased GIA of $850 as
compared to the actual amount assessed on those firms.\40\ FINRA notes
that these firms currently receive a rebate of $1,200 against their GIA
fee and that that rebate will continue until at least 2012. Therefore,
under the current and the proposed GIA, these firms, if they have FOCUS
revenues of less than $1 million, effectively pay no GIA
assessment.\41\
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    \40\ See Id. at page 7.
    \41\ See Id. at page 7.
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    The Financial Services Institute (``FSI''), which represents the
interests of independent broker-dealers, believes that the GIA
modification is inequitably allocated and will ``fall particularly
heavily on independent broker-dealer firms. * * * '' \42\ FINRA
believes that its data shows that the proposal, if implemented, will
not disparately impact the GIA of independent firms.\43\ FINRA reports
that, for 2009, independent broker-dealers paid a total of $11.63
million in GIA fees. Under the proposal, that figure is estimated to
fall to $11.17 million for 2010. By comparison, the GIA of the largest
100 GIA-assessed firms is projected to rise from $94 million in 2009 to
$123.53 million under the proposal. Thus, FINRA believes that the
increases resulting from the proposed GIA calculation will fall most
heavily not on independent broker-dealers but on the largest 100 GIA-
assessed firms, which include the several largest firms whose steep
income declines primarily account for FINRA's current revenue deficit.
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    \42\ See FSI Letter, infra in Exhibit 1.
    \43\ See Response Letter, supra note 5 at page at page 7.
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    After reviewing the comment letters and considering FINRA's
Response Letter, the Commission believes that the GIA reformulation is
an equitable allocation of fees. As FINRA notes, nearly 95% of the $100
million in GIA revenue drop since 2008 is attributable to the largest
100 GIA-assessed firms. Had the proposed new GIA calculation been in
place for the 2009 billing cycle, FINRA projects that approximately $47
million (nearly 49%) of the lost revenues would have been replaced, and
those largest 100 GIA-assessed firms would have absorbed approximately
$44 million, or nearly 94%, of the shortfall. FINRA estimates also show
that the new GIA calculation will increase the GIA burden for the
largest 100 GIA-assessed firms in 2010 from 57% to 63% of total GIA
revenue. The GIA assessments for

the largest 100 GIA-assessed firms are predicted to be $280,000 more
per firm in 2010 under the new formulation than under the current
formulation. The expected average increase for all other firms is
expected to be only $1,000 per firm. The totality of the data appears
to show that any increase that results from the new GIA formulation
falls primarily on the largest 100 GIA-assessed firms, the same firms
largely responsible for the revenue shortfall.
    In addition, one commenter argues that using income to determine
assessment fees is too simplified an approach and ignores many other
factors that may be indicative of FINRA's regulatory costs relative to
member firms, such as significant proprietary trading positions held by
a member firm, holding of customer funds or securities by the member
firm, and whether a member firm is self-clearing.\44\ As FINRA notes,
it has a large and diverse membership of differing sizes and business
models and therefore it is impossible for FINRA to develop a pricing
scheme that accounts for the particulars of every firm.\45\ FINRA
believes, and the Commission agrees, that the current pricing structure
is reasonable in that it achieves a generally equitable impact across
FINRA's membership and correlates the fees assessed to the regulatory
services provided by FINRA.\46\ Therefore, the Commission finds that
the proposed change to the GIA calculation will result in an equitable
allocation that will help reduce the risk of future fluctuations in GIA
income.
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    \44\ See MetLife Letter, infra in Exhibit 1.
    \45\ See Response Letter, supra note 5 at page 2.
    \46\ See Id. at page 2.
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D. GIA Reformulation Is Reasonable

    Based on two quarters of 2009 FOCUS data, FINRA estimates that
under the proposed GIA revision, in 2010, the assessment for the
largest 100 firms (based on the amount of GIA assessed for 2008) will
increase approximately $280,00 per firm over the current
formulation.\47\ The remaining firms are estimated to experience an
average increase of approximately $1,000 per firm. FINRA believes that
this increase does not disproportionately burden the firms outside of
the largest 100 (based on the amount of GIA assessed for 2008) in terms
of the revenue generated by those firms. In addition, FINRA contends
that this increase is necessary to cover its costs of regulatory
oversight and will ensure that it is able to continue meet its
regulatory obligations.\48\
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    \47\ See Id. at page 2.
    \48\ See Response Letter, supra note 5 at page 6.
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    One commenter, while appreciative of the need for stability
resulting from the use of a three-year average, suggested that GIA
should be based on a three-year average instead of the proposed greater
of a three-year average or GIA based on actual current year FOCUS
revenue.\49\ The Commission notes that using the greater of the two
figures allows FINRA to recoup any losses on a faster time frame,
thereby reducing the duration of the risk that any deficits in funding
would affect FINRA's ability to meet its statutory obligations.
Therefore, the Commission finds that FINRA's proposed GIA reformulation
is reasonable as proposed.
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    \49\ See Committee of Annuity Issuers Letter, infra Exhibit 1.
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    In addition, the Commission notes that the intent of the GIA
reformulation is not to impose additional burdens on FINRA members. The
intent is to enable FINRA to fulfill its regulatory obligations by
guarding against future revenue declines as a result of drastic
reductions in the FOCUS revenue of FINRA members. The introduction of a
three-year average should make this revenue stream less volatile and
more reliable for FINRA in the future. Therefore, the Commission
believes that the proposed GIA increase is appropriate.

E. Other Concerns of Commenters

1. FINRA Should Have Foreseen/Prepared for the Inevitable Shortfall
    727 commenters state that FINRA should have predicted the market
downturn and taken budgetary steps to account for it. As many
commenters stated in Letter Type B, ``FINRA's failure to properly
prepare for the inevitable market downturn is the root cause of their
operating cash flow concerns.'' \50\
---------------------------------------------------------------------------

    \50\ See Letter Type B.
---------------------------------------------------------------------------

    The Commission notes that FINRA is an SRO and is obligated under
the Act to carry out its regulatory obligations even during a period of
economic downturn. FINRA notes that it actually planned for a decline
in GIA from 2008 to 2009 and accordingly adjusted its 2009 budget
downward compared to 2008 in anticipation of the reduced revenues.\51\
The Commission is aware that, in a market downturn, each element of
FINRA's funding sources is vulnerable. A firm's gross income declines
as its trading activity declines, thereby affecting FINRA's funding for
its regulatory programs. It would be difficult for FINRA to account for
economic events outside of its control when planning its regulatory
program needs and its budget. This is because one of FINRA's primary
means of meeting its regulatory costs is the GIA, and the funding FINRA
receives from the GIA is wholly dependent on firms' revenues.\52\
Moreover, to the extent that the commenters raise issues with FINRA's
balance sheet investments, the Commission agrees with FINRA that those
comments are misplaced. The balance sheet is used to augment FINRA's
funding and thereby decrease the full cost of regulation assessed to
FINRA's member firms; its value does not negate the need to adequately
fund FINRA's regulatory programs. As an SRO, FINRA's needs and
requirements differ from those of its members and it would be improper
for FINRA to cut its regulatory programs to adjust to leaner times when
those programs are necessary to meet its statutory obligations. As
FINRA has noted, it has established a comprehensive cost-cutting
program that so far has reduced expenses that do not directly impact
its regulatory programs by more than $70 million from the prior
year.\53\ This cost-cutting is in addition to the income yield from its
balance sheet portfolio that supplements the PA and GIA fees. In the
Commission's view, FINRA's fee proposal is fair and reasonable in light
of FINRA's regulatory responsibilities.
---------------------------------------------------------------------------

    \51\ See Response Letter, supra note 5 at page 4-5.
    \52\ See Id. at page 4.
    \53\ See Id. at page 2.
---------------------------------------------------------------------------

2. Any Fee Increase Is Inappropriate Given the Current Economic
Conditions
    728 commenters believe that the proposal is unfair because it
occurs at a time when firms are suffering financially and have incurred
fee increases from a variety of other entities, including the
Commission, the Securities Investor Protection Corporation, a national
securities exchange, the Municipal Securities Rulemaking Board and
several states. In response, FINRA notes that its regulatory
responsibilities have not lessened--if anything, they may have
increased.\54\ To that end, FINRA refers to statistics that demonstrate
that the population of registered representatives has remained fairly
constant, even throughout recent market events.\55\ The Commission
strongly believes that FINRA must have sufficient resources to carry
out its statutory obligations, particularly during periods of market
turmoil, even when its members also are

assessed fees by other organizations or governmental entities. In the
Commission's view, fee increases imposed by other regulators, market
operators or securities-related entities are not dispositive regarding
whether it is appropriate for FINRA to increase its regulatory fees.
The proposed PA and GIA fee increases are designed to allow FINRA to
maintain a robust regulatory program, which the Commission believes is
both necessary and appropriate so that FINRA can carry out its
regulatory responsibilities effectively.
---------------------------------------------------------------------------

    \54\ See Id. at page 5.
    \55\ See supra, note 6.
---------------------------------------------------------------------------

F. Other Approaches Suggested by Commenters

    In addition to the concerns and suggestions raised by commenters
that are discussed above, commenters offered several alternative
approaches to the proposed PA and GIA increases. For example, some
commenters suggest that the proposed revisions to PA and GIA
assessments be capped at a certain amount or phased in over a period of
years.\56\ Other commenters note that FINRA has failed to sufficiently
demonstrate a need for additional revenue in the form of increased PA
and GIA.\57\
---------------------------------------------------------------------------

    \56\ See e.g., SIFMA Letter, MetLife Letter, and GBS Financial
Letter, infra Exhibit 1.
    \57\ See e.g., Whitestone Letter, PFS Investment Letter, and
SagePoint Financial Letter, infra Exhibit 1.
---------------------------------------------------------------------------

1. Caps on Increases or Phase-In Period
    Eight commenters suggest that any fee increase should be subject to
an annual cap or a gradual phase-in period.\58\ One commenter suggests
a one year delay in any fee increase \59\ while another commenter
favors a three year phase-in period for any fee increase.\60\ Three
other commenters recommend a phase-in period of an unspecified
length.\61\ Five of the commenters favored a cap on any PA increase.
Two of these commenters support a 10% cap,\62\ another commenter
prefers a 10%-15% cap,\63\ and the two others do not suggest a specific
amount.\64\
---------------------------------------------------------------------------

    \58\ See Foresters Equity Letter, State Farm Letter, FSI Letter,
MetLife Letter, GBS Financial Letter, SIFMA Letter, World Group
Letter, and Committee of Annuity Insurers Letter, infra Exhibit 1.
    \59\ See Foresters Equity Letter, infra Exhibit 1.
    \60\ See FSI Letter, infra Exhibit 1.
    \61\ See GBS Financial Letter, SIFMA Letter, and World Group
Letter, infra Exhibit 1.
    \62\ See State Farm Letter and Committee of Annuity Insurers
Letter, infra Exhibit 1.
    \63\ See Foresters Equity Letter, infra Exhibit 1.
    \64\ See SIFMA Letter and World Group Letter, infra Exhibit 1.
---------------------------------------------------------------------------

    In its Response Letter, FINRA states that it is critical to
implement the proposed rule change as of January 2010 and without any
limitations. FINRA notes that it has already phased in the need for
additional assessed funding by not charging firms in 2008 and 2009 for
cash flow shortfalls that are funded out of its capital. FINRA points
out that the GIA will remain subject to an existing cap for 2010,\65\
but notes that any further caps could leave FINRA facing the same
fiscal quandary it currently faces in the event of continuing decreased
revenue at firms. For the same reason, FINRA opposes a phased-in
implementation period. FINRA believes that prolonging implementation of
these changes will only lead to a ``geometric future fee increase, as
FINRA perpetuates a budget imbalance and depletes its revenue-producing
assets.'' \66\
---------------------------------------------------------------------------

    \65\ For 2010, any increase or decrease in GIA will be capped at
10% of what a firm would have paid under the prior NASD or NYSE rate
structures that it was subject to before FINRA's GIA rate structure
was amended in 2008.
    \66\ See Response Letter, supra note 5 at page 8.
---------------------------------------------------------------------------

    The Commission agrees with FINRA that by not charging members
increases in 2008 and 2009 when its cash flow shortfalls were
occurring, FINRA effectively has provided a type of delayed or phased-
in implementation of the fee increases. The Commission also agrees with
FINRA's view that any further delay in implementing the fee increases
could result in a greater financial impact to firms in the future and,
in the Commission's view, could potentially impact FINRA's ability to
meet its statutory requirements. Therefore, the Commission believes
that it is reasonable for FINRA to refrain from implementing a yearly
cap on, or a phase-in period for, the PA and GIA fee increases.
2. FINRA Does Not Need the Additional Revenue
    Nine commenters suggest that FINRA has failed to sufficiently
demonstrate a need for additional revenue and thus argue against any
increase in the PA or GIA.\67\ One commenter remarks that ``it is
apparent from FINRA's annual report that the organization has more than
adequate assets and reserves to withstand the recent downturn.'' \68\
Another commenter states that ``FINRA's proposed Rule Change lacks
proper and adequate support. Nowhere does FINRA provide any disclosure
of what proportion PA and GIA fees represent in its revenue or income.
Nor does FINRA describe its financial or investment models or state
what if any preparations or actions it took or has taken in light of
the economic and industry downturns.'' \69\
---------------------------------------------------------------------------

    \67\ See IBN Financial Letter, First Independent Letter,
Whitestone Letter, JanHobbs Financial Letter, SagePoint Financial
Letter, Magdaleno Letter, GBS Financial Letter, FSC Securities
Letter, and PFS Investment Letter, infra Exhibit 1.
    \68\ See e.g., First Independent Letter, infra Exhibit 1.
    \69\ See e.g., FSC Securities Letter, infra Exhibit 1.
---------------------------------------------------------------------------

    In its Response Letter, FINRA states that income from its reserves
is used to offset a part of the cost of its regulatory program each
year, and consequently that funding stream is in lieu of a more
substantial fee increase on members.\70\ FINRA expects such income to
offset regulatory costs by approximately $50 million in 2010.\71\
Moreover, FINRA notes that it delayed seeking any fee increase for 2008
and 2009 by utilizing the principal of its reserves. However, FINRA
does not believe that it would be prudent to continue to exhaust its
reserves to cover all future operating deficits, because such a
practice is unsustainable and would inevitably result in a much more
substantial fee increase in the future.\72\
---------------------------------------------------------------------------

    \70\ See Response Letter, supra note 5 at page 3.
    \71\ See Id. at page 3.
    \72\ See Id. at pages 3-4.
---------------------------------------------------------------------------

    FINRA further notes that it has minimized the proposed fee
increases through a comprehensive cost-cutting program that so far has
reduced expenses that do not directly impact its regulatory programs by
more than $70 million from the prior year.\73\ According to FINRA, it
supplements, where possible, member fees and assessments with the
income yield from its balance sheet portfolio. FINRA states that by
reallocating assets it has reduced performance volatility, while
creating a more reliable income stream to subsidize fees. However,
FINRA notes that these actions alone have been insufficient to make up
the funding deficits it has experienced over the prior two years.
According to FINRA, the proposed rule change is intended to remedy
ongoing deficits and ameliorate vulnerability to future revenue
shortfalls. Therefore, FINRA believes that the proposed fee increases
are necessary and any delay in their implementation will necessitate
future fee increases of much greater magnitude.\74\
---------------------------------------------------------------------------

    \73\ See Id. at page 2.
    \74\ See Id. at page 2.
---------------------------------------------------------------------------

    The Commission believes that FINRA has sufficiently demonstrated
that the proposed increases in PA and GIA fees are necessary to
adequately support FINRA's regulatory programs. FINRA makes a
compelling argument that its balance sheet resources are finite and
cannot be relied upon solely to overcome a regulatory revenue
shortfall. As an SRO, FINRA needs to maintain adequate reserves to
ensure that it can

continue to operate a vigorous regulatory system. In addition, the
Commission notes that FINRA has implemented cost cutting measures and
taken other steps to minimize the magnitude of the proposed fee
increases. Therefore, the Commission finds that the proposed fee
increases are equitable and consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\75\ that the proposed rule change (SR-FINRA-2009-057), be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \75\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\76\
---------------------------------------------------------------------------

    \76\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.

EXHIBIT 1

Comments on FINRA Rulemaking

    Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
Section 1(c) of Schedule A to the FINRA By-Laws to Amend the Personnel
Assessment and Gross Income Assessment.
    (Release No. 34-60624; File No. SR-FINRA-2009-057).
    Total Number of Comment Letters Received--745.
    Comments have been received from individuals and entities using the
following Letter Types:
    a. 4 individuals or entities using Letter Type A.
    b. 672 individuals or entities using Letter Type B.
    1. Jonathan Zulauf, dated September 2, 2009.
    2. Richard J. Carlesco Jr., LUTCF, IBN Financial Services, Inc.,
dated September 17, 2009 (``IBN Financial Letter'').
    3. Phillip H. Palmer, ChFC, President and CEO, First Independent
Financial Services Inc. dated September 17, 2009 (``First Independent
Letter'').
    4. William R. Sykes, President, Sykes Financial Services LLC, dated
September 17, 2009 (``Sykes Financial Letter'').
    5. Anthony Pappas, Ph.D., President, Whitestone Securities Inc.,
dated September 21, 2009 (``Whitestone Letter'').
    6. David M. Sobel, Esq., EVP/COO, Abel/Noser Corp., dated September
22, 2009 (``Abel Noser Letter'').
    7. Kevin Hart Korfield, Kevin Hart Korfield & Co. Inc. dated
September 23, 2009.
    8. Nancy Wheeler Bertacini, Curnes Financial Group, FNIC, dated
September 24, 2009 (``Curnes Financial Letter'').
    9. David L. Ehrig, dated September 24, 2009.
    10. Janice Hobbs, President, JanHobbs Financial Group, dated
September 24, 2009 (``JanHobbs Financial Letter'').
    11. Bryon Holz, dated September 24, 2009.
    12. John Ikeda, Registered Principal Financial Network Investment
Corp., dated September 24, 2009 (``Financial Network Letter'').
    13. Timothy Jones, Chairman CJM Wealth Advisers LTD, dated
September 24, 2009.
    14. Kate Marvel, President, Marvel Financial Planning, Inc., dated
September 24, 2009 (``Marvel Financial Letter').
    15. Jonathan Meany, CFP, dated September 24, 2009.
    16. Gary Orler, Investment Executive, Raymond James Financial
Services, Inc., dated September 24, 2009.
    17. Suzanne Seay, CFP, Royal Alliance, dated September 24, 2009.
    18. John Sklencar, Financial Advisor FSC Securities Corp., dated
September 24, 2009.
    19. Frank L. Smith, President, Foresters Equity Services, Inc.,
dated September 24, 2009 (``Foresters Equity Letter'').
    20. Daniel G. Trout, Senior Associate, Financial Principles LLC,
dated September 24, 2009.
    21. James Woytcke, CEO/Owner, Financial Success Ltd., dated
September 24, 2009.
    22. Tim, dated September 24, 2009.
    23. Jeffrey M. Auld, President and Chief Executive Officer,
SagePoint Financial Inc., dated September 24, 2009 (``SagePoint
Letter'').
    24. Kurt Dressler, Capital Investment Counsel, dated September 25,
2009.
    25. Bruce Ferguson, Managing Member, Raymond James Financial, dated
September 25, 2009.
    26. Pamela Fritz, CCO, MWA Financial Services, dated September 25,
2009.
    27. Robert B. Lyons, CLU, ChFC, ING Financial Partners, dated
September 25, 2009.
    28. Brian Perley, ChFC, CFP, Hammond Financial Inc., dated
September 25, 2009.
    29. S. Ann Pugh, CFP, ING Financial Partners, dated September 25,
2009.
    30. William Robbins, Registered Representative, Coordinated Capital
Securities, Inc., dated September 25, 2009.
    31. Stephen Russell, Senior Vice President, VSR Financial Services,
dated September 25, 2009.
    32. James G. Timpa, dated September 25, 2009.
    33. Sherri White, CPA/PFS, dated September 25, 2009.
    34. Martin Cohen, President, Balanced Financial Securities, dated
September 26, 2009.
    35. Joel Dash, dated September 28, 2009.
    36. D.W. Hadley, Jr., Capital Analyst of NC Inc., dated September
28, 2009.
    37. Michelle E. Heyne, CCO, McAdams Wright Ragen, Inc., dated
September 28, 2009.
    38. Penn Rettig, Branch Manager, Multi Financial Securities Corp.,
dated September 28, 2009.
    39. Donna M. Stevenson, dated September 28, 2009.
    40. John Terry, President, High Street Securities Inc., dated
September 28, 2009.
    41. Russell L. Bacon, MBA, CSA, Director, Montgomery Wealth
Management, dated September 29, 2009.
    42. Robert Black, Jr., President, Legacy Planning Group, dated
September 29, 2009.
    43. Nicholas C. Cochran, Vice President, American Investors
Company, dated September 29, 2009.
    44. Pamela Goodall, dated September 29, 2009.
    45. Cynthia Iquinto, Registered Representative, FSC Securities
Corporation, dated September 29, 2009.
    46. Jim Loessberg, Financial Advisor, Raymond James Financial,
dated September 29, 2009.
    47. Sandra Hay Magdaleno, CFP, dated September 29, 2009
(``Magdaleno Letter'').
    48. Edward Skelly, President, Sterling Financial Planners, dated
September 29, 2009.
    49. Neal E. Nakagiri, President, CEO, CCO, NPB Financial Group LLC,
dated September 30, 2009.
    50. Kevin Tucker, dated September 30, 2009.
    51. Paige W. Pierce, CEO, RW Smith Associates Inc., dated October
1, 2009.
    52. Richard P. Woltman, CEO & Chairman, Girard Securities Inc.,
dated October 1, 2009.
    53. David E. Axtell, Compliance Director, State Farm Investment
Management Corp, dated October 2, 2009 (``State Farm Letter'').
    54. Dale E. Brown, CAE, President & CEO, Financial Services
Institute, Inc., dated October 2, 2009.
    55. Paul Cellupica, Chief Counsel, Securities Regulation &
Corporate Services, MetLife, Inc., dated October 2, 2009 (``MetLife
Letter'').

    56. James M. Clous, Registered Representative, dated October 2,
2009.
    57. Gerard P. Gloisten, President, GBS Financial Corp, dated
October 2, 2009 (``GBS Financial Letter'').
    58. Ronald C. Long, Director, Regulatory Affairs, Wells Fargo
Advisors, dated October 2, 2009.
    59. Debra G. McGuire, CPA, McGuire Dyke Investment Group, dated
October 2, 2009.
    60. E. John Moloney, Chairman, SIFMA Small Firms Committee,
Securities Industry and Financial Markets Association, dated October 2,
2009 (``SIFMA Letter'').
    61. Kevin L. Palmer, CEO/President, World Group Securities Inc.,
dated October 2, 2009 (``World Group Letter'').
    62. Mark J. Schlafly, President & CEO, FSC Securities Corporation,
dated October 2, 2009 (``FSC Securities Letter'').
    63. Sutherland Asbill & Brennan LLP, on behalf of Committee of
Annuity Insurers, dated October 2, 2009 (``Committee of Annuity
Insurers Letter'').
    64. John S. Watts, SVP & Chief Counsel, PFS Investment Inc., dated
October 2, 2009 (``PFS Investment Letter'').
    65. Edward Wiles, SVP & CCO, Genworth Financial Securities Corp,
dated October 2, 2009.
    66. Cuneo, Gilbert & Laduca LLP and Greenfield & Goodman LLC, on
behalf of Standard Investment Chartered Inc., dated October 5, 2009.
    67. Elliott Harris, dated October 5, 2009.
    68. Daniel W. Roberts, President/CEO, Roberts & Ryan Investments
Inc., dated October 5, 2009.
    69. Mark E. Larson, Esquire, CPA, Academic Director of the
Certificate in Financial planning Program at Marquette University,
dated October 13, 2009.

[FR Doc. E9-28472 Filed 11-27-09; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 97 (Monday, May 20, 2013)]
[Notices]
[Pages 29364-29365]
[FR Doc No: 2013-11924]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL13-62-000]

Independent Power Producers of New York, Inc. v. New York
Independent System Operator, Inc.

Notice of Complaint

    Take notice that on May 10, 2013, Independent Power Producers of
New York, Inc. (IPPNY or Complainant) filed a complaint against New
York Independent System Operator, Inc. (NYISO or Respondent), pursuant
to

sections 206 and 306 for the Federal Power Act, 16 U.S.C. 824e, 825e
(2006) and Rule 206, 18 CFR 385.206, of the Federal Energy Regulatory
Commission's Rules of Practice and Procedure, alleging that NYISO's
Market Administration and Control Area Services Tariff is unjust and
unreasonable because it does not include provisions to control the
artificial suppression of prices in the New York Control Area capacity
markets by existing resources.
    IPPNY certifies that copies of the complaint were served on the
contacts of New York Independent System Operator, Inc. as listed on the
Commission's list of Corporate Officials.
    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. The Respondent's
answer and all interventions, or protests must be filed on or before
the comment date. The Respondent's answer, motions to intervene, and
protests must be served on the Complainants.
    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 5 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 email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please email
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5:00 p.m. Eastern Time on May 30, 2013.

    Dated: May 14, 2013.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-11924 Filed 5-17-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 77 (Monday, April 24, 2017)]
[Notices]
[Pages 18945-18947]
[FR Doc No: 2017-08165]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80482; File No. SR-GEMX-2017-03]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Rulebook and Schedule of Fees To Incorporate Certain Name Changes

April 18, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 12, 2017, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') 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 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)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the Rulebook and Schedule of Fees to
incorporate certain names changes that became operative on April 3,
2017. Specifically, the Exchange proposes to: (i) Amend references to
ISE Gemini to Nasdaq GEMX in the Schedule of Fees, which references
were overlooked in a prior filing; \3\ and (ii) amend the name of the
``International Securities Exchange'' and ``ISE'' to ``Nasdaq ISE''.\4\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 80248 (March 15,
2017), 82 FR 14547 (March 21, 2017) (SR-ISEGemini-2017-13).
    \4\ See Securities Exchange Act Release No. 80325 (March 29,
2017) (SR-ISE-2017-25).
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's
Web site at www.ise.com, at the principal office of the Exchange, 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, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend the Schedule of
Fees to correct references ``ISE Gemini'' which should have been
changed to ``Nasdaq GEMX'' in a prior rule change.\5\ The Exchange also
proposes to amend references to ``International Securities Exchange''
and ``ISE'' to ``Nasdaq ISE'' as these name changes became operative on
April 3, 2017.\6\
---------------------------------------------------------------------------

    \5\ See note 3 above.
    \6\ See notes 4 and 5 above.
---------------------------------------------------------------------------

    This proposed rule change amends corporate names referred to in the
GEMX rules which are already operative and currently in effect. This
proposed rule change also proposes to amend references to Nasdaq ISE to
make them accurate as of April 3, 2017.
    Finally, a non-substantive formatting rule change is proposes to
the Supplementary Material to Rule 804.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Section
6(b)(5) of the Act \8\ in particular, in that it is designed to promote
just and equitable principles of trade, 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,
by correcting references to corporate names, which are already in
effect, to properly reflect the Exchange's name and that of its
affiliate.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impact the intense competition that
exists in the options market. The amendment to references to name
changes, which are already in effect, will accurately reflect the
current ownership structure of Nasdaq, Inc.

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

    No written comments were either solicited or received.

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

    Pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(1)
\10\ thereunder, the Exchange has designated this proposal as one that
constitutes a stated policy, practice or interpretation with respect to
the meaning, administration, or enforcement of an existing rule of the
SRO, and therefore has become effective.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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-GEMX-2017-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-GEMX-2017-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments

received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-GEMX-2017-03, and should be
submitted on or before May 15, 2017.

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

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

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08165 Filed 4-21-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: September 23, 2008 (Volume 73, Number 185)]
[Notices]
[Page 54829-54831]
[DOCID:fr23se08-73]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2008-N-0482]

Ophthalmic Balanced Salt Solutions for Ocular Surgical
Procedures; Enforcement Action Dates

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing its
intention to take enforcement action against unapproved ophthalmic
balanced salt solutions for irrigation of the eye during surgery and
persons\1\ who manufacture or cause the manufacture of such products or
their shipment in interstate commerce. Unapproved ophthalmic balanced
salt solutions have been associated with adverse events, some of them
leading to permanent loss of visual acuity, because of contamination of
the product or other product defects. Ophthalmic balanced salt
solutions are new drugs that require approved applications because they
are not generally recognized as safe and effective. Two firms have
approved applications to market these products. Manufacturers who wish
to market ophthalmic balanced salt solutions must obtain FDA approval
of a new drug application (NDA) or an abbreviated new drug application
(ANDA).
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    \1\ A ``person'' includes individuals, partnerships,
corporations, or associations (21 U.S.C. 321(e)).

DATES: This notice is effective September 23, 2008. For information
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about enforcement dates, see SUPPLEMENTARY INFORMATION, section III.B.

ADDRESSES: All communications in response to this notice should be
identified with Docket No. FDA-2008-N-0482 and directed to the
appropriate office listed as follows:
    Regarding applications under section 505(b) of Federal Food, Drug,
and Cosmetic Act (the act) (21 U.S.C. 355(b)): Division of Anti-
Infective and Ophthalmology Products, Office of New Drugs, Center for
Drug Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire

Ave., Bldg. 22, Silver Spring, MD 20993-0002.
    Regarding applications under section 505(j) of the act: Office of
Generic Drugs, Center for Drug Evaluation and Research (HFD-600), Food
and Drug Administration, 7500 Standish Pl., Rockville, MD 20855.
    All other communications: Jennifer Devine, Center for Drug
Evaluation and Research (HFD-310), Food and Drug Administration, 10903
New Hampshire Ave., Bldg. 51, rm. 5240, Silver Spring, MD 20993-0002.

FOR FURTHER INFORMATION CONTACT: Jennifer Devine, Office of Compliance,
Division of New Drugs and Labeling Compliance, Center for Drug
Evaluation and Research (HFD-310), Food and Drug Administration, 10903
New Hampshire Ave., Bldg. 51, rm. 5240, Silver Spring, MD 20993-0002,
301-796-3347, e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    Ophthalmic balanced salt solutions are sterile, isotonic irrigating
solutions used during surgical procedures on the eye. Prior to the
1960s, saline was the ophthalmic irrigating solution most commonly used
to replace small amounts of intraocular fluid and wet the external eye.
Balanced salt solutions for use during ocular surgery were developed in
the 1960s to provide a temporary replacement for the aqueous humor,
physiologically supporting the cornea until sufficient fluid is
replaced by the ciliary body. These products enable the conduct of
complex intraocular surgery techniques that require the replacement of
large amounts of aqueous and vitreous humor. Some of the products
marketed today are designed for use in surgical procedures of limited
duration, while others are appropriate for use in procedures of any
expected duration.
    Two firms--Alcon Laboratories and Akorn, Inc. (Adorn),--have
approved applications for ophthalmic balanced salt solutions. Alcon's
approved products are marketed under the names BSS (NDA 20-742),
intended for surgeries of under 60 minutes, and BSS-plus (NDA 18-469),
intended for surgery of any expected duration. Akorn's approved
products include Balanced Salt Solution (ANDA 75-503) and Endosol Extra
(NDA 20-079). BSS, BSS-plus, and Endosol Extra have been designated as
reference listed drugs, meaning that FDA can accept ANDAs referencing
these products and filed under section 505(j) of the Federal, Food,
Drug, and Cosmetic Act (act). In addition, the agency is aware that
other firms market unapproved ophthalmic balanced salt solutions.

II. Safety Issues Associated With Ophthalmic Balanced Salt Solutions.

    Serious safety concerns associated with ophthalmic balanced salt
solutions are mentioned in adverse drug events reported to the agency
and in the literature. Through January 31, 2008,\2\ FDA had received
over 300 spontaneous reports of serious adverse events associated with
all ophthalmic balanced salt solution products. Adverse events
associated with these products that have been reported to FDA include
toxic anterior segment syndrome (TASS) (a noninfectious inflammation of
the anterior segment of the eye), bacterial endophthalmitis, corneal
edema, and corneal opacity (clouding). In some cases, these adverse
events have resulted in permanent loss of visual acuity. Because the
adverse event reports sometimes include limited information on the
product used, it is often difficult to establish whether an adverse
event was caused by a particular product. In some instances, adverse
events may be the result of improperly manufactured products. Product
defects affecting the safety and performance of ophthalmic balanced
salt solutions include contaminants (such as bacteria, endotoxins,
fungi, or particulates) and variations in pH and osmolality.\3\ In
2006, for example, contamination with endotoxins of unapproved products
made by one manufacturer was associated with several hundred reports of
adverse events (both serious and nonserious), including TASS. Given the
safety concerns described previously, FDA's review of the individual
applications and application supplements for ophthalmic balanced salt
solutions, including their manufacturing methods and controls, is
essential to ensuring the safety, efficacy, and quality of these
products.
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    \2\ Data in the current system date back to 1969, when FDA first
implemented an adverse event reporting system.
    \3\ McDermott, M.L., H.F. Edelhauser, H.M. Hack, and R.H.S.
Langston, ``Ophthalmic Irrigants: A Current Review and Update,''
Ophthalmic Surgery, 19(10):724 733, 1988; Briggs, R.B. and D.L.
McCartney, ``Balanced Salt Solution Infusion Alert,'' Archives of
Ophthalmology, 106:718, 1988.
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III. Legal Status

A. Ophthalmic Balanced Salt Solutions Are New Drugs Requiring Approved
Applications

    As described previously, ophthalmic balanced salt solution products
used for irrigation of the eye during surgery are not generally
recognized as safe and effective under section 201(p) of the act (21
U.S.C. 321(p)). Therefore, ophthalmic balanced salt solution products
are regarded as new drugs as defined in section 201(p) of the act and
are subject to the requirements of section 505 of the act. As set forth
in this notice, approval of an NDA or an ANDA under section 505 of the
act is required as a condition for manufacturing or marketing all
ophthalmic balanced salt solutions. After the dates identified in this
notice, FDA intends to take enforcement action against unapproved
ophthalmic balanced salt solutions and persons who cause the
manufacture or interstate shipment of such products. Any person who
submits an application for an ophthalmic balanced salt solution but has
not received approval must comply with this notice.

B. Notice of Enforcement Action

    Although not required to do so by the Administrative Procedure Act,
the act, or any rules issued under its authority, or for any other
legal reason, FDA is providing this notice to persons who are marketing
unapproved ophthalmic balanced salt solution products that the agency
intends to take enforcement action against such products and those who
manufacture them or cause them to be manufactured or shipped in
interstate commerce.
    Manufacturing or shipping unapproved ophthalmic balanced salt
solution products can result in enforcement action, including seizure,
injunction, or other judicial or administrative proceeding. Consistent
with policies described in the agency's guidance entitled ``Marketed
Unapproved Drugs--Compliance Policy Guide'' (the Marketed Unapproved
Drugs CPG), the agency does not expect to issue a warning letter or any
other further warning to firms marketing unapproved ophthalmic balanced
salt solution products prior to taking enforcement action. The agency
also reminds firms that, as stated in the Marketed Unapproved Drugs
CPG, any unapproved drug marketed without a required approved drug
application is subject to agency enforcement action at any time. The
issuance of this notice does not in any way obligate the agency to
issue similar notices or any notice in the future regarding marketed
unapproved drugs.\4\
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    \4\ The agency's general approach for dealing with these
products in an orderly manner is spelled out in the Marketed
Unapproved Drugs CPG. That CPG, however, provides notice that any
product that is being marketed illegally, and the persons
responsible for causing the illegal marketing of the product, are
subject to FDA enforcement action at any time.

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    As described in the Marketed Unapproved Drugs CPG, the agency may,
at its discretion, identify a period of time during which the agency
does not intend to initiate an enforcement action against a currently
marketed unapproved drug solely on the ground that it lacks an approved
application under section 505 of the act. With respect to unapproved
ophthalmic balanced salt solution products, the agency intends to
exercise its enforcement discretion for only a limited period of time
because ophthalmic balanced salt solution products are drugs with
potential safety risks and approved ophthalmic balanced salt solutions
for use in surgical procedures of both shorter and longer durations
have been available since 1997. Therefore, the agency intends to
implement this notice as follows.
    For the effective date of this notice, see the DATES section of
this document. FDA intends to take enforcement action to enforce
section 505(a) of the act against any unapproved ophthalmic balanced
salt solution product that is not listed with the agency in full
compliance with section 510 of the act (21 U.S.C. 360) before September
22, 2008, and is manufactured, shipped, or otherwise introduced or
delivered for introduction into interstate commerce by any person on or
after September 23, 2008. FDA also intends to take enforcement action
to enforce section 505(a) of the act against any unapproved ophthalmic
balanced salt solution that is listed with FDA in full compliance with
section 510 of the act but is not being commercially used or sold\5\ in
the United States on September 22, 2008 and that is manufactured,
shipped, or otherwise introduced or delivered for introduction into
interstate commerce by any person on or after September 23, 2008.
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    \5\ For the purposes of this notice, the term ``commercially
used or sold'' means that the product has been used in a business or
activity involving retail or wholesale marketing and/or sale.
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    However, for unapproved ophthalmic balanced salt solution products
that are commercially used or sold in the United States, have a
National Drug Code (NDC) number listed with FDA, and are in full
compliance with section 510 of the act before September 22, 2008
(``currently marketed and listed''), the agency intends to exercise its
enforcement discretion as follows. FDA intends to initiate enforcement
action against any currently marketed and listed unapproved ophthalmic
balanced salt solution product that is manufactured on or after
November 24, 2008 or that is shipped on or after January 21, 2009.\6\
Further, FDA intends to take enforcement action against any person who
manufactures or ships such products after these dates. Any person who
has submitted or submits an application for an ophthalmic balanced salt
solution product but has not received approval must comply with this
notice.
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    \6\ If FDA finds it necessary to take enforcement action against
a product covered by this notice, the agency may take action
relating to all of the defendant's other violations of the act at
the same time. For example, if a firm continues to manufacture or
market a product covered by this notice after the applicable
enforcement date has passed, to preserve limited agency resources,
FDA may take enforcement action relating to all of the firm's
unapproved drugs that require applications at the same time (see,
e.g., United States v. Sage Pharmaceuticals, 210 F.3d 475, 479-480
(5th Cir. 2000) (permitting the agency to combine all violations of
the act in one proceeding, rather than taking action against
multiple violations of the act in ``piecemeal fashion'')).
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    The agency, however, does not intend to exercise its enforcement
discretion as outlined previously if the following apply: (1) A
manufacturer or distributor of an unapproved ophthalmic balanced salt
solution product covered by this notice is violating other provisions
of the act, including but not limited to, violations related to FDA's
current good manufacturing practices, adverse drug event reporting,
labeling or misbranding requirements or (2) it appears that a firm, in
response to this notice, increases its manufacture or interstate
shipment of ophthalmic balanced salt solution products above its usual
volume during these periods.
    Nothing in this notice, including FDA's intent to exercise its
enforcement discretion, alters any person's liability or obligations in
any other enforcement action, or precludes the agency from initiating
or proceeding with enforcement action in connection with any other
alleged violation of the act, whether or not related to an unapproved
drug product covered by this notice. Similarly, a person who is or
becomes enjoined from marketing unapproved drugs may not resume
marketing of unapproved ophthalmic balanced salt solution products
based on FDA's exercise of enforcement discretion that is set forth in
this notice.
    Drug manufacturers and distributors should be aware that the agency
is exercising its enforcement discretion as described previously only
in regard to ophthalmic balanced salt solution products that are
marketed under an NDC number listed with the agency in full compliance
with section 510 of the act before September 22, 2008. As previously
stated, unapproved ophthalmic balanced salt solution products that are
currently marketed but not listed with the agency on the date of this
notice must, as of the effective date of this notice, have approved
applications prior to their shipment in interstate commerce. Moreover,
any person or firm that has submitted or submits an application but has
yet to receive approval for such products is still responsible for full
compliance with this notice.

C. Discontinued Products

    Some firms may have previously discontinued the manufacturing or
distribution of products covered by this notice without removing them
from the listing of their products under section 510(j) of the act.
Other firms may discontinue manufacturing or marketing listed products
in response to this notice. Firms that wish to notify the agency of
product discontinuation should send a letter, signed by the firm's
chief executive officer, fully identifying the discontinued product(s),
including NDC number(s), and stating that the product(s) has (have)
been discontinued. The letter should be sent to Jennifer Devine (see
ADDRESSES). Firms should also update the listing of their products
under section 510(j) of the act to reflect discontinuation of
unapproved ophthalmic balanced salt solution products. FDA plans to
rely on its existing records, including drug listing records, or other
available information when it targets violations for enforcement
action.
    This notice is issued under the Federal Food, Drug, and Cosmetic
Act (sections 502 and 505 (21 U.S.C. 352)) and under authority
delegated to the Deputy Commissioner for Policy under section 1410.10
of the FDA Staff Manual Guide.

    Dated: September 8, 2008.
Jeffrey Shuren,
Associate Commissioner for Policy and Planning.
[FR Doc. E8-22305 Filed 9-22-08; 8:45 am]

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[Federal Register: July 14, 2010 (Volume 75, Number 134)]
[Notices]
[Page 40816]
[DOCID:fr14jy10-56]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 13351-000]

Marseilles Land and Water Company; Notice of Meeting

July 7, 2010.
    a. Date and Time of Meeting: Thursday, July 22, 2010 from 9 a.m. to
12 p.m. CDT.
    b. Place: Illinois Historic Preservation Agency, Old State Capitol
Building, Springfield, IL 62701.
    c. FERC Contact: Janet Hutzel,<PHONE_NUMBER> or
<EMAIL_ADDRESS>    d. Purpose of Meeting: Commission staff will be meeting with
Illinois Historic Preservation Agency to discuss the effects that the
Marseilles Lock and Dam Project (P-13351-000) may have on cultural
resources. Discussion topics will include the following: (1) Effects
that project operations may have on properties listed on, or eligible
for, the National Register of Historic Places (historic properties);
(2) ways to lessen, avoid, or mitigate for adverse effects on historic
properties; and (3) the Commission's standard programmatic agreement
and guidelines for the development of Historic Properties Management
Plans.
    e. All local, state, and federal agencies, tribes, and interested
parties are hereby invited to participate. The meeting location will be
provided upon a request made by interested parties. Please make that
request to Janet Hutzel via e-mail at<EMAIL_ADDRESS>by the
close of business on Wednesday, July 14, 2010.

Kimberly D. Bose,
Secretary.
[FR Doc. 2010-17107 Filed 7-13-10; 8:45 am]
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