[Federal Register: September 15, 2009 (Volume 74, Number 177)]
[Notices]
[Page 47302-47303]
[DOCID:fr15se09-143]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60635; File No. SR-FINRA-2007-024]

Self-Regulatory Organizations; Financial Industry Regulatory,
Inc.; Order Approving Proposed Rule Change as Modified by Amendment No.
1 Thereto Amending Rule 2320 Regarding Best Execution and
Interpositioning

September 8, 2009.
    On November 27, 2007, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NASD Rule 2320, Best Execution and
Interpositioning. On April 13, 2009, FINRA filed Amendment No. 1 to the
proposed rule change. The proposed rule change was published for
comment in the Federal Register on April 24, 2009.\3\ The Commission
received no comments regarding the proposal. This order approves the
proposed rule change, as modified by Amendment No. 1.
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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. 59788 (April 17,
2009), 74 FR 18777 (``Notice'').
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    In its filing, FINRA proposed to amend NASD Rule 2320, which
governs members' obligations regarding best execution and
interpositioning.\4\ Rule 2320(a) provides that, in any transaction for
or with a customer or a customer of another broker-dealer, a member
must use ``reasonable diligence to ascertain the best market for the
subject security,'' so that the resulting price to the customer is ``as
favorable as possible under prevailing market conditions.'' \5\ A
number of factors will be considered in determining whether the member
exercised reasonable diligence, including the character of the market
for the security, the size and type of the transaction, and the terms
and conditions of the order that resulted in the transaction.\6\
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    \4\ NASD Rule 2320 paragraph (a) governs best execution and
paragraph (b) governs interpositioning.
    \5\ See NASD Rule 2320(a).
    \6\ Id.
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    Currently, Rule 2320(b) prohibits a member from interposing a third
party between the member and the best available market for a security,
unless the member ``can demonstrate that to his knowledge at the time
of the transaction the total cost or proceeds of the transaction * * *
was better than the prevailing inter-dealer market for the security.''
\7\ In addition, a member's obligations to its customer ``are generally
not fulfilled'' under the current Rule when interposing a third party,
unless the member can show that the interpositioning ``reduced the
costs of the transactions to the customer.'' \8\
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    \7\ See NASD Rule 2320(b).
    \8\ Id.
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    With this rule change, FINRA proposed to apply the standards
governing best execution, which are set forth in Rule 2320(a), to
interpositioning. As such, a member interposing a third party will have
to use ``reasonable diligence to ascertain the best market for the
subject security,'' so that the resulting price to the customer is ``as
favorable as possible under prevailing market conditions.'' \9\ FINRA
also proposed to make conforming amendments to other NASD and FINRA
rules to reflect the re-designation of Rule 2320.
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    \9\ See NASD Rule 2320(a).
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    The Commission has carefully reviewed the proposed rule change and
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
registered securities association \10\ and, in particular, Section
15A(b)(6) of the Act,\11\ which requires that FINRA rules 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.
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    \10\ 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).
    \11\ 15 U.S.C. 78o-3(b)(6).
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    In stating that interpositioning generally does not fulfill a
member's obligation to its customer unless that interpositioning
``reduced the costs of the transactions to the customer,'' the current
rule contains a presumption against interpositioning.\12\ FINRA stated
in its filing that the presumption is overbroad and may not accurately
reflect the realities of the current market. The Commission understands

FINRA's argument that the rule, as currently written, may be overbroad.
There have been a number of changes in the markets since the time the
rule was adopted by the NASD in 1968. However, the Commission believes
that there continue to be opportunities for unscrupulous participants
in the marketplace to interposition third parties in a securities
transaction between themselves and their customers to the disadvantage
of those customers.\13\ The Commission expects FINRA, when it finds
evidence of interpositioning by members that was detrimental to the
customer, to charge member firms or associated persons, as appropriate,
with violations of its rules.
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    \12\ See, e.g., In re Thomson & McKinnon, Securities Exchange
Act Release No. 8310 (May 8, 1968). In that proceeding, an NASD
member firm interposed broker-dealers between itself and the best
available market, and the added transaction cost was borne by its
customers. The Commission found that, ``[i]n view of the obligation
of a broker to obtain the most favorable price for his customer,
where he interposes another broker-dealer between himself and a
third broker-dealer, he prima facie has not met that obligation and
he has the burden of showing that the customer's total cost or
proceeds of the transaction is the most favorable obtainable under
the circumstances.''
    \13\ See, e.g., In re Andrew P. Gonchar and Polyvious T.
Polyviou, Securities Exchange Act Release No. 34-60506 (August 14,
2009).
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    The Commission notes that its approval of this rule change is not
an indication that interpositioning is no longer an issue. Rather, it
is meant to reflect changes in the market place that have occurred
since 1968 when the rule was adopted.\14\ The Commission notes that,
even with this rule change, the cost to the customer under the proposed
rule will ``remain a crucial factor in determining whether a member has
fulfilled its best execution obligations under Rule 2320,'' including
transactions involving interposed third parties.\15\ The Commission
also notes that interpositioning ``that is unnecessary or violates a
member's general best execution obligations--either because of
unnecessary costs to the customer or improperly delayed executions--
would still be prohibited.'' \16\ In this respect, the Commission takes
comfort from FINRA's representations that interpositioning that harms a
customer violates NASD Rule 2440 and FINRA Rule 2010.\17\
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    \14\ See Notice, supra note 3, at 18778.
    \15\ Id. at 18778.
    \16\ Id. at 18779.
    In addition to the proposed rule language, other FINRA and NASD
rules would continue to govern the handling of customer orders. In
particular, FINRA Rule 2010 requires that members observe high
standards of commercial honor and just and equitable principles of
trade, and NASD Rule 2440 requires that members charge fair prices
and commissions in their dealings with customers.
    \17\ Id. at 18778 n.4.
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    The proposed rule will thus continue to prohibit interpositioning
that adversely affects the customer, and the cost to the customer will
remain a central part of that determination. The Commission expects
FINRA to diligently pursue such conduct by members.\18\
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    \18\ See In re Andrew P. Gonchar and Polyvious T. Polyviou,
supra note 13.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-FINRA-2007-024), as modified by
Amendment No. 1, be, and it hereby is, approved.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22109 Filed 9-14-09; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 81, Number 89 (Monday, May 9, 2016)]
[Notices]
[Pages 28089-28090]
[FR Doc No: 2016-10899]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2016-0262]

Information Collection Request to Office of Management and
Budget; OMB Control Number: 1625-0066

AGENCY: Coast Guard, DHS.

ACTION: Sixty-day notice requesting comments.

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SUMMARY: In compliance with the Paperwork Reduction Act of 1995, the
U.S. Coast Guard intends to submit an Information Collection Request
(ICR) to the Office of Management and Budget (OMB), Office of
Information and Regulatory Affairs (OIRA), requesting approval of
revisions to the following collection of information: 1625-0066, Vessel
and Facility Response Plans (Domestic and International), and
Additional Response Requirements for Prince William Sound, Alaska. Our
ICR describes the information we seek to collect from the public.
Before submitting this ICR to OIRA, the Coast Guard is inviting
comments as described below.

DATES: Comments must reach the Coast Guard on or before July 8, 2016.

ADDRESSES: You may submit comments identified by Coast Guard docket
number [USCG-2016-0262] to the Coast Guard using the Federal
eRulemaking Portal at http://www.regulations.gov. See the ``Public
participation and request for comments'' portion of the SUPPLEMENTARY
INFORMATION section for further instructions on submitting comments.
    A copy of the ICR is available through the docket on the Internet
at http://

www.regulations.gov. Additionally, copies are available from:
COMMANDANT (CG-612), ATTN: PAPERWORK REDUCTION ACT MANAGER, U.S. COAST
GUARD, 2703 MARTIN LUTHER KING JR AVE. SE., STOP 7710, WASHINGTON, DC
20593-7710.

FOR FURTHER INFORMATION CONTACT: Mr. Anthony Smith, Office of
Information Management, telephone<PHONE_NUMBER>, or fax<PHONE_NUMBER>,
for questions on these documents.

SUPPLEMENTARY INFORMATION:

Public Participation and Request for Comments

    This Notice relies on the authority of the Paperwork Reduction Act
of 1995; 44 U.S.C. chapter 35, as amended. An ICR is an application to
OIRA seeking the approval, extension, or renewal of a Coast Guard
collection of information (Collection). The ICR contains information
describing the Collection's purpose, the Collection's likely burden on
the affected public, an explanation of the necessity of the Collection,
and other important information describing the Collection. There is one
ICR for each Collection.
    The Coast Guard invites comments on whether this ICR should be
granted based on the Collection being necessary for the proper
performance of Departmental functions. In particular, the Coast Guard
would appreciate comments addressing: (1) The practical utility of the
Collection; (2) the accuracy of the estimated burden of the Collection;
(3) ways to enhance the quality, utility, and clarity of information
subject to the Collection; and (4) ways to minimize the burden of the
Collection on respondents, including the use of automated collection
techniques or other forms of information technology. In response to
your comments, we may revise this ICR or decide not to seek approval of
revisions of the Collection. We will consider all comments and material
received during the comment period.
    We encourage you to respond to this request by submitting comments
and related materials. Comments must contain the OMB Control Number of
the ICR and the docket number of this request, [USCG-2016-0262], and
must be received by July 8, 2016.

Submitting Comments

    We encourage you to submit comments through the Federal eRulemaking
Portal at http://www.regulations.gov. If your material cannot be
submitted using http://www.regulations.gov, contact the person in the
FOR FURTHER INFORMATION CONTACT section of this document for alternate
instructions. Documents mentioned in this notice, and all public
comments, are in our online docket at http://www.regulations.gov and
can be viewed by following that Web site's instructions. Additionally,
if you go to the online docket and sign up for email alerts, you will
be notified when comments are posted.
    We accept anonymous comments. All comments received will be posted
without change to http://www.regulations.gov and will include any
personal information you have provided. For more about privacy and the
docket, you may review a Privacy Act notice regarding the Federal
Docket Management System in the March 24, 2005, issue of the Federal
Register (70 FR 15086).

Information Collection Request

    Title: Vessel and Facility Response Plans (Domestic and
International), and Additional Response Requirements for Prince William
Sound, Alaska.
    OMB Control Number: 1625-0066.
    Summary: The Oil Pollution Act of 1990 (OPA 90) required the
development of Vessel and Facility Response Plans to minimize the
impact of oil spills. OPA 90 also required additional response
requirements for Prince William Sound. Shipboard Oil Pollution
Emergency Plans and Shipboard Marine Pollution Emergency Plans are
required of other vessels to minimize impacts of oil spills.
    Need: This information is needed to ensure that vessels and
facilities are prepared to respond in event of a spill incident. The
information will be reviewed by the Coast Guard to assess the
effectiveness of the response plan.
    Forms: CG-6083, Application for Approval/Revision of Vessel
Pollution Response Plans and Vessel Response Plan (VRP) Express Search
Tool.
    Respondents: Owners and operators of vessels and facilities.
    Frequency: On occasion.
    Hour Burden Estimate: The estimated burden has decreased from
136,460 hours to 75,395 hours a year. The decrease in burden is
primarily due to a decrease in the estimated annual number of Facility
Response Plan (FRP) respondents.

    Authority: The Paperwork Reduction Act of 1995; 44 U.S.C.
Chapter 35, as amended.

    Dated: 29 April 2016.
Thomas P. Michelli,
U.S. Coast Guard, Deputy Chief Information Officer.
[FR Doc. 2016-10899 Filed 5-6-16; 8:45 am]
 BILLING CODE 9110-04-P