Corporate And Financial Weekly Digest - March 29, 2013

Edited by Robert Weiss and Gregory Xethalis

BROKER DEALER

Proposed Change to FINRA Rule Regarding Release of Disciplinary Complaints, Decisions and Other Information

The Financial Industry Regulatory Authority filed a proposed rule change to amend Rule 8313, which governs the release of disciplinary and other information by FINRA to the public. Among other things, amended Rule 8313 would establish general standards for the release of disciplinary information to the public to provide greater information regarding FINRA's disciplinary actions, clarify the scope of information subject to Rule 8313 and eliminate provisions that do not address the release of information to the public. For example, with respect to disciplinary complaints and decisions, the proposed rule would eliminate the publicity thresholds and adopt general standards for release to the public. This would allow FINRA to make available information that is available in BrokerCheck, but is not eligible for publication under current publicity thresholds. In addition, under the proposed rule FINRA would release unredacted copies of statutory disqualification decisions, notifications and notices (subject to limited exceptions). Furthermore, to clarify the scope of Rule 8313 the proposed rule change would delete or move provisions that do not address publication standards. For example, the proposed rule change would amend certain rules in the Rule 9000 Series (Code of Procedure) and add a provision to Rule 9268 (Decision of Hearing Panel or Extended Hearing Panel) regarding the effective dates of sanctions.

The Securities and Exchange Commission is accepting comments on the proposed rule change. Comments should refer to File Number SR-FINRA-2013-018 and must be submitted to the SEC by April 15, 2013.

The notice of filing is available here.

SEC Approves on an Accelerated Basis FINRA Rule Change Relating to Margin Requirements for Credit Default Swaps

The Securities and Exchange Commission has approved a Financial Industry Regulatory Authority proposed change to amend FINRA Rule 4240, which implements an interim pilot program with respect to margin requirements related to credit default swaps (CDS). The proposed rule change provides that, in lieu of the margin methodology requirements set forth in the rule, a member firm may margin CDS on a portfolio margin basis. However, the member firm must notify FINRA in advance in writing of its intent to operate under the portfolio margin program. The proposed rule change also clarifies that, in addition to requiring initial margin, a member firm must collect daily variation margin from each customer or broker-dealer counterparty. In addition, the proposed rule change amends the reference to "largest maximum possible loss" by providing a reference point for the computation of such loss.

The SEC is accepting comments on the proposed rule change. Comments should refer to File Number SR-FINRA-2013-017 and must be submitted to the SEC by April 4, 2013.

The notice of filing and order granting approval is available here.

FINRA Proposed Rule Change to Extend Temporary Limit on Application of FINRA Rules to Security-Based Swaps

On July 1, 2011, the Securities and Exchange Commission granted temporary exemptions under the Securities Exchange Act of 1934 in connection with the pending revision of the definition of "security" to encompass security-based swaps. As a result, the Financial Industry Regulatory Authority adopted Rule 0180, which (with certain exceptions) temporarily limits the application of FINRA rules with respect to security-based swaps. The SEC has issued an order extending the expiration date of the temporary exemptions until February 11, 2014. Thus, FINRA has filed the proposed rule change in order to align the expiration date of Rule 0180 with the new expiration date of the SEC's temporary exemptions.

The SEC is accepting comments on the proposed rule change. Comments should refer to File Number SR-FINRA-2013-019 and must be submitted to the SEC on or before 21 days from publication in the Federal Register.

The notice of proposed rule change is available here.

NASDAQ Files to Change Order Processing Algorithm, Permit Registration of Market Makers and Amend Order Types on PSX

In 2010, NASDAQ OMX PHLX LLC (PHLX) launched NASDAQ OMX PSX (PSX) as a platform for trading NMS stocks using a price/size execution model. Now PHLX has filed a proposed rule change to adopt a price/time model for PSX. PHLX is amending PSX rules to replace the price/size execution model with a price/display/time priority algorithm that is substantively identical to corresponding rules in effect at the NASDAQ Stock Market (NASDAQ) and NASDAQ OMX BX, Inc. (BX).

PHLX also has proposed rules to allow member organizations that are PSX participants to register and act as market makers...