• SEC Issues Final Commission Guidance Relating to Proposed Rule Changes Filed by Self-Regulatory Organizations ("SROs")
  • August 11, 2008
  • Law Firm: Wilmer Cutler Pickering Hale and Dorr LLP - Office
  • On July 3, 2008, the SEC issued final guidance and a final rule amendment, in which it took several actions intended to facilitate more expeditious handling of proposed rule changes submitted by SROs.  First, the SEC provided interpretive guidance regarding the range of proposed changes to exchange trading rules that qualify for immediate effectiveness, pursuant to Rule 19b-4(f)(6) under the Exchange Act, as not significantly affecting the protection of investors or the public interest and not imposing any significant burden on competition.  The SEC anticipated that the guidance would result in exchanges filing a broader range of proposed changes to trading rules for immediate effectiveness under Rule 19b-4(f)(6).  Additionally, the SEC provided guidance on proposed rule changes relating to an SRO’s minor rule violation plan and “copycat” filings relating to SRO rules other than trading rules.  The guidance that relates to proposed changes to trading rules is directed at SROs that operate trading systems (i.e., the national securities exchanges).  The additional guidance is applicable to all SROs, including exchanges, national securities associations, clearing agencies and the Municipal Securities Rulemaking Board.  Further, the SEC adopted an amendment to Rule 200.30-3(a)(12) relating to the delegation of authority to the Director of the Division of Trading and Markets regarding the publication of proposed rule changes.   Amended Rule 200.30-3(a)(12) applies with regard to all SRO rule filings.

    In 2001, the SEC proposed comprehensive changes to the SRO rule filing process (the “2001 Proposal”).  The SEC proposed to replace completely Rule 19b-4, the rule governing the requirements for SRO rule filings, with proposed new Rule 19b-6.  Proposed Rule 19b-6, among other things, would have defined terms used in proposed Rule 19b-6 to allow most exchange trading rules, other than proposals involving fundamental market structure changes, to be immediately effective upon filing with the SEC pursuant to Section 19(b)(3)(A) of the Exchange Act.  The SEC also proposed related changes that would have imposed a number of new obligations on SROs filing proposed rule changes with the SEC.  For example, in proposed Rule 19b-6, the SEC would have required, among other things, that a senior SRO official certify the accuracy and completeness of the proposal.  The SEC also proposed to eliminate the 30-day operational date and the five-day pre-filing requirement for non-controversial rule filings.

    The SEC noted that it had considered thoroughly all of the comments relating to the 2001 Proposal.  In the July 3, 2008 release, the SEC did not take action on proposed Rule 19b-6, nor with regard to any of the other related changes.  Instead, the SEC noted that its action is consistent with the objectives underlying the 2001 Proposal and takes into account the varying views expressed in the comments.  The SEC noted that the guidance and rule adopted in the July 3, 2008 release do not alter the existing legal obligations for SROs filing proposed rule changes.  The SEC expounded that the release is not modifying or replacing Rule 19b-4, nor is it imposing related obligations on SROs with regard to the rule filing process and, therefore, the SEC believes that the additional requirements proposed in the 2001 Proposal are not necessary at this time.

    These guidelines and amendment will be effective on the date of publication in the Federal Register.

    For more information, see the SEC Release, which may be found at http://sec.gov/rules/final/2008/34-58092.pdf.