Regulatory Notice 10-04

SEC Approves Consolidated FINRA Rules Governing Clearly Erroneous Transactions

Effective Date: February 15, 2010

On December 1, 2009, the SEC approved FINRA's proposed rule change to adopt a new set of rules governing clearly erroneous transactions in the consolidated rulebook. The new FINRA Rule 11890 Series replaces NASD Rule 11890, IM-11890-1 and IM-11890-2 and was adopted as part of a market-wide effort by multiple self-regulatory organizations to provide transparency and finality with respect to clearly erroneous executions. Among other things, the new rule series includes a new general rule defining "clearly erroneous" transactions, separate provisions for the determination of clearly erroneous transactions depending upon whether the transaction involves an exchange-listed security or an over-the-counter equity security and procedures for appealing FINRA clearly erroneous determinations. In addition, the new rule series codifies minimum numerical criteria necessary for a transaction to qualify as clearly erroneous.

The text of the new rules is set forth on FINRA's Web site at

Questions concerning this Notice should be directed to Brant K. Brown, Associate General Counsel, Office of General Counsel, at (202) 728-6927.