Direct Edge Regulatory Notice #12-03: Telemarketing Rules - Effective June 29, 2012

Overview

This Regulatory Notice (the “Notice”) serves to inform Members of EDGA Exchange, Inc. and EDGX Exchange, Inc. (together, the “Exchanges”) that beginning on Friday, June 29, 2012, the Exchanges will be implementing new rules  that impose certain requirements in accordance with rules¹ promulgated by the Federal Trade Commission (“FTC”) pursuant to the Telemarketing Consumer Fraud and Prevention Act of 1994.²

The Exchanges amended Chapter III of their respective rulebooks to adopt new Rules 3.26 to add provisions that are substantially similar to the Financial Industry Regulatory Authority’s (“FINRA”) Rule 3230³  and FTC rules that prohibit deceptive and other abusive telemarketing acts or practices.  As described below, Rules 3.26 require Members to, among other things, maintain “do-not-call” lists, limit the hours of telephone solicitations, and prohibit deceptive and abusive acts and practices in connection with telemarketing.   

The following summarizes Members’ obligations under Rules 3.26: 

• Telemarketing Restrictions:  Rules 3.26(a)(1) provide that no Member or associated person of a Member shall make an outbound telephone call to:  (1) any person’s residence at any time other than between 8 a.m. and 9 p.m. local time at the called person’s location; (2) any person that previously has stated that he or she does not wish to receive any outbound telephone calls on behalf of the Member; or (3) any person who has registered his or her telephone number on the FTC’s national do-not-call registry.  Certain exceptions to these restrictions are delineated in Rules 3.26(c).

• Caller Disclosures:  Rules 3.26(b) provide that no Member or person associated with a Member shall make an outbound telephone call to any person without promptly disclosing truthful identifying information about the caller, his or her contact information and the purpose of the call.

• Do-Not-Call List:  Rules 3.26(d) provide that each Member must make and maintain a centralized list of persons who have informed the Member or any of its associated persons that they do not wish to receive outbound telephone calls, and adopt procedures to comply with Rules 3.26(a) and (b). 

• Do-Not-Call Safe Harbors:  Rules 3.26(e) provide for certain exceptions to the telemarketing restriction set forth in Rules 3.26(a)(3), which prohibit outbound telephone calls to persons on the FTC’s national do-not-call registry.

• Wireless Communications:  Rules 3.26(f) provide that the provisions set forth in Rules 3.26 are applicable to Members and persons associated with Members making outbound telephone calls to wireless telephone numbers.

• Outsourcing:  Rules 3.26(g) provide that if a Member uses another entity to perform telemarketing services on its behalf, the Member remains responsible for ensuring compliance with Rules 3.26.  Rules 3.26(g) also provide that such entities must be appropriately registered or licensed, where required.

• Billing Information:  Rules 3.26(h) require that no Member or person associated with a Member shall submit billing information for payment without the express informed consent of the customer.  Pre-acquired account information and a free-to-pay conversion feature may be utilized provided the Member or person associated with a Member complies with the procedures detailed under Rules 3.26(h).

• Caller Identification Information:  Rules 3.26(i) provide that Members must transmit caller identification information and the telephone number provided must permit any person to make a do-not-call request during normal business hours.

• Unencrypted Consumer Account Numbers:  Rules 3.26(j) prohibit a Member or person associated with a Member from disclosing or receiving, for consideration, unencrypted consumer account numbers for use in telemarketing.

• Abandoned Calls:  Rules 3.26(k) prohibit a Member or person associated with a Member from abandoning any outbound telemarketing call unless it qualifies for the “safe harbor” under Rule 3.26(k)(2).

• Pre-Recorded Messages:  Rules 3.26(l) prohibit a Member or person associated with a Member from initiating any outbound telemarketing call that delivers a pre-recorded message without a person’s express written agreement to receive such calls.  The rules also require that all pre-recorded telemarketing calls provide specified opt-out mechanisms so that a person can opt out of future calls.

• Credit Card Laundering:  Rules 3.26(m) prohibit the practice of depositing into the credit card system a sales draft that is not the result of a credit card transaction between the cardholder and the Member.

More Information

• For additional detail regarding Rules 3.26, please refer to the Exchanges’ rulebooks, FINRA Rule 3230 and/or relevant FTC rules.
• All questions regarding this Notice should be directed to Jeffrey Rosenstrock, General Counsel at 201.942.8295.
• EDGA/EDGX Telemarketing Rules
• FINRA Rule 3230
• FTC Telemarketing Sales Rule

¹ Securities and Exchange Act Release No. 66874 (April 27, 2012), 77 FR 26348 (May 3, 2012) (SR-EDGA-2012-16); Securities and Exchange Act Release No. 66873 (April 27, 2012), 77 FR 26343 (May 3, 2012) (SR-EDGX-2012-15).
² 15 U.S.C. 6102.
³ See FINRA Regulatory Notice 12-17 (April 2012)