[Federal Register Volume 86, Number 18 (Friday, January 29, 2021)]
[Notices]
[Pages 7590-7597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01941]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90985; File No. 4-523]
Program for Allocation of Regulatory Responsibilities Pursuant To
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amended Plan for the Allocation of Regulatory
Responsibilities Between the Financial Industry Regulatory Authority,
Inc. and NYSE Arca, Inc.
January 25, 2021.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility (``Plan'') filed on December 18, 2020, pursuant to Rule
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and NYSE Arca, Inc. (``NYSE Arca'') (collectively,
``Participating Organizations'' or ``parties''). This agreement amends
and restates the agreement entered into between the parties on February
9, 2007, entitled ``Agreement Between the National Association of
Securities Dealers, Inc. and NYSE Arca, Inc. Pursuant to SEA Rule 17d-2
Under the Securities Exchange Act of 1934,'' and any subsequent
amendments thereafter.
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\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
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I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act.
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
Such regulatory duplication would add unnecessary expenses for common
members and their SROs.
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\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
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Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
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\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
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\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
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To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and opportunity for comment, it
determines that the plan is necessary or appropriate in the public
interest and for the protection of investors, to foster cooperation and
coordination among the SROs, to remove impediments to, and foster the
development of, a national market system and a national clearance and
settlement system, and is in conformity with the factors set forth in
Section 17(d) of the Act. Commission approval of a plan filed pursuant
to Rule 17d-2 relieves an SRO of those regulatory responsibilities
allocated by the plan to another SRO.
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\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan
On August 31, 2006, the Commission declared effective the Plan
entered into between FINRA and NYSE Arca for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ On March 22, 2007, the
Commission approved an amendment to the Plan that (1) eliminated
paragraph 11 of the Plan that allocated to FINRA the responsibility to
receive and act upon requests for extension of time pursuant to Federal
Reserve Regulation T and Rule 15c3-3 under the Act, and (2) changed
from ``monthly'' to ``upon request'' the obligation of FINRA to share
information with NYSE Arca regarding notice of changes in allied
members, partners, officers, registered personnel and other persons,
and the opening, address change, and termination of main and branch
offices and the names of branch office managers.\12\
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\11\ See Securities Exchange Act Release No. 54394 (August 31,
2006), 71 FR 52827 (September 7, 2006).
\12\ See Securities Exchange Act Release No. 55505 (March 22,
2007), 72 FR 14628 (March 28, 2007).
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The Plan is intended to reduce regulatory duplication for firms
that are common members of FINRA and NYSE Arca by allocating regulatory
responsibility with respect to certain applicable laws, rules, and
regulations that are common among them. Included in the Plan is an
exhibit that lists every NYSE Arca rule for which FINRA bears
responsibility under the Plan for overseeing and enforcing with respect
to NYSE Arca members that are also members of FINRA and the associated
persons therewith (``Certification'').
III. Proposed Amendment to the Plan
On December 18, 2020, the parties submitted a proposed amendment to
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is
to
[[Page 7591]]
remove Regulation SHO from the Certification. The text of the proposed
Amended Plan, which replaces and supersedes the current Plan in its
entirety, is as follows:
* * * * *
AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
NYSE ARCA, INC. PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934
This Agreement, by and between Financial Industry Regulatory
Authority, Inc. (``FINRA'') and the NYSE Arca, Inc. (``NYSE Arca''), is
made this 17th day of December, 2020 (the ``Agreement''), pursuant to
Section 17(d) of the Securities Exchange Act of 1934 (the ``Exchange
Act'' or ``SEA'') and Rule 17d-2 thereunder which permits agreements
between self-regulatory organizations to allocate regulatory
responsibility to eliminate regulatory duplication. FINRA and NYSE Arca
may be referred to individually as a ``party'' and together as the
``parties.''
This Agreement amends and restates the agreement entered into
between the parties on February 9, 2007, entitled ``Agreement Between
the National Association of Securities Dealers, Inc. and NYSE Arca,
Inc. Pursuant to SEA Rule 17d-2 Under the Securities Exchange Act of
1934,'' and any subsequent amendments thereafter.
Whereas, FINRA and NYSE Arca desire to reduce duplication in the
examination of their Dual Members (as defined herein) and in the filing
and processing of certain registration and membership records; and
Whereas, FINRA and NYSE Arca desire to execute an agreement
covering such subjects pursuant to the provisions of Rule 17d-2 under
the Exchange Act and to file such agreement with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, FINRA and NYSE Arca hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or the
context otherwise requires, the terms used in this Agreement shall have
the same meaning as they have under the Exchange Act and the rules and
regulations thereunder. As used in this Agreement, the following terms
shall have the following meanings:
(a) ``NYSE Arca Rules'' or ``FINRA Rules'' shall mean: (i) The
rules of the NYSE Arca, or (ii) the rules of FINRA, respectively, as
the rules of an exchange or association are defined in Exchange Act
Section 3(a)(27).
(b) ``Common Rules'' shall mean the NYSE Arca Rules that are
substantially similar to the applicable FINRA Rules and certain
provisions of the Exchange Act and SEA rules set forth on Exhibit 1 in
that examination for compliance with such rules would not require FINRA
to develop one or more new examination standards, modules, procedures,
or criteria in order to analyze the application of such provisions or
rule, or a Dual Member's activity, conduct, or output in relation to
such rule; provided, however, Common Rules shall not include the
application of SEA, NYSE Arca or FINRA rules as they pertain to
violations of insider trading activities, which is covered by a
separate 17d-2 Agreement by and among the Cboe BZX Exchange, Inc., Cboe
BYX Exchange, Inc., NYSE Chicago, Inc., Cboe EDGA Exchange, Inc., Bats
Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority,
Inc., MEMX, LLC, MIAX Pearl, LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, The
Nasdaq Stock Market LLC, NYSE National, Inc., New York Stock Exchange
LLC, NYSE American LLC, NYSE Arca, Inc., Investors Exchange LLC and
Long-Term Stock Exchange, Inc., approved by the SEC on September 23,
2020, as may be amended from time to time. Common Rules shall not
include provisions regarding (i) notice, reporting or any other filings
made directly to or from NYSE Arca, (ii) incorporation by reference of
other NYSE Arca Rules that are not Common Rules, (iii) exercise of
discretion in a manner that differs from FINRA's exercise of
discretion, including, but not limited to exercise of exemptive
authority, by NYSE Arca, (iv) prior written approval of NYSE Arca, and
(v) payment of fees or fines to NYSE Arca.
(c) ``Dual Members'' shall mean those NYSE Arca members that are
also members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with the FINRA Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural rules, to
determine whether violations of Common Rules have occurred, and if such
violations are deemed to have occurred, the imposition of appropriate
sanctions as specified under the FINRA Code of Procedure and sanctions
guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the Dual Members with the Common Rules and the provisions
of the Exchange Act and the rules and regulations thereunder, and other
applicable laws, rules and regulations, each as set forth on Exhibit 1
attached hereto.
2. Regulatory and Enforcement Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
NYSE Arca furnished FINRA with a current list of Common Rules and
certified to FINRA that such rules are substantially similar to the
corresponding FINRA Rule (the ``Certification''). FINRA hereby agrees
that the rules listed in the Certification are Common Rules as defined
in this Agreement. Each year following the Effective Date of this
Agreement, or more frequently if required by changes in either the
rules of NYSE Arca or FINRA, NYSE Arca shall submit an updated list of
Common Rules to FINRA for review which shall add NYSE Arca Rules not
included in the current list of Common Rules that qualify as Common
Rules as defined in this Agreement; delete NYSE Arca Rules included in
the current list of Common Rules that no longer qualify as Common Rules
as defined in this Agreement; and confirm that the remaining rules on
the current list of Common Rules continue to be NYSE Arca Rules that
qualify as Common Rules as defined in this Agreement. Within 30 days of
receipt of such updated list, FINRA shall confirm in writing whether
the rules listed in any updated list are Common Rules as defined in
this Agreement. Notwithstanding anything herein to the contrary, it is
explicitly understood that the term ``Regulatory Responsibilities''
does not include, and NYSE Arca shall retain full responsibility for
(unless otherwise addressed by separate agreement or rule) the
following (collectively, the ``Retained Responsibilities''):
(a) Surveillance, examination, investigation and enforcement with
respect to trading activities or practices involving NYSE Arca's own
marketplace;
(b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act, if
applicable; and
[[Page 7592]]
(d) any NYSE Arca Rules that are not Common Rules except for NYSE
Arca Rules for any NYSE Arca affiliate that is a member that operates
as a facility (as defined in Section 3(a)(2) of the Exchange Act), acts
as a router for NYSE Arca and is a member of FINRA (``Router Member'')
as provided in paragraph 6. As of the date of this Agreement,
Archipelago Securities LLC is the only Router Member.
3. Dual Members. Prior to the Effective Date, NYSE Arca shall
furnish FINRA with a current list of Dual Members, which shall be
updated no less frequently than once each quarter.
4. No Charge. There shall be no charge to NYSE Arca by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
FINRA shall provide NYSE Arca with ninety (90) days advance written
notice in the event FINRA decides to impose any charges to NYSE Arca
for performing the Regulatory Responsibilities under this Agreement. If
FINRA determines to impose a charge, NYSE Arca shall have the right at
the time of the imposition of such charge to terminate this Agreement;
provided, however, that FINRA's Regulatory Responsibilities under this
Agreement shall continue until the Commission approves the termination
of this Agreement.
5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be subject
to any statute, or any rule or order of the Commission. To the extent
such statute, rule or order is inconsistent with one or more provisions
of this Agreement, the statute, rule or order shall supersede the
provision(s) hereof to the extent necessary to be properly effectuated
and the provision(s) hereof in that respect shall be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any NYSE Arca Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities assumed
hereunder, FINRA shall notify NYSE Arca of those apparent violations
for such response as NYSE Arca deems appropriate. With respect to
apparent violations of any NYSE Arca Rules by any Router Member, FINRA
shall not make referrals to NYSE Arca pursuant to this paragraph 6.
Such apparent violations shall be processed by, and enforcement
proceedings in respect thereto will be conducted by, FINRA as provided
in this agreement.
(b) In the event that NYSE Arca becomes aware of apparent
violations of any Common Rules, discovered pursuant to the performance
of the Retained Responsibilities, NYSE Arca shall notify FINRA of those
apparent violations and such matters shall be handled by FINRA as
provided in this Agreement.
(c) Apparent violations of Common Rules shall be processed by, and
enforcement proceedings in respect thereto shall be conducted by FINRA
as provided hereinbefore; provided, however, that in the event a Dual
Member is the subject of an investigation relating to a transaction on
the NYSE Arca, NYSE Arca may in its discretion assume concurrent
jurisdiction and responsibility.
(d) Each party agrees to make available promptly all files, records
and witnesses necessary to assist the other in its investigation or
proceedings.
7. Continued Assistance.
(a) FINRA shall make available to NYSE Arca all information
obtained by FINRA in the performance by it of the Regulatory
Responsibilities hereunder with respect to the Dual Members subject to
this Agreement. In particular, and not in limitation of the foregoing,
FINRA shall furnish NYSE Arca any information it obtains about Dual
Members which reflects adversely on their financial condition. NYSE
Arca shall make available to FINRA any information coming to its
attention that reflects adversely on the financial condition of Dual
Members or indicates possible violations of applicable laws, rules or
regulations by such firms.
(b) The parties agree that documents or information shared shall be
held in confidence, and used only for the purposes of carrying out
their respective regulatory obligations. Neither party shall assert
regulatory or other privileges as against the other with respect to
documents or information that is required to be shared pursuant to this
Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
8. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with respect
to a Dual Member, FINRA shall determine pursuant to Sections 15A(g)
and/or Section 6(c) of the Exchange Act the acceptability or continued
applicability of the person to whom such disqualification applies and
keep NYSE Arca advised of its actions in this regard for such
subsequent proceedings as NYSE Arca may initiate.
9. Customer Complaints. NYSE Arca shall forward to FINRA copies of
all customer complaints involving Dual Members received by NYSE Arca
relating to FINRA's Regulatory Responsibilities under this Agreement.
It shall be FINRA's responsibility to review and take appropriate
action in respect to such complaints.
10. Advertising. FINRA shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is accompanied with any applicable filing fees set forth
in FINRA Rules.
11. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of either
party to conduct its own independent or concurrent investigation,
examination or enforcement proceeding of or against Dual Members, as
either party, in its sole discretion, shall deem appropriate or
necessary.
12. Termination. This Agreement may be terminated by NYSE Arca or
FINRA at any time upon the approval of the Commission after one (1)
year's written notice to the other party, except as provided in
paragraph 4.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, NYSE Arca and FINRA hereby agree
that any such dispute shall be settled by arbitration in Washington, DC
in accordance with the rules of the American Arbitration Association
then in effect, or such other procedures as the parties may mutually
agree upon. Judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Each party acknowledges that
the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of the other
party. In the event of a dispute between the parties, the parties shall
continue to perform their respective obligations under this Agreement
in good faith during the resolution of such dispute unless and until
this Agreement is terminated in accordance with its provisions. Nothing
in this Section 13 shall interfere with a party's right to terminate
this Agreement as set forth herein.
14. Notification of Members. NYSE Arca and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
[[Page 7593]]
15. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
16. Limitation of Liability. Neither FINRA nor NYSE Arca nor any of
their respective directors, governors, officers or employees shall be
liable to the other party to this Agreement for any liability, loss or
damage resulting from or claimed to have resulted from any delays,
inaccuracies, errors or omissions with respect to the provision of
Regulatory Responsibilities as provided hereby or for the failure to
provide any such responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or the other of
FINRA or NYSE Arca and caused by the willful misconduct of the other
party or their respective directors, governors, officers or employees.
No warranties, express or implied, are made by FINRA or NYSE Arca with
respect to any of the responsibilities to be performed by each of them
hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and NYSE
Arca join in requesting the Commission, upon its approval of this
Agreement or any part thereof, to relieve NYSE Arca of any and all
responsibilities with respect to matters allocated to FINRA pursuant to
this Agreement; provided, however, that this Agreement shall not be
effective until the Effective Date.
18. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
20. Separate Agreement. This Agreement is wholly separate from (1)
the multiparty Agreement made pursuant to Rule 17d-2 of the Securities
Exchange Act of 1934 between the NYSE American LLC, Cboe BZX Exchange,
Inc., the Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe
Exchange, Inc., Nasdaq ISE, LLC, Financial Industry Regulatory
Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, BOX
Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, Miami International
Securities Exchange, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, MIAX
PEARL, LLC, and MIAX Emerald, LLC involving the allocation of
regulatory responsibilities with respect to common members for
compliance with common rules relating to the conduct by broker-dealers
of accounts for listed options or index warrants entered into on
February 12, 2019, and as may be amended from time to time or (2) the
multiparty Agreement made pursuant to Rule 17d-2 of the Exchange Act
among NYSE American LLC, Cboe BZX Exchange, Inc., the Cboe EDGX
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Nasdaq
ISE, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca,
Inc., The NASDAQ Stock Market LLC, BOX Exchange LLC, NASDAQ BX, Inc.,
NASDAQ PHLX LLC, Miami International Securities Exchange, LLC, Nasdaq
GEMX, LLC, Nasdaq MRX, LLC, MIAX PEARL, LLC, and MIAX Emerald, LLC
approved by the Commission on February 11, 2019 involving options-
related market surveillance matters and such agreements as may be
amended from time to time.
* * * * *
Exhibit 1
NYSE ARCA Certification
NYSE Arca Rules Certification for 17d-2 Agreement With FINRA
NYSE Arca, Inc. hereby certifies that the requirements contained in
the rules listed below are identical to, or substantially similar to
the comparable FINRA Rules and bylaws identified (``Common Rules'').
# Common Rules shall not include provisions regarding (i) notice,
reporting or any other filings made directly to or from NYSE Arca, (ii)
incorporation by reference of other NYSE Arca Rules that are not Common
Rules (iii) exercise of discretion in a manner than differs from
FINRA's exercise of discretion including, but not limited to exercise
of exemptive authority, by NYSE Arca, (iv) prior written approval of
NYSE Arca, and (v) payment of fees or fines to NYSE Arca.
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NYSE Arca Rule(s) \1\ FINRA Rule(s)
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2.16 Responsibilities of Non-Resident FINRA Rule 1021 Foreign Members.
Firms .
2.1210 Registration Requirements ... FINRA Rule 1210 Registration
Requirements.
2.1220 Registration Categories \2\ . FINRA Rule 1220(a)(1)-(4), (7),
(8), (10), and (b)(1), (2) and
(4), SM. 01-.06 Registration
Categories.
2.1230 Associated Persons Exempt from FINRA Rule 1230(a) and SM. 01,
Registration. Associated Persons Exempt from
Registration.
2.28 Books and Records ............. FINRA Rule 4511 General
Requirements.*
11.1(b) Adherence to Law and Good FINRA Rule 2010 Standards of
Business Practice. Commercial Honor and Principals
of Trade.*
11.2 Prohibited Acts ............... FINRA Rule 2010 Standards of
Commercial Honor and Principals
of Trade,* FINRA Rule 1122
Filing of Misleading Information
as to Membership or
Registration, and FINRA By-Laws
Article XIII, Section 1.
11.10 Excessive Trading.............. FINRA Rule 6140(c) Other Trading
Practices.
11.13 Disciplinary Action By Other FINRA Rule 4530(a)(1)(A),
Organizations . (a)(1)(C), (a)(1)(D) & (2)
Reporting Requirements and FINRA
By-Laws Article V, Section 2.
11.18 Supervision \3\.............. FINRA Rule 3110(a), (b)(1) and
(f) Supervision,* and FINRA Rule
1220(a)(1)-(4), (7), (8), (10)
Registration Categories.
11.19 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
11.20 Miscellaneous Provisions(a)(1) FINRA Rule 6140 Other Trading
and (3). Practices.
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NYSE Arca Equities Rule(s) \4\ FINRA Rule(s)
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2.24 Registration-Employees of ETP FINRA Rule 1210 Registration
Holders and Commentary .02 \5\. Requirements, FINRA Rule 1010(a)
and (c) Electronic Filing
Requirements for Uniform Forms,
and FINRA By-Laws Article V,
Sec. 2 Application for
Registration.
[[Page 7594]]
2.24(b), (c), and Commentary .03 and FINRA Rule 1210 and SM .03, .07
.05 Registration-Employees of ETP and .08 Registration
Holders . Requirements, and FINRA Rule
1240 Continuing Education
Requirements, and FINRA Rule
1230(a) Associated Persons
Exempt from Registration.
2.24(d) and Commentary .04 Continuing FINRA Rule 1240 Continuing
Education and 9.27-E(c) Continuing Education Requirements.
Education Requirements.
2.24(i) Registration-Employees of ETP FINRA Rule 1010(e) Electronic
Holders. Filing Requirements for Uniform
Forms and FINRA By-Laws Article
V, Section 3 Notification by
Member to the Corporation and
Associated Person of
Termination; Amendments to
Notification.
2.24(j) Registration-Employees of ETP FINRA By-Laws Article V, Section
Holders. 2 Application for Registration.
5.2-E(h) Unit Investment Trusts FINRA Rule 3260(c) Discretionary
(``UITs'') Commentary .03 . Accounts.
7.3-E(b) and (c) Commissions......... FINRA Rule 2232 Customer
Confirmations and SEA 10b-10.
9.1-E(a) Register with the Exchange FINRA Rule 3110(a)(3) Supervisory
System, SM .01 Registration of
Main Office, and SM .02
Designation of Additional OSJs,
and FINRA By-Laws Article IV,
Sec. 1(c) Application for
Membership.
9.1-E(c) Office Supervision ........ FINRA Rule 3110(a) Supervision.*
9.1-E(d) ETP Holder shall at all FINRA Rule 3110(a) Supervison.*
times .
9.1-E(e)(2) and (3) Guarantees....... FINRA Rule 2150(b) Improper use
of Customers' Securities or
Funds; Prohibitions Against
Guarantees and Sharing in
Accounts.
9.2-E(a) Diligence As To Accounts.... FINRA Rule 2090 Know Your
Customer.\6\
9.2-E(a)(2) and (3) Diligence As To FINRA Rule 2111 Suitability.
Accounts.
9.2-E(b)(1) and (4) Account FINRA Rule 3110 Supervision and
Supervision. FINRA Rule 4511.*
9.2-E(c) Customer Records............ FINRA Rule 4512 Customer Account
Information.* \7\
9.3-E(a) Employee Accounts........... FINRA Rule 3210 Accounts at Other
Broker-Dealers and Financial
Institutions.\8\
9.3-E(b) ETP Holder Accounts......... FINRA Rule 3210 Accounts at Other
Broker-Dealers and Financial
Institutions.
9.4-E Proxies Voting................. FINRA Rule 2251(b) Processing and
Forwarding of Proxies and Other
Issuer-Related Materials.
9.5-E Solicitation Expense........... FINRA Rule 2251(c) Processing and
Forwarding of Proxies and Other
Issuer-Related Materials.
9.6-E(a) Discretion as to Customers' FINRA Rule 3260 Discretionary
Accounts and 9.6-E(b) Records of Accounts and FINRA Rule
Discretionary Accounts. 4512(a)(3) Customer Account
Information.*
9.6-E(c) Marking Discretionary Orders FINRA Rule 3260 Discretionary
Accounts.
9.7-E(b) Use of Customer Securities.. FINRA Rule 2150(a) Improper use
of Customers' Securities or
Funds; Prohibition Against
Guarantees and Sharing in
Accounts, and FINRA Rule 2010
Standards of Commercial Honor
and Principles of Trade.
9.7-E(c) Customer Protection-- FINRA 4330(b)(1)(A) Customer
Reserves and Custody of Securities. Protection--Permissible Use of
Customers' Securities and SM .01
Definitions.
9.7-E(d) Agreements for Use of FINRA 4330(a)Customer Protection--
Customer Securities. Permissible Use of Customers'
Securities.
9.11-E Confirmations................. Temporary Dual FINRA NYSE Member
Rule 409T(b) Statements of
Accounts to Customer.\9\
9.12-E COD Orders--Partial Delivery.. FINRA Rule 11860 COD Orders.
9.14-E Account Designation........... FINRA Rule 4515 Approval and
Documentation of Changes in
Account Name or Designation.
9.15-E Statements of Account to FINRA Rule 2231 Customer Account
Customers. Statements.
9.16-O Statement or Notice on FINRA Rule 2360(b)(15) Options,
Interest. FINRA Rule 2231(a) Customer
Account Statements.
9.18-E(h) Doing a Public Business in FINRA Rule 2360(b)(13) Options.
Options.
9.19-E Transfer of Accounts.......... FINRA Rule 11870 Customer Account
Transfer Contracts.
9.20-E(b) Telemarketing.............. FINRA Rule 3230 Telemarketing.
9.27-E(a) and (b) Registration of FINRA Rule 1220 Registration
Representatives . Categories, FINRA Rule 1240
Continuing Education
Requirements, FINRA Rule 1010(d)
Electronic Filing Requirements
for Uniform Forms, and FINRA By-
Laws Article V Registered
Representatives and Associated
Persons.
9.29-E Borrowing From or Lending to FINRA Rule 3240 Borrowing From or
Customers. Lending to Customers.
11.22 Trading Ahead of Research FINRA Rule 5280 Trading Ahead of
Reports. Research Reports.
9.2010-E Standards of Commercial FINRA Rule 2010 Standards of
Honor and Principles of Trade. Commercial Honor and Principles
of Trade.*
9.2020-E Use of Manipulative, FINRA Rule 2020 Use of
Deceptive or Other Fraudulent Manipulative, Deceptive or Other
Devices. Fraudulent Devices.*
9.2150-E Improper Use of Customers' FINRA Rule 2150 Improper Use of
Securities or Funds' Prohibition Customers' Securities or Funds;
Against Guarantees and Sharing in Prohibition Against Guarantees
Accounts. and Sharing in Accounts.
9.2262-E Disclosure of Control FINRA Rule 2262 Disclosure of
Relationship with Issuer. Control Relationship with
Issuer.
9.2269-E Disclosure of Participation FINRA Rule 2269 Disclosure of
or Interest in Primary or Secondary Participation or Interest in
Distribution. Primary or Secondary
Distribution.
9.3220-E Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others. Rewarding Employees of Others.
9.3270-E Outside Business Activities FINRA Rule 3270 Outside Business
of Registered Persons. Activities of Registered
Persons.
9.5320-E Prohibition Against trading FINRA Rule 5320 Prohibition
Ahead of Customer Orders. Against Trading Ahead of
Customer Orders.
9.5190-E Notification Requirements FINRA Rule 5190 Notification
for Offering Participants . Requirements for Offering
Participants.\10\
9.5210-E Publication of Transactions FINRA Rule 5210 Publication of
and Quotations. Transactions and Quotations.
6.7410-E Definitions................. FINRA Rule 7410 Definitions.
6.7420-E Applicability............... FINRA Rule 7420 Applicability.
6.7430-E Synchronization of ETP FINRA Rule 4590 Synchronization
Holder Business Clock . of Member Business Clocks.
[[Page 7595]]
6.7440-E Recording of Order FINRA Rule 7440 Recording of
Information. Order Information.
6.7450-E Order Data Transmission FINRA Rule 7450 Order Data
Requirements. Transmission Requirements.
6.7460-E Violation of Order Audit FINRA Rule 7460 Violation of
Trail System Rules. Order Audit Trail System Rules.
6.7470-E Exemption to the Order FINRA Rule 7470 Exemption to the
Recording and Data Transmission Order Recording and Data
Requirements . Transmission Requirements.
------------------------------------------------------------------------
NYSE Arca Options Rule(s) \11\ FINRA Rule(s)
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2.23(a) Registration--OTPs ......... FINRA Rule 1210 Registration
Requirements, FINRA Rule 1010(a)
and (c) Electronic Filing
Requirements for Uniform Forms,
and FINRA By-Laws Article V,
Sec. 2 Application for
Registration.
2.23(b)(1) and (3) Registration .... FINRA Rule 1210 and SM .03 and
.07 Registration Requirements,
and FINRA Rule 1220(a)(2), (7)
and (b)(2) Registration
Categories.
2.23(c) and .04 Registration......... FINRA Rule 1210 SM .03 and .08
Registration Requirements.
2.23(d) and .03 Registration and 9.27- FINRA Rule 1240 Continuing
O(c) Continuing Education Education Requirements.
Requirements.
2.23(j) Registration................. FINRA By-Laws Article V, Section
2 Application for Registration.
9.1-O(c) Office Supervision ........ FINRA Rule 3110(a) Supervision.*
9.1-O(d) OTP Holders ............... FINRA Rule 3110(a) Supervision.*
9.2-O(c) Customer Records............ FINRA Rule 4512 Customer Account
Information.\12\
9.3-O(a) Employee Accounts........... FINRA Rule 3210 Accounts at Other
Broker-Dealers and Financial
Institutions.\10\
9.3-O(b) OTP Firms, OTP Holder FINRA Rule 3210 Accounts at Other
Accounts. Broker-Dealers and Financial
Institutions.
9.4-O Proxies Voting................. FINRA Rule 2251(b) Forward of
Proxies and Other Issuer-Related
Materials.
9.5-O Solicitation Expense........... FINRA Rule 2251(c)(1)(b) Forward
of Proxies and Other Issuer-
Related Materials.
9.6-O(a) Discretion as to Customers' FINRA Rule 3260 Discretionary
Accounts and 9.6-O(b) Records of Accounts and FINRA Rule
Discretionary Accounts. 4512(a)(3) Customer Account
Information.*
9.6-O(c) Marking Discretionary Orders FINRA Rule 3260 Discretionary
Accounts.
9.7-O(b) Use Customer Securities..... FINRA Rule 2150(a) Improper Use
of Customers' Securities or
Funds Prohibition and FINRA Rule
2010 Standards of Commercial
Honor and Principles of Trade.
9.7-O(c) Customer Protection-- FINRA Rule 4330(b)(1)(A) Customer
Reserves and Customer's Securities. Protection--Permissible Use of
Customers' Securities and SM .01
Definitions.
9.7-O(d) Agreements for Use of FINRA Rule 4330(a) Customer
Customer Securities. Protection--Permissible Use of
Customers' Securities.
9.11-O Confirmations................. Temporary Dual FINRA NYSE Member
Rule 409T(b) Statements of
Accounts to Customers.\11\
9.12-O COD Orders--Partial Delivery.. FINRA Rule 11860 COD Orders.
9.14-O Account Designation........... FINRA Rule 4515 Approval and
Documentation of Changes in
Account Name or Designation.
9.15-O Statements of Accounts to FINRA Rule 2231 Customer Account
Customers . Statements.
9.16-O Statement or Notice on FINRA Rule 2360(b)(15) Options,
Interest. FINRA Rule 2231(a) Customer
Account Statements.
9.18-O(h) Doing a Public Business in FINRA Rule 2360(b)(13) Options.
Options.
9.19-O Transfer of Accounts.......... FINRA Rule 11870 Customer Account
Transfer Contracts.
9.20-O(b) Telemarketing.............. FINRA Rule 3230 Telemarketing.
9.29-O Borrowing From or Lending to FINRA Rule 3240 Borrowing From or
Customers. Lending to Customers.
------------------------------------------------------------------------
\1\ The rules in this section apply to ETP Holders, OTP Holders and OTP
Firms, where applicable.
\2\ FINRA shall not have Regulatory Responsibilities for Rule
2.1220(a)(4)(B) to the extent FINRA exempts a member from the
requirement to have a Financial and Operations Principal.
\3\ FINRA shall not have Regulatory Responsibilities regarding NYSE Arca
Rule 11.18(d).
\4\ The rules in this section apply specifically to ETP Holders.
\5\ This Certification only applies to the first two sentences of Rule
2.24, which are not enumerated, and Commentary .02. Certifications to
other parts of Rule 2.24 appear elsewhere in this Exhibit.
\6\ FINRA's requirements do not include an exercise of due diligence as
to every order.
\7\ FINRA shall not have Regulatory Responsibilities for NYSE Arca Rule
9.2-E(c) Commentary .01-.03 as it relates to institutional accounts
and responsibility for such rule shall remain with NYSE Arca.
\8\ FINRA shall not have any Regulatory Responsibilities with respect to
employees of NYSE Arca.
\9\ FINRA shall only have Regulatory Responsibilities to the extent the
Common Member is subject to FINRA's Temporary Dual FINRA-NYSE Member
Rule.
\10\ FINRA shall not have Regulatory Responsibilities for NYSE Arca Rule
5190-E(e).
\11\ The rules in this section apply specifically to OTP Holders.
\12\ FINRA shall not have Regulatory Responsibilities for NYSE Arca Rule
9.2-O(c) Commentary .01-.03 as it relates to institutional accounts
and responsibility for such rule shall remain with NYSE Arca.
* FINRA shall not have any Regulatory Responsibilities for these rules
as they pertain to violations insider trading activities, which is
covered by a separate 17d-2 Agreement by and among Cboe BZX Exchange,
Inc., Cboe BYX Exchange, Inc., NYSE Chicago, Inc., Cboe EDGA Exchange,
Inc., Cboe EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc., MEMX LLC, MIAX Pearl, LLC, Nasdaq BX, Inc., Nasdaq
PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., New York
Stock Exchange LLC, NYSE American LLC, NYSE Arca Inc., Investors'
Exchange LLC and Long-Term Stock Exchange, Inc. effective September
23, 2020, as may be amended from time to time.
[[Page 7596]]
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number 4-523 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number 4-523. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of FINRA and NYSE Arca. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number 4-523 and should be submitted on or before
February 19, 2021.
V. Discussion
The Commission finds that the proposed Amended Plan is consistent
with the factors set forth in Section 17(d) of the Act \13\ and Rule
17d-2(c) thereunder \14\ in that the proposed Amended Plan is necessary
or appropriate in the public interest and for the protection of
investors, fosters cooperation and coordination among SROs, and removes
impediments to and fosters the development of the national market
system. In particular, the Commission believes that the proposed
Amended Plan should reduce unnecessary regulatory duplication by
allocating to FINRA certain examination and enforcement
responsibilities for Common Members that would otherwise be performed
by both FINRA and NYSE Arca. Accordingly, the proposed Amended Plan
promotes efficiency by reducing costs to Common Members. Furthermore,
because NYSE Arca and FINRA will coordinate their regulatory functions
in accordance with the Amended Plan, the Amended Plan should promote
investor protection.
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\13\ 15 U.S.C. 78q(d).
\14\ 17 CFR 240.17d-2(c).
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The Commission notes that, under the Amended Plan, NYSE Arca and
FINRA have allocated regulatory responsibility for those NYSE Arca
rules, set forth in the Certification, that are substantially similar
to the applicable FINRA rules in that examination for compliance with
such provisions and rules would not require FINRA to develop one or
more new examination standards, modules, procedures, or criteria in
order to analyze the application of the rule, or a Common Member's
activity, conduct, or output in relation to such rule. In addition,
under the Amended Plan, FINRA would assume regulatory responsibility
for certain provisions of the federal securities laws and the rules and
regulations thereunder that are set forth in the Certification. The
Common Rules covered by the Amended Plan are specifically listed in the
Certification, as may be amended by the Parties from time to time.
According to the Amended Plan, NYSE Arca will review the
Certification at least annually, or more frequently if required by
changes in either the rules of NYSE Arca or FINRA, and, if necessary,
submit to FINRA an updated list of Common Rules to add NYSE Arca rules
not included on the then-current list of Common Rules that are
substantially similar to FINRA rules; delete NYSE Arca rules included
in the then-current list of Common Rules that no longer qualify as
common rules; and confirm that the remaining rules on the list of
Common Rules continue to be NYSE Arca rules that qualify as common
rules.\15\ FINRA will then confirm in writing whether the rules listed
in any updated list are Common Rules as defined in the Amended Plan.
Under the Amended Plan, NYSE Arca also will provide FINRA with a
current list of Common Members and will update the list no less
frequently than once each quarter.\16\ The Commission believes that
these provisions are designed to provide for continuing communication
between the Parties to ensure the continued accuracy of the scope of
the proposed allocation of regulatory responsibility.
---------------------------------------------------------------------------
\15\ See paragraph 2 of the Amended Plan.
\16\ See paragraph 3 of the Amended Plan.
---------------------------------------------------------------------------
The Commission is hereby declaring effective an Amended Plan that,
among other things, allocates regulatory responsibility to FINRA for
the oversight and enforcement of all NYSE Arca rules that are
substantially similar to the rules of FINRA for Common Members of NYSE
Arca and FINRA. Therefore, modifications to the Certification need not
be filed with the Commission as an amendment to the Amended Plan,
provided that the Parties are only adding to, deleting from, or
confirming changes to NYSE Arca rules in the Certification in
conformance with the definition of Common Rules provided in the Amended
Plan. However, should the Parties decide to add a NYSE Arca rule to the
Certification that is not substantially similar to a FINRA rule; delete
a NYSE Arca rule from the Certification that is substantially similar
to a FINRA rule; or leave on the Certification a NYSE Arca rule that is
no longer substantially similar to a FINRA rule, then such a change
would constitute an amendment to the Amended Plan, which must be filed
with the Commission pursuant to Rule 17d-2 under the Act.\17\
---------------------------------------------------------------------------
\17\ The addition to or deletion from the Certification of any
federal securities laws, rules, and regulations for which FINRA
would bear responsibility under the Amended Plan for examining, and
enforcing compliance by, Common Members, also would constitute an
amendment to the Amended Plan.
---------------------------------------------------------------------------
Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that appropriate
notice and comment can take place after the proposed amendment is
effective. The primary purpose of the amendment is to remove Regulation
SHO from the Certification. The Commission notes that the prior version
of this plan immediately prior to this proposed amendment was published
for comment and the Commission did not receive any comments
thereon.\18\ Furthermore, the Commission does not believe that the
amendment to the plan raises any new
[[Page 7597]]
regulatory issues that the Commission has not previously considered.
---------------------------------------------------------------------------
\18\ See supra note 12 (citing to Securities Exchange Act
Release No. 55505).
---------------------------------------------------------------------------
VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-523. The Parties shall notify all members
affected by the Amended Plan of their rights and obligations under the
Amended Plan.
It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Amended Plan in File No. 4-523, between the FINRA and NYSE Arca,
filed pursuant to Rule 17d-2 under the Act, hereby is approved and
declared effective.
It is further ordered that NYSE Arca is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-523.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(34).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01941 Filed 1-28-21; 8:45 am]
BILLING CODE 8011-01-P