Notice2021-22810
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 Investors' Exchange LLC
Primary source
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Published
October 20, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 200 (Wednesday, October 20, 2021)</title>
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[Federal Register Volume 86, Number 200 (Wednesday, October 20, 2021)]
[Notices]
[Pages 58110-58116]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22810]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93324; File No. 4-700]
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 Investors' Exchange LLC
October 14, 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 September 13, 2021, pursuant to Rule
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and Investors' Exchange LLC (``IEX'') (collectively,
``Participating Organizations'' or ``parties''). This agreement amends
and restates the agreement entered into between FINRA and IEX on June
20, 2016, entitled ``Agreement between Financial Industry Regulatory
Authority, Inc. and Investors' Exchange LLC pursuant to 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
[[Page 58111]]
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 July 28, 2016, the Commission declared effective the Plan
entered into between FINRA and IEX for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to
reduce regulatory duplication for firms that are common members of
FINRA and IEX 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 IEX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to IEX members that are also members of FINRA
and the associated persons therewith (``Certification'').
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\11\ See Securities Exchange Act Release No. 54136 (July 12,
2006), 81 FR 51256 (August 3, 2016).
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III. Proposed Amendment to the Plan
On September 13, 2021, the parties submitted a proposed amendment
to the Plan (``Amended Plan''). The primary purpose of the Amended Plan
is to clarify what is considered a Common Rule under the Plan, add
Securities Exchange Act Rules 604, 610(d), and 611 to the
Certification, eliminate the requirement that IEX provide to FINRA a
current list of members each quarter, and eliminate the requirement
that IEX and FINRA notify Dual Members of the Agreement after the
Effective Date by a uniform joint notice. The text of the proposed
Amended Plan is as follows (additions are italicized; deletions are
[bracketed]):
* * * * *
AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
INVESTORS' EXCHANGE LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and Investors' Exchange LLC (``IEX''),
is made this [20th]9th day of [June 20, 2016] September, 2021 (the
``Agreement''), pursuant to Section 17(d) of the Securities Exchange
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder, which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. FINRA
and IEX may be referred to individually as a ``party'' and together
as the ``parties.''
This Agreement amends and restates the agreement entered into
between FINRA and IEX on June 20, 2016, entitled ``Agreement between
Financial Industry Regulatory Authority, Inc. and Investors'
Exchange LLC pursuant to Rule 17d-2 under the Securities Exchange
Act of 1934,'' and any subsequent amendments thereafter.
WHEREAS, FINRA and IEX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined
herein) and in the filing and processing of certain registration and
membership records; and
WHEREAS, FINRA and IEX 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 IEX 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) ``IEX Rules'' or ``FINRA Rules'' shall mean: (i) The rules
of IEX, 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 IEX Rules that are substantially
similar to the applicable FINRA Rules and certain provisions of the
Exchange Act and SEC rules set forth on Exhibit 1 in that
examination or surveillance for compliance with such provisions and
rules would not require FINRA to develop one or more new examination
or surveillance standards, modules, procedures, or criteria in order
to analyze the application of the provision or rule, or a Dual
Member's activity, conduct, or output in relation to such provision
or rule; provided, however, Common Rules shall not include the
application of the SEC, IEX or FINRA rules as they pertain to
violations of insider trading activities, which is covered by a
separate 17d-2 Agreement by and among [BATS Exchange, Inc., BATS Y-
Exchange, Inc., Chicago Board Options Exchange, Inc., Chicago Stock
Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX
PHLX LLC, the NASDAQ Stock Market LLC, National Stock Exchange,
Inc., New York Stock Exchange LLC, NYSE Amex LLC, and NYSE Arca
Inc., effective December 16, 2011], 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. approved by the Commission on
September 23, 2020 as may be amended from time to time. Common Rules
shall not include any provisions regarding: (i) Notice, reporting or
any other filings made directly to or from IEX; (ii) incorporation
by reference of other IEX 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 IEX; (iv) prior written approval of IEX; and
(v) payment of fees or fines to IEX.
(c) ``Dual Members'' shall mean those IEX 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 FINRA's 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 FINRA's
Code of Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities, surveillance 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, IEX furnished FINRA with a current list of Common Rules
and certified to FINRA that such rules that are IEX Rules are
substantially similar to the corresponding FINRA Rules (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 IEX or
FINRA, IEX shall submit an updated list of Common Rules to FINRA for
review which shall add IEX Rules not included in the current list of
Common Rules
[[Page 58112]]
that qualify as Common Rules as defined in this Agreement; delete
IEX 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 IEX 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 IEX shall retain full responsibility for (unless
otherwise addressed by separate agreement or rule) (collectively,
the ``Retained Responsibilities'') the following:
(a) Surveillance, examination, investigation and enforcement
with respect to trading activities or practices involving IEX's own
marketplace for rules that are not Common Rules;
(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;
and
(d) any IEX Rules that are not Common Rules, except for IEX
Rules for IEX Services LLC as provided in paragraph [6]5.
[3. Dual Members. Prior to the Effective Date, IEX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.]
[4]3. No Charge. There shall be no charge to IEX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by
the parties, either herein or in a separate agreement.
[5]4. 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 this
Agreement, the statute, rule or order shall supersede the
provision(s) hereof to the extent necessary for them to be properly
effectuated and the provision(s) hereof in that respect shall be
null and void.
[6]5. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations
of any IEX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities
assumed hereunder, FINRA shall notify IEX of those apparent
violations for such response as IEX deems appropriate.
(b) In the event that IEX becomes aware of apparent violations
of any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, IEX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement. With respect to apparent violations of IEX Services
LLC FINRA shall not make referrals to IEX pursuant to this paragraph
[6]5. Such apparent violations shall be processed by, and
enforcement proceedings in respect thereto will be conducted 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 IEX, IEX 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]6. Continued Assistance.
(a) FINRA shall make available to IEX 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 IEX any information it obtains about Dual
Members which reflects adversely on their financial condition. IEX
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]7. 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 IEX advised of its actions in this regard for such
subsequent proceedings as IEX may initiate.
[9]8. Customer Complaints. IEX shall forward to FINRA copies of
all customer complaints involving Dual Members received by IEX
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]9. 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]10. 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]11. Termination. This Agreement may be terminated by IEX or
FINRA at any time upon the approval of the Commission after one (1)
year's written notice to the other party.
[13]12. Arbitration. In the event of a dispute between the
parties as to the operation of this Agreement, IEX 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]12 shall interfere with a party's right to
terminate this Agreement as set forth herein.
[14. Notification of Members. IEX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.]
[15]13. 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]14. Limitation of Liability. Neither FINRA nor IEX 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 IEX 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 IEX with respect to any of the responsibilities
to be performed by each of them hereunder.
[17]15. Relief from Responsibility. Pursuant to Sections
17(d)(1)(A) and 19(g) of the Exchange Act and Rule 17d-2 thereunder,
FINRA and IEX join in requesting the Commission, upon its approval
of this Agreement or any part thereof, to relieve IEX 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.
[[Page 58113]]
[18]16. 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]17. 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.
Note: The entire existing table of rules should be deleted and
replaced with the table below and for the remainder of the exhibit
new text is italicized and deleted text is in brackets.
EXHIBIT 1
IEX CERTIFICATION OF COMMON RULES
IEX hereby certifies that the requirements contained in the
rules listed below for IEX are identical to, or substantially
similar to, the comparable FINRA [(NASD)] Rules, Exchange Act
provision or SEC rule identified (``Common Rules'').
# Common Rules shall not include provisions regarding (i)
notice, reporting or any other filings made directly to or from IEX,
(ii) incorporations by reference of other IEX 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 IEX, (iv) prior written approval
of IEX, and (v) payment of fees or fines to IEX.
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FINRA rule, exchange act
IEX rule provision, SEC rule
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Rule 2.140 Prohibited Conditions FINRA Rule 2081 Prohibited
Relating to Expungement of Customer Conditions Relating to
Dispute. Expungement of Customer
Dispute.
Rule 2.160(o) Lapse of Registration and FINRA Rule 1210.08--
Expiration of SIE. Registration Requirements--
Lapse of Registration and
Expiration of SIE.
Rule 2.160(p) Restrictions on FINRA Rule 1240(a)(1)-(4), (6)-
Membership--Continuing Education (7) and (b) Continuing
Requirements . Education Requirements.
Rule 2.160(q) and (r) Registration FINRA By-Laws of the
Requirements and Restrictions on Corporation Article IV, Sec
Membership, and Rule 2.170(b) and (g) 1(c) Application for
Application Procedures for Membership Membership, Article V,
or to become an Associated Person of a Sections 2 and 3 Application
Member . for Registration and
Notification by Member to the
Corporation and Associated
Person of Termination;
Amendments to Notification,
FINRA Rule 1010(c) and (e)
Electronic Filing Requirements
for Uniform Forms and FINRA
Rule 4517 Members Filing and
Contact Information
Requirements.
Rule 2.240 Fidelity Bonds ............ FINRA Rule 4360 Fidelity Bonds.
Rule 3.110 Business Conduct of Members FINRA Rule 2010 Standards of
<SUP>caret</SUP>. Commercial Honor and
Principles of Trade. <SUP>caret</SUP>
Rule 3.120 Violations Prohibited1 <SUP>caret</SUP> FINRA Rule 2010 Standards of
. Commercial Honor and
Principles of Trade <SUP>caret</SUP> and
FINRA Rule 3110 Supervision.
Rule 3.130 Use of Fraudulent Devices FINRA Rule 2020 Use of
<SUP>caret</SUP>. Manipulative, Deceptive or
Other Fraudulent Devices.
<SUP>caret</SUP>
Rule 3.150 Know Your Customer.......... FINRA Rule 2090 Know Your
Customer.
Rule 3.160 Fair Dealing with Customers. FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent Devices.
<SUP>caret</SUP>
Rule 3.170 Suitability................. FINRA Rule 2111 Suitability.
Rule 3.180(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.180(b) The Prompt Receipt and SEA Regulation SHO.
Delivery of Securities.
Rule 3.190 Charges for Services FINRA Rule 2122 Charges for
Performed. Services Performed.
Rule 3.200 Use of Information Obtained FINRA Rule 2060 Use of
in a Fiduciary Capacity. Information Obtained in
Fiduciary Capacity.
Rule 3.210 Publication of Transactions FINRA Rule 5210 Publication of
and Quotations. Transactions and Quotations.
Rule 3.220 Offers at Stated Prices..... FINRA Rule 5220 Offers at
Stated Prices.
Rule 3.230 Payments Involving FINRA Rule 5230 Payments
Publications that Influence the Market Involving Publications that
Price of a Security. Influence the Market Price of
a Security.
Rule 3.240 Customer Confirmations...... FINRA Rule 2232(a) Customer
Confirmations and SEA Rule 10b-
10 Confirmation of
Transactions.
Rule 3.250 Disclosure of Control FINRA Rule 2262 Disclosure of
Relationship with Issuer. Control Relationship with
Issuer.
Rule 3.260 Discretionary Accounts...... FINRA Rule 3260 Discretionary
Accounts.
Rule 3.270 Improper Use of Customers' FINRA Rule 2150(a)-(c) and SM
Securities or Funds; Prohibition .03 Improper Use of Customers'
Against Guarantees and Sharing in Securities or Funds;
Accounts. Prohibition Against Guarantees
and Sharing in Accounts.
Rule 3.280 Communications with the FINRA Rule 2210 Communications
Public. with the Public.
FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.291 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others; Gratuities. Rewarding Employees of Others.
Rule 3.292 Telemarketing............... FINRA Rule 3230 Telemarketing.
Rule 3.293 Short-Interest Reporting.... FINRA Rule 4560 Short-Interest
Reporting.
Rule 4.511 General Requirements........ FINRA Rule 4511 General
Requirements.
Rule 4.512 Customer Account Information FINRA Rule 4512 Customer
Account Information.
Rule 4.513 Record of Written Customer FINRA Rule 4513 Record of
Complaints. Written Customer Complaints.
Rule 4.550 Disclosure of Financial FINRA Rule 2261 Disclosure of
Condition. Financial Condition.
Rule 5.110 Supervision ............... FINRA Rule 3110 Supervision.
Rule 5.120 Supervisory Control System FINRA Rule 3120 Supervisory
Control System.
Rule 5.130 Annual Certification of FINRA Rule 3130 Annual
Compliance and Supervisory Processes . Certification of Compliance
and Supervisory Processes.
Rule 5.160 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
Rule 5.170 Transactions for or by FINRA Rule 3210 Accounts At
Associated Persons. Other Broker-Dealers and
Financial Institutions.
Rule 6.120 Failure to Deliver and Regulation SHO Rules 200 and
Failure to Receive. 203.
Rule 6.130(a), (b), (d)-(i) Forwarding FINRA Rule 2251 Processing and
of Proxy and Other Issuer-Related Forwarding of Proxy and Other
Materials; Proxy Voting. Issuer-Related Materials.
Rule 10.110(a) Market Manipulation..... FINRA Rule 6140 Other Trading
Practices.
[[Page 58114]]
Rule 10.110(b) Market Manipulation..... FINRA Rule 5210 Publication of
Transactions and Quotations,
FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent Devices,
FINRA Rule 2010 Standards of
Commercial Honor and
Principles of Trade, and FINRA
Rule 6140(a) Other Trading
Practices.
Rule 10.120 Fictitious Transactions.... FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02
Self-Trades.
Rule 10.130 Excessive Sales By A Member FINRA Rule 6140(c) Other
Trading Practices.
Rule 10.140 Manipulative Transactions.. FINRA Rule 6140 Other Trading
Practices.
Rule 10.150 Dissemination of False FINRA Rule 6140(e) Other
Information. Trading Practices.
Rule 10.160 Prohibition Against Trading FINRA Rule 5320 Prohibition
Ahead of Customer Orders **. Against Trading Ahead of
Customer Orders. **
Rule 10.180 Influencing the FINRA Rule 6140(a) Other
Consolidated Tape. Trading Practices and FINRA
Rule 5210 Publication of
Transactions and Quotations.
Rule 10.190 Trade Shredding............ FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 10.220 Best Execution and FINRA Rule 5310 Best Execution
Interpositioning **. and Interpositioning. **
Rule 10.240 Trading Ahead of Research FINRA Rule 5280 Trading Ahead
Reports **. of Research Reports. **
Rule 10.260 Front Running of Block FINRA Rule 5270 Front Running
Transactions **. of Block Transactions. **
Rule 11.151(e) Market Maker FINRA Rule 6240(a)-(c), (d)(1)
Obligations.. and (2) Prohibition from
Locking or Crossing Quotations
in NMS Stocks
Rule 11.280(e)(3) & (4) Trading Halts FINRA Rule 6190(a)&(b)
Due to Extraordinary Market Volatility. Compliance with Regulation NMS
Plan to Address Extraordinary
Market Volatility.
Rule 11.310 Locking or Crossing FINRA Rule 6240(a),-(c), (d)(1)
Quotations in NMS Stocks **. and (2) Prohibition from
Locking or Crossing Quotations
in NMS Stocks. **
Rule 11.420(c) Order Audit Trail System FINRA Rule 4590 Synchronization
Requirements. of Member Business Clocks.
Rule 11.420(d)--Order Audit Trail FINRA Rule 7440--Recording of
System Requirements--Recording of Order Information.
Order Information.
Rule 11.420(e)--Order Audit Trail FINRA Rule 7450--Order Data
System Requirements--Order Data Transmission.
Transmission Requirements.
Rule 12.110(c) Arbitration............. FINRA Rule 2268 Requirements
When Using Predispute
Arbitration Agreements for
Customer Accounts.
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\1\ FINRA shall only have Regulatory Responsibilities for Rule 3.120(a)
regarding conduct in violation of the Act, or the rules or regulations
thereunder.
In addition, the following provisions shall be part of this 17d-2
Agreement:
Securities Exchange Act of 1934 (``SEA''):
Section 15(g)
SEA Rules:
<bullet> SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements**
<bullet> SEA Rule 201 of Regulation SHO--Circuit Breaker**
<bullet> SEA Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements**
<bullet> SEA Rule 204 of Regulation SHO--Close-Out Requirement**
<bullet> SEA Rule 101 of Regulation M--Activities by Distribution
Participants**
<bullet> SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution**
<bullet> SEA Rule 103 of Regulation M--Nasdaq Passive Market Making**
<bullet> SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering**
<bullet> SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering**
<bullet> SEA Rule 604 of Regulation NMS--Display of Customer Limit
Orders**
<bullet> SEA Rule 610(d) of Regulation NMS--Locking or Crossing
Quotations**
<bullet> SEA Rule 611 of Regulation NMS--Order Protection Rule**
<bullet> SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
<SUP>caret</SUP>
<bullet> SEA Rule 17a-3/17a-4--Records to Be Made by Certain Exchange
Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers <SUP>caret</SUP>
[ FINRA shall not have Regulatory Responsibilities regarding
notification or reporting to IEX.]
<SUP>caret</SUP> FINRA shall not have any Regulatory Responsibilities for these
rules as they pertain to violations of insider trading activities,
which is covered by a separate 17d-2 Agreement by and among [BATS
Exchange, Inc., BATS-Y Exchange, Inc., Chicago Board Options Exchange,
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX
Exchange Inc., Financial Industry Regulatory Authority, Inc., NASDAQ
OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC,
National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex
LLC, and NYSE Arca Inc. effective December 16, 2011] 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., and Investors'
Exchange LLC and the Long-Term Stock Exchange, Inc. as approved by the
SEC on September 23, 2020, as may be amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double
star rules. These rules may be cited by FINRA in both the context of
this Agreement and the Regulatory Services Agreement.
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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa">[email protected]</span></a>. Please include
File Number 4-700 on the subject line.
Paper Comments
<bullet> 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 4-700. This file number
should be included on the subject line if email is used. To help the
Commission
[[Page 58115]]
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>). 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 IEX. 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 4-700
and should be submitted on or before November 10, 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 \12\ and Rule
17d-2(c) thereunder \13\ 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 Dual Members that would otherwise be performed by
FINRA and IEX. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Dual Members. Furthermore, because IEX
and FINRA will coordinate their regulatory functions in accordance with
the Amended Plan, the Amended Plan should promote investor protection.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78q(d).
\13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------
The Commission notes that, under the Amended Plan, IEX and FINRA
have allocated regulatory responsibility for those IEX 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 Dual 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, IEX will review the Certification at
least annually, or more frequently if required by changes in either the
rules of IEX or FINRA, and, if necessary, submit to FINRA an updated
list of Common Rules to add IEX rules not included on the then-current
list of Common Rules that are substantially similar to FINRA rules;
delete IEX 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 IEX rules that qualify as
common rules.\14\ FINRA will then confirm in writing whether the rules
listed in any updated list are Common Rules as defined in the Amended
Plan. 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.
---------------------------------------------------------------------------
\14\ See paragraph 2 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 IEX rules that are substantially
similar to the rules of FINRA for Dual Members of IEX 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 IEX
rules in the Certification in conformance with the definition of Common
Rules provided in the Amended Plan. However, should the Parties decide
to add an IEX rule to the Certification that is not substantially
similar to a FINRA rule; delete an IEX rule from the Certification that
is substantially similar to a FINRA rule; or leave on the Certification
an IEX 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.\15\
---------------------------------------------------------------------------
\15\ 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, Dual 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 Amended Plan to clarify what is
considered a Common Rule under the Plan, add Securities Exchange Act
Rules 604, 610(d), and 611 to the Certification, eliminate the
requirement that IEX provide FINRA a current list of members each
quarter, and eliminate the requirements that IEX and FINRA notify Dual
Members of the Agreement after the Effective Date by a uniform joint
notice. 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.\16\
Furthermore, the Commission does not believe that the amendment to the
plan raises any new regulatory issues that the Commission has not
previously considered. The Commission notes that FINRA has access to
real-time information regarding Exchange membership via its Central
Registration Depository.
---------------------------------------------------------------------------
\16\ See supra note 11 (citing to Securities Exchange Act
Release No. 78434).
---------------------------------------------------------------------------
VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-700. 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. 4-700, between the FINRA and IEX, filed
pursuant to Rule 17d-2 under the Act, hereby is approved and declared
effective.
It is further ordered that IEX is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-700.
[[Page 58116]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22810 Filed 10-19-21; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.