Notice2024-15910
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., The Nasdaq Stock Market LLC, and Nasdaq BX, Inc.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 139 (Friday, July 19, 2024)</title>
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[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Notices]
[Pages 58819-58828]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-15910]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100536; File No. 4-575]
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., The Nasdaq Stock Market LLC, and Nasdaq BX, Inc.
July 15, 2024.
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 July 1, 2024, pursuant to Rule 17d-2
of the Act,\2\ by the Financial Industry Regulatory Authority, Inc.
(``FINRA''), The Nasdaq Stock Market LLC (``Nasdaq''), and Nasdaq BX,
Inc. (``BX'') (collectively, ``Participating Organizations'' or
``parties''). This Agreement amends and restates the agreement entered
into between FINRA, Nasdaq, and BX approved by the SEC on September 23,
2021, entitled ``Agreement Among Financial Industry Regulatory
Authority, Inc., The Nasdaq Stock Market LLC and Nasdaq BX, Inc.
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,
[[Page 58820]]
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 January 8, 2009, the Commission declared effective the Plan
entered into between FINRA and the Boston Stock Exchange, Incorporated
(n/k/a Nasdaq BX, Inc. (``BX'')) 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 BX 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 BX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to BX members that are also members of FINRA and
the associated persons therewith (``Certification''). On September 23,
2021, the Commission declared effective an amendment to the Plan to
allocate surveillance, investigation, and enforcement responsibilities
for Rule 14e-4 under the Act, to reflect the name change of Boston
Stock Exchange, Incorporated to Nasdaq BX, Inc., and to add Nasdaq as a
Participant to the Plan.\12\
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\11\ See Securities Exchange Act Release No. 59218 (January 8,
2009), 74 FR 2143 (January 14, 2009).
\12\ See Securities Exchange Act Release No. 93114 (September
23, 2021), 86 FR 53996 (September 29, 2021).
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III. Proposed Amendment to the Plan
On July 1, 2024, the parties submitted a proposed amendment to the
Plan (``Amended Plan''). The primary purpose of the Amended Plan is to:
(i) update the list of Common Rules; (ii) add surveillance and
investigation coverage for certain Common Rules specified in Exhibit 1
to the Amended Plan; (iii) to reflect that, for Router Members, FINRA
will retain regulatory responsibility for Nasdaq and BX rules that are
not Common Rules; and (iv) to reflect that FINRA will not make
referrals to Nasdaq and BX for apparent violations of any Nasdaq or BX
Rules by any Router Member. The text of the proposed Amended Plan is as
follows (additions are in italics; deletions are [bracketed]):
* * * * *
AGREEMENT AMONG FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., THE
NASDAQ STOCK MARKET LLC AND NASDAQ BX, INC. PURSUANT TO RULE 17d-2
UNDER THE SECURITIES EXCHANGE ACT OF 1934
This Agreement, by and among the Financial Industry Regulatory
Authority, Inc. (``FINRA''), The Nasdaq Stock Market LLC (``Nasdaq'')
and Nasdaq BX, Inc. (``BX''), is made this [30th]1st day of [August,
2021] July, 2024 (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, Nasdaq and BX may be referred to
individually as a ``party'' and together as the ``parties.''
This Agreement amends and restates the agreement entered into
between FINRA, Nasdaq and BX approved by the SEC on September 23, 2021
[on December 5, 2008], entitled ``Agreement [between] among Financial
Industry Regulatory Authority, Inc., The Nasdaq Stock Market LLC and
[Boston Stock Exchange, Incorporated] Nasdaq BX, Inc. pursuant to Rule
17d-2 under the Securities Exchange Act of 1934,'' and any subsequent
amendments thereafter [and the agreement entered into between FINRA and
Nasdaq approved by the SEC on July 12, 2006, entitled ``Agreement
between the National Association of Securities Dealers, Inc. and The
Nasdaq Stock Market LLC Pursuant to Section 17(d) and Rule 17d-2,'' and
any subsequent amendments thereafter].
Whereas, FINRA, Nasdaq and BX desire to reduce duplication in the
examination, surveillance and investigation of their Common Members (as
defined herein) and in the filing and processing of certain
registration and membership records; and
Whereas, FINRA, Nasdaq and BX 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 U.S. Securities
and Exchange Commission
[[Page 58821]]
(the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, FINRA, Nasdaq and BX 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) ``Nasdaq Rules'', ``BX Rules'' or ``FINRA Rules'' shall mean:
(i) the rules of Nasdaq, (ii) the rules of BX, or (iii) 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 Nasdaq Rules and BX 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, surveillance or investigation for compliance with
such provisions and rules would not require FINRA to develop one or
more new examination, surveillance or investigation standards, modules,
procedures, or criteria in order to analyze the application of the
provision or rule, or a Common 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, Nasdaq, BX or FINRA rules
as they pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among Cboe BZX Exchange,
Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, 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 Nasdaq or BX;
(ii) incorporation by reference of other Nasdaq or BX 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 Nasdaq or BX; (iv) prior written
approval of Nasdaq or BX; and (v) payment of fees or fines to Nasdaq or
BX.
(c) ``Common Members'' shall mean those members of FINRA and a
member of at least one of Nasdaq or BX and the associated persons
therewith.
(d) ``Effective Date'' shall [have the meaning set forth in
paragraph 13]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,
surveillance and investigation responsibilities and Enforcement
Responsibilities relating to compliance by the Common 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. [The term
``Regulatory Responsibilities'' shall also include the surveillance,
investigation and Enforcement Responsibilities relating to compliance
by Common Members with Rule 14e-4 of the Securities Exchange Act
(``Rule 14e-4''), with a focus on the standardized call option
provision of Rule 14e-4(a)(1)(ii)(D).]
2. Regulatory Responsibilities. FINRA shall assume Regulatory
Responsibilities for Common Members. Attached as Exhibit 1 to this
Agreement and made part hereof, Nasdaq and BX furnished FINRA with a
current list of Common Rules and certified to FINRA that such rules
that are Nasdaq Rules and BX 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 Nasdaq, BX or FINRA, Nasdaq and BX shall submit an updated
list of Common Rules to FINRA for review which shall add Nasdaq Rules
and BX Rules not included in the current list of Common Rules that
qualify as Common Rules as defined in this Agreement; delete Nasdaq
Rules and BX 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 Nasdaq Rules and BX 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 Nasdaq and BX 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 Nasdaq's or BX's
own marketplaces;
(b) registration pursuant to Nasdaq's or BX's applicable rules of
associated persons (i.e., registration rules that are not Common
Rules);
(c) discharge of Nasdaq's or BX's duties and obligations as a
Designated Examining Authority pursuant to Rule 17d-1 under the
Exchange Act; and
(d) any Nasdaq Rules and BX Rules that are not Common Rules, except
for Nasdaq Rules and BX Rules for any Nasdaq member or BX member that
operates as a facility (as defined in Section 3(a)(2) of the Exchange
Act), acts as an outbound router for Nasdaq or BX, and is a member of
FINRA (``Router Member'') as provided in paragraph 5. As of the date of
this Agreement, the only Router Member is Nasdaq Execution Services,
LLC.
3. No Charge. There shall be no charge to Nasdaq and BX by FINRA
for performing the Regulatory Responsibilities under this Agreement
except as hereinafter provided. FINRA shall provide Nasdaq and BX with
ninety (90) days advance written notice in the event FINRA decides to
impose any charges to Nasdaq and BX for performing the Regulatory
Responsibilities under this Agreement. If FINRA determines to impose a
charge, Nasdaq and BX 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.
4. [Reassignment of Regulatory Responsibilities] Applicability of
Certain Laws, Rules, Regulations or
[[Page 58822]]
Orders. Notwithstanding any provision hereof, this Agreement shall be
subject to any statute, or any rule or order of the Commission
[reassigning Regulatory Responsibilities between self-regulatory
organizations]. To the extent such [action] statute, rule or order is
inconsistent with this Agreement, the statue, rule or order [such
action] 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.
5. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any Nasdaq Rules or BX Rules, which are not listed as Common Rules,
discovered pursuant to the performance of the Regulatory
Responsibilities assumed hereunder, FINRA shall notify Nasdaq and BX of
those apparent violations for such response as Nasdaq and BX deem[s]
appropriate. With respect to apparent violations of any Nasdaq Rules or
BX Rules by any Router Member, FINRA shall not make referrals to Nasdaq
and BX pursuant to this paragraph 5. 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 Nasdaq or BX becomes aware of apparent
violations of any Common Rules, discovered pursuant to the performance
of the Retained Responsibilities, Nasdaq and BX shall notify FINRA of
those apparent violations and such matters shall be handled by FINRA
[as provided] consistent with the provisions in this Agreement. [Each
party agrees to make available promptly all files, records and
witnesses necessary to assist the other in its investigation or
proceedings.]
(c) Apparent violations of Common Rules[, FINRA Rules, federal
securities laws, and rules and regulations thereunder,] 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 Common Member is the subject of an investigation relating
to a transaction on Nasdaq or BX, Nasdaq and BX, at each party's
discretion, may 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.
6. Continued Assistance.
(a) FINRA shall make available to Nasdaq and BX all information
obtained by FINRA in the performance by it of the Regulatory
Responsibilities hereunder with respect to the Common Members subject
to this Agreement. In particular, and not in limitation of the
foregoing, FINRA shall furnish Nasdaq and BX any information it obtains
about Common Members which reflects adversely on their financial
condition. Nasdaq and BX shall make available to FINRA any information
coming to their attention that reflects adversely on the financial
condition of Common 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.
7. Common Member Applications.
(a) Common Members subject to this Agreement shall be required to
submit, and FINRA shall be responsible for processing and acting upon
all applications submitted on behalf of allied persons, partners,
officers, registered personnel and any other person required to be
approved by the rules of Nasdaq, BX and FINRA or associated with Common
Members thereof. Upon request, FINRA shall advise Nasdaq and BX of any
changes of allied members, partners, officers, registered personnel and
other persons required to be approved by the rules of Nasdaq, BX and
FINRA.
(b) Common Members shall be required to send to FINRA all letters,
termination notices or other material respecting the individuals listed
in paragraph 7(a).
(c) When as a result of processing such submissions FINRA becomes
aware of a statutory disqualification as defined in the Exchange Act
with respect to a Common 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 Nasdaq and BX advised of its actions
in this regard for such subsequent proceedings as Nasdaq and BX may
initiate.
(d) Notwithstanding the foregoing, FINRA shall not review the
membership application, reports, filings, fingerprint cards, notices,
or other writings filed to determine if such documentation submitted by
a broker or dealer, or a person associated therewith or other persons
required to register or qualify by examination meets the Nasdaq or BX
requirements for general membership or for specified categories of
membership or participation in Nasdaq or BX, such as Equities Market
Maker, Equities ECN, Order Entry Firm, or any similar type of Nasdaq or
BX membership or participation that is created after this Agreement is
executed. FINRA shall not review applications or other documentation
filed to request a change in the rights or status described in this
paragraph 7(d), including termination or limitation on activities, of a
member or a participant of Nasdaq or BX, or a person associated with,
or requesting association with, a member or participant of Nasdaq or
BX.
8. Branch Office Information. FINRA shall also be responsible for
processing and, if required, acting upon all requests for the opening,
address changes, and terminations of branch offices by Common Members
and any other applications required of Common Members with respect to
the Common Rules as they may be amended from time to time. Upon
request, FINRA shall advise Nasdaq and BX of the opening, address
change and termination of branch and main offices of Common Members and
the names of such branch office managers.
9. Customer Complaints. Nasdaq and BX shall forward to FINRA copies
of all customer complaints involving Common Members received by Nasdaq
and BX 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 Common 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. Notwithstanding anything
else herein and to the contrary, except for paragraph 5(a), [N]nothing
contained in this Agreement shall restrict or in any way encumber the
right of either FINRA, or Nasdaq or BX, [party] to conduct its own
independent or concurrent investigation, examination or enforcement
proceeding of or against Common Members of the Common Rules, as either
[party] FINRA, or
[[Page 58823]]
Nasdaq or BX, in its sole discretion, shall deem appropriate or
necessary.
12. Termination. This Agreement may be terminated by Nasdaq, BX 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 3.
[13. Effective Date. This Agreement shall be effective upon
approval of the Commission.]
13[4]. Arbitration. In the event of a dispute between the parties
as to the operation of this Agreement, Nasdaq, BX 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 1[4]3 shall
interfere with a party's right to terminate this Agreement as set forth
herein.
14[5]. 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.
15[6]. Limitation of Liability. None of the parties nor any of
their respective directors, governors, officers or employees shall be
liable to any 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 any party and caused by
the willful misconduct of another party or their respective directors,
governors, officers or employees. No warranties, express or implied,
are made by any party hereto with respect to any of the
responsibilities to be performed by them hereunder.
16[7]. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA, Nasdaq
and BX join in requesting the Commission, upon its approval of this
Agreement or any part thereof, to relieve Nasdaq and BX 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.
17[8]. 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.
18[9]. Separate Agreement. This Agreement is wholly separate from
any other 17d-2 agreement where FINRA, NASDAQ and BX are parties,
including but not limited to, (1) the multiparty Agreement made
pursuant to Rule 17d-2 of the Exchange Act among [NYSE American LLC,]
Cboe BZX Exchange, Inc., BOX Exchange, LLC, [the Cboe EDGX Exchange,
Inc., Cboe C2 Exchange, Inc.,] Cboe Exchange, Inc., Cboe C2 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, NYSE American LLC, NYSE Arca, Inc., The Nasdaq Stock Market LLC,
Nasdaq BX, Inc., Nasdaq PHLX LLC, Nasdaq GEMX, LLC, Cboe EDGX Exchange,
Inc., Nasdaq MRX, LLC, MIAX PEARL, LLC, [and] MIAX Emerald, LLC and
MEMX LLC approved by the Commission on [February 12, 2019] October 18,
2022 concerning options related sales-practice matters [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, index warrants, currency
index warrants and currency warrants or] and (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, and MEMX LLC approved by
the Commission on [February 11, 2019] November 23, 2022 involving
options-related market surveillance matters and such agreements as may
be amended from time to time.
19[20]. 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.
Exhibit 1
NASDAQ and BX Rules Certification for 17d-2 Agreement With FINRA
The Nasdaq Stock Market LLC (``Nasdaq'') and Nasdaq BX, Inc.
(``BX'') hereby certify that the requirements contained in the Nasdaq
and BX rules listed below are identical to, or substantially similar
to, the FINRA [r]Rules, Exchange Act provisions or SEA rules identified
(``Common Rules''). [noted below:]
# Common Rules shall not include provisions regarding (i) notice,
reporting or any other filings made directly to or from Nasdaq or BX,
(ii) incorporation by reference to other Nasdaq or BX 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 Nasdaq or BX, (iv) prior written
approval of Nasdaq or BX, and (v) payment of fees or fines to Nasdaq or
BX.
------------------------------------------------------------------------
FINRA rule(s),
exchange action
BX rule Nasdaq rule provision(s), or SEA
rule(s)
------------------------------------------------------------------------
General 2, Section 15. General 2, Section 4370. Business
Business Continuity Plans 15. Business Continuity Plans
and General 2, Section 16. Continuity Plans and Emergency
Emergency Contact and General 2, Contact
Information . Section 16. Information.
Emergency Contact
Information .
[[Page 58824]]
General 2, Section 10. General 2, Section 4517. Member Filing
Executive Representative; 10. Executive and Contact
General 2, Section 11. Representative; Information
Contact Information General 2, Section Requirements.
Requirements . 11. Contact
Information
Requirements .
General 3, Rule 1002(b) General 3, Rule FINRA Bylaws Article
Qualifications of Exchange 1002(b) III, Sec. 1.
Members and Associated Qualifications of
Persons; Registration of Exchange Members
Branch Offices and and Associated
Designation of Office of Persons;
Supervisory Jurisdiction . Registration of
Branch Offices and
Designation of
Office of
Supervisory
Jurisdiction .
General 3, Rule 1002(d). General 3, Rule 3110(a)(3)
Registration of Branch 1002(d). Supervision and SM
Offices and Designation of Registration of .01 and .02
Office of Supervisory Branch Offices and Supervision* and
Jurisdiction . Designation of FINRA By-Laws
Office of Article IV, Sec. 8.
Supervisory
Jurisdiction .
General 3, 1012(c)(1). Duty General 3, Rule 1122. Filing of
to Ensure the Accuracy, 1012(c)(1). Duty to Misleading
Completeness, and Current Ensure the Information as to
Nature of Membership Accuracy, Membership or
Information Filed with the Completeness, and Registration; FINRA
Exchange . Current Nature of Bylaws Article IV,
Membership [s]Sec. 1(c) of the
Information Filed By-Laws.
with the Exchange .
General 4, Section 1, 1210. General 4, Section 1210. Registration
Registration Requirements . 1, 1210. Requirements.
Registration
Requirements .
General 4, Section 1, 1220. General 4, Section 1220. Registration
Registration Categories 1, 1220. Categories.
\1\. Registration
Categories \2\[1].
General 4, Section 1, General 4, Section 1220.06. Eliminated
1220.06. Eliminated 1, 1220.06. Registration
Registration Categories \1\. Eliminated Categories.
Registration
Categories.
General 4, Section 1, Rule General 4, Section 1230. Associated
1230(1) (2)(D) Associated 1, Rule 1230(1)- Persons Exempt from
Persons Exempt from (2)(D) Associated Registration.
Registration . Persons Exempt from
Registration .
General 4, Section 1, 1240. General 4, Section 1240. Continuing
Continuing Education 1, 1240. Continuing Education
Requirements. Education Requirements.
Requirements \3\.
General 4, Section 1, 1250. General 4, Section 1010. Electronic
Electronic Filing 1, 1250. Electronic Filing Requirements
Requirements for Uniform Filing Requirements for Uniform Forms
Forms . for Uniform Forms . and FINRA Bylaws
Article V, Section
2.
[Equity 5, Section 1. [Equity 5, Section [7410. Definitions].
Definitions]. 1. Definitions].
[Equity 5, Section 2. [Equity 5, Section [7420.
Applicability]. 2. Applicability]. Applicability].
[Equity 5, Section 3. [Equity 5, Section [7430.
Synchronization of Member 3. Synchronization Synchronization of
Business Clocks]. of Member Business Member Business
Clocks]. Clocks].
[Equity 5, Section 4. [Equity 5, Section [7440. Recording of
Recording of Order 4. Recording of Order Information].
Information]. Order Information].
[Equity 5, Section 5. Order [Equity 5, Section [7450. Order Data
Data Transmission 5. Order Data Transmission
Requirements]. Transmission Requirements].
Requirements].
[Equity 5, Section 6. [Equity 5, Section [7460. Violation of
Violation of Order Audit 6. Violation of Order Audit Trail
Trail System Rules]. Order Audit Trail System Rules].
System Rules].
General 9, Section 1(a). General 9, Section 2010. Standards of
Standards of Commercial 1(a). Standards of Commercial Honor
Honor and Principles of Commercial Honor and Principles of
Trade. and Principles of Trade.*
Trade.
General 9, Section 1(b). General 9, Section 5320. Prohibition
Prohibition Against Trading 1(b). Prohibition Against Trading
Ahead of Customer Orders. Against Trading Ahead of Customer
Ahead of Customer Orders.**
Orders.
General 9, Section 1(c). General 9, Section 5270. Front Running
Front Running Policy. 1(c). Front Running of Block
Policy. Transactions.**
General 9, Section 1(d). General 9, Section 5280. Trading Ahead
Trading Ahead of Research 1(d). Trading Ahead of Research
Reports. of Research Reports. Reports.**
General 9, Section 1(e). General 9, Section 5240. Anti-
Anti-Intimidation/ 1(e). Anti- Intimidation/
Coordination. Intimidation/ Coordination.
Coordination.
General 9, Section 1(f). General 9, Section 2232. Customer
Confirmation of Callable 1(f). Confirmation Confirmations.
Common Stock. of Callable Common
Stock.
General 9, Section 1(g). General 9, Section 2140. Interfering
Interfering With the 1(h). Interfering With the Transfer
Transfer of Customer With the Transfer of Customer
Accounts in the Context of of Customer Accounts in the
Employment Disputes. Accounts in the Context of
Context of Employment
Employment Disputes. Disputes.
General 9, Section 1[(i)] General 9, Section 2020. Use of
(h). Use of Manipulative, 1(g). Use of Manipulative,
Deceptive or Other Manipulative, Deceptive or Other
Fraudulent Devices. Deceptive or Other Fraudulent
Fraudulent Devices. Devices.*
General 9, Section 2. General 9, Section 2150. Improper Use
Customers' Securities or 2. Customers' of Customers'
Funds. Securities or Funds. Securities or
Funds; Prohibition
Against Guarantees
and Sharing in
Accounts.
General 9, Section 3. General 9, Section 2210. Communications
Communications with the 3. Communications with the Public.
Public. with the Public.
General 9, Section 5. General 9, Section 3230. Telemarketing.
Telemarketing. 5. Telemarketing.
General 9, Section 6. General 9, Section 2251. Processing and
Forwarding of Proxy and 6. Forwarding of Forwarding of Proxy
Other Issuer-Related Proxy and Other and Other Issuer-
Materials. Issuer-Related Related Materials.
Materials.
General 9, Section 7(a). General 9, Section 2261. Disclosure of
Disclosure of Financial 7(a). Disclosure of Financial
Condition. Financial Condition. Condition.
General 9, Section 7(b). General 9, Section 2262. Disclosure of
Disclosure of Control 7(b). Disclosure of Control
Relationship with Issuer. Control Relationship with
Relationship with Issuer.'
Issuer.
General 9, Section 7(c). General 9, Section 2269. Disclosure of
Disclosure of Participation 7(c). Disclosure of Participation or
or Interest in Primary or Participation or Interest in Primary
Secondary Distribution. Interest in Primary or Secondary
or Secondary Distribution.
Distribution.
General 9, Section 8. SIPC General 9, Section 2266. SIPC
Information. 8. SIPC Information. Information.
General 9, Section 9. General 9, Section 5150. Fairness
Fairness Opinions. 9. Fairness Opinions.
Opinions.
General 9, Section 10 General 9, Section 2111. Suitability.
Recommendations to 10. Recommendations
Customers (Suitability). to Customers
(Suitability).
[[Page 58825]]
General 9, Section 11. Best General 9, Section 5310. Best Execution
Execution and 11. Best Execution and
Interpositioning. and Interpositioning.**
Interpositioning.
General 9, Section 12. General 9, Section 2231. Customer
Customer Account Statements. 12. Customer Account Statements.
Account Statements.
General 9, Section 13. General 9, Section 2264. Margin
Margin Disclosure Statement. 13. Margin Disclosure
Disclosure Statement.
Statement.
General 9, Section 14. General 9, Section 2130. Approval
Approval Procedures for Day- 14. Approval Procedures for Day-
Trading Accounts. Procedures for Day- Trading Accounts
Trading Accounts. and Rule 2270 Day-
Trading Risk
Disclosure
Statement.
General 9, Section 15. General 9, Section 3240. Borrowing From
Borrowing From or Lending 15. Borrowing From or Lending to
to Customers. or Lending to Customers.
Customers.
General 9, Section 16. General 9, Section 2122. Charges for
Charges for Services 16. Charges for Services Performed.
Performed. Services Performed.
General 9, Section 18. General 9, Section 5250. Payments for
Payments for Market Making. 18. Payments for Market Making.
Market Making.
General 9, Section 19. General 9, Section 3260. Discretionary
Discretionary Accounts. 19. Discretionary Accounts.
Accounts.
General 9, Section 20. General 9, Section 3110. Supervision.
Supervision. 20. Supervision.
General 9, Section 21(a). General 9, Section 3120. Supervisory
Supervisory Control System, 21(a). Supervisory Control System.
Annual Certification of Control System,
Compliance and Supervisory Annual
Processes. Certification of
Compliance and
Supervisory
Processes.
General 9, Section 21(c). General 9, Section 3130. Annual
Supervisory Control System, 21(c). Supervisory Certification of
Annual Certification of Control System, Compliance and
Compliance and Supervisory Annual Supervisory
Processes. Certification of Processes.
Compliance and
Supervisory
Processes.
General 9, Section 23. General 9, Section 3270. Outside
Outside Business Activities 23. Outside Business Activities
of an Associated Person. Business Activities of an Associated
of an Associated Person.
Person.
General 9, Section 24. General 9, Section 3280. Private
Private Securities 24. Private Securities
Transactions of an Securities Transactions of an
Associated Person. Transactions of an Associated Person.
Associated Person.
General 9, Section 25. General 9, Section 3210. Accounts at
Transactions for or by 25. Transactions Other Broker-
Associated Persons. for or by Dealers and
Associated Persons. Financial
Institutions.
General 9, Section 26. General 9, Section 3220. Influencing or
Influencing or Rewarding 26. Influencing or Rewarding Employees
Employees of Others. Rewarding Employees of Others.
of Others.
General 9, Section 27. General 9, Section 4530. Reporting
Reporting Requirements . 27. Reporting Requirements.
Requirements .
General 9, Section 28. General 9, Section 2263. Arbitration
Disclosure to Associated 28. Disclosure to Disclosure to
Persons When Signing Form U- Associated Persons Associated Persons
4. When Signing Form U- When Signing or
4. Acknowledging Form
U-4.
General 9, Section 30. Books General 9, Section 4511. General
and Records, Section 43. 30. Books and Requirements.
General Requirements. Records, Section
43. General
Requirements.
General 9, Section 31. Use General 9, Section 2060. Use of
of Information Obtained in 31. Use of Information
Fiduciary Capacity. Information Obtained in
Obtained in Fiduciary Capacity.
Fiduciary Capacity.
General 9, Section 37. Anti- General 9, Section 3310. Anti-Money
Money Laundering Compliance 37. Anti-Money Laundering
Program. Laundering Compliance Program.
Compliance Program.
General 9, Section 39. General 9, Section 4360. Fidelity
Fidelity Bonds. 39. Fidelity Bonds. Bonds.
[General 9, Section 30. General 9, Section 4513. Records of
Books and Records, (d) 44. Records of Written Customer
Record of Written Written Customer Complaints.
Complaints; (e) Complaints.
``Complaint'' Defined]
General 9, Section 44.
Records of Written Customer
Complaints.
[General 9, Section 30. General 9, Section 4512. Customer
Books and Records, (b) 45. Customer Account
Customer Account Account Information. Information.
Information] General 9,
Section 45. Customer
Account Information.
[General 9, Section 30. General 9, Section 4514. Authorization
Books and Records, (g) 46. Authorization Records for
Negotiable Instruments Records for Negotiable
Drawn From A Customer's Negotiable Instruments Drawn
Account] General 9, Section Instruments Drawn From a Customer's
46. Authorization Records From a Customer's Account.
for Negotiable Instruments Account.
Drawn From a Customer's
Account.
[General 9, Section 30. General 9, Section 4515. Approval and
Books and Records, (j) 47. Approval and Documentation of
Changes in Account Name or Documentation of Changes in Account
Designation] General 9, Changes in Account Name or
Section 47. Approval and Name or Designation. Designation.
Documentation of Changes in
Account Name or Designation.
General 9, Section 49. General 9, Section 5230. Payments
Payments Involving 49. Payments Involving
Publications that Influence Involving Publications that
the Market Price of a Publications that Influence the
Security. Influence the Market Price of a
Market Price of a Security.
Security.
General 9, Section 50. General 9, Section 1021. Foreign
Foreign Members . 50. Foreign Members Members.
.
General 9, Section 51. General 9, Section 2241. Research
Research Analysts. 51. Research Analysts and
Analyst. Research Reports.
General 9, Section 71. General 9, Section 4570. Custodian of
Custodian of Books and 71. Custodian of Books and Record,
Records. Books and Records. (a) Designation of
Custodian.
Equity 2, Section 5(e). Equity 2, Section FINRA Rule 6240.
Locked and Crossed Markets. 5(e). Locked and Prohibition from
Crossed Markets. Locking or Crossing
Quotations in NMS
Stocks.**
Equity 9, Section 1 Equity 9, Section 1. 5330. Adjustment of
Adjustment of Open Orders. Adjustment of Open Orders.
Orders.
[[Page 58826]]
Equity 9, Section 3. Equity 9, Section 3. 5210. Publication of
Publication of Transactions Publication of Transactions and
and Quotations. Transactions and Quotations.
Quotations.
Equity 9, Section 10. Prompt Equity 9, Section 11860(a)(4)(A).
Receipt and Delivery of 10. Prompt Receipt Purchases.
Securities. and Delivery of
Securities.
Equity 9, Section 11. Order Equity 9, Section 5290. Order Entry
Entry and Execution 11. Order Entry and and Execution
Practices . Execution Practices Practices.
.
Equity 10, Section 1. Direct Equity 10, Section 2310. Direct
Participation Programs. 1. Direct Participation
Participation Programs.
Programs.
Equity 10, Section 2. Equity 10, Section 2341. Investment
Investment Company 2. Investment Company Securities.
Securities. Company Securities.
[2841. General] Equity 10, Equity 10, Section 2351(a). General
Section 3(a) Trading in 3(a). [General] Provisions
Index Warrants, Currency Trading in Index Applicable to
Index Warrants, and Warrants, Currency Trading in Index
Currency Warrants. Index Warrants, and Warrants, Currency
Currency Warrants. Index Warrants and
Currency Warrants.
Equity 10, Section 4 Equity 10, Section 4 2357. Position and
Position Limits; 5 Exercise Position Limits; 5 Exercise Limits;
Limits; and 7 Liquidation Exercise Limits; Liquidations.
of Index Warrant Positions. and 7 Liquidation
of Index Warrant
Positions.
Options 6E, Section 1. Options 6E, Section 4511(a). General
Maintenance, Retention and 1. Maintenance, Requirements.
Furnishing of Books, Retention and
Records and Other Furnishing of
Information . Books, Records and
Other Information .
Options 9, Section 9. Options 9, Section Section 15(g) of the
Prevention of the Misuse of 9. Prevention of Securities Exchange
Material Nonpublic the Misuse of Act of 1934, and
Information . Material Nonpublic 3110(b)(1), (d).
Information . Supervision.
Options 9, Section 10. Options 9, Section 4530(a)(1)(A) and
Disciplinary Action by 10. Disciplinary (2). Reporting
Other Organizations . Action by Other Requirements; FINRA
Organizations . By-Laws, Article V,
Section 2(c); and
FINRA By-Laws,
Article V, Section
3.
Options 10, Section 12. Options 10, Section SEA Rule 17a-5 [of
Statements of Financial 12. Statements of the Securities
Condition to Public Financial Condition Exchange Act of
Customers. to Public Customers. 1934].
Options 10, Section 19. Options 10, Section 11870. Customer
Transfer of Accounts. 19. Transfer of Account Transfer
Accounts. Contracts.
Options 10 Section 23. Options 10 Section 3230. Telemarketing.
Telephone Solicitation. 23. Telephone
Solicitation.
Equity 9, Section 15. N/A................. 2353. Suitability.
Suitability.
Equity 9, Section 16. N/A................. 2354. Discretionary
Discretionary Accounts. Accounts.
Equity 9, Section 17. N/A................. 2355. Supervision of
Supervision of Accounts. Accounts.
Equity 9, Section 18. N/A................. 2356. Customer
Customer Complaints. Complaints.
Equity 9, Section 19. N/A................. 2357. Communications
Communications with the with the Public and
Public and Customers Customers
Concerning Index Warrants, Concerning Index
Currency Index Warrants, Warrants, Currency
and Currency Warrants. Index Warrants and
Currency Warrants.
Equity 9, Section 20. N/A................. 2358. Maintenance of
Maintenance of Records. Records.
------------------------------------------------------------------------
\1\ FINRA shall only have Regulatory Responsibilities regarding BX
General 4, Section 1220 to the extent that BX recognizes the same
categories of limited principal and representative registration as the
BX Rule, by incorporating Nasdaq General 4, Section 1220, does not
recognize registration related to investment banking, research,
government securities, investment company and variable contracts
products, direct participation programs, private securities offerings,
and operations professional.
\2\ FINRA shall only have Regulatory Responsibilities regarding Nasdaq
General 4, Section 1220 to the extent that Nasdaq recognizes the same
categories of limited principal and representative registration as
Nasdaq General 4, Section 1220, does not recognize registration
related to investment banking, research, government securities,
investment company and variable contracts products, direct
participation programs, private securities offerings, and operations
professional.
\3\ FINRA Rule 1240.01 allows for eligible persons to make their
election to participate in the continuing education program under Rule
1240(c) either (1) between January 31, 2022, and March 15, 2022; or
(2) between March 15, 2023, and December 31, 2023. In contrast,
Supplementary Material .01 of Nasdaq and BX General 4, Section 1, Rule
1240 allows for eligible persons to make their election to participate
in the continuing education program under Nasdaq and BX General 4,
Section 1(c) either (1) by March 15, 2022, or (2) between July 6,
2023, and December 31, 2023. Therefore, FINRA will not accept
Regulatory Responsibilities for elections made under Supplementary
Material .01 of Nasdaq or BX General 4, Section 1, Rule 1240 between
March 16, 2023, and July 5, 2023.
The following provisions are covered by the Agreement between the
Parties:
<bullet> SEC '34 Act Section 28(e)--Effect on Existing Law
<bullet> [SEC '34 Act] SEA Rule 10b-10--Confirmation of Transactions
<bullet> SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements**
<bullet> SEA Rule 201 of Regulation SHO--Circuit Breaker**
<bullet> [SEC '34 Act] SEA Rule 203 of Regulation SHO--Borrowing and
Delivery Requirements
<bullet> SEA Rule 204 of Regulation SHO--Close-Out Requirements**
<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> [SEC '34 Act] SEA Rule 606 of Regulation NMS--Disclosure of
Order Routing Information**
<bullet> [SEC '34 Act Rule 607 of Regulation NMS Customer Account
Statements]
<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*
<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*
<bullet> SEA Rule 14e-4--Prohibited Transactions in Connection with
Partial Tender Offers[\-\]
<bullet> SEA Rule 14e-4(a)(1)(ii)(D)--Prohibited Transactions in
Connection with Partial Tender Offers (with a focus on the
standardized call option provision)**
[[caret] FINRA shall perform surveillance, investigation, and
Enforcement Responsibilities for SEA Rule 14e-4(a)(1)(ii)(D).]
[[Page 58827]]
**In addition to performing examinations and Enforcement
Responsibilities as provided in this Agreement for the double star
rules, FINRA shall also perform the surveillance and investigation
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 among FINRA, Nasdaq and BX.
*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 Cboe BZX Exchange,
Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, 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.
[caret] FINRA shall perform the surveillance and investigation
responsibilities for these rules. The examination responsibility for
these rules is covered by a separate 17d-2 Agreement by and among Cboe
BZX Exchange, Inc., Cboe BYX Exchange, Inc., BOX Exchange LLC, Cboe
Exchange, Inc., Cboe C2 Exchange, Inc., NYSE Chicago, Inc., Cboe EDGA
Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry
Regulatory Authority, Inc., MEMX LLC, Nasdaq ISE, LLC, Nasdaq GEMX,
LLC, Nasdaq MRX, LLC, Investors Exchange LLC, Miami International
Securities Exchange, LLC, MIAX PEARL, LLC, MIAX Emerald, LLC, The
Nasdaq Stock Market LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, NYSE
National, Inc., New York Stock Exchange LLC, NYSE American LLC, NYSE
Arca, Inc. and Long-Term Stock Exchange, Inc. as approved by the SEC
on June 10, 2020 concerning covered Regulation NMS and Consolidated
Audit Trail Rules, as may be amended from time to time.
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#740601181159171b1919111a0007340711175a131b02"><span class="__cf_email__" data-cfemail="b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7">[email protected]</span></a>. Please include
File Number 4-575 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 4-575. 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 (<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, Nasdaq, and BX. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to File No. 4-575 and should be submitted on
or before August 9, 2024.
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 Nasdaq, and FINRA and BX. Accordingly, the proposed
Amended Plan promotes efficiency by reducing costs to Common Members.
Furthermore, because FINRA, Nasdaq, and BX will coordinate their
regulatory functions in accordance with the Amended Plan, the Amended
Plan should promote investor protection.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78q(d).
\14\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------
The Commission notes that, under the Amended Plan, FINRA, Nasdaq,
and BX have allocated regulatory responsibility for those Nasdaq and BX
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, Nasdaq and BX will review the
Certification at least annually, or more frequently if required by
changes in either the rules of Nasdaq, BX or FINRA, and, if necessary,
submit to FINRA an updated list of Common Rules to add Nasdaq or BX
rules not included on the then-current list of Common Rules that are
substantially similar to FINRA rules; delete Nasdaq or BX 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 Nasdaq and BX 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. 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.
---------------------------------------------------------------------------
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 Nasdaq and BX rules that are
substantially similar to the rules of FINRA for Common Members of BX
and FINRA, and Nasdaq 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 Nasdaq or BX rules in the
Certification in conformance with the definition of Common Rules
provided in the Amended Plan. However, should the
[[Page 58828]]
Parties decide to add a Nasdaq or BX rule to the Certification that is
not substantially similar to a FINRA rule; delete a Nasdaq or BX rule
from the Certification that is substantially similar to a FINRA rule;
or leave in the Certification a Nasdaq or BX 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.\16\
---------------------------------------------------------------------------
\16\ 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 Amended Plan is to: (i) update
the list of Common Rules; (ii) add surveillance and investigation
coverage for certain Common Rules specified in Exhibit 1 to the Amended
Plan; (iii) reflect that, for Router Members, FINRA will retain
regulatory responsibility for Nasdaq and BX rules that are not Common
Rules; and (iv) reflect that FINRA will not make referrals to Nasdaq
and BX for apparent violations of any Nasdaq or BX Rules by any Router
Member. By declaring it effective today, the Amended Plan can become
effective and be implemented without undue delay. 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.\17\ Furthermore, the Commission does not believe
that the amendment to the plan raises any new regulatory issues that
the Commission has not previously considered.
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\17\ See supra note 12 (citing to Securities Exchange Act
Release No. 93114).
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VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-575. 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. 4-575, between the FINRA, BX, and Nasdaq,
filed pursuant to Rule 17d-2 under the Act, hereby is approved and
declared effective.
It is further ordered that BX and Nasdaq are relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-575.
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\18\ 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15910 Filed 7-18-24; 8:45 am]
BILLING CODE 8011-01-P
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