Notice2024-30160
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Bylaws of the Exchange's Parent Corporation To Add Provisions Permitting the Board of Directors, in Its Sole Discretion, To Invite One or More Observers To Attend and Participate in Board Meetings in a Non-Voting Capacity and to Make a Conforming Change to the Bylaws
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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
December 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 244 (Thursday, December 19, 2024)</title>
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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103904-103907]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30160]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101905; File No. SR-IEX-2024-28]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
Bylaws of the Exchange's Parent Corporation To Add Provisions
Permitting the Board of Directors, in Its Sole Discretion, To Invite
One or More Observers To Attend and Participate in Board Meetings in a
Non-Voting Capacity and to Make a Conforming Change to the Bylaws
December 13, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 3, 2025, the Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 103905]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\3\
and Rule 19b-4 thereunder,\4\ the Exchange is filing with the
Commission a proposed rule change to amend the bylaws (the ``Bylaws'')
of IEX Group, Inc. (``Group''), the Exchange's parent corporation, to
add provisions permitting the Group Board of Directors (the ``Group
Board''), in its sole discretion, to invite one or more observers to
attend and participate in Group Board meetings in a non-voting capacity
(``Board Observers'') and to make a conforming change to the Bylaws.
The Exchange has designated this proposal as non-controversial and
provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\5\
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\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ 17 CFR 240.19b-4(f)(6)(iii).
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The text of the proposed rule change is available at the Exchange's
website at <a href="http://www.iextrading.com">www.iextrading.com</a>, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Group Bylaws \6\ to codify an
existing arrangement whereby the Group Board, at its sole discretion,
may invite Board Observers to attend meetings of the Group Board in a
non-voting capacity. The proposed amendment is intended to set forth
and delineate the rights, responsibilities and obligations of Board
Observers with respect to such meetings. The Exchange is also proposing
to make a non-substantive conforming change to the Group Bylaws, as
described below.
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\6\ Group governance documents, including the Group Bylaws, are
accessible on the Group website at <a href="https://www.iex.io/legal/governance">https://www.iex.io/legal/governance</a>. These documents are also accessible on the Exchange's
website at <a href="https://www.iexexchange.io/resources/regulation/governance">https://www.iexexchange.io/resources/regulation/governance</a>.
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The Exchange makes this proposal to codify an existing arrangement
in which the Group Board may, from time to time, invite certain
parties, including representatives of some Group shareholders, to
attend Group Board meetings as non-voting ``Board Observers.'' At Group
Board meetings, the Board Observers are permitted to contribute to any
discussions, in particular discussions about which they have relevant
expertise. The Group Board, as appropriate, exercises its discretionary
right to exclude these Board Observers from applicable Group Board
materials, meetings or specific portions of meetings if the
conversation involves attorney-client privileged matters, or matters
that are confidential, proprietary, or otherwise concern information
deemed by the Group Board to be inappropriate to share with the Board
Observers. IEX notes that it is not novel to allow non-voting persons
to attend board meetings as observers. For example, BOX Exchange allows
observers to attend its board meetings, and MEMX allows certain
shareholders to appoint non-voting board observers who may participate
in its board meetings.\7\
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\7\ See Section 5.02 of the Bylaws of BOX Exchange LLC,
available at <a href="https://boxexchange.com/assets/BOX-Exchange-Bylaws-221004.pdf">https://boxexchange.com/assets/BOX-Exchange-Bylaws-221004.pdf</a>; Section 8.13 of Seventh Amended and Restated LLC
Agreement of MEMX Holdings LLC (March 17, 2023), available at
<a href="https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-SeventhAmendedandRestatedLLCA-3.17.23.pdf">https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-SeventhAmendedandRestatedLLCA-3.17.23.pdf</a>.
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IEX proposes to codify this arrangement in order to delineate the
rights, responsibilities and obligations of Board Observers.
Specifically, IEX proposes to amend Article IV, Section 26 as follows:
<bullet> Add ``(a) General'' to the beginning of the existing
text to reflect the addition of the proposed new paragraph (b).
<bullet> Add paragraph (b) which would read in full: ``(b) Board
Observers. The Board of Directors may, from time to time and, in its
sole discretion, invite one or more observers to attend and
participate in meetings of the Board of Directors in a non-voting
capacity (``Board Observers''). Board Observers shall hold in
confidence any and all information so provided. Board Observers may
be excluded from access to any material or meeting or portion
thereof if the Board of Directors determines in good faith, upon the
advice of counsel, that such exclusion is reasonably necessary to
preserve the attorney-client privilege, to protect highly
confidential proprietary information, or for other similar reasons,
including, but not limited to, sensitive regulatory information,
regulatory independence or other similar regulatory matters relating
to Investors' Exchange LLC or otherwise. The Board of Directors
shall, as promptly as practicable, take such actions as are
necessary and appropriate to exclude any Board Observer upon the
Board of Directors becoming aware that any of the bad actor
disqualifying events described in Rule 506(d)(1)(i)-(viii) of the
Securities Act of 1933, or any of the statutory disqualifications
described in Section 3(a)(39) of the 1934 Act apply to such Board
Observer, and such exclusion may be lifted in the event the Board of
Directors determines that the applicable bad actor or statutory
disqualifications no longer apply to such Board Observer. For so
long as the Corporation shall control Investors' Exchange LLC, each
Board Observer shall, in connection with such Board Observer's
attendance and participation in meetings of the Board of Directors
be subject to Article VII of these Bylaws, and in furtherance of the
applicability of Article VII to such Board Observers, the Board of
Directors may exclude such Board Observer from applicable materials
or meetings or portions thereof. Notwithstanding the preceding
sentence or anything set forth in these Bylaws to the contrary,
nothing in these Bylaws or the applicability of Article VII shall be
interpreted to expand the role or position of a Board Observer
beyond the scope of attending and participating in meetings at the
invitation of the Board of Directors or to otherwise give Board
Observers any right or authority to take any action on behalf of the
Corporation. No present or past stockholder, employee, beneficiary,
agent, customer, creditor, regulatory authority (or member thereof)
or other person or entity shall have any rights against any Board
Observer under this Section 26(b).
As set forth in the proposed new paragraph (b) of Section 26 of the
Group Bylaws, the Group Board may, from time to time and in its sole
discretion, invite one or more Board Observers to attend and
participate in meetings of the Group Board in a non-voting capacity.
Board Observers shall hold in confidence any and all information
provided to them at Group Board meetings. Additionally, Board Observers
may be excluded from access to any material or meeting or portion
thereof if the Group Board determines in good faith, upon the advice of
counsel, that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential proprietary
information, or for other similar reasons, including, but not limited
to, sensitive regulatory information, regulatory independence or other
similar regulatory matters relating to the Exchange or otherwise.
The proposed amendment further provides that the Group Board shall,
as promptly as practicable, take such actions as are necessary and
appropriate to exclude any Board Observer upon the Group Board becoming
aware that any
[[Page 103906]]
of the ``bad actor'' disqualifying events described in Rule
506(d)(1)(i)-(viii) under the Securities Act of 1933,\8\ or any of the
statutory disqualifications described in Section 3(a)(39) of the Act
\9\ apply to such Board Observer, with the additional provision that
such exclusion may be lifted in the event the Group Board determines
that the applicable bad actor events or statutory disqualification no
longer apply to such Board Observer.
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\8\ 17 CFR 230.506(d)(i-viii).
\9\ 15 U.S.C. 78c(a)(39).
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As proposed, the amended Group Bylaws further provide that, for so
long as Group shall control the Exchange, each Board Observer shall, in
connection with such Board Observer's attendance and participation in
meetings of the Group Board, be subject to Article VII of the Group
Bylaws \10\ and, in furtherance of the applicability of Article VII to
such Board Observers, the Group Board may exclude such Board Observer
from applicable materials or meetings or portions thereof.\11\ However,
notwithstanding the foregoing provision or anything set forth in the
Group Bylaws to the contrary, nothing in the Group Bylaws or the
applicability of Article VII shall be interpreted to expand the role or
position of a Board Observer beyond the scope of attending and
participating in meetings at the invitation of the Group Board, or to
otherwise give Board Observers any right or authority to take any
action on behalf of Group.
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\10\ Article VII of the Group Bylaws, ``SRO Functions of
Investors' Exchange LLC,'' addresses the obligations of Group and
the Group Board with respect to the regulatory independence of the
Exchange in its capacity as a self-regulatory organization pursuant
to Section 6 of the Act, 15 U.S.C. 78f. These include Section 34
(Non-Interference), pertaining to the preservation of the
independence of the Exchange's self-regulatory function; Section 35
(Confidentiality), requiring that Group maintain the confidentiality
of all information in its possession pertaining to the Exchange's
self-regulatory functions; Section 36 (Books and Records), requiring
Group books and records to be maintained within the United States
and deeming any of its books and records to be records of the
Exchange to the extent they pertain to the Exchange's self-
regulatory functions and subject to Commission oversight; Section 37
(Cooperation with the Securities and Exchange Commission); Section
38 (Consent to Jurisdicton) requiring consent to the jurisdiction of
the federal courts, the Commission and the Exchange in any action of
proceeding involving the activities of the Exchange under the
federal securities laws, rules and regulations; and Section 39
(Consent to Application), requiring Group to take reasonable steps
to cause its officers, directors, employees and agents to consent in
writing to the applicability of Article VII of the Bylaws to their
activities related to the Exchange.
\11\ IEX notes that BOX and MEMX similarly require their board
observers to meet the same confidentiality requirements that are
imposed upon its board members. See supra note 8.
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Finally, the proposed amendment states that no present or past
stockholder, employee, beneficiary, agent, customer, creditor,
regulatory authority (or member thereof) or other person or entity
shall have any rights against any Board Observer under proposed Section
26(b). This provision is intended to clarify that the proposed
amendments do not expand the role or position of a Board Observer
beyond the scope of attending and participating in meetings and does
not permit present or past stockholders, employees, beneficiaries,
agents, customers, creditors, regulatory authorities (or members
thereof) or other persons or entities to bring claims against Board
Observers.
The Exchange is also proposing to make a non-substantive conforming
change to the Group Bylaws to: (i) rename the document by adding
``Amended and Restated'' to the header and (ii) delete the words
``Adopted November 30, 2015'' from the header and replace them with the
words ``Amended December 3, 2024''.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(1) of the Act in particular,\13\ in that it
continues to assure that the Exchange is so organized as to have the
capacity to be able to carry out the purposes of the Act and to comply,
and to enforce compliance by its Exchange members and persons
associated with its Exchange members, with the provisions of the
Exchange Act, the rules and regulations thereunder, and the rules of
the Exchange.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(1).
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The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(5) of the Act \14\ in that they are
intended to, inter alia, promote just and equitable principles of
trade, foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors and the public interest.
Additionally, the proposed amendment is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\14\ 15 U.S.C. 78f(b)(5).
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As noted in the Purpose section, the proposed amendment to the
Group Bylaws is intended to foster clarity and transparency with
respect to Board Observers attending Group Board meetings at the Group
Board's invitation and sole discretion, and to delineate the roles,
responsibilities, and obligations of Board Observers with respect to
such meetings. The proposed amendment contains detailed provisions to
that effect, and also provides for instances where Board Observers'
participation in a particular meeting may be limited, or disallowed, as
well as exclusion of an individual subject to a ``bad actor'' or
statutory disqualification as described in the Purpose section. The
Exchange believes that the inclusion of Board Observers, at the Group
Board's sole discretion and at its invitation, provides a valuable
opportunity for other constituencies to participate in the work of the
Group Board in a manner that safeguards the Exchange's regulatory
independence and its operation as a self-regulatory organization. The
Exchange believes that the proposed amendments thereby fulfill the
goals of Section 6(b) of the Act \15\ in that they are designed to
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and national market
system, and in general operate to protect investors and the public
interest.
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\15\ 15 U.S.C. 78f(b).
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Additionally, as noted in the Purpose section, allowing board
observers to attend holding company board meetings is not novel.\16\
Thus, this proposed rule change does not raise any new or novel issues
that have not already been considered by the Commission.
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\16\ See supra note 8.
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Finally, IEX believes that the proposed non-substantive conforming
changes to the header of the Bylaws further the purposes of the Act
because they provide greater clarity and consistency to the Bylaws
thereby reducing the potential for confusion by market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The proposed
amendments relate to the rights, responsibilities and obligations of
Board Observers at Group Board meetings and, as such, are concerned
solely with the corporate governance of Group, the Exchange's parent
corporation, and do not present any issues that impact competition.
[[Page 103907]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \17\ of the Act and Rule 19b-4(f)(6) \18\
thereunder. Because the proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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The Exchange believes that the proposed rule change would not
adversely affect investors or the public interest. In fact, the
Exchange believes that the proposed amendments to the Group Bylaws
operate to enhance investor protection and the public interest by
providing clarity and transparency into the roles, responsibilities and
obligations of Board Observers. The proposed amendments thus fulfill
the purposes of Section 6(b)(1) of the Act, which requires that ``. . .
[s]uch exchange is so organized and has the capacity to be able to
carry out the purposes of this chapter and to comply, and (subject to
any rule or order of the Commission pursuant to section 78q(d) or
78s(g)(2) of this title) to enforce compliance by its members and
persons associated with its members, with the provisions of this
chapter, the rules and regulations thereunder, and the rules of the
exchange.'' Additionally, as discussed in the Purpose and Statutory
Basis sections, this rule change proposal is not novel; at least two
other exchanges, BOX and MEMX, also allow non-voting board observers to
participate in board meetings, subject to similar confidentiality
requirements to IEX's proposal.
The Exchange further believes that the proposed rule change would
not impose a burden on competition because it is not intended to
address competitive issues but rather is concerned solely with the
corporate governance of Group, the Exchange's parent corporation.
Accordingly, for the foregoing reasons, this rule filing qualifies for
immediate effectiveness as a ``non-controversial'' rule change under
paragraph (f)(6) of Rule 19b-4.
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6614130a034b05090b0b030812152615030548010910"><span class="__cf_email__" data-cfemail="b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2">[email protected]</span></a>. Please include
file number SR-IEX-2024-28 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 SR-IEX-2024-28. 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change 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 filing also will be available
for inspection and copying at the principal office of the Exchange. 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 number SR-IEX-2024-28, and should
be submitted on or before January 9, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30160 Filed 12-18-24; 8:45 am]
BILLING CODE 8011-01-P
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