Notice2026-09254
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rule Regarding Members and Associated Persons of Members Who Are or Become Subject to a Statutory Disqualification
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
May 11, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 90 (Monday, May 11, 2026)</title>
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[Federal Register Volume 91, Number 90 (Monday, May 11, 2026)]
[Notices]
[Pages 25633-25638]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09254]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105379; File No. SR-CboeBZX-2026-038]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Rule Regarding Members and Associated Persons of Members Who Are or
Become Subject to a Statutory Disqualification
May 6, 2026.
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 April 28, 2026, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
amend its rule regarding Members and associated persons of Members who
are or become subject to a statutory disqualification. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/equities/regulation/rule_filings/bzx/">https://www.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
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 Exchange 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 Exchange 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 is proposing to amend Exchange Rule 2.5, the
Exchange's eligibility proceedings section regarding statutory
disqualifications, and adopt Rule 2.13 to conform (with certain
exceptions) to rules of the Financial Industry Regulatory Authority,
Inc. (``FINRA'') \3\ and to industry standard rules.\4\ The Exchange's
proposal also includes the proposed Statutory Disqualification Circular
(``SD Circular'') that outlines the applicable eligibility procedures.
The amended rules would incorporate by reference the procedures in the
SD Circular. As further detailed in the SD Circular, the need for a
Member to file an application with the Exchange for approval,
notwithstanding the disqualification would depend on (i) the type of
disqualification; (ii) the date of disqualification; and (iii) whether
the firm or individual is seeking admission, readmission or
continuation in the securities industry.
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\3\ See Securities Exchange Act Release No. 59586 (March 17,
2009), 74 FR 12166 (March 23, 2009) (SR-FINRA-2008-045); Securities
Exchange Act Release No. 59722 (April 7, 2009), (SR-FINRA-2009-022).
\4\ See, e.g., NYSE Rules 9520-9550 or IEX Rule Series 9.520.
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By way of background, Section 3(a)(39) of the Act defines the term
``statutory disqualification'' and the circumstances that can cause a
person (either a Member, or a person associated with a Member) to be
subject to a statutory disqualification.\5\ Absent relief, a statutory
disqualification would preclude a Member or person associated with a
Member from certain activities, including membership in a self-
regulatory organization (``SRO'').
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\5\ 15 U.S.C. 78c(a)(39).
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There is, however, a well-established process through which a
Member (or a person associated with a broker-dealer) may continue to
operate in the securities industry (and either become a Member of, or
continue as a Member of, one or more SROs) despite being subject to a
statutory disqualification.\6\
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\6\ See FINRA Regulatory Notice 09-19 (``Amendments to FINRA
Rule 9520 Series to Establish Procedures Applicable to Firms and
Associated Persons Subject to Certain Statutory
Disqualifications'').
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In particular, SEC Rule 19h-1 \7\ describes several ways an SRO may
seek relief for a member (or prospective member) that is subject to a
statutory disqualification, including whether an
[[Page 25634]]
SRO must file a notice with the Commission in order to allow the
disqualified firm to become or continue as a member with the SRO (a
``19h-1 Notice'').
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\7\ 17 CFR 240.19h-1.
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The existing Rule 2.5(b) provides that if a Member or person
associated with a Member that becomes subject to a statutory
disqualification under the Exchange Act wants to continue as a Member
of the Exchange or in association with a Member, the Member or
associated person must, within 30 days of becoming subject to a
statutory disqualification, submit a request to the Exchange seeking to
continue as a Member or in association with a Member notwithstanding
the statutory disqualification. Failure to timely submit such a request
may be taken into consideration by the Exchange in determining whether
the Exchange may determine not to permit a person to become a Member or
person associated with a Member or person associated with a Member in
any capacity on the Exchange pursuant to Rule 2.5(a). The existing Rule
2.5(c) provides that the procedural elements for making this request
and the Exchange's review of the request will occur pursuant to Chapter
X of the Exchange's Rulebook.
Currently, FINRA processes statutory disqualification applications
on behalf of the Exchange.\8\ Notably, having different rules has led
to outcomes where FINRA is not required to process an application and/
or an applicable 19h-1 Notice under its rules, but the Exchange (or
FINRA, acting on the Exchange's behalf) is required under its existing
Rule 2.5. As such, the Exchange proposes to, in large part, conform to
FINRA Rule Series 9520 Eligibility Proceedings in order to prevent
different outcomes when FINRA is reviewing potential statutory
disqualifications on behalf of the Exchange. The Exchange also notes
that its existing Rule 2.5 is an outlier when compared to industry
standards, as other exchanges have adopted rules similar to FINRA's.
This may lead to inconsistent results when a firm is a member of
multiple exchanges and/or FINRA.\9\
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\8\ FINRA processes these applications on behalf of the Exchange
pursuant to a Regulatory Services Agreement (``RSA'') between the
Exchange and FINRA.
\9\ See, e.g., NYSE Rule 9520, IEX Rule 9.520 and Nasdaq Rule
9520.
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To aid in further conformity between the Exchange and FINRA, the
Exchange further proposes that it shall also rely on the no-action
letter issued to FINRA in 2009 that provides interpretive guidance
regarding (i) the effect of certain time-limited bars or license
revocations, (ii) the effect of bars by State securities commissions
that are based solely upon a disciplinary action taken by an SRO, (iii)
the notice requirements for willful violations of the Municipal
Securities Rulemaking Board and aiding and abetting violations, and
(iv) enforcement action to the Commission under Exchange Action
15A(g)(2) or Rule 19h-1(a) if an SRO does not file a notice with the
Commission for any person subject to a statutory disqualification under
Section 3(a)(39) that an SRO is proposing to admit or continue in
membership or association with a member under specific
circumstances.\10\ Due to FINRA's No-Action Letter, there have been
instances where review of the same circumstances had resulted in
different outcomes regarding when a notice is required pursuant to Rule
19h-1.\11\ Specifically, the No-Action Letter makes clear certain
instances where they will grant no-action relief if FINRA does not file
a 19h-1 Notice with the Commission. For example, the Commission
explicitly grants no-action relief if FINRA does not file a 19h-1
Notice if the subject person is subject to a statutory disqualification
solely due to a finding of a willful violation of the CEA or the rules
or regulations thereunder, provided that the sanctions are no longer in
effect. The FINRA No-Action Letter ultimately requires fewer 19h-1
Notices to be filed.
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\10\ See Financial Industry Regulatory Authority, Inc., SEC No-
Action Letter, 2009 SEC No-Act. (March 17, 2009) (``FINRA No-Action
Letter'').
\11\ For example, the FINRA No-Action Letter grants FINRA relief
from notice requirements regarding a member's continued association
with a disqualified person when the statutory disqualification is
based on willful violations of the CEA. Because of the relief
granted by the No Action Letter and pursuant to Regulatory Notice
09-19, FINRA would not require a member to file an application.
However, the Exchange's current Rule 2.5 does not offer relief from
application requirements for the firm to continue its association
with an associated person, notwithstanding their disqualification.
Relief is also not provided under the Exchange Act Rule
19hndash;1(a)(3)(iii), since the disqualifying event is a finding by
the CFTC of a willful violation of the CEA and not a finding by the
SEC or SRO of a willful violation of the Exchange Act, among others.
As such, a notice pursuant to Rule 19h-1 for the Exchange is
required, but is not required for FINRA.
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The Exchanges notes that other exchanges, such as The Nasdaq Stock
Market LLC (``Nasdaq''), Investors Exchange (IEX) and New York Stock
Exchange (``NYSE''), have already adopted similar changes to more
materially align their rules with FINRA's.
Proposed Rule 2.13 would govern eligibility proceedings for persons
subject to statutory disqualifications.\12\ Proposed Rule 2.13(a) would
add certain definitions relating to eligibility proceedings that are
not currently part of the Exchange's rules, including ``Application,''
``disqualified Member,'' ``disqualified person,'' ``sponsoring
Member,'' and ``Exchange staff.'' The Exchange notes that this is
substantially similar to FINRA's Rule 9521, with the following
exceptions: (i) ``member'' has been replaced with ``Member''; (ii)
references to FINRA By Laws have been replaced with references to the
Exchange Act and Exchange rules (where applicable); (iii) a new term of
Exchange staff has been added to account for the relationship between
the Exchange and FINRA, where the Exchange has a regulatory services
agreement in place with FINRA and FINRA may act within the bounds of
the agreed upon services; (iv) the definition of a disqualified Member
differs; and (v) proposed Rule 2.13(a)(1) does not include reference to
FINRA By Laws.
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\12\ The Exchange notes that it is also proposing to amend the
text of Rule 2.5(b) to specify that the procedures set forth under
the proposed Rule 2.13 shall be followed if a Member or person
associated with a Member becomes subject to a statutory
disqualification.
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The Exchange proposes to define ``disqualified Member'' as a Member
that is or becomes subject to a disqualification under Section 3(a)(39)
of the Exchange Act. This differs from the definition in FINRA Rule
9521(b)(2), which includes various other industry participants in
addition to existing members in the definition. The Exchange limited
its definition to Members, as the Exchange has jurisdiction over
Members.\13\
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\13\ The Exchange notes the definition excludes Member
applicants (the Exchange understands FINRA's definition also does
not apply to FINRA member applicants), because the Exchange would
address a disqualification of a Member applicant as part of the
Member application process, and the Exchange would not file a 19h-1
Notice with the Commission for a Member applicant. The proposed rule
language, like FINRA's, indicates the provisions that are applicable
to a Member applicant. If the Exchange approves the Member
application of an applicant that is or becomes subject to a
disqualification, the firm would then be a Member that could take
advantage of the provisions of the proposed rule that apply to a
disqualified Member. The Exchange understands this is consistent
with FINRA's process with respect to member applicants that are or
become subject to a disqualification.
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Further, while the Exchange differs from FINRA in that it does not
include reference to FINRA By Laws or Exchange Rules under proposed
Rule 2.13(a)(1), the Exchange believes this language better suits the
intended purpose of this section. Specifically, proposed Rule 2.13
specifies procedures to be followed in the event of a statutory
disqualification as defined in Section 3(a)(39) of the Exchange Act.
FINRA's equivalent Rule 9521 states that the Rule 9520 Series sets
forth procedures for a person to become or remain
[[Page 25635]]
associated with a member, notwithstanding the existence of a statutory
disqualification as defined in Article III, Section 4 of the FINRA By-
Laws and for a current member or person associated with a member to
obtain relief from the eligibility or qualification requirements of the
FINRA By-Laws and FINRA rules. Such actions hereinafter are referred to
as `eligibility proceedings.' '' While the Exchange only references
statutory disqualification events in its equivalent rule, for its
purposes, it believes it is more fitting as different procedures would
be followed in the event a Member, or Member applicant is ineligible
for other reasons.\14\
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\14\ See, e.g., Rule 2.7, which permits the Exchange to revoke a
person's membership or association if the Exchange has reason to
believe that such a Member or associated person fails to meet all
the qualifications set forth in the Exchange Rules.. The Exchange
understands FINRA similarly follows procedures set forth in other
applicable rules (such as FINRA Rule 9555) in the event a FINRA
member or member applicant is ineligible for other reasons.
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Proposed Rule 2.13(b) is largely mirrored off of FINRA's Rule 9522;
however, there were adjustments made to account for updating rule
references, adjusting ``member'' to ``Member'', and replacing the
``National Adjudicatory Council'' with the ``Appeals Committee.''
First, the proposed Rules 2.13(b)(1) \15\ and 2.13(b)(2) would govern
the initiation of an eligibility proceeding by the Exchange and the
obligation for a Member to file an application to initiate an
eligibility proceeding if it or a Member's associated person \16\ has
been subject to certain disqualifications.
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\15\ The Exchange notes that for instances in which Exchange
staff will not issue written notice to Members or applicants for
membership with respect to disqualifications arising solely from
findings or orders specified in Section 15(b)(4)(D), (E), or (H) of
the Exchange Act or arising under Section 3(a)(39)(E) of the
Exchange Act (when a Member or application for membership under
Exchange Rules is not required to file an application pursuant to
the SD Regulatory Circular), information regarding the disqualifying
event and the resolution of any fines, sanctions, or undertakings
related to the disqualification are recorded in WebCRD.
\16\ Under proposed Rule 2.13(b)(1)(C), if a Member fails to
file the application or, where appropriate, the written request for
relief, within the 10-day period, the registration of the
disqualified person shall be revoked and the sponsoring Member must
promptly terminate association with the disqualified person.
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Next, Rule 2.13(b)(3) sets out the process for a withdrawal of an
application and Rule 2.13(b)(4) sets out prohibitions against ex parte
communications when Exchange staff has initiated the eligibility
proceedings. The Exchange notes that its rule text does differ from
FINRA's; however, this is due to FINRA having a panel that reviews the
matter prior to an appeal and thus, ex parte communication concerns
arise before appeals. Under the Exchange's proposed rule, with Exchange
staff making determinations, a firm will need to talk to the Exchange
and FINRA while their application is pending. Thus, the Exchange
proposes to note that the proposed ex parte communications provision
shall become effective only when an appeal is initiated. Further, under
the proposed Rule 2.13(b)(5), the Exchange could approve a written
request for relief from the eligibility requirements under certain
circumstances. Specifically, Rule 2.13(b)(5)(A) describes certain
circumstances of which a matter may be approved by the Exchange staff
without the filing of an application. This provision is the same as the
corresponding provisions of FINRA, Nasdaq, and IEX, with one exception.
Specifically, under proposed Rule 2.13(b)(5)(A)(iii), Exchange staff
may approve a written request for relief without the filing of an
application if a disqualified Member or sponsoring Member is a Member
or seeking to become a Member is a member of both the Exchange and
another SRO and the other SRO intends to file a Notice under Exchange
Act Rule 19h-1 approving the membership continuance of the disqualified
Member or, in the case of a sponsoring Member, the proposed association
or continued associated of the disqualified person and Exchange staff
concurs with that determination. This proposed provision is the same as
that of Nasdaq, FINRA, and IEX, except it applies to those seeking to
become a Member in addition to Members, while the corresponding rules
of Nasdaq, FINRA, and IEX apply solely to members of those SROs.
However, other organizations have acknowledged this gap in their rules,
noting it would be their practice to apply this provision to
prospective members as well as members. Therefore, despite the
differences in the rule text of these other organizations, the Exchange
believes the outcome under its proposed rule would be the same as both
IEX and Nasdaq from a practical perspective.\17\
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\17\ See, e.g., Securities Exchange Act Release No. 101799
(November 29, 2024), 89 FR 96698 (December 5, 2024) (SR-IEX-2024-
26), where IEX states ``In the course of reviewing this membership
application, IEX identified that its rules do not specifically
address this situation, which has not previously occurred with
respect to IEX. Specifically, the Exchange believes that its rules
regarding the process by which a prospective Member that is subject
to a statutory disqualification can be approved for membership on
IEX notwithstanding the statutory disqualification could be enhanced
to provide additional clarity and more clearly align with the
processes set forth in Rule 19h-1 for a membership applicant that is
subject to a statutory disqualification.''
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Proposed Rule 2.13(b)(5)(B) covers matters that may be approved by
\18\ the Exchange staff after the filing of an application. Notably,
under proposed Rule 2.13(b)(5)(B) the Exchange staff may approve an
application with respect to disqualifications arising solely from
findings or orders specified in Section 15(b)(4)(D), (E), or (H) of the
Act or arising under Section 3(a)(39)(E) of the Act. Proposed Rule
2.13(b)(6) specifies the process for implementing an interim plan of
heightened supervision during the application process for a
disqualified person.
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\18\ The Exchange notes that approval of an application allows
for a Member's continued participation on the Exchange.
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Proposed Rules 2.13(b)(7) and 2.13(b)(8) cover the process for
determining that an application is substantially incomplete and the
consequences for not remedying an application in a timely manner.\19\
In the event an applicant fails to remedy an application under Rule
2.13(b)(8), Exchange staff will serve a written notice on the
sponsoring Member of its determination to reject the application and
the sponsoring Member must promptly terminate association with the
disqualified person. Under FINRA's Rule 9522, there is a reference to
FINRA's application fee and that FINRA shall refund the application
fee, less $1,000 which shall be retained by FINRA as a processing fee
The Exchange notes, however, that the Exchange has its own application
fee program reflected in its fee schedule that is distinct from
FINRA's. As a result, the Exchange proposes to not include this in its
proposed rule.
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\19\ Proposed Rule 2.13(b)(7) applies to applications that are
deemed substantially incomplete if they do not include information
related to an interim plan of heightened supervision. Plans of
heightened supervisions are issued solely for associated persons
(and not Members), and thus this provision applies solely to
associated persons.
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As further explained, proposed Rule 2.13(c) largely mirrors FINRA
Rule 9523, with technical changes to account for different defined
terms and functions across the SROs. This proposed rule would allow the
Exchange staff (handled by FINRA) to recommend a supervisory plan to
which the disqualified Member, sponsoring Member, and/or disqualified
person, as the case may be, may consent and by doing so, waive the
right to appeal if the plan is accepted and right to claim bias or
prejudgment, or prohibited ex parte communications. If such a
supervisory plan were rejected, proposed Rule 2.13(d) would allow a
request for review
[[Page 25636]]
by the applicant to the Appeals Committee and would provide that a
filing of an application for review would not stay the effectiveness of
final action by the Exchange unless the Commission otherwise ordered.
Proposed Rule 2.13(c) is covered under two parts: (i) to cover all
disqualification except those arising solely from findings or orders
specified in Section 15(b)(4)(D),(E), or (H) of the Exchange Act and
(ii) to cover disqualifications that arise solely from findings or
orders specified in Section 15(b)(4)(D), (E) or (H). The Exchange notes
that the latter (proposed Rule 2.13(c)(2)) is intended to cover events
where an application is required under the SD Circular, as under the
proposed rule, events arising from findings or order specified in
Section 15(b)(4)(D), (E) or (H) of the Exchange Act do not typically
require an application unless otherwise specified in the SD Circular.
The text of the proposed rule change is similar to that in FINRA's
counterpart rules, except for conforming and technical changes and
except as follows. First, under proposed Rule 2.13(c), if the
disqualified Member, sponsoring Member, and/or disqualified person
executed a letter consenting to a supervisory plan, it would be
submitted to the Exchange staff. Under FINRA's rule, the letter is
submitted to FINRA Office of General Counsel, which submits it to the
Chairman of the Statutory Disqualification Committee, acting on behalf
of the NAC; the Chairman may accept or reject the plan or refer it to
the NAC for action. The Exchange does not propose to utilize the NAC or
the Statutory Disqualification Committee Chairman for this purpose. The
Exchange believes that its staff can provide an appropriate review. The
staff is performing this same function today when it reviews statutory
disqualification decisions reached by FINRA subject to an RSA Agreement
between the Exchange and FINRA. In addition, under FINRA's rule, the
waiver of bias or prejudgment is with respect to the Department of
Member Regulation, the FINRA General Counsel, the NAC and any member
thereof, while under proposed Rule 2.13(c), the waiver would be with
respect to the Exchange staff, the Exchange, the Appeals Committee, or
any member of the Appeals Committee.
Next, under proposed Rule 2.13(d), if the Exchange staff rejects
the plan, the Member or applicant may request a review by the Appeals
Committee.\20\ This differs from FINRA's process, which provides for a
hearing before the NAC and further consideration by the FINRA Board of
Directors. Because the Exchange does not propose to utilize the NAC,
the Exchange proposes instead that any appeal be heard by the Appeals
Committee. FINRA Rule 9525 also allows for discretionary review by the
FINRA Board and the Exchange does not propose to adopt a comparable
rule. The Exchange believes that the Exchange staff's role in the
process will provide sufficient oversight and independence.
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\20\ The Exchange's proposed Rule 2.13(d) closely aligns with
NYSE Rule 9524 except for conforming and technical changes.
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The Exchange does not propose to adopt the text of FINRA Rule 9526,
which provides for expedited proceedings by the FINRA Board of
Governors in certain instances. The Exchange believes that its proposed
rules for review can be carried out in a timely manner and would
sufficiently protect investors. The Exchange historically has not
provided an expedited statutory disqualification review.
Lastly, the Exchange also notes that it will adopt a definition of
``associated person'' in Rule 1.5(q), specifically as it pertains to
statutory disqualifications. This rule will be similar to the
definitions of associated persons implemented by other exchanges to
specifically apply to the process of statutory disqualifications.\21\
Currently, the Exchange's rule for associated person includes entities,
meaning that an entity that is under common control of a Member is
considered a person associated with the Member. As the proposed rule
requires Members to submit an application for continuance as a TH if
any person associated with the Member becomes subject to a statutory
disqualification, the Exchange's current rules require Members to file
applications for affiliates under common control that would be subject
to a statutory disqualification under securities law. In contrast,
FINRA does not define ``Person Associated with a member'' or
``Associated Person of a Member'' as including affiliates under common
control of the FINRA member.\22\ Thus, a firm that is both an Exchange
Member and FINRA member, which has an affiliate under common control
that would be subject to a statutory disqualification under securities
laws, is required to file an application with the Exchange, but not
with FINRA.
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\21\ See IEX Rule 1.160(y)(2) and Nasdaq General 3, Rule
1002(b)(2).
\22\ FINRA Regulation, Inc. By-laws, Article I, paragraph (ee)
defines the terms ``person associated with a member'' or
``associated person of a member'' in relevant part as: ``(2) a sole
proprietor, partner, officer, director, or branch manager of a
member, or other natural person occupying a similar status or
performing similar functions, or a natural person engaged in the
investment banking or securities business who is directly or
indirectly controlling or controlled by a member, whether or not any
such person is registered or exempt from registration with the
Corporation under these By-Laws or the Rules of the Corporation; and
(3) for purposes of Rule 8210, any other person listed in Schedule A
of Form BD.''
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The Exchange proposes to adopt a similar definition to Nasdaq and
IEX except that it shall (i) remove the reference to investment banking
as that is not applicable for the Exchange's functions and (ii) remove
subpoint (3) which specifies that for the purposes of another exchange
rule of Nasdaq and IEX \23\ (that is not the exchange's statutory
disqualification rule), that it shall also include any other person
listed in Schedule A of Form BD of a member. As the Exchange does not
have this rule, the Exchange proposes not to include this subpoint (3)
in its adopted definition of associated persons for the purpose of
statutory disqualifications.
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\23\ See IEX Rule 8.210 and Nasdaq General 5, Rule 8210.
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As noted above, other exchanges, such as Nasdaq, IEX and NYSE, have
already adopted similar changes to more materially align its rules with
FINRA's, and similar to the Exchange, have made some edits to align its
proposed rules with existing exchange processes.\24\
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\24\ See, e.g., Securities Exchange Act Release No. 61703 (March
12, 2010), 75 FR 13620 (March 22, 2010) (SR-NASDAQ-2010-023) and
Securities Exchange Act Release No. 68678 (January 16, 2013), 78 FR
5213 (January 24, 2013) (SR-NYSE-2013-02).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\25\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \26\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with
[[Page 25637]]
the Section 6(b)(5) \27\ requirement that the rules of an exchange not
be designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, because the rule applies uniformly to all Members
and does not unfairly discriminate against any Member or type of market
participant. The Exchange also believes the proposed rule change is
consistent with Section 6(b)(1) of the Act,\28\ which provides that the
Exchange be organized and have the capacity to be able to carry out the
purposes of the Act and to enforce compliance by the Exchange's Members
and persons associated with its Members with the Act, the rules and
regulations thereunder, and the rules of the Exchange.
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\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
\27\ Id.
\28\ 15 U.S.C. 78f(b)(1).
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In particular, the proposed rule change will better enable the
Exchange to streamline the administration of its statutory
disqualification program and better protect investors and the public
interest, as it will eliminate the need for Members or associated
persons of Members to submit Statutory Disqualification Applications
for prior statutory qualifications that have been resolved. Similar to
Nasdaq, IEX and NYSE, the Exchange proposes to harmonize its
description of statutory disqualification to align its application of
statutory disqualification to FINRA.\29\ This proposal would avoid
potentially different outcomes for members of both FINRA and the
Exchange with respect to ineligibility for membership and association.
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\29\ See supra note 11.
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The proposed changes will provide greater harmonization between
Exchange and FINRA rules of similar purpose, resulting in less
burdensome and more efficient regulatory compliance for dual members.
As previously noted, in many instances the proposed rule text is
substantially similar to FINRA's current rule text, which already has
been approved by the Commission, and in many other cases the
differences between current FINRA rules and the proposed rules would be
strictly technical in nature. Further, in other instances, such as the
Exchange's proposed Rule 2.13(d), the Exchange's rule closely follows
NYSE's Rule 9524.
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 Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to provide greater harmonization between Exchange and FINRA rules of
similar purpose for investigations and disciplinary matters, resulting
in less burdensome and more efficient regulatory compliance for dual
members and facilitating FINRA's performance of its regulatory
functions under the RSA.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\
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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
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\30\ 15 U.S.C. 78s(b)(3)(A)(iii).
\31\ 17 CFR 240.19b-4(f)(6).
\32\ 15 U.S.C. 78s(b)(3)(A).
\33\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \34\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\35\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the Exchange
and its affiliates can have uniform proposed rules in place at the same
time. The Exchange notes that its proposed rule is mirrored off the
revised rule for Cboe Exchange, Inc., which will become operative on
May 18, 2026, and it is in the best interest of participants to have a
uniform change carried out across all Cboe exchanges \36\ on the same
date to avoid confusion. Further, the Exchange states that waiver of
the operative delay will permit the Exchange to harmonize its rules
regarding statutory disqualifications with the industry as soon as
practicable, allowing for consistent outcomes for industry participants
across exchanges and FINRA. For these reasons, and because the proposed
rule change does not raise any new or novel regulatory issues, the
Commission finds that waiving the 30-day operative delay is consistent
with the protection of investors and the public interest. Accordingly,
the Commission hereby waives the 30-day operative delay and designates
the proposed rule change as operative upon filing.\37\
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\34\ 17 CFR 240.19b-4(f)(6).
\35\ 17 CFR 240.19b-4(f)(6)(iii).
\36\ The Exchange notes that the Exchange's affiliated
exchanges, Cboe BYX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe
EDGX Exchange, Inc., and Cboe EDGA Exchange, Inc. are also proposing
this revised new rule for statutory disqualifications.
\37\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 will institute proceedings under
Section 19(b)(2)(B) \38\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\38\ 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#a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de"><span class="__cf_email__" data-cfemail="2351564f460e404c4e4e464d5750635046400d444c55">[email protected]</span></a>. Please include
file number SR-CboeBZX-2026-038 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 25638]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2026-038. 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 filing 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-CboeBZX-2026-038 and
should be submitted on or before June 1, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-09254 Filed 5-8-26; 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.