80 FR 51334 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Amending Certain of Its Disciplinary Rules To Facilitate the Reintegration of Certain Regulatory Functions From Financial Industry Regulatory Authority, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 163 (August 24, 2015)

Page Range		51334-51340
FR Document		2015-20792
Federal Register, Volume 80 Issue 163 (Monday, August 24, 2015)
[Federal Register Volume 80, Number 163 (Monday, August 24, 2015)]
[Notices]
[Pages 51334-51340]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-20792]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75721; File No. SR-NYSE-2015-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, Amending Certain of Its Disciplinary Rules To Facilitate the 
Reintegration of Certain Regulatory Functions From Financial Industry 
Regulatory Authority, Inc.

August 18, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 5, 2015, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. On August 14, 2015, the exchange filed Amendment No. 1 to 
the proposed rule change, which amended and replaced the proposed rule 
change in its entirety. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to amend certain of its disciplinary rules to 
facilitate the reintegration of certain regulatory functions from 
Financial Industry Regulatory Authority, Inc. (``FINRA''). This 
Amendment No. 1 supersedes the original filing in its entirety. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, 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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend certain of its disciplinary rules to 
permit the reintegration of certain regulatory functions from FINRA as 
of January 1, 2016.
Background of Proposed Rule Change
    On June 14, 2010, the NYSE, NYSE Regulation, Inc. (``NYSE 
Regulation''),\4\ and FINRA entered into a Regulatory Services 
Agreement (``RSA''), whereby FINRA was retained to perform the market 
surveillance and enforcement functions that had previously been 
performed by NYSE, through its wholly-owned subsidiary NYSE Regulation. 
Pursuant to the RSA, FINRA has been performing Exchange enforcement-
related regulatory services, including investigating and enforcing 
violations of Exchange rules, and conducting disciplinary proceedings 
arising out of such enforcement actions, including those relating to 
NYSE-only rules and against dual members and non-FINRA members. To 
facilitate FINRA's performance of these functions, the Exchange amended 
its rules to provide that Exchange rules that refer to NYSE Regulation 
or its staff, Exchange staff, and Exchange departments should be 
understood to also refer to FINRA staff and FINRA departments acting on 
behalf of the Exchange pursuant to the RSA.\5\
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    \4\ NYSE Regulation, a not-for-profit subsidiary of the 
Exchange, performs the Exchange's regulatory functions pursuant to a 
delegation agreement. See note 7 [sic], infra. The Exchange recently 
filed to, among other things, terminate the delegation agreement, 
establish a regulatory oversight committee (``ROC'') as a committee 
of the board of directors of the Exchange, and reintegrate its 
regulatory and market functions. See Release No. 75288 (June 24, 
2015), 80 FR 37316 (June 30, 2015) (SR-NYSE-2015-27) (the ``NYSE ROC 
Filing''). The amendments proposed herein are consistent with, and 
not dependent on approval of, the NYSE ROC Filing.
    \5\ See Rule 0. Notwithstanding the RSA, the Exchange retains 
ultimate legal responsibility for, and control of, the Exchange's 
regulatory functions performed by FINRA. See Securities Exchange Act 
Release No. 62355 (June 22, 2010), 75 FR 36729 (June 28, 2010) (SR-
NYSE-2010-46).
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    In 2013, the Exchange adopted new disciplinary rules that are, with 
certain exceptions, substantially the same as the text of the FINRA 
Rule 8000 Series and Rule 9000 Series, which set forth rules for 
conducting investigations and enforcement actions.\6\ Those rules were 
implemented on July 1, 2013 \7\ and, among other things: (1) Identify 
FINRA's Department of Enforcement and Department of Market Regulation 
as the departments permitted to commence disciplinary proceedings, when 
authorized by FINRA's Office of Disciplinary Affairs (``ODA''); (2)

[[Page 51335]]

identify ODA as the office permitted to accept or reject a letter of 
acceptance, waiver, and consent (``AWC'') or minor rule violation plan 
letter on behalf of the Board; and (3) identify ODA as the office 
permitted to accept or reject an offer of settlement if not opposed by 
FINRA's Department of Enforcement or Department of Market Regulation. 
Those rules do not, however, specify whether Exchange staff or 
departments, or staff of the Exchange's wholly-owned subsidiary NYSE 
Regulation, to which the Exchange currently delegates certain 
regulatory functions,\8\ may perform the functions described in the 
rules.
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    \6\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02), 69045 (March 
5, 2013), 78 FR 15394 (March 11, 2013) (SR-NYSE-2013-02), and 69963 
(July 10, 2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \7\ See NYSE Information Memorandum 13-8 (May 24, 2013).
    \8\ The Exchange currently delegates to NYSE Regulation certain 
responsibilities and functions of the Exchange, including taking 
``action to assure compliance with the rules, interpretations, 
policies and procedures of [the Exchange], the federal securities 
laws, or other laws, rules and regulations that [the Exchange] has 
the authority to administer or enforce, through examination, 
surveillance, investigation, enforcement, disciplinary and other 
programs.'' Delegation Agreement by and among New York Stock 
Exchange LLC, NYSE Regulation, Inc. and NYSE Market, Inc. (the 
``Delegation Agreement''), Section II, A.2. The Exchange, however, 
retains ultimate responsibility for such delegated responsibilities 
and functions. See Securities Exchange Act Release No. 53382, 71 FR 
11251, 11264 (February 27, 2006) (SR-NYSE-2005-77). Actions taken by 
NYSE Regulation pursuant to delegated authority remain subject to 
review, approval or rejection by the board of directors of the 
Exchange. The one exception is that actions taken by NYSE Regulation 
upon review of disciplinary decisions by the NYSE Regulation board 
of directors is not subject to review, approval or rejection by the 
Exchange and constitutes a final action of the Exchange. See 
Delegation Agreement, Section I. The Exchange is not proposing in 
this filing any changes to its rules that impact the review of 
disciplinary decisions by the NYSE Regulation board of directors.
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    In October 2014, the Exchange announced that, upon expiration of 
the current RSA on December 31, 2015, certain market surveillance, 
investigation and enforcement functions performed on behalf of the 
Exchange would be reintegrated.\9\ Accordingly, effective January 1, 
2016, the Exchange will perform certain of the market surveillance, 
investigation and enforcement functions FINRA was retained to perform 
in 2010. The proposed changes to the disciplinary rules in the present 
filing are necessary to permit the Exchange to perform certain 
regulatory functions currently performed on the Exchange's behalf by 
FINRA.
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    \9\ It is anticipated that FINRA, under a new RSA currently 
being negotiated, would continue to conduct, inter alia, the 
registration, testing and examination of broker-dealer members of 
the Exchange, and certain cross-market surveillance and related 
investigation and enforcement activities.
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    The Exchange proposes the following changes to facilitate the 
reintegration of certain regulatory functions from FINRA by providing 
that investigative and enforcement functions of the Exchange under the 
Rule 8000 and 9000 Series would be performed by personnel and 
departments reporting to the Chief Regulatory Officer of the Exchange 
\10\ or by FINRA personnel and departments:
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    \10\ NYSE Regulation staff report to the Chief Executive Officer 
of NYSE Regulation, who is also the Chief Regulatory Officer 
(``CRO'') of the Exchange.

(1) Amend Rule 9120 to include two new defined terms: 
``Enforcement,'' referring to any department reporting to the CRO of 
the Exchange with responsibility for investigating or imposing 
sanctions on a member organization or covered person, in addition to 
FINRA's departments of Enforcement and Market Regulation; and 
``Regulatory Staff,'' referring to any officer or employee reporting 
directly or indirectly to the CRO of the Exchange, in addition to 
FINRA staff acting on behalf of the Exchange in connection with the 
Rule 8000 and 9000 Series;
(2) amend Rules 9120, 9131, 9146, 9211, 9212, 9213, 9215, 9216, 
9251, 9253, 9264, 9269, 9270, 9551, 9552, 9554, 9556, 9810, 9820 and 
9830 to replace references to Exchange and FINRA departments and 
personnel with references to ``Enforcement'' and ``Regulatory 
Staff'';
(3) amend Rules 8210 and 9110 to provide that in performing 
functions under the disciplinary code, the CRO and Regulatory Staff 
shall function independently of the commercial interests of the 
Exchange and of the member organizations;
(4) amend Rules 9141 and 9242 to prohibit former Regulatory Staff 
from appearing in a proceeding under the Rule 9000 Series and from 
providing expert testimony in a proceeding under the Rule 9000 
Series within one year of termination, respectively;
(5) amend Rules 9211, 9216 and 9270 to provide that the CRO would be 
responsible for authorizing complaints; approving letters of 
acceptance, waiver, and consent; approving minor rule violation plan 
letters; and approving offers of settlement in place of FINRA's ODA; 
and
(6) amend Rules 476, 8120, 9001, 9110, 9217, 9232, 9310 and 9810 to 
make certain technical changes and correct a typographical error.

    The Exchange proposes that the changes described herein would be 
operative on January 1, 2016, following the reintegration of certain 
regulatory functions from FINRA as described below.
Replacement of References To Exchange and FINRA Departments and 
Personnel With References to Enforcement and Regulatory Staff
    The Exchange proposes to amend Rules 9120, 9131, 9146, 9211, 9212, 
9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9551, 9552, 9554, 9556, 
9810, 9820 and 9830 to replace references to Exchange and FINRA 
departments and personnel with references to the defined terms 
``Enforcement'' and ``Regulatory Staff.''
    The proposed amendments would allow disciplinary actions to be 
investigated and prosecuted on the Exchange's behalf by officers or 
employees reporting to the CRO beginning on January 1, 2016, while 
still enabling FINRA staff to continue to perform investigative and 
disciplinary activities that FINRA is authorized to perform on the 
Exchange's behalf.
    More specifically, the Exchange proposes to make the following 
amendments:
     Rule 9120 (Definitions) sets forth the definitions 
applicable to the disciplinary code. The Exchange proposes to add 
definitions of ``Enforcement,'' referring to any department reporting 
to the CRO of the Exchange with responsibility for investigating or 
imposing sanctions on a member organization or covered person, in 
addition to FINRA's departments of Enforcement and Market Regulation; 
and ``Regulatory Staff,'' referring to any officer or employee 
reporting, directly or indirectly, to the CRO of the Exchange, in 
addition to FINRA staff acting on behalf of the Exchange in connection 
with the Rule 8000 and 9000 Series.\11\
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    \11\ Certain rules in the Rule 8000 and 9000 Series currently 
refer to ``Exchange staff,'' a term which includes NYSE employees, 
NYSE Regulation staff that administers rules under the Delegation 
Agreement, and authorized FINRA staff pursuant to Rules 0 and 1. The 
proposed definition of ``Regulatory Staff'' provides that for 
purposes of the Rule 8000 Series and Rule 9000 Series (except for 
Rule 9557), the term ``Exchange staff'' shall have the same meaning 
as ``Regulatory Staff.''
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    The Exchange also proposes to delete the definitions of ``Head of 
Enforcement'' (Rule 9120(q)) and ``Head of Market Regulation'' (Rule 
9120(r)), which refer to the FINRA department heads.\12\
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    \12\ The Exchange also proposes to delete the definition of ODA 
(Rule 9120(v)) and replace all references to ODA in the Exchange's 
rules with ``CRO,'' for the reasons discussed in ``Substitution of 
CRO for ODA in Rules 9211, 9216 and 9270,'' infra.
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    Similarly, the Exchange proposes to replace the reference to the 
``Department of Enforcement or the Department of Market Regulation'' in 
Rule 9120(y) (definition of the term ``Party'') with ``Enforcement.'' 
The Exchange further proposes to streamline the definition of 
``Interested Staff'' (Rule 9120(u)) to eliminate references to Exchange 
and FINRA departments and staff, and provide that ``Interested Staff'' 
under any proceeding brought under the Code

[[Page 51336]]

of Procedure means Regulatory Staff or Exchange staff who (i) report, 
directly or indirectly, to any Enforcement employee, or to the head of 
any department or office that issues a notice or decision or is 
designated as a Party under the Rule 9000 Series, (ii) directly 
participated in the authorization or initiation of a complaint or 
proceeding, or (iii) directly participated in the proceeding, or 
directly participated in an examination, investigation, prosecution, or 
litigation related to a proceeding, as well as any person(s) who 
supervise such staff. Thus, as in the current definition, the new 
definition of ``Interested Staff'' in a particular matter encompasses 
supervisory personnel up to the most senior level, including the CRO, 
when staff reporting to such supervisory personnel directly 
participated in the matter.
    Finally, the Exchange proposes to renumber the remaining 
definitions in Rule 9120.
     Rule 9131 (Service of Complaint) provides that the 
``Department of Enforcement or the Department of Market Regulation'' 
shall serve a complaint on both a party and counsel for a party. The 
Exchange proposes to replace these references with ``Enforcement.'' The 
proposed change would enable Enforcement to serve disciplinary 
complaints beginning January 1, 2016.
     Rule 9146 (Motions) governs motion practice under the 
disciplinary rules. The Exchange proposes to amend Rule 9146(k)(1) to 
replace a reference to the ``Department of Enforcement and the 
Department of Market Regulation and other Exchange staff'' with 
``Regulatory Staff.'' The Exchange also proposes to replace a reference 
to ``Exchange staff'' in subsection (k)(2) with ``Regulatory Staff.'' 
The proposed changes would identify the staff that may receive or use 
documents subject to a protective order.
     Rule 9211 (Authorization of Complaint) sets forth the 
process for authorizing issuance of a complaint against a member 
organization or covered person. The Exchange proposes to replace 
references to the ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' in Rules 9211(a)(1) and 
(a)(2). The Exchange proposes to add the phrase ``has reason to 
believe'' in subsection (a)(1) with reference to Enforcement to make 
the construction consistent with other disciplinary rules (e.g., Rule 
9216). The proposed change would enable the Exchange, in addition to 
FINRA, to authorize and issue disciplinary complaints beginning January 
1, 2016. As discussed below, the Exchange also proposes to amend Rule 
9211 to provide that the Exchange's CRO would authorize issuance of a 
complaint.
     Rule 9212 (Complaint Issuance) sets forth the requirements 
of the complaint. In subsection (a)(1), the Exchange proposes to delete 
the first sentence as redundant, and to delete two references to 
``Department of Enforcement or the Department of Market Regulation.'' 
The proposed change would permit ``authorized Enforcement staff'' to 
sign a complaint that would be served by ``Enforcement.''
    The Exchange also proposes to replace ``Department of Enforcement 
or the Department of Market Regulation'' with ``Enforcement'' in Rule 
9212(a)(2) to permit, in addition to the relevant FINRA departments, 
any department reporting to the CRO that meets the definition of 
``Enforcement'' to propose a hearing location or that the Chief Hearing 
Officer select a Floor-Based Panelist as provided for therein.
    Similarly, the Exchange proposes to replace ``Department of 
Enforcement or the Department of Market Regulation'' with 
``Enforcement'' in Rule 9212(b) and Rule 9212(c)(1) and (2) to enable 
any department reporting to the CRO that meets the definition of 
``Enforcement,'' in addition to the relevant FINRA departments, to 
amend and withdraw complaints.
     Rule 9213(a) (Assignment of Hearing Officer) provides for 
the appointment of a Hearing Officer and Panelists by the Chief Hearing 
Officer as soon as practicable after the filing of a complaint by the 
``Department of Enforcement or the Department of Market Regulation.'' 
The Exchange proposes to replace this reference with ``Enforcement'' to 
include complaints filed by any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to the relevant 
FINRA departments.
     Rule 9215(f) (Answer to Complaint) sets forth the 
requirements for answering a complaint. The Exchange proposes to 
replace ``Department of Enforcement or the Department of Market 
Regulation'' with ``Enforcement'' in Rule 9215(f) to enable any 
department reporting to the CRO that meets the definition of 
``Enforcement,'' in addition to the relevant FINRA departments, to send 
a second notice if a respondent does not file an answer or timely 
respond to the complaint.
     Rule 9216(a) (Acceptance, Waiver, and Consent Procedures) 
sets forth the procedures by which a respondent can execute an AWC 
letter prior to the issuance of a complaint. Under the current rule, 
FINRA's Department of Enforcement or Department of Market Regulation 
prepares and requests that a member organization or covered person 
execute an AWC letter, and ``Exchange staff'' may determine the 
effective date of sanctions unless the letter states otherwise. The 
Exchange proposes to replace ``Department of Enforcement or the 
Department of Market Regulation'' in Rule 9216(a)(1) with 
``Enforcement'' to permit any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to the relevant 
FINRA departments, to prepare and request execution of AWC letters. The 
Exchange also proposes to replace ``Exchange staff'' with ``Regulatory 
Staff'' to identify the staff that may determine the effective date of 
sanctions.
    Rule 9216(b) (Procedure for Violation Under Plan Pursuant to SEA 
Rule 19d-1(c)(2)) sets forth the procedures for executing a minor rule 
violation plan letter.\13\ Under the current rule, FINRA's Department 
of Enforcement or Department of Market Regulation may prepare and 
request that a member organization or covered person execute a minor 
rule violation plan letter, and ``Exchange staff'' may determine the 
effective date of sanctions unless the letter states otherwise. The 
Exchange proposes to replace references to ``the Department of 
Enforcement or the Department of Market Regulation'' in Rule 9216(b)(1) 
with ``Enforcement'' so that any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to FINRA, may 
prepare and request such letters. The Exchange also proposes to replace 
``Exchange staff'' with ``Regulatory Staff'' to identify the staff that 
may determine the effective date of sanctions.
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    \13\ A minor rule violation plan letter under the Exchange's 
rules permits a fine not to exceed $2,500 and/or a censure to be 
imposed with respect to certain specifically enumerated rules. See 
Rules 9216(b)(1) and 9217.
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     Rule 9251 (Inspection and Copying of Documents in 
Possession of Staff) requires that documents prepared or obtained in 
connection with an investigation be made available to a respondent. The 
Exchange proposes to amend subsections (a) (documents that must be made 
available for inspection and copying), (b) (documents withheld from 
inspection and copying), (c) (list of documents withheld), (d) (timing 
of inspection and copying), and (g) (failure to make documents 
available) to replace references to ``the Department of Enforcement or 
the Department of Market Regulation'' with ``Enforcement'' to bring 
departments reporting to the CRO that meet the definition of

[[Page 51337]]

``Enforcement'' within the scope of this rule.
     Rule 9253 (Production of Witness Statements) sets forth 
the procedures for filing motions to obtain witness statements. The 
Exchange proposes to amend Rule 9253(a) and (b) to replace ``Department 
of Enforcement or the Department of Market Regulation'' with 
``Enforcement'' to bring departments reporting to the CRO that meet the 
definition of ``Enforcement'' within the scope of this Rule.
     Rule 9264 (Motion for Summary Disposition) sets forth the 
procedures for filing summary disposition motions. The Exchange 
proposes to replace ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' to bring departments reporting 
to the CRO that meet the definition of ``Enforcement'' within the scope 
of this Rule.
     Rule 9269 (Default Decisions) sets forth the process for 
issuance and review of default decisions. The Exchange proposes to 
replace ``Department of Enforcement or the Department of Market 
Regulation'' in subsection (a)(2) with ``Enforcement'' in order to 
bring departments reporting to the CRO that meet the definition of 
``Enforcement'' within the scope of this Rule. The Exchange also 
proposes to replace ``Exchange staff'' with ``Regulatory Staff'' in 
subsection (d) to identify the staff that may determine the effective 
date of certain sanctions.
     Rule 9270 (Settlement Procedure) governs offers of 
settlement. The Exchange proposes to replace ``the Department of 
Enforcement or the Department of Market Regulation'' in subsections (e) 
and (f) with ``Enforcement'' in order to permit a department reporting 
to the CRO that meets the definition of ``Enforcement'' to consider 
offers of settlement by respondents. The Exchange also proposes to 
replace ``Exchange staff'' with ``Regulatory Staff'' in subsection 
(c)(5) to identify the staff that may determine the effective date of 
sanctions when provided in an offer of settlement.\14\
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    \14\ As discussed below, the Exchange further proposes to amend 
Rule 9270 to have certain offers of settlement submitted to the CRO 
and not ODA.
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     Rule 9551 (Failure to Comply with Public Communication 
Standards) governs expedited proceedings relating to a member 
organization's departure from the public communication standards of 
Rule 2210. The Exchange proposes to replace ``Exchange staff'' with 
``Regulatory Staff'' to identify the staff that initiates and otherwise 
participates in such proceedings.
     Rule 9552 (Failure to Provide Information or Keep 
Information Current) sets forth procedures for expedited proceedings 
relating to a member organization or covered person's failure to 
provide information or keep information current. The Exchange proposes 
to replace ``Exchange staff'' with ``Regulatory Staff'' to identify the 
staff that initiates and otherwise participates in such proceedings.
     Rule 9554 (Failure to Comply with an Arbitration Award or 
Related Settlement or an Order of Restitution or Settlement Providing 
for Restitution) governs expedited proceedings relating to 
noncompliance with an arbitration award, settlement agreement, or 
restitution order. The Exchange proposes to replace ``Exchange staff'' 
with ``Regulatory Staff'' to identify the staff that initiates and 
otherwise participates in such proceedings.
     Rule 9556 (Failure to Comply with Temporary and Permanent 
Cease and Desist Orders) governs expedited proceedings relating to 
noncompliance with a temporary or permanent cease and desist order. The 
Exchange proposes to replace ``Exchange staff'' with ``Regulatory 
Staff'' to identify the staff that initiates and otherwise participates 
in such proceedings.
     Rule 9810 (Initiation of Proceeding) sets forth procedures 
for initiating temporary cease and desist proceedings. The Exchange 
proposes to replace ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' in the title and the text of 
the rule to permit a department reporting to the CRO that meets the 
definition of ``Enforcement'' to initiate such proceedings.
     The Exchange proposes to replace references to 
``Department of Enforcement or the Department of Market Regulation'' 
with ``Enforcement'' in Rule 9820 (Appointment of Hearing Officer and 
Hearing Panel), which governs the appointment of Hearing Officers and 
Panelists for temporary cease and desist proceedings, to bring 
departments reporting to the CRO that meet the definition of 
``Enforcement'' within the scope of this Rule.
     Rule 9830 (Hearing) sets forth hearing procedures for 
temporary cease and desist proceedings. The Exchange proposes to amend 
Rule 9830(b) and (h) to replace ``Department of Enforcement or the 
Department of Market Regulation'' with ``Enforcement'' to permit 
service of a notice in a temporary cease and desist proceeding on a 
department reporting to the CRO that meets the definition of 
``Enforcement,'' and to describe available remedies in the event 
Enforcement fails to appear at a hearing.
Independence of the CRO and Staff in the Disciplinary Process
    The Exchange proposes to amend Rules 8210 and 9110 to add rule text 
providing that in performing functions under the disciplinary code, the 
CRO and Regulatory Staff would function independently of the commercial 
interests of the Exchange and the commercial interests of the member 
organizations. This requirement is already being met and is consistent 
with longstanding policies and practices at the Exchange. The proposed 
change would also be consistent with rules currently in effect for the 
equities and options markets of the Exchange's affiliate NYSE Arca, 
Inc., and would reflect the Exchange's ongoing commitment to performing 
its regulatory functions under its disciplinary rules in an independent 
and impartial manner.\15\
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    \15\ See Arca Equities Rule 10.2(a); Arca Options Rule 10.2(a).
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One Year Revolving Door Restriction and Prohibition on Serving as 
Expert Witness
    Rule 9141 governs appearances in a proceeding. The Exchange 
proposes to amend Rule 9141 by adding a new section (c) that would 
prohibit former Regulatory Staff from making an appearance before an 
Adjudicator on behalf of any other person in any proceeding under the 
Rule 9000 Series within one year immediately following termination of 
employment with the Exchange or FINRA. The rule text is broader than 
FINRA's counterpart rule in that it covers not only former FINRA staff 
but also former Regulatory Staff that reported to the CRO, and covers 
both officers and employees. The rule text is otherwise substantially 
the same as the text of FINRA Rule 9141(c), which the Exchange declined 
to adopt in 2013.\16\ At the time, the Exchange did not believe it was 
necessary to bar former employees from such appearances because its 
employees were not conducting disciplinary functions and their 
appearance would not create the same type of potential conflict of 
interest. Once Regulatory Staff reporting to the CRO again directly 
perform market surveillance, investigation and enforcement functions 
following expiration of the current RSA, that would no longer be the 
case and the Exchange therefore believes that such a prohibition would 
help prevent

[[Page 51338]]

potential conflicts or appearance of conflicts of interest.
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    \16\ See Securities Exchange Act Release No. 69045, 78 FR at 
15395 n.14.
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    Similarly, the Exchange proposes to amend Rule 9242, which governs 
pre-hearing submissions, to add a new section (b) prohibiting former 
Regulatory Staff from providing expert testimony on behalf of any other 
person in any proceeding under the Rule 9000 Series within one year 
immediately following termination of employment with the Exchange or 
FINRA. The Exchange also proposes that nothing in proposed Rule 9242(b) 
would prohibit former Regulatory Staff from testifying as a witness on 
behalf of the Exchange or FINRA. The rule text is broader than FINRA's 
counterpart rule in that it covers not only former FINRA staff but also 
former Regulatory Staff that reported to the CRO, and covers both 
officers and employees. The rule text is otherwise substantially the 
same as the text of FINRA Rule 9242(b), which the Exchange declined to 
adopt in 2013 for the same reasons it did not adopt the one year 
prohibition of FINRA Rule 9141(c). Given the Exchange's anticipated 
resumption of certain regulatory functions, the Exchange believes that 
a prohibition on former Regulatory Staff providing expert testimony 
would help prevent potential conflicts or appearance of conflicts of 
interest. The Exchange also believes that, consistent with FINRA Rule 
9242(b), permitting a former Regulatory Staff member to testify as a 
witness on behalf of the Exchange does not pose potential conflicts of 
interest.
Substitution of CRO for ODA in Rules 9211, 9216 and 9270
    The Exchange proposes that the CRO rather than FINRA's ODA would be 
responsible for: (1) Authorizing issuance of a complaint; (2) accepting 
or rejecting AWC letters and minor rule violation plan letters; and (3) 
accepting or rejecting uncontested offers of settlement.
    The Exchange believes that providing for the CRO to authorize 
issuance of complaints and approve settlements would be consistent with 
the Exchange's reintegration of regulatory functions and the rules of 
other SROs.\17\ The proposed change is also consistent with certain 
powers the CRO currently has under the disciplinary rules.\18\ 
Moreover, as noted above, by rule the CRO would be required to operate 
independently of the commercial interests of the Exchange and of member 
organizations.
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    \17\ See e.g., BATS Exchange Rules 8.4 and 8.8; Chicago Stock 
Exchange Article 12, Rules 1(b) and (d) (providing that the CRO 
shall direct written charges and approve or reject offers of 
settlement). The International Securities Exchange (``ISE''), Miami 
International Securities Exchange (``MIAX'') and BOX Options 
Exchange (``BOX'') also provide that complaints are to be approved 
by the CRO. Each also requires offers of settlement to be authorized 
by the CRO if a hearing panel has not yet been appointed, and 
requires letters of consent to be authorized by the CRO and approved 
by a business conduct committee. See ISE Rules 1603, 1604 and 1609; 
MIAX Rules 1003, 1004 and 1009; BOX Rules 12030, 12040 and 12090.
    \18\ In adopting FINRA's disciplinary rules, the Exchange 
provided that the CRO, rather than FINRA's CEO, would authorize the 
initiation of temporary cease and desist proceedings and the 
initiation of suspension or cancellation proceedings for a violation 
of a temporary cease and desist order. The Exchange also retained 
the ability of the CRO to resolve certain procedural matters in 
connection with settlements under Rule 9270(d). See Securities 
Exchange Act Release No. 69045, 78 FR at 15394, 15398-15400 & n.24.
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    To accomplish these changes, the Exchange proposes to amend Rules 
9211, 9216 and 9270 as follows:
     Rule 9211(a)(1) and (a)(2) would be amended to replace 
``Office of Disciplinary Affairs'' with ``CRO.'' This proposed change 
would identify the CRO rather than ODA as being responsible for 
authorizing Enforcement to issue a complaint.
     Rule 9216(a)(3) and (a)(4) would be amended to replace 
references to ``Office of Disciplinary Affairs'' with ``CRO.'' The 
proposed change would permit the CRO to accept or reject an AWC letter 
and, if accepted, to be deemed final.
     Rule 9216(a)(4) would be amended to provide that if the 
CRO rejects an AWC letter, the Exchange may take other appropriate 
disciplinary action with respect to the alleged violation or 
violations. This is consistent with the current rule as it relates to 
an AWC letter that is rejected by FINRA's ODA.
     Rule 9216(b)(3) and (b)(4) would be amended to replace 
``Office of Disciplinary Affairs'' with ``CRO.'' This proposed change 
would allow an executed minor rule violation plan letter to be 
submitted to the CRO, which, on behalf of the SRO Board, may accept or 
reject it. If accepted, it would be deemed final; if the CRO rejects 
the letter, the Exchange may take other appropriate disciplinary action 
with respect to the alleged violation or violations. This is consistent 
with the current rule as it relates to a minor rule violation plan 
letter that is accepted or rejected by ODA.
     Finally, Rule 9270(e), (f), (h), and (j) would also be 
amended to replace ``Office of Disciplinary Affairs'' with ``CRO.'' The 
proposed change to subsection (f) would provide that uncontested offers 
of settlement would be transmitted to the CRO and, if accepted under 
proposed Rule 9270(f)(3), would be issued and become final. Under 
proposed Rule 9270(h), if the CRO does not accept an uncontested offer 
of settlement, the respondent would be notified in writing and the 
offer of settlement and proposed order of acceptance would be deemed 
withdrawn.\19\ Under proposed Rule 9270(j), an offer of settlement 
rejected by the CRO would not prejudice a respondent and would not be 
introduced into evidence in connection with the determination of the 
issues involved in the pending complaint or in any other proceeding. 
This is consistent with the current rule as it relates to an offer of 
settlement that is not accepted by ODA.
---------------------------------------------------------------------------

    \19\ Because the Exchange does not have sanction guidelines, the 
CRO, Hearing Panel, or Extended Hearing Panel, as applicable, would 
consider Exchange precedent or such other precedent as it deemed 
appropriate in determining whether or not to accept a settlement 
offer under Rule 9270. See Securities Exchange Act Release No. 68678 
at 43 n.38 (January 16, 2013), 78 FR 5213 at 5229 n.39 (January 24, 
2013) (SR-NYSE-2013-02).
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Miscellaneous Amendments to Rules 476, 8120, 9001, 9110, 9217, 9232, 
9310 and 9810
    The Exchange proposes several miscellaneous amendments to make 
certain technical changes and correct a typographical error.
    First, the Exchange proposes to insert a reference to the Rule 8000 
Series in Rule 476 in order to clarify that both the Rule 8000 Series 
and the Rule 9000 Series would apply to proceedings for which no Charge 
Memorandum was filed with the hearing board under Rule 476(d) prior to 
July 1, 2013 and for which no written Stipulation and Consent was 
submitted to a Hearing Officer prior to July 1, 2013.\20\ The Exchange 
proposes the same change to Rule 9001, which specifies the effective 
date of the Rule 9000 Series.
---------------------------------------------------------------------------

    \20\ Rule 476 is the Exchange's legacy disciplinary rule that 
applies to a Charge Memorandum filed under Rule 476(d) prior to July 
1, 2013 or for which a written Stipulation and Consent was submitted 
prior to July 1, 2013. See Securities Exchange Act Release Nos. 
68678, 78 FR at 5213 and 69045, 78 FR at 15394.
---------------------------------------------------------------------------

    Second, the Exchange proposes to delete the last sentence in Rule 
476 as obsolete. By its terms, that sentence relates only to orders 
issued on or before July 1, 2013.
    Third, the Exchange proposes to add a reference to the term 
``Regulatory Staff'' in Rule 8120, because, as set forth above, that 
new defined term is referenced in certain proposed changes to the Rule 
8000 Series.
    Fourth, the Exchange proposes to delete the last sentence in Rule 
9110(c) as obsolete.

[[Page 51339]]

    Fifth, the Exchange proposes to correct a typographical error in 
Rule 9217, which sets forth the rules eligible for minor rule plan 
fines, by adding a dash in the rule text describing Rule 123C.
    Sixth, the Exchange proposes to amend Rule 9232(b), which governs 
appointment of panelists, to provide that the Board shall from time to 
time appoint a Hearing Board as set forth in the rule. Under the 
current rule, the Chairman of the Board, subject to Board approval, has 
this responsibility. The Exchange believes that because the approval of 
the Board is required for appointment of the Hearing Board, it is not 
necessary to specify that the Chairman of the Exchange Board would 
appoint the Hearing Board subject to such approval.
    Seventh, the Exchange proposes two [sic] technical, clarifying 
amendments to Rule 9310. The Exchange proposes to amend Rule 9310 to 
provide that none of the persons referenced in the Rule, i.e., Board 
directors, members of the Committee for Review, and the parties, may 
request Board review of a decision concerning an Exchange member that 
is an affiliate. Under the current Rule, only the parties are 
prohibited from requesting Board review of a decision in such 
circumstances.\21\
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    \21\ A decision with respect to an Exchange member that is an 
affiliate of the Exchange constitutes final Exchange disciplinary 
action pursuant to SEC Rule 19d-1(c)(1) and may not be reviewed by 
the Board. See Rule 9268(e)(2).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to add the phrase ``Service and 
Filing of Notice'' to the title of Rule 9810(a) in order to identify 
the subject matter covered by the rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\22\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\23\ in particular, in that it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. In addition, the Exchange believes 
that the proposed rule change furthers the objectives of Section 
6(b)(7) of the Act,\24\ in particular, in that it provides fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof. In addition, the Exchange believes that the 
proposed rule change furthers the objectives of Section 6(b)(3) of the 
Act,\25\ in particular, in that it supports the fair representation of 
members in the administration of the Exchange's affairs.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78f(b)(7).
    \25\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    The Exchange believes that eliminating references to FINRA 
departments and replacing them with ``Enforcement,'' a new defined term 
that includes any department reporting to the CRO of the Exchange with 
responsibility for investigating or imposing sanctions on a member 
organization or covered person, in addition to FINRA's departments of 
Enforcement and Market Regulation, in Rules 9120, 9131, 9146, 9211, 
9212, 9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9810, 9820 and 
9830 would facilitate the Exchange's ability to directly conduct 
investigations and bring disciplinary actions for matters it will be 
conducting after the reintegration of certain functions next year. The 
Exchange believes that defining ``Regulatory Staff'' as including any 
officer or employee reporting directly or indirectly to the CRO of the 
Exchange in addition to FINRA staff acting on behalf of the Exchange in 
connection with the Rule 8000 and 9000 Series, in Rules 9120, 9146, 
9216, 9269, 9270, 9551, 9552, 9554, and 9556 would similarly facilitate 
the Exchange's ability to directly conduct investigations and bring 
disciplinary actions, as well as FINRA.
    Because the substance of the rules would remain unchanged, the 
Exchange believes that the proposed change would provide fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof. Further, removing references to Exchange and FINRA 
offices and departments in the Exchange's Rules that are unnecessary in 
light of Rule 0 removes impediments to and perfects a national market 
system because it would reduce potential confusion that may result from 
retaining different designations in the Exchange's rulebook. Removing 
potentially confusing conflicting designations would also further the 
goal of transparency and add consistency to the Exchange's Rules.
    The Exchange believes that adding rule text to Rules 8210 and 9110 
stating that the CRO and Regulatory Staff would function independently 
of the commercial interests of the Exchange and the commercial 
interests of member organizations in performing functions under the 
disciplinary rules would further ensure the integrity and independence 
of the disciplinary process and further provide fair procedures for the 
disciplining of members and persons associated with members. For the 
same reasons, addition of the proposed rule text would protect 
investors and the public interest and would therefore be consistent 
with Section 6(b)(5) of the Exchange Act.
    The Exchange believes that prohibiting former Regulatory Staff from 
representing respondents and providing expert testimony in Exchange 
disciplinary matters within one year immediately following termination 
of employment would provide greater harmonization between Exchange and 
FINRA rules of similar purpose. As previously noted, the proposed rule 
text is based on FINRA's current rule text, which already has been 
approved by the Commission. As such, the proposed rule change would 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and will remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
    The Exchange also believes that making the CRO responsible for 
authorizing complaints and approving AWC letters, minor rule violation 
plan letters and offers of settlement in place of FINRA's ODA is fair 
and reasonable, and provides adequate procedural protections. In 
particular, requiring approval of complaints and settlements by an 
independent CRO will serve as an appropriate check on the authority of 
the investigative and enforcement staff at both the Exchange and FINRA 
to bring and resolve such actions.
    Further, the Exchange believes that by having decisions regarding 
initiating and resolving formal disciplinary actions and resolving 
minor rule violations made by an individual with the most direct 
expertise relevant to the NYSE's markets,\26\ the proposal promotes 
efficiency and consistency and aligns the Exchange's process with other 
SROs. As noted above, the proposed change is consistent with the 
reintegration of regulatory functions by the Exchange and the practices 
at other

[[Page 51340]]

SROs where CROs authorize issuance of complaints and approve 
settlements.
---------------------------------------------------------------------------

    \26\ See, e.g., Securities Exchange Act Release No. 69045, 78 FR 
at 15401.
---------------------------------------------------------------------------

    Finally, making technical amendments and correcting a typographical 
error in Rules 476, 8120, 9001, 9110, 9217, 9232, 9310 and 9810 removes 
impediments to and perfects the mechanism of a free and open market by 
removing confusion that may result from having incorrect or redundant 
material in the Exchange's rulebook. The Exchange believes that 
eliminating incorrect or redundant material would not be inconsistent 
with the public interest and the protection of investors because 
investors will not be harmed and in fact would benefit from increased 
transparency, thereby reducing potential confusion. Removing such 
references will also remove impediments to and perfects the mechanism 
of a free and open market by ensuring that persons subject to the 
Exchange's jurisdiction, regulators, and the investing public can more 
easily navigate and understand the Exchange's rulebook. The Exchange 
believes that eliminating incorrect or redundant material would not be 
inconsistent with the public interest and the protection of investors 
because investors will not be harmed and in fact would benefit from 
increased transparency, thereby reducing potential confusion. Removing 
such references will also further the goal of transparency and add 
clarity to the Exchange's rules.

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 intended to address competitive issues but rather to enable the 
Exchange to directly investigate and initiate disciplinary actions 
following and facilitate the reintegration of certain regulatory 
functions from FINRA.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2015-35 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2015-35. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2015-35, and should be 
submitted on or before September 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-20792 Filed 8-21-15; 8:45 am]
BILLING CODE 8011-01-P
51334 Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices

should be included on the subject line ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Background of Proposed Rule Change
if email is used. To help the notice is hereby given that, on August On June 14, 2010, the NYSE, NYSE
Commission process and review your 5, 2015, New York Stock Exchange LLC Regulation, Inc. (‘‘NYSE Regulation’’),4
comments more efficiently, please use (‘‘NYSE’’ or the ‘‘Exchange’’) filed with and FINRA entered into a Regulatory
only one method. The Commission will the Securities and Exchange Services Agreement (‘‘RSA’’), whereby
post all comments on the Commission’s Commission (the ‘‘Commission’’) the FINRA was retained to perform the
Internet Web site (http://www.sec.gov/ proposed rule change as described in market surveillance and enforcement
rules/sro.shtml). Copies of the Items I and II below, which Items have functions that had previously been
submission, all subsequent been prepared by the self-regulatory performed by NYSE, through its wholly-
amendments, all written statements organization. On August 14, 2015, the owned subsidiary NYSE Regulation.
with respect to the proposed rule exchange filed Amendment No. 1 to the Pursuant to the RSA, FINRA has been
change that are filed with the proposed rule change, which amended performing Exchange enforcement-
Commission, and all written related regulatory services, including
and replaced the proposed rule change
communications relating to the investigating and enforcing violations of
in its entirety. The Commission is
proposed rule change between the Exchange rules, and conducting
Commission and any person, other than publishing this notice to solicit
comments on the proposed rule change, disciplinary proceedings arising out of
those that may be withheld from the such enforcement actions, including
public in accordance with the as amended, from interested persons.
those relating to NYSE-only rules and
provisions of 5 U.S.C. 552, will be I. Self-Regulatory Organization’s against dual members and non-FINRA
available for Web site viewing and Statement of the Terms of Substance of members. To facilitate FINRA’s
printing in the Commission’s Public the Proposed Rule Change performance of these functions, the
Reference Room, 100 F Street NE., Exchange amended its rules to provide
Washington, DC 20549, on official The Exchange proposes to amend that Exchange rules that refer to NYSE
business days between the hours of certain of its disciplinary rules to Regulation or its staff, Exchange staff,
10:00 a.m. and 3:00 p.m. Copies of such facilitate the reintegration of certain and Exchange departments should be
filing will also be available for regulatory functions from Financial understood to also refer to FINRA staff
inspection and copying at the principal Industry Regulatory Authority, Inc. and FINRA departments acting on
office of the Exchange. All comments (‘‘FINRA’’). This Amendment No. 1 behalf of the Exchange pursuant to the
received will be posted without change; supersedes the original filing in its RSA.5
the Commission does not edit personal entirety. The text of the proposed rule In 2013, the Exchange adopted new
identifying information from change is available on the Exchange’s disciplinary rules that are, with certain
submissions. You should submit only Web site at www.nyse.com, at the exceptions, substantially the same as the
information that you wish to make principal office of the Exchange, and at text of the FINRA Rule 8000 Series and
available publicly. All submissions the Commission’s Public Reference Rule 9000 Series, which set forth rules
should refer to File No. SR–BYX–2015– Room. for conducting investigations and
35 and should be submitted on or before enforcement actions.6 Those rules were
September 14, 2015. II. Self-Regulatory Organization’s implemented on July 1, 2013 7 and,
For the Commission, by the Division of Statement of the Purpose of, and among other things: (1) Identify FINRA’s
Trading and Markets, pursuant to delegated Statutory Basis for, the Proposed Rule Department of Enforcement and
authority.17 Change Department of Market Regulation as the
Robert W. Errett, departments permitted to commence
In its filing with the Commission, the
Deputy Secretary. disciplinary proceedings, when
self-regulatory organization included
[FR Doc. 2015–20793 Filed 8–21–15; 8:45 am]
statements concerning the purpose of, authorized by FINRA’s Office of
BILLING CODE 8011–01–P Disciplinary Affairs (‘‘ODA’’); (2)
and basis for, the proposed rule change
and discussed any comments it received 4 NYSE Regulation, a not-for-profit subsidiary of

SECURITIES AND EXCHANGE on the proposed rule change. The text the Exchange, performs the Exchange’s regulatory
COMMISSION of those statements may be examined at functions pursuant to a delegation agreement. See
the places specified in Item IV below. note 7 [sic], infra. The Exchange recently filed to,
among other things, terminate the delegation
The Exchange has prepared summaries, agreement, establish a regulatory oversight
[Release No. 34–75721; File No. SR–NYSE–
2015–35]
set forth in sections A, B, and C below, committee (‘‘ROC’’) as a committee of the board of
of the most significant parts of such directors of the Exchange, and reintegrate its
regulatory and market functions. See Release No.
Self-Regulatory Organizations; New statements. 75288 (June 24, 2015), 80 FR 37316 (June 30, 2015)
York Stock Exchange LLC; Notice of A. Self-Regulatory Organization’s (SR–NYSE–2015–27) (the ‘‘NYSE ROC Filing’’). The
Filing of Proposed Rule Change, as amendments proposed herein are consistent with,
Statement of the Purpose of, and the and not dependent on approval of, the NYSE ROC
Modified by Amendment No. 1,
Statutory Basis for, the Proposed Rule Filing.
Amending Certain of Its Disciplinary 5 See Rule 0. Notwithstanding the RSA, the
Change
Rules To Facilitate the Reintegration of Exchange retains ultimate legal responsibility for,
Certain Regulatory Functions From 1. Purpose and control of, the Exchange’s regulatory functions
Financial Industry Regulatory performed by FINRA. See Securities Exchange Act
The Exchange proposes to amend Release No. 62355 (June 22, 2010), 75 FR 36729
Authority, Inc. (June 28, 2010) (SR–NYSE–2010–46).
tkelley on DSK3SPTVN1PROD with NOTICES

certain of its disciplinary rules to permit 6 See Securities Exchange Act Release Nos. 68678
August 18, 2015. the reintegration of certain regulatory (January 16, 2013), 78 FR 5213 (January 24, 2013)
Pursuant to Section 19(b)(1) 1 of the functions from FINRA as of January 1, (SR–NYSE–2013–02), 69045 (March 5, 2013), 78 FR
Securities Exchange Act of 1934 (the 2016. 15394 (March 11, 2013) (SR–NYSE–2013–02), and
69963 (July 10, 2013), 78 FR 42573 (July 16, 2013)
(SR–NYSE–2013–49).
17 17 CFR 200.30–3(a)(12). 2 15 U.S.C. 78a. 7 See NYSE Information Memorandum 13–8 (May
1 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4. 24, 2013).

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Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices 51335

identify ODA as the office permitted to enforcement functions of the Exchange 9269, 9270, 9551, 9552, 9554, 9556,
accept or reject a letter of acceptance, under the Rule 8000 and 9000 Series 9810, 9820 and 9830 to replace
waiver, and consent (‘‘AWC’’) or minor would be performed by personnel and references to Exchange and FINRA
rule violation plan letter on behalf of the departments reporting to the Chief departments and personnel with
Board; and (3) identify ODA as the Regulatory Officer of the Exchange 10 or references to the defined terms
office permitted to accept or reject an by FINRA personnel and departments: ‘‘Enforcement’’ and ‘‘Regulatory Staff.’’
offer of settlement if not opposed by (1) Amend Rule 9120 to include two new
The proposed amendments would
FINRA’s Department of Enforcement or defined terms: ‘‘Enforcement,’’ referring allow disciplinary actions to be
Department of Market Regulation. Those to any department reporting to the CRO investigated and prosecuted on the
rules do not, however, specify whether of the Exchange with responsibility for Exchange’s behalf by officers or
Exchange staff or departments, or staff investigating or imposing sanctions on a employees reporting to the CRO
of the Exchange’s wholly-owned member organization or covered person, beginning on January 1, 2016, while still
subsidiary NYSE Regulation, to which in addition to FINRA’s departments of enabling FINRA staff to continue to
the Exchange currently delegates certain Enforcement and Market Regulation; and perform investigative and disciplinary
regulatory functions,8 may perform the ‘‘Regulatory Staff,’’ referring to any activities that FINRA is authorized to
officer or employee reporting directly or perform on the Exchange’s behalf.
functions described in the rules. indirectly to the CRO of the Exchange, in
In October 2014, the Exchange More specifically, the Exchange
addition to FINRA staff acting on behalf
announced that, upon expiration of the of the Exchange in connection with the
proposes to make the following
current RSA on December 31, 2015, Rule 8000 and 9000 Series; amendments:
certain market surveillance, (2) amend Rules 9120, 9131, 9146, 9211, • Rule 9120 (Definitions) sets forth
investigation and enforcement functions 9212, 9213, 9215, 9216, 9251, 9253, the definitions applicable to the
performed on behalf of the Exchange 9264, 9269, 9270, 9551, 9552, 9554, disciplinary code. The Exchange
would be reintegrated.9 Accordingly, 9556, 9810, 9820 and 9830 to replace proposes to add definitions of
effective January 1, 2016, the Exchange references to Exchange and FINRA ‘‘Enforcement,’’ referring to any
will perform certain of the market departments and personnel with department reporting to the CRO of the
surveillance, investigation and references to ‘‘Enforcement’’ and Exchange with responsibility for
‘‘Regulatory Staff’’; investigating or imposing sanctions on a
enforcement functions FINRA was (3) amend Rules 8210 and 9110 to provide
retained to perform in 2010. The member organization or covered person,
that in performing functions under the
proposed changes to the disciplinary disciplinary code, the CRO and in addition to FINRA’s departments of
rules in the present filing are necessary Regulatory Staff shall function Enforcement and Market Regulation;
to permit the Exchange to perform independently of the commercial and ‘‘Regulatory Staff,’’ referring to any
certain regulatory functions currently interests of the Exchange and of the officer or employee reporting, directly
performed on the Exchange’s behalf by member organizations; or indirectly, to the CRO of the
FINRA. (4) amend Rules 9141 and 9242 to prohibit Exchange, in addition to FINRA staff
The Exchange proposes the following former Regulatory Staff from appearing acting on behalf of the Exchange in
changes to facilitate the reintegration of in a proceeding under the Rule 9000 connection with the Rule 8000 and 9000
certain regulatory functions from FINRA Series and from providing expert Series.11
testimony in a proceeding under the The Exchange also proposes to delete
by providing that investigative and Rule 9000 Series within one year of
the definitions of ‘‘Head of
termination, respectively;
8 The Exchange currently delegates to NYSE
(5) amend Rules 9211, 9216 and 9270 to Enforcement’’ (Rule 9120(q)) and ‘‘Head
Regulation certain responsibilities and functions of
provide that the CRO would be of Market Regulation’’ (Rule 9120(r)),
the Exchange, including taking ‘‘action to assure which refer to the FINRA department
compliance with the rules, interpretations, policies responsible for authorizing complaints;
and procedures of [the Exchange], the federal approving letters of acceptance, waiver, heads.12
securities laws, or other laws, rules and regulations and consent; approving minor rule Similarly, the Exchange proposes to
that [the Exchange] has the authority to administer violation plan letters; and approving replace the reference to the ‘‘Department
or enforce, through examination, surveillance, offers of settlement in place of FINRA’s of Enforcement or the Department of
investigation, enforcement, disciplinary and other ODA; and
programs.’’ Delegation Agreement by and among
Market Regulation’’ in Rule 9120(y)
(6) amend Rules 476, 8120, 9001, 9110, 9217, (definition of the term ‘‘Party’’) with
New York Stock Exchange LLC, NYSE Regulation,
Inc. and NYSE Market, Inc. (the ‘‘Delegation 9232, 9310 and 9810 to make certain ‘‘Enforcement.’’ The Exchange further
Agreement’’), Section II, A.2. The Exchange, technical changes and correct a
typographical error.
proposes to streamline the definition of
however, retains ultimate responsibility for such
delegated responsibilities and functions. See ‘‘Interested Staff’’ (Rule 9120(u)) to
Securities Exchange Act Release No. 53382, 71 FR The Exchange proposes that the eliminate references to Exchange and
11251, 11264 (February 27, 2006) (SR–NYSE–2005– changes described herein would be FINRA departments and staff, and
77). Actions taken by NYSE Regulation pursuant to operative on January 1, 2016, following provide that ‘‘Interested Staff’’ under
delegated authority remain subject to review, the reintegration of certain regulatory
approval or rejection by the board of directors of the any proceeding brought under the Code
Exchange. The one exception is that actions taken functions from FINRA as described
by NYSE Regulation upon review of disciplinary below. 11 Certain rules in the Rule 8000 and 9000 Series

decisions by the NYSE Regulation board of currently refer to ‘‘Exchange staff,’’ a term which
directors is not subject to review, approval or Replacement of References To Exchange includes NYSE employees, NYSE Regulation staff
rejection by the Exchange and constitutes a final and FINRA Departments and Personnel that administers rules under the Delegation
action of the Exchange. See Delegation Agreement, With References to Enforcement and Agreement, and authorized FINRA staff pursuant to
Section I. The Exchange is not proposing in this Rules 0 and 1. The proposed definition of
filing any changes to its rules that impact the
Regulatory Staff ‘‘Regulatory Staff’’ provides that for purposes of the
review of disciplinary decisions by the NYSE The Exchange proposes to amend Rule 8000 Series and Rule 9000 Series (except for
tkelley on DSK3SPTVN1PROD with NOTICES

Regulation board of directors. Rule 9557), the term ‘‘Exchange staff’’ shall have the
9 It is anticipated that FINRA, under a new RSA
Rules 9120, 9131, 9146, 9211, 9212, same meaning as ‘‘Regulatory Staff.’’
currently being negotiated, would continue to 9213, 9215, 9216, 9251, 9253, 9264, 12 The Exchange also proposes to delete the

conduct, inter alia, the registration, testing and definition of ODA (Rule 9120(v)) and replace all
examination of broker-dealer members of the 10 NYSE Regulation staff report to the Chief references to ODA in the Exchange’s rules with
Exchange, and certain cross-market surveillance Executive Officer of NYSE Regulation, who is also ‘‘CRO,’’ for the reasons discussed in ‘‘Substitution
and related investigation and enforcement the Chief Regulatory Officer (‘‘CRO’’) of the of CRO for ODA in Rules 9211, 9216 and 9270,’’
activities. Exchange. infra.

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51336 Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices

of Procedure means Regulatory Staff or Rule 9211 to provide that the Regulation prepares and requests that a
Exchange staff who (i) report, directly or Exchange’s CRO would authorize member organization or covered person
indirectly, to any Enforcement issuance of a complaint. execute an AWC letter, and ‘‘Exchange
employee, or to the head of any • Rule 9212 (Complaint Issuance) sets staff’’ may determine the effective date
department or office that issues a notice forth the requirements of the complaint. of sanctions unless the letter states
or decision or is designated as a Party In subsection (a)(1), the Exchange otherwise. The Exchange proposes to
under the Rule 9000 Series, (ii) directly proposes to delete the first sentence as replace ‘‘Department of Enforcement or
participated in the authorization or redundant, and to delete two references the Department of Market Regulation’’
initiation of a complaint or proceeding, to ‘‘Department of Enforcement or the in Rule 9216(a)(1) with ‘‘Enforcement’’
or (iii) directly participated in the Department of Market Regulation.’’ The to permit any department reporting to
proceeding, or directly participated in proposed change would permit the CRO that meets the definition of
an examination, investigation, ‘‘authorized Enforcement staff’’ to sign a ‘‘Enforcement,’’ in addition to the
prosecution, or litigation related to a complaint that would be served by relevant FINRA departments, to prepare
proceeding, as well as any person(s) ‘‘Enforcement.’’ and request execution of AWC letters.
who supervise such staff. Thus, as in the The Exchange also proposes to The Exchange also proposes to replace
current definition, the new definition of replace ‘‘Department of Enforcement or ‘‘Exchange staff’’ with ‘‘Regulatory
‘‘Interested Staff’’ in a particular matter the Department of Market Regulation’’ Staff’’ to identify the staff that may
encompasses supervisory personnel up with ‘‘Enforcement’’ in Rule 9212(a)(2) determine the effective date of
to the most senior level, including the to permit, in addition to the relevant sanctions.
CRO, when staff reporting to such FINRA departments, any department Rule 9216(b) (Procedure for Violation
supervisory personnel directly reporting to the CRO that meets the Under Plan Pursuant to SEA Rule 19d–
participated in the matter. definition of ‘‘Enforcement’’ to propose 1(c)(2)) sets forth the procedures for
Finally, the Exchange proposes to a hearing location or that the Chief executing a minor rule violation plan
renumber the remaining definitions in Hearing Officer select a Floor-Based letter.13 Under the current rule, FINRA’s
Rule 9120. Panelist as provided for therein. Department of Enforcement or
• Rule 9131 (Service of Complaint) Similarly, the Exchange proposes to
Department of Market Regulation may
provides that the ‘‘Department of replace ‘‘Department of Enforcement or
prepare and request that a member
Enforcement or the Department of the Department of Market Regulation’’
organization or covered person execute
Market Regulation’’ shall serve a with ‘‘Enforcement’’ in Rule 9212(b) and
a minor rule violation plan letter, and
complaint on both a party and counsel Rule 9212(c)(1) and (2) to enable any
‘‘Exchange staff’’ may determine the
for a party. The Exchange proposes to department reporting to the CRO that
effective date of sanctions unless the
replace these references with meets the definition of ‘‘Enforcement,’’
letter states otherwise. The Exchange
‘‘Enforcement.’’ The proposed change in addition to the relevant FINRA
proposes to replace references to ‘‘the
would enable Enforcement to serve departments, to amend and withdraw
complaints. Department of Enforcement or the
disciplinary complaints beginning
• Rule 9213(a) (Assignment of Department of Market Regulation’’ in
January 1, 2016.
• Rule 9146 (Motions) governs Hearing Officer) provides for the Rule 9216(b)(1) with ‘‘Enforcement’’ so
motion practice under the disciplinary appointment of a Hearing Officer and that any department reporting to the
rules. The Exchange proposes to amend Panelists by the Chief Hearing Officer as CRO that meets the definition of
Rule 9146(k)(1) to replace a reference to soon as practicable after the filing of a ‘‘Enforcement,’’ in addition to FINRA,
the ‘‘Department of Enforcement and the complaint by the ‘‘Department of may prepare and request such letters.
Department of Market Regulation and Enforcement or the Department of The Exchange also proposes to replace
other Exchange staff’’ with ‘‘Regulatory Market Regulation.’’ The Exchange ‘‘Exchange staff’’ with ‘‘Regulatory
Staff.’’ The Exchange also proposes to proposes to replace this reference with Staff’’ to identify the staff that may
replace a reference to ‘‘Exchange staff’’ ‘‘Enforcement’’ to include complaints determine the effective date of
in subsection (k)(2) with ‘‘Regulatory filed by any department reporting to the sanctions.
Staff.’’ The proposed changes would CRO that meets the definition of • Rule 9251 (Inspection and Copying
identify the staff that may receive or use ‘‘Enforcement,’’ in addition to the of Documents in Possession of Staff)
documents subject to a protective order. relevant FINRA departments. requires that documents prepared or
• Rule 9211 (Authorization of • Rule 9215(f) (Answer to Complaint) obtained in connection with an
Complaint) sets forth the process for sets forth the requirements for investigation be made available to a
authorizing issuance of a complaint answering a complaint. The Exchange respondent. The Exchange proposes to
against a member organization or proposes to replace ‘‘Department of amend subsections (a) (documents that
covered person. The Exchange proposes Enforcement or the Department of must be made available for inspection
to replace references to the ‘‘Department Market Regulation’’ with ‘‘Enforcement’’ and copying), (b) (documents withheld
of Enforcement or the Department of in Rule 9215(f) to enable any from inspection and copying), (c) (list of
Market Regulation’’ with ‘‘Enforcement’’ department reporting to the CRO that documents withheld), (d) (timing of
in Rules 9211(a)(1) and (a)(2). The meets the definition of ‘‘Enforcement,’’ inspection and copying), and (g) (failure
Exchange proposes to add the phrase in addition to the relevant FINRA to make documents available) to replace
‘‘has reason to believe’’ in subsection departments, to send a second notice if references to ‘‘the Department of
(a)(1) with reference to Enforcement to a respondent does not file an answer or Enforcement or the Department of
make the construction consistent with timely respond to the complaint. Market Regulation’’ with ‘‘Enforcement’’
• Rule 9216(a) (Acceptance, Waiver, to bring departments reporting to the
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other disciplinary rules (e.g., Rule
9216). The proposed change would and Consent Procedures) sets forth the CRO that meet the definition of
enable the Exchange, in addition to procedures by which a respondent can
13 A minor rule violation plan letter under the
FINRA, to authorize and issue execute an AWC letter prior to the
Exchange’s rules permits a fine not to exceed $2,500
disciplinary complaints beginning issuance of a complaint. Under the and/or a censure to be imposed with respect to
January 1, 2016. As discussed below, current rule, FINRA’s Department of certain specifically enumerated rules. See Rules
the Exchange also proposes to amend Enforcement or Department of Market 9216(b)(1) and 9217.

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Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices 51337

‘‘Enforcement’’ within the scope of this • Rule 9552 (Failure to Provide the event Enforcement fails to appear at
rule. Information or Keep Information a hearing.
• Rule 9253 (Production of Witness Current) sets forth procedures for
Statements) sets forth the procedures for Independence of the CRO and Staff in
expedited proceedings relating to a
filing motions to obtain witness the Disciplinary Process
member organization or covered
statements. The Exchange proposes to person’s failure to provide information The Exchange proposes to amend
amend Rule 9253(a) and (b) to replace or keep information current. The Rules 8210 and 9110 to add rule text
‘‘Department of Enforcement or the Exchange proposes to replace providing that in performing functions
Department of Market Regulation’’ with ‘‘Exchange staff’’ with ‘‘Regulatory under the disciplinary code, the CRO
‘‘Enforcement’’ to bring departments Staff’’ to identify the staff that initiates and Regulatory Staff would function
reporting to the CRO that meet the and otherwise participates in such independently of the commercial
definition of ‘‘Enforcement’’ within the proceedings. interests of the Exchange and the
scope of this Rule. • Rule 9554 (Failure to Comply with commercial interests of the member
• Rule 9264 (Motion for Summary an Arbitration Award or Related organizations. This requirement is
Disposition) sets forth the procedures Settlement or an Order of Restitution or already being met and is consistent with
for filing summary disposition motions. Settlement Providing for Restitution) longstanding policies and practices at
The Exchange proposes to replace governs expedited proceedings relating the Exchange. The proposed change
‘‘Department of Enforcement or the to noncompliance with an arbitration would also be consistent with rules
Department of Market Regulation’’ with award, settlement agreement, or currently in effect for the equities and
‘‘Enforcement’’ to bring departments restitution order. The Exchange options markets of the Exchange’s
reporting to the CRO that meet the proposes to replace ‘‘Exchange staff’’ affiliate NYSE Arca, Inc., and would
definition of ‘‘Enforcement’’ within the with ‘‘Regulatory Staff’’ to identify the reflect the Exchange’s ongoing
scope of this Rule. staff that initiates and otherwise commitment to performing its
• Rule 9269 (Default Decisions) sets participates in such proceedings. regulatory functions under its
forth the process for issuance and • Rule 9556 (Failure to Comply with disciplinary rules in an independent
review of default decisions. The Temporary and Permanent Cease and and impartial manner.15
Exchange proposes to replace Desist Orders) governs expedited
‘‘Department of Enforcement or the proceedings relating to noncompliance One Year Revolving Door Restriction
Department of Market Regulation’’ in with a temporary or permanent cease and Prohibition on Serving as Expert
subsection (a)(2) with ‘‘Enforcement’’ in and desist order. The Exchange Witness
order to bring departments reporting to proposes to replace ‘‘Exchange staff’’ Rule 9141 governs appearances in a
the CRO that meet the definition of with ‘‘Regulatory Staff’’ to identify the proceeding. The Exchange proposes to
‘‘Enforcement’’ within the scope of this staff that initiates and otherwise amend Rule 9141 by adding a new
Rule. The Exchange also proposes to participates in such proceedings. section (c) that would prohibit former
replace ‘‘Exchange staff’’ with • Rule 9810 (Initiation of Proceeding) Regulatory Staff from making an
‘‘Regulatory Staff’’ in subsection (d) to sets forth procedures for initiating appearance before an Adjudicator on
identify the staff that may determine the temporary cease and desist proceedings. behalf of any other person in any
effective date of certain sanctions. The Exchange proposes to replace proceeding under the Rule 9000 Series
• Rule 9270 (Settlement Procedure) ‘‘Department of Enforcement or the within one year immediately following
governs offers of settlement. The Department of Market Regulation’’ with termination of employment with the
Exchange proposes to replace ‘‘the ‘‘Enforcement’’ in the title and the text Exchange or FINRA. The rule text is
Department of Enforcement or the of the rule to permit a department broader than FINRA’s counterpart rule
Department of Market Regulation’’ in reporting to the CRO that meets the in that it covers not only former FINRA
subsections (e) and (f) with definition of ‘‘Enforcement’’ to initiate staff but also former Regulatory Staff
‘‘Enforcement’’ in order to permit a such proceedings. that reported to the CRO, and covers
department reporting to the CRO that • The Exchange proposes to replace
both officers and employees. The rule
meets the definition of ‘‘Enforcement’’ references to ‘‘Department of
text is otherwise substantially the same
to consider offers of settlement by Enforcement or the Department of
as the text of FINRA Rule 9141(c),
respondents. The Exchange also Market Regulation’’ with ‘‘Enforcement’’
which the Exchange declined to adopt
proposes to replace ‘‘Exchange staff’’ in Rule 9820 (Appointment of Hearing
in 2013.16 At the time, the Exchange did
with ‘‘Regulatory Staff’’ in subsection Officer and Hearing Panel), which
not believe it was necessary to bar
(c)(5) to identify the staff that may governs the appointment of Hearing
former employees from such
determine the effective date of sanctions Officers and Panelists for temporary
appearances because its employees were
when provided in an offer of cease and desist proceedings, to bring
not conducting disciplinary functions
settlement.14 departments reporting to the CRO that
and their appearance would not create
• Rule 9551 (Failure to Comply with meet the definition of ‘‘Enforcement’’
the same type of potential conflict of
Public Communication Standards) within the scope of this Rule.
• Rule 9830 (Hearing) sets forth interest. Once Regulatory Staff reporting
governs expedited proceedings relating to the CRO again directly perform
hearing procedures for temporary cease
to a member organization’s departure market surveillance, investigation and
and desist proceedings. The Exchange
from the public communication enforcement functions following
proposes to amend Rule 9830(b) and (h)
standards of Rule 2210. The Exchange expiration of the current RSA, that
to replace ‘‘Department of Enforcement
proposes to replace ‘‘Exchange staff’’ would no longer be the case and the
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or the Department of Market
with ‘‘Regulatory Staff’’ to identify the Exchange therefore believes that such a
Regulation’’ with ‘‘Enforcement’’ to
staff that initiates and otherwise prohibition would help prevent
permit service of a notice in a temporary
participates in such proceedings.
cease and desist proceeding on a 15 See Arca Equities Rule 10.2(a); Arca Options
14 As discussed below, the Exchange further
department reporting to the CRO that Rule 10.2(a).
proposes to amend Rule 9270 to have certain offers meets the definition of ‘‘Enforcement,’’ 16 See Securities Exchange Act Release No. 69045,

of settlement submitted to the CRO and not ODA. and to describe available remedies in 78 FR at 15395 n.14.

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51338 Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices

potential conflicts or appearance of The proposed change is also consistent 9270(f)(3), would be issued and become
conflicts of interest. with certain powers the CRO currently final. Under proposed Rule 9270(h), if
Similarly, the Exchange proposes to has under the disciplinary rules.18 the CRO does not accept an uncontested
amend Rule 9242, which governs pre- Moreover, as noted above, by rule the offer of settlement, the respondent
hearing submissions, to add a new CRO would be required to operate would be notified in writing and the
section (b) prohibiting former independently of the commercial offer of settlement and proposed order
Regulatory Staff from providing expert interests of the Exchange and of member of acceptance would be deemed
testimony on behalf of any other person organizations. withdrawn.19 Under proposed Rule
in any proceeding under the Rule 9000 To accomplish these changes, the 9270(j), an offer of settlement rejected
Series within one year immediately Exchange proposes to amend Rules by the CRO would not prejudice a
following termination of employment 9211, 9216 and 9270 as follows: respondent and would not be
with the Exchange or FINRA. The • Rule 9211(a)(1) and (a)(2) would be introduced into evidence in connection
Exchange also proposes that nothing in amended to replace ‘‘Office of with the determination of the issues
proposed Rule 9242(b) would prohibit Disciplinary Affairs’’ with ‘‘CRO.’’ This involved in the pending complaint or in
former Regulatory Staff from testifying proposed change would identify the any other proceeding. This is consistent
as a witness on behalf of the Exchange CRO rather than ODA as being with the current rule as it relates to an
or FINRA. The rule text is broader than responsible for authorizing Enforcement offer of settlement that is not accepted
FINRA’s counterpart rule in that it to issue a complaint. by ODA.
covers not only former FINRA staff but • Rule 9216(a)(3) and (a)(4) would be
also former Regulatory Staff that amended to replace references to Miscellaneous Amendments to Rules
reported to the CRO, and covers both ‘‘Office of Disciplinary Affairs’’ with 476, 8120, 9001, 9110, 9217, 9232, 9310
officers and employees. The rule text is ‘‘CRO.’’ The proposed change would and 9810
otherwise substantially the same as the permit the CRO to accept or reject an The Exchange proposes several
text of FINRA Rule 9242(b), which the AWC letter and, if accepted, to be miscellaneous amendments to make
Exchange declined to adopt in 2013 for deemed final. certain technical changes and correct a
the same reasons it did not adopt the • Rule 9216(a)(4) would be amended typographical error.
one year prohibition of FINRA Rule to provide that if the CRO rejects an First, the Exchange proposes to insert
9141(c). Given the Exchange’s AWC letter, the Exchange may take a reference to the Rule 8000 Series in
anticipated resumption of certain other appropriate disciplinary action Rule 476 in order to clarify that both the
regulatory functions, the Exchange with respect to the alleged violation or Rule 8000 Series and the Rule 9000
believes that a prohibition on former violations. This is consistent with the Series would apply to proceedings for
Regulatory Staff providing expert current rule as it relates to an AWC which no Charge Memorandum was
testimony would help prevent potential letter that is rejected by FINRA’s ODA. filed with the hearing board under Rule
conflicts or appearance of conflicts of • Rule 9216(b)(3) and (b)(4) would be 476(d) prior to July 1, 2013 and for
interest. The Exchange also believes amended to replace ‘‘Office of which no written Stipulation and
that, consistent with FINRA Rule Disciplinary Affairs’’ with ‘‘CRO.’’ This Consent was submitted to a Hearing
9242(b), permitting a former Regulatory proposed change would allow an Officer prior to July 1, 2013.20 The
Staff member to testify as a witness on executed minor rule violation plan letter Exchange proposes the same change to
behalf of the Exchange does not pose to be submitted to the CRO, which, on Rule 9001, which specifies the effective
potential conflicts of interest. behalf of the SRO Board, may accept or date of the Rule 9000 Series.
reject it. If accepted, it would be deemed Second, the Exchange proposes to
Substitution of CRO for ODA in Rules final; if the CRO rejects the letter, the delete the last sentence in Rule 476 as
9211, 9216 and 9270 Exchange may take other appropriate obsolete. By its terms, that sentence
The Exchange proposes that the CRO disciplinary action with respect to the relates only to orders issued on or before
rather than FINRA’s ODA would be alleged violation or violations. This is July 1, 2013.
responsible for: (1) Authorizing issuance consistent with the current rule as it Third, the Exchange proposes to add
of a complaint; (2) accepting or rejecting relates to a minor rule violation plan a reference to the term ‘‘Regulatory
AWC letters and minor rule violation letter that is accepted or rejected by Staff’’ in Rule 8120, because, as set forth
plan letters; and (3) accepting or ODA. above, that new defined term is
rejecting uncontested offers of • Finally, Rule 9270(e), (f), (h), and (j) referenced in certain proposed changes
settlement. would also be amended to replace to the Rule 8000 Series.
The Exchange believes that providing ‘‘Office of Disciplinary Affairs’’ with
Fourth, the Exchange proposes to
for the CRO to authorize issuance of ‘‘CRO.’’ The proposed change to
delete the last sentence in Rule 9110(c)
complaints and approve settlements subsection (f) would provide that
as obsolete.
would be consistent with the uncontested offers of settlement would
Exchange’s reintegration of regulatory be transmitted to the CRO and, if 19 Because the Exchange does not have sanction
functions and the rules of other SROs.17 accepted under proposed Rule guidelines, the CRO, Hearing Panel, or Extended
Hearing Panel, as applicable, would consider
17 See e.g., BATS Exchange Rules 8.4 and 8.8; 1604 and 1609; MIAX Rules 1003, 1004 and 1009; Exchange precedent or such other precedent as it
Chicago Stock Exchange Article 12, Rules 1(b) and BOX Rules 12030, 12040 and 12090. deemed appropriate in determining whether or not
(d) (providing that the CRO shall direct written 18 In adopting FINRA’s disciplinary rules, the to accept a settlement offer under Rule 9270. See
charges and approve or reject offers of settlement). Exchange provided that the CRO, rather than Securities Exchange Act Release No. 68678 at 43
The International Securities Exchange (‘‘ISE’’), FINRA’s CEO, would authorize the initiation of n.38 (January 16, 2013), 78 FR 5213 at 5229 n.39
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Miami International Securities Exchange (‘‘MIAX’’) temporary cease and desist proceedings and the (January 24, 2013) (SR–NYSE–2013–02).
and BOX Options Exchange (‘‘BOX’’) also provide initiation of suspension or cancellation proceedings 20 Rule 476 is the Exchange’s legacy disciplinary

that complaints are to be approved by the CRO. for a violation of a temporary cease and desist rule that applies to a Charge Memorandum filed
Each also requires offers of settlement to be order. The Exchange also retained the ability of the under Rule 476(d) prior to July 1, 2013 or for which
authorized by the CRO if a hearing panel has not CRO to resolve certain procedural matters in a written Stipulation and Consent was submitted
yet been appointed, and requires letters of consent connection with settlements under Rule 9270(d). prior to July 1, 2013. See Securities Exchange Act
to be authorized by the CRO and approved by a See Securities Exchange Act Release No. 69045, 78 Release Nos. 68678, 78 FR at 5213 and 69045, 78
business conduct committee. See ISE Rules 1603, FR at 15394, 15398–15400 & n.24. FR at 15394.

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Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices 51339

Fifth, the Exchange proposes to the prohibition or limitation by the transparency and add consistency to the
correct a typographical error in Rule Exchange of any person with respect to Exchange’s Rules.
9217, which sets forth the rules eligible access to services offered by the The Exchange believes that adding
for minor rule plan fines, by adding a Exchange or a member thereof. In rule text to Rules 8210 and 9110 stating
dash in the rule text describing Rule addition, the Exchange believes that the that the CRO and Regulatory Staff
123C. proposed rule change furthers the would function independently of the
Sixth, the Exchange proposes to objectives of Section 6(b)(3) of the Act,25 commercial interests of the Exchange
amend Rule 9232(b), which governs in particular, in that it supports the fair and the commercial interests of member
appointment of panelists, to provide representation of members in the organizations in performing functions
that the Board shall from time to time administration of the Exchange’s affairs. under the disciplinary rules would
appoint a Hearing Board as set forth in The Exchange believes that further ensure the integrity and
the rule. Under the current rule, the eliminating references to FINRA independence of the disciplinary
Chairman of the Board, subject to Board departments and replacing them with process and further provide fair
approval, has this responsibility. The ‘‘Enforcement,’’ a new defined term that procedures for the disciplining of
Exchange believes that because the includes any department reporting to members and persons associated with
approval of the Board is required for the CRO of the Exchange with members. For the same reasons,
appointment of the Hearing Board, it is responsibility for investigating or addition of the proposed rule text would
not necessary to specify that the imposing sanctions on a member protect investors and the public interest
Chairman of the Exchange Board would organization or covered person, in and would therefore be consistent with
appoint the Hearing Board subject to addition to FINRA’s departments of Section 6(b)(5) of the Exchange Act.
such approval. Enforcement and Market Regulation, in The Exchange believes that
Seventh, the Exchange proposes two Rules 9120, 9131, 9146, 9211, 9212, prohibiting former Regulatory Staff from
[sic] technical, clarifying amendments 9213, 9215, 9216, 9251, 9253, 9264, representing respondents and providing
to Rule 9310. The Exchange proposes to 9269, 9270, 9810, 9820 and 9830 would expert testimony in Exchange
amend Rule 9310 to provide that none facilitate the Exchange’s ability to disciplinary matters within one year
of the persons referenced in the Rule, directly conduct investigations and immediately following termination of
i.e., Board directors, members of the bring disciplinary actions for matters it employment would provide greater
Committee for Review, and the parties, will be conducting after the harmonization between Exchange and
may request Board review of a decision reintegration of certain functions next FINRA rules of similar purpose. As
concerning an Exchange member that is year. The Exchange believes that previously noted, the proposed rule text
an affiliate. Under the current Rule, only defining ‘‘Regulatory Staff’’ as including is based on FINRA’s current rule text,
the parties are prohibited from any officer or employee reporting which already has been approved by the
requesting Board review of a decision in directly or indirectly to the CRO of the Commission. As such, the proposed rule
such circumstances.21 Exchange in addition to FINRA staff change would foster cooperation and
Finally, the Exchange proposes to add acting on behalf of the Exchange in coordination with persons engaged in
the phrase ‘‘Service and Filing of connection with the Rule 8000 and 9000 facilitating transactions in securities and
Notice’’ to the title of Rule 9810(a) in Series, in Rules 9120, 9146, 9216, 9269, will remove impediments to and perfect
order to identify the subject matter 9270, 9551, 9552, 9554, and 9556 would the mechanism of a free and open
covered by the rule. similarly facilitate the Exchange’s market and a national market system.
ability to directly conduct investigations The Exchange also believes that
2. Statutory Basis
and bring disciplinary actions, as well making the CRO responsible for
The Exchange believes that the as FINRA. authorizing complaints and approving
proposed rule change is consistent with Because the substance of the rules AWC letters, minor rule violation plan
Section 6(b) of the Act,22 in general, and would remain unchanged, the Exchange letters and offers of settlement in place
furthers the objectives of Section 6(b)(5) believes that the proposed change of FINRA’s ODA is fair and reasonable,
of the Act,23 in particular, in that it is would provide fair procedures for the and provides adequate procedural
designed to promote just and equitable disciplining of members and persons protections. In particular, requiring
principles of trade and to remove associated with members, the denial of approval of complaints and settlements
impediments to and perfect the membership to any person seeking by an independent CRO will serve as an
mechanism of a free and open market membership therein, the barring of any appropriate check on the authority of
and a national market system. In person from becoming associated with a the investigative and enforcement staff
addition, the Exchange believes that the member thereof, and the prohibition or at both the Exchange and FINRA to
proposed rule change furthers the limitation by the Exchange of any bring and resolve such actions.
objectives of Section 6(b)(7) of the Act,24 person with respect to access to services Further, the Exchange believes that by
in particular, in that it provides fair offered by the Exchange or a member having decisions regarding initiating
procedures for the disciplining of thereof. Further, removing references to and resolving formal disciplinary
members and persons associated with Exchange and FINRA offices and actions and resolving minor rule
members, the denial of membership to departments in the Exchange’s Rules violations made by an individual with
any person seeking membership therein, that are unnecessary in light of Rule 0 the most direct expertise relevant to the
the barring of any person from becoming removes impediments to and perfects a NYSE’s markets,26 the proposal
associated with a member thereof, and national market system because it promotes efficiency and consistency
would reduce potential confusion that and aligns the Exchange’s process with
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21 A decision with respect to an Exchange may result from retaining different other SROs. As noted above, the
member that is an affiliate of the Exchange designations in the Exchange’s
constitutes final Exchange disciplinary action
proposed change is consistent with the
pursuant to SEC Rule 19d–1(c)(1) and may not be
rulebook. Removing potentially reintegration of regulatory functions by
reviewed by the Board. See Rule 9268(e)(2). confusing conflicting designations the Exchange and the practices at other
22 15 U.S.C. 78f(b). would also further the goal of
23 15 U.S.C. 78f(b)(5). 26 See, e.g., Securities Exchange Act Release No.
24 15 U.S.C. 78f(b)(7). 25 15 U.S.C. 78f(b)(3). 69045, 78 FR at 15401.

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51340 Federal Register / Vol. 80, No. 163 / Monday, August 24, 2015 / Notices

SROs where CROs authorize issuance of to be appropriate and publishes its 2015–35, and should be submitted on or
complaints and approve settlements. reasons for so finding or (ii) as to which before September 14, 2015.
Finally, making technical the self-regulatory organization For the Commission, by the Division of
amendments and correcting a consents, the Commission will: Trading and Markets, pursuant to delegated
typographical error in Rules 476, 8120, (A) by order approve or disapprove authority.27
9001, 9110, 9217, 9232, 9310 and 9810 such proposed rule change, or Robert W. Errett,
removes impediments to and perfects (B) institute proceedings to determine Deputy Secretary.
the mechanism of a free and open whether the proposed rule change
[FR Doc. 2015–20792 Filed 8–21–15; 8:45 am]
market by removing confusion that may should be disapproved.
BILLING CODE 8011–01–P
result from having incorrect or IV. Solicitation of Comments
redundant material in the Exchange’s
rulebook. The Exchange believes that Interested persons are invited to
submit written data, views, and SECURITIES AND EXCHANGE
eliminating incorrect or redundant COMMISSION
material would not be inconsistent with arguments concerning the foregoing,
the public interest and the protection of including whether the proposed rule [Release No. 34–75723; File No. SR–BATS–
investors because investors will not be change is consistent with the Act. 2015–60]
harmed and in fact would benefit from Comments may be submitted by any of
the following methods: Self-Regulatory Organizations; BATS
increased transparency, thereby
Exchange, Inc.; Notice of Filing and
reducing potential confusion. Removing Electronic Comments Immediate Effectiveness of a Proposed
such references will also remove
impediments to and perfects the • Use the Commission’s Internet Rule Change Related to Fees for Use
comment form (http://www.sec.gov/ of BATS Exchange, Inc.
mechanism of a free and open market by
ensuring that persons subject to the rules/sro.shtml); or
August 18, 2015.
• Send an email to rule-comments@
Exchange’s jurisdiction, regulators, and Pursuant to section 19(b)(1) of the
sec.gov. Please include File Number SR–
the investing public can more easily Securities Exchange Act of 1934 (the
NYSE–2015–35 on the subject line.
navigate and understand the Exchange’s ‘‘Act’’),1 and Rule 19b–4 thereunder,2
rulebook. The Exchange believes that Paper Comments notice is hereby given that on August 7,
eliminating incorrect or redundant • Send paper comments in triplicate 2015, BATS Exchange, Inc. (the
material would not be inconsistent with to Brent J. Fields, Secretary, Securities ‘‘Exchange’’ or ‘‘BATS’’) filed with the
the public interest and the protection of and Exchange Commission, 100 F Street Securities and Exchange Commission
investors because investors will not be NE., Washington, DC 20549–1090. (‘‘Commission’’) the proposed rule
harmed and in fact would benefit from All submissions should refer to File change as described in Items I, II and III
increased transparency, thereby below, which Items have been prepared
Number SR–NYSE–2015–35. This file
reducing potential confusion. Removing by the Exchange. The Exchange has
number should be included on the
such references will also further the goal designated the proposed rule change as
subject line if email is used. To help the
of transparency and add clarity to the one establishing or changing a member
Commission process and review your
Exchange’s rules. due, fee, or other charge imposed by the
comments more efficiently, please use
Exchange under section 19(b)(3)(A)(ii)
B. Self-Regulatory Organization’s only one method. The Commission will
of the Act 3 and Rule 19b–4(f)(2)
Statement on Burden on Competition post all comments on the Commission’s
thereunder,4 which renders the
The Exchange does not believe that Internet Web site (http://www.sec.gov/
proposed rule change effective upon
the proposed rule change will impose rules/sro.shtml). Copies of the
filing with the Commission. The
any burden on competition that is not submission, all subsequent Commission is publishing this notice to
necessary or appropriate in furtherance amendments, all written statements solicit comments on the proposed rule
of the purposes of the Act. The with respect to the proposed rule change from interested persons.
proposed rule change is not intended to change that are filed with the
Commission, and all written I. Self-Regulatory Organization’s
address competitive issues but rather to
communications relating to the Statement of the Terms of Substance of
enable the Exchange to directly
proposed rule change between the the Proposed Rule Change
investigate and initiate disciplinary
actions following and facilitate the Commission and any person, other than The Exchange filed a proposal to
reintegration of certain regulatory those that may be withheld from the amend the fee schedule applicable to
functions from FINRA. public in accordance with the Members 5 and non-members of the
provisions of 5 U.S.C. 552, will be Exchange pursuant to BATS Rules
C. Self-Regulatory Organization’s available for Web site viewing and 15.1(a) and (c) (‘‘Fee Schedule’’) to
Statement on Comments on the printing in the Commission’s Public remove fees for BATS Investor Pro and
Proposed Rule Change Received From Reference Room, 100 F Street NE., BATS Investor RT, as the Exchange will
Members, Participants, or Others Washington, DC 20549 on official no longer make these products available
No written comments were solicited business days between the hours of as of August 29, 2015.
or received with respect to the proposed 10:00 a.m. and 3:00 p.m. Copies of such The text of the proposed rule change
rule change. filing also will be available for is available at the Exchange’s Web site
inspection and copying at the principal
III. Date of Effectiveness of the office of the Exchange. All comments 27 17 CFR 200.30–3(a)(12).
Proposed Rule Change and Timing for
tkelley on DSK3SPTVN1PROD with NOTICES

received will be posted without change; 1 15 U.S.C. 78s(b)(1).
Commission Action the Commission does not edit personal 2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
Within 45 days of the date of identifying information from
4 17 CFR 240.19b–4(f)(2).
publication of this notice in the Federal submissions. You should submit only 5 The term ‘‘Member’’ is defined as ‘‘any
Register or within such longer period information that you wish to make registered broker or dealer that has been admitted
up to 90 days (i) as the Commission may available publicly. All submissions to membership in the Exchange.’’ See Exchange
designate if it finds such longer period should refer to File Number SR–NYSE– Rule 1.5(n).

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Document Created: 2015-12-15 10:54:33
Document Modified: 2015-12-15 10:54:33
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 51334