81 FR 31974 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting New NYSE Rules 2090 (Know Your Customer) and 2111 (Suitability) That Are Substantially Similar to FINRA Rules 2090 and 2111 and Deleting Current Rule 405 and the Related NYSE Rule Interpretation To Harmonize Its Rules With Certain Financial Industry Regulatory Authority, Inc. Rules

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 98 (May 20, 2016)

Page Range		31974-31977
FR Document		2016-11884
Federal Register, Volume 81 Issue 98 (Friday, May 20, 2016)
[Federal Register Volume 81, Number 98 (Friday, May 20, 2016)]
[Notices]
[Pages 31974-31977]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-11884]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77838; File No. SR-NYSE-2016-33]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Adopting New NYSE Rules 2090 (Know Your Customer) and 2111 
(Suitability) That Are Substantially Similar to FINRA Rules 2090 and 
2111 and Deleting Current Rule 405 and the Related NYSE Rule 
Interpretation To Harmonize Its Rules With Certain Financial Industry 
Regulatory Authority, Inc. Rules

May 16, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ notice is hereby given that on May 3, 2016, 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, II, and III below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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: (1) Adopting new NYSE Rules 2090 (Know Your 
Customer) and 2111 (Suitability) that are substantially similar to 
FINRA Rules 2090 (Know Your Customer) and 2111 (Suitability); (2) 
deleting current Rule 405 (Diligence as to Accounts) and the related 
NYSE Rule Interpretation in order to harmonize its rules with certain 
Financial Industry Regulatory Authority, Inc. (``FINRA'') rules; and 
(3) making other conforming changes. 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of 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 its rules to harmonize with certain 
FINRA rules. Specifically, the Exchange proposes: (1) Adopting new NYSE 
Rules 2090 and 2111 that are substantially similar to FINRA Rules 2090 
and 2111; (2) deleting Rule 405 \4\ and the related NYSE Rule 
Interpretation; and (3) making other conforming changes.
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    \4\ References to ``Rules'' are to NYSE Rules unless otherwise 
indicated.
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Background
    In 2007, the Exchange and FINRA \5\ entered into an agreement (the 
``Agreement'') pursuant to Rule 17d-2 under the Act to reduce 
regulatory duplication by allocating to FINRA certain regulatory 
responsibilities for NYSE rules and rule interpretations (``FINRA 
Incorporated NYSE Rules'').\6\ In order to reduce regulatory 
duplication and relieve firms that are both members of the Exchange and 
FINRA of conflicting or unnecessary regulatory burdens, FINRA has been 
reviewing and amending the NASD and FINRA Incorporated NYSE Rules in 
order to create a consolidated FINRA rulebook.\7\ NYSE MKT LLC (``NYSE

[[Page 31975]]

MKT'') became a party to the Agreement effective December 15, 2008.\8\
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    \5\ NYSE Regulation, Inc., a former not-for-profit subsidiary of 
the Exchange, was also a party to the Agreement by virtue of the 
fact that it performed regulatory functions for the Exchange 
pursuant to a delegation agreement. See Exchange Act Release No. 
53382 (Feb. 27, 2006), 71 FR 11251, 11264-65 (Mar. 6, 2006) (SR-
NYSE-2005-77) (approving delegation agreement). The delegation 
agreement terminated on February 16, 2016, and NYSE Regulation has 
ceased providing regulatory services to the Exchange, which has re-
integrated its regulatory functions.
    \6\ See Exchange Act Release Nos. 56148 (July 26, 2007), 72 FR 
42146 (Aug. 1, 2007) (order approving the Agreement); 56147 (Jul. 
26, 2007), 72 FR 42166 (Aug. 1, 2007) (SR-NASD-2007-054) (order 
approving the incorporation of certain NYSE Rules as ``Common 
Rules''). Paragraph 2(b) of the Agreement sets forth procedures 
regarding proposed changes by FINRA or the Exchange to the substance 
of any of the Common Rules.
    \7\ FINRA's rulebook currently has three sets of rules: (1) NASD 
Rules; (2) FINRA Incorporated NYSE Rules; and (3) consolidated FINRA 
Rules. The FINRA Incorporated NYSE Rules apply only to those members 
of FINRA that are also members of the NYSE (``Dual Members''), while 
the consolidated FINRA Rules apply to all FINRA members. For more 
information about the FINRA rulebook consolidation process, see 
FINRA Information Notice, March 12, 2008.
    \8\ See Exchange Act Release No. 60409 (Jul. 30, 2009), 74 FR 
39353 (Aug. 6, 2009) (order approving the amended and restated 
Agreement, adding NYSE MKT as a party). Paragraph 2(b) of the 
Agreement sets forth procedures regarding proposed changes by FINRA, 
NYSE or NYSE MKT to the substance of any of the Common Rules.
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    As part of the rule consolidation process, in 2010, FINRA 
harmonized NASD and FINRA Incorporated NYSE Rules and interpretations 
concerning know your customer and suitability.\9\ In its filing, FINRA: 
(1) Adopted FINRA Rules 2090 (Know Your Customer) and 2090 
(Suitability); and (2) deleted NASD Rule 2310 (Recommendations to 
Customers (Suitability)), NYSE Rule 405 (Diligence as to Accounts), and 
NYSE Rule Interpretations 405/01 through /04. The rule change was 
effective July 9, 2012.\10\
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    \9\ See Exchange Act Release No. 63325 (Nov. 17, 2010), 75 FR 
71479 (Nov. 23, 2010) (SR-FINRA-2010-039) (``FINRA Know Your 
Customer and Suitability Approval'').
    \10\ See FINRA Regulatory Notice 11-25 (May 2011). The original 
effective date was October 7, 2011.
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    Currently, the Exchange does not have separate rules for know your 
customer and suitability. Rather, Rule 405 (Diligence as to Accounts) 
requires every member organization, through a principal executive or a 
person or persons designated under the provisions of Rule 3110(a), to 
take certain actions relative to customers and customer accounts. 
First, Rule 405(1) requires member organizations to use ``due 
diligence'' to learn the ``essential facts relative to every customer, 
every order, every cash or margin account accepted or carried by such 
organization and every person holding power of attorney over any 
account accepted or carried by such organization.'' Second, Rule 405(2) 
requires member organizations to supervise diligently all accounts 
handled by registered representatives. Finally, Rule 405(3) requires 
persons designated by the member to be informed of the essential facts 
relative to the customer and to the nature of the proposed account 
prior to approving the opening of the account.
    Supplementary Material .10 of Rule 405 discusses the requirement 
that firms know their customers and imposes specific knowledge and due 
diligence requirements in connection with the authority of third 
parties to act on behalf of customers that are legal entities, 
including margin accounts carried by a member organization for a non-
member corporation, cash accounts carried for a non-member corporation, 
and agency accounts carried by a member organization.\11\ Supplementary 
Material .20 of Rule 405 refers to the requirements of Rule 4311 
concerning the permitted allocation of responsibilities between 
introducing and carrying organizations. Supplementary Material .30 
cross references to Rule 414 (Index and Currency Warrants).\12\
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    \11\ As discussed below, the Exchange believes that 
Supplementary Material .10 of Rule 405 is redundant of Proposed Rule 
2090 and Proposed Supplementary Material .01 thereof that would 
require firms to know the essential facts concerning every customer.
    \12\ Rule 414 provides that Rule 723 (Suitability) applies to 
recommendations in currency warrants, currency index warrants and 
stock index warrants. The Exchange proposes to replace the outdated 
references to Rule 723 with a reference to Proposed Rule 2111. The 
Exchange believes that the remaining cross references in Rule 405 
are either no longer necessary or moot.
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Proposed Rule Change
    The Exchange proposes to delete current Rule 405 and the related 
NYSE Rule Interpretation, which are, in main part, either duplicative 
of, or do not align with, the proposed know your customer and 
suitability requirements discussed below, and adopt the text of FINRA 
Rules 2090 and 2111.\13\
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    \13\ The Exchange would also make the following technical and 
conforming changes: (1) Substitute the term ``member organization'' 
for the term ``member,'' which appears in FINRA's rules (see note 
17, infra); (2) substitute the term ``person associated with a 
member organization'' for the term ``associated person,'' which 
appears in FINRA's rules (see note 17, infra); (3) substitute the 
term ``Exchange'' for ``FINRA''; (4) change certain cross-references 
to FINRA rules to cross-references to Exchange rules; and (5) add 
references to Proposed Rules 2090 and 2111 in Rule 3170 (Tape 
Recording of Registered Persons by Certain Firms).
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Proposed Rule 2090 (Know Your Customer)
    Like FINRA Rule 2090, Proposed NYSE Rule 2090 would encompass the 
``main ethical standard'' of Rule 405(1).\14\ The proposed rule would 
require every ``member organization through a principal executive or a 
person or persons designated under the provisions of Rule 3110(a)'' 
\15\ to use ``reasonable diligence,'' with regard to the opening and 
maintenance of every account, in order to know and retain the essential 
facts concerning every customer. The proposed supplementary material 
would define ``essential facts'' as those ``required to (a) effectively 
service the customer's account, (b) act in accordance with any special 
handling instructions for the account, (c) understand the authority of 
each person acting on behalf of the customer, and (d) comply with 
applicable laws, regulations, and rules.'' \16\ The proposed rule would 
be identical to FINRA Rule 2090 except that the proposed rule would use 
the term ``member organization'' rather than the term ``member,'' as 
the terms have different meanings under the FINRA rules and the 
Exchange rules.\17\
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    \14\ See FINRA Know Your Customer and Suitability Approval, 75 
FR at 71480.
    \15\ This is the current formulation in Rule 405, which the 
Exchange proposes to retain. This formulation differs from that of 
FINRA Rule 2090, which does not require a member to fulfill its 
obligations under the rule ``through a principal executive or a 
person or persons designated under the provisions of Rule 3110(a).''
    \16\ See Proposed Rule 2090.01. Like FINRA, the Exchange does 
not propose to incorporate the requirement in NYSE Rule 405(1) to 
learn the essential facts relative to ``every order.'' The Exchange 
agrees with FINRA that the application of existing order-handling 
rules renders this formulation unnecessary. See FINRA Know Your 
Customer and Suitability Approval, 75 FR at 71480. Further, the 
Exchange's proposed suitability rule would also require members and 
member organizations and their associated persons to use reasonable 
diligence to understand the securities and strategies they 
recommend, further obviating the need for this language. See id.
    \17\ Under FINRA Rule 0160(b)(9), ``member'' means an 
organization that is a member of FINRA. NYSE's equivalent term is 
``member organization.'' See Rule 2(b)(i). Under NYSE Rule 2(a), the 
term ``member'' means a natural person associated with a member 
organization that has been approved by the Exchange and designated 
by such member organization to effect transactions on the floor of 
the Exchange or any facility thereof. A ``member'' is not a 
registered broker-dealer and does not have employees; only member 
organizations have employees. As noted below, for purposes of the 
proposed change, the Exchange proposes to continue using the phrase 
``person associated with a member organization'' to indicate 
employees of a member organization for purposes of Proposed Rule 
2111.
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Proposed Rule 2111 (Suitability)
    Proposed Rule 2111, like its FINRA counterpart, would require a 
member organization or person associated with a member organization 
\18\ to have a ``reasonable basis'' to believe that a recommended 
transaction or investment strategy involving a security or securities 
is suitable for the customer. This assessment would be based on the 
information obtained through the reasonable diligence of the member 
organization or person associated with a member organization to 
ascertain the customer's investment profile, which includes, but is not 
limited to, the customer's age, other investments,

[[Page 31976]]

financial situation and needs, tax status, investment objectives, 
investment experience, investment time horizon, liquidity needs, risk 
tolerance, and any other information the customer may disclose to the 
member organization or person associated with a member organization in 
connection with such recommendation.\19\ Like the FINRA rule, the 
proposed rule would explicitly cover a recommended investment 
strategy.\20\ The proposed rule would exclude the following 
communications from the coverage of Proposed Rule 2111 as long as they 
do not include (standing alone or in combination with other 
communications) a recommendation of a particular security or 
securities:
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    \18\ As proposed, Rule 2111 is identical to FINRA Rule 2111 
except that the Exchange proposes to use the phrase ``member 
organization or person associated with a member organization'' 
rather than ``member or an associated person'' to indicate the 
coverage of the rule. As discussed above, ``member'' and ``member 
organization'' have different meanings under the NYSE and FINRA 
rules, and under the NYSE's rules only member organizations can have 
employees. See note 17, supra. The Exchange thus proposes to use the 
phrase ``person associated with a member organization'' to indicate 
employees of a member organization for purposes of Proposed Rule 
2111.
    \19\ See Proposed Rule 2111(a). For institutional customers, the 
proposed rule would, like the FINRA rule, require that a member 
organization or person associated with a member organization have a 
reasonable basis to believe that the institutional customer is 
capable of evaluating investment risks independently, both in 
general and with regard to particular transactions and investment 
strategies, and is exercising independent judgment in evaluating 
recommendations. See Proposed Rule 2111(b). Institutional customers 
would also be required to affirmatively indicate that they are 
exercising independent judgment. See id.
    \20\ See FINRA Know Your Customer and Suitability Approval, 75 
FR at 71481.
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     General financial and investment information, including 
(i) basic investment concepts, such as risk and return, 
diversification, dollar cost averaging, compounded return, and tax 
deferred investment, (ii) historic differences in the return of asset 
classes (e.g., equities, bonds, or cash) based on standard market 
indices, (iii) effects of inflation, (iv) estimates of future 
retirement income needs, and (v) assessment of a customer's investment 
profile;
     Descriptive information about an employer-sponsored 
retirement or benefit plan, participation in the plan, the benefits of 
plan participation, and the investment options available under the 
plan;
     Asset allocation models that are (i) based on generally 
accepted investment theory, (ii) accompanied by disclosures of all 
material facts and assumptions that may affect a reasonable investor's 
assessment of the asset allocation model or any report generated by 
such model, and (iii) in compliance with FINRA Rule 2214 (Requirements 
for the Use of Investment Analysis Tools) if the asset allocation model 
is an ``investment analysis tool'' covered by FINRA Rule 2214; and
     Interactive investment materials that incorporate the 
above.\21\
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    \21\ See Proposed Rule 2111.03.
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    Again, like its FINRA counterpart, the proposed rule would be 
composed of three main suitability obligations, as follows:
     The reasonable-basis suitability obligation, which 
requires a member organization or person associated with a member 
organization to have a reasonable basis to believe, based on reasonable 
diligence, that the recommendation is suitable for at least some 
investors; \22\
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    \22\ See Proposed Rule 2111.05(a). The proposed rule would 
clarify that, in general, what constitutes reasonable diligence will 
vary depending on, among other things, the complexity of and risks 
associated with the security or investment strategy and the member 
organization's or person associated with a member organization's 
familiarity with the security or investment strategy. Further, a 
member organization's or person associated with a member 
organization's reasonable diligence must provide the member 
organization or person associated with a member organization with an 
understanding of the potential risks and rewards associated with the 
recommended security or strategy. Finally, the proposed rule would 
specify that the lack of such an understanding when recommending a 
security or strategy violates the suitability rule. See generally 
id.
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     The customer-specific suitability obligation, which 
requires that a member organization or person associated with a member 
organization have a reasonable basis to believe that the recommendation 
is suitable for a particular customer based on that customer's 
investment profile, as delineated in Proposed Rule 2111(a); \23\ and
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    \23\ See Proposed Rule 2111.05(b).
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     The quantitative suitability obligation, which requires a 
member organization or person associated with a member organization who 
has actual or de facto control over a customer account to have a 
reasonable basis for believing that a series of recommended 
transactions, even if suitable when viewed in isolation, are not 
excessive and unsuitable for the customer when taken together in light 
of the customer's investment profile, as delineated in Proposed Rule 
2111(a).\24\
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    \24\ See Proposed Rule 2111.05(c). The proposed rule would 
provide that no single test defines excessive activity but that 
factors such as the turnover rate, the cost-equity ratio, and the 
use of in-and-out trading in a customer's account may provide a 
basis for a finding that a member organization or person associated 
with a member organization has violated the quantitative suitability 
obligation. See id.
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    Proposed Rule 2111 would also prohibit a member organization or 
person associated with a member organization from recommending a 
transaction or investment strategy involving a security or securities 
or the continuing purchase of a security or securities or use of an 
investment strategy involving a security or securities unless the 
member organization or person associated with a member organization has 
a reasonable basis to believe that the customer has the financial 
ability to meet such a commitment.\25\
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    \25\ See Proposed Rule 2111.06.
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    Finally, like the FINRA rule, Proposed Rule 2111 would provide an 
exemption to customer-specific suitability for institutional investors, 
who would be required to affirmatively indicate that they are 
exercising independent judgment in evaluating the recommendations of 
the member organization or person associated with a member organization 
on a trade-by-trade basis, on an asset-class-by-asset-class basis, or 
in terms of all potential transactions for its account.\26\
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    \26\ See Proposed Rule 2111.07. Like the FINRA rule, the 
institutional-customer exemption would apply only if both parts of 
the two-part test are met: (1) There is a reasonable basis to 
believe that the institutional customer is capable of evaluating 
investment risks independently, in general and with regard to 
particular transactions and investment strategies, and (2) the 
institutional customer affirmatively indicates that it is exercising 
independent judgment in evaluating recommendations. See Proposed 
Rule 2111(b); FINRA Know Your Customer and Suitability Approval, 75 
FR at 71481, n. 25.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\27\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\28\ in particular, because 
the proposed rule change would be consistent with and facilitate a 
governance and regulatory structure that is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to, and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. The Exchange believes the 
proposed rule change is consistent with the Exchange's obligations 
under the Exchange Act to prevent fraudulent or manipulative acts and 
practices, and to promote just and equitable principles of trade, 
because the proposed rule would incorporate the FINRA ``know your 
customer'' rule and related suitability standards into the Exchange's 
rules. The ``know your customer'' and suitability obligations are 
critical to ensuring investor protection and fair dealing with 
customers.
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    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
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    Further, the Exchange believes that the proposed rule change 
supports the objectives of Section 6(b)(5) of the Act

[[Page 31977]]

by providing greater harmonization between Exchange rules and FINRA 
rules of similar purpose, resulting in less burdensome and more 
efficient regulatory compliance. In particular, Exchange member 
organizations that are also FINRA members are subject to NYSE Rule 405 
and FINRA Rules 2090 and 2111, and harmonizing these rules by adopting 
proposed rules identical to FINRA Rules 2090 and 2111would promote just 
and equitable principles of trade by providing greater harmonization 
between NYSE rules and FINRA rules of similar purpose by requiring the 
same standards for ``know your customer'' and suitability, resulting in 
less burdensome and more efficient regulatory compliance for Dual 
Members. As previously noted, the proposed rule text is substantially 
the same as FINRA's rule text. To the extent the Exchange has proposed 
changes that differ from the FINRA version of the Exchange rules, such 
changes are technical in nature and do not change the substance of the 
proposed rules. The Exchange also believes that the proposed rule 
change will update and add specificity to the requirements governing 
``know your customer'' and suitability requirements, which will promote 
just and equitable principles of trade and help to protect investors.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\29\ 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 achieve greater consistency 
between the Exchange's rules and FINRA's rules concerning ``know your 
customer'' and suitability.
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    \29\ 15 U.S.C. 78f(b)(8).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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    \30\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing.\32\ 
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.\33\
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    \32\ 17 CFR 240.19b-4(f)(6)(iii).
    \33\ Id.
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \34\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \34\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     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-2016-33 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2016-33. 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 the 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-2016-33 and should be 
submitted on or before June 10, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11884 Filed 5-19-16; 8:45 am]
 BILLING CODE 8011-01-P
31974 Federal Register / Vol. 81, No. 98 / Friday, May 20, 2016 / Notices

substantially the same information SECURITIES AND EXCHANGE the proposed rule change and discussed
required by Form MSD or Form BD. The COMMISSION any comments it received on the
statement is necessary to ensure that the proposed rule change. The text of those
[Release No. 34–77838; File No. SR–NYSE–
Commission and the public have statements may be examined at the
2016–33]
adequate information about the places specified in Item IV below. The
fiduciary. Self-Regulatory Organizations; New Exchange has prepared summaries, set
York Stock Exchange LLC; Notice of forth in sections A, B, and C below, of
There is approximately 1 respondent the most significant parts of such
per year that requires an aggregate total Filing and Immediate Effectiveness of
Proposed Rule Change Adopting New statements.
of 4 hours to comply with this rule. This
respondent makes an estimated 1 NYSE Rules 2090 (Know Your A. Self-Regulatory Organization’s
Customer) and 2111 (Suitability) That Statement of the Purpose of, and the
annual response. Each response takes
Are Substantially Similar to FINRA Statutory Basis for, the Proposed Rule
approximately 4 hours to complete.
Rules 2090 and 2111 and Deleting Change
Thus, the total compliance burden per
Current Rule 405 and the Related
year is 4 burden hours. The approximate NYSE Rule Interpretation To 1. Purpose
cost per hour is $20, resulting in a total Harmonize Its Rules With Certain The Exchange proposes to amend its
internal cost of compliance for the Financial Industry Regulatory rules to harmonize with certain FINRA
respondent of approximately $80 (i.e., 4 Authority, Inc. Rules rules. Specifically, the Exchange
hours × $20). proposes: (1) Adopting new NYSE Rules
May 16, 2016. 2090 and 2111 that are substantially
Written comments are invited on: (a)
Pursuant to Section 19(b)(1) 1 of the similar to FINRA Rules 2090 and 2111;
Whether the proposed collection of
Securities Exchange Act of 1934 (the (2) deleting Rule 405 4 and the related
information is necessary for the proper
‘‘Act’’ or ‘‘Exchange Act’’) 2 and Rule NYSE Rule Interpretation; and (3)
performance of the functions of the 19b–4 thereunder,3 notice is hereby
Commission, including whether the making other conforming changes.
given that on May 3, 2016, New York
information shall have practical utility; Stock Exchange LLC (‘‘NYSE’’ or the Background
(b) the accuracy of the Commission’s ‘‘Exchange’’) filed with the Securities In 2007, the Exchange and FINRA 5
estimates of the burden of the proposed and Exchange Commission (the entered into an agreement (the
collection of information; (c) ways to ‘‘Commission’’) the proposed rule ‘‘Agreement’’) pursuant to Rule 17d–2
enhance the quality, utility, and clarity change as described in Items I, II, and under the Act to reduce regulatory
of the information to be collected; and III below, which Items have been duplication by allocating to FINRA
(d) ways to minimize the burden of the substantially prepared by the Exchange. certain regulatory responsibilities for
collection of information on The Commission is publishing this NYSE rules and rule interpretations
respondents, including through the use notice to solicit comments on the (‘‘FINRA Incorporated NYSE Rules’’).6
of automated collection techniques or proposed rule change from interested In order to reduce regulatory
other forms of information technology. persons. duplication and relieve firms that are
Consideration will be given to both members of the Exchange and
I. Self-Regulatory Organization’s
comments and suggestions submitted in FINRA of conflicting or unnecessary
Statement of the Terms of Substance of
writing within 60 days of this regulatory burdens, FINRA has been
the Proposed Rule Change
publication. reviewing and amending the NASD and
The Exchange proposes: (1) Adopting FINRA Incorporated NYSE Rules in
An agency may not conduct or new NYSE Rules 2090 (Know Your order to create a consolidated FINRA
sponsor, and a person is not required to Customer) and 2111 (Suitability) that rulebook.7 NYSE MKT LLC (‘‘NYSE
respond to, a collection of information are substantially similar to FINRA Rules
under the PRA unless it displays a 2090 (Know Your Customer) and 2111 4 References to ‘‘Rules’’ are to NYSE Rules unless

currently valid OMB control number. (Suitability); (2) deleting current Rule otherwise indicated.
5 NYSE Regulation, Inc., a former not-for-profit
Please direct your written comments 405 (Diligence as to Accounts) and the
subsidiary of the Exchange, was also a party to the
to: Pamela Dyson, Director/Chief related NYSE Rule Interpretation in Agreement by virtue of the fact that it performed
Information Officer, Securities and order to harmonize its rules with certain regulatory functions for the Exchange pursuant to
Exchange Commission, c/o Remi Pavlik- Financial Industry Regulatory a delegation agreement. See Exchange Act Release
Authority, Inc. (‘‘FINRA’’) rules; and (3) No. 53382 (Feb. 27, 2006), 71 FR 11251, 11264–65
Simon, 100 F Street NE., Washington, (Mar. 6, 2006) (SR–NYSE–2005–77) (approving
DC 20549, or send an email to: PRA_ making other conforming changes. The delegation agreement). The delegation agreement
proposed rule change is available on the terminated on February 16, 2016, and NYSE
Mailbox@sec.gov.
Exchange’s Web site at www.nyse.com, Regulation has ceased providing regulatory services
Dated: May 16, 2016. at the principal office of the Exchange, to the Exchange, which has re-integrated its
regulatory functions.
Robert W. Errett, and at the Commission’s Public 6 See Exchange Act Release Nos. 56148 (July 26,

Deputy Secretary. Reference Room. 2007), 72 FR 42146 (Aug. 1, 2007) (order approving
[FR Doc. 2016–11872 Filed 5–19–16; 8:45 am] the Agreement); 56147 (Jul. 26, 2007), 72 FR 42166
II. Self-Regulatory Organization’s (Aug. 1, 2007) (SR–NASD–2007–054) (order
BILLING CODE 8011–01–P Statement of the Purpose of, and approving the incorporation of certain NYSE Rules
Statutory Basis for, the Proposed Rule as ‘‘Common Rules’’). Paragraph 2(b) of the
Change Agreement sets forth procedures regarding
mstockstill on DSK3G9T082PROD with NOTICES

proposed changes by FINRA or the Exchange to the
In its filing with the Commission, the substance of any of the Common Rules.
Exchange included statements 7 FINRA’s rulebook currently has three sets of

concerning the purpose of, and basis for, rules: (1) NASD Rules; (2) FINRA Incorporated
NYSE Rules; and (3) consolidated FINRA Rules.
The FINRA Incorporated NYSE Rules apply only to
1 15 U.S.C. 78s(b)(1). those members of FINRA that are also members of
2 15 U.S.C. 78a. the NYSE (‘‘Dual Members’’), while the
3 17 CFR 240.19b–4. consolidated FINRA Rules apply to all FINRA

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Federal Register / Vol. 81, No. 98 / Friday, May 20, 2016 / Notices 31977

by providing greater harmonization 19b–4(f)(6) thereunder.31 Because the Paper Comments
between Exchange rules and FINRA proposed rule change does not: (i)
rules of similar purpose, resulting in Significantly affect the protection of • Send paper comments in triplicate
less burdensome and more efficient investors or the public interest; (ii) to Secretary, Securities and Exchange
regulatory compliance. In particular, impose any significant burden on Commission, 100 F Street NE.,
Exchange member organizations that are competition; and (iii) become operative Washington, DC 20549–1090.
also FINRA members are subject to prior to 30 days from the date on which All submissions should refer to File
NYSE Rule 405 and FINRA Rules 2090 it was filed, or such shorter time as the Number SR–NYSE–2016–33. This file
and 2111, and harmonizing these rules Commission may designate, if number should be included on the
by adopting proposed rules identical to consistent with the protection of subject line if email is used. To help the
FINRA Rules 2090 and 2111would investors and the public interest, the Commission process and review your
promote just and equitable principles of proposed rule change has become
comments more efficiently, please use
trade by providing greater effective pursuant to Section 19(b)(3)(A)
only one method. The Commission will
harmonization between NYSE rules and of the Act and Rule 19b–4(f)(6)
post all comments on the Commission’s
FINRA rules of similar purpose by thereunder.
Internet Web site (http://www.sec.gov/
requiring the same standards for ‘‘know A proposed rule change filed under
your customer’’ and suitability, rules/sro.shtml).
Rule 19b–4(f)(6) normally does not
resulting in less burdensome and more become operative prior to 30 days after Copies of the submission, all
efficient regulatory compliance for Dual the date of the filing.32 However, subsequent amendments, all written
Members. As previously noted, the pursuant to Rule 19b–4(f)(6)(iii), the statements with respect to the proposed
proposed rule text is substantially the Commission may designate a shorter rule change that are filed with the
same as FINRA’s rule text. To the extent time if such action is consistent with the Commission, and all written
the Exchange has proposed changes that protection of investors and the public communications relating to the
differ from the FINRA version of the interest.33 proposed rule change between the
Exchange rules, such changes are Commission and any person, other than
technical in nature and do not change At any time within 60 days of the
those that may be withheld from the
the substance of the proposed rules. The filing of such proposed rule change, the
public in accordance with the
Exchange also believes that the Commission summarily may
temporarily suspend such rule change if provisions of 5 U.S.C. 552, will be
proposed rule change will update and available for Web site viewing and
add specificity to the requirements it appears to the Commission that such
action is necessary or appropriate in the printing in the Commission’s Public
governing ‘‘know your customer’’ and Reference Room, 100 F Street NE.,
suitability requirements, which will public interest, for the protection of
investors, or otherwise in furtherance of Washington, DC 20549 on official
promote just and equitable principles of business days between the hours of
trade and help to protect investors. the purposes of the Act. If the
Commission takes such action, the 10:00 a.m. and 3:00 p.m. Copies of the
B. Self-Regulatory Organization’s Commission shall institute proceedings filing also will be available for
Statement on Burden on Competition under Section 19(b)(2)(B) 34 of the Act to inspection and copying at the principal
determine whether the proposed rule office of the Exchange. All comments
In accordance with Section 6(b)(8) of change should be approved or received will be posted without change;
the Act,29 the Exchange does not believe disapproved. the Commission does not edit personal
that the proposed rule change will identifying information from
impose any burden on competition that IV. Solicitation of Comments
submissions. You should submit only
is not necessary or appropriate in information that you wish to make
furtherance of the purposes of the Act. Interested persons are invited to
submit written data, views, and available publicly. All submissions
The proposed rule change is not
arguments concerning the foregoing, should refer to File Number SR–NYSE–
intended to address competitive issues
including whether the proposed rule 2016–33 and should be submitted on or
but rather to achieve greater consistency
between the Exchange’s rules and change is consistent with the Act. before June 10, 2016.
FINRA’s rules concerning ‘‘know your Comments may be submitted by any of For the Commission, by the Division of
customer’’ and suitability. the following methods: Trading and Markets, pursuant to delegated
Electronic Comments authority.35
C. Self-Regulatory Organization’s
Robert W. Errett,
Statement on Comments on the • Use the Commission’s Internet
Proposed Rule Change Received From Deputy Secretary.
comment form (http://www.sec.gov/
Members, Participants, or Others [FR Doc. 2016–11884 Filed 5–19–16; 8:45 am]
rules/sro.shtml); or
BILLING CODE 8011–01–P
No written comments were solicited • Send an email to rule-comments@
or received with respect to the proposed sec.gov. Please include File Number SR–
rule change. NYSE–2016–33 on the subject line.
III. Date of Effectiveness of the 31 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
Proposed Rule Change and Timing for 4(f)(6) requires a self-regulatory organization to give
mstockstill on DSK3G9T082PROD with NOTICES

Commission Action the Commission written notice of its intent to file
the proposed rule change at least five business days
The Exchange has filed the proposed prior to the date of filing of the proposed rule
rule change pursuant to Section change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
19(b)(3)(A)(iii) of the Act 30 and Rule requirement.
32 17 CFR 240.19b–4(f)(6)(iii).
29 15 U.S.C. 78f(b)(8). 33 Id.
30 15 U.S.C. 78s(b)(3)(A)(iii). 34 15 U.S.C. 78s(b)(2)(B). 35 17 CFR 200.30–3(a)(12).

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Document Created: 2016-05-20 01:59:43
Document Modified: 2016-05-20 01:59:43
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		81 FR 31974