81 FR 52722 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and Investors Exchange LLC Relating to the Surveillance, Investigation, and Enforcement of Insider Trading Rules
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 153 (August 9, 2016)
Federal Register Volume 81, Issue 153 (August 9, 2016)
| Page Range | 52722-52730 | |
| FR Document | 2016-18793 |
[Federal Register Volume 81, Number 153 (Tuesday, August 9, 2016)] [Notices] [Pages 52722-52730] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-18793] [[Page 52722]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78473; File No. 4-566] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and Investors Exchange LLC Relating to the Surveillance, Investigation, and Enforcement of Insider Trading Rules August 3, 2016. Notice is hereby given that the Securities and Exchange Commission (``Commission'') has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring effective an amendment to the plan for allocating regulatory responsibility (``Plan'') filed on July 21, 2016, pursuant to Rule 17d- 2 of the Act,\2\ by Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Chicago Stock Exchange, Inc. (``CHX''), Bats EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ BX, Inc. (``NASDAQ BX''), NASDAQ PHLX LLC (``NASDAQ PHLX''), The NASDAQ Stock Market LLC (``NASDAQ''), National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), NYSE Arca, Inc. (``NYSE Arca''), and Investors Exchange LLC (``IEX'') (collectively, ``Participating Organizations'' or ``parties''). --------------------------------------------------------------------------- \1\ 15 U.S.C. 78q(d). \2\ 17 CFR 240.17d-2. --------------------------------------------------------------------------- I. Introduction Section 19(g)(1) of the Act,\3\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (``common members''). Such regulatory duplication would add unnecessary expenses for common members and their SROs. --------------------------------------------------------------------------- \3\ 15 U.S.C. 78s(g)(1). \4\ 15 U.S.C. 78q(d). \5\ 15 U.S.C. 78s(g)(2). --------------------------------------------------------------------------- Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\7\ With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q(d)(1). \7\ See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975). --------------------------------------------------------------------------- To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the Commission to name a single SRO as the designated examining authority (``DEA'') to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\9\ When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d-1 deals only with an SRO's obligations to enforce member compliance with financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. --------------------------------------------------------------------------- \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. \9\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). --------------------------------------------------------------------------- To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d-2, the Commission may declare such a plan effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system, and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). --------------------------------------------------------------------------- II. The Plan On September 12, 2008, the Commission declared effective the Participating Organizations' Plan for allocating regulatory responsibilities pursuant to Rule 17d-2.\11\ The Plan is designed to eliminate regulatory duplication by allocating regulatory responsibility over Common FINRA Members \12\ (collectively ``Common Members'') for the surveillance, investigation, and enforcement of common insider trading rules (``Common Rules'').\13\ The Plan assigns regulatory responsibility over Common FINRA Members to FINRA for surveillance, investigation, and enforcement of insider trading by broker-dealers, and their associated persons, with respect to Listed Stocks (as defined in the Plan), irrespective of the marketplace(s) maintained by the Participating Organizations on which the relevant trading may occur. --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 58536 (September 12, 2008), 73 FR 54646 (September 22, 2008). See also Securities Exchange Act Release Nos. 58806 (October 17, 2008), 73 FR 63216 (October 23, 2008); 61919 (April 15, 2010), 75 FR 21051 (April 22, 2010); 63103 (October 14, 2010), 75 FR 64755 (October 20, 2010); 63750 (January 21, 2011), 76 FR 4948 (January 27, 2011); and 65991 (December 16, 2011), 76 FR 79714 (December 22, 2011). \12\ Common FINRA Members include members of FINRA and at least one of the Participating Organizations. \13\ Common rules are defined as: (i) Federal securities laws and rules promulgated by the Commission pertaining to insider trading, and (ii) the rules of the Participating Organizations that are related to insider trading. See Exhibit A to the Plan. --------------------------------------------------------------------------- III. Proposed Amendment to the Plan On July 21, 2016, the Parties submitted a proposed amendment to the Plan. The proposed amendment was submitted to reflect the addition of IEX as a Listing Market (as defined in the [[Page 52723]] Plan). Other similar conforming amendments were made to reflect this addition. The Participating Organizations also amended the Plan, among other things, to: (i) Reflect name changes of certain Participating Organizations; (ii) remove Chicago Board Options Exchange, Inc. as a Participating Organization; (iii) replace the defined term ``Listed Stock(s)'' with ``NMS Stock(s)'' and revise the definition of the term; and (iv) update the SRO rules that are covered by the Agreement. In addition, the Participating Organizations entered into a regulatory services agreement that addresses investigation and enforcement in situations involving Insider Trading by non-Common FINRA Members. The text of the proposed amended 17d-2 plan is as follows (additions are italicized; deletions are [bracketed]): * * * * * Agreement for the Allocation of Regulatory Responsibility of Surveillance, Investigation and Enforcement for Insider Trading pursuant to Sec. 17(d) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78q(d), and Rule 17d-2 Thereunder This agreement (the ``Agreement'') by and among [BATS]Bats BZX Exchange, Inc. (``[BATS]BZX''), [BATS Y-]Bats BYX Exchange, Inc. (``BYX''), [Chicago Board Options Exchange, Inc. (``CBOE'') \1\,] Chicago Stock Exchange, Inc. (``CHX''), Bats EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ [OMX] BX, Inc. (``NASDAQ [OMX] BX''), NASDAQ [OMX] PHLX LLC (``NASDAQ [OMX] PHLX''), The NASDAQ Stock Market LLC (``NASDAQ''), National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC (``NYSE''), NYSE [Amex]MKT LLC (``NYSE [Amex]MKT''), [and] NYSE Arca, Inc. (``NYSE Arca'') and Investors' Exchange LLC (``IEX'') (each a ``Participating Organization'' and together, the ``Participating Organizations''), is made pursuant to Sec. 17(d) of the Securities Exchange Act of 1934 (the ``Act''), 15 U.S.C. 78q(d), and Securities and Exchange Commission (``SEC'') Rule 17d-2, which allow for plans to allocate regulatory responsibility among self-regulatory organizations (``SROs''). Upon approval by the SEC, this Agreement shall amend and restate the agreement among the Participating Organizations approved by the SEC on [January 21, 2011]December 16, 2011. --------------------------------------------------------------------------- \1\ [CBOE's allocation of certain regulatory responsibilities to FINRA under this Agreement is limited to the activities of the CBOE Stock Exchange, LLC, a facility of CBOE.] --------------------------------------------------------------------------- Whereas, the Participating Organizations desire to: (a) foster cooperation and coordination among the SROs; (b) remove impediments to, and foster the development of, a national market system; (c) strive to protect the interest of investors; and (d) eliminate duplication in their regulatory surveillance, investigation and enforcement of insider trading; Whereas, the Participating Organizations are interested in allocating to FINRA regulatory responsibility for Common FINRA Members (as defined below) for surveillance, investigation and enforcement of Insider Trading (as defined below) in [Listed] NMS Stocks (as defined below) irrespective of the marketplace(s) maintained by the Participating Organizations on which the relevant trading may occur in violation of Common Insider Trading Rules (as defined below); Whereas, the Participating Organizations will request regulatory allocation of these regulatory responsibilities by executing and filing with the SEC a plan for the above stated purposes (this Agreement, also known herein as the ``Plan'') pursuant to the provisions of Sec. 17(d) of the Act, and SEC Rule 17d-2 thereunder, as described below; and Whereas, the Participating Organizations will also enter into a Regulatory Services Agreement (the ``Insider Trading RSA''), of even date herewith, to provide for the investigation and enforcement of suspected Insider Trading against broker-dealers, and their associated persons, that are not Common FINRA Members in the case of Insider Trading in [Listed] NMS Stocks.. Now, Therefore, in consideration of the mutual covenants contained hereafter, and other valuable consideration to be mutually exchanged, the Participating Organizations hereby agree as follows: 1. Definitions. Unless otherwise defined in this Agreement, or the context otherwise requires, the terms used in this Agreement will have the same meaning they have under the Act, and the rules and regulations thereunder. As used in this Agreement, the following terms will have the following meanings: a. ``Rule'' of an ``exchange'' or an ``association'' shall have the meaning defined in Section 3(a)(27) of the Act. b. ``Common FINRA Members'' shall mean members of FINRA and at least one of the Participating Organizations. c. ``Common Insider Trading Rules'' shall mean (i) the federal securities laws and rules thereunder promulgated by the SEC pertaining to insider trading, and (ii) the rules of the Participating Organizations that are related to insider trading, as provided on Exhibit A to this Agreement. d. ``Effective Date'' shall have the meaning set forth in paragraph [28]27. e. ``Insider Trading'' shall mean any conduct or action taken by a natural person or entity related in any way to the trading of securities by an insider or a related party based on or on the basis of material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise misappropriated, that could be deemed a violation of the Common Insider Trading Rules. f. ``Intellectual Property'' will mean any: (1) Processes, methodologies, procedures, or technology, whether or not patentable; (2) trademarks, copyrights, literary works or other works of authorship, service marks and trade secrets; or (3) software, systems, machine-readable texts and files and related documentation. g. ``Plan'' shall mean this Agreement, which is submitted as a Plan for the allocation of regulatory responsibilities of surveillance for insider trading pursuant to Sec. 17(d) of the Act, 15 U.S.C. 78q(d), and SEC Rule 17d-2. h. ``[Listed]NMS Stock(s)'' shall [mean NYSE Listed Stock(s), NASDAQ Listed Stock(s), NYSE Amex Listed Stock(s), NYSE Arca Listed Stock(s), BATS Listed Stock(s) or CHX Solely Listed Stock(s)]have the meaning set forth in Rule 600(b)(47) of SEC Regulation NMS. [i. ``NYSE Listed Stock'' shall mean an equity security that is listed on the NYSE.] [j. ``NASDAQ Listed Stock'' shall mean an equity security that is listed on NASDAQ.] [k. ``NYSE Amex Listed Stock'' shall mean an equity security that is listed on NYSE Amex.] [l. ``NYSE Arca Listed Stock'' shall mean an equity security that is listed on NYSE Arca.] [m. ``BATS Listed Stock'' shall mean an equity security that is listed on BATS.] [n. ``CHX Solely Listed Stock'' shall mean an equity security that is listed only on the CHX.] [o.]i. ``Listing Market'' shall mean [NYSE Amex, NASDAQ, NYSE, NYSE Arca or BATS, but not CHX] an exchange that lists NMS stocks. 2. Assumption of Regulatory Responsibilities. On the Effective Date of the Plan, FINRA will assume regulatory responsibilities for surveillance, [[Page 52724]] investigation and enforcement of Insider Trading by broker-dealers, and their associated persons, for Common FINRA Members with respect to [Listed]NMS Stocks, irrespective of the marketplace(s) maintained by the Participant Organizations on which the relevant trading may occur in violation of the Common Insider Trading Rules (``Regulatory Responsibilities''). 3. Certification of Insider Trading Rules. a. Initial Certification. By signing this Agreement, the Participating Organizations, other than FINRA, hereby certify to FINRA that their respective lists of Common Insider Trading Rules contained in Exhibit A hereto are correct, and FINRA hereby confirms that such rules are Common Insider Trading Rules as defined in this Agreement. b. Yearly Certification. Each year following the commencement of operation of this Agreement, or more frequently if required by changes in the rules of the Participating Organizations, each Participating Organization shall submit a certified and updated list of Common Insider Trading Rules to FINRA for review, which shall (i) add Participating Organization rules not included in the then-current list of Common Insider Trading Rules that qualify as Common Insider Trading Rules as defined in this Agreement; (ii) delete Participating Organization rules included in the current list of Common Insider Trading Rules that no longer qualify as Common Insider Trading Rules as defined in this Agreement; and (iii) confirm that the remaining rules on the current list of Common Insider Trading Rules continue to be Participating Organization rules that qualify as Common Insider Trading Rules as defined in this Agreement. FINRA shall review each Participating Organization's annual certification and confirm whether FINRA agrees with the submitted certified and updated list of Common Insider Trading Rules by each of the Participating Organizations. 4. No Retention of Regulatory Responsibility. The Participating Organizations do not contemplate the retention of any responsibilities with respect to the regulatory activities being assumed by FINRA under the terms of this Agreement. [5. Dually Listed Stocks. Stocks that are listed on more than one Participating Organization shall be designated as an NYSE Listed Stock, a NASDAQ Listed Stock, an NYSE Arca Listed Stock or an NYSE Amex Listed Stock based on the applicable transaction reporting plan for the equity security as set forth in paragraph 1.b. of Exhibit B.] [6]5. Fees. FINRA shall charge Participating Organizations for performing the Regulatory Responsibilities, as set forth in the Schedule of Fees, attached as Exhibit B. [7]6. Applicability of Certain Laws, Rules, Regulations or Orders. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the SEC. To the extent such statute, rule, or order is inconsistent with one or more provisions of this Agreement, the statute, rule, or order shall supersede the provision(s) hereof to the extent necessary to be properly effectuated and the provision(s) hereof in that respect shall be null and void. [8]7. Exchange Committee; Reports. a. Exchange Committee. The Participating Organizations shall form a committee (the ``Exchange Committee''), which shall act on behalf of all of Participating Organizations in receiving copies of the reports described below and in reviewing issues that arise under this Agreement. Each Participating Organization shall appoint a representative to the Exchange Committee. The Exchange Committee representatives shall report to their respective executive management bodies regarding status or issues under this Agreement. The Participating Organizations agree that the Exchange Committee will meet regularly up to four (4) times a year, with no more than one meeting per calendar quarter. At these meetings, the Exchange Committee will discuss the conduct of the Regulatory Responsibilities and identify issues or concerns with respect to this Agreement, including matters related to the calculation of the cost formula and accuracy of fees charged and provision of information related to the same. The SEC shall be permitted to attend the meetings as an observer. b. Reports. FINRA shall provide the reports set forth in Exhibit C hereto and any additional reports related to this Agreement reasonably requested by a majority vote of all representatives to the Exchange Committee at each Exchange Committee meeting, or more often as the Participating Organizations deem appropriate, but no more often than once every quarterly billing period. [9]8. Customer Complaints. If a Participating Organization receives a copy of a customer complaint relating to Insider Trading or other activity or conduct that is within FINRA's Regulatory Responsibilities as set forth in this Agreement, the Participating Organization shall promptly forward to FINRA, as applicable, a copy of such customer complaint. [10]9. Parties to Make Personnel Available as Witnesses. Each Participating Organization shall make its personnel available to FINRA to serve as testimonial or non-testimonial witnesses as necessary to assist FINRA in fulfilling the Regulatory Responsibilities allocated under this Agreement. FINRA shall provide reasonable advance notice when practicable and shall work with a Participating Organization to accommodate reasonable scheduling conflicts within the context and demands as the entity with ultimate regulatory responsibility. The Participating Organization shall pay all reasonable travel and other expenses incurred by its employees to the extent that FINRA requires such employees to serve as witnesses, and provide information or other assistance pursuant to this Agreement. [11]10. Market Data; Sharing of Work-Papers, Data and Related Information. a. Market Data. FINRA shall obtain raw market data necessary to the performance of regulation under this Agreement from (a) the Consolidated Tape Association (``CTA'') [as the exclusive securities information processor (``SIP'') for all NYSE Listed Stocks, NYSE Amex Listed Stocks, NYSE Arca Listed Stocks, BATS Listed Stocks and CHX Solely Listed Stocks] and (b) the NASDAQ Unlisted Trading Privileges Plan [as the exclusive SIP for all NASDAQ Listed Stocks]. b. Sharing. A Participating Organization shall make available to FINRA information necessary to assist FINRA in fulfilling the Regulatory Responsibilities assumed under the terms of this Agreement. Such information shall include any information collected by a Participating Organization in the course of performing its regulatory obligations under the Act, including information relating to an on- going disciplinary investigation or action against a member, the amount of a fine imposed on a member, financial information, or information regarding proprietary trading systems gained in the course of examining a member (``Regulatory Information''). This Regulatory Information shall be used by FINRA solely for the purposes of fulfilling its Regulatory Responsibilities. c. No Waiver of Privilege. The sharing of documents or information between the parties pursuant to this Agreement shall not be deemed a waiver as against third parties of regulatory or other privileges relating to the discovery of documents or information. [[Page 52725]] d. Intellectual Property. (i) Existing Intellectual Property. FINRA is and will remain the owner of all right, title and interest in and to the proprietary Intellectual Property it employs in the provision of regulation hereunder (including the SONAR [and Stock Watch] system[s]), and any derivative works thereof. To the extent certain elements of FINRA's systems, or portions thereof, may be licensed or leased from third parties, all such third party elements shall remain the property of such third parties, as applicable. Likewise, any other Participating Organization is and will remain the owner of all right, title and interest in and to its own existing proprietary Intellectual Property. (ii) Enhancements to Existing Intellectual Property or New Developments. In the event FINRA (a) makes any changes, modifications or enhancements to its Intellectual Property for any reason, or (b) creates any newly developed Intellectual Property for any reason, including as a result of requested enhancements or new development by the Exchange Committee (collectively, the ``New IP''), the Participating Organizations acknowledge and agree that FINRA shall be deemed the owner of the New IP created by it (and any derivative works thereof), and shall retain all right, title and interest therein and thereto, and each other Participating Organization hereby irrevocably assigns, transfers and conveys to FINRA without further consideration all of its right, title and interest in or to all such New IP (and any derivative works thereof). (iii) Fees for New IP. FINRA will not charge the Participating Organizations any fees for any New IP created and used by FINRA; provided, however, that FINRA will be permitted to charge fees for software maintenance work performed on systems used in the discharge of its duties hereunder. [12]11. Special or Cause Examinations. Nothing in this Agreement shall restrict or in any way encumber the right of a party to conduct special or cause examinations of Common FINRA Members as any party, in its sole discretion, shall deem appropriate or necessary. [13]12. Dispute Resolution Under this Agreement. a. Negotiation. The parties to this Agreement will attempt to resolve any disputes through good faith negotiation and discussion, escalating such discussion up through the appropriate management levels until reaching the executive management level. In the event a dispute cannot be settled through these means, the parties shall refer the dispute to binding arbitration. b. Binding Arbitration. All claims, disputes, controversies, and other matters in question between the parties to this Agreement arising out of or relating to this Agreement or the breach thereof that cannot be resolved by the parties will be resolved through binding arbitration. Unless otherwise agreed by the parties, a dispute submitted to binding arbitration pursuant to this paragraph shall be resolved using the following procedures: (i) The arbitration shall be conducted in the city of New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof; and (ii) There shall be three arbitrators, and the chairperson of the arbitration panel shall be an attorney. [14]13. Limitation of Liability. As between the Participating Organizations, no Participating Organization, including its respective directors, governors, officers, employees and agents, will be liable to any other Participating Organization, or its directors, governors, officers, employees and agents, for any liability, loss or damage resulting from any delays, inaccuracies, errors or omissions with respect to its performing or failing to perform regulatory responsibilities, obligations, or functions, except (a) as otherwise provided for under the Act, (b) in instances of a Participating Organization's gross negligence, willful misconduct or reckless disregard with respect to another Participating Organization, (c) in instances of a breach of confidentiality obligations owed to another Participating Organization, or (d) in the case of any Participating Organization paying fees hereunder, for any payments due. The Participating Organizations understand and agree that the Regulatory Responsibilities are being performed on a good faith and best effort basis and no warranties, express or implied, are made by any Participating Organization to any other Participating Organization with respect to any of the responsibilities to be performed hereunder. This paragraph is not intended to create liability of any Participating Organization to any third party. [15]14. SEC Approval. a. The parties agree to file promptly this Agreement with the SEC for its review and approval. FINRA shall file this Agreement on behalf, and with the explicit consent, of all Participating Organizations. b. If approved by the SEC, the Participating Organizations will notify their members of the general terms of this Agreement and of its impact on their members. [16]15. Subsequent Parties; Limited Relationship. This Agreement shall inure to the benefit of and shall be binding upon the Participating Organizations hereto and their respective legal representatives, successors, and assigns. Nothing in this Agreement, expressed or implied, is intended or shall: (a) Confer on any person other than the Participating Organizations hereto, or their respective legal representatives, successors, and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, (b) constitute the Participating Organizations hereto partners or participants in a joint venture, or (c) appoint one Participating Organization the agent of the other. [17]16. Assignment. No Participating Organization may assign this Agreement without the prior written consent of all the other Participating Organizations, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that any Participating Organization may assign this Agreement to a corporation controlling, controlled by or under common control with the Participating Organization without the prior written consent of any other party. [18]17. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. [19]18. Termination. a. Any Participating Organization may cancel its participation in this Agreement at any time, provided that it has given 180 days written notice to the other Participating Organizations (or in the case of a change of control in ownership of a Participating Organization, such other notice time period as that Participating Organization may choose), and provided that such termination has been approved by the SEC. The cancellation of its participation in this Agreement by any Participating Organization shall not terminate this Agreement as to the remaining Participating Organizations. b. The Regulatory Responsibilities assumed under this Agreement by FINRA may be terminated by FINRA [[Page 52726]] against any Participating Organization as follows. The Participating Organization will have thirty (30) days from receipt to satisfy the invoice. If the Participating Organization fails to satisfy the invoice within thirty (30) days of receipt (``Default''), FINRA will notify the Participating Organization of the Default. The Participating Organization will have thirty (30) days from receipt of the Default notice to satisfy the invoice. c. FINRA will have the right to terminate the Regulatory Responsibilities assumed under this Agreement if a Participating Organization has Defaulted in its obligation to pay the invoice on more than three (3) occasions in any rolling twenty-four (24) month period. [20]19. Intermarket Surveillance Group (``ISG''). In order to participate in this Agreement, all Participating Organizations to this Agreement must be members of the ISG. [21]20. General. The Participating Organizations agree to perform all acts and execute all supplementary instruments or documents that may be reasonably necessary or desirable to carry out the provisions of this Agreement. [22]21. Liaison and Notices. All questions regarding the implementation of this Agreement shall be directed to the persons identified below, as applicable. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon (i) actual receipt by the notified party or (ii) constructive receipt (as of the date marked on the return receipt) if sent by certified or registered mail, return receipt requested, to the following addresses: * * * * * [23]22. Confidentiality. The parties agree that documents or information shared shall be held in confidence, and used only for the purposes of carrying out their respective regulatory obligations under this Agreement. No party shall assert regulatory or other privileges as against the other with respect to Regulatory Information that is required to be shared pursuant to this Agreement, as defined by paragraph [11]10, above. [24]23. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of the Act, and Rule 17d-2 thereunder, the Participating Organizations jointly and severally request the SEC, upon its approval of this Agreement, to relieve the Participating Organizations, jointly and severally, of any and all responsibilities with respect to the matters allocated to FINRA pursuant to this Agreement for purposes of Sec. Sec. 17(d) and 19(g) of the Act. [25]24. Governing Law. This Agreement shall be deemed to have been made in the State of New York, and shall be construed and enforced in accordance with the law of the State of New York, without reference to principles of conflicts of laws thereof. Each of the parties hereby consents to submit to the jurisdiction of the courts of the State of New York in connection with any action or proceeding relating to this Agreement. [26]25. Survival of Provisions. Provisions intended by their terms or context to survive and continue notwithstanding delivery of the regulatory services by FINRA, the payment of the Fees by the Participating Organizations, and any expiration of this Agreement shall survive and continue. [27]26. Amendment. a. This Agreement may be amended to add a new Participating Organization, provided that such Participating Organization does not assume regulatory responsibility, solely by an amendment executed by FINRA and such new Participating Organization. All other Participating Organizations expressly consent to allow FINRA to add new Participating Organizations to this Agreement as provided above. FINRA will promptly notify all Participating Organizations of any such amendments to add a new Participating Organization. b. All other amendments must be approved by each Participating Organization. All amendments, including adding a new Participating Organization, must be filed with and approved by the SEC before they become effective. [28]27. Effective Date. The Effective Date of this Agreement will be the date the SEC declares this Agreement to be effective pursuant to authority conferred by Sec. 17(d) of the Act, and SEC Rule 17d-2 thereunder. [29]28. Counterparts. This Agreement may be executed in any number of counterparts, including facsimile, each of which will be deemed an original, but all of which taken together shall constitute one single agreement between the parties. * * * * * Exhibit A: Common Insider Trading Rules 1. Securities Exchange Act of 1934 Section 10(b), and rules and regulations promulgated there under in connection with insider trading, including SEC Rule 10b-5 (as it pertains to insider trading), which states that: Rule 10b-5--Employment of Manipulative and Deceptive Devices It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, a. To employ any device, scheme, or artifice to defraud, b. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or c. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 2. Securities Exchange Act of 1934 Section 17(a), and rules and regulations promulgated there under in connection with insider trading, including SEC Rule 17a-3 (as it pertains to insider trading). 3. The following SRO Rules as they pertain to violations of insider trading: FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices) FINRA [NASD] Rule [3010]3110 (Supervision) [FINRA NASD Rule 3110(a) and (c) (Books and Records; Financial Condition)] FINRA Rule 4511 (General Requirements) FINRA Rule 4512 (Customer Account Information) [NYSE Rule 342 (Offices--Approval, Supervision and Control)] NYSE Rule 440 (Books and Records) NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against Members, Member Organizations, Principal Executives, Approved Persons, Employees, or Others) NYSE Rule 2010 (Standards of Commercial Honor and Principles of Trade) NYSE Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NYSE Rule 3110 (Supervision) NYSE MKT General and Floor Rule 3(j) (General Prohibitions and Duty to Report) [NYSE Amex Equities Rule 342 (Offices--Approval, Supervision and Control)] [[Page 52727]] NYSE [Amex]MKT Equities Rule 440 (Books and Records) NYSE [Amex]MKT Equities Rule 476(a) (Disciplinary Proceedings Involving Charges Against Members, Member Organizations, Principal Executives, Approved Persons, Employees, or Others) NYSE [Amex]MKT Equities Rule 2010 (Standards of Commercial Honor and Principles of Trade) NYSE [Amex]MKT Equities Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NYSE MKT Equities Rule 3110 (Supervision) NASDAQ [OMX] Rule 2110A (Standards of Commercial Honor and Principles of Trade) NASDAQ [OMX] Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NASDAQ [OMX] Rule 3010 (Supervision) [NASDAQ [OMX] Rule 3110(a) and (c) (Books and Records; Financial Condition)] NASDAQ Rule 4511A (General Requirements NASDAQ Rule 4512A (Customer Account Information) CHX Article 8, Rule 3 (Fraudulent Acts) CHX Article 9, Rule 2 (Just & Equitable Trade Principles) CHX Article 11, Rule 2 (Maintenance of Books and Records) CHX Article 6, Rule 5 (Supervision of Registered Persons and Branch and Resident Offices) [CBOE Rule 4.1 (Practices inconsistent with just and equitable principles)] [CBOE Rule 4.2 (adherence to law)] [CBOE Rule 4.7 (Manipulation)] [CBOE Rule 4.18 (Prevention of the misuse of material non public information)] NASDAQ [OMX] PHLX Rule 707 (Conduct Inconsistent with Just and Equitable Principles of Trade) NASDAQ [OMX] PHLX Rule 748 (Supervision) NASDAQ [OMX] PHLX Rule 760 (Maintenance, Retention and Furnishing of Books, Records and Other Information) NASDAQ [OMX] PHLX Rule 761 (Supervisory Procedures Relating to ITSFEA and to Prevention of Misuse or Material Nonpublic Information) NASDAQ [OMX] PHLX Rule 782 (Manipulative Operations) NYSE Arca Equities Rule 2.24 (ETP Books and Records) NYSE Arca Equities Rule 5.1(a)(2)(v)(D) (General Provisions and Unlisted Trading Privileges) NYSE Arca Equities Rule 6.3 (Prevention of the Misuse of Material, Nonpublic Information) NYSE Arca Equities Rule 6.2(b) (Prohibited Acts (J&E)) NYSE Arca Equities Rule 6.1 (Adherence to Law) NYSE Arca Equities Rule 6.18 (Supervision) NYSE Arca Equities Rule 9.1(c) (Office Supervision) NYSE Arca Equities Rule 9.2(b) (Account Supervision) NYSE Arca Equities Rule 9.2(c) (Customer Records) NYSE Arca Equities Rule 2010 (Standards of Commercial Honor and Principles of Trade) NYSE Arca Equities Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NSX Rule 3.1 (Business Conduct of ETP Holders) NSX Rule 3.2 (Violations Prohibited) NSX Rule 3.3 (Use of Fraudulent Devices) NSX Rule 4.1 (Requirements) NSX Rule 5.1 (Written Procedures) NSX Rule 5.3 (Records) NSX Rule 5.5 (Chinese Wall Procedures) NSX Rule 12.4 (Manipulative Transactions) NASDAQ [OMX] BX Rule 2110 (Standards of Commercial Honor and Principles of Trade) NASDAQ [OMX] BX Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NASDAQ [OMX] BX Rule 3010 (Supervision) NASDAQ [OMX] BX Rule 3110(a) and (c) (Books and Records; Financial Condition) [BATS]BZX Rule 3.1 (Business Conduct of Members) [BATS]BZX Rule 3.2 (Violations Prohibited) [BATS]BZX Rule 3.3 (Use of Fraudulent Devices) [BATS]BZX Rule 4.1 (Requirements) [BATS]BZX Rule 5.1 (Written Procedures) [BATS]BZX Rule 5.3 (Records) [BATS]BZX Rule 5.5 (Prevention of the Misuse of Material, Non-Public Information) [BATS]BZX Rule 12.4 (Manipulative Transactions) BYX Rule 3.1 (Business Conduct of ETP Holders) BYX Rule 3.2 (Violations Prohibited) BYX Rule 3.3 (Use of Fraudulent Devices) BYX Rule 4.1 (Requirements) BYX Rule 5.1 (Written Procedures) BYX Rule 5.3 (Records) BYX Rule 5.5 (Prevention of the Misuse of Material, Non-Public Information) BYX Rule 12.4 (Manipulative Transactions) EDGA Rule 3.1 (Business Conduct of Members) EDGA Rule 3.2 (Violations Prohibited) EDGA Rule 3.3 (Use of Fraudulent Devices) EDGA Rule 4.1 (Requirements) EDGA Rule 5.1 (Written Procedures) EDGA Rule 5.3 (Records) EDGA Rule 5.5 (Prevention of Misuse of Material, Nonpublic Information) EDGA Rule 12.4 (Manipulative Transactions) EDGX Rule 3.1 (Business Conduct of Members) EDGX Rule 3.2 (Violations Prohibited) EDGX Rule 3.3 (Use of Fraudulent Devices) EDGX Rule 4.1 (Requirements) EDGX Rule 5.1 (Written Procedures) EDGX Rule 5.3 (Records) EDGX Rule 5.5 (Prevention of Misuse of Material, Nonpublic Information) EDGX Rule 12.4 (Manipulative Transactions) IEX Rule 3.110 (Business Conduct of Members) IEX Rule 3.120 (Violations Prohibited) IEX Rule 3.130 (Use of Fraudulent Devices) IEX Rule 4.511 (General Requirements) IEX Rule 4.512 (Customer Account Information) IEX Rule 5.110 (Supervision) IEX Rule 5.150 (Prevention of Misuse of Material, Non-Public Information) IEX Rule 10.140 (Manipulative Transactions) Exhibit B: Fee Schedule 1. Fees. FINRA shall charge each Participating Organization a Quarterly Fee in arrears for the performance of FINRA's Regulatory Responsibilities under the Plan (each, a ``Quarterly Fee,'' and together, the ``Fees''). a. Quarterly Fees. (1) Quarterly Fees for each Participating Organization will be charged by FINRA according to the Participating Organization's ``Percentage of Publicly Reported Trades'' occurring over three-month billing periods. The ``Percentage of Publicly Reported Trades'' shall equal a Participating Organization's number of reported [Listed]NMS Stock trades during the relevant period (the ``Numerator''), divided by the total number of all [Listed]NMS Stock trades for the same period (the ``Denominator''). For purposes of clarification, ADF and Trade Reporting Facility (``TRF'') activity will be included in the Denominator. Additionally, with regard to TRFs, TRF trade volume will be charged to FINRA. Consequently, for purposes of calculating the Quarterly Fees, the volume for each Participant Organization's TRF will be calculated separately (that is, TRF volume will be broken out from the Participating [[Page 52728]] Organization's overall Percentage of Publicly Reported Trades) and the fees for such will be billed to FINRA in accordance with paragraph 1a.(2), rather than to the applicable Participating Organization. (2) The Quarterly Fees shall be determined by FINRA in the following manner for each Participating Organization: (a) Less than 1.0%: If the Participating Organization's Percentage of Publicly Reported Trades for the relevant three-month billing period is less than 1.0%, the Quarterly Fee shall be $6,250, per quarter (``Static Fee''); (b) Less than 2.0% but No Less than 1.0%: If the Participating Organization's Percentage of Publicly Reported Trades for the relevant three-month billing period is less than 2.0% but no less than 1.0%, the Quarterly Fee shall be $18,750, per quarter (``Static Fee''); (c) 2.0% or Greater: If the Participating Organization's Percentage of Publicly Reported Trades for the relevant three-month billing period is 2.0% or greater, the Quarterly Fee shall be the amount equal to the Participating Organization's Percentage of Publicly Reported Trades multiplied by FINRA's total charge (``Total Charge'') for its performance of Regulatory Responsibilities for the relevant three-month billing period. (3) Increases in Static Fees. FINRA will re-evaluate the Quarterly Fees on an annual basis during the annual budget process outlined in paragraph 1.c. below. During each annual re-evaluation, FINRA will have the discretion to increase the Static Fees by a percentage no greater than the percentage increase in the Final Budget over the preceding year's Final Budget. Any changes to the Static Fees shall not require an amendment to this Agreement, but rather shall be memorialized through the budget process. (4) Increases in Total Charges. Any change in the Total Charges (whether a Final Budget increase or any mid year change) shall not require an amendment to this Agreement, but rather shall be memorialized through the budget process. b. Source of Data. For purposes of calculation of the Percentage of Publicly Reported Trades for each Participating Organization, FINRA shall use (a) the Consolidated Tape Association (``CTA'') [as the exclusive securities information processor (``SIP'') for all NYSE Listed Stocks, NYSE Amex Listed Stocks, NYSE Arca Listed Stocks, BATS Listed Stocks and CHX Solely Listed Stocks], and (b) the Unlisted Trading Privileges Plan [as the exclusive SIP for NASDAQ Listed Stocks]. c. Annual Budget Forecast. FINRA will notify the Participating Organizations of the forecasted costs of its insider trading program for the following calendar year by close of business on October 15 of the then-current year (the ``Forecasted Budget''). FINRA shall use best efforts to provide as accurate a forecast as possible. FINRA shall then provide a final submission of the costs following approval of such costs by its Board of Governors (the ``Final Budget''). Subject to paragraph 1d. below, in the event of a difference between the Forecasted Budget and the Final Budget, the Final Budget will govern. d. Increases in Fees over Five Percent. (1) In the event that any proposed increase to Fees by FINRA for a given calendar year (which increase may arise either during the annual budgetary forecasting process or through any mid-year increase) will result in a cumulative increase in such calendar year's Fees of more than five percent (5%) above the preceding calendar year's Final Budget (a ``Major Increase''), then senior management of any Participating Organization (a) that is a Listing Market or (b) for which the Percentage of Publicly Reported Trades is then currently twenty percent (20%) or greater, shall have the right to call a meeting with the senior management of FINRA in order to discuss any disagreement over such proposed Major Increase. By way of example, if FINRA provides a Final Budget for 2011 that represents an 4% increase above the Final Budget for 2010, the terms of this paragraph 1.d.(1) shall not apply; if, however, in April of 2011, FINRA notifies the Exchange Committee of an increase in Fees that represents an additional 3% increase above the Final Budget for 2010, then the increase shall be deemed a Major Increase, and the terms of this paragraph 1.d.(1) shall become applicable (i.e., 4% and 3% represents a cumulative increase of 7% above the 2010 Final Budget). (2) In the event that senior management members of the involved parties are unable to reach an agreement regarding the proposed Major Increase, then the matter shall be referred back to the Exchange Committee for final resolution. Prior to the matter being referred back to the Exchange Committee, nothing shall prohibit the parties from conferring with the SEC. Resolution shall be reached through a vote of no fewer than all Participating Organizations seated on the Exchange Committee, and a simple majority shall be required in order to reject the proposed Major Increase. e. Time Tracking. FINRA shall track the time spent by staff on insider trading responsibilities under this Agreement; however, time tracking will not be used to allocate costs. 2. Invoicing and Payment. FINRA shall invoice each Participating Organization for the Quarterly Fee associated with the regulatory activities performed pursuant to this Agreement during the previous three-month billing period within forty five (45) days of the end of such previous 3-month billing period. A Participating Organization shall have thirty (30) days from date of invoice to make payment to FINRA on such invoice. The invoice will reflect the Participating Organization's Percentage of Publicly Reported Trades for that billing period. 3. Disputed Invoices; Interest. In the event that a Participating Organization disputes an invoice or a portion of an invoice, the Participating Organization shall notify FINRA in writing of the disputed item(s) within fifteen (15) days of receipt of the invoice. In its notification to FINRA of the disputed invoice, the Participating Organization shall identify the disputed item(s) and provide a brief explanation of why the Participating Organization disputes the charges. FINRA may charge a Participating Organization interest on any undisputed invoice or the undisputed portions of a disputed invoice that a Participating Organization fails to pay within thirty (30) days of its receipt of such invoice. Such interest shall be assessed monthly. Interest will mean one and one half percent per month, or the maximum allowable under applicable law, whichever is less. 4. Taxes. In the event any governmental authority deems the regulatory activities allocated to FINRA to be taxable activities similar to the provision of services in a commercial context, the other Participating Organizations agree that they shall bear full responsibility, on a joint and several basis, for the payment of any such taxes levied on FINRA, or, if such taxes are paid by FINRA directly to the governmental authority, the other Participating Organizations agree that they shall reimburse FINRA for the amount of any such taxes paid. 5. Audit Right; Record Keeping. a. Audit Right. (i) Once every rolling twelve (12) month period, FINRA shall permit no more than one audit (to be performed by one or more Participating Organizations) of the Fees charged by FINRA to the Participating Organizations hereunder and a detailed cost analysis supporting [[Page 52729]] such Fees (the ``Audit''). The Participating Organization or Organizations that conduct this Audit will select a nationally- recognized independent auditing firm (or may use its regular independent auditor, providing it is a nationally-recognized auditing firm) (``Auditing Firm'') to act on its, or their behalf, and will provide reasonable notice to other Participating Organizations of the Audit. FINRA will permit the Auditing Firm reasonable access during FINRA's normal business hours, with reasonable advance notice, to such financial records and supporting documentation as are necessary to permit review of the accuracy of the calculation of the Fees charged to the Participating Organizations. The Participating Organization, or Organizations, as applicable, other than FINRA, shall be responsible for the costs of performing any such audit. (ii) If, through an Audit, the Exchange Committee determines that FINRA has inaccurately calculated the Fees for any Participating Organization, the Exchange Committee will promptly notify FINRA in writing of the amount of such difference in the Fees, and, if applicable, FINRA shall issue a reimbursement of the overage amount to the relevant Participating Organization(s), less any amount owed by the Participating Organization under any outstanding, undisputed invoice(s). If such an Audit reveals that any Participating Organization paid less than what was required pursuant to the Agreement, then that Participating Organization shall promptly pay FINRA the difference between what the Participating Organization owed pursuant to the Agreement and what that Participating Organization originally paid FINRA. If FINRA disputes the results of an Audit regarding the accuracy of the Fees, it will submit the dispute for resolution pursuant to the dispute resolution procedures in paragraph [13]12 of the Agreement. (iii) In the event that through the review of any supporting documentation provided during the Audit, any one or more Participating Organizations desire to discuss with FINRA the supporting documentation and any questions arising therefrom with regard to the manner in which regulation was conducted, the Participating Organization(s) shall call a meeting with FINRA. FINRA shall in turn notify the Exchange Committee of this meeting in advance, and all Participating Organizations shall be welcome to attend (the ``Fee Analysis Meeting''). The parties to this Agreement acknowledge and agree that while FINRA commits to discuss the supporting documentation at the Fee Analysis Meeting, FINRA shall not be subject, by virtue of the above Audit rights or any discussions during the Fee Analysis Meeting or otherwise, to any limitation whatsoever, other than the Increase in Fee provisions set forth in paragraph 1.d. of this Exhibit, on its discretion as to the manner and means by which it conducts its regulatory efforts in its role as the SRO primarily liable for regulatory decisions under this Agreement. To that end, no disagreement among the Participating Organizations as to the manner or means by which FINRA conducts its regulatory efforts hereunder shall be subject to the dispute resolution procedures hereunder, and no Participating Organization shall have the right to compel FINRA to alter the manner or means by which it conducts its regulatory efforts. Further, a Participating Organization shall not have the right to compel a rebate or reassessment of fees for services rendered, on the basis that the Participating Organization would have conducted regulatory efforts in a different manner than FINRA in its professional judgment chose to conduct its regulatory efforts. b. Record Keeping. In anticipation of any audit that may be performed by the Exchange Committee under paragraph 5.a. above, FINRA shall keep accurate financial records and documentation relating to the Fees charged by it under this Agreement. Exhibit C: Reports FINRA shall provide the following information in reports to the Exchange Committee, which information covers activity occurring under this Agreement: 1. Alert Summary Statistics: Total number of surveillance system alerts generated by quarter along with associated number of reviews and investigations. In addition, this paragraph shall also reflect the number of reviews and investigations originated from a source other than an alert. A separate table would be presented for the trading activity of the NMS Stocks listed on each Participating Organization's exchange. [NYSE Listed Stock, NYSE Amex Listed Stock, NYSE Arca Listed Stock, NASDAQ Listed Stock, BATS Listed Stock and CHX Solely Listed Stock trading activity.] ------------------------------------------------------------------------ Surveillance 2008 alerts Investigations ------------------------------------------------------------------------ 1st Quarter..................... 2nd Quarter..................... 3rd Quarter..................... 4th Quarter..................... --------------------------------------- 2008 Total.................... ------------------------------------------------------------------------ 2. Aging of Open Matters: Would reflect the aging for all currently open matters for the quarterly period being reported. A separate table would be presented for the trading activity of the NMS Stocks listed on each Participating Organization's exchange. [NYSE Listed Stock, NYSE Amex Listed Stock, NYSE Arca Listed Stock, NASDAQ Listed Stock, BATS Listed Stock and CHX Solely Listed Stock trading activity.] Example: ------------------------------------------------------------------------ Surveillance alerts Investigations ------------------------------------------------------------------------ 0-6 months...................... 6-9 months...................... 9-12 months..................... 12+ months...................... --------------------------------------- Total....................... ------------------------------------------------------------------------ 3. Timeliness of Completed Matters: Would reflect the total age of those matters that were completed or closed during the quarterly period being reported. FINRA will provide total referrals to the SEC. Example: ------------------------------------------------------------------------ Surveillance alerts Investigations ------------------------------------------------------------------------ 0-6 months...................... 6-9 months...................... 9-12 months..................... 12+ months...................... --------------------------------------- Total......................... ------------------------------------------------------------------------ 4. Disposition of Closed Matters: Would reflect the disposition of those matters that were completed or closed during the quarterly period being reported. A separate table would be presented for the trading activity of the NMS Stocks listed on each Participating Organization's exchange. [NYSE Listed Stock, NYSE Amex Listed Stock, NYSE Arca Listed Stock, NASDAQ Listed Stock, BATS Listed Stock and CHX Solely Listed Stock trading activity.] Example: ------------------------------------------------------------------------ Surveillance YTD Investigations YTD ------------------------------------------------------------------------ No Further Review............... Letter of Caution/Admonition/ Fine. Referred to Legal/Enforcement... Referred to SEC/SRO............. Merged.......................... Other........................... --------------------------------------- Total......................... ------------------------------------------------------------------------ [[Page 52730]] 5. Pending Reviews. In addition to the above reports, the Chief Regulatory Officer (CRO) (or his or her designee) of any Participating Organization that is also a Listing Market [(including CHX)] may inquire about pending reviews involving stocks listed on that Participating Organization's market. FINRA will respond to such inquiries from a CRO; provided, however, that (a) the CRO must hold any information provided by FINRA in confidence and (b) FINRA will not be compelled to provide information in contradiction of any mandate, directive or order from the SEC, US Attorney's Office, the Office of any State Attorney General or court of competent jurisdiction. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number 4-566 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 4-566. 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 plan that are filed with the Commission, and all written communications relating to the proposed plan between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for 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 plan also will be available for inspection and copying at the principal offices of the Participating Organizations. 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 4-566 and should be submitted on or before August 30, 2016. V. Discussion The Commission finds that the Plan, as proposed to be amended, is consistent with the factors set forth in Section 17(d) of the Act \14\ and Rule 17d-2 thereunder \15\ in that it is necessary or appropriate in the public interest and for the protection of investors, fosters cooperation and coordination among SROs, and removes impediments to and fosters the development of the national market system. The Commission continues to believe that the Plan, as amended, should reduce unnecessary regulatory duplication by allocating regulatory responsibility for the surveillance, investigation, and enforcement of Common Rules to FINRA. Accordingly, the proposed amendment to the Plan promotes efficiency by consolidating these regulatory functions in a single SRO. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78q(d). \15\ 17 CFR 240.17d-2. --------------------------------------------------------------------------- Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. In particular, the purpose of the amendment is to add IEX as a Participating Organization and reflect that IEX will be a Listing Market (which will expand the Plan's coverage of NMS Stocks to include equity securities listed on IEX), remove CBOE as a Participating Organization and update the names of certain other Participating Organizations, update defined terms, and reflect updates to the list of Common Rules. The Commission notes that the most recent prior amendment to the Plan, which, among other things, reflected the addition of BATS as a Listing Market, was published for comment and the Commission did not receive any comments thereon.\16\ The Commission believes that the current amendment to the Plan does not raise any new regulatory issues that the Commission has not previously considered, and therefore believes that the amended Plan should become effective without any undue delay. --------------------------------------------------------------------------- \16\ See supra note 11. --------------------------------------------------------------------------- VI. Conclusion This order gives effect to the amended Plan submitted to the Commission that is contained in File No. 4-566. It is therefore ordered, pursuant to Section 17(d) of the Act,\17\ that the Plan, as amended, filed with the Commission pursuant to Rule 17d-2 on July 21, 2016, is hereby approved and declared effective. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78q(d). --------------------------------------------------------------------------- It is further ordered that the Participating Organizations are relieved of those regulatory responsibilities allocated to FINRA under the amended Plan to the extent of such allocation. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(34). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-18793 Filed 8-8-16; 8:45 am] BILLING CODE 8011-01-P
![52722 Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Notices
SECURITIES AND EXCHANGE unless the SRO is relieved of this joint plans for the allocation of
COMMISSION responsibility pursuant to Section regulatory responsibilities with respect
17(d) 4 or Section 19(g)(2) 5 of the Act. to their common members. Under
[Release No. 34–78473; File No. 4–566]
Without this relief, the statutory paragraph (c) of Rule 17d–2, the
Program for Allocation of Regulatory obligation of each individual SRO could Commission may declare such a plan
Responsibilities Pursuant to Rule 17d– result in a pattern of multiple effective if, after providing for notice
2; Notice of Filing and Order examinations of broker-dealers that and comment, it determines that the
Approving and Declaring Effective an maintain memberships in more than one plan is necessary or appropriate in the
Amendment to the Plan for the SRO (‘‘common members’’). Such public interest and for the protection of
Allocation of Regulatory regulatory duplication would add investors, to foster cooperation and
Responsibilities Among Bats BZX unnecessary expenses for common coordination among the SROs, to
Exchange, Inc., Bats BYX Exchange, members and their SROs. remove impediments to, and foster the
Inc., Chicago Stock Exchange, Inc., Section 17(d)(1) of the Act 6 was development of, a national market
Bats EDGA Exchange, Inc., Bats EDGX intended, in part, to eliminate system and a national clearance and
Exchange, Inc., Financial Industry unnecessary multiple examinations and settlement system, and is in conformity
Regulatory Authority, Inc., NASDAQ regulatory duplication.7 With respect to with the factors set forth in Section
BX, Inc., NASDAQ PHLX LLC, The a common member, Section 17(d)(1) 17(d) of the Act. Commission approval
NASDAQ Stock Market LLC, National authorizes the Commission, by rule or of a plan filed pursuant to Rule 17d–2
Stock Exchange, Inc., New York Stock order, to relieve an SRO of the relieves an SRO of those regulatory
Exchange LLC, NYSE MKT LLC, NYSE responsibility to receive regulatory responsibilities allocated by the plan to
Arca, Inc., and Investors Exchange reports, to examine for and enforce another SRO.
LLC Relating to the Surveillance, compliance with applicable statutes,
rules, and regulations, or to perform II. The Plan
Investigation, and Enforcement of
other specified regulatory functions. On September 12, 2008, the
Insider Trading Rules
To implement Section 17(d)(1), the Commission declared effective the
August 3, 2016. Commission adopted two rules: Rule Participating Organizations’ Plan for
Notice is hereby given that the 17d–1 and Rule 17d–2 under the Act.8 allocating regulatory responsibilities
Securities and Exchange Commission Rule 17d–1 authorizes the Commission pursuant to Rule 17d–2.11 The Plan is
(‘‘Commission’’) has issued an Order, to name a single SRO as the designated designed to eliminate regulatory
pursuant to Section 17(d) of the examining authority (‘‘DEA’’) to duplication by allocating regulatory
Securities Exchange Act of 1934 examine common members for responsibility over Common FINRA
(‘‘Act’’),1 approving and declaring compliance with the financial Members 12 (collectively ‘‘Common
effective an amendment to the plan for responsibility requirements imposed by Members’’) for the surveillance,
allocating regulatory responsibility the Act, or by Commission or SRO investigation, and enforcement of
(‘‘Plan’’) filed on July 21, 2016, pursuant rules.9 When an SRO has been named as common insider trading rules
to Rule 17d–2 of the Act,2 by Bats BZX a common member’s DEA, all other (‘‘Common Rules’’).13 The Plan assigns
Exchange, Inc. (‘‘BZX’’), Bats BYX SROs to which the common member regulatory responsibility over Common
Exchange, Inc. (‘‘BYX’’), Chicago Stock belongs are relieved of the responsibility FINRA Members to FINRA for
Exchange, Inc. (‘‘CHX’’), Bats EDGA to examine the firm for compliance with surveillance, investigation, and
Exchange, Inc. (‘‘EDGA’’), Bats EDGX the applicable financial responsibility enforcement of insider trading by
Exchange, Inc. (‘‘EDGX’’), Financial rules. On its face, Rule 17d–1 deals only broker-dealers, and their associated
Industry Regulatory Authority, Inc. with an SRO’s obligations to enforce persons, with respect to Listed Stocks
(‘‘FINRA’’), NASDAQ BX, Inc. member compliance with financial (as defined in the Plan), irrespective of
(‘‘NASDAQ BX’’), NASDAQ PHLX LLC responsibility requirements. Rule 17d–1 the marketplace(s) maintained by the
(‘‘NASDAQ PHLX’’), The NASDAQ does not relieve an SRO from its Participating Organizations on which
Stock Market LLC (‘‘NASDAQ’’), obligation to examine a common the relevant trading may occur.
National Stock Exchange, Inc. (‘‘NSX’’), member for compliance with its own
rules and provisions of the federal III. Proposed Amendment to the Plan
New York Stock Exchange LLC
(‘‘NYSE’’), NYSE MKT LLC (‘‘NYSE securities laws governing matters other On July 21, 2016, the Parties
MKT’’), NYSE Arca, Inc. (‘‘NYSE than financial responsibility, including submitted a proposed amendment to the
Arca’’), and Investors Exchange LLC sales practices and trading activities and Plan. The proposed amendment was
(‘‘IEX’’) (collectively, ‘‘Participating practices. submitted to reflect the addition of IEX
Organizations’’ or ‘‘parties’’). To address regulatory duplication in as a Listing Market (as defined in the
these and other areas, the Commission
I. Introduction adopted Rule 17d–2 under the Act.10 11 See Securities Exchange Act Release No. 58536
Section 19(g)(1) of the Act,3 among Rule 17d–2 permits SROs to propose (September 12, 2008), 73 FR 54646 (September 22,
2008). See also Securities Exchange Act Release
other things, requires every self- Nos. 58806 (October 17, 2008), 73 FR 63216
4 15 U.S.C. 78q(d).
regulatory organization (‘‘SRO’’) (October 23, 2008); 61919 (April 15, 2010), 75 FR
5 15 U.S.C. 78s(g)(2).
registered as either a national securities 6 15 U.S.C. 78q(d)(1).
21051 (April 22, 2010); 63103 (October 14, 2010),
exchange or national securities 75 FR 64755 (October 20, 2010); 63750 (January 21,
7 See Securities Act Amendments of 1975, Report
2011), 76 FR 4948 (January 27, 2011); and 65991
asabaliauskas on DSK3SPTVN1PROD with NOTICES
association to examine for, and enforce of the Senate Committee on Banking, Housing, and (December 16, 2011), 76 FR 79714 (December 22,
compliance by, its members and persons Urban Affairs to Accompany S. 249, S. Rep. No. 94– 2011).
associated with its members with the 75, 94th Cong., 1st Session 32 (1975). 12 Common FINRA Members include members of
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
Act, the rules and regulations FINRA and at least one of the Participating
respectively. Organizations.
thereunder, and the SRO’s own rules, 9 See Securities Exchange Act Release No. 12352 13 Common rules are defined as: (i) Federal
(April 20, 1976), 41 FR 18808 (May 7, 1976). securities laws and rules promulgated by the
1 15 U.S.C. 78q(d). 10 See Securities Exchange Act Release No. 12935 Commission pertaining to insider trading, and (ii)
2 17 CFR 240.17d–2. (October 28, 1976), 41 FR 49091 (November 8, the rules of the Participating Organizations that are
3 15 U.S.C. 78s(g)(1). 1976). related to insider trading. See Exhibit A to the Plan.
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Plan). Other similar conforming the SEC on [January 21, 2011]December c. ‘‘Common Insider Trading Rules’’
amendments were made to reflect this 16, 2011. shall mean (i) the federal securities laws
addition. The Participating Whereas, the Participating and rules thereunder promulgated by
Organizations also amended the Plan, Organizations desire to: (a) foster the SEC pertaining to insider trading,
among other things, to: (i) Reflect name cooperation and coordination among the and (ii) the rules of the Participating
changes of certain Participating SROs; (b) remove impediments to, and Organizations that are related to insider
Organizations; (ii) remove Chicago foster the development of, a national trading, as provided on Exhibit A to this
Board Options Exchange, Inc. as a market system; (c) strive to protect the Agreement.
Participating Organization; (iii) replace interest of investors; and (d) eliminate d. ‘‘Effective Date’’ shall have the
the defined term ‘‘Listed Stock(s)’’ with duplication in their regulatory meaning set forth in paragraph [28]27.
‘‘NMS Stock(s)’’ and revise the surveillance, investigation and e. ‘‘Insider Trading’’ shall mean any
definition of the term; and (iv) update enforcement of insider trading; conduct or action taken by a natural
the SRO rules that are covered by the Whereas, the Participating person or entity related in any way to
Agreement. In addition, the Organizations are interested in the trading of securities by an insider or
Participating Organizations entered into allocating to FINRA regulatory a related party based on or on the basis
a regulatory services agreement that responsibility for Common FINRA of material non-public information
addresses investigation and enforcement Members (as defined below) for obtained during the performance of the
in situations involving Insider Trading surveillance, investigation and insider’s duties at the corporation, or
by non-Common FINRA Members. The enforcement of Insider Trading (as otherwise misappropriated, that could
text of the proposed amended 17d–2 defined below) in [Listed] NMS Stocks be deemed a violation of the Common
plan is as follows (additions are (as defined below) irrespective of the Insider Trading Rules.
italicized; deletions are [bracketed]): marketplace(s) maintained by the f. ‘‘Intellectual Property’’ will mean
* * * * * Participating Organizations on which any: (1) Processes, methodologies,
the relevant trading may occur in procedures, or technology, whether or
Agreement for the Allocation of not patentable; (2) trademarks,
violation of Common Insider Trading
Regulatory Responsibility of copyrights, literary works or other
Rules (as defined below);
Surveillance, Investigation and works of authorship, service marks and
Enforcement for Insider Trading Whereas, the Participating
Organizations will request regulatory trade secrets; or (3) software, systems,
pursuant to § 17(d) of the Securities machine-readable texts and files and
Exchange Act of 1934, 15 U.S.C. allocation of these regulatory
responsibilities by executing and filing related documentation.
§ 78q(d), and Rule 17d–2 Thereunder g. ‘‘Plan’’ shall mean this Agreement,
with the SEC a plan for the above stated
This agreement (the ‘‘Agreement’’) by purposes (this Agreement, also known which is submitted as a Plan for the
and among [BATS]Bats BZX Exchange, herein as the ‘‘Plan’’) pursuant to the allocation of regulatory responsibilities
Inc. (‘‘[BATS]BZX’’), [BATS Y-]Bats provisions of § 17(d) of the Act, and SEC of surveillance for insider trading
BYX Exchange, Inc. (‘‘BYX’’), [Chicago Rule 17d–2 thereunder, as described pursuant to § 17(d) of the Act, 15 U.S.C.
Board Options Exchange, Inc. below; and 78q(d), and SEC Rule 17d–2.
(‘‘CBOE’’) 1,] Chicago Stock Exchange, Whereas, the Participating h. ‘‘[Listed]NMS Stock(s)’’ shall [mean
Inc. (‘‘CHX’’), Bats EDGA Exchange, Inc. Organizations will also enter into a NYSE Listed Stock(s), NASDAQ Listed
(‘‘EDGA’’), Bats EDGX Exchange, Inc. Regulatory Services Agreement (the Stock(s), NYSE Amex Listed Stock(s),
(‘‘EDGX’’), Financial Industry ‘‘Insider Trading RSA’’), of even date NYSE Arca Listed Stock(s), BATS Listed
Regulatory Authority, Inc. (‘‘FINRA’’), herewith, to provide for the Stock(s) or CHX Solely Listed
NASDAQ [OMX] BX, Inc. (‘‘NASDAQ investigation and enforcement of Stock(s)]have the meaning set forth in
[OMX] BX’’), NASDAQ [OMX] PHLX suspected Insider Trading against Rule 600(b)(47) of SEC Regulation NMS.
LLC (‘‘NASDAQ [OMX] PHLX’’), The [i. ‘‘NYSE Listed Stock’’ shall mean an
broker-dealers, and their associated
NASDAQ Stock Market LLC equity security that is listed on the
persons, that are not Common FINRA
(‘‘NASDAQ’’), National Stock Exchange, NYSE.]
Members in the case of Insider Trading [j. ‘‘NASDAQ Listed Stock’’ shall
Inc. (‘‘NSX’’), New York Stock Exchange in [Listed] NMS Stocks..
LLC (‘‘NYSE’’), NYSE [Amex]MKT LLC mean an equity security that is listed on
Now, Therefore, in consideration of NASDAQ.]
(‘‘NYSE [Amex]MKT’’), [and] NYSE the mutual covenants contained
Arca, Inc. (‘‘NYSE Arca’’) and Investors’ [k. ‘‘NYSE Amex Listed Stock’’ shall
hereafter, and other valuable mean an equity security that is listed on
Exchange LLC (‘‘IEX’’) (each a consideration to be mutually exchanged,
‘‘Participating Organization’’ and NYSE Amex.]
the Participating Organizations hereby [l. ‘‘NYSE Arca Listed Stock’’ shall
together, the ‘‘Participating agree as follows:
Organizations’’), is made pursuant to mean an equity security that is listed on
1. Definitions. Unless otherwise NYSE Arca.]
§ 17(d) of the Securities Exchange Act of defined in this Agreement, or the [m. ‘‘BATS Listed Stock’’ shall mean
1934 (the ‘‘Act’’), 15 U.S.C. 78q(d), and context otherwise requires, the terms an equity security that is listed on
Securities and Exchange Commission used in this Agreement will have the BATS.]
(‘‘SEC’’) Rule 17d–2, which allow for same meaning they have under the Act, [n. ‘‘CHX Solely Listed Stock’’ shall
plans to allocate regulatory and the rules and regulations mean an equity security that is listed
responsibility among self-regulatory thereunder. As used in this Agreement,
asabaliauskas on DSK3SPTVN1PROD with NOTICES
only on the CHX.]
organizations (‘‘SROs’’). Upon approval the following terms will have the [o.]i. ‘‘Listing Market’’ shall mean
by the SEC, this Agreement shall amend following meanings: [NYSE Amex, NASDAQ, NYSE, NYSE
and restate the agreement among the a. ‘‘Rule’’ of an ‘‘exchange’’ or an Arca or BATS, but not CHX] an
Participating Organizations approved by ‘‘association’’ shall have the meaning exchange that lists NMS stocks.
1 [CBOE’s allocation of certain regulatory
defined in Section 3(a)(27) of the Act. 2. Assumption of Regulatory
responsibilities to FINRA under this Agreement is
b. ‘‘Common FINRA Members’’ shall Responsibilities. On the Effective Date of
limited to the activities of the CBOE Stock mean members of FINRA and at least the Plan, FINRA will assume regulatory
Exchange, LLC, a facility of CBOE.] one of the Participating Organizations. responsibilities for surveillance,
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investigation and enforcement of Insider security as set forth in paragraph 1.b. of FINRA, as applicable, a copy of such
Trading by broker-dealers, and their Exhibit B.] customer complaint.
associated persons, for Common FINRA [6]5. Fees. FINRA shall charge [10]9. Parties to Make Personnel
Members with respect to [Listed]NMS Participating Organizations for Available as Witnesses. Each
Stocks, irrespective of the performing the Regulatory Participating Organization shall make
marketplace(s) maintained by the Responsibilities, as set forth in the its personnel available to FINRA to
Participant Organizations on which the Schedule of Fees, attached as Exhibit B. serve as testimonial or non-testimonial
relevant trading may occur in violation [7]6. Applicability of Certain Laws, witnesses as necessary to assist FINRA
of the Common Insider Trading Rules Rules, Regulations or Orders. in fulfilling the Regulatory
(‘‘Regulatory Responsibilities’’). Notwithstanding any provision hereof, Responsibilities allocated under this
3. Certification of Insider Trading this Agreement shall be subject to any Agreement. FINRA shall provide
Rules. statute, or any rule or order of the SEC. reasonable advance notice when
a. Initial Certification. By signing this To the extent such statute, rule, or order practicable and shall work with a
Agreement, the Participating is inconsistent with one or more Participating Organization to
Organizations, other than FINRA, provisions of this Agreement, the accommodate reasonable scheduling
hereby certify to FINRA that their statute, rule, or order shall supersede conflicts within the context and
respective lists of Common Insider the provision(s) hereof to the extent demands as the entity with ultimate
Trading Rules contained in Exhibit A necessary to be properly effectuated and regulatory responsibility. The
hereto are correct, and FINRA hereby the provision(s) hereof in that respect Participating Organization shall pay all
confirms that such rules are Common shall be null and void. reasonable travel and other expenses
Insider Trading Rules as defined in this [8]7. Exchange Committee; Reports. incurred by its employees to the extent
Agreement. a. Exchange Committee. The that FINRA requires such employees to
b. Yearly Certification. Each year Participating Organizations shall form a serve as witnesses, and provide
following the commencement of committee (the ‘‘Exchange Committee’’), information or other assistance pursuant
operation of this Agreement, or more to this Agreement.
which shall act on behalf of all of
[11]10. Market Data; Sharing of Work-
frequently if required by changes in the Participating Organizations in receiving
Papers, Data and Related Information.
rules of the Participating Organizations, copies of the reports described below a. Market Data. FINRA shall obtain
each Participating Organization shall and in reviewing issues that arise under raw market data necessary to the
submit a certified and updated list of this Agreement. Each Participating performance of regulation under this
Common Insider Trading Rules to Organization shall appoint a Agreement from (a) the Consolidated
FINRA for review, which shall (i) add representative to the Exchange Tape Association (‘‘CTA’’) [as the
Participating Organization rules not Committee. The Exchange Committee exclusive securities information
included in the then-current list of representatives shall report to their processor (‘‘SIP’’) for all NYSE Listed
Common Insider Trading Rules that respective executive management Stocks, NYSE Amex Listed Stocks,
qualify as Common Insider Trading bodies regarding status or issues under NYSE Arca Listed Stocks, BATS Listed
Rules as defined in this Agreement; (ii) this Agreement. The Participating Stocks and CHX Solely Listed Stocks]
delete Participating Organization rules Organizations agree that the Exchange and (b) the NASDAQ Unlisted Trading
included in the current list of Common Committee will meet regularly up to Privileges Plan [as the exclusive SIP for
Insider Trading Rules that no longer four (4) times a year, with no more than all NASDAQ Listed Stocks].
qualify as Common Insider Trading one meeting per calendar quarter. At b. Sharing. A Participating
Rules as defined in this Agreement; and these meetings, the Exchange Organization shall make available to
(iii) confirm that the remaining rules on Committee will discuss the conduct of FINRA information necessary to assist
the current list of Common Insider the Regulatory Responsibilities and FINRA in fulfilling the Regulatory
Trading Rules continue to be identify issues or concerns with respect Responsibilities assumed under the
Participating Organization rules that to this Agreement, including matters terms of this Agreement. Such
qualify as Common Insider Trading related to the calculation of the cost information shall include any
Rules as defined in this Agreement. formula and accuracy of fees charged information collected by a Participating
FINRA shall review each Participating and provision of information related to Organization in the course of
Organization’s annual certification and the same. The SEC shall be permitted to performing its regulatory obligations
confirm whether FINRA agrees with the attend the meetings as an observer. under the Act, including information
submitted certified and updated list of b. Reports. FINRA shall provide the relating to an on-going disciplinary
Common Insider Trading Rules by each reports set forth in Exhibit C hereto and investigation or action against a
of the Participating Organizations. any additional reports related to this member, the amount of a fine imposed
4. No Retention of Regulatory Agreement reasonably requested by a on a member, financial information, or
Responsibility. The Participating majority vote of all representatives to information regarding proprietary
Organizations do not contemplate the the Exchange Committee at each trading systems gained in the course of
retention of any responsibilities with Exchange Committee meeting, or more examining a member (‘‘Regulatory
respect to the regulatory activities being often as the Participating Organizations Information’’). This Regulatory
assumed by FINRA under the terms of deem appropriate, but no more often Information shall be used by FINRA
this Agreement. than once every quarterly billing period. solely for the purposes of fulfilling its
asabaliauskas on DSK3SPTVN1PROD with NOTICES
[5. Dually Listed Stocks. Stocks that [9]8. Customer Complaints. If a Regulatory Responsibilities.
are listed on more than one Participating Organization receives a c. No Waiver of Privilege. The sharing
Participating Organization shall be copy of a customer complaint relating to of documents or information between
designated as an NYSE Listed Stock, a Insider Trading or other activity or the parties pursuant to this Agreement
NASDAQ Listed Stock, an NYSE Arca conduct that is within FINRA’s shall not be deemed a waiver as against
Listed Stock or an NYSE Amex Listed Regulatory Responsibilities as set forth third parties of regulatory or other
Stock based on the applicable in this Agreement, the Participating privileges relating to the discovery of
transaction reporting plan for the equity Organization shall promptly forward to documents or information.
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d. Intellectual Property. through these means, the parties shall b. If approved by the SEC, the
(i) Existing Intellectual Property. refer the dispute to binding arbitration. Participating Organizations will notify
FINRA is and will remain the owner of b. Binding Arbitration. All claims, their members of the general terms of
all right, title and interest in and to the disputes, controversies, and other this Agreement and of its impact on
proprietary Intellectual Property it matters in question between the parties their members.
employs in the provision of regulation to this Agreement arising out of or [16]15. Subsequent Parties; Limited
hereunder (including the SONAR [and relating to this Agreement or the breach Relationship. This Agreement shall
Stock Watch] system[s]), and any thereof that cannot be resolved by the inure to the benefit of and shall be
derivative works thereof. To the extent parties will be resolved through binding binding upon the Participating
certain elements of FINRA’s systems, or arbitration. Unless otherwise agreed by Organizations hereto and their
portions thereof, may be licensed or the parties, a dispute submitted to respective legal representatives,
leased from third parties, all such third binding arbitration pursuant to this successors, and assigns. Nothing in this
party elements shall remain the paragraph shall be resolved using the Agreement, expressed or implied, is
property of such third parties, as following procedures: intended or shall: (a) Confer on any
applicable. Likewise, any other (i) The arbitration shall be conducted person other than the Participating
Participating Organization is and will in the city of New York in accordance Organizations hereto, or their respective
remain the owner of all right, title and with the Commercial Arbitration Rules legal representatives, successors, and
interest in and to its own existing of the American Arbitration Association assigns, any rights, remedies,
proprietary Intellectual Property. and judgment upon the award rendered obligations or liabilities under or by
(ii) Enhancements to Existing by the arbitrator may be entered in any reason of this Agreement, (b) constitute
Intellectual Property or New court having jurisdiction thereof; and the Participating Organizations hereto
Developments. In the event FINRA (a) (ii) There shall be three arbitrators, partners or participants in a joint
makes any changes, modifications or and the chairperson of the arbitration venture, or (c) appoint one Participating
enhancements to its Intellectual panel shall be an attorney. Organization the agent of the other.
[17]16. Assignment. No Participating
Property for any reason, or (b) creates [14]13. Limitation of Liability. As
Organization may assign this Agreement
any newly developed Intellectual between the Participating Organizations,
without the prior written consent of all
Property for any reason, including as a no Participating Organization, including the other Participating Organizations,
result of requested enhancements or its respective directors, governors, which consent shall not be
new development by the Exchange officers, employees and agents, will be unreasonably withheld, conditioned or
Committee (collectively, the ‘‘New IP’’), liable to any other Participating delayed; provided, however, that any
the Participating Organizations Organization, or its directors, governors, Participating Organization may assign
acknowledge and agree that FINRA shall officers, employees and agents, for any this Agreement to a corporation
be deemed the owner of the New IP liability, loss or damage resulting from controlling, controlled by or under
created by it (and any derivative works any delays, inaccuracies, errors or common control with the Participating
thereof), and shall retain all right, title omissions with respect to its performing Organization without the prior written
and interest therein and thereto, and or failing to perform regulatory consent of any other party.
each other Participating Organization responsibilities, obligations, or [18]17. Severability. Any term or
hereby irrevocably assigns, transfers and functions, except (a) as otherwise provision of this Agreement that is
conveys to FINRA without further provided for under the Act, (b) in invalid or unenforceable in any
consideration all of its right, title and instances of a Participating jurisdiction shall, as to such
interest in or to all such New IP (and Organization’s gross negligence, willful jurisdiction, be ineffective to the extent
any derivative works thereof). misconduct or reckless disregard with of such invalidity or unenforceability
(iii) Fees for New IP. FINRA will not respect to another Participating without rendering invalid or
charge the Participating Organizations Organization, (c) in instances of a unenforceable the remaining terms and
any fees for any New IP created and breach of confidentiality obligations provisions of this Agreement or
used by FINRA; provided, however, that owed to another Participating affecting the validity or enforceability of
FINRA will be permitted to charge fees Organization, or (d) in the case of any any of the terms or provisions of this
for software maintenance work Participating Organization paying fees Agreement in any other jurisdiction.
performed on systems used in the hereunder, for any payments due. The [19]18. Termination.
discharge of its duties hereunder. Participating Organizations understand a. Any Participating Organization may
[12]11. Special or Cause and agree that the Regulatory cancel its participation in this
Examinations. Nothing in this Responsibilities are being performed on Agreement at any time, provided that it
Agreement shall restrict or in any way a good faith and best effort basis and no has given 180 days written notice to the
encumber the right of a party to conduct warranties, express or implied, are made other Participating Organizations (or in
special or cause examinations of by any Participating Organization to any the case of a change of control in
Common FINRA Members as any party, other Participating Organization with ownership of a Participating
in its sole discretion, shall deem respect to any of the responsibilities to Organization, such other notice time
appropriate or necessary. be performed hereunder. This paragraph period as that Participating Organization
[13]12. Dispute Resolution Under this is not intended to create liability of any may choose), and provided that such
Agreement. Participating Organization to any third termination has been approved by the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
a. Negotiation. The parties to this party. SEC. The cancellation of its
Agreement will attempt to resolve any [15]14. SEC Approval. participation in this Agreement by any
disputes through good faith negotiation a. The parties agree to file promptly Participating Organization shall not
and discussion, escalating such this Agreement with the SEC for its terminate this Agreement as to the
discussion up through the appropriate review and approval. FINRA shall file remaining Participating Organizations.
management levels until reaching the this Agreement on behalf, and with the b. The Regulatory Responsibilities
executive management level. In the explicit consent, of all Participating assumed under this Agreement by
event a dispute cannot be settled Organizations. FINRA may be terminated by FINRA
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against any Participating Organization responsibilities with respect to the Rule 10b–5 (as it pertains to insider
as follows. The Participating matters allocated to FINRA pursuant to trading), which states that:
Organization will have thirty (30) days this Agreement for purposes of §§ 17(d)
Rule 10b–5—Employment of
from receipt to satisfy the invoice. If the and 19(g) of the Act.
[25]24. Governing Law. This Manipulative and Deceptive Devices
Participating Organization fails to
satisfy the invoice within thirty (30) Agreement shall be deemed to have It shall be unlawful for any person,
days of receipt (‘‘Default’’), FINRA will been made in the State of New York, directly or indirectly, by the use of any
notify the Participating Organization of and shall be construed and enforced in means or instrumentality of interstate
the Default. The Participating accordance with the law of the State of commerce, or of the mails or of any
Organization will have thirty (30) days New York, without reference to facility of any national securities
from receipt of the Default notice to principles of conflicts of laws thereof. exchange,
satisfy the invoice. Each of the parties hereby consents to a. To employ any device, scheme, or
c. FINRA will have the right to submit to the jurisdiction of the courts artifice to defraud,
terminate the Regulatory of the State of New York in connection b. To make any untrue statement of a
Responsibilities assumed under this with any action or proceeding relating material fact or to omit to state a
Agreement if a Participating to this Agreement. material fact necessary in order to make
Organization has Defaulted in its [26]25. Survival of Provisions. the statements made, in the light of the
obligation to pay the invoice on more Provisions intended by their terms or circumstances under which they were
than three (3) occasions in any rolling context to survive and continue made, not misleading, or
twenty-four (24) month period. notwithstanding delivery of the c. To engage in any act, practice, or
[20]19. Intermarket Surveillance regulatory services by FINRA, the course of business which operates or
Group (‘‘ISG’’). In order to participate in payment of the Fees by the Participating would operate as a fraud or deceit upon
this Agreement, all Participating Organizations, and any expiration of any person, in connection with the
Organizations to this Agreement must this Agreement shall survive and purchase or sale of any security.
be members of the ISG. continue. 2. Securities Exchange Act of 1934
[27]26. Amendment. Section 17(a), and rules and regulations
[21]20. General. The Participating
a. This Agreement may be amended to promulgated there under in connection
Organizations agree to perform all acts
add a new Participating Organization, with insider trading, including SEC
and execute all supplementary
provided that such Participating Rule 17a–3 (as it pertains to insider
instruments or documents that may be
Organization does not assume trading).
reasonably necessary or desirable to
regulatory responsibility, solely by an 3. The following SRO Rules as they
carry out the provisions of this
amendment executed by FINRA and pertain to violations of insider trading:
Agreement.
such new Participating Organization. FINRA Rule 2010 (Standards of
[22]21. Liaison and Notices. All
All other Participating Organizations Commercial Honor and Principles of
questions regarding the implementation
expressly consent to allow FINRA to Trade)
of this Agreement shall be directed to
add new Participating Organizations to FINRA Rule 2020 (Use of Manipulative,
the persons identified below, as
this Agreement as provided above. Deceptive or Other Fraudulent
applicable. All notices and other
FINRA will promptly notify all Devices)
communications required or permitted
Participating Organizations of any such FINRA [NASD] Rule [3010]3110
to be given under this Agreement shall
amendments to add a new Participating (Supervision)
be in writing and shall be deemed to
Organization. [FINRA NASD Rule 3110(a) and (c)
have been duly given upon (i) actual b. All other amendments must be (Books and Records; Financial
receipt by the notified party or (ii) approved by each Participating Condition)]
constructive receipt (as of the date Organization. All amendments, FINRA Rule 4511 (General
marked on the return receipt) if sent by including adding a new Participating Requirements)
certified or registered mail, return Organization, must be filed with and FINRA Rule 4512 (Customer Account
receipt requested, to the following approved by the SEC before they Information)
addresses: become effective. [NYSE Rule 342 (Offices—Approval,
* * * * * [28]27. Effective Date. The Effective Supervision and Control)]
[23]22. Confidentiality. The parties Date of this Agreement will be the date NYSE Rule 440 (Books and Records)
agree that documents or information the SEC declares this Agreement to be NYSE Rule 476(a) (Disciplinary
shared shall be held in confidence, and effective pursuant to authority conferred Proceedings Involving Charges
used only for the purposes of carrying by § 17(d) of the Act, and SEC Rule 17d– Against Members, Member
out their respective regulatory 2 thereunder. Organizations, Principal Executives,
obligations under this Agreement. No [29]28. Counterparts. This Agreement Approved Persons, Employees, or
party shall assert regulatory or other may be executed in any number of Others)
privileges as against the other with counterparts, including facsimile, each NYSE Rule 2010 (Standards of
respect to Regulatory Information that is of which will be deemed an original, but Commercial Honor and Principles of
required to be shared pursuant to this all of which taken together shall Trade)
Agreement, as defined by paragraph constitute one single agreement between NYSE Rule 2020 (Use of Manipulative,
[11]10, above. the parties. Deceptive or Other Fraudulent
asabaliauskas on DSK3SPTVN1PROD with NOTICES
[24]23. Regulatory Responsibility. * * * * * Devices)
Pursuant to Section 17(d)(1)(A) of the NYSE Rule 3110 (Supervision)
Act, and Rule 17d–2 thereunder, the Exhibit A: Common Insider Trading NYSE MKT General and Floor Rule 3(j)
Participating Organizations jointly and Rules (General Prohibitions and Duty to
severally request the SEC, upon its 1. Securities Exchange Act of 1934 Report)
approval of this Agreement, to relieve Section 10(b), and rules and regulations [NYSE Amex Equities Rule 342
the Participating Organizations, jointly promulgated there under in connection (Offices—Approval, Supervision and
and severally, of any and all with insider trading, including SEC Control)]
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NYSE [Amex]MKT Equities Rule 440 NYSE Arca Equities Rule 6.2(b) EDGA Rule 3.2 (Violations Prohibited)
(Books and Records) (Prohibited Acts (J&E)) EDGA Rule 3.3 (Use of Fraudulent
NYSE [Amex]MKT Equities Rule 476(a) NYSE Arca Equities Rule 6.1 Devices)
(Disciplinary Proceedings Involving (Adherence to Law) EDGA Rule 4.1 (Requirements)
Charges Against Members, Member NYSE Arca Equities Rule 6.18 EDGA Rule 5.1 (Written Procedures)
Organizations, Principal Executives, (Supervision) EDGA Rule 5.3 (Records)
Approved Persons, Employees, or NYSE Arca Equities Rule 9.1(c) (Office EDGA Rule 5.5 (Prevention of Misuse of
Others) Supervision) Material, Nonpublic Information)
NYSE [Amex]MKT Equities Rule 2010 NYSE Arca Equities Rule 9.2(b) EDGA Rule 12.4 (Manipulative
(Standards of Commercial Honor and (Account Supervision) Transactions)
Principles of Trade) NYSE Arca Equities Rule 9.2(c) EDGX Rule 3.1 (Business Conduct of
NYSE [Amex]MKT Equities Rule 2020 (Customer Records) Members)
(Use of Manipulative, Deceptive or NYSE Arca Equities Rule 2010 EDGX Rule 3.2 (Violations Prohibited)
Other Fraudulent Devices) (Standards of Commercial Honor and EDGX Rule 3.3 (Use of Fraudulent
NYSE MKT Equities Rule 3110 Principles of Trade) Devices)
(Supervision) NYSE Arca Equities Rule 2020 (Use of EDGX Rule 4.1 (Requirements)
NASDAQ [OMX] Rule 2110A Manipulative, Deceptive or Other EDGX Rule 5.1 (Written Procedures)
(Standards of Commercial Honor and Fraudulent Devices) EDGX Rule 5.3 (Records)
Principles of Trade) NSX Rule 3.1 (Business Conduct of ETP EDGX Rule 5.5 (Prevention of Misuse of
NASDAQ [OMX] Rule 2120 (Use of Holders) Material, Nonpublic Information)
Manipulative, Deceptive or Other NSX Rule 3.2 (Violations Prohibited) EDGX Rule 12.4 (Manipulative
Fraudulent Devices) NSX Rule 3.3 (Use of Fraudulent Transactions)
NASDAQ [OMX] Rule 3010 Devices) IEX Rule 3.110 (Business Conduct of
(Supervision) NSX Rule 4.1 (Requirements) Members)
[NASDAQ [OMX] Rule 3110(a) and (c) NSX Rule 5.1 (Written Procedures) IEX Rule 3.120 (Violations Prohibited)
(Books and Records; Financial NSX Rule 5.3 (Records) IEX Rule 3.130 (Use of Fraudulent
Condition)] NSX Rule 5.5 (Chinese Wall Procedures) Devices)
NASDAQ Rule 4511A (General NSX Rule 12.4 (Manipulative IEX Rule 4.511 (General Requirements)
Requirements Transactions) IEX Rule 4.512 (Customer Account
NASDAQ Rule 4512A (Customer NASDAQ [OMX] BX Rule 2110 Information)
Account Information) (Standards of Commercial Honor and IEX Rule 5.110 (Supervision)
CHX Article 8, Rule 3 (Fraudulent Acts) Principles of Trade) IEX Rule 5.150 (Prevention of Misuse of
CHX Article 9, Rule 2 (Just & Equitable NASDAQ [OMX] BX Rule 2120 (Use of Material, Non-Public Information)
Trade Principles) Manipulative, Deceptive or Other IEX Rule 10.140 (Manipulative
CHX Article 11, Rule 2 (Maintenance of Fraudulent Devices) Transactions)
Books and Records) NASDAQ [OMX] BX Rule 3010 Exhibit B: Fee Schedule
CHX Article 6, Rule 5 (Supervision of (Supervision)
Registered Persons and Branch and NASDAQ [OMX] BX Rule 3110(a) and 1. Fees. FINRA shall charge each
Resident Offices) (c) (Books and Records; Financial Participating Organization a Quarterly
[CBOE Rule 4.1 (Practices inconsistent Condition) Fee in arrears for the performance of
with just and equitable principles)] [BATS]BZX Rule 3.1 (Business Conduct FINRA’s Regulatory Responsibilities
[CBOE Rule 4.2 (adherence to law)] of Members) under the Plan (each, a ‘‘Quarterly Fee,’’
[CBOE Rule 4.7 (Manipulation)] [BATS]BZX Rule 3.2 (Violations and together, the ‘‘Fees’’).
[CBOE Rule 4.18 (Prevention of the Prohibited) a. Quarterly Fees.
misuse of material non public [BATS]BZX Rule 3.3 (Use of Fraudulent (1) Quarterly Fees for each
information)] Devices) Participating Organization will be
NASDAQ [OMX] PHLX Rule 707 [BATS]BZX Rule 4.1 (Requirements) charged by FINRA according to the
(Conduct Inconsistent with Just and [BATS]BZX Rule 5.1 (Written Participating Organization’s ‘‘Percentage
Equitable Principles of Trade) Procedures) of Publicly Reported Trades’’ occurring
NASDAQ [OMX] PHLX Rule 748 [BATS]BZX Rule 5.3 (Records) over three-month billing periods. The
(Supervision) [BATS]BZX Rule 5.5 (Prevention of the ‘‘Percentage of Publicly Reported
NASDAQ [OMX] PHLX Rule 760 Misuse of Material, Non-Public Trades’’ shall equal a Participating
(Maintenance, Retention and Information) Organization’s number of reported
Furnishing of Books, Records and [BATS]BZX Rule 12.4 (Manipulative [Listed]NMS Stock trades during the
Other Information) Transactions) relevant period (the ‘‘Numerator’’),
NASDAQ [OMX] PHLX Rule 761 BYX Rule 3.1 (Business Conduct of ETP divided by the total number of all
(Supervisory Procedures Relating to Holders) [Listed]NMS Stock trades for the same
ITSFEA and to Prevention of Misuse BYX Rule 3.2 (Violations Prohibited) period (the ‘‘Denominator’’). For
or Material Nonpublic Information) BYX Rule 3.3 (Use of Fraudulent purposes of clarification, ADF and
NASDAQ [OMX] PHLX Rule 782 Devices) Trade Reporting Facility (‘‘TRF’’)
activity will be included in the
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(Manipulative Operations) BYX Rule 4.1 (Requirements)
NYSE Arca Equities Rule 2.24 (ETP BYX Rule 5.1 (Written Procedures) Denominator. Additionally, with regard
Books and Records) BYX Rule 5.3 (Records) to TRFs, TRF trade volume will be
NYSE Arca Equities Rule 5.1(a)(2)(v)(D) BYX Rule 5.5 (Prevention of the Misuse charged to FINRA. Consequently, for
(General Provisions and Unlisted of Material, Non-Public Information) purposes of calculating the Quarterly
Trading Privileges) BYX Rule 12.4 (Manipulative Fees, the volume for each Participant
NYSE Arca Equities Rule 6.3 Transactions) Organization’s TRF will be calculated
(Prevention of the Misuse of Material, EDGA Rule 3.1 (Business Conduct of separately (that is, TRF volume will be
Nonpublic Information) Members) broken out from the Participating
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![52728 Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Notices
Organization’s overall Percentage of Plan [as the exclusive SIP for NASDAQ be required in order to reject the
Publicly Reported Trades) and the fees Listed Stocks]. proposed Major Increase.
for such will be billed to FINRA in c. Annual Budget Forecast. FINRA e. Time Tracking. FINRA shall track
accordance with paragraph 1a.(2), rather will notify the Participating the time spent by staff on insider trading
than to the applicable Participating Organizations of the forecasted costs of responsibilities under this Agreement;
Organization. its insider trading program for the however, time tracking will not be used
(2) The Quarterly Fees shall be following calendar year by close of to allocate costs.
determined by FINRA in the following business on October 15 of the then- 2. Invoicing and Payment. FINRA
manner for each Participating current year (the ‘‘Forecasted Budget’’). shall invoice each Participating
Organization: FINRA shall use best efforts to provide Organization for the Quarterly Fee
(a) Less than 1.0%: If the Participating as accurate a forecast as possible. FINRA associated with the regulatory activities
Organization’s Percentage of Publicly shall then provide a final submission of performed pursuant to this Agreement
Reported Trades for the relevant three- the costs following approval of such during the previous three-month billing
month billing period is less than 1.0%, costs by its Board of Governors (the period within forty five (45) days of the
the Quarterly Fee shall be $6,250, per ‘‘Final Budget’’). Subject to paragraph end of such previous 3-month billing
quarter (‘‘Static Fee’’); 1d. below, in the event of a difference period. A Participating Organization
(b) Less than 2.0% but No Less than between the Forecasted Budget and the shall have thirty (30) days from date of
1.0%: If the Participating Organization’s Final Budget, the Final Budget will invoice to make payment to FINRA on
Percentage of Publicly Reported Trades govern. such invoice. The invoice will reflect
for the relevant three-month billing d. Increases in Fees over Five Percent. the Participating Organization’s
period is less than 2.0% but no less than Percentage of Publicly Reported Trades
(1) In the event that any proposed
for that billing period.
1.0%, the Quarterly Fee shall be increase to Fees by FINRA for a given 3. Disputed Invoices; Interest. In the
$18,750, per quarter (‘‘Static Fee’’); calendar year (which increase may arise event that a Participating Organization
(c) 2.0% or Greater: If the either during the annual budgetary disputes an invoice or a portion of an
Participating Organization’s Percentage forecasting process or through any mid- invoice, the Participating Organization
of Publicly Reported Trades for the year increase) will result in a shall notify FINRA in writing of the
relevant three-month billing period is cumulative increase in such calendar disputed item(s) within fifteen (15) days
2.0% or greater, the Quarterly Fee shall year’s Fees of more than five percent of receipt of the invoice. In its
be the amount equal to the Participating (5%) above the preceding calendar notification to FINRA of the disputed
Organization’s Percentage of Publicly year’s Final Budget (a ‘‘Major Increase’’), invoice, the Participating Organization
Reported Trades multiplied by FINRA’s then senior management of any shall identify the disputed item(s) and
total charge (‘‘Total Charge’’) for its Participating Organization (a) that is a provide a brief explanation of why the
performance of Regulatory Listing Market or (b) for which the Participating Organization disputes the
Responsibilities for the relevant three- Percentage of Publicly Reported Trades charges. FINRA may charge a
month billing period. is then currently twenty percent (20%) Participating Organization interest on
(3) Increases in Static Fees. FINRA or greater, shall have the right to call a any undisputed invoice or the
will re-evaluate the Quarterly Fees on meeting with the senior management of undisputed portions of a disputed
an annual basis during the annual FINRA in order to discuss any invoice that a Participating Organization
budget process outlined in paragraph disagreement over such proposed Major fails to pay within thirty (30) days of its
1.c. below. During each annual re- Increase. By way of example, if FINRA receipt of such invoice. Such interest
evaluation, FINRA will have the provides a Final Budget for 2011 that shall be assessed monthly. Interest will
discretion to increase the Static Fees by represents an 4% increase above the mean one and one half percent per
a percentage no greater than the Final Budget for 2010, the terms of this month, or the maximum allowable
percentage increase in the Final Budget paragraph 1.d.(1) shall not apply; if, under applicable law, whichever is less.
over the preceding year’s Final Budget. however, in April of 2011, FINRA 4. Taxes. In the event any
Any changes to the Static Fees shall not notifies the Exchange Committee of an governmental authority deems the
require an amendment to this increase in Fees that represents an regulatory activities allocated to FINRA
Agreement, but rather shall be additional 3% increase above the Final to be taxable activities similar to the
memorialized through the budget Budget for 2010, then the increase shall provision of services in a commercial
process. be deemed a Major Increase, and the context, the other Participating
(4) Increases in Total Charges. Any terms of this paragraph 1.d.(1) shall Organizations agree that they shall bear
change in the Total Charges (whether a become applicable (i.e., 4% and 3% full responsibility, on a joint and several
Final Budget increase or any mid year represents a cumulative increase of 7% basis, for the payment of any such taxes
change) shall not require an amendment above the 2010 Final Budget). levied on FINRA, or, if such taxes are
to this Agreement, but rather shall be (2) In the event that senior paid by FINRA directly to the
memorialized through the budget management members of the involved governmental authority, the other
process. parties are unable to reach an agreement Participating Organizations agree that
b. Source of Data. For purposes of regarding the proposed Major Increase, they shall reimburse FINRA for the
calculation of the Percentage of Publicly then the matter shall be referred back to amount of any such taxes paid.
Reported Trades for each Participating the Exchange Committee for final
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5. Audit Right; Record Keeping.
Organization, FINRA shall use (a) the resolution. Prior to the matter being a. Audit Right.
Consolidated Tape Association (‘‘CTA’’) referred back to the Exchange (i) Once every rolling twelve (12)
[as the exclusive securities information Committee, nothing shall prohibit the month period, FINRA shall permit no
processor (‘‘SIP’’) for all NYSE Listed parties from conferring with the SEC. more than one audit (to be performed by
Stocks, NYSE Amex Listed Stocks, Resolution shall be reached through a one or more Participating Organizations)
NYSE Arca Listed Stocks, BATS Listed vote of no fewer than all Participating of the Fees charged by FINRA to the
Stocks and CHX Solely Listed Stocks], Organizations seated on the Exchange Participating Organizations hereunder
and (b) the Unlisted Trading Privileges Committee, and a simple majority shall and a detailed cost analysis supporting
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![Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Notices 52729
such Fees (the ‘‘Audit’’). The while FINRA commits to discuss the 2008 Surveillance Investigations
Participating Organization or supporting documentation at the Fee alerts
Organizations that conduct this Audit Analysis Meeting, FINRA shall not be 4th Quarter.
will select a nationally-recognized subject, by virtue of the above Audit
independent auditing firm (or may use rights or any discussions during the Fee 2008 Total.
its regular independent auditor, Analysis Meeting or otherwise, to any
providing it is a nationally-recognized limitation whatsoever, other than the 2. Aging of Open Matters: Would
auditing firm) (‘‘Auditing Firm’’) to act Increase in Fee provisions set forth in reflect the aging for all currently open
on its, or their behalf, and will provide paragraph 1.d. of this Exhibit, on its matters for the quarterly period being
reasonable notice to other Participating discretion as to the manner and means reported. A separate table would be
Organizations of the Audit. FINRA will by which it conducts its regulatory presented for the trading activity of the
permit the Auditing Firm reasonable efforts in its role as the SRO primarily NMS Stocks listed on each Participating
access during FINRA’s normal business liable for regulatory decisions under this Organization’s exchange. [NYSE Listed
hours, with reasonable advance notice, Agreement. To that end, no Stock, NYSE Amex Listed Stock, NYSE
to such financial records and supporting disagreement among the Participating Arca Listed Stock, NASDAQ Listed
documentation as are necessary to Organizations as to the manner or Stock, BATS Listed Stock and CHX
permit review of the accuracy of the means by which FINRA conducts its Solely Listed Stock trading activity.]
calculation of the Fees charged to the regulatory efforts hereunder shall be Example:
Participating Organizations. The subject to the dispute resolution
Participating Organization, or Surveillance
procedures hereunder, and no alerts Investigations
Organizations, as applicable, other than Participating Organization shall have
FINRA, shall be responsible for the costs the right to compel FINRA to alter the 0–6 months.
of performing any such audit. 6–9 months.
manner or means by which it conducts 9–12 months.
(ii) If, through an Audit, the Exchange its regulatory efforts. Further, a 12+ months.
Committee determines that FINRA has Participating Organization shall not
inaccurately calculated the Fees for any have the right to compel a rebate or Total.
Participating Organization, the reassessment of fees for services
Exchange Committee will promptly rendered, on the basis that the 3. Timeliness of Completed Matters:
notify FINRA in writing of the amount Participating Organization would have Would reflect the total age of those
of such difference in the Fees, and, if conducted regulatory efforts in a matters that were completed or closed
applicable, FINRA shall issue a different manner than FINRA in its during the quarterly period being
reimbursement of the overage amount to professional judgment chose to conduct reported. FINRA will provide total
the relevant Participating its regulatory efforts. referrals to the SEC.
Organization(s), less any amount owed Example:
by the Participating Organization under b. Record Keeping. In anticipation of
any outstanding, undisputed invoice(s). any audit that may be performed by the Surveillance Investigations
If such an Audit reveals that any Exchange Committee under paragraph alerts
Participating Organization paid less 5.a. above, FINRA shall keep accurate 0–6 months.
than what was required pursuant to the financial records and documentation 6–9 months.
Agreement, then that Participating relating to the Fees charged by it under 9–12 months.
this Agreement. 12+ months.
Organization shall promptly pay FINRA
the difference between what the Exhibit C: Reports Total.
Participating Organization owed
pursuant to the Agreement and what FINRA shall provide the following 4. Disposition of Closed Matters:
that Participating Organization information in reports to the Exchange Would reflect the disposition of those
originally paid FINRA. If FINRA Committee, which information covers matters that were completed or closed
disputes the results of an Audit activity occurring under this Agreement: during the quarterly period being
regarding the accuracy of the Fees, it 1. Alert Summary Statistics: Total reported. A separate table would be
will submit the dispute for resolution number of surveillance system alerts presented for the trading activity of the
pursuant to the dispute resolution generated by quarter along with NMS Stocks listed on each Participating
procedures in paragraph [13]12 of the associated number of reviews and Organization’s exchange. [NYSE Listed
Agreement. investigations. In addition, this Stock, NYSE Amex Listed Stock, NYSE
(iii) In the event that through the paragraph shall also reflect the number Arca Listed Stock, NASDAQ Listed
review of any supporting of reviews and investigations originated Stock, BATS Listed Stock and CHX
documentation provided during the from a source other than an alert. A Solely Listed Stock trading activity.]
Audit, any one or more Participating separate table would be presented for Example:
Organizations desire to discuss with the trading activity of the NMS Stocks
FINRA the supporting documentation listed on each Participating Surveillance Investigations
and any questions arising therefrom YTD YTD
Organization’s exchange. [NYSE Listed
with regard to the manner in which Stock, NYSE Amex Listed Stock, NYSE No Further Review.
regulation was conducted, the
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Arca Listed Stock, NASDAQ Listed Letter of Caution/
Participating Organization(s) shall call a Stock, BATS Listed Stock and CHX
Admonition/Fine.
meeting with FINRA. FINRA shall in Referred to Legal/
Solely Listed Stock trading activity.] Enforcement.
turn notify the Exchange Committee of Referred to SEC/
this meeting in advance, and all Surveillance SRO.
2008 Investigations
Participating Organizations shall be alerts Merged.
welcome to attend (the ‘‘Fee Analysis Other.
1st Quarter.
Meeting’’). The parties to this 2nd Quarter. Total.
Agreement acknowledge and agree that 3rd Quarter.
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![52730 Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Notices
5. Pending Reviews. In addition to the not edit personal identifying VI. Conclusion
above reports, the Chief Regulatory information from submissions. You This order gives effect to the amended
Officer (CRO) (or his or her designee) of should submit only information that Plan submitted to the Commission that
any Participating Organization that is you wish to make available publicly. All is contained in File No. 4–566.
also a Listing Market [(including CHX)] submissions should refer to File It is therefore ordered, pursuant to
may inquire about pending reviews Number 4–566 and should be submitted Section 17(d) of the Act,17 that the Plan,
involving stocks listed on that on or before August 30, 2016. as amended, filed with the Commission
Participating Organization’s market. pursuant to Rule 17d–2 on July 21,
FINRA will respond to such inquiries V. Discussion
2016, is hereby approved and declared
from a CRO; provided, however, that (a) The Commission finds that the Plan, effective.
the CRO must hold any information as proposed to be amended, is It is further ordered that the
provided by FINRA in confidence and consistent with the factors set forth in Participating Organizations are relieved
(b) FINRA will not be compelled to Section 17(d) of the Act 14 and Rule of those regulatory responsibilities
provide information in contradiction of 17d–2 thereunder 15 in that it is allocated to FINRA under the amended
any mandate, directive or order from the necessary or appropriate in the public Plan to the extent of such allocation.
SEC, US Attorney’s Office, the Office of interest and for the protection of For the Commission, by the Division of
any State Attorney General or court of investors, fosters cooperation and Trading and Markets, pursuant to delegated
competent jurisdiction. coordination among SROs, and removes authority.18
IV. Solicitation of Comments impediments to and fosters the Robert W. Errett,
development of the national market Deputy Secretary.
Interested persons are invited to
system. The Commission continues to [FR Doc. 2016–18793 Filed 8–8–16; 8:45 am]
submit written data, views, and
believe that the Plan, as amended,
arguments concerning the foregoing. BILLING CODE 8011–01–P
should reduce unnecessary regulatory
Comments may be submitted by any of
duplication by allocating regulatory
the following methods:
responsibility for the surveillance, SECURITIES AND EXCHANGE
Electronic Comments investigation, and enforcement of COMMISSION
• Use the Commission’s Internet Common Rules to FINRA. Accordingly,
the proposed amendment to the Plan [Release No. 34–78475; File No. SR–IEX–
comment form (http://www.sec.gov/ 2016–05]
rules/sro.shtml); or promotes efficiency by consolidating
• Send an email to rule-comments@ these regulatory functions in a single Self-Regulatory Organizations;
sec.gov. Please include File Number 4– SRO. Investors Exchange LLC; Notice of
566 on the subject line. Under paragraph (c) of Rule 17d–2, Filing and Immediate Effectiveness of
the Commission may, after appropriate Proposed Rule Change To Amend Rule
Paper Comments
notice and comment, declare a plan, or 11.330 To Combine the TOPS and
• Send paper comments in triplicate any part of a plan, effective. In this LAST Data Products and Make Minor
to Secretary, Securities and Exchange instance, the Commission believes that Correcting and Conforming Changes
Commission, 100 F Street NE., appropriate notice and comment can to the Description of TOPS Viewer
Washington, DC 20549–1090. take place after the proposed
All submissions should refer to File amendment is effective. In particular, August 3, 2016.
Number 4–566. This file number should the purpose of the amendment is to add Pursuant to Section 19(b)(1) 1 of the
be included on the subject line if email IEX as a Participating Organization and Securities Exchange Act of 1934 (the
is used. To help the Commission reflect that IEX will be a Listing Market ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
process and review your comments (which will expand the Plan’s coverage notice is hereby given that, on July 28,
more efficiently, please use only one of NMS Stocks to include equity 2016, the Investors Exchange LLC
method. The Commission will post all securities listed on IEX), remove CBOE (‘‘IEX’’ or the ‘‘Exchange’’) filed with the
comments on the Commission’s Internet as a Participating Organization and Securities and Exchange Commission
Web site (http://www.sec.gov/rules/ update the names of certain other (the ‘‘Commission’’) the proposed rule
sro.shtml). Copies of the submission, all Participating Organizations, update change as described in Items I and II
subsequent amendments, all written defined terms, and reflect updates to the below, which Items have been prepared
statements with respect to the proposed list of Common Rules. The Commission by the self-regulatory organization. The
plan that are filed with the Commission, notes that the most recent prior Commission is publishing this notice to
and all written communications relating amendment to the Plan, which, among solicit comments on the proposed rule
to the proposed plan between the other things, reflected the addition of change from interested persons.
Commission and any person, other than BATS as a Listing Market, was I. Self-Regulatory Organization’s
those that may be withheld from the published for comment and the Statement of the Terms of Substance of
public in accordance with the Commission did not receive any the Proposed Rule Change
provisions of 5 U.S.C. 552, will be comments thereon.16 The Commission
available for Web site viewing and Pursuant to the provisions of Section
believes that the current amendment to
printing in the Commission’s Public 19(b)(1) under the Securities Exchange
the Plan does not raise any new
Reference Room, 100 F Street NE., Act of 1934 (‘‘Act’’),4 and Rule 19b–4
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regulatory issues that the Commission
Washington, DC 20549, on official has not previously considered, and thereunder,5 Investors Exchange LLC
business days between the hours of therefore believes that the amended 17 15 U.S.C. 78q(d).
10:00 a.m. and 3:00 p.m. Copies of the Plan should become effective without 18 17 CFR 200.30–3(a)(34).
plan also will be available for inspection any undue delay. 1 15 U.S.C. 78s(b)(1).
and copying at the principal offices of 2 15 U.S.C. 78a.
the Participating Organizations. All 14 15 U.S.C. 78q(d). 3 17 CFR 240.19b–4.
comments received will be posted 15 17 CFR 240.17d–2. 4 15 U.S.C. 78s(b)(1).
without change; the Commission does 16 See supra note 11. 5 17 CFR 240.19b–4.
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Document Created: 2016-08-09 01:10:00
Document Modified: 2016-08-09 01:10:00
| 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 52722 |
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