81 FR 80109 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Cease and Desist Authority Rules

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 220 (November 15, 2016)

Page Range		80109-80114
FR Document		2016-27365
Federal Register, Volume 81 Issue 220 (Tuesday, November 15, 2016)
[Federal Register Volume 81, Number 220 (Tuesday, November 15, 2016)]
[Notices]
[Pages 80109-80114]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-27365]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79260; File No. SR-BX-2016-055]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt Cease and 
Desist Authority Rules

November 8, 2016
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 28, 2016, NASDAQ BX, Inc. (``BX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Rules 9556 and 9800, which were 
previously adopted as a pilot the term of which has since expired, and 
to make related changes to the 9100, 9200, 9300, 9550, and 9800 Rule 
Series.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to adopt new Rules 9556 and 9800, which 
were previously adopted as a pilot the term of which has since expired, 
and to make related changes to the 9100, 9200, 9300, 9550, and 9800 
Rule Series. In May 2003, the Commission approved, on a pilot basis, a 
rule change to adopt NASD Rules 9556 and 9800 that gave NASD, now known 
as FINRA, authority to issue temporary cease and desist orders and made 
explicit NASD's ability to impose permanent cease and desist orders as 
a remedy in disciplinary cases.\3\ Because NASD was, and now FINRA is, 
the Exchange's regulatory services provider and administers the 
Exchange's disciplinary program under contract, the Exchange seeks to 
maintain comparability between its disciplinary procedure rules and 
those of NASD and now FINRA. As a consequence, the Exchange adopted 
Rules 9556 and 9800 to mirror the then-FINRA rules to operate as a 
pilot in conjunction with the related FINRA pilot.\4\
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    \3\ See Securities Exchange Act Release No. 47925 (May 23, 2003) 
(File No. SR-NASD-98-80), 68 FR 33548 (June 4, 2003). See also 
Securities Exchange Act Release No. 51860 (June 16, 2005), 70 FR 
36427 (June 23, 2005) (SR-NASD-2005-061) (extending the pilot to 
June 23, 2007 and making non-substantive changes); and Securities 
Exchange Act Release No. 55819 (May 25, 2007), 72 FR 30895 (June 4, 
2007) (SR-NASD-2007-033) (extending the pilot to June 23, 2009 and 
making non-substantive changes).
    \4\ See Securities Exchange Act Release No. 59154 (December 23, 
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48).
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    On June 23, 2009, the Exchange's Rule 9556 and 9800 pilot programs 
expired, at which time those rules and certain references thereto 
became obsolete, notwithstanding that they remained in the rulebook. 
The FINRA pilot program, however, continued and was approved on July 
14, 2009 on a permanent basis.\5\
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    \5\ Securities Exchange Act Release No. 60306 (July 14, 2009), 
74 FR 36292 (July 22, 2009) (SR-FINRA-2009-035). The Exchange notes 
that FINRA, in its rule change proposal to make its pilot program 
permanent, noted that it had used the authority under Rules 9556 and 
9800 sparingly. Id. at 36293.
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    Neither the Exchange nor FINRA, acting on behalf of the Exchange 
pursuant to agreement, have [sic] used the cease and desist authority 
under Rules 9556 and 9800 during the time that the rules were 
effective. Nonetheless, the Exchange believes that, in addition to 
maintaining similar disciplinary rules, adoption of Rules 9556 and 9800 
is important to the Exchange's disciplinary program. The authority 
under these rules will provide the Exchange and FINRA, operating on 
behalf of the Exchange, with a mechanism to take appropriate remedial 
action against a member or an associated person that has engaged (or is 
engaging) in violative conduct that could cause continuing harm to the 
investing public if not addressed expeditiously, such as dissipation or 
conversion of assets. It must be emphasized, however, that the cease 
and desist provisions contain numerous procedural protections for 
respondents to ensure that the proceedings are fair. Consequently, the 
Exchange believes that adoption of these rules is important to its 
regulatory program, notwithstanding that it anticipates exercising the 
authority provided by the rules sparingly.
    The Exchange is proposing to delete Rules 9556 and 9800 (and 
related references in other rules \6\) because the pilot period for 
these rules has expired rendering them void, and adopt new Rules 9556 
and 9800 (and related references in other rules) \7\ based on FINRA's 
analogous cease and desist rules, which include amendments to the 
former BX cease and desist rules to reflect changes that FINRA has made 
to its cease and desist rules in 2011 and 2015 after they were made 
permanent.\8\ The Exchange is also proposing to amend other Rules under 
the 9000 Series to incorporate changes that FINRA made to its analogous 
rules in

[[Page 80110]]

2015, as discussed below. These proposed changes include significant 
amendments made by FINRA to not only its Rules 9556 and 9800, but also 
to its 9100, 9200, 9300, 9550, and 9800 Rule Series in 2015. Unless 
otherwise noted, BX is adopting the FINRA Rules with only minor changes 
to reflect the Exchange's committee structure and rules,\9\ as 
described below.
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    \6\ The Exchange is deleting text from related provisions of 
Rules 8310, IM-8310-3(c)(1), 9120(r), 9241(c), 9290, 9311(b), 
9312(b), and 9360 that also expired on June 23, 2009 and is 
inserting new text identical to what was deleted.
    \7\ As a consequence of the expiration of the pilot rendering 
the existing related rule text void, in certain cases the Exchange 
is deleting the void text and reinserting identical rule text 
thereafter so the text may have effect once again. For example, the 
Exchange is deleting Rule 8310(a)(6), concerning imposition of a 
temporary or permanent cease and desist order, and adopting a new 
Rule 8310(a)(6) identical to what was deleted.
    \8\ In 2013, FINRA consolidated the publication standards for 
expedited proceeding decisions, including under FINRA Rule 9556, in 
FINRA Rule 8313(a)(3) and consequently amended FINRA Rule 9556 to 
remove paragraph (h) ``Notice to Membership'' from the rule. See 
Securities Exchange Act Release No. 69825 (June 21, 2013), 78 FR 
38771 (June 27, 2013) (SR-FINRA-2013-018). The Exchange did not have 
such a provision in its Rule 9556. The Exchange's disclosure 
obligations are provided under IM-8310-3, including the Exchange's 
disclosure obligations related to expedited proceedings. See IM-
8310-3(c).
    \9\ The Exchange is replacing references to FINRA and FINRA 
staff with references to the Exchange and Exchange staff, which are 
the appropriate analogous parties at BX. The Exchange is also 
replacing FINRA text that states ``Chief Executive Officer or such 
other senior officer as the Chief Executive Officer may designate'' 
with ``Chief Regulatory Officer,'' which is the Exchange officer 
vested with the authority described under the rules. For example, 
old Rules 9556(a) and 9860 vested authority with the Chief 
Regulatory Officer to authorize notice and initiation of 
proceedings, respectively, whereas the analogous FINRA rules 
authorize its Chief Executive Officer or such other senior officer 
as the Chief Executive Officer may designate instead. Last, the 
Exchange is adding clarifying language to Rule 9810 to make it clear 
that initiation of a proceeding must not only be authorized by 
FINRA's Chief Executive Officer or such other senior officer as the 
Chief Executive Officer may designate, but also BX's Chief 
Regulatory Officer. As a practical matter, the Chief Regulatory 
Officer must agree that such a proceeding should be brought pursuant 
to BX rules.
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2011 FINRA Rule Changes
    In 2011, FINRA amended Rules 9552(b), 9553(b), 9554(b), 9555(b), 
and 9556(b), all of which concern service of notice.\10\ Each of these 
rules concern [sic] the process followed when a person or entity 
subject to FINRA's jurisdiction fail [sic] to comply with various 
requirements under its rules. FINRA amended the rule provisions noted 
above to allow notice of failure to comply with a temporary or 
permanent cease and desist order to be served on counsel representing 
the member or person, or other person authorized to represent others 
under FINRA Rule 9141,\11\ when counsel or other person authorized to 
represent others under FINRA Rule 9141 agrees to accept service for the 
member or person.
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    \10\ Securities Exchange Act Release No. 60306 (January 4, 
2012), 77 FR 1524 (January 10, 2012) (SR-FINRA-2011-044). FINRA also 
amended other rules in the FINRA Rule 9000 Series not addressed in 
this filing. Id.
    \11\ FINRA Rule 9141, entitled ``Appearance and Practice; Notice 
of Appearance,'' provides, among other things, what is permissible 
in terms of representation before an Adjudicator. Exchange Rule 9141 
is consistent with FINRA Rule 9141.
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2015 FINRA Rule Changes
    In 2015, FINRA made significant changes to its temporary and 
permanent cease and desist rules.\12\ FINRA lowered the evidentiary 
standard to obtain a temporary cease and desist order, adopted a new 
expedited proceedings [sic] to address situations involving repeated 
violations of temporary or permanent cease and desist orders, and made 
a series of rule amendments to the temporary cease and desist order 
rules under FINRA Rule Series 9800, the expedited proceedings rules 
under FINRA Rule Series 9550,\13\ and FINRA's Code of Procedure (FINRA 
Rule Series 9000) that harmonize service provisions in temporary cease 
and desist proceedings and expedited proceedings, ease administrative 
burdens in temporary cease and desist proceedings, and clarify the 
process by which permanent cease and desist orders may be imposed.
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    \12\ Securities Exchange Act Release No. 75629 (August 6, 2015), 
80 FR 48379 (August 12, 2015) (SR-FINRA-2015-019).
    \13\ FINRA amended its Rule 9551 ``Failure to Comply with Public 
Communications Standards.'' BX does not have such a rule (BX Rule 
9551 is held in reserve) and is thus not incorporating those 
changes. In a related change, the Exchange is also amending its Rule 
9559 to delete the references to Rule 9551, which were erroneously 
included in the rule.
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(i) Evidentiary Standard for Imposing a Temporary Cease and Desist 
Order
    FINRA amended FINRA Rule 9840(a)(1) to change the evidentiary 
standard applied by Hearing Panels in issuing a temporary cease and 
desist order. Specifically, FINRA changed the standard for issuing a 
temporary cease and desist order from ``by a preponderance of the 
evidence that the alleged violation specified in the notice has 
occurred'' to a ``showing of a likelihood of success on the merits.'' 
FINRA noted that it believed that the ``preponderance of the evidence'' 
standard set too high an evidentiary threshold for this critical 
investor-protection tool, and noted that it is the identical standard 
for proving a violation in the underlying disciplinary proceeding that 
must be pursued at the same time.\14\ Thus, to obtain a temporary cease 
and desist order--and thereby prevent the likely and significant 
dissipation or conversion of assets or other significant harm to 
investors--FINRA's prosecuting department had to make an evidentiary 
presentation in the temporary cease and desist proceeding that is 
similar in extent to its evidentiary presentation in the subsequent 
underlying disciplinary proceeding, but in an expedited manner.
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    \14\ See Securities Exchange Act Release No. 75333 (June 30, 
2015), 80 FR 38783 (July 7, 2015) (Notice of Filing File No. SR-
FINRA-2015-019) at 38784.
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    FINRA also made a corresponding amendment to FINRA Rule 9840(a)(2). 
Prior to the amendment, FINRA Rule 9840(a)(2) provided that a temporary 
cease and desist order shall be imposed if the Hearing Panel finds that 
the violative conduct or continuation thereof is likely to result in 
significant dissipation or conversion of assets or other significant 
harm to investors prior to the completion of the underlying proceeding. 
The 2015 rule change modified this requirement to apply to the 
``alleged'' violative conduct or continuation thereof, to be consistent 
with the proposed change to the evidentiary standard.
(ii) Failures To Comply With Temporary Cease and Desist Orders and 
Permanent Cease and Desist Orders (FINRA Rule 9556)
    FINRA also made amendments to FINRA Rule 9556, which sets forth 
expedited procedures for enforcing violations of FINRA-issued temporary 
and permanent cease and desist orders. FINRA was concerned that their 
[sic] existing expedited procedures may permit cease and desist orders 
to be circumvented without any real threat of a sanction.\15\ Thus, 
FINRA amended FINRA Rule 9556 to adopt a new paragraph (h) to permit 
its staff (with prior authorization from FINRA's Chief Executive 
Officer or other designated senior officer) to institute a new kind of 
expedited proceeding if the subject of a temporary or permanent cease 
and desist order fails to comply with that order and has previously 
been served with a notice under Rule 9556(a) for failure to comply with 
any provision of the same temporary or permanent cease and desist 
order. FINRA adopted the change to prevent a respondent from abusing 
the existing process by repeatedly violating a cease and desist order 
and curing that violation before the effective date of any FINRA Rule 
9556 notice,\16\ without being subject to the immediate sanctions or 
review by the Office of Hearing Officers for a prolonged period. FINRA 
noted in its filing that the new FINRA Rule 9556(h) proceeding differs 
from other FINRA Rule 9556 expedited proceedings in other respects that 
reflect the response that FINRA believes is warranted for situations 
involving repeated violations of temporary or permanent cease and 
desist orders.\17\ These differences include the following:
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    \15\ Id. at 38785.
    \16\ Under the then-current FINRA Rule 9556, if a member or 
person failed to comply with a temporary or permanent cease and 
desist order, FINRA staff (with prior authorization from FINRA's 
Chief Executive Officer or other designated senior officer) may have 
issued a notice stating that the failure to comply within seven days 
will result in a suspension or cancellation of membership or a 
suspension or bar from associating with any member and also would 
have stated what the respondent must do to avoid such action.
    \17\ See supra note 14 at 38785.

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[[Page 80111]]

     A FINRA Rule 9556(h) proceeding could be initiated only if 
the respondent has previously been served, under FINRA Rule 9556(a), 
with a notice for failing to comply with any provision of the same 
temporary or permanent cease and desist order;
     FINRA's prosecuting department would initiate a FINRA Rule 
9556(h) proceeding by filing a petition with FINRA's Office of Hearing 
Officers (and serving the respondent) that seeks the imposition of 
sanctions for the violation (rather than issuing a notice to the 
respondent);
     FINRA's prosecuting department would seek the imposition 
of any fitting sanction at the outset of the FINRA Rule 9556(h) 
proceeding (in contrast to other FINRA Rule 9556 expedited proceedings, 
where the recipient of a notice is not subject to the imposition of any 
fitting sanction unless such recipient opts for a hearing);
     a hearing is required in a FINRA Rule 9556(h) proceeding;
     the hearing for a FINRA Rule 9556(h) proceeding must be 
held in a condensed time frame (ten business days after a respondent is 
served the petition, versus other Rule 9556 proceedings which require a 
respondent to request a hearing within seven business days after 
service of a notice instituting a proceeding and require hearings to be 
held within 14 days after a request for a hearing is filed); \18\
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    \18\ See FINRA Rule 9559(f)(2) and (3); FINRA Rule 9556(e).
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     a FINRA Rule 9556(h) proceeding is presided over by a 
Hearing Officer,\19\ rather than a Hearing Panel; \20\ and
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    \19\ As defined by FINRA Rule 9120(r).
    \20\ As defined by FINRA Rule 9120(s). See FINRA Rule 9559(d)(1) 
and (2) for a description of the appointment and authority [sic] of 
a Hearing Officer and/or Hearing Panel in expedited proceedings.
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     the Hearing Officer may issue default decisions in FINRA 
Rule 9556(h) proceedings.\21\
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    \21\ See FINRA Rule 9559(m)(2).
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    Under amended FINRA Rule 9556(h)(4), the FINRA department that 
filed the petition can withdraw it without prejudice and shall be 
permitted to refile a petition based on allegations concerning the same 
facts and circumstances that are set forth in the withdrawn petition. 
FINRA noted that this provision provides it the flexibility to withdraw 
the petition where, for instance, the respondent evidences a good faith 
intent to comply with the temporary or permanent cease and desist order 
without the need to adjudicate the petition, while preserving FINRA's 
right to refile the petition if the respondent fails to do so.\22\
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    \22\ See supra note 14 at 38785.
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(iii) Service Provisions in Temporary Cease and Desist Proceedings and 
Expedited Proceedings
    FINRA also made the rules that govern service of documents in 
temporary cease and desist proceedings and the eight different types of 
expedited proceedings under the Rule 9550 Series more consistent.\23\ 
Prior to the changes, some provisions of these rules explicitly 
addressed service by facsimile and on counsel, while some did not. 
FINRA's amendments explicitly allow service by facsimile and on counsel 
across all temporary cease and desist and expedited proceedings, noting 
that doing so removed unnecessary burdens and inefficiencies. FINRA 
also amended its rules to permit service by email for all temporary 
cease and desist proceedings and expedited proceedings. FINRA noted 
that email service would allow parties to receive information quickly, 
which is particularly important in these types of proceedings, 
considering the short time frames involved.\24\ As part of the changes 
allowing service by email, FINRA also now requires duplicate service 
through some other means such as overnight courier or personal delivery 
and made changes to its Rule 9550 Series to reflect this requirement.
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    \23\ The Exchange notes that in SR-FINRA-2015-019 FINRA replaced 
references to ``contact questionnaires'' with reference to the 
``FINRA Contact System,'' FINRA's proprietary system that 
facilitates member firm reporting of key contacts to FINRA. Exchange 
members are required to use the FINRA Contact System to report to 
the Exchange all contact information required by the Exchange and 
update its required contact information promptly. See Rule 1160. 
Under the FINRA Rule 9550 Series, the rules cite Article 4, Section 
III of the FINRA By-Laws as the authority pursuant to which its 
members have an obligation to report required contact information to 
it via the FINRA Contact System, whereas the Exchange's authority is 
pursuant to Rule 1160, as noted above. Thus, the Exchange is instead 
referencing Rule 1160 in the Rule 9550 Series as the authority 
pursuant to which members have the reporting obligation.
    \24\ See supra note 14 at 38785-6.
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(iv) Clarifying FINRA's Authority To Impose Permanent Cease and Desist 
Orders
    FINRA clarified its rules concerning the process for imposing 
permanent cease and desist orders in disciplinary proceedings. FINRA 
noted that when it obtained the authority to impose temporary cease and 
desist orders, it also obtained the authority to impose permanent cease 
and desist orders.\25\ Thus, the clarifying changes were procedural in 
nature and did not reflect any change to FINRA's prior representations 
concerning the context in which it would seek permanent cease and 
desist orders.
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    \25\ See supra note 14 at 38786.
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(v) Administrative Changes to Temporary Cease and Desist Proceedings
    FINRA also expanded the pool of persons eligible to serve on 
hearing panels to include those who may serve on hearing panels for 
disciplinary matters, as provided under FINRA Rules 9231(b) and 
9559(d)(2).\26\ Specifically, FINRA amended its Rule 9820 to provide 
that the potential panelists for the Hearing Panels that preside over 
temporary cease and desist proceedings to [sic] include persons who 
currently serve or previously served on a District Committee; \27\ 
previously served on the National Adjudicatory Council; \28\ previously 
served on a disciplinary subcommittee of the National Adjudicatory 
Council or the National Business Conduct Committee;\29\ previously 
served as a member of the Board of Directors of FINRA Regulation or of 
the Board of Governors of FINRA; or currently serve or previously 
served on a committee appointed or approved by the Board of Governors 
of FINRA, but do not serve currently on the National Adjudicatory 
Council or as a member of the Board of Directors of FINRA Regulation or 
of the Board of Governors of FINRA. The amendment to FINRA Rule 9820 
also required that each panelist be associated with a member of FINRA 
or retired therefrom. FINRA noted that, while its Office of Hearing 
Officers has presided over only a limited number of temporary cease and 
desist proceedings, those experiences have revealed that the narrowly 
circumscribed set of potential panelists can impede the recruitment of 
Hearing Panel members, especially considering that the expedited nature 
of temporary cease and desist proceedings will

[[Page 80112]]

already preclude many from being able to serve.\30\ FINRA also noted 
that it had concerns that the small pool of potential panelists will 
often make it difficult to recruit hearing panelists who can serve on 
both the temporary cease and desist proceeding and the subsequent 
underlying disciplinary proceeding, as well as any related expedited 
proceeding under FINRA Rule 9556.\31\
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    \26\ FINRA harmonized the categories of individuals eligible for 
appointment as a Hearing Panelist under FINRA Rule 9820 with FINRA 
Rule 9231(b) (providing that each panelist shall be associated with 
a member of FINRA or retired therefrom and that the pool of 
panelists for disciplinary proceedings includes current or previous 
members of District Committees, former members of the National 
Adjudicatory Council, past members of disciplinary subcommittees of 
the National Adjudicatory Council or the National Business Conduct 
Committee, past members of the Board of Directors of FINRA 
Regulation or past members of the Board of Governors of FINRA, and 
current or previous members of committees appointed or approved by 
the Board of Governors of FINRA); FINRA Rule 9559(d)(2) (providing 
for the same pool for FINRA Rule 9556 expedited proceedings).
    \27\ As defined by FINRA Rule 9120(g).
    \28\ See By-Laws of FINRA Regulation, Inc., Article V, National 
Adjudicatory Council.
    \29\ The predecessor to the FINRA National Adjudicatory Council.
    \30\ See supra note 14 at 38786.
    \31\ Id.
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    The Exchange is proposing to, likewise, expand the categories of 
individuals eligible to participate as Hearing Panelists. Like FINRA, 
the Exchange is harmonizing the categories of eligible individuals with 
the criteria under Rules 9231(b) and 9559(d)(2).\32\ Thus, the Exchange 
is allowing the Chief Hearing Officer to select as a Panelist pursuant 
to proposed Rule 9820(a) a person who: previously served on the 
Exchange Review Council; \33\ previously served on a disciplinary 
subcommittee of the Exchange Review Council, including a Subcommittee, 
an Extended Proceeding Committee,\34\ or their predecessor 
subcommittees; previously served as a Director, or as a Governor of the 
Exchange prior to its acquisition by The NASDAQ OMX Group, Inc., but 
does not serve currently in that position; or is a FINRA Panelist 
approved by the Exchange Board at least annually, including a member of 
FINRA's Market Regulation Committee or a person who previously served 
on the Market Regulation Committee not earlier than four years before 
the date the complaint was served upon the Respondent who was the first 
served Respondent in the disciplinary proceeding for which the Hearing 
Panel or the Extended Hearing Panel is being appointed, or from other 
sources the Board deems appropriate given the responsibilities of 
Panelists.
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    \32\ Like FINRA's Rule 9559(d)(2), Rule 9559(d)(2) provides for 
the same pool for Rule 9556 expedited proceedings) [sic]. Supra note 
26.
    \33\ See By-Laws of NASDAQ BX, Inc., Article VII, Exchange 
Review Council.
    \34\ As defined by Rule 9120(n).
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    FINRA's proposed changes also eased other administrative burdens 
created by the shortened time frame of a temporary cease and desist 
proceeding. Those proposed changes were aimed at improving Hearing 
Panels' and parties' ability to prepare for hearings and giving Hearing 
Officers some needed flexibility. For example, under FINRA Rule 9830(a) 
prior to the 2015 amendments a Hearing Officer was not able to extend a 
hearing date in a temporary cease and desist proceeding unless all 
parties consented to the extension. The requirement to obtain the 
parties' consent was problematic in instances whereby the Office of 
Hearing Officers, rather than one of the parties, had a need for an 
extension, such as when it encounters difficulty in quickly appointing 
a Hearing Panel. To address this problem, FINRA amended its Rule 
9830(a) to allow hearing deadlines to be extended by the Chief Hearing 
Officer or Deputy Chief Hearing Officer for good cause shown.
    FINRA also made similar amendments to the process by which 
extensions are obtained to the deadlines for issuing decisions in 
temporary cease and desist proceedings and responding to requests to 
modify, set aside, limit, or suspend a temporary cease and desist 
order. Before the amendments to FINRA Rule 9840(a), the Hearing Panel's 
deadline for issuing its written decision could not be extended, even 
where there was good cause, without the consent of the parties. 
Likewise, prior to amending FINRA Rule 9850, a Hearing Panel's deadline 
for responding to an application to have a temporary cease and desist 
order modified, set aside, limited, or suspended could not be extended, 
even where there was a good cause, without the consent of the Parties. 
To allow a Hearing Panel some flexibility where there is a need for 
additional time to prepare its decision or respond to a FINRA Rule 9850 
request (e.g., when a member of the Hearing Panel becomes ill, where 
the temporary cease and desist proceeding is highly complex), FINRA 
amended FINRA Rules 9840(a) and 9850 to permit the deadlines for 
issuing decisions and responding to FINRA Rule 9850 applications to be 
extended by the Chief Hearing Officer or Deputy Chief Hearing Officer 
for good cause shown.
    To further address the burdens created by the short time frame of 
temporary cease and desist proceedings, FINRA amended its rules to: (i) 
Require FINRA's prosecuting department to file a memorandum of points 
and authorities with the notice initiating a temporary cease and desist 
proceeding; and (ii) permit the Hearing Officer to order a party to 
furnish to all other parties and the Hearing Panel such information as 
deemed appropriate, including any or all of the pre-hearing submissions 
described in FINRA Rule 9242(a). FINRA noted that requiring its 
prosecuting department to file a memorandum of points and authorities 
at the initiation of the proceeding provides more context to the 
allegations and set [sic] forth legal authorities on which the notice 
seeking a temporary cease and desist order is premised.\35\ FINRA 
believed that the change would, in turn, facilitate a more efficient 
process and improve the quality of the hearing through more thorough 
preparation, which are the same goals of the pre-hearing processes in 
FINRA disciplinary proceedings. FINRA also noted that requiring the 
filing of a memorandum of points and authorities at the initiation of a 
temporary cease and desist proceeding also enhances disclosure of the 
prosecuting department's allegations, which would inure to the benefit 
of the respondents and further increases the fairness of the 
proceeding.\36\ Last, FINRA noted that all of these objectives are 
served by authorizing Hearing Officers to order a party to furnish 
other pre-hearing submissions.\37\
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    \35\ See supra note 14 at 38787.
    \36\ Id.
    \37\ Id.
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    FINRA also proposed Rule 9840(e), which is a delivery requirement 
that requires a member firm that is the subject of a temporary cease 
and desist order to provide a copy of the order to its associated 
persons, within one business day of receiving it. Considering the 
significant nature of the harm that a temporary cease and desist order 
is aimed at stopping, FINRA believed that there is a heightened need to 
ensure that the persons who may act on behalf of the member firm are 
made aware of the contents of a temporary cease and desist order 
imposed against the member firm and the delivery requirement furthers 
that goal.\38\
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    \38\ Similarly, FINRA made related amendments to FINRA Rules 
9269, 9270, and 9840 to require that the Office of Hearing Officers, 
the Department of Enforcement, the Department of Market Regulation, 
or the General Counsel, as appropriate, disseminate default 
decisions, orders of acceptance of settlement, and temporary cease 
and desist orders to each member of FINRA with which a respondent is 
associated. FINRA noted that these dissemination requirements are 
intended to ensure that a respondent's member firm is made aware of 
the disciplinary history of its associated persons, regardless of 
the specific disciplinary procedure involved. See supra note 14 at 
38787, n. 15. FINRA also noted that the amendments are consistent 
with other FINRA Rules that already require the Office of Hearing 
Officers, the National Adjudicatory Council, or the Board of 
Governors of FINRA to provide copies of a decision issued by a 
Hearing Panel, an Extended Hearing Panel, the National Adjudicatory 
Council, or the Board of Governors of FINRA to each member firm with 
which a respondent is associated. Id.; see also FINRA Rules 9268(d), 
9349(c), 9351(e). The Exchange is adopting these amendments to Rules 
9269, 9270, and 9840.
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    FINRA's rule change clarified the following additional three 
issues: (1) How settlements may be approved in temporary cease and 
desist proceedings; (2) which Hearing Panel has jurisdiction to preside 
over applications filed under FINRA Rule 9850 to modify, set aside, 
limit or suspend temporary cease and desist orders that are filed after 
a

[[Page 80113]]

Hearing Panel has already been appointed in the underlying disciplinary 
proceeding; and (3) whether temporary and permanent cease and desist 
orders imposed against a firm also apply to successors of that firm.
    With respect to the first issue, new FINRA Rule 9810(c) established 
that, if the parties agree to the terms of a proposed temporary cease 
and desist order, the Hearing Officer has the authority to approve and 
issue the order. On the second issue, amended FINRA Rule 9850 provided 
that the Hearing Panel that presided over the temporary cease and 
desist order proceeding shall retain jurisdiction to review a FINRA 
Rule 9850 application unless at the time the application is filed a 
Hearing Panel has already been appointed in the underlying disciplinary 
proceeding commenced under FINRA Rule 9211, in which case the Hearing 
Panel appointed in the disciplinary proceeding has jurisdiction. As to 
the third issue, amended FINRA Rule 9840(b) and new Rule 9291(a) 
established that when a temporary or permanent cease and desist order 
is imposed against a member firm, it also applies to any successor of 
the member firm.
    Finally, FINRA amended certain provisions of FINRA Rule 9120. FINRA 
amended FINRA Rule 9120(s), ``Hearing Panel,'' to include an 
Adjudicator that is constituted under Rule 9231 to conduct a 
disciplinary proceeding governed by the Rule 9800 Series. The Exchange 
is adopting this amendment in its Rule 9120(s).
    FINRA also amended FINRA Rule 9120(t), ``Interested Staff,'' to: 
(1) Insert ``or petition'' under paragraph (2)(A) of the rule, thus 
expanding the definition to include FINRA staff that filed a petition 
in a proceeding under the Rule 9520 Series or Rule 9550 Series; and (2) 
include a new paragraph (4) to list FINRA staff that are defined as 
Interested Staff in a proceeding under the FINRA Rule 9800 Series. The 
Exchange is also adopting the amendment to its Rule 9120(t) 
``Interested Staff,'' but is expanding the definition to also include 
BX Regulation employees who directly participated in the authorization 
of the notice that initiates a temporary cease and desist proceeding, 
or directly participated in an examination, investigation, prosecution, 
or litigation related to a specific temporary cease and desist 
proceeding, under new paragraphs (t)(4)(C) and (D) of the rule.
    FINRA also amended FINRA Rule 9120(w), ``Panelists,'' to include 
references to Panelists in the Rule 9550 Series, and the Rule 9800 
Series within the definition provided by the rule. The Exchange is 
adopting this amendment in Rule 9120(z). FINRA also amended Rule 
9120(z) ``Respondent'' to define a Respondent in a proceeding governed 
by the Rule 9800 Series to mean a FINRA member or associated person 
that has been served a notice initiating a cease and desist proceeding. 
The Exchange is adopting this amendment in Rule 9120(bb) 
``Respondent.''
    The Exchange believes that the changes made by FINRA in 2011 and 
2015, as described above, improve the cease and desist authority as 
well as the service provisions. Consequently, the Exchange is proposing 
to adopt the changes, as described above, as its own.
Other Non-Substantive Changes
    The Exchange is also proposing to make other non-substantive 
changes to its rules to correct misuse of the word ``FINRA,'' which 
were introduced erroneously when the Exchange adopted the rules. 
Specifically, the Exchange is proposing to amend Rule 9555(g) to remove 
reference to FINRA and replace it with reference to the Exchange to 
make clear that it is BX's departments that should be contacted. The 
Exchange is also replacing references to FINRA's rules under new Rule 
9810 with references to analogous rules of BX. Specifically, BX is 
replacing reference to FINRA Rule 2010 with reference to Equity Rule 
2110, reference to FINRA Rule 2020 with reference to Equity Rule 2120, 
and FINRA Rule 4330 with reference to Equity Rule 2150.\39\ The 
Exchange is also replacing the word ``FINRA'' with ``Exchange'' in 
adopting Rule 9840(d) to make it clear that the rule applies to BX 
members. Last, the Exchange is proposing not to include the word 
``FINRA'' prior to ``Rule 9211'' in adopting Rule 9850 to make it clear 
that the rule referenced is BX's rule, not FINRA's.
---------------------------------------------------------------------------

    \39\ BX notes that the BX rules cited in new Rule 9810 are the 
same as those that were cited under old Rule 9810(a). BX further 
notes that under FINRA Rule 9810(a), FINRA cites to FINRA Rules 
2010, 2020, and 4330. BX is replacing reference to the FINRA rules 
with reference to BX's analogous Equity Rules 2110, 2120 and 2150, 
as was the case in old Equity Rule 9810(a). While the provisions of 
Equity Rules 2110 and 2120 closely mirror FINRA Rules 2010 and 2020, 
Equity Rule 2150 is significantly different than FINRA Rule 4330. 
FINRA Rule 4330 concerns the permissible use of customers' margin 
securities while Equity Rule 2150 requires a member and persons 
associated with a member to comply with FINRA's Rule 2150. FINRA 
Rule 2150 is titled ``Improper Use of Customers' Securities or 
Funds; Prohibition Against Guarantees and Sharing in Accounts'' and, 
among other things, prohibits members or persons associated with a 
member from making improper use of a customer's securities or funds, 
guaranteeing a customer against loss in connection with any 
securities transaction or in any securities account of such 
customer, and setting forth what is permissible in terms of sharing 
in profits and losses in a customer account. BX believes that Equity 
Rule 2150 is the appropriate rule cite under new Rule 9810(a) for 
purposes of alleged violations concerning misuse or conversion of 
customer assets.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\40\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\41\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b).
    \41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule is consistent 
with Section 6(b)(6) of the Act,\42\ which requires the rules of an 
exchange provide that its members be appropriately disciplined for 
violations of the Act as well as the rules and regulations thereunder, 
or the rules of the Exchange, by expulsion, suspension, limitation of 
activities, functions, and operations, fine, censure, being suspended 
or barred from being associated with a member, or any other fitting 
sanction.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent 
with these provisions because the proposed changes are based on the 
cease and desist authority that FINRA has adopted, which the Exchange 
believes furthers the objectives of the Act by providing it with 
ability to stop violative conduct that is likely to cause dissipation 
or conversion of assets or other significant harm to investors, and on 
other changes to its related rules that clarify, harmonize, and improve 
its disciplinary process.
    The proposed rule change will improve the Exchange's capacity to 
enforce compliance with applicable laws and rules by its members and 
persons associated with members and improving [sic] the Exchange's 
capability to prevent fraudulent and manipulative acts and practices. 
Thus, this authority is a vitally important tool to have to protect 
market participants.
    The Exchange acknowledges that, when used, the cease and desist 
authority proposed herein would significantly impact a respondent. The 
Exchange, however, notes that the proposed rules incorporate numerous 
procedural protections for respondents to ensure that the proceedings 
initiated under these rules are fair, including

[[Page 80114]]

notice and an opportunity to be heard before a neutral tribunal. 
Moreover, the Exchange anticipates using the authority provided by 
these rules sparingly.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The changes are being proposed 
to provide an important regulatory tool to the Exchange and FINRA, 
acting on its behalf, which will protect investors when violative 
conduct is being taken by a member or person associated with a member, 
and time is of the essence to prevent harm, or further harm, to 
investors.
    The proposed change does not impose a burden on competition among 
participants or other venues because it will only be used in 
circumstances where investor harm is imminent or is occurring. Thus, to 
the extent a burden on competition results from use of the authority 
provided by the proposed rules, such burden is necessary to protect 
investors, which is consistent with the purposes of the Act.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the 
Act \43\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\44\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \44\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative upon filing. The 
Exchange has stated that it is requesting this waiver so that the 
Exchange could apply, at the earliest time possible, the authority to 
issue temporary cease and desist orders and explicit authority to 
impose permanent cease and desist orders as a remedy in disciplinary 
cases. The Exchange explained that although it does not anticipate that 
it will be necessary to use this authority, when its cease and desist 
authority is needed, the Exchange must be able to move swiftly to 
prevent or stop investor harm. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest because this waiver will enable the Exchange to 
utilize the temporary or permanent cease and desist authority described 
herein without delay in the unlikely event that circumstances arise 
that warrant its use. For this reason, the Commission hereby waives the 
30-day operative delay and designates the proposed rule change as 
operative upon filing.\45\
---------------------------------------------------------------------------

    \45\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2016-055 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2016-055. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2016-055, and should be 
submitted on or December 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-27365 Filed 11-14-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices 80109

available publicly. All submissions any comments it received on the the cease and desist authority under
should refer to File Number SR- proposed rule change. The text of these Rules 9556 and 9800 during the time
BatsBZX–2016–68, and should be statements may be examined at the that the rules were effective.
submitted on or before December 6, places specified in Item IV below. The Nonetheless, the Exchange believes that,
2016. Exchange has prepared summaries, set in addition to maintaining similar
For the Commission, by the Division of forth in sections A, B, and C below, of disciplinary rules, adoption of Rules
Trading and Markets, pursuant to delegated the most significant aspects of such 9556 and 9800 is important to the
authority.54 statements. Exchange’s disciplinary program. The
Brent J. Fields, authority under these rules will provide
A. Self-Regulatory Organization’s
Secretary. the Exchange and FINRA, operating on
Statement of the Purpose of, and the
behalf of the Exchange, with a
[FR Doc. 2016–27371 Filed 11–14–16; 8:45 am] Statutory Basis for, the Proposed Rule
mechanism to take appropriate remedial
BILLING CODE 8011–01–P Change
action against a member or an
1. Purpose associated person that has engaged (or is
SECURITIES AND EXCHANGE The Exchange is proposing to adopt engaging) in violative conduct that
COMMISSION new Rules 9556 and 9800, which were could cause continuing harm to the
previously adopted as a pilot the term investing public if not addressed
[Release No. 34–79260; File No. SR–BX– expeditiously, such as dissipation or
2016–055] of which has since expired, and to make
related changes to the 9100, 9200, 9300, conversion of assets. It must be
9550, and 9800 Rule Series. In May emphasized, however, that the cease
Self-Regulatory Organizations;
2003, the Commission approved, on a and desist provisions contain numerous
NASDAQ BX, Inc.; Notice of Filing and
pilot basis, a rule change to adopt NASD procedural protections for respondents
Immediate Effectiveness of Proposed
Rules 9556 and 9800 that gave NASD, to ensure that the proceedings are fair.
Rule Change To Adopt Cease and
now known as FINRA, authority to issue Consequently, the Exchange believes
Desist Authority Rules
temporary cease and desist orders and that adoption of these rules is important
November 8, 2016 made explicit NASD’s ability to impose to its regulatory program,
Pursuant to Section 19(b)(1) of the permanent cease and desist orders as a notwithstanding that it anticipates
Securities Exchange Act of 1934 remedy in disciplinary cases.3 Because exercising the authority provided by the
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 NASD was, and now FINRA is, the rules sparingly.
notice is hereby given that on October Exchange’s regulatory services provider The Exchange is proposing to delete
28, 2016, NASDAQ BX, Inc. (‘‘BX’’ or and administers the Exchange’s Rules 9556 and 9800 (and related
the ‘‘Exchange’’) filed with the disciplinary program under contract, the references in other rules 6) because the
Securities and Exchange Commission Exchange seeks to maintain pilot period for these rules has expired
(‘‘Commission’’) the proposed rule comparability between its disciplinary rendering them void, and adopt new
change as described in Items I and II procedure rules and those of NASD and Rules 9556 and 9800 (and related
below, which Items have been prepared now FINRA. As a consequence, the references in other rules) 7 based on
by the Exchange. The Commission is Exchange adopted Rules 9556 and 9800 FINRA’s analogous cease and desist
publishing this notice to solicit to mirror the then-FINRA rules to rules, which include amendments to the
comments on the proposed rule change former BX cease and desist rules to
operate as a pilot in conjunction with
from interested persons. reflect changes that FINRA has made to
the related FINRA pilot.4
On June 23, 2009, the Exchange’s Rule its cease and desist rules in 2011 and
I. Self-Regulatory Organization’s 2015 after they were made permanent.8
9556 and 9800 pilot programs expired,
Statement of the Terms of Substance of The Exchange is also proposing to
at which time those rules and certain
the Proposed Rule Change amend other Rules under the 9000
references thereto became obsolete,
The Exchange proposes to adopt notwithstanding that they remained in Series to incorporate changes that
Rules 9556 and 9800, which were the rulebook. The FINRA pilot program, FINRA made to its analogous rules in
previously adopted as a pilot the term however, continued and was approved 6 The Exchange is deleting text from related
of which has since expired, and to make on July 14, 2009 on a permanent basis.5 provisions of Rules 8310, IM–8310–3(c)(1), 9120(r),
related changes to the 9100, 9200, 9300, Neither the Exchange nor FINRA, 9241(c), 9290, 9311(b), 9312(b), and 9360 that also
9550, and 9800 Rule Series. acting on behalf of the Exchange expired on June 23, 2009 and is inserting new text
The text of the proposed rule change pursuant to agreement, have [sic] used identical to what was deleted.
7 As a consequence of the expiration of the pilot
is available on the Exchange’s Web site
rendering the existing related rule text void, in
at http://nasdaqomxbx.cchwall 3 See Securities Exchange Act Release No. 47925
certain cases the Exchange is deleting the void text
street.com/, at the principal office of the (May 23, 2003) (File No. SR–NASD–98–80), 68 FR and reinserting identical rule text thereafter so the
Exchange, and at the Commission’s 33548 (June 4, 2003). See also Securities Exchange text may have effect once again. For example, the
Act Release No. 51860 (June 16, 2005), 70 FR 36427 Exchange is deleting Rule 8310(a)(6), concerning
Public Reference Room. (June 23, 2005) (SR–NASD–2005–061) (extending imposition of a temporary or permanent cease and
II. Self-Regulatory Organization’s the pilot to June 23, 2007 and making non- desist order, and adopting a new Rule 8310(a)(6)
substantive changes); and Securities Exchange Act identical to what was deleted.
Statement of the Purpose of, and Release No. 55819 (May 25, 2007), 72 FR 30895 8 In 2013, FINRA consolidated the publication
Statutory Basis for, the Proposed Rule (June 4, 2007) (SR–NASD–2007–033) (extending the standards for expedited proceeding decisions,
Change pilot to June 23, 2009 and making non-substantive including under FINRA Rule 9556, in FINRA Rule
changes). 8313(a)(3) and consequently amended FINRA Rule
mstockstill on DSK3G9T082PROD with NOTICES

In its filing with the Commission, the 4 See Securities Exchange Act Release No. 59154
9556 to remove paragraph (h) ‘‘Notice to
Exchange included statements (December 23, 2008), 73 FR 80468 (December 31, Membership’’ from the rule. See Securities
concerning the purpose of and basis for 2008) (SR–BSE–2008–48). Exchange Act Release No. 69825 (June 21, 2013), 78
5 Securities Exchange Act Release No. 60306 (July FR 38771 (June 27, 2013) (SR–FINRA–2013–018).
the proposed rule change and discussed
14, 2009), 74 FR 36292 (July 22, 2009) (SR–FINRA– The Exchange did not have such a provision in its
2009–035). The Exchange notes that FINRA, in its Rule 9556. The Exchange’s disclosure obligations
54 17 CFR 200.30–3(a)(12). rule change proposal to make its pilot program are provided under IM–8310–3, including the
1 15 U.S.C. 78s(b)(1). permanent, noted that it had used the authority Exchange’s disclosure obligations related to
2 17 CFR 240.19b–4. under Rules 9556 and 9800 sparingly. Id. at 36293. expedited proceedings. See IM–8310–3(c).

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80110 Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices

2015, as discussed below. These adopted a new expedited proceedings thereof is likely to result in significant
proposed changes include significant [sic] to address situations involving dissipation or conversion of assets or
amendments made by FINRA to not repeated violations of temporary or other significant harm to investors prior
only its Rules 9556 and 9800, but also permanent cease and desist orders, and to the completion of the underlying
to its 9100, 9200, 9300, 9550, and 9800 made a series of rule amendments to the proceeding. The 2015 rule change
Rule Series in 2015. Unless otherwise temporary cease and desist order rules modified this requirement to apply to
noted, BX is adopting the FINRA Rules under FINRA Rule Series 9800, the the ‘‘alleged’’ violative conduct or
with only minor changes to reflect the expedited proceedings rules under continuation thereof, to be consistent
Exchange’s committee structure and FINRA Rule Series 9550,13 and FINRA’s with the proposed change to the
rules,9 as described below. Code of Procedure (FINRA Rule Series evidentiary standard.
9000) that harmonize service provisions
2011 FINRA Rule Changes (ii) Failures To Comply With Temporary
in temporary cease and desist
In 2011, FINRA amended Rules proceedings and expedited proceedings, Cease and Desist Orders and Permanent
9552(b), 9553(b), 9554(b), 9555(b), and ease administrative burdens in Cease and Desist Orders (FINRA Rule
9556(b), all of which concern service of temporary cease and desist proceedings, 9556)
notice.10 Each of these rules concern and clarify the process by which
[sic] the process followed when a FINRA also made amendments to
permanent cease and desist orders may
person or entity subject to FINRA’s FINRA Rule 9556, which sets forth
be imposed.
jurisdiction fail [sic] to comply with expedited procedures for enforcing
various requirements under its rules. (i) Evidentiary Standard for Imposing a violations of FINRA-issued temporary
FINRA amended the rule provisions Temporary Cease and Desist Order and permanent cease and desist orders.
noted above to allow notice of failure to FINRA amended FINRA Rule FINRA was concerned that their [sic]
comply with a temporary or permanent 9840(a)(1) to change the evidentiary existing expedited procedures may
cease and desist order to be served on standard applied by Hearing Panels in permit cease and desist orders to be
counsel representing the member or issuing a temporary cease and desist circumvented without any real threat of
person, or other person authorized to order. Specifically, FINRA changed the a sanction.15 Thus, FINRA amended
represent others under FINRA Rule standard for issuing a temporary cease FINRA Rule 9556 to adopt a new
9141,11 when counsel or other person and desist order from ‘‘by a paragraph (h) to permit its staff (with
authorized to represent others under preponderance of the evidence that the prior authorization from FINRA’s Chief
FINRA Rule 9141 agrees to accept alleged violation specified in the notice Executive Officer or other designated
service for the member or person. has occurred’’ to a ‘‘showing of a senior officer) to institute a new kind of
likelihood of success on the merits.’’ expedited proceeding if the subject of a
2015 FINRA Rule Changes temporary or permanent cease and
FINRA noted that it believed that the
In 2015, FINRA made significant ‘‘preponderance of the evidence’’ desist order fails to comply with that
changes to its temporary and permanent standard set too high an evidentiary order and has previously been served
cease and desist rules.12 FINRA lowered threshold for this critical investor- with a notice under Rule 9556(a) for
the evidentiary standard to obtain a protection tool, and noted that it is the failure to comply with any provision of
temporary cease and desist order, identical standard for proving a the same temporary or permanent cease
violation in the underlying disciplinary and desist order. FINRA adopted the
9 The Exchange is replacing references to FINRA
proceeding that must be pursued at the change to prevent a respondent from
and FINRA staff with references to the Exchange abusing the existing process by
and Exchange staff, which are the appropriate
same time.14 Thus, to obtain a
analogous parties at BX. The Exchange is also temporary cease and desist order—and repeatedly violating a cease and desist
replacing FINRA text that states ‘‘Chief Executive thereby prevent the likely and order and curing that violation before
Officer or such other senior officer as the Chief significant dissipation or conversion of the effective date of any FINRA Rule
Executive Officer may designate’’ with ‘‘Chief 9556 notice,16 without being subject to
Regulatory Officer,’’ which is the Exchange officer
assets or other significant harm to
vested with the authority described under the rules. investors—FINRA’s prosecuting the immediate sanctions or review by
For example, old Rules 9556(a) and 9860 vested department had to make an evidentiary the Office of Hearing Officers for a
authority with the Chief Regulatory Officer to presentation in the temporary cease and prolonged period. FINRA noted in its
authorize notice and initiation of proceedings,
respectively, whereas the analogous FINRA rules
desist proceeding that is similar in filing that the new FINRA Rule 9556(h)
authorize its Chief Executive Officer or such other extent to its evidentiary presentation in proceeding differs from other FINRA
senior officer as the Chief Executive Officer may the subsequent underlying disciplinary Rule 9556 expedited proceedings in
designate instead. Last, the Exchange is adding proceeding, but in an expedited manner. other respects that reflect the response
clarifying language to Rule 9810 to make it clear FINRA also made a corresponding
that initiation of a proceeding must not only be
that FINRA believes is warranted for
authorized by FINRA’s Chief Executive Officer or amendment to FINRA Rule 9840(a)(2). situations involving repeated violations
such other senior officer as the Chief Executive Prior to the amendment, FINRA Rule of temporary or permanent cease and
Officer may designate, but also BX’s Chief 9840(a)(2) provided that a temporary desist orders.17 These differences
Regulatory Officer. As a practical matter, the Chief cease and desist order shall be imposed
Regulatory Officer must agree that such a
include the following:
proceeding should be brought pursuant to BX rules. if the Hearing Panel finds that the
10 Securities Exchange Act Release No. 60306 violative conduct or continuation 15 Id. at 38785.
(January 4, 2012), 77 FR 1524 (January 10, 2012) 16 Under the then-current FINRA Rule 9556, if a
(SR–FINRA–2011–044). FINRA also amended other 13 FINRA amended its Rule 9551 ‘‘Failure to member or person failed to comply with a
rules in the FINRA Rule 9000 Series not addressed Comply with Public Communications Standards.’’ temporary or permanent cease and desist order,
mstockstill on DSK3G9T082PROD with NOTICES

in this filing. Id. BX does not have such a rule (BX Rule 9551 is held FINRA staff (with prior authorization from FINRA’s
11 FINRA Rule 9141, entitled ‘‘Appearance and in reserve) and is thus not incorporating those Chief Executive Officer or other designated senior
Practice; Notice of Appearance,’’ provides, among changes. In a related change, the Exchange is also officer) may have issued a notice stating that the
other things, what is permissible in terms of amending its Rule 9559 to delete the references to failure to comply within seven days will result in
representation before an Adjudicator. Exchange Rule 9551, which were erroneously included in the a suspension or cancellation of membership or a
Rule 9141 is consistent with FINRA Rule 9141. rule. suspension or bar from associating with any
12 Securities Exchange Act Release No. 75629 14 See Securities Exchange Act Release No. 75333 member and also would have stated what the
(August 6, 2015), 80 FR 48379 (August 12, 2015) (June 30, 2015), 80 FR 38783 (July 7, 2015) (Notice respondent must do to avoid such action.
(SR–FINRA–2015–019). of Filing File No. SR–FINRA–2015–019) at 38784. 17 See supra note 14 at 38785.

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• A FINRA Rule 9556(h) proceeding (iii) Service Provisions in Temporary in which it would seek permanent cease
could be initiated only if the respondent Cease and Desist Proceedings and and desist orders.
has previously been served, under Expedited Proceedings
(v) Administrative Changes to
FINRA Rule 9556(a), with a notice for
FINRA also made the rules that Temporary Cease and Desist
failing to comply with any provision of Proceedings
the same temporary or permanent cease govern service of documents in
and desist order; temporary cease and desist proceedings FINRA also expanded the pool of
• FINRA’s prosecuting department and the eight different types of persons eligible to serve on hearing
would initiate a FINRA Rule 9556(h) expedited proceedings under the Rule panels to include those who may serve
proceeding by filing a petition with 9550 Series more consistent.23 Prior to on hearing panels for disciplinary
FINRA’s Office of Hearing Officers (and the changes, some provisions of these matters, as provided under FINRA Rules
serving the respondent) that seeks the rules explicitly addressed service by 9231(b) and 9559(d)(2).26 Specifically,
imposition of sanctions for the violation facsimile and on counsel, while some FINRA amended its Rule 9820 to
(rather than issuing a notice to the did not. FINRA’s amendments explicitly provide that the potential panelists for
respondent); allow service by facsimile and on the Hearing Panels that preside over
• FINRA’s prosecuting department counsel across all temporary cease and temporary cease and desist proceedings
would seek the imposition of any fitting desist and expedited proceedings, to [sic] include persons who currently
sanction at the outset of the FINRA Rule noting that doing so removed serve or previously served on a District
9556(h) proceeding (in contrast to other unnecessary burdens and inefficiencies. Committee; 27 previously served on the
FINRA Rule 9556 expedited FINRA also amended its rules to permit National Adjudicatory Council; 28
proceedings, where the recipient of a service by email for all temporary cease previously served on a disciplinary
notice is not subject to the imposition of and desist proceedings and expedited subcommittee of the National
any fitting sanction unless such proceedings. FINRA noted that email Adjudicatory Council or the National
recipient opts for a hearing); service would allow parties to receive Business Conduct Committee;29
• a hearing is required in a FINRA information quickly, which is previously served as a member of the
Rule 9556(h) proceeding; particularly important in these types of Board of Directors of FINRA Regulation
• the hearing for a FINRA Rule proceedings, considering the short time or of the Board of Governors of FINRA;
9556(h) proceeding must be held in a frames involved.24 As part of the or currently serve or previously served
condensed time frame (ten business changes allowing service by email, on a committee appointed or approved
days after a respondent is served the FINRA also now requires duplicate by the Board of Governors of FINRA, but
petition, versus other Rule 9556 service through some other means such do not serve currently on the National
proceedings which require a respondent as overnight courier or personal delivery Adjudicatory Council or as a member of
to request a hearing within seven and made changes to its Rule 9550 the Board of Directors of FINRA
business days after service of a notice Series to reflect this requirement. Regulation or of the Board of Governors
instituting a proceeding and require of FINRA. The amendment to FINRA
(iv) Clarifying FINRA’s Authority To Rule 9820 also required that each
hearings to be held within 14 days after
Impose Permanent Cease and Desist panelist be associated with a member of
a request for a hearing is filed); 18
• a FINRA Rule 9556(h) proceeding is Orders FINRA or retired therefrom. FINRA
presided over by a Hearing Officer,19 FINRA clarified its rules concerning noted that, while its Office of Hearing
rather than a Hearing Panel; 20 and the process for imposing permanent Officers has presided over only a
• the Hearing Officer may issue cease and desist orders in disciplinary limited number of temporary cease and
default decisions in FINRA Rule 9556(h) proceedings. FINRA noted that when it desist proceedings, those experiences
proceedings.21 obtained the authority to impose have revealed that the narrowly
Under amended FINRA Rule temporary cease and desist orders, it circumscribed set of potential panelists
9556(h)(4), the FINRA department that also obtained the authority to impose can impede the recruitment of Hearing
filed the petition can withdraw it permanent cease and desist orders.25 Panel members, especially considering
without prejudice and shall be that the expedited nature of temporary
Thus, the clarifying changes were
permitted to refile a petition based on cease and desist proceedings will
procedural in nature and did not reflect
allegations concerning the same facts
any change to FINRA’s prior
and circumstances that are set forth in 26 FINRA harmonized the categories of
representations concerning the context individuals eligible for appointment as a Hearing
the withdrawn petition. FINRA noted
Panelist under FINRA Rule 9820 with FINRA Rule
that this provision provides it the 23 The Exchange notes that in SR–FINRA–2015– 9231(b) (providing that each panelist shall be
flexibility to withdraw the petition 019 FINRA replaced references to ‘‘contact associated with a member of FINRA or retired
where, for instance, the respondent questionnaires’’ with reference to the ‘‘FINRA therefrom and that the pool of panelists for
evidences a good faith intent to comply Contact System,’’ FINRA’s proprietary system that disciplinary proceedings includes current or
facilitates member firm reporting of key contacts to previous members of District Committees, former
with the temporary or permanent cease members of the National Adjudicatory Council, past
FINRA. Exchange members are required to use the
and desist order without the need to FINRA Contact System to report to the Exchange all members of disciplinary subcommittees of the
adjudicate the petition, while preserving contact information required by the Exchange and National Adjudicatory Council or the National
FINRA’s right to refile the petition if the update its required contact information promptly. Business Conduct Committee, past members of the
See Rule 1160. Under the FINRA Rule 9550 Series, Board of Directors of FINRA Regulation or past
respondent fails to do so.22 members of the Board of Governors of FINRA, and
the rules cite Article 4, Section III of the FINRA By-
Laws as the authority pursuant to which its current or previous members of committees
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18 See FINRA Rule 9559(f)(2) and (3); FINRA Rule
members have an obligation to report required appointed or approved by the Board of Governors
9556(e). contact information to it via the FINRA Contact of FINRA); FINRA Rule 9559(d)(2) (providing for
19 As defined by FINRA Rule 9120(r). the same pool for FINRA Rule 9556 expedited
System, whereas the Exchange’s authority is
20 As defined by FINRA Rule 9120(s). See FINRA pursuant to Rule 1160, as noted above. Thus, the proceedings).
Rule 9559(d)(1) and (2) for a description of the Exchange is instead referencing Rule 1160 in the 27 As defined by FINRA Rule 9120(g).

appointment and authority [sic] of a Hearing Officer Rule 9550 Series as the authority pursuant to which 28 See By-Laws of FINRA Regulation, Inc., Article
and/or Hearing Panel in expedited proceedings. members have the reporting obligation. V, National Adjudicatory Council.
21 See FINRA Rule 9559(m)(2). 24 See supra note 14 at 38785–6. 29 The predecessor to the FINRA National
22 See supra note 14 at 38785. 25 See supra note 14 at 38786. Adjudicatory Council.

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Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices 80113

Hearing Panel has already been Series, and the Rule 9800 Series within rule applies to BX members. Last, the
appointed in the underlying the definition provided by the rule. The Exchange is proposing not to include
disciplinary proceeding; and (3) Exchange is adopting this amendment the word ‘‘FINRA’’ prior to ‘‘Rule 9211’’
whether temporary and permanent in Rule 9120(z). FINRA also amended in adopting Rule 9850 to make it clear
cease and desist orders imposed against Rule 9120(z) ‘‘Respondent’’ to define a that the rule referenced is BX’s rule, not
a firm also apply to successors of that Respondent in a proceeding governed FINRA’s.
firm. by the Rule 9800 Series to mean a
With respect to the first issue, new 2. Statutory Basis
FINRA member or associated person
FINRA Rule 9810(c) established that, if that has been served a notice initiating The Exchange believes that its
the parties agree to the terms of a a cease and desist proceeding. The proposal is consistent with Section 6(b)
proposed temporary cease and desist Exchange is adopting this amendment of the Act,40 in general, and furthers the
order, the Hearing Officer has the in Rule 9120(bb) ‘‘Respondent.’’ objectives of Section 6(b)(5) of the Act,41
authority to approve and issue the The Exchange believes that the in particular, in that it is designed to
order. On the second issue, amended changes made by FINRA in 2011 and promote just and equitable principles of
FINRA Rule 9850 provided that the 2015, as described above, improve the trade, to remove impediments to and
Hearing Panel that presided over the cease and desist authority as well as the perfect the mechanism of a free and
temporary cease and desist order service provisions. Consequently, the open market and a national market
proceeding shall retain jurisdiction to Exchange is proposing to adopt the system, and, in general to protect
review a FINRA Rule 9850 application changes, as described above, as its own. investors and the public interest.
unless at the time the application is The Exchange also believes that the
Other Non-Substantive Changes
filed a Hearing Panel has already been proposed rule is consistent with Section
appointed in the underlying The Exchange is also proposing to 6(b)(6) of the Act,42 which requires the
disciplinary proceeding commenced make other non-substantive changes to rules of an exchange provide that its
under FINRA Rule 9211, in which case its rules to correct misuse of the word members be appropriately disciplined
the Hearing Panel appointed in the ‘‘FINRA,’’ which were introduced for violations of the Act as well as the
disciplinary proceeding has jurisdiction. erroneously when the Exchange adopted rules and regulations thereunder, or the
As to the third issue, amended FINRA the rules. Specifically, the Exchange is rules of the Exchange, by expulsion,
Rule 9840(b) and new Rule 9291(a) proposing to amend Rule 9555(g) to suspension, limitation of activities,
established that when a temporary or remove reference to FINRA and replace functions, and operations, fine, censure,
permanent cease and desist order is it with reference to the Exchange to being suspended or barred from being
imposed against a member firm, it also make clear that it is BX’s departments associated with a member, or any other
applies to any successor of the member that should be contacted. The Exchange fitting sanction.
firm. is also replacing references to FINRA’s The Exchange believes that the
Finally, FINRA amended certain rules under new Rule 9810 with proposed rule change is consistent with
provisions of FINRA Rule 9120. FINRA references to analogous rules of BX. these provisions because the proposed
amended FINRA Rule 9120(s), ‘‘Hearing Specifically, BX is replacing reference to changes are based on the cease and
Panel,’’ to include an Adjudicator that is FINRA Rule 2010 with reference to desist authority that FINRA has
constituted under Rule 9231 to conduct Equity Rule 2110, reference to FINRA adopted, which the Exchange believes
a disciplinary proceeding governed by Rule 2020 with reference to Equity Rule furthers the objectives of the Act by
the Rule 9800 Series. The Exchange is 2120, and FINRA Rule 4330 with providing it with ability to stop
adopting this amendment in its Rule reference to Equity Rule 2150.39 The violative conduct that is likely to cause
9120(s). Exchange is also replacing the word dissipation or conversion of assets or
FINRA also amended FINRA Rule ‘‘FINRA’’ with ‘‘Exchange’’ in adopting other significant harm to investors, and
9120(t), ‘‘Interested Staff,’’ to: (1) Insert Rule 9840(d) to make it clear that the on other changes to its related rules that
‘‘or petition’’ under paragraph (2)(A) of clarify, harmonize, and improve its
the rule, thus expanding the definition 39 BX notes that the BX rules cited in new Rule
disciplinary process.
to include FINRA staff that filed a 9810 are the same as those that were cited under
old Rule 9810(a). BX further notes that under The proposed rule change will
petition in a proceeding under the Rule FINRA Rule 9810(a), FINRA cites to FINRA Rules improve the Exchange’s capacity to
9520 Series or Rule 9550 Series; and (2) 2010, 2020, and 4330. BX is replacing reference to enforce compliance with applicable
include a new paragraph (4) to list the FINRA rules with reference to BX’s analogous laws and rules by its members and
FINRA staff that are defined as Equity Rules 2110, 2120 and 2150, as was the case
in old Equity Rule 9810(a). While the provisions of persons associated with members and
Interested Staff in a proceeding under Equity Rules 2110 and 2120 closely mirror FINRA improving [sic] the Exchange’s
the FINRA Rule 9800 Series. The Rules 2010 and 2020, Equity Rule 2150 is capability to prevent fraudulent and
Exchange is also adopting the significantly different than FINRA Rule 4330.
manipulative acts and practices. Thus,
amendment to its Rule 9120(t) FINRA Rule 4330 concerns the permissible use of
customers’ margin securities while Equity Rule this authority is a vitally important tool
‘‘Interested Staff,’’ but is expanding the 2150 requires a member and persons associated to have to protect market participants.
definition to also include BX Regulation with a member to comply with FINRA’s Rule 2150. The Exchange acknowledges that,
employees who directly participated in FINRA Rule 2150 is titled ‘‘Improper Use of when used, the cease and desist
Customers’ Securities or Funds; Prohibition Against
the authorization of the notice that Guarantees and Sharing in Accounts’’ and, among authority proposed herein would
initiates a temporary cease and desist other things, prohibits members or persons significantly impact a respondent. The
proceeding, or directly participated in associated with a member from making improper Exchange, however, notes that the
an examination, investigation, use of a customer’s securities or funds, guaranteeing
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a customer against loss in connection with any
proposed rules incorporate numerous
prosecution, or litigation related to a securities transaction or in any securities account procedural protections for respondents
specific temporary cease and desist of such customer, and setting forth what is to ensure that the proceedings initiated
proceeding, under new paragraphs permissible in terms of sharing in profits and losses under these rules are fair, including
(t)(4)(C) and (D) of the rule. in a customer account. BX believes that Equity Rule
2150 is the appropriate rule cite under new Rule
FINRA also amended FINRA Rule 9810(a) for purposes of alleged violations
40 15 U.S.C. 78f(b).
9120(w), ‘‘Panelists,’’ to include concerning misuse or conversion of customer 41 15 U.S.C. 78f(b)(5).
references to Panelists in the Rule 9550 assets. 42 15 U.S.C. 78f(b)(6).

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80114 Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices

notice and an opportunity to be heard desist orders and explicit authority to only one method. The Commission will
before a neutral tribunal. Moreover, the impose permanent cease and desist post all comments on the Commission’s
Exchange anticipates using the authority orders as a remedy in disciplinary cases. Internet Web site (http://www.sec.gov/
provided by these rules sparingly. The Exchange explained that although it rules/sro.shtml). Copies of the
does not anticipate that it will be submission, all subsequent
B. Self-Regulatory Organization’s amendments, all written statements
necessary to use this authority, when its
Statement on Burden on Competition with respect to the proposed rule
cease and desist authority is needed, the
The Exchange does not believe that Exchange must be able to move swiftly change that are filed with the
the proposed rule change will impose to prevent or stop investor harm. The Commission, and all written
any burden on competition not Commission believes that waiving the communications relating to the
necessary or appropriate in furtherance 30-day operative delay is consistent proposed rule change between the
of the purposes of the Act. The changes with the protection of investors and the Commission and any person, other than
are being proposed to provide an public interest because this waiver will those that may be withheld from the
important regulatory tool to the enable the Exchange to utilize the public in accordance with the
Exchange and FINRA, acting on its temporary or permanent cease and provisions of 5 U.S.C. 552, will be
behalf, which will protect investors desist authority described herein available for Web site viewing and
when violative conduct is being taken without delay in the unlikely event that printing in the Commission’s Public
by a member or person associated with circumstances arise that warrant its use. Reference Room, 100 F Street NE.,
a member, and time is of the essence to For this reason, the Commission hereby Washington, DC 20549 on official
prevent harm, or further harm, to waives the 30-day operative delay and business days between the hours of
investors. designates the proposed rule change as 10:00 a.m. and 3:00 p.m. Copies of such
The proposed change does not impose operative upon filing.45 filing also will be available for
a burden on competition among At any time within 60 days of the inspection and copying at the principal
participants or other venues because it filing of the proposed rule change, the office of the Exchange. All comments
will only be used in circumstances Commission summarily may received will be posted without change;
where investor harm is imminent or is temporarily suspend such rule change if the Commission does not edit personal
occurring. Thus, to the extent a burden it appears to the Commission that such identifying information from
on competition results from use of the action is: (i) Necessary or appropriate in submissions. You should submit only
authority provided by the proposed the public interest; (ii) for the protection information that you wish to make
rules, such burden is necessary to of investors; or (iii) otherwise in available publicly. All submissions
protect investors, which is consistent furtherance of the purposes of the Act. should refer to File Number SR–BX–
with the purposes of the Act. If the Commission takes such action, the 2016–055, and should be submitted on
Commission shall institute proceedings or December 6, 2016.
C. Self-Regulatory Organization’s
Statement on Comments on the to determine whether the proposed rule For the Commission, by the Division of
should be approved or disapproved. Trading and Markets, pursuant to delegated
Proposed Rule Change Received From
authority.46
Members, Participants, or Others IV. Solicitation of Comments Brent J. Fields,
No written comments were either Interested persons are invited to Secretary.
solicited or received. submit written data, views, and [FR Doc. 2016–27365 Filed 11–14–16; 8:45 am]
III. Date of Effectiveness of the arguments concerning the foregoing, BILLING CODE 8011–01–P
Proposed Rule Change and Timing for including whether the proposed rule
Commission Action change is consistent with the Act.
Comments may be submitted by any of SECURITIES AND EXCHANGE
Because the foregoing proposed rule COMMISSION
the following methods:
change does not: (i) Significantly affect
the protection of investors or the public Electronic Comments [Release No. 34–79264; File No. SR-
interest; (ii) impose any significant BatsEDGX–2016–60]
• Use the Commission’s Internet
burden on competition; and (iii) become comment form (http://www.sec.gov/ Self-Regulatory Organizations; Bats
operative for 30 days from the date on rules/sro.shtml); or EDGX Exchange, Inc.; Notice of Filing
which it was filed, or such shorter time • Send an email to rule-comments@ of a Proposed Rule Change in
as the Commission may designate, if sec.gov. Please include File Number SR– Connection With the Proposed
consistent with the protection of BX–2016–055 on the subject line. Corporate Transaction Involving Bats
investors and the public interest, the
Paper Comments Global Markets, Inc. and CBOE
proposed rule change has become
Holdings, Inc.
effective pursuant to Section • Send paper comments in triplicate
19(b)(3)(A)(iii) of the Act 43 and to Brent J. Fields, Secretary, Securities November 8, 2016.
subparagraph (f)(6) of Rule 19b–4 and Exchange Commission, 100 F Street Pursuant to Section 19(b)(1) of the
thereunder.44 NE., Washington, DC 20549–1090. Securities Exchange Act of 1934 (the
The Exchange has asked the ‘‘Act’’),1 and Rule 19b–4 thereunder,2
All submissions should refer to File
Commission to waive the 30-day notice is hereby given that on November
Number SR–BX–2016–055. This file
operative delay so that the proposal may 2, 2016, Bats EDGX Exchange, Inc. (the
number should be included on the
mstockstill on DSK3G9T082PROD with NOTICES

become operative upon filing. The ‘‘Exchange’’ or ‘‘EDGX’’) filed with the
subject line if email is used. To help the
Exchange has stated that it is requesting Securities and Exchange Commission
Commission process and review your
this waiver so that the Exchange could (‘‘Commission’’) the proposed rule
comments more efficiently, please use
apply, at the earliest time possible, the
authority to issue temporary cease and 45 For purposes only of waiving the 30-day
46 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
operative delay, the Commission has considered the
43 15 U.S.C. 78s(b)(3)(A)(iii). 2 17 CFR 240.19b–4.
proposed rule’s impact on efficiency, competition,
44 17 CFR 240.19b–4(f)(6). and capital formation. See 15 U.S.C. 78c(f). 3 15 U.S.C. 78f(a).

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Document Created: 2016-11-15 00:47:46
Document Modified: 2016-11-15 00:47:46
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 80109