81 FR 84625 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of an Amendment to Rule 8.11, Effective Date of Judgment and the Adoption of Rule 8.18, Release of Disciplinary Complaints, Decisions and Other Information
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 226 (November 23, 2016)
Federal Register Volume 81, Issue 226 (November 23, 2016)
| Page Range | 84625-84628 | |
| FR Document | 2016-28186 |
[Federal Register Volume 81, Number 226 (Wednesday, November 23, 2016)] [Notices] [Pages 84625-84628] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-28186] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79342; File No. SR-BatsBZX-2016-73] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of an Amendment to Rule 8.11, Effective Date of Judgment and the Adoption of Rule 8.18, Release of Disciplinary Complaints, Decisions and Other Information November 17, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on November 3, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 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 Exchange has designated this proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b- 4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to add proposed Rule 8.18 to require the publication of the Exchange's disciplinary complaints and disciplinary decisions issued and to remove the part of Interpretation and Policy .01 to Rule 8.11 that currently governs the publication of disciplinary complaints and information related to disciplinary complaints. The text of the proposed rule change is available at the Exchange's Web site at www.batstrading.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 parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Proposed Rule Change Reorganization of Exchange Rules Governing Release of Disciplinary Complaints, Decisions and Other Information Based on FINRA Rule 8313 Interpretation and Policy .01 to Rule 8.11 currently provides, in part, that the Exchange shall cause details regarding all formal disciplinary actions where a final decision has been issued, except as provided in Rule 8.15(a), to be published on its Web site. Interpretation and Policy .01 also provides that the Exchange shall not issue any press release or other statement to the press concerning any formal or informal disciplinary matter unless the Chief Regulatory Officer recommends a press release to the Executive Committee or the Board of the Exchange and either body determines that such a press release is warranted. The Exchange proposes to remove parts of Interpretation and Policy .01 to Rule 8.11 described above and to add proposed Rule 8.18 modeled after FINRA Rule 8313,\5\ as described below, to govern the publication of disciplinary information. The scope of proposed Rule 8.18 would be limited to publication of materials relating to the disciplinary process set forth in Chapter VIII because the Exchange seeks to provide prompt access to more information regarding its disciplinary [[Page 84626]] actions to Members and associated persons. By providing more information regarding the Exchange's disciplinary process, including publishing disciplinary complaints at the time they are filed, Members and associated persons will be able to sooner identify conduct that the Exchange views as problematic and have will [sic] the ability to take corrective steps sooner than they can under the current rules that provide only for the publication of disciplinary decisions after they become final. In that regard, the Exchange has determined not to adopt FINRA Rule 8313 in all respects at this time.\6\ --------------------------------------------------------------------------- \5\ New York Stock Exchange, LLC (``NYSE'') similarly adopted rules modeled after FINRA Rule 8313. See Securities Exchange Act Release No. 78664 (August 24, 2016), 81 FR 59678, 59679 (August 30, 2016) (SR-NYSE-2016-40). \6\ NYSE similarly declined to adopt all provisions of FINRA Rule 8313 insofar as the FINRA rule related to information beyond the formal disciplinary process. See id. at 59679. --------------------------------------------------------------------------- General Standards The Exchange proposes Rule 8.18(a) to be entitled ``General Standards.'' The text would set forth general standards for the release to the public of disciplinary complaints, decisions, or information. Proposed Rule 8.18(a)(1) would, in part, essentially replace the part of Interpretation and Policy .01 to Rule 8.11 that addresses the publication of disciplinary decisions and conform [sic] to FINRA Rule 8313. The proposed rule would provide that the Exchange shall release to the public a copy of and, at the Exchange's discretion, information with respect to, any disciplinary decision issued by the Exchange, as defined in proposed Rule 8.18(e). Additionally, the proposed rule would provide that the Exchange would release to the public copies of disciplinary complaints as defined in proposed Rule 8.18(e). Also, the decision to issue other related information, including a press release, under proposed Rule 8.18(a)(1) would be in the discretion of the Exchange generally instead of requiring Executive Committee or Exchange Board approval as currently required in Interpretation and Policy .01 to Rule 8.11. Proposed Rule 8.18(a)(1) would also provide that, in response to a request, the Exchange shall also release to the requesting party a copy of any identified disciplinary complaint or disciplinary decision issued by the Exchange, as defined in proposed Rule 8.18(e). These proposed amendments are modeled after FINRA Rule 8313(a)(1) and would be substantially similar to the FINRA rule. The Exchange does not propose to incorporate subsections (2), (3), (4) and (6) of FINRA Rule 8313(a) because the Exchange proposes to limit the scope of proposed Rule 8.18 to the publication of materials relating to the disciplinary process set forth in Chapter VIII at this time.\7\ The Exchange, however, notes that although Exchange Rules do not provide for temporary cease and desist orders as provided for in FINRA Rule 9800, the Exchange's Client Suspension Rule--Rule 8.17--is similar in its procedure and purpose. The Exchange proposes to include a client suspension order issued pursuant to Rule 8.17 in the definition of ``disciplinary decision'' under proposed Rule 8.18(e)(2) consistent with FINRA's inclusion of its temporary cease and desist orders for publication because the Exchange views client suspension proceedings as disciplinary in nature. For the same reason, the Exchange proposes to include a notice of the initiation of a client suspension proceeding in the definition of ``disciplinary complaint'' under proposed Rule 8.18(e)(1). --------------------------------------------------------------------------- \7\ Subsection (2) of FINRA Rule 8313(a) provides for the publication of statutory disqualification decisions and temporary cease and desist orders. Subsection (3) provides for the publication of any suspension, cancellation, expulsion, or bar for: failing to keep information current; failing to pay dues; failing to comply with an arbitration award or related settlement or an order of restitution or settlement providing for restitution; failing to meet the eligibility or qualification standards or prerequisites for access to services; or experiencing financial or operational difficulties. Additionally, subsection (3) provides for the publication of any suspension, cancellation, expulsion, or bar imposed as the result of a summary proceeding for actions authorized by Section 15A(h)(3) of the Act. Subsection (4) addresses procedures for membership proceedings. The Exchange does not propose to adopt subsections (2), (3), and (4) because, as discussed above, the Exchange's proposal is intended to provide more information regarding the Exchange's disciplinary process to the public so that Members and associated persons will be able to identify conduct that the Exchange views as problematic and will have the ability to take corrective steps sooner. Subsections (2), (3), and (4) to the FINRA rule would not further that purpose because those subsections would require the publication of information generally relating to membership eligibility or failure to satisfy one's membership obligations rather than discipline. Subsection (2) additionally addresses temporary cease and desist proceedings, which the Exchange does not have, and Subsection (3) additionally addresses Section 15A(h)(3) of the Act, which applies only to registered securities associations. Subsection (6) permits discretionary release of a complaint, decision, order, notification, or notice issued under FINRA rules, where the release of such information is deemed by FINRA's Chief Executive Officer (or such other senior officer as the Chief Executive Officer may designate) to be in the public interest. The Exchange does not propose to adopt this open-ended subsection because [sic] Exchange intends for the proposed rule to instead be limited to disciplinary information for the reasons discussed above. --------------------------------------------------------------------------- The Exchange does not propose to incorporate subsection (5) of FINRA Rule 8313(a) because the Exchange does not have at this time provisions analogous to FINRA Rule 6490 \8\ and the FINRA Rule 9700 Series.\9\ Additionally, the Exchange does not propose to include its procedures for exemptive relief analogous to the FINRA Rule 9600 Series because the Exchange proposes to limit scope of proposed Rule 8.18 to the publication of disciplinary materials. --------------------------------------------------------------------------- \8\ ``Processing of Company-Related Actions.'' \9\ ``Procedure For Grievances Concerning the Automated Systems.'' --------------------------------------------------------------------------- Release Specifications The Exchange proposes to include subsection (b) to proposed Rule 8.18 entitled ``Release Specifications'' modeled after FINRA Rule 8313(b). Proposed Rule 8.18(b)(1) provides that copies of, and information with respect to, any disciplinary complaint released to the public pursuant to paragraph (a) of the proposed rule shall indicate that a disciplinary complaint represents the initiation of a formal proceeding by the Exchange in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. The proposed rule would be the same as FINRA Rule 8313(b)(1) except that the proposed rule would substitute the term ``Exchange'' for ``FINRA.'' Proposed Rule 8.18(b)(2) provides that copies of, and information with respect to, any disciplinary decision released to the public pursuant to paragraph (a) of the proposed rule prior to the expiration of the time period provided for an appeal or call for review as permitted under Exchange Rules or the Act, or while such an appeal or call for review is pending, shall indicate that the findings and sanctions imposed therein are subject to review and modification by the Exchange or the Commission. The proposed rule would be substantially similar to FINRA Rule 8313(b)(2). The proposed rule would substitute the term ``Exchange'' for ``FINRA'' and would not include a provision relating to the release specifications for an ``other decision, order, notification, or notice'' because, as noted above, the Exchange proposes to limit the rule only to disciplinary complaints and disciplinary decisions. Discretion To Redact Certain Information or Waive Publication The Exchange has determined that, subject to limited exceptions, disciplinary information should be released to the public in unredacted form. To provide the standard for such limited exceptions, the Exchange proposes subsection (c) of proposed Rule 8.18 entitled ``Discretion to Redact Certain Information or Waive [[Page 84627]] Publication,'' modeled after FINRA Rule 8313(c). Proposed Rule 8.18(c)(1) would provide that the Exchange reserves the right to redact, on a case-by-case basis, information that contains confidential customer information, including customer identities, or information that raises significant identity theft, personal safety, or privacy concerns that are not outweighed by investor protection concerns. The proposed rule would be the same as FINRA Rule 8313(c)(1) except that the proposed rule would substitute the term ``Exchange'' for ``FINRA.'' Similarly, proposed Rule 8.18(c)(2) provides that, notwithstanding paragraph (a) of the proposed rule, the Exchange may determine, in its discretion, to waive the requirement to release a copy of, or information with respect to, any disciplinary complaint or disciplinary decision under those extraordinary circumstances where the release of such information would violate fundamental notions of fairness or work an injustice. The proposed rule would be the same as FINRA Rule 8313(c)(2) except that the proposed rule would substitute the term ``Exchange'' for ``FINRA'' and would not include a provision relating to the waiver of the release of an ``other decision, order, notification, or notice'' because, as noted above, the Exchange proposes to limit the rule only to disciplinary complaints and disciplinary decisions. Notice of Appeals of Exchange Decisions The Exchange proposes to include subsection (d) to proposed Rule 8.18 entitled ``Notice of Appeals of Exchange Decisions to the SEC'' modeled on FINRA Rule 8313(d). Proposed Rule 8.18(d) provides that the Exchange must provide notice to the public when a disciplinary decision of the Exchange is appealed to the Commission and the notice shall state whether the effectiveness of the decision has been stayed pending the outcome of proceedings before the Commission. The proposed rule would be the same as FINRA Rule 8313(d) except that the proposed Rule would substitute the term ``Exchange'' for ``FINRA.'' Definitions Finally, the Exchange proposes subsection (e) of proposed Rule 8.18 entitled ``Definitions.'' Proposed Rule 8.18(e) would set forth definitions of the terms ``disciplinary complaint'' and ``disciplinary decision'' as used in the rule, modeled after the definitions contained in FINRA Rule 8313(e). First, proposed Rule 8.18(e)(1) would define the term ``disciplinary complaint'' to mean any statement of charges issued pursuant to Rule 8.4 or any notice served pursuant to Rule 8.17. This proposed rule is based on FINRA Rule 8313(e)(1) except that it replaces the term ``complaint pursuant to the Rule 9200 Series'' with ``statement of charges pursuant to Rule 8.4'' and it includes a notice of the initiation of a client suspension proceeding issued pursuant to Rule 8.17 in the definition of ``disciplinary complaint.'' Second, proposed Rule 8.18(e)(2) would define the term ``disciplinary decision'' to mean any decision issued pursuant to the Chapter VIII, including, decisions issued by a Hearing Panel or the Appeals Committee and accepted offers of settlement. The Exchange additionally proposes to include suspension orders issued pursuant to Rule 8.17 in the definition of ``disciplinary decision.'' The Exchange does not propose to adopt the part of FINRA Rule 8313(e)(2) that discusses decisions issued pursuant to the FINRA Rule 9550 Series, FINRA Rule 9600 Series, FINRA Rule 9700 Series, or FINRA Rule 9800 Series, or decisions, notifications, or notices issued pursuant to the FINRA Rule 9520 Series because, as explained above, the Exchange does not propose to adopt the provisions of the FINRA Rule providing for the publication of such information. Finally, proposed Rule 8.18(e)(2) would provide that minor rule violation plan letters issued pursuant to Rules 8.15 and 25.3 are not subject to the proposed rule. 2. Statutory Basis The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.\10\ In particular, the proposal is consistent with Section 6(b)(1) \11\ in that it enables the Exchange to be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its exchange members and persons associated with its exchange members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange. In particular, the Exchange believes that the proposed addition of Rule 8.18 regarding release of disciplinary complaints, decisions and other information are [sic] consistent with Section 6(b)(1) of the Act because it would establish general standards for the release of disciplinary information to the public to provide greater access to information regarding the Exchange's disciplinary actions. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b). \11\ 15 U.S.C. 78f(b)(1). --------------------------------------------------------------------------- For the same reasons, the Exchange believes that proposed Rule 8.18 furthers the objectives of Section 6(b)(5) of the Act \12\ because the proposed rule is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. In particular, proposed Rule 8.18 furthers the objectives of Section 6(b)(5) of the Act by providing greater clarity, consistency, and transparency regarding the release of disciplinary complaints, decisions and other information to the public. By adopting the proposed Rule 8.18 modeled after FINRA Rule 8313, the Exchange would establish standards for the release of disciplinary information to the public in line with those in effect at FINRA that provide greater access to information regarding the Exchange's disciplinary actions and describe the scope of information subject to proposed Rule 8.18. The Exchange believes that this proposed rule change promotes greater transparency to the Exchange's disciplinary process, and that the proposed rule change provides greater access to information regarding its disciplinary actions, and also provides valuable guidance and information to Members, associated persons, other regulators, and the investing public. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competitive issues, but rather it is designed to enhance the Exchange's rules governing the release of disciplinary complaints, decisions and other information to the public, thereby providing greater clarity and consistency and resulting in less burdensome and more efficient regulatory compliance and facilitating performance of regulatory functions. [[Page 84628]] C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and paragraph (f)(6) of Rule 19b-4 thereunder.\14\ --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A). \14\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange requests that the Commission waive the 30-day operative delay. The Exchange states that FINRA performs services for it under a Regulatory Services Agreement (``RSA''), including the filing and prosecution of disciplinary complaints on the Exchange's behalf. FINRA also files and prosecutes disciplinary complaints on its own behalf, sometimes on cases involving identical or similar conduct to the cases it brings on the Exchange's behalf. Without the waiver, the Exchange is concerned that FINRA might publish a complaint during the 30-day operative delay, and that the Exchange would not be permitted to publish its own complaint, prepared by FINRA, regarding the same conduct. According to the Exchange, this would supply the public with an incomplete picture of the disciplinary proceedings, the full nature of which could not be disclosed until much later when a final disciplinary decision is issued. The Exchange, therefore, believes that waiver of the operative delay is consistent with the protection of investors and the public interest, as it will allow the Exchange to immediately publish any disciplinary complaints or decisions that are filed or issued after the proposal is filed. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow BZX to publish disciplinary complaints or decisions that have been filed or issued without delay. Therefore, the Commission designates the proposed rule change to be operative upon filing.\16\ --------------------------------------------------------------------------- \15\ 17 CFR 240.19b-4(f)(6)(iii). \16\ For purposes only of waiving the 30-day operative delay, the Commission also 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: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) 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 CommentsUse 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-BatsBZX-2016-73 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BatsBZX-2016-73. 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-BatsBZX-2016-73 and should be submitted on or before December 14, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\17\ --------------------------------------------------------------------------- \17\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-28186 Filed 11-22-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 226 / Wednesday, November 23, 2016 / Notices 84625
SECURITIES AND EXCHANGE proceedings to determine whether to at www.batstrading.com, at the
COMMISSION disapprove, the proposed rule change principal office of the Exchange, and at
(File No. SR-BatsEDGX–2016–41). the Commission’s Public Reference
[Release No. 34–79339; File No. SR-
BatsEDGX–2016–41] For the Commission, by the Division of Room.
Trading and Markets, pursuant to delegated II. Self-Regulatory Organization’s
Self-Regulatory Organizations; Bats authority.6
Statement of the Purpose of, and
EDGX Exchange, Inc.; Notice of Brent J. Fields, Statutory Basis for, the Proposed Rule
Designation of Longer Period for Secretary. Change
Commission Action on Proposed Rule [FR Doc. 2016–28184 Filed 11–22–16; 8:45 am]
Change Related to the Exchange’s In its filing with the Commission, the
BILLING CODE 8011–01–P
Equity Options Platform To Adopt a Exchange included statements
Price Improvement Auction, the Bats concerning the purpose of and basis for
Auction Mechanism SECURITIES AND EXCHANGE the proposed rule change and discussed
COMMISSION any comments it received on the
November 17, 2016. proposed rule change. The text of these
On September 16, 2016, Bats EDGX [Release No. 34–79342; File No. SR– statements may be examined at the
Exchange, Inc. (the ‘‘Exchange’’ or BatsBZX–2016–73] places specified in Item IV below. The
‘‘EDGX’’) filed with the Securities and Self-Regulatory Organizations; Bats Exchange has prepared summaries, set
Exchange Commission (‘‘Commission’’), BZX Exchange, Inc.; Notice of Filing forth in Sections A, B, and C below, of
pursuant to Section 19(b)(1) of the and Immediate Effectiveness of an the most significant parts of such
Securities Exchange Act of 1934 Amendment to Rule 8.11, Effective statements.
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a Date of Judgment and the Adoption of A. Self-Regulatory Organization’s
proposed rule change for the Exchange’s Rule 8.18, Release of Disciplinary Statement of the Purpose of, and
equity options platform (‘‘EDGX Complaints, Decisions and Other Statutory Basis for, the Proposed Rule
Options’’) to adopt a price improvement Information Change
auction, the Bats Auction Mechanism.
The proposed rule change was November 17, 2016. 1. Purpose
published for comment in the Federal Pursuant to Section 19(b)(1) of the Proposed Rule Change
Register on October 5, 2016.3 The Securities Exchange Act of 1934 (the
Commission has received no comment ‘‘Act’’),1 and Rule 19b–4 thereunder,2 Reorganization of Exchange Rules
letters on the proposal. notice is hereby given that on November Governing Release of Disciplinary
Section 19(b)(2) of the Act 4 provides 3, 2016, Bats BZX Exchange, Inc. (the Complaints, Decisions and Other
that within 45 days of the publication of ‘‘Exchange’’ or ‘‘BZX’’) filed with the Information Based on FINRA Rule 8313
notice of the filing of a proposed rule Securities and Exchange Commission Interpretation and Policy .01 to Rule
change, or within such longer period up (‘‘Commission’’) the proposed rule 8.11 currently provides, in part, that the
to 90 days as the Commission may change as described in Items I and II Exchange shall cause details regarding
designate if it finds such longer period below, which Items have been prepared all formal disciplinary actions where a
to be appropriate and publishes its by the Exchange. The Exchange has final decision has been issued, except as
reasons for so finding or as to which the designated this proposal as a ‘‘non- provided in Rule 8.15(a), to be
self-regulatory organization consents, controversial’’ proposed rule change published on its Web site. Interpretation
the Commission shall either approve the pursuant to Section 19(b)(3)(A) of the and Policy .01 also provides that the
proposed rule change, disapprove the Act 3 and Rule 19b–4(f)(6)(iii) Exchange shall not issue any press
proposed rule change, or institute thereunder,4 which renders it effective release or other statement to the press
proceedings to determine whether the upon filing with the Commission. The concerning any formal or informal
proposed rule change should be Commission is publishing this notice to disciplinary matter unless the Chief
disapproved. The 45th day for this filing solicit comments on the proposed rule Regulatory Officer recommends a press
is November 19, 2016. change from interested persons. release to the Executive Committee or
The Commission is extending the 45- the Board of the Exchange and either
I. Self-Regulatory Organization’s
day time period for Commission action body determines that such a press
Statement of the Terms of Substance of
on the proposed rule change. The release is warranted. The Exchange
the Proposed Rule Change
Commission finds that it is appropriate proposes to remove parts of
to designate a longer period within The Exchange filed a proposal to add Interpretation and Policy .01 to Rule
which to take action on the proposed proposed Rule 8.18 to require the 8.11 described above and to add
rule change so that it has sufficient time publication of the Exchange’s proposed Rule 8.18 modeled after
to consider and take action on the disciplinary complaints and FINRA Rule 8313,5 as described below,
Exchange’s proposed rule change. disciplinary decisions issued and to to govern the publication of disciplinary
Accordingly, pursuant to Section remove the part of Interpretation and information. The scope of proposed
19(b)(2)(A)(ii)(I) of the Act 5 and for the Policy .01 to Rule 8.11 that currently Rule 8.18 would be limited to
reasons stated above, the Commission governs the publication of disciplinary publication of materials relating to the
designates January 3, 2017, as the date complaints and information related to disciplinary process set forth in Chapter
by which the Commission should either disciplinary complaints. VIII because the Exchange seeks to
mstockstill on DSK3G9T082PROD with NOTICES
approve or disapprove, or institute The text of the proposed rule change
provide prompt access to more
is available at the Exchange’s Web site
information regarding its disciplinary
1 15 U.S.C. 78s(b)(1).
2 17 6 17 CFR 200.30–3(a)(31).
CFR 240.19b-4. 5 New York Stock Exchange, LLC (‘‘NYSE’’)
3 See Securities Exchange Act Release No. 78988 1 15 U.S.C. 78s(b)(1). similarly adopted rules modeled after FINRA Rule
(September 29, 2016), 81 FR 69172. 2 17 CFR 240.19b–4.
8313. See Securities Exchange Act Release No.
4 15 U.S.C. 78s(b)(2). 3 15 U.S.C. 78s(b)(3)(A).
78664 (August 24, 2016), 81 FR 59678, 59679
5 15 U.S.C. 78s(b)(2)(A)(ii)(I). 4 17 CFR 240.19b–4(f)(6)(iii). (August 30, 2016) (SR–NYSE–2016–40).
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actions to Members and associated materials relating to the disciplinary FINRA Rule 9700 Series.9 Additionally,
persons. By providing more information process set forth in Chapter VIII at this the Exchange does not propose to
regarding the Exchange’s disciplinary time.7 The Exchange, however, notes include its procedures for exemptive
process, including publishing that although Exchange Rules do not relief analogous to the FINRA Rule 9600
disciplinary complaints at the time they provide for temporary cease and desist Series because the Exchange proposes to
are filed, Members and associated orders as provided for in FINRA Rule limit scope of proposed Rule 8.18 to the
persons will be able to sooner identify 9800, the Exchange’s Client Suspension publication of disciplinary materials.
conduct that the Exchange views as Rule—Rule 8.17—is similar in its
procedure and purpose. The Exchange Release Specifications
problematic and have will [sic] the
ability to take corrective steps sooner proposes to include a client suspension The Exchange proposes to include
than they can under the current rules order issued pursuant to Rule 8.17 in subsection (b) to proposed Rule 8.18
that provide only for the publication of the definition of ‘‘disciplinary decision’’ entitled ‘‘Release Specifications’’
disciplinary decisions after they become under proposed Rule 8.18(e)(2) modeled after FINRA Rule 8313(b).
final. In that regard, the Exchange has consistent with FINRA’s inclusion of its Proposed Rule 8.18(b)(1) provides that
determined not to adopt FINRA Rule temporary cease and desist orders for copies of, and information with respect
8313 in all respects at this time.6 publication because the Exchange views to, any disciplinary complaint released
client suspension proceedings as to the public pursuant to paragraph (a)
General Standards disciplinary in nature. For the same of the proposed rule shall indicate that
The Exchange proposes Rule 8.18(a) reason, the Exchange proposes to a disciplinary complaint represents the
to be entitled ‘‘General Standards.’’ The include a notice of the initiation of a initiation of a formal proceeding by the
text would set forth general standards client suspension proceeding in the Exchange in which findings as to the
for the release to the public of definition of ‘‘disciplinary complaint’’ allegations in the complaint have not
disciplinary complaints, decisions, or under proposed Rule 8.18(e)(1). been made and does not represent a
information. The Exchange does not propose to decision as to any of the allegations
Proposed Rule 8.18(a)(1) would, in incorporate subsection (5) of FINRA contained in the complaint. The
part, essentially replace the part of Rule 8313(a) because the Exchange does proposed rule would be the same as
Interpretation and Policy .01 to Rule not have at this time provisions FINRA Rule 8313(b)(1) except that the
8.11 that addresses the publication of analogous to FINRA Rule 6490 8 and the proposed rule would substitute the term
disciplinary decisions and conform [sic] ‘‘Exchange’’ for ‘‘FINRA.’’
7 Subsection (2) of FINRA Rule 8313(a) provides
to FINRA Rule 8313. The proposed rule Proposed Rule 8.18(b)(2) provides that
for the publication of statutory disqualification
would provide that the Exchange shall decisions and temporary cease and desist orders. copies of, and information with respect
release to the public a copy of and, at Subsection (3) provides for the publication of any to, any disciplinary decision released to
the Exchange’s discretion, information suspension, cancellation, expulsion, or bar for:
the public pursuant to paragraph (a) of
with respect to, any disciplinary failing to keep information current; failing to pay
dues; failing to comply with an arbitration award the proposed rule prior to the expiration
decision issued by the Exchange, as or related settlement or an order of restitution or of the time period provided for an
defined in proposed Rule 8.18(e). settlement providing for restitution; failing to meet appeal or call for review as permitted
Additionally, the proposed rule would the eligibility or qualification standards or
under Exchange Rules or the Act, or
provide that the Exchange would release prerequisites for access to services; or experiencing
financial or operational difficulties. Additionally, while such an appeal or call for review
to the public copies of disciplinary subsection (3) provides for the publication of any is pending, shall indicate that the
complaints as defined in proposed Rule suspension, cancellation, expulsion, or bar imposed findings and sanctions imposed therein
8.18(e). Also, the decision to issue other as the result of a summary proceeding for actions
are subject to review and modification
related information, including a press authorized by Section 15A(h)(3) of the Act.
Subsection (4) addresses procedures for by the Exchange or the Commission.
release, under proposed Rule 8.18(a)(1) membership proceedings. The proposed rule would be
would be in the discretion of the The Exchange does not propose to adopt substantially similar to FINRA Rule
Exchange generally instead of requiring subsections (2), (3), and (4) because, as discussed 8313(b)(2). The proposed rule would
Executive Committee or Exchange Board above, the Exchange’s proposal is intended to
provide more information regarding the Exchange’s substitute the term ‘‘Exchange’’ for
approval as currently required in disciplinary process to the public so that Members ‘‘FINRA’’ and would not include a
Interpretation and Policy .01 to Rule and associated persons will be able to identify provision relating to the release
8.11. Proposed Rule 8.18(a)(1) would conduct that the Exchange views as problematic
specifications for an ‘‘other decision,
also provide that, in response to a and will have the ability to take corrective steps
sooner. Subsections (2), (3), and (4) to the FINRA order, notification, or notice’’ because,
request, the Exchange shall also release rule would not further that purpose because those as noted above, the Exchange proposes
to the requesting party a copy of any subsections would require the publication of to limit the rule only to disciplinary
identified disciplinary complaint or information generally relating to membership
complaints and disciplinary decisions.
disciplinary decision issued by the eligibility or failure to satisfy one’s membership
obligations rather than discipline. Subsection (2) Discretion To Redact Certain
Exchange, as defined in proposed Rule additionally addresses temporary cease and desist
8.18(e). These proposed amendments proceedings, which the Exchange does not have, Information or Waive Publication
are modeled after FINRA Rule and Subsection (3) additionally addresses Section
The Exchange has determined that,
8313(a)(1) and would be substantially 15A(h)(3) of the Act, which applies only to
registered securities associations. subject to limited exceptions,
similar to the FINRA rule. Subsection (6) permits discretionary release of a disciplinary information should be
The Exchange does not propose to complaint, decision, order, notification, or notice released to the public in unredacted
incorporate subsections (2), (3), (4) and issued under FINRA rules, where the release of
mstockstill on DSK3G9T082PROD with NOTICES
such information is deemed by FINRA’s Chief
form. To provide the standard for such
(6) of FINRA Rule 8313(a) because the limited exceptions, the Exchange
Executive Officer (or such other senior officer as the
Exchange proposes to limit the scope of Chief Executive Officer may designate) to be in the proposes subsection (c) of proposed
proposed Rule 8.18 to the publication of public interest. The Exchange does not propose to Rule 8.18 entitled ‘‘Discretion to Redact
adopt this open-ended subsection because [sic]
6 NYSE similarly declined to adopt all provisions Exchange intends for the proposed rule to instead
Certain Information or Waive
of FINRA Rule 8313 insofar as the FINRA rule be limited to disciplinary information for the
related to information beyond the formal reasons discussed above. 9 ‘‘Procedure For Grievances Concerning the
disciplinary process. See id. at 59679. 8 ‘‘Processing of Company-Related Actions.’’ Automated Systems.’’
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![Federal Register / Vol. 81, No. 226 / Wednesday, November 23, 2016 / Notices 84627
Publication,’’ modeled after FINRA Rule First, proposed Rule 8.18(e)(1) would other information are [sic] consistent
8313(c). define the term ‘‘disciplinary with Section 6(b)(1) of the Act because
Proposed Rule 8.18(c)(1) would complaint’’ to mean any statement of it would establish general standards for
provide that the Exchange reserves the charges issued pursuant to Rule 8.4 or the release of disciplinary information
right to redact, on a case-by-case basis, any notice served pursuant to Rule 8.17. to the public to provide greater access
information that contains confidential This proposed rule is based on FINRA to information regarding the Exchange’s
customer information, including Rule 8313(e)(1) except that it replaces disciplinary actions.
customer identities, or information that the term ‘‘complaint pursuant to the
Rule 9200 Series’’ with ‘‘statement of For the same reasons, the Exchange
raises significant identity theft, personal believes that proposed Rule 8.18
safety, or privacy concerns that are not charges pursuant to Rule 8.4’’ and it
includes a notice of the initiation of a furthers the objectives of Section 6(b)(5)
outweighed by investor protection
client suspension proceeding issued of the Act 12 because the proposed rule
concerns. The proposed rule would be
pursuant to Rule 8.17 in the definition is designed to promote just and
the same as FINRA Rule 8313(c)(1)
except that the proposed rule would of ‘‘disciplinary complaint.’’ equitable principles of trade, to foster
substitute the term ‘‘Exchange’’ for Second, proposed Rule 8.18(e)(2) cooperation and coordination with
‘‘FINRA.’’ would define the term ‘‘disciplinary persons engaged in facilitating
decision’’ to mean any decision issued transactions in securities, and to remove
Similarly, proposed Rule 8.18(c)(2)
provides that, notwithstanding pursuant to the Chapter VIII, including, impediments to and perfect the
decisions issued by a Hearing Panel or mechanism of a free and open market
paragraph (a) of the proposed rule, the
the Appeals Committee and accepted and a national market system. In
Exchange may determine, in its
offers of settlement. The Exchange particular, proposed Rule 8.18 furthers
discretion, to waive the requirement to
additionally proposes to include the objectives of Section 6(b)(5) of the
release a copy of, or information with
suspension orders issued pursuant to Act by providing greater clarity,
respect to, any disciplinary complaint or
Rule 8.17 in the definition of consistency, and transparency regarding
disciplinary decision under those
‘‘disciplinary decision.’’ The Exchange the release of disciplinary complaints,
extraordinary circumstances where the
does not propose to adopt the part of decisions and other information to the
release of such information would
FINRA Rule 8313(e)(2) that discusses public. By adopting the proposed Rule
violate fundamental notions of fairness
decisions issued pursuant to the FINRA 8.18 modeled after FINRA Rule 8313,
or work an injustice. The proposed rule Rule 9550 Series, FINRA Rule 9600
would be the same as FINRA Rule the Exchange would establish standards
Series, FINRA Rule 9700 Series, or
8313(c)(2) except that the proposed rule for the release of disciplinary
FINRA Rule 9800 Series, or decisions,
would substitute the term ‘‘Exchange’’ information to the public in line with
notifications, or notices issued pursuant
for ‘‘FINRA’’ and would not include a to the FINRA Rule 9520 Series because, those in effect at FINRA that provide
provision relating to the waiver of the as explained above, the Exchange does greater access to information regarding
release of an ‘‘other decision, order, not propose to adopt the provisions of the Exchange’s disciplinary actions and
notification, or notice’’ because, as the FINRA Rule providing for the describe the scope of information
noted above, the Exchange proposes to publication of such information. subject to proposed Rule 8.18. The
limit the rule only to disciplinary Finally, proposed Rule 8.18(e)(2) would Exchange believes that this proposed
complaints and disciplinary decisions. provide that minor rule violation plan rule change promotes greater
Notice of Appeals of Exchange letters issued pursuant to Rules 8.15 and transparency to the Exchange’s
Decisions 25.3 are not subject to the proposed disciplinary process, and that the
rule. proposed rule change provides greater
The Exchange proposes to include access to information regarding its
subsection (d) to proposed Rule 8.18 2. Statutory Basis disciplinary actions, and also provides
entitled ‘‘Notice of Appeals of Exchange The Exchange believes that its valuable guidance and information to
Decisions to the SEC’’ modeled on proposal is consistent with the Members, associated persons, other
FINRA Rule 8313(d). Proposed Rule requirements of the Act and the rules regulators, and the investing public.
8.18(d) provides that the Exchange must and regulations thereunder that are
provide notice to the public when a applicable to a national securities B. Self-Regulatory Organization’s
disciplinary decision of the Exchange is exchange, and, in particular, with the Statement on Burden on Competition
appealed to the Commission and the requirements of Section 6(b) of the
notice shall state whether the The Exchange does not believe that
Act.10 In particular, the proposal is
effectiveness of the decision has been the proposed rule change will impose
consistent with Section 6(b)(1) 11 in that
stayed pending the outcome of any burden on competition that is not
it enables the Exchange to be so
proceedings before the Commission. necessary or appropriate in furtherance
organized as to have the capacity to be
The proposed rule would be the same as of the purposes of the Act. The
able to carry out the purposes of the Act
FINRA Rule 8313(d) except that the proposed rule change is not intended to
and to comply, and to enforce
proposed Rule would substitute the compliance by its exchange members address competitive issues, but rather it
term ‘‘Exchange’’ for ‘‘FINRA.’’ and persons associated with its is designed to enhance the Exchange’s
exchange members, with the provisions rules governing the release of
Definitions disciplinary complaints, decisions and
of the Act, the rules and regulations
Finally, the Exchange proposes other information to the public, thereby
mstockstill on DSK3G9T082PROD with NOTICES
thereunder, and the rules of the
subsection (e) of proposed Rule 8.18 Exchange. In particular, the Exchange providing greater clarity and
entitled ‘‘Definitions.’’ Proposed Rule believes that the proposed addition of consistency and resulting in less
8.18(e) would set forth definitions of the Rule 8.18 regarding release of burdensome and more efficient
terms ‘‘disciplinary complaint’’ and disciplinary complaints, decisions and regulatory compliance and facilitating
‘‘disciplinary decision’’ as used in the performance of regulatory functions.
rule, modeled after the definitions 10 15 U.S.C. 78f(b).
contained in FINRA Rule 8313(e). 11 15 U.S.C. 78f(b)(1). 12 15 U.S.C. 78f(b)(5).
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![84628 Federal Register / Vol. 81, No. 226 / Wednesday, November 23, 2016 / Notices
C. Self-Regulatory Organization’s decisions that are filed or issued after communications relating to the
Statement on Comments on the the proposal is filed. The Commission proposed rule change between the
Proposed Rule Change Received From believes that waiver of the 30-day Commission and any person, other than
Members, Participants, or Others operative delay is consistent with the those that may be withheld from the
The Exchange has not solicited, and protection of investors and the public public in accordance with the
does not intend to solicit, comments on interest because it will allow BZX to provisions of 5 U.S.C. 552, will be
this proposed rule change. The publish disciplinary complaints or available for Web site viewing and
Exchange has not received any written decisions that have been filed or issued printing in the Commission’s Public
comments from members or other without delay. Therefore, the Reference Room, 100 F Street NE.,
interested parties. Commission designates the proposed Washington, DC 20549 on official
rule change to be operative upon business days between the hours of
III. Date of Effectiveness of the filing.16 10:00 a.m. and 3:00 p.m. Copies of such
Proposed Rule Change and Timing for At any time within 60 days of the filing also will be available for
Commission Action filing of the proposed rule change, the inspection and copying at the principal
Because the foregoing proposed rule Commission summarily may office of the Exchange. All comments
change does not: (i) Significantly affect temporarily suspend such rule change if received will be posted without change;
the protection of investors or the public it appears to the Commission that such the Commission does not edit personal
interest; (ii) impose any significant action is: (1) Necessary or appropriate in identifying information from
burden on competition; and (iii) become the public interest; (2) for the protection submissions. You should submit only
operative for 30 days from the date on of investors; or (3) otherwise in information that you wish to make
which it was filed or such shorter time furtherance of the purposes of the Act. available publicly. All submissions
as the Commission may designate, it has If the Commission takes such action, the should refer to File Number SR–
become effective pursuant to Section Commission shall institute proceedings BatsBZX–2016–73 and should be
19(b)(3)(A) of the Act 13 and paragraph to determine whether the proposed rule submitted on or before December 14,
(f)(6) of Rule 19b–4 thereunder.14 should be approved or disapproved. 2016.
A proposed rule change filed under IV. Solicitation of Comments For the Commission, by the Division of
Rule 19b–4(f)(6) normally does not Trading and Markets, pursuant to delegated
become operative prior to 30 days after Interested persons are invited to authority.17
the date of filing. However, Rule 19b– submit written data, views and Brent J. Fields,
4(f)(6)(iii) 15 permits the Commission to arguments concerning the foregoing,
Secretary.
designate a shorter time if such action including whether the proposed rule
[FR Doc. 2016–28186 Filed 11–22–16; 8:45 am]
is consistent with the protection of change is consistent with the Act.
Comments may be submitted by any of BILLING CODE 8011–01–P
investors and the public interest. In its
filing with the Commission, the the following methods:
Exchange requests that the Commission Electronic Comments SECURITIES AND EXCHANGE
waive the 30-day operative delay. The COMMISSION
• Use the Commission’s Internet
Exchange states that FINRA performs
comment form (http://www.sec.gov/ [Release Nos. 33–10258; 34–79350; File No.
services for it under a Regulatory
rules/sro.shtml); or 265–27]
Services Agreement (‘‘RSA’’), including • Send an email to rule-
the filing and prosecution of comments@sec.gov. Please include File Advisory Committee on Small and
disciplinary complaints on the Number SR–BatsBZX–2016–73 on the Emerging Companies
Exchange’s behalf. FINRA also files and subject line.
prosecutes disciplinary complaints on AGENCY: Securities and Exchange
its own behalf, sometimes on cases Paper Comments Commission.
involving identical or similar conduct to • Send paper comments in triplicate ACTION: Notice of Meeting.
the cases it brings on the Exchange’s to Secretary, Securities and Exchange
behalf. Without the waiver, the SUMMARY: The Securities and Exchange
Commission, 100 F Street NE., Commission Advisory Committee on
Exchange is concerned that FINRA Washington, DC 20549–1090.
might publish a complaint during the Small and Emerging Companies is
All submissions should refer to File providing notice that it will hold an
30-day operative delay, and that the Number SR-BatsBZX–2016–73. This file
Exchange would not be permitted to open, public telephone meeting on
number should be included on the Wednesday, December 7, 2016,
publish its own complaint, prepared by
subject line if email is used. To help the beginning at 11:00 a.m. ET. Members of
FINRA, regarding the same conduct.
Commission process and review your the public may attend the meeting by
According to the Exchange, this would
comments more efficiently, please use listening to the audiocast accessible on
supply the public with an incomplete
only one method. The Commission will the Commission’s Web site at
picture of the disciplinary proceedings,
post all comments on the Commission’s www.sec.gov. Persons needing special
the full nature of which could not be
Internet Web site (http://www.sec.gov/ accommodations to access the meeting
disclosed until much later when a final
rules/sro.shtml). Copies of the because of a disability should notify the
disciplinary decision is issued. The
submission, all subsequent contact person listed below. The agenda
Exchange, therefore, believes that
waiver of the operative delay is amendments, all written statements for the meeting includes a continuation
with respect to the proposed rule of discussions started at the
mstockstill on DSK3G9T082PROD with NOTICES
consistent with the protection of
investors and the public interest, as it change that are filed with the Committee’s meeting on October 5,
will allow the Exchange to immediately Commission, and all written 2016, including outreach and board
publish any disciplinary complaints or diversity. The public is invited to
16 For purposes only of waiving the 30-day
submit written statements to the
operative delay, the Commission also has
13 15 U.S.C. 78s(b)(3)(A). considered the proposed rule’s impact on Committee.
14 17 CFR 240.19b–4(f)(6). efficiency, competition, and capital formation. See
15 17 CFR 240.19b–4(f)(6)(iii). 15 U.S.C. 78c(f). 17 17 CFR 200.30–3(a)(12).
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Document Created: 2016-11-23 05:30:31
Document Modified: 2016-11-23 05:30:31
| 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 84625 |
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