83 FR 50723 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Align Existing Investigatory and Disciplinary Processes and Related Rules With the Investigatory and Disciplinary Processes and Related Rules of Nasdaq PHLX LLC
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 195 (October 9, 2018)
Federal Register Volume 83, Issue 195 (October 9, 2018)
| Page Range | 50723-50726 | |
| FR Document | 2018-21906 |
[Federal Register Volume 83, Number 195 (Tuesday, October 9, 2018)] [Notices] [Pages 50723-50726] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-21906] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84354; File No. SR-BX-2018-042] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Align Existing Investigatory and Disciplinary Processes and Related Rules With the Investigatory and Disciplinary Processes and Related Rules of Nasdaq PHLX LLC October 3, 2018. 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 September 21, 2018, Nasdaq BX, Inc. (``BX'' or ``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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to a proposal [sic] to align its existing investigatory and disciplinary processes and related rules with the investigatory and disciplinary processes and related rules of Nasdaq PHLX LLC (``Phlx''). The text of the proposed rule change is available on the Exchange's website at http://nasdaqbx.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 Statutory Basis for, the Proposed Rule Change 1. Purpose BX proposes to amend certain of its rules to align its existing investigatory and disciplinary processes and related rules with the investigatory and disciplinary processes and related rules of Phlx. BX notes that Phlx amended its rules recently to adopt an investigatory and disciplinary process identical in all material respects to the investigatory and disciplinary processes of Nasdaq, Inc. and BX.\3\ The amendment also vested the Phlx Regulation Department with the same authority proposed herein. The Exchange therefore proposes the below changes to the 8000 and 9000 Series of the BX Rules in order to conform its rules to those of Phlx 8000 and 9000 Series rules in all respects.\4\ --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 82143 (November 22, 2017), 82 FR 56672 (November 29, 2017) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Investigatory and Disciplinary Processes Substantially Similar to Nasdaq BX, Inc. and The Nasdaq Stock Market LLC for Phlx, which, among other things, similarly enabled Phlx to retain discretion to perform these functions). \4\ The Exchange notes that the Financial Industry Regulatory Authority (``FINRA'') amended its rules recently to reflect an internal reorganization of FINRA's Enforcement Operations. See Securities Exchange Act Release No. 83781 (August 6, 2018), 83 FR 39802 (August 10, 2018). In July 2017, FINRA announced its plan to consolidate its existing enforcement functions into a unified Department of Enforcement. FINRA's recent rule change makes technical and other non-substantive changes to FINRA Rules 9000 Series Code of Procedure (the ``Code'') to reflect the single Department of Enforcement. The rule change removed references to the Market Regulation department, its head and employees from the Code where those references reflect the previously separate Market Regulation enforcement function. In light of FINRA's reorganization, the Exchange is likewise removing references to the Market Regulation department, its head and employees from the Code, and re- lettering the remainder of those sections where such re-lettering is necessary (i.e. Rule 9120). Phlx will also submit a similar rule filing to remove those references in due course. --------------------------------------------------------------------------- Definition of Exchange Regulation The Exchange proposes to revise the definition of [sic] BX Current Rule 9120(w) (``Exchange's Regulation Department'') to expressly include the Exchange's Enforcement Department. The Exchange's Enforcement Department is specifically charged with pursuing disciplinary action against members, persons associated with a member, and persons subject to the Exchange's jurisdiction, in addition to FINRA's departments of Enforcement and Market Regulation. Similarly, the Exchange proposes to add references to the ``Exchange's Regulation Department'' in BX Current Rule 9120(aa) (definition of the term ``Party''). The Exchange also proposes to add a definition for the term ``Party'' as used in the BX Rule 9400 series,\5\ and to add references to ``FINRA'' in BX Current Rule 9120(aa)(4) to clarify that FINRA falls under the definition of ``Party'' as used in the BX Rule 9550 series. In addition, the Exchange is adding references to the Exchange's Regulation Department throughout the BX Rule 8000 and 9000 series.\6\ These amendments will conform the text of BX 8000 and 9000 rules to those of Phlx.\7\ --------------------------------------------------------------------------- \5\ The Exchange notes that, like Phlx, it is likewise including the Department of Enforcement as a potential party to a matter under the Rule 9400 Series. The Exchange believes that including these departments in Rule 9400 Series is appropriate because they may be involved in the initiation of such a matter for BX currently. The Exchange is also adding FINRA to other parts of Rule 9400 where it is appropriate to show that FINRA may be the entity that initiated an action under the rule. \6\ See BX Current Rules 9120, 9212, 9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9311, 9400, 9810, 9820, 9830, and 9840. \7\ The Exchange is also amending Current BX Rule 9120(aa)(2), to align that rule text with FINRA's recent rule change. The term ``Party'' when used in the Rule 9520 Series, now means FINRA's Department of Enforcement, rather than Member Regulation. See Securities Exchange Act Release No. 83781 (August 6, 2018), 83 FR 39802 (August 10, 2018). --------------------------------------------------------------------------- [[Page 50724]] Role of FINRA The Exchange proposes to add rule text to certain rules to clarify that FINRA may act on behalf of the Exchange. Today, FINRA is empowered to act on behalf of the Exchange.\8\ The revisions to these rules will therefore clarify FINRA's authority as it currently exists today.\9\ --------------------------------------------------------------------------- \8\ See BX Current Rule 8001 (``The Exchange and FINRA are parties to the FINRA Regulatory Contract pursuant to which FINRA has agreed to perform certain functions described in these rules on behalf of the Exchange. Exchange rules that refer to the Exchange's Regulation Department, Exchange Regulation staff, Exchange staff, and Exchange departments should be understood as also referring to FINRA staff and FINRA departments acting on behalf of the Exchange pursuant to the FINRA Regulatory Contract.''). \9\ See BX Current Rules 9400, 9522, 9552, 9553, 9554, 9555, 9556, 9557, and 9558. The Exchange notes that FINRA currently performs the functions described in these rules. The proposed changes further clarify that in the rule text. --------------------------------------------------------------------------- Jurisdiction The Exchange proposes to replace the current rule text related to jurisdiction of BX to initiate disciplinary actions with text substantially similar to the Phlx's jurisdiction rule text. Current BX Rules 1012(h) \10\ and 1031(f) \11\ permit a disciplinary action to be brought within two years after the effective date of resignation, cancellation, or revocation of a member or associated person. The current BX provisions are more limited than Phlx's jurisdictional language. Phlx Rule 9110(d) does not contain a time limit on when a matter may be brought against a member or associated person following its termination or deregistration, so long as the Exchange serves written notice within one year of receipt by the Exchange of notice of such termination or deregistration that the Exchange is making inquiry into a matter or matters which occurred prior to the termination of such person's status as a member or associated person.\12\ The substantive amendment with respect to jurisdiction is with the timeframe for bringing a disciplinary action against a member or associated person. The proposed rule expands the timeframe. --------------------------------------------------------------------------- \10\ A resigned Exchange member or an Exchange member that has had its membership canceled or revoked shall continue to be subject to the filing of a complaint under the Rules of the Exchange based upon conduct that commenced prior to the effective date of the Exchange member's resignation from the Exchange or the cancellation or revocation of its membership. Any such complaint, however, shall be filed within two years after the effective date of resignation, cancellation, or revocation. \11\ A person whose association with an Exchange member has been terminated and who is no longer associated with any member of the Exchange or a person whose registration has been revoked or canceled shall continue to be subject to the filing of a complaint under the Rules of the Exchange based upon conduct which commenced prior to the termination, revocation, or cancellation or upon such person's failure, while subject to the Exchange's jurisdiction as provided herein, to provide information requested by the Exchange pursuant to the Rules of the Exchange, but any such complaint shall be filed within: (A) Two years after the effective date of termination of registration pursuant to subsection (c); provided, however, that any amendment to a notice of termination filed pursuant to paragraph (c)(2) that is filed within two years of the original notice that discloses that such person may have engaged in conduct actionable under any applicable statute, rule, or regulation shall operate to recommence the running of the two-year period under this subsection; (B) two years after the effective date of revocation or cancellation of registration pursuant to the Rules of the Exchange; or (C) in the case of an unregistered person, within two years after the date upon which such person ceased to be associated with the Exchange member. A person whose association with a member has been terminated and is no longer associated with any Exchange member shall continue to be subject to a proceeding to suspend, consistent with Section 12.2 of the Exchange By-Laws, his or her ability to associate with a member based on such person's failure to comply with an arbitration award or a written and executed settlement agreement obtained in connection with an arbitration or mediation submitted for disposition pursuant to the Rules of the Exchange, provided that such proceeding is instituted within two years after the date of entry of such award or settlement. \12\ Any member or any partner, officer, director or person employed by or associated with any member (the Respondent) who is alleged to have violated or aided and abetted a violation of the Securities Exchange Act of 1934 (Exchange Act), the rules and regulations thereunder, the By-Laws and Rules of the Exchange or any interpretation thereof, and the Rules, Regulations, resolutions and stated policies of the Board of Directors or any Committee of the Exchange, shall be subject to the disciplinary jurisdiction of the Exchange, and after notice and opportunity for a hearing may be appropriately disciplined by expulsion, suspension, fine, censure, limitation or termination as to activities, functions, operations, or association with a member organization, or any other fitting sanction in accordance with the provisions of these disciplinary Rules. An individual member, or a partner, officer, director or person employed by or associated with a member may be charged with any violation within the disciplinary jurisdiction of the Exchange committed by employees under his supervision or by the member with which he is associated, as though such violations were his own. A member may be charged with any violation within the disciplinary jurisdiction of the Exchange committed by its officers, directors, or employees or by a member or other person who is associated with such member, as though such violation were its own. Any member, or any partner, officer, director, or person employed by or associated with a member organization, and any member organization shall continue to be subject to the disciplinary jurisdiction of the Exchange following the termination of such person's permit or the termination of the employment by or the association with a member organization of such member or partner, officer, director or person, or following the deregistration of a member organization from the Exchange; provided, that the Exchange serves written notice to such former member, partner, officer, director, employee, associated person or member organization within one year of receipt by the Exchange of notice of such termination or deregistration that the Exchange is making inquiry into a matter or matters which occurred prior to the termination of such person's status as a member, or as a partner, officer, director or person employed by or associated with a member organization, or prior to the deregistration of such member organization. --------------------------------------------------------------------------- The amendment to expand jurisdiction will not apply retroactively and any complaints not filed within the existing two year time-period will be time-barred. The new jurisdiction rule will only apply to the applicable members or associated persons who terminate with the Exchange on or after October 15, 2018. The Exchange also proposes to eliminate the rule text contained within BX Current Rules 1012(h) and 1031(f) and reserve those sections. Interested Staff Definition The definition of Interested Staff is being conformed to Phlx's definition and includes references to Exchange and FINRA employees as those terms are proposed to be defined.\13\ The proposed BX definition better defines who falls within the category of Interested Staff without substantively amending the definition. At this time, BX's proposal mirrors the Phlx definition, except insofar as BX's proposal omits references to FINRA's Department of Market Regulation for the reasons set forth in footnote 6 above.\14\ The Exchange also notes that it is removing the words ``a district director or'' from BX Current Rules 9120(t)(1)(D), 9120(t)(2)(D), and 9120(t)(3)(D) because there is no such position at the Exchange. The use of those words in the current definition refers to the individual to whom a FINRA employee may report. Those words are therefore being preserved as they relate to FINRA in Proposed BX New Rules 9120(r)(1)(H), 9120(r)(2)(E), 9120(4)(3)(E), and 9120(4)(r)(F). --------------------------------------------------------------------------- \13\ As noted in n.6 above, the Exchange is, however, omitting references to FINRA's Department of Market Regulation in light of FINRA's recent rule filing that similarly omitted references to its Department of Market Regulation. \14\ The Exchange notes that it is adopting a more comprehensive definition of ``Interested Staff'' under BX Current Rule 9120(t) to align it with the definition used by Phlx. Specifically, the Exchange is adopting new text that accounts for the role of the Exchange's Regulation Department, including the involvement of employees thereof. Thus, the proposed new definition will include all individuals that should be considered as ``Interested Staff'' for purposes of the BX Rule 9000 Series. --------------------------------------------------------------------------- Other Non-Substantive and Technical Amendments The Exchange proposes to add a sentence within Current BX Rule 9270(e)(2), similar to Phlx, to add more [[Page 50725]] specificity to this rule and make clear that the Office of Disciplinary Affairs may accept an offer of settlement and order of acceptance or refer them to the Exchange Review Council. The Exchange notes that today the Office of Disciplinary Affairs may accept an offer of settlement and order of acceptance or refer them to the Exchange Review Council, so this language is intended to clarify the current practice under the rule. The Exchange also proposes to make certain technical amendments throughout these rules to: (i) Amend ``NASD'' to the updated name ``FINRA'' \15\; (ii) replace ``Association'' with ``FINRA'' \16\; (iii) update certain incorrect cross-references to both FINRA and Nasdaq rule citations \17\; (iv) add rule text in certain rules to conform the rule text of BX to Phlx \18\; (v) include the phrase ``or person'' in various places throughout the rule to make it clear that inclusion of the person associated with a member is applicable \19\; and correct typographical errors.\20\ --------------------------------------------------------------------------- \15\ See BX Current Rules 8110 and 9120(f). \16\ See BX Current Rules 9558(a), 9558(a)(2), and 9610(a). \17\ See BX Current Rules 9231(c) and 9331(a)(2). \18\ See BX Current Rules IM-8310-3, 9211(a)(1)-(2), and 9270(e)(2). \19\ See BX Current Rules 9552(b), 9553(b), 9554(b), 9555(b), and 9556(e). \20\ See BX Current Rules 9215(f), 9523(a)(4) and 9554(a). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\21\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\22\ 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. In addition, the Exchange believes that the proposed rule changes [sic] further the objectives of Section 6(b)(7) of the Act,\23\ in particular, in that these changes provide for fair procedures for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the Exchange of any person with respect to access to services offered by the Exchange or a member thereof. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78f(b). \22\ 15 U.S.C. 78f(b)(5). \23\ 15 U.S.C. 78f(b)(7). --------------------------------------------------------------------------- In addition, the Exchange believes that the proposed rule changes are consistent with Section 6(b)(6) of the Act,\24\ 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. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b)(6). --------------------------------------------------------------------------- The Exchange believes that the proposed changes are consistent with these requirements because the changes further harmonize BX's investigative and adjudicatory processes with similar processes used by Phlx. The new processes are well-established as fair and designed to protect investors and the public interest. Because the Exchange is conforming the BX rule text to the Phlx rule text to eliminate any differences (except for those noted herein), the Exchange believes that the proposed changes should facilitate prompt, appropriate, and effective discipline of members and their associated persons consistent with the Act. The Exchange believes that adding references to the Exchange's Regulation Department within the 8000 and 9000 BX Series rules as described in this proposal clarifies the involvement that the Exchange's Regulation Department plays in the investigation and enforcement of BX's disciplinary rules. In addition, the Exchange believes that adding references to FINRA within the 8000 and 9000 BX Series rules as described in this proposal brings greater transparency to its rules and clarifies the process as it exists today. Today, FINRA is empowered to act on behalf of the Exchange.\25\ --------------------------------------------------------------------------- \25\ See BX Current Rule 8001. --------------------------------------------------------------------------- The Exchange believes that harmonizing the rule text of the investigative and adjudicatory processes with those of Phlx will reduce the burden on members and their associated persons as they only will need to be familiar with a single rule set going forward. Because the substance of the rules would remain unchanged, the Exchange believes that the proposed change would continue to provide fair procedures for the suspending and disciplining of members and associated persons, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the Exchange of any person with respect to access to services offered by the Exchange or a member thereof. The Exchange's proposal to replace the current rule text related to jurisdiction of BX to initiate disciplinary actions with text substantially similar to the Phlx's jurisdiction rule text will permit the Exchange to initiate a disciplinary action beyond two years after the effective date of the member's or associated person's termination with the Exchange. This provision would not apply retroactively, but would permit the Exchange to bring actions after the effective date of termination, so long as the Exchange serves written notice within one year of receipt by the Exchange of notice of such termination that the Exchange is making inquiry into a matter or matters which occurred prior to the termination of status as a member or associated person. The Exchange believes that this provision will provide the Exchange with the same latitude as Phlx to bring actions against its members and associated persons for violations of its rule. The Exchange believes that it is consistent with the Act to provide the Exchange with the ability to initiate violations for members and their associated persons for violations which took place while these members and associated persons were members of the Exchange. The rule change will better protect investors and the public interest by allowing actions to proceed that may otherwise have been time barred under the old rule. The Exchange's proposal to amend the definition of Interested Staff will conform BX's definition to Phlx's definition, except insofar as BX's proposal omits references to FINRA's Department of Market Regulation for the reasons set forth in footnote 6 above. The Exchange believes that it is consistent with the Act because the definition better defines who falls within the category of Interested Staff without substantively amending the definition. Finally, making technical amendments in BX Rules 8110, IM-8310-3, 9120, 9211, 9231, 9270, 9331, 9522, 9523, 9552, 9553, 9554, 9555, 9556, 9558, and 9610 removes impediments to and perfects the mechanism of a free and open market by removing confusion that may result from having incorrect or incomplete material in the Exchange's rulebook. The Exchange believes that its proposal furthers the objectives of Section 6(b)(7) of the Act,\26\ in that it is designed to provide a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person [[Page 50726]] seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof. Specifically, the Exchange believes that the proposed investigatory and disciplinary process is consistent with Section 6(b)(7) of the Act \27\ because it is based on the existing processes used by Phlx. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78f(b)(7). \27\ Id. --------------------------------------------------------------------------- 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 proposed rule change is intended to more clearly align the text of Phlx's and the Exchange's rules. Specifically and as described in detail above, the Exchange believes that this change will bring efficiency and consistency to the investigative and adjudicatory processes, thereby reducing the burden on members and their associated persons who are also members of Phlx. 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, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \28\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\29\ --------------------------------------------------------------------------- \28\ 15 U.S.C. 78s(b)(3)(A)(iii). \29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \30\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\31\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so the Exchange may immediately amend its disciplinary rules to conform to Phlx's disciplinary process. The Exchange states that the proposed amendment to expand its current jurisdiction will not apply retroactively and any complaints not filed within the existing two-year time period will be time-barred. The Exchange further states that its new jurisdiction rule will only apply to applicable members or associated persons who terminate their membership or association on October 15, 2018 or thereafter. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest as it will allow BX to conform its disciplinary rules to those of Phlx. In addition, the proposal does not present any novel issues. Therefore, the Commission hereby waives the operative delay and designates the proposal as operative upon filing.\32\ --------------------------------------------------------------------------- \30\ 17 CFR 240.19b-4(f)(6). \31\ 17 CFR 240.19b-4(f)(6)(iii). \32\ For purposes only of waving the 30-day operative delay, the Commission has considered the purposed 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 necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 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-BX-2018-042 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-BX-2018-042. 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 website (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 website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BX-2018-042 and should be submitted on or before October 30, 2018. --------------------------------------------------------------------------- \33\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\33\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-21906 Filed 10-5-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 195 / Tuesday, October 9, 2018 / Notices 50723
of the functions of the agency, including publishing this notice to solicit 8000 and 9000 Series rules in all
whether the information will have comments on the proposed rule change respects.4
practical utility; (b) the accuracy of the from interested persons.
Definition of Exchange Regulation
agency’s estimate of the burden imposed
I. Self-Regulatory Organization’s The Exchange proposes to revise the
by the collection of information; (c)
Statement of the Terms of Substance of definition of [sic] BX Current Rule
ways to enhance the quality, utility, and
the Proposed Rule Change 9120(w) (‘‘Exchange’s Regulation
clarity of the information collected; and
(d) ways to minimize the burden of the The Exchange proposes to a proposal Department’’) to expressly include the
collection of information on [sic] to align its existing investigatory Exchange’s Enforcement Department.
respondents, including through the use and disciplinary processes and related The Exchange’s Enforcement
of automated collection techniques or rules with the investigatory and Department is specifically charged with
other forms of information technology. disciplinary processes and related rules pursuing disciplinary action against
Background documentation for this of Nasdaq PHLX LLC (‘‘Phlx’’). members, persons associated with a
information collection may be viewed at member, and persons subject to the
The text of the proposed rule change
the following website: www.reginfo.gov. Exchange’s jurisdiction, in addition to
is available on the Exchange’s website at
Comments should be directed to: (i) FINRA’s departments of Enforcement
http://nasdaqbx.cchwallstreet.com/, at
Desk Officer for the Securities and and Market Regulation.
the principal office of the Exchange, and Similarly, the Exchange proposes to
Exchange Commission, Office of at the Commission’s Public Reference
Information and Regulatory Affairs, add references to the ‘‘Exchange’s
Room. Regulation Department’’ in BX Current
Office of Management and Budget,
Room 10102, New Executive Office II. Self-Regulatory Organization’s Rule 9120(aa) (definition of the term
Building, Washington, DC 20503, or by Statement of the Purpose of, and ‘‘Party’’). The Exchange also proposes to
sending an email to: Shagufta_Ahmed@ Statutory Basis for, the Proposed Rule add a definition for the term ‘‘Party’’ as
Change used in the BX Rule 9400 series,5 and
omb.eop.gov; and (ii) Charles Riddle,
to add references to ‘‘FINRA’’ in BX
Acting Director/Chief Information In its filing with the Commission, the Current Rule 9120(aa)(4) to clarify that
Officer, Securities and Exchange Exchange included statements FINRA falls under the definition of
Commission, c/o Candace Kenner, 100 F concerning the purpose of and basis for ‘‘Party’’ as used in the BX Rule 9550
St. NE, Washington, DC 20549 or send the proposed rule change and discussed series. In addition, the Exchange is
an email to: PRA_Mailbox@sec.gov. any comments it received on the adding references to the Exchange’s
Comments must be submitted to OMB proposed rule change. The text of these Regulation Department throughout the
within 30 days of this notice. statements may be examined at the BX Rule 8000 and 9000 series.6 These
Dated: October 3, 2018. places specified in Item IV below. The amendments will conform the text of BX
Eduardo A. Aleman, Exchange has prepared summaries, set 8000 and 9000 rules to those of Phlx.7
Assistant Secretary. forth in sections A, B, and C below, of
[FR Doc. 2018–21831 Filed 10–5–18; 8:45 am]
the most significant aspects of such 4 The Exchange notes that the Financial Industry
statements. Regulatory Authority (‘‘FINRA’’) amended its rules
BILLING CODE 8011–01–P recently to reflect an internal reorganization of
A. Self-Regulatory Organization’s FINRA’s Enforcement Operations. See Securities
Statement of the Purpose of, and Exchange Act Release No. 83781 (August 6, 2018),
SECURITIES AND EXCHANGE 83 FR 39802 (August 10, 2018). In July 2017, FINRA
Statutory Basis for, the Proposed Rule announced its plan to consolidate its existing
COMMISSION Change enforcement functions into a unified Department of
[Release No. 34–84354; File No. SR–BX– Enforcement. FINRA’s recent rule change makes
1. Purpose technical and other non-substantive changes to
2018–042]
FINRA Rules 9000 Series Code of Procedure (the
BX proposes to amend certain of its ‘‘Code’’) to reflect the single Department of
Self-Regulatory Organizations; Nasdaq rules to align its existing investigatory Enforcement. The rule change removed references
BX, Inc.; Notice of Filing and and disciplinary processes and related to the Market Regulation department, its head and
Immediate Effectiveness of Proposed rules with the investigatory and employees from the Code where those references
reflect the previously separate Market Regulation
Rule Change To Align Existing disciplinary processes and related rules enforcement function. In light of FINRA’s
Investigatory and Disciplinary of Phlx. BX notes that Phlx amended its reorganization, the Exchange is likewise removing
Processes and Related Rules With the rules recently to adopt an investigatory references to the Market Regulation department, its
Investigatory and Disciplinary and disciplinary process identical in all head and employees from the Code, and re-lettering
the remainder of those sections where such re-
Processes and Related Rules of material respects to the investigatory lettering is necessary (i.e. Rule 9120). Phlx will also
Nasdaq PHLX LLC and disciplinary processes of Nasdaq, submit a similar rule filing to remove those
Inc. and BX.3 The amendment also references in due course.
October 3, 2018. 5 The Exchange notes that, like Phlx, it is likewise
vested the Phlx Regulation Department
Pursuant to Section 19(b)(1) of the with the same authority proposed
including the Department of Enforcement as a
Securities Exchange Act of 1934 potential party to a matter under the Rule 9400
herein. The Exchange therefore Series. The Exchange believes that including these
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 proposes the below changes to the 8000 departments in Rule 9400 Series is appropriate
notice is hereby given that on and 9000 Series of the BX Rules in order because they may be involved in the initiation of
September 21, 2018, Nasdaq BX, Inc. such a matter for BX currently. The Exchange is
to conform its rules to those of Phlx also adding FINRA to other parts of Rule 9400
(‘‘BX’’ or ‘‘Exchange’’) filed with the where it is appropriate to show that FINRA may be
Securities and Exchange Commission
amozie on DSK3GDR082PROD with NOTICES1
3 See Securities Exchange Act Release No. 82143 the entity that initiated an action under the rule.
(‘‘Commission’’) the proposed rule (November 22, 2017), 82 FR 56672 (November 29, 6 See BX Current Rules 9120, 9212, 9213, 9215,
change as described in Items I and II 2017) (Notice of Filing and Immediate Effectiveness 9216, 9251, 9253, 9264, 9269, 9270, 9311, 9400,
below, which Items have been prepared of Proposed Rule Change To Adopt Investigatory 9810, 9820, 9830, and 9840.
and Disciplinary Processes Substantially Similar to 7 The Exchange is also amending Current BX Rule
by the Exchange. The Commission is Nasdaq BX, Inc. and The Nasdaq Stock Market LLC 9120(aa)(2), to align that rule text with FINRA’s
for Phlx, which, among other things, similarly recent rule change. The term ‘‘Party’’ when used in
1 15 U.S.C. 78s(b)(1). enabled Phlx to retain discretion to perform these the Rule 9520 Series, now means FINRA’s
2 17 CFR 240.19b–4. functions). Continued
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![Federal Register / Vol. 83, No. 195 / Tuesday, October 9, 2018 / Notices 50725
specificity to this rule and make clear consistent with Section 6(b)(6) of the The Exchange’s proposal to replace
that the Office of Disciplinary Affairs Act,24 which requires the rules of an the current rule text related to
may accept an offer of settlement and exchange provide that its members be jurisdiction of BX to initiate
order of acceptance or refer them to the appropriately disciplined for violations disciplinary actions with text
Exchange Review Council. The of the Act as well as the rules and substantially similar to the Phlx’s
Exchange notes that today the Office of regulations thereunder, or the rules of jurisdiction rule text will permit the
Disciplinary Affairs may accept an offer the Exchange, by expulsion, suspension, Exchange to initiate a disciplinary
of settlement and order of acceptance or limitation of activities, functions, and action beyond two years after the
refer them to the Exchange Review operations, fine, censure, being effective date of the member’s or
Council, so this language is intended to suspended or barred from being associated person’s termination with the
clarify the current practice under the associated with a member, or any other Exchange. This provision would not
rule. fitting sanction. apply retroactively, but would permit
The Exchange also proposes to make The Exchange believes that the the Exchange to bring actions after the
certain technical amendments proposed changes are consistent with effective date of termination, so long as
throughout these rules to: (i) Amend these requirements because the changes the Exchange serves written notice
‘‘NASD’’ to the updated name further harmonize BX’s investigative within one year of receipt by the
‘‘FINRA’’ 15; (ii) replace ‘‘Association’’ and adjudicatory processes with similar Exchange of notice of such termination
with ‘‘FINRA’’ 16; (iii) update certain processes used by Phlx. The new that the Exchange is making inquiry into
incorrect cross-references to both FINRA processes are well-established as fair a matter or matters which occurred prior
and Nasdaq rule citations 17; (iv) add and designed to protect investors and to the termination of status as a member
rule text in certain rules to conform the the public interest. Because the or associated person. The Exchange
rule text of BX to Phlx 18; (v) include the Exchange is conforming the BX rule text believes that this provision will provide
phrase ‘‘or person’’ in various places to the Phlx rule text to eliminate any the Exchange with the same latitude as
throughout the rule to make it clear that differences (except for those noted Phlx to bring actions against its
inclusion of the person associated with herein), the Exchange believes that the members and associated persons for
a member is applicable 19; and correct proposed changes should facilitate violations of its rule. The Exchange
typographical errors.20 prompt, appropriate, and effective believes that it is consistent with the
discipline of members and their Act to provide the Exchange with the
2. Statutory Basis
associated persons consistent with the ability to initiate violations for members
The Exchange believes that its Act. The Exchange believes that adding and their associated persons for
proposal is consistent with Section 6(b) references to the Exchange’s Regulation violations which took place while these
of the Act,21 in general, and furthers the Department within the 8000 and 9000 members and associated persons were
objectives of Section 6(b)(5) of the Act,22 BX Series rules as described in this members of the Exchange. The rule
in particular, in that it is designed to proposal clarifies the involvement that change will better protect investors and
promote just and equitable principles of the Exchange’s Regulation Department the public interest by allowing actions
trade, to remove impediments to and plays in the investigation and to proceed that may otherwise have
perfect the mechanism of a free and enforcement of BX’s disciplinary rules. been time barred under the old rule.
open market and a national market In addition, the Exchange believes that The Exchange’s proposal to amend
system, and, in general to protect adding references to FINRA within the the definition of Interested Staff will
investors and the public interest. In 8000 and 9000 BX Series rules as conform BX’s definition to Phlx’s
addition, the Exchange believes that the described in this proposal brings greater definition, except insofar as BX’s
proposed rule changes [sic] further the transparency to its rules and clarifies proposal omits references to FINRA’s
objectives of Section 6(b)(7) of the Act,23 the process as it exists today. Today, Department of Market Regulation for the
in particular, in that these changes FINRA is empowered to act on behalf of reasons set forth in footnote 6 above.
provide for fair procedures for the the Exchange.25 The Exchange believes that it is
disciplining of members and persons The Exchange believes that consistent with the Act because the
associated with members, the denial of harmonizing the rule text of the definition better defines who falls
membership to any person seeking investigative and adjudicatory processes within the category of Interested Staff
membership therein, the barring of any with those of Phlx will reduce the without substantively amending the
person from becoming associated with a burden on members and their associated definition.
member thereof, and the prohibition or persons as they only will need to be Finally, making technical
limitation by the Exchange of any familiar with a single rule set going amendments in BX Rules 8110, IM–
person with respect to access to services forward. Because the substance of the 8310–3, 9120, 9211, 9231, 9270, 9331,
offered by the Exchange or a member rules would remain unchanged, the 9522, 9523, 9552, 9553, 9554, 9555,
thereof. Exchange believes that the proposed 9556, 9558, and 9610 removes
In addition, the Exchange believes change would continue to provide fair impediments to and perfects the
that the proposed rule changes are procedures for the suspending and mechanism of a free and open market by
disciplining of members and associated removing confusion that may result
15 See BX Current Rules 8110 and 9120(f).
16 See
persons, the denial of membership to from having incorrect or incomplete
BX Current Rules 9558(a), 9558(a)(2), and
9610(a). any person seeking membership therein, material in the Exchange’s rulebook.
17 See BX Current Rules 9231(c) and 9331(a)(2). the barring of any person from becoming The Exchange believes that its
associated with a member thereof, and proposal furthers the objectives of
amozie on DSK3GDR082PROD with NOTICES1
18 See BX Current Rules IM–8310–3, 9211(a)(1)–
(2), and 9270(e)(2). the prohibition or limitation by the Section 6(b)(7) of the Act,26 in that it is
19 See BX Current Rules 9552(b), 9553(b), 9554(b),
Exchange of any person with respect to designed to provide a fair procedure for
9555(b), and 9556(e).
20 See BX Current Rules 9215(f), 9523(a)(4) and
access to services offered by the the disciplining of members and
9554(a). Exchange or a member thereof. persons associated with members, the
21 15 U.S.C. 78f(b). denial of membership to any person
22 15 U.S.C. 78f(b)(5). 24 15 U.S.C. 78f(b)(6).
23 15 U.S.C. 78f(b)(7). 25 See BX Current Rule 8001. 26 15 U.S.C. 78f(b)(7).
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![50726 Federal Register / Vol. 83, No. 195 / Tuesday, October 9, 2018 / Notices
seeking membership therein, the barring to Rule 19b–4(f)(6)(iii),31 the Paper Comments
of any person from becoming associated Commission may designate a shorter
with a member thereof, and the time if such action is consistent with the • Send paper comments in triplicate
prohibition or limitation by the protection of investors and the public to Secretary, Securities and Exchange
exchange of any person with respect to interest. The Exchange has asked the Commission, 100 F Street NE,
access to services offered by the Commission to waive the 30-day Washington, DC 20549–1090.
exchange or a member thereof. operative delay so the Exchange may All submissions should refer to File
Specifically, the Exchange believes that immediately amend its disciplinary Number SR–BX–2018–042. This file
the proposed investigatory and rules to conform to Phlx’s disciplinary number should be included on the
disciplinary process is consistent with process. The Exchange states that the subject line if email is used. To help the
Section 6(b)(7) of the Act 27 because it is proposed amendment to expand its Commission process and review your
based on the existing processes used by current jurisdiction will not apply
Phlx. comments more efficiently, please use
retroactively and any complaints not only one method. The Commission will
B. Self-Regulatory Organization’s filed within the existing two-year time
post all comments on the Commission’s
Statement on Burden on Competition period will be time-barred. The
internet website (http://www.sec.gov/
Exchange further states that its new
The Exchange does not believe that rules/sro.shtml). Copies of the
jurisdiction rule will only apply to
the proposed rule change will impose applicable members or associated submission, all subsequent
any burden on competition not persons who terminate their amendments, all written statements
necessary or appropriate in furtherance membership or association on October with respect to the proposed rule
of the purposes of the Act. The 15, 2018 or thereafter. The Commission change that are filed with the
proposed rule change is intended to believes that waiving the 30-day Commission, and all written
more clearly align the text of Phlx’s and operative delay is consistent with the communications relating to the
the Exchange’s rules. Specifically and as protection of investors and the public proposed rule change between the
described in detail above, the Exchange interest as it will allow BX to conform Commission and any person, other than
believes that this change will bring its disciplinary rules to those of Phlx. In those that may be withheld from the
efficiency and consistency to the addition, the proposal does not present public in accordance with the
investigative and adjudicatory any novel issues. Therefore, the provisions of 5 U.S.C. 552, will be
processes, thereby reducing the burden Commission hereby waives the available for website viewing and
on members and their associated operative delay and designates the printing in the Commission’s Public
persons who are also members of Phlx. proposal as operative upon filing.32 Reference Room, 100 F Street NE,
C. Self-Regulatory Organization’s At any time within 60 days of the Washington, DC 20549, on official
Statement on Comments on the filing of the proposed rule change, the business days between the hours of
Proposed Rule Change Received From Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the
Members, Participants, or Others temporarily suspend such rule change if filing also will be available for
No written comments were either it appears to the Commission that such inspection and copying at the principal
solicited or received. action is necessary or appropriate in the office of the Exchange. All comments
public interest, for the protection of received will be posted without change.
III. Date of Effectiveness of the investors, or otherwise in furtherance of Persons submitting comments are
Proposed Rule Change and Timing for the purposes of the Act. If the cautioned that we do not redact or edit
Commission Action Commission takes such action, the personal identifying information from
Because the foregoing proposed rule Commission shall institute proceedings comment submissions. You should
change does not: (i) Significantly affect to determine whether the proposed rule submit only information that you wish
the protection of investors or the public should be approved or disapproved. to make available publicly. All
interest; (ii) impose any significant submissions should refer to File
burden on competition; and (iii) become IV. Solicitation of Comments
Number SR–BX–2018–042 and should
operative for 30 days from the date on Interested persons are invited to be submitted on or before October 30,
which it was filed, or such shorter time submit written data, views, and 2018.
as the Commission may designate, it has arguments concerning the foregoing, For the Commission, by the Division of
become effective pursuant to Section including whether the proposed rule Trading and Markets, pursuant to delegated
19(b)(3)(A)(iii) of the Act 28 and change is consistent with the Act. authority.33
subparagraph (f)(6) of Rule 19b–4 Comments may be submitted by any of
thereunder.29 Eduardo A. Aleman,
the following methods:
A proposed rule change filed under Assistant Secretary.
Rule 19b–4(f)(6) 30 normally does not Electronic Comments [FR Doc. 2018–21906 Filed 10–5–18; 8:45 am]
become operative prior to 30 days after BILLING CODE 8011–01–P
the date of the filing. However, pursuant • Use the Commission’s internet
comment form (http://www.sec.gov/
27 Id.
rules/sro.shtml); or
28 15 U.S.C. 78s(b)(3)(A)(iii). • Send an email to rule-comments@
amozie on DSK3GDR082PROD with NOTICES1
29 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– sec.gov. Please include File Number SR–
4(f)(6) requires a self-regulatory organization to give BX–2018–042 on the subject line.
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule 31 17CFR 240.19b–4(f)(6)(iii).
change, or such shorter time as designated by the 32 Forpurposes only of waving the 30-day
Commission. The Exchange has satisfied this operative delay, the Commission has considered the
requirement. purposed rule’s impact on efficiency, competition,
30 17 CFR 240.19b–4(f)(6). and capital formation. See 15 U.S.C. 78c(f). 33 17 CFR 200.30–3(a)(12).
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Document Created: 2018-10-06 00:59:20
Document Modified: 2018-10-06 00:59:20
| 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 | 83 FR 50723 |
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