83 FR 51015 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 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 196 (October 10, 2018)

Page Range		51015-51020
FR Document		2018-21900
Federal Register, Volume 83 Issue 196 (Wednesday, October 10, 2018)
[Federal Register Volume 83, Number 196 (Wednesday, October 10, 2018)]
[Notices]
[Pages 51015-51020]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-21900]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84355; File No. SR-NASDAQ-2018-066]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
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 24, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to align its existing investigatory and 
disciplinary processes and related rules with the investigatory and 
disciplinary processes and related rules of Nasdaq PHLX LLC (``Phlx'') 
[sic]
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.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.

[[Page 51016]]

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

1. Purpose
    Nasdaq 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. 
Nasdaq 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 BX, 
Inc. (``BX'') and Nasdaq.\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 Nasdaq Rules in order to conform its rules to those of 
Phlx 8000 and 9000 Series rules in all respects.\4\
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    \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.
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Definition of Nasdaq Regulation
    The Exchange proposes to revise the definition of Nasdaq Current 
Rule 9120(w) (``Nasdaq Regulation'') 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 Department of 
Enforcement.
    Similarly, the Exchange proposes to add references to the ``Nasdaq 
Regulation Department'' in Nasdaq 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 Nasdaq Rule 9400 series,\5\ and to 
add references to ``FINRA'' in Nasdaq Current Rule 9120(aa)(3) to 
clarify that FINRA falls under the definition of ``Party'' as used in 
the Rule 9550 series. In addition, the Exchange is adding references to 
the Nasdaq Regulation Department throughout the Nasdaq Rule 8000 and 
9000 series.\6\ These amendments will conform the text of Nasdaq 8000 
and 9000 rules with those of Phlx.\7\
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    \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 this 
department in Rule 9400 Series is appropriate because it may be 
involved in the initiation of such a matter for Nasdaq 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 Nasdaq Current Rules 8001, 8210, 8211, IM-8310-3, 9001, 
9120, 9131, 9133, 9143, 9146, 9211, 9212, 9213, 9215, 9216, 9251, 
9252, 9253, 9264, 9269, 9270, 9311, 9400, 9522, 9523, 9524, 9552, 
9553, 9554, 9555, 9556, 9557, 9558, 9559, 9610, 9630, 9810, 9820, 
9830, and 9840.
    \7\ The Exchange is also amending Current Nasdaq 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).
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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\
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    \8\ See Nasdaq Current Rule 8001 (``Nasdaq and FINRA are parties 
to the Regulatory Contract pursuant to which FINRA has agreed to 
perform certain functions described in these rules on behalf of 
Nasdaq. Nasdaq rules that refer to Nasdaq Regulation, Nasdaq 
Regulation staff, Nasdaq staff, and Nasdaq departments should be 
understood as also referring to FINRA staff and FINRA departments 
acting on behalf of Nasdaq pursuant to the Regulatory Contract.'').
    \9\ See Nasdaq 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.
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Jurisdiction
    The Exchange proposes to replace the current rule text related to 
jurisdiction of Nasdaq to initiate disciplinary actions with text 
substantially similar to the Phlx's jurisdiction rule text. Nasdaq 
Current 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 Nasdaq 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

[[Page 51017]]

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.
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    \10\ A resigned Nasdaq member or a Nasdaq member that has had 
its membership canceled or revoked shall continue to be subject to 
the filing of a complaint under the Nasdaq Rules based upon conduct 
that commenced prior to the effective date of the Nasdaq member's 
resignation from Nasdaq 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 a Nasdaq member has been 
terminated and who is no longer associated with any member of Nasdaq 
or a person whose registration has been revoked or canceled shall 
continue to be subject to the filing of a complaint under Nasdaq 
Rules based upon conduct which commenced prior to the termination, 
revocation, or cancellation or upon such person's failure, while 
subject to Nasdaq's jurisdiction as provided herein, to provide 
information requested by Nasdaq pursuant to the Nasdaq Rules, 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 Nasdaq Rules; 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 Nasdaq member.
    A person whose association with a member has been terminated and 
is no longer associated with any Nasdaq member shall continue to be 
subject to a proceeding to suspend, consistent with Article IX, 
Section 2 of the Nasdaq 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 Nasdaq Rules, 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.
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    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 
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 Nasdaq 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 Nasdaq 
definition better defines who falls within the category of Interested 
Staff without substantively amending the definition. At this time, 
Nasdaq's proposal mirrors the Phlx definition, except insofar as 
Nasdaq's proposal omits references to FINRA's Department of Market 
Regulation for the reasons set forth in footnote 5 above.\14\ The 
Exchange also notes that it is removing the words ``a district director 
or'' from Nasdaq 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 New Rules 9120(r)(1)(H), 
9120(r)(2)(E), 9120(r)(3)(E), and 9210(r)(4)(F).
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    \13\ As noted in n.5 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 Nasdaq 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 
Nasdaq 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 Nasdaq Rule 9000 Series.
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Special Panelist
    The Exchange is removing the definition of Special Panelist and re-
lettering the remainder of the Section. Phlx and BX do not use or 
otherwise define a Special Panelist. Nasdaq Current Rule 9120(u) 
defines a Special Panelist.\15\ The Exchange notes that related rules, 
Nasdaq Current Rules 9212(a)(2)(B) and 9231(b)(2), are not mandatory 
today and permit, but do not require, a Chief Hearing Officer to 
utilize a Special Panelist. Nasdaq has automated its system throughout 
the years so that most disciplinary actions today involve issues which 
pertain to quotations of securities, execution of transactions, 
reporting of transactions and trading practices, including rules, for 
example, that prohibit manipulation and insider trading, among other 
Rules as described in Nasdaq Current Rules 9120(u)(1)-(4). Further, 
FINRA has skilled panelists who, like the Special Panelists, are 
trained to handle matters involving the subject matters described in 
the Special Panelist definition. The Exchange believes that the notion 
of a Special Panelist is not necessary because today FINRA panelists 
are equipped to handle matters related to the subject matter of Nasdaq 
Current Rules 9120(u)(1)-(4) with respect to any type of hearing. The 
concept of a Special Panelist is not extraordinary, rather it is a 
presumed skill set for today's FINRA panelists. The Exchange therefore 
proposes to remove all references to the term ``Special Panelist'' from 
its rules because the reality of current panelist selection and 
disciplinary processes obviate the need for this rule.\16\
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    \15\ ``The term ``Special Panelist'' means an individual 
approved by the Nasdaq Board of Directors at least annually who may 
be selected by the Chief Hearing Officer to serve on a Hearing Panel 
pursuant to Rules 9212, 9221, 9231, and 9232. A Special Panelist may 
be drawn from FINRA's Market Regulation Committee, or any other 
source the Nasdaq Board of Directors deems appropriate given the 
responsibilities of Special Panelists. Special Panelists may 
participate in disciplinary proceedings in which issues arise 
regarding: (1) The quotations of securities; (2) the execution of 
transactions; (3) the reporting of transactions; and (4) trading 
practices, including rules prohibiting manipulation and insider 
trading, and those Rules designated as Trading Rules (Rule 3300 
Series), The Nasdaq Stock Market Rules (Rule 4000 Series), and Other 
Systems and Programs Rules (Rule 6000 Series).'' See Nasdaq Current 
Rule 9120(u).
    \16\ See Nasdaq Current Rules 9120(u), 9212(a)(2)(B), 
9221(a)(3), 9231(b)(2), 9231(c)(2), and 9232(a)-(c).
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Hearing Panelists
    The Exchange is removing a category of individuals that may serve 
on a Hearing Panel and re-lettering the remainder of the section.\17\ 
Phlx and BX rules do not include that category of individuals from 
among those whom the Chief Hearing Officer may select as a Panelist. 
The Exchange originally proposed Current Rule 9231(b)(1)(D) as a 
transitional rule when the Exchange sought to become registered as a 
national securities exchange. The Rule allowed ``persons who served on 
the NASD National Adjudicatory Council, or a disciplinary subcommittee 
thereof, prior to the date that Nasdaq commenced operating as a 
national securities exchange to sit on Hearing Panels.'' \18\ This 
enabled the Exchange to pull from a larger pool of candidates. The 
Exchange has now been a national securities exchange for nearly 12 
years, and believes that there is a sufficient pool of panelists from 
which the Chief Hearing Officer may now pull. This is evidenced by the 
Hearing Panels both Phlx and BX are able to assemble. Given the passage 
of time, the need for Nasdaq Current Rule 9231(b)(1)(D) no longer 
exists.
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    \17\ Specifically, the Exchange is removing Nasdaq Current Rule 
9231(b)(1)(D) (``served on the FINRA National Adjudicatory Council 
or on a disciplinary subcommittee of the FINRA National Adjudicatory 
Council prior to the date that Nasdaq commenced operating as a 
national securities exchange; or'').
    \18\ See Securities Exchange Act Release No. 34-53128 (January 
13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131) (Order 
granting application of NASDAQ Stock Market LLC for registration as 
a national securities exchange).
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    The Exchange is also clarifying Current Rule 9231(b)(1)(E) 
(Proposed New Rule 9231(b)(1)(D)) to more clearly state who may serve 
on a Hearing Panel.

[[Page 51018]]

Currently, BX and Phlx Rules 9231(b)(1)(D) indicate that the Chief 
Hearing Office may select as a Panelist a person who ``is a FINRA 
Panelist approved by the Nasdaq Board at least annually, including a 
person who previously served on the Market Regulation Committee \19\ 
not earlier than four years before the date the complaint was served 
upon the Respondent who was the first served Respondent in the 
disciplinary proceeding for which the Hearing Panel or the Extended 
Hearing Panel is being appointed, or from other sources the Board deems 
appropriate given the responsibilities of Panelists.'' The Exchange is 
adding the same text after ``is a FINRA Panelist approved by the Nasdaq 
Board at least annually'' in Proposed New Rule 9231(b)(1)(D) to make it 
clear that a person who served on the Market Regulation Committee is 
among those permitted to serve as a Panelist, provided that person 
meets the requirements of the rule.
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    \19\ The Exchange notes that while FINRA recently 
``consolidate[d] its existingenforcement [sic] functions into a 
unified Department of Enforcement'', see Securities Exchange Act 
Release No. 83781 (August 6, 2018), 83 FR 39802 (August 10, 2018), 
it did not eliminate the Market Regulation Committee. See, e.g., 
FINRA Code of Procedure Rule 9120(u).
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Other Non-Substantive and Technical Amendments
    The Exchange proposes to add a sentence within Nasdaq Current Rule 
9270(e)(2), similar to Phlx, to add more 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 current practice under the rule.
    The Exchange also proposes to make certain technical amendments 
throughout these rules to: (i) Add ``FINRA'' before ``Regulatory 
Contract''; \20\ (ii) amend ``NASD'' to the updated name ``FINRA''; 
\21\ (iii) replace ``Association'' with ``FINRA''; \22\ (iv) update 
certain incorrect cross-references to both FINRA and Nasdaq rule 
citations \23\; (v) add, remove, or modify rule text or punctuation in 
certain rules to conform the rule text of Nasdaq to Phlx ;\24\ (vi) 
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 ;\25\ (vii) relocate and/or renumber certain rules for 
ease of reference given other amendments described herein ;\26\ and 
(vii) correct a typographical error.\27\
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    \20\ See Nasdaq Current Rules 8001, 9001, 9120(f), and Proposed 
New Rules 9120(g), and 9120(u) and (v).
    \21\ See Nasdaq Current Rule 8110.
    \22\ See Nasdaq Current Rules 8210(a)(1), 9558(a)(2), and 
9610(a).
    \23\ See Nasdaq Current Rules 9231(c), 9268(e)(2), 9269(d)(2), 
9270(e), 9270(e)(2), 9270(f)(2), 9311(a), 9312(a)(3), 9331(a)(2), 
9351(a), 9524(a)(1), 9524(b)(3), and 9559 (q)(1).
    \24\ See Nasdaq Current Rules IM-8310-3, 9211(a)(1)-(2), 
9221(a)(1), 9231(b)(1), 9270(e)(2), 9270(f)(3), 9559(e), 9559(h)(2), 
and 9630(b).
    \25\ See Nasdaq Current Rules 9552(b), 9553(b), 9554(b), 
9555(b).
    \26\ See Proposed New Rule 9212(a)(2), which relocates language 
from Current Rule 9212(a)(2)(A); and Proposed New Rule 9231(c), 
which relocates language from Current Rule 9231(c)(1).
    \27\ See Nasdaq Current Rules 9215(f) and 9523(a)(4).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\28\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\29\ 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 further the objectives of Section 6(b)(7) of the Act,\30\ 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.
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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
    \30\ 15 U.S.C. 78f(b)(7).
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    In addition, the Exchange believes that the proposed rule changes 
are consistent with Section 6(b)(6) of the Act,\31\ 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.
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    \31\ 15 U.S.C. 78f(b)(6).
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    The Exchange believes that the proposed changes are consistent with 
these requirements because the changes further harmonize Nasdaq'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 Nasdaq 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 
Nasdaq Regulation Department within the 8000 and 9000 Nasdaq Series 
rules as described in this proposal clarifies the involvement that 
Nasdaq Regulation plays in the investigation and enforcement of 
Nasdaq's disciplinary rules. In addition, the Exchange believes that 
adding references to FINRA within the 8000 and 9000 Nasdaq 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.\32\
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    \32\ See Nasdaq Current Rule 8001.
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    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 Nasdaq 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

[[Page 51019]]

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 Nasdaq's definition to Phlx's definition, except insofar 
as Nasdaq's proposal omits references to FINRA's Department of Market 
Regulation for the reasons set forth in footnote 5 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.
    Removing the definition of Special Panelist is consistent with the 
Act because today Nasdaq Current Rules 9212(a)(2)(B) and 9231(b)(2) do 
not require a Chief Hearing Officer to utilize a Special Panelist. 
Further, FINRA has skilled panelists who, like the Special Panelists, 
are trained to handle matters involving the subject matters described 
in the Special Panelist definition, thus the reality of the panel 
selection and disciplinary processes today obviate the need for this 
rule.
    Removing from the pool of panelists persons that served on the 
FINRA National Adjudicatory Council or on a disciplinary subcommittee 
of the FINRA National Adjudicatory Council prior to the date that 
Nasdaq commenced operating as a national securities exchange is 
consistent with the act because there currently exists a sufficient 
number of persons from whom a Chief Hearing Officer may select as a 
Panelist. This change, in addition to adding clarifying text to Current 
Rule 9231(b)(1)(E) (Proposed New Rule 9231(b)(1)(D)) to more clearly 
state who may serve on a Hearing Panel, thereby aligning the text with 
the text of the parallel BX and Phlx Rules, is also consistent with the 
Act because it creates a uniform pool from which Panelists may be 
selected across the Nasdaq, BX, and Phlx, thus removing confusion that 
may result from having different pools of Panelists depending on the 
exchange.
    Finally, making technical amendments in Nasdaq Current Rules 8001, 
8110, 8210, IM-8310-3, 9001, 9120, 9211, 9212, 9221, 9231, 9268, 9269, 
9270, 9311, 9312, 9331, 9351, 9524, 9552, 9553, 9554, 9555, 9556, 9558, 
9559, 9610, and 9630 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,\33\ 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 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 \34\ because it is based on the existing 
processes used by Phlx.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(7).
    \34\ 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 \35\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\36\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \36\ 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)\37\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\38\ 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 Nasdaq 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.\39\
---------------------------------------------------------------------------

    \37\ 17 CFR 240.19b-4(f)(6).
    \38\ 17 CFR 240.19b-4(f)(6)(iii).
    \39\ 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

[[Page 51020]]

Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2018-066 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-NASDAQ-2018-066. 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 a.m. and 3 
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-NASDAQ-2018-066 and should be submitted 
on or before October 31, 2018.
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21900 Filed 10-9-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices 51015

19(b)(3)(A) of the Act 78 and Rule 19b– All submissions should refer to File SECURITIES AND EXCHANGE
4(f)(6) thereunder. Number SR–BX–2018–047. This file COMMISSION
A proposed rule change filed under number should be included on the
Rule 19b–4(f)(6) normally does not subject line if email is used. To help the [Release No. 34–84355; File No. SR–
become operative for 30 days from the Commission process and review your NASDAQ–2018–066]
date of filing. However, Rule 19b– comments more efficiently, please use
4(f)(6)(iii) 79 permits the Commission to only one method. The Commission will Self-Regulatory Organizations; The
designate a shorter time if such action post all comments on the Commission’s Nasdaq Stock Market LLC; Notice of
is consistent with the protection of Filing and Immediate Effectiveness of
internet website (http://www.sec.gov/
investors and the public interest. The Proposed Rule Change To Align
rules/sro.shtml). Copies of the
Exchange has asked the Commission to Existing Investigatory and Disciplinary
waive the 30-day operative delay so that submission, all subsequent
amendments, all written statements Processes and Related Rules With the
the proposal may become operative on Investigatory and Disciplinary
October 1, 2018 to coincide with the with respect to the proposed rule
change that are filed with the Processes and Related Rules of
effective date of FINRA’s proposed rule Nasdaq PHLX LLC
change on which the proposal is Commission, and all written
based.80 The waiver of the operative communications relating to the October 3, 2018.
delay would make the Exchange’s proposed rule change between the
Commission and any person, other than Pursuant to Section 19(b)(1) of the
qualification requirements consistent
with those of FINRA, as of October 1, those that may be withheld from the Securities Exchange Act of 1934
2018. Therefore, the Commission (‘‘Act’’),1 and Rule 19b–4 thereunder,2
public in accordance with the
believes that the waiver of the 30-day notice is hereby given that on
provisions of 5 U.S.C. 552, will be
operative delay is consistent with the September 24, 2018, The Nasdaq Stock
available for website viewing and
protection of investors and the public Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
printing in the Commission’s Public filed with the Securities and Exchange
interest and hereby waives the 30-day Reference Room, 100 F Street NE,
operative delay and designates the Commission (‘‘Commission’’) the
Washington, DC 20549, on official proposed rule change as described in
proposal operative on October 1, 2018.81 business days between the hours of
At any time within 60 days of the Items I and II, below, which Items have
10:00 a.m. and 3:00 p.m. Copies of the been prepared by the Exchange. The
filing of the proposed rule change, the
filing also will be available for Commission is publishing this notice to
Commission summarily may
inspection and copying at the principal solicit comments on the proposed rule
temporarily suspend such rule change if
office of the Exchange. All comments change from interested persons.
it appears to the Commission that such
action is necessary or appropriate in the received will be posted without change.
Persons submitting comments are I. Self-Regulatory Organization’s
public interest, for the protection of Statement of the Terms of Substance of
investors, or otherwise in furtherance of cautioned that we do not redact or edit
the Proposed Rule Change
the purposes of the Act. personal identifying information from
comment submissions. You should The Exchange proposes to align its
IV. Solicitation of Comments submit only information that you wish existing investigatory and disciplinary
Interested persons are invited to to make available publicly. All processes and related rules with the
submit written data, views, and submissions should refer to File investigatory and disciplinary processes
arguments concerning the foregoing, Number SR–BX–2018–047 and should and related rules of Nasdaq PHLX LLC
including whether the proposed rule be submitted on or before October 31, (‘‘Phlx’’) [sic]
change is consistent with the Act. 2018. The text of the proposed rule change
Comments may be submitted by any of
For the Commission, by the Division of is available on the Exchange’s website at
the following methods:
Trading and Markets, pursuant to delegated http://nasdaq.cchwallstreet.com, at the
Electronic Comments authority.82 principal office of the Exchange, and at
• Use the Commission’s internet Eduardo A. Aleman, the Commission’s Public Reference
comment form (http://www.sec.gov/ Assistant Secretary. Room.
rules/sro.shtml); or [FR Doc. 2018–21904 Filed 10–9–18; 8:45 am] II. Self-Regulatory Organization’s
• Send an email to rule-comments@ BILLING CODE 8011–01–P Statement of the Purpose of, and
sec.gov. Please include File Number SR– Statutory Basis for, the Proposed Rule
BX–2018–047 on the subject line. Change
Paper Comments
In its filing with the Commission, the
• Send paper comments in triplicate Exchange included statements
to Secretary, Securities and Exchange concerning the purpose of and basis for
Commission, 100 F Street NE, the proposed rule change and discussed
Washington, DC 20549–1090. any comments it received on the
proposed rule change. The text of these
78 15 U.S.C. 78s(b)(3)(A).
79 17
statements may be examined at the
CFR 240.19b–4(f)(6)(iii).
places specified in Item IV below. The
amozie on DSK3GDR082PROD with NOTICES1

80 See supra note 7. As discussed above, the

Exchange has stated that the new registration Exchange has prepared summaries, set
requirements for developers of algorithmic trading forth in sections A, B, and C below, of
strategies would become operative on April 1, 2019. the most significant aspects of such
81 For purposes only of waiving the 30-day
statements.
operative delay, the Commission has also
considered the proposed rule’s impact on
1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). 82 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.

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51016 Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices

A. Self-Regulatory Organization’s Regulation Department’’ in Nasdaq Current Rules 1012(h) 10 and 1031(f) 11
Statement of the Purpose of, and Current Rule 9120(aa) (definition of the permit a disciplinary action to be
Statutory Basis for, the Proposed Rule term ‘‘Party’’). The Exchange also brought within two years after the
Change proposes to add a definition for the term effective date of resignation,
‘‘Party’’ as used in the Nasdaq Rule 9400 cancellation, or revocation of a member
1. Purpose
series,5 and to add references to or associated person. The current
Nasdaq proposes to amend certain of ‘‘FINRA’’ in Nasdaq Current Rule Nasdaq provisions are more limited
its rules to align its existing than Phlx’s jurisdictional language. Phlx
9120(aa)(3) to clarify that FINRA falls
investigatory and disciplinary processes Rule 9110(d) does not contain a time
under the definition of ‘‘Party’’ as used
and related rules with the investigatory limit on when a matter may be brought
in the Rule 9550 series. In addition, the
and disciplinary processes and related against a member or associated person
rules of Phlx. Nasdaq notes that Phlx Exchange is adding references to the
following its termination or
amended its rules recently to adopt an Nasdaq Regulation Department deregistration, so long as the Exchange
investigatory and disciplinary process throughout the Nasdaq Rule 8000 and serves written notice within one year of
identical in all material respects to the 9000 series.6 These amendments will receipt by the Exchange of notice of
investigatory and disciplinary processes conform the text of Nasdaq 8000 and such termination or deregistration that
of Nasdaq BX, Inc. (‘‘BX’’) and Nasdaq.3 9000 rules with those of Phlx.7 the Exchange is making inquiry into a
The amendment also vested the Phlx Role of FINRA matter or matters which occurred prior
Regulation Department with the same to the termination of such person’s
authority proposed herein. The The Exchange proposes to add rule status as a member or associated
Exchange therefore proposes the below text to certain rules to clarify that person.12 The substantive amendment
changes to the 8000 and 9000 Series of FINRA may act on behalf of the
the Nasdaq Rules in order to conform its Exchange. Today, FINRA is empowered
10 A resigned Nasdaq member or a Nasdaq

rules to those of Phlx 8000 and 9000 member that has had its membership canceled or
to act on behalf of the Exchange.8 The revoked shall continue to be subject to the filing of
Series rules in all respects.4 revisions to these rules will therefore a complaint under the Nasdaq Rules based upon
clarify FINRA’s authority as it currently conduct that commenced prior to the effective date
Definition of Nasdaq Regulation of the Nasdaq member’s resignation from Nasdaq or
The Exchange proposes to revise the exists today.9 the cancellation or revocation of its membership.
Any such complaint, however, shall be filed within
definition of Nasdaq Current Rule Jurisdiction two years after the effective date of resignation,
9120(w) (‘‘Nasdaq Regulation’’) to cancellation, or revocation.
expressly include the Exchange’s The Exchange proposes to replace the 11 A person whose association with a Nasdaq

Enforcement Department. The current rule text related to jurisdiction member has been terminated and who is no longer
Exchange’s Enforcement Department is of Nasdaq to initiate disciplinary actions associated with any member of Nasdaq or a person
whose registration has been revoked or canceled
specifically charged with pursuing with text substantially similar to the shall continue to be subject to the filing of a
disciplinary action against members, Phlx’s jurisdiction rule text. Nasdaq complaint under Nasdaq Rules based upon conduct
persons associated with a member, and which commenced prior to the termination,
revocation, or cancellation or upon such person’s
persons subject to the Exchange’s 5 The Exchange notes that, like Phlx, it is likewise
failure, while subject to Nasdaq’s jurisdiction as
jurisdiction, in addition to FINRA’s including the Department of Enforcement as a provided herein, to provide information requested
Department of Enforcement. potential party to a matter under the Rule 9400 by Nasdaq pursuant to the Nasdaq Rules, but any
Series. The Exchange believes that including this
Similarly, the Exchange proposes to such complaint shall be filed within: (A) Two years
department in Rule 9400 Series is appropriate after the effective date of termination of registration
add references to the ‘‘Nasdaq because it may be involved in the initiation of such pursuant to subsection (c); provided, however, that
a matter for Nasdaq currently. The Exchange is also any amendment to a notice of termination filed
3 See Securities Exchange Act Release No. 82143 adding FINRA to other parts of Rule 9400 where it pursuant to paragraph (c)(2) that is filed within two
(November 22, 2017), 82 FR 56672 (November 29, is appropriate to show that FINRA may be the entity years of the original notice that discloses that such
2017) (Notice of Filing and Immediate Effectiveness that initiated an action under the rule. person may have engaged in conduct actionable
of Proposed Rule Change To Adopt Investigatory 6 See Nasdaq Current Rules 8001, 8210, 8211, IM– under any applicable statute, rule, or regulation
and Disciplinary Processes Substantially Similar to 8310–3, 9001, 9120, 9131, 9133, 9143, 9146, 9211, shall operate to recommence the running of the
Nasdaq BX, Inc. and The Nasdaq Stock Market LLC 9212, 9213, 9215, 9216, 9251, 9252, 9253, 9264, two-year period under this subsection; (B) two years
for Phlx, which, among other things, similarly 9269, 9270, 9311, 9400, 9522, 9523, 9524, 9552, after the effective date of revocation or cancellation
enabled Phlx to retain discretion to perform these 9553, 9554, 9555, 9556, 9557, 9558, 9559, 9610, of registration pursuant to the Nasdaq Rules; or (C)
functions). 9630, 9810, 9820, 9830, and 9840. in the case of an unregistered person, within two
4 The Exchange notes that the Financial Industry
7 The Exchange is also amending Current Nasdaq years after the date upon which such person ceased
Regulatory Authority (‘‘FINRA’’) amended its rules to be associated with the Nasdaq member.
Rule 9120(aa)(2), to align that rule text with
recently to reflect an internal reorganization of FINRA’s recent rule change. The term ‘‘Party’’ when A person whose association with a member has
FINRA’s Enforcement Operations. See Securities used in the Rule 9520 Series, now means FINRA’s been terminated and is no longer associated with
Exchange Act Release No. 83781 (August 6, 2018), any Nasdaq member shall continue to be subject to
Department of Enforcement, rather than Member
83 FR 39802 (August 10, 2018). In July 2017, FINRA a proceeding to suspend, consistent with Article IX,
Regulation. See Securities Exchange Act Release
announced its plan to consolidate its existing Section 2 of the Nasdaq By-Laws, his or her ability
No. 83781 (August 6, 2018), 83 FR 39802 (August
enforcement functions into a unified Department of to associate with a member based on such person’s
10, 2018). failure to comply with an arbitration award or a
Enforcement. FINRA’s recent rule change makes 8 See Nasdaq Current Rule 8001 (‘‘Nasdaq and
technical and other non-substantive changes to written and executed settlement agreement
FINRA Rules 9000 Series Code of Procedure (the FINRA are parties to the Regulatory Contract obtained in connection with an arbitration or
‘‘Code’’) to reflect the single Department of pursuant to which FINRA has agreed to perform mediation submitted for disposition pursuant to
Enforcement. The rule change removed references certain functions described in these rules on behalf Nasdaq Rules, provided that such proceeding is
to the Market Regulation department, its head and of Nasdaq. Nasdaq rules that refer to Nasdaq instituted within two years after the date of entry
employees from the Code where those references Regulation, Nasdaq Regulation staff, Nasdaq staff, of such award or settlement.
amozie on DSK3GDR082PROD with NOTICES1

reflect the previously separate Market Regulation and Nasdaq departments should be understood as 12 Any member or any partner, officer, director or

enforcement function. In light of FINRA’s also referring to FINRA staff and FINRA person employed by or associated with any member
reorganization, the Exchange is likewise removing departments acting on behalf of Nasdaq pursuant to (the Respondent) who is alleged to have violated or
references to the Market Regulation department, its the Regulatory Contract.’’). aided and abetted a violation of the Securities
head and employees from the Code, and re-lettering 9 See Nasdaq Current Rules 9400, 9522, 9552, Exchange Act of 1934 (Exchange Act), the rules and
the remainder of those sections where such re- 9553, 9554, 9555, 9556, 9557, and 9558. The regulations thereunder, the By-Laws and Rules of
lettering is necessary (i.e. Rule 9120). Phlx will also Exchange notes that FINRA currently performs the the Exchange or any interpretation thereof, and the
submit a similar rule filing to remove those functions described in these rules. The proposed Rules, Regulations, resolutions and stated policies
references in due course. changes further clarify that in the rule text. of the Board of Directors or any Committee of the

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51018 Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices

Currently, BX and Phlx Rules to conform the rule text of Nasdaq to further harmonize Nasdaq’s
9231(b)(1)(D) indicate that the Chief Phlx ;24 (vi) include the phrase ‘‘or investigative and adjudicatory processes
Hearing Office may select as a Panelist person’’ in various places throughout with similar processes used by Phlx.
a person who ‘‘is a FINRA Panelist the rule to make it clear that inclusion The new processes are well-established
approved by the Nasdaq Board at least of the person associated with a member as fair and designed to protect investors
annually, including a person who is applicable ;25 (vii) relocate and/or and the public interest. Because the
previously served on the Market renumber certain rules for ease of Exchange is conforming the Nasdaq rule
Regulation Committee 19 not earlier than reference given other amendments text to the Phlx rule text to eliminate
four years before the date the complaint described herein ;26 and (vii) correct a any differences (except for those noted
was served upon the Respondent who typographical error.27 herein), the Exchange believes that the
was the first served Respondent in the proposed changes should facilitate
2. Statutory Basis
disciplinary proceeding for which the prompt, appropriate, and effective
Hearing Panel or the Extended Hearing The Exchange believes that its discipline of members and their
Panel is being appointed, or from other proposal is consistent with Section 6(b) associated persons consistent with the
sources the Board deems appropriate of the Act,28 in general, and furthers the Act. The Exchange believes that adding
given the responsibilities of Panelists.’’ objectives of Section 6(b)(5) of the Act,29 references to the Nasdaq Regulation
The Exchange is adding the same text in particular, in that it is designed to Department within the 8000 and 9000
after ‘‘is a FINRA Panelist approved by promote just and equitable principles of Nasdaq Series rules as described in this
the Nasdaq Board at least annually’’ in trade, to remove impediments to and proposal clarifies the involvement that
Proposed New Rule 9231(b)(1)(D) to perfect the mechanism of a free and Nasdaq Regulation plays in the
make it clear that a person who served open market and a national market investigation and enforcement of
on the Market Regulation Committee is system, and, in general to protect Nasdaq’s disciplinary rules. In addition,
among those permitted to serve as a investors and the public interest. In the Exchange believes that adding
Panelist, provided that person meets the addition, the Exchange believes that the references to FINRA within the 8000
requirements of the rule. proposed rule changes further the and 9000 Nasdaq Series rules as
objectives of Section 6(b)(7) of the Act,30 described in this proposal brings greater
Other Non-Substantive and Technical in particular, in that these changes transparency to its rules and clarifies
Amendments provide for fair procedures for the the process as it exists today. Today,
The Exchange proposes to add a disciplining of members and persons FINRA is empowered to act on behalf of
sentence within Nasdaq Current Rule associated with members, the denial of the Exchange.32
9270(e)(2), similar to Phlx, to add more membership to any person seeking The Exchange believes that
specificity to this rule and make clear membership therein, the barring of any harmonizing the rule text of the
that the Office of Disciplinary Affairs person from becoming associated with a investigative and adjudicatory processes
may accept an offer of settlement and member thereof, and the prohibition or with those of Phlx will reduce the
order of acceptance or refer them to the limitation by the Exchange of any burden on members and their associated
Exchange Review Council. The person with respect to access to services persons as they only will need to be
Exchange notes that today the Office of offered by the Exchange or a member familiar with a single rule set going
Disciplinary Affairs may accept an offer thereof. forward. Because the substance of the
of settlement and order of acceptance or In addition, the Exchange believes rules would remain unchanged, the
refer them to the Exchange Review that the proposed rule changes are Exchange believes that the proposed
Council, so this language is intended to consistent with Section 6(b)(6) of the change would continue to provide fair
clarify current practice under the rule. Act,31 which requires the rules of an procedures for the suspending and
The Exchange also proposes to make exchange provide that its members be disciplining of members and associated
certain technical amendments appropriately disciplined for violations persons, the denial of membership to
throughout these rules to: (i) Add of the Act as well as the rules and any person seeking membership therein,
‘‘FINRA’’ before ‘‘Regulatory regulations thereunder, or the rules of the barring of any person from becoming
Contract’’; 20 (ii) amend ‘‘NASD’’ to the the Exchange, by expulsion, suspension, associated with a member thereof, and
updated name ‘‘FINRA’’; 21 (iii) replace limitation of activities, functions, and the prohibition or limitation by the
‘‘Association’’ with ‘‘FINRA’’; 22 (iv) operations, fine, censure, being Exchange of any person with respect to
update certain incorrect cross-references suspended or barred from being access to services offered by the
to both FINRA and Nasdaq rule associated with a member, or any other Exchange or a member thereof.
citations 23; (v) add, remove, or modify fitting sanction. The Exchange’s proposal to replace
rule text or punctuation in certain rules The Exchange believes that the the current rule text related to
proposed changes are consistent with jurisdiction of Nasdaq to initiate
19 The Exchange notes that while FINRA recently
these requirements because the changes disciplinary actions with text
‘‘consolidate[d] its existingenforcement [sic] substantially similar to the Phlx’s
functions into a unified Department of
Enforcement’’, see Securities Exchange Act Release
24 See Nasdaq Current Rules IM–8310–3, jurisdiction rule text will permit the
No. 83781 (August 6, 2018), 83 FR 39802 (August 9211(a)(1)–(2), 9221(a)(1), 9231(b)(1), 9270(e)(2), Exchange to initiate a disciplinary
9270(f)(3), 9559(e), 9559(h)(2), and 9630(b).
10, 2018), it did not eliminate the Market
25 See Nasdaq Current Rules 9552(b), 9553(b),
action beyond two years after the
Regulation Committee. See, e.g., FINRA Code of effective date of the member’s or
Procedure Rule 9120(u). 9554(b), 9555(b).
20 See Nasdaq Current Rules 8001, 9001, 9120(f), 26 See Proposed New Rule 9212(a)(2), which associated person’s termination with the
relocates language from Current Rule 9212(a)(2)(A); Exchange. This provision would not
amozie on DSK3GDR082PROD with NOTICES1

and Proposed New Rules 9120(g), and 9120(u) and
(v). and Proposed New Rule 9231(c), which relocates apply retroactively, but would permit
language from Current Rule 9231(c)(1).
21 See Nasdaq Current Rule 8110.
27 See Nasdaq Current Rules 9215(f) and
the Exchange to bring actions after the
22 See Nasdaq Current Rules 8210(a)(1),
9523(a)(4). effective date of termination, so long as
9558(a)(2), and 9610(a).
23 See Nasdaq Current Rules 9231(c), 9268(e)(2),
28 15 U.S.C. 78f(b). the Exchange serves written notice
9269(d)(2), 9270(e), 9270(e)(2), 9270(f)(2), 9311(a),
29 15 U.S.C. 78f(b)(5). within one year of receipt by the
30 15 U.S.C. 78f(b)(7).
9312(a)(3), 9331(a)(2), 9351(a), 9524(a)(1),
9524(b)(3), and 9559 (q)(1). 31 15 U.S.C. 78f(b)(6). 32 See Nasdaq Current Rule 8001.

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51020 Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices

Commission shall institute proceedings For the Commission, by the Division of of the most significant parts of such
to determine whether the proposed rule Trading and Markets, pursuant to delegated statements.
should be approved or disapproved. authority.40
Eduardo A. Aleman, A. Self-Regulatory Organization’s
IV. Solicitation of Comments Assistant Secretary.
Statement of the Purpose of, and the
Interested persons are invited to Statutory Basis for, the Proposed Rule
[FR Doc. 2018–21900 Filed 10–9–18; 8:45 am]
submit written data, views, and Change
BILLING CODE 8011–01–P
arguments concerning the foregoing, 1. Purpose
including whether the proposed rule
The Exchange proposes to amend
change is consistent with the Act. SECURITIES AND EXCHANGE Rule 7.14, Clearance and Settlement, to
Comments may be submitted by any of COMMISSION remove language that was inadvertently
the following methods:
included when the rule was first
Electronic Comments [Release No. 34–84349; File No. SR–NYSE– adopted and that is inconsistent with
2018–42] the Exchange’s Price List. The Exchange
• Use the Commission’s internet
comment form (http://www.sec.gov/ adopted Rule 7.14 as part of a proposed
Self-Regulatory Organizations; New rule change to adopt rules for trading
rules/sro.shtml); or York Stock Exchange LLC; Notice of
• Send an email to rule-comments@ UTP securities on Pillar, the Exchange’s
Filing and Immediate Effectiveness of new trading technology platform.4 Rule
sec.gov. Please include File Number SR– Proposed Rule Change To Amend Rule
NASDAQ–2018–066 on the subject line. 7.14 was based on similar rules of its
7.14, Clearance and Settlement affiliate, NYSE Arca, Inc. (‘‘NYSE
Paper Comments Arca’’) Rule 7.14–E and adopted by the
October 3, 2018.
• Send paper comments in triplicate Pursuant to Section 19(b)(1) 1 of the Exchange without any substantive
to Secretary, Securities and Exchange Securities Exchange Act of 1934 differences.5 Rule 7.14 applies only to
Commission, 100 F Street NE, (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 trading in UTP Securities. Paragraph (c)
Washington, DC 20549–1090. notice is hereby given that on of Rule 7.14 states that ‘‘[e]ach clearing
All submissions should refer to File September 20, 2018, New York Stock firm must be admitted to the Exchange
Number SR–NASDAQ–2018–066. This Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) as a member organization by meeting
file number should be included on the filed with the Securities and Exchange the qualification requirements set forth
subject line if email is used. To help the in Rule 2.’’ Paragraph (c) of Rule 7.14
Commission (‘‘Commission’’) the
Commission process and review your also includes language that exempts
proposed rule change as described in
comments more efficiently, please use clearing firms from paying the regular
Items I, II, and III below, which Items
only one method. The Commission will member organization fee 6 where that
have been prepared by the self-
post all comments on the Commission’s clearing firm became a member
regulatory organization. The
internet website (http://www.sec.gov/ organization for the sole purpose of
Commission is publishing this notice to
rules/sro.shtml). Copies of the acting as a clearing firm on the
solicit comments on the proposed rule
submission, all subsequent Exchange. This language was
change from interested persons.
amendments, all written statements inadvertently included when Rule 7.14
with respect to the proposed rule I. Self-Regulatory Organization’s was adopted and is inconsistent with
change that are filed with the Statement of the Terms of Substance of the Exchange’s Price List, which does
Commission, and all written the Proposed Rule Change not include language exempting clearing
communications relating to the only member organizations from the
The Exchange proposes to amend
proposed rule change between the fee’s application.7 The Exchange notes
Rule 7.14, Clearance and Settlement, to
Commission and any person, other than that no such exemption exists in the
remove language that is inconsistent
those that may be withheld from the Exchange’s rule governing the trading of
with the Exchange’s Price List. The
public in accordance with the NYSE-listed securities. Therefore, the
proposed rule change is available on the
provisions of 5 U.S.C. 552, will be Exchange proposes to remove the
Exchange’s website at www.nyse.com, at
available for website viewing and following phrase from the first sentence
the principal office of the Exchange, and
printing in the Commission’s Public of Exchange Rule 7.14(c): ‘‘provided,
at the Commission’s Public Reference however, if the clearing firm has become
Reference Room, 100 F Street NE, Room.
Washington, DC 20549, on official a member organization for the sole
business days between the hours of 10 II. Self-Regulatory Organization’s purpose of acting as a clearing firm on
a.m. and 3 p.m. Copies of the filing also Statement of the Purpose of, and the Exchange, such clearing firm need
will be available for inspection and Statutory Basis for, the Proposed Rule
copying at the principal office of the Change 4 See Securities Exchange Act Release Nos. 76803;

(December 30, 2015), 81 FR 536 (January 6, 2016)
Exchange. All comments received will In its filing with the Commission, the (SR–NYSE–2015–67); and 81225 (July 27, 2017), 82
be posted without change. Persons self-regulatory organization included FR 36033 (August 2, 2017) (SR–NYSE–2017–35).
5 Id.
submitting comments are cautioned that statements concerning the purpose of, 6 The ‘‘regular membership organization fee’’
we do not redact or edit personal and basis for, the proposed rule change referred to in Exchange Rule 7.14(c) is referred to
identifying information from comment and discussed any comments it received as a Trading Licenses fee in the Exchange’s Price
submissions. You should submit only on the proposed rule change. The text List.
7 In accordance with the Price list, the Exchange
information that you wish to make of those statements may be examined at
amozie on DSK3GDR082PROD with NOTICES1

charges all member organizations a Trading License
available publicly. All submissions the places specified in Item IV below. fee on an annual basis. All member organizations
should refer to File Number SR– The Exchange has prepared summaries, with 10 or more trading licenses are charged a fee
NASDAQ–2018–066 and should be set forth in sections A, B, and C below, or $50,000 for the first trading license held by the
submitted on or before October 31, member organization unless they qualify for a
reduced rate. See the Exchange’s Price List on pages
2018. 1 15 U.S.C. 78s(b)(1). 33–34 available at https://www.nyse.com/
2 15 U.S.C. 78a. publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf
40 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4. (dated September 4, 2018).

VerDate Sep<11>2014 21:20 Oct 09, 2018 Jkt 247001 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 E:\FR\FM\10OCN1.SGM 10OCN1
Document Created: 2018-10-10 17:36:56
Document Modified: 2018-10-10 17:36:56
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 51015