Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Chicago Board Options Exchange, Incorporated and the National Association of Securities Dealers, Inc., 19556-19560 [E7-7321]
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Federal Register / Vol. 72, No. 74 / Wednesday, April 18, 2007 / Notices
Charles.Mierzwa@RRB.GOV. Comments
regarding the information collection
should be addressed to Ronald J.
Hodapp, Railroad Retirement Board, 844
North Rush Street, Chicago, Illinois
60611–2092 or send an e-mail to
Ronald.Hodapp@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Clearance Officer.
[FR Doc. E7–7303 Filed 4–17–07; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55612; File No. 4–536]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing of Proposed Plan for
the Allocation of Regulatory
Responsibilities Between the Chicago
Board Options Exchange, Incorporated
and the National Association of
Securities Dealers, Inc.
April 10, 2007.
Pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 17d–2 thereunder,2
notice is hereby given that on April 5,
2007, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’) and
the National Association of Securities
Dealers, Inc. (‘‘NASD’’) (together with
the CBOE, the ‘‘Parties’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a plan for the
allocation of regulatory responsibilities
with respect to the CBOE Stock
Exchange, LLC (‘‘CBSX’’), dated April 4,
2007 (‘‘17d–2 Plan’’). The Commission
is publishing this notice to solicit
comments on the 17d–2 Plan from
interested persons.
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I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section 17(d)
or Section 19(g)(2) of the Act.4 Without
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
4 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
respectively.
2 17
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this relief, the statutory obligation of
each individual SRO could result in a
pattern of multiple examinations of
broker-dealers that maintain
memberships in more than one SRO
(‘‘common members’’). Such regulatory
duplication would add unnecessary
expenses for common members and
their SROs.
Section 17(d)(1) of the Act 5 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.6 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.7
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.8 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
member compliance with financial
responsibility requirements. Rule 17d–1
does not relieve an SRO from its
obligation to examine a common
member for compliance with its own
rules and provisions of the federal
securities laws governing matters other
than financial responsibility, including
sales practices and trading activities and
practices.
To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17d–2 under the Act.9
Rule 17d–2 permits SROs to propose
joint plans for the allocation of
regulatory responsibilities with respect
to their common members. Under
paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
5 15
U.S.C. 78q(d)(1).
Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
7 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
8 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
9 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
6 See
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effective if, after providing for
appropriate notice and comment, it
determines that the plan is necessary or
appropriate in the public interest and
for the protection of investors; to foster
cooperation and coordination among the
SROs; to remove impediments to, and
foster the development of, a national
market system and a national clearance
and settlement system; and is in
conformity with the factors set forth in
Section 17(d) of the Act. Commission
approval of a plan filed pursuant to Rule
17d–2 relieves an SRO of those
regulatory responsibilities allocated by
the plan to another SRO.
II. Proposed Plan
The Commission recently approved
proposed rule changes submitted by
CBOE to establish the CBSX as a facility
of CBOE.10 CBSX is a fully automated
marketplace for trading of non-option
securities by CBOE members.
Pursuant to the proposed 17d–2 Plan,
NASD would assume certain
examination and enforcement
responsibilities for common members
with respect to certain applicable laws,
rules, and regulations. The proposed
17d–2 Plan is intended to reduce
regulatory duplication, with respect to
CBSX, for firms that are common
members of both CBOE and NASD.11
The text of the plan delineates
regulatory responsibilities with respect
to the Parties, including responsibility
for CBOE rules applicable to the CBSX.
Included in the proposed plan is an
exhibit (the ‘‘CBOE Certification of
Common Rules,’’ referred to herein as
the ‘‘Certification’’) that lists every
CBOE rule, and the federal securities
laws, rules, and regulations thereunder,
for which NASD would bear
responsibility under the plan for
overseeing and enforcing with respect to
common members.
In particular, under the 17d–2 Plan,
NASD would assume examination and
enforcement responsibility relating to
compliance by dual members and
persons associated therewith with the
rules of CBOE that are substantially
similar to the applicable rules of NASD
10 Accordingly, CBOE serves as CBSX’s selfregulatory organization and has regulatory
responsibility for the activities of CBSX. See
Securities Exchange Act Release Nos. 55326
(February 21, 2007), 72 FR 8816 (February 27, 2007)
(SR–CBOE–2006–106) (relating to a permit program
for CBSX); 55389 (March 2, 2007), 72 FR 10575
(March 8, 2007) (SR–CBOE–2006–110) (relating to
governance structure of CBSX); and 55392 (March
2, 2007), 72 FR 10572 (March 8, 2007) (SR–CBOE–
2006–112) (relating to trading rules for CBSX).
11 The proposed 17d–2 Plan refers to these
common members as ‘‘Dual Members.’’ See
Paragraph 1(c) of the proposed 17d–2 Plan.
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(‘‘Common Rules’’),12 as well as any
provisions of the federal securities laws
and the rules and regulations
thereunder delineated in the
Certification.13 Under the plan, CBOE
would retain full responsibility for
surveillance and enforcement with
respect to trading activities or practices
involving CBOE’s own marketplace,
including, without limitation, CBOE’s
rules relating to the rights and
obligations of market makers;
registration pursuant to its unique rules
(i.e., non-Common Rules); its duties as
a DEA pursuant to Rule 17d–1 under the
Act; and any rules that are not Common
Rules.
The text of the 17d–2 Plan is as
follows:
Agreement Between NASD and Chicago
Board Options Exchange, Incorporated
Pursuant to Rule 17d–2 Under the
Securities Exchange Act of 1934
This Agreement, by and between the
National Association of Securities
Dealers, Inc. (‘‘NASD’’) and the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’), is made this 4th day of April,
2007 (the ‘‘Agreement’’), pursuant to
section 17(d) of the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’) and
rule 17d–2 thereunder which permits
agreements between self-regulatory
organizations to allocate regulatory
responsibility to eliminate regulatory
duplication. NASD and CBOE may be
referred to individually as a ‘‘party’’ and
together as the ‘‘parties.’’
Whereas, NASD and CBOE desire to
reduce duplication in the examination
of their Dual Members (as defined
herein) and in the filing and processing
of certain registration and membership
records as it relates to the CBOE Stock
Exchange, LLC; and
Whereas, NASD and CBOE desire to
execute an agreement covering such
subjects pursuant to the provisions of
Rule 17d–2 under the Exchange Act and
to file such agreement with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’) for its
approval.
Now, therefore, in consideration of
the mutual covenants contained
hereinafter, NASD and CBOE hereby
agree as follows:
1. Definitions. Unless otherwise
defined in this Agreement or the context
otherwise requires, the terms used in
this Agreement shall have the same
meaning as they have under the
Exchange Act and the rules and
regulations thereunder. As used in this
12 See paragraph 1(b) of the proposed 17d–2 plan
(defining Common Rules).
13 See paragraph 1(f) of the proposed 17d–2 plan.
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Agreement, the following terms shall
have the following meanings:
(a) ‘‘CBOE Rules’’ or ‘‘NASD Rules’’
shall mean the rules of the CBOE or
NASD, respectively, as the rules of an
exchange or association are defined in
Exchange Act section 3(a)(27).
(b) ‘‘Common Rules’’ shall mean the
CBOE Rules that are substantially
similar to the applicable NASD Rules in
that examination for compliance with
such rules would not require NASD to
develop one or more new examination
standards, modules, procedures, or
criteria in order to analyze the
application of the rule, or a Dual
Member’s activity, conduct, or output in
relation to such rule.
(c) ‘‘Dual Members’’ shall mean those
CBOE members that are also members of
NASD and the associated persons
therewith.
(d) ‘‘Effective Date’’ shall have the
meaning set forth in paragraph 14.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with the
NASD Code of Procedure (the Rule 9000
Series) and other applicable NASD
procedural rules, to determine whether
violations of pertinent laws, rules or
regulations have occurred, and if such
violations are deemed to have occurred,
the imposition of appropriate sanctions
as specified under the NASD’s Code of
Procedure and sanctions guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities
and Enforcement Responsibilities
relating to compliance by the Dual
Members with the Common Rules and
the provisions of the Exchange Act and
the rules and regulations thereunder,
and other applicable laws, rules and
regulations, each as set forth on Exhibit
1 attached hereto.
2. Regulatory and Enforcement
Responsibilities. NASD shall assume
Regulatory Responsibilities and
Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this
Agreement and made part hereof, CBOE
furnished NASD with a current list of
Common Rules and certified to NASD
that such rules are substantially similar
to the corresponding NASD rule (the
‘‘Certification’’). NASD hereby agrees
that the rules listed in the Certification
are Common Rules as defined in this
Agreement. Each year following the
Effective Date of this Agreement, or
more frequently if required by changes
in either the rules of CBOE or NASD,
CBOE shall submit an updated list of
Common Rules to NASD for review
which shall add CBOE rules not
included in the current list of Common
Rules that qualify as Common Rules as
defined in this Agreement; delete CBOE
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rules included in the current list of
Common Rules that no longer qualify as
Common Rules as defined in this
Agreement; and confirm that the
remaining rules on the current list of
Common Rules continue to be CBOE
rules that qualify as Common Rules as
defined in this Agreement. Within 30
days of receipt of such updated list,
NASD shall confirm in writing whether
the rules listed in any updated list are
Common Rules as defined in this
Agreement. Notwithstanding anything
herein to the contrary, it is explicitly
understood that the term ‘‘Regulatory
Responsibilities’’ does not include, and
CBOE shall retain full responsibility for
(unless otherwise addressed by separate
agreement or rule) the following:
(a) surveillance and enforcement with
respect to trading activities or practices
involving CBOE’s own marketplace,
including without limitation CBOE’s
rules relating to the rights and
obligations of market makers;
(b) registration pursuant to its
applicable rules of associated persons
(i.e., registration rules that are not
Common Rules);
(c) discharge of its duties and
obligations as a Designated Examining
Authority pursuant to Rule 17d-1 under
the Exchange Act; and
(d) any CBOE Rules that are not
Common Rules.
3. Dual Members. Prior to the
Effective Date, CBOE shall furnish
NASD with a current list of Dual
Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no
charge to CBOE by NASD for performing
the Regulatory Responsibilities and
Enforcement Responsibilities under this
Agreement except as hereinafter
provided. NASD shall provide CBOE
with ninety (90) days advance written
notice in the event NASD decides to
impose any charges to CBOE for
performing the Regulatory
Responsibilities under this Agreement.
If NASD determines to impose a charge,
CBOE shall have the right at the time of
the imposition of such charge to
terminate this Agreement; provided,
however, that NASD’s Regulatory
Responsibilities under this Agreement
shall continue until the Commission
approves the termination of this
Agreement.
5. Reassignment of Regulatory
Responsibilities. Notwithstanding any
provision hereof, this Agreement shall
be subject to any statute, or any rule or
order of the Commission, or industry
agreement, restructuring the regulatory
framework of the securities industry or
reassigning Regulatory Responsibilities
between self-regulatory organizations.
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To the extent such action is inconsistent
with this Agreement, such action shall
supersede the provisions hereof to the
extent necessary for them to be properly
effectuated and the provisions hereof in
that respect shall be null and void.
6. Notification of Violations. In the
event that NASD becomes aware of
apparent violations of any CBOE Rules,
which are not listed as Common Rules,
discovered pursuant to the performance
of the Regulatory Responsibilities
assumed hereunder, NASD shall notify
CBOE of those apparent violations for
such response as CBOE deems
appropriate. Apparent violations of all
other applicable rules, including
violations of the Common Rules, various
securities acts, and rules and regulations
thereunder, shall be processed by, and
enforcement proceedings in respect
thereto shall be conducted by NASD as
provided hereinbefore; provided,
however, that in the event a Dual
Member is the subject of an
investigation relating to a transaction on
the CBOE, CBOE may in its discretion
assume concurrent jurisdiction and
responsibility. Each party agrees to
make available promptly all files,
records and witnesses necessary to
assist the other in its investigation or
proceedings.
7. Continued Assistance. NASD shall
make available to CBOE all information
obtained by NASD in the performance
by it of the Regulatory Responsibilities
hereunder in respect to the Dual
Members subject to this Agreement. In
particular, and not in limitation of the
foregoing, NASD shall furnish CBOE
any information it obtains about Dual
Members which reflects adversely on
their financial condition. It is
understood that such information is of
an extremely sensitive nature and,
accordingly, CBOE acknowledges and
agrees to take all reasonable steps to
maintain its confidentiality. CBOE shall
make available to NASD any
information coming to its attention that
reflects adversely on the financial
condition of Dual Members or indicates
possible violations of applicable laws,
rules or regulations by such firms.
8. Dual Member Applications.
(a) Dual Members subject to this
Agreement shall be required to submit,
and NASD shall be responsible for
processing and acting upon all
applications submitted on behalf of
allied persons, partners, officers,
registered personnel and any other
person required to be approved by the
rules of both CBOE and NASD or
associated with Dual Members thereof.
Upon request, NASD shall advise CBOE
of any changes of allied members,
partners, officers, registered personnel
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and other persons required to be
approved by the rules of both CBOE and
NASD.
(b) Dual Members shall be required to
send to NASD all letters, termination
notices or other material respecting the
individuals listed in paragraph 8(a).
(c) When as a result of processing
such submissions NASD becomes aware
of a statutory disqualification as defined
in the Exchange Act with respect to a
Dual Member, NASD shall determine
pursuant to Sections 15A(g) and/or
Section 6(c) of the Exchange Act the
acceptability or continued applicability
of the person to whom such
disqualification applies and keep CBOE
advised of its actions in this regard for
such subsequent proceedings as CBOE
may initiate.
(d) Notwithstanding the foregoing,
NASD shall not review the membership
application, reports, filings, fingerprint
cards, notices, or other writings filed to
determine if such documentation
submitted by a broker or dealer, or a
person associated therewith or other
persons required to register or qualify by
examination meets the CBOE
requirements for general membership or
for specified categories of membership
or participation in the CBOE. NASD
shall not review applications or other
documentation filed to request a change
in the rights or status described in this
paragraph 8(d), including termination or
limitation on activities, of a member or
a participant of the CBOE, or a person
associated with, or requesting
association with, a member or
participant of the CBOE.
9. Branch Office Information. NASD
shall also be responsible for processing
and, if required, acting upon all requests
for the opening, address changes, and
terminations of branch offices by Dual
Members and any other applications
required of Dual Members with respect
to the Common Rules as they may be
amended from time to time. Upon
request, NASD shall advise CBOE of the
opening, address change and
termination of branch and main offices
of Dual Members and the names of such
branch office managers.
10. Customer Complaints. CBOE shall
forward to NASD copies of all customer
complaints involving Dual Members
received by CBOE relating to NASD’s
Regulatory Responsibilities under this
Agreement. It shall be NASD’s
responsibility to review and take
appropriate action in respect to such
complaints.
11. Advertising. NASD shall assume
responsibility to review the advertising
of Dual Members subject to the
Agreement, provided that such material
is filed with NASD in accordance with
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NASD’s filing procedures and is
accompanied with any applicable filing
fees set forth in NASD Rules. Such
review shall be made in accordance
with then applicable NASD rules and
interpretations. The advertising of Dual
Members shall be subject only to
compliance with appropriate NASD
rules and interpretations.
12. No Restrictions on Regulatory
Action. Nothing contained in this
Agreement shall restrict or in any way
encumber the right of either party to
conduct its own independent or
concurrent investigation, examination
or enforcement proceeding of or against
Dual Members, as either party, in its
sole discretion, shall deem appropriate
or necessary.
13. Termination. This Agreement may
be terminated by CBOE or NASD at any
time upon the approval of the
Commission after one (1) year’s written
notice to the other party, except as
provided in paragraph 4.
14. Effective Date. This Agreement
shall be effective upon approval of the
Commission.
15. Arbitration. In the event of a
dispute between the parties as to the
operation of this Agreement, CBOE and
NASD hereby agree that any such
dispute shall be settled by arbitration in
Washington, D.C. in accordance with
the rules of the American Arbitration
Association then in effect, or such other
procedures as the parties may mutually
agree upon. Judgment on the award
rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
16. Separate Agreement. This
Agreement is wholly separate from the
multiparty Agreement made pursuant to
Rule 17d-2 of the Exchange Act between
the American Stock Exchange LLC, the
Boston Stock Exchange, Inc., the
Chicago Board Options Exchange,
Incorporated, the International
Securities Exchange LLC, the National
Association of Securities Dealers, Inc.,
the New York Stock Exchange, LLC, the
NYSE Arca, Inc., and the Philadelphia
Stock Exchange, Inc. involving the
allocation of regulatory responsibilities
with respect to common members for
compliance with common rules relating
to the conduct by broker-dealers of
accounts for listed options or index
warrants entered into on December 1,
2006, and as may be amended from time
to time.
17. Notification of Members. CBOE
and NASD shall notify Dual Members of
this Agreement after the Effective Date
by means of a uniform joint notice.
18. Amendment. This Agreement may
be amended in writing duly approved
by each party. All such amendments
must be filed with and approved by the
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Commission before they become
effective.
19. Limitation of Liability. Neither
NASD nor CBOE nor any of their
respective directors, governors, officers
or employees shall be liable to the other
party to this Agreement for any liability,
loss or damage resulting from or
claimed to have resulted from any
delays, inaccuracies, errors or omissions
with respect to the provision of
Regulatory Responsibilities as provided
hereby or for the failure to provide any
such responsibility, except with respect
to such liability, loss or damages as
shall have been suffered by one or the
other of NASD or CBOE and caused by
the willful misconduct of the other
party or their respective directors,
governors, officers or employees. No
warranties, express or implied, are made
by NASD or CBOE with respect to any
of the responsibilities to be performed
by each of them hereunder.
20. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, NASD and CBOE join in
requesting the Commission, upon its
approval of this Agreement or any part
thereof, to relieve CBOE of any and all
responsibilities with respect to matters
allocated to NASD pursuant to this
Agreement; provided, however, that this
Agreement shall not be effective until
the Effective Date.
In witness whereof, each party has
executed or caused this Agreement to be
executed on its behalf by a duly
authorized officer as of the date first
written above.
CBOE rule(s)
4.18
4.20 Anti-Money Laundering Compliance Program ...............................
9.3 Registration and Termination of Representatives ...........................
9.3A Continuing Education For Registered Persons .............................
9.4(a) Other Affiliations of Registered Associated Persons ..................
9.12 Statements of Accounts to Customers†††† ..................................
9.13 Statement of Financial Condition to Customers ............................
9.16 Restrictions on Pledge and Lending of Customers’ Securities .....
9.18 Guarantees and Profit Sharing ......................................................
9.20 Transfer of Accounts ......................................................................
9.23 Customer Complaints†††††† ........................................................
9.24 Telephone Solicitation ....................................................................
9.25 Borrowing From or Lending to Customers ....................................
53.6(c) Duty to Know and Approve Customers .....................................
Branch Offices of Member Organizations .................................
53.6(e) Discretionary Accounts ..............................................................
53.6(f) Confirmation to Customers .........................................................
53.6(g) Communications to Customers .................................................
53.6(h)
National Association Of Securities
Dealers, Inc.
By lllllllllllllllll
Name:
Title:
Chicago Board Options Exchange,
Incorporated
By lllllllllllllllll
Name:
Title:
Exhibit 1
CBOE Certification of Common Rules
CBOE hereby certifies that the
requirements contained in the CBOE
Rules listed below are identical to, or
substantially similar to, the NASD or
SEC Rules identified.†
NASD or SEC rule(s)††
Prevention of the Misuse of Material, Nonpublic Information .......
53.6(d)
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Supervision of Accounts ............................................................
Section 15(f) of the Securities Exchange Act of 1934 (Exchange
Act).†††
3011 Anti-Money Laundering Compliance Program.
1031(a), (b) Registration Requirements 1140(a), (d) Electronic Filing
Rules, and NASD By-Laws, Art. V, Sections 2 and 3 Registered
Representatives and Associated Persons.
1120 Continuing Education Requirements.
3030 Outside Business Activities of an Associated Person.
2340 Customer Account Statements.
Exchange Act Rule 17a–5.
2330(a)–(d) Customers’ Securities or Funds.
2330(e) & (f) Customers’ Securities or Funds.†††††
11870 Customer Account Transfer Contracts.
3110(d) Books and Records.
2212 Telemarketing and 3110(g) Books and Records.
2370 Borrowing From or Lending to Customers.
2310 Recommendations to Customers (Suitability) and 3110(c) Books
and Records.
1021(a) Registration Requirements and IM–1000–4 Branch Offices and
Offices of Supervisory Jurisdiction.
2510 Discretionary Accounts.
2230 Confirmations and Exchange Act Rule 10b–10.†††††††
2210(b) and(d) Communications with the Public and IM–2210–1(6)
Guidelines to Ensure That Communications With the Public Are Not
Misleading.
3010(a), (b) Supervision and 3110(c) Books and Records.
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† To the extent that any CBOE Rule listed herein makes reference to options, such rule shall be read to apply to equity securities as provided
in CBOE Rule 53.6.
†† CBOE will be responsible for any significant differences between its rules and the comparable NASD rule identified.
††† NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement to have Form X–17A–5 filed with CBOE; responsibility for such requirement remains with CBOE.
†††† NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement that the statement have a legend requesting the
customer to advise the member of any material change in the customer’s investment objectives or financial situation; responsibility for such requirement remains with CBOE.
††††† The NASD Rule requires, among other things, prior written approval of the member employing the associated person in order for such
associated person to share in accounts of a customer, whereas the CBOE rule requires consent of the member carrying the account. To the extent that the employing member and carrying member are different firms, the NASD’s and CBOE’s rule differ, and NASD’s Regulatory Responsibility will not cover CBOE’s rule; responsibility for such requirement remains with CBOE.
†††††† NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement of what must be contained in the complaint file
or the timing during which the complaint must be sent to the central file by the branch office; responsibility for such requirement remains with
CBOE.
†††††††NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement to disclose on a confirmation whether a transaction was executed on the CBOE; responsibility for such requirement remains with CBOE.
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19560
*
*
Federal Register / Vol. 72, No. 74 / Wednesday, April 18, 2007 / Notices
*
*
*
III. Date of Effectiveness of the
Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the
Act 14 and Rule 17d–2 thereunder,15
after May 9, 2007, the Commission may,
by written notice, declare the plan
submitted by CBOE and NASD, File No.
4–536, to be effective if the Commission
finds that the plan is necessary or
appropriate in the public interest and
for the protection of investors, to foster
cooperation and coordination among
self-regulatory organizations, or to
remove impediments to and foster the
development of the national market
system and a national system for the
clearance and settlement of securities
transactions and in conformity with the
factors set forth in Section 17(d) of the
Act.
IV. Solicitation of Comments
In order to assist the Commission in
determining whether to approve
proposed 17d–2 Plan and to relieve
CBOE of the responsibilities which
would be assigned to NASD, interested
persons are invited to submit written
data, views, and arguments concerning
the foregoing. Comments may be
submitted by any of the following
methods:
pwalker on PROD1PC71 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number 4–536 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number 4–536. This file number should
be included on the subject line if e-mail
is used. To help the Commission
process and review your comments
more efficiently, please use only one
method. The Commission will post all
comments on the Commission’s Internet
Web site (https://www.sec.gov/rules/
other.shtml). Copies of the submission,
all subsequent amendments, all written
statements with respect to the proposed
plan that are filed with the Commission,
and all written communications relating
to the proposed plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of the plan also will be
available for inspection and copying at
the principal offices of the CBOE and
NASD. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number 4–536 and should be submitted
on or before May 9, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–7321 Filed 4–17–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55619; File No. SR–Amex–
2007–31]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change and
Amendment No. 1 Thereto Relating to
Transaction Charges for Equities,
ETFs, and Nasdaq UTP Securities
April 12, 2007.
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 March 30,
2007, the American Stock Exchange LLC
(‘‘Amex’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by Amex. On
April 10, 2007, the Exchange filed
Amendment No. 1 to the proposed rule
change. The Commission is publishing
this notice, as amended, to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to revise the
equities, Exchange Traded Funds and
Trust Issued Receipts (‘‘ETFs’’), and
Nasdaq UTP Fee Schedules to eliminate
16 17
14 15
15 17
CFR 200.30–3(a)(34).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
U.S.C. 78q(d)(1).
CFR 240.17d–2.
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the five percent discount applied to
each firm’s total charges for customer
orders in equities, ETFs, and Nasdaq
UTP securities. The text of the proposed
rule change is available on Amex’s Web
site at https://www.amex.com, at Amex,
and in 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
The Exchange recently revised the
transaction charges for its members and
member organizations largely relating to
the Exchange’s new hybrid market
trading platform (known as AEMI), the
implementation of Regulation NMS, and
changes in the competitive landscape
for equities and ETFs.3 These new
transaction charges became effective on
February 22, 2007. As part of the new
transaction charges, the Exchange
provided that a five percent discount
will be applied to each firm’s total
charges for customer orders in equities,
ETFs, and Nasdaq UTP securities. The
five percent discount does not apply to
charges for specialists and registered
traders. The Exchange is now proposing
to eliminate the five percent discount in
all product lines. The Exchange will
eliminate the five percent discount
effective April 1, 2007.
2. Statutory Basis
The proposed fee change is consistent
with Section 6(b)(4) of the Act 4
regarding the equitable allocation of
reasonable dues, fees, and other charges
among exchange members and other
persons using exchange facilities.
3 See Securities Exchange Act Release No. 55458
(March 13, 2007), 72 FR 13320 (March 21, 2007)
(SR–Amex–2007–23).
4 15 U.S.C. 78f(b)(4).
E:\FR\FM\18APN1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 74 (Wednesday, April 18, 2007)]
[Notices]
[Pages 19556-19560]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7321]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55612; File No. 4-536]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the Chicago Board Options Exchange,
Incorporated and the National Association of Securities Dealers, Inc.
April 10, 2007.
Pursuant to Section 17(d) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that
on April 5, 2007, the Chicago Board Options Exchange, Incorporated
(``CBOE'') and the National Association of Securities Dealers, Inc.
(``NASD'') (together with the CBOE, the ``Parties'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') a plan
for the allocation of regulatory responsibilities with respect to the
CBOE Stock Exchange, LLC (``CBSX''), dated April 4, 2007 (``17d-2
Plan''). The Commission is publishing this notice to solicit comments
on the 17d-2 Plan from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) or Section 19(g)(2) of the Act.\4\ Without
this relief, the statutory obligation of each individual SRO could
result in a pattern of multiple examinations of broker-dealers that
maintain memberships in more than one SRO (``common members''). Such
regulatory duplication would add unnecessary expenses for common
members and their SROs.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\6\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q(d)(1).
\6\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\8\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
---------------------------------------------------------------------------
\7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\8\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------
To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\9\ Rule 17d-2 permits SROs
to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and comment, it determines that
the plan is necessary or appropriate in the public interest and for the
protection of investors; to foster cooperation and coordination among
the SROs; to remove impediments to, and foster the development of, a
national market system and a national clearance and settlement system;
and is in conformity with the factors set forth in Section 17(d) of the
Act. Commission approval of a plan filed pursuant to Rule 17d-2
relieves an SRO of those regulatory responsibilities allocated by the
plan to another SRO.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. Proposed Plan
The Commission recently approved proposed rule changes submitted by
CBOE to establish the CBSX as a facility of CBOE.\10\ CBSX is a fully
automated marketplace for trading of non-option securities by CBOE
members.
---------------------------------------------------------------------------
\10\ Accordingly, CBOE serves as CBSX's self-regulatory
organization and has regulatory responsibility for the activities of
CBSX. See Securities Exchange Act Release Nos. 55326 (February 21,
2007), 72 FR 8816 (February 27, 2007) (SR-CBOE-2006-106) (relating
to a permit program for CBSX); 55389 (March 2, 2007), 72 FR 10575
(March 8, 2007) (SR-CBOE-2006-110) (relating to governance structure
of CBSX); and 55392 (March 2, 2007), 72 FR 10572 (March 8, 2007)
(SR-CBOE-2006-112) (relating to trading rules for CBSX).
---------------------------------------------------------------------------
Pursuant to the proposed 17d-2 Plan, NASD would assume certain
examination and enforcement responsibilities for common members with
respect to certain applicable laws, rules, and regulations. The
proposed 17d-2 Plan is intended to reduce regulatory duplication, with
respect to CBSX, for firms that are common members of both CBOE and
NASD.\11\
---------------------------------------------------------------------------
\11\ The proposed 17d-2 Plan refers to these common members as
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
---------------------------------------------------------------------------
The text of the plan delineates regulatory responsibilities with
respect to the Parties, including responsibility for CBOE rules
applicable to the CBSX. Included in the proposed plan is an exhibit
(the ``CBOE Certification of Common Rules,'' referred to herein as the
``Certification'') that lists every CBOE rule, and the federal
securities laws, rules, and regulations thereunder, for which NASD
would bear responsibility under the plan for overseeing and enforcing
with respect to common members.
In particular, under the 17d-2 Plan, NASD would assume examination
and enforcement responsibility relating to compliance by dual members
and persons associated therewith with the rules of CBOE that are
substantially similar to the applicable rules of NASD
[[Page 19557]]
(``Common Rules''),\12\ as well as any provisions of the federal
securities laws and the rules and regulations thereunder delineated in
the Certification.\13\ Under the plan, CBOE would retain full
responsibility for surveillance and enforcement with respect to trading
activities or practices involving CBOE's own marketplace, including,
without limitation, CBOE's rules relating to the rights and obligations
of market makers; registration pursuant to its unique rules (i.e., non-
Common Rules); its duties as a DEA pursuant to Rule 17d-1 under the
Act; and any rules that are not Common Rules.
---------------------------------------------------------------------------
\12\ See paragraph 1(b) of the proposed 17d-2 plan (defining
Common Rules).
\13\ See paragraph 1(f) of the proposed 17d-2 plan.
---------------------------------------------------------------------------
The text of the 17d-2 Plan is as follows:
Agreement Between NASD and Chicago Board Options Exchange, Incorporated
Pursuant to Rule 17d-2 Under the Securities Exchange Act of 1934
This Agreement, by and between the National Association of
Securities Dealers, Inc. (``NASD'') and the Chicago Board Options
Exchange, Incorporated (``CBOE''), is made this 4th day of April, 2007
(the ``Agreement''), pursuant to section 17(d) of the Securities
Exchange Act of 1934 (the ``Exchange Act'') and rule 17d-2 thereunder
which permits agreements between self-regulatory organizations to
allocate regulatory responsibility to eliminate regulatory duplication.
NASD and CBOE may be referred to individually as a ``party'' and
together as the ``parties.''
Whereas, NASD and CBOE desire to reduce duplication in the
examination of their Dual Members (as defined herein) and in the filing
and processing of certain registration and membership records as it
relates to the CBOE Stock Exchange, LLC; and
Whereas, NASD and CBOE desire to execute an agreement covering such
subjects pursuant to the provisions of Rule 17d-2 under the Exchange
Act and to file such agreement with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, NASD and CBOE hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or the
context otherwise requires, the terms used in this Agreement shall have
the same meaning as they have under the Exchange Act and the rules and
regulations thereunder. As used in this Agreement, the following terms
shall have the following meanings:
(a) ``CBOE Rules'' or ``NASD Rules'' shall mean the rules of the
CBOE or NASD, respectively, as the rules of an exchange or association
are defined in Exchange Act section 3(a)(27).
(b) ``Common Rules'' shall mean the CBOE Rules that are
substantially similar to the applicable NASD Rules in that examination
for compliance with such rules would not require NASD to develop one or
more new examination standards, modules, procedures, or criteria in
order to analyze the application of the rule, or a Dual Member's
activity, conduct, or output in relation to such rule.
(c) ``Dual Members'' shall mean those CBOE members that are also
members of NASD and the associated persons therewith.
(d) ``Effective Date'' shall have the meaning set forth in
paragraph 14.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with the NASD Code of Procedure
(the Rule 9000 Series) and other applicable NASD procedural rules, to
determine whether violations of pertinent laws, rules or regulations
have occurred, and if such violations are deemed to have occurred, the
imposition of appropriate sanctions as specified under the NASD's Code
of Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the Dual Members with the Common Rules and the provisions
of the Exchange Act and the rules and regulations thereunder, and other
applicable laws, rules and regulations, each as set forth on Exhibit 1
attached hereto.
2. Regulatory and Enforcement Responsibilities. NASD shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
CBOE furnished NASD with a current list of Common Rules and certified
to NASD that such rules are substantially similar to the corresponding
NASD rule (the ``Certification''). NASD hereby agrees that the rules
listed in the Certification are Common Rules as defined in this
Agreement. Each year following the Effective Date of this Agreement, or
more frequently if required by changes in either the rules of CBOE or
NASD, CBOE shall submit an updated list of Common Rules to NASD for
review which shall add CBOE rules not included in the current list of
Common Rules that qualify as Common Rules as defined in this Agreement;
delete CBOE rules included in the current list of Common Rules that no
longer qualify as Common Rules as defined in this Agreement; and
confirm that the remaining rules on the current list of Common Rules
continue to be CBOE rules that qualify as Common Rules as defined in
this Agreement. Within 30 days of receipt of such updated list, NASD
shall confirm in writing whether the rules listed in any updated list
are Common Rules as defined in this Agreement. Notwithstanding anything
herein to the contrary, it is explicitly understood that the term
``Regulatory Responsibilities'' does not include, and CBOE shall retain
full responsibility for (unless otherwise addressed by separate
agreement or rule) the following:
(a) surveillance and enforcement with respect to trading activities
or practices involving CBOE's own marketplace, including without
limitation CBOE's rules relating to the rights and obligations of
market makers;
(b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any CBOE Rules that are not Common Rules.
3. Dual Members. Prior to the Effective Date, CBOE shall furnish
NASD with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no charge to CBOE by NASD for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
NASD shall provide CBOE with ninety (90) days advance written notice in
the event NASD decides to impose any charges to CBOE for performing the
Regulatory Responsibilities under this Agreement. If NASD determines to
impose a charge, CBOE shall have the right at the time of the
imposition of such charge to terminate this Agreement; provided,
however, that NASD's Regulatory Responsibilities under this Agreement
shall continue until the Commission approves the termination of this
Agreement.
5. Reassignment of Regulatory Responsibilities. Notwithstanding any
provision hereof, this Agreement shall be subject to any statute, or
any rule or order of the Commission, or industry agreement,
restructuring the regulatory framework of the securities industry or
reassigning Regulatory Responsibilities between self-regulatory
organizations.
[[Page 19558]]
To the extent such action is inconsistent with this Agreement, such
action shall supersede the provisions hereof to the extent necessary
for them to be properly effectuated and the provisions hereof in that
respect shall be null and void.
6. Notification of Violations. In the event that NASD becomes aware
of apparent violations of any CBOE Rules, which are not listed as
Common Rules, discovered pursuant to the performance of the Regulatory
Responsibilities assumed hereunder, NASD shall notify CBOE of those
apparent violations for such response as CBOE deems appropriate.
Apparent violations of all other applicable rules, including violations
of the Common Rules, various securities acts, and rules and regulations
thereunder, shall be processed by, and enforcement proceedings in
respect thereto shall be conducted by NASD as provided hereinbefore;
provided, however, that in the event a Dual Member is the subject of an
investigation relating to a transaction on the CBOE, CBOE may in its
discretion assume concurrent jurisdiction and responsibility. Each
party agrees to make available promptly all files, records and
witnesses necessary to assist the other in its investigation or
proceedings.
7. Continued Assistance. NASD shall make available to CBOE all
information obtained by NASD in the performance by it of the Regulatory
Responsibilities hereunder in respect to the Dual Members subject to
this Agreement. In particular, and not in limitation of the foregoing,
NASD shall furnish CBOE any information it obtains about Dual Members
which reflects adversely on their financial condition. It is understood
that such information is of an extremely sensitive nature and,
accordingly, CBOE acknowledges and agrees to take all reasonable steps
to maintain its confidentiality. CBOE shall make available to NASD any
information coming to its attention that reflects adversely on the
financial condition of Dual Members or indicates possible violations of
applicable laws, rules or regulations by such firms.
8. Dual Member Applications.
(a) Dual Members subject to this Agreement shall be required to
submit, and NASD shall be responsible for processing and acting upon
all applications submitted on behalf of allied persons, partners,
officers, registered personnel and any other person required to be
approved by the rules of both CBOE and NASD or associated with Dual
Members thereof. Upon request, NASD shall advise CBOE of any changes of
allied members, partners, officers, registered personnel and other
persons required to be approved by the rules of both CBOE and NASD.
(b) Dual Members shall be required to send to NASD all letters,
termination notices or other material respecting the individuals listed
in paragraph 8(a).
(c) When as a result of processing such submissions NASD becomes
aware of a statutory disqualification as defined in the Exchange Act
with respect to a Dual Member, NASD shall determine pursuant to
Sections 15A(g) and/or Section 6(c) of the Exchange Act the
acceptability or continued applicability of the person to whom such
disqualification applies and keep CBOE advised of its actions in this
regard for such subsequent proceedings as CBOE may initiate.
(d) Notwithstanding the foregoing, NASD shall not review the
membership application, reports, filings, fingerprint cards, notices,
or other writings filed to determine if such documentation submitted by
a broker or dealer, or a person associated therewith or other persons
required to register or qualify by examination meets the CBOE
requirements for general membership or for specified categories of
membership or participation in the CBOE. NASD shall not review
applications or other documentation filed to request a change in the
rights or status described in this paragraph 8(d), including
termination or limitation on activities, of a member or a participant
of the CBOE, or a person associated with, or requesting association
with, a member or participant of the CBOE.
9. Branch Office Information. NASD shall also be responsible for
processing and, if required, acting upon all requests for the opening,
address changes, and terminations of branch offices by Dual Members and
any other applications required of Dual Members with respect to the
Common Rules as they may be amended from time to time. Upon request,
NASD shall advise CBOE of the opening, address change and termination
of branch and main offices of Dual Members and the names of such branch
office managers.
10. Customer Complaints. CBOE shall forward to NASD copies of all
customer complaints involving Dual Members received by CBOE relating to
NASD's Regulatory Responsibilities under this Agreement. It shall be
NASD's responsibility to review and take appropriate action in respect
to such complaints.
11. Advertising. NASD shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with NASD in accordance with NASD's filing
procedures and is accompanied with any applicable filing fees set forth
in NASD Rules. Such review shall be made in accordance with then
applicable NASD rules and interpretations. The advertising of Dual
Members shall be subject only to compliance with appropriate NASD rules
and interpretations.
12. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of either
party to conduct its own independent or concurrent investigation,
examination or enforcement proceeding of or against Dual Members, as
either party, in its sole discretion, shall deem appropriate or
necessary.
13. Termination. This Agreement may be terminated by CBOE or NASD
at any time upon the approval of the Commission after one (1) year's
written notice to the other party, except as provided in paragraph 4.
14. Effective Date. This Agreement shall be effective upon approval
of the Commission.
15. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, CBOE and NASD hereby agree that any
such dispute shall be settled by arbitration in Washington, D.C. in
accordance with the rules of the American Arbitration Association then
in effect, or such other procedures as the parties may mutually agree
upon. Judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
16. Separate Agreement. This Agreement is wholly separate from the
multiparty Agreement made pursuant to Rule 17d-2 of the Exchange Act
between the American Stock Exchange LLC, the Boston Stock Exchange,
Inc., the Chicago Board Options Exchange, Incorporated, the
International Securities Exchange LLC, the National Association of
Securities Dealers, Inc., the New York Stock Exchange, LLC, the NYSE
Arca, Inc., and the Philadelphia Stock Exchange, Inc. involving the
allocation of regulatory responsibilities with respect to common
members for compliance with common rules relating to the conduct by
broker-dealers of accounts for listed options or index warrants entered
into on December 1, 2006, and as may be amended from time to time.
17. Notification of Members. CBOE and NASD shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
18. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the
[[Page 19559]]
Commission before they become effective.
19. Limitation of Liability. Neither NASD nor CBOE nor any of their
respective directors, governors, officers or employees shall be liable
to the other party to this Agreement for any liability, loss or damage
resulting from or claimed to have resulted from any delays,
inaccuracies, errors or omissions with respect to the provision of
Regulatory Responsibilities as provided hereby or for the failure to
provide any such responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or the other of NASD
or CBOE and caused by the willful misconduct of the other party or
their respective directors, governors, officers or employees. No
warranties, express or implied, are made by NASD or CBOE with respect
to any of the responsibilities to be performed by each of them
hereunder.
20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, NASD and CBOE
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve CBOE of any and all responsibilities
with respect to matters allocated to NASD pursuant to this Agreement;
provided, however, that this Agreement shall not be effective until the
Effective Date.
In witness whereof, each party has executed or caused this
Agreement to be executed on its behalf by a duly authorized officer as
of the date first written above.
National Association Of Securities Dealers, Inc.
By---------------------------------------------------------------------
Name:
Title:
Chicago Board Options Exchange, Incorporated
By---------------------------------------------------------------------
Name:
Title:
Exhibit 1
CBOE Certification of Common Rules
CBOE hereby certifies that the requirements contained in the CBOE
Rules listed below are identical to, or substantially similar to, the
NASD or SEC Rules identified.[dagger]
------------------------------------------------------------------------
NASD or SEC
CBOE rule(s) rule(s)[dagger][dagger]
------------------------------------------------------------------------
4.18 Prevention of the Misuse of Section 15(f) of the Securities
Material, Nonpublic Information. Exchange Act of 1934 (Exchange
Act).[dagger][dagger][dagger]
4.20 Anti-Money Laundering Compliance 3011 Anti-Money Laundering
Program. Compliance Program.
9.3 Registration and Termination of 1031(a), (b) Registration
Representatives. Requirements 1140(a), (d)
Electronic Filing Rules, and
NASD By-Laws, Art. V, Sections
2 and 3 Registered
Representatives and Associated
Persons.
9.3A Continuing Education For 1120 Continuing Education
Registered Persons. Requirements.
9.4(a) Other Affiliations of 3030 Outside Business Activities
Registered Associated Persons. of an Associated Person.
9.12 Statements of Accounts to 2340 Customer Account
Customers[dagger][dagger][dagger][dag Statements.
ger].
9.13 Statement of Financial Condition Exchange Act Rule 17a-5.
to Customers.
9.16 Restrictions on Pledge and 2330(a)-(d) Customers'
Lending of Customers' Securities. Securities or Funds.
9.18 Guarantees and Profit Sharing.... 2330(e) & (f) Customers'
Securities or
Funds.[dagger][dagger][dagger][
dagger][dagger]
9.20 Transfer of Accounts............. 11870 Customer Account Transfer
Contracts.
9.23 Customer 3110(d) Books and Records.
Complaints[dagger][dagger][dagger][da
gger][dagger][dagger].
9.24 Telephone Solicitation........... 2212 Telemarketing and 3110(g)
Books and Records.
9.25 Borrowing From or Lending to 2370 Borrowing From or Lending
Customers. to Customers.
53.6(c) Duty to Know and Approve 2310 Recommendations to
Customers. Customers (Suitability) and
3110(c) Books and Records.
53.6(d) Branch Offices of Member 1021(a) Registration
Organizations. Requirements and IM-1000-4
Branch Offices and Offices of
Supervisory Jurisdiction.
53.6(e) Discretionary Accounts........ 2510 Discretionary Accounts.
53.6(f) Confirmation to Customers..... 2230 Confirmations and Exchange
Act Rule 10b-
10.[dagger][dagger][dagger][dag
ger][dagger][dagger][dagger]
53.6(g) Communications to Customers... 2210(b) and(d) Communications
with the Public and IM-2210-
1(6) Guidelines to Ensure That
Communications With the Public
Are Not Misleading.
53.6(h) Supervision of Accounts....... 3010(a), (b) Supervision and
3110(c) Books and Records.
------------------------------------------------------------------------
[dagger] To the extent that any CBOE Rule listed herein makes reference
to options, such rule shall be read to apply to equity securities as
provided in CBOE Rule 53.6.
[dagger][dagger] CBOE will be responsible for any significant
differences between its rules and the comparable NASD rule identified.
[dagger][dagger][dagger] NASD shall not have any Regulatory
Responsibilities regarding the CBOE requirement to have Form X-17A-5
filed with CBOE; responsibility for such requirement remains with
CBOE.
[dagger][dagger][dagger][dagger] NASD shall not have any Regulatory
Responsibilities regarding the CBOE requirement that the statement
have a legend requesting the customer to advise the member of any
material change in the customer's investment objectives or financial
situation; responsibility for such requirement remains with CBOE.
[dagger][dagger][dagger][dagger][dagger] The NASD Rule requires, among
other things, prior written approval of the member employing the
associated person in order for such associated person to share in
accounts of a customer, whereas the CBOE rule requires consent of the
member carrying the account. To the extent that the employing member
and carrying member are different firms, the NASD's and CBOE's rule
differ, and NASD's Regulatory Responsibility will not cover CBOE's
rule; responsibility for such requirement remains with CBOE.
[dagger][dagger][dagger][dagger][dagger][dagger] NASD shall not have any
Regulatory Responsibilities regarding the CBOE requirement of what
must be contained in the complaint file or the timing during which the
complaint must be sent to the central file by the branch office;
responsibility for such requirement remains with CBOE.
[dagger][dagger][dagger][dagger][dagger][dagger][dagger]NASD shall not
have any Regulatory Responsibilities regarding the CBOE requirement to
disclose on a confirmation whether a transaction was executed on the
CBOE; responsibility for such requirement remains with CBOE.
[[Page 19560]]
* * * * *
III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \14\ and Rule 17d-2
thereunder,\15\ after May 9, 2007, the Commission may, by written
notice, declare the plan submitted by CBOE and NASD, File No. 4-536, to
be effective if the Commission finds that the plan is necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development
of the national market system and a national system for the clearance
and settlement of securities transactions and in conformity with the
factors set forth in Section 17(d) of the Act.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78q(d)(1).
\15\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
proposed 17d-2 Plan and to relieve CBOE of the responsibilities which
would be assigned to NASD, interested persons are invited to submit
written data, views, and arguments concerning the foregoing. Comments
may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/other.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number 4-536 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number 4-536. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (https://www.sec.gov/rules/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of the plan also will be
available for inspection and copying at the principal offices of the
CBOE and NASD. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number 4-536
and should be submitted on or before May 9, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-7321 Filed 4-17-07; 8:45 am]
BILLING CODE 8010-01-P
