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 Financial Industry Regulatory Authority, Inc. and BATS Exchange, Inc., 55180-55185 [E8-22212]
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55180
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices
FORM SH INFORMATION TABLE—PAGE 5
FRIDAY, [Month, Day, Year]
Name of issuer
Short position
(start of day)
CUSIP
Number of
securities sold
short (day)
Value of
securities sold
short (day)
Short position
(end of day)
Largest intraday short
position
Time of day of
largest intraday short
position
Largest intraday short
position
Time of day of
largest intraday short
position
FORM SH INFORMATION TABLE—PAGE 6
SATURDAY-SUNDAY, [Month, Day, Year]
Name of issuer
Short position
(start of day)
CUSIP
[FR Doc. E8–22487 Filed 9–23–08; 8:45 am]
BILLING CODE 8010–01–P
Number of
securities sold
short (day)
Value of
securities sold
short (day)
SECURITIES AND EXCHANGE
COMMISSION
jlentini on PROD1PC65 with NOTICES
[Release No. 34–58563; File No. 4–569]
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 Financial
Industry Regulatory Authority, Inc. and
BATS Exchange, Inc.
Short position
(end of day)
(‘‘Act’’),1 and Rule 17d–2 thereunder,2
notice is hereby given that on August
27, 2008, BATS Exchange, Inc.
(‘‘BATS’’) and the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
(together with BATS, the ‘‘Parties’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
a plan for the allocation of regulatory
responsibilities, dated August 25, 2008
(‘‘17d–2 Plan’’ or the ‘‘Plan’’). The
Commission is publishing this notice to
September 17, 2008.
Pursuant to section 17(d) of the
Securities Exchange Act of 1934
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2 17
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U.S.C. 78q(d).
CFR 240.17d–2.
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solicit comments on the 17d–2 Plan
from interested persons.
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
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
3 15
U.S.C. 78s(g)(1).
U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
respectively.
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).
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).
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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
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 proposed 17d–2 Plan is intended
to reduce regulatory duplication for
firms that are common members of both
BATS and FINRA.10 Pursuant to the
proposed 17d–2 Plan, FINRA would
assume certain examination and
enforcement responsibilities for
common members with respect to
certain applicable laws, rules, and
regulations.
The text of the Plan delineates the
proposed regulatory responsibilities
with respect to the Parties. Included in
the proposed Plan is an exhibit (the
‘‘BATS Exchange Rules Certification for
17d–2 Agreement with FINRA,’’ referred
to herein as the ‘‘Certification’’) that
lists every BATS rule, and select federal
securities laws, rules, and regulations,
for which FINRA would bear
responsibility under the Plan for
overseeing and enforcing with respect to
BATS members that are also members of
FINRA and the associated persons
therewith (‘‘Dual Members’’).
Specifically, under the 17d–2 Plan,
FINRA would assume examination and
enforcement responsibility relating to
9 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
10 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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55181
compliance by Dual Members with the
rules of BATS that are substantially
similar to the applicable rules of
FINRA,11 as well as any provisions of
the federal securities laws and the rules
and regulations thereunder delineated
in the Certification (‘‘Common Rules’’).
Common Rules would not include the
application of any BATS rule or FINRA
rule, or any rule or regulation under the
Act, to the extent that it pertains to
violations of insider trading activities,
because such matters are covered by a
separate multiparty agreement under
Rule 17d–2.12 In the event that a Dual
Member is the subject of an
investigation relating to a transaction on
BATS, the plan acknowledges that
BATS may, in its discretion, exercise
concurrent jurisdiction and
responsibility for such matter.13
Under the Plan, BATS would retain
full responsibility for surveillance and
enforcement with respect to trading
activities or practices involving BATS’s
own marketplace, including, without
limitation, registration pursuant to its
applicable rules of associated persons
(i.e., registration rules that are not
Common Rules); its duties as a DEA
pursuant to Rule 17d–1 under the Act;
and any BATS rules that are not
Common Rules, except for BATS rules
for any broker-dealer subsidiary of
BATS Holding, Inc.14 Apparent
violations of any BATS rules by any
broker-dealer subsidiary of BATS
Holdings, Inc. will be processed by, and
enforcement proceedings in respect
thereto will be conducted by, FINRA.15
The text of the proposed 17d–2 Plan
is as follows:
11 See paragraph 1(b) of the proposed 17d–2 Plan
(defining Common Rules). See also paragraph 1(f)
of the proposed 17d–2 Plan (defining Regulatory
Responsibilities). Paragraph 2 of the Plan provides
that annually, or more frequently as required by
changes in either BATS’s rules or FINRA rules, the
parties shall review and update, if necessary, the
list of Common Rules. Further, paragraph 3 of the
Plan provides that BATS shall furnish FINRA with
a list of Dual Members, and shall update the list no
less frequently than once each calendar quarter.
12 See Securities Exchange Act Release No. 58350
(August 13, 2008), 73 FR 48247 (August 18, 2008)
(File No. 4–566) (notice of filing of proposed plan).
See also Securities Exchange Act Release No. 58536
(September 12, 2008) (File No. 4–566) (order
approving and declaring effective the plan). The
Certification identifies several Common Rules that
may also be addressed in the context of regulating
insider trading activities pursuant to the proposed
separate multiparty agreement.
13 See paragraph 6 of the proposed 17d–2 Plan.
14 See paragraph 2 of the proposed 17d–2 Plan.
15 See paragraph 6 of the proposed 17d–2 Plan.
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Agreement Between Financial Industry
Regulatory Authority, Inc. and BATS
Exchange, Inc. Pursuant to Rule 17d–2
Under the Securities Exchange Act of
1934
This Agreement, by and between the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and BATS
Exchange, Inc. (‘‘BATS’’), is made this
25th day of August, 2008 (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. FINRA
and BATS may be referred to
individually as a ‘‘party’’ and together
as the ‘‘parties.’’
Whereas, FINRA and BATS 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; and
Whereas, FINRA and BATS 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, FINRA and BATS 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) ‘‘BATS Rules’’ or ‘‘FINRA Rules’’
shall mean: (i) The rules of BATS, or (ii)
the rules of FINRA, respectively, as the
rules of an exchange or association are
defined in Exchange Act Section
3(a)(27).
(b) ‘‘Common Rules’’ shall mean
BATS Rules that are substantially
similar to the applicable FINRA Rules
and certain provisions of the Exchange
Act and SEC rules set forth on Exhibit
1 in that examination for compliance
with such provisions and rules would
not require FINRA to develop one or
more new examination standards,
modules, procedures, or criteria in order
to analyze the application of the
provision or rule, or a Dual Member’s
activity, conduct, or output in relation
to such provision or rule; provided,
however, Common Rules shall not
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include the application of the SEC,
BATS or FINRA rules as they pertain to
violations of insider trading activities,
which is covered by a separate 17d–2
Agreement by and among the American
Stock Exchange, LLC, Boston Stock
Exchange, Inc., CBOE Stock Exchange,
LLC, Chicago Stock Exchange, Inc.,
Financial Industry Regulatory
Authority, Inc., International Securities
Exchange, LLC, The NASDAQ Stock
Market LLC, National Stock Exchange,
Inc., New York Stock Exchange, LLC,
NYSE Arca Inc., NYSE Regulation, Inc.,
and Philadelphia Stock Exchange, Inc.
submitted to the SEC on August 12,
2008.
(c) ‘‘Dual Members’’ shall mean those
BATS members that are also members of
FINRA and the associated persons
therewith.
(d) ‘‘Effective Date’’ shall have the
meaning set forth in paragraph 13.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with
FINRA’s Code of Procedure (the NASD
Rule 9000 Series) and other applicable
FINRA procedural rules, to determine
whether violations of Common Rules
have occurred, and if such violations are
deemed to have occurred, the
imposition of appropriate sanctions as
specified under FINRA’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. FINRA shall assume
Regulatory Responsibilities and
Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this
Agreement and made part hereof, BATS
furnished FINRA with a current list of
Common Rules and certified to FINRA
that such rules that are BATS Rules are
substantially similar to the
corresponding FINRA Rules (the
‘‘Certification’’). FINRA 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 BATS or FINRA,
BATS shall submit an updated list of
Common Rules to FINRA for review
which shall add BATS Rules not
included in the current list of Common
Rules that qualify as Common Rules as
defined in this Agreement; delete BATS
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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 BATS
Rules that qualify as Common Rules as
defined in this Agreement. Within 30
days of receipt of such updated list,
FINRA 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
BATS shall retain full responsibility for
(unless otherwise addressed by separate
agreement or rule) (collectively, the
‘‘Retained Responsibilities’’) the
following:
(a) Surveillance, examination,
investigation and enforcement with
respect to trading activities or practices
involving BATS’s own marketplace;
(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 BATS Rules that are not
Common Rules, except for BATS Rules
for any broker-dealer subsidiary of
BATS Holdings, Inc., as provided in
paragraph 6.
3. Dual Members. Prior to the
Effective Date, BATS shall furnish
FINRA 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 BATS by FINRA for performing the
Regulatory Responsibilities and
Enforcement Responsibilities under this
Agreement except as hereinafter
provided. FINRA shall provide BATS
with ninety (90) days advance written
notice in the event FINRA decides to
impose any charges to BATS for
performing the Regulatory
Responsibilities under this Agreement.
If FINRA determines to impose a charge,
BATS shall have the right at the time of
the imposition of such charge to
terminate this Agreement; provided,
however, that FINRA’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
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framework of the securities industry or
reassigning Regulatory Responsibilities
between self-regulatory organizations.
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 FINRA becomes aware of
apparent violations of any BATS Rules,
which are not listed as Common Rules,
discovered pursuant to the performance
of the Regulatory Responsibilities
assumed hereunder, FINRA shall notify
BATS of those apparent violations for
such response as BATS deems
appropriate. In the event that BATS
becomes aware of apparent violations of
any Common Rules, discovered
pursuant to the performance of the
Retained Responsibilities, BATS shall
notify FINRA of those apparent
violations and such matters shall be
handled by FINRA as provided in this
Agreement. With respect to apparent
violations of any BATS Rules by any
broker-dealer subsidiary of BATS’
parent company, BATS Holdings, Inc.,
FINRA shall not make referrals to BATS
pursuant to this paragraph 6. Such
apparent violations shall be processed
by, and enforcement proceedings in
respect thereto will be conducted by,
FINRA as provided in this Agreement.
Each party agrees to make available
promptly all files, records and witnesses
necessary to assist the other in its
investigation or proceedings. Apparent
violations of Common Rules, FINRA
Rules, federal securities laws, and rules
and regulations thereunder, shall be
processed by, and enforcement
proceedings in respect thereto shall be
conducted by FINRA as provided
hereinbefore; provided, however, that in
the event a Dual Member is the subject
of an investigation relating to a
transaction on BATS, BATS may in its
discretion assume concurrent
jurisdiction and responsibility.
7. Continued Assistance.
(a) FINRA shall make available to
BATS all information obtained by
FINRA in the performance by it of the
Regulatory Responsibilities hereunder
with respect to the Dual Members
subject to this Agreement. In particular,
and not in limitation of the foregoing,
FINRA shall furnish BATS any
information it obtains about Dual
Members which reflects adversely on
their financial condition. BATS shall
make available to FINRA any
information coming to its attention that
reflects adversely on the financial
condition of Dual Members or indicates
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possible violations of applicable laws,
rules or regulations by such firms.
(b) The parties agree that documents
or information shared shall be held in
confidence, and used only for the
purposes of carrying out their respective
regulatory obligations. Neither party
shall assert regulatory or other
privileges as against the other with
respect to documents or information
that is required to be shared pursuant to
this Agreement.
(c) The sharing of documents or
information between the parties
pursuant to this Agreement shall not be
deemed a waiver as against third parties
of regulatory or other privileges relating
to the discovery of documents or
information.
8. Statutory Disqualifications. When
FINRA becomes aware of a statutory
disqualification as defined in the
Exchange Act with respect to a Dual
Member, FINRA 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 BATS
advised of its actions in this regard for
such subsequent proceedings as BATS
may initiate.
9. Customer Complaints. BATS shall
forward to FINRA copies of all customer
complaints involving Dual Members
received by BATS relating to FINRA’s
Regulatory Responsibilities under this
Agreement. It shall be FINRA’s
responsibility to review and take
appropriate action in respect to such
complaints.
10. Advertising. FINRA shall assume
responsibility to review the advertising
of Dual Members subject to the
Agreement, provided that such material
is filed with FINRA in accordance with
FINRA’s filing procedures and is
accompanied with any applicable filing
fees set forth in FINRA Rules.
11. 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.
12. Termination. This Agreement may
be terminated by BATS or FINRA 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.
13. Effective Date. This Agreement
shall be effective upon approval of the
Commission.
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55183
14. Arbitration. In the event of a
dispute between the parties as to the
operation of this Agreement, BATS and
FINRA hereby agree that any such
dispute shall be settled by arbitration in
Washington, DC 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.
Each party acknowledges that the timely
and complete performance of its
obligations pursuant to this Agreement
is critical to the business and operations
of the other party. In the event of a
dispute between the parties, the parties
shall continue to perform their
respective obligations under this
Agreement in good faith during the
resolution of such dispute unless and
until this Agreement is terminated in
accordance with its provisions. Nothing
in this Section 14 shall interfere with a
party’s right to terminate this Agreement
as set forth herein.
15. Notification of Members. BATS
and FINRA shall notify Dual Members
of this Agreement after the Effective
Date by means of a uniform joint notice.
16. Amendment. This Agreement may
be amended in writing duly approved
by each party. All such amendments
must be filed with and approved by the
Commission before they become
effective.
17. Limitation of Liability. Neither
FINRA nor BATS 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 FINRA or BATS 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 FINRA or BATS with respect to any
of the responsibilities to be performed
by each of them hereunder.
18. Relief from Responsibility.
Pursuant to sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, FINRA and BATS join in
requesting the Commission, upon its
approval of this Agreement or any part
thereof, to relieve BATS of any and all
responsibilities with respect to matters
allocated to FINRA pursuant to this
Agreement; provided, however, that this
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Agreement shall not be effective until
the Effective Date.
19. Severability. Any term or
provision of this Agreement that is
invalid or unenforceable in any
jurisdiction shall, as to such
jurisdiction, be ineffective to the extent
of such invalidity or unenforceability
without rendering invalid or
unenforceable the remaining terms and
provisions of this Agreement or
affecting the validity or enforceability of
any of the terms or provisions of this
Agreement in any other jurisdiction.
20. Counterparts. This Agreement
may be executed in one or more
counterparts, each of which shall be
deemed an original, and such
counterparts together shall constitute
one and the same instrument.
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.
BATS EXCHANGE, INC.
By: llllllllllllllll
Name:
Title:
FINANCIAL INDUSTRY REGULATORY
AUTHORITY, INC.
By:
llllllllllllllll
Name:
Title:
Exhibit 1
BATS Exchange Rules Certification for
17d–2 Agreement With FINRA
BATS Exchange hereby certifies that
the requirements contained in the rules
listed below are identical to, or
substantially similar to, the comparable
FINRA (NASD) Rule, Exchange Act
provision or SEC rule identified
(‘‘Common Rules’’).
BATS Exchange Rule:
FINRA (NASD) Rule, Exchange Act Provision or SEC Rule:
Rule 2.5 Interpretation and Policy .02, Continuing Education Requirement for Authorized Traders of Members.
Rule 3.1 Business Conduct of Members ...............................................
Rule 3.2 Violations Prohibited* ..............................................................
1120(a)(1)–(4)
Rule 3.3 Use of Fraudulent Devices ......................................................
Rule 3.5(a) Advertising Practices ..........................................................
Rule 3.5(b) Advertising Practices ..........................................................
Rule 3.5(c) Advertising Practices ...........................................................
Rule 3.5(d) Advertising Practices ..........................................................
Rule 3.5(e) Advertising Practices ..........................................................
Rule 3.5(f) Advertising Practices ...........................................................
Rule 3.5(g) Advertising Practices ..........................................................
Rule 3.5(h) Advertising Practices ..........................................................
Rule 3.6 Fair Dealing with Customers ...................................................
Rule 3.7(a) Recommendations to Customers .......................................
Rule 3.8(a) The Prompt Receipt and Delivery of Securities .................
Rule 3.8(b) The Prompt Receipt and Delivery of Securities .................
Rule 3.9 Charges for Services Performed .............................................
Rule 3.10 Use of Information .................................................................
Rule 3.13 Payment Designed to Influence Market Prices, Other than
Paid Advertising.
Rule 3.14 Disclosure on Confirmations .................................................
Rule
Rule
Rule
Rule
3.15
3.16
3.17
3.18
Disclosure of Control .............................................................
Discretionary Accounts ..........................................................
Customer’s Securities or Funds ............................................
Prohibition Against Guarantees ............................................
Rule 3.19
Sharing in Accounts; Extent Permissible ..............................
Rule
Rule
Rule
Rule
Rule
4.1
5.1
5.2
5.3
5.4
Requirements ..........................................................................
Written Procedures ..................................................................
Responsibility of Members ......................................................
Records ...................................................................................
Review of Activities .................................................................
Rule 5.5
Rule 5.6
Rule 9.3
Information Barrier Procedures ...............................................
Anti-Money Laundering Compliance Program ........................
Predispute Arbitration Agreements .........................................
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Rule 12.11
Best Execution ....................................................................
Continuing Education Requirements.
2110 Standards of Commercial Honor and Principles of Trade.
2110 Standards of Commercial Honor and Principles of Trade and
3010 Supervision.*
2120 Use of Manipulative, Deceptive or Other Fraudulent Device.
2210(d)(1)(B) Communications with the Public.
2210(d)(2)(C) Communications with the Public.
2210(d)(1) Communications with the Public.
2210(b)(1) Communications with the Public.
2210(b)(2)(A) and 2210(c) Communications with the Public.
2210(d)(2)(A) and 2210(d)(1)(E) Communications with the Public.
2210(d)(1) Communications with the Public.
2210(d)(1) Communications with the Public.
IM–2310–2(b)(1), (2), (4)(A)(i), (4)(A)(iii), (4)(A)(iv), and (5).
2310(a) Recommendations to Customers (Suitability).
3370 Purchases.
SEC Regulation SHO.
2430 Charges for Services Performed.
3120 Use of Information Obtained in Fiduciary Capacity.
3330 Payment Designed to Influence Market Prices, Other than Paid
Advertising.
2230 Confirmations and SEC Rule 10b–10 Confirmation of Transactions.
2240 Disclosure of Control Relationship With Issuer.
2510 Discretionary Accounts.
2330(a) Customers’ Securities or Funds—Improper Use.
2330(e) Customers’ Securities or Funds—Prohibition Against Guarantees.
2330(f)(1) Customers’ Securities or Funds—Sharing in Accounts; Extent Permissible.
Section 17 of the Exchange Act and the rules thereunder.
3010(b)(1) Supervision—Written Procedures.*
3010(a)(4) and (b)(4) Supervision.*
3010(a)(1), (b) and (c) Supervision.*
3010(c) & (d) Supervision—Internal Inspections/ Review of Transactions and Correspondence.*
Section 15(f) of Exchange Act.
3011 Anti-Money Laundering Compliance Program.
3110(f)—Books and Records (Requirements When Using Predispute
Arbitration Agreements for Customer Accounts).*
2320 Best Execution and Interpositioning.
FINRA shall only have Regulatory Responsibility regarding the first phase of the BATS rule regarding prohibitions from violating the Securities
Exchange Act of 1934 and the rules and regulations thereunder; responsibility for the remainder of the Rule shall remain with BATS.
* FINRA shall not have any Regulatory Responsibilities for these rules as they pertain to violations of insider trading activities, which is covered
by a separate 17d–2 Agreement by and among the American Stock Exchange, LLC, Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC,
Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, The NASDAQ Stock Market
LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Arca Inc., NYSE Regulation, Inc., and Philadelphia Stock Exchange, Inc. submitted to the SEC on August 12, 2008.
VerDate Aug<31>2005
17:38 Sep 23, 2008
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Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices
In addition, the following provisions
shall be part of this 17d–2 Agreement:
Securities Exchange Act of 1934:
Section 15(f)
SEC Rules:
Rule 200 of Regulation SHO—Definition
of ‘‘Short Sale’’ and Marking
Requirements
Rule 203 of Regulation SHO—
Borrowing and Delivery Requirements
Rule 606 of Regulation NMS—
Disclosure of Order Routing
Information
Rule 607 of Regulation NMS—Customer
Account Statements
*
*
*
*
*
III. Date of Effectiveness of the
Proposed Plan and Timing for
Commission Action
Pursuant to section 17(d)(1) of the
Act 16 and Rule 17d–2 thereunder,17
October 15, 2008, the Commission may,
by written notice, declare the plan
submitted by BATS and FINRA, File No.
4–569, 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 the
proposed 17d–2 Plan and to relieve
BATS of the responsibilities which
would be assigned to FINRA, interested
persons are invited to submit written
data, views, and arguments concerning
the foregoing. Comments may be
submitted by any of the following
methods:
jlentini on PROD1PC65 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 4–569 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number 4–569. This file number should
be included on the subject line if e-mail
is used. To help the Commission
process and review your comments
16 15
17 17
U.S.C. 78q(d)(1).
CFR 240.17d–2.
VerDate Aug<31>2005
17:38 Sep 23, 2008
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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of the plan also will be available for
inspection and copying at the principal
offices of BATS and FINRA. 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 4–569 and should be submitted
on or before October 15, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22212 Filed 9–23–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, September 18, 2008, at
5:30 p.m.
Commissioners and certain staff
members who have an interest in the
matter will attend the Closed Meeting.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions as set forth in
5 U.S.C. 552b(c)(8) and (9) and 17 CFR
200.402(a)(8) and (9), permit
consideration of the scheduled matter at
the Closed Meeting.
Commissioner Paredes as duty officer,
voted to consider the item listed for the
closed meeting in closed session, and
determined that no earlier notice thereof
was possible.
The subject matter of the Closed
Meeting scheduled for Thursday,
September 18, 2008, will be:
Matters related to the financial
markets.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact:
The Office of the Secretary at
(202) 551–5400.
Dated: September 18, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22246 Filed 9–23–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58570; File No. SR–Amex–
2008–70]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, To
Revise Its Initial Listing Process To
Eliminate the Current Appeal Process
for Initial Listing Decisions, Add a New
Confidential Pre-application Eligibility
Review Process, and Upgrade Its
Listing Requirements by Eliminating
the Alternative Listing Standards
September 17, 2008.
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 4, 2008, the American Stock
Exchange LLC (‘‘Amex’’ or the
‘‘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
prepared by the Exchange. Amex filed
Amendment No. 1 on September 17,
2008. The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
In connection with its pending
acquisition by NYSE Euronext, the
parent company of the New York Stock
Exchange LLC (‘‘NYSE’’) and NYSE
Arca, Inc. (‘‘NYSE Arca’’), the Exchange
desires to revise its initial listing
process to more closely align it with the
process in place at the NYSE, as well as
to upgrade its listing requirements. To
that end, the Exchange proposes to
amend Sections 101, 201, 206 and
1 15
18 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 73, Number 186 (Wednesday, September 24, 2008)]
[Notices]
[Pages 55180-55185]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22212]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58563; File No. 4-569]
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 Financial Industry Regulatory
Authority, Inc. and BATS Exchange, Inc.
September 17, 2008.
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 August 27, 2008, BATS Exchange, Inc. (``BATS'') and the Financial
Industry Regulatory Authority, Inc. (``FINRA'') (together with BATS,
the ``Parties'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a plan for the allocation of regulatory
responsibilities, dated August 25, 2008 (``17d-2 Plan'' or the
``Plan''). The Commission is publishing this notice to
[[Page 55181]]
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 proposed 17d-2 Plan is intended to reduce regulatory
duplication for firms that are common members of both BATS and
FINRA.\10\ Pursuant to the proposed 17d-2 Plan, FINRA would assume
certain examination and enforcement responsibilities for common members
with respect to certain applicable laws, rules, and regulations.
---------------------------------------------------------------------------
\10\ 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 the proposed regulatory
responsibilities with respect to the Parties. Included in the proposed
Plan is an exhibit (the ``BATS Exchange Rules Certification for 17d-2
Agreement with FINRA,'' referred to herein as the ``Certification'')
that lists every BATS rule, and select federal securities laws, rules,
and regulations, for which FINRA would bear responsibility under the
Plan for overseeing and enforcing with respect to BATS members that are
also members of FINRA and the associated persons therewith (``Dual
Members'').
Specifically, under the 17d-2 Plan, FINRA would assume examination
and enforcement responsibility relating to compliance by Dual Members
with the rules of BATS that are substantially similar to the applicable
rules of FINRA,\11\ as well as any provisions of the federal securities
laws and the rules and regulations thereunder delineated in the
Certification (``Common Rules''). Common Rules would not include the
application of any BATS rule or FINRA rule, or any rule or regulation
under the Act, to the extent that it pertains to violations of insider
trading activities, because such matters are covered by a separate
multiparty agreement under Rule 17d-2.\12\ In the event that a Dual
Member is the subject of an investigation relating to a transaction on
BATS, the plan acknowledges that BATS may, in its discretion, exercise
concurrent jurisdiction and responsibility for such matter.\13\
---------------------------------------------------------------------------
\11\ See paragraph 1(b) of the proposed 17d-2 Plan (defining
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan
(defining Regulatory Responsibilities). Paragraph 2 of the Plan
provides that annually, or more frequently as required by changes in
either BATS's rules or FINRA rules, the parties shall review and
update, if necessary, the list of Common Rules. Further, paragraph 3
of the Plan provides that BATS shall furnish FINRA with a list of
Dual Members, and shall update the list no less frequently than once
each calendar quarter.
\12\ See Securities Exchange Act Release No. 58350 (August 13,
2008), 73 FR 48247 (August 18, 2008) (File No. 4-566) (notice of
filing of proposed plan). See also Securities Exchange Act Release
No. 58536 (September 12, 2008) (File No. 4-566) (order approving and
declaring effective the plan). The Certification identifies several
Common Rules that may also be addressed in the context of regulating
insider trading activities pursuant to the proposed separate
multiparty agreement.
\13\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------
Under the Plan, BATS would retain full responsibility for
surveillance and enforcement with respect to trading activities or
practices involving BATS's own marketplace, including, without
limitation, registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules); its
duties as a DEA pursuant to Rule 17d-1 under the Act; and any BATS
rules that are not Common Rules, except for BATS rules for any broker-
dealer subsidiary of BATS Holding, Inc.\14\ Apparent violations of any
BATS rules by any broker-dealer subsidiary of BATS Holdings, Inc. will
be processed by, and enforcement proceedings in respect thereto will be
conducted by, FINRA.\15\
---------------------------------------------------------------------------
\14\ See paragraph 2 of the proposed 17d-2 Plan.
\15\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------
The text of the proposed 17d-2 Plan is as follows:
[[Page 55182]]
Agreement Between Financial Industry Regulatory Authority, Inc. and
BATS Exchange, Inc. Pursuant to Rule 17d-2 Under the Securities
Exchange Act of 1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and BATS Exchange, Inc. (``BATS''), is made
this 25th day of August, 2008 (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. FINRA and BATS may be referred to individually
as a ``party'' and together as the ``parties.''
Whereas, FINRA and BATS 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; and
Whereas, FINRA and BATS 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, FINRA and BATS 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) ``BATS Rules'' or ``FINRA Rules'' shall mean: (i) The rules of
BATS, or (ii) the rules of FINRA, respectively, as the rules of an
exchange or association are defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean BATS Rules that are substantially
similar to the applicable FINRA Rules and certain provisions of the
Exchange Act and SEC rules set forth on Exhibit 1 in that examination
for compliance with such provisions and rules would not require FINRA
to develop one or more new examination standards, modules, procedures,
or criteria in order to analyze the application of the provision or
rule, or a Dual Member's activity, conduct, or output in relation to
such provision or rule; provided, however, Common Rules shall not
include the application of the SEC, BATS or FINRA rules as they pertain
to violations of insider trading activities, which is covered by a
separate 17d-2 Agreement by and among the American Stock Exchange, LLC,
Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC, Chicago Stock
Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
International Securities Exchange, LLC, The NASDAQ Stock Market LLC,
National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Arca
Inc., NYSE Regulation, Inc., and Philadelphia Stock Exchange, Inc.
submitted to the SEC on August 12, 2008.
(c) ``Dual Members'' shall mean those BATS members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall have the meaning set forth in
paragraph 13.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of Procedure
(the NASD Rule 9000 Series) and other applicable FINRA procedural
rules, to determine whether violations of Common Rules have occurred,
and if such violations are deemed to have occurred, the imposition of
appropriate sanctions as specified under FINRA'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. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
BATS furnished FINRA with a current list of Common Rules and certified
to FINRA that such rules that are BATS Rules are substantially similar
to the corresponding FINRA Rules (the ``Certification''). FINRA 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 BATS or FINRA, BATS shall submit an updated list of Common
Rules to FINRA for review which shall add BATS Rules not included in
the current list of Common Rules that qualify as Common Rules as
defined in this Agreement; delete BATS 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 BATS Rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of such
updated list, FINRA 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 BATS shall retain full responsibility for (unless
otherwise addressed by separate agreement or rule) (collectively, the
``Retained Responsibilities'') the following:
(a) Surveillance, examination, investigation and enforcement with
respect to trading activities or practices involving BATS's own
marketplace;
(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 BATS Rules that are not Common Rules, except for BATS Rules
for any broker-dealer subsidiary of BATS Holdings, Inc., as provided in
paragraph 6.
3. Dual Members. Prior to the Effective Date, BATS shall furnish
FINRA 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 BATS by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
FINRA shall provide BATS with ninety (90) days advance written notice
in the event FINRA decides to impose any charges to BATS for performing
the Regulatory Responsibilities under this Agreement. If FINRA
determines to impose a charge, BATS shall have the right at the time of
the imposition of such charge to terminate this Agreement; provided,
however, that FINRA'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
[[Page 55183]]
framework of the securities industry or reassigning Regulatory
Responsibilities between self-regulatory organizations. 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 FINRA becomes
aware of apparent violations of any BATS Rules, which are not listed as
Common Rules, discovered pursuant to the performance of the Regulatory
Responsibilities assumed hereunder, FINRA shall notify BATS of those
apparent violations for such response as BATS deems appropriate. In the
event that BATS becomes aware of apparent violations of any Common
Rules, discovered pursuant to the performance of the Retained
Responsibilities, BATS shall notify FINRA of those apparent violations
and such matters shall be handled by FINRA as provided in this
Agreement. With respect to apparent violations of any BATS Rules by any
broker-dealer subsidiary of BATS' parent company, BATS Holdings, Inc.,
FINRA shall not make referrals to BATS pursuant to this paragraph 6.
Such apparent violations shall be processed by, and enforcement
proceedings in respect thereto will be conducted by, FINRA as provided
in this Agreement. Each party agrees to make available promptly all
files, records and witnesses necessary to assist the other in its
investigation or proceedings. Apparent violations of Common Rules,
FINRA Rules, federal securities laws, and rules and regulations
thereunder, shall be processed by, and enforcement proceedings in
respect thereto shall be conducted by FINRA as provided hereinbefore;
provided, however, that in the event a Dual Member is the subject of an
investigation relating to a transaction on BATS, BATS may in its
discretion assume concurrent jurisdiction and responsibility.
7. Continued Assistance.
(a) FINRA shall make available to BATS all information obtained by
FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this Agreement.
In particular, and not in limitation of the foregoing, FINRA shall
furnish BATS any information it obtains about Dual Members which
reflects adversely on their financial condition. BATS shall make
available to FINRA 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.
(b) The parties agree that documents or information shared shall be
held in confidence, and used only for the purposes of carrying out
their respective regulatory obligations. Neither party shall assert
regulatory or other privileges as against the other with respect to
documents or information that is required to be shared pursuant to this
Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
8. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with respect
to a Dual Member, FINRA 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 BATS advised of its actions in this regard for such subsequent
proceedings as BATS may initiate.
9. Customer Complaints. BATS shall forward to FINRA copies of all
customer complaints involving Dual Members received by BATS relating to
FINRA's Regulatory Responsibilities under this Agreement. It shall be
FINRA's responsibility to review and take appropriate action in respect
to such complaints.
10. Advertising. FINRA shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is accompanied with any applicable filing fees set forth
in FINRA Rules.
11. 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.
12. Termination. This Agreement may be terminated by BATS or FINRA
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.
13. Effective Date. This Agreement shall be effective upon approval
of the Commission.
14. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, BATS and FINRA hereby agree that
any such dispute shall be settled by arbitration in Washington, DC 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. Each party acknowledges that
the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of the other
party. In the event of a dispute between the parties, the parties shall
continue to perform their respective obligations under this Agreement
in good faith during the resolution of such dispute unless and until
this Agreement is terminated in accordance with its provisions. Nothing
in this Section 14 shall interfere with a party's right to terminate
this Agreement as set forth herein.
15. Notification of Members. BATS and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
16. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
17. Limitation of Liability. Neither FINRA nor BATS 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
FINRA or BATS 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 FINRA or BATS with respect
to any of the responsibilities to be performed by each of them
hereunder.
18. Relief from Responsibility. Pursuant to sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and BATS
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve BATS of any and all responsibilities
with respect to matters allocated to FINRA pursuant to this Agreement;
provided, however, that this
[[Page 55184]]
Agreement shall not be effective until the Effective Date.
19. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
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.
BATS EXCHANGE, INC.
By:--------------------------------------------------------------------
Name:
Title:
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.
By:--------------------------------------------------------------------
Name:
Title:
Exhibit 1
BATS Exchange Rules Certification for 17d-2 Agreement With FINRA
BATS Exchange hereby certifies that the requirements contained in
the rules listed below are identical to, or substantially similar to,
the comparable FINRA (NASD) Rule, Exchange Act provision or SEC rule
identified (``Common Rules'').
------------------------------------------------------------------------
FINRA (NASD) Rule, Exchange Act
BATS Exchange Rule: Provision or SEC Rule:
------------------------------------------------------------------------
Rule 2.5 Interpretation and Policy .02, 1120(a)(1)-(4) Continuing
Continuing Education Requirement for Education Requirements.
Authorized Traders of Members.
Rule 3.1 Business Conduct of Members... 2110 Standards of Commercial
Honor and Principles of Trade.
Rule 3.2 Violations Prohibited*........ 2110 Standards of Commercial
Honor and Principles of Trade
and 3010 Supervision.*
Rule 3.3 Use of Fraudulent Devices..... 2120 Use of Manipulative,
Deceptive or Other Fraudulent
Device.
Rule 3.5(a) Advertising Practices...... 2210(d)(1)(B) Communications
with the Public.
Rule 3.5(b) Advertising Practices...... 2210(d)(2)(C) Communications
with the Public.
Rule 3.5(c) Advertising Practices...... 2210(d)(1) Communications with
the Public.
Rule 3.5(d) Advertising Practices...... 2210(b)(1) Communications with
the Public.
Rule 3.5(e) Advertising Practices...... 2210(b)(2)(A) and 2210(c)
Communications with the
Public.
Rule 3.5(f) Advertising Practices...... 2210(d)(2)(A) and 2210(d)(1)(E)
Communications with the
Public.
Rule 3.5(g) Advertising Practices...... 2210(d)(1) Communications with
the Public.
Rule 3.5(h) Advertising Practices...... 2210(d)(1) Communications with
the Public.
Rule 3.6 Fair Dealing with Customers... IM-2310-2(b)(1), (2),
(4)(A)(i), (4)(A)(iii),
(4)(A)(iv), and (5).
Rule 3.7(a) Recommendations to 2310(a) Recommendations to
Customers. Customers (Suitability).
Rule 3.8(a) The Prompt Receipt and 3370 Purchases.
Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and SEC Regulation SHO.
Delivery of Securities.
Rule 3.9 Charges for Services Performed 2430 Charges for Services
Performed.
Rule 3.10 Use of Information........... 3120 Use of Information
Obtained in Fiduciary
Capacity.
Rule 3.13 Payment Designed to Influence 3330 Payment Designed to
Market Prices, Other than Paid Influence Market Prices, Other
Advertising. than Paid Advertising.
Rule 3.14 Disclosure on Confirmations.. 2230 Confirmations and SEC Rule
10b-10 Confirmation of
Transactions.
Rule 3.15 Disclosure of Control........ 2240 Disclosure of Control
Relationship With Issuer.
Rule 3.16 Discretionary Accounts....... 2510 Discretionary Accounts.
Rule 3.17 Customer's Securities or 2330(a) Customers' Securities
Funds. or Funds--Improper Use.
Rule 3.18 Prohibition Against 2330(e) Customers' Securities
Guarantees. or Funds--Prohibition Against
Guarantees.
Rule 3.19 Sharing in Accounts; Extent 2330(f)(1) Customers'
Permissible. Securities or Funds--Sharing
in Accounts; Extent
Permissible.
Rule 4.1 Requirements.................. Section 17 of the Exchange Act
and the rules thereunder.
Rule 5.1 Written Procedures............ 3010(b)(1) Supervision--Written
Procedures.*
Rule 5.2 Responsibility of Members..... 3010(a)(4) and (b)(4)
Supervision.*
Rule 5.3 Records....................... 3010(a)(1), (b) and (c)
Supervision.*
Rule 5.4 Review of Activities.......... 3010(c) & (d) Supervision--
Internal Inspections/ Review
of Transactions and
Correspondence.*
Rule 5.5 Information Barrier Procedures Section 15(f) of Exchange Act.
Rule 5.6 Anti-Money Laundering 3011 Anti-Money Laundering
Compliance Program. Compliance Program.
Rule 9.3 Predispute Arbitration 3110(f)--Books and Records
Agreements. (Requirements When Using
Predispute Arbitration
Agreements for Customer
Accounts).*
Rule 12.11 Best Execution.............. 2320 Best Execution and
Interpositioning.
------------------------------------------------------------------------
FINRA shall only have Regulatory Responsibility regarding the first
phase of the BATS rule regarding prohibitions from violating the
Securities Exchange Act of 1934 and the rules and regulations
thereunder; responsibility for the remainder of the Rule shall remain
with BATS.
* FINRA shall not have any Regulatory Responsibilities for these rules
as they pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among the American Stock
Exchange, LLC, Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC,
Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority,
Inc., International Securities Exchange, LLC, The NASDAQ Stock Market
LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE
Arca Inc., NYSE Regulation, Inc., and Philadelphia Stock Exchange,
Inc. submitted to the SEC on August 12, 2008.
[[Page 55185]]
In addition, the following provisions shall be part of this 17d-2
Agreement:
Securities Exchange Act of 1934:
Section 15(f)
SEC Rules:
Rule 200 of Regulation SHO--Definition of ``Short Sale'' and Marking
Requirements
Rule 203 of Regulation SHO--Borrowing and Delivery Requirements
Rule 606 of Regulation NMS--Disclosure of Order Routing Information
Rule 607 of Regulation NMS--Customer Account Statements
* * * * *
III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to section 17(d)(1) of the Act \16\ and Rule 17d-2
thereunder,\17\ October 15, 2008, the Commission may, by written
notice, declare the plan submitted by BATS and FINRA, File No. 4-569,
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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78q(d)(1).
\17\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the proposed 17d-2 Plan and to relieve BATS of the responsibilities
which would be assigned to FINRA, 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 4-569 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090.
All submissions should refer to File Number 4-569. 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of the plan also will be
available for inspection and copying at the principal offices of BATS
and FINRA. 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 4-569
and should be submitted on or before October 15, 2008.
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22212 Filed 9-23-08; 8:45 am]
BILLING CODE 8010-01-P
