Self-Regulatory Organizations; Order Approving Minor Rule Violation Plan for BATS Exchange, Inc., 63219-63220 [E8-25241]
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dwashington3 on PRODPC61 with NOTICES
Federal Register / Vol. 73, No. 206 / Thursday, October 23, 2008 / Notices
of Mr. William Horvitz’s son, such stepchildren’s spouses and their children,
one of Mr. William Horvitz’s brothers,
such brother’s spouse, his two children
and four grandchildren, and the spouses
of these children and grandchildren
(collectively, the ‘‘Horvitz Family’’ or
‘‘Family’’).
2. Applicant provides services
exclusively to: (i) The members of the
Horvitz Family; (ii) private charitable
foundations established exclusively by
members of the Horvitz Family (‘‘Private
Foundations’’); (iii) trusts that exist
exclusively for the benefit of members
of the Horvitz Family and Private
Foundations (‘‘Family Trusts’’); (iv)
pooled investment vehicles that have
been created exclusively for the benefit
of, and are wholly owned by, Family
members, Family Trusts, or Private
Foundations (‘‘Family Investment
Entities’’), except that certain key
employees, as described below, are
permitted to invest in these Family
Investment Entities; and (v) solely for
the purpose of investing in the Family
Investment Entities, several executive
level employees of the Applicant who
have significant involvement with the
investment advisory process (‘‘Key
Employees’’) or revocable trusts
established for the benefit of Key
Employees (‘‘Key Employee Trusts’’).
The members of the Horvitz Family, the
Private Foundations, the Family Trusts,
the Family Investment Entities, and
solely with respect to investments in
Family Investment Entities, the Key
Employees and the Key Employee
Trusts, are referred to collectively as the
‘‘Family Clients.’’
3. Applicant provides both advisory
services and non-advisory services to
Family Clients, which include asset
allocation advice, investment due
diligence, recordkeeping assistance,
federal and state tax advice, and
coordination of professional
relationships with accountants,
attorneys and unaffiliated investment
advisers. Applicant provides advisory
services to Family Clients directly, or
indirectly through persons that manage
Family Investment Entities or Family
Trusts (‘‘Pool Advisory Entities’’). All
Pool Advisory Entities are wholly
owned and controlled by the Applicant,
the Horvitz Family, or Family Trusts.
4. Applicant represents that it does
not hold itself out to the public as an
investment adviser. Applicant further
represents that it is not listed in any
phone book as an in investment adviser
and does not (i) have a publicly
accessible Web site, (ii) engage in any
advertising, (iii) attend investment
management-related conferences as a
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14:58 Oct 22, 2008
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vendor, and (iv) conduct any marketing
activities.
5. Applicant represents that it and the
Pool Advisory Entities do not and will
not solicit or accept investment advisory
clients from the public.
6. Applicant represents that it does
not operate with the purpose of
generating a profit. It charges fees only
to pay its operating expenses and the
salaries of the professionals it employs.
7. Applicant represents that it has
provided each member of the Family
who is not a lineal descendant
(including by adoption) of Mr. William
Horvitz and his wife Norma Horvitz or
such lineal descendant’ spouse written
disclosure describing the material terms
of this Application and the material
legal effects associated with a
Commission Order as a result of this
Application, and has received written
consent from these Family members.
8. Applicant acknowledges that the
Order, if granted, would not affect any
legal obligation (other than those under
the Advisers Act) relating to the services
it and the Pool Advisory Entities
provide to their clients, including
without limitation any applicable state
fiduciary obligation.
Applicant’s Legal Analysis
1. Section 202(a)(11) of the Advisers
Act defines the term ‘‘investment
adviser’’ to mean ‘‘any person who, for
compensation, engages in the business
of advising others, either directly or
through publications or writings, as to
the value of securities or as to the
advisability of investing in, purchasing,
or selling securities, or who, for
compensation and as a part of a regular
business, issues or promulgates analyses
or reports concerning securities. * * *’’
2. Section 203(a) of the Advisers Act
requires investment advisers to register
with the SEC. Section 203(b) of the
Advisers Act provides several
exemptions from this registration
requirement.
3. Applicant represents that it
currently relies on the registration
exemption provided in section 203(b)(3)
of the Advisers Act for advisers that
have less than 15 clients. The Applicant
anticipates that this exemption will
soon be unavailable to it as the number
of Family Clients grows. Applicant also
represents that it is not prohibited from
registering with the Commission under
section 203A(a) because it has assets
under management of $25,000,000 or
more.
4. Applicant requests that the SEC
declare it, the existing and future Pool
Advisory Entities, and their respective
employees acting within the scope of
their employment, to be persons not
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
63219
within the intent of section 202(a)(11).
Applicant states that there is no public
interest in requiring that it, the Pool
Advisory Entities, or their respective
employees acting within the scope of
their employment be registered under
the Advisers Act because they offer and
provide investment advisory services
only to Family Clients.
Applicant’s Conditions
1. The Applicant and all the existing
and future Pool Advisory Entities will
offer and provide advisory services only
to Family Clients and will not hold
themselves out to the public as
investment advisers.
2. Members of the Horvitz Family will
at all times comprise a majority of the
Board of Directors of the Applicant.
3. The Applicant and all the existing
and future Pool Advisory Entities will at
all times be owned, directly or
indirectly, exclusively by one or more
members of the Horvitz Family.
4. All the existing and future Family
Investment Entities: (a) Are excepted
from the definition of ‘‘investment
company’’ under section 3(c)(1) or
section 3(c)(7) of the Investment
Company Act of 1940, and (b) are
owned and controlled exclusively by
the Applicant, the Pool Advisory
Entities, or the Family Clients.
5. If any Key Employee who owns an
interest in any Family Investment
Entity, directly or through a Key
Employee Trust, is no longer employed
by the Applicant or a Pool Advisory
Entity or is no longer a Key Employee,
his interest in such Family Investment
Entity and/or Key Employee Trust will
be limited to his investment at the time
of termination (or at the time that he no
longer is a Key Employee) together with
reinvestment of accretions or
distributions on that interest.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8–25243 Filed 10–22–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58807; File No. 4–568]
Self-Regulatory Organizations; Order
Approving Minor Rule Violation Plan
for BATS Exchange, Inc.
October 17, 2008.
On August 29, 2008, the BATS
Exchange, Inc. (‘‘BATS’’ or the
‘‘Exchange’’) filed with the Securities
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63220
Federal Register / Vol. 73, No. 206 / Thursday, October 23, 2008 / Notices
and Exchange Commission (the
‘‘Commission’’) a proposed minor rule
violation plan (‘‘MRVP’’) pursuant to
Section 19(d)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19d–1(c)(2) thereunder.2 The proposed
MRVP was published for public
comment on September 16, 2008.3 The
Commission received no comments on
the proposal. This order approves
BATS’s proposed
BATS’s MRVP specifies those
uncontested minor rule violations with
sanctions not exceeding $2,500 which
would not be subject to the provisions
of Rule 19d–1(c)(1) under the Act 4
requiring that a self-regulatory
organization promptly file notice with
the Commission of any final
disciplinary action taken with respect to
any person or organization.5 In
accordance with Rule 19d–1(c)(2), the
Exchange proposed to designate certain
rule violations as minor rule violations,
and requested that it be relieved of the
reporting requirements regarding such
violations, provided it gives notice of
such violations to the Commission on a
quarterly basis. BATS included in its
proposed MRVP the policies and
procedures currently included in BATS
Exchange Rule 8.15 (‘‘Imposition of
Fines for Minor Violation(s) of Rules’’)
and the rule violations included in
BATS Exchange Rule 8.15.01,
Interpretations and Policies.6
1 15
U.S.C. 78s(d)(1).
CFR 240.19d–1(c)(2).
3 See Securities Exchange Act Release No. 58485
(September 8, 2008), 73 FR 53468.
4 17 CFR 240.19d–1(c)(1).
5 The Commission adopted amendments to
paragraph (c) of Rule 19d–1 to allow self-regulatory
organizations (‘‘SROs’’) to submit for Commission
approval plans for the abbreviated reporting of
minor disciplinary infractions. See Securities
Exchange Act Release No. 21013 (June 1, 1984), 49
FR 23828 (June 8, 1984). Any disciplinary action
taken by an SRO against any person for violation
of a rule of the SRO which has been designated as
a minor rule violation pursuant to such a plan shall
not be considered ‘‘final’’ for purposes of Section
19(d)(1) of the Act if the sanction imposed consists
of a fine not exceeding $2,500 and the sanctioned
person has not sought an adjudication, including a
hearing, or otherwise exhausted his or her
administrative remedies.
6 On August 18, 2008, the Commission approved
BATS’s application for registration as a national
securities exchange, including the rules governing
the Exchange. See Securities Exchange Act Release
No. 58375, 73 FR 49498 (August 21, 2008). In the
approval order, the Commission noted that BATS
Rule 8.15 provides for the imposition of fines for
minor rule violations pursuant to a minor rule
violation plan. Accordingly, the Commission noted
that, as a condition to the operation of the
Exchange, it must file a minor rule violation plan
with the Commission. BATS represented that
modifications may be made to Rule 8.15.01 in the
future. BATS proposed that, when amendments to
Rule 8.15.01 are made pursuant to a rule filing
submitted pursuant to Rule 19b–4 under the Act,
such filing would automatically be deemed a
dwashington3 on PRODPC61 with NOTICES
2 17
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Pursuant to the Exchange’s proposed
MRVP, under Rule 8.15, the Exchange
may impose a fine (not to exceed
$2,500) on a member, an associated
person of a member, or a registered or
non-registered employee of a member,
with respect to any rule listed in Rule
8.15.01. The Exchange shall serve the
person against whom a fine is imposed
with a written statement setting forth
the rule or rules allegedly violated, the
act or omission constituting each such
violation, the fine imposed, and the date
by which such determination becomes
final or by which such determination
must be contested. If the person against
whom the fine is imposed pays the fine,
such payment shall be deemed to be a
waiver of such person’s right to a
disciplinary proceeding and any review
of the matter under Exchange rules. Any
person against whom a fine is imposed
may contest the Exchange’s
determination by filing with the
Exchange a written response, at which
point the matter shall become a
disciplinary proceeding.
Upon approval of the plan, the
Exchange will provide the Commission
a quarterly report of actions taken on
minor rule violations under the plan.
The quarterly report will include the
Exchange’s internal file number for the
case, the name of the individual and/or
organization, the nature of the violation,
the specific rule provision violated, the
sanction imposed, the number of times
the rule violation has occurred, and the
date of disposition.7
The Commission finds that the
proposed MRVP is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange. In
particular, the Commission believes that
the proposal is consistent with Section
6(b)(5) of the Act,8 which requires that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments and to
perfect the mechanism of a free and
open market and national market
system, and, in general, to protect
investors and the public interest. The
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act 9 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
the Commission and Exchange rules. In
addition, because the MRVP offers
request by BATS for Commission approval of a
modification to its MRVP.
7 BATS attached a sample form of the quarterly
report with its submission to the Commission.
8 15 U.S.C. 78f(b)(5).
9 15 U.S.C. 78f(b)(1) and 78f(b)(6).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
procedural rights to a person sanctioned
under Rule 8.15, the Commission
believes that Rule 8.15 provides a fair
procedure for the disciplining of
members and persons associated with
members, consistent with Sections
6(b)(7) and 6(d)(1) of the Act.10
Finally, the Commission finds that the
proposal is consistent with the public
interest, the protection of investors, or
otherwise in furtherance of the purposes
of the Act, as required by Rule 19d–
1(c)(2) under the Act,11 because the
MRVP strengthens BATS’s ability to
carry out its oversight and enforcement
responsibilities as an SRO in cases
where full disciplinary proceedings are
unsuitable in view of the minor nature
of the particular violation.
In approving this proposal, the
Commission in no way minimizes the
importance of compliance with
Exchange rules and all other rules
subject to the imposition of sanctions
under Rule 8.15. The Commission
believes that the violation of an SRO’s
rules, as well as Commission rules, is a
serious matter. However, Rule 8.15
provides a reasonable means of
addressing violations that do not rise to
the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. The Commission
expects that BATS will continue to
conduct surveillance with due diligence
and make determinations based on its
findings, on a case-by-case basis,
whether a sanction under the MRVP is
appropriate, or whether a violation
requires formal disciplinary action.
It is therefore ordered, pursuant to
Rule 19d–1(c)(2) under the Act,12 that
the proposed MRVP for BATS, File No.
4–568, be, and hereby is, approved and
declared effective.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8–25241 Filed 10–22–08; 8:45 am]
BILLING CODE 8011–01–P
10 15
11 17
U.S.C. 78f(b)(7) and 78f(d)(1).
CFR 240.19d–1(c)(2).
12 Id.
13 17
E:\FR\FM\23OCN1.SGM
CFR 200.30–3(a)(44).
23OCN1
]]>Agencies
[Federal Register Volume 73, Number 206 (Thursday, October 23, 2008)]
[Notices]
[Pages 63219-63220]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-25241]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58807; File No. 4-568]
Self-Regulatory Organizations; Order Approving Minor Rule
Violation Plan for BATS Exchange, Inc.
October 17, 2008.
On August 29, 2008, the BATS Exchange, Inc. (``BATS'' or the
``Exchange'') filed with the Securities
[[Page 63220]]
and Exchange Commission (the ``Commission'') a proposed minor rule
violation plan (``MRVP'') pursuant to Section 19(d)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19d-1(c)(2)
thereunder.\2\ The proposed MRVP was published for public comment on
September 16, 2008.\3\ The Commission received no comments on the
proposal. This order approves BATS's proposed
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(d)(1).
\2\ 17 CFR 240.19d-1(c)(2).
\3\ See Securities Exchange Act Release No. 58485 (September 8,
2008), 73 FR 53468.
---------------------------------------------------------------------------
BATS's MRVP specifies those uncontested minor rule violations with
sanctions not exceeding $2,500 which would not be subject to the
provisions of Rule 19d-1(c)(1) under the Act \4\ requiring that a self-
regulatory organization promptly file notice with the Commission of any
final disciplinary action taken with respect to any person or
organization.\5\ In accordance with Rule 19d-1(c)(2), the Exchange
proposed to designate certain rule violations as minor rule violations,
and requested that it be relieved of the reporting requirements
regarding such violations, provided it gives notice of such violations
to the Commission on a quarterly basis. BATS included in its proposed
MRVP the policies and procedures currently included in BATS Exchange
Rule 8.15 (``Imposition of Fines for Minor Violation(s) of Rules'') and
the rule violations included in BATS Exchange Rule 8.15.01,
Interpretations and Policies.\6\
---------------------------------------------------------------------------
\4\ 17 CFR 240.19d-1(c)(1).
\5\ The Commission adopted amendments to paragraph (c) of Rule
19d-1 to allow self-regulatory organizations (``SROs'') to submit
for Commission approval plans for the abbreviated reporting of minor
disciplinary infractions. See Securities Exchange Act Release No.
21013 (June 1, 1984), 49 FR 23828 (June 8, 1984). Any disciplinary
action taken by an SRO against any person for violation of a rule of
the SRO which has been designated as a minor rule violation pursuant
to such a plan shall not be considered ``final'' for purposes of
Section 19(d)(1) of the Act if the sanction imposed consists of a
fine not exceeding $2,500 and the sanctioned person has not sought
an adjudication, including a hearing, or otherwise exhausted his or
her administrative remedies.
\6\ On August 18, 2008, the Commission approved BATS's
application for registration as a national securities exchange,
including the rules governing the Exchange. See Securities Exchange
Act Release No. 58375, 73 FR 49498 (August 21, 2008). In the
approval order, the Commission noted that BATS Rule 8.15 provides
for the imposition of fines for minor rule violations pursuant to a
minor rule violation plan. Accordingly, the Commission noted that,
as a condition to the operation of the Exchange, it must file a
minor rule violation plan with the Commission. BATS represented that
modifications may be made to Rule 8.15.01 in the future. BATS
proposed that, when amendments to Rule 8.15.01 are made pursuant to
a rule filing submitted pursuant to Rule 19b-4 under the Act, such
filing would automatically be deemed a request by BATS for
Commission approval of a modification to its MRVP.
---------------------------------------------------------------------------
Pursuant to the Exchange's proposed MRVP, under Rule 8.15, the
Exchange may impose a fine (not to exceed $2,500) on a member, an
associated person of a member, or a registered or non-registered
employee of a member, with respect to any rule listed in Rule 8.15.01.
The Exchange shall serve the person against whom a fine is imposed with
a written statement setting forth the rule or rules allegedly violated,
the act or omission constituting each such violation, the fine imposed,
and the date by which such determination becomes final or by which such
determination must be contested. If the person against whom the fine is
imposed pays the fine, such payment shall be deemed to be a waiver of
such person's right to a disciplinary proceeding and any review of the
matter under Exchange rules. Any person against whom a fine is imposed
may contest the Exchange's determination by filing with the Exchange a
written response, at which point the matter shall become a disciplinary
proceeding.
Upon approval of the plan, the Exchange will provide the Commission
a quarterly report of actions taken on minor rule violations under the
plan. The quarterly report will include the Exchange's internal file
number for the case, the name of the individual and/or organization,
the nature of the violation, the specific rule provision violated, the
sanction imposed, the number of times the rule violation has occurred,
and the date of disposition.\7\
---------------------------------------------------------------------------
\7\ BATS attached a sample form of the quarterly report with its
submission to the Commission.
---------------------------------------------------------------------------
The Commission finds that the proposed MRVP is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. In particular, the
Commission believes that the proposal is consistent with Section
6(b)(5) of the Act,\8\ which requires that the rules of an exchange be
designed to promote just and equitable principles of trade, to remove
impediments and to perfect the mechanism of a free and open market and
national market system, and, in general, to protect investors and the
public interest. The Commission also believes that the proposal is
consistent with Sections 6(b)(1) and 6(b)(6) of the Act \9\ which
require that the rules of an exchange enforce compliance with, and
provide appropriate discipline for, violations of the Commission and
Exchange rules. In addition, because the MRVP offers procedural rights
to a person sanctioned under Rule 8.15, the Commission believes that
Rule 8.15 provides a fair procedure for the disciplining of members and
persons associated with members, consistent with Sections 6(b)(7) and
6(d)(1) of the Act.\10\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
---------------------------------------------------------------------------
Finally, the Commission finds that the proposal is consistent with
the public interest, the protection of investors, or otherwise in
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2)
under the Act,\11\ because the MRVP strengthens BATS's ability to carry
out its oversight and enforcement responsibilities as an SRO in cases
where full disciplinary proceedings are unsuitable in view of the minor
nature of the particular violation.
---------------------------------------------------------------------------
\11\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------
In approving this proposal, the Commission in no way minimizes the
importance of compliance with Exchange rules and all other rules
subject to the imposition of sanctions under Rule 8.15. The Commission
believes that the violation of an SRO's rules, as well as Commission
rules, is a serious matter. However, Rule 8.15 provides a reasonable
means of addressing violations that do not rise to the level of
requiring formal disciplinary proceedings, while providing greater
flexibility in handling certain violations. The Commission expects that
BATS will continue to conduct surveillance with due diligence and make
determinations based on its findings, on a case-by-case basis, whether
a sanction under the MRVP is appropriate, or whether a violation
requires formal disciplinary action.
It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the
Act,\12\ that the proposed MRVP for BATS, File No. 4-568, be, and
hereby is, approved and declared effective.
---------------------------------------------------------------------------
\12\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-25241 Filed 10-22-08; 8:45 am]
BILLING CODE 8011-01-P
