Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Order Approving and Declaring Effective a Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Boston Stock Exchange, Incorporated, 2143-2145 [E9-613]

Download as PDF Federal Register / Vol. 74, No. 9 / Wednesday, January 14, 2009 / Notices Inquiries may be mailed, delivered, or faxed to Caroyl Miller, Deputy Special Textile Negotiator, Office of the United States Trade Representative, 600 17th Street, NW., Washington, DC 20508, fax number, (202) 395–5639. ADDRESSES: SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59218; File No. 4–575] FOR FURTHER INFORMATION CONTACT: Caroyl Miller, Office of the United States Trade Representative, 202–395– 3026. Section 205(a) of the Act (Pub. L. 109–53; 119 Stat. 462, 483; 19 U.S.C. 4034) provides that certain entries of textile or apparel goods of designated eligible countries that are parties to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA–DR) made on or after January 1, 2004 may be liquidated or reliquidated at the applicable rate of duty for those goods established in the Schedule of the United States to Annex 3.3 of the CAFTA–DR. Section 205(b) of the Act requires the USTR to determine, in accordance with Article 3.20 of the CAFTA–DR, which CAFTA–DR countries are eligible countries for purposes of Section 205(a). Article 3.20 provides that importers may claim retroactive duty treatment for imports of certain textile or apparel goods entered on or after January 1, 2004 and before the entry into force of CAFTA–DR from those CAFTA–DR countries that will provide reciprocal retroactive duty treatment or a benefit for textile or apparel goods that is equivalent to retroactive duty treatment. Pursuant to Section 205(b) of the Act, I have determined that Costa Rica will provide an equivalent benefit for textile or apparel goods of the United States within the meaning of Article 3.20 of the CAFTA–DR. I therefore determine that Costa Rica is an eligible country for purposes of Section 205 of the Act. SUPPLEMENTARY INFORMATION: Susan C. Schwab, U.S. Trade Representative. [FR Doc. E9–493 Filed 1–13–09; 8:45 am] sroberts on PROD1PC70 with NOTICES BILLING CODE 3190–W9–P Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Order Approving and Declaring Effective a Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Boston Stock Exchange, Incorporated January 8, 2009. On December 8, 2008, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and the Boston Stock Exchange, Incorporated (‘‘BX’’) (together with FINRA, the ‘‘Parties’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a plan for the allocation of regulatory responsibilities, dated December 5, 2008 (‘‘17d–2 Plan’’ or the ‘‘Plan’’). The Plan was published for comment on December 22, 2008.1 The Commission received no comments on the Plan. This order approves and declares effective the Plan. I. Introduction Section 19(g)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),2 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.3 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 4 was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.5 With respect to a common member, Section 17(d)(1) 1 See Securities Exchange Act Release No. 59101 (December 15, 2008), 73 FR 78402. 2 15 U.S.C. 78s(g)(1). 3 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. 4 15 U.S.C. 78q(d)(1). 5 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). VerDate Nov<24>2008 21:01 Jan 13, 2009 Jkt 217001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 2143 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.6 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.7 When an SRO has been named as a common member’s DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d–1 deals only with an SRO’s obligations to enforce member compliance with financial responsibility requirements. Rule 17d–1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. To address regulatory duplication in these and other areas, the Commission adopted Rule 17d–2 under the Act.8 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. 6 17 CFR 240.17d–1 and 17 CFR 240.17d–2, respectively. 7 See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). 8 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). E:\FR\FM\14JAN1.SGM 14JAN1 2144 Federal Register / Vol. 74, No. 9 / Wednesday, January 14, 2009 / Notices sroberts on PROD1PC70 with NOTICES II. Proposed Plan On August 29, 2008, BX was acquired by The NASDAQ OMX Group, Inc. (‘‘NASDAQ OMX’’). At the time of this acquisition, BX was not operating a venue for trading cash equities. BX has since adopted a new rulebook with rules governing membership, the regulatory obligations of members, listing, and equity trading.9 The new BX rules, in particular the member conduct rules that would be the Common Rules under the proposed Plan, are based to a substantial extent on the rules of the NASDAQ Stock Market LLC (‘‘NASDAQ Exchange’’),10 which, in turn, are based to a substantial extent on the comparable rules of FINRA. The NASDAQ Exchange currently is party to a 17d–2 plan with FINRA.11 The proposed Plan would allocate regulatory responsibility between BX and FINRA in a manner similar to the allocation of regulatory responsibility that currently exists between the NASDAQ Exchange and FINRA. Accordingly, the proposed 17d–2 Plan is intended to reduce regulatory duplication for firms that are common members of both FINRA and BX.12 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 ‘‘Rules Certification for 17d–2 Agreement with FINFA,’’ referred to herein as the ‘‘Certification’’) that lists every BX 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 BX 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 9 See Securities Exchange Act Release Nos. 58927 (November 10, 2008), 73 FR 69685 (November 19, 2008) (SR–BSE–2008–48) (notice of proposed rule change); and 59154 (December 23, 2008), 73 FR 80468 (December 31, 2008) (SR–BSE–2008–48) (order approving proposed rule change). 10 See Securities Exchange Act Release No. 58927 (November 10, 2008), 73 FR at 69686 (November 19, 2008) (SR–BSE–2008–48) (notice of proposed rule change). 11 See Securities Exchange Act Release No. 54136 (July 12, 2006), 71 FR 40759 (July 18, 2006) (File No. 4–517) (order approving and declaring effective the plan between the NASDAQ Exchange and NASD (n/k/a FINRA)). 12 The proposed 17d–2 Plan refers to these common members as ‘‘Dual Members.’’ See Paragraph 1(c) of the proposed 17d–2 Plan. VerDate Nov<24>2008 21:01 Jan 13, 2009 Jkt 217001 enforcement responsibility relating to compliance by Dual Members with the rules of BX that are substantially similar to the applicable rules of FINRA, as well as any provisions of the federal securities laws and the rules and regulations thereunder delineated in the Certification (‘‘Common Rules’’).13 Common Rules would not include the application of any BX 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–2.14 In the event that a Dual Member is the subject of an investigation relating to a transaction on BX, the plan acknowledges that BX may, in its discretion, exercise concurrent jurisdiction and responsibility for such matter.15 Under the Plan, BX would retain full responsibility for surveillance, examination, investigation, and enforcement with respect to trading activities or practices involving BX’s own marketplace; registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules); its duties and obligations as a DEA pursuant to Rule 17d–1 under the Act; and any BX rules that are not Common Rules.16 III. Discussion The Commission finds that the proposed Plan is consistent with the factors set forth in Section 17(d) of the Act 17 and Rule 17d–2(c) thereunder 18 in that the proposed Plan is necessary or appropriate in the public interest and for the protection of investors, fosters cooperation and coordination among SROs, and removes impediments to and fosters the development of the national market system. In particular, the Commission believes that the proposed Plan should reduce unnecessary 13 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 BX 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 BX shall furnish FINRA with a list of Dual Members, and shall update the list no less frequently than once each calendar quarter. 14 See Securities Exchange Act Release No. 58806 (October 17, 2008), 73 FR 63216 (October 23, 2008) (File No. 4–566) (notice of filing and order approving and declaring effective the plan). The Certification identifies two Common Rules that may also be addressed in the context of regulating insider trading activities pursuant to the separate multiparty agreement. 15 See paragraph 6 of the proposed 17d–2 Plan. 16 See paragraph 2 of the proposed 17d–2 Plan. 17 15 U.S.C. 78q(d). 18 17 CFR 240.17d–2(c). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 regulatory duplication by allocating to FINRA certain examination and enforcement responsibilities for Dual Members that would otherwise be performed by both BX and FINRA. Accordingly, the proposed Plan promotes efficiency by reducing costs to Dual Members. Furthermore, because BX and FINRA will coordinate their regulatory functions in accordance with the Plan, the Plan should promote investor protection. The Commission notes that the proposed Plan would allocate regulatory responsibility between BX and FINRA in a manner similar to the allocation of regulatory responsibility that currently exists between the NASDAQ Exchange and FINRA.19 The Commission notes that, under the Plan, BX and FINRA have allocated regulatory responsibility for those BX rules, set forth on the Certification, that are substantially similar to the applicable FINRA rules 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 rule, or a Dual Member’s activity, conduct, or output in relation to such rule. In addition, under the Plan, FINRA would assume regulatory responsibility for certain provisions of the federal securities laws and the rules and regulations thereunder that are set forth in the Certification. The Common Rules covered by the Plan are specifically listed in the Certification, as may be amended by the Parties from time to time. According to the Plan, BX will review the Certification, at least annually, or more frequently if required by changes in either the rules of BX or FINRA, and, if necessary, submit to FINRA an updated list of Common Rules to add BX rules not included on the thencurrent list of Common Rules that are substantially similar to FINRA rules; delete BX rules included in the thencurrent list of Common Rules that are no longer substantially similar to FINRA rules; and confirm that the remaining rules on the list of Common Rules continue to be BX rules that are substantially similar to FINRA rules.20 19 The proposed new BX rules are based to a substantial extent on the rules of the NASDAQ Exchange which, in turn, are based to a substantial extent on the comparable rules of FINRA. The NASDAQ Exchange currently is party to a 17d–2 plan with FINRA. See Securities Exchange Act Release No. 54136 (July 12, 2006), 71 FR 40759 (July 18, 2006) (File No. 4–517) (order approving and declaring effective the plan between the NASDAQ Exchange and NASD (n/k/a FINRA)). 20 See paragraph 2 of the proposed 17d–2 Plan. E:\FR\FM\14JAN1.SGM 14JAN1 Federal Register / Vol. 74, No. 9 / Wednesday, January 14, 2009 / Notices FINRA will then confirm in writing whether the rules listed in any updated list are Common Rules as defined in the Plan. Under the Plan, BX will also provide FINRA with a current list of Dual Members and shall update the list no less frequently than once each quarter.21 The Commission believes that these provisions are designed to provide for continuing communication between the Parties to ensure the continued accuracy of the scope of the proposed allocation of regulatory responsibility. The Commission is hereby declaring effective a plan that, among other things, allocates regulatory responsibility to FINRA for the oversight and enforcement of all BX rules that are substantially similar to the rules of FINRA for Dual Members of BX and FINRA. Therefore, modifications to the Certification need not be filed with the Commission as an amendment to the Plan, provided that the Parties are only adding to, deleting from, or confirming changes to BX rules in the Certification in conformance with the definition of Common Rules provided in the Plan. However, should the Parties decide to add a BX rule to the Certification that is not substantially similar to a FINRA rule; delete a BX rule from the Certification that is substantially similar to a FINRA rule; or leave on the Certification a BX rule that is no longer substantially similar to a FINRA rule, then such a change would constitute an amendment to the Plan, which must be filed with the Commission pursuant to Rule 17d–2 under the Act and noticed for public comment.22 The Plan also permits BX and FINRA to terminate the Plan, subject to notice.23 The Commission notes, however, that while the Plan permits the Parties to terminate the Plan, the Parties cannot by themselves reallocate the regulatory responsibilities set forth in the Plan, since Rule 17d–2 under the Act requires that any allocation or reallocation of regulatory responsibilities be filed with the Commission.24 IV. Conclusion This Order gives effect to the Plan filed with the Commission in File No. 4–575. The Parties shall notify all 21 See paragraph 3 of the proposed 17d–2 Plan. Commission also notes that the addition to or deletion from the Certification of any federal securities laws, rules, and regulations for which FINRA would bear responsibility under the Plan for examining, and enforcing compliance by, Dual Members, also would constitute an amendment to the Plan. 23 See paragraph 13 of the proposed 17d–2 Plan. 24 The Commission notes that paragraph 13 of the Plan reflects the fact that FINRA’s responsibilities under the Plan will continue in effect until the Commission approves any termination of the Plan. sroberts on PROD1PC70 with NOTICES 22 The VerDate Nov<24>2008 21:01 Jan 13, 2009 Jkt 217001 members affected by the Plan of their rights and obligations under the Plan. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan in File No. 4–575, between FINRA and BX, filed pursuant to Rule 17d–2 under the Act, is approved and declared effective. It is further ordered that BX is relieved of those responsibilities allocated to FINRA under the Plan in File No. 4–575. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–613 Filed 1–13–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59222; File No. SR–FINRA– 2009–002] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Conforming Changes to FINRA Rules 6380B and 6730 To Reflect Amendments Proposed Pursuant to SR–FINRA– 2008–060 January 8, 2009. 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 January 8, 2009, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) (‘‘FINRA’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 25 17 CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 2145 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to make conforming changes to Rules 6380B and 6730 to reflect amendments that were proposed pursuant to proposed rule change SR–FINRA–2008–060, but were superseded by an intervening rule change. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On December 11, 2008, FINRA filed proposed rule change SR–FINRA–2008– 060 to amend FINRA rules to clarify the trade reporting requirements relating to transfers of securities pursuant to an asset purchase agreement (‘‘APA’’). In that filing, FINRA proposed to amend Rule 6380C(e) relating to trade reporting to the FINRA/NYSE Trade Reporting Facility (the ‘‘FINRA/NYSE TRF’’) and Rule 6730(e) relating to trade reporting to the Trade Reporting and Compliance Engine (‘‘TRACE’’). SR–FINRA–2008– 060 was filed for immediate effectiveness with an operative date of January 12, 2009.4 On December 18, 2008, FINRA filed proposed rule change SR–FINRA–2008– 065 to extend the pilot program in Rule 6730(e)(4). SR–FINRA–2008–065 was filed for immediate effectiveness with an operative date of January 8, 2009. The underlying text of SR–FINRA– 2008–065 did not reflect the amendments to Rule 6730(e) that were proposed pursuant to SR–FINRA–2008– 4 See Securities Exchange Act Release No. 59126 (December 19, 2008), 73 FR 79948 (December 30, 2008) (notice of filing and immediate effectiveness of SR–FINRA–2008–060). E:\FR\FM\14JAN1.SGM 14JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 9 (Wednesday, January 14, 2009)]
[Notices]
[Pages 2143-2145]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-613]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59218; File No. 4-575]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Order Approving and Declaring Effective a Plan for the 
Allocation of Regulatory Responsibilities Between the Financial 
Industry Regulatory Authority, Inc. and the Boston Stock Exchange, 
Incorporated

January 8, 2009.
    On December 8, 2008, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') and the Boston Stock Exchange, Incorporated (``BX'') 
(together with FINRA, the ``Parties'') filed with the Securities and 
Exchange Commission (``Commission'') a plan for the allocation of 
regulatory responsibilities, dated December 5, 2008 (``17d-2 Plan'' or 
the ``Plan''). The Plan was published for comment on December 22, 
2008.\1\ The Commission received no comments on the Plan. This order 
approves and declares effective the Plan.
---------------------------------------------------------------------------

    \1\ See Securities Exchange Act Release No. 59101 (December 15, 
2008), 73 FR 78402.
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I. Introduction

    Section 19(g)(1) of the Securities Exchange Act of 1934 
(``Act''),\2\ 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.\3\ 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.
---------------------------------------------------------------------------

    \2\ 15 U.S.C. 78s(g)(1).
    \3\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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    Section 17(d)(1) of the Act \4\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\5\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78q(d)(1).
    \5\ 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).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\6\ 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.\7\ 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.
---------------------------------------------------------------------------

    \6\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \7\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\8\ 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.
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    \8\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).

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[[Page 2144]]

II. Proposed Plan

    On August 29, 2008, BX was acquired by The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''). At the time of this acquisition, BX was not operating 
a venue for trading cash equities. BX has since adopted a new rulebook 
with rules governing membership, the regulatory obligations of members, 
listing, and equity trading.\9\ The new BX rules, in particular the 
member conduct rules that would be the Common Rules under the proposed 
Plan, are based to a substantial extent on the rules of the NASDAQ 
Stock Market LLC (``NASDAQ Exchange''),\10\ which, in turn, are based 
to a substantial extent on the comparable rules of FINRA.
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    \9\ See Securities Exchange Act Release Nos. 58927 (November 10, 
2008), 73 FR 69685 (November 19, 2008) (SR-BSE-2008-48) (notice of 
proposed rule change); and 59154 (December 23, 2008), 73 FR 80468 
(December 31, 2008) (SR-BSE-2008-48) (order approving proposed rule 
change).
    \10\ See Securities Exchange Act Release No. 58927 (November 10, 
2008), 73 FR at 69686 (November 19, 2008) (SR-BSE-2008-48) (notice 
of proposed rule change).
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    The NASDAQ Exchange currently is party to a 17d-2 plan with 
FINRA.\11\ The proposed Plan would allocate regulatory responsibility 
between BX and FINRA in a manner similar to the allocation of 
regulatory responsibility that currently exists between the NASDAQ 
Exchange and FINRA.
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    \11\ See Securities Exchange Act Release No. 54136 (July 12, 
2006), 71 FR 40759 (July 18, 2006) (File No. 4-517) (order approving 
and declaring effective the plan between the NASDAQ Exchange and 
NASD (n/k/a FINRA)).
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    Accordingly, the proposed 17d-2 Plan is intended to reduce 
regulatory duplication for firms that are common members of both FINRA 
and BX.\12\ 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.
---------------------------------------------------------------------------

    \12\ 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 ``Rules Certification for 17d-2 Agreement with 
FINFA,'' referred to herein as the ``Certification'') that lists every 
BX 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 BX 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 BX that are substantially similar to the applicable 
rules of FINRA, as well as any provisions of the federal securities 
laws and the rules and regulations thereunder delineated in the 
Certification (``Common Rules'').\13\ Common Rules would not include 
the application of any BX 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.\14\ In the event that a Dual 
Member is the subject of an investigation relating to a transaction on 
BX, the plan acknowledges that BX may, in its discretion, exercise 
concurrent jurisdiction and responsibility for such matter.\15\
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    \13\ 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 BX 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 BX shall furnish FINRA with a list of Dual 
Members, and shall update the list no less frequently than once each 
calendar quarter.
    \14\ See Securities Exchange Act Release No. 58806 (October 17, 
2008), 73 FR 63216 (October 23, 2008) (File No. 4-566) (notice of 
filing and order approving and declaring effective the plan). The 
Certification identifies two Common Rules that may also be addressed 
in the context of regulating insider trading activities pursuant to 
the separate multiparty agreement.
    \15\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    Under the Plan, BX would retain full responsibility for 
surveillance, examination, investigation, and enforcement with respect 
to trading activities or practices involving BX's own marketplace; 
registration pursuant to its applicable rules of associated persons 
(i.e., registration rules that are not Common Rules); its duties and 
obligations as a DEA pursuant to Rule 17d-1 under the Act; and any BX 
rules that are not Common Rules.\16\
---------------------------------------------------------------------------

    \16\ See paragraph 2 of the proposed 17d-2 Plan.
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III. Discussion

    The Commission finds that the proposed Plan is consistent with the 
factors set forth in Section 17(d) of the Act \17\ and Rule 17d-2(c) 
thereunder \18\ in that the proposed Plan is necessary or appropriate 
in the public interest and for the protection of investors, fosters 
cooperation and coordination among SROs, and removes impediments to and 
fosters the development of the national market system. In particular, 
the Commission believes that the proposed Plan should reduce 
unnecessary regulatory duplication by allocating to FINRA certain 
examination and enforcement responsibilities for Dual Members that 
would otherwise be performed by both BX and FINRA. Accordingly, the 
proposed Plan promotes efficiency by reducing costs to Dual Members. 
Furthermore, because BX and FINRA will coordinate their regulatory 
functions in accordance with the Plan, the Plan should promote investor 
protection. The Commission notes that the proposed Plan would allocate 
regulatory responsibility between BX and FINRA in a manner similar to 
the allocation of regulatory responsibility that currently exists 
between the NASDAQ Exchange and FINRA.\19\
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    \17\ 15 U.S.C. 78q(d).
    \18\ 17 CFR 240.17d-2(c).
    \19\ The proposed new BX rules are based to a substantial extent 
on the rules of the NASDAQ Exchange which, in turn, are based to a 
substantial extent on the comparable rules of FINRA. The NASDAQ 
Exchange currently is party to a 17d-2 plan with FINRA. See 
Securities Exchange Act Release No. 54136 (July 12, 2006), 71 FR 
40759 (July 18, 2006) (File No. 4-517) (order approving and 
declaring effective the plan between the NASDAQ Exchange and NASD 
(n/k/a FINRA)).
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    The Commission notes that, under the Plan, BX and FINRA have 
allocated regulatory responsibility for those BX rules, set forth on 
the Certification, that are substantially similar to the applicable 
FINRA rules 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 rule, or a Dual Member's activity, conduct, or 
output in relation to such rule. In addition, under the Plan, FINRA 
would assume regulatory responsibility for certain provisions of the 
federal securities laws and the rules and regulations thereunder that 
are set forth in the Certification. The Common Rules covered by the 
Plan are specifically listed in the Certification, as may be amended by 
the Parties from time to time.
    According to the Plan, BX will review the Certification, at least 
annually, or more frequently if required by changes in either the rules 
of BX or FINRA, and, if necessary, submit to FINRA an updated list of 
Common Rules to add BX rules not included on the then-current list of 
Common Rules that are substantially similar to FINRA rules; delete BX 
rules included in the then-current list of Common Rules that are no 
longer substantially similar to FINRA rules; and confirm that the 
remaining rules on the list of Common Rules continue to be BX rules 
that are substantially similar to FINRA rules.\20\

[[Page 2145]]

FINRA will then confirm in writing whether the rules listed in any 
updated list are Common Rules as defined in the Plan. Under the Plan, 
BX will also provide FINRA with a current list of Dual Members and 
shall update the list no less frequently than once each quarter.\21\ 
The Commission believes that these provisions are designed to provide 
for continuing communication between the Parties to ensure the 
continued accuracy of the scope of the proposed allocation of 
regulatory responsibility.
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    \20\ See paragraph 2 of the proposed 17d-2 Plan.
    \21\ See paragraph 3 of the proposed 17d-2 Plan.
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    The Commission is hereby declaring effective a plan that, among 
other things, allocates regulatory responsibility to FINRA for the 
oversight and enforcement of all BX rules that are substantially 
similar to the rules of FINRA for Dual Members of BX and FINRA. 
Therefore, modifications to the Certification need not be filed with 
the Commission as an amendment to the Plan, provided that the Parties 
are only adding to, deleting from, or confirming changes to BX rules in 
the Certification in conformance with the definition of Common Rules 
provided in the Plan. However, should the Parties decide to add a BX 
rule to the Certification that is not substantially similar to a FINRA 
rule; delete a BX rule from the Certification that is substantially 
similar to a FINRA rule; or leave on the Certification a BX rule that 
is no longer substantially similar to a FINRA rule, then such a change 
would constitute an amendment to the Plan, which must be filed with the 
Commission pursuant to Rule 17d-2 under the Act and noticed for public 
comment.\22\
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    \22\ The Commission also notes that the addition to or deletion 
from the Certification of any federal securities laws, rules, and 
regulations for which FINRA would bear responsibility under the Plan 
for examining, and enforcing compliance by, Dual Members, also would 
constitute an amendment to the Plan.
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    The Plan also permits BX and FINRA to terminate the Plan, subject 
to notice.\23\ The Commission notes, however, that while the Plan 
permits the Parties to terminate the Plan, the Parties cannot by 
themselves reallocate the regulatory responsibilities set forth in the 
Plan, since Rule 17d-2 under the Act requires that any allocation or 
re-allocation of regulatory responsibilities be filed with the 
Commission.\24\
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    \23\ See paragraph 13 of the proposed 17d-2 Plan.
    \24\ The Commission notes that paragraph 13 of the Plan reflects 
the fact that FINRA's responsibilities under the Plan will continue 
in effect until the Commission approves any termination of the Plan.
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IV. Conclusion

    This Order gives effect to the Plan filed with the Commission in 
File No. 4-575. The Parties shall notify all members affected by the 
Plan of their rights and obligations under the Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Plan in File No. 4-575, between FINRA and BX, filed pursuant to 
Rule 17d-2 under the Act, is approved and declared effective.
    It is further ordered that BX is relieved of those responsibilities 
allocated to FINRA under the Plan in File No. 4-575.
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    \25\ 17 CFR 200.30-3(a)(34).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-613 Filed 1-13-09; 8:45 am]
BILLING CODE 8011-01-P

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