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 Chicago Stock Exchange, Inc., 55833-55835 [2010-22837]
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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Notices
Physical Loan Application Deadline
Date: 10/12/2010.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/11/2011.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice
of the President’s major disaster
declaration for Private Non-Profit
organizations in the State of
WISCONSIN, dated 08/11/2010, is
hereby amended to include the
following areas as adversely affected by
the disaster.
Primary Counties: Calumet.
All other information in the original
declaration remains unchanged.
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
James E. Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2010–22912 Filed 9–13–10; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #12303 and #12304]
Tennessee Disaster #TN–00042
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
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The Interest Rates are:
Percent
For Physical Damage:
Homeowners With Credit Available Elsewhere ......................
Homeowners Without Credit
Available Elsewhere ..............
Businesses With Credit Available Elsewhere ......................
Businesses
Without
Credit
Available Elsewhere ..............
Non-Profit Organizations With
Credit Available Elsewhere ...
Non-Profit Organizations Without Credit Available Elsewhere .....................................
For Economic Injury:
Businesses & Small Agricultural
Cooperatives Without Credit
Available Elsewhere ..............
5.000
2.500
6.000
4.000
3.625
3.000
4.000
Non-Profit Organizations Without
Credit Available Elsewhere 3.000.
The number assigned to this disaster
for physical damage is 12303 B and for
economic injury is 123040.
The States which received an EIDL
Declaration # are Tennessee.
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
This is a notice of an
Administrative declaration of a disaster
for the State of Tennessee dated 09/07/
2010.
Incident: Severe Storms and Flooding.
Incident Period: 08/16/2010.
DATES: Effective Date: 09/07/2010.
Physical Loan Application Deadline
Date: 11/08/2010.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/07/2011.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
SUMMARY:
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Putnam.
Contiguous Counties:
Tennessee: Cumberland, Dekalb,
Fentress, Jackson, Overton, Smith,
White.
Dated: September 7, 2010.
Karen G. Mills,
Administrator.
[FR Doc. 2010–22914 Filed 9–13–10; 8:45 am]
BILLING CODE 8025–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62866; File No. 4–274]
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 Chicago Stock
Exchange, Inc.
September 8, 2010.
On July 21, 2010, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) and the Chicago Stock
Exchange, Inc. (‘‘CHX’’) (together with
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55833
FINRA, the ‘‘Parties’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’), pursuant to
Section 17(d) of the Securities Exchange
Act of 1934 (‘‘Act’’),1 and Rule 17d–2
thereunder,2 an amendment to their
September 16, 1977 Agreement Between
the National Association of Securities
Dealers, Inc. (n/k/a FINRA) and the
Midwest Stock Exchange Incorporated
(n/k/a CHX) (‘‘17d–2 Plan’’ or the ‘‘Plan’’)
for the allocation of regulatory
responsibilities. The proposed amended
Plan was published for comment on
August 12, 2010.3 The Commission
received no comments on the amended
Plan. This order approves and declares
effective the amended Plan.
I. Introduction
Section 19(g)(1) of the Act,4 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.5 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 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 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
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 See Securities Exchange Act Release No. 62657
(August 5, 2010), 75 FR 49005 (August 12, 2010).
4 15 U.S.C. 78s(g)(1).
5 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
respectively.
6 15 U.S.C. 78q(d)(1).
7 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).
2 17
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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Notices
17d–1 and Rule 17d–2 under the Act.8
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.9 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.10
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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II. The Plan
On September 26, 1978, the
Commission approved the Plan
allocating regulatory responsibilities
pursuant to Rule 17d–2 on a provisional
basis.11 Under the Plan, FINRA was
responsible, in part, for conducting onsite examinations of each dual member
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
10 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
11 See Securities Exchange Act Release No. 15191
(September 26, 1978), 43 FR 46093 (October 5,
1978).
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for which it was the DEA. On February
20, 1980, the Commission noticed for
comment an amendment to the Plan,
which provided, in part, for the
handling of customer complaints, the
review of dual members’ advertising,
and the arbitration of disputes under the
Plan.12 On May 30, 1980, the
Commission approved the Plan, as
amended.13
III. Proposed Amendment to the Plan
The proposed 17d–2 Plan is intended
to reduce regulatory duplication for
firms that are common members 14 of
both CHX and FINRA. 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 amended agreement
would replace the previous Plan in its
entirety.
The text of the proposed Plan
delineates the proposed regulatory
responsibilities with respect to the
Parties. Included in the proposed Plan
is an exhibit (the ‘‘CHX Certification of
Common Rules’’ referred to herein as the
‘‘Certification’’) that lists every CHX
rule, and select federal securities laws,
rules, and regulations, for which FINRA
would bear responsibility under the
proposed Plan for examining and
enforcing with respect to CHX members
that are also members of FINRA and the
associated persons therewith (‘‘Dual
Members’’).
Specifically, under the proposed 17d–
2 Plan, FINRA would assume
examination and enforcement
responsibility relating to compliance by
Dual Members with the rules of CHX
that are substantially similar to the
applicable rules of FINRA, as well as
certain provisions of the federal
securities laws and the rules and
regulations thereunder delineated in the
Certification (‘‘Common Rules’’).15
Common Rules would not include the
application of any CHX 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 pursuant
12 See Securities Exchange Act Release No. 16591
(February 20, 1980), 45 FR 12573 (February 26,
1980).
13 See Securities Exchange Act Release No. 16858
(May 30, 1980), 45 FR 37927 (June 5, 1980).
14 The proposed 17d–2 Plan refers to these
members as ‘‘Dual Members.’’ See Paragraph 1(c) of
the proposed 17d–2 Plan.
15 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).
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to Rule 17d–2.16 In the event that a Dual
Member is the subject of an
investigation relating to a transaction on
CHX, the plan acknowledges that CHX
may, in its discretion, exercise
concurrent jurisdiction and
responsibility for such matter.17
Under the proposed Plan, CHX would
retain full responsibility for
surveillance, examination, investigation,
and enforcement with respect to trading
activities or practices involving CHX’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 CHX rules
that are not Common Rules.18
IV. Discussion
The Commission finds that the
proposed Plan is consistent with the
factors set forth in Section 17(d) of the
Act 19 and Rule 17d–2(c) thereunder 20
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 CHX and FINRA.
Accordingly, the proposed Plan
promotes efficiency by reducing costs to
Dual Members. Furthermore, because
CHX and FINRA will coordinate their
regulatory functions in accordance with
the proposed Plan, the Plan should
promote investor protection.
The Commission notes that, under the
proposed Plan, CHX and FINRA have
allocated regulatory responsibility for
those CHX 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 proposed Plan,
16 See Securities Exchange Act Release No. 61919
(April 15, 2010), 75 FR 21051 (April 22, 2010) (File
No. 4–566) (notice of filing and order approving and
declaring effective the plan).
17 See paragraph 6 of the proposed 17d–2 Plan.
18 See paragraph 2 of the proposed 17d–2 Plan.
19 15 U.S.C. 78q(d).
20 17 CFR 240.17d–2(c).
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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Notices
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 proposed Plan are
specifically listed in the Certification, as
may be amended by the Parties from
time to time pursuant to the terms and
conditions specified in the Plan.
According to the proposed Plan, CHX
will review the Certification, at least
annually, or more frequently if required
by changes in either the rules of CHX or
FINRA, and, if necessary, submit to
FINRA an updated list of Common
Rules to add CHX rules not included on
the then-current list of Common Rules
that are substantially similar to FINRA
rules; delete CHX 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 CHX rules that are
substantially similar to FINRA rules.21
FINRA will then confirm in writing
whether the rules listed in any updated
list are Common Rules as defined in the
proposed Plan. Under the proposed
Plan, CHX will also provide FINRA with
a current list of Dual Members and shall
update the list no less frequently than
once each quarter.22
Under the proposed Plan, CHX would
retain full responsibility for
surveillance, examination, investigation,
and enforcement with respect to trading
activities or practices involving CHX’s
own marketplace; 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 CHX rules that are not Common
Rules.
The Commission is hereby declaring
effective a plan that, among other
things, allocates regulatory
responsibility to FINRA for the
oversight and enforcement of CHX rules
that are substantially similar to the rules
of FINRA for Dual Members of CHX 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 CHX rules in the
Certification in conformance with the
definition of Common Rules provided in
the Plan. However, should the Parties
decide to add a CHX rule to the
Certification that is not substantially
similar to a FINRA rule; delete a CHX
rule from the Certification that is
21 See
22 See
paragraph 2 of the proposed 17d–2 Plan.
paragraph 3 of the proposed 17d–2 Plan.
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16:38 Sep 13, 2010
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substantially similar to a FINRA rule; or
leave on the Certification a CHX 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.23
The Plan also permits CHX and
FINRA to terminate the Plan, subject to
notice.24 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.25
IV. Conclusion
This Order gives effect to the Plan
filed with the Commission in File No.
4–274. 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. 4–274, between FINRA and
CHX, filed pursuant to Rule 17d–2
under the Act, is approved and declared
effective.
It is therefore ordered that CHX is
relieved of those responsibilities
allocated to FINRA under the Plan in
File No. 4–274.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–22837 Filed 9–13–10; 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 an Open Meeting
on September 17, 2010 at 10 a.m., in the
Auditorium, Room L–002.
23 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.
24 See paragraph 12 of the proposed 17d–2 Plan.
25 The Commission notes that paragraph 12 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.
26 17 CFR 200.30–3(a)(34).
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55835
The subject matter of the Open
Meeting will be:
The Commission will consider whether to
propose rules that would require a public
company to provide certain disclosures about
its short-term borrowings in its filings with
the Commission. The Commission will also
consider whether to publish an interpretive
release to provide guidance regarding the
Commission’s current disclosure
requirements in ‘‘Management’s Discussion
and Analysis of Financial Condition and
Results of Operations’’ relating to liquidity
and capital resources.
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 10, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–22949 Filed 9–10–10; 11:15 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act; Notice of 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 16, 2010 at 3
p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Paredes, as duty
officer, voted to consider the items
listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting scheduled for Thursday,
September 16, 2010 will be:
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings; an
opinion; and
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]]>Agencies
[Federal Register Volume 75, Number 177 (Tuesday, September 14, 2010)]
[Notices]
[Pages 55833-55835]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-22837]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62866; File No. 4-274]
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 Chicago Stock Exchange,
Inc.
September 8, 2010.
On July 21, 2010, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and the Chicago Stock Exchange, Inc. (``CHX'') (together
with FINRA, the ``Parties'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to Section 17(d) of
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 17d-2
thereunder,\2\ an amendment to their September 16, 1977 Agreement
Between the National Association of Securities Dealers, Inc. (n/k/a
FINRA) and the Midwest Stock Exchange Incorporated (n/k/a CHX) (``17d-2
Plan'' or the ``Plan'') for the allocation of regulatory
responsibilities. The proposed amended Plan was published for comment
on August 12, 2010.\3\ The Commission received no comments on the
amended Plan. This order approves and declares effective the amended
Plan.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
\3\ See Securities Exchange Act Release No. 62657 (August 5,
2010), 75 FR 49005 (August 12, 2010).
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\4\ 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.\5\ 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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(g)(1).
\5\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ 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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ 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
[[Page 55834]]
17d-1 and Rule 17d-2 under the Act.\8\ 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.\9\ 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.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ 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.\10\ 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.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. The Plan
On September 26, 1978, the Commission approved the Plan allocating
regulatory responsibilities pursuant to Rule 17d-2 on a provisional
basis.\11\ Under the Plan, FINRA was responsible, in part, for
conducting on-site examinations of each dual member for which it was
the DEA. On February 20, 1980, the Commission noticed for comment an
amendment to the Plan, which provided, in part, for the handling of
customer complaints, the review of dual members' advertising, and the
arbitration of disputes under the Plan.\12\ On May 30, 1980, the
Commission approved the Plan, as amended.\13\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 15191 (September
26, 1978), 43 FR 46093 (October 5, 1978).
\12\ See Securities Exchange Act Release No. 16591 (February 20,
1980), 45 FR 12573 (February 26, 1980).
\13\ See Securities Exchange Act Release No. 16858 (May 30,
1980), 45 FR 37927 (June 5, 1980).
---------------------------------------------------------------------------
III. Proposed Amendment to the Plan
The proposed 17d-2 Plan is intended to reduce regulatory
duplication for firms that are common members \14\ of both CHX and
FINRA. 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 amended
agreement would replace the previous Plan in its entirety.
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\14\ The proposed 17d-2 Plan refers to these members as ``Dual
Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
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The text of the proposed Plan delineates the proposed regulatory
responsibilities with respect to the Parties. Included in the proposed
Plan is an exhibit (the ``CHX Certification of Common Rules'' referred
to herein as the ``Certification'') that lists every CHX rule, and
select federal securities laws, rules, and regulations, for which FINRA
would bear responsibility under the proposed Plan for examining and
enforcing with respect to CHX members that are also members of FINRA
and the associated persons therewith (``Dual Members'').
Specifically, under the proposed 17d-2 Plan, FINRA would assume
examination and enforcement responsibility relating to compliance by
Dual Members with the rules of CHX that are substantially similar to
the applicable rules of FINRA, as well as certain provisions of the
federal securities laws and the rules and regulations thereunder
delineated in the Certification (``Common Rules'').\15\ Common Rules
would not include the application of any CHX 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 pursuant to Rule 17d-2.\16\
In the event that a Dual Member is the subject of an investigation
relating to a transaction on CHX, the plan acknowledges that CHX may,
in its discretion, exercise concurrent jurisdiction and responsibility
for such matter.\17\
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\15\ 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).
\16\ See Securities Exchange Act Release No. 61919 (April 15,
2010), 75 FR 21051 (April 22, 2010) (File No. 4-566) (notice of
filing and order approving and declaring effective the plan).
\17\ See paragraph 6 of the proposed 17d-2 Plan.
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Under the proposed Plan, CHX would retain full responsibility for
surveillance, examination, investigation, and enforcement with respect
to trading activities or practices involving CHX'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 CHX
rules that are not Common Rules.\18\
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\18\ See paragraph 2 of the proposed 17d-2 Plan.
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IV. Discussion
The Commission finds that the proposed Plan is consistent with the
factors set forth in Section 17(d) of the Act \19\ and Rule 17d-2(c)
thereunder \20\ 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 CHX and FINRA. Accordingly, the
proposed Plan promotes efficiency by reducing costs to Dual Members.
Furthermore, because CHX and FINRA will coordinate their regulatory
functions in accordance with the proposed Plan, the Plan should promote
investor protection.
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\19\ 15 U.S.C. 78q(d).
\20\ 17 CFR 240.17d-2(c).
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The Commission notes that, under the proposed Plan, CHX and FINRA
have allocated regulatory responsibility for those CHX 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 proposed Plan,
[[Page 55835]]
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 proposed Plan are specifically listed in the Certification, as may
be amended by the Parties from time to time pursuant to the terms and
conditions specified in the Plan.
According to the proposed Plan, CHX will review the Certification,
at least annually, or more frequently if required by changes in either
the rules of CHX or FINRA, and, if necessary, submit to FINRA an
updated list of Common Rules to add CHX rules not included on the then-
current list of Common Rules that are substantially similar to FINRA
rules; delete CHX 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 CHX rules that are substantially similar to FINRA rules.\21\
FINRA will then confirm in writing whether the rules listed in any
updated list are Common Rules as defined in the proposed Plan. Under
the proposed Plan, CHX will also provide FINRA with a current list of
Dual Members and shall update the list no less frequently than once
each quarter.\22\
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\21\ See paragraph 2 of the proposed 17d-2 Plan.
\22\ See paragraph 3 of the proposed 17d-2 Plan.
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Under the proposed Plan, CHX would retain full responsibility for
surveillance, examination, investigation, and enforcement with respect
to trading activities or practices involving CHX's own marketplace;
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 CHX rules that are
not Common Rules.
The Commission is hereby declaring effective a plan that, among
other things, allocates regulatory responsibility to FINRA for the
oversight and enforcement of CHX rules that are substantially similar
to the rules of FINRA for Dual Members of CHX 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 CHX rules in
the Certification in conformance with the definition of Common Rules
provided in the Plan. However, should the Parties decide to add a CHX
rule to the Certification that is not substantially similar to a FINRA
rule; delete a CHX rule from the Certification that is substantially
similar to a FINRA rule; or leave on the Certification a CHX 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.\23\
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\23\ 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 CHX and FINRA to terminate the Plan, subject
to notice.\24\ 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.\25\
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\24\ See paragraph 12 of the proposed 17d-2 Plan.
\25\ The Commission notes that paragraph 12 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. 4-274. 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. 4-274, between FINRA and CHX, filed pursuant to
Rule 17d-2 under the Act, is approved and declared effective.
It is therefore ordered that CHX is relieved of those
responsibilities allocated to FINRA under the Plan in File No. 4-274.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(34).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-22837 Filed 9-13-10; 8:45 am]
BILLING CODE 8010-01-P
