Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Amending the Definition of Approved Person To Exclude Foreign Affiliates, Creating a New Definition of “Foreign Securities Affiliate,” Eliminating the Application Process for Approved Persons, and Making Related Technical and Conforming Changes, 46860-46863 [2011-19647]
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46860
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Notices
a credit for removing liquidity when a
customer order is executed in the PIP,
but no such credit is available to
responders. As a result of these
comparatively higher fees, according to
this commenter, competitive responders
will be less likely to participate in the
PIP and will participate less
aggressively when they do participate,
thus burdening competition and
reducing the likelihood and size of price
improvement in the PIP. Do you agree
with this commenter? Please explain
why or why not.
Comments may be submitted by any
of the following methods:
srobinson on DSK4SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BX–2011–046 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BX–2011–046. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NW.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BX–
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16:24 Aug 02, 2011
Jkt 223001
2011–046 and should be submitted on
or before August 24, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–19563 Filed 8–2–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64988; File No. SR–NYSE–
2011–36]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Amending the Definition of Approved
Person To Exclude Foreign Affiliates,
Creating a New Definition of ‘‘Foreign
Securities Affiliate,’’ Eliminating the
Application Process for Approved
Persons, and Making Related
Technical and Conforming Changes
July 29, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on July 15,
2011, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
definition of approved person to
exclude foreign affiliates, create a new
definition of ‘‘foreign securities
affiliate,’’ eliminate the application
process for approved persons, and make
related technical and conforming
changes. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
11 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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.
The Exchange 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
definition of approved person to
exclude foreign affiliates, create a new
definition of ‘‘foreign securities
affiliate,’’ eliminate the application
process for approved persons, and make
related technical and conforming
changes. Following approval of the
proposed rule change, the Exchange will
advise member organizations of the
implementation date of the rule change
via Information Memo.
Background
The current rules governing the
definition of and application process for
an approved person are NYSE Rules 2
and 304.4 If the definition requirements
under NYSE Rule 2 are met, then the
person or entity has to apply to the
Exchange for approval to register as an
approved person. This requirement is
intended to bring certain affiliates of
Exchange member organizations within
the Exchange’s jurisdiction and to
subject such affiliates’ activities to
Exchange rules to the extent their
activities are related to the activities of
the member organization.
NYSE Rule 2(c) defines the term
‘‘approved person’’ as ‘‘a person, other
than a member, principal executive or
employee of a member organization,
who controls a member organization or
is engaged in a securities or kindred
business that is controlled by or under
common control with a member or
member organization who has been
approved by the Exchange as an
approved person.’’ NYSE Rule 2(d)
further defines ‘‘person’’ to include not
only natural persons, but also
4 NYSE Amex LLC has filed a companion rule
filing to conform its Equities Rules to the changes
proposed in this filing. See SR–NYSEAmex–2011–
54.
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srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Notices
corporations, limited liability
companies, partnerships, associations
and other organized groups of persons.
NYSE Rule 2(e) defines the term
‘‘control’’ to mean the power to direct or
cause the direction of management or
policies, whether through ownership of
securities, by contract or otherwise, and
creates a rebuttable presumption of
control if the person has a right to vote
25 percent or more of the voting
securities, is entitled to receive 25
percent or more of the net profits, or is
a director, general partner, or principal
executive of the member organization.
NYSE Rule 2(f) defines ‘‘engage in a
securities or kindred business’’ to mean
transacting business as a broker or
dealer in securities. Thus, the current
definition of approved person includes
a foreign affiliate of a member
organization that is engaged in a brokerdealer business, but does not include,
for example, a registered investment
company. NYSE Rules 2A(e) and (f)
further provide that the Exchange has
jurisdiction after notice and a hearing to
discipline approved persons in
connection with the member
organization’s business and has
jurisdiction over any and all other
functions of approved persons in
connection with the member
organization’s business in order for the
Exchange to comply with its statutory
obligation as a self-regulatory
organization (‘‘SRO’’).
NYSE Rules 304 and 311(a) require,
with limited exceptions, that persons
who meet the NYSE Rule 2(c) definition
of an approved person must apply for
approval by the Exchange as an
approved person. NYSE Rule 304
further provides that no person may
become or remain an approved person
unless such person meets the standards
prescribed in the Exchange’s rules, and
it prescribes the process that an
applicant must follow to become an
approved person. Among other things,
this process involves submission to the
Exchange of a completed Form AP–1 (in
the case of a corporation or other legal
entity) or Forms AD–G 2 and AD–G 3
(in the case of a natural person,
collectively referred to as ‘‘AD–G’’), and
other pertinent information regarding
the candidate for approval. By executing
the Form AP–1 or AD–G, as applicable,
the approved person affirmatively
consents to the Exchange’s jurisdiction.
Proposed Rule Change
The Exchange proposes to amend the
definition of approved person to
exclude certain foreign affiliates because
the Exchange believes that the current
definition is overbroad and it is
unnecessary to assert jurisdiction over a
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foreign affiliate of a member
organization that does not control a
member organization. The Exchange
notes that excluding such foreign
affiliates from its jurisdiction would be
consistent with Rule 19g2–1 under the
Securities Exchange Act of 1934, as
amended (the ‘‘Act’’), which provides
that an exchange is not required to
enforce compliance with its rules
against certain persons; 5 the Exchange
has not identified a rule of any other
SRO that asserts jurisdiction over a
foreign affiliate under common control
with a member of that SRO. As such, the
Exchange proposes to amend the
definition of approved person so that it
would include any person, other than a
member, principal executive or
employee of a member organization,
who controls a member organization, is
engaged in a securities or kindred
business that is controlled by a member
or member organization, or is a U.S.
registered broker-dealer under common
control with a member organization.
By changing the definition of
approved person to exclude certain
foreign affiliates, the Exchange does not
intend to eliminate controls in Exchange
rules related to potential conflicts of
interest associated with having a foreign
affiliate under common control with a
member organization. Accordingly, the
Exchange proposes to add a new
defined term to Rule 2, ‘‘foreign
securities affiliate,’’ which includes
foreign persons not registered as a
broker dealer in the United States that
are in a securities or kindred business
and that are under common control with
a member organization. The Exchange
proposes to insert the term ‘‘foreign
securities affiliate’’ in Rules 21, 22, 91,
92, 96, 98A, 112, 304, 402, 422, 410A,
5 See 17 CFR 240.19g2–1. Under Rule 19g2–1, a
national securities exchange is not required to
enforce compliance, within the meaning of Section
19(g) of the Act, with the Act and the rules and
regulations thereunder, with respect to persons
associated with a member, other than securities
persons or persons who control a member. Under
Rule 19g2–1(b)(1), a ‘‘securities person’’ is defined
as a ‘‘person who is a general partner or officer (or
person occupying a similar status or performing
similar functions) or employee of a member;
provided, however, that a registered broker or dealer
which controls, is controlled by, or is under
common control with, the member and the general
partners and officers (and persons occupying
similar status or performing similar functions) and
employees of such a registered broker or dealer
shall be securities persons if they effect, directly or
indirectly, transactions in securities through the
member by use of facilities maintained or
supervised by such exchange or association.’’ A
foreign broker-dealer not registered in the United
States that is under common control with an NYSE
member organization and that is not a general
partner or officer (or person occupying similar
status or performing similar functions) or employee
of a member, falls outside of the definition of
‘‘securities person.’’
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46861
460, and 1301, so that the coverage of
such rules remains the same following
the proposed rule change. For example,
Rule 21 seeks to eliminate conflicts of
interests associated with reviewing
decisions related to listing of securities
at the Exchange. By including the
proposed new definition of ‘‘foreign
securities affiliates,’’ the scope of the
rule remains unchanged,
notwithstanding the proposed new
definition of ‘‘approved persons’’ to
exclude foreign affiliates under common
control with a member organization.
The Exchange also proposes to amend
its rules to remove the requirement that
the Exchange affirmatively approve each
application to become an approved
person. If a person meets the definition
of an approved person, as proposed, the
Exchange will obtain jurisdiction by
consent as described below. The
Exchange believes that the current
application process requires the
submission of a substantial amount of
information and documents related to
member organization affiliates that is
unnecessary to carry out the Exchange’s
regulatory responsibilities. In particular,
because the Exchange is no longer the
Designated Examining Authority
(‘‘DEA’’) for Exchange member
organizations,6 the Exchange does not
believe that it needs to engage in a
detailed financial review of approved
persons of its member organization
applicants. The Exchange further notes
that other SROs do not require that such
persons undergo such an application
and approval process.7 The Exchange,
therefore, proposes to remove all
references to an approval process and
the submission of an application for
such approval from NYSE Rules 2, 304,
308, and 311. The Exchange also would
eliminate use of the Forms AP–1 and
AD–G.
Nevertheless, the Exchange’s
jurisdiction over approved persons in
accordance with the revised definition
would remain. Thus, the Exchange
6 Prospective member organization applicants
must be either a member of FINRA or, if the
applicant does not transact business with public
customers or conduct business on the Floor of the
Exchange, a member of another registered securities
exchange, before being approved as an Exchange
member organization. See NYSE Rule 2(b)(i).
Generally, FINRA or the other exchange already is,
or will be, designated as the DEA under SEC Rule
17d–1 and the Exchange will not be designated as
such. Currently, the Exchange is not the DEA for
any of its member organizations, but if it were
designated as the DEA, the Exchange has retained
FINRA to perform services related to meeting the
Exchange’s DEA responsibilities for a member
organization.
7 For example, the rules of FINRA and The
NASDAQ Stock Market, Inc. do not impose
application and approval requirements on member
affiliates. See also note 9, infra.
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Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
proposes to amend NYSE Rule 304 to
provide specifically that a member
organization would be required to
identify all of its foreign securities
affiliates and approved persons to the
Exchange and each such approved
person would be required to consent to
the Exchange’s jurisdiction, which is
consistent with the obligations currently
imposed on approved persons. The
provisions of the current NYSE Rule
304(e)(2)–(4) that require an approved
person to agree to (i) Inform the
Exchange of any statutory
disqualification of the approved person
under Section 3(a)(39) of the Act, (ii)
abide by the Rules of the Exchange
relating to approved persons, and (iii)
permit examination by the Exchange, or
any person designated by it, of its books
and records to verify the accuracy of the
information required to be supplied
under Exchange Rules, would be
retained in proposed Rule 304.8
The focus on identification of
affiliates and approved persons by each
member organization and consent to
jurisdiction by each approved person,
instead of review and approval of
applications by the Exchange, would
make the entire process more efficient
while maintaining appropriate
regulatory standards. The proposed rule
change would remove unnecessary
paperwork in the process while holding
each member organization accountable
for identifying to the Exchange its
affiliates and approved persons. The
remaining jurisdictional requirements
for approved persons would enable the
Exchange to continue to pursue matters
involving or affecting its member
organizations.9
The Exchange also proposes to make
technical and conforming changes to
8 The Exchange proposes to eliminate the text in
current Rule 304(e)(1), which requires an approved
person to supply information concerning its
relationship with the member organization. This
provision relates to information required to be
submitted on Form AP–1 or AD–G, and as such it
is not necessary to retain it in proposed Rule 304.
9 The Exchange notes that FINRA is in the process
of harmonizing legacy NASD and NYSE Rules, and
has published a proposal to harmonize membership
rules. See FINRA Regulatory Notice 10–01. While
FINRA has proposed that a member firm be
required to provide certain information about
affiliates, FINRA has not proposed to adopt the
approved person definition or application process,
or assert jurisdiction over such persons. When
FINRA completes that harmonization process for
the membership rules, the Exchange will consider
whether further amendments to its approved person
rules are advisable. Until such time, the Exchange
believes that the narrowing of the approved person
definition and the elimination of the approved
person application process will remove
unnecessary complexities and excessive
informational requirements and thereby reduce
burdens on membership applicants and member
organizations while still maintaining high
regulatory standards consistent with the Act.
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16:24 Aug 02, 2011
Jkt 223001
other rules that reference the approved
person application process.10 The
Exchange further proposes to make
technical amendments to replace the
term ‘‘allied member’’ with ‘‘principal
executive’’ in Rules 21, 22, 91, 96, 112,
304, 308, 410A, 422, 460, and 1301 and
NYSE Rule Interpretation for Rule 304,
delete ‘‘allied member’’ from Rule 304A,
and delete NYSE Rule Interpretation for
Rule 304A entirely; the Exchange
replaced the term ‘‘allied member’’ with
the term ‘‘principal executive’’ in an
earlier rule filing and the proposed
amendments are consistent with the
previous rule filing.11
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 12 of the
Act, in general, and furthers the
objectives of Section 6(b)(5) 13 in
particular in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. More specifically, the
NYSE believes that the proposed
approved person definition and consent
to jurisdiction process would remove
unnecessary complexities and excessive
informational requirements and create a
more efficient and less burdensome
process for membership applicants and
member organizations while
maintaining appropriate regulatory
standards. As such, the proposed rule
change would contribute to removing
impediments to and perfecting the
mechanism of a free and open market
and a national market system.
10 Specifically, the Exchange proposes to clarify
Rule 98A, which provides that no issuer, or partner
or subsidiary thereof, may become an approved
person of a Designated Market Maker unit that is
registered in the stock of that issuer. Because an
entity is an approved person by virtue of status, as
described above, the Exchange proposes to clarify
the meaning of the Rule by amending it to provide
that a DMM unit may not be registered in a stock
of an issuer, or a partner or subsidiary thereof, if
such entity is an approved person of the DMM
unit’s member organization. Finally, the Exchange
proposes to amend Rule 476A, which addresses
minor rule violations, to correct a citation to Rule
304.
11 See Securities Exchange Act Release No. 58549
(September 15, 2008), 73 FR 54444 (September 19,
2008) (SR–NYSE–2008–80).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
As the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rule-comments
@sec.gov. Please include File Number
SR–NYSE–2011–36 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2011–36. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
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Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Notices
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site printing and
viewing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at https://www.nyse.com. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2011–36 and should
be submitted on or before August 24,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–19647 Filed 8–2–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–64987; File No. SR–
NYSEAMEX–2011–54]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing of
Proposed Rule Change Amending the
Definition of Approved Person To
Exclude Foreign Affiliates, Creating a
New Definition of ‘‘Foreign Securities
Affiliate,’’ Eliminating the Application
Process for Approved Persons, and
Making Related Technical and
Conforming Changes
July 29, 2011.
srobinson on DSK4SPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
definition of approved person to
exclude foreign affiliates, create a new
definition of ‘‘foreign securities
affiliate,’’ eliminate the application
process for approved persons, and make
related technical and conforming
changes. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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.
The Exchange 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 the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on July 15,
2011, NYSE Amex LLC (the ‘‘Exchange’’
or ‘‘NYSE Amex’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
substantially prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to amend the
definition of approved person to
exclude foreign affiliates, create a new
definition of ‘‘foreign securities
affiliate,’’ eliminate the application
process for approved persons, and make
related technical and conforming
changes. Following approval of the
proposed rule change, the Exchange will
advise member organizations of the
implementation date of the rule change
via Information Memo.
Background
The current rules governing the
definition of and application process for
an approved person are NYSE Amex
Equities Rules 2 and 304.4 If the
definition requirements under NYSE
Amex Equities Rule 2 are met, then the
person or entity has to apply to the
Exchange for approval to register as an
14 17
1 15
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16:24 Aug 02, 2011
4 NYSE has filed a companion rule filing to
conform its Equities Rules to the changes proposed
in this filing. See SR–NYSE–2011–36.
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46863
approved person. This requirement is
intended to bring certain affiliates of
Exchange member organizations within
the Exchange’s jurisdiction and to
subject such affiliates’ activities to
Exchange rules to the extent their
activities are related to the activities of
the member organization.
NYSE Amex Equities Rule 2(c)
defines the term ‘‘approved person’’ as
‘‘a person, other than a member,
principal executive or employee of a
member organization, who controls a
member organization or is engaged in a
securities or kindred business that is
controlled by or under common control
with a member or member organization
who has been approved by the Exchange
as an approved person.’’ NYSE Amex
Equities Rule 2(d) further defines
‘‘person’’ to include not only natural
persons, but also corporations, limited
liability companies, partnerships,
associations and other organized groups
of persons. NYSE Amex Equities Rule
2(e) defines the term ‘‘control’’ to mean
the power to direct or cause the
direction of management or policies,
whether through ownership of
securities, by contract or otherwise, and
creates a rebuttable presumption of
control if the person has a right to vote
25 percent or more of the voting
securities, is entitled to receive 25
percent or more of the net profits, or is
a director, general partner, or principal
executive of the member organization.
NYSE Amex Equities Rule 2(f) defines
‘‘engage in a securities or kindred
business’’ to mean transacting business
as a broker or dealer in securities. Thus,
the current definition of approved
person includes a foreign affiliate of a
member organization that is engaged in
a broker-dealer business, but does not
include, for example, a registered
investment company. NYSE Amex
Equities Rules 2A(e) and (f) further
provide that the Exchange has
jurisdiction after notice and a hearing to
discipline approved persons in
connection with the member
organization’s business and has
jurisdiction over any and all other
functions of approved persons in
connection with the member
organization’s business in order for the
Exchange to comply with its statutory
obligation as a self-regulatory
organization (‘‘SRO’’).
NYSE Amex Equities Rules 304 and
311(a) require, with limited exceptions,
that persons who meet the NYSE Amex
Equities Rule 2(c) definition of an
approved person must apply for
approval by the Exchange as an
approved person. NYSE Amex Equities
Rule 304 further provides that no person
may become or remain an approved
E:\FR\FM\03AUN1.SGM
03AUN1
]]>Agencies
[Federal Register Volume 76, Number 149 (Wednesday, August 3, 2011)]
[Notices]
[Pages 46860-46863]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19647]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64988; File No. SR-NYSE-2011-36]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending the Definition of
Approved Person To Exclude Foreign Affiliates, Creating a New
Definition of ``Foreign Securities Affiliate,'' Eliminating the
Application Process for Approved Persons, and Making Related Technical
and Conforming Changes
July 29, 2011.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 15, 2011, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been substantially prepared by the
self-regulatory organization. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the definition of approved person to
exclude foreign affiliates, create a new definition of ``foreign
securities affiliate,'' eliminate the application process for approved
persons, and make related technical and conforming changes. The text of
the proposed rule change is available at the Exchange, the Commission's
Public Reference Room, and https://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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. The Exchange 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the definition of approved person to
exclude foreign affiliates, create a new definition of ``foreign
securities affiliate,'' eliminate the application process for approved
persons, and make related technical and conforming changes. Following
approval of the proposed rule change, the Exchange will advise member
organizations of the implementation date of the rule change via
Information Memo.
Background
The current rules governing the definition of and application
process for an approved person are NYSE Rules 2 and 304.\4\ If the
definition requirements under NYSE Rule 2 are met, then the person or
entity has to apply to the Exchange for approval to register as an
approved person. This requirement is intended to bring certain
affiliates of Exchange member organizations within the Exchange's
jurisdiction and to subject such affiliates' activities to Exchange
rules to the extent their activities are related to the activities of
the member organization.
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\4\ NYSE Amex LLC has filed a companion rule filing to conform
its Equities Rules to the changes proposed in this filing. See SR-
NYSEAmex-2011-54.
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NYSE Rule 2(c) defines the term ``approved person'' as ``a person,
other than a member, principal executive or employee of a member
organization, who controls a member organization or is engaged in a
securities or kindred business that is controlled by or under common
control with a member or member organization who has been approved by
the Exchange as an approved person.'' NYSE Rule 2(d) further defines
``person'' to include not only natural persons, but also
[[Page 46861]]
corporations, limited liability companies, partnerships, associations
and other organized groups of persons. NYSE Rule 2(e) defines the term
``control'' to mean the power to direct or cause the direction of
management or policies, whether through ownership of securities, by
contract or otherwise, and creates a rebuttable presumption of control
if the person has a right to vote 25 percent or more of the voting
securities, is entitled to receive 25 percent or more of the net
profits, or is a director, general partner, or principal executive of
the member organization. NYSE Rule 2(f) defines ``engage in a
securities or kindred business'' to mean transacting business as a
broker or dealer in securities. Thus, the current definition of
approved person includes a foreign affiliate of a member organization
that is engaged in a broker-dealer business, but does not include, for
example, a registered investment company. NYSE Rules 2A(e) and (f)
further provide that the Exchange has jurisdiction after notice and a
hearing to discipline approved persons in connection with the member
organization's business and has jurisdiction over any and all other
functions of approved persons in connection with the member
organization's business in order for the Exchange to comply with its
statutory obligation as a self-regulatory organization (``SRO'').
NYSE Rules 304 and 311(a) require, with limited exceptions, that
persons who meet the NYSE Rule 2(c) definition of an approved person
must apply for approval by the Exchange as an approved person. NYSE
Rule 304 further provides that no person may become or remain an
approved person unless such person meets the standards prescribed in
the Exchange's rules, and it prescribes the process that an applicant
must follow to become an approved person. Among other things, this
process involves submission to the Exchange of a completed Form AP-1
(in the case of a corporation or other legal entity) or Forms AD-G 2
and AD-G 3 (in the case of a natural person, collectively referred to
as ``AD-G''), and other pertinent information regarding the candidate
for approval. By executing the Form AP-1 or AD-G, as applicable, the
approved person affirmatively consents to the Exchange's jurisdiction.
Proposed Rule Change
The Exchange proposes to amend the definition of approved person to
exclude certain foreign affiliates because the Exchange believes that
the current definition is overbroad and it is unnecessary to assert
jurisdiction over a foreign affiliate of a member organization that
does not control a member organization. The Exchange notes that
excluding such foreign affiliates from its jurisdiction would be
consistent with Rule 19g2-1 under the Securities Exchange Act of 1934,
as amended (the ``Act''), which provides that an exchange is not
required to enforce compliance with its rules against certain persons;
\5\ the Exchange has not identified a rule of any other SRO that
asserts jurisdiction over a foreign affiliate under common control with
a member of that SRO. As such, the Exchange proposes to amend the
definition of approved person so that it would include any person,
other than a member, principal executive or employee of a member
organization, who controls a member organization, is engaged in a
securities or kindred business that is controlled by a member or member
organization, or is a U.S. registered broker-dealer under common
control with a member organization.
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\5\ See 17 CFR 240.19g2-1. Under Rule 19g2-1, a national
securities exchange is not required to enforce compliance, within
the meaning of Section 19(g) of the Act, with the Act and the rules
and regulations thereunder, with respect to persons associated with
a member, other than securities persons or persons who control a
member. Under Rule 19g2-1(b)(1), a ``securities person'' is defined
as a ``person who is a general partner or officer (or person
occupying a similar status or performing similar functions) or
employee of a member; provided, however, that a registered broker or
dealer which controls, is controlled by, or is under common control
with, the member and the general partners and officers (and persons
occupying similar status or performing similar functions) and
employees of such a registered broker or dealer shall be securities
persons if they effect, directly or indirectly, transactions in
securities through the member by use of facilities maintained or
supervised by such exchange or association.'' A foreign broker-
dealer not registered in the United States that is under common
control with an NYSE member organization and that is not a general
partner or officer (or person occupying similar status or performing
similar functions) or employee of a member, falls outside of the
definition of ``securities person.''
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By changing the definition of approved person to exclude certain
foreign affiliates, the Exchange does not intend to eliminate controls
in Exchange rules related to potential conflicts of interest associated
with having a foreign affiliate under common control with a member
organization. Accordingly, the Exchange proposes to add a new defined
term to Rule 2, ``foreign securities affiliate,'' which includes
foreign persons not registered as a broker dealer in the United States
that are in a securities or kindred business and that are under common
control with a member organization. The Exchange proposes to insert the
term ``foreign securities affiliate'' in Rules 21, 22, 91, 92, 96, 98A,
112, 304, 402, 422, 410A, 460, and 1301, so that the coverage of such
rules remains the same following the proposed rule change. For example,
Rule 21 seeks to eliminate conflicts of interests associated with
reviewing decisions related to listing of securities at the Exchange.
By including the proposed new definition of ``foreign securities
affiliates,'' the scope of the rule remains unchanged, notwithstanding
the proposed new definition of ``approved persons'' to exclude foreign
affiliates under common control with a member organization.
The Exchange also proposes to amend its rules to remove the
requirement that the Exchange affirmatively approve each application to
become an approved person. If a person meets the definition of an
approved person, as proposed, the Exchange will obtain jurisdiction by
consent as described below. The Exchange believes that the current
application process requires the submission of a substantial amount of
information and documents related to member organization affiliates
that is unnecessary to carry out the Exchange's regulatory
responsibilities. In particular, because the Exchange is no longer the
Designated Examining Authority (``DEA'') for Exchange member
organizations,\6\ the Exchange does not believe that it needs to engage
in a detailed financial review of approved persons of its member
organization applicants. The Exchange further notes that other SROs do
not require that such persons undergo such an application and approval
process.\7\ The Exchange, therefore, proposes to remove all references
to an approval process and the submission of an application for such
approval from NYSE Rules 2, 304, 308, and 311. The Exchange also would
eliminate use of the Forms AP-1 and AD-G.
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\6\ Prospective member organization applicants must be either a
member of FINRA or, if the applicant does not transact business with
public customers or conduct business on the Floor of the Exchange, a
member of another registered securities exchange, before being
approved as an Exchange member organization. See NYSE Rule 2(b)(i).
Generally, FINRA or the other exchange already is, or will be,
designated as the DEA under SEC Rule 17d-1 and the Exchange will not
be designated as such. Currently, the Exchange is not the DEA for
any of its member organizations, but if it were designated as the
DEA, the Exchange has retained FINRA to perform services related to
meeting the Exchange's DEA responsibilities for a member
organization.
\7\ For example, the rules of FINRA and The NASDAQ Stock Market,
Inc. do not impose application and approval requirements on member
affiliates. See also note 9, infra.
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Nevertheless, the Exchange's jurisdiction over approved persons in
accordance with the revised definition would remain. Thus, the Exchange
[[Page 46862]]
proposes to amend NYSE Rule 304 to provide specifically that a member
organization would be required to identify all of its foreign
securities affiliates and approved persons to the Exchange and each
such approved person would be required to consent to the Exchange's
jurisdiction, which is consistent with the obligations currently
imposed on approved persons. The provisions of the current NYSE Rule
304(e)(2)-(4) that require an approved person to agree to (i) Inform
the Exchange of any statutory disqualification of the approved person
under Section 3(a)(39) of the Act, (ii) abide by the Rules of the
Exchange relating to approved persons, and (iii) permit examination by
the Exchange, or any person designated by it, of its books and records
to verify the accuracy of the information required to be supplied under
Exchange Rules, would be retained in proposed Rule 304.\8\
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\8\ The Exchange proposes to eliminate the text in current Rule
304(e)(1), which requires an approved person to supply information
concerning its relationship with the member organization. This
provision relates to information required to be submitted on Form
AP-1 or AD-G, and as such it is not necessary to retain it in
proposed Rule 304.
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The focus on identification of affiliates and approved persons by
each member organization and consent to jurisdiction by each approved
person, instead of review and approval of applications by the Exchange,
would make the entire process more efficient while maintaining
appropriate regulatory standards. The proposed rule change would remove
unnecessary paperwork in the process while holding each member
organization accountable for identifying to the Exchange its affiliates
and approved persons. The remaining jurisdictional requirements for
approved persons would enable the Exchange to continue to pursue
matters involving or affecting its member organizations.\9\
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\9\ The Exchange notes that FINRA is in the process of
harmonizing legacy NASD and NYSE Rules, and has published a proposal
to harmonize membership rules. See FINRA Regulatory Notice 10-01.
While FINRA has proposed that a member firm be required to provide
certain information about affiliates, FINRA has not proposed to
adopt the approved person definition or application process, or
assert jurisdiction over such persons. When FINRA completes that
harmonization process for the membership rules, the Exchange will
consider whether further amendments to its approved person rules are
advisable. Until such time, the Exchange believes that the narrowing
of the approved person definition and the elimination of the
approved person application process will remove unnecessary
complexities and excessive informational requirements and thereby
reduce burdens on membership applicants and member organizations
while still maintaining high regulatory standards consistent with
the Act.
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The Exchange also proposes to make technical and conforming changes
to other rules that reference the approved person application
process.\10\ The Exchange further proposes to make technical amendments
to replace the term ``allied member'' with ``principal executive'' in
Rules 21, 22, 91, 96, 112, 304, 308, 410A, 422, 460, and 1301 and NYSE
Rule Interpretation for Rule 304, delete ``allied member'' from Rule
304A, and delete NYSE Rule Interpretation for Rule 304A entirely; the
Exchange replaced the term ``allied member'' with the term ``principal
executive'' in an earlier rule filing and the proposed amendments are
consistent with the previous rule filing.\11\
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\10\ Specifically, the Exchange proposes to clarify Rule 98A,
which provides that no issuer, or partner or subsidiary thereof, may
become an approved person of a Designated Market Maker unit that is
registered in the stock of that issuer. Because an entity is an
approved person by virtue of status, as described above, the
Exchange proposes to clarify the meaning of the Rule by amending it
to provide that a DMM unit may not be registered in a stock of an
issuer, or a partner or subsidiary thereof, if such entity is an
approved person of the DMM unit's member organization. Finally, the
Exchange proposes to amend Rule 476A, which addresses minor rule
violations, to correct a citation to Rule 304.
\11\ See Securities Exchange Act Release No. 58549 (September
15, 2008), 73 FR 54444 (September 19, 2008) (SR-NYSE-2008-80).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \12\ of
the Act, in general, and furthers the objectives of Section 6(b)(5)
\13\ in particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest. More specifically, the NYSE believes that the proposed
approved person definition and consent to jurisdiction process would
remove unnecessary complexities and excessive informational
requirements and create a more efficient and less burdensome process
for membership applicants and member organizations while maintaining
appropriate regulatory standards. As such, the proposed rule change
would contribute to removing impediments to and perfecting the
mechanism of a free and open market and a national market system.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2011-36 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2011-36. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
[[Page 46863]]
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site printing and viewing in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549-1090. Copies of
the filing will also be available for inspection and copying at the
NYSE's principal office and on its Internet Web site at https://www.nyse.com. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSE-2011-36 and should be submitted on or before August 24, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19647 Filed 8-2-11; 8:45 am]
BILLING CODE 8011-01-P
