Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change Adopting Investigation, Disciplinary, Sanction, and Other Procedural Rules That Are Modeled on the Rules of the Financial Industry Regulatory Authority and To Make Certain Conforming and Technical Changes, 15394-15402 [2013-05539]
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15394
Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Notices
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 NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of NASDAQ. 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
publicly available. All submissions
should refer to File Number SR–
NASDAQ–2013–031 and should be
submitted on or before April 1, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05537 Filed 3–8–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69045; File No. SR–NYSE–
2013–02]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving Proposed Rule Change
Adopting Investigation, Disciplinary,
Sanction, and Other Procedural Rules
That Are Modeled on the Rules of the
Financial Industry Regulatory
Authority and To Make Certain
Conforming and Technical Changes
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March 5, 2013.
I. Introduction
On January 4, 2013, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
8 17
1 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
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thereunder,2 a proposed rule change to
adopt rules governing investigations,
discipline of members, sanctions that
can be imposed as a result of
disciplinary proceedings, cease and
desist authority, and other procedural
rules that are modeled on the rules of
the Financial Industry Regulatory
Authority (‘‘FINRA’’). The proposed
rule change was published for comment
in the Federal Register on January 24,
2013.3 The Commission received no
comments on the proposed rule change.
This order approves the proposed rule
change.
II. Description of the Proposal
On July 30, 2007, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’), the Exchange, and NYSE
Regulation, Inc. (‘‘NYSER’’)
consolidated their member firm
regulation operations into a combined
organization, FINRA, and entered into a
plan to allocate to FINRA regulatory
responsibility for common rules and
common members (‘‘17d–2
Agreement’’).4 The 17d–2 Agreement
was entered into in accordance with the
requirements of Rule 17d–2 under the
Act,5 which permits self-regulatory
organizations (‘‘SROs’’) to allocate
regulatory responsibilities with respect
to common members and common
rules. In 2007, the parties also entered
into a Regulatory Services Agreement
(‘‘RSA’’), whereby FINRA was retained
to perform certain regulatory services on
behalf of NYSER for non-common rules.
On June 14, 2010, the Exchange,
NYSER, and FINRA amended the RSA
and retained FINRA to perform the
market surveillance and enforcement
functions that had previously been
performed by NYSER up to that point.6
Accordingly, since June 14, 2010,
FINRA has been performing all
enforcement-related regulatory services
on behalf of NYSER, including
disciplinary proceedings relating to
NYSE-only rules or against both dual
members and non-FINRA members.
According to the Exchange, to
facilitate FINRA’s performance of these
enforcement functions under the RSA
and to further harmonize the rules of
FINRA and NYSE generally, NYSE is
2 17
CFR 240.19b–4.
Exchange Act Release No. 68678
(January 16, 2013), 78 FR 5213 (January 24, 2013)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 56148
(July 26, 2007), 72 FR 42146 (August 1, 2007) (File
No. 4–544) (Notice of Filing and Order Approving
and Declaring Effective a Plan for the Allocation of
Regulatory Responsibilities).
5 17 CFR 240.17d–2.
6 See Securities Exchange Act Release No. 62355
(June 22, 2010), 75 FR 36729 (June 28, 2010) (SR–
NYSE–2010–46).
3 Securities
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proposing to adopt the text of the
FINRA Rule 8000 Series and Rule 9000
Series, which set forth rules for
conducting investigations and
enforcement actions. The Exchange
proposes to adopt most of FINRA’s rules
that are set forth in FINRA Rule 8000
and 9000 Series with no modification or
only with conforming and technical
changes.7 However, in certain key
respects, the proposed NYSE rules
would continue to differ from FINRA’s
rules. Specifically, as described in more
detail below, NYSE proposes, in part, to
(1) establish processes for settling
disciplinary matters both before and
after the issuance of a complaint that
differ both from NYSE’s current
Stipulation and Consent process and
FINRA’s current settlement processes;
(2) retain the NYSE selection process for
Hearing Panelists, rather than use
FINRA’s Panelists; (3) retain the
substance of NYSE’s current appellate
process; (4) have NYSE’s Chief
Regulatory Officer (‘‘CRO’’) rather than
FINRA’s General Counsel make certain
procedural decisions in the proposed
rules; (5) have NYSE’s CRO rather than
FINRA’s CEO authorize certain
proceedings; (6) have FINRA’s Chief
Hearing Officer rather than FINRA’s
National Adjudicatory Council (‘‘NAC’’)
review certain decisions; (7) retain the
current NYSE list of minor rule
violations, with certain technical and
conforming amendments, while
adopting FINRA’s minor rule violation
fine levels and FINRA’s process for
imposing them; and (8) not allow
proceeds from fines and other monetary
sanctions to be used for general
corporate purposes. The major
differences from the FINRA rules are
highlighted below.8
7 The following proposed NYSE Rules would be
identical to the text of their counterpart FINRA
Rules: 9131–9134, 9136–9138, 9142, 9148, 9213–
9215, 9222, 9233–9241, 9261, 9263–9266, and 9290.
The Exchange also made only conforming and
technical changes to certain FINRA rules, such as
changing ‘‘member’’ and ‘‘associated person’’ to
‘‘member organization’’ and ‘‘covered person,’’
respectively; changing cross-references to FINRA
rules to cross-references to Exchange rules; and
other non-substantive changes. The following
proposed NYSE Rules include only such
conforming and technical amendments to their
counterpart FINRA rule text: 8110, 8120, 8210,
8211, 8311, 8330, 9110, 9143, 9145, 9252, 9262,
9267, 9521, 9527, 9620, and 9870. Proposed NYSE
Rule 8130 would set forth retention of jurisdiction
provisions modeled on Article IV, Section 6 and
Article V, Section 4 of the FINRA Bylaws. The text
of the proposed rule is substantially the same as the
text in FINRA’s Bylaws, except that in paragraph (d)
it contains a provision establishing how the
transition period from NYSE Rule 477 will work.
NYSE also made certain conforming changes to
cross-references outside the 8000 and 9000 series.
8 A detailed description of NYSE’s current rules
and proposed changes can be found in the Notice.
See supra note 3.
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Transition
Following approval of the proposed
rule change, the Exchange intends to
announce the effective date of the new
rules at least 30 days in advance in an
Information Memorandum to its
members and member organizations. To
further facilitate an orderly transition
from the current rules to the new rules,
the Exchange proposes that certain
matters already initiated under the
current rules would be completed under
such rules.9
Proposed NYSE Rule 8000 Series
The Exchange proposes to adopt the
text of FINRA Rules 8110 through 8330,
Investigation and Sanctions, as NYSE
Rules 8110 through 8330, with the
differences described below.10
Unlike FINRA Rule 8313, proposed
NYSE Rule 8313 would provide that the
Exchange would publish all final
disciplinary decisions issued under the
proposed NYSE Rule 9000 Series, other
than minor rule violations, on its Web
site.11 According to the Exchange, this
codifies its long-standing practice. By
way of comparison, FINRA’s Rule 8313
provides that disciplinary complaints
and decisions that meet certain criteria
will be either published or made
available upon request.
Further, unlike FINRA Rule 8320(a),
the NYSE Rule would not provide that
proceeds from fines and other monetary
sanctions could be used for general
corporate purposes. Currently, the
Exchange uses fine monies for
regulatory purposes subject to the
approval of the NYSER Board.12 The
remainder of the proposed rule is
substantially the same as the text in
FINRA’s counterpart rule, with only
conforming and technical amendments.
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Proposed NYSE Rule 9000 Series
The Exchange proposes to adopt the
text of FINRA Rules 9110 through 9290,
9 See Notice, supra note 3, 78 FR at 5218–19
(discussing the particular circumstances under
which the current rules would continue to apply).
10 FINRA does not have a Rule 8212. Moreover,
the Exchange is retaining NYSE Rule 410B, which
concerns reports of listed securities transactions
effected off the Exchange. As such, the Exchange is
not proposing to adopt FINRA Rule 8213. NYSE is
also not proposing to adopt FINRA Rule 8312,
which describes FINRA’s BrokerCheck disclosures.
As such, to maintain consistency with FINRA’s rule
numbering, the Exchange has designated proposed
NYSE Rules 8212, 8213 and 8312 as ‘‘Reserved.’’
11 According to the Exchange, consistent with
current practice, a determination in a statutory
disqualification proceeding under the proposed
NYSE Rule 9520 Series would not be considered a
disciplinary decision and thus would not be subject
to publication.
12 See Securities Exchange Act Release Nos.
55003 (December 22, 2006), 71 FR 78497 (December
29, 2006) (SR–NYSE–2006–109) and 55216 (January
31, 2007), 72 FR 5779 (February 7, 2007).
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Code of Procedure, as NYSE Rules 9110
through 9290, with the differences
described below.13
Proposed NYSE Rule 9130 Through
9138
Proposed NYSE Rules 9130 through
9138 would govern the service of a
complaint or other procedural
documents under the NYSE Rules. The
text of these proposed rules, other than
proposed NYSE Rule 9135, is identical
to FINRA’s counterpart rules. Proposed
NYSE Rule 9135 differs from its FINRA
counterpart because it deletes a
reference to filing an appeal with
FINRA’s Office of Hearing Officer. As
previously noted, the Exchange is
retaining its current appeals process.
Proposed NYSE Rules 9140 Through
9148
Proposed NYSE Rules 9140 through
9148 are among the rules that would
govern the conduct of disciplinary
proceedings. Proposed NYSE Rule 9141
would govern appearances in a
proceeding, notice of appearances, and
representation.14
Generally, the text of proposed NYSE
Rules 9142 through 9148 is substantially
the same as the text of FINRA’s
counterpart rules, with only confirming
and technical changes. However,
proposed NYSE Rules 9144, 9146, and
13 Proposed NYSE Rule 9120 would set forth
definitions and is based on FINRA Rule 9120,
which certain conforming changes for NYSE’s
proposed rules. Certain defined terms in FINRA
Rule 9120 would be inapplicable in the Exchange’s
rules—‘‘Counsel to the National Adjudicatory
Council,’’ ‘‘District Committee,’’ ‘‘Extended
Proceeding,’’ ‘‘Extended Proceeding Committee,’’
‘‘FINRA Board,’’ ‘‘FINRA Regulation Board,’’
‘‘General Counsel,’’ ‘‘Governor,’’ ‘‘Market
Regulation Committee,’’ ‘‘Primary District
Committee,’’ ‘‘Review Subcommittee,’’ ‘‘Statutory
Disqualification Committee,’’ and
‘‘Subcommittee’’—and therefore are not included in
the proposed rule change. The Exchange also
proposes to include certain definitions that are not
included in FINRA’s rule text. ‘‘Board of Directors,’’
‘‘Chief Regulatory Officer’’ or ‘‘CRO,’’ ‘‘covered
person,’’ ‘‘Department of Market Regulation,’’
‘‘Department of Member Regulation,’’ ‘‘Exchange,’’
‘‘Floor-Based Panelist,’’ ‘‘Head of Market
Regulation,’’ and ‘‘Office of Hearing Officers’’ are
definitions that appear in subsequent proposed
rules and are necessary for harmonization with the
Exchange’s rules.
14 The text of the proposed rule is the same as the
text of FINRA’s counterpart rule, except that the
Exchange does not propose to adopt the text of
FINRA Rule 9141(c), which provides that no former
officer of FINRA shall, within one year after
termination of employment with FINRA, make an
appearance before an adjudicator on behalf of any
other person under the Rule 9000 Series. The
Exchange does not believe that it is necessary to bar
its former employees from such appearances
because its employees generally are not involved in
the regulatory and disciplinary functions carried
out by FINRA on behalf of the Exchange; as such,
their appearance does not create the same type of
conflict of interest. Thus, proposed NYSE Rule
9141(c) is marked ‘‘Reserved.’’
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15395
9147 differ from FINRA’s counterpart
rules to reflect that the Exchange would
retain its appellate process by replacing
FINRA’s NAC and Review
Subcommittee with the Exchange’s
Board of Directors.
Proposed NYSE Rule 9150
Proposed NYSE Rule 9150 would
provide that a representative can be
excluded by an Adjudicator for
improper or unethical conduct. The text
of the proposed rule is substantially the
same as the text in FINRA’s counterpart
rule, except for conforming and
technical amendments and an
amendment to reflect the Exchange’s
retention of its appellate process by
replacing the NAC with the Exchange’s
Board of Directors.
Proposed NYSE Rule 9160
Proposed NYSE Rule 9160 would
provide that no person may act as an
Adjudicator if he has a conflict of
interest or bias, or circumstances exist
where his fairness could reasonably be
questioned. In such case, the person
must recuse himself or may be
disqualified. The proposed rule would
cover the recusal or disqualification of
an Adjudicator, the Chair of the
Exchange Board of Directors, or a
Director. The text of the proposed rule
is substantially the same as the text in
FINRA’s counterpart rule.15
Proposed NYSE Rules 9200 Through
9217
Proposed NYSE Rule 9200 would
cover disciplinary proceedings.
Generally, proposed NYSE Rules 9211,
and 9213 through 9215 are substantially
the same as the text in FINRA’s
counterpart rule, with only conforming
and technical changes.
Proposed NYSE Rule 9212 would set
forth the requirements of the complaint,
amendments to the complaint,
withdrawal of the complaint, and
service of the complaint. The text of the
proposed rule is modeled on the text in
FINRA’s counterpart rule, except that
FINRA Rule 9212(a)(2) permits the
Department of Enforcement or
Department of Market Regulation to
propose that the Chief Hearing Officer
select one Panelist from the Market
Regulation Committee if certain tradingrelated violations, described in FINRA
Rule 9120(u), are alleged in the
complaint. The Exchange proposes
instead to permit the Chief Hearing
Officer to select one Floor-Based
15 The rule does not reference certain
Adjudicators used by FINRA that the Exchange will
not utilize in its proceedings (e.g., NAC and Review
Subcommittee); as such, proposed NYSE Rules
9160(b) and (c) are designated as ‘‘Reserved.’’
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Panelist, who would be a person who is,
or, if retired, was, active on the Floor of
the Exchange, to serve on a Hearing
Panel if the complaint alleges at least
one cause of action involving activities
on the Floor of the Exchange. Each
subsequent reference in the FINRA rules
to a Market Regulation Committee
Panelist would be substituted with a
reference to a Floor-Based Panelist in
the proposed NYSE Rules.16
Proposed NYSE Rule 9216 would
establish the acceptance, waiver, and
consent (‘‘AWC’’) procedures by which
a Respondent, before a complaint is
issued, may execute a letter accepting a
finding of violation, consenting to the
imposition of sanctions, and agreeing to
waive the right to a hearing, appeal, and
certain other procedures.17 It also would
establish procedures for executing a
minor rule violation plan letter.
The proposed rule is similar to FINRA
Rule 9216, except that the Office of
Disciplinary Affairs, on behalf of the
Exchange Board of Directors, would be
authorized to accept or reject an AWC
or minor rule violation plan letter. If the
AWC or minor rule violation plan letter
were accepted by the Office of
Disciplinary Affairs, it would be
deemed final. If the letter were rejected
by the Office of Disciplinary Affairs, the
Exchange would be permitted to take
any other appropriate disciplinary
action with respect to the alleged
violation or violations. If the letter were
rejected, the member organization or
covered person would not be prejudiced
by the execution of the AWC or minor
rule violation plan letter and such
document could not be introduced into
evidence in connection with the
determination of the issues set forth in
any complaint or in any other
proceeding.18
The proposed AWC process also
differs from the Exchange’s current
Stipulation and Consent procedure in
NYSE Rule 476(g). Under current NYSE
Rule 476(g), a Hearing Officer must act
on a Stipulation and Consent submitted
by either party—the ‘‘respondent’’ or
‘‘any authorized officer or employee of
the Exchange’’—and may choose to
convene a Hearing Panel. No Hearing
Officer would be involved in the
process under the proposed rule.
16 See proposed NYSE Rules 9221(a)(3), 9231(b)
and (c), and 9232. The term ‘‘Floor-Based Panelist’’
would be defined in proposed NYSE Rule 9120(p).
17 Proposed NYSE Rule 9270 would address
settlement procedures after the issuance of a
complaint.
18 Under FINRA’s rule, the Review Subcommittee
or Office of Disciplinary Affairs may accept the
AWC or letter or refer it to FINRA’s NAC for
acceptance or rejection, or the Review
Subcommittee may reject the AWC or letter or refer
it to the NAC for acceptance or rejection.
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Furthermore, any member of the
Exchange Board of Directors, any
member of the NYSER Committee for
Review, and any Executive Floor
Governor may require a review by the
Exchange Board of Directors of any
determination or penalty, or both,
imposed by a Hearing Panel or Hearing
Officer in connection with a Stipulation
and Consent. In addition, the
Respondent or the Division which
entered into the written consent may
require a review by the Exchange Board
of Directors of any rejection of a
Stipulation and Consent by the Hearing
Panel. There would be no appeals or
reviews of AWCs by the Exchange Board
of Directors under the proposed rule
change.
The Exchange also proposes to adopt
aspects of FINRA’s process and fine
levels for minor rule violations while
retaining the specific list of rules
included in the Exchange’s current
minor rule violation plan, with certain
technical and conforming amendments.
Proposed NYSE Rule 9216(b) would be
similar to FINRA Rule 9216(b), with
technical amendments and amendments
to make it consistent with proposed
NYSE Rule 9216(a) in that the Office of
Disciplinary Affairs could accept or
reject the minor rule violation letter.
While FINRA Rule 9216(b) would
provide that a member or associated
person that executes a minor rule
violation letter waives any right to claim
bias or prejudgment on the part of
FINRA’s General Counsel, the NAC, or
any member of the NAC, the Exchange’s
proposed rule would provide that a
member organization or covered person
could not claim bias or prejudgment on
the part of the CRO, the Exchange Board
of Directors, Counsel to the Exchange
Board of Directors, or any Director in
order to conform with the Exchange’s
proposed rules.
Proposed NYSE Rule 9217 would set
forth the rules that are included in the
NYSE’s minor rule violation plan under
which a member organization or
covered person could be fined, as
described in proposed NYSE Rule
9216(b). The Exchange would retain the
list of rules currently set forth in NYSE
Rule 476A with certain technical and
conforming changes under proposed
NYSE Rule 9217, rather than adopt the
list of rules in FINRA’s plan.19
19 The technical and conforming changes are as
follows. First, the NYSE’s current list of minor rules
includes a reference to the record retention
provisions in NYSE Rule 472(c); the reference
would be corrected to refer to NYSE Rule 472(d).
Second, the reference to the submission of blue
sheets under NYSE Rule 410A would be
supplemented with a reference to proposed NYSE
Rule 8211. Third, the reference to the submission
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Proposed NYSE Rules 9220 Through
9222
Proposed NYSE Rules 9221 and 9222
would describe how a Respondent can
request a hearing, how the notice of a
hearing will be provided, and timing
considerations. The text of the proposed
rules is the same as that in FINRA’s
counterpart rules, except that it permits
a Respondent to request a Floor-Based
Panelist rather than a Market Regulation
Committee Panelist.
Proposed NYSE Rules 9230 Through
9235
Proposed NYSE Rules 9231 and 9232
would govern the composition of
Hearing Panels and Extended Hearing
Panels. The rules also govern how panel
members are approved and the criteria
for selection of a Replacement Hearing
Officer, Panelists, Replacement
Panelists, and Floor-Based Panelists.
Under the proposed rule change, the
Exchange would use FINRA’s Chief
Hearing Officer and Hearing Officers
from FINRA’s Office of Hearing Officers;
however, the Exchange would not use
FINRA’s pool of Panelists but would
instead continue to draw Panelists
appointed from the Exchange Hearing
Board. As it is today, the Hearing Board
would be appointed annually by the
Chairman and would be composed of
members of the Exchange who are not
members of the Exchange Board of
Directors and registered employees and
non-registered employees of member
organizations, as well as former
members, former allied members, or
registered and non-registered employees
of member organizations who have
retired from the securities industry.20 As
is the case under current NYSE Rule
of books and records under NYSE Rule 476(a)(11)
would be supplemented with a reference to
proposed NYSE Rule 8210. Finally, there is a
reference to NYSE Rule 1000–1005. NYSE Rule
1005 was deleted from the NYSE rules in 2006 and
as such the Exchange proposes to change the
reference to NYSE Rule 1000–1004. See Securities
Exchange Act Release No. 53539 (March 22, 2006),
71 FR 16353 (March 31, 2006) (SR–NYSE–2004–05).
The current list of NYSE minor rules includes some
rules that have been more recently removed from
the NYSE rules as part of the FINRA rule
harmonization process, including NYSE Rules
312(h), 382(a), 352(b) and (c), 392, and 445(4). The
Exchange proposes to maintain the references to
these former rules in its current list of minor rules
in proposed NYSE Rule 9217. By doing so, the
Exchange could continue to resolve violations of
them that occurred before the harmonization via a
minor rule violation letter. This rationale for
maintaining references to prior rules in the list of
minor rule violations was noted in Securities
Exchange Act Release No. 62940 (September 20,
2010), 75 FR 58452 (September 24, 2010) (SR–
NYSE–2010–66).
20 The Exchange no longer has allied members,
but former allied members would continue to be
eligible to be appointed to the Hearing Board, and
the text of proposed NYSE Rule 9232 reflects that.
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476(b), Panelists are required to be
persons of integrity and judgment.
There is one change in Hearing Board
eligibility in the proposed rule.
Currently, the Exchange requires that a
Panelist cannot have been retired from
the securities industry for more than
five years. The Exchange is eliminating
the five-year restriction in order to have
the largest number of potential retired
Panelists.
In addition, as noted above, while
FINRA’s rules permit the Chief Hearing
Officer to select one Panelist from the
Market Regulation Committee if certain
trading-related violations are alleged in
the complaint, the Exchange proposes
instead to permit the Chief Hearing
Officer to select one Floor-Based
Panelist to serve on a Hearing Panel if
the complaint alleges at least one cause
of action involving activities on the
Floor of the Exchange, consistent with
the Exchange’s practice under current
NYSE Rule 476(b).
Proposed Rule 9232 would also
include certain Panelist selection
criteria that are included in FINRA Rule
9232. These criteria are expertise,
absence of any conflict of interest or
bias or any appearance thereof,
availability, and the frequency with
which a person has served as a Panelist
in the last two years, favoring the
selection of a person as a Panelist who
has never served or who has served
infrequently as a Panelist during the
period.
Proposed NYSE Rules 9240 Through
9242
Proposed NYSE Rules 9241 and 9242
would govern the substantive and
procedural requirements for pre-hearing
conferences and pre-hearing
submissions. The text of the proposed
rules is identical to FINRA’s counterpart
rules, except that the Exchange does not
propose to adopt the text of FINRA Rule
9242(b).21
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Proposed NYSE Rules 9250 Through
9253
Proposed NYSE Rules 9250 through
9253 would address discovery,
including the requirements and
limitations relating to the inspection
and copying of documents in the
21 Rule 9242(b) provides that no former officer of
FINRA may, within one year after termination of
employment with FINRA, appear as an expert
witness in a proceeding under the Rule 9000 Series
except on behalf of FINRA. The Exchange does not
believe that it is necessary to bar its former
employees from such appearances because its
employees generally are not involved in the
regulatory and disciplinary functions carried out by
FINRA on behalf of the Exchange; as such, their
appearance does not create the same type of conflict
of interest.
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possession of Exchange staff, requests
for information and limitations on such
requests, and the production of witness
statements and any harmless error
relating to the production of witness
statements. Proposed NYSE Rule 9252 is
substantially the same as FINRA’s
counterpart rule with only technical
amendments.
Proposed NYSE Rule 9251 would
generally require the Department of
Enforcement or Department of Market
Regulation to make available to a
Respondent any documents prepared or
obtained in connection with the
investigation that led to the
proceedings, except that certain
privileged or other internal documents,
such as examination or inspection
reports or documents that would reveal
an examination, investigation, or
enforcement technique or confidential
source, or documents that are prohibited
from disclosure under federal law, are
not required to be made available. A
Hearing Officer may require preparation
of a withheld document list. Proposed
NYSE Rule 9251 also sets forth
procedures for inspection and copying
of documents that have been produced.
In addition, if a Document required to
be made available to a Respondent
pursuant to the proposed rule was not
made available by the Department of
Enforcement or the Department of
Market Regulation, no rehearing or
amended decision of a proceeding
already heard or decided would be
required unless the Respondent
establishes that the failure to make the
Document available was not harmless
error. The Hearing Officer, or, upon
review under proposed NYSE Rule
9310, the Exchange Board of Directors,
would determine whether the failure to
make the document available was not
harmless error, applying applicable
Exchange, FINRA, SEC, and federal
judicial precedent.22
Under proposed NYSE Rule 9253, a
Respondent could file a motion to
obtain certain witness statements. The
text of the proposed rule is substantially
the same as FINRA’s counterpart rule,
except for conforming and technical
changes and changes to reflect the
Exchange’s retention of its current
appeals process.
22 The text of the proposed rule is substantially
the same as FINRA’s counterpart rule, except for
conforming and technical changes and changes to
reflect the Exchange’s retention of its current
appeals process, and the addition of the Exchange’s
consideration of its own precedent with respect to
determining harmless error. The proposed rule
would not establish any preference for Exchange
versus other precedent in this respect; rather the
Adjudicators could determine in their discretion
what precedent to apply.
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Proposed NYSE Rules 9260 Through
9269
Proposed NYSE Rules 9260 through
9269 would govern hearings and
decisions. These rules, other than
proposed NYSE Rule 9268, are
substantially the same as FINRA’s rules.
Proposed NYSE Rule 9268 would set
forth the timing and the contents of a
decision of the Hearing Panel or
Extended Hearing Panel and the
procedures for a dissenting opinion,
service of the decision, and any requests
for review. The text of the proposed rule
is similar to FINRA Rule 9268, with
conforming and technical changes,
changes to reflect the Exchange’s
retention of its appeals process, and an
additional provision to address the fact
that the Exchange has member
affiliates.23 As such, in proposed NYSE
Rule 9268, the Exchange proposes to
include text providing that a
disciplinary decision concerning a
member that is an affiliate of the
Exchange would not be subject to
review under proposed NYSE Rule 9310
but instead would be treated as a final
disciplinary action subject to
Commission review.
Proposed NYSE Rule 9270
Proposed NYSE Rule 9270 would
provide for a settlement procedure for a
Respondent who has been notified that
a proceeding has been instituted against
him. The proposed settlement
procedure would differ from FINRA
Rule 9270, as noted below.
Proposed NYSE Rule 9270(c) would
set forth the required content of the
proposal, which would include a
statement consenting to findings of fact
and violations and a proposed sanction.
The proposed rule would be
substantially the same as FINRA’s rule,
except for conforming and technical
changes and except that it would not
require that the proposed sanction be
consistent with FINRA’s Sanction
Guidelines. According to the Exchange,
it currently does not have Sanction
Guidelines and does not propose to
follow FINRA’s because they are
tailored to FINRA’s rules, not the
Exchange’s rules.
Proposed NYSE Rule 9270(d) would
provide that by submitting a settlement
offer a Respondent waives the right to
a hearing, to claim bias or violations of
the prohibition on ex parte
communications, and to review by the
23 The Exchange has one member, Archipelago
Securities, Inc., that is an affiliate of the Exchange
that is used for inbound and outbound routing of
certain orders. See NYSE Rule 17(c). The Exchange
also has a joint venture with BIDS Holding, LP, an
affiliate of which, BIDS Trading L.P., is a member
of the Exchange. See NYSE Rule 2B.01.
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Exchange Board of Directors, the
Commission, or the courts. This differs
from current NYSE Rule 476(g), which
allows either party to request a hearing
on a Stipulation and Consent or a
Hearing Officer to convene a hearing on
a Stipulation and Consent in certain
circumstances; in addition, current
NYSE Rule 476(g) allows the Exchange
Board of Directors to call for review a
determination or penalty imposed by a
Hearing Panel or Hearing Officer.24
Proposed Rule 9270(e) would address
contested settlement offers. Under the
proposed rule, if a Respondent made an
offer of settlement and the Department
of Enforcement or the Department of
Market Regulation opposed it, the offer
of settlement would be contested and
thereby deemed rejected, and thus the
proceeding would proceed under the
proposed NYSE Rule 9200 Series.25
Proposed NYSE Rule 9270(f) and (h)
would address uncontested settlement
offers. Under the proposed rule, if a
hearing on the merits had not begun, the
Office of Disciplinary Affairs could
accept the settlement offer; if a hearing
on the merits had begun, the Hearing
Panel or Extended Hearing Panel could
accept the settlement offer.26 If they did
not, the offer would be deemed
withdrawn and the matter would
proceed under the proposed NYSE Rule
9200 Series; the settlement offer would
not be part of the record. The proposed
text is modeled in part on FINRA’s
counterpart rules, FINRA Rule 9270(e)
and (h), but differs in certain key
respects. Under FINRA’s rules, the NAC
ultimately must accept the offer of
settlement. The Exchange is retaining its
appellate process and not utilizing the
24 Proposed NYSE Rule 9270(d) would also differ
from FINRA’s counterpart rule to reflect the
Exchange’s retention of its appellate process and its
designation of its CRO, rather than FINRA’s General
Counsel, to determine certain procedural matters. In
addition, the text of the rule would differ from
FINRA’s counterpart in that it would delete
references to General Counsel, the NAC, or any
member of the NAC with respect to waiving claims
of bias and replace them with references to the
CRO, the Exchange Board of Directors, Counsel to
the Exchange Board of Directors, or any Director to
conform those provisions to the Exchange’s
proposed rules.
25 The contested offer of settlement would not be
transmitted to the Office of Hearing Officers, Office
of Disciplinary Affairs, or Hearing Panel or
Extended Hearing Panel, and would not constitute
a part of the record in any proceeding against the
Respondent making the offer. The proposed rule
differs from FINRA’s counterpart rule, FINRA Rule
9270(f), which permits a Hearing Panel or Extended
Hearing Panel and the NAC to act on contested
offers of settlement.
26 Because the Exchange does not have sanction
guidelines, the Office of Disciplinary Affairs,
Hearing Panel, or Extended Hearing Panel, as
applicable, would consider Exchange precedent or
such other precedent as it deemed appropriate in
determining whether to accept the settlement offer.
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NAC. Therefore, the Exchange is not
proposing to replicate this aspect of
FINRA’s rules. Further, the Exchange
believes that it is unnecessary to have a
second level of review of an
uncontested settlement offer that is
accepted by the Office of Disciplinary
Affairs, Hearing Panel, or Extended
Hearing Panel, as applicable, because all
parties are in agreement with respect to
the resolution of the matter.
Proposed NYSE Rule 9270(j) would
provide that a Respondent may not be
prejudiced by a rejected offer of
settlement nor may it be introduced into
evidence. The text of the proposed rule
is substantially the same as FINRA Rule
9270(j).27
Proposed NYSE Rule 9280
Proposed NYSE Rule 9280 would set
forth sanctions for contemptuous
conduct by a Party or attorney or other
representative, which may include
exclusion from a hearing or conference,
and sets forth a process for reviewing
such exclusions. The text of the
proposed rule is substantially the same
as that in FINRA’s counterpart rule,
except that rather than having the NAC
review exclusions, the Exchange
proposes to have the Chief Hearing
Officer review exclusions.
Proposed NYSE Rule 9290
The Exchange proposes to adopt the
text of FINRA Rule 9290 for expedited
disciplinary proceedings without any
changes.
Proposed NYSE Rules 9300 Through
9310
The Exchange is not proposing to
adopt FINRA’s appellate and call for
review processes as set forth in the
FINRA Rule 9300 Series. Rather, the text
of current NYSE Rule 476(f) and (l)
would be moved to proposed NYSE
Rule 9310, with certain technical and
substantive changes described below.
Under proposed NYSE Rule
9310(a)(1), any Party, any Director, and
any member of the NYSER Committee
for Review could require a review by the
Exchange Board of Directors of any
determination or penalty, or both,
imposed by a Hearing Panel or Extended
Hearing Panel under the proposed
NYSE Rule 9200 Series, except that
neither Party could request a review by
the Exchange Board of Directors of a
decision concerning an Exchange
member that is an affiliate. A request for
review would be made by filing a
27 The only difference is that proposed NYSE
Rule 9270(j) references the Office of Disciplinary
Affairs and does not include references to the NAC
and Review Subcommittee, which the Exchange
does not propose to utilize.
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written request with the Secretary of the
Exchange, which states the basis and
reasons for the review, within 25 days
after notice of the determination and/or
penalty was served upon the
Respondent. The Secretary of the
Exchange would give notice of any such
request for review to the Parties.
The proposed rule differs from the
current rule in one substantive respect.
It would eliminate the authority of an
Executive Floor Governor to require a
review of a disciplinary decision.
According to the Exchange, this
authority is no longer necessary because
the Exchange has moved away from a
Floor-only trading model, and the
Exchange’s roster of member
organizations includes those without
any Floor presence. The Exchange
believes that Executive Floor Governors
no longer represent the full community
of market participants who may be
subject to disciplinary action.28
Under proposed NYSE Rule
9310(a)(2), the Secretary of the
Exchange would direct the Office of
Hearing Officers to complete and
transmit a record of the disciplinary
proceeding in accordance with NYSE
Rule 9267. Within 21 days after the
Secretary of the Exchange gives notice
of a request for review to the Parties, or
at such later time as the Secretary of the
Exchange could designate, the Office of
Hearing Officers would assemble and
prepare an index to the record, transmit
the record and the index to the
Secretary of the Exchange, and serve
copies of the index upon all Parties. The
Hearing Officer who participated in the
disciplinary proceeding, or the Chief
Hearing Officer, would certify that the
record transmitted to the Secretary of
the Exchange was complete. Current
NYSE Rule 476(f) does not contain such
requirements; the text is modeled on
FINRA Rule 9321.
Proposed NYSE Rule 9310(b)
governing review is substantially the
same as provided in current NYSE Rule
476(f), other than conforming and
technical changes to align it with terms
used in the remainder of the proposed
NYSE Rule 9000 Series.
Proposed NYSE Rule 9310(c) governs
requests for leave to adduce additional
evidence; it is substantially the same as
provided in current NYSE Rule 476(f),
other than conforming and technical
changes to align it with terms used in
the remainder of the proposed NYSE
Rule 9000 Series.
Proposed NYSE Rule 9310(d)
prohibits the CEO from requiring a
28 The text also contains certain conforming and
technical changes to align it with terms used in the
remainder of the proposed NYSE Rule 9000 Series.
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review by the Exchange Board of
Directors and governs the CEO’s recusal
from reviews by the Exchange Board of
Directors. It is substantially the same as
NYSE Rule 476(l), other than
conforming and technical changes to
align it with terms used in the
remainder of the proposed NYSE Rule
9000 Series.
Proposed NYSE Rules 9500 Through
9527
The proposed NYSE Rule 9500 Series
governs all other proceedings under the
Exchange Rules.
The proposed NYSE Rule 9520 Series
would govern eligibility proceedings for
persons subject to statutory
disqualifications who are not FINRA
members.29 The scope of the proposed
NYSE Rule 9520 Series is meant to be
the same as FINRA Rule 9520 Series.30
The text of proposed NYSE Rule 9523
is similar to that in FINRA’s counterpart
rules, except for conforming and
technical changes and except as follows.
First, under proposed NYSE Rule 9523,
if the disqualified member organization,
sponsoring member organization, and/or
disqualified person executed a letter
consenting to a supervisory plan, it
would be submitted to the Exchange’s
CRO. Under FINRA’s rule, the letter is
submitted to FINRA’s Office of General
Counsel, which submits it to the
Chairman of the Statutory
Disqualification Committee, acting on
behalf of the NAC; the Chairman may
accept or reject the plan or refer it to the
NAC for action. The Exchange does not
propose to utilize the NAC or the
Statutory Disqualification Committee
Chairman for this purpose. In addition,
under FINRA’s rule, the waiver of bias
or prejudgment is with respect to the
Department of Member Regulation, the
FINRA General Counsel, the NAC and
any member thereof, while under
proposed NYSE Rule 9523, the waiver
would be with respect to the
Department of Member Regulation, the
CRO, the Exchange Board of Directors,
or any member thereof to conform to the
Exchange’s proposed rules.
Under proposed NYSE Rule 9524, if
the CRO rejects the plan, the member
organization or applicant may request a
review by the Exchange Board of
Directors. This differs from FINRA’s
process, which provides for a hearing
before the NAC and further
consideration by the FINRA Board of
Directors. Because the Exchange does
not propose to utilize the NAC, the
29 FINRA has been processing statutory
disqualification applications on behalf of the
Exchange since 2007. See supra notes 4 and 6.
30 NYSE intends to issue a notice similar to
FINRA Regulatory Notice 09–19.
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Exchange proposes instead that the
Exchange Board of Directors may hear
any appeal.31
Proposed NYSE Rules 9550 Through
9559
Proposed NYSE Rules 9550 through
9559 would govern expedited
proceedings, which are substantially
similar to FINRA Rules 9550 through
9559, with the following changes to
those rules.32 The Exchange is not
proposing to adopt the text of FINRA
Rule 9551, which concerns failure to
comply with the advertising and sales
literature requirements in NASD Rule
2210. According to the Exchange, all
NYSE member organizations that
circulate advertising or sales literature
are by definition doing business with
the public, and therefore must be
members of FINRA and are already
subject to FINRA Rules 2210 and 9551.
In addition, under the SEC Rule 17d–2
Agreement, FINRA is allocated
responsibility for NYSE Rule 472,
NYSE’s counterpart to NASD Rule
2210.33
The Exchange also does not propose
to adopt the text of FINRA Rule 9553,
which concerns failure to pay fees,
dues, assessments or other charges. The
Exchange proposes to adopt the text of
FINRA Rule 8320, which addresses the
non-payment of fines and monetary
sanctions and would continue to use
NYSE Rule 309 for non-payment of all
other amounts due to the Exchange.
Proposed NYSE Rule 9556 would
provide procedures and consequences
for a failure to comply with temporary
and permanent cease and desist orders,
which would be authorized by proposed
NYSE Rule 9810. The text of proposed
NYSE Rule 9556 is the same as FINRA
Rule 9556, except in the following
respects. First, the text contains
conforming and technical changes.
Second, under FINRA’s rule, FINRA’s
CEO authorizes proceedings under
FINRA Rule 9556; under the Exchange’s
proposed rule, the Exchange’s CRO
would have the authority. Third,
FINRA’s rule permits service of process
by facsimile; the Exchange does not
believe that this alternative service
method is necessary and the service
31 FINRA Rule 9525 also allows for discretionary
review by the FINRA Board; the Exchange does not
propose to adopt a comparable rule. Further, the
Exchange also does not propose to adopt the text
of FINRA Rule 9526, which provides for expedited
proceedings by the FINRA Board of Governors in
certain instances.
32 NYSE proposed Rules 9552, 9554 and 9555 are
substantially the same as FINRA’s counterpart
rules, except that NYSE’s proposed rules do not
carry over FINRA’s notice provisions because it
would be duplicative of proposed NYSE Rule 8313.
33 See supra note 4.
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15399
methods permitted under proposed
NYSE Rule 9134 (which are identical to
FINRA Rule 9134) would be sufficient.
Finally, the Exchange does not propose
to include a notice to its membership of
decisions under the rule, as FINRA
does, it would be duplicative of
proposed NYSE Rule 8313.
Proposed NYSE Rule 9557 would
allow the Exchange to issue a notice
directing a member organization to
comply with the provisions of NYSE
Rule 4110 (Capital Compliance), 4120
(Regulatory Notification and Business
Curtailment), or 4130 (Regulation of
Activities of Section 15C Member
Organizations Experiencing Financial
and/or Operational Difficulties) or
otherwise directing it to restrict its
business activities. The notice would be
immediately effective, except that a
timely request for a hearing would stay
the effective date for 10 business days
(unless the Exchange’s CRO determined
otherwise) or until an order was issued
by the Office of Hearing Officers,
whichever occurs first. The notice could
be withdrawn upon a showing that all
the requirements were met.
The text of the proposed rule change
is substantially the same as that in
FINRA Rule 9557, except in the
following respects. First, the text
contains conforming and technical
changes. Second, under FINRA’s rule,
FINRA’s CEO exercises authority with
respect to stays under the rule; under
the Exchange’s proposed rule, the
Exchange’s CRO would have the
authority. Third, FINRA’s rule permits
service of process by facsimile; the
Exchange does not believe that this
alternative service method is necessary
for the reasons stated above. Finally, the
Exchange does not propose to include a
notice to its membership of decisions
under the rule, as FINRA does, because
it would be duplicative of proposed
NYSE Rule 8313.
Proposed NYSE Rule 9558 would
allow the Exchange’s CRO to provide
written authorization to the Exchange
staff to issue a written notice for a
summary proceeding for an action
authorized by Section 6(d)(3) of the Act.
Such notice would be immediately
effective. The text of the proposed rule
change is substantially the same as that
in FINRA Rule 9558, except as follows.
First, the text contains conforming and
technical changes. Second, under
FINRA’s rule, FINRA’s CEO authorizes
such proceedings. Third, the Exchange
would not permit service of process by
facsimile. Finally, the Exchange does
not propose to include a notice to its
membership of decisions under the rule,
as FINRA does, because it would be
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duplicative of proposed NYSE Rule
8313.
Proposed NYSE Rule 9559 would set
forth uniform hearing procedures for all
expedited proceedings under the
proposed NYSE Rule 9550 Series.
Proposed NYSE Rule 9559 differs from
FINRA Rule 9559 as follows. First, any
call for review would be conducted by
the Exchange’s Board of Directors rather
than FINRA’s NAC. Second, the
Exchange would not utilize current or
former members of the FINRA Financial
Responsibility Committee for
proceedings initiated under proposed
NYSE Rule 9557, as FINRA does under
its counterpart rule. The Exchange
would use the same pool of Hearing
Panelists from the Hearing Board as it
uses for other proceedings. Third, any
instance in FINRA’s rule that authorized
FINRA’s CEO to act would instead
authorize the Exchange’s CRO to act.
Fourth, the Exchange does not propose
to adopt the text of FINRA Rule 9559(r),
which provides for the publication of
decisions under the Rule, because it
would be duplicative of proposed NYSE
Rule 8313. Fifth, the Exchange does not
propose to adopt the text of FINRA Rule
9559(q)(1) that sets forth 14-day and 21day call for review periods because a
call for review period would be
described in proposed NYSE Rule 9310.
Proposed NYSE Rule 9559(q)(1) would
instead state that calls for review would
be conducted in accordance with
proposed NYSE Rule 9310, which,
consistent with the time period in
current NYSE Rule 476(f), would
provide for a 25-day call for review
period. Finally, the proposed text
contains conforming and technical
changes.
Proposed NYSE Rule 9600 Series
The Exchange proposes to adopt a
new NYSE Rule 9600 Series, which
would set forth procedures by which a
member organization could seek
exemptive relief from current NYSE
Rules 4311(carrying agreements) and
4360 (fidelity bonds) and proposed
NYSE Rule 8211 (submission of
electronic blue sheet data). The rule text
would be modeled on FINRA’s Rule
9600 Series; the Exchange’s proposed
rules primarily differ from FINRA’s in
that they contain technical and
conforming changes and that the
Exchange’s CRO, rather than FINRA’s
Office of General Counsel, would
receive the request and any notice of
appeal, and the CRO, rather than
FINRA’s NAC, would carry out the
proposed appellate process.34
34 Currently, the FINRA Rule 9600 Series also
permits FINRA members to seek exemptive relief
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Proposed NYSE Rule 9700 Series
FINRA’s Rule 9700 Series provides
redress for persons aggrieved by the
operations of any automated quotation,
execution, or communication system
owned or operated by FINRA. As this
would be inapplicable to the Exchange,
the Exchange proposes to designate the
proposed NYSE Rule 9700 Series as
reserved to maintain consistency with
FINRA’s rule numbering conventions.
The Exchange notes that under current
NYSE Rule 18, if a member organization
suffers a loss related to an Exchange
system failure, it can submit a claim
pursuant to that rule.
Proposed NYSE Rule 9800 Series
The Exchange proposes to adopt a
new NYSE Rule 9800 Series to set forth
procedures for issuing temporary cease
and desist orders.
The proposed rule text would be
substantially the same as that in
FINRA’s Rule 9800 Series, except for
conforming and technical amendments
and except that the Exchange’s CRO,
rather than FINRA’s CEO, would
authorize the initiation of temporary
cease and desist proceedings and the
initiation of suspension or cancellation
proceedings for a violation of a
temporary cease and desist order.
III. Discussion
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act.35 The Commission believes that the
proposed rule change is consistent with
Section 6(b) of the Act,36 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,37 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,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. In addition, the Commission
believes that the proposed rule furthers
from other rules—NASD Rules 1021, 1050, 1070,
2210, 2340, 3010(b)(2), or 3150, or FINRA Rules
2114, 2310, 2359, 2360, 4210, 4320, 5110, 5121,
5122, 5130, 6183, 6625, 6731, 7470, 8213, 11870,
or 11900, or Municipal Securities Rulemaking
Board Rule G–37. If NYSE adopts similar rules in
the future as part of the rules harmonization project,
it will consider permitting member organizations to
seek exemptive relief through the NYSE Rule 9600
Series.
35 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
36 15 U.S.C. 78f(b).
37 15 U.S.C. 78f(b)(5).
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the objectives of Section 6(b)(7) of the
Act,38 in that it provides fair procedures
for the disciplining of members and
persons associated with members, the
denial of membership to any person
seeking membership therein, the barring
of any person from becoming associated
with a member thereof, and the
prohibition or limitation by the
Exchange of any person with respect to
access to services offered by the
Exchange or a member thereof. In
addition, the Commission believes that
the proposed rule change furthers the
objectives of Section 6(b)(3) of the Act,39
in that it supports the fair representation
of members in the administration of the
Exchange’s affairs.
The Commission believes that it is
consistent with the Act for NYSE to
adopt FINRA’s disciplinary rules, which
have previously been approved by the
Commission.40 According to the
Exchange, most of its member
organizations are members of FINRA
and as such are already subject to the
FINRA Rule 8000 Series and Rule 9000
Series.41 Moreover, FINRA already
administers much of the disciplinary
process for NYSE under both its 17d–2
Agreement with NYSE and the RSA.42
As noted above, since June 14, 2010,
FINRA has been performing all
enforcement-related regulatory services
on behalf of NYSER, including
disciplinary proceedings relating to
NYSE-only rules or against both dual
members and non-FINRA members.
Further, according to the Exchange,
those member organizations that are not
members of FINRA are members of The
NASDAQ Stock Market (‘‘Nasdaq’’),
which has disciplinary rules that are
similar to FINRA’s rules.43 Thus, all
Exchange members, by virtue of their
membership either in FINRA or Nasdaq,
are already complying with the FINRA
rules described herein. Accordingly, the
38 15
U.S.C. 78f(b)(7).
U.S.C. 78f(b)(3).
40 See Order Approving Proposed Rule Change
Relating to the Adoption of NASD Rules 4000
through 10000 Series and the 12000 through 14000
Series as FINRA Rules in the New Consolidated
FINRA Rulebook, Securities Exchange Act Release
No. 58643 (September 25, 2008), 73 FR 57174
(October 1, 2008) (‘‘Order Adopting NASD Rules’’).
41 See Notice, supra note 3, 78 FR at 5214..
42 See supra notes 4 and 6 and accompanying
text.
43 See Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to Adopt
Certain FINRA Rules Relating to Trading Halts and
Disclosure of Disciplinary Information, Securities
Exchange Act Release No. 56204 (August 3, 2007),
72 FR 45288 (August 13, 2007) (‘‘To ensure that
FINRA members did not incur significant regulatory
burdens as a result of Nasdaq separating from
FINRA and registering as a national securities
exchange, Nasdaq based its rules governing
regulatory standards and disciplinary processes on
FINRA rules, to a significant extent.’’).
39 15
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proposed changes will provide greater
harmonization between Exchange and
FINRA rules of similar purpose, such
that dual members will be subject to
more consistent rules which should
eliminate confusion potentially
resulting from differing procedures and
requirements. As such, the Commission
believes the proposed rule change will
foster cooperation and coordination
with persons engaged in facilitating
transactions in securities and will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Commission also believes that it
is consistent with the Act for NYSE to
retain some of its current procedures.
For example, NYSE would retain its
appeals process and the use of NYSE
Panelists; codify its notice provision in
Rule 8313 governing how it releases its
disciplinary decisions; and limit the use
of fines, in proposed Rule 8320. The
Commission notes that the Act requires
that the rules of an exchange provide, in
part, a ‘‘fair procedure for the
disciplining of members and persons
associated with members.’’ 44 The Act,
however, does not dictate what those
procedures should be and therefore,
exchanges are not required by the Act to
follow one process. The Commission
notes that proposed NYSE Rule 9310,
Review by Exchange Board of Directors,
merely codifies the Exchange’s current
appeals process under NYSE Rule 476(f)
and (l) into NYSE’s proposed rules.
Similarly, the Commission also believes
that it is consistent with the Act for the
Exchange to retain its current selection
process for Hearing Panelists. According
to the Exchange, Hearing Panelists
cannot be drawn solely from a pool of
FINRA members and associated
persons, but rather must include NYSEonly member organizations and persons
with experience in NYSE Floor matters
in order for the Exchange’s members to
have a fair representation in its affairs.45
Finally, the Commission also believes
that it is consistent with the Act for the
Exchange to codify its policy regarding
the publication of disciplinary decisions
and to limit the use of proceeds from
fines and other monetary sanctions. The
Commission notes with respect to
publishing disciplinary decisions, that
proposed Rule 8313 would require the
Exchange to publish all final
disciplinary actions other than minor
rule violations, and is therefore, nondiscriminatory and non-discretionary.
Further, the Commission believes that
not allowing monies from fines and
sanctions to be used for general
44 See
45 See
Section 6(b)(7), 15 U.S.C. 78f(b)(7).
Notice, supra note 3, 78 FR at 5235.
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16:19 Mar 08, 2013
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corporate purposes is consistent with
the Commission’s prior order regarding
the use of such monies.46
The Commission also believes that it
is consistent with the Act for the
Exchange to modify FINRA’s Rule 9268
to reflect that the Exchange has member
affiliates. With regard to proposed Rule
9268, the Commission believes that it is
appropriate that a disciplinary decision
concerning an affiliate of the Exchange
not be subject to review by the Exchange
Board of Directors, but instead be
treated as final action subject to review
by the Commission. The Commission
notes that Nasdaq, which also has a
member affiliate, has a rule that is
substantially the same as the Exchange’s
proposed rule.47 In approving Nasdaq’s
rule, the Commission determined that
such a rule would insulate Nasdaq’s role
as a SRO from its commercial
interests.48 Similarly, the Commission
believes that NYSE’s rule is designed to
protect the integrity of the disciplinary
process and is consistent with the Act.
The Commission also notes that in
certain instances the Exchange has
replaced FINRA’s General Counsel or
Chief Executive Officer with the
Exchange’s CRO, as well as replaced
FINRA’s NAC with its Chief Hearing
Officer.49 The Commission believes that
this is consistent with the Act and that
these changes reflect that FINRA is
providing services to a separate SRO.
The Exchange believes that its CRO is
better suited to resolving certain
procedural matters and rendering
certain decisions under the proposed
rule change, because the Exchange’s
CRO would have greater familiarity with
the Exchange’s rules and membership.50
Moreover, the Exchange has represented
that the CRO is independent of the
Department of Member Regulation and
as such can provide an appropriate
review.51 The Exchange also believes
that it is appropriate for FINRA’s Chief
46 See Order Granting Approval of Proposed Rule
Change Relating to NYSE Regulation, Inc. Policies
Regarding Exercise of Power To Fine NYSE Member
Organizations and Use of Money Collected as Fines,
Securities Exchange Act Release No. 55216 (January
31, 2007), 72 FR 5779 (February 7, 2007) (finding
that limitation on the uses of fines to be consistent
with Section 6 of the Act in order to guard against
the possibility that fines may be assessed to respond
to budgetary needs rather than to serve a
disciplinary purpose). Unlike FINRA, the Exchange
is a publicly traded company.
47 See Nasdaq Rule 9268(e)(2).
48 See Order Granting Approval of Proposed Rule
Change as Amended by Amendment No. 1
Regarding Restrictions on Affiliations between
Nasdaq and its Members, Securities Exchange Act
Release No. 54170 (July 18, 2006), 71 FR 42149
(July 25, 2006).
49 See e.g., proposed NYSE Rules 9523, 9556, and
9280.
50 See Notice, supra note 3, 78 FR at 5235.
51 See id. at 5231.
PO 00000
Frm 00061
Fmt 4703
Sfmt 4703
15401
Hearing Officer, in lieu of the NAC or
the Exchange Board of Directors, to
review certain decisions, such as
exclusions from a hearing or conference,
since the Exchange Board of Directors
does not currently review such
decisions.52
The Commission believes that it is
consistent with the Act for NYSE to
modify its proposed rules in a way that
is neither its current practice nor
FINRA’s rules. The Exchange does so for
procedures relating to AWCs pursuant
to proposed NYSE Rule 9216 and
settlements pursuant to proposed NYSE
Rule 9270. The Commission believes
that the proposed processes for settling
disciplinary are fair and reasonable.
Although by adopting proposed NYSE
Rule 9216 the Exchange would be
changing the type of review associated
with settlement procedures, the
Commission believes that the proposed
process provides appropriate controls to
assure consistency and protect against
aberrant settlements. Specifically,
FINRA’s Office of Disciplinary Affairs,
which is an independent body from
FINRA’s Department of Enforcement,53
would be reviewing all proposed AWCs
or minor rule violation plan letters.
Accordingly, FINRA’s Office of
Disciplinary Affairs would serve the
role currently being performed by a
Hearing Officer under NYSE rules to
review a proposed settlement. Similarly,
the Office of Disciplinary Affairs would
be reviewing any uncontested offers of
settlement before a hearing pursuant to
proposed NYSE Rule 9270.54 If the
parties are unable to reach an agreement
on settlement, the matter would proceed
under the proposed 9200 Series and the
processes provided therein.
Finally, the Commission believes that
it is consistent with the Act for the
Exchange to retain its list of minor rule
violations, which have been approved
by the Commission,55 with certain
technical and conforming amendments,
while adopting FINRA’s minor rule
violation fine levels and process for
imposing them, which also have been
approved by the Commission.56
52 See
id. at 5330.
FINRA Regulatory Notice 09–17.
54 A Hearing Panel or Extended Hearing Panel
would have to accept or reject an uncontested offer
of settlement after a hearing has begun. See
proposed NYSE Rule 9270(f).
55 The most recent amendments to the Exchange’s
minor rule violation plan were approved in
Securities Exchange Act Release No. 66758 (April
6, 2012), 77 FR 22032 (April 12, 2012) (SR–NYSE–
2012–05).
56 See Order Adopting NASD Rules, supra note
40.
53 See
E:\FR\FM\11MRN1.SGM
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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Notices
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,57 that the
proposed rule change (SR–NYSE–2013–
02) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.58
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05539 Filed 3–8–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[ File No. 500–1]
Xytos, Inc.; Order of Suspension of
Trading
March 6, 2013.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Xytos, Inc.
(‘‘Xytos’’) because of questions
regarding the adequacy and accuracy of
information Xytos publicly disseminates
concerning the company’s financial
conditions and business operations, and
because of potentially manipulative
conduct in the trading of Xytos shares.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed company is
suspended for the period from 9:30 a.m.
EST on March 6, 2013 through 11:59
p.m. EDT on March 19, 2013.
By the Commission.
Lynn M. Powalski,
Deputy Secretary.
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
May 10, 2013.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collections, to
Carol Fendler, System Accountant,
Office of Investment, Small Business
Administration, 409 3rd Street, 6th
Floor, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Carol Fendler, System Accountant, 202–
205–7559 carol.fendler@sba.gov Curtis
B. Rich, Management Analyst, 202–205–
7030 curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION:
Title: ‘‘SBIC Management
Questionnaire & License Application;
Exhibits to SBIC License Application/
Management Assessment
Questionnaire’’
Abstract: SBA Forms 2181, 2182 and
2183 provide SBA with the necessary
information to make informed and
proper decisions regarding the approval
or denial of an applicant for a small
business investment company (SBIC)
license. SBA uses this information to
assess an applicant’s ability to
successfully operate an SBIC within the
scope of the Small Business Investment
Act, as amended.
Description of Respondents: Small
Business Owners and Farmers.
Form Numbers: 2181, 2182, 2183.
Annual Responses: 425.
Annual Burden: 7,167.
Curtis Rich,
Management Analyst.
[FR Doc. 2013–05542 Filed 3–8–13; 8:45 am]
BILLING CODE P
[FR Doc. 2013–05567 Filed 3–7–13; 11:15 am]
BILLING CODE 8011–01–P
SUSQUEHANNA RIVER BASIN
COMMISSION
SMALL BUSINESS ADMINISTRATION
Projects Approved for Consumptive
Uses of Water
Susquehanna River Basin
Commission.
ACTION: Notice.
AGENCY:
Data Collection Available for Public
Comments
60 Day Notice and request for
comments.
mstockstill on DSK4VPTVN1PROD with NOTICES
ACTION:
In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
SUMMARY:
57 15
58 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:19 Mar 08, 2013
Jkt 229001
This notice lists the projects
approved by rule by the Susquehanna
River Basin Commission during the
period set forth in DATES.
DATES: January 1 through January 31,
2013
ADDRESSES: Susquehanna River Basin
Commission, 1721 North Front Street,
Harrisburg, PA 17102–2391.
SUMMARY:
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
FOR FURTHER INFORMATION CONTACT:
Richard A. Cairo, General Counsel,
telephone: (717) 238–0423, ext. 306; fax:
(717) 238–2436; email: rcairo@srbc.net.
Regular mail inquiries may be sent to
the above address.
SUPPLEMENTARY INFORMATION: This
notice lists the projects, described
below, receiving approval for the
consumptive use of water pursuant to
the Commission’s approval by rule
process set forth in 18 CFR § 806.22(e)
and § 806.22(f) for the time period
specified above:
Approvals by Rule Issued Under 18
CFR 806.22(e)
1. Moxie Energy, LLC, Moxie Patriot,
LLC Facility, ABR–201301006, Clinton
Township, Lycoming County, Pa.;
Consumptive Use of Up to 0.060 mgd;
Approval Date: January 18, 2013.
2. Moxie Energy, LLC, Moxie Liberty,
LLC Facility, ABR–201301007, Asylum
Township, Bradford County, Pa.;
Consumptive Use of Up to 0.060 mgd;
Approval Date: January 18, 2013.
Approvals by Rule Issued Under 18
CFR 806.22(f)
1. EOG Resources, Inc., Pad ID:
HARKNESS C Pad, ABR–201301001,
Smithfield Township, Bradford County,
Pa.; Consumptive Use of Up to 5.000
mgd; Approval Date: January 7, 2013.
2. EOG Resources, Inc., Pad ID:
HOPPAUGH C Pad, ABR–201301002,
Springfield Township, Bradford County,
Pa.; Consumptive Use of Up to 5.000
mgd; Approval Date: January 7, 2013.
3. Chief Oil & Gas LLC, Pad ID:
Cochran Drilling Pad, ABR–201301003,
West Burlington Township, Bradford
County, Pa.; Consumptive Use of Up to
2.000 mgd; Approval Date: January 11,
2013.
4. Pennsylvania General Energy
Company, LLC, Pad ID: COP Tract 322
Pad A, ABR–201301004, Cummings
Township, Lycoming County, Pa.;
Consumptive Use of Up to 3.500 mgd;
Approval Date: January 11, 2013.
5. Pennsylvania General Energy
Company, LLC, Pad ID: COP Tract 322
Pad B, ABR–201301005, Cummings
Township, Lycoming County, Pa.;
Consumptive Use of Up to 3.500 mgd;
Approval Date: January 11, 2013.
6. Range Resources—Appalachia,
LLC, Pad ID: Grays Run 6H–10H, ABR–
201301008, McIntyre Township,
Lycoming County, Pa.; Consumptive
Use of Up to 5.000 mgd; Approval Date:
January 25, 2013.
7. Chesapeake Appalachia, LLC, Pad
ID: Three D Acres, ABR–201301009,
Monroe Township, Bradford County,
Pa.; Consumptive Use of Up to 7.500
mgd; Approval Date: January 25, 2013.
E:\FR\FM\11MRN1.SGM
11MRN1
]]>Agencies
[Federal Register Volume 78, Number 47 (Monday, March 11, 2013)]
[Notices]
[Pages 15394-15402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05539]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69045; File No. SR-NYSE-2013-02]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change Adopting Investigation, Disciplinary,
Sanction, and Other Procedural Rules That Are Modeled on the Rules of
the Financial Industry Regulatory Authority and To Make Certain
Conforming and Technical Changes
March 5, 2013.
I. Introduction
On January 4, 2013, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt rules governing investigations,
discipline of members, sanctions that can be imposed as a result of
disciplinary proceedings, cease and desist authority, and other
procedural rules that are modeled on the rules of the Financial
Industry Regulatory Authority (``FINRA''). The proposed rule change was
published for comment in the Federal Register on January 24, 2013.\3\
The Commission received no comments on the proposed rule change. This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 68678 (January 16,
2013), 78 FR 5213 (January 24, 2013) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
On July 30, 2007, the National Association of Securities Dealers,
Inc. (``NASD''), the Exchange, and NYSE Regulation, Inc. (``NYSER'')
consolidated their member firm regulation operations into a combined
organization, FINRA, and entered into a plan to allocate to FINRA
regulatory responsibility for common rules and common members (``17d-2
Agreement'').\4\ The 17d-2 Agreement was entered into in accordance
with the requirements of Rule 17d-2 under the Act,\5\ which permits
self-regulatory organizations (``SROs'') to allocate regulatory
responsibilities with respect to common members and common rules. In
2007, the parties also entered into a Regulatory Services Agreement
(``RSA''), whereby FINRA was retained to perform certain regulatory
services on behalf of NYSER for non-common rules. On June 14, 2010, the
Exchange, NYSER, and FINRA amended the RSA and retained FINRA to
perform the market surveillance and enforcement functions that had
previously been performed by NYSER up to that point.\6\ Accordingly,
since June 14, 2010, FINRA has been performing all enforcement-related
regulatory services on behalf of NYSER, including disciplinary
proceedings relating to NYSE-only rules or against both dual members
and non-FINRA members.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 56148 (July 26,
2007), 72 FR 42146 (August 1, 2007) (File No. 4-544) (Notice of
Filing and Order Approving and Declaring Effective a Plan for the
Allocation of Regulatory Responsibilities).
\5\ 17 CFR 240.17d-2.
\6\ See Securities Exchange Act Release No. 62355 (June 22,
2010), 75 FR 36729 (June 28, 2010) (SR-NYSE-2010-46).
---------------------------------------------------------------------------
According to the Exchange, to facilitate FINRA's performance of
these enforcement functions under the RSA and to further harmonize the
rules of FINRA and NYSE generally, NYSE is proposing to adopt the text
of the FINRA Rule 8000 Series and Rule 9000 Series, which set forth
rules for conducting investigations and enforcement actions. The
Exchange proposes to adopt most of FINRA's rules that are set forth in
FINRA Rule 8000 and 9000 Series with no modification or only with
conforming and technical changes.\7\ However, in certain key respects,
the proposed NYSE rules would continue to differ from FINRA's rules.
Specifically, as described in more detail below, NYSE proposes, in
part, to (1) establish processes for settling disciplinary matters both
before and after the issuance of a complaint that differ both from
NYSE's current Stipulation and Consent process and FINRA's current
settlement processes; (2) retain the NYSE selection process for Hearing
Panelists, rather than use FINRA's Panelists; (3) retain the substance
of NYSE's current appellate process; (4) have NYSE's Chief Regulatory
Officer (``CRO'') rather than FINRA's General Counsel make certain
procedural decisions in the proposed rules; (5) have NYSE's CRO rather
than FINRA's CEO authorize certain proceedings; (6) have FINRA's Chief
Hearing Officer rather than FINRA's National Adjudicatory Council
(``NAC'') review certain decisions; (7) retain the current NYSE list of
minor rule violations, with certain technical and conforming
amendments, while adopting FINRA's minor rule violation fine levels and
FINRA's process for imposing them; and (8) not allow proceeds from
fines and other monetary sanctions to be used for general corporate
purposes. The major differences from the FINRA rules are highlighted
below.\8\
---------------------------------------------------------------------------
\7\ The following proposed NYSE Rules would be identical to the
text of their counterpart FINRA Rules: 9131-9134, 9136-9138, 9142,
9148, 9213-9215, 9222, 9233-9241, 9261, 9263-9266, and 9290. The
Exchange also made only conforming and technical changes to certain
FINRA rules, such as changing ``member'' and ``associated person''
to ``member organization'' and ``covered person,'' respectively;
changing cross-references to FINRA rules to cross-references to
Exchange rules; and other non-substantive changes. The following
proposed NYSE Rules include only such conforming and technical
amendments to their counterpart FINRA rule text: 8110, 8120, 8210,
8211, 8311, 8330, 9110, 9143, 9145, 9252, 9262, 9267, 9521, 9527,
9620, and 9870. Proposed NYSE Rule 8130 would set forth retention of
jurisdiction provisions modeled on Article IV, Section 6 and Article
V, Section 4 of the FINRA Bylaws. The text of the proposed rule is
substantially the same as the text in FINRA's Bylaws, except that in
paragraph (d) it contains a provision establishing how the
transition period from NYSE Rule 477 will work. NYSE also made
certain conforming changes to cross-references outside the 8000 and
9000 series.
\8\ A detailed description of NYSE's current rules and proposed
changes can be found in the Notice. See supra note 3.
---------------------------------------------------------------------------
[[Page 15395]]
Transition
Following approval of the proposed rule change, the Exchange
intends to announce the effective date of the new rules at least 30
days in advance in an Information Memorandum to its members and member
organizations. To further facilitate an orderly transition from the
current rules to the new rules, the Exchange proposes that certain
matters already initiated under the current rules would be completed
under such rules.\9\
---------------------------------------------------------------------------
\9\ See Notice, supra note 3, 78 FR at 5218-19 (discussing the
particular circumstances under which the current rules would
continue to apply).
---------------------------------------------------------------------------
Proposed NYSE Rule 8000 Series
The Exchange proposes to adopt the text of FINRA Rules 8110 through
8330, Investigation and Sanctions, as NYSE Rules 8110 through 8330,
with the differences described below.\10\
---------------------------------------------------------------------------
\10\ FINRA does not have a Rule 8212. Moreover, the Exchange is
retaining NYSE Rule 410B, which concerns reports of listed
securities transactions effected off the Exchange. As such, the
Exchange is not proposing to adopt FINRA Rule 8213. NYSE is also not
proposing to adopt FINRA Rule 8312, which describes FINRA's
BrokerCheck disclosures. As such, to maintain consistency with
FINRA's rule numbering, the Exchange has designated proposed NYSE
Rules 8212, 8213 and 8312 as ``Reserved.''
---------------------------------------------------------------------------
Unlike FINRA Rule 8313, proposed NYSE Rule 8313 would provide that
the Exchange would publish all final disciplinary decisions issued
under the proposed NYSE Rule 9000 Series, other than minor rule
violations, on its Web site.\11\ According to the Exchange, this
codifies its long-standing practice. By way of comparison, FINRA's Rule
8313 provides that disciplinary complaints and decisions that meet
certain criteria will be either published or made available upon
request.
---------------------------------------------------------------------------
\11\ According to the Exchange, consistent with current
practice, a determination in a statutory disqualification proceeding
under the proposed NYSE Rule 9520 Series would not be considered a
disciplinary decision and thus would not be subject to publication.
---------------------------------------------------------------------------
Further, unlike FINRA Rule 8320(a), the NYSE Rule would not provide
that proceeds from fines and other monetary sanctions could be used for
general corporate purposes. Currently, the Exchange uses fine monies
for regulatory purposes subject to the approval of the NYSER Board.\12\
The remainder of the proposed rule is substantially the same as the
text in FINRA's counterpart rule, with only conforming and technical
amendments.
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release Nos. 55003 (December
22, 2006), 71 FR 78497 (December 29, 2006) (SR-NYSE-2006-109) and
55216 (January 31, 2007), 72 FR 5779 (February 7, 2007).
---------------------------------------------------------------------------
Proposed NYSE Rule 9000 Series
The Exchange proposes to adopt the text of FINRA Rules 9110 through
9290, Code of Procedure, as NYSE Rules 9110 through 9290, with the
differences described below.\13\
---------------------------------------------------------------------------
\13\ Proposed NYSE Rule 9120 would set forth definitions and is
based on FINRA Rule 9120, which certain conforming changes for
NYSE's proposed rules. Certain defined terms in FINRA Rule 9120
would be inapplicable in the Exchange's rules--``Counsel to the
National Adjudicatory Council,'' ``District Committee,'' ``Extended
Proceeding,'' ``Extended Proceeding Committee,'' ``FINRA Board,''
``FINRA Regulation Board,'' ``General Counsel,'' ``Governor,''
``Market Regulation Committee,'' ``Primary District Committee,''
``Review Subcommittee,'' ``Statutory Disqualification Committee,''
and ``Subcommittee''--and therefore are not included in the proposed
rule change. The Exchange also proposes to include certain
definitions that are not included in FINRA's rule text. ``Board of
Directors,'' ``Chief Regulatory Officer'' or ``CRO,'' ``covered
person,'' ``Department of Market Regulation,'' ``Department of
Member Regulation,'' ``Exchange,'' ``Floor-Based Panelist,'' ``Head
of Market Regulation,'' and ``Office of Hearing Officers'' are
definitions that appear in subsequent proposed rules and are
necessary for harmonization with the Exchange's rules.
---------------------------------------------------------------------------
Proposed NYSE Rule 9130 Through 9138
Proposed NYSE Rules 9130 through 9138 would govern the service of a
complaint or other procedural documents under the NYSE Rules. The text
of these proposed rules, other than proposed NYSE Rule 9135, is
identical to FINRA's counterpart rules. Proposed NYSE Rule 9135 differs
from its FINRA counterpart because it deletes a reference to filing an
appeal with FINRA's Office of Hearing Officer. As previously noted, the
Exchange is retaining its current appeals process.
Proposed NYSE Rules 9140 Through 9148
Proposed NYSE Rules 9140 through 9148 are among the rules that
would govern the conduct of disciplinary proceedings. Proposed NYSE
Rule 9141 would govern appearances in a proceeding, notice of
appearances, and representation.\14\
---------------------------------------------------------------------------
\14\ The text of the proposed rule is the same as the text of
FINRA's counterpart rule, except that the Exchange does not propose
to adopt the text of FINRA Rule 9141(c), which provides that no
former officer of FINRA shall, within one year after termination of
employment with FINRA, make an appearance before an adjudicator on
behalf of any other person under the Rule 9000 Series. The Exchange
does not believe that it is necessary to bar its former employees
from such appearances because its employees generally are not
involved in the regulatory and disciplinary functions carried out by
FINRA on behalf of the Exchange; as such, their appearance does not
create the same type of conflict of interest. Thus, proposed NYSE
Rule 9141(c) is marked ``Reserved.''
---------------------------------------------------------------------------
Generally, the text of proposed NYSE Rules 9142 through 9148 is
substantially the same as the text of FINRA's counterpart rules, with
only confirming and technical changes. However, proposed NYSE Rules
9144, 9146, and 9147 differ from FINRA's counterpart rules to reflect
that the Exchange would retain its appellate process by replacing
FINRA's NAC and Review Subcommittee with the Exchange's Board of
Directors.
Proposed NYSE Rule 9150
Proposed NYSE Rule 9150 would provide that a representative can be
excluded by an Adjudicator for improper or unethical conduct. The text
of the proposed rule is substantially the same as the text in FINRA's
counterpart rule, except for conforming and technical amendments and an
amendment to reflect the Exchange's retention of its appellate process
by replacing the NAC with the Exchange's Board of Directors.
Proposed NYSE Rule 9160
Proposed NYSE Rule 9160 would provide that no person may act as an
Adjudicator if he has a conflict of interest or bias, or circumstances
exist where his fairness could reasonably be questioned. In such case,
the person must recuse himself or may be disqualified. The proposed
rule would cover the recusal or disqualification of an Adjudicator, the
Chair of the Exchange Board of Directors, or a Director. The text of
the proposed rule is substantially the same as the text in FINRA's
counterpart rule.\15\
---------------------------------------------------------------------------
\15\ The rule does not reference certain Adjudicators used by
FINRA that the Exchange will not utilize in its proceedings (e.g.,
NAC and Review Subcommittee); as such, proposed NYSE Rules 9160(b)
and (c) are designated as ``Reserved.''
---------------------------------------------------------------------------
Proposed NYSE Rules 9200 Through 9217
Proposed NYSE Rule 9200 would cover disciplinary proceedings.
Generally, proposed NYSE Rules 9211, and 9213 through 9215 are
substantially the same as the text in FINRA's counterpart rule, with
only conforming and technical changes.
Proposed NYSE Rule 9212 would set forth the requirements of the
complaint, amendments to the complaint, withdrawal of the complaint,
and service of the complaint. The text of the proposed rule is modeled
on the text in FINRA's counterpart rule, except that FINRA Rule
9212(a)(2) permits the Department of Enforcement or Department of
Market Regulation to propose that the Chief Hearing Officer select one
Panelist from the Market Regulation Committee if certain trading-
related violations, described in FINRA Rule 9120(u), are alleged in the
complaint. The Exchange proposes instead to permit the Chief Hearing
Officer to select one Floor-Based
[[Page 15396]]
Panelist, who would be a person who is, or, if retired, was, active on
the Floor of the Exchange, to serve on a Hearing Panel if the complaint
alleges at least one cause of action involving activities on the Floor
of the Exchange. Each subsequent reference in the FINRA rules to a
Market Regulation Committee Panelist would be substituted with a
reference to a Floor-Based Panelist in the proposed NYSE Rules.\16\
---------------------------------------------------------------------------
\16\ See proposed NYSE Rules 9221(a)(3), 9231(b) and (c), and
9232. The term ``Floor-Based Panelist'' would be defined in proposed
NYSE Rule 9120(p).
---------------------------------------------------------------------------
Proposed NYSE Rule 9216 would establish the acceptance, waiver, and
consent (``AWC'') procedures by which a Respondent, before a complaint
is issued, may execute a letter accepting a finding of violation,
consenting to the imposition of sanctions, and agreeing to waive the
right to a hearing, appeal, and certain other procedures.\17\ It also
would establish procedures for executing a minor rule violation plan
letter.
---------------------------------------------------------------------------
\17\ Proposed NYSE Rule 9270 would address settlement procedures
after the issuance of a complaint.
---------------------------------------------------------------------------
The proposed rule is similar to FINRA Rule 9216, except that the
Office of Disciplinary Affairs, on behalf of the Exchange Board of
Directors, would be authorized to accept or reject an AWC or minor rule
violation plan letter. If the AWC or minor rule violation plan letter
were accepted by the Office of Disciplinary Affairs, it would be deemed
final. If the letter were rejected by the Office of Disciplinary
Affairs, the Exchange would be permitted to take any other appropriate
disciplinary action with respect to the alleged violation or
violations. If the letter were rejected, the member organization or
covered person would not be prejudiced by the execution of the AWC or
minor rule violation plan letter and such document could not be
introduced into evidence in connection with the determination of the
issues set forth in any complaint or in any other proceeding.\18\
---------------------------------------------------------------------------
\18\ Under FINRA's rule, the Review Subcommittee or Office of
Disciplinary Affairs may accept the AWC or letter or refer it to
FINRA's NAC for acceptance or rejection, or the Review Subcommittee
may reject the AWC or letter or refer it to the NAC for acceptance
or rejection.
---------------------------------------------------------------------------
The proposed AWC process also differs from the Exchange's current
Stipulation and Consent procedure in NYSE Rule 476(g). Under current
NYSE Rule 476(g), a Hearing Officer must act on a Stipulation and
Consent submitted by either party--the ``respondent'' or ``any
authorized officer or employee of the Exchange''--and may choose to
convene a Hearing Panel. No Hearing Officer would be involved in the
process under the proposed rule. Furthermore, any member of the
Exchange Board of Directors, any member of the NYSER Committee for
Review, and any Executive Floor Governor may require a review by the
Exchange Board of Directors of any determination or penalty, or both,
imposed by a Hearing Panel or Hearing Officer in connection with a
Stipulation and Consent. In addition, the Respondent or the Division
which entered into the written consent may require a review by the
Exchange Board of Directors of any rejection of a Stipulation and
Consent by the Hearing Panel. There would be no appeals or reviews of
AWCs by the Exchange Board of Directors under the proposed rule change.
The Exchange also proposes to adopt aspects of FINRA's process and
fine levels for minor rule violations while retaining the specific list
of rules included in the Exchange's current minor rule violation plan,
with certain technical and conforming amendments. Proposed NYSE Rule
9216(b) would be similar to FINRA Rule 9216(b), with technical
amendments and amendments to make it consistent with proposed NYSE Rule
9216(a) in that the Office of Disciplinary Affairs could accept or
reject the minor rule violation letter. While FINRA Rule 9216(b) would
provide that a member or associated person that executes a minor rule
violation letter waives any right to claim bias or prejudgment on the
part of FINRA's General Counsel, the NAC, or any member of the NAC, the
Exchange's proposed rule would provide that a member organization or
covered person could not claim bias or prejudgment on the part of the
CRO, the Exchange Board of Directors, Counsel to the Exchange Board of
Directors, or any Director in order to conform with the Exchange's
proposed rules.
Proposed NYSE Rule 9217 would set forth the rules that are included
in the NYSE's minor rule violation plan under which a member
organization or covered person could be fined, as described in proposed
NYSE Rule 9216(b). The Exchange would retain the list of rules
currently set forth in NYSE Rule 476A with certain technical and
conforming changes under proposed NYSE Rule 9217, rather than adopt the
list of rules in FINRA's plan.\19\
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\19\ The technical and conforming changes are as follows. First,
the NYSE's current list of minor rules includes a reference to the
record retention provisions in NYSE Rule 472(c); the reference would
be corrected to refer to NYSE Rule 472(d). Second, the reference to
the submission of blue sheets under NYSE Rule 410A would be
supplemented with a reference to proposed NYSE Rule 8211. Third, the
reference to the submission of books and records under NYSE Rule
476(a)(11) would be supplemented with a reference to proposed NYSE
Rule 8210. Finally, there is a reference to NYSE Rule 1000-1005.
NYSE Rule 1005 was deleted from the NYSE rules in 2006 and as such
the Exchange proposes to change the reference to NYSE Rule 1000-
1004. See Securities Exchange Act Release No. 53539 (March 22,
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05). The current
list of NYSE minor rules includes some rules that have been more
recently removed from the NYSE rules as part of the FINRA rule
harmonization process, including NYSE Rules 312(h), 382(a), 352(b)
and (c), 392, and 445(4). The Exchange proposes to maintain the
references to these former rules in its current list of minor rules
in proposed NYSE Rule 9217. By doing so, the Exchange could continue
to resolve violations of them that occurred before the harmonization
via a minor rule violation letter. This rationale for maintaining
references to prior rules in the list of minor rule violations was
noted in Securities Exchange Act Release No. 62940 (September 20,
2010), 75 FR 58452 (September 24, 2010) (SR-NYSE-2010-66).
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Proposed NYSE Rules 9220 Through 9222
Proposed NYSE Rules 9221 and 9222 would describe how a Respondent
can request a hearing, how the notice of a hearing will be provided,
and timing considerations. The text of the proposed rules is the same
as that in FINRA's counterpart rules, except that it permits a
Respondent to request a Floor-Based Panelist rather than a Market
Regulation Committee Panelist.
Proposed NYSE Rules 9230 Through 9235
Proposed NYSE Rules 9231 and 9232 would govern the composition of
Hearing Panels and Extended Hearing Panels. The rules also govern how
panel members are approved and the criteria for selection of a
Replacement Hearing Officer, Panelists, Replacement Panelists, and
Floor-Based Panelists. Under the proposed rule change, the Exchange
would use FINRA's Chief Hearing Officer and Hearing Officers from
FINRA's Office of Hearing Officers; however, the Exchange would not use
FINRA's pool of Panelists but would instead continue to draw Panelists
appointed from the Exchange Hearing Board. As it is today, the Hearing
Board would be appointed annually by the Chairman and would be composed
of members of the Exchange who are not members of the Exchange Board of
Directors and registered employees and non-registered employees of
member organizations, as well as former members, former allied members,
or registered and non-registered employees of member organizations who
have retired from the securities industry.\20\ As is the case under
current NYSE Rule
[[Page 15397]]
476(b), Panelists are required to be persons of integrity and judgment.
There is one change in Hearing Board eligibility in the proposed rule.
Currently, the Exchange requires that a Panelist cannot have been
retired from the securities industry for more than five years. The
Exchange is eliminating the five-year restriction in order to have the
largest number of potential retired Panelists.
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\20\ The Exchange no longer has allied members, but former
allied members would continue to be eligible to be appointed to the
Hearing Board, and the text of proposed NYSE Rule 9232 reflects
that.
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In addition, as noted above, while FINRA's rules permit the Chief
Hearing Officer to select one Panelist from the Market Regulation
Committee if certain trading-related violations are alleged in the
complaint, the Exchange proposes instead to permit the Chief Hearing
Officer to select one Floor-Based Panelist to serve on a Hearing Panel
if the complaint alleges at least one cause of action involving
activities on the Floor of the Exchange, consistent with the Exchange's
practice under current NYSE Rule 476(b).
Proposed Rule 9232 would also include certain Panelist selection
criteria that are included in FINRA Rule 9232. These criteria are
expertise, absence of any conflict of interest or bias or any
appearance thereof, availability, and the frequency with which a person
has served as a Panelist in the last two years, favoring the selection
of a person as a Panelist who has never served or who has served
infrequently as a Panelist during the period.
Proposed NYSE Rules 9240 Through 9242
Proposed NYSE Rules 9241 and 9242 would govern the substantive and
procedural requirements for pre-hearing conferences and pre-hearing
submissions. The text of the proposed rules is identical to FINRA's
counterpart rules, except that the Exchange does not propose to adopt
the text of FINRA Rule 9242(b).\21\
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\21\ Rule 9242(b) provides that no former officer of FINRA may,
within one year after termination of employment with FINRA, appear
as an expert witness in a proceeding under the Rule 9000 Series
except on behalf of FINRA. The Exchange does not believe that it is
necessary to bar its former employees from such appearances because
its employees generally are not involved in the regulatory and
disciplinary functions carried out by FINRA on behalf of the
Exchange; as such, their appearance does not create the same type of
conflict of interest.
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Proposed NYSE Rules 9250 Through 9253
Proposed NYSE Rules 9250 through 9253 would address discovery,
including the requirements and limitations relating to the inspection
and copying of documents in the possession of Exchange staff, requests
for information and limitations on such requests, and the production of
witness statements and any harmless error relating to the production of
witness statements. Proposed NYSE Rule 9252 is substantially the same
as FINRA's counterpart rule with only technical amendments.
Proposed NYSE Rule 9251 would generally require the Department of
Enforcement or Department of Market Regulation to make available to a
Respondent any documents prepared or obtained in connection with the
investigation that led to the proceedings, except that certain
privileged or other internal documents, such as examination or
inspection reports or documents that would reveal an examination,
investigation, or enforcement technique or confidential source, or
documents that are prohibited from disclosure under federal law, are
not required to be made available. A Hearing Officer may require
preparation of a withheld document list. Proposed NYSE Rule 9251 also
sets forth procedures for inspection and copying of documents that have
been produced. In addition, if a Document required to be made available
to a Respondent pursuant to the proposed rule was not made available by
the Department of Enforcement or the Department of Market Regulation,
no rehearing or amended decision of a proceeding already heard or
decided would be required unless the Respondent establishes that the
failure to make the Document available was not harmless error. The
Hearing Officer, or, upon review under proposed NYSE Rule 9310, the
Exchange Board of Directors, would determine whether the failure to
make the document available was not harmless error, applying applicable
Exchange, FINRA, SEC, and federal judicial precedent.\22\
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\22\ The text of the proposed rule is substantially the same as
FINRA's counterpart rule, except for conforming and technical
changes and changes to reflect the Exchange's retention of its
current appeals process, and the addition of the Exchange's
consideration of its own precedent with respect to determining
harmless error. The proposed rule would not establish any preference
for Exchange versus other precedent in this respect; rather the
Adjudicators could determine in their discretion what precedent to
apply.
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Under proposed NYSE Rule 9253, a Respondent could file a motion to
obtain certain witness statements. The text of the proposed rule is
substantially the same as FINRA's counterpart rule, except for
conforming and technical changes and changes to reflect the Exchange's
retention of its current appeals process.
Proposed NYSE Rules 9260 Through 9269
Proposed NYSE Rules 9260 through 9269 would govern hearings and
decisions. These rules, other than proposed NYSE Rule 9268, are
substantially the same as FINRA's rules. Proposed NYSE Rule 9268 would
set forth the timing and the contents of a decision of the Hearing
Panel or Extended Hearing Panel and the procedures for a dissenting
opinion, service of the decision, and any requests for review. The text
of the proposed rule is similar to FINRA Rule 9268, with conforming and
technical changes, changes to reflect the Exchange's retention of its
appeals process, and an additional provision to address the fact that
the Exchange has member affiliates.\23\ As such, in proposed NYSE Rule
9268, the Exchange proposes to include text providing that a
disciplinary decision concerning a member that is an affiliate of the
Exchange would not be subject to review under proposed NYSE Rule 9310
but instead would be treated as a final disciplinary action subject to
Commission review.
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\23\ The Exchange has one member, Archipelago Securities, Inc.,
that is an affiliate of the Exchange that is used for inbound and
outbound routing of certain orders. See NYSE Rule 17(c). The
Exchange also has a joint venture with BIDS Holding, LP, an
affiliate of which, BIDS Trading L.P., is a member of the Exchange.
See NYSE Rule 2B.01.
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Proposed NYSE Rule 9270
Proposed NYSE Rule 9270 would provide for a settlement procedure
for a Respondent who has been notified that a proceeding has been
instituted against him. The proposed settlement procedure would differ
from FINRA Rule 9270, as noted below.
Proposed NYSE Rule 9270(c) would set forth the required content of
the proposal, which would include a statement consenting to findings of
fact and violations and a proposed sanction. The proposed rule would be
substantially the same as FINRA's rule, except for conforming and
technical changes and except that it would not require that the
proposed sanction be consistent with FINRA's Sanction Guidelines.
According to the Exchange, it currently does not have Sanction
Guidelines and does not propose to follow FINRA's because they are
tailored to FINRA's rules, not the Exchange's rules.
Proposed NYSE Rule 9270(d) would provide that by submitting a
settlement offer a Respondent waives the right to a hearing, to claim
bias or violations of the prohibition on ex parte communications, and
to review by the
[[Page 15398]]
Exchange Board of Directors, the Commission, or the courts. This
differs from current NYSE Rule 476(g), which allows either party to
request a hearing on a Stipulation and Consent or a Hearing Officer to
convene a hearing on a Stipulation and Consent in certain
circumstances; in addition, current NYSE Rule 476(g) allows the
Exchange Board of Directors to call for review a determination or
penalty imposed by a Hearing Panel or Hearing Officer.\24\
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\24\ Proposed NYSE Rule 9270(d) would also differ from FINRA's
counterpart rule to reflect the Exchange's retention of its
appellate process and its designation of its CRO, rather than
FINRA's General Counsel, to determine certain procedural matters. In
addition, the text of the rule would differ from FINRA's counterpart
in that it would delete references to General Counsel, the NAC, or
any member of the NAC with respect to waiving claims of bias and
replace them with references to the CRO, the Exchange Board of
Directors, Counsel to the Exchange Board of Directors, or any
Director to conform those provisions to the Exchange's proposed
rules.
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Proposed Rule 9270(e) would address contested settlement offers.
Under the proposed rule, if a Respondent made an offer of settlement
and the Department of Enforcement or the Department of Market
Regulation opposed it, the offer of settlement would be contested and
thereby deemed rejected, and thus the proceeding would proceed under
the proposed NYSE Rule 9200 Series.\25\
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\25\ The contested offer of settlement would not be transmitted
to the Office of Hearing Officers, Office of Disciplinary Affairs,
or Hearing Panel or Extended Hearing Panel, and would not constitute
a part of the record in any proceeding against the Respondent making
the offer. The proposed rule differs from FINRA's counterpart rule,
FINRA Rule 9270(f), which permits a Hearing Panel or Extended
Hearing Panel and the NAC to act on contested offers of settlement.
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Proposed NYSE Rule 9270(f) and (h) would address uncontested
settlement offers. Under the proposed rule, if a hearing on the merits
had not begun, the Office of Disciplinary Affairs could accept the
settlement offer; if a hearing on the merits had begun, the Hearing
Panel or Extended Hearing Panel could accept the settlement offer.\26\
If they did not, the offer would be deemed withdrawn and the matter
would proceed under the proposed NYSE Rule 9200 Series; the settlement
offer would not be part of the record. The proposed text is modeled in
part on FINRA's counterpart rules, FINRA Rule 9270(e) and (h), but
differs in certain key respects. Under FINRA's rules, the NAC
ultimately must accept the offer of settlement. The Exchange is
retaining its appellate process and not utilizing the NAC. Therefore,
the Exchange is not proposing to replicate this aspect of FINRA's
rules. Further, the Exchange believes that it is unnecessary to have a
second level of review of an uncontested settlement offer that is
accepted by the Office of Disciplinary Affairs, Hearing Panel, or
Extended Hearing Panel, as applicable, because all parties are in
agreement with respect to the resolution of the matter.
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\26\ Because the Exchange does not have sanction guidelines, the
Office of Disciplinary Affairs, Hearing Panel, or Extended Hearing
Panel, as applicable, would consider Exchange precedent or such
other precedent as it deemed appropriate in determining whether to
accept the settlement offer.
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Proposed NYSE Rule 9270(j) would provide that a Respondent may not
be prejudiced by a rejected offer of settlement nor may it be
introduced into evidence. The text of the proposed rule is
substantially the same as FINRA Rule 9270(j).\27\
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\27\ The only difference is that proposed NYSE Rule 9270(j)
references the Office of Disciplinary Affairs and does not include
references to the NAC and Review Subcommittee, which the Exchange
does not propose to utilize.
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Proposed NYSE Rule 9280
Proposed NYSE Rule 9280 would set forth sanctions for contemptuous
conduct by a Party or attorney or other representative, which may
include exclusion from a hearing or conference, and sets forth a
process for reviewing such exclusions. The text of the proposed rule is
substantially the same as that in FINRA's counterpart rule, except that
rather than having the NAC review exclusions, the Exchange proposes to
have the Chief Hearing Officer review exclusions.
Proposed NYSE Rule 9290
The Exchange proposes to adopt the text of FINRA Rule 9290 for
expedited disciplinary proceedings without any changes.
Proposed NYSE Rules 9300 Through 9310
The Exchange is not proposing to adopt FINRA's appellate and call
for review processes as set forth in the FINRA Rule 9300 Series.
Rather, the text of current NYSE Rule 476(f) and (l) would be moved to
proposed NYSE Rule 9310, with certain technical and substantive changes
described below.
Under proposed NYSE Rule 9310(a)(1), any Party, any Director, and
any member of the NYSER Committee for Review could require a review by
the Exchange Board of Directors of any determination or penalty, or
both, imposed by a Hearing Panel or Extended Hearing Panel under the
proposed NYSE Rule 9200 Series, except that neither Party could request
a review by the Exchange Board of Directors of a decision concerning an
Exchange member that is an affiliate. A request for review would be
made by filing a written request with the Secretary of the Exchange,
which states the basis and reasons for the review, within 25 days after
notice of the determination and/or penalty was served upon the
Respondent. The Secretary of the Exchange would give notice of any such
request for review to the Parties.
The proposed rule differs from the current rule in one substantive
respect. It would eliminate the authority of an Executive Floor
Governor to require a review of a disciplinary decision. According to
the Exchange, this authority is no longer necessary because the
Exchange has moved away from a Floor-only trading model, and the
Exchange's roster of member organizations includes those without any
Floor presence. The Exchange believes that Executive Floor Governors no
longer represent the full community of market participants who may be
subject to disciplinary action.\28\
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\28\ The text also contains certain conforming and technical
changes to align it with terms used in the remainder of the proposed
NYSE Rule 9000 Series.
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Under proposed NYSE Rule 9310(a)(2), the Secretary of the Exchange
would direct the Office of Hearing Officers to complete and transmit a
record of the disciplinary proceeding in accordance with NYSE Rule
9267. Within 21 days after the Secretary of the Exchange gives notice
of a request for review to the Parties, or at such later time as the
Secretary of the Exchange could designate, the Office of Hearing
Officers would assemble and prepare an index to the record, transmit
the record and the index to the Secretary of the Exchange, and serve
copies of the index upon all Parties. The Hearing Officer who
participated in the disciplinary proceeding, or the Chief Hearing
Officer, would certify that the record transmitted to the Secretary of
the Exchange was complete. Current NYSE Rule 476(f) does not contain
such requirements; the text is modeled on FINRA Rule 9321.
Proposed NYSE Rule 9310(b) governing review is substantially the
same as provided in current NYSE Rule 476(f), other than conforming and
technical changes to align it with terms used in the remainder of the
proposed NYSE Rule 9000 Series.
Proposed NYSE Rule 9310(c) governs requests for leave to adduce
additional evidence; it is substantially the same as provided in
current NYSE Rule 476(f), other than conforming and technical changes
to align it with terms used in the remainder of the proposed NYSE Rule
9000 Series.
Proposed NYSE Rule 9310(d) prohibits the CEO from requiring a
[[Page 15399]]
review by the Exchange Board of Directors and governs the CEO's recusal
from reviews by the Exchange Board of Directors. It is substantially
the same as NYSE Rule 476(l), other than conforming and technical
changes to align it with terms used in the remainder of the proposed
NYSE Rule 9000 Series.
Proposed NYSE Rules 9500 Through 9527
The proposed NYSE Rule 9500 Series governs all other proceedings
under the Exchange Rules.
The proposed NYSE Rule 9520 Series would govern eligibility
proceedings for persons subject to statutory disqualifications who are
not FINRA members.\29\ The scope of the proposed NYSE Rule 9520 Series
is meant to be the same as FINRA Rule 9520 Series.\30\
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\29\ FINRA has been processing statutory disqualification
applications on behalf of the Exchange since 2007. See supra notes 4
and 6.
\30\ NYSE intends to issue a notice similar to FINRA Regulatory
Notice 09-19.
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The text of proposed NYSE Rule 9523 is similar to that in FINRA's
counterpart rules, except for conforming and technical changes and
except as follows. First, under proposed NYSE Rule 9523, if the
disqualified member organization, sponsoring member organization, and/
or disqualified person executed a letter consenting to a supervisory
plan, it would be submitted to the Exchange's CRO. Under FINRA's rule,
the letter is submitted to FINRA's Office of General Counsel, which
submits it to the Chairman of the Statutory Disqualification Committee,
acting on behalf of the NAC; the Chairman may accept or reject the plan
or refer it to the NAC for action. The Exchange does not propose to
utilize the NAC or the Statutory Disqualification Committee Chairman
for this purpose. In addition, under FINRA's rule, the waiver of bias
or prejudgment is with respect to the Department of Member Regulation,
the FINRA General Counsel, the NAC and any member thereof, while under
proposed NYSE Rule 9523, the waiver would be with respect to the
Department of Member Regulation, the CRO, the Exchange Board of
Directors, or any member thereof to conform to the Exchange's proposed
rules.
Under proposed NYSE Rule 9524, if the CRO rejects the plan, the
member organization or applicant may request a review by the Exchange
Board of Directors. This differs from FINRA's process, which provides
for a hearing before the NAC and further consideration by the FINRA
Board of Directors. Because the Exchange does not propose to utilize
the NAC, the Exchange proposes instead that the Exchange Board of
Directors may hear any appeal.\31\
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\31\ FINRA Rule 9525 also allows for discretionary review by the
FINRA Board; the Exchange does not propose to adopt a comparable
rule. Further, the Exchange also does not propose to adopt the text
of FINRA Rule 9526, which provides for expedited proceedings by the
FINRA Board of Governors in certain instances.
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Proposed NYSE Rules 9550 Through 9559
Proposed NYSE Rules 9550 through 9559 would govern expedited
proceedings, which are substantially similar to FINRA Rules 9550
through 9559, with the following changes to those rules.\32\ The
Exchange is not proposing to adopt the text of FINRA Rule 9551, which
concerns failure to comply with the advertising and sales literature
requirements in NASD Rule 2210. According to the Exchange, all NYSE
member organizations that circulate advertising or sales literature are
by definition doing business with the public, and therefore must be
members of FINRA and are already subject to FINRA Rules 2210 and 9551.
In addition, under the SEC Rule 17d-2 Agreement, FINRA is allocated
responsibility for NYSE Rule 472, NYSE's counterpart to NASD Rule
2210.\33\
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\32\ NYSE proposed Rules 9552, 9554 and 9555 are substantially
the same as FINRA's counterpart rules, except that NYSE's proposed
rules do not carry over FINRA's notice provisions because it would
be duplicative of proposed NYSE Rule 8313.
\33\ See supra note 4.
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The Exchange also does not propose to adopt the text of FINRA Rule
9553, which concerns failure to pay fees, dues, assessments or other
charges. The Exchange proposes to adopt the text of FINRA Rule 8320,
which addresses the non-payment of fines and monetary sanctions and
would continue to use NYSE Rule 309 for non-payment of all other
amounts due to the Exchange.
Proposed NYSE Rule 9556 would provide procedures and consequences
for a failure to comply with temporary and permanent cease and desist
orders, which would be authorized by proposed NYSE Rule 9810. The text
of proposed NYSE Rule 9556 is the same as FINRA Rule 9556, except in
the following respects. First, the text contains conforming and
technical changes. Second, under FINRA's rule, FINRA's CEO authorizes
proceedings under FINRA Rule 9556; under the Exchange's proposed rule,
the Exchange's CRO would have the authority. Third, FINRA's rule
permits service of process by facsimile; the Exchange does not believe
that this alternative service method is necessary and the service
methods permitted under proposed NYSE Rule 9134 (which are identical to
FINRA Rule 9134) would be sufficient. Finally, the Exchange does not
propose to include a notice to its membership of decisions under the
rule, as FINRA does, it would be duplicative of proposed NYSE Rule
8313.
Proposed NYSE Rule 9557 would allow the Exchange to issue a notice
directing a member organization to comply with the provisions of NYSE
Rule 4110 (Capital Compliance), 4120 (Regulatory Notification and
Business Curtailment), or 4130 (Regulation of Activities of Section 15C
Member Organizations Experiencing Financial and/or Operational
Difficulties) or otherwise directing it to restrict its business
activities. The notice would be immediately effective, except that a
timely request for a hearing would stay the effective date for 10
business days (unless the Exchange's CRO determined otherwise) or until
an order was issued by the Office of Hearing Officers, whichever occurs
first. The notice could be withdrawn upon a showing that all the
requirements were met.
The text of the proposed rule change is substantially the same as
that in FINRA Rule 9557, except in the following respects. First, the
text contains conforming and technical changes. Second, under FINRA's
rule, FINRA's CEO exercises authority with respect to stays under the
rule; under the Exchange's proposed rule, the Exchange's CRO would have
the authority. Third, FINRA's rule permits service of process by
facsimile; the Exchange does not believe that this alternative service
method is necessary for the reasons stated above. Finally, the Exchange
does not propose to include a notice to its membership of decisions
under the rule, as FINRA does, because it would be duplicative of
proposed NYSE Rule 8313.
Proposed NYSE Rule 9558 would allow the Exchange's CRO to provide
written authorization to the Exchange staff to issue a written notice
for a summary proceeding for an action authorized by Section 6(d)(3) of
the Act. Such notice would be immediately effective. The text of the
proposed rule change is substantially the same as that in FINRA Rule
9558, except as follows. First, the text contains conforming and
technical changes. Second, under FINRA's rule, FINRA's CEO authorizes
such proceedings. Third, the Exchange would not permit service of
process by facsimile. Finally, the Exchange does not propose to include
a notice to its membership of decisions under the rule, as FINRA does,
because it would be
[[Page 15400]]
duplicative of proposed NYSE Rule 8313.
Proposed NYSE Rule 9559 would set forth uniform hearing procedures
for all expedited proceedings under the proposed NYSE Rule 9550 Series.
Proposed NYSE Rule 9559 differs from FINRA Rule 9559 as follows. First,
any call for review would be conducted by the Exchange's Board of
Directors rather than FINRA's NAC. Second, the Exchange would not
utilize current or former members of the FINRA Financial Responsibility
Committee for proceedings initiated under proposed NYSE Rule 9557, as
FINRA does under its counterpart rule. The Exchange would use the same
pool of Hearing Panelists from the Hearing Board as it uses for other
proceedings. Third, any instance in FINRA's rule that authorized
FINRA's CEO to act would instead authorize the Exchange's CRO to act.
Fourth, the Exchange does not propose to adopt the text of FINRA Rule
9559(r), which provides for the publication of decisions under the
Rule, because it would be duplicative of proposed NYSE Rule 8313.
Fifth, the Exchange does not propose to adopt the text of FINRA Rule
9559(q)(1) that sets forth 14-day and 21-day call for review periods
because a call for review period would be described in proposed NYSE
Rule 9310. Proposed NYSE Rule 9559(q)(1) would instead state that calls
for review would be conducted in accordance with proposed NYSE Rule
9310, which, consistent with the time period in current NYSE Rule
476(f), would provide for a 25-day call for review period. Finally, the
proposed text contains conforming and technical changes.
Proposed NYSE Rule 9600 Series
The Exchange proposes to adopt a new NYSE Rule 9600 Series, which
would set forth procedures by which a member organization could seek
exemptive relief from current NYSE Rules 4311(carrying agreements) and
4360 (fidelity bonds) and proposed NYSE Rule 8211 (submission of
electronic blue sheet data). The rule text would be modeled on FINRA's
Rule 9600 Series; the Exchange's proposed rules primarily differ from
FINRA's in that they contain technical and conforming changes and that
the Exchange's CRO, rather than FINRA's Office of General Counsel,
would receive the request and any notice of appeal, and the CRO, rather
than FINRA's NAC, would carry out the proposed appellate process.\34\
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\34\ Currently, the FINRA Rule 9600 Series also permits FINRA
members to seek exemptive relief from other rules--NASD Rules 1021,
1050, 1070, 2210, 2340, 3010(b)(2), or 3150, or FINRA Rules 2114,
2310, 2359, 2360, 4210, 4320, 5110, 5121, 5122, 5130, 6183, 6625,
6731, 7470, 8213, 11870, or 11900, or Municipal Securities
Rulemaking Board Rule G-37. If NYSE adopts similar rules in the
future as part of the rules harmonization project, it will consider
permitting member organizations to seek exemptive relief through the
NYSE Rule 9600 Series.
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Proposed NYSE Rule 9700 Series
FINRA's Rule 9700 Series provides redress for persons aggrieved by
the operations of any automated quotation, execution, or communication
system owned or operated by FINRA. As this would be inapplicable to the
Exchange, the Exchange proposes to designate the proposed NYSE Rule
9700 Series as reserved to maintain consistency with FINRA's rule
numbering conventions. The Exchange notes that under current NYSE Rule
18, if a member organization suffers a loss related to an Exchange
system failure, it can submit a claim pursuant to that rule.
Proposed NYSE Rule 9800 Series
The Exchange proposes to adopt a new NYSE Rule 9800 Series to set
forth procedures for issuing temporary cease and desist orders.
The proposed rule text would be substantially the same as that in
FINRA's Rule 9800 Series, except for conforming and technical
amendments and except that the Exchange's CRO, rather than FINRA's CEO,
would authorize the initiation of temporary cease and desist
proceedings and the initiation of suspension or cancellation
proceedings for a violation of a temporary cease and desist order.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act.\35\ The
Commission believes that the proposed rule change is consistent with
Section 6(b) of the Act,\36\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\37\ 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, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system. In addition, the
Commission believes that the proposed rule furthers the objectives of
Section 6(b)(7) of the Act,\38\ in that it provides fair procedures for
the disciplining of members and persons associated with members, the
denial of membership to any person seeking membership therein, the
barring of any person from becoming associated with a member thereof,
and the prohibition or limitation by the Exchange of any person with
respect to access to services offered by the Exchange or a member
thereof. In addition, the Commission believes that the proposed rule
change furthers the objectives of Section 6(b)(3) of the Act,\39\ in
that it supports the fair representation of members in the
administration of the Exchange's affairs.
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\35\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\36\ 15 U.S.C. 78f(b).
\37\ 15 U.S.C. 78f(b)(5).
\38\ 15 U.S.C. 78f(b)(7).
\39\ 15 U.S.C. 78f(b)(3).
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The Commission believes that it is consistent with the Act for NYSE
to adopt FINRA's disciplinary rules, which have previously been
approved by the Commission.\40\ According to the Exchange, most of its
member organizations are members of FINRA and as such are already
subject to the FINRA Rule 8000 Series and Rule 9000 Series.\41\
Moreover, FINRA already administers much of the disciplinary process
for NYSE under both its 17d-2 Agreement with NYSE and the RSA.\42\ As
noted above, since June 14, 2010, FINRA has been performing all
enforcement-related regulatory services on behalf of NYSER, including
disciplinary proceedings relating to NYSE-only rules or against both
dual members and non-FINRA members. Further, according to the Exchange,
those member organizations that are not members of FINRA are members of
The NASDAQ Stock Market (``Nasdaq''), which has disciplinary rules that
are similar to FINRA's rules.\43\ Thus, all Exchange members, by virtue
of their membership either in FINRA or Nasdaq, are already complying
with the FINRA rules described herein. Accordingly, the
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proposed changes will provide greater harmonization between Exchange
and FINRA rules of similar purpose, such that dual members will be
subject to more consistent rules which should eliminate confusion
potentially resulting from differing procedures and requirements. As
such, the Commission believes the proposed rule change will foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and will remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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\40\ See Order Approving Proposed Rule Change Relating to the
Adoption of NASD Rules 4000 through 10000 Series and the 12000
through 14000 Series as FINRA Rules in the New Consolidated FINRA
Rulebook, Securities Exchange Act Release No. 58643 (September 25,
2008), 73 FR 57174 (October 1, 2008) (``Order Adopting NASD
Rules'').
\41\ See Notice, supra note 3, 78 FR at 5214..
\42\ See supra notes 4 and 6 and accompanying text.
\43\ See Notice of Filing and Immediate Effectiveness of
Proposed Rule Change to Adopt Certain FINRA Rules Relating to
Trading Halts and Disclosure of Disciplinary Information, Securities
Exchange Act Release No. 56204 (August 3, 2007), 72 FR 45288 (August
13, 2007) (``To ensure that FINRA members did not incur significant
regulatory burdens as a result of Nasdaq separating from FINRA and
registering as a national securities exchange, Nasdaq based its
rules governing regulatory standards and disciplinary processes on
FINRA rules, to a significant extent.'').
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The Commission also believes that it is consistent with the Act for
NYSE to retain some of its current procedures. For example, NYSE would
retain its appeals process and the use of NYSE Panelists; codify its
notice provision in Rule 8313 governing how it releases its
disciplinary decisions; and limit the use of fines, in proposed Rule
8320. The Commission notes that the Act requires that the rules of an
exchange provide, in part, a ``fair procedure for the disciplining of
members and persons associated with members.'' \44\ The Act, however,
does not dictate what those procedures should be and therefore,
exchanges are not required by the Act to follow one process. The
Commission notes that proposed NYSE Rule 9310, Review by Exchange Board
of Directors, merely codifies the Exchange's current appeals process
under NYSE Rule 476(f) and (l) into NYSE's proposed rules. Similarly,
the Commission also believes that it is consistent with the Act for the
Exchange to retain its current selection process for Hearing Panelists.
According to the Exchange, Hearing Panelists cannot be drawn solely
from a pool of FINRA members and associated persons, but rather must
include NYSE-only member organizations and persons with experience in
NYSE Floor matters in order for the Exchange's members to have a fair
representation in its affairs.\45\ Finally, the Commission also
believes that it is consistent with the Act for the Exchange to codify
its policy regarding the publication of disciplinary decisions and to
limit the use of proceeds from fines and other monetary sanctions. The
Commission notes with respect to publishing disciplinary decisions,
that proposed Rule 8313 would require the Exchange to publish all final
disciplinary actions other than minor rule violations, and is
therefore, non-discriminatory and non-discretionary. Further, the
Commission believes that not allowing monies from fines and sanctions
to be used for general corporate purposes is consistent with the
Commission's prior order regarding the use of such monies.\46\
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\44\ See Section 6(b)(7), 15 U.S.C. 78f(b)(7).
\45\ See Notice, supra note 3, 78 FR at 5235.
\46\ See Order Granting Approval of Proposed Rule Change
Relating to NYSE Regulation, Inc. Policies Regarding Exercise of
Power To Fine NYSE Member Organizations and Use of Money Collected
as Fines, Securities Exchange Act Release No. 55216 (January 31,
2007), 72 FR 5779 (February 7, 2007) (finding that limitation on the
uses of fines to be consistent with Section 6 of the Act in order to
guard against the possibility that fines may be assessed to respond
to budgetary needs rather than to serve a disciplinary purpose).
Unlike FINRA, the Exchange is a publicly traded company.
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The Commission also believes that it is consistent with the Act for
the Exchange to modify FINRA's Rule 9268 to reflect that the Exchange
has member affiliates. With regard to proposed Rule 9268, the
Commission believes that it is appropriate that a disciplinary decision
concerning an affiliate of the Exchange not be subject to review by the
Exchange Board of Directors, but instead be treated as final action
subject to review by the Commission. The Commission notes that Nasdaq,
which also has a member affiliate, has a rule that is substantially the
same as the Exchange's proposed rule.\47\ In approving Nasdaq's rule,
the Commission determined that such a rule would insulate Nasdaq's role
as a SRO from its commercial interests.\48\ Similarly, the Commission
believes that NYSE's rule is designed to protect the integrity of the
disciplinary process and is consistent with the Act.
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\47\ See Nasdaq Rule 9268(e)(2).
\48\ See Order Granting Approval of Proposed Rule Change as
Amended by Amendment No. 1 Regarding Restrictions on Affiliations
between Nasdaq and its Members, Securities Exchange Act Release No.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006).
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The Commission also notes that in certain instances the Exchange
has replaced FINRA's General Counsel or Chief Executive Officer with
the Exchange's CRO, as well as replaced FINRA's NAC with its Chief
Hearing Officer.\49\ The Commission believes that this is consistent
with the Act and that these changes reflect that FINRA is providing
services to a separate SRO. The Exchange believes that its CRO is
better suited to resolving certain procedural matters and rendering
certain decisions under the proposed rule change, because the
Exchange's CRO would have greater familiarity with the Exchange's rules
and membership.\50\ Moreover, the Exchange has represented that the CRO
is independent of the Department of Member Regulation and as such can
provide an appropriate review.\51\ The Exchange also believes that it
is appropriate for FINRA's Chief Hearing Officer, in lieu of the NAC or
the Exchange Board of Directors, to review certain decisions, such as
exclusions from a hearing or conference, since the Exchange Board of
Directors does not currently review such decisions.\52\
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\49\ See e.g., proposed NYSE Rules 9523, 9556, and 9280.
\50\ See Notice, supra note 3, 78 FR at 5235.
\51\ See id. at 5231.
\52\ See id. at 5330.
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The Commission believes that it is consistent with the Act for NYSE
to modify its proposed rules in a way that is neither its current
practice nor FINRA's rules. The Exchange does so for procedures
relating to AWCs pursuant to proposed NYSE Rule 9216 and settlements
pursuant to proposed NYSE Rule 9270. The Commission believes that the
proposed processes for settling disciplinary are fair and reasonable.
Although by adopting proposed NYSE Rule 9216 the Exchange would be
changing the type of review associated with settlement procedures, the
Commission believes that the proposed process provides appropriate
controls to assure consistency and protect against aberrant
settlements. Specifically, FINRA's Office of Disciplinary Affairs,
which is an independent body from FINRA's Department of
Enforcement,\53\ would be reviewing all proposed AWCs or minor rule
violation plan letters. Accordingly, FINRA's Office of Disciplinary
Affairs would serve the role currently being performed by a Hearing
Officer under NYSE rules to review a proposed settlement. Similarly,
the Office of Disciplinary Affairs would be reviewing any uncontested
offers of settlement before a hearing pursuant to proposed NYSE Rule
9270.\54\ If the parties are unable to reach an agreement on
settlement, the matter would proceed under the proposed 9200 Series and
the processes provided therein.
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\53\ See FINRA Regulatory Notice 09-17.
\54\ A Hearing Panel or Extended Hearing Panel would have to
accept or reject an uncontested offer of settlement after a hearing
has begun. See proposed NYSE Rule 9270(f).
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Finally, the Commission believes that it is consistent with the Act
for the Exchange to retain its list of minor rule violations, which
have been approved by the Commission,\55\ with certain technical and
conforming amendments, while adopting FINRA's minor rule violation fine
levels and process for imposing them, which also have been approved by
the Commission.\56\
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\55\ The most recent amendments to the Exchange's minor rule
violation plan were approved in Securities Exchange Act Release No.
66758 (April 6, 2012), 77 FR 22032 (April 12, 2012) (SR-NYSE-2012-
05).
\56\ See Order Adopting NASD Rules, supra note 40.
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[[Page 15402]]
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\57\ that the proposed rule change (SR-NYSE-2013-02) be, and it
hereby is, approved.
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\57\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\58\
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\58\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05539 Filed 3-8-13; 8:45 am]
BILLING CODE 8011-01-P
