Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and Topaz Exchange, LLC, 46656-46660 [2013-18476]

Download as PDF 46656 Federal Register / Vol. 78, No. 148 / Thursday, August 1, 2013 / Notices prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest and Section 15A(b)(5) of the Act,22 which requires, among other things, that FINRA rules provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system that FINRA operates or controls. FINRA believes that the proposed rule change establishes an equitable and transparent method for registering members for participation on the ADF. FINRA also believes that requiring individual members to ensure the recoupment of a portion of the specific costs FINRA incurs to accommodate their request to accelerate the migration of the ADF or use the ADF is a fair and equitable way to ensure that the members responsible for those costs are accountable should they not participate on the ADF to the extent anticipated. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA believes that members that choose to use the ADF should bear responsibility for costs incurred in accelerating the ADF’s migration or in otherwise building out the ADF. The decision to request acceleration or to use the ADF to display quotations or orders lies solely with the member. Further, members are able to recover the full amount of their ADF Deposit Amount by meeting the terms of the agreement. Although a member would be required to provide a commitment to quote on and report trades to the ADF, it always retains the option to leave the ADF or choose to quote or trade through another trading venue, but must bear certain financial consequences associated with that choice. mstockstill on DSK4VPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) 22 15 U.S.C. 78o–3(b)(5). VerDate Mar<15>2010 17:02 Jul 31, 2013 Jkt 229001 as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2013–031 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2013–031. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://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 the filing will also be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2013–031 and should be submitted on or before August 22, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–18470 Filed 7–31–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70053; File No. 4–663] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and Topaz Exchange, LLC July 26, 2013. Pursuant to Section 17(d) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 17d–2 thereunder,2 notice is hereby given that on June 21, 2013, Topaz Exchange, LLC (‘‘Topaz’’) and the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (together with Topaz, the ‘‘Parties’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) a plan for the allocation of regulatory responsibilities, dated June 21, 2013 (‘‘17d–2 Plan’’ or the ‘‘Plan’’). The Commission is publishing this notice to solicit comments on the 17d–2 Plan from interested persons. I. Introduction Section 19(g)(1) of the Act,3 among other things, requires every selfregulatory organization (‘‘SRO’’) registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO’s own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) or Section 19(g)(2) of the Act.4 Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of 23 17 CFR 200.30–3(a)(12). U.S.C. 78q(d). 2 17 CFR 240.17d–2. 3 15 U.S.C. 78s(g)(1). 4 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. 1 15 E:\FR\FM\01AUN1.SGM 01AUN1 Federal Register / Vol. 78, No. 148 / Thursday, August 1, 2013 / Notices broker-dealers that maintain memberships in more than one SRO (‘‘common members’’). Such regulatory duplication would add unnecessary expenses for common members and their SROs. Section 17(d)(1) of the Act 5 was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.6 With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d–1 and Rule 17d–2 under the Act.7 Rule 17d–1 authorizes the Commission to name a single SRO as the designated examining authority (‘‘DEA’’) to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.8 When an SRO has been named as a common member’s DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d–1 deals only with an SRO’s obligations to enforce member compliance with financial responsibility requirements. Rule 17d–1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. To address regulatory duplication in these and other areas, the Commission adopted Rule 17d–2 under the Act.9 Rule 17d–2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d–2, the Commission may declare such a plan effective if, after providing for appropriate notice and comment, it determines that the plan is necessary or 5 15 U.S.C. 78q(d)(1). Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94– 75, 94th Cong., 1st Session 32 (1975). 7 17 CFR 240.17d–1 and 17 CFR 240.17d–2, respectively. 8 See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). 9 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). mstockstill on DSK4VPTVN1PROD with NOTICES 6 See VerDate Mar<15>2010 17:02 Jul 31, 2013 Jkt 229001 appropriate in the public interest and for the protection of investors; to foster cooperation and coordination among the SROs; to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system; and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d–2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. II. Proposed Plan The proposed 17d–2 Plan is intended to reduce regulatory duplication for firms that are common members of both Topaz and FINRA.10 Pursuant to the proposed 17d–2 Plan, FINRA would assume certain examination and enforcement responsibilities for common members with respect to certain applicable laws, rules, and regulations. The text of the Plan delineates the proposed regulatory responsibilities with respect to the Parties. Included in the proposed Plan is an exhibit (the ‘‘Topaz Certification of Common Rules,’’ referred to herein as the ‘‘Certification’’) that lists every Topaz rule for which FINRA would bear responsibility under the Plan for overseeing and enforcing with respect to Topaz members that are also members of FINRA and the associated persons therewith (‘‘Dual Members’’). Specifically, under the 17d–2 Plan, FINRA would assume examination and enforcement responsibility relating to compliance by Dual Members with the rules of Topaz that are substantially similar to the applicable rules of FINRA,11 as well as any provisions of the federal securities laws and the rules and regulations thereunder delineated in the Certification (‘‘Common Rules’’). In the event that a Dual Member is the subject of an investigation relating to a transaction on Topaz, the plan acknowledges that Topaz may, in its discretion, exercise concurrent jurisdiction and responsibility for such matter.12 10 The proposed 17d–2 Plan refers to these common members as ‘‘Dual Members.’’ See Paragraph 1(c) of the proposed 17d–2 Plan. 11 See paragraph 1(b) of the proposed 17d–2 Plan (defining Common Rules). See also paragraph 1(f) of the proposed 17d–2 Plan (defining Regulatory Responsibilities). Paragraph 2 of the Plan provides that annually, or more frequently as required by changes in either Topaz rules or FINRA rules, the parties shall review and update, if necessary, the list of Common Rules. Further, paragraph 3 of the Plan provides that Topaz shall furnish FINRA with a list of Dual Members, and shall update the list no less frequently than once each calendar quarter. 12 See paragraph 6 of the proposed 17d–2 Plan. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 46657 Under the Plan, Topaz would retain full responsibility for surveillance and enforcement with respect to trading activities or practices involving Topaz’s own marketplace, including, without limitation, registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules); its duties as a DEA pursuant to Rule 17d–1 under the Act; and any Topaz rules that are not Common Rules.13 The text of the proposed 17d–2 Plan is as follows: Agreement Between Financial Industry Regulatory Authority, Inc. and Topaz Exchange, LLC Pursuant to Rule 17d–2 Under The Securities Exchange Act of 1934 This Agreement, by and between Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and Topaz Exchange, LLC (‘‘Topaz’’), is made this 21st day of June, 2013 (the ‘‘Agreement’’), pursuant to Section 17(d) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and Rule 17d–2 thereunder which permits agreements between self-regulatory organizations to allocate regulatory responsibility to eliminate regulatory duplication. FINRA and Topaz may be referred to individually as a ‘‘party’’ and together as the ‘‘parties.’’ Whereas, FINRA and Topaz desire to reduce duplication in the examination of their Dual Members (as defined herein) and in the filing and processing of certain registration and membership records; and Whereas, FINRA and Topaz desire to execute an agreement covering such subjects pursuant to the provisions of Rule 17d–2 under the Exchange Act and to file such agreement with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) for its approval. Now, therefore, in consideration of the mutual covenants contained hereinafter, FINRA and Topaz hereby agree as follows: 1. Definitions. Unless otherwise defined in this Agreement or the context otherwise requires, the terms used in this Agreement shall have the same meaning as they have under the Exchange Act and the rules and regulations thereunder. As used in this Agreement, the following terms shall have the following meanings: (a) ‘‘Topaz Rules’’ or ‘‘FINRA Rules’’ shall mean the rules of Topaz or FINRA, respectively, as the rules of an exchange or association are defined in Exchange Act Section 3(a)(27). 13 See E:\FR\FM\01AUN1.SGM paragraph 2 of the proposed 17d–2 Plan. 01AUN1 mstockstill on DSK4VPTVN1PROD with NOTICES 46658 Federal Register / Vol. 78, No. 148 / Thursday, August 1, 2013 / Notices (b) ‘‘Common Rules’’ shall mean the Topaz Rules that are substantially similar to the applicable FINRA Rules in that examination for compliance with such rules would not require FINRA to develop one or more new examination standards, modules, procedures, or criteria in order to analyze the application of the rule, or a Dual Member’s activity, conduct, or output in relation to such rule. (c) ‘‘Dual Members’’ shall mean those Topaz members that are also members of FINRA and the associated persons therewith. (d) ‘‘Effective Date’’ shall have the meaning set forth in paragraph 13. (e) ‘‘Enforcement Responsibilities’’ shall mean the conduct of appropriate proceedings, in accordance with the FINRA Code of Procedure (the Rule 9000 Series) and other applicable FINRA procedural rules, to determine whether violations of pertinent laws, rules or regulations have occurred, and if such violations are deemed to have occurred, the imposition of appropriate sanctions as specified under the FINRA’s Code of Procedure and sanctions guidelines. (f) ‘‘Regulatory Responsibilities’’ shall mean the examination responsibilities and Enforcement Responsibilities relating to compliance by the Dual Members with the Common Rules and the provisions of the Exchange Act and the rules and regulations thereunder, and other applicable laws, rules and regulations, each as set forth on Exhibit 1 attached hereto. 2. Regulatory and Enforcement Responsibilities. FINRA shall assume Regulatory Responsibilities and Enforcement Responsibilities for Dual Members. Attached as Exhibit 1 to this Agreement and made part hereof, Topaz furnished FINRA with a current list of Common Rules and certified to FINRA that such rules are substantially similar to the corresponding FINRA Rule (the ‘‘Certification’’). FINRA hereby agrees that the rules listed in the Certification are Common Rules as defined in this Agreement. Each year following the Effective Date of this Agreement, or more frequently if required by changes in either the Topaz Rules or FINRA Rules, Topaz shall submit an updated list of Common Rules to FINRA for review which shall add Topaz Rules not included in the current list of Common Rules that qualify as Common Rules as defined in this Agreement; delete Topaz Rules included in the current list of Common Rules that no longer qualify as Common Rules as defined in this Agreement; and confirm that the remaining rules on the current list of Common Rules continue to be Topaz VerDate Mar<15>2010 17:02 Jul 31, 2013 Jkt 229001 Rules that qualify as Common Rules as defined in this Agreement. Within 30 days of receipt of such updated list, FINRA shall confirm in writing whether the rules listed in any updated list are Common Rules as defined in this Agreement. Notwithstanding anything herein to the contrary, it is explicitly understood that the term ‘‘Regulatory Responsibilities’’ does not include, and Topaz shall retain full responsibility for (unless otherwise addressed by separate agreement or rule) the following (collectively, the ‘‘Retained Responsibilities’’): (a) Surveillance and enforcement with respect to trading activities or practices involving Topaz’s own marketplaces, including without limitation Topaz’s Rules relating to the rights and obligations of market makers; (b) Registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules); (c) Discharge of its duties and obligations as a Designated Examining Authority pursuant to Rule 17d–1 under the Exchange Act; and (d) Any Topaz Rules that are not Common Rules. 3. Dual Members. Prior to the Effective Date, Topaz shall furnish FINRA with a current list of Dual Members, which shall be updated no less frequently than once each quarter. 4. No Charge. There shall be no charge to Topaz by FINRA for performing the Regulatory Responsibilities and Enforcement Responsibilities under this Agreement except as hereinafter provided. FINRA shall provide Topaz with ninety (90) days advance written notice in the event FINRA decides to impose any charges to Topaz for performing the Regulatory Responsibilities under this Agreement. If FINRA determines to impose a charge, Topaz shall have the right at the time of the imposition of such charge to terminate this Agreement; provided, however, that FINRA’s Regulatory Responsibilities under this Agreement shall continue until the Commission approves the termination of this Agreement. 5. Reassignment of Regulatory Responsibilities. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the Commission, or effective industry agreement, restructuring the regulatory framework of the securities industry or reassigning Regulatory Responsibilities between self-regulatory organizations. To the extent such action is inconsistent with this Agreement, such action shall supersede the provisions hereof to the extent PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 necessary for them to be properly effectuated and the provisions hereof in that respect shall be null and void. 6. Notification of Violations. In the event that FINRA becomes aware of apparent violations of any Topaz Rules, which are not listed as Common Rules, discovered pursuant to the performance of the Regulatory Responsibilities assumed hereunder, FINRA shall notify Topaz of those apparent violations for such response as Topaz deems appropriate. In the event Topaz becomes aware of apparent violations of the Common Rules, discovered pursuant to the performance of the Retained Responsibilities, Topaz shall notify FINRA of those apparent violations and such matters shall be handled by FINRA as provided in this Agreement. Apparent violations of all the Common Rules shall be processed by, and enforcement proceedings in respect thereto shall be conducted by FINRA as provided hereinbefore; provided, however, that in the event a Dual Member is the subject of an investigation relating to a transaction on Topaz, Topaz may in its discretion assume concurrent jurisdiction and responsibility. Each party agrees to make available promptly all files, records and witnesses necessary to assist the other in its investigation or proceedings. 7. Continued Assistance. FINRA shall make available to Topaz all information obtained by FINRA in the performance by it of the Regulatory Responsibilities hereunder in respect to the Dual Members subject to this Agreement. In particular, and not in limitation of the foregoing, FINRA shall furnish Topaz any information it obtains about Dual Members which reflects adversely on their financial condition. It is understood that such information is of an extremely sensitive nature and, accordingly, Topaz acknowledges and agrees to take all reasonable steps to maintain its confidentiality. Topaz shall make available to FINRA any information coming to its attention that reflects adversely on the financial condition of Dual Members or indicates possible violations of applicable laws, rules or regulations by such firms. 8. Dual Member Applications. (a) Dual Members subject to this Agreement shall be required to submit, and FINRA shall be responsible for processing and acting upon all applications submitted on behalf of allied persons, partners, officers, registered personnel and any other person required to be approved by the Topaz Rules and FINRA Rules or associated with Dual Members thereof. Upon request, FINRA shall advise E:\FR\FM\01AUN1.SGM 01AUN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 148 / Thursday, August 1, 2013 / Notices Topaz of any changes of allied members, partners, officers, registered personnel and other persons required to be approved by the Topaz Rules and FINRA Rules. (b) Dual Members shall be required to send to FINRA all letters, termination notices or other material respecting the individuals listed in paragraph 8(a). (c) When as a result of processing such submissions FINRA becomes aware of a statutory disqualification as defined in the Exchange Act with respect to a Dual Member, FINRA shall determine pursuant to Sections 15A(g) and/or Section 6(c) of the Exchange Act the acceptability or continued applicability of the person to whom such disqualification applies and keep Topaz advised of its actions in this regard for such subsequent proceedings as Topaz may initiate. (d) Notwithstanding the foregoing, FINRA shall not review the membership application, reports, filings, fingerprint cards, notices, or other writings filed to determine if such documentation submitted by a broker or dealer, or a person associated therewith or other persons required to register or qualify by examination: (i) Meets the Topaz requirements for general membership or for specified categories of membership or participation in Topaz, such as (A) Primary Market Maker Membership (‘‘PMM’’); (B) Competitive Market Maker Membership (‘‘CMM’’); (C) Electronic Access Membership (‘‘EAM’’) (or any similar type of Topaz membership or participation that is created after this Agreement is executed); or (ii) meets the Topaz requirements to be associated with, or employed by, a Topaz member or participant in any capacity, such a Designated Trading Representative (‘‘DTR’’) (or any similar type of participation, employment category or title, or associate-person category or class that is created after this Agreement is executed). FINRA shall not review applications or other documentation filed to request a change in the rights or status described in this paragraph 8(d), including termination or limitation on activities, of a member or a participant of Topaz, or a person associated with, or requesting association with, a member or participant of Topaz. 9. Branch Office Information. FINRA shall also be responsible for processing and, if required, acting upon all requests for the opening, address changes, and terminations of branch offices by Dual Members and any other applications required of Dual Members with respect to the Common Rules as they may be amended from time to time. Upon request, FINRA shall advise Topaz of VerDate Mar<15>2010 17:02 Jul 31, 2013 Jkt 229001 the opening, address change and termination of branch and main offices of Dual Members and the names of such branch office managers. 10. Customer Complaints. Topaz shall forward to FINRA copies of all customer complaints involving Dual Members received by Topaz relating to FINRA’s Regulatory Responsibilities under this Agreement. It shall be FINRA’s responsibility to review and take appropriate action in respect to such complaints. 11. No Restrictions on Regulatory Action. Nothing contained in this Agreement shall restrict or in any way encumber the right of either party to conduct its own independent or concurrent investigation, examination or enforcement proceeding of or against Dual Members, as either party, in its sole discretion, shall deem appropriate or necessary. 12. Termination. This Agreement may be terminated by Topaz or FINRA at any time upon the approval of the Commission after one (1) year’s written notice to the other party (or such shorter time as may be agreed by the parties), except as provided in paragraph 4. 13. Effective Date. This Agreement shall be effective upon approval of the Commission. 14. Arbitration. In the event of a dispute between the parties as to the operation of this Agreement, Topaz and FINRA hereby agree that any such dispute shall be settled by arbitration in Washington, DC in accordance with the rules of the American Arbitration Association then in effect, or such other procedures as the parties may mutually agree upon. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. 15. Separate Agreement. This Agreement is wholly separate from (1) the multiparty Agreement made pursuant to Rule 17d–2 of the Exchange Act among BATS Exchange, Inc., BOX Options Exchange, LLC, the Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, the International Securities Exchange, LLC, Financial Industry Regulatory Authority, Inc., Miami International Securities Exchange, LLC, the New York Stock Exchange, LLC, the NYSE MKT LLC, the NYSE Arca Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., and the NASDAQ OMX PHLX, LLC approved by the Commission on December 5, 2012 involving the allocation of regulatory responsibilities with respect to common members for compliance with common rules relating to the conduct by broker-dealers of accounts for listed options or index warrants or (2) the multiparty PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 46659 Agreement made pursuant to Rule 17d– 2 of the Exchange Act among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange, LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, International Securities Exchange LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Inc. and Miami International Securities Exchange, LLC, approved by the Commission on December 5, 2012 involving options-related market surveillance matters and such agreements as may be amended from time to time. 16. Notification of Members. Topaz and FINRA shall notify Dual Members of this Agreement after the Effective Date by means of a uniform joint notice. 17. Amendment. This Agreement may be amended in writing duly approved by each party. All such amendments must be filed with and approved by the Commission before they become effective. 18. Limitation of Liability. Neither FINRA nor Topaz nor any of their respective directors, governors, officers or employees shall be liable to the other party to this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibilities as provided hereby or for the failure to provide any such responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or the other of FINRA or Topaz and caused by the willful misconduct of the other party or their respective directors, governors, officers or employees. No warranties, express or implied, are made by FINRA or Topaz with respect to any of the responsibilities to be performed by each of them hereunder. 19. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. 20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and Rule 17d– 2 thereunder, FINRA and Topaz join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve Topaz of any and all E:\FR\FM\01AUN1.SGM 01AUN1 46660 Federal Register / Vol. 78, No. 148 / Thursday, August 1, 2013 / Notices responsibilities with respect to matters allocated to FINRA pursuant to this Agreement; provided, however, that this Agreement shall not be effective until the Effective Date. In witness whereof, each party has executed or caused this Agreement to be executed on its behalf by a duly authorized officer as of the date first written above. FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. By lllllllllllllllll Name: Title: TOPAZ EXCHANGE LLC By lllllllllllllllll Name: Title: EXHIBIT 1 TOPAZ CERTIFICATION OF COMMON RULES Topaz hereby certifies that the requirements contained in the rules listed below for Topaz are identical to, or substantially similar to, the comparable FINRA Rules or SEC Rules identified. FINRA or SEC rule 1 Topaz rule 408(a)(1) Prevention of the Misuse of Material, Nonpublic Information .. 409 Disciplinary Action 2 ........................................................................ 604 Continuing Education for Registered Persons ............................... 614 Statements of Financial Condition to Customers ........................... 622 Transfer of Accounts ....................................................................... 626 Telephone Solicitation ..................................................................... 1400(a) Maintenance, Retention, and Furnishing of Books, Records and Other Information 3. Section 15(f) of the Securities Exchange Act of 1934. FINRA Rule 4530(a)(1)(A) and (2) Reporting Requirements. FINRA Rule 1250 Continuing Education Requirements. Rule 17a–5 of the Securities Exchange Act of 1934. FINRA rule 11870 Customer Account Transfer Contracts. FINRA Rule 3230 Telemarketing. FINRA Rule 4511(a) Books and Records—Requirements. 1 Topaz will be responsible for any significant differences between its rules and the comparable FINRA rule identified, until such time amendments to such rule(s) may be approved. 2 FINRA shall not have Regulatory Responsibilities regarding the requirement to notify Topaz; responsibility for such requirement remains with Topaz. 3 FINRA shall not have Regulatory Responsibilities regarding the requirement to ‘‘keep current and preserve such books and records as the Exchange may prescribe;’’ responsibility for such requirement remains with Topaz. III. Date of Effectiveness of the Proposed Plan and Timing for Commission Action Pursuant to Section 17(d)(1) of the Act 14 and Rule 17d–2 thereunder,15 after August 16, 2013, the Commission may, by written notice, declare the plan submitted by Topaz and FINRA, File No. 4–663, to be effective if the Commission finds that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among self-regulatory organizations, or to remove impediments to and foster the development of the national market system and a national system for the clearance and settlement of securities transactions and in conformity with the factors set forth in Section 17(d) of the Act. mstockstill on DSK4VPTVN1PROD with NOTICES IV. Solicitation of Comments In order to assist the Commission in determining whether to approve the proposed 17d–2 Plan and to relieve Topaz of the responsibilities which would be assigned to FINRA, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: 14 15 15 17 U.S.C. 78q(d)(1). CFR 240.17d–2. VerDate Mar<15>2010 17:02 Jul 31, 2013 Jkt 229001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/other.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number 4–663 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number 4–663. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/rules/ other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, and all written communications relating to the proposed plan 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, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of Topaz and FINRA. All comments received will PO 00000 Frm 00096 Fmt 4703 Sfmt 9990 be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number 4–663 and should be submitted on or before August 16, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–18476 Filed 7–31–13; 8:45 am] BILLING CODE 8011–01–P 16 17 E:\FR\FM\01AUN1.SGM CFR 200.30–3(a)(34). 01AUN1

Agencies

[Federal Register Volume 78, Number 148 (Thursday, August 1, 2013)]
[Notices]
[Pages 46656-46660]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18476]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70053; File No. 4-663]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of 
Regulatory Responsibilities Between the Financial Industry Regulatory 
Authority, Inc. and Topaz Exchange, LLC

 July 26, 2013.
    Pursuant to Section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on June 21, 2013, Topaz Exchange, LLC (``Topaz'') and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') (together with Topaz, 
the ``Parties'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') a plan for the allocation of regulatory 
responsibilities, dated June 21, 2013 (``17d-2 Plan'' or the ``Plan''). 
The Commission is publishing this notice to solicit comments on the 
17d-2 Plan from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or national securities association to examine for, 
and enforce compliance by, its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
SRO's own rules, unless the SRO is relieved of this responsibility 
pursuant to Section 17(d) or Section 19(g)(2) of the Act.\4\ Without 
this relief, the statutory obligation of each individual SRO could 
result in a pattern of multiple examinations of

[[Page 46657]]

broker-dealers that maintain memberships in more than one SRO (``common 
members''). Such regulatory duplication would add unnecessary expenses 
for common members and their SROs.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
---------------------------------------------------------------------------

    Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\6\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q(d)(1).
    \6\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------

    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\8\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
---------------------------------------------------------------------------

    \7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \8\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------

    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\9\ Rule 17d-2 permits SROs 
to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for appropriate notice and comment, it determines that 
the plan is necessary or appropriate in the public interest and for the 
protection of investors; to foster cooperation and coordination among 
the SROs; to remove impediments to, and foster the development of, a 
national market system and a national clearance and settlement system; 
and is in conformity with the factors set forth in Section 17(d) of the 
Act. Commission approval of a plan filed pursuant to Rule 17d-2 
relieves an SRO of those regulatory responsibilities allocated by the 
plan to another SRO.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------

II. Proposed Plan

    The proposed 17d-2 Plan is intended to reduce regulatory 
duplication for firms that are common members of both Topaz and 
FINRA.\10\ Pursuant to the proposed 17d-2 Plan, FINRA would assume 
certain examination and enforcement responsibilities for common members 
with respect to certain applicable laws, rules, and regulations.
---------------------------------------------------------------------------

    \10\ The proposed 17d-2 Plan refers to these common members as 
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    The text of the Plan delineates the proposed regulatory 
responsibilities with respect to the Parties. Included in the proposed 
Plan is an exhibit (the ``Topaz Certification of Common Rules,'' 
referred to herein as the ``Certification'') that lists every Topaz 
rule for which FINRA would bear responsibility under the Plan for 
overseeing and enforcing with respect to Topaz members that are also 
members of FINRA and the associated persons therewith (``Dual 
Members'').
    Specifically, under the 17d-2 Plan, FINRA would assume examination 
and enforcement responsibility relating to compliance by Dual Members 
with the rules of Topaz that are substantially similar to the 
applicable rules of FINRA,\11\ as well as any provisions of the federal 
securities laws and the rules and regulations thereunder delineated in 
the Certification (``Common Rules''). In the event that a Dual Member 
is the subject of an investigation relating to a transaction on Topaz, 
the plan acknowledges that Topaz may, in its discretion, exercise 
concurrent jurisdiction and responsibility for such matter.\12\
---------------------------------------------------------------------------

    \11\ See paragraph 1(b) of the proposed 17d-2 Plan (defining 
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan 
(defining Regulatory Responsibilities). Paragraph 2 of the Plan 
provides that annually, or more frequently as required by changes in 
either Topaz rules or FINRA rules, the parties shall review and 
update, if necessary, the list of Common Rules. Further, paragraph 3 
of the Plan provides that Topaz shall furnish FINRA with a list of 
Dual Members, and shall update the list no less frequently than once 
each calendar quarter.
    \12\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    Under the Plan, Topaz would retain full responsibility for 
surveillance and enforcement with respect to trading activities or 
practices involving Topaz's own marketplace, including, without 
limitation, registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules); its 
duties as a DEA pursuant to Rule 17d-1 under the Act; and any Topaz 
rules that are not Common Rules.\13\
---------------------------------------------------------------------------

    \13\ See paragraph 2 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    The text of the proposed 17d-2 Plan is as follows:

Agreement Between Financial Industry Regulatory Authority, Inc. and 
Topaz Exchange, LLC Pursuant to Rule 17d-2 Under The Securities 
Exchange Act of 1934

    This Agreement, by and between Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and Topaz Exchange, LLC (``Topaz''), is 
made this 21st day of June, 2013 (the ``Agreement''), pursuant to 
Section 17(d) of the Securities Exchange Act of 1934 (the ``Exchange 
Act'') and Rule 17d-2 thereunder which permits agreements between self-
regulatory organizations to allocate regulatory responsibility to 
eliminate regulatory duplication. FINRA and Topaz may be referred to 
individually as a ``party'' and together as the ``parties.''
    Whereas, FINRA and Topaz desire to reduce duplication in the 
examination of their Dual Members (as defined herein) and in the filing 
and processing of certain registration and membership records; and
    Whereas, FINRA and Topaz desire to execute an agreement covering 
such subjects pursuant to the provisions of Rule 17d-2 under the 
Exchange Act and to file such agreement with the Securities and 
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, FINRA and Topaz hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or the 
context otherwise requires, the terms used in this Agreement shall have 
the same meaning as they have under the Exchange Act and the rules and 
regulations thereunder. As used in this Agreement, the following terms 
shall have the following meanings:
    (a) ``Topaz Rules'' or ``FINRA Rules'' shall mean the rules of 
Topaz or FINRA, respectively, as the rules of an exchange or 
association are defined in Exchange Act Section 3(a)(27).

[[Page 46658]]

    (b) ``Common Rules'' shall mean the Topaz Rules that are 
substantially similar to the applicable FINRA Rules in that examination 
for compliance with such rules would not require FINRA to develop one 
or more new examination standards, modules, procedures, or criteria in 
order to analyze the application of the rule, or a Dual Member's 
activity, conduct, or output in relation to such rule.
    (c) ``Dual Members'' shall mean those Topaz members that are also 
members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 13.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the FINRA Code of Procedure 
(the Rule 9000 Series) and other applicable FINRA procedural rules, to 
determine whether violations of pertinent laws, rules or regulations 
have occurred, and if such violations are deemed to have occurred, the 
imposition of appropriate sanctions as specified under the FINRA's Code 
of Procedure and sanctions guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities and Enforcement Responsibilities relating to 
compliance by the Dual Members with the Common Rules and the provisions 
of the Exchange Act and the rules and regulations thereunder, and other 
applicable laws, rules and regulations, each as set forth on Exhibit 1 
attached hereto.
    2. Regulatory and Enforcement Responsibilities. FINRA shall assume 
Regulatory Responsibilities and Enforcement Responsibilities for Dual 
Members. Attached as Exhibit 1 to this Agreement and made part hereof, 
Topaz furnished FINRA with a current list of Common Rules and certified 
to FINRA that such rules are substantially similar to the corresponding 
FINRA Rule (the ``Certification''). FINRA hereby agrees that the rules 
listed in the Certification are Common Rules as defined in this 
Agreement. Each year following the Effective Date of this Agreement, or 
more frequently if required by changes in either the Topaz Rules or 
FINRA Rules, Topaz shall submit an updated list of Common Rules to 
FINRA for review which shall add Topaz Rules not included in the 
current list of Common Rules that qualify as Common Rules as defined in 
this Agreement; delete Topaz Rules included in the current list of 
Common Rules that no longer qualify as Common Rules as defined in this 
Agreement; and confirm that the remaining rules on the current list of 
Common Rules continue to be Topaz Rules that qualify as Common Rules as 
defined in this Agreement. Within 30 days of receipt of such updated 
list, FINRA shall confirm in writing whether the rules listed in any 
updated list are Common Rules as defined in this Agreement. 
Notwithstanding anything herein to the contrary, it is explicitly 
understood that the term ``Regulatory Responsibilities'' does not 
include, and Topaz shall retain full responsibility for (unless 
otherwise addressed by separate agreement or rule) the following 
(collectively, the ``Retained Responsibilities''):
    (a) Surveillance and enforcement with respect to trading activities 
or practices involving Topaz's own marketplaces, including without 
limitation Topaz's Rules relating to the rights and obligations of 
market makers;
    (b) Registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) Discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) Any Topaz Rules that are not Common Rules.
    3. Dual Members. Prior to the Effective Date, Topaz shall furnish 
FINRA with a current list of Dual Members, which shall be updated no 
less frequently than once each quarter.
    4. No Charge. There shall be no charge to Topaz by FINRA for 
performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as hereinafter provided. 
FINRA shall provide Topaz with ninety (90) days advance written notice 
in the event FINRA decides to impose any charges to Topaz for 
performing the Regulatory Responsibilities under this Agreement. If 
FINRA determines to impose a charge, Topaz shall have the right at the 
time of the imposition of such charge to terminate this Agreement; 
provided, however, that FINRA's Regulatory Responsibilities under this 
Agreement shall continue until the Commission approves the termination 
of this Agreement.
    5. Reassignment of Regulatory Responsibilities. Notwithstanding any 
provision hereof, this Agreement shall be subject to any statute, or 
any rule or order of the Commission, or effective industry agreement, 
restructuring the regulatory framework of the securities industry or 
reassigning Regulatory Responsibilities between self-regulatory 
organizations. To the extent such action is inconsistent with this 
Agreement, such action shall supersede the provisions hereof to the 
extent necessary for them to be properly effectuated and the provisions 
hereof in that respect shall be null and void.
    6. Notification of Violations. In the event that FINRA becomes 
aware of apparent violations of any Topaz Rules, which are not listed 
as Common Rules, discovered pursuant to the performance of the 
Regulatory Responsibilities assumed hereunder, FINRA shall notify Topaz 
of those apparent violations for such response as Topaz deems 
appropriate. In the event Topaz becomes aware of apparent violations of 
the Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, Topaz shall notify FINRA of those apparent 
violations and such matters shall be handled by FINRA as provided in 
this Agreement. Apparent violations of all the Common Rules shall be 
processed by, and enforcement proceedings in respect thereto shall be 
conducted by FINRA as provided hereinbefore; provided, however, that in 
the event a Dual Member is the subject of an investigation relating to 
a transaction on Topaz, Topaz may in its discretion assume concurrent 
jurisdiction and responsibility. Each party agrees to make available 
promptly all files, records and witnesses necessary to assist the other 
in its investigation or proceedings.
    7. Continued Assistance. FINRA shall make available to Topaz all 
information obtained by FINRA in the performance by it of the 
Regulatory Responsibilities hereunder in respect to the Dual Members 
subject to this Agreement. In particular, and not in limitation of the 
foregoing, FINRA shall furnish Topaz any information it obtains about 
Dual Members which reflects adversely on their financial condition. It 
is understood that such information is of an extremely sensitive nature 
and, accordingly, Topaz acknowledges and agrees to take all reasonable 
steps to maintain its confidentiality. Topaz shall make available to 
FINRA any information coming to its attention that reflects adversely 
on the financial condition of Dual Members or indicates possible 
violations of applicable laws, rules or regulations by such firms.
    8. Dual Member Applications.
    (a) Dual Members subject to this Agreement shall be required to 
submit, and FINRA shall be responsible for processing and acting upon 
all applications submitted on behalf of allied persons, partners, 
officers, registered personnel and any other person required to be 
approved by the Topaz Rules and FINRA Rules or associated with Dual 
Members thereof. Upon request, FINRA shall advise

[[Page 46659]]

Topaz of any changes of allied members, partners, officers, registered 
personnel and other persons required to be approved by the Topaz Rules 
and FINRA Rules.
    (b) Dual Members shall be required to send to FINRA all letters, 
termination notices or other material respecting the individuals listed 
in paragraph 8(a).
    (c) When as a result of processing such submissions FINRA becomes 
aware of a statutory disqualification as defined in the Exchange Act 
with respect to a Dual Member, FINRA shall determine pursuant to 
Sections 15A(g) and/or Section 6(c) of the Exchange Act the 
acceptability or continued applicability of the person to whom such 
disqualification applies and keep Topaz advised of its actions in this 
regard for such subsequent proceedings as Topaz may initiate.
    (d) Notwithstanding the foregoing, FINRA shall not review the 
membership application, reports, filings, fingerprint cards, notices, 
or other writings filed to determine if such documentation submitted by 
a broker or dealer, or a person associated therewith or other persons 
required to register or qualify by examination: (i) Meets the Topaz 
requirements for general membership or for specified categories of 
membership or participation in Topaz, such as (A) Primary Market Maker 
Membership (``PMM''); (B) Competitive Market Maker Membership 
(``CMM''); (C) Electronic Access Membership (``EAM'') (or any similar 
type of Topaz membership or participation that is created after this 
Agreement is executed); or (ii) meets the Topaz requirements to be 
associated with, or employed by, a Topaz member or participant in any 
capacity, such a Designated Trading Representative (``DTR'') (or any 
similar type of participation, employment category or title, or 
associate-person category or class that is created after this Agreement 
is executed). FINRA shall not review applications or other 
documentation filed to request a change in the rights or status 
described in this paragraph 8(d), including termination or limitation 
on activities, of a member or a participant of Topaz, or a person 
associated with, or requesting association with, a member or 
participant of Topaz.
    9. Branch Office Information. FINRA shall also be responsible for 
processing and, if required, acting upon all requests for the opening, 
address changes, and terminations of branch offices by Dual Members and 
any other applications required of Dual Members with respect to the 
Common Rules as they may be amended from time to time. Upon request, 
FINRA shall advise Topaz of the opening, address change and termination 
of branch and main offices of Dual Members and the names of such branch 
office managers.
    10. Customer Complaints. Topaz shall forward to FINRA copies of all 
customer complaints involving Dual Members received by Topaz relating 
to FINRA's Regulatory Responsibilities under this Agreement. It shall 
be FINRA's responsibility to review and take appropriate action in 
respect to such complaints.
    11. No Restrictions on Regulatory Action. Nothing contained in this 
Agreement shall restrict or in any way encumber the right of either 
party to conduct its own independent or concurrent investigation, 
examination or enforcement proceeding of or against Dual Members, as 
either party, in its sole discretion, shall deem appropriate or 
necessary.
    12. Termination. This Agreement may be terminated by Topaz or FINRA 
at any time upon the approval of the Commission after one (1) year's 
written notice to the other party (or such shorter time as may be 
agreed by the parties), except as provided in paragraph 4.
    13. Effective Date. This Agreement shall be effective upon approval 
of the Commission.
    14. Arbitration. In the event of a dispute between the parties as 
to the operation of this Agreement, Topaz and FINRA hereby agree that 
any such dispute shall be settled by arbitration in Washington, DC in 
accordance with the rules of the American Arbitration Association then 
in effect, or such other procedures as the parties may mutually agree 
upon. Judgment on the award rendered by the arbitrator(s) may be 
entered in any court having jurisdiction.
    15. Separate Agreement. This Agreement is wholly separate from (1) 
the multiparty Agreement made pursuant to Rule 17d-2 of the Exchange 
Act among BATS Exchange, Inc., BOX Options Exchange, LLC, the Chicago 
Board Options Exchange, Incorporated, C2 Options Exchange, 
Incorporated, the International Securities Exchange, LLC, Financial 
Industry Regulatory Authority, Inc., Miami International Securities 
Exchange, LLC, the New York Stock Exchange, LLC, the NYSE MKT LLC, the 
NYSE Arca Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., and 
the NASDAQ OMX PHLX, LLC approved by the Commission on December 5, 2012 
involving the allocation of regulatory responsibilities with respect to 
common members for compliance with common rules relating to the conduct 
by broker-dealers of accounts for listed options or index warrants or 
(2) the multiparty Agreement made pursuant to Rule 17d-2 of the 
Exchange Act among NYSE MKT LLC, BATS Exchange, Inc., BOX Options 
Exchange, LLC, C2 Options Exchange, Incorporated, Chicago Board Options 
Exchange, Incorporated, International Securities Exchange LLC, 
Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The 
NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Inc. and 
Miami International Securities Exchange, LLC, approved by the 
Commission on December 5, 2012 involving options-related market 
surveillance matters and such agreements as may be amended from time to 
time.
    16. Notification of Members. Topaz and FINRA shall notify Dual 
Members of this Agreement after the Effective Date by means of a 
uniform joint notice.
    17. Amendment. This Agreement may be amended in writing duly 
approved by each party. All such amendments must be filed with and 
approved by the Commission before they become effective.
    18. Limitation of Liability. Neither FINRA nor Topaz nor any of 
their respective directors, governors, officers or employees shall be 
liable to the other party to this Agreement for any liability, loss or 
damage resulting from or claimed to have resulted from any delays, 
inaccuracies, errors or omissions with respect to the provision of 
Regulatory Responsibilities as provided hereby or for the failure to 
provide any such responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by one or the other of 
FINRA or Topaz and caused by the willful misconduct of the other party 
or their respective directors, governors, officers or employees. No 
warranties, express or implied, are made by FINRA or Topaz with respect 
to any of the responsibilities to be performed by each of them 
hereunder.
    19. Severability. Any term or provision of this Agreement that is 
invalid or unenforceable in any jurisdiction shall, as to such 
jurisdiction, be ineffective to the extent of such invalidity or 
unenforceability without rendering invalid or unenforceable the 
remaining terms and provisions of this Agreement or affecting the 
validity or enforceability of any of the terms or provisions of this 
Agreement in any other jurisdiction.
    20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and 
Topaz join in requesting the Commission, upon its approval of this 
Agreement or any part thereof, to relieve Topaz of any and all

[[Page 46660]]

responsibilities with respect to matters allocated to FINRA pursuant to 
this Agreement; provided, however, that this Agreement shall not be 
effective until the Effective Date.
    In witness whereof, each party has executed or caused this 
Agreement to be executed on its behalf by a duly authorized officer as 
of the date first written above.

FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.

By---------------------------------------------------------------------

Name:
Title:

TOPAZ EXCHANGE LLC

By---------------------------------------------------------------------

Name:
Title:

EXHIBIT 1

TOPAZ CERTIFICATION OF COMMON RULES
    Topaz hereby certifies that the requirements contained in the rules 
listed below for Topaz are identical to, or substantially similar to, 
the comparable FINRA Rules or SEC Rules identified.

------------------------------------------------------------------------
               Topaz rule                     FINRA or SEC rule \1\
------------------------------------------------------------------------
408(a)(1) Prevention of the Misuse of    Section 15(f) of the Securities
 Material, Nonpublic Information.         Exchange Act of 1934.
409 Disciplinary Action \2\............  FINRA Rule 4530(a)(1)(A) and
                                          (2) Reporting Requirements.
604 Continuing Education for Registered  FINRA Rule 1250 Continuing
 Persons.                                 Education Requirements.
614 Statements of Financial Condition    Rule 17a-5 of the Securities
 to Customers.                            Exchange Act of 1934.
622 Transfer of Accounts...............  FINRA rule 11870 Customer
                                          Account Transfer Contracts.
626 Telephone Solicitation.............  FINRA Rule 3230 Telemarketing.
1400(a) Maintenance, Retention, and      FINRA Rule 4511(a) Books and
 Furnishing of Books, Records and Other   Records--Requirements.
 Information \3\.
------------------------------------------------------------------------
\1\ Topaz will be responsible for any significant differences between
  its rules and the comparable FINRA rule identified, until such time
  amendments to such rule(s) may be approved.
\2\ FINRA shall not have Regulatory Responsibilities regarding the
  requirement to notify Topaz; responsibility for such requirement
  remains with Topaz.
\3\ FINRA shall not have Regulatory Responsibilities regarding the
  requirement to ``keep current and preserve such books and records as
  the Exchange may prescribe;'' responsibility for such requirement
  remains with Topaz.

III. Date of Effectiveness of the Proposed Plan and Timing for 
Commission Action

    Pursuant to Section 17(d)(1) of the Act \14\ and Rule 17d-2 
thereunder,\15\ after August 16, 2013, the Commission may, by written 
notice, declare the plan submitted by Topaz and FINRA, File No. 4-663, 
to be effective if the Commission finds that the plan is necessary or 
appropriate in the public interest and for the protection of investors, 
to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development 
of the national market system and a national system for the clearance 
and settlement of securities transactions and in conformity with the 
factors set forth in Section 17(d) of the Act.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78q(d)(1).
    \15\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the proposed 17d-2 Plan and to relieve Topaz of the responsibilities 
which would be assigned to FINRA, interested persons are invited to 
submit written data, views, and arguments concerning the foregoing. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number 4-663 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number 4-663. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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, on official business days between 
the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be 
available for inspection and copying at the principal offices of Topaz 
and FINRA. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number 4-663 
and should be submitted on or before August 16, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18476 Filed 7-31-13; 8:45 am]
BILLING CODE 8011-01-P