Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Amended Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., the Chicago Board Options Exchange, Incorporated, and C2 Options Exchange, Incorporated, 22709-22715 [2014-09208]
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Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
The Commission appoints Pamela A.
Thompson to serve as Public
Representative in this docket.
publishing this notice to solicit
comments on the 17d–2 Plan from
interested persons.
III. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. CP2014–46 for consideration of the
matters raised by the Postal Service’s
Notice.
2. Comments are due no later than
April 25, 2014.
3. Pursuant to 39 U.S.C. 505, Pamela
A. Thompson is appointed to serve as
an officer of the Commission to
represent the interests of the general
public in this proceeding (Public
Representative).
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
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
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
By the Commission.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2014–09252 Filed 4–22–14; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71964; File No. 4–536]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing of Proposed
Amended Plan for the Allocation of
Regulatory Responsibilities Between
the Financial Industry Regulatory
Authority, Inc., the Chicago Board
Options Exchange, Incorporated, and
C2 Options Exchange, Incorporated
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April 17, 2014.
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 March 24,
2014, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’), and C2 Options Exchange,
Incorporated (‘‘C2’’) (collectively, the
‘‘Parties’’) filed with the Securities and
Exchange Commission (‘‘Commission’’
or ‘‘SEC’’) a plan for the allocation of
regulatory responsibilities, dated March
21, 2014 (‘‘17d–2 Plan’’ or the ‘‘Plan’’).
This Agreement amends and restates the
agreement entered into between NASD
(n/k/a FINRA) and CBOE on April 4,
2007, entitled ‘‘Agreement between
NASD and CBOE Pursuant to Rule 17d–
2 under the Securities Exchange Act of
1934,’’ and any subsequent amendments
thereafter. The Commission is
1 15
2 17
U.S.C. 78q(d).
CFR 240.17d–2.
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3 15
U.S.C. 78s(g)(1).
U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
respectively.
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).
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).
4 15
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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
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. The Plan
On May 14, 2007, the Commission
declared effective the Plan entered into
between NASD (n/k/a FINRA) and
CBOE for allocating regulatory
responsibility pursuant to Rule 17d–
2 10. The Plan is intended to reduce
regulatory duplication for firms that are
common members of both CBOE and
FINRA. The plan reduces regulatory
duplication for firms that are members
of CBOE and FINRA by allocating
regulatory responsibility with respect to
certain applicable laws, rules, and
regulations, including responsibility for
CBOE rules applicable to the CBOE
Stock Exchange, LLC (‘‘CBSX’’), an
equity exchange facility operated by
CBOE. Included in the Plan is an exhibit
that lists every CBOE rule for which
FINRA bears responsibility under the
Plan for overseeing and enforcing with
respect to CBOE members that are also
members of FINRA and the associated
persons therewith.
III. Proposed Amendment to Plan
On March 24, 2014, the parties
submitted a proposed amendment to the
9 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
10 See Securities Exchange Act Release No. 55755
(May 14, 2007), 72 FR 28087 (May 18, 2007).
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Plan. The primary purpose of the
amendment is to add C2 as a Participant
to the Plan. The text of the proposed
amended 17d–2 plan is as follows
(additions are italicized; deletions are
[bracketed]):
AGREEMENT [BETWEEN NASD
AND] AMONG FINANCIAL INDUSTRY
REGULATORY AUTHORITY, INC.,
CHICAGO BOARD OPTIONS
EXCHANGE, INCORPORATED, AND C2
OPTIONS EXCHANGE,
INCORPORATED PURSUANT TO RULE
17d–2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
This Agreement, by and [between the
National Association of Securities
Dealers]among Financial Industry
Regulatory Authority, Inc. [(‘‘NASD’’)
and] (‘‘FINRA’’), the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’), and C2 Options Exchange,
Incorporated (‘‘C2’’) is made this 21st
[4th] day of [April, 2007] March, 2014
(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. [NASD]FINRA, [and] CBOE
and C2 may be referred to individually
as a ‘‘party’’ and together as the
‘‘parties.’’
This Agreement amends and restates
the agreement entered into between
NASD (n/k/a FINRA) and CBOE on
April 4, 2007, entitled ‘‘Agreement
between NASD and CBOE Pursuant to
Rule 17d–2 under the Securities
Exchange Act of 1934,’’ and any
subsequent amendments thereafter.
WHEREAS, [NASD and CBOE] the
parties desire to reduce duplication in
the examination of their [Dual]Common
Members (as defined herein) and in the
filing and processing of certain
registration and membership records as
it relates to the CBOE options exchange,
C2 options exchange and the CBOE
equity exchange facility operated by
CBOE Stock Exchange, LLC[;] (‘‘CBSX’’);
and
WHEREAS, [NASD and CBOE]the
parties 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, [NASD and CBOE]the
parties hereby agree as follows:
1. Definitions. Unless otherwise
defined in this Agreement or the context
otherwise requires, the terms used in
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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) [‘‘CBOE Rules’’ or ‘‘NASD Rules’’
shall mean the rules of the CBOE or
NASD, respectively, as the rules]‘‘Rule’’
of an ‘‘exchange’’ or an ‘‘association’’
shall have the meaning [are] defined in
Exchange Act Section 3(a)(27).
(b) ‘‘Common Rules’’ shall mean the
CBOE Rules and C2 Rules that are
substantially similar to the applicable
[NASD] FINRA Rules in that
examination for compliance with such
[rules] Rules would not require [NASD]
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] Common Member’s activity,
conduct, or output in relation to such
rule; provided, however, Common Rules
shall not include the application of SEC,
CBOE, C2 or FINRA Rules as they
pertain to violations of insider trading
activities, which is covered by a
separate 17d–2 Agreement by and
among the BATS Exchange, Inc., BATS–
Y Exchange, Inc., CBOE, Chicago Stock
Exchange, Inc., EDGA Exchange, Inc.,
EDGX Exchange, Inc., FINRA, NASDAQ
OMX BX, Inc., NASDAQ OMX PHLX
LLC, The NASDAQ Stock Market LLC,
National Stock Exchange, Inc., New
York Stock Exchange, LLC, NYSE Amex
LLC, and NYSE Arca Inc., effective
December 16, 2011, as may be amended
from time to time.
(c) [‘‘Dual Members’’]‘‘Common
Members’’ shall mean [those CBOE]
members [that are also members of
NASD and the associated persons
therewith]of FINRA and at least one of
CBOE or C2.
(d) ‘‘Effective Date’’ shall [have the
meaning set forth in paragraph 14]be the
date this Agreement is approved by the
Commission.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with [the
NASD]FINRA’s Code of Procedure (the
Rule 9000 Series) and other applicable
[NASD]FINRA procedural [rules]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 NASD’s]FINRA’s
Code of Procedure and sanctions
guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities
and Enforcement Responsibilities
relating to compliance by the
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[Dual]Common 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. [NASD]FINRA shall
assume Regulatory Responsibilities and
Enforcement Responsibilities for
[Dual]Common Members. Attached as
Exhibit 1 to this Agreement and made
part hereof, CBOE and C2 furnished
[NASD]FINRA with a current list of
Common Rules and certified to
[NASD]FINRA that such [rules]Rules are
substantially similar to the
corresponding [NASD rule]FINRA Rule
(the ‘‘Certification’’). [NASD]FINRA
hereby agrees that the [rules]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 rules]
the Rulesof the parties, CBOE [or NASD,
CBOE]and C2 shall submit an updated
list of Common Rules to [NASD]FINRA
for review which shall add CBOE [rules]
or C2 Rulesnot included in the current
list of Common Rules that qualify as
Common Rules as defined in this
Agreement; delete CBOE [rules]or C2
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]Rules on the current
list of Common Rules continue to be
CBOE [rules]or C2 Rules that qualify as
Common Rules as defined in this
Agreement. Within 30 days of receipt of
such updated list, [NASD]FINRA shall
confirm in writing whether the
[rules]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
CBOE and C2 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 CBOE’s or C2’s own
marketplace, including without
limitation CBOE’s [rules]or C2’s Rules
relating to the rights and obligations of
market makers;
(b) registration pursuant to [its]their
applicable [rules]Rules of associated
persons (i.e., registration rules that are
not Common Rules);
(c) discharge of [its]their duties and
obligations as a Designated Examining
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Authority pursuant to Rule 17d–1 under
the Exchange Act; and
(d) any CBOE Rules and C2 Rules that
are not Common Rules.
3. [Dual]Common Members. Prior to
the Effective Date, CBOE and C2 shall
furnish [NASD]FINRA with a current
list of [Dual]Common Members, which
shall be updated no less frequently than
once [each quarter]every six months.
4. No Charge. There shall be no charge
to CBOE and C2 by [NASD]FINRA for
performing the Regulatory
Responsibilities and Enforcement
Responsibilities under this Agreement
except as hereinafter provided.
[NASD]FINRA shall provide CBOE and
C2 with ninety (90) days advance
written notice in the event
[NASD]FINRA decides to impose any
charges to CBOE and C2 for performing
the Regulatory Responsibilities under
this Agreement. If [NASD]FINRA
determines to impose a charge, CBOE
and C2 shall have the right at the time
of the imposition of such charge to
terminate this Agreement; provided,
however, that [NASD’s]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 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 [NASD]FINRA becomes
aware of apparent violations of any
CBOE or C2 Rules, which are not listed
as Common Rules, discovered pursuant
to the performance of the Regulatory
Responsibilities assumed hereunder,
[NASD]FINRA shall notify CBOE and
C2 of those apparent violations for such
response as CBOE and C2 deems
appropriate. [Apparent violations of all
other applicable rules, including]In the
event, CBOE or C2 becomes aware of
apparent violations of [the]any Common
Rules[, various securities acts, and rules
and regulations thereunder,] discovered
pursuant to the Retained
Responsibilities, CBOE and C2 shall
notify FINRA of those apparent
violations and such matters shall be
handled by FINRA as provided in this
Agreement. Apparent violations of
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Common Rules shall be processed by,
and enforcement proceedings in respect
thereto shall be conducted by
[NASD]FINRA as provided
hereinbefore; provided, however, that in
the event a [Dual]Common Member is
the subject of an investigation relating to
a transaction on the CBOE or C2 options
exchanges or the CBSX, CBOE and C2
may in [its]their 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.
[NASD]FINRA shall make available to
CBOE and C2 all information obtained
by [NASD]FINRA in the performance by
it of the Regulatory Responsibilities
hereunder in respect to the
[Dual]Common Members subject to this
Agreement. In particular, and not in
limitation of the foregoing,
[NASD]FINRA shall furnish CBOE and
C2 any information it obtains about
[Dual]Common Members which reflects
adversely on their financial condition. It
is understood that such information is
of an extremely sensitive nature and,
accordingly, CBOE [acknowledges and
agrees]and C2 acknowledge and agree to
take all reasonable steps to maintain its
confidentiality. CBOE and C2 shall
make available to [NASD]FINRA any
information coming to [its]their
attention that reflects adversely on the
financial condition of [Dual]Common
Members or indicates possible
violations of applicable laws, rules or
regulations by such firms.
8. [Dual]Common Member
Applications.
(a) [Dual]Common Members subject to
this Agreement shall be required to
submit, and [NASD]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 [rules of both CBOE and
NASD]Rules of the parties or associated
with [Dual]Common Members thereof.
Upon request, [NASD]FINRA shall
advise CBOE and C2 of any changes of
allied members, partners, officers,
registered personnel and other persons
required to be approved by the [rules of
both CBOE and NASD]Rules of the
parties.
(b) [Dual]Common Members shall be
required to send to [NASD]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 [NASD]FINRA
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22711
becomes aware of a statutory
disqualification as defined in the
Exchange Act with respect to a
[Dual]Common Member, [NASD]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 CBOE and C2 advised of its actions
in this regard for such subsequent
proceedings as CBOE and C2 may
initiate.
(d) Notwithstanding the foregoing,
[NASD]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 meets the CBOE
or C2 requirements for general
membership or for specified categories
of membership or participation in the
CBOE or C2. [NASD]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 the CBOE or C2, or a
person associated with, or requesting
association with, a member or
participant of the CBOE or C2.
9. Branch Office Information.
[NASD]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]Common
Members and any other applications
required of [Dual]Common Members
with respect to the Common Rules as
they may be amended from time to time.
Upon request, [NASD]FINRA shall
advise CBOE and C2 of the opening,
address change and termination of
branch and main offices of
[Dual]Common Members and the names
of such branch office managers.
10. Customer Complaints. CBOE and
C2 shall forward to [NASD]FINRA
copies of all customer complaints
involving [Dual]Common Members
received by CBOE and C2 relating to
[NASD’s]FINRA’s Regulatory
Responsibilities under this Agreement.
It shall be [NASD’s]FINRA’s
responsibility to review and take
appropriate action in respect to such
complaints.
11. Advertising. [NASD]FINRA shall
assume responsibility to review the
advertising of [Dual]Common Members
subject to the Agreement, provided that
such material is filed with
[NASD]FINRA in accordance with
[NASD’s]FINRA’s filing procedures and
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is accompanied with any applicable
filing fees set forth in [NASD]FINRA
Rules. Such review shall be made in
accordance with then applicable [NASD
rules]FINRA Rules and interpretations.
The advertising of [Dual]Common
Members shall be subject only to
compliance with appropriate [NASD
rules]FINRA Rules and interpretations.
12. No Restrictions on Regulatory
Action. Nothing contained in this
Agreement shall restrict or in any way
encumber the right of [either]any party
to conduct its own independent or
concurrent investigation, examination
or enforcement proceeding of or against
[Dual]Common Members, as [either]any
party, in its sole discretion, shall deem
appropriate or necessary.
13. Termination. This Agreement may
be terminated by [CBOE or NASD]any
party at any time upon the approval of
the Commission after one (1) year’s
written notice (or such shorter time as
may be agreed by the parties) to the
other [party]parties, except as provided
in paragraph 4.
14. Effective Date. This Agreement
shall be effective upon approval of the
Commission.
15. Arbitration. In the event of a
dispute [between]among the parties as
to the operation of this Agreement,
[CBOE and NASD]the parties 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.
16. Separate Agreement. This
Agreement is wholly separate from the
following agreement: (1) The multiparty
Agreement made pursuant to Rule 17d–
2 of the Exchange Act [between the
American Stock Exchange LLC, the
Boston Stock]among BATS Exchange,
Inc., [the Chicago Board]BOX Options
Exchange, [Incorporated]LLC, CBOE, C2,
the International Securities Exchange
LLC, [the National Association of
Securities Dealers, Inc.,]FINRA, the New
York Stock Exchange, LLC, NYSE Amex
LLC, the NYSE Arca, Inc., [and the
Philadelphia Stock Exchange, Inc.]and
The NASDAQ Stock Market LLC,
NASDAQ OMX BX, Inc., and NASDAQ
OMX PHLX LLC 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 entered into on [December 1,
2006] April 25, 2012, and as may be
amended from time to time; and (2) the
multiparty Agreement made pursuant to
Rule 17d–2 of the Exchange Act among
NYSE Amex LLC, BATS Exchange, Inc.,
C2, CBOE, International Securities
Exchange LLC, FINRA, NYSE Arca, Inc.,
The NASDAQ Stock Market LLC, the
BOX Options Exchange, LLC, NASDAQ
OMX BX, Inc. and NASDAQ OMX PHLX
LLC involving the allocation of
regulatory responsibilities with respect
to SRO market surveillance of common
members activities with regard to
certain common rules relating to listed
options entered into on April 25, 2012,
and as may be amended from time to
time.
17. Notification of Members. [CBOE
and NASD]The parties shall notify
[Dual]Common Members of this
Agreement after the Effective Date by
means of a uniform joint notice.
18. 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.
19. Limitation of Liability. [Neither
NASD nor CBOE]None of the parties nor
any of their respective directors,
governors, officers or employees shall be
liable to [the]any 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 NASD or CBOE]any party and caused
by the willful misconduct [of the
other]another party or their respective
directors, governors, officers or
employees. No warranties, express or
implied, are made by [NASD or
CBOE]any party hereto with respect to
any of the responsibilities to be
performed by [each of] them hereunder.
20. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, [NASD]FINRA, C2 and
CBOE join in requesting the
Commission, upon its approval of this
Agreement [or any part thereof], to
relieve CBOE and C2 of any and all
responsibilities with respect to matters
allocated to [NASD]FINRA pursuant to
this Agreement; provided, however, that
this Agreement shall not be effective
until the Effective Date.
21. Counterparts. This Agreement
may be executed in one or more
counterparts, each of which shall be
deemed an original, and such
counterparts together shall constitute
one and the same instrument.
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.
[NATIONAL ASSOCIATION OF
SECURITIES DEALERS]FINANCIAL
INDUSTRY REGULATORY
AUTHORITY, INC.
By lllllllllllllllll
Name:
Title:
CHICAGO BOARD OPTIONS
EXCHANGE, INCORPORATED
By lllllllllllllllll
Name:
Title:
C2 OPTIONS EXCHANGE,
INCORPORATED
By lllllllllllllllll
Name:
Title:
Exhibit 1 *
CBOE AND C2 CERTIFICATION OF
COMMON RULES
CBOE and C2 hereby [certifies] certify
that the requirements contained in the
[CBOE] Rules listed below are identical
to, or substantially similar to, the
NASD/FINRA or SEC Rules identified.[1]
wreier-aviles on DSK5TPTVN1PROD with NOTICES
C2 Rule(s)
CBOE Rule(s)
CBSX 1
NASD/FINRA or SEC Rule(s) 2
Chapter 4 Business Conduct
CBOE Rule 4.18 is incorporated
by reference.
Chapter 4 Business Conduct
CBOE Rule 4.20 is incorporated
by reference.
4.18 Prevention of the Misuse of
Material, Nonpublic Information.
Appendix A—CBOE Rule 4.18 is
incorporated by reference.
4.20
Anti-Money
Laundering
Compliance Program.
Appendix A—CBOE Rule 4.20 is
incorporated by reference.
Section 15(f) of the Securities Exchange Act of 1934 (Exchange
Act) [3]
FINRA Rule 3310 [3011] AntiMoney Laundering Compliance
Program 3
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23APN1
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
22713
C2 Rule(s)
CBOE Rule(s)
CBSX 1
NASD/FINRA or SEC Rule(s) 2
Chapter 9 Doing Business with the
Public—CBOE Rule 9.3 incorporated by reference **.
9.3 Registration and Termination
of Representatives **.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.3 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.3A is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.4(a) is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.12 incorporated by reference **.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.13 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.16 is incorporated by reference.
9.3A Continuing Education For
Registered Persons.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.3A is incorporated by reference.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.4(a) is incorporated by reference.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.12 is incorporated by reference 6.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.13 is incorporated by reference.
53.6(i) Applicability of Chapter
IX—CBOE Rule 9.16 is incorporated by reference.
NASD Rule 1031(a), (b) Registration Requirements, [1140(a),
(d)] FINRA Rule 1010(a) and
(e) Electronic Filing [Rules] Requirements for Uniform Forms,
and [NASD] FINRA By-Laws,
Art. V, Sections 2 and 3 Registered Representatives and Associated Persons
FINRA Rule 1250 [1120] Continuing
Education
Requirements 4
FINRA Rule 3270 [3030] Outside
Business Activities of [an Associated] Registered Persons 5
NASD Rule 2340 Customer Account Statements
Chapter 9 Doing Business with the
Public—CBOE Rule 9.18 incorporated by reference **.
9.18 Guarantees and Profit Sharing **.
53.6(i) Applicability of Chapter 9—
CBOE Rule 9.18 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.20 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.23 incorporated by reference **.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.24 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.25 is incorporated by reference.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.7 incorporated by reference **.
9.20 Transfer of Accounts ............
53.6(i) Applicability of Chapter 9—
CBOE Rule 9.20 is incorporated by reference.
53.7 Record of Written Complaints 9.
9.4(a) Other Affiliations of Registered Associated Persons.
9.12 Statements of Accounts to
Customers[4] **.
9.13 Statement of Financial Condition to Customers.
9.16 Restrictions on Pledge and
Lending of Customers’ Securities.
9.23 Customer Complaints[6] ** ....
Appendix A—CBOE Rule 9.24 is
incorporated by reference.
9.25 Borrowing From or Lending
to Customers.
.......................................................
9.7 Opening of Accounts **
[53.6(c) Duty to Know and Approve Customers].
53.6(c) Duty to Know and Approve Customers.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.6 incorporated by reference **.
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9.24 Telephone Solicitation ..........
9.6 Branch Offices of TPH Organizations ** [53.6(d) Branch Offices of Member Organizations].
53.6(d) Branch Offices of TPH Organizations.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.10 incorporated by reference **.
Chapter 9 Doing Business with the
Public—CBOE Rule 9.11 incorporated by reference **.
9.10 Discretionary Accounts ** 53.6(e) Discretionary Accounts ....
[53.6(e) Discretionary Accounts].
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9.11 Confirmation to Customers **
[53.6(f) Confirmation to Customers].
[53.6(g) Communications to Customers.
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53.6(f) Confirmation to Customers
.......................................................
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E:\FR\FM\23APN1.SGM
Exchange Act Rule 17a–5 7
FINRA Rule 2150(a) Improper
Use of Customers’ Securities or
Funds;
Prohibition
Against
Guarantees and Sharing in Accounts,
and
NASD
Rule
2330[(a)](b)–(d) Customers’ Securities or Funds
FINRA Rule 2150(b) and (c) Improper Use of Customers’ Securities or Funds; Prohibition
Against Guarantees and Sharing in Accounts 8 [2330(e) & (f)
Customers’
Securities
or
Funds 5]
FINRA Rule 11870 Customer Account Transfer Contracts
FINRA Rule 4513 Records of
Written Customer Complaints
[3110(d) Books and Records]
FINRA Rule 3230 Telemarketing
[2212
Telemarketing
and
3110(g) Books and Records]
FINRA Rule 3240 [2370] Borrowing From or Lending to Customers
FINRA Rule 2090 Know Your
Customer 10 and FINRA Rule
4512 Customer Account Information [2310 Recommendations to Customers (Suitability)
and
3110(c)
Books
and
Records]
NASD Rule 1021(a) Registration
Requirements and NASD IM–
1000–4 Branch Offices and Offices of Supervisory Jurisdiction
NASD Rule 2510 Discretionary
Accounts, Exchange Act Rule
17a–3(a)(6)(i) 11
FINRA Rule 2232 Customer
[2230] Confirmations and Exchange Act Rule 10b–10[7] 12
[2210(b) and (d) Communications
with the Public and IM–2210–
1(6) Guidelines to Ensure that
Communications With The Public Are Not Misleading]
23APN1
22714
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
C2 Rule(s)
CBOE Rule(s)
CBSX 1
NASD/FINRA or SEC Rule(s) 2
Chapter 9 Doing Business with the
Public—CBOE Rule 9.8 incorporated by reference **.
9.8 Supervision of Accounts **
[53.6(h) Supervision of Accounts].
53.6(h) Supervision of Accounts ..
NASD Rule 3010(a), (b) Supervision [and 3110(c) Books and
Records]*
* The Commission notes that although CBSX was covered by the original Plan, the Parties have determined to explicitly list CBSX rules in the
exhibit as part of the proposed amended 17d–2 Plan, to provide additional clarity. See Email from Kathryn Moore, Associate General Counsel,
FINRA, to Sonia Trocchio, Special Counsel, Division of Trading and Markets, Commission (April 10, 2014).
1 [To the extent that any CBOE Rule listed herein makes reference to options, such rule] The rules applicable to CBSX are Chapters 50
through 54 and Appendix A of the CBOE rules. Any reference to options shall be read to equity securities [as provided in] (See e.g., CBOE Rule
53.6).
2 CBOE and C2, as applicable, will be responsible for any significant differences between its rules and the comparable NASD/FINRA rule identified.
[3 NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement to have Form X–17A–5 filed with CBOE; responsibility for such requirement remains with CBOE.]
3 FINRA shall not have any Regulatory Responsibilities regarding the requirement to conduct independent testing during the first calendar year
of a broker-dealer becoming a Trading Permit Holder or TPH organization; responsibility for such requirement remains with CBOE and C2, as
applicable.
4 FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time is consistently granted.
5 FINRA shall not have any Regulatory Responsibilities regarding the requirement that the Trading Permit Holder provide prior written consent
to the TPH organization; responsibility for such requirement remains with CBOE and C2, as applicable.
[4]6 FINRA [NASD] shall not have any Regulatory Responsibilities regarding the CBOE requirement that the statement have a legend requesting the customer to advise the member of any material change in the customer’s investment objectives or financial situation; responsibility for
such requirement remains with CBOE.
7 FINRA shall not have any Regulatory Responsibilities regarding the CBOE and C2 requirement to have Form X–17A–5 filed with CBOE and
C2, as applicable; responsibility for such requirement remains with CBOE and C2, as applicable.
8 [5 The NASD Rule] FINRA Rule 2150 requires, among other things, prior written approval of the member employing the associated person in
order for such associated person to share in accounts of a customer, whereas the CBOE rule requires consent of the member carrying the account. To the extent that the employing member and carrying member are different firms, the [NASD’s and CBOE’s rule] FINRA and CBOE rules
differ, and [NASD’s] FINRA’s Regulatory [Responsibility] Responsibilities will not cover the CBOE[’s] rule; responsibility for such requirement remains with CBOE.
9 FINRA shall only have Regulatory Responsibilities to the extent records must be kept for four years. [6 NASD shall not have any Regulatory
Responsibilities regarding the CBOE requirement of what must be contained in the complaint file or the timing during which the compliant must
be send to the central file by the branch office; responsibility for such requirement remains with CBOE.]
10 FINRA shall only have regulatory Responsibilities with regard to the first sentence of CBSX Rule 53.6(c); responsibility for the remainder of
the rule remains with CBOE.
11 NASD Rule 2510 requires review of transactions in discretionary accounts by ‘‘the member or person duly designated.’’ However, CBSX
Rule 53.6(e)(3) requires approval of discretionary accounts by ‘‘a person other than a person using the discretionary authority.’’ To the extent this
requirement of approval by a person other than a person using the discretionary authority applies, FINRA’s Regulatory Responsibilities will not
cover CBSX’s rule; responsibility for such requirement remains with CBOE.
[7 NASD] 12 FINRA shall not have any Regulatory Responsibilities regarding the [CBOE] CBSX requirements to disclose on a confirmation; 1)
the settlement date of a transaction to the extent it is not required by FINRA Rule 2232(b)(1); or 2) whether a transaction was executed on the
[CBOE]CBSX; reasonability for such requirements remains with CBOE.
*FINRA shall not have any Regulatory Responsibilities for these Rules as they pertain to violations of insider trading activities, which is covered by a separate 17d–2 Agreement by and among the BATS Exchange, Inc., BATS–Y Exchange, Inc., CBOE, Chicago Stock Exchange, Inc.,
EDGA Exchange, Inc., EDGX Exchange, Inc., FINRA, NASDAQ OMX BX, Inc., NADAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc., effective December 16, 2011, as may be amended from time to time.
**FINRA shall not have an Regulatory Responsibilities for these Rules as they pertain to violations of sales practice activities, which is covered
by a separate 17d–2 Agreement by and among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the International Securities Exchange LLC, FINRA, NYSE Arca Inc., The
NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., Miami International Securities Exchange, LLC, and Topaz
Exchange, LLC, effective July 26, 2013, as may be mended from time to time.
wreier-aviles on DSK5TPTVN1PROD with NOTICES
The following provisions are covered:
• Rule 200 of Regulation SHO—
Definition of Short Sales and Marking
Requirements
• Rule 203 of Regulation SHO—
Borrowing and Delivery Requirements
• Rule 204 of Regulation SHO—CloseOut Requirement
• Rule 105 of Regulation M—Short
Selling in Connection with a Public
Offering
• Section 14(e) of the Exchange Act
• Rule 14e–4 of the Exchange Act—
Prohibited Transactions in
Connection with Partial Tender Offers
• Regulation ATS
• Regulation S–P
IV. Date of Effectiveness of the
Proposed Plan and Timing for
Commission Action
transactions and in conformity with the
factors set forth in Section 17(d) of the
Act.
Pursuant to Section 17(d)(1) of the
Act 11 and Rule 17d–2 thereunder,12
after May 8, 2014, the Commission may,
by written notice, declare the plan
submitted by CBOE, C2, and FINRA,
File No. 4–536, 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
V. Solicitation of Comments
In order to assist the Commission in
determining whether to approve the
proposed 17d–2 Plan and to relieve
CBOE and C2 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:
11 15
12 17
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U.S.C. 78q(d)(1).
CFR 240.17d–2.
Frm 00097
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number 4–
536 on the subject line.
E:\FR\FM\23APN1.SGM
23APN1
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number 4–536. 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 (https://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
CBOE, C2, 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 4–536 and
should be submitted on or before May
8, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–09208 Filed 4–22–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31020; 812–14058]
Matthews A Share Selections Fund,
LLC, et al.; Notice of Application
wreier-aviles on DSK5TPTVN1PROD with NOTICES
April 17, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) granting exemptions from
section 8(b)(1)(E) and section 22(e) of
AGENCY:
13 17
CFR 200.30–3(a)(34).
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
the Act, and rule 22c–1 under the Act,
and pursuant to section 12(d)(1)(J) of the
Act granting exemptions from sections
12(d)(1)(A) and (B) of the Act, and
pursuant to sections 6(c) and 17(b) of
the Act, granting an exemption from
section 17(a) of the Act. Applicants:
Matthews A Share Selections Fund, LLC
(the ‘‘Fund’’), on behalf of its series (the
‘‘Series’’), Matthews International Funds
(d/b/a Matthews Asia Funds), on behalf
of its series (the ‘‘Matthews Funds’’),
Matthews Asia Funds SICAV, on behalf
of its series (the ‘‘UCITS Funds’’),
Matthews Asian Selections Funds Plc
(the ‘‘Irish Fund’’), and Matthews
International Capital Management, LLC
(the ‘‘Adviser’’).
Summary of Application:
Applicants request an order to permit
the Fund to operate as an extended
payment fund established to invest in
China A shares, to exempt the Fund
from the requirement that funds must
disclose a concentration policy
regarding investments in any industry
or group of industries, and to permit the
Fund and its Series to sell their limited
liability company interests (‘‘Interests’’)
to, and redeem their Interests from,
certain pooled investment vehicles that
are managed or subadvised by the
Adviser, including the UCITS Funds,
the Irish Fund and other entities that
may be organized outside the United
States (the UCITS Funds, the Irish Fund
and such other entities are, collectively,
the ‘‘Other Funds’’).
DATES: Filing Dates: The Application
was filed on July 17, 2012, and amended
on December 28, 2012, and August 28,
2013.
Hearing or Notification of Hearing: An
order granting the Application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
Applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on May 12, 2014, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: the Fund, the Matthews
Funds, and the Adviser, Four
Embarcadero Center, Suite 550, San
SUMMARY:
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
22715
Francisco, CA 94111; the UCITS Funds,
6, route de Treves, L–2633
Senningerberg, Grand Duchy of
Luxembourg; and the Irish Fund,
Brooklawn House, Crampton Avenue/
Shelbourne Road, Ballsbridge, Dublin 4,
Ireland.
FOR FURTHER INFORMATION CONTACT:
Steven I. Amchan, Senior Counsel, at
(202) 551–6826, or Janet M. Grossnickle,
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
Application. The complete Application
may be obtained via the Commission’s
Web site by searching for the file
number, or an Applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Fund, a Delaware limited
liability company registered as an openend management investment company
under Act, is organized as a series
investment company, and will be
operated as an extended payment fund,
as discussed below. The Fund is
designed to be a viable and economical
means to permit the Matthews Funds,
Other Funds and separate accounts
managed by the Adviser to invest in
China A Shares. Each investing
Matthews Fund, Other Fund, or separate
account will own all of the Interests
offered by a particular Series, and
investors in the Fund’s Series will be
exclusively entities advised or managed
by the Adviser. Interests will not be
registered under the Securities Act of
1933 (the ‘‘Securities Act’’); they will be
offered only in private placement
transactions to ‘‘accredited investors,’’
as defined in Regulation D under the
Securities Act, that are also ‘‘qualified
purchasers,’’ as defined in section
2(a)(51) of the Act and the rules
thereunder (‘‘Qualified Purchasers’’).1
The Fund, through its Series, will be the
entity that invests in and holds China A
Shares.2
1 The Fund will adopt a policy to permit the
transfer of Interests only to other Qualified
Purchasers.
2 Each entity that currently intends to rely on the
requested order has been named as an Applicant.
Applicants request that the relief from section
8(b)(1)(E), section 22(e), and rule 22c–1 of the Act
apply also to any existing or future Series of the
Fund, and that the relief from sections 12(d)(1)(A)
and (B) of the Act, and from section 17(a) of the Act,
apply to any existing or future Series of the Fund,
and any investment company, or series thereof,
advised by the Adviser or any entity controlling,
controlled by or under common control with the
Adviser that wishes to invest in the Fund or a Series
E:\FR\FM\23APN1.SGM
Continued
23APN1
]]>Agencies
[Federal Register Volume 79, Number 78 (Wednesday, April 23, 2014)]
[Notices]
[Pages 22709-22715]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09208]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71964; File No. 4-536]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Amended Plan for the
Allocation of Regulatory Responsibilities Between the Financial
Industry Regulatory Authority, Inc., the Chicago Board Options
Exchange, Incorporated, and C2 Options Exchange, Incorporated
April 17, 2014.
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 March 24, 2014, the Financial Industry Regulatory Authority, Inc.
(``FINRA''), the Chicago Board Options Exchange, Incorporated
(``CBOE''), and C2 Options Exchange, Incorporated (``C2'')
(collectively, the ``Parties'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a plan for the allocation of
regulatory responsibilities, dated March 21, 2014 (``17d-2 Plan'' or
the ``Plan''). This Agreement amends and restates the agreement entered
into between NASD (n/k/a FINRA) and CBOE on April 4, 2007, entitled
``Agreement between NASD and CBOE Pursuant to Rule 17d-2 under the
Securities Exchange Act of 1934,'' and any subsequent amendments
thereafter. 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 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. The Plan
On May 14, 2007, the Commission declared effective the Plan entered
into between NASD (n/k/a FINRA) and CBOE for allocating regulatory
responsibility pursuant to Rule 17d-2 \10\. The Plan is intended to
reduce regulatory duplication for firms that are common members of both
CBOE and FINRA. The plan reduces regulatory duplication for firms that
are members of CBOE and FINRA by allocating regulatory responsibility
with respect to certain applicable laws, rules, and regulations,
including responsibility for CBOE rules applicable to the CBOE Stock
Exchange, LLC (``CBSX''), an equity exchange facility operated by CBOE.
Included in the Plan is an exhibit that lists every CBOE rule for which
FINRA bears responsibility under the Plan for overseeing and enforcing
with respect to CBOE members that are also members of FINRA and the
associated persons therewith.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 55755 (May 14,
2007), 72 FR 28087 (May 18, 2007).
---------------------------------------------------------------------------
III. Proposed Amendment to Plan
On March 24, 2014, the parties submitted a proposed amendment to
the
[[Page 22710]]
Plan. The primary purpose of the amendment is to add C2 as a
Participant to the Plan. The text of the proposed amended 17d-2 plan is
as follows (additions are italicized; deletions are [bracketed]):
AGREEMENT [BETWEEN NASD AND] AMONG FINANCIAL INDUSTRY REGULATORY
AUTHORITY, INC., CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, AND C2
OPTIONS EXCHANGE, INCORPORATED PURSUANT TO RULE 17d-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
This Agreement, by and [between the National Association of
Securities Dealers]among Financial Industry Regulatory Authority, Inc.
[(``NASD'') and] (``FINRA''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), and C2 Options Exchange, Incorporated (``C2'')
is made this 21st [4th] day of [April, 2007] March, 2014 (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.
[NASD]FINRA, [and] CBOE and C2 may be referred to individually as a
``party'' and together as the ``parties.''
This Agreement amends and restates the agreement entered into
between NASD (n/k/a FINRA) and CBOE on April 4, 2007, entitled
``Agreement between NASD and CBOE Pursuant to Rule 17d-2 under the
Securities Exchange Act of 1934,'' and any subsequent amendments
thereafter.
WHEREAS, [NASD and CBOE] the parties desire to reduce duplication
in the examination of their [Dual]Common Members (as defined herein)
and in the filing and processing of certain registration and membership
records as it relates to the CBOE options exchange, C2 options exchange
and the CBOE equity exchange facility operated by CBOE Stock Exchange,
LLC[;] (``CBSX''); and
WHEREAS, [NASD and CBOE]the parties 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, [NASD and CBOE]the parties 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) [``CBOE Rules'' or ``NASD Rules'' shall mean the rules of the
CBOE or NASD, respectively, as the rules]``Rule'' of an ``exchange'' or
an ``association'' shall have the meaning [are] defined in Exchange Act
Section 3(a)(27).
(b) ``Common Rules'' shall mean the CBOE Rules and C2 Rules that
are substantially similar to the applicable [NASD] FINRA Rules in that
examination for compliance with such [rules] Rules would not require
[NASD] 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] Common Member's activity, conduct, or output in
relation to such rule; provided, however, Common Rules shall not
include the application of SEC, CBOE, C2 or FINRA Rules as they pertain
to violations of insider trading activities, which is covered by a
separate 17d-2 Agreement by and among the BATS Exchange, Inc., BATS-Y
Exchange, Inc., CBOE, Chicago Stock Exchange, Inc., EDGA Exchange,
Inc., EDGX Exchange, Inc., FINRA, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX
LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New
York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc., effective
December 16, 2011, as may be amended from time to time.
(c) [``Dual Members'']``Common Members'' shall mean [those CBOE]
members [that are also members of NASD and the associated persons
therewith]of FINRA and at least one of CBOE or C2.
(d) ``Effective Date'' shall [have the meaning set forth in
paragraph 14]be the date this Agreement is approved by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with [the NASD]FINRA's Code of
Procedure (the Rule 9000 Series) and other applicable [NASD]FINRA
procedural [rules]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 NASD's]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]Common 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. [NASD]FINRA shall
assume Regulatory Responsibilities and Enforcement Responsibilities for
[Dual]Common Members. Attached as Exhibit 1 to this Agreement and made
part hereof, CBOE and C2 furnished [NASD]FINRA with a current list of
Common Rules and certified to [NASD]FINRA that such [rules]Rules are
substantially similar to the corresponding [NASD rule]FINRA Rule (the
``Certification''). [NASD]FINRA hereby agrees that the [rules]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 rules] the
Rulesof the parties, CBOE [or NASD, CBOE]and C2 shall submit an updated
list of Common Rules to [NASD]FINRA for review which shall add CBOE
[rules] or C2 Rulesnot included in the current list of Common Rules
that qualify as Common Rules as defined in this Agreement; delete CBOE
[rules]or C2 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]Rules on the current list of Common
Rules continue to be CBOE [rules]or C2 Rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of such
updated list, [NASD]FINRA shall confirm in writing whether the
[rules]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 CBOE and C2 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 CBOE's or C2's own marketplace, including
without limitation CBOE's [rules]or C2's Rules relating to the rights
and obligations of market makers;
(b) registration pursuant to [its]their applicable [rules]Rules of
associated persons (i.e., registration rules that are not Common
Rules);
(c) discharge of [its]their duties and obligations as a Designated
Examining
[[Page 22711]]
Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any CBOE Rules and C2 Rules that are not Common Rules.
3. [Dual]Common Members. Prior to the Effective Date, CBOE and C2
shall furnish [NASD]FINRA with a current list of [Dual]Common Members,
which shall be updated no less frequently than once [each quarter]every
six months.
4. No Charge. There shall be no charge to CBOE and C2 by
[NASD]FINRA for performing the Regulatory Responsibilities and
Enforcement Responsibilities under this Agreement except as hereinafter
provided. [NASD]FINRA shall provide CBOE and C2 with ninety (90) days
advance written notice in the event [NASD]FINRA decides to impose any
charges to CBOE and C2 for performing the Regulatory Responsibilities
under this Agreement. If [NASD]FINRA determines to impose a charge,
CBOE and C2 shall have the right at the time of the imposition of such
charge to terminate this Agreement; provided, however, that
[NASD's]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 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 [NASD]FINRA
becomes aware of apparent violations of any CBOE or C2 Rules, which are
not listed as Common Rules, discovered pursuant to the performance of
the Regulatory Responsibilities assumed hereunder, [NASD]FINRA shall
notify CBOE and C2 of those apparent violations for such response as
CBOE and C2 deems appropriate. [Apparent violations of all other
applicable rules, including]In the event, CBOE or C2 becomes aware of
apparent violations of [the]any Common Rules[, various securities acts,
and rules and regulations thereunder,] discovered pursuant to the
Retained Responsibilities, CBOE and C2 shall notify FINRA of those
apparent violations and such matters shall be handled by FINRA as
provided in this Agreement. Apparent violations of Common Rules shall
be processed by, and enforcement proceedings in respect thereto shall
be conducted by [NASD]FINRA as provided hereinbefore; provided,
however, that in the event a [Dual]Common Member is the subject of an
investigation relating to a transaction on the CBOE or C2 options
exchanges or the CBSX, CBOE and C2 may in [its]their 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. [NASD]FINRA shall make available to CBOE
and C2 all information obtained by [NASD]FINRA in the performance by it
of the Regulatory Responsibilities hereunder in respect to the
[Dual]Common Members subject to this Agreement. In particular, and not
in limitation of the foregoing, [NASD]FINRA shall furnish CBOE and C2
any information it obtains about [Dual]Common Members which reflects
adversely on their financial condition. It is understood that such
information is of an extremely sensitive nature and, accordingly, CBOE
[acknowledges and agrees]and C2 acknowledge and agree to take all
reasonable steps to maintain its confidentiality. CBOE and C2 shall
make available to [NASD]FINRA any information coming to [its]their
attention that reflects adversely on the financial condition of
[Dual]Common Members or indicates possible violations of applicable
laws, rules or regulations by such firms.
8. [Dual]Common Member Applications.
(a) [Dual]Common Members subject to this Agreement shall be
required to submit, and [NASD]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 [rules of both CBOE and NASD]Rules of the parties
or associated with [Dual]Common Members thereof. Upon request,
[NASD]FINRA shall advise CBOE and C2 of any changes of allied members,
partners, officers, registered personnel and other persons required to
be approved by the [rules of both CBOE and NASD]Rules of the parties.
(b) [Dual]Common Members shall be required to send to [NASD]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 [NASD]FINRA
becomes aware of a statutory disqualification as defined in the
Exchange Act with respect to a [Dual]Common Member, [NASD]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 CBOE and C2 advised of
its actions in this regard for such subsequent proceedings as CBOE and
C2 may initiate.
(d) Notwithstanding the foregoing, [NASD]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 meets the CBOE or C2
requirements for general membership or for specified categories of
membership or participation in the CBOE or C2. [NASD]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 the CBOE or C2, or a person associated with, or requesting
association with, a member or participant of the CBOE or C2.
9. Branch Office Information. [NASD]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]Common Members and any other applications required of
[Dual]Common Members with respect to the Common Rules as they may be
amended from time to time. Upon request, [NASD]FINRA shall advise CBOE
and C2 of the opening, address change and termination of branch and
main offices of [Dual]Common Members and the names of such branch
office managers.
10. Customer Complaints. CBOE and C2 shall forward to [NASD]FINRA
copies of all customer complaints involving [Dual]Common Members
received by CBOE and C2 relating to [NASD's]FINRA's Regulatory
Responsibilities under this Agreement. It shall be [NASD's]FINRA's
responsibility to review and take appropriate action in respect to such
complaints.
11. Advertising. [NASD]FINRA shall assume responsibility to review
the advertising of [Dual]Common Members subject to the Agreement,
provided that such material is filed with [NASD]FINRA in accordance
with [NASD's]FINRA's filing procedures and
[[Page 22712]]
is accompanied with any applicable filing fees set forth in [NASD]FINRA
Rules. Such review shall be made in accordance with then applicable
[NASD rules]FINRA Rules and interpretations. The advertising of
[Dual]Common Members shall be subject only to compliance with
appropriate [NASD rules]FINRA Rules and interpretations.
12. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of
[either]any party to conduct its own independent or concurrent
investigation, examination or enforcement proceeding of or against
[Dual]Common Members, as [either]any party, in its sole discretion,
shall deem appropriate or necessary.
13. Termination. This Agreement may be terminated by [CBOE or
NASD]any party at any time upon the approval of the Commission after
one (1) year's written notice (or such shorter time as may be agreed by
the parties) to the other [party]parties, except as provided in
paragraph 4.
14. Effective Date. This Agreement shall be effective upon approval
of the Commission.
15. Arbitration. In the event of a dispute [between]among the
parties as to the operation of this Agreement, [CBOE and NASD]the
parties 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.
16. Separate Agreement. This Agreement is wholly separate from the
following agreement: (1) The multiparty Agreement made pursuant to Rule
17d-2 of the Exchange Act [between the American Stock Exchange LLC, the
Boston Stock]among BATS Exchange, Inc., [the Chicago Board]BOX Options
Exchange, [Incorporated]LLC, CBOE, C2, the International Securities
Exchange LLC, [the National Association of Securities Dealers,
Inc.,]FINRA, the New York Stock Exchange, LLC, NYSE Amex LLC, the NYSE
Arca, Inc., [and the Philadelphia Stock Exchange, Inc.]and The NASDAQ
Stock Market LLC, NASDAQ OMX BX, Inc., and NASDAQ OMX PHLX LLC
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
entered into on [December 1, 2006] April 25, 2012, and as may be
amended from time to time; and (2) the multiparty Agreement made
pursuant to Rule 17d-2 of the Exchange Act among NYSE Amex LLC, BATS
Exchange, Inc., C2, CBOE, International Securities Exchange LLC, FINRA,
NYSE Arca, Inc., The NASDAQ Stock Market LLC, the BOX Options Exchange,
LLC, NASDAQ OMX BX, Inc. and NASDAQ OMX PHLX LLC involving the
allocation of regulatory responsibilities with respect to SRO market
surveillance of common members activities with regard to certain common
rules relating to listed options entered into on April 25, 2012, and as
may be amended from time to time.
17. Notification of Members. [CBOE and NASD]The parties shall
notify [Dual]Common Members of this Agreement after the Effective Date
by means of a uniform joint notice.
18. 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.
19. Limitation of Liability. [Neither NASD nor CBOE]None of the
parties nor any of their respective directors, governors, officers or
employees shall be liable to [the]any 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 NASD or CBOE]any party and caused by
the willful misconduct [of the other]another party or their respective
directors, governors, officers or employees. No warranties, express or
implied, are made by [NASD or CBOE]any party hereto with respect to any
of the responsibilities to be performed by [each of] them hereunder.
20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, [NASD]FINRA,
C2 and CBOE join in requesting the Commission, upon its approval of
this Agreement [or any part thereof], to relieve CBOE and C2 of any and
all responsibilities with respect to matters allocated to [NASD]FINRA
pursuant to this Agreement; provided, however, that this Agreement
shall not be effective until the Effective Date.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
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.
[NATIONAL ASSOCIATION OF SECURITIES DEALERS]FINANCIAL INDUSTRY
REGULATORY AUTHORITY, INC.
By---------------------------------------------------------------------
Name:
Title:
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
By---------------------------------------------------------------------
Name:
Title:
C2 OPTIONS EXCHANGE, INCORPORATED
By---------------------------------------------------------------------
Name:
Title:
Exhibit 1 *
CBOE AND C2 CERTIFICATION OF COMMON RULES
CBOE and C2 hereby [certifies] certify that the requirements
contained in the [CBOE] Rules listed below are identical to, or
substantially similar to, the NASD/FINRA or SEC Rules identified.\[1]\
----------------------------------------------------------------------------------------------------------------
NASD/FINRA or SEC
C2 Rule(s) CBOE Rule(s) CBSX \1\ Rule(s) \2\
----------------------------------------------------------------------------------------------------------------
Chapter 4 Business Conduct CBOE Rule 4.18 Prevention of the Appendix A--CBOE Rule Section 15(f) of the
4.18 is incorporated by reference. Misuse of Material, 4.18 is incorporated Securities Exchange
Nonpublic Information. by reference. Act of 1934 (Exchange
Act) [\3\]
Chapter 4 Business Conduct CBOE Rule 4.20 Anti-Money Appendix A--CBOE Rule FINRA Rule 3310 [3011]
4.20 is incorporated by reference. Laundering Compliance 4.20 is incorporated Anti-Money Laundering
Program. by reference. Compliance Program \3\
[[Page 22713]]
Chapter 9 Doing Business with the 9.3 Registration and 53.6(i) Applicability NASD Rule 1031(a), (b)
Public--CBOE Rule 9.3 incorporated Termination of of Chapter IX--CBOE Registration
by reference **. Representatives **. Rule 9.3 is Requirements,
incorporated by [1140(a), (d)] FINRA
reference. Rule 1010(a) and (e)
Electronic Filing
[Rules] Requirements
for Uniform Forms, and
[NASD] FINRA By-Laws,
Art. V, Sections 2 and
3 Registered
Representatives and
Associated Persons
Chapter 9 Doing Business with the 9.3A Continuing 53.6(i) Applicability FINRA Rule 1250 [1120]
Public--CBOE Rule 9.3A is Education For of Chapter IX--CBOE Continuing Education
incorporated by reference. Registered Persons. Rule 9.3A is Requirements \4\
incorporated by
reference.
Chapter 9 Doing Business with the 9.4(a) Other 53.6(i) Applicability FINRA Rule 3270 [3030]
Public--CBOE Rule 9.4(a) is Affiliations of of Chapter IX--CBOE Outside Business
incorporated by reference. Registered Associated Rule 9.4(a) is Activities of [an
Persons. incorporated by Associated] Registered
reference. Persons \5\
Chapter 9 Doing Business with the 9.12 Statements of 53.6(i) Applicability NASD Rule 2340 Customer
Public--CBOE Rule 9.12 incorporated Accounts to of Chapter IX--CBOE Account Statements
by reference **. Customers[\4\] **. Rule 9.12 is
incorporated by
reference \6\.
Chapter 9 Doing Business with the 9.13 Statement of 53.6(i) Applicability Exchange Act Rule 17a-5
Public--CBOE Rule 9.13 is Financial Condition to of Chapter IX--CBOE \7\
incorporated by reference. Customers. Rule 9.13 is
incorporated by
reference.
Chapter 9 Doing Business with the 9.16 Restrictions on 53.6(i) Applicability FINRA Rule 2150(a)
Public--CBOE Rule 9.16 is Pledge and Lending of of Chapter IX--CBOE Improper Use of
incorporated by reference. Customers' Securities. Rule 9.16 is Customers' Securities
incorporated by or Funds; Prohibition
reference. Against Guarantees and
Sharing in Accounts,
and NASD Rule
2330[(a)](b)-(d)
Customers' Securities
or Funds
Chapter 9 Doing Business with the 9.18 Guarantees and 53.6(i) Applicability FINRA Rule 2150(b) and
Public--CBOE Rule 9.18 incorporated Profit Sharing **. of Chapter 9--CBOE (c) Improper Use of
by reference **. Rule 9.18 is Customers' Securities
incorporated by or Funds; Prohibition
reference. Against Guarantees and
Sharing in Accounts
\8\ [2330(e) & (f)
Customers' Securities
or Funds \5\]
Chapter 9 Doing Business with the 9.20 Transfer of 53.6(i) Applicability FINRA Rule 11870
Public--CBOE Rule 9.20 is Accounts. of Chapter 9--CBOE Customer Account
incorporated by reference. Rule 9.20 is Transfer Contracts
incorporated by
reference.
Chapter 9 Doing Business with the 9.23 Customer 53.7 Record of Written FINRA Rule 4513 Records
Public--CBOE Rule 9.23 incorporated Complaints[\6\] **. Complaints \9\. of Written Customer
by reference **. Complaints [3110(d)
Books and Records]
Chapter 9 Doing Business with the 9.24 Telephone Appendix A--CBOE Rule FINRA Rule 3230
Public--CBOE Rule 9.24 is Solicitation. 9.24 is incorporated Telemarketing [2212
incorporated by reference. by reference. Telemarketing and
3110(g) Books and
Records]
Chapter 9 Doing Business with the 9.25 Borrowing From or ....................... FINRA Rule 3240 [2370]
Public--CBOE Rule 9.25 is Lending to Customers. Borrowing From or
incorporated by reference. Lending to Customers
Chapter 9 Doing Business with the 9.7 Opening of Accounts 53.6(c) Duty to Know FINRA Rule 2090 Know
Public--CBOE Rule 9.7 incorporated ** [53.6(c) Duty to and Approve Customers. Your Customer \10\ and
by reference **. Know and Approve FINRA Rule 4512
Customers]. Customer Account
Information [2310
Recommendations to
Customers
(Suitability) and
3110(c) Books and
Records]
Chapter 9 Doing Business with the 9.6 Branch Offices of 53.6(d) Branch Offices NASD Rule 1021(a)
Public--CBOE Rule 9.6 incorporated TPH Organizations ** of TPH Organizations. Registration
by reference **. [53.6(d) Branch Requirements and NASD
Offices of Member IM-1000-4 Branch
Organizations]. Offices and Offices of
Supervisory
Jurisdiction
Chapter 9 Doing Business with the 9.10 Discretionary 53.6(e) Discretionary NASD Rule 2510
Public--CBOE Rule 9.10 incorporated Accounts ** [53.6(e) Accounts. Discretionary
by reference **. Discretionary Accounts, Exchange Act
Accounts]. Rule 17a-3(a)(6)(i)
\11\
Chapter 9 Doing Business with the 9.11 Confirmation to 53.6(f) Confirmation to FINRA Rule 2232
Public--CBOE Rule 9.11 incorporated Customers ** [53.6(f) Customers. Customer [2230]
by reference **. Confirmation to Confirmations and
Customers]. Exchange Act Rule 10b-
10[\7\] \12\
[53.6(g) Communications ....................... [2210(b) and (d)
to Customers. Communications with
the Public and IM-2210-
1(6) Guidelines to
Ensure that
Communications With
The Public Are Not
Misleading]
[[Page 22714]]
Chapter 9 Doing Business with the 9.8 Supervision of 53.6(h) Supervision of NASD Rule 3010(a), (b)
Public--CBOE Rule 9.8 incorporated Accounts ** [53.6(h) Accounts. Supervision [and
by reference **. Supervision of 3110(c) Books and
Accounts]. Records]*
----------------------------------------------------------------------------------------------------------------
* The Commission notes that although CBSX was covered by the original Plan, the Parties have determined to
explicitly list CBSX rules in the exhibit as part of the proposed amended 17d-2 Plan, to provide additional
clarity. See Email from Kathryn Moore, Associate General Counsel, FINRA, to Sonia Trocchio, Special Counsel,
Division of Trading and Markets, Commission (April 10, 2014).
\1\ [To the extent that any CBOE Rule listed herein makes reference to options, such rule] The rules applicable
to CBSX are Chapters 50 through 54 and Appendix A of the CBOE rules. Any reference to options shall be read to
equity securities [as provided in] (See e.g., CBOE Rule 53.6).
\2\ CBOE and C2, as applicable, will be responsible for any significant differences between its rules and the
comparable NASD/FINRA rule identified.
[\3\ NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement to have Form X-17A-5
filed with CBOE; responsibility for such requirement remains with CBOE.]
\3\ FINRA shall not have any Regulatory Responsibilities regarding the requirement to conduct independent
testing during the first calendar year of a broker-dealer becoming a Trading Permit Holder or TPH
organization; responsibility for such requirement remains with CBOE and C2, as applicable.
\4\ FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time is
consistently granted.
\5\ FINRA shall not have any Regulatory Responsibilities regarding the requirement that the Trading Permit
Holder provide prior written consent to the TPH organization; responsibility for such requirement remains with
CBOE and C2, as applicable.
[\4\]\6\ FINRA [NASD] shall not have any Regulatory Responsibilities regarding the CBOE requirement that the
statement have a legend requesting the customer to advise the member of any material change in the customer's
investment objectives or financial situation; responsibility for such requirement remains with CBOE.
\7\ FINRA shall not have any Regulatory Responsibilities regarding the CBOE and C2 requirement to have Form X-
17A-5 filed with CBOE and C2, as applicable; responsibility for such requirement remains with CBOE and C2, as
applicable.
\8\ [\5\ The NASD Rule] FINRA Rule 2150 requires, among other things, prior written approval of the member
employing the associated person in order for such associated person to share in accounts of a customer,
whereas the CBOE rule requires consent of the member carrying the account. To the extent that the employing
member and carrying member are different firms, the [NASD's and CBOE's rule] FINRA and CBOE rules differ, and
[NASD's] FINRA's Regulatory [Responsibility] Responsibilities will not cover the CBOE['s] rule; responsibility
for such requirement remains with CBOE.
\9\ FINRA shall only have Regulatory Responsibilities to the extent records must be kept for four years. [\6\
NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement of what must be contained
in the complaint file or the timing during which the compliant must be send to the central file by the branch
office; responsibility for such requirement remains with CBOE.]
\10\ FINRA shall only have regulatory Responsibilities with regard to the first sentence of CBSX Rule 53.6(c);
responsibility for the remainder of the rule remains with CBOE.
\11\ NASD Rule 2510 requires review of transactions in discretionary accounts by ``the member or person duly
designated.'' However, CBSX Rule 53.6(e)(3) requires approval of discretionary accounts by ``a person other
than a person using the discretionary authority.'' To the extent this requirement of approval by a person
other than a person using the discretionary authority applies, FINRA's Regulatory Responsibilities will not
cover CBSX's rule; responsibility for such requirement remains with CBOE.
[\7\ NASD] \12\ FINRA shall not have any Regulatory Responsibilities regarding the [CBOE] CBSX requirements to
disclose on a confirmation; 1) the settlement date of a transaction to the extent it is not required by FINRA
Rule 2232(b)(1); or 2) whether a transaction was executed on the [CBOE]CBSX; reasonability for such
requirements remains with CBOE.
*FINRA shall not have any Regulatory Responsibilities for these Rules as they pertain to violations of insider
trading activities, which is covered by a separate 17d-2 Agreement by and among the BATS Exchange, Inc., BATS-
Y Exchange, Inc., CBOE, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., FINRA, NASDAQ
OMX BX, Inc., NADAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York
Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc., effective December 16, 2011, as may be amended from time to
time.
**FINRA shall not have an Regulatory Responsibilities for these Rules as they pertain to violations of sales
practice activities, which is covered by a separate 17d-2 Agreement by and among NYSE MKT LLC, BATS Exchange,
Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange,
Incorporated, the International Securities Exchange LLC, FINRA, NYSE Arca Inc., The NASDAQ Stock Market LLC,
NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., Miami International Securities Exchange, LLC, and Topaz
Exchange, LLC, effective July 26, 2013, as may be mended from time to time.
The following provisions are covered:
Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements
Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements
Rule 204 of Regulation SHO--Close-Out Requirement
Rule 105 of Regulation M--Short Selling in Connection with a
Public Offering
Section 14(e) of the Exchange Act
Rule 14e-4 of the Exchange Act--Prohibited Transactions in
Connection with Partial Tender Offers
Regulation ATS
Regulation S-P
IV. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \11\ and Rule 17d-2
thereunder,\12\ after May 8, 2014, the Commission may, by written
notice, declare the plan submitted by CBOE, C2, and FINRA, File No. 4-
536, 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.
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\11\ 15 U.S.C. 78q(d)(1).
\12\ 17 CFR 240.17d-2.
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V. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the proposed 17d-2 Plan and to relieve CBOE and C2 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 (https://www.sec.gov/rules/other.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number 4-536 on the subject line.
[[Page 22715]]
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street NE., Washington,
DC 20549-1090.
All submissions should refer to File Number 4-536. 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 (https://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 CBOE,
C2, 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 4-536
and should be submitted on or before May 8, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(34).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09208 Filed 4-22-14; 8:45 am]
BILLING CODE 8011-01-P
