Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Investors' Exchange LLC, 43673-43678 [2016-15757]
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Federal Register / Vol. 81, No. 128 / Tuesday, July 5, 2016 / Notices
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physical and biophysical processes to
human activities.
Æ Future projections of changes in the
aforementioned climate system
processes will be based on modeling
results of the Coupled Modeled
Intercomparison Project Phase 5
(CMIP5) driven by the emissions
scenarios and Representative
Concentration Pathways (RCPs) as used
in the IPCC Fifth Assessment Report
(e.g., https://sedac.ipcc-data.org/ddc/
ar5_scenario_process/RCPs.html).
Future projections will include
perspectives on mitigation pathways.
3. Human Health and Welfare, Societal
and Environmental Vulnerabilities to a
Changing Climate
This section of NCA4 will provide
national-level overviews of observed
and projected future trends and
potential effects in key areas of concern
for people and the environment,
including human health, social well
being, and natural systems. These same
areas will be addressed to varying
degrees in each of the regional sections
of the outline described under Part 4.
Within each of these areas, nonclimatic trends (e.g., population
changes) will be briefly discussed in
order to set a broader context within
which climate change effects can be
understood. Observed and projected
risks, impacts and potential benefits as
a result of climate change will be
identified in each of these areas, with
quantifiable metrics wherever possible.
The role of extreme events in each area
will be addressed where possible. In
addition, potential adaptive measures to
minimize risks will be described for
each area, to the extent these are
identified in the published literature.
The GCRA of 1990 requires that the
NCA analyze ‘‘the effects of global
change on the natural environment,
agriculture, energy production and use,
land and water resources,
transportation, human health and
welfare, human social systems, and
biological diversity.’’
In addition to these mandated topics,
the following additional specific areas
are proposed for inclusion in NCA4:
Effects on tribal and indigenous
communities; coastal effects; ocean
acidification and marine resources; and
key international effects, particularly
those that may raise environmental,
humanitarian, trade, or security issues
for the United States. Cross-sectoral
issues where interactions can result in
significant effects are also being
proposed in this section of NCA4; these
potentially include (but are not limited
to): The water-energy-land nexus; the
interactions among biodiversity, land
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use, and climate; and linkages between
air quality and climate.
4. Regional Analyses Within the United
States
Under this proposed outline, the
regional detail for each of the areas
described in Part 3 above will be placed
in this section of the report. In other
words, Part 3 will provide more
generalized information at a national
level, whereas Part 4 will go into greater
depth to provide information at subnational and regional levels.
NCA3 included the following regions
of the United States (see https://
nca2014.globalchange.gov/
report#section-1948): Northeast,
Southeast and the Caribbean, Midwest,
Great Plains, Southwest, Northwest,
Alaska, Hawaii and Pacific Islands,
Oceans and Coasts. The proposed
regional breakout for NCA4 is the same
with the exception of the Great Plains;
because that was such a large region,
stretching from the Gulf Coast to the
Canadian border, it will be divided into
two regions: Northern and Southern
Plains.
In addition to the themes for each area
described in Part 3, the regional sections
in Part 4 will also include State-level
information as appropriate and where
available, as well as urban and rural
case studies where possible to
showcase, with local specificity, climate
trends, potential risks, and resiliency
planning.
5. Identifying the Information Needed
To Support Climate Change
Adaptation, Increased Resiliency, and
Risk Reduction
This part of NCA4 will focus on
identifying near-term needs and
opportunities for adaptive measures and
resiliency planning in the face of
observed and projected changes in
climate, as well as the dependency of
risk and potential impacts on
greenhouse gas emissions scenarios over
the longer term. NCA4 is not a policy
document, and as such will not be
evaluating policy measures, actions,
instruments or mechanisms to deliver or
incentivize either adaptation or
mitigation responses at any level of
government. Rather, the intention of this
part of NCA4 is to inform the Nation,
and different regions within the Nation,
about near-term adaptation needs over
the next few decades that are likely to
persist regardless of emissions pathway,
and, over the longer term, the reduced
and/or avoided levels of risks and
impacts in the United States, as a result
of different levels of global greenhouse
gas mitigation.
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Adaptation needs and opportunities
will be drawn from relevant information
from Parts 2, 3 and 4 as outlined above.
In addition to physical metrics of
changing risks and potential impacts
over time under different greenhouse
gas emissions scenarios, analysis of
costs of adaptation options and
potential impacts (or avoided impacts)
will be included where possible, in part
with input from recent EPA efforts, such
as the report on Climate Change in the
United States: Benefits of Global Action
(https://www.epa.gov/cira).
Case studies and links to decisionsupport tools (e.g., the Climate
Resilience Toolkit, https://
toolkit.climate.gov) will also be
included here.
Public comments are sought on all of
the draft outline sections described
above for NCA4.
Stacy L. Murphy,
Operations Manager/Acting Security Officer.
[FR Doc. 2016–15807 Filed 7–1–16; 8:45 am]
BILLING CODE 3270–F6–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78179; File No. 4–700]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17–
2; Notice of Filing of Proposed Plan for
the Allocation of Regulatory
Responsibilities Between the Financial
Industry Regulatory Authority, Inc. and
the Investors’ Exchange LLC
June 28, 2016.
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 20,
2016, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and the
Investors’ Exchange LLC (‘‘IEX’’)
(together with FINRA, the ‘‘Parties’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
a plan for the allocation of regulatory
responsibilities, dated June 20, 2016
(‘‘17–2 Plan’’ or the ‘‘Plan’’). The
Commission is publishing this notice to
solicit comments on the 17–2 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
1 15
U.S.C. 78q(d).
CFR 240.17–2.
3 15 U.S.C. 78s(g)(1).
2 17
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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 17–2 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.
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4 15
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 240.17–2,
respectively.
8 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
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To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17–2 under the Act.9 Rule
17–2 permits SROs to propose joint
plans for the allocation of regulatory
responsibilities with respect to their
common members. Under paragraph (c)
of Rule 17–2, 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 17–2
relieves an SRO of those regulatory
responsibilities allocated by the plan to
another SRO.
II. Proposed Plan
The proposed 17–2 Plan is intended
to reduce regulatory duplication for
firms that are common members of both
IEX and FINRA.10 Pursuant to the
proposed 17–2 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
‘‘IEX Certification of Common Rules,’’
referred to herein as the ‘‘Certification’’)
that lists every IEX rule, and select
federal securities laws, rules, and
regulations, for which FINRA would
bear responsibility under the Plan for
overseeing and enforcing with respect to
IEX 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 IEX that are substantially
similar to the applicable rules of
FINRA,11 as well as any provisions of
9 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
10 The proposed 17–2 Plan refers to these
common members as ‘‘Dual Members.’’ See
Paragraph 1(c) of the proposed 17–2 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 IEX rules or FINRA rules, the
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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 IEX, the plan
acknowledges that IEX may, in its
discretion, exercise concurrent
jurisdiction and responsibility for such
matter.12
Under the Plan, IEX would retain full
responsibility for surveillance and
enforcement with respect to trading
activities or practices involving IEX’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 IEX 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 INVESTORS’
EXCHANGE LLC PURSUANT TO RULE
17d–2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
This Agreement, by and between the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and
Investors’ Exchange LLC (‘‘IEX’’), is
made this 20th day of June, 2016 (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 IEX may be referred to individually
as a ‘‘party’’ and together as the
‘‘parties.’’
WHEREAS, FINRA and IEX desire to
reduce duplication in the examination
and surveillance of their Dual Members
(as defined herein) and in the filing and
processing of certain registration and
membership records; and
WHEREAS, FINRA and IEX 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
parties shall review and update, if necessary, the
list of Common Rules. Further, paragraph 3 of the
Plan provides that IEX 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.
13 See paragraph 2 of the proposed 17d–2 Plan.
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hereinafter, FINRA and IEX 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) ‘‘IEX Rules’’ or ‘‘FINRA Rules’’
shall mean: (i) the rules of IEX, or (ii)
the rules of FINRA, respectively, as the
rules of an exchange or association are
defined in Exchange Act Section
3(a)(27).
(b) ‘‘Common Rules’’ shall mean IEX
Rules that are substantially similar to
the applicable FINRA Rules and certain
provisions of the Exchange Act and SEC
rules set forth on Exhibit 1 in that
examination or surveillance for
compliance with such provisions and
rules would not require FINRA to
develop one or more new examination
or surveillance standards, modules,
procedures, or criteria in order to
analyze the application of the provision
or rule, or a Dual Member’s activity,
conduct, or output in relation to such
provision or rule; provided, however,
Common Rules shall not include the
application of the SEC, IEX or FINRA
rules as they pertain to violations of
insider trading activities, which is
covered by a separate 17d–2 Agreement
by and among BATS Exchange, Inc.,
BATS Y-Exchange, Inc., Chicago Board
Options Exchange, Inc., Chicago Stock
Exchange, Inc., EDGA Exchange, Inc.,
EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc.,
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’’ shall mean those
IEX members that are also members of
FINRA and the associated persons
therewith.
(d) ‘‘Effective Date’’ shall be the date
this Agreement is approved by the
Commission.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with
FINRA’s Code of Procedure (the Rule
9000 Series) and other applicable
FINRA procedural rules, to determine
whether violations of Common Rules
have occurred, and if such violations are
deemed to have occurred, the
imposition of appropriate sanctions as
specified under FINRA’s Code of
Procedure and sanctions guidelines.
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(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities,
surveillance 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, IEX
furnished FINRA with a current list of
Common Rules and certified to FINRA
that such rules that are IEX Rules are
substantially similar to the
corresponding FINRA Rules (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 rules of IEX or FINRA, IEX
shall submit an updated list of Common
Rules to FINRA for review which shall
add IEX Rules not included in the
current list of Common Rules that
qualify as Common Rules as defined in
this Agreement; delete IEX 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 IEX 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 IEX shall retain
full responsibility for (unless otherwise
addressed by separate agreement or
rule) (collectively, the ‘‘Retained
Responsibilities’’) the following:
(a) surveillance, examination,
investigation and enforcement with
respect to trading activities or practices
involving IEX’s own marketplace for
rules that are not Common Rules;
(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
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(d) any IEX Rules that are not
Common Rules, except for IEX Rules for
IEX Services LLC as provided in
paragraph 6.
3. Dual Members. Prior to the
Effective Date, IEX 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 IEX by FINRA for performing
the Regulatory Responsibilities and
Enforcement Responsibilities under this
Agreement except as otherwise agreed
by the parties, either herein or in a
separate agreement.
5. Applicability of Certain Laws,
Rules, Regulations or Orders.
Notwithstanding any provision hereof,
this Agreement shall be subject to any
statute, or any rule or order of the
Commission. To the extent such statute,
rule or order is inconsistent with this
Agreement, the statute, rule or order
shall supersede the provision(s) hereof
to the extent necessary for them to be
properly effectuated and the
provision(s) hereof in that respect shall
be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes
aware of apparent violations of any IEX
Rules, which are not listed as Common
Rules, discovered pursuant to the
performance of the Regulatory
Responsibilities assumed hereunder,
FINRA shall notify IEX of those
apparent violations for such response as
IEX deems appropriate.
(b) In the event that IEX becomes
aware of apparent violations of any
Common Rules, discovered pursuant to
the performance of the Retained
Responsibilities, IEX shall notify FINRA
of those apparent violations and such
matters shall be handled by FINRA as
provided in this Agreement. With
respect to apparent violations of IEX
Services LLC FINRA shall not make
referrals to IEX pursuant to this
paragraph 6. Such apparent violations
shall be processed by, and enforcement
proceedings in respect thereto will be
conducted by, FINRA as provided in
this Agreement.
(c) Apparent violations of 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
IEX, IEX may in its discretion assume
concurrent jurisdiction and
responsibility.
(d) Each party agrees to make
available promptly all files, records and
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witnesses necessary to assist the other
in its investigation or proceedings.
7. Continued Assistance.
(a) FINRA shall make available to IEX
all information obtained by FINRA in
the performance by it of the Regulatory
Responsibilities hereunder with respect
to the Dual Members subject to this
Agreement. In particular, and not in
limitation of the foregoing, FINRA shall
furnish IEX any information it obtains
about Dual Members which reflects
adversely on their financial condition.
IEX 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.
(b) The parties agree that documents
or information shared shall be held in
confidence, and used only for the
purposes of carrying out their respective
regulatory obligations. Neither party
shall assert regulatory or other
privileges as against the other with
respect to documents or information
that is required to be shared pursuant to
this Agreement.
(c) The sharing of documents or
information between the parties
pursuant to this Agreement shall not be
deemed a waiver as against third parties
of regulatory or other privileges relating
to the discovery of documents or
information.
8. Statutory Disqualifications. When
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 IEX
advised of its actions in this regard for
such subsequent proceedings as IEX
may initiate.
9. Customer Complaints. IEX shall
forward to FINRA copies of all customer
complaints involving Dual Members
received by IEX 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.
10. Advertising. FINRA shall assume
responsibility to review the advertising
of Dual Members subject to the
Agreement, provided that such material
is filed with FINRA in accordance with
FINRA’s filing procedures and is
accompanied with any applicable filing
fees set forth in FINRA Rules.
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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 IEX or FINRA at any
time upon the approval of the
Commission after one (1) year’s written
notice to the other party.
13. Arbitration. In the event of a
dispute between the parties as to the
operation of this Agreement, IEX 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.
Each party acknowledges that the timely
and complete performance of its
obligations pursuant to this Agreement
is critical to the business and operations
of the other party. In the event of a
dispute between the parties, the parties
shall continue to perform their
respective obligations under this
Agreement in good faith during the
resolution of such dispute unless and
until this Agreement is terminated in
accordance with its provisions. Nothing
in this Section 13 shall interfere with a
party’s right to terminate this Agreement
as set forth herein.
14. Notification of Members. IEX and
FINRA shall notify Dual Members of
this Agreement after the Effective Date
by means of a uniform joint notice.
15. 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.
16. Limitation of Liability. Neither
FINRA nor IEX 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 IEX and caused by
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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 IEX with respect to any of
the responsibilities to be performed by
each of them hereunder.
17. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, FINRA and IEX join in
requesting the Commission, upon its
approval of this Agreement or any part
thereof, to relieve IEX of any and all
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.
18. 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.
19. 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.
[Remainder of page intentionally left
blank.]
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.
INVESTORS’ EXCHANGE LLC
By: lllllllllllllllllll
Name:
Title:
FINANCIAL INDUSTRY REGULATORY
AUTHORITY, INC.
By: lllllllllllllllllll
Name:
Title:
EXHIBIT 1
IEX CERTIFICATION OF COMMON
RULES
IEX hereby certifies that the
requirements contained in the rules
listed below for IEX are identical to, or
substantially similar to, the comparable
FINRA (NASD) Rules, Exchange Act
provision or SEC rule identified
(‘‘Common Rules’’).
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43677
IEX Rule
FINRA (NASD) Rule, exchange act provision, SEC Rule
Rule 2.140 Prohibited Conditions Relating to Expungement of Customer Dispute.
Rule 2.160(p) Restrictions on Membership—Continuing Education Requirements.
Rule 2.170(b) and (g) Application Procedures for Membership or to become an Associated Person of a Member #.
Rule 2.240 Fidelity Bonds ........................................................................
Rule 3.110 Business Conduct of Members ∧ ...........................................
FINRA Rule 2081 Prohibited Conditions Relating to Expungement of
Customer Dispute.
FINRA Rule 1250(a)(1)–(4) Continuing Education Requirements.1
Rule 3.120 Violations Prohibited 3 ∧ ..........................................................
Rule 3.130 Use of Fraudulent Devices ∧ ..................................................
Rule 3.150 Know Your Customer ............................................................
Rule 3.160 Fair Dealing with Customers .................................................
Rule 3.170 Suitability ................................................................................
Rule 3.180(a) The Prompt Receipt and Delivery of Securities ................
Rule 3.180(b) The Prompt Receipt and Delivery of Securities ................
Rule 3.190 Charges for Services Performed ...........................................
Rule 3.200 Use of Information Obtained in a Fiduciary Capacity ...........
Rule 3.210 Publication of Transactions and Quotations ..........................
Rule 3.220 Offers at Stated Prices ..........................................................
Rule 3.230 Payments Involving Publications that Influence the Market
Price of a Security.
Rule 3.240 Customer Confirmations ........................................................
Rule 3.250 Disclosure of Control Relationship with Issuer ......................
Rule 3.260 Discretionary Accounts ..........................................................
Rule 3.270 Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts.
Rule 3.280 Communications with the Public ...........................................
Rule 3.290 Customer Disclosures ............................................................
Rule 3.291 Influencing or Rewarding Employees of Others; Gratuities ..
Rule 3.292 Telemarketing ........................................................................
Rule 4.511 General Requirements ...........................................................
Rule 4.512 Customer Account Information ..............................................
Rule 4.513 Record of Written Customer Complaints ...............................
Rule 4.550 Disclosure of Financial Condition ..........................................
Rule 5.110 Supervision # ..........................................................................
Rule 5.120 Supervisory Control System ..................................................
Rule 5.130 Annual Certification of Compliance and Supervisory Processes.
Rule 5.160 Anti-Money Laundering Compliance Program ......................
Rule 5.170 Transactions for or by Associated Persons ..........................
Rule 6.120 Failure to Deliver and Failure to Receive ..............................
Rule 6.130(a), (b), (d) and (e) Forwarding of Proxy and Other IssuerRelated Materials; Proxy Voting.
Rule 10.110 Market Manipulation (except 10.110(b)) ..............................
Rule 10.110(b) Market Manipulation ........................................................
Rule 10.120 Fictitious Transactions .........................................................
sradovich on DSK3GDR082PROD with NOTICES
Rule
Rule
Rule
Rule
10.130
10.140
10.150
10.160
Excessive Sales By A Member ...........................................
Manipulative Transactions ...................................................
Dissemination of False Information .....................................
Prohibition Against Trading Ahead of Customer Orders.# **
Rule 10.180 Influencing the Consolidated Tape ......................................
Rule 10.190 Trade Shredding ..................................................................
Rule 10.220 Best Execution and Interpositioning.** ................................
Rule 10.240 Trading Ahead of Research Reports.** ...............................
Rule 10.260 Front Running of Block Transactions ..................................
Rule 11.280(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility.
Rule 11.290 Short Sales 4 ** .....................................................................
FINRA By-Laws of the Corporation, Article IV, Section 1(c) Application
for Membership.
FINRA Rule 4360 Fidelity Bonds.2
FINRA Rule 2010 Standards of Commercial Honor and Principles of
Trade.∧
FINRA Rule 2010 Standards of Commercial Honor and Principles of
Trade ∧ and FINRA Rule 3110 Supervision.
FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent
Devices.∧
FINRA Rule 2090 Know Your Customer.
FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent
Device.∧
FINRA Rule 2111 Suitability.
FINRA Rule 11860 COD Orders.
SEA Regulation SHO.
FINRA Rule 2122 Charges for Services Performed.
FINRA Rule 2060 Use of Information Obtained in Fiduciary Capacity.
FINRA Rule 5210 Publication of Transactions and Quotations.
FINRA Rule 5220 Offers at Stated Prices.
FINRA Rule 5230 Payments Involving Publications that Influence the
Market Price of a Security.
FINRA Rule 2232(a) Customer Confirmations and SEC Rule 10b–10
Confirmation of Transactions.
FINRA Rule 2262 Disclosure of Control Relationship with Issuer.
NASD Rule 2510 Discretionary Accounts.
FINRA Rule 2150 Improper Use of Customers’ Securities or Funds;
Prohibition Against Guarantees and Sharing in Accounts.
FINRA Rule 2210 Communications with the Public.
FINRA Rule 2265 Extended Hours Trading Risk Disclosure.
FINRA Rule 3220 Influencing or Rewarding Employees of Others.
FINRA Rule 3230 Telemarketing.
FINRA Rule 4511 General Requirements.
FINRA Rule 4512 Customer Account Information.
FINRA Rule 4513 Record of Written Customer Complaints.
FINRA Rule 2261 Disclosure of Financial Condition.
FINRA Rule 3110 Supervision.
FINRA Rule 3120 Supervisory Control System.
FINRA Rule 3130 Annual Certification of Compliance and Supervisory
Processes.
FINRA Rule 3310 Anti-Money Laundering Compliance Program.
NASD Rule 3050 Transactions for or by Associated Persons.
Regulation SHO Rules 200 and 203.
FINRA Rule 2251 Forwarding of Proxy and Other Issuer-Related Materials.
FINRA Rule 6140 Other Trading Practices.
FINRA Rule 5210 Publication of Transactions and Quotations, FINRA
Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent Devices, FINRA Rule 2010 Standards of Commercial Honor and Principles of Trade, and FINRA Rule 6140(a) Other Trading Practices.
FINRA Rule 6140 Other Trading Practices and FINRA Rule 5210 Supplementary Material .02 Self-Trades.
FINRA Rule 6140 Other Trading Practices.
FINRA Rule 6140 Other Trading Practices.
FINRA Rule 6140 Other Trading Practices.
FINRA Rule 5320 Prohibition Against Trading Ahead of Customer Orders.**
FINRA Rule 6140(a) Other Trading Practices.
FINRA Rule 5290 Order Entry and Execution Practices.
FINRA Rule 5310 Best Execution and Interpositioning.**
FINRA Rule 5280 Trading Ahead of Research Reports.**
FINRA Rule 5270 Front Running of Block Transactions.
FINRA Rule 6190(a)(1) & (2) Compliance with Regulation NMS Plan to
Address Extraordinary Market Volatility.
FINRA Rule 6182 Trade Reporting of Short Sales.**
1
FINRA shall only have Regulatory Responsibilities to the extent the exercise of discretion by IEX is the same as FINRA.
FINRA shall only have Regulatory Responsibilities to the extent any exemption by IEX is the same as FINRA.
3 FINRA shall only have Regulatory Responsibilities regarding the first phrase of the IEX Rule regarding prohibitions from violating the Securities Exchange Act of 1934 and the rules and regulations thereunder; responsibility for the remainder of the rule shall remain with IEX.
4 FINRA shall not have any Regulatory Responsibilities for Rule 11.290(b) through (d).
In addition, the following provisions shall be part of this 17d–2 Agreement:
2
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Federal Register / Vol. 81, No. 128 / Tuesday, July 5, 2016 / Notices
Securities Exchange Act of 1934 (‘‘SEA’’):
Section 15(g)
SEA Rules:
• SEA Rule 200 of Regulation SHO—Definition of Short Sales and Marking Requirements**
• SEA Rule 201 of Regulation SHO—Circuit Breaker**
• SEA Rule 203 of Regulation SHO—Borrowing and Delivery Requirements**
• SEA Rule 204 of Regulation SHO—Close-Out Requirement**
• SEA Rule 101 of Regulation M—Activities by Distribution Participants
• SEA Rule 102 of Regulation M—Activities by Issuers and Selling Security Holders During a Distribution
• SEA Rule 103 of Regulation M—Nasdaq Passive Market Making
• SEA Rule 104 of Regulation M—Stabilizing and Other Activities in Connection with an Offering
• SEA Rule 105 of Regulation M—Short Selling in Connection With a Public Offering
• SEA Rule 10b–5 Employment of Manipulative and Deceptive Devices∧
• SEA Rule 17a–3/17a–4—Records to Be Made by Certain Exchange Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers∧
# FINRA shall not have Regulatory Responsibilities regarding notification or reporting to IEX.
∧ 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 BATS Exchange, Inc., BATS–Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., 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.
** FINRA shall perform the surveillance responsibilities for the double star rules. These rules may be cited by FINRA in both the context of this
Agreement and the Regulatory Services Agreement.
Commission, Station Place, 100 F Street
NE., Washington, DC 20549–1090.
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 July 20, 2016, the Commission
may, by written notice, declare the plan
submitted by IEX and FINRA, File No.
4–700, 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.
IV. Solicitation of Comments
In order to assist the Commission in
determining whether to approve the
proposed 17d–2 Plan and to relieve IEX
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:
sradovich on DSK3GDR082PROD with NOTICES
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–
700 on the subject line.
Paper Comments
All submissions should refer to File
Number 4–700. 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
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
plan also will be available for inspection
and copying at the principal offices of
IEX 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 4–700 and
should be submitted on or before July
20, 2016.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–15757 Filed 7–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78188; File No. SR–
NASDAQ–2016–082]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Listing and Trading of the Shares of
the AdvisorShares Market Adaptive
Unconstrained Income ETF of the
AdvisorShares Trust
June 28, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 15,
2016, The Nasdaq Stock Market LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes a rule change to the
investment objective and the means of
achieving the investment objective with
16 17
CFR 200.30–3(a)(34).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
14 15
U.S.C. 78q(d)(1).
15 17 CFR 240.17d–2.
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]]>Agencies
[Federal Register Volume 81, Number 128 (Tuesday, July 5, 2016)]
[Notices]
[Pages 43673-43678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15757]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78179; File No. 4-700]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the Financial Industry Regulatory
Authority, Inc. and the Investors' Exchange LLC
June 28, 2016.
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 20, 2016, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and the Investors' Exchange LLC (``IEX'') (together with
FINRA, the ``Parties'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a plan for the allocation of
regulatory responsibilities, dated June 20, 2016 (``17-2 Plan'' or the
``Plan''). The Commission is publishing this notice to solicit comments
on the 17-2 Plan from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17-2.
---------------------------------------------------------------------------
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
[[Page 43674]]
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 17-2 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 240.17-2, 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 17-2 under the Act.\9\ Rule 17-2 permits SROs
to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17-2, 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 17-2 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 17-2 Plan is intended to reduce regulatory duplication
for firms that are common members of both IEX and FINRA.\10\ Pursuant
to the proposed 17-2 Plan, FINRA would assume certain examination and
enforcement responsibilities for common members with respect to certain
applicable laws, rules, and regulations.
---------------------------------------------------------------------------
\10\ The proposed 17-2 Plan refers to these common members as
``Dual Members.'' See Paragraph 1(c) of the proposed 17-2 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 ``IEX Certification of Common Rules,'' referred
to herein as the ``Certification'') that lists every IEX rule, and
select federal securities laws, rules, and regulations, for which FINRA
would bear responsibility under the Plan for overseeing and enforcing
with respect to IEX 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 IEX 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 IEX, the
plan acknowledges that IEX 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 IEX 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 IEX 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, IEX would retain full responsibility for
surveillance and enforcement with respect to trading activities or
practices involving IEX'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 IEX 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
INVESTORS' EXCHANGE LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and Investors' Exchange LLC (``IEX''), is
made this 20th day of June, 2016 (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 IEX may be referred to
individually as a ``party'' and together as the ``parties.''
WHEREAS, FINRA and IEX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined herein)
and in the filing and processing of certain registration and membership
records; and
WHEREAS, FINRA and IEX 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
[[Page 43675]]
hereinafter, FINRA and IEX 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) ``IEX Rules'' or ``FINRA Rules'' shall mean: (i) the rules of
IEX, or (ii) the rules of FINRA, respectively, as the rules of an
exchange or association are defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean IEX Rules that are substantially
similar to the applicable FINRA Rules and certain provisions of the
Exchange Act and SEC rules set forth on Exhibit 1 in that examination
or surveillance for compliance with such provisions and rules would not
require FINRA to develop one or more new examination or surveillance
standards, modules, procedures, or criteria in order to analyze the
application of the provision or rule, or a Dual Member's activity,
conduct, or output in relation to such provision or rule; provided,
however, Common Rules shall not include the application of the SEC, IEX
or FINRA rules as they pertain to violations of insider trading
activities, which is covered by a separate 17d-2 Agreement by and among
BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options
Exchange, Inc., Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX
Exchange, Inc., Financial Industry Regulatory Authority, Inc., 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'' shall mean those IEX members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural rules, to
determine whether violations of Common Rules have occurred, and if such
violations are deemed to have occurred, the imposition of appropriate
sanctions as specified under FINRA's Code of Procedure and sanctions
guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities, surveillance 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,
IEX furnished FINRA with a current list of Common Rules and certified
to FINRA that such rules that are IEX Rules are substantially similar
to the corresponding FINRA Rules (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
rules of IEX or FINRA, IEX shall submit an updated list of Common Rules
to FINRA for review which shall add IEX Rules not included in the
current list of Common Rules that qualify as Common Rules as defined in
this Agreement; delete IEX 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 IEX 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 IEX shall retain full responsibility for (unless otherwise
addressed by separate agreement or rule) (collectively, the ``Retained
Responsibilities'') the following:
(a) surveillance, examination, investigation and enforcement with
respect to trading activities or practices involving IEX's own
marketplace for rules that are not Common Rules;
(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 IEX Rules that are not Common Rules, except for IEX Rules
for IEX Services LLC as provided in paragraph 6.
3. Dual Members. Prior to the Effective Date, IEX 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 IEX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by the
parties, either herein or in a separate agreement.
5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be subject
to any statute, or any rule or order of the Commission. To the extent
such statute, rule or order is inconsistent with this Agreement, the
statute, rule or order shall supersede the provision(s) hereof to the
extent necessary for them to be properly effectuated and the
provision(s) hereof in that respect shall be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any IEX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities assumed
hereunder, FINRA shall notify IEX of those apparent violations for such
response as IEX deems appropriate.
(b) In the event that IEX becomes aware of apparent violations of
any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, IEX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement. With respect to apparent violations of IEX Services LLC
FINRA shall not make referrals to IEX pursuant to this paragraph 6.
Such apparent violations shall be processed by, and enforcement
proceedings in respect thereto will be conducted by, FINRA as provided
in this Agreement.
(c) Apparent violations of 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
IEX, IEX may in its discretion assume concurrent jurisdiction and
responsibility.
(d) Each party agrees to make available promptly all files, records
and
[[Page 43676]]
witnesses necessary to assist the other in its investigation or
proceedings.
7. Continued Assistance.
(a) FINRA shall make available to IEX all information obtained by
FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this Agreement.
In particular, and not in limitation of the foregoing, FINRA shall
furnish IEX any information it obtains about Dual Members which
reflects adversely on their financial condition. IEX 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.
(b) The parties agree that documents or information shared shall be
held in confidence, and used only for the purposes of carrying out
their respective regulatory obligations. Neither party shall assert
regulatory or other privileges as against the other with respect to
documents or information that is required to be shared pursuant to this
Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
8. Statutory Disqualifications. When 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 IEX advised of its actions in this regard for such subsequent
proceedings as IEX may initiate.
9. Customer Complaints. IEX shall forward to FINRA copies of all
customer complaints involving Dual Members received by IEX 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.
10. Advertising. FINRA shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is accompanied with any applicable filing fees set forth
in FINRA Rules.
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 IEX or FINRA
at any time upon the approval of the Commission after one (1) year's
written notice to the other party.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, IEX 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. Each party acknowledges that
the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of the other
party. In the event of a dispute between the parties, the parties shall
continue to perform their respective obligations under this Agreement
in good faith during the resolution of such dispute unless and until
this Agreement is terminated in accordance with its provisions. Nothing
in this Section 13 shall interfere with a party's right to terminate
this Agreement as set forth herein.
14. Notification of Members. IEX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
15. 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.
16. Limitation of Liability. Neither FINRA nor IEX 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 IEX 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 IEX with respect
to any of the responsibilities to be performed by each of them
hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and IEX
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve IEX of any and all 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.
18. 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.
19. 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.
[Remainder of page intentionally left blank.]
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.
INVESTORS' EXCHANGE LLC
By:--------------------------------------------------------------------
Name:
Title:
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.
By:--------------------------------------------------------------------
Name:
Title:
EXHIBIT 1
IEX CERTIFICATION OF COMMON RULES
IEX hereby certifies that the requirements contained in the rules
listed below for IEX are identical to, or substantially similar to, the
comparable FINRA (NASD) Rules, Exchange Act provision or SEC rule
identified (``Common Rules'').
[[Page 43677]]
------------------------------------------------------------------------
FINRA (NASD) Rule, exchange act
IEX Rule provision, SEC Rule
------------------------------------------------------------------------
Rule 2.140 Prohibited Conditions FINRA Rule 2081 Prohibited
Relating to Expungement of Customer Conditions Relating to
Dispute. Expungement of Customer
Dispute.
Rule 2.160(p) Restrictions on FINRA Rule 1250(a)(1)-(4)
Membership--Continuing Education Continuing Education
Requirements. Requirements.\1\
Rule 2.170(b) and (g) Application FINRA By-Laws of the
Procedures for Membership or to become Corporation, Article IV,
an Associated Person of a Member . Section 1(c) Application for
Membership.
Rule 2.240 Fidelity Bonds.............. FINRA Rule 4360 Fidelity
Bonds.\2\
Rule 3.110 Business Conduct of Members FINRA Rule 2010 Standards of
[supcaret]. Commercial Honor and
Principles of Trade.[supcaret]
Rule 3.120 Violations Prohibited \3\ FINRA Rule 2010 Standards of
[supcaret]. Commercial Honor and
Principles of Trade [supcaret]
and FINRA Rule 3110
Supervision.
Rule 3.130 Use of Fraudulent Devices FINRA Rule 2020 Use of
[supcaret]. Manipulative, Deceptive or
Other Fraudulent
Devices.[supcaret]
Rule 3.150 Know Your Customer.......... FINRA Rule 2090 Know Your
Customer.
Rule 3.160 Fair Dealing with Customers. FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent
Device.[supcaret]
Rule 3.170 Suitability................. FINRA Rule 2111 Suitability.
Rule 3.180(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.180(b) The Prompt Receipt and SEA Regulation SHO.
Delivery of Securities.
Rule 3.190 Charges for Services FINRA Rule 2122 Charges for
Performed. Services Performed.
Rule 3.200 Use of Information Obtained FINRA Rule 2060 Use of
in a Fiduciary Capacity. Information Obtained in
Fiduciary Capacity.
Rule 3.210 Publication of Transactions FINRA Rule 5210 Publication of
and Quotations. Transactions and Quotations.
Rule 3.220 Offers at Stated Prices..... FINRA Rule 5220 Offers at
Stated Prices.
Rule 3.230 Payments Involving FINRA Rule 5230 Payments
Publications that Influence the Market Involving Publications that
Price of a Security. Influence the Market Price of
a Security.
Rule 3.240 Customer Confirmations...... FINRA Rule 2232(a) Customer
Confirmations and SEC Rule 10b-
10 Confirmation of
Transactions.
Rule 3.250 Disclosure of Control FINRA Rule 2262 Disclosure of
Relationship with Issuer. Control Relationship with
Issuer.
Rule 3.260 Discretionary Accounts...... NASD Rule 2510 Discretionary
Accounts.
Rule 3.270 Improper Use of Customers' FINRA Rule 2150 Improper Use of
Securities or Funds; Prohibition Customers' Securities or
Against Guarantees and Sharing in Funds; Prohibition Against
Accounts. Guarantees and Sharing in
Accounts.
Rule 3.280 Communications with the FINRA Rule 2210 Communications
Public. with the Public.
Rule 3.290 Customer Disclosures........ FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.291 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others; Gratuities. Rewarding Employees of Others.
Rule 3.292 Telemarketing............... FINRA Rule 3230 Telemarketing.
Rule 4.511 General Requirements........ FINRA Rule 4511 General
Requirements.
Rule 4.512 Customer Account Information FINRA Rule 4512 Customer
Account Information.
Rule 4.513 Record of Written Customer FINRA Rule 4513 Record of
Complaints. Written Customer Complaints.
Rule 4.550 Disclosure of Financial FINRA Rule 2261 Disclosure of
Condition. Financial Condition.
Rule 5.110 Supervision ............... FINRA Rule 3110 Supervision.
Rule 5.120 Supervisory Control System.. FINRA Rule 3120 Supervisory
Control System.
Rule 5.130 Annual Certification of FINRA Rule 3130 Annual
Compliance and Supervisory Processes. Certification of Compliance
and Supervisory Processes.
Rule 5.160 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program. Laundering Compliance Program.
Rule 5.170 Transactions for or by NASD Rule 3050 Transactions for
Associated Persons. or by Associated Persons.
Rule 6.120 Failure to Deliver and Regulation SHO Rules 200 and
Failure to Receive. 203.
Rule 6.130(a), (b), (d) and (e) FINRA Rule 2251 Forwarding of
Forwarding of Proxy and Other Issuer- Proxy and Other Issuer-Related
Related Materials; Proxy Voting. Materials.
Rule 10.110 Market Manipulation (except FINRA Rule 6140 Other Trading
10.110(b)). Practices.
Rule 10.110(b) Market Manipulation..... FINRA Rule 5210 Publication of
Transactions and Quotations,
FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent Devices,
FINRA Rule 2010 Standards of
Commercial Honor and
Principles of Trade, and FINRA
Rule 6140(a) Other Trading
Practices.
Rule 10.120 Fictitious Transactions.... FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02
Self-Trades.
Rule 10.130 Excessive Sales By A Member FINRA Rule 6140 Other Trading
Practices.
Rule 10.140 Manipulative Transactions.. FINRA Rule 6140 Other Trading
Practices.
Rule 10.150 Dissemination of False FINRA Rule 6140 Other Trading
Information. Practices.
Rule 10.160 Prohibition Against Trading FINRA Rule 5320 Prohibition
Ahead of Customer Orders. **. Against Trading Ahead of
Customer Orders.**
Rule 10.180 Influencing the FINRA Rule 6140(a) Other
Consolidated Tape. Trading Practices.
Rule 10.190 Trade Shredding............ FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 10.220 Best Execution and FINRA Rule 5310 Best Execution
Interpositioning.**. and Interpositioning.**
Rule 10.240 Trading Ahead of Research FINRA Rule 5280 Trading Ahead
Reports.**. of Research Reports.**
Rule 10.260 Front Running of Block FINRA Rule 5270 Front Running
Transactions. of Block Transactions.
Rule 11.280(e)(3) & (4) Trading Halts FINRA Rule 6190(a)(1) & (2)
Due to Extraordinary Market Volatility. Compliance with Regulation NMS
Plan to Address Extraordinary
Market Volatility.
Rule 11.290 Short Sales \4\ **......... FINRA Rule 6182 Trade Reporting
of Short Sales.**
------------------------------------------------------------------------
\1\ FINRA shall only have Regulatory Responsibilities to the extent the
exercise of discretion by IEX is the same as FINRA.
\2\ FINRA shall only have Regulatory Responsibilities to the extent any
exemption by IEX is the same as FINRA.
\3\ FINRA shall only have Regulatory Responsibilities regarding the
first phrase of the IEX Rule regarding prohibitions from violating the
Securities Exchange Act of 1934 and the rules and regulations
thereunder; responsibility for the remainder of the rule shall remain
with IEX.
\4\ FINRA shall not have any Regulatory Responsibilities for Rule
11.290(b) through (d).
In addition, the following provisions shall be part of this 17d-2
Agreement:
[[Page 43678]]
Securities Exchange Act of 1934 (``SEA''):
Section 15(g)
SEA Rules:
SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements**
SEA Rule 201 of Regulation SHO--Circuit Breaker**
SEA Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements**
SEA Rule 204 of Regulation SHO--Close-Out Requirement**
SEA Rule 101 of Regulation M--Activities by Distribution
Participants
SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution
SEA Rule 103 of Regulation M--Nasdaq Passive Market Making
SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering
SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering
SEA Rule 10b-5 Employment of Manipulative and Deceptive
Devices[supcaret]
SEA Rule 17a-3/17a-4--Records to Be Made by Certain Exchange
Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers[supcaret]
FINRA shall not have Regulatory Responsibilities regarding
notification or reporting to IEX.
[supcaret] 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 BATS Exchange, Inc., BATS-Y Exchange, Inc., Chicago Board
Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA
Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory
Authority, Inc., 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.
** FINRA shall perform the surveillance responsibilities for the double
star rules. These rules may be cited by FINRA in both the context of
this Agreement and the Regulatory Services Agreement.
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 July 20, 2016, the Commission may, by written
notice, declare the plan submitted by IEX and FINRA, File No. 4-700, 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 IEX 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 4-700 on the subject line.
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 4-700. 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 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 plan also will be available for inspection and
copying at the principal offices of IEX 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 4-700 and should be submitted
on or before July 20, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15757 Filed 7-1-16; 8:45 am]
BILLING CODE 8011-01-P
