Self-Regulatory Organizations; Long-Term Stock Exchange; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fingerprint-Based Background Checks, 16170-16172 [2020-05840]
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16170
Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
Required Majority under section 57(f) of
the Act.
11. No Independent Director of a
Regulated Entity will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of an
Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act) will, to the extent not payable by
an Adviser under the investment
advisory agreements with the Regulated
Entities and the Affiliated Funds, be
shared by the Affiliated Funds and the
Regulated Entities in proportion to the
relative amounts of the securities held
or to be acquired or disposed of, as the
case may be.
13. Any transaction fee 11 (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) of the Act, as applicable),
received in connection with a CoInvestment Transaction will be
distributed to the participating
Regulated Entities and Affiliated Funds
on a pro rata basis based on the amounts
they invested or committed, as the case
may be, in such Co-Investment
Transaction. If any transaction fee is to
be held by the Adviser pending
consummation of the transaction, the
fee will be deposited into an account
maintained by the Adviser at a bank or
banks having the qualifications
prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive
rate of interest that will also be divided
pro rata among the participating
Regulated Entities and Affiliated Funds
based on the amounts they invest in
such Co-Investment Transaction. None
of the Affiliated Funds, the Advisers,
the other Regulated Entities or any
affiliated person of the Regulated
Entities or Affiliated Funds will receive
additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction (other than (a) in the case
of the Regulated Entities and the
Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
condition 2(c)(iii)(C); and (b) in the case
of the Advisers, investment advisory
fees paid in accordance with the
agreements between the Advisers and
11 Applicants are not requesting and the staff is
not providing any relief for transaction fees
received in connection with any Co-Investment
Transaction.
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the Regulated Entities or Affiliated
Funds).
14. The Advisers will each maintain
policies and procedures reasonably
designed to ensure compliance with the
foregoing conditions. These policies and
procedures will require, among other
things, that the applicable Adviser will
be notified of all Potential CoInvestment Transactions that fall within
a Regulated Entity’s then-current
Objectives and Strategies and will be
given sufficient information to make its
independent determination and
recommendations under conditions 1,
2(a), 7 and 8.
15. If the Holders own in the aggregate
more than 25 percent of the Shares of
a Regulated Entity, then the Holders
will vote such Shares as directed by an
independent third party when voting on
(1) the election of directors; (2) the
removal of one or more directors; or (3)
all other matters under either the Act or
applicable State law affecting the
Board’s composition, size or manner of
election.
16. Each Regulated Entity’s chief
compliance officer, as defined in rule
38a–1(a)(4) under the Act, will prepare
an annual report for its Board each year
that evaluates (and documents the basis
of that evaluation) the Regulated
Entity’s compliance with the terms and
conditions of the application and the
procedures established to achieve such
compliance.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–05828 Filed 3–19–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88394; File No. SR–LTSE–
2020–05]
Self-Regulatory Organizations; LongTerm Stock Exchange; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Fingerprint-Based Background Checks
March 16, 2020.
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 March 6,
2020, Long-Term Stock Exchange
(‘‘LTSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00124
Fmt 4703
rule change as described in Items I and
II below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
LTSE proposes a rule change to
amend its rule relating to fingerprintbased background checks of directors,
officers, employees, and others, and to
utilize the services of an Federal Bureau
of Investigation (‘‘FBI’’) approved
Channel Partner to conduct
fingerprinting.
The text of the proposed rule change
is available at the Exchange’s website at
https://longtermstockexchange.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 1.180 (Fingerprint-Based
Background Checks of Employees and
Independent Contractors), which was
based on the corresponding rule of the
Investors Exchange (‘‘IEX’’),3 to adopt
with only minor differences as
discussed below, the provisions of the
New York Stock Exchange (‘‘NYSE’’)
fingerprinting rule.4 In addition, the
proposed rule change would allow the
Exchange to utilize the services of an
FBI-approved Channel Partner, as is
common with other national securities
exchanges, including the NYSE.
3 See
4 See
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IEX Rule 1.180.
NYSE Rule 28.
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
Background and Proposed Rule Change
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Section 17(f)(2) of the Act, as
amended by the Dodd-Frank Wall Street
Reform and Consumer Protection Act of
2010 (‘‘Dodd-Frank Act’’),5 provides
that every member of a national
securities exchange, broker, dealer,
registered transfer agent, registered
clearing agency, registered securities
information processors, national
securities exchanges and national
securities associations shall require each
of its partners, directors, officers, and
employees to be fingerprinted and
submit those fingerprints (or cause the
fingerprints to be submitted) to the
Attorney General of the United States
(‘‘Attorney General’’) for identification.
Section 17(f)(2) explicitly directs the
Attorney General to provide selfregulatory organizations (‘‘SROs’’)
designated by the Commission with
access to criminal history record
information. Further, SEC Rule 17f–2
authorizes SROs to store criminal record
information received from the FBI,
which maintains on behalf of the
Attorney General a database of
fingerprint-based criminal history
records.6
While existing LTSE Rule 1.180 meets
the requirements of section 17(f)(2) of
the Act, it contemplates only the use of
fingerprint ‘‘cards,’’ is not tailored to the
Exchange’s organizational structure, and
has a substantive error.7 Accordingly,
the Exchange proposes to adopt the
fingerprinting rule of the NYSE, with
minor differences described below.
Proposed LTSE Rule 1.180(a) would
be identical to NYSE Rule 28(a) with the
exception of the phrase ‘‘and its
principal subsidiaries.’’ This phrase is
proposed to be omitted because the
Exchange does not have any
subsidiaries; the Exchange is a whollyowned subsidiary of LTSE Group. The
phrase ‘‘each of’’ also would be omitted
to make the first sentence of the
proposed rule grammatically correct.
Proposed LTSE Rule 1.180(b) would
be identical to NYSE Rule 28(b) with the
exception of the sentence that states
‘‘The Exchange, however, may provide
a subsidiary with access to information
from background checks based on
fingerprints obtained from that
subsidiary.’’ Again, the Exchange
5 See 15 U.S.C. 78q(f)(2); Dodd-Frank Act, Public
Law 111–203, 929S, 124 Stat. 1376, 1867 (2010).
6 See 17 CFR 240.17f–2(d).
7 The rule was copied verbatim from IEX Rule
1.180, with changes only to reflect the different
names of the exchanges. LTSE Rule 1.180(c) also
erroneously references FINRA as the source of
background information from the fingerprints,
instead of the Attorney General of the United States
or his or her designee.
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proposes to omit that sentence because
it does not have subsidiaries.
Proposed LTSE Rule 1.180(c) and
Supplementary Material .01 would be
identical to NYSE Rule 28(c) and
Supplementary Material .10. Finally, the
Exchange proposes to amend the title of
Rule 1.180 to be identical to the title of
NYSE Rule 28, which is a more accurate
description of the rule.
In addition, consistent with the
practice at NYSE and other national
securities exchanges, the Exchange
intends to utilize a Live-Scan 8
electronic system to capture and
transmit fingerprints directly to the FBI.
The capture and transmittal function,
and corresponding receipt of criminal
history information from the FBI, would
be handled directly by Exchange
personnel and/or an FBI-approved
‘‘Channel Partner’’ 9 who would
maintain and operate, on behalf of the
Exchange, a LiveScan and/or other
electronic system(s) for the submission
of fingerprints to the FBI; receive and
maintain criminal history record
information from the FBI; and
disseminate such information, through
secure systems, to a limited set of
approved reviewing officials within the
Exchange. The Exchange believes that
Rule 1.180 allows for the retention of a
Channel Partner for these purposes.
The Exchange believes that the
foregoing interpretation is consistent
with the Exchange’s authority under
Section 17(f)(2) of the Act, as amended
by the Dodd-Frank Act,10 which
requires, inter alia, that employees of
exchanges be fingerprinted and that
exchanges ‘‘shall submit such
fingerprints, or cause the same to be
submitted, to the Attorney General of
the United States for identification and
appropriate processing.’’
The Exchange accordingly believes
that under LTSE Rule 1.180 (as adopted
8 Live-Scan refers to the process of capturing
fingerprints directly into a digitized format as
opposed to traditional ink and paper methods. LiveScan technology captures and transfers images to a
central location and/or interface for identification
processing.
9 FBI-approved Channel Partners receive the
fingerprint submission and relevant data, collect the
associated fee(s), electronically forward the
fingerprint submission with the necessary
information to the FBI Criminal Justice Information
Services Division (‘‘CJIS’’) for a national Criminal
History Summary check, and receive the electronic
summary check result for dissemination to the
authorized employer entity. See Securities
Exchange Act Release No. 71066 (December 12,
2013), 78 FR 76667 (December 18, 2013) (SR–ISE–
2013–66). The Exchange would retain ultimate legal
responsibility for the fulfillment of its statutory and
self-regulatory obligations under the Act, including
compliance with Section 17(f)(2) of the Act as
amended by the Dodd-Frank Act.
10 See 15 U.S.C. 17(f)(2); Dodd-Frank Act, Public
Law 111–203, 929S, 124 Stat. 1376, 1867 (2010).
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16171
and as proposed) and applicable
statutes, the Exchange has the authority
to engage an FBI-approved Channel
Partner for some or all of the
fingerprinting processes described in
the Rule. Finally, the Exchange believes
that this proposed interpretation would
ensure the Exchange’s continued
compliance with its Rules and
applicable state and federal law.11
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,12
in general, and furthers the objectives of
Section 6(b)(5) of the Act,13 in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
Continuing to run fingerprint-based
background checks is imperative for the
Exchange, as this process helps to
identify persons with criminal history
records who may pose a threat to the
safety of Exchange personnel and/or the
security of Exchange facilities and
records. This identification and
screening process thus enhances
business continuity, workplace safety,
and the security of the Exchange’s
operations. The use of an FBI-approved
Channel Partner in some or all phases
of this process is consistent with LTSE
Rule 1.180 and applicable state and
federal law, and in furtherance of the
important objectives described herein.
Additionally, the use of a Channel
Partner is consistent with the
fingerprinting method currently
employed by other SROs.14 For all these
11 Access to the FBI’s fingerprint-based database
of criminal records is permitted only when
authorized by law. Section 17(f)(2) of the Act
explicitly directs the Attorney General to provide
SROs designated by the Commission (e.g., the
Exchange) with access to such criminal history
record information. Further, as amended by the
Dodd-Frank Act, Section 17(f)(2) specifically
requires, inter alia, that employees of national
securities exchanges be fingerprinted. New York’s
General Business Law also requires SROs to
fingerprint employees ‘‘as a condition of
employment,’’ as well as certain non-employee
service providers. N.Y. Gen. Bus. Law § 359–e
(McKinney).
12 15 U.S.C. 78f.
13 15 U.S.C. 78f(b)(5).
14 See e.g., NYSE Rule 28; Chicago Board Options
Exchange (‘‘CBOE’’) Rule 15.10. See generally
Securities Exchange Act Release No. 76422
(November 10, 2015), 80 FR 71868 (November 17,
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
reasons, the proposal is also designed to
protect investors as well as the public
interest.
Additionally, the proposed rule is
nearly identical to NYSE Rule 28 15 and
corrects an erroneous reference to
FINRA in LTSE Rule 1.180(c).16
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues but rather
update its existing fingerprint rule to
match, with only minor differences,
NYSE Rule 28, and to allow the use of
an FBI-approved Channel Partner as
described above.17
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 18 and Rule 19b–
4(f)(6) thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
2015) (SR–NYSE–2015–45) (citing Securities
Exchange Act Release No. 71066 (December 12,
2013), 78 FR 76667, 76668 n. 12 (December 18,
2013) (SR–ISE–2013–66) (noting that ‘‘[a]n FBIapproved Channel Partner simply helps expedite
the delivery of Criminal History Summary
information on behalf of the FBI’’, and that the
‘‘process for making a request through an FBIapproved Channel Partner is consistent with FBI
submission procedures’’)).
15 See supra text accompanying note 4.
16 See supra note 7.
17 See supra text accompanying note 8 [sic].
18 15 U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
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filing. However, Rule 19b–4(f)(6)(iii) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay to permit the
Exchange to amend its fingerprinting
rule to be accurate, tailored to the
Exchange, and substantially similar to
NYSE Rule 28 and to begin utilizing the
services of an FBI-approved Channel
Partner as soon as practicable. The
minor differences noted herein do not
raise substantive or novel issues.22 Thus
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest and hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.23
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–LTSE–2020–05 and should
be submitted on or before April 10,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–05840 Filed 3–19–20; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
LTSE–2020–05 on the subject line.
BILLING CODE 8011–01–P
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–LTSE–2020–05. 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
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend the NYSE American
Options Fee Schedule
21 17
CFR 240.19b–4(f)(6)(iii).
supra Background and Proposed Rule
Change.
23 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
22 See
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Fmt 4703
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88391; File No. SR–
NYSEAMER–2020–18]
March 16, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
12, 2020, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 85, Number 55 (Friday, March 20, 2020)]
[Notices]
[Pages 16170-16172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05840]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88394; File No. SR-LTSE-2020-05]
Self-Regulatory Organizations; Long-Term Stock Exchange; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Fingerprint-Based Background Checks
March 16, 2020.
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 March 6, 2020, Long-Term Stock Exchange (``LTSE'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
LTSE proposes a rule change to amend its rule relating to
fingerprint-based background checks of directors, officers, employees,
and others, and to utilize the services of an Federal Bureau of
Investigation (``FBI'') approved Channel Partner to conduct
fingerprinting.
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 1.180 (Fingerprint-Based
Background Checks of Employees and Independent Contractors), which was
based on the corresponding rule of the Investors Exchange (``IEX''),\3\
to adopt with only minor differences as discussed below, the provisions
of the New York Stock Exchange (``NYSE'') fingerprinting rule.\4\ In
addition, the proposed rule change would allow the Exchange to utilize
the services of an FBI-approved Channel Partner, as is common with
other national securities exchanges, including the NYSE.
---------------------------------------------------------------------------
\3\ See IEX Rule 1.180.
\4\ See NYSE Rule 28.
---------------------------------------------------------------------------
[[Page 16171]]
Background and Proposed Rule Change
Section 17(f)(2) of the Act, as amended by the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank
Act''),\5\ provides that every member of a national securities
exchange, broker, dealer, registered transfer agent, registered
clearing agency, registered securities information processors, national
securities exchanges and national securities associations shall require
each of its partners, directors, officers, and employees to be
fingerprinted and submit those fingerprints (or cause the fingerprints
to be submitted) to the Attorney General of the United States
(``Attorney General'') for identification. Section 17(f)(2) explicitly
directs the Attorney General to provide self-regulatory organizations
(``SROs'') designated by the Commission with access to criminal history
record information. Further, SEC Rule 17f-2 authorizes SROs to store
criminal record information received from the FBI, which maintains on
behalf of the Attorney General a database of fingerprint-based criminal
history records.\6\
---------------------------------------------------------------------------
\5\ See 15 U.S.C. 78q(f)(2); Dodd-Frank Act, Public Law 111-203,
929S, 124 Stat. 1376, 1867 (2010).
\6\ See 17 CFR 240.17f-2(d).
---------------------------------------------------------------------------
While existing LTSE Rule 1.180 meets the requirements of section
17(f)(2) of the Act, it contemplates only the use of fingerprint
``cards,'' is not tailored to the Exchange's organizational structure,
and has a substantive error.\7\ Accordingly, the Exchange proposes to
adopt the fingerprinting rule of the NYSE, with minor differences
described below.
---------------------------------------------------------------------------
\7\ The rule was copied verbatim from IEX Rule 1.180, with
changes only to reflect the different names of the exchanges. LTSE
Rule 1.180(c) also erroneously references FINRA as the source of
background information from the fingerprints, instead of the
Attorney General of the United States or his or her designee.
---------------------------------------------------------------------------
Proposed LTSE Rule 1.180(a) would be identical to NYSE Rule 28(a)
with the exception of the phrase ``and its principal subsidiaries.''
This phrase is proposed to be omitted because the Exchange does not
have any subsidiaries; the Exchange is a wholly-owned subsidiary of
LTSE Group. The phrase ``each of'' also would be omitted to make the
first sentence of the proposed rule grammatically correct.
Proposed LTSE Rule 1.180(b) would be identical to NYSE Rule 28(b)
with the exception of the sentence that states ``The Exchange, however,
may provide a subsidiary with access to information from background
checks based on fingerprints obtained from that subsidiary.'' Again,
the Exchange proposes to omit that sentence because it does not have
subsidiaries.
Proposed LTSE Rule 1.180(c) and Supplementary Material .01 would be
identical to NYSE Rule 28(c) and Supplementary Material .10. Finally,
the Exchange proposes to amend the title of Rule 1.180 to be identical
to the title of NYSE Rule 28, which is a more accurate description of
the rule.
In addition, consistent with the practice at NYSE and other
national securities exchanges, the Exchange intends to utilize a Live-
Scan \8\ electronic system to capture and transmit fingerprints
directly to the FBI. The capture and transmittal function, and
corresponding receipt of criminal history information from the FBI,
would be handled directly by Exchange personnel and/or an FBI-approved
``Channel Partner'' \9\ who would maintain and operate, on behalf of
the Exchange, a LiveScan and/or other electronic system(s) for the
submission of fingerprints to the FBI; receive and maintain criminal
history record information from the FBI; and disseminate such
information, through secure systems, to a limited set of approved
reviewing officials within the Exchange. The Exchange believes that
Rule 1.180 allows for the retention of a Channel Partner for these
purposes.
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\8\ Live-Scan refers to the process of capturing fingerprints
directly into a digitized format as opposed to traditional ink and
paper methods. Live-Scan technology captures and transfers images to
a central location and/or interface for identification processing.
\9\ FBI-approved Channel Partners receive the fingerprint
submission and relevant data, collect the associated fee(s),
electronically forward the fingerprint submission with the necessary
information to the FBI Criminal Justice Information Services
Division (``CJIS'') for a national Criminal History Summary check,
and receive the electronic summary check result for dissemination to
the authorized employer entity. See Securities Exchange Act Release
No. 71066 (December 12, 2013), 78 FR 76667 (December 18, 2013) (SR-
ISE-2013-66). The Exchange would retain ultimate legal
responsibility for the fulfillment of its statutory and self-
regulatory obligations under the Act, including compliance with
Section 17(f)(2) of the Act as amended by the Dodd-Frank Act.
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The Exchange believes that the foregoing interpretation is
consistent with the Exchange's authority under Section 17(f)(2) of the
Act, as amended by the Dodd-Frank Act,\10\ which requires, inter alia,
that employees of exchanges be fingerprinted and that exchanges ``shall
submit such fingerprints, or cause the same to be submitted, to the
Attorney General of the United States for identification and
appropriate processing.''
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\10\ See 15 U.S.C. 17(f)(2); Dodd-Frank Act, Public Law 111-203,
929S, 124 Stat. 1376, 1867 (2010).
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The Exchange accordingly believes that under LTSE Rule 1.180 (as
adopted and as proposed) and applicable statutes, the Exchange has the
authority to engage an FBI-approved Channel Partner for some or all of
the fingerprinting processes described in the Rule. Finally, the
Exchange believes that this proposed interpretation would ensure the
Exchange's continued compliance with its Rules and applicable state and
federal law.\11\
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\11\ Access to the FBI's fingerprint-based database of criminal
records is permitted only when authorized by law. Section 17(f)(2)
of the Act explicitly directs the Attorney General to provide SROs
designated by the Commission (e.g., the Exchange) with access to
such criminal history record information. Further, as amended by the
Dodd-Frank Act, Section 17(f)(2) specifically requires, inter alia,
that employees of national securities exchanges be fingerprinted.
New York's General Business Law also requires SROs to fingerprint
employees ``as a condition of employment,'' as well as certain non-
employee service providers. N.Y. Gen. Bus. Law Sec. 359-e
(McKinney).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\12\ in general, and
furthers the objectives of Section 6(b)(5) of the Act,\13\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged
in facilitating transactions in securities, to remove impediments to
and perfect the mechanisms of a free and open market and a national
market system and, in general, to protect investors and the public
interest.
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\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(5).
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Continuing to run fingerprint-based background checks is imperative
for the Exchange, as this process helps to identify persons with
criminal history records who may pose a threat to the safety of
Exchange personnel and/or the security of Exchange facilities and
records. This identification and screening process thus enhances
business continuity, workplace safety, and the security of the
Exchange's operations. The use of an FBI-approved Channel Partner in
some or all phases of this process is consistent with LTSE Rule 1.180
and applicable state and federal law, and in furtherance of the
important objectives described herein. Additionally, the use of a
Channel Partner is consistent with the fingerprinting method currently
employed by other SROs.\14\ For all these
[[Page 16172]]
reasons, the proposal is also designed to protect investors as well as
the public interest.
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\14\ See e.g., NYSE Rule 28; Chicago Board Options Exchange
(``CBOE'') Rule 15.10. See generally Securities Exchange Act Release
No. 76422 (November 10, 2015), 80 FR 71868 (November 17, 2015) (SR-
NYSE-2015-45) (citing Securities Exchange Act Release No. 71066
(December 12, 2013), 78 FR 76667, 76668 n. 12 (December 18, 2013)
(SR-ISE-2013-66) (noting that ``[a]n FBI-approved Channel Partner
simply helps expedite the delivery of Criminal History Summary
information on behalf of the FBI'', and that the ``process for
making a request through an FBI-approved Channel Partner is
consistent with FBI submission procedures'')).
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Additionally, the proposed rule is nearly identical to NYSE Rule 28
\15\ and corrects an erroneous reference to FINRA in LTSE Rule
1.180(c).\16\
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\15\ See supra text accompanying note 4.
\16\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather update its
existing fingerprint rule to match, with only minor differences, NYSE
Rule 28, and to allow the use of an FBI-approved Channel Partner as
described above.\17\
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\17\ See supra text accompanying note 8 [sic].
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay to
permit the Exchange to amend its fingerprinting rule to be accurate,
tailored to the Exchange, and substantially similar to NYSE Rule 28 and
to begin utilizing the services of an FBI-approved Channel Partner as
soon as practicable. The minor differences noted herein do not raise
substantive or novel issues.\22\ Thus the Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest and hereby waives the operative
delay and designates the proposed rule change operative upon
filing.\23\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ See supra Background and Proposed Rule Change.
\23\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-LTSE-2020-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-LTSE-2020-05. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-LTSE-2020-05 and should be submitted on
or before April 10, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05840 Filed 3-19-20; 8:45 am]
BILLING CODE 8011-01-P
