Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules to the List of Minor Rule Violations, 39649-39652 [2020-14119]
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Federal Register / Vol. 85, No. 127 / Wednesday, July 1, 2020 / Notices
technical changes which add clarity to
the Rulebook and do not impose a
burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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 30 and Rule 19b–
4(f)(6) thereunder.31
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 32 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 33
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 asked
the Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange states that waiver
of the operative delay would be
consistent with the protection of
investors and the public interest
because it would allow the Exchange to
immediately increase its position and
exercise limits for options on SPY to
those of Cboe, which the Exchange
believes will ensure fair competition
among exchanges and provide
consistency for Nasdaq Participants that
are also members at Cboe where these
increased position and exercise limits
are currently in place. For this reason,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
30 15
U.S.C. 78s(b)(3)(A).
31 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.
32 17 CFR 240.19b–4(f)(6).
33 17 CFR 240.19b–4(f)(6)(iii).
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39649
operative delay and designates the
proposal as operative upon filing.34
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of 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–NASDAQ–2020–033, and
should be submitted on or before July
22, 2020.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
J. Matthew DeLesDernier,
Assistant Secretary.
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–
NASDAQ–2020–033 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–NASDAQ–2020–033. 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
34 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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[FR Doc. 2020–14113 Filed 6–30–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–89155; File No. SR–IEX–
2020–09]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Order Granting Accelerated
Approval of a Proposed Rule Change
To Add the Consolidated Audit Trail
Industry Member Compliance Rules to
the List of Minor Rule Violations
June 25, 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 June 23,
2020, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘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 and
approving the proposal on an
accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
35 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.
4 15 U.S.C. 78s(b)(1).
1 15
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Federal Register / Vol. 85, No. 127 / Wednesday, July 1, 2020 / Notices
4 thereunder,5 IEX proposes to add the
Consolidated Audit Trail (‘‘CAT’’)
industry member compliance rules to
the list of minor rule violations in Rule
9.218. The Exchange requests
accelerated approval and effectiveness
of this filing.
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of 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 of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add IEX’s
CAT industry member compliance rules
(the ‘‘CAT Compliance Rules’’) to the
list of minor rule violations in Rule
9.218.6 This proposal is based upon the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filing to
amend FINRA Rule 9217 in order to add
FINRA’s corresponding CAT
Compliance Rules to FINRA’s list of
rules that are eligible for minor rule
violation plan treatment.7
Proposed Rule Change
The Exchange adopted the CAT
Compliance Rules in the Rule Series
11.600 in order to implement the
National Market System Plan Governing
the Consolidated Audit Trail (the ‘‘CAT
5 17
CFR 240.19b–4.
minor rule violation plan (‘‘MRVP’’) was
declared effective by the Commission on August 3,
2016. See Securities Exchange Act Release No.
78474 (August 3, 2016), 81 FR 52717 (August 9,
2016) (File No. 4–701).
7 See Securities Exchange Act Release No. 88870
(May 14, 2020), 85 FR 30768 (May 20, 2020) (SR–
FINRA–2020–013). The proposal is also based upon
the New York Stock Exchange (‘‘NYSE’’) filing to
amend NYSE Rule 9217 in order to add NYSE’s
corresponding CAT Compliance Rules to NYSE’s
list of rules that are eligible for MRVP treatment.
See SR–NYSE–2020–51.
6 IEX’s
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NMS Plan’’ or ‘‘Plan’’).8 The CAT NMS
Plan was filed by the Plan Participants
to comply with Rule 613 of Regulation
NMS under the Exchange Act,9 and
each Plan Participant accordingly has
adopted the same compliance rules in
the Exchange’s Rule Series 11.600. The
common CAT Compliance Rules
adopted by each Plan Participant are
designed to require industry members to
comply with the provisions of the CAT
NMS Plan, which broadly calls for
industry members to record and report
timely and accurately customer, order,
and trade information relating to
activity in NMS Securities and OTC
Equity Securities.
Rule 9.218 sets forth the list of rules
under which a Member 10 or associated
person may be subject to a fine under
Rule 9.216(b). Rule 9.216(b) permits the
Exchange to impose a fine of up to
$2,500 on any Member or associated
person for a minor violation of an
eligible rule. The Exchange proposes to
amend Rule 9.218 to add the CAT
Compliance Rules in the Rule Series
11.600 to the list of rules in Rule 9.218
eligible for disposition pursuant to a
minor fine under Rule 9.216(b).11
IEX is coordinating with FINRA and
other Plan Participants to promote
harmonized and consistent enforcement
of all the Plan Participants’ CAT
Compliance Rules. The Commission
recently approved a Rule 17d–2 Plan
under which the regulation of CAT
Compliance Rules will be allocated
among Plan Participants to reduce
regulatory duplication for industry
members that are members of more than
one Participant (‘‘common members’’).12
Under the Rule 17d–2 Plan, the
regulation of CAT Compliance Rules
with respect to common members that
are members of FINRA is allocated to
FINRA. Similarly, under the Rule 17d–
2 Plan, responsibility for common
members of multiple other Plan
8 See Securities Exchange Act Release No. 80256
(March 15, 2017), 82 FR 14526 (March 21, 2017).
9 17 CFR 242.613.
10 See Rule 1.160(s).
11 FINRA’s maximum fine for minor rule
violations under FINRA Rule 9216(b) is also $2,500.
Like FINRA, the Exchange, or FINRA on its behalf,
would be able to pursue a fine greater than $2,500
for violations of the Rule Series 11.600 in a regular
disciplinary proceeding or an acceptance, waiver,
and consent (‘‘AWC’’) under Chapter 9 of the IEX
Rule Book, as appropriate. Any fine imposed in
excess of $2,500 or not otherwise covered by Rule
19d–1(c)(2) of the Act would be subject to prompt
notice to the Commission pursuant to Rule 19d–1
under the Act. As noted below, in assessing the
appropriateness of a minor rule fine with respect to
CAT Compliance Rules, the Exchange will be
guided by the same factors that FINRA utilizes. See
text accompanying notes 13–14, infra.
12 See Securities Exchange Act Release No. 88366
(March 12, 2020), 85 FR 15238 (March 17, 2020)
(File No. 4–618).
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Participants that are not members of
FINRA will be allocated among those
other Plan Participants, including to the
Exchange. For those non-common
members who are allocated to IEX
pursuant to the Rule 17d–2 Plan, the
Exchange and FINRA entered into a
Regulatory Services Agreement (‘‘RSA’’)
pursuant to which FINRA will conduct
surveillance, investigation, examination,
and enforcement activity in connection
with the CAT Compliance Rules on the
Exchange’s behalf. IEX understands that
the other exchanges entered into similar
RSAs with FINRA.
FINRA, in connection with its
amendment to FINRA Rule 9217 to
make FINRA’s CAT Compliance Rules
MRVP eligible, represented that it will
apply MRVP fines for CAT Compliance
Rules in the same manner that FINRA
has for its similar existing audit trailrelated rules.13 Accordingly, in order to
promote regulatory consistency, the
Exchange, and FINRA acting on behalf
of the Exchange, plan to do the same.
Specifically, application of a MRVP fine
with respect to CAT Compliance Rules
will be guided by the same factors that
FINRA referenced in its filing. However,
more formal disciplinary proceedings
may be warranted instead of minor rule
dispositions in certain circumstances
such as where violations prevent
regulatory users of the CAT from
performing their regulatory functions.
Where minor rule dispositions are
appropriate, the following factors help
guide the determination of fine
amounts:
• Total number of reports that are not
submitted or submitted late;
• The timeframe over which the
violations occur;
• Whether violations are batched;
• Whether the violations are the
result of the actions of one individual or
the result of faulty systems or
procedures;
• Whether the firm has taken
remedial measures to correct the
violations;
• Prior minor rule violations within
the past 24 months;
• Collateral effects that the failure has
on customers; and
• Collateral effects that the failure has
on the Exchange’s ability to perform its
regulatory function.14
Upon effectiveness of this rule
change, the Exchange will publish a
regulatory bulletin notifying its
13 See Securities Exchange Act Release No. 88870
(May 14, 2020), 85 FR 30768, 30768–69 (May 20,
2020) (SR–FINRA–2020–013); see also FINRA
Notice to Members 04–19 (March 2004) (providing
specific factors used to inform dispositions for
violations of OATS reporting rules).
14 See supra note 13.
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Federal Register / Vol. 85, No. 127 / Wednesday, July 1, 2020 / Notices
Members of the rule change and the
specific factors that will be considered
in connection with assessing minor rule
fines described above.
For the foregoing reasons, the
Exchange believes that the proposed
rule change will result in a coordinated,
harmonized approach to CAT
compliance rule enforcement across
Plan Participants that will be consistent
with the approach FINRA has taken
with the CAT rules.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,15 in general, and furthers the
objectives of Section 6(b)(5),16 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
Minor rule fines provide a meaningful
sanction for minor or technical
violations of rules when the conduct at
issue does not warrant stronger,
immediately reportable disciplinary
sanctions. The inclusion of a rule in the
Exchange’s MRVP does not minimize
the importance of compliance with the
rule, nor does it preclude the Exchange
from choosing to pursue violations of
eligible rules through an AWC if the
nature of the violations or prior
disciplinary history warrants more
significant sanctions. Rather, the
Exchange believes that the proposed
rule change will strengthen the
Exchange’s ability to carry out its
oversight and enforcement
responsibilities in cases where full
disciplinary proceedings are
unwarranted in view of the minor
nature of the particular violation. Thus,
the option to impose a minor rule
sanction gives the Exchange additional
flexibility to administer its enforcement
program in the most effective and
efficient manner while still fully
meeting the Exchange’s remedial
objectives in addressing violative
conduct. Specifically, the proposed rule
change is designed to prevent
fraudulent and manipulative acts and
practices because it will provide the
Exchange the ability to issue a minor
rule fine for violations of the CAT
Compliance Rules in the Rule Series
15 15
16 15
11.600 where a more formal disciplinary
action may not be warranted or
appropriate consistent with the
approach of other Plan Participants for
the same conduct, and thereby promote
regulatory consistency across selfregulatory organizations
The Exchange further believes that the
proposed changes to Rule 9.218 are
consistent with Section 6(b)(6) of the
Act,17 which provides that members and
persons associated with members shall
be appropriately disciplined for
violation of the provisions of the rules
of the exchange, by expulsion,
suspension, limitation of activities,
functions, and operations, fine, censure,
being suspended or barred from being
associated with a member, or any other
fitting sanction. As noted, the proposed
rule change would provide the
Exchange ability to sanction minor or
technical violations of the Rule Series
11.600 pursuant to the Exchange’s rules.
Finally, the Exchange also believes
that the proposed changes are designed
to provide a fair procedure for the
disciplining of members and persons
associated with members, consistent
with Sections 6(b)(7) and 6(d) of the
Act.18 Rule 9.216 does not preclude a
Member or associated person from
contesting an alleged violation and
receiving a hearing on the matter with
the same procedural rights through a
litigated disciplinary proceeding.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues but rather is
concerned solely with making the CAT
Compliance Rules in the Rule Series
11.600 eligible for disposition pursuant
to a MRVP, thereby strengthening the
Exchange’s ability to carry out its
oversight and enforcement functions
and deter potential violative conduct.
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. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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17 15
18 15
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U.S.C. 78f(b)(6).
U.S.C. 78f(b)(7) and 78f(d).
Frm 00133
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39651
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 rule-comments@
sec.gov. Please include File Number SR–
IEX–2020–09 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–IEX–2020–09. 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–IEX–2020–09 and should
be submitted on or before July 22, 2020.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
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Federal Register / Vol. 85, No. 127 / Wednesday, July 1, 2020 / Notices
exchange.19 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,20 which requires that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments and to
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act 21 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
Commission and Exchange rules.
Finally, the Commission finds that the
proposal is consistent with the public
interest, the protection of investors, or
otherwise in furtherance of the purposes
of the Act, as required by Rule 19d–
1(c)(2) under the Act,22 which governs
minor rule violation plans.
As stated above, the Exchange
proposes to add the CAT Compliance
Rules to the list of minor rule violations
in Rule 9.218 to be consistent with the
approach FINRA has taken for minor
violations of its corresponding CAT
Compliance Rules.23 The Commission
has already approved FINRA’s treatment
of CAT Compliance Rules violations
when it approved the addition of CAT
Compliance Rules to FINRA’s MRVP.24
As noted in that order, and similarly
herein, the Commission believes that
Exchange’s treatment of CAT
Compliance Rules violations as part of
its MRVP provides a reasonable means
of addressing violations that do not rise
to the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. However, the
Commission expects that, as with
FINRA, the Exchange will continue to
conduct surveillance with due diligence
19 In
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78f(b)(1) and 78f(b)(6).
22 17 CFR 240.19d–1(c)(2).
23 As discussed above, the Exchange has entered
into a Rule 17d–2 Plan and an RSA with FINRA
with respect to the CAT Compliance Rules. The
Commission notes that, unless relieved by the
Commission of its responsibility, as may be the case
under the Rule 17d–2 Plan, the Exchange continues
to bear the responsibility for self-regulatory conduct
and liability for self-regulatory failures, not the selfregulatory organization retained to perform
regulatory functions on the Exchange’s behalf
pursuant to an RSA. See Securities Exchange
Release No. 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (SR–BATS–2009–031), note 93
and accompanying text.
24 See supra note 7.
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and make determinations based on its
findings, on a case-by-case basis,
regarding whether a sanction under the
rule is appropriate, or whether a
violation requires formal disciplinary
action. Accordingly, the Commission
believes the proposal raises no novel or
significant issues.
For the same reasons discussed above,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,25 for approving the proposed rule
change prior to the thirtieth day after
the date of publication of the notice of
the filing thereof in the Federal
Register. The proposal merely adds the
CAT Compliance Rules to the
Exchange’s MRVP and harmonizes its
application with FINRA’s application of
CAT Compliance Rules under its own
MRVP. Accordingly, the Commission
believes that a full notice-and-comment
period is not necessary before approving
the proposal.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 26 and Rule
19d–1(c)(2) thereunder,27 that the
proposed rule change (SR–IEX–2020–
09) be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–14119 Filed 6–30–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33913; File No. 812–15072]
Conversus StepStone Private Markets,
et al.
June 25, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
under section 17(d) of the Investment
Company Act of 1940 (the ‘‘Act’’) and
rule 17d–1 under the Act to permit
certain joint transactions otherwise
prohibited by section 17(d) of the Act
and rule 17d–1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
closed-end management investment
PO 00000
25 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
27 17 CFR 240.19d–1(c)(2).
28 17 CFR 200.30–3(a)(12).
26 15
Frm 00134
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companies to co-invest in portfolio
companies with each other and with
affiliated investment funds.
APPLICANTS: Conversus StepStone
Private Markets (‘‘Conversus Fund’’ or
the ‘‘Existing Regulated Entity’’);
StepStone Conversus LLC (‘‘StepStone
Conversus’’); StepStone Group LP
(‘‘StepStone Group’’); 2006 CoInvestment Portfolio, L.P., 2007 CoInvestment Portfolio, L.P., 2008 CoInvestment Portfolio, L.P., Asia
Enterprise II Offshore L.P., Asia
Enterprise II Onshore LLC, Capitol
Private Opportunities II (Parallel) LP,
Capitol Private Opportunities II LP,
Capitol Private Opportunities III
(Parallel) LP, Capitol Private
Opportunities III LP, Capitol Private
Opportunities LP, CGR/PE, LLC, Europe
Enterprise II Offshore, L.P., Europe
Enterprise II Offshore, L.P., Europe
Enterprise III Offshore L.P., Europe
Enterprise III Onshore L.P., Latin
America Opportunities (Delaware) L.P.,
Latin America Opportunities L.P.,
Lexington C/RE, LLC, Masters IV
Cayman Holdings, L.P., MBKP North
Asian Opportunities Partners Offshore
L.P., Mezzanine Co-Investment
Portfolio, L.P., NYSCRF Pioneer
Opportunities Fund A, L.P., NYSCRF
Pioneer Partnership Fund B, L.P.,
Pegasus Multi-Strategy Series (A) LP,
Real Estate Domestic Partnership Fund
I, L.P., Real Estate Global Partnership
Fund II, L.P., Real Estate International
Partnership Fund I, L.P., Silverstone I,
LLC, Silverstone II, LLC—Series A,
Silverstone II, LLC—Series B,
Silverstone II, LLC—Series C,
Silverstone II, LLC—Series D,
Silverstone II, LLC—Series E,
Silverstone II, LLC—Series F,
Silverstone II, LLC—Series G,
Silverstone II, LLC—Series H,
Silverstone II, LLC—Series I, Silverstone
II, LLC—Series J, Silverstone II, LLC—
Series K (Class 1), Silverstone II, LLC—
Series K (Class 2), Silverstone III, L.P.,
SIMA Private Equity 6 GmbH & Co. KG,
SRE Care—Investco, L.P., SRE Colt
Devco—Investco, L.P., SRE Colt Opco—
Investco, L.P., SRE Curator—Investco,
L.P., SRE Curator-TS, LP, SRE Encore—
Investco, L.P., SRE Freyja—Investco,
L.P., SRE Hasso—Investco, L.P., SRE
Magnesia—Investco, L.P., SRE Maple
Direct Investco, LP, SRE Maple REIT
Investco, LP, SRE Panther—Investco,
L.P., SRE Preservation—Investco, L.P.,
SRE Ripple—Investco LP, SRE Stern
Debt—Investco, L.P., SRE Stern
Equity—Investco, L.P., SREP III COLT
OPCO REIT, LLC, SREP III Flight—
Investco, L.P., StepStone A
Opportunities Fund, L.P., StepStone
Aegon Opportunities Fund, LP.—Series
E:\FR\FM\01JYN1.SGM
01JYN1
]]>Agencies
[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
[Notices]
[Pages 39649-39652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14119]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89155; File No. SR-IEX-2020-09]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Order Granting Accelerated Approval of a Proposed Rule
Change To Add the Consolidated Audit Trail Industry Member Compliance
Rules to the List of Minor Rule Violations
June 25, 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 June 23, 2020, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``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 and
approving the proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\4\
and Rule 19b-
[[Page 39650]]
4 thereunder,\5\ IEX proposes to add the Consolidated Audit Trail
(``CAT'') industry member compliance rules to the list of minor rule
violations in Rule 9.218. The Exchange requests accelerated approval
and effectiveness of this filing.
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
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The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of 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 of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add IEX's CAT industry member compliance
rules (the ``CAT Compliance Rules'') to the list of minor rule
violations in Rule 9.218.\6\ This proposal is based upon the Financial
Industry Regulatory Authority, Inc. (``FINRA'') filing to amend FINRA
Rule 9217 in order to add FINRA's corresponding CAT Compliance Rules to
FINRA's list of rules that are eligible for minor rule violation plan
treatment.\7\
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\6\ IEX's minor rule violation plan (``MRVP'') was declared
effective by the Commission on August 3, 2016. See Securities
Exchange Act Release No. 78474 (August 3, 2016), 81 FR 52717 (August
9, 2016) (File No. 4-701).
\7\ See Securities Exchange Act Release No. 88870 (May 14,
2020), 85 FR 30768 (May 20, 2020) (SR-FINRA-2020-013). The proposal
is also based upon the New York Stock Exchange (``NYSE'') filing to
amend NYSE Rule 9217 in order to add NYSE's corresponding CAT
Compliance Rules to NYSE's list of rules that are eligible for MRVP
treatment. See SR-NYSE-2020-51.
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Proposed Rule Change
The Exchange adopted the CAT Compliance Rules in the Rule Series
11.600 in order to implement the National Market System Plan Governing
the Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'').\8\ The
CAT NMS Plan was filed by the Plan Participants to comply with Rule 613
of Regulation NMS under the Exchange Act,\9\ and each Plan Participant
accordingly has adopted the same compliance rules in the Exchange's
Rule Series 11.600. The common CAT Compliance Rules adopted by each
Plan Participant are designed to require industry members to comply
with the provisions of the CAT NMS Plan, which broadly calls for
industry members to record and report timely and accurately customer,
order, and trade information relating to activity in NMS Securities and
OTC Equity Securities.
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\8\ See Securities Exchange Act Release No. 80256 (March 15,
2017), 82 FR 14526 (March 21, 2017).
\9\ 17 CFR 242.613.
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Rule 9.218 sets forth the list of rules under which a Member \10\
or associated person may be subject to a fine under Rule 9.216(b). Rule
9.216(b) permits the Exchange to impose a fine of up to $2,500 on any
Member or associated person for a minor violation of an eligible rule.
The Exchange proposes to amend Rule 9.218 to add the CAT Compliance
Rules in the Rule Series 11.600 to the list of rules in Rule 9.218
eligible for disposition pursuant to a minor fine under Rule
9.216(b).\11\
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\10\ See Rule 1.160(s).
\11\ FINRA's maximum fine for minor rule violations under FINRA
Rule 9216(b) is also $2,500. Like FINRA, the Exchange, or FINRA on
its behalf, would be able to pursue a fine greater than $2,500 for
violations of the Rule Series 11.600 in a regular disciplinary
proceeding or an acceptance, waiver, and consent (``AWC'') under
Chapter 9 of the IEX Rule Book, as appropriate. Any fine imposed in
excess of $2,500 or not otherwise covered by Rule 19d-1(c)(2) of the
Act would be subject to prompt notice to the Commission pursuant to
Rule 19d-1 under the Act. As noted below, in assessing the
appropriateness of a minor rule fine with respect to CAT Compliance
Rules, the Exchange will be guided by the same factors that FINRA
utilizes. See text accompanying notes 13-14, infra.
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IEX is coordinating with FINRA and other Plan Participants to
promote harmonized and consistent enforcement of all the Plan
Participants' CAT Compliance Rules. The Commission recently approved a
Rule 17d-2 Plan under which the regulation of CAT Compliance Rules will
be allocated among Plan Participants to reduce regulatory duplication
for industry members that are members of more than one Participant
(``common members'').\12\ Under the Rule 17d-2 Plan, the regulation of
CAT Compliance Rules with respect to common members that are members of
FINRA is allocated to FINRA. Similarly, under the Rule 17d-2 Plan,
responsibility for common members of multiple other Plan Participants
that are not members of FINRA will be allocated among those other Plan
Participants, including to the Exchange. For those non-common members
who are allocated to IEX pursuant to the Rule 17d-2 Plan, the Exchange
and FINRA entered into a Regulatory Services Agreement (``RSA'')
pursuant to which FINRA will conduct surveillance, investigation,
examination, and enforcement activity in connection with the CAT
Compliance Rules on the Exchange's behalf. IEX understands that the
other exchanges entered into similar RSAs with FINRA.
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\12\ See Securities Exchange Act Release No. 88366 (March 12,
2020), 85 FR 15238 (March 17, 2020) (File No. 4-618).
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FINRA, in connection with its amendment to FINRA Rule 9217 to make
FINRA's CAT Compliance Rules MRVP eligible, represented that it will
apply MRVP fines for CAT Compliance Rules in the same manner that FINRA
has for its similar existing audit trail-related rules.\13\
Accordingly, in order to promote regulatory consistency, the Exchange,
and FINRA acting on behalf of the Exchange, plan to do the same.
Specifically, application of a MRVP fine with respect to CAT Compliance
Rules will be guided by the same factors that FINRA referenced in its
filing. However, more formal disciplinary proceedings may be warranted
instead of minor rule dispositions in certain circumstances such as
where violations prevent regulatory users of the CAT from performing
their regulatory functions. Where minor rule dispositions are
appropriate, the following factors help guide the determination of fine
amounts:
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\13\ See Securities Exchange Act Release No. 88870 (May 14,
2020), 85 FR 30768, 30768-69 (May 20, 2020) (SR-FINRA-2020-013); see
also FINRA Notice to Members 04-19 (March 2004) (providing specific
factors used to inform dispositions for violations of OATS reporting
rules).
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Total number of reports that are not submitted or
submitted late;
The timeframe over which the violations occur;
Whether violations are batched;
Whether the violations are the result of the actions of
one individual or the result of faulty systems or procedures;
Whether the firm has taken remedial measures to correct
the violations;
Prior minor rule violations within the past 24 months;
Collateral effects that the failure has on customers; and
Collateral effects that the failure has on the Exchange's
ability to perform its regulatory function.\14\
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\14\ See supra note 13.
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Upon effectiveness of this rule change, the Exchange will publish a
regulatory bulletin notifying its
[[Page 39651]]
Members of the rule change and the specific factors that will be
considered in connection with assessing minor rule fines described
above.
For the foregoing reasons, the Exchange believes that the proposed
rule change will result in a coordinated, harmonized approach to CAT
compliance rule enforcement across Plan Participants that will be
consistent with the approach FINRA has taken with the CAT rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\15\ in general, and furthers the objectives of Section
6(b)(5),\16\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to, and perfect the mechanism 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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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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Minor rule fines provide a meaningful sanction for minor or
technical violations of rules when the conduct at issue does not
warrant stronger, immediately reportable disciplinary sanctions. The
inclusion of a rule in the Exchange's MRVP does not minimize the
importance of compliance with the rule, nor does it preclude the
Exchange from choosing to pursue violations of eligible rules through
an AWC if the nature of the violations or prior disciplinary history
warrants more significant sanctions. Rather, the Exchange believes that
the proposed rule change will strengthen the Exchange's ability to
carry out its oversight and enforcement responsibilities in cases where
full disciplinary proceedings are unwarranted in view of the minor
nature of the particular violation. Thus, the option to impose a minor
rule sanction gives the Exchange additional flexibility to administer
its enforcement program in the most effective and efficient manner
while still fully meeting the Exchange's remedial objectives in
addressing violative conduct. Specifically, the proposed rule change is
designed to prevent fraudulent and manipulative acts and practices
because it will provide the Exchange the ability to issue a minor rule
fine for violations of the CAT Compliance Rules in the Rule Series
11.600 where a more formal disciplinary action may not be warranted or
appropriate consistent with the approach of other Plan Participants for
the same conduct, and thereby promote regulatory consistency across
self-regulatory organizations
The Exchange further believes that the proposed changes to Rule
9.218 are consistent with Section 6(b)(6) of the Act,\17\ which
provides that members and persons associated with members shall be
appropriately disciplined for violation of the provisions of the rules
of the exchange, by expulsion, suspension, limitation of activities,
functions, and operations, fine, censure, being suspended or barred
from being associated with a member, or any other fitting sanction. As
noted, the proposed rule change would provide the Exchange ability to
sanction minor or technical violations of the Rule Series 11.600
pursuant to the Exchange's rules.
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\17\ 15 U.S.C. 78f(b)(6).
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Finally, the Exchange also believes that the proposed changes are
designed to provide a fair procedure for the disciplining of members
and persons associated with members, consistent with Sections 6(b)(7)
and 6(d) of the Act.\18\ Rule 9.216 does not preclude a Member or
associated person from contesting an alleged violation and receiving a
hearing on the matter with the same procedural rights through a
litigated disciplinary proceeding.
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\18\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
intended to address competitive issues but rather is concerned solely
with making the CAT Compliance Rules in the Rule Series 11.600 eligible
for disposition pursuant to a MRVP, thereby strengthening the
Exchange's ability to carry out its oversight and enforcement functions
and deter potential violative conduct.
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. 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-IEX-2020-09 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-IEX-2020-09. 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-IEX-2020-09 and should be submitted on
or before July 22, 2020.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities
[[Page 39652]]
exchange.\19\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\20\ which
requires that the rules of an exchange be designed to promote just and
equitable principles of trade, to remove impediments and to perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. The
Commission also believes that the proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act \21\ which require that the rules of an
exchange enforce compliance with, and provide appropriate discipline
for, violations of Commission and Exchange rules. Finally, the
Commission finds that the proposal is consistent with the public
interest, the protection of investors, or otherwise in furtherance of
the purposes of the Act, as required by Rule 19d-1(c)(2) under the
Act,\22\ which governs minor rule violation plans.
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\19\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\20\ 15 U.S.C. 78f(b)(5).
\21\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\22\ 17 CFR 240.19d-1(c)(2).
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As stated above, the Exchange proposes to add the CAT Compliance
Rules to the list of minor rule violations in Rule 9.218 to be
consistent with the approach FINRA has taken for minor violations of
its corresponding CAT Compliance Rules.\23\ The Commission has already
approved FINRA's treatment of CAT Compliance Rules violations when it
approved the addition of CAT Compliance Rules to FINRA's MRVP.\24\ As
noted in that order, and similarly herein, the Commission believes that
Exchange's treatment of CAT Compliance Rules violations as part of its
MRVP provides a reasonable means of addressing violations that do not
rise to the level of requiring formal disciplinary proceedings, while
providing greater flexibility in handling certain violations. However,
the Commission expects that, as with FINRA, the Exchange will continue
to conduct surveillance with due diligence and make determinations
based on its findings, on a case-by-case basis, regarding whether a
sanction under the rule is appropriate, or whether a violation requires
formal disciplinary action. Accordingly, the Commission believes the
proposal raises no novel or significant issues.
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\23\ As discussed above, the Exchange has entered into a Rule
17d-2 Plan and an RSA with FINRA with respect to the CAT Compliance
Rules. The Commission notes that, unless relieved by the Commission
of its responsibility, as may be the case under the Rule 17d-2 Plan,
the Exchange continues to bear the responsibility for self-
regulatory conduct and liability for self-regulatory failures, not
the self-regulatory organization retained to perform regulatory
functions on the Exchange's behalf pursuant to an RSA. See
Securities Exchange Release No. 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (SR-BATS-2009-031), note 93 and accompanying
text.
\24\ See supra note 7.
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For the same reasons discussed above, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\25\ for approving the
proposed rule change prior to the thirtieth day after the date of
publication of the notice of the filing thereof in the Federal
Register. The proposal merely adds the CAT Compliance Rules to the
Exchange's MRVP and harmonizes its application with FINRA's application
of CAT Compliance Rules under its own MRVP. Accordingly, the Commission
believes that a full notice-and-comment period is not necessary before
approving the proposal.
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\25\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\26\ and Rule 19d-1(c)(2) thereunder,\27\ that the proposed rule change
(SR-IEX-2020-09) be, and hereby is, approved on an accelerated basis.
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\26\ 15 U.S.C. 78s(b)(2).
\27\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14119 Filed 6-30-20; 8:45 am]
BILLING CODE 8011-01-P
