Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules To the List of Minor Rule Violations in Rule 10.9217, 46772-46775 [2020-16710]

Download as PDF 46772 Federal Register / Vol. 85, No. 149 / Monday, August 3, 2020 / Notices F. Rules and Procedures Addressed to Fraudulent or Manipulative Dissemination Not applicable. filing also will be available for website viewing and printing at the principal office of the Plan. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number S7–24–89 and should be submitted on or before August 24, 2020. G. Terms of Access to Transaction Reports Not applicable. By the Commission. J. Matthew DeLesDernier, Assistant Secretary. D. Manner of Consolidation Not applicable. E. Standards and Methods Ensuring Promptness, Accuracy and Completeness of Transaction Reports Not applicable. [FR Doc. 2020–16805 Filed 7–31–20; 8:45 am] H. Identification of Marketplace of Execution Not applicable. BILLING CODE 8011–01–P III. Solicitation of Comments The Commission seeks comments on the Amendment. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed Amendment is consistent with the Act. Comments may be submitted by any of the following methods: khammond on DSKJM1Z7X2PROD with NOTICES 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 S7– 24–89 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 S7–24–89. 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 website (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all written statements with respect to the proposed Amendment that are filed with the Commission, and all written communications relating to the proposed Amendment 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 VerDate Sep<11>2014 20:39 Jul 31, 2020 Jkt 250001 SECURITIES AND EXCHANGE COMMISSION 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose [Release No. 34–89415; File No. SR– NYSEARCA–2020–66] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules To the List of Minor Rule Violations in Rule 10.9217 July 28, 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 July 21, 2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ 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 The Exchange proposes to add the Consolidated Audit Trail (‘‘CAT’’) industry member compliance rules to the list of minor rule violations in Rule 10.9217. The proposed change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. PO 00000 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 Frm 00187 Fmt 4703 Sfmt 4703 The Exchange proposes to add NYSE Arca’s CAT industry member compliance rules (the ‘‘CAT Compliance Rules’’) to the list of minor rule violations in Rule 10.9217. 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 and the filing of the Exchange’s affiliate the New York Stock Exchange LLC (‘‘NYSE’’) to add NYSE’s corresponding CAT Compliance Rules to the list of minor rule violations in NYSE Rule 9217.4 Proposed Rule Change The Exchange recently adopted the CAT Compliance Rules in the Rule 11.6800 Series in order to implement the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).5 The CAT NMS Plan was filed by the Plan Participants to comply with Rule 613 of Regulation NMS under the Exchange Act,6 and each Plan Participant accordingly has adopted the same compliance rules in the Exchange’s Rule 11.6800 Series. The common compliance rules adopted by each Plan Participant are designed to require industry members to comply with the provisions of the CAT NMS Plan, which 4 See Securities Exchange Act Release No. 88870 (May 14, 2020), 85 FR 30768 (May 20, 2020) (SR– FINRA–2020–013); Securities Exchange Act Release No. 89123 (June 23, 2020), 85 FR 39016 (June 29, 2020) (SR–NYSE–2020–51). 5 See Securities Exchange Act Release No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR–NYSEArca–2017–03; SR–NYSEArca-2017–04). 6 17 CFR 242.613. E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 85, No. 149 / Monday, August 3, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 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 10.9217 sets forth the list of rules under which an ETP Holder, OTP Holder, OTP Firm or covered person may be subject to a fine under Rule 10.9216(b). Rule 10.9217 permits the Exchange to impose a fine of up to $5,000 on any ETP Holder, OTP Holder, OTP Firm or covered person for a minor violation of an eligible rule. The Exchange proposes to amend Rule 10.9217 to add the CAT Compliance Rules in the Rule 11.6800 Series to the list of equities and options rules in Rule 10.9217 eligible for disposition pursuant to a minor fine under Rule 10.9216(b).7 The Exchange 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’’).8 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 17d2 Plan, responsibility for common members of multiple other Plan Participants and not a member of FINRA will be allocated among those other Plan Participants, including to the Exchange. For those non-common members who are allocated to NYSE Arca pursuant to the Rule 17d-2 Plan, if any, the Exchange and FINRA entered into a Regulatory Services Agreement (‘‘RSA’’) pursuant to which FINRA will conduct 7 FINRA’s maximum fine for minor rule violations under FINRA Rule 9216(b) is $2,500. Like the NYSE, the Exchange will apply an identical maximum fine amount for eligible violations of the Rule 11.6800 Series to achieve consistency with FINRA and also to amend its minor rule violation plan (‘‘MRVP’’) to include such fines. Like FINRA, the Exchange would be able to pursue a fine greater than $2,500 for violations of the Rule 11.6800 Series in a regular disciplinary proceeding or an acceptance, waiver, and consent (‘‘AWC’’) under the Rule 10.9000 Series 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 9–10, infra. 8 See Securities Exchange Act Release No. 88366 (March 12, 2020), 85 FR 15238 (March 17, 2020) (File No. 4–618). VerDate Sep<11>2014 20:39 Jul 31, 2020 Jkt 250001 surveillance, investigation, examination, and enforcement activity in connection with the CAT Compliance Rules on the Exchange’s behalf (with the exception of such matters once a complaint is filed which in such instance is no longer administered through the MRVP). We expect that the other exchanges would be entering into a similar RSA. In order to achieve consistency with FINRA and the other Plan Participants, the Exchange proposes to adopt fines up to $2,500 in connection with minor rule fines for violations of the CAT Compliance Rules in the Rule 11.6800 Series under Rule 10.9217 and the Exchange’s MRVP. FINRA, in connection with its proposed amendment to FINRA Rule 9217 to make FINRA’s CAT Compliance Rules MRVP eligible, has represented that it will apply the minor fines for CAT Compliance Rules in the same manner that FINRA has for its similar existing audit trail-related rules.9 Accordingly, in order to promote regulatory consistency, the Exchange plans to do the same. Specifically, application of a minor rule 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.10 Upon effectiveness of this rule change, the Exchange will publish a 9 See 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). 10 See id. PO 00000 Frm 00188 Fmt 4703 Sfmt 4703 46773 regulatory bulletin notifying its ETP Holders, OTP Holders, and OTP Firms 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,11 in general, and furthers the objectives of Section 6(b)(5),12 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. Rather, 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 11 15 12 15 E:\FR\FM\03AUN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 03AUN1 46774 Federal Register / Vol. 85, No. 149 / Monday, August 3, 2020 / Notices rule fine for violations of the CAT Compliance Rules in the Rule 11.6800 Series where a more formal disciplinary action may not be warranted or appropriate consistent with the approach of other Plan Participants for the same conduct. In connection with the fine level specified in the proposed rule change, adding language that minor rule fines for violations of the CAT Compliance Rules in the Rule 11.6800 Series shall not exceed $2,500 would further the goal of transparency and add clarity to the Exchange’s rules. Adopting the same cap as FINRA and the NYSE for minor rule fines in connection with the CAT Compliance Rules would also promote regulatory consistency across selfregulatory organizations. The Exchange further believes that the proposed amendments to Rule 10.9217 are consistent with Section 6(b)(6) of the Act,13 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 11.6800 Series 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.14 Rule 10.9217 does not preclude an ETP Holder, OTP Holder, OTP Firm or covered person from contesting an alleged violation and receiving a hearing on the matter with the same procedural rights through a litigated disciplinary proceeding. khammond on DSKJM1Z7X2PROD with NOTICES 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 is concerned solely with making the CAT Compliance Rules in the Rule 11.6800 Series eligible for a minor rule fine disposition, thereby strengthening the Exchange’s ability to carry out its 13 15 14 15 U.S.C. 78f(b)(6). U.S.C. 78f(b)(7) and 78f(d). VerDate Sep<11>2014 20:39 Jul 31, 2020 Jkt 250001 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 No written comments were solicited or received with respect to the proposed rule change. 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 rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2020–66 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–NYSEARCA–2020–66. 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 PO 00000 Frm 00189 Fmt 4703 Sfmt 4703 submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEARCA–2020–66 and should be submitted on or before August 24, 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 exchange.15 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,16 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 17 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,18 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 10.9217 to be consistent with the approach FINRA has taken for minor violations of its corresponding CAT Compliance Rules.19 The Commission has already approved FINRA’s treatment of CAT Compliance Rules violations when it approved the addition of CAT 15 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). 16 15 U.S.C. 78f(b)(5). 17 15 U.S.C. 78f(b)(1) and 78f(b)(6). 18 17 CFR 240.19d–1(c)(2). 19 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. E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 85, No. 149 / Monday, August 3, 2020 / Notices Compliance Rules to FINRA’s MRVP.20 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. For the same reasons discussed above, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,21 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 22 and Rule 19d–1(c)(2) thereunder,23 that the proposed rule change (SR- NYSEARCA– 2020–66) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–16710 Filed 7–31–20; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION National Small Business Development Centers Advisory Board Small Business Administration. ACTION: Notice of open Federal Advisory Committee meeting. khammond on DSKJM1Z7X2PROD with NOTICES AGENCY: 20 See supra note 4. U.S.C. 78s(b)(2). 22 15 U.S.C. 78s(b)(2). 23 17 CFR 240.19d–1(c)(2). 24 17 CFR 200.30–3(a)(12). 21 15 VerDate Sep<11>2014 20:39 Jul 31, 2020 Jkt 250001 The SBA is issuing this notice to announce the date, time and agenda for a meeting of the National Small Business Development Center Advisory Board. The meeting will be open to the public; however, advance notice of attendance is required. DATES: Wednesday, August 12, 2020 at 2:00 p.m. EDT. ADDRESSES: Meeting will be held via Microsoft Teams. FOR FURTHER INFORMATION CONTACT: Alanna Falcone, Office of Small Business Development Centers, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416; alanna.falcone@sba.gov; 202– 619–1612. If anyone wishes to be a listening participant or would like to request accommodations, please contact Alanna Falcone at the information above. SUPPLEMENTARY INFORMATION: Pursuant to section 10(a) of the Federal Advisory Committee Act (5 U.S.C. Appendix 2), the SBA announces the meetings of the National SBDC Advisory Board. This Board provides advice and counsel to the SBA Administrator and Associate Administrator for Small Business Development Centers. SUMMARY: Purpose The purpose of the meeting is to onboard the new members and discuss the following issues pertaining to the SBDC Program: • SBA Briefing • Member Introductions • Annual Meetings • Board Assignments Nicole Nelson, Acting Committee Management Officer. [FR Doc. 2020–16801 Filed 7–31–20; 8:45 am] BILLING CODE P SMALL BUSINESS ADMINISTRATION 504 Debt Refinancing Without Expansion—Borrower’s Contribution for Projects Involving Limited or Single Purpose Buildings During Recession U.S. Small Business Administration. ACTION: Notice. AGENCY: The U.S. Small Business Administration (‘‘SBA’’) is announcing that, due to an economic recession as determined by the National Bureau of Economic Research, Borrowers in the 504 Loan Program may contribute not less than 10%, instead of not less than 15%, to Projects involving limited or special purpose buildings or structures when refinancing debt without SUMMARY: PO 00000 Frm 00190 Fmt 4703 Sfmt 4703 46775 expansion. The lower required contribution will be in effect until the first day of the calendar quarter following the end of the economic recession as determined by the National Bureau of Economic Research or its equivalent. The lower required contribution will apply to applications submitted on or after August 3, 2020. FOR FURTHER INFORMATION CONTACT: Linda Reilly, Chief, 504 Loan Division, (202) 205–9949, linda.reilly@sba.gov. SUPPLEMENTARY INFORMATION: The 504 Loan Program is an SBA business loan program authorized under title V of the Small Business Investment Act of 1958, 15 U.S.C. 695 et seq. The core mission of the 504 Loan Program is to provide long-term financing to small businesses for the purchase or improvement of land, buildings, and major equipment, to promote the creation or retention of jobs and local economic development. Under the 504 Loan Program, loans are provided to small businesses by Certified Development Companies (‘‘CDCs’’), which are certified and regulated by SBA to promote economic development within their community. In general, a project in the 504 Loan Program (a ‘‘504 Project’’) is financed with: A loan obtained from a private sector lender with a senior lien for at least 50% of the project cost (the ‘‘Third Party Loan’’); a loan obtained through a CDC (the ‘‘504 Loan’’) with a junior lien covering up to 40% of the total cost (funded through a 100% SBAguaranteed debenture sold in private pooling transactions); and a contribution from the Borrower of at least 10% equity. However, for 504 Projects that involve limited or special purpose buildings or structures, the Borrower is required to contribute at least 15% equity to the Project. In accordance with 13 CFR 120.882(g), a Project in the 504 Loan Program may also be used to refinance debt where there is no expansion of the small business concern (‘‘Refinancing Without Expansion Project’’). Generally, if the Refinancing Without Expansion Project involves a limited or single purpose building or structure, the Borrower must contribute not less than 15% (excluding administrative costs) of the Project’s costs, unless SBA determines, in its discretion, and publishes in the Federal Register that, due to an economic recession as determined by the National Bureau of Economic Research or its equivalent, Borrowers may contribute not less than 10% of the Project’s costs during the recession. See 13 CFR 120.882(g)(5). DATES: E:\FR\FM\03AUN1.SGM 03AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46772-46775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16710]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89415; File No. SR-NYSEARCA-2020-66]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To Add 
the Consolidated Audit Trail Industry Member Compliance Rules To the 
List of Minor Rule Violations in Rule 10.9217

July 28, 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 July 21, 2020, NYSE Arca, Inc. (``NYSE Arca'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add the Consolidated Audit Trail (``CAT'') 
industry member compliance rules to the list of minor rule violations 
in Rule 10.9217. The proposed change is available on the Exchange's 
website at www.nyse.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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add NYSE Arca's CAT industry member 
compliance rules (the ``CAT Compliance Rules'') to the list of minor 
rule violations in Rule 10.9217. 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 and the filing of the Exchange's 
affiliate the New York Stock Exchange LLC (``NYSE'') to add NYSE's 
corresponding CAT Compliance Rules to the list of minor rule violations 
in NYSE Rule 9217.\4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 88870 (May 14, 
2020), 85 FR 30768 (May 20, 2020) (SR-FINRA-2020-013); Securities 
Exchange Act Release No. 89123 (June 23, 2020), 85 FR 39016 (June 
29, 2020) (SR-NYSE-2020-51).
---------------------------------------------------------------------------

Proposed Rule Change
    The Exchange recently adopted the CAT Compliance Rules in the Rule 
11.6800 Series in order to implement the National Market System Plan 
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or 
``Plan'').\5\ The CAT NMS Plan was filed by the Plan Participants to 
comply with Rule 613 of Regulation NMS under the Exchange Act,\6\ and 
each Plan Participant accordingly has adopted the same compliance rules 
in the Exchange's Rule 11.6800 Series. The common compliance rules 
adopted by each Plan Participant are designed to require industry 
members to comply with the provisions of the CAT NMS Plan, which

[[Page 46773]]

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.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 80256 (March 15, 
2017), 82 FR 14526 (March 21, 2017) (SR-NYSEArca-2017-03; SR-
NYSEArca-2017-04).
    \6\ 17 CFR 242.613.
---------------------------------------------------------------------------

    Rule 10.9217 sets forth the list of rules under which an ETP 
Holder, OTP Holder, OTP Firm or covered person may be subject to a fine 
under Rule 10.9216(b). Rule 10.9217 permits the Exchange to impose a 
fine of up to $5,000 on any ETP Holder, OTP Holder, OTP Firm or covered 
person for a minor violation of an eligible rule. The Exchange proposes 
to amend Rule 10.9217 to add the CAT Compliance Rules in the Rule 
11.6800 Series to the list of equities and options rules in Rule 
10.9217 eligible for disposition pursuant to a minor fine under Rule 
10.9216(b).\7\
---------------------------------------------------------------------------

    \7\ FINRA's maximum fine for minor rule violations under FINRA 
Rule 9216(b) is $2,500. Like the NYSE, the Exchange will apply an 
identical maximum fine amount for eligible violations of the Rule 
11.6800 Series to achieve consistency with FINRA and also to amend 
its minor rule violation plan (``MRVP'') to include such fines. Like 
FINRA, the Exchange would be able to pursue a fine greater than 
$2,500 for violations of the Rule 11.6800 Series in a regular 
disciplinary proceeding or an acceptance, waiver, and consent 
(``AWC'') under the Rule 10.9000 Series 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 9-10, 
infra.
---------------------------------------------------------------------------

    The Exchange 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'').\8\ 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 
and not a member of FINRA will be allocated among those other Plan 
Participants, including to the Exchange. For those non-common members 
who are allocated to NYSE Arca pursuant to the Rule 17d-2 Plan, if any, 
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 (with the exception 
of such matters once a complaint is filed which in such instance is no 
longer administered through the MRVP). We expect that the other 
exchanges would be entering into a similar RSA.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 88366 (March 12, 
2020), 85 FR 15238 (March 17, 2020) (File No. 4-618).
---------------------------------------------------------------------------

    In order to achieve consistency with FINRA and the other Plan 
Participants, the Exchange proposes to adopt fines up to $2,500 in 
connection with minor rule fines for violations of the CAT Compliance 
Rules in the Rule 11.6800 Series under Rule 10.9217 and the Exchange's 
MRVP.
    FINRA, in connection with its proposed amendment to FINRA Rule 9217 
to make FINRA's CAT Compliance Rules MRVP eligible, has represented 
that it will apply the minor fines for CAT Compliance Rules in the same 
manner that FINRA has for its similar existing audit trail-related 
rules.\9\ Accordingly, in order to promote regulatory consistency, the 
Exchange plans to do the same. Specifically, application of a minor 
rule 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:
---------------------------------------------------------------------------

    \9\ See 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).
---------------------------------------------------------------------------

     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.\10\
---------------------------------------------------------------------------

    \10\ See id.
---------------------------------------------------------------------------

    Upon effectiveness of this rule change, the Exchange will publish a 
regulatory bulletin notifying its ETP Holders, OTP Holders, and OTP 
Firms 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,\11\ in general, and furthers the objectives of Section 
6(b)(5),\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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. Rather, 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

[[Page 46774]]

rule fine for violations of the CAT Compliance Rules in the Rule 
11.6800 Series where a more formal disciplinary action may not be 
warranted or appropriate consistent with the approach of other Plan 
Participants for the same conduct.
    In connection with the fine level specified in the proposed rule 
change, adding language that minor rule fines for violations of the CAT 
Compliance Rules in the Rule 11.6800 Series shall not exceed $2,500 
would further the goal of transparency and add clarity to the 
Exchange's rules. Adopting the same cap as FINRA and the NYSE for minor 
rule fines in connection with the CAT Compliance Rules would also 
promote regulatory consistency across self-regulatory organizations.
    The Exchange further believes that the proposed amendments to Rule 
10.9217 are consistent with Section 6(b)(6) of the Act,\13\ 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 11.6800 Series 
pursuant to the Exchange's rules.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    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.\14\ Rule 10.9217 does not preclude an ETP Holder, 
OTP Holder, OTP Firm or covered person from contesting an alleged 
violation and receiving a hearing on the matter with the same 
procedural rights through a litigated disciplinary proceeding.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

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 is concerned 
solely with making the CAT Compliance Rules in the Rule 11.6800 Series 
eligible for a minor rule fine disposition, 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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-NYSEARCA-2020-66 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-NYSEARCA-2020-66. 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-NYSEARCA-2020-66 and should be submitted 
on or before August 24, 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 exchange.\15\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\16\ 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 \17\ 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,\18\ which 
governs minor rule violation plans.
---------------------------------------------------------------------------

    \15\ 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).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \18\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    As stated above, the Exchange proposes to add the CAT Compliance 
Rules to the list of minor rule violations in Rule 10.9217 to be 
consistent with the approach FINRA has taken for minor violations of 
its corresponding CAT Compliance Rules.\19\ The Commission has already 
approved FINRA's treatment of CAT Compliance Rules violations when it 
approved the addition of CAT

[[Page 46775]]

Compliance Rules to FINRA's MRVP.\20\ 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.
---------------------------------------------------------------------------

    \19\ 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.
    \20\ See supra note 4.
---------------------------------------------------------------------------

    For the same reasons discussed above, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\21\ 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\22\ and Rule 19d-1(c)(2) thereunder,\23\ that the proposed rule change 
(SR- NYSEARCA-2020-66) be, and hereby is, approved on an accelerated 
basis.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(2).
    \23\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16710 Filed 7-31-20; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.