Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Shorten the Time Period Before a Letter of Acceptance, Waiver, and Consent Under Rule 10.9216 and an Uncontested Offer of Settlement Under Rule 10.9270(f), 81537-81540 [2020-27595]
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Federal Register / Vol. 85, No. 242 / Wednesday, December 16, 2020 / Notices
Makers to continue to direct trading
interest (particularly Market Maker
posted interest) to the Exchange,
provide liquidity, and attract order flow.
To the extent that this purpose is
achieved, all the Exchange’s market
participants should benefit from the
improved market quality and increased
opportunities for price improvement.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar Market
Maker posting credits, by encouraging
additional orders to be sent to the
Exchange for execution.
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. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 20 of the Act and
subparagraph (f)(2) of Rule 19b–4 21
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such 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
under Section 19(b)(2)(B) 22 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
khammond on DSKJM1Z7X2PROD with NOTICES
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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2020–109 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–2020–109. 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–2020–109, and
should be submitted on or before
January 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27598 Filed 12–15–20; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
22 15 U.S.C. 78s(b)(2)(B).
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90624; File No. SR–
NYSENAT–2020–36]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Shorten the Time
Period Before a Letter of Acceptance,
Waiver, and Consent Under Rule
10.9216 and an Uncontested Offer of
Settlement Under Rule 10.9270(f)
December 10, 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 December
3, 2020, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to shorten the
time period before a letter of acceptance,
waiver, and consent under Rule 10.9216
and an uncontested offer of settlement
under Rule 10.9270(f) becomes final and
the corresponding time period to
request review of these settlements
under Rule 10.9310 from 25 days to 10
days. The proposed rule 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.
20 15
1 15
21 17
2 15
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81537
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to shorten the
time period before a letter of acceptance,
waiver, and consent (‘‘AWC’’) under
Rule 10.9216 and an uncontested offer
of settlement under Rule 10.9270(f)
becomes final and the corresponding
time period to request review of these
settlements under Rule 10.9310 from 25
days to 10 days.
In 2018, NYSE National adopted
disciplinary rules that are, with certain
exceptions, substantially the same as the
FINRA Rule 8000 Series and Rule 9000
Series, and which set forth rules for
conducting investigations and
enforcement actions.4 In adopting
disciplinary rules modeled on FINRA’s
rules, the Exchange established
processes for settling disciplinary
matters both before and after issuance of
a complaint.5 As adopted, Rules
10.9216, 10.9270 and 10.9310 permit a
Director and any member of the
Committee for Review (‘‘CFR’’) to
require a review by the Board of any
AWC letter under Rule 10.9216 and any
offer of settlement under Rule 10.9270
within 25 days after the AWC letter or
offer of settlement was sent to each
Director and each member of the CFR.
Proposed Rule Change
Rule 10.9216 (Acceptance, Waiver,
and Consent; Procedure for Imposition
of Fines for Minor Violation(s) of Rules)
establishes AWC procedures by which a
ETP Holder or Associated Person, prior
to the issuance of a complaint, may
execute a letter accepting a finding of
violation, consenting to the imposition
of sanctions, and agreeing to waive such
ETP Holder’s or Associated Person’s
right to a hearing, appeal and certain
other procedures. The rule also
establishes procedures for executing a
minor rule violation plan letter.
Under Rule 10.9216(a)(4), an AWC
accepted by the Chief Regulatory Officer
(‘‘CRO’’) must be sent to each Director
and each member of the CFR and would
be deemed final and constitute the
complaint, answer, and decision in the
matter 25 days after being sent to each
Director and each member of the CFR,
unless review by the Exchange Board of
Directors is requested pursuant to Rule
10.9310(a)(1)(B).6
4 See Securities Exchange Act Release No. 34–
83289 (May 17, 2018), 83 FR 23968 (May 23, 2018)
(SR–NYSENAT–2018–02) (‘‘Approval Order’’).
5 See Approval Order, 83 FR at 23973.
6 Requests for review of an AWC accepted by the
CRO are governed by Rule 10.9310(a)(1)(B)(i). For
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The Exchange proposes that an AWC
accepted by the CRO would be deemed
final and constitute the complaint,
answer, and decision in a matter 10
days after being sent to each Director
and each member of the CFR, unless
review is requested pursuant to Rule
10.9310(a)(1)(B)(i). As described below,
the time period to request review under
Rule 10.9310(a)(1)(B)(i) would also be
shortened to 10 days.
Rule 10.9270 (Settlement Procedure)
provides a settlement procedure for a
Respondent who has been notified of
the initiation of a proceeding.
Specifically, Rule 10.9270(f) provides
that uncontested settlement offers
accepted by the CRO, the Hearing Panel
or, if applicable, Extended Hearing
Panel must be issued and sent to each
Director and each member of the CFR
and becomes final 25 days after being
sent to each Director and each member
of the CFR, unless review by the
Exchange Board of Directors is
requested pursuant to Rule
10.9310(a)(1).
The Exchange proposes that
uncontested settlement offers accepted
by the CRO, the Hearing Panel or, if
applicable, Extended Hearing Panel
(together, a ‘‘Panel’’) under Rule
10.9270(f) would become final 10 days
after being sent to each Director and
each member of the CFR, unless review
by the Exchange Board of Directors is
requested pursuant to Rule
10.9310(a)(1). As noted, the time to
request review of an uncontested
settlement under Rule 10.9310(a)(1)
would also be shortened to 10 days.
Finally, under Rule
10.9310(a)(1)(B)(i), any Director and any
member of the CFR may require a
review by the Board of any
determination or penalty, or both,
imposed in connection with an AWC
letter under Rule 10.9216 or an offer of
settlement determined to be
uncontested before a hearing on the
merits has begun under Rule 10.9270(f),
except that none of those persons could
request Board review of a determination
or penalty concerning an affiliate of the
Exchange as such term is defined in
Rule 12b–2 under the Exchange Act. A
request for review under this provision
is made by filing with the Secretary of
the Exchange a written request stating
the basis and reasons for such review,
within 25 days after an AWC letter or an
offer of settlement has been sent to each
Director and each member of the CFR
the sake of clarity and transparency, the Exchange
proposes the non-substantive change of including
the omitted reference to subsection (B)(i) of Rule
10.9310(a)(1) in both in the current and proposed
text of Rule 10.9216(a)(4).
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pursuant to Rule 10.9216(a)(4) or Rule
10.9270(f)(3).
To permit AWC letters and
uncontested settlements to become final
within 10 days as proposed, the
Exchange would amend Rule
10.9310(a)(1)(B)(i) to provide that a
request for review of these settlements
as permitted by the rule must be made
by filing the requisite written request
with the Secretary of the Exchange
within 10 days after the AWC letter or
an offer of settlement is sent to each
Director and each member of the CFR
pursuant to Rule 10.9216(a)(4) or Rule
10.9270(f)(3).7
The Exchange believes maintaining a
25 day waiting period for negotiated
settlements under Rule 10.9216 and
uncontested settlements pursuant to
10.9270(f) unnecessarily delays final
resolution of matters that have been
resolved by the parties and accepted by
the CRO or a Panel. Shortening the
waiting period to 10 days, and requiring
requests for Board of Directors review to
be made within that same 10 day
period, would significantly expedite the
settlement process in situations where
ETP Holders, Associated Persons and
Respondents have entered into a
consensual, negotiated settlement with
Enforcement or made settlement offers
that Enforcement does not oppose,
while continuing to ensure the
independence and integrity of the
regulatory process by preserving the
ability of Directors and CFR members to
call those settlements for review.
Further, the Exchange believes that
the proposed 10 day period to call a
settlement for review under Rule
10.9310(a)(1)(B)(i) is reasonable and
sufficient. Like the current 25 day
period, the time to call a settlement for
review would begin when the AWC or
uncontested settlement is sent to each
Director and member of the CFR. Rules
10.9216 and 10.9270 specify that an
AWC or uncontested settlement
accepted by the CRO or a Panel can be
sent to each Director and each CFR
member via courier, express delivery or
electronic means. As a practical matter,
7 The time period for requesting review pursuant
to Rule 10.9310(a)(1)(B)(ii) of any rejection by the
CRO of any AWC letter under Rule 10.9216 or of
an uncontested offer of settlement under Rule
10.9270(f), would remain unchanged as would the
time period to request for review of any
determination or penalty, or both, imposed by a
Panel under the Rule 10.9310(a)(1)(A) other than an
offer of settlement determined to be uncontested
after a hearing on the merits have begun under Rule
10.9270(f). For the avoidance of doubt, the
Exchange would add text to Rule 10.9310(a)(1)(A)
providing that any request for review of an offer of
settlement determined to be uncontested after a
hearing on the merits has begun under Rule
10.9270(f) that has been accepted by a Panel shall
be governed by Rule 10.9310(a)(1)(B)(i).
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AWCs and settlements are sent to the
Directors and CFR members by email,
which ensures prompt and
instantaneous communication. As a
result, the Directors and members of the
CFR will have the full 10 day period to
determine whether to call these
settlements for review. Moreover, the
requirement in Rule 10.9310(a)(1)(B)(i)
that a request for review be in writing
and state the basis and reasons for such
review can similarly be satisfied by a
Director or CFR member sending an
email to the Secretary of the Exchange
requesting that a specific matter be
reviewed within the proposed 10 day
period. The Director or CFR member
would need to take no additional steps
nor include any additional information
in order to call a matter for review
under Rule 10.9310(a)(1)(B)(i). In light
of these facts, and the relative
infrequency of calls for review of AWCs
and uncontested settlements,8 the
Exchange believes that 10 days are more
than sufficient for a Director or member
of the CFR to determine whether to call
a settlement for review. Once accepted
by the CRO or Panel, the proposed 10
day period for negotiated settlements to
be called for review or become final
would expedite disciplinary
proceedings and provide finality to the
disciplinary process sooner, to the
benefit of the parties and the investing
public.
Finally, the Exchange also believes
that shortening these time periods
would further promote efficiency in
connection with cross-market
settlements involving multiple selfregulatory organizations (‘‘SROs’’).
Often such settlements are contingent
upon the acceptance of a settlement by
all of the SROs involved in the matter.
In these situations, a settlement with the
Exchange would not be final until the
end of the time period specified in
Rules 10.9216 and 10.9270 while a
settlement with other SROs could be
final once accepted.9 Thus by reducing
8 For example, no AWC letter or uncontested
settlement has been called for review in the past
year.
9 See, e.g., FINRA Rule 9216(a)(4) (‘‘If the [AWC]
letter is accepted by the National Adjudicatory
Council, the Review Subcommittee, or the Office of
Disciplinary Affairs, it shall be deemed final and
shall constitute the complaint, answer, and decision
in the matter.’’); FINRA Rule 9270(e)(3) (‘‘If the offer
of settlement and order of acceptance are accepted
by the National Adjudicatory Council, the Review
Subcommittee, or the Office of Disciplinary Affairs,
they shall become final and the Director of the
Office of Disciplinary Affairs shall issue the order
and notify the Office of Hearing Officers. The
Department of Enforcement shall provide a copy of
an issued order of acceptance to each FINRA
member with which a Respondent is associated.’’).
See also e.g., Nasdaq Rule 9216(a)(4) & 9270(e)(3);
Cboe BZX Exchange, Inc. Rule 8.8(a); Cboe EDGA
Exchange, Inc. Rule 8.8(a).
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17:32 Dec 15, 2020
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the amount of time these settlements are
outstanding at the Exchange, the
proposed change could speed up the
settlement process for cross-market
settlements involving multiple SROs, to
the benefit of the parties and the
investing public.
The Exchange intends to announce
the operative date of the amended time
periods in Rules 10.9216(a)(4),
10.9270(f)(3) and 10.9310(a)(1) at least
30 days in advance via regulatory
notice.10 To further facilitate an orderly
transition from the current rules to the
new rules, the Exchange proposes that
matters already initiated under the
current rules would be completed under
such rules. Specifically, the Exchange
proposes to apply the current 25 day
period for AWCs prepared and
submitted to an ETP Holder or
Associated Person under Rule
10.9216(a)(1) prior to the operative date
and to uncontested settlement offers in
proceedings where a Party was served
with a complaint by Enforcement
pursuant to Rule 10.9131 prior to the
operative date. Rules 10.9216(a)(4),
10.9270(f)(3) and 10.9310(a)(1)(B)(i)
would be amended to reflect the
transition process. When the transition
is complete, the Exchange intends to
submit a proposed rule change that
would delete the unnecessary transition
provisions of 10.9216(a)(4), 10.9270(f)(3)
and 10.9310(a)(1)(B)(i).
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. Additionally, the
Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 13 requirement that the rules of
an exchange not be designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
Specifically, the Exchange believes
that shortening the waiting period for
negotiated settlements and uncontested
10 The effective date of the new time periods
would be simultaneously communicated to the
Directors and to the members of the CFR.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
13 Id.
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81539
offers of settlement would serve to
expedite the final resolution of both
Exchange and cross-market matters that
have been resolved by the parties and
accepted by the CRO or Panel, thereby
protecting investors and the public
interest by addressing rule violations
and achieving finality in disciplinary
matters sooner. The proposed rule
change to shorten the waiting period
before an AWC letter and offer of
settlement becomes final and the
member of CFR or Board’s time to call
such settlements for review will
therefore provide for a more efficient,
streamlined disciplinary process.
The Exchange further believes that the
proposed amendments are consistent
with Section 6(b)(6) of the Act,14 which
provides that members and persons
associated with members shall be
appropriately disciplined for violation
of the provisions of the rules of an
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
changes will not affect the ability of
Enforcement to enter into negotiated
settlements or accepting uncontested
settlement offers when appropriate, and
will not alter the requirement that
settlements be scrutinized by the CRO
or Panel, who will continue to approve
them, or the Directors and members of
the CFR, whose right to call both types
of voluntary settlements for review will
not change.
For the same reasons, the Exchange
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.15 Moreover, as noted, the
Exchange believes that the proposed 10
day period to call a settlement for
review under Rules 10.9310(a)(1)(B)(i) is
reasonable and sufficient, and provides
an appropriate balance between the
procedural safeguards of the call for
review process and the benefits of
expediting the resolution of disciplinary
matters and providing finality to the
disciplinary process sooner. Reducing
the period for review would also mean
that AWCs and uncontested settlements
would be published two weeks earlier,
thereby allowing ETP Holders,
Associated Persons and the investing
public to be educated about the issues
they addressed sooner. Finally, the
Exchange believes that the proposed
transition plan is designed to provide a
14 15
15 15
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U.S.C. 78f(b)(6).
U.S.C. 78f(b)(7) and 78f(d).
16DEN1
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fair procedure for the disciplining of
ETP Holders and Associated Persons by
providing for a clearly demarcated and
orderly transition from the current 25
day period to the proposed 10 day
period.
Finally, the Exchange believes that
the non-substantive changes to clarify
the cross-reference to Rule 10.9310 in
Rules 10.9216 would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest because the proposed nonsubstantive changes would add clarity,
transparency and consistency to the
Exchange’s disciplinary rules. The
Exchange believes that market
participants would benefit from the
increased clarity, thereby reducing
potential confusion and ensuring that
persons subject to the Exchange’s
jurisdiction, regulators, and the
investing public can more easily
navigate and understand the Exchange’s
rules.
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 is rather
concerned with facilitating less
burdensome regulatory compliance and
processes and enhancing the quality of
the regulatory process. The Exchange
believes the proposed rule changes
would reduce the burdens within the
disciplinary process, as well as move
matters through the process
expeditiously by providing for more
efficient finality of negotiated
settlements and offers of settlement, to
the benefit of all ETP Holders,
Associated Persons and the investing
public.
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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. 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
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17:32 Dec 15, 2020
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which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 16 and
subparagraph (f)(6) of Rule 19b–4
thereunder.17
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
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSENAT–2020–36 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–NYSENAT–2020–36. 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
16 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
17 17
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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–NYSENAT–2020–36, and
should be submitted on or before
January 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27595 Filed 12–15–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90635; File No. SR–FINRA–
2020–011]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To Address Brokers
With a Significant History of
Misconduct
December 10, 2020.
I. Introduction
On April 3, 2020, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend FINRA’s
rules to help further address the issue of
associated persons with a significant
history of misconduct and the brokerdealers that employ them.
The proposed rule change was
published for comment in the Federal
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\16DEN1.SGM
16DEN1
]]>Agencies
[Federal Register Volume 85, Number 242 (Wednesday, December 16, 2020)]
[Notices]
[Pages 81537-81540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27595]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90624; File No. SR-NYSENAT-2020-36]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Shorten
the Time Period Before a Letter of Acceptance, Waiver, and Consent
Under Rule 10.9216 and an Uncontested Offer of Settlement Under Rule
10.9270(f)
December 10, 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 December 3, 2020, NYSE National, Inc. (``NYSE National''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II, 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.
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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
The Exchange proposes to shorten the time period before a letter of
acceptance, waiver, and consent under Rule 10.9216 and an uncontested
offer of settlement under Rule 10.9270(f) becomes final and the
corresponding time period to request review of these settlements under
Rule 10.9310 from 25 days to 10 days. The proposed rule 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.
[[Page 81538]]
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 shorten the time period before a letter of
acceptance, waiver, and consent (``AWC'') under Rule 10.9216 and an
uncontested offer of settlement under Rule 10.9270(f) becomes final and
the corresponding time period to request review of these settlements
under Rule 10.9310 from 25 days to 10 days.
In 2018, NYSE National adopted disciplinary rules that are, with
certain exceptions, substantially the same as the FINRA Rule 8000
Series and Rule 9000 Series, and which set forth rules for conducting
investigations and enforcement actions.\4\ In adopting disciplinary
rules modeled on FINRA's rules, the Exchange established processes for
settling disciplinary matters both before and after issuance of a
complaint.\5\ As adopted, Rules 10.9216, 10.9270 and 10.9310 permit a
Director and any member of the Committee for Review (``CFR'') to
require a review by the Board of any AWC letter under Rule 10.9216 and
any offer of settlement under Rule 10.9270 within 25 days after the AWC
letter or offer of settlement was sent to each Director and each member
of the CFR.
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\4\ See Securities Exchange Act Release No. 34-83289 (May 17,
2018), 83 FR 23968 (May 23, 2018) (SR-NYSENAT-2018-02) (``Approval
Order'').
\5\ See Approval Order, 83 FR at 23973.
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Proposed Rule Change
Rule 10.9216 (Acceptance, Waiver, and Consent; Procedure for
Imposition of Fines for Minor Violation(s) of Rules) establishes AWC
procedures by which a ETP Holder or Associated Person, prior to the
issuance of a complaint, may execute a letter accepting a finding of
violation, consenting to the imposition of sanctions, and agreeing to
waive such ETP Holder's or Associated Person's right to a hearing,
appeal and certain other procedures. The rule also establishes
procedures for executing a minor rule violation plan letter.
Under Rule 10.9216(a)(4), an AWC accepted by the Chief Regulatory
Officer (``CRO'') must be sent to each Director and each member of the
CFR and would be deemed final and constitute the complaint, answer, and
decision in the matter 25 days after being sent to each Director and
each member of the CFR, unless review by the Exchange Board of
Directors is requested pursuant to Rule 10.9310(a)(1)(B).\6\
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\6\ Requests for review of an AWC accepted by the CRO are
governed by Rule 10.9310(a)(1)(B)(i). For the sake of clarity and
transparency, the Exchange proposes the non-substantive change of
including the omitted reference to subsection (B)(i) of Rule
10.9310(a)(1) in both in the current and proposed text of Rule
10.9216(a)(4).
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The Exchange proposes that an AWC accepted by the CRO would be
deemed final and constitute the complaint, answer, and decision in a
matter 10 days after being sent to each Director and each member of the
CFR, unless review is requested pursuant to Rule 10.9310(a)(1)(B)(i).
As described below, the time period to request review under Rule
10.9310(a)(1)(B)(i) would also be shortened to 10 days.
Rule 10.9270 (Settlement Procedure) provides a settlement procedure
for a Respondent who has been notified of the initiation of a
proceeding. Specifically, Rule 10.9270(f) provides that uncontested
settlement offers accepted by the CRO, the Hearing Panel or, if
applicable, Extended Hearing Panel must be issued and sent to each
Director and each member of the CFR and becomes final 25 days after
being sent to each Director and each member of the CFR, unless review
by the Exchange Board of Directors is requested pursuant to Rule
10.9310(a)(1).
The Exchange proposes that uncontested settlement offers accepted
by the CRO, the Hearing Panel or, if applicable, Extended Hearing Panel
(together, a ``Panel'') under Rule 10.9270(f) would become final 10
days after being sent to each Director and each member of the CFR,
unless review by the Exchange Board of Directors is requested pursuant
to Rule 10.9310(a)(1). As noted, the time to request review of an
uncontested settlement under Rule 10.9310(a)(1) would also be shortened
to 10 days.
Finally, under Rule 10.9310(a)(1)(B)(i), any Director and any
member of the CFR may require a review by the Board of any
determination or penalty, or both, imposed in connection with an AWC
letter under Rule 10.9216 or an offer of settlement determined to be
uncontested before a hearing on the merits has begun under Rule
10.9270(f), except that none of those persons could request Board
review of a determination or penalty concerning an affiliate of the
Exchange as such term is defined in Rule 12b-2 under the Exchange Act.
A request for review under this provision is made by filing with the
Secretary of the Exchange a written request stating the basis and
reasons for such review, within 25 days after an AWC letter or an offer
of settlement has been sent to each Director and each member of the CFR
pursuant to Rule 10.9216(a)(4) or Rule 10.9270(f)(3).
To permit AWC letters and uncontested settlements to become final
within 10 days as proposed, the Exchange would amend Rule
10.9310(a)(1)(B)(i) to provide that a request for review of these
settlements as permitted by the rule must be made by filing the
requisite written request with the Secretary of the Exchange within 10
days after the AWC letter or an offer of settlement is sent to each
Director and each member of the CFR pursuant to Rule 10.9216(a)(4) or
Rule 10.9270(f)(3).\7\
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\7\ The time period for requesting review pursuant to Rule
10.9310(a)(1)(B)(ii) of any rejection by the CRO of any AWC letter
under Rule 10.9216 or of an uncontested offer of settlement under
Rule 10.9270(f), would remain unchanged as would the time period to
request for review of any determination or penalty, or both, imposed
by a Panel under the Rule 10.9310(a)(1)(A) other than an offer of
settlement determined to be uncontested after a hearing on the
merits have begun under Rule 10.9270(f). For the avoidance of doubt,
the Exchange would add text to Rule 10.9310(a)(1)(A) providing that
any request for review of an offer of settlement determined to be
uncontested after a hearing on the merits has begun under Rule
10.9270(f) that has been accepted by a Panel shall be governed by
Rule 10.9310(a)(1)(B)(i).
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The Exchange believes maintaining a 25 day waiting period for
negotiated settlements under Rule 10.9216 and uncontested settlements
pursuant to 10.9270(f) unnecessarily delays final resolution of matters
that have been resolved by the parties and accepted by the CRO or a
Panel. Shortening the waiting period to 10 days, and requiring requests
for Board of Directors review to be made within that same 10 day
period, would significantly expedite the settlement process in
situations where ETP Holders, Associated Persons and Respondents have
entered into a consensual, negotiated settlement with Enforcement or
made settlement offers that Enforcement does not oppose, while
continuing to ensure the independence and integrity of the regulatory
process by preserving the ability of Directors and CFR members to call
those settlements for review.
Further, the Exchange believes that the proposed 10 day period to
call a settlement for review under Rule 10.9310(a)(1)(B)(i) is
reasonable and sufficient. Like the current 25 day period, the time to
call a settlement for review would begin when the AWC or uncontested
settlement is sent to each Director and member of the CFR. Rules
10.9216 and 10.9270 specify that an AWC or uncontested settlement
accepted by the CRO or a Panel can be sent to each Director and each
CFR member via courier, express delivery or electronic means. As a
practical matter,
[[Page 81539]]
AWCs and settlements are sent to the Directors and CFR members by
email, which ensures prompt and instantaneous communication. As a
result, the Directors and members of the CFR will have the full 10 day
period to determine whether to call these settlements for review.
Moreover, the requirement in Rule 10.9310(a)(1)(B)(i) that a request
for review be in writing and state the basis and reasons for such
review can similarly be satisfied by a Director or CFR member sending
an email to the Secretary of the Exchange requesting that a specific
matter be reviewed within the proposed 10 day period. The Director or
CFR member would need to take no additional steps nor include any
additional information in order to call a matter for review under Rule
10.9310(a)(1)(B)(i). In light of these facts, and the relative
infrequency of calls for review of AWCs and uncontested settlements,\8\
the Exchange believes that 10 days are more than sufficient for a
Director or member of the CFR to determine whether to call a settlement
for review. Once accepted by the CRO or Panel, the proposed 10 day
period for negotiated settlements to be called for review or become
final would expedite disciplinary proceedings and provide finality to
the disciplinary process sooner, to the benefit of the parties and the
investing public.
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\8\ For example, no AWC letter or uncontested settlement has
been called for review in the past year.
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Finally, the Exchange also believes that shortening these time
periods would further promote efficiency in connection with cross-
market settlements involving multiple self-regulatory organizations
(``SROs''). Often such settlements are contingent upon the acceptance
of a settlement by all of the SROs involved in the matter. In these
situations, a settlement with the Exchange would not be final until the
end of the time period specified in Rules 10.9216 and 10.9270 while a
settlement with other SROs could be final once accepted.\9\ Thus by
reducing the amount of time these settlements are outstanding at the
Exchange, the proposed change could speed up the settlement process for
cross-market settlements involving multiple SROs, to the benefit of the
parties and the investing public.
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\9\ See, e.g., FINRA Rule 9216(a)(4) (``If the [AWC] letter is
accepted by the National Adjudicatory Council, the Review
Subcommittee, or the Office of Disciplinary Affairs, it shall be
deemed final and shall constitute the complaint, answer, and
decision in the matter.''); FINRA Rule 9270(e)(3) (``If the offer of
settlement and order of acceptance are accepted by the National
Adjudicatory Council, the Review Subcommittee, or the Office of
Disciplinary Affairs, they shall become final and the Director of
the Office of Disciplinary Affairs shall issue the order and notify
the Office of Hearing Officers. The Department of Enforcement shall
provide a copy of an issued order of acceptance to each FINRA member
with which a Respondent is associated.''). See also e.g., Nasdaq
Rule 9216(a)(4) & 9270(e)(3); Cboe BZX Exchange, Inc. Rule 8.8(a);
Cboe EDGA Exchange, Inc. Rule 8.8(a).
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The Exchange intends to announce the operative date of the amended
time periods in Rules 10.9216(a)(4), 10.9270(f)(3) and 10.9310(a)(1) at
least 30 days in advance via regulatory notice.\10\ To further
facilitate an orderly transition from the current rules to the new
rules, the Exchange proposes that matters already initiated under the
current rules would be completed under such rules. Specifically, the
Exchange proposes to apply the current 25 day period for AWCs prepared
and submitted to an ETP Holder or Associated Person under Rule
10.9216(a)(1) prior to the operative date and to uncontested settlement
offers in proceedings where a Party was served with a complaint by
Enforcement pursuant to Rule 10.9131 prior to the operative date. Rules
10.9216(a)(4), 10.9270(f)(3) and 10.9310(a)(1)(B)(i) would be amended
to reflect the transition process. When the transition is complete, the
Exchange intends to submit a proposed rule change that would delete the
unnecessary transition provisions of 10.9216(a)(4), 10.9270(f)(3) and
10.9310(a)(1)(B)(i).
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\10\ The effective date of the new time periods would be
simultaneously communicated to the Directors and to the members of
the CFR.
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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. Additionally, the Exchange believes
the proposed rule change is consistent with the Section 6(b)(5) \13\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
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Specifically, the Exchange believes that shortening the waiting
period for negotiated settlements and uncontested offers of settlement
would serve to expedite the final resolution of both Exchange and
cross-market matters that have been resolved by the parties and
accepted by the CRO or Panel, thereby protecting investors and the
public interest by addressing rule violations and achieving finality in
disciplinary matters sooner. The proposed rule change to shorten the
waiting period before an AWC letter and offer of settlement becomes
final and the member of CFR or Board's time to call such settlements
for review will therefore provide for a more efficient, streamlined
disciplinary process.
The Exchange further believes that the proposed amendments are
consistent with Section 6(b)(6) of the Act,\14\ which provides that
members and persons associated with members shall be appropriately
disciplined for violation of the provisions of the rules of an 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 changes will not affect the ability of Enforcement to enter
into negotiated settlements or accepting uncontested settlement offers
when appropriate, and will not alter the requirement that settlements
be scrutinized by the CRO or Panel, who will continue to approve them,
or the Directors and members of the CFR, whose right to call both types
of voluntary settlements for review will not change.
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\14\ 15 U.S.C. 78f(b)(6).
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For the same reasons, the Exchange 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.\15\ Moreover, as noted, the
Exchange believes that the proposed 10 day period to call a settlement
for review under Rules 10.9310(a)(1)(B)(i) is reasonable and
sufficient, and provides an appropriate balance between the procedural
safeguards of the call for review process and the benefits of
expediting the resolution of disciplinary matters and providing
finality to the disciplinary process sooner. Reducing the period for
review would also mean that AWCs and uncontested settlements would be
published two weeks earlier, thereby allowing ETP Holders, Associated
Persons and the investing public to be educated about the issues they
addressed sooner. Finally, the Exchange believes that the proposed
transition plan is designed to provide a
[[Page 81540]]
fair procedure for the disciplining of ETP Holders and Associated
Persons by providing for a clearly demarcated and orderly transition
from the current 25 day period to the proposed 10 day period.
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\15\ 15 U.S.C. 78f(b)(7) and 78f(d).
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Finally, the Exchange believes that the non-substantive changes to
clarify the cross-reference to Rule 10.9310 in Rules 10.9216 would
remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, protect investors
and the public interest because the proposed non-substantive changes
would add clarity, transparency and consistency to the Exchange's
disciplinary rules. The Exchange believes that market participants
would benefit from the increased clarity, thereby reducing potential
confusion and ensuring that persons subject to the Exchange's
jurisdiction, regulators, and the investing public can more easily
navigate and understand the Exchange's rules.
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 is rather concerned with
facilitating less burdensome regulatory compliance and processes and
enhancing the quality of the regulatory process. The Exchange believes
the proposed rule changes would reduce the burdens within the
disciplinary process, as well as move matters through the process
expeditiously by providing for more efficient finality of negotiated
settlements and offers of settlement, to the benefit of all ETP
Holders, Associated Persons and the investing public.
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. 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)(iii) of the Act \16\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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 should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSENAT-2020-36 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-NYSENAT-2020-36. 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-NYSENAT-2020-36, and should be submitted
on or before January 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27595 Filed 12-15-20; 8:45 am]
BILLING CODE 8011-01-P
