Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add Violations of Rule 2.1210 to the Exchange's Minor Rule Violation Plan for the Equities and Options Markets, 68771-68774 [2022-24892]

Download as PDF Federal Register / Vol. 87, No. 220 / Wednesday, November 16, 2022 / Notices systems capacity to support the new options series.17 Therefore, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 18 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,19 that the proposed rule change (SR–ISE–2022– 18), be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–24888 Filed 11–15–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add Violations of Rule 2.1210 to the Exchange’s Minor Rule Violation Plan for the Equities and Options Markets November 9, 2022. 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 October 26, 2022, 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 Exchange. 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. khammond on DSKJM1Z7X2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to (1) add Rule 2.1210 to the list of minor rule violations in Rule 10.9217 for both the equities and options markets, and (2) make certain non-substantive clarifying 1. Purpose The Exchange proposes to (1) add Rule 2.1210 (Registration Requirements) to the list of minor rule violations in Rule 10.9217 for both the equities and options markets, and (2) make certain non-substantive clarifying changes to Rule 10.9217. Addition of Rule 2.1210 to the List of Rules Eligible for a Minor Fine Rule 10.9217 sets forth the list of rules under which a ETP Holder, OTP Holder or OTP Firm or covered person may be subject to a fine under a minor rule violation plan as described in Rule 10.9216(b) for both its equities and options markets. Rule 2.1210, which was adopted in 2018,4 sets forth the requirements for persons engaged in the investment banking or securities business of an ETP Holder, OTP Holder or OTP Firm to be registered with the Exchange as a representative or principal in each category of registration appropriate to his or her functions and responsibilities as specified in Rule 2.1220. The Exchange proposes to add Rule 2.1210 to the list of rules in Rule 10.9217 eligible for disposition pursuant to a minor fine under Rule 10.9216(b). Specifically, the Exchange proposes to 4 See Securities Exchange Act Release No. 84389 (October 10, 2018), 83 FR 52272 (October 16, 2018) (SR–NYSEArca–2018–71) (Notice of Filing and Immediate Effectiveness of Amendments to Rules Regarding Qualification, Registration and Continuing Education Applicable to Equity Trading Permit Holders, Options Trading Permit Holders or OTP Firms). 17 See id. at 58401. U.S.C. 78f(b)(5). 19 15 U.S.C. 78s(b)(2). 20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 18 15 17:27 Nov 15, 2022 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 III 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 [Release No. 34–96289; File No. SR– NYSEArca–2022–72] VerDate Sep<11>2014 changes to 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. Jkt 259001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 68771 add Rule 2.1210 to Rule 10.9217(g) as new item 13 applicable to both equities and options permit holders. NYSE Arca Rule 2.1210 is substantially similar to Rule 1210 adopted by the Exchange’s affiliate New York Stock Exchange LLC (‘‘NYSE’’) in 2018 5 which is currently eligible for minor rule fines under the NYSE’s version of Rule 10.9217.6 The Exchange believes that having the ability to issue a minor rule fine for failing to comply with the registration requirements of Rule 2.1210 would be consistent with and complement the Exchange’s current ability to issue minor rule fines for other registration violations (e.g., Rule 2.24 (Registration—Employees of ETP Holders)). The Exchange further believes that the violations of the registration requirements are particularly suited to minor rule fines because minor fines provide 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. The Exchange further proposes to add fine levels for violations of Rule 2.1210 to both the equities and the options fine schedules. First, the Exchange would add proposed first, second and third level fines for violations of Rule 2.1210 to the options fine schedule as proposed Rule 10.9217(h)(iii)(12) of $1,000 for the first violation, $2,500 for the second violation and $3,500 for the third and subsequent violations. The proposed fine levels would be the same as those in the Exchange’s current Rule 10.9217(h)(iii)(11) for violations of Rule 2.23. Second, the Exchange would add proposed first, second and third level fines for violations of Rule 2.1210 to the equities fine schedule as proposed Rule 10.9217(i)(2)(12) of $1,000 for the first violation, $2,500 for the second violation and $3,500 for the third and subsequent violations. The proposed fine levels would be the same as those in the Exchange’s current Rule 10.9217(i)(2)(11) for violations of Rule 2.24. The Exchange believes that the proposed change would strengthen the 5 See Securities Exchange Act Release No. 84336 (October 2, 2018), 83 FR 50727 (October 9, 2018) (SR–NYSE–2018–44) (Notice of Filing and Immediate Effectiveness of Amendments To Rules Regarding Qualification, Registration and Continuing Education Applicable to Members and Member Organizations). 6 See NYSE Rule 9217. See generally Securities Exchange Act Release No. 87212 (October 3, 2019), 84 FR 54193 (October 9, 2019) (SR–NYSE–2019–44) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Add Certain Rules to the List of Minor Rule Violations in Rule 9217, Delete Obsolete Rules, and Increase the Maximum Fine for Minor Rule Violations). E:\FR\FM\16NON1.SGM 16NON1 68772 Federal Register / Vol. 87, No. 220 / Wednesday, November 16, 2022 / Notices 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. failure to comply with the employee registration or other requirements of Rule 2.24. The numbered footnote text appears in the rule, but the footnote number was inadvertently omitted from Rule 10.9217(i)(2)(11). Non-Substantive Clarifying Changes to Rule 10.9217 The Exchange proposes the following non-substantive clarifying changes to Rule 10.9217. First, the Exchange proposes to correct a typographical error in Rule 10.9217(h)(i)(23). Rule 10.9217(h)(i)(23) sets forth the proposed fine levels for violations of the rule governing reporting of options positions. Rule 10.9217(h)(i)(23), however, refers to Rule 6.4–O(a) (Series of Options Open for Trading) and not Rule 6.6–O(a), which governs reporting of options positions, which is correctly referred to in Rule 10.9217(e)(23). The Exchange accordingly proposes to correct the error. Second, the Exchange proposes to add clarifying language regarding the disposition of minor rule fines for violations of the CAT Compliance Rules in the Rule 11.6800 Series based on language adopted by the Exchange’s affiliates. Specifically, the Exchange would add a new footnote 4 to current Rule 10.9217(h)(iii)(13) and a new footnote 3 to current Rule 10.9217(i)(2)(14) (governing minor rule fine levels of the options and equities markets, respectively) that would provide as follows: 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(5),9 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 Rule 10.9217 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 formal disciplinary action 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. 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. The proposed rule change is thus designed to prevent fraudulent and manipulative acts and practices because it will provide the Exchange the ability to issue a minor rule fine for violations of the registration requirements set forth in Rule 2.1210 where a more formal disciplinary action may not be warranted or appropriate. In addition, the Exchange believes that adding rules based on the rules of its affiliate to the Exchange’s minor rule plan, and adding associated fine levels based on current treatment of violations of its registration khammond on DSKJM1Z7X2PROD with NOTICES For failures to comply with the Consolidated Audit Trail Compliance Rule requirements of the Rule 11.6800 Series, the Exchange may impose a minor rule violation fine of up to $2,500. For more serious violations, other disciplinary action may be sought. The language is identical to that adopted by the Exchange’s affiliates NYSE and NYSE Chicago, Inc.7 In addition, ‘‘Up to $2,500.00’’ would be deleted from current Rule 10.9217(i)(2)(14) and 10.9217(h)(iii)(13) as redundant of proposed footnote 3. The proposed change is not intended to make a substantive change. Violations of the CAT Compliance Rules are currently eligible for minor rule fines and $2,500 is currently the maximum eligible fine. Third, the Exchange would add a missing footnote number ‘‘2’’ to the end of Rule 10.9217(i)(2)(11), governing 7 See NYSE Rule 9217(d) (‘‘For failures to comply with the Consolidated Audit Trail Compliance Rule requirements of the Rule 6800 Series, the Exchange may impose a minor rule violation fine of up to $2,500. For more serious violations, other disciplinary action may be sought.’’); NYSE Chicago Rule 10.9217(f), n. ** (same). VerDate Sep<11>2014 17:27 Nov 15, 2022 Jkt 259001 8 15 9 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00105 Fmt 4703 rules, would promote fairness and consistency in the marketplace by permitting the Exchange to issue a minor rule fine for violations of substantially similar rules that are already eligible for minor rule treatment, thereby harmonizing minor rule plan fines across affiliated exchanges for the same conduct. The Exchange further believes that the proposed amendments to Rule 10.9217 are consistent with Section 6(b)(6) of the Act,10 which provides that members and persons associated with members shall be appropriately disciplined for violation of the provisions of the Act, the rules and regulations thereunder and 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 proposed Rule 2.1210 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.11 Rule 10.9217 does not preclude an ETP Holder, OTP Holder or OTP Firm or covered person from contesting an alleged violation and receiving a hearing on the matter with procedural rights through a litigated disciplinary proceeding. In addition, the Exchange believes that the proposed non-substantive clarifying changes described above to correct a typographical error, add clarifying language regarding the disposition of minor rule fines for violations of the CAT Compliance Rules in the Rule 11.6800 Series based on language adopted by the Exchange’s affiliates, and to insert a missing footnote number would add clarity and consistency to the Exchange’s rules. The Exchange believes that adding such clarity would also be consistent with the public interest and the protection of investors because investors will not be harmed and in fact would benefit from increased clarity, thereby reducing potential confusion. In addition, the Exchange believes that incorporating language relating to violations of the CAT Compliance Rules adopted by the Exchange’s affiliates would promote fairness and consistency in the marketplace by eliminating differences and harmonizing language related to 10 15 11 15 Sfmt 4703 E:\FR\FM\16NON1.SGM U.S.C. 78f(b)(6). U.S.C. 78f(b)(7) and 78f(d). 16NON1 Federal Register / Vol. 87, No. 220 / Wednesday, November 16, 2022 / Notices minor rule treatment of similar rule violations across affiliates. The proposed change is not intended to make any substantive change to the applicability of minor rule fines to violations of the CAT Compliance Rules or the amount of those fines. 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 change is not designed to address any competitive issue but rather to update the Exchange’s rules to strengthen 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: 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 SR– NYSEArca–2022–72 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–2022–72. 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 VerDate Sep<11>2014 17:27 Nov 15, 2022 Jkt 259001 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–2022–72 and should be submitted on or before December 8, 2022. 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.12 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,13 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 14 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,15 which governs minor rule violation plans. As stated above, the Exchange proposes to amend Rule 10.9217 by: (1) adding Rule 2.1210 (Registration 12 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). 13 15 U.S.C. 78f(b)(5). 14 15 U.S.C. 78f(b)(1) and 78f(b)(6). 15 17 CFR 240.19d–1(c)(2). PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 68773 Requirements) to the list of minor rule violations, including in the fine schedules, for both the equities and options markets; and (2) making other clarifying and non-substantive changes. The Commission believes that Rules 10.9216(b) and 10.9217 are an effective way to discipline a member for a minor violation of a rule. More specifically, the Commission believes that the proposed addition of Rule 2.1210 (Registration Requirements) to the Exchange’s list of current minor rule violations 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. The Commission also believes that amending the associated fine schedule is consistent with the Act because it may help the Exchange’s ability to better carry out its oversight and enforcement responsibilities by levying appropriate fines for minor violations of the rules included in Rule 10.9217, including minor violations of Rule 2.1210. Finally, the Commission believes that the Exchange’s proposal to make certain non-substantive changes to Rule 10.9217 are consistent with the Act because these changes will add clarity to the Exchange’s rules. In approving the proposed rule change, the Commission in no way minimizes the importance of compliance with the Exchange’s rules and all other rules subject to fines under Rules 10.9216(b) and 10.9217. The Commission believes that a violation of any self-regulatory organization’s rules, as well as Commission rules, is a serious matter. However, Rules 10.9216(b) and 10.9217 provide a reasonable means of addressing rule violations that may not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on a case-by-case basis, whether a fine of more or less than the recommended amount is appropriate for a violation under Rules 10.9216(b) and 10.9217 or whether a violation requires formal disciplinary action. For the same reasons as discussed above, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,16 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 will 16 15 E:\FR\FM\16NON1.SGM U.S.C. 78s(b)(2). 16NON1 68774 Federal Register / Vol. 87, No. 220 / Wednesday, November 16, 2022 / Notices assist the Exchange in preventing fraudulent and manipulative practices by allowing the Exchange to adequately enforce compliance with, and provide appropriate discipline for, violations of Exchange rules. Moreover, the proposed changes raise no new or novel issues. 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 17 and Rule 19d–1(c)(2) thereunder,18 that the proposed rule change (SR–NYSEArca– 2022–72) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–24892 Filed 11–15–22; 8:45 am] II. Description of the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96297; File No. SR–FINRA– 2022–021] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt Supplementary Material .18 (Remote Inspections Pilot Program) Under FINRA Rule 3110 (Supervision) khammond on DSKJM1Z7X2PROD with NOTICES November 10, 2022. I. Introduction On July 28, 2022, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change SR–FINRA– 2022–021 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 2 thereunder to adopt a voluntary, threeyear remote inspection pilot program (‘‘Pilot’’) to allow broker-dealers to elect to fulfill their obligation under Rule 3110(c) (Internal Inspections) by conducting inspections of some or all branch offices and non-branch locations remotely without an on-site visit to such office or location, subject to specified 17 15 U.S.C. 78s(b)(2). CFR 240.19d–1(c)(2). 19 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 18 17 VerDate Sep<11>2014 17:27 Nov 15, 2022 Jkt 259001 terms.3 The proposed rule change was published for public comment in the Federal Register on August 15, 2022.4 On September 23, 2022, FINRA consented to an extension of the time period in which the Commission must approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change to November 11, 2022.5 On November 9, 2022, FINRA filed a letter stating it was still considering the comments to the Notice, and anticipates submitting a response to comments and amendments to the Notice in the near future.6 The Commission is publishing this order pursuant to Section 19(b)(2)(B) of the Exchange Act 7 to solicit comments on the proposed rule change and to institute proceedings to determine whether to approve or disapprove the proposed rule change. A. Background As stated in the Notice, the COVID– 19 pandemic prompted FINRA to provide temporary relief to member firms from certain regulatory requirements.8 For example, FINRA adopted temporary Rule 3110.17, effective since November 2020, to provide member firms the option to conduct inspections of their branch offices and non-branch locations remotely, subject to specified terms 9 3 See infra note 4. Act Release No. 95452 (Aug. 9, 2022), 87 FR 50144 (Aug. 15, 2022) (File No. SR–FINRA– 2022–021) (‘‘Notice’’). 5 See letter from Sarah Kwak, Associate General Counsel, Office of General Counsel, FINRA, to Daniel Fisher, Branch Chief, Division of Trading and Markets, Commission, dated September 23, 2022. 6 See letter from Sarah Kwak, Associate General Counsel, FINRA, to Vanessa Countryman, Secretary, Commission, dated November 9, 2022, available at https://www.finra.org/sites/default/files/2022-11/ FINRA-2022-021-Response-to-Comments-11-092022.pdf. 7 15 U.S.C. 78s(b)(2)(B). 8 See Notice at 50147 and notes 28 and 29. 9 See Exchange Act Release No. 90454 (Nov. 18, 2020), 85 FR 75097 (Nov. 24, 2020) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2020–040). See also Exchange Act Release No. 93002 (Sept. 15, 2021), 86 FR 52508 (Sept. 21, 2021) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2021–023); Exchange Act Release No. 94018 (Jan. 20, 2022), 87 FR 4072 (Jan. 26, 2022) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2022–001); Exchange Act Release No. 96241 (Nov. 4, 2022) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2022–030). If the proposed rule change is approved, Rule 3110.17 would automatically sunset on the effective date of proposed Rule 3110.18, if it has not already expired by its own terms. See Notice at 50152. 4 Exchange PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 FINRA stated in the Notice that it believes now is the time to assess possible longer-term rule changes regarding its inspection program and is, therefore, proposing a voluntary, threeyear remote inspections pilot program.10 B. The Proposed Rule Change The Notice states that Rule 3110(c)(1) currently provides that an inspection of an office or location must occur on a designated frequency, and that the periodicity of the required inspection varies depending on the classification of the location as an office of supervisory jurisdiction (‘‘OSJ’’), branch office, or non-branch location.11 FINRA is proposing to amend FINRA Rule 3110 (Supervision) to adopt a voluntary, three-year remote inspection pilot program to allow member firms to elect to fulfill their obligation under Rule 3110(c) (Internal Inspections) by conducting inspections of some or all branch offices and non-branch locations remotely without an on-site visit to such office or location, subject to specified terms described below (such members hereinafter referred to as ‘‘participating members’’). i. Scope of Pilot Proposed Rule 3110.18(b)(1) would provide that a participating member may elect to conduct the inspection of an office or location during the pilot period remotely when the member reasonably determines that the purposes of the rule can be accomplished by conducting such required inspection remotely. Proposed Rule 3110.18(b)(1) would require a participating member to develop a reasonable risk-based approach to using remote inspections and conduct and document a risk assessment for an office or location prior to electing to conduct a remote inspection for that office or location. The risk assessment must document the factors considered, including the factors set forth in Rule 3110.12, and must take into account any higher risk activities that take place or higher risk associated persons that are assigned to that location.12 ii. Inelegible Offices and Locations Under proposed Rule 3110.18(b)(2)(A), a member firm would be ineligible to conduct remote inspections of any of its offices or locations if any time during the period of the proposed pilot program, the member is or becomes designated as: (1) a Restricted Firm under Rule 4111 10 See Notice at 50145. id. at 50146. 12 See id. at 50148–49. 11 See E:\FR\FM\16NON1.SGM 16NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 220 (Wednesday, November 16, 2022)]
[Notices]
[Pages 68771-68774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24892]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96289; File No. SR-NYSEArca-2022-72]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of a Proposed Rule Change To 
Add Violations of Rule 2.1210 to the Exchange's Minor Rule Violation 
Plan for the Equities and Options Markets

November 9, 2022.
    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 October 26, 2022, 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 Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (1) add Rule 2.1210 to the list of minor 
rule violations in Rule 10.9217 for both the equities and options 
markets, and (2) make certain non-substantive clarifying changes to 
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 III 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 (1) add Rule 2.1210 (Registration 
Requirements) to the list of minor rule violations in Rule 10.9217 for 
both the equities and options markets, and (2) make certain non-
substantive clarifying changes to Rule 10.9217.
Addition of Rule 2.1210 to the List of Rules Eligible for a Minor Fine
    Rule 10.9217 sets forth the list of rules under which a ETP Holder, 
OTP Holder or OTP Firm or covered person may be subject to a fine under 
a minor rule violation plan as described in Rule 10.9216(b) for both 
its equities and options markets.
    Rule 2.1210, which was adopted in 2018,\4\ sets forth the 
requirements for persons engaged in the investment banking or 
securities business of an ETP Holder, OTP Holder or OTP Firm to be 
registered with the Exchange as a representative or principal in each 
category of registration appropriate to his or her functions and 
responsibilities as specified in Rule 2.1220.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 84389 (October 10, 
2018), 83 FR 52272 (October 16, 2018) (SR-NYSEArca-2018-71) (Notice 
of Filing and Immediate Effectiveness of Amendments to Rules 
Regarding Qualification, Registration and Continuing Education 
Applicable to Equity Trading Permit Holders, Options Trading Permit 
Holders or OTP Firms).
---------------------------------------------------------------------------

    The Exchange proposes to add Rule 2.1210 to the list of rules in 
Rule 10.9217 eligible for disposition pursuant to a minor fine under 
Rule 10.9216(b). Specifically, the Exchange proposes to add Rule 2.1210 
to Rule 10.9217(g) as new item 13 applicable to both equities and 
options permit holders. NYSE Arca Rule 2.1210 is substantially similar 
to Rule 1210 adopted by the Exchange's affiliate New York Stock 
Exchange LLC (``NYSE'') in 2018 \5\ which is currently eligible for 
minor rule fines under the NYSE's version of Rule 10.9217.\6\ The 
Exchange believes that having the ability to issue a minor rule fine 
for failing to comply with the registration requirements of Rule 2.1210 
would be consistent with and complement the Exchange's current ability 
to issue minor rule fines for other registration violations (e.g., Rule 
2.24 (Registration--Employees of ETP Holders)). The Exchange further 
believes that the violations of the registration requirements are 
particularly suited to minor rule fines because minor fines provide 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.
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    \5\ See Securities Exchange Act Release No. 84336 (October 2, 
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44) (Notice of 
Filing and Immediate Effectiveness of Amendments To Rules Regarding 
Qualification, Registration and Continuing Education Applicable to 
Members and Member Organizations).
    \6\ See NYSE Rule 9217. See generally Securities Exchange Act 
Release No. 87212 (October 3, 2019), 84 FR 54193 (October 9, 2019) 
(SR-NYSE-2019-44) (Order Granting Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, To Add Certain Rules to the 
List of Minor Rule Violations in Rule 9217, Delete Obsolete Rules, 
and Increase the Maximum Fine for Minor Rule Violations).
---------------------------------------------------------------------------

    The Exchange further proposes to add fine levels for violations of 
Rule 2.1210 to both the equities and the options fine schedules. First, 
the Exchange would add proposed first, second and third level fines for 
violations of Rule 2.1210 to the options fine schedule as proposed Rule 
10.9217(h)(iii)(12) of $1,000 for the first violation, $2,500 for the 
second violation and $3,500 for the third and subsequent violations. 
The proposed fine levels would be the same as those in the Exchange's 
current Rule 10.9217(h)(iii)(11) for violations of Rule 2.23. Second, 
the Exchange would add proposed first, second and third level fines for 
violations of Rule 2.1210 to the equities fine schedule as proposed 
Rule 10.9217(i)(2)(12) of $1,000 for the first violation, $2,500 for 
the second violation and $3,500 for the third and subsequent 
violations. The proposed fine levels would be the same as those in the 
Exchange's current Rule 10.9217(i)(2)(11) for violations of Rule 2.24.
    The Exchange believes that the proposed change would strengthen the

[[Page 68772]]

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.
Non-Substantive Clarifying Changes to Rule 10.9217
    The Exchange proposes the following non-substantive clarifying 
changes to Rule 10.9217.
    First, the Exchange proposes to correct a typographical error in 
Rule 10.9217(h)(i)(23). Rule 10.9217(h)(i)(23) sets forth the proposed 
fine levels for violations of the rule governing reporting of options 
positions. Rule 10.9217(h)(i)(23), however, refers to Rule 6.4-O(a) 
(Series of Options Open for Trading) and not Rule 6.6-O(a), which 
governs reporting of options positions, which is correctly referred to 
in Rule 10.9217(e)(23). The Exchange accordingly proposes to correct 
the error.
    Second, the Exchange proposes to add clarifying language regarding 
the disposition of minor rule fines for violations of the CAT 
Compliance Rules in the Rule 11.6800 Series based on language adopted 
by the Exchange's affiliates. Specifically, the Exchange would add a 
new footnote 4 to current Rule 10.9217(h)(iii)(13) and a new footnote 3 
to current Rule 10.9217(i)(2)(14) (governing minor rule fine levels of 
the options and equities markets, respectively) that would provide as 
follows:

    For failures to comply with the Consolidated Audit Trail 
Compliance Rule requirements of the Rule 11.6800 Series, the 
Exchange may impose a minor rule violation fine of up to $2,500. For 
more serious violations, other disciplinary action may be sought.

    The language is identical to that adopted by the Exchange's 
affiliates NYSE and NYSE Chicago, Inc.\7\ In addition, ``Up to 
$2,500.00'' would be deleted from current Rule 10.9217(i)(2)(14) and 
10.9217(h)(iii)(13) as redundant of proposed footnote 3. The proposed 
change is not intended to make a substantive change. Violations of the 
CAT Compliance Rules are currently eligible for minor rule fines and 
$2,500 is currently the maximum eligible fine.
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    \7\ See NYSE Rule 9217(d) (``For failures to comply with the 
Consolidated Audit Trail Compliance Rule requirements of the Rule 
6800 Series, the Exchange may impose a minor rule violation fine of 
up to $2,500. For more serious violations, other disciplinary action 
may be sought.''); NYSE Chicago Rule 10.9217(f), n. ** (same).
---------------------------------------------------------------------------

    Third, the Exchange would add a missing footnote number ``2'' to 
the end of Rule 10.9217(i)(2)(11), governing failure to comply with the 
employee registration or other requirements of Rule 2.24. The numbered 
footnote text appears in the rule, but the footnote number was 
inadvertently omitted from Rule 10.9217(i)(2)(11).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and furthers the objectives of Section 6(b)(5),\9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 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 Rule 10.9217 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 formal 
disciplinary action 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. 
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. The 
proposed rule change is thus designed to prevent fraudulent and 
manipulative acts and practices because it will provide the Exchange 
the ability to issue a minor rule fine for violations of the 
registration requirements set forth in Rule 2.1210 where a more formal 
disciplinary action may not be warranted or appropriate. In addition, 
the Exchange believes that adding rules based on the rules of its 
affiliate to the Exchange's minor rule plan, and adding associated fine 
levels based on current treatment of violations of its registration 
rules, would promote fairness and consistency in the marketplace by 
permitting the Exchange to issue a minor rule fine for violations of 
substantially similar rules that are already eligible for minor rule 
treatment, thereby harmonizing minor rule plan fines across affiliated 
exchanges for the same conduct.
    The Exchange further believes that the proposed amendments to Rule 
10.9217 are consistent with Section 6(b)(6) of the Act,\10\ which 
provides that members and persons associated with members shall be 
appropriately disciplined for violation of the provisions of the Act, 
the rules and regulations thereunder and 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 proposed Rule 2.1210 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.\11\ Rule 10.9217 does not 
preclude an ETP Holder, OTP Holder or OTP Firm or covered person from 
contesting an alleged violation and receiving a hearing on the matter 
with procedural rights through a litigated disciplinary proceeding.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(6).
    \11\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

    In addition, the Exchange believes that the proposed non-
substantive clarifying changes described above to correct a 
typographical error, add clarifying language regarding the disposition 
of minor rule fines for violations of the CAT Compliance Rules in the 
Rule 11.6800 Series based on language adopted by the Exchange's 
affiliates, and to insert a missing footnote number would add clarity 
and consistency to the Exchange's rules. The Exchange believes that 
adding such clarity would also be consistent with the public interest 
and the protection of investors because investors will not be harmed 
and in fact would benefit from increased clarity, thereby reducing 
potential confusion. In addition, the Exchange believes that 
incorporating language relating to violations of the CAT Compliance 
Rules adopted by the Exchange's affiliates would promote fairness and 
consistency in the marketplace by eliminating differences and 
harmonizing language related to

[[Page 68773]]

minor rule treatment of similar rule violations across affiliates. The 
proposed change is not intended to make any substantive change to the 
applicability of minor rule fines to violations of the CAT Compliance 
Rules or the amount of those fines.

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 change is not 
designed to address any competitive issue but rather to update the 
Exchange's rules to strengthen 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-2022-72 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-2022-72. 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-2022-72 and should be submitted 
on or before December 8, 2022.

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.\12\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\13\ 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 \14\ 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,\15\ which 
governs minor rule violation plans.
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    \12\ 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).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \15\ 17 CFR 240.19d-1(c)(2).
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    As stated above, the Exchange proposes to amend Rule 10.9217 by: 
(1) adding Rule 2.1210 (Registration Requirements) to the list of minor 
rule violations, including in the fine schedules, for both the equities 
and options markets; and (2) making other clarifying and non-
substantive changes.
    The Commission believes that Rules 10.9216(b) and 10.9217 are an 
effective way to discipline a member for a minor violation of a rule. 
More specifically, the Commission believes that the proposed addition 
of Rule 2.1210 (Registration Requirements) to the Exchange's list of 
current minor rule violations 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. The Commission also believes that amending 
the associated fine schedule is consistent with the Act because it may 
help the Exchange's ability to better carry out its oversight and 
enforcement responsibilities by levying appropriate fines for minor 
violations of the rules included in Rule 10.9217, including minor 
violations of Rule 2.1210. Finally, the Commission believes that the 
Exchange's proposal to make certain non-substantive changes to Rule 
10.9217 are consistent with the Act because these changes will add 
clarity to the Exchange's rules.
    In approving the proposed rule change, the Commission in no way 
minimizes the importance of compliance with the Exchange's rules and 
all other rules subject to fines under Rules 10.9216(b) and 10.9217. 
The Commission believes that a violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, Rules 10.9216(b) and 10.9217 provide a reasonable means of 
addressing rule violations that may not rise to the level of requiring 
formal disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that the Exchange 
will continue to conduct surveillance with due diligence and make a 
determination based on its findings, on a case-by-case basis, whether a 
fine of more or less than the recommended amount is appropriate for a 
violation under Rules 10.9216(b) and 10.9217 or whether a violation 
requires formal disciplinary action.
    For the same reasons as discussed above, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\16\ 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 will

[[Page 68774]]

assist the Exchange in preventing fraudulent and manipulative practices 
by allowing the Exchange to adequately enforce compliance with, and 
provide appropriate discipline for, violations of Exchange rules. 
Moreover, the proposed changes raise no new or novel issues. 
Accordingly, the Commission believes that a full notice-and-comment 
period is not necessary before approving the proposal.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\17\ and Rule 19d-1(c)(2) thereunder,\18\ that the proposed rule change 
(SR-NYSEArca-2022-72) be, and hereby is, approved on an accelerated 
basis.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-24892 Filed 11-15-22; 8:45 am]
BILLING CODE 8011-01-P

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