[Federal Register Volume 79, Number 78 (Wednesday, April 23, 2014)]
[Notices]
[Pages 22709-22715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-09208]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71964; File No. 4-536]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Amended Plan for the
Allocation of Regulatory Responsibilities Between the Financial
Industry Regulatory Authority, Inc., the Chicago Board Options
Exchange, Incorporated, and C2 Options Exchange, Incorporated
April 17, 2014.
Pursuant to Section 17(d) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that
on March 24, 2014, the Financial Industry Regulatory Authority, Inc.
(``FINRA''), the Chicago Board Options Exchange, Incorporated
(``CBOE''), and C2 Options Exchange, Incorporated (``C2'')
(collectively, the ``Parties'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a plan for the allocation of
regulatory responsibilities, dated March 21, 2014 (``17d-2 Plan'' or
the ``Plan''). This Agreement amends and restates the agreement entered
into between NASD (n/k/a FINRA) and CBOE on April 4, 2007, entitled
``Agreement between NASD and CBOE Pursuant to Rule 17d-2 under the
Securities Exchange Act of 1934,'' and any subsequent amendments
thereafter. The Commission is publishing this notice to solicit
comments on the 17d-2 Plan from interested persons.
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\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
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I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) or Section 19(g)(2) of the Act.\4\ Without
this relief, the statutory obligation of each individual SRO could
result in a pattern of multiple examinations of broker-dealers that
maintain memberships in more than one SRO (``common members''). Such
regulatory duplication would add unnecessary expenses for common
members and their SROs.
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\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\6\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
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\5\ 15 U.S.C. 78q(d)(1).
\6\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\8\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
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\7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\8\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
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To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\9\ Rule 17d-2 permits SROs
to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and comment, it determines that
the plan is necessary or appropriate in the public interest and for the
protection of investors; to foster cooperation and coordination among
the SROs; to remove impediments to, and foster the development of, a
national market system and a national clearance and settlement system;
and is in conformity with the factors set forth in Section 17(d) of the
Act. Commission approval of a plan filed pursuant to Rule 17d-2
relieves an SRO of those regulatory responsibilities allocated by the
plan to another SRO.
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\9\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan
On May 14, 2007, the Commission declared effective the Plan entered
into between NASD (n/k/a FINRA) and CBOE for allocating regulatory
responsibility pursuant to Rule 17d-2 \10\. The Plan is intended to
reduce regulatory duplication for firms that are common members of both
CBOE and FINRA. The plan reduces regulatory duplication for firms that
are members of CBOE and FINRA by allocating regulatory responsibility
with respect to certain applicable laws, rules, and regulations,
including responsibility for CBOE rules applicable to the CBOE Stock
Exchange, LLC (``CBSX''), an equity exchange facility operated by CBOE.
Included in the Plan is an exhibit that lists every CBOE rule for which
FINRA bears responsibility under the Plan for overseeing and enforcing
with respect to CBOE members that are also members of FINRA and the
associated persons therewith.
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\10\ See Securities Exchange Act Release No. 55755 (May 14,
2007), 72 FR 28087 (May 18, 2007).
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III. Proposed Amendment to Plan
On March 24, 2014, the parties submitted a proposed amendment to
the
[[Page 22710]]
Plan. The primary purpose of the amendment is to add C2 as a
Participant to the Plan. The text of the proposed amended 17d-2 plan is
as follows (additions are italicized; deletions are [bracketed]):
AGREEMENT [BETWEEN NASD AND] AMONG FINANCIAL INDUSTRY REGULATORY
AUTHORITY, INC., CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, AND C2
OPTIONS EXCHANGE, INCORPORATED PURSUANT TO RULE 17d-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
This Agreement, by and [between the National Association of
Securities Dealers]among Financial Industry Regulatory Authority, Inc.
[(``NASD'') and] (``FINRA''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), and C2 Options Exchange, Incorporated (``C2'')
is made this 21st [4th] day of [April, 2007] March, 2014 (the
``Agreement''), pursuant to Section 17(d) of the Securities Exchange
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication.
[NASD]FINRA, [and] CBOE and C2 may be referred to individually as a
``party'' and together as the ``parties.''
This Agreement amends and restates the agreement entered into
between NASD (n/k/a FINRA) and CBOE on April 4, 2007, entitled
``Agreement between NASD and CBOE Pursuant to Rule 17d-2 under the
Securities Exchange Act of 1934,'' and any subsequent amendments
thereafter.
WHEREAS, [NASD and CBOE] the parties desire to reduce duplication
in the examination of their [Dual]Common Members (as defined herein)
and in the filing and processing of certain registration and membership
records as it relates to the CBOE options exchange, C2 options exchange
and the CBOE equity exchange facility operated by CBOE Stock Exchange,
LLC[;] (``CBSX''); and
WHEREAS, [NASD and CBOE]the parties desire to execute an agreement
covering such subjects pursuant to the provisions of Rule 17d-2 under
the Exchange Act and to file such agreement with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
NOW, THEREFORE, in consideration of the mutual covenants contained
hereinafter, [NASD and CBOE]the parties hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or the
context otherwise requires, the terms used in this Agreement shall have
the same meaning as they have under the Exchange Act and the rules and
regulations thereunder. As used in this Agreement, the following terms
shall have the following meanings:
(a) [``CBOE Rules'' or ``NASD Rules'' shall mean the rules of the
CBOE or NASD, respectively, as the rules]``Rule'' of an ``exchange'' or
an ``association'' shall have the meaning [are] defined in Exchange Act
Section 3(a)(27).
(b) ``Common Rules'' shall mean the CBOE Rules and C2 Rules that
are substantially similar to the applicable [NASD] FINRA Rules in that
examination for compliance with such [rules] Rules would not require
[NASD] FINRA to develop one or more new examination standards, modules,
procedures, or criteria in order to analyze the application of the
rule, or a [Dual] Common Member's activity, conduct, or output in
relation to such rule; provided, however, Common Rules shall not
include the application of SEC, CBOE, C2 or FINRA Rules as they pertain
to violations of insider trading activities, which is covered by a
separate 17d-2 Agreement by and among the BATS Exchange, Inc., BATS-Y
Exchange, Inc., CBOE, Chicago Stock Exchange, Inc., EDGA Exchange,
Inc., EDGX Exchange, Inc., FINRA, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX
LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New
York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc., effective
December 16, 2011, as may be amended from time to time.
(c) [``Dual Members'']``Common Members'' shall mean [those CBOE]
members [that are also members of NASD and the associated persons
therewith]of FINRA and at least one of CBOE or C2.
(d) ``Effective Date'' shall [have the meaning set forth in
paragraph 14]be the date this Agreement is approved by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with [the NASD]FINRA's Code of
Procedure (the Rule 9000 Series) and other applicable [NASD]FINRA
procedural [rules]Rules, to determine whether violations of pertinent
laws, rules or regulations have occurred, and if such violations are
deemed to have occurred, the imposition of appropriate sanctions as
specified under [the NASD's]FINRA's Code of Procedure and sanctions
guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the [Dual]Common Members with the Common Rules and the
provisions of the Exchange Act and the rules and regulations
thereunder, and other applicable laws, rules and regulations, each as
set forth on Exhibit 1 attached hereto.
2. Regulatory and Enforcement Responsibilities. [NASD]FINRA shall
assume Regulatory Responsibilities and Enforcement Responsibilities for
[Dual]Common Members. Attached as Exhibit 1 to this Agreement and made
part hereof, CBOE and C2 furnished [NASD]FINRA with a current list of
Common Rules and certified to [NASD]FINRA that such [rules]Rules are
substantially similar to the corresponding [NASD rule]FINRA Rule (the
``Certification''). [NASD]FINRA hereby agrees that the [rules]Rules
listed in the Certification are Common Rules as defined in this
Agreement. Each year following the Effective Date of this Agreement, or
more frequently if required by changes in [either the rules] the
Rulesof the parties, CBOE [or NASD, CBOE]and C2 shall submit an updated
list of Common Rules to [NASD]FINRA for review which shall add CBOE
[rules] or C2 Rulesnot included in the current list of Common Rules
that qualify as Common Rules as defined in this Agreement; delete CBOE
[rules]or C2 Rules included in the current list of Common Rules that no
longer qualify as Common Rules as defined in this Agreement; and
confirm that the remaining [rules]Rules on the current list of Common
Rules continue to be CBOE [rules]or C2 Rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of such
updated list, [NASD]FINRA shall confirm in writing whether the
[rules]Rules listed in any updated list are Common Rules as defined in
this Agreement. Notwithstanding anything herein to the contrary, it is
explicitly understood that the term ``Regulatory Responsibilities''
does not include, and CBOE and C2 shall retain full responsibility for
(unless otherwise addressed by separate agreement or rule) the
following, (collectively, the ``Retained Responsibilities''):
(a) Surveillance and enforcement with respect to trading activities
or practices involving CBOE's or C2's own marketplace, including
without limitation CBOE's [rules]or C2's Rules relating to the rights
and obligations of market makers;
(b) registration pursuant to [its]their applicable [rules]Rules of
associated persons (i.e., registration rules that are not Common
Rules);
(c) discharge of [its]their duties and obligations as a Designated
Examining
[[Page 22711]]
Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any CBOE Rules and C2 Rules that are not Common Rules.
3. [Dual]Common Members. Prior to the Effective Date, CBOE and C2
shall furnish [NASD]FINRA with a current list of [Dual]Common Members,
which shall be updated no less frequently than once [each quarter]every
six months.
4. No Charge. There shall be no charge to CBOE and C2 by
[NASD]FINRA for performing the Regulatory Responsibilities and
Enforcement Responsibilities under this Agreement except as hereinafter
provided. [NASD]FINRA shall provide CBOE and C2 with ninety (90) days
advance written notice in the event [NASD]FINRA decides to impose any
charges to CBOE and C2 for performing the Regulatory Responsibilities
under this Agreement. If [NASD]FINRA determines to impose a charge,
CBOE and C2 shall have the right at the time of the imposition of such
charge to terminate this Agreement; provided, however, that
[NASD's]FINRA's Regulatory Responsibilities under this Agreement shall
continue until the Commission approves the termination of this
Agreement.
5. Reassignment of Regulatory Responsibilities. Notwithstanding any
provision hereof, this Agreement shall be subject to any statute, or
any rule or order of the Commission, or industry agreement,
restructuring the regulatory framework of the securities industry or
reassigning Regulatory Responsibilities between self-regulatory
organizations. To the extent such action is inconsistent with this
Agreement, such action shall supersede the provisions hereof to the
extent necessary for them to be properly effectuated and the provisions
hereof in that respect shall be null and void.
6. Notification of Violations. In the event that [NASD]FINRA
becomes aware of apparent violations of any CBOE or C2 Rules, which are
not listed as Common Rules, discovered pursuant to the performance of
the Regulatory Responsibilities assumed hereunder, [NASD]FINRA shall
notify CBOE and C2 of those apparent violations for such response as
CBOE and C2 deems appropriate. [Apparent violations of all other
applicable rules, including]In the event, CBOE or C2 becomes aware of
apparent violations of [the]any Common Rules[, various securities acts,
and rules and regulations thereunder,] discovered pursuant to the
Retained Responsibilities, CBOE and C2 shall notify FINRA of those
apparent violations and such matters shall be handled by FINRA as
provided in this Agreement. Apparent violations of Common Rules shall
be processed by, and enforcement proceedings in respect thereto shall
be conducted by [NASD]FINRA as provided hereinbefore; provided,
however, that in the event a [Dual]Common Member is the subject of an
investigation relating to a transaction on the CBOE or C2 options
exchanges or the CBSX, CBOE and C2 may in [its]their discretion assume
concurrent jurisdiction and responsibility. Each party agrees to make
available promptly all files, records and witnesses necessary to assist
the other in its investigation or proceedings.
7. Continued Assistance. [NASD]FINRA shall make available to CBOE
and C2 all information obtained by [NASD]FINRA in the performance by it
of the Regulatory Responsibilities hereunder in respect to the
[Dual]Common Members subject to this Agreement. In particular, and not
in limitation of the foregoing, [NASD]FINRA shall furnish CBOE and C2
any information it obtains about [Dual]Common Members which reflects
adversely on their financial condition. It is understood that such
information is of an extremely sensitive nature and, accordingly, CBOE
[acknowledges and agrees]and C2 acknowledge and agree to take all
reasonable steps to maintain its confidentiality. CBOE and C2 shall
make available to [NASD]FINRA any information coming to [its]their
attention that reflects adversely on the financial condition of
[Dual]Common Members or indicates possible violations of applicable
laws, rules or regulations by such firms.
8. [Dual]Common Member Applications.
(a) [Dual]Common Members subject to this Agreement shall be
required to submit, and [NASD]FINRA shall be responsible for processing
and acting upon all applications submitted on behalf of allied persons,
partners, officers, registered personnel and any other person required
to be approved by the [rules of both CBOE and NASD]Rules of the parties
or associated with [Dual]Common Members thereof. Upon request,
[NASD]FINRA shall advise CBOE and C2 of any changes of allied members,
partners, officers, registered personnel and other persons required to
be approved by the [rules of both CBOE and NASD]Rules of the parties.
(b) [Dual]Common Members shall be required to send to [NASD]FINRA
all letters, termination notices or other material respecting the
individuals listed in paragraph 8(a).
(c) When as a result of processing such submissions [NASD]FINRA
becomes aware of a statutory disqualification as defined in the
Exchange Act with respect to a [Dual]Common Member, [NASD]FINRA shall
determine pursuant to Sections 15A(g) and/or Section 6(c) of the
Exchange Act the acceptability or continued applicability of the person
to whom such disqualification applies and keep CBOE and C2 advised of
its actions in this regard for such subsequent proceedings as CBOE and
C2 may initiate.
(d) Notwithstanding the foregoing, [NASD]FINRA shall not review the
membership application, reports, filings, fingerprint cards, notices,
or other writings filed to determine if such documentation submitted by
a broker or dealer, or a person associated therewith or other persons
required to register or qualify by examination meets the CBOE or C2
requirements for general membership or for specified categories of
membership or participation in the CBOE or C2. [NASD]FINRA shall not
review applications or other documentation filed to request a change in
the rights or status described in this paragraph 8(d), including
termination or limitation on activities, of a member or a participant
of the CBOE or C2, or a person associated with, or requesting
association with, a member or participant of the CBOE or C2.
9. Branch Office Information. [NASD]FINRA shall also be responsible
for processing and, if required, acting upon all requests for the
opening, address changes, and terminations of branch offices by
[Dual]Common Members and any other applications required of
[Dual]Common Members with respect to the Common Rules as they may be
amended from time to time. Upon request, [NASD]FINRA shall advise CBOE
and C2 of the opening, address change and termination of branch and
main offices of [Dual]Common Members and the names of such branch
office managers.
10. Customer Complaints. CBOE and C2 shall forward to [NASD]FINRA
copies of all customer complaints involving [Dual]Common Members
received by CBOE and C2 relating to [NASD's]FINRA's Regulatory
Responsibilities under this Agreement. It shall be [NASD's]FINRA's
responsibility to review and take appropriate action in respect to such
complaints.
11. Advertising. [NASD]FINRA shall assume responsibility to review
the advertising of [Dual]Common Members subject to the Agreement,
provided that such material is filed with [NASD]FINRA in accordance
with [NASD's]FINRA's filing procedures and
[[Page 22712]]
is accompanied with any applicable filing fees set forth in [NASD]FINRA
Rules. Such review shall be made in accordance with then applicable
[NASD rules]FINRA Rules and interpretations. The advertising of
[Dual]Common Members shall be subject only to compliance with
appropriate [NASD rules]FINRA Rules and interpretations.
12. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of
[either]any party to conduct its own independent or concurrent
investigation, examination or enforcement proceeding of or against
[Dual]Common Members, as [either]any party, in its sole discretion,
shall deem appropriate or necessary.
13. Termination. This Agreement may be terminated by [CBOE or
NASD]any party at any time upon the approval of the Commission after
one (1) year's written notice (or such shorter time as may be agreed by
the parties) to the other [party]parties, except as provided in
paragraph 4.
14. Effective Date. This Agreement shall be effective upon approval
of the Commission.
15. Arbitration. In the event of a dispute [between]among the
parties as to the operation of this Agreement, [CBOE and NASD]the
parties hereby agree that any such dispute shall be settled by
arbitration in Washington, DC in accordance with the rules of the
American Arbitration Association then in effect, or such other
procedures as the parties may mutually agree upon. Judgment on the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction.
16. Separate Agreement. This Agreement is wholly separate from the
following agreement: (1) The multiparty Agreement made pursuant to Rule
17d-2 of the Exchange Act [between the American Stock Exchange LLC, the
Boston Stock]among BATS Exchange, Inc., [the Chicago Board]BOX Options
Exchange, [Incorporated]LLC, CBOE, C2, the International Securities
Exchange LLC, [the National Association of Securities Dealers,
Inc.,]FINRA, the New York Stock Exchange, LLC, NYSE Amex LLC, the NYSE
Arca, Inc., [and the Philadelphia Stock Exchange, Inc.]and The NASDAQ
Stock Market LLC, NASDAQ OMX BX, Inc., and NASDAQ OMX PHLX LLC
involving the allocation of regulatory responsibilities with respect to
common members for compliance with common rules relating to the conduct
by broker-dealers of accounts for listed options or index warrants
entered into on [December 1, 2006] April 25, 2012, and as may be
amended from time to time; and (2) the multiparty Agreement made
pursuant to Rule 17d-2 of the Exchange Act among NYSE Amex LLC, BATS
Exchange, Inc., C2, CBOE, International Securities Exchange LLC, FINRA,
NYSE Arca, Inc., The NASDAQ Stock Market LLC, the BOX Options Exchange,
LLC, NASDAQ OMX BX, Inc. and NASDAQ OMX PHLX LLC involving the
allocation of regulatory responsibilities with respect to SRO market
surveillance of common members activities with regard to certain common
rules relating to listed options entered into on April 25, 2012, and as
may be amended from time to time.
17. Notification of Members. [CBOE and NASD]The parties shall
notify [Dual]Common Members of this Agreement after the Effective Date
by means of a uniform joint notice.
18. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
19. Limitation of Liability. [Neither NASD nor CBOE]None of the
parties nor any of their respective directors, governors, officers or
employees shall be liable to [the]any other party to this Agreement for
any liability, loss or damage resulting from or claimed to have
resulted from any delays, inaccuracies, errors or omissions with
respect to the provision of Regulatory Responsibilities as provided
hereby or for the failure to provide any such responsibility, except
with respect to such liability, loss or damages as shall have been
suffered by [one or the other of NASD or CBOE]any party and caused by
the willful misconduct [of the other]another party or their respective
directors, governors, officers or employees. No warranties, express or
implied, are made by [NASD or CBOE]any party hereto with respect to any
of the responsibilities to be performed by [each of] them hereunder.
20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, [NASD]FINRA,
C2 and CBOE join in requesting the Commission, upon its approval of
this Agreement [or any part thereof], to relieve CBOE and C2 of any and
all responsibilities with respect to matters allocated to [NASD]FINRA
pursuant to this Agreement; provided, however, that this Agreement
shall not be effective until the Effective Date.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each party has executed or caused this
Agreement to be executed on its behalf by a duly authorized officer as
of the date first written above.
[NATIONAL ASSOCIATION OF SECURITIES DEALERS]FINANCIAL INDUSTRY
REGULATORY AUTHORITY, INC.
By---------------------------------------------------------------------
Name:
Title:
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
By---------------------------------------------------------------------
Name:
Title:
C2 OPTIONS EXCHANGE, INCORPORATED
By---------------------------------------------------------------------
Name:
Title:
Exhibit 1 *
CBOE AND C2 CERTIFICATION OF COMMON RULES
CBOE and C2 hereby [certifies] certify that the requirements
contained in the [CBOE] Rules listed below are identical to, or
substantially similar to, the NASD/FINRA or SEC Rules identified.\[1]\
----------------------------------------------------------------------------------------------------------------
NASD/FINRA or SEC
C2 Rule(s) CBOE Rule(s) CBSX \1\ Rule(s) \2\
----------------------------------------------------------------------------------------------------------------
Chapter 4 Business Conduct CBOE Rule 4.18 Prevention of the Appendix A--CBOE Rule Section 15(f) of the
4.18 is incorporated by reference. Misuse of Material, 4.18 is incorporated Securities Exchange
Nonpublic Information. by reference. Act of 1934 (Exchange
Act) [\3\]
Chapter 4 Business Conduct CBOE Rule 4.20 Anti-Money Appendix A--CBOE Rule FINRA Rule 3310 [3011]
4.20 is incorporated by reference. Laundering Compliance 4.20 is incorporated Anti-Money Laundering
Program. by reference. Compliance Program \3\
[[Page 22713]]
Chapter 9 Doing Business with the 9.3 Registration and 53.6(i) Applicability NASD Rule 1031(a), (b)
Public--CBOE Rule 9.3 incorporated Termination of of Chapter IX--CBOE Registration
by reference **. Representatives **. Rule 9.3 is Requirements,
incorporated by [1140(a), (d)] FINRA
reference. Rule 1010(a) and (e)
Electronic Filing
[Rules] Requirements
for Uniform Forms, and
[NASD] FINRA By-Laws,
Art. V, Sections 2 and
3 Registered
Representatives and
Associated Persons
Chapter 9 Doing Business with the 9.3A Continuing 53.6(i) Applicability FINRA Rule 1250 [1120]
Public--CBOE Rule 9.3A is Education For of Chapter IX--CBOE Continuing Education
incorporated by reference. Registered Persons. Rule 9.3A is Requirements \4\
incorporated by
reference.
Chapter 9 Doing Business with the 9.4(a) Other 53.6(i) Applicability FINRA Rule 3270 [3030]
Public--CBOE Rule 9.4(a) is Affiliations of of Chapter IX--CBOE Outside Business
incorporated by reference. Registered Associated Rule 9.4(a) is Activities of [an
Persons. incorporated by Associated] Registered
reference. Persons \5\
Chapter 9 Doing Business with the 9.12 Statements of 53.6(i) Applicability NASD Rule 2340 Customer
Public--CBOE Rule 9.12 incorporated Accounts to of Chapter IX--CBOE Account Statements
by reference **. Customers[\4\] **. Rule 9.12 is
incorporated by
reference \6\.
Chapter 9 Doing Business with the 9.13 Statement of 53.6(i) Applicability Exchange Act Rule 17a-5
Public--CBOE Rule 9.13 is Financial Condition to of Chapter IX--CBOE \7\
incorporated by reference. Customers. Rule 9.13 is
incorporated by
reference.
Chapter 9 Doing Business with the 9.16 Restrictions on 53.6(i) Applicability FINRA Rule 2150(a)
Public--CBOE Rule 9.16 is Pledge and Lending of of Chapter IX--CBOE Improper Use of
incorporated by reference. Customers' Securities. Rule 9.16 is Customers' Securities
incorporated by or Funds; Prohibition
reference. Against Guarantees and
Sharing in Accounts,
and NASD Rule
2330[(a)](b)-(d)
Customers' Securities
or Funds
Chapter 9 Doing Business with the 9.18 Guarantees and 53.6(i) Applicability FINRA Rule 2150(b) and
Public--CBOE Rule 9.18 incorporated Profit Sharing **. of Chapter 9--CBOE (c) Improper Use of
by reference **. Rule 9.18 is Customers' Securities
incorporated by or Funds; Prohibition
reference. Against Guarantees and
Sharing in Accounts
\8\ [2330(e) & (f)
Customers' Securities
or Funds \5\]
Chapter 9 Doing Business with the 9.20 Transfer of 53.6(i) Applicability FINRA Rule 11870
Public--CBOE Rule 9.20 is Accounts. of Chapter 9--CBOE Customer Account
incorporated by reference. Rule 9.20 is Transfer Contracts
incorporated by
reference.
Chapter 9 Doing Business with the 9.23 Customer 53.7 Record of Written FINRA Rule 4513 Records
Public--CBOE Rule 9.23 incorporated Complaints[\6\] **. Complaints \9\. of Written Customer
by reference **. Complaints [3110(d)
Books and Records]
Chapter 9 Doing Business with the 9.24 Telephone Appendix A--CBOE Rule FINRA Rule 3230
Public--CBOE Rule 9.24 is Solicitation. 9.24 is incorporated Telemarketing [2212
incorporated by reference. by reference. Telemarketing and
3110(g) Books and
Records]
Chapter 9 Doing Business with the 9.25 Borrowing From or ....................... FINRA Rule 3240 [2370]
Public--CBOE Rule 9.25 is Lending to Customers. Borrowing From or
incorporated by reference. Lending to Customers
Chapter 9 Doing Business with the 9.7 Opening of Accounts 53.6(c) Duty to Know FINRA Rule 2090 Know
Public--CBOE Rule 9.7 incorporated ** [53.6(c) Duty to and Approve Customers. Your Customer \10\ and
by reference **. Know and Approve FINRA Rule 4512
Customers]. Customer Account
Information [2310
Recommendations to
Customers
(Suitability) and
3110(c) Books and
Records]
Chapter 9 Doing Business with the 9.6 Branch Offices of 53.6(d) Branch Offices NASD Rule 1021(a)
Public--CBOE Rule 9.6 incorporated TPH Organizations ** of TPH Organizations. Registration
by reference **. [53.6(d) Branch Requirements and NASD
Offices of Member IM-1000-4 Branch
Organizations]. Offices and Offices of
Supervisory
Jurisdiction
Chapter 9 Doing Business with the 9.10 Discretionary 53.6(e) Discretionary NASD Rule 2510
Public--CBOE Rule 9.10 incorporated Accounts ** [53.6(e) Accounts. Discretionary
by reference **. Discretionary Accounts, Exchange Act
Accounts]. Rule 17a-3(a)(6)(i)
\11\
Chapter 9 Doing Business with the 9.11 Confirmation to 53.6(f) Confirmation to FINRA Rule 2232
Public--CBOE Rule 9.11 incorporated Customers ** [53.6(f) Customers. Customer [2230]
by reference **. Confirmation to Confirmations and
Customers]. Exchange Act Rule 10b-
10[\7\] \12\
[53.6(g) Communications ....................... [2210(b) and (d)
to Customers. Communications with
the Public and IM-2210-
1(6) Guidelines to
Ensure that
Communications With
The Public Are Not
Misleading]
[[Page 22714]]
Chapter 9 Doing Business with the 9.8 Supervision of 53.6(h) Supervision of NASD Rule 3010(a), (b)
Public--CBOE Rule 9.8 incorporated Accounts ** [53.6(h) Accounts. Supervision [and
by reference **. Supervision of 3110(c) Books and
Accounts]. Records]*
----------------------------------------------------------------------------------------------------------------
* The Commission notes that although CBSX was covered by the original Plan, the Parties have determined to
explicitly list CBSX rules in the exhibit as part of the proposed amended 17d-2 Plan, to provide additional
clarity. See Email from Kathryn Moore, Associate General Counsel, FINRA, to Sonia Trocchio, Special Counsel,
Division of Trading and Markets, Commission (April 10, 2014).
\1\ [To the extent that any CBOE Rule listed herein makes reference to options, such rule] The rules applicable
to CBSX are Chapters 50 through 54 and Appendix A of the CBOE rules. Any reference to options shall be read to
equity securities [as provided in] (See e.g., CBOE Rule 53.6).
\2\ CBOE and C2, as applicable, will be responsible for any significant differences between its rules and the
comparable NASD/FINRA rule identified.
[\3\ NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement to have Form X-17A-5
filed with CBOE; responsibility for such requirement remains with CBOE.]
\3\ FINRA shall not have any Regulatory Responsibilities regarding the requirement to conduct independent
testing during the first calendar year of a broker-dealer becoming a Trading Permit Holder or TPH
organization; responsibility for such requirement remains with CBOE and C2, as applicable.
\4\ FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time is
consistently granted.
\5\ FINRA shall not have any Regulatory Responsibilities regarding the requirement that the Trading Permit
Holder provide prior written consent to the TPH organization; responsibility for such requirement remains with
CBOE and C2, as applicable.
[\4\]\6\ FINRA [NASD] shall not have any Regulatory Responsibilities regarding the CBOE requirement that the
statement have a legend requesting the customer to advise the member of any material change in the customer's
investment objectives or financial situation; responsibility for such requirement remains with CBOE.
\7\ FINRA shall not have any Regulatory Responsibilities regarding the CBOE and C2 requirement to have Form X-
17A-5 filed with CBOE and C2, as applicable; responsibility for such requirement remains with CBOE and C2, as
applicable.
\8\ [\5\ The NASD Rule] FINRA Rule 2150 requires, among other things, prior written approval of the member
employing the associated person in order for such associated person to share in accounts of a customer,
whereas the CBOE rule requires consent of the member carrying the account. To the extent that the employing
member and carrying member are different firms, the [NASD's and CBOE's rule] FINRA and CBOE rules differ, and
[NASD's] FINRA's Regulatory [Responsibility] Responsibilities will not cover the CBOE['s] rule; responsibility
for such requirement remains with CBOE.
\9\ FINRA shall only have Regulatory Responsibilities to the extent records must be kept for four years. [\6\
NASD shall not have any Regulatory Responsibilities regarding the CBOE requirement of what must be contained
in the complaint file or the timing during which the compliant must be send to the central file by the branch
office; responsibility for such requirement remains with CBOE.]
\10\ FINRA shall only have regulatory Responsibilities with regard to the first sentence of CBSX Rule 53.6(c);
responsibility for the remainder of the rule remains with CBOE.
\11\ NASD Rule 2510 requires review of transactions in discretionary accounts by ``the member or person duly
designated.'' However, CBSX Rule 53.6(e)(3) requires approval of discretionary accounts by ``a person other
than a person using the discretionary authority.'' To the extent this requirement of approval by a person
other than a person using the discretionary authority applies, FINRA's Regulatory Responsibilities will not
cover CBSX's rule; responsibility for such requirement remains with CBOE.
[\7\ NASD] \12\ FINRA shall not have any Regulatory Responsibilities regarding the [CBOE] CBSX requirements to
disclose on a confirmation; 1) the settlement date of a transaction to the extent it is not required by FINRA
Rule 2232(b)(1); or 2) whether a transaction was executed on the [CBOE]CBSX; reasonability for such
requirements remains with CBOE.
*FINRA shall not have any Regulatory Responsibilities for these Rules as they pertain to violations of insider
trading activities, which is covered by a separate 17d-2 Agreement by and among the BATS Exchange, Inc., BATS-
Y Exchange, Inc., CBOE, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., FINRA, NASDAQ
OMX BX, Inc., NADAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York
Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc., effective December 16, 2011, as may be amended from time to
time.
**FINRA shall not have an Regulatory Responsibilities for these Rules as they pertain to violations of sales
practice activities, which is covered by a separate 17d-2 Agreement by and among NYSE MKT LLC, BATS Exchange,
Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange,
Incorporated, the International Securities Exchange LLC, FINRA, NYSE Arca Inc., The NASDAQ Stock Market LLC,
NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., Miami International Securities Exchange, LLC, and Topaz
Exchange, LLC, effective July 26, 2013, as may be mended from time to time.
The following provisions are covered:
Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements
Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements
Rule 204 of Regulation SHO--Close-Out Requirement
Rule 105 of Regulation M--Short Selling in Connection with a
Public Offering
Section 14(e) of the Exchange Act
Rule 14e-4 of the Exchange Act--Prohibited Transactions in
Connection with Partial Tender Offers
Regulation ATS
Regulation S-P
IV. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \11\ and Rule 17d-2
thereunder,\12\ after May 8, 2014, the Commission may, by written
notice, declare the plan submitted by CBOE, C2, and FINRA, File No. 4-
536, to be effective if the Commission finds that the plan is necessary
or appropriate in the public interest and for the protection of
investors, to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development
of the national market system and a national system for the clearance
and settlement of securities transactions and in conformity with the
factors set forth in Section 17(d) of the Act.
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\11\ 15 U.S.C. 78q(d)(1).
\12\ 17 CFR 240.17d-2.
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V. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the proposed 17d-2 Plan and to relieve CBOE and C2 of the
responsibilities which would be assigned to FINRA, interested persons
are invited to submit written data, views, and arguments concerning the
foregoing. Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
Send an email to [email protected]. Please include
File Number 4-536 on the subject line.
[[Page 22715]]
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street NE., Washington,
DC 20549-1090.
All submissions should refer to File Number 4-536. 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 Web site (http://www.sec.gov/rules/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan 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 Web site viewing and printing in the
Commission's Public Reference Room, on official business days between
the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be
available for inspection and copying at the principal offices of CBOE,
C2, and FINRA. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number 4-536
and should be submitted on or before May 8, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(34).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09208 Filed 4-22-14; 8:45 am]
BILLING CODE 8011-01-P