[Federal Register Volume 81, Number 153 (Tuesday, August 9, 2016)]
[Notices]
[Pages 52717-52718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18794]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78474; File No. 4-701]
Self-Regulatory Organizations; Investors Exchange LLC; Order
Declaring Effective a Minor Rule Violation Plan
August 3, 2016.
On July 11, 2016, Investors Exchange LLC (``IEX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed minor rule violation plan (``MRVP'' or ``Plan'') pursuant to
Section 19(d)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP was published for
public comment on July 18, 2016.\3\ The Commission received no comments
on the proposal. This order declares the Exchange's proposed MRVP
effective.
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\1\ 15 U.S.C. 78s(d)(1).
\2\ 17 CFR 240.19d-1(c)(2).
\3\ See Securities Exchange Act Release No. 78300 (July 12,
2016), 81 FR 46730 (``Notice'').
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The Exchange's MRVP specifies the rule violations which will be
included in the Plan and will have sanctions not exceeding $2,500. Any
violations which are resolved under the MRVP would not be subject to
the provisions of Rule 19d-1(c)(1) of the Act,\4\ which requires that a
self-regulatory organization (``SRO'') promptly file notice with the
Commission of any final disciplinary action taken with respect to any
person or organization.\5\ In accordance with Rule 19d-1(c)(2) under
the Act,\6\ the Exchange proposed to designate certain specified rule
violations as minor rule violations, and requested that it be relieved
of the prompt reporting requirements regarding such violations,
provided it gives notice of such violations to the Commission on a
quarterly basis.
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\4\ 17 CFR 240.19d-1(c)(1).
\5\ The Commission adopted amendments to paragraph (c) of Rule
19d-1 to allow SROs to submit for Commission approval plans for the
abbreviated reporting of minor disciplinary infractions. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23828 (June 8, 1984). Any disciplinary action taken by an SRO
against any person for violation of a rule of the SRO which has been
designated as a minor rule violation pursuant to such a plan filed
with and declared effective by the Commission is not considered
``final'' for purposes of Section 19(d)(1) of the Act if the
sanction imposed consists of a fine not exceeding $2,500 and the
sanctioned person has not sought an adjudication, including a
hearing, or otherwise exhausted his administrative remedies.
\6\ 17 CFR 240.19d-1(c)(2).
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The Exchange proposed to include in its MRVP the procedures
included in Exchange Rule 9.216(b) (``Procedure for Violation Under
Plan Pursuant to Exchange Act Rule 19d-1(c)(2)'') and the violations to
be included in Exchange Rule 9.218 (``Violations Appropriate for
Disposition Under Plan Pursuant to Exchange Act Rule 19d-1(c)(2)'').\7\
According to the Exchange's
[[Page 52718]]
proposed MRVP, under Rule 9.216(b), the Exchange may impose a fine (not
to exceed $2,500) and/or a censure on any Member or associated person
with respect to any rule listed in IEX Rule 9.218. If the Financial
Industry Regulatory Authority Department of Enforcement or the
Department of Market Regulation, on behalf of the Exchange, has reason
to believe a violation has occurred and if the Member or associated
person does not dispute the violation, the Department of Enforcement or
the Department of Market Regulation may prepare and request that the
Member or associated person execute a minor rule violation plan letter
accepting a finding of violation, consenting to the imposition of
sanctions, and agreeing to waive the Member's or associated person's
right to a hearing before a Hearing Panel or, if applicable, an
Extended Hearing Panel, and any right of appeal to the IEX Appeals
Committee, the Board, the Commission, and the courts, or to otherwise
challenge the validity of the letter, if the letter is accepted. The
letter must describe the act or practice engaged in or omitted, the
rule, regulation, or statutory provision violated, and the sanction or
sanctions to be imposed. Unless the letter states otherwise, the
effective date of any sanction imposed will be a date to be determined
by IEX Regulation staff. In the event the letter is not accepted by the
Member or associated person, or is rejected by the Office of
Disciplinary Affairs, the matter can proceed in accordance with the
Exchange's disciplinary rules, which include hearing rights for formal
disciplinary proceedings.\8\
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\7\ The Exchange received its grant of registration on June 17,
2016, which included approving the rules that govern the Exchange.
See Securities Exchange Act Release No. 78101 (June 17, 2016), 81 FR
41141 (June 23, 2016) (File No. 10-222).
Under the proposed MRVP, violations of the following rules would
be appropriate for disposition under the MRVP: Rule 2.160(p)--
Continuing Education Requirements; Rule 4.511 (General Requirements
related to books and records requirements); Rule 4.540 (Furnishing
of records); Rule 5.110 (Supervision); Rule 8.220 (Automated
submission of trading data requested); Rule 11.151(a)(1) (Market
Maker two-sided quotation requirement); Rule 11.290 (Short sales);
Rule 11.310 (Locking or crossing quotations in NMS stocks); and Rule
11.420 (Order audit trail system requirements). See Notice, supra
note 3. When IEX's MRVP is declared effective, IEX will file a
proposed rule change to amend Rule 9.218 to specify the violations
to be included in the MRVP.
\8\ See, Notice, supra note 3.
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Once IEX's MRVP is effective, the Exchange will provide to the
Commission a quarterly report for any actions taken on minor rule
violations under the MRVP. The quarterly report will include: The
Exchange's internal file number for the case, the name of the
individual and/or organization, the nature of the violation, the
specific rule provision violated, the sanction imposed, the number of
times the rule violation occurred, and the date of the disposition.\9\
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\9\ The Exchange attached a sample form of the quarterly report
with its submission to the Commission.
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The Commission finds that the proposal is consistent with the
public interest, the protection of investors, and otherwise in
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2)
under the Act,\10\ because the MRVP will permit the Exchange to carry
out its oversight and enforcement responsibilities as an SRO more
efficiently in cases where full disciplinary proceedings are not
necessary due to the minor nature of the particular violation.
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\10\ 17 CFR 240.19d-1(c)(2).
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In declaring the Exchange's MRVP effective, the Commission in no
way minimizes the importance of compliance with Exchange rules and all
other rules subject to the imposition of sanctions under Exchange Rule
9.216(b). The Commission believes that the violation of an SRO's rules,
as well as Commission rules, is a serious matter. However, Exchange
Rule 9.216(b) 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 expects that the Exchange will continue to conduct
surveillance and make determinations based on its findings, on a case-
by-case basis, regarding whether a sanction under the MRVP is
appropriate, or whether a violation requires formal disciplinary
action.
IT IS THEREFORE ORDERED, pursuant to Rule 19d-1(c)(2) under the
Act,\11\ that the proposed MRVP for Investors Exchange LLC, File No. 4-
701, be, and hereby is, declared effective.
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\11\ Id.
\12\ 17 CFR 200.30-3(a)(44).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18794 Filed 8-8-16; 8:45 am]
BILLING CODE 8011-01-P