[Federal Register Volume 83, Number 123 (Tuesday, June 26, 2018)]
[Notices]
[Pages 29850-29855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13594]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83477; File No. 4-709]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amended Plan for the Allocation of Regulatory
Responsibilities Between the Financial Industry Regulatory Authority,
Inc. and BOX Options Exchange LLC
June 20, 2018.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility (``Plan'') filed on June 13, 2018, pursuant to Rule 17d-
2 of the Act,\2\ by the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and BOX Options Exchange LLC (``BOX'') (collectively,
``Participating Organizations'' or ``parties''). This agreement amends
and restates the agreement entered into between FINRA and BOX on March
2, 2017, entitled ``Agreement Between Financial Industry Regulatory
Authority, Inc. and BOX Options Exchange LLC Pursuant to Rule 17d-2
under the Securities Exchange Act of 1934,'' and any subsequent
amendments thereafter.
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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) \4\ or Section 19(g)(2) \5\ of the Act.
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).
\5\ 15 U.S.C. 78s(g)(2).
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Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ 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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\6\ 15 U.S.C. 78q(d)(1).
\7\ 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.\8\ 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.\9\ 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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\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ 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.\10\ Rule 17d-2 permits
SROs to propose
[[Page 29851]]
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 opportunity for 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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\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan
On April 6, 2017, the Commission declared effective the Plan
entered into between FINRA and BOX for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to
reduce regulatory duplication for firms that are common members of
FINRA and BOX by allocating regulatory responsibility with respect to
certain applicable laws, rules, and regulations that are common among
them. Included in the Plan is an exhibit that lists every BOX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to BOX members that are also members of FINRA
and the associated persons therewith (``Certification'').
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\11\ See Securities Exchange Act Release No. 80388 (April 6,
2017), 82 FR 17712 (April 12, 2017).
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III. Proposed Amendment to the Plan
On June 13, 2018, the parties submitted a proposed amendment to the
Plan (``Amended Plan''). The primary purpose of the Amended Plan is to
allocate surveillance, investigation, and enforcement responsibilities
for Rule 14e-4 under the Act, as well as certain provisions of
Regulation SHO. The text of the proposed Amended Plan is as follows
(additions are italicized; deletions are [bracketed]):
* * * * *
Agreement Between Financial Industry Regulatory Authority, Inc. and BOX
Options Exchange LLC Pursuant to Rule 17d-2 Under the Securities
Exchange Act of 1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and BOX Options Exchange LLC (``BOX''), is
made this [2nd day of March, 2017] 13th day of June, 2018 (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. FINRA
and BOX may be referred to individually as a ``party'' and together as
the ``parties.''
This Agreement amends and restates this agreement entered into
between FINRA and BOX on March 2, 2017, entitled ``Agreement between
Financial Industry Regulatory Authority, Inc. and BOX Options Exchange
LLC Pursuant to Rule 17d-2 under the Securities Exchange Act of 1934,''
and any subsequent amendments thereafter.
Whereas, FINRA and BOX desire to reduce duplication in the
examination of their Dual Members (as defined herein) and in the filing
and processing of certain registration and membership records; and
Whereas, FINRA and BOX 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, FINRA and BOX 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) ``BOX Rules'' or ``FINRA Rules'' shall mean: (i) The rules of
BOX, or (ii) the rules of FINRA, respectively, as the rules of an
exchange or association are defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean BOX Rules that are substantially
similar to the applicable FINRA Rules and certain provisions of the
Exchange Act and SEC rules set forth on Exhibit 1 in that examination
for compliance with such provisions and rules would not require FINRA
to develop one or more new examination standards, modules, procedures,
or criteria in order to analyze the application of the provision or
rule, or a Dual Member's activity, conduct, or output in relation to
such provision or rule. Common Rules shall not include any provisions
regarding (i) notice, reporting or any other filings made directly to
or from BOX, (ii) [compliance with other referenced]incorporation by
reference of BOX Rules that are not Common Rules, (iii) exercise of
discretion in a manner that differs from FINRA's exercise of discretion
including, but not limited to exercise of exemptive authority[,] by
BOX, (iv) prior written approval of BOX and (v) payment of fees or
fines to BOX.
(c) ``Dual Members'' shall mean those BOX members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural rules, to
determine whether violations of Common Rules have occurred, and if such
violations are deemed to have occurred, the imposition of appropriate
sanctions as specified under 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 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. The term ``Regulatory Responsibilities'' shall also
include the surveillance, investigation and Enforcement
Responsibilities relating to compliance by Common Members with Rule
14e-4 of the Securities Exchange Act (``Rule 14e-4''), with a focus on
the standardized call option provision of Rule 14e-4(a)(1)(ii)(D).
2. Regulatory and Enforcement Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
BOX furnished FINRA with a current list of Common Rules and certified
to FINRA that such rules that are BOX Rules are substantially similar
to the corresponding FINRA Rules (the ``Certification''). FINRA hereby
agrees that the 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 of BOX or FINRA, BOX shall submit an updated list of Common Rules
to FINRA for review which shall add BOX Rules not
[[Page 29852]]
included in the current list of Common Rules that qualify as Common
Rules as defined in this Agreement; delete BOX 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 on the
current list of Common Rules continue to be BOX Rules that qualify as
Common Rules as defined in this Agreement. Within 30 days of receipt of
such updated list, FINRA shall confirm in writing whether the 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 BOX shall retain full responsibility for (unless
otherwise addressed by separate agreement or rule) (collectively, the
``Retained Responsibilities'') the following:
(a) Surveillance, examination, investigation and enforcement with
respect to trading activities or practices involving BOX's own
marketplace;
(b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any BOX Rules that are not Common Rules as provided in
paragraph 6.
3. Dual Members. Prior to the Effective Date, BOX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no charge to BOX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
FINRA shall provide BOX with ninety (90) days advance written notice in
the event FINRA decides to impose any charges to BOX for performing the
Regulatory Responsibilities under this Agreement. If FINRA determines
to impose a charge, BOX shall have the right at the time of the
imposition of such charge to terminate this Agreement; provided,
however, that FINRA's Regulatory Responsibilities under this Agreement
shall continue until the Commission approves the termination of this
Agreement.
5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be subject
to any statute, or any rule or order of the SEC. To the extent such
statute, rule or order is inconsistent with one or more provisions of
this Agreement, the statute, rule or order shall supersede the
provision(s) hereof to the extent necessary to be properly effectuated
and the provision(s) hereof in that respect shall be null and void.
6. Notification of Violations. In the event that FINRA becomes
aware of apparent violations of any BOX Rules, which are not listed as
Common Rules, discovered pursuant to the performance of the Regulatory
Responsibilities assumed hereunder, FINRA shall notify BOX of those
apparent violations for such response as BOX deems appropriate. In the
event that BOX becomes aware of apparent violations of any Common
Rules, discovered pursuant to the performance of the Retained
Responsibilities, BOX 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
FINRA as provided hereinbefore; provided, however, that in the event a
Dual Member is the subject of an investigation relating to a
transaction on BOX, BOX may in its 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.
(a) FINRA shall make available to BOX all information obtained by
FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this Agreement.
In particular, and not in limitation of the foregoing, FINRA shall
furnish BOX any information it obtains about Dual Members which
reflects adversely on their financial condition. BOX shall make
available to FINRA any information coming to its attention that
reflects adversely on the financial condition of Dual Members or
indicates possible violations of applicable laws, rules or regulations
by such firms.
(b) The parties agree that documents or information shared shall be
held in confidence, and used only for the purposes of carrying out
their respective regulatory obligations. Neither party shall assert
regulatory or other privileges as against the other with respect to
documents or information that is required to be shared pursuant to this
Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
8. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with respect
to a Dual Member, 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 BOX advised of its actions in this regard for such subsequent
proceedings as BOX may initiate.
9. Customer Complaints. BOX shall forward to FINRA copies of all
customer complaints involving Dual Members received by BOX relating to
FINRA's Regulatory Responsibilities under this Agreement. It shall be
FINRA's responsibility to review and take appropriate action in respect
to such complaints.
10. Advertising. FINRA shall assume Regulatory Responsibility, to
the extent applicable, to review the advertising of Dual Members
subject to the Agreement, provided that such material is filed with
FINRA in accordance with FINRA's filing procedures and is accompanied
with any applicable filing fees set forth in FINRA Rules.
11. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of either
party to conduct its own independent or concurrent investigation,
examination or enforcement proceeding of or against Dual Members, as
either party, in its sole discretion, shall deem appropriate or
necessary.
12. Termination. This Agreement may be terminated by BOX or FINRA
at any time upon the approval of the Commission after one (1) year's
written notice to the other party (or such shorter time as agreed by
the parties), except as provided in paragraph 4.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, BOX and FINRA 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. Each party acknowledges that
the timely and complete performance of its
[[Page 29853]]
obligations pursuant to this Agreement is critical to the business and
operations of the other party. In the event of a dispute between the
parties, the parties shall continue to perform their respective
obligations under this Agreement in good faith during the resolution of
such dispute unless and until this Agreement is terminated in
accordance with its provisions. Nothing in this Section 13 shall
interfere with a party's right to terminate this Agreement as set forth
herein.
14. 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 among BATS Exchange, Inc., BOX Options
Exchange, LLC, Chicago Board Options Exchange, Incorporated, C2 Options
Exchange, Incorporated, the International Securities Exchange, LLC,
FINRA, Miami International Securities Exchange, LLC, NYSE MKT LLC, the
NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc.,
NASDAQ OMX PHLX LLC, ISE Gemini, LLC, EDGX Exchange, Inc., ISE Mercury,
LLC and MIAX PEARL, 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 as approved by the SEC on
February 2, 2017, 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 MKT LLC, BATS Exchange, Inc., EDGX Exchange, Inc., BOX
Options Exchange LLC, NASDAQ OMX BX, Inc., C2 Options Exchange,
Incorporated, Chicago Board Options Exchange, Incorporated,
International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury,
LLC, FINRA, NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX
PHLX, Inc., Miami International Securities Exchange, LLC and MIAX
PEARL, 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 approved by
the SEC on February 2, 2017, and as may be amended from time to time.
15. Notification of Members. BOX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
16. Amendment. This Agreement may be amended in writing provided
that the changes are approved by both parties. All such amendments must
be filed with and approved by the Commission before they become
effective.
17. Limitation of Liability. Neither FINRA nor BOX nor any of their
respective directors, governors, officers or employees shall be liable
to the 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
FINRA or BOX and caused by the willful misconduct of the other party or
their respective directors, governors, officers or employees. No
warranties, express or implied, are made by FINRA or BOX with respect
to any of the responsibilities to be performed by each of them
hereunder.
18. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and BOX
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve BOX of any and all responsibilities
with respect to matters allocated to FINRA pursuant to this Agreement;
provided, however, that this Agreement shall not be effective until the
Effective Date.
19. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
20. 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.
* * * * *
Exhibit 1
BOX Options Exchange LLC Rules Certification for 17d-2 Agreement With
FINRA
BOX Options Exchange LLC (``BOX'') hereby certifies that the
requirements contained in the rules listed below are identical to, or
substantially similar to, the comparable FINRA (NASD) Rule, Exchange
Act provision or SEC rule identified (``Common Rules'').
# Common Rules shall not including any provisions regarding (i)
notice, reporting or any other filings made directly to or from BOX,
(ii) incorporation by reference of BOX Rules that are not Common Rules,
(iii) exercise of discretion in a manner that differs from FINRA's
exercise of discretion including, but not limited to exercise of
exemptive authority by BOX, (iv) prior written approval of BOX and (v)
payment of fees or fines to BOX.
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FINRA (NASD) rules, exchange
BOX rules act provision or SEC rule
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BOX Rule 3210 (a) [and (b)]............ FINRA Rule 2251 Processing and
Forwarding of Proxy and Other
Issuer-Related Materials.
BOX Rule 10070 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
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In addition, the following provisions shall be part of this 17d-2
Agreement:
SEA Rule 200 of Regulation SHO--Definition of ``Short Sale'' and
Marking Requirements and
SEA Rule 201 of Regulation SHO--Circuit Breaker
SEA Rule 203 of Regulation SHO--Borrowing and Delivery Requirements
SEA Rule 204 of Regulation SHO--Close-Out Requirement
SEA Rule 14e-4--Prohibited Transactions in Connection with Partial
Tender Offers [supcaret]
[supcaret] FINRA shall perform surveillance, investigation, and
Enforcement Responsibilities for SEA Rule 14e-4(a)1)(ii)(D).
[* FINRA shall not have 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 BATS BZX Exchange,
Inc., BATS BYX Y-Exchange, Inc., Chicago Stock Exchange, Inc., BATS
EDGA Exchange, Inc., BATS EDGX Exchange, Inc.,
[[Page 29854]]
Financial Industry Regulatory Authority, Inc., NASDAQ BX, Inc., NASDAQ
PHLX LLC, the NASDAQ Stock Market LLC, National Stock Exchange, Inc.,
New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca Inc.,
effective August 3, 2016, as may be amended from time to time.]
[# FINRA shall not have any Regulatory Responsibilities
regarding (i) notice, reporting or any other filings made directly to
or from BOX, (ii) compliance with other referenced BOX Rules that are
not Common Rules, (iii) exercise of discretion including, but not
limited to exercise of exemptive authority, by BOX, (iv) prior written
approval of BOX and (v) payment of fees or fines to BOX.]
IV. Solicitation of Comments
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/sro.shtml); or
Send an email to [email protected]. Please include
File Number 4-709 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 4-709. 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 (http://www.sec.gov/rules/sro.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 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 plan also will be available for inspection and
copying at the principal offices of FINRA and BOX. 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 4-709 and should be submitted on or before
July 17, 2018.
V. Discussion
The Commission finds that the proposed Amended Plan is consistent
with the factors set forth in Section 17(d) of the Act \12\ and Rule
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary
or appropriate in the public interest and for the protection of
investors, fosters cooperation and coordination among SROs, and removes
impediments to and fosters the development of the national market
system. In particular, the Commission believes that the proposed
Amended Plan should reduce unnecessary regulatory duplication by
allocating to FINRA certain examination and enforcement
responsibilities for Common Members that would otherwise be performed
by both FINRA and BOX. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Common Members. Furthermore, because
BOX and FINRA will coordinate their regulatory functions in accordance
with the Amended Plan, the Amended Plan should promote investor
protection.
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\12\ 15 U.S.C. 78q(d).
\13\ 17 CFR 240.17d-2(c).
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The Commission notes that, under the Amended Plan, BOX and FINRA
have allocated regulatory responsibility for those BOX rules, set forth
in the Certification, that are substantially similar to the applicable
FINRA rules in that examination for compliance with such provisions and
rules would not require FINRA to develop one or more new examination
standards, modules, procedures, or criteria in order to analyze the
application of the rule, or a Common Member's activity, conduct, or
output in relation to such rule. In addition, under the Amended Plan,
FINRA would assume regulatory responsibility for certain provisions of
the federal securities laws and the rules and regulations thereunder
that are set forth in the Certification. The Common Rules covered by
the Amended Plan are specifically listed in the Certification, as may
be amended by the Parties from time to time.
According to the Amended Plan, BOX will review the Certification at
least annually, or more frequently if required by changes in either the
rules of BOX or FINRA, and, if necessary, submit to FINRA an updated
list of Common Rules to add BOX rules not included on the then-current
list of Common Rules that are substantially similar to FINRA rules;
delete BOX rules included in the then-current list of Common Rules that
no longer qualify as common rules; and confirm that the remaining rules
on the list of Common Rules continue to be BOX rules that qualify as
common rules.\14\ FINRA will then confirm in writing whether the rules
listed in any updated list are Common Rules as defined in the Amended
Plan. Under the Amended Plan, BOX also will provide FINRA with a
current list of Common Members and shall update the list no less
frequently than once each quarter.\15\ The Commission believes that
these provisions are designed to provide for continuing communication
between the Parties to ensure the continued accuracy of the scope of
the proposed allocation of regulatory responsibility.
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\14\ See paragraph 2 of the Amended Plan.
\15\ See paragraph 3 of the Amended Plan.
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The Commission is hereby declaring effective an Amended Plan that,
among other things, allocates regulatory responsibility to FINRA for
the oversight and enforcement of all BOX rules that are substantially
similar to the rules of FINRA for Common Members of BOX and FINRA.
Therefore, modifications to the Certification need not be filed with
the Commission as an amendment to the Amended Plan, provided that the
Parties are only adding to, deleting from, or confirming changes to BOX
rules in the Certification in conformance with the definition of Common
Rules provided in the Amended Plan. However, should the Parties decide
to add a BOX rule to the Certification that is not substantially
similar to a FINRA rule; delete a BOX rule from the Certification that
is substantially similar to a FINRA rule; or leave on the Certification
a BOX rule that is no longer substantially similar to a FINRA rule,
then such a change would constitute an amendment to the Amended Plan,
which must be filed with the Commission pursuant to Rule 17d-2 under
the Act.\16\
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\16\ The addition to or deletion from the Certification of any
federal securities laws, rules, and regulations for which FINRA
would bear responsibility under the Amended Plan for examining, and
enforcing compliance by, Common Members, also would constitute an
amendment to the Amended Plan.
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Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that
[[Page 29855]]
appropriate notice and comment can take place after the proposed
amendment is effective. The primary purpose of the amendment is to
allocate surveillance, investigation, and enforcement responsibilities
for Rule 14e-4 under the Act, as well as certain provisions of
Regulation SHO. By declaring it effective today, the Amended Plan can
become effective and be implemented without undue delay. The Commission
notes that the prior version of this plan immediately prior to this
proposed amendment was published for comment and the Commission did not
receive any comments thereon.\17\ Furthermore, the Commission does not
believe that the amendment to the plan raises any new regulatory issues
that the Commission has not previously considered.
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\17\ See supra note 12 (citing to Securities Exchange Act
Release No. 72137).
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VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-709. The Parties shall notify all members
affected by the Amended Plan of their rights and obligations under the
Amended Plan.
It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Amended Plan in File No. 4-709, between the FINRA and BOX, filed
pursuant to Rule 17d-2 under the Act, hereby is approved and declared
effective.
It is further ordered that BOX is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-709.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(34).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13594 Filed 6-25-18; 8:45 am]
BILLING CODE 8011-01-P