[Federal Register Volume 84, Number 213 (Monday, November 4, 2019)]
[Notices]
[Pages 59427-59428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23977]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87415; File No. 4-753]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Order Declaring Effective a Minor Rule Violation Plan
October 29, 2019.
On August 23, 2019, Long-Term Stock Exchange, Inc. (``LTSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed minor rule violation plan (``MRVP'')
pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP
was published for comment on September 25, 2019.\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. 87021 (September 19,
2019), 84 FR 50525 (``Notice'').
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In accordance with Rule 19d-1(c)(2) under the Act,\4\ the Exchange
proposed to designate certain specified rule violations as minor rule
violations, with sanctions not exceeding $2,500. Violations resolved
under the MRVP would not be subject to the provisions of Rule 19d-
1(c)(1) of the Act,\5\ 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.\6\ In accordance with Rule 19d-1(c)(2) under the Act,\7\
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)(2).
\5\ 17 CFR 240.19d-1(c)(1).
\6\ 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 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.
\7\ 17 CFR 240.19d-1(c)(2).
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The Exchange proposed to include in its MRVP the procedures
included in LTSE Rule 9.216(b) (``Procedure for Violation Under Plan
Pursuant to Exchange Act Rule 19d-1(c)(2)'') and violations included in
Rule 9.218 (``Violations Appropriate for Disposition Under Plan
Pursuant to Exchange Act Rule 19d-1(c)(2)'').\8\ According to the
Exchange's proposed MRVP, the Exchange may impose a fine (not to exceed
$2,500) and/or a censure on any Member or its associated person with
respect to any rule listed in LTSE Rule 9.218. If the Financial
Industry Regulatory Authority's (``FINRA'') Department of Enforcement
or Department of Market Regulation, on behalf of the Exchange, has
reason to believe a violation has occurred, and if the Member or its
associated person does not dispute the violation, either Department may
prepare and request that the Member or associated person execute a
minor rule violation plan letter. The letter would describe the act or
practice engaged in or omitted, the rule, regulation, or statutory
provision
[[Page 59428]]
violated, and the sanction or sanctions to be imposed. The letter, if
accepted, would stipulate that the Member or associated person accepts
the finding of violation, consents to the imposition of sanctions, and
agrees to waive such 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 LTSE Appeals Committee, the Board, the
Commission, and the courts, or to otherwise challenge the validity of
the letter. Unless the letter states otherwise, the effective date of
any sanction(s) imposed would be a date to be determined by LTSE
Regulation staff. In the event the letter is not accepted by the Member
or associated person, or is rejected by FINRA's Office of Disciplinary
Affairs, the matter can proceed in accordance with the Exchange's
disciplinary rules, which include hearing rights for formal
disciplinary proceedings.\9\
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\8\ The Commission granted the Exchange's application for
registration as a national securities exchange on May 10, 2019,
which included the rules that govern the Exchange. See Securities
Exchange Act Release No. 85828 (May 10, 2019), 84 FR 21841 (May 15,
2019). Terms not otherwise defined in this Order are defined in the
LTSE rules.
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 Quote Obligation); 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, at 50526.
\9\ See Notice, supra note 3, at 50526.
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According to the Exchange, upon the Commission's declaration of
effectiveness of the MRVP, the Exchange will provide to the Commission
a quarterly report for any actions taken on minor rule violations under
the MRVP.\10\ 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.\11\
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\10\ See Id.
\11\ The Exchange attached a sample form of the quarterly report
with its submission to the Commission.
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The Exchange requested that the Commission deem any changes to the
rules applicable to the Exchange's MRVP to be deemed modifications to
the Exchange's MRVP.\12\
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\12\ See Notice, supra note 3, at 50526.
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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,\13\ because the MRVP will permit the Exchange to carry
out its oversight and enforcement responsibilities as an SRO more
efficiently in cases where formal disciplinary proceedings are not
necessary due to the minor nature of the particular violation.
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\13\ 17 CFR 240.19d-1(c)(2).
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In declaring the Exchange's MRVP effective, the Commission does not
minimize the importance of compliance with Exchange rules and all other
rules subject to the imposition of sanctions under LTSE Rule 9.216(b).
Violation of an SRO's rules, as well as Commission rules, is a serious
matter. However, LTSE 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. Regarding whether a violation requires
formal disciplinary action or whether a sanction under the MRVP is
appropriate, the Commission expects the Exchange to continue to conduct
surveillance and make determinations based on its findings on a case-
by-case basis.
It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the
Act,\14\ that the proposed MRVP for Long-Term Stock Exchange, Inc, File
No. 4-753 be, and hereby is, declared effective.
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\14\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(44).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23977 Filed 11-1-19; 8:45 am]
BILLING CODE 8011-01-P