[Federal Register Volume 85, Number 102 (Wednesday, May 27, 2020)]
[Notices]
[Pages 31838-31843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11283]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88918; File No. 4-762]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the Financial Industry Regulatory
Authority, Inc. and MEMX LLC
May 20, 2020.
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 April 16, 2020, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and MEMX LLC (``MEMX'') (together with FINRA, the
``Parties'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a plan for the allocation of regulatory
responsibilities, dated April 16, 2020 (``17d-2 Plan'' or the
``Plan''). 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
[[Page 31839]]
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. Proposed Plan
The proposed 17d-2 Plan is intended to reduce regulatory
duplication for firms that are common members of both MEMX and
FINRA.\10\ Pursuant to the proposed 17d-2 Plan, FINRA would assume
certain examination and enforcement responsibilities for common members
with respect to certain applicable laws, rules, and regulations.
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\10\ The proposed 17d-2 Plan refers to these common members as
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
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The text of the Plan delineates the proposed regulatory
responsibilities with respect to the Parties. Included in the proposed
Plan is an exhibit (the ``MEMX Certification of Common Rules,''
referred to herein as the ``Certification'') that lists every MEMX
rule, and select federal securities laws, rules, and regulations, for
which FINRA would bear responsibility under the Plan for overseeing and
enforcing with respect to MEMX members that are also members of FINRA
and the associated persons therewith (``Dual Members'').
Specifically, under the 17d-2 Plan, FINRA would assume examination
and enforcement responsibility relating to compliance by Dual Members
with the rules of MEMX that are substantially similar to the applicable
rules of FINRA,\11\ as well as any provisions of the federal securities
laws and the rules and regulations thereunder delineated in the
Certification (``Common Rules''). In the event that a Dual Member is
the subject of an investigation relating to a transaction on MEMX, the
plan acknowledges that MEMX may, in its discretion, exercise concurrent
jurisdiction and responsibility for such matter.\12\
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\11\ See paragraph 1(b) of the proposed 17d-2 Plan (defining
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan
(defining Regulatory Responsibilities). Paragraph 2 of the Plan
provides that annually, or more frequently as required by changes in
either MEMX rules or FINRA rules, the parties shall review and
update, if necessary, the list of Common Rules. Further, paragraph 3
of the Plan provides that MEMX shall furnish FINRA with a list of
Dual Members, and shall update the list no less frequently than once
each calendar quarter.
\12\ See paragraph 6 of the proposed 17d-2 Plan.
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Under the Plan, MEMX would retain full responsibility for
surveillance, examination, investigation and enforcement with respect
to trading activities or practices involving MEMX's own marketplace,
including, without limitation, registration pursuant to its applicable
rules of associated persons (i.e., registration rules that are not
Common Rules); its duties as a DEA pursuant to Rule 17d-1 under the
Act; and any MEMX rules that are not Common Rules.\13\
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\13\ See paragraph 2 of the proposed 17d-2 Plan.
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The text of the proposed 17d-2 Plan is as follows:
AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
MEMX 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 MEMX LLC (``MEMX''), is made this 16th
day of April, 2020 (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 MEMX may be referred to individually
as a ``party'' and together as the ``parties.''
Whereas, FINRA and MEMX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined herein)
and in the filing and processing of certain registration and membership
records; and
Whereas, FINRA and MEMX 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 MEMX 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) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) The rules of
MEMX, 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 MEMX 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
or surveillance for compliance with such provisions and rules would not
require FINRA to
[[Page 31840]]
develop one or more new examination or surveillance 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; provided, however, Common Rules
shall not include the application of the SEC, MEMX or FINRA rules as
they pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among Cboe BZX Exchange,
Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, Inc., Cboe EDGA
Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc., Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock
Market LLC, NYSE National, Inc., New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca Inc., Investors' Exchange LLC and Long-Term
Stock Exchange, Inc. effective August 1, 2019, as may be amended from
time to time. Common Rules shall not include any provisions regarding
(i) notice, reporting or any other filings made directly to or from
MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval of MEMX
and (v) payment of fees or fines to MEMX.
(c) ``Dual Members'' shall mean those MEMX 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, surveillance 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.
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,
MEMX furnished FINRA with a current list of Common Rules and certified
to FINRA that such rules that are MEMX 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 MEMX or FINRA, MEMX shall submit an updated list of Common
Rules to FINRA for review which shall add MEMX Rules not included in
the current list of Common Rules that qualify as Common Rules as
defined in this Agreement; delete MEMX 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 MEMX 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 MEMX 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 MEMX's own
marketplace for rules that are not Common Rules;
(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 MEMX Rules that are not Common Rules, except for MEMX Rules
for any MEMX member that operates as a facility (as defined in Section
3(a)(2) of the Exchange Act), acts as an outbound router for the MEMX
and is a member of FINRA (``Router Member'') as provided in paragraph
6. As of the date of this Agreement, MEMX Execution Services LLC is the
only Router Member.
3. Dual Members. Prior to the Effective Date, MEMX 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 MEMX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by the
parties, either herein or in a separate 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 Commission. To the extent
such statute, rule or order is inconsistent with this Agreement, the
statute, rule or order shall supersede the provision(s) hereof to the
extent necessary for them to be properly effectuated and the
provision(s) hereof in that respect shall be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any MEMX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities assumed
hereunder, FINRA shall notify MEMX of those apparent violations for
such response as MEMX deems appropriate. With respect to apparent
violations of any MEMX Rules by any Router Member, FINRA shall not make
referrals to MEMX pursuant to this paragraph 6. Such apparent
violations shall be processed by, and enforcement proceedings in
respect thereto will be conducted by, FINRA as provided in this
Agreement.
(b) In the event that MEMX becomes aware of apparent violations of
any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, MEMX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
(c) 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
MEMX, MEMX may in its discretion assume concurrent jurisdiction and
responsibility.
(d) 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.
[[Page 31841]]
(a) FINRA shall make available to MEMX 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 MEMX any information it obtains about Dual Members which
reflects adversely on their financial condition. MEMX 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 MEMX advised of its actions in this regard for such subsequent
proceedings as MEMX may initiate.
9. Customer Complaints. MEMX shall forward to FINRA copies of all
customer complaints involving Dual Members received by MEMX 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 responsibility 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 MEMX or FINRA
at any time upon the approval of the Commission after six (6) month's
written notice to the other party.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, MEMX 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 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. Notification of Members. MEMX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
15. 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.
16. Limitation of Liability. Neither FINRA nor MEMX 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 MEMX 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 MEMX with respect
to any of the responsibilities to be performed by each of them
hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and MEMX
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve MEMX 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.
18. 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.
19. 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.
* * * * *
Exhibit 1
MEMX Certification of Common Rules
MEMX hereby certifies that the requirements contained in the rules
listed below for MEMX are identical to, or substantially similar to,
the comparable FINRA (NASD) Rules, Exchange Act provision or SEC rule
identified (``Common Rules'').
# Common Rules shall not include any provisions
regarding (i) notice, reporting or any other filings made directly to
or from MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval
of MEMX and (v) payment of fees or fines to MEMX.
[[Page 31842]]
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FINRA (NASD) Rule, Exchange Act
MEMX Rule Provision, SEC Rule
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Rule 2.5 Restrictions, FINRA Rule 1240(a)(1)-(4)
Interpretation and Policy .02 Continuing Education Requirements
Continuing Education Requirements ;.
.
Rule 2.5 Restrictions, FINRA By-Laws of the Corporation,
Interpretation and Policy .04 Article V, Section 3 Notification
Termination of Employment. by Member to the Corporation and
Associated Person of Termination;
Amendments to Notification; FINRA
Rule 1010(e) Electronic Filing
Requirements for Uniform Forms.
Rule 2.6(g) Application Procedures FINRA By-Laws of the Corporation,
for Membership or to become an Article IV, Section 1(c)
Associated Person of a Member . Application for Membership and
Article V, Sec. 2(c); FINRA Rule
1010(c) Electronic Filing
Requirements for Uniform Forms.
Rule 3.1 Business Conduct of FINRA Rule 2010 Standards of
Members [supcaret]. Commercial Honor and Principles of
Trade [supcaret].
Rule 3.2 Violations Prohibited FINRA Rule 2010 Standards of
[supcaret] . Commercial Honor and Principles of
Trade and FINRA Rule 3110
Supervision [supcaret].
Rule 3.3 Use of Fraudulent Devices FINRA Rule 2020 Use of
[supcaret]. Manipulative, Deceptive or Other
Fraudulent Devices [supcaret].
Rule 3.5 Communications with the FINRA Rule 2210 Communications with
Public. the Public.
Rule 3.6 Fair Dealing with FINRA Rule 2020 Use of
Customers. Manipulative, Deceptive or Other
Fraudulent Devices,[supcaret] \1\
FINRA Rule 2111 Suitability.
Rule 3.7(a) Recommendations to FINRA Rule 2111(a) and SM .03
Customers. Suitability.
Rule 3.8(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and SEC Regulation SHO.
Delivery of Securities.
Rule 3.9 Charges for Services FINRA Rule 2122 Charges for
Performed. Services Performed.
Rule 3.10 Use of Information....... FINRA Rule 2060 Use of Information
Obtained in Fiduciary Capacity.
Rule 3.11 Publication of FINRA Rule 5210 Publication of
Transactions and Quotations . Transactions and Quotations.
Rule 3.12 Offers at Stated Prices.. FINRA Rule 5220 Offers at Stated
Prices.
Rule 3.13 Payments Involving FINRA Rule 5230 Payments Involving
Publications that Influence the Publications that Influence the
Market Price of a Security. Market Price of a Security.
Rule 3.14 Disclosure on FINRA Rule 2232(a) Customer
Confirmations. Confirmations and SEC Rule 10b-10
Confirmation of Transactions.
Rule 3.15 Disclosure of Control.... FINRA Rule 2262 Disclosure of
Control Relationship With Issuer.
Rule 3.16 Discretionary Accounts... FINRA Rule 3260 Discretionary
Accounts.
Rule 3.17 Customer's Securities or FINRA Rule 2150(a) Improper Use of
Funds. Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Improper Use.
Rule 3.21 Communications with FINRA Rule 2210 Communications with
Customers. the Public.
Rule 3.18 Prohibition Against FINRA Rule 2150(b) Improper Use of
Guarantees. Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Prohibition
Against Guarantees.
Rule 3.19 Sharing in Accounts; FINRA Rule 2150(c)(1) Improper Use
Extent Permissible. of Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Sharing in
Accounts; Extent Permissible.
Rule 3.21 Customer Disclosures..... FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others; Gratuities. Rewarding Employees of Others.
Rule 3.26 Telemarketing and FINRA Rule 3230 Telemarketing.
Interpretations and Policies .01.
Rule 4.1 Requirements ............ Section 17 of the Exchange Act and
rules thereunder and FINRA Rule
4511(a) and (c) General
Requirements \2\.
Rule 4.3 Record of Written FINRA Rule 4513 Records of Written
Complaints. Customer Complaints.
Rule 5.1 Written Procedures ...... FINRA Rule 3110(b)(1) Supervision-
Written Procedures [supcaret].
Rule 5.2 Responsibility of Members. FINRA Rule 3110 (a)(4), (b)(4) and
(b)(7) Supervision--Supervisory
System/Written Procedures--Review
of Correspondence and Internal
Communications [supcaret].
Rule 5.3 Records................... FINRA Rule 3110 Supervision
[supcaret].
Rule 5.4 Review of Activities...... FINRA Rule 3110(c) and (d)
Supervision--Internal Inspections/
Transaction Review and
Investigation [supcaret].
Rule 5.6 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
Rule 9.3 Predispute Arbitration FINRA Rule 2268 Requirements When
Agreements. Using Predispute Arbitration
Agreements for Customer Accounts.
Rule 11.16(e)(3) & (4) Trading FINRA Rule 6190(a) & (b) Compliance
Halts Due to Extraordinary Market with Regulation NMS Plan to
Volatility. Address Extraordinary Market
Volatility.
Rule 11.10(a)(5) Order Execution- FINRA Rule 6182 Trade Reporting of
Short Sales [supcaret][supcaret]. Short Sales [supcaret] [supcaret].
Rule 12.2 Fictitious Transactions.. FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02 Self-
Trades.
Rule 12.3 Excessive Sales By A FINRA Rule 6140(c) Other Trading
Member. Practices.
Rule 12.4 Manipulative Transactions FINRA Rule 6140 Other Trading
Practices.
Rule 12.5 Dissemination of False FINRA Rule 6140(e) Other Trading
Information. Practices.
Rule 12.6 Prohibition Against FINRA Rule 5320 Prohibition Against
Trading Ahead of Customer Orders Trading Ahead of Customer Orders
**. **.
Rule 12.9 Trade Shredding.......... FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 12.11 Best Execution and FINRA Rule 5310 Best Execution and
Interpositioning **. Interpositioning **.
Rule 12.13 Trading Ahead of FINRA Rule 5280 Trading Ahead of
Research Reports **. Research Reports **.
Rule 12.14 Front Running of Block FINRA Rule 5270 Front Running of
Transactions **. Block Transactions **.
[[Page 31843]]
Rule 13.3(a), (b)(i), (d) and FINRA Rule 2251 Processing and
Interpretation and Policy .01 Forwarding of Proxy and Other
Forwarding of Proxy and Other Issuer-Related Materials.
Issuer-Related Materials.
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\1\ FINRA shall not have Regulatory Responsibilities regarding .01 of
MEMX Rule 3.6.
\2\ FINRA shall not have Regulatory Responsibilities regarding
requirements to keep records ``in conformity with . . . Exchange
Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
Agreement:
SEA Rules:
SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements **
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 101 of Regulation M--Activities by Distribution
Participants **
SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution **
SEA Rule 103 of Regulation M--Nasdaq Passive Market Making **
SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering **
SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering **
SEA Rule 604 of Regulation NMS--Display of Customer Limit
Orders **
SEA Rule 606 of Regulation NMS--Disclosure of Routing
Information **
SEA Rule 610(d) of Regulation NMS--Locking or Crossing
Quotations **
SEA Rule 611 of Regulation NMS--Order Protection Rule **
SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
[supcaret]
SEA Rule 17a-3/17a-4--Records to Be Made by Certain Exchange
Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers [supcaret]
[supcaret] 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 Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock
Exchange, Inc., Cboe EDGA Exchange Inc., Cboe EDGX Exchange Inc.,
Financial Industry Regulatory Authority, Inc., Nasdaq BX, Inc., Nasdaq
PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., New York
Stock Exchange, LLC, NYSE American LLC, NYSE Arca Inc., and Investors'
Exchange LLC and the Long-Term Stock Exchange, Inc. effective August
1, 2019, as may be amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double
star rules. These rules may be cited by FINRA in both the context of
this Agreement and the Regulatory Services Agreement.
III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \14\ and Rule 17d-2
thereunder,\15\ after June 11, 2020, the Commission may, by written
notice, declare the plan submitted by MEMX and FINRA, File No. 4-762,
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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\14\ 15 U.S.C. 78q(d)(1).
\15\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the proposed 17d-2 Plan and to relieve MEMX 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 4-762 on the subject line.
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 4-762. 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/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of MEMX and FINRA. 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 4-762 and should be submitted on or before
June 11, 2020.
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\16\ 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11283 Filed 5-26-20; 8:45 am]
BILLING CODE 8011-01-P