
[Federal Register Volume 80, Number 163 (Monday, August 24, 2015)]
[Notices]
[Pages 51334-51340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20792]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75721; File No. SR-NYSE-2015-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, Amending Certain of Its Disciplinary Rules To Facilitate the 
Reintegration of Certain Regulatory Functions From Financial Industry 
Regulatory Authority, Inc.

August 18, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 5, 2015, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. On August 14, 2015, the exchange filed Amendment No. 1 to 
the proposed rule change, which amended and replaced the proposed rule 
change in its entirety. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend certain of its disciplinary rules to 
facilitate the reintegration of certain regulatory functions from 
Financial Industry Regulatory Authority, Inc. (``FINRA''). This 
Amendment No. 1 supersedes the original filing in its entirety. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend certain of its disciplinary rules to 
permit the reintegration of certain regulatory functions from FINRA as 
of January 1, 2016.
Background of Proposed Rule Change
    On June 14, 2010, the NYSE, NYSE Regulation, Inc. (``NYSE 
Regulation''),\4\ and FINRA entered into a Regulatory Services 
Agreement (``RSA''), whereby FINRA was retained to perform the market 
surveillance and enforcement functions that had previously been 
performed by NYSE, through its wholly-owned subsidiary NYSE Regulation. 
Pursuant to the RSA, FINRA has been performing Exchange enforcement-
related regulatory services, including investigating and enforcing 
violations of Exchange rules, and conducting disciplinary proceedings 
arising out of such enforcement actions, including those relating to 
NYSE-only rules and against dual members and non-FINRA members. To 
facilitate FINRA's performance of these functions, the Exchange amended 
its rules to provide that Exchange rules that refer to NYSE Regulation 
or its staff, Exchange staff, and Exchange departments should be 
understood to also refer to FINRA staff and FINRA departments acting on 
behalf of the Exchange pursuant to the RSA.\5\
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    \4\ NYSE Regulation, a not-for-profit subsidiary of the 
Exchange, performs the Exchange's regulatory functions pursuant to a 
delegation agreement. See note 7 [sic], infra. The Exchange recently 
filed to, among other things, terminate the delegation agreement, 
establish a regulatory oversight committee (``ROC'') as a committee 
of the board of directors of the Exchange, and reintegrate its 
regulatory and market functions. See Release No. 75288 (June 24, 
2015), 80 FR 37316 (June 30, 2015) (SR-NYSE-2015-27) (the ``NYSE ROC 
Filing''). The amendments proposed herein are consistent with, and 
not dependent on approval of, the NYSE ROC Filing.
    \5\ See Rule 0. Notwithstanding the RSA, the Exchange retains 
ultimate legal responsibility for, and control of, the Exchange's 
regulatory functions performed by FINRA. See Securities Exchange Act 
Release No. 62355 (June 22, 2010), 75 FR 36729 (June 28, 2010) (SR-
NYSE-2010-46).
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    In 2013, the Exchange adopted new disciplinary rules that are, with 
certain exceptions, substantially the same as the text of the FINRA 
Rule 8000 Series and Rule 9000 Series, which set forth rules for 
conducting investigations and enforcement actions.\6\ Those rules were 
implemented on July 1, 2013 \7\ and, among other things: (1) Identify 
FINRA's Department of Enforcement and Department of Market Regulation 
as the departments permitted to commence disciplinary proceedings, when 
authorized by FINRA's Office of Disciplinary Affairs (``ODA''); (2)

[[Page 51335]]

identify ODA as the office permitted to accept or reject a letter of 
acceptance, waiver, and consent (``AWC'') or minor rule violation plan 
letter on behalf of the Board; and (3) identify ODA as the office 
permitted to accept or reject an offer of settlement if not opposed by 
FINRA's Department of Enforcement or Department of Market Regulation. 
Those rules do not, however, specify whether Exchange staff or 
departments, or staff of the Exchange's wholly-owned subsidiary NYSE 
Regulation, to which the Exchange currently delegates certain 
regulatory functions,\8\ may perform the functions described in the 
rules.
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    \6\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02), 69045 (March 
5, 2013), 78 FR 15394 (March 11, 2013) (SR-NYSE-2013-02), and 69963 
(July 10, 2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \7\ See NYSE Information Memorandum 13-8 (May 24, 2013).
    \8\ The Exchange currently delegates to NYSE Regulation certain 
responsibilities and functions of the Exchange, including taking 
``action to assure compliance with the rules, interpretations, 
policies and procedures of [the Exchange], the federal securities 
laws, or other laws, rules and regulations that [the Exchange] has 
the authority to administer or enforce, through examination, 
surveillance, investigation, enforcement, disciplinary and other 
programs.'' Delegation Agreement by and among New York Stock 
Exchange LLC, NYSE Regulation, Inc. and NYSE Market, Inc. (the 
``Delegation Agreement''), Section II, A.2. The Exchange, however, 
retains ultimate responsibility for such delegated responsibilities 
and functions. See Securities Exchange Act Release No. 53382, 71 FR 
11251, 11264 (February 27, 2006) (SR-NYSE-2005-77). Actions taken by 
NYSE Regulation pursuant to delegated authority remain subject to 
review, approval or rejection by the board of directors of the 
Exchange. The one exception is that actions taken by NYSE Regulation 
upon review of disciplinary decisions by the NYSE Regulation board 
of directors is not subject to review, approval or rejection by the 
Exchange and constitutes a final action of the Exchange. See 
Delegation Agreement, Section I. The Exchange is not proposing in 
this filing any changes to its rules that impact the review of 
disciplinary decisions by the NYSE Regulation board of directors.
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    In October 2014, the Exchange announced that, upon expiration of 
the current RSA on December 31, 2015, certain market surveillance, 
investigation and enforcement functions performed on behalf of the 
Exchange would be reintegrated.\9\ Accordingly, effective January 1, 
2016, the Exchange will perform certain of the market surveillance, 
investigation and enforcement functions FINRA was retained to perform 
in 2010. The proposed changes to the disciplinary rules in the present 
filing are necessary to permit the Exchange to perform certain 
regulatory functions currently performed on the Exchange's behalf by 
FINRA.
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    \9\ It is anticipated that FINRA, under a new RSA currently 
being negotiated, would continue to conduct, inter alia, the 
registration, testing and examination of broker-dealer members of 
the Exchange, and certain cross-market surveillance and related 
investigation and enforcement activities.
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    The Exchange proposes the following changes to facilitate the 
reintegration of certain regulatory functions from FINRA by providing 
that investigative and enforcement functions of the Exchange under the 
Rule 8000 and 9000 Series would be performed by personnel and 
departments reporting to the Chief Regulatory Officer of the Exchange 
\10\ or by FINRA personnel and departments:
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    \10\ NYSE Regulation staff report to the Chief Executive Officer 
of NYSE Regulation, who is also the Chief Regulatory Officer 
(``CRO'') of the Exchange.

(1) Amend Rule 9120 to include two new defined terms: 
``Enforcement,'' referring to any department reporting to the CRO of 
the Exchange with responsibility for investigating or imposing 
sanctions on a member organization or covered person, in addition to 
FINRA's departments of Enforcement and Market Regulation; and 
``Regulatory Staff,'' referring to any officer or employee reporting 
directly or indirectly to the CRO of the Exchange, in addition to 
FINRA staff acting on behalf of the Exchange in connection with the 
Rule 8000 and 9000 Series;
(2) amend Rules 9120, 9131, 9146, 9211, 9212, 9213, 9215, 9216, 
9251, 9253, 9264, 9269, 9270, 9551, 9552, 9554, 9556, 9810, 9820 and 
9830 to replace references to Exchange and FINRA departments and 
personnel with references to ``Enforcement'' and ``Regulatory 
Staff'';
(3) amend Rules 8210 and 9110 to provide that in performing 
functions under the disciplinary code, the CRO and Regulatory Staff 
shall function independently of the commercial interests of the 
Exchange and of the member organizations;
(4) amend Rules 9141 and 9242 to prohibit former Regulatory Staff 
from appearing in a proceeding under the Rule 9000 Series and from 
providing expert testimony in a proceeding under the Rule 9000 
Series within one year of termination, respectively;
(5) amend Rules 9211, 9216 and 9270 to provide that the CRO would be 
responsible for authorizing complaints; approving letters of 
acceptance, waiver, and consent; approving minor rule violation plan 
letters; and approving offers of settlement in place of FINRA's ODA; 
and
(6) amend Rules 476, 8120, 9001, 9110, 9217, 9232, 9310 and 9810 to 
make certain technical changes and correct a typographical error.

    The Exchange proposes that the changes described herein would be 
operative on January 1, 2016, following the reintegration of certain 
regulatory functions from FINRA as described below.
Replacement of References To Exchange and FINRA Departments and 
Personnel With References to Enforcement and Regulatory Staff
    The Exchange proposes to amend Rules 9120, 9131, 9146, 9211, 9212, 
9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9551, 9552, 9554, 9556, 
9810, 9820 and 9830 to replace references to Exchange and FINRA 
departments and personnel with references to the defined terms 
``Enforcement'' and ``Regulatory Staff.''
    The proposed amendments would allow disciplinary actions to be 
investigated and prosecuted on the Exchange's behalf by officers or 
employees reporting to the CRO beginning on January 1, 2016, while 
still enabling FINRA staff to continue to perform investigative and 
disciplinary activities that FINRA is authorized to perform on the 
Exchange's behalf.
    More specifically, the Exchange proposes to make the following 
amendments:
     Rule 9120 (Definitions) sets forth the definitions 
applicable to the disciplinary code. The Exchange proposes to add 
definitions of ``Enforcement,'' referring to any department reporting 
to the CRO of the Exchange with responsibility for investigating or 
imposing sanctions on a member organization or covered person, in 
addition to FINRA's departments of Enforcement and Market Regulation; 
and ``Regulatory Staff,'' referring to any officer or employee 
reporting, directly or indirectly, to the CRO of the Exchange, in 
addition to FINRA staff acting on behalf of the Exchange in connection 
with the Rule 8000 and 9000 Series.\11\
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    \11\ Certain rules in the Rule 8000 and 9000 Series currently 
refer to ``Exchange staff,'' a term which includes NYSE employees, 
NYSE Regulation staff that administers rules under the Delegation 
Agreement, and authorized FINRA staff pursuant to Rules 0 and 1. The 
proposed definition of ``Regulatory Staff'' provides that for 
purposes of the Rule 8000 Series and Rule 9000 Series (except for 
Rule 9557), the term ``Exchange staff'' shall have the same meaning 
as ``Regulatory Staff.''
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    The Exchange also proposes to delete the definitions of ``Head of 
Enforcement'' (Rule 9120(q)) and ``Head of Market Regulation'' (Rule 
9120(r)), which refer to the FINRA department heads.\12\
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    \12\ The Exchange also proposes to delete the definition of ODA 
(Rule 9120(v)) and replace all references to ODA in the Exchange's 
rules with ``CRO,'' for the reasons discussed in ``Substitution of 
CRO for ODA in Rules 9211, 9216 and 9270,'' infra.
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    Similarly, the Exchange proposes to replace the reference to the 
``Department of Enforcement or the Department of Market Regulation'' in 
Rule 9120(y) (definition of the term ``Party'') with ``Enforcement.'' 
The Exchange further proposes to streamline the definition of 
``Interested Staff'' (Rule 9120(u)) to eliminate references to Exchange 
and FINRA departments and staff, and provide that ``Interested Staff'' 
under any proceeding brought under the Code

[[Page 51336]]

of Procedure means Regulatory Staff or Exchange staff who (i) report, 
directly or indirectly, to any Enforcement employee, or to the head of 
any department or office that issues a notice or decision or is 
designated as a Party under the Rule 9000 Series, (ii) directly 
participated in the authorization or initiation of a complaint or 
proceeding, or (iii) directly participated in the proceeding, or 
directly participated in an examination, investigation, prosecution, or 
litigation related to a proceeding, as well as any person(s) who 
supervise such staff. Thus, as in the current definition, the new 
definition of ``Interested Staff'' in a particular matter encompasses 
supervisory personnel up to the most senior level, including the CRO, 
when staff reporting to such supervisory personnel directly 
participated in the matter.
    Finally, the Exchange proposes to renumber the remaining 
definitions in Rule 9120.
     Rule 9131 (Service of Complaint) provides that the 
``Department of Enforcement or the Department of Market Regulation'' 
shall serve a complaint on both a party and counsel for a party. The 
Exchange proposes to replace these references with ``Enforcement.'' The 
proposed change would enable Enforcement to serve disciplinary 
complaints beginning January 1, 2016.
     Rule 9146 (Motions) governs motion practice under the 
disciplinary rules. The Exchange proposes to amend Rule 9146(k)(1) to 
replace a reference to the ``Department of Enforcement and the 
Department of Market Regulation and other Exchange staff'' with 
``Regulatory Staff.'' The Exchange also proposes to replace a reference 
to ``Exchange staff'' in subsection (k)(2) with ``Regulatory Staff.'' 
The proposed changes would identify the staff that may receive or use 
documents subject to a protective order.
     Rule 9211 (Authorization of Complaint) sets forth the 
process for authorizing issuance of a complaint against a member 
organization or covered person. The Exchange proposes to replace 
references to the ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' in Rules 9211(a)(1) and 
(a)(2). The Exchange proposes to add the phrase ``has reason to 
believe'' in subsection (a)(1) with reference to Enforcement to make 
the construction consistent with other disciplinary rules (e.g., Rule 
9216). The proposed change would enable the Exchange, in addition to 
FINRA, to authorize and issue disciplinary complaints beginning January 
1, 2016. As discussed below, the Exchange also proposes to amend Rule 
9211 to provide that the Exchange's CRO would authorize issuance of a 
complaint.
     Rule 9212 (Complaint Issuance) sets forth the requirements 
of the complaint. In subsection (a)(1), the Exchange proposes to delete 
the first sentence as redundant, and to delete two references to 
``Department of Enforcement or the Department of Market Regulation.'' 
The proposed change would permit ``authorized Enforcement staff'' to 
sign a complaint that would be served by ``Enforcement.''
    The Exchange also proposes to replace ``Department of Enforcement 
or the Department of Market Regulation'' with ``Enforcement'' in Rule 
9212(a)(2) to permit, in addition to the relevant FINRA departments, 
any department reporting to the CRO that meets the definition of 
``Enforcement'' to propose a hearing location or that the Chief Hearing 
Officer select a Floor-Based Panelist as provided for therein.
    Similarly, the Exchange proposes to replace ``Department of 
Enforcement or the Department of Market Regulation'' with 
``Enforcement'' in Rule 9212(b) and Rule 9212(c)(1) and (2) to enable 
any department reporting to the CRO that meets the definition of 
``Enforcement,'' in addition to the relevant FINRA departments, to 
amend and withdraw complaints.
     Rule 9213(a) (Assignment of Hearing Officer) provides for 
the appointment of a Hearing Officer and Panelists by the Chief Hearing 
Officer as soon as practicable after the filing of a complaint by the 
``Department of Enforcement or the Department of Market Regulation.'' 
The Exchange proposes to replace this reference with ``Enforcement'' to 
include complaints filed by any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to the relevant 
FINRA departments.
     Rule 9215(f) (Answer to Complaint) sets forth the 
requirements for answering a complaint. The Exchange proposes to 
replace ``Department of Enforcement or the Department of Market 
Regulation'' with ``Enforcement'' in Rule 9215(f) to enable any 
department reporting to the CRO that meets the definition of 
``Enforcement,'' in addition to the relevant FINRA departments, to send 
a second notice if a respondent does not file an answer or timely 
respond to the complaint.
     Rule 9216(a) (Acceptance, Waiver, and Consent Procedures) 
sets forth the procedures by which a respondent can execute an AWC 
letter prior to the issuance of a complaint. Under the current rule, 
FINRA's Department of Enforcement or Department of Market Regulation 
prepares and requests that a member organization or covered person 
execute an AWC letter, and ``Exchange staff'' may determine the 
effective date of sanctions unless the letter states otherwise. The 
Exchange proposes to replace ``Department of Enforcement or the 
Department of Market Regulation'' in Rule 9216(a)(1) with 
``Enforcement'' to permit any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to the relevant 
FINRA departments, to prepare and request execution of AWC letters. The 
Exchange also proposes to replace ``Exchange staff'' with ``Regulatory 
Staff'' to identify the staff that may determine the effective date of 
sanctions.
    Rule 9216(b) (Procedure for Violation Under Plan Pursuant to SEA 
Rule 19d-1(c)(2)) sets forth the procedures for executing a minor rule 
violation plan letter.\13\ Under the current rule, FINRA's Department 
of Enforcement or Department of Market Regulation may prepare and 
request that a member organization or covered person execute a minor 
rule violation plan letter, and ``Exchange staff'' may determine the 
effective date of sanctions unless the letter states otherwise. The 
Exchange proposes to replace references to ``the Department of 
Enforcement or the Department of Market Regulation'' in Rule 9216(b)(1) 
with ``Enforcement'' so that any department reporting to the CRO that 
meets the definition of ``Enforcement,'' in addition to FINRA, may 
prepare and request such letters. The Exchange also proposes to replace 
``Exchange staff'' with ``Regulatory Staff'' to identify the staff that 
may determine the effective date of sanctions.
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    \13\ A minor rule violation plan letter under the Exchange's 
rules permits a fine not to exceed $2,500 and/or a censure to be 
imposed with respect to certain specifically enumerated rules. See 
Rules 9216(b)(1) and 9217.
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     Rule 9251 (Inspection and Copying of Documents in 
Possession of Staff) requires that documents prepared or obtained in 
connection with an investigation be made available to a respondent. The 
Exchange proposes to amend subsections (a) (documents that must be made 
available for inspection and copying), (b) (documents withheld from 
inspection and copying), (c) (list of documents withheld), (d) (timing 
of inspection and copying), and (g) (failure to make documents 
available) to replace references to ``the Department of Enforcement or 
the Department of Market Regulation'' with ``Enforcement'' to bring 
departments reporting to the CRO that meet the definition of

[[Page 51337]]

``Enforcement'' within the scope of this rule.
     Rule 9253 (Production of Witness Statements) sets forth 
the procedures for filing motions to obtain witness statements. The 
Exchange proposes to amend Rule 9253(a) and (b) to replace ``Department 
of Enforcement or the Department of Market Regulation'' with 
``Enforcement'' to bring departments reporting to the CRO that meet the 
definition of ``Enforcement'' within the scope of this Rule.
     Rule 9264 (Motion for Summary Disposition) sets forth the 
procedures for filing summary disposition motions. The Exchange 
proposes to replace ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' to bring departments reporting 
to the CRO that meet the definition of ``Enforcement'' within the scope 
of this Rule.
     Rule 9269 (Default Decisions) sets forth the process for 
issuance and review of default decisions. The Exchange proposes to 
replace ``Department of Enforcement or the Department of Market 
Regulation'' in subsection (a)(2) with ``Enforcement'' in order to 
bring departments reporting to the CRO that meet the definition of 
``Enforcement'' within the scope of this Rule. The Exchange also 
proposes to replace ``Exchange staff'' with ``Regulatory Staff'' in 
subsection (d) to identify the staff that may determine the effective 
date of certain sanctions.
     Rule 9270 (Settlement Procedure) governs offers of 
settlement. The Exchange proposes to replace ``the Department of 
Enforcement or the Department of Market Regulation'' in subsections (e) 
and (f) with ``Enforcement'' in order to permit a department reporting 
to the CRO that meets the definition of ``Enforcement'' to consider 
offers of settlement by respondents. The Exchange also proposes to 
replace ``Exchange staff'' with ``Regulatory Staff'' in subsection 
(c)(5) to identify the staff that may determine the effective date of 
sanctions when provided in an offer of settlement.\14\
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    \14\ As discussed below, the Exchange further proposes to amend 
Rule 9270 to have certain offers of settlement submitted to the CRO 
and not ODA.
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     Rule 9551 (Failure to Comply with Public Communication 
Standards) governs expedited proceedings relating to a member 
organization's departure from the public communication standards of 
Rule 2210. The Exchange proposes to replace ``Exchange staff'' with 
``Regulatory Staff'' to identify the staff that initiates and otherwise 
participates in such proceedings.
     Rule 9552 (Failure to Provide Information or Keep 
Information Current) sets forth procedures for expedited proceedings 
relating to a member organization or covered person's failure to 
provide information or keep information current. The Exchange proposes 
to replace ``Exchange staff'' with ``Regulatory Staff'' to identify the 
staff that initiates and otherwise participates in such proceedings.
     Rule 9554 (Failure to Comply with an Arbitration Award or 
Related Settlement or an Order of Restitution or Settlement Providing 
for Restitution) governs expedited proceedings relating to 
noncompliance with an arbitration award, settlement agreement, or 
restitution order. The Exchange proposes to replace ``Exchange staff'' 
with ``Regulatory Staff'' to identify the staff that initiates and 
otherwise participates in such proceedings.
     Rule 9556 (Failure to Comply with Temporary and Permanent 
Cease and Desist Orders) governs expedited proceedings relating to 
noncompliance with a temporary or permanent cease and desist order. The 
Exchange proposes to replace ``Exchange staff'' with ``Regulatory 
Staff'' to identify the staff that initiates and otherwise participates 
in such proceedings.
     Rule 9810 (Initiation of Proceeding) sets forth procedures 
for initiating temporary cease and desist proceedings. The Exchange 
proposes to replace ``Department of Enforcement or the Department of 
Market Regulation'' with ``Enforcement'' in the title and the text of 
the rule to permit a department reporting to the CRO that meets the 
definition of ``Enforcement'' to initiate such proceedings.
     The Exchange proposes to replace references to 
``Department of Enforcement or the Department of Market Regulation'' 
with ``Enforcement'' in Rule 9820 (Appointment of Hearing Officer and 
Hearing Panel), which governs the appointment of Hearing Officers and 
Panelists for temporary cease and desist proceedings, to bring 
departments reporting to the CRO that meet the definition of 
``Enforcement'' within the scope of this Rule.
     Rule 9830 (Hearing) sets forth hearing procedures for 
temporary cease and desist proceedings. The Exchange proposes to amend 
Rule 9830(b) and (h) to replace ``Department of Enforcement or the 
Department of Market Regulation'' with ``Enforcement'' to permit 
service of a notice in a temporary cease and desist proceeding on a 
department reporting to the CRO that meets the definition of 
``Enforcement,'' and to describe available remedies in the event 
Enforcement fails to appear at a hearing.
Independence of the CRO and Staff in the Disciplinary Process
    The Exchange proposes to amend Rules 8210 and 9110 to add rule text 
providing that in performing functions under the disciplinary code, the 
CRO and Regulatory Staff would function independently of the commercial 
interests of the Exchange and the commercial interests of the member 
organizations. This requirement is already being met and is consistent 
with longstanding policies and practices at the Exchange. The proposed 
change would also be consistent with rules currently in effect for the 
equities and options markets of the Exchange's affiliate NYSE Arca, 
Inc., and would reflect the Exchange's ongoing commitment to performing 
its regulatory functions under its disciplinary rules in an independent 
and impartial manner.\15\
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    \15\ See Arca Equities Rule 10.2(a); Arca Options Rule 10.2(a).
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One Year Revolving Door Restriction and Prohibition on Serving as 
Expert Witness
    Rule 9141 governs appearances in a proceeding. The Exchange 
proposes to amend Rule 9141 by adding a new section (c) that would 
prohibit former Regulatory Staff from making an appearance before an 
Adjudicator on behalf of any other person in any proceeding under the 
Rule 9000 Series within one year immediately following termination of 
employment with the Exchange or FINRA. The rule text is broader than 
FINRA's counterpart rule in that it covers not only former FINRA staff 
but also former Regulatory Staff that reported to the CRO, and covers 
both officers and employees. The rule text is otherwise substantially 
the same as the text of FINRA Rule 9141(c), which the Exchange declined 
to adopt in 2013.\16\ At the time, the Exchange did not believe it was 
necessary to bar former employees from such appearances because its 
employees were not conducting disciplinary functions and their 
appearance would not create the same type of potential conflict of 
interest. Once Regulatory Staff reporting to the CRO again directly 
perform market surveillance, investigation and enforcement functions 
following expiration of the current RSA, that would no longer be the 
case and the Exchange therefore believes that such a prohibition would 
help prevent

[[Page 51338]]

potential conflicts or appearance of conflicts of interest.
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    \16\ See Securities Exchange Act Release No. 69045, 78 FR at 
15395 n.14.
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    Similarly, the Exchange proposes to amend Rule 9242, which governs 
pre-hearing submissions, to add a new section (b) prohibiting former 
Regulatory Staff from providing expert testimony on behalf of any other 
person in any proceeding under the Rule 9000 Series within one year 
immediately following termination of employment with the Exchange or 
FINRA. The Exchange also proposes that nothing in proposed Rule 9242(b) 
would prohibit former Regulatory Staff from testifying as a witness on 
behalf of the Exchange or FINRA. The rule text is broader than FINRA's 
counterpart rule in that it covers not only former FINRA staff but also 
former Regulatory Staff that reported to the CRO, and covers both 
officers and employees. The rule text is otherwise substantially the 
same as the text of FINRA Rule 9242(b), which the Exchange declined to 
adopt in 2013 for the same reasons it did not adopt the one year 
prohibition of FINRA Rule 9141(c). Given the Exchange's anticipated 
resumption of certain regulatory functions, the Exchange believes that 
a prohibition on former Regulatory Staff providing expert testimony 
would help prevent potential conflicts or appearance of conflicts of 
interest. The Exchange also believes that, consistent with FINRA Rule 
9242(b), permitting a former Regulatory Staff member to testify as a 
witness on behalf of the Exchange does not pose potential conflicts of 
interest.
Substitution of CRO for ODA in Rules 9211, 9216 and 9270
    The Exchange proposes that the CRO rather than FINRA's ODA would be 
responsible for: (1) Authorizing issuance of a complaint; (2) accepting 
or rejecting AWC letters and minor rule violation plan letters; and (3) 
accepting or rejecting uncontested offers of settlement.
    The Exchange believes that providing for the CRO to authorize 
issuance of complaints and approve settlements would be consistent with 
the Exchange's reintegration of regulatory functions and the rules of 
other SROs.\17\ The proposed change is also consistent with certain 
powers the CRO currently has under the disciplinary rules.\18\ 
Moreover, as noted above, by rule the CRO would be required to operate 
independently of the commercial interests of the Exchange and of member 
organizations.
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    \17\ See e.g., BATS Exchange Rules 8.4 and 8.8; Chicago Stock 
Exchange Article 12, Rules 1(b) and (d) (providing that the CRO 
shall direct written charges and approve or reject offers of 
settlement). The International Securities Exchange (``ISE''), Miami 
International Securities Exchange (``MIAX'') and BOX Options 
Exchange (``BOX'') also provide that complaints are to be approved 
by the CRO. Each also requires offers of settlement to be authorized 
by the CRO if a hearing panel has not yet been appointed, and 
requires letters of consent to be authorized by the CRO and approved 
by a business conduct committee. See ISE Rules 1603, 1604 and 1609; 
MIAX Rules 1003, 1004 and 1009; BOX Rules 12030, 12040 and 12090.
    \18\ In adopting FINRA's disciplinary rules, the Exchange 
provided that the CRO, rather than FINRA's CEO, would authorize the 
initiation of temporary cease and desist proceedings and the 
initiation of suspension or cancellation proceedings for a violation 
of a temporary cease and desist order. The Exchange also retained 
the ability of the CRO to resolve certain procedural matters in 
connection with settlements under Rule 9270(d). See Securities 
Exchange Act Release No. 69045, 78 FR at 15394, 15398-15400 & n.24.
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    To accomplish these changes, the Exchange proposes to amend Rules 
9211, 9216 and 9270 as follows:
     Rule 9211(a)(1) and (a)(2) would be amended to replace 
``Office of Disciplinary Affairs'' with ``CRO.'' This proposed change 
would identify the CRO rather than ODA as being responsible for 
authorizing Enforcement to issue a complaint.
     Rule 9216(a)(3) and (a)(4) would be amended to replace 
references to ``Office of Disciplinary Affairs'' with ``CRO.'' The 
proposed change would permit the CRO to accept or reject an AWC letter 
and, if accepted, to be deemed final.
     Rule 9216(a)(4) would be amended to provide that if the 
CRO rejects an AWC letter, the Exchange may take other appropriate 
disciplinary action with respect to the alleged violation or 
violations. This is consistent with the current rule as it relates to 
an AWC letter that is rejected by FINRA's ODA.
     Rule 9216(b)(3) and (b)(4) would be amended to replace 
``Office of Disciplinary Affairs'' with ``CRO.'' This proposed change 
would allow an executed minor rule violation plan letter to be 
submitted to the CRO, which, on behalf of the SRO Board, may accept or 
reject it. If accepted, it would be deemed final; if the CRO rejects 
the letter, the Exchange may take other appropriate disciplinary action 
with respect to the alleged violation or violations. This is consistent 
with the current rule as it relates to a minor rule violation plan 
letter that is accepted or rejected by ODA.
     Finally, Rule 9270(e), (f), (h), and (j) would also be 
amended to replace ``Office of Disciplinary Affairs'' with ``CRO.'' The 
proposed change to subsection (f) would provide that uncontested offers 
of settlement would be transmitted to the CRO and, if accepted under 
proposed Rule 9270(f)(3), would be issued and become final. Under 
proposed Rule 9270(h), if the CRO does not accept an uncontested offer 
of settlement, the respondent would be notified in writing and the 
offer of settlement and proposed order of acceptance would be deemed 
withdrawn.\19\ Under proposed Rule 9270(j), an offer of settlement 
rejected by the CRO would not prejudice a respondent and would not be 
introduced into evidence in connection with the determination of the 
issues involved in the pending complaint or in any other proceeding. 
This is consistent with the current rule as it relates to an offer of 
settlement that is not accepted by ODA.
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    \19\ Because the Exchange does not have sanction guidelines, the 
CRO, Hearing Panel, or Extended Hearing Panel, as applicable, would 
consider Exchange precedent or such other precedent as it deemed 
appropriate in determining whether or not to accept a settlement 
offer under Rule 9270. See Securities Exchange Act Release No. 68678 
at 43 n.38 (January 16, 2013), 78 FR 5213 at 5229 n.39 (January 24, 
2013) (SR-NYSE-2013-02).
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Miscellaneous Amendments to Rules 476, 8120, 9001, 9110, 9217, 9232, 
9310 and 9810
    The Exchange proposes several miscellaneous amendments to make 
certain technical changes and correct a typographical error.
    First, the Exchange proposes to insert a reference to the Rule 8000 
Series in Rule 476 in order to clarify that both the Rule 8000 Series 
and the Rule 9000 Series would apply to proceedings for which no Charge 
Memorandum was filed with the hearing board under Rule 476(d) prior to 
July 1, 2013 and for which no written Stipulation and Consent was 
submitted to a Hearing Officer prior to July 1, 2013.\20\ The Exchange 
proposes the same change to Rule 9001, which specifies the effective 
date of the Rule 9000 Series.
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    \20\ Rule 476 is the Exchange's legacy disciplinary rule that 
applies to a Charge Memorandum filed under Rule 476(d) prior to July 
1, 2013 or for which a written Stipulation and Consent was submitted 
prior to July 1, 2013. See Securities Exchange Act Release Nos. 
68678, 78 FR at 5213 and 69045, 78 FR at 15394.
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    Second, the Exchange proposes to delete the last sentence in Rule 
476 as obsolete. By its terms, that sentence relates only to orders 
issued on or before July 1, 2013.
    Third, the Exchange proposes to add a reference to the term 
``Regulatory Staff'' in Rule 8120, because, as set forth above, that 
new defined term is referenced in certain proposed changes to the Rule 
8000 Series.
    Fourth, the Exchange proposes to delete the last sentence in Rule 
9110(c) as obsolete.

[[Page 51339]]

    Fifth, the Exchange proposes to correct a typographical error in 
Rule 9217, which sets forth the rules eligible for minor rule plan 
fines, by adding a dash in the rule text describing Rule 123C.
    Sixth, the Exchange proposes to amend Rule 9232(b), which governs 
appointment of panelists, to provide that the Board shall from time to 
time appoint a Hearing Board as set forth in the rule. Under the 
current rule, the Chairman of the Board, subject to Board approval, has 
this responsibility. The Exchange believes that because the approval of 
the Board is required for appointment of the Hearing Board, it is not 
necessary to specify that the Chairman of the Exchange Board would 
appoint the Hearing Board subject to such approval.
    Seventh, the Exchange proposes two [sic] technical, clarifying 
amendments to Rule 9310. The Exchange proposes to amend Rule 9310 to 
provide that none of the persons referenced in the Rule, i.e., Board 
directors, members of the Committee for Review, and the parties, may 
request Board review of a decision concerning an Exchange member that 
is an affiliate. Under the current Rule, only the parties are 
prohibited from requesting Board review of a decision in such 
circumstances.\21\
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    \21\ A decision with respect to an Exchange member that is an 
affiliate of the Exchange constitutes final Exchange disciplinary 
action pursuant to SEC Rule 19d-1(c)(1) and may not be reviewed by 
the Board. See Rule 9268(e)(2).
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    Finally, the Exchange proposes to add the phrase ``Service and 
Filing of Notice'' to the title of Rule 9810(a) in order to identify 
the subject matter covered by the rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\22\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\23\ in particular, in that it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. In addition, the Exchange believes 
that the proposed rule change furthers the objectives of Section 
6(b)(7) of the Act,\24\ in particular, in that it provides fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof. In addition, the Exchange believes that the 
proposed rule change furthers the objectives of Section 6(b)(3) of the 
Act,\25\ in particular, in that it supports the fair representation of 
members in the administration of the Exchange's affairs.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78f(b)(7).
    \25\ 15 U.S.C. 78f(b)(3).
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    The Exchange believes that eliminating references to FINRA 
departments and replacing them with ``Enforcement,'' a new defined term 
that includes any department reporting to the CRO of the Exchange with 
responsibility for investigating or imposing sanctions on a member 
organization or covered person, in addition to FINRA's departments of 
Enforcement and Market Regulation, in Rules 9120, 9131, 9146, 9211, 
9212, 9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9810, 9820 and 
9830 would facilitate the Exchange's ability to directly conduct 
investigations and bring disciplinary actions for matters it will be 
conducting after the reintegration of certain functions next year. The 
Exchange believes that defining ``Regulatory Staff'' as including any 
officer or employee reporting directly or indirectly to the CRO of the 
Exchange in addition to FINRA staff acting on behalf of the Exchange in 
connection with the Rule 8000 and 9000 Series, in Rules 9120, 9146, 
9216, 9269, 9270, 9551, 9552, 9554, and 9556 would similarly facilitate 
the Exchange's ability to directly conduct investigations and bring 
disciplinary actions, as well as FINRA.
    Because the substance of the rules would remain unchanged, the 
Exchange believes that the proposed change would provide fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof. Further, removing references to Exchange and FINRA 
offices and departments in the Exchange's Rules that are unnecessary in 
light of Rule 0 removes impediments to and perfects a national market 
system because it would reduce potential confusion that may result from 
retaining different designations in the Exchange's rulebook. Removing 
potentially confusing conflicting designations would also further the 
goal of transparency and add consistency to the Exchange's Rules.
    The Exchange believes that adding rule text to Rules 8210 and 9110 
stating that the CRO and Regulatory Staff would function independently 
of the commercial interests of the Exchange and the commercial 
interests of member organizations in performing functions under the 
disciplinary rules would further ensure the integrity and independence 
of the disciplinary process and further provide fair procedures for the 
disciplining of members and persons associated with members. For the 
same reasons, addition of the proposed rule text would protect 
investors and the public interest and would therefore be consistent 
with Section 6(b)(5) of the Exchange Act.
    The Exchange believes that prohibiting former Regulatory Staff from 
representing respondents and providing expert testimony in Exchange 
disciplinary matters within one year immediately following termination 
of employment would provide greater harmonization between Exchange and 
FINRA rules of similar purpose. As previously noted, the proposed rule 
text is based on FINRA's current rule text, which already has been 
approved by the Commission. As such, the proposed rule change would 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and will remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
    The Exchange also believes that making the CRO responsible for 
authorizing complaints and approving AWC letters, minor rule violation 
plan letters and offers of settlement in place of FINRA's ODA is fair 
and reasonable, and provides adequate procedural protections. In 
particular, requiring approval of complaints and settlements by an 
independent CRO will serve as an appropriate check on the authority of 
the investigative and enforcement staff at both the Exchange and FINRA 
to bring and resolve such actions.
    Further, the Exchange believes that by having decisions regarding 
initiating and resolving formal disciplinary actions and resolving 
minor rule violations made by an individual with the most direct 
expertise relevant to the NYSE's markets,\26\ the proposal promotes 
efficiency and consistency and aligns the Exchange's process with other 
SROs. As noted above, the proposed change is consistent with the 
reintegration of regulatory functions by the Exchange and the practices 
at other

[[Page 51340]]

SROs where CROs authorize issuance of complaints and approve 
settlements.
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    \26\ See, e.g., Securities Exchange Act Release No. 69045, 78 FR 
at 15401.
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    Finally, making technical amendments and correcting a typographical 
error in Rules 476, 8120, 9001, 9110, 9217, 9232, 9310 and 9810 removes 
impediments to and perfects the mechanism of a free and open market by 
removing confusion that may result from having incorrect or redundant 
material in the Exchange's rulebook. The Exchange believes that 
eliminating incorrect or redundant material would not be inconsistent 
with the public interest and the protection of investors because 
investors will not be harmed and in fact would benefit from increased 
transparency, thereby reducing potential confusion. Removing such 
references will also remove impediments to and perfects the mechanism 
of a free and open market by ensuring that persons subject to the 
Exchange's jurisdiction, regulators, and the investing public can more 
easily navigate and understand the Exchange's rulebook. The Exchange 
believes that eliminating incorrect or redundant material would not be 
inconsistent with the public interest and the protection of investors 
because investors will not be harmed and in fact would benefit from 
increased transparency, thereby reducing potential confusion. Removing 
such references will also further the goal of transparency and add 
clarity to the Exchange's rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but rather to enable the 
Exchange to directly investigate and initiate disciplinary actions 
following and facilitate the reintegration of certain regulatory 
functions from FINRA.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2015-35 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2015-35. 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/sro.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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. 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 SR-NYSE-2015-35, and should be 
submitted on or before September 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-20792 Filed 8-21-15; 8:45 am]
BILLING CODE 8011-01-P


