
[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Notices]
[Pages 11311-11335]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04633]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77241; File No. SR-NYSEMKT-2016-30]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Adopting Investigation, 
Disciplinary, Sanction, and Other Procedural Rules Modeled on the Rules 
of the New York Stock Exchange LLC and Certain Conforming and Technical 
Changes

February 26, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on February 19, 2016, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change 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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[[Page 11312]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to [sic] (1) investigation, disciplinary, 
sanction, and other procedural rules modeled on the rules of the New 
York Stock Exchange LLC (``NYSE''), and (2) certain conforming and 
technical changes. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes (1) investigation, disciplinary, sanction, 
and other procedural rules that are modeled on the rules of its 
affiliate New York Stock Exchange LLC (``NYSE''), and (2) certain 
conforming and technical changes.
Background and Description of Proposed Rule Change
    On July 30, 2007, the National Association of Securities Dealers, 
Inc. (``NASD''), NYSE, and NYSE Regulation, Inc. (``NYSE Regulation''), 
a not-for-profit subsidiary of the NYSE,\4\ consolidated their member 
firm regulation operations into a combined organization, the Financial 
Industry Regulatory Authority, Inc. (``FINRA''), and entered into a 
plan to allocate to FINRA regulatory responsibility for common rules 
and common members (``17d-2 Agreement'').\5\ In 2007, the parties 
entered into a Regulatory Services Agreement (``RSA''), whereby FINRA 
was retained to perform certain regulatory services for non-common 
rules. Following its acquisition by NYSE Euronext in 2008, NYSE MKT 
amended certain of its disciplinary rules to make them substantially 
the same as NYSE's disciplinary rules, and NYSE MKT became a party to 
the RSA.\6\
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    \4\ NYSE Regulation performs regulatory functions for the 
Exchange pursuant to an intercompany Regulatory Services Agreement 
(the ``Intercompany RSA'').
    \5\ See Securities Exchange Act Release No. 56148 (July 26, 
2007), 72 FR 42146 (August 1, 2007) (File No. 4-544) (Notice of 
Filing and Order Approving and Declaring Effective a Plan for the 
Allocation of Regulatory Responsibilities).
    \6\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-62 & SR-NYSE-
2008-60). Certain of these rules were transitional in nature, and 
the Exchange later deleted them because they were obsolete. See 
Securities Exchange Act Release No. 70294 (August 30, 2013), 78 FR 
54943 (September 6, 2013) (SR-NYSEMKT-2013-72).
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    On June 14, 2010, the RSA was amended to retain FINRA to perform 
the market surveillance and enforcement functions that had, up to that 
point, been performed by NYSE Regulation.\7\ 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.\8\
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    \7\ See Securities Exchange Act Release No. 62355 (June 22, 
2010), 75 FR 36729 (June 28, 2010) (SR-NYSE-2010-46); Securities 
Exchange Act Release No. 62354 (June 22, 2010), 75 FR 36730 (June 
28, 2010) (SR-NYSEAmex-2010-57).
    \8\ See Rule 0. Notwithstanding the RSA, the Exchange retains 
ultimate legal responsibility for, and control of, the Exchange's 
regulatory functions performed by FINRA. Securities Exchange Act 
Release No. 62354 (June 22, 2010), 75 FR 36730 (June 28, 2010) (SR-
NYSEAmex-2010-57).
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    In 2013, the NYSE adopted disciplinary rules that are, with certain 
exceptions, substantially the same as the text of the FINRA Rule 8000 
Series and Rule 9000 Series, and which set forth rules for conducting 
investigations and enforcement actions (the ``2013 NYSE Disciplinary 
Rule Filing'').\9\ The new NYSE disciplinary rules were implemented on 
July 1, 2013.\10\
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    \9\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02) (``2013 
Notice''), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR-
NYSE-2013-02) (``2013 Approval Order''), and 69963 (July 10, 2013), 
78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \10\ See NYSE Information Memorandum 13-8 (May 24, 2013).
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    To achieve further rule harmonization among exchanges and to 
facilitate the reintegration of regulatory functions from FINRA,\11\ 
the Exchange proposes to adopt, with certain changes, the text of the 
NYSE Rule 8000 and Rule 9000 Series, as modified to reflect amendments 
recently proposed by the NYSE and described in more detail below.
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    \11\ 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. It is anticipated that 
FINRA, under the new RSA, will 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. On August 14, 2015, NYSE 
filed a proposed rule change to amend certain of its disciplinary 
rules to facilitate the reintegration of these regulatory functions 
from FINRA as of January 1, 2016, which filing was approved on 
November 13, 2015 (the ``NYSE Reintegration Facilitation Filing''). 
See Securities Exchange Act Release No. 75721 (Aug. 18, 2015), 80 FR 
51334 (August 24, 2015) (``Notice'') and Exchange Act Release No. 
76436 (November 13, 2015), 80 FR 72460 (November 19, 2015) 
(``Approval Order'') (SR-NYSE-2015-35).
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    The Exchange notes that some of its member organizations, by virtue 
of their membership in other self-regulatory organizations (``SRO''), 
are already subject to rules that are similar to the proposed rules. 
All NYSE MKT member organizations that have equity trading licenses are 
also NYSE members pursuant to Rule 2--Equities. Several other NYSE MKT 
member organizations and NYSE Amex Trading Permit (``ATP'') Holders 
also are members of FINRA (``Dual Members''). As such, these Dual 
Members are already subject to their respective Rule 8000 Series and 
Rule 9000 Series. Certain member organizations that are not members of 
FINRA or NYSE are members of The NASDAQ Stock Market (``NASDAQ''), 
which has similar disciplinary rules to FINRA and are therefore also 
already subject to similar rules. The proposed rule change would result 
in the Exchange and NYSE having substantially the same disciplinary 
process, which would closely resemble FINRA's process.
    Set forth below in this Purpose section are:
     A description of the Exchange's current disciplinary 
rules, Rules 475-477;
     a description of the proposed rule change and transition 
generally;
     a more detailed description of the proposed rules with a 
comparison to the current rules;
     a description of technical and conforming amendments; and
     a description of current rules that will not be carried 
over into the proposed rule set and the reasons therefor.
Current Rules 475-477 \12\
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    \12\ All references are to NYSE MKT rules unless otherwise 
noted. Further, where current or proposed NYSE MKT rules or NYSE 
rules use capitalized terms, descriptions of such rules herein 
follow those capitalization conventions.
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    This section summarizes NYSE MKT's current disciplinary rules, 
which

[[Page 11313]]

are set forth in Section 9A of the Office Rules and apply to both the 
NYSE MKT equities market and the NYSE Amex options market.
Current Rule 475--Summary Proceedings
    Rule 475 sets forth summary procedures under which the Exchange may 
prohibit or limit access to services. Under Rule 475(a), except as 
otherwise provided in Rule 475(b), the Exchange may not prohibit or 
limit any person with respect to access to services offered by the 
Exchange or any member or member organization thereof unless the 
Exchange has provided 15 days' prior written notice of, and an 
opportunity to be heard upon, the specific grounds for such prohibition 
or limitation. The Exchange must keep a record of any such proceeding. 
Any determination by the Exchange to prohibit or limit access to 
services must be supported by a statement setting forth the specific 
grounds for the prohibition or limitation.
    Under Rule 475(b), the Exchange may summarily suspend persons 
subject to its jurisdiction that have been expelled or suspended by 
another SRO, or barred or suspended from being associated with a member 
or any such SRO, as long as any such summary suspension imposed by the 
Exchange does not exceed the termination of the suspension imposed by 
the other SRO. The Exchange also may suspend a member or member 
organization that is in such financial or operating difficulty that the 
Exchange determines, and so notifies the SEC, that the member or member 
organization cannot be permitted to continue to do business with safety 
to investors, creditors, other members or member organizations, or the 
Exchange. The Exchange also may limit or prohibit any person with 
respect to access to Exchange services if such person has been 
summarily suspended under this rule or, in the case of a person who is 
not a member or member organization, if the Exchange determines that 
such person does not meet the qualification requirements or other 
prerequisites for such access and such person cannot be permitted to 
continue to have such access with safety to investors, creditors, 
members, member organizations, or the Exchange.
    Any person subject to summary action must receive written notice 
and an opportunity to be heard by the Exchange upon the specific 
grounds for the action, and the Exchange must keep a record of any 
summary proceeding. Any determination by the Exchange with respect to 
such summary action must be supported by a statement setting forth the 
specific grounds on which the summary action is based. The Commission, 
by order, may stay any such summary action in accordance with the 
provisions of the Act.
    Rule 475(c) governs hearings and proceedings pursuant to Rule 
475(a) and (b). Hearings are conducted by a Hearing Officer, appointed 
by the Exchange Board of Directors, acting alone. The Hearing Officer 
schedules and conducts hearings promptly and, in doing so, provides 
such discovery to the person whose access or suspension is the subject 
of such a hearing and to the Exchange officers and employees. The 
Hearing Officer renders determinations based upon the record at such 
hearings. The Hearing Officer may modify, reverse, or terminate a 
summary action, unless within 10 days of such determination, a request 
for review is filed with the Secretary of the Exchange. Any member of 
the Exchange Board of Directors, any member of the Committee for Review 
(``CFR''),\13\ and either the Exchange or the respondent may require a 
review by the Exchange Board of Directors of any determination by the 
Hearing Officer. The Exchange Board of Directors, with the advice of 
the CFR, may affirm, modify, or reverse any such determination, or 
remand the matter to the Hearing Officer for further proceedings. 
Unless the Exchange Board of Directors otherwise specifically directs, 
the determination and the penalty, if any, of the Exchange Board of 
Directors after review is final and conclusive, subject to the 
provisions for review under the Act.
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    \13\ The CFR is a subcommittee of the Exchange's Regulatory 
Oversight Committee (``ROC''). See Securities Exchange Act Release 
No. 77008 (February 1, 2016) (NYSEMKT 2015-106).
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    Under Rule 475(d), whenever a member or member organization fails 
to perform its contracts, becomes insolvent, or is in such financial or 
operating difficulty that it cannot be permitted to continue to do 
business as a member or member organization with safety to investors, 
creditors, other members or member organizations, or the Exchange, such 
member or member organization must promptly give written notice thereof 
to the Secretary of the Exchange.
    Under Rule 475(e), any person suspended under the provisions of the 
rule must, at the request of the Exchange, submit to the Exchange its 
books and records or the books and records of any employee thereof and 
furnish information to or appear or testify before or cause any such 
employee to appear or testify before the Exchange.
    Under Rule 475(f), any person suspended under Rule 475 may, at any 
time, be reinstated by the Exchange Board of Directors.
    Under Rule 475(g), any person suspended under Rule 475 may be 
disciplined in accordance with the Exchange's rules for any offense 
committed before or after the suspension.
    Under Rule 475(h), a member suspended under Rule 475 is deprived 
during the term of the suspension of all rights and privileges of 
membership, and any suspension of a member or principal executive 
creates a vacancy in any office or position held by such member or 
principal executive.
    Under Rule 475(i), the limitations on the Chief Executive Officer 
(``CEO'') of the Exchange contained in Rule 476(l) that prohibit the 
CEO from initiating a call for review apply to all matters under Rule 
475.
    Under Rule 475(j), any member of the Exchange Board of Directors, 
any member of the CFR, the Exchange, and the respondent may require a 
review by the Exchange Board of Directors of any determination under 
Rule 475 by filing with the Secretary of the Exchange a written request 
therefor within 10 days following such determination. The Exchange 
Board of Directors, with the advice of the CFR, shall have the power to 
affirm, modify, or reverse any such determination, or remand the matter 
for further proceedings. Unless the Exchange Board of Directors 
otherwise specifically directs, the determination and the penalty, if 
any, of the Exchange Board of Directors after review is final and 
conclusive, subject to the provisions for review under the Act.
Current Rule 476--Disciplinary Proceedings
    Rule 476 governs disciplinary proceedings involving charges against 
members, member organizations, principal executives, approved persons, 
employees, or others subject to the Exchange's jurisdiction. Under Rule 
476(a), if such a person is adjudged guilty of certain offenses in a 
proceeding under Rule 476, then a Hearing Panel or Hearing Officer, in 
accordance with the Sanctions Guidelines in Rule 476.10,\14\

[[Page 11314]]

may impose disciplinary sanctions on such person, including expulsion; 
suspension; limitation as to activities, functions, and operations, 
including the suspension or cancellation of a registration in, or 
assignment of, one or more stocks; fine; censure; suspension or bar 
from being associated with any member or member organization; or any 
other fitting sanction. The list of offenses under Rule 476(a)(1)-(11) 
includes, for example, violating an Exchange rule or the Act, making a 
material misstatement, or engaging in manipulation.
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    \14\ The Sanctions Guidelines in Rule 476.10 apply to certain 
options-related violations. See Securities Exchange Act Release Nos. 
45412 (February 7, 2002), 67 FR 6770 (February 13, 2002); 45566 
(March 15, 2002), 67 FR 13379 (March 22, 2002) (SR-Amex-2001-68). 
The Exchange filed this proposed rule change pursuant to the 
provisions of Section IV.B.i of the Commission's September 11, 2000 
Order Instituting Public Administrative Proceedings Pursuant to 
Section 19(h)(1) of the Act, which required the Exchange to adopt 
rules establishing, or modifying existing, sanctioning guidelines 
such that they are reasonably designed to effectively enforce 
compliance with options order handling rules. See Securities 
Exchange Act Release No. 43268 (September 11, 2000), Administrative 
Proceeding File No. 3-10282. The Sanctions Guidelines, as under the 
current rules, would not apply to equities-related violations. As 
such, the CRO, Hearing Panel or Extended Hearing Panel, as 
applicable, would consider relevant Exchange precedent or such other 
precedent as it deemed appropriate in determining sanctions that 
should be imposed in connection with a decision pursuant to proposed 
Rule 9268 or 9269, or in connection with a settlement pursuant to 
proposed Rule 9216 or 9270.
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    Rule 476(b) describes the role of Hearing Panels and Hearing 
Officers. Under Rule 476(b), all proceedings under Rule 476, except for 
matters resolved by a Hearing Officer when authorized by the rule, are 
conducted at a hearing in accordance with the Rule and held before a 
Hearing Panel consisting of at least three persons of integrity and 
judgment: A Hearing Officer, who chairs the Hearing Panel, and at least 
two members of the Hearing Board, at least one of whom must be engaged 
in securities activities differing from that of the respondent or, if 
retired, was so engaged in differing activities at the time of 
retirement. In any disciplinary proceeding involving activities on the 
Floor of the Exchange, no more than one of the persons serving on the 
Hearing Panel may be, or if retired, may have been, active on the Floor 
of the Exchange. A Hearing Panel may include only one retired person.
    The Chairman of the Exchange Board of Directors, subject to the 
approval of the Exchange Board of Directors, from time to time appoints 
a Hearing Board to be composed of persons of integrity and judgment who 
are members and principal executives of the Exchange who are not 
members of the Exchange Board of Directors, registered and non-
registered employees of members and member organizations, and such 
other persons as the Chairman deems necessary. Former members, 
principal executives, or registered and non-registered employees of 
members and member organizations who have retired from the securities 
industry may be appointed to the Hearing Board within five years of 
their retirement. The members of the Hearing Board are appointed 
annually and serve at the pleasure of the Exchange Board of Directors.
    The Chairman, subject to the approval of the Exchange Board of 
Directors, annually designates a Chief Hearing Officer and one or more 
other Hearing Officers who have no Exchange duties or functions 
relating to the investigation or preparation of disciplinary matters. 
Hearing Officers serve at the pleasure of the Exchange Board of 
Directors. An individual cannot be a Hearing Officer (including the 
Chief Hearing Officer) if he or she is, or within the last three years 
was, a member, principal executive, or registered or non-registered 
employee of a member or member organization.
    Under the rule, the decision of a majority of the Hearing Panel is 
the decision of the Hearing Panel and is final and conclusive, unless a 
request to the Exchange Board of Directors for review is filed.
    Rule 476(c) governs procedural matters and the conduct of the 
hearing. Under Rule 476(c), upon application to the Chief Hearing 
Officer by either party to a proceeding, the Chief Hearing Officer, or 
any Hearing Officer designated by the Chief Hearing Officer, resolves 
any and all procedural and evidentiary matters and substantive legal 
motions, and may require the Exchange to permit the respondent to 
inspect and copy documents or records in the possession of the Exchange 
that are material to the preparation of the defense or are intended for 
use by the Exchange as evidence in chief at the hearing. The respondent 
may be required to provide discovery of non-privileged documents and 
records to the Exchange. The rule does not authorize the discovery or 
inspection of reports, memoranda, or other internal Exchange documents 
prepared by the Exchange in connection with the proceeding. There is no 
interlocutory appeal to the Exchange Board of Directors of any 
determination as to which this provision applies.
    Rule 476(d) governs Charge Memorandums, Answers, and motions. Under 
Rule 476(d), except as otherwise provided in Rule 476(g), which governs 
Stipulations and Consents, the specific charges against the respondent 
must be in the form of a written statement (a ``Charge Memorandum'') 
and signed by an authorized officer or employee of the Exchange, or an 
authorized employee of another SRO with which the Exchange has entered 
into an RSA pursuant to Rule 1B on behalf of the Exchange. A copy of 
such Charge Memorandum must be filed with the Hearing Board at the same 
time it is served upon the respondent. Service is deemed effective by 
personal service of such Charge Memorandum, or by leaving the same 
either at the respondent's last known office address during business 
hours or the respondent's last place of residence as reflected in 
Exchange records, or upon mailing same to the respondent at such office 
address or place of residence. The Hearing Board assumes jurisdiction 
upon receipt of the Charge Memorandum.
    A written Answer to the Charge Memorandum must be filed not later 
than 25 days from the date of service or within such longer period of 
time as the Hearing Officer may deem proper. The Answer must be signed 
by or on behalf of the respondent and filed with the Hearing Board, 
with a copy served on the Exchange. The Answer must indicate 
specifically which assertions of fact and charges in the Charge 
Memorandum are denied and which are admitted, and also contain any 
specific facts in contradiction of the charges and any affirmative 
defenses. A general denial is insufficient. Any assertions of fact not 
specifically denied in the Answer may be deemed admitted and failure to 
file an Answer may be deemed an admission of any facts asserted in the 
Charge Memorandum.
    The Hearing Board sets a schedule for the filing of motions and 
establishes hearing dates. If the respondent fails to file an Answer, 
the Exchange, by motion, accompanied by proof of notice to the 
respondent, may request a determination of guilt by default and may 
recommend a penalty to be imposed. If the respondent opposes the 
motion, the Hearing Officer, on a determination that the respondent had 
adequate reason to fail to file an Answer, may adjourn the hearing date 
and direct the respondent to promptly file an Answer. If the default 
motion is unopposed, or the respondent did not have adequate reason to 
fail to file an Answer, or the respondent failed to file an Answer 
after being given an opportunity to do so, the Hearing Officer, on a 
determination that the respondent has had notice of the charges and 
that the Exchange has jurisdiction in the matter, may find guilt and 
determine a penalty.
    Notice of the hearing is served upon the Exchange and the 
respondent. The respondent is entitled to be personally present. The 
Hearing Officer determines the specific facts at issue, and with 
respect to those facts only, both the Exchange and the respondent may

[[Page 11315]]

produce witnesses and any other evidence and they may examine and 
cross-examine any witnesses so produced. After hearing all the 
witnesses and considering all the evidence, the Hearing Panel 
determines whether the respondent is guilty of the charges, and if so, 
may impose a penalty.
    Rule 476(e) concerns the hearing record and time for appeal. Under 
Rule 476(e), the Exchange must keep a record of any hearing conducted 
and a written notice of the result must be served upon the respondent 
and the Exchange.
    The determination of the Hearing Panel, or of the Hearing Officer 
on a determination of default, and any penalty imposed, is final and 
conclusive 25 days after notice has been served upon the respondent, 
unless a request to the Exchange Board of Directors for review of such 
determination and/or penalty is filed, in which case any penalty 
imposed is stayed pending the outcome of such review.
    Rule 476(f) concerns appeals to the Exchange Board of Directors. 
Under Rule 476(f), the Exchange, the respondent, any member of the 
Exchange Board of Directors, and any member of the CFR may require a 
review by the Exchange Board of Directors of any determination or 
penalty, or both, imposed by a Hearing Panel or Hearing Officer. A 
written request for review must be filed with the Secretary of the 
Exchange within 25 days after notice of the determination and/or 
penalty is served upon the respondent. The Secretary of the Exchange 
gives notice of any such request for review to the Exchange and any 
respondent affected thereby.
    Any review must be conducted by the Exchange Board of Directors or 
the CFR, in the sole discretion of the Exchange Board of Directors, and 
is based on oral arguments and written briefs and is limited to 
consideration of the record before the Hearing Panel or Hearing 
Officer. The CFR in turn can appoint an appeals panel to conduct the 
review and make a recommendation to the CFR.\15\
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    \15\ An appeals panel appointed by the CFR must consist of at 
least three and no more than five individuals. For equities matters, 
the panel must be composed of at least one director and one member 
or individual associated with an equities member organization. For 
options matters, the appeals panel must be composed of at least one 
director and one member or individual associated with an options 
member organization. See Rule 476(f).
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    Upon review, and with the advice of the CFR, the Exchange Board of 
Directors, by majority vote, may sustain any determination or penalty 
imposed, or both; may modify or reverse any such determination; and may 
increase, decrease or eliminate any such penalty, or impose any penalty 
permitted under the provisions of this rule. Unless the Exchange Board 
of Directors otherwise specifically directs, the determination and 
penalty, if any, of the Exchange Board of Directors after review is 
final and conclusive, subject to the provisions for review under the 
Act.
    Notwithstanding the foregoing, if either party upon review applies 
for leave to adduce additional evidence, and shows to the satisfaction 
of the Exchange Board of Directors, with the advice of the CFR, that 
the additional evidence is material and that there was reasonable 
ground for failure to adduce it before the Hearing Panel or Hearing 
Officer, the Exchange Board of Directors, with the advice of the CFR, 
may remand the case for further proceedings, in whatever manner and on 
whatever conditions the Exchange Board of Directors considers 
appropriate.
    Rule 476(g) sets forth an alternative Stipulation and Consent 
procedure that may be used in lieu of the procedures set forth in Rule 
476(d). Under Rule 476(g), a Hearing Officer acting alone may determine 
whether a person subject to the Exchange's jurisdiction has committed 
an offense on the basis of a written Stipulation and Consent entered 
into between the respondent and any authorized officer or employee of 
the Exchange or an authorized employee of another SRO with which the 
Exchange has entered into an RSA pursuant to Rule 1B on behalf of the 
Exchange. Any such Stipulation and Consent must contain a stipulation 
with respect to the facts, or the basis for findings of fact by the 
Hearing Officer; a consent to findings of fact by the Hearing Officer, 
including a finding that a specified offense had been committed; and a 
consent to the imposition of a specified penalty.
    A Hearing Officer must convene a Hearing Panel if the Hearing 
Officer requires clarification or further information on the 
Stipulation and Consent, or if either party requests a hearing before a 
Hearing Panel. A Hearing Officer, acting alone, may not reject a 
Stipulation and Consent, but must convene a Hearing Panel to consider 
such action.
    Notice of any hearing held for the purpose of considering a 
Stipulation and Consent is served upon the respondent as provided in 
Rule 476(d). In any such hearing, if the Hearing Panel determines that 
the respondent has committed an offense, it may impose the penalty 
agreed to in such Stipulation and Consent. In addition, a Hearing Panel 
may reject such Stipulation and Consent.
    Such rejection does not preclude the parties to the proceeding from 
entering into a modified Stipulation and Consent or preclude the 
Exchange from bringing or presenting the same or different charges to a 
Hearing Panel in accordance with Rule 476(d). The Exchange must keep a 
record of any hearing conducted under this Rule and a written notice of 
the result setting forth the requirements contained in Section 6(d)(1) 
of the Act must be served on the parties to the proceeding.
    The determination of the Hearing Panel or Hearing Officer and any 
penalty imposed are final and conclusive 25 days after notice thereof 
has been served upon the respondent, unless a request to the Exchange 
Board of Directors for review of such determination and/or penalty is 
filed, in which case any penalty imposed is stayed pending the outcome 
of such review.
    Any member of the Exchange Board of Directors and any member of the 
CFR may require a review by the Exchange Board of Directors of any 
determination or penalty, or both, imposed by a Hearing Panel or 
Hearing Officer in connection with a Stipulation and Consent. The 
respondent or the Exchange Division that entered into the Stipulation 
and Consent may require a review by the Exchange Board of Directors of 
any rejection of such Stipulation and Consent by the Hearing Panel. A 
written request for review must be filed with the Secretary of the 
Exchange within 25 days after notice of the determination and/or 
penalty is served on the respondent. The Secretary of the Exchange 
gives notice of any such request for review to the Exchange Division 
involved in the proceeding and any respondent affected thereby.
    Any review must be conducted by the Exchange Board of Directors, or 
the CFR, in the sole discretion of the Exchange Board of Directors, and 
consists of oral arguments and written briefs and is limited to 
consideration of the record before the Hearing Panel or Hearing 
Officer. Upon review, and with the advice of the CFR, the Exchange 
Board of Directors, by majority vote, may fix and impose the penalty 
agreed to in such Stipulation and Consent or any penalty that is less 
severe than the stipulated penalty, or may remand for further 
proceedings. Unless the Exchange Board of Directors otherwise 
specifically directs, the determination and penalty, if any, of the 
Exchange Board of Directors after review is final and conclusive, 
subject to the provisions for review under the Act.

[[Page 11316]]

    Rule 476(h) concerns legal representation. Under the rule, a person 
subject to the Exchange's jurisdiction has the right to be represented 
by legal counsel or other representative in any hearing or review held 
under Rule 476 and in any investigation before any committee, officer, 
or employee of the Exchange. A Hearing Officer may impose a fine or any 
other appropriate sanction on any party or the party's representative 
for improper conduct in connection with a matter before the Hearing 
Board, and may, if appropriate, exclude any participant, including any 
party, witness, attorney or representative from a hearing on the basis 
of such conduct.
    Under Rule 476(i), a member or principal executive of the Exchange 
who is associated with a member organization is liable to the same 
discipline and penalties for any act or omission of such member 
organization as for the member or principal executive's own personal 
act or omission. The Hearing Panel that considers the charges against 
such member, or principal executive, or the Exchange Board of Directors 
upon any review thereof, may relieve him from the penalty therefor or 
may remit or reduce such penalty on such terms and conditions as the 
Hearing Panel or the Exchange Board of Directors, with the advice of 
the CFR, deems fair and equitable.
    Rule 476(j) governs suspensions. When a member is suspended under 
Rule 476, such member is deprived during the term of the member's 
suspension of all rights and privileges of membership. The expulsion of 
a member terminates all membership rights and privileges.
    Rule 476(k) addresses non-payment of fines and other sums due to 
the Exchange. Under this rule, if any approved person or registered or 
non-registered employee fails to pay any fine within 45 days after the 
same is payable, such individual may, after written notice mailed to 
such individual at either the member's office or last place of 
residence as reflected in Exchange records, be summarily suspended from 
association in any capacity with a member organization or have the 
member's approval withdrawn until such fine is paid. The rule further 
provides that any member, member organization or principal executive 
that fails to pay a fine or any other sums due to the Exchange within 
45 days is reported by the Exchange Treasurer to the Chairman of the 
Exchange Board of Directors and, after written notice mailed to such 
member, member organization or principal executive of such arrearages, 
may be suspended by the Exchange Board of Directors until payment is 
made.
    An individual or organization may be proceeded against for any 
offense other than that for which such individual or organization was 
suspended. In addition, the suspension or expulsion of a member or 
principal executive under the provisions of this rule creates a vacancy 
in any office or position held by the member or principal executive. 
Similarly, current Rule 309--Equities provides that any member, member 
organization or principal executive that fails to pay a fee or any 
other sums due to the Exchange (excluding a fine) within 45 days after 
the same are payable shall be reported to the Chief Financial Officer 
of the Exchange or designee who, after notice has been given to such 
member, member organization or principal executive of such arrearages, 
may suspend access to some or all of the facilities of the Exchange 
until payment is made. Written suspension notices under both Rules 
309--Equities and 476(k) are immediately effective upon such notice and 
the rules provide no further process; upon payment of the fine or 
amount due, the suspension is lifted.
    Under Rule 476(l), the CEO may not require a review by the Exchange 
Board of Directors under Rule 476 and is recused from deliberations and 
actions of the Board with respect to such matters.
    Rule 476.10 sets forth the Exchange's Sanctions Guidelines with 
respect to certain options-related violations.\16\
---------------------------------------------------------------------------

    \16\ See note 14, supra.
---------------------------------------------------------------------------

Current Rule 476A--Imposition of Fines for Minor Violations of Rules
    Under Rule 476A(a), in lieu of commencing a disciplinary proceeding 
under Rule 476, the Exchange may impose a fine not to exceed $5,000 on 
any member, member organization, principal executive, approved person, 
or registered or non-registered employee of a member or member 
organization for violation of the rules listed in Rule 476A. Any fine 
imposed pursuant to this rule and not contested is not publicly 
reported, except as may be required by SEC Rule 19d-1 and as may be 
required by any other regulatory authority.
    Under Rule 476A(b), the person against whom a minor rule violation 
fine is imposed is served with a written statement, signed by an 
authorized officer or employee of the Exchange on behalf of the 
Division or Department of the Exchange taking the action, setting forth 
(i) the rule or rules alleged to have been violated; (ii) the act or 
omission constituting each such violation; (iii) the fine imposed for 
each such violation; and (iv) the date by which such determination 
becomes final and such fine becomes due and payable to the Exchange, or 
such determination must be contested as provided in Rule 476A(d). Such 
date may not be less than 25 days after the date of service of the 
written statement.
    Under Rule 476A(c), if the person against whom a minor rule 
violation fine is imposed pays the fine, such payment is deemed to be a 
waiver by such person of such person's right to a disciplinary 
proceeding under Rule 476 and any review of the matter by a Hearing 
Panel or the Exchange Board of Directors.
    Under Rule 476A(d), any person against whom a minor rule violation 
is imposed may contest the Exchange's determination by timely filing a 
written response meeting the requirements of an answer as provided in 
Rule 476(d), at which point the matter becomes a disciplinary 
proceeding subject to the provisions of Rule 476. In any such 
disciplinary proceeding, if the Hearing Panel determines that the 
person is guilty of the rule violation(s) charged, the Hearing Panel is 
free to impose any one or more of the disciplinary sanctions provided 
in Rule 476 and determine whether the rule violation(s) is minor in 
nature. NYSE Regulation, the person charged, any member of the Exchange 
Board of Directors, any member of the CFR, and any Executive Floor 
Governor may require a review by the Board of any determination by the 
Hearing Panel by proceeding in the manner described in Rule 476.
    Under Rule 476A(e), the Exchange must prepare and announce to its 
members and member organizations from time to time a listing of the 
Exchange rules as to which the Exchange may impose minor rule violation 
fines. Such listing also indicates the specific dollar amount that may 
be imposed as a fine or may indicate the minimum and maximum dollar 
amounts that may be imposed by the Exchange with respect to any such 
violation. If the Exchange determines that any violation is not minor 
in nature, the Exchange can proceed under Rule 476 rather than under 
Rule 476A.
    The remainder of Rule 476A sets forth the lists of rule violations 
that may be treated as minor rule violations and fines, which may not 
exceed $5,000. Part 1A sets forth a list of equities rule violations 
and fines applicable thereto, and Part 1C sets forth a list of options 
rule violations and fines applicable

[[Page 11317]]

thereto. Part 1D addresses certain late reports.
Current Rule 477--Retention of Jurisdiction and Failure To Cooperate
    Under Rule 477(a), if, prior to termination, or during the period 
of one year immediately following the receipt by the Exchange of 
written notice of the termination, of a person's status as a member, 
member organization, principal executive, approved person, or 
registered or non-registered employee of a member or member 
organization, the Exchange serves (as provided in Rule 476(d)) a 
written notice on such person that it is making inquiry into, or serves 
a Charge Memorandum on such person with respect to, any matter or 
matters occurring prior to the termination of such person's status, the 
Exchange may thereafter require such person to comply with any requests 
of the Exchange to appear, testify, submit books, records, papers, or 
tangible objects, respond to written requests and attend hearings in 
every respect in conformance with the Rules of the Exchange in the same 
manner and to the same extent as if such person had remained a member, 
member organization, principal executive, approved person, or 
registered or non-registered employee of a member or member 
organization.
    Under Rule 477(b), prior to termination, or during the period of 
one year immediately following the receipt by the Exchange of written 
notice of the termination, of a person's status as a member, member 
organization, principal executive, approved person, or registered or 
non-registered employee of a member or member organization, the 
Exchange may, through the exercise of its jurisdiction, as described in 
Rule 477(a), require such person to comply with any requests of an 
organization or association included in Rule 476(a)(11) to appear, 
testify, submit books, records, papers, or tangible objects, respond to 
written requests and attend hearings in every respect in conformance 
with the Exchange rules in the same manner and to the same extent as if 
such person had remained a member, member organization, principal 
executive, approved person, or registered or non-registered employee of 
a member or member organization with respect to any matter or matters 
occurring prior to the termination of such person's status.
    Under Rule 477(c), if a former member, member organization, 
principal executive, approved person, or registered or non-registered 
employee of a member or member organization, provided such notice or 
Charge Memorandum is or has been served, is adjudged guilty in a 
proceeding under Rule 476 of having refused or failed to comply with 
any such requirement, such person may be barred permanently, or for 
such period of time as may be determined, or until such time as the 
Exchange has completed its investigation into the matter or matters 
specified in such notice or Charge Memorandum, has determined a 
penalty, if any, to be imposed, and until the penalty, if any, has been 
carried out.
    Under Rule 477(d), following the termination of a person's status 
as a member, member organization, principal executive, approved person, 
or registered or non-registered employee of a member or member 
organization, provided such notice or Charge Memorandum is or has been 
served, such person may also be charged with having committed, prior to 
termination, any other offense with which such person might have been 
charged had such status not been terminated. Any such charges shall be 
brought and determined in accordance with the provisions set forth in 
Rule 476.

Proposed Rule Change

    The Exchange proposes to adopt new Rule 8000 and 9000 Series, under 
new Section 9B of the Office Rules titled ``Disciplinary Rules.'' \17\ 
These proposed new rules would be identical to the NYSE Rule 8000 and 
9000 Series \18\ except that the Exchange would:
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    \17\ Section 9A would be renamed ``Legacy Disciplinary Rules'' 
to distinguish the two sections.
    \18\ The NYSE Rule 8000 and 9000 Series was based on the FINRA 
Rule 8000 and 9000 Series. See 2013 Approval Order, 78 FR at 15394. 
Like the NYSE Rule 8000 and 9000 Series, the proposed rule change 
would provide for investigative and enforcement functions to be 
performed by personnel and departments reporting to the Chief 
Regulatory Officer (``CRO'') and by FINRA personnel and departments. 
See NYSE Reintegration Facilitation Filing, 80 FR at 72462. As 
discussed below, the proposed rule change also reflects 
modifications proposed in the NYSE Reintegration Facilitation Filing 
that the CRO rather than FINRA's Office of Disciplinary Affairs 
(``ODA'') would be responsible for: (i) Authorizing issuance of a 
complaint; (ii) accepting or rejecting acceptance, waiver, and 
consent letters and minor rule violation plan letters; and (iii) 
accepting or rejecting offers of settlement that are determined to 
be uncontested before a hearing on the merits has begun.
---------------------------------------------------------------------------

     Retain its currently applicable list of minor rule 
violations and accompanying fine levels in proposed Rules 9216(b) and 
9217, rather than adopt the text of NYSE's minor rule violation plan; 
\19\
---------------------------------------------------------------------------

    \19\ As discussed below, the Exchange would also make certain 
technical and conforming changes to its rules relating to minor rule 
violations. See text accompanying notes 50 and 51, infra.
---------------------------------------------------------------------------

     retain its options-related Sanctions Guidelines in Rule 
476.10, with certain updates, and continue to apply them in sanctions 
imposed under the proposed Rule 9000 Series (NYSE does not have 
sanctions guidelines); \20\
---------------------------------------------------------------------------

    \20\ See note 14, supra.
---------------------------------------------------------------------------

     retain recently adopted provisions in Rule 476(f) relating 
to appeals panels; and
     make certain technical and conforming changes, including 
changes to reflect the Exchange's equities and options membership.\21\
---------------------------------------------------------------------------

    \21\ These technical and conforming changes are to reference the 
Exchange hearing board, rather than the NYSE hearing board, in 
proposed Rule 9232; substitute the correct cross-references in 
proposed Rules 8130, 9120(n), 9610(a), and 9810(a); define the term 
``Board of Directors'' in proposed Rule 9120(b); and include the 
terms ``member,'' ``member organization,'' ``ATP Holder,'' ``covered 
person,'' and ``person'' defined in the proposed rule change or 
elsewhere in the NYSE MKT rules where appropriate in the following 
proposed rules so as to reflect the Exchange's equities and options 
membership: 8110, 8130, 8210, 8211, 8310, 8311, 8320, 9001, 9110, 
9120, 9216, 9232, 9268, 9310, 9521, 9522, 9551, 9552, 9554, 9555, 
9556, 9558, 9559, 9610, and 9810.
---------------------------------------------------------------------------

    The Exchange also proposes to harmonize its rules for non-payment 
of fees or other sums due to the Exchange, other than fines or monetary 
sanctions, with the NYSE's rule by adopting new Rule 41. In particular, 
the Exchange proposes to amend current Rule 476(k) to delete the phrase 
``or any other sums due to the Exchange,'' and thereby limit Rule 
476(k) to fines. The Exchange also proposes to delete current Rule 
309--Equities, which authorizes the Exchange's Chief Financial Officer 
to address non-payment of amounts due to the Exchange other than fines 
and monetary sanctions. The Exchange proposes to adopt a new Rule 41 in 
the General Rules that will mirror the text of Rule 309--Equities, 
except that proposed Rule 41 would reference proposed Rule 8320 and 
would apply to the Exchange's options and equities markets. Proposed 
Rule 41 would also specifically state that failure to pay any fine 
levied in connection with a disciplinary action shall be governed by 
Rule 476(k) or Rule 8320, as applicable. By adopting this new rule 
text, the Exchange would have a single rule applicable to both its 
equities and options markets that is consistent with the counterpart 
rule of its NYSE affiliate.
    The new Rule 8000-9000 Series and new Rule 41 would apply to the 
Exchange's equities and options markets.\22\
---------------------------------------------------------------------------

    \22\ Rule references have been added to Rule 0--Equities to make 
clear that these proposed rules would apply to equities transactions 
on the Exchange.
---------------------------------------------------------------------------

Transition

    The Exchange intends to announce the operative date of the new 
rules at least 30 days in advance in an

[[Page 11318]]

Information Memorandum. To further facilitate an orderly transition 
from the current rules to the new rules, the Exchange proposes that 
certain matters already initiated under the current rules would be 
completed under such rules. The proposed transition is similar to the 
transition proposed when the NYSE adopted disciplinary rules based on 
the FINRA Rule 8000 and 9000 Series in 2013.\23\
---------------------------------------------------------------------------

    \23\ See 2013 Approval Order, 78 FR at 15395.
---------------------------------------------------------------------------

    Specifically, the Exchange proposes that current Rule 475 would 
continue to apply to proceedings for which a written notice had been 
issued prior to the effective date of the new rules. Current Rules 476 
and 476A would continue to apply with respect to a proceeding for which 
a Charge Memorandum had been filed with the Hearing Board under Rule 
476(d) prior to the effective date of the new rules. Current Rule 476 
also would continue to apply to a matter for which a written 
Stipulation and Consent had been submitted to a Hearing Officer prior 
to the effective date of the new rules. Current Rules 475, 476, or 476A 
would continue to apply until any such proceeding was final. In all 
other cases, the proposed Rule 8000 and 9000 Series, as described 
below, would apply.
    Until the effective date, the Exchange could issue a written notice 
of suspension for non-payment of a fine or other sum due to the 
Exchange under current Rule 476(k), which would remain in effect until 
payment was made. Thereafter, the Exchange would proceed against an 
individual or entity subject to its jurisdiction that failed to pay a 
fine or monetary sanction under proposed Rule 8320.
    As noted above, current Rule 476(a)(1)-(11) also contains 
substantive elements in addition to procedural elements. Specifically, 
Rule 476(a)(1)-(11) contains a list of offenses for which the Exchange 
can take disciplinary action. The proposed rule change would not alter 
this substantive aspect of Rule 476(a). The Exchange could continue to 
take disciplinary action against a member organization or other person 
subject to its jurisdiction for committing any of these substantive 
violations; following the transition described above, the Exchange 
would bring disciplinary cases for such offenses under the proposed 
Rule 9000 Series.
    The Sanctions Guidelines in Rule 476.10 relating to options rule 
violations would continue to apply to proceedings under both Rule 476 
and the Rule 9000 Series. The Exchange proposes to amend Rule 476.10 to 
update certain cross-references to options rules.
    Similarly, the retention of jurisdiction provisions of Rule 477 
would continue to apply to any member or member organization that 
resigned or had its membership canceled or revoked and any person whose 
status as a person subject to the Exchange's jurisdiction was 
terminated or whose registration was revoked or canceled if such member 
organization or person had been served with a Charge Memorandum or 
written notice of inquiry pursuant to Rule 477 prior to the effective 
date of the new rules. As described above, current Rule 477 generally 
provides that the Exchange retains jurisdiction for one year after such 
status is terminated and such jurisdiction continues if during that 
one-year period the Exchange has provided written notice that it is 
making inquiry into matters that arose prior to termination. In all 
other cases, the retention of jurisdiction provisions of proposed Rule 
8130 would apply, which would be substantially the same as the 
counterpart NYSE rule. Under the proposed rule change, as described 
below, the Exchange would retain jurisdiction to file a complaint 
against any entity or individual subject to its jurisdiction for two 
years after such status was terminated, and the proposed Rule 8000 
Series and Rule 9000 Series generally would apply.\24\
---------------------------------------------------------------------------

    \24\ In light of the proposed rule changes with respect to 
retention of jurisdiction and non-payment of monies due to the 
Exchange, the Exchange proposes to delete Rule 353A(b) of the Office 
Rules because it is no longer necessary. The rule provides that 
every ATP Holder and any successor-in-interest thereto, and each ATP 
Holder whose ATP is terminated due to expulsion, suspension without 
reinstatement, death, declaration of incompetency, dissolution, 
winding up, or other cessation of business, must be current in all 
filings and payments of dues, fees and charges relating to that ATP, 
including, without limitation, filing fees and charges required by 
the Commission and the Securities Investor Protection Corporation. 
The rule further provides that if any ATP Holder, or any successor-
in-interest thereto, fails to make all such filings, or to pay all 
such dues, fees and charges, the Secretary of the Exchange retains 
such jurisdiction over such former ATP Holder to require such 
filings and collect such outstanding dues, fines and charges until 
such time as they have been filed and/or paid. The Exchange believes 
that it will retain sufficient authority over ATP Holders under the 
proposed rule change to address such situations.
---------------------------------------------------------------------------

    The Exchange proposes to add italicized language to Rules 475, 476, 
476A and 477 describing the proposed applicability and transition of 
each rule as described herein.
    When the transition is complete and there are no longer any member 
organizations or persons who would be subject to Rules 475, 476, 476A, 
and 477, the Exchange intends to submit a proposed rule change that 
would delete any investigative and disciplinary provisions that are no 
longer needed. Other provisions would be retained and moved to an 
appropriate place in the Exchange's rules.

Terms and Definitions Used Throughout the Proposed Rule 8000 and 9000 
Series

    To continue the current coverage of the NYSE MKT disciplinary rules 
and conform to the NYSE rules' terminology, the proposed rule change 
would use the terms ``member,'' ``member organization'' and ``covered 
person'' to describe the persons to which the proposed Rule 8000 and 
9000 Series apply. The term ``covered person,'' referenced in proposed 
Rule 8120(b) and defined in proposed Rule 9120(g), would include a 
member, principal executive, approved person, registered or non-
registered employee of a member organization or an ATP Holder,\25\ or 
other person (excluding a member organization) subject to the 
jurisdiction of the Exchange.\26\ By defining and utilizing the term 
``covered person'' in this manner, the Exchange would effect no 
substantive change in the scope of persons subject to the Exchange's 
disciplinary rules.\27\
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    \25\ Current Rule 476(a) contains a reference to a registered or 
non-registered employee of a member. Under Rule 2(a)--Equities, 
however, a ``member'' is a natural person associated with a member 
organization; thus, equities members do not have employees. Such 
persons would be employees of the member organization and thus 
covered by the proposed definition of ``covered person.'' An ``ATP 
Holder,'' on the other hand, may be a natural person and may have 
registered or non-registered employees. See Rule 900.2NY(5). 
Therefore, to reflect the fact that equities members do not have 
employees but options members may, the Exchange proposes to use the 
phrase ``associated with a member organization or ATP Holder'' in 
the proposed definition of ``covered person.'' In addition, the 
Exchange proposes to use the term ``ATP Holder,'' which is defined 
in Rule 900.2NY(5), where appropriate in the proposed rules. As 
discussed below in connection with the proposed Rule 9520 Series, 
which governs eligibility proceedings for persons subject to 
statutory disqualifications, references to ATP Holders in the 
context of proposed Rules 9520 through 9527 would apply to those 
options members that have employees.
    \26\ References to ``member'' and ``member organization'' as 
those terms are used in the rules of the Exchange include ATP 
Holders. See Rules 18, 24 & 900.2NY(5). As such, ATP Holders would 
be covered by the proposed terminology.
    \27\ The Exchange notes that the term ``allied member,'' which 
historically referred to certain general partners, principal 
executives, or control persons of a member organization, has been 
replaced in the Exchange's rules with the term ``principal 
executive.'' See Securities Exchange Act Release Nos. 59022 
(November 26, 2008), 73 FR 73683 (December 3, 2008) (SR-NYSEALTR-
2008-10) and 69822 (June 21, 2013), 78 FR 38769 (June 27, 2013) (SR-
NYSEMKT-2013-58). Former allied members are referenced in proposed 
Rule 9232 because they are eligible to serve on the Exchange hearing 
board.

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[[Page 11319]]

Proposed Rule 8000 Series

    Proposed Rule 8001 would include the effective date of the proposed 
rule change for the Rule 8000 Series, noting the exception for the 
retention of jurisdiction dates in proposed Rule 8130 and the 
transition from current Rule 476(k) to proposed Rule 8320, as described 
above. The text of NYSE Rules 8110 through 8330 would be adopted as 
Rules 8110 through 8330.\28\
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    \28\ NYSE does not have a Rule 8212, 8213, or 8312. In order to 
maintain consistency with NYSE's rule numbering, the Exchange 
proposes to designate proposed Rules 8212, 8213, and 8312 as 
``Reserved.''
---------------------------------------------------------------------------

    Proposed Rule 8110 would require an NYSE MKT member or member 
organization to provide access to the Exchange's rules to its 
customers. Although there is no comparable requirement in the current 
rules, the Exchange currently makes available its rules on the 
Exchange's Web site.\29\ Proposed Rule 8110 is the same as NYSE Rule 
8110 except for the inclusion of ``member'' to reflect the Exchange's 
membership.
---------------------------------------------------------------------------

    \29\ The Exchange's rules are available at http://wallstreet.cch.com/MKT/Rules/.
---------------------------------------------------------------------------

    Proposed Rule 8120 would provide cross-references to definitions of 
the terms ``Adjudicator,'' ``covered person'' and ``Regulatory Staff'' 
in proposed Rule 9120. Similarly, NYSE Rule 8120 cross-references the 
same three definitions. Proposed Rule 8120 is simply technical in 
nature, and is the same as the NYSE Rule.
    Proposed Rule 8130 would set forth retention of jurisdiction 
provisions that are substantially the same as NYSE Rule 8130, except 
for the following conforming changes: ``Member'' would be added to 
paragraph (d); the cross-references in paragraph (b)(1) would be 
conformed to NYSE MKT's rules; and ``ATP Holder'' \30\ would be added 
to paragraphs (a), (b) and (c). Under the proposed rule change, the 
Exchange would retain jurisdiction to file a complaint against an 
entity or individual for two years after such person's status as a 
member organization or covered person is terminated. This differs from 
current Rule 477, which provides that the Exchange retains jurisdiction 
after the termination of status as long as a Charge Memorandum or 
written notice of inquiry is served within one year after termination 
of such status. The Exchange believes that the period under the 
proposed rule is appropriate because it would harmonize the Exchange's 
rule with NYSE's rule and would provide a fixed time period for a 
complaint to be brought, which provides repose to respondents while 
still providing Exchange staff with sufficient time to determine if a 
complaint should be brought.
---------------------------------------------------------------------------

    \30\ See notes 24-26, supra, and accompanying text.
---------------------------------------------------------------------------

    Proposed Rule 8210 would set forth procedures for the provision of 
information and testimony and the inspection and copying of books by 
the Exchange, as amended by the NYSE in 2013.\31\ Proposed Rule 8210 is 
the same as NYSE Rule 8210 except that references to ``member'' and 
``ATP Holder'' would be added where appropriate to reflect the 
Exchange's membership.
---------------------------------------------------------------------------

    \31\ See Securities Exchange Act Release No. 69963 (July 10, 
2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
---------------------------------------------------------------------------

    Proposed Rule 8210(a) would require a member organization or 
covered person to provide information and testimony and permit the 
inspection of books, records, and accounts that are in such member 
organization's or covered person's possession, custody or control for 
the purpose of an investigation, complaint, examination, or proceeding 
authorized by the Exchange's rules. As noted above, under proposed Rule 
8130, the Exchange would retain jurisdiction over a member organization 
or covered person to file a complaint or otherwise initiate a 
proceeding for two years after such member organization's or covered 
person's status is terminated \32\ and as such can continue to obtain 
information and testimony during such period and thereafter if a 
complaint or proceeding is timely filed. Currently the Exchange also 
requires persons subject to its jurisdiction to provide books and 
records and appear and testify upon request under current Rules 475(e), 
476(a)(11), and 477(a) and (b), and in Rule 31 in the General Rules. In 
addition, as noted above, the Exchange retains jurisdiction after 
termination of a registration as long as a Charge Memorandum or written 
notice of inquiry has been served within one year following termination 
of such status. The Exchange believes the proposed rule is appropriate 
because it would harmonize the Exchange's rules with respect to 
jurisdiction and obtaining books and records from member organizations 
and covered persons with the NYSE's rules.
---------------------------------------------------------------------------

    \32\ This would include individual members since the definition 
of ``covered person'' in proposed Rule 9120 includes ``members.''
---------------------------------------------------------------------------

    The Exchange also proposes new rule text in Rule 8210(a), recently 
proposed by NYSE, 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 members and member organizations.\33\ This 
requirement is consistent with longstanding policies and practices at 
the Exchange. The proposed provision 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 
commitment to performing its regulatory functions under its 
disciplinary rules in an independent and impartial manner.\34\
---------------------------------------------------------------------------

    \33\ See NYSE Reintegration Facilitation Filing, 80 FR at 51337. 
The inclusion of ``members and member organizations'' would conform 
the proposed rule to the Exchange's membership.
    \34\ See NYSE Arca Equities Rule 10.2(a); NYSE Arca Options Rule 
10.2(a).
---------------------------------------------------------------------------

    Proposed Rule 8210(b) would authorize Exchange staff to enter into 
regulatory cooperation agreements with a domestic federal agency or 
subdivision thereof or a foreign regulator. Current Rule 27--Equities 
permits the Exchange to enter into agreements with domestic or foreign 
SROs or associations, contract markets and registered futures 
associations, but does not specify domestic federal agencies or 
subdivisions thereof or foreign regulators; because the scope of 
current Rule 27--Equities is different, the Exchange would retain it 
along with proposed Rule 8210(b).\35\ Similarly, current Commentary .02 
of Rule 31 in the General Rules provides that the Exchange may enter 
into agreements with domestic and foreign SROs providing for the 
exchange of information and other forms of mutual assistance for market 
surveillance, investigative, enforcement and other regulatory purposes. 
Because current Rule 31.02 differs in scope from proposed Rule 8210(b), 
the Exchange would retain it along with the proposed rule.\36\
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    \35\ Rule 27--Equities also cross-references Rule 476(a)(11), 
which enumerates certain violations, including the violation of 
refusing or failing to comply with a request of the Exchange, or a 
domestic or foreign SRO or association, contract market, or 
registered futures association with which the Exchange has entered 
into an agreement or to furnish information to or to appear or 
testify before the Exchange or such other organization or 
association. The proposed rule change would not alter this 
substantive aspect of Rule 476(a)(11) and as such the cross-
reference in current Rule 27--Equities would not be amended.
    \36\ As discussed below, the rest of Rule 31, which concerns 
requests for books and records and testimony as well as extensions 
of time to comply, would be deleted and Rule 31 would be re-named 
``Regulatory Cooperation.''
---------------------------------------------------------------------------

    The remainder of proposed Rule 8210 would set forth certain 
procedures for investigations. Proposed Rule 8210(c) would require 
member organizations and covered persons to comply with information 
requests under the Rule.

[[Page 11320]]

This requirement is substantially the same as current Rules 475(e), 
476(a)(11), and 477(a) and (b), as noted above.
    Proposed Rule 8210(d) would provide that a notice under this Rule 
would be deemed received by the member organization or covered person 
(including a currently or formerly registered person) to whom it is 
directed by mailing or otherwise transmitting the notice to the last 
known business address of the member organization or the last known 
residential address of the covered person as reflected in the Central 
Registration Depository (``CRD''). With respect to a person currently 
associated with a member organization or ATP Holder in an unregistered 
capacity, a notice under this Rule would be deemed received by the 
person by mailing or otherwise transmitting the notice to the last 
known business address of the member organization or ATP Holder as 
reflected in the CRD. With respect to a person subject to the 
Exchange's jurisdiction who was formerly associated with a member 
organization or ATP Holder in an unregistered capacity, a notice under 
this Rule would be deemed received by the person upon personal service, 
as set forth in Rule 9134(a)(1).
    If the Adjudicator or Exchange staff responsible for mailing or 
otherwise transmitting the notice to the member organization or covered 
person had actual knowledge that the address in the CRD is out of date 
or inaccurate, then a copy of the notice would be mailed or otherwise 
transmitted to: (1) The last known business address of the member 
organization or the last known residential address of the covered 
person as reflected in the CRD; and (2) any other more current address 
of the member organization or covered person known to the Adjudicator 
or Exchange staff responsible for mailing or otherwise transmitting the 
notice. Current Rules 475(e), 476(a)(11), and 477(a) and (b), and Rule 
31 in the General Rules, which require persons subject to the 
Exchange's jurisdiction to provide books and records and appear and 
testify upon the Exchange's request, do not specify the address to 
which a notice of such request must be directed. The additional 
specificity in proposed Rule 8210(d) would afford member organizations 
and covered persons additional procedural protections in that respect.
    If the Adjudicator or Exchange staff responsible for mailing or 
otherwise transmitting the notice to the member organization or covered 
person knew that the member organization or covered person was 
represented by counsel regarding the investigation, complaint, 
examination, or proceeding that was the subject of the notice, then the 
notice would be served upon counsel by mailing or otherwise 
transmitting the notice to the counsel in lieu of the member 
organization or covered person, and any notice served upon counsel 
would be deemed received by the member organization or covered person.
    Proposed Rule 8210(e) would provide that in carrying out its 
responsibilities under this Rule, the Exchange may, as appropriate, 
establish programs for the submission of information to the Exchange on 
a regular basis through a direct or indirect electronic interface 
between the Exchange and members or member organizations. Proposed Rule 
8210(f) would permit a witness to inspect the official transcript of 
the witness's own testimony, and permit a person who has submitted 
documentary evidence or testimony in an Exchange investigation to get a 
copy of the person's documentary evidence or the transcript of the 
person's testimony under certain circumstances. Finally, proposed Rule 
8210(g) would require any member organization or covered person who in 
response to a request pursuant to this Rule provided the requested 
information on a portable media device to ensure that such information 
was encrypted. The Exchange's current rules do not contain comparable 
provisions.
    Proposed Supplementary Material 8210.01 would provide that the rule 
requires member organizations and covered persons to provide Exchange 
staff and Adjudicators with requested books, records and accounts. In 
specifying the books, records and accounts ``of such member 
organization or covered person,'' paragraph (a) of the rule would refer 
to books, records and accounts that the broker-dealer or its associated 
persons make [sic] or keep [sic] relating to its operation as a broker-
dealer or relating to the person's association with the member 
organization or ATP Holder. This would include but is not limited to 
records relating to an Exchange investigation of outside business 
activities, private securities transactions or possible violations of 
just and equitable principles of trade, as well as other Exchange rules 
and the federal securities laws. It would not ordinarily include books 
and records that were in the possession, custody or control of a member 
organization or covered person, but whose bona fide ownership was held 
by an independent third party and the records were unrelated to the 
business of the member organization or covered person. The rule would 
require, however, that a member organization or covered person must 
make available its books, records or accounts when these books, records 
or accounts are in the possession of another person or entity, such as 
a professional service provider, but the member organization or covered 
person controlled or had a right to demand them. The Exchange's current 
rules do not have comparable provisions.
    Proposed Rule 8211 would set forth the procedures for the automated 
submission of trading data requested by the Exchange (commonly referred 
to as ``blue sheet'' data) for transactions on the Exchange. The 
proposed Rule is the same as its NYSE counterpart except for the 
inclusion of ``ATP Holder.''
    The procedures set forth in proposed Rule 8211 are substantially 
the same as current Rule 956.1NY and Rule 410A--Equities. Because FINRA 
performs surveillance functions based on the information gathered as a 
result of these rules, the Exchange believes that the procedures for 
the automated submission of trading data should be harmonized with the 
FINRA and NYSE rules. Therefore, the Exchange proposes to delete 
current Rule 956.1NY and Rule 410A--Equities and adopt proposed Rule 
8211 instead, which is identical to NYSE Rule 8211.\37\
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    \37\ The Exchange is not proposing to adopt FINRA Rule 8213, 
which provides for the automated submission of trading data for non-
exchange listed securities, and has marked it as ``Reserved.'' 
Because the Exchange does not have regulatory responsibility for 
trading in non-Exchange listed securities, it is not necessary for 
the Exchange to incorporate FINRA Rule 8213 into its rules. 
Moreover, the Exchange recently deleted Rule 410B--Equities, which 
required the reporting of off-Exchange transactions in Exchange-
listed securities that are not reported to the Consolidated Tape, as 
duplicative of existing regulatory reporting requirements. See 
Securities Exchange Act Release No. 76982 (January 28, 2016) (SR-
NYSEMKT-2015-80).
---------------------------------------------------------------------------

    Proposed Rule 8310 would set forth the range of sanctions that 
could be imposed in connection with disciplinary actions under the 
proposed rule change. Such sanctions would include censure, fine, 
suspension, revocation, bar, expulsion, or any other fitting sanction. 
The sanctions also are substantially the same as the permitted 
sanctions set forth in current Rule 476(a)(11), which are expulsion; 
suspension; limitation as to activities, functions, and operations, 
including the suspension or cancellation of a registration in, or 
assignment of, one or more stocks; fine; censure; suspension or bar 
from being associated with any member or member organization; or any 
other fitting sanction. Although there is some difference between the 
text of the current and proposed rules, the Exchange believes that in 
practice the

[[Page 11321]]

range of sanctions is the same due to the inclusion in both rules of 
the general category ``any other fitting sanction.''
    Proposed Rule 8310 would also allow the Exchange to impose a 
temporary or permanent cease and desist order against a member 
organization or covered person. This new authority, not currently 
available under the Exchange's rules, is described in further detail 
below in the section concerning the proposed Rule 9800 Series. Proposed 
Rule 8310 is the same as NYSE Rule 8310 except for the inclusion of 
references to ``member'' and ``ATP Holders.''
    Proposed Rule 8311 would provide that if the Commission or the 
Exchange imposed a suspension, revocation, cancellation or bar on a 
covered person, a member organization or ATP Holder may not permit such 
person to remain associated, and, in the case of a suspension, may not 
pay any remuneration that results from any securities transaction. The 
proposed rule is similar in result to current Rule 476(j), which 
provides that a member will be deprived of all rights and privileges of 
membership during a suspension and that an expulsion of a member 
terminates all rights and privileges arising out of the membership. 
However, the proposed rule is broader because it applies to all covered 
persons subject to a suspension, revocation, cancellation or bar and 
more explicitly prohibits the payment of compensation in the case of a 
suspension. Except for references to ATP Holders where appropriate, the 
proposed Rule is the same as NYSE Rule 8311.
    Proposed Rule 8313 would provide that the Exchange will publish all 
final disciplinary decisions issued under the proposed Rule 9000 
Series, other than minor rule violations, on its Web site.\38\ This is 
the Exchange's longstanding practice, although it does not have a 
current rule with respect to it. The Exchange believes that its current 
practice is fair and non-discriminatory and as such proposes to 
continue it. The proposed Rule is identical to the NYSE Rule.
---------------------------------------------------------------------------

    \38\ Consistent with current practice, a determination in a 
statutory disqualification proceeding under the proposed Rule 9520 
Series would not be considered a disciplinary decision and thus 
would not be subject to publication.
---------------------------------------------------------------------------

    Proposed Rule 8320(a) would provide that all fines and other 
monetary sanctions shall be paid to the Treasurer of the Exchange. Such 
monies could not be used for commercial purposes.\39\ Rather, the 
Exchange uses fine monies for regulatory purposes.\40\
---------------------------------------------------------------------------

    \39\ See Article IV, Section 4.05 of the Seventh Amended and 
Restated Operating Agreement of NYSE MKT LLC, available at https://www.nyse.com/publicdocs/nyse/regulation/nyse-mkt/Seventh_Amended_and_Restated_Operating_Agreement_of_NYSE_MKT_LLC.pdf.

    \40\ See Securities Exchange Act Release No. 58673 (September 
29, 2008), 73 FR 57707, 57717 (October 3, 2008) (SR-NYSE-2008-60 and 
SR-Amex-2008-62) (approving merger whereby the Exchange's 
predecessor, the American Stock Exchange LLC, a subsidiary of The 
Amex Membership Corporation, became a subsidiary of NYSE Euronext).
---------------------------------------------------------------------------

    Proposed Rule 8320(b) and (c) would permit the Exchange, after 
seven days' notice in writing, to suspend or expel a member or member 
organization from membership or revoke the registration of a covered 
person for failure to pay a fine. The text of the proposed rule is the 
same as the text of the NYSE's rule except for the inclusion of 
``member'' in subpart (b) to reflect the Exchange's membership.
    As noted above, under current Rule 476(k), a person may be 
summarily suspended for failing to pay a fine within a 45-day notice 
period; a membership cancellation or bar also could be imposed in a 
regular disciplinary proceeding for non-payment of a fine. FINRA's 
rules do not set forth a notice period but, as a matter of practice, 
FINRA typically provides a respondent at least 30 days to pay a fine 
after the conclusion of a proceeding. As the NYSE explained in 
proposing its Rule 8320, a 30-day period, along with the seven days' 
notice provided under NYSE Rule 8320, provides respondents with an 
adequate amount of time to pay a fine and avoid any further sanction by 
the Exchange.\41\ The Exchange proposes to follow the same reasoning 
for its Rule 8320. For clarity regarding the transition, proposed Rule 
8001 would provide that the Exchange may issue a written notice of 
suspension for non-payment of a fine under Rule 476(k) until the 
effective date of the proposed rule change, and thereafter proposed 
Rule 8320 would apply. In addition, Rule 8320(d) would provide that the 
Exchange may exercise the authority set forth in Rules 8320(b) and (c) 
with respect to non-payment of a fine, monetary sanction, or cost 
assessed in a disciplinary action initiated under Rule 476 for which a 
decision was issued on or after the transition date.
---------------------------------------------------------------------------

    \41\ See 2013 Notice, 78 FR at 5222.
---------------------------------------------------------------------------

    Proposed Rule 8330 would provide that a disciplined member 
organization or covered person may be assessed the costs of a 
proceeding. There is no comparable requirement in the current rules, 
although the Exchange may assess costs as a ``fitting sanction'' under 
current Rule 476(a)(11). The proposed Rule is the same as the text of 
the NYSE Rule.

Proposed Rule 9000 Series

    As noted above, the text of the Rule 9000 Series would be based on 
the text of the NYSE Rule 9000 Series, with certain changes noted 
below.
Proposed Rules 9001 Through 9120
    Proposed Rule 9001 would set forth the effective date of the rule, 
noting the transitional provisions described above. The text of 
proposed Rule 9001 would be based on the proposed introductory text of 
Rule 476, except that the transition with respect to proposed Rule 8320 
would be reflected in proposed Rule 8001 as described above.
    Proposed Rule 9110 would state the types of proceedings to which 
the proposed Rule 9000 Series would apply (each of which is described 
below) and the rights, duties, and obligations of member organizations 
and covered persons, and would set forth the defined terms and cross-
references. The Exchange also proposes to adopt rule text in Rule 
9110(a), 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 members and member organizations. As discussed above, this 
requirement is already being met and is consistent with longstanding 
policies and practices at the Exchange, and the proposed provision 
would also be consistent with rules currently in effect for the 
equities and options markets of the Exchange's affiliate.\42\ The 
Exchange does not have a comparable rule. Except for the inclusion of 
``member,'' the proposed Rule is the same as NYSE Rule 9110.
---------------------------------------------------------------------------

    \42\ See notes 33 and 34, supra, and accompanying text.
---------------------------------------------------------------------------

    Proposed Rule 9120 would set forth definitions. The definitions are 
identical to those in NYSE Rule 9120, except that the term ``Board of 
Directors'' would be defined in paragraph (b), rather than including a 
cross-reference to another rule; the term ``covered person'' in 
proposed paragraph (g) would include a reference to ATP Holders; the 
cross-reference in the definition of ``Exchange'' in proposed paragraph 
(n) would be conformed to NYSE MKT's rules; and the definition of 
``Party'' in proposed paragraph (w) would include a reference to ``ATP 
Holder'' to conform to the proposed Rule 9520 Series. The Exchange also 
proposes to include definitions recently added to NYSE Rule 9120, 
including defined terms ``Enforcement'' and ``Regulatory

[[Page 11322]]

Staff.'' \43\ More specifically, the Exchange proposes the following:
---------------------------------------------------------------------------

    \43\ See NYSE Reintegration Facilitation Filing Approval Order, 
80 FR at 72461. The Exchange also proposes to incorporate those 
defined terms in proposed Rules 9131, 9146, 9211, 9212, 9213, 9215, 
9216, 9251, 9253, 9264, 9269, 9270, 9551, 9552, 9554, 9556, 9810, 
9820, and 9830.
---------------------------------------------------------------------------

     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.\44\
---------------------------------------------------------------------------

    \44\ 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.''
---------------------------------------------------------------------------

     The Exchange proposes to include definitions of 
``Interested Staff'' and ``Party'' in proposed Rules 9120(t) and 
9120(w), which include the terms ``Regulatory Staff'' and 
``Enforcement,'' respectively, and are identical to the definitions in 
the NYSE Rules.
     The Exchange proposes to number the definitions in Rule 
9120 to correspond with the NYSE Rules.
Proposed Rules 9130 Through 9138
    Proposed Rules 9130 through 9138 would govern the service of a 
complaint or other procedural documents under the rules. The proposed 
Rules are the same as NYSE Rules 9130 through 9138.
    Proposed Rule 9131 would set forth the requirements for serving a 
complaint or document initiating a proceeding. Proposed Rule 9132 would 
cover the service of orders, notices, and decisions by an Adjudicator. 
Proposed Rule 9133 would govern the service of papers other than 
complaints, orders, notices, or decisions. Proposed Rule 9134 would 
describe the methods of service and the procedures for service. 
Proposed Rule 9135 would set forth the procedure for filing papers with 
an Adjudicator. Proposed Rule 9136 would govern the form of papers 
filed in connection with any proceeding under the proposed Rule 9200 
and 9300 Series. Proposed Rule 9137 would state the requirements for 
and the effect of a signature in connection with the filing of papers. 
Finally, proposed Rule 9138 would establish the computation of time.
    By comparison, current Rule 476(d), which governs service of 
process, is generally less detailed and, as noted above, provides that 
service is deemed effective by personal service of the Charge 
Memorandum, or by leaving the same either at the respondent's last 
known office address during business hours or the respondent's last 
place of residence as reflected in Exchange records, or upon mailing 
same to the respondent at such office address or place of residence.
    Under proposed Rule 9134, papers served on a natural person could 
be served at the natural person's residential address, as reflected in 
CRD, if applicable. When a Party or other person responsible for 
serving such person had actual knowledge that the natural person's CRD 
address was out of date, duplicate copies would be required to be 
served on the natural person at the natural person's last known 
residential address and the business address in CRD of the entity with 
which the natural person is employed or affiliated. Papers could also 
be served at the business address of the entity with which the natural 
person is employed or affiliated, as reflected in CRD, or at a business 
address, such as a branch office, at which the natural person is 
employed or at which the natural person is physically present during a 
normal business day. The Hearing Officer could waive the requirement of 
serving documents (other than complaints) at the addresses listed in 
CRD if there were evidence that these addresses were no longer valid 
and there was a more current address available. If a natural person 
were represented by counsel or a representative, papers served on the 
natural person, excluding a complaint or a document initiating a 
proceeding, would be required to be served on the counsel or 
representative.
    Similarly, under proposed Rule 9134, papers served on an entity 
would be required to be made by service on an officer, a partner of a 
partnership, a managing or general agent, a contact employee as set 
forth on Form BD, or any other agent authorized by appointment or by 
law to accept service. Such papers would be required to be served at 
the entity's business address as reflected in CRD, if applicable; 
provided, however, that when the Party or other person responsible for 
serving such entity had actual knowledge that an entity's CRD address 
was out of date, duplicate copies would be required to be served at the 
entity's last known address. If an entity were represented by counsel 
or a representative, papers served on such entity, excluding a 
complaint or document initiating a proceeding, would be required to be 
served on such counsel or representative.
    The Exchange's current rules do not explicitly permit service of a 
Charge Memorandum or other document on a respondent's counsel or other 
authorized representative. The proposed rule change would accommodate 
respondents who have retained counsel and have authorized them to 
accept service. The proposed rule change also would harmonize the 
Exchange's rules with many states' Rules of Professional Conduct for 
attorneys, which generally require that, once a person retains an 
attorney, unless the attorney specifically provides otherwise, all 
communications be directed to such attorney.\45\
---------------------------------------------------------------------------

    \45\ See, e.g., American Bar Association Model Rule of 
Professional Conduct 4.2 (Communication with Person Represented by 
Counsel) (``ABA Rule 4.2''). ABA Rule 4.2 provides that ``[i]n 
representing a client, a lawyer shall not communicate about the 
subject of the representation with a person the lawyer knows to be 
represented by another lawyer in the matter, unless the lawyer has 
the consent of the other lawyer or is authorized to do so by law or 
a court order.'' Many states have rules regarding communication with 
a person represented by counsel that are based on ABA Rule 4.2.
---------------------------------------------------------------------------

    The Exchange believes that these more detailed procedures for 
service of process would increase the likelihood of successful service 
of process while providing appropriate due process protections to its 
member organizations and covered persons.
Proposed Rules 9140 Through 9148
    Proposed Rules 9140 through 9148 would contain various rules 
relating to the conduct of disciplinary proceedings. The proposed Rules 
are the same as NYSE Rules 9140 through 9148.
    Proposed Rule 9141 would govern appearances in a proceeding, 
notices of appearance, and representation. Proposed Rule 9141 would 
permit a respondent to represent himself or be represented by an 
attorney, just as is permitted under current Rule 476(h). Current Rule 
476(h) is more general, in that it permits a respondent to be 
represented by an attorney or other representative, while proposed Rule 
9141 is more specific in that it permits a respondent to be represented 
by an attorney admitted to practice in the United States, permits a 
partnership to be represented by a partner, and permits a corporation, 
trust, or association to be represented by an officer of such entity. 
Proposed Rule 9141 also requires an attorney or representative to file 
a notice of appearance, which is not required under current Exchange 
rules.
    In addition, proposed Rule 9141, in conformance with a recent NYSE 
amendment and based on FINRA's

[[Page 11323]]

counterpart rule,\46\ would provide that no former Regulatory Staff 
shall, within a period of one year immediately following termination of 
employment with the Exchange or FINRA, make an appearance before an 
Adjudicator on behalf of any other person in any proceeding under the 
Rule 9000 Series. 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 Exchange believes that once Regulatory Staff reporting 
to the CRO directly perform market surveillance, investigation and 
enforcement functions following termination of the Intercompany RSA, 
such a prohibition would help prevent potential conflicts or appearance 
of conflicts of interest. Current Rule 476 does not address appearances 
by former staff.
---------------------------------------------------------------------------

    \46\ See NYSE Reintegration Facilitation Filing Notice, 80 FR at 
51337; Approval Order, 80 FR at 72462.
---------------------------------------------------------------------------

    Proposed Rule 9142 would require an attorney or representative to 
file a motion to withdraw. There is no current comparable Exchange 
rule.
    Proposed Rule 9143(a) would prohibit certain ex parte 
communications. Under proposed Rule 9143(b), an Adjudicator 
participating in a decision with respect to a proceeding, or an 
Exchange employee participating or advising in the decision of an 
Adjudicator, who received, made, or knowingly caused to be made a 
communication prohibited by the Rule would be required to place in the 
record of the proceeding (1) all such written communications; (2) 
memoranda stating the substance of all such oral communications; and 
(3) all written responses and memoranda stating the substance of all 
oral responses to all such communications.
    Under proposed Rule 9143(c), upon receipt of a prohibited 
communication made or knowingly caused to be made by any Party, any 
counsel to or representative of a Party, or any Interested Staff, the 
Exchange or an Adjudicator may order the Party responsible for the 
communication, or the Party who may benefit from the ex parte 
communication made, to show cause why the Party's claim or interest in 
the proceeding should not be dismissed, denied, disregarded, or 
otherwise adversely affected by reason of such ex parte communication. 
All participants in a proceeding could respond to any allegations or 
contentions contained in a prohibited ex parte communication placed in 
the record, and such responses would be placed in the record.
    Under proposed Rule 9143(d), in a disciplinary proceeding governed 
by the Rule 9200 Series and the Rule 9300 Series, the prohibitions of 
the Rule would apply beginning with the authorization of a complaint as 
provided in Rule 9211, unless the person responsible for the 
communication had knowledge that the complaint would be authorized, in 
which case the prohibitions would apply beginning at the time of his or 
her acquisition of such knowledge. Under proposed Rule 9143(e), there 
would be a waiver of the ex parte prohibition in the case of an offer 
of settlement, letter of acceptance, waiver and consent, or minor rule 
violation plan letter. There is no current comparable rule.
    Proposed Rule 9144 would establish the separation of functions for 
Interested Staff and Adjudicators and provide for waivers. There is no 
current comparable rule.
    Proposed Rule 9145 would provide that formal rules of evidence 
would not apply in any proceeding brought under the proposed Rule 9000 
Series. NYSE MKT does not have a current comparable rule that 
explicitly makes such a statement, although in practice the result is 
the same--formal rules of evidence do not apply to current NYSE MKT 
disciplinary proceedings.
    Proposed Rule 9146 would govern motions a Party may make and 
requirements for responses and formatting. A Party would be permitted 
to make written and oral motions, although an Adjudicator could require 
that a motion be in writing. An opposition to a written motion would 
have to be filed within 14 days, but the moving Party would have no 
right to reply, unless an Adjudicator so permits, in which case such 
reply generally would be due within five days. Proposed Rule 9146 also 
would permit a Party to move for a protective order. There is no 
current comparable rule that contains such detail. Current Rule 476(c) 
simply provides that the Chief Hearing Officer or a Hearing Officer may 
resolve any substantive legal motions. The Exchange believes that the 
more detailed provisions of the proposed rule would provide additional 
clarity to all Parties to a proceeding.
    Proposed Rule 9147 would provide that Adjudicators may rule on 
procedural matters. The proposed rule is similar to current Rule 
476(c), which provides that the Chief Hearing Officer or a Hearing 
Officer may resolve any procedural matters. However, the Exchange's 
current rules do not explicitly provide for the Exchange Board of 
Directors (who are included in the proposed definition of 
``Adjudicator'') ruling on procedural matters.
    Finally, proposed Rule 9148 would generally prohibit interlocutory 
review, except as provided in proposed Rule 9280 for contemptuous 
conduct. Similarly, current Rule 476(c) provides that there is no 
interlocutory appeal to the Exchange Board of Directors.
Proposed Rule 9150
    Proposed Rule 9150 would provide that a representative can be 
excluded by an Adjudicator for improper or unethical conduct. The 
proposed rule also is substantially the same as current Rule 476(h), 
which provides that the Hearing Board can exclude a representative for 
improper conduct in a proceeding, and is the same as NYSE Rule 9150.
Proposed Rule 9160
    Proposed Rule 9160 would provide that no person may act as an 
Adjudicator if he or she has a conflict of interest or bias, or 
circumstances exist where his or her fairness could reasonably be 
questioned. In such case, the person must recuse himself or herself, or 
may be disqualified. The proposed rule would cover the recusal or 
disqualification of an Adjudicator, the Chair of the Exchange Board of 
Directors, or a Director. Current Rule 22--Equities similarly prohibits 
a person from participating in an adjudication or consideration of a 
matter if he or she has a personal interest, and would apply during the 
transition period to proceedings under the current rules. The Exchange 
believes that the broader text of the proposed rule could help to 
increase the fairness of its proceedings and also cover matters 
involving the Exchange's options market. Proposed Rules 9160(b), (c), 
and (d) are designated as ``Reserved'' to maintain consistency with 
NYSE's rule numbering. The proposed Rule is the same as the NYSE Rule.
Proposed Rules 9200 Through 9212
    Proposed Rule 9200 would cover disciplinary proceedings. Proposed 
Rule 9211 would permit Enforcement to request the authorization of the 
CRO to issue a complaint against a member organization or covered 
person, thereby commencing a disciplinary proceeding. The proposed Rule 
is the same as NYSE Rule 9211. The complaint would replace the Charge 
Memorandum currently used under Rule 476(d), as described above, which 
requires that the specific charges against the respondent in the form 
of a written statement be

[[Page 11324]]

signed by an authorized officer or employee of the Exchange, or an 
authorized employee of another self-regulatory organization.
    Proposed Rule 9212 would set forth the requirements of the 
complaint, amendments to the complaint, withdrawal of the complaint, 
and service of the complaint. The proposed rule would also permit the 
Chief Hearing Officer to select one Floor-Based Panelist, who would be 
a person who is, or, if retired, was, active on the Floor of the 
Exchange, to serve on a Hearing Panel if the complaint alleges at least 
one cause of action involving activities on the Floor of the Exchange. 
The proposed rule change would be consistent with the Exchange's 
practice under current Rule 476(b), which provides that in any 
disciplinary proceeding involving activities on the Floor of the 
Exchange, no more than one of the persons serving on the three-person 
Hearing Panel may be, or, if retired, may have been, active on the 
Floor of the Exchange. Proposed Rule 9212 is the same as the 
counterpart NYSE Rule.
    Under the proposed rule change, the form of the complaint also 
would be more prescribed than under current Rule 476. Current Rule 476 
also does not address the amendment or withdrawal of complaints.
Proposed Rules 9213 Through 9215
    Proposed Rule 9213 would provide for the appointment of a Hearing 
Officer and Panelists by the Chief Hearing Officer. Current Rule 476(b) 
is similar in that it provides for the appointment of a Chief Hearing 
Officer by the Exchange Board of Directors and the utilization of 
three-person Hearing Panels led by a Hearing Officer.
    Proposed Rule 9214 would permit the Chief Hearing Officer to sever 
or consolidate two or more disciplinary proceedings under certain 
circumstances and permit a Party to move for such action under certain 
circumstances. There is no rule comparable to proposed Rule 9214 for 
severing or consolidating proceedings. Under current Rule 476(c), the 
Chief Hearing Officer or a Hearing Officer resolves all procedural 
matters and substantive legal motions.
    Proposed Rule 9215 would set forth requirements for answering a 
complaint, including form, service, notice, content, defenses, 
amendments, default, and timing. An answer to a Charge Memorandum under 
current Rule 476(d) and an answer to a complaint under the proposed 
rule change have the same 25-day response deadline; however, proposed 
Rule 9215 would explicitly allow for an extension of time to answer an 
amended complaint.
    Proposed Rules 9213 through 9215 are the same as NYSE Rules 9213 
through 9215.
Proposed Rules 9216 and 9217
    Proposed Rule 9216 would establish the acceptance, waiver, and 
consent (``AWC'') procedures by which a respondent, prior to the 
issuance of a complaint, may execute a letter accepting a finding of 
violation, consenting to the imposition of sanctions, and agreeing to 
waive such respondent's right to a hearing, appeal, and certain other 
procedures.\47\ The proposed rule also would establish procedures for 
executing a minor rule violation plan letter.\48\
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    \47\ Proposed Rule 9270 would address settlement procedures 
after the issuance of a complaint.
    \48\ As described in proposed Rules 9216(b) and 9217, a minor 
rule violation plan letter is a means by which a fine (not to exceed 
$5,000) and/or a censure may be imposed on a member organization or 
covered person with respect to certain specifically enumerated 
rules, provided that there is reason to believe a violation has 
occurred and the member organization or covered person does not 
dispute the violation.
---------------------------------------------------------------------------

    Enforcement could prepare and request that a member organization or 
covered person execute an AWC letter if Enforcement had reason to 
believe a violation had occurred and the member organization or covered 
person did not dispute the violation. The CRO would be authorized to 
accept or reject an AWC letter that has been executed by a member 
organization or covered person. If the AWC letter were accepted by the 
CRO, it would be deemed final and would constitute the complaint, 
answer, and decision in the matter 25 days after it is sent to each 
Director and each member of the Committee for Review, unless review by 
the Exchange Board of Directors is requested pursuant to proposed Rule 
9310(a)(1)(B). Such review is consistent with the call for review 
process in connection with a Stipulation and Consent under current Rule 
476(g) and the process set forth in the NYSE Rules.\49\ The Exchange 
also believes that allowing AWC letters to be called for review by the 
Exchange Board of Directors provides an additional, appropriate check 
and balance to the settlement process. If the AWC letter were rejected 
by the CRO, the member organization or covered person who executed the 
letter would be notified in writing and the letter would be deemed 
withdrawn.
---------------------------------------------------------------------------

    \49\ See NYSE Reintegration Facilitation Filing Approval Order, 
80 FR at 72460.
---------------------------------------------------------------------------

    While the AWC process has some similarity to the Exchange's current 
Stipulation and Consent procedure in Rule 476(g) in that it provides a 
settlement mechanism, there are certain key differences. Under current 
Rule 476(g), a Hearing Officer must act on a Stipulation and Consent 
submitted by the parties and may choose to convene a Hearing Panel. No 
Hearing Officer would be involved in the process under the proposed 
rule.
    The Exchange also proposes to adopt the NYSE's process for minor 
rule violations while retaining the specific fine levels and list of 
rules included in the Exchange's current minor rule violation plan, 
with certain technical and conforming amendments. Under the proposed 
rule, the CRO, on behalf of the SRO Board, would be authorized to 
accept or reject a minor rule violation plan letter. If the minor rule 
violation plan letter were accepted by the CRO, it would be deemed 
final. Proposed Rule 9216(b)(4) would further provide that any fine 
imposed pursuant to proposed Rule 9216(b) and not contested would not 
be publicly reported, except as may be required by Rule 19d-1 under the 
Exchange Act, and as may be required by any other regulatory authority. 
If the letter were rejected by the CRO, the Exchange would be permitted 
to take any other appropriate disciplinary action with respect to the 
alleged violation or violations. If the letter were rejected, the 
member organization or covered person would not be prejudiced by the 
execution of the minor rule violation plan letter, and such document 
could not be introduced into evidence in connection with the 
determination of the issues set forth in any complaint or in any other 
proceeding.
    Unlike current Rule 476A, which is described above, the proposed 
rule would not permit a respondent to contest a minor rule violation 
letter by filing an answer and converting it into a regular 
disciplinary proceeding, nor would the proposed rule permit any person 
to require a review by the Board of any Hearing Panel determination in 
such a proceeding. Rather, under the proposed rule, if the respondent 
rejects the minor rule violation letter, then a complaint must be 
served and filed under proposed Rule 9211 in order to begin a 
disciplinary proceeding, and the minor rule violation letter may not be 
introduced into evidence. The Exchange believes that the proposed rule 
provides similar and sufficient procedural protections to respondents.
    Proposed Rule 9217 would set forth the list of rules under which a 
member organization or covered person may be subject to a fine under a 
minor rule violation plan as described in proposed Rule 9216(b). The 
Exchange would

[[Page 11325]]

retain the list of rules currently set forth in its own minor rule 
violation plan (found in Parts 1A, 1C, and 1D of current Rule 476A), 
and also insert them, with certain technical and conforming changes, 
into proposed Rule 9217, rather than adopt the list of rules in NYSE's 
plan.\50\
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    \50\ The proposed rule also would retain the Exchange's maximum 
fine for minor rule violations which, under current Rule 476A, is 
$5,000. NYSE's maximum fine for minor rule violations is $2,500. See 
NYSE Rule 9216(b).
---------------------------------------------------------------------------

    The technical and conforming changes relating to minor rule 
violations are as follows. The list of equities rules violations would 
be supplemented with references to proposed Rules 8210 and 8211. In 
particular, references to the failure to submit books and records or to 
furnish information on the date or within the time period that the 
Exchange requires under Rule 476(a)(11) would be supplemented with a 
reference to proposed Rule 8210. References to the submission of 
trading data under Rule 410A--Equities would be supplemented with a 
reference to proposed Rule 8211.
    The list of options rules violations and accompanying fine levels 
chart would be similarly updated. Failure to submit trade data to the 
Exchange in a timely manner (item (ii)(1)) would be supplemented by 
references to proposed Rule 8211 in both places. Failure to furnish in 
a timely manner books, records or other requested information or 
testimony in connection with an examination of financial responsibility 
and/or operational conditions under Rule 31 (item (ii)(2)) would be 
supplemented in both places with a reference to proposed Rule 8210. 
Delaying, impeding or failing to cooperate in an Exchange investigation 
under Rule Section 9A (item (ii)(5)) would be supplemented in both 
places with references to proposed Rule 8210. Finally, the Exchange 
proposes to replace the reference to Rule 476A in the first paragraph 
under the heading ``List of Reports Required to be Filed with the 
Exchange by ATP Holders and Filing Deadlines'' relating to the 
Exchange's ability to impose a $100 per day fine on any ATP Holder 
failing to file an enumerated report with a reference to Rule 9216(b).
    The current list of minor rules includes a reference to Rule 
504(b)(6)--Equities, which was deleted in August 2012; \51\ as such, 
the Exchange proposes to delete the rule from the list in Rule 476A and 
not include it in proposed Rule 9217. The current list of NYSE MKT 
minor rules also includes references to certain rules that have been 
removed from the rules as part of the FINRA rule harmonization process, 
including previous Rules 312(h)--Equities, 382(a)--Equities, 352(b) and 
(c)--Equities, 392--Equities, and 445(4)--Equities, as well as rules 
the Exchange is proposing to delete in the current rule filing, such as 
Rule 410A--Equities. The Exchange proposes to maintain the references 
to these former rules in its current list of minor rules in proposed 
Rule 9217. By doing so, the Exchange could continue to resolve 
violations of them that occurred prior to the harmonization via a minor 
rule violation letter.\52\ For example, guarantees against loss were 
covered by Rule 352--Equities until December 2009, when Rule 2150--
Equities was adopted.\53\ The Exchange could resolve a guarantee 
against loss violation that occurred in November 2009 when Rule 352--
Equities was effective, and Rule 2150--Equities was not effective, via 
a minor rule violation plan letter under proposed Rule 9217. The 
Exchange will determine at a later time when it is appropriate to 
remove these previous rule references from the list of minor rules.
---------------------------------------------------------------------------

    \51\ See Securities Exchange Act Release No. 67740 (August 28, 
2012), 77 FR 53952 (September 4, 2012) (SR-NYSEMKT-2012-37).
    \52\ This rationale for maintaining references to former rules 
in the list of minor rule violations was noted in Securities 
Exchange Act Release No. 62940 (September 20, 2010), 75 FR 58452 
(September 24, 2010) (SR-NYSE-2010-66).
    \53\ See Securities Exchange Act Release No. 61157 (December 11, 
2009), 74 FR 67939 (December 21, 2009) (SR-NYSEAmex-2009-88).
---------------------------------------------------------------------------

Proposed Rules 9220 Through 9222
    Proposed Rules 9220 and 9222 would describe how a respondent can 
request a hearing, the notice of a hearing, and timing considerations. 
The proposed rules are the same as NYSE Rules 9220 through 9222. 
Proposed Rule 9221 provides that a Hearing Officer generally must 
provide at least 28 days' notice of the hearing. Current Rule 476 does 
not have comparable provisions relating to how a hearing can be ordered 
and time for notices; rather, current Rule 476(b) states that all 
proceedings under the Rule, except as to matters that are resolved by a 
Hearing Officer when so authorized, are conducted at a Hearing in 
accordance with the provisions of Rule 476.
Proposed Rules 9230 Through 9235
    Proposed Rules 9231 and 9232 would govern how a Hearing Panel, 
Extended Hearing Panel, Replacement Hearing Officer, Panelists, 
Replacement Panelists, and Floor-Based Panelists are appointed and 
their composition and criteria for selection. Proposed Rules 9231 and 
9232 are the same as the counterpart NYSE rules, except for the 
substitution of ``Exchange'' for ``NYSE'' before ``hearing board'' and 
the use of ``ATP Holders'' in proposed Rule 9232 to reflect the 
Exchange's membership.
    Under the proposed rule change, the Exchange would use FINRA's 
Chief Hearing Officer and Hearing Officers from FINRA's Office of 
Hearing Officers, rather than have the Exchange Board of Directors 
appoint such persons as it does under current Rule 476(b). To harmonize 
the Exchange's rules with the hearing process under NYSE rules, the 
Exchange believes that it is reasonable to utilize FINRA's Office of 
Hearing Officers as described in the proposed rule change.
    The Exchange would continue to draw Panelists appointed from an 
Exchange hearing board. The hearing board would be composed of members 
of the Exchange who are not members of the Exchange Board of Directors 
and registered employees and non-registered employees of member 
organizations or ATP Holders, as well as former members, allied 
members, or registered and non-registered employees of member 
organizations or ATP Holders who have retired from the securities 
industry.\54\ As is the case under current Rule 476(b), Panelists would 
be required to be persons of integrity and judgment. The proposed rule 
would provide that the hearing board would be appointed by the Exchange 
Board of Directors. Under current Rule 476(b), the Hearing Board is 
selected by the Chairman of the Exchange Board of Directors, subject to 
the approval of the Board of Directors. The Exchange believes that 
because the approval of the Exchange Board of Directors is required for 
appointment of the hearing board, it is not necessary to specify that 
the Chairman of the Exchange Board shall appoint the hearing board 
subject to such approval.\55\
---------------------------------------------------------------------------

    \54\ As noted above, the Exchange no longer has allied members, 
but former allied members would continue to be eligible to be 
appointed to the Hearing Board, and the text of proposed Rule 9232 
reflects this. See note 27, supra.
    \55\ The proposed rule is based on NYSE's recent amendment to 
NYSE Rule 9232. See NYSE Reintegration Facilitation Filing Approval 
Order, 80 FR at 72464.
---------------------------------------------------------------------------

    There would be one change in hearing board eligibility in the 
proposed rule as compared to the current rule. Currently, the Exchange 
requires that a Panelist cannot have been retired from the securities 
industry for more than five years. In order to have the largest number 
of potential retired Panelists available following the proposed rule 
change, the Exchange proposes to drop

[[Page 11326]]

the five-year restriction. The Exchange believes that there are well-
qualified persons, in particular retirees, who continue to stay abreast 
of industry developments and rules after more than five years of 
retirement and that such persons would be valuable additions to the 
hearing board.
    In addition, as noted above, the Exchange proposes to permit the 
Chief Hearing Officer to select one Floor-Based Panelist to serve on a 
Hearing Panel if the complaint alleges at least one cause of action 
involving activities on the Floor of the Exchange, consistent with the 
Exchange's practice under current Rule 476(b).
    Proposed Rule 9232 would include Panelist selection criteria, which 
are expertise, absence of any conflict of interest or bias or any 
appearance thereof, availability, and the frequency with which a person 
has served as a Panelist in the last two years, favoring the selection 
of a person as a Panelist who has never served or who has served 
infrequently as a Panelist during the period. Rule 476(b) currently 
does not include these criteria.
    Proposed Rules 9233 and 9234 would establish the processes for 
recusal and disqualification of Hearing Officers, Hearing Panels, or 
Extended Hearing Panels. Current Rule 22--Equities similarly prohibits 
a person from participating in an adjudication if he or she has a 
personal interest but does not specifically provide for recusals and 
disqualifications in the manner in which the comparable NYSE rule does. 
The options market does not have a comparable rule. Proposed Rules 9233 
and 9234 are the same as the NYSE rules.
    Proposed Rule 9235 would set forth the Hearing Officer's duties and 
authority in detail. The proposed rule change is similar to current 
Rule 476(c), which gives the Hearing Officer general authority in 
procedural and evidentiary matters. The proposed rule is the same as 
NYSE Rule 9235.
Proposed Rules 9240 Through 9242
    Proposed Rules 9241 and 9242 would govern the substantive and 
procedural requirements for pre-hearing conferences and pre-hearing 
submissions. In addition, proposed Rule 9242, in conformance with the 
current NYSE rule based on FINRA's counterpart rule, would provide that 
no former Regulatory Staff shall, within a period of one year 
immediately following termination of employment with the Exchange or 
FINRA, provide expert testimony on behalf of any other person under the 
Rule 9000 Series.\56\ Nothing in this Rule would prohibit former 
Regulatory Staff from testifying as a witness on behalf of the Exchange 
or FINRA. The rule text in proposed Rule 9242(b) 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. Given the Exchange's resumption of certain 
regulatory functions earlier this year, 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.
---------------------------------------------------------------------------

    \56\ See id., 80 FR at 51338.
---------------------------------------------------------------------------

    As stated above, current Rule 476(c) gives Hearing Officers general 
authority in procedural matters, but there are no specific provisions 
in the current rules relating to pre-hearing conferences and 
submissions, nor do the current rules address expert testimony by 
former staff.
Proposed Rules 9250 Through 9253
    Proposed Rules 9250 through 9253 would address discovery, including 
the requirements and limitations relating to the inspection and copying 
of documents in the possession of Exchange staff, requests for 
information and limitations on such requests, and the production of 
witness statements and any harmless error relating to the production of 
such witness statements. The proposed rules are the same as NYSE Rules 
9250 through 9253.
    Proposed Rule 9251 would generally require Enforcement to make 
available to a respondent any documents prepared or obtained in 
connection with the investigation that led to the proceedings, except 
that certain privileged or other internal documents, such as 
examination or inspection reports or documents that would reveal an 
examination, investigation, or enforcement technique or confidential 
source, or documents that are prohibited from disclosure under federal 
law, are not required to be made available. A Hearing Officer may 
require that a withheld document list be prepared. Proposed Rule 9251 
also sets forth procedures for inspection and copying of produced 
documents. In addition, if a Document required to be made available to 
a respondent pursuant to the proposed Rule was not made available by 
Enforcement, no rehearing or amended decision of a proceeding already 
heard or decided would be required unless the respondent establishes 
that the failure to make the Document available was not harmless error. 
The Hearing Officer, or, upon review under proposed Rule 9310, the 
Exchange Board of Directors, would determine whether the failure to 
make the document available was not harmless error, applying applicable 
Exchange, FINRA, SEC, and federal judicial precedent. The proposed Rule 
would not establish any preference for Exchange versus other precedent 
in this respect; rather, the Adjudicators could determine in their 
discretion what precedent to apply.
    Current Rule 476(c) contains provisions that address the same 
subject. As described above, under that rule the Chief Hearing Officer, 
or any Hearing Officer designated by the Chief Hearing Officer, may 
require the Exchange to permit a respondent to inspect and copy 
documents or records in the possession of the Exchange that are 
material to the preparation of the defense or are intended for use by 
the Exchange as evidence in chief at the hearing; however, the rule 
does not authorize the discovery or inspection of reports, memoranda, 
or other internal Exchange documents prepared by the Exchange in 
connection with the proceeding. Under the proposed rule, there would be 
no materiality standard. The Exchange believes that eliminating the 
materiality standard will ease administration of the rule while still 
providing appropriate protections for internal Exchange documents.
    In addition, under current Rule 476(c), the respondent may be 
required to provide discovery of non-privileged documents and records 
to the Exchange. There is no explicit counterpart in the proposed NYSE 
MKT or current NYSE rules, but the Exchange notes that proposed Rule 
8210 may always be used to obtain non-privileged documents from a 
respondent. Thus, in that respect, there is no substantive difference 
in the result under the current or proposed rules.
    Under proposed Rule 9252, a respondent could request that the 
Exchange invoke proposed Rule 8210 to compel the production of 
Documents or testimony at the hearing if the respondent can show that 
certain standards are met, e.g., that the information sought is 
relevant, material, and non-cumulative. Current Rule 476 provides that 
a respondent may be required to provide discovery of non-privileged 
documents to the Exchange.

[[Page 11327]]

    Under proposed Rule 9253, a respondent could file a motion to 
obtain certain witness statements. The Exchange's current rules do not 
contain such a provision.
Proposed Rules 9260 Through 9269
    Proposed Rules 9260 through 9269 would govern hearings and 
decisions. The proposed rules are the same as the counterpart NYSE 
rules except for the inclusion of ``ATP Holder'' and ``member'' in Rule 
9268.
    Proposed Rule 9261 would generally require the Parties to submit a 
list of documentary evidence and witnesses no later than 10 days before 
the hearing. The Exchange's current rules do not contain such a 
provision.
    Proposed Rule 9262 would require persons subject to the Exchange's 
jurisdiction to testify under oath or affirmation at a hearing. The 
Exchange's current rules do not contain such a provision.
    Proposed Rule 9263 would authorize the Hearing Officer to exclude 
irrelevant, immaterial, or unduly repetitious or prejudicial evidence 
and a Party to object; excluded evidence would be attached to the 
record as a supplemental document. Under current Rule 476(c), the Chief 
Hearing Officer or a Hearing Officer resolves all evidentiary issues. 
There is no explicit provision in the Exchange's current rules for 
excluded evidence to be attached to the record.
    Proposed Rule 9264 would allow Parties to file a motion for summary 
disposition under certain circumstances and would describe the 
procedures for filing and ruling on such a motion. Under current Rule 
476(c), the Chief Hearing Officer or a Hearing Officer resolves all 
procedural matters, but the Rule does not specifically address motions 
for summary disposition. In practice, however, Hearing Panels accept 
and rule on motions for summary disposition.
    Proposed Rule 9265 would require that the hearing be recorded by a 
court reporter, that a transcript be prepared and made available for 
purchase, and that a Party be permitted to seek a correction of the 
transcript from the Hearing Officer. Current Rule 476(e) provides 
generally that the Exchange must keep a record of hearings.
    Proposed Rule 9266 would authorize the Hearing Officer to require a 
post-hearing brief or proposed findings of fact and conclusions of law 
and would outline the form and timing for such submissions. Under 
current Rule 476(c), the Chief Hearing Officer or a Hearing Officer 
resolves all procedural matters, but the rule does not specifically 
address such post-hearing activities.
    Proposed Rule 9267(a) would detail the required contents of the 
hearing record and Rule 9267(b) would describe treatment of 
supplemental documents attached to the record. The Exchange's current 
rules do not contain such a provision.
    Proposed Rule 9268 would set forth the timing and the contents of a 
decision of the Hearing Panel or Extended Hearing Panel and the 
procedures for a dissenting opinion, service of the decision, and any 
requests for review. Other than a reference to ``ATP Holder'' in 
subparagraph (d), the proposed Rule is the same as NYSE Rule 9268.
    The Exchange notes that it has a member organization affiliate.\57\ 
As such, in proposed Rule 9268(e)(2), the Exchange proposes to include 
text providing that a disciplinary decision concerning an Exchange 
member or member organization that is an affiliate of the Exchange 
would not be subject to review under proposed Rule 9310 but instead 
would be treated as a final disciplinary action subject to SEC review. 
The Exchange does not believe that an appeal by an affiliate to the 
Exchange Board of Directors is appropriate, but rather such affiliate 
should be permitted to appeal directly to the SEC. The Exchange notes 
that NASDAQ, which also has an affiliate, has a rule that is 
substantially the same as the Exchange's proposed rule and NYSE's 
current rule.\58\ Because the Exchange's affiliates will still have a 
right to appeal to the SEC, the Exchange believes that the proposed 
rule is not unfairly discriminatory.
---------------------------------------------------------------------------

    \57\ The Exchange has one member organization, Archipelago 
Securities LLC, that is an affiliate of the Exchange and that is 
used for inbound and outbound routing of certain orders. See Rule 1, 
Rule 17(c)--Equities & Rule 993NY.
    \58\ See NASDAQ Rule 9268(e)(2); NYSE Rule 9268(e)(2).
---------------------------------------------------------------------------

    Finally, proposed Rule 9269 would establish the process for the 
issuance and review of default decisions by a Hearing Officer when a 
respondent fails to timely answer a complaint or fails to appear at a 
pre-hearing conference or hearing where due notice has been provided. A 
Party may, for good cause shown, file a motion to set aside a default 
decision. A default decision would become the final disciplinary action 
of the Exchange if a request for review by the Exchange Board of 
Directors is not filed within 25 days after the date the decision is 
served on the Parties. The proposed rule is the same as NYSE Rule 9269.
    Current Rule 476(d) provides a similar mechanism for default 
decisions as the proposed rule change. As described above, under the 
current rule, if the respondent has failed to file an Answer, the 
Exchange, by motion, accompanied by proof of notice to the respondent, 
may request a determination of guilt by default, and may recommend a 
penalty to be imposed. If the respondent opposes the motion, the 
Hearing Officer, on a determination that the respondent had adequate 
reason to fail to file an Answer, may adjourn the hearing date and 
direct the respondent to promptly file an Answer. If the default motion 
is unopposed, or the respondent did not have adequate reason to fail to 
file an Answer, or the respondent failed to file an Answer after being 
given an opportunity to do so, the Hearing Officer, on a determination 
that the respondent has had notice of the charges and that the Exchange 
has jurisdiction in the matter, may find guilt and determine a penalty. 
Unlike the proposed rule, the current rule does not contain a provision 
for setting aside a default decision that has been rendered.
Proposed Rule 9270
    Proposed Rule 9270 would provide for a settlement procedure for a 
respondent who has been notified that a proceeding has been instituted 
against him or her. The proposed settlement procedure would be 
different from the Stipulation and Consent procedure under current Rule 
476(g), which is described above. The proposed rule would be the same 
as NYSE Rule 9270, except as described below.
    Under proposed Rule 9270(a), a respondent notified of the 
institution of a disciplinary proceeding could make a written offer of 
settlement at any time, but the proposal would not stay the proceeding 
unless the Hearing Officer determined otherwise. The proposed rule 
differs from current Rule 476(g), which requires that a Stipulation and 
Consent be agreed to by both the respondent and Exchange staff.
    Under proposed Rule 9270(b), a respondent would be prohibited from 
making a frivolous settlement offer or one that was inconsistent with 
the seriousness of the violations. Current Rule 476(g) does not contain 
a similar provision.
    Proposed Rule 9270(c) would set forth the required content of the 
proposal, which would include a statement consenting to findings of 
fact and violations and a proposed sanction. The proposed rule would be 
the same as NYSE's rule, except that, like FINRA Rule 9270(c)(5), the 
proposed rule would also require that the proposed

[[Page 11328]]

sanction be consistent with the Exchange's sanctions guidelines, if 
applicable, or, if inconsistent with the sanction guidelines, include a 
detailed statement supporting the proposed sanction. The NYSE does not 
have sanctions guidelines, so this requirement was not included in 
NYSE's rules.\59\ As noted above, the Exchange's Sanctions Guidelines 
apply only to matters involving violations of the options rules. In 
connection with matters not covered by the Sanctions Guidelines, the 
CRO, Hearing Panel or Extended Hearing Panel, as applicable, would 
consider relevant Exchange precedent or such other precedent as it 
deemed appropriate in determining whether to accept a settlement offer. 
Current Rule 476(g) similarly requires that a Stipulation and Consent 
contain proposed findings of fact, violations, and a specified penalty.
---------------------------------------------------------------------------

    \59\ See 2013 Notice, 78 FR at 5229.
---------------------------------------------------------------------------

    Proposed Rule 9270(d) would provide that submission of a settlement 
offer waives a respondent's right to a hearing, the right to claim bias 
or ex parte communication violations, and the right to review by the 
Exchange Board of Directors, the Commission, or the courts. This 
differs from current Rule 476(g), which allows either party to request 
a hearing on a Stipulation and Consent or a Hearing Officer to convene 
a hearing on a Stipulation and Consent in certain circumstances.
    Proposed Rule 9270(e) would address contested settlement offers. 
Under the proposed rule, if a respondent made an offer of settlement 
and Enforcement opposed it, the offer of settlement would be contested 
and thereby deemed rejected, and thus the proceeding would continue to 
completion under the proposed Rule 9200 Series. The contested offer of 
settlement would not be transmitted to the Office of Hearing Officers, 
the CRO, or Hearing Panel or Extended Hearing Panel, and would not 
constitute a part of the record in any proceeding against the 
respondent making the offer. The Exchange has determined that if the 
Parties cannot reach agreement on the offer of settlement, then the 
matter should proceed under the proposed Rule 9200 Series. The Exchange 
believes that its proposed rule would encourage respondents to make 
reasonable offers of settlement that will be acceptable to Enforcement 
and is consistent with the Exchange's current process under Rule 
476(g), which does not contemplate contested settlement offers but 
rather requires that both the respondent and Exchange staff agree on 
the Stipulation and Consent.
    Proposed Rule 9270(f) and (h) would address uncontested offers of 
settlement. Under the proposed rule, an offer of settlement would be 
uncontested if Enforcement does not oppose it. If a hearing on the 
merits had not begun, the CRO could accept the settlement offer; if a 
hearing on the merits had begun, the Hearing Panel or Extended Hearing 
Panel could accept the settlement offer.\60\ If they did not, the offer 
would be deemed withdrawn and the matter would proceed under the 
proposed Rule 9200 Series and the settlement offer would not be part of 
the record. As described below, if the offer of settlement were 
accepted by the CRO, Hearing Panel or Extended Hearing Panel, it would 
become final 25 days after being sent, together with an order of 
acceptance, to each Director and each member of the Committee for 
Review, unless review by the Exchange Board of Directors is required 
pursuant to proposed Rule 9310(a)(1)(A) or (B).
---------------------------------------------------------------------------

    \60\ In determining whether to accept a settlement offer, the 
CRO, Hearing Panel or Extended Hearing Panel, as applicable, would 
consider Exchange precedent or such other precedent as it deemed 
appropriate, in addition to considering the Sanctions Guidelines, if 
applicable.
---------------------------------------------------------------------------

    The Exchange anticipates that the required acceptance by the CRO, 
Hearing Panel, or Extended Hearing Panel would help ensure objectivity 
and consistency among offers of settlement that are issued. The 
proposed rule change would also allow an offer of settlement to be 
called for review by the Exchange Board of Directors. The Exchange 
believes that this review mechanism provides an additional, appropriate 
check and balance to the proposed settlement process.
    While the offer of settlement process has some similarity to the 
Exchange's current Stipulation and Consent procedure in Rule 476(g) in 
that it provides a settlement mechanism, there are certain key 
differences. Under current Rule 476(g), a Hearing Officer must act on a 
Stipulation and Consent submitted by the parties and may choose to 
convene a Hearing Panel. Under the proposed rule change, as under NYSE 
Rule 9270, a Hearing Officer would be required to act on an offer of 
settlement only if a hearing on the merits had already begun. In 
addition, under Rule 476(g), all determinations and penalties imposed 
in connection with a Stipulation and Consent are final and conclusive 
25 days after notice has been served upon the respondent. As discussed 
below in connection with proposed Rule 9310(a)(1)(B), an offer of 
settlement issued before a hearing on the merits has begun would become 
final 25 days after being sent to each Director and member of the 
Committee for Review, if not called for review by the Exchange Board of 
Directors.
    Proposed Rule 9270(i) would address disciplinary proceedings with 
multiple respondents and permit settlement offers to be accepted or 
rejected as to any one or all of such respondents. Current Rule 476(g) 
does not have a similar provision.
    Proposed Rule 9270(j) would provide that a respondent may not be 
prejudiced by a rejected offer of settlement nor may such an offer of 
settlement be introduced into evidence. The current rules do not have a 
similar provision.
Proposed Rule 9280
    Proposed Rule 9280 would set forth sanctions for contemptuous 
conduct by a Party or attorney or other representative, which may 
include exclusion from a hearing or conference, and sets forth a 
process for reviewing such exclusions. The Exchange proposes to have 
the Chief Hearing Officer review exclusions. The Exchange believes that 
respondents and their attorneys and representatives will have adequate 
procedural protections with a review by the Chief Hearing Officer. 
Current Rule 476 does not have similar procedures for contemptuous 
conduct generally, but Rule 476(h) does allow for a fine or sanction 
for improper conduct before a Hearing Board. The proposed Rule is the 
same as NYSE Rule 9280.
Proposed Rule 9290
    Under proposed Rule 9290, for any disciplinary proceeding the 
subject matter of which also is subject to a temporary cease and desist 
proceeding initiated pursuant to proposed Rule 9810 or a temporary 
cease and desist order, hearings would be required to be held and 
decisions rendered at the earliest possible time. The Exchange 
currently does not have a similar rule. The proposed rule is the same 
as NYSE Rule 9290.
Proposed Rules 9300 and 9310
    The Exchange's appellate and call for review processes would be set 
forth in the Rule 9300 Series, specifically proposed Rule 9310. The 
text is substantially similar to current Rule 476(f), (g) and (l), with 
certain differences that are described below. The text of proposed Rule 
9310 is the same as NYSE Rule 9310, except as described below.
    Under proposed Rule 9310(a)(1)(A), any Party, any Director, and any 
member of the Committee for Review could require a review by the 
Exchange

[[Page 11329]]

Board of Directors of any determination or penalty, or both, imposed by 
a Hearing Panel or Extended Hearing Panel under the proposed Rule 9200 
Series, except that none of the aforementioned persons could request a 
review by the Exchange Board of Directors of a decision concerning an 
Exchange member or member organization that is an affiliate. Under the 
proposed rule, a request for review would be made by filing with the 
Secretary of the Exchange a written request therefor, which states the 
basis and reasons for such review, within 25 days after notice of the 
determination and/or penalty was served upon the respondent. The 
Secretary of the Exchange would give notice of any such request for 
review to the Parties.
    Proposed Rule 9310(a)(1)(B) would govern the call for review 
process in connection with AWC letters and offers of settlement 
determined to be uncontested before a hearing on the merits has begun. 
Under the proposed rule, any Director and any member of the Committee 
for Review could require a review by the Exchange Board of Directors of 
any determination or penalty, or both, imposed in connection with an 
AWC letter under Rule 9216 or an offer of settlement determined to be 
uncontested before a hearing on the merits has begun under Rule 
9270(f), except that none of those persons could request a review by 
the Exchange Board of Directors of a determination or penalty 
concerning an Exchange member or member organization that is an 
affiliate of the Exchange. A request for review pursuant to proposed 
paragraph (a)(1)(B)(i) would be made by filing with the Secretary of 
the Exchange a written request stating the basis and reasons for such 
review, within 25 days after the AWC letter or offer of settlement has 
been sent to each Director and each member of the CFR. The Secretary of 
the Exchange would give notice of any such request for review to the 
Parties.
    In addition, the Exchange proposes that any party could require a 
review by the Exchange Board of Directors of any rejection by the CRO 
of an AWC letter under Rule 9216 or an offer of settlement determined 
to be uncontested before a hearing on the merits has begun under Rule 
9270(f), except that no party could request Board review of a rejection 
of an AWC letter or offer of settlement concerning an Exchange member 
or member organization that is an affiliate of the Exchange. Under 
subparagraph (B)(ii) of proposed Rule 9310(a)(1), such a request for 
review would be made by filing with the Secretary of the Exchange a 
written request therefor, which states the basis and reasons for such 
review, within 25 days after notification pursuant to Rule 9216(a)(3) 
or Rule 9270(h) that an AWC letter or uncontested offer of settlement 
or order of acceptance is not accepted by the CRO. The Exchange 
proposes that the Secretary of the Exchange would give notice of any 
such request for review to the parties.
    The text of proposed Rule 9310(a)(1) differs from Rule 476 in order 
to align it with terms used in the remainder of the proposed Rule 9000 
Series. The call for review process described in proposed Rule 
9310(a)(1)(A) is consistent with the process described in Rule 476(f) 
and (g) regarding review of a determination or penalty imposed by a 
Hearing Panel. The call for review process described in Rule 
9310(a)(1)(B) for AWC letters and offers of settlement before a hearing 
on the merits has begun differs from Rule 476 because it describes a 
process for reviewing determinations and penalties imposed without 
involvement of a Hearing Officer or Hearing Panel. No such process 
exists under the Exchange's current rules because Rule 476(g) provides 
that a Hearing Officer must act on a Stipulation and Consent submitted 
by the parties and may choose to convene a Hearing Panel.
    The Exchange believes that allowing AWC letters and offers of 
settlement accepted by the CRO to be called for review by the Exchange 
Board of Directors, together with the proposed rule permitting parties 
to request Board review of a determination to reject an uncontested 
offer of settlement, provides an additional, appropriate check and 
balance to the settlement process. Allowing for such review would 
provide an additional layer of review for determinations made by the 
CRO. It would also permit all AWC letters and offers of settlement to 
be subject to review if requested by a Director or a member of the 
Committee for Review. The Exchange believes that the 25-day period in 
proposed Rule 9310(a)(1)(B) is reasonable and sufficient. The proposed 
25-day period is consistent with the 25-day period for Board review of 
a Stipulation and Consent (or rejection thereof) set forth in current 
Rule 476(g). The proposed rule change is also consistent with the 
period applicable to review of a determination or penalty imposed by a 
Hearing Panel or Extended Hearing Panel in NYSE Rule 9310(a)(1). 
Similarly, the proposed rule change is consistent with the 25-day 
period for requesting review of a default decision under proposed Rule 
9269(d).
    Under proposed Rule 9310(a)(2), the Secretary of the Exchange would 
direct the Office of Hearing Officers, in connection with any review 
under paragraph (a)(1)(A), to complete and transmit a record of the 
disciplinary proceeding in accordance with Rule 9267. Within 21 days 
after the Secretary of the Exchange gives notice of a request for 
review to the Parties, or at such later time as the Secretary of the 
Exchange could designate, the Office of Hearing Officers would assemble 
and prepare an index to the record, transmit the record and the index 
to the Secretary of the Exchange, and serve copies of the index upon 
all Parties. The Hearing Officer who participated in the disciplinary 
proceeding, or the Chief Hearing Officer, would certify that the record 
transmitted to the Secretary of the Exchange was complete. Current Rule 
476(f) does not contain such requirements.
    Under proposed Rule 9310(b), any review by the Exchange Board of 
Directors would be based on oral arguments and written briefs and 
limited to consideration of the record before the Hearing Panel or 
Extended Hearing Panel. Proposed Rule 9310(b) also incorporates Rule 
476(f)'s provision relating to appeals panels.\61\ Specifically, under 
proposed Rule 9310(b), the CFR may, but is not required to, appoint an 
appeals panel to conduct a review under this subsection and make a 
recommendation to the CFR. An appeals panel appointed by the CFR would 
consist of at least three and no more than five individuals. An appeals 
panel appointed by the CFR for equities matters would be composed of at 
least one director and one member or individual associated with an 
equities member organization. An appeals panel appointed by the CFR for 
options matters would be composed of at least one director and one 
member or individual associated with an options member organization. 
NYSE Rule 9310(b) does not contain a similar provision relating to 
appeals panels.
---------------------------------------------------------------------------

    \61\ See note 15, supra.
---------------------------------------------------------------------------

    Upon review, and with the advice of the CFR, the Exchange Board of 
Directors, by the affirmative vote of a majority of the Exchange Board 
of Directors then in office, could sustain any determination or penalty 
imposed, or both; could modify or reverse any such determination; and 
could increase, decrease or eliminate any such penalty, or impose any 
penalty permitted under the Exchange's rules, as it deems appropriate. 
Unless the Exchange Board of Directors otherwise specifically directed, 
the determination and penalty,

[[Page 11330]]

if any, of the Exchange Board of Directors after review would be final 
and conclusive, subject to the provisions for review under the Act. The 
proposed rule is substantially the same as provided in current Rule 
476(f), other than conforming and technical changes to align it with 
terms used in the remainder of the proposed Rule 9000 Series.
    Under proposed Rule 9310(c), notwithstanding the foregoing, if 
either Party upon review applied to the Exchange Board of Directors for 
leave to adduce additional evidence, and showed to the satisfaction of 
the Exchange Board of Directors that the additional evidence was 
material and that there were reasonable grounds for failure to adduce 
it before the Hearing Panel or Extended Hearing Panel, the Exchange 
Board of Directors could remand the case for further proceedings, in 
whatever manner and on whatever conditions the Exchange Board of 
Directors considered appropriate. The proposed rule is substantially 
the same as provided in current Rule 476(f), other than conforming and 
technical changes to align it with terms used in the remainder of the 
proposed Rule 9000 Series.
    Under proposed Rule 9310(d), notwithstanding any other provisions 
of the proposed Rule 9000 Series, the CEO could not require a review by 
the Exchange Board of Directors under this Rule and would be recused 
from deliberations and actions of the Exchange Board of Directors with 
respect to such matters. The proposed rule is substantially the same as 
provided in current Rule 476(l), other than conforming and technical 
changes to align it with terms used in the remainder of the proposed 
Rule 9000 Series.
Proposed Rules 9500 Through 9527
    The proposed Rule 9520 Series would govern eligibility proceedings 
for persons subject to statutory disqualifications that are not FINRA 
members. The Exchange does not currently have any rules governing this 
subject matter and proposes to adopt the NYSE Rule 9520 Series.\62\ The 
Exchange intends for the scope of the proposed Rule 9520 Series to be 
the same as the NYSE Rule 9520 Series, and as such, intends to issue a 
notice to that effect.
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    \62\ The NYSE Rule 9520 Series was based on the FINRA Rule 9520 
Series, and the scope of the NYSE Rule 9520 Series was intended to 
be the same as FINRA Rule 9520 Series. See 2013 Approval Order, 78 
FR at 15399. FINRA has been processing statutory disqualification 
applications on behalf of the Exchange since 2009. See Securities 
Exchange Act Release No. 60409 (July 30, 2009), 74 FR 39353 (August 
6, 2009) (File No. 4-587).
---------------------------------------------------------------------------

    Proposed Rule 9521 would add certain definitions relating to 
eligibility proceedings that are not currently part of the Exchange's 
rules, including definitions of ``Application,'' ``disqualified member 
organization,'' ``disqualified person,'' and ``sponsoring member 
organization.'' Proposed Rule 9521 is the same as NYSE Rule 9521 except 
that it includes ``ATP Holder'' in subparagraph (a) describing the 
rule's purpose and in the definition of ``disqualified member 
organization'' in subparagraph (b)(2). As noted previously, the 
references to ATP Holders in the proposed Rule 9520 Series relate 
solely to options members that have employees and not ATP Holders 
without employees or those associated with an options member 
organization.
    Proposed Rule 9522 would govern the initiation of an eligibility 
proceeding by the Exchange and the obligation for a member organization 
or covered person to file an application to initiate an eligibility 
proceeding if it has been subject to certain disqualifications. 
Further, under the proposed rule, FINRA's Department of Member 
Regulation could approve a written request for relief from the 
eligibility requirements under certain circumstances. Once again, the 
proposed Rule is the same as its NYSE counterpart except for references 
to ``ATP Holder'' to reflect the Exchange's membership.
    Proposed Rule 9523 would allow the Department of Member Regulation 
to recommend a supervisory plan to which the disqualified member 
organization, sponsoring member organization, and/or disqualified 
person, as the case may be, may consent and by doing so, waive the 
right to hearing or appeal if the plan is accepted and the right to 
claim bias or prejudgment, or prohibited ex parte communications. If 
such a supervisory plan were rejected, proposed Rule 9524 would allow a 
request for review by the applicant to the Exchange Board of Directors. 
Proposed Rule 9524 is the same as the NYSE Rule. Proposed Rule 9527 
would provide that a filing of an application for review would not stay 
the effectiveness of final action by the Exchange unless the Commission 
otherwise ordered. Proposed Rule 9527 is the same as the NYSE Rule. To 
maintain consistency with NYSE's rule numbering, proposed Rules 9525 
and 9526 would be designated ``Reserved.''
Proposed Rules 9550 Through 9559
    Proposed Rules 9551 through 9559 would govern expedited 
proceedings.\63\
---------------------------------------------------------------------------

    \63\ Proposed Rule 9553 would be designated ``Reserved'' to 
maintain consistency with NYSE's rule numbering.
---------------------------------------------------------------------------

    Under proposed Rule 9551, Regulatory Staff could issue a written 
notice requiring a member or member organization \64\ to file 
communications with the Exchange's Advertising Regulation Department at 
least 10 days prior to use if the staff determined that the member or 
member organization had departed from the standards of Rule 2210--
Equities or Rule 991.\65\ The notice would state the specific grounds 
and include the factual basis for the action as well as the effective 
date. The member or member organization could file a written request 
for a hearing with the Office of Hearing Officers pursuant to proposed 
Rule 9559. A member or member organization would be required to set 
forth with specificity any and all defenses to the action in its 
request for a hearing. Pursuant to proposed Rules 8310(a) and 9559(n), 
a Hearing Officer or, if applicable, Hearing Panel, could approve, 
modify or withdraw any and all sanctions or limitations imposed by the 
staff's notice, and impose any other fitting sanction. A member or 
member organization subject to a pre-use filing requirement also could 
file a written request for modification or termination of the 
requirement. The Exchange currently uses FINRA Rule 9551 and 9559, 
which are the same, to carry out these procedures.
---------------------------------------------------------------------------

    \64\ See notes 25 and 26, supra.
    \65\ Proposed Rule 9551 is the same as NYSE Rule 9551 except for 
the inclusion of references to Exchange rules, and the inclusion of 
``member'' before ``member organization'' to reflect the Exchange's 
membership.
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    Proposed Rule 9552 would establish procedures in the event that a 
member organization or covered person failed to provide any 
information, report, material, data, or testimony requested or required 
to be filed under the Exchange's rules, or failed to keep its 
membership application or supporting documents current. In the event of 
the foregoing, under proposed Rule 9552, the member organization or 
covered person could be suspended if corrective action were not taken 
within 21 days after service of notice. A member organization or 
covered person served with a notice could request a hearing within the 
21-day period. A member organization or covered person subject to a 
suspension could file a written request for termination of the 
suspension on the ground of full compliance. A member organization or 
covered person suspended under the

[[Page 11331]]

proposed rule change that failed to request termination of the 
suspension within three months of issuance of the original notice of 
suspension would automatically be expelled or barred.\66\
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    \66\ The Exchange believes that the provision for automatic 
expulsion or bar after three months is consistent with Section 6 of 
the Act because the respondent would have ample notice and 
opportunity to be heard under proposed Rule 9552, the proposed rule 
is substantially the same as FINRA's counterpart rule, and the 
Commission has upheld at least one bar under a prior version of 
FINRA's rule. See, e.g., Dennis A. Pearson, Jr., Securities Exchange 
Act Rel. Nos. 54913 (December 11, 2006) (dismissing application for 
review by associated person barred under NASD Rule 9552(h)) & 55597A 
(April 6, 2007) (denying motion for reconsideration).
---------------------------------------------------------------------------

    There is no provision for such an expedited proceeding under the 
Exchange's current rules. Under current Rule 476(a)(11), a member 
organization or covered person is subject to a regular, as opposed to 
expedited, disciplinary proceeding for failure to submit books and 
records or provide testimony upon request of the Exchange and for 
failure to update a Form BD. Proposed Rule 9552 is the same as its NYSE 
counterpart except for references to ``ATP Holder'' to reflect the 
Exchange's membership.
    Proposed Rule 9554, relating to failures to comply with an 
arbitration award or related settlement or an Exchange order of 
restitution or Exchange settlement agreement providing for restitution, 
would contain similar procedures and consequences as proposed Rule 
9552. Under proposed Rule 9554, if a member organization or covered 
person failed to comply with an arbitration award or a settlement 
agreement related to an arbitration or mediation under the Exchange's 
rules, or an Exchange order of restitution or Exchange settlement 
agreement providing for restitution, Regulatory Staff could provide 
written notice to such member organization or covered person stating 
that the failure to comply within 21 days of service of the notice will 
result in a suspension or cancellation of membership or a suspension 
from associating with any member organization or ATP Holder. Under 
current Rule 600(c)--Equities and Rule 624 of the Exchange's 
Arbitration Rules applicable to options members, the failure to honor 
an arbitration award subjects a member organization, member, or 
registered person to a regular disciplinary proceeding under Rule 476. 
Proposed Rule 9554 is also the same as its NYSE counterpart except for 
references to ``ATP Holder.''
    Proposed Rule 9555 would govern the failure to meet the eligibility 
or qualification standards or prerequisites for access to services 
offered by the Exchange. Under proposed Rule 9555, if a member 
organization or covered person did not meet the eligibility or 
qualification standards set forth in the Exchange's rules, Exchange 
staff could provide written notice to such member organization or 
covered person stating that the failure to become eligible or qualified 
will result in a suspension or cancellation of membership or a 
suspension or bar from associating with any member organization or ATP 
Holder.
    Similarly, if a member organization or covered person did not meet 
the prerequisites for access to services offered by the Exchange or a 
member or member organization thereof or could not be permitted to 
continue to have access to services offered by the Exchange or a member 
or member organization thereof with safety to investors, creditors, 
members or member organizations, or the Exchange, Exchange staff could 
provide written notice to such member organization or covered person 
limiting or prohibiting access to services offered by the Exchange or a 
member or member organization thereof. The limitation, prohibition, 
suspension, cancellation, or bar referenced in the notice would become 
effective 14 days after service of the notice unless the member 
organization or covered person requested a hearing during that time, 
except that the effective date for a notice of a limitation or 
prohibition on access to services would be upon service of the notice. 
As described above, under Rule 475(a), the Exchange currently may 
prohibit or limit access to services offered by the Exchange or any 
member or member organization thereof if the Exchange has provided 15 
days' prior written notice of, and an opportunity to be heard upon, the 
specific grounds for such prohibition or limitation, and provides a 
written decision. Proposed Rule 9555 is the same as its NYSE 
counterpart except for references to ``member'' and ``ATP Holder'' as 
appropriate to reflect the Exchange's membership.
    Proposed Rule 9556 would provide procedures and consequences for a 
failure to comply with temporary and permanent cease and desist orders, 
which would be authorized by proposed Rule 9810. The Exchange currently 
does not issue temporary or permanent cease and desist orders and, as 
such, there is no counterpart in the Exchange's current rules. The 
proposed rule is the same as its NYSE counterpart except for references 
to ``ATP Holder.''
    Proposed Rule 9557 would allow the Exchange to issue a notice 
directing a member or member organization to comply with the provisions 
of Rule 470 (Capital Requirements for Members and Member 
Organizations), Rule 471 (Business Expansion Restrictions and Business 
Reduction Requirements), Rule 4110--Equities (Capital Compliance), 
4120--Equities (Regulatory Notification and Business Curtailment), or 
4130--Equities (Regulation of Activities of Section 15C Member 
Organizations Experiencing Financial and/or Operational Difficulties) 
or otherwise directing it to restrict its business activities. The 
notice would be immediately effective, except that a timely request for 
a hearing would stay the effective date for 10 business days (unless 
the Exchange's CRO determined otherwise) or until an order was issued 
by the Office of Hearing Officers, whichever was earlier. The notice 
could be withdrawn upon a showing that all the requirements were met. 
Currently, if a member organization fails to comply with Rule 4110--
Equities, 4120--Equities, or 4130--Equities (which are substantially 
the same as FINRA Rules 4110, 4120, and 4130), the Exchange issues a 
notice pursuant to FINRA Rule 9557. Summary suspensions are also 
authorized pursuant to Rule 475(b), as described above, for any 
equities or options member or member organization that is in such 
financial or operating difficulty that the member or member 
organization cannot be permitted to continue to do business with safety 
to investors, creditors, other members or member organizations, or the 
Exchange. The proposed rule is the same as its NYSE counterpart except 
for the inclusion of references to ``member'' to reflect the Exchange's 
membership.
    Proposed Rule 9558 would allow the Exchange's CRO to provide 
written authorization to Exchange staff to issue a written notice for a 
summary proceeding for an action authorized by Section 6(d)(3) of the 
Act. Such notice would be immediately effective. Such summary 
proceedings are currently authorized under Rule 475(b), under which the 
Exchange has authority to summarily suspend a member organization that 
is expelled or suspended by another SRO or a covered person that is 
barred or suspended by an SRO or limit or prohibit any person with 
respect to access to Exchange services in certain circumstances; while 
this rule also provides for notice and an opportunity for a hearing, it 
does not set forth a specific time limit for requesting a hearing. The 
proposed rule is the same

[[Page 11332]]

as its NYSE counterpart except for references to ``ATP Holder.''
    Proposed Rule 9559 would set forth uniform hearing procedures for 
all expedited proceedings under the proposed Rule 9550 Series. 
Currently, the Exchange does not have a rule comparable to FINRA Rule 
9559. The proposed rule is the same as its NYSE counterpart except for 
references to ``ATP Holder.''
Proposed Rule 9600 Series
    The Exchange proposes to adopt a new Rule 9600 Series, which would 
set forth procedures by which a member or member organization could 
seek exemptive relief from current Rule 341.05 of Section 4 of the 
Office Rules and Rule 345.15--Equities (examination requirements); Rule 
2210--Equities (communications with the public pre-filing 
requirements); Rule 3170--Equities (tape recording of registered 
persons by certain firms); Rule 4311--Equities (carrying agreements); 
Rule 4360--Equities (fidelity bonds); and proposed Rule 8211 
(submission of electronic trading data). Under proposed Rule 9610, a 
member or member organization seeking exemptive relief would be 
required to file a written application with the appropriate department 
or staff of the Exchange and provide a copy of the application to the 
CRO. Under proposed Rule 9620, after considering the application, 
Exchange staff would be required to issue a written decision setting 
forth its findings and conclusions. The decision would be served on the 
Applicant pursuant to proposed Rules 9132 and 9134. Under proposed Rule 
9630, an Applicant that wished to appeal the decision would be required 
to file a written notice of appeal with the Exchange's CRO within 15 
calendar days after service of the decision. Under proposed Rule 
9630(e), the CRO would affirm, modify, or reverse the decision issued 
under proposed Rule 9620 and issue a written decision setting forth his 
or her findings and conclusions and serve the decision on the 
Applicant. The decision would be served pursuant to proposed Rules 9132 
and 9134, would be effective upon service, and would constitute final 
action of the Exchange.
    Currently, Rule 410A(d)--Equities permits a member or member 
organization to seek an exception from the data format elements for 
submitting electronic trading data for transactions effected on the 
Exchange, but the Rule does not set forth specific procedures for doing 
so. Similarly, current Rule 345.15--Equities and Rule 341.05 of Section 
4 of the Office Rules and Rule 4311--Equities permit exemptions but do 
not set forth specific procedures. Current Rules 2210--Equities and 
4360--Equities reference FINRA's exemptive process; these rules would 
be amended to delete the reference to the FINRA Rule 9600 Series as the 
Exchange would now have its own such provisions.
    The proposed Rule 9600 Series is the same as the NYSE Rule 9600 
Series, except for the list of rules providing exemptive relief and 
references to ``member'' and ``ATP Holder'' to reflect the Exchange's 
membership.
Proposed Rule 9700 Series
    The Rule 9700 Series would be marked ``Reserved'' to maintain 
consistency with NYSE's rule numbering conventions. In adopting FINRA's 
Rule 9000 Series in 2013, the NYSE did not adopt FINRA's Rule 9700 
Series, which provides redress for persons aggrieved by the operations 
of any automated quotation, execution, or communication system owned or 
operated by FINRA, as inapplicable to the NYSE. For the same reasons, 
the Exchange does not propose to adopt the FINRA Rule 9700 Series. The 
Exchange notes that under current Rule 18--Equities, if a member 
organization suffers a loss related to an Exchange system failure, it 
can submit a claim pursuant to the procedures of that rule.\67\ ATP 
Holders can submit similar claims for damages arising out of the use of 
the NYSE Amex Options trading platform under Rule 905NY, subject to the 
limitations set forth in that rule.
---------------------------------------------------------------------------

    \67\ The NYSE referenced its counterpart rule, NYSE Rule 18, in 
the 2013 NYSE Disciplinary Rule Filing. See 2013 Approval Order, 78 
FR at 15400.
---------------------------------------------------------------------------

Proposed Rule 9800 Series
    The Exchange proposes to adopt a new Rule 9800 Series to set forth 
procedures for issuing temporary cease and desist orders. The Exchange 
does not currently have a comparable rule.
    Under proposed Rule 9810, with the prior written authorization of 
the Exchange's CRO or such other senior officers as the CRO may 
designate, Enforcement could initiate a temporary cease and desist 
proceeding with respect to alleged violations of Section 10(b) of the 
Act, SEC Rules 10b-5 and 15g-1 through 15g-9, Rule 476(a)(6) or Rule 
2010--Equities (if the alleged violation is unauthorized trading, or 
misuse or conversion of customer assets, or is based on violations of 
Section 17(a) of the Securities Act of 1933) or Rule 476(a)(5) or Rule 
2020--Equities. Proposed Rule 9820 would govern the appointment of a 
Hearing Officer and Panelists.
    Under proposed Rule 9830, the hearing would be held not later than 
15 days after service of the notice and filing initiating the temporary 
cease and desist proceeding, unless otherwise extended by the Hearing 
Officer with the consent of the Parties for good cause shown. Proposed 
Rule 9830 would govern how the hearing was conducted.
    Under proposed Rule 9840, the Hearing Panel would be authorized to 
issue a written decision stating whether a temporary cease and desist 
order would be imposed. The Hearing Panel would be required to issue 
the decision not later than 10 days after receipt of the hearing 
transcript, unless otherwise extended by the Hearing Officer with the 
consent of the Parties for good cause shown. Under proposed Rule 9850, 
at any time after the Office of Hearing Officers served the respondent 
with a temporary cease and desist order, a Party could apply to the 
Hearing Panel to have the order modified, set aside, limited, or 
suspended. The Hearing Panel generally would be required to respond to 
the request in writing within 10 days after receipt of the request. 
Proposed Rule 9860 would authorize the initiation of a suspension or 
cancellation of a respondent's association or membership under proposed 
Rule 9556 if the respondent violated a temporary cease and desist 
order.
    Finally, proposed Rule 9870 would provide that temporary cease and 
desist orders issued under the proposed Rule 9800 Series would 
constitute final and immediately effective disciplinary sanctions 
imposed by the Exchange, and that the right to have any action under 
this rule series reviewed by the Commission would be governed by 
Section 19 of the Act. The filing of an application for review would 
not stay the effectiveness of the temporary cease and desist order, 
unless the Commission otherwise ordered.\68\
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    \68\ FINRA recently amended its Rule 9800 Series to lower the 
evidentiary standard for finding a violation to ``a showing of 
likelihood of success on the merits.'' FINRA also amended Rule 
Series 9100, 9200, 9300, and 9550 to adopt a new expedited 
proceeding for failure to comply with a temporary cease and desist 
order or a permanent cease and desist order; to harmonize the 
provisions governing how documents are served in temporary cease and 
desist proceedings and related expedited proceedings; to clarify the 
process for issuing permanent cease and desist orders; to ease 
FINRA's administrative burden in temporary cease and desist 
proceedings; and to make conforming changes. See Securities Exchange 
Act Release No. 75629 (Aug. 6, 2015), 80 FR 48379 (August 12, 2015) 
(SR-FINRA-2015-019). The Exchange is not proposing to incorporate 
similar amendments into its proposed Rule Series 9100, 9200, 9300, 
9550, and 9800 at this time.
---------------------------------------------------------------------------

    The proposed Rule 9800 Series is the same as the NYSE Rule 9800 
Series,

[[Page 11333]]

except that proposed Rule 9810(a) references violations of Exchange 
rules rather than violations of similar NYSE rules.

Technical and Conforming Changes

    The Exchange proposes the following technical and conforming 
changes.
General Rules
    Rule 0 in the Definitions under the General and Floor Rules would 
be amended so that it correctly cross-references the current and 
proposed disciplinary rule sets.
    Rule 31 of the General Rules and Supplementary Material .01 would 
be deleted. This rule contains text that concerns requests for books 
and records and testimony that is duplicative of current Rule 
476(a)(11) and proposed Rule 8210. Supplementary Material .02 relating 
to regulatory cooperation is not duplicative of proposed Rule 8210(b) 
and would be retained. Rule 31 would be renamed ``Regulatory 
Cooperation.''
    Rule 40 of the General Rules, which concerns denial of an ATP, 
would be deleted. It is a legacy rule that is duplicative of current 
Rule 475 and would be covered by proposed Rule 9558.
Contracts in Securities Rules
    Rule 781, which concerns insolvency, cross-references current Rule 
475, so a cross-reference to proposed Rule 9558 would be added.
    Equities Rules Rule 0--Equities and Rule 500--Equities would be 
amended so that they correctly cross-reference the current and proposed 
disciplinary rule sets.
    Rule 2A--Equities would be amended to specify that the list of 
disciplinary sanctions currently set forth in that rule would apply to 
proceedings under current Rules 475 and 476, and the list of 
disciplinary sanctions set forth in proposed Rule 8310(a) would apply 
to proceedings initiated under the proposed Rule 9000 Series.
    Rule 36--Equities would be amended to include a reference to 
proposed Rule 9558, which relates to summary proceedings for actions 
authorized by Section 6(d)(3) of the Act.
    Rule 103B--Equities, which sets forth certain security allocation 
and reallocation procedures when a Designated Market Maker unit loses 
its registration in a specialty stock due to disciplinary proceedings, 
would be amended to include references to the proposed Rule 8000 Series 
and Rule 9000 Series.
    Rule 308--Equities, which sets forth procedures for member and 
member organization acceptability proceedings, would be amended to 
reference the Chief Hearing Officer as defined in proposed Rule 9120, 
and delete the reference to a Chief Hearing Officer designated under 
legacy Rule 476(b).
    The text of Rule 309--Equities would be deleted and the rule marked 
``Reserved'' because new Rule 41 would replace it, as described above.
    Rule 345A--Equities would be amended to delete a reference to 
recently deleted Rule 346(f)--Equities and replace it with a reference 
to Rule 342(e) of the Office Rules.\69\
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    \69\ Rule 346(f)--Equities provided that unless otherwise 
permitted by the Exchange, no member, member organization, approved 
person, employee or any person directly or indirectly controlling, 
controlled by or under common control with a member or member 
organization shall have associated with him or it any person who is 
known, or in the exercise of reasonable care should be known, to be 
subject to any ``statutory disqualification'' defined in Section 
3(a)(39) of the Exchange Act. See 15 U.S.C. 78c(a)(39). Rule 346--
Equities was based on NYSE Rule 346 (Limitations--Employment and 
Association with Members and Member Organizations). FINRA deleted 
Incorporated NYSE Rule 346 in 2010 after adopting NASD Rule 3030 
(Outside Business Activities of an Associated Person) as FINRA Rule 
3270 (Outside Business Activities of Registered Persons). See 
Securities Exchange Act Release No. 62762 (August 23, 2010), 75 FR 
53362 (August 31, 2010) (order approving SR-FINRA-2009-042). FINRA 
deleted NYSE Rule 346(f) as redundant given that FINRA had amended 
its definition of disqualification in its By-Laws to align with the 
Exchange Act definition, thereby incorporating additional categories 
of statutory disqualification, including certain affiliated 
relationships. See id., 75 FR at 53363.
    The Exchange deleted Rule 346(f)--Equities in its entirety and 
adopted a new Rule 3270--Equities (Outside Business Activities of 
Registered Persons), to correspond with rule changes filed by FINRA. 
See Securities Exchange Act Release No. 64130 (March 28, 2011), 76 
FR 18283 (April 1, 2011) (SR-NYSEAmex-2011-17). Rule 3270--Equities, 
however, does not contain a provision comparable to Rule 346(f)--
Equities and in fact makes no mention of statutory disqualification. 
The comparable provision to Rule 346(f)--Equities in the Exchange's 
rules can be found in Rule 342(e) of the Office Rules, which 
provides that no member, member organization, allied member, 
approved person, employee, or any person directly or indirectly 
controlling, controlled by or under common control with a member or 
member organization shall have associated with him or it any person 
who is known, or in the exercise of reasonable care should be known, 
to be subject to any ``statutory disqualification'' defined in 
Section 3(a)(39) of the Exchange Act. The Exchange accordingly 
proposes to replace the reference to Rule 346(f)--Equities in Rule 
345A--Equities with a reference to Rule 342(e).
---------------------------------------------------------------------------

    Rule 410A--Equities, concerning electronic trading data, would be 
deleted as described above.
    Rule 600--Equities would be amended to include references to the 
disciplinary proceedings of the proposed Rule 8000 Series and Rule 9000 
Series for failure to honor an arbitration award.
    As the Exchange proposes to adopt Rules 9551 and 9559 and the Rule 
9600 Series, Rule 2210--Equities would be amended to revise the cross-
references to ``FINRA,'' ``FINRA Rules 9551 and 9559,'' and the ``FINRA 
Rule 9600 Series.'' These cross-references were adopted as part of a 
prior harmonization of Rule 2210--Equities with FINRA's rules and would 
be obsolete.\70\
---------------------------------------------------------------------------

    \70\ See Securities Exchange Act Release No. 70963 (November 29, 
2013), 78 FR 73223 (December 5, 2013) (SR-NYSEMKT-2013-95).
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    Rule 3170--Equities, concerning tape recording of registered 
persons by certain firms, would be amended to add a reference to the 
proposed Rule 9600 Series, pursuant to which exemptive relief may be 
sought.
    Rules 4110--Equities, 4120--Equities, and 4130--Equities would be 
amended to revise a cross-reference to FINRA Rule 9557 as the Exchange 
proposes to adopt Rule 9557. Rule 4110--Equities would also be 
corrected to add the missing paragraph designation for paragraph (e) of 
the rule.
    Rule 4360--Equities would be amended to provide that any request 
for an exemption would be processed under the proposed Rule 9600 Series 
rather than FINRA rules.
Options Rules
    Rules 972, 902NY, 921NY, 923NY, 927.1NY, 927.2NY, 931NY, 955NY and 
957NY contain cross-references to the current disciplinary rules. 
Corresponding references to the proposed disciplinary rules would be 
added.
    Rule 991 would be amended to revise cross-references to FINRA Rules 
9551 and 9559 as the Exchange proposes to adopt Rules 9551 and 
9559.\71\
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    \71\ See id.
---------------------------------------------------------------------------

    Finally, as noted above, Rule 956.1NY, which concerns electronic 
trading data, would be deleted and marked ``Reserved.''
Certain Current Exchange Rules Not Included in Proposed Rule Text
    Certain aspects of current Exchange rules described above would not 
be included in the proposed Rule 8000-9000 Series, because either the 
Exchange does not believe they are necessary or the authority is 
implicit in the proposed rule change.
    First, under current Rule 475(f), any person suspended under Rule 
475 may, at any time, be reinstated by the Exchange Board of Directors. 
The Exchange does not believe that it would continue to be appropriate 
for the Exchange Board of Directors to have the authority to overturn a 
suspension imposed by another Adjudicator in light of the detailed 
procedural rules,

[[Page 11334]]

comprehensive protections to respondents, and continued availability of 
the Exchange's appeals process under the proposed rule change.
    Second, under current Rules 475(g) and 476(k), any person suspended 
under such rules may be disciplined in accordance with the Exchange's 
rules for any offense committed before or after the suspension. The 
Exchange believes that such authority is implicit in proposed Rule 9211 
and need not be expressed in the proposed rule change.
    Under current Rules 475(h) and 476(j) and (k), a suspended person 
is deprived during the term of the suspension of all rights and 
privileges of membership, and any suspension of a member or principal 
executive creates a vacancy in any office or position held by such 
member or principal executive. The Exchange believes that this is 
implicit in the concept of a suspension and need not be expressed in 
the proposed rule change.
    Under current Rule 476(i), a member or principal executive of the 
Exchange who is associated with a member organization is liable to the 
same discipline and penalties for any act or omission of such member 
organization as for the member or principal executive's own personal 
act or omission. The Hearing Panel that considers the charges may 
relieve him from the penalty therefor or may adjust the penalty on such 
terms and conditions as the Hearing Panel or the Exchange Board of 
Directors deems fair and equitable. The Exchange believes that this 
authority is contained in the proposed rule change because complaints 
may be brought against both member organizations and covered persons 
and are subject to review by the Hearing Panel and the Exchange Board 
of Directors.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\72\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\73\ in particular, because it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, 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,\74\ 
in particular, in that it provides fair procedures for the disciplining 
of members and persons associated with members,\75\ 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.
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    \72\ 15 U.S.C. 78f(b).
    \73\ 15 U.S.C. 78f(b)(5).
    \74\ 15 U.S.C. 78f(b)(7).
    \75\ Under the Exchange's equities rules, the equivalent to the 
term ``member'' in this context is ``member organization.'' See 
notes 25-26, supra, and accompanying text.
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    The proposed changes will provide greater harmonization between 
Exchange, NYSE, and FINRA rules of similar purpose, resulting in less 
burdensome and more efficient regulatory compliance for common members. 
As previously noted, the proposed rule text is substantially the same 
as the NYSE's rule text. The proposed rule change will enhance the 
Exchange's ability to have a direct and meaningful impact on the end-
to-end quality of its regulatory program, from detection and 
investigation of potential violations through the efficient initiation 
and completion of disciplinary measures where appropriate. As such, the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
    Certain key aspects of the Exchange's disciplinary proceedings 
would be retained. In particular, the Exchange would retain its current 
selection process for Hearing Panelists. The Exchange believes that it 
is necessary to do so in order to provide a fair procedure to its 
member organizations and covered persons, some of which are not subject 
to NYSE or FINRA jurisdiction. As such, the Exchange's Hearing 
Panelists cannot be drawn solely from a pool of NYSE or FINRA members 
and associated persons but rather must include NYSE MKT-only member 
organizations and persons with experience in NYSE MKT Floor matters in 
order for the Exchange's members to have a fair representation in its 
affairs. For the same reasons, the Exchange also believes that its 
Board of Directors remains the appropriate body for appeals or reviews 
of initial disciplinary decisions because its Board of Directors 
includes fair representation candidates from its membership.
    The Exchange further believes that the proposed processes for 
settling disciplinary matters both before and after the issuance of a 
complaint are fair and reasonable. While such proposed rules differ 
both from certain aspects of the Exchange's current Stipulation and 
Consent process and FINRA's current settlement processes, the Exchange 
believes that the proposed rule change nonetheless provides adequate 
procedural protections to all parties and promotes efficiency.
    The Exchange would retain its list of minor rule violations, which 
have already been approved by the Commission,\76\ with certain 
technical and conforming amendments, while adopting NYSE's and FINRA's 
process for imposing minor rule violation fines, which also have 
already been approved by the Commission.\77\
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    \76\ The most recent amendments to the Exchange's minor rule 
violation plan were approved in Securities Exchange Act Release No. 
66809 (April 13, 2012), 77 FR 23532 (April 19, 2012) (SR-NYSEAmex-
2012-10).
    \77\ See NYSE Rule 9216(b) and FINRA Rule 9216(b).
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    Finally, the Exchange believes that its proposed transition plan 
would allow for a more orderly and less burdensome transition for the 
Exchange's members and member organizations. The proposed delayed 
implementation of the new rule set would provide a clear demarcation 
between matters that would proceed under the new rules and those that 
would be completed under the legacy 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 it is designed 
to (i) provide greater harmonization among Exchange, NYSE, and FINRA 
rules of similar purpose for investigations and disciplinary matters; 
and (ii) enhance the quality of the Exchange's regulatory program, from 
detection of violations through disciplinary actions, resulting in less 
burdensome and more efficient regulatory compliance and facilitating 
performance of regulatory functions.

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.

[[Page 11335]]

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days after the date of the filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \78\ and Rule 19b-4(f)(6) thereunder.\79\
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    \78\ 15 U.S.C. 78s(b)(3)(A).
    \79\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 No. SR-NYSEMKT-2016-30 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-NYSEMKT-2016-30. 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 No. SR-NYSEMKT-2016-30, and should be 
submitted on or before March 24, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\80\
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    \80\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04633 Filed 3-2-16; 8:45 am]
 BILLING CODE 8011-01-P


