[Federal Register Volume 85, Number 245 (Monday, December 21, 2020)]
[Notices]
[Pages 83136-83140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28011]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90678; File No. SR-NYSEARCA-2020-111]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Shorten the Time 
Period Before a Letter of Acceptance, Waiver, and Consent Under Rule 
10.9216 and an Uncontested Offer of Settlement Under Rule 10.9270(f)

December 15, 2020.
    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 December 9, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II

[[Page 83137]]

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

    The Exchange proposes to shorten the time period before a letter of 
acceptance, waiver, and consent under Rule 10.9216 and an uncontested 
offer of settlement under Rule 10.9270(f) becomes final and the 
corresponding time period to request review of these settlements under 
Rule 10.9310 from 25 days to 10 days. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to shorten the time period before a letter of 
acceptance, waiver, and consent (``AWC'') under Rule 10.9216 and an 
uncontested offer of settlement under Rule 10.9270(f) becomes final and 
the corresponding time period to request review of these settlements 
under Rule 10.9310 from 25 days to 10 days.
    In 2019, NYSE Arca adopted disciplinary rules that are, with 
certain exceptions, substantially the same as the FINRA Rule 8000 
Series and Rule 9000 Series, and which set forth rules for conducting 
investigations and enforcement actions.\4\ In adopting disciplinary 
rules modeled on FINRA's rules, the Exchange established processes for 
settling disciplinary matters both before and after issuance of a 
complaint.\5\ As adopted, Rules 10.9216, 10.9270 and 10.9310 permit a 
Director and any member of the Committee for Review (``CFR'') to 
require a review by the Board of any AWC letter under Rule 10.9216 and 
any offer of settlement under Rule 10.9270 within 25 days after the AWC 
letter or offer of settlement was sent to each Director and each member 
of the CFR.
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    \4\ See Securities Exchange Act Release No. 34-85639 (April 12, 
2019), 84 FR 16346 (April 18, 2019) (SR-NYSEArca-2019-15) 
(``Notice'').
    \5\ See Notice, 84 FR at 16366-67.
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Proposed Rule Change
    Rule 10.9216 (Acceptance, Waiver, and Consent; Procedure for 
Imposition of Fines for Minor Violation(s) of Rules) establishes AWC 
procedures by which an ETP Holder, OTP Holder, OTP Firm or covered 
person, 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 ETP Holder's, OTP Holder's, OTP 
Firm's or covered person's right to a hearing, appeal and certain other 
procedures. The rule also establishes procedures for executing a minor 
rule violation plan letter.
    Under Rule 10.9216(a)(4), an AWC accepted by the Chief Regulatory 
Officer (``CRO'') must be sent to each Director and each member of the 
CFR and would be deemed final and constitute the complaint, answer, and 
decision in the matter 25 days after being sent to each Director and 
each member of the CFR, unless review by the Exchange Board of 
Directors is requested pursuant to Rule 10.9310(a)(1)(B).\6\
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    \6\ Requests for review of an AWC accepted by the CRO are 
governed by Rule 10.9310(a)(1)(B)(i). For the sake of clarity and 
transparency, the Exchange proposes the non-substantive change of 
including the omitted reference to subsection (B)(i) of Rule 
10.9310(a)(1) in both in the current and proposed text of Rule 
10.9216(a)(4).
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    The Exchange proposes that an AWC accepted by the CRO would be 
deemed final and constitute the complaint, answer, and decision in a 
matter 10 days after being sent to each Director and each member of the 
CFR, unless review is requested pursuant to Rule 10.9310(a)(1)(B)(i). 
As described below, the time period to request review under Rule 
10.9310(a)(1)(B)(i) would also be shortened to 10 days.
    Rule 10.9270 (Settlement Procedure) provides a settlement procedure 
for a Respondent who has been notified of the initiation of a 
proceeding. Specifically, Rule 10.9270(f) provides that uncontested 
settlement offers accepted by the CRO, the Hearing Panel or, if 
applicable, Extended Hearing Panel must be issued and sent to each 
Director and each member of the CFR and becomes final 25 days after 
being sent to each Director and each member of the CFR, unless review 
by the Exchange Board of Directors is requested pursuant to Rule 
10.9310(a)(1).
    The Exchange proposes that uncontested settlement offers accepted 
by the CRO, the Hearing Panel or, if applicable, Extended Hearing Panel 
(together, a ``Panel'') under Rule 10.9270(f) would become final 10 
days after being sent to each Director and each member of the CFR, 
unless review by the Exchange Board of Directors is requested pursuant 
to Rule 10.9310(a)(1). As noted, the time to request review of an 
uncontested settlement under Rule 10.9310(a)(1) would also be shortened 
to 10 days.
    Finally, under Rule 10.9310(a)(1)(B)(i), any Director and any 
member of the CFR may require a review by the Board of any 
determination or penalty, or both, imposed in connection with an AWC 
letter under Rule 10.9216 or an offer of settlement determined to be 
uncontested before a hearing on the merits has begun under Rule 
10.9270(f), except that none of those persons could request Board 
review of a determination or penalty concerning an affiliate of the 
Exchange as such term is defined in Rule 12b-2 under the Exchange Act. 
A request for review under this provision is made by filing with the 
Secretary of the Exchange a written request stating the basis and 
reasons for such review, within 25 days after an AWC letter or an offer 
of settlement has been sent to each Director and each member of the CFR 
pursuant to Rule 10.9216(a)(4) or Rule 10.9270(f)(3).
    To permit AWC letters and uncontested settlements to become final 
within 10 days as proposed, the Exchange would amend Rule 
10.9310(a)(1)(B)(i) to provide that a request for review of these 
settlements as permitted by the rule must be made by filing the 
requisite written request with the Secretary of the Exchange within 10 
days after the AWC letter or an offer of settlement is sent to each 
Director and each member of the CFR pursuant to Rule 10.9216(a)(4) or 
Rule 10.9270(f)(3).\7\
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    \7\ The time period for requesting review pursuant to Rule 
10.9310(a)(1)(B)(ii) of any rejection by the CRO of any AWC letter 
under Rule 10.9216 or of an uncontested offer of settlement under 
Rule 10.9270(f), would remain unchanged as would the time period to 
request for review of any determination or penalty, or both, imposed 
by a Panel under the Rule 10.9310(a)(1)(A) other than an offer of 
settlement determined to be uncontested after a hearing on the 
merits have begun under Rule 10.9270(f). For the avoidance of doubt, 
the Exchange would add text to Rule 10.9310(a)(1)(A) providing that 
any request for review of an offer of settlement determined to be 
uncontested after a hearing on the merits has begun under Rule 
10.9270(f) that has been accepted by a Panel shall be governed by 
Rule 10.9310((a)(1)(B)(i).

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[[Page 83138]]

    The Exchange believes maintaining a 25 day waiting period for 
negotiated settlements under Rule 10.9216 and uncontested settlements 
pursuant to 10.9270(f) unnecessarily delays final resolution of matters 
that have been resolved by the parties and accepted by the CRO or a 
Panel. Shortening the waiting period to 10 days, and requiring requests 
for Board of Directors review to be made within that same 10 day 
period, would significantly expedite the settlement process in 
situations where ETP Holders, OTP Holders, OTP Firms and covered 
persons and Respondents have entered into a consensual, negotiated 
settlement with Enforcement or made settlement offers that Enforcement 
does not oppose, while continuing to ensure the independence and 
integrity of the regulatory process by preserving the ability of 
Directors and CFR members to call those settlements for review.
    Further, the Exchange believes that the proposed 10 day period to 
call a settlement for review under Rule 10.9310(a)(1)(B)(i) is 
reasonable and sufficient. Like the current 25 day period, the time to 
call a settlement for review would begin when the AWC or uncontested 
settlement is sent to each Director and member of the CFR. Rules 
10.9216 and 10.9270 specify that an AWC or uncontested settlement 
accepted by the CRO or a Panel can be sent to each Director and each 
CFR member via courier, express delivery or electronic means. As a 
practical matter, AWCs and settlements are sent to the Directors and 
CFR members by email, which ensures prompt and instantaneous 
communication. As a result, the Directors and members of the CFR will 
have the full 10 day period to determine whether to call these 
settlements for review. Moreover, the requirement in Rule 
10.9310(a)(1)(B)(i) that a request for review be in writing and state 
the basis and reasons for such review can similarly be satisfied by a 
Director or CFR member sending an email to the Secretary of the 
Exchange requesting that a specific matter be reviewed within the 
proposed 10 day period. The Director or CFR member would need to take 
no additional steps nor include any additional information in order to 
call a matter for review under Rule 10.9310(a)(1)(B)(i). In light of 
these facts, and the relative infrequency of calls for review of AWCs 
and uncontested settlements,\8\ the Exchange believes that 10 days are 
more than sufficient for a Director or member of the CFR to determine 
whether to call a settlement for review. Once accepted by the CRO or 
Panel, the proposed 10 day period for negotiated settlements to be 
called for review or become final would expedite disciplinary 
proceedings and provide finality to the disciplinary process sooner, to 
the benefit of the parties and the investing public.
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    \8\ For example, no AWC letter or uncontested settlement has 
been called for review in the past year.
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    Finally, the Exchange also believes that shortening these time 
periods would further promote efficiency in connection with cross-
market settlements involving multiple self-regulatory organizations 
(``SROs''). Often such settlements are contingent upon the acceptance 
of a settlement by all of the SROs involved in the matter. In these 
situations, a settlement with the Exchange would not be final until the 
end of the time period specified in Rules 10.9216 and 10.9270 while a 
settlement with other SROs could be final once accepted.\9\ Thus by 
reducing the amount of time these settlements are outstanding at the 
Exchange, the proposed change could speed up the settlement process for 
cross-market settlements involving multiple SROs, to the benefit of the 
parties and the investing public.
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    \9\ See, e.g., FINRA Rule 9216(a)(4) (``If the [AWC] letter is 
accepted by the National Adjudicatory Council, the Review 
Subcommittee, or the Office of Disciplinary Affairs, it shall be 
deemed final and shall constitute the complaint, answer, and 
decision in the matter.''); FINRA Rule 9270(e)(3) (``If the offer of 
settlement and order of acceptance are accepted by the National 
Adjudicatory Council, the Review Subcommittee, or the Office of 
Disciplinary Affairs, they shall become final and the Director of 
the Office of Disciplinary Affairs shall issue the order and notify 
the Office of Hearing Officers. The Department of Enforcement shall 
provide a copy of an issued order of acceptance to each FINRA member 
with which a Respondent is associated.''). See also e.g., Nasdaq 
Rule 9216(a)(4) & 9270(e)(3); Cboe BZX Exchange, Inc. Rule 8.8(a); 
Cboe EDGA Exchange, Inc. Rule 8.8(a).
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    The Exchange intends to announce the operative date of the amended 
time periods in Rules 10.9216(a)(4), 10.9270(f)(3) and 10.9310(a)(1) at 
least 30 days in advance via regulatory notice to its ETP Holders, OTP 
Holders and OTP Firms.\10\ To further facilitate an orderly transition 
from the current rules to the new rules, the Exchange proposes that 
matters already initiated under the current rules would be completed 
under such rules. Specifically, the Exchange proposes to apply the 
current 25 day period for AWCs prepared and submitted to an ETP Holder, 
OTP Holder, OTP Firm or covered persons under Rule 10.9216(a)(1) prior 
to the operative date and to uncontested settlement offers in 
proceedings where a Party was served with a complaint by Enforcement 
pursuant to Rule 10.9131 prior to the operative date. Rules 
10.9216(a)(4), 10.9270(f)(3) and 10.9310(a)(1)(B)(i) would be amended 
to reflect the transition process. When the transition is complete, the 
Exchange intends to submit a proposed rule change that would delete the 
unnecessary transition provisions of 10.9216(a)(4), 10.9270(f)(3) and 
10.9310(a)(1)(B)(i).
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    \10\ The effective date of the new time periods would be 
simultaneously communicated to the Directors and to the members of 
the CFR.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 
6(b)(5),\12\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is consistent with the Section 6(b)(5) \13\ 
requirement that the rules of an exchange not be designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    Specifically, the Exchange believes that shortening the waiting 
period for negotiated settlements and uncontested offers of settlement 
would serve to expedite the final resolution of both Exchange and 
cross-market matters that have been resolved by the parties and 
accepted by the CRO or Panel, thereby protecting investors and the 
public interest by addressing rule violations and achieving finality in 
disciplinary matters sooner. The proposed rule change to shorten the 
waiting period before an AWC letter and offer of settlement becomes 
final and the member of CFR or Board's time to call such settlements 
for review will therefore provide for a more efficient, streamlined 
disciplinary process.
    The Exchange further believes that the proposed amendments are 
consistent with Section 6(b)(6) of the Act,\14\ which

[[Page 83139]]

provides that members and persons associated with members shall be 
appropriately disciplined for violation of the provisions of the rules 
of an exchange by expulsion, suspension, limitation of activities, 
functions, and operations, fine, censure, being suspended or barred 
from being associated with a member, or any other fitting sanction. As 
noted, the proposed changes will not affect the ability of Enforcement 
to enter into negotiated settlements or accepting uncontested 
settlement offers when appropriate, and will not alter the requirement 
that settlements be scrutinized by the CRO or Panel, who will continue 
to approve them, or the Directors and members of the CFR, whose right 
to call both types of voluntary settlements for review will not change.
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    \14\ 15 U.S.C. 78f(b)(6).
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    For the same reasons, the Exchange believes that the proposed 
changes are designed to provide a fair procedure for the disciplining 
of members and persons associated with members, consistent with 
Sections 6(b)(7) and 6(d) of the Act.\15\ Moreover, as noted, the 
Exchange believes that the proposed 10 day period to call a settlement 
for review under Rules 10.9310(a)(1)(B)(i) is reasonable and 
sufficient, and provides an appropriate balance between the procedural 
safeguards of the call for review process and the benefits of 
expediting the resolution of disciplinary matters and providing 
finality to the disciplinary process sooner. Reducing the period for 
review would also mean that AWCs and uncontested settlements would be 
published two weeks earlier, thereby allowing members and the investing 
public to be educated about the issues they addressed sooner. Finally, 
the Exchange believes that the proposed transition plan is designed to 
provide a fair procedure for the disciplining of members and persons 
associated with members by providing for a clearly demarcated and 
orderly transition from the current 25 day period to the proposed 10 
day period.
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    \15\ 15 U.S.C. 78f(b)(7) and 78f(d).
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    Finally, the Exchange believes that the non-substantive changes to 
clarify the cross-reference to Rule 10.9310 in Rules 10.9216 would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, protect investors 
and the public interest because the proposed non-substantive changes 
would add clarity, transparency and consistency to the Exchange's 
disciplinary rules. The Exchange believes that market participants 
would benefit from the increased clarity, thereby reducing potential 
confusion and ensuring that persons subject to the Exchange's 
jurisdiction, regulators, and the investing public can more easily 
navigate and understand the Exchange's rules.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but is rather concerned with 
facilitating less burdensome regulatory compliance and processes and 
enhancing the quality of the regulatory process. The Exchange believes 
the proposed rule changes would reduce the burdens within the 
disciplinary process, as well as move matters through the process 
expeditiously by providing for more efficient finality of negotiated 
settlements and offers of settlement, to the benefit of all permit 
holders and the investing public.

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

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

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

    Because the foregoing 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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \16\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
The Exchange has satisfied this requirement.
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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 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 Number SR-NYSEARCA-2020-111 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEARCA-2020-111. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2020-111,

[[Page 83140]]

and should be submitted on or before January 11, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28011 Filed 12-18-20; 8:45 am]
BILLING CODE 8011-01-P


