DocuSign Envelope ID: 026B005B-6554-4BA8-8756-0EA7F897B69E

NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2018057171902
TO:Nasdaq PHLX LLC
c/o Department of Enforcement
Financial Industry Regulatory Authority (“FINRA”)

RE:Sanford C. Bernstein & Co., LLC, Respondent
Member Firm
CRD No. 104474

Pursuant to Rule 9216 of Nasdaq PHLX LLC (“Phlx”) Code of Procedure,1 Sanford C. Bernstein& Co., LLC (the “Firm” or “Respondent”) submits this Letter of Acceptance, Waiver andConsent (“AWC”) for the purpose of proposing a settlement of the alleged rule violations
described below. This AWC is submitted on the condition that, if accepted, Phlx will not bringany future actions against the Respondent alleging violations based on the same factual findings
described herein.
I.
ACCEPTANCE AND CONSENT
A.

Respondent hereby accepts and consents, without admitting or denying the findings, andsolely for the purposes of this proceeding and any other proceeding brought by or on
behalf of Phlx, or to which Phlx is a party, prior to a hearing and without an adjudicationof any issue of law or fact, to the entry of the following findings by Phlx:
BACKGROUND
The Firm became registered with Phlx in December 2006, and became a FINRA member
in November 2000. Its registrations with Phlx and FINRA remain in effect. The Firm isheadquartered in New York, New York and has 23 branch offices. It currently has 940
registered representatives. The Firm provides equity research, and equity and options
sales and execution services to institutional clients.
The Firm has no relevant disciplinary history.
SUMMARY1.

The Financial Industry Regulatory Authority’s (“FINRA”) Trading and Financial
Compliance Examinations staff (the “Staff”) within the Department of MarketRegulation, on behalf of Phlx and other options exchanges, conducted a review of the1

Series 9000 of The Nasdaq Stock Market Rules are incorporated by reference into Phlx Rule General 5, Section 3,
and are thus Phlx Rules and thereby applicable to Phlx members, member organizations, persons associated withmember organizations, and other persons subject to the Exchange’s jurisdiction.

STAR No. 20180571719 (JWG)

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manual options order tickets handled by the Firm during the period between April 16 andApril 20, 2018 (the “Exam Review Period”).
2.

During the Exam Review Period, the Firm failed to accurately record the order receipt
and order transmission times of manual options orders it had routed to floor brokers atPhlx and various other national securities exchanges for execution in violation of Rule17a-3(a)(6)(i) promulgated under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and Phlx Rule 760. Additionally, during the period between April 16and September 1, 2018 (the “Supervisory Review Period”), the Firm violated Phlx Rule748(h) because its written supervisory procedures (“WSPs”) and supervisory systemapplicable to the handling of manual options orders were not reasonably designed toachieve compliance with, and to detect and prevent, insofar as practicable, violations of,
the applicable recordkeeping provisions of the federal securities laws and Phlx rules that
require the accurate documentation of the order receipt and transmission times of options
orders.
FACTS AND VIOLATIVE CONDUCT

3.

The recordkeeping provisions of the federal securities laws and Phlx rules are designed toensure that regulators have access to certain basic information about securities
transactions. Access to transaction records serves as an essential component for effective
surveillance and examination of broker-dealers by Phlx and other self-regulatoryorganizations.

4.

Section 17 of the Exchange Act and Rule 17a-3(a)(6)(i) promulgated thereunder require
broker-dealers, such as the Firm, to create a brokerage order ticket of each brokerage order,
and of any other instruction, given or received for the purchase or sale of securities, whether
executed or unexecuted. In relevant part, the rule requires the brokerage order ticket toshow, among other things, the terms and conditions of the order or instructions, the time theorder was received, the time the order was entered, and the time of execution orcancellation. Such records must be accurate.

5.

Phlx Rule 760 requires member firms to make, keep current, and preserve books andrecords as prescribed by the Exchange Act.

6.

Phlx Rule 748(h) requires member organizations to establish, maintain and enforce
WSPs, and a system of supervision for applying such procedures, that are reasonably
designed to supervise the types of businesses and activities in which they and theirassociated persons engage in order to achieve compliance with, and to prevent and detect,insofar as practicable, violations of, applicable securities laws and regulations, including
the By-Laws and Rules of the Exchange.

7.

During 2018, the Firm handled approximately 4,840 manual options orders,approximately 60% of which were manual customer orders routed to option exchangefloor brokers for execution. During the Exam Review Period, the staff sampled a total of
62 manual customer options orders the Firm had routed to various options exchanges, andreviewed 37 orders that were routed to floor brokers for timestamp accuracy.

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8.

From the 37 manual customer options orders routed to floor brokers for execution during
the Exam Review Period, the Firm did not maintain an accurate record of the order
receipt time for 16 (approximately 43%) of the sampled orders. Of these 16 orders, seven
were executed on Phlx.

9.

From the same sample of 37 manual customer options orders routed to floor brokers forexecution during the Exam Review Period, the Firm did not maintain an accurate recordof the order transmission times for all 37 (100%) of those orders. Of these 37 orders, 15
were executed on Phlx.

10. The conduct described in paragraphs eight and nine constitutes violations of Rule 17a3(a)(6)(i) promulgated under the Exchange Act, and Phlx Rule 760.
11. During the Supervisory Review Period, the Firm failed to establish and maintain WSPs
and a supervisory system that were reasonably designed to achieve compliance with, andto detect and prevent violations of, the recordkeeping provisions of the federal securities
laws and Phlx rules that require the accurate documentation of the order receipt andtransmission times of options orders. Specifically, the Firm’s WSPs did not include any
review for the accuracy of order receipt and order transmission times of manual options
orders handled by the Firm.
12. The conduct described in paragraph 11 constitutes a violation of Phlx Rule 748(h).
B.

Respondent also consents to the imposition of the following sanctions:1.

A censure; and2.

A fine of $85,000, of which $27,500 ($25,000 for the books and records
violations and $2,500 for the supervision violations) shall be paid to Phlx.2

Acceptance of this AWC is conditioned upon acceptance of similar settlementagreements in related matters between the Firm and NYSE American LLC, NYSE Arca,
Inc. and Nasdaq ISE, LLC.
Respondent agrees to pay the monetary sanction in accordance with its Payment
Information form.
Respondent specifically and voluntarily waives any right to claim that it is unable to pay,
now or at any time hereafter, the monetary sanction imposed in this matter.
The sanctions imposed herein shall be effective on a date set by FINRA staff.

2The balance of the fine shall be paid to NYSE Arca, Inc, NYSE American LLC, and Nasdaq ISE, LLC.

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II.
WAIVER OF PROCEDURAL RIGHTS
Respondent specifically and voluntarily waives the following rights granted under Phlx’s Codeof Procedure:A.

To have a Formal Complaint issued specifying the allegations against the Firm;

B.

To be notified of the Formal Complaint and have the opportunity to answer theallegations in writing;C.

To defend against the allegations in a disciplinary hearing before a hearing panel,to have a written record of the hearing made and to have a written decision issued;
andD.

To appeal any such decision to the Exchange Review Council and then to the U.S.
Securities and Exchange Commission and a U.S. Court of Appeals.

Further, Respondent specifically and voluntarily waives any right to claim bias or prejudgmentof the Chief Regulatory Officer, the Exchange Review Council, or any member of the Exchange
Review Council, in connection with such person’s or body’s participation in discussions
regarding the terms and conditions of this AWC, or other consideration of this AWC, including
acceptance or rejection of this AWC.
Respondent further specifically and voluntarily waives any right to claim that a person violated
the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144,
in connection with such person’s or body’s participation in discussions regarding the terms andconditions of this AWC, or other consideration of this AWC, including its acceptance orrejection.
III.
OTHER MATTERS
Respondent understands that:A.

Submission of this AWC is voluntary and will not resolve this matter unless anduntil it has been reviewed and accepted by FINRA’s Department of Enforcement
and the Exchange Review Council, the Review Subcommittee, or the Office ofDisciplinary Affairs (“ODA”), pursuant to Phlx Rule 9216;

B.

If this AWC is not accepted, its submission will not be used as evidence to prove
any of the allegations against the Respondent; and4

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C.

D.

If accepted:
1.

This AWC will become part of the Respondent’s permanent disciplinary
record and may be considered in any future actions brought by Phlx or any
other regulator against the Respondent;

2.

Phlx may release this AWC or make a public announcement concerning
this agreement and the subject matter thereof in accordance with Phlx
Rule 8310 and IM-8310-3; and3.

Respondent may not take any action or make or permit to be made anypublic statement, including in regulatory filings or otherwise, denying,directly or indirectly, any finding in this AWC or create the impressionthat the AWC is without factual basis. Respondent may not take any
position in any proceeding brought by or on behalf of Phlx, or to which
Phlx is a party, that is inconsistent with any part of this AWC. Nothing inthis provision affects the Respondent’s right to take legal or factual
positions in litigation or other legal proceedings in which Phlx is not aparty.

Respondent may attach a Corrective Action Statement to this AWC that is astatement of demonstrable corrective steps taken to prevent future misconduct.
Respondent understands that it may not deny the charges or make any statementthat is inconsistent with the AWC in this Statement. This Statement does notconstitute factual or legal findings by Phlx, nor does it reflect the views of Phlx or
its staff.

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The undersigned, on behalf of the Firm, certifies that a person duly authorized to act on its behalf
has read and understands all of the provisions of this AWC and has been given a full opportunity
to ask questions about it; that the Firm has agreed to the AWC’s provisions voluntarily; and that
no offer, threat, inducement, or promise of any kind, other than the terms set forth herein and theprospect of avoiding the issuance of a Complaint, has been made to induce the Firm to submit it.

8/11/2020_____________
Date_________________________________
Sanford C. Bernstein & Co., LLC
Respondent
By: ______________________________
Laurence H. Bertan
Senior Vice President, Compliance

Accepted by Phlx:
September 9, 2020____________
Date__________________________________
Joaquin Gubb
Senior Counsel
Department of Enforcement
Signed on behalf of Phlx, by delegatedauthority from the Director of ODA

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