NASDAQ PIILX LLCNOTICE OF ACCEPTANCE OF AWC

Via Certified Mail, Return Receipt Requested
TO:Jefferies LLC
Ms. Cynthia B. Adams
Managing Director
520 Madison Avenue
New York, NY 10022

FROM:

Nasdaq PHLX LLC ("PHLX")
do Financial Industry Regulatory Authority ("FINRA")
Department of Enforcement
15200 Omega Drive, Suite 300
Rockville, MD 20850

DATE:

August 14, 2019

RE:

Notice of Acceptance of Letter of Acceptance, Waiver and Consent No. 2016048769502

Please be advised that your above-referenced Letter of Acceptance, Waiver and Consent ("AWC") has
been accepted on August 14, 2019 by the PHLX Review Council's Review Subcommittee, or by theOffice of Disciplinary Affairs on behalf of the PHLX Review Council, pursuant to PHLX Rule 9216. A
copy of the AWC is enclosed herewith.
You are again reminded of your obligation, if currently registered, immediately to update your Uniform
Application for Broker-Dealer Registration ("Form BD") to reflect the conclusion of this disciplinaryaction. Additionally, you must also notify FINRA (or PHLX if you are not a member of FINRA) inwriting of any change of address or other changes required to be made to your Form BD.
You will be notified by the Registration and Disclosure Department regarding sanctions if a suspension
has been imposed and by Nasdaq's Finance Department regarding the payment of any fine if a fine has
been imposed.

Jefferies LLC
Page 2

If you have any questions concerning this matter, please contact me at (215) 209-7002.

Eustace 11; me's
Senior Counsel
Department of Enforcement, FINRA
Signed on behalf of PHLX

Enclosure
FINRA District 10 -- New YorkWilliam St. Louis
Senior Vice President and Regional Director(Via email)NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2016048769502
TO:Nasdaq PHLX LLC
c/o Department of Enforcement
Financial Industry Regulatory Authority ("FINRA")

RE:

Jefferies LLC, Respondent
Member Firm
CRD No. 2347

Pursuant to Rule 9216 of Nasdaq PHLX LLC ("PHLX" or the "Exchange") Code of Procedure,
Jefferies LLC ("Jefferies", the "Firm", or "Respondent") submits this Letter of Acceptance,
Waiver and Consent ("AWC") for the purpose of proposing a settlement of the alleged ruleviolations described below. This AWC is submitted on the condition that, if accepted, PHLX
will not bring any 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 anadjudication of any issue of law or fact, to the entry of the following findings by PHLX:BACKGROUND
Jefferies became a member of FINRA on March 1, 1963 and PHLX on May 9, 2012, andits registrations remain in effect. The Firm provides investment banking and brokerage
services. It is headquartered in New York, New York and has branch offices in 12 states,
Puerto Rico and the District of Columbia. The Firm currently employs approximately
1,726 registered representatives.
RELEVANT PRIOR DISCIPLINARY HISTORYOn July 15, 2016, the Firm was censured and fined $50,000 for violating Rule 17a3(a)(6)(i) promulgated under the Securities Exchange Act of 1934, as amended (the"Exchange Act"), and PHLX Rules 1064(d), 760, 748, and 707, by: (i) failing, on a single
trade date, to maintain an accurate record of the order receipt time and order transmission
times of an options order; (ii) purchasing and executing an order in its proprietaryaccount for a security, after receiving a customer spread order for options related to that
security but before exposing it to a trading crowd, in order to hedge its anticipatedfacilitation of the customer's options order; and (iii) failing to maintain, establish, andSTAR No. 20160487695 (ETF)enforce a reasonable supervisory system and written supervisory procedures ("WSPs")
for reviewing options order records for erroneous or missing order receipt times.
SUMMARY
1

The Financial Industry Regulatory Authority's ("FINRA") Trading and Financial
Compliance Examinations staff (the "Staff') within the Department of Market
Regulation, on behalf of PHLX and other options exchanges, conducted a review of themanual options order tickets handled by the Firm during the period between July 11,2016 and July 15, 2016 (the "Exam Review Period").

2.

During the Exam Review Period, Jefferies failed to accurately record the order receipt
and order transmission times of manual options orders it had routed to floor brokers at
PHLX 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. The Firm also violated PHLX Rule 748(h)because its WSPs and supervisory system applicable to the handling of manual options
orders by its Derivatives Trading Desk during the period between July 2016 and July
2019 (the "Supervisory Review Period") were not reasonably designed to achievecompliance with, and to detect and prevent, insofar as practicable, violations of, theapplicable recordkeeping provisions of the federal securities laws and PHLX rules.
FACTS AND VIOLATIVE CONDUCT

3.

The recordkeeping provisions of the federal securities laws and PHLX rules are designed
to ensure that regulators have access to certain basic information about securities
transactions. Access to transaction records serves as an essential component for effectivesurveillance 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 Jefferies, 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, including2the By-Laws and Rules of the Exchange.
7.

During 2016, the Firm handled approximately 1,380 manual options orders,approximately 30% of which were manual customer orders routed to options exchange
floor brokers for execution. A sample of 49 manual options customer options orders
routed to floor brokers at the various options exchanges during the Exam Review Period
was reviewed for timestamp accuracy.

8.

From the sample of 49 manual customer options orders routed to various options
exchanges for execution during the Exam Review Period, the Firm did not maintain anaccurate record of the order receipt time for 14 (approximately 29%) of the sampled
orders. Of these 14 orders, one was executed on the PHLX.

9.

From the same sample of 49 manual customer options orders routed to options exchanges
for execution during the Exam Review Period, the Firm did not maintain an accurate
record of the order transmission times for 39 (approximately 80%) of the manual
customer orders routed to floor brokers for execution. Of these 39 orders, 15 wereexecuted on the PHLX.

10.

The conduct described in paragraphs eight and nine constitutes violations of Rule 17a3(a)(6)(i) promulgated under the Exchange Act, and PH LX Rule 760.

11.

The Firm's Derivatives Trading Desk handles institutional clients and facilitates customerorders. During the Supervisory Review Period, the Firm failed to establish and maintain
WSPs and a supervisory system that were reasonably designed to achieve compliancewith, and to 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 and transmission times of options orders. Specifically, the Firm's WSPs andsupervisory system did not include a supervisory review for the presence and accuracy ofthe order receipt and transmission times of options orders handled by its Derivatives
Trading Desk. Moreover, although the Firm represented that it captured the ordertransmission time on instant message communications, its supervisory review did notinclude a review of such communications for the presence or accuracy of ordertransmission times.

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:
A censure and a fine of $64,000, of which $32,000 ($27,000 for the books and records
violations and $5,000 for the supervision violations) shall be paid to PHLX.'
Acceptance of this AWC is conditioned upon acceptance of a similar settlementagreement in a related matter between the Firm and NYSE American LLC.

1 The balance of the fine shall be paid to NYSE American LLC.

3

Respondent agrees to pay the monetary sanction upon notice that this AWC has been
accepted and such payment is due and payable. It has submitted a Payment Information
form showing the method by which it proposes to pay the fine imposed.
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.
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 PHLX 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 PHLX Review Council, or any member of the PHLX
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.

4

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 PHLX 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; andC.

If accepted:

D.

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 any
public 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
in this 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 ofPHLX or its staff.

5

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.

•‘oDateJefferies LLC
Respondent

0 ,0

By:
Cynthia . Adams, Esq.
Managing Director — Legal
Jefferies LLC
520 Madison Avenue
New York, New York 10022
Tel: (212) 284-2193

Accepted by PHLX:

Etstace T. ranci , Esq.
Senior Counsel
Department of Enforcement
Signed on behalf of PHLX, by delegatedauthority from the Director of ODA6

PAYMENT INFORMATION
The fine amount will be reflected on an upcoming invoice and will be direct debited from theaccount for your firm that Nasdaq currently has on file. Please DO NOT submit payment at thistime.
Please inform your finance or applicable department of this forthcoming debit.
If you would like to arrange for an alternative method of payment, please enter the billing
contact information below and Nasdaq's Billing Department will contact you. Otherwise, pleaseleave the following information blank.
Billing Contact Name:
Billing Contact Address:
Billing Contact Email:Billing Contact Phone Number:

Respectfully submitted,

RespondentJefferies LLC
Date

By: C
Name:a00(2:6PI4-03-vi-

Title:
LtIr

STAR No. 20160487695 (ETF)