DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2019061065701
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”) Code of Procedure, 1 Jefferies LLC(“Jefferies” or the “firm”) submits this Letter of Acceptance, Waiver and Consent (“AWC”) forthe 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 bring any future actions against theRespondent 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
Jefferies has been a Phlx member since May 2012 and a FINRA member since March
1963. It is a wholly-owned subsidiary of Jefferies Group LLC, which in turn is a whollyowned subsidiary of Jefferies Financial Group Inc., a diversified holding company.
Jefferies provides investment banking and brokerage services. The firm is headquarteredin New York, New York, and has approximately 2,100 registered persons.
RELEVANT PRIOR DISCIPLINARY HISTORY
The firm has prior relevant disciplinary history specifically relating to the accurate
recording of order receipt and transmission times.
In July and August 2019, Jefferies consented to a censure and a total fine of $84,000
allocated among Nasdaq Phlx LLC, NYSE American LLC, and Cboe Exchange, Inc. forviolations of § 17(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) andSeries 9000 of The Nasdaq Stock Market LLC 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 with member organizations, and other persons subject to the Exchange’s jurisdiction.

1DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

Exchange Act Rule 17a-3 thereunder, and the recordkeeping and related supervisory rulesof those exchanges, for its failure to maintain accurate order receipt and ordertransmission times for certain of its manual options orders routed to exchange floor
brokers in 2016. 2SUMMARY
This matter arises from a 2019 examination of the firm conducted by FINRA’sDepartment of Market Regulation on behalf of Phlx and other options exchanges. Theexamination found that from January 2019, through December 2019, Jefferies failed tocomply with the recordkeeping requirements of Exchange Act § 17(a) and Exchange Act
Rule 17a-3 thereunder, and Phlx Rule 760. 3 In addition, from October 2018, throughJune 2020, Jefferies failed to establish, maintain, and enforce a supervisory system
reasonably designed to achieve compliance with Exchange Act Rule 17a-3 and Phlx Rule760 in violation of Phlx Rules 748 and 707. 4FACTS AND VIOLATIVE CONDUCT1. The recordkeeping provisions of the federal securities laws and Phlx rules aredesigned to ensure that regulators have access to important information about
securities transactions. Access to complete and accurate transaction records isessential for effective surveillance and examination of broker-dealers by Phlx andother regulators.
2. Exchange Act §17(a) and Exchange Act Rule 17a-3(a)(6)(i) thereunder require
broker-dealers, such as Jefferies, to create a memorandum of each brokerage order,
and of any other instruction, given or received for the purchase or sale of securities,
whether executed or unexecuted. The rule requires the memorandum to show, among
other things, the time the order was received and the time of order entry. 5
3. Phlx Rule 760 required member organizations to make, keep current and preserve
such books and records as the Exchange may prescribe and as may be prescribed by
the Exchange Act and the rules and regulations thereunder.
4. From January 2019, through December 2019, Jefferies failed to accurately record
order receipt times and failed to record transmission times for certain options orders
manually routed to Phlx floor brokers. Specifically, traders and salespersons, byeither submitting late order tickets or failing to use Jefferies’ order management
system (“OMS”) functionality to generate a transmission timestamp, caused the firm

Nasdaq Phlx LLC Matter No. 20160487695.
As of February 3, 2020, Phlx Rule 760 was renumbered to Options 6E, Section 1.
4
As of February 3, 2020, Phlx Rule 748 was renumbered to General 9, Section 20, and Phlx Rule 707 wasrenumbered to Phlx General 9, Section 1(c).
5Rule 17a-3(a)(6) defines the time of order entry as “the time when the member, broker or dealer transmits the orderor instruction for execution.”232

DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

to fail to record or inaccurately record timestamps on approximately 1,225 options
orders manually routed to floor brokers on Phlx and other options exchanges.
5. Accordingly, Jefferies violated Exchange Act § 17(a) and Exchange Act Rule 17a-3
thereunder, and Phlx Rule 760 during the relevant period.
6. Phlx Rule 748, and subsequently General 9, Section 20, requires members to“establish, maintain, and enforce written supervisory procedures, and a system forapplying such procedures, to supervise the types of business(es) in which the member
or member organization engages in and to supervise the activities of all registeredrepresentatives, employees, and associated persons. The written supervisory
procedures and the system for applying such procedures shall reasonably be designed
to prevent and detect, insofar as practicable, violations of the applicable securities
laws and regulations, including the By-Laws and Rules of the Exchange.”
7. Phlx Rule 707, now General 9, Section 1(c), requires members, member
organizations, and persons associated with or employed by a member or member
organizations to not engage in conduct inconsistent with just and equitable principlesof trade.
8. In October 2018 and February 2019, Jefferies implemented coding updates thatcaused its OMS to capture inaccurate timestamps. After the updates, the OMS
incorrectly recorded the user’s workstation/desktop time rather than the server timesynchronized with the Network Time Protocol 6 as the source for timestamps for all
option orders.
9. From October 2018, through June 2020, Jefferies’ procedures applicable to its
Derivatives Trading Desk correctly described the documentation requirements ofExchange Act Rule 17a-3 and Phlx rules, including the requirement to record atimestamp on order memoranda when an options order is entered, transmitted, andexecuted. Jefferies’ procedures further required each desk head to review ordertickets for accuracy and completeness.
10. Jefferies failed to have, however, a supervisory system reasonably designed to ensurethat any updates or changes it made to its OMS did not impact the system’s accurate
timestamp function. Specifically, the firm did not perform any testing to ensure that
the October 2018 and February 2019 changes to its OMS would not impact theautomated timestamping of its options orders.
11. Accordingly, Jefferies violated Phlx Rule 748, subsequently General 9, Section 20,
and Phlx Rule 707, subsequently General 9, Section 1(c), during the relevant period.
B.

Respondent also consents to the imposition of the following sanctions:
1. Censure; andNetwork Time Protocol is a protocol used to synchronize computer clock times in a network (i.e., from desktops toservers).

63DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

2. A total fine in the amount of $225,000 ($28,333.33 payable to Phlx). 7
Respondent agrees to pay the monetary sanction in accordance with its executed payment
form. Respondent agrees to pay the monetary sanction upon notice that this AWC has
been accepted and that such payment is due and payable.
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 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 andThe remainder of the fine shall be allocated to BOX Exchange LLC, Cboe Exchange, Inc., Cboe C2 Exchange,
Inc., Cboe BZX Exchange, Inc., Cboe EDGX Exchange, Inc., Miami International Securities Exchange, LLC,MIAX PEARL, LLC, Nasdaq ISE, LLC, Nasdaq GEMX, LLC, The Nasdaq Options Market LLC, NYSE American
LLC, and NYSE Arca, Inc. for similar violations.
74DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

conditions 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; 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 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 orits staff.

5DocuSign Envelope ID: DB12D0E6-30EE-4721-B770-2A69BC991E29
29BE60BB-89F2-4E4E-B6CA-AA0C04B0BC4B

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.

August 5, 2022____________________
DateJefferies LLC
Respondent
By: ______________________
Cynthia B. Adams
Managing Director

Accepted by Phlx:
August 23, 2022_________________
Date____________________________________
Steven Tanner
Senior Counsel
Department of Enforcement
Signed on behalf of Phlx, by delegatedauthority from the Director of ODA

6