100578 Federal Register / Vol. 89, No. 239 / Thursday, December 12, 2024 / Notices 

85 15 U.S.C. 78s(b)(3)(A)(ii). 

86 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78c(a)(39). 

5See FINRA Regulatory Notice 09–19 

(‘‘Amendments to FINRA Rule 9520 Series to 

Establish Procedures Applicable to Firms and 

Associated Persons Subject to Certain Statutory 

Disqualifications’’). 

6 17 CFR 240.19h–1. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.85

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: (i) necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NASDAQ–2024–076 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–NASDAQ–2024–076. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NASDAQ–2024–076 and should be 

submitted on or before January 2, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.86

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29151 Filed 12–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101830; File No. SR– 

NYSEAMER–2024–75] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Change To Amend Rule 342 

December 6, 2024. 

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 

3, 2024, NYSE American LLC (‘‘NYSE 

American’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 342 to add clarity to the process for 

a broker-dealer to become or remain a 

member organization notwithstanding a 

statutory disqualification. 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 amend 

proposes to amend Rule 342 to add 

clarity to the process to the process for 

a broker-dealer to become or remain a 

member organization notwithstanding a 

statutory disqualification. 

Background and Proposed Rule Filing 

Section 3(a)(39) of the Act defines the 

term ‘‘statutory disqualification’’ and 

the circumstances that can cause a 

person (either a Member, or a person 

associated with a Member) to be subject 

to a statutory disqualification.4 Absent 

relief, a statutory disqualification would 

preclude a broker-dealer or person 

associated with a broker-dealer from 

certain activities, including membership 

in a self-regulatory organization 

(‘‘SRO’’). 

There is, however, a well-established 

process through which a broker-dealer 

(or a person associated with a brokerdealer) may continue to operate in the 

securities industry (and either become a 

member of, or continue as a member of, 

one or more SROs) despite being subject 

to a statutory disqualification.5 In 

particular, SEC Rule 19h–1 6 describes 

several ways an SRO may seek relief for 

a member (or prospective member) that 

is subject to a statutory disqualification, 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 239 / Thursday, December 12, 2024 / Notices 100579 

7 Id. at (a)(3). 

8The processing of new membership applications 

at the Exchange includes statutory disqualification 

disclosures and background investigations. Review, 

assessment, and processing of these membership 

applications has been conducted on behalf of the 

Exchange by FINRA pursuant to a regulatory 

services agreement. 

9See Cboe EDGX Exchange, Inc. (‘‘Cboe EDGX’’) 

Rule 2.5(a) & Interpretation and Policies .04; Cboe 

BZX Exchange, Inc. (‘‘Cboe BZX’’) Rule 2.5(a) & 

Interpretation and Policies .04; Cboe BYX 

Exchange, Inc. (‘‘Cboe BYX’’) Rule 2.5(a) & 

Interpretation and Policies .04; Cboe EDGA 

Exchange, Inc. (‘‘Cboe EDGA’’) Rule 2.5(a) & 

Interpretation and Policies .04; and BOX Options 

Exchange LLC (‘‘BOX’’) Rule 2040(a) & IM–2040– 

08. 

10See Securities Exchange Act Release No. 78449 

(August 1, 2016), 81 FR 51947 (August 5, 2016) 

(SR–BOX–2016–26); Securities Exchange Act 

Release No. 79229 (November 3, 2016), 81 FR 78875 

(November 9, 2016) (SR–BatsBZX–2016–67); 

Securities Exchange Act Release No. 79233 

(November 3, 2016), 81 FR 78869 (November 9, 

2016) (SR–BatsBYX–2016–28); Securities Exchange 

Act Release No. 79234 (November 3, 2016), 81 FR 

78867 (November 9, 2016) (SR–BatsEDGA–2016– 

23); Securities Exchange Act Release No. 79236 

(November 3, 2016), 81 FR 78878 (November 9, 

2016) (SR–BatsEDGX2016–59). 

11The 2016 rule filings also added some other 

conditions for eligibility for exchange membership 

such as adding a restriction that members must 

meet any condition the exchange placed on such 

member, which the Exchange believes are 

adequately addressed in other Exchange rules. See, 

e.g., Rule 310 (Formation of or Admission to 

Member Organization or Membership Owner). 

Moreover, the Rule 9520 Series sets forth 

procedures for a covered person (defined in Rule 

9120(g) as a member, principal executive, approved 

person, registered or non-registered employee of a 

member organization or an ATP Holder (an options 

permit holder, see Rule 900.2NY (Definitions)), or 

other person (excluding a member organization) 

subject to the jurisdiction of the Exchange) to 

become or remain associated with a member 

organization or ATP Holder notwithstanding the 

existence of a statutory disqualification as defined 

in Section 3(a)(39) of the Act, and for a current 

member organization or covered person to obtain 

relief from the eligibility or qualification 

requirements of the Exchange’s Rules, referred to in 

the Rule as ‘‘eligibility proceedings.’’ 

12The proposed changes mirror the language in 

the following rules: BOX Rule 2040(a) and IM– 

2040–08; Cboe BZX Rule 2.5(a) and Interpretation 

and Policies .04; Cboe BYX Rule 2.5(a) and 

Interpretation and Policies .04; Cboe EDGA Rule 

2.5(a) and Interpretation and Policies .04; and Cboe 

EDGX Rule 2.5(a) and Interpretation and Policies 

.04. 

13 15 U.S.C. 78f(b)(5). 

14See note 11, supra. 

including whether an SRO must file a 

notice with the Commission in order to 

allow the disqualified firm to become or 

continue as a member with the SRO (a 

‘‘19h–1 Notice’’). A 19h–1 Notice does 

not, for instance, need to be filed by an 

SRO if the firm subject to a statutory 

disqualification is a member of at least 

one other SRO, and that SRO intends to 

file a 19h–1 Notice for the firm.7

Rule 342 (Association of Members, 

Member Organizations, and Persons 

Associated With Member Organizations) 

of the Office Rules provides that, except 

as 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 Act. 

Recently, a non-member broker-dealer 

firm subject to a statutory 

disqualification that is currently under 

review by the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

applied for Exchange membership.8

In reviewing this application, the 

Exchange determined that this situation 

is not explicitly addressed in its rules as 

it is in the rules of other exchanges.9

Specifically, BOX, Cboe BZX, Cboe 

BYX, Cboe EDGX, and Cboe EDGA each 

amended their respective rules in 2016 

to provide more clarity as to the 

authority of each exchange to determine 

whether to admit a prospective member 

that is subject to a statutory 

disqualification.10 The 2016 rule change 

filings of these exchanges also amended 

several other aspects of their application 

procedures, but the Exchange only seeks 

to harmonize its rules insofar as they 

apply to member organizations and 

prospective member organizations (and 

associated persons of member 

organizations) that are subject to a 

statutory disqualification in order to 

address the membership application 

described herein.11

The Exchange accordingly proposes to 

align its rule with these other exchanges 

specifically with respect to the process 

of assessing an applicant for 

membership that is subject to a statutory 

disqualification.12 As discussed below, 

the Exchange is making the proposed 

rule changes and seeks waiver of the 30- 

day operative delay in order to address 

an unusual and time sensitive situation 

in which a firm subject to a statutory 

disqualification seeks to become an 

Exchange member organization during 

the pendency of the process by which 

the firm is seeking relief from the 

statutory disqualification. 

To effectuate these changes, the 

Exchange proposes to add 

Supplementary Material .01 to Rule 342 

to provide that the Exchange could 

approve an applicant for membership 

(or association with a member 

organization) that is subject to a 

statutory disqualification when a 

proceeding is pending before another 

SRO to determine whether to permit a 

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 

to become or continue membership or 

association notwithstanding a statutory 

disqualification. This provision, which 

is consistent with SEC Rule 19h–1(a)(3), 

would provide as follows (additions 

italicized): 

.01 Statutory Disqualification 

Proceedings Pending Before Another 

SRO. The Exchange may waive the 

provisions of this Rule when a 

proceeding is pending before another 

self-regulatory organization to 

determine whether to permit a member 

or associated person of a member to 

become or continue membership or 

association notwithstanding a statutory 

disqualification. In the event the 

Exchange determines to waive the 

provisions of this Rule with respect to 

an existing or prospective 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, the Exchange 

shall determine whether it will concur 

in any Exchange Act Rule 19h–1 filing 

made by another self-regulatory 

organization with respect to such 

person. 

This Supplementary Material is 

substantively identical to IM–2040–8 to 

BOX Rule 2040 and Interpretation and 

Policies .04 to Cboe BZX, BYX, EDGX, 

and EDGA Rules 2.5, except for 

language clarifying that the new 

supplementary material would apply to 

both prospective and existing members, 

member organizations, approved 

persons, employees, or any person 

directly or indirectly controlling, 

controlled by or under common control 

with a member or member organization. 

The Exchange believes that the 

proposed rule change would 

appropriately align its rules with the 

Commission’s rules regarding statutory 

disqualifications and harmonize the 

Exchange’s process with several other 

SROs. The Exchange notes that in 

assessing the statutory disqualification 

of a member organization or a 

prospective member organization, it 

must act consistent with the protection 

of investors and in the public interest 

and cannot unfairly discriminate against 

existing or prospective member 

organizations.13 Moreover, as noted 

above, a current member organization or 

covered person can seek relief from the 

Exchange’s eligibility or qualification 

requirements pursuant to the Rule 9520 

Series.14 In addition, any prospective 


ddrumheller on DSK120RN23PROD with NOTICES1
100580 Federal Register / Vol. 89, No. 239 / Thursday, December 12, 2024 / Notices 

15 15 U.S.C. 78f(b). 

16 15 U.S.C. 78f(b)(5). 

17 15 U.S.C. 78s(b)(3)(A). 

18 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, along with a brief 

description and 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. NYSE American 

has satisfied this requirement. 

19 17 CFR 240.19b–4(f)(6). 

20 17 CFR 240.19b–4(f)(6)(iii). 

member organization that has been 

denied membership in the Exchange or 

barred from becoming associated with a 

member organization is entitled to 

certain due process pursuant to the Rule 

308—Equities (Acceptability 

Proceedings), which includes, but is not 

limited to, potential review by the 

Commission. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act 15

in general, and furthers the objectives of 

Section 6(b)(5),16 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. 

The Exchange believes that the 

proposed rule change would better align 

the Exchange’s rules with the 

Commission’s rules regarding statutory 

disqualifications and enable a consistent 

process across the Exchange and several 

other SROs to make appropriate filings 

with respect to persons subject to a 

statutory disqualification, thereby 

protecting investors and the public 

interest by providing more clarity and 

consistency with respect to the process 

of seeking relief from a statutory 

disqualification and in general enabling 

the Exchange to more efficiently 

administer membership applications 

involving statutory disqualifications. 

The Exchange further believes that the 

proposed change 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, and 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. 

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 is 

concerned solely with aligning the 

Exchange’s rules with those of other 

exchanges and with the Commission’s 

approach to handling firms that are 

subject to statutory disqualification. 

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) of the Act 17 and Rule 19b– 

4(f)(6) thereunder.18

A proposed rule change filed under 

Rule 19b–4(f)(6) 19 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),20 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. 

NYSE American has asked the 

Commission to waive the 30-day 

operative delay so that the proposed 

rule change may become operative upon 

filing. NYSE American states that 

waiving the 30-day delay in this manner 

would allow the Exchange to address an 

unusual and time sensitive situation in 

which a firm subject to a statutory 

disqualification seeks to become an 

Exchange member organization during 

the pendency of the process by which 

the firm is seeking relief from the 

statutory disqualification. For this 

reason, the Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. 

Therefore, the Commission hereby 

waives the operative delay and 

designates the proposal operative upon 

filing. 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEAMER–2024–75 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–NYSEAMER–2024–75. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 239 / Thursday, December 12, 2024 / Notices 100581 

21 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78c(a)(39). 

5See FINRA Regulatory Notice 09–19 

(‘‘Amendments to FINRA Rule 9520 Series to 

Establish Procedures Applicable to Firms and 

Associated Persons Subject to Certain Statutory 

Disqualifications’’). 

6 17 CFR 240.19h–1. 

7 Id. at (a)(3). 

8See Rule 2.4(e). 

9The processing of new membership applications 

at the Exchange includes statutory disqualification 

disclosures and background investigations of 

prospective ETP Holders and persons associated 

with an ETP Holder. Review, assessment, and 

processing of these membership applications has 

been conducted on behalf of the Exchange by 

FINRA pursuant to a regulatory services agreement. 

10See Cboe EDGX Exchange, Inc. (‘‘Cboe EDGX’’) 

Rule 2.5(a) & Interpretation and Policies .04; Cboe 

BZX Exchange, Inc. (‘‘Cboe BZX’’) Rule 2.5(a) & 

Interpretation and Policies .04; Cboe BYX 

Exchange, Inc. (‘‘Cboe BYX’’) Rule 2.5(a) & 

Interpretation and Policies .04; Cboe EDGA 

Exchange, Inc. (‘‘Cboe EDGA’’) Rule 2.5(a) & 

Interpretation and Policies .04; and BOX Options 

Exchange LLC (‘‘BOX’’) Rule 2040(a) & IM–2040– 

08. 

11See Securities Exchange Act Release No. 78449 

(August 1, 2016), 81 FR 51947 (August 5, 2016) 

(SR–BOX–2016–26); Securities Exchange Act 

Release No. 79229 (November 3, 2016), 81 FR 78875 

(November 9, 2016) (SR–BatsBZX–2016–67); 

Securities Exchange Act Release No. 79233 

(November 3, 2016), 81 FR 78869 (November 9, 

2016) (SR–BatsBYX–2016–28); Securities Exchange 

Continued 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NYSEAMER–2024–75 and should 

be submitted on or before January 2, 

2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29143 Filed 12–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101831; File No. SR– 

NYSEARCA–2024–108] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Rule 2.4 

December 6, 2024 

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 

3, 2024, NYSE Arca, Inc. (‘‘NYSE Arca’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 2.4 to add clarity to the process for 

a broker-dealer to become or remain an 

ETP Holder, OTP Holder or OTP Firm 

or remain an ETP Holder, OTP Holder 

or OTP Firm on the Exchange 

notwithstanding the existence of a 

statutory disqualification. 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 amend 

Rule 2.4 to add clarity to the process for 

a broker-dealer to become or remain an 

ETP Holder, OTP Holder or OTP Firm 

on the Exchange notwithstanding the 

existence of a statutory disqualification. 

Background and Proposed Rule Filing 

Section 3(a)(39) of the Act defines the 

term ‘‘statutory disqualification’’ and 

the circumstances that can cause a 

person (either a Member, or a person 

associated with a Member) to be subject 

to a statutory disqualification.4 Absent 

relief, a statutory disqualification would 

preclude a broker-dealer or person 

associated with a broker-dealer from 

certain activities, including membership 

in a self-regulatory organization 

(‘‘SRO’’). 

There is, however, a well-established 

process through which a broker-dealer 

(or a person associated with a brokerdealer) may continue to operate in the 

securities industry (and either become a 

member of, or continue as a member of, 

one or more SROs) despite being subject 

to a statutory disqualification.5 In 

particular, SEC Rule 19h–1 6 describes 

several ways an SRO may seek relief for 

a member (or prospective member) that 

is subject to a statutory disqualification, 

including whether an SRO must file a 

notice with the Commission in order to 

allow the disqualified firm to become or 

continue as a member with the SRO (a 

‘‘19h–1 Notice’’). A 19h–1 Notice does 

not, for instance, need to be filed by an 

SRO if the firm subject to a statutory 

disqualification is a member of at least 

one other SRO, and that SRO intends to 

file a 19h–1 Notice for the firm.7

Rule 2.4 (Application Procedures) 

governs application procedures for 

persons applying to become an ETP 

Holder, every individual or organization 

applying to become the holder of an 

OTP and every individual applying to 

become a Nominee of an OTP Firm, and 

provides in subsection (e) that the 

Exchange shall approve an application 

if it finds that the applicant meets all of 

the qualifications for holding an ETP or 

OTP, as applicable, and shall reject an 

application if it does not make such a 

finding or if it finds that, if the 

application were approved, the ETP 

Holder, OTP Holder or OTP Firm, as 

applicable, would be subject to 

suspension or expulsion under the 

provisions of the Bylaws, Rules or 

procedures of the Exchange or the rules, 

regulations and procedures promulgated 

under the Securities Exchange Act of 

1934, as amended.8

Recently, a non-member broker-dealer 

firm subject to a statutory 

disqualification that is currently under 

review by the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

applied for Exchange membership.9

In reviewing this application, the 

Exchange determined that this situation 

is not explicitly addressed in its rules as 

it is in the rules of other exchanges.10

Specifically, BOX, Cboe BZX, Cboe 

BYX, Cboe EDGX, and Cboe EDGA each 

amended their respective rules in 2016 

to provide more clarity as to the 

authority of each exchange to determine 

whether to admit a prospective member 

that is subject to a statutory 

disqualification.11 The 2016 rule change 


ddrumheller on DSK120RN23PROD with NOTICES1