[Federal Register Volume 79, Number 247 (Wednesday, December 24, 2014)]
[Notices]
[Pages 77550-77552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30125]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73882; File No. SR-NYSEMKT-2014-101]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 342--
Equities To Remove the Three Years' Experience Requirement for 
Supervisory Personnel and To Add Supplementary Material to Rule 3110--
Equities Stating That Supervisors Must Reasonably Discharge Their 
Supervisory Duties and Obligations

December 18, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 8, 2014, NYSE MKT LLC (``NYSE MKT'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons. The Exchange has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under Exchange Act Rule 19b-4(f)(6), which 
renders the proposal effective upon receipt of this filing by the 
Commission.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 amend NYSE MKT Rule 342--Equities (``Rule 
342'') to remove the three years' experience requirement for 
supervisory personnel and to add supplementary material to NYSE MKT 
Rule 3110--Equities (``Rule 3110'') stating that supervisors must 
reasonably discharge their supervisory duties and obligations. The text 
of the proposed rule change is available on the Exchange's Web site 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 Exchange 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 342 to remove the three years' 
experience requirement for supervisory personnel. The Exchange also 
proposes to add supplementary material to Rule 3110 to further clarify 
that supervisors must reasonably discharge their supervisory duties and 
obligations.
Rule 342 (Compliance Supervisors)
    As part of the Exchange's efforts to harmonize its rules concerning 
supervision with those of the Financial Industry Regulatory Authority 
(``FINRA''), the Exchange recently amended Rule 342 by deleting 
elements of the rule relating to general supervision and focusing the 
rule on requirements regarding qualifications and exam requirements for 
individuals with supervisory responsibilities.\3\ As part of those 
amendments, the Exchange incorporated the following requirements for 
supervisory personnel into Rule 342(a) contained in the Interpretation 
to New York Stock Exchange (``NYSE'') Rule 342:
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    \3\ See Exchange Act Release No. 73640 (Nov. 19, 2014), 79 FR 
70237 (Nov. 25, 2014) (SR-NYSEMKT-2014-93) (``Supervision Filing'').
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    <bullet> Every branch office or sales manager must have at least 
three years' experience as a registered representative or substantial 
experience in a related sales or managerial position (the new rule 
provided examples of roles that would qualify as a related sales or 
managerial position); and
    <bullet> In order to qualify as a supervisory person, a principal 
executive should have at least three years' experience as a registered 
representative unless granted an exception.
    The Exchange proposes to delete these requirements from Rule 342(a) 
as inconsistent with prior amendments to NYSE Rule 342 on which the 
Exchange's rule is based.\4\ Specifically,

[[Page 77551]]

effective September 12, 2008, the NYSE amended its Rule 342 and its 
related Interpretation to eliminate the prescribed three-year record 
requirement for supervisory personnel and conform NYSE Rule 342.13(a) 
to the standard outlined in NASD Rule 1014(a)(10)(D).\5\ In the 
Supervision Filing, the Exchange inadvertently re-introduced the 
standards from the formerly deleted NYSE Interpretation to its Rule 
342. Because the re-introduction of the three-year experience 
requirement for supervisory personnel was inadvertent and inconsistent 
with the harmonization effectuated in 2008, the Exchange proposes to 
delete this text from Rule 342(a).
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    \4\ The Exchange's NYSE affiliate has also submitted a proposed 
rule change to amend NYSE Rule 342 to delete the requirements 
incorporated from the related NYSE Interpretation that every branch 
office or sales manager must have at least three years' experience 
as a registered representative or substantial experience in a 
related sales or managerial position and must pass the Series 9/10. 
See SR-NYSE-2014-66.
    \5\ See Exchange Act Release No. 58549 (Sept. 15, 2008), 73 FR 
54444 (Sept. 19, 2008) (SR-NYSE-2008-80).
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Rule 3110 (Supervision)
    In the Supervision Filing, the Exchange also adopted new Rule 3110, 
which is based on FINRA Rule 3110.\6\ New Rule 3110(a) covers 
supervisory systems and requires member organizations to establish and 
maintain a system to supervise the activities of each associated person 
that is reasonably designed to achieve compliance with applicable 
securities laws and regulations, and with applicable Exchange rules. 
Under Rule 3110, final responsibility for proper supervision rests with 
the member organization. While the Exchange believes that under Rule 
3110 both member organizations and individual supervisors at member 
organizations may be liable for failing to reasonably discharge their 
duties and obligations with supervision and control of those employees 
under their supervision, for the avoidance of doubt, the Exchange 
proposes to add Supplementary Material .16 to Rule 3110 providing that 
individuals in charge of a group of employees must reasonably discharge 
their duties and obligations with respect to supervision and control of 
those employees related to the business of their employer and 
compliance with securities laws and regulations and Exchange rules.\7\
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    \6\ See Supervision Filing, supra, n. 4.
    \7\ FINRA Rule 0140 provides that FINRA's rules apply to all 
members and persons associated with a member, and that persons 
associated with a member have the same duties and obligations as a 
member under FINRA's rules. Under FINRA Rule 0140, supervisors 
associated with a member are subject to the requirements of FINRA 
Rule 3110. The Exchange does not have a rule comparable to FINRA 
Rule 0140. The proposed amendment further clarifies that Rule 3110 
applies to individual supervisors and thus promotes harmonization of 
the rule with Exchange rules and FINRA rules of similar purpose.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, because it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, and to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system. Specifically, the Exchange believes that the proposed 
rule change supports the objectives of the Act by providing greater 
harmonization between Exchange rules and FINRA rules of similar 
purpose, resulting in less burdensome and more efficient regulatory 
compliance. In particular, the Exchange believes that removing the 
three-year experience requirement for supervisors, which was previously 
deleted from NYSE Rule 342 on which the Exchange's rule is based and 
inadvertently re-introduced, would remove impediments to and perfect 
the mechanism of a free and open market by eliminating a regulatory 
disparity between the supervisory rules of the Exchange and FINRA, 
thereby also further harmonizing those rules. Further, the Exchange 
believes that adding the proposed supplementary material to Rule 3110 
emphasizing that individual supervisors shall reasonably discharge 
their supervisory duties and obligations would remove impediments to 
and perfect the mechanism of a free and open market because it would 
reduce potential confusion and provide transparency regarding the 
duties and obligations of individual supervisors under the Exchange's 
harmonized supervision rules. The Exchange also believes that the 
proposed rule change would update and add specificity to the 
requirements governing supervision, which would promote just and 
equitable principles of trade and help to protect investors.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\10\ 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 to achieve greater transparency 
and consistency between the Exchange's rules and FINRA's rules 
concerning supervision.
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    \10\ 15 U.S.C. 78f(b)(8).
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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

    A proposed rule change filed under Exchange Act Rule 19b-4(f)(6) 
normally does not become operative prior to 30 days after the date of 
the filing.\11\ However, pursuant to Rule 19b-4(f)(6)(iii), the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest.\12\ The 
Exchange believes that the proposal qualifies for immediate 
effectiveness upon filing because it is a ``non-controversial'' rule 
change in accordance with Section 19(b)(3)(A) of the Act \13\ and Rule 
19b-4(f)(6) thereunder.\14\ Accordingly, the Exchange has asked that 
the Commission waive the 30-day operative delay so that the proposal 
becomes operative immediately upon filing.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    The Exchange believes that the proposal is non-controversial 
because it raises no novel issues and is consistent with rules 
previously approved by the Commission. The Exchange states that the 
purpose of the proposed rule change is to eliminate requirements in the 
Exchange's rules previously deleted by the Exchange and to further 
conform the Exchange's supervision rules to those of FINRA. The 
Exchange believes that updating and adding transparency to the 
requirements governing individual supervisors would help to protect 
investors and would not significantly burden competition. More 
specifically, the Exchange believes that: (1) Members of both FINRA and 
the Exchange (``Dual Members'') are already subject to the requirement 
that individual supervisors reasonably discharge their supervisory 
duties and obligations; and (2) the proposed clarification does not 
represent a new standard for Exchange-only members, who were subject to 
the same standard under former Rule 342. Accordingly, the Exchange 
believes that these proposed rule changes are eligible

[[Page 77552]]

for immediately effective treatment under the Commission's current 
procedures for processing rule filings.\15\
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    \15\ See Exchange Act Release No. 58092 (Jul. 3, 2008), 73 FR 
40144 (Jul. 11, 2008) (concerning 17 CFR 200 and 241).
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    The Commission believes that because the 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 prior to 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, if consistent 
with the protection of investors and the public interest, the proposed 
rule change has become effective pursuant to Section 19(b)(3)(A) of the 
Act and Rule 19b-4(f)(6)(iii) thereunder. More specifically, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because enhanced transparency to the supervision obligations of 
individual supervisors will help members improve compliance with 
applicable securities laws, including rules governing sale practices. 
In addition, granting the waiver would allow the Exchange to 
immediately eliminate requirements in the Exchange's rules that were 
mistakenly reinserted after being previously deleted. For these 
reasons, the Commission designates the proposed rule change as 
operative upon filing.\16\
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    \16\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition and capital formation. See 15 U.S.C. 78c(f).
     In addition, the Exchange has given 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 (5) business days prior to the date of the filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. See 17 CFR 240.19b-4(f)(6)(iii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the 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 under 
Section 19(b)(2)(B) of the Act \17\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#fc8e899099d19f9391919992888fbc8f999fd29b938a"><span class="__cf_email__" data-cfemail="95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3">[email protected]</span></a>. Please include 
File Number SR-NYSEMKT-2014-101 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-101. 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 Web site (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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSEMKT-2014-
101 and should be submitted on or before January 14, 2015.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30125 Filed 12-23-14; 8:45 am]
BILLING CODE 8011-01-P


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