Document ID: SEC-2022-0412-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2022-03-24T04:00Z

[Federal Register Volume 87, Number 57 (Thursday, March 24, 2022)]
[Notices]
[Pages 16804-16805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06192]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94473; File No. SR-NASDAQ-2022-022]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend General 3, Rule 1002, Qualifications of Exchange Members and 
Associated Persons; Registration of Branch Offices and Designation of 
Office of Supervisory Jurisdiction

March 18, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 8, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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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 General 3, Rule 1002, Qualifications 
of Exchange Members and Associated Persons; Registration of Branch 
Offices and Designation of Office of Supervisory Jurisdiction.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend General 3, Rule 1002, Qualifications 
of Exchange Members and Associated Persons; Registration of Branch 
Offices and Designation of Office of Supervisory Jurisdiction. 
Specifically, General 3, Rule 1002(b) provides for ineligibility of 
certain persons for Membership or Association. General 3, Rule 
1002(b)(2) provides,

    Subject to such exceptions as may be explicitly provided 
elsewhere in the Rules, no person shall become associated with a 
Member, continue to be associated with a Member, or transfer 
association to another Member, if such person fails or ceases to 
satisfy the qualification requirements established by the Rules, or 
if such person is or becomes subject to a statutory 
disqualification; and no broker or dealer shall be admitted to 
membership, and no Member shall be continued in membership, if any 
person associated with it is ineligible to be an Associated Person 
under this subsection.

    For purposes of statutory disqualification, as such term is defined 
in Section 3(a)(39) of the Act,\3\ the Exchange proposes to 
specifically define the terms ``person associated with a member'' and 
``associated person'' to align those terms with FINRA's By-Laws. FINRA 
defines the terms ``person associated with a member'' or ``associated 
person of a member'' at paragraph (ee) of Article I, Definitions, of 
those By-Laws.\4\ Nasdaq currently defines an ``Associated Person'' 
within General 3, Section 1011(b) to mean any partner, officer, 
director, or branch manager of a Member or Applicant (or person 
occupying a similar status or performing similar functions), any person 
directly or indirectly controlling, controlled by, or under common 
control with such Member or Applicant, or any employee of such Member 
or Applicant, except that any person associated with a Member or 
Applicant whose functions are solely clerical or ministerial shall not 
be included in the meaning of such term for purposes of the Rules.
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    \3\ 15 U.S.C. 78c(a)(39).
    \4\ FINRA By-Law Article I(ee) provides, ``person associated 
with a member'' or ``associated person of a member'' means: (1) A 
natural person who is registered or has applied for registration 
under the Rules of the Corporation; (2) a sole proprietor, partner, 
officer, director, or branch manager of a member, or other natural 
person occupying a similar status or performing similar functions, 
or a natural person engaged in the investment banking or securities 
business who is directly or indirectly controlling or controlled by 
a member, whether or not any such person is registered or exempt 
from registration with FINRA under these By-Laws or the Rules of the 
Corporation; and (3) for purposes of Rule 8210, any other person 
listed in Schedule A of Form BD of a member.
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    At this time, Nasdaq proposes to adopt FINRA's definitions of 
``person associated with a member'' and ``associated person'' as 
provided within FINRA By-Law Article I(ee), for purposes of statutory 
disqualification, within new Nasdaq General 3, Rule 1002(b)(2)(A). As 
proposed, General 3, Rule 1002(b)(2)(A) would provide,

    For purposes of ``statutory disqualification'' as such term is 
defined in Section 3(a)(39) of the Exchange Act the terms ``person 
associated with a member'' and ``associated person'' shall mean (1) 
a natural person who is registered or has applied for registration 
under the Rules of the Exchange; (2) a sole proprietor, partner, 
officer, director, or branch manager of a member, or other natural 
person occupying a similar status or performing similar functions, 
or a natural person engaged in the investment banking or securities 
business who is directly or indirectly controlling or controlled by 
a member, whether or not any such person is registered or exempt 
from registration with the Exchange under its Rules; and (3) for 
purposes of Nasdaq General 5, Rule 8210, any other person listed in 
Schedule A of Form BD of a member.

    By defining the terms ``person associated with a member'' and 
``associated person'' substantively identical \5\ to FINRA, for 
purposes of statutory disqualification, the Exchange would align its 
application of statutory disqualification with FINRA's process. This 
proposal would avoid potentially different outcomes for members of both 
FINRA and Nasdaq with respect to ineligibility for membership and 
association.
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    \5\ References to ``Corporation'' within FINRA By-Law Article 
I(ee) were amended to ``Exchange'' and references to ``By-Laws and 
Rules of FINRA'' were amended to reference Nasdaq's Rules.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest. The Exchange's proposal to adopt FINRA's definitions 
of ``person

[[Page 16805]]

associated with a member'' and ``associated person'' as provided within 
FINRA By-Law Article I(ee), for purposes of statutory disqualification 
pursuant to Section 3(a)(39) of Act,\8\ within new Nasdaq General 3, 
Rule 1002(b)(2)(A) is consistent with the Act. Aligning the terms 
``person associated with a member'' and ``associated person'' with 
paragraph (ee) of Article I, Definitions, of FINRA's By-Laws would 
avoid potentially different outcomes for members of both FINRA and 
Nasdaq with respect to ineligibility for membership and association as 
a result of statutory disqualification.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78c(a)(39).
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    The Exchange believes its proposal will promote just and equitable 
principles of trade and protect investors and the public interest by 
ensuring market participants that are members of both FINRA and Nasdaq 
are held to the same standard with respect to statutory 
disqualification.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange's proposal to 
adopt FINRA's definitions of ``person associated with a member'' and 
``associated person'' as provided within FINRA By-Law Article I(ee) 
within General 3, Rule 1002(b)(2)(A), for purposes of statutory 
disqualification pursuant to Section 3(a)(39) of Act,\9\ does not 
impose an undue burden on competition. Aligning the terms ``person 
associated with a member'' and ``associated person'' with paragraph 
(ee) of Article I, Definitions, of FINRA's By-Laws would avoid 
potentially different outcomes for members of both FINRA and Nasdaq 
with respect to ineligibility for membership and association as a 
result of statutory disqualification and ensure that all FINRA and 
Nasdaq members are held to the same standard with respect to statutory 
disqualification. Today, all Nasdaq members are subject to the General 
3 rules.
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    \9\ 15 U.S.C. 78c(a)(39).
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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 either solicited or received.

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)(iii) of the Act \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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 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. 
The Exchange has satisfied this requirement.
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    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-022 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-2022-022. 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 (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 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. 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-NASDAQ-2022-022 and 
should be submitted on or before April 14, 2022.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06192 Filed 3-23-22; 8:45 am]
BILLING CODE 8011-01-P