Document ID: SEC-2010-0422-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX
Posted Date: 2010-03-22T04:00Z

[Federal Register: March 22, 2010 (Volume 75, Number 54)]
[Notices]               
[Page 13641-13643]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr10-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61702; File No. SR-BX-2010-016]

 
Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BX Rule 
9520 Series Regarding Eligibility Procedures for Persons Subject to 
Certain Disqualifications

March 12, 2010.
    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 February 19, 2010, NASDAQ OMX BX (``BX'' 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 BX. BX has designated the proposed 
rule change as constituting a ``non-controversial'' rule change under 
paragraph (f)(6) of Section 19 under the Act.\3\ 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    BX proposes to amend the BX Rule 9520 Series regarding eligibility 
procedures for persons subject to certain disqualifications. BX 
proposes to implement this rule change immediately upon filing. The 
text of the proposed rule change is available at http://
BXomx.cchwallstreet.com/, at BX's principal office, 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, BX 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. BX 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 is proposing to amend the BX Rule 9520 Series, the 
Exchange's eligibility proceedings section, to conform to recent 
changes in the rules of the Financial Industry Regulatory Authority, 
Inc. (``FINRA'').\4\ The proposal also includes the proposed Statutory 
Disqualification Regulatory Alert (``SD Regulatory Alert'') that 
outlines the applicable eligibility procedures. The amended rules would 
incorporate by reference, the procedures in the SD Regulatory Alert. As 
further detailed in the SD Regulatory Alert, the need for a member to 
file an application with BX for approval, notwithstanding the 
disqualification would depend on (1) the type of disqualification; (2) 
the date of disqualification; or (3) whether the firm or individual is 
seeking admission, readmission or continuation in the securities 
industry.
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    \4\ See Securities Exchange Act Release No. 59586 (March 17, 
2009), 74 FR 12166 (March 23, 2009) (SR-FINRA-2008-045); Securities 
Exchange Act Release No. 59722 (April 7, 2009), (SR-FINRA-2009-022).
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    FINRA recently revised its definition of disqualification to 
incorporate three additional categories of statutory disqualification, 
including willful violations of the federal securities or commodities 
laws, grounds for statutory disqualification that were enacted in the 
Sarbanes-Oxley Act, and associations with certain other persons subject 
to disqualification. Although the Exchange's definition has always 
included these categories, Commission staff informed the NASDAQ Stock 
Market LLC (``NASDAQ'') at the time of its registration as a national 
securities exchange that, in light of the NASDAQ's origin as a 
subsidiary of FINRA's predecessor, the National Association of 
Securities Dealers, Inc., staff would not object if NASDAQ applied 
FINRA's then more-limited definition, pending adoption of procedures by 
FINRA to process disqualifications under these additional categories. 
BX, an affiliate of NASDAQ, adopted the same definition as NASDAQ.
    The proposed rule change would amend BX Rule 9522 to address the

[[Page 13642]]

initiation of eligibility proceedings and the authority of the 
Exchange's Department of Member Regulation (``BX Regulation'' or 
``Member Regulation'') to approve applications relating to a 
disqualification where the disqualification arises from findings or 
orders specified in Section 15(b)(4)(D), (E) or (H) of the Act or 
arises under Section 3(a)(39)(E) of the Act (i.e., the added categories 
of disqualification). Currently, BX Rule 9522(a)(1) provides, among 
other things, that if the Exchange Regulation Department staff has 
reason to believe that a disqualification exists, the Exchange 
Regulation Department staff will issue a written notice to the member 
or applicant for membership under BX Rule 1013, specifying the grounds 
for such disqualification. The proposed rule provides that the Exchange 
Regulation Department staff will not issue a written notice to members 
or applicants for membership under BX Rule 1013 with respect to 
disqualifications arising solely from findings or orders specified in 
Section 15(b)(4)(D), (E), or (H) of the Act or arising under Section 
3(a)(39)(E) of the Act, unless the member is instructed to do so by the 
SD Regulatory Alert. Furthermore, a member will not have to file an 
application or a written request for relief with the Central 
Registration Depository/Public Disclosure, for any disqualifications 
arising solely from findings or orders specified in Section 
15(b)(4)(D), (E), or (H) of the Act or arising under Section 
3(a)(39)(E) of the Act, unless the member is instructed to do so by the 
SD Regulatory Alert.
    Additionally, under the current rules, a member is allowed to 
withdraw its application after the start of a hearing but prior to the 
issuance of a decision by the Exchange Review Council (``Review 
Council'') with prior written consent of the Review Council. The 
proposed rules provide that written consent is no longer required. The 
member may withdraw its application by filing a written notice with the 
Review Council and the Office of General Counsel pursuant to Rules 
9135, 9136 and 9137.
    In addition, under the current rules, the Exchange Regulation 
Department is generally responsible for evaluating applications with 
disqualifications filed by a disqualified member or sponsoring member. 
The proposed amendments to BX Rule 9522 would specifically authorize 
the Exchange Regulation Department to approve applications based on the 
added categories of disqualification that arises from finding or orders 
specified in Section 15(b)(4)(D), (E), or (H) of the Act or arises 
under Section 3(a)(39)(E) of the Act.
    In addition, if the Exchange Regulation Department determines that 
an application relating to a disqualification that arises from findings 
or orders specified in Section 15(b)(4)(D), (E), or (H) of the Act or 
arises under Section 3(a)(39)(E) of the Act should be approved, but 
with specific supervisory requirements that have the consent of the 
disqualified member, sponsoring member and/or disqualified person, then 
proposed BX Rule 9523(b) would authorize the Exchange Regulation 
Department to approve a supervisory plan, without submitting a 
recommendation to the Chairman of the Statutory Disqualification 
Committee, acting on behalf of the Review Council. Consistent with the 
current rule regarding the submission of supervisory plans, proposed BX 
Rule 9523(b)(1) would provide that, by submitting an executed letter 
consenting to a supervisory plan, a disqualified member, sponsoring 
member and/or disqualified person waives the following (in summary):

    (a) The right to a hearing and any right of appeal to challenge 
the validity of the supervisory plan;
    (b) The right to claim bias or prejudgment by the Exchange 
Regulation Department or the General Counsel regarding the 
supervisory plan; and
    (c) The right to claim a violation of the ex parte prohibitions 
or the separation of functions provisions of BX Rules 9143 and 9144, 
respectively, in connection with participation in the supervisory 
plan.

If the supervisory plan is rejected, the disqualified member, 
sponsoring member and/or disqualified person would have the right to 
proceed under BX Rule 9524. Furthermore, the proposed rule change would 
delete all references in BX Rule 9523 to the ``Office of Disciplinary 
Affairs'' as this step will no longer be utilized in the process, 
consistent with current FINRA rules.
    The proposed rule change also would include several technical 
amendments. For example, the proposed rule change would amend BX Rule 
9522(b) to renumber sections 1, 2, and 3 and the Exchange Rule 9522(c) 
to allow a member that has filed a statutory disqualification 
application to withdraw that application after the start of a hearing 
but prior to the issuance of a decision by the Review Council by filing 
a written notice with the Review Council and the Exchange's Office of 
General Counsel. In addition, for purposes of clarity and consistency, 
the proposed rule change would amend BX Rule 9522(e) to replace 
references that the Exchange Regulation Department ``may grant'' or 
``may approve'' certain matters with ``is authorized to approve'' such 
matters.
b. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provision of Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) 
\6\ thereunder, in that the proposal does not significantly affect the 
protection of investors or the public interest and does not impose any 
significant burden on competition. While the current rules broadly 
include the proposed categories of disqualification, the proposed rule 
change merely conforms to FINRA rules by specifically incorporating the 
additional categories of disqualification that were not previously 
specified in FINRA rules. Since these categories were already covered 
in the current rules, this change just delineates the specifics for 
conforming purposes. All other changes are administrative to effectuate 
the conforming changes.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor 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) \7\ of the Act and Rule 19b-
4(f)(6) thereunder.\8\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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,

[[Page 13643]]

or otherwise in furtherance of the purposes of the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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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

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2010-016. This file 
number should be included on the subject line if e-mail 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 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 such filing also will be 
available for inspection and copying at the principal offices of BX. 
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-BX-2010-016, and 
should be submitted on or before April 12, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6116 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P