Document ID: SEC-2021-0394-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2021-03-23T04:00Z

[Federal Register Volume 86, Number 54 (Tuesday, March 23, 2021)]
[Notices]
[Pages 15538-15541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05916]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91342; File No. SR-Phlx-2021-13]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend General 9, 
Section 19, ``Discretionary Power as to Customers' Accounts'' and Adopt 
Two New Rules Within General 9 at Sections 30 and 45

March 17, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 15539]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 5, 2021, Nasdaq PHLX LLC (``Phlx'' 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 9, Section 19, 
``Discretionary Power as to Customers' Accounts'' and adopt two new 
rules within General 9 at Sections 30 and 45.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq._com/rulebook/phlx/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
    A proposal to amend General 9, Section 19, ``Discretionary Power as 
to Customers' Accounts'' and adopt two new rules within General 9 at 
Sections 30 and 45. Each change is described below.
General 9, Section 19
    Today, General 9, Section 19, ``Discretionary Power as to 
Customers' Accounts'' has a rule citation to former ``NASD Rule 2510.'' 
General 9, Section 19 was relocated \3\ in 2020 from Phlx Rule 754 in 
connection with a Rulebook harmonization effort.\4\
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    \3\ See Securities Exchange Act Release No. 88213 (February 14, 
2020), 85 FR 9859 (February 20, 2020) (SR-Phlx-2020-03) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Relocate Rules From Its Current Rulebook Into Its New Rulebook 
Shell).
    \4\ See Securities Exchange Act Release No. 78419 (July 26, 
2016), 81 FR 50582 (August 1, 2016) (SR-Phlx-2016-78) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Phlx Rule 754 (Employees' Discretion as to Customers' Accounts)).
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    During 2008, FINRA embarked on an extended process of moving rules 
formerly designated as ``NASD Rules'' into a consolidated FINRA 
rulebook.\5\ As part of that relocation, NASD Rule 2510 was relocated 
to FINRA Rule 3260 without any substantive changes to the NASD rule 
text.\6\
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    \5\ See Securities Exchange Act Release No. 63784 (January 27, 
2011), 76 FR 5850 (February 2, 2011) (SR-FINRA-2010-052) (``FINRA 
Filing'').
    \6\ See supra note 21 [sic].
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    At this time, the Exchange proposes to update the reference to 
``NASD Rule 2510'' within General 9, Section 19 and replace it with a 
reference to ``FINRA Rule 3260''. The Exchange also proposes to add a 
new section (b) to provide cross-references to rules cited within FINRA 
Rule 3260 to corresponding Phlx rules. In doing so, Phlx is cross-
referencing two new rules which are being adopted by this proposal.
    The Exchange also proposes to amend the title of this rule from 
``Discretionary Power as to Customers' Accounts'' to ``Discretionary 
Accounts.''
General 9, Section 30
    The Exchange proposes to adopt a new General 9, Section 30, which 
is currently reserved, which is identical to FINRA Rule 4511 in order 
to align its rule with FINRA's rule.
    By way of background, current FINRA Rule 4511 streamlined, and 
replaced, the language of former NASD Rule 3110(a) to clarify that 
members are obligated to make and preserve books and records as 
required under the FINRA rules, the Exchange Act and the applicable 
Exchange Act rules.\7\ FINRA Rule 4511 requires members to preserve for 
a period of at least six years those FINRA books and records for which 
there is no specified retention period under the FINRA Rules or 
applicable Exchange Act rules. The rule also clarifies that members are 
required to preserve the books and records required to be made pursuant 
to the FINRA Rules in a format and media that complies with Exchange 
Act Rule 17a-4. FINRA deleted the general recordkeeping provisions of 
NYSE Rule 440 because its provisions are substantially similar to FINRA 
Rule 4511.\8\
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    \7\ FINRA Filing at 5851.
    \8\ Id.
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    Phlx proposes to incorporate by reference FINRA Rule 4511. The 
Nasdaq Stock Market LLC (``Nasdaq'') General 9, Section 30 similarly 
incorporates FINRA Rule 4511.
General 9, Section 45
    The Exchange proposes to adopt a new General 9, Section 45, which 
is currently reserved, and title that rule ``Customer Account 
Information.'' The Exchange proposes to adopt rule text similar to 
Nasdaq General 9, Section 45, which is based on FINRA Rule 4512.
    By way of background, former NASD Rule 3110(c)(1) required that 
members maintain certain information relating to customer accounts, 
including, among other things, the signature of the registered 
representative introducing the account and signature of the member, 
partner, officer or manager who accepts the account. FINRA proposed to 
simplify this provision by instead requiring members to maintain the 
name of the associated person, if any, responsible for the account. 
Current FINRA Rule 4512 requires where a member designates multiple 
individuals as being responsible for an account, the member maintain 
each of their names and a record indicating the scope of their 
responsibilities with respect to the account. Also, the rule requires 
that members maintain the signature of the partner, officer or manager 
denoting that the account has been accepted in accordance with the 
member's policies and procedures for acceptance of accounts.\9\
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    \9\ FINRA Filing at [sic].
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    FINRA provides that with respect to accounts opened pursuant to 
prior NASD Rules (e.g., the January 1991 cut-off specified in NASD Rule 
3110(c)), members will be permitted to continue maintaining the 
information required by those prior NASD Rules until such time as they 
update the account information in the course of their routine and 
customary business or as required by other applicable laws or rules. 
Additionally, FINRA's rule added supplementary material to:
     Clarify that required customer account records are subject 
to a six-year retention period;
     Remind members that they may be subject to additional 
recordkeeping requirements under the Exchange Act (e.g., Exchange Act 
Rule 17a-3(a)(17));
     Remind members of their obligation to comply with the 
requirements of FINRA Rule 2070 (Transactions Involving FINRA 
Employees); \[\21\]\ [sic] and

[[Page 15540]]

     Provide general explanations of the terms ``maintain'' and 
``preserve'' for purposes of Rule 4512 only.
    The remaining provisions of NASD Rule 3110(c) were incorporated 
into FINRA Rule 4512 without material change.
    Phlx proposes to adopt a new rule, similar to Nasdaq General 9, 
Section 45, which provides:

    (a) Phlx member organizations and persons associated with a 
member shall comply with FINRA Rule 4512 as if such Rule were part 
of the Phlx rules.
    (b) For purposes of this Rule:
    (1) References to Rule 3260 shall be construed as references to 
General 9, Section 19;
    (2) references to Rules 2070, 2090, and 4512 shall be construed 
as references to General 9, Sections 29, 10, and this Rule, 
respectively;
    (3) references to ``a prior FINRA rule'' shall be construed as 
references to ``a FINRA or PHLX rule in effect prior to the 
effectiveness of FINRA Rule 4512'';
    (4) PHLX and FINRA are parties to the Regulatory Contract 
pursuant to which FINRA has agreed to perform certain functions on 
behalf of BX. Therefore, PHLX members are complying with this Rule 
by complying with FINRA Rule 4512 as written, including, for 
example, providing information required by FINRA staff. In addition, 
functions performed by FINRA, FINRA departments, and FINRA staff 
under this Rule are being performed by FINRA on behalf of PHLX.

    This rule text incorporates FINRA Rule 4512 similar to Nasdaq 
General 9, Section 45.
Exemption Request
    The Exchange will request an exemption from the rule filing 
requirements of Section 19(b) of the Exchange Act for those rules of 
another self-regulatory organization (``SRO'') that it proposes to 
incorporate by reference and to the extent such rules are effected 
solely by virtue of a change to any of those rules.
Implementation
    The proposed rule changes that are the subject of this filing will 
be operative on May 31, 2021, but only if the Exchange's request for an 
exemption under Section 36 of the Exchange Act from filing proposed 
rule changes, described above, is granted by that date. The Exchange 
will publish a notice to confirm the status of its exemptive request on 
or before May 31, 2021. In the event the exemption is not granted by 
May 31, 2021, the Exchange will submit a filing to designate a 
different operative date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and with 
Section 6(b)(5) of the Act,\11\ in particular, in that the proposal 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 regulating, clearing, 
settling, processing information with respect to, and 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.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to General 9, Section 19 and adoption of the 
books and records rules within General 9, Sections 30 and 45 will 
conform certain Phlx's Rules to FINRA rules, thus promoting application 
of consistent regulatory standards with respect to rules that FINRA 
enforces pursuant to its regulatory services agreement with Phlx.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. The 
proposed changes to General 9, Section 19 and adoption of the books and 
records rules within General 9, Sections 30 and 45 will conform Phlx 
Rules to those of FINRA which has no impact on competition. Today, 
FINRA members must adhere to these rules.

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2021-13 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-Phlx-2021-13. 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

[[Page 15541]]

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. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly.
    All submissions should refer to File Number SR-Phlx-2021-13 and 
should be submitted on or before April 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05916 Filed 3-22-21; 8:45 am]
BILLING CODE 8011-01-P