Document ID: SEC-2015-1944-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2015-11-19T05:00Z

[Federal Register Volume 80, Number 223 (Thursday, November 19, 2015)]
[Notices]
[Pages 72460-72465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29488]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76436; File No. SR-NYSE-2015-35]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment Nos. 3 and 5 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment Nos. 1, 3 and 5, Amending Exchange Disciplinary Rules To 
Facilitate the Reintegration of Certain Regulatory Functions From 
Financial Industry Regulatory Authority, Inc.

November 13, 2015.

I. Introduction

    On August 5, 2015, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant

[[Page 72461]]

to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change amending its 
disciplinary rules to facilitate the reintegration of certain 
regulatory functions from Financial Industry Regulatory Authority, Inc. 
(``FINRA''). On August 14, 2015, the Exchange filed Amendment No. 1 to 
the proposed rule change, which amended and replaced the proposed rule 
change in its entirety. The proposed rule change, as modified by 
Amendment No. 1, was published in the Federal Register on August 24, 
2015.\3\ On October 6, 2015, the Exchange filed Amendment No. 2 to the 
proposal.\4\ On October 7, 2015, the Commission extended the time 
period in which to either approve the proposal, disapprove the 
proposal, or institute proceedings to determine whether to approve or 
disapprove the proposal, to November 22, 2015.\5\ On October 8, 2015, 
the Exchange filed Amendment No. 3 to the proposed rule change, which 
amended and replaced Amendment No. 2 in its entirety.\6\ On October 28, 
2015 and November 6, 2015, the Exchange filed Amendment Nos. 4 \7\ and 
5,\8\ respectively, to the proposed rule change. Amendment No. 5 
superseded Amendment No. 4 in its entirety. The Commission received no 
comments on the proposed rule change. The Commission is publishing this 
notice to solicit comment on this filing as amended by Amendment Nos. 3 
and 5 from interested persons, and is approving the proposed rule 
change, as modified by Amendment Nos. 1, 3 and 5, on an accelerated 
basis.
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    \1\ 15 U.S.C. 19s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75721 (August 18, 
2015), 80 FR 51334 (``Notice'').
    \4\ In Amendment No. 2, the Exchange revised proposed NYSE Rules 
9216, 9270 and 9310 to allow any Director or member of the Committee 
for Review (``CFR'') to require a review by the Board of any 
determination or penalty, or both, imposed in connection with an 
Acceptance, Waiver, and Consent (``AWC'') letter or offer of 
settlement determined to be uncontested before a hearing on the 
merits has begun pursuant to Rules 9216 and 9270, respectively. The 
Exchange also amended its proposed rules to permit any party to 
require review by the Board of any rejection by the Chief Regulatory 
Officer (``CRO'') of an AWC letter or offer of settlement determined 
to be uncontested before a hearing on the merits has begun. The 
Exchange further amended Rule 9310(a)(2) to provide that the 
transmission of the record of a disciplinary proceeding applied only 
to review of determinations made or penalties imposed by a Hearing 
Panel or Extended Hearing Panel, and not to determination made or 
penalties imposed pursuant to an AWC letter or an offer of 
settlement determined to be uncontested before a hearing on the 
merits has begun as no hearing record would exist. Finally, the 
Exchange also amended proposed Rule 9120(t), Interested Staff, to 
reflect that the terms ``Regulatory Staff'' and ``Exchange Staff'' 
have the same meaning for purposes of the 8000 and 9000 series as 
defined in proposed Rule 9120(x), Regulatory Staff. The amendment 
makes clear that ``Interested Staff'' encompasses any staff of the 
Exchange or FINRA that directly or indirectly participated in any 
proceeding brought under the Code of Procedure, not just Regulatory 
Staff. The Exchange further represented that the proposed definition 
of ``Interested Staff'' is not intended to substantively amend the 
rule and would encompass all staff referenced in and covered by the 
current definition.
    \5\ See Securities Exchange Act Release No. 76088, 80 FR 61857 
(October 14, 2015).
    \6\ In Amendment No. 3, the Exchange restated Amendment No. 2 
and made the following changes: (i) Clarified in its discussion that 
proposed NYSE Rule 9310(a)(2) would apply to a review of a 
determination or penalty imposed by a Hearing Panel or Extended 
Hearing Panel, (ii) made a technical change to its rule text to 
harmonize its Exhibits 4 and 5, and (iii) amended proposed NYSE Rule 
9310(a) to reflect rule text recently approved in NYSE-2015-27. See 
Securities Exchange Act Release No. 75991 (September 28, 2015), 80 
FR 59837 (October 2, 2015) (``NYSE ROC Filing''). The Commission 
recently approved the Exchange's filing to, among other things, 
establish a Regulatory Oversight Committee (``ROC''); terminate the 
agreement delegating regulatory functions to NYSE Regulation, Inc. 
(``NYSE Regulation''); and establish a CFR modeled on the current 
NYSE Regulation Board committee as a subcommittee of the ROC.
    \7\ In Amendment No. 4, the Exchange clarified the call for 
review process between January 1, 2016, when the proposed amendments 
to Rule 9216, 9270, and 9310 would be effective, if approved, and 
the termination of the delegation agreement and creation of the 
NYSE's ROC and CFR. The Exchange represented that the NYSE ROC and 
CFR would be created and the delegation agreement terminated no 
later than June 1, 2016. The Exchange further represented that it 
would be able to operate consistent with its proposed call for 
review process in proposed Rule 9310. Prior to the termination of 
the delegation agreement, a member of NYSE Regulation's CFR could 
call a matter for review. A matter called for review would be heard 
by the current NYSE Regulation's CFR and would be considered final 
action of the Exchange and could not be appealed to the Exchange 
Board. After the termination of the delegation agreement, a member 
of NYSE's CFR would have the authority to call a matter for review.
    \8\ In Amendment No. 5, the Exchange substantially restated 
Amendment No. 4, but further clarified that prior to the termination 
of the delegation agreement, the NYSE Regulation's CFR would be 
acting on behalf of the Exchange's Board of Directors and any 
decision would be considered final action of the Exchange. The 
Exchange also deleted the final sentence of Amendment No. 4.
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II. Description of the Proposal \9\
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    \9\ A full description of the proposed rule change may be found 
in the Notice, supra note 3.
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    The Exchange proposes to amend its disciplinary rules to permit the 
reintegration of certain regulatory functions from FINRA as of January 
1, 2016.

A. Background of the Proposed Rule Change

    On June 14, 2010, the NYSE, NYSE Regulation and FINRA entered into 
a Regulatory Services Agreement (``RSA''), whereby FINRA was retained 
to perform the market surveillance and enforcement functions that had 
previously been performed by NYSE, through its wholly-owned subsidiary 
NYSE Regulation. Pursuant to the RSA, FINRA has been performing 
Exchange enforcement-related regulatory services, including 
investigating and bringing enforcement actions for violations of 
Exchange rules, and conducting disciplinary proceedings arising out of 
such enforcement actions, including those relating to NYSE-only rules 
and against dual members and non-FINRA members. To facilitate FINRA's 
performance of these functions, the Exchange amended its rules to 
provide that Exchange rules that refer to NYSE Regulation or its staff, 
Exchange staff, and Exchange departments should be understood to also 
refer to FINRA staff and FINRA departments acting on behalf of the 
Exchange pursuant to the RSA.\10\
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    \10\ See NYSE Rule 0. References to NYSE Regulation and its 
staff were removed from NYSE Rule 0 as part of the NYSE ROC Filing. 
See NYSE ROC Filing, supra note 6.
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    In 2013, the Exchange adopted new disciplinary rules that are, with 
certain exceptions, substantially the same as the FINRA Rule 8000 
Series and Rule 9000 Series, which set forth rules for conducting 
investigations and enforcement actions.\11\ Those rules were 
implemented on July 1, 2013,\12\ and, among other things, the rules: 
(i) Identify FINRA's Department of Enforcement and Department of Market 
Regulation as the departments permitted to commence disciplinary 
proceedings, when authorized by FINRA's Office of Disciplinary Affairs 
(``ODA''); (ii) identify ODA as the office permitted to accept or 
reject an AWC or minor rule violation plan letter on behalf of the 
Board; and (iii) identify ODA as the office permitted to accept or 
reject an offer of settlement if not opposed by FINRA's Department of 
Enforcement or Department of Market Regulation. Those rules do not, 
however, specify whether Exchange staff or departments may perform the 
functions described in the rules.
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    \11\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02), 69045 (March 
5, 2013), 78 FR 15394 (March 11, 2013) (SR-NYSE-2013-02), and 69963 
(July 10, 2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \12\ See NYSE Information Memorandum 13-8 (May 24, 2013).
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    In October 2014, the Exchange announced that, upon expiration of 
the current RSA on December 31, 2015, certain market surveillance, 
investigation and enforcement functions performed by FINRA on behalf of 
the Exchange would be reintegrated.\13\

[[Page 72462]]

Therefore, effective January 1, 2016, the Exchange would perform 
certain of the market surveillance, investigation and enforcement 
functions FINRA was retained to perform in 2010. According to the 
Exchange, the proposed changes to the disciplinary rules in the present 
filing are necessary to permit the Exchange to perform these functions.
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    \13\ According to the Exchange, it anticipates that FINRA, under 
a new RSA currently being negotiated, would continue to conduct, 
inter alia, the registration, testing and examination of broker-
dealer members of the Exchange, and certain cross-market 
surveillance and related investigation and enforcement activities. 
See Notice, supra note 3, at n.9.
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B. Proposal

    The Exchange proposes the following changes to facilitate the 
reintegration of certain regulatory functions from FINRA by providing 
that investigative and enforcement functions of the Exchange under the 
Rule 8000 and 9000 Series would be performed by personnel and 
departments reporting to the CRO of the Exchange \14\ or by FINRA 
personnel and departments. These changes would be operative on January 
1, 2016.
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    \14\ Prior to the NYSE ROC Filing, NYSE Regulation staff 
reported to the Chief Executive Officer of NYSE Regulation, who was 
also the CRO of the Exchange.
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1. Replacement of References to Exchange and FINRA Departments and 
Personnel With References to Enforcement and Regulatory Staff
    NYSE Rule 9210 sets forth the definitions applicable to the 
disciplinary code. The Exchange proposes to add definitions of 
``Enforcement,'' referring to any department reporting to the CRO of 
the Exchange with responsibility for investigating or imposing 
sanctions on a member organization or covered person, in addition to 
FINRA's Departments of Enforcement and Market Regulation; \15\ and 
``Regulatory Staff,'' referring to any officer or employee reporting, 
directly or indirectly, to the CRO of the Exchange, in addition to 
FINRA staff acting on behalf of the Exchange in connection with the 
Rule 8000 and 9000 Series.\16\ According to the Exchange, the proposed 
amendments would allow disciplinary actions to be investigated and 
prosecuted on the Exchange's behalf by officers or employees reporting 
to the CRO beginning on January 1, 2016, while still enabling FINRA 
staff to continue to perform investigative and disciplinary activities 
that FINRA is authorized to perform on the Exchange's behalf. 
Accordingly, the Exchange proposes to amend Rules 9120, 9131, 9146, 
9211, 9212, 9213, 9215, 9216, 9251, 9253, 9264, 9269, 9270, 9551, 9552, 
9554, 9556, 9810, 9820 and 9830 to replace references to Exchange and 
FINRA departments and personnel \17\ with references to the defined 
terms ``Enforcement'' and ``Regulatory Staff.''
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    \15\ See Proposed Rule 9120(m).
    \16\ See Proposed Rule 9210(x). Certain rules in the Rule 8000 
and 9000 Series currently refer to ``Exchange staff.'' The proposed 
definition of ``Regulatory Staff'' also provides that for purposes 
of the Rule 8000 Series and Rule 9000 Series (except for Rule 9557), 
the term ``Exchange staff'' would have the same meaning as 
``Regulatory Staff.'' The Commission notes that Exchange Rule 9557 
already defines ``Exchange staff'' for purposes of that Rule. See 
NYSE Rule 9557(h).
    \17\ The Exchange also proposes to delete the definitions of 
``Head of Enforcement'' (Rule 9120(q)) and ``Head of Market 
Regulation'' (Rule 9120(r)), which refer to the FINRA department 
heads. The Commission notes that these defined terms only appear in 
the 8000 and 9000 series in the definition of ``Interested Staff,'' 
which the Exchange is also proposing to amend. The Exchange also 
proposes to delete the definition of ODA (Rule 9120(v)) and replace 
all references to ODA in the Exchange's rules with CRO, for the 
reasons discussed in ``Substitution of CRO for ODA in Rules 9211, 
9216 and 9270,'' infra. The remaining definitions in Rule 9120 would 
be renumbered.
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    The Exchange further proposes to streamline the definition of 
``Interested Staff'' (Rule 9120(u)) to eliminate references to Exchange 
and FINRA departments and staff, and provide that ``Interested Staff'' 
under any proceeding brought under the Code of Procedure (``Code'') 
means Regulatory Staff or staff \18\ who (i) report, directly or 
indirectly, to any Enforcement employee, or to the head of any 
department or office that issues a notice or decision or is designated 
as a Party under the Rule 9000 Series, (ii) directly participated in 
the authorization or initiation of a complaint or proceeding, (iii) 
directly participated in the proceeding, or (iv) directly participated 
in an examination, investigation, prosecution, or litigation related to 
a proceeding, as well as any person(s) who supervises such staff. Thus, 
according to the Exchange, as in the current definition, the new 
definition of ``Interested Staff'' in a particular matter encompasses 
supervisory personnel up to the most senior level, including the CRO, 
when staff reporting to such supervisory personnel directly 
participated in the matter.
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    \18\ See Amendment No. 3, supra note 6 (replacing the term 
``Exchange staff'' with ``staff'' in proposed Rule 9120(t)). The 
Exchange has represented that the proposed definition is not 
intended to substantively amend the rule and would encompass all 
staff referenced in and covered by the current definition. Id.
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2. Independence of the CRO and Staff in the Disciplinary Process
    The Exchange proposes to amend Rules 8210 and 9110 to add rule text 
providing that in performing functions under the Code, as well as in 
performing the functions necessary to an investigation, developing a 
complaint, examination, or proceeding authorized by Exchange rules, the 
CRO and Regulatory Staff would function independently of the commercial 
interests of the Exchange and the commercial interests of the member 
organizations.
3. One Year Revolving Door Restriction and Prohibition on Serving as 
Expert Witness
    The Exchange proposes to amend Rules 9141 and 9242 to prohibit 
former Regulatory Staff from appearing on behalf of any other person in 
a proceeding under the Rule 9000 Series and from providing expert 
testimony on behalf of any other person in a proceeding under the Rule 
9000 Series within one year of termination of employment with the 
Exchange or FINRA, respectively. However, Regulatory Staff would be 
permitted to testify as a witness on behalf of the Exchange or FINRA.
4. Substitution of CRO for ODA in Rules 9211, 9216 and 9270
    The Exchange proposes to amend Rules 9211, 9216 and 9270 to provide 
that the CRO would be responsible for (i) authorizing Enforcement to 
issue a complaint; (ii) accepting or rejecting AWC letters and minor 
rule violation plan letters; and (iii) accepting or rejecting 
uncontested offers of settlement before a hearing on the merits has 
begun, rather than FINRA's ODA.\19\
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    \19\ After a hearing on the merits has begun, an uncontested 
offer of settlement would continue to be considered by a Hearing 
Panel or Extended Hearing Panel as provided for under the current 
rule. See Proposed Rule 9270(f). The Exchange has represented that, 
because the Exchange does not have sanction guidelines, the CRO, 
Hearing Panel, or Extended Hearing Panel, as applicable, would 
consider Exchange precedent or such other precedent as it deemed 
appropriate in determining whether or not to accept a settlement 
offer under Rule 9270. See Notice, supra note 3, at n.19.
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5. Call for Review Process \20\
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    \20\ See Amendment No. 3, supra note 6.
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    The Exchange proposes to amend Rules 9216, 9270 and 9310 to permit 
a Director and any member of the CFR to require a review by the Board 
of any AWC letter under Rule 9216 and any offer of settlement under 
Rule 9270. The Exchange also proposes to permit any party to require a 
review by the Board of any rejection by the CRO or Hearing Panel or 
Extended Hearing Panel of an AWC letter or uncontested offer of 
settlement.

[[Page 72463]]

a. Call for Review of AWC Letters and Offers of Settlement
    The Exchange proposes to add subparagraph (B)(i) to Rule 
9310(a)(1), providing that any Director and any member of the CFR may 
require a review by the Board of any determination or penalty, or both, 
imposed in connection with an AWC letter under Rule 9216 or an offer of 
settlement determined to be uncontested before a hearing on the merits 
has begun under Rule 9270(f), except that none of those persons could 
request Board review of a determination or penalty concerning an 
Exchange member or member organization that is an affiliate of the 
Exchange. Under current Rule 9310(a)(1), the call for review process 
encompasses only determinations or penalties imposed by a Hearing Panel 
or Extended Hearing Panel, and thus is not available with respect to 
AWC letters and offers of settlement determined to be uncontested 
before a hearing on the merits has begun. The Exchange further proposes 
that a request for review would be made by filing with the Secretary of 
the Exchange a written request stating the basis and reasons for such 
review, within 25 days after an AWC letter or an offer of settlement 
has been sent to each Director and each member of the CFR pursuant to 
Rule 9216(a)(4) or Rule 9270(f)(3).\21\ The Exchange proposes that the 
Secretary of the Exchange would give notice of any such request for 
review to the parties.
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    \21\ Conforming changes would be made to Rule 9216(a)(3) and (4) 
and Rule 9270(f)(3) and (g). Rule 9216(a)(3) would be further 
amended to provide that if an AWC letter is rejected by the CRO, the 
member organization or covered person who executed the letter would 
be notified in writing and the letter deemed withdrawn.
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b. Call for Review of Rejected AWC Letters and Offers of Settlement
    In addition to broadening the types of settlements with respect to 
which a Director or member of the CFR may require Board review, the 
Exchange proposes that any party could require a review by the Exchange 
Board of Directors of any rejection by the CRO of an AWC letter under 
Rule 9216 or an offer of settlement determined to be uncontested before 
a hearing on the merits has begun under Rule 9270(f), except that no 
party could request Board review of a rejection of an AWC letter or 
offer of settlement concerning an Exchange member or member 
organization that is an affiliate of the Exchange. Thus, while current 
Rule 9310(a)(1) permits parties to request Board review of a 
determination by a Hearing Panel or Extended Hearing Panel to reject an 
uncontested offer of settlement, the proposed rule change would also 
allow parties to request Board review of any rejection of an AWC letter 
or uncontested offer of settlement by the CRO. Under subparagraph 
(B)(ii) of proposed Rule 9310(a)(1), such a request for review would be 
made by filing with the Secretary of the Exchange a written request 
therefor, which states the basis and reasons for such review, within 25 
days after notification pursuant to Rule 9216(a)(3) or Rule 9270(h) 
that an AWC letter or uncontested offer of settlement or order of 
acceptance is not accepted by the CRO. The Exchange proposes that the 
Secretary of the Exchange would give notice of any such request for 
review to the parties.
6. Miscellaneous Amendments to Rules 476, 8120, 9001, 9110, 9217, 9232, 
9310 and 9810
    The Exchange also proposes amending Rules 476, 8120, 9001, 9110, 
9217, 9232, 9310 and 9810 to make certain technical changes and correct 
a typographical error in Exchange Rule 9217. Specifically, the Exchange 
proposes to (i) include a reference to the 8000 series in Rule 476(a) 
and Exchange Rule 9001, (ii) delete obsolete text in Rule 476 and 9110, 
(iii) cross-reference the term ``Regulatory Staff'' in Rule 8120, (iv) 
revise Rule 9232 to provide that the Board shall from time to time 
appoint a Hearing Board in lieu of the Chairman of the Board subject to 
the Board's approval, (v) revise the title of Rule 9810(a) from 
``Department of Enforcement or Department of Regulation'' to 
``Enforcement; Service and Filing of Notice,'' and (vi) amend Rule 9310 
to provide that none of the persons referenced in the Rule, i.e., Board 
Directors, members of the Committee for Review, and the parties, may 
request Board review of a decision concerning an Exchange member 
organization that is an affiliate. Under the current Rule, only the 
parties are prohibited from requesting Board review of a decision in 
such circumstances.

III. Discussion and Commission Findings

    The Commission believes that the proposed rule change, as modified 
by Amendment Nos. 1, 3 and 5, is consistent with Section 6 of the 
Act,\22\ and the rules and regulations thereunder applicable to a 
national securities exchange.\23\ Specifically, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\24\ which requires among other things, that the Exchange's rules 
be 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, and to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system. In addition, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(7) of the Act,\25\ which 
requires in part, that the rules of the Exchange provide fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof.
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    \22\ 15 U.S.C. 78f(b).
    \23\ In approving the proposed rule change, as modified by 
Amendment Nos. 1, 3 and 5, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ 15 U.S.C. 78f(b)(7).
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    The Commission believes that (i) eliminating specific references to 
FINRA departments and replacing them with ``Enforcement,'' which would 
include departments reporting to the CRO of the Exchange with 
responsibility for investigating or sanctioning member organizations or 
covered persons, as well as FINRA's Departments of Enforcement and 
Market Regulation, and (ii) using the term ``Regulatory Staff, '' which 
would include both Exchange employees, including officers, reporting 
directly or indirectly to the CRO and FINRA staff acting on behalf of 
the Exchange in connection with the 8000 and 9000 series, should enable 
the Exchange to perform the functions described in the rules after it 
resumes certain regulatory functions next year. In addition, the 
proposed rule change would continue to allow FINRA to perform certain 
functions, such as cross-market surveillance and related investigation 
and enforcement activities, on behalf of the Exchange.\26\ According to 
the Exchange, the substance of the rules would remain unchanged.\27\
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    \26\ See supra note 13.
    \27\ See Notice, supra note 3, at 51339. The Exchange is also 
proposing to streamline its definition of ``Interested Staff'' under 
proposed Rule 9120(t). While specific references to the heads of 
departments have been deleted, the Exchange has represented that it 
is not substantively amending the rule and it would encompass all 
staff referenced in and covered by the current definition. See 
Amendment No. 3, supra note 6.

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[[Page 72464]]

    The Commission also believes that making the CRO responsible for 
authorizing complaints and approving AWC letters, minor rule violation 
plan letters and offers of settlement determined to be uncontested 
prior to a hearing on the in merits, in place of FINRA's ODA is 
consistent with the Act. These changes are similar to the rules of 
other self-regulatory organizations.\28\ Moreover, as part of the 
proposed rule change, the Exchange proposes codifying the requirement 
that the CRO and Regulatory Staff function independently of the 
commercial interests of the Exchange and member organizations in 
performing their functions under the 8000 and 9000 series. These 
provisions recognize the importance of maintaining the integrity and 
independence of the disciplinary process and should help to ensure that 
the Exchange acts in an independent and impartial manner in performing 
its regulatory functions.\29\ The call for review process proposed in 
Rule 9310(a) \30\ should provide additional oversight of the AWC and 
settlement process and further help to ensure impartial results.\31\ 
These changes are consistent with the statutory requirement to provide 
a fair procedure for disciplining members.
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    \28\ For example, the International Securities Exchange 
(``ISE'') requires its CRO to approve the statement of charges. See 
ISE Rule 1604. The ISE also requires offers of settlement to be 
approved by its CRO if a panel has not yet been appointed. However, 
letters of consent must be found acceptable by the CRO and then 
approved by its business conduct committee. See ISE Rules 1603 and 
1609. BATS Exchange, Inc. (``BATS'') Rule 8.3, however, allows its 
CRO to accept letters of consent; BATS Rule 8.8 permits its CRO to 
accept or reject settlement agreements, subject to a call for review 
by its Board pursuant to BATS Rule 8.10(c).
    \29\ See Proposed rules 8210(a) and 9110(a). The Commission 
expects the Exchange to affirmatively monitor and enforce compliance 
with these proposed rules, as it does with the other rules of the 
Exchange and consistent with its statutory obligations.
    \30\ See Amendment No. 3, supra note 6.
    \31\ Furthermore, the Commission notes that the Exchange has 
represented that, because the Exchange does not have sanction 
guidelines, the CRO, Hearing Panel, or Extended Hearing Panel, as 
applicable, would consider Exchange precedent or such other 
precedent as it deemed appropriate in determining whether or not to 
accept a settlement offer under Rule 9270. See Notice, supra note 3, 
at n.19. The Commission would also expect the Exchange to consider 
precedent in determining whether to accept or reject an AWC letter 
under Rule 9216.
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    The Commission also believes that it is consistent with the Act for 
the Exchange to have a rule prohibiting former Regulatory Staff from 
representing respondents and providing expert testimony in Exchange 
disciplinary matters within one year of termination of employment with 
either FINRA or the Exchange. These provisions are substantially 
similar to FINRA Rules 9141(c) and 9242(b),\32\ which the Exchange did 
not adopt in 2013 when the Exchange adopted its 8000 and 9000 series 
based on FINRA's rules. At the time, the Exchange believed such 
provisions were unnecessary as its employees were not generally 
involved in the regulatory and disciplinary functions which were 
carried out by FINRA on behalf of the Exchange. As such, their 
appearance would not have created the same type of conflict of 
interest.\33\ Given that the Exchange now proposes to perform functions 
under the 8000 and 9000 series, in addition to FINRA, the Commission 
believes that it is appropriate for the Exchange to adopt similar 
provisions.
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    \32\ FINRA's rules only apply to officers of FINRA and 
termination of employment with FINRA, while the Exchange's proposed 
rules would apply to all Regulatory Staff and termination of 
employment with FINRA or the Exchange.
    \33\ See Securities Exchange Act Release No. 69045, supra note 
11, at n.14 and 21. The Commission notes that the Exchange, similar 
to FINRA, would permit a former Regulatory Staff member to testify 
as a witness on behalf of the Exchange or FINRA. See Proposed Rule 
9242(b). The Commission does not believe that this poses the same 
potential conflict of interest.
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    Finally, with respect to the Exchange's proposed miscellaneous 
changes to Rules 476, 8120, 9001, 9110, 9217, 9232, 9310 and 9810, the 
Commission notes that most of these changes, such as deleting obsolete 
text, correcting a typographical error, adding cross-references, and 
amending the title of a rule to better reflect the rule, are merely 
technical in nature. With respect to the Exchange's proposed change to 
Rule 9232, which would require the Board to appoint a Hearing Board in 
lieu of the Chairman of the Board, subject to the Board's approval, the 
Commission believes that as the Board is currently required to approve 
the appointment of the Hearing Board, it is unnecessary to require the 
Chairman to appoint the Hearing Board as an initial matter. Also, with 
respect to the Exchange's proposed changes to Rule 9310(a), the 
Commission notes that some of the changes to this filing are necessary 
to reflect recently approved rule text.\34\ Moreover, the Exchange's 
proposed change to prohibit any party, Director, or CFR member from 
appealing a decision concerning an affiliate of the Exchange to the 
Exchange Board is consistent with the Exchange's current Rule 9268(e), 
which states that a majority decision of the Hearing Panel or Extended 
Hearing Panel with respect to an affiliate of the Exchange is final 
disciplinary action of the Exchange that may not be reviewed under Rule 
9310.
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    \34\ See Amendment No. 3, supra note 6.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 3, and 5, is consistent 
with Sections 6(b)(5) and 6(b)(7) of the Act \35\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \35\ 15 U.S.C. 78f(b)(5) and (7).
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IV. Accelerated Approval of the Proposed Rule Change as Modified by 
Amendment Nos. 1, 3 and 5

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act, to approve the proposal, as modified by Amendment Nos. 1, 3, 
and 5, prior to the 30th day after publication of Amendment Nos. 3 and 
5 in the Federal Register. Currently, the Exchange's call for review 
process under Rule 9310(a) only applies to determinations or penalties 
imposed by a Hearing Panel or Extended Hearing Panel under the 9200 
series. Amendment No. 3 would allow a call for review in a broader 
array of contexts, including when a CRO accepts or rejects an AWC 
letter or an offer of settlement determined to be uncontested before a 
hearing on the merits has begun, unless the determination applies to an 
affiliate. The Commission notes that NYSE's proposed call for review 
process is substantially similar to the current call for review process 
under Rule 9310(a)(1) and NYSE Rule 476(g) and therefore, does not 
raise any novel issues.\36\ Further, in Amendment No. 5, the Exchange 
merely clarified the application of the call for review process after 
the effective date of the proposed rules, if approved, and prior to the 
termination of the delegation agreement and confirmed that the Exchange 
would operate consistent with its rules in permitting calls for review 
during that time. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act,\37\ to

[[Page 72465]]

approve the proposed rule change, as modified by Amendment Nos. 1, 3 
and 5, on an accelerated basis.
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    \36\ The Commission notes that the other changes made in 
Amendment No. 3 are merely technical changes to the Exchange's rule 
text to (i) incorporate changes recently approved in the NYSE ROC 
Filing, (ii) reflect that the terms ``Regulatory Staff'' and 
``Exchange Staff'' have the same meaning for purposes of the 8000 
and 9000 series as defined in proposed Rule 9120(x), Regulatory 
Staff, and (iii) clarify that the transmission of the record of a 
disciplinary proceeding only applies to reviews of determinations 
made or penalties imposed by a Hearing Panel or Extended Hearing 
Panel as a hearing record would not exist under the circumstances 
provided for under Rule 9310(a)(1)(B).
    \37\ 15 U.S.C. 78s(b)(2).
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V. Solicitation of Comments on Amendment Nos. 3 and 5

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether this filing, as 
modified by Amendment Nos. 3 and 5, 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-NYSE-2015-35 on the subject line.

Paper Comments

     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-NYSE-2015-35. 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 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 such 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-NYSE-2015-35, and should be 
submitted on or before December 10, 2015.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\38\ that the proposed rule change, as modified by Amendment Nos. 
1, 3 and 5 (NYSE-2015-35) be, and it hereby is, approved on an 
accelerated basis.
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    \38\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
Brent J. Fields,
Secretary.
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    \39\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-29488 Filed 11-18-15; 8:45 am]
 BILLING CODE 8011-01-P