Document ID: SEC-2016-1527-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2016-08-30T04:00Z

[Federal Register Volume 81, Number 168 (Tuesday, August 30, 2016)]
[Notices]
[Pages 59678-59688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20733]

[[Page 59678]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78664; File No. SR-NYSE-2016-40)

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending the Text of Current Rule 8313; Amending Rules Relating to the 
Imposition of Temporary and Current Cease and Desist Orders to 
Correspond to Recent Amendments by FINRA; and Making Certain Technical 
and Conforming Changes to Rule 9310

August 24, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on August 12, 2016, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 (1) amendments to Rule 8313 relating to the 
Exchange's ability to publicly release disciplinary complaints, 
decisions and other information, modeled on the text of FINRA Rule 
8313; (2) amendments to Rules 9120, 9268, 9269, 9270, 9551, 9552, 9554, 
9555, 9556, 9557, 9558, 9559, 9810, 9830, 9840, 9850, and 9860 and a 
new Rule 9291 relating to temporary or permanent cease and desist 
orders to correspond to recent amendments by FINRA to its Rule 9100, 
9200, 9550, and 9800 Series; and (3) certain technical and conforming 
changes to Rule 9310. 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 self-regulatory organization 
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:
    (1) Amendments to Rule 8313 (Release of Disciplinary Decisions) 
relating to the Exchange's ability to publicly release disciplinary 
complaints, decisions and other information, modeled on the text of 
FINRA Rule 8313; \4\
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    \4\ References to rules are to NYSE rules unless otherwise 
indicated.
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    (2) amendments to Rules 9120, 9268, 9269, 9270, 9551, 9552, 9554, 
9555, 9556, 9557, 9558, 9559, 9810, 9830, 9840, 9850, and 9860 and a 
new Rule 9291 relating to temporary or permanent cease and desist 
orders to correspond to recent amendments by FINRA to its Rule 9100, 
9200, 9550, and 9800 Series; and
    (3) certain technical and conforming changes to Rule 9310.\5\
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    \5\ In addition, the Exchange proposes the following technical 
and conforming changes to the harmonized rules: (1) Substituting the 
term ``member organization'' for ``member'' (see note 23, infra); 
(2) substituting the term ``Exchange'' for ``FINRA''; (3) changing 
certain cross-references to FINRA rules to cross-references to 
Exchange rules; (4) substituting a reference to the Exchange's Chief 
Regulatory Officer for a reference to a senior officer at FINRA; and 
(5) changing certain references to Adjudicators to make them 
consistent with references to Adjudicators throughout the Rule 9000 
Series.
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Background
    In 2013, the NYSE adopted disciplinary rules that are, with certain 
exceptions, substantially the same as the FINRA Rule 8000 Series and 
Rule 9000 Series, and which set forth rules for conducting 
investigations and enforcement actions.\6\ The NYSE disciplinary rules 
were implemented on July 1, 2013.\7\
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    \6\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02) (``2013 
Notice''), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR-
NYSE-2013-02) (``2013 Approval Order''), and 69963 (July 10, 2013), 
78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \7\ See NYSE Information Memorandum 13-8 (May 24, 2013).
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    In adopting the FINRA disciplinary rules, the NYSE retained its 
long-standing practice of publishing all final disciplinary decisions, 
other than minor rule violations, on its Web site and did not adopt the 
text of FINRA Rule 8313, which provides that disciplinary complaints 
and decisions that meet certain criteria will be either published or 
made available upon request.\8\ At the time, the Exchange was not 
directly performing enforcement-related regulatory functions, having 
entered into a Regulatory Services Agreement with FINRA in 2010 to 
perform those functions, among others, on the Exchange's behalf.\9\
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    \8\ 2013 Approval Order, 78 FR at 15395.
    \9\ See Securities Exchange Act Release No. 62355 (June 22, 
2010), 75 FR 36729, 36729 (June 28, 2010) (SR-NYSE-2010-46).
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    In adopting the FINRA disciplinary rules, the Exchange adopted 
FINRA's rules and procedures for imposing temporary or permanent cease 
and desist orders. In particular, the Exchange adopted FINRA Rule 8310 
as NYSE Rule 8310, which, among other things, allows the Exchange to 
impose a temporary or permanent cease and desist order.\10\ NYSE Rule 
9290, based on FINRA Rule 9290, provides for expedited disciplinary 
proceedings.\11\ Rule 9556, based on FINRA Rule 9556, provides 
procedures and consequences for a failure to comply with temporary and 
permanent cease and desist orders.\12\ The Exchange also adopted the 
FINRA Rule 9800 Series, which sets forth the procedures for issuing 
temporary cease and desist orders, as the NYSE Rule 9800 Series.\13\
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    \10\ 2013 Notice, 78 FR at 5221.
    \11\ 2013 Notice, 78 FR at 5230. Under Rule 9290, for any 
disciplinary proceeding, the subject matter of which also is subject 
to a temporary cease and desist proceeding initiated pursuant to 
Rule 9810 or a temporary cease and desist order, hearings are 
required to be held and decisions rendered at the earliest possible 
time. See id.
    \12\ Id. at 5232.
    \13\ Id. at 5233.
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    In 2015, FINRA adopted a series of amendments to its substantive 
and procedural rules governing temporary and permanent cease and desist 
orders.\14\ In particular, FINRA amended its Rule Series 9800 to, among 
other things, revise the evidentiary standard for finding a violation 
to ``a showing of likelihood of success on the merits.'' \15\ FINRA 
also amended its Rules 9120,

[[Page 59679]]

9268, 9269, 9270, 9291,\16\ 9551, 9552,\17\ 9554, 9555, 9556, 9557, 
9558, 9559, 9810,\18\ 9830, 9840, 9850 and 9860 to adopt a new 
expedited proceeding for failure to comply with a temporary cease and 
desist order or a permanent cease and desist order; harmonize the 
provisions governing how documents are served in temporary cease and 
desist proceedings and related expedited proceedings; clarify the 
process for issuing permanent cease and desist orders; ease FINRA's 
administrative burden in temporary cease and desist proceedings; and 
make conforming changes throughout its Code of Procedure.\19\
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    \14\ See Securities Exchange Act Release Nos. 75333 (June 30, 
2015), 80 FR 38783 (July 7, 2015) (SR-FINRA-2015-019) (``2015 FINRA 
Notice''), 75629 (August 6, 2015), 80 FR 48379 (August 12, 2015) 
(SR-FINRA-2015-019) (``2015 FINRA Filing'').
    \15\ Id. at 48379.
    \16\ FINRA also amended Rules 9348 (Powers of the National 
Adjudicatory Council on Review) and 9351 (Discretionary Review by 
FINRA Board). The Exchange did not adopt either rule and instead 
retained the substance of its appeals process when it adopted the 
Rule 8000 and 9000 Series in 2013. See 2013 Approval Order, 78 FR at 
15394.
    \17\ FINRA also amended Rule 9553, which concerns failure to pay 
fees, dues, assessments or other charges. The Exchange did not adopt 
FINRA Rule 9553 in 2013. See 2013 Approval Order, 78 FR at 15399.
    \18\ FINRA also amended Rule 9820 (Appointment of Hearing 
Officers and Hearing Panel) to expand the pool of persons eligible 
to serve on hearing panels in order to ease certain administrative 
burdens on FINRA's Office of Hearing Officers. See 2015 FINRA 
Filing, 80 FR at 48380. The Exchange is not adopting these changes.
    \19\ Id. at 48379.
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    On January 1, 2016, the Exchange reintegrated certain regulatory 
functions previously performed on its behalf by FINRA.\20\ Among other 
things, the Exchange now directly performs enforcement-related 
regulatory functions, including investigating potential violations of 
Exchange rules, and bringing enforcement actions and conducting 
disciplinary proceedings arising out of such investigations.
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    \20\ See Securities Exchange Act Release No. 75721 (Aug. 18, 
2015), 80 FR 51334 (August 24, 2015) and Exchange Act Release No. 
76436 (November 13, 2015), 80 FR 72460 (November 19, 2015) (SR-NYSE-
2015-35).
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Proposed Rule Change
Amendments to Rule 8313 Governing Release of Disciplinary Complaints, 
Decisions and Other Information Based on FINRA Rule 8313
    Rule 8313 currently provides that the Exchange shall publish a copy 
of final disciplinary action under the Rule 9000 Series, other than 
minor rule violations, on its Web site. The Exchange proposes to 
restructure Rule 8313 and add four subsections and text modeled on 
FINRA Rule 8313, as described below. The scope of proposed Rule 8313 
would be limited to publication of materials relating to the 
disciplinary process set forth in the Rule 8000 and 9000 Series. In 
that regard, the Exchange has determined not to adopt the FINRA rule in 
all respects.
General Standards
    The Exchange proposes to add a new subsection (a) to Rule 8313 
entitled ``General Standards'' and text that would set forth general 
standards for the release to the public of disciplinary complaints, 
decisions or information.
    Proposed Rule 8313(a)(1) would retain, as modified, the current 
text of Rule 8313. The word ``publish'' would be replaced with 
``release to the public'' to conform to the FINRA rule. The phrase 
``final disciplinary action'' would be deleted as unnecessary in light 
of the more detailed provisions throughout the proposed Rule. The 
proposed Rule would provide that the Exchange shall release to the 
public a copy of and, at the Exchange's discretion, information with 
respect to, any disciplinary complaint or disciplinary decision issued 
by the Exchange, as defined in proposed Rule 8313(e) under the Rule 
9000 Series, other than minor rule violations, on its Web site. 
Proposed Rule 8313(a)(1) would also provide that, in response to a 
request, the Exchange shall also release to the requesting party a copy 
of any identified disciplinary complaint or disciplinary decision 
issued by the Exchange, as defined in proposed Rule 8313(e). These 
proposed amendments are modeled on FINRA Rule 8313(a)(1) and would be 
substantially similar to the FINRA rule.
    Proposed Rule 8313(a)(2) provides that the Exchange shall release 
to the public a copy of, and at the Exchange's discretion information 
with respect to, any statutory disqualification decision, notification, 
or notice issued by the Exchange pursuant to the Rule 9520 Series that 
will be filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') and any temporary cease and desist order or decision 
issued by the Exchange pursuant to the Rule 9800 Series. Proposed Rule 
8313(a)(2) is modeled on FINRA Rule 8313(a)(2) but would substitute the 
term ``Exchange'' for ``FINRA.''
    Proposed Rule 8313(a)(3) provides that the Exchange shall release 
to the public information with respect to any suspension, cancellation, 
expulsion, or bar that constitutes final Exchange action imposed 
pursuant to Rules 9552, 9554,\21\ 9555, 9556, and 9558, as well as 
information with respect to any suspension imposed pursuant to Rule 
9557. Proposed subsection (a)(3) would also provide that the Exchange 
shall release to the public a copy of, and information with respect to, 
any decision issued pursuant to Rule 9559 that constitutes final 
Exchange action. Further, the proposed subsection would provide that 
the Exchange shall release to the public information with respect to 
the summary suspension or expulsion of a member organization or the 
summary revocation of the registration of a covered person for a 
failure to pay fines, other monetary sanctions, or costs pursuant to 
Rule 8320. Proposed Rule 8313(a)(3) is modeled on FINRA Rule 8313(a)(3) 
but would (1) exclude failure to pay Exchange fees from its scope; \22\ 
(2) substitute the term ``Exchange'' for ``FINRA''; and (3) use the 
terms ``member organization'' and ``covered person'' rather than 
``member'' and ``person associated with a member,'' which have 
different meanings under FINRA and Exchange rules.\23\
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    \21\ FINRA's version of Rule 8313 also includes a reference to 
FINRA Rule 9553, which relates to failure to pay FINRA dues, fees 
and other charges. In 2013, the Exchange adopted the text of FINRA 
Rule 8320, which addresses the non-payment of fines and monetary 
sanctions, but did not adopt FINRA Rule 9553. See note 17, supra. 
Instead, the Exchange continued to use Rule 309, which relates to 
failure to pay Exchange fees and other amounts due to the Exchange. 
See 2013 Approval Order, 78 FR at 15399. Inasmuch as the scope of 
the proposed rule change would be limited to publication of 
materials relating to the disciplinary process under the Rule 8000 
and 9000 Series, the Exchange proposes to include Rule 8320 but not 
Rule 309 within the scope of proposed Rule 8313(a)(3).
    \22\ See note 21, supra.
    \23\ Under FINRA Rules, a ``member'' means an individual, 
partnership, corporation or other legal entity admitted to 
membership in FINRA under Articles III and IV of the FINRA By-Laws. 
See FINRA Rule 0160(b)(10). Article III, Sec. 1(a) generally limits 
membership to registered brokers, dealers, municipal securities 
brokers or dealers, or government securities brokers or dealers. 
NYSE's equivalent term is ``member organization.'' See Rule 2(b)(i) 
(defining ``member organization'' as a registered broker or dealer 
(unless exempt pursuant to the Act) that is a member of FINRA or 
another registered securities exchange). Under Rule 2(a), the term 
``member'' means a natural person associated with a member 
organization who has been approved by the Exchange and designated by 
such member organization to effect transactions on the floor of the 
Exchange or any facility thereof. A ``member'' is not a registered 
broker-dealer and does not have employees; only member organizations 
have employees. For purposes of the proposed amendments to its 
disciplinary rules, the Exchange proposes to continue using the 
phrase ``covered person'' to indicate employees of a member 
organization. See 2013 Notice, 78 FR at 5219.
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    Proposed Rule 8313(a)(4) provides that the Exchange may release to 
the public a copy of, and information with respect to, any decision or 
notice issued pursuant to the Rule 9600 Series, and any other decision 
appealable to the SEC under Exchange Act Section 19(d). Proposed Rule 
8313(a)(4) is modeled on FINRA Rule 8313(a)(5). FINRA Rule 8313(a)(5) 
also contains cross references to FINRA Rule 6490 and the FINRA Rule 
9700 Series. FINRA Rule 6490

[[Page 59680]]

(Processing of Company-Related Actions) applies to issuers of non-
exchange listed equity and debt securities quoted on the OTC 
marketplace. FINRA's Rule 9700 Series provides redress for persons 
aggrieved by the operations of any automated quotation, execution, or 
communication system owned or operated by FINRA. FINRA Rule 6490 has no 
analogue in the Exchange's Rules. The Exchange does not propose to 
include Rule 18, which addresses compensation in connection with an 
Exchange system failure, within the scope of Rule 8313. As noted above, 
the Exchange has determined to limit the scope of Rule 8313 to 
publication of materials relating to the disciplinary process under the 
Rule 8000 and 9000 Series.\24\ The Exchange would also substitute the 
term ``Exchange'' for ``FINRA.'' \25\
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    \24\ For the same reasons, the Exchange also does not propose to 
adopt FINRA Rule 8313(a)(6), which provides that that FINRA may 
release to the public a copy of, and information with respect to, 
any complaint, decision, order, notification or notice issued under 
FINRA rules, where the release of such information is deemed by 
FINRA's CEO (or such other senior officer as the CEO may designate) 
to be in the public interest, in such format as he or she finds 
appropriate.
    \25\ The Exchange is not proposing to adopt rule text similar to 
FINRA Rule 8313(a)(4), which provides that FINRA may release to the 
public a copy of, and information with respect to, any decision or 
notice issued pursuant to NASD Rules 1015 and 1016 governing appeals 
from adverse membership and continuing membership decisions. As 
noted above, the Exchange has determined to limit the scope of Rule 
8313 to publication of materials relating to the disciplinary 
process under the Rule 8000 and 9000 Series.
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Release Specifications
    The Exchange proposes to add a new subsection (b) to Rule 8313 
entitled ``Release Specifications'' modeled on FINRA Rules 8313(b)(1) 
and (2).
    Proposed Rule 8313(b)(1) provides that copies of, and information 
with respect to, any disciplinary complaint released to the public 
pursuant to paragraph (a) of the proposed Rule shall indicate that a 
disciplinary complaint represents the initiation of a formal proceeding 
by the Exchange in which findings as to the allegations in the 
complaint have not been made and does not represent a decision as to 
any of the allegations contained in the complaint. The proposed Rule 
would be the same as FINRA Rule 8313(b)(1) except that the proposed 
Rule would substitute the term ``Exchange'' for ``FINRA.''
    Proposed Rule 8313(b)(2) provides that copies of, and information 
with respect to, any disciplinary decision or other decision, order, 
notification, or notice released to the public pursuant to paragraph 
(a) of the proposed Rule prior to the expiration of the time period 
provided for an appeal or call for review as permitted under Exchange 
rules or the Exchange Act, or while such an appeal or call for review 
is pending, shall indicate that the findings and sanctions imposed 
therein are subject to review and modification by the Exchange or the 
SEC. The proposed Rule would be the same as FINRA Rule 8313(b)(2) 
except that the proposed Rule would substitute the term ``Exchange'' 
for ``FINRA.''
Discretion To Redact Certain Information or Waive Publication
    The Exchange has determined that, subject to limited exceptions, 
disciplinary information should be released to the public in unredacted 
form. The Exchange proposes to add a new subsection (c) to Rule 8313 
entitled ``Discretion to Redact Certain Information or Waive 
Publication,'' modeled on FINRA Rule 8313(c)(1) and (2).
    With respect to the limited exceptions, proposed Rule 8313(c)(1) 
would provide that the Exchange reserves the right to redact, on a 
case-by-case basis, information that contains confidential customer 
information, including customer identities, or information that raises 
significant identity theft, personal safety, or privacy concerns that 
are not outweighed by investor protection concerns. The proposed Rule 
would be the same as FINRA Rule 8313(c)(1) except that the proposed 
Rule would substitute the term ``Exchange'' for ``FINRA.''
    Similarly, proposed Rule 8313(c)(2) provides that, notwithstanding 
paragraph (a) of the proposed rule, the Exchange may determine, in its 
discretion, to waive the requirement to release a copy of, or 
information with respect to, any disciplinary complaint, disciplinary 
decision or other decision, order, notification, or notice under those 
extraordinary circumstances where the release of such information would 
violate fundamental notions of fairness or work an injustice. The 
proposed Rule would be the same as FINRA Rule 8313(c)(1) [sic] except 
that the proposed Rule would substitute the term ``Exchange'' for 
``FINRA.''
Notice of Appeals of Exchange Decisions
    The Exchange proposes to add a new subsection (d) to Rule 8313 
entitled ``Notice of Appeals of Exchange Decisions to the SEC'' modeled 
on FINRA Rule 8313(d). Proposed Rule 8313(d) provides that the Exchange 
must provide notice to the public when a disciplinary decision of the 
Exchange is appealed to the SEC and the notice shall state whether the 
effectiveness of the decision has been stayed pending the outcome of 
proceedings before the Commission. The proposed Rule would be the same 
as FINRA Rule 8313(d)(1) except that the proposed Rule would substitute 
the term ``Exchange'' for ``FINRA.''
Definitions
    Finally, the Exchange proposes to add a new subsection (e) to Rule 
8313 entitled ``Definitions.'' Proposed Rule 8313(e) would set forth 
definitions of the terms ``disciplinary complaint'' and ``disciplinary 
decision'' as used in the Rule, modeled on the definitions contained in 
FINRA Rule 8313(e).
    First, Rule 8313(e)(1) would define the term ``disciplinary 
complaint'' to mean any complaint issued pursuant to the Rule 9200 
Series. The proposed text is identical to FINRA Rule 8313(e)(1).
    Second, Rule 8313(e)(2) would define the term ``disciplinary 
decision'' to mean any decision issued pursuant to the Rule 9000 
Series, including, decisions issued by a Hearing Officer, Hearing 
Panel, Extended Hearing Panel, or the Board of Directors, and orders 
accepting offers of settlement, and Letters of Acceptance, Waiver and 
Consent. Under proposed subsection (e)(2), the term would not include 
decisions issued pursuant to the Rule 9550 Series, Rule 9600 Series, or 
Rule 9800 Series, or decisions, notifications, or notices issued 
pursuant to the Rule 9520 Series, which are addressed by paragraphs 
(a)(2), (a)(3) and (a)(4) of the proposed Rule. Finally, Rule 
8313(e)(2) provides that minor rule violation plan letters issued 
pursuant to Rules 9216 and 9217 are not subject to the proposed Rule. 
The proposed Rule would be the same as FINRA Rule 8313(e)(2) except 
that the proposed Rule would substitute the term ``Exchange'' for 
``FINRA.''
* * * * *
    The Exchange believes that greater access to information regarding 
disciplinary actions provides valuable guidance and information to 
member organizations, associated persons, other regulators, and 
investors.\26\ Further, releasing detailed disciplinary information to 
the public can serve to deter and prevent future misconduct and improve 
overall business standards in the securities industry as well as 
allowing investors to consider firms' and representatives' disciplinary 
histories when considering whether to

[[Page 59681]]

engage in business with them.\27\ Publishing more detailed information 
than the exchange currently does would also allow member organizations 
to utilize that information to educate associated persons as to 
compliance matters, highlight potential violations and related 
sanctions, as well as inform the firms' compliance procedures involving 
similar business lines, products, or industry practices. Finally, the 
Exchange believes that any member organization or individual facing 
allegations of rule violations would also have access to more 
information to gain greater insight on related facts and sanctions.\28\
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    \26\ See Securities Exchange Act Release Nos. 69178 (March 19, 
2013), 78 FR 17975, 17976 (March 25, 2013) (SR-FINRA-2013-018) and 
69825 (June 21, 2013), 78 FR 38771, 38775 (June 27, 2013) (SR-FINRA-
2013-018).
    \27\ Release No. 69178, 78 FR at 17976.
    \28\ See id.
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Harmonization With FINRA Rules Relating to Temporary or Permanent Cease 
and Desist Orders
    The Exchange also proposes to harmonize its disciplinary rules and 
procedures relating to the imposition of temporary and permanent cease 
and desist orders with approved FINRA amendments. To effectuate these 
changes, the Exchange proposes the following amendments to Rules 9120, 
9268, 9269, 9270, 9551, 9552, 9554, 9555, 9556, 9557, 9558, 9559, 9810, 
and 9830, 9840, 9850, and 9860. The Exchange also proposes to adopt a 
new Rule 9291 based on FINRA's recently adopted Rule 9291.
     The Exchange proposes to amend the Rule 9120 definitions 
applicable to the Rule 9000 Series, as follows:
    [cir] The Exchange proposes to amend the definition of ``Hearing 
Panel'' in Rule 9120(s) to encompass a Hearing Panel constituted under 
the Rule 9800 Series to conduct a temporary cease and desist 
proceeding.
    [cir] The Exchange proposes to amend the definition of ``Interested 
Staff'' in Rule 9120(t)(A) to encompass any staff that issues a 
petition under the Rule 9000 Series.\29\
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    \29\ In 2015, the Exchange amended and streamlined the 
definition of ``Interested Staff'' in Rule 9120(t) and, as a result, 
the NYSE and FINRA definitions of ``Interested Staff'' are organized 
differently. However, both definitions encompass supervisory 
personnel up to the most senior level, including the CRO, when staff 
reporting to such supervisory personnel directly participated in a 
matter. See Securities Exchange Act Release No. 76436 (November 13, 
2015), 80 FR 72460, 72462 (November 19, 2015) (June 27, 2013) (SR-
NYSE-2015-35). The proposed change to Rule 9120(t)(A) would bring 
any staff that issues a petition under the Rule 9000 Series within 
the ambit of the definition, and thus remain consistent with the 
FINRA definition, as amended in the 2015 FINRA Filing.
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    [cir] The Exchange proposes to amend the definition of ``Panelist'' 
in Rule 9120(v) to encompass the use of the term in the Rule 9550 
Series and the Rule 9800 Series.
    [cir] Finally, the Exchange proposes to amend the definition of 
``Respondent'' in Rule 9120(y) to provide that in a proceeding governed 
by the Rule 9800 Series, the term ``Respondent'' means a member 
organization or covered person that has been served with a notice 
initiating a cease and desist proceeding.
     Rule 9268 sets forth the timing and the contents of a 
decision of the Hearing Panel or Extended Hearing Panel and the 
procedures for a dissenting opinion, service of the decision, and any 
requests for review. The Exchange proposes to amend Rule 9268(b), which 
sets forth the contents of a panel decision, by adding a new subsection 
(7), providing that when the sanctions include a permanent cease and 
desist order, the decision should include a statement that is 
consistent with the requirements of Rule 9291(a) concerning the 
content, scope, and form of a permanent cease and desist order. The 
proposed change is identical to that recently adopted by FINRA to its 
version of Rule 9268.
     Rule 9269 governs the process for the issuance and review 
of default decisions when a Respondent fails to timely answer a 
complaint or fails to appear at a pre-hearing conference or hearing 
where due notice has been provided. The Exchange proposes to amend Rule 
9269(a), governing issuance of default decisions, to add a new 
subsection (4) that provides that the Office of Hearing Officers shall 
provide a copy of the default decision to each member organization with 
which a Respondent is associated. The proposed change is identical to 
recently adopted FINRA Rule 9269(a)(4), except for conforming 
references to member organizations.
     Rule 9270 provides a settlement procedure for a Respondent 
who has been notified that a proceeding has been instituted against him 
or her. The Exchange proposes two amendments to this Rule. First, the 
Exchange would amend Rule 9270(c), which details the content and 
signature requirements for offers of settlement, to add a new 
subsection (6) providing that, if applicable, the offer should describe 
in detail a proposed permanent cease and desist order to be imposed 
that is consistent with the requirements of proposed Rule 9291(a) 
concerning the content, scope, and form of a permanent cease and desist 
order. This proposed amendment is substantially the same as FINRA Rule 
9270(c)(6) as amended in the 2015 FINRA Filing.\30\
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    \30\ The Exchange also proposes a non-substantive amendment at 
the end of Rule 9270(c)(4) to delete the word ``and'' and a non-
substantive amendment at the end of Rule 9270(c)(5) to delete a 
period, add a semicolon, and add the word ``and.''
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    Second, the Exchange proposes to add the phrase ``including, if 
applicable, a permanent cease and desist order'' to Rule 9270(f)(1), 
governing uncontested offers of settlement, and a sentence to Rule 
9270(f)(3) providing that Enforcement shall provide a copy of an issued 
order of acceptance to each member organization with which a Respondent 
is associated. The proposed amendments are identical to FINRA Rules 
9270(e)(1) and 9270(e)(3), respectively, except for conforming 
references to the Exchange's Enforcement group and member 
organizations.
     The Exchange proposes to amend the notice and service 
requirements for expedited proceedings under the Rule 9550 Series, by 
providing for service upon counsel and service by email. Specifically, 
the Exchange proposes to make amendments to subsection (b) of the 
following Rules, consistent with recent changes to the counterpart 
FINRA rules, regarding service on counsel or other representative and 
the requirements for service by email:
    [cir] The Exchange proposes to add a clause to the first sentence 
of subsection (b) of Rule 9551 (Failure to Comply with Public 
Communication Standards), which governs expedited proceedings relating 
to a member organization's departure from the public communication 
standards of Rule 2210, providing that Regulatory Staff shall 
alternatively serve counsel representing the member organization, or 
other person authorized to represent others under Rule 9141, when 
counsel or other person authorized to represent others under Rule 9141 
agrees to accept service for the member organization with the required 
notice under the Rule and that the notice can also be provided by 
email.
    The Exchange proposes to delete the sentence, ``When counsel for 
the member organization or other person authorized to represent others 
under Rule 9141 agrees to accept service of such notice, then 
Regulatory Staff may serve notice on counsel or other person authorized 
to represent others under Rule 9141 as specified in Rule 9134,'' and 
add a sentence to the end of subsection (b) providing that papers 
served on a member organization by email shall be sent to the email 
address on file with the Exchange and shall also be served by either 
overnight courier or personal delivery in conformity with subsections 
(a)(1) and (3) and (b)(2) of Rule 9134.

[[Page 59682]]

    The Exchange would also add text providing that the papers served 
on counsel for a member organization, or other person authorized to 
represent others under Rule 9141, by email shall be sent to the email 
address that counsel or other person authorized to represent others 
under Rule 9141 provides and shall also be served by either overnight 
courier or personal delivery in conformity with Rule 9134(a)(1) and 
(3). Finally, the Exchange would add a sentence specifying that service 
is complete upon sending the notice by email, mailing the notice by 
U.S. Postal Service first class mail, first class certified mail, first 
class registered mail, or Express Mail, sending the notice through a 
courier service, or delivering it in person, except that, where 
duplicate service is required, service is complete when the duplicate 
service is complete;
    [cir] Rule 9552 (Failure to Provide Information or Keep Information 
Current), which sets forth procedures for expedited proceedings 
relating to a member organization or covered person's failure to 
provide information or keep information current, would be amended by 
adding a clause to the first sentence of subsection (b) providing that 
Regulatory Staff shall alternatively serve counsel representing the 
member organization or covered person, or other person authorized to 
represent others under Rule 9141, when counsel or other person 
authorized to represent others under Rule 9141 agrees to accept service 
for the member organization or covered person with the required notice 
under the Rule and that the notice can also be provided by email.
    The Exchange proposes to delete the sentence, ``When counsel for 
the member organization or covered person, or other person authorized 
to represent others under Rule 9141 agrees to accept service of such 
notice, then Regulatory Staff may serve notice on counsel or other 
person authorized to represent others under Rule 9141 as specified in 
Rule 9134,'' and add a sentence to the end of Rule 9552(b) providing 
that papers served on a member organization by email shall be sent to 
the email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134.
    Further, the proposed rule text would provide that papers served on 
a person by email shall be sent to the person's last known email 
address and shall also be served by either overnight courier or 
personal delivery in conformity with paragraphs (a)(1) and (3) and 
(b)(1) of Rule 9134. The proposed amendment would specify that papers 
served on counsel for a member organization or covered person, or other 
person authorized to represent others under Rule 9141, by email shall 
be sent to the email address that counsel or other person authorized to 
represent others under Rule 9141 provides and shall also be served by 
either overnight courier or personal delivery in conformity with Rule 
9134(a)(1) and (3).
    Finally, the proposed amendment would provide that service is 
complete upon sending the notice by email, mailing the notice by U.S. 
Postal Service first class mail, first class certified mail, first 
class registered mail, or Express Mail, sending the notice through a 
courier service, or delivering it in person, except that, where 
duplicate service is required, service is complete when the duplicate 
service is complete;
    [cir] The Exchange proposes to amend Rule 9554 (Failure to Comply 
with an Arbitration Award or Related Settlement or an Order of 
Restitution or Settlement Providing for Restitution), which governs 
expedited proceedings relating to noncompliance with an arbitration 
award, settlement agreement, or restitution order, by adding a clause 
to the first sentence of subsection (b) providing that Regulatory Staff 
shall alternatively serve counsel representing the member organization 
or covered person, or other person authorized to represent others under 
Rule 9141, when counsel or other person authorized to represent others 
under Rule 9141 agrees to accept service for the member organization or 
covered person with the required notice under the Rule and that the 
notice can also be provided by email.
    The Exchange would also delete the sentence, ``When counsel for the 
member organization or covered person, or other person authorized to 
represent others under Rule 9141 agrees to accept service of such 
notice, then Regulatory Staff may serve notice on counsel or other 
person authorized to represent others under Rule 9141 as specified in 
Rule 9134,'' and add a sentence to the end of Rule 9554(b) providing 
that papers served on a member organization by email shall be sent to 
the email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134. Further, the 
proposed amendment would specify that papers served on a person by 
email shall be sent to the person's last known email address and shall 
also be served by either overnight courier or personal delivery in 
conformity with paragraphs (a)(1) and (3) and (b)(1) of Rule 9134.
    The proposed amendment would also specify that papers served on 
counsel for a member organization or covered person, or other person 
authorized to represent others under Rule 9141, by email shall be sent 
to the email address that counsel or other person authorized to 
represent others under Rule 9141 provides and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) of Rule 9134.
    Finally, the proposed amendment would provide that service is 
complete upon sending the notice by email, mailing the notice by U.S. 
Postal Service first class mail, first class certified mail, first 
class registered mail, or Express Mail, sending the notice through a 
courier service, or delivering it in person, except that, where 
duplicate service is required, service is complete when the duplicate 
service is complete;
    [cir] The Exchange proposes to add a clause to the first sentence 
of subsection (b) of Rule 9555 (Failure to Meet the Eligibility or 
Qualification Standards or Prerequisites for Access to Services), which 
governs expedited proceedings in connection with the failure to meet 
the eligibility or qualification standards or prerequisites for access 
to services offered by the Exchange, providing that Exchange staff 
shall alternatively serve counsel representing the member organization 
or covered person, or other person authorized to represent others under 
Rule 9141, when counsel or other person authorized to represent others 
under Rule 9141 agrees to accept service for the member organization or 
covered person with the required notice under the Rule and that the 
notice can also be provided by email.
    The Exchange would also delete the sentence, ``When counsel for the 
member organization or covered person, or other person authorized to 
represent others under Rule 9141 agrees to accept service of such 
notice, then Exchange staff may serve notice on counsel or other person 
authorized to represent others under Rule 9141 as specified in Rule 
9134,'' and add a sentence to the end of Rule 9554(b) providing that 
papers served on a member organization by email shall be sent to the 
email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134.
    Further, the proposed amendment would specify that papers served on 
a person by email shall be sent to the person's last known email 
address and shall also be served by either overnight courier or 
personal delivery in conformity with paragraphs (a)(1) and

[[Page 59683]]

(3) and (b)(1) of Rule 9134. The proposed amendment would also specify 
that the papers served on counsel for a member organization or covered 
person, or other person authorized to represent others under Rule 9141, 
by email shall be sent to the email address that counsel or other 
person authorized to represent others under Rule 9141 provides and 
shall also be served by either overnight courier or personal delivery 
in conformity with Rule 9134(a)(1) and (3).
    Finally, the proposed amendment would provide that service is 
complete upon sending the notice by email, mailing the notice by U.S. 
Postal Service first class mail, first class certified mail, first 
class registered mail, or Express Mail, sending the notice through a 
courier service, or delivering it in person, except that, where 
duplicate service is required, service is complete when the duplicate 
service is complete;
    [cir] The Exchange proposes to amend subsection (b) of Rule 9556 
(Failure to Comply with Temporary and Permanent Cease and Desist 
Orders), which governs expedited proceedings relating to noncompliance 
with a temporary or permanent cease and desist order, to add the word 
``email'' to the list of service methods in the first sentence. The 
proposed Rule would therefore permit Regulatory Staff to serve the 
member organization or covered person subject to a notice issued under 
the Rule (or upon counsel representing the member organization or 
covered person, or other person authorized to represent others under 
Rule 9141, when counsel or other person authorized to represent others 
under Rule 9141 agrees to accept) by email in addition to overnight 
courier or personal delivery.
    The Exchange would also add a sentence to subsection (b) providing 
that papers served on a member organization by email shall be sent to 
the email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134. Further, the 
proposed amendment would specify that papers served on a person by 
email shall be sent to the person's last known email address and shall 
also be served by either overnight courier or personal delivery in 
conformity with paragraphs (a)(1) and (3) and (b)(1) of Rule 9134. The 
proposed amendment would also specify that the papers served on counsel 
for a member organization or covered person, or other person authorized 
to represent others under Rule 9141 by email shall be sent to the email 
address that counsel or other person authorized to represent others 
under Rule 9141 provides and shall also be served by either overnight 
courier or personal delivery in conformity with Rule 9134(a)(1) and 
(3).
    Finally, the Exchange proposes to amend the last sentence of 
subsection (b) to provide that service is complete upon ``sending'' 
rather than ``mailing'', which word would be deleted; adding the phrase 
``email or'' to the list of service methods; and adding an exception 
clause providing that ``except that, where duplicate service is 
required, service is complete upon sending the duplicate service'';
    [cir] Rule 9557 (Procedures for Regulating Activities Under Rules 
4110, 4120 and 4130 Regarding a Member Organization Experiencing 
Financial or Operational Difficulties), which allows the Exchange to 
issue a notice directing a member organization to comply with the 
provisions of Rule 4110 (Capital Compliance), 4120 (Regulatory 
Notification and Business Curtailment), or 4130 (Regulation of 
Activities of Section 15C Member Organizations Experiencing Financial 
and/or Operational Difficulties), or otherwise directing it to restrict 
its business activities, would be amended to add a clause to the first 
sentence of subsection (b) providing Exchange staff shall alternatively 
serve counsel representing the member organization, or other person 
authorized to represent others under Rule 9141, when counsel or other 
person authorized to represent others under Rule 9141 agrees to accept 
service for the member organization and that the notice can also be 
provided by email.
    The Exchange would also add a sentence to subsection (b) providing 
that papers served on a member organization by email shall be sent to 
the email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134. Further, the 
proposed amendment would specify that papers served on counsel for a 
member organization or other person authorized to represent others 
under Rule 9141 by email shall be sent to the email address that 
counsel or other person authorized to represent others under Rule 9141 
provides and shall also be served by either overnight courier or 
personal delivery in conformity with paragraphs (a)(1) and (3) of Rule 
9134.
    Finally, the last sentence of subsection (b) would be amended to 
reflect that service is complete upon ``sending'' rather than 
``mailing'', which word would be deleted; adding the phrase ``email 
or'' to the list of service methods; and adding an exception clause 
providing that ``except that, where duplicate service is required, 
service is complete upon sending the duplicate service''; and
    [cir] Subsection (b) of Rule 9558 (Summary Proceedings for Actions 
Authorized by Section 6(d)(3) of the Exchange Act), which allows the 
Exchange's Chief Regulatory Officer to provide written authorization to 
Exchange staff to issue a written notice for a summary proceeding for 
an action authorized by Section 6(d)(3) of the Act, would be amended by 
to add a clause to the first sentence providing Exchange staff shall 
alternatively serve counsel representing the member organization, or 
other person authorized to represent others under Rule 9141, when 
counsel or other person authorized to represent others under Rule 9141 
agrees to accept service for the member organization or covered person 
and adding ``email'' to the list of service methods.
    The Exchange would also add a sentence to subsection (b) providing 
that papers served on a member organization by email shall be sent to 
the email address on file with the Exchange and shall also be served by 
either overnight courier or personal delivery in conformity with 
paragraphs (a)(1) and (3) and (b)(2) of Rule 9134.
    Papers served on a person by email shall be sent to the person's 
last known email address and shall also be served by either overnight 
courier or personal delivery in conformity with paragraphs (a)(1) and 
(3) and (b)(1) of Rule 9134. Further, the proposed amendment would 
specify that papers served on counsel for a member organization or 
covered person, or other person authorized to represent others under 
Rule 9141 by email shall be sent to the email address that counsel or 
other person authorized to represent others under Rule 9141 provides 
and shall also be served by either overnight courier or personal 
delivery in conformity with Rule 9134(a)(1) and (3).
    Finally, the last sentence of subsection (b) would be amended to 
reflect that service is complete ``sending'' rather than ``mailing'', 
which word would be deleted; adding the phrase ``email or'' to the list 
of service methods; and adding an exception clause providing that 
``except that, where duplicate service is required, service is complete 
upon sending the duplicate service.''
     With the exception of conforming changes to reflect the 
Exchange's membership, omission of service by

[[Page 59684]]

facsimile,\31\ and omission of a reference to ``the email address 
listed in the FINRA Contact System submitted to FINRA pursuant to 
Article 4, Section III of the FINRA By-Laws,'' \32\ the text of the 
proposed amendments to NYSE Rules 9551, 9552, 9554, 9555, 9556, 9557, 
and 9558 is substantially similar to that of FINRA Rules 9551, 9552, 
9554, 9555, 9556, 9557, and 9558.
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    \31\ See 2015 FINRA Filing, 80 FR at 48380 (``FINRA proposed to 
explicitly allow service by facsimile and on counsel, as well as by 
email, across all temporary cease and desist and expedited 
proceedings'').
    \32\ See id. The proposed rule change permitting email service 
in Rules 9551, 9552, 9554, 9555, 9556, 9557, and 9558 is the same as 
that contained in the corresponding FINRA rules, except the proposed 
rules provide that papers served on a member organization by email 
shall be sent to ``the email address on file with the Exchange'' 
instead of ``the email address listed in the FINRA Contact System 
submitted to FINRA pursuant to Article 4, Section III of the FINRA 
By-Laws.'' The Exchange's membership department collects and 
maintains email contact information for member organizations.
---------------------------------------------------------------------------

     The Exchange proposes amending Rule 9556(g) to add the 
phrase, ``imposed after the process described in paragraphs (a) through 
(f) of'' (and delete the word ``under'') before the phrase, ``this 
Rule,'' to conform to the recent changes to FINRA Rule 9556(g). The 
Exchange believes that the proposed change adds greater specificity to 
the Rule.
     The Exchange also proposes adding a new subsection (h) to 
Rule 9556 titled ``Subsequent Proceedings'' permitting Regulatory Staff 
(with prior written authorization from the CRO) to file a petition 
seeking a hearing if the subject of a temporary or permanent cease and 
desist order fails to comply with that order and has previously been 
served with a notice under Rule 9556(a) for a failure to comply with 
any provision of the same temporary or permanent cease and desist 
order.
    [cir] Under the proposed Rule, the petition shall be served in 
accordance with Rule 9556(b) and filed with the Office of Hearing 
Officers.\33\ The proposed Rule would also require the petition to 
explicitly identify the provision of the permanent or temporary cease 
and desist order that is alleged to have been violated, contain a 
statement of facts specifying the alleged violation, describe with 
particularity the sanctions that Regulatory Staff seeks to have 
imposed, and note that a hearing under Rule 9559 is requested. 
Regulatory Staff may seek the imposition of any fitting sanction.\34\
---------------------------------------------------------------------------

    \33\ Proposed Rule 9556(h)(1).
    \34\ Id. at (2).
---------------------------------------------------------------------------

    [cir] Proposed Rule 9556(h)(3) provides that, in contrast to other 
Rule 9556 proceedings, a Respondent's compliance with the temporary or 
permanent cease and desist order is not a ground for dismissing the 
Rule 9556(h) proceeding. Thus, a Respondent's compliance with a 
temporary or permanent cease and desist order after a Rule 9556(h) 
proceeding has been initiated would not prevent an adjudicator from 
reviewing the matter and imposing a fitting sanction for the 
Respondent's violation.
    [cir] Finally, Proposed Rule 9556(h)(4) provides that Regulatory 
Staff can withdraw the petition without prejudice and can refile a 
petition based on allegations concerning the same facts and 
circumstances that are set forth in the withdrawn petition. As with the 
FINRA rule on which it is based, the proposed provision provides the 
Exchange with the flexibility to withdraw the petition where, for 
instance, the Respondent evidences a good faith intent to comply with 
the temporary or permanent cease and desist order without the need to 
adjudicate the petition, while preserving the Exchange's right to 
refile the petition if the Respondent fails to do so.\35\ Proposed Rule 
9556(h) is substantially similar to FINRA Rule 9556(h).
---------------------------------------------------------------------------

    \35\ See 2015 FINRA Notice, 80 FR at 38785.
---------------------------------------------------------------------------

     Rule 9559 (Hearing Procedures for Expedited Proceedings 
Under the Rule 9550 Series) sets forth uniform hearing procedures for 
all expedited proceedings under the Rule 9550 Series. The Exchange 
proposes to amend Rule 9559 to reflect the new expedited proceedings 
set forth in proposed Rule 9556(h). The proposed changes are 
substantially similar to those recently adopted by FINRA for its Rule 
9559. Specifically:
    [cir] Rule 9559(a) would be amended to add the phrase ``or who is 
served with a petition instituting an expedited proceeding under Rule 
9556(h).''
    [cir] Rule 9559(c), which governs stays, would be amended to add a 
new subparagraph (1)(B) specifying that stays under subsection (c) 
would not apply to a petition instituting an expedited proceeding under 
Rule 9556(h).
    [cir] Rule 9559(d), governing the appointment and authority of 
hearing officers and hearing panels, would similarly be amended to add 
references to proceedings under Rule 9556(h).
    [cir] Rule 9559(f), governing time of hearing, would be amended to 
add a new subsection (2) providing that a hearing shall be held within 
ten days after a Respondent is served a petition seeking an expedited 
proceeding issued under Rule 9556(h), adding a reference to Rule 
9556(h) to current subsection (2), and renumbering the remaining 
subsections.
    [cir] Rule 9559(g), governing notice of hearing, would be amended 
to add a new subsection (2) providing that a Hearing Officer shall 
issue a notice stating the date, time, and place of the hearing at 
least six days prior to the hearing in the case of an action brought 
pursuant to Rule 9556(h), adding a reference to Rule 9556(h) to current 
subsection (2), and renumbering the remaining subsections.
    [cir] Rule 9559(h) governing transmission of documents would be 
amended as follows to reflect the new expedited proceeding the Exchange 
proposes under Rule 9556(h) for enforcing violations of a temporary or 
permanent cease and desist orders [sic]. The changes closely parallel 
FINRA's amendments to its version of Rule 9559(h) to bring Rule 9556(h) 
proceedings within the scope of the rule and distinguish them from 
actions brought under Rule 9556 and already reflected in the rule.
    The first sentence of subsection (h)(1) would be amended to add the 
clause ``not less than six days before the hearing in an action brought 
under Rule 9556(h)'' after ``Not less than two business days before the 
hearing in an action brought under Rule 9557,'' to specifically bring 
proposed proceedings under Rule 9556(h) within the scope of the Rule. 
The clause ``not less than seven days before the hearing in an action 
brought under Rules 9556 and 9558'' that would follow the proposed 
addition would be amended to carve out Rule 9556(h) proceedings by 
adding the words ``except Rule 9556(h)'' after ``Rules 9556'' and 
before ``and 9558.'' Subsection (h)(1) would be further amended to 
reflect that ``the respondent who has received a petition pursuant to 
Rule 9556(h)'' would also be provided with all documents that were 
considered in issuing the notice, and that these documents could be 
provided by email or personal delivery in addition to overnight 
courier.
    The Exchange also proposes to add the sentence ``Documents served 
by email shall also be served by either overnight courier or personal 
delivery'' before the last sentence in Rule 9559(h)(1).
    The last sentence of subsection (h)(1) would be amended to delete 
the word ``such'' and add the word ``the'' before ``criteria,'' and to 
add the clause ``in this paragraph'' after the word ``criteria.''
    Rule 9559(h)(2) would be amended to provide that exhibit and 
witness lists shall be served by email or personal delivery in addition 
to overnight courier. Finally, the Exchange proposes

[[Page 59685]]

to add a sentence to the end of subsection (h)(2) providing that 
``Documents served by email shall also be served by either overnight 
courier or personal delivery.''
    [cir] Rule 9559(m), governing failure to appear at a pre-hearing 
conference or hearing or to comply with a Hearing Officer order 
requiring production of information, would be amended to add a new 
subsection (2) providing that a Hearing Officer may issue a default 
decision against a Respondent who is the subject of a petition \36\ 
filed pursuant to Rule 9556(h), and may deem the allegations against 
that Respondent admitted. The contents of a default decision shall 
conform to the content requirements of Rule 9559(p). A Respondent may, 
for good cause shown, file a motion to set aside a default. Upon a 
showing of good cause, the Hearing Officer that entered the original 
order shall decide the motion. If the Hearing Officer is not available, 
the Chief Hearing Officer shall appoint another Hearing Officer to 
decide the motion. If a default decision is not called for review 
pursuant to Rule 9559(q), the default decision shall become the final 
Exchange action.
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    \36\ The first paragraph of Rule 9559(m) would also be amended 
to add ``or petition'' after the word ``notice'' to reflect proposed 
expedited proceedings under Rule 9556(h). In the penultimate 
sentence of the first paragraph, the comma after ``In such cases'' 
would be deleted, and a colon would be added in its place. The 
remainder of the sentence, together with the last sentence of the 
current rule, would be renumbered as new subsection (1).
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    [cir] Finally, Rule 9559(n) governing sanctions, costs and remands 
would be amended to add references to Rule 9556(h) proceedings. Rule 
9559(n) would also be amended to add a new subsection (2) providing 
that, in an action brought under Rule 9556(h), the Hearing Officer may 
impose any fitting sanction. The remaining subsections of the Rule 
would be renumbered. These proposed changes are identical to those 
recently adopted in FINRA Rule 9559.
     Rule 9810 (Initiation of Proceeding) sets forth procedures 
for initiating temporary cease and desist proceedings. The Exchange 
proposes various amendments to the Rule to harmonize it with FINRA Rule 
9810, as follows:
    [cir] Rule 9810(a) governing service and filing of a notice would 
be amended to add text providing that a proceeding can alternatively be 
initiated by service upon counsel representing the Respondent, or other 
person authorized to represent others under Rule 9141, when counsel or 
other person authorized to represent others under Rule 9141 agrees to 
accept service for the Respondent. Rule 9810(a) would also be amended 
to specifically provide for service by email, and text would be added 
to the Rule providing that if service is made by email, Enforcement 
shall send an additional copy of the notice by personal service or 
overnight commercial courier and that service is complete upon sending 
the notice by email or overnight courier or delivering it in person, 
except that, where duplicate service is required, service is complete 
when the duplicate service is complete. Finally, the Rule would be 
amended to provide that the notice shall be effective when service is 
complete.
    [cir] Rule 9810(b) sets forth the requirements for the content of 
the notice, and would be amended to add a new subsection (2) providing 
that the notice also be accompanied by a memorandum of points and 
authorities setting forth the legal theories upon which Enforcement 
relies. Current subsection (2) would be renumbered. The Exchange also 
proposes to clarify the required contents of the notice by specifying 
that the notice shall state whether Enforcement is requesting the 
Respondent to be required to take action, refrain from taking action 
``or both.''
    [cir] The Exchange proposes to add a new subsection (c) to Rule 
9810 entitled ``Authority to Approve Settlements,'' providing that if 
the Parties agree to the terms of the proposed temporary cease and 
desist order, the Hearing Officer shall have the authority to approve 
and issue the order.
    [cir] Current subsection (c) of Rule 9810 governing filing of the 
underlying complaint would become subsection (d). The Exchange also 
proposes to add a sentence providing that service of the complaint can 
be made in accordance with the service provisions in paragraph (a).
     Rule 9830 (Hearing) sets forth hearing procedures for 
temporary cease and desist proceedings. The Exchange proposes the 
following changes to harmonize the Rule with FINRA's recent amendments:
    [cir] Rule 9830(a) would be amended to specify that either the 
Chief Hearing Officer or Deputy Chief Hearing Officer can extend the 
date of hearing for good cause shown and eliminate the need for consent 
of the parties.
    [cir] Rule 9830(b) would be amended to add text specifying that the 
Office of Hearing Officers can also serve notice of a hearing upon 
counsel representing the Respondent, or other person authorized to 
represent others under Rule 9141, when counsel or other person 
authorized to represent others under Rule 9141 agrees to accept service 
for the Respondent, and to specify that service can be by email.
    The Rule would also be amended to add text specifying that if 
service is made by email, the Office of Hearing Officers shall send an 
additional copy of the notice by personal service or overnight 
commercial courier. Service is complete upon sending the notice by 
email or overnight courier or delivering it in person, except that, 
where duplicate service is required, service is complete when the 
duplicate service is complete.
    [cir] Rule 9830(e) would be amended to add text specifying that, 
prior to the hearing, the Hearing Officer may order a Party to furnish 
to all other Parties and the Hearing Panel such information as deemed 
appropriate, including any or all of the pre-hearing submissions 
described in Rule 9242(a). The Rule would also provide that documentary 
evidence submitted by the Parties would not become part of the record, 
unless the Hearing Officer or Hearing Panel orders some or all of the 
evidence included pursuant to Rule 9830(g). The Exchange would also 
change the phrase, ``its consideration'' to ``the Hearing Panel's 
consideration,'' to add greater specificity.
     Rule 9840 (Issuance of Temporary Cease and Desist Order by 
Hearing Panel) sets forth the basis, including the evidentiary 
standard, for issuance of a temporary cease and desist order. The 
Exchange proposes the following changes to harmonize the Rule with 
FINRA's recent amendments:
    [cir] Rule 9840(a) would be amended to specify that either the 
Chief Hearing Officer or Deputy Chief Hearing Officer can extend the 
ten day period for issuance of a decision stating whether a cease and 
desist order shall be imposed for good cause shown and eliminate the 
need for consent of the parties. Rule 9840(a)(1) would be amended to 
revise the evidentiary standard in temporary cease and desist 
proceedings to ``a showing of likelihood of success on the merits.'' 
This was one of the main changes recently effectuated by FINRA.\37\ 
Rule 9840(a)(2) would be amended to add ``alleged'' before the

[[Page 59686]]

term ``violative conduct'' in keeping with the recent FINRA amendment.
---------------------------------------------------------------------------

    \37\ See 2015 FINRA Notice, 80 FR at 38784. The current 
evidentiary standard for imposing a temporary cease and desist 
order, set forth in Rule 9840(a)(1), is ``a preponderance of the 
evidence that the alleged violation specified in the notice has 
occurred.'' As explained in the 2015 FINRA Notice, the 
``preponderance of the evidence'' standard sets too high an 
evidentiary threshold for this critical investor-protection tool. 
Indeed, it is the identical standard for proving a violation in the 
concurrent underlying disciplinary proceeding. This poses 
administrative challenges that create a strong disincentive to seek 
a temporary cease and desist order. See id.
---------------------------------------------------------------------------

    [cir] Rule 9840(b)(1) and (3) would be amended to apply to any 
successor of a Respondent, where the Respondent is a member 
organization. This proposed change is similar to the proposed change 
with respect to Rule 9291, discussed above [sic]. Subsection (3) would 
also be amended to remove the words ``is to'' and ``or'' and add the 
words ``or both'' to the end of the clause.
    [cir] Rule 9840(c) would be amended to provide that, alternatively, 
a temporary cease and desist order would remain effective and 
enforceable until a settlement offer is accepted pursuant to Rule 9270.
    [cir] Rule 9840(d) would be amended to specify that the Hearing 
Panel's decision and any temporary cease and desist order should be 
served by the Office of Hearing Officers on Enforcement and the 
Respondent or upon counsel representing the Respondent, or other person 
authorized to represent others under Rule 9141, when counsel or other 
person authorized to represent others under Rule 9141 agrees to accept 
service for the Respondent. The Rule would also be amended to specify 
that service can be by email and that if service is made by email, the 
Office of Hearing Officers shall send an additional copy of the 
decision and any temporary cease and desist order by personal service 
or overnight commercial courier. Under the proposed Rule, service is 
complete upon sending the notice by email or overnight courier or 
delivering it in person, except that, where duplicate service is 
required, service is complete when duplicate service is complete. The 
Office of Hearing Officers provides a copy of the temporary cease and 
desist order to each member organization with which a Respondent is 
associated.
    [cir] Finally, the Exchange proposes to add a new subsection (e) 
headed ``Delivery Requirement'' that provides that where a Respondent 
is a member organization, Respondent shall deliver a copy of a 
temporary cease and desist order, within one business day of receiving 
it, to its covered persons.
     Rule 9850 (Review by Hearing Panel) sets forth the process 
for a Party to petition the Hearing Panel to modify, set aside, limit 
or suspend a temporary cease and desist order. The Exchange proposes 
the following changes to harmonize the Rule with FINRA's recent 
amendments:
    [cir] The first sentence of Rule 9850 would be amended to add a 
clause specifying that the Office of Hearing Officers can also serve a 
temporary cease and desist order upon counsel representing the 
Respondent, or other person authorized to represent others under Rule 
9141, when counsel or other person authorized to represent others under 
Rule 9141 agrees to accept service for the Respondent.
    [cir] Rule 9850 would be amended to add a sentence providing that 
the Hearing Panel that presided over the temporary cease and desist 
order proceeding shall retain jurisdiction to modify, set aside, limit, 
or suspend the temporary cease and desist order, unless at the time the 
application is filed a Hearing Panel has already been appointed in the 
underlying disciplinary proceeding commenced under Rule 9211 in which 
case the Hearing Panel appointed in the disciplinary proceeding has 
jurisdiction.
    [cir] Rule 9850 would also be amended to specify that either the 
Chief Hearing Officer or Deputy Chief Hearing Officer can extend the 
time for the Hearing Panel to respond to a request under the Rule for 
good cause shown and eliminate the need for consent of the parties.
    [cir] Rule 9850 would be amended to add text specifying that the 
Hearing Panel's response can also be served upon counsel representing 
the Respondent, or other person authorized to represent others under 
Rule 9141, when counsel or other person authorized to represent others 
under Rule 9141 agrees to accept service for the Respondent, and that 
email is a permitted method of service. A sentence would also be added 
before the last sentence in the Rule providing that if service is made 
by email, the Office of Hearing Officers shall send an additional copy 
of the temporary cease and desist order by personal service or 
overnight commercial courier.
     Rule 9860 (Violation of Temporary Cease and Desist Orders) 
provides that a Respondent who violates a temporary cease and desist 
order may have its association or membership suspended or canceled 
under Rule 9556. The Exchange proposes to amend the Rule to add that a 
Respondent may also be subject to any fitting sanction under Rule 9556.
     Finally, the Exchange proposes to adopt the text of FINRA 
Rule 9291 governing the content, scope, and form of a permanent cease 
and desist order. Under proposed Rule 9291(a), when a decision issued 
under Rule 9268 or Rule 9269 or an order of acceptance issued under 
Rule 9270 imposes a permanent cease and desist order, the decision 
shall: order a Respondent (and any successor of a Respondent, where the 
Respondent is a member organization) to cease and desist permanently 
from violating a specific rule or statutory provision; set forth the 
violation; and describe in reasonable detail the act or acts the 
Respondent (and any successor of a Respondent, where the Respondent is 
a member organization) shall take or refrain from taking.
    The proposed Rule would also require Respondents that are member 
organizations to deliver a copy of a permanent cease and desist order, 
within one business day of receiving it, to its covered persons.\38\ 
With the exception of conforming changes to reflect the Exchange's 
membership, the text of the proposed Rule is the same as FINRA Rule 
9291. The Exchange currently does not have a similar rule.
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    \38\ See proposed Rule 9291(b).
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Technical and Conforming Changes
    The Exchange proposes technical and conforming changes to Rule 
9310. Rule 9310(b), which governs reviews by the Exchange Board of 
Directors, would be amended to specify that the determinations or 
penalties imposed subject to Board review would include the terms of 
any permanent cease and desist order.
2. Statutory Basis
Amendments to Rule 8313
    The Exchange believes that the proposed changes to Rule 8313 are 
consistent with Section 6(b) of the Act,\39\ in general, and Section 
6(b)(1) \40\ in particular, in that they enable the NYSE to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Exchange Act and to comply, and to enforce compliance by its 
exchange members and persons associated with its exchange members, with 
the provisions of the Exchange Act, the rules and regulations 
thereunder, and the rules of NYSE. In particular, the Exchange believes 
that the proposed changes to Rule 8313 regarding release of 
disciplinary complaints, decisions and other information are consistent 
with Section 6(b) of the Act because they would establish general 
standards for the release of disciplinary information to the public to 
provide greater access to information regarding the Exchange's 
disciplinary actions.
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    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(1).
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    For the same reasons, the Exchange believes that the proposed 
changes to Rule 8313 further the objectives of Section 6(b)(5) of the 
Act \41\ because the changes are designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating

[[Page 59687]]

transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
In particular, the proposed amendments to Rule 8313 further the 
objectives of Section 6(b)(5) of the Act by providing greater clarity, 
consistency, and transparency regarding the release of disciplinary 
complaints, decisions and other information to the public. By adopting 
the proposed amendments to Rule 8313 modeled on FINRA's rule, the 
Exchange would establish standards for the release of disciplinary 
information to the public in line with those in effect at FINRA that 
provide greater access to information regarding the Exchange's 
disciplinary actions and describe the scope of information subject to 
proposed Rule 8313. The Exchange believes that this proposed rule 
change promotes greater transparency to the Exchange's disciplinary 
process, and that the proposed rule change provides greater access to 
information regarding its disciplinary actions, and also provides 
valuable guidance and information to member organizations, associated 
persons, other regulators, and the investing public.\42\
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    \41\ 15 U.S.C. 78f(b)(5).
    \42\ See Release No. 69178, 78 FR at 38775.
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Harmonization With FINRA Rules
    The Exchange believes that the proposed changes to Rules 9120, 
9268, 9269, 9270, 9551, 9552, 9554, 9555, 9556, 9557, 9558, 9559, 9810, 
9830, 9840, 9850, and 9860 and adopting a new Rule 9291 regarding the 
imposition of temporary or permanent cease and desist orders are 
consistent with Section 6(b) of the Act,\43\ in general, and Section 
6(b)(1) \44\ in particular, in that they enable the NYSE to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Exchange Act and to comply, and to enforce compliance by its 
exchange members and persons associated with its exchange members, with 
the provisions of the Exchange Act, the rules and regulations 
thereunder, and the rules of NYSE. In particular, the Exchange believes 
that the proposed changes are consistent with Section 6(b) of the Act 
because the changes would enhance the Exchange's ability to utilize its 
temporary cease and desist authority, thereby making it a more viable 
investor-protection tool and allowing the Exchange to take appropriate 
action against member organizations and their associated persons 
engaged in serious misconduct.
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    \43\ 15 U.S.C. 78f(b).
    \44\ 15 U.S.C. 78f(b)(1).
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    For the same reasons, the Exchange believes that the proposed 
changes to the Exchange's rules further the objectives of Section 
6(b)(5) of the Act \45\ because the changes are 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.
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    \45\ 15 U.S.C. 78f(b)(5).
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    In addition, revising the evidentiary standard for obtaining 
temporary cease and desist orders by harmonizing the Exchange's rules 
with those of FINRA would better serve the investor protection purposes 
of the Exchange's temporary cease and desist authority and allow the 
Exchange to initiate and resolve temporary cease and desist proceedings 
more expeditiously. Further, these proposed changes, including the 
revised evidentiary standard, would also improve the Exchange's ability 
to enforce compliance with applicable laws and rules by its member 
organizations and persons associated with member organizations, and the 
Exchange's ability to prevent fraudulent and manipulative acts and 
practices.
    The Exchange also believes that the proposed rule change supports 
the objectives of Section 6(b)(5) of the Act by providing greater 
harmonization between Exchange and FINRA rules of similar purpose, 
resulting in less burdensome and more efficient regulatory compliance 
for common members. As previously noted, the text of Rules 9120, 9268, 
9269, 9270, 9291, 9551, 9552, 9554, 9555, 9556, 9557, 9558, 9559, 9810, 
9830, 9840, 9850, and 9860 relating to the imposition of temporary or 
permanent cease and desist orders is substantially the same as FINRA's 
rule text. To the extent the Exchange has proposed changes that differ 
from the FINRA version of the Exchange rules, such changes are 
generally technical in nature and do not change the substance of the 
rules.
    In addition, the Exchange believes that the proposed changes to 
Rules 9120, 9268, 9269, 9270, 9551, 9552, 9554, 9555, 9556, 9557, 9558, 
9559, 9810, 9830, 9840, 9850, and 9860 and adopting a new Rule 9291 
further the objectives of Section 6(b)(7) of the Act \46\ in that they 
provide fair procedures for, among other things, the disciplining of 
members and persons associated with members \47\ because the rules 
governing temporary cease and desist orders and expedited proceedings 
require notice and an opportunity to be heard before a neutral 
tribunal, in addition to the numerous other procedural safeguards 
described above and included in the rules. At the same time, the 
proposed rule change maintains all of the existing restraints on the 
Exchange's temporary cease and desist authority, including rule 
provisions that restrict who may authorize the initiation of a 
temporary cease and desist proceeding; narrowly define the violations 
that a temporary cease and desist order can address; and limit the 
issuance of temporary cease and desist orders to situations where the 
alleged violative conduct or continuation thereof is likely to result 
in significant dissipation or conversion of assets or other significant 
harm to investors.\48\
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    \46\ 15 U.S.C. 78f(b)(7).
    \47\ Under the Exchange's equities rules, the equivalent to the 
term ``member'' in this context is ``member organization.'' See note 
23, supra.
    \48\ See Rule 9840(a)(2). Under NYSE Rule 9810(a), with the 
prior written authorization of the Exchange's CRO or such other 
senior officers as the CRO may designate, Enforcement may initiate a 
temporary cease and desist proceeding with respect to alleged 
violations of Section 10(b) of the Act, SEC Rules 10b-5 and 15g-1 
through 15g-9, NYSE Rule 2010 (if the alleged violation is 
unauthorized trading, or misuse or conversion of customer assets, or 
is based on violations of Section 17(a) of the Securities Act of 
1933) or NYSE Rule 2020. See also 2015 FINRA Notice, 80 FR at 38784.
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    Finally, making conforming amendments to Rule 9310 in connection 
with the proposed harmonization of the Exchange's rules governing 
temporary cease and desist orders and expedited proceedings supports 
the objectives of Section 6(b)(5) of the Act. The conforming amendments 
will update and add specificity to the Exchange's rules, which will 
promote just and equitable principles of trade and help to protect 
investors.

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 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 it is designed 
to (1) enhance the Exchange's rules governing the release of 
disciplinary complaints, decisions and other information to the public, 
thereby providing greater clarity and consistency and resulting in less 
burdensome and more efficient regulatory compliance and facilitating 
performance of regulatory functions, and (2) provide greater 
harmonization among Exchange and FINRA rules of

[[Page 59688]]

similar purpose regarding the imposition of temporary cease and desist 
orders and expedited proceedings, thereby enhancing the quality of the 
Exchange's regulatory program, resulting in less burdensome and more 
efficient regulatory compliance and facilitating performance of 
regulatory functions.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \49\ and Rule 19b-4(f)(6) thereunder.\50\ 
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 for 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 \51\ and Rule 19b-
4(f)(6) thereunder.\52\
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    \49\ 15 U.S.C. 78s(b)(3)(A).
    \50\ 17 CFR 240.19b-4(f)(6).
    \51\ 15 U.S.C. 78s(b)(3)(A).
    \52\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of 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.

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-NYSE-2016-40 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-2016-40. 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-2016-40, and should be 
submitted on or before September 20, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\53\
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    \53\ 17 CFR 200.30-3(a)(12), (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20733 Filed 8-29-16; 8:45 am]
 BILLING CODE 8011-01-P