Document ID: SEC-2020-2051-0001
Agency: sec
Document Type: Notice
Title: Filing and Order: Financial Industry Regulatory Authority, Inc. and Nasdaq ISE, LLC
Posted Date: 2020-12-23T05:00Z

[Federal Register Volume 85, Number 247 (Wednesday, December 23, 2020)]
[Notices]
[Pages 84034-84039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28307]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90702; File No. 4-529]

Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amended Plan for the Allocation of Regulatory 
Responsibilities Between the Financial Industry Regulatory Authority, 
Inc. and Nasdaq ISE, LLC

December 17, 2020.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed on November 19, 2020, pursuant to Rule 
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') and Nasdaq ISE, LLC (``ISE'') (collectively, 
``Participating Organizations'' or ``parties''). This agreement amends 
and restates the agreement entered into between FINRA and International 
Securities Exchange, LLC on December 16, 2006, entitled ``Agreement 
Between Financial Industry Regulatory Authority, Inc. and International 
Securities Exchange, LLC Pursuant to Rule 17d-2 under the Securities 
Exchange Act of 1934,'' and any subsequent amendments thereafter.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or national securities association to examine for, 
and enforce compliance by, its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
SRO's own rules, unless the SRO is relieved of this responsibility 
pursuant to Section

[[Page 84035]]

17(d) \4\ or Section 19(g)(2) \5\ of the Act. Without this relief, the 
statutory obligation of each individual SRO could result in a pattern 
of multiple examinations of broker-dealers that maintain memberships in 
more than one SRO (``common members''). Such regulatory duplication 
would add unnecessary expenses for common members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for appropriate notice and opportunity for comment, it 
determines that the plan is necessary or appropriate in the public 
interest and for the protection of investors, to foster cooperation and 
coordination among the SROs, to remove impediments to, and foster the 
development of, a national market system and a national clearance and 
settlement system, and is in conformity with the factors set forth in 
Section 17(d) of the Act. Commission approval of a plan filed pursuant 
to Rule 17d-2 relieves an SRO of those regulatory responsibilities 
allocated by the plan to another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On February 27, 2007, the Commission declared effective the Plan 
entered into between FINRA and ISE for allocating regulatory 
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to 
reduce regulatory duplication for firms that are common members of 
FINRA and ISE by allocating regulatory responsibility with respect to 
certain applicable laws, rules, and regulations that are common among 
them. Included in the Plan is an exhibit that lists every ISE rule for 
which FINRA bears responsibility under the Plan for overseeing and 
enforcing with respect to ISE members that are also members of FINRA 
and the associated persons therewith (``Certification'').
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    \11\ See Securities Exchange Act Release No. 55367 (February 27, 
2007), 72 FR 9983 (March 6, 2007).
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III. Proposed Amendment to the Plan

    On November 19, 2020, the parties submitted a proposed amendment to 
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is 
to allocate surveillance, investigation, and enforcement 
responsibilities for Rule 14e-4 under the Act and to reflect the name 
change of International Securities Exchange, LLC to Nasdaq ISE, LLC. 
The text of the proposed Amended Plan is as follows (additions are 
italicized; deletions are [bracketed]):
* * * * *
AGREEMENT BETWEEN [NASD]FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. 
AND [INTERNATIONAL SECURITIES EXCHANGE]NASDAQ ISE, LLC PURSUANT TO RULE 
17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934
    This Agreement, by and between the [National Association of 
Securities Dealers, Inc. (``NASD'')]Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and the [International Securities 
Exchange]Nasdaq ISE, LLC (``ISE''), is made this [20th] 16th day of 
[December] November, 20[06]20 (the ``Agreement''), pursuant to Section 
17(d) of the Securities Exchange Act of 1934 (the ``Exchange Act'') and 
Rule 17d-2 thereunder which permits agreements between self-regulatory 
organizations to allocate regulatory responsibility to eliminate 
regulatory duplication. [NASD]FINRA and ISE may be referred to 
individually as a ``party'' and together as the ``parties.''
    This Agreement amends and restates the agreement entered into 
between the parties on April 3, 2000 and amended on April 27, 2000 and 
December 20, 2006, entitled ``Agreement Between the National 
Association of Securities Dealers, Inc., NASD [Regulation, Inc.] and 
the International Securities Exchange LLC Pursuant to Section 17(d) and 
Rule 17d-2,'' and any subsequent amendments thereafter.
    Whereas, [NASD]FINRA and ISE desire to reduce duplication in the 
examination of their Dual Members (as defined herein) and in the filing 
and processing of certain registration and membership records; and
    Whereas, [NASD]FINRA and ISE desire to execute an agreement 
covering such subjects pursuant to the provisions of Rule 17d-2 under 
the Exchange Act and to file such agreement with the Securities and 
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, [NASD]FINRA and ISE hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or the 
context otherwise requires, the terms used in this Agreement shall have 
the same meaning as they have under the Exchange Act and the rules and 
regulations thereunder. As used in this Agreement, the following terms 
shall have the following meanings:

    (a) ``ISE Rules'' or ``[NASD]FINRA Rules'' shall mean the rules 
of the ISE or [NASD]FINRA, respectively, as the rules of an exchange 
or association are defined in Exchange Act Section 3(a)(27).
    (b) ``Common Rules'' shall mean the ISE Rules that are 
substantially similar to the applicable [NASD]FINRA Rules in that 
examination for compliance with such rules would not require 
[NASD]FINRA to develop one or more new examination standards, 
modules, procedures, or criteria in order to analyze the application 
of the rule, or a Dual Member's activity, conduct, or output in 
relation to such rule. Common Rules shall not include any provisions 
regarding (i)

[[Page 84036]]

notice, reporting or any other filings made directly to or from ISE, 
(ii) incorporation by reference of ISE Rules that are not Common 
Rules, (iii) exercise of discretion in a manner that differs from 
FINRA's exercise of discretion including, but not limited to 
exercise of exemptive authority by ISE, (iv) prior written approval 
of ISE and (v) payment of fees or fines to ISE.
    (c) ``Dual Members'' shall mean those ISE members that are also 
members of [NASD]FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 14.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the [NASD]FINRA Code of 
Procedure (the Rule 9000 Series) and other applicable [NASD]FINRA 
procedural rules, to determine whether violations of pertinent laws, 
rules or regulations have occurred, and if such violations are 
deemed to have occurred, the imposition of appropriate sanctions as 
specified under the [NASD]FINRA's Code of Procedure and sanctions 
guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities and Enforcement Responsibilities relating to 
compliance by the Dual Members with the Common Rules and the 
provisions of the Exchange Act and the rules and regulations 
thereunder, and other applicable laws, rules and regulations, each 
as set forth on Exhibit 1 attached hereto. The term ``Regulatory 
Responsibilities'' shall also include the surveillance, 
investigation and Enforcement Responsibilities relating to 
compliance by Common Members with Rule 14e-4 of the Securities 
Exchange Act (``Rule 14e-4''), with a focus on the standardized call 
option provision of Rule 14e-4(a)(1)(ii)(D).

    2. Regulatory and Enforcement Responsibilities. [NASD]FINRA shall 
assume Regulatory Responsibilities and Enforcement Responsibilities for 
Dual Members. Attached as Exhibit 1 to this Agreement and made part 
hereof, ISE furnished [NASD]FINRA with a current list of Common Rules 
and certified to [NASD]FINRA that such rules are substantially similar 
to the corresponding [NASD]FINRA rule (the ``Certification''). 
[NASD]FINRA hereby agrees that the rules listed in the Certification 
are Common Rules as defined in this Agreement. Each year following the 
Effective Date of this Agreement, or more frequently if required by 
changes in either the rules of ISE or [NASD]FINRA, ISE shall submit an 
updated list of Common Rules to [NASD]FINRA for review which shall add 
ISE rules not included in the current list of Common Rules that qualify 
as Common Rules as defined in this Agreement; delete ISE rules included 
in the current list of Common Rules that no longer qualify as Common 
Rules as defined in this Agreement; and confirm that the remaining 
rules on the current list of Common Rules continue to be ISE rules that 
qualify as Common Rules as defined in this Agreement. Within 30 days of 
receipt of such updated list, [NASD]FINRA shall confirm in writing 
whether the rules listed in any updated list are Common Rules as 
defined in this Agreement. Notwithstanding anything herein to the 
contrary, it is explicitly understood that the term ``Regulatory 
Responsibilities'' does not include, and ISE shall retain full 
responsibility for (unless otherwise addressed by separate agreement or 
rule) the following:
    (a) Surveillance and enforcement with respect to trading activities 
or practices involving ISE's own marketplace, including without 
limitation ISE's rules relating to the rights and obligations of market 
makers;
    (b) registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) any ISE Rules that are not Common Rules, except for ISE Rules 
for any ISE member that operates as a facility (as defined in Section 
3(a)(2) of the Exchange Act), acts as an outbound router for the ISE 
and is a member of [NASD]FINRA (``Router Member'') as provided in 
paragraph 6. As of the date of this Agreement, ISE Route LLC is the 
only Router Member.
    3. Dual Members. Prior to the Effective Date, ISE shall furnish 
[NASD]FINRA with a current list of Dual Members, which shall be updated 
no less frequently than once each quarter.
    4. No Charge. There shall be no charge to ISE by [NASD]FINRA for 
performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as hereinafter provided. 
[NASD]FINRA shall provide ISE with ninety (90) days advance written 
notice in the event [NASD]FINRA decides to impose any charges to ISE 
for performing the Regulatory Responsibilities under this Agreement. If 
[NASD]FINRA determines to impose a charge, ISE shall have the right at 
the time of the imposition of such charge to terminate this Agreement; 
provided, however, that [NASD]FINRA's Regulatory Responsibilities under 
this Agreement shall continue until the Commission approves the 
termination of this Agreement.
    5. Reassignment of Regulatory Responsibilities. Notwithstanding any 
provision hereof, this Agreement shall be subject to any statute, or 
any rule or order of the Commission, or industry agreement, 
restructuring the regulatory framework of the securities industry or 
reassigning Regulatory Responsibilities between self-regulatory 
organizations. To the extent such action is inconsistent with this 
Agreement, such action shall supersede the provisions hereof to the 
extent necessary for them to be properly effectuated and the provisions 
hereof in that respect shall be null and void.
    6. Notification of Violations. In the event that [NASD]FINRA 
becomes aware of apparent violations of any ISE Rules, which are not 
listed as Common Rules, discovered pursuant to the performance of the 
Regulatory Responsibilities assumed hereunder, [NASD]FINRA shall notify 
ISE of those apparent violations for such response as ISE deems 
appropriate. Apparent violations of all other applicable rules, 
including violations of the Common Rules, various securities acts, and 
rules and regulations thereunder, shall be processed by, and 
enforcement proceedings in respect thereto shall be conducted by 
[NASD]FINRA as provided hereinbefore; provided, however, that in the 
event a Dual Member is the subject of an investigation relating to a 
transaction on the ISE, ISE may in its discretion assume concurrent 
jurisdiction and responsibility. With respect to apparent violations of 
any ISE Rules by any Router Member, [NASD]FINRA shall not make 
referrals to ISE pursuant to this paragraph 6. Such apparent violations 
shall be processed by, and enforcement proceedings in respect thereto 
will be conducted by, [NASD]FINRA as provided in this Agreement. Each 
party agrees to make available promptly all files, records and 
witnesses necessary to assist the other in its investigation or 
proceedings.
    7. Continued Assistance. [NASD]FINRA shall make available to ISE 
all information obtained by [NASD]FINRA in the performance by it of the 
Regulatory Responsibilities hereunder in respect to the Dual Members 
subject to this Agreement. In particular, and not in limitation of the 
foregoing, [NASD]FINRA shall furnish ISE any information it obtains 
about Dual Members which reflects adversely on their financial 
condition. It is understood that such information is of an extremely 
sensitive nature and, accordingly, ISE acknowledges and agrees to take 
all reasonable steps to maintain its confidentiality. ISE shall make 
available to [NASD]FINRA any information coming to its attention that 
reflects adversely on the financial condition of Dual Members or 
indicates

[[Page 84037]]

possible violations of applicable laws, rules or regulations by such 
firms.
    8. Dual Member Applications.
    (a) Dual Members subject to this Agreement shall be required to 
submit, and [NASD]FINRA shall be responsible for processing and acting 
upon all applications submitted on behalf of allied persons, partners, 
officers, registered personnel and any other person required to be 
approved by the rules of both ISE and [NASD]FINRA or associated with 
Dual Members thereof. Upon request, [NASD]FINRA shall advise ISE of any 
changes of allied members, partners, officers, registered personnel and 
other persons required to be approved by the rules of both ISE and 
[NASD]FINRA.
    (b) Dual Members shall be required to send to [NASD]FINRA all 
letters, termination notices or other material respecting the 
individuals listed in paragraph 8(a).
    (c) When as a result of processing such submissions [NASD]FINRA 
becomes aware of a statutory disqualification as defined in the 
Exchange Act with respect to a Dual Member, [NASD]FINRA shall determine 
pursuant to Sections 15A(g) and/or Section 6(c) of the Exchange Act the 
acceptability or continued applicability of the person to whom such 
disqualification applies and keep ISE advised of its actions in this 
regard for such subsequent proceedings as ISE may initiate.
    (d) Notwithstanding the foregoing, [NASD]FINRA shall not review the 
membership application, reports, filings, fingerprint cards, notices, 
or other writings filed to determine if such documentation submitted by 
a broker or dealer, or a person associated therewith or other persons 
required to register or qualify by examination: (i) Meets the ISE 
requirements for general membership or for specified categories of 
membership or participation in the ISE, such as (A) Primary Market 
Maker Membership (``PMM''); (B) Competitive Market Maker Membership 
(``CMM''); (C) Electronic Access Membership (``EAM'') (or any similar 
type of ISE membership or participation that is created after this 
Agreement is executed); or (ii) meets the ISE requirements to be 
associated with, or employed by, an ISE member or participant in any 
capacity, such a Designated Trading Representative (``DTR'') (or any 
similar type of participation, employment category or title, or 
associate-person category or class that is created after this Agreement 
is executed). [NASD]FINRA shall not review applications or other 
documentation filed to request a change in the rights or status 
described in this paragraph 8(d), including termination or limitation 
on activities, of a member or a participant of the ISE, or a person 
associated with, or requesting association with, a member or 
participant of the ISE.
    9. Branch Office Information. [NASD]FINRA shall also be responsible 
for processing and, if required, acting upon all requests for the 
opening, address changes, and terminations of branch offices by Dual 
Members and any other applications required of Dual Members with 
respect to the Common Rules as they may be amended from time to time. 
[NASD]FINRA shall advise ISE monthly of the opening, address change and 
termination of branch and main offices of Dual Members and the names of 
such branch office managers.
    10. Customer Complaints. ISE shall forward to [NASD]FINRA copies of 
all customer complaints involving Dual Members received by ISE relating 
to [NASD]FINRA's Regulatory Responsibilities under this Agreement. It 
shall be [NASD]FINRA's responsibility to review and take appropriate 
action in respect to such complaints.
    11. Advertising. [NASD]FINRA shall assume responsibility to review 
the advertising of Dual Members subject to the Agreement, provided that 
such material is filed with [NASD]FINRA in accordance with 
[NASD]FINRA's filing procedures and is accompanied with any applicable 
filing fees set forth in [NASD]FINRA Rules. Such review shall be made 
in accordance with then applicable [NASD]FINRA rules and 
interpretations. The advertising of Dual Members shall be subject only 
to compliance with appropriate [NASD]FINRA rules and interpretations.
    12. No Restrictions on Regulatory Action. Nothing contained in this 
Agreement shall restrict or in any way encumber the right of either 
party to conduct its own independent or concurrent investigation, 
examination or enforcement proceeding of or against Dual Members, as 
either party, in its sole discretion, shall deem appropriate or 
necessary.
    13. Termination. This Agreement may be terminated by ISE or 
[NASD]FINRA at any time upon the approval of the Commission after one 
(1) year's written notice to the other party, except as provided in 
paragraph 4.
    14. Effective Date. This Agreement shall be effective upon approval 
of the Commission.
    15. Arbitration. In the event of a dispute between the parties as 
to the operation of this Agreement, ISE and [NASD]FINRA hereby agree 
that any such dispute shall be settled by arbitration in Washington, DC 
in accordance with the rules of the American Arbitration Association 
then in effect, or such other procedures as the parties may mutually 
agree upon. Judgment on the award rendered by the arbitrator(s) may be 
entered in any court having jurisdiction.
    16. Separate Agreement. This Agreement is wholly separate from (1) 
the multiparty Agreement made pursuant to Rule 17d-2 of the Exchange 
Act between the [American Stock Exchange LLC, the Boston Stock 
Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
International Securities Exchange LLC, the National Association of 
Securities Dealers, Inc., the New York Stock Exchange, Inc., the 
Pacific Exchange, Inc., and the Philadelphia Stock Exchange, Inc.] NYSE 
American LLC, Cboe BZX Exchange, Inc., the Cboe EDGX Exchange, Inc., 
Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Nasdaq ISE, LLC, Financial 
Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock 
Market LLC, BOX Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, Miami 
International Securities Exchange, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, 
LLC, MIAX PEARL, LLC, and MIAX Emerald, LLC involving the allocation of 
regulatory responsibilities with respect to common members for 
compliance with common rules relating to the conduct by broker-dealers 
of accounts for listed options or index warrants entered into on 
[January 14, 2004]February 12, 2019, and as may be amended from time to 
time or (2) the multiparty Agreement made pursuant to Rule 17d-2 of the 
Exchange Act among NYSE American LLC, Cboe BZX Exchange, Inc., the Cboe 
EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., 
Nasdaq ISE, LLC, Financial Industry Regulatory Authority, Inc., NYSE 
Arca, Inc., The NASDAQ Stock Market LLC, BOX Exchange LLC, NASDAQ BX, 
Inc., NASDAQ PHLX LLC, Miami International Securities Exchange, LLC, 
Nasdaq GEMX, LLC, Nasdaq MRX, LLC, MIAX PEARL, LLC, and MIAX Emerald, 
LLC approved by the Commission on February 11, 2019 involving options-
related market surveillance matters and such agreements as may be 
amended from time to time.
    17. Notification of Members. ISE and [NASD]FINRA shall notify Dual 
Members of this Agreement after the Effective Date by means of a 
uniform joint notice.
    18. Amendment. This Agreement may be amended in writing duly 
approved

[[Page 84038]]

by each party. All such amendments must be filed with and approved by 
the Commission before they become effective.
    19. Limitation of Liability. Neither [NASD]FINRA nor ISE nor any of 
their respective directors, governors, officers or employees shall be 
liable to the other party to this Agreement for any liability, loss or 
damage resulting from or claimed to have resulted from any delays, 
inaccuracies, errors or omissions with respect to the provision of 
Regulatory Responsibilities as provided hereby or for the failure to 
provide any such responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by one or the other of 
[NASD]FINRA or ISE and caused by the willful misconduct of the other 
party or their respective directors, governors, officers or employees. 
No warranties, express or implied, are made by [NASD]FINRA or ISE with 
respect to any of the responsibilities to be performed by each of them 
hereunder.
    20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, [NASD]FINRA 
and ISE join in requesting the Commission, upon its approval of this 
Agreement or any part thereof, to relieve ISE of any and all 
responsibilities with respect to matters allocated to [NASD]FINRA 
pursuant to this Agreement; provided, however, that this Agreement 
shall not be effective until the Effective Date.
    In witness whereof, each party has executed or caused this 
Agreement to be executed on its behalf by a duly authorized officer as 
of the date first written above.

[NATIONAL ASSOCIATION OF SECURITIES DEALERS]FINANCIAL INDUSTRY 
REGULATORY AUTHORITY, INC.

By---------------------------------------------------------------------
Name:
Title:

[INTERNATIONAL SECURITIES EXCHANGE]NASDAQ ISE, LLC

By---------------------------------------------------------------------
Name:
Title:

    Note: The entire existing table of rules should be deleted and 
replaced with the table below.

EXHIBIT 1

ISE CERTIFICATION OF COMMON RULES
    ISE hereby certifies that the requirements contained in the rules 
listed below for ISE are identical to, or substantially similar to, the 
comparable [NASD]FINRA rules identified.
    # Common Rules shall not include provisions regarding (i) notice, 
reporting or any other filings made directly to or from ISE, (ii) 
incorporations by reference to other ISE Rules that are not Common 
Rules, (iii) exercise of discretion in a manner that differs from 
FINRA's exercise of discretion including, but not limited to exercise 
of exemptive authority, by ISE, (iv) prior written approval of ISE, and 
(v) payment of fees or fines to ISE.

------------------------------------------------------------------------
              ISE RULE(S)                         FINRA RULE(S)
------------------------------------------------------------------------
General 3, Section 3(b)--Persons         FINRA Rule 1010 Electronic
 Associated with Members; General 4--     Filing Requirements for
 Nasdaq Stock Market General 4, Rule      Uniform Forms; FINRA By-Laws
 1.1250 Electronic Filing Requirements    Article IV, Sec. 1(c)
 for Uniform Forms incorporated by        Application for Membership;
 reference .                             FINRA By-Laws, Article V,
                                          Section 1 Qualification
                                          Requirements; FINRA By-Laws,
                                          Article V, Sec. 2 Application
                                          for Registration; and FINRA By-
                                          Laws Article V, Section 3
                                          Notification by Member to the
                                          Corporation and Associated
                                          Person of Termination;
                                          Amendments to Notification.
General 4--Nasdaq Stock Market General   FINRA Rule 1240 Continuing
 4, Section 1.1240 Continuing Education   Education Requirements.
 Requirements incorporated by reference
 .
Options 9, Section 1 Just and Equitable  FINRA Rule 2010 Standards of
 Principles of Trade \1\.                 Commercial Honor and
                                          Principles of Trade; FINRA
                                          Rule 0140(a) Applicability.
Options 9, Section 9(a)(1) Prevention    Section 15(g) of the Securities
 of the Misuse of Material, Nonpublic     Exchange Act of 1934, and
 Information .                           FINRA Rule 3110(b)(1), (d)
                                          Supervision.
Options 9, Section 10 Disciplinary       FINRA Rule 4530(a)(1)(A) and
 Action by Other Organizations .         (2) Reporting Requirements;
                                          FINRA By-Laws, Article V,
                                          Section 2(c); and FINRA By-
                                          Laws, Article V, Section 3.
Options 9, Section 21 Anti-Money         FINRA Rule 3310 Anti-Money
 Laundering Compliance Program .         Laundering Compliance Program.
Options 10, Section 12 Statements of     Rule 17a-5 of the Securities
 Financial Condition to Customers.        Exchange Act of 1934.
Options 10, Section 19 Transfer of       FINRA Rule 11870 Customer
 Accounts .                              Account Transfer Contracts.
Options 10, Section 23 Telemarketing...  FINRA Rule 3230 Telemarketing.
Options 6E, Section 1 Maintenance,       FINRA Rule 4511(a) Books and
 Retention, and Furnishing of Books,      Records--Requirements.
 Records and Other Information .
------------------------------------------------------------------------
\1\ FINRA shall not have Regulatory Responsibilities with respect to the
  Supplementary Material to ISE Options 9, Section 1. Responsibility for
  such shall remain with ISE.

    In addition, the following provisions shall be part of this 17d-2 
Agreement:
    SEA Rule 14e-4--Prohibited Transactions in Connection with Partial 
Tender Offers [supcaret]
    [supcaret] FINRA shall perform surveillance, investigation, and 
Enforcement Responsibilities for SEA Rule 14e-4(a)1)(ii)(D).

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. 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 4-529 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-529. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed

[[Page 84039]]

plan that are filed with the Commission, and all written communications 
relating to the proposed plan between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for website 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE, Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be 
available for inspection and copying at the principal offices of FINRA 
and ISE. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number 4-529 and should be submitted 
on or before January 13, 2021.

V. Discussion

    The Commission finds that the proposed Amended Plan is consistent 
with the factors set forth in Section 17(d) of the Act \12\ and Rule 
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary 
or appropriate in the public interest and for the protection of 
investors, fosters cooperation and coordination among SROs, and removes 
impediments to and fosters the development of the national market 
system. In particular, the Commission believes that the proposed 
Amended Plan should reduce unnecessary regulatory duplication by 
allocating to FINRA certain examination and enforcement 
responsibilities for Common Members that would otherwise be performed 
by both FINRA and ISE. Accordingly, the proposed Amended Plan promotes 
efficiency by reducing costs to Common Members. Furthermore, because 
ISE and FINRA will coordinate their regulatory functions in accordance 
with the Amended Plan, the Amended Plan should promote investor 
protection.
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    \12\ 15 U.S.C. 78q(d).
    \13\ 17 CFR 240.17d-2(c).
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    The Commission notes that, under the Amended Plan, ISE and FINRA 
have allocated regulatory responsibility for those ISE rules, set forth 
in the Certification, that are substantially similar to the applicable 
FINRA rules in that examination for compliance with such provisions and 
rules would not require FINRA to develop one or more new examination 
standards, modules, procedures, or criteria in order to analyze the 
application of the rule, or a Common Member's activity, conduct, or 
output in relation to such rule. In addition, under the Amended Plan, 
FINRA would assume regulatory responsibility for certain provisions of 
the federal securities laws and the rules and regulations thereunder 
that are set forth in the Certification. The Common Rules covered by 
the Amended Plan are specifically listed in the Certification, as may 
be amended by the Parties from time to time.
    According to the Amended Plan, ISE will review the Certification at 
least annually, or more frequently if required by changes in either the 
rules of ISE or FINRA, and, if necessary, submit to FINRA an updated 
list of Common Rules to add ISE rules not included on the then-current 
list of Common Rules that are substantially similar to FINRA rules; 
delete ISE rules included in the then-current list of Common Rules that 
no longer qualify as common rules; and confirm that the remaining rules 
on the list of Common Rules continue to be ISE rules that qualify as 
common rules.\14\ FINRA will then confirm in writing whether the rules 
listed in any updated list are Common Rules as defined in the Amended 
Plan. Under the Amended Plan, ISE also will provide FINRA with a 
current list of Common Members and will update the list no less 
frequently than once each quarter.\15\ The Commission believes that 
these provisions are designed to provide for continuing communication 
between the Parties to ensure the continued accuracy of the scope of 
the proposed allocation of regulatory responsibility.
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    \14\ See paragraph 2 of the Amended Plan.
    \15\ See paragraph 3 of the Amended Plan.
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    The Commission is hereby declaring effective an Amended Plan that, 
among other things, allocates regulatory responsibility to FINRA for 
the oversight and enforcement of all ISE rules that are substantially 
similar to the rules of FINRA for Common Members of ISE and FINRA. 
Therefore, modifications to the Certification need not be filed with 
the Commission as an amendment to the Amended Plan, provided that the 
Parties are only adding to, deleting from, or confirming changes to ISE 
rules in the Certification in conformance with the definition of Common 
Rules provided in the Amended Plan. However, should the Parties decide 
to add a ISE rule to the Certification that is not substantially 
similar to a FINRA rule; delete a ISE rule from the Certification that 
is substantially similar to a FINRA rule; or leave on the Certification 
a ISE rule that is no longer substantially similar to a FINRA rule, 
then such a change would constitute an amendment to the Amended Plan, 
which must be filed with the Commission pursuant to Rule 17d-2 under 
the Act.\16\
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    \16\ The addition to or deletion from the Certification of any 
federal securities laws, rules, and regulations for which FINRA 
would bear responsibility under the Amended Plan for examining, and 
enforcing compliance by, Common Members, also would constitute an 
amendment to the Amended Plan.
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    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The primary purpose of the amendment is to allocate 
surveillance, investigation, and enforcement responsibilities for Rule 
14e-4 under the Act, to reflect the name change of International 
Securities Exchange, LLC to Nasdaq ISE, LLC. By declaring it effective 
today, the Amended Plan can become effective and be implemented without 
undue delay. The Commission notes that the prior version of this plan 
immediately prior to this proposed amendment was published for comment 
and the Commission did not receive any comments thereon.\17\ 
Furthermore, the Commission does not believe that the amendment to the 
plan raises any new regulatory issues that the Commission has not 
previously considered.
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    \17\ See supra note 11 (citing to Securities Exchange Act 
Release No. 55367).
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VI. Conclusion

    This order gives effect to the Amended Plan filed with the 
Commission in File No. 4-529. The Parties shall notify all members 
affected by the Amended Plan of their rights and obligations under the 
Amended Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Amended Plan in File No. 4-529, between the FINRA and ISE, filed 
pursuant to Rule 17d-2 under the Act, hereby is approved and declared 
effective.
    It is further ordered that ISE is relieved of those 
responsibilities allocated to FINRA under the Amended Plan in File No. 
4-529.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(34).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28307 Filed 12-22-20; 8:45 am]
BILLING CODE 8011-01-P