Document ID: SEC-2019-1650-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Long-Term Stock Exchange, Inc.
Posted Date: 2019-11-04T05:00Z

[Federal Register Volume 84, Number 213 (Monday, November 4, 2019)]
[Notices]
[Pages 59427-59428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23977]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87415; File No. 4-753]

Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Order Declaring Effective a Minor Rule Violation Plan

October 29, 2019.
    On August 23, 2019, Long-Term Stock Exchange, Inc. (``LTSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed minor rule violation plan (``MRVP'') 
pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP 
was published for comment on September 25, 2019.\3\ The Commission 
received no comments on the proposal. This order declares the 
Exchange's proposed MRVP effective.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(d)(1).
    \2\ 17 CFR 240.19d-1(c)(2).
    \3\ See Securities Exchange Act Release No. 87021 (September 19, 
2019), 84 FR 50525 (``Notice'').
---------------------------------------------------------------------------

    In accordance with Rule 19d-1(c)(2) under the Act,\4\ the Exchange 
proposed to designate certain specified rule violations as minor rule 
violations, with sanctions not exceeding $2,500. Violations resolved 
under the MRVP would not be subject to the provisions of Rule 19d-
1(c)(1) of the Act,\5\ which requires that a self-regulatory 
organization (``SRO'') promptly file notice with the Commission of any 
final disciplinary action taken with respect to any person or 
organization.\6\ In accordance with Rule 19d-1(c)(2) under the Act,\7\ 
the Exchange proposed to designate certain specified rule violations as 
minor rule violations, and requested that it be relieved of the prompt 
reporting requirements regarding such violations, provided it gives 
notice of such violations to the Commission on a quarterly basis.
---------------------------------------------------------------------------

    \4\ 17 CFR 240.19d-1(c)(2).
    \5\ 17 CFR 240.19d-1(c)(1).
    \6\ The Commission adopted amendments to paragraph (c) of Rule 
19d-1 to allow SROs to submit for Commission approval plans for the 
abbreviated reporting of minor disciplinary infractions. See 
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR 
23828 (June 8, 1984). Any disciplinary action taken by an SRO 
against any person for violation of a rule of the SRO which has been 
designated as a minor rule violation pursuant to a plan filed with 
and declared effective by the Commission is not considered ``final'' 
for purposes of Section 19(d)(1) of the Act if the sanction imposed 
consists of a fine not exceeding $2,500 and the sanctioned person 
has not sought an adjudication, including a hearing, or otherwise 
exhausted his administrative remedies.
    \7\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    The Exchange proposed to include in its MRVP the procedures 
included in LTSE Rule 9.216(b) (``Procedure for Violation Under Plan 
Pursuant to Exchange Act Rule 19d-1(c)(2)'') and violations included in 
Rule 9.218 (``Violations Appropriate for Disposition Under Plan 
Pursuant to Exchange Act Rule 19d-1(c)(2)'').\8\ According to the 
Exchange's proposed MRVP, the Exchange may impose a fine (not to exceed 
$2,500) and/or a censure on any Member or its associated person with 
respect to any rule listed in LTSE Rule 9.218. If the Financial 
Industry Regulatory Authority's (``FINRA'') Department of Enforcement 
or Department of Market Regulation, on behalf of the Exchange, has 
reason to believe a violation has occurred, and if the Member or its 
associated person does not dispute the violation, either Department may 
prepare and request that the Member or associated person execute a 
minor rule violation plan letter. The letter would describe the act or 
practice engaged in or omitted, the rule, regulation, or statutory 
provision

[[Page 59428]]

violated, and the sanction or sanctions to be imposed. The letter, if 
accepted, would stipulate that the Member or associated person accepts 
the finding of violation, consents to the imposition of sanctions, and 
agrees to waive such Member's or associated person's right to a hearing 
before a Hearing Panel or, if applicable, an Extended Hearing Panel, 
and any right of appeal to the LTSE Appeals Committee, the Board, the 
Commission, and the courts, or to otherwise challenge the validity of 
the letter. Unless the letter states otherwise, the effective date of 
any sanction(s) imposed would be a date to be determined by LTSE 
Regulation staff. In the event the letter is not accepted by the Member 
or associated person, or is rejected by FINRA's Office of Disciplinary 
Affairs, the matter can proceed in accordance with the Exchange's 
disciplinary rules, which include hearing rights for formal 
disciplinary proceedings.\9\
---------------------------------------------------------------------------

    \8\ The Commission granted the Exchange's application for 
registration as a national securities exchange on May 10, 2019, 
which included the rules that govern the Exchange. See Securities 
Exchange Act Release No. 85828 (May 10, 2019), 84 FR 21841 (May 15, 
2019). Terms not otherwise defined in this Order are defined in the 
LTSE rules.
    Under the proposed MRVP, violations of the following rules would 
be appropriate for disposition under the MRVP: Rule 2.160(p) 
(Continuing Education Requirements); Rule 4.511 (General 
Requirements related to books and records requirements); Rule 4.540 
(Furnishing of Records); Rule 5.110 (Supervision); Rule 8.220 
(Automated Submission of Trading Data Requested); Rule 11.151(a)(1) 
(Market Maker Two-sided Quote Obligation); Rule 11.290 (Short 
Sales); Rule 11.310 (Locking or Crossing Quotations in NMS Stocks); 
and Rule 11.420 (Order Audit Trail System Requirements). See Notice, 
supra note 3, at 50526.
    \9\ See Notice, supra note 3, at 50526.
---------------------------------------------------------------------------

    According to the Exchange, upon the Commission's declaration of 
effectiveness of the MRVP, the Exchange will provide to the Commission 
a quarterly report for any actions taken on minor rule violations under 
the MRVP.\10\ The quarterly report will include: The Exchange's 
internal file number for the case, the name of the individual and/or 
organization, the nature of the violation, the specific rule provision 
violated, the sanction imposed, the number of times the rule violation 
occurred, and the date of the disposition.\11\
---------------------------------------------------------------------------

    \10\ See Id.
    \11\ The Exchange attached a sample form of the quarterly report 
with its submission to the Commission.
---------------------------------------------------------------------------

    The Exchange requested that the Commission deem any changes to the 
rules applicable to the Exchange's MRVP to be deemed modifications to 
the Exchange's MRVP.\12\
---------------------------------------------------------------------------

    \12\ See Notice, supra note 3, at 50526.
---------------------------------------------------------------------------

    The Commission finds that the proposal is consistent with the 
public interest, the protection of investors, or otherwise in 
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2) 
under the Act,\13\ because the MRVP will permit the Exchange to carry 
out its oversight and enforcement responsibilities as an SRO more 
efficiently in cases where formal disciplinary proceedings are not 
necessary due to the minor nature of the particular violation.
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    In declaring the Exchange's MRVP effective, the Commission does not 
minimize the importance of compliance with Exchange rules and all other 
rules subject to the imposition of sanctions under LTSE Rule 9.216(b). 
Violation of an SRO's rules, as well as Commission rules, is a serious 
matter. However, LTSE Rule 9.216(b) provides a reasonable means of 
addressing violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. Regarding whether a violation requires 
formal disciplinary action or whether a sanction under the MRVP is 
appropriate, the Commission expects the Exchange to continue to conduct 
surveillance and make determinations based on its findings on a case-
by-case basis.
    It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the 
Act,\14\ that the proposed MRVP for Long-Term Stock Exchange, Inc, File 
No. 4-753 be, and hereby is, declared effective.
---------------------------------------------------------------------------

    \14\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23977 Filed 11-1-19; 8:45 am]
 BILLING CODE 8011-01-P