[Federal Register Volume 75, Number 91 (Wednesday, May 12, 2010)]
[Notices]
[Pages 26822-26823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11259]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62036; File No. 4-594]
Self-Regulatory Organizations; Order Approving Minor Rule
Violation Plan for EDGX Exchange, Inc.
May 5, 2010.
On March 19, 2010, EDGX Exchange, Inc. (``EDGX Exchange'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') a proposed minor rule violation plan (``MRVP'')
pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19d-1(c)(2) thereunder.\2\ The proposed MRVP was
published for public comment on March 29, 2010.\3\ The Commission
received no comments on the proposal. This order approves EDGX
Exchange's proposed MRVP.
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\1\ 15 U.S.C. 78s(d)(1).
\2\ 17 CFR 240.19d-1(c)(2).
\3\ See Securities Exchange Act Release No. 61752 (March 22,
2010), 75 FR 15475.
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EDGX Exchange's MRVP specifies those uncontested minor rule
violations with sanctions not exceeding $2,500 which would not be
subject to the provisions of Rule 19d-1(c)(1) under the Act \4\
requiring that a self-regulatory organization promptly file notice with
the Commission of any final disciplinary action taken with respect to
any person or organization.\5\ In accordance with Rule 19d-1(c)(2), the
Exchange proposed to designate certain rule violations as minor rule
violations, and requested that it be relieved of the reporting
requirements regarding such violations, provided it gives notice of
such violations to the Commission on a quarterly basis. EDGX Exchange
included in its proposed MRVP the policies and procedures currently
included in EDGX Exchange Rule 8.15 (``Imposition of Fines for Minor
Violation(s) of Rules'') and the rule violations included in EDGX
Exchange Rule 8.15.01.\6\
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\4\ 17 CFR 240.19d-1(c)(1).
\5\ The Commission adopted amendments to paragraph (c) of Rule
19d-1 to allow self-regulatory organizations (``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 such a plan shall not be 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 or
her administrative remedies.
\6\ On March 12, 2010, the Commission approved EDGX Exchange's
application for registration as a national securities exchange,
including the rules governing the EDGX Exchange. See Securities
Exchange Act Release No. 61698, 75 FR 13151 (March 18, 2010). In the
approval order, the Commission noted that EDGX Exchange Rule 8.15
provides for the imposition of fines for minor rule violations
pursuant to a minor rule violation plan. Accordingly, the Commission
noted that, EDGX Exchange Rule 8.15 provides for the imposition of
fines for minor rule violations pursuant to a minor rule violation
plan. Accordingly, the Commission noted that as a condition to the
operation of EDGX Exchange, the Exchange must file a minor rule
violation plan with the Commission.
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[[Page 26823]]
Pursuant to the Exchange's proposed MRVP, under Rule 8.15, the
Exchange may impose a fine (not to exceed $2,500) on a member, an
associated person of a member, or a registered or non-registered
employee of a member with respect to any rule listed in Rule 8.15.01.
The Exchange shall serve the person against whom a fine is imposed with
a written statement setting forth the rule or rules allegedly violated,
the act or omission constituting each such violation, the fine imposed,
and the date by which such determination becomes final or by which such
determination must be contested. If the person against whom the fine is
imposed pays the fine, such payment shall be deemed to be a waiver of
such person's right to a disciplinary proceeding and any review of the
matter under Exchange rules. Any person against whom a fine is imposed
may contest the Exchange's determination by filing with the Exchange a
written response, at which point the matter shall become a disciplinary
proceeding.
Upon approval of the plan, the Exchange will provide the Commission
a quarterly report of actions taken on minor rule violations under the
plan. 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 has occurred,
and the date of disposition.\7\
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\7\ EDGX Exchange attached a sample form of the quarterly report
with its submission to the Commission.
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The Commission finds that the proposed MRVP is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. In particular, the
Commission believes that the proposal is consistent with Section
6(b)(5) of the Act,\8\ which requires that the rules of an exchange be
designed to promote just and equitable principles of trade, to remove
impediments and to perfect the mechanism of a free and open market and
national market system, and, in general, to protect investors and the
public interest. The Commission also believes that the proposal is
consistent with Sections 6(b)(1) and 6(b)(6) of the Act \9\ which
require that the rules of an exchange enforce compliance with, and
provide appropriate discipline for, violations of the Commission and
Exchange rules. In addition, because the MRVP offers procedural rights
to a person sanctioned under Rule 8.15, the Commission believes that
Rule 8.15 provides a fair procedure for the disciplining of members and
persons associated with members, consistent with Sections 6(b)(7) and
6(d)(1) of the Act.\10\
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\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
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Finally, 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,\11\ because the MRVP strengthens EDGX Exchange's ability
to carry out its oversight and enforcement responsibilities as an SRO
in cases where full disciplinary proceedings are unsuitable in view of
the minor nature of the particular violation.
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\11\ 17 CFR 240.19d-1(c)(2).
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In approving this proposal, the Commission in no way minimizes the
importance of compliance with Exchange rules and all other rules
subject to the imposition of sanctions under Rule 8.15. The Commission
believes that the violation of an SRO's rules, as well as Commission
rules, is a serious matter. However, Rule 8.15 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. The Commission expects that
EDGX Exchange will continue to conduct surveillance with due diligence
and make determinations based on its findings, on a case-by-case basis,
whether a sanction under the MRVP is appropriate, or whether a
violation requires formal disciplinary action.
It is therefore ordered, pursuant to Rule 19d-1(c)(2) under the
Act,\12\ that the proposed MRVP for EDGX Exchange, File No. 4-594, be,
and hereby is, approved and declared effective.
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\12\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11259 Filed 5-11-10; 8:45 am]
BILLING CODE 8010-01-P