[Federal Register Volume 78, Number 16 (Thursday, January 24, 2013)]
[Notices]
[Pages 5213-5236]
[FR Doc No: 2013-01375]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68678; File No. SR-NYSE-2013-02]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Adopting Investigation,
Disciplinary, Sanction, and Other Procedural Rules That Are Modeled on
the Rules of the Financial Industry Regulatory Authority and To Make
Certain Conforming and Technical Changes

January 16, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 4, 2013, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III 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 to adopt investigation, disciplinary,
sanction, and other procedural rules that are modeled on the rules of
the Financial Industry Regulatory Authority (``FINRA'') and to make
certain conforming and technical changes. The text of 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 to adopt investigation, disciplinary,
sanction, and other procedural rules that are modeled on the rules of
FINRA and to make certain conforming and technical changes.

Background and General Description of Proposed Rule Change

    On July 30, 2007, the National Association of Securities Dealers,
Inc. (``NASD''), the Exchange, and NYSE Regulation, Inc. (``NYSER'')
consolidated their member firm regulation operations into a combined
organization, FINRA, and entered into a plan to allocate to FINRA
regulatory responsibility for common rules and common members (``17d-2
Agreement'').\4\ The 17d-2 Agreement was entered into in accordance
with the requirements of Rule 17d-2 of the Securities and Exchange
Commission (``SEC'' or ``Commission''),\5\ which permits self-
regulatory organizations (``SROs'') to allocate regulatory
responsibilities with respect to common members and common rules. In
2007, the parties also entered into a Regulatory Services Agreement
(``RSA''), whereby FINRA was retained to perform certain regulatory
services on behalf of NYSER for non-common rules. On June 14, 2010, the
Exchange, NYSER, and FINRA amended the RSA and retained FINRA to
perform the market surveillance and enforcement functions that had
previously been performed by NYSER up to that point.\6\ Accordingly,
since June 14, 2010, FINRA has been performing all enforcement-related
regulatory services on behalf of NYSER, including disciplinary
proceedings relating to NYSE-only rules or against both dual members
and non-FINRA members.
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    \4\ See Securities Exchange Act Release No. 56148 (July 26,
2007), 72 FR 42146 (August 1, 2007) (File No. 4-544) (Notice of
Filing and Order Approving and Declaring Effective a Plan for the
Allocation of Regulatory Responsibilities).
    \5\ 17 CFR 240.17d-2.
    \6\ See Securities Exchange Act Release No. 62355 (June 22,
2010), 75 FR 36729 (June 28, 2010) (SR-NYSE-2010-46).
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    To facilitate FINRA's performance of these enforcement functions
under the RSA and to further harmonize the rules of FINRA and NYSE
generally, NYSE is proposing to adopt the text of the FINRA Rule 8000
Series and Rule 9000 Series, which set [sic] forth rules for conducting
investigations and enforcement actions, with certain modifications that
are described below.
    The Exchange notes that most of its member organizations are
members of FINRA and as such are already subject to the FINRA Rule 8000
Series and Rule 9000 Series. Those member organizations that are not
members of FINRA are members of The NASDAQ Stock Market (``NASDAQ''),
which has similar disciplinary rules to FINRA and thus are also already
subject to such rules. Thus, all Exchange members, by virtue of their
membership either in FINRA or NASDAQ, are already subject to the FINRA
rules described herein.\7\
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    \7\ For that reason, the Exchange has included in this filing a
general description of current FINRA rules because its members are
already subject to and expected to be familiar with them. The
Exchange describes in more detail how its proposed rules would
differ from FINRA rules and the Exchange's current rules. To further
highlight the precise difference between certain of the Exchange's
proposed rules and FINRA's current rules, the Exchange has attached
as Exhibit 3 a blackline comparing the FINRA Rule 8000-9000 Series
as of December 31, 2012 against the Exchange's proposed Rule 8000-
9000 Series. The Exchange notes that FINRA has received approval
for, but not yet implemented, certain changes to its rules (for
example, SR-FINRA-2009-060, which amends FINRA Rule 8210) or may
propose further changes to its rules in the future. The Exchange
will review each such rule change and determine if a conforming
amendment should be made to the NYSE rules.
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Current NYSE Rules 475-477

    This section sets forth a summary of NYSE's current disciplinary
rules.\8\ These rules include NYSE Rule 475, which describes summary
disciplinary proceedings; NYSE Rule 476, which describes initial
disciplinary proceedings and appeals; NYSE Rule 476A, which addresses
the imposition of minor rule violation sanctions; and NYSE Rule 477,
which addresses retention of jurisdiction by the Exchange.
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    \8\ Where current or proposed NYSE rules or FINRA rules use
capitalized terms, descriptions of such rules herein follow those
capitalization conventions.
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Current NYSE Rule 475--Summary Proceedings
    NYSE Rule 475 sets forth summary procedures under which the
Exchange may prohibit or limit access to services. Under Rule 475(a),
except as otherwise provided in Rule 475(b), the Exchange may not
prohibit or limit any person with respect to access to services offered
by the Exchange or any member or member organization thereof unless the
Exchange has provided 15 days' prior written notice of, and an
opportunity to be heard upon, the specific grounds for such prohibition
or limitation. The Exchange must keep a record of any such proceeding.
Any determination by the Exchange to prohibit or limit access to
services must be supported by a statement setting forth the specific
grounds for the prohibition or limitation.
    Under NYSE Rule 475(b), the Exchange may summarily suspend persons
subject to its jurisdiction that have been expelled or suspended by
another SRO, or barred or suspended from being associated with a member
or any such SRO, as long as any such summary suspension imposed by the
Exchange does not exceed the termination of the suspension imposed by
the other SRO. The Exchange also may suspend a member or member
organization that is in such financial or operating difficulty that the
Exchange determines, and so notifies the SEC, that the member or member
organization cannot be permitted to continue to do business with safety
to investors, creditors, other members or member organizations, or the
Exchange. The Exchange also may limit or prohibit any person with
respect to access to Exchange services if such person has been
summarily suspended under this rule or, in the case of a person who is
not a member or member organization, if the Exchange determines that
such person does not meet the qualification requirements or other
prerequisites for such access and such person cannot be permitted to
continue to have such access with safety to investors, creditors,
members, member organizations, or the Exchange.
    Any person subject to summary action must receive written notice
and an opportunity to be heard by the Exchange upon the specific
grounds for the action, and the Exchange must keep a record of any
summary proceeding. Any determination by the Exchange with respect to
such summary action must be supported by a statement setting forth the
specific grounds on which the summary action is based. The Commission,
by order, may stay any such summary action in accordance with the
provisions of the Act.
    NYSE Rule 475(c) governs hearings and proceedings pursuant to Rule
475(a) and (b). Hearings are conducted by a Hearing Officer, appointed
by the Exchange Board of Directors, acting alone. The Hearing Officer
schedules and conducts hearings promptly and, in doing so, provides
such discovery to the person whose access or suspension is the subject
of such a hearing and to the Exchange officers and employees. The
Hearing Officer renders determinations based upon the record at such
hearings. The Hearing Officer may modify, reverse, or terminate a
summary action, unless within 10 days of such

determination, a request for review is filed with the Secretary of the
Exchange. Any member of the Exchange Board of Directors, any member of
the committee of NYSER to which is delegated the authority to review
disciplinary decisions on behalf of the Exchange Board of Directors
(``NYSER Committee For Review''), and any Executive Floor Governor and
either the Division of the Exchange initiating the proceedings or the
respondent may require a review by the Exchange Board of Directors of
any determination by the Hearing Officer. The Exchange Board of
Directors may affirm, modify, or reverse any such determination, or
remand the matter to the Hearing Officer for further proceedings.
    Under NYSE Rule 475(d), whenever a member or member organization
fails to perform its contracts, becomes insolvent, or is in such
financial or operating difficulty that it cannot be permitted to
continue to do business as a member or member organization with safety
to investors, creditors, other members or member organizations, or the
Exchange, such member or member organization must promptly give written
notice thereof to the Secretary of the Exchange.
    Under NYSE Rule 475(e), any person suspended under the provisions
of the rule must, at the request of the Exchange, submit to the
Exchange its books and records or the books and records of any employee
thereof and furnish information to or to appear or testify before or
cause any such employee to appear or testify before the Exchange.
    Under NYSE Rule 475(f), any person suspended under Rule 475 may, at
any time, be reinstated by the Exchange Board of Directors.
    Under NYSE Rule 475(g), any person suspended under Rule 475 may be
disciplined in accordance with the Exchange's rules for any offense
committed before or after the suspension.
    Under NYSE Rule 475(h), a member suspended under Rule 475 is
deprived during the term of the suspension of all rights and privileges
of membership, and any suspension of a member or allied member creates
a vacancy in any office or position held by such member or allied
member.
    Under NYSE Rule 475(i), the limitations on the Chief Executive
Officer (``CEO'') of the Exchange contained in NYSE Rule 476(l) that
prohibit the CEO from initiating a call for review apply to all matters
under NYSE Rule 475.
    Under NYSE Rule 475(j), any member of the Exchange Board of
Directors, any member of the NYSER Committee for Review, any Executive
Floor Governor, the Division of the Exchange initiating the
proceedings, and the respondent may require a review by the Exchange
Board of Directors of any determination under Rule 475 by filing with
the Secretary of the Exchange a written request thereof within 10 days
following such determination. The Exchange Board of Directors shall
have the power to affirm, modify, or reverse any such determination, or
remand the matter for further proceedings.
Current Rule 476--Disciplinary Proceedings
    NYSE Rule 476 governs disciplinary proceedings involving charges
against members, member organizations, principal executives, approved
persons, employees, or others subject to the Exchange's jurisdiction.
Under NYSE Rule 476(a), if such a person is adjudged guilty of certain
offenses in a proceeding under NYSE Rule 476, then a Hearing Panel or
Hearing Officer may impose disciplinary sanctions on such person,
including expulsion; suspension; limitation as to activities,
functions, and operations, including the suspension or cancellation of
a registration in, or assignment of, one or more stocks; fine; censure;
suspension or bar from being associated with any member or member
organization; or any other fitting sanction. The list of offenses under
NYSE Rule 476(a)(1)-(11) includes, for example, violating an Exchange
rule or the Act, making a material misstatement, or engaging in
manipulation.
    NYSE Rule 476(b) describes the role of Hearing Panels and Hearing
Officers. Under NYSE Rule 476(b), all proceedings under NYSE Rule 476,
except for matters resolved by a Hearing Officer when authorized by the
rule, are conducted at a hearing in accordance with the Rule and held
before a Hearing Panel consisting of at least three persons of
integrity and judgment: A Hearing Officer, who chairs the Hearing
Panel, and at least two members of the Hearing Board, at least one of
whom must be engaged in securities activities differing from that of
the respondent or, if retired, was so engaged in differing activities
at the time of retirement. In any disciplinary proceeding involving
activities on the Floor of the Exchange, no more than one of the
persons serving on the Hearing Panel may be, or if retired, may have
been, active on the Floor of the Exchange. A Hearing Panel may include
only one retired person.
    The Chairman of the Exchange Board of Directors (``Chairman''),
subject to the approval of the Exchange Board of Directors, from time
to time appoints a Hearing Board to be composed of persons of integrity
and judgment who are members and allied members of the Exchange who are
not members of the Exchange Board of Directors, and registered and non-
registered employees of members and member organizations, and such
other persons as the Chairman deems necessary. Former members, allied
members, or registered and non-registered employees of members and
member organizations who have retired from the securities industry may
be appointed to the Hearing Board within five years of their
retirement. The members of the Hearing Board are appointed annually and
serve at the pleasure of the Exchange Board of Directors.
    The Chairman, subject to the approval of the Exchange Board of
Directors, annually designates a Chief Hearing Officer and one or more
other Hearing Officers who have [sic] no Exchange duties or functions
relating to the investigation or preparation of disciplinary matters.
Hearing Officers serve at the pleasure of the Exchange Board of
Directors. An individual cannot be a Hearing Officer (including the
Chief Hearing Officer) if he or she is, or within the last three years
was, a member, allied member, or registered or non-registered employee
of a member or member organization.
    Under the rule, the decision of a majority of the Hearing Panel is
the decision of the Hearing Panel and is final and conclusive, unless a
request to the Exchange Board of Directors for review is filed.
    NYSE Rule 476(c) governs procedural matters and the conduct of the
hearing. Under NYSE Rule 476(c), upon application to the Chief Hearing
Officer by either party to a proceeding, the Chief Hearing Officer, or
any Hearing Officer designated by the Chief Hearing Officer, resolves
any and all procedural and evidentiary matters and substantive legal
motions, and may require the Exchange to permit the respondent to
inspect and copy documents or records in the possession of the Exchange
that are material to the preparation of the defense or are intended for
use by the Division of the Exchange initiating the proceeding as
evidence in chief at the hearing. The respondent may be required to
provide discovery of non-privileged documents and records to the
Exchange. The rule does not authorize the discovery or inspection of
reports, memoranda, or other internal Exchange documents prepared by
the Exchange in connection with the proceeding. There is no
interlocutory appeal to the Exchange Board of Directors of any

determination as to which this provision applies.
    NYSE Rule 476(d) governs Charge Memorandums, Answers, and motions.
Under NYSE Rule 476(d), except as otherwise provided in NYSE Rule
476(g), which governs Stipulations and Consents, the specific charges
against the respondent must be in the form of a written statement (a
``Charge Memorandum'') and signed by an authorized officer or employee
of the Exchange on behalf of the Division of the Exchange bringing the
charges. A copy of such Charge Memorandum must be filed with the
Hearing Board at the same time it is served upon the respondent.
Service is deemed effective by personal service of such Charge
Memorandum, or by leaving the same either at the respondent's last
known office address during business hours or respondent's last place
of residence as reflected in Exchange records, or upon mailing same to
the respondent at such office address or place of residence. The
Hearing Board assumes jurisdiction upon receipt of the Charge
Memorandum.
    A written Answer to the Charge Memorandum must be filed not later
than 25 days from the date of service or within such longer period of
time as the Hearing Officer may deem proper. The Answer must be signed
by or on behalf of the respondent and filed with the Hearing Board,
with a copy served on the Division of the Exchange bringing the
charges. The Answer must indicate specifically which assertions of fact
and charges in the Charge Memorandum are denied and which are admitted,
and also contain any specific facts in contradiction of the charges and
any affirmative defenses. A general denial is insufficient. Any
assertions of fact not specifically denied in the Answer may be deemed
admitted and failure to file an Answer may be deemed an admission of
any facts asserted in the Charge Memorandum.
    The Hearing Board sets a schedule for the filing of motions and
establishes hearing dates. If the respondent has failed to file an
Answer, the Division of the Exchange bringing the charges, by motion,
accompanied by proof of notice to the respondent, may request a
determination of guilt by default, and may recommend a penalty to be
imposed. If the respondent opposes the motion, the Hearing Officer, on
a determination that the respondent had adequate reason to fail to file
an Answer, may adjourn the hearing date and direct the respondent to
promptly file an Answer. If the default motion is unopposed, or the
respondent did not have adequate reason to fail to file an Answer, or
the respondent failed to file an Answer after being given an
opportunity to do so, the Hearing Officer, on a determination that the
respondent has had notice of the charges and that the Exchange has
jurisdiction in the matter, may find guilt and determine a penalty.
    Notice of the hearing is served upon the Division of the Exchange
and the respondent. The respondent is entitled to be personally
present. The Hearing Officer determines the specific facts at issue,
and with respect to those facts only, both the Division of the Exchange
bringing the charges and the respondent may produce witnesses and any
other evidence and they may examine and cross-examine any witnesses so
produced. After hearing all the witnesses and considering all the
evidence, the Hearing Panel determines whether the respondent is guilty
of the charges, and if so, may impose a penalty.
    NYSE Rule 476(e) concerns the hearing record and time for appeal.
Under Rule 476(e), the Exchange must keep a record of any hearing
conducted and a written notice of the result served upon the respondent
and the Division of the Exchange that brought the charges.
    The determination of the Hearing Panel, or of the Hearing Officer
on a determination of default, and any penalty imposed, is final and
conclusive 25 days after notice has been served upon the respondent,
unless a request to the Exchange Board of Directors for review of such
determination and/or penalty is filed, in which case any penalty
imposed is stayed pending the outcome of such review.
    NYSE Rule 476(f) concerns appeals to the Exchange Board of
Directors. Under NYSE Rule 476(f), the Division of the Exchange that
brought the charges, the respondent, and any member of the Exchange
Board of Directors, any member of the NYSER Committee for Review, and
any Executive Floor Governor may require a review by the Exchange Board
of Directors of any determination or penalty, or both, imposed by a
Hearing Panel or Hearing Officer. A written request for review must be
filed with the Secretary of the Exchange within 25 days after notice of
the determination and/or penalty is served upon the respondent. The
Secretary of the Exchange gives notice of any such request for review
to the Division of the Exchange that brought the charges and any
respondent affected thereby.
    Any review by the Exchange Board of Directors is based on oral
arguments and written briefs and is limited to consideration of the
record before the Hearing Panel or Hearing Officer. Upon review, the
Exchange Board of Directors, by majority vote, may sustain any
determination or penalty imposed, or both; may modify or reverse any
such determination; and may increase, decrease or eliminate any such
penalty, or impose any penalty permitted under the provisions of this
rule, as it deems appropriate. Unless the Exchange Board of Directors
otherwise specifically directs, the determination and penalty, if any,
of the Exchange Board of Directors after review is final and
conclusive, subject to the provisions for review under the Act.
    Notwithstanding the foregoing, if either party upon review applies
to the Exchange Board of Directors for leave to adduce additional
evidence, and shows to the satisfaction of the Exchange Board of
Directors that the additional evidence is material and that there was
reasonable ground [sic] for failure to adduce it before the Hearing
Panel or Hearing Officer, the Exchange Board of Directors may remand
the case for further proceedings, in whatever manner and on whatever
conditions the Exchange Board of Directors considers appropriate.
    NYSE Rule 476(g) sets forth an alternative Stipulation and Consent
procedure that may be used in lieu of the procedures set forth in NYSE
Rule 476(d). Under NYSE Rule 476(g), a Hearing Officer acting alone may
determine whether a person subject to the Exchange's jurisdiction has
committed an offense on the basis of a written Stipulation and Consent
entered into between the respondent and any authorized officer or
employee of the Exchange. Any such Stipulation and Consent must contain
a stipulation with respect to the facts, or the basis for findings of
fact by the Hearing Officer; a consent to findings of fact by the
Hearing Officer, including a finding that a specified offense had been
committed; and a consent to the imposition of a specified penalty.
    A Hearing Officer must convene a Hearing Panel if the Hearing
Officer requires clarification or further information on the
Stipulation and Consent, or if either party requests a hearing before a
Hearing Panel. A Hearing Officer, acting alone, may not reject a
Stipulation and Consent, but must convene a Hearing Panel to consider
such action.
    Notice of any hearing held for the purpose of considering a
Stipulation and Consent is served upon the respondent as provided in
NYSE Rule 476(d). In any such hearing, if the Hearing Panel determines
that the respondent has committed an offense, it

may impose the penalty agreed to in such Stipulation and Consent. In
addition, a Hearing Panel may reject such Stipulation and Consent.
    Such rejection does not preclude the parties to the proceeding from
entering into a modified Stipulation and Consent or preclude the
Exchange from bringing or presenting the same or different charges to a
Hearing Panel in accordance with NYSE Rule 476(d). The Exchange must
keep a record of any hearing conducted under this Rule and a written
notice of the result setting forth the requirements contained in
Section 6(d)(1) of the Act must be served on the parties to the
proceeding.
    The determination of the Hearing Panel or Hearing Officer and any
penalty imposed are final and conclusive 25 days after notice thereof
has been served upon the respondent, unless a request to the Exchange
Board of Directors for review of such determination and/or penalty is
filed, in which case any penalty imposed is stayed pending the outcome
of such review.
    Any member of the Exchange Board of Directors, any member of the
NYSER Committee for Review, and any Executive Floor Governor may
require a review by the Exchange Board of Directors of any
determination or penalty, or both, imposed by a Hearing Panel or
Hearing Officer in connection with a Stipulation and Consent. The
respondent or the Division that entered into the Stipulation and
Consent may require a review by the Exchange Board of Directors of any
rejection of such Stipulation and Consent by the Hearing Panel. A
written request for review must be filed with the Secretary of the
Exchange within 25 days after notice of the determination and/or
penalty is served on the respondent. The Secretary of the Exchange
gives notice of any such request for review to the Division of the
Exchange involved in the proceeding and any respondent affected
thereby.
    Any review by the Exchange Board of Directors consists of oral
arguments and written briefs and is limited to consideration of the
record before the Hearing Panel or Hearing Officer. Upon review, the
Exchange Board of Directors, by majority vote, may fix and impose the
penalty agreed to in such Stipulation and Consent or any penalty that
is less severe than the stipulated penalty, or may remand for further
proceedings. Unless the Exchange Board of Directors otherwise
specifically directs, the determination and penalty, if any, of the
Exchange Board of Directors after review is final and conclusive,
subject to the provisions for review under the Act.
    NYSE Rule 476(h) concerns legal representation. Under the rule, a
person subject to the Exchange's jurisdiction has the right to be
represented by legal counsel or other representative in any hearing or
review held under Rule 476 and in any investigation before any
committee, officer, or employee of the Exchange. A Hearing Officer may
impose a fine or any other appropriate sanction on any party or the
party's representative for improper conduct in connection with a matter
before the Hearing Board, and may, if appropriate, exclude any
participant, including any party, witness, attorney or representative
from a hearing on the basis of such conduct.
    Under NYSE Rule 476(i), a member or allied member of the Exchange
who is associated with a member organization is liable to the same
discipline and penalties for any act or omission of such member
organization as for the member or allied member's own personal act or
omission. The Hearing Panel that considers the charges against such
member, or allied member, or the Exchange Board of Directors upon any
review thereof, may relieve him from the penalty therefor or may remit
or reduce such penalty on such terms and conditions as the Hearing
Panel or the Exchange Board of Directors deems fair and equitable.
    NYSE Rule 476(j) governs suspensions. When a member is suspended
under Rule 476, such member is deprived during the term of the member's
suspension of all rights and privileges of membership. The expulsion of
a member terminates all membership rights and privileges.
    NYSE Rule 476(k) addresses non-payment of fines and other sums due
to the Exchange. Under this rule, if any approved person or registered
or non-registered employee fails to pay any fine within 45 days after
the same is payable, such individual may, after written notice mailed
to such individual at either the member's office or last place of
residence as reflected in Exchange records, be summarily suspended from
association in any capacity with a member organization or have the
member's approval withdrawn until such fine is paid. The rule further
provides that any member, member organization or allied member that
fails to pay a fine or any other sums due to the Exchange within 45
days is reported by the Exchange Treasurer to the Chairman of the
Exchange Board of Directors and, after written notice mailed to such
member, member organization or allied member of such arrearages, may be
suspended by the Exchange Board of Directors until payment is made. An
individual or organization may be proceeded against for any offense
other than that for which such individual or organization was
suspended. In addition, the suspension or expulsion of a member or
allied member under the provisions of this rule creates a vacancy in
any office or position held by the member or allied member. Similarly,
current NYSE Rule 309 provides that any member, member organization or
allied member that fails to pay a fee or any other sums due to the
Exchange (excluding a fine) with 45 days after the same are payable
shall be reported to the Chief Financial Officer of the Exchange or
[sic] designee who, after notice has been given to such member, member
organization or allied member of such arrearages, may suspend access to
some or all of the facilities of the Exchange until payment is made.
Written suspension notices under both NYSE Rules 309 and 476(k) are
immediately effective upon such notice and the rules provide no further
process; upon payment of the fine or amount due, the suspension is
lifted.
    Under NYSE Rule 476(l), the CEO may not require a review by the
Exchange Board of Directors under Rule 476 and is recused from
deliberations and actions of the Board with respect to such matters.
Current NYSE Rule 476A--Imposition of Fines for Minor Violations of
Rules
    Under NYSE Rule 476A(a), in lieu of commencing a disciplinary
proceeding under NYSE Rule 476, the Exchange may impose a fine not to
exceed $5,000 on any member, member organization, principal executive,
approved person, or registered or non-registered employee of a member
or member organization for the rules listed in NYSE Rule 476A. Any fine
imposed pursuant to this rule and not contested is not publicly
reported, except as may be required by SEC Rule 19d-1 and as may be
required by any other regulatory authority.
    Under NYSE Rule 476A(b), the person against whom a minor rule
violation fine is imposed is served with a written statement, signed by
an authorized officer or employee of the Exchange on behalf of the
Division or Department of the Exchange taking the action, setting forth
(i) the rule or rules alleged to have been violated; (ii) the act or
omission constituting each such violation; (iii) the fine imposed for
each such violation; and (iv) the date by which such determination
becomes final and such fine becomes due and payable to the Exchange, or
such determination must be contested as provided in NYSE Rule 476A(d).
Such date may not be less than

25 days after the date of service of the written statement.
    Under NYSE Rule 476A(c), if the person against whom a minor rule
violation fine is imposed pays the fine, such payment is deemed to be a
waiver by such person of such person's right to a disciplinary
proceeding under NYSE Rule 476 and any review of the matter by a
Hearing Panel or the Exchange Board of Directors.
    Under NYSE Rule 476A(d), any person against whom a minor rule
violation is imposed may contest the Exchange's determination by timely
filing a written response meeting the requirements of an answer as
provided in NYSE Rule 476(d), at which point the matter becomes a
disciplinary proceeding subject to the provisions of NYSE Rule 476. In
any such disciplinary proceeding, if the Hearing Panel determines that
the person is guilty of the rule violation(s) charged, the Hearing
Panel is free to impose any one or more of the disciplinary sanctions
provided in NYSE Rule 476 and determine whether the rule violation(s)
is minor in nature. NYSER, the person charged, any member of the
Exchange Board of Directors, any member of the NYSER Committee for
Review, and any Executive Floor Governor may require a review by the
Board of any determination by the Hearing Panel by proceeding in the
manner described in NYSE Rule 476(f).
    Under NYSE Rule 476A(e), the Exchange must prepare and announce to
its members and member organizations from time to time a listing of the
Exchange rules as to which the Exchange may impose minor rule violation
fines. Such listing also indicates the specific dollar amount that may
be imposed as a fine or may indicate the minimum and maximum dollar
amounts that may be imposed by the Exchange with respect to any such
violation. The Exchange is free, whenever it determines that any
violation is not minor in nature, to proceed under NYSE Rule 476 rather
than under NYSE Rule 476A.
    The remainder of NYSE Rule 476A sets forth the list of rule
violations that may be treated as minor rule violations and fines,
which may not exceed $5,000.
Current NYSE Rule 477--Retention of Jurisdiction and Failure To
Cooperate
    Under NYSE Rule 477(a), if, prior to termination, or during the
period of one year immediately following the receipt by the Exchange of
written notice of the termination, of a person's status as a member,
member organization, principal executive, approved person, or
registered or non-registered employee of a member or member
organization, the Exchange serves (as provided in NYSE Rule 476(d)) a
written notice on such person that it is making inquiry into, or serves
a Charge Memorandum on such person with respect to, any matter or
matters occurring prior to the termination of such person's status, the
Exchange may thereafter require such person to comply with any requests
of the Exchange to appear, testify, submit books, records, papers, or
tangible objects, respond to written requests and attend hearings in
every respect in conformance with the Rules of the Exchange in the same
manner and to the same extent as if such person had remained a member,
member organization, principal executive, approved person, or
registered or non-registered employee of a member or member
organization.
    Under NYSE Rule 477(b), prior to termination, or during the period
of one year immediately following the receipt by the Exchange of
written notice of the termination of a person's status as a member,
member organization, principal executive, approved person, or
registered or non-registered employee of a member or member
organization, the Exchange may, through the exercise of its
jurisdiction, as described in NYSE Rule 477(a) above, require such
person to comply with any requests of an organization or association
included in NYSE Rule 476(a)(11) to appear, testify, submit books,
records, papers, or tangible objects, respond to written requests and
attend hearings in every respect in conformance with the Exchange rules
in the same manner and to the same extent as if such person had
remained a member, member organization, principal executive, approved
person, or registered or non-registered employee of a member or member
organization with respect to any matter or matters occurring prior to
the termination of such person's status.
    Under NYSE Rule 477(c), if a former member, member organization,
principal executive, approved person, or registered or non-registered
employee of a member or member organization, provided such notice or
Charge Memorandum is or has been served, is adjudged guilty in a
proceeding under NYSE Rule 476 of having refused or failed to comply
with any such requirement, such person may be barred permanently, or
for such period of time as may be determined, or until such time as the
Exchange has completed its investigation into the matter or matters
specified in such notice or Charge Memorandum, has determined a
penalty, if any, to be imposed, and until the penalty, if any, has been
carried out.
    Under NYSE Rule 477(d), following the termination of a person's
status as a member, member organization, principal executive, approved
person, or registered or non-registered employee of a member or member
organization, provided such notice or Charge Memorandum is or has been
served, such person may also be charged with having committed, prior to
termination, any other offense with which such person might have been
charged had such status not been terminated. Any such charges shall be
brought and determined in accordance with the provisions set forth in
NYSE Rule 476.

Proposed Rule Change

    The Exchange proposes to adopt many of FINRA's rules that are set
forth in FINRA Rule 8000 and 9000 Series with no modification \9\ or
with conforming and technical changes as described below. However, in
certain key respects, the proposed NYSE rules would continue to differ
from FINRA's rules. Specifically, as described in more detail below,
NYSE proposes to (1) establish processes for settling disciplinary
matters both before and after the issuance of a complaint that differ
both from NYSE's current Stipulation and Consent process and FINRA's
current settlement processes; (2) retain the NYSE selection process for
Hearing Panelists, rather than use FINRA's Panelists; (3) retain the
substance of NYSE's current appellate process; (4) use NYSE's Chief
Regulatory Officer (``CRO'') rather than FINRA's General Counsel for
certain procedural decisions in the proposed rules; and (5) retain the
current NYSE list of minor rule violations, with certain technical and
conforming amendments, while adopting FINRA's minor rule violation fine
levels and FINRA's process for imposing them. A more detailed
description of the proposed rules is set forth below.
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    \9\ The following proposed NYSE Rules would be identical to the
text of their counterpart FINRA Rules: 9131-9134, 9136-9138, 9142,
9148, 9213-9215, 9222, 9233-9241, 9261, 9263-9266, and 9290. See
infra note 17 for a list of proposed rules with only conforming and
technical amendments.
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Transition

    Following approval of the proposed rule change, the Exchange
intends to announce the effective date of the new rules at least 30
days in advance in an Information Memorandum to its members and member
organizations. To further facilitate an orderly transition from the
current rules to the new rules, the Exchange proposes that certain

matters already initiated under the current rules would be completed
under such rules.
    Specifically, current NYSE Rule 475 would continue to apply with
respect to a proceeding for which a written notice had been issued
prior to the effective date of the new rules. Current NYSE Rules 476
and 476A would continue to apply with respect to a proceeding for which
a Charge Memorandum had been filed with the Hearing Board under NYSE
Rule 476(d) prior to the effective date of the new rules. Current NYSE
Rule 476 also would continue to apply to a matter for which a written
Stipulation and Consent has been submitted to a Hearing Officer prior
to the effective date of the new rules. Current NYSE Rules 475, 476, or
476A would continue to apply until any such proceeding was final. In
all other cases, the proposed NYSE Rule 9000 Series, as described
below, would apply.
    Until the effective date, the Exchange could issue a written notice
of suspension for non-payment of a fine or other sum due to the
Exchange under current NYSE Rule 476(k), which would remain in effect
until payment was made. Thereafter, the Exchange would proceed against
an individual or entity subject to its jurisdiction that failed to pay
a fine or monetary sanction under proposed NYSE Rule 8320, which would
be modeled on the counterpart FINRA rule that similarly provides for a
summary suspension until such fine or monetary sanction is paid. With
respect to non-payment of amounts other than fines and monetary
sanctions, the Exchange proposes to delete the language in current NYSE
Rule 476(k) regarding these matters because it is duplicative of the
language in current NYSE Rule 309, which authorizes the Exchange's
Chief Financial Officer to address non-payment of amounts due to the
Exchange other than fines and monetary sanctions. Thus, following the
effective date, NYSE Rule 309 would govern non-payment of sums owed to
the Exchange other than fines and monetary sanctions. Current NYSE Rule
309 includes a cross-reference to NYSE Rule 476(k), which would be
replaced with a reference to proposed NYSE Rule 8320.
    As noted above, current NYSE Rule 476(a)(1)-(11) also contains
substantive elements in addition to its procedural elements.
Specifically, NYSE Rule 476(a)(1)-(11) contains a list of offenses for
which the Exchange can take disciplinary action. The proposed rule
change would not alter this substantive aspect of Rule 476(a). The
Exchange could continue to take disciplinary action against a member
organization or other person subject to its jurisdiction for committing
any of these substantive violations; following the transition described
above, the Exchange would bring disciplinary cases for such offenses
under the proposed NYSE Rule 9000 Series.
    Similarly, the retention of jurisdiction provisions of NYSE Rule
477 would continue to apply to any member organization that resigned or
had its membership canceled or revoked and any person whose status as a
person subject to the Exchange's jurisdiction was terminated or whose
registration was revoked or canceled if such member organization or
person had been served with a Charge Memorandum or written notice of
inquiry pursuant to NYSE Rule 477 prior to the effective date of the
new rules. As described above, current NYSE Rule 477 generally provides
that the Exchange retains jurisdiction for one year after such status
is terminated and such jurisdiction continues if during that one-year
period the Exchange has provided written notice that it is making
inquiry into matters that arose prior to termination. In all other
cases, the retention of jurisdiction provisions of proposed NYSE Rule
8130 would apply, which would set forth retention of jurisdiction
provisions modeled on Article IV, Section 6 and Article V, Section 4 of
the FINRA Bylaws. Under the proposed rule change, as described below,
the Exchange would retain jurisdiction to file a complaint against a
member organization or person subject to its jurisdiction for two years
after such status was terminated, and the proposed NYSE Rule 8000
Series and Rule 9000 Series generally would apply.
    When the transition is complete and there are no longer any member
organizations or persons who would be subject to NYSE Rules 475, 476,
476A, and 477, the Exchange intends to submit a proposed rule change
that would delete such rules (except for the listed offenses under NYSE
Rule 476(a)).

Terms and Definitions Used Throughout the Proposed NYSE Rule 8000 and
9000 Series Resulting in Technical Amendments to FINRA Text

    To continue the current coverage of the NYSE disciplinary rules,
the proposed rule change would use the terms ``member organization''
and ``covered person'' rather than ``member'' and ``person associated
with a member,'' respectively, which terms are used throughout the
FINRA Rule 8000 and 9000 Series. The term ``member'' has different
meanings under FINRA and NYSE rules. Under FINRA Rule 0160(b)(9),
``member'' means an organization that is a member of FINRA; NYSE's
equivalent term is ``member organization.'' \10\ Under NYSE 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.
---------------------------------------------------------------------------

    \10\ See NYSE Rule 2(b).
---------------------------------------------------------------------------

    The Exchange proposes to use the term ``covered person'' rather
than the Act's definition of ``associated person'' or FINRA's
definition of ``associated person'' so that the proposed rule change
appropriately captures each of the individuals and entities other than
member organizations that are currently subject to the Exchange's
rules, thus preserving the Exchange's current scope of jurisdiction.
These individuals and entities are members, principal executives,
approved persons, and registered and non-registered employees of a
member or member organization, and any other person subject to the
Exchange's jurisdiction.\11\ Each of these individuals and entities
falls within the definition of ``associated person'' in Section
3(a)(18) of the Act.\12\
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    \11\ See NYSE Rules 2A and 476. The Interpretation of NYSE Rule
345(a) has long permitted registered representatives associated with
a member organization to assert the status of ``independent
contractor,'' provided such designation does not in any way
compromise such person's characterization and treatment as an
``employee'' of his or her associated member organization for
purposes of the rules of the Exchange. See Information Memo 06-51.
As such, independent contractors are deemed employees of member
organizations and thus subject to the Exchange's jurisdiction.
    \12\ See 15 U.S.C. 78c(a)(18). Under Section 3(a)(18),
``associated person'' means any partner, officer, director, or
branch manager of a broker-dealer (or any person occupying a similar
status or performing similar functions), any person directly or
indirectly controlling, controlled by, or under common control with
a broker-dealer, or any employee of such broker-dealer, excluding
for certain purposes any person whose functions are solely clerical
or ministerial.
---------------------------------------------------------------------------

    However, the definition in the Act is broader in scope that [sic]
the individuals and entities currently subject to the Exchange's
jurisdiction and for that reason the Exchange could not use the Act's
definition for purposes of the proposed rule change. For example, the
Act's definition of associated person includes any person under common
control with a broker-dealer. However, the Exchange's scope of
jurisdiction is not so broad. Specifically, the definition of approved
person \13\ does not include all affiliates;

rather, it includes only affiliates engaged in a securities or kindred
business that is controlled by a member or member organization or a
U.S. registered broker-dealer under common control with a member
organization. The Exchange also could not use FINRA's definition of
associated person in Article I(rr) of FINRA Bylaws \14\ because it does
not include the affiliates of a broker-dealer that are covered by the
Exchange's definition of approved person; thus, the FINRA definition
would be too narrow. As such, the Exchange proposes to use the new term
``covered person,'' referenced in proposed NYSE Rule 8120(b) and
defined in proposed NYSE Rule 9120(g), which would include a member,
principal executive, approved person, registered or non-registered
employee of a member organization, or other person (excluding a member
organization) subject to the jurisdiction of the Exchange.\15\ By
utilizing the term ``covered person,'' there would be no substantive
change in the scope of persons subject to the Exchange's disciplinary
rules.\16\
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    \13\ Under NYSE Rule 2(c), ``approved person'' means a person,
other than a member, principal executive or employee of a member
organization, who controls a member organization, is engaged in a
securities or kindred business that is controlled by a member or
member organization, or is a U.S. registered broker-dealer under
common control with a member organization.
    \14\ FINRA's definition of ``associated person'' means (1) a
natural person who is registered or has applied for registration
under FINRA's Rules; (2) a sole proprietor, partner, officer,
director, or branch manager of a member, or other natural person
occupying a similar status or performing similar functions, or a
natural person engaged in the investment banking or securities
business who is directly or indirectly controlling or controlled by
a member, whether or not any such person is registered or exempt
from registration with FINRA; and (3) for purposes of FINRA Rule
8210, any other person listed in Schedule A of Form BD of a member.
FINRA's definition also is narrower than the Act because it does not
include, for example, entities under common control with a broker-
dealer.
    \15\ Current NYSE Rule 476(a) refers to registered or non-
registered employee of a member. Under current NYSE Rule 2(a), a
member is a natural person associated with a member organization. A
member does not have employees. Such persons would be employees of
the member organization and thus covered by the proposed definition
of covered person.
    \16\ The Exchange notes that the term ``allied member,'' which
historically referred to certain general partners, principal
executives, or control persons of a member organization, has been
replaced in the Exchange's rules with the term ``principal
executive.'' See Securities Exchange Act Release No. 58549
(September 15, 2008), 73 FR 54444 (September 19, 2008) (SR-NYSE-
2008-80). As such, allied members are not included in the definition
of covered person in the proposed rule change. The Exchange proposes
conforming changes to NYSE Rules 309, 475, 619, 1301A, and 1301B to
replace references to ``allied member'' with ``principal executive''
and to delete unnecessary parentheticals.
---------------------------------------------------------------------------

    Where the term ``FINRA'' appears in FINRA's rule text, the term
``Exchange'' would be substituted in the proposed rule change. As noted
in Exchange Rule 0, Exchange Rules that refer to NYSER, NYSER staff or
departments, Exchange staff, and Exchange departments should be
understood as also referring to FINRA staff and FINRA departments
acting on behalf of the Exchange pursuant to the RSA, as
applicable.\17\
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    \17\ Thus, where below the Exchange states that only conforming
and technical changes have been made, the Exchange is referring to
instances in which it changed ``member'' and ``associated person''
to ``member organization'' and ``covered person,'' respectively;
changed cross-references to FINRA rules to cross-references to
Exchange rules; and made other non-substantive changes. The
following proposed NYSE Rules include only such conforming and
technical amendments to their counterpart FINRA rule text: 8110,
8120, 8210, 8211, 8311, 8330, 9110, 9143, 9145, 9252, 9262, 9267,
9521, 9527, 9620, and 9870.
---------------------------------------------------------------------------

Proposed NYSE Rule 8000 Series

    Proposed NYSE Rule 8001 would include the effective date of the
proposed rule change for the NYSE Rule 8000 Series, noting the
exception for the retention of jurisdiction dates in proposed NYSE Rule
8130 and the transition from current NYSE Rule 476(k) to proposed NYSE
Rule 8320, as described above; FINRA does not have a Rule 8001. The
text of FINRA Rules 8110 through 8330 would be adopted as NYSE Rules
8110 through 8330, with certain changes as described below.\18\
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    \18\ FINRA does not have a Rule 8212. NYSE is not proposing to
adopt FINRA Rule 8312, which describes FINRA's BrokerCheck
disclosures. As such, to maintain consistency with FINRA's rule
numbering, the Exchange has designated proposed NYSE Rules 8212 and
8312 as ``Reserved.''
---------------------------------------------------------------------------

    Proposed NYSE Rule 8110 would require an NYSE member organization
to provide access to the Exchange's rules to its customers. The text of
the proposed rule is substantially the same as the text in FINRA's
counterpart rule with only conforming and technical amendments.
Although there is no comparable requirement in the current NYSE Rules,
the Exchange already meets the requirement because the Exchange's rules
are available on the Exchange's Web site.\19\
---------------------------------------------------------------------------

    \19\ The NYSE Rules are available at http://nyserules.nyse.com/NYSE/Rules/.
---------------------------------------------------------------------------

    As noted above, proposed NYSE Rule 8120 would provide cross-
references to definitions of the terms ``Adjudicator'' and ``covered
person'' in proposed NYSE Rule 9120. Similarly, FINRA Rule 8120 cross-
references the definition of ``Adjudicator.'' Proposed Rule 8120 is
simply technical in nature.
    Proposed NYSE Rule 8130 would set forth retention of jurisdiction
provisions modeled on Article IV, Section 6 and Article V, Section 4 of
the FINRA Bylaws. The text of the proposed rule is substantially the
same as the text in FINRA's Bylaws, except that it contains a provision
in paragraph (d) for the transition period as described above. Under
the proposed rule change, the Exchange would retain jurisdiction to
file a complaint against a member organization or covered person for
two years after such member organization's or covered person's status
is terminated. This differs from current NYSE Rule 477, which provides
that the Exchange retains jurisdiction after the termination of status
as long as a Charge Memorandum or written notice of inquiry is served
within one year after termination of such status. The Exchange believes
that the longer period under the proposed rule is appropriate because
it will harmonize the Exchange's rule with FINRA's rule and provide a
fixed time period for a complaint to be brought, which provides repose
[sic] to respondents while still providing Exchange staff with
sufficient time to determine if a complaint should be brought.
    Proposed NYSE Rule 8210 would set forth procedures for the
provision of information and testimony and inspection and copying books
by the Exchange. The proposed text of the rule is substantially the
same as the text in FINRA's counterpart rule, with only technical and
conforming amendments.
    Proposed NYSE Rule 8210(a) would require a member organization and
covered person to provide information and testimony and permit the
inspection of books, records, and accounts for the purpose of an
investigation, complaint, examination, or proceeding authorized by the
Exchange's rules. As noted above, under proposed NYSE Rule 8130, the
Exchange would retain jurisdiction over a member organization or
covered person to file a complaint or otherwise initiate a proceeding
for two years after such member organization's or covered person's
status is terminated and as such can continue to obtain information and
testimony during such period and thereafter if a complaint or
proceeding is timely filed. Currently the Exchange also requires
persons subject to its jurisdiction to provide books and records and
appear and testify upon request under current NYSE Rules 475(e),
476(a)(11), and 477(a) and (b), and as noted above, the Exchange
retains jurisdiction after termination of a registration as long as a
Charge Memorandum or written notice of inquiry has been served within
one year after termination of such status. The Exchange believes the
proposed rule is appropriate because it will harmonize the Exchange's
rules with FINRA's rules with respect to jurisdiction and obtaining
books and records from member organizations and covered persons.

    Proposed Rule 8210(b) would authorize Exchange staff to enter into
regulatory cooperation agreements with a domestic federal agency or
subdivision thereof or a foreign regulator. Current NYSE Rule 27
permits the Exchange to enter into agreements with domestic or foreign
SROs or associations, contract markets and registered futures
associations, but does not specify domestic federal agencies or
subdivisions thereof or foreign regulators; because the scope of
current NYSE Rule 27 is different, the Exchange would retain it along
with proposed NYSE Rule 8210(b).\20\
---------------------------------------------------------------------------

    \20\ Current NYSE Rule 27 also cross-references current NYSE
Rule 476(a)(11), which enumerates certain violations, including the
violation of refusing or failing to comply with a request of a
domestic or foreign SRO or association, contract market, or
registered futures associations with which the Exchange has entered
into an agreement or to furnish information to or to appear or
testify before the Exchange or such other organization or
association. The proposed rule change would not alter this
substantive aspect of NYSE Rule 476(a)(11) and as such the cross-
reference in current NYSE Rule 27 would not be amended.
---------------------------------------------------------------------------

    The remainder of proposed NYSE Rule 8210 would set forth certain
procedures for investigations. Proposed Rule 8210(c) would require
member organizations and covered persons to comply with information
requests under the Rule. This requirement is substantially the same as
current NYSE Rules 475(e), 476(a)(11), and 477(a) and (b), as noted
above.
    Proposed NYSE Rule 8210(d) would provide that a notice under this
Rule would be deemed received by the member organization or covered
person to whom it is directed by mailing or otherwise transmitting the
notice to the last known business address of the member organization or
the last known residential address of the covered person as reflected
in the Central Registration Depository. If the Adjudicator or Exchange
staff responsible for mailing or otherwise transmitting the notice to
the member organization or covered person had actual knowledge that the
address in the Central Registration Depository is out of date or
inaccurate, then a copy of the notice would be mailed or otherwise
transmitted to: (1) The last known business address of the member
organization or the last known residential address of the covered
person as reflected in the Central Registration Depository; and (2) any
other more current address of the member organization or covered person
known to the Adjudicator or Exchange staff responsible for mailing or
otherwise transmitting the notice. Current NYSE Rules 475(e),
476(a)(11), and 477(a) and (b), which require persons subject to the
Exchange's jurisdiction to provide books and records and appear and
testify upon the Exchange's request, do not specify the address to
which a notice of such request must be directed. The additional
specificity in proposed NYSE Rule 8210(d) would afford member
organizations and covered persons additional procedural protections in
that respect.
    Proposed NYSE Rule 8210(e) would provide that in carrying out its
responsibilities under this Rule, the Exchange may, as appropriate,
establish programs for the submission of information to the Exchange on
a regular basis through a direct or indirect electronic interface
between the Exchange and member organizations. Proposed NYSE Rule
8210(f) would permit a witness to inspect the official transcript of
the witness's own testimony, and permit a person who has submitted
documentary evidence or testimony in an Exchange investigation to get a
copy of the person's documentary evidence or the transcript of the
person's testimony under certain circumstances. Finally, proposed NYSE
Rule 8210(g) would require any member organization or covered person
who in response to a request pursuant to this Rule provided the
requested information on a portable media device to ensure that such
information was encrypted. The Exchange's current rules do not contain
comparable provisions.
    Proposed NYSE Rule 8211 would set forth the procedures for the
automated submission for trading data requested by the Exchange
(commonly referred to as ``blue sheets'') for transactions on the
Exchange. These procedures are substantially the same as the procedures
in FINRA's counterpart rule, with only conforming and technical
amendments, and substantially the same as current NYSE Rule 410A.
Because FINRA now performs all surveillance functions based on the
information gathered as a result of these rules, the Exchange believes
that the procedures for the automated submission of trading data should
be harmonized with the FINRA rules, and therefore proposes to delete
current NYSE Rule 410A and adopt proposed NYSE Rule 8211 instead.\21\
---------------------------------------------------------------------------

    \21\ The Exchange is retaining NYSE Rule 410B, which concerns
reports of listed securities transactions effected off the Exchange.
As such, the Exchange is not adopting FINRA Rule 8213 and has marked
it as ``Reserved.''
---------------------------------------------------------------------------

    Proposed NYSE Rule 8310 would set forth the range of sanctions that
could be imposed in connection with disciplinary actions under the
proposed rule change. Such sanctions would include censure, fine,
suspension, revocation, bar, expulsion, or any other fitting sanction.
The text of the proposed rule is substantially the same as the text in
FINRA's counterpart rule, with only conforming and technical
amendments. The sanctions also are substantially the same as the
permitted sanctions set forth in current NYSE Rule 476(a)(11), which
are expulsion; suspension; limitation as to activities, functions, and
operations, including the suspension or cancellation of a registration
in, or assignment of, one or more stocks; fine; censure; suspension or
bar from being associated with any member or member organization; or
any other fitting sanction. Although there is some difference between
the text of the current and proposed NYSE rules, the Exchange believes
that in practice the range of sanctions is the same due to the
inclusion in both rules of the general category ``any other fitting
sanction.''
    Proposed NYSE Rule 8310 would also allow the Exchange to impose a
temporary or permanent cease and desist order against a member
organization or covered person. This new authority, not currently
available under NYSE rules, is described in further detail below in the
section concerning the proposed NYSE Rule 9800 Series.
    Proposed NYSE Rule 8311 would provide that if the Commission or the
Exchange imposed a suspension, revocation, cancellation or bar on a
covered person, a member organization may not permit such person to
remain associated, and, in the case of a suspension, may not make any
remuneration that results from any securities transaction. The text of
the proposed rule is substantially the same as the text in FINRA's
counterpart rule, with only conforming and technical amendments. The
proposed rule is similar in result to current NYSE Rule 476(j), which
provides that a member will be deprived of all rights and privileges of
membership during a suspension and that an expulsion of a member
terminates all rights and privileges arising out of the membership.
However, the proposed rule is broader because it applies to all covered
persons subject to a suspension, revocation, cancellation or bar and
more explicitly prohibits the payment of compensation in the case of a
suspension.
    Proposed NYSE Rule 8313 would provide that the Exchange will
publish all final disciplinary decisions issued under the proposed NYSE
Rule 9000 Series, other than minor rule violations,

on its Web site.\22\ This is the Exchange's long-standing practice,
although it does not have a current rule with respect to it. By way of
comparison, FINRA's Rule 8313 provides that disciplinary complaints and
decisions that meet certain criteria will be either published or made
available upon request. The Exchange believes that its current practice
is fair and non-discriminatory and as such proposes to continue it.
---------------------------------------------------------------------------

    \22\ Consistent with current practice, a determination in a
statutory disqualification proceeding under the proposed NYSE Rule
9520 Series would not be considered a disciplinary decision and thus
would not be subject to publication.
---------------------------------------------------------------------------

    Proposed NYSE Rule 8320(a) would provide that all fines and other
monetary sanctions shall be paid to the Treasurer of the Exchange.
Unlike FINRA Rule 8320(a), the Rule would not provide that such monies
could be used for general corporate purposes. The Exchange uses fine
monies for regulatory purposes subject to the approval of the NYSER
Board.\23\
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    \23\ See Securities Exchange Act Release Nos. 55003 (December
22, 2006), 71 FR 78497 (December 29, 2006) (SR-NYSE-2006-109) and
55216 (January 31, 2007), 72 FR 5779 (February 7, 2007).
---------------------------------------------------------------------------

    Proposed NYSE Rule 8320(b) and (c) would permit the Exchange, after
seven days' notice in writing, to suspend or expel a member
organization from membership or revoke the registration of a covered
person for failure to pay a fine. The text of the proposed rule is
substantially the same as the text in FINRA's counterpart rule, with
only conforming and technical amendments. As noted above, under current
NYSE Rule 476(k), a member organization or covered person may be
summarily suspended for failing to pay a fine within a 45-day notice
period; a membership cancellation or bar also could be imposed in a
regular disciplinary proceeding for non-payment of a fine. Although
FINRA's rules do not specifically so provide, FINRA typically gives a
Respondent at least 30 days to pay a fine after the conclusion of a
proceeding. Thus, the Exchange believes that such period, along with
the seven days notice provided under proposed NYSE Rule 8320, would
provide Respondents with an adequate amount of time to pay a fine and
avoid any further sanction by the Exchange. For clarity regarding the
transition, proposed NYSE Rule 8001 would provide that the Exchange may
issue a written notice of suspension for non-payment of a fine under
Rule 476(k) until the effective date of the proposed rule change, and
thereafter proposed NYSE Rule 8320 would apply.
    Proposed NYSE Rule 8330 would provide that a disciplined member
organization or covered person may be assessed the costs of a
proceeding. The text of the proposed rule is substantially the same as
the text in FINRA's counterpart rule, with only conforming and
technical amendments. There is no comparable requirement in the current
NYSE Rules, although the Exchange may assess costs as a ``fitting
sanction'' under current NYSE Rule 476(a)(11).

Proposed NYSE Rule 9000 Series

    Proposed NYSE Rule 9001 would set forth the effective date of the
rule, noting the transitional provisions described above. The text of
proposed NYSE Rule 9001 would be identical to the proposed introductory
text of NYSE Rule 476, except that the transition with respect to
proposed NYSE Rule 8320 would be reflected in proposed NYSE Rule 8001
as described above.
    The Exchange proposes to adopt the text of FINRA Rules 9110 through
9290 with certain changes as described below. Proposed NYSE Rule 9110
would state the types of proceedings to which the proposed NYSE Rule
9000 Series would apply (each of which is described below) and the
rights, duties, and obligations of member organizations and covered
persons, and would set forth the defined terms and cross-references.
The text of the proposed rule is substantially the same as the text in
FINRA's counterpart rule, with only conforming and technical
amendments. The Exchange does not have a comparable rule.
    Proposed NYSE Rule 9120 would set forth definitions. Certain
defined terms in FINRA Rule 9120 would be inapplicable in the
Exchange's rules--``Counsel to the National Adjudicatory Council,''
``District Committee,'' ``Extended Proceeding,'' ``Extended Proceeding
Committee,'' ``FINRA Board,'' ``FINRA Regulation Board,'' ``General
Counsel,'' ``Governor,'' ``Market Regulation Committee,'' ``Primary
District Committee,'' ``Review Subcommittee,'' ``Statutory
Disqualification Committee,'' and ``Subcommittee''--and therefore are
not included in the proposed rule change. As described in more detail
below, the Exchange proposes to continue to use its own Hearing Board
for Panelists \24\ and its current appellate process.\25\ As such, the
terms above are unnecessary in the proposed rule change.
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    \24\ See proposed NYSE Rule 9232.
    \25\ See generally proposed NYSE Rules 9310, 9524, and 9559.
---------------------------------------------------------------------------

    The Exchange proposes to include certain definitions that are not
included in FINRA's rule text: ``Board of Directors,'' ``Chief
Regulatory Officer'' or ``CRO,'' ``covered person,'' ``Department of
Market Regulation,'' ``Department of Member Regulation,'' ``Exchange,''
``Floor-Based Panelist,'' ``Head of Market Regulation,'' and ``Office
of Hearing Officers.'' These definitions appear in subsequent proposed
rules, as described below, and are necessary for harmonization with the
Exchange's rules.
    The remaining definitions--``Adjudicator,'' ``Chief Hearing
Officer,'' ``Code,'' ``Counsel to the Exchange Board of Directors,''
``Department of Enforcement,'' ``Director,'' ``Document,'' ``Extended
Hearing,'' ``Extended Hearing Panel,'' ``Head of Enforcement,''
``Hearing Officer,'' ``Hearing Panel,'' ``Interested Staff,'' ``Office
of Disciplinary Affairs,'' ``Panelist,'' ``Party,'' and
``Respondent''--are substantially the same as FINRA's definitions. To
the extent the definitions differ, the differences are technical and
conforming to reflect the Exchange's continued use of its Hearing Board
and appellate processes and other differences noted below.
Proposed NYSE Rules 9130 Through 9138
    Proposed NYSE Rules 9130 through 9138 would govern the service of a
complaint or other procedural documents under the NYSE Rules. Proposed
NYSE Rule 9131 would set forth the requirements for serving a complaint
or document initiating a proceeding. Proposed NYSE Rule 9132 would
cover the service of orders, notices, and decisions by an Adjudicator.
Proposed NYSE Rule 9133 would govern the service of papers other than
complaints, orders, notices, or decisions. Proposed NYSE Rule 9134
would describe the methods of service and the procedures for service.
Proposed NYSE Rule 9135 would set forth the procedure for filing papers
with an Adjudicator. Proposed NYSE Rule 9136 would govern the form of
papers filed in connection with any proceeding under the proposed NYSE
Rule 9200 and 9300 Series. Proposed NYSE Rule 9137 would state the
requirements for and the effect of a signature in connection with the
filing of papers. Finally, proposed NYSE Rule 9138 would establish the
computation of time. The text of these proposed rules, other than
proposed NYSE Rule 9135, is identical to FINRA's counterpart rules.\26\
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    \26\ Proposed NYSE Rule 9135 differs from its FINRA counterpart
because it deletes a reference to filing an appeal with FINRA's
Office of Hearing Officer. As previously noted, the Exchange is
retaining its current appeal process.

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

    By comparison, current NYSE Rule 476(d), which governs service of
process, is generally less detailed and, as noted above, provides that
service is deemed effective by personal service of the Charge
Memorandum, or by leaving the same either at the respondent's last
known office address during business hours or the respondent's last
place of residence as reflected in Exchange records, or upon mailing
same to the respondent at such office address or place of residence.
Under proposed NYSE Rule 9134, as under current FINRA Rule 9134, papers
served on a natural person could be served at the natural person's
residential address, as reflected in the Central Registration
Depository (``CRD''), if applicable. When a Party or other person
responsible for serving such person had actual knowledge that the
natural person's CRD address was out of date, duplicate copies would be
required to be served on the natural person at the natural person's
last known residential address and the business address in the CRD of
the entity with which the natural person is employed or affiliated.
Papers could also be served at the business address of the entity with
which the natural person is employed or affiliated, as reflected in
CRD, or at a business address, such as a branch office, at which the
natural person is employed or at which the natural person is physically
present during a normal business day. The Hearing Officer could waive
the requirement of serving documents (other than complaints) at the
addresses listed in the CRD if there were evidence that these addresses
were no longer valid and there was a more current address available. If
a natural person were represented by counsel or a representative,
papers served on the natural person, excluding a complaint or a
document initiating a proceeding, would be required to be served on the
counsel or representative.
    Similarly, under proposed NYSE Rule 9134, papers served on an
entity would be required to be made by service on an officer, a partner
of a partnership, a managing or general agent, a contact employee as
set forth on Form BD, or any other agent authorized by appointment or
by law to accept service. Such papers would be required to be served at
the entity's business address as reflected in CRD, if applicable;
provided, however, that when the Party or other person responsible for
serving such entity had actual knowledge that an entity's CRD address
was out of date, duplicate copies would be required to be served at the
entity's last known address. If an entity were represented by counsel
or a representative, papers served on such entity, excluding a
complaint or document initiating a proceeding, would be required to be
served on such counsel or representative.
    The Exchange's current rules do not explicitly permit service of a
Charge Memorandum or other document on a respondent's counsel or other
authorized representative. FINRA recently amended FINRA Rule 9131(a) to
provide that when counsel for a Party or other person authorized to
represent others agrees to accept service of a complaint, FINRA's
Department of Enforcement or Department of Market Regulation may serve
the complaint on counsel for a respondent or other person authorized to
represent others under FINRA Rule 9141.\27\ FINRA Rules 9132 and 9133
also provide that whenever service of an order, notice, decision, or
other document (other than a complaint) is required to be made on a
person represented by counsel or other authorized representative, then
service must be made on such counsel or authorized representative. The
proposed rule change would include these provisions and thereby
accommodate Respondents who have retained counsel and have authorized
them to accept service. The proposed rule change also would harmonize
the Exchange's rules with many states' Rules of Professional Conduct
for attorneys, which generally require that, once a person retains an
attorney, unless the attorney specifically provides otherwise, all
communications be directed to such attorney.\28\
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    \27\ See Securities Exchange Act Release No. 66096 (January 4,
2012), 77 FR 1524 (January 10, 2012) (SR-FINRA-2011-044).
    \28\ See, e.g., American Bar Association Model Rule of
Professional Conduct 4.2 (Communication with Person Represented by
Counsel) (``ABA Rule 4.2''). ABA Rule 4.2 provides that, ``[i]n
representing a client, a lawyer shall not communicate about the
subject of the representation with a person the lawyer knows to be
represented by another lawyer in the matter, unless the lawyer has
the consent of the other lawyer or is authorized to do so by law or
a court order.'' Many states have rules regarding communication with
a person represented by counsel that are based on ABA Rule 4.2.
---------------------------------------------------------------------------

    The Exchange believes that these more detailed procedures for
service of process would increase the likelihood of successful service
of process while providing appropriate due process protections to its
member organizations and covered persons.
Proposed NYSE Rules 9140 Through 9148
    Proposed NYSE Rules 9140 through 9148 would contain various rules
relating to the conduct of disciplinary proceedings.
    Proposed NYSE Rule 9141 would govern appearances in a proceeding,
notice of appearances, and representation. The text of the proposed
rule is the same as the text of FINRA's counterpart rule, except that
the Exchange does not propose to adopt the text of FINRA Rule 9141(c),
which provides that no former officer of FINRA shall, within one year
after termination of employment with FINRA, make an appearance before
an adjudicator on behalf of any other person under the Rule 9000
Series. The Exchange does not believe that it is necessary to bar its
former employees from such appearances because its employees generally
are not involved in the regulatory and disciplinary functions carried
out by FINRA on behalf of the Exchange; as such, their appearance does
not create the same type of conflict of interest. Thus, proposed NYSE
Rule 9141(c) is marked ``Reserved.''
    Proposed NYSE Rule 9141 would permit a Respondent to represent
himself or be represented by an attorney, just as is permitted under
current NYSE Rule 476(h). Current NYSE Rule 476(h) is more general, in
that it permits a respondent to be represented by an attorney or other
representative, while proposed NYSE Rule 9141 is more specific in that
it permits a Respondent to be represented by a bar-admitted U.S.
attorney, permits a partnership to be represented by a partner, and
permits a corporation, trust, or association to be represented by an
officer of such entity. Proposed NYSE Rule 9141 also requires an
attorney or representative to file a notice of appearance, which is not
required under current Exchange rules.
    Proposed NYSE Rule 9142 would require an attorney or representative
to file a motion to withdraw. The text of the proposed rule is the same
as the text of FINRA's counterpart rule. There is no current comparable
NYSE rule.
    Proposed NYSE Rule 9143(a) would prohibit certain ex parte
communications with an Adjudicator or Exchange employee. Under proposed
NYSE Rule 9143(b), an Adjudicator participating in a decision with
respect to a proceeding, or an Exchange employee participating or
advising in the decision of an Adjudicator, who received, made, or
knowingly caused to be made a communication prohibited by the Rule
would be required to place in the record of the proceeding: (1) All
such written communications; (2) memoranda stating the substance of all
such oral communications; and (3) all written responses and memoranda
stating the substance of all oral responses to all such communications.

Under proposed NYSE Rule 9143(c), upon receipt of a prohibited
communication made or knowingly caused to be made by any Party, any
counsel or representative to a Party, or any Interested Staff, the
Exchange or an Adjudicator may order the Party responsible for the
communication, or the Party who may benefit from the ex parte
communication made, to show cause why the Party's claim or interest in
the proceeding should not be dismissed, denied, disregarded, or
otherwise adversely affected by reason of such ex parte communication.
All participants to a proceeding could respond to any allegations or
contentions contained in a prohibited ex parte communication placed in
the record, and such responses would be placed in the record. Under
proposed NYSE Rule 9143(d), in a disciplinary proceeding governed by
the NYSE Rule 9200 Series and the NYSE Rule 9300 Series, the
prohibitions of the Rule would apply beginning with the authorization
of a complaint as provided in NYSE Rule 9211, unless the person
responsible for the communication had knowledge that the complaint
would be authorized, in which case the prohibitions would apply
beginning at the time of his or her acquisition of such knowledge.
Under proposed NYSE Rule 9143(e), there would be a waiver of the ex
parte prohibition in the case of an offer of settlement, letter of
acceptance, waiver and consent, or minor rule violation plan letter.
The text of the proposed rule is substantially the same as the text of
FINRA's counterpart rule, with only conforming and technical changes.
There is no current comparable NYSE rule.
    Proposed NYSE Rule 9144 would establish the separation of functions
for Interested Staff and Adjudicators and provide for waivers. The text
of the proposed rule is modeled on the text of FINRA's counterpart
rule, with conforming and technical changes and changes to reflect that
the Exchange would retain its appellate process. There is no current
comparable NYSE rule.
    Proposed NYSE Rule 9145 would provide that formal rules of evidence
would not apply in any proceeding brought under the proposed NYSE Rule
9000 Series. The text of the proposed rule is the same as the text of
the FINRA counterpart rule, with only a conforming and technical
change. The NYSE does not have a current comparable rule that
explicitly makes such a statement, although in practice the result is
the same--formal rules of evidence do not apply to current NYSE
disciplinary proceedings.
    Proposed NYSE Rule 9146 would govern motions a Party may make and
requirements for responses and formatting. A Party would be permitted
to make written and oral motions, although an Adjudicator could require
that a motion be in writing. An opposition to a written motion would
have to be filed within 14 days, but the moving party would have no
right to reply, unless an Adjudicator so permits, in which case such
reply generally would be due within five days. Proposed NYSE Rule 9146
also would permit a Party to move for a protective order. The text of
the proposed rule is modeled on the text of FINRA's counterpart rule,
with conforming and technical changes and changes to reflect that the
Exchange would retain its appellate process. There is no current
comparable NYSE rule that contains such detail. Current NYSE Rule
476(c) simply provides that the Chief Hearing Officer or a Hearing
Officer may resolve any substantive legal motions. The Exchange
believes that the more detailed provisions of the proposed rule would
provide additional clarity to all Parties to a proceeding.
    Proposed NYSE Rule 9147 would provide that Adjudicators may rule on
procedural matters. The text of the proposed rule is the same as the
text of the FINRA counterpart rule, except that certain text is amended
to reflect that the Exchange would retain its appellate process. The
proposed rule is similar to current NYSE Rule 476(c), which provides
that the Chief Hearing Officer or a Hearing Officer may resolve any
procedural matters. However, the Exchange's current rules do not
explicitly provide for the Exchange Board of Directors ruling on
procedural matters.
    Finally, proposed NYSE Rule 9148 would generally prohibit
interlocutory review, except as provided in proposed NYSE Rule 9280 for
contemptuous conduct. The text of the proposed rule is the same as that
in FINRA's counterpart rule. Similarly, current NYSE Rule 476(c)
provides that there is no interlocutory appeal to the Exchange Board of
Directors.
Proposed NYSE Rule 9150
    Proposed NYSE Rule 9150 would provide that a representative can be
excluded by an Adjudicator for improper or unethical conduct. The text
of the proposed rule is substantially the same as the text in FINRA's
counterpart rule, except for conforming and technical amendments and an
amendment to reflect the Exchange's retention of its appellate process.
The proposed rule also is substantially the same as the text in current
NYSE Rule 476(h), which provides that the Hearing Board can exclude a
representative for improper conduct in a proceeding.
Proposed NYSE Rule 9160
    Proposed NYSE Rule 9160 would provide that no person may act as an
Adjudicator if he or she has a conflict of interest or bias, or
circumstances exist where his or her fairness could reasonably be
questioned. In such case, the person must recuse himself or may be
disqualified. The proposed rule would cover the recusal or
disqualification of an Adjudicator, the Chair of the Exchange Board of
Directors, or a Director. The text of the proposed rule is
substantially the same as the text in FINRA's counterpart rule, except
that it does not reference certain Adjudicators used by FINRA that the
Exchange will not utilize in its proceedings (e.g., a Review
Subcommittee); as such, proposed NYSE Rules 9160(b) and (c) are
designated as ``Reserved.'' \29\ Current NYSE Rule 22 similarly
prohibits a person from participating in an adjudication or
consideration of a matter if he or she has a personal interest, and
would apply during the transition period to proceedings under the
current NYSE rules. The Exchange believes that the broader text of the
proposed rule could help to increase the fairness of its proceedings.
---------------------------------------------------------------------------

    \29\ FINRA Rule 9160(d) is designated as ``Reserved.'' To
maintain consistency with FINRA's rule numbering, the Exchange has
also designated its counterpart rule as ``Reserved.''
---------------------------------------------------------------------------

Proposed NYSE Rules 9200 Through 9217
    Proposed NYSE Rule 9200 would cover disciplinary proceedings.
Proposed NYSE Rule 9211 would permit FINRA's Department of Enforcement
and Department of Market Regulation to request the authorization of
FINRA's Office of Disciplinary Affairs to issue a complaint against a
member organization or covered person, thereby commencing a
disciplinary proceeding. The text of the proposed rule is substantially
the same as the text in FINRA's counterpart rule, with only conforming
and technical changes. The complaint would replace the Charge
Memorandum currently used by the Exchange under current NYSE Rule
476(d), as described above, which requires that the specific charges
against the respondent in the form of a written statement be signed by
an authorized officer or employee of the Exchange on

behalf of the Division of the Exchange bringing the charges.
    Proposed NYSE Rule 9212 would set forth the requirements of the
complaint, amendments to the complaint, withdrawal of the complaint,
and service of the complaint. The text of the proposed rule is modeled
on the text in FINRA's counterpart rule, except that FINRA Rule
9212(a)(2) permits the Department of Enforcement or Department of
Market Regulation to propose that the Chief Hearing Officer select one
Panelist from the Market Regulation Committee if certain trading-
related violations, described in FINRA Rule 9120(u), are alleged in the
complaint. The Exchange proposes instead to permit the Chief Hearing
Officer to select one Floor-Based Panelist, who would be a person who
is, or, if retired, was, active on the Floor of the Exchange, to serve
on a Hearing Panel if the complaint alleges at least one cause of
action involving activities on the Floor of the Exchange. Each
subsequent reference in the FINRA rules to a Market Regulation
Committee Panelist would be substituted with a reference to a Floor-
Based Panelist in the proposed NYSE Rules.\30\ The proposed rule change
would be consistent with the Exchange's practice under current NYSE
Rule 476(b), which provides that in any disciplinary proceeding
involving activities on the Floor of the Exchange, no more than one of
the persons serving on the three-person Hearing Panel may be, or, if
retired, may have been, active on the Floor of the Exchange.
---------------------------------------------------------------------------

    \30\ See proposed NYSE Rules 9221(a)(3), 9231(b) and (c), and
9232. The term ``Floor-Based Panelist'' would be defined in proposed
NYSE Rule 9120(p).
---------------------------------------------------------------------------

    Under the proposed rule change, the form of the complaint also
would be more prescribed than under current NYSE Rule 476. Current NYSE
Rule 476 also does not address the amendment or withdrawal of
complaints.
    Proposed NYSE Rule 9213 would provide for the appointment of a
Hearing Officer and Panelists by the Chief Hearing Officer. The text of
the proposed rule is the same as FINRA Rule 9213. Current NYSE Rule
476(b) is similar in that it provides for the appointment of a Chief
Hearing Officer by the Exchange Board of Directors and the utilization
of three-person hearing panels led by a Hearing Officer.
    Proposed NYSE Rule 9214 would permit the Chief Hearing Officer to
sever or consolidate two or more disciplinary proceedings under certain
circumstances and permit a Party to move for such action under certain
circumstances. The text of the proposed rule is the same as FINRA Rule
9214. There is no NYSE rule comparable to proposed NYSE Rule 9214 for
severing or consolidating proceedings. Under current NYSE Rule 476(c),
the Chief Hearing Officer or a Hearing Officer resolves all procedural
matters and substantive legal motions.
    Proposed NYSE Rule 9215 would set forth requirements for answering
a complaint, including form, service, notice, content, defenses,
amendments, default, and timing. The text of the proposed rule is the
same as FINRA Rule 9215. An answer to a Charge Memorandum under current
NYSE Rule 476(d) and an answer to a complaint under the proposed rule
change have the same 25-day response deadline; however, proposed NYSE
Rule 9215 would explicitly allow for an extension of time to answer an
amended complaint.
    Proposed NYSE Rule 9216 would establish the acceptance, waiver, and
consent (``AWC'') procedures by which a Respondent, prior to the
issuance of a complaint, may execute a letter accepting a finding of
violation, consenting to the imposition of sanctions, and agreeing to
waive such Respondent's right to a hearing, appeal, and certain other
procedures.\31\ It also would establish procedures for executing a
minor rule violation plan letter. The text of the proposed rule is
similar to the text of FINRA Rule 9216, except that the Office of
Disciplinary Affairs, on behalf of the Exchange Board of Directors,
would be authorized to accept or reject an AWC or minor rule violation
plan letter. If the AWC or minor rule violation plan letter were
accepted by the Office of Disciplinary Affairs, it would be deemed
final. If the letter were rejected by the Office of Disciplinary
Affairs, the Exchange would be permitted to take any other appropriate
disciplinary action with respect to the alleged violation or
violations. If the letter were rejected, the member organization or
covered person would not be prejudiced by the execution of the AWC or
minor rule violation plan letter and such document could not be
introduced into evidence in connection with the determination of the
issues set forth in any complaint or in any other proceeding.
---------------------------------------------------------------------------

    \31\ Proposed NYSE Rule 9270 would address settlement procedures
after the issuance of a complaint.
---------------------------------------------------------------------------

    Under FINRA's rule, the Review Subcommittee or Office of
Disciplinary Affairs may accept such AWC or letter or refer it to
FINRA's National Adjudicatory Council (``NAC'') for acceptance or
rejection, or the Review Subcommittee may reject such AWC or letter or
refer it to the NAC for acceptance or rejection. Because the Exchange
does not propose to use a Review Subcommittee or the NAC, procedures
and references relating to these entities would not be included.
    While the AWC process has some similarity to the Exchange's current
Stipulation and Consent procedure in NYSE Rule 476(g) in that it
provides a settlement mechanism, there are certain key differences.
Under current NYSE Rule 476(g), a Hearing Officer must act on a
Stipulation and Consent submitted by the parties and may choose to
convene a Hearing Panel. No Hearing Officer would be involved in the
process under the proposed rule. Furthermore, any member of the
Exchange Board of Directors, any member of the NYSER Committee for
Review, and any Executive Floor Governor may require a review by the
Exchange Board of Directors of any determination or penalty, or both,
imposed by a Hearing Panel or Hearing Officer in connection with a
Stipulation and Consent. In addition, the Respondent or the Division
which entered into the written consent may require a review by the
Exchange Board of Directors of any rejection of a Stipulation and
Consent by the Hearing Panel. There would be no appeals or reviews of
AWCs by the Exchange Board of Directors under the proposed rule change.
    Although by adopting proposed NYSE Rule 9216 the Exchange would be
changing the type of review associated with settlement procedures, the
Exchange believes that the proposed process provides appropriate
controls to assure consistency and protect against aberrant settlement.
Specifically, FINRA's Office of Disciplinary Affairs, which is an
independent body from FINRA's Department of Enforcement,\32\ would be
reviewing all proposed AWCs or minor rule violation plan letters.
Accordingly, FINRA's Office of Disciplinary Affairs would serve the
role currently being performed by a Hearing Officer under NYSE rules to
review a proposed settlement. The Exchange believes that when both
Parties to a proceeding agree to a settlement, a review by the Office
of Disciplinary Affairs would be sufficient and it is not necessary to
bring such matters to the Exchange Board of Directors level. The call
for review process under current NYSE Rule 476(g) for a Stipulation and
Consent in practice is rarely exercised, and the Exchange believes that
the Office of Disciplinary

Affairs can serve a similar function and provide objectivity and an
appropriate check and balance to the settlement process, and thus it is
not necessary to continue the current Hearing Officer and call for
review processes.
---------------------------------------------------------------------------

    \32\ See FINRA Regulatory Notice 09-17.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt aspects of FINRA's process and
fine levels for minor rule violations while retaining the specific list
of rules included in the Exchange's current minor rule violation plan,
with certain technical and conforming amendments. Proposed NYSE Rule
9216(b) would be similar to FINRA Rule 9216(b), with technical
amendments and amendments to make it consistent with proposed NYSE Rule
9216(a) in that the Office of Disciplinary Affairs could accept or
reject the minor rule violation letter. While FINRA Rule 9216(b)
provides that a member or associated person that executes a minor rule
violation letter waives any right to claim bias or prejudgment of
FINRA's General Counsel, the National Adjudicatory Council, or any
member of the National Adjudicatory Council, the Exchange's proposed
Rule would provide that a member organization or covered person could
not claim bias or prejudgment by CRO, the Exchange Board of Directors,
Counsel to the Exchange Board of Directors, or any Director in order to
conform with the Exchange's proposed rules. Unlike current NYSE Rule
476A, which is described above, the proposed rule would not permit a
Respondent to contest a minor rule violation letter by filing an answer
and convert it into a regular disciplinary proceeding. Rather, under
the proposed rule, if the Respondent rejects the minor rule violation
letter, then a complaint must be filed under proposed NYSE Rule 9211,
and the minor rule violation letter may not be introduced into
evidence. The Exchange believes that the proposed rule provides similar
and sufficient procedural protections to Respondents.
    FINRA's maximum fine for minor rule violations under FINRA Rule
9216(b) is $2,500. Currently, the Exchange's maximum fine for minor
rule violations under current NYSE Rule 476A(a) is $5,000. The Exchange
believes that it is appropriate to lower the maximum fine amount to
achieve harmony with FINRA rules. Like FINRA, the Exchange would still
be able to pursue a fine greater than $2,500 in a regular disciplinary
proceeding or an AWC under the proposed NYSE Rule 9000 Series as
appropriate.
    Finally, proposed NYSE Rule 9217 would set forth the list of rules
under which a member organization or covered person may be subject to a
fine under a minor rule violation plan as described in proposed NYSE
Rule 9216(b). The Exchange would retain the list of rules currently set
forth in its own minor rule violation plan (and found in current NYSE
Rule 476A) with certain technical and conforming changes under proposed
NYSE Rule 9217, rather than adopt the list of rules in FINRA's plan.
The technical and conforming changes are as follows. First, the NYSE's
current list of minor rules includes a reference to the record
retention provisions in NYSE Rule 472(c); the reference would be
corrected to refer to NYSE Rule 472(d). Second, the reference to the
submission of blue sheets under NYSE Rule 410A would be supplemented
with a reference to proposed NYSE Rule 8211. Third, the reference to
the submission of books and records under NYSE Rule 476(a)(11) would be
supplemented with a reference to proposed NYSE Rule 8210. Finally,
there is a reference to NYSE Rule 1000-1005. NYSE Rule 1005 was deleted
from the NYSE rules in 2006 and as such the Exchange proposes to change
the reference to NYSE Rule 1000-1004.\33\
---------------------------------------------------------------------------

    \33\ See Securities Exchange Act Release No. 53539 (March 22,
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05).
---------------------------------------------------------------------------

    The current list of NYSE minor rules includes references to certain
rules that have been more recently removed from the NYSE rules as part
of the FINRA rule harmonization process, including previous NYSE Rules
312(h), 382(a), 352(b) and (c), 392, and 445(4). The Exchange proposes
to maintain the references to these former rules in its current list of
minor rules in proposed NYSE Rule 9217. By doing so, the Exchange could
continue to resolve violations of them that occurred prior to the
harmonization via a minor rule violation letter.\34\ For example,
guarantees against loss were covered by NYSE Rule 352 until December
2009, when NYSE Rule 2150 was adopted.\35\ The Exchange could resolve a
guarantee against loss violation that occurred in November 2009 when
NYSE Rule 352 was effective, and NYSE Rule 2150 was not effective, via
a minor rule violation plan letter under proposed NYSE Rule 9217. The
Exchange will determine at a later time when it is appropriate to
remove these previous rule references from the list of minor rules.
---------------------------------------------------------------------------

    \34\ This rationale for maintaining references to prior rules in
the list of minor rule violations was noted in Securities Exchange
Act Release No. 62940 (September 20, 2010), 75 FR 58452 (September
24, 2010) (SR-NYSE-2010-66).
    \35\ See Securities Exchange Act Release No. 61158 (December 11,
2009), 74 FR 67942 (December 21, 2009) (SR-NYSE-2009-123).
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Proposed NYSE Rules 9220 Through 9222
    Proposed NYSE Rules 9221 and 9222 would describe how a Respondent
can request a hearing, the notice of a hearing, and timing
considerations. The text of the proposed rules is the same as that in
FINRA's counterpart rules, except that it permits a Respondent to
request a Floor-Based Panelist rather than a Market Regulation
Committee Panelist. Proposed Rule 9221 provides that a Hearing Officer
generally must provide at least 28 days notice of the hearing. Current
NYSE Rule 476 does not have comparable provisions relating to how a
hearing can be ordered and time for notices; rather, current NYSE Rule
476(b) states that all proceedings under the Rule, except as to matters
which are resolved by a Hearing Officer when so authorized, are
conducted at a Hearing in accordance with the provisions of NYSE Rule
476.
Proposed NYSE Rules 9230 Through 9235
    Proposed NYSE Rules 9231 and 9232 would govern how a Hearing Panel,
Extended Hearing Panel, Replacement Hearing Officer, Panelists,
Replacement Panelists, and Floor-Based Panelists are appointed and
their composition and criteria for selection.
    Under the proposed rule change, the Exchange would use FINRA's
Chief Hearing Officer and Hearing Officers from FINRA's Office of
Hearing Officers, rather than have the Exchange Board of Directors
appoint such persons as it does today under current NYSE Rule 476(b).
Because such positions are staff positions, the Exchange believes that
it is reasonable to utilize FINRA staff, just as it is doing with
respect to other proposed rules.
    The proposed rules also differ from the counterpart FINRA rules in
that the Exchange would not use FINRA's pool of Panelists but would
instead continue to draw Panelists appointed from an Exchange Hearing
Board. As it is today, the Hearing Board would be appointed annually by
the Chairman and would be composed of members of the Exchange who are
not members of the Exchange Board of Directors and registered employees
and non-registered employees of members and member organizations, as
well as former members, allied members, or registered and non-
registered employees of members and member organizations who have
retired from the securities industry.\36\ As is the case under current

NYSE Rule 476(b), Panelists would be required to be persons of
integrity and judgment. There would be one change in Hearing Board
eligibility in the proposed rule as compared to the current rule.
Currently, the Exchange requires that a Panelist cannot have been
retired from the securities industry for more than five years. In order
to have the largest number of potential retired Panelists available
following the proposed rule change, the Exchange proposes to drop the
five-year restriction. The Exchange believes that there are well-
qualified persons, in particular retirees, who continue to stay abreast
of industry developments and rules after more than five years of
retirement and that such persons would be valuable additions to the
Hearing Board.
---------------------------------------------------------------------------

    \36\ As noted above, the Exchange no longer has allied members,
but former allied members would continue to be eligible to be
appointed to the Hearing Board, and the text of proposed NYSE Rule
9232 reflects that. See supra note 16.
---------------------------------------------------------------------------

    In addition, as noted above, while FINRA's rules permit the Chief
Hearing Officer to select one Panelist from the Market Regulation
Committee if certain trading-related violations are alleged in the
complaint, the Exchange proposes instead to permit the Chief Hearing
Officer to select one Floor-Based Panelist to serve on a Hearing Panel
if the complaint alleges at least one cause of action involving
activities on the Floor of the Exchange, consistent with the Exchange's
practice under current NYSE Rule 476(b).
    Proposed Rule 9232 would also include certain Panelist selection
criteria that are included in FINRA Rule 9232. These criteria are
expertise, absence of any conflict of interest or bias or any
appearance thereof, availability, and the frequency with which a person
has served as a Panelist in the last two years, favoring the selection
of a person as a Panelist who has never served or who has served
infrequently as a Panelist during the period. NYSE Rule 476(b)
currently does not include these criteria.
    Proposed NYSE Rules 9233 and 9234 would establish the processes for
recusal and disqualification of Hearing Officers, Hearing Panels, or
Extended Hearing Panels. The text of the proposed rules is identical to
the text in FINRA's counterpart rules. Current NYSE Rule 22 similarly
prohibits a person from participating in an adjudication if he or she
has a personal interest but does not specifically provide for recusals
and disqualifications in the manner in which the comparable FINRA rule
does.
    Proposed NYSE Rule 9235 would set forth the Hearing Officer's
duties and authority in detail. The text of the proposed rule is
identical to that in FINRA's counterpart rule. The proposed rule change
is similar to current NYSE Rule 476(c), which gives the Hearing Officer
general authority in procedural and evidentiary matters.
Proposed NYSE Rules 9240 Through 9242
    Proposed NYSE Rules 9241 and 9242 would govern the substantive and
procedural requirements for pre-hearing conferences and pre-hearing
submissions. The text of the proposed rules is identical to FINRA's
counterpart rules, except that the Exchange does not propose to adopt
the text of FINRA Rule 9242(b), which provides that no former officer
of FINRA may, within one year after termination of employment with
FINRA, appear as an expert witness in a proceeding under the Rule 9000
Series except on behalf of FINRA. The Exchange does not believe that it
is necessary to bar its former employees from such appearances because
its employees generally are not involved in the regulatory and
disciplinary functions carried out by FINRA on behalf of the Exchange;
as such, their appearance does not create the same type of conflict of
interest. As such, proposed NYSE Rule 9242(b) is marked ``Reserved.''
As stated above, current NYSE Rule 476(c) gives Hearing Officers
general authority in procedural matters, but there are no specific
provisions in the current NYSE rules relating to pre-hearing
conferences and submissions.
Proposed NYSE Rules 9250 Through 9253
    Proposed NYSE Rules 9250 through 9253 would address discovery,
including the requirements and limitations relating to the inspection
and copy of documents in the possession of Exchange staff, requests for
information and limitations on such requests, and the production of
witness statements and any harmless error relating to the production of
such witness statements.
    Proposed NYSE Rule 9251 would generally require the Department of
Enforcement or Department of Market Regulation to make available to a
Respondent any documents prepared or obtained in connection with the
investigation that led to the proceedings, except that certain
privileged or other internal documents, such as examination or
inspection reports or documents that would reveal an examination,
investigation, or enforcement technique or confidential source, or
documents that are prohibited from disclosure under federal law, are
not required to be made available. A Hearing Officer may require that a
withheld document list be prepared. Proposed NYSE Rule 9251 also sets
forth procedures for inspection and copying of produced documents. In
addition, if a Document required to be made available to a Respondent
pursuant to the proposed Rule was not made available by the Department
of Enforcement or the Department of Market Regulation, no rehearing or
amended decision of a proceeding already heard or decided would be
required unless the Respondent establishes that the failure to make the
Document available was not harmless error. The Hearing Officer, or,
upon review under proposed NYSE Rule 9310, the Exchange Board of
Directors, would determine whether the failure to make the document
available was not harmless error, applying applicable Exchange, FINRA,
SEC, and federal judicial precedent. The text of the proposed rule is
substantially the same as FINRA's counterpart rule, except for
conforming and technical changes and changes to reflect the Exchange's
retention of its current appeals process, and the addition of the
Exchange's consideration of its own precedent with respect to
determining harmless error. The proposed Rule would not establish any
preference for Exchange versus other precedent in this respect; rather
the Adjudicators could determine in their discretion what precedent to
apply.
    Current NYSE Rule 476(c) contains provisions that address the same
subject. As described above, under that rule the Chief Hearing Officer,
or any Hearing Officer designated by the Chief Hearing Officer, may
require the Exchange to permit a respondent to inspect and copy
documents or records in the possession of the Exchange that are
material to the preparation of the defense or are intended for use by
the Division of the Exchange initiating the proceeding as evidence in
chief at the hearing; however, the rule does not authorize the
discovery or inspection of reports, memoranda, or other internal
Exchange documents prepared by the Exchange in connection with the
proceeding. Under the proposed rule, there would be no materiality
standard. The Exchange believes that eliminating the materiality
standard will ease administration of the rule while still providing
appropriate protections for internal Exchange documents.
    In addition, under current NYSE Rule 476(c), the respondent may be
required to provide discovery of non-privileged documents and records
to the Exchange. There is no explicit counterpart in the proposed NYSE
or current FINRA rules, but the Exchange notes that proposed

NYSE Rule 8210 may always be used to obtain non-privileged documents
from a Respondent. Thus, in that respect, there is no substantive
difference in the result under the current or proposed rules.
    Under proposed NYSE Rule 9252, a Respondent could request that the
Exchange invoke proposed Rule 8210 to compel the production of
Documents or testimony at the hearing if the Respondent can show that
certain standards are met, e.g., that the information sought is
relevant, material, and non-cumulative. The text of the proposed rule
is substantially the same as that in FINRA's counterpart rule, with
only technical amendments. Current NYSE Rule 476 provides that a
respondent may be required to provide discovery of non-privileged
documents to the Exchange.
    Under proposed NYSE Rule 9253, a Respondent could file a motion to
obtain certain witness statements. The text of the proposed rule is
substantially the same as FINRA's counterpart rule, except for
conforming and technical changes and changes to reflect the Exchange's
retention of its current appeals process. The Exchange's current rules
do not contain such a provision.
Proposed NYSE Rules 9260 Through 9269
    Proposed NYSE Rules 9260 through 9269 would govern hearings and
decisions.
    Proposed NYSE Rule 9261 would generally require the Parties to
submit a list of documentary evidence and witnesses no later than 10
days before the hearing. The text of the proposed rule is identical to
the counterpart FINRA rule. The Exchange's current rules do not contain
such a provision.
    Proposed NYSE Rule 9262 would require persons subject to the
Exchange's jurisdiction to testify under oath or affirmation at a
hearing. The proposed rule is substantially the same as FINRA's
counterpart rule, with only conforming and technical changes. The
Exchange's current rules do not contain such a provision.
    Proposed NYSE Rule 9263 would authorize the Hearing Officer to
exclude irrelevant, immaterial, or unduly repetitious or prejudicial
evidence and a Party to object; excluded evidence would be part of the
record. The text of the proposed rule is identical to the text of FINRA
Rule 9263. Under current NYSE Rule 476(c), the Chief Hearing Officer or
a Hearing Officer resolves all evidentiary issues. There is no explicit
provision in the Exchange's current rules for excluded evidence to be
included in the record.
    Proposed NYSE Rule 9264 would allow Parties to file a motion for
summary disposition under certain circumstances and would describe the
procedures for filing and ruling on such motion. The text of the
proposed rule is identical to the text of FINRA Rule 9264. Under
current NYSE Rule 476(c), the Chief Hearing Officer or a Hearing
Officer resolves all procedural matters, but the Rule does not
specifically address motions for summary disposition. In practice,
however, the NYSE Hearing Panels accept and rule on motions for summary
disposition.
    Proposed NYSE Rule 9265 would require that the hearing be recorded
by a court reporter, that a transcript be prepared and made available
for purchase, and that a Party be permitted to seek a correction of the
transcript from the Hearing Officer. The text of the proposed rule is
identical to the text of FINRA Rule 9265. Current NYSE Rule 476(e)
provides generally that the Exchange must keep a record of hearings.
    Proposed NYSE Rule 9266 would authorize the Hearing Officer to
require a post-hearing brief or proposed finding of facts and
conclusions of law and would outline the form and timing for such
submissions. The text of the proposed rule is identical to the text of
FINRA Rule 9266. Under current NYSE Rule 476(c), the Chief Hearing
Officer or a Hearing Officer resolves all procedural matters, but the
rule does not specifically address such post-hearing activities.
    Proposed NYSE Rule 9267 would detail the required contents of the
hearing record and the treatment of any supplemental documents attached
to the record. The text of the proposed rule is substantially the same
as the text of FINRA Rule 9267, except for conforming and technical
changes. The Exchange's current rules do not contain such a provision.
    Proposed NYSE Rule 9268 would set 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 text of the proposed rule is similar to FINRA
Rule 9268, except for conforming and technical changes and changes to
reflect the Exchange's retention of its appeal process, and except for
an additional provision to address the fact that the Exchange has
member affiliates.\37\ As such, in proposed NYSE Rule 9268, the
Exchange proposes to include text providing that a disciplinary
decision concerning a member that is an affiliate of the Exchange would
not be subject to review under proposed NYSE Rule 9310 but instead
would be treated as a final disciplinary action subject to SEC review.
The Exchange does not believe that an appeal by an affiliate to the
Exchange Board of Directors is appropriate, but rather such affiliate
should be permitted to appeal directly to the SEC. The Exchange notes
that NASDAQ, which also has a member affiliate, has a rule that is
substantially the same as the Exchange's proposed rule.\38\ Because the
Exchange's member affiliates will still have a right to appeal to the
SEC, the Exchange believes that the proposed rule is not unfairly
discriminatory.
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    \37\ The Exchange has one member, Archipelago Securities, Inc.,
that is an affiliate of the Exchange that is used for inbound and
outbound routing of certain orders. See NYSE Rule 17(c). The
Exchange also has a joint venture with BIDS Holding, LP, an
affiliate of which, BIDS Trading L.P., is a member of the Exchange.
See NYSE Rule 2B.01.
    \38\ See NASDAQ Rule 9268(e)(2).
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    Finally, proposed NYSE Rule 9269 would establish the process for
the issuance and review of default decisions by a Hearing Officer 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. A
Party may, for good cause shown, file a motion to set aside a default
decision. The text of the proposed rule is similar to FINRA Rule 9268,
except for conforming and technical changes and changes to reflect the
Exchange's retention of its appeal process.
    Current NYSE Rule 476(d) provides a similar mechanism for default
decisions as the proposed rule change. As described above, under the
current rule, if the respondent has failed to file an answer, the
Division of the Exchange bringing the charges, by motion, accompanied
by proof of notice to the respondent, may request a determination of
guilt by default, and may recommend a penalty to be imposed. If the
respondent opposes the motion, the Hearing Officer, on a determination
that the respondent had adequate reason to fail to file an answer, may
adjourn the hearing date and direct the respondent to promptly file an
answer. If the default motion is unopposed, or the respondent did not
have adequate reason to fail to file an answer, or the respondent
failed to file an answer after being given an opportunity to do so, the
Hearing Officer, on a determination that the respondent has had notice
of the charges and that the Exchange has jurisdiction in the matter,
may find guilt

and determine a penalty. Unlike the proposed rule, the current rule
does not contain a provision for setting aside a default decision that
has been rendered.
Proposed NYSE Rule 9270
    Proposed NYSE Rule 9270 would provide for a settlement procedure
for a Respondent who has been notified that a proceeding has been
instituted against him or her. The proposed settlement procedure would
be different from both FINRA Rule 9270 and the Stipulation and Consent
procedure under current NYSE Rule 476(g), which is described above.
    Under proposed NYSE Rule 9270(a), a Respondent notified of the
institution of a disciplinary proceeding could make a written offer of
settlement at any time, but the proposal would not stay the proceeding
unless the Hearing Officer determined otherwise. The proposed rule is
identical to FINRA's counterpart rule. The proposed rule differs from
current NYSE Rule 476(g), which requires that a Stipulation and Consent
be agreed to by both the respondent and Exchange staff.
    Under proposed NYSE Rule 9270(b), a Respondent would be prohibited
from making a frivolous settlement offer or one that was inconsistent
with the seriousness of the violations. The proposed rule is identical
to FINRA's counterpart rule. Current NYSE Rule 476(g) does not contain
a similar provision.
    Proposed NYSE Rule 9270(c) would set forth the required content of
the proposal, which would include a statement consenting to findings of
fact and violations and a proposed sanction. The proposed rule would be
substantially the same as FINRA's rule, except for conforming and
technical changes and except that it would not require that the
proposed sanction be consistent with FINRA's Sanction Guidelines
because the Exchange currently does not have Sanction Guidelines and
does not propose to follow FINRA's because they are tailored to FINRA's
rules, not the Exchange's rules. The Exchange notes that other SROs,
such as BATS Exchange, Inc. and Direct Edge, also do not publish
sanction guidelines. Current Rule 476(g) similarly requires that a
Stipulation and Consent contain proposed findings of facts, violations,
and a specified penalty.
    Proposed NYSE Rule 9270(d) would provide that submission of a
settlement offer waives a Respondent's right to a hearing, to claim
bias or ex parte communication violations, and the right to review by
the Exchange Board of Directors, the Commission, or the courts. This
differs from current NYSE Rule 476(g), which allows either party to
request a hearing on a Stipulation and Consent or a Hearing Officer to
convene a hearing on a Stipulation and Consent in certain
circumstances; in addition, current NYSE Rule 476(g) allows the
Exchange Board of Directors to call for review a determination or
penalty imposed by a Hearing Panel or Hearing Officer. The Exchange
does not believe that it is necessary to preserve the hearing process
or call for review in instances where the parties have agreed upon a
resolution of the matter and such resolution has been subject to a
review by the Office of Disciplinary Affairs, which is independent of
the parties. The text of the rule would differ from FINRA's counterpart
rule to reflect the Exchange's retention of its appellate process and
its designation of its CRO, rather than FINRA's General Counsel, to
determine certain procedural matters. In addition, the text of the rule
would differ from FINRA's counterpart in that it would delete
references to General Counsel, the National Adjudicatory Council, or
any member of the National Adjudicatory Council with respect to waiving
claims of bias and replace them with references to the CRO, the
Exchange Board of Directors, Counsel to the Exchange Board of
Directors, or any Director to conform those provisions to the
Exchange's proposed rules.
    Proposed Rule 9270(e) would address contested settlement offers.
Under the proposed rule, if a Respondent made an offer of settlement
and the Department of Enforcement or the Department of Market
Regulation opposed it, the offer of settlement would be contested and
thereby deemed rejected, and thus the proceeding would continue to
completion under the proposed NYSE Rule 9200 Series. The contested
offer of settlement would not be transmitted to the Office of Hearing
Officers, Office of Disciplinary Affairs, or Hearing Panel or Extended
Hearing Panel, and would not constitute a part of the record in any
proceeding against the Respondent making the offer. The proposed rule
differs from FINRA's counterpart rule, FINRA Rule 9270(f), which
permits a Hearing Panel or Extended Hearing Panel and the NAC to act on
contested offers of settlement. The Exchange has determined that if the
Parties cannot reach agreement on the offer of settlement, then the
matter should proceed under the proposed Rule 9200 Series. The Exchange
believes that its proposed rule would encourage Respondents to make
reasonable offers of settlement that will be acceptable to the
Department of Enforcement or Department of Market Regulation and is
consistent with its current process under NYSE Rule 476(g), which does
not contemplate contested settlement offers but rather requires that
both the respondent and the Exchange staff agree on the Stipulation and
Consent.
    Proposed NYSE Rule 9270(f) and (h) would address uncontested
settlement offers. Under the proposed rule, if a hearing on the merits
had not begun, the Office of Disciplinary Affairs could accept the
settlement offer; if a hearing on the merits had begun, the Hearing
Panel or Extended Hearing Panel could accept the settlement offer.\39\
If they did not, the offer would be deemed withdrawn and the matter
would proceed under the proposed NYSE Rule 9200 Series and the
settlement offer would not be part of the record. The proposed text is
modeled in part on FINRA's counterpart rules, FINRA Rule 9270(e) and
(h), but differs in certain key respects. Under FINRA's rules, the NAC
ultimately must accept the offer of settlement. Because the Exchange is
retaining its appellate process and not utilizing the NAC, the Exchange
does not propose to replicate this aspect of FINRA's rules. As
discussed above, the Exchange believes that it is unnecessary to have a
second level of review of an uncontested settlement offer that is