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Home > > Phlx General 5
General 5 Discipline
Section 1. Disciplinary Jurisdiction

(a) Any member, member organization, or any partner, officer, director or person employed by or associated with any member organization (the Respondent) who is alleged to have violated or aided and abetted a violation of the Securities Exchange Act of 1934 (Exchange Act), the rules and regulations thereunder, the By-Laws and Rules of the Exchange or any interpretation thereof, and the Rules, Regulations, resolutions and stated policies of the Board of Directors or any Committee of the Exchange, shall be subject to the disciplinary jurisdiction of the Exchange, and after notice and opportunity for a hearing may be appropriately disciplined by expulsion, suspension, fine, censure, limitation or termination as to activities, functions, operations, or association with a member organization, or any other fitting sanction in accordance with the provisions of these disciplinary Rules.

(b) An individual member, or a partner, officer, director or person employed by or associated with a member organization may be charged with any violation within the disciplinary jurisdiction of the Exchange committed by employees under his supervision or by the member organization with which he is associated, as though such violations were his own. A member organization may be charged with any violation within the disciplinary jurisdiction of the Exchange committed by its officers, directors, or employees or by a member or other person who is associated with such member organization, as though such violation were its own.

(c) Any member, or any partner, officer, director, or person employed by or associated with a member organization, and any member organization shall continue to be subject to the disciplinary jurisdiction of the Exchange following the termination of such person's permit or the termination of the employment by or the association with a member organization of such member or partner, officer, director or person, or following the deregistration of a member organization from the Exchange; provided, that the Exchange serves written notice to such former member, partner, officer, director, employee, associated person or member organization within one year of receipt by the Exchange of notice of such termination or deregistration that the Exchange is making inquiry into a matter or matters which occurred prior to the termination of such person's status as a member, or as a partner, officer, director or person employed by or associated with a member organization, or prior to the deregistration of such member organization.

Adopted Mar. 20, 2020 (20-09); amended March 20, 2020 (SR-Phlx-2020-09), operative September 1, 2020.

Section 2. Investigations and Sanctions

Series 8000 of The Nasdaq Stock Market LLC Rules, as such rules may be in effect from time to time (the "Nasdaq Rule 8000 Series"), are hereby incorporated by reference into this General 5, Section 2 of the Nasdaq PHLX LLC ("Phlx") Rules, and are thus Phlx Rules and thereby applicable to Phlx members, member organizations, persons associated with member organizations, and other persons subject to the Exchange's jurisdiction. Phlx members, member organizations, persons associated with member organizations, and other persons subject to the Exchange's jurisdiction shall comply with the Nasdaq Rule 8000 Series as though such rules were fully set forth herein.

All terms (whether or not defined), including any variations thereof, contained in the Nasdaq Rule 8000 Series shall be read to refer to the Phlx-related meaning of such term. The terms "Exchange" or "Nasdaq" in the Nasdaq Rule 8000 Series shall be read to refer to the Phlx Exchange; the terms "Rules" or "Rules of Nasdaq" in the Nasdaq Rule 8000 Series shall be read to refer to the Phlx Rules; the terms "Board" or "Nasdaq Board" in the Nasdaq Rule 8000 Series shall be read to refer to the Phlx Board of Directors; the term "member" in the Nasdaq 8000 Series shall be read to refer to a Phlx member organization; the phrase "person associated with a member" shall be read to refer to a Phlx member or a person associated with a Phlx member organization; the terms "Nasdaq Regulation" or "Nasdaq Regulation Department" shall be read to refer to the Phlx Regulation Department; and the term "Chief Regulatory Officer" shall be read to refer to the Chief Regulatory Officer of Phlx.

Additionally, references in the Nasdaq Rule 8000 Series to "Rule 0120" shall be read to refer to Phlx General 1, Section 1. References in the Nasdaq Rule 8000 Series to "Rule 1015" shall be read to refer to Phlx Rule General 3, Section 16(a).

When applied to a Phlx member, Rule 8310(a)(3) shall also permit the suspension of the permit of a Phlx member and Rule 8310(a)(4) shall also permit the revocation or cancellation of the permit of a Phlx member, or expulsion of a Phlx member; and IM-8310-3(c)(1) shall also permit the Phlx Regulation Department to release to the public information with respect to any disciplinary decision issued pursuant to the Rule 9000 Series imposing a suspension, cancellation or expulsion of a Phlx member, or suspension or revocation of a Phlx member's permit or any decision issued pursuant to the Rule 9550 Series imposing a suspension or cancellation of the Phlx member, or a suspension or bar of the association of a Phlx member with a Phlx member organization.

IM-8310-3(g) and (h) also shall be read to apply to a Phlx member with respect to a decision of the Exchange that imposes upon him or her a monetary sanction of $10,000 or more or a penalty of expulsion, revocation, suspension, or bar; and IM-8310-3(i) also shall be read to apply to a Phlx member with respect to any order issued by the Commission of suspension, expulsion, bar, or the imposition of monetary sanctions of $10,000 or more.

Finally, Rules 8320(a)(2), (b), and (c) in the Nasdaq Rule 8000 Series also shall be read to apply to Phlx members. Subsection (a)(1) shall have no application to the Phlx Exchange or its members, member organizations, persons associated with member organizations, and other persons subject to the Exchange's jurisdiction as that provision in the Nasdaq 8000 Series applies to the Nasdaq Options Market members only.

Notwithstanding the above, Rule IM-8310-1 in the Nasdaq Rule 8000 Series shall not apply to the Phlx Exchange or its members, member organizations, persons associated with member organizations, or other persons subject to its jurisdiction. Instead, the applicable Phlx rule shall be the following:

IM-8310-1. Effect of a Suspension, Revocation, Cancellation, or Bar

If the Exchange or the Commission issues an order that imposes a suspension, revocation, or cancellation of the registration of a person associated with a member organization or a member, or bars a person or member from further association with any member organization, a member organization shall not allow such person or member to remain associated with it in any capacity, including a clerical or ministerial capacity. If the Exchange or the Commission suspends a person associated with a member organization or a member, the member organization also shall not pay or credit any salary, or any commission, profit, or other remuneration that results directly or indirectly from any securities transaction, that the person associated with a member organization or member might have earned during the period of suspension.

Adopted Mar. 20, 2020 (20-09); amended March 20, 2020 (SR-Phlx-2020-09), operative September 1, 2020.

Section 3. Code of Procedure

Series 9000 of The Nasdaq Stock Market LLC Rules, as such rules may be in effect from time to time (the "Nasdaq Rule 9000 Series"), are hereby incorporated by reference into this General 5, Section 3 of the Phlx Rules, and are thus Phlx Rules and thereby applicable to Phlx members, member organizations, persons associated with member organizations, and other persons subject to the Exchange's jurisdiction. Phlx members, member organizations, persons associated with member organizations, and other persons subject to the Exchange's jurisdiction shall comply with the Nasdaq Rule 9000 Series as though such rules were fully set forth herein. All terms (whether or not defined), including any variations thereof, contained in the Nasdaq Rule 9000 Series shall be read to refer to the Phlx-related meaning of such term. Solely by way of example, and not in limitation or in exhaustion: the terms "Exchange" or "Nasdaq" in the Nasdaq Rule 9000 Series shall be read to refer to the Phlx Exchange; the terms "Rules" or "Rules of Nasdaq" in the Nasdaq Rule 9000 Series shall be read to refer to the Phlx Rules; the terms "Board" or "Nasdaq Board" in the Nasdaq Rule 9000 Series shall be read to refer to the Phlx Board of Directors; the terms "member" or "member firm" in the Nasdaq Rule 9000 Series shall be read to refer to a Phlx member organization, except that with respect to Rules 9268(e)(2), 9269(d)(2), 9312(a)(3), 9351(a), 9524(a)(10), 9524(b)(3), and 9559(q)(1), the term "member" shall be read also to apply to a Phlx member; the terms "Associated Person" or "person associated with a member" shall be read to refer to a Phlx member or person associated with a Phlx member organization; the terms "Nasdaq Regulation" or "Nasdaq Regulation Department" shall be read to refer to the Phlx Regulation Department; and the term "Chief Regulatory Officer" shall be read to refer to the Chief Regulatory Officer of Phlx.

Additionally, references in the Nasdaq Rule 9000 Series to the following rules shall be read to refer to the following Phlx Rules:


Nasdaq Rule

Corresponding Exchange Rule


0120

General 1, Section 1


1013

General 3, Section 5 or General 3, Section 2


1015

General 3, Section 16 (a)


1160

General 3, Section 7 (d)


2010A

Options 9, Section 1


2160

General 2, Section 4


2170

General 9, Section 53


4110A

Options 6D, Section 1


4120A

Options 6D, Section 1


Options 9, Section 4

General 9, Section 53


When applied to a Phlx member organization, Rule 9558(a)(2) and any other applicable rules in the Nasdaq Rule 9000 Series shall also allow the summary suspension of the associated permit(s) of a Phlx member organization.

Rules 9552(f), 9553(g), 9554(g), 9555(g), 9556(g), and 9558(g) in the Nasdaq Rule 9000 Series shall be read to allow the filing of a request for termination of a suspension (or a request for termination of the limitation, prohibition or suspension with respect to Rules 9555(g) and 9558(g)), to be made with either the head of the Exchange or FINRA department or office that issued the notice or that is handling the matter on behalf of the issuing department or office.

Notwithstanding the above:

1. Rule 9110(d) ("Jurisdiction") in the Nasdaq Rule 9000 Series shall not apply to the Phlx Exchange or its members, member organizations, persons associated with member organizations, or other persons subject to its jurisdiction. Instead, the Phlx Rule that governs jurisdiction is found in General 5, Section 1.

2. The Waiver of Ex Parte Prohibition set forth in Nasdaq Rule 9143(e)(3) and Separation of Functions set forth in Nasdaq Rule 9144(c)(3) shall also apply to violation letters executed pursuant to Phlx Rule 9216(b)(2).

3. The following paragraph shall be added after the existing paragraph of Nasdaq Rule 9211(a)(1):

When the number of violations under Exchange Rules is determined based upon an exception-based surveillance program, the Phlx Regulation Department or the Department of Enforcement may aggregate, or "batch," individual violations of Exchange order handling Rules and consider such "batched" violations as a single offense only in accordance with the guidelines set forth in the Exchange's Numerical Criteria for Bringing Cases for Violations of Exchange Order Handling Rules. In addition, the Phlx Regulation Department or the Department of Enforcement may batch individual violations of Rule Options 2, Section 5(c) pertaining to quote spread parameters (and corresponding Options Floor Procedure Advice Options 11, Section 7). In the alternative, the Phlx Regulation Department or the Department of Enforcement may request authorization from the FINRA Office of Disciplinary Affairs to issue a complaint when (i) the Phlx Regulation Department or the Department of Enforcement determines that there exists a pattern or practice of violative conduct without exceptional circumstances, or (ii) any single instance of violative conduct without exceptional circumstances is deemed to be egregious.

4. Rule 9216 ("Acceptance, Waiver, and Consent; Plan Pursuant to SEC Rule 19d-1(c)(2)") in the Nasdaq Rule 9000 Series shall not apply to the Phlx Exchange or its members, member organizations, persons associated with member organizations, or other persons subject to its jurisdiction. Instead, the applicable Phlx Rule shall be the following:

Rule 9216. Acceptance, Waiver, and Consent; Violation of Floor Procedure Advices; Violation of Order and Decorum Regulations

(a) Acceptance, Waiver, and Consent Procedures

(1) Notwithstanding Rule 9211, if the Phlx Regulation Department or the Department of Enforcement has reason to believe a violation has occurred and the member, member organization or associated person does not dispute the violation, the Phlx Regulation Department or the Department of Enforcement may prepare and request that the member, member organization or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's, member organization's or associated person's right to a hearing before a Hearing Panel or, if applicable, an Extended Hearing Panel, and any right of appeal to the Exchange Review Council, the Commission, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed. Unless the letter states otherwise, the effective date of any sanction(s) imposed will be a date to be determined by the Phlx Regulation Department staff.

(2)

(A) If a member, member organization or person associated with a member organization submits an executed letter of acceptance, waiver, and consent, by the submission such member, member organization or person associated with a member organization also waives:

(i) any right of such member, member organization or person associated with a member organization to claim bias or prejudgment of the Chief Regulatory Officer, the Exchange Review Council, or any member of the Exchange Review Council, in connection with such person's or body's participation in discussions regarding the terms and conditions of the letter of acceptance, waiver, and consent, or other consideration of the letter of acceptance, waiver, and consent, including acceptance or rejection of such letter of acceptance, waiver, and consent; and

(ii) any right of such member, member organization or person associated with a member organization to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of the letter of acceptance, waiver, and consent, or other consideration of the letter of acceptance, waiver, and consent, including acceptance or rejection of such letter of acceptance, waiver, and consent.

(B) If a letter of acceptance, waiver, and consent is rejected, the member, member organization or associated person shall be bound by the waivers made under subparagraphs (a)(1) and (a)(2)(A) for conduct by persons or bodies occurring during the period beginning on the date the letter of acceptance, waiver, and consent was executed and submitted and ending upon the rejection of the letter of acceptance, waiver, and consent.

(3) If the member, member organization or associated person executes the letter of acceptance, waiver, and consent, it shall be submitted to the Exchange Review Council. The Review Subcommittee or the Office of Disciplinary Affairs may accept such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council. The Review Subcommittee may reject such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council.

(4) If the letter is accepted by the Exchange Review Council, the Review Subcommittee, or the Office of Disciplinary Affairs, it shall be deemed final and shall constitute the complaint, answer, and decision in the matter. If the letter is rejected by the Review Subcommittee or the Exchange Review Council, the Phlx Regulation Department may take any other appropriate disciplinary action with respect to the alleged violation or violations. If the letter is rejected, the member, member organization or associated person shall not be prejudiced by the execution of the letter of acceptance, waiver, and consent under subparagraph (a)(1) and the letter may not be introduced into evidence in connection with the determination of the issues set forth in any complaint or in any other proceeding.

(b) Procedure for Violation of Floor Procedure Advices Other than Regulations Concerning Violation of Order, Decorum, Health, Safety and Welfare on the Exchange

(1) The following process is followed for fines assessed under a plan pursuant to SEC Rule 19d-1(c)(2):

(A) Notwithstanding Rule 9211, the Exchange Review Council may, subject to the requirements set forth in subparagraphs (b)(1)(B) through (b)(1)(E) and in SEC Rule 19d-1(c)(2), impose a fine (not to exceed $2,500) on any member, member organization, or any partner, officer, director or person employed by or associated with any member organization with respect to any rule listed in IM-9216. If the Phlx Regulation Department or the Department of Enforcement has reason to believe a violation has occurred and if the member, member organization or associated person does not dispute the violation, the Phlx Regulation Department or the Department of Enforcement may prepare and request that the member, member organization or associated person execute a minor rule violation plan letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's, member organization's or associated person's right to a hearing before a Hearing Panel or, if applicable, an Extended Hearing Panel, and any right of appeal to the Exchange Review Council, the Commission, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed. Unless the letter states otherwise, the effective date of any sanction(s) imposed will be a date to be determined by the Phlx Regulation Department staff.

(B)

(i) If a member, member organization or person associated with a member organization submits an executed minor rule violation plan letter, by the submission such member, member organization or person associated with a member organization also waives:

(a) any right of such member, member organization or person associated with a member organization to claim bias or prejudgment of the Chief Regulatory Officer, the Exchange Review Council, or any member of the Exchange Review Council, in connection with such person's or body's participation in discussions regarding the terms and conditions of the minor rule violation plan letter or other consideration of the minor rule violation plan letter, including acceptance or rejection of such minor rule violation plan letter; and

(b) any right of such member, member organization or person associated with a member organization to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of the minor rule violation plan letter or other consideration of the minor rule violation plan letter, including acceptance or rejection of such minor rule violation plan letter.

(ii) If a minor rule violation plan letter is rejected, the member, member organization or person associated with a member organization shall be bound by the waivers made under subparagraphs (b)(1)(A) and (b)(1)(B)(i) for conduct by persons or bodies occurring during the period beginning on the date the minor rule violation plan letter was executed and submitted and ending upon the rejection of the minor rule violation plan letter.

(C) If the member, member organization or person associated with a member organization executes the minor rule violation plan letter, it shall be submitted to the Exchange Review Council. The Review Subcommittee or the Office of Disciplinary Affairs may accept such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council. The Review Subcommittee may reject such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council.

(D) If the letter is accepted by the Exchange Review Council, the Review Subcommittee, or the Office of Disciplinary Affairs, it shall be deemed final and the Exchange shall report the violation to the Commission as required by the Commission pursuant to a plan approved under SEC Rule 19d-1(c)(2). If the letter is rejected by the Review Subcommittee or the Exchange Review Council, the Phlx Regulation Department may take any other appropriate disciplinary action with respect to the alleged violation or violations. If the letter is rejected, the member, member organization or associated person shall not be prejudiced by the execution of the minor rule violation plan letter under subparagraph (b)(1)(A) and the letter may not be introduced into evidence in connection with the determination of the issues set forth in any complaint or in any other proceeding.

(E) For purposes of imposing fines under the Option Floor Procedure Advices, when the number of violations under Exchange Rules is determined based upon an exception-based surveillance program the Phlx Regulation Department or the Department of Enforcement may aggregate, or "batch," individual violations of order handling Options Floor Procedure Advices, and consider such "batched" violations as a single Occurrence only in accordance with the guidelines set forth in the Exchange's Numerical Criteria for Bringing Cases for Violations of Phlx Order Handling Rules. In addition, the Phlx Regulation Department or the Department of Enforcement may batch individual violations of Rule Options 2, Section 5(c) pertaining to quote spread parameters (and corresponding Options Floor Procedure Advice Options 11, Section 7). In the alternative, the Phlx Regulation Department or the Department of Enforcement may request authorization from the FINRA Office of Disciplinary Affairs to issue a complaint when (i) the Phlx Regulation Department or the Department of Enforcement determines that there exists a pattern or practice of violative conduct without exceptional circumstances, or (ii) any single instance of violative conduct without exceptional circumstances is deemed to be egregious.

(2) The following process is followed for fines assessed that are not subject to a plan pursuant to SEC Rule 19d-1(c)(2):

(A) Notwithstanding Rule 9211, the Exchange Review Council may, subject to the requirements set forth in subparagraphs (b)(2)(B) through (b)(2)(E), impose a fine, in excess of $2,500 but not to exceed $10,000, on any member, member organization, or any partner, officer, director or person employed by or associated with any member organization with respect to any rule listed in IM-9216. If the Phlx Regulation Department or the Department of Enforcement has reason to believe a violation has occurred and if the member, member organization or associated person does not dispute the violation, the Phlx Regulation Department or the Department of Enforcement may prepare and request that the member, member organization or associated person execute a violation letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's, member organization's or associated person's right to a hearing before a Hearing Panel or, if applicable, an Extended Hearing Panel, and any right of appeal to the Exchange Review Council, the Commission, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed. Unless the letter states otherwise, the effective date of any sanction(s) imposed will be a date to be determined by the Phlx Regulation Department staff.

(B)

(i) If a member, member organization or person associated with a member organization submits an executed violation letter, by the submission such member, member organization or person associated with a member organization also waives:

(a) any right of such member, member organization or person associated with a member organization to claim bias or prejudgment of the Chief Regulatory Officer, the Exchange Review Council, or any member of the Exchange Review Council, in connection with such person's or body's participation in discussions regarding the terms and conditions of the violation letter or other consideration of the violation letter, including acceptance or rejection of such violation letter; and

(b) any right of such member, member organization or person associated with a member organization to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of the violation letter or other consideration of the violation letter, including acceptance or rejection of such violation plan letter.

(ii) If a violation letter is rejected, the member, member organization or person associated with a member organization shall be bound by the waivers made under subparagraphs (b)(2)(A) and (b)(2)(B)(i) for conduct by persons or bodies occurring during the period beginning on the date the violation plan letter was executed and submitted and ending upon the rejection of the violation letter.

(C) If the member, member organization or associated person executes the violation letter, it shall be submitted to the Exchange Review Council. The Review Subcommittee or the Office of Disciplinary Affairs may accept such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council. The Review Subcommittee may reject such letter or refer it to the Exchange Review Council for acceptance or rejection by the Exchange Review Council.

(D) If the letter is accepted by the Exchange Review Council, the Review Subcommittee, or the Office of Disciplinary Affairs, it shall be deemed final and the Exchange shall report the violation to the Commission as required by the Commission pursuant to SEC Rule 19d-1(c)(1). If the letter is rejected by the Review Subcommittee or the Exchange Review Council, the Phlx Regulation Department may take any other appropriate disciplinary action with respect to the alleged violation or violations. If the letter is rejected, the member, member organization or associated person shall not be prejudiced by the execution of the violation letter under subparagraph (b)(2)(A) and the letter may not be introduced into evidence in connection with the determination of the issues set forth in any complaint or in any other proceeding.

(E) For purposes of imposing fines under the Option Floor Procedure Advices, when the number of violations under Exchange Rules is determined based upon an exception-based surveillance program the Phlx Regulation Department or the Department of Enforcement may aggregate, or "batch," individual violations of order handling Options Floor Procedure Advices, and consider such "batched" violations as a single Occurrence only in accordance with the guidelines set forth in the Exchange's Numerical Criteria for Bringing Cases for Violations of Phlx Order Handling Rules. In addition, the Phlx Regulation Department or the Department of Enforcement may batch individual violations of Rule Options 2, Section 5(c) pertaining to quote spread parameters (and corresponding Options Floor Procedure Advice Options 11, Section 7). In the alternative, the Phlx Regulation Department or the Department of Enforcement may request authorization from the FINRA Office of Disciplinary Affairs to issue a complaint when (i) the Phlx Regulation Department or the Department of Enforcement determines that there exists a pattern or practice of violative conduct without exceptional circumstances, or (ii) any single instance of violative conduct without exceptional circumstances is deemed to be egregious.

(c) Procedure for Violation of Regulations that Relate to Administration of Order, Decorum, Health, Safety and Welfare on the Exchange

Notwithstanding Rule 9211 and paragraph (b) above, an Options Exchange Official or Exchange Staff may impose the following sanctions on members, member organizations and associated persons for violations of regulations relating to order, decorum, health, safety and welfare under Options 8, Section 39, F. In most cases, the Exchange will enforce compliance with the regulations under Options 8, Section 39, F pursuant to this rule. While ordinarily a finding of a violation will result in the appropriate pre-set fine and/or sanction, an Options Exchange Official or Exchange Staff may request authorization of a complaint directly from the Office of Disciplinary Affairs, or refer the matter to the Department of Enforcement, where it shall proceed in accordance with the Rule 8000 and 9000 Series. In the case of repeat violations of a regulation by the same individual, the amount of the fine is determined by the number of such violations which have occurred within the year immediately preceding the current violation.

(1) An Options Exchange Official and Exchange Staff may impose on members, member organizations and associated persons, fines for breaches of regulations that relate to administration of order, decorum, health, safety, and welfare on the Exchange or an Options Exchange Official may request authorization of a complaint directly from the Office of Disciplinary Affairs, or refer the matter to the Department of Enforcement, where it shall proceed in accordance with Rule 8000 and 9000 Series.

The procedure to be followed in cases where a pre-set fine of up to $10,000.00 is summarily assessed is as follows:

(A) Notice of Fine. Notice of fine for breach of such regulations shall be given by the issuance of a written citation. Exchange Staff shall serve the written citations that are issued by the Options Exchange Official. The cited party may accept or contest the written citation.

(B) Time and Place of Hearing. If the written citation is contested, the Exchange shall fix a mutually convenient time and place of hearing, notice of which must be given in advance and may be given orally.

(C) Record. An appropriate record shall be kept. The costs of the making of such a transcript, including, but not limited to, the costs for the court reporter, reproduction of the transcript and producing copies thereof, shall be equally borne by the Exchange and by the cited party.

(D) Procedure. The hearing shall be conducted by a Hearing Director appointed by the Chair of the Exchange Review Council, and will be conducted in whatever manner will permit full presentation of the evidence.

(E) Finding. The finding of the Hearing Director shall be rendered at the close of the hearing. The Hearing Director may decide that: (i) the citation should be overturned; (ii) the citation is valid as issued; or (iii) the citation as issued should be modified to specify either a higher or lower fine than the one on the notice as issued.

(F) Forum Fee. If a person contests a citation imposed under Rule 9216(c) and the citation is upheld by the reviewing body, the reviewing body will impose a forum fee against the person in the amount of $100.

(G) No Right of Appeal. The finding of the Hearing Director shall be final. There shall be no appeal from such finding.

(H) Report to Securities and Exchange Commission (SEC). A report in appropriate form shall be made to the SEC. As provided by SEC Rule 19d-1(c)(1), no report shall be made in the case of citations for breaches of regulations relating to order, decorum, health, safety and welfare or administration of the Exchange if a citation is not contested and the fine is $1,000 or less, or if the Hearing Director finds in favor of the appellant.

(2) An Options Exchange Official and an officer of the Exchange may exclude a member and any associated person from the trading floor for breaches of regulations that relate to administration of order, decorum, health, safety and welfare on the Exchange that occurred on the trading floor or on the premises immediately adjacent to the trading floor. Specifically, members and associated persons shall be excluded if they pose an immediate threat to the safety of persons or property, are seriously disrupting Exchange operations, or are in possession of a firearm. Members or associated persons so excluded may be excluded for a period of up to five (5) business days.

(A) For purposes of this Rule, an "officer of the Exchange" shall refer to an officer who is a vice president or higher.

(B) For purposes of this Rule and the Regulations promulgated thereunder, the "premises immediately adjacent to the trading floor" shall include the following: (1) all premises other than the trading floor that are under Exchange control, and (2) premises in the building where the Exchange maintains its principal office and place of business, namely FMC Tower, 2929 Walnut Street, Philadelphia, Pennsylvania.

(C) Exclusion from the floor may not be the exclusive sanction for breaches of this Rule and the regulations thereunder. In addition to exclusion, a member or associated person may also be subject to a fine or Exchange staff may request authorization of a complaint directly from the Office of Disciplinary Affairs, or refer the matter to the Department of Enforcement, where it shall proceed in accordance with Rule 8000 and 9000 Series.

(D) If a member shall be excluded for a period exceeding forty-eight hours, an expedited hearing ("Expedited Hearing") will be held before the Chair of the Exchange Review Council or a member of the Exchange Review Council designated by the Chair ("Expedited Hearing Officer") within forty-eight (48) business hours after the members' exclusion from the trading floor. Written notice will be provided to the member of the date, time and place of the hearing. The member may be represented by counsel. The Expedited Hearing Officer or his or her designee shall conduct an Expedited Hearing. The Expedited Hearing Officer shall allow both the member or his or her representative and Exchange staff to present arguments. The Expedited Hearing Officer shall make a determination of whether to continue the member's exclusion from the trading floor for a period of up to five (5) business days. The determination shall be based on the severity of the threat posed to persons on the trading floor, the disruptiveness caused by the actor and the safety and welfare of persons on the trading floor. The Expedited Hearing Officer shall make a ruling at the time of the hearing and a written decision will be provided to the member following the hearing. Members shall not be excluded from electronic trading, but will not be permitted to be physically present on the trading floor for the duration of any exclusion.

(E) The procedure to be followed when a member is to be excluded from the trading floor is as follows:

(i) No Further Right of Appeal. The determination that a member shall be excluded is final. There shall be no appeal from such determination.

(ii) Report to the SEC. A report in appropriate form shall be made to the SEC. However, no report shall be made in a case where a clerical employee is excluded from the trading floor for not more than five days for a breach of regulations relating to order, decorum, health, safety and welfare or administration of the Exchange if the clerical employee has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies at the Exchange with respect to the matter, as provided by Rule 19b-1(c) of the Act.

5. Rule IM-9216 ("Violations Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-1(c)(2") in the Nasdaq Rule 9000 Series shall not apply to the Nasdaq PHLX Exchange or its members, member organizations, persons associated with member organizations, or other persons subject to its jurisdiction. Instead, the applicable Phlx Rule shall be the following:

Rule IM-9216. Violations Appropriate for Disposition Under Plan Pursuant to SEC Rule 19d-1(c)(2)

• EQUITY PROCEDURE ADVICES (fines equal to or less than $2,500)

General 7 Failure to comply with the Consolidated Audit Trail Compliance Rule requirements (fines up to $2,500).

A-1 Record of Orders on PSX

Member organizations which act as brokers on PSX shall make and maintain the memorandum described in rule 17a-3(a)(6) and Rule 17a-4(b)(1) for all orders and partial orders that they enter on PSX in which they act as brokers.

 

 

FINE SCHEDULE (Implemented on a one year running calendar basis)

1st Occurrence

$100.00

2nd Occurrence

$250.00

3rd Occurrence

$500.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

A-2 Failure to Comply with an Exchange Inquiry

Each member, member organization, or associated person is required to promptly comply with any request of information made by the Exchange in connection with any regulatory inquiry, investigation or examination relating to the Exchange's disciplinary jurisdiction or regulatory obligations.

For the purposes of this Advice, information received within ten business days from the date of the original request shall be deemed to meet the requirement of prompt compliance, except, for purposes of Exchange requests, information received within two business days from the date of the original request shall be deemed to meet the requirement of prompt compliance.

The Exchange may under extenuating circumstances grant extensions to allow for responses beyond the allotted requirement. Requests for extensions must be submitted in writing to the appropriate department prior to the due date of the outstanding request. Each additional request for information not furnished within the allotted time periods may be considered a separate occurrence for purposes of the fine schedule below.

 

 

FINE SCHEDULE (Implemented on a three year running calendar basis)

1st Occurrence

$200.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,500.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

A-3 Supervisory Procedures Relating to ITSFEA

(a) Member organizations must maintain written supervisory procedures as required by the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA). Such procedures must be reasonably designed to prevent the misuse of material, non-public information by employees.

(b) In addition to the requirements under ITSFEA, the Exchange herein institutes basic minimum standards for incorporation into ITSFEA-related written supervisory procedures for all member organizations. The requirements enumerated below must be included and, together with all related additional written supervisory procedures maintained in accordance with paragraph (a) above, must receive approval by the Exchange. These requirements are not intended to supersede, or be presumed to fulfill, the requirements of ITSFEA. These requirements are instead set forth as separate requirements of the Exchange.

In the instance where written a member organization is subject to written supervisory procedures relating to ITSFEA imposed by another self-regulatory organization which is it designated examining authority ("DEA"), the Exchange requirements set forth in paragraph (b) of this Advice will not apply.

1.) Each new employee of the organization shall be furnished with a copy of the most current version of the Exchange's "Notice of Insider Trading" (Notice), or a document substantially similar to the Notice approved by the DEA for use in this connection. Within ten business days from the first date of employment with the Unit, each new employee must sign and return the Notice to the employer. By his signature on the Notice, the employee attests to having carefully read the Notice and agrees to appropriately supply the employer firm with all trading accounts for which such person maintains a beneficial interest, including all personal and household accounts of the employee. Also, by his signature on the Notice, each new employee ensures that delivery of all related account statements will be made directly from the firm(s) maintaining the account to the employer.

2.) Each organization must complete the Exchange's "ITSFEA Accounts List," comprising all accounts submitted in connection with paragraph (1) above and all proprietary accounts of the Unit. Updates to the list must be made within one month of any change and each completed version of the list must be maintained for no less than three years by the organization.

3.) Each month a supervisory person of the organization is required to make a reasonable review of all activities from the account statements of those accounts reflected on the ITSFEA Accounts List with a view toward identifying the possible misuse of material non-public information. A report must be made promptly to the Exchange's Regulatory staff in the event that any such unusual profits are so identified.

For purposes of paragraph (b) of this Advice, an employee shall include every person who is compensated directly or indirectly by the member organization for the solicitation or handling of business in securities, including trading securities for the account of the member organization, whether such securities are those dealt in on the Exchange or those dealt over-the-counter.

Failure to properly maintain the ITSFEA Accounts List, or to conduct related reviews required by this Advice, may result in the issuance of fines in accordance with the schedule below.

 

 

FINE SCHEDULE (Implemented on a three year running calendar basis)

1st Occurrence

$250.00

2nd Occurrence

$500.00

3rd and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

A-4 Fingerprinting Personnel

Member organizations are required to comply with Section 17(f) of the Securities Exchange Act of 1934 respecting the fingerprinting of required employees. Applicants for a permit must also be fingerprinted. Such fingerprints must be submitted to FINRA for identification and appropriate processing prior to any employee performing the functions listed in SEC rule 17f-2.

 

 

FINE SCHEDULE

1st Occurrence

$50.00

2nd Occurrence

$100.00

3rd Occurrence

$250.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

A-6 Failure to Provide Notification of Changes in Business Operations

Any member organization for which the Exchange is the Designated Examining Authority ("DEA") shall provide prior written notification to the Exchange or its designee of any change in the business operations of such member organization which would cause the member organization to be subject to additional or modified net capital requirements, examination schedules or other registration, examination or regulatory requirements.

For the purposes of this Advice, the appropriate time frame for notification is at least 10 business days prior to the change in business operations.

 

 

FINE SCHEDULE (Implemented on a three year running calendar basis)

1st Occurrence

$250.00

2nd Occurrence

$500.00

3rd Occurrence

$1,000.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

A-7 Failure to Timely Submit Amendments to Form U4, Form U5 and Form BD

Any member organization that is required to file Form U4, Form U5 or Form BD pursuant to Exchange Rules or the Securities Exchange Act of 1934 and the rules promulgated thereunder, is required to amend the applicable Form U4, Form U5 or Form BD to keep such forms current at all times. Member organizations shall amend Form U4, Form U5 or Form BD not later than thirty (30) days after the filer knew or should have known of the facts which gave rise to the need for the amendment.

 

 

FINE SCHEDULE (Implemented on a running 12 month period)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department or Department of Enforcement

• OPTION FLOOR PROCEDURE ADVICES AND ORDER & DECORUM REGULATIONS (fines equal to or less than $2,500; does not include Order & Decorum Regulations under Options 8, Section 39, F)

B-1 Responsibility to Make Markets

B-2 Crowd Courtesy

B-3 Trading Requirements

B-4 Floor Market Makers Entering Orders from On-Floor and Off-Floor for Execution on the Exchange

B-5 Agency-Principal Restrictions

B-6 Priority of Options Orders for Equity Options, Index Options and U.S. Dollar-Settled Foreign Currency Options by Account Type (EQUITY OPTION, INDEX OPTION AND U.S. DOLLAR-SETTLED FOREIGN CURRENCY OPTION ONLY), Section F

B-8 Use of Floor Brokers by an ROT While on the Floor

B-11 Floor Market Makers and Lead Market Makers Entering Orders for Execution on Other Exchanges in Multiply Traded Options

C-1 Ascertaining the Presence of Floor Market Makers in a Trading Crowd

C-2 Options Floor Broker Management System

C-3 Handling Orders of Floor Market Makers and Other Registered Options Market Makers

C-4 Floor Brokers Handling Orders for Same Firm

C-5 Floor Market Makers Acting as Floor Brokers

C-7 Responsibility to Represent Orders to the Trading Crowd

C-9 Floor Brokers and Clerks Trading in their Customer Accounts

D-1 Required Staffing of Options Floor

E-2 Allocation, Time Stamping, Matching and Access to Matched Trades

E-3 Orders Executed as Spreads, Straddles, Combinations or Synthetics and Other Order Ticket Marking Requirements

E-4 Changes or Corrections to Material Terms of a Matched Trade

E-5 Option Quote Parameters

E-6 Failure to Comply with an Exchange Inquiry

E-7 Affiliations

E-8 Splitting Orders

E-9 Responsibility for Assigning Participation

Options 11, Section 6 Supervisory Procedures Relating to ITSFEA

Options 11, Section 7 Minor Infractions of Position/Exercise Limits and Hedge Exemptions

Options 11, Section 8 Clearing Agents' Responsibility for Carrying Positions in Market Maker Accounts

E-13 Clerks in the Crowd

E-14 Fingerprinting Floor Personnel

Options 11, Section 9 Options Exchange Official Rulings

E-15 Options Trading Floor Training

E-16 Communications and Equipment

Options 11, Section 10 Failure to Provide Notification of Changes in Business Operations

Options 11, Section 11 Failure to Timely Submit Amendments to Form U4, Form U5 and Form BD

Options 11, Section 12 Violations of Exercise and Exercise Advice Rules for Noncash-Settled Equity Option Contracts

Options 11, Section 13 Index Option Exercise Advices

6. Pursuant to Nasdaq Rule 9231(b)(1)(C), the Chief Hearing Officer may also select as a Panelist a person who previously served as a Governor of the Exchange prior to its acquisition by Nasdaq, Inc., but does not serve currently in that position.

7. Pursuant to Nasdaq Rule 9231(b)(1)(D), a person who is a member of FINRA's Market Regulation Committee is among the FINRA Panelists approved by the Exchange Board at least annually that the Chief Hearing Officer may also select as a Panelist.

8. Rule 9610(b) in the Nasdaq Rule 9000 Series shall not apply to the Phlx Exchange or its members, member organizations, persons associated with member organizations, or other persons subject to its jurisdiction. Instead, the applicable Phlx Rule shall be the following:

Rule 9610(b) Content

An application filed pursuant to this Rule shall contain the member organization's name and address, the name of a person associated with the member organization who will serve as the primary contact for the application, the Rule from which the member or member organization is seeking an exemption, and a detailed statement of the grounds for granting the exemption. If the member organization does not want the application or the decision on the application to be publicly available in whole or in part, the member organization also shall include in its application a detailed statement, including supporting facts, showing good cause for treating the application or decision as confidential in whole or in part.

Adopted Mar. 20, 2020 (20-09); amended March 20, 2020 (SR-Phlx-2020-09), operative September 1, 2020; amended January 22, 2021 (SR-Phlx-2021-04).

 
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