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Investigations and Sanctions (Rules 8000—8330)
Rule 8000. Investigations and Sanctions

Rule 8001. Regulation of the Exchange and its Member Organizations

The Exchange and FINRA are parties to the FINRA Regulatory Contract pursuant to which FINRA has agreed to perform certain functions described in these rules on behalf of the Exchange. Exchange rules that refer to the Phlx Regulation Department, Exchange Regulation staff, 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 FINRA Regulatory Contract.

Notwithstanding the fact that the Exchange has entered into the Regulatory Contract with FINRA to perform some of the Exchange's functions, the Exchange shall retain ultimate legal responsibility for, and control of, such functions.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8100. General Provisions

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8110. Availability of Manual to Customers

Member organizations shall keep and maintain current paper or electronic copies of the FINRA and the Exchange Manuals in a readily accessible place and shall make them available for examination by customers upon request.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8120. Definitions

(a) Unless otherwise provided, terms used in the Rule 8000 Series shall have the meaning as defined in Rule 1.

(b) The term "Adjudicator" shall have the meaning as defined in Rule 9120.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8200. Investigations

Rule 8210. Provision of Information and Testimony and Inspection and Copying of Books

(a) Authority of the Phlx Regulation Department, Including FINRA Staff

For the purpose of an investigation, complaint, examination, or proceeding authorized by the By-Laws or Exchange Rules, the Phlx Regulation Department, including FINRA staff shall have the right to:

(1) require a member, member organization, person associated with a member organization, or person subject to the Exchange's jurisdiction to provide information orally, in writing, or electronically (if the requested information is, or is required to be, maintained in electronic form) and to testify at a location specified by the Phlx Regulation Department, including FINRA staff, under oath or affirmation administered by a court reporter or a notary public if requested, with respect to any matter involved in the investigation, complaint, examination, or proceeding; and

(2) (2) inspect and copy the books, records, and accounts of such member, member organization or person with respect to any matter involved in the investigation, complaint, examination, or proceeding.

(b) Other SROs and Regulators

The Phlx Regulation Department, including FINRA staff, also may exercise the authority set forth in paragraph (a) for the purpose of an investigation, complaint, examination, or proceeding conducted by another domestic or foreign self-regulatory organization, association, securities or contract market, or regulator of such markets with which the Exchange has entered into an agreement providing for the exchange of information and other forms of material assistance solely for market surveillance, investigative, enforcement, or other regulatory purposes.

(c) Requirement to Comply

No member, member organization or person shall fail to provide information or testimony or to permit an inspection and copying of books, records, or accounts pursuant to this Rule.

(d) Notice

A notice under this Rule shall be deemed received by the member, member organization or 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 member or person as reflected in the Central Registration Depository. If the Phlx Regulation Department staff, including FINRA staff, responsible for mailing or otherwise transmitting the notice to the member, member organization or person has actual knowledge that the address in the Central Registration Depository is out of date or inaccurate, then a copy of the notice shall be mailed or otherwise transmitted to:

(1) the last known business address of the member organization or the last known residential address of the member or person as reflected in the Central Registration Depository, and

(2) any other more current address of the member, member organization or the person known to the Adjudicator or the Phlx Regulation Department, including FINRA staff who is responsible for mailing or otherwise transmitting the notice.

(e) Electronic Interface

In carrying out its responsibilities under this Rule, the Exchange may, as appropriate, establish programs for the submission of information to FINRA on a regular basis through a direct or indirect electronic interface between FINRA and Exchange member organizations.

(f) Inspection and Copying

A witness, upon proper identification, may inspect the official transcript of the witness's own testimony. Upon written request, a person who has submitted documentary evidence or testimony in an investigation may procure a copy of the person's documentary evidence or the transcript of the person's testimony upon payment of the appropriate fees, except that prior to the issuance of a complaint arising from the investigation, the Phlx Regulation Department, including FINRA staff, may for good cause deny such request.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8211. Automated Submission of Trading Data

(a) A member organization shall submit the trade data specified below in automated format as may be prescribed by the Phlx Regulation Department, including FINRA staff, from time to time. This information shall be supplied with respect to any transaction or transactions that are the subject of a request for information made by the Phlx Regulation Department, including FINRA staff.

(b) If the transaction was a proprietary transaction effected or caused to be effected by the member organization for any account in which such member organization, or person associated with a member organization, is directly or indirectly interested, such member organization shall submit or cause to be submitted the following information:

(1) Clearing house number, or alpha symbol as used by the member organization submitting the data;

(2) Clearing house number(s), or alpha symbol(s) as may be used from time to time, of the member organization(s) on the opposite side of the transaction;

(3) Identifying symbol assigned to the security;

(4) Date transaction was executed;

(5) Number of shares, or quantity of bonds or options contracts for each specific transaction and whether each transaction was a purchase, sale, short sale, or, if an options contract, whether open long or short or close long or short;

(6) Transaction price;

(7) Account number; and

(8) Market center where transaction was executed.

(c) If the transaction was effected or caused to be effected by the member organization for any customer account, such member organization shall submit or cause to be submitted the following information:

(1) The data described in subparagraphs (b)(1) through (8) above;

(2) The customer name, address(es), branch office number, registered representative number, whether order was solicited or unsolicited, date account opened, employer name, and the tax identification number(s); and

(3) If the transaction was effected for another member organization, whether the other member organization was acting as principal or agent.

(d) In addition to the above trade data, a member organization shall submit such other information in such automated format as may from time to time be required by the Phlx Regulation Department.

(e) Pursuant to the Rule 9600 Series, the Exchange may exempt a member organization from the requirement that the data prescribed in paragraphs (b) through (d) above be submitted to the Phlx Regulation Department, including FINRA staff, in an automated format for good cause shown.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8212. Reserved

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8213. Reserved

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8220. Reserved

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8300. Sanctions

Rule 8310. Sanctions for Violation of the Rules

(a) Imposition of Sanction

After compliance with the Rule 9000 Series, the Exchange may impose one or more of the following sanctions on a member, member organization or person associated with a member organization for each violation of the federal securities laws, rules or regulations thereunder, or the Exchange Rules, or may impose one or more of the following sanctions on a member, member organization or person associated with a member organization for any neglect or refusal to comply with an order, direction, or decision issued under the Rules of the Exchange:

(1) censure a member, member organization or person associated with a member organization;

(2) impose a fine upon a member, member organization or person associated with a member organization;

(3) suspend the membership of a member organization, suspend the permit of a member, or suspend the registration of a person associated with a member organization for a definite period or a period contingent on the performance of a particular act;

(4) expel a member, member organization, cancel the membership of a member organization, revoke or cancel the permit of a member, or revoke or cancel the registration of a person associated with a member organization;

(5) suspend or bar a member, member organization or person associated with a member organization from association with all member organizations;

(6) impose a temporary or permanent cease and desist order against a member, member organization or a person associated with a member organization; or

(7) impose any other fitting sanction.

(b) Assent to Sanction

Each party to a proceeding resulting in a sanction shall be deemed to have assented to the imposition of the sanction unless such party files a written application for appeal, review, or relief pursuant to the Rule 9000 Series.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

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.

November 15, 2017 (17-92), operative January 2, 2018.

Rule IM-8310-2. Reserved

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule IM-8310-3. Release of Disciplinary Complaints, Decisions and Other Information

(a) The Phlx Regulation Department shall, in response to a request, release to the requesting party a copy of any identified disciplinary complaint or disciplinary decision issued by the Exchange or any committee thereof; provided, however, that each copy of:

(1) a disciplinary complaint shall be accompanied by the following statement: "The issuance of a disciplinary complaint represents the initiation of a formal proceeding by Nasdaq PHLX in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, you may wish to contact the respondent before drawing any conclusions regarding the allegations in the complaint."

(2) a disciplinary decision that is released prior to the expiration of the time period provided under the Rule 9000 Series for appeal or call for review within the Exchange or while such an appeal or call for review is pending, shall be accompanied by a statement that the findings and sanctions imposed in the decision may be increased, decreased, modified, or reversed by the Exchange;

(3) a final decision of the Exchange that is released prior to the time period provided under the Act for appeal to the Commission or while such an appeal is pending, shall be accompanied by a statement that the findings and sanctions of the Exchange are subject to review and modification by the Commission; and

(4) a final decision of the Exchange that is released after the decision is appealed to the Commission shall be accompanied by a statement as to whether the effectiveness of the sanctions has been stayed pending the outcome of proceedings before the Commission.

(b)

(1) The Phlx Regulation Department shall release to the public information with respect to any disciplinary complaint initiated by the Department of Enforcement or the Department of Market Regulation of FINRA as defined in Rules 9120(f) and (g), respectively, containing an allegation of a violation of a designated statute, rule or regulation of the Commission or the Exchange, as determined by the Chief Regulatory Officer of the Exchange (a "Designated Rule"); and may also release such information with respect to any disciplinary complaint or group of disciplinary complaints that involve a significant policy or enforcement determination where the release of information is deemed by the Chief Regulatory Officer to be in the public interest.

(2) Information released to the public pursuant to paragraph (b)(1) shall be accompanied by the statement required under paragraph (a)(1).

(c)

(1) The Phlx Regulation Department shall 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 member organization or member; suspension or revocation of a member's permit; or suspension or revocation of the registration of a member or person associated with a member organization; or suspension or barring of a member organization, member or person associated with a member organization from association with all member organizations; or imposition of monetary sanctions of $10,000 or more upon a member organization, member or person associated with a member organization; or containing an allegation of a violation of a Designated Rule; and may also release such information with respect to any disciplinary decision or group of decisions that involve a significant policy or enforcement determination where the release of information is deemed by the Chief Regulatory Officer to be in the public interest. The Phlx Regulation Department also may release to the public information with respect to any decision issued pursuant to the Rule 9550 Series imposing a suspension or cancellation of the member organization or member or a suspension or bar of the association of a member or a person with a member organization, unless the Phlx Regulation Department determines otherwise. The Phlx Regulation Department may, in its discretion, determine to waive the requirement to release information with respect to a disciplinary or other decision under those extraordinary circumstances where the release of such information would violate fundamental notions of fairness or work an injustice. The Phlx Regulation Department also shall release to the public information with respect to any temporary cease and desist order issued pursuant to the Rule 9800 Series. The Phlx Regulation Department may release to the public information on any disciplinary or other decision issued pursuant to the Rule 9000 Series, not specifically enumerated in this paragraph, regardless of sanctions imposed, so long as the names of the parties and other identifying information is redacted.

(A) The Phlx Regulation Department shall release to the public, in unredacted form, information with respect to any disciplinary decision issued pursuant to the Rule 9300 Series that does not meet one or more of the criteria in IM-8310-3(c)(1) for the release of information to the public, provided that the underlying decision issued pursuant to the Rule 9200 Series meets one or more of the criteria in IM-8310-3(c)(1) for the release of information to the public, and information regarding such decision has been released to the public in unredacted form.

(B) In the event there is more than one respondent in a disciplinary decision issued pursuant to the Rule 9000 Series, and sanctions imposed on one or more, but not all, of the respondents meet one or more of the criteria in IM-8310-3(c)(1) for the release of information to the public, the Phlx Regulation Department shall release to the public, in unredacted form, information with respect to the respondent(s) who meet such criteria, and may release to the public, in redacted form, information with respect to the respondent(s) who do not meet such criteria. Notwithstanding the foregoing, the Phlx Regulation Department shall release to the public, in unredacted form, information with respect to any respondent in a disciplinary decision issued pursuant to the Rule 9300 Series if the sanctions imposed on such respondent in the underlying decision issued pursuant to the Rule 9200 Series meet one or more of the criteria for release of information to the public, and information with respect to that respondent has been released in unredacted form.

(2) Information released to the public pursuant to paragraph (c)(1) shall be accompanied by a statement to the extent required for that type of information under paragraphs (a)(2)-(4).

(d) If a decision issued pursuant to the Rule 9000 Series other than by the Exchange Review Council is not appealed to or called for review by the Exchange Review Council, the decision shall become effective on a date set by the Phlx Regulation Department but not before the expiration of 45 days after the date of decision.

(e) Notwithstanding paragraph (d), expulsions and bars imposed pursuant to the provisions of Rules 9216 and 9270 shall become effective upon approval or acceptance by the Exchange Review Council, and information regarding any sanctions imposed pursuant to those Rules may be released to the public pursuant to paragraph (c) immediately upon such approval or acceptance.

(f) If a decision issued pursuant to the Rule 9000 Series is called for review by the Exchange Board, the decision shall be stayed pending a final determination and decision by the Board.

(g) If a decision of the Exchange imposing monetary sanctions of $10,000 or more or a penalty of expulsion, revocation, or suspension of a member, member organization and/or barring of a person from being associated with all member organizations is appealed to the Commission, notice thereof shall be given to the membership and to the press as soon as possible after receipt by the Exchange of notice from the Commission of such appeal and the Exchange's notice shall state whether the effectiveness of the Board's decision has been stayed pending the outcome of proceedings before the Commission.

(h) In the event an appeal to the courts is filed from a decision by the Commission in a case previously appealed to it from a decision of the Exchange, involving the imposition of monetary sanctions of $10,000 or more or a penalty of expulsion, revocation, or suspension of a member, member organization and/or barring of a person from being associated with all member organizations, notice thereof shall be given to the membership as soon as possible after receipt by the Exchange of a formal notice of appeal. Such notice shall include a statement whether the order of the Commission has been stayed.

(i) Any order issued by the Commission of revocation or suspension of a member organization's broker/dealer registration with the Commission; or the suspension or expulsion of a member or member organization from the Exchange; or the barring of a person associated with a member organization from association with all broker/dealers or membership; or the imposition of monetary sanctions of $10,000 or more shall be released to the public through a notice containing the effective date thereof sent as soon as possible after receipt by the Exchange of the order of the Commission.

(j) Cancellations of membership or registration pursuant to the Rules of the Exchange shall be released to the public as soon after the effective date of the cancellation as possible.

(k) Releases to the public referred to in paragraphs (b) and (c) above shall identify the Rules of the Exchange or SEC Rules violated, and shall describe the conduct constituting such violation. Releases may also identify the member organization with which an individual was associated at the time the violations occurred if such identification is determined by the Phlx Regulation Department to be in the public interest.

(l) The Phlx Regulation Department shall release to the public, in the form issued by the Exchange Review Council, information with respect to any decision issued by the Exchange Review Council pursuant to Rule 923(a). In its discretion, the Exchange Review Council may have redacted certain information from such decisions prior to their issuance.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8320. Payment of Fines, Other Monetary Sanctions, or Costs; Summary Action for Failure to Pay

(a) Payment to Treasurer

All fines and other monetary sanctions shall be paid to the Treasurer of the Exchange.

Subject to the following conditions and procedures, a member or member organization may pay a regulatory fine via an installment plan:

(1) The member or member organization must check the installment plan option on the election of payment form included with the letter of acceptance, waiver, and consent ("AWC").

(2) The fine under the AWC must be fifty thousand dollars ($50,000) or more. A fine of less than fifty thousand dollars ($50,000) is not eligible for the installment plan.

(3) A down payment of twenty-five percent (25%) or more of the total fine must be submitted with the signed AWC.

(4) An installment package, including a promissory note and payment schedule, will be mailed to the member or member organization upon receipt of the down payment, as required in paragraph (3) above.

(5) An executed (signed and notarized) promissory note for the unpaid balance of the fine must be returned with the first installment payment.

(6) The term of the installment plan shall not exceed four (4) years after the execution of the AWC. The member or member organization may elect monthly or quarterly payments.

(b) Summary Suspension or Expulsion

After seven days notice in writing, the Exchange may summarily suspend or expel from membership a member or member organization that fails to:

(1) pay promptly a fine or other monetary sanction imposed pursuant to Rule 8310 or cost imposed pursuant to Rule 8330 when such fine, monetary sanction, or cost becomes finally due and payable; or

(2) terminate immediately the association of a person who fails to pay promptly a fine or other monetary sanction imposed pursuant to Rule 8310 or a cost imposed pursuant to Rule 8330 when such fine, monetary sanction, or cost becomes finally due and payable.

(c) Summary Revocation of Registration

After seven days notice in writing, the Exchange may summarily revoke the registration of a person associated with a member organization if such person fails to pay promptly a fine or other monetary sanction imposed pursuant to Rule 8310 or a cost imposed pursuant to Rule 8330 when such fine, monetary sanction, or cost becomes finally due and payable.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

Rule 8330. Costs of Proceedings

A member, member organization or person associated with a member organization disciplined pursuant to Rule 8310 shall bear such costs of the proceeding, as the Adjudicator deems fair and appropriate under the circumstances.

Adopted.

November 15, 2017 (17-92), operative January 2, 2018.

 
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