The SEC approved and declared effective a Securities Exchange Act Rule 17d-2 plan (the "Plan") for allocating regulatory responsibility between FINRA and numerous Bats Exchanges in order to reduce regulatory duplication for firms that are common members of both a Bats Exchange and FINRA ("Common Members"). The final order was published in the Federal Register.
The Plan establishes that FINRA would assume examination and enforcement responsibilities relating to compliance by Common Members with the rules of each Bats Exchange that are substantially similar to the applicable rules of FINRA, as well as any provisions of the federal securities laws, rules and regulations otherwise agreed upon (together, the "Common Rules"). In the event that a Common Member is the subject of an investigation relating to a transaction occurring on a Bats Exchange, the Bats Exchange may, in its discretion, "exercise concurrent jurisdiction and responsibility for such matter."
Under the Plan, each Bats Exchange would retain full responsibility for:
- surveillance and enforcement with respect to trading activities or practices involving the Bats Exchange's own marketplace, including, without limitation, registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules);
- its duties as a Designated Examining Authority pursuant to Securities Exchange Act Rule 17d-1; and
- any rules of the Bats Exchange that are not Common Rules (except for the Bats Exchanges' rules for any broker-dealer subsidiary of the Bats Exchanges' parent company, Bats Global Markets, Inc.).
Further, violations of any of the Bats Exchanges' rules by any broker-dealer subsidiary of Bats Global Markets, Inc. will be processed by, and subject to, enforcement proceedings conducted by FINRA.
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