October 15, 2021

Volume XI, Number 288

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October 15, 2021

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NASDAQ Proposes Rule Change to SEC to Assume Operational Responsibility for Certain Investigation and Enforcement Functions Currently Performed by FINRA

On April 3, the Securities and Exchange Commission published a notice to solicit comments on Amendment No. 2 to a proposed rule change filed by the Nasdaq Stock Market LLC, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934. The SEC also approved the proposed rule change, as modified by Amendment No. 2, on an accelerated basis.

Since becoming a national securities exchange, Nasdaq has contracted with the Financial Industry Regulatory Authority (FINRA) through various agreements to perform certain regulatory functions on Nasdaq’s behalf, while it retained operational responsibility for a number of regulatory functions. Nasdaq now proposes to assume operational responsibility from FINRA for the following activities:

  • investigation and enforcement responsibilities for conduct occurring on the Nasdaq Options Market; and
  • investigation and enforcement responsibilities for conduct occurring on Nasdaq’s equity market only (i.e., not also on non-Nasdaq equities markets).

Under the proposed rule change, FINRA will continue to perform certain functions, including, among other things:

  • the investigation and enforcement of conduct occurring on the Nasdaq equity market that also related to cross market activity on non-Nasdaq exchanges;
  • the handling of contested disciplinary proceedings arising out of Nasdaq Regulation-led investigation and enforcement activities; and
  • matters covered by agreements to allocate regulatory responsibility under Rule 17d-2 of the Securities Exchange Act of 1934.

The full notice issued by the SEC is available here.

 

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume IX, Number 95
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About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

312-902-5452
Susan Light, Katten Law Firm, Finance Law Attorney, New York
Partner

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

...
212-940-8599
Associate

Leonard Licht is an associate in the Financial Services practice. He advises a broad range of financial market participants, including investment managers to private funds and investors in private funds. Prior to joining Katten, Lenny practiced as a corporate and securities attorney and has also worked in an analytical capacity with a family office.

While in law school, Lenny was a Heyman scholar and member of the Moot Court Honor Society.

212-940-6587
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