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.