Series 56 Proprietary Trading Permit Holder Statutory Disqualifications

VN:F [1.9.22_1171]
Rate This Product or Firm
Rating: 0.0/5 (0 votes cast)

Regulatory Circular RG10-105
Date:  October 13, 2010
To:  CBOE and CBSXTrading Permit Holders,Trading Permit Holder Applicants, and
Persons Associated with Trading Permit Holders
From: Legal Division
Re: Statutory Disqualifications
Definition of StatutoryDisqualification
Pursuant to Section 3(a)(39) of the Securities Exchange Act of 1934 (“Act”), a person is subject
to a statutorydisqualification if, among other things, the person:
(i)  has been convicted within the preceding 10 years of anyfelony;
(ii)  has been convicted within the preceding 10 years of anymisdemeanor involving a
securities transaction, the securities business, the making of a false report, bribery,perjury,
burglary,or the misappropriation of funds or securities;
(iii)  is barred or suspended from membership in a self-regulatoryorganization (“SRO”) or from
being associated with a member of an SRO;
(iv)  is barred or suspended  by  the  Securities and Exchange Commission (“SEC”) or the
CommodityFutures Trading Commission;
(v)  is barred bya state securities or insurance authorityor a federal or state banking authority;
(vi)  is enjoined fromanyaction, conduct, orpractice in connection with the securities or
commodities industryor securities or commodities transactions;
(vii)  has willfullyviolated federal securities or commodities law or aided, abetted, or counseled
others to do so; or
(viii) has willfully made in anyapplication, report, or proceeding of an SRO a false or misleading
statement as to a material fact or has willfullyomitted to state a material fact that was
required to be stated in anysuch application, report, or proceeding.
Trading Permit Holders Who BecomeSubject to a StatutoryDisqualification
If a Trading Permit Holder is or becomes subject to a statutorydisqualification and wants to
continue acting as a Trading Permit Holder, the Trading Permit Holder must, within 10 days of becoming
subject to the statutorydisqualification, submit an application to the Registration Services Department
pursuant to CBOE Rule 3.18 seeking to continue acting as a Trading Permit Holder notwithstanding the
statutorydisqualification. The application consistsof the completion of a FormU-4 for information
gathering purposes, including applicable disclosure reporting pages, and should be accompanied by
copies of all documents that are contained in the record of the underlying proceeding that triggered the
statutorydisqualification. The Registration Services Department mayalso request other information from
the Trading Permit Holder and fromanyother Trading Permit Holder or associated person in connection
with the proceeding. Failure to timelyfile such an application is a factor that maybe taken into
consideration bythe Exchange in rendering its decision with respect to the application.
Following the receipt of the application, or inthe event the Exchange becomes aware that the
Trading Permit Holder is subject to a statutorydisqualification and has not timely  submitted  an
application, a three person panel, composed of Trading Permit Holders appointed bythe Exchange, holds
a hearing to determine whether to permit the Trading Permit Holder to continue acting as a Trading
Permit Holder, and if so, whether to condition such continuance as a Trading Permit Holder. The Trading
Permit Holder is required to attend the hearing. The panel mayalso request information from the Trading
Permit Holder and require anyother Trading Permit Holder or associated person to provide information
or to testifyat the hearing.  During the hearing,the Trading Permit Holder and Exchange staff are
afforded an opportunityto present relevant information, arguments, and witnesses. The panel regulates
the conduct of the hearing, and formal rules of evidence do not apply.
Following the hearing, the panel presents its recommended decision to an Exchange designee,
which mayratifyor amend the decision. The Executive Committee maydetermine within 7 daysafter
issuance of the decision to the Trading Permit Holder to order review of the decision pursuant to Rule
3.18(h). If the Executive Committee does not order reviewof the decision, the decision becomes the final
decision of the Exchange. If the Executive Committee orders review of the decision, the decision of the
Executive Committee with respect to that review is the final decision of the Exchange. No determination
to permit, not permit or conditionallypermit the continuation of the Trading Permit Holder’sstatus as a
Trading Permit Holder shall take effect until the above review procedures havebeen exhausted or the
time for review has expired.
The Exchange maywaive the provisions of Rule 3.18 when a proceeding is pending before
another SRO to determine whether to permit a Trading Permit Holder to continue acting as a Trading
Permit Holder notwithstanding a statutory disqualification. In the event the Exchange determines to
waive the provisions of CBOE Rule 3.18 with respectto a Trading Permit Holder, the Department of
Member FirmRegulation determines whether the Exchange will concur in anyRule 19h-1 filing made by
another SRO with respect to the Trading Permit Holder. The Department of Member FirmRegulation
also ordinarilydetermines whether to concur in a Rule 19h-1 filing made byanother SRO with respect to
a Trading Permit Holder applicant.
The Exchange mayalso waive the hearing provisions of Rule 3.18 with respect to a Trading
Permit Holder if the Exchange intends to grant the Trading Permit Holder’s application and either (i)
Exchange Act Rule 19h-1(a)(2) or Exchange Act Rule19h-1(a)(3) does not requirethe Exchange to make
a notice filing with the SEC to permit the Trading Permit Holder to continue as a Trading Permit Holder;
or (ii) the Exchange determines that it is otherwise appropriate to waive the hearing provisions of Rule
3.18 under the circumstances.

Trading Permit Holder Applicants Who Are Subject to a StatutoryDisqualification
Under CBOE Rule 3.5(b), the Exchange maydenya Trading Permit application, or grant
conditional approval, to anyTrading Permit Holder applicant that is subject to a statutorydisqualification.
Before making anydetermination with respect to a Trading Permit Holder applicant that is
subject to a statutory disqualification, the Exchangewill review the matter. The Exchange reviews any
application materials submitted by the applicant.  Pursuant to CBOE Rule 3.9(i), the Exchange may
request fromthe applicant and associated persons of the applicant anyadditional information that the
Exchange deems relevant.  Following the Exchange’sreview of anyapplication materials and any
additional requested information, the Exchange conductsan in-person interview of the applicant and may
conduct in-person interviews of other persons associated with the applicant, such as the applicant’s
supervisor(s).
AnyTrading Permit Holder that is denied or granted conditional Trading Permit Holder status
mayappeal the Exchange’s decision to the Appeals Committee pursuant to Chapter XIX of  the
Exchange’s rules, and mayappeal the Appeals Committee’s decision to the Board of Directors pursuant to
CBOE Rule 19.5.
SEC Approval Process
In the event that (i) the Exchange decides that a Trading Permit Holder that is subject to a
statutorydisqualification maycontinue acting as a Trading Permit Holder, (ii) the Exchange approves the
Trading Permit Holder application of an applicant that issubject to a statutorydisqualification, or (iii) the
Exchange does either of the foregoing subject to specified conditions placed on the effected Trading
Permit Holder or applicant (such as a limitation on activities or functions), anysuch decision is subject to
the approval of the SEC. Specifically, SEC Rule 19h-1 requires that in order for a person who is subject
to a statutorydisqualification to continue as a Trading Permit Holder or be admitted as a Trading Permit
Holder, the Exchange must request SEC approval of that action bysubmitting a Rule 19h-1 filing to the
SEC and the SEC must approve the action.
A Rule 19h-1 filing is an extensive filing which is required to set forth various information
concerning the person that is the subject of the filing,the person’s statutorydisqualification, and the firm,
if any,with which the person is associated or intends to associate. In addition, if the person that is the
subject of the filing is associated or intends to associate with a firm that is a Trading Permit Holder of the
Exchange and a member of another SRO, the SEC takes into consideration whether the other SRO
concurs with the Exchange’srequest in determining whether to grant the Exchange’srequest.
The status of a person who is subject to a statutory disqualification and on whose behalf the
Exchange determines to make a Rule 19h-1 filing remains unchanged during the Rule 19h-1 filing
process. Thus, a Trading Permit Holder applicant thatis subject to a statutory disqualification may not
becomea Trading Permit Holder of the Exchange unless and until the SEC approves the Rule 19h-1 filing
made bythe Exchange on the person’s behalf. Similarly,as long as a Trading Permit Holder who is
subject to a statutorydisqualification otherwise remains a Trading Permit Holder of the Exchange in good
standing, the Trading Permit Holder is permitted toremain as an Exchange Trading Permit Holder
pending the SEC’sdetermination as to whether to approve the Rule 19h-1 filing made bythe Exchange on
the Trading Permit Holder’sbehalf.
Associated Persons Who Becomeor Are Subject to a StatutoryDisqualification

The above-described rules and procedures apply to anyperson associated with an Exchange
Trading Permit Holder and to anyperson applying tobecomeassociated with an Exchange Trading
Permit Holder in the same manner that theyapplywith respect to Exchange Trading Permit Holders and
Trading Permit Holder applicants.
Exchange Fees Applicable to Those Who Are Subject to a StatutoryDisqualification
The Exchange assesses a $2,750 fee whenever a person or entity that is subject to a statutory
disqualification (i) is an Exchange Trading Permit Holder applicant or is seeking to be an associated person of
an Exchange Trading Permit Holder (except where the Exchange is merelyasked to concur in a Rule 19h-1
filing byanother SRO) or (ii) is an existing ExchangeTrading Permit Holder or associated person who makes
an application in accordance with Rule 3.18(b) or withrespect to whoma proceeding is initiated pursuant to
Rule 3.18. This fee is in addition to anyother Trading Permit Holder fees that might be applicable.
In addition, the Exchange assesses a $1,650 fee whenever a person or entityon whose behalf the
Exchange has filed a Rule 19h-1(c) filing that has been approved by the SEC applies for a change in status
that will require the Exchange to file an amended or additional Rule 19h-1(c) filing if the Exchange approves
the requested change in status. This fee is also in addition to any other Trading Permit Holder fees that might
be applicable.
Reporting Requirements
If an associated person of a Trading Permit Holder is or becomes subject to a statutory
disqualification, the Trading Permit Holder is required to immediately provide written notice to the
Registration Services Department of the nameof the associated person, the person’s capacitywith the
Trading Permit Holder, and the nature ofthe statutorydisqualification.
In the event that a Trading Permit Holder is a registered broker-dealer and the Trading Permit
Holder or an associated person of the Trading Permit Holder (i) becomes subject to an event that gives
rise to a statutorydisqualification or (ii) becomes the subject of a proceeding that could result in an event
that gives rise to a statutorydisqualification, the Trading Permit Holder is required to report the event by
promptlyfiling an amendment to SEC FormBD.
In addition, in the event that a person maintains anysecurities industryregistrations (e.g., is a
registered representative or registered options principal) and the person (i) becomes subject to an event
that gives rise to a statutorydisqualification or (ii)becomes the subject of an investigation, regulatory
complaint, or proceeding that could result in an event that gives rise to a statutorydisqualification, the
person is required to report the event bypromptlyfiling an amendment to FormU-4.
Trading Permit Holders are reminded to question all associated persons for information
that could reveal a statutory disqualification, suchas by requesting the completion of a Form U4
(even if not filed on WebCRD), prior to their association with the Trading Permit Holder.
Anyquestions regarding this circular may be directed to KerryAdler at (312) 786-8093.
(RegulatoryCircular RG03-61 Revised)

VN:F [1.9.22_1171]
Rate This Product or Firm
Rating: 0.0/5 (0 votes cast)

Leave a Review

Follow us on Facebook





© 2017 Proprietary Trading All rights reserved. No part of the materials including media, graphics or logos, available in this web site may be copied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without specific permission (please contact us to request permission to use materials). Unlicensed distribution for any and all purposes is prohibited.