Cboe Exchange Proposes Statutory Disqualification Rule Change to Conform with FINRA

Content

April 22, 2026. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), (1) and Rule 19b-4 thereunder, (2) notice is hereby given that on April 16, 2026 Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities
and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule
change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to amend its rule regarding Trading Permit Holders and associated
persons of a Trading Permit Holder who are or become subject to a statutory disqualification. The text of the proposed rule
change is provided in Exhibit 5.

The text of the proposed rule change is also available on the Commission's website (https://www.sec.gov/rules/sro.shtml), the Exchange's website (https://www.cboe.com/us/options/regulation/rule_filings/bzx/ [sic]), and at the principal office of the Exchange.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange is proposing to amend Exchange Rule 3.13, the Exchange's eligibility proceedings section regarding statutory
disqualifications, to conform (with certain exceptions) to rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) (3) and to industry standard rules. (4) The Exchange's proposal also includes the proposed Statutory Disqualification Circular (“SD Circular”) that outlines the applicable
eligibility procedures. The amended rules would incorporate by reference the procedures in the SD Circular. As further detailed
in the SD Circular, the need for a Trading Permit Holder (“TPH”) to file an application with the Exchange for approval, notwithstanding
the disqualification would depend on (i) the type of disqualification; (ii) the date of disqualification; and (iii) whether
the firm or individual is seeking admission, readmission or continuation in the securities industry.

By way of background, Section 3(a)(39) of the Act defines the term “statutory disqualification” and the circumstances that
can cause a person (either a Member, or a person associated with a Member) to be subject to a statutory disqualification. (5) Absent relief, a statutory disqualification would preclude a TPH or person associated with a TPH from certain activities,
including membership in a self-regulatory organization (“SRO”).

There is, however, a well-established process through which a TPH (or a person associated with a broker-dealer) may continue
to operate in the securities industry (and either become a TPH of, or continue as a TPH of, one or more SROs) despite being
subject to a statutory disqualification. (6)

In particular, SEC Rule 19h-1 (7) describes several ways an SRO may seek relief for a member (or prospective

member) that is subject to a statutory disqualification, including whether an SRO must file a notice with the Commission in
order to allow the disqualified firm to become or continue as a member with the SRO (a “19h-1 Notice”).

The existing Rule 3.13(b) and (c) provides that either (i) a TPH shall submit an application to the exchange within 10 days
of becoming subject to a statutory disqualification or, (ii) alternatively, if the Exchange becomes aware that a TPH or associated
person of a TPH is subject to a statutory disqualification, then, in either event, the Exchange shall then appoint a panel
of three TPHs to conduct a hearing concerning the matter. The existing Rule 3.13(d), (e), (f), (g), and (h) provisions specify
the procedural elements of the hearing itself and the process for a final decision.

Currently, FINRA processes statutory disqualification applications on behalf of the Exchange. (8) Notably, having different rules has led to outcomes where FINRA is not required to process an application and/or an applicable
19h-1 Notice under its rules, but the Exchange (or FINRA acting on the Exchange's behalf) is required under its existing Rule
3.13. As such, the Exchange proposes to, in large part, conform to FINRA Rule Series 9520 Eligibility Proceedings in order
to prevent different outcomes when FINRA is reviewing potential statutory disqualifications on behalf of the Exchange. The
Exchange also notes that its existing Rule 3.13 is an outlier when compared to industry standards, as other exchanges have
adopted rules similar to FINRA's. This may lead to inconsistent results when a firm is a member of multiple exchanges and/or
FINRA. (9)

To aid in further conformity between the Exchange and FINRA, the Exchange further proposes that it shall also rely on the
no-action letter issued to FINRA in 2009 that provides interpretive guidance regarding (i) the effect of certain time-limited
bars or license revocations, (ii) the effect of bars by State securities commissions that are based solely upon a disciplinary
action taken by an SRO, (iii) the notice requirements for willful violations of the Municipal Securities Rulemaking Board
and aiding and abetting violations, and (iv) enforcement action to the Commission under Exchange Action 15A(g)(2) or Rule
19h-1(a) if an SRO does not file a notice with the Commission for any person subject to a statutory disqualification under
Section 3(a)(39) that an SRO is proposing to admit or continue in membership or association with a member under specific circumstances. (10) Due to FINRA's No-Action Letter, there have been instances where review of the same circumstances had resulted in different
outcomes regarding when a notice is required pursuant to Rule 19h-1. (11) Specifically, the No-Action Letter makes clear certain instances where they will grant no-action relief if FINRA does not
file a 19h-1 Notice with the Commission. For example, the Commission explicitly grants no-action relief if FINRA does not
file a 19h-1 Notice if the subject person is subject to a statutory disqualification solely due to a finding of a willful
violation of the CEA or the rules or regulations thereunder, provided that the sanctions are no longer in effect. The FINRA
No-Action Letter ultimately requires fewer 19h-1 Notices to be filed.

The Exchanges notes that other exchanges, such as The Nasdaq Stock Market LLC (“Nasdaq”), Investors Exchange (IEX) and New
York Stock Exchange (“NYSE”), have already adopted similar changes to more materially align their rules with FINRA's.

Proposed Rule 3.13 would govern eligibility proceedings for persons subject to statutory disqualifications. Proposed Rule
3.13(a) would add certain definitions relating to eligibility proceedings that are not currently part of the Exchange's rules,
including “Application,” “disqualified TPH,” “disqualified person,” “sponsoring TPH,” and “Exchange staff.” The Exchange notes
that this is substantially similar to FINRA's Rule 9521, with the following exceptions: (i) “member” has been replaced with
“TPH;” (ii) references to FINRA By-Laws have been replaced with references to the Exchange Act and Exchange rules (where applicable);
(iii) a new term of Exchange staff has been added to account for the relationship between the Exchange and FINRA, where the
Exchange has a regulatory services agreement in place with FINRA and FINRA may act within the bounds of the agreed upon services;
(iv) the definition of a disqualified TPH differs; and (v) proposed Rule 3.13(a)(1) does not include reference to FINRA By-Laws.

The Exchange proposes to define “disqualified TPH” as a TPH that is or becomes subject to a disqualification under Section
3(a)(39) of the Exchange Act. This differs from the definition in FINRA Rule 9521(b)(2), which includes various other industry
participants in addition to existing members in the definition. The Exchange limited its definition to TPHs, as the Exchange
has jurisdiction over TPHs. (12)

Further, while the Exchange differs from FINRA in that it does not include reference to FINRA By-Laws or Exchange Rules under
proposed Rule 3.13(a)(1), the Exchange believes this language better suits the intended purpose of this section. Specifically,
proposed Rule 3.13 specifies procedures to be followed in the event of a statutory disqualification as defined in Section
3(a)(39) of the Exchange Act. FINRA's equivalent Rule 9521 states that the Rule 9520 Series sets forth procedures for a person
to become or remain associated with a member, notwithstanding the existence of a statutory disqualification as defined in
Article III, Section 4 of the FINRA By-Laws and for a current member or person associated with a member to obtain relief from
the eligibility or qualification requirements of the FINRA By-Laws and FINRA rules. Such actions hereinafter are referred
to as `eligibility proceedings.” While the Exchange only references statutory disqualification events in its equivalent rule,
for its purposes, it believes it is more fitting as

different procedures would be followed in the event a TPH, or TPH applicant, is ineligible for other reasons. (13)

Proposed Rule 3.13(b) is largely mirrored off of FINRA's Rule 9522; however, there were adjustments made to account for updating
rule references, adjusting “member” to “TPH”, and replacing the “National Adjudicatory Council” with the “Appeals Committee.”
First, the proposed Rules 3.13(b)(1) (14) and 3.13(b)(2) would govern the initiation of an eligibility proceeding by the Exchange and the obligation for a TPH to file
an application to initiate an eligibility proceeding if it or a TPH's associated person (15) has been subject to certain disqualifications.

Next, Rule 3.13(b)(3) sets out the process for a withdrawal of an application and Rule 3.13(b)(4) sets out prohibitions against
ex parte communications when Exchange staff has initiated the eligibility proceedings. The Exchange notes that its rule text
does differ from FINRA's; however, this is due to FINRA having a panel that reviews the matter prior to an appeal and thus,
ex parte communication concerns arise before appeals. Under the Exchange's proposed rule, with Exchange staff making determinations,
a firm will need to talk to the Exchange and FINRA while their application is pending. Thus, the Exchange proposes to note
that the proposed ex parte communications provision shall become effective only when an appeal is initiated. Further, under
the proposed Rule 3.13(b)(5), the Exchange could approve a written request for relief from the eligibility requirements under
certain circumstances. Specifically, Rule 3.13(b)(5)(A) describes certain circumstances of which a matter may be approved
by the Exchange staff without the filing of an application. This provision is the same as the corresponding provisions of
FINRA, Nasdaq, and IEX, with one exception. Specifically, under proposed Rule 3.13(b)(5)(A)(iii), Exchange staff may approve
a written request for relief without the filing of an application if a disqualified TPH or sponsoring TPH is a TPH or seeking
to become a TPH is a member of both the Exchange and another SRO and the other SRO intends to file a Notice under Exchange
Act Rule 19h-1 approving the membership continuance of the disqualified TPH or, in the case of a sponsoring TPH, the proposed
association or continued associated of the disqualified person and Exchange staff concurs with that determination. This proposed
provision is the same as that of Nasdaq, FINRA, and IEX, except it applies to those seeking to become a TPH in addition to
TPHs, while the corresponding rules of Nasdaq, FINRA, and IEX apply solely to members of those SROs. However, other organizations
have acknowledged this gap in their rules, noting it would be their practice to apply this provision to prospective members
as well as members. Therefore, despite the differences in the rule text of these other organizations, the Exchange believes
the outcome under its proposed rule would be the same as both IEX and Nasdaq from a practical perspective. (16)

Proposed Rule 3.13(b)(5)(B) covers matters that may be approved by (17) the Exchange staff after the filing of an application. Notably, under proposed Rule 3.13(b)(5)(B) the Exchange staff may approve
an application with respect to disqualifications arising solely from findings or orders specified in Section 15(b)(4)(D),
(E), or (H) of the Act or arising under Section 3(a)(39)(E) of the Act. Proposed Rule 3.13(b)(6) specifies the process for
implementing an interim plan of heightened supervision during the application process for a disqualified person.

Proposed Rules 3.13(b)(7) and 3.13(b)(8) cover the process for determining that an application is substantially incomplete
and the consequences for not remedying an application in a timely manner. (18) In the event an applicant fails to remedy an application under Rule 3.13(b)(8), Exchange staff will serve a written notice
on the sponsoring TPH of its determination to reject the application and the sponsoring TPH must promptly terminate association
with the disqualified person. Under FINRA's Rule 9522, there is reference to FINRA's application fee and that FINRA shall
refund the application fee, less $1,000 which shall be retained by FINRA as a processing fee. The Exchange notes, however,
that the Exchange has its own application fee program reflected it its fee schedule that is distinct from FINRA's. As a result,
the Exchange proposes to not include this in its proposed rule.

As further explained, proposed Rule 3.13(c) largely mirrors FINRA Rule 9523, with technical changes to account for different
defined terms and functions across the SROs. This proposed rule would allow the Exchange staff (handled by FINRA) to recommend
a supervisory plan to which the disqualified TPH, sponsoring TPH, and/or disqualified person, as the case may be, may consent
and by doing so, waive the right to appeal if the plan is accepted and right to claim bias or prejudgment, or prohibited ex
parte communications. If such a supervisory plan were rejected, proposed Rule 3.13(d) would allow a request for review by
the applicant to the Appeals Committee and would provide that a filing of an application for review would not stay the effectiveness
of final action by the Exchange unless the Commission otherwise ordered.

Proposed Rule 3.13(c) is covered under two parts: (i) to cover all disqualification except those arising solely from findings
or orders specified in Section 15(b)(4)(D),(E), or (H) of the Exchange Act and (ii) to cover disqualifications that arise
solely from findings or orders specified in Section 15(b)(4)(D), (E) or (H). The Exchange notes that the latter (proposed
Rule 3.13(c)(2)) is intended to cover events

where an application is required under the SD Circular, as under the proposed rule, events arising from findings or order
specified in Section 15(b)(4)(D), (E) or (H) of the Exchange Act do not typically require an application unless otherwise
specified in the SD Circular.

The text of the proposed rule change is similar to that in FINRA's counterpart rules, except for conforming and technical
changes and except as follows. First, under proposed Rule 3.13(c), if the disqualified TPH, sponsoring TPH, and/or disqualified
person executed a letter consenting to a supervisory plan, it would be submitted to the Exchange staff. Under FINRA's rule,
the letter is submitted to FINRA Office of General Counsel, which submits it to the Chairman of the Statutory Disqualification
Committee, acting on behalf of the NAC; the Chairman may accept or reject the plan or refer it to the NAC for action. The
Exchange does not propose to utilize the NAC or the Statutory Disqualification Committee Chairman for this purpose. The Exchange
believes that its staff can provide an appropriate review. The staff is performing this same function today when it reviews
statutory disqualification decisions reached by FINRA subject to an RSA Agreement between the Exchange and FINRA. In addition,
under FINRA's rule, the waiver of bias or prejudgment is with respect to the Department of Member Regulation, the FINRA General
Counsel, the NAC and any member thereof, while under proposed Rule 3.13(c), the waiver would be with respect to the Exchange
staff, the Exchange, the Appeals Committee, or any member of the Appeals Committee.

Next, under proposed Rule 3.13(d), if the Exchange staff rejects the plan, the TPH or applicant may request a review by the
Appeals Committee. (19) This differs from FINRA's process, which provides for a hearing before the NAC and further consideration by the FINRA Board
of Directors. Because the Exchange does not propose to utilize the NAC, the Exchange proposes instead that any appeal be heard
by the Appeals Committee. FINRA Rule 9525 also allows for discretionary review by the FINRA Board and the Exchange does not
propose to adopt a comparable rule. The Exchange believes that the Exchange staff's role in the process will provide sufficient
oversight and independence.

The Exchange does not propose to adopt the text of FINRA Rule 9526, which provides for expedited proceedings by the FINRA
Board of Governors in certain instances. The Exchange believes that its proposed rules for review can be carried out in a
timely manner and would sufficiently protect investors. The Exchange historically has not provided an expedited statutory
disqualification review.

Lastly, the Exchange also notes that it will adopt a definition of “associated person” in Rule 1.1, specifically as it pertains
to statutory disqualifications. This rule will be similar to the definitions of associated persons implemented by other exchanges
to specifically apply to the process of statutory disqualifications. (20) Currently, the Exchange's rule for associated person includes entities, meaning that an entity that is under common control
of a TPH is considered a person associated with the TPH. As the proposed rule requires TPHs to submit an application for continuance
as a TH if any person associated with the TPH becomes subject to a statutory disqualification, the Exchange's current rules
require TPHs to file applications for affiliates under common control that would be subject to a statutory disqualification
under securities law. In contrast, FINRA does not define “Person Associated with a member” or “Associated Person of a Member”
as including affiliates under common control of the FINRA member. (21) Thus, a firm that is both an Exchange TPH and FINRA member, which has an affiliate under common control that would be subject
to a statutory disqualification under securities laws, is required to file an application with the Exchange, but not with
FINRA.

The Exchange proposes to adopt a similar definition to Nasdaq and IEX except that it shall (i) remove the reference to investment
banking as that is not applicable for the Exchange's functions and (ii) remove subpoint (3) which specifies that for the purposes
of another exchange rule of Nasdaq and IEX (22) (that is not the exchange's statutory disqualification rule), that it shall also include any other person listed in Schedule
A of Form BD of a member. As the Exchange does not have this rule, the Exchange proposes not to include this subpoint (3)
in its adopted definition of associated persons for the purpose of statutory disqualifications.

As noted above, other exchanges, such as Nasdaq, IEX and NYSE, have already adopted similar changes to more materially align
its rules with FINRA's, and similar to the Exchange, have made some edits to align its proposed rules with existing exchange
processes. (23)

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable
to the Exchange and, in particular, the requirements of Section 6(b) of the Act. (24) Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) (25) requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the
public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) (26) requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers,
or dealers, because the rule applies uniformly to all TPHs and does not unfairly discriminate against any TPH or type of market
participant. The Exchange also believes the proposed rule change is consistent with Section 6(b)(1) of the Act, (27) which provides that the Exchange be organized and have the capacity to be able to carry out the purposes of the Act and to
enforce compliance by the Exchange's TPHs and persons associated with its TPHs with the Act, the rules and

regulations thereunder, and the rules of the Exchange.

In particular, the proposed rule change will better enable the Exchange to streamline the administration of its statutory
disqualification program and better protect investors and the public interest, as it will eliminate the need for TPHs or associated
persons of TPHs to submit Statutory Disqualification Applications for prior statutory qualifications that have been resolved.
Similar to Nasdaq, IEX and NYSE, the Exchange proposes to harmonize its description of statutory disqualification to align
its application of statutory disqualification to FINRA. (28) This proposal would avoid potentially different outcomes for members of both FINRA and the Exchange with respect to ineligibility
for membership and association.

The proposed changes will provide greater harmonization between Exchange and FINRA rules of similar purpose, resulting in
less burdensome and more efficient regulatory compliance for dual members. As previously noted, in many instances the proposed
rule text is substantially similar to FINRA's current rule text, which already has been approved by the Commission, and in
many other cases the differences between current FINRA rules and the proposed rules would be strictly technical in nature.
Further, in other instances, such as the Exchange's proposed Rule 3.13(d), the Exchange's rule closely follows NYSE's Rule
9524.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive
issues but rather is designed to provide greater harmonization between Exchange and FINRA rules of similar purpose for investigations
and disciplinary matters, resulting in less burdensome and more efficient regulatory compliance for dual members and facilitating
FINRA's performance of its regulatory functions under the RSA.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or

Others

The Exchange neither solicited nor received comments on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest;
(ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act (29) and Rule 19b-4(f)(6) thereunder. (30)

At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such
rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission
shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the
proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or

• Send an email to rule-comments@sec.gov. Please include file number SR-CBOE-2026-038 on the subject line.

Paper Comments

• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to file number SR-CBOE-2026-038. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection.

All submissions should refer to file number SR-CBOE-2026-038 and should be submitted on or before May 18, 2026.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. (31)

Sherry R. Haywood, Assistant Secretary. [FR Doc. 2026-08111 Filed 4-24-26; 8:45 am] BILLING CODE 8011-01-P

Footnotes

(1) 15 U.S.C. 78s(b)(1).

(2) 17 CFR 240.19b-4.

(3) See Securities Exchange Act Release No. 59586 (March 17, 2009), 74 FR 12166 (March 23, 2009) (SR-FINRA-2008-045); Securities Exchange
Act Release No. 59722 (April 7, 2009), (SR-FINRA-2009-022).

(4) See, e.g., NYSE Rules 9520-9550 or IEX Rule Series 9.520.

(5) 15 U.S.C. 78c(a)(39).

(6) See FINRA Regulatory Notice 09-19 (“Amendments to FINRA Rule 9520 Series to Establish Procedures Applicable to Firms and Associated
Persons Subject to Certain Statutory Disqualifications”).

(7) 17 CFR 240.19h-1.

(8) FINRA processes these applications on behalf of the Exchange pursuant to a Regulatory Services Agreement (“RSA”) between
the Exchange and FINRA.

(9) See, e.g., NYSE Rule 9520, IEX Rule 9.520 and Nasdaq Rule 9520.

(10) See Financial Industry Regulatory Authority, Inc., SEC No-Action Letter, 2009 SEC No-Act. (March 17, 2009) (“FINRA No-Action Letter”).

(11) For example, the FINRA No-Action Letter grants FINRA relief from notice requirements regarding a member's continued association
with a disqualified person when the statutory disqualification is based on willful violations of the CEA. Because of the relief
granted by the No Action Letter and pursuant to Regulatory Notice 09-19, FINRA would not require a member to file an application.
However, the Exchange's current Rule 3.13 does not offer relief from application requirements for the firm to continue its
association with an associated person, notwithstanding their disqualification. Relief is also not provided under the Exchange
Act Rule 19h-1(a)(3)(iii), since the disqualifying event is a finding by the CFTC of a willful violation of the CEA and not
a finding by the SEC or SRO of a willful violation of the Exchange Act, among others. As such, a notice pursuant to Rule 19h-1
for the Exchange is required, but is not required for FINRA.

(12) The Exchange notes the definition excludes TPH applicants (the Exchange understands FINRA's definition also does not apply
to FINRA member applicants), because the Exchange would address a disqualification of a TPH applicant as part of the TPH application
process, and the Exchange would not file a 19h-1 Notice with the Commission for a TPH applicant. The proposed rule language,
like FINRA's, indicates the provisions that are applicable to a TPH applicant. If the Exchange approves the TPH application
of an applicant that is or becomes subject to a disqualification, the firm would then be a TPH that could take advantage of
the provisions of the proposed rule that apply to a disqualified TPH. The Exchange understands this is consistent with FINRA's
process with respect to member applicants that are or become subject to a disqualification.

(13) See, e.g., Rule 3.5(b) specifying a permitted timeline for a TPH to come into compliance with its requirements under Rule 3.5. The Exchange
understands FINRA similarly follows procedures set forth in other applicable rules (such as FINRA Rule 9555) in the event
a FINRA member or member applicant is ineligible for other reasons.

(14) The Exchange notes that for instances in which Exchange staff will not issue written notice to TPHs or applicants for membership
with respect to disqualifications arising solely from findings or orders specified in Section 15(b)(4)(D), (E), or (H) of
the Exchange Act or arising under Section 3(a)(39)(E) of the Exchange Act (when a TPH or application for membership under
Exchange Rules is not required to file an application pursuant to the SD Regulatory Circular), information regarding the disqualifying
event and the resolution of any fines, sanctions, or undertakings related to the disqualification are recorded in WebCRD.

(15) Under proposed Rule 3.13(b)(1)(C), if a TPH fails to file the application or, where appropriate, the written request for
relief, within the 10-day period, the registration of the disqualified person shall be revoked and the sponsoring TPH must
promptly terminate association with the disqualified person.

(16) See, e.g., Securities Exchange Act Release No. 101799 (November 29, 2024), 89 FR 96698 (December 5, 2024) (SR-IEX-2024-26), where IEX
states “In the course of reviewing this membership application, IEX identified that its rules do not specifically address
this situation, which has not previously occurred with respect to IEX. Specifically, the Exchange believes that its rules
regarding the process by which a prospective Member that is subject to a statutory disqualification can be approved for membership
on IEX notwithstanding the statutory disqualification could be enhanced to provide additional clarity and more clearly align
with the processes set forth in Rule 19h-1 for a membership applicant that is subject to a statutory disqualification.”

(17) The Exchange notes that approval of such an application allows for a TPH's continued participation on the Exchange.

(18) Proposed Rule 3.13(b)(7) applies to applications that are deemed substantially incomplete if they do not include information
related to an interim plan of heightened supervision. Plans of heightened supervisions are issued solely for associated persons
(and not TPHs), and thus this provision applies solely to associated persons.

(19) The Exchange's proposed Rule 3.13(d) closely aligns with NYSE Rule 9524 except for conforming and technical changes.

(20) See IEX Rule 1.160(y)(2) and Nasdaq General 3, Rule 1002(b)(2).

(21) FINRA Regulation, Inc. By-laws, Article I, paragraph (ee) defines the terms “person associated with a member” or “associated
person of a member” in relevant part as: “(2) a sole proprietor, partner, officer, director, or branch manager of a member,
or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment
banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not any such
person is registered or exempt from registration with the Corporation under these By-Laws or the Rules of the Corporation;
and (3) for purposes of Rule 8210, any other person listed in Schedule A of Form BD.”

(22) See IEX Rule 8.210 and Nasdaq General 5, Rule 8210.

(23) See, e.g., Securities Exchange Act Release No. 61703 (March 12, 2010), 75 FR 13620 (March 22, 2010) (SR-NASDAQ-2010-023) and Securities
Exchange Act Release No. 68678 (January 16, 2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02).

(24) 15 U.S.C. 78f(b).

(25) 15 U.S.C. 78f(b)(5).

(26) Id.

(27) 15 U.S.C. 78f(b)(1).

(28) See supra note 11.

(29) 15 U.S.C. 78s(b)(3)(A).

(30) 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated
by the Commission. The Exchange has satisfied this requirement.

(31) 17 CFR 200.30-3(a)(12).

Download File

Download