NYSE AMERICAN LLC LETTER OF ACCEPTANCE, WAIVER AND CONSENT ACCEPTANCE AND CONSENT BACKGROUND SUMMARY

Transcription

1 NYSE AMERICAN LLC LETTER OF ACCEPTANCE, WAIVER AND CONSENT NO TO: NYSE American LLC. c/o Department of Market Regulation Financial Industiy Regulatory Authority ("FINRA") RE: Nomura Securities International, Inc., Respondent Broker-Dealer CRDNo.4297 Pursuant to Rule 9216 of the NYSE Amerlcan LLC 1 ("NYSE American'; or the ~'Exchange") Code of Procedure, Nomura Securities International, Inc. ("N1viR.A" or the "fitm") sribmits this Letter of A~epta.nce, Waiver and Consent ("A WC;') for the purpose of proposing a settlement of the alleged rule violations described below. This A WC is submitted on the conqition that, if accepted, NYSE.American will not bring any future actions against the firm alleging violations based on the same factual findings descnoed herein. I. ACCEPTANCE AND CONSENT A. The firm hereby accepts ai:j.d consents, without admitting, or denying the :finding~, and solely for the purposes of this pic>ceeding and any other proceeding brought by or on behalf ofnyse American, or to which NYSE American is a party, prior to a hearing and without an adjudication of any issue oflaw or fac~ to the entry of the following :findings by NYSE American: BACKGROUND The firm has been a member ofnyse American since August 28, 2009, and a member of FINRA sinc e October 20, 2009, and its registnitions remain in effect The fum does not fatve any relevant disciplinary history. SUMMARY The Financial Industry Regulatory Authority's e'finra") Department of Matket Regulation, Trading and Ffu.ancial Compliance Examinations (''TFCE") staff, conducted. a-review of the firm's compliance with Rule 17a-3 of the Securities Exchange Act of 1934 ("Rule l7a-3,') and NYSE American Rules 956NY and 320 during January 12-16, 2015 (the "review period'~. 2 The TFCE staff's review was conducted for NYSE American and certain other exchanges~ including NYSE Arca, Inc. ("NYSE Arca") and 1 Effective July 24, 2017, NYSE MKT ILC was ren~~ to NYSE Am~canLLC. Thus, while all of the.conduct referred to herein occmrecl prior to July 24, 2017, and 'thus the violations were of NYSE MKT rules, for purposes of this document all the violations cited herein will be referred to ~,.~SE American Rules~" 2 Related disciplinary actions on behalf ofnyse Arca, Inc., and NASDAQ PHLX LLC concutr~ntly are being taken in conjunction. with this matter. $TAR.'N'o l(J\V)

2 NASDAQ PHLX LLX (''PHLX''). NYSE American, NYSE Arca, and PHLX are collectively referred to as the ''Exchanges." As detailed below, during the review period, the firm failed to comply with certain recordkeeping.and related supervision reqirirements. FACTS AND VIOLATIVE CONDUCT 1. Rule l 7a-3 prescribes minimum requirements With respect to the records that broker.. dealers are required to maintain, and llufo 17a-3(a)(6)(i) specifically requires :fittn$ to maintain records which include, among other requirements, "[a] memorandum of each brokerage order,... [which] $hall show... the time the order was received [and] the time of entry... " 2. NYSE American Rule 956NY states, in part: ''Every ATP Holder.must.maintain and preserve for the period specified 'Qnder SEC Rule 17a-4,. a record of every order and of any other instruction given or received for the purchase or sale of option contracts." The rule further provides, in part, that such records must include "[ o ]rder entry date and time, or the date and time of any modification ofthe terms of the order or canc~llation of the order." 3. The requirements-uliderrule 17a.. 3 and NYSE AmericanRule956NY support the: important objective of ensuring transaction records that provide an accurate sequence of orders and trade events for the effective regulatory surveillance ofbrok~s and dealers. The policy underlying these rules is to ensure thatreguiators have access to certain basic information about securities tra:ij..sactions to allow theni to adequately surveil the securities markets. 4. During the review period, the firm failed to show the time of transmission for customer orders ro11ted to third-party brokers on the m~oranda of S options orders, 4 of which the. firm also failed to record the.correct time: of order receipt The conduct d(:scribed in this paragraph constitutes separate and distinct violations of Rule l 7a- 3( a)(6)(i) and NYSE American Rule 956NY. 5. During the- review period, the firm's supervisory system did not provide for supeivision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations~ and/or the Rules. of NYSE American. At a minimum,. adequate written supervisory procedures addressing quality of markets topics should describe the following: (a) (b) (e) specific identificatfon of the individual(s) responsible for supervision:; the supervisory steps and reviews to be taken by the appropriate sup~sor; the :frequ:ency of such reviews; and 2

3 (d) how such reviews shall be documented. The firm's written supervisory procedures failed to provide for one or more of the four above-cited min.im:um requirements for adequate written supervisory procedures, in the following subject areas: record.keeping rega,rding ttansnrissio:il times [(a), (b ), ( c), and ( d)] and accuracy of order timestamps [(b )]. The conduct descn'bed in this paragraph constitutes a Violation ofnyse American Rule B. The firm also consents to the imposition of the following sanctions: l. a censure; 2. a total fine of$24;000 (to be paidjoilitlyto the Exchanges, of which $8,000 shall be paid to NYSE American); and 3~ an undertaking to revise the fi.nn~ s written supervisory procedures with respect to the areas described m paragraph LA.5. Withiil 30 business days of acceptance of this A WC by the Chief Regulatory Officer of NYSE American, a registered principal ofth~ firin shall submit to the CO:MPLIANCE ASSISTANT, LEGAL SECTION, MARKET REGULATION DEPARTMENT, 9509 KEY WEST A VENUE, RO~LE, l\.1l) 20850, a signed, dated letter, or an from a work-related account of the registered principal to MarketR.egulati.onCom.p@finra.org, providing the following information: (1) a re:(erence to this matter; (2) a representation that the firm has revised its written supervisory procedures to address the.-deficienci.es described in p~graph 1.A.5; and (3) the di;ite the revised procedures were implemented. The Department of.market Regulation may, upon a showing of good cause ~d inits sole discretion, extend the: time for compliance with these provisions. The firm agrees to pay the monetary sa.iiction(s) upon notice th.at this AWC has been accepted and that suchpayment(s) are due and payable. The firm specifically and voluntarily waives any right to claim that it is unable to p~y, now or at any time hereafter, the monetary san.ction(s) imposed in this matter. The firm agrees that it shall not seek ot aecept, directly or indirectly, reinibursement or indemnification from any source, including but not limited. to payment made pursuan,t to any msurance policy, with regard to any fine amounts that the fum. pays pursuant to this AWC, regardless of the use of the fine amounts. The firm furtb.er agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any fine amounts that Respondent pays pursuant to this A WC, regardless of the use of the fine amow.its. The sanctions imposed herefu shall be effective on a date set by NYSE Regulation staff. 3

4 n. WAIVER OF PROCEDURAL RIGHTS The :film specificallyand voluntarilywaives the following rights granted under the NYSE Ametican's Code of Procedure: A. To have a Formal Complaint issued specifying the allegations against the firm; B. To be notified of the Form.al Complaint and have the opp ortunity to answer the allegations in writing; C. To defend ~gain.st the allegatfons in a disciplinary hemng before a hearing panel, to have a written record of the hearing made and to have a written decision issued; and D. To appeal any such d~ision to the Exchange' s Board of Directors and then to the U.S. Securities and Exchange.Commission anda U.S. Court of Appeals. Further, the specifically.and voluntarily waives any right to claim bias or prejudgment of the ChiefRegulatoryOfficer ofnyseam.erican; the Exchange's Board of Directors, Disciplinary Action Committee (''DAC'') and Committee for Review (''CFR"); any Director, DAC meinbet ox CFR member; Counsel to the Exchange Boatd of Directors or CPR; any other NYSE.Amencan employee; or any Regulatory Staff as defined in Rule 9120 in connection with such pei$on's or body's participation in discussions regarding the terms and conditions of this A WC, or other consideration ofthis A WC, including acceptance or rejection of this A WC~ The firm further specifically and voluntarily waives any right to claitn that a person violated the ex parte_prohibitions of Rule 9143 ot the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in disc~sions regarding the terms and conditions ofthis A WC, or other conside.ration of this A WC, including.its acceptance or rejection. The firm understands that: m, OTHER MATTERS A. Submission of this AWC is vdluntary and will notresolve this matter unless and until it has been reviewed and acc~ted by the Chief Regulatory Officer of NYSE American, pursuant to NYSE Al;nerican Rule 9216; B. If this A WC is not accepted, its subn;lission will not be used as evidence to prove any of the allegations against the firm; and 4

5 C. If acc.epted: 1. the AWC shall be sent to each Director and eachmember of the Con:m:tl:ttee for Review via courier, express delivery or electronic means, and shall be deemed.final and shall constitute the complaint,. answer, and deeision in the ma~er, 25 days after it is sent to each Director and. each member of the Committee for Review, unless r~view by the Exchange Board of Directors is requested pursuant to NYSE American Rule 931 O(a)(l )(B). 2. this AWCwill become part of the fum~s permanent disciplinary record and may be considered in any future actions brought by NYSE American, or any other regulator against the firm; 3. NYSE American shall publish a copy of the A WC on its website in. accordance with NYSE.American Rule 8313; 4. NYSE American may make a public announcement concerning this agreement and the subject matter thereofjn accordance with NYSE American Rule 8313 ; and 5. The fum may not take any action or make or permit tc> be made any public statement, inclucllijg in regulatory :filmgs or otherwise, d~ying, directly or indirectly, any fin.ding in this A WC or create the impression that the AWC is without factiial basis. The finn may not tak~ any position in any proceedfug brought by or on behalf of NYSE.Attierican, or to which NYSE American is a partyj that is inconsistent with any part of this AWC. Nothing in this provision affects the firm's (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in whi~h NYSE American is not a party. D. A signed copy of'l;his AWC.and the accompanying.method of Payment Confirmation form delivered by , facsimile or other means of ~lectronic transmission shall. be deemed to have the same legal effect as delivery of an original signed copy. E. The firm may attach a Corrective Action Statement to this AWC that is a statei1.1ent of demon.strahle corrective steps taken. to prevent future misconduct. The firm understands that it may ~ot deny the charges or make any statement that is inconsistent ~th the A WC in this Statement This Statement does not constitute factual or legal :findings by NYSE Am~tiean, nor does it reflect the Views of NYSE Regulation or its staff. s

6 The undersigned, on behalf of the firm, certifies that a person duly authorized to act on its behalf has read and understands all of the provisions oftbis AWC and has been given a full opportunity to ask questions about it; that it has agreed to the A WC' s provisions voluntarily; and that no offer, threat, inducement, or promise of any kind, other than the terms set forth herein and the prospect of avoiding the issuance of a Complaint, has been made to induce the firm to submit it. Date Nomura Securities International, Inc. Respondent Reviewed by: By:~~ [Name; and Title, if applicable] F4.ro~ We~~ A.,4 "'-"-j~ D,'re.cfor Counsel for -J~P.op.dent ;)../) Firm Name f<{icu1"1 J1luc/ll1l. 14XM~1ULZ11 U,- Address S?l~ W lfl~ City/State/Zip CJuca q',o, ~ &o V;~/ Phone Number 31 J _q 15~ -S L/lJ tj Accepted by FINRA 0-t:c g ', Date Jam;k;; Chief Litigation Counsel FINRA Department of Market Regulation Signed on behalf of NYSE American LLC, by delegated authority from the Chief Regulatory Officer of NYSE American LLC. 6