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Federal Register / Vol. 86, No. 180 / Tuesday, September 21, 2021 / Notices
profits or gains in an account provided certain conditions are met. Specifically, the member or person associated with a member organization seeking such compensation obtains prior written authorization from the member or member organization employing the associated person; and such member, member organization, or person associated with a member organization seeking such compensation obtains prior written authorization from the customer; and all of the conditions in Rule 2053 of the Investment Advisers Act of 1940 as the same may be amended from time to time are satisfied.
This proposal would enable Phlx to better regulate profit sharing arrangements of member organizations, members, and persons associated with member organizations by clearly specifying the manner in which a member organization, member, or person associated with a member organization may share in the profits or losses in such an account, describing what activity is exempt from the direct proportionate share limitation of proposed paragraph a3, and delineating within proposed paragraph c how a member organization, member, or person associated with a member organization that is acting as an investment adviser may receive compensation based on a share in profits or gains in an account. Today, Phlx General 9, Section 7, Report of Financial Arrangements, permits Phlx to learn of such arrangements. The proposed rule would enable Phlx to restrict the ability to profit share to certain limited circumstances, similar to FINRA.

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General 9, Section 58
The Exchange proposes to amend General 9, Section 58, Advertisements, Market Letters, Research Reports and Sales Literature, to amend the heading Supplementary Material to Supplementary Material to General 9, Section 58 so the format of the heading is the same as other General 9 rules.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,17
in general, and with Section 6b5 of the Act,18 in particular, in that the proposal is 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 17 15
18 15

U.S.C. 78f.
U.S.C. 78fb5.

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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.
Options 10, Section 5
The adoption of a new Options 10, Section 5, titled Branch Offices, is consistent with the Act and will protect investors and the public interest because the proposed rule explains the requirement to be qualified as a Registered Options Principal or General Securities Sales Supervisor and also explains when the requirement to be registered as such does not apply.19
General 9, Section 20, Supervision, does not offer the same specificity as proposed within Options 10, Section 5
with respect to branch offices, and General 9, Section 20 does not specifically apply only to members doing business with the public. The addition of this rule, similar to NOM
and BX Options 10, Section 5, will permit Phlx to enforce the rule in a manner similar to NOM and BX by requiring certain qualifications for members doing business with the public. These qualifications for branch managers will protect investors and the public interest by ensuring branch offices are properly supervised by qualified individuals who will ensure compliance with the Exchanges rules.
Today, Phlx General 4 requires member organizations, members, and persons associated with a member organization to have certain qualifications when conducting certain activity. These qualifications are designed to ensure that individuals have the necessary knowledge and experience to supervise persons employed by the member organization at a branch office.
Proposed Options 10, Section 5
specifically requires that members and member organizations that are doing business with the public maintain certain qualifications. Members and member organizations that are required to comply with Options 10, Section 5
now have transparent information to determine which of the qualifications apply to a manager of a branch office and when those qualification apply.
19 The qualification requirement shall not apply to branch offices in which not more than three representatives are located so long as the OEF can demonstrate to the satisfaction of Phlx Regulation that the options activities of such branch offices are appropriately supervised by a Registered Options Principal or General Securities Sales Supervisor.
See proposed Options 10, Section 5b.

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Options 10, Section 17
Adopting a new Options 10, Section 17, Profit Sharing, similar to FINRA
Rule 2150c, Sharing in Accounts;
Extent Permissible, is consistent with the Act. This proposal will protect investors and the public interest because it will clearly specify the way a member, member organization, or person associated with a member organization may share in the profits or losses in such an account. The proposal also will describe what activity is exempt from the direct proportionate share limitation of proposed paragraph a3. Finally, the proposal will delineate within proposed paragraph c how a member, member organization, or person associated with a member organization that is acting as an investment adviser may receive compensation based on a share in profits or gains in an account. Members, member organizations, and persons associated with a member organization will have clear guidance on when profit sharing is permissible. Today, Phlx General 9, Section 7, Report of Financial Arrangements, permits Phlx to learn of such arrangements, and Phlx General 1, Section 1c does not permit members, member organizations, and persons associated with a member organization to engage in conduct inconsistent with just and equitable principles of trade.
The proposed rule would enable Phlx to further restrict the ability to profit share in certain limited circumstances, similar to FINRA.
General 9, Section 58
The Exchanges proposal to amend a heading within General 9, Section 58, Advertisements, Market Letters, Research Reports and Sales Literature, is a non-substantive rule change.
B. Self-Regulatory Organizations Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.
Options 10, Section 5
The Exchanges proposal to adopt a new Options 10, Section 5, titled Branch Offices, does not impose an undue burden on competition as all member organizations that conduct business with the public would be subject to the proposed rule.
Options 10, Section 17
The Exchanges proposal to adopt a new Options 10, Section 17, Profit Sharing, similar to FINRA Rule 2150c, Sharing in Accounts; Extent
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