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Federal Register / Vol. 86, No. 180 / Tuesday, September 21, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

2018, NOMs and BXs registration requirements 9 were updated to mirror a similar change by FINRA.10 At that time, Phlx Options 10, Section 5 should have been amended to update the registrations applicable to a branch office manager to conform to the new General 4 registration requirements. The Exchange is proposing to make those amendments at this time.
The Exchange proposes to relocate Supplementary Material .08 to Options 10, Section 6 to proposed Supplementary Material .01 to Options 10, Section 5 and amend a citation within proposed Supplementary Material .01vi of Options 10, Section 5
from 1vii to i to vii to conform the numbering.
The proposed rule would permit Phlx to better regulate branch offices of member organizations 11 by making clear within proposed Options 10, Section 5, related to doing business with the public, that an OEF that transacts business with the public must be qualified as a Registered Options Principal or General Securities Sales Supervisor. Further, the proposed rule explains that the requirement to be qualified as a Registered Options Principal or General Securities Sales Supervisor shall not apply to branch offices in which not more than three representatives are located so long as 9 See Securities Exchange Act Nos. 84386
October 9, 2018, 83 FR 51988 October 15, 2018
SRNASDAQ2018078 Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend, Reorganize and Enhance Its Membership, Registration and Qualification Rules;
and 84353 October 3, 2018, 83 FR 50999 October 10, 2018 SRBX2018047 Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend, Reorganize and Enhance Membership, Registration and Qualification Rules, and To Make Conforming Changes to Certain Other Rules.
10 See Securities Exchange Act Release No. 81098
July 7, 2017, 82 FR 32419 July 13, 2017 SR
FINRA2017007 Order Approving Proposed Rule Change To Adopt Consolidated Registration Rules, Restructure the Representative-Level Qualification Examination Program, Allow Permissive Registration, Establish Exam Waiver Process for Persons Working for Financial Services Affiliate of Member, and Amend the Continuing Education Requirements.
11 The term member organization means a corporation, partnership general or limited, limited liability partnership, limited liability company, business trust or similar organization, transacting business as a broker or a dealer in securities and which has the status of a member organization by virtue of i admission to membership given to it by the Membership Department pursuant to the provisions of General 3, Sections 5 and 10 or the By-Laws or ii the transitional rules adopted by the Exchange pursuant to Section 64 of the By-Laws. References herein to officer or partner, when used in the context of a member organization, shall include any person holding a similar position in any organization other than a corporation or partnership that has the status of a member organization. See General 1, Section 117.

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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. This additional specificity will assist member organizations in complying with branch office requirements. Today, the Exchange has other rules to regulate supervision of branch office such as General 9, Section 20, Supervision. The addition of this rule, similar to NOM
and BX, will permit Phlx to enforce the rule in a manner similar to NOM and BX by specifically requiring that members and member organizations that are doing business with the public maintain certain qualifications similar to NOM and BX. Members and member organizations that are required to comply with Options 10, Section 5 now have transparent information to determine if they have the appropriate manager qualifications. Also, the proposed rule makes clear when the requirement to be qualified as a Registered Options Principal or General Securities Sales Supervisor does not apply. The specified qualifications for branch managers will ensure branch offices are properly supervised by qualified individuals.
Options 10, Section 17
The Exchange proposes to adopt a new Options 10, Section 17, Profit Sharing. Options 10, Section 17 is currently reserved. The Exchanges rule is similar to FINRA Rule 2150c,12
Sharing in Accounts; Extent Permissible.13 For purposes of comparing Phlxs proposed rule to FINRAs Rule 2150, the Exchange notes that the term member within FINRA
Rule 2150 is equivalent to Phlxs defined term member organization.
Phlx also utilizes an additional term, member,14 to define its floor membership. Each member on Phlxs trading floor is required to obtain a permit to conduct business on the trading floor.15 FINRA does not have a similar trading floor concept.
12 FINRA

and Phlx utilize different terminology to describe members. Also, the rules are numbered differently and the rule citations differ.
13 Phlx has rule text similar to FINRA Rule 2150a within General 9, Section 2a. Also, Phlx has rule text similar to FINRA Rule 2150b within General 9, Section 54.
14 The term member means a permit holder which has not been terminated in accordance with the By-Laws and these Rules of the Exchange. A
member is a natural person and must be a person associated with a member organization. Any references in the rules of the Exchange to the rights or obligations of an associated person or person associated with a member organization also includes a member. See General 1, Section 116.
15 See Phlx General 3, Section 11.

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Similar to FINRA Rule 2150c, Phlx proposes to prohibit members, member organizations, and associated persons from sharing directly or indirectly in the profits or losses in any account of a customer, however the rule does provide three circumstance within proposed Options 10, Section 17a1
through 3 wherein a member, member organization, or person associated with a member organization may share in the profits or losses in such an account.16
Specifically, proposed Options 10, Section 17a permits a member, member organization, or person associated with a member organization to share directly or indirectly in the profits or losses in any account of a customer carried by a member, member organization, or person associated with a member organization, if prior written authorization is obtained as described in proposed subparagraphs 1 and 2 and the member, member organization, or person associated with a member organization shares in the profits or losses in any account of such customer only in direct proportion to the financial contributions made to such account by either the member, member organization, or person associated with a member organization as described in proposed subparagraph 3.
Proposed Options 10, Section 17b exempts from paragraph a3 the accounts of the immediate family of such member, member organization, or person associated with a member organization. The rule proposes to define immediate family to include parents, mother-in-law or father-in-law, husband or wife, children or any relative to whose support the member, member organization, or person associated with a member organization otherwise contributes directly or indirectly.
Proposed Options 10, Section 17c permits a member, member organization, or person associated with a member organization that is acting as an investment adviser to receive compensation based on a share in 16 Proposed Options 10, Section 17a1 through 3 provides that a member, member organization, or person associated with a member organization may share in the profits or losses in such an account if 1 such member or person associated with a member organization obtains prior written authorization from the member organization employing the associated person; 2 such member, member organization, or person associated with a member organization obtains prior written authorization from the customer; and 3 such member, member organization, or person associated with a member organization shares in the profits or losses in any account of such customer only in direct proportion to the financial contributions made to such account by either the member, member organization, or person associated with a member organization.

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