The Enforcement Department is the Exchange’s representative in all disciplinary matters. Through the effective disciplinary of its participants, the Exchange seeks to protect investors by deterring future violations. Enforcement inquiries generally arise from referrals from either the Surveillance Department or the Compliance and Examinations Department, or may be initiated by Enforcement personnel themselves. Under Exchange Rules, Enforcement staff have the authority to compel the production of documents from participants and participant organizations. Additionally, the Exchange can interview participants or take their sworn statements. Before it seeks to impose a disciplinary sanction, the Enforcement staff will normally seek the input of participants to ensure that any relevant facts or legal arguments have not been overlooked (known as the "Wells" process).
The Enforcement department has the ability to seek a variety of sanctions in disciplinary actions on behalf of the Exchange. Under Article 12, Rule 8, violations of certain provisions of the Exchange’s Rules can be handled according to the Minor Rule Violation Plan ("MRVP"). MRVP actions are generally reserved for circumstances involving violative conduct of an isolated nature or where there is minimal or no investor harm. Pursuant to this Plan, violations of specified rules can be punished by fines not exceeding $2,500 per violation. In appropriate circumstances, Enforcement staff may recommend that a particular matter be disposed through the MRVP process. Such matters are reviewed by the Exchange’s MRVP Panel, which issues the fine to the responsible participant party. Under Article 12, Rule 2, the Exchange also has the authority to issue Summary Fines up to $500 per violation for violations of any Exchange rule. If a participant elects to contest the imposition of either a MRVP or Summary Fines, the participant can request that a formal hearing of relevant evidence be held.
For more significant violations or a widespread pattern or practice of misconduct, the Enforcement staff can prosecute a formal disciplinary proceeding under Article 12, Rule 1. Such actions may be settled with the agreement of the parties or may proceed to an evidentiary hearing. Upon conclusion of the hearing, the presiding officer will issue a draft Order finding violations and imposing sanctions or dismissing the charges against the respondent(s). Available sanctions include censures, monetary fines in any appropriate amount, suspensions or expulsions from membership, disgorgement of unlawfully-obtained profits, the imposition of various limitations on conduct and a variety of remedial undertakings, such as improvements to a participant’s internal compliance processes and systems.
Draft orders of the hearing officer must be reviewed and approved by the Exchange's CRO. Final orders can be appealed by the respondent to a Judiciary Committee of the Board of Directors and, on a discretionary basis, by the Executive Committee or the Board of Directors. Once the Exchange's action is final, an order can be appealed to the U.S. Securities and Exchange Commission for further review. Copies of recent disciplinary orders are available on this site.