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Re: 236T568 post# 103547

Thursday, 02/11/2016 1:12:08 PM

Thursday, February 11, 2016 1:12:08 PM

Post# of 220223
"...still blaming the SEC..."

From a Motion that I submitted in that case:

"In June of 2012, Penson announced that it was leaving the clearing business in the United States. “Penson Financial is selling and transferring its

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customer accounts and clearing contracts to Apex Clearing Solutions LLC…Penson Financial Services, however, will remain a fixture in the clearing business. It will receive a 94% equity interest in a new joint venture, Apex Clearing Holdings LLC, which will be managed by Apex Clearing Solutions.” (articles by Bruce Kelly, investmentnews.com)

I had subpoena authority to obtain Penson’s EBS trading records and, knowing that Penson had sold or transferred their clearing business to Apex Clearing, I wrote to Apex to get contact information for the subpoena, as shown. Also shown are the replies I received from Apex.

“From: Jay Booth <jayatthelake2003@yahoo.com>
Sent: Fri May 17 18:45:27 CDT 2013
To: info@apexclearing.com <info@apexclearing.com>
Subject: Trading Records for SpongeTech Delivery Systems (SPNGQ)

May I have contact information for the person who can provide trading records, such as Electronic Blue Sheets, for transactions of SpongeTech Delivery Systems, which were cleared and otherwise transacted by Penson Financial and its affiliates and feeder brokerages?

SPNGQ is currently in bankruptcy court in New York City. The judge in this case has appointed me as the Estate Representative, and authorized me to subpoena the trading records.

Your assistance is appreciated.
Jay P. Booth”

· jira@apexclearing.com


· jayatthelake2003@yahoo.com
Thank you for contacting APEX Clearing Corporation. We have received your inquiry and it is currently being reviewed.
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Any follow up questions or comments should be referred to the Correspondent Support Group.

If following up by phone, please refer to case [OPS-136932] when calling.

Thank you,

Correspondent Support Group
214-765-1009
APEX Clearing Corporation

=========== Issue Details ===========
ISSUE NUMBER:
OPS-136932
· jira@apexclearing.com

·
To
· jayatthelake2003@yahoo.com
We have closed your case [OPS-136932] based on the following resolution:

Resolution: Complete
Dear Sir:

Penson Financial Services is no longer in business and their parent company Penson Worldwide filed for bankruptcy in Jan 2013. Apex Clearing assumed the clearing contracts they had in effect as of Jun 6, 2012 but nothing more.
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Case Completion Date: 2013-05-20 07:04:27.344

Please let us know if we can be of further assistance on this matter.

Thank you,

Correspondent Support Group
214-765-1009
APEX Clearing Corporation

=========== Issue Details ===========
ISSUE NUMBER:
OPS-136932
Please note that Penson filed for bankruptcy protection just six days before my hearing was held in January 2013, in which I was requesting the Blue Sheets.

I notified the bankruptcy judge of the above reply from Apex, when I submitted a Rule 2004 Application for FINRA’s records. That Application also provided the following communication I sent to the Chicago Board of Options Exchange (CBOE). As I told the judge:

“In an effort to determine exactly what obligations Apex had, in relation to providing Penson’s Blue Sheets, I wrote to attorney Kerry Adler of the Chicago Board of Options Exchange. Attorney Adler was listed as the contact person regarding a Proposed Rule Change (File Number SR-C2-2012-018) submitted by CBOE affiliate C2 Options Exchange. The reason for the Proposed Rule Change was as follows.
“3 (a) Purpose
The Exchange proposes this rule filing to temporarily suspend the requirements of C2 Rule 3.1 and related rules regarding the approval of Permit Holders in order to immediately approve Apex Clearing as a C2 Permit Holder. The Exchange proposes this temporary suspension on an

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emergency basis to ensure that Apex Clearing can continue the clearing operations of PFSI (Penson Financial) without unnecessary disruption, which could have a significant collateral impact to a number of other Permit Holders.” (emphasis added).


My email to Attorney Adler follows.

From: Jay Booth <jayatthelake2003@yahoo.com>
To: "adler@cboe.com" <adler@cboe.com>
Sent: Tuesday, July 9, 2013 5:56 PM
Subject: SR-C2-2012- 018

I am writing to you in my capacity as a court-appointed shareholder Estate Representative for SpongeTech Delivery Systems (SPNGQ). The judge who granted this appointment, the Honorable Stuart M. Bernstein, sits on the bench of the Federal Bankruptcy Court for the Southern District of New York.

Part of the Relief the judge provided to me was the authority to subpoena the Electronic Blue Sheet (EBS) trading records of a number of market participants who effected transactions of the Debtor's common equity. Penson Financial Services had a significant role in our market, and is also the subject of the Proposed Rule Change referenced in the "Subject" line of this email.

It is absolutely crucial to my investigation that I examine the EBS trading records transacted by Penson. However, as a result of the conversion of Penson's accounts to Apex, it is not clear to me who is now responsible for providing that information to me.

Can you clarify who the responsible party is, so that I can subpoena these important records?

Thank you.
Jay Booth
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I did not receive a reply to this email.

Statements of interest in regards to this emergency Proposed Rule Change include the following.

Pg. 6 “In addition, the Exchange reviews whether the applicant meets federal and C2 capital requirements and whether it has adopted controls and procedures to comply with Exchange rules.

Pg 7 As proposed this temporary suspension is contingent upon:

• Apex providing the Exchange with sufficient information to confirm that
Apex will meet its capital requirements as a C2 Permit Holder…

In addition, the Exchange proposes to permit Apex Clearing to assume all existing clearing agreements and arrangements currently in effect with other C2 Permit Holders by execution of global agreements thereto.

Pg 8 (b) Statutory Basis

The Exchange believes the proposed rule change is consistent with Section 6(b)3 of the Securities Exchange Act of 1934 (the “Act”), in general, and furthers the objectives of Section 6(b)(5)4 in particular in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system and, in general, to protect investors and the public interest. (emphasis added).

Pg 10 In view of the immediate nature of the relief requested, the Exchange seeks to have the proposed amendments become operative immediately. The Exchange requests that the Commission waive the 5 business day notice of C2’s intent to file this proposed rule change, as well as the 30-day delayed operative date, so that the proposed rule change may become (effective) immediately…



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Moreover, the proposed relief does not exempt Apex from Exchange rule requirements governing Permit Holders…

Moreover, given the rapidity with which events have developed, C2 believes that immediate effectiveness is required in order to avoid significant disruption to PFSI’s existing customers and the market generally. Time is of the essence as PFSI may be unable to continue its clearing operations beginning on June 6, 2012.
(http://www.C2exchange.com)

Events subsequent to the submission of this emergency Proposed Rule Change cast doubt on the CBOE’s and C2’s commitment to prevent fraudulent and manipulative acts, or to protect investors and the public interest.

On June 11, 2013, the SEC charged the CBOE and C2 for Regulatory Failures and cited the Exchanges for “… various systemic breakdowns in their regulatory and compliance functions as a self-regulatory organization, including a failure to enforce or even fully comprehend rules to prevent abusive short selling… An SEC investigation found that CBOE failed to adequately police and control this conflict for a member firm that later became the subject of an SEC enforcement action. CBOE put the interests of the firm ahead of its regulatory obligations by failing to properly investigate the firm's compliance with Regulation SHO and then interfering with the SEC investigation of the firm.” (emphasis added).

It should be noted that the firm that allegedly engaged in this example of naked shorting has also transacted shares of the Debtor’s equity.”

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171575348#.Uh_ExdxtGAQ

I cannot say that Penson’s sale of their US clearing operations and transfer of accounts to Apex was an example of diversion of assets. I cannot say that
Apex seemingly met CBOE’s capital requirements by looting the Penson accounts to the point of bankruptcy. I cannot say that the SEC should have known, based on their then on-going investigation of the CBOE, that the Proposed Rule Change submitted to them would not necessarily meet the
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requirements to “prevent fraudulent and manipulative acts”, or “protect investors and the public interest.” But such conclusions would be justified.

Incredible.

The SEC becomes aware of systematic Reg SHO violations at Penson as they are completing their Formal Investigation of SpongeTech in 2010. They don’t disclose this until the month after SpongeTech’s bankruptcy case is closed. Instead, they approve an Emergency Rule Change submitted by the CBOE and C2, to allow Apex Clearing (94% owned by Penson) to obtain Permit Holder status on an Exchange that, itself, has systemic failures to enforce Reg SHO, and whose staff has to take training classes on rules they are expected to enforce themselves, but never have, because they don’t know the rules."

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