II. FINRA Regulation, Inc.

a. To establish and interpret rules and regulations and provide exemptions for FINRA members including, but not limited to, fees, membership requirements and dispute resolution programs.

b. To determine Association policy, including developing and adopting necessary or appropriate rule changes, relating to the business and sales practices of FINRA members and associated persons with respect to, but not limited to, (i) public and private sale or distribution of securities including underwriting arrangements and compensation, (ii) financial responsibility, (iii) qualifications for FINRA membership and association with FINRA members, (iv) clearance and settlement of securities transactions and other financial responsibility and operational matters affecting members in general and securities quoted or trade reported through a FINRA facility, (v) FINRA member advertising practices, (vi) administration, interpretation, and enforcement of FINRA rules, (vii) administration and enforcement of Municipal Securities Rulemaking Board ("MSRB") rules, the federal securities laws, and other laws, rules and regulations that the Association has the authority to administer or enforce, (viii) standards of proof for violations and sanctions imposed on FINRA members and associated persons in connection with disciplinary actions, and (ix) arbitration, mediation or other resolution of disputes among and between FINRA members, associated persons and customers.

c. To take necessary or appropriate action to assure compliance with Association policy, FINRA and MSRB rules, the federal securities laws, and other laws, rules and regulations that the Association has the authority to administer or enforce, through examination, surveillance, investigation, enforcement, disciplinary, and other programs.

d. To administer programs and systems for the surveillance and enforcement of FINRA rules governing members' conduct and trading activities.

e. To examine and investigate FINRA members and associated persons to determine if they have violated FINRA or MSRB rules, the federal securities laws, and other laws, rules, and regulations that the Association has the authority to administer, interpret, or enforce.

f. To administer Association enforcement and disciplinary programs, including investigation, adjudication of cases and the imposition of fines and other sanctions.

g. To administer the Association's office of professional hearing officers.

h. To conduct qualification examinations and continuing education programs.

i. To operate the Central Registration Depository.

j. To determine whether applicants for FINRA membership have met the requirements for membership established by the Association.

k. To place restrictions on the business activities of FINRA members consistent with the public interest, the protection of investors, and the federal securities laws.

l. To determine whether persons seeking to register as associated persons of FINRA members have met such qualifications for registration as may be established by the Association, including whether statutorily disqualified persons will be permitted to associate with particular FINRA members and the conditions of such association.

m. To oversee all District Office activities.

o. To establish the annual budget and business plan for FINRA Regulation.

p. To determine allocation of FINRA Regulation resources.

q. To establish and assess fees and other charges on FINRA members, persons associated with FINRA members, and others using the services or facilities of FINRA or FINRA Regulation, which includes the dispute resolution forum.

r. To manage external relations on enforcement, regulatory, dispute resolution, and other policy issues with Congress, the Securities and Exchange Commission ("Commission"), state regulators, other self-regulatory organizations, business groups, and the public.

s. To establish internal procedures for considering complaints by members, associated persons, and members of the public who request an investigation or disciplinary action by the Association.

t. To develop and adopt rule changes (i) applicable to the collection, processing, and dissemination of quotation and transaction information for securities traded in the over-the-counter market, and (ii) establishing trading practices with respect to these securities.

u. To develop and adopt rules, interpretations, policies, and procedures and provide exemptions to maintain and enhance the integrity, fairness, efficiency, and competitiveness of the over-the-counter market.

a. If the FINRA Regulation Board or FINRA Board takes action on a rule change relating to the business and sales practices of FINRA members or associated persons or enforcement policies, including policies with respect to fines and other sanctions, and such action is materially inconsistent with the recommendation of the National Adjudicatory Council, the FINRA Regulation Board or the FINRA Board, as applicable, shall provide written notice of its action to the National Adjudicatory Council within one calendar day.

b. Within two calendar days after receipt of such notice, the National Adjudicatory Council, by majority vote, may petition the FINRA Board for reconsideration. Such petition shall be in writing and include a statement explaining in detail why the National Adjudicatory Council believes that the FINRA Regulation Board's or FINRA Board's action should be set aside.

c. The FINRA Executive Committee shall act on a timely and complete petition for reconsideration within three calendar days after its receipt. If the FINRA Executive Committee grants reconsideration, the matter shall be added to the agenda of the next regularly scheduled meeting of the FINRA Board. If the FINRA Executive Committee denies reconsideration, the FINRA Regulation Board's or FINRA Board's previous action on the rule shall be final, and staff shall submit the necessary rule filing to the Commission.

a. The Market Regulation Committee shall advise the FINRA Regulation Board on regulatory proposals and industry initiatives relating to quotations, execution, trade reporting, and trading practices; advise the FINRA Regulation Board in its administration of programs and systems for the surveillance and enforcement of rules governing FINRA members' conduct and trading activities in the over-the-counter market; provide a pool of panelists for those hearing panels that the Chief Hearing Officer or his or her designee determines should include a member of the Market Regulation Committee pursuant to FINRA rules; participate in the training of hearing panelists on issues relating to quotations, executions, trade reporting, and trading practices; and review and recommend to the National Adjudicatory Council changes to the Association's Sanction Guidelines.

b. The FINRA Regulation Board shall appoint the Market Regulation Committee by resolution. The members of the Market Regulation Committee shall be balanced between Industry and Non-Industry committee members.

c. At all meetings of the Market Regulation Committee, a quorum for the transaction of business shall consist of a majority of the Market Regulation Committee, including not less than 50 percent of the Non-Industry committee members. If at least 50 percent of the Non-Industry committee members are (i) present at or (ii) have filed a waiver of attendance for a meeting after receiving an agenda prior to such meeting, the requirement that not less than 50 percent of the Non-Industry committee members be present to constitute the quorum shall be waived.

a. The Uniform Practice Code Committee shall have the following functions:

b. The FINRA Regulation Board shall appoint the Uniform Practice Code Committee by resolution. The Uniform Practice Code Committee shall have not more than 50 percent of its members directly engaged in market-making activity or employed by a member firm whose revenues from market-making activity exceed ten percent of its total revenues.