THE NEW YORK STOCK EXCHANGE LLC LETTER OF ACCEPTANCE, WAIVER AND CONSENT NO. 20170530827-03 TO: The New York Stock Exchange LLC c/o Department of Enforcement Financial Industry Regulatory Authority ("FINRA")

RE: Bay Crest Partners, LLC, Respondent Broker-Dealer CRD No. 39944

Bay Crest Partners, LLC, violated NYSE Rule 345, by failing to qualify and register one of its principals as a Securities Trader Principal with the New York Stock Exchange, and Rule 15c3-5(b) and (c)(1Xi) of the Securities Exchange Act of 1934 and NYSE Rule 3110, by failing to establish, document, and maintain risk management controls and supervisory procedures reasonably designed to prevent the entry of orders that exceeded appropriate pre-set credit thresholds in the aggregate for each customer. Consent to censure and $32,000 fine. Pursuant to Rule 9216 of the New York Stock Exchange LLC ("NYSE" or the "Exchange") Code of Procedure, Bay Crest Partners, LLC ("Bay Crest" or the "firm") submits this Letter of Acceptance, Waiver and Consent ("AWC") for the purpose of proposing a settlement of the alleged rule violations described below. This AWC is submitted on the condition that, if accepted, the NYSE will not bring any future actions against the firm alleging violations based on the same factual findings described herein.

I.

ACCEPTANCE AND CONSENT

A. The firm hereby accepts and consents, without admitting or denying the findings, and solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the NYSE, or to which the NYSE is a party, prior to a hearing and without an adjudication of any issue of law or fact, to the entry of the following findings by the NYSE:

BACKGROUND

The firm has been a member of NYSE since June 18, 1993. The firm has 68 registered representatives across four branch offices. Its principal place of business is New York, NY.

RELEVANT DISCIPLINARY HISTORY

The firm has no relevant disciplinary history.

20170530827 SUMMARY

FINRA, on behalf of NYSE, reviewed the firm's compliance with NYSE's registration rules and Rule 15c3-5 promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 ("Rule 15c3-5"), and related supervisory requirements, during the period December 17, 2016 through June 15, 2017 (the "review period"). As detailed below, during the review period, the firm failed to comply with NYSE Rule 345, NYSE Rule 3110, and SEC Rule 15c3-5(b) and (c)(1)(i).

FACTS AND VIOLATIVE CONDUCT

Registration

1. During the review period, NYSE Rule 345 required associated persons of member organizations "to comply with NASD Rule 1031, concerning the registration and approval of registered representatives and their supervisors .. . as if such Rule is part of NYSE's Rules."

2. During the review period, NASD Rule 1031 required that "[a]ll persons engaged or to be engaged in the investment banking or securities business of a member who are to function as representatives shall be registered as such with [FINRA] in the category of registration appropriate to the function to be performed as specified in [NASD] Rule 1032."

3. During the review period, NASD Rule 1032(0(1) required that registered persons engaged in the following securities trading activities register as Securities Traders: "proprietary trading, the execution of transactions on an agency basis, or the direct supervision of such activities . . ." in equity, preferred, or convertible debt securities.

4. During the review period, NASD Rule 1022(a)(6) required "[e]ach person associated with a member who is included within the definition of principal in [NASD] Rule 1021 and who will have supervisory responsibility over the securities trading activities described in [NASD] Rule 1032(f)(1) shall become qualified and registered as a Securities Trader Principal."

5. During the review period, the firm's Chief Compliance Officer ("CCO"), a principal of the firm by virtue of her position as an officer, had supervisory responsibility over the securities trading activities of the firm's 11 Securities Traders, but was not qualified or registered as a Securities Trader Principal.' Therefore, the firm violated NYSE Rule 345.

' The CCO was properly qualified and registered with NYSE as a General Securities Principal authorizing her to supervise the firm's General Securities Representatives. The CCO's responsibility with respect to supervising Securities Traders was limited to reviewing three reports of their trading activity. The CCO no longer conducts supervisory reviews of the securities trading activities of the firm's Securities Traders.

2 20170530827 Rule 15c3-5

6. Rule 15c3-5 is designed to reduce the risks faced by broker-dealers, as well as the markets and the financial system as a whole, as a result of various market access arrangements, by requiring financial and regulatory risk management controls reasonably designed to limit financial exposure and ensure compliance with applicable regulatory requirements to be implemented on a market-wide basis.

7. Rule I5c3-5(b) requires, in relevant part, that "[a] broker-dealer . .. that provides a customer or any other person with access to an exchange . . . through use of its market participant identifier or otherwise, shall establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity."

8. Rule 15c3-5(c)(1) requires firms that provide market access to establish risk management controls and supervisory procedures that are "reasonably designed to systematically limit the financial exposure of the broker or dealer that could arise as a result of market access."

9. Specifically, Rule 15c3-5(c)(1)(i) requires that such controls and procedures be reasonably designed to "prevent the entry of orders that exceed appropriate pre- set credit or capital thresholds in the aggregate for each customer and the broker or dealer and, where appropriate, more finely-tuned by sector, security, or otherwise by rejecting orders if such orders would exceed the applicable credit or capital thresholds."

10. The SEC's Rule 15c3-5 Adopting Release stated that "a broker-dealer will be required to set appropriate credit thresholds for each customer for which it provides market access, including broker-dealer customers," and that such thresholds will be "determin[ed] based on appropriate due diligence as to the customer's business, financial condition, trading patterns, and other matters" and that the firm's decision should be documented.2 The Adopting Release also stated that "the Commission expects that the broker-dealer will monitor on an ongoing basis whether the credit thresholds remain appropriate, and promptly make adjustments to them, and its controls and procedures, as warranted."3

11. During the review period, the firm failed to establish risk management controls reasonably designed to prevent the entry of orders that exceeded appropriate pre- set credit thresholds in the aggregate for each customer by rejecting orders if such orders would exceed the applicable credit thresholds.

2 Risk Management Controls for Brokers or Dealers with Market Access, Exchange Act Release No. 63241, 75 Fed. Reg. 69792, 69802 (Nov. 15, 2010). 3 Id.

3 20170530827 12. Specifically, the firm had written market access procedures during the review period that described certain due diligence steps supervisors should take to set appropriate customer credit thresholds, including by reviewing "the nature of the customer, the nature of the trading, the capital available to the customer and the customer's trading history." Despite the written procedures, the firm could not demonstrate that it performed reasonable due diligence in selecting customer credit thresholds or how the thresholds it selected for customers meaningfully limited the financial exposure generated by the customers' trading activity. Nor could the firm establish that it monitored the continued appropriateness of those thresholds on an ongoing basis.

13. Instead of evaluating the relevant factors discussed in the Adopting Release, the firm relied solely on customers' trading activity in selecting customer credit thresholds. The thresholds the firm implemented, however, were not reasonably related to customers' actual trading activity. Customers with access to the NYSE floor were placed in one of three tiers of daily credit thresholds set at $3 billion, $4 billion, or $5 billion. The firm did not demonstrate, however, that these thresholds were based on any analysis with respect to the customers' business, financial condition, or trading patterns. This failure resulted in the firm implementing credit thresholds that were not reasonably designed to prevent the entry of orders that exceeded appropriate pre-set credit thresholds in the aggregate for each customer.

14. In addition, for approximately five customers, the firm failed to aggregate the credit thresholds across the other order management systems ("OMSs") the firm utilized to provide customers with market access. This failure allowed the customers to potentially exceed the OMS-specific thresholds the firm assigned to the customers.

15. The conduct in paragraphs 11 through 14 violated Rule 15c3-5(b) and (c)(1)(i).

16. As a result of the deficiencies described above, the firm also violated NYSE Rule 3110.

B. The firm also consents to the imposition of the following sanctions:

• A censure; • a fine of $32,000' to be paid to the Exchange (consisting of $2,000 for the registration violation and $30,000 for the Rule 15c3-5 and related supervisory violations); and

4 Related disciplinary actions on behalf of Cboe BZX Exchange, Inc. ("BZX"), Cboe EDGX Exchange, Inc. ("EDGX"), The NASDAQ Stock Market LLC ("Nasdaq"), NYSE American LLC ("NYSE American"), and FINRA (collectively, the "SROs") for violations of each SRO's registration rules are being taken concurrently in conjunction with this matter. The FINRA disciplinary action also includes violations of Rule 15c3-5.

4 20170530827 • an undertaking to revise the firm's written supervisory procedures with respect to the areas described in paragraphs I.A.11 through 14. Within 30 days after this AWC becomes final, a registered principal of the Respondent shall submit to the COMPLIANCE ASSISTANT, DEPARTMENT OF ENFORCEMENT, 15200 OMEGA DRIVE, SUITE 300, ROCKVILLE, MD 20850-3241, a signed, dated letter, or an e-mail from a work-related account of the registered principal to MarketRegulationComnQfinra.org„ acknowledging that the firm revised its written supervisory procedures, and the date the revised procedures were implemented.

The firm agrees to pay the monetary sanction(s) upon notice that this AWC has been accepted and that such payment(s) are due and payable. The firm has submitted a Method of Payment Confirmation form showing the method by which it will pay the fine imposed.

The firm specifically and voluntarily waives any right to claim that it is unable to pay, now or at any time hereafter, the monetary sanction(s) imposed in this matter.

The firm agrees that it shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any fine amounts that the firm pays pursuant to this AWC, regardless of the use of the fine amounts. The firm further agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any fine amounts that Respondent pays pursuant to this AWC, regardless of the use of the fine amounts.

The sanctions imposed herein shall be effective on a date set by NYSE Regulation staff.

II.

WAIVER OF PROCEDURAL RIGHTS

The firm specifically and voluntarily waives the following rights granted under the NYSE's Code of Procedure:

A. To have a Formal Complaint issued specifying the allegations against the firm;

B. To be notified of the Formal Complaint and have the opportunity to answer the allegations in writing;

C. To defend against the allegations in a disciplinary hearing before a hearing panel, to have a written record of the hearing made and to have a written decision issued; and

D. To appeal any such decision to the Exchange's Board of Directors and then to the U.S. Securities and Exchange Commission and a U.S. Court of Appeals.

5 20170530827 Further, the firm specifically and voluntarily waives any right to claim bias or prejudgment of the Chief Regulatory Officer of the NYSE; the Exchange's Board of Directors, Disciplinary Action Committee ("DAC") and Committee for Review ("CFR"); any Director, DAC member or CFR member; Counsel to the Exchange Board of Directors or CFR; any other NYSE employee; or any Regulatory Staff as defined in Rule 9120 in connection with such person's or body's participation in discussions regarding the terms and conditions of this AWC, or other consideration of this AWC, including acceptance or rejection of this AWC.

The firm further specifically and voluntarily waives any right to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of this AWC, or other consideration of this AWC, including its acceptance or rejection.

OTHER MATTERS

The firm understands that:

A. Submission of this AWC is voluntary and will not resolve this matter unless and until it has been reviewed and accepted by the Chief Regulatory Officer of the NYSE, pursuant to NYSE Rule 9216;

B. If this AWC is not accepted, its submission will not be used as evidence to prove any of the allegations against the firm; and

C. If accepted:

1. The AWC shall be sent to each Director and each member of the Committee for Review via courier, express delivery or electronic means, and shall be deemed final and shall constitute the complaint, answer, and decision in the matter, 25 days after it is sent to each Director and each member of the Committee for Review, unless review by the Exchange Board of Directors is requested pursuant to NYSE Rule 9310(a)(1)(B);

2. This AWC will become part of the fum permanent disciplinary record and may be considered in any future actions brought by the NYSE, or any other regulator against the firm;

3. The NYSE shall publish a copy of the AWC on its website in accordance with NYSE Rule 8313;

4. The NYSE may make a public announcement concerning this agreement and the subject matter thereof in accordance with NYSE Rule 8313; and

6 20170530827 5. The firm may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any finding in this AWC or create the impression that the AWC is without factual basis. The firm may not take any position in any proceeding brought by or on behalf of the NYSE, or to which the NYSE is a party, that is inconsistent with any part of this AWC. Nothing in this provision affects the firm's (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the NYSE is not a party.

D. A signed copy of this AWC and the accompanying Method of Payment Confirmation form delivered by email, facsimile or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy.

E. The firm may attach a Corrective Action Statement to this AWC that is a statement of demonstrable corrective steps taken to prevent future misconduct. The firm understands that it may not deny the charges or make any statement that is inconsistent with the AWC in this Statement. This Statement does not constitute factual or legal findings by the NYSE, nor does it reflect the views of NYSE Regulation or its staff.

7 20170530827 The undersigned, on behalf of the firm, certifies that a person duly authorized to act on its behalf has read and understands all of the provisions of this AWC and has been given a full opportunity to ask questions about it; that it has agreed to the AWC's provisions voluntarily; and that no offer, threat, inducement, or promise of any kind, other than the terms set forth herein and the prospect of avoiding the issuance of a Complaint, has been made to induce the firm to submit it.

Mat cr\ 5 202-0 Bay Crest Partners, LLC Date Respondent

By: j—) AAA Pnivv),

Reviewed by:

Madelyn Calabrese, Esq. Haynes and Boone, LLP Counsel for Respondent

Accepted by FINRA 4.0 Dat Gerald J. 0' Senior Counsel Department of Enforcement

Signed on behalf of the NYSE, by delegated authority from the Chief Regulatory Officer of the NYSE.

8 20170530827