Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Temporarily Extend the Time To Complete Office Inspections Under FINRA Rule 3110 (Supervision), 40713-40715 [2020-14487]
Download as PDF
Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BOX–2020–22, and should
be submitted on or before July 28, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–14492 Filed 7–6–20; 8:45 am]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt
temporary Supplementary Material .16
(Temporary Extension of Time to
Complete Office Inspections) under
FINRA Rule 3110 (Supervision) that, in
light of the operational challenges
member firms are facing due to the
outbreak of the coronavirus disease
(COVID–19), would extend the time by
which member firms must complete
their calendar year 2020 inspection
obligations under Rule 3110(c) (Internal
Inspections) to March 31, 2021.4
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
3000. SUPERVISION AND
RESPONSIBILITIES RELATING TO
ASSOCIATED PERSONS
*
BILLING CODE 8011–01–P
*
*
*
*
3100. Supervisory Responsibilities
SECURITIES AND EXCHANGE
COMMISSION
*
[Release No. 34–89188; File No. SR–FINRA–
2020–019]
*
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Temporarily Extend
the Time To Complete Office
Inspections Under FINRA Rule 3110
(Supervision)
• • • Supplementary Material:———
.01 through .15 No Change.
.16 Temporary Extension of Time to
Complete Office Inspections. Each
member obligated to complete an
inspection of an office of supervisory
jurisdiction, branch office or nonbranch location in calendar year 2020
pursuant to, as applicable, paragraphs
(c)(1)(A), (B) and (C) under Rule 3110,
shall be deemed to have satisfied such
obligation if the applicable inspection is
completed on or before March 31, 2021.
*
*
*
*
*
jbell on DSKJLSW7X2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 19,
2020, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
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*
*
*
3110. Supervision
June 30, 2020.
17 17
*
*
*
*
*
(a) through (f) No Change.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
4 The proposed rule change will automatically
sunset on March 31, 2021. If FINRA seeks to
provide additional temporary relief from the rule
requirement identified in this proposal beyond
March 31, 2021, FINRA will submit a separate rule
filing to further extend the temporary extension of
time.
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
40713
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
FINRA is closely monitoring the
impact of the COVID–19 pandemic on
member firms, investors, and other
stakeholders. FINRA recognizes that
firms are experiencing operational
challenges with much of their personnel
working from home due to shelter-inplace orders, restrictions on businesses
and social activity imposed in various
states, and adhering to other social
distancing guidelines consistent with
the recommendations of public health
officials.5 FINRA believes that these
ongoing extenuating circumstances
warrant sensible and tailored
accommodations for member firms to
meet their inspection obligations under
Rule 3110(c) for calendar year 2020.
Rule 3110(c) requires on-site
inspections of offices of supervisory
jurisdiction (‘‘OSJs’’) and supervisory
branch offices at least annually (on a
calendar-year basis), non-supervisory
branch offices at least every three years,
and non-branch locations on a regular
periodic schedule, presumed to be every
three years.6 As a result of the
compelling health and welfare concerns
stemming from the COVID–19
pandemic, firms are facing potentially
significant disruptions to their normal
business operations that may include
staff absenteeism, the increased use of
remote offices or telework arrangements,
travel or transportation limitations, and
technology interruptions or slowdowns.
These circumstances make it
impracticable for firms in most cases to
reach and conduct an on-site inspection
of office locations. To provide firms an
opportunity to better manage these
operational challenges and the resources
attendant to fulfilling these supervisory
obligations during these pressing times,
FINRA is proposing to adopt Rule
3110.16 that would extend the time by
which inspections must be completed in
accordance with Rule 3110(c) for
calendar year 2020 to March 31, 2021.7
FINRA emphasizes that this extension
of time does not relieve firms from the
5 See, e.g., Centers for Disease Control and
Prevention, How to Protect Yourself & Others,
https://www.cdc.gov/coronavirus/2019-ncov/
prevent-getting-sick/prevention.html (last visited
June 17, 2020).
6 See Rule 3110(c)(1)(A), (B), and (C). See also
Rule 3110.13 (General Presumption of Three-Year
Limit for Periodic Inspection Schedules).
7 See supra note 4.
E:\FR\FM\07JYN1.SGM
07JYN1
40714
Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices
on-site inspection requirement of
branch offices and non-branch locations
currently prescribed by the rule. FINRA
also notes that this proposed extension
of time would create further efficiencies
for firms by aligning with the Municipal
Securities Rulemaking Board’s
(‘‘MSRB’’) temporary extension for
meeting the inspection requirements of
offices set forth under MSRB Rule G–27
(Supervision) to March 31, 2021.8
FINRA believes that this proposed
extension of time is tailored to address
the needs and constraints on a firm’s
operations during the COVID–19
pandemic, without significantly
compromising critical investor
protection. FINRA believes that
potential risks that may arise from
providing firms additional time to
comply with their inspection
obligations due in calendar year 2020
are mitigated by firms’ ongoing
supervisory obligations, off-site
monitoring, and the temporary nature of
the extension. FINRA will continue to
monitor the situation and engage with
member firms, other financial
regulators, and governmental authorities
to determine whether additional
regulatory relief or guidance related to
this rule may be appropriate. In
particular, FINRA will consider whether
additional relief may be warranted to
address any backlog of 2020 inspections
that may continue to exist in light of
ongoing public health and safety
concerns.
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so FINRA can
implement the proposed rule change
immediately.
jbell on DSKJLSW7X2PROD with NOTICES
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,9 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. The proposed rule
change is intended to provide firms
additional time to comply with their
Rule 3110(c) inspection obligations due
8 See Securities Exchange Act Release No. 88694
(April 20, 2020), 85 FR 23088 (April 24, 2020)
(Notice of Filing and Immediate Effectiveness of
File No SR–MSRB–2020–01). See also MSRB Notice
2020–09 (MSRB Amends Certain Rules to Provide
Regulatory Relief During COVID–19 Pandemic)
(April 9, 2020).
9 15 U.S.C. 78o–3(b)(6).
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16:59 Jul 06, 2020
Jkt 250001
in calendar year 2020 to March 31,
2021, and does not relieve firms from
completing those obligations or from
maintaining, under the circumstances, a
reasonably designed system to supervise
the activities of their associated persons
to achieve compliance with applicable
securities laws and regulations, and
with applicable FINRA rules that
directly serve investor protection. In a
time when faced with unique challenges
resulting from the COVID–19 pandemic,
FINRA believes that the proposed rule
change is a sensible accommodation
that will afford firms the ability to
observe the recommendations of public
health officials to provide for the health
and safety of its personnel, while
continuing to serve and promote the
protection of investors and the public
interest in this unique environment.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is intended solely
to provide temporary relief given the
impacts of the COVID–19 pandemic
crisis.10 As a result of the temporary
nature of the proposed relief, an
abbreviated economic impact
assessment is appropriate.
Economic Impact Assessment
A. Regulatory Objective
FINRA is proposing Rule 3110.16 to
address an issue that has arisen due to
the impacts of the coronavirus outbreak
and restrictions related to health and
safety concerns. In addition to social
distancing requirements that have been
implemented across the United States to
benefit the health and welfare of the
populace, firms are facing potentially
significant business disruptions that
may include staff absenteeism,
increased use of remote offices or
telework arrangements, travel or
transportation limitations, and
technology interruptions or slowdowns.
These limitations pose significant
challenges for firms to satisfy the on-site
inspection component of Rule 3110(c),
which requires travel to visit offices and
non-branch locations. In recognition of
these circumstances, the proposed rule
change would provide temporary relief
by extending the date by which firms
must complete their 2020 inspections.
B. Economic Baseline
The Economic Baseline of the
proposed temporary relief is the
PO 00000
10 See
also FINRA Regulatory Notice 20–08.
Frm 00095
Fmt 4703
Sfmt 4703
obligation under Rule 3110(c), as
described above, and the current
number and types of FINRA member
locations that require inspections.
C. Economic Impact
Proposed Rule 3110.16 is intended
solely to provide an accommodation
from the timing requirements set forth
under Rule 3110(c) (as applicable to
year 2020) due to the current pandemicrelated limitations in place across the
United States to benefit the health and
welfare of the populace. FINRA believes
that the proposed rule change will not
impose any new costs on member firms.
Moreover, the proposed rule change
would align with similar temporary
relief provided by the MSRB (as
discussed above), and such coordination
among regulators will provide for
greater clarity and the efficient use of
resources by firms during this public
health crisis.
FINRA notes that even in the current
environment, member firms have an
ongoing obligation to supervise the
activities of their associated persons at
their branch offices and non-branch
locations in a manner reasonably
designed to achieve compliance with
applicable securities laws and
regulations, and with applicable FINRA
rules. Any risks that may arise from
providing firms additional time to
comply with their Rule 3110(c)
inspection obligations due in calendar
year 2020 are mitigated by firms’
ongoing supervisory obligations, off-site
monitoring, and the temporary nature of
the extension. As noted above, the
proposed rule change would be limited
in time, and in place to March 31, 2021,
or until the conclusion of any extension
thereof.11
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
11 See
E:\FR\FM\07JYN1.SGM
supra note 4.
07JYN1
Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices
19(b)(3)(A) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii), the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
FINRA has asked the Commission to
waive the 30-day operative delay so that
this proposed rule change may become
operative immediately upon filing.
FINRA has stated that the requested
relief in this proposed rule change is in
response to the potentially significant
disruptions to normal business
operations that may include staff
absenteeism, the increased use of
remote offices or telework arrangements,
travel or transportation limitations, and
technology interruptions or slowdowns.
FINRA notes also that such
circumstances make it impracticable for
firms in most cases to reach and
conduct an on-site inspection of office
locations. FINRA states that the
temporary relief provided for in the
proposed rule change will provide firms
an opportunity to better manage these
operational challenges and the resources
attendant to fulfilling these supervisory
obligations. We note that this proposal
provides only temporary relief from the
time required to complete office
inspections; as proposed, these changes
would be in place through March 31,
2021. FINRA also stated that the
amended rule will revert back to its
original state at the conclusion of the
temporary relief period and, if
applicable, any extension thereof. For
these reasons, the Commission believes
that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. FINRA has
satisfied this requirement.
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
jbell on DSKJLSW7X2PROD with NOTICES
13 17
VerDate Sep<11>2014
16:59 Jul 06, 2020
Jkt 250001
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
40715
All submissions should refer to File
Number SR–FINRA–2020–019 and
should be submitted on or before July
28, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
[FR Doc. 2020–14487 Filed 7–6–20; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2020–019 on the subject line.
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend Rules 7.36 and 7.37
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2020–019. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly.
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89205; File No. SR–NYSE–
2020–55]
June 30, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 24,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rules 7.36 and 7.37 relating to Setter
Priority. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
15 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\07JYN1.SGM
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Agencies
[Federal Register Volume 85, Number 130 (Tuesday, July 7, 2020)]
[Notices]
[Pages 40713-40715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14487]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89188; File No. SR-FINRA-2020-019]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Temporarily Extend the Time To Complete Office
Inspections Under FINRA Rule 3110 (Supervision)
June 30, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 19, 2020, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to adopt temporary Supplementary Material .16
(Temporary Extension of Time to Complete Office Inspections) under
FINRA Rule 3110 (Supervision) that, in light of the operational
challenges member firms are facing due to the outbreak of the
coronavirus disease (COVID-19), would extend the time by which member
firms must complete their calendar year 2020 inspection obligations
under Rule 3110(c) (Internal Inspections) to March 31, 2021.\4\
---------------------------------------------------------------------------
\4\ The proposed rule change will automatically sunset on March
31, 2021. If FINRA seeks to provide additional temporary relief from
the rule requirement identified in this proposal beyond March 31,
2021, FINRA will submit a separate rule filing to further extend the
temporary extension of time.
---------------------------------------------------------------------------
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
3000. SUPERVISION AND RESPONSIBILITIES RELATING TO ASSOCIATED PERSONS
* * * * *
3100. Supervisory Responsibilities
* * * * *
3110. Supervision
* * * * *
(a) through (f) No Change.
Supplementary Material:------
.01 through .15 No Change.
.16 Temporary Extension of Time to Complete Office Inspections.
Each member obligated to complete an inspection of an office of
supervisory jurisdiction, branch office or non-branch location in
calendar year 2020 pursuant to, as applicable, paragraphs (c)(1)(A),
(B) and (C) under Rule 3110, shall be deemed to have satisfied such
obligation if the applicable inspection is completed on or before March
31, 2021.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
FINRA is closely monitoring the impact of the COVID-19 pandemic on
member firms, investors, and other stakeholders. FINRA recognizes that
firms are experiencing operational challenges with much of their
personnel working from home due to shelter-in-place orders,
restrictions on businesses and social activity imposed in various
states, and adhering to other social distancing guidelines consistent
with the recommendations of public health officials.\5\ FINRA believes
that these ongoing extenuating circumstances warrant sensible and
tailored accommodations for member firms to meet their inspection
obligations under Rule 3110(c) for calendar year 2020.
---------------------------------------------------------------------------
\5\ See, e.g., Centers for Disease Control and Prevention, How
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html (last visited June 17,
2020).
---------------------------------------------------------------------------
Rule 3110(c) requires on-site inspections of offices of supervisory
jurisdiction (``OSJs'') and supervisory branch offices at least
annually (on a calendar-year basis), non-supervisory branch offices at
least every three years, and non-branch locations on a regular periodic
schedule, presumed to be every three years.\6\ As a result of the
compelling health and welfare concerns stemming from the COVID-19
pandemic, firms are facing potentially significant disruptions to their
normal business operations that may include staff absenteeism, the
increased use of remote offices or telework arrangements, travel or
transportation limitations, and technology interruptions or slowdowns.
These circumstances make it impracticable for firms in most cases to
reach and conduct an on-site inspection of office locations. To provide
firms an opportunity to better manage these operational challenges and
the resources attendant to fulfilling these supervisory obligations
during these pressing times, FINRA is proposing to adopt Rule 3110.16
that would extend the time by which inspections must be completed in
accordance with Rule 3110(c) for calendar year 2020 to March 31,
2021.\7\ FINRA emphasizes that this extension of time does not relieve
firms from the
[[Page 40714]]
on-site inspection requirement of branch offices and non-branch
locations currently prescribed by the rule. FINRA also notes that this
proposed extension of time would create further efficiencies for firms
by aligning with the Municipal Securities Rulemaking Board's (``MSRB'')
temporary extension for meeting the inspection requirements of offices
set forth under MSRB Rule G-27 (Supervision) to March 31, 2021.\8\
---------------------------------------------------------------------------
\6\ See Rule 3110(c)(1)(A), (B), and (C). See also Rule 3110.13
(General Presumption of Three-Year Limit for Periodic Inspection
Schedules).
\7\ See supra note 4.
\8\ See Securities Exchange Act Release No. 88694 (April 20,
2020), 85 FR 23088 (April 24, 2020) (Notice of Filing and Immediate
Effectiveness of File No SR-MSRB-2020-01). See also MSRB Notice
2020-09 (MSRB Amends Certain Rules to Provide Regulatory Relief
During COVID-19 Pandemic) (April 9, 2020).
---------------------------------------------------------------------------
FINRA believes that this proposed extension of time is tailored to
address the needs and constraints on a firm's operations during the
COVID-19 pandemic, without significantly compromising critical investor
protection. FINRA believes that potential risks that may arise from
providing firms additional time to comply with their inspection
obligations due in calendar year 2020 are mitigated by firms' ongoing
supervisory obligations, off-site monitoring, and the temporary nature
of the extension. FINRA will continue to monitor the situation and
engage with member firms, other financial regulators, and governmental
authorities to determine whether additional regulatory relief or
guidance related to this rule may be appropriate. In particular, FINRA
will consider whether additional relief may be warranted to address any
backlog of 2020 inspections that may continue to exist in light of
ongoing public health and safety concerns.
FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. The proposed rule change is intended to provide firms
additional time to comply with their Rule 3110(c) inspection
obligations due in calendar year 2020 to March 31, 2021, and does not
relieve firms from completing those obligations or from maintaining,
under the circumstances, a reasonably designed system to supervise the
activities of their associated persons to achieve compliance with
applicable securities laws and regulations, and with applicable FINRA
rules that directly serve investor protection. In a time when faced
with unique challenges resulting from the COVID-19 pandemic, FINRA
believes that the proposed rule change is a sensible accommodation that
will afford firms the ability to observe the recommendations of public
health officials to provide for the health and safety of its personnel,
while continuing to serve and promote the protection of investors and
the public interest in this unique environment.
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\9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
intended solely to provide temporary relief given the impacts of the
COVID-19 pandemic crisis.\10\ As a result of the temporary nature of
the proposed relief, an abbreviated economic impact assessment is
appropriate.
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\10\ See also FINRA Regulatory Notice 20-08.
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Economic Impact Assessment
A. Regulatory Objective
FINRA is proposing Rule 3110.16 to address an issue that has arisen
due to the impacts of the coronavirus outbreak and restrictions related
to health and safety concerns. In addition to social distancing
requirements that have been implemented across the United States to
benefit the health and welfare of the populace, firms are facing
potentially significant business disruptions that may include staff
absenteeism, increased use of remote offices or telework arrangements,
travel or transportation limitations, and technology interruptions or
slowdowns. These limitations pose significant challenges for firms to
satisfy the on-site inspection component of Rule 3110(c), which
requires travel to visit offices and non-branch locations. In
recognition of these circumstances, the proposed rule change would
provide temporary relief by extending the date by which firms must
complete their 2020 inspections.
B. Economic Baseline
The Economic Baseline of the proposed temporary relief is the
obligation under Rule 3110(c), as described above, and the current
number and types of FINRA member locations that require inspections.
C. Economic Impact
Proposed Rule 3110.16 is intended solely to provide an
accommodation from the timing requirements set forth under Rule 3110(c)
(as applicable to year 2020) due to the current pandemic-related
limitations in place across the United States to benefit the health and
welfare of the populace. FINRA believes that the proposed rule change
will not impose any new costs on member firms. Moreover, the proposed
rule change would align with similar temporary relief provided by the
MSRB (as discussed above), and such coordination among regulators will
provide for greater clarity and the efficient use of resources by firms
during this public health crisis.
FINRA notes that even in the current environment, member firms have
an ongoing obligation to supervise the activities of their associated
persons at their branch offices and non-branch locations in a manner
reasonably designed to achieve compliance with applicable securities
laws and regulations, and with applicable FINRA rules. Any risks that
may arise from providing firms additional time to comply with their
Rule 3110(c) inspection obligations due in calendar year 2020 are
mitigated by firms' ongoing supervisory obligations, off-site
monitoring, and the temporary nature of the extension. As noted above,
the proposed rule change would be limited in time, and in place to
March 31, 2021, or until the conclusion of any extension thereof.\11\
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\11\ See supra note 4.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section
[[Page 40715]]
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
FINRA has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest. FINRA has asked the Commission to
waive the 30-day operative delay so that this proposed rule change may
become operative immediately upon filing. FINRA has stated that the
requested relief in this proposed rule change is in response to the
potentially significant disruptions to normal business operations that
may include staff absenteeism, the increased use of remote offices or
telework arrangements, travel or transportation limitations, and
technology interruptions or slowdowns. FINRA notes also that such
circumstances make it impracticable for firms in most cases to reach
and conduct an on-site inspection of office locations. FINRA states
that the temporary relief provided for in the proposed rule change will
provide firms an opportunity to better manage these operational
challenges and the resources attendant to fulfilling these supervisory
obligations. We note that this proposal provides only temporary relief
from the time required to complete office inspections; as proposed,
these changes would be in place through March 31, 2021. FINRA also
stated that the amended rule will revert back to its original state at
the conclusion of the temporary relief period and, if applicable, any
extension thereof. For these reasons, the Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the 30-day operative delay and designates the proposal
operative upon filing.\14\
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\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2020-019 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2020-019. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly.
All submissions should refer to File Number SR-FINRA-2020-019 and
should be submitted on or before July 28, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14487 Filed 7-6-20; 8:45 am]
BILLING CODE 8011-01-P