Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Harmonize Rules 9261 and 9830 with Recent Changes by the Financial Industry Regulatory Authority, Inc., 62353-62356 [2020-21765]

Download as PDF Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES The Commission believes that adding the MLA Charge and Bid-Ask Spread Charge to its margin methodologies should enable FICC to more effectively identify, measure, monitor, and manage its credit exposures in connection with liquidating a defaulted member’s portfolio that may give rise to (1) decreased marketability due to large positions of securities sharing similar risk profiles, and (2) bid-ask spread transaction costs. Accordingly, the Commission believes that adding the MLA Charge and Bid-Ask Spread Charge to FICC’s margin methodologies would be consistent with Rule 17Ad22(e)(4)(i) because these new margin charges should better enable FICC to maintain sufficient financial resources to cover FICC’s credit exposure to its members fully with a high degree of confidence.45 C. Consistency With Rules 17Ad– 22(e)(6)(i) and (v) Rule 17Ad–22(e)(6)(i) requires that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, considers, and produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market.46 Rule 17Ad–22(e)(6)(v) requires that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, uses an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products.47 As described above in Section I.B, FICC’s current margin methodologies do not account for the potential increase in market impact costs when liquidating a defaulted member’s portfolio where the portfolio contains a large position in securities sharing similar risk profiles. FICC proposes to address this risk by adding the MLA Charge to its margin methodologies. To avoid excessive MLA Charges and ensure margin requirements are commensurate with the relevant risks, FICC also contemplates reducing a member’s MLA Charge when FICC could otherwise partially mitigate the relevant risks by extending the time period for liquidating a defaulted member’s portfolio beyond the three day period. 45 Id. CFR 240.17Ad–22(e)(6)(i). 47 17 CFR 240.17Ad–22(e)(6)(v). Additionally, as described above in Section I.A and C, FICC’s current margin methodologies do not account for the risk of incurring bid-ask spread transaction costs when liquidating the securities in a defaulted member’s portfolio. FICC proposes to address this risk by adding the Bid-Ask Spread Charge to its margin methodologies. Adding the MLA Charge and Bid-Ask Spread Charge to FICC’s margin methodologies should better enable FICC to collect margin amounts commensurate with the risk attributes of its members’ portfolios than FICC’s current margin methodologies. Specifically, the MLA Charge should better enable FICC to manage the risk of increased costs to FICC associated with the decreased marketability of a defaulted member’s portfolio where the portfolio contains a large position in securities sharing similar risk profiles. Moreover, the proposal to reduce the MLA Charge when FICC could otherwise partially mitigate the relevant risks demonstrates how the proposal provides an appropriate method for measuring credit exposure, in that it seeks to take into account the particular circumstances related to a particular portfolio when determining the MLA Charge. Additionally, since FICC’s current margin methodologies do not account for bid-ask spread transaction costs associated with liquidating a defaulted member’s portfolio, the BidAsk Spread Charge should enable FICC to manage such risks. Accordingly, the Commission believes that adding the MLA Charge and BidAsk Spread Charge to FICC’s margin methodologies would be consistent with Rules 17Ad–22(e)(6)(i) and (v) because these new margin charges should better enable FICC to establish a risk-based margin system that (1) considers and produces relevant margin levels commensurate with the risks associated with liquidating member portfolios in a default scenario, including decreased marketability of a portfolio’s securities due to large positions in securities sharing similar risk profiles and bid-ask transaction costs, and (2) uses an appropriate method for measuring credit exposure that accounts for such risk factors and portfolio effects.48 IV. Conclusion It is therefore noticed, pursuant to Section 806(e)(1)(I) of the Clearing Supervision Act, that the Commission does not object to Advance Notice (SR– FICC–2020–802) and that FICC is authorized to implement the proposed change as of the date of this notice or 46 17 VerDate Sep<11>2014 19:38 Oct 01, 2020 the date of an order by the Commission approving Proposed Rule Change SR– FICC–2020–009, whichever is later. By the Commission. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–21784 Filed 10–1–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90024; File No. SR–NYSE– 2020–76] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Harmonize Rules 9261 and 9830 with Recent Changes by the Financial Industry Regulatory Authority, Inc. September 28, 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 September 15, 2020, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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 harmonize Rules 9261 and 9830 with recent changes by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) that temporarily grants the Chief or Deputy Chief Hearing Officer the authority to order that hearings be conducted by video conference if warranted by public health risks posed by in-person hearings during the ongoing novel coronavirus (‘‘COVID– 19’’) pandemic. As proposed, these temporary amendments would be in effect through December 31, 2020. 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. 1 15 U.S.C.78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 48 17 Jkt 253001 PO 00000 CFR 240.17Ad–22(e)(6)(i) and (v). Frm 00080 Fmt 4703 Sfmt 4703 62353 E:\FR\FM\02OCN1.SGM 02OCN1 62354 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Notices 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, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to harmonize Rules 9261 (Evidence and Procedure in Hearing) and 9830 (Hearing) with recent changes by FINRA to its Rules 9261 and 9830 that temporarily grants to the Chief or Deputy Chief Hearing Officer the authority to order that hearings be conducted by video conference if warranted by public health risks posed by in-person hearings during the ongoing COVID–19 pandemic. As proposed, these temporary amendments would be in effect through December 31, 2020.4 jbell on DSKJLSW7X2PROD with NOTICES Background In 2013, the NYSE adopted disciplinary rules that are, with certain exceptions, substantially the same as the FINRA Rule 8000 Series and Rule 9000 Series, and which set forth rules for conducting investigations and enforcement actions.5 The NYSE disciplinary rules were implemented on July 1, 2013.6 In adopting disciplinary rules modeled on FINRA’s rules, the NYSE adopted the hearing and evidentiary processes set forth in Rule 9261 and in Rule 9830 for hearings in matters involving temporary and permanent 4 The Exchange may submit a separate rule filing to extend the expiration date of the proposed temporary amendments if the Exchange requires temporary relief from the rule requirements identified in this proposal beyond December 31, 2020. The amended NYSE rules will revert back to their current state at the conclusion of the temporary relief period and any extension thereof. 5 See Securities Exchange Act Release Nos. 68678 (January 16, 2013), 78 FR 5213 (January 24, 2013) (SR–NYSE–2013–02) (‘‘2013 Notice’’), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR– NYSE–2013–02) (‘‘2013 Approval Order’’), and 69963 (July 10, 2013), 78 FR 42573 (July 16, 2013) (SR–NYSE–2013–49). 6 See NYSE Information Memorandum 13–8 (May 24, 2013). VerDate Sep<11>2014 19:38 Oct 01, 2020 Jkt 253001 cease and desist orders under the Rule 9800 Series. As adopted, the text of Rule 9261 is identical to the counterpart FINRA rule. Rule 9830 is substantially the same as FINRA’s rule, except for conforming and technical amendments.7 In view of the ongoing spread of COVID–19 and its effect on FINRA’s adjudicatory functions nationwide, FINRA recently filed a temporary rule change to grant FINRA’s Office of Hearing Officers (‘‘OHO’’) and the National Adjudicatory Council (‘‘NAC’’) the authority to conduct certain hearings by video conference, if warranted by the current COVID–19related public health risks posed by inperson hearings. Among the rules FINRA amended were Rules 9261 and 9830.8 FINRA represented in its filing that its protocol for conducting hearings by video conference would ensure that such hearings maintain fair process for the parties by, among other things, FINRA’s use of a high quality, secure and user-friendly video conferencing service and provide thorough instructions, training and technical support to all hearing participants.9 According to FINRA, the proposed changes were a reasonable interim solution to allow FINRA’s critical adjudicatory processes to continue to function while protecting the health and safety of hearing participants as FINRA works towards resuming in-person hearings in a manner that is compliant with the current guidance of public health authorities.10 Pursuant to a regulatory services agreement (‘‘RSA’’), FINRA’s OHO will administer all aspects of adjudications, including assigning hearing officers to serve as NYSE hearing officers. A 7 See 2013 Approval Order, 78 FR at 15394, n.7 & 15400; 2013 Notice, 78 FR at 5228 & 5234. 8 See Securities Exchange Act Release Nos. 83289 (September 2, 2020), 85 FR 55712 (September 9, 2020) (SR–FINRA–2020–027) (‘‘FINRA Filing’’). FINRA also proposed to temporarily amend FINRA Rules 1015 and 9524. FINRA Rule 1015 governs the process by which an applicant for new or continuing membership can appeal a decision rendered by FINRA’s Department of Member Supervision under FINRA Rule 1014 or 1017 and request a hearing which would be conducted by a subcommittee of the NAC. See id. The Exchange has not adopted FINRA Rule 1015. FINRA Rule 9524 governs the process by which a statutorily disqualified member firm or associated person can appeal the Department’s recommendation to deny a firm or sponsoring firm’s application to the NAC. See id. Under the Exchange’s version of Rule 9524, if the Exchange’s Chief Regulatory Officer rejects the application, the member organization or applicant may request a review by the Exchange Board of Directors. This differs from FINRA’s process, which provides for a hearing before the NAC and further consideration by the FINRA Board of Directors. 9 See FINRA Filing, 85 FR at 55713. 10 See id. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 hearing officer from OHO will, among other things, preside over the disciplinary hearing, select and chair the hearing panel, and prepare and issue written decisions. The Chief or Deputy Hearing Officer for all Exchange disciplinary hearings are currently drawn from OHO and are all FINRA employees. The Exchange believes that OHO will utilize the same video conference protocol and processes for Exchange matters under the RSA as it proposes for FINRA matters. Given that FINRA and its OHO administers disciplinary hearings on the Exchange’s behalf, and given that the public health concerns addressed by FINRA’s amendments apply equally to the Exchange’s disciplinary hearings, the Exchange proposes to temporarily amend its disciplinary rules to allow FINRA to conduct virtual hearings on its behalf. Proposed Rule Change Rule 9261(b) states that if a disciplinary hearing is held, a party shall be entitled to be heard in-person, by counsel, or by the party’s representative. Absent an agreement by all parties to proceed in another manner, Exchange disciplinary hearings are in-person. As noted, the Chief and Deputy Hearing Officers for all Exchange and cross-market matters are supplied by OHO and are FINRA employees. Accordingly, absent an agreement by all parties to proceed in another manner, under Rule 9261(b) the Chief or Deputy Hearing Officer conducts disciplinary hearings inperson. Similarly, Rule 9830 outlines the requirements for hearings for temporary and permanent cease and desist orders. Rule 9830(a), however, does not specify that a party shall be entitled to be heard in-person, by counsel, or by the party’s representative. Consistent with FINRA’s temporary amendment to FINRA Rules 9261 and 9830, the Exchange proposes to temporarily grant the Chief or Deputy Chief Hearing Officer temporary authority to order, upon consideration of the current COVID–19-related public health risks presented by an in-person hearing, that a hearing under those rules be conducted by video conference. The proposed rule change will permit OHO to make an assessment, based on critical COVID–19 data and criteria and the guidance of health and security consultants, whether an in-person hearing would compromise the health and safety of the hearing participants such that the hearing should proceed by video conference. As noted, FINRA has adopted a detailed and thorough E:\FR\FM\02OCN1.SGM 02OCN1 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Notices protocol to ensure that hearings conducted by video conference will maintain fair process for the parties.11 The Exchange believes that this is a reasonable procedure to follow in hearings under Rules 9261 and 9830 chaired by a FINRA employee.12 To effectuate these changes, the Exchange proposes to add the following sentence to Rule 9261(b): Upon consideration of the current public health risks presented by an in-person hearing, the Chief Hearing Officer or Deputy Chief Hearing Officer may, on a temporary basis, determine that the hearing shall be conducted, in whole or in part, by video conference. The proposed text is identical to the language adopted by FINRA.13 Similarly, the Exchange proposes to add the following text to Rule 9830(a): Upon consideration of the current public health risks presented by an in-person hearing, the Chief Hearing Officer or Deputy Chief Hearing Officer may, on a temporary basis, determine that the hearing shall be conducted, in whole or in part, by video conference. Once again, the proposed language is identical to the language adopted by FINRA.14 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,15 in general, and furthers the objectives of Section 6(b)(5),16 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.17 11 See FINRA Filing, 85 FR at 55713. Exchange notes, as did FINRA, that SEC’s Rules of Practice pertaining to temporary cease-anddesist orders provide that parties and witnesses may participate by telephone or, in the Commission’s discretion, through the use of alternative technologies that allow remote access, such as a video link. See SEC Rule of Practice 511(d)(3); Comment (d); see FINRA Filing, 85 FR at 55714, n. 21. 13 See FINRA Filing, 85 FR at 55712. 14 Id. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). 17 15 U.S.C. 78f(b)(7) and 78f(d). jbell on DSKJLSW7X2PROD with NOTICES 12 The VerDate Sep<11>2014 19:38 Oct 01, 2020 Jkt 253001 The Exchange believes that the proposed rule change supports the objectives of the Act by providing greater harmonization between Exchange rules and FINRA rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance. As previously noted, the text of Rule 9261 is identical to the counterpart FINRA rule and Rule 9830 is substantially the same as FINRA’s rule, except for conforming and technical amendments. As such, the proposed rule change will foster cooperation and coordination with persons engaged in facilitating transactions in securities and will remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposed temporary rule change will permit the Exchange to effectively conduct hearings during the COVID–19 pandemic in situations where in-person hearings present likely public health risks. The ability to conduct hearings by video conference will thereby permit the adjudicatory functions of the Exchange’s disciplinary rules to continue unabated, thereby avoiding protracted delays. The Exchange believes that this is especially important in matters where temporary and permanent cease and desist orders are sought because the proposed rule change would enable those hearings to proceed without delay, thereby enabling the Exchange to take immediate action to stop significant, ongoing customer harm, to the benefit of the investing public. Conducting hearings via video conference will give the parties and adjudicators simultaneous visual and oral communication without the risks inherent in physical proximity during a pandemic. Temporarily permitting hearings for disciplinary matters to proceed by video conference maintains fair process by providing respondents a timely opportunity to address and potentially resolve any allegations of misconduct. As noted, FINRA will use a high quality, secure video conferencing technology with features that will allow the parties to reasonably approximate those tasks that are typically performed at an in-person hearing, such as sharing documents, marking documents, and utilizing breakout rooms. FINRA will also provide training for participants on how to use the video conferencing platform and detailed guidance on the procedures that will govern such hearings. Moreover, the Chief or Deputy Chief Hearing Officer may take into consideration, among other things, a PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 62355 hearing participant’s access to connectivity and technology in scheduling a video conference hearing and can also, at their discretion, allow a party or witness to participate by telephone, if necessary, to address such access issues.18 For the same reasons, the Exchange believes that the proposed rule change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.19 The Exchange believes that the temporary proposed rule change strikes an appropriate balance between providing fair process and enabling the Exchange to fulfill its statutory obligations to protect investors and maintain fair and orderly markets while accounting for the significant health and safety risks of in-person hearings stemming from the outbreak of COVID– 19. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competitive issues but is rather intended solely to provide temporary relief given the impacts of the COVID– 19 pandemic. In its filing, FINRA provides an abbreviated economic impact assessment maintaining that the changes are necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rules 1015, 9261, 9524 and 9830 in response to the impacts of the COVID– 19 pandemic that is equally applicable to the changes the Exchange proposes.20 The Exchange accordingly incorporates FINRA’s abbreviated economic impact assessment by reference. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 21 and Rule 18 See text accompanying notes 9–10, supra. U.S.C. 78f(b)(7) and 78f(d). 20 FINRA Filing, 85 FR at 55716. 21 15 U.S.C. 78s(b)(3)(A)(iii). 19 15 E:\FR\FM\02OCN1.SGM 02OCN1 62356 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Notices 19b–4(f)(6) thereunder.22 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) 23 of the Act to determine whether the proposed rule change 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: jbell on DSKJLSW7X2PROD with NOTICES 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– NYSE–2020–76 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–NYSE–2020–76. 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 22 17 23 15 CFR 240.19b–4(f)(6). U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 19:38 Oct 01, 2020 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, on business days between the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE, Washington, DC 20549. 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–NYSE–2020–76 and should be submitted on or before October 23, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–21765 Filed 10–1–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34031; File No. 812–15142] Frost Family of Funds and Frost Investment Advisors, LLC September 29, 2020. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order pursuant to: (a) Section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements and transactions. Applicants request an order that would permit certain registered management investment companies to participate in a joint lending and borrowing facility. 24 17 Jkt 253001 PO 00000 CFR 200.30–3(a)(12). Frm 00083 Fmt 4703 Sfmt 4703 Frost Family of Funds (the ‘‘Trust’’) a Delaware statutory trust registered under the Act as an open-end management investment company on behalf of all existing series; 1and Frost Investment Advisors, LLC (‘‘Frost’’), a Delaware limited liability company that is registered as an investment adviser under the Investment Advisers Act of 1940. FILING DATES: The application was filed on July 8, 2020. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by emailing the Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants with a copy of the request by email. Hearing requests should be received by the Commission by 5:30 p.m. on October 26, 2020, and should be accompanied by proof of service on the applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at SecretarysOffice@sec.gov. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090; Applicants: Michael Beattie, SEI Investments, One Freedom Valley Drive, Oaks, PA 19456, MBeattie@seic.com. FOR FURTHER INFORMATION CONTACT: Stephan N. Packs, Senior Counsel, at (202) 551–6853, or David J. Marcinkus, Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s website by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Summary of the Application: 1. Applicants request an order that would permit Applicants to participate APPLICANTS: 1 Certain of the Funds (defined below) may be money market funds that comply with Rule 2a–7 under the Act (each a ‘‘Money Market Fund’’). None of the existing Funds is a Money Market Fund, but if Money Market Funds rely on this relief in the future, they typically will not participate as borrowers because such Funds rarely need to borrow cash to meet redemptions. E:\FR\FM\02OCN1.SGM 02OCN1

Agencies

[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Notices]
[Pages 62353-62356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21765]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90024; File No. SR-NYSE-2020-76]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Harmonize Rules 9261 and 9830 with Recent Changes by the Financial 
Industry Regulatory Authority, Inc.

September 28, 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 September 15, 2020, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to harmonize Rules 9261 and 9830 with recent 
changes by the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') that temporarily grants the Chief or Deputy Chief Hearing 
Officer the authority to order that hearings be conducted by video 
conference if warranted by public health risks posed by in-person 
hearings during the ongoing novel coronavirus (``COVID-19'') pandemic. 
As proposed, these temporary amendments would be in effect through 
December 31, 2020. 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.

[[Page 62354]]

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, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose

    The Exchange proposes to harmonize Rules 9261 (Evidence and 
Procedure in Hearing) and 9830 (Hearing) with recent changes by FINRA 
to its Rules 9261 and 9830 that temporarily grants to the Chief or 
Deputy Chief Hearing Officer the authority to order that hearings be 
conducted by video conference if warranted by public health risks posed 
by in-person hearings during the ongoing COVID-19 pandemic. As 
proposed, these temporary amendments would be in effect through 
December 31, 2020.\4\
---------------------------------------------------------------------------

    \4\ The Exchange may submit a separate rule filing to extend the 
expiration date of the proposed temporary amendments if the Exchange 
requires temporary relief from the rule requirements identified in 
this proposal beyond December 31, 2020. The amended NYSE rules will 
revert back to their current state at the conclusion of the 
temporary relief period and any extension thereof.
---------------------------------------------------------------------------

Background

    In 2013, the NYSE adopted disciplinary rules that are, with certain 
exceptions, substantially the same as the FINRA Rule 8000 Series and 
Rule 9000 Series, and which set forth rules for conducting 
investigations and enforcement actions.\5\ The NYSE disciplinary rules 
were implemented on July 1, 2013.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02) (``2013 
Notice''), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR-
NYSE-2013-02) (``2013 Approval Order''), and 69963 (July 10, 2013), 
78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \6\ See NYSE Information Memorandum 13-8 (May 24, 2013).
---------------------------------------------------------------------------

    In adopting disciplinary rules modeled on FINRA's rules, the NYSE 
adopted the hearing and evidentiary processes set forth in Rule 9261 
and in Rule 9830 for hearings in matters involving temporary and 
permanent cease and desist orders under the Rule 9800 Series. As 
adopted, the text of Rule 9261 is identical to the counterpart FINRA 
rule. Rule 9830 is substantially the same as FINRA's rule, except for 
conforming and technical amendments.\7\
---------------------------------------------------------------------------

    \7\ See 2013 Approval Order, 78 FR at 15394, n.7 & 15400; 2013 
Notice, 78 FR at 5228 & 5234.
---------------------------------------------------------------------------

    In view of the ongoing spread of COVID-19 and its effect on FINRA's 
adjudicatory functions nationwide, FINRA recently filed a temporary 
rule change to grant FINRA's Office of Hearing Officers (``OHO'') and 
the National Adjudicatory Council (``NAC'') the authority to conduct 
certain hearings by video conference, if warranted by the current 
COVID-19-related public health risks posed by in-person hearings. Among 
the rules FINRA amended were Rules 9261 and 9830.\8\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release Nos. 83289 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (SR-FINRA-2020-027) (``FINRA 
Filing''). FINRA also proposed to temporarily amend FINRA Rules 1015 
and 9524. FINRA Rule 1015 governs the process by which an applicant 
for new or continuing membership can appeal a decision rendered by 
FINRA's Department of Member Supervision under FINRA Rule 1014 or 
1017 and request a hearing which would be conducted by a 
subcommittee of the NAC. See id. The Exchange has not adopted FINRA 
Rule 1015. FINRA Rule 9524 governs the process by which a 
statutorily disqualified member firm or associated person can appeal 
the Department's recommendation to deny a firm or sponsoring firm's 
application to the NAC. See id. Under the Exchange's version of Rule 
9524, if the Exchange's Chief Regulatory Officer rejects the 
application, the member organization or applicant may request a 
review by the Exchange Board of Directors. This differs from FINRA's 
process, which provides for a hearing before the NAC and further 
consideration by the FINRA Board of Directors.
---------------------------------------------------------------------------

    FINRA represented in its filing that its protocol for conducting 
hearings by video conference would ensure that such hearings maintain 
fair process for the parties by, among other things, FINRA's use of a 
high quality, secure and user-friendly video conferencing service and 
provide thorough instructions, training and technical support to all 
hearing participants.\9\ According to FINRA, the proposed changes were 
a reasonable interim solution to allow FINRA's critical adjudicatory 
processes to continue to function while protecting the health and 
safety of hearing participants as FINRA works towards resuming in-
person hearings in a manner that is compliant with the current guidance 
of public health authorities.\10\
---------------------------------------------------------------------------

    \9\ See FINRA Filing, 85 FR at 55713.
    \10\ See id.
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    Pursuant to a regulatory services agreement (``RSA''), FINRA's OHO 
will administer all aspects of adjudications, including assigning 
hearing officers to serve as NYSE hearing officers. A hearing officer 
from OHO will, among other things, preside over the disciplinary 
hearing, select and chair the hearing panel, and prepare and issue 
written decisions. The Chief or Deputy Hearing Officer for all Exchange 
disciplinary hearings are currently drawn from OHO and are all FINRA 
employees. The Exchange believes that OHO will utilize the same video 
conference protocol and processes for Exchange matters under the RSA as 
it proposes for FINRA matters.
    Given that FINRA and its OHO administers disciplinary hearings on 
the Exchange's behalf, and given that the public health concerns 
addressed by FINRA's amendments apply equally to the Exchange's 
disciplinary hearings, the Exchange proposes to temporarily amend its 
disciplinary rules to allow FINRA to conduct virtual hearings on its 
behalf.
Proposed Rule Change
    Rule 9261(b) states that if a disciplinary hearing is held, a party 
shall be entitled to be heard in-person, by counsel, or by the party's 
representative. Absent an agreement by all parties to proceed in 
another manner, Exchange disciplinary hearings are in-person. As noted, 
the Chief and Deputy Hearing Officers for all Exchange and cross-market 
matters are supplied by OHO and are FINRA employees. Accordingly, 
absent an agreement by all parties to proceed in another manner, under 
Rule 9261(b) the Chief or Deputy Hearing Officer conducts disciplinary 
hearings in-person.
    Similarly, Rule 9830 outlines the requirements for hearings for 
temporary and permanent cease and desist orders. Rule 9830(a), however, 
does not specify that a party shall be entitled to be heard in-person, 
by counsel, or by the party's representative.
    Consistent with FINRA's temporary amendment to FINRA Rules 9261 and 
9830, the Exchange proposes to temporarily grant the Chief or Deputy 
Chief Hearing Officer temporary authority to order, upon consideration 
of the current COVID-19-related public health risks presented by an in-
person hearing, that a hearing under those rules be conducted by video 
conference. The proposed rule change will permit OHO to make an 
assessment, based on critical COVID-19 data and criteria and the 
guidance of health and security consultants, whether an in-person 
hearing would compromise the health and safety of the hearing 
participants such that the hearing should proceed by video conference. 
As noted, FINRA has adopted a detailed and thorough

[[Page 62355]]

protocol to ensure that hearings conducted by video conference will 
maintain fair process for the parties.\11\ The Exchange believes that 
this is a reasonable procedure to follow in hearings under Rules 9261 
and 9830 chaired by a FINRA employee.\12\
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    \11\ See FINRA Filing, 85 FR at 55713.
    \12\ The Exchange notes, as did FINRA, that SEC's Rules of 
Practice pertaining to temporary cease-and-desist orders provide 
that parties and witnesses may participate by telephone or, in the 
Commission's discretion, through the use of alternative technologies 
that allow remote access, such as a video link. See SEC Rule of 
Practice 511(d)(3); Comment (d); see FINRA Filing, 85 FR at 55714, 
n. 21.
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    To effectuate these changes, the Exchange proposes to add the 
following sentence to Rule 9261(b):

    Upon consideration of the current public health risks presented 
by an in-person hearing, the Chief Hearing Officer or Deputy Chief 
Hearing Officer may, on a temporary basis, determine that the 
hearing shall be conducted, in whole or in part, by video 
conference.

    The proposed text is identical to the language adopted by 
FINRA.\13\
---------------------------------------------------------------------------

    \13\ See FINRA Filing, 85 FR at 55712.
---------------------------------------------------------------------------

    Similarly, the Exchange proposes to add the following text to Rule 
9830(a):

    Upon consideration of the current public health risks presented 
by an in-person hearing, the Chief Hearing Officer or Deputy Chief 
Hearing Officer may, on a temporary basis, determine that the 
hearing shall be conducted, in whole or in part, by video 
conference.

    Once again, the proposed language is identical to the language 
adopted by FINRA.\14\
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    \14\ Id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\15\ in general, and furthers the objectives of Section 
6(b)(5),\16\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is designed to provide a fair procedure for 
the disciplining of members and persons associated with members, 
consistent with Sections 6(b)(7) and 6(d) of the Act.\17\
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78f(b)(7) and 78f(d).
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    The Exchange believes that the proposed rule change supports the 
objectives of the Act by providing greater harmonization between 
Exchange rules and FINRA rules of similar purpose, resulting in less 
burdensome and more efficient regulatory compliance. As previously 
noted, the text of Rule 9261 is identical to the counterpart FINRA rule 
and Rule 9830 is substantially the same as FINRA's rule, except for 
conforming and technical amendments. As such, the proposed rule change 
will foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and will remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
    The Exchange believes that the proposed temporary rule change will 
permit the Exchange to effectively conduct hearings during the COVID-19 
pandemic in situations where in-person hearings present likely public 
health risks. The ability to conduct hearings by video conference will 
thereby permit the adjudicatory functions of the Exchange's 
disciplinary rules to continue unabated, thereby avoiding protracted 
delays. The Exchange believes that this is especially important in 
matters where temporary and permanent cease and desist orders are 
sought because the proposed rule change would enable those hearings to 
proceed without delay, thereby enabling the Exchange to take immediate 
action to stop significant, ongoing customer harm, to the benefit of 
the investing public.
    Conducting hearings via video conference will give the parties and 
adjudicators simultaneous visual and oral communication without the 
risks inherent in physical proximity during a pandemic. Temporarily 
permitting hearings for disciplinary matters to proceed by video 
conference maintains fair process by providing respondents a timely 
opportunity to address and potentially resolve any allegations of 
misconduct.
    As noted, FINRA will use a high quality, secure video conferencing 
technology with features that will allow the parties to reasonably 
approximate those tasks that are typically performed at an in-person 
hearing, such as sharing documents, marking documents, and utilizing 
breakout rooms. FINRA will also provide training for participants on 
how to use the video conferencing platform and detailed guidance on the 
procedures that will govern such hearings. Moreover, the Chief or 
Deputy Chief Hearing Officer may take into consideration, among other 
things, a hearing participant's access to connectivity and technology 
in scheduling a video conference hearing and can also, at their 
discretion, allow a party or witness to participate by telephone, if 
necessary, to address such access issues.\18\
---------------------------------------------------------------------------

    \18\ See text accompanying notes 9-10, supra.
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    For the same reasons, the Exchange believes that the proposed rule 
change is designed to provide a fair procedure for the disciplining of 
members and persons associated with members, consistent with Sections 
6(b)(7) and 6(d) of the Act.\19\ The Exchange believes that the 
temporary proposed rule change strikes an appropriate balance between 
providing fair process and enabling the Exchange to fulfill its 
statutory obligations to protect investors and maintain fair and 
orderly markets while accounting for the significant health and safety 
risks of in-person hearings stemming from the outbreak of COVID-19.
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    \19\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but is rather intended 
solely to provide temporary relief given the impacts of the COVID-19 
pandemic. In its filing, FINRA provides an abbreviated economic impact 
assessment maintaining that the changes are necessary to temporarily 
rebalance the attendant benefits and costs of the obligations under 
FINRA Rules 1015, 9261, 9524 and 9830 in response to the impacts of the 
COVID-19 pandemic that is equally applicable to the changes the 
Exchange proposes.\20\ The Exchange accordingly incorporates FINRA's 
abbreviated economic impact assessment by reference.
---------------------------------------------------------------------------

    \20\ FINRA Filing, 85 FR at 55716.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \21\ and Rule

[[Page 62356]]

19b-4(f)(6) thereunder.\22\ Because the 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 prior to 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, if consistent 
with the protection of investors and the public interest, the proposed 
rule change has become effective pursuant to Section 19(b)(3)(A) of the 
Act and Rule 19b-4(f)(6)(iii) thereunder.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \22\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSE-2020-76 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-NYSE-2020-76. 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, on business days between the 
hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE, 
Washington, DC 20549. 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-NYSE-2020-76 and should be 
submitted on or before October 23, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21765 Filed 10-1-20; 8:45 am]
BILLING CODE 8011-01-P
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