Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Temporary Commentary .10 Under NYSE American Rule 2.1210, 64595-64598 [2020-22634]
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
is equal to the price of the National Best
Bid and Offer in the Eligible Security
and does not lock or cross a previously
displayed ‘‘automated quotation’’ (as
defined under Rule 600 of Regulation
NMS). The dollar value of size of a
quote shall be determined by
multiplying the price of a quote by its
size.
(j) Net Distributable Operating
Income. The ‘‘Net Distributable
Operating Income’’ for any particular
calendar year shall mean:
(i) All cash revenues, funds and
proceeds received by the Company
during such calendar year (other than
Capital Contributions by the Members
or amounts paid pursuant to Section
3.7(b) of this Agreement), including all
revenues from (A) the CT Feeds, which
includes the dissemination of
information with respect to Eligible
Securities to foreign marketplaces, and
(B) FINRA quotation data and last sale
information for securities classified as
OTC Equity Securities under FINRA’s
Rule 6400 Series (the ‘‘FINRA OTC
Data’’) ((A) and (B) collectively, the
‘‘Data Feeds’’), and (C) any Membership
Fees; less
(ii) 6.25% of the revenue received by
the Company during such calendar year
attributable to the segment of the Data
Feeds reflecting the dissemination of
information with respect to Network C
Securities and FINRA OTC Data (but, for
the avoidance of doubt, not including
revenue attributable to the segment of
the Data Feeds reflecting the
dissemination of information with
respect to Network A Securities and
Network B Securities), which amount
shall be paid to FINRA as compensation
for the FINRA OTC Data; 1 less
(iii) reasonable working capital
reserves and reasonable reserves for
contingencies for such calendar year, as
determined by the Operating
Committee, and all costs and expenses
of the Company during such calendar
year, including:
(A) All amounts payable during such
calendar year to the Administrator
pursuant to the Administrative Services
Agreement or this Agreement;
(B) all amounts payable during such
calendar year to the Processors pursuant
to the Processor Services Agreements or
this Agreement; and
(C) all amounts payable during such
calendar year to third-party service
providers engaged by or on behalf of the
Company.
1All costs associated with collecting,
consolidating, validating, generating, and
disseminating the FINRA OTC Data are borne
directly by FINRA and not the Company and the
Members.
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(k) Initial Eligibility. At the time a
Member implements a Processorapproved electronic interface with the
Processors, the Member will become
eligible to receive revenue.
(l) Quarterly Distributions. The
Company shall cause the Administrator
to provide Members with written
estimates of each Member’s quarterly
Net Distributable Operating Income
within 45 calendar days of the end of
the quarter, and estimated quarterly
payments or billings shall be made on
the basis of such estimates. All quarterly
payments or billings shall be made to
each eligible Member within 45 days
following the end of each calendar
quarter in which the Member is eligible
to receive revenue; provided, that each
quarterly payment or billing shall be
reconciled against a Member’s
cumulative year-to-date payment or
billing received to date and adjusted
accordingly; further, provided, that the
total of such estimated payments or
billings shall be reconciled at the end of
each calendar year and, if necessary,
adjusted by March 31st of the following
year. Interest shall be included in
quarterly payments and in adjusted
payments made on March 31st of the
following year. Such interest shall
accrue monthly during the period in
which revenue was earned and not yet
paid and will be based on the 90-day
Treasury bill rate in effect at the end of
the quarter in which the payment is
made. Monthly interest shall start
accruing 45 days following the month in
which it is earned and accrue until the
date on which the payment is made.
(m) Itemized Statements. In
conjunction with calculating estimated
quarterly and reconciled annual
payments under this Exhibit D, the
Company shall cause the Administrator
to submit to the Members a quarterly
itemized statement setting forth the
basis upon which Net Distributable
Operating Income was calculated. Such
Net Distributable Operating Income
shall be adjusted annually based solely
on the quarterly itemized statement
audited pursuant to the annual audit.
The Company shall cause the
Administrator to pay or bill Members
for the audit adjustments within thirty
days of completion of the annual audit.
Upon the affirmative vote of Voting
Representatives pursuant to Section 4.3,
the Company shall cause the
Administrator to engage an independent
auditor to audit the Administrator’s
costs or other calculation(s).
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64595
Exhibit E
Fees
[To be determined by the Operating
Committee under this Agreement]
[FR Doc. 2020–22467 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90115; File No. SR–
NYSEAMER–2020–71]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adopt Temporary
Commentary .10 Under NYSE
American Rule 2.1210
October 7, 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 25, 2020, NYSE American
LLC (‘‘NYSE American’’ 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 a rule change
to adopt temporary Commentary .10
(Temporary Extension of the Limited
Period for Registered Persons to
Function as Principals) under NYSE
American Rule 2.1210 (Registration
Requirements) applicable to member
organizations, Equity Trading Permit
(‘‘ETP’’) Holders and American Trading
Permit (‘‘ATP’’) Holders. 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
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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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
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The Exchange proposes to adopt
temporary Commentary .10 (Temporary
Extension of the Limited Period for
Registered Persons to Function as
Principals) under NYSE American Rule
2.1210 (Registration Requirements)
applicable to member organizations,
ETP Holders and ATP Holders
(collectively, ‘‘Members’’).4 The
proposed rule change would extend the
120-day period that certain individuals
can function as a principal without
having successfully passed an
appropriate qualification examination
through December 31, 2020,5 and would
4 The term ‘‘member organization’’ is defined in
Rule 24 (Office Rules) as ‘‘a partnership,
corporation or such other entity as the Exchange
may, by Rule, permit to become a member
organization, and which meets the qualifications
specified in the Rules.’’ The term ‘‘member
organization’’ is defined in Rule 2(b)(i) (Equities
Rules) as a registered broker or dealer (unless
exempt pursuant to the Securities Exchange Act of
1934) (the ‘‘Act’’) that is a member of the Financial
Industry Regulatory Authority, Inc. (‘‘FINRA’’) or
another registered securities exchange. Member
organizations that transact business with public
customers or conduct business on the Floor of the
Exchange shall at all times be members of FINRA.
A registered broker or dealer must also be approved
by the Exchange and authorized to designate an
associated natural person to effect transactions on
the floor of the Exchange or any facility thereof.
This term shall include a natural person so
registered, approved and licensed who directly
effects transactions on the floor of the Exchange or
any facility thereof.’’ The term ‘‘member
organization’’ also includes any registered broker or
dealer that is a member of FINRA or a registered
securities exchange, consistent with the
requirements of section 2(b)(i) of this Rule, which
does not own a trading license and agrees to be
regulated by the Exchange as a member
organization and which the Exchange has agreed to
regulate.’’ See Rule 2(a)(ii) (Equities Rules). The
term ‘‘ETP Holder’’ means a member organization
that has been issued an ETP. An ETP Holder will
agree to be bound by the Rules of the Exchange, and
by all applicable rules and regulations of the
Securities and Exchange Commission. See Rule
1.1E(n). References to ‘‘member organization’’ as
used in Exchange rules include ATP Holders,
which are registered brokers or dealers approved to
effect transactions on the Exchange’s options
marketplace. Under the Exchange’s rules, an ATP
Holder has the status as a ‘‘member’’ of the
Exchange as that term is defined in Section 3 of the
Act. See Rule 900.2NY(4) & (5).
5 If NYSE American seeks to provide additional
temporary relief from the rule requirements
identified in this proposed rule change beyond
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apply only to those individuals who
were designated to function as a
principal prior to September 3, 2020.
This proposed rule change is based on
a filing recently submitted by the
Financial Regulatory Authority, Inc.
(‘‘FINRA’’) 6 and is intended to
harmonize the Exchange’s registration
rules with those of FINRA so as to
promote uniform standards across the
securities industry.
In response to COVID–19, earlier this
year FINRA began providing temporary
relief by way of frequently asked
questions (‘‘FAQs’’) 7 to address
disruptions to the administration of
FINRA qualification examinations
caused by the pandemic that have
significantly limited the ability of
individuals to sit for examinations due
to Prometric test center capacity issues.8
FINRA published the first FAQ on
March 20, 2020, providing that
individuals who were designated to
function as principals under FINRA
Rule 1210.04 9 prior to February 2, 2020,
would be given until May 31, 2020, to
pass the appropriate principal
qualification examination.10 On May 19,
2020, FINRA extended the relief to pass
the appropriate examination until June
30, 2020. Most recently, on June 29,
2020, FINRA again extended the
temporary relief providing that
individuals who were designated to
function as principals under FINRA
Rule 1210.04 prior to May 4, 2020,
would be given until August 31, 2020,
December 31, 2020, NYSE American will submit a
separate rule filing to further extend the temporary
extension of time.
6 See Securities Exchange Act Release No. 89732
(September 1, 2020), 85 FR 55535 (September 8,
2020) (SR–FINRA–2020–026) (the ‘‘FINRA Filing’’).
The Exchange notes that the FINRA Filing also
provides temporary relief to individuals registered
with FINRA as Operations Professionals under
FINRA Rule 1220. The Exchange does not have a
registration category for Operations Professionals
and therefore, the Exchange is not proposing to
adopt that aspect of the FINRA Filing.
7 See https://www.finra.org/rules-guidance/keytopics/covid-19/faq#qe.
8 At the outset of the COVID–19 pandemic, all
FINRA qualification examinations were
administered at test centers operated by Prometric.
Based on the health and welfare concerns resulting
from COVID–19, in March Prometric closed all of
its test centers in the United States and Canada and
began to slowly reopen some of them at limited
capacity in May. At this time, not all of these
Prometric test centers have reopened at full
capacity.
9 NYSE American Rule 2.1210.03 is the
corresponding rule to FINRA Rule 1210.04.
10 FINRA Rule 1210.04 (Requirements for
Registered Persons Functioning as Principals for a
Limited Period) allows a member firm to designate
certain individuals to function in a principal
capacity for 120 calendar days before having to pass
an appropriate principal qualification examination.
NYSE American Rule 2.1210.03 provides the same
allowance to Members.
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to pass the appropriate principal
qualification examination.
One of the impacts of COVID–19
continues to be serious interruptions in
the administration of FINRA
qualification examinations at Prometric
test centers and the limited ability of
individuals to sit for the examinations.11
Although Prometric has begun
reopening test centers, Prometric’s
safety practices mean that currently not
all test centers are open, some of the
open test centers are at limited capacity,
and some open test centers are
delivering only certain examinations
that have been deemed essential by the
local government.12 Furthermore,
Prometric has had to close some
reopened test centers due to incidents of
COVID–19 cases. The initial nationwide
closure in March along with the
inability to fully reopen all Prometric
test centers due to COVID–19 have led
to a significant backlog of individuals
who are waiting to sit for FINRA
examinations.13
In addition, firms are continuing to
experience 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
adherence to other social distancing
guidelines consistent with the
recommendations of public health
officials.14 As a result, firms continue to
face potentially significant disruptions
to their normal business operations that
may include a limitation of in-person
activities and staff absenteeism as a
result of the health and welfare
concerns stemming from COVID–19.
Such potential disruptions may be
further exacerbated and may even affect
client services if firms cannot continue
to keep principal positions filled as they
may have difficulty finding other
qualified individuals to transition into
these roles or may need to reallocate
employee time and resources away from
other critical responsibilities at the firm.
These ongoing, extenuating
circumstances make it impracticable for
Members to ensure that the individuals
11 Information about the continued impact of
COVID–19 on FINRA-administered examinations is
available at https://www.finra.org/rules-guidance/
keytopics/covid-19/exams.
12 Information from Prometric about its safety
practices and the impact of COVID–19 on its
operations is available at https://
www.prometric.com/corona-virus-update. See also
supra note 11.
13 Although an online test delivery service has
been launched to help address the backlog, the
General Securities Principal Examination (Series
24) is not available online. See supra note 11.
14 See, e.g., Centers for Disease Control and
Prevention, How to Protect Yourself & Others,
https://www.cdc.gov/coronavirus/2019-ncov/
prevent-gettingsick/prevention.html.
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whom they have designated to function
in a principal capacity, as set forth in
NYSE American Rule 2.1210.03, are
able to successfully sit for and pass an
appropriate qualification examination
within the 120-calendar day period
required under the rule, or to find other
qualified staff to fill this position. The
ongoing circumstances also require
individuals to be exposed to the health
risks associated with taking an inperson examination, because the
General Securities Principal
examination is not available online.
Therefore, NYSE American is proposing
to continue the temporary relief
provided through the FINRA FAQs by
adopting Rule 2.1210.10 to extend the
120-day period during which an
individual can function as a principal
before having to pass an applicable
qualification examination until
December 31, 2020.15 The proposed rule
change would apply only to those
individuals who were designated to
function as a principal prior to
September 3, 2020. Any individuals
designated to function as a principal on
or after September 3, 2020, would need
to successfully pass an appropriate
qualification examination within 120
days.
NYSE American believes that this
proposed continued extension of time is
tailored to address the needs and
constraints on a Member’s operations
during the COVID–19 pandemic,
without significantly compromising
critical investor protection. The
proposed extension of time will help to
minimize the impact of COVID–19 on
Members by providing continued
flexibility so that Members can ensure
that principal positions remain filled.
The potential risks from the proposed
extension of the 120-day period are
mitigated by the Member’s continued
requirement to supervise the activities
of these designated individuals and
ensure compliance with federal
securities laws and regulations, as well
as NYSE American rules.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,16 in general, and furthers the
objectives of Section 6(b)(5),17 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
15 See
supra note 5.
U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
16 15
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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.
The proposed rule change is intended
to minimize the impact of COVID–19 on
Member operations by extending the
120-day period certain individuals may
function as a principal without having
successfully passed an appropriate
qualification examination under NYSE
American Rule 2.1210.03 until
December 31, 2020. The proposed rule
change does not relieve Members 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 NYSE American rules
that directly serve investor protection.
In a time when faced with unique
challenges resulting from the COVID–19
pandemic, NYSE American believes that
the proposed rule change is a sensible
accommodation that will continue to
afford Members the ability to ensure
that critical positions are filled and
client services maintained, 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
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 intended to
provide temporary relief given the
impacts of the COVID–19 pandemic
crisis and to also maintain consistency
with the rules of other self-regulatory
organizations (‘‘SROs’’) with respect to
the registration requirements applicable
to Members and their registered
personnel. In that regard, the Exchange
believes that any burden on competition
would be clearly outweighed by
providing Members with temporary
relief in this unique environment while
also ensuring clear and consistent
requirements applicable across SROs
and mitigating any risk of SROs
implementing different standards in
these important areas. 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 Rule 1210 in
response to the impacts of the COVID–
19 pandemic that is equally applicable
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64597
to the changes the Exchange proposes.18
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
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
19(b)(3)(A) of the Act 19 and Rule 19b4(f)(6) 20 thereunder.
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.
NYSE American has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative
immediately upon filing. As noted
above, NYSE American stated that the
temporary proposed rule change is
based on a recent rule change by FINRA
and is intended to harmonize NYSE
American registration rules with those
of FINRA to promote uniform standards
across the securities industry.21 NYSE
American states that it will also help
minimize the impact of the COVID–19
outbreak on NYSE American Members’
operations by allowing them to keep
principal positions filled and
minimizing disruptions to client
services and other critical
responsibilities. The ongoing
extenuating circumstances of the
COVID–19 pandemic make it
impractical to ensure that individuals
designated to act in principal capacities
18 FINRA
Filing, 85 FR at 55537.
U.S.C. 78s(b)(3)(A).
20 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. NYSE American
has satisfied this requirement.
21 See supra note 6.
19 15
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are able to take and pass the appropriate
qualification examination during the
120-calendar day period required under
the rules. Shelter-in-place orders,
quarantining, restrictions on business
and social activity and adherence to
other social distancing guidelines
consistent with the recommendation of
public officials remain in place in
various states.22 Further, NYSE
American states that Prometric test
centers have experienced serious
interruptions in the administration of
FINRA qualification examinations,
resulting in a backlog of individuals
waiting to take these examinations.
Following a nationwide closure of all
test centers earlier in the year, some test
centers have re-opened, but are
operating at limited capacity or are only
delivering certain examinations that
have been deemed essential by the local
government.23 FINRA has launched an
online test delivery service to help
address this backlog. However, the
General Securities Principal (Series 24)
Examination is not available online.
NYSE American states that the
temporary proposed rule change will
provide needed flexibility to ensure that
these positions remain filled and is
tailored to address the constraints on
Members’ operations during the
COVID–19 pandemic without
significantly compromising critical
investor protection.24
The Commission also notes that the
proposal provides only temporary relief
from the requirement to pass certain
qualification examinations within the
120-day period in the rules. As
proposed, this relief would extend the
120-day period that certain individuals
can function as principals through
December 31, 2020. NYSE American has
also stated that if it requires temporary
relief from the rule requirements
identified in this proposal beyond
December 31, 2020, it may submit a
separate rule filing to extend the
effectiveness of the temporary relief
under these rules.25 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.26 Accordingly, the
22 See
supra note 14.
supra notes 11 and 12. NYSE American
states that Prometric has also had to close some
reopened test centers due to incidents of COVID–
19 cases.
24 NYSE American states that Members remain
subject to the continued requirement to supervise
the activities of these designated individuals and
ensure compliance with federal securities laws and
regulations, as well as NYSE American rules.
25 See supra note 5.
26 As noted above by the Exchange, this proposed
temporary change is based on a recent filing by
FINRA that the Commission approved with a
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23 See
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Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.27
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 rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2020–71 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–NYSEAMER–2020–71. 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
waiver of the 30-day operative delay. See supra
note 6, 85 FR at 55538.
27 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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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 NYSE American. 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–NYSEAMER–2020–71 and
should be submitted on or before
November 3, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22634 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90104; File No. SR–
NYSEArca–2020–84]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1, Amending NYSE
Arca Rule 8.900–E To Adopt Generic
Listing Standards for Managed
Portfolio Shares
October 7, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 22, 2020, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. On October 2, 2020, the
Exchange filed Amendment No. 1 to the
proposed rule change. The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.
28 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\13OCN1.SGM
13OCN1
Agencies
[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64595-64598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22634]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90115; File No. SR-NYSEAMER-2020-71]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Temporary Commentary .10 Under NYSE American Rule 2.1210
October 7, 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 25, 2020, NYSE American LLC (``NYSE American''
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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes a rule change to adopt temporary Commentary
.10 (Temporary Extension of the Limited Period for Registered Persons
to Function as Principals) under NYSE American Rule 2.1210
(Registration Requirements) applicable to member organizations, Equity
Trading Permit (``ETP'') Holders and American Trading Permit (``ATP'')
Holders. 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
[[Page 64596]]
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 adopt temporary Commentary .10 (Temporary
Extension of the Limited Period for Registered Persons to Function as
Principals) under NYSE American Rule 2.1210 (Registration Requirements)
applicable to member organizations, ETP Holders and ATP Holders
(collectively, ``Members'').\4\ The proposed rule change would extend
the 120-day period that certain individuals can function as a principal
without having successfully passed an appropriate qualification
examination through December 31, 2020,\5\ and would apply only to those
individuals who were designated to function as a principal prior to
September 3, 2020. This proposed rule change is based on a filing
recently submitted by the Financial Regulatory Authority, Inc.
(``FINRA'') \6\ and is intended to harmonize the Exchange's
registration rules with those of FINRA so as to promote uniform
standards across the securities industry.
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\4\ The term ``member organization'' is defined in Rule 24
(Office Rules) as ``a partnership, corporation or such other entity
as the Exchange may, by Rule, permit to become a member
organization, and which meets the qualifications specified in the
Rules.'' The term ``member organization'' is defined in Rule 2(b)(i)
(Equities Rules) as a registered broker or dealer (unless exempt
pursuant to the Securities Exchange Act of 1934) (the ``Act'') that
is a member of the Financial Industry Regulatory Authority, Inc.
(``FINRA'') or another registered securities exchange. Member
organizations that transact business with public customers or
conduct business on the Floor of the Exchange shall at all times be
members of FINRA. A registered broker or dealer must also be
approved by the Exchange and authorized to designate an associated
natural person to effect transactions on the floor of the Exchange
or any facility thereof. This term shall include a natural person so
registered, approved and licensed who directly effects transactions
on the floor of the Exchange or any facility thereof.'' The term
``member organization'' also includes any registered broker or
dealer that is a member of FINRA or a registered securities
exchange, consistent with the requirements of section 2(b)(i) of
this Rule, which does not own a trading license and agrees to be
regulated by the Exchange as a member organization and which the
Exchange has agreed to regulate.'' See Rule 2(a)(ii) (Equities
Rules). The term ``ETP Holder'' means a member organization that has
been issued an ETP. An ETP Holder will agree to be bound by the
Rules of the Exchange, and by all applicable rules and regulations
of the Securities and Exchange Commission. See Rule 1.1E(n).
References to ``member organization'' as used in Exchange rules
include ATP Holders, which are registered brokers or dealers
approved to effect transactions on the Exchange's options
marketplace. Under the Exchange's rules, an ATP Holder has the
status as a ``member'' of the Exchange as that term is defined in
Section 3 of the Act. See Rule 900.2NY(4) & (5).
\5\ If NYSE American seeks to provide additional temporary
relief from the rule requirements identified in this proposed rule
change beyond December 31, 2020, NYSE American will submit a
separate rule filing to further extend the temporary extension of
time.
\6\ See Securities Exchange Act Release No. 89732 (September 1,
2020), 85 FR 55535 (September 8, 2020) (SR-FINRA-2020-026) (the
``FINRA Filing''). The Exchange notes that the FINRA Filing also
provides temporary relief to individuals registered with FINRA as
Operations Professionals under FINRA Rule 1220. The Exchange does
not have a registration category for Operations Professionals and
therefore, the Exchange is not proposing to adopt that aspect of the
FINRA Filing.
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In response to COVID-19, earlier this year FINRA began providing
temporary relief by way of frequently asked questions (``FAQs'') \7\ to
address disruptions to the administration of FINRA qualification
examinations caused by the pandemic that have significantly limited the
ability of individuals to sit for examinations due to Prometric test
center capacity issues.\8\
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\7\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
\8\ At the outset of the COVID-19 pandemic, all FINRA
qualification examinations were administered at test centers
operated by Prometric. Based on the health and welfare concerns
resulting from COVID-19, in March Prometric closed all of its test
centers in the United States and Canada and began to slowly reopen
some of them at limited capacity in May. At this time, not all of
these Prometric test centers have reopened at full capacity.
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FINRA published the first FAQ on March 20, 2020, providing that
individuals who were designated to function as principals under FINRA
Rule 1210.04 \9\ prior to February 2, 2020, would be given until May
31, 2020, to pass the appropriate principal qualification
examination.\10\ On May 19, 2020, FINRA extended the relief to pass the
appropriate examination until June 30, 2020. Most recently, on June 29,
2020, FINRA again extended the temporary relief providing that
individuals who were designated to function as principals under FINRA
Rule 1210.04 prior to May 4, 2020, would be given until August 31,
2020, to pass the appropriate principal qualification examination.
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\9\ NYSE American Rule 2.1210.03 is the corresponding rule to
FINRA Rule 1210.04.
\10\ FINRA Rule 1210.04 (Requirements for Registered Persons
Functioning as Principals for a Limited Period) allows a member firm
to designate certain individuals to function in a principal capacity
for 120 calendar days before having to pass an appropriate principal
qualification examination. NYSE American Rule 2.1210.03 provides the
same allowance to Members.
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One of the impacts of COVID-19 continues to be serious
interruptions in the administration of FINRA qualification examinations
at Prometric test centers and the limited ability of individuals to sit
for the examinations.\11\ Although Prometric has begun reopening test
centers, Prometric's safety practices mean that currently not all test
centers are open, some of the open test centers are at limited
capacity, and some open test centers are delivering only certain
examinations that have been deemed essential by the local
government.\12\ Furthermore, Prometric has had to close some reopened
test centers due to incidents of COVID-19 cases. The initial nationwide
closure in March along with the inability to fully reopen all Prometric
test centers due to COVID-19 have led to a significant backlog of
individuals who are waiting to sit for FINRA examinations.\13\
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\11\ Information about the continued impact of COVID-19 on
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/keytopics/covid-19/exams.
\12\ Information from Prometric about its safety practices and
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus-update. See also supra note 11.
\13\ Although an online test delivery service has been launched
to help address the backlog, the General Securities Principal
Examination (Series 24) is not available online. See supra note 11.
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In addition, firms are continuing to experience 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 adherence to other social distancing
guidelines consistent with the recommendations of public health
officials.\14\ As a result, firms continue to face potentially
significant disruptions to their normal business operations that may
include a limitation of in-person activities and staff absenteeism as a
result of the health and welfare concerns stemming from COVID-19. Such
potential disruptions may be further exacerbated and may even affect
client services if firms cannot continue to keep principal positions
filled as they may have difficulty finding other qualified individuals
to transition into these roles or may need to reallocate employee time
and resources away from other critical responsibilities at the firm.
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\14\ See, e.g., Centers for Disease Control and Prevention, How
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-gettingsick/prevention.html.
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These ongoing, extenuating circumstances make it impracticable for
Members to ensure that the individuals
[[Page 64597]]
whom they have designated to function in a principal capacity, as set
forth in NYSE American Rule 2.1210.03, are able to successfully sit for
and pass an appropriate qualification examination within the 120-
calendar day period required under the rule, or to find other qualified
staff to fill this position. The ongoing circumstances also require
individuals to be exposed to the health risks associated with taking an
in-person examination, because the General Securities Principal
examination is not available online. Therefore, NYSE American is
proposing to continue the temporary relief provided through the FINRA
FAQs by adopting Rule 2.1210.10 to extend the 120-day period during
which an individual can function as a principal before having to pass
an applicable qualification examination until December 31, 2020.\15\
The proposed rule change would apply only to those individuals who were
designated to function as a principal prior to September 3, 2020. Any
individuals designated to function as a principal on or after September
3, 2020, would need to successfully pass an appropriate qualification
examination within 120 days.
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\15\ See supra note 5.
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NYSE American believes that this proposed continued extension of
time is tailored to address the needs and constraints on a Member's
operations during the COVID-19 pandemic, without significantly
compromising critical investor protection. The proposed extension of
time will help to minimize the impact of COVID-19 on Members by
providing continued flexibility so that Members can ensure that
principal positions remain filled. The potential risks from the
proposed extension of the 120-day period are mitigated by the Member's
continued requirement to supervise the activities of these designated
individuals and ensure compliance with federal securities laws and
regulations, as well as NYSE American rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\16\ in general, and furthers the objectives of Section
6(b)(5),\17\ 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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is intended to minimize the impact of
COVID-19 on Member operations by extending the 120-day period certain
individuals may function as a principal without having successfully
passed an appropriate qualification examination under NYSE American
Rule 2.1210.03 until December 31, 2020. The proposed rule change does
not relieve Members 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 NYSE American rules that
directly serve investor protection. In a time when faced with unique
challenges resulting from the COVID-19 pandemic, NYSE American believes
that the proposed rule change is a sensible accommodation that will
continue to afford Members the ability to ensure that critical
positions are filled and client services maintained, 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
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
intended to provide temporary relief given the impacts of the COVID-19
pandemic crisis and to also maintain consistency with the rules of
other self-regulatory organizations (``SROs'') with respect to the
registration requirements applicable to Members and their registered
personnel. In that regard, the Exchange believes that any burden on
competition would be clearly outweighed by providing Members with
temporary relief in this unique environment while also ensuring clear
and consistent requirements applicable across SROs and mitigating any
risk of SROs implementing different standards in these important areas.
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 Rule 1210
in response to the impacts of the COVID-19 pandemic that is equally
applicable to the changes the Exchange proposes.\18\ The Exchange
accordingly incorporates FINRA's abbreviated economic impact assessment
by reference.
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\18\ FINRA Filing, 85 FR at 55537.
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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 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) \20\ thereunder.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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.
NYSE American 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. NYSE American has asked the
Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. As noted
above, NYSE American stated that the temporary proposed rule change is
based on a recent rule change by FINRA and is intended to harmonize
NYSE American registration rules with those of FINRA to promote uniform
standards across the securities industry.\21\ NYSE American states that
it will also help minimize the impact of the COVID-19 outbreak on NYSE
American Members' operations by allowing them to keep principal
positions filled and minimizing disruptions to client services and
other critical responsibilities. The ongoing extenuating circumstances
of the COVID-19 pandemic make it impractical to ensure that individuals
designated to act in principal capacities
[[Page 64598]]
are able to take and pass the appropriate qualification examination
during the 120-calendar day period required under the rules. Shelter-
in-place orders, quarantining, restrictions on business and social
activity and adherence to other social distancing guidelines consistent
with the recommendation of public officials remain in place in various
states.\22\ Further, NYSE American states that Prometric test centers
have experienced serious interruptions in the administration of FINRA
qualification examinations, resulting in a backlog of individuals
waiting to take these examinations. Following a nationwide closure of
all test centers earlier in the year, some test centers have re-opened,
but are operating at limited capacity or are only delivering certain
examinations that have been deemed essential by the local
government.\23\ FINRA has launched an online test delivery service to
help address this backlog. However, the General Securities Principal
(Series 24) Examination is not available online. NYSE American states
that the temporary proposed rule change will provide needed flexibility
to ensure that these positions remain filled and is tailored to address
the constraints on Members' operations during the COVID-19 pandemic
without significantly compromising critical investor protection.\24\
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\21\ See supra note 6.
\22\ See supra note 14.
\23\ See supra notes 11 and 12. NYSE American states that
Prometric has also had to close some reopened test centers due to
incidents of COVID-19 cases.
\24\ NYSE American states that Members remain subject to the
continued requirement to supervise the activities of these
designated individuals and ensure compliance with federal securities
laws and regulations, as well as NYSE American rules.
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The Commission also notes that the proposal provides only temporary
relief from the requirement to pass certain qualification examinations
within the 120-day period in the rules. As proposed, this relief would
extend the 120-day period that certain individuals can function as
principals through December 31, 2020. NYSE American has also stated
that if it requires temporary relief from the rule requirements
identified in this proposal beyond December 31, 2020, it may submit a
separate rule filing to extend the effectiveness of the temporary
relief under these rules.\25\ 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.\26\ Accordingly,
the Commission hereby waives the 30-day operative delay and designates
the proposal operative upon filing.\27\
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\25\ See supra note 5.
\26\ As noted above by the Exchange, this proposed temporary
change is based on a recent filing by FINRA that the Commission
approved with a waiver of the 30-day operative delay. See supra note
6, 85 FR at 55538.
\27\ 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-NYSEAMER-2020-71 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-NYSEAMER-2020-71. 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 NYSE American. 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-NYSEAMER-2020-71 and should
be submitted on or before November 3, 2020.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22634 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P