Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Form CMA (Continuing Membership Application Form), 49394-49399 [2021-18945]
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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
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proposed rule changes were published
for comment in the Federal Register on
March 4, 2021.3 On April 7, 2021,
pursuant to Section 19(b)(2) of the Act,4
the Commission designated a longer
period within which to either approve
the proposed rule changes, disapprove
the proposed rule changes, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule changes.5 On May 26, 2021, the
Commission instituted proceedings to
determine whether to approve or
disapprove the proposed rule changes.6
The Commission has received comment
letters on the proposed rule changes.7
Section 19(b)(2) of the Act 8 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
changes were published for notice and
comment in the Federal Register on
March 4, 2021.9 August 31, 2021 is 180
days from that date, and October 30,
2021 is 240 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule changes
so that it has sufficient time to consider
the proposed rule changes, the issues
raised in the comment letter that has
been submitted in connection therewith,
and the Exchanges’ response to the
comment letter. Accordingly, the
Commission, pursuant to Section
3 See Securities Exchange Act Release Nos. 91217
(February 26, 2021), 86 FR 12715 (March 4, 2021)
(SR–NYSE–2021–14); 91218 (February 26, 2021), 86
FR 12744 (March 4, 2021) (SR–NYSEAMER–2021–
10); 91216 (February 26, 2021), 86 FR 12735 (March
4, 2021) (SR–NYSEArca–2021–13); 91219 (February
26, 2021), 86 FR 12724 (March 4, 2021) (SR–
NYSECHX–2021–03); and 91215 (February 26,
2021), 86 FR 12752 (March 4, 2021) (SR–
NYSENAT–2021–04) (collectively, the ‘‘Notices’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 91490
(April 7, 2021), 86 FR 19313 (April 13, 2021). The
Commission designated June 2, 2021, as the date by
which it should approve, disapprove, or institute
proceedings to determine whether to approve or
disapprove the proposed rule changes.
6 See Securities Exchange Act Release No. 92033
(May 26, 2021), 86 FR 29601 (June 2, 2021).
7 Comments received on the Notices are available
on the Commission’s website at: https://
www.sec.gov/comments/sr-nyse-2021-14/
srnyse202114.htm.
8 15 U.S.C. 78s(b)(2).
9 See Notices, supra note 3.
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19(b)(2) of the Act,10 designates October
30, 2021 as the date by which the
Commission should either approve or
disapprove the proposed rule changes
(File Nos. SR–NYSE–2021–14, SR–
NYSEAMER–2021–10, SR–NYSEArca–
2021–13, SR–NYSECHX–2021–03, SR–
NYSENAT–2021–04).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–18946 Filed 9–1–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92793; File No. SR-FINRA–
2021–020]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Form CMA
(Continuing Membership Application
Form)
August 27, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
20, 2021, the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by FINRA. FINRA
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change under paragraph (f)(6) of
Rule 19b–4 under the Act,3 which
renders the proposal effective upon
receipt of this filing by the Commission.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to (1) amend
Form CMA (Continuing Membership
Application Form) required under Rule
1017 (Application for Approval of
Change in Ownership, Control, or
Business Operations) to conform to
amendments to the Membership
10 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
11 17
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Application Program (‘‘MAP’’) rules 4 as
described in File No. SR–FINRA–2020–
011, which become effective on
September 1, 2021; 5 and (2) make nonsubstantive and technical changes to
Form CMA.6 The proposed rule change
does not make any changes to the text
of FINRA rules.
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA 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,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
The MAP rules require an applicant
for continuing membership to file an
application that includes a Form CMA.7
Form CMA is organized into sections
that align with the standards for
admission set forth in Rule 1014(a)
(Standards for Admission). Each section
begins with a description of the
applicable standard in Rule 1014(a),
followed by a series of questions related
to that standard that are intended to
help the applicant provide the
responses needed to demonstrate that it
4 The MAP rules consist of Rules 1011 through
1019, which reside under the Rule 1000 Series
(Member Application and Associated Person
Registration).
5 See Securities Exchange Act Release No. 90635
(December 10, 2020), 85 FR 81540 (December 16,
2020) (Order Approving File No. SR–FINRA–2020–
011, as Modified by Amendment No. 1) (‘‘SEC
Order’’). See also Regulatory Notice 21–09 (March
2021) (announcing September 1, 2021, as the
effective date of the amendments to the MAP rules,
and different effective dates of the amendments to
other FINRA rules to address brokers with a
significant history of misconduct).
6 FINRA is separately developing comprehensive
changes to the MAP rules in connection with the
retrospective review of this rule set, which will also
require conforming amendments to the
standardized forms. See Regulatory Notice 18–23
(July 2018) (requesting comment on a proposal
regarding the MAP rules).
7 See Rule 1017(b)(2).
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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
can meet each of the standards
described under Rule 1014(a), and to
facilitate FINRA’s review of the
application.8 An applicant is able to
provide its documents and information
by attaching files in various formats
(e.g., .docx, .pdf, .xlsx) or by entering
free form text in text boxes, and making
selections through screen components
such as drop-down menus and radio
buttons, among others.
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Recent Amendments to the MAP Rules
On December 10, 2020, FINRA
amended the MAP rules, among other
FINRA rules, to address the issue of
persons with a significant history of
misconduct and the member firms that
employ them.9 As amended, Rule 1017
includes new paragraph (a)(7), which
requires a member to file a continuing
member application (‘‘CMA’’) whenever
a natural person seeking to become an
owner,10 control person,11 principal or
registered person of a member has, in
the prior five years, one or more ‘‘final
criminal matters’’ (as defined in new
Rule 1011(h) 12) or two or more
‘‘specified risk events’’ (as defined in
new Rule 1011(p) 13), and the member is
not otherwise required to file a Form
CMA in accordance with Rule 1017,
unless the member has submitted a
written request to FINRA seeking a
materiality consultation for such
contemplated activity. As part of the
materiality consultation, Rule 1017(a)(7)
also provides that FINRA will determine
in the public interest and the protection
of investors that either the member is
not required to file a Form CMA and
may effect the contemplated activity, or
the member is required to file a Form
CMA in accordance with Rule 1017 and
the member may not effect the
contemplated activity unless FINRA
approves the Form CMA. In addition,
Rule 1017(a)(7) provides that
8 The sections of Form CMA that are marked with
a red asterisk require the applicant to provide a
response.
9 See supra note 5.
10 For purposes of Rule 1017(a)(7) only, the term
‘‘owner’’ has the same meaning as ‘‘direct owner’’
and ‘‘indirect owner’’ on the Uniform Application
for Broker-Dealer Registration (‘‘Form BD’’)
Schedules A and B, as amended from time to time.
See Rule 1017(a)(7).
11 For purposes of Rule 1017(a)(7), the term
‘‘control person’’ means a person who would have
‘‘control’’ as defined on Form BD, as amended from
time to time. See Rule 1017(a)(7).
12 See paragraph (h) under Rule 1011 (defining
‘‘final criminal matter’’) as amended by SR–FINRA–
2020–011, supra note 5.
13 See paragraph (p) under Rule 1011 (defining
‘‘specified risk event’’) as amended by SR–FINRA–
2020–011, supra note 5. See also Securities
Exchange Act Release No. 92710 (August 19, 2021)
(Order Approving File No. SR–FINRA–2021–011)
(amendment to the ‘‘specified risk event’’
definition).
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Interpretative Material (‘‘IM’’)–1011–1
(Safe Harbor for Business Expansions) is
not available to the member when a
materiality consultation is required
under Rule 1017(a)(7).14
Proposed Conforming Amendments to
Form CMA
As a result of the recent amendments
to the MAP rules, FINRA is proposing
to amend Form CMA to: (1) List in the
section of the form entitled ‘‘Type of
Continuing Membership Application’’
all of the events under Rule 1017(a) that
require a member to file Form CMA; (2)
incorporate questions into Form CMA
that relate specifically to Rule
1017(a)(7); and (3) make other nonsubstantive and technical changes in the
form for clarity and consistency, and to
promote efficiency. FINRA believes that
these proposed conforming changes to
Form CMA and the non-substantive and
technical changes will help guide an
applicant to provide the responses
needed to demonstrate that it can meet
the standards set forth under Rule
1014(a), and to facilitate FINRA’s review
of the application in light of the recent
admendments to the MAP rules.
A. Amend Form CMA’s ‘‘Type of
Continuing Membership Application’’
Section To List All of the Events
Specified in Paragraphs (a)(1) Through
(a)(7) Under Rule 1017
As noted above, Form CMA is
organized into sections that correspond
to the standards for admission set forth
in Rule 1014(a), with each section
containing its own set of questions,
some of which are mandatory, related to
that particular standard for admission.15
But before an applicant proceeds with
completing those sections, Form CMA
requests the applicant to identify all
applicable types of changes in
ownership, control, or business
operations in the section titled, ‘‘Type of
Continuing Membership Application.’’
This section currently bears two headers
that categorize some Rule 1017(a) events
as either ‘‘Ownership of asset transfer
changes,’’ covering the events described
under Rule 1017(a)(1) through Rule
1017(a)(4), or ‘‘Change(s) in business
operations,’’ covering the events
14 Relatedly, new IM–1011–3 (Business
Expansions and Persons with Specified Risk
Events) provides that IM–1011–1 is not available to
any member that is seeking to add a natural person
who has, in the prior five years, one or more final
criminal matters or two or more specified risk
events and seeks to become an owner, control
person, principal, or registered person of the
member. In general, IM–1011–1 creates a safe
harbor for specified categories of business
expansions, subject to certain thresholds, that a
member may undergo without filing a CMA.
15 See supra note 8.
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described under Rule 1017(a)(5).16
Currently, Form CMA’s ‘‘Type of
Continuing Membership Application’’
section presents the events under Rule
1017(a)(1) through Rule 1017(a)(5),
some of which appear in a summary
fashion, without rule references.17
FINRA is proposing to amend this
section of Form CMA so that all the
events described under Rule 1017(a),
including those set forth in paragraphs
(a)(6) and (a)(7), and their respective
rule references would be listed in the
form. In addition, FINRA is proposing to
delete the two headers—‘‘Ownership of
asset transfer changes’’ and ‘‘Change(s)
in business operations’’—for clarity and
to facilitate presenting the events under
Rule 1017(a)(1) through 1017(a)(7)
sequentially.
Specifically, the proposed changes to
Form CMA’s ‘‘Type of Continuing
Membership Application’’ section
would add the following three types of
changes in ownership, control, or
business operations that an applicant
may select, as applicable, with
references to the corresponding
provisions in Rule 1017(a)(6) 18 and
(a)(7):
16 Rule 1017(a)(5) provides that a member shall
file a CMA for approval of a ‘‘material change in
business operations,’’ which is defined in Rule
1011(m). Currently on Form CMA, the ‘‘Change(s)
in business operations’’ category lists five options
that an applicant may select to further identify the
type of material change involved. Three of those
options correspond to changes that are set forth in
subparagraphs (1), (2) and (3) under the definition
of ‘‘material change in business operations’’ in Rule
1011(m). A fourth option describes an expansion of
Associated Persons, offices, or number of markets
made. A fifth ‘‘other’’ option also is included
because the definition of ‘‘material change in
business operations’’ is not exhaustive. See
generally paragraph (m) under Rule 1011 as
amended by SR–FINRA–2020–011 (renumbering
from paragraph (l) to paragraph (m)), supra note 5;
IM–1011–1; Rule 1017(b)(2)(C).
17 For example, Rule 1017(a)(1) provides that a
CMA is required for ‘‘a merger of the member with
another member, unless both are members of the
New York Stock Exchange, Inc. or the surviving
entity will continue to be a member of the New
York Stock Exchange, Inc[.]’’ Form CMA, in the
Type of Continuing Membership Application
section, summarizes this event as ‘‘Merger of the
member with another member.’’ In another
example, while Rule 1017(a)(2) states that a CMA
is required for ‘‘a direct or indirect acquisition by
the member of another member, unless the
acquiring member is a member of the New York
Stock Exchange, Inc.[,]’’ Form CMA summarizes
such event as a ‘‘[d]irect or indirect acquisition by
the member of another member.’’ Except for one
technical change pertaining to the event that
corresponds to Rule 1017(a)(3), FINRA is not
proposing to change the descriptions of Rule
1017(a)(1) through Rule 1017(a)(5) as they currently
appear in Form CMA.
18 FINRA recently made changes to Form CMA to
account for Rule 1017(a)(6). See Securities
Exchange Act Release No. 89867 (September 15,
2020), 85 FR 58404 (September 18, 2020) (Notice of
Filing and Immediate Effectiveness of File No. SR–
FINRA–2020–028).
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b Any direct or indirect acquisition or
transfer of a member’s assets or any asset,
business or line of operation where the
transferring member or an Associated Person
of the transferring member has a ‘‘covered
pending arbitration claim,’’ an unpaid
arbitration award or an unpaid settlement
related to an arbitration (FINRA Rule
1017(a)(6)(A))
b Business expansion to add one or more
Associated Persons involved in sales and one
or more of those Associated Persons has a
‘‘covered pending arbitration claim,’’ an
unpaid arbitration award or an unpaid
settlement related to an arbitration (FINRA
Rule 1017(a)(6)(B))
b Natural person seeks to become an
owner, control person, principal or registered
person of a member and has, in the prior five
years, one or more ‘‘final criminal matters’’
or two or more ‘‘specified risk events’’
(FINRA Rule 1017(a)(7))
These proposed conforming changes
to this section of Form CMA will list all
of the events under Rule 1017(a).
Additionally, the specific references on
Form CMA to the applicable subsections
of Rule 1017 will give applicants clarity
about which events require them to
submit Form CMA to FINRA for
approval.
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B. Incorporate Questions To Conform
Form CMA to Rule 1017(a)(7)
Rule 1017(i) provides that in
rendering a decision on a CMA, FINRA
must consider whether the applicant
and its associated persons meet each of
the standards in Rule 1014(a). FINRA is
proposing to amend two sections in
Form CMA, which are ‘‘Standard 1:
Overview of the Applicants,’’
corresponding to Rule 1014(a)(1)
(‘‘Standard 1’’), and ‘‘Standard 3:
Compliance with securities laws, just
and equitable principles of trade,’’
corresponding to Rule 1014(a)(3)
(‘‘Standard 3’’). FINRA believes that
these proposed changes would conform
Form CMA to, and are necessary to
effectively account for, Rule 1017(a)(7).
The proposed amendments to Form
CMA are described in further detail
below.
1. Form CMA’s ‘‘Standard 1: Overview
of the Applicants’’ Section
Standard 1 requires FINRA to
determine whether the application and
all supporting documents are complete
and accurate. Form CMA’s Standard 1
section has several questions that, in
general, focus on understanding the
circumstances surrounding the
contemplated change or event set forth
under Rule 1017(a), and are intended to
elicit from the applicant the information
necessary for FINRA to assess whether
Standard 1 is met. For example, the
applicant is required to provide a
complete description of the
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contemplated change, the persons or
entities that will become associated or
affiliated with the applicant as a result
of the contemplated change, and to the
extent applicable, a description of the
liabilities that will not be included in a
transfer of assets or a line of business.19
FINRA is proposing to add several
new questions to this section that would
require the applicant to provide
information necessary to support
compliance with Rule 1017(a)(7). These
proposed questions are intended to
collect the necessary information in an
efficient manner, as further explained
below.
Proposed new Question 5 would
require, as marked by the asterisk, the
applicant to provide a ‘‘yes’’ or ‘‘no’’
answer to the following question:
5. Is this application required because the
Applicant seeks to add a natural person as an
owner, control person, principal or registered
person who, in the prior five years, has one
or more ‘‘final criminal matters’’ or two or
more ‘‘specified risk events’’ (as defined in
FINRA Rule 1011)?* (As Rule 1017(a)(7)
provides, the term ‘‘owner’’ has the same
meaning as ‘‘direct owner’’ and ‘‘indirect
owner’’ on Form BD Schedules A and B, as
amended from time to time, and the term
‘‘control person’’ means a person who would
have ‘‘control’’ as defined on Form BD, as
amended from time to time.)
If the applicant’s answer to proposed
Question 5 is ‘‘yes,’’ proposed Question
5.a. would prompt the applicant to
identify in a chart, for each ‘‘final
criminal matter’’ or ‘‘specified risk
event,’’ the subject party, that person’s
CRD number, and, if the matter or event
has not been reported on a Uniform
Registration Form, a description of the
nature of the activity, any findings, any
fine or other dispositions.20
Specifically, proposed Question 5.a.
would ask: 21
19 See generally Exhibit 3 (Form CMA, Standard
1, Questions 1, 2, and 3, within the category titled
‘‘Overview of the proposed change’’).
20 See Exhibit 3 (Form CMA, Standard 1, chart
accompanying Proposed Question 5.a., within the
category titled ‘‘Overview of the proposed change’’).
This proposed chart would be similar to how
members, when submitting a request for a
materiality consultation pursuant to Rule
1017(a)(7), would need to provide information
about individuals’ ‘‘final criminal matters’’ and
‘‘specified risk events.’’ See Rule 1017(a)(7)
(providing that the member’s written request for a
materiality consultation ‘‘must address the issues
that are central to the materiality consultation’’);
Securities Exchange Act Release No. 88600 (April
8, 2020), 85 FR 20745, 20753 (April 14, 2020)
(Notice of Filing of File No. SR–FINRA–2020–011)
(explaining that a member submitting a request for
a materiality consultation would need to provide
information relating to the individuals’ ‘‘final
criminal matters’’ and ‘‘specified risk events’’).
21 The following quoted material includes
references to the Uniform Application for Securities
Industry Registration or Transfer (‘‘Form U4’’), the
Uniform Termination Notice for Securities Industry
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a. If the answer to Question 5 is ‘‘yes,’’ for
each ‘‘final criminal matter’’ or ‘‘specified
risk event,’’ if the matter or event has been
reported on a Uniform Registration Form
(i.e., Forms U4, U5, U6, BD), please provide
the subject party and that person’s CRD
number. If the matter or event has not been
reported on a Uniform Registration Form,
please also provide a description of the
nature of the activity, any findings, any fine
or other dispositions.
If the applicant’s answer to proposed
Question 5 is ‘‘no,’’ the applicant would
not be prompted to answer proposed
Question 5.a.
The proposed conforming changes to
Standard 1 of Form CMA are intended
to collect necessary information
efficiently. Proposed Question 5.a.
would reduce the burden on firms to
provide FINRA with duplicate
information by not requiring applicants
to describe each ‘‘final criminal matter’’
or ‘‘specified risk event’’ that was
already described on a Uniform
Registration Form. Thus, if the matter or
event has already been reported on a
Uniform Registration Form, the
applicant would only need to provide
the subject party and that person’s CRD
number. If the matter or event has not
been reported on a Uniform Registration
Form, the applicant also would be
required to provide a description of the
nature of the activity, any findings, any
fine or other dispositions, to support
compliance with Rule 1017(a)(7).
Further, requiring firms to provide the
subject party’s CRD number would
facilitate FINRA’s coordination of
information entered on Form CMA with
information that has been entered on a
Uniform Registration Form or provided
in a related materiality consultation,
and thus enable FINRA to more
efficiently monitor for compliance with
Rule 1017(a)(7).
Form CMA’s Standard 1 section also
requests the applicant to provide
information on contemplated changes in
direct ownership and indirect
ownership. For example, the applicant
is currently prompted to provide, as
applicable, the proposed direct or
indirect owner’s CRD number, name,
roles, the date the role was acquired, the
person’s ownership percentage, and
whether the person is a ‘‘control
person,’’ among other information. Rule
1017(a)(7) applies when a natural
person seeking to become an ‘‘owner’’ or
‘‘control person’’ (among other roles)
has, in the prior five years, ‘‘one or more
final criminal matters or two or more
specified risk events.’’ Rule 1017(a)(7)
further provides that, for purposes of
Registration (‘‘Form U5’’), the Uniform Disciplinary
Action Reporting Form (‘‘Form U6’’), and the
Central Registration Depository (‘‘CRD’’).
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Rule 1017(a)(7), the term ‘‘owner’’ has
the same meaning as ‘‘direct owner’’
and ‘‘indirect owner’’ on Form BD
Schedules A and B, as amended from
time to time. To conform with Rule
1017(a)(7), FINRA is proposing to add a
question about whether the
contemplated direct or indirect owner of
the applicant is a ‘‘FINRA Rule
1017(a)(7) Person (i.e. , whether such
person has one or more ‘final criminal
matters’ or two or more ‘specified risk
events’ in the prior five years).’’ 22
2. Form CMA’s ‘‘Standard 3:
Compliance with securities laws, just
and equitable principles of trade’’
Section
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Standard 3 requires FINRA to
determine whether an applicant and its
associated persons ‘‘are capable of
complying with’’ the applicable
securities laws and regulations, and
with applicable FINRA rules. Standard
3 sets forth several factors, including
past and current disciplinary actions
and customer claims, that FINRA must
consider in making that determination.
The existence of certain factors that
‘‘[raise] a question of capacity to comply
with the federal securities laws and the
rules of [FINRA]’’ results in a rebuttable
presumption to deny the application.23
In general, Form CMA’s Standard 3
section currently includes questions
that require an applicant to indicate
whether it or any of its associated
persons are subject to any of the
specified factors described in Standard
3, direct the applicant to provide
additional information about those
factors, require the applicant to explain,
even with the existence of the specified
factors, how it will be able to comply
with applicable securities laws and
regulations and with applicable FINRA
rules, ask arbitration-related questions,
and prompt the applicant to provide
supporting documents.24
22 Member firms also would identify these direct
and indirect owners in materiality consultations
pursuant to Rule 1017(a)(7). See Rule 1017(a)(7)
(providing that a written request for a materiality
consultation ‘‘must address the issues that are
central to the materiality consultation’’); Securities
Exchange Act Release No. 88600 (April 8, 2020), 85
FR 20745, 20753 (April 14, 2020) (Notice of Filing
of File No. SR–FINRA–2020–011) (explaining that
a member submitting a request for a materiality
consultation would need to provide information
relating to the subject person), supra note 20.
23 See Notice to Members 04–10 (February 2004)
(announcing amendments to Rules 1011, 1014, and
1017); and Rule 1017(i) (setting forth the events that
create a rebuttable presumption to deny a CMA).
24 See generally Form CMA, Standard 3,
Questions 1, 2, 3, and 4 (within the category titled
‘‘Explain how this Standard is met.’’). In 2020, some
questions in Form CMA’s Standard 3 section
underwent adjustments to align with the
arbitration-related amendments to the MAP rules as
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FINRA is proposing to add new
questions to Form CMA’s Standard 3
section for the same reason that FINRA
is proposing new questions to Form
CMA’s Standard 1 section, which is to
require the applicant to provide
information necessary to support
compliance with Rule 1017(a)(7). These
proposed questions are intended to
collect the necessary information in an
efficient manner, as further explained
below.
FINRA is proposing to add new
Question 5 to Form CMA’s Standard 3
section, using language similar to
proposed Question 5 in Form CMA’s
Standard 1 section. A similar question
in Form CMA’s Standard 3 section is
needed because information concerning
a person described in Rule 1017(a)(7)
would be relevant to a CMA filed
pursuant to other subparagraphs of Rule
1017(a).25 Specifically, proposed
Question 5 would require the applicant
to provide a ‘‘yes’’ or ‘‘no’’ answer to the
following:
5. Does this application propose to add a
natural person as an owner, control person,
principal or registered person who, in the
prior five years, has one or more ‘‘final
criminal matters’’ or two or more ‘‘specified
risk events’’?* See FINRA Rule 1017(a)(7).
(For purposes of Rule 1017(a)(7), the term
‘‘owner’’ has the same meaning as ‘‘direct
owner’’ and ‘‘indirect owner’’ on Form BD
Schedules A and B, as amended from time
to time, and the term ‘‘control person’’ means
a person who would have ‘‘control’’ as
defined on Form BD, as amended from time
to time.)
If the applicant answers ‘‘yes,’’ the
applicant would then be asked in
proposed Question 5.a. whether the
information was provided above in the
section concerning Standard 1, Question
5.a. If the answer to Standard 3,
Question 5.a. is ‘‘yes,’’ then the
applicant would not be required to
complete Question 5.b. If the answer to
Standard 3, Question 5.a. is ‘‘no,’’ then
the applicant would be required to
respond to proposed Question 5.b.:
49397
The applicant would be able to provide
the information requested in proposed
Question 5.b. in a chart identical to the
chart proposed to follow Question 5.a.
in Form CMA’s Standard 1 section.26
The proposed conforming changes to
Standard 3 of Form CMA are intended
to collect necessary information
efficiently. Proposed Questions 5.a. and
5.b. and the accompanying chart to
Form CMA’s Standard 3 section would
reduce the burden on firms to provide
FINRA with duplicate information
already provided earlier on Form CMA
or separately in a Uniform Registration
Form. If the matter or event has already
been described in Form CMA’s Standard
1 section, the applicant would be able
to cross-reference that description. If the
matter or event was not already
described in Form CMA’s Standard 1
section but was already reported on a
Uniform Registration Form, the
applicant would only need to provide
the subject party and that person’s CRD
number. If the matter or event has not
been reported in Form CMA’s Standard
1 section or on a Uniform Registration
Form, the applicant would also be
required to provide a description of the
nature of the activity, any findings, any
fine or other dispositions, to support
compliance with Rule 1017(a)(7).
Further, requiring firms to provide a
CRD number would enable FINRA to
facilitate FINRA’s coordination of
information entered on Form CMA with
information that has been entered on a
Uniform Registration Form or provided
in a related materiality consultation,
and therefore enable FINRA to more
efficiently gather relevant information.
C. Other Proposed Non-Substantive,
Technical Amendments to Form CMA
b. If the answer to Question 5.a. is ‘‘no,’’
for each ‘‘final criminal matter’’ or ‘‘specified
risk event,’’ if the matter or event has been
reported on a Uniform Registration Form
(i.e., Forms U4, U5, U6, BD), please provide
the subject party and that person’s CRD
number. If the matter or event has not been
reported on a Uniform Registration Form,
please also provide a description of the
nature of the activity, any findings, any fine
or other dispositions.
FINRA is also proposing several nonsubstantive, technical changes to Form
CMA. First, FINRA is proposing to
include in Form CMA’s Standard 1
section and Standard 3 section a
reminder to the applicant that, ‘‘[e]very
Form U4 shall be kept current at all
times by supplementary amendments to
the original Form U4. See FINRA ByLaws, Art. V, Sec. 2(c).’’ Form U4 is one
of the ‘‘Uniform Registration Forms,’’ as
defined by amendments to the MAP
rules.27 Second, FINRA is proposing to
amend Form CMA’s ‘‘Type of
Continuing Membership Application’’
section to change ‘‘comprising’’ to
described in File No. SR–FINRA–2019–030. See
supra note 18.
25 Rule 1017(a)(7) requires a member to file a
CMA only when ‘‘the member is not otherwise
required to file a Form CMA in accordance with
Rule 1017.’’
26 See Exhibit 3 (Form CMA, Standard 3, chart
accompanying Proposed Question 5.b., within the
category titled ‘‘Explain how this Standard is met’’).
27 See paragraph (r) under Rule 1011 (defining
‘‘Uniform Registration Forms’’) as amended by SR–
FINRA–2020–011, supra note 5.
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‘‘composing’’ to match the language
used in Rule 1017(a)(3).28
Finally, FINRA is proposing to add
within Form CMA’s Standard 1 section
new Questions 4.a., 4.b. and 4.c that
would efficiently collect the information
needed to monitor for compliance with
Rule 1017(a)(6). Proposed Questions 4.a.
and 4.b. would ask the applicant to
indicate whether the CMA is required
under Rule 1017(a)(6)(A) or Rule
1017(a)(6)(B), respectively.29 If the
applicant answers ‘‘yes’’ to either
question, then proposed Question 4.c.
would prompt the applicant to list, for
each covered pending arbitration claim,
unpaid arbitration award, or unpaid
settlement related to an arbitration, the
subject party and that person’s CRD
number in a chart. FINRA believes that
adding these proposed questions and
the accompanying chart to Form CMA’s
Standard 1 section would efficiently
collect the information needed to
monitor for compliance with Rule
1017(a)(6).30 The proposed questions
would also achieve parity with the
manner FINRA is proposing to elicit
information needed to monitor for
compliance with Rule 1017(a)(7).
Additionally, proposed Question 4
would allow FINRA to readily
coordinate information entered on Form
CMA with information that may have
been entered on a Uniform Registration
Form or provided in a materiality
consultation.
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so FINRA can
implement the proposed rule change on
September 1, 2021, to coincide with the
28 See Rule 1017(a)(3) (requiring, in pertinent
part, a member to file an application for approval
of ‘‘direct or indirect acquisitions or transfers of 25
percent or more in the aggregate of the member’s
assets or any asset, business or line of operation that
generates revenues composing 25 percent or more
in the aggregate of the member’s earnings measured
on a rolling 36-month basis’’) (Emphasis added).
29 See generally Exhibit 3 (Form CMA, Standard
1, proposed Questions 4, 4.a., 4.b., 4.c. and
accompanying chart, within the category titled
‘‘Overview of the proposed change’’).
30 The requested information is similar to the
information that member firms would provide in a
materiality consultation pursuant to Rule
1017(a)(6). See Rule 1017(a)(6)(A) and (B)
(providing that the written request for a materiality
consultation ‘‘must address the issues that are
central to the materiality consultation’’); see also
Checklist for Mandatory Materiality Consultations
Under Rule 1017(a)(6), https://www.finra.org/rulesguidance/guidance/materiality-consultationprocess/checklist-under-rule-1017a6 (providing
guidance to firms to provide, among other things,
the name, title and CRD number of associated
persons with a covered pending arbitration claim,
unpaid arbitration award or unpaid settlement
related to an arbitration).
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effective date of the amendments to the
MAP rules as announced in Regulatory
Notice 21–09.31 The proposed changes
to Form CMA conform to the recently
amended MAP rules. To facilitate
member firm compliance with the
amended rules on the date they become
effective, it is necessary for the
amendments to Form CMA to become
effective on the same date.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,32 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest.
The proposed changes to Form CMA
will conform the form to the
amendments to Rule 1017(a)(7), as
described in the SEC Order. The
proposed changes to Form CMA will
also help ensure that applicants for
continuing membership provide the
information and documentation to
produce a complete application package
for FINRA’s review.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. FINRA’s
recent amendments to the MAP rules,
which specify additional events that
require a CMA for FINRA’s approval,
necessitate conforming changes to the
sections of Form CMA pertaining to the
type of CMA, Standard 1 and Standard
3. The proposed conforming changes—
i.e., listing in Form CMA’s ‘‘Type of
Continuing Membership Application’’
section all of the events under Rule
1017(a) that require a member to file
Form CMA, and incorporating in Form
CMA’s Standard 1 and Standard 3
sections questions that would require
the applicant to provide information
about an individual’s ‘‘final criminal
matters’’ and ‘‘specified risk events’’
that is necessary to support compliance
with Rule 1017(a)(7)—are derived from,
31 FINRA notes that the proposed rule change
would impact all members, including members that
have elected to be treated as capital acquisition
brokers (‘‘CABs’’), given that CAB Rule 116
(Application for Approval of Change in Ownership,
Control, or Business Operations) incorporates, by
reference, Rule 1017, which requires that a
member’s application for approval of changes to its
ownership, control, or business operations include
a Form CMA. See Rule 1017(b)(2).
32 15 U.S.C. 78o–3(b)(6).
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Fmt 4703
Sfmt 4703
and effectuate, recent amendments to
the MAP rules concerning persons with
a significant history of misconduct and
the broker-dealers that employ them, as
described in the SEC Order. In addition,
the proposed changes to Form CMA’s
Standard 1 section pertaining to Rule
1017(a)(6) would efficiently collect the
information needed to monitor for
compliance with that rule in the same
manner that FINRA proposes to collect
information needed to monitor for
compliance with Rule 1017(a)(7).
FINRA considered and discussed the
potential economic impact of the recent
amendments in File No. SR–FINRA–
2020–011, including the burden
imposed on some applicants to seek a
materiality consultation with FINRA,
and noted the potential requirement to
file a Form CMA and certain associated
costs.33 FINRA believes that the
proposed conforming changes to Form
CMA and the proposed technical
changes described herein would not
result in new material economic effects.
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 34 and Rule 19b–
4(f)(6) thereunder.35
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),36 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. FINRA has requested that the
Commission waive the 30-day operative
delay requirement so that the proposed
rule change may become operative on
September 1, 2021. The Commission
hereby grants the request. The
33 See Securities Exchange Act Release No. 88600
(April 8, 2020), 85 FR 20745, 20755–62 (April 14,
2020) (Notice of Filing of File No. SR–FINRA–
2020–011).
34 15 U.S.C. 78s(b)(3)(A).
35 17 CFR 240.19b–4(f)(6).
36 17 CFR 240.19b–4(f)(6)(iii).
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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
Commission finds that the proposed
changes to Form CMA conform to the
recently amended MAP rules.37 The
Commission therefore finds that the
proposed rule change is consistent with
the goals set forth by the Commission
when it approved amendments to the
MAP rules as described in File No. SR–
FINRA–2020–011, which become
effective on September 1, 2021.38 The
Commission finds that waiving the 30day operative delay would facilitate
firm compliance with the amended
MAP rules on the date they become
effective.39 Therefore, the Commission
believes it is consistent with the
protection of investors and the public
interest to waive the 30-day operative
delay requirement. Therefore the
Commission designates the proposed
rule change as operative on September
1, 2021.
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:
lotter on DSK11XQN23PROD with NOTICES1
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–FINRA–2021–020 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2021–020. This file
number should be included on the
subject line if email is used. To help the
37 See
supra note 5.
38 Id.
39 Similarly, the Commission finds that the nonsubstantive and technical changes to Form CMA are
consistent with the protection of investors and the
public interest.
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49399
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–FINRA–2021–020 and
should be submitted on or before
August 23, 2021.
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’
or ‘‘Act’’),1 and Rule 19b–4 thereunder,2
a proposed rule change (File Number
SR–PEARL–2021–32) to amend the
MIAX Pearl Options Fee Schedule (‘‘Fee
Schedule’’) to remove certain credits
and increase monthly Trading Permit
fees for Exchange Members.3 The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to Section
19(b)(3)(A) of the Act.4 The proposed
rule change was published for comment
in the Federal Register on July 15,
2021.5 The Commission has received no
comment letters on the proposed rule
change. Under Section 19(b)(3)(C) of the
Act,6 the Commission is hereby: (i)
Temporarily suspending File Number
SR–PEARL–2021–32; and (ii) instituting
proceedings to determine whether to
approve or disapprove File Number SR–
PEARL–2021–32.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Vanessa A. Countryman,
Secretary.
Remove ‘‘Monthly Volume Credit’’
[FR Doc. 2021–18945 Filed 9–1–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92797; File No. SR–
PEARL–2021–32]
II. Description of the Proposed Rule
Change
The Exchange proposes to amend its
Fee Schedule to: (1) Delete the
definition of and remove the credits
applicable to the Monthly Volume
Credit for Members; (2) and; (3) amend
Section (3)(b) of the Fee Schedule to
increase the amount of monthly Trading
Permit Fees.
The Exchange proposes to amend the
Definitions section of its Fee Schedule
to delete the definition of ‘‘Monthly
Volume Credit’’ and remove the credits
applicable to the Monthly Volume
Credit for Members.7 The Exchange
states that the Monthly Volume Credit
was established in 2018 to encourage
Members to send increased Priority
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The term ‘‘Trading Permit’’ means a permit
issued by the Exchange that confers the ability to
transact on the Exchange. See Notice, infra note 5,
at 37379. The term ‘‘Member’’ means an individual
or organization that is registered with the Exchange
pursuant to Chapter II of Exchange Rules for
purposes of trading on the Exchange as an
‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’
Members are deemed ‘‘members’’ under the
Exchange Act. See id.
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Securities Exchange Act Release No. 92366
(July 9, 2021), 86 FR 37379 (‘‘Notice’’).
6 15 U.S.C. 78s(b)(3)(C).
7 See Notice, supra note 5, at 37379–80.
2 17
Self-Regulatory Organizations; MIAX
PEARL, LLC; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove
Proposed Rule Changes To Amend the
MIAX Pearl Options Fee Schedule To
Remove Certain Credits and Increase
Trading Permit Fees
August 27, 2021.
I. Introduction
On July 1, 2021, MIAX PEARL, LLC
(‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
40 17
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 86, Number 168 (Thursday, September 2, 2021)]
[Notices]
[Pages 49394-49399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18945]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92793; File No. SR-FINRA-2021-020]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Form CMA (Continuing Membership
Application Form)
August 27, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 20, 2021, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to (1) amend Form CMA (Continuing Membership
Application Form) required under Rule 1017 (Application for Approval of
Change in Ownership, Control, or Business Operations) to conform to
amendments to the Membership Application Program (``MAP'') rules \4\ as
described in File No. SR-FINRA-2020-011, which become effective on
September 1, 2021; \5\ and (2) make non-substantive and technical
changes to Form CMA.\6\ The proposed rule change does not make any
changes to the text of FINRA rules.
---------------------------------------------------------------------------
\4\ The MAP rules consist of Rules 1011 through 1019, which
reside under the Rule 1000 Series (Member Application and Associated
Person Registration).
\5\ See Securities Exchange Act Release No. 90635 (December 10,
2020), 85 FR 81540 (December 16, 2020) (Order Approving File No. SR-
FINRA-2020-011, as Modified by Amendment No. 1) (``SEC Order''). See
also Regulatory Notice 21-09 (March 2021) (announcing September 1,
2021, as the effective date of the amendments to the MAP rules, and
different effective dates of the amendments to other FINRA rules to
address brokers with a significant history of misconduct).
\6\ FINRA is separately developing comprehensive changes to the
MAP rules in connection with the retrospective review of this rule
set, which will also require conforming amendments to the
standardized forms. See Regulatory Notice 18-23 (July 2018)
(requesting comment on a proposal regarding the MAP rules).
---------------------------------------------------------------------------
The text of the proposed rule change is available on FINRA's
website at https://www.finra.org, at the principal office of FINRA 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, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The MAP rules require an applicant for continuing membership to
file an application that includes a Form CMA.\7\ Form CMA is organized
into sections that align with the standards for admission set forth in
Rule 1014(a) (Standards for Admission). Each section begins with a
description of the applicable standard in Rule 1014(a), followed by a
series of questions related to that standard that are intended to help
the applicant provide the responses needed to demonstrate that it
[[Page 49395]]
can meet each of the standards described under Rule 1014(a), and to
facilitate FINRA's review of the application.\8\ An applicant is able
to provide its documents and information by attaching files in various
formats (e.g., .docx, .pdf, .xlsx) or by entering free form text in
text boxes, and making selections through screen components such as
drop-down menus and radio buttons, among others.
---------------------------------------------------------------------------
\7\ See Rule 1017(b)(2).
\8\ The sections of Form CMA that are marked with a red asterisk
require the applicant to provide a response.
---------------------------------------------------------------------------
Recent Amendments to the MAP Rules
On December 10, 2020, FINRA amended the MAP rules, among other
FINRA rules, to address the issue of persons with a significant history
of misconduct and the member firms that employ them.\9\ As amended,
Rule 1017 includes new paragraph (a)(7), which requires a member to
file a continuing member application (``CMA'') whenever a natural
person seeking to become an owner,\10\ control person,\11\ principal or
registered person of a member has, in the prior five years, one or more
``final criminal matters'' (as defined in new Rule 1011(h) \12\) or two
or more ``specified risk events'' (as defined in new Rule 1011(p)
\13\), and the member is not otherwise required to file a Form CMA in
accordance with Rule 1017, unless the member has submitted a written
request to FINRA seeking a materiality consultation for such
contemplated activity. As part of the materiality consultation, Rule
1017(a)(7) also provides that FINRA will determine in the public
interest and the protection of investors that either the member is not
required to file a Form CMA and may effect the contemplated activity,
or the member is required to file a Form CMA in accordance with Rule
1017 and the member may not effect the contemplated activity unless
FINRA approves the Form CMA. In addition, Rule 1017(a)(7) provides that
Interpretative Material (``IM'')-1011-1 (Safe Harbor for Business
Expansions) is not available to the member when a materiality
consultation is required under Rule 1017(a)(7).\14\
---------------------------------------------------------------------------
\9\ See supra note 5.
\10\ For purposes of Rule 1017(a)(7) only, the term ``owner''
has the same meaning as ``direct owner'' and ``indirect owner'' on
the Uniform Application for Broker-Dealer Registration (``Form BD'')
Schedules A and B, as amended from time to time. See Rule
1017(a)(7).
\11\ For purposes of Rule 1017(a)(7), the term ``control
person'' means a person who would have ``control'' as defined on
Form BD, as amended from time to time. See Rule 1017(a)(7).
\12\ See paragraph (h) under Rule 1011 (defining ``final
criminal matter'') as amended by SR-FINRA-2020-011, supra note 5.
\13\ See paragraph (p) under Rule 1011 (defining ``specified
risk event'') as amended by SR-FINRA-2020-011, supra note 5. See
also Securities Exchange Act Release No. 92710 (August 19, 2021)
(Order Approving File No. SR-FINRA-2021-011) (amendment to the
``specified risk event'' definition).
\14\ Relatedly, new IM-1011-3 (Business Expansions and Persons
with Specified Risk Events) provides that IM-1011-1 is not available
to any member that is seeking to add a natural person who has, in
the prior five years, one or more final criminal matters or two or
more specified risk events and seeks to become an owner, control
person, principal, or registered person of the member. In general,
IM-1011-1 creates a safe harbor for specified categories of business
expansions, subject to certain thresholds, that a member may undergo
without filing a CMA.
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Proposed Conforming Amendments to Form CMA
As a result of the recent amendments to the MAP rules, FINRA is
proposing to amend Form CMA to: (1) List in the section of the form
entitled ``Type of Continuing Membership Application'' all of the
events under Rule 1017(a) that require a member to file Form CMA; (2)
incorporate questions into Form CMA that relate specifically to Rule
1017(a)(7); and (3) make other non-substantive and technical changes in
the form for clarity and consistency, and to promote efficiency. FINRA
believes that these proposed conforming changes to Form CMA and the
non-substantive and technical changes will help guide an applicant to
provide the responses needed to demonstrate that it can meet the
standards set forth under Rule 1014(a), and to facilitate FINRA's
review of the application in light of the recent admendments to the MAP
rules.
A. Amend Form CMA's ``Type of Continuing Membership Application''
Section To List All of the Events Specified in Paragraphs (a)(1)
Through (a)(7) Under Rule 1017
As noted above, Form CMA is organized into sections that correspond
to the standards for admission set forth in Rule 1014(a), with each
section containing its own set of questions, some of which are
mandatory, related to that particular standard for admission.\15\ But
before an applicant proceeds with completing those sections, Form CMA
requests the applicant to identify all applicable types of changes in
ownership, control, or business operations in the section titled,
``Type of Continuing Membership Application.'' This section currently
bears two headers that categorize some Rule 1017(a) events as either
``Ownership of asset transfer changes,'' covering the events described
under Rule 1017(a)(1) through Rule 1017(a)(4), or ``Change(s) in
business operations,'' covering the events described under Rule
1017(a)(5).\16\ Currently, Form CMA's ``Type of Continuing Membership
Application'' section presents the events under Rule 1017(a)(1) through
Rule 1017(a)(5), some of which appear in a summary fashion, without
rule references.\17\ FINRA is proposing to amend this section of Form
CMA so that all the events described under Rule 1017(a), including
those set forth in paragraphs (a)(6) and (a)(7), and their respective
rule references would be listed in the form. In addition, FINRA is
proposing to delete the two headers--``Ownership of asset transfer
changes'' and ``Change(s) in business operations''--for clarity and to
facilitate presenting the events under Rule 1017(a)(1) through
1017(a)(7) sequentially.
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\15\ See supra note 8.
\16\ Rule 1017(a)(5) provides that a member shall file a CMA for
approval of a ``material change in business operations,'' which is
defined in Rule 1011(m). Currently on Form CMA, the ``Change(s) in
business operations'' category lists five options that an applicant
may select to further identify the type of material change involved.
Three of those options correspond to changes that are set forth in
subparagraphs (1), (2) and (3) under the definition of ``material
change in business operations'' in Rule 1011(m). A fourth option
describes an expansion of Associated Persons, offices, or number of
markets made. A fifth ``other'' option also is included because the
definition of ``material change in business operations'' is not
exhaustive. See generally paragraph (m) under Rule 1011 as amended
by SR-FINRA-2020-011 (renumbering from paragraph (l) to paragraph
(m)), supra note 5; IM-1011-1; Rule 1017(b)(2)(C).
\17\ For example, Rule 1017(a)(1) provides that a CMA is
required for ``a merger of the member with another member, unless
both are members of the New York Stock Exchange, Inc. or the
surviving entity will continue to be a member of the New York Stock
Exchange, Inc[.]'' Form CMA, in the Type of Continuing Membership
Application section, summarizes this event as ``Merger of the member
with another member.'' In another example, while Rule 1017(a)(2)
states that a CMA is required for ``a direct or indirect acquisition
by the member of another member, unless the acquiring member is a
member of the New York Stock Exchange, Inc.[,]'' Form CMA summarizes
such event as a ``[d]irect or indirect acquisition by the member of
another member.'' Except for one technical change pertaining to the
event that corresponds to Rule 1017(a)(3), FINRA is not proposing to
change the descriptions of Rule 1017(a)(1) through Rule 1017(a)(5)
as they currently appear in Form CMA.
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Specifically, the proposed changes to Form CMA's ``Type of
Continuing Membership Application'' section would add the following
three types of changes in ownership, control, or business operations
that an applicant may select, as applicable, with references to the
corresponding provisions in Rule 1017(a)(6) \18\ and (a)(7):
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\18\ FINRA recently made changes to Form CMA to account for Rule
1017(a)(6). See Securities Exchange Act Release No. 89867 (September
15, 2020), 85 FR 58404 (September 18, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2020-028).
[[Page 49396]]
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[square] Any direct or indirect acquisition or transfer of a
member's assets or any asset, business or line of operation where
the transferring member or an Associated Person of the transferring
member has a ``covered pending arbitration claim,'' an unpaid
arbitration award or an unpaid settlement related to an arbitration
(FINRA Rule 1017(a)(6)(A))
[square] Business expansion to add one or more Associated
Persons involved in sales and one or more of those Associated
Persons has a ``covered pending arbitration claim,'' an unpaid
arbitration award or an unpaid settlement related to an arbitration
(FINRA Rule 1017(a)(6)(B))
[square] Natural person seeks to become an owner, control
person, principal or registered person of a member and has, in the
prior five years, one or more ``final criminal matters'' or two or
more ``specified risk events'' (FINRA Rule 1017(a)(7))
These proposed conforming changes to this section of Form CMA will
list all of the events under Rule 1017(a). Additionally, the specific
references on Form CMA to the applicable subsections of Rule 1017 will
give applicants clarity about which events require them to submit Form
CMA to FINRA for approval.
B. Incorporate Questions To Conform Form CMA to Rule 1017(a)(7)
Rule 1017(i) provides that in rendering a decision on a CMA, FINRA
must consider whether the applicant and its associated persons meet
each of the standards in Rule 1014(a). FINRA is proposing to amend two
sections in Form CMA, which are ``Standard 1: Overview of the
Applicants,'' corresponding to Rule 1014(a)(1) (``Standard 1''), and
``Standard 3: Compliance with securities laws, just and equitable
principles of trade,'' corresponding to Rule 1014(a)(3) (``Standard
3''). FINRA believes that these proposed changes would conform Form CMA
to, and are necessary to effectively account for, Rule 1017(a)(7). The
proposed amendments to Form CMA are described in further detail below.
1. Form CMA's ``Standard 1: Overview of the Applicants'' Section
Standard 1 requires FINRA to determine whether the application and
all supporting documents are complete and accurate. Form CMA's Standard
1 section has several questions that, in general, focus on
understanding the circumstances surrounding the contemplated change or
event set forth under Rule 1017(a), and are intended to elicit from the
applicant the information necessary for FINRA to assess whether
Standard 1 is met. For example, the applicant is required to provide a
complete description of the contemplated change, the persons or
entities that will become associated or affiliated with the applicant
as a result of the contemplated change, and to the extent applicable, a
description of the liabilities that will not be included in a transfer
of assets or a line of business.\19\
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\19\ See generally Exhibit 3 (Form CMA, Standard 1, Questions 1,
2, and 3, within the category titled ``Overview of the proposed
change'').
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FINRA is proposing to add several new questions to this section
that would require the applicant to provide information necessary to
support compliance with Rule 1017(a)(7). These proposed questions are
intended to collect the necessary information in an efficient manner,
as further explained below.
Proposed new Question 5 would require, as marked by the asterisk,
the applicant to provide a ``yes'' or ``no'' answer to the following
question:
5. Is this application required because the Applicant seeks to
add a natural person as an owner, control person, principal or
registered person who, in the prior five years, has one or more
``final criminal matters'' or two or more ``specified risk events''
(as defined in FINRA Rule 1011)?* (As Rule 1017(a)(7) provides, the
term ``owner'' has the same meaning as ``direct owner'' and
``indirect owner'' on Form BD Schedules A and B, as amended from
time to time, and the term ``control person'' means a person who
would have ``control'' as defined on Form BD, as amended from time
to time.)
If the applicant's answer to proposed Question 5 is ``yes,'' proposed
Question 5.a. would prompt the applicant to identify in a chart, for
each ``final criminal matter'' or ``specified risk event,'' the subject
party, that person's CRD number, and, if the matter or event has not
been reported on a Uniform Registration Form, a description of the
nature of the activity, any findings, any fine or other
dispositions.\20\ Specifically, proposed Question 5.a. would ask: \21\
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\20\ See Exhibit 3 (Form CMA, Standard 1, chart accompanying
Proposed Question 5.a., within the category titled ``Overview of the
proposed change''). This proposed chart would be similar to how
members, when submitting a request for a materiality consultation
pursuant to Rule 1017(a)(7), would need to provide information about
individuals' ``final criminal matters'' and ``specified risk
events.'' See Rule 1017(a)(7) (providing that the member's written
request for a materiality consultation ``must address the issues
that are central to the materiality consultation''); Securities
Exchange Act Release No. 88600 (April 8, 2020), 85 FR 20745, 20753
(April 14, 2020) (Notice of Filing of File No. SR-FINRA-2020-011)
(explaining that a member submitting a request for a materiality
consultation would need to provide information relating to the
individuals' ``final criminal matters'' and ``specified risk
events'').
\21\ The following quoted material includes references to the
Uniform Application for Securities Industry Registration or Transfer
(``Form U4''), the Uniform Termination Notice for Securities
Industry Registration (``Form U5''), the Uniform Disciplinary Action
Reporting Form (``Form U6''), and the Central Registration
Depository (``CRD'').
a. If the answer to Question 5 is ``yes,'' for each ``final
criminal matter'' or ``specified risk event,'' if the matter or
event has been reported on a Uniform Registration Form (i.e., Forms
U4, U5, U6, BD), please provide the subject party and that person's
CRD number. If the matter or event has not been reported on a
Uniform Registration Form, please also provide a description of the
nature of the activity, any findings, any fine or other
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dispositions.
If the applicant's answer to proposed Question 5 is ``no,'' the
applicant would not be prompted to answer proposed Question 5.a.
The proposed conforming changes to Standard 1 of Form CMA are
intended to collect necessary information efficiently. Proposed
Question 5.a. would reduce the burden on firms to provide FINRA with
duplicate information by not requiring applicants to describe each
``final criminal matter'' or ``specified risk event'' that was already
described on a Uniform Registration Form. Thus, if the matter or event
has already been reported on a Uniform Registration Form, the applicant
would only need to provide the subject party and that person's CRD
number. If the matter or event has not been reported on a Uniform
Registration Form, the applicant also would be required to provide a
description of the nature of the activity, any findings, any fine or
other dispositions, to support compliance with Rule 1017(a)(7).
Further, requiring firms to provide the subject party's CRD number
would facilitate FINRA's coordination of information entered on Form
CMA with information that has been entered on a Uniform Registration
Form or provided in a related materiality consultation, and thus enable
FINRA to more efficiently monitor for compliance with Rule 1017(a)(7).
Form CMA's Standard 1 section also requests the applicant to
provide information on contemplated changes in direct ownership and
indirect ownership. For example, the applicant is currently prompted to
provide, as applicable, the proposed direct or indirect owner's CRD
number, name, roles, the date the role was acquired, the person's
ownership percentage, and whether the person is a ``control person,''
among other information. Rule 1017(a)(7) applies when a natural person
seeking to become an ``owner'' or ``control person'' (among other
roles) has, in the prior five years, ``one or more final criminal
matters or two or more specified risk events.'' Rule 1017(a)(7) further
provides that, for purposes of
[[Page 49397]]
Rule 1017(a)(7), the term ``owner'' has the same meaning as ``direct
owner'' and ``indirect owner'' on Form BD Schedules A and B, as amended
from time to time. To conform with Rule 1017(a)(7), FINRA is proposing
to add a question about whether the contemplated direct or indirect
owner of the applicant is a ``FINRA Rule 1017(a)(7) Person (i.e. ,
whether such person has one or more `final criminal matters' or two or
more `specified risk events' in the prior five years).'' \22\
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\22\ Member firms also would identify these direct and indirect
owners in materiality consultations pursuant to Rule 1017(a)(7). See
Rule 1017(a)(7) (providing that a written request for a materiality
consultation ``must address the issues that are central to the
materiality consultation''); Securities Exchange Act Release No.
88600 (April 8, 2020), 85 FR 20745, 20753 (April 14, 2020) (Notice
of Filing of File No. SR-FINRA-2020-011) (explaining that a member
submitting a request for a materiality consultation would need to
provide information relating to the subject person), supra note 20.
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2. Form CMA's ``Standard 3: Compliance with securities laws, just and
equitable principles of trade'' Section
Standard 3 requires FINRA to determine whether an applicant and its
associated persons ``are capable of complying with'' the applicable
securities laws and regulations, and with applicable FINRA rules.
Standard 3 sets forth several factors, including past and current
disciplinary actions and customer claims, that FINRA must consider in
making that determination. The existence of certain factors that
``[raise] a question of capacity to comply with the federal securities
laws and the rules of [FINRA]'' results in a rebuttable presumption to
deny the application.\23\ In general, Form CMA's Standard 3 section
currently includes questions that require an applicant to indicate
whether it or any of its associated persons are subject to any of the
specified factors described in Standard 3, direct the applicant to
provide additional information about those factors, require the
applicant to explain, even with the existence of the specified factors,
how it will be able to comply with applicable securities laws and
regulations and with applicable FINRA rules, ask arbitration-related
questions, and prompt the applicant to provide supporting
documents.\24\
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\23\ See Notice to Members 04-10 (February 2004) (announcing
amendments to Rules 1011, 1014, and 1017); and Rule 1017(i) (setting
forth the events that create a rebuttable presumption to deny a
CMA).
\24\ See generally Form CMA, Standard 3, Questions 1, 2, 3, and
4 (within the category titled ``Explain how this Standard is
met.''). In 2020, some questions in Form CMA's Standard 3 section
underwent adjustments to align with the arbitration-related
amendments to the MAP rules as described in File No. SR-FINRA-2019-
030. See supra note 18.
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FINRA is proposing to add new questions to Form CMA's Standard 3
section for the same reason that FINRA is proposing new questions to
Form CMA's Standard 1 section, which is to require the applicant to
provide information necessary to support compliance with Rule
1017(a)(7). These proposed questions are intended to collect the
necessary information in an efficient manner, as further explained
below.
FINRA is proposing to add new Question 5 to Form CMA's Standard 3
section, using language similar to proposed Question 5 in Form CMA's
Standard 1 section. A similar question in Form CMA's Standard 3 section
is needed because information concerning a person described in Rule
1017(a)(7) would be relevant to a CMA filed pursuant to other
subparagraphs of Rule 1017(a).\25\ Specifically, proposed Question 5
would require the applicant to provide a ``yes'' or ``no'' answer to
the following:
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\25\ Rule 1017(a)(7) requires a member to file a CMA only when
``the member is not otherwise required to file a Form CMA in
accordance with Rule 1017.''
5. Does this application propose to add a natural person as an
owner, control person, principal or registered person who, in the
prior five years, has one or more ``final criminal matters'' or two
or more ``specified risk events''?* See FINRA Rule 1017(a)(7). (For
purposes of Rule 1017(a)(7), the term ``owner'' has the same meaning
as ``direct owner'' and ``indirect owner'' on Form BD Schedules A
and B, as amended from time to time, and the term ``control person''
means a person who would have ``control'' as defined on Form BD, as
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amended from time to time.)
If the applicant answers ``yes,'' the applicant would then be asked in
proposed Question 5.a. whether the information was provided above in
the section concerning Standard 1, Question 5.a. If the answer to
Standard 3, Question 5.a. is ``yes,'' then the applicant would not be
required to complete Question 5.b. If the answer to Standard 3,
Question 5.a. is ``no,'' then the applicant would be required to
respond to proposed Question 5.b.:
b. If the answer to Question 5.a. is ``no,'' for each ``final
criminal matter'' or ``specified risk event,'' if the matter or
event has been reported on a Uniform Registration Form (i.e., Forms
U4, U5, U6, BD), please provide the subject party and that person's
CRD number. If the matter or event has not been reported on a
Uniform Registration Form, please also provide a description of the
nature of the activity, any findings, any fine or other
dispositions.
The applicant would be able to provide the information requested in
proposed Question 5.b. in a chart identical to the chart proposed to
follow Question 5.a. in Form CMA's Standard 1 section.\26\
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\26\ See Exhibit 3 (Form CMA, Standard 3, chart accompanying
Proposed Question 5.b., within the category titled ``Explain how
this Standard is met'').
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The proposed conforming changes to Standard 3 of Form CMA are
intended to collect necessary information efficiently. Proposed
Questions 5.a. and 5.b. and the accompanying chart to Form CMA's
Standard 3 section would reduce the burden on firms to provide FINRA
with duplicate information already provided earlier on Form CMA or
separately in a Uniform Registration Form. If the matter or event has
already been described in Form CMA's Standard 1 section, the applicant
would be able to cross-reference that description. If the matter or
event was not already described in Form CMA's Standard 1 section but
was already reported on a Uniform Registration Form, the applicant
would only need to provide the subject party and that person's CRD
number. If the matter or event has not been reported in Form CMA's
Standard 1 section or on a Uniform Registration Form, the applicant
would also be required to provide a description of the nature of the
activity, any findings, any fine or other dispositions, to support
compliance with Rule 1017(a)(7). Further, requiring firms to provide a
CRD number would enable FINRA to facilitate FINRA's coordination of
information entered on Form CMA with information that has been entered
on a Uniform Registration Form or provided in a related materiality
consultation, and therefore enable FINRA to more efficiently gather
relevant information.
C. Other Proposed Non-Substantive, Technical Amendments to Form CMA
FINRA is also proposing several non-substantive, technical changes
to Form CMA. First, FINRA is proposing to include in Form CMA's
Standard 1 section and Standard 3 section a reminder to the applicant
that, ``[e]very Form U4 shall be kept current at all times by
supplementary amendments to the original Form U4. See FINRA By-Laws,
Art. V, Sec. 2(c).'' Form U4 is one of the ``Uniform Registration
Forms,'' as defined by amendments to the MAP rules.\27\ Second, FINRA
is proposing to amend Form CMA's ``Type of Continuing Membership
Application'' section to change ``comprising'' to
[[Page 49398]]
``composing'' to match the language used in Rule 1017(a)(3).\28\
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\27\ See paragraph (r) under Rule 1011 (defining ``Uniform
Registration Forms'') as amended by SR-FINRA-2020-011, supra note 5.
\28\ See Rule 1017(a)(3) (requiring, in pertinent part, a member
to file an application for approval of ``direct or indirect
acquisitions or transfers of 25 percent or more in the aggregate of
the member's assets or any asset, business or line of operation that
generates revenues composing 25 percent or more in the aggregate of
the member's earnings measured on a rolling 36-month basis'')
(Emphasis added).
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Finally, FINRA is proposing to add within Form CMA's Standard 1
section new Questions 4.a., 4.b. and 4.c that would efficiently collect
the information needed to monitor for compliance with Rule 1017(a)(6).
Proposed Questions 4.a. and 4.b. would ask the applicant to indicate
whether the CMA is required under Rule 1017(a)(6)(A) or Rule
1017(a)(6)(B), respectively.\29\ If the applicant answers ``yes'' to
either question, then proposed Question 4.c. would prompt the applicant
to list, for each covered pending arbitration claim, unpaid arbitration
award, or unpaid settlement related to an arbitration, the subject
party and that person's CRD number in a chart. FINRA believes that
adding these proposed questions and the accompanying chart to Form
CMA's Standard 1 section would efficiently collect the information
needed to monitor for compliance with Rule 1017(a)(6).\30\ The proposed
questions would also achieve parity with the manner FINRA is proposing
to elicit information needed to monitor for compliance with Rule
1017(a)(7). Additionally, proposed Question 4 would allow FINRA to
readily coordinate information entered on Form CMA with information
that may have been entered on a Uniform Registration Form or provided
in a materiality consultation.
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\29\ See generally Exhibit 3 (Form CMA, Standard 1, proposed
Questions 4, 4.a., 4.b., 4.c. and accompanying chart, within the
category titled ``Overview of the proposed change'').
\30\ The requested information is similar to the information
that member firms would provide in a materiality consultation
pursuant to Rule 1017(a)(6). See Rule 1017(a)(6)(A) and (B)
(providing that the written request for a materiality consultation
``must address the issues that are central to the materiality
consultation''); see also Checklist for Mandatory Materiality
Consultations Under Rule 1017(a)(6), https://www.finra.org/rules-guidance/guidance/materiality-consultation-process/checklist-under-rule-1017a6 (providing guidance to firms to provide, among other
things, the name, title and CRD number of associated persons with a
covered pending arbitration claim, unpaid arbitration award or
unpaid settlement related to an arbitration).
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change on
September 1, 2021, to coincide with the effective date of the
amendments to the MAP rules as announced in Regulatory Notice 21-
09.\31\ The proposed changes to Form CMA conform to the recently
amended MAP rules. To facilitate member firm compliance with the
amended rules on the date they become effective, it is necessary for
the amendments to Form CMA to become effective on the same date.
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\31\ FINRA notes that the proposed rule change would impact all
members, including members that have elected to be treated as
capital acquisition brokers (``CABs''), given that CAB Rule 116
(Application for Approval of Change in Ownership, Control, or
Business Operations) incorporates, by reference, Rule 1017, which
requires that a member's application for approval of changes to its
ownership, control, or business operations include a Form CMA. See
Rule 1017(b)(2).
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2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\32\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
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\32\ 15 U.S.C. 78o-3(b)(6).
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The proposed changes to Form CMA will conform the form to the
amendments to Rule 1017(a)(7), as described in the SEC Order. The
proposed changes to Form CMA will also help ensure that applicants for
continuing membership provide the information and documentation to
produce a complete application package for FINRA's review.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. FINRA's recent amendments to
the MAP rules, which specify additional events that require a CMA for
FINRA's approval, necessitate conforming changes to the sections of
Form CMA pertaining to the type of CMA, Standard 1 and Standard 3. The
proposed conforming changes--i.e., listing in Form CMA's ``Type of
Continuing Membership Application'' section all of the events under
Rule 1017(a) that require a member to file Form CMA, and incorporating
in Form CMA's Standard 1 and Standard 3 sections questions that would
require the applicant to provide information about an individual's
``final criminal matters'' and ``specified risk events'' that is
necessary to support compliance with Rule 1017(a)(7)--are derived from,
and effectuate, recent amendments to the MAP rules concerning persons
with a significant history of misconduct and the broker-dealers that
employ them, as described in the SEC Order. In addition, the proposed
changes to Form CMA's Standard 1 section pertaining to Rule 1017(a)(6)
would efficiently collect the information needed to monitor for
compliance with that rule in the same manner that FINRA proposes to
collect information needed to monitor for compliance with Rule
1017(a)(7). FINRA considered and discussed the potential economic
impact of the recent amendments in File No. SR-FINRA-2020-011,
including the burden imposed on some applicants to seek a materiality
consultation with FINRA, and noted the potential requirement to file a
Form CMA and certain associated costs.\33\ FINRA believes that the
proposed conforming changes to Form CMA and the proposed technical
changes described herein would not result in new material economic
effects.
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\33\ See Securities Exchange Act Release No. 88600 (April 8,
2020), 85 FR 20745, 20755-62 (April 14, 2020) (Notice of Filing of
File No. SR-FINRA-2020-011).
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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 \34\ and Rule 19b-
4(f)(6) thereunder.\35\
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\34\ 15 U.S.C. 78s(b)(3)(A).
\35\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\36\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. FINRA has requested
that the Commission waive the 30-day operative delay requirement so
that the proposed rule change may become operative on September 1,
2021. The Commission hereby grants the request. The
[[Page 49399]]
Commission finds that the proposed changes to Form CMA conform to the
recently amended MAP rules.\37\ The Commission therefore finds that the
proposed rule change is consistent with the goals set forth by the
Commission when it approved amendments to the MAP rules as described in
File No. SR-FINRA-2020-011, which become effective on September 1,
2021.\38\ The Commission finds that waiving the 30-day operative delay
would facilitate firm compliance with the amended MAP rules on the date
they become effective.\39\ Therefore, the Commission believes it is
consistent with the protection of investors and the public interest to
waive the 30-day operative delay requirement. Therefore the Commission
designates the proposed rule change as operative on September 1, 2021.
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\36\ 17 CFR 240.19b-4(f)(6)(iii).
\37\ See supra note 5.
\38\ Id.
\39\ Similarly, the Commission finds that the non-substantive
and technical changes to Form CMA are consistent with the protection
of investors and the public interest.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2021-020 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2021-020. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly.
All submissions should refer to File Number SR-FINRA-2021-020 and
should be submitted on or before August 23, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-18945 Filed 9-1-21; 8:45 am]
BILLING CODE 8011-01-P
