Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish a Short-Form Membership Application Process and Partial Fee Waiver for Certain Firms Applying Due to Amended Exchange Act Rule 15b9-1, 77384-77388 [2023-24759]

Download as PDF 77384 Federal Register / Vol. 88, No. 216 / Thursday, November 9, 2023 / Notices effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6) 8 thereunder. 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 under Section 19(b)(2)(B) 9 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2023–52 on the subject line. ddrumheller on DSK120RN23PROD with NOTICES1 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–2023–52. 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 8 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) 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. The Exchange has satisfied this requirement. 9 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:22 Nov 08, 2023 Jkt 262001 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 the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSEAMER–2023–52 and should be submitted on or before November 30, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–24757 Filed 11–8–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98850; File No. SR–FINRA– 2023–014] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish a ShortForm Membership Application Process and Partial Fee Waiver for Certain Firms Applying Due to Amended Exchange Act Rule 15b9–1 November 3, 2023. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 30, 2023, 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 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 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 adopt (1) FINRA Interpretive Material 1013–3 (‘‘IM–1013–3’’) that would set forth a short-form membership application process for firms that apply for FINRA membership due to the amendments to Exchange Act Rule 15b9–1,4 adopted by the Commission on August 23, 2023; 5 and (2) FINRA Interpretive Material Section 4(e) of Schedule A to the FINRA By-Laws (‘‘IM-Section 4(e)’’) that would provide a partial waiver of the new membership application fee to those firms that are eligible to apply for FINRA membership pursuant to proposed IM–1013–3. Proposed IM– 1013–3 and IM-Section 4(e) would be available only to SEC-registered nonFINRA member firms that apply for FINRA membership due to the Commission’s Exchange Act Rule 15b9– 1 amendments and, as of August 23, 2023, have been a member of a national securities exchange with which FINRA has had a regulatory service agreement (‘‘RSA’’) for the 12-month period prior to August 23, 2023 (‘‘Eligible Firms’’). 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. 4 17 CFR 240.15b9–1. Securities Exchange Act Release No. 98202 (August 23, 2023), 88 FR 61850 (September 7, 2023). 5 See E:\FR\FM\09NON1.SGM 09NON1 Federal Register / Vol. 88, No. 216 / Thursday, November 9, 2023 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On August 23, 2023, the Commission adopted amendments to Exchange Act Rule 15b9–1 that narrowed the exemption from membership in a registered national securities association (‘‘Association’’) for certain SECregistered brokers or dealers that effect securities transactions other than on a national securities exchange of which they are a member.6 Under amended Exchange Act Rule 15b9–1, a broker or dealer that effects securities transactions other than on a national securities exchange of which it is a member is exempt from Association membership if such broker or dealer (1) is a member of a national securities exchange; (2) carries no customer accounts; and (3) such transactions result solely from orders that are routed by a national securities exchange of which it is a member to comply with order protection regulatory requirements, or are solely for the purpose of executing the stock leg of a stock-option order.7 Due to the amendments, certain existing SEC-registered brokers or dealers will no longer qualify for the exemption from Association membership and must become FINRA members.8 The Commission has announced an effective date of November 6, 2023, and a compliance date of September 6, 2024. ddrumheller on DSK120RN23PROD with NOTICES1 Application Review Process for New FINRA Membership Under FINRA Rule 1013 (New Member Application and Interview) and Application Filing Fee An entity seeking to become a new FINRA member firm must undergo an application process that typically begins by filing Form NMA (Application for New Membership) with FINRA in accordance with Rule 1013.9 FINRA Rule 1014 (Department Decision) provides that after considering the application, a membership interview, other information and documents provided by the applicant or obtained by FINRA, and the public interest and protection of investors, FINRA must determine whether the applicant meets the standards for admission.10 Under Rule 1014, FINRA must render a 6 See supra note 5. CFR 240.15b9–1. 8 FINRA is currently the only registered national securities association. 9 A firm seeking new FINRA membership must also, among other requirements, provide FINRA with the documents and information outlined in Rule 1013(a)(1)(B) through (R). 10 See generally Rule 1014(a). 7 17 VerDate Sep<11>2014 18:22 Nov 08, 2023 Jkt 262001 decision on a new membership application within 180 days after the application is filed (or such later date as FINRA and the applicant have agreed in writing).11 When the applicant submits Form NMA, it must also submit the appropriate filing fee pursuant to Section 4(e) of Schedule A to the FINRA By-Laws. As described below, FINRA is proposing to establish a short-form membership application process for Eligible Firms and provide for a partial waiver of the new membership application fee. Short-Form Membership Application Process In lieu of completing Form NMA and the other requirements under Rule 1013, including the new membership interview, proposed IM–1013–3 would allow an Eligible Firm to undergo a new membership application process that would permit completing a short-form application. An Eligible Firm would otherwise remain subject to all applicable FINRA rules, including the provisions of the FINRA Rule 1000 Series (Membership Application and Associated Person Registration).12 FINRA recognizes that Eligible Firms have already undergone a membership application and review process with at least one national securities exchange to determine whether these firms were fit for membership. In addition, FINRA currently has substantial information about and experience with these firms and therefore is familiar with their businesses and associated risks (e.g., operational risks, market risk, market integrity risk) by virtue of the regulatory services FINRA provides pursuant to the RSAs it has with the national securities exchanges of which Eligible Firms are members.13 For example, FINRA 11 Pursuant to FINRA Rule 1015 (Review by National Adjudicatory Council), an applicant may file a written request for review of FINRA’s decision with the National Adjudicatory Council. 12 While FINRA typically has 180 days after a firm submits a new membership application to issue a decision, absent any factors that might prompt a request for additional information or for a full membership application, FINRA anticipates that it can process most applications for Eligible Firms and issue a decision in line with, or in many cases more quickly than, FINRA’s current FastTrack Review process timeframe for eligible applications. Under the Fast-Track Review process, FINRA aims to process eligible full membership applications within 100 days. See infra note 14. 13 FINRA already has access to most, if not all, documents and information that would be required of these Eligible Firms during the membership application process. For example, by virtue of the regulatory services FINRA provides pursuant to the RSAs and related Central Registration Depository (‘‘Web CRD®’’) agreements it has with the national securities exchanges of which Eligible Firms are members, FINRA has access to, among other documents and information, Forms BD, Forms U4 for all registered persons and principals and other PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 77385 already conducts exams of Eligible Firms pursuant to an RSA, including trading-related exams for most of these firms. FINRA also provides, among other regulatory services, cross-market surveillance, investigations and disciplinary services pursuant to those RSAs. Some of the Eligible Firms are also affiliates of member firms. For these reasons, FINRA believes an abbreviated, short-form membership application process is appropriate for the Eligible Firms and that, in most cases, FINRA can effectively determine whether an Eligible Firm meets the membership standards in Rule 1014 without requiring submission of a Form NMA, provision of additional information or engaging in a formal interview with the firm. Nonetheless, depending on particular facts and circumstances, FINRA may find it necessary to obtain additional information to evaluate an Eligible Firm for membership. To that end, proposed IM–1013–3 would provide that FINRA, in the public interest and for the protection of investors, may require an Eligible Firm to provide FINRA with additional information or documents or meet any other requirement pursuant to Rule 1013, or to apply for membership pursuant to the full application and interview process under Rule 1013.14 In addition, proposed IM–1013–3 would provide that if an Eligible Firm’s application for FINRA membership seeks to materially expand or change the firm’s business operations, such firm would be required to apply for new FINRA membership pursuant to the full application and interview process under Rule 1013, including completing Form NMA and submitting the appropriate application fee set forth in Section 4(e) of Schedule A to the FINRA By-Laws.15 Proposed IM–1013–3 would also require an Eligible Firm to submit the information available on Web CRD®, as well as Risk Assessment Reports, financial filings such as FOCUS Reports and Annual Reports and most recent Examination Reports with accompanying files and dispositions. 14 Factors that might prompt a request for additional information or a full membership application could include, for example, whether an Eligible Firm’s associated person is subject to a statutory disqualification or there are regulatory gaps identified that such firm would need to address to come into compliance with FINRA rules. 15 If a firm is approved for FINRA membership and subsequently contemplates a business expansion to include activities beyond the scope underlying the new membership approval or a material change in business operations as that term is defined in paragraph (m) under FINRA Rule 1011 (Definitions), then such firm must apply for approval for a change in business operations pursuant to FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations) and would be subject to the appropriate fee pursuant to Schedule A to the FINRA By-Laws. E:\FR\FM\09NON1.SGM 09NON1 77386 Federal Register / Vol. 88, No. 216 / Thursday, November 9, 2023 / Notices short-form application to FINRA at least 120 calendar days before the amended Exchange Act Rule 15b9–1 compliance date to provide FINRA with the time to process a firm’s short-form membership application before the amended Exchange Act Rule 15b9–1 compliance date—unless FINRA, in its discretion, agrees to accept an application after this deadline but before the amended Exchange Act Rule 15b9–1 compliance date.16 As stated above, the Commission has announced a compliance date of September 6, 2024. Partial Membership Application Fee Waiver As stated above, the fee for an application for new membership, submitted through Form NMA, is typically subject to the fee structure set forth under Section 4(e) of Schedule A to the FINRA By-Laws.17 FINRA is proposing a partial waiver of the new membership application fee for a shortform application submitted pursuant to proposed IM–1013–3. Proposed IMSection 4(e) would assess one-half the applicable membership application fee set forth in Section 4(e) of Schedule A to the FINRA By-Laws. FINRA believes a partial fee waiver is appropriate with respect to the review of a short-form application submitted by an Eligible Firm because, as stated above, FINRA has substantial information about and experience with these firms and is familiar with their business and associated risks by virtue of the regulatory services FINRA provides pursuant to RSAs with the national securities exchanges of which the Eligible Firms are members. As such, FINRA will not need to obtain the same amount of information from an Eligible Firm that applies with the short-form application or dedicate the same resources to evaluate such an application as it would in other cases. However, as stated above, if FINRA determines that an Eligible Firm must undergo the full application and interview process pursuant to Rule 1013, such firm shall be assessed the full membership application fee set ddrumheller on DSK120RN23PROD with NOTICES1 16 As stated above, certain factors may prompt a request for additional information or for a full membership application, which could prolong the time needed for FINRA to process a firm’s application and issue a decision. Therefore, FINRA would encourage firms to apply for membership pursuant to proposed IM–1013–3 even earlier than 120 days before the compliance date of amended Exchange Act Rule 15b9–1. 17 Pursuant to Section 4(e) of Schedule A to the FINRA By-Laws, the fees associated with a new FINRA membership application can vary, including a one-time application fee ranging from $7,500 to $55,000, depending on the number of registered representatives associated with a firm. VerDate Sep<11>2014 18:22 Nov 08, 2023 Jkt 262001 forth in Section 4(e) of Schedule A to the FINRA By-Laws.18 FINRA has filed the proposed rule change for immediate effectiveness. FINRA will announce the implementation date of the proposed rule change in a Regulatory Notice. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,19 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, and must not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. FINRA believes the proposed rule change would facilitate efficient and expedited processing of membership applications from the Eligible Firms, while maintaining investor protection by ensuring that these firms meet the applicable standards for FINRA membership. As stated above, the Eligible Firms have already undergone a membership application and review process with at least one national securities exchange to determine whether these firms were fit for membership. In addition, FINRA has substantial information about and experience with these firms and therefore is familiar with their businesses and associated risks (e.g., operational risks, market risk, market integrity risk) by virtue of the regulatory services FINRA provides pursuant to the RSAs it has with the national securities exchanges of which Eligible Firms are members. FINRA also retains the ability to request additional documents or information from an Eligible Firm or to require a firm to undergo the full application and interview process pursuant to Rule 1013, which further protects investors and the public interest. FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(5) of the Act,20 which requires, among other things, that FINRA rules provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system that FINRA operates or controls. FINRA believes that the proposed partial waiver of the membership application fee, which 18 See FINRA By-Laws, Schedule A, Section 4(e). U.S.C. 78o–3(b)(6). 20 15 U.S.C. 78o–3(b)(5). 19 15 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 would be available to all Eligible Firms that qualify to apply for new FINRA membership pursuant to proposed IM– 1013–3, is consistent with an equitable allocation of reasonable fees. FINRA believes the proposed partial fee waiver reflects an equitable allocation of reasonable fees considering the streamlined review process contemplated in the short-form membership application process. As discussed above, to facilitate this streamlined membership application process, FINRA is able to leverage the substantial information about and experience with these firms gained by virtue of the regulatory services FINRA provides pursuant to RSAs with the national securities exchanges of which these firms are members. As such, FINRA would not need to obtain the same amount of information from an Eligible Firm applicant that it would from a non-Eligible Firm applicant. Moreover, the review process would also be streamlined for an Eligible Firm applicant relative to a non-Eligible Firm applicant. Thus, it is equitable to apply the fee waiver only to the Eligible Firms. 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. Economic Impact Assessment (a) Regulatory Need As discussed above, as a result of amendments to Exchange Act Rule 15b9–1, certain SEC-registered brokers or dealers that effect securities transactions other than on a national securities exchange of which they are a member will no longer qualify for an exemption from Association membership. FINRA understands that as a result, approximately 62 firms may seek to become FINRA members by the compliance date of amended Exchange Act Rule 15b9–1.21 FINRA further understands that most, if not all, of these firms meet the standards for 21 The Commission estimated that, as of April 2023, there were 64 firms that were SEC-registered broker-dealers and exchange members but not FINRA members, and that such firms have forgone FINRA membership presumably in reliance on Exchange Act Rule 15b9–1. See Securities Exchange Act Release No. 98202 (August 23, 2023), 88 FR 61850, 61853–54 (September 7, 2023) (Exemption for Certain Exchange Members; Final Rule). The actual number of firms that may ultimately seek FINRA membership due to the narrowed exemption may change based on several factors. For example, since the Commission’s estimate in April 2023, some firms have terminated their status as an SECregistered broker-dealer or have already become FINRA members. E:\FR\FM\09NON1.SGM 09NON1 Federal Register / Vol. 88, No. 216 / Thursday, November 9, 2023 / Notices Eligible Firms as defined above. FINRA can, in most cases, effectively determine whether an Eligible Firm meets the membership standards in Rule 1014 without requiring submission of a Form NMA or subjecting such a firm to the other application and interview requirements of Rule 1013.22 The proposed rule change to implement the short-form membership application process would allow FINRA to review membership applications from Eligible Firms efficiently while maintaining investor protection. The partial membership application fee waiver is aligned with the proposed short-form membership application process and the related streamlined review process. iii. Anticipated Competitive Effects ii. Anticipated Costs Relative to the baseline, FINRA anticipates little or no additional risks to market integrity or investors. FINRA will obtain additional information or documents or require a firm to go through the regular NMA process if such is in the public interest and for the protection of investors. A firm that seeks to materially expand or change its business operations when applying Relative to the baseline in which Eligible Firms would go through the full application and interview process and pay the full membership application fee, FINRA anticipates minimal competitive effects, if any. A streamlined membership application process for Eligible Firms would provide them certainty that they will be able to continue their business in compliance with amended Exchange Act Rule 15b9– 1. Such certainty would mitigate any concerns regarding their ability to compete in the security markets without interruption. In addition, Eligible Firms that successfully become FINRA members through the short-form membership application process would retain the resources that they would have otherwise spent on the full application and interview process and would pay only one-half of the membership application fee. These firms may use these resources for operational or investment purposes. Regarding the membership application fee, however, FINRA anticipates that the median amount waived would be $6,250.23 FINRA does not believe that this amount would significantly impact an Eligible Firm’s business. Similarly, with respect to firms that seek FINRA membership but do not meet the proposed definition of ‘‘Eligible Firm’’ and therefore are not able to avail themselves of the short-form membership application and partial fee waiver, FINRA does not anticipate that the existence of the proposal would deter such firms from applying for FINRA membership or place them at a significant disadvantage relative to Eligible Firms. Thus, FINRA expects that the effect of the proposed rule change on industry structure and competition would be insignificant. 22 The full membership application process may be required in some cases. See supra note 14. 23 The average amount waived is anticipated to be $6,840 and ranges from $3,750 to $15,000. (b) Economic Baseline The economic baseline for the proposed rule change includes the full application and interview process provided in Rule 1013, the membership application fee set forth in Section 4(e) of Schedule A to the FINRA By-Laws, and the recent amendments to Exchange Act Rule 15b9–1. FINRA understands that approximately 62 firms may seek to become FINRA members by the compliance date for amended Exchange Act Rule 15b9–1. (c) Economic Impacts i. Anticipated Benefits Eligible Firms that successfully become FINRA members through the short-form membership application process would benefit from financial and non-financial cost savings given that these firms would not be required to provide documents and other information that are required under the full application and interview process. Eligible Firms would also receive a financial benefit from paying only onehalf of the membership application fee. Becoming FINRA members more quickly would also resolve earlier any uncertainty firms may have about being able to join FINRA by the Commission’s compliance date for its amendments to Exchange Act Rule 15b9–1. ddrumheller on DSK120RN23PROD with NOTICES1 would be required to apply for FINRA membership pursuant to all requirements under Rule 1013. A firm that is approved for FINRA membership and subsequently contemplates a business expansion to include activities beyond the scope underlying the new membership approval or a material change in business operations would be required to apply for approval for a change in business operations pursuant to Rule 1017 and be subject to the appropriate fee pursuant to Schedule A to the FINRA By-Laws. VerDate Sep<11>2014 18:22 Nov 08, 2023 Jkt 262001 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 77387 (d) Alternatives Considered FINRA considered charging the full membership application fee for Eligible Firms. However, FINRA believes a partial membership application fee waiver is appropriate because, as stated above, FINRA would not need to obtain the same amount of information from an Eligible Firm applicant or dedicate the same resources to evaluate such applicant as it would for a typical new applicant because FINRA is able to leverage the substantial information about and experience with these firms gained by virtue of the regulatory services FINRA provides pursuant to the RSAs with the national securities exchanges of which the Eligible Firms are members. 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 after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 24 and Rule 19b–4(f)(6) 25 thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 26 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),27 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. FINRA has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative upon filing. FINRA proposes to make the proposed rule change operative on the 24 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. FINRA has satisfied this requirement. 26 17 CFR 240.19b–4(f)(6). 27 17 CFR 240.19b–4(f)(6)(iii). 25 17 E:\FR\FM\09NON1.SGM 09NON1 77388 Federal Register / Vol. 88, No. 216 / Thursday, November 9, 2023 / Notices date of filing to allow Eligible Firms to apply for FINRA membership pursuant to proposed IM–1013–3 beginning on, or as close as possible to, the November 6, 2023 effective date of amended Exchange Act Rule 15b9–1. FINRA stated that while under the proposed rule change Eligible Firms must apply for membership at least 120 days before the September 6, 2024 compliance date of amended Exchange Act Rule 15b9–1, some firms have already inquired about beginning the application process. For those firms that wish to apply close to the effective date, this will also provide FINRA with additional time to process such Eligible Firms’ applications and provide more certainty that they will be able to continue their business in compliance with amended Exchange Act Rule 15b9–1. For these reasons, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.28 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. All submissions should refer to file number SR–FINRA–2023–014. 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 the filing also will be available for inspection and copying at the principal office of FINRA. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–FINRA–2023–014 and should be submitted on or before November 30, 2023. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Sherry R. Haywood, Assistant Secretary. 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– FINRA–2023–014 on the subject line. ddrumheller on DSK120RN23PROD with NOTICES1 Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. 28 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 18:22 Nov 08, 2023 Jkt 262001 [FR Doc. 2023–24759 Filed 11–8–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98859; File No. SR–FINRA– 2023–015] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to Dissemination of Information on Individual Transactions in U.S. Treasury Securities and Related Fees November 3, 2023. PO 00000 CFR 200.30–3(a)(12). Frm 00132 Fmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to (1) amend FINRA Rules 6710 and 6750 to provide that FINRA will disseminate information on individual transactions in U.S. Treasury Securities that are Onthe-Run Nominal Coupons reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’) on an end-of-day basis with specified dissemination caps for large trades, and (2) amend FINRA Rule 7730 to include U.S. Treasury Securities within the existing fee structure for end-of-day and historic TRACE data. 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 On July 10, 2017,3 FINRA members began reporting information on transactions in U.S. Treasury 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Regulatory Notice 16–39 (October 2016); see also Securities Exchange Act Release No. 79116 (October 18, 2016), 81 FR 73167 (October 24, 2016) (Order Granting Accelerated Approval of File No. SR–FINRA–2016–027). 2 17 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 29 17 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 2, 2023, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Sfmt 4703 E:\FR\FM\09NON1.SGM 09NON1

Agencies

[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77384-77388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24759]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98850; File No. SR-FINRA-2023-014]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Establish a Short-Form Membership Application 
Process and Partial Fee Waiver for Certain Firms Applying Due to 
Amended Exchange Act Rule 15b9-1

November 3, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on October 30, 2023, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    FINRA is proposing to adopt (1) FINRA Interpretive Material 1013-3 
(``IM-1013-3'') that would set forth a short-form membership 
application process for firms that apply for FINRA membership due to 
the amendments to Exchange Act Rule 15b9-1,\4\ adopted by the 
Commission on August 23, 2023; \5\ and (2) FINRA Interpretive Material 
Section 4(e) of Schedule A to the FINRA By-Laws (``IM-Section 4(e)'') 
that would provide a partial waiver of the new membership application 
fee to those firms that are eligible to apply for FINRA membership 
pursuant to proposed IM-1013-3. Proposed IM-1013-3 and IM-Section 4(e) 
would be available only to SEC-registered non-FINRA member firms that 
apply for FINRA membership due to the Commission's Exchange Act Rule 
15b9-1 amendments and, as of August 23, 2023, have been a member of a 
national securities exchange with which FINRA has had a regulatory 
service agreement (``RSA'') for the 12-month period prior to August 23, 
2023 (``Eligible Firms'').
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    \4\ 17 CFR 240.15b9-1.
    \5\ See Securities Exchange Act Release No. 98202 (August 23, 
2023), 88 FR 61850 (September 7, 2023).
---------------------------------------------------------------------------

    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.

[[Page 77385]]

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

1. Purpose
    On August 23, 2023, the Commission adopted amendments to Exchange 
Act Rule 15b9-1 that narrowed the exemption from membership in a 
registered national securities association (``Association'') for 
certain SEC-registered brokers or dealers that effect securities 
transactions other than on a national securities exchange of which they 
are a member.\6\ Under amended Exchange Act Rule 15b9-1, a broker or 
dealer that effects securities transactions other than on a national 
securities exchange of which it is a member is exempt from Association 
membership if such broker or dealer (1) is a member of a national 
securities exchange; (2) carries no customer accounts; and (3) such 
transactions result solely from orders that are routed by a national 
securities exchange of which it is a member to comply with order 
protection regulatory requirements, or are solely for the purpose of 
executing the stock leg of a stock-option order.\7\ Due to the 
amendments, certain existing SEC-registered brokers or dealers will no 
longer qualify for the exemption from Association membership and must 
become FINRA members.\8\ The Commission has announced an effective date 
of November 6, 2023, and a compliance date of September 6, 2024.
---------------------------------------------------------------------------

    \6\ See supra note 5.
    \7\ 17 CFR 240.15b9-1.
    \8\ FINRA is currently the only registered national securities 
association.
---------------------------------------------------------------------------

Application Review Process for New FINRA Membership Under FINRA Rule 
1013 (New Member Application and Interview) and Application Filing Fee
    An entity seeking to become a new FINRA member firm must undergo an 
application process that typically begins by filing Form NMA 
(Application for New Membership) with FINRA in accordance with Rule 
1013.\9\ FINRA Rule 1014 (Department Decision) provides that after 
considering the application, a membership interview, other information 
and documents provided by the applicant or obtained by FINRA, and the 
public interest and protection of investors, FINRA must determine 
whether the applicant meets the standards for admission.\10\ Under Rule 
1014, FINRA must render a decision on a new membership application 
within 180 days after the application is filed (or such later date as 
FINRA and the applicant have agreed in writing).\11\ When the applicant 
submits Form NMA, it must also submit the appropriate filing fee 
pursuant to Section 4(e) of Schedule A to the FINRA By-Laws. As 
described below, FINRA is proposing to establish a short-form 
membership application process for Eligible Firms and provide for a 
partial waiver of the new membership application fee.
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    \9\ A firm seeking new FINRA membership must also, among other 
requirements, provide FINRA with the documents and information 
outlined in Rule 1013(a)(1)(B) through (R).
    \10\ See generally Rule 1014(a).
    \11\ Pursuant to FINRA Rule 1015 (Review by National 
Adjudicatory Council), an applicant may file a written request for 
review of FINRA's decision with the National Adjudicatory Council.
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Short-Form Membership Application Process
    In lieu of completing Form NMA and the other requirements under 
Rule 1013, including the new membership interview, proposed IM-1013-3 
would allow an Eligible Firm to undergo a new membership application 
process that would permit completing a short-form application. An 
Eligible Firm would otherwise remain subject to all applicable FINRA 
rules, including the provisions of the FINRA Rule 1000 Series 
(Membership Application and Associated Person Registration).\12\
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    \12\ While FINRA typically has 180 days after a firm submits a 
new membership application to issue a decision, absent any factors 
that might prompt a request for additional information or for a full 
membership application, FINRA anticipates that it can process most 
applications for Eligible Firms and issue a decision in line with, 
or in many cases more quickly than, FINRA's current Fast-Track 
Review process timeframe for eligible applications. Under the Fast-
Track Review process, FINRA aims to process eligible full membership 
applications within 100 days. See infra note 14.
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    FINRA recognizes that Eligible Firms have already undergone a 
membership application and review process with at least one national 
securities exchange to determine whether these firms were fit for 
membership. In addition, FINRA currently has substantial information 
about and experience with these firms and therefore is familiar with 
their businesses and associated risks (e.g., operational risks, market 
risk, market integrity risk) by virtue of the regulatory services FINRA 
provides pursuant to the RSAs it has with the national securities 
exchanges of which Eligible Firms are members.\13\ For example, FINRA 
already conducts exams of Eligible Firms pursuant to an RSA, including 
trading-related exams for most of these firms. FINRA also provides, 
among other regulatory services, cross-market surveillance, 
investigations and disciplinary services pursuant to those RSAs. Some 
of the Eligible Firms are also affiliates of member firms. For these 
reasons, FINRA believes an abbreviated, short-form membership 
application process is appropriate for the Eligible Firms and that, in 
most cases, FINRA can effectively determine whether an Eligible Firm 
meets the membership standards in Rule 1014 without requiring 
submission of a Form NMA, provision of additional information or 
engaging in a formal interview with the firm.
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    \13\ FINRA already has access to most, if not all, documents and 
information that would be required of these Eligible Firms during 
the membership application process. For example, by virtue of the 
regulatory services FINRA provides pursuant to the RSAs and related 
Central Registration Depository (``Web CRD[supreg]'') agreements it 
has with the national securities exchanges of which Eligible Firms 
are members, FINRA has access to, among other documents and 
information, Forms BD, Forms U4 for all registered persons and 
principals and other information available on Web CRD[supreg], as 
well as Risk Assessment Reports, financial filings such as FOCUS 
Reports and Annual Reports and most recent Examination Reports with 
accompanying files and dispositions.
---------------------------------------------------------------------------

    Nonetheless, depending on particular facts and circumstances, FINRA 
may find it necessary to obtain additional information to evaluate an 
Eligible Firm for membership. To that end, proposed IM-1013-3 would 
provide that FINRA, in the public interest and for the protection of 
investors, may require an Eligible Firm to provide FINRA with 
additional information or documents or meet any other requirement 
pursuant to Rule 1013, or to apply for membership pursuant to the full 
application and interview process under Rule 1013.\14\ In addition, 
proposed IM-1013-3 would provide that if an Eligible Firm's application 
for FINRA membership seeks to materially expand or change the firm's 
business operations, such firm would be required to apply for new FINRA 
membership pursuant to the full application and interview process under 
Rule 1013, including completing Form NMA and submitting the appropriate 
application fee set forth in Section 4(e) of Schedule A to the FINRA 
By-Laws.\15\
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    \14\ Factors that might prompt a request for additional 
information or a full membership application could include, for 
example, whether an Eligible Firm's associated person is subject to 
a statutory disqualification or there are regulatory gaps identified 
that such firm would need to address to come into compliance with 
FINRA rules.
    \15\ If a firm is approved for FINRA membership and subsequently 
contemplates a business expansion to include activities beyond the 
scope underlying the new membership approval or a material change in 
business operations as that term is defined in paragraph (m) under 
FINRA Rule 1011 (Definitions), then such firm must apply for 
approval for a change in business operations pursuant to FINRA Rule 
1017 (Application for Approval of Change in Ownership, Control, or 
Business Operations) and would be subject to the appropriate fee 
pursuant to Schedule A to the FINRA By-Laws.
---------------------------------------------------------------------------

    Proposed IM-1013-3 would also require an Eligible Firm to submit 
the

[[Page 77386]]

short-form application to FINRA at least 120 calendar days before the 
amended Exchange Act Rule 15b9-1 compliance date to provide FINRA with 
the time to process a firm's short-form membership application before 
the amended Exchange Act Rule 15b9-1 compliance date--unless FINRA, in 
its discretion, agrees to accept an application after this deadline but 
before the amended Exchange Act Rule 15b9-1 compliance date.\16\ As 
stated above, the Commission has announced a compliance date of 
September 6, 2024.
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    \16\ As stated above, certain factors may prompt a request for 
additional information or for a full membership application, which 
could prolong the time needed for FINRA to process a firm's 
application and issue a decision. Therefore, FINRA would encourage 
firms to apply for membership pursuant to proposed IM-1013-3 even 
earlier than 120 days before the compliance date of amended Exchange 
Act Rule 15b9-1.
---------------------------------------------------------------------------

Partial Membership Application Fee Waiver
    As stated above, the fee for an application for new membership, 
submitted through Form NMA, is typically subject to the fee structure 
set forth under Section 4(e) of Schedule A to the FINRA By-Laws.\17\ 
FINRA is proposing a partial waiver of the new membership application 
fee for a short-form application submitted pursuant to proposed IM-
1013-3. Proposed IM-Section 4(e) would assess one-half the applicable 
membership application fee set forth in Section 4(e) of Schedule A to 
the FINRA By-Laws. FINRA believes a partial fee waiver is appropriate 
with respect to the review of a short-form application submitted by an 
Eligible Firm because, as stated above, FINRA has substantial 
information about and experience with these firms and is familiar with 
their business and associated risks by virtue of the regulatory 
services FINRA provides pursuant to RSAs with the national securities 
exchanges of which the Eligible Firms are members. As such, FINRA will 
not need to obtain the same amount of information from an Eligible Firm 
that applies with the short-form application or dedicate the same 
resources to evaluate such an application as it would in other cases. 
However, as stated above, if FINRA determines that an Eligible Firm 
must undergo the full application and interview process pursuant to 
Rule 1013, such firm shall be assessed the full membership application 
fee set forth in Section 4(e) of Schedule A to the FINRA By-Laws.\18\
---------------------------------------------------------------------------

    \17\ Pursuant to Section 4(e) of Schedule A to the FINRA By-
Laws, the fees associated with a new FINRA membership application 
can vary, including a one-time application fee ranging from $7,500 
to $55,000, depending on the number of registered representatives 
associated with a firm.
    \18\ See FINRA By-Laws, Schedule A, Section 4(e).
---------------------------------------------------------------------------

    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA will announce the implementation date of the 
proposed rule change in a Regulatory Notice.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\19\ 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, and must not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers. FINRA 
believes the proposed rule change would facilitate efficient and 
expedited processing of membership applications from the Eligible 
Firms, while maintaining investor protection by ensuring that these 
firms meet the applicable standards for FINRA membership. As stated 
above, the Eligible Firms have already undergone a membership 
application and review process with at least one national securities 
exchange to determine whether these firms were fit for membership. In 
addition, FINRA has substantial information about and experience with 
these firms and therefore is familiar with their businesses and 
associated risks (e.g., operational risks, market risk, market 
integrity risk) by virtue of the regulatory services FINRA provides 
pursuant to the RSAs it has with the national securities exchanges of 
which Eligible Firms are members. FINRA also retains the ability to 
request additional documents or information from an Eligible Firm or to 
require a firm to undergo the full application and interview process 
pursuant to Rule 1013, which further protects investors and the public 
interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\20\ which requires, among 
other things, that FINRA rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that FINRA operates or 
controls. FINRA believes that the proposed partial waiver of the 
membership application fee, which would be available to all Eligible 
Firms that qualify to apply for new FINRA membership pursuant to 
proposed IM-1013-3, is consistent with an equitable allocation of 
reasonable fees. FINRA believes the proposed partial fee waiver 
reflects an equitable allocation of reasonable fees considering the 
streamlined review process contemplated in the short-form membership 
application process. As discussed above, to facilitate this streamlined 
membership application process, FINRA is able to leverage the 
substantial information about and experience with these firms gained by 
virtue of the regulatory services FINRA provides pursuant to RSAs with 
the national securities exchanges of which these firms are members. As 
such, FINRA would not need to obtain the same amount of information 
from an Eligible Firm applicant that it would from a non-Eligible Firm 
applicant. Moreover, the review process would also be streamlined for 
an Eligible Firm applicant relative to a non-Eligible Firm applicant. 
Thus, it is equitable to apply the fee waiver only to the Eligible 
Firms.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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.
Economic Impact Assessment
(a) Regulatory Need
    As discussed above, as a result of amendments to Exchange Act Rule 
15b9-1, certain SEC-registered brokers or dealers that effect 
securities transactions other than on a national securities exchange of 
which they are a member will no longer qualify for an exemption from 
Association membership. FINRA understands that as a result, 
approximately 62 firms may seek to become FINRA members by the 
compliance date of amended Exchange Act Rule 15b9-1.\21\ FINRA further 
understands that most, if not all, of these firms meet the standards 
for

[[Page 77387]]

Eligible Firms as defined above. FINRA can, in most cases, effectively 
determine whether an Eligible Firm meets the membership standards in 
Rule 1014 without requiring submission of a Form NMA or subjecting such 
a firm to the other application and interview requirements of Rule 
1013.\22\
---------------------------------------------------------------------------

    \21\ The Commission estimated that, as of April 2023, there were 
64 firms that were SEC-registered broker-dealers and exchange 
members but not FINRA members, and that such firms have forgone 
FINRA membership presumably in reliance on Exchange Act Rule 15b9-1. 
See Securities Exchange Act Release No. 98202 (August 23, 2023), 88 
FR 61850, 61853-54 (September 7, 2023) (Exemption for Certain 
Exchange Members; Final Rule). The actual number of firms that may 
ultimately seek FINRA membership due to the narrowed exemption may 
change based on several factors. For example, since the Commission's 
estimate in April 2023, some firms have terminated their status as 
an SEC-registered broker-dealer or have already become FINRA 
members.
    \22\ The full membership application process may be required in 
some cases. See supra note 14.
---------------------------------------------------------------------------

    The proposed rule change to implement the short-form membership 
application process would allow FINRA to review membership applications 
from Eligible Firms efficiently while maintaining investor protection. 
The partial membership application fee waiver is aligned with the 
proposed short-form membership application process and the related 
streamlined review process.
(b) Economic Baseline
    The economic baseline for the proposed rule change includes the 
full application and interview process provided in Rule 1013, the 
membership application fee set forth in Section 4(e) of Schedule A to 
the FINRA By-Laws, and the recent amendments to Exchange Act Rule 15b9-
1. FINRA understands that approximately 62 firms may seek to become 
FINRA members by the compliance date for amended Exchange Act Rule 
15b9-1.
(c) Economic Impacts
i. Anticipated Benefits
    Eligible Firms that successfully become FINRA members through the 
short-form membership application process would benefit from financial 
and non-financial cost savings given that these firms would not be 
required to provide documents and other information that are required 
under the full application and interview process. Eligible Firms would 
also receive a financial benefit from paying only one-half of the 
membership application fee. Becoming FINRA members more quickly would 
also resolve earlier any uncertainty firms may have about being able to 
join FINRA by the Commission's compliance date for its amendments to 
Exchange Act Rule 15b9-1.
ii. Anticipated Costs
    Relative to the baseline, FINRA anticipates little or no additional 
risks to market integrity or investors. FINRA will obtain additional 
information or documents or require a firm to go through the regular 
NMA process if such is in the public interest and for the protection of 
investors. A firm that seeks to materially expand or change its 
business operations when applying would be required to apply for FINRA 
membership pursuant to all requirements under Rule 1013. A firm that is 
approved for FINRA membership and subsequently contemplates a business 
expansion to include activities beyond the scope underlying the new 
membership approval or a material change in business operations would 
be required to apply for approval for a change in business operations 
pursuant to Rule 1017 and be subject to the appropriate fee pursuant to 
Schedule A to the FINRA By-Laws.
iii. Anticipated Competitive Effects
    Relative to the baseline in which Eligible Firms would go through 
the full application and interview process and pay the full membership 
application fee, FINRA anticipates minimal competitive effects, if any. 
A streamlined membership application process for Eligible Firms would 
provide them certainty that they will be able to continue their 
business in compliance with amended Exchange Act Rule 15b9-1. Such 
certainty would mitigate any concerns regarding their ability to 
compete in the security markets without interruption.
    In addition, Eligible Firms that successfully become FINRA members 
through the short-form membership application process would retain the 
resources that they would have otherwise spent on the full application 
and interview process and would pay only one-half of the membership 
application fee. These firms may use these resources for operational or 
investment purposes. Regarding the membership application fee, however, 
FINRA anticipates that the median amount waived would be $6,250.\23\ 
FINRA does not believe that this amount would significantly impact an 
Eligible Firm's business. Similarly, with respect to firms that seek 
FINRA membership but do not meet the proposed definition of ``Eligible 
Firm'' and therefore are not able to avail themselves of the short-form 
membership application and partial fee waiver, FINRA does not 
anticipate that the existence of the proposal would deter such firms 
from applying for FINRA membership or place them at a significant 
disadvantage relative to Eligible Firms. Thus, FINRA expects that the 
effect of the proposed rule change on industry structure and 
competition would be insignificant.
---------------------------------------------------------------------------

    \23\ The average amount waived is anticipated to be $6,840 and 
ranges from $3,750 to $15,000.
---------------------------------------------------------------------------

(d) Alternatives Considered
    FINRA considered charging the full membership application fee for 
Eligible Firms. However, FINRA believes a partial membership 
application fee waiver is appropriate because, as stated above, FINRA 
would not need to obtain the same amount of information from an 
Eligible Firm applicant or dedicate the same resources to evaluate such 
applicant as it would for a typical new applicant because FINRA is able 
to leverage the substantial information about and experience with these 
firms gained by virtue of the regulatory services FINRA provides 
pursuant to the RSAs with the national securities exchanges of which 
the Eligible Firms are members.

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 after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6) \25\ thereunder.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. FINRA proposes to make 
the proposed rule change operative on the

[[Page 77388]]

date of filing to allow Eligible Firms to apply for FINRA membership 
pursuant to proposed IM-1013-3 beginning on, or as close as possible 
to, the November 6, 2023 effective date of amended Exchange Act Rule 
15b9-1. FINRA stated that while under the proposed rule change Eligible 
Firms must apply for membership at least 120 days before the September 
6, 2024 compliance date of amended Exchange Act Rule 15b9-1, some firms 
have already inquired about beginning the application process. For 
those firms that wish to apply close to the effective date, this will 
also provide FINRA with additional time to process such Eligible Firms' 
applications and provide more certainty that they will be able to 
continue their business in compliance with amended Exchange Act Rule 
15b9-1. For these reasons, the Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and 
the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposal operative upon filing.\28\
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    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 17 CFR 240.19b-4(f)(6)(iii).
    \28\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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-2023-014 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-2023-014. 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 the filing also will be available for 
inspection and copying at the principal office of FINRA. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to file number SR-FINRA-2023-014 and should be submitted 
on or before November 30, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24759 Filed 11-8-23; 8:45 am]
BILLING CODE 8011-01-P
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