Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Rules 10.9261 and 10.9830, 86693-86697 [2023-27400]

Download as PDF Federal Register / Vol. 88, No. 239 / Thursday, December 14, 2023 / Notices 19(b)(3)(A)(iii) of the Act 37 and Rule 19b–4(f)(6) thereunder.38 Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.39 A proposed rule change filed under Rule 19b–4(f)(6) 40 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),41 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 42 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– NYSENAT–2023–28 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–NYSENAT–2023–28. 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 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–NYSENAT–2023–28 and should be submitted on or before January 4, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.43 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–27404 Filed 12–13–23; 8:45 am] BILLING CODE 8011–01–P lotter on DSK11XQN23PROD with NOTICES1 37 15 U.S.C. 78s(b)(3)(A)(iii). 38 17 CFR 240.19b–4(f)(6). 39 Rule 19b–4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 40 17 CFR 240.19b–4(f)(6). 41 17 CFR 240.19b–4(f)(6)(iii). 42 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:39 Dec 13, 2023 Jkt 262001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99122; File No. SR– NYSEARCA–2023–82] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Rules 10.9261 and 10.9830 December 8, 2023. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 27, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to harmonize Rules 10.9261 and 10.9830 with recent changes by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) that allow for video conference hearings under specified conditions. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 43 17 PO 00000 CFR 200.30–3(a)(12). Frm 00072 Fmt 4703 Sfmt 4703 86693 E:\FR\FM\14DEN1.SGM 14DEN1 86694 Federal Register / Vol. 88, No. 239 / Thursday, December 14, 2023 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to harmonize Rules 10.9261 (Evidence and Procedure in Hearing) and 10.9830 (Hearing) with recent changes by FINRA to its Rules 9261 and 9830 that allow for video conference hearings under specified conditions. lotter on DSK11XQN23PROD with NOTICES1 Background In 2019, NYSE Arca adopted disciplinary rules modeled on the text of the Rule 8000 and Rule 9000 Series of its affiliate NYSE American LLC (‘‘NYSE American’’) and the Rule 8000 Series and Rule 9000 Series of FINRA and the New York Stock Exchange LLC.4 The NYSE Arca disciplinary rules were implemented on May 27, 2019.5 In adopting disciplinary rules modeled on FINRA’s rules, NYSE Arca adopted the hearing and evidentiary processes set forth in Rule 10.9261 and in Rule 10.9830 for hearings in matters involving temporary and permanent cease and desist orders under the Rule 10.9800 Series. As adopted, the text of Rule 10.9261 is identical to the counterpart FINRA rule. Rule 10.9830 is also identical to FINRA’s counterpart rule, except for conforming and technical amendments.6 In 2020, given the spread of COVID– 19 and its effect on FINRA’s adjudicatory functions nationwide, FINRA filed a temporary rule change to grant FINRA’s Office of Hearing Officers (‘‘OHO’’) and the National Adjudicatory Council (‘‘NAC’’) the authority to conduct certain hearings by video conference if warranted by the current COVID–19-related public health risks posed by in-person hearings. Among the rules FINRA amended were FINRA Rules 9261 and 9830.7 4 See Securities Exchange Act Release No. 85639 (April 12, 2019), 84 FR 16346 (April 18, 2019) (SR– NYSEArca–2019–15) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Investigation, Disciplinary, Sanction, and Other Procedural Rules Modeled on the Rules of the Exchange’s Affiliate NYSE American LLC) (‘‘2019 Notice’’). 5 See NYSE Arca Equities RB–19–060 & NYSE Arca Options RB–19–02 (April 26, 2019). 6 See 2019 Notice, 84 FR at 16365 & 16373–4. 7 See Securities Exchange Act Release Nos. 83289 (September 2, 2020), 85 FR 55712 (September 9, 2020) (SR–FINRA–2020–027). FINRA also proposed to temporarily amend FINRA Rules 1015 and 9524. FINRA Rule 1015 governs the process by which an applicant for new or continuing membership can appeal a decision rendered by FINRA’s Department of Member Supervision under FINRA Rule 1014 or 1017 and request a hearing which would be conducted by a subcommittee of the NAC. See id. The Exchange has not adopted FINRA Rule 1015. VerDate Sep<11>2014 17:39 Dec 13, 2023 Jkt 262001 In its filing, FINRA represented that its protocol for conducting hearings by video conference would ensure that such hearings maintain a fair process for the parties by, among other things, FINRA’s use of a high quality, secure and user-friendly video conferencing service and provision of thorough instructions, training and technical support to all hearing participants.8 According to FINRA, the changes were a reasonable interim solution to allow FINRA’s critical adjudicatory processes to continue to function while protecting the health and safety of hearing participants.9 Given that FINRA and OHO administer disciplinary hearings on the Exchange’s behalf pursuant to a regulatory services agreement (‘‘RSA’’),10 and that the public health concerns addressed by FINRA’s amendments applied equally to the Exchange’s disciplinary hearings, in 2020 the Exchange also temporarily amended its disciplinary rules to allow virtual hearings.11 Both FINRA 12 and FINRA Rule 9524 governs the process by which a statutorily disqualified member firm or associated person can appeal the Department’s recommendation to deny a firm or sponsoring firm’s application to the NAC. See id. Under the Exchange’s version of Rule 9524, if the Chief Regulatory Officer rejects the application, the member organization or applicant may request a review by the Exchange Board of Directors. This differs from FINRA’s process, which provides for a hearing before the NAC and further consideration by the FINRA Board of Directors. 8 See 85 FR at 55713. 9 See id. 10 FINRA’s OHO administers all aspects of Exchange adjudications, including assigning hearing officers to serve as NYSE Arca hearing officers. A hearing officer from OHO will, among other things, preside over the disciplinary hearing, select and chair the hearing panel, and prepare and issue written decisions. The Chief or Deputy Hearing Officer for all Exchange disciplinary hearings are currently drawn from OHO and are all FINRA employees. The Exchange believes that OHO will utilize the same video conference protocol and processes for Exchange matters under the RSA as it proposes for FINRA matters. 11 See Securities Exchange Act Release No. 90088 (October 5, 2020), 85 FR 64186 (October 9, 2020) (SR–NYSEArca–2020–85). 12 See Securities Exchange Act Release No. 90619 (December 9, 2020), 85 FR 81250 (December 15, 2020) (SR–FINRA–2020–042); Securities Exchange Act Release No. 91495 (April 7, 2021), 86 FR 19306 (April 13, 2021) (SR–FINRA–2021–006); Securities Exchange Act Release No. 92685 (August 17, 2021), 86 FR 47169 (August 23, 2021) (SR–FINRA–2021– 019); Securities Exchange Act Release No. 93758 (December 13, 2021), 86 FR 71695 (December 17, 2021) (SR–FINRA–2021–31); Securities Exchange Act Release No. 94430 (March 16, 2022), 87 FR 16262 (March 22, 2022) (SR–FINRA–2022–004); Securities Exchange Act Release No. 95281 (July 14, 2022), 87 FR 43335 (July 20, 2022) (SR–FINRA– 2022–018); Securities Exchange Act Release No. 96107 (October 19, 2022), 87 FR 64526 (October 25, 2022) (SR–FINRA–2022–029); and Securities Exchange Act Release No. 96746 (January 25, 2023), 88 FR 6346 (January 31, 2023) (SR–FINRA–2023– 001). PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 the Exchange 13 extended the temporary relief several times due to the continuing public health risks and logistical challenges related to COVID– 19, including whether hearing participants could safely travel and abide by state or local quarantine requirements. The Exchange’s temporary amendments to Rules 10.9261 and 10.9830 expired on April 30, 2023.14 Recently, the Commission approved FINRA’s proposal to make the temporary amendments regarding video conference hearings permanent, with some modifications, to permit the use of video conferences for reasons beyond COVID–19.15 Specifically, FINRA amended, among other rules, FINRA Rules 9261 and 9830 to extend OHO’s authority to order hearings by video conference to other similar situations in which proceeding in person could endanger the health or safety of the participant or alternatively would be impracticable (e.g., an uncommon situation or extraordinary circumstances such as a natural disaster or terrorist attack that caused travel to be cancelled for an extended period of time).16 As approved, OHO has discretion to determine whether the circumstances for a video hearing have been met and can act quickly if a future unexpected event impairs their ability to conduct in13 See Securities Exchange Act Release No. 90820 (December 30, 2020), 86 FR 647 (January 6, 2021) (SR–NYSEArca–2020–116); Securities Exchange Act Release No. 91633 (April 22, 2021), 86 FR 22474 (April 28, 2021) (SR–NYSEArca–2021–27); Securities Exchange Act Release No. 92909 (September 9, 2021), 86 FR 51415 (September 15, 2021) (SR–NYSEArca–2021–76); Securities Exchange Act Release No. 93918 (January 6, 2022), 87 FR 1810 (January 12, 2022) (SR–NYSEArca– 2021–107); Securities Exchange Act Release No. 94663 (April 11, 2022), 87 FR 22587 (April 15, 2022) (SR–NYSEArca–2022–18); Securities Exchange Act Release No. 95475 (August 11, 2022), 87 FR 50673 (August 17, 2022) (SR–NYSEArca– 2022–44); Securities Exchange Act Release No. 96259 (November 8, 2022), 87 FR 68536 (November 15, 2022) (SR–NYSEArca–2022–73); and Securities Exchange Act Release No. 96871 (February 9, 2023), 88 FR 9915 (February 15, 2023) (SR–NYSEArca– 2023–10). 14 See Securities Exchange Act Release No. 96871 (February 9, 2023), 88 FR 9915 (February 15, 2023) (SR–NYSEArca–2023–10) (extending the expiration date of the temporary rule amendments to, among other rules, FINRA Rules 9261 and 9830 from January 31, 2023 to April 30, 2023). The temporary amendments expired on April 30, 2023, because the Exchange did not file another proposed rule change again extending the temporary amendments beyond that date. See id. at 9916. 15 See Securities Exchange Act Release Nos. 98029 (August 4, 2023), 88 FR 51879 (August 4, 2023) (SR–FINRA–2023–008) (Order Approving a Proposed Rule Change To Amend FINRA Rules 1015, 9261, 9341, 9524, 9830 and Funding Portal Rule 900 (Code of Procedure) To Permit Hearings Under Those Rules To Be Conducted by Video Conference) (‘‘FINRA Approval Order’’). 16 See FINRA Approval Order, 88 FR at 51880. E:\FR\FM\14DEN1.SGM 14DEN1 Federal Register / Vol. 88, No. 239 / Thursday, December 14, 2023 / Notices person hearings safely.17 In addition, OHO also has authority to order hearings to occur by video conference based on a motion, which was not permitted under the previous temporary amendments to FINRA Rules 9261 and 9830.18 As the FINRA Approval Order noted, FINRA represented that it will utilize the same protocols for conducting video conference hearings as those employed under the temporary amendments, including using a high quality, secure, user-friendly video conferencing service and providing thorough instructions, training, and technical support to all hearing participants.19 In addition, the FINRA Approval Order noted that, according to FINRA, the parties could file a joint motion requesting the hearing to occur, in whole or in part, by video conference based on a showing of good cause. In-person hearings, however, would remain the default method for conducting hearings.20 Further, as noted in the FINRA Approval Order, given the nature of evidentiary hearings,21 which often occur over multiple days and generally include numerous documents in evidence and witness testimony, motions for a hearing by video conference would need to be joined by all parties, and even joint motions could be denied if the adjudicator determines that good cause has not been shown.22 According to FINRA, OHO would have reasonable discretion based on a joint motion of the parties to exercise its authority to determine whether a hearing should occur by video conference under the proposed rule change.23 Moreover, in deciding whether to schedule a hearing by video conference, OHO could consider and balance a variety of factors including, for example and without limitation, a hearing participant’s individual health concerns and access to the connectivity and technology necessary to participate in a video conference hearing. Additionally, as noted above, OHO may consider whether a situation is uncommon or there are extraordinary circumstances.24 Finally, the FINRA Approval Order noted that for approximately two and a half years, while the temporary amendments were in effect, OHO 17 See id. id. 19 See id. 20 See id. 21 As used herein, ‘‘evidentiary hearings’’ refers to hearings conducted before OHO under Rules 10.9261 and 10.9830. See id., 88 FR at 51880, n. 25. 22 See id. at 51881. 23 See id. 24 See text accompanying note 16, supra. lotter on DSK11XQN23PROD with NOTICES1 18 See VerDate Sep<11>2014 17:39 Dec 13, 2023 Jkt 262001 successfully conducted numerous hearings by video conference using Zoom, a system which was vetted by FINRA’s information technology staff.25 FINRA stated that this use of video conference technology has been an effective and efficient alternative to inperson hearings.26 As discussed below, the Exchange proposes to delete the temporary rule text in Rule 10.9261 and Rule 10.9830 permitting video conferences that expired earlier this year and replace it with rule text based on FINRA’s recently approved amendments to its Rules 9261 and 9830 permitting video conference hearings under specified conditions. Proposed Rule Change NYSE Arca Rule 10.9261(b) provides that if a disciplinary hearing is held, a party shall be entitled to be heard inperson, by counsel, or by the party’s representative. Similarly, NYSE Arca Rule 10.9830 outlines the requirements for hearings for temporary and permanent cease and desist orders. NYSE Arca Rule 10.9830(a), however, does not specify that a party shall be entitled to be heard in-person, by counsel, or by the party’s representative. Consistent with FINRA’s temporary amendment to FINRA Rules 9261 and 9830 that expired earlier this year, both NYSE Arca rules temporarily granted the Chief or Deputy Chief Hearing Officer temporary authority to order, upon consideration of COVID–19related public health risks presented by an in-person hearing, that a hearing under those rules be conducted by video conference. The Exchange proposes to delete the temporary amendments to Rules 10.9261 and 10.9830 and conform these rules to FINRA Rules 9261 and 9830 as recently amended. The Exchange would add text to the rules permitting the Chief or Deputy Chief Hearing Officer to order the hearing to be conducted in whole or in part by video conference consistent with the FINRA Approval Order either based upon an assessment that proceeding in person may endanger the health or safety of the participants or would be impracticable or upon consideration of a joint motion of the parties for good cause shown. As noted, FINRA has adopted a detailed and thorough protocol to ensure that hearings conducted by video conference will maintain a fair process for the parties.27 Moreover, the proposed rule change would modernize existing 25 See FINRA Approval Order, 88 FR at 51880. id. 27 See text accompanying notes 8 & 19, supra. 26 See PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 86695 procedures and allow parties who jointly prefer video conference to potentially save travel costs and time. As proposed, the use of video conferences would be limited and controlled, and in-person hearings would continue to be the default method for conducting hearings.28 Furthermore, the proposed rule includes procedural safeguards to ensure fairness, such as the requirement for evidentiary hearings that any motions be joined by all parties and show good cause.29 The Exchange believes that this is a reasonable procedure to follow in hearings under Rules 10.9261 and 10.9830 chaired by a FINRA employee. To effectuate these changes, the Exchange proposes to add the following deletions (bracketed) and additions (italicized) to Rule 10.9261(b): If a hearing is held, a Party shall be entitled to be heard in person, by counsel, or by the Party’s representative. [Upon consideration of the current public health risks presented by an in-person hearing, the Chief Hearing Officer or Deputy Chief Hearing Officer may, on a temporary basis, determine that the hearing shall be conducted, in whole or in part, by video conference.]Upon a determination that proceeding in person may endanger the health or safety of the participants or would be impracticable, or upon consideration of a joint motion of the Parties for good cause shown, the Chief Hearing Officer or Deputy Chief Hearing Officer may, in the exercise of reasonable discretion, order the hearing to be conducted, in whole or in part, by video conference. The proposed text is identical to the language adopted by FINRA.30 Similarly, the Exchange proposes the following deletions and additions to Rule 10.9830(a): The hearing shall be held not later than 15 days after service of the notice and filing initiating the temporary cease and desist proceeding, unless otherwise extended by the Chief Hearing Officer or Deputy Chief Hearing Officer for good cause shown. If a Hearing Officer or Hearing Panelist is recused or disqualified, the hearing shall be held not later than five days after a replacement Hearing Officer or Hearing Panelist is appointed. [Upon consideration of the current public health risks presented by an in-person hearing, the Chief Hearing Officer or Deputy Chief Hearing Officer may, on a temporary basis, determine that the hearing shall be conducted, in whole or in part, by video conference.]Upon a determination that proceeding in person may endanger the 28 See FINRA Approval Order, 88 FR at 51882. id. 30 See Exchange Act Release No. 97403 (May 4, 2023), 88 FR 28645 (May 4, 2023) (File No. SR– FINRA–2023–008) (Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 1015, 9261, 9341, 9524, 9830 and Funding Portal Rule 900 (Code of Procedure) To Permit Hearings Under Those Rules To Be Conducted by Video Conference). 29 See E:\FR\FM\14DEN1.SGM 14DEN1 86696 Federal Register / Vol. 88, No. 239 / Thursday, December 14, 2023 / Notices health or safety of the participants or would be impracticable, or upon consideration of a joint motion of the Parties for good cause shown, the Chief Hearing Officer or Deputy Chief Hearing Officer may, in the exercise of reasonable discretion, order the hearing to be conducted, in whole or in part, by video conference. lotter on DSK11XQN23PROD with NOTICES1 Once again, the proposed language is identical to the language adopted by FINRA.31 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,32 in general, and furthers the objectives of Section 6(b)(5),33 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.34 The Exchange believes that the proposed rule changes support the objectives of the Act by harmonizing Exchange rules modeled on FINRA’s rules, resulting in less burdensome and more efficient regulatory compliance. As previously noted, the additional text proposed for Rule 10.9261 and Rule 10.9830 is identical to the text in the counterpart FINRA rules. As such, the proposed rule change would facilitate rule harmonization among selfregulatory organizations with respect to the conduct of video conference hearings, thereby fostering cooperation and coordination with persons engaged in facilitating transactions in securities and will remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposed rule change protects investors and the public interest by permitting the use of broadly available technology to allow hearings to proceed by video conference under certain circumstances. The Exchange’s disciplinary proceedings serve a critical role in providing investor protection and id. U.S.C. 78f(b). 33 15 U.S.C. 78f(b)(5). 34 15 U.S.C. 78f(b)(7) & 78f(d). maintaining fair and orderly markets by, for example, sanctioning misconduct and preventing further customer harm by members and associated persons. The proposed rule change would encourage the prompt resolution of these cases while preserving fair process. The Exchange believes that this is especially important in matters where temporary and permanent cease and desist orders are sought because the proposed rule change would enable those hearings to proceed without delay, thereby enabling the Exchange to take immediate action to stop significant, ongoing customer harm, to the benefit of the investing public. The proposed rule change promotes efficiency by permitting hearings to occur by video conference in situations where the hearings would otherwise be postponed for an uncertain period of time. Moreover, as noted, FINRA will utilize the same protocols for conducting video conference hearings as those employed under the temporary amendments, including using a high quality, secure, user-friendly video conferencing service and providing thorough instructions, training, and technical support to all hearing participants.35 In addition, the Chief or Deputy Chief Hearing Officer may take into consideration, among other things, a hearing participant’s individual health concerns and access to the connectivity and technology necessary to participate in a video conference hearing.36 For the same reasons, the Exchange believes that the proposed changes are designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.37 The Exchange believes that the proposed rule change provides a fair procedure by allowing hearings to proceed by video conference not only due to public health or safety reasons, but also at a party or the parties’ request for reasons particular to them. The Chief or Deputy Chief Hearing Officer could allow a hearing to proceed by video conference in the exercise of reasonable discretion and subject to procedural safeguards that ensure fairness, including the requirement that any motions be joined by all parties and show good cause. Overall, the proposed rule change represents a significant step toward modernizing disciplinary process procedures in a manner that preserves in-person hearings but allows 31 See 32 15 VerDate Sep<11>2014 17:39 Dec 13, 2023 35 See FINRA Approval Order, 88 FR at 51880. id. at 51881 & n. 36. 37 15 U.S.C. 78f(b)(7) and 78f(d). 36 See Jkt 262001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 for the use of video conference technology under certain circumstances. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competitive issues but is rather intended solely to create permanent rules that would allow video conference hearings if OHO determines that proceeding in person may endanger the health or safety of the participants or would be impracticable, or where both parties prefer doing so and show good cause, thereby providing greater harmonization with approved FINRA rules. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 38 and Rule 19b–4(f)(6) thereunder.39 Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.40 A proposed rule change filed under Rule 19b–4(f)(6) 41 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),42 the Commission may designate a shorter time if such 38 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 40 Rule 19b–4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 41 17 CFR 240.19b–4(f)(6). 42 17 CFR 240.19b–4(f)(6)(iii). 39 17 E:\FR\FM\14DEN1.SGM 14DEN1 Federal Register / Vol. 88, No. 239 / Thursday, December 14, 2023 / Notices action is consistent with the protection of investors and the public interest. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 43 of the Act to determine whether the proposed rule change should be approved or disapproved. lotter on DSK11XQN23PROD with NOTICES1 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: 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–NYSEARCA–2023–82 and should be submitted on or before January 4, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.44 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–27400 Filed 12–13–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–NYSEARCA–2023–82 on the subject line. [Release No. 34–99121; File No. SR– NYSEAMER–2023–62] 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–NYSEARCA–2023–82. 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 December 8, 2023. 43 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:39 Dec 13, 2023 Jkt 262001 Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Harmonize Rules 9261 and 9830 19(b)(1) 1 Pursuant to Section of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 27, 2023, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to harmonize Rules 9261 and 9830 with recent changes by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) that allow for video conference hearings under specified conditions. The proposed rule change is available on the Exchange’s website at www.nyse.com, at 44 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 86697 the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to harmonize Rules 9261 (Evidence and Procedure in Hearing) and 9830 (Hearing) with recent changes by FINRA to its Rules 9261 and 9830 that allow for video conference hearings under specified conditions. Background In 2016, NYSE American (then known as NYSE MKT LLC) adopted disciplinary rules modeled the Rule 8000 Series and Rule 9000 Series of FINRA and its affiliate the New York Stock Exchange LLC, and which set forth rules for conducting investigations and enforcement actions.4 The NYSE American disciplinary rules were implemented on April 15, 2016.5 In adopting disciplinary rules modeled on FINRA’s rules, NYSE American adopted the hearing and evidentiary processes set forth in Rule 9261 and in Rule 9830 for hearings in matters involving temporary and permanent cease and desist orders under the Rule 9800 Series. As adopted, the text of Rule 9261 is identical to the counterpart FINRA rule. Rule 9830 is also identical to FINRA’s counterpart rule, except for conforming and technical amendments.6 In 2020, given the spread of COVID– 19 and its effect on FINRA’s adjudicatory functions nationwide, FINRA filed a temporary rule change to grant FINRA’s Office of Hearing Officers 4 See Securities Exchange Act Release Nos. 77241 (February 26, 2016), 81 FR 11311 (March 3, 2016) (SR–NYSEMKT–2016–30) (‘‘2016 Notice’’). 5 See NYSE MKT Information Memorandum 16– 02 (March 14, 2016). 6 See 2016 Notice, 81 FR at 11327 & 11332. E:\FR\FM\14DEN1.SGM 14DEN1

Agencies

[Federal Register Volume 88, Number 239 (Thursday, December 14, 2023)]
[Notices]
[Pages 86693-86697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27400]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99122; File No. SR-NYSEARCA-2023-82]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Harmonize Rules 
10.9261 and 10.9830

December 8, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on November 27, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to harmonize Rules 10.9261 and 10.9830 with 
recent changes by the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') that allow for video conference hearings under specified 
conditions. The proposed rule change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

[[Page 86694]]

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

1. Purpose
    The Exchange proposes to harmonize Rules 10.9261 (Evidence and 
Procedure in Hearing) and 10.9830 (Hearing) with recent changes by 
FINRA to its Rules 9261 and 9830 that allow for video conference 
hearings under specified conditions.
Background
    In 2019, NYSE Arca adopted disciplinary rules modeled on the text 
of the Rule 8000 and Rule 9000 Series of its affiliate NYSE American 
LLC (``NYSE American'') and the Rule 8000 Series and Rule 9000 Series 
of FINRA and the New York Stock Exchange LLC.\4\ The NYSE Arca 
disciplinary rules were implemented on May 27, 2019.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 85639 (April 12, 
2019), 84 FR 16346 (April 18, 2019) (SR-NYSEArca-2019-15) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Investigation, Disciplinary, Sanction, and Other Procedural Rules 
Modeled on the Rules of the Exchange's Affiliate NYSE American LLC) 
(``2019 Notice'').
    \5\ See NYSE Arca Equities RB-19-060 & NYSE Arca Options RB-19-
02 (April 26, 2019).
---------------------------------------------------------------------------

    In adopting disciplinary rules modeled on FINRA's rules, NYSE Arca 
adopted the hearing and evidentiary processes set forth in Rule 10.9261 
and in Rule 10.9830 for hearings in matters involving temporary and 
permanent cease and desist orders under the Rule 10.9800 Series. As 
adopted, the text of Rule 10.9261 is identical to the counterpart FINRA 
rule. Rule 10.9830 is also identical to FINRA's counterpart rule, 
except for conforming and technical amendments.\6\
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    \6\ See 2019 Notice, 84 FR at 16365 & 16373-4.
---------------------------------------------------------------------------

    In 2020, given the spread of COVID-19 and its effect on FINRA's 
adjudicatory functions nationwide, FINRA filed a temporary rule change 
to grant FINRA's Office of Hearing Officers (``OHO'') and the National 
Adjudicatory Council (``NAC'') the authority to conduct certain 
hearings by video conference if warranted by the current COVID-19-
related public health risks posed by in-person hearings. Among the 
rules FINRA amended were FINRA Rules 9261 and 9830.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release Nos. 83289 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (SR-FINRA-2020-027). FINRA 
also proposed to temporarily amend FINRA Rules 1015 and 9524. FINRA 
Rule 1015 governs the process by which an applicant for new or 
continuing membership can appeal a decision rendered by FINRA's 
Department of Member Supervision under FINRA Rule 1014 or 1017 and 
request a hearing which would be conducted by a subcommittee of the 
NAC. See id. The Exchange has not adopted FINRA Rule 1015. FINRA 
Rule 9524 governs the process by which a statutorily disqualified 
member firm or associated person can appeal the Department's 
recommendation to deny a firm or sponsoring firm's application to 
the NAC. See id. Under the Exchange's version of Rule 9524, if the 
Chief Regulatory Officer rejects the application, the member 
organization or applicant may request a review by the Exchange Board 
of Directors. This differs from FINRA's process, which provides for 
a hearing before the NAC and further consideration by the FINRA 
Board of Directors.
---------------------------------------------------------------------------

    In its filing, FINRA represented that its protocol for conducting 
hearings by video conference would ensure that such hearings maintain a 
fair process for the parties by, among other things, FINRA's use of a 
high quality, secure and user-friendly video conferencing service and 
provision of thorough instructions, training and technical support to 
all hearing participants.\8\ According to FINRA, the changes were a 
reasonable interim solution to allow FINRA's critical adjudicatory 
processes to continue to function while protecting the health and 
safety of hearing participants.\9\
---------------------------------------------------------------------------

    \8\ See 85 FR at 55713.
    \9\ See id.
---------------------------------------------------------------------------

    Given that FINRA and OHO administer disciplinary hearings on the 
Exchange's behalf pursuant to a regulatory services agreement 
(``RSA''),\10\ and that the public health concerns addressed by FINRA's 
amendments applied equally to the Exchange's disciplinary hearings, in 
2020 the Exchange also temporarily amended its disciplinary rules to 
allow virtual hearings.\11\ Both FINRA \12\ and the Exchange \13\ 
extended the temporary relief several times due to the continuing 
public health risks and logistical challenges related to COVID-19, 
including whether hearing participants could safely travel and abide by 
state or local quarantine requirements. The Exchange's temporary 
amendments to Rules 10.9261 and 10.9830 expired on April 30, 2023.\14\
---------------------------------------------------------------------------

    \10\ FINRA's OHO administers all aspects of Exchange 
adjudications, including assigning hearing officers to serve as NYSE 
Arca hearing officers. A hearing officer from OHO will, among other 
things, preside over the disciplinary hearing, select and chair the 
hearing panel, and prepare and issue written decisions. The Chief or 
Deputy Hearing Officer for all Exchange disciplinary hearings are 
currently drawn from OHO and are all FINRA employees. The Exchange 
believes that OHO will utilize the same video conference protocol 
and processes for Exchange matters under the RSA as it proposes for 
FINRA matters.
    \11\ See Securities Exchange Act Release No. 90088 (October 5, 
2020), 85 FR 64186 (October 9, 2020) (SR-NYSEArca-2020-85).
    \12\ See Securities Exchange Act Release No. 90619 (December 9, 
2020), 85 FR 81250 (December 15, 2020) (SR-FINRA-2020-042); 
Securities Exchange Act Release No. 91495 (April 7, 2021), 86 FR 
19306 (April 13, 2021) (SR-FINRA-2021-006); Securities Exchange Act 
Release No. 92685 (August 17, 2021), 86 FR 47169 (August 23, 2021) 
(SR-FINRA-2021-019); Securities Exchange Act Release No. 93758 
(December 13, 2021), 86 FR 71695 (December 17, 2021) (SR-FINRA-2021-
31); Securities Exchange Act Release No. 94430 (March 16, 2022), 87 
FR 16262 (March 22, 2022) (SR-FINRA-2022-004); Securities Exchange 
Act Release No. 95281 (July 14, 2022), 87 FR 43335 (July 20, 2022) 
(SR-FINRA-2022-018); Securities Exchange Act Release No. 96107 
(October 19, 2022), 87 FR 64526 (October 25, 2022) (SR-FINRA-2022-
029); and Securities Exchange Act Release No. 96746 (January 25, 
2023), 88 FR 6346 (January 31, 2023) (SR-FINRA-2023-001).
    \13\ See Securities Exchange Act Release No. 90820 (December 30, 
2020), 86 FR 647 (January 6, 2021) (SR-NYSEArca-2020-116); 
Securities Exchange Act Release No. 91633 (April 22, 2021), 86 FR 
22474 (April 28, 2021) (SR-NYSEArca-2021-27); Securities Exchange 
Act Release No. 92909 (September 9, 2021), 86 FR 51415 (September 
15, 2021) (SR-NYSEArca-2021-76); Securities Exchange Act Release No. 
93918 (January 6, 2022), 87 FR 1810 (January 12, 2022) (SR-NYSEArca-
2021-107); Securities Exchange Act Release No. 94663 (April 11, 
2022), 87 FR 22587 (April 15, 2022) (SR-NYSEArca-2022-18); 
Securities Exchange Act Release No. 95475 (August 11, 2022), 87 FR 
50673 (August 17, 2022) (SR-NYSEArca-2022-44); Securities Exchange 
Act Release No. 96259 (November 8, 2022), 87 FR 68536 (November 15, 
2022) (SR-NYSEArca-2022-73); and Securities Exchange Act Release No. 
96871 (February 9, 2023), 88 FR 9915 (February 15, 2023) (SR-
NYSEArca-2023-10).
    \14\ See Securities Exchange Act Release No. 96871 (February 9, 
2023), 88 FR 9915 (February 15, 2023) (SR-NYSEArca-2023-10) 
(extending the expiration date of the temporary rule amendments to, 
among other rules, FINRA Rules 9261 and 9830 from January 31, 2023 
to April 30, 2023). The temporary amendments expired on April 30, 
2023, because the Exchange did not file another proposed rule change 
again extending the temporary amendments beyond that date. See id. 
at 9916.
---------------------------------------------------------------------------

    Recently, the Commission approved FINRA's proposal to make the 
temporary amendments regarding video conference hearings permanent, 
with some modifications, to permit the use of video conferences for 
reasons beyond COVID-19.\15\ Specifically, FINRA amended, among other 
rules, FINRA Rules 9261 and 9830 to extend OHO's authority to order 
hearings by video conference to other similar situations in which 
proceeding in person could endanger the health or safety of the 
participant or alternatively would be impracticable (e.g., an uncommon 
situation or extraordinary circumstances such as a natural disaster or 
terrorist attack that caused travel to be cancelled for an extended 
period of time).\16\ As approved, OHO has discretion to determine 
whether the circumstances for a video hearing have been met and can act 
quickly if a future unexpected event impairs their ability to conduct 
in-

[[Page 86695]]

person hearings safely.\17\ In addition, OHO also has authority to 
order hearings to occur by video conference based on a motion, which 
was not permitted under the previous temporary amendments to FINRA 
Rules 9261 and 9830.\18\
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release Nos. 98029 (August 4, 
2023), 88 FR 51879 (August 4, 2023) (SR-FINRA-2023-008) (Order 
Approving a Proposed Rule Change To Amend FINRA Rules 1015, 9261, 
9341, 9524, 9830 and Funding Portal Rule 900 (Code of Procedure) To 
Permit Hearings Under Those Rules To Be Conducted by Video 
Conference) (``FINRA Approval Order'').
    \16\ See FINRA Approval Order, 88 FR at 51880.
    \17\ See id.
    \18\ See id.
---------------------------------------------------------------------------

    As the FINRA Approval Order noted, FINRA represented that it will 
utilize the same protocols for conducting video conference hearings as 
those employed under the temporary amendments, including using a high 
quality, secure, user-friendly video conferencing service and providing 
thorough instructions, training, and technical support to all hearing 
participants.\19\ In addition, the FINRA Approval Order noted that, 
according to FINRA, the parties could file a joint motion requesting 
the hearing to occur, in whole or in part, by video conference based on 
a showing of good cause. In-person hearings, however, would remain the 
default method for conducting hearings.\20\
---------------------------------------------------------------------------

    \19\ See id.
    \20\ See id.
---------------------------------------------------------------------------

    Further, as noted in the FINRA Approval Order, given the nature of 
evidentiary hearings,\21\ which often occur over multiple days and 
generally include numerous documents in evidence and witness testimony, 
motions for a hearing by video conference would need to be joined by 
all parties, and even joint motions could be denied if the adjudicator 
determines that good cause has not been shown.\22\ According to FINRA, 
OHO would have reasonable discretion based on a joint motion of the 
parties to exercise its authority to determine whether a hearing should 
occur by video conference under the proposed rule change.\23\ Moreover, 
in deciding whether to schedule a hearing by video conference, OHO 
could consider and balance a variety of factors including, for example 
and without limitation, a hearing participant's individual health 
concerns and access to the connectivity and technology necessary to 
participate in a video conference hearing. Additionally, as noted 
above, OHO may consider whether a situation is uncommon or there are 
extraordinary circumstances.\24\
---------------------------------------------------------------------------

    \21\ As used herein, ``evidentiary hearings'' refers to hearings 
conducted before OHO under Rules 10.9261 and 10.9830. See id., 88 FR 
at 51880, n. 25.
    \22\ See id. at 51881.
    \23\ See id.
    \24\ See text accompanying note 16, supra.
---------------------------------------------------------------------------

    Finally, the FINRA Approval Order noted that for approximately two 
and a half years, while the temporary amendments were in effect, OHO 
successfully conducted numerous hearings by video conference using 
Zoom, a system which was vetted by FINRA's information technology 
staff.\25\ FINRA stated that this use of video conference technology 
has been an effective and efficient alternative to in-person 
hearings.\26\
---------------------------------------------------------------------------

    \25\ See FINRA Approval Order, 88 FR at 51880.
    \26\ See id.
---------------------------------------------------------------------------

    As discussed below, the Exchange proposes to delete the temporary 
rule text in Rule 10.9261 and Rule 10.9830 permitting video conferences 
that expired earlier this year and replace it with rule text based on 
FINRA's recently approved amendments to its Rules 9261 and 9830 
permitting video conference hearings under specified conditions.
Proposed Rule Change
    NYSE Arca Rule 10.9261(b) provides that if a disciplinary hearing 
is held, a party shall be entitled to be heard in-person, by counsel, 
or by the party's representative. Similarly, NYSE Arca Rule 10.9830 
outlines the requirements for hearings for temporary and permanent 
cease and desist orders. NYSE Arca Rule 10.9830(a), however, does not 
specify that a party shall be entitled to be heard in-person, by 
counsel, or by the party's representative. Consistent with FINRA's 
temporary amendment to FINRA Rules 9261 and 9830 that expired earlier 
this year, both NYSE Arca rules temporarily granted the Chief or Deputy 
Chief Hearing Officer temporary authority to order, upon consideration 
of COVID-19-related public health risks presented by an in-person 
hearing, that a hearing under those rules be conducted by video 
conference.
    The Exchange proposes to delete the temporary amendments to Rules 
10.9261 and 10.9830 and conform these rules to FINRA Rules 9261 and 
9830 as recently amended. The Exchange would add text to the rules 
permitting the Chief or Deputy Chief Hearing Officer to order the 
hearing to be conducted in whole or in part by video conference 
consistent with the FINRA Approval Order either based upon an 
assessment that proceeding in person may endanger the health or safety 
of the participants or would be impracticable or upon consideration of 
a joint motion of the parties for good cause shown. As noted, FINRA has 
adopted a detailed and thorough protocol to ensure that hearings 
conducted by video conference will maintain a fair process for the 
parties.\27\ Moreover, the proposed rule change would modernize 
existing procedures and allow parties who jointly prefer video 
conference to potentially save travel costs and time. As proposed, the 
use of video conferences would be limited and controlled, and in-person 
hearings would continue to be the default method for conducting 
hearings.\28\ Furthermore, the proposed rule includes procedural 
safeguards to ensure fairness, such as the requirement for evidentiary 
hearings that any motions be joined by all parties and show good 
cause.\29\ The Exchange believes that this is a reasonable procedure to 
follow in hearings under Rules 10.9261 and 10.9830 chaired by a FINRA 
employee.
---------------------------------------------------------------------------

    \27\ See text accompanying notes 8 & 19, supra.
    \28\ See FINRA Approval Order, 88 FR at 51882.
    \29\ See id.
---------------------------------------------------------------------------

    To effectuate these changes, the Exchange proposes to add the 
following deletions (bracketed) and additions (italicized) to Rule 
10.9261(b):

    If a hearing is held, a Party shall be entitled to be heard in 
person, by counsel, or by the Party's representative. [Upon 
consideration of the current public health risks presented by an in-
person hearing, the Chief Hearing Officer or Deputy Chief Hearing 
Officer may, on a temporary basis, determine that the hearing shall 
be conducted, in whole or in part, by video conference.]Upon a 
determination that proceeding in person may endanger the health or 
safety of the participants or would be impracticable, or upon 
consideration of a joint motion of the Parties for good cause shown, 
the Chief Hearing Officer or Deputy Chief Hearing Officer may, in 
the exercise of reasonable discretion, order the hearing to be 
conducted, in whole or in part, by video conference.

    The proposed text is identical to the language adopted by 
FINRA.\30\
---------------------------------------------------------------------------

    \30\ See Exchange Act Release No. 97403 (May 4, 2023), 88 FR 
28645 (May 4, 2023) (File No. SR-FINRA-2023-008) (Notice of Filing 
of a Proposed Rule Change To Amend FINRA Rules 1015, 9261, 9341, 
9524, 9830 and Funding Portal Rule 900 (Code of Procedure) To Permit 
Hearings Under Those Rules To Be Conducted by Video Conference).
---------------------------------------------------------------------------

    Similarly, the Exchange proposes the following deletions and 
additions to Rule 10.9830(a):

    The hearing shall be held not later than 15 days after service 
of the notice and filing initiating the temporary cease and desist 
proceeding, unless otherwise extended by the Chief Hearing Officer 
or Deputy Chief Hearing Officer for good cause shown. If a Hearing 
Officer or Hearing Panelist is recused or disqualified, the hearing 
shall be held not later than five days after a replacement Hearing 
Officer or Hearing Panelist is appointed. [Upon consideration of the 
current public health risks presented by an in-person hearing, the 
Chief Hearing Officer or Deputy Chief Hearing Officer may, on a 
temporary basis, determine that the hearing shall be conducted, in 
whole or in part, by video conference.]Upon a determination that 
proceeding in person may endanger the

[[Page 86696]]

health or safety of the participants or would be impracticable, or 
upon consideration of a joint motion of the Parties for good cause 
shown, the Chief Hearing Officer or Deputy Chief Hearing Officer 
may, in the exercise of reasonable discretion, order the hearing to 
be conducted, in whole or in part, by video conference.

    Once again, the proposed language is identical to the language 
adopted by FINRA.\31\
---------------------------------------------------------------------------

    \31\ See id.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\32\ in general, and furthers the objectives of Section 
6(b)(5),\33\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is designed to provide a fair procedure for 
the disciplining of members and persons associated with members, 
consistent with Sections 6(b)(7) and 6(d) of the Act.\34\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b).
    \33\ 15 U.S.C. 78f(b)(5).
    \34\ 15 U.S.C. 78f(b)(7) & 78f(d).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule changes support the 
objectives of the Act by harmonizing Exchange rules modeled on FINRA's 
rules, resulting in less burdensome and more efficient regulatory 
compliance. As previously noted, the additional text proposed for Rule 
10.9261 and Rule 10.9830 is identical to the text in the counterpart 
FINRA rules. As such, the proposed rule change would facilitate rule 
harmonization among self-regulatory organizations with respect to the 
conduct of video conference hearings, thereby fostering cooperation and 
coordination with persons engaged in facilitating transactions in 
securities and will remove impediments to and perfect the mechanism of 
a free and open market and a national market system.
    The Exchange believes that the proposed rule change protects 
investors and the public interest by permitting the use of broadly 
available technology to allow hearings to proceed by video conference 
under certain circumstances. The Exchange's disciplinary proceedings 
serve a critical role in providing investor protection and maintaining 
fair and orderly markets by, for example, sanctioning misconduct and 
preventing further customer harm by members and associated persons. The 
proposed rule change would encourage the prompt resolution of these 
cases while preserving fair process. The Exchange believes that this is 
especially important in matters where temporary and permanent cease and 
desist orders are sought because the proposed rule change would enable 
those hearings to proceed without delay, thereby enabling the Exchange 
to take immediate action to stop significant, ongoing customer harm, to 
the benefit of the investing public.
    The proposed rule change promotes efficiency by permitting hearings 
to occur by video conference in situations where the hearings would 
otherwise be postponed for an uncertain period of time. Moreover, as 
noted, FINRA will utilize the same protocols for conducting video 
conference hearings as those employed under the temporary amendments, 
including using a high quality, secure, user-friendly video 
conferencing service and providing thorough instructions, training, and 
technical support to all hearing participants.\35\ In addition, the 
Chief or Deputy Chief Hearing Officer may take into consideration, 
among other things, a hearing participant's individual health concerns 
and access to the connectivity and technology necessary to participate 
in a video conference hearing.\36\
---------------------------------------------------------------------------

    \35\ See FINRA Approval Order, 88 FR at 51880.
    \36\ See id. at 51881 & n. 36.
---------------------------------------------------------------------------

    For the same reasons, the Exchange believes that the proposed 
changes are designed to provide a fair procedure for the disciplining 
of members and persons associated with members, consistent with 
Sections 6(b)(7) and 6(d) of the Act.\37\ The Exchange believes that 
the proposed rule change provides a fair procedure by allowing hearings 
to proceed by video conference not only due to public health or safety 
reasons, but also at a party or the parties' request for reasons 
particular to them. The Chief or Deputy Chief Hearing Officer could 
allow a hearing to proceed by video conference in the exercise of 
reasonable discretion and subject to procedural safeguards that ensure 
fairness, including the requirement that any motions be joined by all 
parties and show good cause. Overall, the proposed rule change 
represents a significant step toward modernizing disciplinary process 
procedures in a manner that preserves in-person hearings but allows for 
the use of video conference technology under certain circumstances.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but is rather intended 
solely to create permanent rules that would allow video conference 
hearings if OHO determines that proceeding in person may endanger the 
health or safety of the participants or would be impracticable, or 
where both parties prefer doing so and show good cause, thereby 
providing greater harmonization with approved FINRA rules.

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

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

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \38\ and Rule 19b-4(f)(6) thereunder.\39\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\40\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \39\ 17 CFR 240.19b-4(f)(6).
    \40\ Rule 19b-4(f)(6)(iii) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change, along with a brief description and 
text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change, or such shorter 
time as designated by the Commission. The Exchange has satisfied 
this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \41\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\42\ the Commission 
may designate a shorter time if such

[[Page 86697]]

action is consistent with the protection of investors and the public 
interest.
---------------------------------------------------------------------------

    \41\ 17 CFR 240.19b-4(f)(6).
    \42\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \43\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \43\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEARCA-2023-82 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-NYSEARCA-2023-82. 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 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-NYSEARCA-2023-82 and 
should be submitted on or before January 4, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
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    \44\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27400 Filed 12-13-23; 8:45 am]
BILLING CODE 8011-01-P
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