Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68255 

77 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Self-Regulatory Organizations; ICE Clear Europe 

Limited; Notice of Filing of Proposed Rule Change 

Relating to Amendments to the Model Risk Policy, 

Exchange Act Release No. 98138 (August 15, 2023); 

88 FR 56901 (August 21, 2023) (SR–ICEEU–2023– 

019) (‘‘Notice’’). 

The Exchange believes that the 

proposal is, in particular, designed to 

protect investors and the public interest. 

The investor protection issues for U.S. 

investors has grown significantly over 

the last several years, through roll costs 

for Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Funds. As discussed 

herein, this growth investor protection 

concerns need to be reevaluated and 

rebalanced with the prevention of 

fraudulent and manipulative acts and 

practices concerns that previous 

disapproval orders have relied upon. 

Finally, the Exchange notes that in 

addition to all of the arguments herein 

which it believes sufficiently establish 

the CME Bitcoin Futures market as a 

regulated market of significant size, it is 

logically inconsistent to find that the 

CME Bitcoin Futures market is a 

significant market as it relates to the 

CME Bitcoin Futures market, but not a 

significant market as it relates to the 

bitcoin spot market for the numerous 

reasons laid out above. 

For the above reasons, the Exchange 

believes that the proposed rule change 

is consistent with the requirements of 

Section 6(b)(5) of the Act. 

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 purpose of the Act. The Exchange 

notes that the proposed rule change, 

rather will facilitate the listing and 

trading of an additional exchange-traded 

product that will enhance competition 

among both market participants and 

listing venues, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be 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– 

CboeBZX–2023–072 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–CboeBZX–2023–072. 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–CboeBZX–2023–072 and should be 

submitted on or before October 24, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.77

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21787 Filed 10–2–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98570; File No. SR–ICEEU– 

2023–019] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Order Approving 

Proposed Rule Change Relating to 

Amendments to the Model Risk Policy 

September 27, 2023. 

I. Introduction 

On August 4, 2023, ICE Clear Europe 

Limited (‘‘ICE Clear Europe’’ or ‘‘the 

Clearing House’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (the ‘‘Act’’),1 and Rule 19b–4,2

a proposed rule change to amend its 

Model Risk Policy (the ‘‘Policy’’). The 

proposed rule change was published for 

comment in the Federal Register on 

August 21, 2023.3 The Commission did 

not receive comments regarding the 

proposed rule change. For the reasons 

discussed below, the Commission is 

approving the proposed rule change. 

II. Description of the Proposed Rule 

Change 

A. Background 

ICE Clear Europe is registered with 

the Commission as a clearing agency for 

the purpose of clearing security-based 

swaps. In its role as a clearing agency 

for security-based swaps, ICE Clear 

Europe maintains the Policy. The 

purpose of the Policy is to establish 

standards and principles for managing 

and mitigating the impact to ICE Clear 

Europe’s business caused by model 

error, model failure or inappropriate 

model use. 

The proposed rule change would 

make updates and amendments to the 

Policy. ICE Clear Europe is making these 

changes to implement the results of 

internal and external reviews of the 

Policy. The Policy has five sections that 


ddrumheller on DSK120RN23PROD with NOTICES1
68256 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

4Production deviations are categorized under 

significant non-BAU changes to risk parameters. 

5The business First Line includes models 

developed internally, third-party models, and 

models shared with other group entities, as well as 

risk frameworks used to quantify, aggregate, and 

manage the risks of the Clearing House. 

6The second line includes the Risk Oversight 

Department. 

7As discussed above, in certain situations for 

certain futures and options contracts, Board 

notification rather than Board pre-approval is 

required. 

8 15 U.S.C. 78s(b)(2)(C). 

address (1) the Purpose of the Policy, (2) 

Definitions, (3) Model Risk Governance, 

(4) Document Governance and 

Exception Handling, and (5) Version 

History. ICE Clear Europe proposes 

amendments to all five sections except 

for Document Governance and 

Exception Handling. ICE Clear Europe 

also proposes to update the Version 

History section to reflect these changes. 

B. Purpose of the Policy 

Section 1, ‘‘Purpose,’’ addresses the 

purpose, scope, and architecture of the 

Policy. In this section and throughout 

the Policy, ICE Clear Europe proposes to 

replace references to ‘‘Framework’’ with 

‘‘Policy’’ and to include new language to 

expand the scope of the Policy to 

include risk frameworks used to 

quantify, aggregate, and manage the 

risks of the Clearing House. The 

amendments would further add 

language to clarify that references to 

‘‘model’’ in the rest of the document 

would refer to both models and risk 

frameworks. 

Section 1 also lists certain 

components that support the Policy. For 

example, ICE Clear Europe’s model 

inventory, schedule for model 

validations, and schedule for 

remediation of validation findings all 

support the Policy. The amendments 

would further add language to include 

on this list of supporting components 

guidelines for remediation of validation 

findings. 

C. Definitions 

Section 2, ‘‘Definitions,’’ describes in 

detail certain concepts that are used 

throughout the Policy, such as the 

meaning of the terms model and model 

risk, as well as the materiality of 

models, and significance of model 

changes. ICE Clear Europe proposes to 

amend the discussion of significance of 

model changes. The Policy currently 

states that only model changes are 

categorized into significant and not 

significant. ICE Clear Europe proposes 

to modify the Policy so that changes to 

both models and parameters, not just 

models, would be categorized as 

significant and not significant. 

With respect to changes in 

parameters, ICE Clear Europe would 

further categorize these changes as 

Business as Usual (‘‘BAU’’) or non-BAU. 

Changes considered BAU would be 

defined as changes in the parameters 

resulting from the application of 

existing methodologies as part of a 

regular review or calibration exercise. 

Non-BAU changes would refer to all 

other changes. The amendments would 

clarify that the definition of BAU would 

be in accordance with existing 

regulatory guidelines. 

Finally, the amendments would also 

update a footnote to remove a reference 

to a specific European Securities and 

Markets Authority opinion as providing 

the criteria defining model change 

significance. This footnote would be 

revised to state more generally that the 

criteria will be in accordance with 

prevailing regulatory opinions, 

guidelines, or requirements. 

D. Model Risk Governance 

Within Section 3, ‘‘Model Risk 

Governance,’’ ICE Clear Europe 

proposes to make amendments to the 

governance and responsibilities and 

model risk management subsections. In 

the governance and responsibilities 

subsection, the amendments would 

update the responsibilities of the Board 

of Directors (‘‘Board’’). Currently, the 

Board has several responsibilities, such 

as reviewing actions of the Model 

Oversight Committee and approving 

new material models and significant 

model changes for material models. The 

amendments would add to those 

responsibilities a new requirement for 

the Board to approve significant nonBAU changes to risk parameters. 

The amendments would also add a 

footnote explaining the reasoning for the 

new responsibility. The footnote would 

state that the Auto Pilot versus 

Production deviations 4 beyond BAU 

thresholds will generally follow a 

similar governance process to that for 

changes in parameters, but given that 

these deviations are usually timesensitive and driven by stressed market 

conditions, the ability to act quickly to 

help ensure market stability is critical. 

This footnote only applies to specific 

margin updates for certain futures and 

options contracts and does not apply to 

any parameter updates for credit default 

swaps. Thus, for these situations, the 

governance process will involve Board 

notification rather than Board preapproval, and Risk Oversight 

Department review rather than full 

independent pre-validation. 

ICE Clear Europe proposes to add new 

responsibilities for the Model Oversight 

Committee as well. Under the proposed 

rule change, the Model Oversight 

Committee would be responsible for 

establishing and maintaining a model 

inventory and assigning a specific 

owner to each model (a function 

currently performed by the First Line of 

Defense).5 This function is currently 

performed by the First Line. The Model 

Oversight Committee would also would 

be responsible for approving nonsignificant non-BAU changes to risk 

parameters, reviewing significant nonBAU changes to risk parameters for 

recommendation to the Board, and 

approving changes to model 

documentation. This is a new function 

currently not performed and is part of 

ICE Clear Europe’s Policy expansion to 

distinguish between BAU and non-BAU 

parameter changes. ICE Clear Europe 

also proposes to modify the 

responsibilities of the First and Second 

Lines of Defense.6 The First Line would 

no longer be responsible for establishing 

and maintaining a model inventory and 

assigning a specific owner to each 

model, as that responsibility would be 

moved to the Model Oversight 

Committee. The amendments would 

include new responsibilities for the 

First Line, specifically, proposing and 

seeking approval for non-BAU changes 

to risk parameters (as it currently does 

for models, model changes, and model 

retirements) and proposing significance 

levels for non-BAU changes to risk 

parameters . Under the amendments, the 

Second Line would be responsible for 

performing independent validation 

exercises for non-BAU changes to risk 

parameters (as it currently does for 

models). 

Finally, within the model risk 

management subsection, a new 

subsection would be added addressing 

non-BAU parameter changes. The 

section would provide that significant 

non-BAU changes to risk parameters 

must be validated before they are 

implemented in production.7 Nonsignificant non-BAU changes must be 

validated in accordance with the 

validation pipeline. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization.8 For the 

reasons given below, the Commission 

finds that the proposed rule change is 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68257 

9 15 U.S.C. 78q–1(b)(3)(F). 

10 17 CFR 240.17Ad–22(e)(2)(i) and (v), and (e)(3). 

11 15 U.S.C. 78q–1(b)(3)(F). 

12 15 U.S.C. 78q–1(b)(3)(F). 

13 17 CFR 240.17Ad–22(e)(2)(i) and (v). 

14 17 CFR 240.17Ad–22(e)(2)(i) and (v). 

15 17 CFR 240.17Ad–22(e)(3). 

16 17 CFR 240.17Ad–22(e)(3). 

17 15 U.S.C. 78q–1(b)(3)(F). 

18 17 CFR 240.17Ad–22(e)(2)(i) and (v), and (e)(3). 

19 15 U.S.C. 78s(b)(2). 

consistent with Section 17A(b)(3)(F) of 

the Act 9 and Rules 17Ad–22(e)(2)(i) and 

(v), and (e)(3) thereunder.10

A. Consistency With Section 

17A(b)(3)(F) of the Act 

Section 17A(b)(3)(F) of the Act 

requires, among other things, that the 

rules of ICE Clear Europe be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions and, to the extent 

applicable, derivative agreements, 

contracts, and transactions.11

As discussed above, the proposed rule 

change would modify the Policy. The 

Policy establishes standards and 

principles for managing and mitigating 

model risk for all product categories that 

ICE Clear Europe clears. The 

Commission believes that these changes, 

taken as a whole, would help ICE Clear 

Europe establish and maintain effective 

and functioning models. For example, 

by requiring parameters to be 

categorized as significant or not 

significant, the Commission believes 

that the proposed rule change would 

help ICE Clear Europe to identify and 

remediate possible errors in parameter 

changes before such changes are put 

into effect by allowing for more scrutiny 

for parameter changes. Because 

parameter changes can affect the 

function of ICE Clear Europe’s models, 

the Commission further believes that 

doing so may help avoid the potential 

harm that could result from models that 

do not function properly, such as 

margin requirements that are not 

effective at mitigating risk. Similarly, 

the Commission believes that the 

proposed rule change, in making the 

Second Line responsible for 

independent validation of non-BAU 

changes to risk parameters, would help 

ensure that validations are completed 

objectively and competently because it 

brings additional scrutiny to model 

changes by adding additional levels of 

review. Biased or ineffective validations 

could miss potential errors in models 

and model changes. The Commission 

believes that this change may also help 

ICE Clear Europe avoid the potential 

harm that could result from models that 

do not function properly. 

Given that ICE Clear Europe uses its 

margin and other models to manage and 

mitigate ICE Clear Europe’s credit 

exposures to its Clearing Members and 

the risks associated with clearing 

security-based swap-related portfolios, 

the Commission believes that the 

proposed rule change would enhance 

ICE Clear Europe’s ability to avoid 

losses that could result from the 

mismanagement of such credit 

exposures and risks. Because such 

losses could disrupt ICE Clear Europe’s 

ability to promptly and accurately clear 

security-based swap transactions, the 

Commission believes that the proposed 

rule change would enhance ICE Clear 

Europe’s ability to promote the prompt 

and accurate clearance and settlement of 

securities transactions. 

Therefore, the Commission finds that 

the proposed rule change would 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, consistent with the Section 

17A(b)(3)(F) of the Act.12

B. Consistency With Rules 17Ad– 

22(e)(2)(i) and (v) 

Rules 17Ad–22(e)(2)(i) and (v) require 

that ICE Clear Europe establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to provide for 

governance arrangements that are clear 

and transparent and specify clear and 

direct lines of responsibility.13

As discussed above, the proposed rule 

change would add a new requirement 

for the Board where it would be 

responsible for the approval of 

significant non-BAU changes to risk 

parameters. In doing so, the 

Commission believes that the Policy 

would clearly and transparently define 

who is responsible for this aspect of 

oversight of the Policy. The proposed 

rule change would also assign new 

responsibilities to the First and Second 

Lines. For example, the Second Line 

would be responsible for performing 

independent validation exercises for 

non-BAU changes to risk parameters, 

while the First Line would now be 

responsible for proposing and seeking 

approval for non-BAU changes to risk 

parameters. 

The Commission believes the 

proposed rule change would improve 

the transparency of the governance 

related to the Policy by improving the 

relevant responsibilities for the 

development and validation of models 

and the review of the overall 

effectiveness of the Policy. The 

Commission believes these aspects of 

the Policy would also clearly define the 

responsibilities of the First and Second 

Lines. 

Therefore, for the above reasons the 

Commission finds that the proposed 

rule change is consistent with Rules 

17Ad–22(e)(2)(i) and (v).14

C. Consistency With Rule 17Ad–22(e)(3) 

Rule 17Ad–22(e)(3) requires that ICE 

Clear Europe establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

maintain a sound risk management 

framework for comprehensively 

managing legal, credit, liquidity, 

operational, general business, 

investment, custody, and other risks 

that arise in or are borne by ICE Clear 

Europe. This includes risk management 

policies, procedures, and systems 

designed to identify, measure, monitor, 

and manage the range of risks that arise 

in or are borne by ICE Clear Europe, that 

are subject to review on a specified 

periodic basis and approved by the 

board of directors annually.15

As discussed above, the proposed rule 

change would add new requirements for 

the Model Oversight Committee so that 

it would be responsible for establishing 

and maintaining a model inventory and 

assigning a specific owner to each 

model. Additionally, the proposed rule 

change would add a requirement for 

significant non-BAU changes to risk 

parameters to be validated before they 

are implemented in production. In this 

way, the Commission believes the 

proposed rule change would help 

reduce model risk at ICE Clear Europe. 

Moreover, the Commission believes the 

proposed rule change would help 

ensure the objectivity and competence 

of validations by establishing a specific 

owner for each model. The Commission 

believes that competent and objective 

validations would, in turn, help to 

reduce model risk. Thus, the 

Commission believes that the proposed 

rule change would enable ICE Clear 

Europe to maintain a sound risk 

management framework for 

comprehensively managing its model 

risk. 

Therefore, the Commission finds that 

the proposed rule change is consistent 

with Rule 17Ad–22(e)(3).16

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and in 

particular, with the requirements of 

Section 17A(b)(3)(F) of the Act 17 and 

Rules 17Ad–22(e)(2)(i) and (v), and 

(e)(3) thereunder.18

It is therefore ordered pursuant to 

Section 19(b)(2) of the Act 19 that the 


ddrumheller on DSK120RN23PROD with NOTICES1
68258 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

20 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

21 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4See Securities Exchange Act Release No. 97398 

(April 28, 2023), 88 FR 28620 (May 4, 2023) (Notice 

of Filing of File No. SR–FINRA–2023–007) and 

Securities Exchange Act Release No. 98046 (August 

2, 2023), 88 FR 53569 (August 8, 2023) (Notice of 

Filing of Amendment No. 1 and Order Instituting 

Proceedings To Determine Whether To Approve or 

Disapprove File No. SR–FINRA–2023–007) 

(‘‘Remote Inspections Pilot Program Proposal’’). 

5SEC staff and FINRA have stated in guidance 

that inspections must include a physical, on-site 

review component. See SEC National Examination 

Risk Alert, Volume I, Issue 2 (November 30, 2011) 

and Regulatory Notice 11–54 (November 2011) 

(joint SEC and FINRA guidance stating, a ‘‘brokerdealer must conduct on-site inspections of each of 

its office locations; [OSJs] and non-OSJ branches 

that supervise non-branch locations at least 

annually, all non-supervising branch offices at least 

every three years; and non-branch offices 

periodically.’’) (footnote defining an OSJ omitted). 

See also SEC Division of Market Regulation, Staff 

Legal Bulletin No. 17: Remote Office Supervision 

(March 19, 2004) (stating, in part, that brokerdealers that conduct business through 

geographically dispersed offices have not 

adequately discharged their supervisory obligations 

where there are no on-site routine or ‘‘for cause’’ 

inspections of those offices). 

6 15 U.S.C. 78s(b)(2); see also note 4, supra. 

proposed rule change (SR–ICEEU–2023– 

019), be, and hereby is, approved.20

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21794 Filed 10–2–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98560; File No. SR–FINRA– 

2023–012] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Extend Temporary 

Supplementary Material .17 

(Temporary Relief To Allow Remote 

Inspections for Calendar Years 2020, 

2021, 2022, and 2023) Under FINRA 

Rule 3110 (Supervision) To Include 

Calendar Year 2024 

September 27, 2023. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 22, 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, II, and 

III below, which Items have been 

prepared by FINRA. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under paragraph (f)(6) of Rule 

19b–4 under the Act,3 which renders 

the proposal effective upon receipt of 

this filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to extend 

temporary Supplementary Material .17 

(Temporary Relief to Allow Remote 

Inspections for Calendar Years 2020, 

2021, 2022, and 2023) under FINRA 

Rule 3110 (Supervision) to include 

calendar year 2024 inspection 

obligations through the earlier of the 

effective date of the remote inspections 

pilot program proposed in File No. SR– 

FINRA–2023–007, if approved, or June 

30, 2024 within the scope of the 

supplementary material.4 FINRA is 

proposing to extend Rule 3110.17 to 

provide member firms continuity 

related to conducting inspections as part 

of satisfying the obligations of Rule 

3110(c) (Internal Inspections) at offices 

and locations requiring inspection 

during the first half of calendar year 

2024.5 By statute, the Commission has 

until the end of December 2023 to 

approve or disapprove the Remote 

Inspections Pilot Program Proposal.6

Given the uncertainty as to whether the 

Commission will approve or disapprove 

the Remote Inspections Pilot Program 

Proposal by the end of calendar year 

2023, FINRA believes that the proposed 

extension is necessary to provide firms 

the time to prepare for either the 

resumption of on-site inspections if the 

Commission disapproves the Remote 

Inspections Pilot Program Proposal, or 

alternatively, the implementation of the 

proposed remote inspections pilot 

program (‘‘Pilot Program’’) if the 

Commission approves the Remote 

Inspections Pilot Program Proposal. 

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are 

bracketed. 

* * * * * 

3000. SUPERVISION AND 

RESPONSIBILITES RELATING TO 

ASSOCIATED PERSONS 

3100. SUPERVISORY 

RESPONSIBILITIES 

3110. Supervision 

(a) through (f) No Change. 

••• Supplementary Material: 

————— 

.01 through .16 No Change. 

.17 Temporary Relief to Allow Remote 

Inspections for Calendar Years 2020, 

2021, 2022, [and] 2023, and Through 

the Earlier of the Effective Date of the 

Remote Inspections Pilot Program, if 

Approved, or June 30, 2024. 

(a) Use of Remote Inspections. Each 

member obligated to conduct an 

inspection of an office of supervisory 

jurisdiction, branch office or non-branch 

location in the calendar years specified 

in this supplementary material pursuant 

to, as applicable, paragraphs (c)(1)(A), 

(B) and (C) under Rule 3110 may, 

subject to the requirements of this Rule 

3110.17, satisfy such obligation by 

conducting the applicable inspection 

remotely, without an on-site visit to the 

office or location. In accordance with 

Rule 3110.16, inspections for calendar 

year 2020 must [be]have been 

completed on or before March 31, 2021. 

Inspections for calendar year 2021 must 

[be]have been completed on or before 

December 31, 2021, [and inspections] 

for calendar year 2022, [must be 

completed] on or before December 31, 

2022, and for calendar year 2023, on or 

before December 31, 2023. With respect 

to a member’s obligation to conduct an 

inspection of an office or location in 

calendar year [2023]2024, a member has 

the option to conduct those inspections 

remotely through the earlier of the 

effective date of the Remote Inspections 

[p]Pilot [p]Program proposed in File No. 

[SR–FINRA–2022–021]SR–FINRA– 

2023–007, if approved, or [December 31, 

2023]June 30, 2024. Notwithstanding 

Rule 3110.17, a member shall remain 

subject to the other requirements of Rule 

3110(c). 

(b) No Change. 

(c) Effective Supervisory System. The 

requirement to conduct inspections of 

offices and locations is one part of the 

member’s overall obligation to have an 

effective supervisory system and 

therefore, the member must continue 

with its ongoing review of the activities 

and functions occurring at all offices 

and locations, whether or not the 

member conducts inspections remotely. 

A member’s use of a remote inspection 

of an office or location will be held to 

the same standards for review as set 

forth under Rule 3110.12. Where a 


ddrumheller on DSK120RN23PROD with NOTICES1