Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices 77209 

3See rule 154(c). 

4The Commission estimates that 530 mutual 

funds prepare both the implied consent notice and 

the annual explanation of the right to revoke 

consent + 265 mutual funds that prepare only the 

annual explanation of the right to revoke. 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(1). 

5 17 CFR 240.19b–4. 

6See IEX Rule 1.160(s). 

provide contrary instructions. In 

addition, at least once a year, issuers, 

underwriters, or dealers relying on rule 

154 for the householding of 

prospectuses relating to open-end 

management investment companies that 

are registered under the Investment 

Company Act of 1940 (‘‘mutual funds’’) 

and each series thereof must explain to 

investors who have provided written or 

implied consent how they can revoke 

their consent.3 Preparing and sending 

the notice and the annual explanation of 

the right to revoke are collections of 

information. 

The rule allows issuers, underwriters, 

or dealers to household prospectuses if 

certain conditions are met. Among the 

conditions with which a person relying 

on the rule must comply are providing 

notice to each investor that only one 

prospectus will be sent to the household 

and, in the case of issuers that are 

mutual funds and any series thereof, 

providing to each investor who consents 

to householding an annual explanation 

of the right to revoke consent to the 

delivery of a single prospectus to 

multiple investors sharing an address. 

The purpose of the notice and annual 

explanation requirements of the rule is 

to ensure that investors who wish to 

receive individual copies of 

prospectuses are able to do so. 

Although rule 154 is not limited to 

mutual funds, the Commission believes 

that it is used mainly by mutual funds 

and by broker-dealers that deliver 

prospectuses for mutual funds. The 

Commission is unable to estimate the 

number of issuers other than mutual 

funds that rely on the rule. 

The Commission estimates that, as of 

March 2024, there are approximately 

12,118 mutual fund series registered on 

Form N–1A, approximately 1,060 of 

which are directly sold and therefore 

deliver their own prospectuses. Of 

these, the Commission estimates that 

approximately half (530 mutual fund 

series): (i) do not send the implied 

consent notice requirement because 

they obtain affirmative written consent 

to household prospectuses in the fund’s 

account opening documentation; or (ii) 

do not take advantage of the 

householding provision because of 

electronic delivery options which lessen 

the economic and operational benefits 

of rule 154 when compared with the 

costs of compliance. Therefore, the 

Commission estimates that each of the 

530 directly sold mutual fund series 

will spend an average of 20 hours per 

year complying with the notice 

requirement of the rule, for a total of 

10,600 burden hours. In addition, of the 

approximately 1,060 mutual fund series 

that are directly sold, the Commission 

estimates that approximately 75% (or 

795) will each spend 1 hour complying 

with the annual explanation of the right 

to revoke requirement of the rule, for a 

total of 795 hours. 

The Commission estimates that, as of 

March 2024, there were approximately 

70 broker-dealers that have customer 

accounts with mutual funds, and 

therefore may be required to deliver 

mutual fund prospectuses. The 

Commission estimates that each affected 

broker-dealer will spend, on average, 20 

hours complying with the notice 

requirement of the rule, for a total of 

1,400 hours. In addition, each brokerdealer will also spend one hour 

complying with the annual explanation 

of the right to revoke requirement, for a 

total of 70 hours. Therefore, the total 

number of respondents for rule 154 is 

865 (795 4 mutual fund series plus 70 

broker-dealers), and the estimated total 

hour burden is approximately 12,865 

hours (11,395 hours for mutual fund 

series, plus 1,470 hours for brokerdealers). 

The estimate of average burden hours 

is made solely for the purposes of the 

Paperwork Reduction Act and is not 

derived from a comprehensive or even 

a representative survey or study of the 

costs of Commission rules and forms. 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to a collection of information unless it 

displays a currently valid OMB control 

number. 

Written comments are invited on: (a) 

whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

estimate of the burden of the collection 

of information; (c) ways to enhance the 

quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burden of the collection of 

information on respondents, including 

through the use of automated collection 

techniques or other forms of information 

technology. Consideration will be given 

to comments and suggestions submitted 

by November 19, 2024. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: Austin Gerig, Director/Chief Data 

Officer, Securities and Exchange 

Commission, c/o Oluwaseun Ajayi, 100 

F Street NE, Washington, DC 20549 or 

send an email to: PRA_Mailbox@

sec.gov. 

Dated: September 17, 2024. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–21555 Filed 9–19–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101025; File No. SR–IEX– 

2024–16] 

Self-Regulatory Organizations; 

Investors Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Adopt 

Supplementary Material .16 to IEX Rule 

5.110 (Supervision), So That IEX 

Members Who Participate in the 

Recently Approved FINRA Pilot 

Program on Remote Inspections Will 

Also Satisfy the Internal Inspection 

Requirements Found in IEX’s Rules 

September 16, 2024. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on 

September 4, 2024, the Investors 

Exchange LLC (‘‘IEX’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Pursuant to the provisions of Section 

19(b)(1) under the Act,4 and Rule 19b– 

4 thereunder,5 the Exchange is filing 

with the Commission a proposed rule 

change to adopt Supplementary 

Material .16 to IEX Rule 5.110 

(Supervision), so that IEX Members 6

who participate in the recentlyapproved FINRA pilot program on 

remote inspections (the ‘‘Remote 


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7See Securities Exchange Act Release No. 97398 

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

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

Securities Exchange Act Release No. 98982 

(November 17, 2023), 88 FR 82464 (November 24, 

2023) (‘‘Remote Inspections Pilot Program Approval 

Order’’) (SR–FINRA–2023–007). 

8See FINRA Rule 3110.18. 

9See IEX Rule 5.110(f)(1). 

10See IEX Rule 5.110(f)(2)(A). 

11See Supplementary Material .15 to IEX Rule 

5.110 (‘‘Temporary Relief to Allow Remote 

Inspections for Calendar Years 2021, 2022, 2023, 

and Through the Earlier of the Effective Date of the 

Remote Inspections Pilot Program or June 30, 

2024’’). 

12See Id. The equivalent temporary relief offered 

by FINRA also sunset on June 30, 2024. See FINRA 

Rule 3110.17 

13 IEX notes that all IEX Members are currently 

FINRA members, or in the process of becoming 

FINRA members. 

14See Securities Exchange Act Release No. 93324 

(October 14, 2021), 86 FR 58110 (October 20, 2021) 

(File No. 4–700). The 17d–2 Agreement includes a 

certification by IEX that states that the requirements 

contained in certain Exchange rules are identical to, 

or substantially similar to, certain FINRA rules that 

have been identified as comparable. 

15See generally SEC Division of Market 

Regulation, Staff Legal Bulletin No. 17: Remote 

Office Supervision (March 19, 2004) (‘‘SLB 17’’) 

(SEC guidance on remote office supervision), 

https://www.sec.gov/interps/legal/mrslb17.htm; and 

Regulatory Notice 11–54 (November 2011) (‘‘Notice 

11–54’’) (joint SEC and FINRA guidance on 

effective policies and procedures for broker-dealer 

branch inspections). 

16See IEX Rule 5.110(a) 

17See IEX Rule 5.110(c)(1)(A). 

18See IEX Rule 5.110(c)(1)(B). 

19See IEX Rule 5.110(c)(1)(C) and Supplementary 

Material .13 to IEX Rule 5.110 (‘‘General 

Presumption of Three-Year Limit for Periodic 

Inspection Schedules’’). 

20See IEX Rule 5.110(c)(2). 

21See IEX Rule 5.110(c)(2)(A) (providing that the 

inspection report must include, without limitation, 

the testing and verification of the Member’s policies 

and procedures, including supervisory policies and 

procedures for: (1) safeguarding of customer funds 

and securities; (2) maintaining books and records; 

(3) supervision of supervisory personnel; (4) 

transmittals of funds from customers to third party 

accounts, from customer accounts to outside 

entities, from customer accounts to locations other 

than a customer’s primary residence, and between 

customers and registered representatives, including 

the hand delivery of checks; and (5) changes of 

customer account information, including address 

and investment objectives changes, and validation 

of such changes). 

22 IEX Rule 5.110(c)(3) provides a limited 

exception from this requirement if a firm 

determines compliance is not possible either 

because of the firm’s size or its business model. 

Supplementary Material .14 to IEX Rule 5.110 

(Exception to Persons Prohibited from Conducting 

Inspections) reflects IEX’s expectation that a firm 

generally will rely on the exception in instances 

where the firm has only one office or has a business 

model where small or single-person offices report 

directly to an OSJ manager who is also considered 

the offices’ branch office manager. However, these 

situations are non-exclusive, and a firm may still 

rely on the exception in other instances where it 

Inspections Pilot Program’’) 7 will also 

satisfy the internal inspection 

requirements found in IEX’s rules. 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.iextrading.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 the 

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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

IEX proposes to adopt Supplementary 

Material .16 to IEX Rule 5.110, which 

would provide that any IEX Member 

that participates in the FINRA Remote 

Inspections Pilot Program,8 thereby 

satisfying the internal inspections 

requirements in FINRA Rule 3110(c), 

would also satisfy the equivalent 

internal inspections requirements in IEX 

Rule 5.110(c). This proposed rule 

change would supplant Supplementary 

Material .15 to IEX Rule 5.110, which 

allowed Members to fulfill any calendar 

year 2024 internal inspection 

obligations set forth in IEX Rule 5.110(c) 

by conducting remote inspections of the 

applicable offices of supervisory 

jurisdiction (‘‘OSJs’’),9 branch offices 

(both supervisory and nonsupervisory),10 and non-branch 

locations.11 This temporary relief, 

which was analogous to relief that 

FINRA provided for, automatically 

sunset on June 30, 2024.12 As described 

below, adding Proposed Supplementary 

Material .16 to IEX Rule 5.110 would 

harmonize IEX’s internal inspections 

obligations for its Members with 

FINRA’s comparable obligations for its 

members, thereby avoiding confusion to 

IEX Members with respect to the 

applicability of participation in the 

FINRA Remote Inspections Pilot 

Program with respect to compliance 

with IEX Rule 5.110.13 Additionally, 

because Proposed Supplementary 

Material .16 to IEX Rule 5.110 

incorporates by reference FINRA Rule 

3110.18, this rule change enables IEX 

Rule 5.110 to continue to be 

incorporated into the agreement 

between IEX and FINRA to allocate 

regulatory responsibility for common 

rules (the ‘‘17d–2 Agreement’’).14

Standards for Supervision of Remote 

Offices 

The responsibility of firms to 

supervise their associated persons is a 

critical component of broker-dealer 

regulation.15 Members must supervise 

all of their associated persons, 

regardless of their location, 

compensation or employment 

arrangement, or registration status. IEX 

Rule 5.110, which is substantially 

identical to FINRA Rule 3110(c), 

requires any Member, regardless of size 

or type, to have a supervisory system for 

the activities of its associated persons 

that is reasonably designed to achieve 

compliance with the applicable 

securities laws and regulations and IEX 

rules, and that sets forth the minimum 

requirements for such supervisory 

system.16 The internal inspection 

obligation under IEX Rule 5.110(c) and 

FINRA Rule 3110(c) is one component 

of such system. 

IEX Rule 5.110(c) sets forth three 

main requirements for inspections. 

First, an inspection of an office or 

location must occur on a designated 

frequency. The periodicity of the 

required inspection varies depending on 

the classification of the location or the 

nature of the activities that take place: 

OSJs and supervisory branch offices 

must be inspected at least annually; 17

non-supervisory branch offices must be 

inspected at least every three years; 18

and non-branch locations must be 

inspected on a periodic schedule, 

presumed to be at least every three 

years.19 Second, a Member must retain 

a written record of the date upon which 

each review and inspection occurred, 

reduce a location’s inspection to a 

written report and keep each inspection 

report on file either for a minimum of 

three years or, if the location’s 

inspection schedule is longer than three 

years, until the next inspection report 

has been written.20 If applicable to the 

location being inspected, the inspection 

report must include the testing and 

verification of the Member’s policies 

and procedures, including supervisory 

policies and procedures, in specified 

areas.21 Third, to prevent compromising 

the effectiveness of inspections due to 

conflicts of interest, the rule requires a 

Member to ensure that the person 

conducting the inspection is not an 

associated person assigned to the 

location or is not directly or indirectly 

supervised by, or otherwise reporting to, 

an associated person assigned to that 

location.22 All OSJs, branch offices, and 


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cannot comply because of its size or business 

model, provided the firm complies with the 

documentation requirements under the rule. 

23Such red flags may include: customer 

complaints; a large number of elderly customers; a 

concentration in highly illiquid or risky 

investments; an unexplained increase or change in 

the types of investments or trading concentration 

that a representative is recommending or trading; an 

unexpected improvement in a representative’s 

production, lifestyle, or wealth; questionable or 

frequent transfers of cash or securities between 

customer or third party accounts, or to or from the 

representative; a representative that serves as a 

power of attorney, trustee or in a similar capacity 

for a customer or has discretionary control over a 

customer’s account(s); a representative with 

disciplinary records; customer investments in one 

or a few securities or class of securities that is 

inconsistent with firm policies related to such 

investments; churning; trading that is inconsistent 

with customer objectives; numerous trade 

corrections, extensions, liquidations; or significant 

switching activity of mutual funds or variable 

products held for short time periods. See SLB 17, 

supra note 15. 

24See NASD [FINRA] Notice to Members 98–38 

(May 1998) and 99–45 (June 1999). 

25See SLB 17 and Notice 11–54, supra note 15. 

26See Remote Inspections Pilot Program 

Proposal, supra note 7. 

27See Id. 

28See Id. 

29See Remote Inspections Pilot Program 

Approval Order, supra note 7. 

30See FINRA Regulatory Notice 24–02. 

31See Remote Inspections Pilot Program 

Proposal, supra note 7. 

32See Id. 

33See FINRA Rule 3110.18(b). 

34See FINRA Rule 3110.18(c). 

35See FINRA Rule 3110.18(d). 

non-branch locations are subject to IEX 

Rule 5.110(c). 

Further, Supplementary Material .12 

to IEX Rule 5.110 sets out factors that 

constitute a reasonable review. This 

provision emphasizes establishing 

reasonable supervisory procedures and 

conducting reviews of locations, taking 

into consideration, among other things, 

the Member’s size, organizational 

structure, scope of business activities, 

number and location of the Member’s 

offices, the nature and complexity of the 

products and services offered by the 

Member, the volume of business done, 

the number of associated persons 

assigned to a location, the disciplinary 

history of registered representatives or 

associated persons, and any indicators 

of irregularities or misconduct (i.e., ‘‘red 

flags’’).23 The provision further states 

that the procedures established and 

reviews conducted must provide that 

the quality of supervision at remote (i.e., 

geographically dispersed) locations is 

sufficient to ensure compliance with 

applicable securities laws and 

regulations and with IEX rules, and that 

Members must be especially diligent 

with respect to a non-branch location 

where a registered representative 

engages in securities activities. This 

provision incorporates guidance FINRA 

has previously issued about supervising 

associated persons working in 

geographically dispersed offices.24

Notably, all of the above requirements 

about supervision and inspections of 

OSJs, branch offices, and non-branch 

locations reflected a business 

environment in which Members 

conducted in-person inspections of all 

of their offices.25

FINRA’s Recent Attempts To Change the 

In-Person Inspection Requirements of 

OSJs, Branch Offices, and Non-Branch 

Locations 

In the Remote Inspections Pilot 

Program Proposal, FINRA described its 

efforts during the past several years to 

offer its members the option of remotely 

conducting internal inspections of their 

OSJs, branch offices, and non-branch 

locations.26 As stated therein, FINRA 

believed that as more recordkeeping 

moved from paper to electronic records, 

and as more meetings were conducted 

virtually using platforms such as Zoom 

and WebEx, the burden on FINRA 

members of conducting in-person 

inspections for all their remote office 

locations became harder to justify.27

Thus, when the COVID–19 pandemic 

required many securities industry 

professionals to work from home, 

FINRA implemented several forms of 

regulatory relief to its members, 

including introducing FINRA Rule 

3110.17, which IEX also introduced as 

Supplementary Material .15 to IEX Rule 

5.110, to permit remote internal 

inspections of their OSJs, branch offices, 

and non-branch locations. 

The pandemic accelerated the 

industry’s adoption of a broad remote 

work environment and IEX recognizes 

that the pandemic has profoundly 

changed attitudes on where work can 

occur. As a result of this change many 

firms have adopted, in varying scale, 

hybrid work models involving 

personnel who are working at least part 

time from alternative work locations 

(e.g., private residences). As part of an 

effort to modernize its rules to reflect 

evolving technologies and business 

models, in April 2023, FINRA filed the 

Remote Inspections Pilot Program 

Proposal with the Commission to 

establish a voluntary, three-year remote 

inspections pilot program that would 

allow eligible firms to conduct 

inspections of all or some offices or 

locations, remotely, subject to the 

specified terms therein.28 The SEC 

approved the FINRA Remote Inspection 

Pilot Program Proposal in November 

2023,29 and FINRA commenced the 

pilot program on July 1, 2024.30

FINRA’s Remote Inspections Pilot 

Program 

FINRA’s Remote Inspection Pilot 

Program builds on the terms of the 

temporary relief in FINRA Rule 3110.17, 

while requiring members to provide 

even more information about their 

remote inspections to allow FINRA to 

assess the overall impact and 

effectiveness of remote inspections.31

The pilot program is designed to 

provide broader systemized information 

to supplement the information obtained 

through the FINRA examination process 

in an environment where offices and 

locations were closed. The information 

firms would be required to produce as 

a pilot program participant will help 

FINRA more accurately assess the 

overall impact and effectiveness of 

remote inspections.32

FINRA’s Remote Inspection Pilot 

Program includes, among other things, 

the following requirements for 

participating firms: 

• Risk Assessment. Prior to electing a 

remote inspection for an office or location, 

participating firms must develop a reasonable 

risk-based approach to using remote 

inspections and conduct and document a risk 

assessment for that office or location.33

• Written Supervisory Procedures for 

Remote Inspections. Participating firms must 

establish, maintain, and enforce written 

procedures that are reasonably designed for 

conducting remote inspections and 

reasonably designed to achieve compliance 

with applicable securities laws and 

regulations.34

• Effective Supervisory System. 

Participating firms must have an effective 

supervisory system for remote inspections 

that will be held to the same standards of 

review (set forth under FINRA Rule 3110.12). 

Where a member’s remote inspection of an 

office or location identifies any ‘‘red flags,’’ 

the member may need to impose additional 

supervisory procedures for that office or 

location or may need to provide for more 

frequent monitoring of that office or location, 

including potentially a subsequent on-site 

visit on an announced or unannounced 

basis.35

• Documentation Requirement. 

Participating firms must maintain and 

preserve a centralized record for each of the 

Pilot Years specified in the pilot program that 

separately identifies: (1) all offices or 

locations that were inspected remotely; and 

(2) any offices or locations for which the 

member determined to impose additional 

supervisory procedures or more frequent 

monitoring, as provided in FINRA Rule 

3110.18(d). A member’s documentation of 

the results of a remote inspection for an 

office or location must identify any 

additional supervisory procedures or more 

frequent monitoring for that office or location 

that were imposed as a result of the remote 

inspection, including whether an on-site 


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36See FINRA Rule 3110.18(e). 

37See FINRA Rule 3110.18(f). 

38See FINRA Rule 3110.18(g). 

39See FINRA Rule 3110.18(h). 

40See FINRA Rule 3110.18(i). 

41See FINRA Rule 3110.18(j). 

42See FINRA Rule 3110.18(k). 

43See FINRA Rule 3110.18(l). 

44Proposed Supplementary Material .16 to IEX 

Rule 5.110. 

45Pursuant to this proposed rule change, IEX 

Members will be required to collect and on a 

quarterly basis produce to FINRA data regarding its 

participation in the Remote Inspections Pilot 

Program. See FINRA Rule 3110.18(h). But Members 

will not be required to produce that information 

directly to IEX. 

46See supra note 14. 

47 IEX notes that any inspections conducted by its 

Members in the brief period between July 1, 2024 

and the effective date of this filing will not satisfy 

IEX Rule 5.110(c), but believes this will not be an 

issue for its Members because the remote 

inspections process outlined in the pilot program is 

an ongoing process that cannot be completed in the 

few days between the start of the FINRA’s pilot 

program and the effectiveness of this rule filing. 

48Those standards provide, in part, that based on 

the factors set forth under that supplementary 

material, Members ‘‘may need to provide for more 

frequent review of certain locations.’’ 

49 15 U.S.C. 78f. 

50 15 U.S.C. 78f(b)(5). 

inspection was conducted at such office or 

location.36

• Firm Level Requirements. Participating 

firms must meet certain firm-level eligibility 

requirements to participate in the program 

set forth in FINRA Rule 3110.18(f)(1). For 

example, a firm cannot participate if it is 

designated as: (i) Restricted Firm under 

FINRA Rule 4111 or (ii) a Taping Firm under 

FINRA Rule 3170. Additionally, firms with 

suspended or new (effective less than 12 

months) FINRA memberships or that have 

been found by the SEC or FINRA to have 

violated FINRA Rule 3110(c) are ineligible to 

participate. Participating firms must also 

comply with firm-level conditions to 

participate in the program. For example, a 

firm must have a recordkeeping system that 

keeps records current and promptly 

accessible, and that does not maintain 

physical or electronic records at the location 

subject to remote inspection. Additionally, 

participating firms must have firm-wide tools 

such as electronic recordkeeping systems, 

system security tools such as secure network 

connections and effective cybersecurity 

protocols, and tools specifically applied to 

each office or location based on the activities 

of associated persons, products offered, or 

any restrictions on the activity of the office 

or location.37

• Location Level Requirements. 

Participating firms must exclude from 

participating in the program any locations 

that do not meet the location level eligibility 

criteria set forth in FINRA Rule 3110.18(g)(1) 

(e.g., the location includes: (i) persons subject 

to a disciplinary action, a statutory 

disqualification, or a mandated heightened 

supervisory plan; (ii) persons engaged in 

proprietary trading; or (iii) the handling of 

customer funds or securities). Additionally, 

eligible locations must use the firm’s 

electronic communication system and may 

not maintain any original copies of books or 

records at the location.38

• Data and Information Collection 

Requirement. Participating firms must collect 

and on a quarterly basis produce to FINRA 

data consisting of separate counts for OSJs, 

supervisory branch offices, non-supervisory 

branch offices, and non-branch locations. 

This data must include information about the 

number of remote inspections conducted and 

any significant findings. Firms shall 

establish, maintain, and enforce written 

policies and procedures that are reasonably 

designed to comply with the data collection 

and transmission requirements.39

• Election to Participate in Remote 

Inspections Pilot Program. Participating firms 

must opt-in to the pilot program in a manner 

specified by FINRA.40

• Failure to Satisfy Conditions and 

Determination of Ineligibility. Participating 

firms that fail to satisfy terms of the Remote 

Inspections Pilot Program will be ineligible 

to participate in the pilot program and return 

to conducting only on-site inspections.41

FINRA may also make a determination to 

revoke a member’s eligibility to participate if 

FINRA finds it to be in the public interest.42

• Definitions of Pilot Year periods. 

Includes clarifications that Pilot Year 1 is the 

second half of 2024, and Pilot Year 4 is the 

first half of 2027.43

Proposal 

IEX proposes to adopt Supplementary 

Material .16 to IEX Rule 5.110. This 

proposed new supplementary material 

reads as follows: 

Members that are obligated to conduct an 

inspection of an office of supervisory 

jurisdiction, branch office or non-branch 

location pursuant to, as applicable, 

paragraphs (c)(1)(A), (B) and (C) under IEX 

Rule 5.110 may satisfy such obligation by 

participating in the FINRA Remote 

Inspections Pilot Program, as set forth in 

FINRA Rule 3110.18. The FINRA Remote 

Inspections Pilot Program shall cover 

required inspections of such offices or 

locations for a period of three years starting 

on September 4, 2024 (‘‘pilot period’’), and 

such pilot period shall expire on July 1, 2027. 

If the pilot period is not extended, this 

Supplementary Material will automatically 

sunset on July 1, 2027. Members will not be 

able to participate in the FINRA Remote 

Inspections Pilot Program after such date.44

As stated in proposed new 

Supplementary Material .16 to IEX Rule 

5.110, any IEX Member that participates 

in the FINRA Remote Inspections Pilot 

Program, thereby satisfying the internal 

inspections requirements in FINRA Rule 

3110(c), will satisfy the equivalent 

internal inspections requirements in IEX 

Rule 5.110(c). 

IEX is not proposing to add the entire 

FINRA Remote Inspections Pilot 

Program to its rules, because it would be 

unnecessarily duplicative and 

burdensome for IEX Members to submit 

the data and information required as 

part of the Remote Inspections Pilot 

Program to both IEX and FINRA.45

Based upon conversations with FINRA 

staff, IEX understands that adopting 

Proposed Supplementary Material .16 to 

IEX Rule 5.110 would update IEX Rule 

5.110 so that it remains substantially 

similar to FINRA Rule 3110, such that 

they remain common rules subject to 

the 17d–2 Agreement.46 As a result, 

regulatory responsibility for IEX Rule 

5.110 would continue to be allocated to 

FINRA. 

As noted above, all IEX Members 

were temporarily eligible to conduct 

remote office inspections until June 30, 

2024. This proposed rule change allows 

those Members who have enrolled in 

FINRA’s Remote Inspections Pilot 

Program to continue to use remote 

inspections as part of an effective 

supervisory system.47 IEX believes this 

Remote Inspections Pilot Program is a 

reasonable alternative for firms to fulfill 

their IEX Rule 5.110(c) obligations while 

permitting FINRA to collect data as the 

regulatory authority in this area under 

the 17d–2 Agreement to assess the 

efficacy and long-term viability of a 

permanent remote office inspections 

program. IEX emphasizes that the 

inspection requirement is one aspect of 

a firm’s overall supervisory system, and 

that the inspection, whether done in 

accordance with the FINRA Remote 

Inspections Pilot Program, or on-site, 

would be held to the existing standards 

of review under Supplementary 

Material .12 to IEX Rule 5.110 

(Standards for Reasonable Review).48

2. Statutory Basis 

IEX believes that the proposed rule 

change is consistent with the provisions 

of Section 6(b) 49 of the Act in general, 

and furthers the objectives of Section 

6(b)(5) of the Act 50 in particular, in that 

it is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, 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. The 

Exchange’s rule proposal is intended to 

harmonize IEX’s supervision rules, 

specifically with respect to the 

requirements for inspections of 

Members’ branch offices and other 

locations, with those of FINRA, on 

which they are based. As discussed in 

the Purpose section, because Proposed 

Supplementary Material .16 to IEX Rule 

5.110 incorporates by reference FINRA 

Rule 3110.18, this rule change enables 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices 77213 

51 15 U.S.C. 78f(b)(5). 

52 15 U.S.C. 78s(b)(3)(A). 

53 17 CFR 240.19b–4(f)(6). 

54 17 CFR 240.19b–4(f)(6)(iii). 

55 17 CFR 240.19b–4(f)(6). 

56 17 CFR 240.19b–4(f)(6)(iii). 

57See supra note 47. 

58For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule change’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

59 15 U.S.C. 78s(b)(2)(B). 

IEX Rule 5.110 to continue to be 

incorporated into the 17d–2 Agreement, 

resulting in less burdensome and more 

efficient regulatory compliance. 

Specifically, the proposed change will 

conform the Exchange’s rules to changes 

made to corresponding FINRA rules 

insofar as a Member’s compliance with 

FINRA Rule 3110.18 shall mean the 

Member is also in compliance with 

Supplementary Material .16 to IEX Rule 

5.110, thus promoting the application of 

consistent regulatory standards with 

respect to rules that FINRA enforces 

pursuant to the 17d–2 Agreement. As 

such, the proposed rule change would 

foster cooperation and coordination 

with persons engaged in facilitating 

transactions in securities and would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system in 

accordance with Section 6(b)(5) of the 

Act.51

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

IEX does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is not designed to 

address any competitive issue but rather 

to provide greater harmonization among 

IEX and FINRA rules of similar purpose, 

resulting in less burdensome and more 

efficient regulatory compliance for 

common members and facilitating 

FINRA’s performance of its regulatory 

performance on the pending 17d–2 

Agreement. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has designated this rule 

filing as non-controversial under 

Section 19(b)(3)(A) 52 of the Act and 

Rule 19b–4(f)(6) 53 thereunder. 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 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act and Rule 19b– 

4(f)(6) thereunder. In addition, the 

Exchange provided the Commission 

with 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.54

A proposed rule change filed under 

Rule 19b–4(f)(6) 55 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),56 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay to permit the Exchange 

to harmonize its rules with FINRA, as 

described herein, upon effectiveness of 

the proposed rule filing. 

The Exchange stated that this 

proposed rule change is noncontroversial because it does not present 

any new or novel issues. In particular, 

IEX is harmonizing its supervision rules 

with those of FINRA, on which they are 

based and which have been previously 

approved by the Commission. By 

conforming the Exchange’s rules to 

FINRA’s, the proposed rule change 

would promote the application of 

consistent regulatory standards with 

respect to rules that FINRA enforces 

pursuant to the 17d–2 Agreement. As 

such, the Exchange believes that the 

proposed rule change would foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities and would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system in 

accordance with Exchange Act Section 

6(b)(5). 

In addition, the Exchange stated that 

since the FINRA Remote Inspections 

Pilot Program commenced on July 1, 

2024, waiving the 30-day operative 

delay would provide assurances to IEX 

members who enroll in the Remote 

Inspections Pilot Program that they can 

plan the remainder of their 2024 

inspection program under a harmonized 

rule set, with just a short window of 

time in which the FINRA pilot program 

was not part of IEX’s rules,57 while at 

the same time helping ensure that IEX 

members continue to perform their 

supervisory obligations. Further, the 

Exchange stated that waiver of the 

operative delay should reduce any 

potential confusion that may otherwise 

occur on the part of IEX members as to 

the applicable rules governing 

inspections of branch offices and other 

locations. For these reasons, the 

Commission believes that waiver of the 

30-day operative delay for this proposed 

rule change is consistent with the 

protection of investors and the public 

interest. Accordingly, the Commission 

hereby waives the 30-day operative 

delay and designates the proposed rule 

change operative upon filing.58

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 59 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– 

IEX–2024–16 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–IEX–2024–16. 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 


ddrumheller on DSK120RN23PROD with NOTICES1
77214 Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices 

60 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 

10:00 a.m. and 3:00 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–IEX–2024–16 and 

should be submitted on or before 

October 11, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.60

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–21491 Filed 9–19–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–172, OMB Control No. 

3235–0169] 

Submission for OMB Review; 

Comment Request; Extension: Form 

N–5 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.), the Securities 

and Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for extension of the 

previously approved collection of 

information discussed below. 

Form N–5 (17 CFR 239.24 and 274.5) 

is the form used by small business 

investment companies (‘‘SBICs’’) to 

register their securities under the 

Securities Act of 1933 (15 U.S.C. 77a et 

seq.) (‘‘Securities Act’’) and the 

Investment Company Act of 1940 (15 

U.S.C. 80a–1 et seq.) (‘‘Investment 

Company Act’’). Form N–5 is the 

registration statement form adopted by 

the Commission for use by an SBIC that 

has been licensed as such under the 

Small Business Investment Act of 1958 

or which has received the preliminary 

approval of the Small Business 

Administration (‘‘SBA’’) and has been 

notified by the SBA that the company 

may submit a license application Form 

N–5 is an integrated registration form 

and may be used as the registration 

statement under both the Securities Act 

and the Investment Company Act. The 

purpose of Form N–5 is to meet the 

filing and disclosure requirements of 

both the Securities Act and Investment 

Company Act, and to provide investors 

with information sufficient to evaluate 

an investment in an SBIC. The 

information that is required to be filed 

with the Commission permits 

verification of compliance with 

securities law requirements and assures 

the public availability and 

dissemination of the information. 

The Commission did not receive any 

filings on Form N–5 in the last three 

years (or in the three years before that). 

Nevertheless, for purposes of this PRA, 

we conservatively estimate that at least 

one Form N–5 will be filed in the next 

three years, which translates to about 

0.333 filings on Form N–5 per year. The 

currently approved internal burden of 

Form N–5 is 352 hours per response. We 

continue to believe this estimate for 

Form N–5’s internal hour burden is 

appropriate. Therefore, the number of 

currently approved aggregate burden 

hours, when calculated using the 

current estimate for number of filings, is 

about 117 internal hours per year. 

The currently approved external cost 

burden of Form N–5 is $12,524 per 

filing. The requested external cost 

burden for filing one Form N–5 would 

be $14,746 per year. This estimated 

burden is based on the estimated wage 

rate of $584/hour, for 25.25 hours, for 

outside legal services to complete the 

form and provide the required 

hyperlinks. 

Estimates of average burden hours 

and costs are made solely for the 

purposes of the Paperwork Reduction 

Act, and are not derived from a 

comprehensive or even representative 

survey or study of the costs of 

Commission rules and forms. 

Compliance with the collection of 

information requirements of Form N–5 

is mandatory. Responses to the 

collection of information will not be 

kept confidential. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website: 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent 

within 30 days of publication of this 

notice by October 21, 2024 to (i) 

MBX.OMB.OIRA.SEC_desk_officer@

omb.eop.gov and (ii) Austin Gerig, 

Director/Chief Data Officer, Securities 

and Exchange Commission, c/o 

Oluwaseun Ajayi, 100 F Street NE, 

Washington, DC 20549, or by sending an 

email to: PRA_Mailbox@sec.gov. 

Dated: September 17, 2024. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–21596 Filed 9–19–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101034; File No. SR– 

CboeEDGX–2024–058] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fee Schedule Relating to Volume Tiers 

September 16, 2024. 

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 3, 2024, Cboe EDGX 

Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

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 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) proposes to 

amend its Fee Schedule. The text of the 


ddrumheller on DSK120RN23PROD with NOTICES1