Federal Register / Vol. 89, No. 196 / Wednesday, October 9, 2024 / Notices 81971 

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(y). 

7See IEX Rules 5.110(a)(4) and 5.110(c)(1)(A). 

8See IEX Rule 1.160(s). 

9 IEX notes that all IEX Members are currently 

FINRA members, or in the process of becoming 

FINRA members. 

10See 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. 

11Among the temporary regulatory relief 

provided, FINRA adopted relief pertaining to 

branch office registration requirements through 

Form BR (Uniform Branch Office Registration Form) 

and FINRA Rule 3110(c) inspection requirements. 

Specifically, FINRA temporarily suspended the 

requirement for member firms to submit branch 

office applications on Form BR for any newly 

opened temporary office locations or space-sharing 

arrangements established as a result of the 

pandemic. See Regulatory Notice 20–08 (March 

2020). With respect to inspection obligations, 

FINRA adopted temporary Rule 3110.16 that 

provided additional time for member firms to 

complete their calendar year 2020 inspection 

obligations. See Securities Exchange Act Release 

No. 89188 (June 30, 2020), 85 FR 40713 (July 7, 

2020) (SR–FINRA–2020–019). 

12See Securities Exchange Act Release No. 90454 

(November 18, 2020), 85 FR 75097 (November 24, 

2020) (SR–FINRA–2020–040). 

13See Securities Exchange Act Release No. 96241 

(November 4, 2022), 87 FR 67969 (November 10, 

2022) (SR–FINRA–2022–030); Securities Exchange 

Act Release No. 93002 (September 15, 2021), 86 FR 

52508 (September 21, 2021) (SR–FINRA–2021–023); 

Securities Exchange Act Release No. 94018 (January 

20, 2022), 87 FR 4072 (January 26, 2022) (SR– 

FINRA–2022–001); and Securities Exchange Act 

Release No. 98560 (September 27, 2023), 88 FR 

68258 (October 3, 2023) (SR–FINRA–2023–012). 

14See Securities Exchange Act Release No. 92222 

(June 22, 2021), 86 FR 34069 (June 28, 2021) (SR– 

IEX–2021–09); Securities Exchange Act Release No. 

96460 (December 7, 2022), 87 FR 76222 (December 

13, 2022) (SR–IEX–2022–12); Securities Exchange 

Act Release No. 96606 (January 6, 2023), 88 FR 

2140 (January 12, 2023) (SR–IEX–2022–14); and 

Securities Exchange Act Release No. 99383 (January 

17, 2024), 89 FR 4355 (January 23, 2024) (SR–IEX– 

2024–02). 

15See FINRA Rule 3110.18. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101237; File No. SR–IEX– 

2024–19] 

Self-Regulatory Organizations; 

Investors Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Adopt 

Supplementary Material .17 to IEX Rule 

5.110 (Supervision), so That Any 

Location That Is the Private Residence 

of a Person Associated With a Member 

at Which Supervisory Activities Are 

Conducted, Which the Member Has 

Designated as a Residential 

Supervisory Location Pursuant to 

FINRA Rule 3110.19, Would Also Be 

Considered a Non-Branch Location 

Pursuant to IEX’s Rules 

October 3, 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 20, 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 .17 to IEX Rule 5.110 

(Supervision), so that any location that 

is the private residence of a person 

associated with a Member 6 at which 

supervisory activities are conducted, 

which the Member has designated as a 

Residential Supervisory Location 

(‘‘RSL’’) pursuant to FINRA Rule 

3110.19, would also be considered a 

non-branch location pursuant to 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 .17 to IEX Rule 5.110, which 

would allow a location that is the 

private residence of a person associated 

with a Member where supervisory 

activities are conducted, including those 

described in IEX Rule 5.110(f)(1)(D) 

through (G) or IEX Rule 5.110(f)(2), that 

satisfies the conditions for designation 

as a RSL set forth in FINRA Rule 

3110.19 to also be considered a nonbranch location (i.e., an unregistered 

office) for those activities under IEX 

rules. Without this proposed rule 

change, any private residence at which 

a person associated with a member 

conducts supervisory activities is 

subject to registration, an annual 

inspection and, in some cases, 

additional licensing requirements.7 As 

described below, adding Proposed 

Supplementary Material .17 to IEX Rule 

5.110 would harmonize IEX’s internal 

inspections obligations for its Members 8

with FINRA’s comparable obligations 

for its members, thereby avoiding 

confusion to IEX Members with respect 

to the applicability of FINRA’s new RSL 

designation with respect to compliance 

with IEX Rule 5.110.9 Additionally, 

because Proposed Supplementary 

Material .17 to IEX Rule 5.110 

incorporates by reference FINRA Rule 

3110.19, 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’’).10

Background 

Early in 2020, the COVID–19 

pandemic prompted FINRA to provide 

temporary relief to member firms from 

certain regulatory requirements to 

address the public health crisis.11

FINRA subsequently adopted temporary 

relief to allow remote inspections of an 

Office of Supervisory Jurisdiction 

(‘‘OSJ’’), branch office, or non-branch 

location for calendar years 2020 and 

2021; 12 FINRA extended the temporary 

relief several times to include calendar 

years 2022, 2023, and the first half of 

2024.13 IEX, following FINRA, offered 

its Members the same temporary relief 

to allow remote inspections of OSJs, 

branch offices, and non-branch 

locations for calendar years 2021, 2022, 

2023, and until June 30, 2024.14 FINRA 

replaced the temporary remote 

inspections relief with the Remote 

Inspections Pilot Program 15 that 

impacts the internal inspections 

requirements of FINRA Rule 3110(c); 

IEX subsequently amended its 

supervision rules such that any IEX 

Member that participates in the FINRA 

pilot shall be deemed to satisfy the 


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16See Securities Exchange Act Release No. 

101025 (September 16, 2024); see also 

Supplementary Material .16 to IEX Rule 5.110. 

17See Securities Exchange Act Release No. 97237 

(March 31, 2023), 88 FR 20568 n. 8 (April 6, 2023) 

(SR–FINRA–2023–006) (‘‘FINRA RSL Proposal’’) 

(describing FINRA’s ‘‘practice of periodically 

reviewing its rules to ensure they continue to 

promote their intended investor protection 

objectives in a manner that is effective and efficient, 

without imposing undue burdens, particularly in 

light of technological, industry and market 

changes.’’) 

18See IEX Rule 5.110(a). 

19See IEX Rule 5.110(f). 

20See IEX Rule 5.110(a)(3) and Supplementary 

Material .01 to IEX Rule 5.110. 

21See IEX Rule 5.110(f)(2). 

22See IEX Rule 5.110(f)(4). 

23See IEX Rule 5.110(c)(1)(A) & (B). 

24See IEX Rule 5.110(f)(1)(A)–(G). 

25See IEX Rules 5.110(a)(4) and 5.110(c)(1)(A). 

26See generally IEX Rule 5.110(f)(2)(A) and IEX 

Rule 5.110(f)(2)(D)–(G) which, in addition to the 

primary residence and the non-primary residence 

exclusions that are further described, excludes the 

following from the definition of ‘‘branch office’’: (1) 

any location that is established solely for customer 

service or back office type functions where no sales 

activities are conducted and that is not held out to 

the public as a branch office; (2) any office of 

convenience, where associated persons occasionally 

and exclusively by appointment meet with 

customers, which is not held out to the public as 

an office; (3) any location that is used primarily to 

engage in non-securities activities and from which 

the associated person(s) effects no more than 25 

securities transactions in any one calendar year; 

provided that any retail communication identifying 

such location also sets forth the address and 

telephone number of the location from which the 

associated person(s) conducting business at the 

non-branch locations are directly supervised; (4) the 

Floor of a registered national securities exchange 

where a member conducts a direct access business 

with public customers; or (5) a temporary location 

established in response to the implementation of a 

business continuity plan. 

equivalent internal inspection 

requirements in IEX Rule 5.110(c).16

In response to the pandemic, many 

private and government employers 

closed their offices and their employees 

continued with their work from 

alternative locations such as private 

residences. IEX, like FINRA, believes 

this model will endure, irrespective of 

the state of the pandemic. The 

pandemic accelerated reliance on 

technological advances in surveillance 

and monitoring capabilities and 

prompted significant changes in 

lifestyles and work habits, including the 

growing expectation for workplace 

flexibility. Moreover, the technology 

advancements that facilitated the 

transition to working outside the 

conventional office setting on a broad 

scale have not only effected a profound 

change in lifestyle and workplace 

practices for member firms, but 

provided SROs such as FINRA and IEX 

an opportunity to consider aspects of 

their supervision rules that may benefit 

from modernization.17 As such, IEX, 

like FINRA, believes measured changes 

to its regulatory approach would allow 

firms to effectively and more efficiently 

carry out their supervisory 

responsibilities to review the activities 

of each office or location while 

preserving investor protections. 

Current IEX Requirements to Register 

and Inspect Offices 

Currently, IEX Rule 5.110 

(Supervision) requires a 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 

applicable securities laws and 

regulations, and IEX rules.18 The rule 

sets forth the minimum requirements of 

a Member’s supervisory system that 

includes registering a location as an OSJ 

or branch office that meets the 

definitions under IEX Rule 5.110(f) and 

inspecting all offices and locations in 

accordance with IEX Rule 5.110(c). The 

rule categorizes offices or locations as 

an OSJ or supervisory branch office, a 

non-supervisory branch office, or a nonbranch location.19 The requirements to 

register, inspect and have a principal 

on-site vary based on the categorization. 

Specifically, the rule requires the 

registration and designation as an OSJ or 

branch office of each location, including 

the main office, that meets their 

respective definition under paragraphs 

(f)(1) and (f)(2) of IEX Rule 5.110, as 

described in more detail below.20

An OSJ is a type of branch office. IEX 

defines a ‘‘branch office’’ as ‘‘any 

location where one or more associated 

persons of a member firm regularly 

conducts the business of effecting any 

transactions in, or inducing or 

attempting to induce the purchase or 

sale of, any security, or is held out as 

such[.]’’ 21 In addition, any location that 

is responsible for supervising the 

activities of persons associated with the 

member at one or more non-branch 

locations of the member is considered to 

be a supervisory branch office.22 A 

location registered as a branch office 

must have one or more appropriately 

registered representatives or principals 

in each office, and is subject to an 

inspection at least every three years, 

unless it is a supervisory branch office 

in which case it is subject to at least an 

annual inspection.23

Depending upon the functions 

occurring at a branch office, it may be 

further classified as an OSJ, which IEX 

Rule 5.110(f)(1) defines as a member’s 

business location at which any one or 

more of the following functions take 

place: (1) order execution or market 

making; (2) structuring of public 

offerings or private placements; (3) 

maintaining custody of customers’ 

funds or securities; (4) final acceptance 

(approval) of new accounts on behalf of 

the member; (5) review and 

endorsement of customer orders, 

pursuant to IEX Rule 5.110(b)(2); (6) 

final approval of retail communications 

for use by Persons Associated with the 

Member, pursuant to IEX Rule 3.280, 

except for an office that solely conducts 

final approval of research reports; or (7) 

responsibility for supervising the 

activities of persons associated with the 

member at one or more other branch 

offices of the Member.24 An office 

designated as an OSJ must have an 

appropriately registered principal onsite at the location, and must be 

inspected at least annually.25

However, subject to specified 

conditions, an office or location may be 

deemed a ‘‘non-branch location,’’ and 

excluded from registration as a branch 

office. Currently, IEX Rule 5.110(f)(2) 

sets forth seven exclusions—often 

referred to as unregistered offices or 

non-branch locations—of which two 

pertain to residential locations.26 One 

such exclusion appears under IEX Rule 

5.110(f)(2)(B) and exempts from 

registration as a branch office an 

associated person’s primary residence 

subject to the following express 

conditions: (1) only one associated 

person, or multiple associated persons 

who reside at that location and are 

members of the same immediate family, 

conduct business at the location; (2) the 

location is not held out to the public as 

an office and the associated person does 

not meet with customers at the location; 

(3) neither customer funds nor securities 

are handled at that location; (4) the 

associated person is assigned to a 

designated branch office, and such 

designated branch office is reflected on 

all business cards, stationery, retail 

communications and other 

communications to the public by such 

associated person; (5) the associated 

person’s correspondence and 

communications with the public are 

subject to the firm’s supervision in 

accordance with IEX Rule 5.110; (6) 

electronic communications (e.g., email) 

are made through the Member’s 

electronic system; (7) all orders are 

entered through the designated branch 

office or an electronic system 

established by the Member that is 

reviewable at the branch office; (8) 

written supervisory procedures 

pertaining to supervision of sales 

activities conducted at the residence are 

maintained by the Member; and (9) a list 

of the residence locations is maintained 


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27See IEX Rule 5.110(f)(2)(B)(i)–(ix). The primary 

residence exclusion is also set forth in FINRA Rule 

3110(f)(2)(A)(ii). 

28See IEX Rule 5.110(f)(2)(C). The non-primary 

residence exclusion is also set forth in FINRA Rule 

3110(f)(2)(A)(iii). 

29See NASD [FINRA] Notice to Members 06–12 

(March 2006). 

30See IEX Rule 5.110(c)(1)(C) and Supplementary 

Material .13 to IEX Rule 5.110. 

31See generally IEX Rule 5.110(f)(2)(A) and IEX 

Rule 5.110(f)(2)(D)–(G). 

32See IEX Rule 5.110(f)(1)(D)–(G) and IEX Rule 

5.110(f)(4). 

33See IEX Rules 5.110(a)(4) and 5.110(c)(1)(A). 

34See FINRA Regulatory Notice 24–02. 

35See IEX Rule 5.110(c)(1)(C) and Supplementary 

Material .13 to IEX Rule 5.110. 

36See FINRA Rule 3110(f)(2)(A)(ii)a., b., c., d., e., 

f., and i. 

37See, e.g., NASD [FINRA] Notice to Members 

06–12 (March 2006). 

38See FINRA Rule 3110.19(a). 

39See FINRA Rule 3110.19(a)(1). 

40See FINRA Rule 3110.19(a)(2). 

41See FINRA Rule 3110.19(a)(3). 

42See IEX Rule 5.110(f)(2)(B)(i)–(ix). 

43See IEX Rule 5.110(f)(2)(C). 

44See FINRA Rule 3110.19(a)(4). 

45See FINRA Rule 3110.19(a)(5). 

46See FINRA Rule 3110.19(a)(6). 

47See FINRA Rule 3110.19(a)(7). 

48See FINRA Rule 3110.19(a)(8). 

49See FINRA Rule 3110.19(a)(9). 

50See FINRA Rule 3110.19(a)(10). 

by the Member (‘‘primary residence 

exclusion’’).27 The second exclusion 

that pertains to a residential location 

appears under IEX Rule 5.110(f)(2)(C) is 

any location, other than a primary 

residence, that is used for securities 

business for less than 30 business days 

in any one calendar year, provided that 

the Member complies with the 

conditions described in (1) through (8) 

above (‘‘non-primary residence 

exclusion’’).28 In general, the nonprimary residence exclusion typically 

refers to a vacation or second home.29 A 

non-branch location must be inspected 

on a periodic schedule, presumed to be 

at least every three years.30

Notwithstanding either of these two 

residential exclusions or the other 

exclusions listed under Rule 

5.110(f)(2)(A),31 a primary or nonprimary residence location that is 

responsible for either the supervisory 

activities set forth in the OSJ definition 

or for supervising the activities of 

persons associated with the Member at 

one or more non-branch locations of the 

Member is considered an OSJ or 

(supervisory) branch office, 

respectively.32 Consequently, such 

residential supervisory offices are 

subject to registration, an annual 

inspection and, in some cases, 

additional licensing requirements.33

FINRA Residential Supervisory 

Location Rule 

Effective June 1, 2024, FINRA 

implemented a rule change that 

establishes a new Residential 

Supervisory Location (‘‘RSL’’) 

designation for a private residence at 

which an associated person engages in 

specified supervisory activities, subject 

to specified investor protection 

safeguards and limitations.34 This new 

non-branch location targets the subset of 

residential locations that have many of 

the attributes contained in the primary 

residence exclusion, but must be 

registered as an OSJ or branch office 

because of the supervisory functions 

taking place there. 

As described in the FINRA RSL 

Proposal, the definition of an RSL is 

based largely on several existing aspects 

of FINRA Rule 3110(f) (and therefore on 

the functionally identical IEX Rule 

5.110(f)). In particular, the RSL 

definition incorporates the existing 

supervisory functions appearing in the 

OSJ definition (FINRA Rule 3110(f)(1)) 

and branch office definition (FINRA 

Rule 3110(f)(2)(A) with the existing 

residential exclusions set forth in the 

branch office definition to classify an 

RSL as a non-branch location. Under 

current IEX rules, a private residence at 

which these supervisory functions occur 

must be registered and designated as a 

branch office or OSJ under IEX Rule 

5.110(a)(3), and inspected at least 

annually under IEX Rule 5.110(c)(1)(A). 

By treating such location as a nonbranch location, the private residence 

would become subject to inspections on 

a regular periodic schedule under IEX 

Rule 5.110(c)(1)(C), presumed to be 

every three years.35

FINRA Rule 3110.19 incorporates 

some existing safeguards and limitations 

members must already satisfy to rely on 

the primary residence exclusion.36 As 

described in the FINRA RSL Proposal, 

FINRA intends for the terms underlying 

the RSL designation to be interpreted 

consistently with their meaning in 

FINRA Rule 3110(f) and existing related 

guidance.37 The requirements for 

designation of a location as an RSL, 

which are set forth in FINRA Rule 

3110.19, include the following key 

elements: 

• A location where supervisory 

activities are conducted shall be 

considered for those activities a nonbranch location provided that: 38

Æ only one associated person (or 

members of the same immediate family) 

may conduct business at the location; 39

Æ the location is not held out to the 

public as an office; 40

Æ the associated person does not meet 

with customers or prospective 

customers at the location; 41

Æ any sales activity that takes place at 

the location complies with the 

conditions set forth under FINRA Rule 

3110(f)(2)(A)(ii) (the primary residence 

exclusion 42) or FINRA Rule 

3110(f)(2)(A)(iii) (the non-primary 

residence exclusion 43); 44

Æ neither customer funds nor 

securities are handled at that location; 45

Æ the associated person is assigned to 

a designated branch office, and such 

designated branch office is reflected on 

all business cards, stationery, retail 

communications and other 

communications to the public by such 

associated person; 46

Æ the associated person’s 

correspondence and communications 

with the public are subject to the firm’s 

supervision in accordance with FINRA’s 

supervision rule; 47

Æ the associated person’s electronic 

communications are made through the 

member’s electronic system; 48

Æ the member must have a 

recordkeeping system to make and keep 

current, and preserve records required 

to be made and kept current, and 

preserved under applicable securities 

laws and regulations, FINRA rules, and 

the member’s own written supervisory 

procedures under Rule 3110; such 

records are not physically or 

electronically maintained and preserved 

at the office or location; and the member 

has prompt access to such records; 49

and 

Æ the member must determine that its 

surveillance and technology tools are 

appropriate to supervise the types of 

risks presented by each Residential 

Supervisory Location, and these tools 

may include but are not limited to: firmwide tools such as, electronic 

recordkeeping system; electronic 

surveillance of email and 

correspondence; electronic trade 

blotters; regular activity-based sampling 

reviews; and tools for visual 

inspections; tools specific to the RSL 

based on the activities of associated 

person assigned to the location, 

products offered, restrictions on the 

activity of the RSL; and system tools 

such as secure network connections and 

effective cybersecurity protocols.50

• FINRA members shall not be 

eligible to designate an office or location 

as an RSL if, among other things, the 

FINRA member 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 


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51See FINRA Rule 3110.19(b). 

52See FINRA Rule 3110.19(c). 

53See FINRA Rule 3110.19(c)(1). 

54See FINRA Rule 3110.19(c)(2). 

55See FINRA Rule 3110.19(c)(3). 

56See FINRA Rule 3110.19(c)(4). 

57See FINRA Rule 3110.19(c)(5). 

58See FINRA Rule 3110.19(c)(6). 

59See FINRA Rule 3110.19(d). 

60See FINRA Rule 3110.19(e). 

61Proposed Supplementary Material .17 to IEX 

Rule 5.110. 

have been found within the past three 

years by the SEC or FINRA to have 

violated FINRA Rule 3110(c) are 

ineligible to participate.51

• An office or location shall not be 

eligible for designation as an RSL if one 

or more associated persons at such 

office or location: 52

Æ is a designated supervisor who has 

less than one year of direct supervisory 

experience with the member, or an 

affiliate or subsidiary of the member 

that is registered as a broker-dealer or 

investment adviser; 53

Æ is functioning as a principal for a 

limited period in accordance with 

FINRA Rule 1210.04; 54

Æ is subject to a mandatory 

heightened supervisory plan under the 

rules of the SEC, FINRA or state 

regulatory agency; 55

Æ is statutorily disqualified, unless 

such disqualified person has been 

approved (or is otherwise permitted 

pursuant to FINRA rules and the federal 

securities laws) to associate with a 

member and is not subject to a 

mandatory heightened supervisory plan 

under FINRA Rule 3110.19(c)(3) or 

otherwise as a condition to approval or 

permission for such association; 56

Æ has an event in the prior three years 

that required a ‘‘yes’’ response to any 

item in Questions 14A(1)(a) and 2(a), 

14B(1)(a) and 2(a), 14C, 14D and 14E on 

Form U4; 57 or 

Æ has been notified in writing that 

such associated person is now subject 

to, any Investigation or Proceeding, as 

such terms are defined in the 

Explanation of Terms for the Form U4 

(Uniform Application for Securities 

Industry Registration or Transfer), by 

the SEC, an SRO, including FINRA, or 

state securities commission (or agency 

or office performing like functions) 

(each, a ‘‘Regulator’’) expressly alleging 

they have failed reasonably to supervise 

another person subject to their 

supervision, with a view to preventing 

the violation of any provision of the 

Securities Act, the Exchange Act, the 

Investment Advisers Act, the 

Investment Company Act, the 

Commodity Exchange Act, any state law 

pertaining to the regulation of securities 

or any rule or regulation under any of 

such Acts or laws, or any of the rules 

of the MSRB or other self-regulatory 

organization, including FINRA; 

provided, however, such office or 

location may be designated or 

redesignated as an RSL subject to the 

requirements of FINRA Rule 3110.19 

upon the earlier of: (i) the member’s 

receipt of written notification from the 

applicable Regulator that such 

Investigation has concluded without 

further action; or (ii) one year from the 

date of the last communication from 

such Regulator relating to such 

Investigation.58

• FINRA members that elect to 

designate an office or location of the 

member as an RSL shall provide FINRA 

with a current list of all locations 

designated as RSLs by the 15th day of 

the month following each calendar 

quarter in the manner and format as 

FINRA may prescribe.59

• FINRA members must conduct a 

risk assessment prior to designating an 

office or location as an RSL. 

Specifically, the FINRA member must 

develop a reasonable risk-based 

approach to designating such office or 

location as an RSL, and conduct and 

document a risk assessment for the 

associated person assigned to that office 

or location. The assessment must 

document the factors considered, 

including among others, whether the 

associated person at such office or 

location is now subject to: (1) customer 

complaints, taking into account the 

volume and nature of the complaints; 

(2) heightened supervision other than 

where such office or location is 

ineligible for RSL designation under 

FINRA Rule 3110.19(c)(3); (3) any 

failure to comply with the member’s 

written supervisory procedures; (4) any 

recordkeeping violation; and (5) any 

regulatory communications from a 

Regulator, indicating that the associated 

person at such office or location failed 

reasonably to supervise another person 

subject to their supervision, including 

but not limited to, subpoenas, 

preliminary or routine regulatory 

inquiries or requests for information, 

deficiency letters, ‘‘blue sheet’’ requests 

or other trading questionnaires, or 

examinations. The FINRA member must 

take into account any higher risk 

activities that take place or a higher risk 

associated person that is assigned to that 

office or location. Consistent with its 

obligation under FINRA Rule 3110(a), 

the member’s supervisory system must 

take into consideration any indicators of 

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

flags’’) when designating an office or 

location as an RSL. Red flags should 

also be reviewed in determining 

whether it is reasonable to maintain the 

RSL designation of such office or 

location in accordance with the 

requirements of FINRA Rule 3110.19 

and the member should consider 

evidencing steps taken to address those 

red flags where appropriate.60

Proposal 

IEX proposes to adopt Supplementary 

Material .17 to IEX Rule 5.110. This 

proposed new supplementary material 

reads as follows: 

Residential Supervisory Location. 

Notwithstanding any other provisions of IEX 

Rule 5.110(f), a location that is the private 

residence of a person associated with a 

Member where supervisory activities are 

conducted, including those described in IEX 

Rule 5.110(f)(1)(D) through (G) or IEX Rule 

5.110(f)(2)(B), which satisfies the conditions 

for designation as a Residential Supervisory 

Location set forth in FINRA Rule 3110.19 

shall also be considered a non-branch 

location for those activities pursuant to IEX’s 

Rules.61

As stated in proposed new 

Supplementary Material .17 to IEX Rule 

5.110, any location that an IEX Member 

designates as an RSL pursuant to FINRA 

Rule 3110.19 shall also be considered a 

non-branch location for those activities 

pursuant to IEX’s rules. 

Pursuant to this proposed rule 

change, IEX Members will be required 

to share information about designated 

RSLs with FINRA on a quarterly basis. 

IEX is not proposing to add the entire 

FINRA Residential Supervisory 

Location designation rule to its rules, 

because it would be unnecessarily 

duplicative and burdensome for IEX 

Members to share the same quarterly 

RSL designation information with IEX. 

Based upon conversations with FINRA 

staff, IEX understands that adopting 

Proposed Supplementary Material .17 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. As a result, 

regulatory responsibility for IEX Rule 

5.110 would continue to be allocated to 

FINRA. 

IEX, like FINRA, believes that the 

current work environment merits a 

reevaluation of the regulatory benefit of 

requiring firms to designate a private 

residence, at which specified 

supervisory functions occur, as an OSJ 

or branch office. IEX’s proposal to 

incorporate by reference FINRA’s RSL 

designation is intended to reflect a 

pragmatic balance between the hybrid 

workforce model and the parameters 

that should ensure that all locations, 


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Federal Register / Vol. 89, No. 196 / Wednesday, October 9, 2024 / Notices 81975 

62See Supplementary Material .12 to IEX Rule 

5.110. 

63See 15 U.S.C. 78o(b)(4)(E) and 15 U.S.C. 

78o(b)(6)(A). 

64See FINRA Regulatory Notice 24–02. 

65 15 U.S.C. 78f. 

66 15 U.S.C. 78f(b)(5). 

67 15 U.S.C. 78f(b)(5). 

68 15 U.S.C. 78s(b)(3)(A). 

69 17 CFR 240.19b–4(f)(6). 

70 17 CFR 240.19b–4(f)(6)(iii). 

71 17 CFR 240.19b–4(f)(6). 

72 17 CFR 240.19b–4(f)(6)(iii). 

73See FINRA Regulatory Notice 24–02. 

including residential locations, are 

appropriately supervised. 

Separate and apart from the 

classification of the office or location 

and the attendant inspection 

obligations, Members will continue to 

have an ongoing obligation to supervise 

the activities of each associated person 

in a manner reasonably designed to 

achieve compliance with applicable 

securities laws and regulations, and 

with applicable IEX and FINRA rules.62

IEX, like FINRA, emphasizes that 

member firms have a statutory duty to 

supervise their associated persons, 

regardless of their location, 

compensation or employment 

arrangement, or registration status, in 

accordance with the IEX and FINRA 

rules.63

IEX notes that although FINRA’s RSL 

designation first became available on 

June 1, 2024, the first action required by 

FINRA members is the October 15, 2024 

deadline for submitting the first list of 

designated RSLs to FINRA.64 As 

described below, IEX is seeking waiver 

of the 30-day operative delay for this 

rule change proposal, so that IEX 

Members that designate any locations as 

RSLs by October 15, 2024 will know 

that the designation also applies to IEX’s 

supervision rules. 

2. Statutory Basis 

IEX believes that the proposed rule 

change is consistent with the provisions 

of Section 6(b) 65 of the Act in general, 

and furthers the objectives of Section 

6(b)(5) of the Act 66 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 designation 

of certain non-branch offices as 

Residential Supervisory Locations, with 

those of FINRA, on which they are 

based. As discussed in the Purpose 

section, because Proposed 

Supplementary Material .17 to IEX Rule 

5.110 incorporates by reference FINRA 

Rule 3110.19, this rule change enables 

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 3110.19 shall mean the 

Member is also in compliance with 

Supplementary Material .17 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.67

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) 68 of the Act and 

Rule 19b–4(f)(6) 69 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.70

A proposed rule change filed under 

Rule 19b–4(f)(6) 71 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),72 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 FINRA first made its Residential 

Supervisory Location designation 

available to its members on June 1, 

2024, waiving the 30-day operative 

delay would provide assurances to IEX 

members who wish to designate certain 

private residences as RSLs that they can 

plan the remainder of their 2024 

inspection program under a harmonized 

rule set, particularly because the first 

list of designated RSLs is not due to 

FINRA until October 15, 2024,73 while 

at the same time assuring that IEC 

members continue to perform their 

supervisory obligations. Further, the 

Exchange stated that waiver of the 

operative delay should avoid any 


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81976 Federal Register / Vol. 89, No. 196 / Wednesday, October 9, 2024 / Notices 

74For 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). 

75 15 U.S.C. 78s(b)(2)(B). 

76 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 100304 

(June 10, 2024), 89 FR 50637 (June 14, 2024) (SR– 

CboeEDGX–2024–028). 

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.74

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) 75 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–2024–19 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–2024–19. 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 

10:00 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–2024–19 and 

should be submitted on or before 

October 30, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.76

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–23286 Filed 10–8–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101242; File No. SR– 

CboeEDGX–2024–060] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Extend the 

Implementation Date of Functionality 

That Will Provide Members and 

Clearing Members With the Option To 

Utilize Additional Credit Risk Settings 

Under Interpretation and Policy .03 of 

Rule 11.10 (‘‘Aggregate Credit Risk 

Checks’’) 

October 3, 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 26, 2024, Cboe EDGX 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘EDGX’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by 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 

extend the implementation date of 

functionality that will provide Members 

and Clearing Members with the option 

to utilize additional credit risk settings 

under Interpretation and Policy .03 or 

Rule 11.10 (‘‘Aggregate Credit Risk 

Checks’’). 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

options/regulation/rule_filings/edgx/), 

at the Exchange’s Office of the 

Secretary, 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 

Exchange 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 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is filing this proposal to 

extend the implementation date of 

functionality providing Members and 

Clearing Members with the option to 

utilize additional Aggregate Credit Risk 

Checks. The functionality relating to 

these additional risk settings was 

submitted by the Exchange on an 

immediately effective basis on May 29, 

2024.3

The Aggregate Credit Risk Checks 

offered under Interpretation and Policy 

.03 or Rule 11.10, provide Members and 

Clearing Members with additional, 

optional credit risk settings, at the 

Market Participant Identifier (‘‘MPID’’) 


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