[Federal Register Volume 87, Number 72 (Thursday, April 14, 2022)]
[Notices]
[Pages 22264-22269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07955]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94654; File No. SR-FINRA-2022-009]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend 
Certain FINRA Rules To Permit, and in Some Instances Require, 
Electronic Service and Filing of Documents in Disciplinary and Other 
Proceedings and Appeals

April 8, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on April 6, 2022, the Financial Industry 
Regulatory Authority, Inc. (``FINRA'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by FINRA. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rules 1012, 1015, 6490, 9132, 
9133, 9135, 9146, 9321, 9341, 9349, 9351, 9522, 9524, 9525, 9559 and 
9630 to permit, and in some instances require, electronic service and 
filing of documents in disciplinary and other proceedings and appeals.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    Several of FINRA's rules regarding method of service and filing 
have been amended temporarily to permit, and in some instances require, 
electronic filing and service during the period in which FINRA's 
operations have been impacted by the COVID-19 pandemic.\3\ These 
temporary amendments pertain to disciplinary proceedings before the 
Office of Hearing Officers (OHO), and to appeals before the National 
Adjudicatory Council (NAC), among other types of administrative 
proceedings.\4\ However, the temporary amendments do not permit 
electronic service of an initial complaint on a respondent. FINRA did 
not temporarily change the method of serving the initial complaint due 
to heightened fair process concerns.\5\ Likewise, the proposed rule 
change would not change how initial complaints are served. The only 
permissible methods of serving the

[[Page 22265]]

initial complaint are by hand, mail or courier.\6\
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    \3\ See Securities Exchange Act Release No. 88917 (May 20, 
2020), 85 FR 31832 (May 27, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-015); Securities Exchange 
Act Release No. 89055 (June 12, 2020), 85 FR 36928 (June 18, 2020) 
(Notice of Filing and Immediate Effectiveness of File No. SR-FINRA-
2020-017); Securities Exchange Act Release No. 89423 (July 29, 
2020), 85 FR 47278 (August 4, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-022); Securities Exchange 
Act Release No. 90619 (December 9, 2020), 85 FR 81250 (December 15, 
2020) (Notice of Filing and Immediate Effectiveness of File No. SR-
FINRA-2020-042); Securities Exchange Act Release No. 91495 (April 7, 
2021), 86 FR 19306 (April 13, 2021) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2021-006); Securities Exchange 
Act Release No. 93758 (December 13, 2021), 86 FR 71695 (December 17, 
2021) (Notice of Filing and Immediate Effectiveness of File No. SR-
FINRA-2021-031); Securities Exchange Act Release No. 94430 (March 
16, 2022), 87 FR 16262 (March 22, 2022) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2022-004).
    \4\ The filings to establish and extend the temporary amendments 
involving electronic service and filing also included additional 
temporary amendments to provide extensions of time to FINRA staff, 
respondents and other parties in connection with certain 
adjudicatory and review processes. See Securities Exchange Act 
Release No. 88917 (May 20, 2020), 85 FR 31832 (May 27, 2020) (Notice 
of Filing and Immediate Effectiveness of File No. SR-FINRA-2020-
015). For example, under original Rule 6490(e), the time to appeal 
was seven calendar days, and a subcommittee was required to convene 
once each calendar month to consider all appeals received during the 
prior month. Under the temporary amendments to Rule 6490(e), the 
time to appeal was extended to 30 calendar days, and the time for 
the subcommittee to convene was extended to once every 90 days. The 
time frames under the proposed rule change are reverting back to 
their original form, so the timing requirements under the proposed 
rule change are the same as they were under the original rule.
    \5\ See 85 FR 31832, supra note 3.
    \6\ See FINRA Rule 9134(a).
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    FINRA is proposing to make the temporary amendments regarding 
electronic service and filing permanent, with some modifications. FINRA 
believes that advances in technology and its availability have made 
filing and service more efficient under the temporary amendments than 
under the original rules.\7\ In addition, FINRA believes that operating 
under the temporary amendments since May 2020 has demonstrated that 
electronic service and filing is beneficial for parties, panelists and 
FINRA staff. FINRA further notes that the SEC also amended its rules in 
November 2020 to require electronic filing and service of documents in 
its administrative proceedings.\8\ FINRA further believes that the 
proposed rule change will similarly improve and modernize FINRA's 
operations.
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    \7\ For ease of reference in this filing, FINRA refers to the 
pre-pandemic rules as ``original rules'' and to the temporary 
changes to the original rules as ``temporary amendments.'' Some of 
the original rules were amended while the temporary amendments were 
in effect. Those amendments to the original rules have been 
incorporated into the temporary amendments. See, e.g., FINRA Rule 
9321 (amended by SR-FINRA-2020-011, eff. April 15, 2021).
    \8\ See Amendments to the Commission's Rules of Practice, 
Securities Exchange Act Release No. 90442 (November 17, 2020), 85 FR 
86464 (File No. S7-18-15) (December 30, 2020) (codified at 17 CFR 
201 (2020)).
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Background
    The FINRA Rule 1000, 6400, 9100, 9300, 9520, 9550 and 9600 Series 
contain filing, service and other procedural requirements. The 
temporary amendments to these rules allowed, and in some instances 
required, FINRA (in its capacity as an Adjudicator) to serve certain 
documents on parties by electronic mail (``email'') and required 
parties to file or serve documents by email, unless the parties agreed 
to an alternative method of service.\9\
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    \9\ See supra note 3.
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    The proposed rule change includes provisions to allow, and in some 
instances require, FINRA to serve certain documents on parties by email 
and require parties to file or serve documents by email, unless another 
method of service is ordered by the Adjudicator. Several of the 
proposed rule changes differ from the temporary amendments, which 
required email service unless the parties agreed to an alternative 
method.\10\ FINRA has observed that a more effective approach would be 
to require email service unless the Adjudicator orders otherwise. As 
discussed further below, the proposal will allow all parties who lack 
the ability to use or access email to request relief to use an 
alternative method of service upon a showing of good cause. But unlike 
the temporary amendments, the parties' agreement to use an alternative 
method of service would be insufficient unless the parties also 
obtained an order from the Adjudicator permitting use of the 
alternative method of service.
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    \10\ See FINRA Rules 6490(e), 9133(b), 9146(l), 9524(a)(3) and 
9559(h).
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    In addition, to support the transition to email service and filing, 
FINRA proposes to require parties in OHO proceedings to file and serve 
all parties with their current email address and contact information at 
the time of their first appearance, and to file and serve any change in 
email address or contact information during the course of the 
proceeding.
Proposed Rule Change To Allow or Require Email Filing and Service
    FINRA rules, with few exceptions, do not provide for service by 
email.\11\ The proposed rule change would permit FINRA to serve 
documents other than the initial complaint by email among various other 
methods of service, such as personal service, mail and courier, and to 
provide that service by email is deemed complete upon sending.\12\
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    \11\ Prior to the temporary amendments, FINRA permitted service 
by email under some of its original rules. For example, FINRA Rule 
6490(d)(5) (Processing of Company-Related Actions; Procedures for 
Reviewing Submissions; Notice Issuance) permits a notice under that 
provision to be issued by facsimile or email, or pursuant to Rule 
9134. Rule 9134 does not permit service by email, however.
    \12\ FINRA sometimes serves documents in its capacity as the 
Adjudicator. In other instances, FINRA is a party, for example, in 
its capacity as the Department of Enforcement.
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    FINRA has elected email service whenever possible while the 
temporary amendments have been in effect, and it is FINRA's intention 
to continue to do so under the proposed rule change. If FINRA has 
knowledge that the address used for service is not current or not 
functional (i.e., FINRA receives a bounce back or other message 
indicating that there was a failure to deliver the email), FINRA will 
use other permissible methods of service until it can verify the 
party's email address.\13\ FINRA notes that, in most cases, FINRA and 
the relevant party, or their counsel, will have already engaged in 
communications prior to the service of documents or other information. 
Accordingly, in most cases, FINRA will already have information 
regarding the relevant party, or their counsel's, preferred method of 
service.
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    \13\ As indicated in the proposed rule text, FINRA will consider 
service by email complete upon sending of the relevant document or 
other information. This is consistent with service by mail under the 
original rules and service by email under the temporary amendments.
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    Further, to the extent an applicant, respondent or other party 
lacks the ability to use or access technology needed to file, serve or 
accept service by email, FINRA intends to provide reasonable 
accommodations to them. The process for requesting an alternative 
method of service or filing will be posted to FINRA's website, as well 
as explained in the Notice of Complaint and in the Code and Guide 
letter.\14\ If a party shows good cause, the Adjudicator will order 
that filing or service occur by hard copy.
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    \14\ When the Department of Enforcement files an initial 
complaint on a respondent, the Notice of Complaint tells the 
respondent how to file the answer and other documents with OHO. In 
addition, once OHO receives an initial complaint, it sends a Code 
and Guide letter to each respondent to notify them of the complaint. 
That letter also includes instructions on how to file with OHO.
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    The proposed rule change to amend the FINRA Rule 1000, 6400, 9100, 
9300, 9520, 9550 and 9600 Series is substantially the same as the 
temporary amendments currently in effect unless otherwise noted, below.
    The FINRA Rule 1000 Series (Member Application and Associated 
Person Registration) governs, among other things, the process for (i) 
applying for FINRA membership; (ii) FINRA members to seek approval of a 
change in ownership, control or business operations, and (iii) an 
applicant to request that FINRA's appellate body, the NAC, review a 
FINRA decision rendered under the Rule 1000 Series. In connection with 
these processes, applicants and FINRA are required to file or serve 
certain documents using the prescribed methods set forth in FINRA Rule 
1012(a), which do not include email.\15\ FINRA proposes to permanently 
amend Rule 1012(a)(4) to permit FINRA to serve documents under the Rule 
1000 Series by email and to amend Rule 1015(f)(1),\16\ which requires 
the NAC to serve a notice of a hearing before the NAC by facsimile or 
overnight courier, to allow service of the notice by email.\17\ The 
proposed rule

[[Page 22266]]

change would also amend Rule 1012(a)(3) to require applicants to file 
an application or any document or information requested under the Rule 
1000 Series by email except where FINRA has otherwise prescribed an 
alternative filing process, while permitting the applicant to also file 
a requested document or information by another method if the Department 
and the Applicant agree.\18\
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    \15\ FINRA Rule 1012(a) (General Provisions; Filing by Applicant 
or Service by FINRA) governs the filing and service requirements for 
the Rule 1000 Series.
    \16\ FINRA Rule 1015(f) (Review by National Adjudicatory 
Council; Hearing).
    \17\ In an effort to streamline processes and avoid duplication, 
FINRA is also proposing to amend Rule 1015(a) to eliminate the 
requirement that the applicant simultaneously file by first-class 
mail a copy of the request for review pursuant to Rule 1015(a) to 
the district office where the applicant filed its application.
    \18\ FINRA is also proposing a non-substantive change to delete 
the word ``electronic'' from the description of the ``alternative 
filing process'' because it is superfluous.
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    FINRA Rule 6490 codifies the requirements in Exchange Act Rule 10b-
17 for issuers of a class of publicly traded securities to provide 
timely notice to FINRA of certain corporate actions (e.g., dividend or 
other distribution of cash or securities, stock split or reverse split, 
rights or subscription offering). FINRA reviews related documentation 
and, under certain circumstances, the documentation may not be 
processed if it is deemed deficient. Rule 6490(e) sets forth the 
process for appealing such a determination.\19\ The proposed rule 
change would require the requesting party to file an appeal by email 
unless an alternative method of service is ordered by the 
Adjudicator.\20\
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    \19\ FINRA Rule 6490(e) (Processing of Company-Related Actions; 
Request for an Appeal to Subcommittee of Uniform Practice Code 
Committee).
    \20\ FINRA is also proposing several non-substantive, technical 
changes including, for example, deleting the parenthetical 
references to the numerals ``3'' and ``7,'' which originally 
followed those words in FINRA Rule 6490(e). As noted supra note 4, 
the time frames under the proposed rule change are reverting back to 
their original form, so the time to appeal and for appellate review 
under the proposed rule change are the same as they were under the 
original rule.
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    The FINRA Rule 9000 Series, among other things, sets forth the 
procedure for FINRA proceedings for disciplining a member, associated 
person or formerly associated person. The Rule 9100 Series is of 
general applicability to all proceedings set forth in the Rule 9000 
Series, unless a rule specifically provides otherwise. Rules 
9132(b),\21\ 9133(b),\22\ and 9146(l) \23\ provide that the documents 
and other information governed by those rules be served pursuant to 
Rule 9134, which permits service on the parties using the following 
methods: (1) Personal service, (2) mail, or (3) courier. Rule 9134 does 
not permit service by email. The proposed rule change would amend Rule 
9132(b) to allow FINRA to serve the relevant documents or information 
by email, and Rules 9133(b) and 9146(l) to require parties to serve 
documents by email, unless an alternative method of service is ordered 
by the Adjudicator.
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    \21\ FINRA Rule 9132(b) (Service of Orders, Notices, and 
Decisions by Adjudicator; How Served).
    \22\ FINRA Rule 9133(b) (Service of Papers Other Than 
Complaints, Orders, Notices or Decisions; How Served).
    \23\ FINRA Rule 9146(l) (Motions; General).
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    In addition, to support the transition to email service and filing, 
FINRA proposes to amend Rule 9135 to add paragraph (d), which would 
require parties in OHO proceedings to file and serve the parties with 
their current email address and contact information at the time of 
their first appearance, and to file and serve any change in email 
address or contact information during the course of the proceeding. 
Based on the experience of operating under the temporary amendments, 
FINRA believes this proposed rule change, which was not part of the 
temporary amendments, will help ensure that documents are successfully 
sent from and received at a valid email address. It will also ensure 
that all participants, including FINRA, applicants, respondents and any 
other parties, have accurate contact information for all parties.
    The FINRA Rule 9300 Series sets forth the procedures for review of 
disciplinary proceedings by the NAC and FINRA Board and for 
applications for SEC review. FINRA Rules 9321,\24\ 9341(c),\25\ 
9349(c),\26\ and 9351(e) \27\ require FINRA to serve documents in 
connection with those proceedings. Service under those rules is 
governed by Rule 9134, which does not permit email as a method of 
service. FINRA proposes to permanently amend Rules 9321, 9341(c), 
9349(c), and 9351(e) to allow for email as a method of service.
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    \24\ FINRA Rule 9321 (Transmission of Record).
    \25\ FINRA Rule 9341(c) (Oral Argument; Notice Regarding Oral 
Argument).
    \26\ FINRA Rule 9349(c) (National Adjudicatory Council Formal 
Consideration; Decision; Issuance of Decision After Expiration of 
Call for Review Period).
    \27\ FINRA Rule 9351(e) (Discretionary Review by FINRA Board; 
Issuance of Decision After Expiration of Call for Review Period).
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    The FINRA Rule 9520 Series sets forth the procedures for 
eligibility proceedings and review of those proceedings by the NAC and 
FINRA Board. Rules 9522(a)(4),\28\ 9524(a)(3)(A) and (B),\29\ 
9524(b)(3),\30\ and 9525(e) \31\ require FINRA to serve documents in 
connection with those proceedings, but do not allow for email as a 
method of service. The proposed rule change would permanently amend 
those rules to allow for email as a method of service. Further, under 
the proposed change to Rule 9524(a)(3)(A) and (B), the disqualified 
member or sponsoring member would be required to serve documents and 
the exhibit and witness lists by email unless an alternative method of 
service is ordered by the Adjudicator.\32\
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    \28\ FINRA Rule 9522(a)(4) (Initiation of Eligibility 
Proceeding; Member Regulation Consideration; Service).
    \29\ FINRA Rule 9524(a)(3)(A) and (B) (National Adjudicatory 
Council Consideration; Transmission of Documents).
    \30\ FINRA Rule 9524(b)(3) (National Adjudicatory Council 
Consideration; Issuance of Decision After Expiration of Call for 
Review Period).
    \31\ FINRA Rule 9525(e) (Discretionary Review by the FINRA 
Board; Issuance of Decision).
    \32\ FINRA is also proposing a non-substantive, technical change 
to replace the numeral ``10'' with the word ``ten'' in Rule 
9524(a)(3)(B).
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    The FINRA Rule 9550 Series sets forth the procedures for expedited 
proceedings and the ability of the NAC to call for review a proposed 
decision prepared under the Rule 9550 Series. Rule 9559(h)(2) \33\ sets 
forth the timing and method of service requirements for the parties' 
exchange of proposed exhibit and witness lists in advance of an 
expedited proceeding.\34\ Rule 9559(q)(2) \35\ requires the NAC to 
serve its decision when it issues one and Rule 9559(q)(5) requires the 
NAC to serve the decision on the parties and all members with which the 
respondent is associated. Rule 9559(q)(2) and (5) do not allow for 
email as a method of service. FINRA proposes to permanently amend Rule 
9559(h)(2) to require FINRA to serve its exhibit and witness lists by 
email, unless an alternative method of service is ordered by the 
Adjudicator. The proposed rule change would amend Rule 9559(q)(2) and 
(5) to allow for email as a method of service.
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    \33\ FINRA Rule 9559(h) (Hearing Procedures for Expedited 
Proceedings Under the Rule 9550 Series; Transmission of Documents). 
Rule 9559(h) currently permits email as a method of service.
    \34\ As with the proposed rule change to amend Rule 1015(a) 
noted supra note 17, FINRA proposes to amend Rule 9559(h) to also 
eliminate the requirements in Rule 9559(h)(1) and (2) that, if the 
specified documents are served by facsimile or email, they must also 
be served by either overnight courier or personal delivery.
    \35\ FINRA Rule 9559(q) (Hearing Procedures for Expedited 
Proceedings Under the Rule 9550 Series; Call for Review by the 
National Adjudicatory Council).
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    The FINRA Rule 9600 Series sets forth the procedures for members to 
seek exemptive relief from a variety of FINRA rules. Rule 9630(e)(1) 
and (2) \36\ require the NAC to serve its decision pursuant to Rule 
9134, which does not allow for email as a method of service. The 
proposed rule change would amend Rule 9630(e) to allow for email as a 
method of service.
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    \36\ FINRA Rule 9630(e) (Procedures for Exemptions; Appeal; 
Decision).
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    As discussed in detail in Item 3(b), FINRA believes the proposal 
will modernize the rules and make service

[[Page 22267]]

and filing more efficient and effective. Email technology is widely 
available, and use of electronic methods of service and filing is 
common practice in the courts and other regulatory agencies, including 
the SEC.\37\ At the same time, the proposal provides for alternative 
methods of service for parties who lack the ability to use or access 
technology needed to send or receive documents electronically.
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    \37\ See supra note 8.
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    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice.\38\
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    \38\ FINRA intends to minimize any gap between the expiration of 
the temporary amendments on electronic service and filing and the 
implementation date of this proposed rule change.
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2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\39\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change is also 
consistent with Section 15A(b)(8) of the Act,\40\ which requires, among 
other things, that FINRA rules provide a fair procedure for the 
disciplining of members and persons associated with members.
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    \39\ 15 U.S.C. 78o-3(b)(6).
    \40\ 15 U.S.C. 78o-3(b)(8).
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    FINRA believes that the proposed rule change protects investors and 
the public interest by requiring use of broadly available technology to 
make service and filing processes more efficient and effective. FINRA's 
disciplinary and eligibility proceedings and other review processes 
serve a critical role in providing investor protection and maintaining 
fair and orderly markets by, for example, sanctioning misconduct and 
preventing further customer harm by members and associated persons.
    The proposed rule change promotes efficiency in these processes by 
permitting electronic service and filing in most instances. To ensure 
that documents are effectively sent and received, FINRA is proposing to 
require parties to provide and update their contact information, 
including their email address, during the course of a proceeding. These 
amendments reduce the reliance on paper documents in favor of more 
efficient electronic formats. FINRA believes adopting permanent rules 
on electronic service and filing is especially important as hybrid and 
remote work become more common.
    At the same time, the proposed rule change includes safeguards to 
ensure fairness. For example, there are procedures in place for persons 
who lack the ability to use or access technology necessary to send or 
receive documents electronically. Such parties will have the ability to 
request relief from the Adjudicator to file or serve documents by 
another method. Based on FINRA's experience of operating under the 
temporary amendments, which have permitted electronic service and 
filing since mid-2020, FINRA anticipates that requests to use non-
electronic methods of service will be rare. In addition, the proposed 
rule change balances the interests of fairness and efficiency. As 
discussed, service of the initial complaint will continue to occur by 
hand, mail or courier, rather than by electronic means, thus ensuring 
there is satisfactory notice and fair process.
    Thus, the proposed rule change represents a significant step toward 
modernizing the service and filing processes in a manner that will 
protect investors and the public interest by promoting efficiency while 
preserving fair process.

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

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment, as set forth 
below, to analyze the regulatory need for the proposed rule change, its 
potential economic impacts, including anticipated costs, benefits, and 
distributional and competitive effects, relative to the current 
baseline, and the alternatives FINRA considered in assessing how best 
to meet FINRA's regulatory objectives.
Regulatory Need
    Several of FINRA's rules regarding method of service and filing 
have been amended temporarily to permit, and in some circumstances 
require, electronic filing and service during the period in which 
FINRA's operations have been impacted by the COVID-19 pandemic.\41\ As 
stated earlier, the proposed rule change is intended to make these 
temporary amendments permanent considering the positive experience of 
operating while the temporary amendments have been in effect. The 
implementation of those temporary amendments suggests that advances in 
technology and its availability have made filing and service more 
efficient under the temporary amendments than under the original rules.
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    \41\ See supra note 3.
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Economic Baseline
    The economic baseline for the proposed rule change consists of the 
original rules together with the experience gained by broker-dealers, 
their associated persons, and FINRA in complying with the temporary 
amendments to the original rules. As discussed above, FINRA Rules 1000, 
6400, 9100, 9300, 9520, 9550 and 9600 Series set forth filing and 
service requirements pertaining to expedited and disciplinary 
proceedings before OHO and to appeals before the NAC, among other types 
of FINRA proceedings. These rules, with few exceptions, do not allow 
FINRA to use email or require others to use email to meet certain 
filing and service requirements. FINRA temporarily amended these rules 
to permit, and in some instances require, electronic filing and 
service.
    The proposed rule change is expected to affect parties to 
disciplinary proceedings before OHO and to appeals before the NAC. 
FINRA thus has collected information detailing the number of new cases 
filed in OHO and NAC proceedings and the number of respondents in 
association with these proceedings in the past three years. The numbers 
are presented below. Note that ``Registered Rep'' includes both current 
and former registered representatives and the numbers of new OHO 
filings include both expedited and disciplinary proceedings before OHO. 
The numbers show that the majority of respondents in OHO filings and 
NAC appeals consist of current and former registered 
representatives.\42\
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    \42\ The proposal also amends filing and service requirements 
for eligibility proceedings under FINRA Rule 9522(a)(4) and for 
appeals of determinations regarding the documentation of certain 
corporate actions under FINRA Rule 6490(e). There were 22 
eligibility proceedings in 2018 and 14 in 2019; there have been no 
appeals of determinations under Rule 6490(e) since the temporary 
requirements came into effect in May 2020.

[[Page 22268]]



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                                                                       2020            2019            2018
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OHO Filings.....................................................              69              95              90
OHO Respondents: Firms Only.....................................               2               7               9
OHO Respondents: Registered Rep Only............................              65              85              76
OHO Respondents: Both Firms and Registered Rep..................               2               3               5
NAC Appeals.....................................................              13              17              22
NAC Respondents: Firms Only.....................................               2               2               3
NAC Respondents: Registered Rep Only............................               9              11              15
NAC Respondents: Both Firms and Registered Rep..................               2               4               4
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Economic Impacts
    The proposed rule change will directly impact current and former 
member firms and associated persons, including registered 
representatives. With limited exceptions, these individuals would be 
applicants, respondents, or other related parties to disciplinary 
proceedings before OHO and to appeals before the NAC. The proposed rule 
change will not directly impact the customers of those firms.
    Parties in relevant proceedings will benefit from savings on time 
and money on printing, shipping, and storage of paper documents as 
filing and serving paper copies will generally not be required 
following the proposed rule change. The proposed rule change would also 
improve the overall efficiency of FINRA's operations in collecting, 
preserving, and distributing documents to parties in these proceedings 
relative to the original rules. Such benefits are anticipated to accrue 
to firms and individuals as well as to FINRA in its capacity as an 
adjudicator. In particular, FINRA believes that the benefits to member 
firms from the proposal will likely be larger for those using hybrid 
and remote work models or in situations where access to physical office 
locations is limited or restricted.
    The extent of the cost savings is likely not uniform across parties 
and cannot be estimated in aggregate for two reasons. First, FINRA does 
not know the frequencies of filing and service and the size of the 
documents in association with relevant proceedings. The expected cost 
savings will likely be greater for parties that file and serve large 
documents more frequently. Second, FINRA does not know how parties 
agreed to serve documents, by email, paper, or other alternative 
methods, during the pre-pandemic period.
    Certain parties may bear incremental burdens over pre-pandemic 
filing and service practices. FINRA does not know the extent to which, 
under the proposed rule change, certain parties will incur some costs 
to scan documents. Anecdotally, FINRA understands that this group is 
small. The proposals to have a valid email address and to require 
filing by email are not expected to impose significant new costs 
because anecdotal evidence suggests that this method of filing was 
already adopted by most parties to OHO and NAC proceedings before the 
pandemic.\43\ FINRA notes that OHO and the NAC have not received any 
complaints regarding the temporary amendments on method of service and 
filing during the pandemic. FINRA also notes that the SEC recently 
finalized a rule to require electronic filing and service of documents 
in SEC administrative proceedings.\44\ The Commission received only 
seven comments on the proposed rule and reported that commenters 
generally supported electronic filing.\45\
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    \43\ It can be difficult to assess potential cost increases 
following the proposal to require service by email because FINRA 
does not know the extent to which parties agreed to service by email 
during the pre-pandemic period.
    \44\ See supra note 8.
    \45\ See supra note 8. The comments are available at https://www.sec.gov/comments/s7-19-15/s71915.shtml.
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    The proposal will likely impose a higher cost on parties who have 
limited access to the internet and to any hardware and software that 
may be involved in processing the documents. For example, it is 
unlikely that member firms or current registered representatives would 
face these challenges, but former registered representatives may. There 
have been a few such individuals in recent proceedings before OHO and 
the NAC.\46\ The proposal will allow reasonable accommodations for such 
individuals. Service of an initial complaint on a respondent would not 
be subject to the proposed rule change on electronic service and 
filing, mitigating any risk that a respondent would be unaware of the 
complaint.
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    \46\ For example, over the year 2020, there were 65 OHO filings 
with registered representatives as the sole respondents. Among them, 
21 OHO filings had former registered representatives as respondents. 
In addition, there were 27 and 26 OHO filings, respectively, with 
former registered representatives as respondents in year 2019 and 
2018.
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    The overall benefits and costs of the proposal will depend on the 
expected volume of the relevant proceedings and the number of 
respondents associated with these proceedings. As described earlier, 
there have been only a limited number of new cases or appeals filed 
annually in OHO and NAC proceedings in the past three years. The 
majority of these cases or appeals involved only one respondent. Based 
on these historical numbers, the overall economic impact is likely to 
be small.
Alternatives Considered
    In developing the proposal, FINRA sought to preserve the 
efficiencies in filing and service practices that were achieved during 
the pandemic. No significant alternatives to these requirements were 
considered.

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

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or

[[Page 22269]]

    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#daa8afb6bff7b9b5b7b7bfb4aea99aa9bfb9f4bdb5ac"><span class="__cf_email__" data-cfemail="0173746d642c626e6c6c646f7572417264622f666e77">[email protected]</span></a>. Please include 
File Number SR-FINRA-2022-009 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2022-009. 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 (http://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 such filing also will be available for inspection 
and copying at the principal office of FINRA. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2022-009 and should be submitted 
on or before May 5, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\47\
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    \47\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-07955 Filed 4-13-22; 8:45 am]
BILLING CODE 8011-01-P


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