Federal Register / Vol. 87, No. 117 / Friday, June 17, 2022 / Notices 36551 

37 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92525 

(July 30, 2021), 86 FR 42925 (August 5, 2021) 

(Order Approving File No. SR–FINRA–2020–041, as 

Modified by Amendment Nos. 1 and 2) (‘‘SEC 

Order’’); see also Securities Exchange Act Release 

No. 92525 (July 30, 2021), 86 FR 49589 (September 

3, 2021) (Order Approving File No. SR–FINRA– 

2020–041) (Correction). 

4See Rule 4111(i)(15) (definition of ‘‘Restricted 

Deposit Requirement’’). A firm subject to a 

Restricted Deposit Requirement will be required to 

establish a Restricted Deposit Account and deposit 

in that account cash or qualified securities with an 

aggregate value that is not less than the member’s 

Restricted Deposit Requirement. See Rule 4111(a); 

4111(i)(14) (definition of ‘‘Restricted Deposit 

Account’’). 

5See SEC Order, 86 FR 42925, 42932. Firms 

designated as Restricted Firms will have 

significantly higher levels of risk-related disclosures 

as compared to firms of similar sizes. See SEC 

Order, 86 FR 42925, 42926. There are numeric 

thresholds for seven firm-size categories, based on 

the number of Registered Persons In-Scope. See 

Rule 4111(i)(11); see also Rule 4111(i)(13) 

(definition of ‘‘Registered Persons In-Scope’’). 

6See SEC Order, 86 FR 42925, 42926. 

7See SEC Order, 86 FR 42925, 42926, 42932. 

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. 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–NYSE–2022–11 and should 

be submitted on or before July 8, 2022. 

Rebuttal comments should be submitted 

by July 22, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13042 Filed 6–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95092; File No. SR–FINRA– 

2022–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend 

FINRA Rule 8312 (FINRA BrokerCheck 

Disclosure) To Release Information on 

BrokerCheck® Relating to Firm 

Designation as a Restricted Firm 

June 13, 2022. 

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 June 3, 

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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend Rule 

8312 (FINRA BrokerCheck Disclosure) 

to release information on BrokerCheck®

as to whether a particular member firm 

or former member firm is currently 

designated as a ‘‘Restricted Firm’’ 

pursuant to Rule 4111 (Restricted Firm 

Obligations) and Rule 9561 (Procedures 

for Regulating Activities Under Rule 

4111). 

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

8000. INVESTIGATIONS AND 

SANCTIONS 

* * * * * 

8300. SANCTIONS 

* * * * * 

8312. FINRA BrokerCheck Disclosure 

(a) No Change. 

(b)(1) No Change. 

(2) The following information shall be 

released pursuant to this paragraph (b): 

(A) through (F) No Change. 

(G) Historic Complaints (i.e., the 

information last reported on 

Registration Forms relating to customer 

complaints that are more than two (2) 

years old and that have not been settled 

or adjudicated, and customer 

complaints, arbitrations or litigations 

that have been settled for an amount 

less than $10,000 prior to May 18, 2009 

or an amount less than $15,000 on or 

after May 18, 2009 and are no longer 

reported on a Registration Form), 

provided that any such matter became a 

Historic Complaint on or after August 

16, 1999; [and] 

(H) the name and succession history 

for current or former BrokerCheck 

Firms[.]; and 

(I) information as to whether a 

particular current or former member is 

currently designated as a Restricted 

Firm pursuant to Rules 4111 and 9561. 

(c) through (g) No Change. 

••• Supplementary Material: 

.01 through .03 No Change. 

* * * * * 

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 

Background 

On July 30, 2021, the SEC issued an 

order approving proposed rule changes 

concerning firms with a significant 

history of misconduct.3 The new rules 

include new Rule 4111 (Restricted Firm 

Obligations), new Rule 9561 

(Procedures for Regulating Activities 

Under Rule 4111), and amendments to 

Rule 9559 (Hearing Procedures for 

Expedited Proceedings Under the Rule 

9550 Series). 

Rule 4111 establishes an annual 

process to designate as ‘‘Restricted 

Firms’’ member firms that present a 

high degree of risk to the investing 

public, based on numeric thresholds of 

firm-level and individual-level 

disclosure events, and then impose on 

such firms a ‘‘Restricted Deposit 

Requirement’’ 4 or, in addition or in the 

alternative, conditions or restrictions on 

the member firm’s operations that are 

necessary or appropriate to protect 

investors and the public interest.5

Rule 4111 is designed to protect 

investors and the public interest by 

strengthening tools available to FINRA 

to address the risks posed by member 

firms with a significant history of 

misconduct.6 The rule will create 

incentives for firms to change behaviors 

and activities, either to avoid being 

designated or re-designated as a 

Restricted Firm, to mitigate FINRA’s 

concerns.7

New Rules 4111 and 9561, and the 

amendments to Rule 9559, were 


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8See Regulatory Notice 21–34 (September 2021). 

On May 26, 2022, FINRA filed for immediate 

effectiveness a proposed rule change to make nonsubstantive and technical amendments to Rules 

4111 and 9561. See SR–FINRA–2022–014 (Form 

19b–4), available at https://www.finra.org/sites/ 

default/files/2022-05/sr-finra-2022-014.pdf. 

9See Information Notice, February 1, 2022 

(FINRA Announces Rule 4111 (Restricted Firm 

Obligations) Evaluation Date); see also Rule 

4111(i)(5) (definition of ‘‘Evaluation Date’’). As 

FINRA explained in that Information Notice, FINRA 

plans to actually perform the annual calculation at 

least 30 days after the June 1, 2022 Evaluation Date. 

10 In the rulemaking that approved the new rules 

concerning firms with a significant history of 

misconduct, FINRA committed to file this proposed 

rule change to Rule 8312. See Letter from Michael 

Garawski, Associate General Counsel, FINRA, to 

Vanessa Countryman, Secretary, SEC, dated July 20, 

2021, at p. 3, (‘‘July 2021 FINRA Response to 

Comments’’). 

11The BrokerCheck website address is 

brokercheck.finra.org. 

12See Rule 2210(d)(8) (requiring that each of a 

member’s websites include a readily apparent 

reference and hyperlink to BrokerCheck on the 

initial web page that the member intends to be 

viewed by retail investors and any other web page 

that includes a professional profile of one or more 

registered persons who conduct business with retail 

investors); Rule 2267 (requiring members to provide 

to customers the FINRA BrokerCheck Hotline 

Number and a statement as to the availability to the 

customer of an investor brochure that includes 

information describing BrokerCheck). 

13See Rule 8312. Rule 8312 uses the term 

‘‘Registration Forms’’ to refer collectively to the 

Uniform Application for Securities Industry 

Registration or Transfer (Form U4), the Uniform 

Termination Notice for Securities Industry 

Registration (Form U5), the Uniform Disciplinary 

Action Reporting Form (Form U6), the Uniform 

Application for Broker-Dealer Registration (Form 

BD), and the Uniform Request for Broker-Dealer 

Withdrawal (Form BDW). See Rule 8312(b)(2)(A). 

14This disclosure would be similar to disclosures 

on BrokerCheck as to whether a particular member 

is subject to the provisions of Rule 3170 (the 

‘‘Taping Rule’’). See Rule 8312(b)(2)(F). 

15See Rule 9561(a)(4) (Effectiveness of the Rule 

4111 Requirements). 

16See Rule 4111(i)(7) (definition of ‘‘Former 

Member’’). 

17See Rule 4111(i)(9) (definition of ‘‘Preliminary 

Criteria for Identification’’). 

18FINRA believes that disclosing on BrokerCheck 

the former members that are currently designated as 

Restricted Firms would provide valuable 

information to investors and third parties. A former 

member that is currently designated as a Restricted 

Firm was a member at the time it was designated 

as a Restricted Firm, and it remains designated as 

a Restricted Firm until the date when the next 

annual calculation of the Preliminary Criteria for 

Identification for member firms occurs. During the 

period when a former member remains designated 

as a Restricted Firm, it continues to be subject to 

the obligations imposed on it pursuant to Rule 4111 

and to a presumption that any application it files 

to withdraw all or any portion of its Restricted 

Deposit Requirement should be denied. See Rule 

4111(f)(1), (3). Disclosure on BrokerCheck of 

information for a firm that was designated as a 

Restricted Firm and became a former member in the 

same year also could be information that investors 

consider when weighing their options in active or 

contemplated arbitration claims against former 

members. See Regulatory Notice 20–11 (April 

2020). 

19This would be similar in nature to how the 

information in BrokerCheck that a firm is a ‘‘taping 

firm’’ includes a hyperlink to a page on FINRA’s 

website containing a clear description of what it 

means to be a ‘‘taping firm.’’ See Regulatory Notice 

21–09 (March 2021); FINRA Taping Rule, available 

at https://www.finra.org/rules-guidance/guidance/ 

taping-rule. 

effective on January 1, 2022.8 FINRA 

explained in Regulatory Notice 21–34 

that FINRA would announce, in a 

separate Regulatory Notice, the first 

Evaluation Date no less than 120 

calendar days before the first Evaluation 

Date, and that FINRA expected that the 

first Evaluation Date would be mid-year 

2022. On February 1, 2022, FINRA 

announced that the first Evaluation Date 

for Rule 4111 would be June 1, 2022.9

Proposed Amendments to Rule 8312 

To enhance the investor-protection 

benefits of Rule 4111, FINRA is 

proposing rule changes to amend Rule 

8312 (FINRA BrokerCheck Disclosure) 

to release information on BrokerCheck 

as to whether a particular member firm 

or former member firm is currently 

designated as a Restricted Firm 

pursuant to Rules 4111 and 9561.10

Rule 8312 governs the information 

FINRA releases to the public through its 

BrokerCheck system.11 BrokerCheck 

helps investors make informed choices 

about the brokers and member firms 

with which they conduct business by 

providing registration and disciplinary 

history to investors at no charge. FINRA 

requires member firms to inform their 

customers of the availability of 

BrokerCheck.12

Information that is released on 

BrokerCheck includes, among other 

things, information reported on the most 

recently filed ‘‘Registration Forms’’ 

(with limited exceptions) for both firms 

and registered individuals, and 

summary information about certain 

arbitration awards against a firm 

involving a securities or commodities 

dispute with a public customer.13 To 

provide enhanced disclosure to the 

public, FINRA is proposing to amend 

Rule 8312 to release information on 

BrokerCheck as to whether a particular 

member firm or former member firm is 

currently designated as a ‘‘Restricted 

Firm’’ pursuant to Rules 4111 and 9561. 

As explained above, Rule 4111 will be 

an important new tool to identify and 

respond to firms that present a high 

degree of risk to investors. Disclosing on 

BrokerCheck the firms that are 

designated as Restricted Firms would 

provide material information to 

investors concerning the identity of 

firms that FINRA has determined pose 

far higher risks to the public than firms 

of similar size.14

If the proposed rule change is 

approved, information that a firm is a 

Restricted Firm would display on 

BrokerCheck while that firm is 

designated as a Restricted Firm. This 

would include while a Rule 9561 

expedited proceeding to review a 

Department of Member Regulation 

(‘‘Department’’) decision is pending, 

because a Department decision that 

designates a firm as a Restricted Firm 

will not be stayed during a Rule 9561 

expedited proceeding.15 When a firm is 

not designated, or is no longer 

designated, as a Restricted Firm, no 

historical information would be 

displayed on BrokerCheck that the firm 

was a Restricted Firm. 

For example: 

➢ If FINRA designates a firm as a 

Restricted Firm in Year 1 but does not 

re-designate the firm as a Restricted 

Firm in Year 2, the Restricted Firm 

status would display in BrokerCheck 

beginning from the date in Year 1 when 

the Department designated the firm as a 

Restricted Firm to the date in Year 2 

when the firm is no longer designated 

as a Restricted Firm. 

➢ If a firm is designated as a 

Restricted Firm in Year 1 and 

subsequently in Year 1 withdraws from 

FINRA membership and becomes a 

former member firm,16 the Restricted 

Firm status would continue to display 

in BrokerCheck until the date in Year 2 

when the firm is no longer designated 

as a Restricted Firm (i.e., when the 

annual calculation of the ‘‘Preliminary 

Criteria for Identification’’ 17 for member 

firms occurs), even though the firm had 

withdrawn from FINRA membership 

before that date.18

Information that a firm is currently a 

Restricted Firm would be displayed in 

BrokerCheck on both a firm’s summary 

report and detailed report. Specifically, 

those reports would include the text, 

‘‘This firm is currently designated as a 

Restricted Firm pursuant to FINRA Rule 

4111 (Restricted Firm Obligations),’’ in 

a color or font that is prominent. The 

alert also would include the text ‘‘Click 

here for more information,’’ with a 

hyperlink to a page on FINRA’s website 

that provides for the investing public a 

clear explanation of Rule 4111 and what 

it means to be a Restricted Firm.19

FINRA believes that releasing 

information on BrokerCheck as to 

whether a particular member firm or 

former member firm is currently 

designated as a Restricted Firm would 

help inform investors of firms that may 

pose outlier-level risks compared to 

firms of similar sizes, which may incent 

investors to research more carefully the 

background of the firm. FINRA also 

believes that the public disclosure of the 

firms currently designated as Restricted 


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20 Information that a firm is currently designated 

as a Restricted Firm would not be made available 

on BrokerCheck prior to the effective date of the 

proposed rule change, and information about the 

obligations to which a Restricted Firm is subject 

would not be made available on BrokerCheck. 

FINRA recognizes that information about a firm’s 

Restricted Firm designation and the obligations 

imposed on it would be important to state securities 

regulators, both before and after the effective date 

of the proposed rule change. FINRA reiterates its 

commitment to working with individual state 

securities regulators to share information 

concerning whether firms that operate in their 

individual states have been designated by FINRA as 

Restricted Firms, along with information 

concerning any obligations that have been imposed 

pursuant to Rules 4111 and 9561 on the Restricted 

Firm. See July 2021 FINRA Response to Comments, 

supra note 10, at p. 3. 

21 15 U.S.C. 78o–3(b)(6). 

22 15 U.S.C. 78o–3(i)(1). 

23This analysis uses a baseline inclusive of Rule 

4111 for clarity and simplicity. The expected 

impacts of Rule 4111 were considered in detail in 

SR–FINRA–2020–041. See Securities Exchange Act 

Release No. 90527 (November 27, 2020), 85 FR 

78540, 78551–54 (December 4, 2020) (Notice of 

Filing of File No. SR–FINRA–2020–041) (‘‘Filing’’). 

24The Preliminary Criteria for Identification are 

based on information that is reportable on Forms 

U4, U5, U6 and BD or derived from customer 

arbitrations filed with FINRA Dispute Resolution 

Services’ arbitration forum. See Rule 4111(i)(4). 

Most of this information is disclosed on 

BrokerCheck. 

25 In 2019, for example, there were 40 small firms 

(1.3% of all small member firms) and five mid-size 

firms (2.5% of all mid-size member firms) that 

would have met the Preliminary Criteria for 

Identification had it existed at that time. See SR– 

FINRA–2020–041, Exh. 3g, available at https://

www.finra.org/sites/default/files/2021-07/SRFINRA-2020-041-Amendment2.pdf. These statistics 

correspond to the number of firms that would have 

met the Preliminary Criteria for Identification as of 

year-end (December 31, 2019) of the identification 

year. The total number of member firms that would 

have met the Preliminary Criteria for Identification 

had it existed at the time has trended down since 

2014, when 75 small firms (2% of all small member 

firms), four mid-size firms (1.9% of all mid-size 

member firms) and one large firm (0.6% of all large 

member firms) would have met the Preliminary 

Criteria for Identification. FINRA defines a small 

firm as a member with at least one and no more 

than 150 registered persons, a mid-size firm as a 

member with at least 151 and no more than 499 

registered persons, and a large firm as a member 

with 500 or more registered persons. See FINRA ByLaws, Article I. 

Firms would create additional 

incentives for firms with a significant 

history of misconduct to change 

behaviors and activities to reduce risk. 

If the proposed rule change is 

approved, FINRA expects that the 

effective date of the proposed rule 

change would be a date after FINRA 

completes the first annual Rule 4111 

cycle, but no later than the Evaluation 

Date for the second annual Rule 4111 

cycle. After the effective date, FINRA 

would make the relevant disclosures on 

BrokerCheck beginning with the firms 

that are designated or re-designated as 

Restricted Firms in the second annual 

Rule 4111 cycle. This would allow 

FINRA to gain meaningful experience 

with new Rule 4111, including any 

operational shortcomings, before FINRA 

begins disclosing Restricted Firms on 

BrokerCheck.20

If the Commission approves the 

proposed rule change, FINRA will 

announce the effective date of the 

proposed rule change in a Regulatory 

Notice following Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,21 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, and Section 15A(i)(1) of 

the Act,22 which requires that FINRA 

establish and maintain a toll-free 

telephone listing, and a readily 

accessible electronic or other process, to 

receive and promptly respond to 

inquiries regarding, registration 

information on its members and their 

associated persons, and to adopt rules 

governing the process for making 

inquiries and the type, scope, and 

presentation of information to be 

provided in response to such inquiries. 

Publicly disclosing through 

BrokerCheck information concerning 

the current status of a member firm as 

a Restricted Firm would inform more 

investors of which firms pose high risks 

to the investing public, compared to 

firms of similar sizes, and thereby 

incent investors to research carefully the 

background of the firm and may also act 

to incentivize firms with a significant 

history of misconduct to change 

behaviors and activities to reduce risk. 

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 benefits and costs, and the 

alternatives FINRA considered in 

assessing how to best meet its regulatory 

objectives. 

1. Regulatory Need 

Rule 4111 identifies member firms 

that present a high degree of risk to the 

investing public and allows FINRA to 

impose on such firms a Restricted 

Deposit Requirement and, in addition or 

in the alternative, other conditions or 

restrictions on firms’ operations. FINRA 

anticipates that investors may benefit 

from the public disclosure of 

information that a firm is a ‘‘Restricted 

Firm,’’ both in how it would help 

investors decide whether to use a firm 

and its registered representatives for 

brokerage services, and in how it would 

make stronger the incentives for a firm 

to improve its supervisory and 

compliance practices. The proposed 

amendments to Rule 8312 would 

provide this information to investors 

through BrokerCheck. 

2. Economic Baseline 

The economic baseline for the 

proposed rule change is the current 

regulatory framework and Rule 4111 

(which was approved by the SEC on 

July 30, 2021, and was effective on 

January 1, 2022), the information 

currently available on BrokerCheck, and 

current investor utilization of 

BrokerCheck.23 Rule 4111 creates a 

multi-step process for FINRA’s 

determination of whether a member 

firm should be designated as a 

Restricted Firm. The first step in the 

process is an annual calculation to 

determine whether a member firm meets 

the Preliminary Criteria for 

Identification.24 Only some of the firms 

that meet the Preliminary Criteria for 

Identification will be designated as 

Restricted Firms at the end of the multistep process.25

The proposed amendments to Rule 

8312 are expected to affect users of 

BrokerCheck, currently and formerly 

registered firms, and, indirectly, the 

individuals associated with those firms. 

Users of BrokerCheck include, among 

others, investors, member firms and 

other entities in the financial services 

industry, regulators, and individuals 

registered as brokers or seeking 

employment in the brokerage industry. 

The information about firms currently 

available to investors through 

BrokerCheck is derived from the 

Registration Forms and the disclosures 

required thereunder, and includes a 

description of where and when the firm 

was established, people and entities that 

own controlling shares or directly 

influence the firm’s daily operations, a 

firm’s history that details mergers, 

acquisitions or name changes affecting 

the firm, the firm’s active licenses and 

registrations, the types of businesses it 

conducts, information about arbitration 

awards and disciplinary matters, and 

information as to whether a particular 


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26See About BrokerCheck, https://www.finra.org/ 

investors/learn-to-invest/choosing-investmentprofessional/about-brokercheck; Rule 8312. 

27See Section 5 of the FINRA BrokerCheck Terms 

of Use, https://brokercheck.finra.org/terms. 

28See Rule 4111(i)(12) (defining ‘‘Registered 

Person and Member Firm Events’’ to include 

‘‘Registered Person Adjudicated Events,’’ 

‘‘Registered Person Pending Events,’’ ‘‘Registered 

Person Termination and Internal Review Events,’’ 

‘‘Member Firm Adjudicated Events,’’ and ‘‘Member 

Firm Pending Events,’’ all of which are defined in 

Rule 4111(i)(4)). 

29FINRA’s analysis compared firms that satisfied 

the Preliminary Criteria for Identification in each 

year between 2013 and 2017 to firms of similar size 

that did not satisfy the criteria and looked at the 

number of subsequent disclosure events in the 

remainder of the period analyzed, which ended in 

2019. See Filing, supra note 23, 85 FR 78540, 

78552; SR–FINRA–2020–041, Exhibit 3c, available 

at https://www.finra.org/sites/default/files/2020-11/ 

SR-FINRA-2020-041.pdf. 

30Rule 4111 will create strong measures of 

deterrence of misconduct while a firm is designated 

a Restricted Firm. See Filing, 85 FR 78540, 78550. 

31See Filing, 85 FR 78540, 78553. 

member is subject to the provisions of 

the Taping Rule, among other 

information and disclosures.26 In 2020, 

BrokerCheck helped users conduct 

almost 38 million searches of firms and 

individual brokers. Information 

available on BrokerCheck may reach 

investors through additional channels, 

because the data may be copied and 

compiled through data gathering or 

extraction tools, subject to applicable 

terms of use.27

3. Economic Impacts 

The proposed amendments to Rule 

8312 would disclose in BrokerCheck a 

firm’s designation as a Restricted Firm 

for the duration of that designation. As 

noted above, the potential benefits to 

investors need not be limited to 

individuals who consult BrokerCheck, 

because third parties may harvest and 

compile the information and make it 

available through other outlets, subject 

to applicable terms of use. 

The disclosure on BrokerCheck of 

firms’ Restricted Firm designations may 

benefit investors. Currently, 

BrokerCheck already displays 

disclosures reported on the most 

recently filed Registration Forms for 

both firms and registered individuals, as 

well as summary information about 

certain arbitration awards against firms 

involving a securities or commodities 

dispute with a public customer. 

However, with the proposed additional 

disclosure of a firm’s designation as a 

Restricted Firm, investors might be 

prompted to learn more about such 

Restricted Firms, engage with them 

more cautiously, or—for investors 

currently using the services of 

Restricted Firms—critically review their 

experiences with these firms. As 

discussed at length in SR–FINRA–2020– 

041, FINRA’s analysis indicated that 

firms that would have met the 

Preliminary Criteria for Identification 

during the 2013–2017 review period 

had on average 6–20 times more new 

‘‘Registered Person and Member Firm 

Events’’ 28 after their identification than 

other firms of the same size category.29

The disclosure on BrokerCheck of a 

firm’s Restricted Firm designation and 

the resulting additional investor caution 

may help some investors avoid the 

harms associated with future 

misconduct. Although the magnitude of 

these effects is not known, they would 

supplement the protective effects of the 

obligations imposed by FINRA on the 

designated Restricted Firms.30 The 

anticipated benefits to investors of the 

proposed amendments would increase 

with the likelihood that potential or 

actual customers of a designated 

Restricted Firm seek or learn 

information in BrokerCheck about a 

firm’s Restricted Firm designation and 

consider it in their research on the 

background of a firm. 

The disclosure on BrokerCheck of 

firms’ Restricted Firm designations and 

additional investor caution may have a 

range of effects on such firms. 

Designated Restricted Firms may 

respond by offering more competitive 

pricing or improved customer service. 

Designated Restricted Firms may also 

act to improve internal controls in order 

to avoid additional reputational harm 

and being re-designated as a Restricted 

Firm in subsequent years. However, 

additional investor caution, if 

significant enough, may cause financial 

distress at some firms. Disclosing a 

firm’s Restricted Firm designation on 

BrokerCheck may lead investors to 

review their engagement with the firm 

more critically and, therefore, also may 

potentially lead to increased customer 

complaints, arbitration cases and 

possible awards against, and settlements 

by, such firms. In addition, as noted in 

SR–FINRA–2020–041, Restricted Firms 

may have greater difficulty or increased 

costs associated with maintaining a 

clearing arrangement, loss of trading 

partners, or similar impairments where 

third parties can determine that a firm 

meets the Preliminary Criteria for 

Identification or has been deemed to be 

a Restricted Firm.31 While some third 

parties like clearing firms may require a 

firm to disclose Restricted Firm status 

during private contract negotiations, 

other third-party firms may learn of a 

firm’s Restricted Firm designation only 

after the information is disclosed 

publicly. These third-party firms may 

then anticipate an increase in legal and 

contingent costs through the potential 

liabilities that they face through their 

business relationships with a Restricted 

Firm. As a result, Restricted Firms may 

find that costs of these third-party 

agreements increase and potentially lose 

access to such providers. While the 

magnitude of these reactions from 

investors and third parties cannot be 

quantified, it is possible that the 

disclosure of the designation as a 

Restricted Firm may result in some 

firms going out of business. 

4. Alternatives Considered 

FINRA recognizes that the design and 

implementation of the rule proposals 

may impose direct and indirect costs on 

a variety of stakeholders, including 

firms, brokers, regulators, investors and 

the public. Accordingly, in developing 

its rule proposals, FINRA seeks to 

identify ways to enhance the efficiency 

and effectiveness of the proposed rules 

while maintaining their regulatory 

objectives. 

In developing the proposal, FINRA 

considered two different alternatives for 

when to begin releasing information on 

BrokerCheck as to whether a particular 

member firm or former member firm is 

currently designated as a Restricted 

Firm. Specifically, FINRA considered 

whether to begin releasing this 

information on BrokerCheck during the 

first annual Rule 4111 cycle or, instead, 

the second annual Rule 4111 cycle. 

FINRA has proposed to start this 

disclosure in the second annual Rule 

4111 cycle, and not sooner, because it 

would allow FINRA and member firms 

to gain meaningful experience with new 

Rule 4111, including any operational 

shortcomings, before FINRA begins 

disclosing Restricted Firms on 

BrokerCheck. 

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 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 117 / Friday, June 17, 2022 / Notices 36555 

32 17 CFR 200.30–3(a)(12). 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2022–015 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–FINRA–2022–015. 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– 

2022–015 and should be submitted on 

or before July 8, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13044 Filed 6–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–245, OMB Control No. 

3235–0204] 

Submission for OMB Review; 

Comment Request Extension: Rule 

19d–3 

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.) (‘‘PRA’’), the 

Securities and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 19d–3 (17 CFR 240.19d–3) under 

the Securities Exchange Act of 1934 (17 

U.S.C. 78a et seq.). 

Rule 19d–3 prescribes the form and 

content of applications to the 

Commission by persons seeking 

Commission review of final disciplinary 

actions against them taken by selfregulatory organizations (‘‘SROs’’) for 

which the Commission is the 

appropriate regulatory agency. The 

Commission uses the information 

provided in the application filed 

pursuant to Rule 19d–3 to review final 

actions taken by SROs including: (1) 

final disciplinary sanctions; (2) denial 

or conditioning of membership, 

participation or association; and (3) 

prohibitions or limitations of access to 

services offered by a SRO or member 

thereof. 

The staff estimates that 32 

respondents will file one application 

pursuant to Rule 19b–3 each year. The 

staff estimates that the average number 

of hours necessary to comply with the 

requirements of Rule 19d–3 is 

approximately eighteen hours. We 

estimate that approximately 16 firms or 

natural persons would draft the 

applications themselves, and therefore 

incur an hour burden of 18 hours each 

(a total hour burden of 288), and that 16 

would hire outside counsel, and 

therefore incur a cost burden of $8,496 

each (a total cost burden of $135,936). 

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. 

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 by 

July 18, 2022 to (i) www.reginfo.gov/ 

public/do/PRAMain and (ii) David 

Bottom, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o John Pezzullo, 100 F 

Street NE, Washington, DC 20549, or by 

sending an email to: PRA_Mailbox@

sec.gov. 

Dated: June 13, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13048 Filed 6–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–242, OMB Control No. 

3235–0206] 

Submission for OMB Review; 

Comment Request Extension: Rule 

19d–1 

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.) (‘‘PRA’’), the 

Securities and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 19d–1 (17 CFR 240.19d–1) under 

the Securities Exchange Act of 1934 (17 

U.S.C. 78a et seq.) (‘‘Exchange Act’’). 

Rule 19d–1 prescribes the form and 

content of notices to be filed with the 

Commission by self-regulatory 

organizations (‘‘SROs’’) for which the 

Commission is the appropriate 

regulatory agency concerning the 

following final SRO actions: (1) 

disciplinary actions with respect to any 

person; (2) denial, bar, prohibition, or 

limitation of membership, participation 

or association with a member or of 

access to services offered by an SRO or 


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