Federal Register / Vol. 81, No. 18 / Thursday, January 28, 2016 / Notices 4931 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 76239 (Oct. 28, 

2015), 80 FR 66348 (‘‘Notice’’). 

4See letters from Judith Shaw, President, North 

American Securities Administrators Association, 

Inc., dated November 19, 2015 (‘‘NASAA Letter’’); 

Hugh D. Berkson, President, Public Investors 

Arbitration Bar Association, dated November 18, 

2015 (‘‘PIABA Letter’’); Chris Tyrrell, Chair, 

CrowdFund Intermediary Regulatory Advocates, 

dated November 18, 2015 (‘‘CFIRA Letter’’). 

5See Partial Amendment No. 1, SR–FINRA– 

2015–040 (Jan. 21, 2016) (‘‘Amendment No. 1’’). 

Amendment No. 1 revised the proposal to include 

‘‘for purposes of FINRA Rule 8210 any other person 

listed in Schedule A of Form Funding Portal of a 

member’’ to the definition of ‘‘associated person of 

a funding portal member’’ or ‘‘person associated 

with a funding portal member’’ in Funding Portal 

Rule 100(b)(1). See Amendment No. 1 at 3. 

Amendment No. 1 is available in the public 

comment file for SR–FINRA–2015–040 on the 

Commission’s Web site. Amendment No. 1 also 

revised the proposal to make certain technical 

changes to Funding Portal Rules 300(a)(1)(A), 

900(a)(4)(C), 900(a)(4)(F), 1200(a)(3), 1200(a)(4) and 

1200(b)(4)(C). See Amendment No. 1 at 3–4. These 

changes are discussed in more detail below. 

6See letter from Adam Arkel, Associate General 

Counsel, FINRA, dated January 21, 2016 (‘‘FINRA 

Letter’’). 

7The Notice contains a more detailed discussion 

of the rules. In addition, the entire text of the rules, 

including the amendments, can be found in Exhibit 

5 of Amendment No. 1. 

8See Exchange Act Release No. 76324, 80 FR 

71387 (Nov. 16, 2015). 

9See Securities Act of 1933 (‘‘Securities Act’’) 

Section 4A(a)(1)–(2); Exchange Act Section 

3(h)(1)(B). A funding portal is defined in Regulation 

Crowdfunding as ‘‘a broker acting as an 

intermediary in a transaction involving the offer or 

sale of securities in reliance on Section 4(a)(6) of 

the Securities Act (15 U.S.C. 77d(a)(6)), that does 

not: (i) Offer investment advice or 

recommendations; (ii) Solicit purchases, sales or 

offers to buy the securities displayed on its 

platform; (iii) Compensate employees, agents, or 

other persons for such solicitation or based on the 

sale of securities displayed or referenced on its 

platform; or (iv) Hold, manage, possess, or 

otherwise handle investor funds or securities.’’ Rule 

300(c)(2) of the SEC’s Regulation Crowdfunding. 

See also Section 3(a)(80) of the Exchange Act. 

10See Section 3(h)(1)(B) of the Exchange Act 

(requiring, as a condition of the exemption from 

broker registration, that a funding portal be a 

members of a national securities association that is 

registered with the Commission under Section 15A 

of the Exchange Act); Regulation Crowdfunding 

Rule 300(a)(2) (requiring an intermediary in 

transactions relying on the crowdfunding 

exemption to be a member of a national securities 

association registered under Section 15A of the 

Exchange Act); Regulation Crowdfunding Rule 400 

et seq. (containing the registration requirements for 

funding portals). See also Securities Act Section 

4A(a)(2). FINRA is currently the only registered 

national securities association. 

11 15 U.S.C. 78c(h)(2) (‘‘[A] national securities 

association shall only examine for and enforce 

against a registered funding portal rules of such 

national securities association written specifically 

for registered funding portals.’’). 

12FINRA separately proposed Section 15 of 

Schedule A to the FINRA By-Laws governing the 

fees for funding portals that are FINRA members on 

October 9, 2015. The proposal became effective 

upon receipt of the filing by the Commission. See 

Exchange Act Release No. 76238, 80 FR 66341 (Oct. 

28, 2015). 

13See Funding Portal Rule 100(a). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76970; File No. SR–FINRA– 

2015–040] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Amendment 

No. 1 and Order Granting Accelerated 

Approval to a Proposed Rule Change, 

as Modified by Amendment No. 1, to 

Adopt the Funding Portal Rules and 

Related Forms and Rule 4518 

January 22, 2016. 

I. Introduction 

On October 9, 2015, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b-4 

thereunder,2 a proposed rule change to 

adopt Funding Portal Rules 100, 110, 

200, 300, 800, 900 and 1200 

(collectively, the ‘‘Funding Portal 

Rules’’) and related forms. In addition, 

as part of the proposed rule change, 

FINRA proposes to adopt new FINRA 

Rule 4518 (Notification to FINRA in 

Connection with the JOBS Act) in the 

FINRA rulebook. The proposed rule 

change was published for comment in 

the Federal Register on October 28, 

2015.3 The Commission received three 

comment letters on the proposed rule 

change.4 On December 9, 2015, FINRA 

extended the time period for 

Commission action on this proposed 

rule change until January 26, 2016. On 

January 21, 2016, FINRA filed an 

amendment to the proposed rule change 

(‘‘Amendment No. 1’’).5 FINRA 

responded to the comment letters on 

January 21, 2016.6 The Commission is 

publishing this Notice and Order to 

solicit comment on Amendment No. 1 

and to approve the proposed rule 

change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

II. Description of the Rule Change and 

Amendment No. 1 7

On October 30, 2015, the Commission 

adopted Regulation Crowdfunding,8

which implements provisions of Title III 

of the JOBS Act, including those relating 

to registration and membership 

requirements of a new type of entity 

called a funding portal.9 Pursuant to 

Section 3(h)(1)(B) of the Exchange Act 

and Regulation Crowdfunding, funding 

portals are required to become members 

of a national securities association 

registered under Section 15A of the 

Exchange Act in order to function as 

intermediaries in certain crowdfunding 

transactions.10 In addition, Section 

3(h)(2) of the Exchange Act requires that 

the national securities association only 

examine for and enforce against 

registered funding portals rules that the 

national securities association has 

written specifically for registered 

funding portals.11 Accordingly, FINRA, 

a national securities association 

registered under Section 15A of the 

Exchange Act, proposed Funding Portal 

Rules 100 (General Standards), 110 

(Funding Portal Application), 200 

(Funding Portal Conduct), 300 (Funding 

Portal Compliance), 800 (Investigations 

and Sanctions), 900 (Code of Procedure) 

and 1200 (Arbitration and Mediation), 

as well as Form FP–NMA (for new 

membership applications), Form FP– 

CMA (for continuing membership 

applications), Funding Portal Rule 

300(c) Form (for reporting disclosure 

events as required by Funding Portal 

Rule 300(c)) and Form FP—Statement of 

Revenue (for reporting gross revenue as 

required by Funding Portal Rule 300(e)). 

FINRA proposed to apply the Funding 

Portal Rules and related forms to SECregistered funding portals that become 

FINRA members.12 FINRA also 

proposed to adopt new FINRA Rule 

4518 (Notification to FINRA in 

Connection with the JOBS Act) to 

implement notification requirements for 

FINRA broker-dealer members that 

engage in certain crowdfunding 

transactions or enter into control 

relationships with funding portals. 

A. General Standards 

Funding Portal Rule 100 sets forth 

basic standards and definitions for 

purposes of the Funding Portal Rules. 

The rule provides that all funding portal 

members and persons associated with 

funding portal members shall be subject 

to the FINRA By-Laws and FINRA 

Regulation By-Laws, unless the context 

requires otherwise, and the Funding 

Portal Rules.13 The rule also provides 

that persons associated with a funding 

portal member shall have the same 

duties and obligations as a funding 

portal member under the Funding Portal 

Rules. The term ‘‘associated person of a 

funding portal member’’ or ‘‘person 

associated with a funding portal 

member’’ is defined in the rule as ‘‘any 

sole proprietor, partner, officer, director 

or manager of a funding portal, or other 

natural person occupying a similar 

status or performing similar functions, 

or any natural person directly or 

indirectly controlling or controlled by a 


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4932 Federal Register / Vol. 81, No. 18 / Thursday, January 28, 2016 / Notices 

14Funding Portal Rule 100(b)(1). 

15 ‘‘FP Applicant’’ is defined as ‘‘a person that 

applies for admission to FINRA as a funding portal 

member under paragraph (a)(3) of Funding Portal 

Rule 110 or a funding portal member that files an 

application for approval of a change in ownership 

or control under paragraph (a)(4) of the rule.’’ 

Funding Portal Rule 110(a)(1)(B). 

16Form FP–NMA is set forth in Exhibit 3a. 

17See Funding Portal Rule 110(a)(3)(B). See also 

15 U.S.C. 78c(a)(39). Section 3(a)(39) of the 

Exchange Act sets forth the definition of ‘‘statutory 

disqualification.’’ Funding Portal Rule 110(a)(1)(A) 

includes a different definition of ‘‘associated 

person’’ solely for purposes of the MAP. Under 

Funding Portal Rule 110(a)(1)(A), ‘‘associated 

person’’ is defined as ‘‘any: (1) sole proprietor, 

partner, officer, director or manager of a funding 

portal, or other natural person occupying a similar 

status or performing similar functions; (2) natural 

person directly or indirectly controlling or 

controlled by such funding portal, or any employee 

of a funding portal, except that any person 

associated with a funding portal whose functions 

are solely clerical or ministerial shall not be 

included in the meaning of such term; or (3) 

partnership, corporation, association, or other legal 

entity controlled by or controlling the FP Applicant 

as defined in Funding Portal Rule 110(a)(1)(B).’’ 

18Form FP–CMA is set forth in Exhibit 3b. 

19See Funding Portal Rule 110(a)(4)(A)–(B). 

20See Funding Portal Rule 110(a)(6), 110(a)(9). 

See also Notice, 80 FR at 66351. Under the rules, 

the membership interview(s) may be conducted by 

video conference or such other means as FINRA 

may specify. 

21See Funding Portal Rule 110(a)(5). See also 

Notice, 80 FR at 66351. 

22See Funding Portal Rule 110(a)(7). See also 

Notice, 80 FR at 66351. 

23See Funding Portal Rule 110(a)(8). See also 

Notice, 80 FR at 66351. 

24According to FINRA, the five standards are 

streamlined and consolidated in comparison to the 

14 standards that apply to broker-dealer 

applications under NASD Rule 1014(a). FINRA 

believes that the streamlined, consolidated 

approach is appropriate to reflect the limited nature 

of funding portal business. See Notice, 80 FR at 

66352, n. 22. 

25See Funding Portal Rule 110(a)(10)(A). 

26See Funding Portal Rule 110(a)(10)(B). 

27See Funding Portal Rule 110(a)(10)(C). 

28See Funding Portal Rule 110(a)(10)(D). 

29See Funding Portal Rule 110(a)(10)(E). 

30See Funding Portal Rule 110(a)(11)(A). 

31See Funding Portal Rule 110(a)(11)(B). 

funding portal member, or any 

employee of a funding portal 

member.’’ 14

B. FINRA Membership 

Funding Portal Rule 110(a) addresses 

the membership application process 

(‘‘MAP’’) for funding portal applicants 

(‘‘FP Applicants’’).15

1. MAP for Initial Membership or 

Change in Ownership or Control 

Funding Portal Rule 110(a)(3)(A) 

provides that an FP Applicant for 

FINRA membership must submit its 

application to FINRA’s Department of 

Member Regulation (‘‘Department’’) by 

filing a Form FP–NMA 16 in the manner 

prescribed by FINRA and an application 

fee. In addition, at the time an FP 

Applicant for FINRA membership 

submits its application, the FP 

Applicant must submit information, in 

a format to be prescribed by FINRA, 

indicating whether the FP Applicant or 

any associated person (as defined in 

Funding Portal Rule 100(b)(1)) of the FP 

Applicant is subject to an event 

described in Section 3(a)(39) of the 

Exchange Act.17 The FP Applicant must 

keep this information current and must 

update such information promptly, but 

in any event not later than 10 days 

following any change in such 

information. 

The rule requires a funding portal 

member to submit its application on 

Form FP–CMA 18 for prior approval of a 

change: 

• In the equity ownership or 

partnership capital, LLC membership 

interest, or other ownership interest of 

the funding portal member that results 

in one person or entity directly or 

indirectly owning or controlling 25 

percent or more of the equity or 

partnership capital, LLC membership 

interest, or other ownership interest; or 

• of control persons of the funding 

portal member, other than the 

appointment or election of a natural 

person as an officer or director of the 

funding portal member in the normal 

course of business, regardless of 

whether such change occurred as a 

result of a direct or indirect change in 

the equity ownership, partnership 

capital, LLC membership interest, or 

other ownership interest in the funding 

portal member.19

After receiving an application, the 

rules provide that FINRA may make 

requests for additional documents or 

information and will hold one or more 

membership interviews.20 The Funding 

Portal Rules also provide processes for 

rejection by FINRA due to an 

incomplete application,21 withdrawal of 

an initial or continued membership 

application by a FP Applicant,22 and 

lapse of application due to certain types 

of inaction by the FP Applicant.23

2. Granting or Denying the Application 

Funding Portal Rule 110(a)(10) 

requires the Department to consider the 

application for initial membership or 

change of ownership or control, other 

information and documents provided by 

the FP Applicant during the application 

process, other information and 

documents obtained by the Department, 

and the public interest and the 

protection of investors. After 

considering this information, the 

Department is required to determine 

whether the FP Applicant meets each of 

the following five standards, as 

applicable: 24

• The FP Applicant and its associated 

persons are capable of complying with 

applicable federal securities laws, the 

rules and regulations thereunder, and 

the Funding Portal Rules, including 

observing high standards of commercial 

honor and just and equitable principles 

of trade. In determining whether this 

standard is met, the Department is 

required to take into consideration all 

information in its possession, including 

information regarding whether an FP 

Applicant or its associated persons: 25

➢ is subject to an event described in 

Section 3(a)(39) of the Exchange Act; 

and 

➢ is the subject of a pending, 

adjudicated, or settled regulatory action 

or investigation by the SEC, the 

Commodity Futures Trading 

Commission, a federal, state, or foreign 

regulatory agency, or a self-regulatory 

organization; an adjudicated or settled 

investment-related private civil action 

for damages or an injunction; or a 

criminal action (other than a minor 

traffic violation) that is pending, 

adjudicated, or that has resulted in a 

guilty or no contest plea of an FP 

Applicant or its associated persons. 

• The FP Applicant has established 

all contractual or other arrangements 

and business relationships with banks, 

broker-dealers, clearing corporations, 

service bureaus, escrow agents, transfer 

agents, technology service providers, or 

others necessary to initiate the 

operations described in the FP 

Applicant’s Form FP–NMA.26

• The FP Applicant has a supervisory 

system that is reasonably designed to 

achieve compliance with applicable 

federal securities laws, the rules and 

regulations thereunder, and the Funding 

Portal Rules.27

• The FP Applicant has fully 

disclosed and established through 

documentation all direct and indirect 

sources of funding.28

• The FP Applicant has a 

recordkeeping system that enables the 

FP Applicant to comply with federal, 

state, and self-regulatory organization 

recordkeeping requirements.29

Under the rules, if the Department 

determines that the FP Applicant meets 

each of the applicable standards set 

forth above, it is required to grant an 

application for initial membership or 

change of ownership or control.30

However, if the Department determines 

that the FP Applicant does not meet one 

or more of the applicable standards, the 

Department is required to deny the 

application.31 The rules further provide 

that the FP Applicant’s approval for 


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32See Notice, 80 FR at 66352–53. 

33 15 U.S.C. 78s(d)(2). 

34See Notice, 80 FR at 66353. 

35See Notice, 80 FR at 66353. 

36See Notice, 80 FR at 66353. 

37See Funding Portal Rule 200(c)(1). 

38See Funding Portal Rule 200(c)(2). 

39See Funding Portal Rule 200(c)(2)(B). 

40See Funding Portal Rule 200(c)(2)(C). 

41See Funding Portal Rule 200(c)(3). 

42See Notice, 80 FR at 66354. 

43See Funding Portal Rule 300(a)(1). 

44 In Amendment No. 1, FINRA is proposing to 

revise the language in this portion of Rule 300(a)(1) 

reading ‘‘funding portal and its associated persons’’ 

to ‘‘funding portal member and its associated 

persons.’’ See Amendment No. 1 at 3–4. 

45See Funding Portal Rule 300(c)(1)(A) 

(discussing the events requiring reporting). See also 

Notice, 80 FR at 66354–55. Each associated person 

Continued 

membership shall be contingent upon 

the FP Applicant’s filing of an executed 

written membership agreement. 

Funding Portal Rule 110(a)(12) 

requires that the Department serve a 

written decision on the application for 

initial membership or change of 

ownership or control within 60 days 

after the filing of the application or such 

later date as the Department and the FP 

Applicant have agreed in writing. If the 

Department denies the application, it is 

required to explain in detail the reason 

for denial, referencing the applicable 

standard(s). A funding portal may 

appeal the Department’s decision under 

the process set forth in Funding Portal 

Rule 110(a)(13), which is described in 

more detail in the Notice.32

3. Application to the SEC for Review 

Funding Portal Rule 110(a)(14) 

provides that a person aggrieved by final 

action of FINRA under paragraph (a) of 

the rule may apply for review by the 

SEC pursuant to Section 19(d)(2) of the 

Exchange Act.33 The filing of an 

application for review shall not stay the 

effectiveness of a decision constituting 

final action of FINRA, unless the SEC 

otherwise orders. 

4. Filing of Misleading Information as to 

Membership or Registration 

Funding Portal Rule 110(a)(15) 

provides that no funding portal member 

or person associated with a funding 

portal member shall file with FINRA 

information with respect to membership 

or registration that is incomplete or 

inaccurate so as to be misleading, or that 

could in any way tend to mislead, or 

shall fail to correct such filing after 

notice thereof. 

C. Funding Portal Conduct 

Funding Portal Rule 200(a) is based in 

large part on FINRA Rule 2010 

(Standards of Commercial Honor and 

Principles of Trade).34 The rule 

provides that a funding portal member, 

in the conduct of its business, shall 

observe high standards of commercial 

honor and just and equitable principles 

of trade. 

Funding Portal Rule 200(b) is based in 

large part on FINRA Rule 2020 (Use of 

Manipulative, Deceptive or Other 

Fraudulent Devices).35 The rule 

provides that no funding portal member 

shall effect any transaction in, or induce 

the purchase or sale of, any security by 

means of, or by aiding or abetting, any 

manipulative, deceptive or other 

fraudulent device or contrivance. 

Funding Portal Rule 200(c) 

(Communications with the Public) is 

aimed at prohibiting false and 

misleading statements.36 The rule 

defines the term ‘‘funding portal 

communication’’ to mean any electronic 

or other written communication that is 

distributed or made available by a 

funding portal member to one or more 

investors.37 Paragraph 200(c)(2) of the 

rule addresses content standards.38

Paragraph 200(c)(2)(A) of the rule 

provides that no funding portal 

communication may: 

• Include any false, exaggerated, 

unwarranted, promissory or misleading 

statement or claim; 

• Omit any material fact or 

qualification if the omission, in light of 

the context of the material presented, 

would cause the communication to be 

misleading; state or imply that FINRA, 

or any other corporate name or facility 

owned by FINRA, or any other 

regulatory organization endorses, 

indemnifies, or guarantees the funding 

portal member’s business practices; or 

• Predict or project performance, 

imply that past performance will recur 

or make any exaggerated or unwarranted 

claim, opinion or forecast. A 

hypothetical illustration of 

mathematical principles is permitted, 

provided that it does not predict or 

project the performance of an 

investment. 

Further, paragraph (c)(2)(B) of the rule 

provides that all funding portal member 

communications must be based on 

principles of fair dealing and good faith 

and must be fair and balanced.39 In 

addition, the rule provides that all 

funding portal member communications 

must prominently disclose the name of 

the funding portal member, or the name 

under which the funding portal member 

primarily conducts business as 

disclosed on the member’s Form FP– 

NMA.40 Finally, paragraph 200(c)(3) of 

the rule addresses issuer 

communications and provides that the 

content standards of the rule shall not 

apply to any communication on the 

funding portal member’s Web site that 

is prepared solely by an issuer; 

provided, however, that no funding 

portal member may include on its Web 

site any issuer communication that the 

funding portal member knows or has 

reason to know contains any untrue 

statement of a material fact or is 

otherwise false or misleading.41

D. Funding Portal Compliance 

1. Supervisory System 

Funding Portal Rule 300(a) is a 

streamlined version of FINRA’s 

supervision rules and is designed to 

permit funding portal members 

flexibility to tailor their supervisory 

systems to their business models.42 The 

rule requires that each funding portal 

member establish and maintain a system 

to supervise the activities of each 

associated person of the funding portal 

member that is reasonably designed to 

achieve compliance with applicable 

securities laws and regulations, and 

with the Funding Portal Rules.43 The 

rule provides that a funding portal 

member’s supervisory system must 

provide, at a minimum, for: 

• The establishment and maintenance 

of written procedures to supervise the 

activities of the funding portal and its 

associated persons; 44

• the designation of a person with 

authority to carry out the supervisory 

responsibilities of the funding portal 

member; and 

• reasonable efforts to determine that 

all supervisory personnel are qualified 

by virtue of experience or training to 

carry out their assigned responsibilities. 

Funding Portal Rule 300(a)(2) 

provides that a funding portal member 

must permit the examination and 

inspection of all of its businesses and 

business operations that relate to its 

activities as a funding portal, such as its 

premises, systems, platforms and 

records, by representatives of FINRA 

and the Commission, and must 

cooperate with the examination, 

inspection or investigation of any 

persons directly or indirectly using its 

platform. 

2. Reporting Requirements 

Funding Portal Rule 300(c), which is 

discussed in further detail in the Notice, 

requires funding portal members to 

report to FINRA (and sets forth the 

obligations of such members’ associated 

persons to report to the member) 

regulatory proceedings, disciplinary and 

other events.45 The rule requires that 


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4934 Federal Register / Vol. 81, No. 18 / Thursday, January 28, 2016 / Notices 

of a funding portal is also required to promptly 

report the existence of an event in Rule 300(c)(1)(A) 

to the funding portal. See Funding Portal Rule 

300(c)(3). In addition to the events specified in Rule 

300(c)(1)(A), each funding portal member is 

required to promptly report to FINRA, within 30 

calendar days, through such means as FINRA may 

specify, after the funding portal member has 

concluded or reasonably should have concluded 

that an associated person of the funding portal 

member or the funding portal member itself has 

violated any securities-, commodities-, financial-or 

investment-related laws, rules, regulations or 

standards of conduct of any foreign or domestic 

regulatory body or self-regulatory organization. See 

Funding Portal Rule 300(c)(2). Funding portal 

members will use the Funding Portal Rule 300(c) 

Form for their reporting requirements pursuant to 

the rule. See Funding Portal Rule 300(c) Form. 

46See Funding Portal Rule 300(c)(1). 

47See Notice, 80 FR at 66354. 

48See Funding Portal Rule 300(c)(4). 

49See id. 

50According to FINRA, the Statement of Gross 

Revenue will be used to determine a funding portal 

member’s annual fees, which FINRA is establishing 

as part of a separate rulemaking. See supra note 12. 

51According to FINRA, the rule is based in large 

part on Exchange Act Rule 17a–3(a)(12)(ii) (17 CFR 

240.17a–3(a)(12)(ii)), which requires broker-dealers 

to make and keep current a record listing every 

associated person of the broker-dealer. FINRA 

believes that requiring funding portals to keep such 

a record is prudent both for supervisory and 

regulatory oversight purposes. See Notice, 80 FR at 

66356. 

52See supra note 5. 

53A funding portal is required to list its direct 

owners and executive officers on Schedule A of 

Form Funding Portal and, therefore, the amendment 

will allow FINRA to obtain information and 

testimony from these persons. 

54See Notice, 80 FR at 66356. 

55With respect to FINRA Rule 8312, as discussed 

below, FINRA proposed Funding Portal Rule 800(b) 

as a streamlined version of the rule to apply to 

funding portal members. See Notice, 80 FR at 

66356, n. 47. 

56There are a few additional changes from the 

Rule 8000 series, which are discussed in the Notice. 

See Notice, 80 FR at 66356–66357. 

57See Notice, 80 FR at 66357. 

58See Funding Portal Rule 800(b)(1). 

59See Funding Portal Rule 800(b)(2). 

60See Funding Portal Rule 800(b)(2). 

61See Funding Portal Rule 800(b)(3). 

funding portals promptly report to 

FINRA, within 30 calendar days, 

through such means as FINRA may 

specify, after the member knows or 

should have known of the existence of 

the event.46 The rule is largely based on 

current FINRA Rule 4530 (Reporting 

Requirements).47 The rule indicates that 

nothing contained in the rule 

eliminates, reduces or otherwise 

abrogates the responsibilities of a 

funding portal member to promptly 

disclose required information on SEC 

Form Funding Portal as applicable, to 

make any other required filings or to 

respond to FINRA with respect to any 

investor complaint, examination or 

inquiry.48 In addition, the rule provides 

that a funding portal member is not 

required to report an event otherwise 

required to be reported under paragraph 

(c)(1)(A) of the rule if the member 

discloses the event on SEC Form 

Funding Portal, consistent with the 

requirements of that form, or as required 

pursuant to Funding Portal Rule 

800(b)(2), which is discussed in more 

detail below.49

4. Statement of Gross Revenue 

Funding Portal Rule 300(e) requires 

each funding portal member each year 

to report to FINRA, in the manner 

prescribed by FINRA, the member’s 

gross revenue on Form FP-Statement of 

Revenue, no later than 60 calendar days 

following each calendar year-end.50 The 

rule requires that the statement of gross 

revenue must be prepared in accordance 

with U.S. Generally Accepted 

Accounting Principles. 

6. Record of Associated Persons of the 

Funding Portal Member 

Funding Portal Rule 300(f) requires 

each funding portal member to make 

and keep current a record listing every 

associated person of the funding portal 

member that shows, for each such 

associated person, every office of the 

funding portal member where the 

associated person regularly conducts 

any business for the funding portal 

member, and any registration number, if 

any, to be prescribed by FINRA, and 

every identification number or code 

assigned to the associated person by the 

funding portal member.51 The rule 

requires each funding portal member to 

preserve all records made pursuant to 

the rule for five years, the first two in 

an easily accessible place. 

FINRA is also proposing in 

Amendment No. 1 to include for 

purposes of FINRA Rule 8210 any other 

person listed in Schedule A of Form 

Funding Portal of a member to the 

definition of associated person.52

FINRA Rule 8210 authorizes it to 

require associated persons of brokerdealers to provide information and 

testimony, and to inspect and copy 

certain books and records, among other 

things. Adding this language will more 

closely align the rule to the definition of 

associated person that it applies to 

associated persons of broker-dealers. 

Therefore, FINRA will be able to obtain 

information and testimony from persons 

listed in Schedule A of a funding 

portal’s Form Funding Portal in the 

same manner that it may from persons 

listed in Schedule A of a broker-dealer’s 

Form BD.53

E. Investigations and Sanctions 

1. Application of the FINRA Rule 8000 

Series (Investigations and Sanctions) 

Funding Portal Rule 800(a) is 

designed to provide that funding portal 

members will be subject to specified 

FINRA rules governing investigations 

and sanctions.54 Specifically, the rule 

provides that, except for FINRA Rules 

8110 (Availability of Manual to 

Customers), 8211 (Automated 

Submission of Trading Data Requested 

by FINRA), 8213 (Automated 

Submission of Trading Data for NonExchange-Listed Securities Requested 

by FINRA) and 8312 (FINRA 

BrokerCheck Disclosure),55 all funding 

portal members shall be subject to the 

FINRA Rule 8000 Series, unless the 

context requires otherwise.56

2. Public Disclosure of Information on 

Funding Portals 

Funding Portal Rule 800(b) is a 

streamlined version of FINRA Rule 8312 

(FINRA BrokerCheck Disclosure) and 

addresses specific information that 

FINRA is required to make available to 

the public.57 The rule authorizes FINRA 

to provide access to the public, via an 

appropriate link on the FINRA Web site, 

to a funding portal member’s current 

SEC Form Funding Portal, including 

amendments and registration 

withdrawal requests, as filed with the 

SEC pursuant to SEC Regulation 

Crowdfunding, in the form made 

publicly available by the SEC.58 The 

rule provides that, with respect to a 

former funding portal member, FINRA 

may provide similar access to the public 

to the former funding portal member’s 

most recent SEC Form Funding Portal, 

and any amendments and registration 

withdrawal requests, as filed with the 

SEC. 

The rule also requires FINRA to make 

available to the public information filed 

by a funding portal member, in a format 

to be prescribed by FINRA, indicating 

whether the funding portal member or 

any associated person of the funding 

portal member is subject to an event 

described in Section 3(a)(39) of the 

Exchange Act.59 The rule provides that 

the funding portal member must keep 

this information current and must 

update such information promptly, but 

in any event not later than 10 days 

following any change in such 

information.60

The rule also provides that, with 

respect to the information provided 

pursuant to paragraph (b)(2) of the rule, 

FINRA shall not make available 

information reported as a social security 

number, information that FINRA is 

otherwise prohibited from releasing 

under Federal law, or information that 

is provided solely for use by FINRA.61

The rule provides that FINRA reserves 

the right to exclude, on a case-by-case 


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62See Funding Portal Rule 800(b)(3). 

63See Notice, 80 FR at 66357. 

64The FINRA Rule 9520 Series addresses 

‘‘eligibility proceedings’’ in the context of statutory 

qualifications which, as discussed further below, 

FINRA is proposing to address under Funding 

Portal Rule 900(b). FINRA Rule 9557 addresses 

service of notice to members that are experiencing 

financial or operational difficulties under net 

capital or similar financial responsibility 

requirements. Because funding portals would not be 

subject to such requirements, FINRA indicated that 

Rule 9557 would not be applicable. Similarly, 

FINRA indicated that it did not propose to apply 

the Rule 9700 Series to funding portals because the 

FINRA Rule 9700 Series addresses the automated 

quotation, execution or communication systems 

owned or operated by FINRA, which are outside the 

scope of funding portal business activity. See 

Notice, 80 FR at 66357. 

65FINRA Rule 9216(b) sets forth procedures for 

disposition of specified rule violations designated 

as minor rule violations pursuant to a plan (referred 

to as an ‘‘MRVP’’) declared effective by the SEC in 

accordance with Exchange Act Section 19(d)(1) (15 

U.S.C. 78s(d)(1)) and Rule 19d–1(c)(2) (17 CFR 

240.19d–1(c)(2)) thereunder. FINRA Rule 9217 sets 

forth the rules that are eligible for such disposition. 

FINRA’s MRVP allows FINRA to impose a fine of 

up to $2,500 on any firm it regulates or person 

associated with a FINRA regulated firm for a minor 

violation of an eligible rule. 

66 In Amendment No. 1, FINRA proposes to 

change the ‘‘Failure’’ to ‘‘failure’’ and add ‘‘FINRA’’ 

before ‘‘Rule 9217’’ in Funding Portal Rule 

900(a)(4)(C). See Amendment No. 1 at 4. 

67 In Amendment No. 1, FINRA proposes to 

change ‘‘Confirmation of Transactions’’ to 

‘‘confirmation of transactions’’ in Funding Portal 

Rule 900(a)(4)(F). See Amendment No. 1 at 4. 

68FINRA Rule 9551 addresses expedited 

proceedings by FINRA for failure to comply with 

public communication standards. 

69See Funding Portal Rule 900(a)(7). 

70See Funding Portal Rule 900(a)(8). 

71FINRA Rule 9810 addresses initiation of cease 

and desist proceedings by FINRA for specified 

violations. 

72See Funding Portal Rule 900(a)(9). 

73See Notice, 80 FR at 66358. 

74 In Amendment No. 1, FINRA is proposing to 

amend Funding Portal Rules 1200(a)(3) and 

1200(a)(4) to add the word ‘‘Series’’ after FINRA 

Rule 1200. See Amendment No. 1 at 4. 

75See Notice, 80 FR at 66362. According to 

FINRA, the rule is a streamlined version of current 

FINRA Rule 2268 (Requirements When Using 

Predispute Arbitration Agreements for Customer 

Agreements). 

76See Funding Portal Rule 1200(b)(1). 

basis, information that contains 

confidential customer information, 

offensive or potentially defamatory 

language or information that raises 

significant identity theft, personal safety 

or privacy concerns that are not 

outweighed by investor protection 

concerns or information that was 

reported in error by a funding portal 

member.62

F. Code of Procedure 

1. Application of FINRA Rule 9000 

Series (Code of Procedure) 

Funding Portal Rule 900(a) is 

designed to provide that funding portal 

members will be subject to specified 

FINRA rules setting forth FINRA’s Code 

of Procedure.63 Specifically, except for 

the FINRA Rule 9520 Series, FINRA 

Rule 9557, and the FINRA Rule 9700 

Series,64 the rule provides that all 

funding portal members shall be subject 

to the FINRA Rule 9000 Series, unless 

the context requires otherwise. The rule 

provides that for purposes of FINRA 

Rule 9217, a funding portal member 

may be subject to a fine under FINRA 

Rule 9216(b) with respect to any of the 

following: 65

• Failure to timely submit 

amendments to SEC Form Funding 

Portal; 

• Funding Portal Rule 200(c) 

(Communications with the Public); 

• Funding Portal Rule 300(a)—Failure 

to maintain adequate written 

supervisory procedures where the 

underlying conduct is subject to Rule 

9217; 66

• Funding Portal Rule 300(c)—failure 

to timely file reports; 

• failure to provide or update contact 

information as required by Funding 

Portal Rule 300(d); 

• Rule 303(f) of SEC Regulation 

Crowdfunding—Confirmation of 

Transactions; 67 and 

• Rule 404 of SEC Regulation 

Crowdfunding—failure to make and 

preserve records in conformance with 

all applicable laws, rules, regulations 

and statements of policy promulgated 

thereunder, and with the Funding Portal 

Rules. 

The rule also provides that for 

purposes of FINRA Rule 9551(a),68

FINRA staff may issue a written notice 

requiring a funding portal member to 

file communications with the FINRA 

Advertising Regulation Department at 

least ten days prior to use if FINRA staff 

determines that the member has 

departed from the standards of Funding 

Portal Rule 200(c).69 In addition, the 

rule provides that for purposes of 

FINRA Rule 9551(d), the pre-use filing 

requirement referenced in a notice 

issued and served under FINRA Rule 

9551 shall become effective 21 days 

after service of the notice, unless stayed 

by a request for a hearing pursuant to 

FINRA Rule 9559.70 The rule further 

provides that for purposes of 

proceedings pursuant to FINRA Rule 

9810(a),71 proceedings may be initiated 

with respect to alleged violations of 

Section 10(b) of the Exchange Act (15 

U.S.C. 78j(b)) and Exchange Act Rule 

10b–5 (17 CFR 240.10b–5), Funding 

Portal Rule 200(a) (if the alleged 

violation is misuse of investor funds or 

assets, or based on violations of Section 

17(a) of the Securities Act (15 U.S.C. 

77q(a)) and Funding Portal Rule 

200(b).72

2. Eligibility Proceedings 

Funding Portal Rule 900(b) is a 

streamlined version of the current 

FINRA Rule 9520 Series.73 The rule sets 

forth procedures for a person to become 

or remain associated with a funding 

portal member, notwithstanding the 

existence of a statutory disqualification 

as defined in Article III, Section 4 of the 

FINRA By-Laws and for a funding portal 

member or person associated with a 

funding portal member to obtain relief 

from the eligibility or qualification 

requirements of the FINRA By-Laws and 

Funding Portal Rules. 

G. Arbitration and Mediation 

Funding Portal Rule 1200(a) provides 

that funding portal members will be 

subject to the FINRA Rule 12000 Series 

(Code of Arbitration Procedure for 

Customer Disputes), FINRA Rule 13000 

Series (Code of Arbitration Procedure 

for Industry Disputes) and FINRA Rule 

14000 Series (Code of Mediation 

Procedure), unless the context requires 

otherwise.74 The rule addresses 

predispute arbitration agreements for 

investor accounts.75 The rule provides 

that any predispute arbitration clause 

must be highlighted and must be 

immediately preceded by the following 

language in outline form: 

‘‘This agreement contains a predispute 

arbitration clause. By signing an arbitration 

agreement the parties agree as follows: 

(A) All parties to this agreement are giving 

up the right to sue each other in court, 

including the right to a trial by jury, except 

as provided by the rules of the arbitration 

forum in which a claim is filed. 

(B) Arbitration awards are generally final 

and binding; a party’s ability to have a court 

reverse or modify an arbitration award is very 

limited. 

(C) The ability of the parties to obtain 

documents, witness statements and other 

discovery is generally more limited in 

arbitration than in court proceedings. 

(D) The arbitrators do not have to explain 

the reason(s) for their award unless, in an 

eligible case, a joint request for an explained 

decision has been submitted by all parties to 

the panel at least 20 days prior to the first 

scheduled hearing date. 

(E) The panel of arbitrators may include a 

minority of arbitrators who were or are 

affiliated with the securities industry. 

(F) The rules of some arbitration forums 

may impose time limits for bringing a claim 

in arbitration. In some cases, a claim that is 

ineligible for arbitration may be brought in 

court. 

(G) The rules of the arbitration forum in 

which the claim is filed, and any 

amendments thereto, shall be incorporated 

into this agreement.’’ 76

Paragraph (b)(2)(A) of the rule 

provides that, in any agreement 


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77 In Amendment No. 1, FINRA is proposing to 

amend Funding Portal Rule 1200(b)(4)(C) to change 

‘‘may be filed under the agreement;’’ to ‘‘may be 

filed under the agreement; or’’. See Amendment No. 

1 at 4. 

78See NASAA Letter at 2. 

79See PIABA Letter at 2. 

80 Id. at 7. 

81See FINRA Letter at 2 (citing Notice, 80 FR at 

66349). 

82See id. at 2. FINRA cites, for example, 

Regulatory Notice 12–34 (July 2012) (FINRA 

Requests Comment on Proposed Regulation of 

Crowdfunding Activities) and Regulatory Notice 

13–34). FINRA also cites to the discussion in the 

Notice regarding Regulatory Notice 13–34 and the 

comments it received for the Regulatory Notice. See 

id. at 2, n. 9 (citing also to the Notice, 80 FR at 

66367). 

83See id. at 2. 

84 Id. at 3. 

85See id. at 3. See also Notice, 80 FR at 66349 

and 66369. 

86See PIABA Letter at 2. The commenter also 

noted that similar limiting language referencing 

‘‘context’’ is unclear in several other places in the 

rules, but did not identify any specific rules. See 

id. 

87FINRA Letter at 3. 

containing a predispute arbitration 

agreement, there must be a highlighted 

statement immediately preceding any 

signature line or other place for 

indicating agreement that states that the 

agreement contains a predispute 

arbitration clause. The statement must 

also indicate at what page and 

paragraph the arbitration clause is 

located. Paragraph (b)(2)(B) provides 

that, within 30 days of signing, a copy 

of the agreement containing any such 

clause must be given to the investor and 

the funding portal member must retain 

proof of delivery or of the investor’s 

acknowledgement of receipt. 

Paragraph (b)(3)(A) of the rule 

provides that, within ten business days 

of receipt of the investor’s request, a 

funding portal member must provide an 

investor with a copy of any predispute 

arbitration clause or investor agreement 

executed between the investor and the 

funding portal member. Paragraph 

(b)(3)(B) provides that, upon request by 

an investor, a funding portal member 

must provide the investor with the 

names of, and information on how to 

contact or obtain the rules of, all 

arbitration forums in which a claim may 

be filed under the agreement. 

Paragraph (b)(4) of the rule provides 

that no predispute arbitration agreement 

shall include any condition that: 

• Limits or contradicts the rules of 

any self-regulatory organization; 

• limits the ability of a party to file 

any claim in arbitration; 

• limits the ability of a party to file 

any claim in court permitted to be filed 

in court under the rules of the forums 

in which a claim may be filed under the 

agreement; 77

• limits the ability of arbitrators to 

make any award. 

Paragraph (b)(5) of the rule provides 

that, if an investor files a complaint in 

court against a funding portal member 

that contains claims that are subject to 

arbitration pursuant to a predispute 

arbitration agreement between the 

funding portal member and the investor, 

the funding portal member may seek to 

compel arbitration of the claims that are 

subject to arbitration. If the funding 

portal member seeks to compel 

arbitration of such claims, the funding 

portal member must agree to arbitrate all 

of the claims contained in the complaint 

if the investor so requests. 

Paragraph (b)(6) of the rule provides 

that all agreements must include a 

statement that ‘‘No person shall bring a 

putative or certified class action to 

arbitration, nor seek to enforce any predispute arbitration agreement against 

any person who has initiated in court a 

putative class action; or who is a 

member of a putative class who has not 

opted out of the class with respect to 

any claims encompassed by the putative 

class action until: (i) The class 

certification is denied; or (ii) the class 

is decertified; or (iii) the investor is 

excluded from the class by the court. 

Such forbearance to enforce an 

agreement to arbitrate shall not 

constitute a waiver of any rights under 

this agreement except to the extent 

stated herein.’’ 

H. Notification to FINRA in Connection 

With the JOBS Act 

FINRA also proposed new FINRA 

Rule 4518. The rule, which would apply 

to registered broker members, provides 

that a FINRA member shall notify 

FINRA, in a manner prescribed by 

FINRA: Prior to engaging, for the first 

time, in a transaction involving the offer 

or sale of securities in reliance on 

Section 4(a)(6) of the Securities Act; or 

within 30 days of directly or indirectly 

controlling, or being controlled by or 

under common control with, a funding 

portal as defined pursuant to Rule 

300(c)(2) of SEC Regulation 

Crowdfunding. 

III. Summary of Comment Letters and 

FINRA’s Response to Comments 

Commenters generally supported 

FINRA’s proposal. As discussed below, 

some commenters recommended that 

the proposal be expanded and include 

additional requirements or explanations 

in certain aspects. One of these 

commenters, while not necessarily 

opposing the proposed rules, also 

suggested that the Commission reject, 

and require FINRA to resubmit, the rule 

proposal. One commenter, while 

appreciating FINRA’s willingness to 

address potential issues through 

subsequent rulemakings, encouraged 

FINRA to address potential shortfalls 

now before any investors lose money.78

A. Timing 

One commenter suggested that FINRA 

and the public should review and 

evaluate FINRA’s proposed Funding 

Portal Rules, related forms and Rule 

4518 (the broker-dealer crowdfunding 

notification requirement) in light of 

Regulation Crowdfunding.79 The 

commenter further suggested that the 

Commission should reject FINRA’s rule 

proposal at this time, require FINRA to 

resubmit its rules after it has conducted 

a review and analysis of Regulation 

Crowdfunding and extend the comment 

period.80 FINRA, however, notes that: 

(1) Its proposal has been informed by 

the Commission’s rulemaking; 81 (2) its 

Funding Portal Rules have been in 

preparation for a considerable time; and 

(3) it has received public input.82

According to FINRA, the proposal is 

intended to create the means for 

registered funding portals to become 

FINRA members and is consistent with 

the JOBS Act and Regulation 

Crowdfunding.83 FINRA further notes 

that it is important that FINRA should 

be in a position to timely implement the 

Funding Portal Rules so that funding 

portals that plan to register with the SEC 

and seek FINRA membership may avail 

themselves of Regulation Crowdfunding 

as it becomes effective.84 Finally, FINRA 

points out that it noted in the proposal 

that it will consider the merit of future 

rulemakings as regulators gain more 

experience with funding portals.85

B. General Standards 

One commenter suggested omitting 

the language of ‘‘unless the context 

requires otherwise’’ in proposed 

Funding Portal Rule 100 regarding the 

application of FINRA by-Laws and 

FINRA Regulation By-Laws to funding 

portal members and their associated 

persons because the commenter believes 

it is unclear when the exception will 

apply.86 In response, FINRA notes that 

it intends the phrase ‘‘unless the context 

requires otherwise’’ to provide clarity 

and ensure that funding portals will not 

be subject to terms under the FINRA ByLaws and FINRA Regulation By-Laws 

that could not relate to them by virtue 

of their distinct status and limited 

permissible business activities under 

the JOBS Act and Regulation 

Crowdfunding.87 FINRA also notes that 

the phrase is used in other portions in 

the FINRA rulebook, such as FINRA 


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88FINRA Rule 0160(b) sets forth definitions for 

the FINRA Rules. 

89See FINRA Letter at 3–4. 

90See id. at 4. 

91See supra note 17. 

92See CFIRA Letter at 2. 

93See id. 

94See FINRA Letter at 4. 

95See id. at 4–5 (citing Securities Exchange Act 

Release No. 48969 (December 22, 2003), 68 FR 

75681 (December 31, 2003) (Notice of Order 

Granting Approval of Proposed Rule Change; File 

No. SR–NASD–2003–007)). 

96See FINRA Letter at 5. 

97See id. See also Notice, 80 FR at 66350. 

98See FINRA Letter at 5. 99See id. 100See Notice, 80 FR 66348, 66349. 101See CFIRA Letter at 1. That commenter also 

indicated that the new member application for 

funding portals still includes a provision to attach 

the bond. However, the Form FP–NMA, as 

proposed by FINRA, does not include such a 

requirement. See Exhibit 3a of the proposal. 102See NASAA Letter at 5; PIABA Letter at 3. 103See NASAA Letter at 5. The commenter also 

noted that funding portals will not be members of 

the Securities Investor Protection Corporation 

(‘‘SIPC’’) and that their customers will not receive 

SIPC protection. See id. 

104 Id. 

105See PIABA Letter at 3. In addition, the 

commenter suggested that funding portals should 

be required to clearly disclose to investors what the 

bond does and does not cover. Id. The commenter 

also suggested that the Commission should impose 

a fidelity bond requirement on funding portals and 

issuers. Id. at n. 5. 

106See id. at 5–6 (citing Notice, 80 FR at 66349, 

66367). 

107See FINRA Letter at 6 (citing language in the 

Commission’s adopting release). See also 

Crowdfunding, Exchange Act Release No. 76324, 80 

FR 71388, 71458 (Nov. 16, 2015). 

108See FINRA Letter at 6; Notice, 80 FR at 66349, 

n. 14 and 66367, n. 86. 

109See FINRA Letter at 6. 

110See PIABA Letter at 4. See also Regulatory 

Notice 13–34 (Oct. 2013) (FINRA Requests 

Comment on Proposed Funding Portal Rules and 

Related Forms). 

111See FINRA Letter at 6–7. 

112See id. at 7. 

113See PIABA Letter at 4. 

Rule 0160(b),88 and that it is not aware 

of any ambiguity that has arisen from 

the use of the phrase.89 Finally, FINRA 

indicates that it is open to further 

discussion of any specific interpretive 

issues.90

C. Definition of Associated Person 

As described above, Funding Portal 

Rule 110(a)(1)(A) includes a different 

definition of associated person solely for 

purposes of the MAP, which excludes 

persons whose functions are solely 

clerical or ministerial.91 One commenter 

suggested the exception for such 

persons from the definition of 

‘‘associated person’’ should be extended 

to the rest of the funding portal rules 

(i.e., the definition in Funding Portal 

Rule 100(b)(1) under the General 

Standards).92 The commenter noted that 

employees that are not listed as 

associated persons in the funding 

portal’s membership application will 

become associated persons once FINRA 

approves the funding portal for 

membership.93

In response, FINRA notes that the two 

different definitions of associated 

person in the rules are tailored to 

different purposes.94 FINRA indicates 

that the language in Funding Portal Rule 

110(a)(1)(A) excepting persons that have 

‘‘solely clerical and ministerial’’ 

functions is based on longstanding 

usage under NASD Rule 1011(b), which 

sets forth the definition of ‘‘associated 

person’’ for purposes of membership 

proceedings for broker-dealers.95

According to FINRA, the definition of 

‘‘associated person’’ in Rule 110(a)(1)(A) 

will perform a similar function for 

funding portals applying for FINRA 

membership.96 FINRA points out that it 

noted in the proposal that Funding 

Portal Rule 110(a) is intended to be 

based on the current broker-dealer 

membership rules, but FINRA 

simplified the MAP for funding portals 

to reflect the limited natured of their 

businesses.97

FINRA further notes that, in contrast, 

it intended the definition under 

Funding Portal Rule 100(b)(1) to be for 

general application to funding portal 

members, in a similar manner to the 

definition of associated persons of 

broker-dealers under paragraph (rr) 

under Article I of the FINRA By-Laws.98

According to FINRA, the purpose of the 

general definition of associated person 

in Funding Portal Rule 100(b)(1) is to 

ensure that all associated persons of the 

funding portal are subject to the 

regulatory framework.99

D. Fidelity Bond 

As discussed in the Notice, FINRA 

has determined not to propose at this 

time a fidelity bond requirement for 

funding portals.100 One commenter 

conveyed its support for FINRA’s 

approach.101 Two commenters, 

however, suggested including a fidelity 

bond requirement for funding portals.102

One commenter stated its view that 

there is ‘‘minimal regulation of 

associated persons working for funding 

portals’’ and that a fidelity bond would 

protect funding portals against potential 

losses due to acts of the employees.103

The commenter further stated its view 

that a streamlined fidelity bond 

requirement that accounts for a funding 

portal’s limited scope of activity is an 

economically feasible alternative given 

the risk that will otherwise exist for 

funding portals.104 Another commenter 

suggested that, in light of a funding 

portal’s responsibilities and potential 

liability, it would be ‘‘prudent’’ for a 

funding portal to be required to have 

fidelity bond (or some other type) of 

insurance.105

In response, FINRA indicates that it is 

not proposing a fidelity bond at this 

time, stating that as discussed in the 

proposal, it believes that this approach 

is appropriate in the interest of reducing 

potential burdens on prospective 

funding portal members given the 

limited nature of funding portal 

business and given that regulatory 

experience with funding portals is 

developing.106 FINRA also notes that 

the Commission considered and 

determined not to adopt a fidelity bond 

requirement for funding portals when it 

adopted Regulation Crowdfunding.107

FINRA indicates that it has determined 

to monitor the development of the 

funding portal business and determine 

whether future rulemaking regarding 

fidelity bonds or other financial 

responsibility requirements is 

merited.108

E. Communications With the Public 

FINRA indicates that it noted in the 

proposal that the proposed rule is a 

streamlined version of FINRA Rule 2210 

(Communications with the Public) and 

is aimed at prohibiting false and 

misleading statements.109 One 

commenter suggested that Funding 

Portal Rule 200 should include a 

requirement that funding portal member 

communications provide a sound basis 

for evaluating the facts in regard to any 

particular security or type of security, 

industry or service, which is language 

that FINRA had originally proposed in 

Regulatory Notice 13–34.110 In response, 

FINRA notes that the rule reflects the 

limited scope of activity permitted to 

funding portals.111 Although FINRA had 

originally included the language 

suggested by the commenter in 

Regulatory Notice 13–34, it indicates 

that, upon further consideration, it 

determined not to include such 

language in the proposal because it 

believes the language could potentially 

suggest the activity of offering 

investment advice or recommendations 

to investors, which is prohibited as a 

funding portal business activity.112

F. Reporting Requirements 

One commenter suggested that 

funding portals should be required to 

report misconduct in 10 days rather 

than 30 days as proposed under 

Funding Portal Rules 300(c)(1) and 300 

(c)(2).113 The commenter also suggested 

that Funding Portal Rule 300(c)(1)(A)(ii) 

should be revised to align with FINRA 

Rule 4530(a)(1)(B), which requires that 


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114See id. at 4–5. See also FINRA Rule 

4530(a)(1)(B). 

115See Funding Portal Rule 300(c)(1)(A)(ii). 

116See PIABA Letter at 5. See also FINRA Rule 

4530(d) and (f). 

117See FINRA Letter at 7. 

118See id. at 8. 

119See id. Both rules, which are discussed above, 

require funding portals to update information about 

statutory disqualification events ‘‘promptly, but in 

any event not later than 10 days following any 

change in such information.’’ See Funding Portal 

Rules 110(a)(3)(B) and 800(b)(2). 

120See FINRA Letter at 8. 

121See id. 122See id. 123See id. 124See id. (citing the Notice, 80 FR at 66363). 125See id. 126See PIABA Letter at 6. 127See id. 128See FINRA Letter at 12. 129See id. 

130See NASAA Letter at 2. Broker-dealers register 

using CRD. 

131See id.at 2. 

132See id. at 3. 

133CFIRA Letter at 2. 

134See FINRA Letter at 9. 

135See id. For example, FINRA notes the 

requirements under Funding Portal Rules 

110(a)(3)(A), 110(a)(4)(B) and 800(b), which are 

described in more detail above. See id. See also 

Notice, 80 FR at 66368. 

136See FINRA Letter at 9. 

137See CFIRA Letter at 2. 

138See PIABA Letter at 3, n. 4; NASAA Letter at 

3. 

a broker-dealer member report to FINRA 

when it or one of its associated persons 

‘‘is the subject of any written customer 

complaint involving allegations of theft 

or misappropriation of funds or 

securities or of forgery.’’ 114 Funding 

Portal Rule 300(c)(1)(A)(ii), as proposed, 

would require a funding portal to report 

when the funding portal member or an 

associated person of the funding portal 

member ‘‘is subject to any written 

complaint involving allegations of 

fraudulent conduct or misuse or 

misappropriation of funds or assets.’’ 115

The commenter further suggested that 

funding portals members, like brokerdealer members, should be required to 

(1) report quarterly statistical and 

summary information related to written 

customer complaints and (2) provide 

copies of source documents for the 

reportable information.116

In response, FINRA indicates that the 

30 calendar day requirement, which is 

consistent with the corresponding 

requirement for broker-dealer members 

under FINRA Rule 4530, strikes the 

appropriate balance between prompt 

regulatory reporting for purpose of risk 

oversight and providing firms sufficient 

time to assess reportable events and 

submit complete and accurate 

reports.117 FINRA also notes that 

funding portal’s permissible business 

activities are limited in scope relative to 

other FINRA members.118 In addition, 

FINRA notes that funding portal 

members would have a shorter amount 

of time to report statutory 

disqualification events under Rules 

110(a)(3)(B) and 800(b)(2) because of the 

significant regulatory implications of 

such events as compared to other 

reportable events.119

In response to the comment about the 

types of written complaints that should 

be reported, FINRA notes its belief that 

the rule is consistent with its goal of 

tailoring the rule language to the limited 

permissible activities in which funding 

portals may engage.120 FINRA states that 

it does not believe it is necessary to 

single out theft and forgery for purposes 

of this particular provision, especially 

given that funding portals are prohibited 

in the first place from holding, 

managing, possessing or otherwise 

handling investor funds or securities.121

However, FINRA also noted its belief 

that the language of Funding Portal Rule 

300(c)(1)(A)(ii) is sufficiently broad to 

encompass such fraudulent conduct, or 

misuse or misappropriation of funds or 

assets, as would be involved in an act 

of theft or forgery.122 FINRA also 

indicates that the rule is broader than 

FINRA Rule 4530(a)(1)(B)—the rule 

specifies ‘‘any written complaint’’ rather 

than ‘‘any written customer 

complaint.’’ 123 In response to the 

commenter’s other suggestions 

regarding requirements for statistical 

and summary information, and the 

filing of copies of the specified 

documents, FINRA cites to the proposal 

where it noted its intent to minimize the 

initial potential costs and burdens to the 

development of the funding portal 

business.124 FINRA, however, indicates 

that it may revisit this issue in a future 

rulemaking after regulators gain more 

experience in connection with funding 

portals.125

G. Disclosure 

As discussed in more detail above, 

Funding Portal Rule 800(b)(1) will allow 

FINRA to provide the public with access 

to a funding portal member’s current 

SEC Form Funding Portal, including 

amendments and registration 

withdrawal requests via a link to the 

Commission’s Web site. One commenter 

expressed concern about the permissive 

nature of Funding Portal Rule 

800(b)(1).126 The commenter suggested 

that the proposed rules should require 

that FINRA provide investors with most 

(if not all) of the information required to 

be submitted to FINRA under Funding 

Portal Rule 300(c).127 In response, 

FINRA notes that it intends to exercise 

its authority under Funding Portal Rule 

800(b)(1), which it states is designed to 

provide FINRA sufficient flexibility as 

to carrying out the specified 

disclosures.128 FINRA also notes that 

Funding Portal Rule 800(b)(2), which is 

discussed in more detail above, requires 

FINRA to make public information 

indicating whether the funding portal 

member or any associated person of the 

funding portal member is subject to an 

event described in Section 3(a)(39) of 

the Exchange Act (i.e., a statutory 

disqualification event).129

H. Central Registration Depository 

(‘‘CRD’’) 

One commenter suggested that 

funding portals should be required to 

use CRD to register and make ongoing 

disclosures.130 The commenter stated its 

view that mandatory use of CRD by 

funding portals would create a central 

location for regulators to easily access 

information about the portals at a 

reasonable expense to the entities.131

The commenter also expressed concern 

about whether information about 

funding portals and their associated 

persons would be made available to the 

public or other regulators.132 Another 

commenter, however, supported the 

decision not to use CRD, stating its view 

that the system is excessively complex 

for the limited scope of activity of 

funding portals, and using alternative 

systems will likely lead to compliance 

cost savings for portals.133

In response, FINRA indicates that it is 

not at this time requiring funding 

portals to use CRD.134 FINRA notes that 

the rules provide for the submission of 

certain information by funding portals 

in a manner and format prescribed by 

FINRA.135 FINRA indicates that it is 

developing systems for the submission 

of such information and it believes the 

systems will be appropriate to the 

limited permissible activities of funding 

portals.136

I. Licensing and Examination 

FINRA has not included any licensing 

or examination requirements in its 

Funding Portal Rules. One commenter 

expressed support for this approach, 

noting its belief that such an approach 

would result in cost savings for funding 

portals and would likely lead to greater 

flexibility and innovation in the roles 

and responsibilities of funding portal 

operators and employees.137 Two 

commenters, however, suggested 

licensing requirements for associated 

persons of funding portals.138 One of 

these commenters suggested licensing 

requirements for all associated persons 

of funding portals or, at a minimum, 

licensing requirements for any person 


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139See NASAA Letter at 3. 

140See PIABA Letter at 3, n. 4. 

141See FINRA Letter at 9. See also Notice, 80 FR 

at 66368. 

142 31 CFR Chapter X. See also 31 CFR 1023.100 

(‘‘Broker-dealer means a person registered or 

required to be registered as a broker or dealer with 

the Commission under the Securities Exchange Act 

of 1934 (15 U.S.C. 77a et seq.), except persons who 

register pursuant to 15 U.S.C. 78o(b)(11).’’). 

143See 31 CFR 1023.320. 

144See FINRA Rule 3310. 

145See NASAA Letter at 5. 

146See FINRA Letter at 11 (citing Notice, 80 FR 

at 66349). 

147See id. at 12. See also Crowdfunding, 

Exchange Act Release No. 76324, 80 FR 71378, 

71471, n. 1098 (Nov. 16, 2015) (‘‘FinCEN within the 

Department of Treasury has primary regulatory 

responsibility for administering the BSA. We note 

that FinCEN has included in the Unified Agenda 

and Regulatory Plan an item that states: ‘‘FinCEN 

. . . is proposing amendments to the regulatory 

definitions of ‘broker or dealer in securities’ under 

the regulations implementing the Bank Secrecy Act. 

The proposed changes are intended to expand the 

current scope of the definitions to include funding 

portals. In addition, these amendments would 

require funding portals to implement policies and 

procedures reasonably designed to achieve 

compliance with all of the Bank Secrecy Act 

requirements that are currently applicable to 

brokers or dealers in securities.’’) (citing Office of 

Mgmt. & Budget, Exec. Office of the President, 

Office of Info. & Regulatory Affairs, Amendments of 

the Definition of Broker or Dealer in Securities, RIN 

1506–AB29, available at http://www.reginfo.gov/

public/do/

eAgendaViewRule?pubId=201504&RIN=1506- 

AB29). 

148See PIABA Letter at 6; NASAA Letter at 4. 

149See PIABA Letter at 7 (suggesting that an 

investor should be permitted to include claims 

against funding portal members and issuers in the 

same FINRA arbitration); NASAA Letter at 4 

(expressing concern that investors wishing to bring 

claims against a funding portal member and issuer 

will have to bring the related claims in separate 

forums if a funding portal uses a pre-dispute 

arbitration agreement). 

150See PIABA Letter at 7. 

151See CFIRA Letter at 2. 

152See FINRA Letter at 13. See also Notice, 80 FR 

at 66369. 

153See id. 

154See id. (citing Exchange Act Release No. 73245 

(September 29, 2014), 79 FR 59876 (October 3, 

2014) (Order Approving Proposed Rule Change; File 

No. SR–FINRA–2014–026). 

155See NASAA Letter at 4. The commenter also 

suggested that FINRA Rule 2210 (Communications 

with the Public) should be applied to funding 

portals. See id. As explained in further detail above, 

FINRA indicates that Funding Portal Rule 200 is a 

streamlined version of FINRA Rule 2210 that 

reflects the limited scope of activity permitted to 

funding portals. 

156See NASAA Letter at 5. 

157See FINRA Letter at 10. See also Notice, 80 FR 

at 66368. FINRA also indicates that it is not 

proposing to apply to funding portals, at this time, 

certain rules based on its belief that they do not 

appear to be tailored to the limited activities of such 

entities. As an example, FINRA cites FINRA Rule 

4370, which contains business continuity plan 

(‘‘BCP’’) requirements for its broker-dealer 

members. According to FINRA, it is not requiring 

a funding portal to maintain a BCP, given that, 

among other things, a funding portal may not hold, 

manage possess or otherwise handle investor funds 

or securities. FINRA, however, stated that it: 

recognizes that funding portals are Internet-based 

businesses and, as part of FINRA’s membership 

application process, [it] will request access to a 

funding portal’s platform; [FINRA] will also 

monitor, as part of FINRA’s examination and 

surveillance process, the development of funding 

portal business to identify emergency or business 

disruptions at funding portal members that affect 

the ability of the members to meet their existing 

obligations to investors and issuers or for investors 

to access their securities positions. These efforts 

will assist in assessing whether additional 

rulemaking in this area is required. 

See id. FINRA Letter at 10, n. 34. 

158See FINRA Letter at 10–11. 

with specific responsibilities under the 

funding portal rules, such as 

supervisory or compliance personnel.139

The other commenter suggested that 

compliance personnel should be 

required to pass a licensing test.140

In response, FINRA notes that it will 

consider whether additional rulemaking 

with respect to examination and 

licensing requirements is needed as it 

gains experience regulating funding 

portals.141

J. Suspicious Activity Reporting 

Broker-dealers registered or required 

to be registered with the Commission 

are required to comply with anti-money 

laundering (‘‘AML’’) regulations 

promulgated by the Department of 

Treasury under the Bank Secrecy Act 

(‘‘BSA’’),142 including a requirement to 

file suspicious activity reports with the 

Financial Crimes Enforcement Network 

(‘‘FinCEN’’).143 FINRA requires its 

broker-dealer members to develop and 

implement AML programs reasonably 

designed to achieve and monitor their 

compliance with the requirements of the 

BSA and the Department of Treasury’s 

implementing regulations thereunder, 

including a requirement to file 

suspicious activity reports.144 One 

commenter suggested that funding 

portals should also be subject to 

suspicious activity reporting 

requirements.145 In response, FINRA 

indicates that it noted in its proposal 

that the BSA and its implementing 

regulations do not currently apply to 

funding portals.146 FINRA, therefore, 

indicates that it is not imposing a 

requirement at this time for funding 

portals to develop and implement an 

AML program, pending further action 

by the primary regulators in this area.147

K. Arbitration and Mediation 

Two commenters suggested that 

crowdfunding investors should be able 

to opt out of arbitration agreements and 

pursue their claims in court.148 The 

commenters also expressed concern 

with investors having to bring claims in 

multiple forums against funding portals 

and issuers.149 One commenter 

suggested that if investors are not 

provided the right to choose their 

forum, at a minimum, FINRA should bar 

arbitration agreements that would 

preclude an investor from joining a class 

action against a funding portal 

member.150 Another commenter, 

however, generally supported proposed 

Rule 1200.151

In response, FINRA notes that the 

purpose of Funding Portal Rule 1200 is 

to ensure in part that funding portal 

members shall be subject to the existing 

rules in this area, unless the context 

requires otherwise.152 FINRA also 

expresses its belief that the proffered 

changes to the arbitration rules raise 

issues for the securities industry in 

general that are beyond the scope of the 

proposal.153 Finally, FINRA states that 

as to the current rules in this area, 

FINRA has previously noted that 

investors experience substantial savings 

in arbitration compared to litigation and 

that the benefits and cost savings of 

arbitration make filing an arbitration 

claim a less costly option for 

investors.154

L. Application of Additional Rules 

One commenter suggested that the 

following conduct rules for FINRA’s 

broker-dealer members should be 

applied to funding portal members: The 

prohibition against guarantees and 

sharing in accounts under FINRA Rule 

2150 (Improper Use of Customers’ 

Securities or Funds; Prohibition Against 

Guarantees and Sharing in Accounts); 

Rule 2210 (Communications with the 

Public); Rule 3220 (Influencing or 

Rewarding Employees of Others); Rule 

3240 (Borrowing From or Lending to 

Customers); Rule 5230 (Payments 

Involving Publications that Influence 

the Market Price of a Security); and Rule 

5110 (Corporate Financing Rule— 

Underwriting Terms and 

Arrangements).155 The commenter also 

acknowledged that FINRA may not want 

to duplicate the recordkeeping rule 

under Rule 404 of Regulation 

Crowdfunding, but suggested that 

FINRA should ‘‘reiterate the importance 

of sound recordkeeping practices’’ of 

funding portals.156

In response, FINRA notes that it 

sought to streamline the Funding Portal 

Rules to the extent possible to reflect the 

limited scope of permissible funding 

portal activities while also maintaining 

investor protection.157 FINRA further 

notes that its Funding Portal Rules 

include rules to address fraud and 

standards of commercial honor and just 

and equitable principles of trade 

(Funding Portal Rules 200(a) and 200(b), 

which are explained in more detail 

above).158 In addition, FINRA notes that 


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159See id. at 11. 

160See id. 

161See id. 

162See FINRA Letter at 10. See also Notice, 80 FR 

at 66368–66369. 

163See FINRA Letter at 11. 

164See PIABA Letter at 5–6. 

165See FINRA Letter at 14. 

166See id. 

167See CFIRA Letter at 3. 

168See FINRA Letter at 13. 

169See CFIRA Letter at 3. 

170See FINRA Letter at 13. FINRA cites to its 

Private Placement Frequently Asked Questions 

(FAQ), available at http://www.finra.org/industry/ 

faq-private-placement- frequently-asked-questionsfaq. (‘‘FINRA will not require member firms that 

participate in crowdfunding offerings (under the 

JOBS Act) to make a filing pursuant to Rule 5123.’’). 

171 In approving this rule change, the Commission 

has considered the rule’s impact on efficiency, 

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

78c(f). 

172 15 U.S.C. 78o–3(b)(6). 

173For example, FINRA determined not to 

include a fidelity bond or any AML requirements 

for funding portal members in the proposal despite 

the fact that it had proposed such requirements in 

its initial Regulatory Notice to its members. FINRA 

also determined not to include licensing or 

examination requirements and to include a 

streamlined version of its communications with the 

public requirements. 174See PIABA Letter at 2. See also CFIRA Letter 

at 1 (supporting certain changes that FINRA made 

from the Regulatory Notice as ‘‘reflect[ing] the 

reality that funding portals will have limited 

permissible activities, and these changes are in line 

with creating a cost-efficient marketplace for small 

securities offerings.’’). 175See FINRA Letter at 1 (citing Notice, 80 FR at 

66349). 

Regulation Crowdfunding contains rules 

to addresses investor protection.159

FINRA believes that Regulation 

Crowdfunding and FINRA’s Funding 

Portal Rules, in combination, are robust 

enough to address a wide range of 

potential concerns that may arise from 

conduct by funding portals.160 As an 

example, FINRA indicates that, 

depending on the facts, it may apply 

Funding Portal Rule 200(a) in situations 

in which a funding portal charged a 

commission or fee that is clearly 

unreasonable under the 

circumstances.161 FINRA further notes 

that it will enforce the rules for funding 

portals under Regulation Crowdfunding 

and that it does not intend for its rules 

to duplicate Regulation 

Crowdfunding.162 FINRA also indicates 

that it may impose additional 

requirements on funding portals in the 

future should FINRA determine that 

such requirements are merited based on 

the development of funding portal 

business under applicable rules.163

M. FINRA Manual 

One commenter suggested FINRA 

should require funding portals to make 

a current copy of the FINRA Manual 

available to customers for examination, 

which it requires of broker-dealers 

members.164 In response, FINRA notes 

that it is seeking to streamline the 

requirements for funding portals and, 

therefore, not proposing to apply this 

requirement to such entities.165 FINRA 

indicates, however, that any approved 

Funding Portal Rules will be fully 

available on the FINRA Web site for 

public access.166

N. Broker-Dealers: Rule 4518 

One commenter requested additional 

guidance regarding Rule 4518, which as 

discussed in more detail above, requires 

broker-dealers members to provide a 

notification to FINRA prior to engaging 

in certain crowdfunding transactions or 

within 30 days of entering into certain 

control relationships with a funding 

portal.167 In response, FINRA indicates 

that it will issue a Regulatory Notice 

providing further guidance in this 

area.168

O. Private Placements 

One commenter requested guidance 

regarding whether offerings relying on 

the exemption under Section 4(a)(6) will 

be subject to the filing requirements of 

FINRA Rule 5123.169 In response, 

FINRA states that it will not require that 

members selling securities in such 

offerings to submit filings pursuant to 

FINRA Rule 5123.170

IV. Discussion and Commission 

Findings 

After careful review of the proposed 

rule change, the comment letters, and 

FINRA’s response to the comments, the 

Commission finds that the proposal, as 

modified by Amendment No. 1, is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder that are 

applicable to a national securities 

association.171 Specifically, the 

Commission finds that the rule change 

is consistent with Section 15A(b)(6) of 

the Exchange Act,172 which requires, 

among other things, that FINRA rules 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. 

The Commission received three 

comment letters and FINRA’s response 

to the comment letters. The Commission 

notes the commenters were generally 

supportive of the proposal but had 

suggestions regarding areas where 

certain aspects of the proposal could be 

expanded or further explained. The 

Commission has considered the 

commenters’ suggestions and believes 

that FINRA has responded adequately to 

their concerns and that the rules are 

consistent with the Exchange Act. 

As discussed above, some 

commenters expressed concern that 

FINRA has determined not to impose 

certain requirements that it imposes on 

its broker-dealer members to funding 

portal members.173 Although one of 

these commenters suggested additions 

to FINRA’s funding portal rules, it also 

indicated that it generally supported the 

proposed rules because it ‘‘knows that 

investors need protection against 

unscrupulous brokers, issuers and 

intermediaries in the crowdfunding 

space.’’ 174 In addition, FINRA indicated 

that the rules have been tailored to 

reflect the limited scope of permissible 

activities in which funding portals may 

engage, while also maintaining investor 

protection.175

Taking into consideration the 

comments and FINRA’s response, we 

believe that the proposal is consistent 

with the Exchange Act. In particular, we 

believe that the Funding Portal Rules 

are appropriately designed to take into 

account the limited permissible 

activities of funding portals, while still 

maintaining investor protection. We 

believe that FINRA’s response, as 

discussed in more detail above, 

appropriately addressed the reasons for 

not including certain requirements in 

the proposal. We note that FINRA, in its 

response, indicates that Rule 200(a), 

which requires funding portal members 

to observe high standards of commercial 

honor and just and equitable principles 

of trade in the conduct of their business, 

and Rule 200(b), which prohibits the 

use of manipulative, deceptive or other 

fraudulent devices, may be used to 

address misconduct by funding portals 

not specifically addressed in the rules. 

We also note that FINRA has 

represented that it will monitor how the 

funding portal business develops under 

the rules as well as other rules 

applicable to such entities, and assess 

whether changes to the rules are 

appropriate or necessary. Taken 

together, we believe that this approach 

is appropriate and designed to protect 

investors and the public interest, 

consistent with Section 15A(b)(6) of the 

Exchange Act. 

The Commission also believes that 

FINRA’s response, which is discussed 

in more detail above, appropriately 

addressed the commenter’s concern 

regarding the timing of the proposal. In 

particular, FINRA notes that its rules 

have been in preparation for a 

considerable amount of time with 

public input, and the proposal is 

intended to provide the means for 


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176See FINRA Letter at 2. 

177See Funding Portal Rule 300(c). 

178See Funding Portal Rule 300(c)(4). 

179See 15 U.S.C. 78o–3(b)(6). 

180See 15 U.S.C. 78s(b)(2). 181 15 U.S.C. 78s(b)(2). 

funding portals to become FINRA 

members consistent with the JOBS Act 

and Regulation Crowdfunding.176

In addition, the Commission also 

believes that the proposal is designed to 

provide for an appropriate amount of 

information to be reported to FINRA. 

FINRA stated that its goal is to develop 

rules for funding portal members that 

are tailored to the limited permissible 

activities in which funding portals may 

engage, and to minimize the initial 

potential costs and burdens to the 

development of the funding portal 

business. The Commission believes that 

FINRA’s reporting rules are tailored to 

funding portal activities. For example, 

FINRA’s Funding Portal Rule 300(c) 

requires funding portal members to 

report regulatory proceedings, 

disciplinary and other events.177 The 

rule also requires funding portal 

members to respond to FINRA with 

respect to any investor complaint, 

examination or inquiry,178 and states 

that a funding portal’s reporting 

obligations under SEC rules are not 

abrogated by the FINRA rules. In 

addition, the rule contains a 30 calendar 

day reporting requirement, which 

FINRA believes strikes the appropriate 

balance between prompt regulatory 

reporting for purpose of risk oversight 

and providing firms sufficient time to 

assess reportable events and submit 

complete and accurate reports. The 

Commission believes FINRA’s reporting 

obligations for funding portal members 

are appropriate because a funding 

portal’s permissible business activities 

are limited in scope. 

Further, the Commission believes that 

the proposal is designed to provide for 

an appropriate level of public disclosure 

of information relating to funding 

portals. The Commission notes that 

FINRA indicates that it intends to 

exercise its authority under its rules and 

provide the public with access to a 

funding portal member’s current SEC 

Form Funding Portal through a link to 

the Commission’s Web site. Form 

Funding Portal, which is also publicly 

available through the Commission’s 

EDGAR system, provides certain 

disclosure information about funding 

portals and their associated persons. In 

addition, FINRA stated its intention to 

make public information indicating 

whether the funding portal member or 

any associated person of the funding 

portal member is subject to a statutory 

disqualification event. 

Accordingly, the Commission believes 

that the rule change is reasonably 

designed to 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.179

For the reasons stated above, the 

Commission finds that the rule change, 

as modified by Amendment No. 1, is 

consistent with the Exchange Act and 

the rules and regulations thereunder. 

V. Accelerated Approval of Proposal, as 

Modified by Amendment No. 1 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Exchange Act 180 for approving the 

proposal, as modified by Amendment 

No. 1, prior to the 30th day after 

publication of Amendment No. 1 in the 

Federal Register. 

Amendment No. 1 revised the 

proposal to include ‘‘for purposes of 

FINRA Rule 8210 any other person 

listed in Schedule A of Form Funding 

Portal of a member’’ to the definition of 

‘‘associated person of a funding portal 

member’’ or ‘‘person associated with a 

funding portal member’’ in Funding 

Portal Rule 100(b)(1). This change will 

help to ensure that FINRA is capable of 

using its Rule 8210 authority with 

regard to key persons controlling the 

funding portal. The Commission also 

believes the amendment is consistent 

with FINRA’s obligation in Section 19(g) 

of the Exchange Act to effectively 

enforce its rules. The Commission also 

believes that Amendment No. 1’s 

amended definition of associated person 

does not raise any novel regulatory 

issues because the change more closely 

aligns the definition with the definition 

of associated person applicable to 

FINRA’s broker-dealer members. 

Amendment No. 1 also revised the 

proposal to make technical changes to 

the language of Funding Portal Rules 

300(a)(1)(A), 900(a)(4)(C), 900(a)(4)(F), 

1200(a)(3), 1200(a)(4) and 1200(b)(4)(C). 

The Commission does not believe that 

these changes raise any novel regulatory 

issues, but rather are technical changes 

that do not change the substance of the 

rules. 

Accordingly, the Commission finds 

that good cause exists to approve the 

proposal, as modified by Amendment 

No. 1, on an accelerated basis. 

VI. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the rule change, as 

modified by Amendment No. 1, 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 rulecomments@sec.gov. Please include File 

Number SR–FINRA–2015–040 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Robert W. Errett, Deputy Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2015–040. 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 Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the rule change that are 

filed with the Commission, and all 

written communications relating to the 

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 Web 

site 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; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2015–040, and 

should be submitted on or before 

February 18, 2016. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,181 that the 

rule change (SR–FINRA–2015–040), as 

modified by Amendment No. 1, be, and 

hereby is, approved on an accelerated 

basis. 


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4942 Federal Register / Vol. 81, No. 18 / Thursday, January 28, 2016 / Notices 

182 17 CFR 200.30–3(a)(12). 

1RSL was previously granted authority to lease 

and operate the Line pursuant to a lease agreement 

with NSR. See RSL R.R., LLC—Lease & Operation 

Exemption—Norfolk S. Ry., FD 35754 (STB served 

Aug. 23, 2013). 

2RSL has filed the lease agreement under seal 

pursuant to 49 CFR 1150.43(h)(1)(ii). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.182

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–01672 Filed 1–27–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission Equity Market Structure 

Advisory Committee will hold a public 

meeting on Tuesday, February 2, 2016, 

in the Multipurpose Room, LL–006 at 

the Commission’s headquarters, 100 F 

Street NE., Washington, DC. 

The meeting will begin at 9:30 a.m. 

(EST) and will be open to the public. 

Seating will be on a first-come, firstserved basis. Doors will be open at 9 

a.m. Visitors will be subject to security 

checks. The meeting will be webcast on 

the Commission’s Web site at 

www.sec.gov. 

On January 13, 2016, the Commission 

published notice of the Committee 

meeting (Release No. 34–76883), 

indicating that the meeting is open to 

the public and inviting the public to 

submit written comments to the 

Committee. This Sunshine Act notice is 

being issued because a majority of the 

Commission may attend the meeting. 

The agenda for the meeting will focus 

on the events of August 24, 2015 and 

certain issues affecting customers in the 

current equity market structure. 

For further information, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: January 26, 2016. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2016–01707 Filed 1–26–16; 4:15 pm] 

BILLING CODE 8011–01–P 

SURFACE TRANSPORTATION BOARD 

[Docket No. FD 35990] 

RSL Railroad, LLC—Lease Exemption 

Containing Interchange Commitment— 

Norfolk Southern Railway Company 

RSL Railroad, LLC (RSL), a Class III 

rail carrier, has filed a verified notice of 

exemption under 49 CFR 1150.41 to 

continue to lease and operate a rail line 

from Norfolk Southern Railway 

Company (NSR), known as the South 

Massillon IT (the Line). The Line 

extends between RSL’s existing 

connection with NSR at milepost MT 

1.4, and the proposed future interchange 

with NSR at milepost MT 0.0, in 

Massillon, OH.1

RSL states that NSR and RSL have 

entered into an amendment to their 

prior lease agreement. RSL states that, at 

its request, the amendment modifies the 

lease rental provisions of the lease 

agreement to permit RSL to receive a 

lease credit against its fixed rental 

payment for each revenue carload it 

interchanges with NSR on the Line. RSL 

states that it requested the amendment 

to provide it the ability to earn a lower 

rental payment and to afford it the 

opportunity to invest in improvements 

on the Line to increase traffic levels.2

RSL has certified that its projected 

annual revenues as a result of the 

proposed transaction will not result in 

RSL becoming a Class II or Class I rail 

carrier. RSL has further certified that its 

projected annual rail freight revenues, 

including the line to be operated 

pursuant to this notice, would not 

exceed $5 million. 

The transaction may be consummated 

on or after February 11, 2016, the 

effective date of the exemption (30 days 

after the exemption was filed). 

If the verified notice contains false or 

misleading information, the exemption 

is void ab initio. Petitions to revoke the 

exemption under 49 U.S.C. 10502(d) 

may be filed at any time. The filing of 

a petition to revoke will not 

automatically stay the effectiveness of 

the exemption. Petitions for stay must 

be filed no later than February 4, 2016 

(at least 7 days before the exemption 

becomes effective). 

An original and 10 copies of all 

pleadings, referring to Docket No. FD 

35990, must be filed with the Surface 

Transportation Board, 395 E Street SW., 

Washington, DC 20423–0001. In 

addition, a copy of each pleading must 

be served on Andy A. Ginella, 4096 

Holiday St. NW., Canton, OH 44718. 

According to RSL, this action is 

categorically excluded from 

environmental review under 49 CFR 

1105.6(c). 

Board decisions and notices are 

available on our Web site at 

WWW.STB.DOT.GOV. 

Decided: January 22, 2016. 

By the Board, Rachel D. Campbell, 

Director, Office of Proceedings. 

Kenyatta Clay, 

Clearance Clerk. 

[FR Doc. 2016–01662 Filed 1–27–16; 8:45 am] 

BILLING CODE 4915–01–P 

DEPARTMENT OF THE TREASURY 

Submission for OMB Review; 

Comment Request 

January 25, 2016. 

The Department of the Treasury will 

submit the following information 

collection request to the Office of 

Management and Budget (OMB) for 

review and clearance in accordance 

with the Paperwork Reduction Act of 

1995, Public Law 104–13, on or after the 

date of publication of this notice. 

DATES: Comments should be received on 

or before March 28, 2016 to be assured 

of consideration. 

ADDRESSES: Send comments regarding 

the burden estimate, or any other aspect 

of the information collection, including 

suggestions for reducing the burden, to 

(1) Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: Desk Officer for 

Treasury, New Executive Office 

Building, Room 10235, Washington, DC 

20503, or email at OIRA_Submission@

OMB.EOP.gov and (2) Treasury PRA 

Clearance Officer, 1750 Pennsylvania 

Ave. NW., Suite 8117, Washington, DC 

20220, or email at PRA@treasury.gov. 

FOR FURTHER INFORMATION CONTACT: 

Copies of the submissions may be 

obtained by emailing PRA@treasury.gov, 

calling (202) 622–1295, or viewing the 

entire information collection request at 

www.reginfo.gov. 

SUPPLEMENTARY INFORMATION: 

Alcohol and Tobacco Tax and Trade 

Bureau (TTB) 

OMB Control Number: 1513–0074. 

Type of Review: Extension of a 

currently approved collection. 

Title: Airlines Withdrawing Stock 

from Customs Custody (TTB REC 5620/ 

2). 

Abstract: Airlines may withdraw, 

without payment of tax, distilled spirits 

and wine from their stocks held in 

customs custody at airports for use as 

supplies on aircraft engaged in foreign 

flights. Accounting for withdrawals of 

such products is necessary to protect the 

revenue by detecting and preventing 

diversion of the products into the 

domestic market. The required record 

shows, among other things, the amount 

of spirits and wine withdrawn, flight 

identification, and Customs 


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