Document ID: SEC-2014-1150-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2014-07-10T04:00Z

[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Notices]
[Pages 39440-39442]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16101]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72543; File No. SR-FINRA-2014-031]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Definition of Hearing Officer To 
Include Former FINRA Employees Who Previously Worked as Hearing 
Officers

July 3, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 2, 2014, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend the definition of ``Hearing Officer'' 
to include former employees of FINRA who previously worked as FINRA 
hearing officers.
    Below is the text of the proposed rule change. Proposed new 
language is in italics.
* * * * *

9000. CODE OF PROCEDURE

9100. APPLICATION AND PURPOSE

* * * * *

9120. Definitions

    (a) through (q) No Change.
    (r) ``Hearing Officer''
    The term ``Hearing Officer'' means an employee of FINRA, or former 
employee of FINRA who previously acted as a Hearing Officer, who is an 
attorney and who is appointed by the Chief Hearing Officer to act in an 
adjudicative role and fulfill various adjudicative responsibilities and 
duties described in the Rule 9200 Series regarding disciplinary 
proceedings, the Rule 9550 Series regarding expedited proceedings, the 
Rule 9700 Series relating to grievances concerning FINRA automated 
systems, and the Rule 9800 Series regarding temporary cease and desist 
proceedings brought against members and associated persons.
    (s) through (cc) No Change.
* * * * *

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

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

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

1. Purpose
    FINRA is proposing to amend the definition of Hearing Officer to 
include a former employee of FINRA who is a licensed attorney and who 
is appointed

[[Page 39441]]

by the Chief Hearing Officer. The current rule limits the definition of 
Hearing Officer to current FINRA employees. The proposed rule would 
permit the Chief Hearing Officer to appoint a former employee of FINRA 
who previously acted as a Hearing Officer to act in an adjudicative 
role and fulfill the various adjudicative responsibilities and duties 
of a Hearing Officer described in the Code of Procedure.
    The former employees appointed by the Chief Hearing Officer would 
be experienced, licensed attorneys who previously acted in the same 
adjudicative role and fulfilled the same adjudicative responsibilities 
and duties for FINRA. As a former employee acting and defined as a 
Hearing Officer, he or she would be subject to the same FINRA rules 
that address the impartiality of Hearing Officers and the fairness of 
disciplinary and expedited proceedings as a current Hearing Officer. 
These include, but are not limited to, the rules prohibiting a party 
from making ex parte communications to a Hearing Officer,\3\ 
prohibiting FINRA's enforcement attorneys who are litigating a case, 
among others, from advising a Hearing Officer,\4\ and the requirement 
that a Hearing Officer not have a conflict of interest or bias.\5\
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    \3\ Rule 9143 (Ex Parte Communications).
    \4\ Rule 9144 (Separation of Functions).
    \5\ Rule 9233 (Hearing Panel or Extended Hearing Panel: Recusal 
and Disqualification of Hearing Officers). For temporary cease-and-
desist matters, a former employee appointed as a Hearing Officer 
would be subject to the provisions on conflict of interest, bias, 
and motions for disqualification contained in Rule 9820 (Appointment 
of Hearing Officer and Hearing Panel).
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    By permitting former employees of FINRA to act as Hearing Officers, 
the Chief Hearing Officer would be able to take advantage of the 
expertise of former Hearing Officers who remain well-versed in the 
typical securities law violations that are resolved in FINRA 
disciplinary proceedings. Therefore, the Chief Hearing Officer would be 
better equipped to fulfill the adjudicative responsibilities and duties 
described in the Code of Procedure, including appointing Hearing 
Officers for expedited proceedings, if the need arises. The Chief 
Hearing Officer also would have greater flexibility to allocate 
resources to the cases pending before the Office of Hearing Officers.
    As noted in Item 2 of this filing, FINRA has filed the proposed 
rule change for immediate effectiveness and has requested that the SEC 
waive the requirement that the proposed rule change not become 
operative for 30 days after the date of the filing so FINRA can 
implement the proposed rule change immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general to protect investors and the 
public interest. FINRA believes that the proposed rule change also will 
promote efficiency because it would enable the Chief Hearing Officer to 
rely on experienced, former employees if the need arises. It is in the 
public interest, and consistent with the Act's purpose, that FINRA 
disciplinary allegations be timely resolved and that well-timed 
sanctions be imposed where necessary to redress customer harm and deter 
future misconduct.
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    \6\ 15 U.S.C. 78o-3(b)(6).
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    FINRA also believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(8) of the Act,\7\ which requires, 
among other things, that FINRA rules provide a fair procedure for the 
disciplining of members and persons associated with members. FINRA 
believes that the adjudicative process will remain fair, consistent 
with the Act, because the former employees appointed by the Chief 
Hearing Officer will be experienced, licensed attorneys who previously 
acted in the same adjudicative role and fulfilled the same adjudicative 
responsibilities and duties for FINRA. The former employees also would 
be subject to the same rules in the Code of Procedure as current 
Hearing Officers with respect to prohibited communications, independent 
advice, conflicts of interest, and bias. These important safeguards of 
procedural fairness will remain intact under the proposed rule change. 
By allowing former employees to act as Hearing Officers, the proposed 
rule change will afford the Chief Hearing Officer additional 
flexibility to rely on the wealth of experience that former FINRA 
Hearing Officers accumulated during their tenure as Hearing Officers. 
Former Hearing Officers are thoroughly familiar with the Code of 
Procedure and the procedural rules and practices that apply to bringing 
a case to a hearing. The proposed rule change will allow FINRA to draw 
on past experience in maintaining fair proceedings in disciplinary 
matters.
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    \7\ 15 U.S.C. 78o-3(b)(8).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
    The former employees of FINRA appointed by the Chief Hearing 
Officer would be experienced, licensed attorneys who previously acted 
in the same adjudicative role and fulfilled the same adjudicative 
responsibilities and duties for FINRA. By permitting former employees 
of FINRA to act as Hearing Officers, the proposed rule change would 
promote greater efficiency with respect to adjudicatory proceedings and 
flexibility for the Chief Hearing Officer appointing Hearing Officers 
for these proceedings.
    The proposed rule change would apply to all disciplinary and other 
adjudicatory proceedings, so all parties in these proceedings after 
implementation of the proposed rule change would be affected, if at 
all, in the same way.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

[[Page 39442]]

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2014-031 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2014-031. 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 proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for 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 
a.m. and 3 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-2014-031 and should be 
submitted on or before July 31, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-16101 Filed 7-9-14; 8:45 am]
BILLING CODE 8011-01-P