Document ID: SEC-2020-2128-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2020-12-30T05:00Z

[Federal Register Volume 85, Number 250 (Wednesday, December 30, 2020)]
[Notices]
[Pages 86600-86603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28808]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90780; File No. SR-NASDAQ-2020-091]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Extend the Effective Date of the Temporary Amendments Concerning 
Exchange Rule 1.1210 From December 31, 2020, to April 30, 2021

December 22, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 17, 2020, The Nasdaq Stock Market LLC 
(``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the effective date of the temporary 
amendments set forth in SR-NASDAQ-2020-073 from December 31, 2020, to 
April 30, 2021. Due to the impacts of COVID-19 on the administration of 
the Financial Industry Regulatory Authority, Inc. (``FINRA'') 
qualification examinations at test centers, SR-NASDAQ-2020-073 extended 
the 120-day period that certain individuals can function as a principal 
without having successfully passed an appropriate qualification 
examination through December 31, 2020.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to extend the effective date of the temporary 
amendments set forth in SR-NASDAQ-2020-073 from December 31, 2020, to 
April 30, 2021. The proposed rule change would extend the 120-day 
period that certain individuals can function as a principal without 
having successfully passed an appropriate qualification examination 
through April 30, 2021,\3\ and would apply only to those individuals 
who were designated to function as a principal prior to January 1, 
2021. This proposed rule change is based on filings recently submitted 
by FINRA \4\ and is intended to harmonize the Exchange's registration 
rules with those of FINRA so as to promote uniform standards across the 
securities industry.
---------------------------------------------------------------------------

    \3\ If the Exchange seeks to provide additional temporary relief 
from the rule requirements identified in this proposed rule change 
beyond April 30, 2021, the Exchange will submit a separate rule 
filing to further extend the temporary extension of time.
    \4\ See Exchange Act Release No. 89732 (September 1, 2020), 85 
FR 55535 (September 8, 2020) (SR-FINRA-2020-026) and Exchange Act 
Release No. 90617 (December 9, 2020), 85 FR 81258 (December 15, 
2020) (SR-FINRA-2020-043) (collectively, the ``FINRA Filings''). The 
Exchange notes that the FINRA Filings also provide temporary relief 
to individuals registered with FINRA as Operations Professionals 
under FINRA Rule 1220. The Exchange does not have a registration 
category for Operations Professionals and therefore, the Exchange is 
not proposing to adopt that aspect of the FINRA Filings.
---------------------------------------------------------------------------

    In response to COVID-19, earlier this year FINRA began providing 
temporary relief by way of frequently asked questions (``FAQs'') \5\ to 
address disruptions to the administration of

[[Page 86601]]

FINRA qualification examinations caused by the pandemic that have 
significantly limited the ability of individuals to sit for 
examinations due to Prometric test center capacity issues.\6\
---------------------------------------------------------------------------

    \5\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
    \6\ At the outset of the COVID-19 pandemic, all FINRA 
qualification examinations were administered at test centers 
operated by Prometric. Based on the health and welfare concerns 
resulting from COVID-19, in March Prometric closed all of its test 
centers in the United States and Canada and began to slowly reopen 
some of them at limited capacity in May. At this time, not all of 
these Prometric test centers have reopened at full capacity.
---------------------------------------------------------------------------

    FINRA published the first FAQ on March 20, 2020, providing that 
individuals who were designated to function as principals under FINRA 
Rule 1210.04 \7\ prior to February 2, 2020, would be given until May 
31, 2020, to pass the appropriate principal qualification 
examination.\8\ On May 19, 2020, FINRA extended the relief to pass the 
appropriate examination until June 30, 2020. On June 29, 2020, FINRA 
again extended the temporary relief providing that individuals who were 
designated to function as principals under FINRA Rule 1210.04 prior to 
May 4, 2020, would be given until August 31, 2020, to pass the 
appropriate principal qualification examination.
---------------------------------------------------------------------------

    \7\ Exchange Rule 1.1210.04 is the corresponding rule to FINRA 
Rule 1210.04.
    \8\ FINRA Rule 1210.04 (Requirements for Registered Persons 
Functioning as Principals for a Limited Period) allows a member firm 
to designate certain individuals to function in a principal capacity 
for 120 calendar days before having to pass an appropriate principal 
qualification examination. Exchange Rule 1.1210.04 provides the same 
allowance to members.
---------------------------------------------------------------------------

    On October 29, 2020, the Exchange filed with the Commission a 
proposed rule change for immediate effectiveness to adopt temporary 
Supplementary Material .13 (Temporary Extension of the Limited Period 
for Registered Persons to Function as Principals) under Exchange Rule 
1.1210 of General 4 (Registration Requirements).\9\ Pursuant to this 
rule filing, individuals who were designated prior to September 3, 
2020, to function as a principal under Exchange Rule 1.1210.04 have 
until December 31, 2020, to pass the appropriate qualification 
examination.
---------------------------------------------------------------------------

    \9\ See Exchange Act Release No. 90359 (November 5, 2020), 85 FR 
71979 (November 12, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NASDAQ-2020-073).
---------------------------------------------------------------------------

    The COVID-19 conditions necessitating the extension of relief 
provided in SR-NASDAQ-2020-073 persist and in fact appear to be 
worsening.\10\ One of the impacts of COVID-19 continues to be serious 
interruptions in the administration of FINRA qualification examinations 
at Prometric test centers and the limited ability of individuals to sit 
for the examinations.\11\ Although Prometric has been reopening its 
test centers, Prometric's safety practices mean that currently not all 
test centers are open, some of the open test centers are at limited 
capacity, and some open test centers are delivering only certain 
examinations that have been deemed essential by the local 
government.\12\ Furthermore, Prometric has had to close some reopened 
test centers due to incidents of COVID-19 cases. The initial nationwide 
closure in March along with the inability to fully reopen all Prometric 
test centers due to COVID-19 have led to a significant backlog of 
individuals who are waiting to sit for FINRA examinations that are not 
available online.\13\
---------------------------------------------------------------------------

    \10\ See, e.g., Meryl Kornfield, Jacqueline Dupree, Marisa Iati, 
Paulina Villegas, Siobhan O'Grady and Hamza Shaban, New daily 
coronavirus cases in U.S. rise to 145,000, latest all-time high, 
Wash. Post, November 11, 2020, https://www.washingtonpost.com/nation/2020/11/11/coronavirus-covid-live-updates-us/.
    \11\ Information about the continued impact of COVID-19 on 
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
    \12\ Information from Prometric about its safety practices and 
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus-update. See also supra note 11.
    \13\ Earlier this year, an online test delivery service was 
launched for candidates seeking to take qualification examinations 
remotely. Only certain qualification examinations are available 
online. See supra note 11. FINRA is considering making additional 
qualification examinations available remotely on a limited basis.
---------------------------------------------------------------------------

    In addition, firms are continuing to experience operational 
challenges with much of their personnel working from home due to 
shelter-in-place orders, restrictions on businesses and social activity 
imposed in various states, and adherence to other social distancing 
guidelines consistent with the recommendations of public health 
officials.\14\ As a result, firms continue to face potentially 
significant disruptions to their normal business operations that may 
include a limitation of in-person activities and staff absenteeism as a 
result of the health and welfare concerns stemming from COVID-19. Such 
potential disruptions may be further exacerbated, and may even affect 
client services, if firms cannot continue to keep principal positions 
filled, as they may have difficulty finding other qualified individuals 
to transition into these roles or may need to reallocate employee time 
and resources away from other critical responsibilities at the firm.
---------------------------------------------------------------------------

    \14\ See, e.g., Centers for Disease Control and Prevention, How 
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
---------------------------------------------------------------------------

    These ongoing, extenuating circumstances make it impracticable for 
members to ensure that the individuals whom they have designated to 
function in a principal capacity, as set forth in Exchange Rule 
1.1210.04, are able to successfully sit for and pass an appropriate 
qualification examination within the 120-calendar day period required 
under the rule, or to find other qualified staff to fill this position. 
The ongoing circumstances also require individuals to be exposed to the 
health risks associated with taking an in-person examination, because 
the General Securities Principal examination is not available online. 
Therefore, the Exchange is proposing to extend the effective date of 
the temporary relief provided through SR-NASDAQ-2020-073 until April 
30, 2021. The proposed rule change would apply only to those 
individuals who were designated to function as a principal prior to 
January 1, 2021. Any individuals designated to function as a principal 
on or after January 1, 2021, would need to successfully pass an 
appropriate qualification examination within 120 days.
    The Exchange believes that this proposed continued extension of 
time is tailored to address the needs and constraints on a member's 
operations during the COVID-19 pandemic, without significantly 
compromising critical investor protection. The proposed extension of 
time will help to minimize the impact of COVID-19 on members by 
providing continued flexibility so that members can ensure that 
principal positions remain filled. The potential risks from the 
proposed extension of the 120-day period are mitigated by the member's 
continued requirement to supervise the activities of these designated 
individuals and ensure compliance with federal securities laws and 
regulations, as well as Exchange rules.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\16\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to, and perfect the mechanism of, a 
free and open market and a national market system and, in

[[Page 86602]]

general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule change is intended to minimize the impact of 
COVID-19 on member operations by further extending the 120-day period 
certain individuals may function as a principal without having 
successfully passed an appropriate qualification examination under 
Exchange Rule 1.1210.04 until April 30, 2021. The proposed rule change 
does not relieve members from maintaining, under the circumstances, a 
reasonably designed system to supervise the activities of their 
associated persons to achieve compliance with applicable securities 
laws and regulations, and with applicable Exchange rules that directly 
serve investor protection. In a time when faced with unique challenges 
resulting from the COVID-19 pandemic, the Exchange believes that the 
proposed rule change is a sensible accommodation that will continue to 
afford members the ability to ensure that critical positions are filled 
and client services maintained, while continuing to serve and promote 
the protection of investors and the public interest in this unique 
environment.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. As set forth in SR-NASDAQ-
2020-073, the proposed rule change is intended to provide temporary 
relief given the impacts of the COVID-19 pandemic crisis and to also 
maintain consistency with the rules of other self-regulatory 
organizations (``SROs'') with respect to the registration requirements 
applicable to members and their registered personnel. In that regard, 
the Exchange believes that any burden on competition would be clearly 
outweighed by providing members with temporary relief in this unique 
environment while also ensuring clear and consistent requirements 
applicable across SROs and mitigating any risk of SROs implementing 
different standards in these important areas. In its filing, FINRA 
provides an abbreviated economic impact assessment maintaining that the 
changes are necessary to temporarily rebalance the attendant benefits 
and costs of the obligations under FINRA Rule 1210 in response to the 
impacts of the COVID-19 pandemic that is equally applicable to the 
changes the Exchange proposes.\17\ The Exchange accordingly 
incorporates FINRA's abbreviated economic impact assessment by 
reference.
---------------------------------------------------------------------------

    \17\ See supra note 4.
---------------------------------------------------------------------------

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

    No written comments were either solicited or 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 \18\ and Rule 19b-
4(f)(6) thereunder.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. As noted 
above, the Exchange stated that the proposed extension of time will 
help minimize the impact of the COVID-19 outbreak on members' 
operations by allowing them to keep principal positions filled and 
minimizing disruptions to client services and other critical 
responsibilities. The Exchange further stated that the ongoing 
extenuating circumstances of the COVID-19 pandemic make it impractical 
to ensure that individuals designated to act in these capacities are 
able to take and pass the appropriate qualification examination during 
the 120-calendar day period required under the rules. The Exchange also 
explained that shelter-in-place orders, quarantining, restrictions on 
business and social activity and adherence to social distancing 
guidelines consistent with the recommendations of public officials 
remain in place in various states.\20\ In addition, the Exchange 
observed that, following a nationwide closure of all test centers 
earlier in the year, some test centers have re-opened, but are 
operating at limited capacity or are only delivering certain 
examinations that have been deemed essential by the local 
government.\21\ Although, as the Exchange noted, FINRA has launched an 
online test delivery service to help address this backlog, the General 
Securities Principal (Series 24) Examination is not available 
online.\22\ Nevertheless, the Exchange explained that the proposed rule 
change will provide needed flexibility to ensure that these positions 
remain filled and is tailored to address the constraints on members' 
operations during the COVID-19 pandemic without significantly 
compromising critical investor protection.\23\
---------------------------------------------------------------------------

    \20\ See supra note 14.
    \21\ See supra notes 11 and 12. The Exchange states that 
Prometric has also had to close some reopened test centers due to 
incidents of COVID-19 cases.
    \22\ See supra note 13. FINRA is considering making additional 
qualification examinations available remotely on a limited basis.
    \23\ The Exchange states that members remain subject to the 
continued requirement to supervise the activities of these 
designated individuals and ensure compliance with federal securities 
laws and regulations, as well as Nasdaq rules.
---------------------------------------------------------------------------

    The Commission observes that the Exchange's proposal, like the 
FINRA Filings on which it is based,\24\ provides only an extension to 
temporary relief from the requirement to pass certain qualification 
examinations within the 120-day period in the rules. As proposed, this 
relief would extend the 120-day period that certain individuals can 
function as principals through April 30, 2021. If a further extension 
of temporary relief from the rule requirements identified in this 
proposal beyond April 30, 2021 is required, the Exchange noted that it 
may submit a separate rule filing to extend the effectiveness of the 
temporary relief under these rules.\25\ For these reasons, the 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\26\ Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\27\
---------------------------------------------------------------------------

    \24\ See supra note 4.
    \25\ See supra note 3.
    \26\ As noted above by Nasdaq, this proposal is an extension of 
temporary relief provided in a prior filing where Nasdaq also 
requested and the Commission granted a waiver of the 30-day 
operative delay. See supra note 9, 85 FR at 71981-82.
    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

---------------------------------------------------------------------------

[[Page 86603]]

    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.

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-NASDAQ-2020-091 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-NASDAQ-2020-091. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of Nasdaq. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2020-091 and should be submitted 
on or before January 21, 2021.
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2020-28808 Filed 12-29-20; 8:45 am]
BILLING CODE 8011-01-P