Document ID: SEC-2018-2000-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2018-12-27T05:00Z

[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Notices]
[Pages 66828-66830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28005]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84855; File No. SR-FINRA-2018-041]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Make Technical Revisions and One Minor 
Correction to the Supplemental Statement of Income Required To Be Filed 
Pursuant to FINRA Rule 4524 (Supplemental FOCUS Information)

December 19, 2018.
    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 December 12, 2018, 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 and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing a rule change to make technical revisions and 
one minor correction to the Supplemental Statement of Income (``SSOI'') 
required to be filed pursuant to FINRA Rule 4524 (Supplemental FOCUS 
Information). The technical revisions would conform the SSOI with 
amendments to SEC Form X-17A-5 (the ``FOCUS Report'') that the SEC has 
adopted.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

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

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any

[[Page 66829]]

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 Rule 4524 (Supplemental FOCUS Information) requires each 
member, as FINRA shall designate, to file such additional financial or 
operational schedules or reports as FINRA may deem necessary or 
appropriate for the protection of investors or in the public interest 
as a supplement to filing FOCUS reports. FINRA implemented the SSOI 
pursuant to Rule 4524 in 2012.\4\
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    \4\ See Regulatory Notice 12-11 (Supplemental FOCUS Information) 
(February 2012) (announcing the SEC's approval of Rule 4524 and the 
SSOI). See also Securities Exchange Act Release No. 66364 (February 
9, 2012), 77 FR 8938 (February 15, 2012) (Notice of Filing of 
Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, Adopting FINRA 
Rule 4524 (Supplemental FOCUS Information) and Proposed 
Supplementary Schedule to the Statement of Income (Loss) Page of 
FOCUS Reports; File No. SR-FINRA-2011-064) and Securities Exchange 
Act Release No. 67257 (June 26, 2012), 77 FR 39313 (July 2, 2012) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Make Non-Substantive Technical Changes to the Supplemental 
Statement of Income Required To Be Filed Pursuant to FINRA Rule 4524 
(Supplemental FOCUS Information); File No. SR-FINRA-2012-033).
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    On August 17, 2018, the SEC adopted amendments that simplify and 
update, among other rules and forms, certain of the FOCUS reporting 
requirements for brokers and dealers and make changes to the annual 
audit requirements.\5\ The SEC's amendments update Parts II, IIA, and 
IIB of the FOCUS Report to reflect updated U.S. Generally Accepted 
Accounting Principles (``U.S. GAAP'') requirements.\6\ More 
specifically, the amendments revise the Statement of Financial 
Condition and the Statement of Income in the FOCUS Reports to include 
new line items added for the reporting of comprehensive income or loss, 
including other comprehensive income and accumulated other 
comprehensive income or loss. The amendments update line items to 
eliminate references to extraordinary gains or losses and the 
cumulative effect of changes in accounting principles.
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    \5\ See Securities Exchange Act Release No. 83875 (August 17, 
2018), 83 FR 50148 (October 4, 2018) (Final Rule: Disclosure Update 
and Simplification) (the SEC's Adopting Release). To facilitate 
members in their financial reporting obligations, FINRA issued 
Regulatory Notice 18-38 to announce updates to the FINRA eFOCUS 
System designed to correspond with the new FOCUS requirements and to 
inform members of the effective date of the new requirements 
pursuant to specified relief granted by the staff of the SEC 
Division of Trading and Markets. See Regulatory Notice 18-38 
(Financial Reporting Requirements) (November 2018); see also letter 
from Michael A. Macchiaroli, Associate Director, Division of Trading 
and Markets, SEC, to Ann Duguid, Senior Director, FINRA, dated 
(October 29, 2018).
    \6\ See, for example, the SEC's Adopting Release at 83 FR 50179, 
50182 and 50183.
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    FINRA is proposing technical revisions that would conform the SSOI 
with the SEC's amendments to the FOCUS Report. FINRA believes that 
conforming the SSOI with the FOCUS Report is consistent with the 
Commission's goal of eliminating redundant, duplicative, overlapping, 
outdated, or superseded requirements,\7\ without significantly altering 
the information available to regulators. Because the SSOI is intended 
to provide more detailed information about a member's revenues and 
expenses reported on the FOCUS Report, making the two forms consistent 
would enable members to file the same information on both forms with 
respect to comprehensive income, extraordinary items, and the effect of 
changes in accounting principles. As such, the proposed revisions 
should create clarity and reduce burdens for members, thereby assisting 
members in their financial reporting obligations and facilitating 
investor protection. Specifically, FINRA proposes to make the following 
changes to the SSOI: \8\
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    \7\ See the SEC's Adopting Release at 83 FR 50150. See also 
Section 72002 of the Fixing America's Surface Transportation Act, 
Public Law 114-94, 29 Stat. 1312 (2015) (mandating that the SEC 
revise Regulation S-K to eliminate provisions that are duplicative, 
overlapping, outdated, or unnecessary).
    \8\ The SSOI as amended pursuant to the proposed rule change is 
included as Exhibit 3 to this filing.
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     Delete SSOI line 14224 (``Extraordinary gains (losses)'') 
and SSOI line 14225 (``Cumulative effect of changes in accounting 
principles'') to conform with the elimination of references to 
extraordinary gains or losses and to the cumulative effect of changes 
in accounting principles in the FOCUS Report;
     delete the phrase ``and extraordinary item'' from SSOI 
line 14230 (``Net income (loss) after Federal income taxes and 
extraordinary item''), again to conform with the elimination of 
references to extraordinary gains or losses in the FOCUS Report;
     add new SSOI line 14226 (``Other comprehensive income 
(loss)'') and new SSOI line 14228 (``Comprehensive income (loss)'') to 
conform with the addition of correspondingly titled new lines in the 
FOCUS Report;
     amend the title of Section 19 of the SSOI, and the 
associated header that precedes Section 19, to read ``Net Income/
Comprehensive Income'' to conform with and correspond to the reporting 
of comprehensive income in the FOCUS Report; and
     amend the General Instructions and the Specific 
Instructions to the SSOI to conform with the above deletions, additions 
and amendments, as appropriate, with respect to SSOI lines 14224, 
14225, 14226, 14228 and 14230, and the header to and title of Section 
19.
    In addition, FINRA proposes to make a minor correction to Section 3 
(Revenue from Sale of Insurance Based Products) under the Specific 
Instructions to the SSOI.\9\
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    \9\ Specifically, FINRA proposes to delete the extra period that 
appears at the end of the instructions to Line 11022 (Aggregate 
amount if less than the greater of $5,000 or 5% of Total Revenue).
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    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be March 31, 2019, for SSOI filings that 
report on the period January 1 through March 31, 2019, and are due by 
April 26, 2019. Thus, all SSOIs filed on or after March 31, 2019 would 
reflect the proposed rule change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ 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 would 
further the purposes of the Act because, as discussed in Section 
II.A.1. of this filing, consistent with the Commission's goal of 
eliminating redundant, duplicative, overlapping, outdated, or 
superseded requirements, without significantly altering the information 
available to regulators, the proposed rule change, by conforming the 
SSOI with the FOCUS Report, would create clarity and reduce burdens for 
members, thereby assisting members in their financial reporting 
obligations and facilitating investor protection.
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    \10\ 15 U.S.C. 78o-3(b)(6).
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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. FINRA

[[Page 66830]]

believes that, by conforming the SSOI with the FOCUS Report, the 
proposed rule change is consistent with the Commission's goal of 
eliminating redundant, duplicative, overlapping, outdated, or 
superseded requirements and does not significantly alter the 
information available to regulators. As such, FINRA believes the 
proposed rule change will create clarity and reduce burdens for 
members, thereby reducing burdens on the marketplace and facilitating 
investor protection.

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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. FINRA has 
asked the Commission to waive the 30-day operative delay so that FINRA 
may implement the proposed rule change to more closely coincide with 
the effective date of the Commission's amendments to the FOCUS Report. 
The Commission does not believe that the proposed change presents any 
new or novel issues, and that making the SSOI consistent with the FOCUS 
Report will reduce burdens for FINRA members by enabling them to file 
the same information on both forms with respect to comprehensive 
income, extraordinary items, and the effect of changes in accounting 
principles, thereby assisting members in their financial reporting 
obligations and facilitating investor protection. Accordingly, waiver 
of the operative delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposal operative upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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.

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-2018-041 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2018-041. 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 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. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
FINRA-2018-041 and should be submitted on or before January 17, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28005 Filed 12-26-18; 8:45 am]
BILLING CODE 8011-01-P