Document ID: SEC-2015-1662-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2015-10-15T04:00Z

[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62137-62139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26157]

[[Page 62137]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76105; File No. SR-FINRA-2015-022]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA 
Rule 2210 (Communications With the Public)

October 8, 2015.

I. Introduction

    On June 29, 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 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend FINRA Rule 2210, Communications With the 
Public. The proposed rule change was published for comment in the 
Federal Register on July 13, 2015.\3\ The Commission received nine 
comment letters on the proposed rule change \4\ and a response to the 
comments from FINRA.\5\ On August 13, 2015, FINRA extended the time 
period for Commission action on this proposed rule change to October 9, 
2015. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75377 (July 7, 
2015), 80 FR 40092 (``Notice'').
    \4\ See letters from David Neuman, Israels Neuman PLC, dated 
July 29, 2015 (``Neuman Letter''); Robert C. Port, Gaslowitz Frankel 
LLC, dated August 1, 2015 (``Gaslowitz Letter''); William Beatty, 
President, North American Securities Administrators Association, 
Inc., dated August 3, 2015 (``NASAA Letter''); David T. Bellaire, 
Executive Vice President & General Counsel, Financial Services 
Institute, dated August 3, 2015 (``FSI Letter''); Dorothy Donohue, 
Deputy General Counsel--Securities Regulation, Investment Company 
Institute, dated August 3, 2015 (``ICI Letter''); Elissa Germaine, 
Supervising Attorney and Jill Gross, Director, Pace Investor Rights 
Clinic, Pace Law School, dated August 3, 2015 (``PIRC Letter''); 
Melissa MacGregor, Managing Director and Associate General Counsel, 
Securities Industry and Financial Markets Association, dated August 
3, 2015 (``SIFMA Letter''); Joseph C. Peiffer, President, Public 
Investors Arbitration Bar Association, dated August 3, 2015 (``PIABA 
Letter''); and Sutherland Asbill & Brennan LLP on behalf of the 
Committee of Annuity Insurers, dated August 3, 2015 (``CAI 
Letter'').
    \5\ See letter from Jeanette Wingler, Assistant General Counsel, 
FINRA, dated September 21, 2015 (``FINRA Letter'').
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II. Description of the Proposed Rule Change

    FINRA proposes to amend Rule 2210 to require each of its member's 
Web sites to include a readily apparent reference and hyperlink to 
BrokerCheck \6\ on: (i) The initial Web page that the member intends to 
be viewed by retail investors; and (ii) any other Web page that 
includes a professional profile of one or more registered persons who 
conducts business with retail investors. These requirements would not 
apply to a member that does not provide products or services to retail 
investors, or to a directory or list of registered persons limited to 
names and contact information.
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    \6\ BrokerCheck provides the public with information on the 
professional background, business practices, and conduct of FINRA 
members and their associated persons. The information that FINRA 
releases through BrokerCheck is derived from the Central 
Registration Depository (``CRD''), the securities industry online 
registration and licensing database.
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III. Comment Letters

    Commenters generally support FINRA's proposal.\7\ As discussed 
below, some commenters recommend that the proposal be expanded and 
include additional requirements, and some request additional guidance 
regarding the application of the proposal.
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    \7\ See Neuman Letter; Gaslowitz Letter; ICI Letter at 1 and 3; 
SIFMA Letter at 1; PIRC Letter at 1; NASAA Letter at 1; FSI Letter 
at 1; and PIABA Letter at 1.
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Requests for Additional Requirements

    Some commenters state that FINRA should require a reference and 
hyperlink to BrokerCheck in members' and registered persons' emails and 
account statements to customers.\8\ In its response letter, FINRA 
states that it did not propose these requirements because at this time 
FINRA believes such requirements would be overly burdensome and require 
significant system and operational changes without commensurate 
benefits.\9\ Some commenters state that FINRA should require firms to 
include BrokerCheck links on certain third party Web sites.\10\ In 
response, FINRA states that it recognizes the difficulties and costs 
associated with including links on third-party Web sites, and therefore 
has determined to limit the application of the proposed rule to 
members' Web sites at this time.\11\ However, FINRA notes that it will 
continue to monitor investors' awareness and use of BrokerCheck and 
consider whether to pursue further rulemaking.\12\
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    \8\ See Neuman Letter and PIRC Letter at 1-2. See also NASAA 
Letter at 2.
    \9\ See FINRA Letter at 3.
    \10\ See PIRC Letter at 1-2; NASAA Letter at 2; and PIABA Letter 
at 1-2. But see, e.g., SIFMA Letter at 2 and FSI Letter at 1 (both 
supporting the exclusion of third-party Web sites).
    \11\ See FINRA Letter at 3.
    \12\ See id.
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    Some commenters state that FINRA should require deep links to 
firms' and individuals' BrokerCheck reports.\13\ In response, FINRA 
states while it has determined not to include deep links at this time, 
most investors should be able to find information concerning particular 
members and registered representatives without difficulty given the 
ease of operation of the BrokerCheck search feature.\14\ FINRA also 
states that, while the proposed rule does not require deep links, it 
does not prohibit members from using deep links.\15\
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    \13\ See PIRC Letter at 1; NASAA Letter at 1-2; and PIABA Letter 
at 1. But see, e.g., FSI Letter at 3 (supporting the exclusion of 
deep links).
    \14\ See FINRA Letter at 2.
    \15\ See id.
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    Finally, some commenters note that BrokerCheck excludes certain 
information that is currently available on the CRD system, and state 
that investors should be able to view all relevant information that is 
available in the CRD system.\16\ FINRA notes that these comments are 
outside the scope of the current proposal, but that it regularly 
assesses the BrokerCheck program and may consider including additional 
information in BrokerCheck at a later time.\17\
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    \16\ See Neuman Letter; PIRC Letter at 2; and PIABA Letter at 2.
    \17\ See FINRA Letter at 3-4.
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Requests for Additional Guidance

    Two commenters seek guidance regarding the interpretation of the 
term ``readily apparent'' as used the proposed rule, including whether 
placing the link to BrokerCheck in a Web site's footer would satisfy 
the ``readily apparent'' requirement.\18\ One commenter seeks guidance 
regarding the placement of the BrokerCheck reference and hyperlink on 
Web sites that are optimized for mobile devices.\19\ One commenter 
requests confirmation that ``readily apparent reference'' is not meant 
to be an extensive disclosure and that a firm can simply reference the 
term BrokerCheck without any accompanying disclosure.\20\ Another 
commenter seeks confirmation that language such as ``check the 
background of an investment professional'' would satisfy the proposed 
rule's ``reference'' requirement.\21\ In its response letter, FINRA 
states that it is unable to provide specific guidance regarding what 
constitutes a readily apparent reference and hyperlink given the wide 
variety of Web pages that its members maintain.\22\

[[Page 62138]]

FINRA states, however, that it generally does not believe that 
including the reference and hyperlink in a footer would satisfy the 
``readily apparent'' standard.\23\ In addition, FINRA notes that 
members have flexibility as to the location of the BrokerCheck 
reference and hyperlink on Web sites that are optimized for mobile 
devices, so long as they are readily apparent.\24\ Moreover, FINRA 
states that it anticipates that the readily apparent reference to 
BrokerCheck would be brief.\25\
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    \18\ See SIFMA Letter at 3 and FSI Letter at 4.
    \19\ See SIFMA Letter at 3.
    \20\ See CAI Letter at 2-3.
    \21\ See SIFMA Letter at 3.
    \22\ See FINRA Letter at 6.
    \23\ See id. FINRA states that members should adopt the 
perspective of a reasonable retail investor when making a 
determination regarding the reference and hyperlink. FINRA states 
that some of the factors that members should consider include 
placement, font size, and font color. See id. at 6-7.
    \24\ See id. at 7.
    \25\ See id. at 6.
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    One commenter seeks confirmation that, for firms that choose to 
provide the BrokerCheck link through an icon or button similar to that 
used by FINRA, such use would be a permissible use of any trademark or 
related intellectual property owned by FINRA.\26\ In response, FINRA 
states that it anticipates making BrokerCheck-related icons or similar 
resources available to members as one option for complying with the 
proposed rule, but use of any such icons or similar resources by 
members would be subject to FINRA's terms and conditions for use.\27\
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    \26\ See SIFMA Letter at 3.
    \27\ See FINRA Letter at 7.
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    One commenter seeks clarification regarding the application of the 
proposed rule to Web sites maintained by independent contractor 
registered representatives.\28\ In its response letter, FINRA states 
that it expects member firms to supervise and review for compliance Web 
sites operated by a registered representative that promote the business 
of the member and, that for purposes of Rule 2210, views such Web sites 
to be Web sites of the member firm.\29\
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    \28\ See SIFMA Letter at 3-4. See also FSI Letter at 3-4 (asking 
whether the client-facing Web site of a financial advisor engaged in 
an independent contractor relationship with its broker-dealer would 
be considered a ``member Web site'' or a third-party Web site under 
the proposal).
    \29\ See FINRA Letter at 4. See also letter to Gordon S. 
Macklin, President, National Association of Securities Dealers, Inc. 
from Douglas Scarff, Director, Division of Market Regulation, dated 
June 18, 1982, regarding the status of ``independent contractors.''
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    One commenter seeks confirmation that, for multi-faceted financial 
institutions, the link to BrokerCheck should be placed on the homepage 
of the broker-dealer member firm as opposed to the enterprise-level 
homepage,\30\ as well as clarification that the term ``initial Web page 
that the member intends to be viewed by retail investors'' applies only 
to the main or primary homepage of a member firm, and not to any 
``micro-sites'' or other sites maintained by the member firm.\31\ With 
respect to multi-faceted financial institutions, FINRA states that the 
proposed rule would apply to the affiliated broker-dealer's main Web 
page but not to the enterprise-level homepage.\32\ With respect to 
micro-sites, FINRA states that if a micro-site acts solely as a conduit 
to the member's main Web site that includes a readily apparent 
reference and hyperlink to BrokerCheck, then FINRA generally would not 
require a separate hyperlink and reference to BrokerCheck on the micro-
site. Otherwise, the proposed rule would require a separate hyperlink 
and reference to BrokerCheck on the initial Web page of the micro-site 
that the member intends to be viewed by retail investors.\33\
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    \30\ See also CAI Letter at 2 (requesting confirmation that, 
where a broker-dealer does not maintain its own independent Web site 
(as is often the case with respect to insurance-affiliated broker-
dealers), the BrokerCheck link would not be required on the broker-
dealer affiliate's main Web page, but rather on the first Web page 
in which the broker-dealer is identified).
    \31\ See SIFMA Letter at 4.
    \32\ See FINRA Letter at 4.
    \33\ See id. at 5.
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    One commenter seeks additional guidance on the treatment of Web 
pages of registered persons and/or branch offices under the 
proposal.\34\ In response, FINRA states that, if a separate retail Web 
site has been established for a branch office or branch office 
personnel, then such a Web site would be treated as a separate Web site 
of the member and would require a separate hyperlink and reference to 
BrokerCheck.\35\ On the other hand, if only a sub-page of the member's 
Web site was established for the branch office or branch office 
personnel, then such a Web page would not be treated as a separate Web 
site of the member.\36\ Moreover, FINRA confirms that hyperlinks and 
references to BrokerCheck would be required for all Web pages where a 
registered person's profile information appears, including Web pages on 
the member's Web site and Web pages on a branch office's Web site.\37\
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    \34\ See CAI Letter at 2 (noting that including the BrokerCheck 
link on the initial page of the branch Web site would be helpful to 
investors; however, the current proposal is unclear on how to treat 
additional pages of a branch office Web site and, in certain 
circumstances, requiring a BrokerCheck link on all possible Web 
pages where a branch office registered person's profile information 
appears could result in redundant and ineffective disclosure).
    \35\ See FINRA Letter at 5.
    \36\ See id. at 5-6.
    \37\ See id. at 6.
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    One commenter requests guidance regarding the application of the 
proposed rule to third-party Web sites that contain professional 
profiles of financial advisors that engage in a networking relationship 
with these third parties, such as Web sites owned and operated by 
credit unions and other non-FINRA members.\38\ In response, FINRA notes 
that the proposed rule does not require hyperlinks and references to 
BrokerCheck on third-party Web sites and, therefore, the proposed rule 
would not apply to third party Web sites that contain the professional 
profiles of registered representatives who engage in networking or 
similar relationships with the third party.\39\
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    \38\ See FSI Letter at 4. See also SIFMA Letter at 4 (seeking 
clarification regarding the application of the proposed rule to Web 
sites of non-member firms who are parties to a networking or other 
similar arrangement with a member firm).
    \39\ See FINRA Letter at 5.
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    One commenter requests that FINRA promulgate a Regulatory Notice to 
provide interpretive guidance or responses to frequently asked 
questions, accompanied by a succinct reiteration of what information is 
and is not disclosed through BrokerCheck.\40\ In response, FINRA states 
that its Web site provides readily available information regarding the 
information disclosed through BrokerCheck.\41\ This commenter also 
requests a limited safe harbor for links to BrokerCheck that are broken 
as a result of script or programming issues that would permit a 
reasonable amount of time to respond to any link maintenance 
issues.\42\ FINRA acknowledges that links occasionally may fail, but 
does not believe that the requested relief is necessary or warranted at 
this time.\43\ Rather, FINRA would consider all of the facts and 
circumstances surrounding any such failures.\44\
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    \40\ See SIFMA Letter at 2-3.
    \41\ See FINRA Letter at 4.
    \42\ See SIFMA Letter at 4.
    \43\ See FINRA Letter at 7.
    \44\ See id.
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    One commenter requests a 12-month implementation period for the 
proposal.\45\ In its response letter, FINRA recognizes that members 
would be required to identify the Web pages that would need to be 
updated, determine where to place the references and hyperlinks within 
the Web pages, and test and deploy the updated Web site. FINRA stated 
that it will consider the need for system and operational changes

[[Page 62139]]

in establishing the effective date for the proposed rule change.\46\
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    \45\ See FSI Letter at 4.
    \46\ See FINRA Letter at 7.
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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 proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder that are applicable to 
a national securities association.\47\ Specifically, the Commission 
finds that the proposed rule change is consistent with Section 
15A(b)(6) of the Act,\48\ 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 proposed 
rule change, by requiring a hyperlink to BrokerCheck on members' Web 
sites is designed to increase investors' awareness and use of 
BrokerCheck. BrokerCheck is an important tool for investors to use to 
help them make informed choices about the individuals and firms with 
which they conduct business.\49\ The Commission believes that the 
requirement for the hyperlink to BrokerCheck to be readily apparent 
should make it easy for investors to find and use BrokerCheck. The 
Commission appreciates FINRA's continuing efforts to enhance 
BrokerCheck and encourages FINRA to continue improving it and to 
consider the suggestions made by commenters that could result in 
increased use of BrokerCheck by the investing public.
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    \47\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \48\ 15 U.S.C. 78o-3(b)(6).
    \49\ The Commission encourages investors to utilize all sources 
of information, including the databases of state regulators, as well 
as legal search engines and records searches to conduct a thorough 
search of any associated person or firm with which they are 
considering doing business. See also Securities Exchange Act Release 
No. 62476 (July 8, 2010), 75 FR 41254 (July 15, 2010) (SR-FINRA-
2010-012).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\50\ that the proposed rule change (SR-FINRA-2015-022) be, and 
hereby is, approved.
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    \50\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\51\
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    \51\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26157 Filed 10-14-15; 8:45 am]
BILLING CODE 8011-01-P