Document ID: SEC-2021-1186-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2021-09-02T04:00Z

[Federal Register Volume 86, Number 168 (Thursday, September 2, 2021)]
[Notices]
[Pages 49394-49399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18945]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92793; File No. SR-FINRA-2021-020]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Form CMA (Continuing Membership 
Application Form)

August 27, 2021.
    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 August 20, 2021, the 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 to (1) amend Form CMA (Continuing Membership 
Application Form) required under Rule 1017 (Application for Approval of 
Change in Ownership, Control, or Business Operations) to conform to 
amendments to the Membership Application Program (``MAP'') rules \4\ as 
described in File No. SR-FINRA-2020-011, which become effective on 
September 1, 2021; \5\ and (2) make non-substantive and technical 
changes to Form CMA.\6\ The proposed rule change does not make any 
changes to the text of FINRA rules.
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    \4\ The MAP rules consist of Rules 1011 through 1019, which 
reside under the Rule 1000 Series (Member Application and Associated 
Person Registration).
    \5\ See Securities Exchange Act Release No. 90635 (December 10, 
2020), 85 FR 81540 (December 16, 2020) (Order Approving File No. SR-
FINRA-2020-011, as Modified by Amendment No. 1) (``SEC Order''). See 
also Regulatory Notice 21-09 (March 2021) (announcing September 1, 
2021, as the effective date of the amendments to the MAP rules, and 
different effective dates of the amendments to other FINRA rules to 
address brokers with a significant history of misconduct).
    \6\ FINRA is separately developing comprehensive changes to the 
MAP rules in connection with the retrospective review of this rule 
set, which will also require conforming amendments to the 
standardized forms. See Regulatory Notice 18-23 (July 2018) 
(requesting comment on a proposal regarding the MAP rules).
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    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 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
Background
    The MAP rules require an applicant for continuing membership to 
file an application that includes a Form CMA.\7\ Form CMA is organized 
into sections that align with the standards for admission set forth in 
Rule 1014(a) (Standards for Admission). Each section begins with a 
description of the applicable standard in Rule 1014(a), followed by a 
series of questions related to that standard that are intended to help 
the applicant provide the responses needed to demonstrate that it

[[Page 49395]]

can meet each of the standards described under Rule 1014(a), and to 
facilitate FINRA's review of the application.\8\ An applicant is able 
to provide its documents and information by attaching files in various 
formats (e.g., .docx, .pdf, .xlsx) or by entering free form text in 
text boxes, and making selections through screen components such as 
drop-down menus and radio buttons, among others.
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    \7\ See Rule 1017(b)(2).
    \8\ The sections of Form CMA that are marked with a red asterisk 
require the applicant to provide a response.
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Recent Amendments to the MAP Rules
    On December 10, 2020, FINRA amended the MAP rules, among other 
FINRA rules, to address the issue of persons with a significant history 
of misconduct and the member firms that employ them.\9\ As amended, 
Rule 1017 includes new paragraph (a)(7), which requires a member to 
file a continuing member application (``CMA'') whenever a natural 
person seeking to become an owner,\10\ control person,\11\ principal or 
registered person of a member has, in the prior five years, one or more 
``final criminal matters'' (as defined in new Rule 1011(h) \12\) or two 
or more ``specified risk events'' (as defined in new Rule 1011(p) 
\13\), and the member is not otherwise required to file a Form CMA in 
accordance with Rule 1017, unless the member has submitted a written 
request to FINRA seeking a materiality consultation for such 
contemplated activity. As part of the materiality consultation, Rule 
1017(a)(7) also provides that FINRA will determine in the public 
interest and the protection of investors that either the member is not 
required to file a Form CMA and may effect the contemplated activity, 
or the member is required to file a Form CMA in accordance with Rule 
1017 and the member may not effect the contemplated activity unless 
FINRA approves the Form CMA. In addition, Rule 1017(a)(7) provides that 
Interpretative Material (``IM'')-1011-1 (Safe Harbor for Business 
Expansions) is not available to the member when a materiality 
consultation is required under Rule 1017(a)(7).\14\
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    \9\ See supra note 5.
    \10\ For purposes of Rule 1017(a)(7) only, the term ``owner'' 
has the same meaning as ``direct owner'' and ``indirect owner'' on 
the Uniform Application for Broker-Dealer Registration (``Form BD'') 
Schedules A and B, as amended from time to time. See Rule 
1017(a)(7).
    \11\ For purposes of Rule 1017(a)(7), the term ``control 
person'' means a person who would have ``control'' as defined on 
Form BD, as amended from time to time. See Rule 1017(a)(7).
    \12\ See paragraph (h) under Rule 1011 (defining ``final 
criminal matter'') as amended by SR-FINRA-2020-011, supra note 5.
    \13\ See paragraph (p) under Rule 1011 (defining ``specified 
risk event'') as amended by SR-FINRA-2020-011, supra note 5. See 
also Securities Exchange Act Release No. 92710 (August 19, 2021) 
(Order Approving File No. SR-FINRA-2021-011) (amendment to the 
``specified risk event'' definition).
    \14\ Relatedly, new IM-1011-3 (Business Expansions and Persons 
with Specified Risk Events) provides that IM-1011-1 is not available 
to any member that is seeking to add a natural person who has, in 
the prior five years, one or more final criminal matters or two or 
more specified risk events and seeks to become an owner, control 
person, principal, or registered person of the member. In general, 
IM-1011-1 creates a safe harbor for specified categories of business 
expansions, subject to certain thresholds, that a member may undergo 
without filing a CMA.
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Proposed Conforming Amendments to Form CMA
    As a result of the recent amendments to the MAP rules, FINRA is 
proposing to amend Form CMA to: (1) List in the section of the form 
entitled ``Type of Continuing Membership Application'' all of the 
events under Rule 1017(a) that require a member to file Form CMA; (2) 
incorporate questions into Form CMA that relate specifically to Rule 
1017(a)(7); and (3) make other non-substantive and technical changes in 
the form for clarity and consistency, and to promote efficiency. FINRA 
believes that these proposed conforming changes to Form CMA and the 
non-substantive and technical changes will help guide an applicant to 
provide the responses needed to demonstrate that it can meet the 
standards set forth under Rule 1014(a), and to facilitate FINRA's 
review of the application in light of the recent admendments to the MAP 
rules.

A. Amend Form CMA's ``Type of Continuing Membership Application'' 
Section To List All of the Events Specified in Paragraphs (a)(1) 
Through (a)(7) Under Rule 1017

    As noted above, Form CMA is organized into sections that correspond 
to the standards for admission set forth in Rule 1014(a), with each 
section containing its own set of questions, some of which are 
mandatory, related to that particular standard for admission.\15\ But 
before an applicant proceeds with completing those sections, Form CMA 
requests the applicant to identify all applicable types of changes in 
ownership, control, or business operations in the section titled, 
``Type of Continuing Membership Application.'' This section currently 
bears two headers that categorize some Rule 1017(a) events as either 
``Ownership of asset transfer changes,'' covering the events described 
under Rule 1017(a)(1) through Rule 1017(a)(4), or ``Change(s) in 
business operations,'' covering the events described under Rule 
1017(a)(5).\16\ Currently, Form CMA's ``Type of Continuing Membership 
Application'' section presents the events under Rule 1017(a)(1) through 
Rule 1017(a)(5), some of which appear in a summary fashion, without 
rule references.\17\ FINRA is proposing to amend this section of Form 
CMA so that all the events described under Rule 1017(a), including 
those set forth in paragraphs (a)(6) and (a)(7), and their respective 
rule references would be listed in the form. In addition, FINRA is 
proposing to delete the two headers--``Ownership of asset transfer 
changes'' and ``Change(s) in business operations''--for clarity and to 
facilitate presenting the events under Rule 1017(a)(1) through 
1017(a)(7) sequentially.
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    \15\ See supra note 8.
    \16\ Rule 1017(a)(5) provides that a member shall file a CMA for 
approval of a ``material change in business operations,'' which is 
defined in Rule 1011(m). Currently on Form CMA, the ``Change(s) in 
business operations'' category lists five options that an applicant 
may select to further identify the type of material change involved. 
Three of those options correspond to changes that are set forth in 
subparagraphs (1), (2) and (3) under the definition of ``material 
change in business operations'' in Rule 1011(m). A fourth option 
describes an expansion of Associated Persons, offices, or number of 
markets made. A fifth ``other'' option also is included because the 
definition of ``material change in business operations'' is not 
exhaustive. See generally paragraph (m) under Rule 1011 as amended 
by SR-FINRA-2020-011 (renumbering from paragraph (l) to paragraph 
(m)), supra note 5; IM-1011-1; Rule 1017(b)(2)(C).
    \17\ For example, Rule 1017(a)(1) provides that a CMA is 
required for ``a merger of the member with another member, unless 
both are members of the New York Stock Exchange, Inc. or the 
surviving entity will continue to be a member of the New York Stock 
Exchange, Inc[.]'' Form CMA, in the Type of Continuing Membership 
Application section, summarizes this event as ``Merger of the member 
with another member.'' In another example, while Rule 1017(a)(2) 
states that a CMA is required for ``a direct or indirect acquisition 
by the member of another member, unless the acquiring member is a 
member of the New York Stock Exchange, Inc.[,]'' Form CMA summarizes 
such event as a ``[d]irect or indirect acquisition by the member of 
another member.'' Except for one technical change pertaining to the 
event that corresponds to Rule 1017(a)(3), FINRA is not proposing to 
change the descriptions of Rule 1017(a)(1) through Rule 1017(a)(5) 
as they currently appear in Form CMA.
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    Specifically, the proposed changes to Form CMA's ``Type of 
Continuing Membership Application'' section would add the following 
three types of changes in ownership, control, or business operations 
that an applicant may select, as applicable, with references to the 
corresponding provisions in Rule 1017(a)(6) \18\ and (a)(7):
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    \18\ FINRA recently made changes to Form CMA to account for Rule 
1017(a)(6). See Securities Exchange Act Release No. 89867 (September 
15, 2020), 85 FR 58404 (September 18, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-028).

[[Page 49396]]

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    [square] Any direct or indirect acquisition or transfer of a 
member's assets or any asset, business or line of operation where 
the transferring member or an Associated Person of the transferring 
member has a ``covered pending arbitration claim,'' an unpaid 
arbitration award or an unpaid settlement related to an arbitration 
(FINRA Rule 1017(a)(6)(A))
    [square] Business expansion to add one or more Associated 
Persons involved in sales and one or more of those Associated 
Persons has a ``covered pending arbitration claim,'' an unpaid 
arbitration award or an unpaid settlement related to an arbitration 
(FINRA Rule 1017(a)(6)(B))
    [square] Natural person seeks to become an owner, control 
person, principal or registered person of a member and has, in the 
prior five years, one or more ``final criminal matters'' or two or 
more ``specified risk events'' (FINRA Rule 1017(a)(7))

    These proposed conforming changes to this section of Form CMA will 
list all of the events under Rule 1017(a). Additionally, the specific 
references on Form CMA to the applicable subsections of Rule 1017 will 
give applicants clarity about which events require them to submit Form 
CMA to FINRA for approval.

B. Incorporate Questions To Conform Form CMA to Rule 1017(a)(7)

    Rule 1017(i) provides that in rendering a decision on a CMA, FINRA 
must consider whether the applicant and its associated persons meet 
each of the standards in Rule 1014(a). FINRA is proposing to amend two 
sections in Form CMA, which are ``Standard 1: Overview of the 
Applicants,'' corresponding to Rule 1014(a)(1) (``Standard 1''), and 
``Standard 3: Compliance with securities laws, just and equitable 
principles of trade,'' corresponding to Rule 1014(a)(3) (``Standard 
3''). FINRA believes that these proposed changes would conform Form CMA 
to, and are necessary to effectively account for, Rule 1017(a)(7). The 
proposed amendments to Form CMA are described in further detail below.
1. Form CMA's ``Standard 1: Overview of the Applicants'' Section
    Standard 1 requires FINRA to determine whether the application and 
all supporting documents are complete and accurate. Form CMA's Standard 
1 section has several questions that, in general, focus on 
understanding the circumstances surrounding the contemplated change or 
event set forth under Rule 1017(a), and are intended to elicit from the 
applicant the information necessary for FINRA to assess whether 
Standard 1 is met. For example, the applicant is required to provide a 
complete description of the contemplated change, the persons or 
entities that will become associated or affiliated with the applicant 
as a result of the contemplated change, and to the extent applicable, a 
description of the liabilities that will not be included in a transfer 
of assets or a line of business.\19\
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    \19\ See generally Exhibit 3 (Form CMA, Standard 1, Questions 1, 
2, and 3, within the category titled ``Overview of the proposed 
change'').
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    FINRA is proposing to add several new questions to this section 
that would require the applicant to provide information necessary to 
support compliance with Rule 1017(a)(7). These proposed questions are 
intended to collect the necessary information in an efficient manner, 
as further explained below.
    Proposed new Question 5 would require, as marked by the asterisk, 
the applicant to provide a ``yes'' or ``no'' answer to the following 
question:

    5. Is this application required because the Applicant seeks to 
add a natural person as an owner, control person, principal or 
registered person who, in the prior five years, has one or more 
``final criminal matters'' or two or more ``specified risk events'' 
(as defined in FINRA Rule 1011)?* (As Rule 1017(a)(7) provides, the 
term ``owner'' has the same meaning as ``direct owner'' and 
``indirect owner'' on Form BD Schedules A and B, as amended from 
time to time, and the term ``control person'' means a person who 
would have ``control'' as defined on Form BD, as amended from time 
to time.)

If the applicant's answer to proposed Question 5 is ``yes,'' proposed 
Question 5.a. would prompt the applicant to identify in a chart, for 
each ``final criminal matter'' or ``specified risk event,'' the subject 
party, that person's CRD number, and, if the matter or event has not 
been reported on a Uniform Registration Form, a description of the 
nature of the activity, any findings, any fine or other 
dispositions.\20\ Specifically, proposed Question 5.a. would ask: \21\
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    \20\ See Exhibit 3 (Form CMA, Standard 1, chart accompanying 
Proposed Question 5.a., within the category titled ``Overview of the 
proposed change''). This proposed chart would be similar to how 
members, when submitting a request for a materiality consultation 
pursuant to Rule 1017(a)(7), would need to provide information about 
individuals' ``final criminal matters'' and ``specified risk 
events.'' See Rule 1017(a)(7) (providing that the member's written 
request for a materiality consultation ``must address the issues 
that are central to the materiality consultation''); Securities 
Exchange Act Release No. 88600 (April 8, 2020), 85 FR 20745, 20753 
(April 14, 2020) (Notice of Filing of File No. SR-FINRA-2020-011) 
(explaining that a member submitting a request for a materiality 
consultation would need to provide information relating to the 
individuals' ``final criminal matters'' and ``specified risk 
events'').
    \21\ The following quoted material includes references to the 
Uniform Application for Securities Industry Registration or Transfer 
(``Form U4''), the Uniform Termination Notice for Securities 
Industry Registration (``Form U5''), the Uniform Disciplinary Action 
Reporting Form (``Form U6''), and the Central Registration 
Depository (``CRD'').

    a. If the answer to Question 5 is ``yes,'' for each ``final 
criminal matter'' or ``specified risk event,'' if the matter or 
event has been reported on a Uniform Registration Form (i.e., Forms 
U4, U5, U6, BD), please provide the subject party and that person's 
CRD number. If the matter or event has not been reported on a 
Uniform Registration Form, please also provide a description of the 
nature of the activity, any findings, any fine or other 
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dispositions.

If the applicant's answer to proposed Question 5 is ``no,'' the 
applicant would not be prompted to answer proposed Question 5.a.
    The proposed conforming changes to Standard 1 of Form CMA are 
intended to collect necessary information efficiently. Proposed 
Question 5.a. would reduce the burden on firms to provide FINRA with 
duplicate information by not requiring applicants to describe each 
``final criminal matter'' or ``specified risk event'' that was already 
described on a Uniform Registration Form. Thus, if the matter or event 
has already been reported on a Uniform Registration Form, the applicant 
would only need to provide the subject party and that person's CRD 
number. If the matter or event has not been reported on a Uniform 
Registration Form, the applicant also would be required to provide a 
description of the nature of the activity, any findings, any fine or 
other dispositions, to support compliance with Rule 1017(a)(7). 
Further, requiring firms to provide the subject party's CRD number 
would facilitate FINRA's coordination of information entered on Form 
CMA with information that has been entered on a Uniform Registration 
Form or provided in a related materiality consultation, and thus enable 
FINRA to more efficiently monitor for compliance with Rule 1017(a)(7).
    Form CMA's Standard 1 section also requests the applicant to 
provide information on contemplated changes in direct ownership and 
indirect ownership. For example, the applicant is currently prompted to 
provide, as applicable, the proposed direct or indirect owner's CRD 
number, name, roles, the date the role was acquired, the person's 
ownership percentage, and whether the person is a ``control person,'' 
among other information. Rule 1017(a)(7) applies when a natural person 
seeking to become an ``owner'' or ``control person'' (among other 
roles) has, in the prior five years, ``one or more final criminal 
matters or two or more specified risk events.'' Rule 1017(a)(7) further 
provides that, for purposes of

[[Page 49397]]

Rule 1017(a)(7), the term ``owner'' has the same meaning as ``direct 
owner'' and ``indirect owner'' on Form BD Schedules A and B, as amended 
from time to time. To conform with Rule 1017(a)(7), FINRA is proposing 
to add a question about whether the contemplated direct or indirect 
owner of the applicant is a ``FINRA Rule 1017(a)(7) Person (i.e. , 
whether such person has one or more `final criminal matters' or two or 
more `specified risk events' in the prior five years).'' \22\
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    \22\ Member firms also would identify these direct and indirect 
owners in materiality consultations pursuant to Rule 1017(a)(7). See 
Rule 1017(a)(7) (providing that a written request for a materiality 
consultation ``must address the issues that are central to the 
materiality consultation''); Securities Exchange Act Release No. 
88600 (April 8, 2020), 85 FR 20745, 20753 (April 14, 2020) (Notice 
of Filing of File No. SR-FINRA-2020-011) (explaining that a member 
submitting a request for a materiality consultation would need to 
provide information relating to the subject person), supra note 20.
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2. Form CMA's ``Standard 3: Compliance with securities laws, just and 
equitable principles of trade'' Section
    Standard 3 requires FINRA to determine whether an applicant and its 
associated persons ``are capable of complying with'' the applicable 
securities laws and regulations, and with applicable FINRA rules. 
Standard 3 sets forth several factors, including past and current 
disciplinary actions and customer claims, that FINRA must consider in 
making that determination. The existence of certain factors that 
``[raise] a question of capacity to comply with the federal securities 
laws and the rules of [FINRA]'' results in a rebuttable presumption to 
deny the application.\23\ In general, Form CMA's Standard 3 section 
currently includes questions that require an applicant to indicate 
whether it or any of its associated persons are subject to any of the 
specified factors described in Standard 3, direct the applicant to 
provide additional information about those factors, require the 
applicant to explain, even with the existence of the specified factors, 
how it will be able to comply with applicable securities laws and 
regulations and with applicable FINRA rules, ask arbitration-related 
questions, and prompt the applicant to provide supporting 
documents.\24\
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    \23\ See Notice to Members 04-10 (February 2004) (announcing 
amendments to Rules 1011, 1014, and 1017); and Rule 1017(i) (setting 
forth the events that create a rebuttable presumption to deny a 
CMA).
    \24\ See generally Form CMA, Standard 3, Questions 1, 2, 3, and 
4 (within the category titled ``Explain how this Standard is 
met.''). In 2020, some questions in Form CMA's Standard 3 section 
underwent adjustments to align with the arbitration-related 
amendments to the MAP rules as described in File No. SR-FINRA-2019-
030. See supra note 18.
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    FINRA is proposing to add new questions to Form CMA's Standard 3 
section for the same reason that FINRA is proposing new questions to 
Form CMA's Standard 1 section, which is to require the applicant to 
provide information necessary to support compliance with Rule 
1017(a)(7). These proposed questions are intended to collect the 
necessary information in an efficient manner, as further explained 
below.
    FINRA is proposing to add new Question 5 to Form CMA's Standard 3 
section, using language similar to proposed Question 5 in Form CMA's 
Standard 1 section. A similar question in Form CMA's Standard 3 section 
is needed because information concerning a person described in Rule 
1017(a)(7) would be relevant to a CMA filed pursuant to other 
subparagraphs of Rule 1017(a).\25\ Specifically, proposed Question 5 
would require the applicant to provide a ``yes'' or ``no'' answer to 
the following:
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    \25\ Rule 1017(a)(7) requires a member to file a CMA only when 
``the member is not otherwise required to file a Form CMA in 
accordance with Rule 1017.''

    5. Does this application propose to add a natural person as an 
owner, control person, principal or registered person who, in the 
prior five years, has one or more ``final criminal matters'' or two 
or more ``specified risk events''?* See FINRA Rule 1017(a)(7). (For 
purposes of Rule 1017(a)(7), the term ``owner'' has the same meaning 
as ``direct owner'' and ``indirect owner'' on Form BD Schedules A 
and B, as amended from time to time, and the term ``control person'' 
means a person who would have ``control'' as defined on Form BD, as 
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amended from time to time.)

If the applicant answers ``yes,'' the applicant would then be asked in 
proposed Question 5.a. whether the information was provided above in 
the section concerning Standard 1, Question 5.a. If the answer to 
Standard 3, Question 5.a. is ``yes,'' then the applicant would not be 
required to complete Question 5.b. If the answer to Standard 3, 
Question 5.a. is ``no,'' then the applicant would be required to 
respond to proposed Question 5.b.:

    b. If the answer to Question 5.a. is ``no,'' for each ``final 
criminal matter'' or ``specified risk event,'' if the matter or 
event has been reported on a Uniform Registration Form (i.e., Forms 
U4, U5, U6, BD), please provide the subject party and that person's 
CRD number. If the matter or event has not been reported on a 
Uniform Registration Form, please also provide a description of the 
nature of the activity, any findings, any fine or other 
dispositions.

The applicant would be able to provide the information requested in 
proposed Question 5.b. in a chart identical to the chart proposed to 
follow Question 5.a. in Form CMA's Standard 1 section.\26\
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    \26\ See Exhibit 3 (Form CMA, Standard 3, chart accompanying 
Proposed Question 5.b., within the category titled ``Explain how 
this Standard is met'').
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    The proposed conforming changes to Standard 3 of Form CMA are 
intended to collect necessary information efficiently. Proposed 
Questions 5.a. and 5.b. and the accompanying chart to Form CMA's 
Standard 3 section would reduce the burden on firms to provide FINRA 
with duplicate information already provided earlier on Form CMA or 
separately in a Uniform Registration Form. If the matter or event has 
already been described in Form CMA's Standard 1 section, the applicant 
would be able to cross-reference that description. If the matter or 
event was not already described in Form CMA's Standard 1 section but 
was already reported on a Uniform Registration Form, the applicant 
would only need to provide the subject party and that person's CRD 
number. If the matter or event has not been reported in Form CMA's 
Standard 1 section or on a Uniform Registration Form, the applicant 
would also be required to provide a description of the nature of the 
activity, any findings, any fine or other dispositions, to support 
compliance with Rule 1017(a)(7). Further, requiring firms to provide a 
CRD number would enable FINRA to facilitate FINRA's coordination of 
information entered on Form CMA with information that has been entered 
on a Uniform Registration Form or provided in a related materiality 
consultation, and therefore enable FINRA to more efficiently gather 
relevant information.

C. Other Proposed Non-Substantive, Technical Amendments to Form CMA

    FINRA is also proposing several non-substantive, technical changes 
to Form CMA. First, FINRA is proposing to include in Form CMA's 
Standard 1 section and Standard 3 section a reminder to the applicant 
that, ``[e]very Form U4 shall be kept current at all times by 
supplementary amendments to the original Form U4. See FINRA By-Laws, 
Art. V, Sec. 2(c).'' Form U4 is one of the ``Uniform Registration 
Forms,'' as defined by amendments to the MAP rules.\27\ Second, FINRA 
is proposing to amend Form CMA's ``Type of Continuing Membership 
Application'' section to change ``comprising'' to

[[Page 49398]]

``composing'' to match the language used in Rule 1017(a)(3).\28\
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    \27\ See paragraph (r) under Rule 1011 (defining ``Uniform 
Registration Forms'') as amended by SR-FINRA-2020-011, supra note 5.
    \28\ See Rule 1017(a)(3) (requiring, in pertinent part, a member 
to file an application for approval of ``direct or indirect 
acquisitions or transfers of 25 percent or more in the aggregate of 
the member's assets or any asset, business or line of operation that 
generates revenues composing 25 percent or more in the aggregate of 
the member's earnings measured on a rolling 36-month basis'') 
(Emphasis added).
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    Finally, FINRA is proposing to add within Form CMA's Standard 1 
section new Questions 4.a., 4.b. and 4.c that would efficiently collect 
the information needed to monitor for compliance with Rule 1017(a)(6). 
Proposed Questions 4.a. and 4.b. would ask the applicant to indicate 
whether the CMA is required under Rule 1017(a)(6)(A) or Rule 
1017(a)(6)(B), respectively.\29\ If the applicant answers ``yes'' to 
either question, then proposed Question 4.c. would prompt the applicant 
to list, for each covered pending arbitration claim, unpaid arbitration 
award, or unpaid settlement related to an arbitration, the subject 
party and that person's CRD number in a chart. FINRA believes that 
adding these proposed questions and the accompanying chart to Form 
CMA's Standard 1 section would efficiently collect the information 
needed to monitor for compliance with Rule 1017(a)(6).\30\ The proposed 
questions would also achieve parity with the manner FINRA is proposing 
to elicit information needed to monitor for compliance with Rule 
1017(a)(7). Additionally, proposed Question 4 would allow FINRA to 
readily coordinate information entered on Form CMA with information 
that may have been entered on a Uniform Registration Form or provided 
in a materiality consultation.
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    \29\ See generally Exhibit 3 (Form CMA, Standard 1, proposed 
Questions 4, 4.a., 4.b., 4.c. and accompanying chart, within the 
category titled ``Overview of the proposed change'').
    \30\ The requested information is similar to the information 
that member firms would provide in a materiality consultation 
pursuant to Rule 1017(a)(6). See Rule 1017(a)(6)(A) and (B) 
(providing that the written request for a materiality consultation 
``must address the issues that are central to the materiality 
consultation''); see also Checklist for Mandatory Materiality 
Consultations Under Rule 1017(a)(6), https://www.finra.org/rules-guidance/guidance/materiality-consultation-process/checklist-under-rule-1017a6 (providing guidance to firms to provide, among other 
things, the name, title and CRD number of associated persons with a 
covered pending arbitration claim, unpaid arbitration award or 
unpaid settlement related to an arbitration).
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    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 on 
September 1, 2021, to coincide with the effective date of the 
amendments to the MAP rules as announced in Regulatory Notice 21-
09.\31\ The proposed changes to Form CMA conform to the recently 
amended MAP rules. To facilitate member firm compliance with the 
amended rules on the date they become effective, it is necessary for 
the amendments to Form CMA to become effective on the same date.
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    \31\ FINRA notes that the proposed rule change would impact all 
members, including members that have elected to be treated as 
capital acquisition brokers (``CABs''), given that CAB Rule 116 
(Application for Approval of Change in Ownership, Control, or 
Business Operations) incorporates, by reference, Rule 1017, which 
requires that a member's application for approval of changes to its 
ownership, control, or business operations include a Form CMA. See 
Rule 1017(b)(2).
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2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\32\ 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.
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    \32\ 15 U.S.C. 78o-3(b)(6).
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    The proposed changes to Form CMA will conform the form to the 
amendments to Rule 1017(a)(7), as described in the SEC Order. The 
proposed changes to Form CMA will also help ensure that applicants for 
continuing membership provide the information and documentation to 
produce a complete application package for FINRA's review.

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's recent amendments to 
the MAP rules, which specify additional events that require a CMA for 
FINRA's approval, necessitate conforming changes to the sections of 
Form CMA pertaining to the type of CMA, Standard 1 and Standard 3. The 
proposed conforming changes--i.e., listing in Form CMA's ``Type of 
Continuing Membership Application'' section all of the events under 
Rule 1017(a) that require a member to file Form CMA, and incorporating 
in Form CMA's Standard 1 and Standard 3 sections questions that would 
require the applicant to provide information about an individual's 
``final criminal matters'' and ``specified risk events'' that is 
necessary to support compliance with Rule 1017(a)(7)--are derived from, 
and effectuate, recent amendments to the MAP rules concerning persons 
with a significant history of misconduct and the broker-dealers that 
employ them, as described in the SEC Order. In addition, the proposed 
changes to Form CMA's Standard 1 section pertaining to Rule 1017(a)(6) 
would efficiently collect the information needed to monitor for 
compliance with that rule in the same manner that FINRA proposes to 
collect information needed to monitor for compliance with Rule 
1017(a)(7). FINRA considered and discussed the potential economic 
impact of the recent amendments in File No. SR-FINRA-2020-011, 
including the burden imposed on some applicants to seek a materiality 
consultation with FINRA, and noted the potential requirement to file a 
Form CMA and certain associated costs.\33\ FINRA believes that the 
proposed conforming changes to Form CMA and the proposed technical 
changes described herein would not result in new material economic 
effects.
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    \33\ See Securities Exchange Act Release No. 88600 (April 8, 
2020), 85 FR 20745, 20755-62 (April 14, 2020) (Notice of Filing of 
File No. SR-FINRA-2020-011).
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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 \34\ and Rule 19b-
4(f)(6) thereunder.\35\
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    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\36\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has requested 
that the Commission waive the 30-day operative delay requirement so 
that the proposed rule change may become operative on September 1, 
2021. The Commission hereby grants the request. The

[[Page 49399]]

Commission finds that the proposed changes to Form CMA conform to the 
recently amended MAP rules.\37\ The Commission therefore finds that the 
proposed rule change is consistent with the goals set forth by the 
Commission when it approved amendments to the MAP rules as described in 
File No. SR-FINRA-2020-011, which become effective on September 1, 
2021.\38\ The Commission finds that waiving the 30-day operative delay 
would facilitate firm compliance with the amended MAP rules on the date 
they become effective.\39\ Therefore, the Commission believes it is 
consistent with the protection of investors and the public interest to 
waive the 30-day operative delay requirement. Therefore the Commission 
designates the proposed rule change as operative on September 1, 2021.
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    \36\ 17 CFR 240.19b-4(f)(6)(iii).
    \37\ See supra note 5.
    \38\ Id.
    \39\ Similarly, the Commission finds that the non-substantive 
and technical changes to Form CMA are consistent with the protection 
of investors and the public interest.
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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-2021-020 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-2021-020. 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-2021-020 and 
should be submitted on or before August 23, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
 [FR Doc. 2021-18945 Filed 9-1-21; 8:45 am]
 BILLING CODE 8011-01-P