Document ID: SEC-2023-0117-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2023-01-31T05:00Z

[Federal Register Volume 88, Number 20 (Tuesday, January 31, 2023)]
[Notices]
[Pages 6346-6349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01878]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96746; File No. SR-FINRA-2023-001]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Expiration Date of the Temporary 
Amendments Set Forth in SR-FINRA-2020-027 and the Temporary Amendments 
to FINRA Rule 9341(d) in SR-FINRA-2020-015

January 25, 2023.
    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 January 18, 2023, 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 extend the expiration date of the temporary 
amendments set forth in SR-FINRA-2020-027 and the temporary amendments 
to FINRA Rule 9341(d) in SR-FINRA-2020-015 from January 31, 2023, to 
April 30, 2023.\4\
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    \4\ If FINRA seeks to provide additional temporary relief from 
the rule requirements identified in this proposed rule change beyond 
April 30, 2023, FINRA will submit a separate rule filing to further 
extend the temporary extension of time. The amended FINRA rules will 
revert to their original form at the conclusion of the temporary 
relief period and any extension thereof.
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    The proposed rule change would not make any changes to the text of 
FINRA rules.

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
    In response to the COVID-19 global health crisis and the 
corresponding need to restrict in-person activities, FINRA filed 
proposed rule changes, SR-FINRA-2020-015 and SR-FINRA-2020-027, which 
respectively provide temporary relief from some timing, method of 
service and other procedural requirements in FINRA rules and allow 
FINRA's Office of Hearing Officers (``OHO'') and the National 
Adjudicatory Council (``NAC'') to conduct hearings, on a temporary 
basis, by video conference, if warranted by the current COVID-19-
related public health risks posed by an in-person hearing. In October 
2022, FINRA filed a proposed rule change, SR-FINRA-2022-029, to extend 
the expiration date of the temporary amendments in both SR-FINRA-2020-
015 and SR-FINRA-2020-027 from October 31, 2022, to January 31, 
2023.\5\ Due to the continued presence and uncertainty of COVID-19, 
FINRA proposes to extend the expiration date of the temporary 
amendments in SR-FINRA-2020-027 and the temporary amendments to FINRA 
Rule 9341(d) in SR-FINRA-

[[Page 6347]]

2020-015 from January 31, 2023, to April 30, 2023.\6\
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    \5\ See Securities Exchange Act Release No. 96107 (October 19, 
2022), 87 FR 64526 (October 25, 2022) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2022-029).
    \6\ In June 2022, the Commission approved FINRA's rule proposal 
to make permanent the temporary amendments to the electronic service 
and filing rules originally set forth in SR-FINRA-2020-015, with 
some modifications, as described in the approval order. See 
Securities Exchange Act Release No. 95147 (June 23, 2022), 87 FR 
38803 (June 29, 2022) (Order Approving File No. SR-FINRA-2022-009). 
Those amendments became effective on August 22, 2022. See Regulatory 
Notice 22-16 (July 2022). In addition to the electronic service and 
filing rules, SR-FINRA-2020-015 also included other temporary 
amendments pertaining to certain adjudicatory and review processes. 
All of these other temporary amendments expired on the effective 
date of SR-FINRA-2022-009, except for the provisions to allow NAC 
oral arguments by video conference (FINRA Rule 9341(d)).
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    Due to the public health concerns and restrictions resulting from 
the outbreak of COVID-19, along with a corresponding backlog of 
disciplinary cases,\7\ FINRA filed, and subsequently extended to 
January 31, 2023, SR-FINRA-2020-027 \8\ to temporarily amend FINRA 
Rules 1015, 9261, 9524, and 9830 to grant OHO and the NAC authority \9\ 
to conduct hearings in connection with appeals of Membership 
Application Program decisions, disciplinary actions, eligibility 
proceedings and temporary and permanent cease and desist orders by 
video conference, if warranted by the COVID-19-related public health 
risks posed by an in-person hearing.\10\
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    \7\ For example, FINRA began temporarily postponing in-person 
hearings as a result of the COVID-19 impacts on March 16, 2020.
    \8\ The same COVID-19 public health concerns and restrictions 
led FINRA to file SR-FINRA-2020-015, which included the temporary 
amendments to allow NAC oral arguments by videoconference. See 
Securities Exchange Act Release No. 88917 (May 20, 2020), 85 FR 
31832 (May 27, 2020) (Notice of Filing and Immediate Effectiveness 
of File No. SR-FINRA-2020-015).
    \9\ For OHO hearings under FINRA Rules 9261 and 9830, the 
proposed rule change temporarily grants authority to the Chief or 
Deputy Chief Hearing Officer to order that a hearing be conducted by 
video conference. For NAC hearings under FINRA Rules 1015 and 9524, 
this temporary authority is granted to the NAC or the relevant 
Subcommittee. With respect to both OHO and NAC hearings, the 
temporary authority of the adjudicator is discretionary, so in-
person hearings may continue to take place where safe and 
appropriate.
    \10\ See Securities Exchange Act Release No. 89737 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-027); Securities 
Exchange Act Release No. 90619 (December 9, 2020), 85 FR 81250 
(December 15, 2020) (Notice of Filing and Immediate Effectiveness of 
File No. SR-FINRA-2020-042); Securities Exchange Act Release No. 
91495 (April 7, 2021), 86 FR 19306 (April 13, 2021) (Notice of 
Filing and Immediate Effectiveness of File No. SR-FINRA-2021-006); 
Securities Exchange Act Release No. 92685 (August 17, 2021), 86 FR 
47169 (August 23, 2021) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2021-019); Securities Exchange 
Act Release No. 93758 (December 13, 2021), 86 FR 71695 (December 17, 
2021) (Notice of Filing and Immediate Effectiveness of File No. SR-
FINRA-2021-031); Securities Exchange Act Release No. 94430 (March 
16, 2022), 87 FR 16262 (March 22, 2022) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2022-004); Securities 
Exchange Act Release No. 95281 (July 14, 2022), 87 FR 43335 (July 
20, 2022) (Notice of Filing and Immediate Effectiveness of File No. 
SR-FINRA-2022-018); and File No. SR-FINRA-2022-029, supra note 5.
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    Due to the upward trend in the number of COVID-19 cases since FINRA 
filed SR-FINRA-2022-029 in October 2022, FINRA believes there is a 
continued need for temporary relief beyond January 31, 2023. In this 
regard, FINRA notes that COVID-19 remains a public health concern. For 
example, according to the Centers for Disease Control and Prevention 
(``CDC''), approximately 61.73 percent of counties in the United States 
have a medium or high COVID-19 Community Level based on the CDC's most 
recent calculations.\11\ The daily average number of hospital 
admissions is also on the rise.\12\ Much uncertainty also remains given 
the emergence of new Omicron variants that the CDC currently is 
tracking \13\ and the dissimilar vaccination rates (completed primary 
series and updated booster dose) throughout the United States.\14\
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    \11\ See CDC, COVID Data Tracker--COVID-19 Integrated County 
View, https://covid.cdc.gov/covid-data-tracker/#county-view?list_select_state=all_states&list_select_county=all_counties&data-type=CommunityLevels&null=CommunityLevels (last visited Jan. 9, 
2023).
    \12\ See CDC, COVID Data Tracker Weekly Review--Daily Trend in 
Number of New COVID-19 Hospital Admissions in the United States, 
https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/index.html (last visited Jan. 9, 2023) (``The current 7-day daily 
average for December 28, 2022-January 3, 2023, was 6,519. This is a 
16.1% increase from the prior 7-day average (5,613) from December 
21-27, 2022.'').
    \13\ These new Omicron variants include BQ.1.1, XBB.1.5 and 
BQ.1. See CDC, COVID Data Tracker--Variant Proportions, https://covid.cdc.gov/covid-data-tracker/#variant-proportions (last visited 
Jan. 9, 2023).
    \14\ A state-by-state comparison of vaccination rates is 
available at https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-people-additional-dose-totalpop (last visited 
Jan. 9, 2023).
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    In addition, as set forth in the previous filings, FINRA relies on 
the guidance of its health and safety consultant, in conjunction with 
COVID-19 data and guidance issued by public health authorities, to 
determine whether the current public health risks presented by an in-
person hearing may warrant a hearing by video conference.\15\ FINRA 
strives to hold in-person hearings when it is safe to do so, but 
because FINRA conducts hearings at locations throughout the United 
States, FINRA believes that it may be difficult to conduct in-person 
hearings at certain locations based on that data and guidance.
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    \15\ As noted in SR-FINRA-2020-027, the temporary proposed rule 
change grants discretion to OHO and the NAC to order a video 
conference hearing. In deciding whether to schedule a hearing by 
video conference, OHO and the NAC may consider a variety of other 
factors in addition to COVID-19 trends. In SR-FINRA-2020-027, FINRA 
provided a non-exhaustive list of other factors OHO and the NAC may 
take into consideration, including a hearing participant's 
individual health concerns and access to the connectivity and 
technology necessary to participate in a video conference hearing.
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    As a result, FINRA believes there will be a continued need for 
temporary relief beyond January 31, 2023. Accordingly, FINRA proposes 
to extend the expiration date of the temporary amendments originally 
set forth in SR-FINRA-2020-027 and the temporary amendments to FINRA 
Rule 9341(d) in SR-FINRA-2020-015 from January 31, 2023, to April 30, 
2023.\16\ As previously noted, FINRA strives to hold in-person hearings 
when it is safe to do so and the extension of temporary relief 
therefore does not mean a video conference hearing will be ordered in 
every case.\17\ Given the uncertainty regarding COVID-19, however, the 
extension of these temporary amendments allowing for specified OHO and 
NAC hearings to proceed by video conference will ensure that FINRA's 
critical adjudicatory functions continue to operate effectively in 
these circumstances--enabling FINRA to fulfill its statutory 
obligations to protect investors and maintain fair and orderly 
markets--while also protecting the health and safety of hearing 
participants.\18\
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    \16\ See supra note 5. As a further basis for extending the 
expiration date to April 30, 2023, FINRA notes that its Board has 
approved the submission of a rule proposal to the Commission to make 
permanent, with some modifications, the temporary rules to allow 
hearings to be conducted by video conference originally set forth in 
SR-FINRA-2020-027 and SR-FINRA-2020-015. See https://www.finra.org/about/governance/finra-board-governors/meetings/update-finra-board-governors-meeting-december-2022. FINRA contemplates filing the rule 
proposal with the Commission in the near future and the extension of 
the temporary rule amendments would help avoid the rules reverting 
to their original form before the permanent rules, if approved by 
the Commission, become effective.
    \17\ In fact, FINRA began to hold in-person hearings at a single 
location in 2021. In July 2021, FINRA held its first in-person 
hearing since the temporary amendments were implemented. A 
subsequent surge in case numbers for the Delta variant of the COVID-
19 virus caused FINRA's outside health and safety consultant to 
recommend in early August 2021 against in-person hearings. 
Accordingly, the Chief Hearing Officer converted hearings scheduled 
after mid-September 2021 from in-person to video conference on a 
case-by-case basis. In July 2022, FINRA scheduled another in-person 
hearing but shortly before it began the parties jointly requested 
that the hearing be conducted via video conference instead, and the 
Chief Hearing Officer used her discretion to order that the hearing 
be conducted by video conference.
    \18\ Since the temporary amendments were implemented, OHO and 
the NAC have conducted several hearings by video conference. As of 
January 9, 2023, OHO has conducted 17 disciplinary hearings by video 
conference (decisions have been issued in all but one of these 
cases). In six of these disciplinary hearings, all of the parties 
agreed to proceed by video conference; the other 11 were ordered to 
proceed by video conference by the Chief Hearing Officer. OHO 
currently has hearings scheduled in eight additional disciplinary 
matters. No determination has yet been made regarding whether these 
eight hearings will be in-person or by video conference. Also, as of 
January 9, 2023, the NAC, through the relevant Subcommittee, has 
conducted 19 oral arguments by video conference in connection with 
appeals of FINRA disciplinary proceedings pursuant to FINRA Rule 
9341(d), as temporarily amended. Furthermore, the NAC has conducted 
via video conference a one-day evidentiary hearing in a membership 
application proceeding pursuant to FINRA Rule 1015, as temporarily 
amended. The NAC also has conducted via video conference three 
evidentiary hearings in eligibility matters pursuant to FINRA Rule 
9524, as temporarily amended.

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[[Page 6348]]

    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\19\ 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 is also 
consistent with Section 15A(b)(8) of the Act,\20\ which requires, among 
other things, that FINRA rules provide a fair procedure for the 
disciplining of members and persons associated with members.
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    \19\ 15 U.S.C. 78o-3(b)(6).
    \20\ 15 U.S.C. 78o-3(b)(8).
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    The proposed rule change, which extends the expiration date of the 
temporary amendments to FINRA rules set forth in SR-FINRA-2020-027 and 
the temporary amendments to FINRA Rule 9341(d) in SR-FINRA-2020-015, 
will continue to aid FINRA's efforts to timely conduct hearings in 
connection with its core adjudicatory functions. Given that COVID-19 
remains a public health concern and the spike in cases of the disease, 
without this relief allowing OHO and NAC hearings to proceed by video 
conference, FINRA might be required to postpone some or almost all 
hearings for a significant period of time. FINRA must be able to 
perform its critical adjudicatory functions to fulfill its statutory 
obligations to protect investors and maintain fair and orderly markets. 
As such, this relief is essential to FINRA's ability to fulfill its 
statutory obligations and allows hearing participants to avoid the 
COVID-19-related health and safety risks associated with in-person 
hearings.
    Among other things, this relief will allow OHO to conduct temporary 
cease and desist proceedings by video conference so that FINRA can take 
immediate action to stop ongoing customer harm and will allow the NAC 
to timely provide members, disqualified individuals and other 
applicants an approval or denial of their applications. As set forth in 
detail in the original filings, this temporary relief allowing OHO and 
NAC hearings to proceed by video conference accounts for fair process 
considerations and will continue to provide fair process while avoiding 
the COVID-19-related public health risks for hearing participants. 
Accordingly, the proposed rule change extending this temporary relief 
is in the public interest and consistent with the Act's purpose.

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

    FINRA does not believe that the temporary proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As set forth in 
SR-FINRA-2020-027 and, with respect to FINRA Rule 9341(d), in SR-FINRA-
2020-015, the proposed rule change is intended solely to extend 
temporary relief necessitated by the continued presence of COVID-19 and 
the related health and safety risks of conducting in-person activities. 
FINRA believes that the proposed rule change will prevent unnecessary 
impediments to FINRA's critical adjudicatory processes and its ability 
to fulfill its statutory obligations to protect investors and maintain 
fair and orderly markets that would otherwise result if the temporary 
amendments were to expire on January 31, 2023.

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 \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 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. As FINRA requested in connection 
with SR-FINRA-2020-015 and related extensions,\23\ FINRA has also asked 
the Commission to waive the 30-day operative delay so that this 
proposed rule change may become operative immediately upon filing.
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    \23\ See SR-FINRA-2020-015, 85 FR at 31836. Although FINRA did 
not request that the Commission waive the 30-day operative delay for 
SR-FINRA-2020-027, FINRA did request that the Commission waive the 
30-day operative delay for SR-FINRA-2020-042, SR-FINRA-2021-006, SR-
FINRA-2021-019, SR-FINRA-2021-031, SR-FINRA-2022-004, and SR-FINRA-
2022-018 which extended the expiration date of the temporary 
amendments originally set forth in SR-FINRA-2020-027.
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    FINRA has indicated that extending the relief provided originally 
in SR-FINRA-2020-015 and SR-FINRA-2020-027 will continue to provide 
FINRA the ability to safely conduct hearings in connection with its 
core functions during the COVID-19 outbreak. Importantly, extending the 
relief provided in these prior rule changes immediately upon filing and 
without a 30-day operative delay will allow FINRA to continue critical 
adjudicatory and review processes in a reasonable and fair manner and 
meet its critical investor protection goals, while also following best 
practices with respect to the health and safety of its employees.\24\ 
The Commission also notes that this proposal, like SR-FINRA-2020-015 
and SR-FINRA-2020-027, provides only temporary relief during the period 
in which FINRA's operations are impacted by COVID-19. As proposed, the 
changes would be in place through April 30, 2023.\25\ FINRA also noted 
in both SR-FINRA-2020-015 and SR-FINRA-2020-027 that the amended rules 
will revert back to their original state at the conclusion of the 
temporary relief period and, if applicable, any extension

[[Page 6349]]

thereof.\26\ For these reasons, the Commission believes that waiver of 
the 30-day operative delay for this proposal is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\27\
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    \24\ See supra Item II.A.1; see also SR-FINRA-2020-015, 85 FR at 
31833.
    \25\ As noted above, see supra note 4, FINRA stated that if it 
requires temporary relief from the rule requirements identified in 
this proposal beyond April 30, 2023, it may submit a separate rule 
filing to extend the effectiveness of the temporary relief under 
these rules.
    \26\ See SR-FINRA-2020-015, 85 FR at 31833; see also SR-FINRA-
2020-027, 85 FR at 55712.
    \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).
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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 [email protected]. Please include 
File Number SR-FINRA-2023-001 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-2023-001. 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 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-2023-001 and should be submitted 
on or before February 21, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-01878 Filed 1-30-23; 8:45 am]
BILLING CODE 8011-01-P