Document ID: SEC-2021-0499-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2021-04-13T04:00Z

[Federal Register Volume 86, Number 69 (Tuesday, April 13, 2021)]
[Notices]
[Pages 19306-19309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07494]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91495; File No. SR-FINRA-2021-006]

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-2020-015 and SR-FINRA-2020-027

April 7, 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 April 1, 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 substantially 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-2020-015 and SR-FINRA-2020-027 from 
April 30, 2021, to August 31, 2021.\4\ The proposed rule change would 
not make any changes to the text of FINRA rules.
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    \4\ If FINRA seeks to provide additional temporary relief from 
the rule requirements identified in this proposed rule change beyond 
August 31, 2021, 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 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
    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 December 
2020, FINRA filed a proposed rule change, SR-FINRA-2020-042, to extend 
the expiration date of the temporary amendments in both SR-FINRA-2020-
015 and SR-FINRA-2020-027 from December 31, 2020, to April 30, 2021.\5\ 
While there are signs of improvement, the COVID-19 conditions 
necessitating these temporary amendments persist and, based on its 
assessment of current COVID-19 conditions and the lack of certainty as 
to when COVID-19-related health concerns and corresponding restrictions 
will meaningfully subside, FINRA has determined that there is a 
continued need for this temporary relief for several months beyond 
April 30, 2021. Accordingly, FINRA proposes to extend

[[Page 19307]]

the expiration date of the temporary rule amendments in SR-FINRA-2020-
015 and SR-FINRA-2020-027 from April 30, 2021, to August 31, 2021.
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    \5\ See 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).
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i. SR-FINRA-2020-015
    As stated in its previous filings, FINRA proposed, and subsequently 
extended, the changes set forth in SR-FINRA-2020-015 to temporarily 
amend some timing, method of service and other procedural requirements 
in FINRA rules during the period in which FINRA's operations are 
impacted by the outbreak of COVID-19.\6\ Among other things, the need 
for FINRA staff, with limited exceptions, to work remotely and restrict 
in-person activities--consistent with the recommendations of public 
health officials--have made it challenging to meet some procedural 
requirements and perform some functions required under FINRA rules. For 
example, working remotely makes it difficult to send and receive hard 
copy documents and conduct in-person oral arguments.
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    \6\ 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); Securities Exchange 
Act Release No. 89055 (June 12, 2020), 85 FR 36928 (June 18, 2020) 
(Notice of Filing and Immediate Effectiveness of File No. SR-FINRA-
2020-017); Securities Exchange Act Release No. 89423 (July 29, 
2020), 85 FR 47278 (August 4, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-022); supra note 5.
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    The temporary amendments have addressed these concerns by easing 
logistical and other issues and providing FINRA with needed flexibility 
for its operations during the COVID-19 outbreak, allowing 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 
staff.
    FINRA staff, with limited exceptions, continue to work remotely to 
protect their health and safety. As indicated in its previous filings, 
FINRA has established a COVID-19 task force to develop a data-driven, 
staged plan for FINRA staff to safely return to working in FINRA office 
locations and resume other in-person activities. Based on its 
assessment of current COVID-19 conditions, FINRA does not believe the 
COVID-19-related health concerns necessitating this relief will 
meaningfully subside by April 30, 2021, and therefore proposes to 
extend the expiration date of the temporary rule amendments originally 
set forth in SR-FINRA-2020-015 from April 30, 2021, to August 31, 
2021.\7\
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    \7\ See supra note 6 (outlining the filing history of SR-FINRA-
2020-015 and its prior extensions).
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ii. SR-FINRA-2020-027
    The same public health concerns and restrictions, along with a 
corresponding backlog of disciplinary cases,\8\ led FINRA to file, and 
subsequently extend to April 30, 2021, SR-FINRA-2020-027 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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    \8\ For example, FINRA began temporarily postponing in-person 
hearings as a result of the COVID-19 impacts on March 16, 2020.
    \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.
    \10\ See Securities Exchange Act Release No. 89739 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-027); supra note 
5.
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    As set forth in the previous filings, FINRA also 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.\11\ Based on 
that guidance and data, FINRA does not believe the COVID-19-related 
health concerns necessitating this relief will meaningfully subside by 
April 30, 2021, and has determined that there will be a continued need 
for this temporary relief for several months beyond that date. 
Accordingly, FINRA proposes to extend the expiration date of the 
temporary rule amendments originally set forth in SR-FINRA-2020-027 
from April 30, 2021, to August 31, 2021.\12\ The extension of these 
temporary amendments allowing for specified OHO and NAC hearings to 
proceed by video conference will allow FINRA's critical adjudicatory 
functions to continue to operate effectively in these extraordinary 
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.\13\
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    \11\ 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.
    \12\ See supra note 5.
    \13\ Since the temporary amendments were implemented, OHO and 
the NAC have conducted several hearings by video conference. As of 
March 16, 2021, OHO has conducted seven disciplinary hearings by 
video conference (decisions have been issued in two of these cases) 
and scheduled hearings in 11 other disciplinary matters, three of 
which already have been ordered to proceed by video conference. 
Also, as of March 16, 2021, the NAC, through the relevant 
Subcommittee, has conducted 10 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.
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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 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ 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,\15\ 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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    \14\ 15 U.S.C. 78o-3(b)(6).
    \15\ 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-2020-015, 
will continue to provide FINRA, and in some cases another party to a 
proceeding, temporary modifications to its procedural requirements in 
order to allow FINRA to maintain fair processes and protect investors 
while operating in a remote work environment and with corresponding 
restrictions on its activities. It is in the public interest, and 
consistent with the Act's purpose, for FINRA to operate pursuant to 
this temporary relief. The temporary

[[Page 19308]]

amendments allow FINRA to specify filing and service methods, extend 
certain time periods, and modify the format of oral argument for FINRA 
disciplinary and eligibility proceedings and other review processes to 
cope with the current pandemic conditions. In addition, extending this 
temporary relief will further support FINRA's disciplinary and 
eligibility proceedings and other review processes that serve a 
critical role in providing investor protection and maintaining fair and 
orderly markets.
    The proposed rule change, which also extends the expiration date of 
the temporary amendments to FINRA rules set forth in SR-FINRA-2020-027, 
will continue to aid FINRA's efforts to timely conduct hearings in 
connection with its core adjudicatory functions. Given current COVID-19 
conditions and the uncertainty around when those conditions will 
meaningfully improve, without this relief allowing OHO and NAC hearings 
to proceed by video conference, FINRA might be required to postpone 
some or all hearings indefinitely. 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 serious 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 filing, 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-2020-015 and SR-FINRA-2020-027, the proposed rule change is 
intended solely to extend temporary relief necessitated by the 
continued impacts of the COVID-19 outbreak 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 operations, including its 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 April 30, 2021.

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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
FINRA has satisfied this requirement.
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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,\18\ 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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    \18\ 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, which extended the 
expiration date of the temporary amendments originally set forth in 
SR-FINRA-20202-027.
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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 ease 
logistical and other issues by providing FINRA with needed flexibility 
for its operations 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.\19\ 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 August 31, 2021.\20\ 
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 thereof.\21\ 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.\22\
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    \19\ See supra p. 4; see also SR-FINRA-2020-015, 85 FR at 31833.
    \20\ As noted above, see supra note 4, FINRA states that if it 
requires temporary relief from the rule requirements identified in 
this proposal beyond August 31, 2021, it may submit a separate rule 
filing to extend the effectiveness of the temporary relief under 
these rules.
    \21\ See SR-FINRA-2020-015, 85 FR at 31833; see also SR-FINRA-
2020-027, 85 FR at 55712.
    \22\ 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.

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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-2021-006 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-2021-006. 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-2021-006 
and should be submitted on or before May 4, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07494 Filed 4-12-21; 8:45 am]
BILLING CODE 8011-01-P