Document ID: SEC-2021-0511-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2021-04-14T04:00Z

[Federal Register Volume 86, Number 70 (Wednesday, April 14, 2021)]
[Notices]
[Pages 19671-19674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07595]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91506; File No. SR-FINRA-2021-005]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Effective Date of the Temporary 
Amendments Set Forth in SR-FINRA-2020-026 and SR-FINRA-2020-043 From 
April 30, 2021, to June 30, 2021

April 8, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on March 31, 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 extend the expiration date of the temporary 
amendments initially set forth in SR-FINRA-2020-026 and subsequently 
extended in SR-FINRA-2020-043 (collectively, the ``Temporary 
Qualification Examination Relief Filings'') from April 30, 2021, to 
June 30, 2021. FINRA does not anticipate providing any further 
extensions to the temporary amendments identified in this proposed rule 
change beyond June 30, 2021.\4\
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    \4\ If due to unforeseen circumstances a further extension is 
necessary, FINRA will submit a separate rule filing to further 
extend the temporary amendments.
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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 pandemic, last year FINRA began 
providing temporary relief to member firms from FINRA rules and 
requirements via frequently asked questions (``FAQs'') on its 
website.\5\ Two of these FAQs \6\ provided temporary relief to address 
disruptions to the administration of FINRA qualification examinations 
caused by the pandemic that have significantly limited the ability of 
individuals to sit for these examinations due to Prometric test center 
capacity issues.\7\
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    \5\ See Frequently Asked Questions Related to Regulatory Relief 
Due to the Coronavirus Pandemic, available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq.
    \6\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
    \7\ At the outset of the COVID-19 pandemic, all FINRA 
qualification examinations were administered at test centers 
operated by Prometric. Based on the health and welfare concerns 
resulting from COVID-19, in March 2020 Prometric closed all of its 
test centers in the United States and Canada and began to slowly 
reopen some of them at limited capacity in May. Currently, Prometric 
has resumed testing in many of its United States and Canada test 
centers, at either full or limited occupancy, based on local and 
government mandates.
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    FINRA published the first FAQ on March 20, 2020, providing that 
individuals who were designated to function as principals under FINRA 
Rule 1210.04 prior to February 2, 2020, would be given until May 31, 
2020, to pass the appropriate principal qualification examination.\8\ 
FINRA

[[Page 19672]]

revised the FAQ to extend the expiration of the temporary relief to 
pass the appropriate principal qualification examination initially 
until June 30, 2020, and then until August 31, 2020.
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    \8\ FINRA Rule 1210.04 (Requirements for Registered Persons 
Functioning as Principals for a Limited Period) allows a member firm 
to designate certain individuals to function in a principal capacity 
for 120 calendar days before having to pass an appropriate principal 
qualification examination.
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    FINRA published the second FAQ on May 15, 2020, providing that 
individuals who were designated to function as Operations Professionals 
under FINRA Rule 1220(b)(3)(B) prior to February 2, 2020, would be 
given until June 30, 2020, to pass the applicable qualification 
examination.\9\ Thereafter, FINRA revised the FAQ to extend the 
expiration of the temporary relief to pass the applicable qualification 
examination until August 31, 2020.
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    \9\ Pursuant to FINRA Rule 1220(b)(3)(B) (Qualifications), a 
person registering as an Operations Professional may function in 
that capacity for 120 days before having to pass an applicable 
qualification examination.
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    On August 28, 2020, FINRA filed with the Commission a proposed rule 
change, SR-FINRA-2020-026, to extend the expiration of the temporary 
relief provided via the two FAQs by adopting: (1) Temporary 
Supplementary Material .12 (Temporary Extension of the Limited Period 
for Registered Persons to Function as Principals) under FINRA Rule 1210 
(Registration Requirements), and (2) temporary Supplementary Material 
.07 (Temporary Extension of the Limited Period for Persons to Function 
as Operations Professionals) under FINRA Rule 1220 (Registration 
Categories).\10\ Pursuant to this rule change, individuals who were 
designated prior to September 3, 2020, to function as a principal under 
FINRA Rule 1210.04 or an Operations Professional under FINRA Rule 
1220(b)(3)(B) had until December 31, 2020, to pass the appropriate 
qualification examination. FINRA thereafter filed SR-FINRA-2020-043 to 
extend the expiration date of the temporary amendments set forth in SR-
FINRA-2020-026 from December 31, 2020, to April 30, 2021.\11\
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    \10\ See Exchange Act Release No. 89732 (September 1, 2020), 85 
FR 55535 (September 8, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-026).
    \11\ See Exchange Act Release No. 90617 (December 9, 2020), 85 
FR 81258 (December 15, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-043).
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    As mentioned in the Temporary Qualification Examination Relief 
Filings, FINRA began providing, and then extended, temporary relief to 
address the interruptions in the administration of FINRA qualification 
examinations at Prometric test centers and the limited ability of 
individuals to sit for the examinations caused by the COVID-19 
pandemic.\12\ FINRA also noted in the Temporary Qualification 
Examination Relief Filings that the pandemic could result in firms 
potentially experiencing significant disruptions to their normal 
business operations that may be exacerbated by being unable to keep 
principal or Operations Professional positions filled. Specifically, 
the limitation of in-person activities and staff absenteeism as a 
result of the health and welfare concerns stemming from COVID-19 could 
result in firms having difficulty finding other qualified individuals 
to transition into those roles or requiring them to reallocate employee 
time and resources away from other critical responsibilities at the 
firm.
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    \12\ Information about the continued impact of COVID-19 on 
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
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    While there are signs of improvement, the COVID-19 conditions 
necessitating the temporary relief persist and FINRA has determined 
that there is a continued need for this temporary relief beyond April 
30, 2021. Although Prometric has resumed testing in many of its U.S. 
test centers, Prometric's safety practices mean that currently not all 
test centers are open, some of the open test centers are at limited 
capacity, and some open test centers are delivering only certain 
examinations that have been deemed essential by the local 
government.\13\ In addition, while certain states have started to ease 
COVID-19 restrictions on businesses and social activities, public 
health officials continue to emphasize the importance for individuals 
to keep taking numerous steps to protect themselves and help slow the 
spread of the disease.\14\
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    \13\ Information from Prometric about its safety practices and 
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus-update. See also supra note 12.
    \14\ See, e.g., Centers for Disease Control and Prevention, How 
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
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    Although the COVID-19 conditions necessitating the temporary relief 
persist, FINRA believes that an extension of the relief is necessary 
only until June 30, 2021, because FINRA recently expanded the 
availability of online examinations. Prior to this expansion, the 
ongoing effects of the pandemic made it impracticable for member firms 
to ensure that the individuals who they had designated to function in a 
principal or Operations Professional capacity, as set forth in FINRA 
Rules 1210.04 and 1220(b)(3)(B), could successfully sit for and pass an 
appropriate qualification examination within the 120-calendar day 
period required under the rules.\15\ Specifically, if the individual 
wanted to take a qualifying examination, they were required to accept 
the health risks associated with taking an in-person examination 
because those examinations were not available online. On February 24, 
2021, however, FINRA adopted an interim accommodation request process 
to allow candidates to take additional FINRA examinations online, 
including the General Securities Principal (Series 24) and Operations 
Professional (Series 99) examinations.\16\ Because the qualifying 
examinations have been made available online only recently, FINRA is 
concerned that individuals who have been designated to function in a 
principal or Operations Professional capacity may not have sufficient 
time to schedule, study for, and take the applicable examination before 
April 30, 2021, the date the temporary amendments are set to expire. 
Therefore, FINRA is proposing to extend the expiration date of the 
temporary amendments set forth in the Temporary Qualification 
Examination Relief Filings until June 30, 2021. The proposed rule 
change would apply only to those individuals who have been designated 
to function as a principal or Operations Professional prior to March 3, 
2021. As noted above, FINRA does not anticipate providing any further 
extensions to the temporary amendments and any individuals designated 
to function as a principal or Operations Professional on or after March 
3, 2021, will need to successfully pass an appropriate qualification 
examination within 120 days.\17\
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    \15\ See supra note 12.
    \16\ Id.
    \17\ FINRA notes that the proposed rule change would impact 
members that have elected to be treated as capital acquisition 
brokers (``CABs''), given that the CAB rule set incorporates the 
impacted FINRA rules by reference.
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    FINRA believes that this proposed continued extension of time is 
tailored to address the needs and constraints on a firm's operations 
during the COVID-19 pandemic, without significantly compromising 
critical investor protection. The proposed extension of time will help 
to minimize the impact of COVID-19 on firms by providing continued 
flexibility so that firms can ensure that principal and Operations 
Professional positions remain filled. The potential risks from the 
proposed extension of the 120-day period are mitigated by a firm's 
continued requirement to supervise the activities of these designated 
individuals and

[[Page 19673]]

ensure compliance with federal securities laws and regulations, as well 
as FINRA rules.
    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.\18\
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    \18\ FINRA notes that waiver of the 30-day operative period here 
is consistent with the Commission's previous waivers of the 
operative period for the temporary relief provided in the Temporary 
Qualification Examination Relief Filings. See supra notes 10 and 11.
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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,\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.
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    \19\ 15 U.S.C. 78o-3(b)(6).
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    The proposed rule change is intended to minimize the impact of 
COVID-19 on firm operations by further extending the 120-day period 
certain individuals may function as a principal or Operations 
Professional without having successfully passed an appropriate 
qualification examination under FINRA Rules 1210.04 and 1220(b)(3)(B) 
until June 30, 2021. The proposed rule change does not relieve firms 
from maintaining, under the circumstances, a reasonably designed system 
to supervise the activities of their associated persons to achieve 
compliance with applicable securities laws and regulations, and with 
applicable FINRA rules that directly serve investor protection. In a 
time when faced with unique challenges resulting from the COVID-19 
pandemic, FINRA believes that the proposed rule change is a sensible 
accommodation that will continue to afford firms the ability to ensure 
that critical positions are filled and client services maintained, 
while continuing to serve and promote the protection of investors and 
the public interest in this unique environment.

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 
the Temporary Qualification Examination Relief Filings, 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 is necessary to temporarily 
rebalance the attendant benefits and costs of the obligations under 
FINRA Rules 1210 and 1220 in response to the impacts of the COVID-19 
pandemic 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 \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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. FINRA has asked the Commission to 
waive the 30-day operative delay so that the proposed rule change may 
become operative immediately upon filing. As noted above, FINRA stated 
that the conditions necessitating the temporary relief continue to 
exist and the proposed extension of time will help minimize the impact 
of the COVID-19 outbreak on FINRA member firms' operations by allowing 
them to keep principal and Operations Professional positions filled and 
minimizing disruptions to client services and other critical 
responsibilities. Despite signs of improvement, FINRA further stated 
that the ongoing extenuating circumstances of the COVID-19 pandemic 
make it impractical to ensure that individuals designated to act in 
these capacities are able to take and pass the appropriate 
qualification examination during the 120-calendar day period required 
under the rules.
    FINRA observed that, following a nationwide closure of all test 
centers earlier in the year, some test centers have re-opened, but are 
operating at limited capacity or are only delivering certain 
examinations that have been deemed essential by the local 
government.\22\ However, on February 24, 2021, FINRA began providing 
the General Securities Principal (Series 24) and Operations 
Professional (Series 99) examinations online through an interim 
accommodation request process.\23\ Prior to this change, if individuals 
wanted to take these qualifying examinations, they were required to 
accept the health risks associated with taking an in-person 
examination. Even with the expansion of online qualifications 
examinations, FINRA stated that extending the expiration date of the 
relief set forth in the Temporary Qualification Examination Relief 
Filings until June 30, 2021 is still needed. FINRA stated that this 
temporary relief will provide flexibility to allow individuals who have 
been designated to function in a principal or Operations Professional 
capacity sufficient time to schedule, study for and take the applicable 
examination before the temporary relief expires. Notably, FINRA stated 
that it does not anticipate providing any further extensions to the 
temporary amendments and that any individuals designated to function as 
a principal or Operations Professional on or after March 3, 2021 will 
need to successfully pass an appropriate qualification examination 
within 120 days.
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    \22\ See supra notes 12 and 13. FINRA states that Prometric has 
also had to close some reopened test centers due to incidents of 
COVID-19 cases.
    \23\ See supra note 12 (including the February 24, 2021 
announcement of the interim accommodation process for candidates to 
take certain examinations, including the General Securities 
Principal (Series 24) and Operations Professional (Series 99) 
examinations, online.
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    For these reasons, the Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest.\24\ Accordingly, the Commission

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hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\25\
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    \24\ As noted above by FINRA, this proposal is an extension of 
temporary relief provided in the Temporary Qualification Examination 
Relief Filings where FINRA also requested and the Commission granted 
a waiver of the 30-day operative delay. See SR-FINRA-2020-026, 85 FR 
at 55538 and SR-FINRA-2020-043, 85 FR at 81260.
    \25\ 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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2021-005 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-2021-005. 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-2021-005 and should be submitted 
on or before May 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07595 Filed 4-13-21; 8:45 am]
BILLING CODE 8011-01-P