Document ID: SEC-2013-2127-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-12-13T05:00Z

[Federal Register Volume 78, Number 240 (Friday, December 13, 2013)]
[Notices]
[Pages 75954-75958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29739]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71027; File No. SR-FINRA-2013-051]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend 
the Uniform Branch Office Registration Form (Form BR)

December 9, 2013.
    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 November 25, 2013, 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, 
II, and III below, which Items have been prepared by FINRA. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend the Uniform Branch Office Registration 
Form (``Form BR'') to (1) eliminate Section 6 (NYSE Branch 
Information), which is currently applicable only to NYSE-registered 
firms; (2) add questions relating to space sharing arrangements and the 
location of books and records that are currently only in Section 6 and 
make them applicable to all members; (3) modify existing questions and 
instructions to provide more detailed selections for describing the 
types of activities conducted at the branch office; (4) add an optional 
question to identify a branch office as an ``Office of Municipal 
Supervisory Jurisdiction,'' as defined under the rules of the Municipal 
Securities Rulemaking Board (MSRB); and (5) make other technical 
changes to adopt uniform terminology and clarify questions and 
instructions (collectively, the proposed amendments to Form BR are 
hereinafter referred to as the ``Updated Form BR'').

[[Page 75955]]

    The text of the proposed rule change is available on FINRA's Web 
site 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
    The purpose of the proposed rule change is to amend Form BR, which 
is used by firms to register their branch offices with FINRA, the New 
York Stock Exchange (``NYSE''), and participating states via the 
Central Registration Depository (``CRD[supreg]''). Form BR enables a 
firm to register a branch office \3\ (either by notice filing or 
approval) as required by the relevant jurisdiction or self-regulatory 
organization (``SRO''), amend a registration, close or terminate a 
registration, or withdraw a filing in the appropriate participating 
jurisdiction and SRO.
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    \3\ See NASD Rule 3010(g)(2) for a definition of the term 
``branch office.'' Certain states participating in the use of Form 
BR via CRD have adopted a similar definition. See also Securities 
Exchange Act Release No. 69902 (July 1, 2013), 78 FR 40792 (July 8, 
2013) (Notice of Filing File No. SR-FINRA-2013-025).
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    In concert with a committee of regulatory and industry 
representatives, FINRA recently undertook a review of Form BR. As a 
result of this review, FINRA is proposing to amend Form BR to (1) 
eliminate Section 6 (NYSE Branch Information), which is currently 
applicable only to NYSE-registered firms; (2) add questions relating to 
space sharing arrangements and the location of books and records that 
are currently only in Section 6 and make them applicable to all 
members; (3) modify existing questions and instructions to provide more 
detailed selections for describing the types of activities conducted at 
the branch office; (4) add an optional question to identify a branch 
office as an ``Office of Municipal Supervisory Jurisdiction,'' as 
defined under MSRB rules; and (5) make other technical changes to adopt 
uniform terminology and clarify questions and instructions.
    FINRA believes the proposed Updated Form BR will provide a more 
comprehensive profile of each firm's registered branch offices, which 
will allow regulators and firms to better understand the activities 
occurring at each registered branch office. This understanding should 
enable firms to strengthen their own compliance and regulators to 
conduct more focused and effective examinations.
    FINRA further believes that the proposal will have a minimal impact 
on firms based principally upon FINRA's experience with Form BR, 
discussions with industry representatives who participated in the 
working group that developed the proposed amendments, and the approach 
to implementation that FINRA is proposing for the Updated Form BR.
    In that regard, and as discussed in more detail below, firms with 
existing registered branch offices will not be required to complete the 
proposed new information items on the Updated Form BR by a date certain 
after implementation, but rather when the firm is otherwise required, 
in the ordinary course, to amend the form to update existing 
information items that have become inaccurate or incomplete.\4\ FINRA 
believes that this more flexible approach accomplishes the important 
regulatory objective of collecting the proposed new information items 
from those members that have not previously reported it,\5\ while 
limiting the associated burden on firms.
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    \4\ Member firms have a continuing obligation to promptly update 
Form BR whenever the information becomes inaccurate or incomplete. 
Amendments require updating only the appropriate section of Form BR. 
FINRA and most participating jurisdictions require that an amendment 
be filed not later than 30 days after the firm learns of facts and 
circumstances giving rise to the amendment.
    \5\ FINRA notes that members that also are registered with the 
NYSE currently report information related to space sharing 
arrangements and the location of books and records for each 
registered branch office on Section 6 (NYSE Branch Information) on 
Form BR.
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Background
    Form BR was developed jointly in 2005 by a working group consisting 
of representatives of FINRA (then the National Association of 
Securities Dealers, Inc. (``NASD'')), the NYSE, the North American 
Securities Administrators Association (``NASAA'') and states to 
establish a uniform electronic process via the CRD system for 
registering branch offices with various jurisdictions. Form BR replaced 
Schedule E of the SEC's Form BD (Broker-Dealer Registration Form), the 
NYSE Branch Office Application Form and state branch office forms, and 
enabled firms to register branch offices electronically with FINRA, the 
NYSE and participating states via a single filing through the CRD 
system.\6\ Form BR enables firms to file, for notice or approval, Form 
BR as required by the applicable jurisdiction or SRO.
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    \6\ Currently, 24 states utilize Form BR; of those, 16 states 
have a notice-filing requirement and eight have a pre-approval 
process.
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    Since its implementation in 2005, Form BR has not been 
substantively updated.\7\ Based on a recent review of the form and 
experience with the form to date, FINRA and a committee of 
representatives from industry, NASAA and participating states (the 
``Form BR Working Group'') believe that the proposed changes are 
appropriate and will result in efficiencies for firms and regulators. 
In particular, FINRA believes the proposed amendments to Form BR will 
make the branch office registration process more efficient by 
eliminating duplicative provisions, eliciting certain information items 
from all filers, and clarifying existing questions so that regulators 
and firms can better understand the activities of each registered 
branch office.
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    \7\ In 2007, Form BR was amended to change references of 
``NASD'' to ``FINRA'' and to make other technical amendments. See 
Securities Exchange Act Release No. 57033 (December 21, 2007), 72 FR 
74382 (December 31, 2007) (Notice of Filing File No. SR-FINRA-2007-
036).
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Proposed Amendments
    Current Form BR consists of the following nine sections: (1) 
General Information; (2) Registration/Notice Filing/Type of Office; (3) 
Types of Activities/Other Business Names/Web sites; (4) Branch Office 
Arrangements; (5) Associated Individuals; (6) NYSE Branch Information; 
(7) Branch Closing; (8) Branch Withdrawal (Pending Application); and 
(9) Signature.
    FINRA is proposing to amend Form BR to consist of eight sections 
with the following section titles: (1) General Information; (2) 
Registration/Notice Filing/Type of Office/Activities; (3) Other 
Business Activities/Names/Web sites; (4) Branch Office Arrangements; 
(5) Associated Individuals; (6) Branch Office Closing; (7) Branch 
Office Withdrawal (Pending Application); and (8) Signature. In addition 
to this reorganization of sections, FINRA is proposing the amendments 
to Form BR described below.
    Delete Section 6 (NYSE Branch Information). Currently only NYSE-
registered firms can view Section 6

[[Page 75956]]

(NYSE Branch Information) on the CRD system and only NYSE-registered 
firms are required to complete and update Section 6. Section 6 of Form 
BR allowed NYSE to administer a pre-approval process for registration 
of certain branch offices that was in place at the time Form BR was 
implemented.\8\ However, following the NASD/NYSE regulatory 
consolidation, the NYSE amended NYSE Rule 342 to change its branch 
office registration requirement from a pre-approval process to a 
notice-filing requirement in an effort to eliminate disparate 
regulatory standards.\9\ As a result, FINRA and the Form BR Working 
Group believe this separate NYSE-registered firm section of Form BR is 
no longer necessary and should be deleted in the Updated Form BR. The 
proposed revisions also will remove references to the NYSE-specific 
terms from the form such as ``regular branch'' and ``small branch.'' 
FINRA believes the proposed changes will create efficiencies for firms 
that are members of both FINRA and the NYSE by eliminating nine 
questions from the current Form BR and for regulators by eliminating 
those questions deemed redundant or of limited regulatory value. In 
addition, FINRA believes that all members will benefit from having one, 
uniform form.
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    \8\ In 2005 when Form BR was initially launched, NYSE Rule 342 
(Offices--Approval, Supervision and Control) required approval of 
new branch office registrations, and NYSE Rule 343 (Offices--Sole 
Tenancy, Hours, Display of Membership Certificates) required 
approval of space sharing arrangements, before the branch office was 
able to conduct business.
    \9\ See Securities Exchange Act Release No. 56143 (July 26, 
2007), 72 FR 42453 (August 2, 2007) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NYSE-2007-59).
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    Add Questions on Space Sharing Arrangements and Location of Books 
and Records. As described above, FINRA is proposing to eliminate 
Section 6 (NYSE Branch Information) from the current Form BR because 
pre-approval of certain branch offices of NYSE-registered firms is no 
longer required. However, FINRA is proposing to retain questions from 
that section relating to space sharing arrangements and the location of 
books and records and add them to proposed Section 4 (Branch Office 
Arrangements) of the Updated Form BR. FINRA and the Form BR Working 
Group determined to retain these questions because they provide 
valuable regulatory information and also will allow continued 
monitoring for compliance with Incorporated NYSE Rule 343.\10\
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    \10\ Incorporated NYSE Rule 343 (Supervision) is still in effect 
and applicable to NYSE-registered firms. As part of the effort to 
develop the consolidated FINRA rulebook, FINRA is proposing to adopt 
FINRA Rule 3110 (Supervision) and delete NYSE Rule 343. In 2007, the 
NYSE amended its branch office registration process from a prior 
consent requirement to a notice requirement (but retained the 
approval standard for space sharing arrangements). Under NYSE Rule 
343, space sharing arrangements must be evaluated by the NYSE and 
FINRA (who has assumed by contract regulatory responsibility to 
review for NYSE member firm compliance). See SR-NYSE-2007-59 and 
NYSE Information Memo 07-81 (August 1, 2007). See also Securities 
Exchange Act Release No. 69902 (July 1, 2013), 78 FR 40792 (July 8, 
2013) (Notice of Filing File No. SR-FINRA-2013-025).
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    Specifically, FINRA is proposing to add a new question to proposed 
Section 4 (Branch Office Arrangements) of the Updated Form BR that will 
ask members to disclose if the branch office occupies, shares space 
with or jointly markets with any other investment-related entity, and 
if the answer is yes, to provide the name of such entity.\11\ FINRA 
believes applying the space sharing arrangement question to all members 
will allow regulators to better understand the specific activities 
occurring at each registered branch office and monitor that such 
arrangements are structured in a manner that allow [sic] public 
customers to identify the entity with which they are conducting 
business.
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    \11\ The term ``investment-related'' is defined in Form BR as 
``[p]ertains to securities, commodities, banking, insurance, or real 
estate (including, but not limited to, acting as or being associated 
with a Broker-Dealer, issuer, investment company, Investment 
Adviser, futures sponsor, bank, or savings association).''
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    FINRA also is proposing to add a question to proposed Section 4 
(Branch Office Arrangements) that will ask members if books and records 
pertaining to the registered branch office are maintained at any 
location other than that branch office, the main office or office of 
supervisory jurisdiction (OSJ) (if applicable). If the answer is yes, a 
member will need to provide the address of such location and the name 
and telephone number of a contact person. FINRA believes many firms 
elect to keep books and records in a centralized office rather than at 
the branch office; therefore, eliciting whether books and records are 
maintained offsite will enable regulators to conduct more effective and 
efficient branch office examinations.
    Modify Existing Question on ``Types of Activities''. FINRA is 
proposing to relocate questions relating to ``Types of Activities'' 
occurring at the branch office from Section 3 (Other Business/Names/Web 
sites) to proposed Section 2 (Registration/Notice Filing/Type of 
Office/Activities) of the Updated Form BR and to expand the list of 
activity types that may be selected to (1) include Retail and 
Institutional (as types of Sales Activity), Public Finance, and Other; 
(2) add ``Trading'' to the existing Market Making activity; and (3) 
combine Investment Banking and Underwriting, which are now listed 
separately. FINRA and the Form BR Working Group believe that clarifying 
and expanding the list of activity types will enhance regulators' 
understanding of the types of activities that occur at each registered 
branch office and assist regulators and members in conducting risk-
based branch office reviews. For example, a member that selects 
``Sales'' can then identify if that activity relates to ``Retail'' or 
``Institutional'' customers. In addition, based on feedback from firms, 
FINRA is proposing to add ``Public Finance'' as an option to enable 
members and regulators to identify via the Form BR office locations 
that require a principal to be registered as a Series 53 (Municipal 
Securities Principal).
    Modify Supervisor/Person-in-Charge Details. FINRA is proposing to 
expand the supervisor and person-in-charge details provided by firms in 
Section 2 (Registration/Notice Filing/Type of Office/Activities) of the 
Updated Form BR, to enable firms (at their option) to provide the 
``type of activity'' associated with each on-site supervisor or person-
in-charge listed. FINRA is proposing to add this option based on 
feedback from firms to date. Firms have requested the ability to link 
each supervisor or person-in-charge listed for a registered branch 
office to identified lines of business to better reflect their 
supervisory structures.
    Add Optional MSRB Branch Office of Municipal Supervisory 
Jurisdiction Question. The MSRB regulates brokers, dealers and 
municipal securities dealers that engage in municipal securities 
activities. Under MSRB rules, certain of these participants are 
required to identify whether a branch is designated as an Office of 
Municipal Supervisory Jurisdiction (``OMSJ''), as defined under MSRB 
rules.\12\ To assist those participants that use Form BR in complying 
with that MSRB requirement, FINRA is proposing to add an optional 
question to Section 2 (Registration/Notice Filing/Type of Office/
Activities) to the Updated Form BR to provide FINRA members that also 
are registered with the MSRB a means to track their OMSJs through a 
standard CRD report that FINRA expects to develop following the 
deployment of the Updated Form BR.
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    \12\ See MSRB Rule G-27 (Supervision).
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    Technical and Clarifying Changes. Based on feedback from the Form 
BR Working Group, FINRA is proposing technical and clarifying changes 
to General and Specific Instructions,

[[Page 75957]]

Explanation of Terms and Sections of the Updated Form BR. These include 
global changes to adopt uniform terminology for terms such as ``CRD 
number'' and ``branch office,'' to capitalize ``Broker-Dealer'' and 
``Investment Adviser,'' and to replace ``person'' with ``individual'' 
when referring to associated individuals. The use of the word 
``individual'' is intended to make the terminology in the Updated Form 
BR consistent with terminology currently used in Section 5 of the Form 
BR, which elicits information with respect to all registered 
individuals who are associated with the branch office. In addition, the 
Instructions of the Updated Form BR will be amended to clarify that 
checking the ``Private Residence Check Box'' when providing the address 
of the branch office does not act to prevent public disclosure of the 
branch address.\13\ FINRA will continue to disclose the full address of 
registered branch offices through BrokerCheck even if the registered 
branch is a private residence, consistent with its existing policy.\14\
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    \13\ Some states elect to withhold disclosing to the public, in 
whole or in part, the address for a branch office of an investment 
adviser if the branch office also is a private residence.
    \14\ FINRA believes that disclosure of the full address is 
appropriate where a member has registered the home office as a 
registered branch office and not relied on the primary residence 
exemption from branch office registration.
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    No Requirement to Submit Amended Forms BR by a Date Certain. 
Members with existing registered branch offices will not be required to 
file an Updated Form BR for such existing offices immediately upon 
deployment of the amended form, but will be required to provide the 
proposed new information items on the Updated Form BR when the member 
is otherwise required, in the ordinary course, to amend the form to 
update existing information items that have become inaccurate or 
incomplete.\15\ FINRA expects to evaluate the number of registered 
branch offices of FINRA members for which an Updated Form BR has not 
been filed (and, therefore, for which FINRA and other regulators do not 
have the proposed new information items) one year after deployment of 
the Form. Based on that evaluation, FINRA may consider imposing a 
future deadline for providing that proposed new information items [sic] 
in the Updated Form BR if a significant number of registered branch 
offices have not filed the information through an amendment in the 
ordinary course.
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    \15\ Member firms have a continuing obligation to promptly 
update Form BR whenever the information becomes inaccurate or 
incomplete. See supra note 4.
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    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 60 days following 
Commission approval. The effective date will be no later than 90 days 
following publication of the Regulatory Notice announcing Commission 
approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\16\ 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 the Updated Form BR is necessary at 
this time to ensure that the form remains current and accurate by 
reflecting changes to applicable rules and regulations of the relevant 
participating jurisdictions, including specifically the regulatory 
consolidation of the NYSE and NASD (e.g., deletion of current Section 6 
(NYSE Branch Information)). Further, the Updated Form BR will provide a 
more comprehensive profile of each firm's registered branch offices and 
thereby allow regulators to better prioritize and plan examinations.
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    \16\ 15 U.S.C. 78o-3(b)(6).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed changes to Form BR will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. FINRA is 
proposing to amend Form BR to reflect changes to applicable rules and 
regulations of the relevant participating jurisdictions, including 
specifically the regulatory consolidation of the NYSE and NASD, making 
the form more current and accurate. FINRA believes the operational 
burden associated with completion of the proposed Updated Form BR will 
be minimal for NYSE-registered firms because such firms already report 
space sharing arrangements and the location of books and records for 
each registered branch office on Form BR.\17\ FINRA believes all other 
firms should have this information readily available, as the questions 
are consistent with the types of information that members typically 
track for purposes of conducting their supervisory reviews and 
inspections of branch offices.
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    \17\ To the extent possible, FINRA will identify information 
relating to space sharing arrangements and the location of books and 
records previously reported by NYSE-registered firms on Form BR that 
will be responsive to the questions being retained on the Updated 
Form BR (i.e., in proposed new Section 4--Branch Office 
Arrangements) and will transfer that information to the appropriate 
data fields. However, firms will be required to verify the accuracy 
of the information that has been transferred to the Updated Form BR.
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    Further, FINRA believes the proposed Updated Form BR will provide a 
more comprehensive profile of each firm's registered branch offices, 
which will create efficiencies by allowing regulators and firms to 
better understand the activities occurring at each registered branch 
office and conduct more focused and effective examinations.
    In addition, FINRA believes that the proposed rule change presents 
a modest burden upon firms because the proposed Updated Form BR does 
not impose an affirmative duty for members to immediately submit the 
amended form upon deployment, but only requires members to provide the 
proposed new information items on the Updated Form BR at the time the 
member otherwise is required, in the ordinary course, to update 
existing information items that have become inaccurate or incomplete on 
the Form BR.
    Therefore, FINRA believes the incremental compliance costs of 
providing the proposed new information items on the Updated Form BR 
should not impose a burden on competition not necessary or appropriate 
in furtherance of the Act and in light of the benefits described above.

(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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or

[[Page 75958]]

    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2013-051 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2013-051. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2013-051 and should be 
submitted on or before January 3, 2014.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29739 Filed 12-12-13; 8:45 am]
BILLING CODE 8011-01-P