Document ID: SEC-2020-2067-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2020-12-28T05:00Z

[Federal Register Volume 85, Number 248 (Monday, December 28, 2020)]
[Notices]
[Pages 84396-84397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28509]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90734; File No. SR-FINRA-2020-030]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
the Proposed Rule Change, as Modified by Amendment No. 1, To Amend the 
Codes of Arbitration Procedure Relating To Requests To Expunge Customer 
Dispute Information, Including Creating a Special Arbitrator Roster To 
Decide Certain Expungement Requests

December 18, 2020.

I. Introduction

    On September 22, 2020, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-FINRA-2020-030 (``Proposed 
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder to 
modify the current process relating to the expungement of customer 
dispute information.\3\ The Proposed Rule Change was published for 
public comment in the Federal Register on October 1, 2020.\4\ On 
November 12, 2020, FINRA consented to an extension of the time period 
in which the Commission must approve the Proposed Rule Change, 
disapprove the Proposed Rule Change, or institute proceedings to 
determine whether to approve or disapprove the Proposed Rule Change to 
December 30, 2020.\5\ On December 18, 2020, FINRA responded to the 
comment letters received in response to the Notice and filed an 
amendment to modify the Proposed Rule Change (``Amendment No. 1'').\6\ 
The Commission is publishing this order pursuant to Section 19(b)(2)(B) 
of the Exchange Act \7\ to solicit comments on Amendment No. 1 from 
interested persons and to institute proceedings to determine whether to 
approve or disapprove the Proposed Rule Change, as modified by 
Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See infra note 4.
    \4\ Exchange Act Release No. 90000, (Sep. 25, 2020), 85 FR 62142 
(Oct. 1, 2020) (File No. SR-FINRA-2020-030) (``Notice'').
    \5\ See letter from Mignon McLemore, Assistant General Counsel, 
Office of General Counsel, FINRA, to Lourdes Gonzalez, Assistant 
Chief Counsel, Division of Trading and Markets, Commission, dated 
November 12, 2020.
    \6\ See letter from Mignon McLemore, Assistant General Counsel, 
Office of General Counsel, FINRA, to Vanessa Countryman, Secretary, 
Commission, dated December 18, 2020.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    FINRA is proposing to amend the Code of Arbitration Procedure for 
Customer Disputes (``Customer Code'') and the Code of Arbitration 
Procedure for Industry Disputes (``Industry Code'') (together, 
``Codes'') to modify the current process relating to the expungement of 
customer dispute information. Specifically, the Proposed Rule Change 
would amend the Codes to: (1) Impose requirements on expungement 
requests (a) filed during an investment-related, customer initiated 
arbitration (``customer arbitration'') by an associated person, or by a 
party to the customer arbitration on-behalf-of an associated person, or 
(b) filed by an associated person separate from a customer arbitration 
(``straight-in request''); (2) establish a roster of arbitrators with 
enhanced training and experience from which a three-person

[[Page 84397]]

panel would be randomly selected to decide straight-in requests; (3) 
establish procedural requirements for expungement hearings; and (4) 
codify and update the best practices of the Notice to Arbitrators and 
Parties on Expanded Expungement Guidance (``Guidance'') that 
arbitrators and parties must follow.\8\ In addition, the Proposed Rule 
Change would amend the Customer Code to specify procedures for 
requesting expungement of customer dispute information arising from 
simplified arbitrations. The Proposed Rule Change would also amend the 
Codes to establish requirements for notifying state securities 
regulators and customers of expungement requests.
---------------------------------------------------------------------------

    \8\ See Guidance, available at https://www.finra.org/arbitration-and-mediation/notice-arbitrators-and-parties-expanded-expungement-guidance.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove File No. 
SR-FINRA-2020-030 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule 
Change, as modified by Amendment No.1, should be approved or 
disapproved.\9\ Institution of proceedings is appropriate at this time 
in view of the legal and policy issues raised by the Proposed Rule 
Change, as modified by Amendment No.1. Institution of proceedings does 
not indicate that the Commission has reached any conclusions with 
respect to the Proposed Rule Change, as modified by Amendment No.1.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\10\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis and input concerning whether the Proposed Rule 
Change, as modified by Amendment No.1, is consistent with the Exchange 
Act and the rules thereunder.
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

IV. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the Proposed Rule Change, as modified by Amendment No. 1. In 
particular, the Commission invites the written views of interested 
persons concerning whether the Proposed Rule Change, as modified by 
Amendment No. 1, is consistent with the Exchange Act and the rules 
thereunder.
    Although there do not appear to be any issues relevant to approval 
or disapproval that would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4, any request for an opportunity to make an oral 
presentation.\11\
---------------------------------------------------------------------------

    \11\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Pub. L. 94-29, 89 Stat. 97 (1975), grants 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Report of the Senate Committee on Banking, Housing and Urban Affairs 
to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 
(1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the Proposed Rule Change, as modified by 
Amendment No. 1, should be approved or disapproved by January 19, 2021. 
Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by February 1, 2021.
    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 No. SR-FINRA-2020-030 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 No. SR- FINRA-2020-030. 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, as modified by 
Amendment No. 1, that are filed with the Commission, and all written 
communications relating to the Proposed Rule Change, as modified by 
Amendment No. 1, 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 No. SR-FINRA-2020-030 and 
should be submitted on or before January 19, 2021. If comments are 
received, any rebuttal comments should be submitted on or before 
February 1, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28509 Filed 12-23-20; 8:45 am]
BILLING CODE 8011-01-P