
[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9523-9531]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03564]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71534; File No. SR-FINRA-2014-005]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Broadening Arbitrators' Authority To Make Referrals During an 
Arbitration Proceeding

February 12, 2014.
    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 29, 2014, 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, 
II, and III below, which Items have been substantially prepared by 
FINRA.\3\ 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\ This notice includes some clarifying changes from the Form 
19b-4 filed with the Commission that were discussed with FINRA. 
Telephone conversation on February 12, 2014 among Mignon McLemore of 
FINRA and John Fahey and Darren Vieira of the Commission.
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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 Rule 12104 of the Code of Arbitration 
Procedure for Customer Disputes (``Customer Code'') and Rule 13104 of 
the Code of Arbitration Procedure for Industry Disputes (``Industry 
Code'') (together, ``Codes'') to broaden

[[Page 9524]]

arbitrators' authority to make referrals during an arbitration 
proceeding.
    In July 2010, FINRA filed a proposal with the Commission to amend 
Rules 12104 and 13104 of the Codes to permit arbitrators to make 
referrals to FINRA during an arbitration case, and to adopt new rules 
to address the assessment of hearing session fees, costs, and expenses 
if an arbitrator made a referral during a case that resulted in 
withdrawal of the entire panel (``original proposal'').\4\ Under the 
original proposal, if an arbitrator made a mid-case referral, a party 
could request that the referring arbitrator withdraw. Upon a party's 
request that the referring arbitrator withdraw, the entire panel also 
would have been required to withdraw. In July 2011, FINRA responded to 
comments received by the SEC by filing Amendment No. 1,\5\ which 
replaced the original proposal in its entirety.
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    \4\ See Securities Exchange Act Rel. No. 62930 (Sept. 17, 2010), 
75 FR 58007 (Sept. 23, 2010) (SR-FINRA-2010-036).
    \5\ See Securities Exchange Act Rel. No. 64954 (July 25, 2011), 
76 FR 45631 (July 29, 2011) (SR-FINRA-2010-036) (Notice of Filing 
Proposed Rule Change and Amendment No. 1 to Amend the Codes of 
Arbitration Procedure To Permit Arbitrators To Make Mid-Case 
Referrals).
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    Under Amendment No. 1, an arbitrator would have been permitted to 
make a mid-case referral if an arbitrator became aware of any matter or 
conduct that the arbitrator had reason to believe posed a serious 
ongoing or imminent threat that was likely to harm investors. A mid-
case referral could not have been based solely on allegations in the 
pleadings. Also, Amendment No. 1 would have instructed the arbitrator 
to wait until the arbitration concluded to make a referral, if investor 
protection would not have been materially compromised by the delay. 
Further, if an arbitrator made a mid-case referral, the Director of 
Arbitration (``Director'') would have disclosed the act of making the 
referral to the parties, and a party would have been permitted to 
request recusal of the referring arbitrator. Amendment No. 1 would have 
required either the President of FINRA Dispute Resolution 
(``President'') or the Director to evaluate the referral and determine 
whether to forward it to other divisions of FINRA for further review. 
Finally, Amendment No. 1 would have retained the provision in Rule 
12104(b) of the Customer Code and Rule 13104(b) of the Industry Code 
that would have permitted an arbitrator to make a post-case referral. 
The SEC received five comments on Amendment No. 1.\6\
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    \6\ See note 40, infra.
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    On January 29, 2014, FINRA withdrew SR-FINRA-2010-036 \7\ without 
responding to the comments submitted on Amendment No. 1. FINRA is 
filing the current proposal, SR-FINRA-2014-005, to replace the 
withdrawn proposal under a new rule filing number and under the SEC's 
new Rules of Practice.\8\ While this new rule filing responds to the 
comments submitted on Amendment No. 1, FINRA is not proposing to make 
any changes to the rule language filed in Amendment No. 1.
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    \7\ See SR-FINRA-2010-036, Withdrawal of Proposed Rule Change, 
available at http://www.finra.org/Industry/Regulation/RuleFilings/2010/P121722.
    \8\ See Securities Exchange Act Rel. No. 63723 (Jan. 14, 2011), 
76 FR 4066 (Jan. 24, 2011), Final Rule (adopting new Rules of 
Practice to formalize the process used when conducting proceedings 
to determine whether an SRO's proposed rule change should be 
disapproved under Section 19(b)(2) of the Exchange Act).
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    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
Background
    In light of well publicized securities markets schemes that 
resulted in harm to investors, FINRA has reviewed the Codes and 
determined that its rules on arbitrator referrals should be amended to 
permit arbitrators to make referrals during an arbitration proceeding, 
rather than solely at the conclusion of a matter as is currently the 
case.
    Currently, Rule 12104(b) of the Customer Code and Rule 13104(b) of 
the Industry Code state, in relevant part, that any arbitrator may 
refer to FINRA for disciplinary investigation any matter that has come 
to the arbitrator's attention during and in connection with the 
arbitration only at the conclusion of an arbitration (emphasis added). 
FINRA is concerned that the current rule's requirement that arbitrators 
in all instances must wait until a case is concluded before making a 
referral could hamper FINRA's efforts to uncover threats to investors 
as early as possible. FINRA is proposing, therefore, to broaden the 
arbitrators' authority under the Codes to make referrals during the 
hearing phase of an arbitration in those extremely rare circumstances 
in which investor protection requires that the referral not be delayed.
The Proposed Rule Change \9\
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    \9\ FINRA is proposing to amend Rules 12104 and 13104 of the 
Codes. To simplify the explanation, FINRA's discussion of the 
proposed changes focuses on changes to Rule 12104. However, as the 
proposed changes are the same for Rule 13104, the discussion also 
applies to Rule 13104.
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Rule 12104--Effect of Arbitration on FINRA Regulatory Activities
    First, FINRA proposes to add the phrase ``Arbitrator Referral 
During or at Conclusion of Case'' to the title of Rule 12104 so that it 
reflects accurately the proposed changes. The new title would read: 
``Effect of Arbitration on FINRA Regulatory Activities; Arbitrator 
Referral During or at Conclusion of Case.''
    Second, the current rule would be rearranged to reflect the order 
in which an arbitrator may make a referral in an arbitration case. 
Subparagraph (a) would remain unchanged. The language in current 
subparagraph (b) of the rule, which addresses arbitrator referrals made 
only at the conclusion of the case (hereinafter, ``the post-case 
referral provision''), would be amended and moved to new subparagraph 
(e). In its place, FINRA would insert new rule language in subparagraph 
(b) to address arbitrator referrals made during the hearing phase of an 
arbitration (hereinafter, ``the mid-case referral provision''). New 
subparagraph (c) would require the Director to disclose the mid-case 
referral to the parties and permit the parties to request the referring 
arbitrators' recusal, as is currently permitted under the Code. New 
subparagraph (d) would provide the President and the Director with the 
authority to evaluate the arbitrator referral to determine whether to 
transmit it to other divisions of FINRA. Finally, new subparagraph (e) 
would contain the rule language in current subparagraph (b), with some 
minor amendments to address post-case referrals.

[[Page 9525]]

Rule 12104(b)--Mid-Case Referral Provision
    Rule 12104(b) would be amended to state that during the pendency of 
an arbitration, any arbitrator may refer to the Director any matter or 
conduct that has come to the arbitrator's attention during the hearing, 
which the arbitrator has reason to believe poses a serious threat, 
whether ongoing or imminent, that is likely to harm investors unless 
immediate action is taken. The proposed rule would also state that 
arbitrators should not make referrals during the pendency of an 
arbitration based solely on allegations in the statement of claim, 
counterclaim, cross claim, or third party claim. Further, the proposed 
rule would state that if a case is nearing completion, the arbitrator 
should wait until the case concludes to make the referral if, in the 
arbitrator's judgment, investor protection would not be materially 
compromised by this delay.
    The first element of proposed Rule 12104(b) contains two 
prerequisites. The first prerequisite would permit any arbitrator \10\ 
to make a mid-case referral to the Director but only after the 
commencement of an evidentiary hearing. The proposal would limit mid-
case referrals so that they would be based on evidence presented by the 
parties during a hearing. FINRA believes this limitation would ensure 
that arbitrators have reviewed or heard actual evidence that would 
enable them to make an informed decision before making a mid-case 
referral, and would thus eliminate unnecessary mid-case referrals. 
Furthermore, Dispute Resolution routinely provides copies of 
arbitration claims and other pleadings to other FINRA divisions for 
analysis; thus, mid-case referrals based only on the pleadings are not 
necessary to apprise these divisions of possible wrongdoing.
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    \10\ Under the proposal, an arbitrator on a three-person panel 
may make a mid-case referral alone or together with either or both 
of the other arbitrators on the panel.
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    The second prerequisite would require that, before making a mid-
case referral, the arbitrator must have reason to believe the serious 
threat, whether ongoing or imminent, is likely to harm investors unless 
immediate action is taken. Under the proposed standard for referral, 
the referring arbitrator would not need to conclude that there is a 
threat; the arbitrator would only need to have reason to believe that a 
threat, whether ongoing or imminent, is likely to harm investors unless 
immediate action is taken. FINRA believes the proposed standard for 
making a mid-case referral would reduce the potential for a finding of 
arbitrator bias and would help a prevailing investor defend against a 
possible motion to vacate the award.
    The Federal Arbitration Act (``FAA'') establishes four grounds for 
vacating an arbitration award, one of which is evident partiality.\11\ 
Arbitrator evident partiality encompasses both an arbitrator's explicit 
bias toward one party and an arbitrator's implicit bias when an 
arbitrator fails to disclose relevant information to the parties.\12\ 
``The party alleging evident partiality must establish specific facts 
which indicate improper motives'' on the part of the arbitrators.\13\ 
The appearance of impropriety, standing alone, is insufficient.\14\ In 
the context of mid-case referrals, FINRA acknowledges that a party may 
challenge an award on the ground that an arbitrator's mid-case referral 
demonstrates an arbitrator's evident partiality. For purposes of 
Section 10(a) of the FAA, courts have found that situations involving 
``evident partiality'' include an arbitrator's financial interest in 
the outcome of the arbitration,\15\ or an arbitrator's failure to 
disclose prior consulting work for a party,\16\ for example. However, 
courts have not found that a situation rises to the level of evident 
partiality where an arbitrator forms an opinion using evidence 
presented during a hearing and then acts on that evidence.\17\
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    \11\ An award may be vacated upon the application of any party 
to the arbitration: (1) Where the award was procured by corruption, 
fraud, or undue means; (2) where there was evident partiality or 
corruption in the arbitrators, or either of them; (3) where the 
arbitrators were guilty of misconduct in refusing to postpone the 
hearing, upon sufficient cause shown, or in refusing to hear 
evidence pertinent and material to the controversy, or of any other 
misbehavior by which the rights of any party have been prejudiced; 
or (4) where the arbitrators exceeded their powers, or so 
imperfectly executed them that a mutual, final, and definite award 
upon the subject matter submitted was not made. See 9 U.S.C. 10(a).
    \12\ Windsor, Kathryn A. (2012) ``Defining Arbitrator Evident 
Partiality: The Catch-22 Of Commercial Litigation Disputes,'' Seton 
Hall Circuit Review: Vol. 6: Iss. 1, Article 7, p. 192. Available 
at: http://erepository.law.shu.edu/circuit_review/vol6/iss1/7.
    \13\ Sheet Metal Workers International Association Local Union 
420 v. Kinney Air Conditioning Co., 756 F.2d 742, 746 (9th Cir. 
1985).
    \14\ Kinney, 756 F.2d at 746 (citing International Produce, Inc. 
v. Rosshavet, 638 F.2d 548, 551 (2d Cir.), cert. denied, 451 U.S. 
1017 (1981)).
    \15\ Id.
    \16\ Commonwealth Coatings Corp. v. Continental Casualty Co., 
393 U.S. 145, 146, 89 S. Ct. 337 (1968), reh. den. 393 U.S. 1112, 89 
S. Ct. 848 (1968).
    \17\ Ballantine Books Inc. v. Capital Distributing Company, 302 
F.2d 17, 21 (2nd Cir. 1962). See also Bell Aerospace Co. v. Local 
516, UAW, 500 F.2d 921, 923 (2nd Cir. 1974).
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    Further, courts expect that after an arbitrator has heard 
considerable testimony, the arbitrator will have some view of the 
case.\18\ As long as that view is one that arises from the evidence and 
the conduct of the parties, courts have found that it cannot be fairly 
claimed that some expression of that view amounts to bias.\19\ FINRA 
believes, therefore, that, as arbitrators are expected to form opinions 
based on evidence presented to them after they are appointed, a 
prevailing investor's award would not likely be vacated because 
arbitrators acted on their views, in the form of a mid-case referral, 
prior to the conclusion of the proceedings.\20\
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    \18\ Ballantine, 302 F.2d at 21.
    \19\ Id. See also Health Services Management Corp. v. Hughes, 
975 F.2d 1253, 1267 (7th Cir. 1992).
    \20\ Health Services Management Corp., 975 F.2d at 1267.
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    The second element of proposed Rule 12104(b) would state that 
arbitrators must not make mid-case referrals based only on allegations 
in the statement of claim, counterclaim, cross claim, or third party 
claim. Thus, mid-case referrals could not be based solely on the 
parties' pleadings.\21\ Because Dispute Resolution routinely provides 
copies of arbitration claims and other pleadings to other FINRA 
divisions for analysis, mid-case referrals based only on the pleadings 
are not necessary to apprise those divisions of possible 
wrongdoing.\22\ By ensuring that a mid-case referral is based on 
testimony and other evidence presented at the hearing on the merits, 
the rule would limit mid-case referrals to situations where facts 
warranting a referral may not generally be known to FINRA regulators.
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    \21\ A pleading is a statement describing a party's causes of 
action or defenses. Documents that are considered pleadings are: a 
statement of claim, an answer, a counterclaim, a cross claim, a 
third party claim, and any replies. Rule 12100(s) of the Customer 
Code and Rule 13100(s) of the Industry Code.
    \22\ Dispute Resolution provides copies of all statements of 
claim, amended initial claims, counterclaims, amended counterclaims, 
cross claims, amended cross claims, third party claims, amended 
third party claims, and answers in promissory note cases to the 
Central Review Group (``CRG''), which is part of the Office of Fraud 
Detection and Market Intelligence, to analyze for fraudulent 
securities activity. If this analysis indicates possible securities 
violations, CRG may alert Enforcement for further review.
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    The final element of proposed Rule 12104(b) would instruct the 
arbitrators to delay their referral until the conclusion of a case if, 
in the arbitrator's judgment, investor protection will not be 
materially compromised by a short delay in making the mid-case 
referral. Arbitrators may have the opportunity to exercise such 
judgment if, for example, during the third of four consecutively

[[Page 9526]]

scheduled hearing days,\23\ they learn of a serious, ongoing or 
imminent threat that meets the criteria of the proposed rule. If the 
arbitrators anticipate that they can complete their remaining tasks 
shortly after the last hearing session is conducted on the fourth day, 
the arbitrators could defer making the mid-case referral until the case 
concludes so that they would not delay significantly the conclusion of 
the case.\24\ In deciding whether to delay making a mid-case referral, 
however, arbitrators should weigh the potential harm a mid-case 
referral could have on the individual claimant against the possible 
harm to the markets and other investors that a brief delay could cause.
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    \23\ The average arbitration hearing takes about 5 days.
    \24\ If the referring arbitrator delays making the referral 
until the conclusion of the case, the referral would then take place 
under the proposed Rule 12104(e), which provides for referrals at 
the conclusion of a case.
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    FINRA contemplates that the mid-case referral rule would typically 
be used in those circumstances where hearings are scheduled for many 
days, or even weeks, and, in particular, when the hearing days are not 
scheduled consecutively. In the example above, if four hearing days 
were scheduled, but not consecutively, and this scheduling resulted in 
a significant time gap between when they learned of the ongoing or 
imminent threat and the potential conclusion of the case, then a delay 
in making a mid-case referral would not likely be appropriate. The 
proposed rule would encourage arbitrators to determine, based on their 
judgment and the facts and circumstances of the case, whether a mid-
case or post-case referral is more appropriate.
    Accordingly, FINRA believes that, as a result of the strict 
criteria in proposed Rule 12104(b), there would be very few mid-case 
referrals.
Rule 12104(c)--Arbitrator Disclosure and Arbitrator Recusal
    To make a referral under proposed Rule 12104(c), the arbitrator 
would notify the Director, who, in turn, would notify the parties about 
the arbitrator's act of making the referral. The proposed rule also 
states that a party may request that the referring arbitrators recuse 
themselves, as provided in the Codes.
    FINRA believes that if an arbitrator makes a mid-case referral, 
this information must be disclosed to the parties.\25\ This disclosure 
might prompt a party to make a recusal motion, which a party currently 
may do under the Codes.\26\ However, it is FINRA's view that an 
arbitrator would not be required to withdraw from the case because of 
the act of making a mid-case referral. Under the Codes, an arbitrator 
who is the subject of a recusal request has the discretion to decide 
whether to withdraw from the case.\27\ FINRA rules do not dictate the 
grounds for granting recusal requests and do not require specific 
decisions by arbitrators in response to such requests. Consistent with 
other recusal requests, an arbitrator challenged because of a mid-case 
referral is required to make that decision in accordance with the Codes 
\28\ and the Code of Ethics for Arbitrators in Commercial Disputes.\29\ 
FINRA does not believe the proposed rule should change this authority, 
or the right of a non-moving party to oppose the request.
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    \25\ See Commonwealth Coatings Corp., 393 U.S. 145, 
(establishing a broad requirement that arbitrators make full 
disclosures of facts that could create an ``impression of bias'').
    \26\ Rule 12406 of the Customer Code and Rule 13409 of the 
Industry Code.
    \27\ Id.
    \28\ Id.
    \29\ See The Code of Ethics for Arbitrators in Commercial 
Disputes, Canon II(G). Section G states, in relevant part, that ``if 
an arbitrator is requested to withdraw by less than all of the 
parties because of alleged partiality, the arbitrator should 
withdraw unless either of the following circumstances exists: (1) An 
agreement of the parties, or arbitration rules agreed to by the 
parties, or applicable law establishes procedures for determining 
challenges to arbitrators, in which case those procedures should be 
followed; or (2) in the absence of applicable procedures, if the 
arbitrator, after carefully considering the matter, determines that 
the reason for the challenge is not substantial, and that he or she 
can nevertheless act and decide the case impartially and fairly.''
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    Thus, under the proposed rule, neither the referring arbitrator nor 
the panel would be required to recuse itself upon a party's recusal 
motion to the referring arbitrator. This means that the entire panel 
could remain after a party's recusal motion, and the case would proceed 
as normal. This should minimize the possibility that the arbitration 
where a mid-case referral occurs would have to start anew; thus, the 
investor would be less likely to experience procedural disadvantages, 
significant delays, or increased costs.
    Moreover, if a referring arbitrator from a three-person panel, in 
his or her discretion, grants a recusal request, the parties may agree 
to proceed with the remaining two arbitrators to limit expenses rather 
than seek a replacement arbitrator.\30\ If the parties agree to select 
a replacement arbitrator, or the parties do not agree on the issue of a 
replacement, FINRA would appoint a replacement arbitrator.
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    \30\ Rules 12403(c)(6) and 12403(d)(6)(A), 12403(d)(7)(A) and 
12403(d)(8)(A) of the Customer Code and Rule 13411 of the Industry 
Code.
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    If an arbitrator from a three-person panel is replaced, the parties 
may agree to methods of saving time and costs, such as rehearing only 
one or two key witnesses, or stipulating to summaries of prior 
testimony.\31\ If an arbitrator from a single-arbitrator panel agrees 
to a recusal request after making a mid-case referral, FINRA would 
appoint a replacement arbitrator who would review the hearing record 
(e.g., digital recordings and exhibits), and the case would proceed 
from where it was interrupted.
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    \31\ Rule 12105 of the Customer Code and Rule 13105 of the 
Industry Code.
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    In either instance, FINRA would pay the replacement arbitrator to 
review the hearing record and learn about the arbitration case up to 
the point at which it was interrupted. Pursuant to forum policy, the 
parties would not be assessed this fee.
    While FINRA cannot eliminate the attendant costs or potential 
delays that may arise if an arbitrator grants a recusal request after a 
mid-case referral, the Codes provide parties with tools to minimize 
them. Further, under the circumstances that would warrant a mid-case 
referral, the referral could save a substantial number of non-party 
investors from losses or costs.
Rule 12104(d)--Authority To Forward the Arbitrator Referral to FINRA 
Divisions
    Proposed Rule 12104(d) would authorize only the President or 
Director to evaluate the arbitrator referral to determine whether it 
should be transmitted to other FINRA divisions to begin a regulatory 
investigation.
    Under this provision, the President or Director would have the 
discretion not to forward information revealed during hearings that an 
arbitrator believed warranted a mid-case referral. Whether or not the 
mid-case referral is forwarded, the staff \32\ would disclose to the 
parties that an arbitrator had made a mid-case referral to the 
President or Director.
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    \32\ In this case, FINRA staff, likely a case administrator, 
would serve as the delegate for the Director, pursuant to delegated 
authority. Rules 12100(k) and 13100(k).
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    This provision would ensure that an experienced regulator reviews 
the referral in order to alert the appropriate FINRA divisions. In most 
cases, the President or Director would forward the mid-case referral, 
unless the President or Director knows that an investigation involving 
such matter or conduct has begun.
Rule 12104(e)--Post-Case Referral Provision
    The language in current subparagraph (b) of Rule 12104, which 
addresses

[[Page 9527]]

arbitrator referrals made only at the conclusion of the case, would be 
amended and moved to new subparagraph (e).
    The current rule states that ``only at the conclusion of an 
arbitration, any arbitrator may refer to FINRA for disciplinary 
investigation any matter that has come to the arbitrator's attention 
during and in connection with the arbitration, either from the record 
of the proceeding or from material or communications related to the 
arbitration, which the arbitrator has reason to believe may constitute 
a violation of NASD or FINRA rules, the federal securities laws, or 
other applicable rules or laws.''
    The proposal would continue to permit arbitrators to make post-case 
referrals. However, FINRA would remove the term ``disciplinary'' to 
ensure that the scope of potential referrals is not limited to 
disciplinary findings, and would add the phrase ``or conduct,'' so that 
the subject-matter of Rule 12104 is consistent throughout the proposed 
rule. Also, the proposed rule would be amended to replace the reference 
to violations of ``NASD or FINRA rules'' with ``the rules of'' FINRA 
because the current FINRA rulebook consists of FINRA Rules, NASD Rules, 
and incorporated NYSE Rules.
    Dispute Resolution would continue the current practice of 
forwarding all post-case arbitrator referrals to FINRA's regulatory 
divisions for review.
Conclusion
    FINRA believes the proposal would strengthen its regulatory 
structure and provide additional protection to investors and the 
securities markets. In addition, FINRA believes the proposed rule 
change would provide it with an important tool for detecting and 
addressing serious ongoing or imminent threats to investors that may 
only be known to the participants in the arbitration.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\33\ 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. The proposed rule change is consistent with FINRA's 
statutory obligations under the Act to protect investors and the public 
interest because the proposal could help FINRA detect serious ongoing 
or imminent threats to the securities markets at an earlier stage, 
which could help curb the financial losses of investors as well as the 
effects these threats could have on investors if left unchecked. Thus, 
the proposed rule change would strengthen FINRA's ability to carry out 
its regulatory mission and provide additional protection to investors 
and the markets.
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    \33\ 15 U.S.C. 78o-3(b)(6).
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    As noted in Item 2 of this filing, 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 30 days following publication of 
the Regulatory Notice announcing Commission approval.

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

    FINRA does not believe that the proposed rule change will be a 
burden on competition. All members would be subject to the proposed 
rule change, so they would be affected in the same manner.
    While the proposed rule change would not be a burden on competition 
for members, FINRA acknowledges that an individual claimant may 
experience delays and costs if an arbitrator makes a mid-case referral 
under the proposed rule change and the arbitrator recuses himself or 
herself as a result. However, the procedural safeguards of the proposed 
rule change would help to ameliorate the negative effects such a 
referral could have on the individual claimant's case. These procedural 
safeguards would help minimize delays and cumbersome administrative 
procedures, and reduce the potential for a finding of arbitrator bias, 
which would help a prevailing investor defend against a motion to 
vacate. When balancing the potential outcomes of possible serious 
misconduct that goes undetected, FINRA believes the proposed rule 
change would save a substantial number of other investors from 
significant losses, which would outweigh the risk of potentially 
increasing hearing costs for an individual claimant.
    In addition, the proposed rule change would help FINRA detect 
serious, ongoing or imminent threats to investors at an earlier stage, 
which could help curb the financial losses of investors as well as the 
effects these threats could have on investors if left unchecked. For 
these reasons, FINRA believes the proposal would not burden 
competition, but, instead, would strengthen FINRA's regulatory 
structure and provide additional protection to investors.
    In assessing the economic impact of the proposed rule change, FINRA 
considered the comments submitted on the original proposal \34\ to 
guide further the process of balancing the risk of potentially 
increasing the costs to an individual investor against the harm of 
significant losses to a larger group of investors. Amendment No. 1 
incorporated FINRA's economic impact assessment by focusing on 
minimizing the costs to the individual claimant under the proposed rule 
change.
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    \34\ See note 38, infra.
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    First, Amendment No. 1 addressed a chief concern raised by the 
commenters with the original proposal by removing the requirement that 
the entire panel withdraw upon a party's request that a referring 
arbitrator withdraw. Under the original proposal, this procedural step 
would likely have required the arbitration case to start over, thereby 
increasing the individual claimant's costs (as well as those of the 
respondent) and delaying resolution of the dispute. In Amendment No. 1, 
FINRA changed the withdrawal requirement to permit a party to submit a 
recusal motion to the referring arbitrator upon learning of the mid-
case referral.
    FINRA notes that under Amendment No. 1, which is identical to the 
current proposal, the referring arbitrator would not have been required 
to grant a recusal motion upon a party's request. FINRA rules do not 
dictate the grounds for granting recusal requests and do not require 
written decisions by arbitrators in response to such requests.\35\ 
Amendment No. 1 reflects FINRA's view that arbitrators who make a mid-
case referral are not required to recuse themselves. Therefore, the 
entire panel could remain after a party's recusal motion, and the case 
would proceed. As a result, the individual claimant would be less 
likely to experience procedural disadvantages, significant delays, and 
increased costs, because Amendment No. 1 minimizes the possibility that 
the arbitration would start anew.
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    \35\ See note 51, infra.
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    Second, the Codes provide parties with tools to minimize these 
costs and delays if a referring arbitrator, in his or her discretion, 
grants a recusal request. For example, the parties could proceed with 
the remaining two arbitrators in a case with a three-arbitrator panel 
to limit expenses, rather than seek a replacement arbitrator.\36\ 
Alternatively, the parties could agree to other methods to save time 
and cost, such as rehearing

[[Page 9528]]

only one or two key witnesses, or stipulating to summaries of prior 
testimony.\37\ Further, a party could seek recovery of any additional 
costs as part of an award.
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    \36\ See note 56, infra.
    \37\ See note 57, infra.
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    Third, under forum policy, if an arbitrator agrees to a recusal 
request after making a mid-case referral and the parties do not agree 
on how to proceed, FINRA would appoint a replacement arbitrator to 
review the hearing record, and the case would proceed from where it was 
interrupted. FINRA would pay the replacement arbitrator to review the 
hearing record and other case documents. The parties would not be 
assessed any fees in conjunction with those payments.
    FINRA recognizes that Amendment No. 1, like the current proposed 
rule change, would not have eliminated all of the potential costs or 
delays that may occur if an arbitrator grants a recusal request. In 
light of its economic impact assessment, FINRA believes that the 
proposed rule change provides targeted solutions to address some of the 
measurable economic effects on the individual claimant.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    On July 12, 2010, FINRA filed the original proposal with the SEC to 
amend Rules 12104 and 13104 of the Codes; the proposal would have 
permitted arbitrators to make referrals during an arbitration. The SEC 
published the original proposal in the Federal Register on September 
23, 2010.\38\ The original proposal would have provided arbitrators 
with express authority to alert the Director during the prehearing, 
discovery, or hearing phase of a case when they learned of any matter 
or conduct that they had reason to believe posed a serious, ongoing, 
imminent threat to investors that required immediate action. Also, the 
original proposal would have required the Director to disclose the mid-
case referral to the parties, and would have required the entire panel 
to withdraw upon a party's request that a referring arbitrator 
withdraw. The SEC received eleven comments, all of which opposed the 
original proposal.\39\
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    \38\ See note 3, supra.
    \39\ See Comments on FINRA Rulemaking, Notice of Proposed Rule 
Change to Amend the Codes of Arbitration Procedure to Permit 
Arbitrators to Make Mid-case Referrals, available at http://www.sec.gov/comments/sr-finra-2010-036/finra2010036.shtml (last 
visited February 10, 2014).
---------------------------------------------------------------------------

    On July 7, 2011, in response to the comments, FINRA filed Amendment 
No. 1 (``Amendment No. 1''), which replaced the original proposal in 
its entirety.\40\ The SEC received five comments on Amendment No. 
1.\41\ FINRA withdrew Amendment No. 1 prior to filing a response to 
comments.\42\ Accordingly, FINRA discusses the comments to Amendment 
No. 1 and its responses below.
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    \40\ See Securities Exchange Act Rel. No. 64954 (July 25, 2011), 
76 FR 45631 (July 29, 2011) (File No. SR-FINRA-2010-036, Notice of 
Filing of Proposed Rule Change and Amendment No. 1 to Amend the 
Codes of Arbitration Procedure to Permit Arbitrators to Make Mid-
Case Referrals).
    \41\ Comments on Amendment No. 1 were submitted from: Peter J. 
Mougey, President, Public Investors Arbitration Bar Association, 
Aug. 18, 2011 (``PIABA Comment''); Richard P. Ryder, Esquire, 
Securities Arbitration Commentator, Inc., Aug. 27, 2001 (``Ryder 
Comment''); William A. Jacobson, Esq., Director, Cornell Securities 
Law Clinic, Aug. 22, 2011 (``Cornell Comment''); Seth E. Lipner, 
Professor of Law, Baruch College, Sept. 8, 2011 (``Lipner 
Comment''); and Barry D. Estell, Attorney at Law, Sept. 12, 2011 
(``Estell Comment'').
    \42\ See note 6, supra.
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    Disclosure of Mid-case Referral to Parties:
    Three commenters \43\ opposed proposed Rule 12104(c) of Amendment 
No. 1, which would have required the Director to disclose to the 
parties when an arbitrator makes a mid-case referral, and would have 
permitted a party to request recusal of the referring arbitrator. These 
commenters noted that the proposed rule would have permitted counsel 
for the party that is the subject of the referral to request recusal of 
the referring arbitrator based solely on the act of making the 
referral.\44\ Two commenters suggested that FINRA amend proposed Rule 
12104(c) to provide that making a mid-case referral would not be 
grounds for recusal of an arbitrator.\45\
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    \43\ PIABA Comment, Cornell Comment, and Estell Comment.
    \44\ Id.
    \45\ The Cornell Comment suggested amending Rule 12104(b) only 
to state that a referral under the rule would not be grounds for 
recusal or removal of an arbitrator. The Estell Comment supported 
this suggestion. However, the Ryder Comment opposed the suggestion.
---------------------------------------------------------------------------

    Disclosure of an arbitrator's mid-case referral is consistent with 
an arbitrator's duty to disclose potential sources of bias.\46\ This 
disclosure might prompt a party to make a recusal motion, which a party 
currently may do under the Codes in other circumstances.\47\ However, 
an arbitrator would not be required to withdraw from the case because 
of a mid-case referral. Under the Codes, an arbitrator who is the 
subject of a recusal request has the discretion to decide whether to 
withdraw from the case.\48\ Amendment No. 1 did not propose to change 
this authority, or the right of a non-moving party to oppose the 
request. Three commenters to the original proposal \49\ cited case law 
that suggests arbitrators are expected to form opinions based on the 
evidence presented to them after they are appointed, and such an 
expression of those views prior to the conclusion of the case would not 
be considered proof of bias.\50\ FINRA believes the disclosure 
provision in Amendment No. 1 is consistent with current practice and 
case law and declines to change it in response to the comments.
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    \46\ See Commonwealth Coatings Corp., 393 U.S. 145 (establishing 
a broad requirement that arbitrators make full disclosures of facts 
that could create an ``impression of bias'').
    \47\ Rule 12406 of the Customer Code and Rule 13409 of the 
Industry Code.
    \48\ Id.
    \49\ Theodore M. Davis, Esq. Law Office of Theodore M. Davis, 
Oct. 11, 2010; Dale Ledbetter, Ledbetter & Associates, P.A., Oct. 
13, 2010, and Richard A. Stephens, Esq., Attorney, Oct. 11, 2010.
    \50\ See Ballantine Books Inc., 302 F.2d at 21; see also Health 
Services Management Corp., 975 F.2d at 1267.
---------------------------------------------------------------------------

    FINRA notes that the original proposal would have required the 
entire panel to withdraw upon a party's request that the referring 
arbitrator withdraw.\51\ After considering the comments and our rules 
concerning arbitrator recusal, FINRA determined not to include this 
requirement in Amendment No. 1, which is identical to the current 
proposal. Some commenters suggested that FINRA should have added rule 
language noting that a mid-case referral would not be a valid basis for 
making a motion to recuse. FINRA rules do not dictate the grounds for 
granting recusal requests and do not require specific decisions by 
arbitrators in response to such requests. Consistent with any other 
recusal requests, an arbitrator challenged because of a mid-case 
referral is required to make that decision in accordance with the 
Codes.\52\ As in Amendment No. 1, the current proposal reflects FINRA's 
view that recusal of arbitrators making a mid-case referral is not 
mandated.
---------------------------------------------------------------------------

    \51\ See note 3, supra.
    \52\ Rule 12406 of the Customer Code and Rule 13409 of the 
Industry Code.
---------------------------------------------------------------------------

    Updating Training Materials:
    One commenter suggested that FINRA update its arbitrator training 
materials and reference guides with relevant case law citations that 
support the argument that mid-case referrals should not provide new 
grounds for recusal.\53\
---------------------------------------------------------------------------

    \53\ PIABA Comment.
---------------------------------------------------------------------------

    Whenever the SEC approves a proposed rule change involving its 
dispute resolution forum, FINRA reviews its arbitrator training 
materials and reference guides and, when

[[Page 9529]]

appropriate, updates them to give guidance on the issue addressed in 
the proposed rule change.
    Impact of Mid-case Referral on Investors:
    Two commenters argued that Amendment No. 1 would have cause 
claimants to incur increased costs if an arbitrator made a mid-case 
referral under the proposed rule.\54\ The commenters expressed concern 
that replacing an arbitrator who granted a recusal request would result 
in additional time and expense to reschedule delayed hearing dates.\55\
---------------------------------------------------------------------------

    \54\ PIABA Comment and Ryder Comment.
    \55\ Id.
---------------------------------------------------------------------------

    Amendment No. 1 addressed a chief concern expressed by commenters 
with the original proposal by removing the requirement that the entire 
panel withdraw upon a party's request that a referring arbitrator 
withdraw.\56\ Under Amendment No. 1, which is identical to the current 
proposal, neither the referring arbitrator nor the panel would have 
been required to withdraw as the original proposal would have required. 
Instead, a party would have been permitted to submit a recusal motion 
to the referring arbitrator. This means that the entire panel could 
remain after a party's recusal motion, and the case could proceed as 
normal. The investor would have been less likely, therefore, to 
experience procedural disadvantages, significant delays, and increased 
costs, because Amendment No. 1 would have minimized the possibility 
that the arbitration would start anew.
---------------------------------------------------------------------------

    \56\ The Lipner Comment suggested that FINRA amend its proposal 
to provide only the investor with the option to continue with the 
existing panel or request a new panel. Amendment No. 1 removed the 
requirement that the entire panel withdraw upon a party's request 
that the referring arbitrator withdraw. Hence, FINRA believes this 
comment was addressed with the changes made by Amendment No. 1.
---------------------------------------------------------------------------

    Further, the Codes provide parties with tools to minimize these 
costs and delays, if a referring arbitrator, in his or her discretion, 
granted a recusal request under Amendment No. 1. For example, the 
parties could agree to proceed with the remaining two arbitrators in a 
three-arbitrator panel to limit expenses rather than seek a replacement 
arbitrator \57\ or could agree to other methods of saving time and 
cost, such as rehearing only one or two key witnesses, or stipulating 
to summaries of prior testimony.\58\ Further, a party could seek 
recovery of any additional costs as part of an award.
---------------------------------------------------------------------------

    \57\ Rules 12403(c)(6) and 12403(d)(6)(A), 12403(d)(7)(A) and 
12403(d)(8)(A) of the Customer Code and Rule 13411 of the Industry 
Code.
    \58\ Rule 12105 of the Customer Code and Rule 13105 of the 
Industry Code.
---------------------------------------------------------------------------

    FINRA recognizes that Amendment No. 1 could not have eliminated the 
attendant costs or potential delays that may have arisen if an 
arbitrator granted a recusal request after making a mid-case referral. 
FINRA believes, however, that the ability to retain the panel after an 
arbitrator makes a mid-case referral would ameliorate the negative 
effects that a mid-case referral could have on the individual 
claimant's case. In addition, the provisions in the Codes help parties 
minimize costs and delays in the event of an arbitrator's recusal.
    Costs of a Replacement Arbitrator:
    Some commenters \59\ contended that arbitrator discretion to assess 
costs associated with selecting and educating a replacement arbitrator 
could have exposed claimants to additional costs that they otherwise 
would not have incurred but for the past conduct of the party that was 
the subject of the mid-case referral.
---------------------------------------------------------------------------

    \59\ PIABA Comment and Cornell Comment (joining in concerns 
expressed by PIABA).
---------------------------------------------------------------------------

    If an arbitrator were to have agreed to a recusal request after 
making a mid-case referral and the parties did not agree on how to 
proceed, FINRA would have appointed a replacement arbitrator to review 
the hearing record (e.g., digital recordings and exhibits), and the 
case would have proceeded from where it was interrupted. FINRA would 
have paid the replacement arbitrator to review the hearing record and 
learn about the arbitration case up to the point at which it was 
interrupted. Pursuant to forum policy, the parties would not have been 
assessed any fees in conjunction with those payments. Thus, as these 
costs could not be allocated to the parties, FINRA did not incorporate 
the commenters' suggestion in Amendment No. 1, or in the current 
proposal.
    Motions to Vacate After a Mid-case Referral:
    One commenter suggested that the party that is the subject of the 
referral would be more likely to file a motion to vacate any award in 
favor of an investor regardless of the referring arbitrator's decision 
on the recusal motion.\60\ This commenter suggested that, even when 
courts deny motions to vacate, investors would incur additional delay 
and expense related to defending against such motions.\61\
---------------------------------------------------------------------------

    \60\ PIABA Comment.
    \61\ Id.
---------------------------------------------------------------------------

    The proposed criteria in Amendment No. 1 for a mid-case referral 
would have helped the prevailing party minimize the expense of 
defending against an attack on the award based on the use of the mid-
case referral rule. Under Amendment No. 1, a mid-case referral would 
have been based on evidence presented at a hearing, not information 
provided in the pleadings. Further, the evidence must have supported 
the arbitrator's belief that the threat was serious, either ongoing or 
imminent, and likely to harm investors unless immediate action was 
taken. Under this standard of referral, which is lower than the 
threshold in the original proposal, the referring arbitrator would not 
need to conclude that there is a violation, just that there might be a 
serious problem that required immediate action.\62\ Moreover, Amendment 
No. 1 instructed arbitrators to consider delaying their referral until 
the conclusion of a case if, in their judgment, investor protection 
would not have been materially compromised by a short delay in making 
the referral.
---------------------------------------------------------------------------

    \62\ Under the original proposal, before making a mid-case 
referral, arbitrators would have been required to have ``reason to 
believe that a matter or conduct poses a serious, ongoing or 
imminent threat to investors that requires immediate action.'' Under 
that standard, the arbitrators would have had to be certain that an 
ongoing threat existed and the threat was imminent. See note 3, 
supra.
---------------------------------------------------------------------------

    FINRA acknowledges that under Amendment No. 1, which is identical 
to the current proposal, there is a risk that a claimant would incur 
costs defending against a motion to vacate. FINRA believes, however, 
that the rule language attempts to minimize this risk by reducing the 
potential for establishing arbitrator bias to help a claimant 
successfully defend against a party's challenge to an award. Despite 
this risk, FINRA believes the theoretical cost to one claimant must be 
weighed against the potential harm to numerous other investors.
    Effect of Mid-case Referral on Case Strategy:
    Some commenters to Amendment No. 1 argued that, if an arbitrator 
made a mid-case referral, the application of the rule would negatively 
impact the investor's case strategy.\63\ Specifically, they contended 
that if parties cannot stipulate how evidence would be presented to the 
replacement arbitrator, the arbitrators, including the replacement 
arbitrator, would decide what evidence would be reviewed and how to 
proceed.\64\ Under this scenario, the commenters contended that 
investors could lose the ability to present their case as they were 
otherwise entitled to do.\65\
---------------------------------------------------------------------------

    \63\ PIABA Comment and Cornell Comment (joining in concerns 
expressed by PIABA).
    \64\ Id.
    \65\ Id.
---------------------------------------------------------------------------

    Under the Codes, if the parties cannot agree or are unable to 
provide suggestions on how to educate a replacement arbitrator, 
arbitrators are permitted to use their discretion in

[[Page 9530]]

deciding what evidence to consider and to admit.\66\ Under Amendment 
No. 1, investors would not forfeit their case strategy because the 
arbitrators, including the replacement arbitrator, would have access to 
information and evidence submitted previously. Transcripts or 
recordings from prior hearing sessions would have provided a verbatim 
account of the sessions that were conducted in accordance with the 
claimant's original strategy. Thus, under current rules, if arbitrators 
make a mid-case referral as proposed, the claimant would be able to 
propose a method of reviewing the prior evidence or testimony.
---------------------------------------------------------------------------

    \66\ Rule 12604 of the Customer Code and Rule 13604 of the 
Industry Code.
---------------------------------------------------------------------------

    Arbitrators' Code of Ethics:
    One commenter \67\ argued that Amendment No. 1 would cause an 
arbitrator who made a mid-case referral to violate the Code of Ethics 
for Arbitrators in Commercial Disputes (``Code of Ethics'').\68\ 
Specifically, the commenter argued that the arbitrator's duty of 
confidentiality could be compromised if the arbitrator acted under the 
proposed rule.\69\
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    \67\ Ryder Comment.
    \68\ See The Code of Ethics for Arbitrators in Commercial 
Disputes http://www.finra.org/ArbitrationMediation/Rules/RuleGuidance/P009525 (last visited January 23, 2014).
    \69\ Ryder Comment (citing The Code of Ethics for Arbitrators in 
Commercial Disputes (2004), Canons VI(A) & (B), which state, in 
relevant part, that ``[a]n arbitrator should not, at any time, use 
confidential information acquired during the arbitration proceeding 
to affect adversely the interest of another. The arbitrator should 
keep confidential all matters relating to the arbitration 
proceedings and decision.'').
---------------------------------------------------------------------------

    An arbitrator must adhere to the duty of confidentiality outlined 
in the Code of Ethics, which requires that if an agreement of the 
parties sets forth procedures to be followed conducting an arbitration, 
the arbitrators must comply with those procedures. Specifically, the 
Code of Ethics states, in relevant part that, ``[w]hen an arbitrator's 
authority is derived from the agreement of the parties, an arbitrator 
should neither exceed that authority nor do less than is required to 
exercise that authority completely. Where the agreement of the parties 
sets forth procedures to be followed in conducting the arbitration or 
refers to rules to be followed, it is the obligation of the arbitrator 
to comply with such procedures or rules.'' \70\ Based on these 
criteria, the FINRA Submission Agreement provides arbitrators with the 
authority to conduct an arbitration pursuant to FINRA rules. Thus, 
arbitrators would not have violated their duty of confidentiality under 
the Code of Ethics by making a mid-case referral pursuant to Amendment 
No. 1, nor would they do so by making a referral under the proposed 
rule.
---------------------------------------------------------------------------

    \70\ See The Code of Ethics for Arbitrators in Commercial 
Disputes, Canon I(E).
---------------------------------------------------------------------------

    Post-Case Referral:
    Three commenters supported proposed paragraph (e) of Rule 
12104,\71\ which makes minor changes to current Rule 12104(b) governing 
post-case referrals. Specifically, under proposed Rule 12104(e), FINRA 
would remove the term ``disciplinary'' as a qualification on the type 
of investigation FINRA may conduct once the arbitrators make a post-
case referral. Further, as proposed in Amendment No. 1 and again here, 
FINRA would expand the type of activity that could be the subject of a 
referral to include ``conduct.'' These commenters believed that 
broadening the scope of potential post-case referrals by arbitrators 
would ``efficiently promote investor protections.'' \72\
---------------------------------------------------------------------------

    \71\ PIABA Comment, Cornell Comment (citing support for PIABA 
Comment), and Estell Comment (citing support for Cornell Comment).
    \72\ Id.
---------------------------------------------------------------------------

    Conclusion:
    FINRA continues to believe that mid-case referrals would provide it 
with an important tool to protect investors by alerting FINRA to 
potentially serious wrongdoing earlier than is currently possible. 
Thus, FINRA has filed the current proposal, which is identical to 
Amendment No. 1. FINRA believes that like Amendment No. 1, the current 
proposal contains stringent criteria for making mid-case referrals, 
which should make them an extremely rare occurrence in its forum. If 
the arbitrators make a mid-case referral, the current proposal's other 
protections would help to ameliorate the negative effects such a 
referral could have on the individual claimant's case. These 
protections would help minimize delays, costs and cumbersome 
administrative procedures, as well as reduce the potential for a 
finding of arbitrator bias, which would help a prevailing investor 
defend against a motion to vacate. Despite these measures, FINRA 
acknowledges that some individual claimants may incur delays and costs. 
However, FINRA believes that its investor protection mission requires 
that an arbitrator who, based on testimony or evidence revealed at a 
hearing, has reason to believe that there is a serious threat, whether 
ongoing or imminent, that is likely to harm investors unless immediate 
action is taken must be permitted to alert FINRA regulators without 
waiting until a case is over. FINRA believes, therefore, that the 
current proposal could save a substantial number of other investors 
from losses, and that this benefit, on balance, outweighs the risk of 
potentially increasing hearing costs for an individual claimant.

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
    (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. The Commission solicits input on all 
aspects of the proposed rule. 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-2014-005 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-2014-005. 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 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

[[Page 9531]]

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 
a.m. and 3 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-2014-005 and should be 
submitted on or before March 12, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\73\
---------------------------------------------------------------------------

    \73\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03564 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P


