
[Federal Register Volume 79, Number 106 (Tuesday, June 3, 2014)]
[Notices]
[Pages 32003-32008]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12771]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72269; File No. SR-FINRA-2014-008]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of Proposed Rule Change, as Modified by Amendment 
No. 1, Relating To Protecting Personal Confidential Information in 
Documents Filed With FINRA Dispute Resolution

May 28, 2014.

I. Introduction

    On February 13, 2014, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend FINRA's Code of Arbitration Procedure for 
Customer Disputes (the ``Customer Code'') and the Code of Arbitration 
Procedure for Industry Disputes (the ``Industry Code'') to require 
parties to redact all but the last four digits of an individual's 
Social Security number, taxpayer identification number, or financial 
account number (collectively, ``personal confidential information'' or 
``PCI'') from documents filed with FINRA Dispute Resolution (``DR''). 
The proposed rule change was published for comment in the Federal 
Register on February 28, 2014.\3\ The Commission received six comments 
on the proposal.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71608 (Feb. 24, 
2014), 79 FR 11491 (Feb. 28, 2014) (``Notice'').
    \4\ See Letters from Steven B. Caruso, Esq., Maddox Hargett & 
Caruso, P.C., dated March 4, 2014 (``Caruso Letter''); Nataliya 
Nemtseva, Student Intern, Timothy Guilmette, Student Intern, Thomas 
Abrahamson, Student Intern, and Nicole Iannarone, Assistant Clinical 
Professor, Georgia State University College of Law's Investor 
Advocacy Clinic, dated March 14, 2014 (``Georgia State Letter''); 
Kara Cain, Esq., Aderant CompuLaw, dated March 19, 2014 (``Aderant 
Letter''); Jason Doss, Public Investors Arbitration Bar Association, 
dated March 20, 2014 (``PIABA Letter''); Ryan Jennings, Legal 
Intern, Christian Corkery, Legal Intern, and Daniel Coleman, Legal 
Intern, Securities Arbitration Clinic, St. Vincent DePaul Legal 
Program, Inc., St. John's University School of Law, dated March 20, 
2014 (``St. John's Letter''); and Jill I. Gross, James D. Hopkins 
Professor of Law, Director, Investor Rights Clinic, Pace Law School, 
dated March 24, 2014 (``Pace Letter'').
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    On April 10, 2014, FINRA granted the Commission an extension of 
time to act on the proposal until May 29, 2014.\5\ On May 5, 2014, 
FINRA responded to the comment letters \6\ and filed Amendment No. 1 to 
the proposed rule change in response to a commenter's concern.\7\ The 
Commission is publishing this notice and order to solicit comments on 
Amendment No. 1 from interested persons, and to approve the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.
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    \5\ See Letter from Margo A. Hassan, Assistant Chief Counsel, 
FINRA Dispute Resolution, Inc., to Lourdes Gonzalez, Assistant Chief 
Counsel, Sales Practices, Division of Trading and Markets, 
Securities and Exchange Commission, dated April 10, 2014.
    \6\ See Letter from Margo A. Hassan, Assistant Chief Counsel, 
FINRA Dispute Resolution, Inc., to Secretary, Securities and 
Exchange Commission, dated May 5, 2014 (``FINRA Response Letter'').
    \7\ See Aderant Letter.
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II. Description of the Proposed Rule Change

Overview

    FINRA filed the proposed rule change to amend the Customer Code and 
the Industry Code to provide that any document that a party files with 
DR that contains an individual's Social Security number, taxpayer 
identification number, or financial account number must be redacted to 
include only the last four digits of any of these numbers.\8\ The 
proposed redaction requirements would apply only to documents filed 
with DR and would not apply to documents that parties exchange with 
each other or submit to the arbitrators at a hearing on the merits.\9\ 
In addition, the proposed redaction requirements would not apply to 
cases administered under FINRA Rule 12800 of the Customer Code and 
FINRA Rule 13800 of the Industry Code (collectively, the ``Simplified 
Arbitration rules'').\10\
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    \8\ See proposed FINRA Rules 12300(g)(1) and 13300(g)(1); see 
also Notice, 79 FR at 11492. The text of the proposed rule change is 
available at the principal office of FINRA, on FINRA's Web site at 
http://www.finra.org, and at the Commission's Public Reference Room.
    \9\ See proposed FINRA Rules 12300(g)(2) and 13300(g)(2); see 
also Notice, 79 FR at 11492.
    \10\ See proposed FINRA Rules 12300(g)(3) and 13300(g)(3); see 
also Notice, 79 FR at 11492. The Simplified Arbitration rules 
generally apply to arbitrations involving $50,000 or less, exclusive 
of interest and expenses.
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Requiring Parties To Redact Specified PCI From Documents Filed With 
FINRA

    During an arbitration proceeding, parties file pleadings and other 
supporting documents with DR that may contain individuals' PCI. FINRA 
stated that, as a service to forum users, DR serves certain pleadings 
on other parties to an arbitration.\11\ DR also provides arbitrators 
with pleadings and attachments.\12\ FINRA believes that the greatest 
risk of DR staff misdirecting PCI occurs when DR staff serves pleadings 
on a party at an incorrect or outdated address (e.g., an associated 
person of a member who has not updated his or her Central Registration 
Depository record).\13\ In addition, FINRA stated that arbitrators 
occasionally have misplaced parties' pleadings containing PCI.\14\
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    \11\ See Notice, 79 FR at 11492.
    \12\ See id.
    \13\ See id.
    \14\ See id.
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    FINRA also stated that, since FINRA employees are regularly exposed 
to PCI as they handle party documents, it has policies and procedures 
in place to help guide staff on how to keep confidential information 
safe.\15\ For example, FINRA maintains an Information Privacy and 
Protection Policy, and administers Information Privacy and Protection 
Training to all FINRA staff annually.\16\ In addition, DR has its own 
procedures for protecting confidential information relating to, among 
other matters, storage and disposal of case materials in a manner that 
preserves the confidentiality of the information, and removal of PCI 
that appears in awards

[[Page 32004]]

that will be published.\17\ In particular, DR procedures require 
arbitrators to keep confidential all information obtained in connection 
with arbitration and to participate in FINRA training programs on 
information security.\18\
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    \15\ See Notice, 79 FR at 11492.
    \16\ See id.
    \17\ See id. at n.4 (stating that FINRA ``keeps all documents 
and information in DR case files confidential except for arbitration 
awards. FINRA publishes every award in the Arbitration Awards Online 
Database on FINRA's Web site'').
    \18\ See Notice, 79 FR at 11492.
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    In addition, FINRA has published guidance recommending that parties 
to an arbitration and their counsel take steps to protect confidential 
information.\19\ FINRA's Protecting PCI Notice states, among other 
things, that parties and their counsel can safeguard confidential 
information by redacting such information from pleadings, exhibits, and 
other documents upon agreement of the parties.\20\ For example, parties 
may agree not to use, or to redact, Social Security, account, or driver 
license numbers and, where such data must be referenced, parties can 
use only the last few digits of these numbers or similar 
information.\21\
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    \19\ FINRA Notice to Parties, Protecting Personal Confidential 
Information, available at http://www.finra.org/ArbitrationAndMediation/Arbitration/Rules/NoticestoArbitratorsParties/NoticestoParties/P123999 (``Protecting 
PCI Notice''); see also id.
    \20\ See Notice, 79 FR at 11492 (discussing FINRA's Protecting 
PCI Notice).
    \21\ See id.
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    FINRA believes that while these efforts have enhanced the security 
of parties' confidential information, the risks associated with the 
loss of PCI (e.g., identity theft) remain as long as parties continue 
to file with DR pleadings and attachments containing PCI.\22\ 
Accordingly, FINRA is proposing to amend the Customer Code and the 
Industry Code to require parties to redact specified PCI from documents 
that parties file with DR. Specifically, FINRA is proposing to amend 
Rule 12300 (Filing and Serving Documents) \23\ and Rule 12307 
(Deficient Claims) \24\ of the Customer Code and Rule 1330 (Filing and 
Serving Documents) \25\ and Rule 13307 (Deficient Claims) \26\ of the 
Industry Code as described below.
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    \22\ See id.
    \23\ See proposed FINRA Rule 12300(g)(1)-(3); see also Notice, 
79 FR at 11492.
    \24\ See proposed FINRA Rule 12307(a)-(c); see also Notice, 79 
FR at 11492.
    \25\ See proposed FINRA Rule 13300(g)(1)-(3); see also Notice, 
79 FR at 11492.
    \26\ See proposed FINRA Rule 13307(a)-(c); see also Notice, 79 
FR at 11492.
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    Given that the proposed amendments to Rules 13300 and 13307 of the 
Industry Code are identical to the proposed amendments to Rules 12300 
and 12307 of the Customer Code, the description below only refers to 
Rules 12300 and 12307 of the Customer Code. FINRA stated that its 
rationale is the same for both sets of rules.\27\
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    \27\ See Notice, 79 FR at 11492.
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Proposed Amendments to FINRA Rule 12300

    FINRA is proposing to amend Rule 12300 to provide that any document 
that a party files with DR that contains an individual's Social 
Security number, taxpayer identification number, or financial account 
number must be redacted to include only the last four digits of any of 
these numbers.\28\ As proposed, the rule would specify that a party 
shall not include the full numbers.\29\
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    \28\ See proposed FINRA Rule 12300(g)(1); see also Notice, 79 FR 
at 11492.
    \29\ See proposed FINRA Rule 12300(g)(1).
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    Under the proposed rule, if DR receives a claim, including 
supporting documents, with a full Social Security, taxpayer 
identification, or financial account number, it would deem the filing 
deficient under Rule 12307 and request that the party refile the 
document, without the PCI, within 30 days of receiving notice of non-
compliance from DR.\30\ In addition, if a party files a document with 
PCI that is not covered by Rule 12307 (a document other than a claim, 
such as a motion), FINRA would deem the filing to be improper and would 
request that the party refile the document, with the required 
redaction, within 30 days.\31\ If the party refiles the document within 
the prescribed 30 days in compliance with the rule, FINRA would 
consider the document to be filed on the date the party initially filed 
it (i.e., the non-complying document) with DR.\32\
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    \30\ See proposed FINRA Rule 12307; see also Notice, 79 FR at 
11492 n.7 (stating that ``[t]he term ``claim'' means an allegation 
or request for relief and includes counterclaims, cross claims and 
third party claims'').
    \31\ See Notice, 79 FR at 11492.
    \32\ See proposed FINRA Rule 12307(c); see also Notice, 79 FR at 
11492.
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Two Exemptions to the Proposed Amendments to FINRA Rule 12300

    The proposed rule change would include two exemptions: (1) For 
documents that parties exchange with each other (not with DR) or submit 
to the arbitrators at a hearing on the merits; \33\ and (2) for cases 
administered under the Simplified Arbitration rules.\34\
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    \33\ See proposed FINRA Rule 12300(g)(2); see also Notice, 79 FR 
at 11492.
    \34\ See proposed FINRA Rule 12300(g)(3); see also Notice, 79 FR 
at 11492.
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    As explained above, FINRA believes that its greatest risk of 
misdirecting PCI occurs when DR staff is transmitting pleadings and 
documents to parties and arbitrators (e.g., serving pleadings).\35\ 
Therefore, FINRA is proposing to exempt documents that parties exchange 
with each other or submit as exhibits during a hearing in order to 
minimize the burden of the new requirements.\36\ FINRA stated, however, 
that parties can always agree to measures that protect PCI in documents 
they exchange with each other or submit or use at a hearing and DR 
staff would not be at risk of transmitting PCI.\37\ Similarly, FINRA 
stated that parties typically only bring hard copies of exhibits to 
hearings, as opposed to transmitting them via email, and can safely 
dispose of them by using secure shredding services.\38\ FINRA believes 
that its proposal represents a balanced approach to protecting PCI 
while minimizing the burden on parties.\39\
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    \35\ See supra note 13 (``The greatest risk of DR staff 
misdirecting PCI occurs when DR staff serves pleadings on a party . 
. . at an incorrect/outdated address.'').
    \36\ See proposed FINRA Rule 12300(g)(2); see also Notice, 79 FR 
at 11493.
    \37\ See Notice, 79 FR at 11493; see also supra note 19 
(discussing FINRA's Protecting PCI Notice).
    \38\ See Notice, 79 FR at 11493.
    \39\ See Notice, 79 FR at 11493.
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    The second exemption relates to claims administered under FINRA's 
Simplified Arbitration rules.\40\ Generally, a single arbitrator 
decides these claims based solely on the parties' written submissions. 
FINRA noted that many claimants who initiate claims under its 
Simplified Arbitration rules are not represented by counsel (i.e., pro 
se parties).\41\ FINRA believes that the redaction requirements in the 
proposed rule change may prove difficult for pro se parties.\42\ 
Therefore, FINRA is proposing to exempt from this proposed rule all 
claims administered under the Simplified Arbitration rules.
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    \40\ See proposed FINRA Rule 12300(g)(3); see also Notice, 79 FR 
at 11493.
    \41\ See Notice, 79 FR at 11493.
    \42\ See id. (noting that pro se parties may not be familiar 
with the practice of redacting documents).
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Proposed Amendments to FINRA Rule 12307

    FINRA Rule 12307 states that the DR Director will not serve any 
claim that is deficient, and identifies many reasons why a claim may be 
deficient, including that the claims does not name all the parties.\43\ 
FINRA is proposing to make conforming changes to FINRA Rule 12307(a) to 
include as a claim that is deficient failure to ``comply with the 
restrictions on filings with personal confidential information under 
Rule

[[Page 32005]]

12300(g).'' \44\ The proposal would also amend Rule 12307(c) to clarify 
that if the submitting party corrects any deficiency within 30 days, 
the claim would be considered filed on the date the deficient claim was 
filed initially with FINRA.\45\ FINRA would also amend Rule 12307(c) to 
correct a typographical error by deleting the word ``the'' (indicated 
by brackets below) in the sentence that currently reads: ``The Director 
will notify the party making the counterclaim, cross claim or third 
party claim of [the] any deficiencies in writing.'' \46\
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    \43\ See proposed FINRA Rule 12307; see also Notice, 79 FR at 
11493.
    \44\ See proposed FINRA Rule 12307(a).
    \45\ See proposed FINRA Rule 12307(c).
    \46\ See id.
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III. Summary of Comments, FINRA's Response, and Proposed Amendment No. 
1

Overview

    As noted above, the Commission received six comment letters on the 
proposed rule change \47\ and a response letter from FINRA.\48\ Five of 
the six commenters expressed support, in whole or in part, for FINRA's 
proposal.\49\ Each of these five commenters, however, raised specific 
concerns about certain aspects of the proposed rule change as discussed 
in more detail below.\50\ The sixth commenter, although not expressing 
a general view of support for or opposition to the proposal, questioned 
what event triggers the 30-day deadline to correct a non-compliant 
document that is included in the proposed rule change.\51\
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    \47\ See supra note 4.
    \48\ See supra note 6.
    \49\ See Caruso Letter; Georgia State Letter; PIABA Letter; St. 
John's Letter; and Pace Letter.
    \50\ See supra note 49.
    \51\ See Aderant Letter
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A. Deadline for Correcting Non-Compliant Documents and Amendment No. 1

    Under the proposed rule change, if FINRA finds a document to be 
deficient because a party did not comply with the redaction 
requirement, the filing party has 30 days to correct the 
submission.\52\ One commenter affirmatively supported the proposed 30-
day cure period.\53\ Two other commenters, however, suggested 
amendments to FINRA's proposal.\54\ One commenter suggested that FINRA 
should give parties an additional 15 days to submit compliant documents 
after the proposed 30-day period expired.\55\ Specifically, this 
commenter suggested that if a party does not resubmit a compliant 
document within the original 30-day cure period, FINRA should send the 
party a second notice granting an additional 15 days in which to 
comply.\56\ Another commenter requested that FINRA clarify what event 
triggers the 30-day deadline for a non-complying party to correct a 
deficiency.\57\ This commenter stated that, as drafted, the proposed 
rule is ambiguous and could be read to begin either: 30 days from the 
date FINRA deems the filing improper, 30 days from the date of FINRA's 
written notice of the deficiency, or 30 days from the date of the 
party's receipt of the notice.\58\
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    \52\ See proposed FINRA Rule 12307(c).
    \53\ See PIABA Letter at 2.
    \54\ See Aderant Letter and Georgia State Letter.
    \55\ See Georgia State Letter.
    \56\ See id.
    \57\ See Aderant Letter.
    \58\ See id. at 1-2.
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    In response to the comment suggesting that FINRA provide parties an 
additional 15 days to correct non-complaint submissions, FINRA noted 
that its existing deficient claim Rules 12307(b) and 13307(b) provide a 
30-day deadline to correct other claim deficiencies.\59\ FINRA also 
stated that it believes that the 30-day deadline for correcting any 
deficient claim, whether for non-compliance with redaction obligations 
or otherwise, should be consistent under FINRA's rules.\60\ For this 
reason, FINRA believes that the proposed 30-day cure period is 
appropriate.\61\
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    \59\ See FINRA Response Letter at 4.
    \60\ See id.
    \61\ See id. (``FINRA staff believes that the deadline for all 
non-compliance should be . . . consistent, and that 30 days is 
sufficient.'').
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    In response to the comment recommending that FINRA clarify what 
event triggers the 30-day deadline to correct a deficiency, FINRA noted 
that its existing Deficient Claims Rules 12307(b) and 13307(b) provide 
that if the claimant corrects the deficiency ``within 30 days from the 
time the claimant receives notice,'' FINRA would consider the claim to 
be filed on the date the initial statement of claim was filed.\62\ 
FINRA also stated that it believes the deadline to submit compliant 
documents should be consistent under its rules.\63\ Therefore, FINRA 
proposed Amendment No. 1 to the proposed rule change to clarify that 
the triggering event for the deadline to submit compliant documents is 
30 days ``from the time a party receives notice'' of non-compliance 
from the Director of FINRA arbitration.\64\
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    \62\ See id.
    \63\ See id.
    \64\ See id. at 4-6 (reflecting the text of FINRA's Amendment 
No. 1 to the proposed rule).
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B. Exemptions From FINRA's Proposed Redaction Requirements

    As noted above, the proposed rule change would include two 
exemptions: (1) For documents that parties exchange with each other 
(not with DR) or submit to the arbitrators at a hearing on the merits; 
\65\ and (2) for cases administered under the Simplified Arbitration 
rules.\66\ Four commenters either raised concerns about or recommended 
changes to the proposed exemptions.\67\
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    \65\ See proposed FINRA Rule 12300(g)(2); see also Notice, 79 FR 
at 11492.
    \66\ See proposed FINRA Rule 12300(g)(3); see also Notice, 79 FR 
at 11492.
    \67\ See Georgia State Letter; PIABA Letter; St. John's Letter; 
and Pace Letter.
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    One commenter suggested that the proposal should be more 
comprehensive.\68\ In particular, the commenter suggested that FINRA 
require parties to redact PCI from all documents submitted or exchanged 
in all stages, and in every type, of arbitration proceeding regardless 
of whether the documents are submitted to DR, another party, or an 
arbitrator.\69\ The same commenter reasoned that investors face the 
same potential harm regardless of the method of submission (e.g., 
electronically or on paper), the type of proceeding (including 
simplified arbitration), whether the submitting party is pro se or 
represented by counsel, or to whom the documents are provided.\70\
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    \68\ See Georgia State Letter.
    \69\ See id.
    \70\ See id.
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    Similarly, another commenter suggested that FINRA not exempt from 
the redaction obligations documents submitted to DR by pro se 
parties.\71\ Specifically, this commenter stated that even if FINRA is 
concerned that many claimants in simplified arbitration are pro se 
parties who, in the absence of counsel, may have difficulty with the 
redaction process, ``that concern is soundly outweighed by far greater 
concerns over identity theft.'' \72\ The commenter also suggested that 
instead of exempting pro se investors, FINRA should assist those pro se 
parties with the redaction process, if needed.\73\ Alternatively, this 
commenter stated that if indeed FINRA believes that pro se parties 
might have difficulty

[[Page 32006]]

complying with the proposed redaction obligations, then the simplified 
arbitration exemption should be amended to exempt all pro se parties 
and not just all claims under the Simplified Arbitration rules. If 
FINRA decides to adopt an exception for pro se parties, the commenter 
stated that FINRA should explain to pro se parties the importance of 
protecting confidential information and strongly encourage them to 
redact PCI from the documents they file with FINRA.\74\
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    \71\ See Pace Letter.
    \72\ Id. (stating that ``[i]f anything, pro se investors need 
more protection from the possibility of identity theft, not less'').
    \73\ See id.; see also Georgia State Letter at 2-3 (recommending 
that FINRA inform parties about the redaction process by (1) 
``creating a guide outlining the process and offering tips for 
compliance'' and (2) providing instructions, in both the Submission 
Agreement and the notices of non-compliance, on how to redact 
documents and the risks associated with non-compliance).
    \74\ Id.
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    Two other commenters recommended that FINRA exempt all pro se 
parties from complying with the proposed redaction requirements, and 
not just those filing simplified arbitration claims, noting that pro se 
claims may be heard in both arbitration and simplified arbitration.\75\ 
One of these commenters also suggested that FINRA should not exempt 
represented parties in simplified arbitration as many claimants in 
simplified arbitration are represented by counsel.\76\
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    \75\ See PIABA Letter and St. John's Letter.
    \76\ See St. John's Letter.
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    In its response, FINRA stated that the exemption for documents 
parties exchange with each other or submit to arbitrators at a hearing 
is appropriate because it ``would reduce the burden of the redaction 
requirements on the parties and would not raise the risk of DR staff 
transmitting PCI.'' \77\ FINRA also noted that currently parties can 
agree to measures to help protect PCI in documents they share (e.g., 
parties can agree to use secure shredding facilities to dispose of 
documents used at a hearings).\78\ In addition, as a practical matter, 
FINRA does not receive copies of the documents parties exchange with 
each other during discovery, which would make policing that exchange 
more difficult.\79\ Moreover, FINRA explained that if it instructed 
arbitrators to reject documents with PCI at a hearing, the rejection 
could disrupt the hearing, resulting in significant delays in 
completing a case.\80\ FINRA also stated that given the current 
precautions in place it believes that, by adopting this exemption, ``it 
is taking a balanced approach to protecting PCI and minimizing burden 
on parties.'' \81\
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    \77\ See FINRA Response Letter at 2 (claiming that ``[t]he 
number and size of documents produced during discovery or submitted 
at a hearing can be voluminous, and the burden of redaction can be 
onerous'').
    \78\ See id. at 2-3.
    \79\ See id. at 3 n.6.
    \80\ See id. at 3.
    \81\ See id.
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    FINRA also believes that the exemption for cases administered under 
the Simplified Arbitration rules is appropriate because, in part, ``the 
risk of FINRA, the parties, or arbitrators misdirecting or losing 
documents with PCI is reduced'' in simplified arbitration because, 
among other things, a single arbitrator resolves the dispute and 
hearings are not generally held in simplified arbitration.\82\ In 
addition, FINRA also stated that there is a large concentration of pro 
se parties in cases administered under the Simplified Arbitration rules 
and, as previously noted, those parties may have greater difficulty 
with the redaction process than parties represented by counsel.\83\ 
Finally, FINRA acknowledged that while not every simplified arbitration 
proceeding involves a pro se party and not every other type of 
arbitration proceeding involves represented parties, as a practical 
matter, ``having a clear distinction between cases administered under 
the Simplified Arbitration rules and all other cases makes application 
of the exemption more straight forward for FINRA staff administering 
cases.'' \84\
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    \82\ See id.
    \83\ See id.; see also Notice, 79 FR at 11493 (noting that pro 
se parties may not be familiar with the practice of redacting 
documents).
    \84\ See FINRA Response Letter at 3.
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    For the reasons stated above, FINRA declined to amend the two 
exemptions from its proposed redaction requirements.\85\ FINRA also 
stated, however, that in order to respond to the concerns raised by 
commenters about the proposed exemption for cases administered under 
the Simplified Arbitration rules, FINRA would add a discussion to its 
Web page alerting pro se parties to the potential for identity theft 
associated with the disclosure of PCI and emphasizing the importance of 
excluding and/or redacting PCI from documents filed with FINRA.\86\ 
FINRA believes that this is a practical approach to alerting pro se 
parties to the importance of protecting PCI. FINRA also noted that its 
staff answers parties' questions about the arbitration process on a 
regular basis, and that FINRA staff would explain the redaction process 
if asked by a party, pro se or otherwise.\87\
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    \85\ See id. at 3.
    \86\ See id. (explaining that FINRA's Web site provides 
resources to pro se parties in arbitration and mediation such as a 
section on its Web site entitled ``Resources for Investors 
Representing Themselves in FINRA Arbitrations and Mediations'').
    \87\ See id.
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C. Additional Redaction Requested by Certain Commenters

    Two commenters requested that FINRA amend the proposal to require 
the redaction of additional confidential information.\88\ One commenter 
recommended that FINRA also require parties to redact the day and month 
of birth from documents filed with FINRA, noting that this would be 
consistent with the Federal Rules of Civil Procedure, Criminal 
Procedure, and Bankruptcy Procedure, and ``should not place an 
unreasonable burden on the parties.'' \89\ The second commenter 
recommended that FINRA amend the proposal to require parties to redact 
the entire Social Security number and taxpayer identification number, 
stating that full redaction would provide the parties with more 
protection and would not be any more burdensome than partial 
redaction.\90\ This second commenter also noted that FINRA's Discovery 
Guide already requires full redaction of these numbers for certain 
items set forth in the Document Production Lists.\91\
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    \88\ See Georgia State Letter and PIABA Letter.
    \89\ Georgia State Letter at 2.
    \90\ See PIABA Letter.
    \91\ See id.; see also Georgia State Letter (claiming that 
FINRA's proposal ``would take away some investor protections that 
are already in place, since the FINRA Discovery Guide requires 
certain redactions on documents parties exchange in the discovery 
process'').
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    In response, FINRA stated that during the development of the 
proposed rule change, FINRA identified Social Security numbers, 
taxpayer identification numbers, and financial account numbers as the 
types of confidential information ``most commonly found in arbitration 
documents'' filed with DR and, as such, FINRA's constituents raised 
concerns only about those numbers.\92\ Accordingly, FINRA declined to 
amend the proposal to require the redaction of an individual's date of 
birth at this time. FINRA also stated, however, that if the Commission 
approves the proposal, FINRA would ``consider whether it makes sense to 
propose additional redaction requirements after it evaluates the 
efficacy of the amendments.'' \93\ In addition, FINRA stated that it 
would update and reissue its Protecting PCI Notice \94\ to include a 
reference to birth dates.\95\
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    \92\ See FINRA Response Letter at 3.
    \93\ Id.
    \94\ See supra note 19.
    \95\ See FINRA Response Letter at 3-4.
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    In its response, FINRA also stated that it believes that the last 
four digits of an individual's Social Security numbers, taxpayer 
identification numbers, and financial account numbers provide a useful 
way to identify parties and their accounts during an arbitration 
proceeding.\96\ In addition, FINRA

[[Page 32007]]

explained that the Federal Rules of Civil Procedure allow parties to 
include the last four digits of the Social Security number and taxpayer 
identification number in filings made with the court.\97\ For these 
reasons, FINRA declined to amend the proposal to require the redaction 
of individuals' entire Social Security numbers, taxpayer identification 
numbers, and financial account numbers.\98\
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    \96\ See id. at 4 (FINRA also explained that its Discovery 
Guide, which requires full redaction for certain items in the 
Document Production Lists, applies only to customer cases over 
$50,000, whereas the context of this proposed rule change is much 
broader).
    \97\ See id.
    \98\ See id.
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended by Amendment No. 1, 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-2014-008 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2014-008. 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 the 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-2014-008 and should be 
submitted on or before June 24, 2014.

V. Discussion and Commission Findings

    After carefully considering the proposed rule change, as modified 
by Amendment No. 1, the comments submitted, and FINRA's response to the 
comments, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities association.\99\ In particular, the Commission finds that 
the proposed rule change is consistent with Section 15A(b)(6) of the 
Act,\100\ which requires, among other things, that FINRA's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.
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    \99\ In approving the proposed rule change, the Commission has 
also considered the rule change's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \100\ 15 U.S.C. 78o-3(b)(6).
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    As discussed above, FINRA proposes to amend the Customer Code and 
the Industry Code to provide that any document that a party files with 
FINRA that contains an individual's Social Security number, taxpayer 
identification number, or financial account number must be redacted to 
include only the last four digits of any of these numbers.\101\ 
Pursuant to the proposal, the proposed redaction requirements would not 
apply to documents (1) that parties exchange with each other or submit 
to the arbitrators at a hearing on the merits \102\ or (2) related to 
cases administered under its Simplified Arbitration rules.\103\
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    \101\ See proposed FINRA Rules 12300(g)(1) and 13300(g)(1); see 
also Notice, 79 FR at 11492.
    \102\ See proposed FINRA Rules 12300(g)(2) and 13300(g)(2); see 
also Notice, 79 FR at 11492.
    \103\ See proposed FINRA Rules 12300(g)(3) and 13300(g)(3); see 
also Notice, 79 FR at 11492.
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    The Commission believes that the proposed rule change would further 
the purposes of the Act as it is reasonably designed to protect 
investors and the public interest. In particular, the Commission agrees 
with FINRA's assessment that prohibiting parties from submitting 
documents with PCI would help ``reduce the risk to forum users of 
identity theft.'' \104\ The Commission also agrees with FINRA's 
assessment that given the processes FINRA already has in place,\105\ 
the proposed redaction requirements should enhance FINRA's ongoing 
efforts to protect forum users' PCI and that the proposed exemptions to 
those redaction requirements provide relief from the burden of 
redaction at minimal risk to the parties.\106\ The Commission also 
notes FINRA's representations, made in response to various commenters, 
to: (1) Amend its Web site to alert pro se parties to the potential for 
identity theft associated with the disclosure of PCI and emphasize the 
importance of excluding and/or redacting PCI from documents filed with 
FINRA; \107\ (2) explain the redaction process to any pro se party 
seeking guidance; \108\ (3) consider whether to propose additional 
redaction requirements after it evaluates the efficacy of the 
amendments; \109\ and (4) update and reissue its 2010 Protecting PCI 
Notice to include a reference to birth dates.\110\
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    \104\ See FINRA Response Letter at 2; see also Notice, 79 FR at 
11493.
    \105\ See FINRA Response Letter at 2 (explaining that, as a 
general matter, FINRA has procedures in place to guide its staff on 
how to keep confidential information safe, maintains an Information 
Privacy and Protection Policy, and administers Information Privacy 
and Protection training to all FINRA staff annually. FINRA also 
noted that DR has its own procedures for protecting confidential 
information).
    \106\ See FINRA Response Letter at 2; see also Notice, 79 FR at 
11493.
    \107\ See FINRA Response Letter at 3.
    \108\ See id.
    \109\ See id.
    \110\ See id. at 3-4.
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    In addition, the Commission also believes that the clarification 
provided in Amendment No. 1 is also consistent with the Act. In 
response to FINRA's initial proposal, one commenter suggested that, as 
drafted, the proposed rule was ambiguous as to what event triggers the 
30-day deadline for a non-complying party to correct a deficiency.\111\ 
FINRA responded by partially amending its proposed rule to clarify that 
FINRA intends the deadline for correcting non-compliant documents to be 
30 days from the time the party receives notice of non-compliance from 
FINRA.\112\ The Commission agrees with FINRA's assessment that this 
trigger event is consistent with other trigger events used in its 
rules.\113\ Accordingly,

[[Page 32008]]

the Commission believes that Amendment No. 1 is consistent with the 
Act.
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    \111\ See Aderant Letter.
    \112\ See FINRA Response Letter at 4-6 (reflecting the text of 
FINRA's Amendment No. 1 to the proposed rule change).
    \113\ See id. at 4 (stating that FINRA believes that the 
deadline for all non-compliance should be consistent under FINRA's 
deficient claim rules).
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VI. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\114\ for approving the proposed rule change, as amended by 
Amendment No. 1 thereto, prior to 30th day after publication of 
Amendment No. 1 in the Federal Register. As discussed above, Amendment 
No. 1 responds to one concern raised by a commenter by partially 
amending FINRA's proposed rule change to clarify that FINRA intends the 
deadline for correcting non-compliant documents to be 30 days from the 
time the party receives notice of non-compliance from FINRA. The scope 
of the amendment adds clarity to one aspect of the proposal, and does 
not raise any novel regulatory concerns. Furthermore, accelerated 
approval would allow FINRA to institute the proposed rule change, as 
amended by Amendment No. 1, without delay. Accordingly, the Commission 
finds that good cause exists to approve the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \114\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\115\ that the proposed rule change (SR-FINRA-2014-008), as 
modified by Amendment No. 1, be and hereby is approved on an 
accelerated basis.
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    \115\ Id.
    \116\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\116\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12771 Filed 6-2-14; 8:45 am]
BILLING CODE 8011-01-P


