
[Federal Register Volume 82, Number 169 (Friday, September 1, 2017)]
[Notices]
[Pages 41670-41673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18533]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81488; File No. SR-FINRA-2017-028]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Implement a New Electronic Form 211

August 28, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``SEA'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on August 24, 2017, Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by FINRA. 
FINRA has designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing a rule change relating to members' filing 
obligations under FINRA Rule 6432 (Compliance with the Information 
Requirements of SEA Rule 15c2-11). The proposal implements a new 
electronic Form 211 in place of the current paper form.
    The proposed rule change does not make any changes to the text of 
FINRA rules.
    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
    SEA Rule 15c2-11 generally prohibits a broker-dealer from 
publishing any quotation for a security not listed or traded on a 
national securities exchange, or directly or indirectly, submitting any 
such quotation for publication, in any quotation medium,\4\ unless it 
has gathered and reviewed specified information about the issuer and 
security that is the subject of the quotation and has a reasonable 
basis under the circumstances for believing that such information is 
accurate in all material respects and obtained from a reliable source. 
The information requirements applicable to a security under SEA Rule 
15c2-11 differ depending on the characteristics of the issuer and the 
security being quoted.
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    \4\ Rule 15c2-11 defines ``quotation medium'' as any `` 
`interdealer quotation system' or any publication or electronic 
communications network or other device which is used by brokers or 
dealers to make known to others their interest in transactions in 
any security, including offers to buy or sell at a stated price or 
otherwise, or invitations of offers to buy or sell.''
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    FINRA Rule 6432 (Compliance with the Information Requirements of 
SEA Rule 15c2-11) facilitates member compliance with SEA Rule 15c2-11 
by prescribing the method by which member firms must demonstrate to 
FINRA compliance with SEA Rule 15c2-11.\5\ Rule 6432 generally provides 
that no member shall initiate or resume quotations in a non-exchange-
listed security unless the member demonstrates compliance by making a 
filing with, and in the form required by, FINRA (``Form 211''). FINRA 
currently requires members to comply with Rule 6432 by submitting a 
paper Form 211, which, pursuant to this filing, will be replaced with 
the proposed electronic Form 211. Form 211 is designed to gather 
pertinent information regarding the subject issuer and security, the 
member's knowledge of and relationship with the issuer, and the 
member's intended quotation activities with respect to the subject 
security. FINRA currently administers the Form 211 manually--in paper 
form--and members transmit the form to FINRA via mail, email, or fax.
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    \5\ For purposes of Rule 6432, the term ``non-exchange-listed 
security'' means any equity security, other than a Restricted Equity 
Security (defined in FINRA Rule 6420(k)), that is not traded on any 
national securities exchange. See Rule 6432(e).
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    FINRA proposes to transition to an electronic Form 211, which would 
be accessible to member firms through FINRA's Firm Gateway.\6\ The 
electronic Form 211 generally solicits the same information currently 
requested in the paper form \7\ and, in addition to a cover page, 
contains five sections covering: (1) Issuer and security information; 
(2) information required pursuant to SEA Rule 15c2-11(a)(1), (a)(2), 
(a)(3), (a)(4) or (a)(5), as applicable; (3) information required 
pursuant to paragraphs (b)(1) through (b)(3) of SEA Rule 15c2-11; (4)

[[Page 41671]]

supplemental information; and (5) the certification.\8\
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    \6\ The Firm Gateway is a single point of service that allows 
members to quickly interact with FINRA. The Firm Gateway provides 
consolidated access to regulatory applications and filings, and 
FINRA's electronic billing system; one-click quick access to common 
tasks, useful resources and key firm information; an at-a-glance 
view of important filing dates, tasks and events; and centralized 
FINRA Information Requests. The applications and filings that firms 
can access through the Firm Gateway include: Web CRD, IARD, OATS, 
Report Center and virtually all electronic regulatory filing 
applications, including FOCUS, Firm Profile, FINRA Contact System, 
and Rule 4530 Customer Complaints.
    \7\ A copy of the proposed electronic Form 211 is attached as 
Exhibit 3.
    \8\ FINRA has reorganized some of the informational content and 
made other technical changes to conform to the new electronic 
format.
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Cover Page and Issuer and Security Information
    The proposed electronic Form 211, as does the current paper Form 
211, includes a general section (i.e., cover page) setting forth the 
instructions for completing the form and requesting that the member 
identify the quotation medium on which it intends to initiate 
quotations. The proposed electronic form also requests that members 
select the paragraph of SEA Rule 15c2-11 under which the application is 
being submitted (i.e., paragraph (a)(1), (a)(2), (a)(3), (a)(4) or 
(a)(5)), which would identify the version of the form to be completed 
by the member, consistent with the information requirements that are 
applicable to each subparagraph of SEA Rule 15c2-11.
    The issuer and security information section of the proposed 
electronic Form 211 requests the same basic information regarding the 
security and issuer that currently is requested in the paper form, 
including, among other things, the name and address of the issuer and 
its transfer agent; the security's symbol (if assigned); type of 
security; the security's CUSIP number; the total number of shares 
outstanding at the end of the issuer's most recent fiscal year; the 
initial price of the quotation sought to be entered (if any); and the 
basis upon which such price was determined and the factors considered 
in making such determination. The proposed electronic Form 211 also 
includes a request for the transfer agent's telephone number.\9\
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    \9\ The current paper form, as does the proposed electronic 
form, also requests the issuer's telephone number, fiscal year end 
date, date and state of incorporation, par or stated value of the 
security, the complete title and class of the security, the issuer's 
SIC Code and, if applicable, the CIK number.
    A Standard Industrial Classification or ``SIC'' Code is used by 
government agencies to classify industry areas. A Central Index Key 
or ``CIK'' is a unique identifier assigned by the SEC to all 
companies and people who file disclosure documents through EDGAR 
with the SEC.
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Specific Information Requirements
    As is currently the case with the paper Form 211, the proposed 
electronic Form 211 requests information specific to the requirements 
set forth in SEA Rule 15c2-11 paragraphs (a)(1), (a)(2), (a)(3), (a)(4) 
or (a)(5), as applicable. SEA Rule 15c2-11 generally requires that 
members have a reasonable basis for believing that the specified Form 
211 information is accurate in all material respects and obtained from 
a reliable source. Thus, in demonstrating compliance with SEA Rule 
15c2-11 and FINRA Rule 6432, members provide a variety of supporting 
documentation to FINRA. In addition to the information specifically 
required by Form 211, which is described below, the electronic form 
also permits members to submit additional supporting information and 
documentation electronically.\10\
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    \10\ FINRA currently requests additional information in follow-
up correspondence as necessary to support a member's Form 211 
submission. Follow-up correspondence relating the electronic Form 
211 will be sent via Request Manager--a FINRA electronic 
correspondence system.
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Electronic Form 211--SEA Rule 15c2-11(a)(1) Requirements
    For applications submitted under paragraph (a)(1) of SEA Rule 15c2-
11 (for recent offerings pursuant to Section 10(a) of the Securities 
Act of 1933 (``1933 Act'')), the current paper Form 211 requests that 
the member provide the prospectus that became effective less than 90 
calendar days prior to the filing of the Form 211, as specified by 
Section 10(a) of the 1933 Act. The current paper form also asks for the 
SEC effective date of the recent offering and the date the security was 
issued. The proposed electronic form continues to solicit this 
information.
Electronic Form 211--SEA Rule 15c2-11(a)(2) Requirements
    For applications submitted under paragraph (a)(2) of SEA Rule 15c2-
11 (for recent offerings pursuant to Regulation A), the current paper 
Form 211 requests that the member provide the offering circular that 
became effective less than 40 calendar days prior to the filing of the 
Form 211, as provided for under Regulation A of the 1933 Act. The 
current paper form similarly requests the date the offering circular 
became qualified less than 40 calendar days prior to the filing of the 
Form 211 and the date of the most recent security issuance. The 
electronic Form 211 continues to require information on when the 
Regulation A offering was qualified by the SEC and the date the 
security was issued.
Electronic Form 211--SEA Rule 15c2-11(a)(3) and (a)(4) Requirements
    For applications submitted under paragraph (a)(3) of SEA Rule 15c2-
11 (for SEC reporting companies), the current paper Form 211 requests 
that the member provide the issuer's most recent annual report filed 
pursuant to Section 13 or 15(d) of the Act or the annual statement 
referred to in Section 12(g)(2)(G)(i) of the Act, and provide quarterly 
and other current reports filed after the issuer's most recent annual 
report or statement. The current form also asks that members list each 
report or statement and applicable amendments filed by the issuer 
through EDGAR that the member has in its possession that meets the 
requirements of this section. The proposed electronic Form 211 modifies 
the current informational requirements in the paper form to incorporate 
recent changes to SEA Rule 15c2-11.\11\ Thus, in addition to requesting 
that the member provide the issuer's most recent annual report filed 
pursuant to Section 13 or 15(d) of the Act or a copy of the annual 
statement referred to in Section 12(g)(2)(G)(i) of the Act, the 
electronic form also covers reports and statements filed pursuant to 
Regulation A.
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    \11\ As part of its amendments to Regulation A and other rules 
and forms to implement Section 401 of the Jumpstart Our Business 
Startups (JOBS) Act, the Commission amended SEA Rule 15c2-11 to 
permit an issuer's ongoing reports filed under Regulation A to 
satisfy a broker-dealer's obligations to review and maintain certain 
information about an issuer's quoted securities. See JOBS Act, 
Public Law 112-106, 401, 126 Stat. 306, 323-325 (2012).
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    For applications submitted under paragraph (a)(4) of SEA Rule 15c2-
11 (for foreign private issuers), the current paper Form 211 requests 
that the member provide the following information regarding the 
issuer's reliance upon Rule 12g3-2(b) of the SEA: (1) The foreign 
exchange(s) on which the subject class of securities is listed that, 
either singly or together with the trading of the same class of the 
issuer's securities in another foreign jurisdiction, constitutes the 
primary trading market for those securities; (2) the symbol(s) of the 
security(ies) that trades on the foreign exchange(s); and (3) the 
location of the internet Web site or electronic information delivery 
system that the member firm would provide upon request to any person to 
direct them to the information that the issuer published electronically 
pursuant to Rule 12g3-2(b). This information will continue to be 
solicited on the electronic form.
Electronic Form 211--SEA Rule 15c2-11(a)(5) Requirements
    For applications submitted under paragraph (a)(5) of SEA Rule 15c2-
11 (for non-SEC reporting companies and all other companies), the 
current paper Form 211, among other things, requires that members 
provide the issuer's most recent balance sheet, profit and loss and 
retained earnings statements, equivalent financial information for the 
two prior fiscal years for the issuer or any predecessor company, and 
the

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documents that support the information provided in the Form 211.
    In addition, the current paper form requires that the member: (1) 
Describe the issuer's business, products/services offered by the 
issuer, and the issuer's facilities; (2) list the name(s) of the 
current chief executive officer(s) and members of the board of 
directors of the issuer; (3) provide information as to whether the 
member (or any person associated with it) is affiliated directly or 
indirectly with the issuer and, if so, the nature of such affiliation; 
(4) provide information as to whether the quotation sought to be 
displayed is being published or submitted on behalf of another broker-
dealer and, if so, the name of such broker-dealer; and (5) provide 
information on whether the quotation sought to be displayed is being 
published or submitted directly or indirectly on behalf of the issuer 
or any director, officer or any person who is directly or indirectly 
the beneficial owner of more than ten percent of the outstanding units 
or shares of any equity security of the issuer, and, if so, the name of 
the person (and the basis for any exemption under the federal 
securities laws for sales of such securities on behalf of this person). 
The proposed electronic Form 211 continues to request this information. 
Because the proposed electronic Form 211 allows documents to be 
uploaded, the process of supplying FINRA with the supporting 
documentation, which, historically, has been provided by members in 
hard copy, would be improved. For example, a member could upload a 
recent annual report to document multiple items of information, such as 
the issuer's name, current chief executive officer, description of its 
business and facilities, and other required information.
Electronic Form 211--SEA Rule 15c2-11(b) Requirements and Supplemental 
Information
    Paragraph (b) of SEA Rule 15c2-11 requests information required 
pursuant to paragraphs (b)(1) through (b)(3) of SEA Rule 15c2-11. Among 
other things, the current paper form requires members to describe the 
circumstances surrounding the submission of the application and 
requests that the member include the identity of any person for whom 
the quotation is being submitted and any information provided to the 
member by such person. The proposed electronic Form 211 would continue 
to request this information,\12\ and also provides members the ability 
to upload any additional information and documentation the firm would 
like to submit to supplement its Form 211.
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    \12\ The current paper form also asks whether the issuer or its 
predecessor (if any) has been subject to a trading suspension order 
issued by the SEC during the past 12 months. If a trading suspension 
order has been issued, the member must provide a copy of the order 
or of the SEC's public release announcing the trading suspension 
order. The proposed electronic Form 211 also includes this 
information request. If the member selects ``yes,'' an upload of a 
copy of the order or SEC public release announcing the trading 
suspension order is required; additional explanatory text is 
optional.
    The current paper form requires members to provide any material 
information, including adverse information regarding the issuer, of 
which the member is aware or has in its possession. The proposed 
electronic Form 211 also includes this information request. If the 
member selects ``yes,'' an explanatory text entry is required; a 
document upload is optional.
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Certifications
    Finally, the certifications required by the proposed electronic 
Form 211 mirror those contained in the current paper form, including 
that the undersigned must have a reasonable basis for believing that 
the information accompanying the form is accurate in all material 
respects and that the sources of information are reliable; that the 
undersigned understands and acknowledges that this affirmative review 
obligation applies to all subsequent submissions made in connection 
with the Form 211 application; that the undersigned certifies that they 
have examined the form and, to the best of their knowledge, it is true, 
correct, and complete; that neither the member nor associated person 
have accepted or will accept any payment or other consideration, 
directly or indirectly, from the issuer of the security to be quoted, 
or any affiliate or promoter thereof, for publishing a quotation or 
acting as market maker in the security to be quoted, or submitting an 
application in connection therewith (including the submission of the 
Form 211); and that the undersigned acknowledges that copies of the 
form, accompanying documents, and subsequent submissions may be 
provided to the SEC, other regulatory agencies, or to the quotation 
medium(s) on which the security is or will be quoted.\13\
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    \13\ The proposed electronic Form 211 slightly modifies the 
contact information requested under this section; specifically, it 
requests the email address of the contact in lieu of a fax number, 
and the phone number and email address of the registered principal 
responsible for submitting the form. The proposed electronic Form 
211 also requests an email address for correspondence sent via 
Request Manager.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA will announce the implementation date of the 
proposed rule change in a Regulatory Notice. The implementation date 
will be no later than 90 days after the date of the filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest.
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    \14\ 15 U.S.C. 78o-3(b)(6).
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    FINRA believes the proposal will simplify and streamline the 
process by which members submit Form 211s, making it more efficient for 
both FINRA and members. As noted above, the proposed electronic form 
will be accessible through FINRA's Firm Gateway, enabling members to 
complete the Form 211 electronically, as well as upload supporting 
documentation. Thus, FINRA believes the proposal enhances FINRA's 
oversight of the Form 211 process, thereby supporting FINRA's efforts 
under Rule 6432 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 with respect to 
non-exchange-listed securities.

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

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal is intended to 
simplify the Form 211 process and increase efficiency for both FINRA 
and the firms that file Form 211s without any loss in the information 
that is being collected. By implementing an electronic Form 211, FINRA 
believes the proposal promotes more efficient compliance with respect 
to the requirements around initiating and resuming quotations for non-
exchange-listed securities. In addition, the proposal applies equally 
to any firm that submits a Form 211, as all member firms have access to 
the FINRA Gateway, and new firms receive login credentials upon 
registration with FINRA. As a result, FINRA believes the proposal will 
not have a significant impact on competition among firms that seek to 
publish quotations for non-exchange-listed securities.
    To the extent that the manual administration of Form 211 in paper 
form was viewed by members as burdensome, those participants should

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benefit from electronic submission of the Form 211 via Firm Gateway, 
which would permit members to mitigate any direct or indirect costs 
associated with mailing, emailing or faxing the paper form and other 
supporting information and documentation.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments:

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2017-028 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-2017-028. 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 
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-2017-028 and should be 
submitted on or before September 22, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18533 Filed 8-31-17; 8:45 am]
 BILLING CODE 8011-01-P


