[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Notices]
[Pages 63603-63606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90085; File No. SR-NYSEAMER-2020-69]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize 
Rules 9261 and 9830 With Recent Changes by the Financial Industry 
Regulatory Authority, Inc.

October 2, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on September 23, 2020, NYSE American LLC (``NYSE American'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to harmonize Rules 9261 and 9830 with recent 
changes by the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') that temporarily grants the Chief or Deputy Chief Hearing 
Officer the authority to order that hearings be conducted by video 
conference if warranted by public health risks posed by in-person 
hearings during the ongoing novel coronavirus (``COVID-19'') pandemic. 
As proposed, these temporary amendments would be in effect through 
December 31, 2020. The proposed rule change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, 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, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to harmonize Rules 9261 (Evidence and 
Procedure in Hearing) and 9830 (Hearing) with recent changes by FINRA 
to its Rules 9261 and 9830 that temporarily grants to the Chief or 
Deputy Chief Hearing Officer the authority to order that hearings be 
conducted by video conference if warranted by public health risks posed 
by in-person hearings during the ongoing COVID-19 pandemic. As 
proposed, these temporary amendments would be in effect through 
December 31, 2020.\4\
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    \4\ The Exchange may submit a separate rule filing to extend the 
expiration date of the proposed temporary amendments if the Exchange 
requires temporary relief from the rule requirements identified in 
this proposal beyond December 31, 2020. The amended NYSE American 
rules will revert back to their current state at the conclusion of 
the temporary relief period and any extension thereof.
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Background
    In 2016, NYSE American (then known as NYSE MKT LLC) adopted 
disciplinary rules that are, with certain exceptions, substantially the 
same as the Rule 8000 Series and Rule 9000 Series of FINRA and its 
affiliate, the New York Stock Exchange LLC (``NYSE''), and which set 
forth rules for conducting investigations and enforcement actions.\5\

[[Page 63604]]

The NYSE MKT disciplinary rules were implemented on April 15, 2016.\6\
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    \5\ See Securities Exchange Act Release Nos. 77241 (February 26, 
2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-30) (``2016 
Notice'').
    \6\ See NYSE MKT Information Memorandum 16-02 (March 14, 2016).
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    In adopting disciplinary rules modeled on FINRA's rules, NYSE 
American adopted the hearing and evidentiary processes set forth in 
Rule 9261 and in Rule 9830 for hearings in matters involving temporary 
and permanent cease and desist orders under the Rule 9800 Series. As 
adopted, the text of Rule 9261 and Rule 9830 are substantially the same 
as the FINRA rules with certain modifications.\7\
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    \7\ See 2016 Notice, 81 FR at 11327 & 11332.
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    In view of the ongoing spread of COVID-19 and its effect on FINRA's 
adjudicatory functions nationwide, FINRA recently filed a temporary 
rule change to grant FINRA's Office of Hearing Officers (``OHO'') and 
the National Adjudicatory Council (``NAC'') the authority to conduct 
certain hearings by video conference, if warranted by the current 
COVID-19-related public health risks posed by in-person hearings. Among 
the rules FINRA amended were Rules 9261 and 9830.\8\
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    \8\ See Securities Exchange Act Release Nos. 83289 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (SR-FINRA-2020-027) (``FINRA 
Filing''). FINRA also proposed to temporarily amend FINRA Rules 1015 
and 9524. FINRA Rule 1015 governs the process by which an applicant 
for new or continuing membership can appeal a decision rendered by 
FINRA's Department of Member Supervision under FINRA Rule 1014 or 
1017 and request a hearing which would be conducted by a 
subcommittee of the NAC. See id. at 55714. The Exchange has not 
adopted FINRA Rule 1015. FINRA Rule 9524 governs the process by 
which a statutorily disqualified member firm or associated person 
can appeal the Department's recommendation to deny a firm or 
sponsoring firm's application to the NAC. See id. Under the 
Exchange's version of Rule 9524, if the Exchange's Chief Regulatory 
Officer rejects the application, the member organization, sponsoring 
member organization, or applicant may request a review by the 
Exchange Board of Directors. This differs from FINRA's process, 
which provides for a hearing before the NAC and further 
consideration by the FINRA Board of Directors.
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    FINRA represented in its filing that its protocol for conducting 
hearings by video conference would ensure that such hearings maintain 
fair process for the parties by, among other things, FINRA's use of a 
high quality, secure and user-friendly video conferencing service and 
provide thorough instructions, training and technical support to all 
hearing participants.\9\ According to FINRA, the proposed changes were 
a reasonable interim solution to allow FINRA's critical adjudicatory 
processes to continue to function while protecting the health and 
safety of hearing participants as FINRA works towards resuming in-
person hearings in a manner that is compliant with the current guidance 
of public health authorities.\10\
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    \9\ See FINRA Filing, 85 FR at 55713.
    \10\ See id.
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    Pursuant to a regulatory services agreement (``RSA''), FINRA's OHO 
will administer all aspects of adjudications, including assigning 
hearing officers to serve as NYSE American hearing officers. A hearing 
officer from OHO will, among other things, preside over the 
disciplinary hearing, select and chair the hearing panel, and prepare 
and issue written decisions. The Chief or Deputy Hearing Officer for 
all Exchange disciplinary hearings are currently drawn from OHO and are 
all FINRA employees. The Exchange believes that OHO will utilize the 
same video conference protocol and processes for Exchange matters under 
the RSA as it proposes for FINRA matters.
    Given that FINRA and its OHO administers disciplinary hearings on 
the Exchange's behalf, and given that the public health concerns 
addressed by FINRA's amendments apply equally to the Exchange's 
disciplinary hearings, the Exchange proposes to temporarily amend its 
disciplinary rules to allow FINRA to conduct virtual hearings on its 
behalf.
Proposed Rule Change
    Rule 9261(b) states that if a disciplinary hearing is held, a party 
shall be entitled to be heard in-person, by counsel, or by the party's 
representative. Absent an agreement by all parties to proceed in 
another manner, Exchange disciplinary hearings are in-person. As noted, 
the Chief and Deputy Hearing Officers for all Exchange and cross-market 
matters are supplied by OHO and are FINRA employees. Accordingly, 
absent an agreement by all parties to proceed in another manner, under 
Rule 9261(b) the Chief or Deputy Hearing Officer conducts disciplinary 
hearings in-person.
    Similarly, Rule 9830 outlines the requirements for hearings for 
temporary and permanent cease and desist orders. Rule 9830(a), however, 
does not specify that a party shall be entitled to be heard in-person, 
by counsel, or by the party's representative.
    Consistent with FINRA's temporary amendment to FINRA Rules 9261 and 
9830, the Exchange proposes to temporarily grant the Chief or Deputy 
Chief Hearing Officer temporary authority to order, upon consideration 
of the current COVID-19-related public health risks presented by an in-
person hearing, that a hearing under those rules be conducted by video 
conference. The proposed rule change will permit OHO to make an 
assessment, based on critical COVID-19 data and criteria and the 
guidance of health and security consultants, whether an in-person 
hearing would compromise the health and safety of the hearing 
participants such that the hearing should proceed by video conference. 
As noted, FINRA has adopted a detailed and thorough protocol to ensure 
that hearings conducted by video conference will maintain fair process 
for the parties.\11\ The Exchange believes that this is a reasonable 
procedure to follow in hearings under Rules 9261 and 9830 chaired by a 
FINRA employee.\12\
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    \11\ See FINRA Filing, 85 FR at 55713.
    \12\ The Exchange notes, as did FINRA, that SEC's Rules of 
Practice pertaining to temporary cease-and-desist orders provide 
that parties and witnesses may participate by telephone or, in the 
Commission's discretion, through the use of alternative technologies 
that allow remote access, such as a video link. See SEC Rule of 
Practice 511(d)(3); Comment (d); see FINRA Filing, 85 FR at 55714, 
n. 21.
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    To effectuate these changes, the Exchange proposes to add the 
following sentence to Rule 9261(b):

    Upon consideration of the current public health risks presented 
by an in-person hearing, the Chief Hearing Officer or Deputy Chief 
Hearing Officer may, on a temporary basis, determine that the 
hearing shall be conducted, in whole or in part, by video 
conference.

    The proposed text is identical to the language adopted by 
FINRA.\13\
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    \13\ See FINRA Filing, 85 FR at 55712.
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    Similarly, the Exchange proposes to add the following text to Rule 
9830(a):

    Upon consideration of the current public health risks presented 
by an in-person hearing, the Chief Hearing Officer or Deputy Chief 
Hearing Officer may, on a temporary basis, determine that the 
hearing shall be conducted, in whole or in part, by video 
conference.

    Once again, the proposed language is identical to the language 
adopted by FINRA.\14\
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    \14\ Id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\15\ in general, and furthers the objectives of Section 
6(b)(5),\16\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market

[[Page 63605]]

and a national market system and, in general, to protect investors and 
the public interest. Additionally, the Exchange believes the proposed 
rule change is designed to provide a fair procedure for the 
disciplining of members and persons associated with members, consistent 
with Sections 6(b)(7) and 6(d) of the Act.\17\
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78f(b)(7) and 78f(d).
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    The Exchange believes that the proposed rule change supports the 
objectives of the Act by providing greater harmonization between 
Exchange rules and FINRA rules of similar purpose, resulting in less 
burdensome and more efficient regulatory compliance. As previously 
noted, the text of Rule 9261 and Rule 9830 is substantially the same as 
FINRA's rule. As such, the proposed rule change will foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities and will remove impediments to and perfect the mechanism of 
a free and open market and a national market system.
    The Exchange believes that the proposed temporary rule change will 
permit the Exchange to effectively conduct hearings during the COVID-19 
pandemic in situations where in-person hearings present likely public 
health risks. The ability to conduct hearings by video conference will 
thereby permit the adjudicatory functions of the Exchange's 
disciplinary rules to continue unabated, thereby avoiding protracted 
delays. The Exchange believes that this is especially important in 
matters where temporary and permanent cease and desist orders are 
sought because the proposed rule change would enable those hearings to 
proceed without delay, thereby enabling the Exchange to take immediate 
action to stop significant, ongoing customer harm, to the benefit of 
the investing public.
    Conducting hearings via video conference will give the parties and 
adjudicators simultaneous visual and oral communication without the 
risks inherent in physical proximity during a pandemic. Temporarily 
permitting hearings for disciplinary matters to proceed by video 
conference maintains fair process by providing respondents a timely 
opportunity to address and potentially resolve any allegations of 
misconduct.
    As noted, FINRA will use a high quality, secure video conferencing 
technology with features that will allow the parties to reasonably 
approximate those tasks that are typically performed at an in-person 
hearing, such as sharing documents, marking documents, and utilizing 
breakout rooms. FINRA will also provide training for participants on 
how to use the video conferencing platform and detailed guidance on the 
procedures that will govern such hearings. Moreover, the Chief or 
Deputy Chief Hearing Officer may take into consideration, among other 
things, a hearing participant's access to connectivity and technology 
in scheduling a video conference hearing and can also, at their 
discretion, allow a party or witness to participate by telephone, if 
necessary, to address such access issues.\18\
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    \18\ See text accompanying notes 9-10, supra.
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    For the same reasons, the Exchange believes that the proposed rule 
change is designed to provide a fair procedure for the disciplining of 
members and persons associated with members, consistent with Sections 
6(b)(7) and 6(d) of the Act.\19\ The Exchange believes that the 
temporary proposed rule change strikes an appropriate balance between 
providing fair process and enabling the Exchange to fulfill its 
statutory obligations to protect investors and maintain fair and 
orderly markets while accounting for the significant health and safety 
risks of in-person hearings stemming from the outbreak of COVID-19.
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    \19\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but is rather intended 
solely to provide temporary relief given the impacts of the COVID-19 
pandemic. In its filing, FINRA provides an abbreviated economic impact 
assessment maintaining that the changes are necessary to temporarily 
rebalance the attendant benefits and costs of the obligations under 
FINRA Rules 1015, 9261, 9524 and 9830 in response to the impacts of the 
COVID-19 pandemic that is equally applicable to the changes the 
Exchange proposes.\20\ The Exchange accordingly incorporates FINRA's 
abbreviated economic impact assessment by reference.
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    \20\ See FINRA Filing, 85 FR at 55716.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \21\ and Rule 19b-4(f)(6) thereunder.\22\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \22\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEAMER-2020-69 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-NYSEAMER-2020-69. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 63606]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change 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 website viewing and printing in the Commission's Public 
Reference Room, on business days between the hours of 10:00 a.m. and 
3:00 p.m., located at 100 F Street NE, Washington, DC 20549. Copies of 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change.
    Persons submitting comments are cautioned that we do not redact or 
edit personal identifying information from comment submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSEAMER-2020-
69 and should be submitted on or before October 29, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22257 Filed 10-7-20; 8:45 am]
BILLING CODE 8011-01-P


