[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81250-81253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27487]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90619; File No. SR-FINRA-2020-042]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Expiration Date of the Temporary 
Amendments Set Forth in SR-FINRA-2020-015 and SR-FINRA-2020-027

December 9, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 1, 2020, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared substantially by FINRA. FINRA 
filed the proposed rule change as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend the expiration date of the temporary 
amendments set forth in SR-FINRA-2020-015 and SR-FINRA-2020-027 from 
December 31, 2020, to April 30, 2021.\5\ Given that both SR-FINRA-

[[Page 81251]]

2020-015 and SR-FINRA-2020-027 provide temporary relief necessitated by 
the COVID-19 global health crisis and the related need to restrict in-
person activities, and the COVID-19 conditions warranting this 
temporary relief persist, FINRA is filing this proposed rule change to 
extend and to continue to align the expiration dates of both 
filings.\6\
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    \5\ As discussed below, SR-FINRA-2020-015 and SR-FINRA-2020-027 
respectively provide temporary relief from some timing, method of 
service and other procedural requirements in FINRA rules and allow 
FINRA's Office of Hearing Officers (``OHO'') and the National 
Adjudicatory Council (``NAC'') to conduct hearings, on a temporary 
basis, by video conference, if warranted by the current COVID-19-
related public health risks posed by an in-person hearing. For 
further information on SR-FINRA-2020-015 and SR-FINRA-2020-027, in 
addition to what is provided herein, visit FINRA's website at 
https://www.finra.org/rules-guidance/rule-filings/sr-finra-2020-015 
and https://www.finra.org/rules-guidance/rule-filings/sr-finra-2020-027, respectively.
    \6\ If FINRA requires temporary relief from the rule 
requirements identified in SR-FINRA-2020-015 and SR-FINRA-2020-027 
beyond April 30, 2021, FINRA may submit a separate rule filing to 
extend the expiration date of the temporary amendments that are the 
subject of those filings. The amended FINRA rules will revert back 
to their original form at the conclusion of the temporary relief 
period and any extension thereof.
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    The text of the proposed rule change is available on FINRA's 
website 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
    In response to the COVID-19 global health crisis and the 
corresponding need to restrict in-person activities, FINRA filed 
proposed rule changes, SR-FINRA-2020-015 and SR-FINRA-2020-027, which 
respectively provide temporary relief from some timing, method of 
service and other procedural requirements in FINRA rules and allow 
FINRA's OHO and the NAC to conduct hearings, on a temporary basis, by 
video conference, if warranted by the current COVID-19-related public 
health risks posed by an in-person hearing. The COVID-19 conditions 
necessitating these temporary amendments persist, with cases rapidly 
escalating nationwide. Based on its assessment of current COVID-19 
conditions, and the lack of certainty as to when COVID-19-related 
health concerns will subside, FINRA has determined that there is a 
continued need for this temporary relief for several months beyond 
December 31, 2020. Accordingly, FINRA proposes to extend the expiration 
date of the temporary rule amendments set forth in SR-FINRA-2020-015 
and SR-FINRA-2020-027 from December 31, 2020, to April 30, 2021.
i. SR-FINRA-2020-015
    On May 8, 2020, FINRA filed with the Commission a proposed rule 
change for immediate effectiveness, SR-FINRA-2020-015, to temporarily 
amend some timing, method of service and other procedural requirements 
in FINRA rules during the period in which FINRA's operations are 
impacted by the outbreak of COVID-19 (the ``May 8 Filing'').\7\ The 
Commission published its notice of filing and immediate effectiveness 
for the May 8 Filing on May 20, 2020.\8\ The temporary amendments, as 
originally proposed in the May 8 Filing, would have expired on June 15, 
2020, absent another proposed rule change filing by FINRA. FINRA 
subsequently filed two proposed rule changes to extend the expiration 
date of the temporary amendments set forth in the May 8 Filing.\9\ The 
most recent proposed rule change, SR-FINRA-2020-022, filed on July 27, 
2020, extended the expiration date of the temporary amendments in the 
May 8 Filing from July 31, 2020, to a date to be specified in a public 
notice issued by FINRA, which date will be at least two weeks from the 
date of the notice, and no later than December 31, 2020 (the ``July 27 
Filing'').\10\
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    \7\ The following FINRA rules are the subject of the May 8 
Filing: 1012, 1015, 6490, 9132, 9133, 9146, 9321, 9341, 9349, 9351, 
9522, 9524, 9525, 9559 and 9630.
    \8\ See Securities Exchange Act Release No. 88917 (May 20, 
2020), 85 FR 31832 (May 27, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-015).
    \9\ On June 10, 2020, FINRA filed SR-FINRA-2020-017 to extend 
the expiration date of the temporary amendments set forth in the May 
8 Filing from June 15, 2020, to July 31, 2020 (the ``June 10 
Filing''). The Commission published its notice of filing and 
immediate effectiveness for the June 10 Filing on June 12, 2020. See 
Securities Exchange Act Release No. 89055 (June 12, 2020), 85 FR 
36928 (June 18, 2020) (Notice of Filing and Immediate Effectiveness 
of File No. SR-FINRA-2020-017).
    \10\ The Commission published its notice of filing and immediate 
effectiveness for the July 27 Filing on July 29, 2020. See 
Securities Exchange Act Release No. 89423 (July 29, 2020), 85 FR 
47278 (August 4, 2020) (Notice of Filing and Immediate Effectiveness 
of File No. SR-FINRA-2020-022).
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    As stated in its previous filings, FINRA proposed, and subsequently 
extended, the temporary amendments set forth in the May 8 Filing to 
address the substantial impacts of the COVID-19 outbreak on FINRA's 
operations. Among other things, the need for FINRA staff, with limited 
exceptions, to work remotely and restrict in-person activities--
consistent with the recommendations of public health officials--made it 
challenging to meet some procedural requirements and perform some 
functions required under FINRA rules. The temporary amendments in the 
May 8 Filing addressed these concerns by easing logistical and other 
issues and providing FINRA with needed flexibility for its operations 
during the COVID-19 outbreak, allowing FINRA to continue critical 
adjudicatory and review processes in a reasonable and fair manner and 
meet its critical investor protection goals, while also following best 
practices with respect to the health and safety of its staff.
    As noted above, the COVID-19 conditions necessitating the temporary 
amendments in the May 8 Filing--and the extensions of that relief 
provided for in FINRA's subsequent filings--persist. FINRA continues to 
face the same logistical and other challenges stemming from the COVID-
19-related public health risks for in-person activities and the 
continued need for FINRA staff, with few exceptions, to work remotely 
to protect their health and safety. Working remotely makes it difficult 
to, among other things, send and receive hard copy documents and 
conduct in-person oral arguments.
    As indicated in its previous filings, FINRA has established a 
COVID-19 task force to develop a data-driven, staged plan for FINRA 
staff to safely return to working in FINRA office locations and resume 
other in-person activities. Based on its assessment of current COVID-19 
conditions, including the recent nationwide surge of COVID-19 cases, 
FINRA does not believe the COVID-19-related health concerns 
necessitating this relief will subside by December 31, 2020, and has 
determined that there will be a continued need for this temporary 
relief for several months beyond December 31, 2020. Accordingly, FINRA 
proposes to extend the expiration date of the temporary rule amendments 
in the May 8 Filing from December 31, 2020, to April 30, 2021.
ii. SR-FINRA-2020-027
    On August 31, 2020, FINRA filed with the Commission a proposed rule 
change for immediate effectiveness, SR-FINRA-2020-027, to temporarily 
amend

[[Page 81252]]

FINRA Rules 1015, 9261, 9524 and 9830 to grant OHO and the NAC 
authority \11\ to conduct hearings in connection with appeals of 
Membership Application Program decisions, disciplinary actions, 
eligibility proceedings and temporary and permanent cease and desist 
orders by video conference, if warranted by the current COVID-19-
related public health risks posed by an in-person hearing (the ``August 
31 Filing'').\12\ The Commission published its notice of filing and 
immediate effectiveness for the August 31 Filing on September 2, 
2020.\13\ The temporary amendments, as originally proposed in the 
August 31 Filing, will expire on December 31, 2020, absent another 
proposed rule change filing by FINRA.
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    \11\ For OHO hearings under FINRA Rules 9261 and 9830, the 
proposed rule change temporarily grants authority to the Chief or 
Deputy Chief Hearing Officer to order that a hearing be conducted by 
video conference. For NAC hearings under FINRA Rules 1015 and 9524, 
this temporary authority is granted to the NAC or the relevant 
Subcommittee.
    \12\ The temporary amendments set forth in the August 31 Filing 
were subject to a 30-day operative delay and, accordingly, became 
operative on October 1, 2020.
    \13\ See Securities Exchange Act Release No. 89739 (September 2, 
2020), 85 FR 55712 (September 9, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-027).
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    FINRA proposed the temporary amendments allowing for specified OHO 
and NAC hearings to be conducted by video conference in response to the 
COVID-19-related public health risks posed in connection with 
conducting traditional, in-person hearings and the corresponding 
backlog of cases resulting from FINRA's postponement of in-person 
hearings starting on March 16, 2020. As set forth in the August 31 
Filing, FINRA relies on the guidance of its health and safety 
consultant, in conjunction with COVID-19 data and guidance issued by 
public health authorities, to determine whether the current public 
health risks presented by an in-person hearing may warrant a hearing by 
video conference.\14\ As noted above, the COVID-19-related public 
health risks necessitating this temporary relief have not yet abated, 
with COVID-19 cases surging nationwide.
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    \14\ As noted in the August 31 Filing, the temporary proposed 
rule change grants discretion to OHO and the NAC to order a video 
conference hearing. In deciding whether to schedule a hearing by 
video conference, OHO and the NAC may consider a variety of other 
factors in addition to COVID-19 trends. In the August 31 Filing, 
FINRA provided a non-exhaustive list of other factors OHO and the 
NAC may take into consideration, including a hearing participant's 
individual health concerns and access to the connectivity and 
technology necessary to participate in a video conference hearing.
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    Based on its assessment of current COVID-19 conditions, including 
the recent escalation in COVID-19 cases nationwide, FINRA does not 
believe the COVID-19-related health concerns necessitating this relief 
will subside by December 31, 2020, and has determined that there will 
be a continued need for this temporary relief for several months beyond 
December 31, 2020. Accordingly, FINRA proposes to extend the expiration 
date of the temporary rule amendments in the August 31 Filing from 
December 31, 2020, to April 30, 2021. The extension of these temporary 
amendments allowing for specified OHO and NAC hearings to proceed by 
video conference will allow FINRA's critical adjudicatory functions to 
continue to operate effectively in these extraordinary circumstances--
enabling FINRA to fulfill its statutory obligations to protect 
investors and maintain fair and orderly markets--while also protecting 
the health and safety of hearing participants.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\15\ 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. FINRA believes that the proposed rule change is also 
consistent with Section 15A(b)(8) of the Act,\16\ which requires, among 
other things, that FINRA rules provide a fair procedure for the 
disciplining of members and persons associated with members.
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    \15\ 15 U.S.C. 78o-3(b)(6).
    \16\ 15 U.S.C. 78o-3(b)(8).
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    The proposed rule change, which extends the expiration date of the 
temporary amendments to FINRA rules set forth in the May 8 Filing, will 
continue to provide FINRA, and in some cases another party to a 
proceeding, temporary modifications to its procedural requirements in 
order to allow FINRA to maintain fair processes and protect investors 
while operating in a remote work environment and with corresponding 
restrictions on its activities. It is in the public interest, and 
consistent with the Act's purpose, for FINRA to operate pursuant to 
this temporary relief. The temporary amendments allow FINRA to specify 
filing and service methods, extend certain time periods, and modify the 
format of oral argument for FINRA disciplinary and eligibility 
proceedings and other review processes in order to cope with the 
current pandemic conditions. In addition, extending this temporary 
relief will further support FINRA's disciplinary and eligibility 
proceedings and other review processes that serve a critical role in 
providing investor protection and maintaining fair and orderly markets.
    The proposed rule change, which also extends the expiration date of 
the temporary amendments to FINRA rules set forth in the August 31 
Filing, will continue to aid FINRA's efforts to timely conduct hearings 
in connection with its core adjudicatory functions. Given current 
COVID-19 conditions and the uncertainty around when those conditions 
will improve, without this relief allowing OHO and NAC hearings to 
proceed by video conference, FINRA would be required to postpone such 
hearings indefinitely. FINRA must be able to perform its critical 
adjudicatory functions in order to fulfill its statutory obligations to 
protect investors and maintain fair and orderly markets. As such, this 
relief is essential to FINRA's ability to fulfill its statutory 
obligations and allows hearing participants to avoid the serious COVID-
19-related health and safety risks associated with in-person hearings.
    Among other things, this relief will allow OHO to conduct temporary 
cease and desist proceedings by video conference so that FINRA can take 
immediate action to stop ongoing customer harm and will allow the NAC 
to timely provide members, disqualified individuals and other 
applicants an approval or denial of their applications. As set forth in 
detail in the August 31 Filing, this temporary relief allowing OHO and 
NAC hearings to proceed by video conference accounts for fair process 
considerations and will continue to provide fair process while avoiding 
the COVID-19-related public health risks for hearing participants. 
Accordingly, the proposed rule change extending this temporary relief 
is in the public interest and consistent with the Act's purpose.

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

    FINRA does not believe that the temporary proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As set forth in 
the May 8 Filing and August 31 Filing, the proposed rule

[[Page 81253]]

change is intended solely to extend temporary relief necessitated by 
the continued impacts of the COVID-19 outbreak and the related health 
and safety risks of conducting in-person activities. FINRA believes 
that the proposed rule change will prevent unnecessary impediments to 
FINRA's operations, including its critical adjudicatory processes, and 
its ability to fulfill its statutory obligations to protect investors 
and maintain fair and orderly markets that would otherwise result if 
the temporary amendments were to expire on December 31, 2020.

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 for this 
proposed rule change.\17\
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    \17\ For the comment file for SR-FINRA-2020-027, see https://www.sec.gov/comments/sr-finra-2020-027/srfinra2020027.htm.
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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 \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
FINRA has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. As FINRA requested in connection 
with its May 8 Filing and related extensions,\20\ FINRA has also asked 
the Commission to waive the 30-day operative delay so that this 
proposed rule change may become operative immediately upon filing. 
FINRA has reiterated that the requested relief in this proposed rule 
change will help minimize the impact of the COVID-19 outbreak on 
FINRA's operations, allowing FINRA to continue critical adjudicatory 
and review processes in a reasonable and fair manner and meet its 
critical investor protection goals, while also following best practices 
with respect to the health and safety of its employees.\21\ We also 
note that this proposal, like FINRA's May 8 Filing and its August 31 
Filing, provides only temporary relief during the period in which 
FINRA's operations are impacted by COVID-19. As proposed, the changes 
would be in place through April 30, 2021.\22\ FINRA also noted in both 
its May 8 Filing and August 31 Filing that the amended rules will 
revert back to their original state at the conclusion of the temporary 
relief period and, if applicable, any extension thereof.\23\ For these 
reasons, the Commission believes that waiver of the 30-day operative 
delay for this proposal is consistent with the protection of investors 
and the public interest. Accordingly, the Commission hereby waives the 
30-day operative delay and designates the proposal operative upon 
filing.\24\
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    \20\ See May 8 Filing, 85 FR at 31836. See also July 27 Filing, 
85 FR at 47280 (requesting a waiver of the 30-day operative delay). 
FINRA did not request that the Commission waive the 30-day operative 
delay for its August 31 Filing.
    \21\ See May 8 Filing, 85 FR at 31833.
    \22\ As noted above, see supra note 6, FINRA states that if it 
requires temporary relief from the rule requirements identified in 
this proposal beyond April 30, 2021, it may submit a separate rule 
filing to extend the effectiveness of the temporary relief under 
these rules.
    \23\ See May 8 Filing, 85 FR at 31833.
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2020-042 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-2020-042. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change 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 FINRA. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2020-042 and should be submitted 
on or before January 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27487 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P


