[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85824-85827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28658]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90752; File No. SR-IEX-2020-20]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX 
Rule 2.160 (Registration Requirements and Restrictions on Membership) 
To Adopt Temporary Supplementary Material .02 (Temporary Extension of 
the Limited Period for Registered Persons To Function as Principals) 
Under the Rule

December 21, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 15, 2020, the Investors Exchange LLC 
(``IEX'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit

[[Page 85825]]

comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Act,\3\ 
and Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a 
proposed rule change to amend IEX Rule 2.160 (Registration Requirements 
and Restrictions on Membership) to adopt temporary Supplementary 
Material .02 (Temporary Extension of the Limited Period for Registered 
Persons to Function as Principals) under paragraph (i) of the Rule. The 
proposed rule change would harmonize the IEX Rule with a Financial 
Industry Regulatory Authority, Inc. (``FINRA'') rule amendment that 
extended the 120-day period during which certain individuals can 
function as a principal without having successfully passed an 
appropriate qualifying examination, through April 30, 2021.\5\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ See Exchange Act Release No. 89732 (September 1, 2020), 85 
FR 55535 (September 8, 2020) (SR-FINRA-2020-26); Exchange Act 
Release No. 90617 (December 9, 2020), 85 FR 81258 (December 15, 
2020) (SR-FINRA-2020-43).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.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
    Currently, IEX Rule 2.160(i), Supplementary Material .01 provides, 
inter alia, that an IEX Member (``Member'') may designate any person 
currently registered, or who becomes registered with the Member as a 
representative to function as a principal for 120 calendar days prior 
to passing an appropriate principal qualification examination and that, 
in no event, may such person function as a principal beyond the initial 
120 calendar day period without having passed an appropriate principal 
qualifying examination.
    The Exchange is proposing to amend IEX Rule 2.160(i) to adopt 
Supplementary Material .02 (Temporary Extension of the Limited Period 
for Registered Persons to Function as Principals). Under the proposed 
amendment, a person designated to function as a principal prior to 
January 1, 2021 may continue to function as a principal without having 
successfully passed an appropriate qualifying examination until April 
30, 2021. The proposed amendment will align IEX's rule with FINRA Rule 
1210, which was recently amended to provide the same temporary 
extension for principals due to the continuing impact of the COVID-19 
pandemic.\6\ FINRA performs certain functions related to the 
qualification, registration and continuing education requirements for 
registered persons pursuant to a regulatory services agreement with the 
Exchange.
---------------------------------------------------------------------------

    \6\ See supra note 5.
---------------------------------------------------------------------------

    In response to COVID-19, earlier this year FINRA began providing 
temporary relief to member firms from FINRA rules and requirements via 
frequently asked questions (``FAQs'') on its website.\7\ Two of these 
FAQs \8\ provided temporary relief to address disruptions to the 
administration of FINRA qualification examinations caused by the 
pandemic that have significantly limited the ability of individuals to 
sit for these examinations due to Prometric test center capacity 
issues.\9\
---------------------------------------------------------------------------

    \7\ See Frequently Asked Questions Related to Regulatory Relief 
Due to the Coronavirus Pandemic, available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq.
    \8\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
    \9\ At the outset of the COVID-19 pandemic, all FINRA 
qualification examinations were administered at test centers 
operated by Prometric. Based on the health and welfare concerns 
resulting from COVID-19, in March Prometric closed all its test 
centers in the United States and Canada and began to slowly reopen 
some of them at limited capacity in May. At this time, not all of 
these Prometric test centers have reopened at full capacity.
---------------------------------------------------------------------------

    FINRA published the first FAQ on March 20, 2020, providing that 
individuals whom were designated to function as principals under FINRA 
Rule 1210.04 prior to February 2, 2020, would be given until May 31, 
2020, to pass the appropriate principal qualification examination.\10\ 
On May 19, 2020, FINRA extended the relief to pass the appropriate 
examination until June 30, 2020. On June 29, 2020, FINRA again extended 
the temporary relief providing that individuals who were designated to 
function as principals under FINRA Rule 1210.04 prior to May 4, 2020, 
would be given until August 31, 2020, to pass the appropriate principal 
qualification examination.\11\
---------------------------------------------------------------------------

    \10\ FINRA Rule 1210.04 (Requirements for Registered Persons 
Functioning as Principals for a Limited Period) allows a member firm 
to designate certain individuals to function in a principal capacity 
for 120 calendar days before having to pass an appropriate principal 
qualification examination. IEX Rule 2.160(i) Supplementary Material 
.01 provides the same allowance to Members.
    \11\ See supra note 8.
---------------------------------------------------------------------------

    On August 28, 2020, FINRA filed with the Commission a proposed rule 
change for immediate effectiveness to extend the temporary relief 
provided via the two FAQs by adopting temporary Supplementary Material 
.12 (Temporary Extension of the Limited Period for Registered Persons 
to Function as Principals) under FINRA Rule 1210 (Registration 
Requirements).\12\ Pursuant to this rule filing, individuals who were 
designated prior to September 3, 2020, to function as a principal under 
FINRA Rule 1210.04 would have until December 31, 2020, to pass the 
appropriate qualification examination.
---------------------------------------------------------------------------

    \12\ See supra note 5. FINRA's proposed rule changes also 
provided for a similar temporary extension of the limited period for 
persons to function as an Operations Professional under FINRA Rule 
1220(b)(3)(B) to December 31, 2020, and later to April 30, 2021, to 
pass the appropriate qualification examination. IEX does not have 
Operations Professional as a registration category.
---------------------------------------------------------------------------

    Thereafter, on December 9, 2020, FINRA filed with the Commission a 
proposed rule change for immediate effectiveness to extend the limited 
period for registered persons to function as a principal through April 
30, 2021.\13\ Pursuant to this rule filing, individuals who were 
designated prior to January 1, 2021 to function as a principal would 
have until April 30, 2021 to pass the appropriate qualifying 
examination.
---------------------------------------------------------------------------

    \13\ See supra note 5.
---------------------------------------------------------------------------

    The Exchange continues to closely monitor the impact of the COVID-
19 pandemic on Members, investors, and other stakeholders. The COVID-19 
conditions necessitating the extension of relief provided in FINRA's 
FAQs and rule amendments persist and, in fact, appear to be 
worsening.\14\ One of the impacts of COVID-19 continues to be serious 
interruptions in the administration of FINRA qualification examinations 
at Prometric test centers

[[Page 85826]]

and the limited ability of individuals to sit for the examinations.\15\ 
Although Prometric has begun reopening test centers, Prometric's safety 
practices mean that currently not all test centers are open, some of 
the open test centers are at limited capacity, and some open test 
centers are delivering only certain examinations that have been deemed 
essential by the local government.\16\ Furthermore, Prometric has had 
to close some reopened test centers due to incidents of COVID-19 cases. 
The initial nationwide closure in March along with the inability to 
fully reopen all Prometric test centers due to COVID-19 have led to a 
significant backlog of individuals who are waiting to sit for FINRA 
examinations.\17\ In addition, Members are continuing to experience 
operational challenges with much of their personnel working from home 
due to shelter-in-place orders, restrictions on businesses and social 
activity imposed in various states, and adherence to other social 
distancing guidelines consistent with the recommendations of public 
health officials.\18\
---------------------------------------------------------------------------

    \14\ See, e.g., Meryl Kornfield, Jacqueline Dupree, Marisa Iati, 
Paulina Villegas, Siobhan O'Grady and Hamza Shaban, New daily 
coronavirus cases in U.S. rise to 145,000, latest all-time high, 
Wash. Post, November 11, 2020, https://www.washingtonpost.com/nation/2020/11/11/coronavirus-covid-live-updates-us/.
    \15\ Information about the continued impact of COVID-19 on 
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
    \16\ Information from Prometric about its safety practices and 
the impact of COVID- 19 on its operations is available at https://www.prometric.com/corona-virus-update.
    \17\ Although an online test delivery service has been launched 
to help address the backlog, the General Securities Principal Exam 
(Series 24) is not available online. See supra note 12. FINRA is 
considering making additional qualifications examinations available 
remotely on a limited basis.
    \18\ See, e.g., Centers for Disease Control and Prevention, How 
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
---------------------------------------------------------------------------

    As a result, Members continue to face potentially significant 
disruptions to their normal business operations that may include a 
limitation of in-person activities and staff absenteeism as a result of 
the health and welfare concerns stemming from COVID-19. Such potential 
disruptions may be further exacerbated and may even affect client 
services if Members cannot continue to keep principal positions filled 
as they may have difficulty finding other qualified individuals to 
transition into these roles or may need to reallocate employee time and 
resources away from other critical responsibilities at the Member.
    These ongoing, extenuating circumstances make it impracticable for 
Members to ensure that the individuals whom they have designated to 
function as a principal as set forth in IEX Rule 2.160(i) are able to 
successfully sit for and pass an appropriate qualification examination 
within the 120-calendar day period required by Supplementary Material 
.01 under Rule 2.160(i), or to find other qualified staff to fill these 
positions. The ongoing circumstances also require individuals to be 
exposed to the health risks associated with taking an in-person 
examination, because the General Securities Principal examination is 
not available online. Therefore, IEX is proposing to extend the 120-day 
period during which an individual can function as a principal before 
having to pass an applicable qualification examination until April 30, 
2021.\19\ The proposed rule change would apply only to those 
individuals who were designated to function as a principal prior to 
January 1, 2021. Any individuals designated to function as a principal 
on or after January 1, 2021 would need to successfully pass an 
appropriate qualification examination within 120 days.
---------------------------------------------------------------------------

    \19\ If IEX seeks to provide additional temporary relief from 
the rule requirements identified in this proposed rule change beyond 
April 30, 2021, IEX will submit a separate rule filing to further 
extend the temporary extension of time.
---------------------------------------------------------------------------

    The Exchange believes that this proposed extension of time is 
tailored to address the needs and constraints on a Member's operations 
during the COVID-19 pandemic, without significantly compromising 
critical investor protection. The proposed extension of time will help 
to minimize the impact of COVID-19 on Members by providing continued 
flexibility so that Members can ensure that principal positions remain 
filled. The potential risks from the proposed extension of the 120-day 
period are mitigated by the ongoing requirement that Members supervise 
the activities of these designated individuals and ensure compliance 
with federal securities laws and regulations, as well as IEX Rules.
    As noted below, IEX 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 IEX can implement the proposed 
rule change immediately.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \20\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \21\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest by harmonizing the Exchange's registration rules with 
those of FINRA, on which they are based. Consequently, the proposed 
change will conform the Exchange's rules to changes made to 
corresponding FINRA rules, thus promoting application of consistent 
regulatory standards with respect to rules that FINRA enforces pursuant 
to its regulatory services agreement with the Exchange.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    IEX 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 proposed rule change is not 
designed to address any competitive issue but to align the Exchange's 
rules with those of FINRA, which will assist FINRA in its oversight 
work done pursuant to a regulatory services agreement with IEX. The 
proposed rule change will also provide for consistent application of 
the Exchange's registration rules with those of FINRA, on which they 
are based. The Exchange believes that the proposed rule change is 
necessary to temporarily rebalance the attendant benefits and costs of 
the obligations under Rule 2.160 in response to the impacts of the 
COVID-19 pandemic that would otherwise result if the temporary rule 
amendment was not adopted. Consequently, the Exchange believes that the 
proposed temporary relief afforded by the proposed rule change and the 
benefit of harmonizing the Exchange's registration and qualification 
rules with those of FINRA does not present any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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

[[Page 85827]]

become effective pursuant to Section 19(b)(3)(A) of the Act \22\ and 
Rule 19b-4(f)(6) thereunder.\23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. As noted 
above, the Exchange stated that the proposed extension of time will 
help minimize the impact of the COVID-19 outbreak on Members' 
operations by allowing them to keep principal positions filled and 
minimizing disruptions to client services and other critical 
responsibilities. The Exchange further stated that the ongoing 
extenuating circumstances of the COVID-19 pandemic make it impractical 
to ensure that individuals designated to act in these capacities are 
able to take and pass the appropriate qualification examination during 
the 120-calendar day period required under the rules. The Exchange also 
explained that shelter-in-place orders, quarantining, restrictions on 
business and social activity and adherence to social distancing 
guidelines consistent with the recommendations of public officials 
remain in place in various states.\24\ In addition, the Exchange 
observed that, following a nationwide closure of all test centers 
earlier in the year, some test centers have re-opened, but are 
operating at limited capacity or are only delivering certain 
examinations that have been deemed essential by the local 
government.\25\ Although, as the Exchange noted, FINRA has launched an 
online test delivery service to help address this backlog, the General 
Securities Principal (Series 24) Examination is not available 
online.\26\ Nevertheless, the Exchange explained that the proposed rule 
change will provide needed flexibility to ensure that these positions 
remain filled and is tailored to address the constraints on Members' 
operations during the COVID-19 pandemic without significantly 
compromising critical investor protection.\27\
---------------------------------------------------------------------------

    \24\ See supra note 18.
    \25\ See supra notes 15 and 16. The Exchange states that 
Prometric has also had to close some reopened test centers due to 
incidents of COVID-19 cases.
    \26\ See supra note 17. FINRA is considering making additional 
qualification examinations available remotely on a limited basis.
    \27\ The Exchange states that Members remain subject to the 
continued requirement to supervise the activities of these 
designated individuals and ensure compliance with federal securities 
laws and regulations, as well as IEX rules.
---------------------------------------------------------------------------

    The Commission observed that the Exchange's proposal, like FINRA's 
analogous filing, provides only temporary relief from the requirement 
to pass certain qualification examinations within the 120-day period in 
the rules. As proposed, this relief would extend the 120-day period 
that certain individuals can function as principals through April 30, 
2021. If a further extension of temporary relief from the rule 
requirements identified in this proposal beyond April 30, 2021 is 
required, the Exchange noted that it may submit a separate rule filing 
to extend the effectiveness of the temporary relief under these 
rules.\28\ For these reasons, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest.\29\ Accordingly, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\30\
---------------------------------------------------------------------------

    \28\ See supra note 19.
    \29\ As noted above by the Exchange, this proposed temporary 
change is based on a recent filing by FINRA that the Commission 
approved with a waiver of the 30-day operative delay. See supra note 
5, 85 FR at 81260.
    \30\ 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).
---------------------------------------------------------------------------

    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-IEX-2020-20 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-IEX-2020-20. 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, 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 such filing also will be available for inspection 
and copying at the principal office of IEX. 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-IEX-2020-20 and 
should be submitted on or before January 19, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28658 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P


