[Federal Register Volume 78, Number 57 (Monday, March 25, 2013)]
[Notices]
[Pages 17975-17982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06718]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69178; File No. SR-FINRA-2013-018]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to 
FINRA Rule 8313 (Release of Disciplinary Complaints, Decisions and 
Other Information)

March 19, 2013.
    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 March 5, 2013, 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. The 
Commission is publishing this notice to solicit 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

    FINRA is proposing to amend FINRA Rule 8313 (Release of 
Disciplinary Complaints, Decisions and Other Information), which 
governs the release of disciplinary and other information by FINRA to 
the public. In addition, the proposed rule change would make conforming 
amendments to certain rules in the FINRA Rule 9000 Series (Code of 
Procedure) and add a provision to FINRA Rule 9268 (Decision of Hearing 
Panel or Extended Hearing Panel) regarding the effective date of 
sanctions.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 8313 (Release of Disciplinary Complaints, Decisions and Other 
Information) governs the release of disciplinary and other information 
by FINRA to the public. Among other things, the proposed rule change 
would amend Rule 8313 to establish general standards for the release of 
disciplinary information to the public to provide greater information 
regarding FINRA's disciplinary actions, clarify the scope of 
information subject to Rule 8313, and eliminate provisions that do not 
address the release of information by FINRA to the public. In addition, 
the proposed rule change would make conforming amendments to certain 
rules in the FINRA Rule 9000 Series (Code of Procedure) and add a 
provision to FINRA Rule 9268 (Decision of Hearing Panel or Extended 
Hearing Panel) regarding the effective date of sanctions. The proposed 
rule change is described in detail below.
A. Disciplinary Complaints and Disciplinary Decisions
    Rule 8313(a) currently provides that in response to a request, 
FINRA shall release any identified disciplinary complaint or 
disciplinary decision issued by FINRA (or any subsidiary or Committee 
thereof) to the requesting party. Absent a specific request for an 
identified complaint or decision, the rule provides publicity 
thresholds for the release of information with respect

[[Page 17976]]

to disciplinary complaints and disciplinary decisions to the public.\3\
---------------------------------------------------------------------------

    \3\ Rule 8313 provides for the release of ``information with 
respect to'' disciplinary complaints and decisions in light of 
FINRA's practice to issue, in addition to the complaints or 
decisions themselves, information, for example, in press releases or 
summaries of complaints and decisions that meet the current 
publicity thresholds, or are otherwise permitted to be released 
under the rule.
---------------------------------------------------------------------------

    Under the publicity thresholds for disciplinary complaints in 
current Rule 8313(b)(1), FINRA shall release to the public information 
with respect to any disciplinary complaint that contains an allegation 
of a violation of a ``designated'' statute, rule, or regulation of the 
SEC, FINRA, or the Municipal Securities Rulemaking Board (``MSRB''), as 
determined by the FINRA Regulation Board of Directors.\4\ In addition, 
FINRA may release to the public information with respect to any 
complaint or group of complaints that involves a significant policy or 
enforcement determination where release of the information is deemed by 
FINRA's Chief Executive Officer (``CEO'') (or such other senior officer 
as the CEO may designate) to be in the public interest.
---------------------------------------------------------------------------

    \4\ FINRA has identified such rules in Notice to Members 97-42 
(July 1997).
---------------------------------------------------------------------------

    Under the publicity thresholds for disciplinary decisions in 
current Rule 8313(c)(1), FINRA shall release to the public information 
with respect to any disciplinary decision that: (1) Imposes a 
suspension, cancellation, or expulsion of a member; (2) imposes a 
suspension or revocation of the registration of an associated person; 
(3) imposes a suspension or bar of a member or associated person from 
association with all members; (4) imposes monetary sanctions of $10,000 
or more upon a member or associated person; or (5) contains an 
allegation of a violation of a designated rule. As is the case with 
disciplinary complaints, FINRA may release information with respect to 
any disciplinary decision or group of decisions that involves a 
significant policy or enforcement determination where its release is 
deemed by FINRA's CEO, or his or her designee, to be in the public 
interest. Rule 8313(c)(1) also currently contains an omnibus provision 
that permits FINRA to release information on any disciplinary or other 
decision issued pursuant to the Rule 9000 Series not specifically 
enumerated, regardless of the sanctions imposed, with redacted names of 
the parties and other identifying information. Rules 8313(c)(1)(A) and 
(c)(1)(B) currently set forth redaction standards for the release of 
information with respect to disciplinary decisions where only certain 
respondents in a decision on appeal meet one or more of the publicity 
thresholds, or where an underlying Office of Hearing Officers (``OHO'') 
decision meets a publicity threshold, but a later National Adjudicatory 
Council (``NAC'') decision on the matter does not meet a threshold.
    In May 2011, FINRA launched its FINRA Disciplinary Actions online 
database (``FDA'') to provide interested parties with greater access to 
information regarding FINRA's disciplinary actions.\5\ The FDA contains 
copies of FINRA disciplinary actions (dating back to early 2005) that 
are eligible for publication under Rule 8313. Interested parties may 
access disciplinary complaints and disciplinary decisions in the FDA to 
obtain copies of actions they may be interested in regarding a specific 
firm or associated person as well as obtaining copies of actions that 
involve a variety of different areas of interest, including specific 
rule or statutory violations, products or business lines, or 
supervisory and compliance practices. Interested parties may search the 
database by entering search criteria, such as an individual's name, 
firm name, case number, date range, document type, document text (e.g., 
such terms as rules citations, product types, sanction, etc.) or CRD 
number.\6\ However, the disciplinary information available for 
publication in the FDA (or otherwise available for release by FINRA) 
currently is limited by the publicity thresholds in Rule 8313.
---------------------------------------------------------------------------

    \5\ The FDA is available at http://www.finra.org/Industry/Enforcement/DisciplinaryActions/FDAS/.
    \6\ The FDA also includes decisions issued by the SEC and 
federal appellate courts that relate to FINRA disciplinary actions 
that have been appealed.
---------------------------------------------------------------------------

    To further increase access to information regarding FINRA's 
disciplinary actions, the proposed rule change would eliminate the 
restrictions to publication of the specified actions by eliminating the 
publicity thresholds in Rules 8313(b)(1) and (c)(1) as well as the 
provision addressing the release of ``identified'' disciplinary 
complaints and disciplinary decisions in Rule 8313(a).\7\ In their 
place, the proposed rule change would adopt general standards for the 
release of disciplinary complaints, disciplinary decisions, and other 
information to the public.\8\ Specifically, proposed Rule 8313(a)(1) 
would provide that FINRA shall release to the public a copy of, and at 
FINRA's discretion information with respect to, any disciplinary 
complaint or disciplinary decision issued by FINRA.\9\ Subject to 
limited exceptions discussed below, FINRA would release such 
information in unredacted form.
---------------------------------------------------------------------------

    \7\ Notwithstanding the proposed elimination of the provision in 
Rule 8313(a) addressing the release of identified complaints and 
decisions to a requesting party, FINRA will continue to respond to 
requests for, and provide access to, identified complaints and 
decisions.
    \8\ In light of the elimination of the publicity thresholds, the 
proposed rule change also would delete from Rule 8313 the redaction 
standards made necessary by the publicity thresholds in current 
paragraphs (c)(1)(A) and (c)(1)(B).
    \9\ The proposed rule change would eliminate as unnecessary 
references to ``groups of'' disciplinary complaints and disciplinary 
decisions. See Rule 8313(b)(1) and (c)(1). FINRA does not view the 
proposed rule change as distinguishing between the release of 
individual, versus groups of, disciplinary complaints and 
disciplinary decisions.
---------------------------------------------------------------------------

    In general, FINRA believes that greater access to information 
regarding its disciplinary actions provides valuable guidance and 
information to members, associated persons, other regulators, and 
investors. Releasing detailed disciplinary information to the public 
can serve to deter and prevent future misconduct and to improve overall 
business standards in the securities industry. It also allows investors 
to consider firms' and representatives' disciplinary histories when 
considering whether to engage in business with them. In addition, firms 
may use such information to educate their associated persons as to 
compliance matters, highlighting potential violations and related 
sanctions, as well as informing the firms' compliance procedures 
involving similar business lines, products, or industry practices. 
Further, any firm or individual facing allegations of rule violations 
may access existing disciplinary decisions to gain greater insight on 
related facts and sanctions.
    FINRA also believes that the current publicity thresholds in Rule 
8313(c) have created an inconsistency in FINRA's release of information 
given that information that may not be disclosed under the current rule 
is often publicly available through other sources. For example, the 
proposed rule change would allow FINRA to make available in the FDA (or 
otherwise) disciplinary information that is available in BrokerCheck, 
but is not eligible for publication by FINRA under the current 
publicity thresholds.\10\ Specifically, the disclosure questions in 
Section 14 of Form U4, among other things, require the reporting of 
regulatory complaints alleging, and any findings of, a violation of 
self-regulatory organization rules. As such, BrokerCheck reports may 
include

[[Page 17977]]

unredacted summary information regarding a FINRA disciplinary action 
that FINRA is not permitted to release in the monthly notice of 
Disciplinary and Other FINRA Actions or in the FDA under the current 
publicity thresholds.
---------------------------------------------------------------------------

    \10\ The information about members and registered persons made 
available through BrokerCheck is derived from the Central 
Registration Depository (CRD[supreg]). Information in the CRD system 
is obtained through the uniform registration forms (i.e., Forms U4, 
U5, and U6, and Forms BD, BDW, and BR).
---------------------------------------------------------------------------

    The proposed general standard for disciplinary complaints and 
disciplinary decisions also would better align FINRA's publication 
standards with the practices of the SEC and other regulators. The SEC 
publishes on its Web site copies of enforcement actions, including 
administrative proceedings and complaints filed in federal court, 
regardless of the type or nature of sanctions imposed. FINRA believes 
that to avoid confusion, the availability of disciplinary information 
generally should not differ among regulators. Interested parties should 
be able to review comparable disciplinary complaints and decisions 
irrespective of the forum in which the case is brought or the type or 
nature of sanctions imposed.
    FINRA notes that, in general, copies of and information with 
respect to disciplinary complaints and disciplinary decisions would be 
released to the public through the FDA and FINRA's monthly notice of 
Disciplinary and Other FINRA Actions. If a disciplinary complaint 
posted in the FDA is dismissed or withdrawn, the order dismissing or 
withdrawing the complaint would accompany the complaint. With respect 
to the issuance of press releases in connection with disciplinary 
complaints, FINRA would retain its current practice of only issuing 
press releases in those situations where there is a significant policy 
or investor protection reason to do so.
    The proposed rule change also would clarify the scope of Rule 8313 
by defining the terms ``disciplinary complaint'' and ``disciplinary 
decision.'' \11\ For the purpose of the rule, the term ``disciplinary 
complaint'' would mean any complaint issued pursuant to the Rule 9200 
Series (Disciplinary Proceedings), and the term ``disciplinary 
decision'' would mean any decision issued pursuant to the Rule 9000 
Series, including decisions issued by the OHO, the NAC, or the FINRA 
Board (``Board''), orders accepting offers of settlement, and Letters 
of Acceptance, Waiver and Consent (``AWCs''). The term disciplinary 
decision would not include decisions issued pursuant to the Rule 9550 
Series (Expedited Proceedings), Rule 9600 Series (Procedures for 
Exemptions), Rule 9700 Series (Procedures on Grievances Concerning the 
Automated Systems), or Rule 9800 Series (Temporary Cease and Desist 
Orders), or decisions, notifications, or notices issued pursuant to the 
Rule 9520 Series (Eligibility Proceedings), which are addressed by 
separate provisions in proposed Rule 8313.\12\ The proposed rule change 
would clarify that consistent with current practice, minor rule 
violation plan (``MRVP'') letters issued pursuant to Rule 9216 
(Acceptance, Waiver, and Consent; Plan Pursuant to SEA Rule 19d-
1(c)(2)) and Rule 9217 (Violations Appropriate for Disposition Under 
Plan Pursuant to SEA Rule 19d-1(c)(2)) are not subject to Rule 8313.
---------------------------------------------------------------------------

    \11\ See proposed Rule 8313(e).
    \12\ See proposed Rules 8313(a)(2), (a)(3), and (a)(5).
---------------------------------------------------------------------------

B. Temporary Cease and Desist Orders (``TCDOs'')
    Rule 8313(c)(1) currently states that FINRA shall release to the 
public information with respect to any TCDO. The proposed rule change 
would adopt this provision with minor changes in proposed Rule 
8313(a)(2) to provide that FINRA shall release to the public a copy of, 
and at FINRA's discretion information with respect to, any order or 
decision issued by FINRA under the Rule 9800 Series, which addresses 
TCDOs.
C. Statutory Disqualification Decisions
    Rule 8313 currently does not specifically address the release of 
statutory disqualification decisions to the public. Pursuant to the 
omnibus provision in Rule 8313(c)(1), discussed above, FINRA currently 
releases information on statutory disqualification decisions issued by 
the NAC pursuant to the Rule 9520 Series with the names of members and 
associated persons redacted. Under proposed Rule 8313(a)(2), FINRA 
would release to the public unredacted copies of, and at FINRA's 
discretion information with respect to, statutory disqualification 
decisions, notifications, and notices issued pursuant to the Rule 9520 
Series by either the NAC or FINRA's Member Regulation Department 
(``Member Regulation'') that will be filed with the SEC.\13\
---------------------------------------------------------------------------

    \13\ All statutory disqualification decisions issued by the NAC 
are filed with the SEC. In contrast, depending on the nature of the 
disqualifying event, Member Regulation may or may not have to file a 
notice of its approval of an application for relief (referred to as 
a 19h-1 notice or notification) with the SEC. For example, Member 
Regulation may approve the association of a person without filing a 
19h-1 notice or notification with the SEC when the disqualifying 
event consists of an injunction that was entered more than 10 years 
ago. See also Exchange Act Rule 19h-1.
---------------------------------------------------------------------------

    As discussed above in the context of disciplinary complaints and 
disciplinary decisions, FINRA believes that subject to limited 
exceptions, information should be released to the public in unredacted 
form. Under the current publicity rule, FINRA releases information 
regarding the underlying conduct that led to a statutory 
disqualification, and the safeguards imposed, including restrictions on 
permissible activities and heightened supervisory plans; however, FINRA 
does not disclose the identity of the statutorily disqualified 
individuals or member firms. The proposed rule change would provide for 
the release of such identities because FINRA believes that it would 
provide investors with valuable information about the individuals and 
firms with whom they conduct business. Further, to the extent that 
information regarding the underlying conduct that results in an 
individual or firm being subject to a statutory disqualification 
decision is reported to the CRD system, identifying information 
regarding such individuals and firms is available in BrokerCheck.
D. Expedited Proceeding Decisions
    Rules 9552 through 9558\14\ provide a procedural mechanism for 
FINRA to address certain types of misconduct (e.g., a failure to pay 
fees or dues or a failure to meet eligibility or qualification 
standards) more expeditiously than would be possible using the FINRA 
disciplinary process. Rule 9559 (Hearing Procedures for Expedited 
Proceedings Under the Rule 9550 Series) allows member firms and 
associated persons to request a hearing regarding the action that often 
results in a stay of the sanction or limitation. Rule 8313(c)(1) 
currently states that FINRA may release to the public information with 
respect to any expedited proceeding decision issued pursuant to the 
Rule 9550 Series imposing a suspension or cancellation of a member, or 
a suspension or bar of the association of a person with a member, 
unless FINRA determines otherwise. Separately, the ``Notice to 
Membership'' provisions in Rules 9552, 9553, 9554, 9555, 9556, 9558, 
and 9559 currently

[[Page 17978]]

state that FINRA shall provide notice of any final FINRA action taken 
under the rules in the next notice of Disciplinary and Other FINRA 
Actions. The Notice to Membership provision in Rule 9557 requires 
notice when FINRA imposes a suspension pursuant to the rule, but does 
not reference final FINRA action because the procedural mechanisms in 
Rule 9557 differ from the other rules in the expedited proceedings 
series.
---------------------------------------------------------------------------

    \14\ See Rule 9552 (Failure to Provide Information or Keep 
Information Current), Rule 9553 (Failure to Pay FINRA Dues, Fees and 
Other Charges), Rule 9554 (Failure to Comply with an Arbitration 
Award or Related Settlement or an Order of Restitution or Settlement 
Providing for Restitution), Rule 9555 (Failure to Meet the 
Eligibility or Qualification Standards or Prerequisites for Access 
to Services), Rule 9556 (Failure to Comply with Temporary and 
Permanent Cease and Desist Orders), Rule 9557 (Procedures for 
Regulating Activities Under Rules 4110, 4120 and 4130 Regarding a 
Member Experiencing Financial or Operational Difficulties), and Rule 
9558 (Summary Proceedings for Actions Authorized by Section 
15A(h)(3) of the Exchange Act).
---------------------------------------------------------------------------

    The proposed rule change would consolidate the publication 
standards for expedited proceeding decisions in proposed Rule 
8313(a)(3). Consistent with the current Rule 9550 Series and FINRA 
practice, the proposed rule would provide that FINRA shall release to 
the public information with respect to any suspension, cancellation, 
expulsion, or bar that constitutes final FINRA action imposed pursuant 
to Rules 9552, 9553, 9554, 9555, 9556, and 9558, and information with 
respect to any suspension imposed pursuant to Rule 9557. FINRA also 
shall release a copy of, and information with respect to, any decision 
issued pursuant to Rule 9559 that constitutes final FINRA action. 
Accordingly, the proposed rule change would delete the ``Notice to 
Membership'' provisions in Rules 9552 through 9559. In general, 
information with respect to expedited proceeding decisions would 
continue to be published in FINRA's monthly notice of Disciplinary and 
Other FINRA Actions.
E. Summary Actions
    Rule 8313 currently does not specifically address the release of 
information regarding summary actions taken by FINRA pursuant to Rule 
8320 (Payment of Fines, Other Monetary Sanctions, or Costs; Summary 
Action for Failure to Pay); however, FINRA generally releases summary 
information with respect to such actions in its monthly notice of 
Disciplinary and Other FINRA Actions. To codify FINRA practice, 
proposed Rule 8313(a)(3) would expressly provide that FINRA shall 
release to the public information with respect to the summary 
suspension or expulsion of a member or the summary revocation of the 
registration of a person associated with a member for a failure to pay 
fines, other monetary sanctions, or costs pursuant to Rule 8320. FINRA 
believes that it is in the public interest to provide notice that a 
member or a registered person is subject to sanctions by FINRA and may 
not have the authority to conduct business with customers or the 
public. In general, such information would continue to be published in 
FINRA's monthly notice of Disciplinary and Other FINRA Actions.
F. Membership and Continuing Membership Application (``MAP'') Appeals
    Rule 8313(l) currently provides that FINRA shall release to the 
public, in the form issued by the NAC, information with respect to any 
MAP appeal decision issued by the NAC pursuant to NASD Rule 1015 
(Review by National Adjudicatory Council). The NAC in its discretion 
may redact certain information from such decisions prior to their 
issuance.
    The proposed rule change would adopt this provision as proposed 
Rule 8313(a)(4) with changes to, among other things, reflect FINRA's 
practice with respect to the release of MAP appeal decisions in 
redacted form. The proposed rule change also would clarify that the 
release to the public of MAP appeal decisions issued by the Board 
pursuant to NASD Rule 1016 (Discretionary Review by FINRA Board) are 
governed by the publicity rule. Proposed Rule 8313(a)(4) would provide 
that FINRA shall release to the public a copy of, and at FINRA's 
discretion information with respect to, any MAP appeal decision issued 
by FINRA pursuant to NASD Rules 1015 and 1016. Copies of, and 
information with respect to, such decisions shall be released to the 
public in redacted form; provided, however, the NAC or the Board, in 
its discretion, may determine to release such decisions and information 
in unredacted form.
    FINRA believes that continuing the practice of redacting MAP appeal 
decisions is appropriate given that as part of the MAP process, 
applicants typically are required to disclose, among other things, 
proprietary information, including business plans, financial plans, and 
commercial agreements. In addition, denials of MAP applications often 
are related to firms' capacity limitations or similar operational 
concerns. Thus, FINRA believes that, as a general matter, the potential 
harm to firms in releasing denial decisions in unredacted form would 
not be outweighed by any investor protection benefit.
G. Permissive Publication of Certain Decisions and Notices
    The proposed rule change would add a new provision in proposed Rule 
8313(a)(5) that would permit FINRA to release to the public a copy of, 
and information with respect to, any decision or notice issued pursuant 
to Rule 6490 (Processing of Company-Related Actions),\15\ the Rule 9600 
Series (Procedures for Exemptions),\16\ the Rule 9700 Series 
(Procedures on Grievances Concerning the Automated Systems),\17\ and 
any other decision appealable to the SEC under Exchange Act Section 
19(d). FINRA is proposing permissive publication for items issued under 
Rule 6490 and the Rule 9700 Series because FINRA does not publish these 
decisions or notices on a wholesale basis; however, FINRA may determine 
that there is public benefit to releasing a specific decision or notice 
issued under these rules to provide guidance to other firms or to alert 
the public to an investor protection issue.\18\
---------------------------------------------------------------------------

    \15\ Under Rule 6490, FINRA's Operations Department reviews and 
processes documents related to announcements for Exchange Act Rule 
10b-17 Actions and Other Company-Related Actions to facilitate the 
orderly trading and settlement of OTC securities.
    \16\ The Rule 9600 Series allows a member seeking exemptive 
relief, as permitted under certain FINRA and NASD rules and MSRB 
Rule G-37, to file a written application with the appropriate 
department or staff of FINRA. The proposed rule change would make 
conforming amendments to Rule 9620, which governs exemption 
decisions issued under the Rule 9600 Series, to reflect the 
permissive nature of proposed Rule 8313(a)(5).
    \17\ The Rule 9700 Series sets forth procedures for redress for 
persons aggrieved by the operations of any automated quotation, 
execution, or communication system owned or operated by FINRA, or 
its subsidiaries, and approved by the SEC, not otherwise provided 
for by the FINRA rules.
    \18\ In general, FINRA is not in the practice of releasing 
copies of, or information with respect to, decisions or notices 
addressing company-related actions or grievances concerning the 
automated systems.
---------------------------------------------------------------------------

    With respect to exemption decisions, the proposed rule change would 
permit, but not require, exemption decisions issued under the Rule 9600 
Series to be released to the public because Rule 9610, which governs 
the application for exemptive relief, authorizes members to request 
relief from a diverse set of member conduct rules that have differing 
benefits to publication. Today, FINRA posts to its Web site exemption 
decisions for several rules listed in Rule 9610, in large part, to 
provide guidance to members, investors, and other interested parties to 
assist them in understanding the rationale for the decisions to grant 
or deny requests for exemptive relief.\19\
---------------------------------------------------------------------------

    \19\ Consistent with current practice under the Rule 9600 
Series, FINRA will continue to consider statements included by an 
applicant to show good cause to treat a decision as confidential in 
whole or in part.
---------------------------------------------------------------------------

    The proposed rule change broadly would provide for the release of 
``any other decision'' appealable to the SEC under Exchange Act Section 
19(d) to avoid the need to make future amendments to Rule 8313 in the 
event of additional rulemaking that results in FINRA issuing decisions 
that may be

[[Page 17979]]

appealed to the SEC under Exchange Act Section 19(d).
H. Publication of Information Deemed by FINRA's CEO To Be in the Public 
Interest
    As stated above, notwithstanding the existing publicity thresholds, 
FINRA Rules 8313(b)(1) and (c)(1) currently allow FINRA to release 
information with respect to any disciplinary complaint or disciplinary 
decision that involves a significant policy or enforcement 
determination where the release of such information is deemed by 
FINRA's CEO to be in the public interest. Consistent with these 
provisions, proposed Rule 8313(a)(6) would provide that FINRA may 
release to the public a copy of, and information with respect to, any 
complaint, decision, order, notification, or notice issued under FINRA 
rules, where the release of such information is deemed by FINRA's CEO 
(or such other senior officer as the CEO may designate) to be in the 
public interest, in such format as he or she finds appropriate. FINRA 
is proposing to retain the provision providing FINRA's CEO with 
discretion to release additional information to address instances in 
which publication is not otherwise permitted under Rule 8313, but the 
release of information is deemed by the CEO to be in the public 
interest. For example, this would allow the CEO to release notices 
issued under the expedited proceedings rules that do not involve a 
suspension, cancellation, expulsion, or bar, such as notices of 
limitations imposed under FINRA's financial rules pursuant to Rule 
9557.
I. Release Specifications
    Rule 8313 currently requires copies of, and information with 
respect to, disciplinary complaints and disciplinary decisions released 
to the public to be accompanied by certain disclosure statements 
regarding their status. FINRA requires these disclosures so that 
disciplinary complaints and disciplinary decisions released to the 
public are viewed in an appropriate context and to provide adequate 
protections to the parties named in the complaint or decision. Rules 
8313(a)(1) and (b)(2) currently require that disciplinary complaints 
and information with respect to disciplinary complaints released to the 
public be accompanied by the following statement: ``The issuance of a 
disciplinary complaint represents the initiation of a formal proceeding 
by FINRA in which findings as to the allegations in the complaint have 
not been made and does not represent a decision as to any of the 
allegations contained in the complaint. Because this complaint is 
unadjudicated, you may wish to contact the respondent before drawing 
any conclusions regarding the allegations in the complaint.''
    The proposed rule change would retain in Rule 8313(b)(1) a modified 
version of the disclosure statement for copies of, and information with 
respect to, disciplinary complaints. Proposed Rule 8313(b)(1) would 
provide that copies of, and information with respect to, any 
disciplinary complaint released to the public pursuant to Rule 8313(a) 
shall indicate that a disciplinary complaint represents the initiation 
of a formal proceeding by FINRA in which findings as to the allegations 
in the complaint have not been made and does not represent a decision 
as to any of the allegations contained in the complaint. FINRA believes 
that copies of, and information with respect to, disciplinary 
complaints released to the public should continue to be accompanied by 
a disclosure statement that alerts recipients that the alleged 
violations contained in FINRA's complaint have not resulted in a 
decision or finding against the respondent.
    Similarly, Rules 8313(a)(2) through (a)(4) and (c)(2) currently 
require copies of, and information with respect to, disciplinary 
decisions released to the public to be accompanied by disclosure 
statements. Under the current rule, a disciplinary decision released 
prior to the expiration of the time period provided under the Rule 9000 
Series for appeal or call for review within FINRA or while such an 
appeal or call for review is pending must be accompanied by a statement 
that the findings and sanctions imposed in the decision may be 
increased, decreased, modified, or reversed by FINRA. In addition, a 
final decision of FINRA that is released prior to the time period 
provided under the Exchange Act for appeal to the SEC or while such an 
appeal is pending must be accompanied by a statement that the findings 
and sanctions of FINRA are subject to review and modification by the 
SEC. And, a final decision of FINRA that is released after the decision 
is appealed to the SEC must be accompanied by a statement as to whether 
the effectiveness of the sanctions has been stayed pending the outcome 
of proceedings before the SEC.
    The proposed rule change would consolidate and streamline the 
disclosure statements for copies of, and information with respect to, 
disciplinary decisions and would expand the statement to cover other 
items released to the public pursuant to proposed Rule 8313(a). 
Proposed Rule 8313(b)(2) would provide that copies of, and information 
with respect to, any disciplinary decision or other decision, order, 
notification, or notice released to the public pursuant to Rule 8313(a) 
prior to the expiration of the time period provided for an appeal or 
call for review as permitted under FINRA rules or the Exchange Act, or 
while such an appeal or call for review is pending, shall indicate that 
the findings and sanctions imposed therein are subject to review and 
modification by FINRA or the SEC. FINRA believes that accompanying 
copies of, and information with respect to, disciplinary decisions 
released to the public with a disclosure statement provides necessary 
context to a non-final disciplinary action and alerts persons viewing 
such information as to the status of these actions. In addition, FINRA 
believes that the proposed consolidation and expansion of the 
disclosure statements in Rule 8313 serve to facilitate the release of 
disciplinary information to the public electronically in the FDA 
because such disclosure will be clearly indicated in the FDA, but will 
not accompany each complaint or decision.
J. Discretion To Redact Certain Information or Waive Publication
    As noted above, FINRA has determined that subject to limited 
exceptions, disciplinary information should be released to the public 
in unredacted form. However, FINRA believes it is necessary in 
releasing information to the public to balance investor protection 
benefits with the harm that may result if certain confidential customer 
information or information that raises personal safety or privacy 
concerns is released to the public. Accordingly, the proposed rule 
change would add a new provision in proposed Rule 8313(c)(1) that would 
permit FINRA, notwithstanding the requirements of proposed Rule 
8313(a), to redact, on a case-by-case basis, information that contains 
confidential customer information, including customer identities, or 
information that raises significant identity theft, personal safety, or 
privacy concerns that are not outweighed by investor protection 
concerns. FINRA takes the same approach with respect to the release of 
information in BrokerCheck.\20\ The proposed rule change aims to 
broaden the types and, on balance, the amount

[[Page 17980]]

of information released by FINRA to the public to establish a 
principled basis for disclosure that meets FINRA's investor protection 
objectives, yet fairly addresses privacy interests.
---------------------------------------------------------------------------

    \20\ See Rule 8312(d) (FINRA BrokerCheck Disclosure) (FINRA 
reserves the right to exclude on a case-by-case basis, information 
that contains confidential customer information, offensive or 
potentially defamatory language or information that raises 
significant identity theft, personal safety or privacy concerns that 
are not outweighed by investor protection concerns).
---------------------------------------------------------------------------

    Similarly, the proposed rule change would adopt with minor changes 
a statement from current Rule 8313(c)(1) that provides FINRA with 
discretion to waive the requirement to release a disciplinary or other 
decision under those extraordinary circumstances where the release of 
such information would violate fundamental notions of fairness or work 
an injustice. The proposed rule change would expand this provision to 
give FINRA discretion to waive the requirement to release any item 
under paragraph (a) of the proposed rule. Accordingly, proposed Rule 
8313(c)(2) would provide that notwithstanding paragraph (a) of the 
proposed rule, FINRA may determine, in its discretion, to waive the 
requirement to release a copy of, or information with respect to, any 
disciplinary complaint, disciplinary decision or other decision, order, 
notification, or notice under those extraordinary circumstances where 
the release of such information would violate fundamental notions of 
fairness or work an injustice.
    FINRA believes it should retain the discretion to waive the 
requirement to release information under the proposed rule in the event 
FINRA is presented with truly unique circumstances where the release of 
information would violate fundamental notions of fairness or work an 
injustice. FINRA does not believe that decisions should be treated 
differently than other items that are required to be released under 
paragraph (a) of the proposed rule.
K. Notification of Appeals of FINRA Decisions
    Rule 8313(g) currently requires FINRA to provide notice to the 
membership and the press that a FINRA disciplinary decision that meets 
certain publicity thresholds is appealed to the SEC. The notice must be 
released as soon as possible after the SEC notifies FINRA of such 
appeal and it must state whether the effectiveness of the Board's 
decision has been stayed pending the outcome of proceedings before the 
SEC. The proposed rule change would adopt this provision with minor 
changes as proposed Rule 8313(d), eliminating the publicity thresholds 
and the limitation on notification to the membership and the press.
    Proposed Rule 8313(d) would state that FINRA shall provide notice 
to the public if a disciplinary decision of FINRA is appealed to the 
SEC and the notice shall state whether the effectiveness of the 
decision has been stayed pending the outcome of proceedings before the 
SEC. FINRA provides notification of appeals to the SEC, including 
information regarding whether sanctions imposed have been stayed during 
the pendency of the appeal, in the monthly notice of Disciplinary and 
Other FINRA Actions. FINRA also intends to indicate whether a 
disciplinary decision available in the FDA has been appealed to the SEC 
so that parties using the FDA are clear as to the status of the 
disciplinary decision. In addition, FINRA notes that the FDA includes 
decisions issued by the SEC that relate to FINRA disciplinary actions 
that have been appealed.
    Rule 8313(h) currently requires FINRA to provide notice to the 
membership in the event an appeal to the courts is filed from an SEC 
disciplinary decision in a case previously appealed to it from a FINRA 
decision that meets certain publicity thresholds. The notice must be 
provided as soon as possible after FINRA receives a formal notice of 
appeal and must include a statement whether the order of the SEC has 
been stayed. The proposed rule change would delete Rule 8313(h) because 
it limits notice to the membership based on the publicity thresholds 
that would be eliminated under the proposed rule change, and 
notification of an appeal to the courts from an SEC disciplinary 
decision is best addressed by the SEC. FINRA notes that the FDA 
includes decisions issued by federal appellate courts that relate to 
FINRA disciplinary actions that have been appealed.
    Rule 8313(i) currently provides that any order issued by the SEC 
imposing sanctions or fines on a member that meet certain publicity 
thresholds must be released to the public through a notice containing 
the effective date thereof. The order must be released to the public as 
soon as possible after FINRA receives the SEC's order. The proposed 
rule change would delete paragraph (i) because it limits notice based 
on the publicity thresholds that would be eliminated under the proposed 
rule change, and the release of SEC orders to the public is best 
addressed by the SEC.
L. Provisions Outside the Scope of Rule 8313
    To clarify the scope of Rule 8313, the proposed rule change would 
eliminate provisions that are outside the purview of the rule, which is 
intended solely to address the release of disciplinary and other 
information by FINRA to the public. Rules 8313(d) and (e) currently 
address when certain disciplinary decisions become effective. Rule 
8313(d) states, if a decision issued pursuant to the Rule 9000 Series 
other than by the NAC is not appealed to or called for review by the 
NAC, the decision shall become effective on a date set by FINRA but not 
before the expiration of 45 days after the date of the decision. The 
proposed rule change would delete Rule 8313(d) because it addresses the 
effective date of certain disciplinary decisions rather than the 
release of disciplinary information to the public.
    The proposed rule change would move the rule language regarding the 
effectiveness of sanctions to Rule 9268 (Decision of Hearing Panel or 
Extended Hearing Panel), which addresses hearing panel decisions, 
including their content and to whom they are disseminated. Proposed 
Rule 9268(f) (Effectiveness of Sanctions) would provide that unless 
otherwise provided in the majority decision issued under Rule 9268(a): 
(1) A sanction (other than a bar or an expulsion) specified in a 
decision constituting final disciplinary action of FINRA for purposes 
of Exchange Act Rule 19d-1(c)(1) shall become effective on a date to be 
determined by FINRA; and (2) a bar or an expulsion specified in a 
decision shall become effective immediately upon the decision becoming 
the final disciplinary action of FINRA for purposes of Exchange Act 
Rule 19d-1(c)(1).\21\
---------------------------------------------------------------------------

    \21\ The proposed rule change would make conforming amendments 
to Rule 9268(b)(6).
---------------------------------------------------------------------------

    The proposed rule change would clarify the process for when 
sanctions imposed in a hearing panel decision become effective in a 
substantially similar format to the parallel provision for decisions 
issued by the NAC or the FINRA Board in Rule 9360 (Effectiveness of 
Sanctions). Although the language in proposed Rule 9268(f) differs 
slightly from Rule 8313(d), the timing for the effectiveness of 
sanctions would remain unchanged. When a hearing panel decision imposes 
a bar or expulsion that sanction becomes effective if the case is not 
appealed or called for review. A respondent or FINRA's Departments of 
Enforcement or Market Regulation have [sic] 25 days after service of a 
decision to appeal a decision issued pursuant to Rule 9268 or Rule 9269 
(Default Decisions). The NAC has 45 days to call a case for review; 
therefore, a bar imposed in a hearing panel decision that is not 
appealed or called for review takes effect after 45 days from the date 
the decision is issued. When a hearing

[[Page 17981]]

panel decision imposes any other sanction (and does not set a date for 
the sanction to take effect), if there is no appeal or call for review, 
the sanctions will take effect on a date determined by FINRA.
    Rule 8313(e) states that notwithstanding paragraph (d) of the rule, 
expulsions and bars imposed in AWCs and settlements shall become 
effective upon approval or acceptance by the NAC and information 
regarding any sanctions imposed may be released to the public 
immediately upon such approval or acceptance. The proposed rule change 
would eliminate paragraph (e) as unnecessary because paragraph (a) of 
the proposed rule would govern the publication of AWCs and settlements, 
and AWC and settlement documents address the effective dates for the 
sanctions imposed pursuant to such decisions.
    Rule 8313(f) currently provides that a decision called for review 
by the Board shall be stayed pending a final determination by the 
Board. The proposed rule change would delete paragraph (f) because it 
does not address publication standards and whether a finding is stayed 
pending a decision by the Board, or otherwise, is governed by the 
appropriate provision(s) in the Rule 9000 Series.
    In addition, the proposed rule change would eliminate Rule 8313(j), 
which states that cancellations of membership or registration pursuant 
to the FINRA By-Laws and rules shall be released to the public as soon 
after the effective date of the cancellation as possible. The proposed 
rule change would delete paragraph (j) as unnecessary because decisions 
regarding such sanctions would be released to the public pursuant to 
paragraph (a) of the proposed rule, and it is standard FINRA practice 
to release information in a timely and efficient manner.
    Finally, the proposed rule change would delete as unnecessary Rule 
8313(k), which provides that information released to the public must 
identify the rules violated, describe the conduct constituting such 
violation, and may also identify the member with which an individual 
was associated at the time the violations occurred if such 
identification is determined by FINRA to be in the public interest. 
FINRA notes that it is standard practice for this information to be 
included in disciplinary items released to the public and FINRA intends 
to continue this practice under the proposed rule.
    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 60 days following 
Commission approval. The effective date will be no later than 120 days 
following publication of the Regulatory Notice announcing Commission 
approval. The proposed rule change would apply prospectively beginning 
on the effective date established by FINRA following Commission 
approval. Once effective, the proposed rule change will govern the 
release of disciplinary and other information for all new and pending 
matters.\22\
---------------------------------------------------------------------------

    \22\ Offers of settlement and AWCs are entered into with the 
express agreement that the publication of such items will be 
pursuant to Rule 8313. Accordingly, publication of any order 
accepting an offer of settlement or AWC entered into prior to the 
effective date of the proposed rule change would be governed by the 
version of the rule in effect as of the date of such offer or AWC.
---------------------------------------------------------------------------

2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\23\ 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. The proposed amendments aim to provide clarity and 
consistency regarding the release by FINRA of disciplinary and other 
information to the public. To that end, the proposed rule change would 
establish general standards for the release of disciplinary information 
to the public to provide greater access to information regarding 
FINRA's disciplinary actions, clarify the scope of information subject 
to Rule 8313, and eliminate provisions that do not address the release 
of information by FINRA to the public. FINRA believes that greater 
access to information regarding its disciplinary actions provides 
valuable guidance and information to members, associated persons, other 
regulators, and the investing public.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    FINRA also believes that the current publicity thresholds have 
created an inconsistency in FINRA's release of information given that 
information that may not be disclosed under the current rule is often 
publicly available through other sources. For example, the proposed 
rule change would allow FINRA to make available in the FDA (or 
otherwise) disciplinary information that is available in BrokerCheck, 
but is not eligible for publication by FINRA under the current 
publicity thresholds, and would better align FINRA's publication 
standards with the practices of the SEC and other regulators.

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. FINRA does not believe that the 
proposed rule change will have a significant negative impact on members 
and associated persons or impose new costs. Rather, FINRA believes that 
the proposed rule change may have a positive impact on members, 
associated persons, other regulators, and investors because greater 
access to information regarding FINRA's disciplinary actions provides 
valuable guidance and information to all parties.
    Among other things, FINRA is proposing to eliminate the 
restrictions to publication in the current rule by eliminating the 
publicity thresholds because releasing detailed disciplinary 
information to the public can serve to deter and prevent future 
misconduct and to improve overall business standards in the securities 
industry. It also allows investors to consider firms' and 
representatives' disciplinary histories when considering whether to 
engage in business with them. In addition, firms may use such 
information to educate their associated persons as to compliance 
matters, highlighting potential violations and related sanctions and 
inform their own compliance procedures. Further, any firm or individual 
facing allegations of rule violations may access existing disciplinary 
decisions to gain greater insight on related facts and sanctions. 
Moreover, FINRA does not anticipate that the proposed rule change will 
negatively impact members, associated persons, or investors because 
information that may not be disclosed under the current rule is often 
already publicly available through other sources such as BrokerCheck.
    FINRA considered continuing its current practice of redacting 
identifying information regarding statutorily disqualified individuals 
and member firms in statutory disqualification decisions released to 
the public. However, FINRA is proposing to release such information 
unredacted because it determined that access to information regarding 
the identity of statutorily disqualified individuals and member firms, 
in addition to the underlying conduct that led to a statutory 
disqualification, and the safeguards imposed, including restrictions on 
permissible activities and heightened supervisory plans, provides 
investors with valuable information about the individuals and firms 
with whom they

[[Page 17982]]

conduct business. Further, to the extent that information regarding the 
underlying conduct that results in an individual or firm being subject 
to a statutory disqualification decision is reported to the CRD system, 
identifying information regarding such individuals and firms is 
available in BrokerCheck. In contrast, FINRA considered releasing MAP 
decisions unredacted and determined that the potential harm to firms in 
releasing such decisions in unredacted form would not be outweighed by 
any investor protection benefit. In this regard, applicants typically 
are required to disclose proprietary information, including, among 
other things, business plans, financial plans, and commercial 
agreements. Moreover, denials of MAP often are related solely to 
operational concerns. As such, FINRA is proposing to continue releasing 
such decisions in redacted form.
    An alternative to the proposed rule change would be to maintain the 
publication standards in the current rule. FINRA believes that the 
current rule lacks clarity and consistency and does not serve the 
public interest because members, associated persons, other regulators, 
and investors would all benefit from greater access to information 
relating to FINRA's disciplinary actions, and information that is 
limited for publication under the current rule is often available from 
other sources.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 [email protected]. Please include 
File Number SR-FINRA-2013-018 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2013-018. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the FINRA's principal office. 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-2013-018, and should 
be submitted on or before April 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06718 Filed 3-22-13; 8:45 am]
BILLING CODE 8011-01-P