[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70016-70017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28680]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76359; File No. SR-FINRA-2015-032]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA 
Rule 8312 (FINRA BrokerCheck Disclosure) To Reduce the Waiting Period 
for the Release of Information Reported on Form U5

November 5, 2015.

I. Introduction

    On September 14, 2015, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend FINRA Rule 8312 (FINRA 
BrokerCheck Disclosure) to reduce the 15-day waiting period for the 
release of information reported on Form U5 (Uniform Termination Notice 
for Securities Industry Registration) through BrokerCheck. The proposed 
rule change was published for comment in the Federal Register on 
October 1, 2015.\3\ The Commission received two comment letters on the 
proposed rule change.\4\ This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75988 (September 25, 
2015), 80 FR 59215 (``Notice'').
    \4\ See Letter from Joseph C. Peiffer, President, Public 
Investors Arbitration Bar Association, dated October 19, 2015 
(``PIABA Letter'') and Letter from Denise M. Hammond, Law Student, 
Barry University, dated October 22, 2014 (``Hammond Letter'').
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II. Description of the Proposed Rule Change

    BrokerCheck provides the public with information on the 
professional background, business practices, and conduct of FINRA 
members and their associated persons. The information that FINRA 
releases through BrokerCheck is derived from the Central Registration 
Depository (``CRD''), the securities industry online registration and 
licensing database. FINRA member firms, their associated persons and 
regulators report information to the CRD system via the uniform 
registration forms.\5\
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    \5\ FINRA discloses through BrokerCheck information that is 
reported on the following uniform registration forms: Form U4 
(Uniform Application for Securities Industry Registration or 
Transfer); Form U5 (Uniform Termination Notice for Securities 
Industry Registration); Form U6 (Uniform Disciplinary Action 
Reporting Form); Form BD (Uniform Application for Broker-Dealer 
Registration); and Form BDW (Uniform Request for Broker-Dealer 
Withdrawal).
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    Rule 8312 governs the information that FINRA releases to the public 
through BrokerCheck. Pursuant to this rule, most of the information 
that FINRA releases through BrokerCheck is made available the day after 
it is filed with the CRD system.\6\ Rule 8312(d)(5), however, prohibits 
FINRA from releasing Form U5 information for 15 days following the 
filing of such information. According to FINRA, this 15-day waiting 
period was established to give brokers on whose behalf the Form U5 was 
submitted an opportunity to comment on the disclosure event either 
through a Form U4, or by submitting a comment directly to FINRA to be 
included on BrokerCheck.\7\
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    \6\ See Notice, supra note 3, at 59216.
    \7\ See Securities Exchange Act Release No. 55127 (January 18, 
2007), 72 FR 3455 (January 25, 2007) (Order Approving File No. SR-
NASD-2003-168).
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    FINRA has proposed to shorten this 15-day waiting period for the 
release of Form U5 disclosure information. Specifically, the proposed 
rule change will amend Rule 8312(d)(5) to provide that FINRA shall not 
release events reported on Section 7 of Form U5 (other than ``Internal 
Review Disclosure'' events) for three business days after FINRA's 
processing \8\ of the filing.\9\ However, if an event is reported on 
Form U5 and the same event is thereafter reported on Form U4 before the 
three-business-day period expires, FINRA will release the Forms U4 and 
U5 information simultaneously upon processing; this three-business-day 
period may be shortened.\10\
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    \8\ FINRA states that, for purposes of the proposed rule change, 
a Form U5 will be considered processed once the Disclosure Reporting 
Page, which contains the details about a disclosure event, has been 
reviewed by FINRA staff. FINRA states that most Forms U5 that 
contain disclosure information are processed within two days of 
being filed with the CRD system. See Notice, supra note 3, at 59216, 
n.7.
    \9\ For example, if disclosure information on Form U5 is 
processed on Monday, FINRA would release that information via 
BrokerCheck on Thursday.
    \10\ For example, if FINRA processes a disclosure event reported 
on Form U5 on Monday, and on Tuesday processes a Form U4 filed by a 
broker reporting that event, the Form U5 information would be made 
publicly available in BrokerCheck on Wednesday, which is the same 
day that the Form U4 information would be released.
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III. Comment Letters

    Commenters support the proposal.\11\ One commenter, while 
supporting the proposed rule change, believes that FINRA needs to go 
further to ``address and correct the present system that allows for the 
routine expungement of customer claims'' from BrokerCheck and to expand 
the information available to the public through BrokerCheck to include 
more comprehensive CRD disclosure information that is currently 
available through some state legacy CRD systems.\12\ Another commenter 
noted that releasing information sooner protects the public and reduces 
the chance that an investor might deal with a broker who has been 
terminated. \13\
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    \11\ See PIABA Letter at 1 and Hammond Letter.
    \12\ See PIABA Letter at 2.
    \13\ See Hammond Letter.
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IV. Discussion and Commission Findings

    After careful review of the proposed rule change and the comment 
letters, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder that are applicable to a national securities 
association.\14\ Specifically, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act,\15\ which 
requires, among other things, that FINRA's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest.
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    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78o-3(b)(6).
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    The proposed rule change, by reducing the waiting period for the 
release of Form U5 information through BrokerCheck, is designed to 
enhance investor protection by allowing investors to more quickly 
access disclosure information reported on Form U5 through BrokerCheck 
and limiting the time period during which an incomplete picture of a 
broker's disclosure history may be displayed in BrokerCheck. In 
addition, by providing for the simultaneous release of Forms U4 and U5 
information on BrokerCheck before the three-business day waiting period 
in the case where the same disclosure event is reported on both forms, 
the proposed rule should help to reduce investor uncertainty and 
confusion regarding the same disclosure event; namely, a broker's 
termination from his prior firm.
    The Commission believes that BrokerCheck is an important tool for 
investors to use to help them make informed choices about the 
individuals and firms with which they conduct business.\16\ The 
Commission believes

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that reducing the waiting period for the release of Form U5 disclosure 
information through BrokerCheck, and releasing Form U4 and Form U5 
information regarding the same disclosure event simultaneously on 
BrokerCheck before the end of the waiting period, will limit the time 
period during which an incomplete picture of a broker's disclosure 
history may be displayed in BrokerCheck and should help to reduce 
investor confusion regarding the reason for a broker's termination. The 
Commission notes that brokers on whose behalf a Form U5 is submitted 
will continue to have an opportunity to comment on the reported 
disclosure event either through a Form U4 or by submitting a broker 
comment directly to FINRA for inclusion in BrokerCheck.
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    \16\ The Commission encourages investors to utilize all sources 
of information, including the databases of state regulators, as well 
as legal search engines and records searches to conduct a thorough 
search of any associated person or firm with which they are 
considering doing business. See also Securities Exchange Act Release 
No. 62476 (July 8, 2010), 75 FR 41254 (July 15, 2010) (SR-FINRA-
2010-012).
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    The Commission appreciates FINRA's efforts to enhance BrokerCheck 
and encourages FINRA to continue improving it and to consider the 
suggestions made regarding the expungement of customer claims from 
BrokerCheck and expanding the information made available to the public 
through BrokerCheck.\17\
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    \17\ See supra note 12 and accompanying text.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-FINRA-2015-032), be, and 
hereby is, approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28680 Filed 11-10-15; 8:45 am]
BILLING CODE 8011-01-P