[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Notices]
[Pages 66828-66830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28005]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84855; File No. SR-FINRA-2018-041]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Make Technical Revisions and One Minor
Correction to the Supplemental Statement of Income Required To Be Filed
Pursuant to FINRA Rule 4524 (Supplemental FOCUS Information)
December 19, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 12, 2018, 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 and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing a rule change to make technical revisions and
one minor correction to the Supplemental Statement of Income (``SSOI'')
required to be filed pursuant to FINRA Rule 4524 (Supplemental FOCUS
Information). The technical revisions would conform the SSOI with
amendments to SEC Form X-17A-5 (the ``FOCUS Report'') that the SEC has
adopted.
The text of the proposed rule change is available on FINRA's
website at http://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any
[[Page 66829]]
comments it received on the proposed rule change. The text of these
statements may be examined at the places specified in Item IV below.
FINRA has prepared summaries, set forth in sections A, B, and C below,
of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
FINRA Rule 4524 (Supplemental FOCUS Information) requires each
member, as FINRA shall designate, to file such additional financial or
operational schedules or reports as FINRA may deem necessary or
appropriate for the protection of investors or in the public interest
as a supplement to filing FOCUS reports. FINRA implemented the SSOI
pursuant to Rule 4524 in 2012.\4\
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\4\ See Regulatory Notice 12-11 (Supplemental FOCUS Information)
(February 2012) (announcing the SEC's approval of Rule 4524 and the
SSOI). See also Securities Exchange Act Release No. 66364 (February
9, 2012), 77 FR 8938 (February 15, 2012) (Notice of Filing of
Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, Adopting FINRA
Rule 4524 (Supplemental FOCUS Information) and Proposed
Supplementary Schedule to the Statement of Income (Loss) Page of
FOCUS Reports; File No. SR-FINRA-2011-064) and Securities Exchange
Act Release No. 67257 (June 26, 2012), 77 FR 39313 (July 2, 2012)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Make Non-Substantive Technical Changes to the Supplemental
Statement of Income Required To Be Filed Pursuant to FINRA Rule 4524
(Supplemental FOCUS Information); File No. SR-FINRA-2012-033).
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On August 17, 2018, the SEC adopted amendments that simplify and
update, among other rules and forms, certain of the FOCUS reporting
requirements for brokers and dealers and make changes to the annual
audit requirements.\5\ The SEC's amendments update Parts II, IIA, and
IIB of the FOCUS Report to reflect updated U.S. Generally Accepted
Accounting Principles (``U.S. GAAP'') requirements.\6\ More
specifically, the amendments revise the Statement of Financial
Condition and the Statement of Income in the FOCUS Reports to include
new line items added for the reporting of comprehensive income or loss,
including other comprehensive income and accumulated other
comprehensive income or loss. The amendments update line items to
eliminate references to extraordinary gains or losses and the
cumulative effect of changes in accounting principles.
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\5\ See Securities Exchange Act Release No. 83875 (August 17,
2018), 83 FR 50148 (October 4, 2018) (Final Rule: Disclosure Update
and Simplification) (the SEC's Adopting Release). To facilitate
members in their financial reporting obligations, FINRA issued
Regulatory Notice 18-38 to announce updates to the FINRA eFOCUS
System designed to correspond with the new FOCUS requirements and to
inform members of the effective date of the new requirements
pursuant to specified relief granted by the staff of the SEC
Division of Trading and Markets. See Regulatory Notice 18-38
(Financial Reporting Requirements) (November 2018); see also letter
from Michael A. Macchiaroli, Associate Director, Division of Trading
and Markets, SEC, to Ann Duguid, Senior Director, FINRA, dated
(October 29, 2018).
\6\ See, for example, the SEC's Adopting Release at 83 FR 50179,
50182 and 50183.
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FINRA is proposing technical revisions that would conform the SSOI
with the SEC's amendments to the FOCUS Report. FINRA believes that
conforming the SSOI with the FOCUS Report is consistent with the
Commission's goal of eliminating redundant, duplicative, overlapping,
outdated, or superseded requirements,\7\ without significantly altering
the information available to regulators. Because the SSOI is intended
to provide more detailed information about a member's revenues and
expenses reported on the FOCUS Report, making the two forms consistent
would enable members to file the same information on both forms with
respect to comprehensive income, extraordinary items, and the effect of
changes in accounting principles. As such, the proposed revisions
should create clarity and reduce burdens for members, thereby assisting
members in their financial reporting obligations and facilitating
investor protection. Specifically, FINRA proposes to make the following
changes to the SSOI: \8\
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\7\ See the SEC's Adopting Release at 83 FR 50150. See also
Section 72002 of the Fixing America's Surface Transportation Act,
Public Law 114-94, 29 Stat. 1312 (2015) (mandating that the SEC
revise Regulation S-K to eliminate provisions that are duplicative,
overlapping, outdated, or unnecessary).
\8\ The SSOI as amended pursuant to the proposed rule change is
included as Exhibit 3 to this filing.
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Delete SSOI line 14224 (``Extraordinary gains (losses)'')
and SSOI line 14225 (``Cumulative effect of changes in accounting
principles'') to conform with the elimination of references to
extraordinary gains or losses and to the cumulative effect of changes
in accounting principles in the FOCUS Report;
delete the phrase ``and extraordinary item'' from SSOI
line 14230 (``Net income (loss) after Federal income taxes and
extraordinary item''), again to conform with the elimination of
references to extraordinary gains or losses in the FOCUS Report;
add new SSOI line 14226 (``Other comprehensive income
(loss)'') and new SSOI line 14228 (``Comprehensive income (loss)'') to
conform with the addition of correspondingly titled new lines in the
FOCUS Report;
amend the title of Section 19 of the SSOI, and the
associated header that precedes Section 19, to read ``Net Income/
Comprehensive Income'' to conform with and correspond to the reporting
of comprehensive income in the FOCUS Report; and
amend the General Instructions and the Specific
Instructions to the SSOI to conform with the above deletions, additions
and amendments, as appropriate, with respect to SSOI lines 14224,
14225, 14226, 14228 and 14230, and the header to and title of Section
19.
In addition, FINRA proposes to make a minor correction to Section 3
(Revenue from Sale of Insurance Based Products) under the Specific
Instructions to the SSOI.\9\
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\9\ Specifically, FINRA proposes to delete the extra period that
appears at the end of the instructions to Line 11022 (Aggregate
amount if less than the greater of $5,000 or 5% of Total Revenue).
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FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the implementation date of the
proposed rule change will be March 31, 2019, for SSOI filings that
report on the period January 1 through March 31, 2019, and are due by
April 26, 2019. Thus, all SSOIs filed on or after March 31, 2019 would
reflect the proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change would
further the purposes of the Act because, as discussed in Section
II.A.1. of this filing, consistent with the Commission's goal of
eliminating redundant, duplicative, overlapping, outdated, or
superseded requirements, without significantly altering the information
available to regulators, the proposed rule change, by conforming the
SSOI with the FOCUS Report, would create clarity and reduce burdens for
members, thereby assisting members in their financial reporting
obligations and facilitating investor protection.
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\10\ 15 U.S.C. 78o-3(b)(6).
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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
[[Page 66830]]
believes that, by conforming the SSOI with the FOCUS Report, the
proposed rule change is consistent with the Commission's goal of
eliminating redundant, duplicative, overlapping, outdated, or
superseded requirements and does not significantly alter the
information available to regulators. As such, FINRA believes the
proposed rule change will create clarity and reduce burdens for
members, thereby reducing burdens on the marketplace and facilitating
investor protection.
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 become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. FINRA has
asked the Commission to waive the 30-day operative delay so that FINRA
may implement the proposed rule change to more closely coincide with
the effective date of the Commission's amendments to the FOCUS Report.
The Commission does not believe that the proposed change presents any
new or novel issues, and that making the SSOI consistent with the FOCUS
Report will reduce burdens for FINRA members by enabling them to file
the same information on both forms with respect to comprehensive
income, extraordinary items, and the effect of changes in accounting
principles, thereby assisting members in their financial reporting
obligations and facilitating investor protection. Accordingly, waiver
of the operative delay is consistent with the protection of investors
and the public interest. Therefore, the Commission hereby waives the
operative delay and designates the proposal operative upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2018-041 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2018-041. 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 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
FINRA-2018-041 and should be submitted on or before January 17, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28005 Filed 12-26-18; 8:45 am]
BILLING CODE 8011-01-P