[Federal Register Volume 86, Number 177 (Thursday, September 16, 2021)]
[Notices]
[Pages 51700-51704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19968]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92932; File No. SR-FINRA-2021-014]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of a Proposed Rule Change
Relating to Members' Filing Requirements Under FINRA Rule 6432
(Compliance With the Information Requirements of SEA Rule 15c2-11)
September 10, 2021.
I. Introduction
On June 9, 2021, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend member firms' filing
requirements under FINRA Rule 6432 (Compliance with the Information
Requirements of SEA Rule 15c2-11). The proposed rule change was
published for comment in the Federal Register on June 15, 2021.\3\ The
Commission received one comment letter regarding the proposed rule
[[Page 51701]]
change,\4\ and a response to the comment from FINRA.\5\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 92139 (June 9, 2021), 86 FR
31774 (June 15, 2021) (``Notice). Comments on the proposed rule
change can be found at: https://www.sec.gov/comments/sr-finra-2021-014/srfinra2021014.htm.
\4\ Letter from OTC Link LLC to SEC (July 6, 2021) (``OTC Link
Letter'').
\5\ See Letter from Robert McNamee to Vanessa Countryman (August
4, 2001) (``FINRA Response'').
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II. Summary of the Proposal
As further described below, in light of the Commission's recent
amendments to Rule 15c2-11 under the Exchange Act,\6\ FINRA proposes to
amend members' filing requirements under FINRA Rule 6432 (Compliance
with the Information Requirements of SEA Rule 15c2-11), including (i)
the addition of a requirement that a qualified inter-dealer quotation
system (``Qualified IDQS'') \7\ submit a modified Form 211 filing to
FINRA in connection with each initial information review that it
conducts; (ii) the addition of a requirement that a Qualified IDQS that
makes a certain publicly available determination under Rule 15c2-11
submit a daily security file to FINRA containing applicable summary
information for all securities quoted on its system; and (iii) other
changes to FINRA Rule 6432 and the Form 211 to further clarify the
operation of the rule and conform it to amended Rule 15c2-11.
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\6\ Rule 15c2-11 specifies key, basic issuer information that
must be obtained and reviewed before a broker-dealer may initiate
(or resume) quotations for a security in a market other than a
national securities exchange, subject to exception. On October 27,
2020, the Commission published in the Federal Register amendments to
Rule 15c2-11. See Exchange Act Release No. 89891 (Sept. 16, 2020),
85 FR 68124 (Oct. 27, 2020) (``Rule 15c2-11 Adopting Release'').
Among the amendments to Rule 15c2-11 are those to permit broker-
dealers to publish quotations in reliance on a qualified interdealer
quotation system's publicly available determination that it complied
with the rule's information review requirement, see 17 CFR 240.15c2-
11(a)(1)(ii), as well as those that provide certain requirements in
order for the qualified interdealer quotation system to make such a
publicly available determination, see 17 CFR 240.15c2-11(a)(2)(i)
through (iv). In addition, the amendments allow broker-dealers to
publish quotations in reliance on a qualified interdealer quotation
system's publicly available determination that certain exceptions
apply, see 17 CFR 240.15c2-11(f)(7), and to rely on a publicly
available determination as to whether certain issuer information is
current and publicly available, see 17 CFR 240.15c2-
11(f)(2)(iii)(B), (f)(3)(ii)(A). The amendments set forth certain
policies and procedures requirements in order for the qualified
interdealer quotation system to make any such publicly available
determination. See 17 CFR 240.15c2-11(a)(3).
\7\ As discussed below in Part II.C, FINRA proposes to define in
FINRA Rule 6432(g) the term ``qualified inter-dealer quotation
system'' as ``any interdealer quotation system that meets the
definition of an `alternative trading system' under [Rule] 300(a) of
[Regulation ATS] and operates pursuant to the exemption from the
definition of an `exchange' under [Rule] 3a1-1(a)(2) of [the
Exchange Act].'' This definition would track the Commission's
definition of the term ``qualified interdealer quotation system'' in
Exchange Act Rule 15c2-11. See 17 CFR 240.15c2-11(e)(6).
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FINRA states that, if the proposed rule changes are approved by the
Commission, FINRA will publish a Regulatory Notice with technical
details on the revised standard Form 211, modified Form 211, and daily
file submission process.\8\ In addition, FINRA states that the
effective date of any such rule changes would be the same date as the
general compliance date of the Commission's amendments to Rule 15c2-11
(except for paragraph (b)(5)(i)(M) of Rule 15c2-11),\9\ including any
extensions to such compliance date.
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\8\ See Notice, supra note 3, at 31775 n.16.
\9\ See Rule 15c2-11 Adopting Release, supra note 6 at 68172.
The compliance date for the amendments to Rule 15c2-11 (except for
provisions involving paragraph (b)(5)(i)(M)) is September 28, 2021.
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A. Proposed Modified Form 211 Submission Requirement
FINRA Rule 6432 sets forth the standards applicable to member firms
quoting equity securities for demonstrating compliance with Rule 15c2-
11 under the Exchange Act, unless an exception or exemption is
available. Under FINRA Rule 6432, no member may publish quotations for
a non-exchange-listed security \10\ in a quotation medium unless the
member has demonstrated compliance with FINRA Rule 6432 and the
applicable requirements for information maintenance under Rule 15c2-11
by making a filing with, and in the form required by, FINRA (i.e., the
Form 211). FINRA states that it uses the Form 211 in connection with
its oversight of member compliance with Rule 15c2-11.\11\ FINRA also
states that the Form 211 is designed to gather pertinent information
regarding the subject issuer and its security, the member's knowledge
of and relationship to the issuer, and the member's intended quotation
activities with respect to the security.\12\
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\10\ The term ``non-exchange-listed security'' is defined in
FINRA Rule 6432(e) as any equity security, other than a Restricted
Equity Security, that is not traded on any national securities
exchange. A ``Restricted Equity Security'' means any equity security
that meets the definition of ``restricted security'' contained in
Rule 144(a)(3) under the Securities Act of 1933. See 17 CFR 230.144.
\11\ See Notice, supra note 3, at 31775.
\12\ See id.
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To account for the new role of a Qualified IDQS resulting from the
amendments to Rule 15c2-11,\13\ FINRA proposes to amend FINRA Rule 6432
by adding a new provision to establish an after-the-fact filing
requirement for a Qualified IDQS that performs an initial review under
Rule 15c2-11(a)(2). This new filing requirement would supplement
FINRA's existing standard Form 211 review process for quoting broker-
dealer members, which would continue to apply where a broker-dealer is
not relying on a Qualified IDQS's publicly available determination with
respect to an initial review of issuer information.\14\
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\13\ See supra note 6.
\14\ See Notice, supra note 3, at 31775. A quoting broker-dealer
member relying on a Qualified IDQS would not be required to
separately submit any sort of Form 211 in connection with the
publication of its initial quotation pursuant to Rule 15c2-
11(a)(1)(ii). See id., at 31775 n.19. FINRA states that permitting
quoting members to rely on a Qualified IDQS's publicly available
determination to initiate quotations in a security is consistent
with the Commission's goals to reduce burdens on broker-dealers
while maintaining investor protection. See id., at 31776.
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FINRA states its belief that requiring a Qualified IDQS to submit a
modified Form 211 is appropriate because the submission would provide
FINRA with information with which to perform oversight of a Qualified
IDQS's compliance with Rule 15c2-11's requirements for an initial
information review, without involving any additional delay for FINRA to
review and process the form prior to members being permitted to
initiate quotations in reliance on the Qualified IDQS's publicly
available determination.\15\ In addition, FINRA states that the
modified Form 211 requirement, together with the required submission of
the daily file, as discussed below in Part II.B, would make a focused,
after-the-fact review more manageable and able to be accomplished in a
shorter period of time.\16\
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\15\ See id., at 31775. Broker-dealers must initiate their
quotations in reliance on any such publicly available determination
within three business days after the publicly available
determination is made. See 17 CFR 240.15c2-11(a)(1)(ii)(B).
\16\ See Notice, supra note 3, at 31776.
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Under the proposed provision, a Qualified IDQS must demonstrate
compliance with Rule 15c2-11 by making a filing with, and in the form
required by FINRA, no later than 6:30:00 p.m. Eastern Time on the
business day following the Qualified IDQS's publicly available
determination under Rule 15c2-11(a)(2) (i.e., a ``modified Form 211''
filing). Like the standard Form 211, the modified Form 211 would
contain requests for the items of information specified in Rule 15c2-
11(b) with respect to the type of issuer involved.\17\ In addition, as
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discussed in Part II.C below, the modified Form 211, like the standard
Form 211, must be reviewed and signed by a principal of the Qualified
IDQS, who must certify, among other things, that neither the firm nor
its associated persons have accepted or will accept any payment or
other consideration prohibited by FINRA Rule 5250 for filing the Form
211.\18\
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\17\ FINRA proposes several technical, non-substantive changes
to update cross-references to the renumbered and re-lettered
provisions of Rule 15c2-11 in light of the amendments. FINRA states
that both the modified and standard Form 211 would conform to the
Commission's amendments to Rule 15c2-11, as applicable. See id., at
31776 n.20. In addition, in light of the addition of the modified
Form 211 provision in FINRA Rule 6432(b), FINRA is re-letting all
FINRA Rule 6432 paragraphs that follow that provision. Finally,
FINRA proposes a technical, non-substantive change to correct FINRA
Rule 6432.01 to read ``.01'' rather than ``01.'' per FINRA rulebook
style. See id., at 31776.
\18\ See id.; Regulatory Notice 14-26 (June 2014) (stating that
the ``Rule 5250 prohibition on receiving payments for market making
includes within its scope the receipt of payments for submitting a
Form 211 to FINRA pursuant to Rule 6432''); see also FINRA Rule 5250
(Payments for Market Making).
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B. Proposed Daily Security File Submission Requirement
To account for the new role of a Qualified IDQS, FINRA also
proposes to amend Supplementary Material .02 to FINRA Rule 6432 by
requiring any Qualified IDQS that makes one or more publicly available
determinations described in any of the following provisions to submit
to FINRA a daily security file containing certain information: Rule
15c2-11(a)(2) (compliance with Rule 15c2-11's information review
requirement); (f)(2)(iii)(B) (information is current and publicly
available); (f)(3)(ii)(A) (information is no longer current and
publicly available); or (f)(7) (the availability of the exchange-traded
security exception, the ``piggyback'' exception, the municipal security
exception, or the ADTV and asset test exception). FINRA states that it
would use the information contained in the daily file as part of its
oversight program to perform surveillance and periodic reviews of
Qualified IDQS and quoting member compliance with Rule 15c2-11.\19\
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\19\ See Notice, supra note 3, at 31776.
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Under this proposed requirement, the daily security file must
contain the following information for all non-exchange-listed equity
securities quoted on the Qualified IDQS's system:
Security symbol;
Issuer name;
If the non-exchange-listed equity security is being quoted
pursuant to a processed Form 211 under FINRA Rule 6432(a);
If applicable, the type of publicly available
determination made by the Qualified IDQS (e.g., that the Qualified IDQS
conducted an initial review pursuant to Rule 15c2-11(a)(2), that the
specified information is current and publicly available pursuant to
Rule 15c2-11(f)(2)(iii)(B) or (f)(3)(ii)(A), or that an exception under
Rule 15c2-11(f)(7) is available) and the date on which such publicly
available determination was made by the Qualified IDQS;
With respect to a non-exchange-listed equity security for
which the Qualified IDQS has made a publicly available determination
under Rule 15c2-11(f)(7) relating to the availability of the piggyback
exception under Rule 15c2-11(f)(3), whether the issuer is a shell
company and, if a shell company, the number of days remaining in the
applicable 18-month period under Rule 15c-2-11(f)(3)(i)(B)(2);
If applicable, that the security is being quoted pursuant
to an exception that does not rely on the Qualified IDQS's publicly
available determination and, if so, identify the exception relied upon
by the subscriber; and
Such other information as specified by FINRA in a
Regulatory Notice (or similar communication).
C. Proposed Clarifying and Conforming Amendments
In addition to the proposals discussed above with respect to member
Qualified IDQS requirements, FINRA proposes several amendments to
clarify the operation of FINRA Rule 6432 and conform the rule
provisions to Rule 15c2-11, as amended. First, with respect to existing
member obligations, FINRA proposes to clarify that a member firm must
receive notification from FINRA that a standard Form 211 has been
processed (i) before initiating or resuming quotations in a quotation
medium for a security, as in paragraph (a) of FINRA Rule 6432; and (ii)
before entering a priced quotation for the security, as in paragraph
(d) of FINRA Rule 6432.\20\ As part of this rule change, FINRA proposes
to delete the requirement that the Form 211 be received by FINRA at
least three business days before the filing firm's quotation is
published or displayed.
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\20\ FINRA proposes a technical, non-substantive change to re-
letter existing paragraph (c) to paragraph (d). See supra note 17.
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Second, to ease burdens on broker-dealers when filing a Form 211,
FINRA proposes in paragraph (c)(1) \21\ to expand FINRA Rule 6432's
treatment currently allowed for documents made available through the
Commission's Electronic Data Gathering, Analysis, and Retrieval
(``EDGAR'') system. In particular, FINRA proposes to allow a member
firm or Qualified IDQS submitting a Form 211, in lieu of filing a copy
of the applicable specified issuer information, to include identifying
information \22\ for each issuer report or statement upon which the
filer relied in satisfying the requirements of Rule 15c2-11's review of
issuer information, with respect to information that is publicly
available through the website of a Qualified IDQS or its affiliate
broker-dealer (but is not available on EDGAR). FINRA states its belief
that this expansion of treatment is appropriate in light of the new
role of a Qualified IDQS under the amendments to Rule 15c2-11.\23\
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\21\ FINRA proposes a technical, non-substantive change to re-
letter existing paragraph (b)(1) to paragraph (c)(1). See supra note
17.
\22\ Such identifying information may include the type of
report, report date, the permanent website address of the location
of the information on the website of the Qualified IDQS or its
affiliate broker-dealer, and any other information as may be
requested by FINRA.
\23\ See Notice, supra note 3 at 31776.
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Third, FINRA proposes in new paragraph (g) of FINRA Rule 6432 to
provide the same definition for term ``qualified inter-dealer quotation
system'' that the term ``qualified interdealer quotation system'' has
under Rule 15c2-11(e)(6). Finally, to assist with oversight of member
firm compliance with Rule 15c2-11, FINRA proposes to require that
members include in the standard and modified Form 211 the names of all
officers and directors of the subject issuer.
III. Discussion and Commission Findings
After carefully reviewing the proposed rule changes, the comment
letter, and the FINRA letter, the Commission finds that the proposed
rule changes are consistent with the requirements of the Exchange Act
and the rules and regulations thereunder applicable to a national
securities association.\24\ In particular, the Commission finds that
the proposed rule changes are consistent with Section 15A(b)(6) of the
Exchange Act \25\ in that they are designed, among other things, 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. In addition, the Commission finds
that the proposed rule changes are consistent with Section 15A(b)(11)
of the Exchange Act \26\ in that they include provisions designed to
produce fair and informative quotations,
[[Page 51703]]
to prevent fictitious or misleading quotations, and to promote orderly
procedures for collecting, distributing, and publishing quotations.
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\24\ In approving this proposed rule change, the Commission has
considered the proposed rule changes' impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\25\ 15 U.S.C. 78o-3(b)(6).
\26\ 15 U.S.C. 78o-3(b)(11).
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A. Proposed Modified Form 211 Submission Requirement
The Commission finds that the proposed requirements set forth in
FINRA Rule 6432(b), with respect to the modified Form 211 submission,
are consistent with the Exchange Act.
First, the proposed requirement on any member Qualified IDQS that
makes a publicly available determination pursuant to Rule 15c2-11(a)(2)
to file a Form 211 with FINRA to demonstrate compliance with Rule 15c2-
11 is designed, among other things, 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. As FINRA noted, ``[t]he amendments to Rule 15c2-11
make substantial changes to the prior framework.'' \27\ This filing
requirement, therefore, was proposed primarily to account for the new
role of a Qualified IDQS under Rule 15c2-11's amendments.\28\ FINRA's
proposal to extend the existing obligation for any member firm
representing that it complied with the requirements of Rule 15c2-11's
review of specified issuer information to any member Qualified IDQS
that makes a publicly available determination that it complied with the
requirements for such review \29\ would update FINRA's framework for
its oversight of member Qualified IDQSs, facilitate its oversight
efforts, and enhance investor protection.\30\
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\27\ See Notice, supra note 3, at 31774.
\28\ See id., at 31775.
\29\ FINRA Rule 6432 would require a principal of the filing
member Qualified IDQS to review and sign the modified Form 211,
which would also include a certification that neither the firm nor
its associated persons have accepted or will accept any payment or
other consideration prohibited by FINRA Rule 5250 for filing the
Form 211. One commenter stated that FINRA Rule 5250 does not and
should not apply to a Qualified IDQS filing a Form 211. See OTC Link
Letter. The question of whether Rule 5250 prohibits the Qualified
IDQS from accepting issuer payments for filing Form 211 in
connection with its review under 15c2-11(a)(2) is an issue
concerning the interpretation of Rule 5250 (not Rule 6432) and is
outside of the scope of FINRA's proposal.
\30\ For example, FINRA stated that it would use the modified
Form 211 filings submitted by a Qualified IDQS to assess
periodically the adequacy of the Qualified IDQS's reviews. See id.,
at 31775.
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Second, the requirement for a member Qualified IDQS's modified Form
211 to be received by FINRA no later than 6:30:00 p.m. Eastern Time on
the business day following the Qualified IDQS's publicly available
determination made pursuant to Rule 15c2-11(a)(2) is designed to
produce fair and informative quotations, to prevent fictitious or
misleading quotations, and to promote orderly procedures for
collecting, distributing, and publishing quotations. The Commission
believes that the proposed deadline for the modified Form 211 filing
(i.e., after-the-fact) appropriately balances the protection of
investors, with respect to the prevention of fraudulent and
manipulative schemes involving fictitious quotations, while preventing
the potential for undue delay in the initiation of quoted markets
following a Qualified IDQS's publicly available determination that it
has complied with Rule 15c2-11's requirements for the review of
specified issuer information.\31\ Further, the Commission believes that
the after-the-fact nature of the submission of the modified Form 211,
together with the requirement for the submission of a daily security
file, could facilitate FINRA's oversight of a member Qualified IDQS's
compliance with the Rule 15c2-11 review by making FINRA's efforts more
focused and efficient.
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\31\ Broker-dealers must initiate their quotations within three
business days after the Qualified IDQS makes a publicly available
determination regarding its review of issuer information. See 17 CFR
240.15c2-11(a)(1)(ii)(B). If broker-dealers needed to wait for
notification from FINRA that the Qualified IDQS's form has been
processed before initiating or resuming quotations, as with the
timing requirement of the standard Form 211, more than three days
could elapse. In such case, the Qualified IDQS may need to repeat
its review, a broker-dealer may need to review the issuer
information itself to initiate a quoted market, or no market may
develop whatsoever. Such a result would be inconsistent with the
amendments' goal, among others, of easing broker-dealers' burdens
where Rule 15c2-11's investor protections can be achieved by
alternative means. See, e.g., Rule 15c2-11 Adopting Release, supra
note 6, at 68131.
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Finally, not requiring quoting member firms to file any Form 211 if
they are relying on a Qualified IDQS's publicly available determination
regarding its compliance with Rule 15c2-11's review of specified issuer
information is designed to produce fair and informative quotations, to
prevent fictitious or misleading quotations, and to promote orderly
procedures for collecting, distributing, and publishing quotation. The
Commission believes that its goal, among others, in amending Rule 15c2-
11 to reduce burdens on broker-dealers while maintaining investor
protection \32\ would be furthered, in part, by the modified Form 211
submission. In light of this requirement, the Commission believes that
also requiring quoting member firms (relying on a Qualified IDQS's
publicly available determination regarding its review of issuer
information) to file a Form 211 would be redundant, including with
respect to the information provided, without necessarily providing any
new information for FINRA or the Commission to use in its oversight
efforts to prevent fictitious or misleading quotations and to protect
investors.
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\32\ See Rule 15c2-11 Adopting Release, supra note 6, at 68131.
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B. Proposed Daily Security File Submission Requirement
The Commission finds that the proposed requirements set forth in
Supplementary Material .02 to FINRA Rule 6432, with respect to the
daily file submission requirement for any member Qualified IDQS that
makes certain publicly available determinations, are consistent with
the Exchange Act.
The proposed requirement under Supplementary Material .02 regarding
the submission of a daily security file is designed, among other
things, 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. Under this proposed
requirement, a member Qualified IDQS must submit a daily file
containing certain information \33\ regarding all non-exchange-listed
equity securities quoted on its system if the Qualified IDQS makes a
publicly available determination involving any of the following:
Whether the Qualified IDQS complied with the requirements of Rule 15c2-
11's review of specified issuer information; whether an issuer's
information is current and publicly available, pursuant to Rule 15c2-
11's unsolicited quotation exception or piggyback exception; or whether
Rule 15c2-11's exchange-traded security exception, municipal security
exception, piggyback exception, or ADTV and asset test exception is
available.
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\33\ See supra Part II.B for a list of the specified
information.
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The proposed daily security file list includes basic information
regarding a quoted security, its issuer, and, as applicable, the
publicly available determination or exception that already would be
preserved as part of a Qualified IDQS's compliance with its existing
recordkeeping requirement under Rule 15c2-11.\34\ The Commission
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believes that the daily security file will facilitate FINRA's oversight
efforts where FINRA might otherwise lack efficient access to such
information. In this regard, FINRA's access to the daily security file
could aid its oversight efforts and protect investors by providing
FINRA with a wider range of information to use in determining whether a
Qualified IDQS has complied with its Rule 15c2-11 obligations (e.g.,
with respect to making a certain type of publicly available
determination) or whether a publicly available determination is being
used in connection with a fraudulent and manipulative scheme.\35\
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\34\ See generally 17 CFR 240.15c2-11(d) (requiring, among other
things, the preservation of information related to a publicly
available determination that the rule's requirements for the review
of specified information have been fulfilled, as well as information
supporting a publicly available determination as to whether an
issuer's information is current and publicly available or whether
certain of the rule's exceptions apply, as applicable).
\35\ FINRA states that the daily security file information would
provide consolidated daily Rule 15c2-11 compliance information to
complement a member Qualified IDQS's modified Form 211 submission so
that FINRA could have a more complete overview of the activities of
its members in the over-the-counter market, including of a Qualified
IDQS's compliance with Rule 15c2-11's obligations. See Notice, supra
note 3, at 31776.
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C. Proposed Clarifying and Conforming Amendments
The Commission finds that the proposed clarifying and conforming
amendments set forth in FINRA Rule 6432 are consistent with the
Exchange Act.
First, the proposed clarifying amendments to Rule 6432(a) and (d),
with respect to the requirement that a member firm receive notification
from FINRA that its standard Form 211 has been processed before
initiating or resuming quotations in a quotation medium or before
entering a priced quotation for the security, respectively, are
designed, among other things, 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
states that these amendments are proposed to clarify existing member
firm obligations when filing a standard Form 211 under FINRA Rule
6432.\36\ The Commission believes that stating explicitly what event
must occur before a member firm may begin publishing quotations
provides a greater degree of clarity as to when a member firm may
initiate or resume quotations than stating when the standard Form 211
must be received by FINRA does. These clarifications could facilitate
broker-dealers' compliance measures and make them more efficient by
removing any uncertainty as to when quotations may begin. In addition,
these clarifications could protect investors by preventing the
likelihood that a member firm would initiate a quoted market before its
compliance with Rule 15c2-11's requirements for an initial information
review have been subject to oversight and verified.
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\36\ See id.
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Second, the proposed requirements in FINRA Rule 6432(c)(1), with
respect to filing member firms' ability to point FINRA to issuer
information publicly available on the website of a Qualified IDQS or
its affiliate broker-dealer, including the manner for doing so, are
designed, among other things, 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
Commission believes that the ability of a member firm or Qualified IDQS
to include in its Form 211 filing certain identifying information for
the issuer reports or statements upon which it relied in complying with
Rule 15c2-11's requirements for reviewing issuer information
appropriately balances the protection of investors while reducing
compliance burdens on the filing member. Specifically, this rule change
would allow any such member to point FINRA to the applicable issuer
information that is publicly available on a regulated market
participant's website,\37\ in lieu of filing a copy of the applicable
issuer reports or statements, while providing FINRA with an alternative
means to conduct its oversight of the member's compliance with Rule
15c2-11 in order to protect investors. In addition, the Commission
believes that the list of identifying information (i.e., the type of
report, report date, the permanent website address of the location of
the information on the website of the Qualified IDQS or its affiliate
broker-dealer, and any other information as may be requested by FINRA)
may aid FINRA in accessing the applicable issuer reports or statements
relied upon as part of its oversight efforts.
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\37\ See Rule 15c2-11 Adopting Release, supra note 6, at 68144.
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Third, the proposed definition in FINRA Rule 6432(g) of the term
``qualified inter-dealer quotation system'' is designed, among other
things, 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's proposed definition
tracks the definition of the term ``qualified interdealer quotation
system'' that is provided in Rule 15c2-11(e)(6). This uniformity
between FINRA Rule 6432 and Rule 15c2-11 under the Exchange Act could
facilitate compliance efforts on the part of member firms and Qualified
IDQSs due to an enhanced understanding of the application of the two
rules' requirements regarding that term. Similarly, such uniformity
could facilitate FINRA's oversight by providing an efficient means to
monitor compliance with Rule 15c2-11. The Commission continues to
believe that the regulatory requirements for a member that meets the
definition of a Qualified IDQS--and the concomitant FINRA and
Commission oversight of this type of entity--would help to ensure
investor protection and to prevent fraud and manipulation.\38\
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\38\ See id., at 68166.
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Finally, the proposal in FINRA Rule 6432(c)(2) to require any
member firm or Qualified IDQS to include in the standard or modified
Form 211, as applicable, a list of all officers and directors of the
subject issuer is designed, among other things, 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 Commission believes that this list appropriately
captures persons who manage a company or have a greater degree of
access to issuer information and who may have a heightened incentive to
engage in fraudulent or manipulative conduct.\39\ Such additional
information, therefore, could aid FINRA in its oversight of Rule 15c2-
11 compliance and the market for an issuer's security.
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\39\ See, e.g., id., at 68167.
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IV. Conclusion
It is therefore ordered that, pursuant to Section 19(b)(2) of the
Exchange Act,\40\ the proposed rule change (File No. SR-FINRA-2021-014)
be, and hereby is, approved.
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\40\ 15 U.S.C. 78s(b)(2).
\41\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19968 Filed 9-15-21; 8:45 am]
BILLING CODE 8011-01-P