[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Notices]
[Pages 56462-56467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14974]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100458; File No. SR-FINRA-2024-010]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend FINRA Rule 8312 (FINRA BrokerCheck
Disclosure)
July 2, 2024.
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 June 27, 2024, the 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 to amend FINRA Rule 8312 (FINRA BrokerCheck
Disclosure), which governs the information FINRA releases to the public
via FINRA's BrokerCheck[supreg] tool, to exclude from release through
BrokerCheck the street address of a registered location that is
reported and identified to FINRA as a private residence.\4\ The
proposed rule change would help address privacy and safety concerns
raised by broker-dealer firms and their associated persons about the
release through BrokerCheck of the full address of an associated
person's private residential registered location.\5\
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\4\ A private residence that meets the office of supervisory
jurisdiction (``OSJ'') or branch office definitions under Rule
3110(f)(1) and Rule 3110(f)(2), respectively, must register with
FINRA through the use of Form BR (Uniform Branch Office Registration
Form) (``Form BR''); provided, however, a private residence that
qualifies for an exclusion from the ``branch office'' definition
under Rule 3110(f)(2) or is eligible to be designated as a
Residential Supervisory Location (``RSL'') under Rule 3110.19 would
not have to be registered with FINRA. Rule 3110.19 became effective
on June 1, 2024, and allows member firms to designate as an RSL the
private residence of an associated person of a member firm at which
they engage in specified supervisory activities, subject to certain
safeguards and limitations, as a non-branch location. See Regulatory
Notice 24-02 (January 2024) (``Notice 24-02''). For purposes of the
proposed rule change, an OSJ or branch office will be collectively
referred to as a ``registered location'' and a registered location
that is also a private residence will be referred to as a ``private
residential registered location.'' For purposes of the proposed rule
change, the street address would consist of the house number (and
apartment or unit number, as applicable), street name, and for U.S.
locations, the postal code (``street address'').
\5\ As noted below, BrokerCheck displays certain information
regarding (i) current or former FINRA member firms (``member
firms'') and current or former associated persons of such member
firms (``associated persons of member firms'') and (ii) current or
former broker-dealers that are members of a self-regulatory
organization (``SRO''), other than FINRA, that uses the Central
Registration Depository (``CRD[supreg]'') for registration purposes
(``non-member firms''), and current or former associated persons of
such non-member firms (``associated persons of non-member firms'').
For purposes of the proposed rule change, associated persons of
member firms and associated persons of non-member firms will be
collectively referred to as ``associated persons,'' and member firms
and non-member firms will be collectively referred to as ``broker-
dealer firms.''
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Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions is in brackets.
* * * * *
8300. SANCTIONS
* * * * *
8312. FINRA BrokerCheck Disclosure
(a) through (f) No Change.
(g) FINRA shall not release:
(1) information reported as a Social Security number, residential
history, [or] physical description, the street address of a registered
location identified as a private residence, information that FINRA is
otherwise prohibited from releasing under Federal law, or information
that is provided solely for use by regulators. 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;
(2) through (7) No Change.
Supplementary Material: ------------
.01 through .03 No Change.
* * * * *
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
a. Background
i. FINRA's BrokerCheck Tool
BrokerCheck is a free tool available on FINRA's website that is
designed to help investors make informed choices about the associated
persons and broker-dealer firms with which they conduct or may conduct
business.\6\ The information that FINRA releases to the public through
BrokerCheck is derived from CRD, the central licensing and registration
system that FINRA operates for the benefit of FINRA, the SEC, other
SROs, state securities regulators and broker-dealer firms. The
information maintained in the CRD system is reported by broker-dealer
firms, associated persons and regulatory authorities in response to
questions on the uniform registration forms.\7\ These forms are used to
collect registration information about broker-dealer firms and
associated persons, including, among other things, registrations
currently held, office locations, ownership information, and
administrative, regulatory, criminal history, financial and other
information.
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\6\ BrokerCheck is available at http://www.brokercheck.finra.org.
\7\ The uniform registration forms are Form BD (Uniform
Application for Broker Dealer Registration), Form BDW (Uniform
Request for Broker-Dealer Withdrawal), Form BR, Form U4, Form U5 and
Form U6 (Uniform Disciplinary Action Reporting Form).
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[[Page 56463]]
The dissemination and accessibility of registration information
maintained in the CRD system serves three important purposes. First,
the CRD system provides securities regulators with a critical
regulatory tool to oversee the activities of broker-dealer firms and
associated persons and to detect regulatory problems. Second, broker-
dealer firms use information in the CRD system to help them make
informed employment decisions.\8\ Finally, to comply with the Exchange
Act, FINRA makes a subset of the data maintained in the CRD system
available through BrokerCheck so that the investing public can obtain
information about associated persons and broker-dealer firms with which
they conduct or may conduct business.\9\
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\8\ As of December 31, 2023, over 67 million registrations for
associated persons and investment adviser representatives have been
processed through the CRD system over a period spanning more than 20
years.
\9\ 15 U.S.C. 78a et seq.
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Rule 8312 specifies which registration information FINRA must
release to the public through BrokerCheck.\10\ Subject to specified
exceptions described below,\11\ investors are able to obtain
information about broker-dealer firms and associated persons who are
currently or were formerly registered with such broker-dealer firms,
including the full address of any registered location where an
associated person conducts business, even if the location is a private
residence.\12\ FINRA notes that BrokerCheck generally does not release
the address of an unregistered location (i.e., a non-branch location)
and this practice would not be impacted by the proposed rule
change.\13\
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\10\ Other aspects of Rule 8312 include, in general,
establishing a process to dispute the accuracy of certain
information released through BrokerCheck; and permitting FINRA to
provide, upon written request, a compilation of information about
broker-dealer firms, subject to specified terms and conditions.
\11\ See generally Rule 8312(g).
\12\ BrokerCheck also displays information already publicly
disseminated through the Investment Adviser Public Disclosure
(``IAPD[supreg]'') database about individuals that are currently
associated persons of a broker-dealer firm who are, or were,
licensed as investment adviser representatives. See Rule 8312(d).
\13\ See generally Rule 3110(f)(2) (listing the locations,
including the residential locations, excluded from the branch office
definition).
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Rule 8312 also specifies information that FINRA does not release
through BrokerCheck.\14\ For example, FINRA does not release through
BrokerCheck information regarding examination scores or failed
examinations,\15\ information reported as a Social Security number,
residential history, or physical description, information that FINRA is
otherwise prohibited from releasing under Federal law, or information
that is provided solely for use by regulators.\16\
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\14\ See note 11, supra.
\15\ See Rule 8312(b)(2)(E).
\16\ See Rule 8312(g)(1).
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While the Form U4 and Form BR historically have included a
``Private Residence Check Box'' to identify private residential
registered locations, this information has been collected for the
purpose of enabling regulators to appropriately prepare for and staff
onsite examinations that are scheduled at a private residence (which
may differ from those examinations taking place at a commercial
office). Accordingly, FINRA had historically determined to display
through BrokerCheck the full address of a registered location or
private residential registered location, irrespective of whether such
location is reported and identified as a private residence. However, in
recent years, especially after the significant increase in work-from-
home and hybrid working arrangements since the pandemic, broker-dealer
firms and their associated persons have raised privacy and safety
concerns to FINRA about the release through BrokerCheck of the full
address of an associated person's private residential registered
location.
As a result, FINRA undertook an assessment of Rule 8312 to take
into consideration such privacy and safety concerns. This assessment,
as described below, is consistent with periodic assessments that FINRA
conducts regarding the information it provides to the public through
BrokerCheck. Based on such periodic assessments, FINRA has previously
made numerous changes to strengthen BrokerCheck, including changes that
have made BrokerCheck information easier to access \17\ and have
expanded the types of information available.\18\
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\17\ At the outset of FINRA's public disclosure program, FINRA
responded to all inquiries (made in writing or via a toll-free
telephone number) by mailing or faxing a summary of an associated
person's or broker-dealer firm's public information to the
requestor. The request and delivery methods of such information
eventually moved towards further electronic means by releasing some
information on FINRA's website and providing information in the form
of an automated report. See generally Notice to Members 97-78
(November 1997) (referencing FINRA responding to inquiries made in
writing, electronically, and telephonically); Special Notice to
Members 98-71 (August 1998) (referencing public disclosure of some
information on FINRA's website); and Notice to Members 00-16 (March
2000) (announcing the ability to generate automated reports that
draw disclosure information from CRD).
\18\ See, e.g., Securities Exchange Act Release No. 88760 (April
28, 2020), 86 FR 26502 (May 4, 2020) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2020-012) (amending Rule 8312 to
allow the dissemination through BrokerCheck of information already
publicly disseminated through IAPD about individuals that are
currently associated persons of broker-dealer firms who are, or
were, licensed as investment adviser representatives).
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ii. Temporary Relief From Registration
In early response to the pandemic, many private and government
employers closed their offices and their employees continued with their
work from alternative locations such as private residences. The
pandemic prompted FINRA and other regulators to provide temporary
relief to member firms from certain regulatory requirements to address
the public health crisis, including the Form BR Relief.\19\
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\19\ See Regulatory Notice 20-08 (March 2020) (``Notice 20-08'')
(describing pandemic-related business continuity planning, guidance
and regulatory relief that included the temporary suspension of the
requirement that member firms submit Form BR for any newly opened
temporary office locations or space-sharing arrangements established
as a result of the pandemic (``Form BR Relief'')). The Form BR
Relief expired on May 31, 2024, thus triggering the requirement
under Article IV, Section 8 of the FINRA By-Laws that a member firm
``shall promptly advise [FINRA] . . . of the opening, closing,
relocation, change in designated supervisor, or change in designated
activities of any branch office of such member not later than 30
days after the effective date of such change.'' See Notice 24-02.
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The pandemic also prompted many broker-dealer firms to adopt a
blended or hybrid work model, whereby associated persons work sometimes
on-site in a commercial office setting and other times remotely in an
alternative location such as a private residence. Based on feedback
from broker-dealer firms received through various pandemic-related
initiatives and other industry outreach,\20\ FINRA believes that this
model will endure. As noted above, starting on June 1, 2024, member
firms, particularly those that have been relying on the Form BR Relief,
must resume the obligation to, among other things, submit or update
branch office applications on Form BR, as applicable, for those
locations, including private residences, that do not otherwise meet an
exclusion from branch office registration under Rule 3110(f)(2) or Rule
3110.19.\21\
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\20\ See generally FINRA's Key Topic: COVID-19/Coronavirus
(referencing, among other things, Frequency Asked Questions,
temporary amendments to FINRA rules, and Regulatory Notices),
located at: https://www.finra.org/rules-guidance/key-topics/covid-19.
\21\ See notes 4 and 19, supra.
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b. Proposed Amendments to Rule 8312(g)(1)
As noted above, Rule 8312(g)(1) currently provides that FINRA shall
not release information reported as a Social Security number,
residential history, or physical description, information that
[[Page 56464]]
FINRA is otherwise prohibited from releasing under Federal law, or
information that is provided solely for use by regulators. In light of
the privacy and safety concerns raised by broker-dealer firms and
associated persons regarding the release through BrokerCheck of the
full address of an associated person's private residential registered
location, coupled with the potentially significant change to the number
of private residences that member firms may be required to register
through Form BR following the expiration of the Form BR Relief,\22\
FINRA is proposing to amend Rule 8312(g)(1) to also exclude from
release through BrokerCheck the street address of a private residential
registered location that a broker-dealer firm has reported and
identified to FINRA. To operationalize the proposed rule change, FINRA
would implement a technology enhancement that would exclude from
release on BrokerCheck the street address information of a private
residential registered location when a broker-dealer firm selects the
``Private Residence Check Box'' on Form BR.\23\
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\22\ See note 19, supra. At this time, an estimate of such
change to the number of private residences that member firms may be
required to register is difficult to ascertain because of member
firm reliance on the Form BR Relief and the potential use of RSLs in
accordance with Rule 3110.19. See note 4, supra.
\23\ FINRA does not believe that any changes to the uniform
registration forms are necessary to conform with the proposed rule
change. A broker-dealer firm establishes a registered location
through the use of Form BR, which includes a ``Private Residence
Check Box'' that a broker-dealer firm must select to report and
identify to FINRA a private residential registered location. See
``Specific Instructions for Completing Form BR'' (which provide, in
part, that applicants ``[c]heck [the ``Private Residence Check
Box''] if this [registered location] is also a private
residence.''). Under the proposed rule change, FINRA expects that
the release of the street address of a private residential
registered location on BrokerCheck would be controlled by the
identification of such location as a private residence through the
``Private Residence Check Box'' on Form BR. Accordingly, where a
private residential registered location is reported and identified
to FINRA through the ``Private Residence Check Box'' on Form BR,
BrokerCheck would release only the city and state, and for such a
location outside the United States, the city and country. Similarly,
under the proposed rule change, for an associated person located at
an unregistered location, BrokerCheck would release only the city
and state of the associated person's ``Supervised From'' address
where such ``Supervised From'' location is a private residential
registered location has been reported and identified to FINRA as a
private residence through the ``Private Residence Check Box'' on
Form BR. However, in some instances, reports or other aggregated
information contained on other uniform registration forms and that
is aggregated in CRD and released through BrokerCheck may
nevertheless include the street address of a private residential
registered location, even where such location is reported and
identified to FINRA through the ``Private Residence Check Box'' on
Form BR. For example, a broker-dealer firm's main address, as
identified on Form BD, regardless of whether such location is also
reported and identified to FINRA through the ``Private Residence
Check Box'' on Form BR, would continue to be released through
BrokerCheck.
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FINRA believes that the proposed rule change would address privacy
and safety concerns raised by broker-dealer firms and associated
persons regarding the release through BrokerCheck of the full address
of an associated person's private residential registered location in a
manner that would not significantly affect the protection of investors
or the public interest in two principal ways. First, the proposed rule
change would address the physical privacy and safety concerns raised to
FINRA by excluding the street address of an associated person's private
residential registered location from release on, and prevent potential
bad actors from accessing this information through, BrokerCheck.\24\
Second, the proposed rule change would address the digital privacy and
safety of associated persons by excluding from public release on
BrokerCheck a piece of personal information that has been linked to
identity theft.\25\
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\24\ FINRA believes that the proposed rule change would also
help address specific safety concerns raised by broker-dealer firms
and associated persons regarding associated persons whose immediate
family members work in certain public service roles (e.g., judges or
other public officials) and reside in the same residence as the
associated person, or associated persons who have obtained
restraining orders or orders of protection against third parties.
\25\ An associated person's home address information could be
used by a bad actor in connection with an identity theft scheme. See
generally What to Know About Identity Theft, Federal Trade
Commission (April 2021), https://consumer.ftc.gov/articles/what-know-about-identity-theft.
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Furthermore, widespread changes in workplace models in the
financial industry, coupled with a broader adoption by customers of
digital means of interacting with broker-dealer firms, appear to place
less relevance on the street address of an associated person's private
residential registered location as a necessary data point in order for
investors to engage in securities activities with an associated person
or broker-dealer firm. In this regard, investors now commonly open
accounts and place trades through online platforms, and associated
persons and broker-dealer firms communicate with customers through
email, video or meetings programs (e.g., WebEx, Zoom) in lieu of
visiting a broker-dealer firm's physical offices.\26\
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\26\ Many customers now expect their primary mode of interaction
with their broker-dealer firm to be digital. In a study to learn
about investors who, during the year 2020, entered into the markets
using taxable, non-retirement investment accounts, FINRA found that
nearly half (48%) of ``new investors,'' investors who opened a non-
retirement investment account during 2020, indicated that they
accessed their account primarily through a mobile app, and three-
quarters (75%) of ``holdover account owners,'' investors who
maintained a taxable investment account opened before year 2020,
indicated they accessed their account primarily through a website.
See generally FINRA Investor Education Foundation & NORC, Consumer
Insights: Money & Investing, Investing 2020: New Accounts and the
People Who Opened Them at 11 (February 2021), https://www.finrafoundation.org/sites/finrafoundation/files/investing-2020-new-accounts-and-the-people-who-opened-them_1_0.pdf.
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As a result, FINRA believes that the proposed rule change would not
significantly affect the protection of investors or the public interest
as it would not impact the information on BrokerCheck that informs an
investor's ability to make decisions about the associated person and
broker-dealer firm with which the investor conducts or may conduct
business, such as disciplinary history (e.g., certain customer
complaints, regulatory actions and criminal or civil judicial
proceedings); disclosure events (e.g., bankruptcies or liens);
registration history; direct and indirect ownership information;
affiliate and executive officer information; employment history and
other business activities. In addition, FINRA notes that the proposed
rule change would align with the approach in IAPD with respect to
private residential address suppression, as IAPD currently excludes
from release the house number (and apartment or unit number, as
applicable), street name, and for U.S. locations, the postal code of a
registered location that is reported and identified as a private
residence on the relevant uniform investment adviser registration
form.\27\
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\27\ See Investment Advisers Act Release No. 1897 (September 12,
2000), 65 FR 57438, 57439 (September 22, 2000) (Final Rule). The
proposed rule change would therefore align IAPD's and BrokerCheck's
treatment of the street address of a registered location that is
reported and identified to FINRA as a private residence through the
relevant uniform registration form (i.e., by excluding from release
through BrokerCheck certain street address information regarding a
private residential registered location that is reported and
identified to FINRA through the ``Private Residence Check Box'' on
Form BR).
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In addition, FINRA does not believe that the proposed rule change
would significantly affect the protection of investors or the public
interest as there are other regulatory requirements that would continue
to provide customers with the necessary broker-dealer firm contact
information for the purposes of submitting inquiries or complaints.\28\
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For example, among other obligations, broker-dealer firms would still
be required to provide customers with periodic customer account
statements that must clearly and prominently disclose the identity of
the introducing firm and carrying firm (if different) and their
respective contact information for customer service.\29\ BrokerCheck
would also continue to display the street address of a broker-dealer
firm's main office, even where such address is a private residence.\30\
Thus, a mailing address would be available if necessary.
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\28\ See, e.g., Exchange Act Rule 17a-3(a)(18)(ii) (which
requires broker-dealer firms to maintain a record indicating that
each of the broker-dealer firms' customers has been provided with a
notice containing the address and telephone number of the department
of the broker-dealer firm to which any complaints as to the
customers' accounts may be directed).
\29\ See FINRA Rule 2231.05 (Customer Account Statements,
Information to be Disclosed on Statement).
\30\ See note 23, supra.
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FINRA also recognizes that some associated persons or broker-dealer
firms may elect to ``hold out'' a private residential registered
location that has been reported and identified to FINRA through the
``Private Residence Check Box'' on Form BR and disclose the street
address of such private residential registered location to existing or
prospective customers through their websites, stationery or otherwise.
FINRA notes that the proposed rule change would not preclude an
associated person or broker-dealer firm from holding out such private
residential registered location to the public using such disclosure
methods. The proposed rule change would govern only FINRA's release of
this specified personal information on BrokerCheck.
Moreover, the full address of an associated person's private
residential registered location that is reported and identified to
FINRA through the ``Private Residence Check Box'' on Form BR would
remain available to FINRA, the SEC, SROs, and state securities
regulators through the CRD system.
FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change on
June 27, 2024. As member firms work to submit or update branch office
registrations or information on Form BR within the timeframes set forth
in Notice 24-02, FINRA believes that a waiver would efficiently match
the timing of the proposed rule change with such efforts and thereby
address the privacy and safety concerns of broker-dealer firms and
their associated persons relating to the release through BrokerCheck of
the full address of an associated person's private residential
registered location in a manner that would not significantly affect the
protection of investors or the public interest. Among those timeframes
are May 31, 2024, the date on which the Form BR Relief expired, and
June 1, 2024, the date on which member firms that have been relying on
the Form BR Relief must resume the obligation to, among other things,
submit or update branch office applications on Form BR for any space-
sharing arrangements or office locations, including private residential
locations, that were established as a result of the pandemic that have
not otherwise been registered or updated with FINRA through Form BR as
prescribed in Article IV, Section 8 of the FINRA By-Laws.\31\ In
resuming this obligation, FINRA expects member firms will need to
submit or update Form BRs for applicable locations and a waiver would
allow member firms to report and identify private residential
registered locations through the use of the ``Private Residence Check
Box'' as part of a single process when updating such Form BRs and thus
address the privacy and safety concerns of broker-dealer firms and
their associated persons relating to the release through BrokerCheck of
the full address of an associated person's private residential
registered location.
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\31\ See note 19, supra.
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2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\32\ which requires, among
other things, that FINRA 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. FINRA believes the proposed rule change would help
address privacy and safety concerns raised by broker-dealer firms and
associated persons regarding the release of an associated person's
street address on BrokerCheck in a manner that would not significantly
affect the protection of investors or the public interest. As noted
above, widespread changes in workplace models, coupled with a broader
adoption by customers of digital means of interacting with broker-
dealer firms and associated persons, appear to place less relevance on
the street address of an associated person's private residential
registered location as a necessary data point in order for investors to
engage in securities activities with associated persons or broker-
dealer firms.\33\ Given the other information that would remain on
BrokerCheck, FINRA believes that excluding from release the street
address, while continuing to display the city and state (or city and
country), of a private residential registered location that is reported
and identified to FINRA through the ``Private Residence Check Box'' on
Form BR would not significantly affect an investor's ability to make
informed decisions about an associated person or broker-dealer firm
with which the investor conducts or may wish to conduct business. In
addition, FINRA believes that the proposed rule change would not
significantly affect the ability of an investor to contact their
broker-dealer firm to raise concerns or complaints as there exist other
regulatory requirements that would continue to provide customers with
the necessary broker-dealer firm contact information.\34\ The proposed
rule change also would not impose appreciable costs on broker-dealer
firms because the proposed rule change does not impose any new
obligation on broker-dealer firms.\35\ In addition, the proposed rule
change would not preclude an associated person or broker-dealer firm
from electing to ``hold out'' a private residential registered location
that has been reported and identified to FINRA through the ``Private
Residence Check Box'' on Form BR and disclose the street address of
such private residential registered location to existing or prospective
customers through their websites, stationery or otherwise.
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\32\ 15 U.S.C. 78o-3(b)(6).
\33\ See note 26, supra.
\34\ See notes 28 and 29, supra.
\35\ See Article IV, Sec. 8(b) of the FINRA By-Laws
(Registration of Branch Offices), which requires that member firms
notify FINRA (via Form BR) of, among other things, the ``opening,
closing or relocation . . . of a branch office location.'' This
requirement would apply to the identification and disclosure of a
private residential registered location that is reported and
identified to FINRA through the use of the ``Private Residence Check
Box'' on Form BR.
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Further, FINRA believes that the proposed rule change would not
impact the efficiency with which broker-dealer firms report information
to the CRD system, or the completeness of information available to
FINRA, the SEC, SROs, and state regulators through the CRD system as
the full address of an associated person's private residential
registered location that is also reported and identified to FINRA
through the ``Private Residence Check Box'' on Form BR would remain
accessible to regulators.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any
[[Page 56466]]
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as discussed below.
Economic Impact Assessment
1. Regulatory Need
BrokerCheck is a free online tool that allows investors to research
the background and qualifications of associated persons and broker-
dealer firms with which they conduct or may conduct business. Excluding
from release through BrokerCheck the street address of a private
residential registered location that is reported and identified to
FINRA through the ``Private Residence Check Box'' on Form BR would help
address the privacy and safety concerns raised by broker-dealer firms
and associated persons about the release of such information through
BrokerCheck. The proposed rule change would not significantly affect
the protection of investors or the public interest as it would not
impact the information on BrokerCheck that informs an investor's
ability to make decisions about the broker-dealer firms or associated
persons with which they conduct or may conduct business.
2. Economic Baseline
The economic baseline for the proposed rule change is the current
regulatory framework, the information currently available through
BrokerCheck and current investor use of BrokerCheck.
As of December 31, 2023, FINRA's membership included 3,300 active
member firms with 148,452 registered locations,\36\ of which 20,109
were reported and identified on Form BR as private residences,
accounting for about 22,038 associated persons of member firms.\37\
Approximately 900 member firms have private residential registered
locations (about 28% of FINRA's membership), and the top five member
firms making the greatest use of private residential registered
locations account for approximately 34% of all such locations. These
data may not fully reflect the number of private residential registered
locations due to temporary regulatory relief, including the Form BR
Relief.\38\
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\36\ This count excludes broker-dealers with FINRA membership
pending approval and withdrawn or terminated from FINRA membership.
\37\ The number of registered locations and private residential
registered locations are derived from information provided by
broker-dealer firms on Form BR. Under the proposed rule change, for
associated persons located at an unregistered location, BrokerCheck
would release the city and state of the associated person's
``Supervised From'' address where such ``Supervised From'' location
is a private residential registered location that has been reported
and identified to FINRA through the ``Private Residence Check Box''
on Form BR. See note 23, supra. FINRA estimates that approximately
6,300 associated persons of member firms working in unregistered
locations are supervised from private residential registered
locations that are reported and identified to FINRA through the
``Private Residence Check Box'' on Form BR.
\38\ See note 22, supra.
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In 2023, BrokerCheck users conducted approximately 18.3 million
searches of broker-dealer firms and associated persons. Street address
information concerning existing private residential registered
locations that could be excluded from release under the proposed rule
change (i.e., those that are reported and identified to FINRA through
the ``Private Residence Check Box'' on Form BR) may persist in the
public domain through other sources that retrieved information from
BrokerCheck before the proposed change is implemented.
3. Economic Impacts
Due to the expiration of the Form BR Relief, many broker-dealer
firms are likely to register additional private residential locations
to accommodate hybrid workforce arrangements.\39\ The proposed rule
change would help to safeguard the privacy of the street addresses of
associated persons' private residential registered locations where such
locations are reported and identified to FINRA through the ``Private
Residence Check Box'' on Form BR, and thereby make broker-dealer firms
and associated person more willing to register private residential
locations with FINRA through Form BR, as applicable. FINRA expects that
the competitive effects of not releasing the street address of a
private residential registered location on BrokerCheck would be
negligible; broker-dealer firms that currently use such locations may
be more likely to expand their use.
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\39\ See note 22, supra.
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For those private residential registered locations newly
established after the proposed rule change would go into effect, the
street address would be excluded from release through BrokerCheck where
the ``Private Residence Check Box'' on Form BR is selected.\40\ As
previously noted, street address information concerning existing
private residential registered locations that would be excluded from
release under the proposed rule change might be available to the public
through other channels that sourced BrokerCheck data prior to the
effectiveness of the proposed rule change.
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\40\ See note 23, supra.
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The proposed rule change would not impose appreciable costs on
broker-dealer firms, nor would it significantly affect the protection
of investors or the public interest. In addition, the proposed rule
change would not preclude an associated person or broker-dealer firm
from electing to ``hold out'' a private residential registered location
that has been reported and identified to FINRA through the ``Private
Residence Check Box'' and disclose the street address of such private
residential registered location to existing or prospective customers
through their websites, stationery or otherwise. FINRA notes that the
proposed rule change would not prohibit distributing such street
address information selectively, but if doing so is costly, a broker-
dealer firm could (as noted above) put the information on its website
or not distribute it at all.
FINRA believes that the proposed rule change would not
significantly affect the protection of investors or the public
interest. Given the other information that would remain on BrokerCheck,
FINRA does not believe that excluding the street address from release
through BrokerCheck, while continuing to display the city and state (or
city and country), of a private residential registered location that is
reported and identified to FINRA through the ``Private Residence Check
Box'' on Form BR would significantly affect the ability of an investor
to make an informed decision about an associated person or broker-
dealer firm with which the investor conducts or may conduct business.
In particular, the disciplinary histories of a broker-dealer firm and
its associated persons that are currently released through BrokerCheck
would continue to be made available to the public. Excluding from
release through BrokerCheck the street address of a private residential
registered location that is reported and identified through the
``Private Residence Check Box'' on Form BR also would not significantly
affect the ability of an investor to raise concerns or make complaints
about the conduct of a broker-dealer firm or associated person.\41\ The
proposed rule change would have no impact on investors' continued
access to the main address of a broker-dealer firm, even if the
location is also reported and identified to FINRA as a private
residence through the ``Private Residence Check Box'' on Form BR.\42\
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\41\ See notes 28 and 29, supra.
\42\ See note 23, supra.
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The proposed rule change would have no impact on broker-dealer
firms' registration requirements or supervision requirements. FINRA,
the SEC, SROs, and state securities regulators would
[[Page 56467]]
continue to have access to the full street addresses of all registered
locations through the CRD system.
4. Alternatives Considered
No significant alternatives to these requirements were considered.
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 \43\ and Rule 19b-
4(f)(6) thereunder.\44\
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\43\ 15 U.S.C. 78s(b)(3)(A).
\44\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\45\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. FINRA has requested
that the Commission waive the 30-day operative delay requirement so
that the proposed rule change may become operative on June 27, 2024.
The Commission hereby grants the request. During the pandemic, FINRA
temporarily suspended the requirement that member firms submit Form BR
for any newly opened temporary office locations or space-sharing
arrangements established as a result of the pandemic. This Form BR
Relief expired on May 31, 2024, triggering a requirement for some of
these offices to register with FINRA. As a result, FINRA expects that
broker-dealer firms will register a potentially significant number of
offices, including a potentially significant number of associated
persons' private residences. The proposed rule change would exclude
from release through BrokerCheck the street address of a private
residential registered location that a broker-dealer firm has reported
and identified to FINRA, helping address privacy and safety concerns
raised by broker-dealer firms and their associated persons. Extending
these protections upon filing of the proposed rule change and without a
30-day operative delay would help ensure that they would apply to
private residential registered locations immediately and align the
timing of the proposed rule change with the resumption of the
obligation to register certain offices following the pandemic, thereby
minimizing potential disruptions to the registration process. For these
reasons, the Commission believes that waiver of the 30-day operative
delay for this proposed rule change is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the 30-day operative delay and designates the proposed
rule change operative upon filing.
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\45\ 17 CFR 240.19b-4(f)(6)(iii).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-FINRA-2024-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-FINRA-2024-010. 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 (https://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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-FINRA-2024-010 and should be submitted
on or before July 30, 2024.
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\46\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-14974 Filed 7-8-24; 8:45 am]
BILLING CODE 8011-01-P