[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Notices]
[Pages 77209-77214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21491]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101025; File No. SR-IEX-2024-16]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Supplementary Material .16 to IEX Rule 5.110 (Supervision), So That IEX 
Members Who Participate in the Recently Approved FINRA Pilot Program on 
Remote Inspections Will Also Satisfy the Internal Inspection 
Requirements Found in IEX's Rules

September 16, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on September 4, 2024, the Investors Exchange LLC (``IEX'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Act,\4\ 
and Rule 19b-4 thereunder,\5\ the Exchange is filing with the 
Commission a proposed rule change to adopt Supplementary Material .16 
to IEX Rule 5.110 (Supervision), so that IEX Members \6\ who 
participate in the recently-approved FINRA pilot program on remote 
inspections (the ``Remote

[[Page 77210]]

Inspections Pilot Program'') \7\ will also satisfy the internal 
inspection requirements found in IEX's rules.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ See IEX Rule 1.160(s).
    \7\ See Securities Exchange Act Release No. 97398 (April 28, 
2023), 88 FR 28620 (May 4, 2023) (``Remote Inspections Pilot Program 
Proposal''); Securities Exchange Act Release No. 98982 (November 17, 
2023), 88 FR 82464 (November 24, 2023) (``Remote Inspections Pilot 
Program Approval Order'') (SR-FINRA-2023-007).
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    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    IEX proposes to adopt Supplementary Material .16 to IEX Rule 5.110, 
which would provide that any IEX Member that participates in the FINRA 
Remote Inspections Pilot Program,\8\ thereby satisfying the internal 
inspections requirements in FINRA Rule 3110(c), would also satisfy the 
equivalent internal inspections requirements in IEX Rule 5.110(c). This 
proposed rule change would supplant Supplementary Material .15 to IEX 
Rule 5.110, which allowed Members to fulfill any calendar year 2024 
internal inspection obligations set forth in IEX Rule 5.110(c) by 
conducting remote inspections of the applicable offices of supervisory 
jurisdiction (``OSJs''),\9\ branch offices (both supervisory and non-
supervisory),\10\ and non-branch locations.\11\ This temporary relief, 
which was analogous to relief that FINRA provided for, automatically 
sunset on June 30, 2024.\12\ As described below, adding Proposed 
Supplementary Material .16 to IEX Rule 5.110 would harmonize IEX's 
internal inspections obligations for its Members with FINRA's 
comparable obligations for its members, thereby avoiding confusion to 
IEX Members with respect to the applicability of participation in the 
FINRA Remote Inspections Pilot Program with respect to compliance with 
IEX Rule 5.110.\13\ Additionally, because Proposed Supplementary 
Material .16 to IEX Rule 5.110 incorporates by reference FINRA Rule 
3110.18, this rule change enables IEX Rule 5.110 to continue to be 
incorporated into the agreement between IEX and FINRA to allocate 
regulatory responsibility for common rules (the ``17d-2 
Agreement'').\14\
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    \8\ See FINRA Rule 3110.18.
    \9\ See IEX Rule 5.110(f)(1).
    \10\ See IEX Rule 5.110(f)(2)(A).
    \11\ See Supplementary Material .15 to IEX Rule 5.110 
(``Temporary Relief to Allow Remote Inspections for Calendar Years 
2021, 2022, 2023, and Through the Earlier of the Effective Date of 
the Remote Inspections Pilot Program or June 30, 2024'').
    \12\ See Id. The equivalent temporary relief offered by FINRA 
also sunset on June 30, 2024. See FINRA Rule 3110.17
    \13\ IEX notes that all IEX Members are currently FINRA members, 
or in the process of becoming FINRA members.
    \14\ See Securities Exchange Act Release No. 93324 (October 14, 
2021), 86 FR 58110 (October 20, 2021) (File No. 4-700). The 17d-2 
Agreement includes a certification by IEX that states that the 
requirements contained in certain Exchange rules are identical to, 
or substantially similar to, certain FINRA rules that have been 
identified as comparable.
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Standards for Supervision of Remote Offices
    The responsibility of firms to supervise their associated persons 
is a critical component of broker-dealer regulation.\15\ Members must 
supervise all of their associated persons, regardless of their 
location, compensation or employment arrangement, or registration 
status. IEX Rule 5.110, which is substantially identical to FINRA Rule 
3110(c), requires any Member, regardless of size or type, to have a 
supervisory system for the activities of its associated persons that is 
reasonably designed to achieve compliance with the applicable 
securities laws and regulations and IEX rules, and that sets forth the 
minimum requirements for such supervisory system.\16\ The internal 
inspection obligation under IEX Rule 5.110(c) and FINRA Rule 3110(c) is 
one component of such system.
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    \15\ See generally SEC Division of Market Regulation, Staff 
Legal Bulletin No. 17: Remote Office Supervision (March 19, 2004) 
(``SLB 17'') (SEC guidance on remote office supervision), https://www.sec.gov/interps/legal/mrslb17.htm; and Regulatory Notice 11-54 
(November 2011) (``Notice 11-54'') (joint SEC and FINRA guidance on 
effective policies and procedures for broker-dealer branch 
inspections).
    \16\ See IEX Rule 5.110(a)
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    IEX Rule 5.110(c) sets forth three main requirements for 
inspections. First, an inspection of an office or location must occur 
on a designated frequency. The periodicity of the required inspection 
varies depending on the classification of the location or the nature of 
the activities that take place: OSJs and supervisory branch offices 
must be inspected at least annually; \17\ non-supervisory branch 
offices must be inspected at least every three years; \18\ and non-
branch locations must be inspected on a periodic schedule, presumed to 
be at least every three years.\19\ Second, a Member must retain a 
written record of the date upon which each review and inspection 
occurred, reduce a location's inspection to a written report and keep 
each inspection report on file either for a minimum of three years or, 
if the location's inspection schedule is longer than three years, until 
the next inspection report has been written.\20\ If applicable to the 
location being inspected, the inspection report must include the 
testing and verification of the Member's policies and procedures, 
including supervisory policies and procedures, in specified areas.\21\ 
Third, to prevent compromising the effectiveness of inspections due to 
conflicts of interest, the rule requires a Member to ensure that the 
person conducting the inspection is not an associated person assigned 
to the location or is not directly or indirectly supervised by, or 
otherwise reporting to, an associated person assigned to that 
location.\22\ All OSJs, branch offices, and

[[Page 77211]]

non-branch locations are subject to IEX Rule 5.110(c).
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    \17\ See IEX Rule 5.110(c)(1)(A).
    \18\ See IEX Rule 5.110(c)(1)(B).
    \19\ See IEX Rule 5.110(c)(1)(C) and Supplementary Material .13 
to IEX Rule 5.110 (``General Presumption of Three-Year Limit for 
Periodic Inspection Schedules'').
    \20\ See IEX Rule 5.110(c)(2).
    \21\ See IEX Rule 5.110(c)(2)(A) (providing that the inspection 
report must include, without limitation, the testing and 
verification of the Member's policies and procedures, including 
supervisory policies and procedures for: (1) safeguarding of 
customer funds and securities; (2) maintaining books and records; 
(3) supervision of supervisory personnel; (4) transmittals of funds 
from customers to third party accounts, from customer accounts to 
outside entities, from customer accounts to locations other than a 
customer's primary residence, and between customers and registered 
representatives, including the hand delivery of checks; and (5) 
changes of customer account information, including address and 
investment objectives changes, and validation of such changes).
    \22\ IEX Rule 5.110(c)(3) provides a limited exception from this 
requirement if a firm determines compliance is not possible either 
because of the firm's size or its business model. Supplementary 
Material .14 to IEX Rule 5.110 (Exception to Persons Prohibited from 
Conducting Inspections) reflects IEX's expectation that a firm 
generally will rely on the exception in instances where the firm has 
only one office or has a business model where small or single-person 
offices report directly to an OSJ manager who is also considered the 
offices' branch office manager. However, these situations are non-
exclusive, and a firm may still rely on the exception in other 
instances where it cannot comply because of its size or business 
model, provided the firm complies with the documentation 
requirements under the rule.
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    Further, Supplementary Material .12 to IEX Rule 5.110 sets out 
factors that constitute a reasonable review. This provision emphasizes 
establishing reasonable supervisory procedures and conducting reviews 
of locations, taking into consideration, among other things, the 
Member's size, organizational structure, scope of business activities, 
number and location of the Member's offices, the nature and complexity 
of the products and services offered by the Member, the volume of 
business done, the number of associated persons assigned to a location, 
the disciplinary history of registered representatives or associated 
persons, and any indicators of irregularities or misconduct (i.e., 
``red flags'').\23\ The provision further states that the procedures 
established and reviews conducted must provide that the quality of 
supervision at remote (i.e., geographically dispersed) locations is 
sufficient to ensure compliance with applicable securities laws and 
regulations and with IEX rules, and that Members must be especially 
diligent with respect to a non-branch location where a registered 
representative engages in securities activities. This provision 
incorporates guidance FINRA has previously issued about supervising 
associated persons working in geographically dispersed offices.\24\
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    \23\ Such red flags may include: customer complaints; a large 
number of elderly customers; a concentration in highly illiquid or 
risky investments; an unexplained increase or change in the types of 
investments or trading concentration that a representative is 
recommending or trading; an unexpected improvement in a 
representative's production, lifestyle, or wealth; questionable or 
frequent transfers of cash or securities between customer or third 
party accounts, or to or from the representative; a representative 
that serves as a power of attorney, trustee or in a similar capacity 
for a customer or has discretionary control over a customer's 
account(s); a representative with disciplinary records; customer 
investments in one or a few securities or class of securities that 
is inconsistent with firm policies related to such investments; 
churning; trading that is inconsistent with customer objectives; 
numerous trade corrections, extensions, liquidations; or significant 
switching activity of mutual funds or variable products held for 
short time periods. See SLB 17, supra note 15.
    \24\ See NASD [FINRA] Notice to Members 98-38 (May 1998) and 99-
45 (June 1999).
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    Notably, all of the above requirements about supervision and 
inspections of OSJs, branch offices, and non-branch locations reflected 
a business environment in which Members conducted in-person inspections 
of all of their offices.\25\
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    \25\ See SLB 17 and Notice 11-54, supra note 15.
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FINRA's Recent Attempts To Change the In-Person Inspection Requirements 
of OSJs, Branch Offices, and Non-Branch Locations
    In the Remote Inspections Pilot Program Proposal, FINRA described 
its efforts during the past several years to offer its members the 
option of remotely conducting internal inspections of their OSJs, 
branch offices, and non-branch locations.\26\ As stated therein, FINRA 
believed that as more recordkeeping moved from paper to electronic 
records, and as more meetings were conducted virtually using platforms 
such as Zoom and WebEx, the burden on FINRA members of conducting in-
person inspections for all their remote office locations became harder 
to justify.\27\
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    \26\ See Remote Inspections Pilot Program Proposal, supra note 
7.
    \27\ See Id.
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    Thus, when the COVID-19 pandemic required many securities industry 
professionals to work from home, FINRA implemented several forms of 
regulatory relief to its members, including introducing FINRA Rule 
3110.17, which IEX also introduced as Supplementary Material .15 to IEX 
Rule 5.110, to permit remote internal inspections of their OSJs, branch 
offices, and non-branch locations.
    The pandemic accelerated the industry's adoption of a broad remote 
work environment and IEX recognizes that the pandemic has profoundly 
changed attitudes on where work can occur. As a result of this change 
many firms have adopted, in varying scale, hybrid work models involving 
personnel who are working at least part time from alternative work 
locations (e.g., private residences). As part of an effort to modernize 
its rules to reflect evolving technologies and business models, in 
April 2023, FINRA filed the Remote Inspections Pilot Program Proposal 
with the Commission to establish a voluntary, three-year remote 
inspections pilot program that would allow eligible firms to conduct 
inspections of all or some offices or locations, remotely, subject to 
the specified terms therein.\28\ The SEC approved the FINRA Remote 
Inspection Pilot Program Proposal in November 2023,\29\ and FINRA 
commenced the pilot program on July 1, 2024.\30\
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    \28\ See Id.
    \29\ See Remote Inspections Pilot Program Approval Order, supra 
note 7.
    \30\ See FINRA Regulatory Notice 24-02.
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FINRA's Remote Inspections Pilot Program
    FINRA's Remote Inspection Pilot Program builds on the terms of the 
temporary relief in FINRA Rule 3110.17, while requiring members to 
provide even more information about their remote inspections to allow 
FINRA to assess the overall impact and effectiveness of remote 
inspections.\31\ The pilot program is designed to provide broader 
systemized information to supplement the information obtained through 
the FINRA examination process in an environment where offices and 
locations were closed. The information firms would be required to 
produce as a pilot program participant will help FINRA more accurately 
assess the overall impact and effectiveness of remote inspections.\32\
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    \31\ See Remote Inspections Pilot Program Proposal, supra note 
7.
    \32\ See Id.
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    FINRA's Remote Inspection Pilot Program includes, among other 
things, the following requirements for participating firms:

     Risk Assessment. Prior to electing a remote inspection 
for an office or location, participating firms must develop a 
reasonable risk-based approach to using remote inspections and 
conduct and document a risk assessment for that office or 
location.\33\
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    \33\ See FINRA Rule 3110.18(b).
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     Written Supervisory Procedures for Remote Inspections. 
Participating firms must establish, maintain, and enforce written 
procedures that are reasonably designed for conducting remote 
inspections and reasonably designed to achieve compliance with 
applicable securities laws and regulations.\34\
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    \34\ See FINRA Rule 3110.18(c).
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     Effective Supervisory System. Participating firms must 
have an effective supervisory system for remote inspections that 
will be held to the same standards of review (set forth under FINRA 
Rule 3110.12). Where a member's remote inspection of an office or 
location identifies any ``red flags,'' the member may need to impose 
additional supervisory procedures for that office or location or may 
need to provide for more frequent monitoring of that office or 
location, including potentially a subsequent on-site visit on an 
announced or unannounced basis.\35\
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    \35\ See FINRA Rule 3110.18(d).
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     Documentation Requirement. Participating firms must 
maintain and preserve a centralized record for each of the Pilot 
Years specified in the pilot program that separately identifies: (1) 
all offices or locations that were inspected remotely; and (2) any 
offices or locations for which the member determined to impose 
additional supervisory procedures or more frequent monitoring, as 
provided in FINRA Rule 3110.18(d). A member's documentation of the 
results of a remote inspection for an office or location must 
identify any additional supervisory procedures or more frequent 
monitoring for that office or location that were imposed as a result 
of the remote inspection, including whether an on-site

[[Page 77212]]

inspection was conducted at such office or location.\36\
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    \36\ See FINRA Rule 3110.18(e).
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     Firm Level Requirements. Participating firms must meet 
certain firm-level eligibility requirements to participate in the 
program set forth in FINRA Rule 3110.18(f)(1). For example, a firm 
cannot participate if it is designated as: (i) Restricted Firm under 
FINRA Rule 4111 or (ii) a Taping Firm under FINRA Rule 3170. 
Additionally, firms with suspended or new (effective less than 12 
months) FINRA memberships or that have been found by the SEC or 
FINRA to have violated FINRA Rule 3110(c) are ineligible to 
participate. Participating firms must also comply with firm-level 
conditions to participate in the program. For example, a firm must 
have a recordkeeping system that keeps records current and promptly 
accessible, and that does not maintain physical or electronic 
records at the location subject to remote inspection. Additionally, 
participating firms must have firm-wide tools such as electronic 
recordkeeping systems, system security tools such as secure network 
connections and effective cybersecurity protocols, and tools 
specifically applied to each office or location based on the 
activities of associated persons, products offered, or any 
restrictions on the activity of the office or location.\37\
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    \37\ See FINRA Rule 3110.18(f).
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     Location Level Requirements. Participating firms must 
exclude from participating in the program any locations that do not 
meet the location level eligibility criteria set forth in FINRA Rule 
3110.18(g)(1) (e.g., the location includes: (i) persons subject to a 
disciplinary action, a statutory disqualification, or a mandated 
heightened supervisory plan; (ii) persons engaged in proprietary 
trading; or (iii) the handling of customer funds or securities). 
Additionally, eligible locations must use the firm's electronic 
communication system and may not maintain any original copies of 
books or records at the location.\38\
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    \38\ See FINRA Rule 3110.18(g).
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     Data and Information Collection Requirement. 
Participating firms must collect and on a quarterly basis produce to 
FINRA data consisting of separate counts for OSJs, supervisory 
branch offices, non-supervisory branch offices, and non-branch 
locations. This data must include information about the number of 
remote inspections conducted and any significant findings. Firms 
shall establish, maintain, and enforce written policies and 
procedures that are reasonably designed to comply with the data 
collection and transmission requirements.\39\
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    \39\ See FINRA Rule 3110.18(h).
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     Election to Participate in Remote Inspections Pilot 
Program. Participating firms must opt-in to the pilot program in a 
manner specified by FINRA.\40\
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    \40\ See FINRA Rule 3110.18(i).
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     Failure to Satisfy Conditions and Determination of 
Ineligibility. Participating firms that fail to satisfy terms of the 
Remote Inspections Pilot Program will be ineligible to participate 
in the pilot program and return to conducting only on-site 
inspections.\41\ FINRA may also make a determination to revoke a 
member's eligibility to participate if FINRA finds it to be in the 
public interest.\42\
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    \41\ See FINRA Rule 3110.18(j).
    \42\ See FINRA Rule 3110.18(k).
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     Definitions of Pilot Year periods. Includes 
clarifications that Pilot Year 1 is the second half of 2024, and 
Pilot Year 4 is the first half of 2027.\43\
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    \43\ See FINRA Rule 3110.18(l).
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Proposal

    IEX proposes to adopt Supplementary Material .16 to IEX Rule 5.110. 
This proposed new supplementary material reads as follows:

    Members that are obligated to conduct an inspection of an office 
of supervisory jurisdiction, branch office or non-branch location 
pursuant to, as applicable, paragraphs (c)(1)(A), (B) and (C) under 
IEX Rule 5.110 may satisfy such obligation by participating in the 
FINRA Remote Inspections Pilot Program, as set forth in FINRA Rule 
3110.18. The FINRA Remote Inspections Pilot Program shall cover 
required inspections of such offices or locations for a period of 
three years starting on September 4, 2024 (``pilot period''), and 
such pilot period shall expire on July 1, 2027. If the pilot period 
is not extended, this Supplementary Material will automatically 
sunset on July 1, 2027. Members will not be able to participate in 
the FINRA Remote Inspections Pilot Program after such date.\44\
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    \44\ Proposed Supplementary Material .16 to IEX Rule 5.110.

    As stated in proposed new Supplementary Material .16 to IEX Rule 
5.110, any IEX Member that participates in the FINRA Remote Inspections 
Pilot Program, thereby satisfying the internal inspections requirements 
in FINRA Rule 3110(c), will satisfy the equivalent internal inspections 
requirements in IEX Rule 5.110(c).
    IEX is not proposing to add the entire FINRA Remote Inspections 
Pilot Program to its rules, because it would be unnecessarily 
duplicative and burdensome for IEX Members to submit the data and 
information required as part of the Remote Inspections Pilot Program to 
both IEX and FINRA.\45\ Based upon conversations with FINRA staff, IEX 
understands that adopting Proposed Supplementary Material .16 to IEX 
Rule 5.110 would update IEX Rule 5.110 so that it remains substantially 
similar to FINRA Rule 3110, such that they remain common rules subject 
to the 17d-2 Agreement.\46\ As a result, regulatory responsibility for 
IEX Rule 5.110 would continue to be allocated to FINRA.
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    \45\ Pursuant to this proposed rule change, IEX Members will be 
required to collect and on a quarterly basis produce to FINRA data 
regarding its participation in the Remote Inspections Pilot Program. 
See FINRA Rule 3110.18(h). But Members will not be required to 
produce that information directly to IEX.
    \46\ See supra note 14.
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    As noted above, all IEX Members were temporarily eligible to 
conduct remote office inspections until June 30, 2024. This proposed 
rule change allows those Members who have enrolled in FINRA's Remote 
Inspections Pilot Program to continue to use remote inspections as part 
of an effective supervisory system.\47\ IEX believes this Remote 
Inspections Pilot Program is a reasonable alternative for firms to 
fulfill their IEX Rule 5.110(c) obligations while permitting FINRA to 
collect data as the regulatory authority in this area under the 17d-2 
Agreement to assess the efficacy and long-term viability of a permanent 
remote office inspections program. IEX emphasizes that the inspection 
requirement is one aspect of a firm's overall supervisory system, and 
that the inspection, whether done in accordance with the FINRA Remote 
Inspections Pilot Program, or on-site, would be held to the existing 
standards of review under Supplementary Material .12 to IEX Rule 5.110 
(Standards for Reasonable Review).\48\
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    \47\ IEX notes that any inspections conducted by its Members in 
the brief period between July 1, 2024 and the effective date of this 
filing will not satisfy IEX Rule 5.110(c), but believes this will 
not be an issue for its Members because the remote inspections 
process outlined in the pilot program is an ongoing process that 
cannot be completed in the few days between the start of the FINRA's 
pilot program and the effectiveness of this rule filing.
    \48\ Those standards provide, in part, that based on the factors 
set forth under that supplementary material, Members ``may need to 
provide for more frequent review of certain locations.''
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \49\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \50\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Exchange's rule proposal is intended to harmonize 
IEX's supervision rules, specifically with respect to the requirements 
for inspections of Members' branch offices and other locations, with 
those of FINRA, on which they are based. As discussed in the Purpose 
section, because Proposed Supplementary Material .16 to IEX Rule 5.110 
incorporates by reference FINRA Rule 3110.18, this rule change enables

[[Page 77213]]

IEX Rule 5.110 to continue to be incorporated into the 17d-2 Agreement, 
resulting in less burdensome and more efficient regulatory compliance. 
Specifically, the proposed change will conform the Exchange's rules to 
changes made to corresponding FINRA rules insofar as a Member's 
compliance with FINRA Rule 3110.18 shall mean the Member is also in 
compliance with Supplementary Material .16 to IEX Rule 5.110, thus 
promoting the application of consistent regulatory standards with 
respect to rules that FINRA enforces pursuant to the 17d-2 Agreement. 
As such, the proposed rule change would foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities and would remove impediments to and perfect the mechanism of 
a free and open market and a national market system in accordance with 
Section 6(b)(5) of the Act.\51\
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    \49\ 15 U.S.C. 78f.
    \50\ 15 U.S.C. 78f(b)(5).
    \51\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX 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. The proposed rule change is not 
designed to address any competitive issue but rather to provide greater 
harmonization among IEX and FINRA rules of similar purpose, resulting 
in less burdensome and more efficient regulatory compliance for common 
members and facilitating FINRA's performance of its regulatory 
performance on the pending 17d-2 Agreement.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \52\ of the Act and Rule 19b-4(f)(6) \53\ 
thereunder. Because the 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 and Rule 19b-
4(f)(6) thereunder. In addition, the Exchange provided the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing.\54\
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    \52\ 15 U.S.C. 78s(b)(3)(A).
    \53\ 17 CFR 240.19b-4(f)(6).
    \54\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) \55\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\56\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to permit the 
Exchange to harmonize its rules with FINRA, as described herein, upon 
effectiveness of the proposed rule filing.
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    \55\ 17 CFR 240.19b-4(f)(6).
    \56\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange stated that this proposed rule change is non-
controversial because it does not present any new or novel issues. In 
particular, IEX is harmonizing its supervision rules with those of 
FINRA, on which they are based and which have been previously approved 
by the Commission. By conforming the Exchange's rules to FINRA's, the 
proposed rule change would promote the application of consistent 
regulatory standards with respect to rules that FINRA enforces pursuant 
to the 17d-2 Agreement. As such, the Exchange believes that the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system in accordance with Exchange Act 
Section 6(b)(5).
    In addition, the Exchange stated that since the FINRA Remote 
Inspections Pilot Program commenced on July 1, 2024, waiving the 30-day 
operative delay would provide assurances to IEX members who enroll in 
the Remote Inspections Pilot Program that they can plan the remainder 
of their 2024 inspection program under a harmonized rule set, with just 
a short window of time in which the FINRA pilot program was not part of 
IEX's rules,\57\ while at the same time helping ensure that IEX members 
continue to perform their supervisory obligations. Further, the 
Exchange stated that waiver of the operative delay should reduce any 
potential confusion that may otherwise occur on the part of IEX members 
as to the applicable rules governing inspections of branch offices and 
other locations. 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.\58\
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    \57\ See supra note 47.
    \58\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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 under 
Section 19(b)(2)(B) \59\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \59\ 15 U.S.C. 78s(b)(2)(B).
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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-IEX-2024-16 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-IEX-2024-16. 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

[[Page 77214]]

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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. 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-IEX-2024-16 and should be submitted on 
or before October 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\60\
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    \60\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-21491 Filed 9-19-24; 8:45 am]
 BILLING CODE 8011-01-P