[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Notices]
[Pages 106715-106717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30917]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102006; File No. SR-NASDAQ-2024-085]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Exchange Rules 1015, 9261, 9341, 9524 and 9830 To Permit Hearings
by Video Conference
December 19, 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 December 19, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Exchange Rules 1015, 9261, 9341,
9524 and 9830 to allow for video conference hearings before the Office
of Hearing Officers (``OHO'') and the Exchange Review Council (``ERC'')
under specified conditions.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 Exchange 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
The Exchange proposes to harmonize Exchange Rules 1015, 9261, 9341,
9524 and 9830 with changes by the Financial Industry Regulatory
Authority, Inc. (``FINRA'') to its Rules 1015, 9261, 9341, 9524 and
9830 that would allow for the use of video conference for reasons in
addition to COVID-19. The proposal also deletes expired references to
temporary amendments.\3\ The Exchange originally filed proposed rule
change SR-NASDAQ-2020-076, which allowed the Exchange's Office of
Hearing Officers (``OHO'') and the Exchange Review Council (``ERC'') to
conduct hearings, on a temporary basis, by video conference, if
warranted by the COVID-19-related public health risks posed by an in-
person hearing.\4\ These were extended several times due to the
continuing public health risks and logistical challenges related to
COVID-19, including whether hearing participants could safely travel
and abide by state or local quarantine requirements.\5\ The use of high
quality, secure and user-friendly video conference technology in
hearings has demonstrated that video is an effective and efficient
alternative to in-person hearings.\6\
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\3\ See Securities Exchange Act Release No. 96282 (November
9,2022), 87 FR 68788 (November 16, 2022) (Notice of Filing and
Immediate Effectiveness of File No. SR-NASDAQ-2022-059) (temporary
amendments expiring on January 31, 2023).
\4\ See Securities Exchange Act Release No. 90390 (November 10,
2020), 85 FR 73302 (November 17, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR-NASDAQ-2020-076).
\5\ See Securities Exchange Act Release No. 90774 (December 22,
2020), 85 FR 86614 (December 30, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR-NASDAQ-2020-092); Securities
Exchange Act Release No. 91763 (May 4, 2021), 86 FR 25055 (May 10,
2021) (Notice of Filing and Immediate Effectiveness of File No. SR-
NASDAQ-2021-033); Securities Exchange Act Release No. 92911
(September 9, 2021), 86 FR 51395 (September 15, 2021) (Notice of
Filing and Immediate Effectiveness of File No. SR-NASDAQ-2021-067);
Securities Exchange Act Release No. 93852 (December 22, 2021), 86 FR
74201 (December 29, 2021) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASDAQ-2021-104); Securities Exchange
Act Release No. 94610 (April 5, 2022), 87 FR 21225 (April 11, 2022)
(Notice of Filing and Immediate Effectiveness of File No. SR-NASDAQ-
2022-028); Securities Exchange Act Release No. 95436 (August 5,
2022), 87 FR 49624 (August 11, 2022) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASDAQ-2022-044); Securities Exchange
Act Release No. 96282 (November 9,2022), 87 FR 68788 (November 16,
2022) (Notice of Filing and Immediate Effectiveness of File No. SR-
NASDAQ-2022-059).
\6\ See Securities Exchange Act Release No. 97403 (April 28,
2023), 88 FR 28645 (May 4, 2023) (SR-FINRA-2023-008).
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The Exchange is proposing to make the temporary amendments
regarding video conference hearings permanent, with some modifications
that would allow for the use of video conference for reasons in
addition to COVID-19. The proposed rule change will continue to improve
and modernize the Exchange's operations so that parties, panelists, and
the Exchange staff may proceed expeditiously by video conference in the
event of certain circumstances, including where unforeseen events make
appearing in person difficult or impracticable. As described below,
impracticability is intended to account for an uncommon situation or
extraordinary circumstance. The proposed rule change further promotes
efficiency by giving OHO and the ERC authority to act quickly if a
future unexpected event impaired their ability to conduct in-person
hearings safely.
OHO conducts hearings in disciplinary proceedings and hearings for
temporary and permanent cease and desist orders. When orders in
disciplinary proceedings are appealed, the ERC holds hearings on oral
argument. The ERC also conducts hearings in membership proceedings and
eligibility proceedings. Under the proposed rule change, OHO and the
ERC's authority to order hearings by
[[Page 106716]]
video conference would extend beyond the public health risks posed by
COVID-19 to other similar situations in which proceeding in person may
endanger the health or safety of the participants or would be
impracticable. For example, appearing in person may be impracticable in
the event of a natural disaster or terrorist attack that caused travel
to be cancelled for a period of time. As with the temporary amendments,
under the proposed rule change, in-person hearings will remain the
default method for hearings before OHO and the ERC, and their exercise
of authority under the proposed rule change would be discretionary. In-
person hearings may take place where safe and appropriate.
Evidentiary Hearings
For evidentiary hearings, the proposed rule change would give OHO
or the ERC authority to order an evidentiary hearing to occur by video
conference, in whole or in part, if OHO or the ERC determines that
proceeding in person may endanger the health or safety of the
participants or would be impracticable. OHO and the ERC would have such
authority on their own. In addition, under the proposed rule change,
parties could file a joint motion requesting the hearing to occur, in
whole or in part, by video conference based on a showing of good cause.
Whether acting on its own or based on a joint motion of the parties,
OHO and the ERC would have reasonable discretion to exercise their
authority under the proposed rule change. In deciding whether to
schedule a hearing by video conference, OHO and the ERC could consider
and balance a variety of factors including, for example and without
limitation, a hearing participant's individual health concerns and
access to the connectivity and technology necessary to participate in a
video conference hearing.
Oral Argument
The proposed rule change would give the ERC authority to order an
oral argument hearing to occur by video conference, in whole or in
part, if it determines that proceeding in person may endanger the
health or safety of the participants or would be impracticable. The ERC
would have such authority on its own. In addition, under the proposed
rule change, the ERC would have authority--on its own or on
consideration of a motion by any party--to order oral argument to occur
by video conference, in whole or in part, for other reasons (i.e.
reasons not limited to public health, safety or impracticability).
Under such circumstances, an opposing party would have the opportunity
to demonstrate that the hearing should proceed in person because
proceeding by video conference would materially disadvantage that
party. Whether a party has shown material disadvantage would depend on
the facts and circumstances. Considerations may include, for example
and without limitation, case complexity, the issues on appeal, and
whether the respondent is pro se and desires to appear in person.
Whether acting on its own or based on a motion of a party, the ERC
would have reasonable discretion to exercise its authority under the
proposed rule change. In deciding whether to order an oral argument
hearing by video conference, the ERC could consider and balance a
variety of factors including, for example and without limitation, a
hearing participant's individual health concerns, access to video
conference technology, whether a party has delayed or refused to appear
in person, and whether proceeding by video conference would materially
disadvantage any party.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed 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,
by continuing to provide greater harmonization between the Exchange
rules and FINRA rules of similar purpose,\9\ resulting in less
burdensome and more efficient regulatory compliance. The proposal also
deletes expired references to temporary amendments.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ See Securities Exchange Act Release No. 97403 (April 28,
2023), 88 FR 28645 (May 4, 2023) (SR-FINRA-2023-008).
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The Exchange believes that the proposed rule change protects
investors and the public interest by permitting the use of broadly
available technology to allow hearings to proceed by video conference
under certain circumstances. The Exchange's disciplinary and
eligibility proceedings and other review processes serve a critical
role in providing investor protection and maintaining fair and orderly
markets by, for example, sanctioning misconduct and preventing further
customer harm by members and associated persons. The proposed rule
change would encourage the prompt resolution of these cases while
preserving a fair process.
The proposed rule change promotes efficiency by permitting hearings
to occur by video conference in situations where the hearings would
otherwise be postponed for an uncertain period of time. As discussed,
COVID-19 necessitated the Exchange to propose the temporary amendments,
which were extended due to the continuing health risks of COVID-19, as
well as limitations on travel, quarantine requirements, and other
logistical challenges to safely conducting hearings in person. The
proposed rule change further promotes efficiency by giving OHO and the
ERC authority to act quickly if a future unexpected event impaired
their ability to conduct in-person hearings safely.
The proposed rule change also serves to provide a fair procedure
for the disciplining of members and persons associated with members by
allowing hearings to proceed by video conference not only due to public
health or safety reasons, but also at a party or the parties' request
for reasons particular to them. The Adjudicator could allow a hearing
to proceed by video conference in the exercise of reasonable discretion
and subject to procedural safeguards that ensure fairness.
Thus, the proposed rule change represents a significant step toward
modernizing the Exchange's procedures in a manner that preserves in-
person hearings, but allows for the use of high quality, secure and
user-friendly video conference technology under certain circumstances.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
intended to address competitive issues but is rather intended solely to
allow for the use of video conference for reasons in addition to COVID-
19 where unforeseen events make appearing in person difficult or
impracticable. In its filing, FINRA provided an economic impact
assessment analyzing the potential impacts of the proposed rule change,
including anticipated costs, benefits,
[[Page 106717]]
and distributional and competitive effects.\10\
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\10\ See Securities Exchange Act Release No. 97403 (April 28,
2023), 88 FR 28645 (May 4, 2023) (SR-FINRA-2023-008).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments were either solicited or 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)(iii) of the Act \11\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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-NASDAQ-2024-085 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-NASDAQ-2024-085. 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 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-NASDAQ-2024-085 and
should be submitted on or before January 21, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-30917 Filed 12-27-24; 8:45 am]
BILLING CODE 8011-01-P