Federal Register, Volume 85 Issue 196 (Thursday, October 8, 2020)

[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Notices]
[Pages 63603-63606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22257]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90085; File No. SR-NYSEAMER-2020-69]

Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize
Rules 9261 and 9830 With Recent Changes by the Financial Industry
Regulatory Authority, Inc.

October 2, 2020.
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 23, 2020, NYSE American LLC (``NYSE American''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III 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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to harmonize Rules 9261 and 9830 with recent
changes by the Financial Industry Regulatory Authority, Inc.
(``FINRA'') that temporarily grants the Chief or Deputy Chief Hearing
Officer the authority to order that hearings be conducted by video
conference if warranted by public health risks posed by in-person
hearings during the ongoing novel coronavirus (``COVID-19'') pandemic.
As proposed, these temporary amendments would be in effect through
December 31, 2020. The proposed rule change is available on the
Exchange's website at www.nyse.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
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 those 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 parts of such statements.

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

1. Purpose
The Exchange proposes to harmonize Rules 9261 (Evidence and
Procedure in Hearing) and 9830 (Hearing) with recent changes by FINRA
to its Rules 9261 and 9830 that temporarily grants to the Chief or
Deputy Chief Hearing Officer the authority to order that hearings be
conducted by video conference if warranted by public health risks posed
by in-person hearings during the ongoing COVID-19 pandemic. As
proposed, these temporary amendments would be in effect through
December 31, 2020.\4\
---------------------------------------------------------------------------

\4\ The Exchange may submit a separate rule filing to extend the
expiration date of the proposed temporary amendments if the Exchange
requires temporary relief from the rule requirements identified in
this proposal beyond December 31, 2020. The amended NYSE American
rules will revert back to their current state at the conclusion of
the temporary relief period and any extension thereof.
---------------------------------------------------------------------------

Background
In 2016, NYSE American (then known as NYSE MKT LLC) adopted
disciplinary rules that are, with certain exceptions, substantially the
same as the Rule 8000 Series and Rule 9000 Series of FINRA and its
affiliate, the New York Stock Exchange LLC (``NYSE''), and which set
forth rules for conducting investigations and enforcement actions.\5\

[[Page 63604]]

The NYSE MKT disciplinary rules were implemented on April 15, 2016.\6\
---------------------------------------------------------------------------

\5\ See Securities Exchange Act Release Nos. 77241 (February 26,
2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-30) (``2016
Notice'').
\6\ See NYSE MKT Information Memorandum 16-02 (March 14, 2016).
---------------------------------------------------------------------------

In adopting disciplinary rules modeled on FINRA's rules, NYSE
American adopted the hearing and evidentiary processes set forth in
Rule 9261 and in Rule 9830 for hearings in matters involving temporary
and permanent cease and desist orders under the Rule 9800 Series. As
adopted, the text of Rule 9261 and Rule 9830 are substantially the same
as the FINRA rules with certain modifications.\7\
---------------------------------------------------------------------------

\7\ See 2016 Notice, 81 FR at 11327 & 11332.
---------------------------------------------------------------------------

In view of the ongoing spread of COVID-19 and its effect on FINRA's
adjudicatory functions nationwide, FINRA recently filed a temporary
rule change to grant FINRA's Office of Hearing Officers (``OHO'') and
the National Adjudicatory Council (``NAC'') the authority to conduct
certain hearings by video conference, if warranted by the current
COVID-19-related public health risks posed by in-person hearings. Among
the rules FINRA amended were Rules 9261 and 9830.\8\
---------------------------------------------------------------------------

\8\ See Securities Exchange Act Release Nos. 83289 (September 2,
2020), 85 FR 55712 (September 9, 2020) (SR-FINRA-2020-027) (``FINRA
Filing''). FINRA also proposed to temporarily amend FINRA Rules 1015
and 9524. FINRA Rule 1015 governs the process by which an applicant
for new or continuing membership can appeal a decision rendered by
FINRA's Department of Member Supervision under FINRA Rule 1014 or
1017 and request a hearing which would be conducted by a
subcommittee of the NAC. See id. at 55714. The Exchange has not
adopted FINRA Rule 1015. FINRA Rule 9524 governs the process by
which a statutorily disqualified member firm or associated person
can appeal the Department's recommendation to deny a firm or
sponsoring firm's application to the NAC. See id. Under the
Exchange's version of Rule 9524, if the Exchange's Chief Regulatory
Officer rejects the application, the member organization, sponsoring
member organization, or applicant may request a review by the
Exchange Board of Directors. This differs from FINRA's process,
which provides for a hearing before the NAC and further
consideration by the FINRA Board of Directors.
---------------------------------------------------------------------------

FINRA represented in its filing that its protocol for conducting
hearings by video conference would ensure that such hearings maintain
fair process for the parties by, among other things, FINRA's use of a
high quality, secure and user-friendly video conferencing service and
provide thorough instructions, training and technical support to all
hearing participants.\9\ According to FINRA, the proposed changes were
a reasonable interim solution to allow FINRA's critical adjudicatory
processes to continue to function while protecting the health and
safety of hearing participants as FINRA works towards resuming in-
person hearings in a manner that is compliant with the current guidance
of public health authorities.\10\
---------------------------------------------------------------------------

\9\ See FINRA Filing, 85 FR at 55713.
\10\ See id.
---------------------------------------------------------------------------

Pursuant to a regulatory services agreement (``RSA''), FINRA's OHO
will administer all aspects of adjudications, including assigning
hearing officers to serve as NYSE American hearing officers. A hearing
officer from OHO will, among other things, preside over the
disciplinary hearing, select and chair the hearing panel, and prepare
and issue written decisions. The Chief or Deputy Hearing Officer for
all Exchange disciplinary hearings are currently drawn from OHO and are
all FINRA employees. The Exchange believes that OHO will utilize the
same video conference protocol and processes for Exchange matters under
the RSA as it proposes for FINRA matters.
Given that FINRA and its OHO administers disciplinary hearings on
the Exchange's behalf, and given that the public health concerns
addressed by FINRA's amendments apply equally to the Exchange's
disciplinary hearings, the Exchange proposes to temporarily amend its
disciplinary rules to allow FINRA to conduct virtual hearings on its
behalf.
Proposed Rule Change
Rule 9261(b) states that if a disciplinary hearing is held, a party
shall be entitled to be heard in-person, by counsel, or by the party's
representative. Absent an agreement by all parties to proceed in
another manner, Exchange disciplinary hearings are in-person. As noted,
the Chief and Deputy Hearing Officers for all Exchange and cross-market
matters are supplied by OHO and are FINRA employees. Accordingly,
absent an agreement by all parties to proceed in another manner, under
Rule 9261(b) the Chief or Deputy Hearing Officer conducts disciplinary
hearings in-person.
Similarly, Rule 9830 outlines the requirements for hearings for
temporary and permanent cease and desist orders. Rule 9830(a), however,
does not specify that a party shall be entitled to be heard in-person,
by counsel, or by the party's representative.
Consistent with FINRA's temporary amendment to FINRA Rules 9261 and
9830, the Exchange proposes to temporarily grant the Chief or Deputy
Chief Hearing Officer temporary authority to order, upon consideration
of the current COVID-19-related public health risks presented by an in-
person hearing, that a hearing under those rules be conducted by video
conference. The proposed rule change will permit OHO to make an
assessment, based on critical COVID-19 data and criteria and the
guidance of health and security consultants, whether an in-person
hearing would compromise the health and safety of the hearing
participants such that the hearing should proceed by video conference.
As noted, FINRA has adopted a detailed and thorough protocol to ensure
that hearings conducted by video conference will maintain fair process
for the parties.\11\ The Exchange believes that this is a reasonable
procedure to follow in hearings under Rules 9261 and 9830 chaired by a
FINRA employee.\12\
---------------------------------------------------------------------------

\11\ See FINRA Filing, 85 FR at 55713.
\12\ The Exchange notes, as did FINRA, that SEC's Rules of
Practice pertaining to temporary cease-and-desist orders provide
that parties and witnesses may participate by telephone or, in the
Commission's discretion, through the use of alternative technologies
that allow remote access, such as a video link. See SEC Rule of
Practice 511(d)(3); Comment (d); see FINRA Filing, 85 FR at 55714,
n. 21.
---------------------------------------------------------------------------

To effectuate these changes, the Exchange proposes to add the
following sentence to Rule 9261(b):

Upon consideration of the current public health risks presented
by an in-person hearing, the Chief Hearing Officer or Deputy Chief
Hearing Officer may, on a temporary basis, determine that the
hearing shall be conducted, in whole or in part, by video
conference.

The proposed text is identical to the language adopted by
FINRA.\13\
---------------------------------------------------------------------------

\13\ See FINRA Filing, 85 FR at 55712.
---------------------------------------------------------------------------

Similarly, the Exchange proposes to add the following text to Rule
9830(a):

Once again, the proposed language is identical to the language
adopted by FINRA.\14\
---------------------------------------------------------------------------

\14\ Id.
---------------------------------------------------------------------------

2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\15\ in general, and furthers the objectives of Section
6(b)(5),\16\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to, and perfect the mechanism of, a free and open
market

[[Page 63605]]

and a national market system and, in general, to protect investors and
the public interest. Additionally, the Exchange believes the proposed
rule change is designed to provide a fair procedure for the
disciplining of members and persons associated with members, consistent
with Sections 6(b)(7) and 6(d) of the Act.\17\
---------------------------------------------------------------------------

\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change supports the
objectives of the Act by providing greater harmonization between
Exchange rules and FINRA rules of similar purpose, resulting in less
burdensome and more efficient regulatory compliance. As previously
noted, the text of Rule 9261 and Rule 9830 is substantially the same as
FINRA's rule. As such, the proposed rule change will foster cooperation
and coordination with persons engaged in facilitating transactions in
securities and will remove impediments to and perfect the mechanism of
a free and open market and a national market system.
The Exchange believes that the proposed temporary rule change will
permit the Exchange to effectively conduct hearings during the COVID-19
pandemic in situations where in-person hearings present likely public
health risks. The ability to conduct hearings by video conference will
thereby permit the adjudicatory functions of the Exchange's
disciplinary rules to continue unabated, thereby avoiding protracted
delays. The Exchange believes that this is especially important in
matters where temporary and permanent cease and desist orders are
sought because the proposed rule change would enable those hearings to
proceed without delay, thereby enabling the Exchange to take immediate
action to stop significant, ongoing customer harm, to the benefit of
the investing public.
Conducting hearings via video conference will give the parties and
adjudicators simultaneous visual and oral communication without the
risks inherent in physical proximity during a pandemic. Temporarily
permitting hearings for disciplinary matters to proceed by video
conference maintains fair process by providing respondents a timely
opportunity to address and potentially resolve any allegations of
misconduct.
As noted, FINRA will use a high quality, secure video conferencing
technology with features that will allow the parties to reasonably
approximate those tasks that are typically performed at an in-person
hearing, such as sharing documents, marking documents, and utilizing
breakout rooms. FINRA will also provide training for participants on
how to use the video conferencing platform and detailed guidance on the
procedures that will govern such hearings. Moreover, the Chief or
Deputy Chief Hearing Officer may take into consideration, among other
things, a hearing participant's access to connectivity and technology
in scheduling a video conference hearing and can also, at their
discretion, allow a party or witness to participate by telephone, if
necessary, to address such access issues.\18\
---------------------------------------------------------------------------

\18\ See text accompanying notes 9-10, supra.
---------------------------------------------------------------------------

For the same reasons, the Exchange believes that the proposed rule
change is designed to provide a fair procedure for the disciplining of
members and persons associated with members, consistent with Sections
6(b)(7) and 6(d) of the Act.\19\ The Exchange believes that the
temporary proposed rule change strikes an appropriate balance between
providing fair process and enabling the Exchange to fulfill its
statutory obligations to protect investors and maintain fair and
orderly markets while accounting for the significant health and safety
risks of in-person hearings stemming from the outbreak of COVID-19.
---------------------------------------------------------------------------

\19\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

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 that is 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 provide temporary relief given the impacts of the COVID-19
pandemic. In its filing, FINRA provides an abbreviated economic impact
assessment maintaining that the changes are necessary to temporarily
rebalance the attendant benefits and costs of the obligations under
FINRA Rules 1015, 9261, 9524 and 9830 in response to the impacts of the
COVID-19 pandemic that is equally applicable to the changes the
Exchange proposes.\20\ The Exchange accordingly incorporates FINRA's
abbreviated economic impact assessment by reference.
---------------------------------------------------------------------------

\20\ See FINRA Filing, 85 FR at 55716.
---------------------------------------------------------------------------

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

No written comments were solicited or received with respect to the
proposed rule change.

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

The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \21\ and Rule 19b-4(f)(6) thereunder.\22\
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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

At any time within 60 days of the filing of such 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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

\23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEAMER-2020-69 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-NYSEAMER-2020-69. This
file number should be included on the subject line if email is used. To
help the Commission process and review your

[[Page 63606]]

comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, on business days between the hours of 10:00 a.m. and
3:00 p.m., located at 100 F Street NE, Washington, DC 20549. Copies of
such filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change.
Persons submitting comments are cautioned that we do not redact or
edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NYSEAMER-2020-
69 and should be submitted on or before October 29, 2020.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22257 Filed 10-7-20; 8:45 am]
BILLING CODE 8011-01-P