[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64556-64559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22633]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90114; File No. SR-NYSECHX-2020-28]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Temporary Interpretation and Policy .10 Under NYSE Chicago Article 6,
Rule 13
October 7, 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 25, 2020, NYSE Chicago, Inc. (``NYSE Chicago''
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
The Exchange proposes a rule change to adopt temporary
Interpretation and Policy .10 (Temporary Extension of the Limited
Period for Registered Persons to Function as Principals) under NYSE
Chicago Article 6, Rule 13 (Registration Requirements) applicable to
Participants. 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 adopt temporary Interpretation and Policy
.10 (Temporary Extension of the Limited Period for Registered Persons
to Function as Principals) under NYSE Chicago Article 6, Rule 13
(Registration Requirements) applicable to Participants.\4\ The proposed
rule change would extend the 120-day period that certain individuals
can function as a principal without having successfully passed an
appropriate qualification examination through December 31, 2020,\5\ and
would apply only to those individuals who were designated to function
as a principal prior to September 3, 2020. This proposed rule change is
based on a filing recently
[[Page 64557]]
submitted by the Financial Regulatory Authority, Inc. (``FINRA'') \6\
and is intended to harmonize the Exchange's registration rules with
those of FINRA so as to promote uniform standards across the securities
industry.
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\4\ The term ``Participant'' means any Participant Firm that
holds a valid Trading Permit and any person associated with a
Participant Firm who is registered with the Exchange. A Participant
shall be considered a ``member'' of the Exchange for purposes of the
Exchange Act. See Article 1, Rule 1(s).
\5\ If NYSE Chicago seeks to provide additional temporary relief
from the rule requirements identified in this proposed rule change
beyond December 31, 2020, NYSE Chicago will submit a separate rule
filing to further extend the temporary extension of time.
\6\ See Securities Exchange Act Release No. 89732 (September 1,
2020), 85 FR 55535 (September 8, 2020) (SR-FINRA-2020-026) (the
``FINRA Filing''). The Exchange notes that the FINRA Filing also
provides temporary relief to individuals registered with FINRA as
Operations Professionals under FINRA Rule 1220. The Exchange does
not have a registration category for Operations Professionals and
therefore, the Exchange is not proposing to adopt that aspect of the
FINRA Filing.
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In response to COVID-19, earlier this year FINRA began providing
temporary relief by way of frequently asked questions (``FAQs'') \7\ to
address disruptions to the administration of FINRA qualification
examinations caused by the pandemic that have significantly limited the
ability of individuals to sit for examinations due to Prometric test
center capacity issues.\8\
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\7\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
\8\ At the outset of the COVID-19 pandemic, all FINRA
qualification examinations were administered at test centers
operated by Prometric. Based on the health and welfare concerns
resulting from COVID-19, in March Prometric closed all of its test
centers in the United States and Canada and began to slowly reopen
some of them at limited capacity in May. At this time, not all of
these Prometric test centers have reopened at full capacity.
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FINRA published the first FAQ on March 20, 2020, providing that
individuals who were designated to function as principals under FINRA
Rule 1210.04 \9\ prior to February 2, 2020, would be given until May
31, 2020, to pass the appropriate principal qualification
examination.\10\ On May 19, 2020, FINRA extended the relief to pass the
appropriate examination until June 30, 2020. Most recently, on June 29,
2020, FINRA again extended the temporary relief providing that
individuals who were designated to function as principals under FINRA
Rule 1210.04 prior to May 4, 2020, would be given until August 31,
2020, to pass the appropriate principal qualification examination.
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\9\ Interpretation and Policy .03 under NYSE Chicago Article 6,
Rule 13 is the corresponding rule to FINRA Rule 1210.04.
\10\ FINRA Rule 1210.04 (Requirements for Registered Persons
Functioning as Principals for a Limited Period) allows a member firm
to designate certain individuals to function in a principal capacity
for 120 calendar days before having to pass an appropriate principal
qualification examination. Interpretation and Policy .03 under NYSE
Chicago Article 6, Rule 13 provides the same allowance to
Participants.
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One of the impacts of COVID-19 continues to be serious
interruptions in the administration of FINRA qualification examinations
at Prometric test centers and the limited ability of individuals to sit
for the examinations.\11\ Although Prometric has begun reopening test
centers, Prometric's safety practices mean that currently not all test
centers are open, some of the open test centers are at limited
capacity, and some open test centers are delivering only certain
examinations that have been deemed essential by the local
government.\12\ Furthermore, Prometric has had to close some reopened
test centers due to incidents of COVID-19 cases. The initial nationwide
closure in March along with the inability to fully reopen all Prometric
test centers due to COVID-19 have led to a significant backlog of
individuals who are waiting to sit for FINRA examinations.\13\
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\11\ Information about the continued impact of COVID-19 on
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/keytopics/covid-19/exams.
\12\ Information from Prometric about its safety practices and
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus-update. See also supra note 11.
\13\ Although an online test delivery service has been launched
to help address the backlog, the General Securities Principal
Examination (Series 24) is not available online. See supra note 11.
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In addition, firms are continuing to experience operational
challenges with much of their personnel working from home due to
shelter-in-place orders, restrictions on businesses and social activity
imposed in various states, and adherence to other social distancing
guidelines consistent with the recommendations of public health
officials.\14\ As a result, firms continue to face potentially
significant disruptions to their normal business operations that may
include a limitation of in-person activities and staff absenteeism as a
result of the health and welfare concerns stemming from COVID-19. Such
potential disruptions may be further exacerbated and may even affect
client services if firms cannot continue to keep principal positions
filled as they may have difficulty finding other qualified individuals
to transition into these roles or may need to reallocate employee time
and resources away from other critical responsibilities at the firm.
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\14\ See, e.g., Centers for Disease Control and Prevention, How
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-gettingsick/prevention.html.
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These ongoing, extenuating circumstances make it impracticable for
Participants to ensure that the individuals whom they have designated
to function in a principal capacity, as set forth in Interpretation and
Policy .03 under Article 6, Rule 13, are able to successfully sit for
and pass an appropriate qualification examination within the 120-
calendar day period required under the rule, or to find other qualified
staff to fill this position. The ongoing circumstances also require
individuals to be exposed to the health risks associated with taking an
in-person examination, because the General Securities Principal
examination is not available online. Therefore, NYSE Chicago is
proposing to continue the temporary relief provided through the FINRA
FAQs by adopting Interpretation and Policy .10 under Article 6, Rule 13
to extend the 120-day period during which an individual can function as
a principal before having to pass an applicable qualification
examination until December 31, 2020.\15\ The proposed rule change would
apply only to those individuals who were designated to function as a
principal prior to September 3, 2020. Any individuals designated to
function as a principal on or after September 3, 2020, would need to
successfully pass an appropriate qualification examination within 120
days.
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\15\ See supra note 5.
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NYSE Chicago believes that this proposed continued extension of
time is tailored to address the needs and constraints on a
Participant's operations during the COVID-19 pandemic, without
significantly compromising critical investor protection. The proposed
extension of time will help to minimize the impact of COVID-19 on
Participants by providing continued flexibility so that Participants
can ensure that principal positions remain filled. The potential risks
from the proposed extension of the 120-day period are mitigated by the
Participant's continued requirement to supervise the activities of
these designated individuals and ensure compliance with federal
securities laws and regulations, as well as NYSE Chicago rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\16\ in general, and furthers the objectives of Section
6(b)(5),\17\ 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 and a national market system and, in
[[Page 64558]]
general, to protect investors and the public interest.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is intended to minimize the impact of
COVID-19 on Participant operations by extending the 120-day period
certain individuals may function as a principal without having
successfully passed an appropriate qualification examination pursuant
to Interpretation and Policy .03 under Article 6, Rule 13 until
December 31, 2020. The proposed rule change does not relieve
Participants from maintaining, under the circumstances, a reasonably
designed system to supervise the activities of their associated persons
to achieve compliance with applicable securities laws and regulations,
and with applicable NYSE Chicago rules that directly serve investor
protection. In a time when faced with unique challenges resulting from
the COVID-19 pandemic, NYSE Chicago believes that the proposed rule
change is a sensible accommodation that will continue to afford
Participants the ability to ensure that critical positions are filled
and client services maintained, while continuing to serve and promote
the protection of investors and the public interest in this unique
environment.
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
intended to provide temporary relief given the impacts of the COVID-19
pandemic crisis and to also maintain consistency with the rules of
other self-regulatory organizations (``SROs'') with respect to the
registration requirements applicable to Participants and their
registered personnel. In that regard, the Exchange believes that any
burden on competition would be clearly outweighed by providing
Participants with temporary relief in this unique environment while
also ensuring clear and consistent requirements applicable across SROs
and mitigating any risk of SROs implementing different standards in
these important areas. 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 Rule 1210 in response to the impacts of the
COVID-19 pandemic that is equally applicable to the changes the
Exchange proposes.\18\ The Exchange accordingly incorporates FINRA's
abbreviated economic impact assessment by reference.
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\18\ FINRA Filing, 85 FR at 55537.
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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 \19\ and Rule 19b-
4(f)(6) \20\ thereunder.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
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 of the proposed
rule change, or such shorter time as designated by the Commission.
NYSE Chicago has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest. NYSE Chicago has asked the
Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. As noted
above, NYSE Chicago stated that the temporary proposed rule change is
based on a recent rule change by FINRA and is intended to harmonize
NYSE Chicago's registration rules with those of FINRA to promote
uniform standards across the securities industry.\21\ NYSE Chicago
states that it will also help minimize the impact of the COVID-19
outbreak on NYSE Chicago Participants' operations by allowing them to
keep principal positions filled and minimizing disruptions to client
services and other critical responsibilities. The ongoing extenuating
circumstances of the COVID-19 pandemic make it impractical to ensure
that individuals designated to act in principal capacities are able to
take and pass the appropriate qualification examination during the 120-
calendar day period required under the rules. Shelter-in-place orders,
quarantining, restrictions on business and social activity and
adherence to other social distancing guidelines consistent with the
recommendation of public officials remain in place in various
states.\22\ Further, NYSE Chicago states that Prometric test centers
have experienced serious interruptions in the administration of FINRA
qualification examinations, resulting in a backlog of individuals
waiting to take these examinations. Following a nationwide closure of
all test centers earlier in the year, some test centers have re-opened,
but are operating at limited capacity or are only delivering certain
examinations that have been deemed essential by the local
government.\23\ FINRA has launched an online test delivery service to
help address this backlog. However, the General Securities Principal
(Series 24) Examination is not available online. NYSE Chicago states
that the temporary proposed rule change will provide needed flexibility
to ensure that these positions remain filled and is tailored to address
the constraints on Participants' operations during the COVID-19
pandemic without significantly compromising critical investor
protection.\24\
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\21\ See supra note 6.
\22\ See supra note 14.
\23\ See supra notes 11 and 12. NYSE Chicago states that
Prometric has also had to close some reopened test centers due to
incidents of COVID-19 cases.
\24\ NYSE Chicago states that Participants remain subject to the
continued requirement to supervise the activities of these
designated individuals and ensure compliance with federal securities
laws and regulations, as well as NYSE Chicago rules.
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The Commission also notes that the proposal provides only temporary
relief from the requirement to pass certain qualification examinations
within the 120-day period in the rules. As proposed, this relief would
extend the 120-day period that certain individuals can function as
principals through December 31, 2020. NYSE Chicago has also stated that
if it requires temporary relief from the rule requirements identified
in this proposal beyond December 31, 2020, it may submit a separate
rule filing to extend the effectiveness of the temporary relief under
these rules.\25\ For these reasons, the Commission believes that waiver
of the 30-day operative delay is consistent with the protection of
investors and the public interest.\26\ Accordingly, the Commission
hereby waives the 30-day
[[Page 64559]]
operative delay and designates the proposal operative upon filing.\27\
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\25\ See supra note 5.
\26\ As noted above by the Exchange, this proposed temporary
change is based on a recent filing by FINRA that the Commission
approved with a waiver of the 30-day operative delay. See supra note
6, 85 FR at 55538.
\27\ 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 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSECHX-2020-28 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-NYSECHX-2020-28. 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 (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 NYSE Chicago. 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-NYSECHX-2020-28 and
should be submitted on or before November 3, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22633 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P