[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85819-85821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28668]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90755; File No. SR-GEMX-2020-21]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Harmonize
Exchange Rule General 3, Section 2 With Recent Changes by the Financial
Industry Regulatory Authority, Inc.
December 21, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on December 11, 2020, Nasdaq GEMX, LLC (``GEMX''
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
substantially 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 harmonize Exchange Rule General 3, Section
2 with recent changes by the Financial Industry Regulatory Authority,
Inc. (``FINRA''). This amendment would temporarily grant the Exchange
Review Council (``ERC'') authority \3\ to conduct hearings in
connection with appeals of Membership Application Program decisions by
video conference, if warranted by the current COVID-19-related public
health risks posed by an in-person hearing. As proposed, the temporary
amendment would be in effect through April 30, 2021.\4\
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\3\ For ERC hearings under Exchange Rule General 3, Section
2(g), this temporary authority is granted to the ERC or relevant
Subcommittee.
\4\ If the Exchange requires temporary relief from the rule
requirements identified in this proposal beyond April 30, 2021, the
Exchange may submit a separate rule filing to extend the expiration
date of the temporary amendments under these rules. The amended
Exchange rules will revert back to their original state at the
conclusion of the temporary relief period and any extension thereof.
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The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/gemx/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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to harmonize Exchange Rule General 3, Section
2 with recent changes to FINRA Rule 1015 in order to temporarily grant
the ERC authority to conduct hearings in connection with appeals of
Membership
[[Page 85820]]
Application Program decisions by video conference, if warranted by the
current COVID-19-related public health risks posed by an in-person
hearing.\5\ As proposed, these temporary amendments would be in effect
through April 30, 2021.
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\5\ See Exchange Act Release No. 89737 (September 2, 2020), 85
FR 55712 (September 9, 2020) (SR-FINRA-2020-027) (``FINRA Filing'').
See also Exchange Act Release No. 90619 (December 9, 2020), 85 FR
81250 (December 15, 2020) (SR-FINRA-2020-042) (extending the relief
in the FINRA Filing through April 30, 2021). The Exchange notes that
the FINRA Filing also proposed to temporarily amend FINRA Rules
9261, 9524, and 9830, which govern hearings in connection with
appeals of disciplinary actions, eligibility proceedings, and
temporary and permanent cease and desist orders. The Exchange's
Rules 9261, 9524, and 9830 incorporate by reference The Nasdaq Stock
Market LLC rules, which are the subject of a separate filing. See
SR-NASDAQ-2020-076 (November 5, 2020). Therefore, the Exchange is
not proposing to adopt that aspect of the FINRA Filing.
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Background
The Exchange's rule regarding the hearing and evidentiary process
for appeals of Membership Application Program decisions as set forth in
Rule General 3, Section 2(g) is based on FINRA's Rule 1015. As adopted,
the text of Exchange Rule General 3, Section 2(g) is substantially the
same as FINRA Rule 1015, with the exception of conforming and technical
differences.
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 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.\6\ Accordingly, the Exchange proposes to file this temporary
rule change to align with the temporary rule change filed by FINRA.
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\6\ See FINRA Filing, 85 FR at 55712.
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Mirroring FINRA's NAC, the ERC is the Exchange's appellate body,
which reviews initial decisions issued by FINRA's Office of Hearing
Officers (``OHO'') and--through Subcommittees--holds evidentiary
hearings for Membership Application Program decision appeals and
eligibility proceedings under Exchange Rule General 3, Section 2(g).
This temporary proposed rule change will allow the ERC or relevant
Subcommittee to make an assessment as to whether an in-person hearing
would compromise the health and safety of the hearing participants such
that the hearing should proceed by video conference.
Proposed Rule Change
Consistent with FINRA's temporary amendment to FINRA Rule 1015, the
Exchange proposes to temporarily grant the ERC authority to conduct
hearings in connection with appeals of Membership Application Program
decisions by video conference, if warranted by the current COVID-19-
related public health risks posed by an in-person hearing. The proposed
change will permit the ERC to make an assessment, based on critical
COVID-19 data and criteria, as to whether an in-person hearing would
compromise the health and safety of the hearing participants such that
the hearing should proceed by video conference. The Exchange believes
that this is a reasonable procedure to follow in hearings under Rule
General 3, Section 2(g).
To effectuate these changes, the Exchange proposes to add the
following sentence to General 3, Section 2(g)(6):
Upon consideration of the current public health risks presented
by an in-person hearing, the Exchange Review Council or Subcommittee
may, on a temporary basis, determine that the hearing shall be
conducted, in whole or in part, by video conference.
The proposed text is substantially the same as the language adopted
by FINRA, excepting conforming and technical differences.\7\
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\7\ See id. at 55712.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\9\ 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 providing greater harmonization between the Exchange rules and FINRA
rules of similar purpose, resulting in less burdensome and more
efficient regulatory compliance.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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As previously noted, the text of Exchange Rule General 3, Section
2(g) 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 Exchange's adjudicatory functions to continue
unabated, thereby avoiding protracted delays. 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.
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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the temporary 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 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 Rule 1015 in response to the impacts of the
COVID-19 pandemic that is equally applicable to the changes the
Exchange proposes.\10\ The Exchange accordingly incorporates FINRA's
abbreviated economic impact assessment by reference.
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\10\ FINRA Filing, 85 FR at 55716.
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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
[[Page 85821]]
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)(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.
The Exchange has satisfied this requirement.
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The Exchange believes that this filing is non-controversial and
eligible to become effective immediately because the proposal promotes
uniformity in rules across self-regulatory organizations thereby
enabling the Exchange to conduct hearings during the COVID-19 pandemic
by video conference where the health risks of in-person hearings are
significant. The proposed rule change is based on, and similar to,
recent changes made to FINRA Rule 1015 that addressed the issue of
balancing public health risks with conducting hearings during the
COVID-19 pandemic. The Exchange proposes to adopt the rule change in
substantially the same form as it was adopted by FINRA. The Exchange
further believes that the proposed rule change would not significantly
affect the protection of investors or the public interest or impose any
significant burden on competition because the changes are based on the
rules of FINRA. Moreover, the proposed rule change is not intended to
address competitive issues but rather is concerned solely with
providing temporary relief given the impacts of the COVID-19 pandemic.
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-GEMX-2020-21 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-GEMX-2020-21. 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, 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. 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-GEMX-2020-21 and should be submitted on
or before January 19, 2021.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28668 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P