[Federal Register Volume 85, Number 250 (Wednesday, December 30, 2020)]
[Notices]
[Pages 86629-86632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28801]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90771; File No. SR-NYSENAT-2020-38]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Extend
the Effective Date in Commentary .10 Under NYSE National Rule 2.1210
December 22, 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 15, 2020, NYSE National, Inc. (``NYSE
National'' or the ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the Exchange. The Commission is publishing this notice to solicit
[[Page 86630]]
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 a rule change to extend the effective date in
Commentary .10 (Temporary Extension of the Limited Period for
Registered Persons to Function as Principals) under NYSE National Rule
2.1210 (Registration Requirements) applicable to ETP Holders, from
December 31, 2020 to April 30, 2021. 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 extend the effective date in Commentary
.10 (Temporary Extension of the Limited Period for Registered Persons
to Function as Principals) under NYSE National Rule 2.1210
(Registration Requirements) applicable to ETP Holders,\3\ from December
31, 2020 to April 30, 2021. 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 April 30, 2021,\4\ and would apply only to those
individuals who were designated to function as a principal prior to
January 1, 2021. This proposed rule change is based on a filing
recently submitted by the Financial Regulatory Authority, Inc.
(``FINRA'') \5\ 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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\3\ The term ``ETP Holder'' means the Exchange-approved holder
of an ETP. See Rule 1.1(i). The term ``ETP'' refers to an Equity
Trading Permit issued by the Exchange for effecting approved
securities transactions on the Exchange. See Rule 1.1(h).
\4\ If NYSE National seeks to provide additional temporary
relief from the rule requirements identified in this proposed rule
change beyond April 30, 2021, NYSE National will submit a separate
rule filing to further extend the temporary extension of time.
\5\ See Exchange Act Release No. 90617 (December 9, 2020), 85 FR
81258 (December 15, 2020) (SR-FINRA-2020-043) (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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The COVID-19 pandemic is an unpredictable, exogenous event that has
resulted in unavoidable disruptions to the securities industry and
impacted member firms, regulators, investors and other stakeholders. In
response to COVID-19, earlier this year FINRA began providing temporary
relief by way of frequently asked questions (``FAQs'') \6\ 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.\7\
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\6\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
\7\ 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. Currently, Prometric has
resumed testing in many of its United States and Canada test
centers, at either full or limited occupancy, based on local and
government mandates.
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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 \8\ prior to February 2, 2020, would be given until May
31, 2020, to pass the appropriate principal qualification
examination.\9\ On May 19, 2020, FINRA extended the relief to pass the
appropriate examination until June 30, 2020. 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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\8\ NYSE National Rule 2.1210.03 is the corresponding rule to
FINRA Rule 1210.04.
\9\ 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. NYSE National Rule 2.1210.03 provides the
same allowance to ETP Holders.
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On September 25, 2020, NYSE National filed with the Commission a
proposed rule change for immediate effectiveness to extend the
temporary relief provided via the FAQ by adopting temporary Commentary
.10 (Temporary Extension of the Limited Period for Registered Persons
to Function as Principals) under NYSE National Rule 2.1210
(Registration Requirements).\10\ Pursuant to this rule filing,
individuals who were designated prior to September 3, 2020, to function
as a principal under NYSE National Rule 2.1210.10 have until December
31, 2020, to pass the appropriate qualification examination.
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\10\ See Exchange Act Release No. 90117 (October 7, 2020), 85 FR
65116 (October 14, 2020) (Notice of Filing and Immediate
Effectiveness of SR-NYSENAT-2020-30).
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The COVID-19 conditions necessitating the extension of relief
provided in the FAQ and SR-NYSENAT-2020-30 persist and in fact appear
to be worsening.\11\ 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.\12\ Although Prometric has
been reopening its 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.\13\ 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 that are not
available online, including the General Securities Principal Exam
(Series 24).\14\
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\11\ See, e.g., Meryl Kornfield, Jacqueline Dupree, Marisa Iati,
Paulina Villegas, Siobhan O'Grady and Hamza Shaban, New daily
coronavirus cases in U.S. rise to 145,000, latest all-time high,
Wash. Post, November 11, 2020, https://www.washingtonpost.com/nation/2020/11/11/coronavirus-covid-live-updates-us/.
\12\ Information about the continued impact of COVID-19 on
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
\13\ 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 12.
\14\ Earlier this year, an online test delivery service was
launched for candidates seeking to take qualification examination
remotely. Only certain qualification examinations are available
online. See supra note 12. FINRA is considering making additional
qualification examinations available remotely on a limited basis.
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[[Page 86631]]
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.\15\ 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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\15\ See, e.g., Centers for Disease Control and Prevention, How
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
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These ongoing, extenuating circumstances make it impracticable for
ETP Holders to ensure that the individuals whom they have designated to
function in a principal capacity, as set forth in NYSE National Rule
2.1210.03, 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 National is proposing to extend the effective date of
the temporary relief provided through SR-NYSENAT-2020-30 until April
30, 2021. The proposed rule change would apply only to those
individuals who were designated to function as a principal prior to
January 1, 2021. Any individuals designated to function as a principal
on or after January 1, 2021, would need to successfully pass an
appropriate qualification examination within 120 days.
NYSE National believes that this proposed continued extension of
time is tailored to address the needs and constraints on an ETP
Holder'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 ETP Holders by
providing continued flexibility so that ETP Holders can ensure that
principal positions remain filled. The potential risks from the
proposed extension of the 120-day period are mitigated by the ETP
Holder's continued requirement to supervise the activities of these
designated individuals and ensure compliance with federal securities
laws and regulations, as well as NYSE National 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 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 ETP Holder operations by extending the 120-day period
certain individuals may function as a principal without having
successfully passed an appropriate qualification examination under NYSE
National Rule 2.1210.03 until April 30, 2021. The proposed rule change
does not relieve ETP Holders 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 National rules that
directly serve investor protection. In a time when faced with unique
challenges resulting from the COVID-19 pandemic, NYSE National believes
that the proposed rule change is a sensible accommodation that will
continue to afford ETP Holders 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. As set forth in SR-NYSENAT-
2020-30, the proposed rule change is intended solely to extend
temporary relief necessitated by the continued impacts of the COVID-19
pandemic and the related health and safety risks of conducting in-
person activities. In its filing, FINRA notes that the proposed rule
change is 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 would otherwise result if the
temporary amendments were to expire on December 31, 2020.\18\ The
Exchange accordingly incorporates FINRA's abbreviated economic impact
assessment by reference.
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\18\ See FINRA Filing, 85 FR at 81260.
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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 solicited or received with respect to the
proposed rule change.
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) thereunder.\20\
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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.
The Exchange 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. The Exchange 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, the Exchange stated that the proposed extension of time will
help minimize the impact of the COVID-19
[[Page 86632]]
outbreak on ETP Holders' operations by allowing them to keep principal
positions filled and minimizing disruptions to client services and
other critical responsibilities. The Exchange further stated that the
ongoing extenuating circumstances of the COVID-19 pandemic make it
impractical to ensure that individuals designated to act in these
capacities are able to take and pass the appropriate qualification
examination during the 120-calendar day period required under the
rules. The Exchange also explained that shelter-in-place orders,
quarantining, restrictions on business and social activity and
adherence to social distancing guidelines consistent with the
recommendations of public officials remain in place in various
states.\21\ In addition, the Exchange observed that, 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.\22\ Although, as the Exchange noted, FINRA has
launched an online test delivery service to help address this backlog,
the General Securities Principal (Series 24) Examination is not
available online.\23\ Nevertheless, the Exchange explained that the
proposed rule change will provide needed flexibility to ensure that
these positions remain filled and is tailored to address the
constraints on ETP Holders' operations during the COVID-19 pandemic
without significantly compromising critical investor protection.\24\
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\21\ See supra note 15.
\22\ See supra notes 12 and 13. The Exchange states that
Prometric has also had to close some reopened test centers due to
incidents of COVID-19 cases.
\23\ See supra note 14. FINRA is considering making additional
qualification examinations available remotely on a limited basis.
\24\ The Exchange states that ETP Holders 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 National rules.
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The Commission observes that the Exchange's proposal, like the
FINRA Filing, provides only an extension to 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
April 30, 2021. If a further extension of temporary relief from the
rule requirements identified in this proposal beyond April 30, 2021 is
required, the Exchange noted that 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 operative delay and designates the proposal
operative upon filing.\27\
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\25\ See supra note 4.
\26\ As noted above by NYSE National, this proposal is an
extension of temporary relief provided in a prior filing where NYSE
National also requested and the Commission granted a waiver of the
30-day operative delay. See supra note 10, 85 FR at 65118.
\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-NYSENAT-2020-38 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-NYSENAT-2020-38. 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 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-NYSENAT-2020-38 and should be submitted
on or before January 20, 2021.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2020-28801 Filed 12-29-20; 8:45 am]
BILLING CODE 8011-01-P