[Federal Register Volume 85, Number 250 (Wednesday, December 30, 2020)]
[Notices]
[Pages 86600-86603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28808]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90780; File No. SR-NASDAQ-2020-091]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Extend the Effective Date of the Temporary Amendments Concerning
Exchange Rule 1.1210 From December 31, 2020, to April 30, 2021
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 17, 2020, 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 and II 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 extend the effective date of the temporary
amendments set forth in SR-NASDAQ-2020-073 from December 31, 2020, to
April 30, 2021. Due to the impacts of COVID-19 on the administration of
the Financial Industry Regulatory Authority, Inc. (``FINRA'')
qualification examinations at test centers, SR-NASDAQ-2020-073 extended
the 120-day period that certain individuals can function as a principal
without having successfully passed an appropriate qualification
examination through December 31, 2020.
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 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 of the temporary
amendments set forth in SR-NASDAQ-2020-073 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,\3\ 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 filings recently submitted
by FINRA \4\ 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\ If the Exchange seeks to provide additional temporary relief
from the rule requirements identified in this proposed rule change
beyond April 30, 2021, the Exchange will submit a separate rule
filing to further extend the temporary extension of time.
\4\ See Exchange Act Release No. 89732 (September 1, 2020), 85
FR 55535 (September 8, 2020) (SR-FINRA-2020-026) and Exchange Act
Release No. 90617 (December 9, 2020), 85 FR 81258 (December 15,
2020) (SR-FINRA-2020-043) (collectively, the ``FINRA Filings''). The
Exchange notes that the FINRA Filings also provide 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 Filings.
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In response to COVID-19, earlier this year FINRA began providing
temporary relief by way of frequently asked questions (``FAQs'') \5\ to
address disruptions to the administration of
[[Page 86601]]
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.\6\
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\5\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
\6\ 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 \7\ prior to February 2, 2020, would be given until May
31, 2020, to pass the appropriate principal qualification
examination.\8\ 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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\7\ Exchange Rule 1.1210.04 is the corresponding rule to FINRA
Rule 1210.04.
\8\ 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. Exchange Rule 1.1210.04 provides the same
allowance to members.
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On October 29, 2020, the Exchange filed with the Commission a
proposed rule change for immediate effectiveness to adopt temporary
Supplementary Material .13 (Temporary Extension of the Limited Period
for Registered Persons to Function as Principals) under Exchange Rule
1.1210 of General 4 (Registration Requirements).\9\ Pursuant to this
rule filing, individuals who were designated prior to September 3,
2020, to function as a principal under Exchange Rule 1.1210.04 have
until December 31, 2020, to pass the appropriate qualification
examination.
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\9\ See Exchange Act Release No. 90359 (November 5, 2020), 85 FR
71979 (November 12, 2020) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASDAQ-2020-073).
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The COVID-19 conditions necessitating the extension of relief
provided in SR-NASDAQ-2020-073 persist and in fact appear to be
worsening.\10\ 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 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.\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 that are not
available online.\13\
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\10\ 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/.
\11\ 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.
\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\ Earlier this year, an online test delivery service was
launched for candidates seeking to take qualification examinations
remotely. Only certain qualification examinations are available
online. See supra note 11. FINRA is considering making additional
qualification examinations available remotely on a limited basis.
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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-getting-sick/prevention.html.
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These ongoing, extenuating circumstances make it impracticable for
members to ensure that the individuals whom they have designated to
function in a principal capacity, as set forth in Exchange Rule
1.1210.04, 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, the Exchange is proposing to extend the effective date of
the temporary relief provided through SR-NASDAQ-2020-073 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.
The Exchange believes that this proposed continued extension of
time is tailored to address the needs and constraints on a member'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 members by
providing continued flexibility so that members can ensure that
principal positions remain filled. The potential risks from the
proposed extension of the 120-day period are mitigated by the member's
continued requirement to supervise the activities of these designated
individuals and ensure compliance with federal securities laws and
regulations, as well as Exchange rules.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\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 and a national market system and, in
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general, to protect investors and the public interest.
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\15\ 15 U.S.C. 78f(b).
\16\ 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 member operations by further extending the 120-day period
certain individuals may function as a principal without having
successfully passed an appropriate qualification examination under
Exchange Rule 1.1210.04 until April 30, 2021. The proposed rule change
does not relieve members 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 Exchange rules that directly
serve investor protection. In a time when faced with unique challenges
resulting from the COVID-19 pandemic, the Exchange believes that the
proposed rule change is a sensible accommodation that will continue to
afford members 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-NASDAQ-
2020-073, 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 members and their registered personnel. In that regard,
the Exchange believes that any burden on competition would be clearly
outweighed by providing members 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.\17\ The Exchange accordingly
incorporates FINRA's abbreviated economic impact assessment by
reference.
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\17\ See supra note 4.
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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) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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 outbreak on members'
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.\20\ 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.\21\ 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.\22\ 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 members'
operations during the COVID-19 pandemic without significantly
compromising critical investor protection.\23\
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\20\ See supra note 14.
\21\ See supra notes 11 and 12. The Exchange states that
Prometric has also had to close some reopened test centers due to
incidents of COVID-19 cases.
\22\ See supra note 13. FINRA is considering making additional
qualification examinations available remotely on a limited basis.
\23\ The Exchange states that members 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 Nasdaq rules.
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The Commission observes that the Exchange's proposal, like the
FINRA Filings on which it is based,\24\ 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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\24\ See supra note 4.
\25\ See supra note 3.
\26\ As noted above by Nasdaq, this proposal is an extension of
temporary relief provided in a prior filing where Nasdaq also
requested and the Commission granted a waiver of the 30-day
operative delay. See supra note 9, 85 FR at 71981-82.
\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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[[Page 86603]]
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-NASDAQ-2020-091 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-2020-091. 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 Nasdaq. 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-NASDAQ-2020-091 and should be submitted
on or before January 21, 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. 2020-28808 Filed 12-29-20; 8:45 am]
BILLING CODE 8011-01-P