82_FR_35392 82 FR 35248 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Definition of Non-Public Arbitrator

82 FR 35248 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Definition of Non-Public Arbitrator

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 144 (July 28, 2017)

Page Range35248-35250
FR Document2017-15909

Federal Register, Volume 82 Issue 144 (Friday, July 28, 2017)
[Federal Register Volume 82, Number 144 (Friday, July 28, 2017)]
[Notices]
[Pages 35248-35250]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-15909]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81196; File No. SR-FINRA-2017-025]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to 
the Definition of Non-Public Arbitrator

July 24, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 10, 2017, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') 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 by FINRA. 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\ 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

    FINRA is proposing to amend FINRA Rule 12100 of the Code of 
Arbitration Procedure for Customer Disputes (``Customer Code'') and 
FINRA Rule 13100 of the Code of Arbitration Procedure for Industry 
Disputes (``Industry Code'' and together, ``Codes''), to define a non-
public arbitrator to mean a person who is otherwise qualified to serve 
as an arbitrator, and is disqualified from service as a public 
arbitrator under the Codes.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 35249]]

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

1. Purpose

    FINRA classifies arbitrators under the Codes as either ``non-
public'' or ``public.'' The Codes define these terms.\3\ The non-public 
arbitrator definition lists affiliations that might qualify a person to 
serve as a non-public arbitrator at the forum. Conversely, the public 
arbitrator definition enumerates criteria that disqualify an applicant 
from inclusion on the public arbitrator roster.
---------------------------------------------------------------------------

    \3\ See FINRA Rules 12100(r) and 13100(r) for the definition of 
non-public arbitrator and Rules 12100(y) and 13100(x) for the 
definition of public arbitrator.
---------------------------------------------------------------------------

    In 2015, the SEC approved amendments to the definitions of non-
public arbitrator and public arbitrator in the Codes.\4\ Among other 
things, the amendments provided that persons who worked in the 
financial industry for any duration during their careers would always 
be classified as non-public arbitrators and the amendments added new 
disqualifications to the public arbitrator definition relating to an 
arbitrator's provision of services to parties in securities arbitration 
and litigation and to revenues earned from the financial industry by an 
arbitrator's co-workers. The amendments also broadened the 
disqualifications based on the activities or affiliations of an 
arbitrator's family members. The intent of the proposed rule change was 
to address concerns about arbitrator neutrality raised by forum 
users.\5\ For example, prior to the 2015 amendments, the Codes, with 
specified exceptions, permitted former financial industry employees who 
ended their industry affiliations to qualify as public arbitrators five 
years after leaving the financial industry. Forum users raised concerns 
about the neutrality of these individuals, and indicated that they did 
not believe former industry employees should ever serve as public 
arbitrators. In response to these concerns, the 2015 amendments 
eliminated the five-year cooling-off period, thereby classifying all 
former financial industry employees as non-public arbitrators.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Rel. No. 74383 (February 26, 
2015), 80 FR 11695 (March 4, 2015).
    \5\ Regulatory Notice 15-18 (Definitions of Non-Public and 
Public Arbitrator) describes the changes made to the arbitrator 
definitions.
---------------------------------------------------------------------------

    Under the definitions as revised in 2015, the non-public arbitrator 
roster is composed of individuals who work, or worked, in the financial 
industry, or provide services to the financial industry or to parties 
engaged in securities arbitration and litigation. The public arbitrator 
roster is composed of individuals who do not have any significant 
affiliation with the financial industry. These arbitrators have never 
been employed by the industry, do not provide services to the industry 
or to parties engaged in securities arbitration and litigation, and do 
not have immediate family members or co-workers who do so.

Eligibility Gap

    The 2015 amendments to the arbitrator definitions created an 
eligibility gap whereby certain otherwise qualified arbitrators \6\ 
could not serve in any capacity. The eligibility gap was created when 
FINRA narrowed the public arbitrator definition as described above. 
Over 800 public arbitrators were disqualified from the public 
arbitrator roster under the revised public arbitrator definition. In 
addition, more than 100 of these disqualified arbitrators did not meet 
any of the criteria outlined in the non-public arbitrator definition 
for service on the non-public arbitrator roster. As a result of this 
eligibility gap, FINRA removed them from service at the forum.
---------------------------------------------------------------------------

    \6\ Unless waived by FINRA at its discretion, arbitrator 
applicants must have a minimum of five years of paid business and/or 
professional experience and at least two years of college-level 
credits. Qualification criteria can be found at http://www.finra.org/arbitration-and-mediation/finra-arbitrators.
---------------------------------------------------------------------------

    In most instances, the basis for removal from the roster was an 
affiliation relating to an arbitrator's family members or co-workers. 
For example, a real estate attorney in a large law firm that has a 
securities practice would be disqualified from service as a public 
arbitrator if the firm derived $50,000 or more in a calendar year from 
providing services to securities entities. In addition, employment as a 
real estate attorney would not qualify the arbitrator to serve as a 
non-public arbitrator under the current definition. Therefore, the 
arbitrator falls into the eligibility gap. In addition to losing over 
100 public arbitrators, the eligibility gap required FINRA to reject 
over 140 arbitrator applicants in 2016 who met FINRA's minimum 
arbitrator qualifications.

Proposed Rule Change

    FINRA is proposing to amend the Codes to allow FINRA to appoint 
individuals to the non-public arbitrator roster if they meet FINRA's 
general arbitrator qualification criteria,\7\ but cannot be classified 
as public arbitrators. FINRA would amend the non-public arbitrator 
definition to delete the specific criteria for inclusion on the non-
public arbitrator roster. Instead, Rules 12100(r) and 13100(r) would 
provide that the term ``non-public arbitrator'' means a person who is 
otherwise qualified to serve as an arbitrator, and is disqualified from 
service as a public arbitrator.
---------------------------------------------------------------------------

    \7\ See id.
---------------------------------------------------------------------------

2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. Specifically, the proposed rule change would close the 
eligibility gap, simplify the non-public arbitrator definition, and 
provide greater choice for parties during the panel selection process.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. A key focus of the 2015 
amendments was the elimination of certain individuals from the public 
arbitrator roster. FINRA's intent was not to prevent these individuals 
from serving in any capacity. Hundreds of arbitrators or arbitrator 
applicants who formerly qualified to serve as public arbitrators are 
now unable to serve as arbitrators in the forum. As a result, the pool 
of eligible arbitrators has decreased, and FINRA is forced to turn away 
new candidates who would have been eligible to serve but for the recent 
amendments.
    The proposed rule change would permit these previously eligible 
persons to serve as non-public arbitrators. While not changing the 
public arbitrator definition as approved by the SEC in 2015, the 
proposed rule change would expand the pool of candidates eligible to 
serve as non-public arbitrators. FINRA considered revising the public 
arbitrator definition to close the eligibility gap, but chose to 
maintain the recently approved criteria that exclude individuals who 
have any significant affiliation with the financial industry. 
Increasing the number of qualified arbitrators benefits all parties who 
come before the forum because it permits parties to consider additional 
arbitrators during panel selection and may reduce

[[Page 35250]]

costs that arise due to an insufficient pool of qualified arbitrators 
such as the costs associated with arbitrators traveling from other 
hearing locations. Further, readmitting previously qualified persons 
increases the pool of experienced arbitrators, which strengthens the 
forum.
    The proposal would impose no direct or indirect costs on persons 
previously eliminated from acting as arbitrators, new candidates for 
arbitrator, or parties accessing the forum.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 [email protected]. Please include 
File Number SR-FINRA-2017-025 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-FINRA-2017-025. 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 Web site (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 Web site 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 FINRA. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-FINRA-2017-025 and 
should be submitted on or before August 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15909 Filed 7-27-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                    35248                            Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices

                                                    instituting proceedings to allow for                       • Send an email to rule-comments@                       SECURITIES AND EXCHANGE
                                                    additional analysis of the Proposed Rule                 sec.gov. Please include File Number SR–                   COMMISSION
                                                    Changes’ consistency with the Act and                    FICC–2017–002 on the subject line.
                                                    the rules thereunder. Specifically, the                                                                            [Release No. 34–81196; File No. SR–FINRA–
                                                    Commission believes that the Proposed                    Paper Comments
                                                                                                                                                                       2017–025]
                                                    Rule Changes raise questions as to                         • Send paper comments in triplicate
                                                    whether they are consistent with (i)                     to Secretary, Securities and Exchange                     Self-Regulatory Organizations;
                                                    Section 17A(b)(3)(F) of the Act,48 which                                                                           Financial Industry Regulatory
                                                                                                             Commission, 100 F Street NE.,
                                                    requires, in part, that clearing agency                                                                            Authority, Inc.; Notice of Filing of a
                                                                                                             Washington, DC 20549–1090.
                                                    rules be designed to assure the                                                                                    Proposed Rule Change Relating to the
                                                    safeguarding of securities in the custody                All submissions should refer to File                      Definition of Non-Public Arbitrator
                                                    or control of the clearing agency and, in                Numbers SR–DTC–2017–005, SR–FICC–
                                                    general, protect investors and the public                                                                          July 24, 2017.
                                                                                                             2017–009, or SR–NSCC–2017–006. This
                                                    interest, and (ii) Rule 17Ad–22(e)(4)                    file number should be included on the                        Pursuant to Section 19(b)(1) of the
                                                    under the Act, which requires, in                        subject line if email is used. To help the                Securities Exchange Act of 1934
                                                    general, that each covered clearing                      Commission process and review your                        (‘‘Act’’)1 and Rule 19b–4 thereunder,2
                                                    agency establish, implement, maintain                    comments more efficiently, please use                     notice is hereby given that on July 10,
                                                    and enforce written policies and                         only one method. The Commission will                      2017, Financial Industry Regulatory
                                                    procedures reasonably designed to,                       post all comments on the Commission’s                     Authority, Inc. (‘‘FINRA’’) filed with the
                                                    among other things, effectively identify,                                                                          Securities and Exchange Commission
                                                                                                             Internet Web site (http://www.sec.gov/
                                                    measure, monitor, and manage their                                                                                 (‘‘SEC’’ or ‘‘Commission’’) the proposed
                                                                                                             rules/sro.shtml). Copies of the
                                                    credit exposures to participants and                                                                               rule change as described in Items I, II,
                                                                                                             submission, all subsequent                                and III below, which Items have been
                                                    those arising from its payment, clearing,
                                                                                                             amendments, all written statements                        prepared by FINRA. The Commission is
                                                    and settlement processes.49
                                                                                                             with respect to the Proposed Rule                         publishing this notice to solicit
                                                      As discussed above, pursuant to the                    Changes that are filed with the
                                                    Proposed Rule Changes, Clearing                                                                                    comments on the proposed rule change
                                                                                                             Commission, and all written                               from interested persons.
                                                    Agencies would adopt the Framework,
                                                                                                             communications relating to the
                                                    which would procedures for identifying,                                                                            I. Self-Regulatory Organization’s
                                                                                                             Proposed Rule Change between the
                                                    measuring, monitoring, and managing                                                                                Statement of the Terms of Substance of
                                                                                                             Commission and any person, other than
                                                    their credit exposures to members. The                                                                             the Proposed Rule Change
                                                    Commission solicits comment on                           those that may be withheld from the
                                                    whether the Proposed Rule Changes are                    public in accordance with the                                FINRA is proposing to amend FINRA
                                                    consistent with Section 17A(b)(3)(F) of                  provisions of 5 U.S.C. 552, will be                       Rule 12100 of the Code of Arbitration
                                                    the Act 50 and Rule 17Ad–22(e)(4) under                  available for Web site viewing and                        Procedure for Customer Disputes
                                                    the Act.51                                               printing in the Commission’s Public                       (‘‘Customer Code’’) and FINRA Rule
                                                                                                             Reference Room, 100 F Street NE.,                         13100 of the Code of Arbitration
                                                    IV. Request for Written Comments                         Washington, DC 20549, on official                         Procedure for Industry Disputes
                                                      The Commission requests that                           business days between the hours of                        (‘‘Industry Code’’ and together,
                                                    interested persons provide written                       10:00 a.m. and 3:00 p.m. Copies of such                   ‘‘Codes’’), to define a non-public
                                                    submissions of their views, data, and                    filings also will be available for                        arbitrator to mean a person who is
                                                    arguments with respect to issues raised                  inspection and copying at the principal                   otherwise qualified to serve as an
                                                    by the Proposed Rule Changes. In                         office of the Clearing Agencies and on                    arbitrator, and is disqualified from
                                                    particular, the Commission invites the                   DTCC’s Web site (http://dtcc.com/legal/                   service as a public arbitrator under the
                                                    written views of interested persons                      sec-rule-filings.aspx). All comments                      Codes.
                                                    concerning whether the Proposed Rule                     received will be posted without change;                      The text of the proposed rule change
                                                    Changes are consistent with Sections                     the Commission does not edit personal                     is available on FINRA’s Web site at
                                                    17A(b)(3)(F) of the Act and Rules 17Ad–                  identifying information from                              http://www.finra.org, at the principal
                                                    22(e)(4) under the Act, cited above, or                  submissions. You should submit only                       office of FINRA and at the
                                                    any other provision of the Act, or the                   information that you wish to make                         Commission’s Public Reference Room.
                                                    rules and regulations thereunder.                        available publicly. All submissions                       II. Self-Regulatory Organization’s
                                                    Interested persons are invited to submit                 should refer to File Numbers SR–DTC–                      Statement of the Purpose of, and
                                                    written data, views, and arguments on                    2017–005, SR–FICC–2017–009, or SR–                        Statutory Basis for, the Proposed Rule
                                                    or before August 14, 2017. Any person                    NSCC–2017–006 and should be                               Change
                                                    who wishes to file a rebuttal to any                     submitted on or before August 14, 2017.
                                                    other person’s submission must file that                                                                             In its filing with the Commission,
                                                                                                             If comments are received, any rebuttal                    FINRA included statements concerning
                                                    rebuttal on or before August 18, 2017.
                                                                                                             comments should be submitted on or                        the purpose of and basis for the
                                                    Comments may be submitted by any of
                                                                                                             before August 18, 2017.                                   proposed rule change and discussed any
                                                    the following methods:
                                                                                                               For the Commission, by the Division of                  comments it received on the proposed
                                                    Electronic Comments
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                                                                                                             Trading and Markets, pursuant to delegated                rule change. The text of these statements
                                                      • Use the Commission’s Internet                        authority.52                                              may be examined at the places specified
                                                    comment form (http://www.sec.gov/                        Eduardo A. Aleman,                                        in Item IV below. FINRA has prepared
                                                    rules/sro.shtml); or                                     Assistant Secretary.                                      summaries, set forth in sections A, B,
                                                                                                             [FR Doc. 2017–15905 Filed 7–27–17; 8:45 am]
                                                                                                                                                                       and C below, of the most significant
                                                      48 15 U.S.C. 78q–1(b)(3)(F).                                                                                     aspects of such statements.
                                                                                                             BILLING CODE 8011–01–P
                                                      49 17 CFR 240.17Ad–22(e)(4).
                                                      50 15 U.S.C. 78q–1(b)(3)(F).                                                                                       1 15   U.S.C. 78s(b)(1).
                                                      51 17 CFR 240.17Ad–22(e)(4).                                52 17   CFR 200.30–3(a)(57).                           2 17   CFR 240.19b–4.



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                                                                                     Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices                                                35249

                                                    A. Self-Regulatory Organization’s                        securities arbitration and litigation. The                the specific criteria for inclusion on the
                                                    Statement of the Purpose of, and                         public arbitrator roster is composed of                   non-public arbitrator roster. Instead,
                                                    Statutory Basis for, the Proposed Rule                   individuals who do not have any                           Rules 12100(r) and 13100(r) would
                                                    Change                                                   significant affiliation with the financial                provide that the term ‘‘non-public
                                                    1. Purpose                                               industry. These arbitrators have never                    arbitrator’’ means a person who is
                                                                                                             been employed by the industry, do not                     otherwise qualified to serve as an
                                                       FINRA classifies arbitrators under the                provide services to the industry or to                    arbitrator, and is disqualified from
                                                    Codes as either ‘‘non-public’’ or                        parties engaged in securities arbitration                 service as a public arbitrator.
                                                    ‘‘public.’’ The Codes define these                       and litigation, and do not have
                                                    terms.3 The non-public arbitrator                                                                                  2. Statutory Basis
                                                                                                             immediate family members or co-
                                                    definition lists affiliations that might                 workers who do so.                                           FINRA believes that the proposed rule
                                                    qualify a person to serve as a non-public                                                                          change is consistent with the provisions
                                                    arbitrator at the forum. Conversely, the                 Eligibility Gap                                           of Section 15A(b)(6) of the Act,8 which
                                                    public arbitrator definition enumerates                     The 2015 amendments to the                             requires, among other things, that
                                                    criteria that disqualify an applicant from               arbitrator definitions created an                         FINRA rules must be designed to
                                                    inclusion on the public arbitrator roster.               eligibility gap whereby certain                           prevent fraudulent and manipulative
                                                       In 2015, the SEC approved                             otherwise qualified arbitrators 6 could                   acts and practices, to promote just and
                                                    amendments to the definitions of non-                    not serve in any capacity. The eligibility                equitable principles of trade, and, in
                                                    public arbitrator and public arbitrator in               gap was created when FINRA narrowed                       general, to protect investors and the
                                                    the Codes.4 Among other things, the                      the public arbitrator definition as                       public interest. Specifically, the
                                                    amendments provided that persons who                     described above. Over 800 public                          proposed rule change would close the
                                                    worked in the financial industry for any                 arbitrators were disqualified from the                    eligibility gap, simplify the non-public
                                                    duration during their careers would                      public arbitrator roster under the                        arbitrator definition, and provide greater
                                                    always be classified as non-public                       revised public arbitrator definition. In                  choice for parties during the panel
                                                    arbitrators and the amendments added                     addition, more than 100 of these                          selection process.
                                                    new disqualifications to the public                      disqualified arbitrators did not meet any                 B. Self-Regulatory Organization’s
                                                    arbitrator definition relating to an                     of the criteria outlined in the non-public                Statement on Burden on Competition
                                                    arbitrator’s provision of services to                    arbitrator definition for service on the
                                                    parties in securities arbitration and                    non-public arbitrator roster. As a result                    FINRA does not believe that the
                                                    litigation and to revenues earned from                   of this eligibility gap, FINRA removed                    proposed rule change will result in any
                                                    the financial industry by an arbitrator’s                them from service at the forum.                           burden on competition that is not
                                                    co-workers. The amendments also                             In most instances, the basis for                       necessary or appropriate in furtherance
                                                    broadened the disqualifications based                    removal from the roster was an                            of the purposes of the Act. A key focus
                                                    on the activities or affiliations of an                  affiliation relating to an arbitrator’s                   of the 2015 amendments was the
                                                    arbitrator’s family members. The intent                  family members or co-workers. For                         elimination of certain individuals from
                                                    of the proposed rule change was to                       example, a real estate attorney in a large                the public arbitrator roster. FINRA’s
                                                    address concerns about arbitrator                        law firm that has a securities practice                   intent was not to prevent these
                                                    neutrality raised by forum users.5 For                   would be disqualified from service as a                   individuals from serving in any
                                                    example, prior to the 2015 amendments,                   public arbitrator if the firm derived                     capacity. Hundreds of arbitrators or
                                                    the Codes, with specified exceptions,                    $50,000 or more in a calendar year from                   arbitrator applicants who formerly
                                                    permitted former financial industry                      providing services to securities entities.                qualified to serve as public arbitrators
                                                    employees who ended their industry                       In addition, employment as a real estate                  are now unable to serve as arbitrators in
                                                    affiliations to qualify as public                        attorney would not qualify the arbitrator                 the forum. As a result, the pool of
                                                    arbitrators five years after leaving the                 to serve as a non-public arbitrator under                 eligible arbitrators has decreased, and
                                                    financial industry. Forum users raised                   the current definition. Therefore, the                    FINRA is forced to turn away new
                                                    concerns about the neutrality of these                   arbitrator falls into the eligibility gap. In             candidates who would have been
                                                    individuals, and indicated that they did                 addition to losing over 100 public                        eligible to serve but for the recent
                                                    not believe former industry employees                    arbitrators, the eligibility gap required                 amendments.
                                                                                                                                                                          The proposed rule change would
                                                    should ever serve as public arbitrators.                 FINRA to reject over 140 arbitrator
                                                                                                                                                                       permit these previously eligible persons
                                                    In response to these concerns, the 2015                  applicants in 2016 who met FINRA’s
                                                                                                                                                                       to serve as non-public arbitrators. While
                                                    amendments eliminated the five-year                      minimum arbitrator qualifications.
                                                                                                                                                                       not changing the public arbitrator
                                                    cooling-off period, thereby classifying
                                                                                                             Proposed Rule Change                                      definition as approved by the SEC in
                                                    all former financial industry employees
                                                                                                               FINRA is proposing to amend the                         2015, the proposed rule change would
                                                    as non-public arbitrators.
                                                       Under the definitions as revised in                   Codes to allow FINRA to appoint                           expand the pool of candidates eligible to
                                                    2015, the non-public arbitrator roster is                individuals to the non-public arbitrator                  serve as non-public arbitrators. FINRA
                                                    composed of individuals who work, or                     roster if they meet FINRA’s general                       considered revising the public arbitrator
                                                    worked, in the financial industry, or                    arbitrator qualification criteria,7 but                   definition to close the eligibility gap,
                                                    provide services to the financial                        cannot be classified as public                            but chose to maintain the recently
                                                    industry or to parties engaged in                        arbitrators. FINRA would amend the                        approved criteria that exclude
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                                                                                                             non-public arbitrator definition to delete                individuals who have any significant
                                                      3 See FINRA Rules 12100(r) and 13100(r) for the                                                                  affiliation with the financial industry.
                                                    definition of non-public arbitrator and Rules              6 Unless waived by FINRA at its discretion,             Increasing the number of qualified
                                                    12100(y) and 13100(x) for the definition of public       arbitrator applicants must have a minimum of five         arbitrators benefits all parties who come
                                                    arbitrator.                                              years of paid business and/or professional                before the forum because it permits
                                                      4 See Securities Exchange Act Rel. No. 74383           experience and at least two years of college-level
                                                    (February 26, 2015), 80 FR 11695 (March 4, 2015).        credits. Qualification criteria can be found at http://
                                                                                                                                                                       parties to consider additional arbitrators
                                                      5 Regulatory Notice 15–18 (Definitions of Non-         www.finra.org/arbitration-and-mediation/finra-            during panel selection and may reduce
                                                    Public and Public Arbitrator) describes the changes      arbitrators.
                                                    made to the arbitrator definitions.                        7 See id.                                                8 15   U.S.C. 78o–3(b)(6).



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                                                    35250                            Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices

                                                    costs that arise due to an insufficient                  post all comments on the Commission’s                     19b–4 thereunder,2 a proposed rule
                                                    pool of qualified arbitrators such as the                Internet Web site (http://www.sec.gov/                    change to: (i) Amend IEX Rule 11.231 to
                                                    costs associated with arbitrators                        rules/sro.shtml). Copies of the                           modify the manner in which the
                                                    traveling from other hearing locations.                  submission, all subsequent                                Exchange opens trading for non-IEX-
                                                    Further, readmitting previously                          amendments, all written statements                        listed securities beginning at the start of
                                                    qualified persons increases the pool of                  with respect to the proposed rule                         Regular Market Hours; and (ii) amend
                                                    experienced arbitrators, which                           change that are filed with the                            IEX Rules 11.190 and 11.220 to specify
                                                    strengthens the forum.                                   Commission, and all written                               the order types eligible to participate in
                                                       The proposal would impose no direct                   communications relating to the                            the proposed opening process for non-
                                                    or indirect costs on persons previously                  proposed rule change between the                          IEX listed securities and priority of such
                                                    eliminated from acting as arbitrators,                   Commission and any person, other than                     orders. The proposed rule change was
                                                    new candidates for arbitrator, or parties                those that may be withheld from the                       published for comment in the Federal
                                                    accessing the forum.                                     public in accordance with the
                                                                                                                                                                       Register on April 28, 2017.3 On May 19,
                                                                                                             provisions of 5 U.S.C. 552, will be
                                                    C. Self-Regulatory Organization’s                                                                                  2017, IEX filed Amendment No. 1 to the
                                                                                                             available for Web site viewing and
                                                    Statement on Comments on the                                                                                       proposal. On June 9, 2017, IEX
                                                                                                             printing in the Commission’s Public
                                                    Proposed Rule Change Received from                                                                                 consented to an extension of time for
                                                                                                             Reference Room, 100 F Street NE.,
                                                    Members, Participants, or Others                                                                                   the Commission to act on the proposal
                                                                                                             Washington, DC 20549, on official
                                                      Written comments were neither                          business days between the hours of                        until July 5, 2017.4 On June 22, 2017,
                                                    solicited nor received.                                  10:00 a.m. and 3:00 p.m. Copies of such                   IEX filed Amendment No. 2 to the
                                                                                                             filing also will be available for                         proposal, which superseded and
                                                    III. Date of Effectiveness of the
                                                                                                             inspection and copying at the principal                   replaced Amendment No. 1 in its
                                                    Proposed Rule Change and Timing for
                                                                                                             office of FINRA. All comments received                    entirety. On June 29, 2017, IEX filed
                                                    Commission Action
                                                                                                             will be posted without change; the                        Amendment No. 3 to the proposal,
                                                       Within 45 days of the date of                         Commission does not edit personal                         which superseded and replaced
                                                    publication of this notice in the Federal                identifying information from                              Amendment No. 2 in its entirety.5 Also
                                                    Register or within such longer period (i)                submissions. You should submit only                       on June 29, 2017, pursuant to Section
                                                    as the Commission may designate up to                    information that you wish to make                         19(b)(2) of the Act,6 the Commission
                                                    90 days of such date if it finds such                    available publicly.                                       designated a longer period within which
                                                    longer period to be appropriate and                         All submissions should refer to File                   to approve the proposed rule change,
                                                    publishes its reasons for so finding or                  Number SR–FINRA–2017–025 and                              disapprove the proposed rule change, or
                                                    (ii) as to which the self-regulatory                     should be submitted on or before
                                                    organization consents, the Commission                                                                              institute proceedings to determine
                                                                                                             August 18, 2017.                                          whether to approve or disapprove the
                                                    will:
                                                       (A) By order approve or disapprove                      For the Commission, by the Division of                  proposed rule change.7 The Commission
                                                    such proposed rule change, or                            Trading and Markets, pursuant to delegated                received no comments on the proposed
                                                                                                             authority.9                                               rule change. The Commission is
                                                       (B) institute proceedings to determine
                                                    whether the proposed rule change                         Eduardo A. Aleman,                                        publishing this notice to solicit
                                                    should be disapproved.                                   Assistant Secretary.                                      comment on Amendment No. 3 to the
                                                                                                             [FR Doc. 2017–15909 Filed 7–27–17; 8:45 am]               proposed rule change from interested
                                                    IV. Solicitation of Comments
                                                                                                             BILLING CODE 8011–01–P                                    persons, and is approving the proposed
                                                      Interested persons are invited to                                                                                rule change, as modified by Amendment
                                                    submit written data, views and                                                                                     No. 3, on an accelerated basis.
                                                    arguments concerning the foregoing,                      SECURITIES AND EXCHANGE
                                                    including whether the proposed rule                      COMMISSION                                                  2 17  CFR 240.19b–4.
                                                    change is consistent with the Act.                                                                                   3 See  Securities Exchange Act Release No. 80514
                                                    Comments may be submitted by any of                      [Release No. 34–81195; File No. SR–IEX–
                                                                                                                                                                       (April 24, 2017), 82 FR 19763 (‘‘Notice’’).
                                                                                                             2017–11]
                                                    the following methods:                                                                                                4 See letter from Claudia Crowley, Chief

                                                                                                                                                                       Regulatory Officer, IEX, to Richard Holley,
                                                    Electronic Comments                                      Self-Regulatory Organizations;
                                                                                                                                                                       Assistant Director, Division of Trading and Markets,
                                                                                                             Investors Exchange LLC; Notice of
                                                      • Use the Commission’s Internet                                                                                  Commission, dated June 9, 2017.
                                                                                                             Filing of Amendment No. 3 and Order                          5 Amendment No. 3 revised the proposal to: (i)
                                                    comment form (http://www.sec.gov/
                                                                                                             Granting Accelerated Approval of                          Provide additional clarity regarding the process for
                                                    rules/sro.shtml); or
                                                                                                             Proposed Rule Change, as Modified by                      determining the opening match price; (ii) modify
                                                      • Send an email to rule-comments@                                                                                the definition of ‘‘Cross Tie Breaker’’ to account for
                                                                                                             Amendment No. 3, To Modify the
                                                    sec.gov. Please include File Number SR–                                                                            the requirement under the National Market System
                                                                                                             Manner in Which the Exchange Opens
                                                    FINRA–2017–025 on the subject line.                                                                                Plan to Implement a Tick Size Pilot Program (‘‘Tick
                                                                                                             Trading for Non-IEX-Listed Securities                     Size Pilot’’) that certain securities be traded in
                                                    Paper Comments                                                                                                     nickel increments; and (iii) correct certain
                                                                                                             July 24, 2017.
                                                      • Send paper comments in triplicate                                                                              typographical errors. Amendment No. 3 also revised
                                                                                                             I. Introduction                                           the proposal to fix an error in the proposed rule text
                                                    to Secretary, Securities and Exchange                                                                              in Amendment No. 2 and correct additional
                                                    Commission, 100 F Street NE.,
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                               On April 13, 2017, Investors Exchange                   typographical errors. Amendment No. 3 is available
                                                    Washington, DC 20549–1090.                               LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed                   at: https://www.sec.gov/comments/sr-iex-2017-11/
                                                    All submissions should refer to File                     with the Securities and Exchange                          iex201711-1831518-154558.pdf.
                                                                                                                                                                          6 15 U.S.C. 78s(b)(2).
                                                    Number SR–FINRA–2017–025. This file                      Commission (‘‘Commission’’), pursuant
                                                                                                                                                                          7 See Securities Exchange Act Release No. 81052
                                                    number should be included on the                         to Section 19(b)(1) of the Securities
                                                                                                                                                                       (June 29, 2017), 82 FR 31377 (July 6, 2017). The
                                                    subject line if email is used. To help the               Exchange Act of 1934 (‘‘Act’’) 1 and Rule                 Commission designated July 27, 2017 as the date by
                                                    Commission process and review your                                                                                 which the Commission shall approve or disapprove,
                                                    comments more efficiently, please use                         9 17   CFR 200.30–3(a)(12).                          or institute proceedings to determine whether to
                                                    only one method. The Commission will                          1 15   U.S.C. 78s(b)(1).                             approve or disapprove, the proposed rule change.



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Document Created: 2017-07-28 03:10:41
Document Modified: 2017-07-28 03:10:41
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 35248 

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