83_FR_22199 83 FR 22107 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Statutory Disqualification Application Fees

83 FR 22107 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Statutory Disqualification Application Fees

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 92 (May 11, 2018)

Page Range22107-22110
FR Document2018-10039

Federal Register, Volume 83 Issue 92 (Friday, May 11, 2018)
[Federal Register Volume 83, Number 92 (Friday, May 11, 2018)]
[Notices]
[Pages 22107-22110]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-10039]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No 34-83181; File No. SR-FINRA-2018-018]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Statutory Disqualification Application 
Fees

May 7, 2018.
    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 April 30, 2018, Financial Industry Regulatory

[[Page 22108]]

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. FINRA has designated the proposed rule change as 
``establishing or changing a due, fee or other charge'' under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposal effective upon receipt of this filing by the 
Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 Section 12 to Schedule A of the FINRA 
By-Laws, regarding statutory disqualification application fees.
    The text of the proposed rule change is available on FINRA's 
website 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.

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

1. Purpose
    FINRA is proposing to increase the fee to file an application for 
an eligibility proceeding under the Rule 9520 Series (Eligibility 
Proceedings) for the first time since 1994.\5\ Pursuant to Article III, 
Section 3 of the FINRA By-Laws, a member is ineligible for continuance 
in membership where the member associates with a person who is subject 
to a ``statutory disqualification'' (``SD'') \6\ or the member itself 
is subject to an SD. The Rule 9520 Series sets forth procedures for a 
person to become or remain associated with a member, notwithstanding 
the existence of an SD, and for a current member or person associated 
with a member to obtain relief from the eligibility or qualification 
requirements of the FINRA By-Laws and rules. A member or person 
associated with a member may request relief from the eligibility 
requirements by filing an application with FINRA (``SD 
Application'').\7\
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    \5\ See Securities Exchange Act Release No. 34897 (October 26, 
1994), 59 FR 54648 (November 1, 1994) (Order Approving File No. SR-
NASD-94-57) (increasing the SD Application Fee from $1,000 to 
$1,500).
    \6\ Article III, Section 4 of the FINRA By-Laws incorporates the 
definition of ``statutory disqualification'' under Section 3(a)(39) 
of the Act.
    \7\ Rule 9520 Series sets forth eligibility proceedings under 
which FINRA may allow a member, person associated with a member, 
potential member, or potential associated person subject to an SD to 
enter or remain in the securities industry.
---------------------------------------------------------------------------

    Currently, Section 12 to Schedule A of the By-Laws (Application and 
Annual Fee for Member Firms with Statutorily Disqualified Individuals) 
provides that a member must pay to FINRA a fee of $1,500 to file an SD 
Application (``SD Application Fee'') when it seeks to employ or 
continue to employ as an associated person any individual who is 
subject to an SD (Form MC-400). In contrast, FINRA currently does not 
require a member to pay a fee to file an SD Application where the 
member itself is subject to an SD (Form MC-400A). Since 1994, FINRA has 
not made any adjustments to the SD Application Fee.
    SD Applications take significant staff time and resources to 
research and review, as each application is assessed on a case-by-case 
basis. While the number of SD Applications has remained relatively 
constant and the SD Application Fee has remained unchanged, the 
complexity of the applications and the time needed to investigate them 
through, for example, public records searches, discussions with federal 
and state regulators, and contacts with state and federal courts, has 
increased. Moreover, even in 1994, the SD Application Fee of $1,500 was 
insufficient to cover the average costs associated with the processing 
and review of SD Applications.\8\
---------------------------------------------------------------------------

    \8\ See supra note 5, 59 FR at 54649 (noting that the average 
costs associated with the processing and review of SD Applications 
was more than $1,500 in 1994).
---------------------------------------------------------------------------

    In order to offset more of the costs associated with FINRA staff's 
thorough assessment of SD Applications, the proposed rule change would 
amend Section 12 to Schedule A of the FINRA By-Laws by increasing from 
$1,500 to $5,000 the SD Application Fee for filing a Form MC-400. In 
addition, the proposed rule change would impose, for the first time, an 
SD Application Fee of $5,000 on SD Applications for filing a Form MC-
400A where the member itself is the subject of the SD. Specifically, 
Section 12 to Schedule A of the FINRA By-Laws would be revised to 
require any member firm, or applicant for membership under NASD Rule 
1013 that is subject to a disqualification as set forth in Article III, 
Section 4 of the By-Laws of the Corporation that seeks to enter, or be 
continued in, membership to pay FINRA a fee of $5,000.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date will be May 30, 2018.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\9\ which requires, among 
other things, that FINRA rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that FINRA operates or 
controls. FINRA believes that the proposed rule change more equitably 
allocates among member firms the costs incurred for time and resources 
needed to thoroughly review and assess SD Applications.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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. FINRA has undertaken an 
economic impact assessment, as set forth below, to analyze the 
regulatory need for the proposed rulemaking and its potential economic 
impacts, including anticipated costs and benefits.
1. Economic Impact Assessment
a. Regulatory Need
    As discussed above, SD Applications take significant FINRA staff 
time and resources to research and review; due to the unique facts and 
circumstances of each SD matter, each application is assessed on a 
case-by-case basis. The current SD Application Fee for Form MC-400 
applications is insufficient to cover the costs associated with the 
review of these applications. Further, FINRA currently does not require 
a member firm to pay a fee for the review of Form MC-400A applications, 
but FINRA still must commit resources to

[[Page 22109]]

review these applications. As a result, the current SD Application Fee 
is even less sufficient to cover the current costs associated with the 
staff's assessment of all SD Applications, requiring a significant 
portion of costs to conduct these assessments to be borne indirectly by 
non-SD applicant member firms. The proposed rule change serves as an 
economic transfer of some of the costs associated with the review from 
unrelated parties to the immediate parties seeking the relief.
b. Economic Baseline
    The economic baseline used to evaluate the impact of the proposed 
amendments is the current regulatory framework. This baseline serves as 
the primary point of comparison for assessing the economic impacts, 
including the incremental benefits and costs of the proposed rule 
change. FINRA reviewed the SD Applications that were filed during 2013-
2016 (``review period''). Based on this review, FINRA estimates that 
there were 167 SD Applications filed by 135 member firms during the 
review period. Of the 167 SD Applications, FINRA identified 122 Form 
MC-400 applications and 45 Form MC-400A applications.\10\ FINRA further 
estimates that approximately 50% of these applications were filed by 
small firms, 17% by mid-sized firms and 33% by large firms.\11\
---------------------------------------------------------------------------

    \10\ Approximately 84% of the filing member firms submitted one 
SD Application, whereas the remaining 16% of the filing member firms 
submitted two or more SD Applications during the review period. 
Further, the total number of SD Applications for the review period 
excludes 52 MC-400A applications filed in 2015 and 12 in 2016 in 
connection with the SEC's Municipalities Continuing Disclosure 
Cooperation (MCDC) Initiative. Applications filed in connection with 
the MCDC Initiative are excluded from the calculation for the review 
period because they were the result of an industry-wide settlement 
and, as such, would disproportionately impact the review numbers 
outside the normal course. See https://www.sec.gov/divisions/enforce/municipalities-continuing-disclosure-cooperation-initiative.shtml.
    \11\ Based on FINRA By-Laws, Article I (Definitions), member 
firms with 150 or fewer registered persons are classified as small, 
member firms with 151-499 registered persons are classified as mid-
size, and member firms with 500 or more registered persons are 
classified as large.
---------------------------------------------------------------------------

c. Economic Impacts
    FINRA examined the time required of its staff to review all SD 
Applications filed during the review period and the reviewing staff's 
compensation associated with the review of these SD Applications. Based 
on that analysis, FINRA determined that the current SD Application Fee 
of $1,500 for Form MC-400 applications is insufficient to cover the 
costs associated with FINRA's review of such applications and even less 
sufficient to cover the costs associated with FINRA's review of all SD 
Applications.
    The impact of this proposal would be to help shift more of the 
costs associated with reviewing SD Applications to the member firms 
that file Form MC-400 or Form MC-400A applications. As noted above, 
FINRA identified 122 Form MC-400 and 45 Form MC-400A applications 
during the review period. Based on the proposed increase in the SD 
Application Fee for both Form MC-400 and Form MC-400A applications to 
$5,000, FINRA estimates that the total cost to all SD applicants would 
increase by $163,000 on average each year, if applications remain at 
their historical levels. For the set of member firms that submitted SD 
Applications during the review period, the proposed fee increase would 
have led to an annual increased cost of $3,500-$13,500 per firm, with a 
median increased cost of $3,500 per member firm.\12\
---------------------------------------------------------------------------

    \12\ The incremental costs are calculated on an annual, per firm 
basis. For each member firm submitting a Form MC-400 or Form MC-400A 
application, FINRA assigned an incremental cost of $3,500 for each 
Form MC-400 application filed and $5,000 for each Form MC-400A 
application filed in that year. The range represents the total 
aggregate incremental cost per submitting firm, per year. Thus, 
$3,500 represents the cost of a member firm that submitted only one 
Form MC-400 in a given year and $13,500 reflects the cost of a 
member firm that submitted two Form MC-400A applications and one 
Form MC-400 application in that year.
---------------------------------------------------------------------------

    Shifting more of the burden of the costs associated with the review 
of SD Applications to the SD applicants also may affect their behavior. 
For instance, increasing the SD Application Fee may dissuade some 
member firms from seeking to employ or continuing to employ statutorily 
disqualified individuals. The increased fees also may cause some member 
firms to be more selective in instances where they might decide to 
employ such individuals. In general, some member firms that today may 
submit an SD Application at little or no cost, may determine that it is 
no longer in their best interest to do so.
    These impacts would likely be higher for smaller firms, cash 
constrained firms, and firms that anticipate that the likelihood of the 
application being accepted is low ex ante. Any reduction in the number 
of SD Applications would lead to less FINRA staff time and resources 
spent on the review of SD Applications, decreasing the costs associated 
with the review of such applications and further reducing the aggregate 
economic transfer to SD applicants.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-FINRA-2018-018 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-2018-018. 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

[[Page 22110]]

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 FINRA. 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-FINRA-2018-018 and 
should be submitted on or before June 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2018-10039 Filed 5-10-18; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                 Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Notices                                                  22107

                                                Rockville Pike, Room T–2B3, Rockville,                  persons planning to attend should check               cannot be provided within this
                                                Maryland 20852.                                         with these references if such                         timeframe, presenters should provide
                                                   The meetings will be open to public                  rescheduling would result in a major                  the DFO with a CD containing each
                                                attendance with the exception of                        inconvenience.                                        presentation at least thirty minutes
                                                portions that may be closed to protect                    If attending this meeting, please enter             before the meeting. Electronic
                                                information that is proprietary pursuant                through the One White Flint North                     recordings will be permitted only
                                                to 5 U.S.C. 552b(c)(4). The agenda for                  building, 11555 Rockville Pike,                       during those portions of the meeting
                                                the subject meeting shall be as follows:                Rockville, Maryland. After registering                that are open to the public. Detailed
                                                Monday, May 15, 2018—8:30 a.m. Until                    with Security, please contact Mr.                     procedures for the conduct of and
                                                12:00 p.m.                                              Theron Brown (Telephone 301–415–                      participation in ACRS meetings were
                                                                                                        6702 or 301–415–8066) to be escorted to               published in the Federal Register on
                                                   The Subcommittee will have a                         the meeting room.                                     October 4, 2017 (82 FR 46312).
                                                briefing with NRC’s Office of Nuclear                                                                            Detailed meeting agendas and meeting
                                                                                                          Dated: May 7, 2018.
                                                Regulatory Research on the                                                                                    transcripts are available on the NRC
                                                Confirmatory Analysis supporting the                    Mark L. Banks,
                                                                                                        Chief, Technical Support Branch, Advisory
                                                                                                                                                              website at http://www.nrc.gov/reading-
                                                Brunswick Steam Electric Plant                                                                                rm/doc-collections/acrs. Information
                                                Maximum Extended Load Line Limit                        Committee on Reactor Safeguards.
                                                                                                        [FR Doc. 2018–09999 Filed 5–10–18; 8:45 am]
                                                                                                                                                              regarding topics to be discussed,
                                                Analysis Plus (MELLLA+) submittal.                                                                            changes to the agenda, whether the
                                                The Subcommittee will hear                              BILLING CODE 7590–01–P
                                                                                                                                                              meeting has been canceled or
                                                presentations by and hold discussions                                                                         rescheduled, and the time allotted to
                                                with the NRC staff, and other interested                                                                      present oral statements can be obtained
                                                persons regarding this matter. The                      NUCLEAR REGULATORY
                                                                                                        COMMISSION                                            from the website cited above or by
                                                Subcommittee will gather information,                                                                         contacting the identified DFO.
                                                analyze relevant issues and facts, and                                                                        Moreover, in view of the possibility that
                                                                                                        Advisory Committee on Reactor
                                                formulate proposed positions and                                                                              the schedule for ACRS meetings may be
                                                                                                        Safeguards (ACRS) Meeting of the
                                                actions, as appropriate, for deliberation                                                                     adjusted by the Chairman as necessary
                                                                                                        ACRS Subcommittee on Regulatory
                                                by the Full Committee.                                                                                        to facilitate the conduct of the meeting,
                                                   Members of the public desiring to                    Policies & Practices; Notice of Meeting
                                                                                                                                                              persons planning to attend should check
                                                provide oral statements and/or written                     The ACRS Subcommittee on                           with these references if such
                                                comments should notify the Designated                   Regulatory Policies and Practices will                rescheduling would result in a major
                                                Federal Official (DFO), Zena Abdullahi                  hold a meeting on May 15, 2018, at
                                                (Telephone 301–415–8716 or Email:                                                                             inconvenience.
                                                                                                        11545 Rockville Pike, Room T–2B1,                        If attending this meeting, please enter
                                                Zena.Abdullahi@nrc.gov) five days prior                 Rockville, Maryland 20852.                            through the One White Flint North
                                                to the meeting, if possible, so that                       This meeting will be open to public                building, 11555 Rockville Pike,
                                                appropriate arrangements can be made.                   attendance. The agenda for the subject                Rockville, Maryland 20852. After
                                                Thirty-five hard copies of each                         meeting shall be as follows:                          registering with Security, please contact
                                                presentation or handout should be
                                                provided to the DFO thirty minutes                      Tuesday, May 15, 2018—8:30 a.m. Until                 Mr. Theron Brown (Telephone 301–
                                                before the meeting. In addition, one                    12:00 p.m.                                            415–6702) to be escorted to the meeting
                                                electronic copy of each presentation                      The Subcommittee will review                        room.
                                                should be emailed to the DFO one day                    selected sections (Geography &                          Dated: May 7, 2018.
                                                before the meeting. If an electronic copy               Demography (2.1); Nearby Industrial,                  Mark L. Banks,
                                                cannot be provided within this                          Transportation and Military Facilities                Chief, Technical Support Branch, Advisory
                                                timeframe, presenters should provide                    (2.2); Aircraft Hazards (3.5.1.6); and                Committee on Reactor Safeguards.
                                                the DFO with a CD containing each                       Accident Analysis (15.1)) of the Early                [FR Doc. 2018–09998 Filed 5–10–18; 8:45 am]
                                                presentation at least thirty minutes                    Site Permit for Clinch River and will                 BILLING CODE 7590–01–P
                                                before the meeting. Electronic                          hear presentations by and hold
                                                recordings will be permitted only                       discussions with the NRC staff and
                                                during those portions of the meeting                    other interested persons regarding this               SECURITIES AND EXCHANGE
                                                that are open to the public. Detailed                   matter. The Subcommittee will gather                  COMMISSION
                                                procedures for the conduct of and                       information, analyze relevant issues and
                                                participation in ACRS meetings were                     facts, and formulate proposed positions               [Release No 34–83181; File No. SR–FINRA–
                                                published in the Federal Register on                    and actions, as appropriate, for                      2018–018]
                                                October 4, 2017 (82 FR 46312).                          deliberation by the Full Committee.                   Self-Regulatory Organizations;
                                                   Detailed meeting agendas and meeting                   Members of the public desiring to
                                                                                                                                                              Financial Industry Regulatory
                                                transcripts are available on the NRC                    provide oral statements and/or written
                                                                                                                                                              Authority, Inc.; Notice of Filing and
                                                website at http://www.nrc.gov/reading-                  comments should notify the Designated
                                                                                                                                                              Immediate Effectiveness of a Proposed
                                                rm/doc-collections/acrs. Information                    Federal Official (DFO), Quynh Nguyen
                                                                                                                                                              Rule Change Relating to Statutory
                                                regarding topics to be discussed,                       (Telephone 301–415–5844 or Email
                                                                                                                                                              Disqualification Application Fees
                                                changes to the agenda, whether the                      Quynh.Nguyen@nrc.gov) five days prior
                                                meeting has been canceled or                            to the meeting, if possible, so that                  May 7, 2018.
                                                rescheduled, and the time allotted to                   appropriate arrangements can be made.
sradovich on DSK3GMQ082PROD with NOTICES




                                                                                                                                                                 Pursuant to Section 19(b)(1) of the
                                                present oral statements can be obtained                 Thirty-five hard copies of each                       Securities Exchange Act of 1934
                                                from the website cited above or by                      presentation or handout should be                     (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
                                                contacting the identified DFO.                          provided to the DFO thirty minutes                    notice is hereby given that on April 30,
                                                Moreover, in view of the possibility that               before the meeting. In addition, one                  2018, Financial Industry Regulatory
                                                the schedule for ACRS meetings may be                   electronic copy of each presentation
                                                adjusted by the Chairman as necessary                   should be emailed to the DFO one day                    1 15   U.S.C. 78s(b)(1).
                                                to facilitate the conduct of the meeting,               before the meeting. If an electronic copy               2 17   CFR 240.19b–4.



                                           VerDate Sep<11>2014   19:21 May 10, 2018   Jkt 244001   PO 00000   Frm 00111   Fmt 4703   Sfmt 4703   E:\FR\FM\11MYN1.SGM     11MYN1


                                                22108                            Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Notices

                                                Authority, Inc. (‘‘FINRA’’) filed with the              to a ‘‘statutory disqualification’’ (‘‘SD’’) 6          proposed rule change would impose, for
                                                Securities and Exchange Commission                      or the member itself is subject to an SD.               the first time, an SD Application Fee of
                                                (‘‘SEC’’ or ‘‘Commission’’) the proposed                The Rule 9520 Series sets forth                         $5,000 on SD Applications for filing a
                                                rule change as described in Items I, II,                procedures for a person to become or                    Form MC–400A where the member
                                                and III below, which Items have been                    remain associated with a member,                        itself is the subject of the SD.
                                                prepared by FINRA. FINRA has                            notwithstanding the existence of an SD,                 Specifically, Section 12 to Schedule A
                                                designated the proposed rule change as                  and for a current member or person                      of the FINRA By-Laws would be revised
                                                ‘‘establishing or changing a due, fee or                associated with a member to obtain                      to require any member firm, or
                                                other charge’’ under Section                            relief from the eligibility or qualification            applicant for membership under NASD
                                                19(b)(3)(A)(ii) of the Act 3 and Rule 19b–              requirements of the FINRA By-Laws and                   Rule 1013 that is subject to a
                                                4(f)(2) thereunder,4 which renders the                  rules. A member or person associated                    disqualification as set forth in Article
                                                proposal effective upon receipt of this                 with a member may request relief from                   III, Section 4 of the By-Laws of the
                                                filing by the Commission. The                           the eligibility requirements by filing an               Corporation that seeks to enter, or be
                                                Commission is publishing this notice to                 application with FINRA (‘‘SD                            continued in, membership to pay
                                                solicit comments on the proposed rule                   Application’’).7                                        FINRA a fee of $5,000.
                                                change from interested persons.                            Currently, Section 12 to Schedule A                     FINRA has filed the proposed rule
                                                                                                        of the By-Laws (Application and Annual                  change for immediate effectiveness. The
                                                I. Self-Regulatory Organization’s                       Fee for Member Firms with Statutorily                   implementation date will be May 30,
                                                Statement of the Terms of Substance of                  Disqualified Individuals) provides that a               2018.
                                                the Proposed Rule Change                                member must pay to FINRA a fee of
                                                                                                                                                                2. Statutory Basis
                                                   FINRA is proposing to amend Section                  $1,500 to file an SD Application (‘‘SD
                                                                                                        Application Fee’’) when it seeks to                        FINRA believes that the proposed rule
                                                12 to Schedule A of the FINRA By-                                                                               change is consistent with the provisions
                                                Laws, regarding statutory                               employ or continue to employ as an
                                                                                                        associated person any individual who is                 of Section 15A(b)(5) of the Act,9 which
                                                disqualification application fees.                                                                              requires, among other things, that
                                                                                                        subject to an SD (Form MC–400). In
                                                   The text of the proposed rule change                 contrast, FINRA currently does not                      FINRA rules provide for the equitable
                                                is available on FINRA’s website at                      require a member to pay a fee to file an                allocation of reasonable dues, fees and
                                                http://www.finra.org, at the principal                  SD Application where the member itself                  other charges among members and
                                                office of FINRA and at the                              is subject to an SD (Form MC–400A).                     issuers and other persons using any
                                                Commission’s Public Reference Room.                     Since 1994, FINRA has not made any                      facility or system that FINRA operates
                                                II. Self-Regulatory Organization’s                      adjustments to the SD Application Fee.                  or controls. FINRA believes that the
                                                Statement of the Purpose of, and                           SD Applications take significant staff               proposed rule change more equitably
                                                Statutory Basis for, the Proposed Rule                  time and resources to research and                      allocates among member firms the costs
                                                Change                                                  review, as each application is assessed                 incurred for time and resources needed
                                                                                                        on a case-by-case basis. While the                      to thoroughly review and assess SD
                                                  In its filing with the Commission,                    number of SD Applications has                           Applications.
                                                FINRA included statements concerning                    remained relatively constant and the SD                 B. Self-Regulatory Organization’s
                                                the purpose of and basis for the                        Application Fee has remained                            Statement on Burden on Competition
                                                proposed rule change and discussed any                  unchanged, the complexity of the
                                                comments it received on the proposed                    applications and the time needed to                       FINRA does not believe that the
                                                rule change. The text of these statements               investigate them through, for example,                  proposed rule change will result in any
                                                may be examined at the places specified                 public records searches, discussions                    burden on competition that is not
                                                in Item IV below. FINRA has prepared                    with federal and state regulators, and                  necessary or appropriate in furtherance
                                                summaries, set forth in sections A, B,                  contacts with state and federal courts,                 of the purposes of the Act. FINRA has
                                                and C below, of the most significant                    has increased. Moreover, even in 1994,                  undertaken an economic impact
                                                aspects of such statements.                             the SD Application Fee of $1,500 was                    assessment, as set forth below, to
                                                                                                        insufficient to cover the average costs                 analyze the regulatory need for the
                                                A. Self-Regulatory Organization’s                                                                               proposed rulemaking and its potential
                                                                                                        associated with the processing and
                                                Statement of the Purpose of, and                                                                                economic impacts, including
                                                                                                        review of SD Applications.8
                                                Statutory Basis for, the Proposed Rule                                                                          anticipated costs and benefits.
                                                                                                           In order to offset more of the costs
                                                Change
                                                                                                        associated with FINRA staff’s thorough                  1. Economic Impact Assessment
                                                1. Purpose                                              assessment of SD Applications, the
                                                                                                                                                                a. Regulatory Need
                                                                                                        proposed rule change would amend
                                                  FINRA is proposing to increase the fee                Section 12 to Schedule A of the FINRA                      As discussed above, SD Applications
                                                to file an application for an eligibility               By-Laws by increasing from $1,500 to                    take significant FINRA staff time and
                                                proceeding under the Rule 9520 Series                   $5,000 the SD Application Fee for filing                resources to research and review; due to
                                                (Eligibility Proceedings) for the first                 a Form MC–400. In addition, the                         the unique facts and circumstances of
                                                time since 1994.5 Pursuant to Article III,                                                                      each SD matter, each application is
                                                Section 3 of the FINRA By-Laws, a                         6 Article III, Section 4 of the FINRA By-Laws         assessed on a case-by-case basis. The
                                                member is ineligible for continuance in                 incorporates the definition of ‘‘statutory              current SD Application Fee for Form
                                                membership where the member                             disqualification’’ under Section 3(a)(39) of the Act.   MC–400 applications is insufficient to
                                                                                                          7 Rule 9520 Series sets forth eligibility
                                                associates with a person who is subject
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                                                                                                        proceedings under which FINRA may allow a
                                                                                                                                                                cover the costs associated with the
                                                                                                        member, person associated with a member,                review of these applications. Further,
                                                  3 15  U.S.C. 78s(b)(3)(A)(ii).                        potential member, or potential associated person        FINRA currently does not require a
                                                  4 17  CFR 240.19b–4(f)(2).                            subject to an SD to enter or remain in the securities   member firm to pay a fee for the review
                                                   5 See Securities Exchange Act Release No. 34897      industry.
                                                                                                                                                                of Form MC–400A applications, but
                                                (October 26, 1994), 59 FR 54648 (November 1, 1994)        8 See supra note 5, 59 FR at 54649 (noting that

                                                (Order Approving File No. SR–NASD–94–57)                the average costs associated with the processing and    FINRA still must commit resources to
                                                (increasing the SD Application Fee from $1,000 to       review of SD Applications was more than $1,500 in
                                                $1,500).                                                1994).                                                   9 15   U.S.C. 78o–3(b)(5).



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                                                                                 Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Notices                                            22109

                                                review these applications. As a result,                 less sufficient to cover the costs                    C. Self-Regulatory Organization’s
                                                the current SD Application Fee is even                  associated with FINRA’s review of all                 Statement on Comments on the
                                                less sufficient to cover the current costs              SD Applications.                                      Proposed Rule Change Received From
                                                associated with the staff’s assessment of                  The impact of this proposal would be               Members, Participants, or Others
                                                all SD Applications, requiring a                                                                                Written comments were neither
                                                                                                        to help shift more of the costs associated
                                                significant portion of costs to conduct                                                                       solicited nor received.
                                                                                                        with reviewing SD Applications to the
                                                these assessments to be borne indirectly
                                                by non-SD applicant member firms. The                   member firms that file Form MC–400 or                 III. Date of Effectiveness of the
                                                proposed rule change serves as an                       Form MC–400A applications. As noted                   Proposed Rule Change and Timing for
                                                economic transfer of some of the costs                  above, FINRA identified 122 Form MC–                  Commission Action
                                                associated with the review from                         400 and 45 Form MC–400A applications
                                                                                                                                                                 The foregoing rule change has become
                                                unrelated parties to the immediate                      during the review period. Based on the                effective pursuant to Section 19(b)(3)(A)
                                                parties seeking the relief.                             proposed increase in the SD Application               of the Act 13 and paragraph (f)(2) of Rule
                                                                                                        Fee for both Form MC–400 and Form                     19b–4 thereunder.14 At any time within
                                                b. Economic Baseline                                    MC–400A applications to $5,000,                       60 days of the filing of the proposed rule
                                                   The economic baseline used to                        FINRA estimates that the total cost to all            change, the Commission summarily may
                                                evaluate the impact of the proposed                     SD applicants would increase by                       temporarily suspend such rule change if
                                                amendments is the current regulatory                    $163,000 on average each year, if                     it appears to the Commission that such
                                                framework. This baseline serves as the                  applications remain at their historical               action is necessary or appropriate in the
                                                primary point of comparison for                         levels. For the set of member firms that              public interest, for the protection of
                                                assessing the economic impacts,                         submitted SD Applications during the                  investors, or otherwise in furtherance of
                                                including the incremental benefits and                  review period, the proposed fee increase              the purposes of the Act. If the
                                                costs of the proposed rule change.                      would have led to an annual increased                 Commission takes such action, the
                                                FINRA reviewed the SD Applications                      cost of $3,500–$13,500 per firm, with a               Commission shall institute proceedings
                                                that were filed during 2013–2016                        median increased cost of $3,500 per                   to determine whether the proposed rule
                                                (‘‘review period’’). Based on this review,              member firm.12                                        should be approved or disapproved.
                                                FINRA estimates that there were 167 SD
                                                Applications filed by 135 member firms                     Shifting more of the burden of the                 IV. Solicitation of Comments
                                                during the review period. Of the 167 SD                 costs associated with the review of SD                  Interested persons are invited to
                                                Applications, FINRA identified 122                      Applications to the SD applicants also                submit written data, views and
                                                Form MC–400 applications and 45 Form                    may affect their behavior. For instance,              arguments concerning the foregoing,
                                                MC–400A applications.10 FINRA further                   increasing the SD Application Fee may                 including whether the proposed rule
                                                estimates that approximately 50% of                     dissuade some member firms from                       change is consistent with the Act.
                                                these applications were filed by small                  seeking to employ or continuing to                    Comments may be submitted by any of
                                                firms, 17% by mid-sized firms and 33%                   employ statutorily disqualified                       the following methods:
                                                by large firms.11                                       individuals. The increased fees also may
                                                                                                        cause some member firms to be more                    Electronic Comments
                                                c. Economic Impacts                                     selective in instances where they might                 • Use the Commission’s internet
                                                   FINRA examined the time required of                  decide to employ such individuals. In                 comment form (http://www.sec.gov/
                                                its staff to review all SD Applications                 general, some member firms that today                 rules/sro.shtml); or
                                                filed during the review period and the                  may submit an SD Application at little                  • Send an email to rule-comments@
                                                reviewing staff’s compensation                          or no cost, may determine that it is no               sec.gov. Please include File Number SR–
                                                associated with the review of these SD                  longer in their best interest to do so.               FINRA–2018–018 on the subject line.
                                                Applications. Based on that analysis,                                                                         Paper Comments
                                                FINRA determined that the current SD                       These impacts would likely be higher
                                                Application Fee of $1,500 for Form MC–                  for smaller firms, cash constrained                     • Send paper comments in triplicate
                                                400 applications is insufficient to cover               firms, and firms that anticipate that the             to Secretary, Securities and Exchange
                                                the costs associated with FINRA’s                       likelihood of the application being                   Commission, 100 F Street NE,
                                                review of such applications and even                    accepted is low ex ante. Any reduction                Washington, DC 20549–1090.
                                                                                                        in the number of SD Applications                      All submissions should refer to File
                                                   10 Approximately 84% of the filing member firms      would lead to less FINRA staff time and               Number SR–FINRA–2018–018. This file
                                                submitted one SD Application, whereas the               resources spent on the review of SD                   number should be included on the
                                                remaining 16% of the filing member firms                Applications, decreasing the costs                    subject line if email is used. To help the
                                                submitted two or more SD Applications during the
                                                review period. Further, the total number of SD          associated with the review of such                    Commission process and review your
                                                Applications for the review period excludes 52          applications and further reducing the                 comments more efficiently, please use
                                                MC–400A applications filed in 2015 and 12 in 2016       aggregate economic transfer to SD                     only one method. The Commission will
                                                in connection with the SEC’s Municipalities                                                                   post all comments on the Commission’s
                                                Continuing Disclosure Cooperation (MCDC)
                                                                                                        applicants.
                                                Initiative. Applications filed in connection with the                                                         internet website (http://www.sec.gov/
                                                MCDC Initiative are excluded from the calculation         12 The incremental costs are calculated on an       rules/sro.shtml). Copies of the
                                                for the review period because they were the result      annual, per firm basis. For each member firm          submission, all subsequent
                                                of an industry-wide settlement and, as such, would      submitting a Form MC–400 or Form MC–400A              amendments, all written statements
                                                disproportionately impact the review numbers            application, FINRA assigned an incremental cost of
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                                                outside the normal course. See https://www.sec.gov/     $3,500 for each Form MC–400 application filed and
                                                                                                                                                              with respect to the proposed rule
                                                divisions/enforce/municipalities-continuing-            $5,000 for each Form MC–400A application filed in     change that are filed with the
                                                disclosure-cooperation-initiative.shtml.                that year. The range represents the total aggregate   Commission, and all written
                                                   11 Based on FINRA By-Laws, Article I                 incremental cost per submitting firm, per year.       communications relating to the
                                                (Definitions), member firms with 150 or fewer           Thus, $3,500 represents the cost of a member firm
                                                registered persons are classified as small, member      that submitted only one Form MC–400 in a given
                                                                                                                                                              proposed rule change between the
                                                firms with 151–499 registered persons are classified    year and $13,500 reflects the cost of a member firm
                                                                                                                                                                13 15   U.S.C. 78s(b)(3)(A).
                                                as mid-size, and member firms with 500 or more          that submitted two Form MC–400A applications
                                                registered persons are classified as large.             and one Form MC–400 application in that year.           14 17   CFR 240.19b–4(f)(2).



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                                                22110                              Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Notices

                                                Commission and any person, other than                     SUPPLEMENTARY INFORMATION:     Notice is                             Notice of open Federal Advisory
                                                                                                                                                                         ACTION:
                                                those that may be withheld from the                       hereby given that as a result of the                           Committee meeting.
                                                public in accordance with the                             President’s major disaster declaration on
                                                provisions of 5 U.S.C. 552, will be                       05/05/2018, applications for disaster                          SUMMARY:   The SBA is issuing this notice
                                                available for website viewing and                         loans may be filed at the address listed                       to announce the location, date, time and
                                                printing in the Commission’s Public                       above or other locally announced                               agenda for the May 2018 meeting of the
                                                Reference Room, 100 F Street NE,                          locations.                                                     Federal Advisory Committee for the
                                                Washington, DC 20549, on official                           The following areas have been                                Small Business Development Centers
                                                business days between the hours of                        determined to be adversely affected by                         Program. The meeting will be open to
                                                10:00 a.m. and 3:00 p.m. Copies of such                   the disaster:                                                  the public; however, advance notice of
                                                filing also will be available for                                                                                        attendance is required.
                                                                                                          Primary Counties (Physical Damage and
                                                inspection and copying at the principal                        Economic Injury Loans): Carroll,                          DATES: Tuesday, May 15, 2018 1:00 p.m.
                                                office of FINRA. All comments received                         Clark, Elkhart, Floyd, Harrison,                          EST—Teleconference.
                                                will be posted without change. Persons                         Jefferson, Lake, Marshall, St Joseph                      ADDRESSES: The Tuesday, May 15, 2018
                                                submitting comments are cautioned that                    Contiguous Counties (Economic Injury                           meeting will be held via conference call.
                                                we do not redact or edit personal                              Loans Only):                                              FOR FURTHER INFORMATION CONTACT:
                                                identifying information from comment                        Indiana: Cass, Clinton, Crawford,                            Anne Reim, Office of Small Business
                                                submissions. You should submit only                            Fulton, Howard, Jasper, Jennings,                         Development Centers, U.S. Small
                                                information that you wish to make                              Kosciusko, La Porte, Lagrange,                            Business Administration, 409 Third
                                                available publicly.                                            Newton, Noble, Porter, Pulaski,                           Street SW, Washington, DC 20416;
                                                   All submissions should refer to File                        Ripley, Scott, Starke, Switzerland,                       anne.reim@sba.gov; 202–205–9565.
                                                Number SR–FINRA–2018–018 and                                   Tippecanoe, Washington, White                               If anyone wishes to be a listening
                                                should be submitted on or before June                       Illinois: Cook, Kankakee, Will                               participant or would like to request
                                                1, 2018.                                                    Kentucky: Carroll, Hardin, Jefferson,                        accommodations, please contact Anne
                                                  For the Commission, by the Division of                       Meade, Oldham, Trimble                                    Reim at the information above.
                                                Trading and Markets, pursuant to delegated                  Michigan: Berrien, Cass, Saint Joseph                        SUPPLEMENTARY INFORMATION: Pursuant
                                                authority.15
                                                                                                            The Interest Rates are:                                      to section 10(a) of the Federal Advisory
                                                Eduardo Aleman,                                                                                                          Committee Act (5 U.S.C. Appendix 2),
                                                Assistant Secretary.                                                                                          Percent    the SBA announces the meetings of the
                                                [FR Doc. 2018–10039 Filed 5–10–18; 8:45 am]                                                                              National SBDC Advisory Board. This
                                                                                                          For Physical Damage:
                                                BILLING CODE 8011–01–P
                                                                                                            Homeowners with Credit Avail-
                                                                                                                                                                         Board provides advice and counsel to
                                                                                                              able Elsewhere ......................              3.625   the SBA Administrator and Associate
                                                                                                            Homeowners without Credit                                    Administrator for Small Business
                                                SMALL BUSINESS ADMINISTRATION                                 Available Elsewhere ..............                 1.813   Development Centers.
                                                                                                            Businesses with Credit Avail-
                                                [Disaster Declaration #15512 and #15513;
                                                                                                              able Elsewhere ......................              7.160
                                                                                                                                                                         Purpose
                                                Indiana Disaster Number IN–00062]
                                                                                                            Businesses        without          Credit                    The purpose of the meeting is to
                                                                                                              Available Elsewhere ..............                 3.580 discuss the following issues pertaining
                                                Presidential Declaration of a Major
                                                                                                            Non-Profit Organizations with                              to the SBDC Program:
                                                Disaster for the State of Indiana                             Credit Available Elsewhere ...                     2.500
                                                                                                            Non-Profit Organizations with-                             • SBA Update
                                                AGENCY: U.S. Small Business                                                                                            • Annual Meetings
                                                Administration.                                               out Credit Available Else-
                                                                                                              where .....................................        2.500 • Board Assignments
                                                ACTION: Notice.                                           For Economic Injury:                                         • Member Roundtable
                                                                                                            Businesses & Small Agricultural
                                                SUMMARY:   This is a Notice of the                                                                                       John Woodard,
                                                                                                              Cooperatives without Credit
                                                Presidential declaration of a major                           Available Elsewhere ..............                 3.580   White House Liaison.
                                                disaster for the State of Indiana (FEMA–                    Non-Profit Organizations with-                               [FR Doc. 2018–10072 Filed 5–10–18; 8:45 am]
                                                4363–DR), dated 05/05/2018.                                   out Credit Available Else-
                                                                                                                                                                         BILLING CODE P
                                                  Incident: Severe Storms and Flooding.                       where .....................................        2.500
                                                  Incident Period: 02/14/2018 through
                                                03/04/2018.                                                 The number assigned to this disaster                         SMALL BUSINESS ADMINISTRATION
                                                DATES: Issued on 05/05/2018.                              for physical damage is 155126 and for
                                                  Physical Loan Application Deadline                      economic injury is 155130.                                     [Disaster Declaration #15514 and #15515;
                                                Date: 07/05/2018.                                                                                                        Indiana Disaster Number IN–00063]
                                                                                                          (Catalog of Federal Domestic Assistance
                                                  Economic Injury (EIDL) Loan                             Number 59008)
                                                Application Deadline Date: 02/05/2019.                                                                                   Presidential Declaration of a Major
                                                ADDRESS: Submit completed loan                            James Rivera,                                                  Disaster for Public Assistance Only for
                                                applications to: U.S. Small Business                      Associate Administrator for Disaster                           the State of Indiana
                                                Administration, Processing and                            Assistance.
                                                                                                                                                                         AGENCY: U.S. Small Business
                                                Disbursement Center, 14925 Kingsport                      [FR Doc. 2018–10031 Filed 5–10–18; 8:45 am]
                                                                                                                                                                         Administration.
                                                Road, Fort Worth, TX 76155.                               BILLING CODE 8025–01–P
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                                                                                                                                                                         ACTION: Notice.
                                                FOR FURTHER INFORMATION CONTACT: A.
                                                Escobar, Office of Disaster Assistance,                                                                                  SUMMARY:   This is a Notice of the
                                                                                                          SMALL BUSINESS ADMINISTRATION                                  Presidential declaration of a major
                                                U.S. Small Business Administration,
                                                409 3rd Street SW, Suite 6050,                            National Small Business Development                            disaster for Public Assistance Only for
                                                Washington, DC 20416, (202) 205–6734.                     Centers Advisory Board; Meeting                                the State of Indiana (FEMA–4363–DR),
                                                                                                                                                                         dated 05/05/2018.
                                                  15 17   CFR 200.30–3(a)(12).                            AGENCY:      Small Business Administration.                      Incident: Severe Storms and Flooding.


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Document Created: 2018-11-02 09:48:56
Document Modified: 2018-11-02 09:48:56
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 Citation83 FR 22107 

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