83 FR 42535 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend FINRA Rule 1220(a)(4), Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 163 (August 22, 2018)
Federal Register Volume 83, Issue 163 (August 22, 2018)
| Page Range | 42535-42537 | |
| FR Document | 2018-18065 |
[Federal Register Volume 83, Number 163 (Wednesday, August 22, 2018)] [Notices] [Pages 42535-42537] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-18065] [[Page 42535]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83863; File No. SR-FINRA-2018-031] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend FINRA Rule 1220(a)(4), Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal August 16, 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 August 15, 2018, 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. FINRA has designated the proposed rule change as constituting a ``non- controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 1220(a)(4) (Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal) to: (1) Reflect that certain firms remain exempt from the requirement to designate an individual as a Financial and Operations Principal (``FINOP'') or an Introducing Broker-Dealer Financial and Operations Principal (``Introducing FINOP''); and (2) provide that the individual designated as Principal Financial Officer and Principal Operations Officer of these exempt firms is not required to be qualified and registered as a FINOP or an Introducing FINOP. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose In July 2017, the SEC approved a proposed rule change to,\4\ among other things, adopt the NASD and Incorporated NYSE rules \5\ relating to individuals responsible for a member's financial and operational activities as FINRA Rule 1220(a)(4) in the Consolidated FINRA Rulebook.\6\ The rule change will become effective on October 1, 2018.\7\ --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 81098 (July 7, 2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR- FINRA-2017-007). For ease of reference, FINRA revised the titles of some of the registration categories as part of SR-FINRA-2017-007. For instance, FINRA changed ``Limited Principal--Financial and Operations'' and ``Limited Principal--Introducing Broker/Dealer Financial and Operations'' to ``Financial and Operations Principal'' and ``Introducing Broker-Dealer Financial and Operations Principal,'' respectively. This proposed rule change refers to the titles that were approved as part of SR-FINRA-2017-007, though the changes are not yet effective. \5\ Current NASD Rules 1022(b) (Limited Principal--Financial and Operations) and 1022(c) (Limited Principal--Introducing Broker/ Dealer Financial and Operations) and Incorporated NYSE Rule Interpretations 311(b)(5)/02 (Examination Requirements for Chief Financial Officers (``CFO'') and Chief Operations Officers (``COO[supreg]'') and/03 (Dual Designation of CFO and COO). \6\ The current FINRA rulebook consists of: (1) FINRA rules; (2) NASD rules; and (3) Incorporated NYSE rules. While the NASD rules generally apply to all FINRA members, the Incorporated NYSE rules apply only to those members of FINRA that are also members of the NYSE (``dual members''). The FINRA rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see Information Notice, March 12, 2008 (Rulebook Consolidation Process). \7\ See Regulatory Notice 17-30 (SEC Approves Consolidated FINRA Registration Rules, Restructured Representative-Level Qualification Examinations and Changes to Continuing Education Requirements) (October 2017). --------------------------------------------------------------------------- Subparagraph (A) of FINRA Rule 1220(a)(4) requires that each firm designate an individual as a FINOP or an Introducing FINOP to carry out specified financial and operational responsibilities,\8\ including, for example, supervision of individuals who assist in the preparation of financial reports. Such individuals must pass the FINOP examination (Series 27) or Introducing FINOP examination (Series 28), as applicable, or obtain a waiver of the examination. They must also register in the Central Registration Depository (``CRD[supreg]'') system with the designation FN (for FINOP) or FI (for Introducing FINOP). --------------------------------------------------------------------------- \8\ The determination of whether a firm is eligible to designate an Introducing FINOP, rather than a FINOP, depends on the firm's minimum net capital requirements. --------------------------------------------------------------------------- Certain members, hereinafter referred to as exempt firms, are exempt from the requirement in current NASD Rules 1022(b) and 1022(c) to designate an individual as a FINOP or an Introducing FINOP to carry out specified financial and operational responsibilities, including from the requirement that such an individual pass the Series 27 or Series 28 examination (or obtain a waiver of the examination) and register in the CRD system with the designation FN or FI.\9\ FINRA preserved these exemptions when it proposed to adopt FINRA Rule 1220(a)(4)(A).\10\ However, these exemptions were not reflected in the rule text. --------------------------------------------------------------------------- \9\ See Securities Exchange Act Release No. 44332 (May 21, 2001), 66 FR 29196, 29197 (May 29, 2001) (Order Approving File No. SR-NASD-00-77). See also Notice to Members (``NTM'') 01-52 (SEC Approves NASD Rule Proposal Relating To Registration Requirements For Limited Principals-Financial And Operations And Limited Principals-Introducing Broker/Dealer Financial And Operations) (August 2001). \10\ See Securities Exchange Act Release No. 80371 (April 4, 2017), 82 FR 17336, 17338, n.12 (April 10, 2017) (Notice of Filing of File No. SR-FINRA-2017-007) (stating that ``[t]hose members that are currently exempt from the requirement to have a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal based on an exemption granted to them prior to September 17, 2001 will continue to be exempt from this requirement.''). --------------------------------------------------------------------------- Subparagraph (B) of FINRA Rule 1220(a)(4) requires each firm to designate an individual as Principal Financial Officer with primary responsibility over the firm's financial filings and the related books and records and an individual as Principal Operations Officer with primary responsibility over the firm's day-to-day operations. Such individuals must also pass the Series 27 or Series 28 examination, as applicable, or obtain a waiver of the examination. Further, they must register in the CRD system with the designation FN or FI. The responsibilities of a designated Principal Financial Officer and Principal Operations Officer intersect with the responsibilities of a designated FINOP or Introducing FINOP. However, [[Page 42536]] the responsibilities of a designated FINOP or Introducing FINOP are more specific in nature (e.g., they are required to supervise individuals who assist in the preparation of financial reports). In addition, a member's designated FINOP or Introducing FINOP is eligible to perform the responsibilities of a Principal Financial Officer and a Principal Operations Officer. As stated in Regulatory Notice 17-30, the requirement to designate a Principal Financial Officer and Principal Operations Officer applies to all firms, including exempt firms. As a result, by October 1, 2018, exempt firms would have been required to designate as Principal Financial Officer and Principal Operations Officer an individual who is qualified and registered as a FINOP or an Introducing FINOP (i.e., the individual must have passed the Series 27 or Series 28 examination (or obtained a waiver of the examination) and registered in the CRD system with the designation FN or FI). Exempt firms have noted that the responsibilities of a Principal Financial Officer and a Principal Operations Officer are functional equivalents to the responsibilities that a designated FINOP or Introducing FINOP would carry out at their firms. Exempt firms have also noted that, given their exempt status, they do not have an individual designated as a FINOP or an Introducing FINOP to whom to assign the responsibilities of a Principal Financial Officer and Principal Operations Officer. Similarly, they do not have any other associated persons who are qualified and registered as a FINOP or an Introducing FINOP (e.g., individuals who have passed the Series 27 examination and registered in the CRD system with the designation FN) to whom to assign the specified responsibilities. Therefore, exempt firms have stated that FINRA Rule 1220(a)(4)(B) would have the indirect impact of eliminating their FINOP and Introducing FINOP exemptions by requiring them to designate an individual who is qualified and registered as a FINOP or an Introducing FINOP to carry out responsibilities that are functionally equivalent to those responsibilities that would otherwise be carried out by a designated FINOP or Introducing FINOP. FINRA recognizes that the rule change would have the impact of eliminating longstanding exemptions that were granted to members, which was not the intended purpose of the rule change. The purpose of the rule change is to ensure that each member has designated individual(s) with primary responsibility for specified financial and operational functions carried out by the firm. Accordingly, FINRA is proposing to amend FINRA Rule 1220(a)(4)(A) to reflect that exempt firms remain exempt from the requirements of FINRA Rule 1220(a)(4)(A). FINRA is also proposing to amend FINRA Rule 1220(a)(4)(B) to provide that individuals designated as Principal Financial Officers and Principal Operations Officers of exempt firms are not required to be qualified and registered as FINOPs or Introducing FINOPs. FINRA Rule 1220(a)(4)(B) would continue to require exempt firms to designate an individual as a Principal Financial Officer and Principal Operations Officer to carry out specified financial and operational responsibilities, but such individual would not be required to be qualified and registered as a FINOP or an Introducing FINOP.\11\ --------------------------------------------------------------------------- \11\ In addition, FINRA notes that individuals designated as Principal Financial Officers and Principal Operations Officers of exempt firms would likely be required to be qualified and registered as principals, such as General Securities Principals, given the scope of their responsibilities. --------------------------------------------------------------------------- Finally, as indicated in NTM 01-52, FINRA reserves the right to require exempt firms to designate an individual as a FINOP or an Introducing FINOP to carry out specified financial and operational responsibilities if changes occur in the circumstances under which the original exemption was granted, such as a substantial increase in business or the addition of new lines of business. FINRA also may require exempt firms to designate an individual as a FINOP or an Introducing FINOP if FINRA determines that there is a material financial-related examination finding that would necessitate it. However, in the case of any of these events, the member would have the right to appeal such actions pursuant to FINRA Rule 9630 (Appeal). In addition, FINRA may impose a disciplinary sanction that would require exempt firms to designate an individual as a FINOP or an Introducing FINOP. In the event that a member is no longer exempt under the circumstances described above, the firm would also have to ensure that the individual designated as Principal Financial Officer and Principal Operations Officer is qualified and registered as a FINOP or an Introducing FINOP. FINRA is filing the proposed rule change for immediate effectiveness. The implementation date will be October 1, 2018, to coincide with the implementation date of the consolidated registration rules. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,\12\ 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. FINRA believes it is appropriate to continue to provide an exemption under FINRA Rule 1220(a)(4) to those firms that were previously granted an exemption from the requirement to designate an individual as a FINOP or an Introducing FINOP to carry out specified financial and operational responsibilities. FINRA also believes the proposed rule change strikes an appropriate balance in that exempt firms would still be required to designate an individual as a Principal Financial Officer and Principal Operations Officer to carry out specified financial and operational responsibilities, though the individual would not have to be qualified and registered as a FINOP or an Introducing FINOP. --------------------------------------------------------------------------- \12\ 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. Economic Impact Assessment FINRA has undertaken an economic impact assessment, as set forth below, to further analyze the regulatory need for the proposed rule change, the economic baseline of analysis, the economic impact and the alternatives considered. Regulatory Need Exempt firms are not required to designate an individual as a FINOP or an Introducing FINOP to carry out specified financial and operational responsibilities. The requirements under FINRA Rule 1220(a)(4)(B), which become operative on October 1, 2018, would effectively and unintentionally undo these exemptions. FINRA is therefore preserving these exemptions, while ensuring that each FINRA member, including exempt firms, has a designated Principal Financial Officer and Principal Operations Officer to carry out specified financial and operational responsibilities. [[Page 42537]] Economic Baseline The economic baseline for the proposed rule change relates to the activities and costs associated with financial and operational controls conducted by exempt firms. There are approximately 140 current exempt firms. Economic Impact For purposes of this discussion, FINRA has identified the potentially material impacts of the proposed rule change. Impact on Firms and Associated Persons The proposed rule change would preserve the ability of exempt firms to maintain financial and operational controls without the addition of a designated individual as FINOP or Introducing FINOP. Relative to current practices, the proposed rule change would not impose material costs on members or associated persons. However, the proposed rule change would eliminate, or significantly reduce, the operational, administrative and cost burden on exempt firms once FINRA Rule 1220(a)(4)(B) becomes effective. Among other benefits, exempt firms would not be required to employ, or otherwise associate with, an individual who is currently qualified and registered as a FINOP or an Introducing FINOP by October 1, 2018 to carry out the responsibilities of Principal Financial Officer and Principal Operations Officer. Alternatively, exempt firms would not be required to ensure that a current associated person is qualified and registered as a FINOP or an Introducing FINOP by October 1, 2018 to carry out the responsibilities of Principal Financial Officer and Principal Operations Officer. The proposed rule change would also reduce the costs and burdens on current associated persons of exempt firms who will be designated as Principal Financial Officers and Principal Operations Officers because such individuals would not be required to qualify and register as FINOPs or Introducing FINOPs. The proposed rule change would not alter the obligations of members that are currently required to have a designated individual as FINOP or Introducing FINOP. As noted above, a firm's designated FINOP or Introducing FINOP is eligible to perform the responsibilities of a Principal Financial Officer and a Principal Operations Officer. Impact on Customers of Exempt Firms The proposed rule change is not expected to materially alter the protections that customers of exempt firms currently receive. Alternatives Considered FINRA considered whether alternative qualifications and registrations would be appropriate for Principal Financial Officers and Principal Operations Officers, other than qualification and registration as a FINOP or an Introducing FINOP. However, FINRA determined not to adopt an alternative qualification and registration requirement pending its evaluation of the structure of its principal- level examinations. 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b- 4(f)(6) thereunder.\14\ --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A). \14\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-2018-031 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-2018-031. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of 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-2018-031, and should be submitted on or before September 12, 2018. --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-18065 Filed 8-21-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 163 / Wednesday, August 22, 2018 / Notices 42535
SECURITIES AND EXCHANGE II. Self-Regulatory Organization’s responsibilities,8 including, for
COMMISSION Statement of the Purpose of, and example, supervision of individuals
Statutory Basis for, the Proposed Rule who assist in the preparation of
[Release No. 34–83863; File No. SR–FINRA– Change financial reports. Such individuals must
2018–031] In its filing with the Commission, pass the FINOP examination (Series 27)
FINRA included statements concerning or Introducing FINOP examination
Self-Regulatory Organizations; the purpose of and basis for the (Series 28), as applicable, or obtain a
Financial Industry Regulatory proposed rule change and discussed any waiver of the examination. They must
Authority, Inc.; Notice of Filing and comments it received on the proposed also register in the Central Registration
Immediate Effectiveness of a Proposed rule change. The text of these statements Depository (‘‘CRD®’’) system with the
Rule Change To Amend FINRA Rule may be examined at the places specified designation FN (for FINOP) or FI (for
1220(a)(4), Financial and Operations in Item IV below. FINRA has prepared Introducing FINOP).
summaries, set forth in sections A, B, Certain members, hereinafter referred
Principal and Introducing Broker-
and C below, of the most significant to as exempt firms, are exempt from the
Dealer Financial and Operations
aspects of such statements. requirement in current NASD Rules
Principal
1022(b) and 1022(c) to designate an
August 16, 2018. A. Self-Regulatory Organization’s individual as a FINOP or an Introducing
Statement of the Purpose of, and the FINOP to carry out specified financial
Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule and operational responsibilities,
Securities Exchange Act of 1934 Change including from the requirement that
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 such an individual pass the Series 27 or
notice is hereby given that on August 1. Purpose
Series 28 examination (or obtain a
15, 2018, Financial Industry Regulatory In July 2017, the SEC approved a waiver of the examination) and register
Authority, Inc. (‘‘FINRA’’) filed with the proposed rule change to,4 among other in the CRD system with the designation
Securities and Exchange Commission things, adopt the NASD and FN or FI.9 FINRA preserved these
(‘‘SEC’’ or ‘‘Commission’’) the proposed Incorporated NYSE rules 5 relating to exemptions when it proposed to adopt
rule change as described in Items I, II, individuals responsible for a member’s FINRA Rule 1220(a)(4)(A).10 However,
and III below, which Items have been financial and operational activities as these exemptions were not reflected in
prepared by FINRA. FINRA has FINRA Rule 1220(a)(4) in the the rule text.
designated the proposed rule change as Consolidated FINRA Rulebook.6 The Subparagraph (B) of FINRA Rule
constituting a ‘‘non-controversial’’ rule rule change will become effective on 1220(a)(4) requires each firm to
change under paragraph (f)(6) of Rule October 1, 2018.7 designate an individual as Principal
19b–4 under the Act,3 which renders Subparagraph (A) of FINRA Rule Financial Officer with primary
the proposal effective upon receipt of 1220(a)(4) requires that each firm responsibility over the firm’s financial
this filing by the Commission. The designate an individual as a FINOP or filings and the related books and records
Commission is publishing this notice to an Introducing FINOP to carry out and an individual as Principal
solicit comments on the proposed rule specified financial and operational Operations Officer with primary
change from interested persons. responsibility over the firm’s day-to-day
4 See Securities Exchange Act Release No. 81098
operations. Such individuals must also
I. Self-Regulatory Organization’s (July 7, 2017), 82 FR 32419 (July 13, 2017) (Order
pass the Series 27 or Series 28
Statement of the Terms of Substance of Approving File No. SR–FINRA–2017–007). For ease
of reference, FINRA revised the titles of some of the examination, as applicable, or obtain a
the Proposed Rule Change registration categories as part of SR–FINRA–2017– waiver of the examination. Further, they
007. For instance, FINRA changed ‘‘Limited must register in the CRD system with
FINRA is proposing to amend FINRA Principal—Financial and Operations’’ and ‘‘Limited
the designation FN or FI. The
Rule 1220(a)(4) (Financial and Principal—Introducing Broker/Dealer Financial and
Operations’’ to ‘‘Financial and Operations responsibilities of a designated
Operations Principal and Introducing
Principal’’ and ‘‘Introducing Broker-Dealer Principal Financial Officer and
Broker-Dealer Financial and Operations Financial and Operations Principal,’’ respectively. Principal Operations Officer intersect
Principal) to: (1) Reflect that certain This proposed rule change refers to the titles that
with the responsibilities of a designated
firms remain exempt from the were approved as part of SR–FINRA–2017–007,
though the changes are not yet effective. FINOP or Introducing FINOP. However,
requirement to designate an individual
5 Current NASD Rules 1022(b) (Limited
as a Financial and Operations Principal Principal—Financial and Operations) and 1022(c) 8 The determination of whether a firm is eligible
(‘‘FINOP’’) or an Introducing Broker- (Limited Principal—Introducing Broker/Dealer to designate an Introducing FINOP, rather than a
Dealer Financial and Operations Financial and Operations) and Incorporated NYSE FINOP, depends on the firm’s minimum net capital
Principal (‘‘Introducing FINOP’’); and Rule Interpretations 311(b)(5)/02 (Examination requirements.
Requirements for Chief Financial Officers (‘‘CFO’’) 9 See Securities Exchange Act Release No. 44332
(2) provide that the individual and Chief Operations Officers (‘‘COO®’’) and/03 (May 21, 2001), 66 FR 29196, 29197 (May 29, 2001)
designated as Principal Financial (Dual Designation of CFO and COO). (Order Approving File No. SR–NASD–00–77). See
Officer and Principal Operations Officer 6 The current FINRA rulebook consists of: (1) also Notice to Members (‘‘NTM’’) 01–52 (SEC
of these exempt firms is not required to FINRA rules; (2) NASD rules; and (3) Incorporated Approves NASD Rule Proposal Relating To
be qualified and registered as a FINOP NYSE rules. While the NASD rules generally apply Registration Requirements For Limited Principals-
to all FINRA members, the Incorporated NYSE rules Financial And Operations And Limited Principals-
or an Introducing FINOP. apply only to those members of FINRA that are also Introducing Broker/Dealer Financial And
The text of the proposed rule change members of the NYSE (‘‘dual members’’). The Operations) (August 2001).
FINRA rules apply to all FINRA members, unless 10 See Securities Exchange Act Release No. 80371
is available on FINRA’s website at
amozie on DSK3GDR082PROD with NOTICES1
such rules have a more limited application by their (April 4, 2017), 82 FR 17336, 17338, n.12 (April 10,
http://www.finra.org, at the principal terms. For more information about the rulebook 2017) (Notice of Filing of File No. SR–FINRA–
office of FINRA and at the consolidation process, see Information Notice, 2017–007) (stating that ‘‘[t]hose members that are
Commission’s Public Reference Room. March 12, 2008 (Rulebook Consolidation Process). currently exempt from the requirement to have a
7 See Regulatory Notice 17–30 (SEC Approves Financial and Operations Principal or an
Consolidated FINRA Registration Rules, Introducing Broker-Dealer Financial and Operations
1 15 U.S.C. 78s(b)(1). Restructured Representative-Level Qualification Principal based on an exemption granted to them
2 17 CFR 240.19b–4. Examinations and Changes to Continuing Education prior to September 17, 2001 will continue to be
3 17 CFR 240.19b–4(f)(6). Requirements) (October 2017). exempt from this requirement.’’).
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![Federal Register / Vol. 83, No. 163 / Wednesday, August 22, 2018 / Notices 42537
Economic Baseline protections that customers of exempt • Send an email to rule-comments@
The economic baseline for the firms currently receive. sec.gov. Please include File Number SR–
proposed rule change relates to the Alternatives Considered FINRA–2018–031 on the subject line.
activities and costs associated with Paper Comments
financial and operational controls FINRA considered whether
conducted by exempt firms. There are alternative qualifications and • Send paper comments in triplicate
approximately 140 current exempt registrations would be appropriate for to Secretary, Securities and Exchange
firms. Principal Financial Officers and Commission, 100 F Street NE,
Principal Operations Officers, other
Economic Impact Washington, DC 20549–1090.
than qualification and registration as a
For purposes of this discussion, FINOP or an Introducing FINOP. All submissions should refer to File
FINRA has identified the potentially However, FINRA determined not to Number SR–FINRA–2018–031. This file
material impacts of the proposed rule adopt an alternative qualification and number should be included on the
change. registration requirement pending its subject line if email is used. To help the
evaluation of the structure of its Commission process and review your
Impact on Firms and Associated Persons
principal-level examinations. comments more efficiently, please use
The proposed rule change would only one method. The Commission will
preserve the ability of exempt firms to C. Self-Regulatory Organization’s
Statement on Comments on the post all comments on the Commission’s
maintain financial and operational
Proposed Rule Change Received From internet website (http://www.sec.gov/
controls without the addition of a
designated individual as FINOP or Members, Participants, or Others rules/sro.shtml). Copies of the
Introducing FINOP. Relative to current submission, all subsequent
Written comments were neither amendments, all written statements
practices, the proposed rule change solicited nor received.
would not impose material costs on with respect to the proposed rule
members or associated persons. III. Date of Effectiveness of the change that are filed with the
However, the proposed rule change Proposed Rule Change and Timing for Commission, and all written
would eliminate, or significantly Commission Action communications relating to the
reduce, the operational, administrative Because the foregoing proposed rule proposed rule change between the
and cost burden on exempt firms once change does not: (i) Significantly affect Commission and any person, other than
FINRA Rule 1220(a)(4)(B) becomes the protection of investors or the public those that may be withheld from the
effective. interest; (ii) impose any significant public in accordance with the
Among other benefits, exempt firms burden on competition; and (iii) become provisions of 5 U.S.C. 552, will be
would not be required to employ, or available for website viewing and
operative for 30 days from the date on
otherwise associate with, an individual printing in the Commission’s Public
which it was filed, or such shorter time
who is currently qualified and Reference Room, 100 F Street NE,
as the Commission may designate, it has
registered as a FINOP or an Introducing Washington, DC 20549, on official
become effective pursuant to Section
FINOP by October 1, 2018 to carry out
19(b)(3)(A) of the Act 13 and Rule 19b– business days between the hours of
the responsibilities of Principal
4(f)(6) thereunder.14 10:00 a.m. and 3:00 p.m. Copies of the
Financial Officer and Principal
Operations Officer. Alternatively, At any time within 60 days of the filing also will be available for
exempt firms would not be required to filing of the proposed rule change, the inspection and copying at the principal
ensure that a current associated person Commission summarily may office of FINRA. All comments received
is qualified and registered as a FINOP or temporarily suspend such rule change if will be posted without change. Persons
an Introducing FINOP by October 1, it appears to the Commission that such submitting comments are cautioned that
2018 to carry out the responsibilities of action is necessary or appropriate in the we do not redact or edit personal
Principal Financial Officer and public interest, for the protection of identifying information from comment
Principal Operations Officer. The investors, or otherwise in furtherance of submissions. You should submit only
proposed rule change would also reduce the purposes of the Act. If the information that you wish to make
the costs and burdens on current Commission takes such action, the available publicly. All submissions
associated persons of exempt firms who Commission shall institute proceedings should refer to File Number SR–FINRA–
will be designated as Principal to determine whether the proposed rule 2018–031, and should be submitted on
Financial Officers and Principal should be approved or disapproved. or before September 12, 2018.
Operations Officers because such IV. Solicitation of Comments For the Commission, by the Division of
individuals would not be required to
Interested persons are invited to Trading and Markets, pursuant to delegated
qualify and register as FINOPs or authority.15
Introducing FINOPs. submit written data, views, and
The proposed rule change would not arguments concerning the foregoing, Eduardo A. Aleman,
alter the obligations of members that are including whether the proposed rule Assistant Secretary.
currently required to have a designated change is consistent with the Act. [FR Doc. 2018–18065 Filed 8–21–18; 8:45 am]
individual as FINOP or Introducing Comments may be submitted by any of BILLING CODE 8011–01–P
FINOP. As noted above, a firm’s the following methods:
designated FINOP or Introducing FINOP
amozie on DSK3GDR082PROD with NOTICES1
Electronic Comments
is eligible to perform the responsibilities
of a Principal Financial Officer and a • Use the Commission’s internet
Principal Operations Officer. comment form (http://www.sec.gov/
rules/sro.shtml); or
Impact on Customers of Exempt Firms
The proposed rule change is not 13 15 U.S.C. 78s(b)(3)(A).
expected to materially alter the 14 17 CFR 240.19b–4(f)(6). 15 17 CFR 200.30–3(a)(12).
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Document Created: 2018-08-22 00:38:26
Document Modified: 2018-08-22 00:38:26
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 42535 |
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