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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
regulatory authority of one or more of the following provisions or a comparable foreign provision or rules or regulations thereunder: Violations of the types enumerated in Section 15b4E and Section 15c of the Exchange Act; Section 17a of the Securities Act; SEA Rules 10b5 and 15g1 through 15g9; FINRA Rules 2010
only if the finding of a violation is for unauthorized trading, churning, conversion, material misrepresentations or omissions to a customer, frontrunning, trading ahead of research reports or excessive markups, 2020, 2111, 2121, 2150, 4330, 3110 failure to supervise only, 5210, and 5230; and MSRB Rules G19, G30, and G37b and c, and all predecessor NASD rules to such FINRA rules.

1017. Application for Approval of Change in Ownership, Control, or Business Operations a through k No Change.
l Removal or Modification of Restriction on Departments Initiative The Department shall modify or remove a restriction on its own initiative if the Department determines such action is appropriate in light of the considerations set forth in paragraph hi1. The Department shall notify the member in writing of the Departments determination and inform the member that it may apply for further modification or removal of a restriction by filing an application under paragraph a.
m No Change.

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II. Self-Regulatory Organizations 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 Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On March 26, 2020, the Commission approved amendments to Rule 1017, among other rules, as part of FINRAs
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efforts to help further address the issue of customer recovery of unpaid arbitration awards.4 Before the amendments to Rule 1017, paragraph h1 related to FINRAs decision on an application for continuing FINRA
membership, and specified some factors that create a presumption to deny an application. File No. SRFINRA2019
030 renumbered that paragraph to paragraph i1. Currently, Rule 1017l cross-references to paragraph h1, which, as a result of SRFINRA2019
030, requires an applicant for continuing FINRA membership to promptly provide FINRA written notification of any arbitration claim involving the applicant or its associated persons that is filed, awarded or becomes unpaid before a decision constituting final action of FINRA is served on the applicant. In File No. SR
FINRA2019030, FINRA did not propose a change to Rule 1017l to reflect the rule cross-reference change from paragraph h1 to paragraph i1.
With this proposed rule change, FINRA
is proposing to make this corrective non-substantive, technical change to Rule 1017l.5
On April 10, 2019, the Commission announced the immediate effectiveness of the adoption of the remaining legacy NASD rules as FINRA rules in the consolidated FINRA rulebook and the remaining Incorporated NYSE Rules and Incorporated NYSE Rule Interpretations in the consolidated FINRA rulebook as a separate Temporary Dual FINRA
NYSE Member Rules Series.6 Among these legacy NASD rules was then NASD Interpretative Material IM
10111 Safe Harbor for Business Expansions. In general, this rule created a safe harbor for specified categories of business expansions, subject to certain thresholds and conditions, that a member may undergo without filing an application for continuing membership with FINRA, but this safe harbor was unavailable to a member with a defined disciplinary history. Under NASD IM10111, the term disciplinary history meant a 4 See Securities Exchange Act Release No. 88482
March 26, 2020, 85 FR 18299 April 1, 2020
Order Approving File No. SRFINRA2019030, as Modified by Amendment No. 1. FINRA announced September 14, 2020 as the effective date of the rule change in Regulatory Notice 2015 May 2020.
5 FINRA notes that the proposed rule change would impact all members, including members that have elected to be treated as capital acquisition brokers CABs and are subject to CAB rules. CAB
Rule 116 Application for Approval of Change in Ownership, Control, or Business Operations incorporates by reference Rule 1017.
6 See Securities Exchange Act Release No. 85589
April 10, 2019, 84 FR 15646 April 16, 2019
Notice of Filing and Immediate Effectiveness of File No. SRFINRA2019009.

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finding of a violation by the member or a principal of the member in the past five years by the SEC, a self-regulatory organization, or a foreign financial regulatory authority of one or more specified provisions that included NASD Rule 2440 Fair Prices and Commissions, the predecessor rule to FINRA Rule 2121 Fair Prices and Commissions.7 Through File No. SR
FINRA2019009, FINRA adopted NASD IM10111 as FINRA IM1011
1 with the intention of replacing therein all references to an NASD rule with its corresponding FINRA rule. The reference to NASD Rule 2440, or 2440
as written in NASD IM10111, was inadvertently omitted from the rule text presented in Exhibit 4 and Exhibit 5 to File No. SRFINRA2019009 and as a result, the list of rules for disciplinary history as they currently appear in FINRA IM10111 omits the reference to FINRA Rule 2121. With this proposed rule change, FINRA is proposing to correct this technical error by including a reference to 2121 to the sequence of FINRA rules defining disciplinary history under FINRA IM10111.
Finally, the proposed rule change would change the references to NYSE
Alternext US in IM-Section 4b1 and e of Schedule A to the FINRA By-Laws to NYSE American. 8
FINRA has filed the proposed rule change for immediate effectiveness and has requested that the SEC waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing so FINRA can implement the proposed rule change immediately.
2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15Ab6 of the Act,9 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. The proposed rule change will make corrective nonsubstantive, technical updates that 7 In 2014, FINRA adopted NASD Rule 2440 and its IMs, without material change, as FINRA Rule 2121. See Securities Exchange Act Release No.
72208 May 21, 2014, 79 FR 30675 May 28, 2014
Notice of filing and Immediate Effectiveness of File No. SRFINRA2014023.
8 NYSE Alternext US LLC is a predecessor entity to NYSE American LLC. See Securities Exchange Act Release No. 80283 March 21, 2017, 82 FR
15244 March 27, 2017 Notice of Filing and Immediate Effectiveness of File No. SRNYSEMKT
201714.
9 15 U.S.C. 78o3b6.

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