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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Notices
would delete from Rule 1011p4 the phrase from associating with a member, which appears after the word suspension. 11
III. Discussion and Commission Findings After careful review of the proposed rule change and the comment letter, the Commission finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder that are applicable to a national securities association.12 Specifically, the Commission finds that the proposed rule change is consistent with Section 15Ab6 of the Exchange Act,13 which requires, among other things, that FINRA rules 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.

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A. Consistent With Basis for Approving the December 2020 Order FINRA stated that including the phrase from associating with a member in Rule 1011p4 was an inadvertent drafting error that inappropriately narrowed the final regulatory actions included in the specified risk event definition.14 In particular, FINRA notes that the current rule may be interpreted to exclude from the definition of specified risk event final SEC and CFTC regulatory actions where the sanction against the person was a suspension other than a suspension from associating with a member.15 FINRA stated that it did not intend to narrow the scope of final regulatory actions that are included in the specified risk event definition in this manner.16 Rather, FINRA stated that it intended Rule 1011p4 to be consistent with Rule 1011p3, which describes the final investment-related civil actions that are included in the specified risk event definition. Rule 1011p3 includes final investmentrelated civil actions that result in a suspension, and does not limit the suspensions to suspensions from associating with a member.17 FINRA
further cited the mapping exhibits it provided in SRFINRA2020011 to illustrate its intent to include final 11 See
supra note 4.
12 In approving this rule change, the Commission has considered the rules impact on efficiency, competition, and capital formation. See 15 U.S.C.
78cf.
13 15 U.S.C. 78o3b6.
14 See Notice at 28406.
15 Id.
16 Id.
17 Id.

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regulatory actions beyond those resulting in suspensions from associating with a member in the specified risk event definition. FINRA
stated that these exhibits demonstrated how the final regulatory actions included within the scope of the specified risk event definition should include final regulatory actions disclosed on the Uniform Registration Forms that resulted in a suspension.18
FINRA stated that those mapping exhibits are consistent with how the relevant sanctions-related questions on the Uniform Registration Forms require the reporting of regulatory actions initiated by numerous regulators and self-regulatory organizationsnot just FINRAand include data fields for suspensions.19
FINRA believes that by amending Rule 1011p4 to accurately describe the final regulatory actions that the definition of specified risk event should include, the proposed rule change would provide greater clarity to members and the public and serve the intended investor-protection purposes of the Misconduct Rule.20
B. The Proposed Rule Change Would Impose No Additional Burden FINRA does not believe that the proposed rule change would result in any additional burdens not already contemplated in SRFINRA2020
011.21 FINRA stated that the aspect of the economic impact assessment undertaken in SRFINRA2020011
that pertained to the amendments to the Rule 1000 Series was based on the broader scope for the final regulatory actions that are included in the specified risk event definition that FINRA is proposing here.22 Consistent with FINRAs original intent, the broader scope for the final regulatory actions that are included in the specified risk event definition includes final SEC and CFTC regulatory actions where the sanction against the 18 See Form 19b4, Exs. 3a and 3b, File No. SR
FINRA2020011, available at https
www.finra.org/sites/default/files/2020-04/SRFINRA-2020-011.pdf; see also Notice at n. 7.
19 See Form U4, Regulatory Action Disclosure Reporting Page, Questions 1 requesting information about which regulator initiated the regulatory action and 13 Sanction Detail; Form BD, Regulatory Action Disclosure Reporting Page, Part II, Questions 1 requesting information about which regulator initiated the regulatory action and Question 2 Principal Sanction. FINRA also stated that the data that it provided in SRFINRA2020
011 concerning the regulatory action disclosures included regulatory actions that resulted in any suspension, not just suspensions from associating with a member; see also Notice at n. 8.
20 See Notice at 28407.
21 Id.
22 Id.

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person was a suspension other than a suspension from associating with a member.23
The Commission received one comment letter in response to the proposed rule change. Because the letter failed to address any component of the proposed rule change, the Commission believes the comment is beyond the scope of the proposal.24
In sum, the Commission finds that the proposed rule change is consistent with its findings in the December 2020 Order.
In the December 2020 Order, the Commission found that the Misconduct Rules would result in greater investor protections by helping address the concerns raised by associated persons with a significant history of misconduct and the broker-dealers that employ them. 25 Specifically, the Commission stated that the Misconduct Rules would strengthen the tools available to FINRA
in responding to associated persons who have a significant history of misconduct and were sufficiently tailored to target the specific misconduct it seeks to address, which would minimize the potential costs to broker-dealers. 26 The Commission agrees that by amending the final regulatory actions that are included in the specified risk event definition, the proposed rule change would provide greater clarity to members and the public and serve the intended investor protection purposes of the Misconduct Rules approved in the December 2020
Order.27 The Commission also agrees with FINRAs assessment that the proposed rule change would impose no additional burden not already contemplated and approved by the Commission.
IV. Conclusion It is therefore ordered pursuant to Section 19b2 of the Exchange Act 28
that the proposal SRFINRA2021
011, be and hereby is approved.

23 Id.
24 See 25 See
Sanderman Letter.
December 2020 Order at 81548.

26 Id.
27 See December 2020 Order at 81546 explaining that the rules approved in SRFINRA2020011
further promote investor protection by applying additional safeguards and disclosure obligations for a broker-dealers continuing membership with FINRA and for changes to a current member brokerdealers ownership, control, or business operations, where those changes involve persons with a significant history of misconduct. See Notice at note 9.
28 15 U.S.C. 78sb2.

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