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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices can meet each of the standards described under Rule 1014a, and to facilitate FINRAs review of the application.8 An applicant is able to provide its documents and information by attaching files in various formats e.g., .docx, .pdf, .xlsx or by entering free form text in text boxes, and making selections through screen components such as drop-down menus and radio buttons, among others.

lotter on DSK11XQN23PROD with NOTICES1

Recent Amendments to the MAP Rules On December 10, 2020, FINRA
amended the MAP rules, among other FINRA rules, to address the issue of persons with a significant history of misconduct and the member firms that employ them.9 As amended, Rule 1017
includes new paragraph a7, which requires a member to file a continuing member application CMA whenever a natural person seeking to become an owner,10 control person,11 principal or registered person of a member has, in the prior five years, one or more final criminal matters as defined in new Rule 1011h 12 or two or more specified risk events as defined in new Rule 1011p 13, and the member is not otherwise required to file a Form CMA in accordance with Rule 1017, unless the member has submitted a written request to FINRA seeking a materiality consultation for such contemplated activity. As part of the materiality consultation, Rule 1017a7
also provides that FINRA will determine in the public interest and the protection of investors that either the member is not required to file a Form CMA and may effect the contemplated activity, or the member is required to file a Form CMA in accordance with Rule 1017 and the member may not effect the contemplated activity unless FINRA
approves the Form CMA. In addition, Rule 1017a7 provides that 8 The sections of Form CMA that are marked with a red asterisk require the applicant to provide a response.
9 See supra note 5.
10 For purposes of Rule 1017a7 only, the term owner has the same meaning as direct owner and indirect owner on the Uniform Application for Broker-Dealer Registration Form BD
Schedules A and B, as amended from time to time.
See Rule 1017a7.
11 For purposes of Rule 1017a7, the term control person means a person who would have control as defined on Form BD, as amended from time to time. See Rule 1017a7.
12 See paragraph h under Rule 1011 defining final criminal matter as amended by SRFINRA
2020011, supra note 5.
13 See paragraph p under Rule 1011 defining specified risk event as amended by SRFINRA
2020011, supra note 5. See also Securities Exchange Act Release No. 92710 August 19, 2021
Order Approving File No. SRFINRA2021011
amendment to the specified risk event definition.

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Interpretative Material IM10111
Safe Harbor for Business Expansions is not available to the member when a materiality consultation is required under Rule 1017a7.14
Proposed Conforming Amendments to Form CMA
As a result of the recent amendments to the MAP rules, FINRA is proposing to amend Form CMA to: 1 List in the section of the form entitled Type of Continuing Membership Application all of the events under Rule 1017a that require a member to file Form CMA; 2
incorporate questions into Form CMA
that relate specifically to Rule 1017a7; and 3 make other nonsubstantive and technical changes in the form for clarity and consistency, and to promote efficiency. FINRA believes that these proposed conforming changes to Form CMA and the non-substantive and technical changes will help guide an applicant to provide the responses needed to demonstrate that it can meet the standards set forth under Rule 1014a, and to facilitate FINRAs review of the application in light of the recent admendments to the MAP rules.
A. Amend Form CMAs Type of Continuing Membership Application Section To List All of the Events Specified in Paragraphs a1 Through a7 Under Rule 1017
As noted above, Form CMA is organized into sections that correspond to the standards for admission set forth in Rule 1014a, with each section containing its own set of questions, some of which are mandatory, related to that particular standard for admission.15
But before an applicant proceeds with completing those sections, Form CMA
requests the applicant to identify all applicable types of changes in ownership, control, or business operations in the section titled, Type of Continuing Membership Application.
This section currently bears two headers that categorize some Rule 1017a events as either Ownership of asset transfer changes, covering the events described under Rule 1017a1 through Rule 1017a4, or Changes in business operations, covering the events 14 Relatedly, new IM10113 Business Expansions and Persons with Specified Risk Events provides that IM10111 is not available to any member that is seeking to add a natural person who has, in the prior five years, one or more final criminal matters or two or more specified risk events and seeks to become an owner, control person, principal, or registered person of the member. In general, IM10111 creates a safe harbor for specified categories of business expansions, subject to certain thresholds, that a member may undergo without filing a CMA.
15 See supra note 8.

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described under Rule 1017a5.16
Currently, Form CMAs Type of Continuing Membership Application section presents the events under Rule 1017a1 through Rule 1017a5, some of which appear in a summary fashion, without rule references.17
FINRA is proposing to amend this section of Form CMA so that all the events described under Rule 1017a, including those set forth in paragraphs a6 and a7, and their respective rule references would be listed in the form. In addition, FINRA is proposing to delete the two headersOwnership of asset transfer changes and Changes in business operationsfor clarity and to facilitate presenting the events under Rule 1017a1 through 1017a7
sequentially.
Specifically, the proposed changes to Form CMAs Type of Continuing Membership Application section would add the following three types of changes in ownership, control, or business operations that an applicant may select, as applicable, with references to the corresponding provisions in Rule 1017a6 18 and a7:
16 Rule 1017a5 provides that a member shall file a CMA for approval of a material change in business operations, which is defined in Rule 1011m. Currently on Form CMA, the Changes in business operations category lists five options that an applicant may select to further identify the type of material change involved. Three of those options correspond to changes that are set forth in subparagraphs 1, 2 and 3 under the definition of material change in business operations in Rule 1011m. A fourth option describes an expansion of Associated Persons, offices, or number of markets made. A fifth other option also is included because the definition of material change in business operations is not exhaustive. See generally paragraph m under Rule 1011 as amended by SRFINRA2020011 renumbering from paragraph l to paragraph m, supra note 5;
IM10111; Rule 1017b2C.
17 For example, Rule 1017a1 provides that a CMA is required for a merger of the member with another member, unless both are members of the New York Stock Exchange, Inc. or the surviving entity will continue to be a member of the New York Stock Exchange, Inc. Form CMA, in the Type of Continuing Membership Application section, summarizes this event as Merger of the member with another member. In another example, while Rule 1017a2 states that a CMA
is required for a direct or indirect acquisition by the member of another member, unless the acquiring member is a member of the New York Stock Exchange, Inc., Form CMA summarizes such event as a direct or indirect acquisition by the member of another member. Except for one technical change pertaining to the event that corresponds to Rule 1017a3, FINRA is not proposing to change the descriptions of Rule 1017a1 through Rule 1017a5 as they currently appear in Form CMA.
18 FINRA recently made changes to Form CMA to account for Rule 1017a6. See Securities Exchange Act Release No. 89867 September 15, 2020, 85 FR 58404 September 18, 2020 Notice of Filing and Immediate Effectiveness of File No. SR
FINRA2020028.

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